Phoenix says it is pursuing an aggressive acquisition strategy and predicts a number of companies running closed funds will look to offload their books.
The firm’s results for 2010 show an £81m drop in pre-tax operating profits, from £469m to £388m. However, the firm says its 2009 figures were inflated due to longevity assumptions which, across the Phoenix business, added £139 million to 2009 IFRS profits. It says removing this effect would show an operating profit increase of 16 per cent, to £373 million, in 2010.
It reported operating cashflows of £734m in 2010, ahead of its target of £625 – £725m.
The firm, which specialises in the consolidation of closed life funds, says it expects a number of companies running closed funds to seek offload the funds.
Phoenix Group chairman Ron Sandler says: “In due course, we expect to grow further by acquisition. There are hundreds of billions of pounds in closed or quasi-closed life funds, particularly in the with-profits sector.
“We are aware that current operators of those funds are reviewing whether they wish to continue to apply scarce capital to maintain this line of business and we expect that many will decide they wish to exit.”
With-profit funds where internal capital support has been provided suffered losses of £7m for the year ended December 31, 2010 compared with profits of £20m the previous year. Phoenix says the result was negatively impacted by a reduction in assumed surrender rates in funds with policyholder guarantees.
However, improvements in market conditions meant the firm’s other with-profit funds experienced a £6m boost in profits, up from £49m in 2009 to £55m in 2010.
Operating profits on non-profit and unit-linked funds slumped to £278m in 2010, down from £331m in 2009. This was primarily due to a drop in new business from vesting annuities, down from £35m last year to £22m in 2010, and the positive impact of longevity assumption changes in 2009.