Standard Life plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Merger or Acquisition (February 2018)
34 slides from Standard Life's merger presentation, Feb 23, 2018
Slide 1: Proposed acquisition of Standard Life Assurance and Strategic Partnership with Standard Life Aberdeen plc
Proposed acquisition of Standard Life Assurance and Strategic Partnership with Standard Life Aberdeen plc 23 February 2018 1
Slide 2: Agenda
Agenda Transaction overview Clive Bannister | Group Chief Executive FY17 performance and financial benefits of transaction Jim McConville | Group Finance Director Conclusion and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Transaction overview
Transaction overview Clive Bannister 3
Slide 4: Phoenix acquires Standard Life Aberdeen's UK and European life business
Phoenix acquires Standard Life Aberdeen’s UK and European life business for £2.9 billion - both parties enter a long-term Strategic Partnership Strategic Phoenix Partnership Standard Life Aberdeen plc Standard Life UK Wealth platform Assurance(1) retained by Standard Life Aberdeen Existing UK 1825 A
Slide 5: Two companies doing what they do best: largest closed life consolidator in Europe
Two companies doing what they do best: The largest Closed Life Consolidator in Europe and a world class Global Investment Manager with a UK wealth platform Standard Life Distinctive benefits for Phoenix anchored in a Phoenix Aberdeen Strategic Partnership Strategic Expansion of current investment ma
Slide 6: The transaction results in a bigger and better Phoenix
The transaction results in a bigger and better Phoenix – all key metrics are improved Total cash generation (2018+) Solvency II surplus(1) £11.8bn £2.5bn £8.3bn £1.8bn £6.3bn 2023+ £3.8bn 2023+ £2.5bn £3.5bn 2018-22 2018-22 Phoenix Combined Group Phoenix FY17 Combined Group Life company assets(1) Po
Slide 7: Attractive pricing and efficient financing structure
Attractive pricing and efficient financing structure Price/Own Funds(1) Capital raisings • Capital raisings to fund cash 0.89x 0.85x consideration of £1,971 million: 0.84x • Fully underwritten Rights Issue on a Abbey Life AXA Wealth Standard Life standby basis to raise £950 million Assurance Conside
Slide 8: Transaction underpinned by strong governance structure
Transaction underpinned by strong governance structure • 2 Directors appointed by Standard Life Aberdeen to join existing PGH Board due Phoenix Group to 19.99% shareholding Holdings • PGH onshoring process to be progressed following the completion of transaction Life company • Identical Board compos
Slide 9: Optionality to participate in European life insurance consolidation
Transaction provides optionality to participate in sizeable and emerging European life insurance consolidation Significant new market opportunity Increased market size (by assets)(1) • Increases potential market opportunity for With profit Unit linked Non profit Phoenix from c.£380 billion in the UK
Slide 10: Strategic rationale underpinned by alignment to Phoenix's M&A criteria
Strategic rationale underpinned by alignment to all of Phoenix’s M&A criteria Provides in-force business with £166 billion of assets and 4.8 million policyholders Closed life Fully aligned with Phoenix’s existing UK product mix – delivers increased scale focus and efficiency Provides base for
Slide 11: FY17 performance and financial benefits of transaction
FY17 performance and financial benefits of transaction Jim McConville 11
Slide 12: Key FY17 highlights: a strong performance for Phoenix
Key FY17 highlights: a strong performance for Phoenix in 2017 • Cash generation of £653 million in FY17 Strong financial • On track to be at the top end of the range for the £1.0 - £1.2 billion cash generation target for 2017 – 2018 performance • Estimated PGH Solvency II surplus of £1.8 billion, 16
Slide 13: Proven track record of integration: AXA and Abbey Life
Proven track record of integration: AXA and Abbey Life integration close to completion and with greater than planned benefits 1 2016 - 2020 2021+ Delivered £282m AXA Wealth £0.3bn £0.2bn to FY17 Cash flows 2016 - 2020 2021+ Abbey Life £0.5bn £1.1bn Delivered £236m to FY17 2 Cost AXA Wealth £10m
Slide 14: The transaction materially enhances cash generation, scale and capital resources
The transaction materially enhances cash generation, and results in an increase in scale and capital resources Figures as of FY17, unless Standard Life otherwise stated Phoenix Combined Assurance Cash generation £6.3bn £5.5bn £11.8bn (2018+) Solvency II surplus £1.8bn £1.0bn £2.5bn capital(1) Solven
Slide 15: Total future in-force cashflows increase to £11.8 billion
Total future in-force cashflows increase to £11.8 billion Future cash generation from in-force business • Phoenix achieved £653 million £8.3bn cash generation in FY17, with new Phoenix target of £2.5 billion between 2018-2022 £4.5bn • Total cashflow of £5.5 billion expected to be generated from £3.5
Slide 16: Significant potential for cost and capital synergies
Significant potential for cost and capital synergies Indicative net value of synergies(1) Sources of synergies • Cost savings of £50 million p.a. (pre tax): £135m • Combination of life company management and support functions £440m • Leverage Phoenix operating model • Capital synergies and managemen
Slide 17: Cash generation builds holding company cash and supports dividend
Cash generation builds holding company cash and supports dividend Combined Group: Illustrative uses of cash from 2018 - 2022 £0.5bn £0.6bn £3.5bn £1.6bn £1.3bn £0.5bn FY17 holding company Cash generation over Operating and pension Debt interest over Dividends over 2018- Illustrative holding cash 201
Slide 18: Beyond 2022, additional cash generation will enhance sustainability of dividends
Beyond 2022, additional cash generation will enhance sustainability of dividends Combined Group: Illustrative uses of cash from 2023 onward • There is an expected £8.3 billion of cash to £2.6bn emerge after 2022 • Strategic £8.3bn Partnership could provide £7.0bn additional value from future new bus
Slide 19: Delivers an increased dividend with enhanced sustainability
Delivers an increased dividend with enhanced sustainability Dividend policy Expected dividend distributions(1) • Dividend distributions to be increased, with additional cash generation £338m providing enhanced sustainability • Expected annualised cost of dividend to £197m increase to £338 million as
Slide 20: Acquisition will increase Solvency II surplus by £0.7 billion
Acquisition will increase Solvency II surplus by £0.7 billion Capital position Solvency II surplus(1) 164% 147% • Single harmonised Internal Model planned £2.5bn • Phoenix will apply hedging strategies to protect capital position from date of £1.8bn announcement • Capital sensitivities will continue
Slide 21: Further value from Client Service and Proposition Agreement
Opportunity for further value from Client Service and Proposition Agreement in Workplace pensions plus SIPP and drawdown administration Phoenix Standard Life Aberdeen 19.99% shareholding Pre-eminent closed life with Board World class global investment consolidator representation manager Standard Lif
Slide 22: Conclusion and Q&A
Conclusion and Q&A Clive Bannister 22
Slide 23: Transaction will accelerate strategic reshaping of the UK life insurance landscape
This transaction will accelerate the strategic reshaping of the UK life insurance landscape Distribution / Advice / Asset Life Insurance Specialists Management Focused Players • Balance sheet led business model • Capital-light business model with reduced insurance risks • Clear understanding and app
Slide 24: Phoenix remains focused on closed life consolidation with adjacent growth opportunities
Phoenix remains focused on closed life consolidation and now has a range of adjacent growth opportunities Closed fund • Continued significant UK opportunity of c.£380 billion consolidation • Additional emerging opportunity in Germany and Ireland of c.£160 billion • New Phoenix team in place and appr
Slide 25: Expected future timing
Expected future timing Milestones Timeline • Standard Life Assurance acquisition and Strategic Partnership 23 February announced • Full year 2017 results announcement 15 March • Expected publication of prospectus and circular Mid April • Expected shareholder vote and Rights Issue Early May • Final d
Slide 26: The £2.9 billion acquisition makes Phoenix the pre-eminent closed life consolidator in Europe
The £2.9 billion acquisition of Standard Life Assurance makes Phoenix the pre-eminent closed life fund consolidator in Europe Acquisition benefits Significant increase in cash generation of £5.5 billion from 2018, to a total of £11.8 billion Increased dividend with enhanced sustainability Cost
Slide 27: Q&A
Q&A 27
Slide 28: Appendices
Appendices 28
Slide 29: FY17 Solvency II Own Funds and SCR (Shareholder Capital basis)
FY17 Solvency II Own Funds and SCR (Shareholder Capital basis) Phoenix(1) Standard Life Assurance(2) Pro forma(3) 164% 143% 147% £4.6bn £3.5bn £7.8bn Surplus Surplus £1.0bn Surplus £1.8bn £2.5bn £2.5bn £2.8bn £5.3bn Own Funds SCR Own Funds SCR Own Funds SCR (1) Estimated position. Solvency II surplu
Slide 30: Overview of Standard Life Assurance: £166bn of assets
Overview of Standard Life Assurance: £166bn of assets Legacy book Legacy book with new business manufacturing UK Mature Europe Workplace Europe Workplace Retail AuA £56bn £12bn £21bn £12bn £19bn £46bn (FY17) ► With profits ► Germany: ► Mature back ► Investment ► Workplace ► Pensions With profits boo
Slide 31: The product mix of both businesses is complementary
The product mix of both businesses is complementary Phoenix product mix(1) Standard Life Assurance product mix(1) With-profit Unit-linked Annuities and protection With-profit Unit-linked Annuities and protection 10% 16% 20% 41% 43% 70% (1) Estimated position as at FY17 31
Slide 32: Overview of current Phoenix debt structure as at FY17
Overview of current Phoenix debt structure as at FY17 Structure of £1,585 million of outstanding debt as at FY17 Instrument Issuer/borrower Maturity Face value Bank Debt Unsecured Revolving Credit Facility (L+110bps)(1) Phoenix Group Holdings June 2021 - Unsecured Senior Bond Phoenix Group Holdings
Slide 33: Disclaimer and other information
Disclaimer and other information NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REG
Slide 34: Disclaimer and other information (cont'd)
Disclaimer and other information (cont’d) This presentation may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of the Company, the enlarged Group following the Transaction and the acquired businesses. These
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