Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group — FY2020 Earnings Presentation
58 slides from Standard Life's earnings presentation, Mar 8, 2021
Slide 1: Phoenix Group Full Year 2020 Results
Phoenix Group Full Year 2020 Results 8 March 2021 1
Slide 2: Agenda
Agenda Andy Briggs 2020 review Group Chief Executive Officer Rakesh Thakrar 2020 financial results Group Chief Financial Officer Andy Briggs Outlook Group Chief Executive Officer Andy Briggs, Group Chief Executive Officer Rakesh Thakrar, Group Chief Financial Officer Andy Moss, Heritage Chief Execut
Slide 3: 2020 review
2020 review Andy Briggs Group Chief Executive Officer 3
Slide 4: 2020 was a landmark year for Phoenix despite the challenging environment
2020 was a landmark year for Phoenix despite the challenging environment ReAssure acquisition completed Dividends paid and increased UK’s largest long-term Record cash generation savings and retirement Net-zero carbon commitment business Increased colleague Record new business engagement
Slide 5: Phoenix has delivered another strong year of cash, resilience and growth
Phoenix has delivered another strong year of cash, resilience and growth Cash Resilience Growth £1,713 £5.3 164% £766 million billion million Cash generation PGH Solvency II PGH Shareholder Incremental new business +142% surplus(1) Capital Coverage long-term cash generation Ratio(1,2) +59% £1,713m +
Slide 6: The resilience of our business model has enabled us to pay an increased dividend
The resilience of our business model has enabled us to pay an increased dividend as planned Dividend per share(5) Phoenix vs FTSE 100 historic dividend payments c. 50% increase in the dividend over 10 years % Will increase in 2021 to 140 reflect recommended 3% final 2020 dividend uplift 47.5p 45.2p
Slide 7: As a purpose-led organisation, Phoenix has a clear role to play in society
As a purpose-led organisation, Phoenix has a clear role to play in society Customers Customer obsessed, focused on outcomes that matter to them Helping people secure a life of possibilities Colleagues Investors The best talent, with Allocate resources to the differentiated capability, diverse most a
Slide 8: Our response to COVID-19 has driven an enduring change in our business
Our response to COVID-19 has driven an enduring change in our business Our priority during the pandemic was to support our customers, colleagues and communities… …which is now driving Tailored community Acceleration of our digitisation an evolution investment driven by key strategy to support custom
Slide 9: We continued to focus on delivering excellent customer service and investing in our customer proposition
We continued to focus on delivering excellent customer service and investing in our customer proposition 2020 key customer KPIs A year of significant customer proposition development 94% In-scheme draw Customer Satisfaction down functionality in Phoenix - telephony Vulnerable customer Master Tru
Slide 10: Our simplified strategic partnership with SLA will accelerate Open business growth
Our simplified strategic partnership with SLA will accelerate Open business growth Simplifying our strategic partnership Compelling strategic and operational benefits Upon SLAL acquisition After new agreement Phoenix Group Phoenix Group Phoenix now owns all of the Life and Pensions business of Sta
Slide 11: We are investing in our people and our culture to prosper for the long-term
We are investing in our people and our culture to prosper for the long-term Employee engagement and Diversity and Inclusion culture • Comprehensive Diversity and Inclusion • 10ppts increase in overall colleague strategy now embedded and active engagement year-on-year to 75% • Enhancing our diversity
Slide 12: Phoenix is putting sustainability at the heart of its business
Phoenix is putting sustainability at the heart of its business Our sustainability strategy Our net-zero carbon commitment Operations Investment Fostering by 2025 portfolio by 2050 Delivering for our Responsible Customers Investment Focus on eliminating and Participated in IIGCC pilot to reducing emi
Slide 13: 2020 financial results
2020 financial results Rakesh Thakrar Group Chief Financial Officer 13
Slide 14: Phoenix delivered a strong financial performance in 2020
Cash Resilience Growth Phoenix delivered a strong financial performance in 2020 Cash generation Incremental new business New business contribution(6) long-term cash generation +142% +59% +82% £1,713m £766m £362m £483m £199m £707m FY19 FY20 FY19(4) FY20 FY19(7) FY20 Operating profit Total dividend be
Slide 15: Phoenix increased the strength of its financial position in 2020
Cash Resilience Growth Phoenix increased the strength of its financial position in 2020 PGH Solvency II PGH Shareholder Capital Leverage ratio Surplus(1) Coverage Ratio(1,2) £5.3bn 164% 140-180% 28% 25-30% 152% target £4.4bn target 22% range range FY19(†)(3) FY20 FY19(†)(3) FY20 FY19 FY20 Group long
Slide 16: Cash generation of £1.7 billion in 2020 exceeded upper end of target range
Cash Resilience Growth Cash generation of £1.7 billion in 2020 exceeded upper end of target range Composition of £1.7 billion cash generation Key messages £0.9bn £1.7bn £1.7 billion of cash remitted from life £1.5-1.6bn companies to Group £0.8bn £0.8bn Organic cash generation comprises the emergence
Slide 17: Increased 5-year cash generation of £6.8 billion with new 1-year and 3-year targets set
Cash Resilience Growth Increased 5-year cash generation of £6.8 billion with new 1-year and 3-year targets set Illustrative future cash generation from in-force business 2019-2023 5-year cash generation £0.3bn £0.2bn £(0.2)bn £6.8bn £6.5bn £17.7 billion guidance over life of business ReAssure 2021-
Slide 18: £2.1 billion of surplus cash to support growth options
Cash Resilience Growth £2.1 billion of surplus cash to support growth options Illustrative 2021-2023 HoldCo sources and uses of cash HoldCo cash Cash generation £4.4 billion of cash generation from Sources £1.0bn £4.4bn in-force business, plus HoldCo cash Head office costs and debt interest Operatin
Slide 19: Group long-term free cash reflects cash available for costs, growth and shareholder returns
Cash Resilience Growth Group long-term free cash reflects cash available for costs, growth and shareholder returns 31 Dec 2019(11) 31 Dec 2020(12) Decreases as cash is remitted to Long-term in-force cash generation £19.0bn £17.7bn HoldCo Transition costs to deliver M&A and transition costs £(0.2)bn
Slide 20: Recurring sources of cash have largely funded recurring uses of cash in 2020
Cash Resilience Growth Recurring sources of cash have largely funded recurring uses of cash in 2020 2020 change in Group long-term free cash Key messages Sources of cash Uses of cash New business LTCG fully funds operating costs, interest £0.3bn and dividend £0.8bn £(0.2)bn £14.1bn £13.9bn £(0.8)bn
Slide 21: Stable dividend payable for 20+ years and a clear framework for dividend growth
Cash Resilience Growth Stable dividend payable for 20+ years and a clear framework for dividend growth We have a stable and sustainable dividend Organic growth can support dividend increases Condition 1: proving ‘the wedge’ £13.4bn £11.8 billion £(1.6)bn £11.8bn supports M&A stable and sustainable
Slide 22: 2020 IFRS operating profit of £1.2 billion
Cash Resilience Growth 2020 IFRS operating profit of £1.2 billion FY20 FY19(15) Key messages Heritage £278m £350m Heritage FY19 operating profit included ReAssure £444m - one-off benefits from modelling Open £516m £469m improvements Service company £6m £26m ReAssure operating profit includes circa G
Slide 23: Strong capital position with coverage ratio in the middle of our target range
Cash Resilience Growth Strong capital position with coverage ratio in the middle of our target range Estimated PGH Shareholder Capital Position Proxy to shareholder value £bn 164% Shareholder own funds 13.6 152% SCCR(2) SCCR(2) Less: Tier 2 and Tier 3 debt(16) (3.8) Surplus Surplus Less: Restricted
Slide 24: Proactive risk management ensures Group remains resilient to risk events
Cash Resilience Growth Proactive risk management ensures Group remains resilient to risk events Group Solvency II Shareholder Capital Coverage Ratio sensitivities(17) Impact on Target range Solvency II surplus FY20 Solvency II SCCR 164% £5.3bn Equities: 20% fall in markets 165% £nil Property: 12% fa
Slide 25: Increase in Solvency II surplus reflects delivery of management actions
Cash Resilience Growth Increase in Solvency II surplus reflects delivery of management actions and limited impact of market volatility Change in PGH Solvency II surplus 2% 20% (6)% (12)% £0.1bn £(0.2)bn (7)% 164% 3% 12% £1.3bn £(0.9)bn 152% £(0.2)bn £0.2bn £0.6bn £5.3bn £4.4bn Surplus as Surplus Deb
Slide 26: Our £35 billion debt portfolio is defensively positioned and proactively managed
Cash Resilience Growth Our £35 billion debt portfolio is defensively positioned and proactively managed Debt portfolio by sector Credit quality of portfolio Key messages at 31 December 2020 at 31 December 2020 2% 8% Well diversified portfolio, actively managed within a dynamic risk appetite 19% 10
Slide 27: Our illiquid asset origination strategy is building momentum with a strong focus on ESG assets
Cash Resilience Growth Our illiquid asset origination strategy is building momentum with a strong focus on ESG assets Asset type Illiquid asset origination Key messages at 31 December 2020 £2,013m 7% £127m Private Well diversified, high quality illiquid 1% £105m 11% Placements £107m 44% of asset por
Slide 28: Strong value creation through the delivery of £1.3 billion of management actions in 2020
Cash Resilience Growth Strong value creation through the delivery of £1.3 billion of management actions in 2020 2020 Solvency II management actions Management actions drive value Other actions Illiquid asset origination £1.3bn £1.3bn Includes active management Sourcing of assets to deliver of the ba
Slide 29: ReAssure synergy targets increase by circa 30% to £1,050 million
Cash Resilience Growth ReAssure synergy targets increase by circa 30% to £1,050 million Capital synergies Cost synergies(25) Integration costs Total net synergies 33% 25% 31% £600m £1,050m £500m Increased synergy targets £450m + £400m − = £800m £50m £50m Original New Original New Original New Orig
Slide 30: Integration programmes on track with £0.7 billion of ReAssure synergies delivered
Cash Resilience Growth Integration programmes on track with £0.7 billion of ReAssure synergies delivered in just 6 months Standard Life ReAssure % Revised % In year Cumulative Target of target In year Cumulative Target of target Capital synergies £75m £720m £720m 100% £479m £479m £600m 80% (net of c
Slide 31: We made significant progress towards proving 'the wedge' in 2020
Cash Resilience Growth We made significant progress towards proving ‘the wedge’ in 2020 New business long-term cash generation Key messages +59% £800m 59% increase in new business long-term cash generation £766m demonstrates significant progress towards proving ‘the wedge’ £56m £140m £522m of BPA bu
Slide 32: A record year of external BPA delivered £350 million of incremental long-term cash generation
Cash Resilience Growth A record year of external BPA delivered £350 million of incremental long-term cash generation 2020 highlights 2020 external activity 2020 external deal economics £1,777m Circa 6% market share in 2020(29) and Invited Deals Deals record year for BPA cash generation, to price pri
Slide 33: Pearl pension scheme buy-in contributed £172 million of long-term cash generation
Cash Resilience Growth Pearl pension scheme buy-in contributed £172 million of long-term cash generation Agreement details 2020 Pearl buy-in economics Future benefits £747m Initial buy-in tranche covering 25% of Committed to a full buy-in of the £3 scheme liabilities completed in Q4 2020 12% £172m
Slide 34: Phoenix has a clear financial framework supporting its strategy
Cash Resilience Growth Phoenix has a clear financial framework supporting its strategy Cash Resilience Growth • Record year of incremental new business cash generation at £766 • £1.7 billion of cash generation • £5.3 billion SII surplus and 164% million 2020 exceeds upper end of £1.5-£1.6 SII ratio
Slide 35: Outlook
Outlook Andy Briggs Group Chief Executive Officer 35
Slide 36: Phoenix is a sustainable and growing business, helping people secure a life of possibilities
Phoenix is a sustainable and growing business, helping people secure a life of possibilities Optimise in-force business Deepen customer relationships Customer acquisition We manage our in force business to By engaging with our customers and Acquire customers and grow our in- deliver resilient cash g
Slide 37: Our Heritage business will continue to deliver management actions and integration programmes
Our Heritage business will continue to deliver management actions and integration programmes Driving our Heritage strategy in 2021 Integration roadmap Phases 1 - 3 2021 2022 2023+ Deliver improved customer outcomes Group ReAssure Functions Manage capital for resilience through our approach to
Slide 38: We will build on our strong Open business growth momentum in 2021
We will build on our strong Open business growth momentum in 2021 Open growth in 2020 nearly offset Heritage Driving our growth strategy in 2021 Allocate £150 - £200 million of capital to external BPA deals and execute future tranches of Pearl scheme buy-in M&A Reduce target external BPA capital
Slide 39: Our clear M&A strategy offers further growth potential if opportunities arise
Our clear M&A strategy offers further growth potential if opportunities arise Disciplined acquisition criteria Allocating capital to growth opportunities Large • £440 billion UK opportunity market • A range of deal sizes can be Value accretive opportunity considered Strategic fit Supports growth • P
Slide 40: Phoenix has a clear set of priorities for 2021 and beyond
Phoenix has a clear set of priorities for 2021 and beyond CASH & RESILIENCE GROWTH Manage our balance sheet for Accelerate our Open business cash and resilience, and growth strategy to enable us deliver on our integrations to prove ‘the wedge’ Helping people secure a life of possibilities SUSTAINABI
Slide 41: Q&A
Q&A 41
Slide 42: Investor Relations activity and contacts
Investor Relations activity and contacts March Virtual results roadshow Investor Relations contacts Claire Hawkins 16 March Morgan Stanley European Financials Conference Director of Corporate Affairs & Investor Relations Email: claire.hawkins@thephoenixgroup.com 29 March HSBC 6th Annual West Coast F
Slide 43: Appendices
Appendices I Leverage ratios II Outline of debt maturity profile as at 31 December 2020 III Movement in assets under administration IV Breakdown of Open business segments as at 31 December 2020 V Change in Life Company Free Surplus VI Estimated PGH Solvency II surplus and coverage ratios VII Estimat
Slide 44: Appendix I: Leverage ratios
Appendix I: Leverage ratios Fitch leverage ratio(1) FY20 leverage ratios % 35 Fitch basis(1) 28% IFRS basis(2) 41% 30 29% (4) 28% 27% Fitch target range: 25-30% SII leverage(3) 31% 25 22% • IFRS leverage ratio classifies RT1 as debt 22% • We estimate a funding capacity for inorganic 20 FY16 FY17 FY1
Slide 45: Appendix II: Outline of debt maturity profile as at 31 December 2020
Appendix II: Outline of debt maturity profile as at 31 December 2020 £500m (3,4) (2) $750m (4) (3,4) (4) £500m £500m £450m £428m €500m (2) $500m $500m (1) £250m £250m £200m £122m H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Slide 46: Appendix III: Movement in assets under administration
Appendix III: Movement in assets under administration £16.7bn £(21.1)bn £18.6bn £337.7bn £2.5bn £(9.8)bn £10.5bn £75.2bn £14.2bn £(11.3)bn £8.1bn £59.0bn £162.3bn £248.3bn £16.2bn Net flows £100.1bn Heritage £(7.3)bn Open £2.9bn £175.4bn £148.2bn FY19 AUA(15) ReAssure acquisition Gross inflows Gross
Slide 47: Appendix IV: Breakdown of Open business segments as at 31 December 2020
Appendix IV: Breakdown of Open business segments as at 31 December 2020 AUA New business LTCG New business contribution 3% 3% 1% 6% 16% 3% 4% 6% 26% 3% 19% 17% £175bn £766m £362m 24% 60% 68% 25% 16% Retirement Solutions Workplace CS&I - Wrap SIPP, Onshore Bond & TIP CS&I - Other Europe SunLife 47
Slide 48: Appendix V: Change in Life Company Free Surplus
Appendix V: Change in Life Company Free Surplus Change in Life Company Free Surplus in 2020 £(0.2)bn £1.3bn £(1.6)bn £0.8bn £4.5bn £2.9bn £2.6bn Free surplus Surplus generation Management actions Economic, Free surplus before Cash Free surplus as at FY19(1) and release of financing and other cash re
Slide 49: Appendix VI: Estimated PGH Solvency II surplus and coverage ratios
Appendix VI: Estimated PGH Solvency II surplus and coverage ratios PGH Solvency II coverage ratio PGH Shareholder capital coverage ratio(2) 141% 147% 161% 164% Surplus £5.3bn Surplus £5.3bn Surplus £3.1bn £16.8bn Surplus £13.6bn £3.1bn £10.8bn £11.5bn £8.3bn £8.3bn £7.7bn £5.2bn FY19 FY20(1) FY19(3)
Slide 50: Appendix VII: Estimated shareholder SCR by risk type and PGH own funds tiering
Appendix VII: Estimated shareholder SCR by risk type and PGH own funds tiering Estimated FY20 SCR by risk type(1) FY20 PGH own funds by capital tier(2) £13.6bn 9% of SCR 12% 39% of SCR £8.3bn 23% 3% 116% of SCR 5% Longevity 3% Property 5% 4% PGH tiering of own funds PGH SCR Credit Persistency Intere
Slide 51: Appendix VIII: Regulatory Capital Coverage Ratio sensitivities
Appendix VIII: Regulatory Capital Coverage Ratio sensitivities PGH Solvency II Regulatory Capital Coverage Ratio (RCR) sensitivities(17) Impact on Solvency II surplus FY20 Solvency II RCR 147% £5.3bn Equities: 20% fall in markets 147% £(0.1)bn Property: 12% fall in values(18) 145% £(0.2)bn Rates: 73
Slide 52: Appendix IX: 2020 operating profit drivers
Appendix IX: 2020 operating profit drivers Heritage ReAssure Open (including Europe) Expected return £347m Expected return £217m Expected return £181m Experience £(52)m Experience £(20)m Experience £(18)m New business £0m New business N/A New business £256m Modelling & Modelling & Modelling & £(20)m
Slide 53: Appendix X: Credit quality by sector for shareholder debt portfolio
Appendix X: Credit quality by sector for shareholder debt portfolio Average credit rating by sector (FY20 vs FY19) Sector FY20 FY20 % AA A BBB ∆ vs FY19 Industrials £1.4bn 4% Consumer, cyclical £1.2bn 3% Tech and Telecoms £2.0bn 6% Consumer, non-cyclical £2.4bn 7% Banks £5.7bn 16% Financial Services
Slide 54: Appendix XI: Sustainability performance ratings
Appendix XI: Sustainability performance ratings Upgraded to ‘A’ from ‘BBB’ Total score increased to 45 in A proud member of the in August 2020 November 2020, above an FTSE4Good Index Series (Scale AAA to CCC) industry average of 39 since July 2019 Ranked 68th out of 267 in the Ranked 34th in the The
Slide 55: Appendix XII: Corporate structure as at 31 December 2020
Appendix XII: Corporate structure as at 31 December 2020 Phoenix Group Holdings plc Phoenix Group Phoenix Life Holdings Standard Life Standard Life ReAssure Group plc Holdings (PLHL) Assurance Limited International DAC ReAssure Midco ReAssure Life Limited Historic Limited holdcos Pearl Group Holding
Slide 56: Appendix XIII: Footnotes
Appendix XIII: Footnotes 1) 31 December 2020 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitionals for the Group’s Life companies. Had the dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Ratio
Slide 57: Appendix XIII: Footnotes (continued)
Appendix XIII: Footnotes (continued) 18) Property stress represents an overall average fall in property values of 12%. 19) Assumes the impact of a dynamic recalculation of transitionals (subject to PRA approval) and an element of dynamic hedging which is performed on a continuous basis to minimise e
Slide 58: Disclaimer and other information
Disclaimer and other information • This presentation in relation to Phoenix Group Holdings plc and its subsidiaries (the ‘Group’) contains, and we may make other statements (verbal or otherwise) containing, forward-looking statements and other financial and/or statistical data about the Group’s curr