Phoenix Group has acquired a £300m ($450m) portfolio of equity-release mortgages, it said in its interim first quarter management statement.
Phoenix explained that this is "in line with the strategy to diversify the asset portfolio by investing in new asset classes to support the group's annuity liabilities."
The statement also said the group generated cash of £87m in the three months to 31 March 2015 (vs £235m in the same period of 2014) and remains on track to meet all its financial targets.
Vidur Bahree, head of the financial management group at Phoenix, told Insurance Asset Risk in January (IAR, 21 January 2015 Phoenix's Vidur Bahree: putting the house in order) that while, from a Solvency II perspective equity- release mortgages "are very challenged", they remain "assets that we would regard as part of the asset strategy for annuity business, supporting a moderate allocation."
UK insurers have been told by the Prudential Regulation Authority (PRA) that equity-release mortgages are not allowed into an asset portfolio when using the matching adjustment. However, it is possible to restructure the assets in a way that the PRA would accept (see IAR, 23 February, PRA gives guidance on equity release mortgages)
Clive Bannister, group chief executive, said Phoenix is "on track for both our Solvency II internal model application and to achieve an investment grade credit rating during 2015. We have successfully managed the introduction of the new pension freedoms, supporting our customers as they consider a wider range of options for their retirement provision. We remain in line to meet all our financial targets."