Slide 1: Phoenix Group Half Year 2021 Results
Phoenix Group Half Year 2021 Results 11 August 2021 1
Slide 2: H1 2021 review
H1 2021 review Andy Briggs Group Chief Executive Officer 2
Slide 3: Phoenix has made strong progress against its strategic priorities in H1 2021
Phoenix has made strong progress against its strategic priorities in H1 2021 CASH & RESILIENCE GROWTH • Strong H1 cash generation; on track to meet top end • Increased new business long-term cash generation of 2021 cash target range of £1.5-1.6 billion • £1.4 billion of BPA transactions YTD; capital
Slide 4: Phoenix continued to deliver cash, resilience and growth in H1 2021
Phoenix continued to deliver cash, resilience and growth in H1 2021 Cash Resilience Growth £872 £5.1 166% £412 million billion million Cash generation PGH Solvency II PGH Shareholder Incremental new business surplus(3) Capital Coverage long-term cash generation +101% Ratio(3,4) +15% £872m £5.3bn £5.
Slide 5: Delivering cash and resilience through a range of management actions
Delivering cash and resilience through a range of management actions Cash Resilience • £0.3 billion of Solvency II Hedging approach delivers minimal economic variance Delivering cash management actions delivered in regardless of growth in company-size and market volatility through value H1 2021, inc
Slide 6: Maximising shareholder value from our European operations
Maximising shareholder value from our European operations European operations Ark Life Standard Life International Business sold (completion expected by early 2022) Business retained Transaction realises shareholder value • Closed-book Heritage Improve its capital efficiency Move the business from
Slide 7: Driving our growth strategy through investment in our Open business
Driving our growth strategy through investment in our Open business Further progress made in H1 2021 Leveraging the brand for future growth Enhanced BPA capability will enable us to • Trusted and well known consumer brand quote on c. 90% of deals in the market by Acquisition volume, up from c. 35%
Slide 8: Maintaining strong customer satisfaction and developing our customer proposition
Maintaining strong customer satisfaction and developing our customer proposition Strong customer satisfaction H1 2021 proposition enhancements maintained in H1 2021 ESG passive default fund now available to DC Master Trust workplace members and expansion of our range of self-select responsible inv
Slide 9: Phoenix is committed to addressing the challenges of climate change
Phoenix is committed to addressing the challenges of climate change Progress towards our 2050 investment portfolio net zero carbon target To date Planned activity in H2 2021 Dec 2020 Jun 2021 H2 2021 Q4 2021 Set net zero Invested £788 Implementation Set 2025 and 2030 carbon targets million in ES
Slide 10: We are investing in our people and our culture to prosper for the long-term
We are investing in our people and our culture to prosper for the long-term • Empowering leaders and creating accountable business units to reflect the Talent and scale of our enlarged Group capabilities • Supplemented existing talent with strong external hires • Innovative data capture app “Who We
Slide 11: H1 2021 financial results
H1 2021 financial results Rakesh Thakrar Group Chief Financial Officer 11
Slide 12: Phoenix delivered a strong H1 2021 performance
Cash Resilience Growth Phoenix delivered a strong H1 2021 performance Cash generation Incremental new business New business contribution long-term cash generation +101% +15% +17% £872m £412m £202m £358m £172m Pearl scheme Pearl scheme £206m £93m £433m buy-in(†) buy-in(†) £206m HY21 £109m HY21 HY20 H
Slide 13: Phoenix maintained a resilient financial position in H1 2021
Cash Resilience Growth Phoenix maintained a resilient financial position in H1 2021 PGH Solvency II PGH Shareholder Capital Leverage ratio Surplus(3) Coverage Ratio(3,4) £5.3bn £5.1bn 164% 166% 140-180% 28% 28% 25-30% target target range range FY20(5) HY21 FY20(5) HY21 FY20 HY21 Assets under adminis
Slide 14: Strong cash generation in H1; now expect to be at top end of 2021 target range
Cash Resilience Growth Strong cash generation in H1; now expect to be at top end of 2021 target range Illustrative future cash generation from in-force business Cash generation of £872 million in H1 2021 as at FY20 £17.7 billion guidance over life of business £0.6-0.7bn £1.5-1.6bn £4.4 billion 3-yea
Slide 15: £2.0 billion of cash to support growth options to end of 2023
Cash Resilience Growth £2.0 billion of cash to support growth options to end of 2023 Illustrative 2021-2023 HoldCo sources and uses of cash FY20 HoldCo cash 2021-2023 cash generation £4.4 billion of cash generation from Sources £1.0bn £4.4bn in-force business, plus HoldCo cash Head office costs and
Slide 16: £11.8 billion of cash generation supports the sustainability of our dividend
Cash Resilience Growth £11.8 billion of cash generation supports the sustainability of our dividend for the long-term Group long-term free cash as at FY20 £11.8 billion supports £17.7bn £1.0bn £(0.3)bn stable and sustainable dividend for the long-term £(5.0)bn £13.4bn £(1.6)bn £11.8bn Long-term in-f
Slide 17: Phoenix's strong capital position is maintained
Cash Resilience Growth Phoenix’s strong capital position is maintained Change in PGH Solvency II surplus and Shareholder Capital Coverage Ratio 164% 6% 3% 4% 2% (5)% (5)% (3)% 166% £0.1bn £(0.1)bn £0.3bn £(0.4)bn £0.3bn £(0.2)bn £(0.2)bn £5.3bn £5.1bn Surplus as Surplus Management Economics Assumpti
Slide 18: Proactive risk management ensures the Group remains resilient to risk events
Cash Resilience Growth Proactive risk management ensures the Group remains resilient to risk events Unrewarded market risks(15) Rewarded market risks(15) Target range Target range 140-180% 140-180% Base position £5.1bn 166% Base position £5.1bn 166% Property £(0.2)bn (4)% 12% fall in values(19) Equi
Slide 19: Phoenix's hedging approach makes us more resilient to market risks
Cash Resilience Growth Phoenix’s hedging approach makes us more resilient to market risks FY20 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Life peers(24) % points change in FY20 SCCR 50% 40% SCCR: 164% Target Range: 30% 140 - 180% 20% 10% 0% -10% -20% -30% -40% Phoeni
Slide 20: Our £33 billion debt portfolio is defensively positioned and proactively managed
Cash Resilience Growth Our £33 billion debt portfolio is defensively positioned and proactively managed High credit quality debt portfolio Maintained prudent BBB exposure £35bn £33bn 19% 19% 8% 9% 33% 8% 9% 33% 38% 38% 9% 8% 19% 19% 2% 2% 2% 1% FY20 HY21 FY20 HY21 AAA AA A BBB BB & below BBB+ BBB BB
Slide 21: £276 million of Solvency II management actions delivered in H1 2021
Cash Resilience Growth £276 million of Solvency II management actions delivered in H1 2021 primarily through BAU activity H1 2021 Solvency II management actions Creating value Other actions 57% Illiquid asset origination £276m £276m Including methodology Sourcing assets to deliver changes and other
Slide 22: Further integration progress in 2021 with significant synergies still to be delivered
Cash Resilience Growth Further integration progress in 2021 with significant synergies still to be delivered Integration synergies • Ongoing integration of ReAssure Group Phase 2021 2022 2023+ delivered to date Functions delivers cost savings • Completion 1 of ReAssure Group Group 9% ReAssure Func
Slide 23: Internal Model Harmonisation is a key enabler for delivering future value
Cash Resilience Growth Internal Model Harmonisation is a key enabler for delivering future value Internal Model Harmonisation delivers incremental benefits Unlocks a pipeline of management actions diversification SII surplus Cash Realisation of material More sophisticated model, enabling us to bet
Slide 24: 67% increase in illiquid asset origination to £1.3 billion in H1 2021
Cash Resilience Growth 67% increase in illiquid asset origination to £1.3 billion in H1 2021 Total illiquid asset origination Impactful investment in a range of sustainable assets +67% Heylo Housing Bruntwood Equitix £1,321m £140m £226m 84% of origination £789m (excl. ERM) in £30m ESG assets 64% of
Slide 25: Increased new business cash generation of £412 million
Cash Resilience Growth Increased new business cash generation of £412 million New business long-term cash generation Key messages +15% 15% increase in new business long-term cash generation as £412m the investment in our Open business begins to deliver growth £358m £206m Subdued external BPA market
Slide 26: Phoenix maintained its market share in a slow BPA market and reduced capital strain
Cash Resilience Growth Phoenix maintained its market share in a slow BPA market and reduced capital strain to 6% H1 2021 highlights External deal economics H2 2021 outlook £431m Phoenix market share maintained at Improved pipeline of transactions £80m c. 7%(25) in a slow first half external 6% b
Slide 27: Pearl Scheme transaction will deliver £206 million of incremental cash generation
Cash Resilience Growth Pearl Scheme transaction completed in July 2021 will deliver £206 million of incremental long-term cash generation Pearl Scheme transaction Pearl Scheme deal economics Future Pearl Scheme activity £998m Executed a further c. £1 billion Pearl £206m Committed to buy-in of the re
Slide 28: Investment in proposition is driving momentum in new business
Cash Resilience Growth Investment in proposition is driving momentum in new business Workplace Customer Savings & Investments Europe & SunLife • Increased inflows and LTCG evidences • Focus on building retail proposition now • Increased gross inflows on new building momentum in the business to drive
Slide 29: 46% increase in operating profit reflects enlarged scale of the Group
Cash Resilience Growth 46% increase in operating profit reflects enlarged scale of the Group HY21 HY20(26) Key messages Heritage £375m £118m Heritage operating profit increased due to Open £178m £241m the inclusion of ReAssure in HY21 Service company £2m £19m Group costs £(28)m £(17)m Open operating
Slide 30: Phoenix is maintaining the resilience and sustainability of its dividend
Cash Resilience Growth Phoenix is maintaining the resilience and sustainability of its dividend Stable and sustainable dividend policy delivers A clear framework for considering a dividend increase resilience and predictability The Board will only consider an increase in dividend if Condition 1: M&A
Slide 31: Phoenix has a clear financial framework supporting its strategy
Cash Resilience Growth Phoenix has a clear financial framework supporting its strategy H1 2021 highlights 2021 targets • Deliver top-end of £1.5-1.6 billion cash • £872 million of cash generation generation target in 2021 Cash • Sale of Ark Life for consideration of £197 • Future cash generation tar
Slide 32: Outlook
Outlook Andy Briggs Group Chief Executive Officer 32
Slide 33: Phoenix is a sustainable and growing business, helping people secure a life of possibilities
Phoenix is a sustainable and growing business, helping people secure a life of possibilities Optimise in-force business Deepen customer relationships Customer acquisition We manage our in force business to By engaging with our customers and Acquire customers and grow our in- deliver resilient cash g
Slide 34: Phoenix has a unique set of competitive advantages to generate value
Phoenix has a unique set of competitive advantages to generate value Phoenix’s strategy delivers unique advantages… …and the whole is greater than the sum of the parts Optimised operating model delivers superior Our unique risk management framework customer experience and market leading delivers res
Slide 35: Phoenix is delivering its purpose of helping people secure a life of possibilities
Phoenix is delivering its purpose of helping people secure a life of possibilities Customers Phoenix Insights Customer obsessed, focused on outcomes that matter to them Think tank launching Q4 2021 High impact research and public engagement ‘For better longer lives’ Helping Commissioning Building pu
Slide 36: Phoenix will continue to execute against its strategic priorities in H2 2021
Phoenix will continue to execute against its strategic priorities in H2 2021 CASH & RESILIENCE GROWTH • Deliver top end of cash generation target and maintain • Deliver incremental new business long-term cash resilience generation • PRA decision on Internal Model Harmonisation • Continue to build Op
Slide 37: Q&A
Q&A 37
Slide 38: Investor Relations activity and contacts
Investor Relations activity and contacts 19 August Ex-dividend date for 2021 interim dividend Investor Relations contacts Claire Hawkins Director of Corporate Affairs 20 August Record date for 2021 interim dividend Email: claire.hawkins@thephoenixgroup.com Tel: +44 (0)20 3735 0575 September Half Yea
Slide 39: Appendices
Appendices I Leverage ratios II Outline of debt maturity profile as at 30 June 2021 III Movement in assets under administration IV Open business segments movement in assets under administration V Breakdown of Open business segments as at 30 June 2021 VI Change in Life Company Free Surplus VII PGH Sh
Slide 40: Appendix I: Leverage ratios
Appendix I: Leverage ratios Fitch leverage ratio(1) HY21 leverage ratios % 35 (4) Fitch basis(1) 28% IFRS basis(2) 44% 30 29% (4) 28% 28% 27% Fitch target SII leverage(3) 31% range: 25-30% 25 22% • IFRS leverage ratio classifies RT1 as debt 22% • We estimate a funding capacity for inorganic 20 FY16
Slide 41: Appendix II: Outline of debt maturity profile as at 30 June 2021
Appendix II: Outline of debt maturity profile as at 30 June 2021 £500m (3) (2) $750m (3) £500m £500m £450m £428m €500m (2) $500m $500m (1) £250m £250m £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 Unsecured Senior Bond
Slide 42: Appendix III: Movement in assets under administration
Appendix III: Movement in assets under administration £337.7bn £7.2bn £(14.1)bn £(29.1)bn £1.5bn £(7.3)bn £4.5bn £(1.8)bn £306.8bn £5.7bn £3.5bn £(6.8)bn £1.0bn £304.4bn £162.3bn £160.5bn Net outflows £158.2bn Heritage £(5.8)bn Open £(1.1)bn £175.4bn £146.3bn £146.2bn Opening AUA Sale of Wrap SIPP,
Slide 43: Appendix IV: Open business segments movement in assets under administration
Appendix IV: Open business segments movement in assets under administration Retirement solutions Workplace CS&I Europe FY20 AUA £44.8bn FY20 AUA £43.7bn FY20 AUA £59.3bn FY20 AUA £27.6bn Sale of Wrap Gross inflows SIPP, TIP, £(29.1)bn Gross inflows £0.9bn Gross inflows £0.4bn - new Onshore bond £0.9
Slide 44: Appendix V: Breakdown of Open business segments as at 30 June 2021
Appendix V: Breakdown of Open business segments as at 30 June 2021 AUA New business LTCG New business contribution 5% 4% 10% 19% 4% 3% 28% 4% 17% £146bn £412m 19% £202m 22% 64%(2) 70%(1) 31% Retirement Solutions Workplace CS&I Europe SunLife 1) H1 2021 incremental new business long-term cash generat
Slide 45: Appendix VI: Change in Life Company Free Surplus
Appendix VI: Change in Life Company Free Surplus Change in Life Company Free Surplus in H1 2021 £0.1bn £(0.1)bn £0.3bn £0.4bn £(0.8)bn £3.6bn £2.9bn £2.8bn Free surplus Surplus generation Management actions Economic variances Assumption changes Free surplus before Cash Free surplus as at FY20(1) and
Slide 46: Appendix VII: PGH Shareholder Capital Position and proxy to shareholder value
Appendix VII: PGH Shareholder Capital Position and proxy to shareholder value PGH Shareholder Capital Position Proxy to shareholder value £bn 164% 166% Shareholder own funds 12.7 SCCR(4) SCCR(4) Less: Tier 2 and Tier 3 debt(27) (3.5) Surplus Less: Restricted Tier 1 debt(27) (1.0) £5.3bn Surplus £5.1
Slide 47: Appendix VIII: PGH Solvency II surplus and coverage ratios
Appendix VIII: PGH Solvency II surplus and coverage ratios PGH Solvency II coverage ratio PGH Shareholder Capital Coverage Ratio(4) 147% 148% 164% 166% Surplus Surplus £5.3bn Surplus Surplus £5.1bn £5.3bn £5.1bn £16.8bn £15.6bn £13.6bn £12.7bn £11.5bn £10.5bn £8.3bn £7.6bn FY20 HY21(3) FY20 HY21(3)
Slide 48: Appendix IX: Estimated shareholder SCR by risk type and PGH own funds tiering
Appendix IX: Estimated shareholder SCR by risk type and PGH own funds tiering Estimated HY21 SCR by risk type(1) HY21 PGH own funds by capital tier(2) £12.7bn 11% of SCR 10% 38% of SCR £7.6bn 2% 22% 6% 117% of SCR Longevity 5% Property 4% PGH tiering of own funds PGH SCR 5% Credit Persistency 7% Sha
Slide 49: Appendix X: PGH Solvency II Regulatory Capital Coverage Ratio sensitivities
Appendix X: PGH Solvency II Regulatory Capital Coverage Ratio sensitivities Unrewarded market risks(15) Rewarded market risks(15) Base position £5.1bn 148% Base position £5.1bn 148% Property £(0.2)bn (2)% 12% fall in values(19) Equities No impact No impact 20% fall in markets Credit £(0.3)bn (1)% 12
Slide 50: Appendix XI: H1 2021 operating profit drivers
Appendix XI: H1 2021 operating profit drivers Heritage Open Expected return £334m Expected return £134m Experience £(6)m Experience £10m New business N/A New business £59m Modelling & Modelling & £38m £(17)m methodology methodology Assumptions £9m Assumptions £(8)m Operating profit £375m Operating p
Slide 51: Appendix XII: Diversification of illiquid asset portfolio
Appendix XII: Diversification of illiquid asset portfolio Infrastructure at 30 June 2021 £1.6 billion with BBB average rating Equity Release Mortgages 15% £3.6 billion with AA average rating • Secured on cash flows from long-term contracts with highly rated counterparties • 40% of portfolio backed b
Slide 52: Appendix XIII: Credit quality by sector for shareholder debt portfolio
Appendix XIII: Credit quality by sector for shareholder debt portfolio Average credit rating by sector (HY21 vs FY20) Sector HY21 £ HY21 % AA A BBB ∆ vs FY20 Industrials £1.3bn 4% Consumer, cyclical £1.1bn 3% Tech and Telecoms £1.7bn 5% Consumer, non-cyclical £2.2bn 7% Banks £5.4bn 16% Financial Ser
Slide 53: Appendix XIV: Integration synergies
Appendix XIV: Integration synergies Standard Life ReAssure % % In year Cumulative Target In year Cumulative Target of target of target Capital synergies £45m £765m £720m 106% £23m £502m £600m 84% (net of costs) Cost synergies(28) £4m £44m £75m 58% £2m £24m £50m 48% (per annum) One off cost £0m £38m
Slide 54: Appendix XV: Sustainability performance ratings
Appendix XV: Sustainability performance ratings Upgraded to ‘A’ from ‘BBB’ Ranked 38th out of 275 in the Ranked 22nd in the in August 2020 insurance industry in April 2021, Responsibility 100 Index, (Scale AAA to CCC) with a risk rating of 20.0 now leading the life sector A proud member of the Total
Slide 55: Appendix XVI: Footnotes
Appendix XVI: Footnotes 1) Scope 1 and Scope 2 greenhouse gas emissions from occupied premises per full-time employee intensity 2) Includes known hires where offers accepted 3) The 30 June 2021 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitional
Slide 56: Appendix XVI: Footnotes
Appendix XVI: Footnotes 14) Includes £(0.1) billion temporary capital strain on Group currency hedges, which is expected to unwind on implementation of the Group’s harmonised Internal Model 15) Assumes stress occurs 1 July 2021 16) Assumes the impact of a dynamic recalculation of transitionals (subj
Slide 57: Disclaimer and other information
Disclaimer and other information This presentation in relation to Phoenix Group Holdings plc and its subsidiaries (the ‘Group’) contains, and the Group may make other statements (verbal or otherwise) containing, forward-looking statements and other financial and/or statistical data about the Group’s