The Phoenix Group reported a record cash generation of £1.7 billion and its first ever organic dividend increase of 3% in its financial results for 2021.
The company’s share price increased 1.41% to 634.8p in early morning Monday trading on the back of the strong financial report.
The FTSE 100 firm reported a final dividend of 24.8p and a total dividend of 48.9p in 2021.
The insurance provider further announced £6.3 billion revenue, an increase from £4.7bn in 2020.
The company reported that its increased dividend cost of £0.5 billion per annum remained sustainable over the long-term, with £11.8 billion in long-term free cash from the group available to shareholders.
The firm also announced its new dividend policy, which “intends to pay a dividend that is sustainable and grows over time.”
The group mentioned that the organic growth from its open business adequately offset the natural run-off from its heritage business after its record cash generation of £1.18 billion, which proved ‘the wedge’ hypothesis for the company.
The firm also attributed its growth to a record level of Bulk Purchase Annuities (BPA) premiums contracted in 2021 at £5.6 billion, more than double its 2020 rate of £2.5 billion.
The Phoenix Group saw momentum in its workplace business and won 41 smaller schemes on the back of leveraging its Standard Life brand acquisition last year.
The company is reportedly targeting a 2022 cash generation target range of £1.3 to £1.4 billion and a three-year 2022-2024 target of £4 billion.
“It has been an outstanding year for Phoenix, with a record set of financial results and significant strategic progress made as we fully embraced our purpose,” said Phoenix Group CEO Andy Briggs.
“2021 marked a pivotal moment for Phoenix, with £1.2 billion of new business from our Open business more than offsetting the run-off of our Heritage business for the first time.”
“This demonstrates that Phoenix is a growing, sustainable business, and enabled the Board to recommend our first ever organic dividend increase of 3%.”
“Phoenix has also today announced a new dividend policy which sets out our intention to pay a dividend that is sustainable and grows over time.”
Analysts pointed to new business as the key driver in the Phoenix success story, and further highlighted the attractiveness of their dividend yield.
“This is a pivotal moment for Phoenix,” said Steve Clayton, fund manager of the HL Select UK Income Shares fund.
“Ever since the Standard Life acquisition the group has been talking about ‘proving the wedge’.”
“The revelation that new business is now more than offsetting the natural decline of the acquired legacy books upon which the group is built shows that the group is now driving its own destiny organically.”
“The dividend increase announced today leaves the stock trading on a very attractive yield of 7.8%.”
“Phoenix’s challenge is now to prove that they can indeed maintain their new business capabilities and support the growth of their dividend into the future.”