Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2011 Earnings Presentation
39 slides from Standard Life's earnings presentation, Mar 23, 2012
Slide 1: Full Year Results 2011
Full Year Results 2011 23 March 2012
Slide 2: Agenda
Agenda Introduction Ron Sandler, Chairman Business update Clive Bannister, Group Chief Executive Financial review Paul Miles, Acting Group Finance Director Outlook Clive Bannister Q&A Ron Sandler 2
Slide 3: Introduction
Introduction Ron Sandler
Slide 4: Continuing the journey
Continuing the journey 2009 • Liberty restructuring 2010 • Simplified capital structure and Premium Listing on LSE 2011 9 Financial and operational delivery 2012 and • Improve capital structure and develop platform for beyond future growth 4
Slide 5: Business update
Business update Clive Bannister
Slide 6: Financial highlights – strong delivery in challenging markets
Financial highlights – strong delivery in challenging markets FY11 FY10 3 Cash generation above mid-point of target range £810m £734m 3 Strong IFRS operating profits £387m £373m 3 Resilient MCEV £2,118m £2,104m 3 Increased assets under management £72.1bn £69.6bn 3 Continued reduction in gearing (1)
Slide 7: Achieved or exceeded all 2011 financial targets
Achieved or exceeded all 2011 financial targets FY11 FY11 Delivery Targets 9 Consistent delivery of cash from operating companies despite difficult market conditions £750m Cash generation £810m to 9 Underlying cash generation remained in the £400m to £500m £850m range 9 £359m of cash accelerated thr
Slide 8: Operational highlights – further transformation of our business
Operational highlights – further transformation of our business 9 Further simplified life company structure 9 Completed the transfer of over two million policies onto new admin system Phoenix Life 9 Increased policyholder payouts through inherited estate distribution 2011 Significant 9 Improved cust
Slide 9: Financial review
Financial review Paul Miles
Slide 10: Financial highlights
Financial highlights £ FY11 FY10 Operating companies cash generation 810m 734m IFRS operating profit Group operating profit(1) 387m 373m Ignis operating profit 46m 46m Group Market Consistent Embedded Value (‘MCEV’) 2,118m 2,104m Group MCEV per share(2) £12.14 £12.27 IGD surplus 1.3bn 1.0bn IGD exce
Slide 11: Cash generation demonstrates strength of Group's business model
Capital Cash IFRS MCEV AUM & B/S Cash generation demonstrates strength of Group’s business model £m FY11 FY10 • Achieved above mid-point Opening cash and cash equivalents target range of £750m to in Holding Companies 486 202 £850m despite difficult market Cash receipts conditions Phoenix Life 778 70
Slide 12: Management actions accelerated £359m of cashflows in Phoenix Life
Capital Cash IFRS MCEV AUM & B/S Management actions accelerated £359m of cashflows in Phoenix Life Cash acceleration through management actions • £359m cash accelerated through actions including £359m – Restructuring corporate loans portfolio – Investment derisking and £242m improved asset allocatio
Slide 13: FY11 free surplus generation impacted by adverse economic variances
Capital Cash IFRS MCEV AUM & B/S FY11 free surplus generation impacted by adverse economic variances £m FY11 FY10 • £121m of free surplus Opening Phoenix Life free surplus generated reflecting impact of 750 464 adverse economic variances Emergence of free surplus • FY11 free surplus of £93m is IFRS
Slide 14: Strong Group IFRS operating profit of £387m
Capital Cash IFRS MCEV AUM & B/S Strong Group IFRS operating profit of £387m £m FY11 FY10 • Underlying recurring Phoenix Life Phoenix Life 395 388 operating profit remained in £275m to £325m range Ignis 46 46 • FY11 Phoenix Life operating profit boosted Group costs (54) (61) by £51m from data cleans
Slide 15: Resilient embedded value in the business
Capital Cash IFRS MCEV AUM & B/S Resilient embedded value in the business Group MCEV(1) growth • MCEV remained stable despite £309m of adverse £165m economic and non-operating £298m variances £12.27 £12.14 per per • Operating earnings reflects share(2) £(309)m share(2) expected returns at long term
Slide 16: Management actions increased embedded value by £165m in Phoenix Life
Capital Cash IFRS MCEV AUM & B/S Management actions increased embedded value by £165m in Phoenix Life 2011 – 2014 incremental MCEV target • £165m incremental MCEV from actions including: £400m – Admin system migration – Resolution of legacy tax £300m issues – Investment de-risking and improved asset
Slide 17: Strong solvency capital
Capital Cash IFRS MCEV AUM & B/S Strong solvency capital Estimated IGD position at 31 Dec 11 • IGD surplus and headroom over capital policy both increased by £0.3bn during FY11 to £1.3bn and £0.4bn respectively • Improvement in both metrics reflects further simplification of £6.8bn life company stru
Slide 18: Minimal shareholder exposure to Peripheral Eurozone
Capital Cash IFRS MCEV AUM & B/S Minimal shareholder exposure to Peripheral Eurozone(1) FY11 HY11 • Shareholder exposure to Of which Of which Peripheral Eurozone debt Total Peripheral Total Peripheral reduced from £862m at HY11 £m exposure Eurozone exposure Eurozone to £363m at FY11 Shareholder debt
Slide 19: Increased Group assets under management
Capital Cash IFRS MCEV AUM & B/S Increased Group assets under management Group AUM • AUM increased by £2.5bn despite life company asset run-off of £4.4bn • Net third party inflows of £1.7bn, mainly in liquidity and real estate funds and mandate from Group pension scheme • Market movement of £5.8bn p
Slide 20: Outlook
Outlook Clive Bannister
Slide 21: The Phoenix Group has a clear strategy to deliver long term shareholder value
The Phoenix Group has a clear strategy to deliver long term shareholder value Vision • Saver-friendly, industry solution for the safe, innovative and profitable management of closed life funds • Leading asset management business Continue operational delivery and develop platform for growth • Harvest
Slide 22: Confidence in delivering significant long-term cashflows
Confidence in delivering significant long-term cashflows Illustrative undiscounted long term cash generation • Over £9bn of Holding Companies cash inflows expected from inherent future profits and capital releases • £3.2bn cash target between 2011 and 2016 £9bn+ • Focus on delivering shareholder val
Slide 23: Organic deleveraging continues
Organic deleveraging continues Gearing(1) • Reduction in gearing reflecting cash generation and stable MCEV 58% 52% 46% • Achieved FY11 target of <50% before half year with further reduction in H2 • Cash generative business model enables organic debt FY 09 FY 10 FY 11 pay-down • Ongoing dialogue wit
Slide 24: Financial targets for 2012 and beyond
Financial targets for 2012 and beyond • 2012 target of £500m to £600m, weighted towards H2 Cash generation • Cumulative £3.2bn between 2011 and 2016, of which £810m delivered in 2011 Gearing • Reduce gearing to 43% or below in 2012 MCEV • Incremental embedded value from management actions of £100m o
Slide 25: The Phoenix Group is well positioned
The Phoenix Group is well positioned 2009 2010 2011 2012 and beyond 3 Our objectives are to deliver: Unique, simple business model 9 Continued cashflow delivery 9 Incremental MCEV 3 Strong operating platform 9 Further organic de-gearing 9 Continued operational focus and delivery 3 Clear strategy and
Slide 26: Q&A
Q&A
Slide 27: Appendices
Appendices I Management actions VII Total equities 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 IGD sensitivities XI Summary of bank facilities
Slide 28: Appendix I: Management actions
Appendix I: Management actions Cash acceleration Incremental EV FY11 FY10 FY11 FY10 Restructuring £173m £45m Restructuring £32m £262m Risk management £104m £109m Risk management £39m - Operational Operational management £82m £88m management £94m £34m Total £359m £242m Total £165m £296m 28
Slide 29: Appendix II: Phoenix Life IFRS operating profit drivers
Appendix II: Phoenix Life IFRS operating profit drivers FY11 FY10 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 pa
Slide 30: Appendix III: Ignis IFRS operating profit drivers
Appendix III: Ignis IFRS operating profit drivers FY11 FY10 IFRS Closing IFRS Closing results AUM Margin(1) results AUM Margin(1) £m £bn bps £m £bn bps Retail 17 1.9 79 17 2.3 83 Institutional, international and Group pension(2) 12 6.7 22 12 5.3 26 Life funds(3) 114 62.1 19 113 60.0 19 Other(4) 3 n/
Slide 31: Appendix IV: IGD sensitivities
Appendix IV: IGD sensitivities IGD IGD excess over IGD Excess £bn surplus capital policy Capital IGD at 31 Dec 2011 (estimated) 1.3 0.4 3.1 20% fall in equity markets 1.3 0.4 3.0 15% fall in property values 1.2 0.4 3.0 75 bps increase in yields 1.2 0.4 2.9 75 bps decrease in yields 1.2 0.3 3.1 Credi
Slide 32: Appendix V: Asset mix of life companies
Appendix V: Asset mix of life companies Total Policyholder funds(2) shareholder, non-profit Non- At 31 December 2011 and supported £m unless otherwise supported with-profits Total Total stated with-profits(1) % funds Unit linked Policyholder assets(4) Cash deposits 4,245 20% 7,493 1,035 8,527 12,773
Slide 33: Appendix VI: Total debt exposure by country
Appendix VI: Total debt exposure by country Other Government Corporate: and Financial Asset backed Total debt At 31 December 2011 Supranational Institutions Corporate: Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyho
Slide 34: Appendix VII: Total equities exposure by country
Appendix VII: Total equities exposure by country Shareholder Policyholder At 31 December 2011 Shareholder and Supported Non supported Unit Total £m non-profit with-profits Total shareholder with-profits linked Total policyholder equities UK 251 11 262 3,525 4,761 8,285 8,548 USA 76 2 78 1,217 817 2,
Slide 35: Appendix VIII: MCEV sensitivities
Appendix VIII: MCEV sensitivities £m FY11 Base at 31 December 11 3,804 1% decrease in risk free rates 153 1% increase in risk free rates (157) 10% decrease in equity market values (75) 10% increase in equity market values 71 10% decrease in property market values (72) 10% increase in property market
Slide 36: 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 31 December 2011 1,135 683 455 291 282 2,846 36
Slide 37: Appendix X: Ignis 3rd party new business flows
Appendix X: Ignis 3rd party new business flows £m FY11 FY10 Gross flows Retail 644 864 Institutional(1) 538 227 International 137 225 Liquidity funds (net) 1,242 1,095 Total 2,561 2,411 Net flows Retail (68) 294 Institutional(1) 432 (222) International 61 110 Liquidity funds (net) 1,242 1,095 Total
Slide 38: Appendix XI: Summary of bank facilities
Appendix XI: Summary of bank facilities £m Coupon Maturity Repayment Bank facility 400 L+125bps 2016 £25m p.a. 2011-2015 Balance in 2016 Subordinated Lender Loan Notes 78 L+100bps(1) 2024 Bullet Total Pearl bank debt 478 Facility A 1,007 L+200bps(2) 2014 £125m p.a. from 2011 Balance in 2014 Facility
Slide 39: 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
Phoenix Group Holdings — FY2011 Earnings Presentation on 6ix