Phoenix Group Reports Strong 2025 Interim Results with Growth and Strategic Progress

Phoenix Group’s H1 2025: cash up, capital stronger, dividend nudged higher

Phoenix Group has posted a tidy first half. Cash generation, operating profit and solvency all moved the right way, while the interim dividend rises 2.6%. Management sounds confident about hitting the 2026 goals and is pressing ahead with the strategy to grow fee income, write disciplined annuities and strip out costs. The group still reports an IFRS loss because of hedging, but the balance sheet and cash tell a sturdier story.

Key metric	H1 2025	Comparator	Change
Operating Cash Generation (OCG)	£705m	H1 2024: £647m	+9%
Total cash generation	£784m	H1 2024: £950m	-17%
Shareholder Capital Coverage Ratio (SCCR)	175%	FY 2024: 172%	+3pp
Solvency II surplus	£3.6bn	FY 2024: £3.5bn	+2%
SII leverage ratio	34%	FY 2024: 36%	-2pp
IFRS adjusted operating profit	£451m	H1 2024: £360m	+25%
IFRS loss after tax	£(156)m	H1 2024: £(646)m	Improved
Adjusted shareholders’ equity	£3,443m	FY 2024: £3,656m	-6%
Interim dividend	27.35p	H1 2024: 26.65p	+2.6%
Assets under administration	£295bn	FY 2024: £292bn	+1%

Cash and capital: why these moves matter

Operating Cash Generation – the group’s preferred measure of underlying cash the life companies can upstream – rose 9% to £705 million. It more than covered recurring uses of cash in the half. The big driver was £294 million of “recurring management actions”, mainly portfolio optimisation and capital improvement. In plain English: better asset-liability matching and balance sheet tinkering that releases cash, now increasingly supported by in-house capabilities.

On capital, the Solvency II surplus nudged up to £3.6 billion and the SCCR improved to 175%, near the top of Phoenix’s 140-180% range. Leverage fell to 34% after repaying $250 million of Restricted Tier 1 notes in February. The path to the 30% target by end-2026 looks credible if excess cash keeps going to debt reduction.

Segment performance: fee growth and disciplined annuities

Pensions and Savings: fee-based engine keeps building

• IFRS adjusted operating profit up 20% to £179 million.
• Average AUA up 5% to £187.9 billion with the margin improving 2bps to 19bps as costs come down.
• Workplace net inflows £2.8 billion (H1 2024: £3.3 billion) – last year benefited from a £0.9 billion one-off bulk win.
• Retail net outflows improved to £4.4 billion from £4.6 billion as early signs of the retail strategy show.

The direction is right. Higher AUA and a slowly improving margin are valuable because this is capital-light revenue. Approval for the in-house Retail advice proposition and tools like the Annuity Desk should help retention and cross-sell from here.

Retirement Solutions: profits up, BPA pipeline loaded

• IFRS adjusted operating profit up 36% to £286 million, supported by higher Contractual Service Margin (CSM) release and investment margin.
• Group CSM (gross of tax) up 10% to £3,567 million – a stock of future profit under IFRS 17.
• H1 BPA volumes £0.3 billion reflecting selective pricing in a competitive market. Year to date, £3.2 billion completed and exclusive at c.3% capital strain, including a £1.9 billion deal in July.
• Individual annuity premiums £0.6 billion (HY 2024: £0.5 billion).
• Phoenix still expects to deploy up to c.£200 million of capital into annuities in 2025.

The story here is discipline over volume. Lower first-half BPA sales kept strain modest, while the second half pipeline looks chunky. The capital strain point matters – writing annuities that are accretive, not just big, protects returns and solvency.

Strategy execution: Grow, Optimise, Enhance

Grow: more products and advice to deepen customer relationships

• FCA approval for Phoenix’s in-house Retail advice proposition, enabling an imminent launch.
• Guaranteed Lifetime Income plan launched, completing the retirement income suite.
• Customer engagement strengthened with digital initiatives, including the pension dashboard connection and Family Finance Hub.

Optimise: in-house management of annuity-backing assets

• Shift to a predominantly in-house model for annuity assets. £5 billion already managed internally out of a £39 billion portfolio, with c.£20 billion more being prepared.
• Recurring management actions of £294 million in the half (H1 2024: £264 million).
• Deleveraging continues – $250 million debt repaid in February.

This is a notable pivot. Bringing annuity asset management in-house should cut costs, enable faster portfolio optimisation and underpin future cash actions. Phoenix is clear it is not turning into a third-party asset manager – this is about improving outcomes on its own liabilities.

Enhance: operating model overhaul accelerates cost savings

• Cumulative run-rate cost savings now £100 million, with FY 2025 expected at c.£160 million – a £35 million acceleration.
• 0.8 million policies migrated to TCS BaNCS in H1; new Wipro partnership to manage 1.9 million policies.

Scale benefits are starting to show through the P&L via margin improvement and lower central costs. The £250 million run-rate savings target by end-2026 remains on track.

Dividend, guidance and the 2026 scorecard

The Board declared an interim dividend of 27.35p, equal to the 2024 final, and 2.6% higher year on year. OCG covered the dividend and other recurring uses. Against the three-year scorecard:

• Total cash generation target of £5.1 billion for 2024-26 – £2.6 billion delivered to date.
• SCCR within the 140-180% operating range – now 175%.
• SII leverage on course for c.30% by end-2026 – now 34%.
• IFRS adjusted operating profit target c.£1.1 billion in 2026 – H1 2025 grew 25% year on year.
• Run-rate cost savings target £250 million by 2026 – £100 million achieved.

Brand-wise, the group plans to change its name to Standard Life plc in March 2026, bringing the most recognised brand in the stable to the top of the shop.

IFRS loss explained: the hedge does its job, the accounting looks ugly

Phoenix reported a statutory IFRS loss after tax of £156 million, far better than last year’s £646 million loss. The culprit remains “economic variances” of £275 million, largely hedge marks as equities rose and rates edged up. Management prioritises protecting cash and solvency – which the hedging programme is designed to do – and accepts the IFRS volatility that comes with it.

My take: positives, pressure points and what to watch next

What looks good

• Cash generation is growing and comfortably covers the dividend.
• Solvency metrics improved and leverage is trending down, giving more optionality.
• Fee-based Pensions and Savings is scaling with better margins – exactly what long-term investors want.
• Retirement Solutions profit growth is strong, with a loaded H2 BPA pipeline at sensible capital strain.
• Cost savings are ahead of plan, aided by platform migrations and partnerships.

What to keep an eye on

• Total cash generation was lower year on year as non-operating remittances eased – timing sensitive, but worth tracking.
• IFRS shareholders’ equity fell to £768 million, reflecting the statutory loss. The company argues equity is not a dividend constraint, but it will draw attention.
• BPA market remains competitive. Maintaining c.3% strain and pricing discipline is key to protecting returns.
• Execution risk on the big in-housing shift for annuity assets and the ongoing policy migrations.

H2 2025 catalysts

• Launch of the in-house Retail advice proposition and further distribution moves.
• Completion of BPA deals already in the bag or in exclusivity – a swing factor for cash and CSM.
• Further deleveraging as excess cash builds.
• Progress on bringing c.£20 billion of annuity assets in-house and driving recurring management actions.

Overall, this is another solid step towards the 2026 targets. If Phoenix keeps compounding fee income, writes disciplined annuities and chips away at leverage, the dividend case strengthens and the valuation should take care of itself. The accounting noise may continue, but the underlying engine looks healthier.