Phoenix, which is currently absorbing Standard Life Aberdeen’s UK and European insurance business, has said it expects to exceed its cash flow target thanks to integrating two earlier acquisitions ahead of schedule.
The specialist insurer confirmed in its half year results it would be at the upper end of its cash generation target of £1bn to £1.2bn between 2017 and 2018, despite delivering weaker cash flow over the latest period. In the first six months of the year the group generated £349m, down slightly from £360m in H1 17.
Shares were up only slightly on the news, rising 2% to 715p by mid-morning on Thursday.
Phoenix is the UK’s largest consolidator of closed with-profits funds or zombie funds, so called because they no longer write new business or policies. It has now amassed £72bn of life company assets and services of over 5.4 million customers.
CEO Clive Bannister said the more bullish cash flow outlook was mainly due to completion of its integration of its Axa and Abbey Life acquisitions “ahead of plan and targets”.
Phoenix bought Deutsche Bank’s insurance business, Abbey Life, in 2016, shortly after purchasing Axa Wealth’s non-platform investment and pension unit.
Bannister said the integration would deliver cost synergies of £27m per year and cumulative cash generation of £768m.
Date set for SLA acquisition
The group also confirmed that its acquisition of SLA’s insurance arm will be completed by 31 August 2018. The deal will take Phoenix up to £240bn of AUM and add another 5 million policy holders.
Bannister said the deal to acquire the newly merged asset manager’s mature insurance book has “received enormous support from our investors” and “represents a pivotal moment in the group’s history”.
SLA bosses Martin Gilbert and Keith Skeoch have described the match-up with Phoenix in similarly glowing terms, calling it a necessary step on their path to becoming a ‘capital lite’ world class investment company. The asset manager has continued haemorrhaging money this year, recording higher outflows than it did pre-merger.
Phoenix expects to generate £5.5bn of additional aggregate cash flows after absorbing SLA’s insurance arm, £1bn of which will be delivered between 2018 and 2022.
