March 5, 2019 / 8:02 AM / 4 months ago

UPDATE 2-Phoenix Group sees more UK Plc pension insurance deals as Brexit nears

* Posts jump in annual profit

* Sees higher cash generation between 2019-2023

* “Bullet proof” to any Brexit scenario - CEO

* Shares rise on profit beat (Adds CEO comments on Brexit, shares, details)

By Noor Zainab Hussain

March 5 (Reuters) - Phoenix Group, Europe’s largest owner of life assurance funds closed to new customers, expects Britain’s approaching departure from the European Union to push more UK companies to offload risks linked to their pension schemes in 2019.

The company also reported higher full-year profit and targeted cash generation of 3.8 billion pounds ($5.01 billion)from 2019 to 2023, more than the 2.5 billion pounds it earlier expected to earn between 2018 and 2022.

Phoenix, poised to enter London’s blue-chip index, also said its preparations for Brexit were complete, adding it would transfer assets to an Irish domiciled unit in which it has injected 250 million pounds.

“We think we are bullet proof. We are ready for any Brexit scenario,” Chief Executive Officer Clive Bannister told Reuters.

Phoenix’s European businesses make up about 10 percent of its assets under management, with the Irish office managing 23 billion pounds. The company employs 600 people in Ireland and Germany, under 15 percent of its workforce.

Phoenix’s shares were 2.5 percent higher at 723.4 pence at 0918 GMT after it said IFRS operating profit rose to 708 million pounds in the year ended Dec. 31, from 368 million pounds a year earlier.

This was significantly above consensus expectations of 492 million pounds, boosted in part by a large release of longevity reserves due to easing growth in life expectancy in Britain.

British companies are already expected to try and offload a record amount of pension schemes risk in 2019 as growth in life expectancy eases and interest rates rise, making deals more attractive for insurance firms.

Asked if Brexit would push more firms to offload pension risks, Bannister said “Yes, If you are running a company, you don’t wish to have your balance sheet exposed to vagaries, ups and downs, deficits or surplus that can cause damage”.

A company’s pension obligations sit on its balance sheet and can limit its financial and strategic options so most boards are keen to pass the burden on.

Phoenix, which bought the bulk of Standard Life Aberdeen Plc’s insurance business last year, expects to generate between 600 million pounds and 700 million pounds of cash, net of the cost of capitalising its Irish unit for Brexit.

“Despite our expectation that market conditions will remain turbulent leading up to and beyond Brexit, we look ahead with optimism as Phoenix’s hedging programme brings resilience to the Group’s solvency position and cash generation,” the company said. ($1 = 0.7584 pounds)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shounak Dasgupta and Emelia Sithole-Matarise

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