Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2023 Earnings Presentation
66 slides from Standard Life's earnings presentation, Mar 22, 2024
Slide 1: Phoenix Full year 2023 results
711 Phoenix Full year 2023 results StandardLife’ SunLife a. PHOENIX LIFE ReAssure
Slide 2: We have three objectives for today's presentation
We have three objectives for today’s presentation Explain our strong 2023 results and strategic progress 2 Update on the next phase of our strategic journey 3 Outline the financial outcomes that shareholders can expect Sil Phoenix
Slide 3: Introduction
Introduction Andy Briggs Group Chief Executive Officer ail Phoenix
Slide 4: Phoenix is transitioning from a closed-book life consolidator to a purpose-led retirement savings and income business
Phoenix is transitioning from a closed-book life consolidator to a purpose-led retirement savings and income business 2020: closed-book life consolidator 2023: today 2026: purpose-led retirement savings and income business Integrate and Build . Grow, Optimise and Enhance . 2021-2023 2024-2026 Innova
Slide 5: Executing on our strategic priorities supports the delivery of our evolved financial framework
Executing on our strategic priorities supports the delivery of our evolved financial framework Meeting more of our existing customers’ needs and acquiring new customers i) Cash Growing Operating Cash Generation that more than covers our recurring uses and dividend 1) Capital Resilient balance sheet
Slide 6: Our strategy delivers sustainable, growing Operating Cash Generation
Our strategy delivers sustainable, growing Operating Cash Generation which supports a progressive dividend Strong growth in Operating Cash Generation id-single digit % Mid-single growth over the Jong = +0.25% £1.4bn f Excess The Board has evolved Phoenix s dividend policy to ; cash reflect the confi
Slide 7: 2023 financial results
2023 financial results Rakesh Thakrar Group Chief Financial Officer ail Phoenix
Slide 8: Our strong 2023 financial performance demonstrates our strategic progress
Our strong 2023 financial performance demonstrates our strategic progress CG) Cash Capital Earnings Total cash generation PGH Solvency II Surplus Adjusted operating profit (2) before tax £2,024m £3.9bn 617m FY22: £1504m FY22: £4.4bn" vem Rat Incremental new business PGH Shareholder Capital Contractu
Slide 9: Total cash generation of £2.0 billion exceeds our upgraded target
Total cash generation of £2.0 billion exceeds our upgraded target Cash Strong total cash generation in 2023 c.£800 million over-delivery of 2021-2023 total cash generation target £2.0bn £5.2bn Part VII c£1.8bn benefit £4.4bn Part VIl £20b1 £0.4bn naan n £1.5bn £17bn 2023 Upgraded 2021 2022 2023 2021
Slide 10: £1.5 billion of new business long-term cash delivered two years ahead of our 2025 target
£1.5 billion of new business long-term cash delivered two years ahead of our 2025 target Strong incremental new business long-term cash +23% £1,514m c£1.5bn £1,233m 2022 2023 2025 target Tl Retirement Solutions [J Pensions and Savings _ [lJ Europe and Other Sil Phoenix @ Cash Earnings Our strategy i
Slide 11: Our capital-light Pensions and Savings business is growing strongly
Our capital-light Pensions and Savings business is growing strongly @ Cash Earnings Incremental new business long-term cash New business net fund flows Adjusted operating profit +59% +210% 427% £395m £3.1bn 190m £150m £249m £1.0bn £47bn Workplace £2.4bn net inflows Retail net outflows £(1.6)bn 2022
Slide 12: Our Retirement Solutions business has been competitive in a busy annuities market
Our Retirement Solutions business has been competitive in a busy annuities market and further reduced the capital strain Incremental new business long-term cash +14% £1,066m £934m 2022 2023 * Continued growth in a competitive BPA market with £6.2bn of premiums written in 2023 (FY22: £4.8bn) * Achiev
Slide 13: Shareholder Capital Coverage Ratio of 176% remains towards the upper-end of our operating range
Shareholder Capital Coverage Ratio of 176% remains towards the upper-end @ of our operating range Capital +16% (19)% 189%) SCCR (3)% (2)% 176%?) 140-180% Operating range r 1 £0.4bn £03bn | ! hs 1 1 £44bn 1 1 £(0.9)bn = H i £(0.3)bn a — £39p, 1 £(0.3)bn £(0.)bn £(0.1)bn een! n Le £(0.3)bn Surplus as
Slide 14: We expect to deliver a growing level of recurring management actions
We expect to deliver a growing level of recurring management actions @ Capital Our recurring management actions come from two key areas: Assets - continuous portfolio optimisation Liabilities - balance sheet efficiency actions + Liquid credit: capturing dynamic pricing dislocations across public * C
Slide 15: Phoenix has undertaken a comprehensive Consumer Duty review of its back-book products
Phoenix has undertaken a comprehensive Consumer Duty review of its @ back-book products and set aside a prudent £70 million provision Copia Phoenix has a strong track record of delivering good customer outcomes Phoenix is a provider of products and services — we do not provide advice * Delivering va
Slide 16: Improved IFRS earnings, including 13% growth in adjusted operating profit
Improved IFRS earnings, including 13% growth in adjusted operating profit @ FY2266) FY23 Pensions and Savings Retirement Solutions With-Profits Europe and Other Corporate Centre Adjusted operating profit before tax Non-operating items Investment return variances and economic assumption changes Amort
Slide 17: 10% growth in the Contractual Service Margin (CSM), a store of future profits
10% growth in the Contractual Service Margin (CSM), a store of future profits @ Total CSM (gross) as at FY22 | ESSE) New business Acquisition of Sun Life of Canada UK £52mF) Interest accretion e51mB) Assumption changes, experience and economics Other Total CSM (gross) pre release CSM release Total C
Slide 18: Strategic update
Strategic update Andy Briggs Group Chief Executive Officer ail Phoenix
Slide 19: Our strategy is to help people secure a life of possibilities
Our strategy is to help people secure a life of possibilities by meeting their savings and retirement income needs from age 18 to 80+ Wealth Saving for retirement through our family of brands: Transitioning to and securing an income in retirement through: Standard Life’ Mmmm PHOENIX LIFE © ReAssure
Slide 20: Our vision is to become the UK's leading retirement savings and income business
Our vision is to become the UK’s leading retirement savings and income business We will win in the market by delivering a compelling ..through building on our strengths and evolving our business customer experience... Wewill i oe . . " P P cular parla prorat OT Digital customer interface with person
Slide 21: We are building the required capabilities on the journey to our vision
Weare building the required capabilities on the journey to our vision Key capabilities 2020 2023 2026 M&A execution and integration Trusted and well-known consumer brand — Standard Life x | SY VA Competitive and capital-efficient annuities business x Integrate SY A Established and growing capital-li
Slide 22: We are investing to grow, optimise and enhance on the next phase of our journey
Weare investing to grow, optimise and enhance on the next phase of our journey row Investment: * c£100m to develop our growth propositions * c£200m of capital p.a. into annuities S_—_- Delivery: /% Develop innovative Retail propositions for both the adviser and direct markets Y Further develop our W
Slide 23: Our strategy delivers sustainable, growing Operating Cash Generation
Our strategy delivers sustainable, growing Operating Cash Generation which supports a progressive dividend Strong growth in Operating Cash Generation id-single digit % Mid-single growth over the Jong = +0.25% £1.4bn f Excess The Board has evolved Phoenix s dividend policy to ; cash reflect the confi
Slide 24: Financial outlook
Financial outlook Rakesh Thakrar Group Chief Financial Officer ail Phoenix
Slide 25: We have a new capital allocation framework for the next phase of our strategy
We have a new capital allocation framework for the next phase of our strategy Y Operate a progressive and sustainable ordinary dividend policy” Y Strong and resilient balance sheet: 140-180% Shareholder Capital Coverage Ratio operating range 2024-2026 investment priorities: Invest to grow Invest to
Slide 26: We expect to deliver £250 million of cost savings
As we invest to enhance, we expect to deliver £250 million of cost savings that improve the key metrics across our financial framework We expect to deliver £250 million of annual cost savings by the end of 2026, net of inflation .£125m ongoing migration and transformation c.£125m new cost efficiency
Slide 27: We will deliver a clear set of financial outcomes for our shareholders
We will deliver a clear set of financial outcomes for our shareholders Cash @ Capital @ Earnings Growing Operating Cash Generation that more Resilient balance sheet supports investment to Growing IFRS adjusted operating profit than covers our recurring uses and dividend grow, optimise and enhance ou
Slide 28: We are introducing Operating Cash Generation as a new metric
We are introducing Operating Cash Generation as a new metric to demonstrate the long-term sustainability of our business model Cosh Operating Cash Generation Surplus Recurring emergence management actions Lo--- eee ee eee ee eee Sil Phoenix Release of Capital Management Policy Non-operating cash gen
Slide 29: We will deliver sustainable, growing Operating Cash Generation
We will deliver sustainable, growing Operating Cash Generation Future new business will more than offset the in-force rurroff... New business. In-force cash 2024 Cash ..with growing recurring management ..which supports sustainable cash actions generated each and every year... generation Recurring m
Slide 30: We expect to deliver 25% growth in Operating Cash Generation by 2026
We expect to deliver 25% growth in Operating Cash Generation by 2026 Cash gle digit % jid-sin' Mies the long term growth ovel 0.25% £1.4bn Can support a reinvestmentinto rd cescah |b the businessand/or lb | additional shareholder returns Recurring management actions c£0.5bn Dividend c£0.2bn Annuitie
Slide 31: We are setting clear targets for total cash generation over the next three years
Weare setting clear targets for total cash generation over the next three years Cash 2024 total cash generation target We will generate cash generation equivalent to c.90% of our current market cap across 2024-26 £1.4-1.5bn ; £4.4 billion total cash generation 3-year target Operating Non-operating T
Slide 32: Operating Cash Generation more than covers our recurring uses
Operating Cash Generation more than covers our recurring uses and generates surplus to invest into our business Cosh 2024-2026 total cash generation of £4.4 billion n ‘ Non-operating Operating Cash Generation cash generation HoldCo cash Dividend, operating costs and debt interest Annuities capital i
Slide 33: We manage our leverage position across a range of metrics
We manage our leverage position across a range of metrics and have a track record of repaying M&A-related debt We manage our leverage position by considering a range ..and our approach is to pay down M&A-related debt as we of factors... generate surplus cash £4.9bn 2 Cash interest cover £(0.5)bn £4.
Slide 34: We have a clear deleveraging approach targeting a Solvency II leverage ratio of c.30%
We have a clear deleveraging approach and are targeting a Solvency II leverage ratio of c.30%") by the end of 2026 We plan to repay at least £500 million of M&A-related debt by the end of 2026 £4.1bn £(0.25)bn >£(0.25)bn <£3.6bn FY23 debt 2024 T2 bond Further FY26 debt outstanding repayment delevera
Slide 35: We are targeting IFRS adjusted operating profit growth of c.50% by 2026
Weare targeting IFRS adjusted operating profit growth of c.50% by 2026 @ Targeting IFRS adjusted operating profit of £900m in 2026 +¢.50% £900m 2023 Grow Optimise Enhance 2026 target Earnings Key messages + Adjusted operating profit will grow over time, as we grow, optimise and enhance our business
Slide 36: We will deliver a clear set of financial outcomes for our shareholders
We will deliver a clear set of financial outcomes for our shareholders Growing Operating Cash Generation supports our new progressive dividend policy cit % jid-single dist oth over the long = or +0.25% £1.4bn — a Excess Elbn | cash Dividend Recurring uses 2023 Grow Optimise Enhance 2026 Phoenix Grou
Slide 37: Summary
Summary Andy Briggs Group Chief Executive Officer ail Phoenix
Slide 38: Our vision is to become the UK's leading retirement savings and income business
Our vision is to become the UK’s leading retirement savings and income business Phoenix is on a journey, as we transition from a closed-book life consolidator to a purpose-led retirement savings and income business We have made significant progress in executing our strategy, as our strong 2023 finan
Slide 39: Q&A
Q&A ail Phoenix
Slide 40: Cash appendices
Cash appendices 311 Phoenix
Slide 41: Cash appendices
Cash appendices 1. Cash generation definition 2. Profile of 2023 in-force and new business cash emergence 3. Group cash flow analysis 4. Changein Life Company Free Surplus 5. 3-year total cash generation targets across 2021-2025 Sil Phoenix
Slide 42: Appendix 1: Cash generation definition
Appendix 1: Cash generation definition Group Total cash The Group holding company utilises —_> Debt interest and repayment generation is this total cash generation to fund remitted to > Group expenses and investment, and Group to provide strong shareholder returns —> Investment into the business —>
Slide 43: Appendix 2: Profile of 2023 in-force and new business cash emergence
Appendix 2: Profile of 2023 in-force and new business cash emergence In-force Operating Cash Generation asat 31 December 2023 Recurring management actions over the long term In-force non-operating cash generation Expected cash emergence from Pensions and Savings” new business (based on volume writte
Slide 44: Appendix 3: Group cash flow analysis
Appendix 3: Group cash flow analysis FY23 Key messages Cash and cash equivalentsat 1 January £503m ; a ; i) * Strong total cash generation of £2,024 million in the period funds our Total cash generation’ £2,024m uses of cash Uses of cash: Operating expenses £(97)m . Nonroperating net cash outflows o
Slide 45: Appendix 4: Change in Life Company Free Surplus
Appendix 4: Change in Life Company Free Surplus £0350 £(2.0)bn £2.3bn £(0.3)bn © £03bn £(0.3)bn 016m £2.2bn Operating Cash Generation Freesurplus Surplus generation Recurring Other Cashremittances Newbusiness Cash remittances Economics Other Free surplus asat FY22” and release of management manageme
Slide 46: Appendix 5: 3-year total cash generation targets across 2021-2025
Appendix 5: 3-year total cash generation targets across 2021-2025 2021-2023 total cash generation £5.2bn £0.8bn over-delivery 2023 2022 2021 2021-2023 Total cash generation target! 120212023 target set in March 2021 22022-2024 target set in March 2022 32023-2025 target upgraded from £4 Ibn to £45bn
Slide 47: Other appendices
Other appendices ail Phoenix
Slide 48: Other appendices
Other appendices 1. Debt maturity profileas at 31 December 2023 2. Movementin assets under administration 3. Movementin assets under administration by segment 4. Movementin assets under administration by segment (Pensions and Savings) 5. Estimated PGH Solvency II surplus and coverage ratios 6. Chang
Slide 49: Appendix 1: Debt maturity profile as at December 2023
Appendix 1: Debt maturity profile as at 31 December 2023 1H24 2H24 1H25 2H25 1H26 2H26 1H27 2H27 1H28 2H28 1H29 2H29 1H30 HEERTIbond [lj Tier 2bond [lll Tier 3 bond ‘First optional redemption All currency debt converted into GBP based on the closing 31 December 2023 exchange rates Sil Phoenix 2H30 1
Slide 50: Appendix 2: Movement in assets under administration
Appendix 2: Movement in assets under administration Movement in AUA from 1 January 2023 to 31 December 2023 £219bn ©187bn £259.0bn Fb iz | | £(25.1)bn £(3.2)bn Group net fund flows Opening AUA Sun Life of Canada Gross Gross Market movements FY22 UK acquisition inflows outflows and other Sil Phoenix
Slide 51: Appendix 3: Movement in assets under administration by segment
Appendix 3: Movement in assets under administration by segment With-Profits Retirement Solutions FY22 AUA” | | £39.9bn FY22 AUA® | £35.7bn Sun Life of Canada UK acquisition Gross inflows - existing Gross outflows Market movements Sun Life of Canada UK acquisition Grossinflows -new Net flows Grossinf
Slide 52: Appendix 4: Movement in assets under administration by segment (Pensions and Savings)
Appendix 4: Movement in assets under administration by segment (Pensions and Savings) Pensions and Savings - Workplace Pensions and Savings - Retail Pensions and Savings — Legacy Gross inflows Gross inflows Sun Life of Canada ~new -new UK acquisition Gross inflows Net flows eon Gross inflows Net flo
Slide 53: Appendix 5: Estimated PGH Solvency II surplus and coverage ratios
Appendix 5: Estimated PGH Solvency II surplus and coverage ratios PGH Solvency II Regulatory Coverage Ratio) PGH Shareholder Capital Coverage Ratio29) Fy224 FY232) Fy224 FY232) Hl Own Funds ll SCR HM OwnFunds ml SCR PGH Solvency Il Own Funds £11.1bn £111bn Less: Unsupported WithProfit funds £(2.0)bn
Slide 54: Appendix 6: Change in Solvency II Own Funds and SCR
Appendix 6: Change in Solvency Il Own Funds and SCR £0.7bn ss Change in £9.3bn Own Funds ShareholderOwn Surplus Funds asatFY22 emerging Change in Baie SCR Shareholder Release of capital SCRasatFY22 requirements Impacton Sil £4.4bn(4 £0.8bn surplus See Appendix 16 for footnotes Sil Phoenix £0.3bn Rec
Slide 55: Appendix 7: Additional Solvency II disclosures
Appendix 7: Additional Solvency Il disclosures Estimated FY23 SCR by risk type” FY23 PGH Own Funds by capital tier?) £8.9bn Tier 2 (ll 12% of SCR ¢5.0bn I 54% of SCR Wl 112% of SCR Tier 1 PGH tiering of Own Funds PGH SCR Share of Solvency I! Own Funds by capital tier Tl Persistency Other market risk
Slide 56: Appendix 8: PGH Solvency II Shareholder Capital Coverage Ratio sensitivities
Appendix 8: PGH Solvency II Shareholder Capital Coverage Ratio sensitivities Unrewarded market risks" Demographic risks") Rewarded market risks) Base position Equities Long-term Long+erm. Long-term Currency Currency Lapse Longevity Property Credit Credit't 20% fallin rates rates inflation 15% 10% 10
Slide 57: Appendix 9: Movement in adjusted shareholders' equity
Appendix 9: Movement in adjusted shareholders’ equity Movement of IFRS adjusted shareholders’ equity over 2023 Key messages £0.6bn + Adjusted shareholders’ equity reduced to ¢5.2bn || CL] co ton £46 billion, with strong CSM growth more <a —x than offset by a decline in shareholders’ £0.2b £4.6b1 £(0
Slide 58: Appendix 10: 2023 operating profit drivers
Appendix 10: 2023 operating profit drivers Reheditetrent Operating profit Expected Non-financial Crane CSM release on investment investment experience 5 release . . profit contracts margin variances Pensions and Savings £25m £8m £262m - £(28)m £(77)m £190m Retirement Solutions £129m £19m - £292m £(9
Slide 59: Appendix 11: Movement in Group Contractual Service Margin, including segmental split
Appendix 11: Movement in Group Contractual Service Margin, including segmental split Movement of the Group CSM from 1 January 2023 to 31 December 2023 Split by segment: With-Profits Retirement Solutions Pensions and Savings Europe and Other Total Group Sil Phoenix £2,590m os TotalCSM New business (g
Slide 60: Appendix 12: Shareholder credit portfolio
Appendix 12: Shareholder credit portfolio Prudently positioned shareholder credit portfolio Credit rating AAA AA A BBB BB & below 4 Shareholder credit assets are a small proportion of our c.£283bn balance sheet (c.14%) Y Our prudent portfolio is c.99% investment grade’ ll Gilts/Sovereigns/Supra/Sub-
Slide 61: Appendix 13: Diversification of illiquid asset portfolio as at 31 December 2023
Appendix 13: Diversification of illiquid asset portfolio as at 31 December 2023 Equity Release Mortgages £4.5 billion with AA rating * Broad regional spread with average LTV of 33% * Secured on property assets with average time to redemption Nyears Private Corporate Credit £2.3 billionwith A rating
Slide 62: Appendix 14: ESG ratings and collaborations
Appendix 14: ESG ratings and collaborations Strong ESG ratings Ratings agency MSCI A AA Sustainalytics 19.8 / low risk 20.3/ medium risk CDP A A Oo S&P Global 84" percentile 90" percentile ISS ESG corporate rating Cc Cprime ESG ratings may vary among ESG rating agencies as the methodologies used to
Slide 63: Appendix 15: 2024 sustainability commitments
Appendix 15: 2024 sustainability commitments We want to help shape a better future. This means delivering good outcomes for our customers, playing a key role in delivering a net zero economy by 2050 and understanding our impact and dependency on nature. Key 2024 commitments: * Begin implementing cus
Slide 64: Appendix 16: Footnotes
Appendix 16: Footnotes 1. The Board will continue to prioritise the sustainability of our dividend over the very long term. Future dividends and annual increases will continue to be subject to the discretion of the Board, following assessment of longer-term affordability. 2. 31December 2023 Solvency
Slide 65: Appendix 16: Footnotes
Appendix 16: Footnotes 13, 22. al Fitch leverage ratiois estimated by management based on Fitch's published methodology. Ratio allows for currency hedges over foreign currency denominated debt. Illustrative impacts assume changing one assumption on 1 January 2024, while keeping others unchanged, and
Slide 66: Legal disclaimer
Legal disclaimer This presentation in relation to Phoenix Group Holdings ple 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 current plans,
Phoenix Group Holdings — FY2023 Earnings Presentation on 6ix