Phoenix Generates Record Cash in 2021; Hikes Dividend

British insurer Phoenix Group Holdings (LON: PHNX) released its 2021 financial report on Monday.

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Cash generation for the year was better than the group expected, helped by the growing demand for its pension insurance policies.

The company, like other insurers, regained ground last year after being hit by a pandemic-fueled decline in business in 2020.

Record Financial Results and Dividend Increase

Phoenix, which specializes in books of life insurance business, reported record cash generation of £1,717 million for the year ending December 31, 2021, surpassing its annual target of £1.5 billion to 1.6 billion. Cash generation was £1,713 million in 2020.

The 2021 cash generation includes around £400 million of integration synergies, with integration synergies to date in the Standard Life and ReAssure acquisitions now exceeding £2.5 billion.

The company has approved a final 2021 dividend of 24.8 pence per share, which includes the company’s first-ever organic dividend increase of 3%. The total dividend for 2021 amounts to 8.9 pence per share.

To better reflect that Phoenix is now a growing and sustainable company, the board “intends to pay a dividend that is sustainable and grows over time.”

Phoenix now has a one-year 2022 cash generation target range of £1.3 billion to 1.4 billion, and a three-year cash generation target of £4 billion.

CEO Commentary

Phoenix Group CEO Andy Briggs said, “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. 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.”

Wall Street’s Take

Last week, Barclays analyst Larissa Van Deventer kept a Buy rating on PHNX and 804p price target. This implies 27.2% upside potential.

Overall, consensus among Wall Street analysts is that PHNX is a Moderate Buy based on three Buys and two Holds. The average Phoenix Group price target of 784.75p implies 24.2% upside potential to current levels.

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