Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2021 Earnings Presentation
67 slides from Standard Life's earnings presentation, Mar 14, 2022
Slide 1: Full year 2021 results
Full year 2021 results Phoenix Group Holdings plc 14 March 2022
Slide 2: 2021 review
2021 review Andy Briggs Group Chief Executive Officer
Slide 3: Introducing our new brand
Introducing our new brand —1| Phoenix Sil Phoenix
Slide 4: We are embracing our role in society
We are embracing our role in society Customers Customer obsessed, focused on the outcomes that matter to our c.13m customers Colleagues The best talent, with differentiated Our purpose: capability, diverse and highly engaged Helping people secure a life of possibilities Wider society We are focused
Slide 5: Record cash, resilience and growth delivered in 2021
Record cash, resilience and growth delivered in 2021 Cash Resilience Growth £1,717 million £5.3 billion 180% £1,184 million Cash generation PGH Solvency II PGH Shareholder Capital Incremental new business surplus(1) Coverage Ratio(1,2) long-term cash generation +16%pts 180% 0% 164% +55% £1,713m £1,7
Slide 6: We have proven 'the wedge' in 2021
We have proven ‘the wedge’ in 2021… Proving ‘the wedge’ is a pivotal moment for Phoenix Group • c.£1.2bn of new business long-term cash generation from our Open business has M&A more than offset the Heritage run-off (currently c.£800m) • We are investing in our Open business and are confident of ong
Slide 7: First ever organic dividend increase of 3%
…and are delighted to announce our first ever organic dividend increase of 3% Our increased dividend is sustainable and funded by Continuing our strong dividend track record(5) organic growth 4% CAGR 46.8p 47.5p 48.9p 45.2p 46.0p 40.8p 40.8p 40.8p 41.9p • Phoenix Group met its two conditions for org
Slide 8: Sustainability and resilience of our dividend differentiates us from peers
Sustainability and resilience of our dividend differentiates us from peers Cash Resilience Growth Dependable dividend Our hedging approach delivers unique resilience regardless Cash now growing both of market volatility organically and inorganically £11.8bn 180% SCCR +16%pts 164% SCCR ReAssure acqui
Slide 9: Our strategic priorities support our purpose and strategy
Our strategic priorities support us in delivering on our purpose and strategy 2. Enhance our 1. Optimise our in- operating model force business Optimise Enhance and culture Helping people secure a life of Invest possibilities Grow 3. Grow our business to 5. Invest in a support both new and sustainab
Slide 10: Optimising our in-force business
Optimising our in-force business Optimise Enhancing our capital efficiency Investment in Asset Management £1.5bn management actions delivered £3.0bn of illiquid assets originated including the UK’s first internal model at an illiquidity premium of c.70bps in 2021, harmonisation of two legacy models,
Slide 11: Enhancing our operating model and culture
Enhancing our operating model and culture Enhance Unique integration capability creates significant value Aspiring to be the best place our colleagues have ever worked Standard Life synergies ReAssure synergies 134% of target delivered 89% of target delivered to date in 18 months • Supplemented our
Slide 12: Growing our business to support both new and existing customers
Growing our business to support both new and existing customers Grow Ongoing investment is delivering continued high levels of customer satisfaction Retirement Solutions Asset-based businesses 92% (BPA, ERM and individual annuities) (Workplace, CS&I, Europe and SunLife) Combined Group customer satis
Slide 13: Innovating to provide our customers with better financial futures
Innovating to provide our customers with better financial futures Innovate Empowering better financial Enhancing our fund and decision making product offering 16% increase in customer logins across Developed a roadmap to transition 1.5m Standard Life platforms customers and over £15bn of assets
Slide 14: Investing in a sustainable future
Investing in a sustainable future Invest Integrating sustainability • Integrate ESG factors into our investment decision High-impact sustainable making process 2021 success: asset investments considerations into our Open letter sent to our asset investment decision • Supported by best-in-class data
Slide 15: Phoenix is a growing, sustainable business
Phoenix is a growing, sustainable business Key takeaways • 2021 was a pivotal year for Phoenix as we have now proven ‘the wedge’ and are confident of proving it going forward Optimise Enhance • The Board has recommended our first ever organic dividend increase of 3%, which remains just as sustainabl
Slide 16: 2021 financial results
2021 financial results Rakesh Thakrar Group Chief Financial Officer
Slide 17: We have delivered a strong financial performance in 2021
We have delivered a strong financial performance in 2021 Cash Resilience Growth Key financial metrics: FY20 FY21 YOY change Cash Cash generation £1,713m £1,717m +0% PGH Solvency II Surplus(1,3) £5.3bn £5.3bn - Solvency II Capital PGH Shareholder Capital Coverage Ratio (‘SCCR’) (1,2,3) 164% 180% +16%
Slide 18: Strong 2021 results reinforce our track record
Strong 2021 results reinforce our consistent track record of cash, Cash Resilience Growth resilience and growth Cash Resilience Growth Cash generation PGH Solvency II Surplus(1,3) Assets under administration +163% +194% +319% £1,713m £1,717m £5.3bn £5.3bn £31bn £310bn £226bn £248bn £3.2bn £3.1bn £65
Slide 19: Cash generation of £1.7 billion exceeds top-end of target range
Cash generation of £1.7 billion exceeds top-end of our target range Cash Record cash generation of £1.7bn in 2021 New 1-year and 3-year in-force cash generation targets set £1.7bn £17.0bn guidance over life of business £1.5-1.6bn £0.1bn £0.4bn £4.0bn 3-year target £0.4bn £1.3-1.4bn 1-yr target £0.8b
Slide 20: £1.7 billion of surplus cash for reinvestment into growth
We have £1.7 billion of surplus cash for reinvestment into growth to the Cash end of 2024 Illustrative 2022-2024 HoldCo sources and uses of cash FY21 HoldCo cash 2022-2024 cash generation £5.0bn of cash available from future in-force business cash generation plus Sources £1.0bn £4.0bn HoldCo cash at
Slide 21: £13.2 billion of long-term free cash supports our dividend
£13.2 billion of Group long-term free cash supports the sustainability of Cash our increased dividend over the long term Recurring sources less recurring uses = +£0.3bn Non-recurring uses £1.2bn £0.2bn £0.1bn £13.4bn £(0.8)bn £13.2bn £(0.4)bn £(0.2)bn £(0.2)bn £(0.1)bn After deducting £1.4bn of inte
Slide 22: We maintained our resilient Solvency II balance sheet
We maintained our resilient Solvency II balance sheet Resilience £5.3bn Shareholder Solvency II surplus 180% Shareholder Capital Coverage Ratio(1,2,3) 180% 180% Target range Surplus £5.3bn 160% Surplus £5.3bn £13.6bn 140% £11.9bn £8.3bn £6.6bn 120% 100% FY20(3) FY21(1) FY18 FY19 FY20 FY17 FY21 Own f
Slide 23: Solvency II surplus generation provides capacity for investment in growth
Solvency II surplus generation provides capacity for investment in Resilience growth 164% 11% 28% 6% (2)% (12)% (10)% (3)% (1)% (1)% 180% £1.5bn £0.1bn £(0.2)bn £0.6bn £(0.8)bn £(0.4)bn £(0.2)bn £(0.3)bn £(0.3)bn £5.3bn £5.3bn Surplus as Surplus Management Economics Assumptions, model Financing and
Slide 24: We hedge the majority of our market risks
We hedge the majority of our market risks to deliver resilience and Resilience protect our dividend sustainability Unrewarded market risks(16) Demographic risks(16) Rewarded market risks(16) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property Credit Credit
Slide 25: Our unique hedging approach differentiates us to our UK peers
Our unique hedging approach differentiates us to our UK peers Resilience FY21 Phoenix Group Shareholder Capital Coverage Ratio (SCCR) sensitivities Key messages relative to UK life peers(25) % points change in FY21 SCCR • Our unique hedging approach makes 40% us far more resilient to the major marke
Slide 26: We manage c.£310 billion of assets
We manage c.£310 billion of assets on behalf of our customers and Resilience shareholders Assets under administration Shareholder asset portfolio Shareholder illiquid credit portfolio £1.1bn £46.3bn £0.2bn £6.2bn £1.3bn £4.2bn £310.4bn £46.3bn £12.3bn £76.1bn £12.3bn £1.5bn £188.0bn £27.8bn £4.0bn £
Slide 27: Conservatively positioned shareholder credit portfolio
We actively manage a conservatively positioned shareholder credit Resilience portfolio Total shareholder credit portfolio BBB split Disciplined approach maintained £39.8bn £40.1bn 19% • We actively manage our sector exposures 12% 12% 17% to minimise risk and our portfolio has remained resilient thro
Slide 28: £3.0 billion of new illiquid assets sourced in 2021
£3.0 billion of new illiquid assets sourced in 2021, demonstrating our Resilience strong capability Total illiquid asset origination 2021 illiquid assets by type Disciplined approach maintained £1.3bn of +48% sustainable assets in 2021 £2,980m (67% of • Originated £3.0bn of illiquid assets at an £62
Slide 29: Record management actions of £1.5 billion in 2021
We delivered record management actions of £1.5 billion in 2021 Resilience 2021 Solvency II management actions Creating value Integration synergies Includes c.£550m benefit from internal model harmonisation and £1.5bn £1.5bn £0.1bn associated actions £0.1bn £0.3bn Other Illiquid asset origination Sou
Slide 30: £2.5 billion of synergies realised to date
£2.5 billion of synergies realised to date on Standard Life and ReAssure Resilience integrations Integration synergies delivered to date Integration progress TODAY Standard Life ReAssure Phase 2021 2022 2023 2024/2025 1. Group Original target £720m £800m ReAssure Functions Revised target £1,220m £1,
Slide 31: Record incremental new business long-term cash generation of £1.2 billion
Our Open business delivered record incremental new business Growth long-term cash generation of £1.2 billion in 2021 Incremental new business long-term cash generation (‘LTCG’) Key messages +55% Retirement Solutions: £950m £1,184m • 82% year-on-year increase in LTCG reflects £5.6bn of BPA premiums w
Slide 32: Investment in BPA proposition delivered £5.6 billion of premiums
The investment in our BPA proposition delivered £5.6 billion of Growth premiums in 2021 Significant progress in 2021 £5.6bn of premiums establishes us as a Strong BPA outlook underpins our future major BPA market player confidence in proving ‘the wedge’ +124% • Now quoting on c.90% of deals in the m
Slide 33: IFRS operating profit remained strong at £1,230 million
Our IFRS operating profit remained strong at £1,230 million Cash Resilience Growth FY20(28) FY21 Key messages Heritage £431m £537m • Heritage operating profit increase due to a full Open £817m £788m year's inclusion of ReAssure partially offset by a Service company £6m £(24)m strengthening of expens
Slide 34: Dividend that is sustainable and grows over time
Phoenix intends to pay a dividend that is sustainable and grows over time Cash Resilience Growth Our dividend approach has evolved Future dividend approach The Board will continue to prioritise maintaining Phoenix Group’s dividend sustainability over the long term Potential for dividend Phoenix Grou
Slide 35: Phoenix is a growing, sustainable business
Phoenix is a growing, sustainable business Cash Resilience Growth Record 2021 results Clear 2022 targets • Record cash generation of over • Deliver £1.3bn-£1.4bn of cash £1.7bn exceeded target range generation in 2022 • First ever organic dividend increase • Deliver £4.0bn of cash generation Cash of
Slide 36: Outlook
Outlook Andy Briggs Group Chief Executive Officer
Slide 37: Clear market trends offer significant growth opportunities
There are clear market trends that offer significant growth opportunities Market trends Flows Growth opportunities for Phoenix Group As the market leader in Heritage M&A we have the capability Insurers are disposing of their Heritage portfolios via M&A c.£480bn market and scale to unlock significant
Slide 38: Clear and differentiated strategy which creates shareholder value
We have a clear and differentiated strategy which creates shareholder value Further Further in-force in-force ORGANIC GROWTH IN-FORCE BUSINESS INORGANIC GROWTH OPEN HERITAGE M&A • Acquire new customers • Market leader in optimising in-force • Market leader in UK Heritage through our multiple Open bu
Slide 39: The whole is greater than the sum of the parts
Phoenix Group – the whole is greater than the sum of the parts Further Further in-force in-force ORGANIC GROWTH IN-FORCE BUSINESS INORGANIC GROWTH OPEN COMPETITIVE HERITAGE COMPETITIVE M&A ADVANTAGES ADVANTAGES Retirement Solutions Capital diversification Optimise our in-force business Capital syner
Slide 40: M&A remains a key priority
M&A remains a key priority and we are ready to consider transactions now Significant M&A opportunities available to us • Increasing costs of legacy IT platforms and Our discussions regulatory burden Large acquisitions indicate that the drivers of • Insurers are looking to simplify their business mod
Slide 41: 2022 will be an exciting year as we execute on our priorities
2022 will be an exciting year as we execute on our strategic priorities Optimise our in- Enhance our Grow our business to Innovate to provide Invest in a force business operating model and support both new and our customers with sustainable future culture existing customers better financial futures
Slide 42: Phoenix is a growing, sustainable business
Phoenix is a growing, sustainable business We have a clear and differentiated strategy, leveraging the major market trends, where the whole is greater than the sum of the parts This supports Phoenix in continuing to deliver: Cash Resilience Growth In-force business covers our Uniquely resilient Grow
Slide 43: Q&A
Q&A ail Phoenix
Slide 44: Investor Relations activity and contacts
Investor Relations activity and contacts Claire Hawkins March-April Full Year 2021 results investor roadshow Director of Corporate Affairs Email: claire.hawkins@thephoenixgroup.com 16 March Morgan Stanley European Financials Conference Tel: +442045593161 31 March Ex-dividend date for 2021 final divi
Slide 45: Appendices
Appendices ail Phoenix
Slide 46: Appendices
Appendices 1. Leverage ratios 16. ESG ratings and collaborations 2. Debt maturity profile as at 31 December 2021 17. 2022 sustainability targets 3. Movement in assets under administration 18. Footnotes 4. Open business segments movement in assets under administration 5. Breakdown of Open business se
Slide 47: Appendix 1: Leverage ratios
Appendix 1: Leverage ratios Fitch leverage ratio Leverage ratios 35% FY20 FY21 Fitch basis(2) 28% 28% 30% 29% IFRS basis(3) 41% 44% 28% 28%(1) Fitch target 27% range SII leverage(4) 31% 31% 25% • IFRS leverage ratio classifies RT1 as debt 22% 22% • We estimate a funding capacity for inorganic growth
Slide 48: Appendix 2: Debt maturity profile
Appendix 2: Debt maturity profile as at 31 December 2021 £500m $750m (2.3) £500m (1) £500m £450m £428m €500m (3) $500m (2,3) $500m (3) £250m (1) £250m 1H22 2H22 1H23 2H23 1H24 2H24 1H25 2H25 1H26 2H26 1H27 2H27 1H28 2H28 1H29 2H29 1H30 2H30 1H31 2H31 RT1 bond Tier 2 bond Tier 3 bond (1) First call d
Slide 49: Appendix 3: Movement in assets under administration
Appendix 3: Movement in assets under administration £337.7bn £18.8bn £(29.1)bn £(14.1)bn £11.6bn £310.4bn £306.8bn £2.9bn £(1.8)bn £(12.7)bn £15.9bn £8.5bn £(26.8)bn £3.1bn £162.3bn £160.5bn Net flows £157.8bn Heritage £(11.2)bn Open £3.2bn £175.4bn £146.3bn £152.6bn Opening AUA Sale of Wrap SIPP, T
Slide 50: Appendix 4: Open business segments movement in AUA
Appendix 4: Open business segments movement in assets under administration Retirement Solutions Workplace CS&I Europe FY20 AUA £43.7bn FY20 AUA £59.3bn FY20 AUA £44.8bn FY20 AUA £27.6bn Sale of Wrap Gross inflows SIPP, TIP, £(29.1)bn £1.7bn Onshore bond Gross inflows - new Gross inflows £5.6bn £1.7b
Slide 51: Appendix 5: Breakdown of Open business segments
Appendix 5: Breakdown of Open business segments as at 31 December 2021 Assets under administration New business LTCG New business contribution £35m £32m £29m £29bn £14m £31m £9m £44bn £139m £74m £153bn £1,184m £471m £34bn £342m £950m £46bn Retirement Solutions Workplace CS&I Europe SunLife 51
Slide 52: Appendix 6: Change in Life Company Free Surplus
Appendix 6: Change in Life Company Free Surplus £0.2bn £(0.4)bn £(0.4)bn £1.2bn £(0.5)bn £0.8bn £(1.6)bn £0.4bn £3.8bn £2.9bn £2.6bn Free surplus Surplus Management Economic variances New Assumption Other Free surplus before Cash Cash Free surplus as at FY20(1) generation and actions business strain
Slide 53: Appendix 7: Estimated PGH Solvency II surplus and coverage ratios
Appendix 7: Estimated PGH Solvency II surplus and coverage ratios PGH SII coverage ratio(1) PGH Shareholder Capital Coverage Ratio(1,2) 147% 156% 164% 180% Surplus Surplus £5.3bn Surplus £5.3bn Surplus £5.3bn £5.3bn £16.8bn £13.6bn £14.8bn £11.9bn £11.5bn £9.5bn £8.3bn £6.6bn FY20 FY21(1) FY20 FY21(
Slide 54: Appendix 8: Change in Solvency II Own Funds and SCR
Appendix 8: Change in Solvency II Own Funds and SCR £0.2bn £0.7bn £(0.2)bn £(0.2)bn £(0.8)bn £(0.2)bn £(0.2)bn £(0.5)bn £(0.5)bn Change in £13.6bn £11.9bn Own Funds Shareholder own Surplus Management Economics Assumptions, Financing and New business Debt LIBOR to SONIA Other Shareholder own funds as
Slide 55: Appendix 9: Change in proxy to shareholder value
Appendix 9: Change in proxy to shareholder value £0.7bn £0.2bn £(0.2)bn £(0.2)bn £(0.8)bn £(0.2)bn £(0.5)bn £(0.3)bn £(0.2)bn £9.2bn £7.7bn Proxy to Surplus emerging Management Economics Assumptions, Financing and New business LIBOR to Removal of Other Proxy to shareholder actions model and corporat
Slide 56: Appendix 10: Additional Solvency II disclosures
Appendix 10: Additional Solvency II disclosures Estimated FY21 SCR by risk type(1) FY21 PGH Own Funds by capital tier(2) £11.9bn 3% 3% 5% Tier 3 22% Tier 2 6% 14% of SCR £6.6bn 6% 44% of SCR 122% of SCR Tier 1 7% 21% PGH tiering PGH SCR 8% of own funds 19% Share of SII Own Funds by capital tier £bn
Slide 57: Appendix 11: Solvency II coverage ratio sensitivities
Appendix 11: PGH Solvency II Regulatory Capital Coverage Ratio sensitivities Unrewarded market risks(16) Demographic risks(16) Rewarded market risks(16) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property Credit Credit 20% fall in rates rates inflation 15%
Slide 58: Appendix 12: 2021 operating profit drivers
Appendix 12: 2021 operating profit drivers Heritage Open Expected return £649m Expected return £263m Experience £(78)m Experience £(11)m New business New business £325m N/A Modelling & Modelling & £2m £81m methodology methodology Assumptions £(36)m Assumptions £130m Operating profit £537m Operating
Slide 59: Appendix 13: Diversification of illiquid asset portfolio
Appendix 13: Diversification of illiquid asset portfolio as at 31 December 2021 Equity Release Mortgages 2% Commercial Real Estate £4.2bn with AA rating 9% £1.3bn with BBB rating • Broad regional spread with average LTV of • Structured with robust covenant protection, 31% 11% a combination of loan-t
Slide 60: Appendix 14: Credit quality by sector for shareholder debt portfolio
Appendix 14: Credit quality by sector for shareholder debt portfolio Average credit rating by sector (FY21 vs FY20) Sector FY21 FY21 AA A BBB ∆ vs FY20 Industrials £1.5bn 4% Consumer, cyclical £1.4bn 3% Tech and Telecoms £1.8bn 4% Consumer, non-cyclical £1.9bn 5% Banks £4.8bn 12% Financial Services
Slide 61: Appendix 15: Integration synergies
Appendix 15: Integration synergies Standard Life ReAssure % of revised In year Cumulative Target % of target In year Cumulative Revised target target Capital synergies (net of costs) £557m £1,277m £720m 177% £209m £688m £600m 115% Cost synergies(29) (per annum) £8m £48m £75m 64% £5m £27m £50m 54% On
Slide 62: Appendix 16: ESG ratings and collaborations
Appendix 16: ESG ratings and collaborations ESG ratings Collaborations and Commitments Ratings agency FY20 FY21 Change MSCI A A Sustainalytics 23.3 / medium risk 20.0 / low risk CDP N/A B Dow Jones Sustainability 66th percentile 69th percentile Index FTSE4Good 66th percentile 76th percentile 62
Slide 63: Appendix 17: 2022 sustainability targets
Appendix 17: 2022 sustainability targets Investing in a sustainable future Engaging people in better financial futures Building a leading responsible business Theme 2022 targets Theme 2022 targets Theme 2022 targets Integrating sustainability Data gathering framework and Empowering better • Launch f
Slide 64: Appendix 18: Footnotes
Appendix 18: Footnotes 1. 31 December 2021 Solvency II capital position is an estimated position and reflects a regulator approved recalculation of transitionals as at 31 December 2021 and recognition of the foreseeable Final 2021 shareholder dividend of £248m 2. The Shareholder Capital Coverage Rat
Slide 65: Appendix 18: Footnotes cont.
Appendix 18: Footnotes cont. 13. £1.5bn dividend cost based on annual dividend cost of £0.5bn per annum 14. 31 December 2020 position on a pro forma basis to reflect the impact of the sale of Wrap SIPP, Onshore Bond and TIP products to SLA (£0.2bn) and the impact of the expected increase in the rate
Slide 66: Appendix 18: Footnotes cont.
Appendix 18: Footnotes cont. 25. All sensitivities as at 31 December 2021, sourced from company disclosure 26. 2020 credit portfolio restated to include equity release mortgages and commercial real estate within the debt portfolio 27. As at 11 March 2022 28. 2020 IFRS Operating profit split has been
Slide 67: Disclaimer
Disclaimer This presentation in relation to Phoenix Group Holdings plc and its subsidiaries (the ‘Group’) contains, and the Group may ma ke other statements (verbal or otherwise) containing, forward-looking statements and other financial and/or statistical data about the Group’s current plans, goals
Phoenix Group Holdings — FY2021 Earnings Presentation on 6ix