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Excessive inflation has supplied a lift to the UK’s retirement sector, as rising pay awards enhance the quantity that individuals are placing into their pension, in accordance with FTSE 100 life insurance coverage group Phoenix.
Official information final week confirmed UK wages grew at 7.8 per cent — the quickest tempo on document — within the three months to July as staff reacted to will increase in the price of dwelling by negotiating greater pay will increase with their employers. As a result of many office retirement schemes are straight linked to salaries, any enhance in pay results in greater pension contributions.
“Counter-intuitively, so far as our sector is anxious, the UK financial setting is accelerating our progress, so we actually are feeling constructive in regards to the market drivers of progress,” stated Phoenix’s chief government Andy Briggs in an interview with the Monetary Occasions.
Briggs additionally pointed to a booming marketplace for bulk buy annuities, through which corporations switch their outlined profit pension schemes to insurers similar to Phoenix, spurred by rising rates of interest.
Increased rates of interest cut back the current worth of the schemes’ future liabilities, and so make pension switch offers extra reasonably priced for corporations. In keeping with consultants Lane Clark & Peacock, there was a document quantity of offers within the first half of the yr.
Briggs was additionally optimistic in regards to the prospect of extra mergers and acquisitions exercise. A lot of Phoenix’s progress traditionally has come from acquisitions, including closed books of life insurance enterprise to its personal operations. Within the first half of the yr, the corporate accomplished the £250mn acquisition of Solar Lifetime of Canada UK, and Briggs expects extra offers as inflation provides to life insurers’ prices.
His feedback got here as Phoenix reported abridged outcomes for the primary half of the yr. New enterprise internet fund flows, a measure of the quantity of latest cash that the corporate was given to handle, rose 72 per cent to £3.1bn.
General, Phoenix’s working companies generated £898mn of money. That was down on the £950mn delivered in the identical interval final yr, however the firm stated the determine for the total yr could be on the prime finish of its goal vary of £1.3bn to £1.4bn.
The primary-half dividend was elevated by 5 per cent to 26p per share.
Phoenix has delayed the publication of a full set of accounts for the primary half of the yr till subsequent week, blaming the “operational complexity” of the transition to the brand new IFRS 17 accounting customary.
Phoenix shares rose by slightly below 1 per cent in early buying and selling on Monday.