Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2010 Earnings Presentation
34 slides from Standard Life's earnings presentation, Aug 27, 2010
Slide 1: Half Year Results
Half Year Results 27 August 2010
Slide 2: Agenda
Agenda • Introduction - Ron Sandler, Chairman • Business review - Jonathan Moss, Group Chief Executive • Financial results - Jonathan Yates, Group Finance Director • Summary - Jonathan Moss • Q&A 2
Slide 3: Introduction
Introduction Ron Sandler
Slide 4: Business review
Business review Jonathan Moss
Slide 5: A simple business model
A simple business model Phoenix Group Holdings Dividends UK Holding Companies Corporate costs Pension scheme contributions Debt service and amortisation £335m cash inflows Ignis Asset Management Life companies Management Services • £68.6bn AuM • IGD surplus £1.3bn • £22m operating profit • Services
Slide 6: Objective - to be the consolidator of choice
Objective - to be the consolidator of choice Key strategic goals Group priorities • Maximise business performance & • Simplify and optimise capital value structure • Maintain a robust & scaleable • Strong capital policies to ensure platform safe release of capital • Efficient capital usage & cash •
Slide 7: Strong capital policies to ensure safe release of capital
Strong capital policies to ensure safe release of capital Illustrative life company capital run-off Free surplus in life companies (1) Capital Free HY 10 FY 09 Policy 0 Surplus £534m £408m Capital Policy 1 ICA 0 ICA 1 Cash release from life companies £155m HY 10 FY 09 £326m £660m • Free surplus at F
Slide 8: Targets to increase EV through management actions
Targets to increase EV through management actions £300m Remaining target H2 10 Achievements in HY 10 £29m 9 £116m of management actions achieved primarily from tax optimisation and resolving Achieved HY 10 £116m legacy tax issues On track to complete delivery of 2009/10 target of £300m of incrementa
Slide 9: AuM growth and building new business
AuM growth and building new business £66.9bn £1.9bn £0.8bn £68.6bn • AuM increased by £1.7bn (2.5%) £(2.7)bn £1.7bn • Strong growth in new business inflows • Life company run-off largely offset by market movements and net new business inflows AuM at Net life Market Net transfers Net new AuM at 31 De
Slide 10: Transparent reporting of performance against targets
Transparent reporting of performance against targets Holding companies cash inflows • Projected cash inflows highly predictable • 5 year target of £2.7bn cash inflows £2.7bn – £335m achieved in HY 10 Other (1) £0.3bn – £400 to £500m target for BAU cash Management actions £0.3bn inflows (£305m in HY
Slide 11: Update on specific group milestones
Update on specific group milestones Achieved in HY 10 Ongoing Fund mergers 9 National Provident Life restructure • PALAL and PLL restructuring Relocation 9 Relocated majority of accounting, tax and • All remaining departments (largely actuarial) strategy/planning functions to Wythall to move to Wyth
Slide 12: Financial results
Financial results Jonathan Yates
Slide 13: HY financial highlights
HY financial highlights £m unless otherwise stated HY 10 FY 09 Holding companies cash inflows 335 716 Market Consistent Embedded Value (“MCEV”) 1,962 1,827 IGD capital surplus 1.3bn 1.2bn Group IFRS operating profit 176 457 Ignis IFRS operating profit 22 34 Assets under Management 68.6bn 66.9bn MCEV
Slide 14: Strong holding companies cash inflows
Strong holding companies cash inflows £m HY 10 FY 09 • On track to deliver recurring cash inflows from operating subsidiaries at top end of Opening cash 202 86 £400m to £500m annual target Cash receipts Cash inflows from life companies 326 660 • Total cash receipts of £335m include £30m Cash inflows
Slide 15: Impressive growth in MCEV despite market uncertainty
Impressive growth in MCEV despite market uncertainty Includes £19m of Includes £97m of management actions management actions • Impressive growth in Group MCEV £79m £(22)m • £116m of management actions generated £(93)m during HY 10 £216m £(45)m £1,962m £1,827m MCEV at Operating Economic Non Finance O
Slide 16: Robust IGD surplus
Robust IGD surplus £0.2bn £(0.1)bn £1.2bn £1.3bn • IGD surplus represents coverage of 135% • 25% of Impala sub-group (currently not included due to holding company structure) would contribute an additional £0.2bn to the IGD surplus IGD Surplus Capital Dividend IGD Surplus at 31 Dec 09 generation pay
Slide 17: IGD relatively insensitive
IGD relatively insensitive £bn Margin IGD surplus at 30 Jun 10 1.3 135% 20% fall in equity markets 1.3 144% 15% fall in property values 1.3 136% 75 bps decrease in yields 1.3 133% 75 bps increase in yields 1.3 135% Credit spread widening (1) 1.2 134% Combined stress (25% equity fall, 20% property fa
Slide 18: Strong IFRS operating profit
Strong IFRS operating profit • Strong IFRS operating profit in HY 10 £m HY 10 FY 09 Phoenix Life 182 469 • FY 09 Phoenix Life results benefited from favourable non-economic experience Ignis Asset Management 22 34 variances and longevity assumption changes in H2 09 Corporate Costs (28) (46) Operating
Slide 19: Reconciling operating profit to profit after tax
Reconciling operating profit to profit after tax • Favourable long term business £m HY 10 investment return variances of £128m Operating profit before adjusting items 176 driven by short equity positions, improvements in property, reduced Investment return variances and economic credit spreads and s
Slide 20: Clear link from Phoenix Life profit and capital to cash
Clear link from Phoenix Life profit and capital to cash £m HY 10 Opening Phoenix Life free surplus 408 Cash distributed to holding companies (326) Phoenix Life IFRS operating profit (1) 175 Phoenix Life IFRS investment variances and non-recurring items 160 Movements in capital requirement & capital
Slide 21: Phoenix Life - IFRS operating profit drivers
Phoenix Life - IFRS operating profit drivers £m unless otherwise stated HY 10 FY 09 IFRS op Average IFRS op Average Fund type How profits are generated Net Margin (2) Net Margin profit assets (1) profit assets (1) Our share of bonuses paid to With profit policyholders of with profit 27 30.0bn 18bps
Slide 22: Ignis - IFRS operating profit drivers
Ignis - IFRS operating profit drivers HY 10 FY 09 IFRS Closing IFRS Closing £m unless otherwise stated Margin (1) Margin (1) results AuM results AuM Retail 8 2.0bn 74bps 14 2.0bn 74bps Institutional and international 7 4.6bn 31bps 15 4.8bn 31bps Life funds 48 62.0bn 15bps 81 60.1bn 14bps Other incom
Slide 23: Summary
Summary Jonathan Moss
Slide 24: Clear group agenda for shareholder value; Well positioned for the future
Clear group agenda for shareholder value • Establish group within London market and FTSE 250 index • Simplification and restructuring of banking arrangements • Increase capital efficiency and cashflow acceleration • Increase value through management actions in Phoenix Life and driving performance in
Slide 25: Q&A
The specialist closed life consolidator Q&A
Slide 26: Appendices
Appendices I Cash flow sensitivity analysis II MCEV sensitivity analysis III Shareholder fund asset mix at 30 June 2010 IV Analysis of shareholder fund debt securities V Ignis new business flows VI Current capitalisation VII Summary of bank facilities
Slide 27: Appendix I - Cash flow sensitivity analysis
Appendix I - Cash flow sensitivity analysis £bn Base case 5 year projections 2.7 20% fall in equity markets 2.5 15% fall in property values 2.6 75 bps increase in yields 2.7 Credit spreads widening (1) 2.4 Combined stress (25% equity fall, 20% property fall, yields up 75 bps and credit spreads 2.0 (
Slide 28: Appendix II - MCEV sensitivity analysis
Appendix II - MCEV sensitivity analysis £m Base case covered business MCEV at 30 Jun 10 4,465 1% decrease in risk free rates 188 1% increase in risk free rates (230) 10% decrease in equity/property market values (148) 100 bps increase in credit spreads (311) 25% increase in equity/property implied v
Slide 29: Appendix III – Shareholder fund asset mix at 30 June 2010
Appendix III – Shareholder fund asset mix at 30 June 2010 £m HY 10 ● Debt securities are analysed in further detail in Cash deposits 2,483 20% Appendix IV Debt securities - gilts 2,820 23% Debt securities - bonds 5,248 43% Equity securities 286 2% Property investments 99 1% Loans 16 0% Derivatives 3
Slide 30: Appendix IV - Analysis of shareholder fund debt securities
Appendix IV - Analysis of shareholder fund debt securities Shareholder fund debt securities - £8,068m Analysis of other government exposure - £1,260m Corporate France (Financial Institutions) £1,600m European 8% Corporate (Other) Investment 20% £1,957m Bank 39% Other 24% Germany Government 36% 16% £
Slide 31: Appendix V - Ignis new business flows
Appendix V - Ignis new business flows £m HY 10 HY 09 H2 09 Gross flows Retail 503 243 438 Institutional 221 137 89 International 190 67 93 Liquidity funds (net) 413 19 236 Total 1,327 466 856 Net flows Retail 153 (59) 181 Institutional 88 56 (35) International 121 (18) 24 Liquidity funds 413 19 236
Slide 32: Appendix VI - Current capitalisation
Appendix VI - Current capitalisation Sept 09 Jan 10 Jul 10 Acquisition of Pearl Warrant exchanges Premium listing on LSE Businesses Warrants 58.8m 25.5m 25.5m Contingent rights over shares (1) 36.0m 36.0m 3.6m Total dilutive instruments (2) 94.8m 61.5m 29.1m Total ordinary shares in issue 126.2m 132
Slide 33: Appendix VII - Summary of bank facilities
Appendix VII - Summary of bank facilities £m Margin (1) Maturity Repayment £25m p.a. 2011-2015 Bank facility 425.0 (2) L+125bps cash 2016 Balance in 2016 L+100bps cash Lender loan notes 75.0 2024 Non-amortising or PIK Total Pearl bank debt 500.0 L+100bps cash £125m p.a. from 2011 Facility A 1,253.0
Slide 34: Disclaimer
Disclaimer This presentation in relation to Phoenix Group Holdings and its subsidiaries (the “Group”) contains forward looking statements concerning future events. Those forward looking statements are based on the current information and assumptions of the Group’s management concerning known and unk
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