Phoenix Group expects positive net fund flows for the first time ever in 2024

Phoenix Group is on track to generate positive net fund flows for the first time in its history in 2024, after new production rose sharply in the first half.

The insurer reported a 72 percent increase in net fund flows for new businesses to £3.1 billion in the six months to June, compared to £1.8 billion at the same time last year.

The company’s long-term incremental cash flow generation rose 106 percent year-on-year to £885 million.

CEO Andy Briggs told Reuters news agency that the outlook for the UK pension market is positive, despite challenging conditions in other sectors.

The occupational pension scheme market has grown rapidly due to the aging of the population and the shift from defined benefit to defined contribution pension schemes, as well as auto-enrolment.

Briggs said he expects the market for bulk annuities – which insure company-defined benefits, or final salary and pension schemes – to grow to a record more than £40 billion this year as higher interest rates make them more affordable. The market has been worth around £30 billion in recent years.

The FTSE 100 company, through its Standard Life brand, has sought to expand into bulk annuities as demand for corporate pension insurance grows against the backdrop of rising interest rates that have pushed up returns.

‘There are a number of very large schemes … over £10 billion that are in discussions with the market and are considering buying out some or all of the scheme, and that is one of the reasons why the market is so strong.’ Briggs said.

“We’re not likely to write those super-sized cases…(we) will be very happy to pick up the medium-sized cases,” he added.

The group’s losses shot up by £1 billion last year due to a fall in the value of assets supporting the company’s pension schemes.

The company reported a loss of £1.76 billion for 2022, compared with £709 million the year before, as rising interest rates, inflation and a widening of credit spreads affected their investment returns.

The losses were further affected by an accounting discrepancy with pension plans for which buy-ins took place

The insurer expects cash generation in 2023 to be at the high end of the expected range of £1.3 billion to £1.4 billion, after new long-term production more than doubled in the first half.

The company’s total cash generation for the six months ended June 30 was £898 million, higher than the average analyst forecast of £733 million.

Phoenix Group shares rose 1 percent to 543.40p in afternoon trading on Monday