Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — RBC 2020 Bulk Annuities Seminar
21 slides from Standard Life's conference presentation, May 13, 2020
Slide 1: Evolving our BPA Franchise
Evolving our BPA Franchise Justin Grainger Head of BPA, Phoenix Group RBC 2020 Bulk Annuities Seminar 13 May 2020 1
Slide 2: Phoenix’s growth journey continues
Phoenix’s growth journey continues 2010 2013 2015 2018 Premium Listing on Debt re-terming Investment grade Acquisition of Standard Life London Stock and £250m credit rating from Assurance Limited (“SLAL”) Exchange equity raising Fitch Ratings 2011 2014 2016 2019 £5bn annuity liability Divestment of
Slide 3: Our Heritage business will grow through new annuity business
Our Heritage business will grow through new annuity business Our annuity book will continue to grow(1) Phoenix’s approach to BPA is: Focus on value accretion not Selective £20bn volume Allocation of c. £100 million Proportionate of surplus capital in 2019 £10bn Funded from Capital strain funded by o
Slide 4: We are at the beginning of our BPA journey
We are at the beginning of our BPA journey Market share Market segmentation Scottish Canada Appetite by transaction size Widows Life £50m- £100m- £500m- Aviva Deferreds <£50m >£2bn £2.0bn £0.4bn £100m £500m £2bn £4.0bn 5% 9% Just 1% Aviva ● ● ● ● ○ £1.2bn Canada Life ● ● ● ○ ○ Rothesay 3% Just ?
Slide 5: Our BPA franchise is growing to support business strategy
Our BPA franchise is growing to support business strategy We have capitalised on both internal and external opportunities Key stats Over £4 billion of new BPA March 2018 November April 2019 October 2019 business delivered over 3 years £470m 2018 £460m £140m pensioner £160m pensioner pensioner buy- b
Slide 6: BPA offers attractive returns and extends our long-term cash generation
BPA offers attractive returns and extends our long-term cash generation 2019 BPA deal economics 2019 activity IRR on each BPA transaction must • Priced 27 transactions exceed hurdle rate of return • 5 BPA deals completed • c. 5% share of £44 billion market • Established participant in market 9% “Cap
Slide 7: Competitive advantages in BPA market and asset origination allow Phoenix to successfully compete
Competitive advantages in BPA market and asset origination allow Phoenix to successfully compete in this market and deliver value accretive deals Financial strength and Market leading OSP resilience administration capabilities Success in delivering Prudent management value Appropriate terms
Slide 8: Asset and liability cash flows (£m)
Sourcing high quality assets which match liability duration is a key criteria for success in the BPA market Illustrative asset and liability matching profile 12 10 Asset and liability cash flows (£m) 8 6 4 2 - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Slide 9: Our Strategic Asset Allocation (“SAA”) for annuities has three key priorities
Our Strategic Asset Allocation (“SAA”) for annuities has three key priorities 1 Appropriate duration 2 Credit discipline 3 Diversification at 31 Dec 2019 at 31 Dec 2019 at 31 Dec 2019 16 years 2% 11% 14% 13 years £20bn £20bn 17% 34% AAA AA Average Traded / liquid assets Private placements A ERM rati
Slide 10: A diversified illiquid asset portfolio is an integral but proportionate part of our annuity strategic asset allocation
A diversified illiquid asset portfolio is an integral but proportionate part of our annuity strategic asset allocation Illiquid asset portfolio Illiquid asset credit quality Key messages at 31 Dec 2019 at 31 Dec 2019 £1.3 billion of illiquid asset origination 7% 2% 9% in 2019 delivered £140 million
Slide 11: 2019 was another record-breaking year for BPA
2019 was another record-breaking year for BPA Buy-in and buy-out volumes since 2008 Record-breaking deals 44 Pension scheme Deal size Insurer Premiums, £bn Telent £4.7bn Rothesay Life 25 25 Rolls Royce £4.6bn Legal & General 13 12 13 8 10 5 8 Allied Domecq £3.8bn Rothesay Life 4 4 4 Asda £3.8bn Roth
Slide 12: Phoenix is well placed to evolve its BPA franchise
Phoenix is well placed to evolve its BPA franchise Strategic priority to deliver selective and proportionate BPA to support long-term cash generation Increased in-house expertise in BPA and illiquid asset sourcing to deliver bespoke products for clients Resilient solvency balance sheet with low vola
Slide 13: Appendices
Appendices Appendices I I Diversified Leverage ratio£5.3 billion illiquid asset portfolio XIII Total debt exposure by country II II Movement Illiquids assets: Equity in assets underRelease Mortgage portfolio administration XIV Credit rating analysis of debt portfolio III III UKOther – movement Openi
Slide 14: Appendix I: Diversified £5.3 billion illiquid asset portfolio
Appendix I: Diversified £5.3 billion illiquid asset portfolio at 31 Dec 2019 Equity Release Mortgages £2.9 billion UK Local Authority Loans £0.3 billion 7% • Broad regional spread and average LTV • Unsecured but with implicit support of 8% of 34% UK Government • Average AA credit rating • Average A+
Slide 15: Appendix II: Illiquids assets: Equity Release Mortgage portfolio
Appendix II: Illiquids assets: Equity Release Mortgage portfolio Credit rating determined through securitisation Key portfolio statistics 2% at 31 Dec 2019 10% Average AAA Average Average time to AA LTV age 27% £2.9bn Current redemption A 61% portfolio BB 34% 77 years 12 years Regional distribution
Slide 16: Appendix III: Other illiquids assets portfolio
Appendix III: Other illiquids assets portfolio Commercial Real Estate £0.4 billion Private Placements £1.3 billion • First-ranking security over the underlying property, transaction • c70% secured on a variety of assets bank accounts and other borrower assets • Diversified portfolio across 38 exposu
Slide 17: Appendix IV: 2019 illiquid asset origination
Appendix IV: 2019 illiquid asset origination 2019 origination focused on longer maturities at attractive spreads Diversified portfolio 300 250 A A- AA A- A+ Spread (bps) 200 AA BBB A A+ A- 150 BBB A A £1.3bn A A- A AA AA- BBB AA- 100 BBB- A+ AA AA AA- 50 Social Housing Infrastructure 0 Student Accom
Slide 18: Appendix V: Shareholder Capital Coverage Ratio sensitivities
Appendix V: Shareholder Capital Coverage Ratio sensitivities PGH Solvency II Shareholder Capital Coverage Ratio sensitivities(2) Impact on Target range Solvency II surplus Solvency II SCCR as at 24 April 2020 172% £4.0bn Equities: 20% fall in markets 175% £0.1bn Property: 12% fall in values(3) 167%
Slide 19: Appendix VI: Phoenix’s resilience to market risks is strong relative to peers
Appendix VI: Phoenix’s resilience to market risks is strong relative to peers FY19 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Life peers(7) Impact on SII ratio 40% 30% 20% 10% 0% -10% -20% -30% Phoenix Peer A Peer B Peer C Peer D Peer E Peer F Peer G United Kingdom E
Slide 20: Appendix VII: Footnotes
Appendix VII: Footnotes (1) Assumptions in graph: £750 million vesting annuities per annum, £1 billion BPA per annum (2) Sensitivity assumes stress occurs on Day1 and that there is no market recovery (3) Property stress represents an overall average fall in property values of 12% (4) Assumes the imp
Slide 21: Disclaimer and other information
Disclaimer and other information • This announcement 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
Phoenix Group Holdings — RBC 2020 Bulk Annuities Seminar on 6ix