Standard Life plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Merger or Acquisition (September 2016)
28 slides from Standard Life's merger presentation, Sep 28, 2016
Slide 1: Proposed acquisition of Abbey Life
Proposed acquisition of Abbey Life 28 September 2016 1
Slide 2: Agenda
Agenda Overview Clive Bannister | Group Chief Executive Financial benefits Jim McConville | Group Finance Director Conclusion and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Overview
Overview Clive Bannister 3
Slide 4: The £935 million acquisition of Abbey Life reinforces Phoenix's position as leading consolidator
The £935 million acquisition of Abbey Life reinforces Phoenix’s position as the UK’s leading closed life fund consolidator Key benefits of the acquisition P Attractive acquisition price P Significant increase in long term cash generation P Strengthens Group solvency P Modest immediate reduction in F
Slide 5: Overview of Abbey Life
Overview of Abbey Life Key metrics Assets under Management £10bn Policyholders 735,000 Employees 45 Solvency II Own Funds (Abbey Life Standard Formula basis – HY16) £1,047m Market Consistent Embedded Value (Abbey Life basis – FY15) £1,218m Unit-linked Non-linked Corporate / other • UK unit-linked li
Slide 6: Attractive pricing and efficient financing structure
Attractive pricing and efficient financing structure Pricing and valuation Funding structure • Price of £935 million(1) • Cash consideration and estimated expenses to be financed with a mix of • Abbey Life acquisition expected to new equity and debt generate £1.6 billion of cashflows in total • Cont
Slide 7: This acquisition meets all of Phoenix's M&A criteria
This acquisition meets all of Phoenix’s M&A criteria UK closed life fund business with £10 billion of assets and 735,000 UK closed life policyholders focus Confirms Phoenix’s position as leading UK closed life fund consolidator Capital and cost synergies Value accretive Total expected cashfl
Slide 8: Standalone business expected to lead to straightforward integration
Standalone business expected to lead to straightforward integration alongside AXA Current status of AXA acquisition Abbey Life integration Standalone business with 45 On track to complete in employees Timeline November, subject to regulatory Separation approvals Few separation issues from Deut
Slide 9: Financial benefits
Financial benefits Jim McConville 9
Slide 10: The AXA and Abbey Life acquisitions create a business with £74 billion of assets
The AXA and Abbey Life acquisitions create a business with £74 billion of assets and over 6 million policyholders Phoenix AXA Abbey Life Combined Cash generation £2.0bn £0.3bn £0.5bn £2.8bn (2016-2020) Cash generation £3.1bn £0.2bn £1.1bn £4.4bn (2021+) Life company £52bn £12bn £10bn £74bn assets Po
Slide 11: The acquisition provides a significant uplift to the Group's cashflows
The acquisition provides a significant uplift to the Group’s cashflows Future cash generation • Cashflow of £1.6 billion expected to be £4.4bn generated from Abbey Life £1.1bn £0.2bn • £0.5 billion cashflow between 2016- £2.8bn 2020 £0.5bn £0.3bn £3.1bn • Stable and sustainable cashflows post £2.0bn
Slide 12: Management actions to support cash generation
Management actions to support cash generation Actions Benefits • Apply Phoenix’s Strategic Asset • Incremental investment returns Allocation to annuity book • Delivery of cost efficiencies • Expected cost savings of £7 million per annum • Maintain existing contract with • Strengthens relationship wi
Slide 13: Abbey Life acquisition will increase Solvency II surplus by £0.4 billion
Abbey Life acquisition will increase Solvency II surplus by £0.4 billion Capital position Solvency II surplus(1) • Abbey Life currently on Standard 144% 151% Formula £1.5bn • Phoenix to apply for Internal Model approval and Transitional Measures in H2 2017 £1.1bn • Future synergies from adoption of
Slide 14: Further increase of dividend to new stable and sustainable level
Further increase of dividend to new stable and sustainable level Dividend policy Dividend distributions (£m) • Proposed 5% equivalent increase in 197 dividend per share from each of AXA 160 and Abbey Life acquisitions(1) 120 • Results in total increase of 10% from 2015 level(1) • Dividend policy, ha
Slide 15: Dividend supported by additional cashflows up to 2020 and beyond
Dividend supported by additional cashflows up to 2020 and beyond Illustrative uses of cash from HY 2016 to 2020 (£bn) 0.1 0.2 0.3 1.1 2.7 0.8 0.7 0.8 HY16 holding Cash generation Operating Pension costs Debt interest Debt repayments Dividends over Illustrative company cash over 2016-2020 expenses ov
Slide 16: Beyond 2020, expected £4.4 billion of cashflows to emerge
Beyond 2020, there is an expected £4.4 billion of cashflows to emerge, before management actions Illustrative uses of cash from 2021 onwards £4.4bn Abbey Life £0.0bn £0.9bn £1.1bn Axa £0.2bn Phoenix stand-alone £3.1bn £4.3bn £0.8bn Illustrative holding company 2021+ cash generation Payment of outsta
Slide 17: Protection in place against potential outcomes from FCA investigations
Protection in place against potential outcomes from FCA investigations Key Terms of Contractual Protection • Market standard warranties and indemnities in place • In addition, £175 million indemnity protection to cover potential outcomes from: • Thematic review relating to the treatment of long-stan
Slide 18: Phoenix will apply its customer model and product governance to Abbey Life's business
Phoenix will apply its customer model and product governance to Abbey Life’s business Clear benefits for policyholders • Abbey Life policyholders will become part of a focused closed life fund specialist with over 6 million customers • Phoenix Life has a clear customer strategy with a strong emphasi
Slide 19: Expected timing
Expected timing Milestones Timeline • Abbey Life acquisition announced 28 September • Expected publication of prospectus and circular Early October • Expected shareholder vote and rights issue By end October • Target closing of AXA acquisition, subject to regulatory November approvals • Target closi
Slide 20: Conclusion and Q&A
Conclusion and Q&A Clive Bannister 20
Slide 21: The £935 million acquisition of Abbey Life reinforces Phoenix's position as leading consolidator
The £935 million acquisition of Abbey Life reinforces Phoenix’s position as the UK’s leading closed life fund consolidator Key benefits of the acquisition P Attractive acquisition price P Significant increase in long term cash generation P Strengthens Group solvency P Modest immediate reduction in F
Slide 22: A transformed Phoenix: £74 billion of assets and over 6 million policyholders
The proposed AXA and Abbey Life acquisitions will create a business with £74 billion of assets, £7.2 billion of cash generation and over 6 million policyholders. A transformed Phoenix YoY change Phoenix AXA Abbey Life Combined % Cash generation £5.1bn £0.5bn £1.6bn £7.2bn +41% (2016+) Life company a
Slide 23: Phoenix is well positioned to lead further industry consolidation
Phoenix is well positioned to lead further industry consolidation Conclusions of the “Meaning of Life” Key drivers for consolidation • Pension assets to be Trapped capital within legacy books dominated by 5-7 providers Fixed cost pressure from policy run-off • Mid-tier, traditional providers under g
Slide 24: Q&A
Q&A 24
Slide 25: Appendix
Appendix 25
Slide 26: Expected debt structure following AXA and Abbey Life acquisitions
Expected debt structure following AXA and Abbey Life acquisitions Instrument Issuer/borrower Face value Maturity Unsecured Revolving Credit Facility (L+175bps)(3) PGH Capital PLC £650m June 2020 Unsecured senior bond (5.75%) PGH Capital PLC £300m July 2021 Subordinated notes (6.625%) PGH Capital PLC
Slide 27: Disclaimer and other information
Disclaimer and other information NOT FOR RELEASE OR DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR SOUTH AFRICA OR INTO ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL SECURITIES LAWS OR REGULATIONS This pr
Slide 28: Disclaimer and other information (cont'd)
Disclaimer and other information (cont’d) Statements containing the words: ‘believes’, ‘intends’, ‘will’, ‘expects’, ‘may’, ‘should’, ‘plans’, ‘aims’, ‘seeks’, ‘continues’, ‘targets’ and ‘anticipates’ or other words of similar meaning are forward-looking. Such forward-looking statements and other fi
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