My blueprint can boost our dividend – by homing in on work pensions
Phoenix chief’s upbeat message to investors
OVERSEEING billions of pounds of retirement money is a serious business, but Andy Briggs is showing little sign of feeling the strain. In fact, the chief executive of FTSE 100 insurer Phoenix Group exudes the confidence of a man with a plan as he talks over Zoom from his West London home.
And he certainly has a bold vision for Britain’s biggest retirement firm. In his first big interview since taking the top job last March, Briggs reveals a strategy for winning new customers that, he hopes, will pave the way for another dividend boost.
He knows a dividend hike will be attractive to investors: lots of companies have slashed payouts during the pandemic, but Phoenix has so far bucked the trend. The group boosted its final dividend by 3 per cent last year and the stock yields 6.7 per cent, making it the ninth highest payer in the FTSE 100, according to investment site AJ Bell.
Although the company’s dividend has soared by 50 per cent in the past decade, this has been propelled by acquisitions rather than growing new business. Now, Briggs aims to go further. He wants to generate extra cash by signing up more firms to Phoenix’s workplace pension plans; expanding its offering of retirement products to over-55s who use the pension freedoms; and ramping up Phoenix’s business insuring defined benefit pensions as companies protect their balance sheets after years of making costly payout promises to staff with final salary schemes.
All told, the 55-year-old reckons Phoenix could rake in more than £800 million from new business this year – up from £766 million last year. ‘If we’re able to get that above £800 million that will be the trigger for us to consider growing the dividend organically,’ Briggs says. ‘Most people own insurance stocks, including Phoenix, for the income.’
Before taking on the chief executive role last March, Briggs was in the running for the top job at rival Aviva. He narrowly lost out to Canadian Maurice Tulloch in 2019, who lasted less than a year and a half in the position.
Is Briggs bitter about the way it panned out? ‘The Aviva thing I was quite relaxed about,’ he says. ‘At the time, the board was not persuaded [by my pitch] and didn’t want to go down that route, but it’s all very amicable.’
Briggs’s push for new business is a significant development for Phoenix. Until recently, it had been known as a company that acquired only closed pension and life insurance funds which no longer sold new policies. Its business was based on winding down these socalled ‘ zombie’ funds in a costeffective way.
But just over two years ago, Phoenix bought Standard Life’s pension business, paving the way for an expansion into workplace pension sales. Phoenix will finalise a deal to use the Standard Life brand name next week on May 18. After snapping up rival Reassure for £3.3 billion last year, Phoenix now oversees £338 billion of pensions and savings and has 14 million customers with some 7,500 employees.
Shares are up by more than a fifth over the past year, giving Phoenix a market value of £7.3 billion.
Briggs says he will continue to build the closed business and hunt for acquisitions – but his big drive will be on expanding the workplace pension business and serving retirees. ‘When we bought Standard Life, it was the first time Phoenix had bought an operation that was open to new business,’ he says.
‘Now we are the UK’s largest longterm savings and retirement business, [the question is] what is our core social purpose, what are we here for, what are we all about?’
His answer is simple: follow the money. ‘Corporates want to de-risk t heir defined benefit pension schemes. That’s worth about £30 billion to £40 billion a year,’ he says.
‘ You’ve got about £ 40 billion a year coming into workplace pension schemes as a result of autoenrolment [where staff are signed up by default by their company].
And then every year, you’ve got about £30 billion from people over 50 on their journey to retirement. So our strategy is built on those market trends.’
Briggs says he’s been busy ‘hiring some strong talent’ to capitalise on the business insuring costly defined benefit pension schemes. He adds: ‘Last year, we invested £150 million and wrote £1.8 billion of business. This year, we’re more likely to allocate £200 million, to write £3 billion to £ 4 billion, so we’ve got quite ambitious plans.’
Meanwhile, Briggs is on the lookout to acquire companies that operate employee benefits packages.
‘Corporates in the UK want to offer wellbeing protection for their employees as part of their benefits packages,’ he says. ‘Group protection plans is one thing we don’t have currently, and there’d be a good strategic logic to having that.’
Briggs says although he’s not ‘desperately pounding the streets looking for the next deal’, Phoenix has the ‘appetite and firepower’ if the right opportunity comes along.
‘The outlook for acquisitions is attractive,’ says Briggs. The pandemic has meant some companies are looking to offload parts of their business to free up capital, he explains. Rivals including Aviva and Prudential have been sharpening their businesses by splitting the group or pulling out of less profitable overseas markets.
Phoenix is also assessing whether to offload part of its business – specifically its German and Irish operations, which were acquired from Standard Life. Investors will hope that, sale or no sale, Briggs has enough irons in the fire to deliver that alluring dividend boost.
‘People own insurance stocks for the income’ ‘The outlook now for acquisitions is attractive’