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09 Feb 2024
UK life: 3 things that matter at FY23 results
Aviva plc (AV:LON), 611 | Legal & General Group Plc (LGEN:LON), 243 | Phoenix Group Holdings plc (PHNX:LON), 643 | M&G Plc (MNG:LON), 222

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UK life: 3 things that matter at FY23 results
Aviva plc (AV:LON), 611 | Legal & General Group Plc (LGEN:LON), 243 | Phoenix Group Holdings plc (PHNX:LON), 643 | M&G Plc (MNG:LON), 222
- Published:
09 Feb 2024 -
Author:
O''Mahony Dominic DO -
Pages:
30 -
FY23 headline financials have already been well guided to by the UK life insurers. So we set out three things that matter at FY23 results beyond the headline print for each of the names in our coverage. We see the most upside from results at Phoenix.
LandG: i) strategy, ii) capital returns, iii) OSG outlook
FY23 results will be the first opportunity for investors to hear from the CEO: expect high-level priorities, but limited specifics yet. Some investors are asking if the group will announce a substantial buyback - we continue to think this is unlikely. The company has already guided to the OSG in FY23 (c.GBP1.8bn), but we will also get information on the outlook for annuity OSG in 2024 and beyond.
Aviva: i) wealth, ii) underwriting, iii) capital vs. cash gen
Wealth is disproportionately important to the investment case, but flows appear to have suffered in 2023. PandC underwriting deteriorated on an underlying basis at HY23 - we expect improvement by year-end, but are still sceptical on the 94% undiscounted COR target. The conversion of OCG into remittances has been very high - if this continues at FY23, expect questions on sustainability.
Phoenix: i) capital deployment, ii) new business targets, iii) disclosure
Phoenix has a few hundred million of deployable cash - we expect the company to reduce debt in the first instance. Phoenix has achieved the 2025 new business target two years early; there is potential for an upgrade of the target at results. The company will likely provide new IFRS 17 related disclosure, which may help assuage concerns on dividend sustainability.
MandG: i) flows, ii) bulk annuities, iii) capital generation outlook
Decent flows will be important to help get the cost/income ratio down to 70% by 2025 (79% in 1H23); wholesale is outperforming, but largely flat nonetheless. We will get more disclosure on the new BPA business. And we expect the capital generation outlook will have improved year on year.