Phoenix Group reckons there are a number of potential acquisition and consolidation opportunities in the UK closed life sector and says it is continuing to review options within the framework of existing commitments to stakeholders.
Having secured an investment grade credit rating in August, the groups third quarter statement published today (22 October) explained it is well positioned to take advantage of these consolidation opportunities.
In September, Phoenix confirmed talks with Cinven-owned Guardian Financial Services as part of a reported £1bn-plus takeover deal.
The interim management release detailed that it is on track to meet both the cash generation target of £200 to £250 million for this year and the long-term cash generation target of £2.8bn between 2014 and 2019.
In its annual results, published in March, Phoenix expressed uncertainty as to whether it would be able to meet the 2015 cash generation target “due to the retention of capital in the life companies in the short term”, however an August update said it was back on track.
Meanwhile, the group continues to work with the Prudential Regulatory Authority as it reviews the internal model application and expects to be notified of the outcome in early December, simultaneously with other firms.
It expects to be well capitalised under the Solvency II regime, with a capital position likely to be in excess of the current surplus, subject to regulatory approval.
However, the statement did note that “there remain uncertainties with regards to the Solvency II capital regime, including the approval of the group’s matching adjustment application and the agreement of a capital management policy with the PRA”.
Clive Bannister, group chief executive of Phoenix, said that the consolidator is on track to meet 2015 cash generation target ranges, notwithstanding recent market volatility.
“As the impact of reforms to the UK life industry become clearer, including the new Solvency II regime, I believe that attractive acquisition opportunities will become available.”
The update also mentioned that Financial Conduct Authority’s thematic review of the fair treatment of long-standing customers in life insurance, pointing out that results are expected before the end of the year.
“The review will look at the level of servicing provided to policyholders whose policies are managed within closed life funds, which we believe is aligned to our strategy of continuing to look for areas of improvement in customer performance and service levels.”
As for April’s pension freedoms, Phoenix stated that it will be next year that the full impact becomes clear, but to date around 26,000 customers have requested full encashment of their pension savings, with an average pot size of £13,500.
However, one unintended consequence of the reforms has been an increase in fraudsters targeting Phoenix customers, bosses said.
“We therefore continue to take action to identify possible incidences of pension fraud where possible, but clearly there is now an increased personal responsibility for our customers to ensure that they understand how their retirement funds are invested.”
Earlier this month, the UK’s largest specialist consolidator of closed life funds identified 1,650 suspicious companies or schemes which it believes are involved in scams.
peter.walker@ft.com
