Phoenix shares soar as insurer upgrades cash targets after funds merger

Shares in Phoenix Group Holdings (LSE: PHNX) jumped over 8% on Monday after the life insurer boosted its near-term cash generation guidance following the completion of a major funds merger.

The FTSE 100-listed firm said it has merged its Standard Life and Phoenix Life businesses into a single entity called Phoenix Life Ltd, consolidating over 8 million policies in one of the largest UK insurance fund transfers on record.

As a result of the merger, Phoenix now expects to generate £1.8 billion in cash during 2023 – up significantly from its previous forecast of £1.3 billion to £1.4 billion. For the three years from 2023 to 2025, the group has increased its cumulative cash generation target by nearly 10% to £4.5 billion.

Phoenix said the funds consolidation will deliver “material synergies” and the deal’s timely completion has allowed it to upgrade guidance ahead of its full-year results in March. The life insurer also noted it expects to have a “significant cash surplus” by the end of 2023, which provides further options to strengthen the balance sheet.

Andy Briggs, Chief Executive of Phoenix Group, said: “The completion of the funds merger of the Standard Life and Phoenix Life businesses into Phoenix Life Ltd, bringing together 8 million policies, is one of the largest UK insurance Part VII transfers ever completed.”

“This reaffirms Phoenix Group’s position as the UK’s leader at delivering cost and capital synergies and generating value for customers and shareholders. This funds merger enables us to materially upgrade our cash generation targets and creates further balance sheet optionality for the group,” Briggs added.

The merger with Standard Life provides Phoenix with greater scale in the UK life insurance market by combining two major books of policies. Phoenix acquired the Standard Life brand in 2021 after agreeing a long-term deal with abrdn.

Shares in Phoenix have fallen 19% year-to-date, underperforming the wider FTSE 100. However, analysts see further upside potential from the group’s cash generation capabilities.

Phoenix specialises in the management and acquisition of life insurance funds closed to new customers. These funds are financially mature, allowing the firm to generate capital efficiently.