Good morning, everybody, and welcome to Phoenix Group's 2021 full year results presentation. I'm delighted to be back presenting in person, and it's great to see you all here. Thank you for coming. It's clearly been an extraordinary two years since I started, firstly with the pandemic, and now with the tragic war in Ukraine. Our thoughts, of course, go out to all of those affected. Before we take you through our results, we wanted to share our new visual identity of Phoenix Group, which has been designed to embody our purpose and better reflects the growing, sustainable business we now are. Under our new Group brand strategy, Phoenix Group will be our master brand and employer brand and endorse our powerful consumer brands of Standard Life, SunLife, Phoenix Life, and ReAssure, who will be part of Phoenix Group.
A powerhouse of brands that together will support us in delivering our purpose and our strategy. Visual identity is important, but what a brand stands for is really critical. I passionately believe that the best businesses have a core social purpose, which is why ours is helping people secure a life of possibilities. Helping a broad range of people in the U.K. to journey to and through retirement and enjoy a better later life. As a purpose-led organization, we are committed to delivering better outcomes for all of our stakeholders. It is only by having the best people, who are focused on our purpose, that we can deliver better outcomes for our customers and wider society, and in turn, produce stronger returns for all our investors. The virtuous circle you see on this slide.
How have we delivered for investors in 2021 against our financial framework of cash, resilience, and growth? 2021 has been an outstanding year for Phoenix and extends our excellent track record of financial results. We delivered record cash generation, once again exceeding our target range for the year. Our balance sheet remains strong, with our shareholder capital coverage ratio at the top end of our 140%-180% target range. We have generated record new business long-term cash generation, up 55% for the year. I am delighted that 2021 was the year that we have proven the wedge, the hypothesis first set back in 2018. In fact, we have more than proven the wedge, with GBP 1.2 billion of new business long-term cash generation from our open business exceeding the GBP 800 million per annum needed to offset the heritage runoff.
The investment we are making into our open business means that we are now confident of delivering ongoing organic growth, which will more than offset the heritage runoff year after year. In addition, we have unique market-leading capabilities and a proven track record of generating further value, both by delivering management actions and by executing more M&A. Phoenix is now a growing, sustainable business. As a result of our strong outperformance in 2021, and having met our two conditions for dividend growth, the board has recommended Phoenix Group's first ever organic dividend increase of 3%. This increase reflects both the growth in our business and our strong delivery of management actions during 2021. Our new increased level of ongoing dividend is just as sustainable as it was before.
As you can see on the chart, our dividend track record is strong, and we have significantly outperformed the wider FTSE 100 over the past seven years. However, until now, historical dividend increases have only come from M&A. What is really exciting is we now have two sources of potential dividend increases, both organic growth and inorganic growth. We have therefore evolved our dividend policy to reflect this, and Rakesh will cover this later. Organic growth is a huge step for Phoenix and significantly enhances our investment case. But what remains unique about Phoenix is both the dependability and resilience of our cash. We are confident that the cash from today's in-force business, without any new business or any M&A, can pay our current increased dividend over the very long term. There are very few stocks in any sector that can say that.
Unlike any other insurer, our cash is also extremely resilient due to our hedging approach. As you can see here, in any market conditions over the last five years, our Solvency II economic variances have been negligible. This is clearly a huge advantage and differentiator in times of significant market uncertainty, such as we have today. We continue to grow, both through our open business and through further M&A. As our business grows, so will our dividend, while fully maintaining its sustainability and resilience. Putting all this together, I'm sure you agree, is a unique and highly attractive combination. That's the numbers. What have we been focused on to deliver them? We have five strategic priorities that structure how we deliver our purpose and strategy across Heritage, Open, and M&A.
These are the key programs and initiatives that will build distinctive capabilities to win in our chosen markets. Let me talk through our progress during the year against each of these strategic priorities. Optimizing our in-force business is the bedrock of Phoenix. It is a market-leading capability that we have built up over many years, and we have undertaken a range of actions during the year. In particular, I am delighted that we have delivered a record level of management actions in 2021 at GBP 1.5 billion, which includes GBP 550 million from our internal model harmonization program. The investment in our asset management capability is delivering tangible results with GBP 3 billion of new liquid asset origination at a strong average illiquidity premium of 70 basis points. Enhancing our operating model and culture is our second strategic priority.
Again, this is a distinctive capability that sets Phoenix apart from others. During 2021, we have once again demonstrated how good we are at realizing significant cost and capital synergies from our integrations, with further substantial synergies in the year. Across our two integrations, we have now delivered over GBP 2.5 billion of synergies, having exceeded our target on Standard Life and delivered 89% of our target for ReAssure in just 18 months. These are huge numbers and demonstrate the significant value we create through M&A. This is underpinned by our unique capability of delivering multiple integrations concurrently as we delivered both the migration of Old Mutual Wealth customers onto our Alpha platform and the ongoing migration of Phoenix customers from Capita to TCS. Turning to our people and culture on the right-hand side of this slide.
A clear focus for me during 2021 has been investing in the development of our fantastic internal talent to support our ambitions, as well as strengthening our teams through the hiring of market-leading external talent to bring new skills to the group. I'm also pleased that our focus on increasing female representation is beginning to develop momentum with the number of females in our top 100 leadership positions increasing from 21 to 31. Finally, it's always important to see our efforts reflected in an improved colleague engagement score. In particular, our colleagues tell us that our strong sustainability agenda is of real importance to them. Our third strategic priority is to grow our business to support both new and existing customers. We are investing in people, processes, and technology to build a market-leading open business.
I'm determined that our open business growth strategy is balanced over time between BPA and our capital-light asset-based businesses such as Workplace. Having acquired the Standard Life brand last year, we are leveraging this trusted brand to accelerate our growth. The investment into our retirement solutions business delivered a strong year in BPA with GBP 5.6 billion of premiums written while reducing our capital strain. To be clear, we are not growing in BPA at the expense of our resilience, with a balanced portfolio and low credit risk sensitivity remaining our long-term ambition here. I was also delighted that we saw clear momentum building in our Workplace business with 41 new schemes won during the year.
This demonstrates the strong proposition we now have and is evidenced by us being awarded Master Trust Offering of the Year by Pensions Age for the second year in a row. While these new scheme wins are small in terms of assets, it's an important milestone with advisors giving us the opportunity to prove ourselves on these smaller schemes before we hopefully begin winning the larger schemes in time. Finally, we have maintained, yet again, our high customer satisfaction scores, exceeding our targets for the year. Our fourth strategic priority is to innovate, to provide our customers with better financial futures. The U.K. faces a significant retirement savings gap, which we are committed to helping close. To do this, we will provide people with the right guidance and products at the right time to support the right decisions.
Key successes in the year include the development of our digital capabilities, which supported a 16% increase in customer logins across our Standard Life digital platforms. As well as the development of a roadmap to transition 1.5 million customers and over GBP 15 billion of assets into a sustainable default fund, which is now in train, enabled by the strengths of our core strategic asset management partner, abrdn. I'm also really excited by the 2022 program of work from our new think tank, Phoenix Insights. We will use research to lead fresh debate, prompt a national conversation, and inspire the action needed to make better longer lives a reality for all of us.
Be sure to keep an eye out for the launch of our Longer Lives Index on the thirtieth of March, which explores the U.K.'s preparedness for longer lives. Our fifth priority is to invest in a sustainable future. As the U.K.'s largest long-term savings and retirement business, we are responsible for managing over GBP 310 billion of assets on behalf of our 13 million customers. Our customers and shareholders trust us to keep their money safe and provide them with strong long-term financial returns while using our scale to play our part in delivering a sustainable future. That is why we are integrating ESG across our business, investing responsibly, and progressing towards our commitment of being net zero by 2050. A clear demonstration of the impact our scale affords us is the GBP 1.3 billion that we invested into sustainable assets during 2021.
For example, we invested over GBP 500 million into affordable housing, which helped support some of society's most vulnerable people, and invested over GBP 200 million into projects with a positive environmental impact, such as the provision of renewable electricity to nearly half a million homes. In summary, 2021 was a pivotal year for Phoenix, as we have now proven the wedge and are confident of proving it going forward. The board has recommended our first ever organic dividend increase of 3%, which remains just as sustainable over the long term. Strong progress has been made against our 5 strategic priorities as we deliver on our purpose and strategy. We offer an attractive dividend that is funded by our in-force business over the very long term. It is uniquely resilient, and both our organic and inorganic growth can now support future dividend increases.
With that, I will hand over to Rakesh.
Thank you, Andy, and good morning everybody. It is great to see you all here. As Andy said, Phoenix has delivered a strong financial performance in 2021. We delivered record cash generation of just over GBP 1.7 billion in the period, maintained our strong solvency balance sheet, and achieved a 55% year-on-year increase in incremental new business long-term cash generation of GBP 1.2 billion. Having met our two conditions for organic dividend growth, the board has recommended our first ever organic increase of 3% in our final dividend, equating to a total dividend of GBP 0.489 per share. As you can see from this slide, our record financial results reinforce our consistent track record of delivering cash, resilience, and growth.
For example, our cash generation has more than doubled over five years, while our dividend has increased by 8%. Meanwhile, our Solvency II surplus has nearly tripled over five years, and our shareholder ratio has increased by 16 percentage points. In terms of growth, our assets under administration have more than quadrupled, and our incremental new business long-term cash generation has grown to nearly GBP 1.2 billion in just four years, and from a standing start. Turning first to cash. With strong cash generation of GBP 1.7 billion, we have once again exceeded the top end of our target range of GBP 1.5 billion-GBP 1.6 billion for the year. This exceptional level of cash generation reflects the synergies generated by the integration of the Standard Life and ReAssure acquisitions.
We are also today setting new one-year and three-year targets, with the latter becoming a rolling target that we will update every year going forward. For 2022, we have set a target range of GBP 1.3 billion-GBP 1.4 billion of cash generation. This is lower than 2021 due to a reduced level of integration capital synergies going forward, having over-delivered on both integrations already. Our three-year cash generation target is GBP 4 billion, and guidance over the life of the business is now GBP 17 billion. As ever, I do just want to remind you that Phoenix's cash generation guidance is conservatively based on our in-force business only. It excludes the benefit of any future new business or M&A, and also excludes management actions from 2025 onwards.
Looking over the period from 2022 to 2024, this slide sets out the whole sources and uses of cash generation. This includes operating costs, debt interest, and our increased dividend. It also reflects debt maturities and call dates, which includes a GBP 450 million repayment due in July this year. This slide highlights the significant amount of surplus cash that will be generated over this period. We expect GBP 1.7 billion to be available for both organic growth through BPA and inorganic growth through M&A. Group long-term free cash was GBP 13.2 billion at the end of 2021, broadly flat on the prior year. Importantly, our recurring sources of cash exceeded our recurring uses by around GBP 300 million in the year.
We have made a significant investment into our growth ambitions during the year with the incremental costs we expect to incur to support our growth ambitions capitalized into long-term free cash with a total GBP 200 million impact. We have also recognized a GBP 200 million adverse impact from the industry-wide transition from LIBOR to SONIA. After the servicing of debt until maturity, there is GBP 11.8 billion of cash available to shareholders. With our future increased dividend cost around GBP 0.5 billion per annum, this level of group cash from our in-force business supports our dividend over the very long term.
Our Solvency II capital position remains strong with a resilient surplus of GBP 5.3 billion, which includes the deduction of our 2021 final dividend, while our shareholder capital coverage ratio has increased to 180%. We operate a target shareholder ratio range of 140%-180%. Our ratio is at the top end of that range, which means we can invest in both organic and inorganic growth opportunities to drive future returns. Our Solvency II surplus has remained resilient through the year, and the additional value we generated through management actions provided us with the capacity to invest into growth. This includes our allocation of GBP 0.4 billion of capital to BPA in 2021.
We also continue to invest into our people, processes, and technology which underpin our future growth ambitions. With these costs now reflected in the Solvency balance sheet within our expense assumptions. While the surplus remains stable year-over-year, our ratio has increased by 16 percentage points, primarily due to the strong over delivery of management actions. We have a particularly low appetite to equity, interest rate, inflation, and currency risks, which we see as unrewarded and therefore hedge to protect our Solvency II surplus. This translates into the low sensitivities presented here under our new harmonized internal model. We also manage our longevity risk through reinsurance, retaining around half of the risk across our current in-force book and reinsuring most of the risk on new business. We see credit risk as rewarded and so actively manage our portfolios to ensure they remain high quality and diversified.
The key sensitivity we focus on here is a full letter downgrade of 20% of our credit portfolio, which is currently GBP 0.4 billion and small in the context of our GBP 5.3 billion Solvency II surplus. It is also worth noting that the credit sensitivities we disclose here are prudent, as they assume no management actions are taken to rebalance our portfolio, which is different to how many of our peers disclose. We will continue to manage our credit risk sensitivity as we grow in BPA through operating a balanced portfolio and with active risk management. As a consequence of our hedging approach, we are far more resilient to the major market risks than our U.K. peers, as this slide clearly demonstrates.
This low sensitivity is especially important during times of market volatility, such as we have at present, and remains a key differentiator for us. This resilience allows us to operate with a 140%-180% target range for our shareholder capital coverage ratio. We manage over GBP 310 billion of assets on behalf of our customers and shareholders, and we have invested significantly into our asset management capability, which oversees this key responsibility. We currently partner with 10 global asset managers to manage our portfolio, which provides us with access to a wide range of new assets to support our growth aspirations. With the expertise of our core strategic partner, abrdn, a major advantage to us here. In order to manage our credit risk, Phoenix maintains a diversified GBP 40 billion shareholder credit portfolio split between liquid and illiquid credit.
Our GBP 12 billion illiquid credit portfolio comprises 29% of annuity backing assets, and we continue to target increasing our allocation of liquid credit assets to around 40% over the medium term. The proactive management of our shareholder credit assets has enabled us to uphold the high credit quality of this portfolio, where we manage our sector exposures to minimize our risk. Integral to this is ensuring we operate within our conservative risk appetite for our BBB exposure being below 20%. At the end of 2021, we were at 17%, while our exposure to BBB- remains very low at 3%, and we have had no defaults during the year. Also, given the current situation, I just wanted to flag that we no longer have any shareholder credit exposure to Russia or Ukraine, nor any exposure to sanctioned banks.
Long-dated or illiquid assets provide excellent cash flow matching for our GBP 42 billion annuity book, and are a key enabler of reducing the capital strain on our BPA business too. Reflecting the ongoing investment into our capability and team, during the year, we increased our illiquid asset origination by 48% to GBP 3 billion, with an average credit rating of single A. The strength of the team we are building is demonstrated in the strong average illiquidity premium we achieved this year. We were able to rotate out of liquid credit assets into illiquid credit at the same credit rating for a yield pickup of around 70 basis points. We have also increased our investment in sustainable assets to GBP 1.3 billion, which is now based on a rigorous definition of sustainable assets developed with Sustainalytics.
Importantly, our illiquid origination strategy is designed to diversify our risk. We do this through using the best asset managers in each asset class and geography, as well as by limiting our credit concentration risk. Our ability to deliver value-accretive management actions is a key differentiator for Phoenix. I am therefore delighted that we have delivered record management actions of GBP 1.5 billion during the year. This included a strong performance of around GBP 700 million from business as usual activity, including illiquid asset origination and asset risk management actions. In addition, our internal model harmonization success provided a significant contribution at around GBP 550 million, the majority of which was a reduction in SCR. With most of our capital synergies now realized, these will be lower in the future until the next M&A transaction.
Going forward, there continues to be further BAU actions for us to realize. We continued to make great progress across both integration programs in 2021 with GBP 824 million of further synergies in the year. A big contributor was, of course, the internal model harmonization, which delivered upfront capital synergies of around GBP 550 million from Standard Life, exceeding our previous expectation of around GBP 400 million. It also supports future capital optimization actions and underpins our future M&A ambitions. We have now delivered over GBP 2.5 billion of synergies from Standard Life and ReAssure, with nearly GBP 2 billion of this realized through capital synergies. We have also taken the strategic decision to rephase our Standard Life customer and IT migration program, with the legacy policy migrations now expected to complete by 2025.
We are looking to accelerate some exciting new capability development on TCS BaNCS to support our future Workplace growth. Moving now to growth. We have reported a 55% increase in new business long-term cash generation to GBP 1.2 billion. The biggest contributor was retirement solutions, where a strong year in BPA delivered GBP 950 million of long-term cash generation, an 82% increase on 2020. Elsewhere, it was great to see our asset-based businesses deliver increased long-term cash generation year on year, after adjusting for the disposal of the platform businesses to abrdn in 2021. We remain focused on only allocating capital to the highest return growth opportunities for our shareholders.
The investment we have made into our developing our BPA and asset management capabilities has supported us in writing GBP 5.6 billion of premiums during the year. Our capital strain has reduced from 9% last year to 6.5% this year. This is fantastic progress towards our target for 5% over the longer term. Having completed two significant transactions of GBP 1.7 billion and GBP 1.8 billion, it is clear we have become an established BPA market player. We've also continued to maintain our discipline in a competitive market, as evidenced by the double-digit IRR we achieved on our transactions in 2021.
As we enter 2022, we are confident in the outlook. Due to the surplus cash generated by our in-force business, we are now able to invest around GBP 300 million of capital into BPA annually. We are expecting a larger market in 2022, at GBP 30 billion-GBP 40 billion. Do expect the market volumes to be more weighted to the second half based on our pipeline. However, I am delighted to report that we have already won 2 external transactions this year, covering GBP 600 million of liabilities, and expect these to complete in the second quarter. We also expect to buy in the remaining Pearl pension scheme liabilities of around GBP 750 million in the second half.
That is a total of nearly GBP 1.4 billion already in train during the first quarter, which is a great start to the year. We will of course continue to retain our pricing discipline through our focus on value over volume. While individual deals will vary, we expect to see broadly similar transaction economics in 2022 as we did in 2021. Turning to our IFRS results. We delivered strong operating profit of GBP 1.2 billion in 2021, 3% higher than the prior year. Operating profit in our heritage business increased year-on-year, primarily reflecting a full year of profits from ReAssure.
Our open business operating profit reduced slightly year-over-year, due to GBP 100 million lower longevity benefit in 2021, and a strengthening of expense assumptions to reflect our investment into our growth capabilities. This was partly offset by stronger new business profits from BPAs. The sizable swing in investment return variances and economic assumption changes reflects the impact of our hedging strategy from rising rates and equities. We hedge the solvency position to deliver dependable cash and dividend resilience, and to protect against market uncertainty. Accept that this will cause volatility in our IFRS balance sheet. Having proven the wedge and recommended our first ever organic dividend increase for 2021, the board has chosen to announce a new dividend policy to better reflect the growing sustainable business that Phoenix now is.
We have therefore replaced our previous stable and sustainable dividend policy with a new policy that sets out our clear intention to pay a dividend that is sustainable and grows over time. It is important to emphasize that the board will, above all else, prioritize the sustainability of our dividend over the long term. We can now grow both organically through our open business and inorganically through M&A. The board will therefore assess annually whether business growth can sustainably fund a dividend increase. We see this new dividend policy as a critical evolution in Phoenix's investment case. To conclude, we delivered record financial results in 2021 across our financial framework of cash, resilience, and growth. We have a clear set of targets for 2022.
This includes our one-year target of GBP 1.3 billion-GBP 1.4 billion of cash generation in 2022, and GBP 4 billion over the three years to 2024. We will retain our resilient balance sheet by operating within our target ranges for solvency and leverage. In terms of growth, we are now confident of proving the wedge going forward through generating in excess of GBP 800 million of new business long-term cash generation annually. We will also remain focused on completing value accretive M&A. With that, I will now hand you back to Andy for the outlook.
Thank you, Rakesh. There are 4 major trends in the U.K. long-term savings and retirement market, and these offer Phoenix multiple growth opportunities. The heritage M&A market is huge at around GBP 480 billion. With the BPA market estimated at over GBP 2 trillion of uninsured defined benefit liabilities, many would say the current GBP 40 billion per annum of flows will be exceeded in the future. While the workplace and individual retirement solutions market, each with an estimated GBP 40 billion of annual market flows, represent significant capital light growth opportunities for us over time. We have a clear and differentiated strategy which creates shareholder value through leveraging all 4 of these major market trends. Heritage is the bedrock of our business, which delivers high levels of predictable cash that covers our dividend into the very long term.
It also generates surplus cash that we can reinvest into both our open business to support organic growth and into M&A to support inorganic growth, both of which can support future dividend increases. We are very focused on optimizing every pound of shareholder capital through a rigorous capital allocation framework that ensures we only invest in those growth opportunities that drive real value. Heritage and M&A