(Reuters) – Phoenix Group Holdings, Europe’s largest owner of life assurance funds closed to new customers, reported higher full-year profit and targeted cash generation of £3.8 billion from 2019 to 2023, as companies offload their pension risks.
The company, which makes money by buying European life insurance policies that are closed to new customers and running them more efficiently, said IFRS operating profit rose to £708 million in the year ended Dec. 31, from 368 million pounds a year earlier.
Phoenix, poised to enter London’s blue-chip index, also said its preparations for Britain’s exit from the European Union were complete, adding it would transfer assets to an Irish domiciled unit, in which it has injected £250 million.
“Despite our expectation that market conditions will remain turbulent leading up to and beyond Brexit, we look ahead with optimism as Phoenix’s hedging programme brings resilience to the Group’s solvency position and cash generation,” the company said.
Phoenix reported cash generation from operating companies of 664 million in 2018, in-line with consensus estimates. The company had said earlier it expects to generate £2.5 billion of cash between 2018 and 2022.
The firm expects to generate between £600 million and £700 million of cash, net of the cost of capitalising its Irish unit for Brexit.
Phoenix bought a bulk of Standard Life Aberdeen Plc’s insurance business last year and has been looking for more bulk annuity purchases as many schemes are in deficit and companies are seeking ways to offload the risk.
UK companies are expected to try and offload a record amount of risk linked to their pension schemes in 2019 as growth in life expectancy eases and interest rates rise, making deals more attractive for insurance firms.
Bulk annuities typically involve the transfer to an insurer of company-defined benefits such as final salary and pension schemes.
Phoenix reported a Solvency II surplus of 3.2 billion pounds as at Dec.31, higher than estimates of £3 billion. Solvency II dictates the amount of capital an EU insurer must hold to reduce the risk of insolvency.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta)