Phoenix Group strengthens capital and profitability, upgrades targets to 2026

Phoenix Group Holdings PLC (LSE: PHNX) has significantly outperformed expectations in 2024, delivering robust financial results that have led to an upward revision of its long-term growth projections. The UK-based insurance and retirement savings provider reported that Operating Cash Generation surged to £1.4 billion, hitting its 2026 target two years ahead of schedule. Meanwhile, Adjusted Operating Profit climbed 31% to £825 million, supported by strong momentum in its Pensions and Savings and Retirement Solutions segments.

These results come amid a broader transformation within the UK’s pension and insurance sector, where providers are increasingly shifting towards capital-light business models to drive efficiency and shareholder value. Against this backdrop, Phoenix Group has focused on organic growth, enhanced asset management, and strategic capital allocation to bolster its long-term financial sustainability. With an upgraded cash generation target of £5.1 billion through 2026, the company remains committed to deleveraging while maintaining a progressive dividend policy.

What Drove Phoenix Group’s Strong Cash and Capital Performance?

Phoenix Group’s ability to generate substantial Operating Cash Generation was a defining factor in its 2024 success. Cash inflows reached £1.78 billion, exceeding the upper range of its £1.4 billion–£1.5 billion target. This was driven by recurring management actions, totaling £537 million, and a growing surplus from its core businesses. Strong cash reserves have enabled the company to cover recurring expenses while generating approximately £300 million in excess capital annually.

On the capital front, Phoenix Group reported a Solvency II Surplus of £3.5 billion, ensuring financial resilience. Its Shareholder Capital Coverage Ratio stood at 172%, positioning the company comfortably within its 140%-180% operational range. The insurer also continued executing its debt reduction strategy, retiring £250 million in M&A-related debt during the year. An additional $250 million in repayments were made post-year-end in February 2025, reinforcing the company’s commitment to lowering its Solvency II leverage ratio to around 30% by 2026.

How Has Phoenix Group’s Profitability Improved?

Phoenix Group’s profitability continued to strengthen, with Adjusted Operating Profit rising 31% year over year to £825 million. Growth was particularly pronounced in its Pensions and Savings segment, where profits surged 66% to £316 million, benefiting from a larger assets under administration base and improved operating margins. The Retirement Solutions division also saw strong results, with Adjusted Operating Profit increasing 25% to £474 million.

Despite these gains, Phoenix Group posted an IFRS after-tax loss of £1.08 billion, largely attributed to £1.3 billion in economic variances stemming from its hedging programme. These non-cash adjustments do not impact the company’s fundamental earnings strength but reflect market-driven fluctuations in asset valuations.

How Is Phoenix Group Performing in the Stock Market?

Phoenix Group’s strong financial results have translated into positive stock performance. As of March 21, 2025, the company’s shares were trading at 576.50 GBX, reflecting a 13.04% increase year-to-date. Market analysts currently maintain a “Hold” rating on the stock, with a 12-month median price target of 594 GBX, suggesting a modest potential upside of 3.04%.

Dividend sustainability remains a key factor attracting income-focused investors to Phoenix Group. The company raised its 2024 final dividend by 2.6% to 27.35p per share, bringing the total annual payout to 54p per share. Analysts anticipate a further 3.33% dividend increase in the coming year, reinforcing the insurer’s position as a stable, high-yield investment.

How Is Phoenix Group Strengthening Its Pensions and Savings Business?

Phoenix Group has solidified its market leadership in the UK pensions sector, particularly within its Workplace division, where net fund flows rose by 13% to £5.3 billion. The company successfully retained key pension schemes while adding £1.8 billion in new business. This was facilitated by digital-first member engagement strategies, competitive pricing, and an improved Master Trust offering designed to meet evolving customer needs.

Retail inflows also surged by 34% to £5.1 billion as Phoenix Group expanded its direct-to-customer business. A growing focus on customer retention and consolidation efforts has contributed to this success, alongside new investment offerings such as the Standard Life Smoothed Return Pension Fund and the launch of Future Growth Capital, a private markets investment manager developed in partnership with Schroders.

What Is Driving Growth in Phoenix Group’s Retirement Solutions Business?

The insurer’s Retirement Solutions division continues to gain traction, with bulk purchase annuity premiums totaling £5.1 billion in 2024. Phoenix Group has consistently maintained a top-five position in the UK’s annuity market by leveraging competitive pricing strategies, optimised balance sheet management, and an expanding network of reinsurance partnerships.

Phoenix Group has also strengthened its individual annuities business, where premiums increased to £1 billion, up from £600 million in 2023. With a 12% market share in this segment, the company is focused on broadening its product range, introducing innovations such as the Standard Life Guaranteed Fixed-term Income plan.

How Is Phoenix Asset Management Enhancing Financial Efficiency?

Phoenix Asset Management played a critical role in driving financial performance, with £537 million in recurring management actions delivering cost efficiencies and capital enhancements. The company has expanded its asset management capabilities, investing in talent and advanced risk management technologies. These measures support initiatives such as annuity portfolio re-optimisation, capital restructuring, and fund consolidation—all of which contribute to long-term capital efficiency and sustainable growth.

What Are the Investment Considerations for Phoenix Group?

Phoenix Group presents a compelling investment opportunity for income-focused investors, particularly given its strong Operating Cash Generation and high dividend yield. With forward-looking dividend yields projected at 9.68% for 2025 and 9.95% for 2026, the stock remains attractive for those seeking stable returns.

However, valuation concerns persist, with the company trading at a Price-to-Earnings (P/E) ratio of 35.8x for 2025, dropping to 14.6x for 2026. While long-term profitability prospects are promising, investors should monitor macroeconomic conditions and regulatory shifts that could impact Phoenix Group’s growth trajectory.

What Lies Ahead for Phoenix Group?

With upgraded Operating Cash Generation, a strong Solvency II Surplus, and rising Adjusted Operating Profit, Phoenix Group is well-positioned for sustained financial growth. The company’s disciplined approach to capital management, strategic investments in asset management, and focus on expanding its pension and retirement offerings reinforce its long-term stability.

As Phoenix Group progresses towards its 2026 targets, its ability to balance profitability, capital strength, and shareholder returns will remain central to its investment appeal. With a resilient market position and a track record of meeting or exceeding financial goals, the insurer continues to strengthen its standing in the UK’s pension and insurance landscape.