Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2016 Earnings Presentation
35 slides from Standard Life's earnings presentation, Aug 25, 2016
Slide 1: Interim results 2016
Interim results 2016 25 August 2016 1
Slide 2: Agenda
Agenda Business update Clive Bannister | Group Chief Executive Financial review Jim McConville | Group Finance Director Phoenix Life Andy Moss | Chief Executive, Phoenix Life Outlook and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Business update
Business update Clive Bannister 3
Slide 4: Key highlights for the first half of 2016
Key highlights for the first half of 2016 £375 million acquisition of AXA P Wealth’s pensions and protection business P Equity placing raised net proceeds of £190 million P Cash generation of £147 million P Continued successful delivery of management actions P Estimated Solvency II surplus of £1.1 b
Slide 5: On track to deliver targets from the AXA Wealth acquisition
On track to deliver targets from the AXA Wealth acquisition Key benefits of the acquisition of AXA Wealth’s pensions and protection businesses Significant capital and cost Leverages Phoenix’s operating P synergies allowing accelerated cash generation of £250 million P model and outsourcer relationsh
Slide 6: Impact of Brexit on Phoenix Group
Impact of Brexit on Phoenix Group • Significant fall in swap rates following EU Referendum impacted Impact on capital Solvency II position, in line with the sensitivities disclosed at position FY15 • Additional management actions delivered during the first half • High quality corporate bond portfoli
Slide 7: Phoenix remains on track to meet the cash generation target for 2016
Phoenix remains on track to meet the cash generation target for 2016 • Cash generation target for 2016 of £350 million to £450 Cash million generation targets(1) • Five year cash generation target of £2.0 billion between 2016 to 2020 Continued focus Stable, Investment grade Growth through on managem
Slide 8: Financial review
Financial review Jim McConville 8
Slide 9: Financial highlights
Financial highlights HY16 HY15 FY15 £ Operating companies cash generation 147m 110m 225m Cash Holding company cash(1) 921m 916m 706m Solvency II surplus (estimated) 1.1bn na 1.3bn Group capital(2) Shareholder capital coverage ratio (estimated) 144% na 154% IFRS Group operating profit 107m 135m 324m
Slide 10: Cash generation of £147 million in HY16
Cash generation of £147 million in HY16 £m HY16 HY15 FY15 • Non-recurring costs include Opening cash and cash equivalents 706 988 988 cost of purchasing interest Cash receipts rate swaptions and project expenses Phoenix Life(1) 147 110 225 Total cash receipts 147 110 225 • Coupon payments for £300 U
Slide 11: Solvency II surplus of £1.1 billion
Solvency II surplus of £1.1 billion Total Solvency II surplus • Phoenix Group capital requirements calculated at PLHL using a Full Internal Model Surplus £1.1bn • Surplus over SCR of £1.1 billion, Surplus which includes the impact of the £1.3bn payment of the interim dividend £6.1bn £5.7bn £5.0bn £4
Slide 12: Solvency II Shareholder Capital coverage ratio of 144%
Solvency II Shareholder Capital coverage ratio of 144% Shareholder Capital position • Shareholder Capital ratio calculation excludes Own Funds and SCR of unsupported With Profit Funds and 144% 154% PGL Group pension scheme • £0.3 billion of unrecognised surplus in unsupported With Profit Funds and S
Slide 13: Impact of market movements partly mitigated by management actions
Impact of market movements partly mitigated by management actions Change in Solvency II surplus • Surplus has been negatively impacted by market movements, primarily lower swap rates £0.1bn £0.1bn £0.3bn • Impact has been partly mitigated £0.1bn by management actions and natural run-off of book £1.3
Slide 14: Solvency II surplus and long term cash generation sensitivities
Solvency II surplus and long term cash generation sensitivities PLHL Solvency II surplus sensitivities(1) Cash generation sensitivities(1) HY16 Solvency II surplus £1.1bn 2016 - 2020 target £2.0bn Following a 20% fall in equity Following a 20% fall in equity markets £1.1bn markets £2.0bn Following a
Slide 15: IFRS operating profit of £107 million in HY16
IFRS operating profit of £107 million in HY16 £m HY16 HY15 FY15 • Phoenix Life operating Phoenix Life 108 141 336 profits enhanced by £14 million of management Group costs (1) (6) (12) actions (HY15: £23 million) Operating profit before tax 107 135 324 Investment return variances and economic • IFRS
Slide 16: Phoenix Life
Phoenix Life Andy Moss 16
Slide 17: Regulatory changes continue to shape the industry
Regulatory changes continue to shape the industry • Outcome of the Legacy Review published, with six firms identified as requiring further investigation FCA Conduct • Phoenix welcomes Best Practice guide Regulation • Over 55s cap on pension contract exit charges proposed – Phoenix impact expected to
Slide 18: Phoenix Way continues to deliver policyholder and shareholder value
Phoenix Way continues to deliver policyholder and shareholder value HY16 achievements The Phoenix Way Expansion of Equity Release RESTRUCTURING OPERATIONAL MANAGEMENT asset investment Further Development of capability in operational commercial real estate debt progress Non Profit Fund acquisit
Slide 19: Management actions have added £86 million to Solvency II surplus
Management actions have added £86 million to Solvency II surplus Increase overall cashflows Accelerate cashflows Increase Solvency II Own Funds Reduce Solvency II SCR • Mortality modelling enhancements • Credit hedging • Asset Liability Management • Gilts spread hedge • Data review associated with O
Slide 20: Continued strong service for customers
Continued strong service for customers Customer actions Customer metrics Full year HY16 target(1) • Digital journey for customers Speed of Pension Transfer 11 days <12 days pay-outs (ORIGO) 90% rating Customer Satisfaction 92% satisfactory • Access to wider range of products, or above including Draw
Slide 21: Phoenix is well prepared for the integration of the AXA acquisition
Phoenix is well prepared for the integration of the AXA acquisition • Diversification benefits, due to mortality exposure of acquired business Capital synergies • Harmonisation to Phoenix Internal Model and transitional measures, subject to regulatory approval • Deployment of Phoenix Life operating
Slide 22: Outlook and Q&A
Outlook and Q&A Clive Bannister 22
Slide 23: There remains a wide range of further M&A opportunities for Phoenix
There remains a wide range of further M&A opportunities for Phoenix Market size is over £300bn Vendor motivations M&A criteria Market opportunities by owner • Loss of new business value • UK closed life focus 17% from annuities Bank owned 35% • Fixed cost pressures of legacy • Value accretive UK lif
Slide 24: Phoenix remains focused on its strategic priorities
Phoenix remains focused on its strategic priorities Continued • Further Matching Adjustment portfolios delivery of management • Part VII transfer of annuity portfolio currently reinsured to Guardian actions Integration of • Change of control process expected to complete in Q4 AXA Wealth • Integratio
Slide 25: Q&A
Q&A 25
Slide 26: Appendices
Appendices I Overview of Solvency II V Total debt exposure by country II Capital management framework under VI Credit rating analysis of debt portfolio Solvency II VII Current corporate structure III Phoenix Life IFRS operating profit drivers VIII Outline of debt structure at HY16 IV Asset mix of li
Slide 27: Appendix I: Overview of Solvency II
Appendix I: Overview of Solvency II Summary of Solvency II capital regime Capital protection for policyholders Surplus “Buffers” that provide protection to policyholders under Solvency II: Own Funds Capital requirements • Risk margin (SCR) • Solvency Capital Requirement (SCR) Assets Risk margin • Ph
Slide 28: Appendix II: Capital management framework under Solvency II
Appendix II: Capital management framework under Solvency II Phoenix Group Debt interest and repayments Holdings Shareholder dividends Cash remittances Group solvency Phoenix Life Head office costs • Full Internal Model Holdings Limited Pension scheme contributions • Group capital position calculated
Slide 29: Appendix III: Phoenix Life IFRS operating profit drivers
Appendix III: Phoenix Life IFRS operating profit drivers HY16 HY15 Reported Opening Closing Expected Reported Opening Closing Expected IFRS Op liability/ liability/ return IFRS Op liability/ liability/ return Profit equity(2) equity(2) margin(1) Profit equity(2) equity(2) margin(1) Fund type How pro
Slide 30: Appendix IV: Asset mix of life companies
Appendix IV: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 30 June 2016 supported with- with-profits Unit Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 3,991 26 4,687 1,191 5,878 9,869 Debt
Slide 31: Appendix V: Total debt exposure by country
Appendix V: Total debt exposure by country Other Corporate: Government Financial Corporate: Asset backed Total debt At 30 June 2016 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder
Slide 32: Appendix VI: Credit rating analysis of debt portfolio
Appendix VI: Credit rating analysis of debt portfolio Policyholder funds Total shareholder, Non- non-profit and supported At 30 June 2016 supported with- with-profits Total £m profits funds Unit-linked Policyholder Total assets AAA 1,841 1,564 180 1,744 3,585 AA 3,626 8,523 713 9,236 12,862 A 2,357
Slide 33: Appendix VII: Current corporate structure
Appendix VII: Current corporate structure Phoenix Group Holdings £650m unsecured bank debt Key: Intermediate PGH Capital Public Limited £300m senior Listed top company holdcos bond Company Holding companies Phoenix Life £428m Holdings subordinated Operating companies (PLHL) notes Finance company Imp
Slide 34: Appendix VIII: Outline of debt structure at HY16
Appendix VIII: Outline of debt structure at HY16 Instrument Issuer/borrower Face value Maturity Unsecured Revolving Credit Facility (L+175bps) PGH Capital PLC £650m June 2020 Unsecured senior bond (5.75%) PGH Capital PLC £300m July 2021 Subordinated notes (6.625%) PGH Capital PLC £428m(1) December 2
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 and other financial and/or statistical data about the Group’s current
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