Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Investor Day (December 2020)
122 slides from Standard Life's investor day presentation, Dec 3, 2020
Slide 1: Capital Markets Day 2020
Capital Markets Day 2020 Thursday 3 December 2020 1
Slide 2: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 3: Phoenix is the UK's largest long-term savings and retirement business
Phoenix is the UK’s largest long-term savings and retirement business We have a clear strategy… …which delivers on our financial framework CASH HELPING PEOPLE SECURE Dependable long-term cash generation A LIFE OF POSSIBILITIES supports dividend HERITAGE OPEN is the bedrock of our has strong foundati
Slide 4: Macro trends are driving profound change and growth in the UK long-term savings market
Macro trends are driving profound change and growth in the UK long-term savings market Ageing population Responsibility shift to Growth in auto- the individual enrolment % of population >65 DC scheme membership 8x Per annum flows into DB workplace schemes tripled since 2012 24% 14.6m 18% £24bn 1.9m
Slide 5: Customers' needs change as they move through the life savings cycle
Customers’ needs change as they move through the stages of the life savings cycle Customer Saving for retirement & Managing transition to retirement Securing life stage: protecting family / lifestyle & protecting family / lifestyle retirement income Wealth Customer needs: Customer needs: Customer ne
Slide 6: Phoenix has a clear role to play in society
Phoenix has a clear role to play in society - Helping people secure a life of possibilities Customers Customer obsessed, focused on outcomes that matter to them Helping people secure a life of possibilities Colleagues Investors The best talent, with Allocate resources to the differentiated capabilit
Slide 7: Phoenix will be a leader in sustainability
Phoenix will be a leader in sustainability, making this integral to our purpose and strategy Our sustainability strategy… Focuses on supporting our circa 14 million customers and Delivering for our Fostering investing our £323 billion of Customers Responsible Investment AUA in a sustainable future R
Slide 8: The UK long-term savings and retirement market is large at £1.8 trillion
The UK long-term savings and retirement market is large, at £1.8 trillion, and growing at 7% per annum INDIVIDUAL PENSIONS & DRAWDOWN Wealth AUA: £350bn WORKPLACE SAVINGS AUA: £400bn ANNUITIES & ERM AUA: £420bn HERITAGE AUA: £600bn PROTECTION In-force premiums: c.£8bn DEFINED BENEFITS(1) AUA: £1.6tn
Slide 9: Phoenix has a 17% share of the total market
Phoenix has a 17% share of the total market, and strong positions in both Heritage and Open product markets CUSTOMER SAVINGS & INVESTMENTS AUA: £55bn Wealth 16% market share WORKPLACE AUA: £41bn 11% market share RETIREMENT SOLUTIONS AUA: £38bn 9% market share (BPA & Annuities) HERITAGE AUA: £162bn S
Slide 10: The major market trends offer significant growth opportunities
The major market trends offer significant growth opportunities Strong AE Individuals are Workplace CUSTOMER SAVINGS & INVESTMENTS Wealth AUA: £55bn retiring growth Customers seek Driven by auto- £40bn guidance to enrolment, the WORKPLACE £30bn p.a. AUA: £41bn p.a. consolidate and ageing population R
Slide 11: Phoenix has a clear strategy that leverages our leading share of in-force
Phoenix has a clear strategy that leverages our leading share of in-force, and the major market trends Optimise in-force business Deepen customer relationships Customer acquisition We manage our in force business to By engaging with our customers and Acquire customers and grow our in- deliver resili
Slide 12: Phoenix is the market leader in managing Heritage businesses
Phoenix is the market leader in managing Heritage businesses Strategy Heritage segment by AUA Competitive advantages at 30 September 2020 Deliver customer outcomes and Proven track record of improving customer manage in-force business for outcomes and excellent customer satisfaction resilience 4% Sc
Slide 13: Phoenix's Open businesses have strong foundations
Phoenix’s Open businesses have strong foundations and are central to our purpose of helping people secure a life of possibilities Strategy Open segment by AUA Competitive advantages at 30 September 2020 To help customers to journey to and Cost efficiency driven by move to a single through retirement
Slide 14: Phoenix has an excellent track record in M&A and integration
Phoenix has an excellent track record in M&A and integration Our recent transaction history Our distinctive capabilities Cash Price paid Target Delivered generation Deal certainty through strong regulatory ReAssure £800m £227m relationships, Part VII capability and low cost of capital funding Grou
Slide 15: Our clear M&A strategy offers further growth potential
Our clear M&A strategy offers further growth potential Heritage market opportunity by UK Heritage market opportunity Priorities geographies by target size £440bn 100% Geography #1 Primary focus on UK 49% £440 billion opportunity... ... with European operations £190bn £630bn £440bn providing optional
Slide 16: We are building a best-in-class Asset Management team
We are building 0a best-in-class Asset Management team to enable our strategy 1 Six pillars underpin our asset management strategy Priorities across our Heritage and Open businesses Customer Developing investment solutions for customers is Manage asset risk for Source assets that support centricity
Slide 17: Cash is King at Phoenix and we deliver dependable cash generation
“Cash is King” at Phoenix and we deliver dependable cash generation year after year 10 year track record of meeting or exceeding all publicly stated targets £957m £810m £817m £734m £690m £707m £653m £664m £486m £19.0 billion over life of business £225m £13.1bn 2010 2011 2012 2013 2014 2015 2016 2017
Slide 18: Phoenix manages its business for resilience and is less sensitive to risk events than peers
Phoenix manages its business for resilience and is materially less sensitive to risk events than peers Pro-forma HY20 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Life peers % change in SCCR 50% • SCCR:150% 40% • Target range: 30% 140-180% 20% 10% 0% -10% -20% -30% -40
Slide 19: Growth from Open brings long-term sustainability to cash generation and dividend
Growth from Open brings long-term sustainability to cash generation and dividend M&A Undertake value accretive M&A, accessing synergies through integration Management Actions Accelerate and increase total cashflows Cash generation Open Growth of our Open business will offset the run-off of our in- f
Slide 20: Phoenix has delivered a dependable and growing dividend
Phoenix has delivered a dependable and growing dividend, and our resilience has dramatically outperformed through the pandemic Phoenix vs FTSE 100 historic dividend growth Date FTSE ranking by Phoenix total % dividend size dividend 140 2020e # 24 £475m 130 2019 # 50 £338m 120 2018 # 54 £262m 110 100
Slide 21: Phoenix is a sustainable and growing business
Phoenix is a sustainable and growing business, helping people secure a life of possibilities Phoenix’s strategy delivers unique advantages… … and the whole is greater than the sum of the parts Optimised operating model delivers superior Our unique risk management framework customer experience and ma
Slide 22: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 23: Phoenix continues to deliver in uncertain times
Phoenix continues to deliver in uncertain times Cash Resilience Growth £1,713 £5.0 159% £472 million billion million Cash generation PGH Solvency II PGH Shareholder Incremental long-term cash surplus(1) Capital Coverage generation from new business £1,713m Ratio(1,2) £36m £472m £1,500-1,600m £42m 15
Slide 24: And our capital position remains strong and resilient
And our capital position remains strong and resilient Change in PGH Solvency II surplus Included in Q320 152% 9% 8% (3)% (7)% 3% (4)% 1% 159% L&G Part VII transfer £0.6bn £0.2bn £0.1bn £5.0bn £0.5bn £(0.1)bn Change in longevity assumptions £4.4bn £(0.5)bn £(0.2)bn Further equity hedging and sy
Slide 25: Phoenix has a clear financial framework supporting its strategy
Phoenix has a clear financial framework supporting its strategy CASH RESILIENCE £19 bn £5.9 bn Risk mgt Stable & sustainable £1.7bn framework dividend 2020 2021 2022 2023 2024+ Capital GROWTH M&A Cash generation Management Actions Open Dividend growth Heritage Time 25
Slide 26: Phoenix delivers predictable long-term cash generation
Cash Resilience Growth Phoenix delivers predictable long-term cash generation Cash generation from in-force business EXCLUDES £19.0 billion guidance over life of business • New BPA; £5.9 billion 4-year guidance • Other new business; £1.5–1.6 billion 1-year target • Future M&A; and £1.7bn • Managemen
Slide 27: Our £19 billion of in-force cash generation has three main sources
Cash Resilience Growth Our £19 billion of in-force cash generation has three main sources Composition of £19 billion cash generation • Cash generated from in-force run off of £800 million per annum in 2020 £2.6bn £19.0bn Organic cash • Reducing typically by 6% per annum generation • c. £250 million
Slide 28: Our sources of cash exceed our total uses
Cash Resilience Growth Our sources of cash exceed our total uses, with £1.8 billion additional liquidity and optionality over the next 4 years Illustrative 2020-2023 sources and uses of cash £5.9 billion of cash generation from in- Sources £5.9bn cash generation force business of Combined Group Oper
Slide 29: Phoenix's resilient in-force cash generation supports the dividend for many years
Cash Resilience Growth Phoenix’s resilient in-force cash generation supports the dividend for many years 2024+ cash generation from in-force business £13.1bn £(4.2)bn £8 billion supports a stable and sustainable dividend till 2040... £(0.9)bn ...but we can enhance £8.0bn dividend sustainability and
Slide 30: We are introducing a new metric – long-term free cash
Cash Resilience Growth We are introducing a new metric – long-term free cash 31 Dec 2019 pro-forma Decreases as cash is remitted to Long-term in-force cash generation £19.0bn HoldCo Transition costs to deliver integration of M&A and transition costs £(0.2)bn SLAL and ReAssure Increases as in-force c
Slide 31: Our risk management framework delivers resilience
Cash Resilience Growth Our risk management framework delivers resilience Leverage • Supports investment grade rating from Fitch • Acceptable to be above 30% for a short period Leverage Liquidity 25-30% 1 in 200 Liquidity target Disciplined liquidity • Surplus liquidity for leverage policy balance sh
Slide 32: We manage risk in accordance with our risk appetite
Cash Resilience Growth We manage risk in accordance with our risk appetite Estimated Q320 SCR by risk type Risk Approach to risk management 11% • Reinsure circa 50% - 60% of longevity risk with 22% Longevity risk external counterparties 3% 3% 6% 5% • Hedge 80-90% of shareholder exposure to Equity Ri
Slide 33: Phoenix is more resilient to risks than peers
Cash Resilience Growth Phoenix is more resilient to risks than peers Pro-forma HY20 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Life peers(8) % point change in SCCR 40% 20% 0% -20% -40% Phoenix Peer A Peer B Peer C Peer D Peer E Peer F Peer G UK Europe Equity Market -
Slide 34: We fund M&A efficiently to ensure we do not over capitalise transactions
Cash Resilience Growth We fund M&A efficiently to ensure we do not over capitalise transactions Shareholder Capital Coverage Ratio Abbey Life Standard Life ReAssure acquisition acquisition acquisition SCCR normally (Dec 16) (Aug 18) (Jul 20) reduces at completion as we 180% manage funding mix and ut
Slide 35: And we also utilise the full target leverage range
Cash Resilience Growth And we also utilise the full target leverage range Fitch leverage Abbey Life Standard Life ReAssure acquisition acquisition acquisition Leverage (Dec 16) (Aug 18) (Jul 20) increases at completion as we 30% use debt to fund Fitch Target Range the deal 28% 26% Leverage reduces 2
Slide 36: We have a rigorous Capital Allocation Framework for surplus capital
Cash Resilience Growth We have a rigorous Capital Allocation Framework for surplus capital Capital Allocation Framework Allocating capital to BPA & M&A Value accretive 1 IRR > risk adjusted WACC Growth through Long-term cash generation M&A or BPA Strategic fit SURPLUS Supports the Supports growth di
Slide 37: We will allocate £150 million - £200 million of surplus capital to BPA per annum
Cash Resilience Growth We will allocate £150 million - £200 million of surplus capital to BPA per annum Success criteria Long-term Transaction must exceed Quantum and profile of Capital Reducing the capital hurdle rate of return strain drives efficiency cash long-term cash will drive IRR (WACC + ris
Slide 38: We evaluate M&A targets by identifying total cash generation
Cash Resilience Growth We evaluate M&A targets by identifying the total cash generation they deliver and applying the appropriate funding mix Incremental cash generation from target • Derived from cash flows IRR and emerging from the target payback including synergy benefits and future management ac
Slide 39: Proving the wedge hypothesis will evidence sustainability of organic cash generation
Cash Resilience Growth Proving the wedge hypothesis will evidence the sustainability of organic cash generation Growth of the open business can offset the run off of The the in-force cash generation and therefore organic hypothesis cash generation is sustainable M&A The outcomes Organic offset not O
Slide 40: In-year cash generation from Open new business: Step 1
Cash Resilience Growth Step 1: Illustrative organic cash generation of £800 million from in-force business declines as business runs off Organic cash generation Cash generation 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 £m £800m LT cash In-force £752m gen from new organic cash 800 752 70
Slide 41: In-year cash generation from Open new business: Step 2
Cash Resilience Growth Step 2: Open new business delivers incremental organic cash generation Organic cash generation Cash generation 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 £m £800m £800m LT cash In-force £752m gen from new organic cash 800 752 707 664 625 587 552 519 488 458 431 £70
Slide 42: In-year cash generation from Open new business: Step 3
Cash Resilience Growth Step 3: Successive years of Open new business replenishes in-force organic cash generation Organic cash generation Cash generation 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 £m £800m £800m £800m £800m £800m £800m £800m £800m £800m £800m £800m LT cash In-force gen f
Slide 43: Over £800 million per annum of long-term cash generation from Open new business is achievable
Cash Resilience Growth Over £800 million per annum of long-term cash generation from Open new business is achievable Annualised new business We will achieve this by… Increasing BPA cash multiplier by Annualising Q3 2020 reducing capital strain Allocating Other Open £150m of Q3 2020 new business su
Slide 44: We will monitor growth by reporting movement in long-term free cash
Cash Resilience Growth We will monitor growth by reporting the movement in long-term free cash each year Sources of cash Sources of cash Uses of cash The in-year increase in life company long- term cash generation including: • Long-term cash generation from Open new business • Over-delivery of manag
Slide 45: M&A remains a core part of the strategy
Cash Resilience Growth M&A remains a core part of the strategy to increase organic cash generation, support growth aspirations and support dividend increases 900 ReAssure acquisition Dividend uplift Organic cash generation (excluding Open new business) £m 800 AXA 700 5% 600 Standard Life Abbey Life
Slide 46: Phoenix's financial framework is supported by a clear set of reporting metrics
Phoenix’s financial framework is supported by a clear set of reporting metrics CASH RESILIENCE GROWTH New Annual Solvency II (1) business cash £1.7 billion surplus £5.0 billion cash £800 million generation generation In-force Movement in long-term free (1) (2) cash £19 billion SCCR 159% cash generat
Slide 47: Key messages
Key messages Cash, resilience and growth remain at the core of Phoenix’s financial framework Phoenix’s resilient cash generation supports the dividend for many years Surplus capital is allocated to BPA and M&A for growth and to enhance shareholder returns New reporting metrics within Phoenix’s finan
Slide 48: Appendix I: Footnotes
Appendix I: Footnotes 1) The 30 September 2020 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitionals for the Group’s Life companies. Had the dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Rati
Slide 49: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 50: Our sustainability strategy is fully aligned to our corporate purpose
Our sustainability strategy is fully aligned to our corporate purpose and enterprise strategy Our sustainability strategy… Focuses on supporting our Delivering for our Fostering circa 14 million customers and investing our £323 Customers Responsible Investment billion of AUA in a sustainable future
Slide 51: Phoenix is committed to becoming net-zero carbon by 2050
Phoenix is committed to becoming net-zero carbon by 2050 Operations by 2025 Investment portfolio by 2050 Includes Scope 1 and Scope 2 of Decarbonisation of our portfolio by occupied premises and Scope 3 business travel setting a science-based target in line with a 1.5°C Paris Agreement aligned p
Slide 52: Delivering for our customers
Delivering for our customers Our ambition Areas of focus To date Moving forward • Broad range of ESG funds • Ongoing development of a We are committed to range of ESG products Product innovation for a available for active selection contributing towards the across the savings life-cycle changing soci
Slide 53: Fostering responsible investment
Fostering responsible investment Our ambition Areas of focus To date Moving forward • Net-zero commitment As an asset owner we act on • Membership of Climate Action Decarbonising the • 1 of 5 participants in IIGCC pilot 100+ and Net-Zero Asset behalf of our clients with a existing portfolio to build
Slide 54: Reducing the environmental impact of our operations
Reducing the environmental impact of our operations We continue to make good progress Our 2025 net-zero carbon target is market leading 100% renewable energy electricity contracts across all sites in 2021 Baselined 2019 greenhouse gas emissions of all 22 occupied premises within the Group Gas
Slide 55: Investing in our people and our culture
Investing in our people and our culture 1 Employee engagement We are committed 2 Diversity and inclusion to making Phoenix Phoenix the best place our colleagues have 3 Job quality and balance accreditations ever worked and and pledges have five areas of focus 4 Wellbeing and mental health 5 Developm
Slide 56: Supporting our communities and interests
Supporting our communitiesand interests To date Moving forward Group wide volunteering programme with New mental health UK-wide charity engagement at community level partnership to be chosen by colleagues Colleague fundraising and donation matching schemes Our Establish framework for measuring
Slide 57: Working ethically with our supply chain
Working ethically with our supply chain Supply chain management framework Our commitments Our supply chain management framework takes a multifaceted Using this framework, we will work in partnership with our approach to assessing and managing sustainability risk which suppliers in a phased approach,
Slide 58: Our strategy is underpinned by governance and risk management
Our strategy is underpinned by governance and risk management PGH plc Board committees PGH plc Board committees Role: To review, challenge, oversee and recommend for Board approval the Sustainability Strategy Chair: PGH plc Board Karen Green Members: • Mike Tumilty • Wendy Mayall • Nicholas Shott Su
Slide 59: Our performance ratings are improving
Our performance ratings are improving, reflecting the progress we have made with our sustainability commitments Increased our total score to 45 in In August, we were We have been a proud November which is above an upgraded to ‘A’ from ‘BBB’ member of the FTSE4Good industry average of 39 (Scale AAA t
Slide 60: Key messages
Key messages Sustainability is integral to Phoenix’s purpose of helping people secure a life of possibilities Our sustainability strategy is focused on delivering for customers and fostering responsible investment Phoenix is committed to becoming net-zero carbon by 2050 The Group Board has establish
Slide 61: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 62: Phoenix is the market leader in managing Heritage businesses
Phoenix is the market leader in managing Heritage businesses Strategy Heritage segment by AUA Competitive advantages at 30 September 2020 Deliver customer outcomes and Proven track record of improving customer manage in-force business for outcomes and excellent customer satisfaction resilience 4% Sc
Slide 63: Our unique and distinctive Heritage strategy positions us to outperform
Our unique and distinctive Heritage strategy positions us to outperform Administration Accounting and platform actuarial models DELIVERING FOR IMPROVED CUSTOMERS CUSTOMER OUTCOMES Optimised MANAGEMENT COST ACTIONS Operating EFFICIENCIES Model CAPITAL Risk EFFICIENCIES INTEGRATION management Investme
Slide 64: Delivering for our customers is central to our sustainability strategy
Management Customers actions Integration Delivering for our customers is central to our sustainability strategy We have a long track record Improving of taking actions which customer improve customer outcomes outcomes Putting customers at the heart of all that we do Facilitating ease Consistent Cust
Slide 65: We have a strong track record of improving outcomes for our Heritage customers
Management Customers actions Integration We have a strong track record of improving outcomes for our Heritage customers £ Strong value for money Remediation of legacy Proactive tracing for framework reviews outstanding claims Making proactive changes to Proactive approach to Repatriated policyholder
Slide 66: Our Heritage customers recognise our high quality service
Management Customers actions Integration Our Heritage customers recognise our high quality service as we continue to support them through COVID-19 Response to Covid-19 Phoenix Group customer satisfaction(1) Proactive offering of premium flexibility to support financial hardship 93% 93% 94% 92% 90% 1
Slide 67: Investment in digital is transforming how we engage with Heritage customers
Management Customers actions Integration Investment in digital is transforming the way we engage with our Heritage customers 2020 2021 Improved Expanded online Drive Drive availability & capability efficiency engagement convenience Benefits for customers Encashment options for Increasing funct
Slide 68: Management actions increase or accelerate cashflows
Management Customers actions Integration Management actions increase or accelerate cashflows Increase own funds Decrease risk capital • Management actions either: Cost efficiencies Reducing risks increase own funds and therefore increase the overall Improvements in outsourcer Hedging of equity, cu
Slide 69: In 2020 we have continued our track record of delivering management actions
Management Customers actions Integration In 2020 we have continued our track record of delivering management actions Cash generation from management actions 2020 Solvency II management actions Other actions Illiquid asset origination 2010 £242m Variety of actions from active Sourcing of assets to 20
Slide 70: Management action case study #1: Investing in illiquid assets
Management Customers actions Integration Management action case study #1: Investing in illiquid assets £1.4 billion asset reallocation Investing in illiquid assets Q320 Solvency II impact • £9 billion illiquid asset portfolio represents 24% of annuity backing Surplus £0.4bn assets, target is 40% +£1
Slide 71: Management action case study #2: Hedging of ReAssure equity risk
Management Customers actions Integration Management action case study #2: Hedging of ReAssure equity risk ReAssure ViF equity risk Hedging of risk Q320 Solvency II impact exposure (£bn) 1.5 • Prior to announcement of Phoenix’s Surplus acquisition, ReAssure was hedging +£120m 40% 80% Surplus hedged h
Slide 72: We have a strong pipeline of management actions
Management Customers actions Integration We have a strong pipeline of management actions and a range of future management action opportunities Cash generation £2.0 billion delivered over Future opportunities target 2020-2023 2020-2023 through a range of actions £5.9bn Regulatory change Regime change
Slide 73: Phoenix and ReAssure have been leaders in the consolidation market
Management Customers actions Integration Phoenix and ReAssure have been leaders in the consolidation market Consideration: Consideration: Consideration: £375m £935m £2,930m Nov 16 Dec 16 Aug 18 Consideration: £3,200m Jul 20 Consideration: Consideration: Consideration: £1,600m £650m £425m Jan 16 Dec
Slide 74: Our legacy businesses have a consistent approach to integration
Management Customers actions Integration Our legacy businesses have a consistent approach to integration Administration Accounting and platform actuarial models IMPROVED CUSTOMER OUTCOMES Optimised INTEGRATION COST ACTIVITIES Operating EFFICIENCIES Model CAPITAL Risk EFFICIENCIES management Investme
Slide 75: Old Mutual Wealth Case Study: £275 million of management actions on Day 1
Management Customers actions Integration Old Mutual Wealth Case Study: £275 million of management actions delivered on Day 1 Price to own Price to own funds ratio 109% Increase in Own Funds funds ratio 76% Own funds £584m Own funds £411m Surplus £21m Surplus £442m £167m Increase in Surplus £425m £44
Slide 76: L&G Mature Savings Part VII underlies capabilities to deliver complex transactions
Management Customers actions Integration L&G Mature Savings Part VII underlies capabilities to deliver complex transactions Situation ReAssure offering Implications Vendors can release Managing £33 billion of AUM(1) £650 million upfront payment significant capital quickly scale 1.1 million customers
Slide 77: Our three phased integration approach enables overlap of M&A
Management Customers actions Integration Our three phased integration approach enables overlap of M&A 2016 2017 2018 2019 2020 2021 2022 2023+ SLAL Announced ReAssure Announced Deal completion Potential for further M&A SLAL Completed ReAssure Completed 1 SLAL Potential for further M&A Group Function
Slide 78: Key messages
Key messages Phoenix is the market leader in managing Heritage businesses Delivering for customers is central to our strategy and at the heart of all that we do We have a strong track record of delivering management actions and confidence of ongoing delivery into the future Phoenix has unique and di
Slide 79: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 80: Phoenix's Open business is central to our purpose
Phoenix’s Open business is central to our purpose of helping people secure a life of possibilities Strategy Open segment by AUA Competitive advantages at 30 September 2020 To help customers to journey to and Cost efficiency driven by move to a single through retirement by providing long- administrat
Slide 81: To prove the Wedge, Open new business must deliver over £800 million
To prove the Wedge, Open new business must deliver over £800 million of incremental long-term cash generation per annum The Wedge Annualised new business Annualising Q3 2020 Allocating Other Open M&A £150m of Q3 2020 new business surplus YTD Additional £800m £57m capital to BPA at a 5% cash from Lon
Slide 82: Phoenix's Open business has three core growth drivers
Phoenix’s Open business has three core growth drivers Phoenix’s Phoenix Phoenix share Industry drivers of Open share of of market Phoenix’s strategy growth business market AUA flows Strategy: To Protect and Grow Strong AE Workplace £40bn p.a. Workplace c.11% c.11% Delivered by: Continuing to invest
Slide 83: The workplace market is growing and competitive
Retirement Workplace CS&I Solutions The workplace market is growing and competitive Industry driver Market shifting to Master Trust Key to winning in this market +146% £40bn p.a. £955bn 1 Best-in-class proposition Workplace Strong AE Workplace growth 44% Driven by auto-enrolment, Customer service an
Slide 84: Phoenix is a top 3 workplace provider
Retirement Workplace CS&I Solutions Phoenix is a top 3 workplace provider and our strategy is to grow and protect Our Workplace business Our Workplace strategy focuses on: Customers • 15k active schemes • Continue to make significant investments in our proposition • 1.9m members of which Brand 1.1m
Slide 85: We continue to make significant investments in our proposition
Retirement Workplace CS&I Solutions We continue to make significant investments in our proposition, driven by customer insight Completed enhancements Upcoming enhancements Refine Workplace Responsible investment ISA In-scheme New ESG investment pathways drawdown Enhanced funds options In colla
Slide 86: We are expanding our range of ESG investment solutions
Retirement Workplace CS&I Solutions And we are expanding our range of ESG investment solutions Our new ESG passive default solution Our ESG programme is moving at pace We are planning to enhance the ESG content of our default We are expanding our responsible investment options for funds. Our new pas
Slide 87: Our partnership with TCS will improve efficiency while maintaining customer service
Retirement Workplace CS&I Solutions Our partnership with TCS will improve efficiency while maintaining customer service Migration of customer and IT operating model… … maintains high customer service Hub consists of skilled Delivers more agile and flexible proposition experts from Standard Life Assu
Slide 88: Customers need help to journey to and through retirement
Retirement Workplace CS&I Solutions Customers need help to journey to and through retirement Industry driver Key trends within this market • Retirement is now seen as a longer, more complex transition versus a single event £30bn p.a. Customer Savings & • Responsibility for managing retirement income
Slide 89: By engaging with our customers, we can better understand their needs
Retirement Workplace CS&I Solutions By engaging with our customers, we can better understand their needs and help them secure a life of possibilities Our Customer Savings & Investments business Phoenix manages c. 14 million policies across Brands the life savings cycle Engage our customers Retain ou
Slide 90: Our strategy in Customer Savings & Investments is to engage and develop
Retirement Workplace CS&I Solutions Our strategy in Customer Savings & Investments is to engage and develop We will achieve this by focusing on the needs of customers across the stages of engagement 1. 2. 3. 4. Awareness Consideration Support Transact Awareness of the need Clarity on the options Hel
Slide 91: We have made significant digital enhancements across Workplace and CS&I
Retirement Workplace CS&I Solutions We have made significant digital enhancements across our Workplace and CS&I propositions Workplace Customer Savings & Investments £325m moved into drawdown online with In-scheme Online drawdown journey for Master Drawdown c.21k users of online retirement journey d
Slide 92: The BPA market is substantial and growing as corporates continue to de-risk
Retirement Workplace CS&I Solutions The BPA market is substantial and growing as corporates continue to de-risk Industry driver Room for further growth Key market trends Stock of corporate BPAs as at 31 March 2019 28% CAGR increase in Increased volumes between 2009 and £40bn p.a. volumes 2019 £2.1tn
Slide 93: Phoenix is an established player in the BPA market
Retirement Workplace CS&I Solutions Phoenix is an established player in the BPA market and our strategy is to grow and expand £5.7 billion of BPA written to date We have grown to Our ambition is to develop a 5% market share market-leading BPA franchise in 2019 £5.8bn Funded from own resources, £1.5b
Slide 94: Optimising the capital strain will improve our deal economics
Retirement Workplace CS&I Solutions Optimising the capital strain will improve our deal economics Our current deal economics, 2020 YTD Our target deal economics £3,000m £600m £1,446m 5% 8% £300m £150m £116m Capital (includes capital Liabilities LT cash generation Capital (includes capital Liabilitie
Slide 95: We are strengthening our capabilities to support our BPA ambitions
Retirement Workplace CS&I Solutions We are strengthening our capabilities to support our BPA ambitions Build best in class Expand our proposition Develop operating model De-risking partnerships asset capability • Identify and execute • Pricing of deferred liabilities • Enlarged market leading • Leve
Slide 96: M&S case study: lasting relationships facilitate follow-on transactions
Retirement Workplace CS&I Solutions M&S case study: our ability to build lasting relationships facilitates follow-on transactions March 2018 Umbrella contract Pensioner benefits fully £470m buy-in £11 billion M&S Pension Scheme established as part of initial modelled on Phoenix 1 systems 5,300 membe
Slide 97: Key messages
Key messages Our Open business has strong foundations and is central to our purpose of helping people secure a life of possibilities We are a top 3 workplace provider and are accelerating our investment in proposition By deepening our customer relationships we will retain our customers and they will
Slide 98: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 99: We are building a best-in-class in-house asset management team
We are building 0a best-in-class in-house asset management team 1 Six pillars underpin our asset management strategy Priorities across our Heritage and Open businesses Customer Developing investment solutions for customers is Manage asset risk for Source assets that support centricity the core of ou
Slide 100: We will be a centre of excellence with extensive asset management expertise
Phoenix Asset Illiquid Management Resilience assets We will be a centre of excellence with extensive asset management expertise Phoenix Asset Management (“AM”) structure Business unit partnerships Chief Investment • Phoenix AM offer real time pricing and Officer Market expertise Open BPA execution c
Slide 101: We use our global strategic partnerships to deliver optimal investment outcomes
Phoenix Asset Illiquid Management Resilience assets We use our global strategic partnerships to deliver optimal investment outcomes Phoenix strategy and partnerships SH PH SH ASI are Phoenix’s core strategic asset management partner and are complemented by a network of select other partners PH SH PH
Slide 102: Fostering responsible investment for the benefit of customer, investors and society
Phoenix Asset Illiquid Management Resilience assets Fostering responsible investment for the benefit of customer, investors and society Strategy and governance Decarbonisation of investment portfolio • Ability to work with best-in-class asset • Net-zero carbon by 2050 and active managers to deliver
Slide 103: Phoenix's asset management strategy delivers resilience through risk management
Phoenix Asset Illiquid Management Resilience assets Phoenix’s asset management strategy delivers resilience through risk management Unrewarded market risks Estimated Q320 SCR by risk type Rewarded market risks Risks we see as unrewarded : 15% 27% Risks we see as rewarded : 7% 5% 19% 3% Interest ra
Slide 104: This is evidenced in our low sensitivity to risk events
Phoenix Asset Illiquid Management Resilience assets This is evidenced in our low sensitivity to risk events Combined Group Solvency II Shareholder Capital Coverage Ratio sensitivities(1) Impact on Target range Solvency II surplus Q320 Solvency II SCCR 159% £5.0bn Equities: 20% fall in markets 160% £
Slide 105: Phoenix hedges 80-90% of the shareholders equity risk exposure
Phoenix Asset Illiquid Management Resilience assets Phoenix hedges 80-90% of the shareholders equity risk exposure Hedging 80-90% of risk Shareholder exposure Hedging programme protects value Change in Solvency II Surplus With-profit Objective: hedge c80-90% of £0.5bn Indirectly exposed to equity wh
Slide 106: We hedge residual shareholder interest rate risk exposure within risk appetite
Phoenix Asset Illiquid Management Resilience assets We hedge residual shareholder interest rate risk exposure within risk appetite Hedging to risk appetite Shareholder exposure Hedging programme protects value Change in Solvency II Surplus With-profit Objective: reduce the exposure to £1.0bn Indirec
Slide 107: We have a well diversified £46 billion shareholder asset portfolio
Phoenix Asset Illiquid Management Resilience assets We have a well diversified £46 billion shareholder asset portfolio £323 billion asset portfolio £46 billion shareholder portfolio Key messages at 30 September 2020 at 30 September 2020 £7bn 11% 11% Shareholder portfolio includes £39 billion annui
Slide 108: Our £35 billion debt portfolio is defensively positioned and proactively managed
Phoenix Asset Illiquid Management Resilience assets Our £35 billion debt portfolio is defensively positioned and proactively managed Approach to managing risk Debt portfolio by sector Key messages at 30 September 2020 • Dedicated in-house credit expertise with market leading managers Largest secto
Slide 109: The Group has a high quality debt portfolio and is on track to reduce BBB holdings
Phoenix Asset Illiquid Management Resilience assets The Group has a high quality debt portfolio and is on track to reduce BBB and below holdings to under 20% Rating breakdown Active management of BBB and below at 30 September 2020 35% 34% Management Actions 23.5% 21.7% (1.8)% (0.2)% 0.2% 19.7% 10% (
Slide 110: Execution risk reduction through portfolio block trading
Phoenix Asset Illiquid Management Resilience assets Execution risk reduction through portfolio block trading helps deliver credit portfolio management actions Logic Stages of block trade delivery £2.0 billion block trades YTD £2,015m 1 Diversification into Optimisation within £300m USD investment gr
Slide 111: Active management of debt portfolio has led to limited downgrade experience
Phoenix Asset Illiquid Management Resilience assets Active management of debt portfolio has led to limited downgrade experience Average credit rating by sector (Q320 vs HY20) Key messages Sector Q320 AA A BBB ∆ vs HY20 Industrials 4% Proactive rotation out of assets on ASI downgrade forecast and i
Slide 112: Resilient and well diversified Equity Release Mortgage portfolio
Phoenix Asset Illiquid Management Resilience assets To manage property risk, we maintain a highly resilient and well diversified Equity Release Mortgage portfolio Managing property risk Key portfolio statistics Clearly defined risk appetite parameters Average Average Average time to Selective appr
Slide 113: Our high quality £9.3 billion illiquid portfolio is well diversified
Phoenix Asset Illiquid Management Resilience assets Our high quality £9.3 billion illiquid portfolio is well diversified Asset type Sub sector split Illiquid asset strategy at 30 September 2020 at 30 September 2020 9% Target SAA of 40% illiquid assets in ERM annuity backing asset portfolio – 35% 32%
Slide 114: 2020 origination delivers diversified assets of appropriate tenor and credit quality
Phoenix Asset Illiquid Management Resilience assets 2020 origination delivers diversified assets of appropriate tenor and credit quality Origination focused on longer maturities at attractive spreads 50% of origination in ESG assets 350 BBB 300 Investment in sustainable BBB development Investment in
Slide 115: Illiquid asset origination helping to Build Britain Back Better
Phoenix Asset Illiquid Management Resilience assets Illiquid asset origination helping to Build Britain Back Better Project Albion – Renewable Energy Project TunTum – Social housing What Albion is a diversified portfolio of What TunTum is a community-based renewable assets across onshore housing
Slide 116: Key messages
Key messages Phoenix is building a best in class asset management team, leveraging a global network of asset management partners with ASI as our strategic partner Sustainable investing is integral to our strategy and we commit to net-zero carbon by 2050 We deliver resilience by hedging shareholder e
Slide 117: Appendix I: Footnotes
Appendix I: Footnotes (1) Sensitivity assumes stress occurs on Day 1 and that there is no market recovery (2) Property stress represents an overall average fall in property values of 12% (3) Assumes the impact of a dynamic recalculation of transitionals and an element of dynamic hedging which is per
Slide 118: Agenda: Phoenix Group Capital Markets Day 2020
Agenda: Phoenix Group Capital Markets Day 2020 Introduction Nicholas Lyons - Chairman 1 Overview Strategy Financial framework Andy Briggs - Group Chief Executive Officer Rakesh Thakrar - Group Chief Financial Officer Sustainability Claire Hawkins - Director of Corporate Affairs & Investor Relations
Slide 119: Phoenix has a clear role to play in society
Phoenix has a clear role to play in society - Helping people secure a life of possibilities Customers Customer obsessed, focused on outcomes that matter to them Helping people secure a life of possibilities Colleagues Investors The best talent, with Allocate resources to the differentiated capabilit
Slide 120: Phoenix has a clear strategy that leverages our leading share of in-force
Phoenix has a clear strategy that leverages our leading share of in-force, and the major market trends Optimise in-force business Deepen customer relationships Customer acquisition We manage our in force business to By engaging with our customers and Acquire customers and grow our in- deliver resili
Slide 121: Phoenix is a sustainable and growing business
Phoenix is a sustainable and growing business, helping people secure a life of possibilities Phoenix’s strategy delivers unique advantages… … and the whole is greater than the sum of the parts Optimised operating model delivers superior Our unique risk management framework customer experience and ma
Slide 122: Disclaimer and other information
Disclaimer and other information • This presentation in relation to Phoenix Group Holdings plc 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 curr
Phoenix Group Holdings — Investor Day (December 2020) on 6ix