Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2020 Earnings Presentation
50 slides from Standard Life's earnings presentation, Aug 6, 2020
Slide 1: Interim Results 2020
CASH RESILIENCE GROWTH Interim Results 2020 6 August 2020 1
Slide 2: Andy Briggs, Group Chief Executive Officer
Andy Briggs Group Chief Executive Officer 2
Slide 3: The UK's largest long-term savings and retirement business
Phoenix Group: The UK’s largest long-term savings and retirement business A CLEAR STRATEGY M&A Manage in-force business for cash and Heritage resilience and deliver customer Management Actions Cash generation outcomes Open Complete value accretive M&A, M&A accessing synergies through BPA integrati
Slide 4: Phoenix's business model has been resilient during the COVID-19 pandemic
Phoenix’s business model has been resilient during the COVID-19 pandemic Financial • Resilient solvency position through dynamic hedging • Active management of high quality credit portfolio • Cash generation continues to be predictable with targets on track • Payment of dividend provides income stre
Slide 5: Phoenix delivered a strong set of 1H 2020 results
Phoenix delivered a strong set of 1H 2020 results Cash Resilience Growth £433 £4.0 169% £358 million billion million Cash generation PGH Solvency II PGH Shareholder Incremental long-term cash surplus(1) Capital Coverage generation from new business Ratio(1,2) +51% +29% +41% £433m £4.0bn £358m £287m
Slide 6: ReAssure transaction completed in July
ReAssure transaction completed in July and strengthens our key attributes Transaction highlights Pro-forma 1H 2020 results £1.1 billion £76 billion 3.9 million £7 billion Cash generation Cash £4.4 billion AUA(5) Policies(5) generation(6) PGH Solvency II surplus(7) 150% Regulatory approval granted
Slide 7: Resilient balance sheet supports payment of 2020 interim dividend
Resilient balance sheet supports payment of 2020 interim dividend 2020 interim dividend Strong cash dividend cover • Solvency II surplus of £4.0 billion(1) Dividend cover Capital • £5.8 billion of SCR over and above best estimate liabilities 3.2x – 3.4x + £1.5-1.6bn • Our approach to risk management
Slide 8: Phoenix is delivering on its 2020 strategic priorities
Phoenix is delivering on its 2020 strategic priorities Heritage M&A and integration Open ReAssure acquisition complete £358 million incremental long-term £1.1 billion pro-forma cash generation from Combined Group and £227 million of synergies delivered on Day 1 cash generation from new busin
Slide 9: Rakesh Thakrar, Group Chief Financial Officer
Rakesh Thakrar Group Chief Financial Officer 9
Slide 10: Financial highlights - Phoenix
Financial highlights - Phoenix Financial performance: HY20 HY19 Cash Cash generation £433m £287m Dividends Dividend per share 23.4p 23.4p IFRS Operating profit before tax £361m £325m Incremental long-term cash generation £358m £254m(4) New business New business contribution(10) – UK Open and Europe
Slide 11: Phoenix and ReAssure delivered £1.1 billion cash generation in 1H 2020
Cash Resilience Growth Phoenix and ReAssure delivered £1.1 billion cash generation in 1H 2020 and are on track for new 2020 target 2020 cash generation Key messages £1.5-1.6bn Target Strong cash generation evidences range resilience in volatile markets £690m £1,123m On track to meet new 2020 cash ge
Slide 12: £19 billion of predictable long-term cash generation from Combined Group
Cash Resilience Growth £19 billion of predictable long-term cash generation from Combined Group Cash generation from in-force business EXCLUDES £19.0 billion guidance over life of business • New Open business; £13.1bn £5.9 billion 4-year guidance • New BPA; £1.5–1.6 billion • Future M&A; and 1-year
Slide 13: Resilience of cash generation provides confidence in our dividend
Cash Resilience Growth Resilience of cash generation provides confidence in our dividend Sensitivities for £5.9 billion 2020 - 2023 cash generation guidance(11) Impact on Uses of cash Op cost & interest: £1.4bn Dividend: £1.9bn cash generation 2020-23 cash generation guidance £5.9bn Equities: 20% fa
Slide 14: Strong HY20 operating profit of £361 million
Cash Resilience Growth Strong HY20 operating profit of £361 million HY20 HY19 Key messages UK Heritage £281m £257m UK Open £58m £43m Increased Heritage operating profit Europe £20m £28m reflecting higher new business profits on BPA transactions Service company £19m £13m Group costs £(17)m £(16)m Inc
Slide 15: £4.0 billion Solvency II surplus
Cash Resilience Growth Phoenix maintains a strong capital position with a £4.0 billion Solvency II surplus Estimated PGH Shareholder Capital Position HY20 PGH own funds by capital tier 169% £9.8bn PGH own funds per capital tier SCCR(2) 161% £5.5bn £1.2bn £2.5bn £0.6bn SCCR(2) Surplus 169% of SCCR Su
Slide 16: Active risk management limits impact of market volatility
Cash Resilience Growth Phoenix’s active approach to risk management limits impact of market volatility in 1H 2020 to £0.2 billion Change in PGH Solvency II Surplus 0% (4)% 27% (7)% £0.1bn £(0.1)bn (9)% (5)% £(0.4)bn 169% £(0.2)bn 6% £1.4bn £(0.1)bn 161% £0.2bn £4.0bn £3.1bn Group surplus Surplus Deb
Slide 17: Combined Group £4.4 billion Solvency II surplus
Cash Resilience Growth Capital strength of the Combined Group is maintained with a £4.4 billion Solvency II surplus Estimated pro-forma PGH Shareholder Capital Position Key messages 152% 150% 150% solvency ratio is well within target range of 140% SCCR SCCR - 180% Surplus Surplus £4.4bn £4.4bn ReAss
Slide 18: The Combined Group remains resilient to risk events
Cash Resilience Growth The Combined Group remains resilient to risk events Combined Group Solvency II Shareholder Capital Coverage Ratio sensitivities(11) Impact on Target range Solvency II surplus HY20 Solvency II SCCR 150% £4.4bn Equities: 20% fall in markets 150% £(0.1)bn Property: 12% fall in va
Slide 19: Diversified asset portfolio with high credit quality
Cash Resilience Growth Phoenix has a diversified asset portfolio with high credit quality Shareholder asset portfolio Debt portfolio by sector Illiquid assets Industrials(22) ERM Consumer, Cyclical(23) UK Local • 98% of shareholder debt 6% Authority Loans Tech & Telecoms portfolio is investment grad
Slide 20: £6.1 billion illiquid asset portfolio is well diversified
Cash Resilience Growth Our £6.1 billion illiquid asset portfolio is well diversified and 100% of scheduled cashflows were paid in 1H 2020 Equity Release Mortgages £3.1billion Private Placements £1.9 billion UK Local Authority Loans £0.3 billion • 64% secured on a variety of • Unsecured but with impl
Slide 21: Active management of credit portfolio has led to limited downgrades
Cash Resilience Growth Active management of credit portfolio has led to limited downgrade experience Average credit rating by sector (HY20 vs FY19) Key messages Sector HY20 AA A BBB ∆ vs FY19 GBP to USD block trade prevented £60 Industrials(22) £0.7bn million Solvency II strain from forecast downg
Slide 22: ReAssure also has a high quality credit portfolio
Cash Resilience Growth ReAssure also has a high quality credit portfolio Sector analysis Credit quality Key messages 5% at 30 June 2020 Active management, using assets 5% FY18 ‘watchlist’ for daily monitoring of 6% sectors with most downgrade exposure 7% 5% 31% 29% 33% 2% 8% £16.6bn 28% Programme of
Slide 23: 28% of synergy targets delivered for ReAssure on Day 1
Cash Resilience Growth 28% of synergy targets delivered for ReAssure on Day 1 Standard Life Transition ReAssure Integration Delivered Target % of target Delivered Target % of target 1 Capital synergies £645m £720m 90% £120m £450m 27% (net of costs) 2 Cost synergies(26) £36m £75m 48% £11m £40m 28% (p
Slide 24: Integration activity on track to deliver £2 billion synergy targets
Cash Resilience Growth Our integration activity remains on track to deliver £2 billion synergy targets 2020 2021 2022 2023+ Key messages Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Standard Life Assurance transition Finance and Actuarial • Parallel running of internal models from Q1 2021 Internal Model H
Slide 25: 2020 new business increased long-term cash generation by £358 million
Cash Resilience Growth 2020 new business has increased long-term cash generation by £358 million, enhancing the sustainability of our dividend HY20 HY19 BPA UK Open Europe Total Total Long-term cash generation £236m £108m £14m £358m £254m(4) Gross inflows (on new business) £1.1bn £2.6bn £0.5bn £4.2b
Slide 26: New business from UK Open and Europe
Cash Resilience Growth New business from UK Open and Europe increased long-term cash generation by £122 million 1H 2020 key messages Incremental LTCG Looking ahead at 30 June 2020 • Total gross inflows in line with 1H 2019 11% Expect continued pressure on inflows demonstrating resilience of this thr
Slide 27: BPA deals increased long-term cash generation by £236 million
Cash Resilience Growth BPA deals increased long-term cash generation by £236 million 1H 2020 highlights Deal economics Looking ahead £1,089m at 30 June 2020 Strong deal flow, with 3 deals Strong pipeline with 2020 BPA market £236m completed in 1H 2020 8% estimated to be £20 - £25 billion 2.6x £90m I
Slide 28: Strong pipeline of management actions
Cash Resilience Growth Phoenix continues to have a strong pipeline of management actions 1H 2020 management actions increased surplus by £0.1 billion 2H 2020 management actions £0.2 billion increase Investment of annuity Swapping credit/gilts for Part VII transfer of L&G mature in Own Funds backing
Slide 29: Andy Briggs, Group Chief Executive Officer
Andy Briggs Group Chief Executive Officer 29
Slide 30: £1.8 billion of surplus cash available to self-fund growth
£1.8 billion of surplus cash available to self-fund growth options over 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 Operating costs Head office costs and debt interest £1.4bn and
Slide 31: In-force business supports the dividend for many years
Phoenix’s in-force business 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 grow the £8.0bn dividend and / or enhance dividend sustainability through: New Op
Slide 32: Phoenix well placed to benefit from industry drivers of change
Phoenix is well placed to benefit strategically from the industry drivers of change, which COVID-19 has accelerated Industry driver Drivers are accelerating Phoenix’s advantages Insurers are Differentiated capability in • More pressure on insurer Heritage management consolidating: balance sheets
Slide 33: Strategic priorities for 2H 2020
Phoenix has a clear set of strategic priorities for 2H 2020 Heritage M&A and integration Open Deepen illiquid asset origination Deliver new 2020 cash generation Submit Internal Model target range of £1.5 - £1.6 billion Harmonisation final application capabilities and further improve BPA capital
Slide 34: Dates for your diary
Dates for your diary Record date for 2020 interim c 14 August 2020 dividend v Payment of 2020 interim 4 September 2020 dividend Capital Markets c 3 December 2020 Day v Full Year Results 8 March 2021 2020 34
Slide 35: Phoenix Group
PHOENIX GROUP.
Slide 36: Appendices
Appendices Appendices I Leverage ratios XI Corporate structure as at 6 August 2020 I II Leverage ratioin assets under administration Movement XIIIXII Total debt exposure by country Footnotes II III Movement UK Openin–assets underinadministration movement AUA by product type XIV Credit rating analysi
Slide 37: Appendix I: Leverage ratios
Appendix I: Leverage ratios Fitch leverage ratio(1) HY20 leverage ratios 33 Fitch basis(1) 27% (4) 29% 29% IFRS basis(2) 44% 30 (4) 27% Fitch target 27% SII leverage(3) 33% 27 range: 25-30% • IFRS leverage ratio classifies RT1 as debt 24 Funding capacity 22% 22% 21 • Our funding capacity is driven b
Slide 38: Appendix II: Movement in assets under administration
Appendix II: Movement in assets under administration £7.9bn £0.9bn £(0.8)bn £(3.3)bn £0.5bn £4.5bn £1.4bn £248.3bn £2.5bn £(4.3)bn £3.7bn £248.3bn £24.7bn £(8.4)bn £(4.6)bn £26.2bn Net flows £94.1bn £97.5bn UK Heritage £(1.8)bn UK Open £1.2bn Europe £0.1bn £126.1bn £128.0bn FY19 AUA Gross inflows Gr
Slide 39: Appendix III: UK Open movement in AUA by product type
Appendix III: UK Open – movement in AUA by product type Workplace Retail Wrap SIPP FY19 AUA £42.5bn FY19 AUA £28.0bn FY19 AUA £27.0bn Gross inflows Gross inflows Gross inflows £0.7bn £0.7bn £1.2bn - new - new - new Gross inflows Gross inflows Gross inflows £1.7bn £0.1bn £0.1bn - existing - existing
Slide 40: Appendix IV: Movements in holding company cash
Appendix IV: Movements in holding company cash and cash equivalents £m HY20 HY19 FY19 Non-operating net cash inflows include: Opening cash and cash equivalents 275 346 346 • £54 million from the close out of derivative instruments entered into by Total cash receipts 433 287 707 the holding companies
Slide 41: Appendix V: Change in Life Company Free Surplus
Appendix V: Change in Life Company Free Surplus Change in Life Company Free Surplus in 1H 2020 £0.1bn £(0.1)bn £0.2bn £(0.4)bn £(0.4)bn £1.2bn £0.1bn £1.0bn £0.7bn Opening free Surplus generation Management New business Economic, Free surplus before Cash Cash Closing free surplus(1) and expected run
Slide 42: Appendix VI: Estimated PGH Solvency II surplus and coverage ratios
Appendix VI: Estimated PGH Solvency II surplus and coverage ratios PGH Solvency II coverage ratio PGH Shareholder capital coverage ratio 137% 150% 146% Surplus 169% 141% Surplus £4.4bn 161% Surplus £4.4bn Surplus Surplus £4.0bn £4.0bn Surplus £3.1bn £16.3bn £3.1bn £13.2bn £12.7bn £11.9bn £9.8bn £10.
Slide 43: Appendix VII: Operating profit analysis
Appendix VII: Operating profit analysis 1H 2020 operating profit drivers Key messages £(24)m New business profits driven by 1H £(12)m £361m 2020 BPA deals and higher volumes £(17)m £142m in SunLife business £272m Favourable longevity experience £281m more than offset by negative £201m mortality and
Slide 44: Appendix VIII: Asset mix of life companies
Appendix VIII: Asset mix of life companies Total shareholder, non- Policyholder funds(3) At 30 June 2020 profit and supported with- Non-supported Total policyholder Total assets(1) profits(2) Unit-linked £m with-profits funds Cash deposits 5,898 5,766 8,012 13,778 19,676 Debt securities Debt securit
Slide 45: Appendix IX: Credit quality by sector for shareholder debt portfolio
Appendix IX: Credit quality by sector for shareholder debt portfolio At 30 June 2020 BB & below AAA AA A BBB Total £m and unrated Industrials(22) - 148 116 460 21 745 3% Consumer, Cyclical(23) - 209 177 167 21 574 3% Tech and Telecoms 44 154 183 362 28 771 4% Consumer, Non-cyclical 123 209 570 317 3
Slide 46: Appendix X: Outline of debt maturity profile
Appendix X: Outline of debt maturity profile as at 6 August 2020 £500m (2,3) $750m (1) (3) (2,3) (3) £500m £500m £450m £428m €500 (1) $500m $500m (1) £250m £250m £200m £122m H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Phoen
Slide 47: Appendix XI: Corporate structure
Appendix XI: Corporate structure as at 6 August 2020 $750m Restricted Tier 1 bond (2025)(2) €500m Tier 2 bond (2029) £500m Tier 2 bond (2031) £1,250m undrawn unsecured £428m Tier 2 bond (2025) $500m Tier 2 bond (2026)(2) Revolving Credit Facility Phoenix Group £450m Tier 3 bond (2022) £250m Tier 2 b
Slide 48: Appendix XII: Footnotes
Appendix XII: Footnotes (1) The HY20 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 Ratio would de
Slide 49: Appendix XII: Footnotes (continued)
Appendix XII: Footnotes (continued) (21) The HY20 Solvency II capital position for ReAssure is an estimated position and reflects a dynamic recalculation of transitionals for the ReAssure Life companies. It also reflects a change in methodology in the transitionals recalculation that is subject to r
Slide 50: 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
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