What we do
Phoenix Group is the UK’s largest specialist closed life and pension fund consolidator. We manage life insurance funds which no longer actively sell new life or pension policies and which run-off gradually over time. The Group’s closed life funds consist of around 5 million policyholders and total life company assets of approximately £52 billion.
Our mission is to improve returns for our policyholders and deliver value for shareholders. We intend to achieve this by realising our vision to be the saver-friendly, “industry solution” for the safe, innovative and profitable management of closed life funds.
How we create value
Unlike open life businesses, we are not required to allocate significant capital to support the writing and distribution of new insurance products. This means that the capital requirements of our operating life companies decline as policies mature, releasing excess capital in the form of cash.
We create value by seeking to enhance policyholder returns from our in-force book of closed life funds and generating profits for shareholders from participation in investment returns, policyholder charges and management fees earned on assets. These additional profits from the in-force policies increase the free surplus which can be released by the Group’s life companies in the form of cash.
External outsource partners are used for policy administration, thereby minimising fixed costs. This provides a more efficient operating model as the policies run-off, in addition to a scalable and cost-effective platform to support the Group’s consolidation strategy.
Our investment thesis:
1. Predictable long term cash generation supporting a stable, sustainable dividend
As the Group’s funds are closed to new business, we have high visibility of our cash flows over the long term. The Group’s target of delivering £2.8 billion of cash over the period 2014 to 2019 supports the Board’s policy of maintaining a stable, sustainable dividend while the Group builds its financial flexibility to execute its growth strategy.
2. An operational platform specifically designed for closed fund management
Phoenix Group is the largest specialist closed life fund consolidator in the UK, with a simplified and scalable business model, allowing it to benefit from economies of scale, diversification benefits and the ability to save costs both internally and through outsourcing arrangements.
3. Management track record of delivering incremental value through “The Phoenix Way”
“The Phoenix Way” characterises an approach for the efficient and effective structuring, integration and management of closed life funds and the investments they hold. As a result of management actions taken, Phoenix Group has achieved £1.2 billion of incremental Market Consistent Embedded Value (“MCEV”) over the period 2009 to 2014.
4. Growth through further closed life fund consolidation
We estimate there are over £300 billion of closed funds in the UK and believe that there is value to be generated for customers and shareholders by these funds being owned and managed by a specialist consolidator like Phoenix Group. The investment we have made in our operating model means that we are well placed to participate in future consolidation of the closed life fund market.