Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2012 Earnings Presentation
41 slides from Standard Life's earnings presentation, Aug 23, 2012
Slide 1: Interim Results 2012
Interim Results 2012 23 August 2012
Slide 2: Agenda
Agenda Introduction and business update Clive Bannister, Group Chief Executive Financial review Jim McConville, Group Finance Director Outlook and Q&A Clive Bannister 2
Slide 3: Introduction and business update
Introduction and business update Clive Bannister
Slide 4: Continuing the journey
Continuing the journey 2009 • Acquisition by Liberty and public listing 2010 • Simplified capital structure and Premium Listing on LSE 2011 • Financial and operational delivery • Proposed dividend of 21p per share • Increased free surplus H1 2012 • Enhanced MCEV • Agreed annuity transfer • Significa
Slide 5: Financial targets for 2012 and beyond, set at FY11
Financial targets for 2012 and beyond, set at FY11 • 2012 target of £500m – £600m, weighted towards H2 Cash generation • 2011 – 2016 cumulative target of £3.2bn Gearing • Reduce gearing to 43% or below • Incremental embedded value from management actions of MCEV £100m on average per annum 2011-2014
Slide 6: FY12 cash generation target increased by £100 million
FY12 cash generation target increased by £100 million Cash generation • £119 million of cash distributed to holding companies in H1 £810m FY12 target increased to £716m £734m £600m - £700m • FY12 target increased by £100m £100 million to £600 to £700 increase million Original • 2011 – 2016 cash gene
Slide 7: On track to achieve FY12 gearing target of 43% or below
On track to achieve FY12 gearing target of 43% or below Gearing(1) • Gearing maintained at 46% at HY12 58% 52% • On track to achieve FY12 gearing target of 43% or 46% 46% FY12 target below 43% or below • Discussions with lenders ongoing FY09 FY10 FY11 HY12 FY12 target • Debt is competitively priced.
Slide 8: Incremental MCEV enhancements of £107 million in H1
Incremental MCEV enhancements of £107 million in H1 MCEV • MCEV increased modestly in £2,118m £2,135m H1 despite market volatility £2,104m • £107 million of incremental £1,827m value generated through management actions in H1 FY09 FY10 FY11 HY12 • Total incremental MCEV 2011 – 2014 incremental MCEV
Slide 9: Summary of annuity transfer
Summary of annuity transfer • Transaction announced on 27 June 2012 • Part of ongoing management action programme to accelerate cash • Significantly reduces sensitivity to longevity risk Summary of • Structured as reinsurance agreement initially, effective 1 July 2012 transaction • Part VII transfer
Slide 10: Significant operational progress
Significant operational progress Funds merger of NPI into PLL completed Funds merger of London Life into Pearl progressing well Annuity transfer transaction agreed Phoenix Life Solvency II programme on track for 2014 implementation date Further 230,000 policies transferred from legacy syst
Slide 11: Financial review
Financial review Jim McConville
Slide 12: Financial highlights
Financial highlights £m HY12 HY11 FY11 Cash Operating companies cash generation 119 496 810 IFRS Group operating profit(1) 207 136 387 MCEV Group Market Consistent Embedded Value (‘MCEV’) 2,135 2,203 2,118 IGD surplus 1.2bn 1.1bn 1.3bn Capital and PLHL ICA surplus 0.4bn n/a n/a balance sheet Gearing
Slide 13: £473 million increase in free surplus since FY11
Capital Cash IFRS MCEV AUM Dividend & B/S £473 million increase in free surplus since FY11 £m HY12 HY11 FY11 • Strong Phoenix Life IFRS operating profit of £184 million Opening Phoenix Life free surplus 93 750 750 increased free surplus, Emergence of free surplus although partly offset by £116 milli
Slide 14: Cash generation on track to meet increased FY12 target
Capital Cash IFRS MCEV AUM Dividend & B/S Cash generation on track to meet increased FY12 target £m HY12 HY11 FY11 • £119 million of cash distributed to holding Opening cash & cash equivalents 837 486 486 companies in H1 Cash receipts Phoenix Life 95 481 778 • Includes £32 million from Ignis 24 15 3
Slide 15: Strong Group IFRS operating profit
Capital Cash IFRS MCEV AUM Dividend & B/S Strong Group IFRS operating profit £m HY12 HY11 FY11 • Phoenix Life operating profit Phoenix Life 205 152 395 enhanced by £59 million of management actions to Ignis 19 18 46 harmonise methodologies and Group costs (17) (34) (54) policies across Phoenix Life
Slide 16: MCEV increased modestly despite market volatility
Capital Cash IFRS MCEV` AUM Dividend & B/S MCEV increased modestly despite market volatility Group MCEV(1) • Operating earnings of £104 £107m million generated in line with £12.14 £12.23 per £104m per long term rate of return share(2) £(83)m share(2) assumptions £(75)m £(36)m • Management actions in
Slide 17: Capital Management Framework
Capital Cash IFRS MCEV AUM Dividend & B/S Capital Management Framework Phoenix Group Holdings PLHL ICA calculation • Pillar 2 assessment of capital resources and IGD risks outside the life companies • Pillar 1 group capital UK Holding • Includes net assets of holding companies and Companies(1) calcu
Slide 18: Robust IGD surplus
Capital Cash IFRS MCEV AUM Dividend & B/S Robust IGD surplus IGD surplus and headroom • IGD surplus and headroom remained robust, estimated at £1.3bn £1.2 billion and £0.4 billion £1.2bn respectively £0.4bn £1.0bn £0.4bn • Significant improvement in £0.1bn IGD headroom over last 18 months through ma
Slide 19: Summary of PLHL ICA calculation
Capital Cash IFRS MCEV AUM Dividend & B/S Summary of PLHL ICA calculation PLHL ICA calculation £0.6bn £0.8bn £0.4bn(3) £0.7bn £(0.5)bn PLHL ICA PVFP of Pension capital Ignis(1) Phoenix PLHL ICA req scheme Life free capital obligation(2) Coverage: 200% surplus resources £0.4bn Cash and other net asse
Slide 20: Estimated PLHL ICA surplus of £0.4 billion
Capital Cash IFRS MCEV AUM Dividend & B/S Estimated PLHL ICA surplus of £0.4 billion PLHL ICA and sensitivities at HY12 • We aim to ensure that PLHL £0.4bn maintains an ICA surplus at least £150 million £250 million PLHL • Estimated PLHL ICA surplus surplus of £0.4 billion and headroom of £0.3 billi
Slide 21: Direct shareholder exposure to Peripheral Eurozone remains very low
Capital Cash IFRS MCEV AUM Dividend & B/S Direct shareholder exposure to Peripheral Eurozone(1) remains very low HY12 FY11 • Shareholder exposure to Of which Of which Peripheral Eurozone debt Total Peripheral Total Peripheral reduced by 31% to £251 £m exposure Eurozone exposure Eurozone million at H
Slide 22: Stable Group assets under management
Capital Cash IFRS MCEV AUM Dividend & B/S Stable Group assets under management Group AUM • Group assets under management remained stable at £71.6 billion at HY12 £0.9bn £0.3bn • Strong third party inflows of £(1.7)bn £0.9 billion in H1 • Ignis secured mandate to £72.1bn £71.6bn continue to manage £5
Slide 23: £927 million of net third party inflows supported by strong investment performance
Capital Cash IFRS MCEV AUM Dividend & B/S £927 million of net third party inflows supported by strong investment performance Net new third party assets • Continuing growth in established liquidity franchise £1,667m • Building on real estate sales in UK Retail and Institutional £1,277m • £225 million
Slide 24: Proposed interim dividend per share of 21 pence
Capital Cash IFRS MCEV AUM Dividend & B/S Proposed interim dividend per share of 21 pence Dividend per share • Proposed interim dividend per share of 21 pence 42p 42p • On an annualised basis, this represents the maximum 21p 21p possible under current facility agreements • Scrip dividend option remo
Slide 25: Outlook
Outlook Clive Bannister
Slide 26: Financial targets for 2012 and beyond
Financial targets for 2012 and beyond Increased cash • 2012 target increased by £100m to £600m – £700m, recognising generation importance of prudence in light of ongoing economic uncertainty targets • 2011 – 2016 cumulative target increased by £0.1bn to £3.3bn Gearing • 2012 target to reduce gearing
Slide 27: Another set of strong results…
Another set of strong results… 2009 2010 2011 2012 and beyond P Our objectives are to deliver: Unique, simple business model Continued cashflow delivery Incremental MCEV P Strong operating platform Further organic de-gearing Continued operational focus and delivery P Clear strategy and focus
Slide 28: Q&A
Q&A
Slide 29: Appendices
Appendices I Management actions VII Total debt exposure by country II Phoenix Life IFRS operating profit VIII MCEV sensitivities drivers IX Maturity profile of business III Ignis IFRS operating profit drivers X Ignis 3rd party new business flows IV Group solvency sensitivities XI Summary of bank fac
Slide 30: Appendix I: Management actions
Appendix I: Management actions Cash acceleration Incremental MCEV HY12 HY11 HY12 HY11 Restructuring £17m £171m Restructuring £15m £30m Risk management - £8m Risk management £36m - Operational Operational £15m £18m £56m £39m management management Total £32m £197m Total £107m £69m 30
Slide 31: Appendix II: Phoenix Life IFRS operating profit drivers
Appendix II: Phoenix Life IFRS operating profit drivers HY12 HY11 Reported Opening Expected Reported Opening Expected IFRS Op liability/ return IFRS Op liability/ return Profit equity margin(1) Profit equity margin(1) Fund type How profits are generated £m £bn bps £m £bn bps Our share of bonuses pai
Slide 32: Appendix III: Ignis IFRS operating profit drivers
Appendix III: Ignis IFRS operating profit drivers HY12 HY11 IFRS Closing IFRS Closing results AUM Margin(1) results AUM Margin(1) £m £bn bps £m £bn bps Retail 8 1.9 82 9 2.1 76 Institutional, international and Group pension(2) 7 7.1 20 7 5.3 26 Life funds(3) 48 61.3 16 49 59.8 17 Other(4) 3 1 Total
Slide 33: Appendix IV: Group solvency sensitivities
Appendix IV: Group solvency sensitivities IGD sensitivities IGD IGD excess over IGD Excess £bn surplus capital policy Capital IGD at 30 June 2012 (estimated) 1.2 0.4 3.2 20% fall in equity markets 1.2 0.4 3.1 15% fall in property values 1.2 0.4 3.1 75 bps increase in yields(1) 1.1 0.4 3.0 75 bps dec
Slide 34: Appendix V: Cashflow sensitivities
Appendix V: Cashflow sensitivities 2011 – 2016 cash £bn generation target Base case 6 year projections 3.3 20% fall in equity markets 3.2 15% fall in property values 3.2 75 bps increase in yields 3.3 Credit spreads widening(1) 3.1 Note: (1) 10 year term: AAA – 46 bps, AA – 77 bps, A – 99 bps, BBB –
Slide 35: Appendix VI: Asset mix of life companies
Appendix VI: Asset mix of life companies Total Policyholder funds(3) shareholder, non-profit Non- At 30 June 2012 and supported £m unless otherwise supported with-profits Total Total stated with-profits(2) % funds Unit linked Policyholder assets(4) Cash deposits 3,724 18% 9,531 1,032 10,563 14,287 D
Slide 36: Appendix VII: Total debt exposure by country
Appendix VII: Total debt exposure by country Other Government Corporate: Total and Financial Asset backed Total debt debt At 30 June 2012 Supranational Institutions Corporate: Other securities securities secur- £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder
Slide 37: Appendix VIII: MCEV sensitivities
Appendix VIII: MCEV sensitivities £m HY12 Base at 30 June 2012 3,837 1% decrease in risk free rates 106 1% increase in risk free rates (79) 10% decrease in equity market values (62) 10% increase in equity market values 59 10% decrease in property market values (58) 10% increase in property market va
Slide 38: Appendix IX: Maturity profile of business
Appendix IX: Maturity profile of business 1-5 6-10 11-15 16-20 20+ £m Total years years years years years MCEV present value of future profits 30 June 2012 1,037 638 407 257 253 2,594 38
Slide 39: Appendix X: Ignis 3rd party new business flows
Appendix X: Ignis 3rd party new business flows £m HY12 HY11 Gross flows Retail 356 382 Institutional(1) 113 495 International 237 55 Liquidity funds (net) 707 347 Total 1,413 1,279 Net flows Retail 9 (5) Institutional(1) 40 407 International 171 17 Liquidity funds (net) 707 347 Total 927 766 Note: (
Slide 40: Appendix XI: Summary of bank facilities at HY12
Appendix XI: Summary of bank facilities at HY12 £m Coupon Maturity Repayment Bank facility 375 L+125bps 2016 £25m p.a. 2011-2015 Balance in 2016 Subordinated Lender Loan Notes 79 L+100bps(1) 2024 Bullet Total Pearl bank debt 454 Facility A 930 L+200bps(2) 2014 £125m p.a. from 2011 Balance in 2014 Fa
Slide 41: 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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