On Monday, Phoenix Group announced a higher interim dividend despite facing significant challenges from its solvency II hedging strategy and the impact of elevated interest rates, which deepened the company’s financial losses. The board is set to distribute a dividend of 0.2665 pound sterling per share for the six-month period ending June 30, marking a notable 2.5% increase from the dividends issued during the same time last year.
In addition to enhancing shareholder returns, the British insurer successfully repaid 250 million pounds of debt and has plans to invest 200 million pounds into its operations, capitalizing on an increase in cash generation to 950 million pounds, up from 898 million pounds year-over-year. The company’s hedging strategy, aimed at protecting its cash flows and ensuring a steady dividend payout, simultaneously led to significant economic variances of 698 million pounds due to rising interest rates and volatile global equity markets.
This impacted the losses attributable to the shareholders, which soared to 656 million pounds, up from 261 million pounds compared to the previous year. Despite these losses, the adjusted operating profit under International Financial Reporting Standards (IFRS) saw a commendable increase of 15%, reaching 360 million pounds.
This surge is largely credited to the performance of the group's pension, savings, and retirement services. Additionally, total income witnessed a dramatic rise to 12.33 billion pounds from 5.80 billion pounds, driven mainly by a steep increase in net investment income, which grew to 11.57 billion pounds from 5.09 billion pounds.
Insurance revenue also improved slightly to 2.57 billion pounds, compared to 2.52 billion pounds reported last year. However, due to prevailing uncertainties in the protection market, Phoenix has decided to halt the sale process for its financial protection products arm, SunLife. Looking forward, the firm anticipates its IFRS adjusted operating profit to reach 900 million pounds by 2026.
The company is also aiming to achieve run-rate cost savings of 50 million pounds by the conclusion of 2024, and to scale this up to an impressive 250 million pounds annually by the end of 2026. Expected cash generation for 2024 is projected to hit the upper echelon of the target range, estimated between 1.4 billion pounds to 1.5 billion pounds.
For a three-year outlook, the target stands robust at 4.4 billion pounds. Phoenix Group's Chief Executive Officer, Andy Briggs, expressed optimism regarding the company's trajectory. He emphasized, "Phoenix’s vision is to be the UK's foremost retirement savings and income business, and I am pleased with the initial progress we have made in executing our 3-year strategy, as reflected in our 2024 interim financial results.
I am confident that as we continue to execute on our strategy, we are building a growing business that is on track to deliver our financial targets and create shareholder value." However, the stock price had a setback, falling approximately 4% near midday trading in London, indicating that market reactions may still be cautious amid the ongoing financial turbulence.
The company's current stock price stands at $554.92, reflecting a decline of $22, or a percent change of -3.74%..