August 23, 2018 / 6:22 AM / in a year

UK's Phoenix Group eyes more corporate pension scheme deals - CEO

(Reuters) - Britain’s Phoenix Group Holdings (PHNX.L) will seek to buy more European corporate pension schemes, the chief executive said on Thursday after the firm completed its first major bulk annuity purchase earlier this year.

Phoenix, Britain’s largest owner of life assurance funds closed to new customers, finalised the 470 million pound deal with the Trustees of the Marks and Spencer Pension Scheme in May.

Bulk annuities, which involve the transfer to an insurer of company defined benefit, or final salary, pension schemes, have become more popular in Britain as many schemes are in deficit and companies are seeking ways to offload the risk.

British bulk annuity sales hit record levels in the first half of the year, pensions consultants said this month. Britain has around 2 trillion pounds in private sector pension liabilities.

The market for bulk annuity deals “provides growth for us and we have relevant transferable skills. So it is a natural (thing) for us to do,” CEO Clive Bannister told Reuters after the company announced first-half results.

He also said Phoenix would be selective, adding that the company looked at seven deals last year but closed only one.

Finance head Jim McConville said the company expected to spend between 50 million pounds and 75 million pounds a year and anticipated it would be funded from its own resources.

Bannister said the deals would be very focused on Britain, the company’s largest market, but that the company would “look positively” towards Germany and Ireland as well.

The company topped estimates for first-half operating profit in Thursday’s results and said it expected to generate more cash than originally targeted for 2017 and 2018.

Phoenix generated 349 million pounds in the first half, above analysts expectation of 298 million pounds, according to company-supplied consensus estimates.

It now expects to exceed its cash generation target of 1 billion pounds to 1.2 billion pounds for 2017 and 2018 but maintained its forecast of 2.5 billion pounds for 2018 to 2022.

Phoenix, which bought the bulk of Standard Life Aberdeen’s (SLA.L) insurance business for 3.24 billion pounds in February, said it would no longer describe itself as purely a “closed” business but as a consolidator of both open and heritage life businesses.

Phoenix bought SLA’s ongoing Irish and German insurance businesses, as well as closed books of annuities, and the enlarged company is expected to have 240 billion pounds of assets under management. Of this, about 160 billion pounds would be closed, while 80 billion pounds would be open.

Phoenix said it expected to complete its acquisition of Standard Life Assurance at the end of this month.

Phoenix said Solvency II surplus stood at 2.3 billion pounds as of June 30, rising 27.8 percent from Dec. 31, matching analysts’ average estimate.

It will pay an interim dividend of 22.6 pence per share, down from 25.1 pence a year earlier but in line with analysts’ expectations.

IFRS operating profit rose marginally to 216 million pounds in the six months ended June 30, beating analysts average expectation of 172 million pounds.

Phoenix shares rose 1.5 percent to 711 pence.

Reporting by Arathy S Nair and Noor Zainab Hussain in Bengaluru; Editing by Sai Sachin Ravikumar and Edmund Blair

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