Phoenix Group posts £266m profit and writes off £40m due to charge cap

Phoenix Group’s profits soared to £266m in the first half of 2014, up 43 per cent on the £186m in the six months to 30 June 2013, mostly due to actuarial changes and “balance sheet reviews”.

Phoenix announced the £390m sale of Ignis to Standard Life Investments in March, but as the sale was completed after 30 June it did not affect accounts for the first half of the year.

It used £250m from the sale, as well as the £300m it raised from issuing a seven-year unsecured bond at 5.75 per cent to pay down debt. Another £206m was paid down using spare cash in July, alongside a refinancing of the group’s loan facility.

Ignis’ six-month profit fell by £2m from a year earlier to £17m, the accounts show, due to life company asset run off, higher staff incentive payments and lower performance fees.

Phoenix chief executive Clive Bannister says it was a “transformational” period for the company, with strong results that helped drive continued refinancing.

“The first half of 2014 has delivered many successes for the Group. The balance sheet has been transformed, our structure has been simplified and our reliance upon bank financing has been reduced,” he says.

“We have created a sound platform for Phoenix to consider potential acquisition opportunities, enabling us to grow the business and strengthen our existing position as the UK’s largest specialist consolidator of closed life funds.”

The firm reduced its embedded value by £40m due to the Government’s announcement of a 75bps charge cap. Despite not being engaged in auto-enrolment, the potential for some historic workplace schemes to become qualifying led to the revaluing.

It wrote off a further £17m because it expects the take-up of guaranteed annuities will fall by a fifth.

Meanwhile, the firm is working with its outsourcing partner HSBC to consolidate its investment fund accounting, unit pricing and custody arrangements. It aims to finish the project by 2015.