Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2013 Earnings Presentation
36 slides from Standard Life's earnings presentation, Aug 22, 2013
Slide 1: Interim Results 2013
Interim Results 2013 22 August 2013
Slide 2: Agenda
Agenda Introduction and Clive Bannister | Group Chief Executive business update 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: A period of strong delivery for Phoenix Group
A period of strong delivery for Phoenix Group P Equity raised and debt re-termed in 2013 P Cash generation on track for FY13 target P Gearing reduced to 48%, towards 40% target by end of 2016 P Robust group solvency P Good IFRS operating profits P MCEV enhanced through management actions P Continued
Slide 5: Significant progress towards FY13 financial targets
Significant progress towards FY13 financial targets Delivery Target £252m of cash accelerated through £650m management actions Cash £416m to £750m generation in 2013 £1.9bn of £3.5bn long-term target from 2011 to 2016 now achieved £52m of incremental value delivered through MCEV £384m to £400m
Slide 6: Building a better business
Building a better business Progressed preparation for Part VII transfer of £5 billion of annuity liabilities and related assets to Guardian Completed migration of Diligenta administered policies onto BaNCS Phoenix admin platform Life Progressed Actuarial Systems Transformation project. New mod
Slide 7: Financial review
Financial review Jim McConville
Slide 8: Financial highlights
Financial highlights HY13 HY12 FY12 £ Cash Operating companies cash generation 416m 119m 690m IFRS Group operating profit(1) 186m 217m 429m MCEV Group MCEV 2.2bn 2.1bn 2.3bn(2) IGD surplus 1.1bn 1.2bn 1.2bn(2) Capital and PLHL ICA surplus 1.0bn 0.4bn 0.8bn(2) balance sheet Gearing – new methodology(
Slide 9: £303 million of free surplus generated in life companies
Cash IFRS AUM MCEV Capital Dividend £303 million of free surplus generated in life companies £m HY13 HY12 FY12 • £303 million of free surplus Opening Phoenix Life free surplus 514 93 93 generated in HY13 Emergence of free surplus • Capital requirement run off IFRS operating profit net of and the imp
Slide 10: Strong cash generation continues
Cash IFRS AUM MCEV Capital Dividend Strong cash generation continues £m HY13 HY12 FY12 Opening cash and cash equivalents 1,066 486 837 • £252m of cash accelerated through management actions Cash receipts • Capital raising proceeds are Phoenix Life 411 95 661 net of commissions, fees and Ignis 5 24 2
Slide 11: Good IFRS operating profits
Cash IFRS AUM MCEV Capital Dividend Good IFRS operating profits £m HY13 HY12(1) FY12(1) • HY13 operating profit includes Phoenix Life 178 205 399 £24 million from management actions (HY12: £59 million) Ignis 19 19 43 • £33 million of adverse Group costs (11) (7) (13) investment variances driven Oper
Slide 12: Group assets under management of £67.1 billion
Cash IFRS AUM MCEV Capital Dividend Group assets under management of £67.1 billion Group AUM(1) £0.2bn £0.1bn (£2.7bn) £0.9bn £68.6bn £67.1bn AuM at Net Life Company Net new third Guardian Market movements AuM at (1) 31 Dec 12 run off party business annuity assets 30 Jun 13 • Natural run-off of the
Slide 13: Growth in Ignis' third party franchise reflects continued strength
Cash IFRS AUM MCEV Capital Dividend Growth in Ignis’ third party franchise reflects continued strength of key capabilities Growth in key products Continued outperformance • ARGBF 1 year return of 5.50% vs. £13.0bn 0.43% SONIA Total Return £11.9bn ARGBF: £0.3bn of net inflows benchmark IUKPF: £0.1bn
Slide 14: Embedded value enhanced by £52 million through management actions
Cash IFRS AUM MCEV Capital Dividend Embedded value enhanced by £52 million through management actions Group MCEV(1) 52 93 £10.39 per share (15) £10.00 per share (72) (144) 2,333 2,247 Pro forma Operating Management Economic & Movement Finance costs and MCEV at MCEV at earnings excl actions non-opera
Slide 15: £1.1 billion IGD surplus
Cash IFRS AUM MCEV Capital Dividend £1.1 billion IGD surplus IGD and sensitivities at HY13 • £0.1 billion reduction in surplus since year end reflects £1.2bn £1.1bn payment of the coupon on Tier £0.4bn 1 bonds, bank debt interest £0.4bn and repayments and IGD shareholder dividends, offset surplus by
Slide 16: Strong PLHL ICA surplus
Cash IFRS AUM MCEV Capital Dividend Strong PLHL ICA surplus PLHL ICA and sensitivities at HY13 • PLHL ICA surplus increased to £1.0 billion at 30 June 2013 £1.0bn £0.8bn reflecting – free surplus generation £0.8bn within Phoenix Life and £0.7bn PLHL ICA surplus – pension scheme modelling improvement
Slide 17: Interim dividend of 26.7 pence in line with 2012 final dividend
Cash IFRS AUM MCEV Capital Dividend Interim dividend of 26.7 pence in line with 2012 final dividend Dividend per share • Interim dividend in line with the 2012 final dividend and represents an increase of 27% 27% increase 26.7p 26.7p compared to the 2012 interim dividend, reflecting increased 21p 21
Slide 18: Outlook and Q&A
Outlook and Q&A Clive Bannister
Slide 19: Financial targets for 2013 and beyond
Financial targets for 2013 and beyond Cash • 2011-2016 cumulative target of £3.5bn generation • 2013 target of £650m to £750m • Cumulative target of £400m incremental embedded value MCEV from management actions over 2011 to 2014 Gearing • Long-term target to reduce gearing to 40% by end 2016 19
Slide 20: Clear strategy to deliver shareholder value
Clear strategy to deliver shareholder value as the UK’s largest specialist closed life fund consolidator Stable and predictable long-term cash generation A saver-friendly Incremental value through solution for the safe, management actions innovative and Financial flexibility enhanced through d
Slide 21: Q&A
Q&A
Slide 22: Appendices
Appendices I Cash sensitivities VIII Total debt exposure by country II Management actions IX MCEV sensitivities III Phoenix Life IFRS operating profit drivers X Maturity profile of business IV Ignis IFRS operating profit drivers XI Undiscounted cash generation profile V Ignis 3rd party new business
Slide 23: Appendix I: Cash sensitivities
Appendix I: Cash sensitivities Cash sensitivities as at 31 December 2012 1 Jan 2011 - 31 Dec 2016 Base case – 6 year target £3.5bn 20% fall in equity markets £3.4bn 15% fall in property values £3.5bn 75bps increase in yields(1) £3.5bn 75bps decrease in yields(2) £3.5bn Credit spreads widening with n
Slide 24: Appendix II: Management actions
Appendix II: Management actions Cash acceleration Incremental EV HY13 HY12 HY13 HY12 Restructuring 252 17 Restructuring 14 15 Risk management - - Risk management 14 36 Operational management - 15 Operational management 24 56 Total 252 32 Total 52 107 24
Slide 25: Appendix III: Phoenix Life IFRS operating profit drivers
Appendix III: Phoenix Life IFRS operating profit drivers HY13 HY12 Reported Opening Expected Reported Opening Expected IFRS Op liability/ return IFRS Op liability/ return Profit Equity(2) margin(1) Profit equity(2) margin(1) Fund type How profits are generated £m £bn bps £m £bn bps Our share of bonu
Slide 26: Appendix IV: Ignis IFRS operating profit drivers
Appendix IV: Ignis IFRS operating profit drivers HY13 HY12 IFRS Closing IFRS Closing results AUM Margin(1) results AUM Margin(1) £m £bn bps £m £bn bps Retail 8 1.5 101 8 1.9 82 Institutional, international and Group pension(2) 10 11.5 18 7 7.1 20 Life funds(3) 43 51.9 16 48 61.3 16 Other 1 n/a n/a 3
Slide 27: Appendix V: Ignis 3rd party new business flows
Appendix V: Ignis 3rd party new business flows £m HY13 HY12 Gross flows(1) Retail 304 356 Institutional 4 113 International 495 237 Liquidity funds (net) 571 707 Total 1,374 1,413 Net flows(1) Retail 93 9 Institutional (35) 40 International 288 171 Liquidity funds (net) 571 707 Total 917 927 Notes:
Slide 28: Appendix VI: Recap of Phoenix Capital Management Framework
Appendix VI: Recap of Phoenix Capital Management Framework Phoenix Group Holdings PLHL ICA calculation IGD • Pillar 2 assessment of capital resources and • Pillar 1 group capital calculation risks outside the life companies UK Holding • Includes net assets of holding companies and • Aggregated view
Slide 29: Appendix VII: Asset mix of life companies
Appendix VII: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 30 June 2013 supported with- with-profits Unit- Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 2,479 16 6,481 1,189 7,670 10,149 D
Slide 30: Appendix VIII: Total debt exposure by country
Appendix VIII: Total debt exposure by country Other Corporate: Government Financial Corporate: Asset backed Total debt At 30 June 2013 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyhold
Slide 31: Appendix IX: MCEV sensitivities
Appendix IX: MCEV sensitivities £m HY13 Base 2,943 1% decrease in risk-free rates 40 1% increase in risk-free rates (45) 10% decrease in equity market values (63) 10% increase in equity market values 60 10% decrease in property market values (44) 10% increase in property market values 44 100 bps inc
Slide 32: Appendix X: Maturity profile of covered present value of future profits
Appendix X: Maturity profile of covered present value of future profits 1-5 6-10 11-15 16-20 20+ Total £m years years years years years MCEV present value of future profits 30 June 2013 1,086 577 341 213 180 2,397 31 December 2012 1,058 596 369 231 196 2,450 31 December 2011 1,135 683 455 291 282 2,
Slide 33: Appendix XI: Undiscounted cash generation profile
Appendix XI: Undiscounted cash generation profile Illustrative annual holding company cash generation(1) (£m) 2011 – 2016 £3.5 billion FY10 2017 – 2022 £2 billion Focus on management actions 810 to accelerate cash and 3.5bn 734 359 enhance profile 690 650 - 750 242 209 492 481 451 2010 2011 2012 201
Slide 34: Appendix XII: Summary of bank facilities
Appendix XII: Summary of bank facilities Balance Amortisation at HY13 £m Coupon HY13 H2 13 2014 2015 2016 2017 2018 2019 Total Pearl facility Pearl bank facility L+125bps 350 - 25 25 300 - - - 350 mandatory amortisation Subordinated Lender L+100bps 81(1) - - - - - - - 81(1) Loan Notes Total Pearl -
Slide 35: Appendix XIII: Overview of dividend payment arrangements
Appendix XIII: Overview of dividend payment arrangements Group dividend formula in facilities agreements • Dividend conditions amended and new formula in place regarding dividend capacity • Dividend capacity of £125m for dividends declared in respect of 2013, with scope to increase capacity by £10m
Slide 36: 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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