Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2011 Earnings Presentation
35 slides from Standard Life's earnings presentation, Aug 25, 2011
Slide 1: Half Year Results 2011
Half Year Results 2011 Continuing the Phoenix journey 25 August 2011
Slide 2: Agenda
Agenda Introduction & business update Clive Bannister Group Chief Executive Financial review Jonathan Yates Group Finance Director Summary and Q&A Clive Bannister 2
Slide 3: Introduction & business update
Introduction & business update Clive Bannister 3
Slide 4: The Phoenix Group is on a journey
The Phoenix Group is on a journey • Private equity ownership 2008 • Resolution acquisition 2009 • Liberty restructuring 2010 • Corporate, operational and financial delivery 9 Strong cash flow generation 9 Enhanced MCEV H1 9 Organic degearing 2011 9 Continued operational delivery 9 Proposed dividend
Slide 5: Consistent growth in operational cash generation
Consistent growth in operational cash generation Operational cash generation 9 Cash generation of £496m has remained strong in the period FY 11 target £750m to 9 Includes £197m cash acceleration £850m ¾ £171m from restructuring activities ¾ £18m operational management £716m £734m benefit including r
Slide 6: Substantial value in MCEV
Substantial value in MCEV Group MCEV 9 Includes £69m incremental value £2,203m delivered from management actions ¾ £30m restructuring benefit and ¾ £39m operational management £2,104m benefit 9 On track to achieve FY 11 incremental FY 10 HY 11 value target of £100m 9 Equates to MCEV per share of £12
Slide 7: Organic de-leveraging continues
Organic de-leveraging continues Gearing (1) 9 Improvement in gearing largely driven by £108m total debt repayment in H1 and 58% growth in MCEV 56% 52% 9 Achieved FY 11 target of < 50% 48% 9 Cash generative business model enables organic debt pay-down 9 Discussions with lenders ongoing on the best st
Slide 8: Focus on operational delivery
Focus on operational delivery 9 Completed Phoenix & London Assurance Limited and Phoenix Life Limited funds merger 9 Recaptured Phoenix Pensions Limited internal reinsurance arrangement 9 Capital restructuring of London Life Limited Phoenix 9 Standardisation of approach to with-profits funds, enhanc
Slide 9: Financial review
Financial review Jonathan Yates 9
Slide 10: Financial highlights
Financial highlights £m unless otherwise stated HY 11 HY 10 FY 10 Cash Operating companies cash generation 496 335 734 IFRS operating profit Group operating profit 136 176 373 IGNIS operating profit 18 22 46 Group Market Consistent Embedded Value (“MCEV”) 2,203 1,962 2,104 Group MCEV per share (1) £
Slide 11: Cash generation demonstrates strength of Group's business model
Cash IFRS MCEV Capital AuM Cash generation demonstrates strength of Group’s business model £m HY 11 HY 10 FY 10 • £234m net cash Opening cash in holding companies 486 202 202 generated in H1 Cash receipts • Increased cash remitted Phoenix Life 481 326 708 by Phoenix Life reflects IGNIS 15 9 26 manag
Slide 12: £199m free surplus generated in HY 11
Cash IFRS MCEV Capital AuM £199m free surplus generated in HY 11 Emergence of free surplus £m HY 11 HY 10 FY 10 Opening Phoenix Life free 750 464 464 Free surplus surplus Free Emergence of free surplus £481m £750m surplus cash IFRS operating profit (net of tax) 141 180 464 to group £468m Capital Pol
Slide 13: Group IFRS operating profit of £136m
Cash IFRS MCEV Capital AuM Group IFRS operating profit of £136m £m HY 11 HY 10 • 2011 results in line with previous guidance for underlying Phoenix Life Phoenix Life 152 182 operating profit of £275m to £325m for FY IGNIS 18 22 • Phoenix Life operating profit in 2010 Group costs (34) (28) benefited
Slide 14: Stable embedded value in the business
Cash IFRS MCEV Capital AuM Stable embedded value in the business Group MCEV growth • £99m increase in Group MCEV £69m from FY 10 £138m £(75)m includes £69m £(33)m created from management actions • Finance costs £2,203m comprised debt £2,104m interest of £40m, tier 1 coupon payment of £27m and swap i
Slide 15: Strong solvency capital
Cash IFRS MCEV Capital AuM Strong solvency capital Estimated IGD • IGD surplus of £1.1bn up from £1.0bn at FY 10 • IGD Excess Capital of £2.9bn up from £2.8bn at FY 10 • Headroom of £0.3bn above £6.7bn £2.9bn capital policy £(3.8)bn £1.1bn £(1.4)bn £(0.4)bn £(0.8)bn £0.3bn Available Capital IGD Poli
Slide 16: Development in Group assets under management
Cash IFRS MCEV Capital AuM Development in Group assets under management Group AuM • Group AuM includes ¾ life company assets of £60.4bn managed by IGNIS or by third parties £1.6bn ¾ third party assets of £7.4bn £0.8bn £(1.4)bn managed by IGNIS and £(2.1)bn ¾ £0.7bn of holding companies cash but ¾ ex
Slide 17: Resilience of balance sheet
Resilience of balance sheet 17
Slide 18: Asset mix of life companies at 30 June 2011
Debt Assets Sensitivities securities Asset mix of life companies at 30 June 2011 Policyholder funds (2) Total shareholder, non-profit and Total supported with- Non-supported Policyholder Total assets £m unless otherwise stated profits (1) % with-profits funds Unit linked funds (4) Cash deposits 4,79
Slide 19: Limited exposure to peripheral Eurozone debt securities
Debt Assets Sensitivities securities Limited exposure to peripheral Eurozone (1) debt securities Other Government Corporate: Corporate: Asset backed Total debt and Supranational Financial Institutions Other securities securities £m Shareholder Policyholder Shareholder Policyholder Shareholder Policy
Slide 20: IGD highly insensitive to market movements
Debt Assets Sensitivities securities IGD highly insensitive to market movements IGD IGD excess IGD £bn Excess over capital surplus Capital policy IGD at 30 June 2011 (estimated) 1.1 2.9 0.3 • IGD Excess Capital is more sensitive than IGD Surplus 20% fall in equity markets 1.1 2.5 0.3 • Sensitivities
Slide 21: Summary
Summary Clive Bannister 21
Slide 22: On track to achieve all 2011 financial targets
On track to achieve all 2011 financial targets FY 11 HY 11 Targets Delivery 9 Delivered £496m which includes £197m of cash flow acceleration from management actions Cash £750m £496m 9 Cash generated to date provides confidence over generation to £850m FY 11 target 9 Contributes towards £3.2bn cash g
Slide 23: The Phoenix Group is well positioned
The Phoenix Group is well positioned 2008 2009 2010 2011 3 Unique, simple business model Our objectives are to deliver: 9 Strengthened cashflow 3 Proven management team and operating platform 9 Enhanced MCEV 9 Appropriately geared balance sheet 3 Clear strategy and focus on delivery 9 Operational fo
Slide 24: Q&A
Q&A
Slide 25: Appendices
Appendices I Phoenix Life IFRS operating profit drivers II IGNIS IFRS operating profit drivers III Total debt exposure by country IV Total equities exposure by country V MCEV sensitivities VI Maturity profile of business VII Gearing VIII IGNIS 3rd party new business flows IX Summary of bank faciliti
Slide 26: Appendix I – Phoenix Life IFRS operating profit drivers
Appendix I – Phoenix Life IFRS operating profit drivers HY 11 HY 10 Reported Average Reported Average IFRS Op liability/ Net IFRS Op liability/ Net Profit equity margin (1) Profit equity margin (1) Fund type How profits are generated £m £bn bps £m £bn bps With-profit Our share of bonuses paid to 27
Slide 27: Appendix II – IGNIS IFRS operating profit drivers
Appendix II – IGNIS IFRS operating profit drivers HY 11 HY 10 IFRS Closing IFRS Closing results AuM Margin (1) results AuM Margin (1) £m £bn bps £m £bn bps Retail revenue 9 2.1 76 8 2.0 74 Institutional, international and 7 5.3 26 7 4.6 31 Group pension revenue Life funds revenue 50 59.8 17 49 59.2
Slide 28: Appendix III – Total debt exposure by country
Appendix III – Total debt exposure by country Other Government Corporate: Corporate: Asset backed Total debt and Supranational Financial Institutions Other securities securities £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyh
Slide 29: Appendix IV – Total equities exposure by country
Appendix IV – Total equities exposure by country Shareholder Policyholder Shareholder and Supported Non supported Unit Total £m non-profit with-profits with-profits linked equities UK 227 274 3,482 5,469 9,453 USA 71 90 1,027 866 2,054 France 9 18 159 187 373 Germany 9 18 162 173 362 Netherlands 3 7
Slide 30: Appendix V – MCEV sensitivities
Appendix V – MCEV sensitivities £m HY 11 Base at 30 June 11 2,203 1% decrease in risk free rates 158 1% increase in risk free rates (132) 10% decrease in equity market values (81) 10% increase in equity market values 81 10% decrease in property market values (81) 10% increase in property market valu
Slide 31: Appendix VI – Maturity profile of business
Appendix VI – Maturity profile of business 1-5 6-10 11-15 16-20 20+ £m years years years years years Total Present value of future profits 30 June 2011 1,136 778 510 253 258 2,953 31 December 2010 1,147 848 488 271 268 3,022 30 June 2010 930 791 539 301 321 2,882 31
Slide 32: Appendix VII – Gearing
Appendix VII – Gearing £bn HY 11 FY 2010 HY 10 FY 2009 Net shareholder debt 2.4 2.7 2.9 3.1 Group MCEV 2.2 2.1 2.0 1.8 IGNIS present value of future profits 0.4 0.4 0.4 0.4 Gearing 48% 52% 56% 58% 32
Slide 33: Appendix VIII – IGNIS 3rd party new business flows
Appendix VIII – IGNIS 3rd party new business flows £m HY 11 HY 10 Gross flows Retail 382 503 Institutional (1) 65 221 International 55 190 Liquidity funds (net) 347 413 Total 849 1,327 Net flows Retail (5) 153 Institutional (1) (23) 88 International 17 121 Liquidity funds (net) 347 413 Total 336 (2)
Slide 34: Appendix IX – Summary of bank facilities
Appendix IX – Summary of bank facilities £m Coupon Maturity Repayment £25m p.a. 2011-2015 Bank facility 400 L+125bps 2016 Balance in 2016 Subordinated Lender Loan 77 L+100bps (1) 2024 Bullet Notes Total Pearl bank debt 477 £125m p.a. from 2011 Facility A 1,070 L+200bps (2) 2014 Balance in 2014 Facil
Slide 35: Disclaimer and other information
Disclaimer and other information • This presentation in relation to Phoenix Group Holdings and its subsidiaries (the ‘Group’) contains, and we may make other statements (verbal or otherwise) containing, forward-looking statements about the Group’s current plans, goals and expectations relating to fu
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