Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Merger or Acquisition (May 2016)
22 slides from Standard Life's merger presentation, May 27, 2016
Slide 1: Phoenix's acquisition of AXA Wealth's pensions and protection businesses
Phoenix’s acquisition of AXA Wealth’s pensions and protection businesses 27 May 2016 1
Slide 2: Agenda
Agenda Overview Clive Bannister | Group Chief Executive Financial benefits Jim McConville | Group Finance Director Conclusion and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Overview
Overview Clive Bannister 3
Slide 4: This important acquisition is in line with Phoenix's strategy of closed life consolidation
This important acquisition of AXA Wealth’s pensions and protection businesses is in line with Phoenix’s strategy of closed life consolidation Key benefits of the acquisition Significant capital synergies P allowing accelerated cash generation P Leverages Phoenix’s operating model P Dividend increase
Slide 5: Overview of transaction – what are we buying?
Overview of transaction – what are we buying? Embassy SunLife • UK individual and corporate pensions on • Leading UK protection business for over Embassy platform 50s • Over £12 billion of assets under • Over 850,000 policies in force management • Administration outsourced to Capita • Administration
Slide 6: Consideration and financing structure
Consideration and financing structure Consideration and funding Valuation metrics • Price of £375 million(1) • Cash consideration to be financed with a mix of new equity and short term debt • Equity placing of 22.5 million shares 0.85x (10% of current share capital), raising 0.71x approximately £190
Slide 7: This acquisition meets all of Phoenix's M&A criteria
This acquisition meets all of Phoenix’s M&A criteria Closed life focus Significant backbook of over 910,000 policies within Embassy and SunLife Cashflow generation of £0.3 billion between 2016-2020 Cashflow generation of £0.2 billion from 2021 onwards Value accretive Cashflow recognises sign
Slide 8: Financial benefits
Financial benefits Jim McConville 8
Slide 9: Acquisition increases cash generation and dividends for shareholders
Acquisition increases cash generation and dividends for shareholders Phoenix (standalone) Phoenix (post acquisition) Cash generation £2.0 billion £2.3 billion (2016-2020) Cash generation £3.2 billion £3.4 billion (2021+) Annual dividend per share 53.4p 56.0p Solvency II PLHL surplus £1.3 billion £1.
Slide 10: The significant backbook enhances the Group's future cashflows
The significant backbook enhances the Group’s future cashflows Illustrative future cash generation(1) £3.4bn • £0.3 billion cashflow between 2016-2020 £0.2bn includes diversification benefits and cost £2.3bn synergies £0.3bn £3.2bn • Expected incremental cashflow £2.0bn generation of £0.2 billion fr
Slide 11: Significant capital is released through Phoenix's Internal Model
Significant capital is released through Phoenix’s Internal Model Capital release FY15 Solvency II surplus post acquisition • Adoption of Phoenix Internal Model 154% 155% • Reinsurance of acquired business to £1.4bn Phoenix Life Limited generates £1.3bn diversification benefits, due to mortality expo
Slide 12: Cost synergies generated through Phoenix's operating model
Cost synergies generated through Phoenix’s operating model Expected cash generation includes cost synergies of £10 million p.a. by end 2017 (1) Actions Benefits • Majority of Embassy to be closed • Streamlined management structure to new customers • Strengthened relationship with • Maintain existing
Slide 13: Additional value from SunLife's new business franchise
Additional value from SunLife’s new business franchise P SunLife new business mix Leader in over 50s protection sector 22% Guaranteed Protection business complementary to annuities P Over 50 Funeral Plans (natural longevity hedge), resulting in reduced capital requirements 78% P Profitable, low capi
Slide 14: Financing structure and terms of placing
Financing structure and terms of placing • Transaction announcement and launch of Placing on 27 May Equity placing • Settlement and admission of new shares (22.5 million new c.£190m(1) expected to be on 1 June shares) • 90-day company lock-up period with customary and strategic M&A carve outs • Shor
Slide 15: Step-up of dividend to new stable and sustainable level
Step-up of dividend to new stable and sustainable level Annualised dividend per share (p) Step-up in dividend per share • Proposed increase in dividend per share of 5% post completion 56.0 53.4 • Increase planned from Final 2016 dividend • Dividend supported by additional cashflows from 2016-2020 an
Slide 16: Acquisition supports dividend increase and de-leveraging
Acquisition supports dividend increase and de-leveraging Illustrative uses of cash from 2016 to 2020 (£bn) 0.2 0.2 0.3 2.3 0.8 0.7 0.7 0.8 FY15 holding Cash generation Operating Pension costs Debt interest Debt Dividends over Illustrative company cash over 2016-2020 expenses over over 2016-2020 over
Slide 17: Conclusion and Q&A
Conclusion and Q&A Clive Bannister 17
Slide 18: Today marks an important step in the Phoenix story
Today marks an important step in the Phoenix story Early • New management team 2011/2012 00s • Financial Leverage of 62.3% at FY11 • £250 million equity raise and re-termed bank debt 2013 • Increase in dividend per share of 27% • Sale of Ignis Asset Management for £390 million to Standard Life 2014
Slide 19: There remains a wide range of further M&A opportunities for Phoenix
There remains a wide range of further M&A opportunities for Phoenix Market size is over £300bn Vendor motivations M&A criteria Market opportunities by owner • Loss of new business value • UK closed life focus 17% from annuities Bank owned 35% • Fixed cost pressures of legacy • Value accretive UK lif
Slide 20: The acquisition meets all of Phoenix's M&A criteria
The acquisition meets all of Phoenix’s M&A criteria Key benefits of the acquisition Significant capital synergies P allowing accelerated cash generation P Leverages Phoenix’s operating model P Dividend increase P Reduced financial leverage Positions Phoenix for future transactions 20
Slide 21: Q&A
Q&A 21
Slide 22: 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 and other financial and/or statistical data about the Group’s current
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