Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Investor Day (May 2013)
46 slides from Standard Life's investor day presentation, May 16, 2013
Slide 1: Cash generation, management actions and opportunities for growth
Cash generation, management actions and opportunities for growth 16 May 2013
Slide 2: Agenda
Agenda Introduction Clive Bannister | Group Chief Executive Cash generation Jim McConville | Group Finance Director Management actions Mike Merrick | Chief Executive of Phoenix Life Opportunities for growth Fiona Clutterbuck | Head of Strategy, Corporate Development and Communications Wrap up and Q&
Slide 3: Introduction
Introduction Clive Bannister
Slide 4: Phoenix Group overview
Phoenix Group overview Phoenix Group Cash generation Senior bank debt Intermediate holding from and PIK companies operating companies Tier 1 bond Holding companies (headed by in PGH1 Phoenix Life Holdings Limited) Ignis Asset Tier 2 bond Phoenix Life(1) Management in PLL Regulated group Notes: (1) I
Slide 5: Cash generation
Cash generation Jim McConville
Slide 6: Consistent cash generation totalling £2.6 billion between 2010 and Q1 2013
Consistent cash generation totalling £2.6 billion between 2010 and Q1 2013 Holding Company cash generation (£m) 2010 – Q1 2013 cash generation totalling £2.6 billion 810 650m - 750m FY13 target 734 690 410 FY10 FY11 FY12 Q113 6
Slide 7: Significant cash generation and increasing holding company cash
Significant cash generation and increasing holding company cash Holding Company cashflow 2010 – Q1 2013 (£m) 2,644 142 131 124 382 908 908 450 prepayment 458 mandatory amortisation 171 211 1,199 £1bn increase in holding company cash 202 Holding Cash Operating Pension Non-recurring Debt interest Amor
Slide 8: £9 billion of undiscounted cash expected over life of book
£9 billion of undiscounted cash expected to be generated over life of book 2011 - 2016 2017 – 2022(1) 2023 and beyond(1) Total(1) £3.5 billion £2 billion £3.5 billion £9 billion Includes certain management No allowance for enhanced or actions accelerated cash generation from management actions Notes
Slide 9: Strong cash generation expected to continue and can be enhanced through management actions
Strong cash generation expected to continue for many years and can be enhanced through management actions 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 prof
Slide 10: Clear path to de-gearing to allow access to debt capital markets
Clear path to de-gearing to allow access to debt capital markets Illustrative senior bank debt at 31 December(1) (£m) 2,227 De-gearing to 40% 1,852 target in 2016(2) 1,632 1,487 1,282 1,162 1,342 1,042 922 922 375 350 325 300 2012 2013 2014 2015 2016 Impala facility Pearl facility Notes: (1) Assumes
Slide 11: Dividends met by strong and predictable cash generation over target period to 2016
Dividends met by strong and predictable cash generation over target period to 2016… Illustrative annual Holding Company cashflow 2013 to 2016 (£m) 135 827 145 500 100 40 80 Illustrative Illustrative Illustrative debt Target debt Illustrative cash Average annual FY12 proforma operating average annual
Slide 12: …and in the future, as we look to replace senior lending with long-dated capital market debt
…and in the future, as we look to replace senior lending with long-dated capital market debt Illustrative annual Holding Company cashflow 2017 to 2022 (£m) Potential to enhance through management 3.5bn actions New management New management actions(4) actions(4) 160 325 100 35 30 Illustrative annual
Slide 13: Cash generation resilient in stress conditions
Cash generation resilient in stress conditions Holding Company cash generation sensitivities(1) (£bn) 3.5 3.4 3.4 3.5 3.3 2.0 2.0 1.9 1.9 1.8 Impact of stress scenario Cash generation targeted 2013 - 2016 1.5 1.5 1.5 1.5 1.5 Cash generation delivered 2011 & 2012 2011 - 2016 cash Following 20% fall i
Slide 14: Management actions
Management actions Mike Merrick
Slide 15: Phoenix Life operating model
Phoenix Life operating model Management focus Incremental A better value and business and cash Management actions operational acceleration efficiency P Shareholder value P Policyholder outcomes 15
Slide 16: Management actions have generated significant benefits for shareholders
Management actions have generated significant benefits for shareholders £810m of cash generated through £628m of incremental MCEV 2010 - 2012 management actions 2010 - 2012 810 734 359 690 296 242 £332m towards £400m 209 2011 – 2014 target 492 481 165 167 451 FY10 FY11 FY12 FY10 FY11 FY12 Management
Slide 17: The Phoenix Way
The Phoenix Way Challenge • Delivering increased value for shareholders and policyholders RESTRUCTURING OPERATIONAL MANAGEMENT • Cashflows for shareholders • Higher payouts for customers Operating environment • Myriad of reporting bases and methodologies • Book of business with varied RISK legacy he
Slide 18: Restructuring and Risk Management
Restructuring and Risk Management Pete Mayes – Chief Actuary, Phoenix Life
Slide 19: Restructuring and Risk Management
Risk Operational Restructuring Outsourcing management management Restructuring and Risk Management P Funds mergers P Intra fund restructuring The Phoenix Way P Asset liability matching P Valuation and ICA harmonisation 19
Slide 20: Funds mergers have delivered significant financial benefits and a simplified business model
Risk Operational Restructuring Outsourcing management management Funds mergers have delivered significant financial benefits and a simplified business model Simplified UK group structure at FY08 and FY12 PLHL PLHL P Capital synergies Phoenix Life Phoenix Phoenix Life Phoenix P Assurance Life Assuran
Slide 21: Capital requirements within a hypothetical funds merger
Risk Operational Restructuring Outsourcing management management Capital requirements within a hypothetical funds merger Combined company capital requirements reduced by Company A capital requirements pre funds merger £100m post funds merger 250 £250m capital requirement £400m capital 150 requiremen
Slide 22: Case study: Fund mergers
Risk Operational Restructuring Outsourcing management management Case study Fund mergers Fund merger of London Life into Phoenix Life Assurance Fund merger of SMA & SPL into Phoenix Life Limited (£m) Limited (£m) 225 192 8 33 Incremental MCEV Cash generation Incremental MCEV Cash generation Analysis
Slide 23: Case study: Annuity transfer
Risk Operational Restructuring Outsourcing management management Case study Annuity transfer Annuity transfer financial benefits (£m) P 252 Exposure to longevity risk reduced by one third £0.2 billion IGD benefit expected 36 P on completion of Part VII in H2 2013 Incremental MCEV Cash generation 23
Slide 24: Operational management
Operational management Andy Moss – Finance Director, Phoenix Life
Slide 25: Operational management delivers synergies within the finance function
Risk Operational Restructuring Outsourcing management management Operational management delivers synergies within the finance function P People and site consolidation P Systems and platforms The Phoenix Way P Actuarial modelling P Resolving legacy issues 25
Slide 26: Case study: Consolidation of finance functions into Wythall
Risk Operational Restructuring Outsourcing management management Case study Consolidation of finance functions into Wythall Headcount reduction(1) Cost reduction(1) No of FTE % £m % Consolidation of Glasgow and Peterborough 104 29% £9m 33% finance functions into Wythall Note: (1) Represents reductio
Slide 27: Case study: Actuarial modelling
Risk Operational Restructuring Outsourcing management management Case study Actuarial modelling Typical actuarial modelling in legacy Phoenix actuarial modelling post Actuarial books of business Systems Transformation O Disparate collection of models on a variety of platforms P Single model for each
Slide 28: Case study: Actuarial modelling financial benefits
Risk Operational Restructuring Outsourcing management management Case study Actuarial modelling financial benefits Significant benefits across key financial metrics in 2012 (£m) 60 50 Significant capital releases and P reduced operational risk capital through simplified and improved modelling Increm
Slide 29: Resolving legacy issues – harmonisation of suspended annuities policy
Risk Operational Restructuring Outsourcing management management Case study Resolving legacy issues – harmonisation of suspended annuities policy Significant benefits across key financial metrics in 2012 (£m) 29 P Tracing of Policyholders 23 P Harmonised policies Incremental MCEV Cash generation P M
Slide 30: Resolving legacy issues – resolution of suspense accounts
Risk Operational Restructuring Outsourcing management management Case study Resolving legacy issues – resolution of suspense accounts Significant benefits across key financial metrics during 2008 and 2009 (£m) P Suspense account balances cleared 117 Overstated liabilities corrected 75 P and unnecess
Slide 31: Outsourcing
Outsourcing Tony Kassimiotis – MD of Operations
Slide 32: Operational efficiency achieved through outsourcing
Risk Operational Restructuring Outsourcing management management Operational efficiency achieved through outsourcing P Operational risk management P Technology and process simplification The Phoenix Way P Site consolidation P Outsourcing 32
Slide 33: Well positioned to manage operational risk through efficient operating model
Risk Operational Restructuring Outsourcing management management Well positioned to manage operational risk through efficient operating model Life Companies Service Companies Outsourcing Partners • Limited scale individually • Operational risk know- • Industry leading contracts • Multiple processes
Slide 34: Scalable and low cost efficient operating platform ensures variable cost base
Risk Operational Restructuring Outsourcing management management Scalable and low cost efficient operating platform ensures variable cost base Outsourcer costs(1) (£m) 183 160 134 FY10 FY11 FY12 Core adminstrative services Projects and transformation FY10 - FY12 Policy run off c.8% p.a. Reduction in
Slide 35: Case study: Migration of policies onto BaNCS administration system
Risk Operational Restructuring Outsourcing management management Case study Migration of policies onto BaNCS administration system Significant benefits across key financial metrics during 2010 & 2011 (£m) 49 P Policies migrated onto single platform, scale benefit P Cost per policy reduced, fixed cos
Slide 36: Summary
Risk Operational Restructuring Outsourcing management management Summary P Focused management teams with know-how Effective operational risk The Phoenix Way P management, core to our business model Established outsource P partnerships, pre-priced for the acquisition model Repeatable Platforms and pr
Slide 37: Management actions wrap up
Management actions wrap up Mike Merrick
Slide 38: Proven ability to add value and accelerate cash through management actions
Proven ability to add value and accelerate cash through management actions Cash Restructuring acceleration Incremental Risk management MCEV Improved group Operational management solvency Increased IFRS Outsourcing operating profits 38
Slide 39: Opportunities for growth
Opportunities for growth Fiona Clutterbuck
Slide 40: Potential market opportunities totalling £200 billion held by various owners
Potential market opportunities totalling £200 billion are held by various types of owner across a range of product types Potential market opportunities by owner(1) Potential market opportunities by product type(1) 29% Unit linked Bank owned life UK life 42% With companies companies profits 48% 52% F
Slide 41: Broad spectrum of potential acquisition sizes and structures
Broad spectrum of potential acquisition sizes and structures Potential acquisition of individual life fund or Potential acquisition of group comprising book of business within life fund several life companies Parent Parent company company Life Life Life Life Life Life company company company company
Slide 42: Potential to deliver significant value generation and cash acceleration from acquisitions
Potential to deliver significant value generation and cash acceleration from acquisitions Sources of cash acceleration and value generation(1) Closed life Potential value and source of cash acceleration and value generation will vary Value accretive depending on specific target Reduce gearing
Slide 43: Wrap up and Q&A
Wrap up and Q&A Clive Bannister
Slide 44: 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(1) • Long-term target to reduce gearing to 40% by end 2016 Note
Slide 45: Q&A
Q&A
Slide 46: 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