Insurer Phoenix Group sees annual losses rise by £1bn as asset values plunge amid economic uncertainty
- Higher yields and inflation and wider credit spreads have affected his investment returns
- Phoenix Group went from a loss of £709m in 2021 to a loss of £1.76bn last year
- Assets under administration plunged by £51bn amid rising economic volatility
Losses at the Phoenix Group soared by £1billion last year following a fall in the value of assets supporting the company’s pension schemes.
The savings giant posted a loss of £1.76bn for 2022, up from £709m the previous year, as rising yields, inflation and widening credit spreads had an impact on its return on investment.
Losses were further impacted by an accounting discrepancy in pension plans that were redeemed.
Profits: The savings giant announced a loss of £1.76bn for 2022 as rising yields, inflation and widening credit spreads impacted its investment returns
Meanwhile, assets under administration plunged by £51bn amid growing volatility exacerbated by former Prime Minister Liz Truss’ controversial mini budget last September.
Yet unlike many other insurers, the company does not participate in the liability-driven investment (LDI) market, which has come under considerable pressure following the budget.
Phoenix received numerous guarantee calls on its hedging instruments following the budget statement, but was able to satisfy all of them.
The FTSE 100 company also continued to make significant wholesale annuity buyouts, in which pension schemes acquire an insurance policy that helps ensure that all future payments and benefits are paid to members.
In a week between late October and early November, its Standard Life arm secured a £530m buyout with the Cobham Pension Scheme and a £200m buyout deal with the Agfa Group Pension Scheme. UK.
Other BPA deals completed during the year included those with the £1bn WH Smith Pension Trust, the Premier Inn owner’s pension scheme Whitbread Group and the Findel Group Pension Fund .
These significant transactions increased Phoenix’s cash generation levels above its expected target range of £1.5 billion and achieved record new business growth of £1.2 billion. .
Company bosses have recommended a 5% increase in its final dividend due to the results, in addition to the impending takeover of Sun Life of Canada UK.
Despite continued political and economic uncertainty affecting the UK economy, Phoenix is confident about its business prospects for the year ahead.
Andy Briggs, the company’s chief executive, said: “It is clear that 2023 will present a difficult economic environment. However, our business model is designed to be resilient throughout the economic cycle.
“Our global hedging approach is designed to protect our solvency capital from the majority of the market risks to which we are exposed, while the key areas of structural market growth that we are focused on remain attractive.”
Shares of Phoenix Group Holdings were down 2% at 605.2p midday Monday, although they have lost around 16% of their value in the past 12 months.