Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2012 Earnings Presentation
49 slides from Standard Life's earnings presentation, Mar 22, 2013
Slide 1: Full Year Results 2012
Full Year Results 2012 22 March 2013
Slide 2: Agenda
Agenda Introduction Howard Davies | Chairman Business update Clive Bannister | Group Chief Executive Financial review Jim McConville | Group Finance Director The Phoenix Way Mike Merrick | Chief Executive Phoenix Life Outlook Clive Bannister Q&A Howard Davies 2
Slide 3: Introduction
Introduction Howard Davies
Slide 4: We have entered the next phase of the Group’s journey
We have entered the next phase of the Group’s journey 2009 • Acquisition by Liberty and public listing • Simplified capital structure and Premium 2010 Listing on LSE 2011/ • Financial and operational delivery 2012 • Reterming delivered long-term capital stability, 2013 providing a platform for growt
Slide 5: Business update
Business update Clive Bannister
Slide 6: Re-terming the Impala bank facility was our highest priority
Re-terming the Impala bank facility was our highest priority £250m of new equity raised through firm placing and open offer EGM in February 2013: – 96% approved Board’s recommendations Equity – 93% took up their entitlements Recommended 2012 final dividend of 26.7p per share – 27% increase vs.
Slide 7: It has been a year of significant achievements
It has been a year of significant achievements … P Equity raised and debt re-termed in 2013 P Cash generation at the top of target range P Significant reduction in gearing P Strengthened group solvency position P Strong IFRS operating profits P Resilient MCEV Recommended 2012 final dividend of P Con
Slide 8: … with strong financial delivery …
… with strong financial delivery … Delivery Target Top end of target range £209m of cash accelerated through Cash £600m £690m management actions generation to £700m £1.5bn of £3.3bn 2011 to 2016 target now achieved £332m of incremental value delivered through MCEV £332m £400m(1) management a
Slide 9: … and significant operational progress
… and significant operational progress Impala bank facility re-termed to June 2019(1) Group New agreement with Pearl Pension Scheme Trustee Further funds mergers reduced number of UK life companies to three 2012 Accelerated capital release through the transfer of £5bn of annuity Phoenix liab
Slide 10: Financial review
Financial review Jim McConville
Slide 11: Financial highlights
Financial highlights £ Pro forma FY12 FY11 Cash Operating companies cash generation n/a 690m 810m IFRS Group operating profit(1) n/a 410m 387m MCEV Group MCEV 2.3bn(2) 2.1bn 2.1bn IGD surplus 1.2bn(2) 1.4bn 1.3bn Capital and PLHL ICA surplus 0.8bn(2) 1.0bn £0.4bn(7) balance sheet Gearing – new metho
Slide 12: Generated £1.1bn of free surplus in 2012
Cash IFRS AUM MCEV Capital Dividend Generated £1.1bn of free surplus in 2012 £m FY12 FY11 • £1.1bn of free surplus Opening Phoenix Life free surplus 93 750 generated in FY12, including: – Strong operating profits Emergence of free surplus – £252m from annuity IFRS operating profit net of policyholde
Slide 13: Achieved top end of increased cash generation target
Cash IFRS AUM MCEV Capital Dividend Achieved top end of increased cash generation target £m FY12 FY11 • £481m of underlying cash Opening cash and cash equivalents 837 486 generation Cash receipts • £209m of cash accelerated through management actions Phoenix Life 661 778 Ignis 29 32 • Operating expe
Slide 14: Delivered strong Group IFRS operating profit of £410m
Cash IFRS AUM MCEV Capital Dividend Delivered strong Group IFRS operating profit of £410m £m FY12 FY11 • FY12 Phoenix Life operating Phoenix Life 399 395 profit boosted by £117m of management actions Ignis 43 46 • Underlying recurring Phoenix Group costs (32) (54) Life operating profit expected Oper
Slide 15: A year of significant change and a growing third party franchise
Cash IFRS AUM MCEV Capital Dividend A year of significant change and a growing third party franchise Ignis operating profits and third party assets • FY12 profits reflect impact of restructuring the joint ventures £46m £46m £43m and discontinuing non-core activities, offset by growth in £34m the thi
Slide 16: Group assets under management
Cash IFRS AUM MCEV Capital Dividend Group assets under management Group AUM(1) £2.7bn £1.6bn £1.6bn (£1.1bn) (£4.7bn) (£2.0bn) £72.1bn £68.6bn £70.2bn (2) (3) AuM at Net Life Net impact of Net new third Market Other AuM at Guardian Pro forma AUM 31 Dec 11 Company run annuity transfer party business
Slide 17: Embedded value maintained through management actions
Cash IFRS AUM MCEV Capital Dividend Embedded value maintained through management actions Group MCEV(1) 167 £10.39 £12.14 203 (45) £12.15 211 per share(2) per share per share (190) (131) 2,333 2,118 2,122 MCEV at Operating Management Economic & Finance costs Pension MCEV at Net impact of Proforma 31
Slide 18: Strengthened PLHL ICA surplus
Cash IFRS AUM MCEV Capital Dividend Strengthened PLHL ICA surplus PLHL ICA and sensitivities at FY12 • PLHL ICA surplus of £1bn at FY12, well in excess of £150m £1.0bn capital policy £0.8bn • Increase since HY12 primarily £0.9bn driven by new agreement £0.4bn £0.7bn PLHL ICA reached with Pearl Pensi
Slide 19: Robust IGD surplus of £1.4bn
Cash IFRS AUM MCEV Capital Dividend Robust IGD surplus of £1.4bn IGD and sensitivities at FY12 • Pro forma surplus remains strong at £1.2bn after debt £1.4bn prepayment made in February £1.3bn £1.2bn 2013 £1.0bn £0.4bn £0.6bn £0.1bn £0.4bn • Part VII transfer of assets to IGD Guardian during 2013 su
Slide 20: 27% increase in final dividend per share to 26.7 pence
Cash IFRS AUM MCEV Capital Dividend 27% increase in final dividend per share to 26.7 pence Dividend per share • 2012 final dividend 27% higher vs. 2011 final dividend 47.7p • Amended dividend conditions 42p 42p allow for further 21p 21p 26.7p dividend growth (1) €0.17 • Dividend capacity of £125m 21
Slide 21: Future dividends met by strong and predictable cash generation
Cash IFRS AUM MCEV Capital Dividend Future dividends met by strong and predictable cash generation Illustrative annual Holding Company cashflow 2013 to 2016 (£m) 135 827 145 500 100 40 80 Illustrative Illustrative Illustrative debt Target debt Illustrative cash Average annual FY12 proforma operating
Slide 22: The Phoenix Way
The Phoenix Way Mike Merrick
Slide 23: The Phoenix Way
The Phoenix Way Challenge • Delivering increased value for shareholders and policyholders RESTRUCTURING OPERATIONAL MANAGEMENT • Cashflows for shareholders • Higher payouts for customers Operating environment • Myriad of reporting bases and methodologies • Book of business with varied RISK legacy he
Slide 24: Outsource model provides low cost efficient operating platform
Outsource model provides low cost efficient operating platform Outsourcer costs(1) (£m) • Outsource arrangements ensure cost base reduces in £183m line with policy run off £160m £134m • Almost two thirds of Phoenix Life cost base converted from fixed to variable through outsource arrangements • Simp
Slide 25: Focus on improving policyholder outcomes
Focus on improving policyholder outcomes Annuities pricing (£m) Inherited estate distribution(1) £1.6bn £652m Excess estate Guaranteed Non-GAR retained Estate Annuity Rates Non- (GAR) Guaranteed 476 527 ICA Annuity Rates 652 Tax free cash 393 OMO Liabilities 176 Retained annuity business Note: (1) C
Slide 26: Proven ability to accelerate cash and increase value through management actions
Proven ability to accelerate cash and increase value through management actions 2012 cash generation Cash generation (£m) management actions (£m) £810m £m FY12 Category £734m £690m Modelling improvements through AST 60 Operational £242m £359m £209m Equity and other market de-risking 43 Risk Policy h
Slide 27: Clear focus on management actions in 2013 and beyond
Clear focus on management actions in 2013 and beyond • Further management action opportunities exist in current Operational Cash book of business management acceleration • Skills and expertise in enhancing value and accelerating cash can be Incremental applied to other closed life Outsourcing MCEV f
Slide 28: Outlook
Outlook Clive Bannister
Slide 29: The Phoenix Group has a clear strategy to deliver long term shareholder value
The Phoenix Group has a clear strategy to deliver long term shareholder value Vision • Saver-friendly solution for the safe, innovative and profitable management of closed life funds Continue operational delivery and develop platform for growth • Improve policyholder outcomes • Stronger investment p
Slide 30: Opportunities for growth
Opportunities for growth Potential market opportunities totalling over £200bn(1) • We firmly believe that further consolidation will increase shareholder value and improve policyholder protection Bank UK life • Any acquisition activity must owned companies / satisfy the following criteria: life fund
Slide 31: Strong cash generation and management actions have allowed increases in long term target
Strong cash generation and management actions have allowed increases in long term target Long term cash generation targets • Strong and predictable cash generation provides the 2010 prospectus confidence to set long term (published June £2.7bn 2010 – 2014 targets 2010) • Long term cash generation FY
Slide 32: Financial targets for 2013 and beyond
Financial targets for 2013 and beyond • 2011-2016 cumulative target increased by £0.2bn Cash from £3.3bn to £3.5bn generation • 2013 target of £650m to £750m • Reiterate cumulative target of £400m incremental MCEV embedded value from management actions over 2011 to 2014 • Long-term target to reduce
Slide 33: We have entered the next phase of the Group’s journey
We have entered the next phase of the Group’s journey 2009 Q1 2013 2013 and beyond Our objectives are to deliver P Focused simple business model Continued cashflow delivery P Strong operating platform Incremental MCEV P Further de-gearing Clear strategy and focus on delivery Continued operational fo
Slide 34: Q&A
Q&A
Slide 35: Appendices
Appendices I Evolution of cash generation targets VIII Total debt exposure by country II Management actions and cash sensitivities IX MCEV sensitivities III Phoenix Life IFRS operating profit drivers X Maturity profile of business IV Ignis IFRS operating profit drivers XI Summary of bank facilities
Slide 36: Appendix I: Evolution of cash generation targets
Appendix I: Evolution of cash generation targets 2010 2011 2012 2013 2014 2015 2016 Total 2010 £2.7bn prospectus (published £2.7bn 2010- June 2010) 2014 FY10 results £3.2bn £750 - (published £734m £3.2bn 2011- March 2011) £850m 2016 FY11 results £3.2bn £500 - (published £810m £3.2bn 2011- March 2012
Slide 37: Appendix II: Management actions and cash sensitivities
Appendix II: Management actions and cash sensitivities Cash acceleration Incremental EV FY12 FY11 FY12 FY11 Restructuring £24m £173m Restructuring £20m £32m Risk management £43m £104m Risk management £36m £39m Operational management £142m £82m Operational management £111m £94m Total £209m £359m Tota
Slide 38: Appendix III: Phoenix Life IFRS operating profit drivers
Appendix III: Phoenix Life IFRS operating profit drivers FY12 FY11 Reported Opening Expected Reported Opening Expected IFRS Op liability/ return IFRS Op liability/ return Profit Equity(2) margin(1) Profit equity(2) margin(1) Fund type How profits are generated £m £bn bps £m £bn bps With-profit Our s
Slide 39: Appendix IV: Ignis IFRS operating profit drivers
Appendix IV: Ignis IFRS operating profit drivers FY12 FY11 IFRS Closing IFRS Closing results AUM Margin(1) results AUM Margin(1) £m £bn bps £m £bn bps Retail 15 1.4 92 17 1.9 79 Institutional, international and Group pension(2) 17 10.5 20 12 6.7 22 Life funds(3) 108 54.1 18 114 62.1 19 Other 3 n/a n
Slide 40: Appendix V: Ignis 3rd party new business flows
Appendix V: Ignis 3rd party new business flows £m FY12 FY11 Gross flows(1) Retail 577 644 Institutional(2) 149 538 International 585 137 Liquidity funds (net) 1,095 1,242 Total 2,406 2,561 Net flows(1) Retail 58 (68) Institutional(2) 40 432 International 384 61 Liquidity funds (net) 1,095 1,242 Tota
Slide 41: Appendix VI: Recap of Phoenix Capital Management Framework
Appendix VI: Recap of Phoenix Capital Management Framework Phoenix Group Holdings PLHL ICA calculation IGD • Pillar 2 assessment of capital resources and • Pillar 1 group capital calculation risks outside the life companies UK Holding • Includes net assets of holding companies and • Aggregated view
Slide 42: Appendix VII: Asset mix of life companies
Appendix VII: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 31 Dec 2012 supported with- with-profits Unit Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 3,373 21 8,298 972 9,270 12,643 Debt
Slide 43: Appendix VIII: Total debt exposure by country
Appendix VIII: Total debt exposure by country Other Corporate: Government Financial Corporate: Asset backed Total debt At 31 Dec 2012 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyholde
Slide 44: Appendix IX: MCEV sensitivities
Appendix IX: MCEV sensitivities £m FY12 Base at 31 December 2012 3,263 1% decrease in risk free rates 91 1% increase in risk free rates (95) 10% decrease in equity market values (70) 10% increase in equity market values 69 10% decrease in property market values (48) 10% increase in property market v
Slide 45: Appendix X: Maturity profile of business
Appendix X: Maturity profile of business 1-5 6-10 11-15 16-20 20+ Total £m years years years years years MCEV present value of future profits 31 December 2012 1,058 596 369 231 196 2,450 31 December 2011 1,135 683 455 291 282 2,846 31 December 2010 1,147 848 488 271 268 3,022 45
Slide 46: Appendix XI: Summary of bank facilities
Appendix XI: Summary of bank facilities Balance Amortisation at FY12 £m Coupon FY12 2013 2014 2015 2016 2017 2018 2019 Total Pearl facility Pearl bank facility L+125bps 375 25 25 25 300 - - - 375 mandatory amortisation Subordinated Lender L+100bps 80(1) - - - - - - - 80(1) Loan Notes Total Pearl 25
Slide 47: Appendix XII: Comparison of gearing calculations
Appendix XII: Comparison of gearing calculations Reduced gearing • NEW GEARING: Gross shareholder debt as a 63% percentage of Gross MCEV 58% 58% • OLD GEARING: 57% 55% Net shareholder debt as a 52% percentage of the sum of Group MCEV, net shareholder 48% 46% debt and the present value of future prof
Slide 48: Appendix XIII: Overview of dividend payment arrangements
Appendix XIII: Overview of dividend payment arrangements Group dividend formula • Dividend conditions amended and new formula in place regarding dividend capacity • Dividend capacity of £125m for dividends declared in respect of 2013, with capacity to increase by £10m p.a. thereafter • Additional di
Slide 49: 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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