Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2022 Earnings Presentation
55 slides from Standard Life's earnings presentation, Aug 15, 2022
Slide 1: Half year 2022 results
Half year 2022 results Phoenix Group Holdings plc 15 August 2022
Slide 2: H1 2022 review
H1 2022 review Andy Briggs Group Chief Executive Officer
Slide 3: Phoenix has had a fantastic first half
Phoenix has had a fantastic first half Record results Strategic progress Growing organically Growing inorganically Dividend growth across cash, resilience with strong delivery with £1.8bn of Open announced our first with a 3% YOY Interim and growth in across all five strategic business net inflows e
Slide 4: We delivered record cash, resilience and growth in H1 2022
We delivered record cash, resilience and growth in H1 2022 Cash Resilience Growth £950 million £4.7 billion 186% £430 million Cash generation PGH Solvency II PGH Shareholder Capital Incremental new business surplus(1) Coverage Ratio(1,2) long-term cash generation 6%pts 186% +9% 180% +109% £950m £5.3
Slide 5: Excellent delivery across all of our strategic priorities
Excellent delivery across all of our strategic priorities Optimise our in-force business Enhance our operating model and culture £421m of management actions delivered including 400k of Standard Life annuities fully migrated to TCS diversification into US credit Realised ReAssure cost synergies
Slide 6: Cash funded M&A can drive significant shareholder value
Cash funded M&A can drive significant shareholder value First cash funded acquisition Disciplined transaction pricing Expected to demonstrate the clear value creation from smaller cash funded M&A • Announced the acquisition of Sun Life of 83% Canada UK, a closed book life insurance company, for £248
Slide 7: Our dividend is growing both organically and inorganically
Our dividend is growing both organically and inorganically Continuing our strong dividend track record(5) Key messages • We have a consistent track record of dividend growth over 10+ years Not to scale • This is underpinned by our dependable cash generation, driven by our low 4% CAGR Potential 48.9p
Slide 8: H1 2022 financial results
H1 2022 financial results Rakesh Thakrar Group Chief Financial Officer
Slide 9: Strong financial performance in H1 2022
Strong financial performance in H1 2022 Cash Resilience Growth Financial performance: HY21 HY22 YOY change Cash Cash generation £872m £950m +9% New Business Incremental new business long-term cash generation £206m £430m +109% Dividend Interim dividend per share 24.1p 24.8p +3% IFRS Operating profit
Slide 10: Strong cash generation in H1; now expect top-end of 2022 target
Strong cash generation in H1; now expect to deliver at top-end of 2022 Cash target range Clear visibility of in-force business cash generation Strong cash generation of £950m in H1 £0.35-0.45bn £1.3-1.4bn £17.0bn guidance over life of business £4.0bn 3-year target £0.95bn £1.3-1.4bn 1-year target 20
Slide 11: Phoenix offers a superior Free Cash Flow yield
Phoenix offers a superior Free Cash Flow yield Cash 2022-2024 estimated Free Cash Flow (‘FCF’) Phoenix offers a superior 3-year average FCF(7) yield compared to the FTSE 100 £4.0bn £(1.1)bn £2.9bn c.15% c.8% In-force cash Operating costs and interest Free generation target Cash Flow Phoenix FTSE 100
Slide 12: We have significant capacity to invest into growth opportunities
We have significant capacity to invest into growth opportunities Cash Illustrative 2022-2024 growth investment capacity(†) Surplus cash and capital available to invest into growth £(1.1)bn We will fund the £248m acquisition of Sun Life of Canada UK from existing £(0.45)bn cash resources £(0.25)bn £4
Slide 13: The sustainability and resilience of our dividend differentiates Phoenix
The sustainability and resilience of our dividend differentiates Phoenix Cash Our dividend can be sustainably funded over the very long term Our long-term free cash is resilient to any market volatility(10) by our in-force cash generation Impact HoldCo £1.0bn cash Base position £11.8bn £(4.6)bn Equi
Slide 14: Resilient Solvency II surplus position provides capacity to invest into growth
Resilient Solvency II surplus position provides capacity to invest into growth Resilience 180% +10% +5% (7)% (2)% +11% (8)% (3)% 186% (7)% 179% £0.4bn £0.4bn £(0.4)bn £(0.1)bn £(0.2)bn £(0.5)bn £(0.2)bn £(0.2)bn £5.3bn £4.7bn £4.5bn Surplus as Surplus Management Financing and New business Economics
Slide 15: Our hedging approach results in low Solvency II capital surplus sensitivities
Our hedging approach results in low Solvency II capital surplus Resilience sensitivities to the key market risks Unrewarded market risks(10) Demographic risks(10) Rewarded market risks(10) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property(†) Credit Credi
Slide 16: Phoenix has no material exposure to inflation
Phoenix has no material exposure to inflation Resilience We manage a portfolio of inflation-linked annuities within our prudently sized annuity portfolio These are hedged against inflation through the use of index-linked gilts Products We have no direct inflation exposure in our other products We th
Slide 17: Our resilient capital position differentiates us to our UK peers
Our resilient capital position differentiates us to our UK peers Resilience H1 2022 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Key messages UK life peers(20) % points change in HY22 SCCR • Our comprehensive hedging approach 40% makes us far more resilient to the majo
Slide 18: We manage c.£270 billion of assets on behalf of our customers
We manage c.£270 billion of assets on behalf of our customers and Resilience retain a high quality shareholder credit portfolio Assets under administration Shareholder asset portfolio Total shareholder credit portfolio 2% £37.6bn 13% £3.8bn 19% £2.9bn £57.3bn £268.8bn £11.1bn £37.6bn £33.8bn £22.7bn
Slide 19: Our shareholder credit portfolio has limited exposure to cyclical sectors
Our shareholder credit portfolio has limited exposure to cyclical sectors Resilience Proactively manage portfolio to limit cyclical exposures; c.£1bn credit default reserve £1.1bn Strong recovery for theme parks & resorts (c.35%). Closely monitor sector £179m £4.1bn (12%) outlook for potential downg
Slide 20: £421 million of management actions in H1 demonstrates delivery capability
£421 million of management actions in H1 demonstrates our ongoing Resilience delivery capability H1 2022 Solvency II management actions Creating value Illiquid asset origination £0.4bn £0.4bn Sourcing assets to deliver closer matching of cash flows in our annuity £62m book; H1 sustainable asset orig
Slide 21: Incremental new business long-term cash generation of £430 million in H1
Incremental new business long-term cash generation of £430 million in H1 Growth puts us on track to grow organically again this year Incremental new business LTCG Retirement Solutions: £282m (+253% YOY) +109% • Year-on-year increase in LTCG reflects a more buoyant H1 market compared to 2021 and conf
Slide 22: Our well established BPA business delivered a further £1.6 billion of premiums
Our well established BPA business delivered a further £1.6 billion of Growth premiums in H1 2022 Premiums Key messages +280% • We expect a total £30-40bn BPA market in 2022 and we are quoting on a strong H2 £1,638m pipeline • Completed 6 external transactions in H1 covering £1.6bn of liabilities • W
Slide 23: Investment in our organic growth strategy is delivering momentum in Workplace
Investment in our organic growth strategy is delivering clear momentum in Growth our fee-based Workplace business Fee-based business net flows Continued positive momentum in Workplace: £1.7bn of net inflows Workplace new scheme wins +£1.9bn +163% • The investment made into our Workplace £1.4bn 42 pr
Slide 24: Our IFRS operating profit remained strong at £507 million
Our IFRS operating profit remained strong at £507 million Cash Resilience Growth HY21 HY22 Key messages Heritage £375m £280m • Heritage operating profit decreased due to lower with- Open £178m £287m profit expected return, and adverse experience and assumption changes Service company £2m £(26)m • Op
Slide 25: Phoenix will continue to deliver on its financial framework
Phoenix will continue to deliver on its financial framework Cash Resilience Growth Strong H1 2022 progress against targets 2022 targets • Deliver top-end of £1.3bn-£1.4bn cash generation target Strong cash generation of £950m in H1 2022 range for 2022 Interim dividend declared of 24.8p (3% incre
Slide 26: Outlook
Outlook Andy Briggs Group Chief Executive Officer
Slide 27: We are embracing our role in society
We are embracing our role in society Customers Customer obsessed, focused on the outcomes that matter to our c.13m customers Colleagues The best talent, with differentiated Our purpose: capability, diverse and highly engaged Helping people secure a life of possibilities Wider society We are focused
Slide 28: We are leveraging strong market growth trends
We are leveraging strong market growth trends Customer income Market trend Flow H2 2022 outlook Economic source outlook impact Legacy pension and Insurers are disposing of M&A c.£480bn Accelerates saving products their Heritage portfolios market Complete the acquisition of Sun Life of Canada UK in Q
Slide 29: We have a simple, clear strategy – the whole is greater than the sum of the parts
We have a simple, clear strategy – the whole is greater than the sum of the parts Further Further in-force in-force ORGANIC GROWTH IN-FORCE BUSINESS INORGANIC GROWTH OPEN COMPETITIVE HERITAGE COMPETITIVE M&A ADVANTAGES ADVANTAGES Retirement Solutions Capital diversification Optimise our in-force bus
Slide 30: We are confident of delivering ongoing organic growth
We are confident of delivering ongoing organic growth and will balance the mix over time… Balancing our future organic growth • Organic growth is now more than offsetting the Heritage run-off, M&A delivering growth in our in-force cash generation • Our Open business strategy leverages the key driver
Slide 31: …and continue to target further inorganic growth
…and continue to target further inorganic growth, which remains a key part of our growth strategy Significant M&A opportunities remain available Simplifying our future dividend approach Large acquisitions • The expected value creation from the acquisition of Sun Life of Canada UK supports a proposed
Slide 32: Phoenix is unique in the insurance sector
Phoenix is unique in the insurance sector Phoenix will continue to deliver: Cash Resilience Growth In-force business covers our Uniquely resilient Growing organically and dividend over very long term capital position inorganically Phoenix is a growing business with a defensive balance sheet, and off
Slide 33: Q&A
Q&A ail Phoenix
Slide 34: Investor Relations activity and contacts
Investor Relations activity and contacts 25 August Ex-dividend date for 2022 Interim dividend Claire Hawkins Director of Corporate Affairs & Investor Relations Email: claire.hawkins@thephoenixgroup.com 26 August Record date for 2022 Interim dividend Tel: +442045593161 September-October Half year 202
Slide 35: Appendices
Appendices ail Phoenix
Slide 36: Appendices
Appendices 1. Leverage ratios 14. Integration synergies 2. Debt maturity profile as at 15 August 2022 15. ESG ratings and collaborations 3. Movement in assets under administration 16. 2022 sustainability targets 4. Open business segments movement in assets under administration 17. Footnotes 5. Break
Slide 37: Appendix 1: Leverage ratios
Appendix 1: Leverage ratios Fitch leverage ratio Leverage ratios 35% FY21 HY22 Fitch basis(2,5) 28% 27% 30% 29% IFRS basis(3,5) 44% 44% 28% 28% Fitch target 27% 27%(1,5) range SII leverage(4,5) 31% 31% 25% • IFRS leverage ratio classifies RT1 as debt 22% 22% • We estimate a funding capacity for inor
Slide 38: Appendix 2: Debt maturity profile as at 15 August 2022
Appendix 2: Debt maturity profile as at 15 August 2022 £500m $750m (2.3) £500m (1) £500m £428m €500m (3) $500m (2,3) $500m (3) £250m (1) £250m 1H23 2H23 1H24 2H24 1H25 2H25 1H26 2H26 1H27 2H27 1H28 2H28 1H29 2H29 1H30 2H30 1H31 2H31 RT1 bond Tier 2 bond Tier 3 bond (1) First call date (2) First rese
Slide 39: Appendix 3: Movement in assets under administration
Appendix 3: Movement in assets under administration £8.3bn £310.4bn £7.3bn £1.0bn £(5.5)bn £(5.9)bn £(11.4)bn £(18.0)bn Nil £(20.5)bn £10.1bn £268.8bn £(38.5)bn £(10.1)bn Net flows £157.8bn Heritage £(4.9)bn £124.8bn Open £1.8bn £152.6bn £144.0bn Opening AUA Gross inflows Gross outflows Market movem
Slide 40: Appendix 4: Open business segments movement in assets under administration
Appendix 4: Open business segments movement in assets under administration Retirement Solutions Workplace CS&I Europe FY21 AUA £45.8bn FY21 AUA £33.5bn FY21 AUA £44.3bn FY21 AUA £29.0bn Gross inflows £1.1bn Gross inflows - new £0.8bn Gross inflows - new Gross inflows £1.6bn £0.7bn - new Net - new Gr
Slide 41: Appendix 5: Breakdown of Open business segments as at 30 June 2022
Appendix 5: Breakdown of Open business segments as at 30 June 2022 Assets under administration New business LTCG New business contribution £11m £10m £12m £1m £25.2bn £13m £36.4bn £112m £47m £144bn £430m £142m £31.1bn £84m £282m £51.3bn Retirement Solutions Workplace CS&I Europe SunLife 41
Slide 42: Appendix 6: Change in Life Company Free Surplus
Appendix 6: Change in Life Company Free Surplus £(0.1)bn Nil £0.4bn £0.4bn £(1.0)bn £0.1bn £3.3bn £2.6bn £2.4bn Free surplus as at FY21(1) Surplus generation Management actions New Economic variances Free surplus before Cash Cash remittances from Free surplus and release of business strain incl. BPA
Slide 43: Appendix 7: Estimated PGH Solvency II surplus and coverage ratios
Appendix 7: Estimated PGH Solvency II surplus and coverage ratios PGH SII coverage ratio(1) PGH Shareholder Capital Coverage Ratio(1,2) 156% 162% 180% 186% Surplus Surplus £5.3bn Surplus £5.3bn Surplus £4.7bn £4.7bn £14.8bn £11.9bn £12.4bn £10.2bn £9.5bn £7.7bn £6.6bn £5.5bn FY21(3) HY22(1) FY21(3)
Slide 44: Appendix 8: Additional Solvency II disclosures
Appendix 8: Additional Solvency II disclosures Estimated HY22 SCR by risk type(1) HY22 PGH Own Funds by capital tier(2) £10.2bn 4% 3% Tier 3 5% 21% Tier 2 5% 9% of SCR £5.5bn 50% of SCR 6% 127% of SCR Tier 1 10% 18% PGH tiering of Own Funds PGH SCR 11% 17% Share of SII Own Funds by capital tier £bn
Slide 45: Appendix 9: PGH Solvency II Regulatory Capital Coverage Ratio sensitivities
Appendix 9: PGH Solvency II Regulatory Capital Coverage Ratio sensitivities Unrewarded market risks(10) Demographic risks(10) Rewarded market risks(10) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property(†) Credit Credit(††) 20% fall in rates rates inflati
Slide 46: Appendix 10: H1 2022 operating profit drivers
Appendix 10: H1 2022 operating profit drivers Heritage Open Expected return £311m Expected return £132m Experience £(38)m Experience £36m New business N/A New business £90m Modelling & Modelling & £19m £32m methodology methodology Assumptions £(12)m Assumptions £(3)m Operating profit £280m Operating
Slide 47: Appendix 11: Asset origination as at 30 June 2022
Appendix 11: Asset origination as at 30 June 2022 2022 asset origination by type 2022 illiquid assets by type Key messages £485m of sustainable assets in H1 2022 (51% of origination • Utilised liquid credit spread widening to 10% excl. ERM) Sustainable originate more liquid credit at strong £1.6bn L
Slide 48: Appendix 12: Diversification of illiquid asset portfolio as at 30 June 2022
Appendix 12: Diversification of illiquid asset portfolio as at 30 June 2022 Equity Release Mortgages Infrastructure – project finance debt £4.1bn with AA rating £0.5bn £0.9bn with BBB rating £0.8bn • Secured on cash flows from long-term contracts with • Broad regional spread with average LTV of 31%
Slide 49: Appendix 13: Credit quality by sector for shareholder debt portfolio
Appendix 13: Credit quality by sector for shareholder debt portfolio Average credit rating by sector (HY22 vs FY21) Sector HY22 HY22 AA A BBB ∆ vs FY21 ERM £4.1bn 12% Consumer, cyclical £1.2bn 4% Industrials £1.2bn 4% Real Estate £4.0bn 12% Consumer, non-cyclical £2.1bn 6% Tech and Telecoms £1.9bn 5
Slide 50: Appendix 14: Integration synergies
Appendix 14: Integration synergies ReAssure In H1 2022 Cumulative Revised target % of revised target Capital synergies (net of costs) £5m £693m £600m 116% Cost synergies(21) (per annum) £15m £42m £50m 85% Integration costs(22) (net of tax) £11m £39m £50m 78% Total value(23) £148m £1,078m £1,050m 103
Slide 51: Appendix 15: ESG ratings and collaborations
Appendix 15: ESG ratings and collaborations ESG ratings Collaborations and Commitments Ratings agency FY21 HY22 Change MSCI A A Sustainalytics 20.0 / low risk 19.8 / low risk CDP B B Dow Jones Sustainability 69th percentile 69th percentile Index FTSE4Good 76th percentile 75th percentile 51
Slide 52: Appendix 16: 2022 sustainability targets
Appendix 16: 2022 sustainability targets Investing in a sustainable future Engaging people in better financial futures Building a leading responsible business Theme 2022 targets Theme 2022 targets Theme 2022 targets Integrating sustainability Data gathering framework and Empowering better • Launch f
Slide 53: Appendix 17: Footnotes
Appendix 17: Footnotes 1. 30 June 2022 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitionals for the Group’s Life companies and the foreseeable interim dividend of £248m. Had the dynamic recalculation not been assumed, the Solvency II surplus and
Slide 54: Appendix 17: Footnotes cont.
Appendix 17: Footnotes cont. 13. Credit stress varies by rating and term and is equivalent to an average 135bps spread widening. It assumes the impact of a dynamic recalculation of transitionals (subject to PRA approval) and makes no allowance for the cost of defaults/downgrades 14. Impact of an imm
Slide 55: Disclaimer
Disclaimer This presentation in relation to Phoenix Group Holdings plc and its subsidiaries (the ‘Group’) contains, and the Group may ma ke other statements (verbal or otherwise) containing, forward-looking statements and other financial and/or statistical data about the Group’s current plans, goals
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