Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2015 Earnings Presentation
47 slides from Standard Life's earnings presentation, Mar 23, 2016
Slide 1: Full Year Results 2015
Full Year Results 2015 23 March 2016 1
Slide 2: Agenda
Agenda Introduction Henry Staunton | Chairman Business update Clive Bannister | Group Chief Executive Financial review Jim McConville | Group Finance Director Phoenix Life Andy Moss | Chief Executive, Phoenix Life Outlook and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Introduction
Introduction Henry Staunton 3
Slide 4: Phoenix continues to be well placed for the future
Phoenix continues to be well placed for the future Today Future • Resilient long-term cash • Enhancing customer service, generation from closed life communication and outcomes funds • Additional management actions • Robust Solvency II capital to add value and accelerate position cashflows • Investme
Slide 5: Business update
Business update Clive Bannister 5
Slide 6: A year of major achievements with all targets met
A year of major achievements with all targets met Cash generation of £225 million Solvency II Full Internal Model approval in December 2015 Incremental MCEV from management actions of £205 million Investment grade credit ratings for senior and hybrid debt Estimated Solvency II surplus of £
Slide 7: Strong financial performance against targets in 2015
Strong financial performance against targets in 2015 Delivery Target FY15 £200m cash £225m to £250m Met the target range for cash generation generation in 2015 in 2015 target Long-term Achieved £1.2 billion of long term cash £2.8bn cash £1.2bn to between generation target of £2.8 billion between
Slide 8: Phoenix's Solvency II capital position is robust and resilient
Phoenix’s Solvency II capital position is robust and resilient • Phoenix Full Internal Model Application approved by the PRA in December 2015 Internal • Matching Adjustment application approved Model • Management actions planned to further optimise Solvency II position during 2016 • Solvency II repl
Slide 9: Financial targets focused on cashflow generation from existing business
Financial targets focused on cashflow generation from existing business • Cash generation target for 2016 of £350 million to £450 Cash million generation • New five year cash generation target of £2.0 billion targets between 2016 to 2020, aligned with maturity of new bank facility Continued focus St
Slide 10: Financial review
Financial review Jim McConville 10
Slide 11: Financial highlights
Financial highlights FY15 FY14 £ Operating companies cash generation 225m 567m(1) Cash Holding company cash 706m 988m IFRS Group operating profit 324m 483m MCEV Group MCEV 2.5bn 2.6bn Solvency II surplus (estimated) 1.3bn na Shareholder Capital coverage ratio (estimated) 154% na Group capital PLHL I
Slide 12: 2015 cash generation in line with target range
2015 cash generation in line with target range £m FY15 FY14 • 2015 cash generation impacted Opening cash and cash equivalents 988 995 by transition to Solvency II Cash receipts • £20 million of cash generation Phoenix Life 225 446 through management actions Ignis (including divestment proceeds) - 42
Slide 13: Continued significant contribution to IFRS operating profit from management actions
Continued significant contribution to IFRS operating profit from management actions £m FY15 FY14 • Phoenix Life operating profits Phoenix Life 336 487 enhanced by £58 million of management actions (FY14: Ignis - 17 £165 million) Group costs (12) (21) • Positive non-recurring items included the restr
Slide 14: Another strong year of management actions have offset impact on embedded value
Another strong year of management actions have offset impact on embedded value of market movements Group MCEV £m 114 205 79 26 £11.76 per 135 91 share 44 £11.15 per 120 (3) share 2,647 2,513 MCEV at Operating Management Economic Impact of Movement in MV Finance costs Pension scheme Dividends MCEV at
Slide 15: Following investment grade rating Phoenix has greater optionality for debt
Following investment grade rating Phoenix has greater optionality for debt • Achieved investment grade credit ratings from Fitch Ratings for both Investment senior and subordinated debt grade ratings • Deeper access to debt capital markets and lower cost of debt • Ability to access longer dated, sub
Slide 16: IGD and PLHL ICA no longer Group solvency measures
IGD and PLHL ICA no longer Group solvency measures IGD IGDand surplus sensitivities and headroom at FY15 PLHL ICA surplus and headroom £1.5bn £1.2bn £0.7bn £0.7bn £0.6bn £0.5bn IGD surplus £0.6bn PLHL £0.5bn ICA surplus FY14 FY15 FY14 FY15 Capital policy Headroom Capital policy Headroom • Corporate
Slide 17: Overview of Solvency II capital position at FY15
Overview of Solvency II capital position at FY15 Total Solvency II surplus • Phoenix Group capital requirements calculated at PLHL using a Full Internal Model • Solvency Capital Requirements (“SCR”) – calibrated at a 1 in 200 Surplus £1.3bn year event • Surplus over SCR of £1.3 billion • 87% of own
Slide 18: Unrecognised additional surpluses within the Group
Unrecognised additional surpluses within the Group Basic own funds reconciliation • Additional surplus over SCR within unsupported with profit funds and Group pension schemes are excluded from total surplus • £0.4 billion of unrecognised surplus in £0.4bn unsupported with profits funds £0.1bn • £0.1
Slide 19: Shareholder Capital coverage ratio of 154%
Shareholder Capital coverage ratio of 154% Breakdown of Solvency II position • Shareholder Capital ratio calculation excludes own funds and SCR of Solvency unsupported with profit funds and 154% ratio Group pension schemes • Phoenix’s unsupported with profit funds have a stated strategy of estate ac
Slide 20: Solvency II surplus is resilient to market movements
Solvency II surplus is resilient to market movements Sensitivities of Solvency II surplus • Surplus is relatively insensitive to market movements FY15 Solvency II surplus £1.3bn • Surplus as at 4 March remains at £1.3 billion1 Following a 20% fall in equity markets £1.3bn • Additional £0.5 billion o
Slide 21: Expected £5.2 billion of cashflow from the existing business from 2016
There is an expected £5.2 billion of cashflow from the existing business from 2016 onwards Illustrative future cash generation(1) £2.0 billion target £3.2bn £20m £350-450m £205m target 2015 2016 2017 2018 2019 2020 2021+ Organic cash generation Management actions Illustrative future cash generation
Slide 22: Long term cash generation supports the Group dividend policy
Long term cash generation supports the Group dividend policy Illustrative uses of cash from 2016 to 2020 (£bn) 0.2 0.2 0.3 2.0 0.7 0.6 0.7 0.8 FY15 holding Cash generation Operating Pension costs Debt interest Debt Dividends over Illustrative company cash over 2016-2020 expenses over over 2016-2020
Slide 23: Beyond 2020, expected £3.2 billion of cash flow to emerge
Beyond 2020, there is an expected £3.2 billion of cash flow to emerge Illustrative uses of cash from 2021 onwards (£bn) 0.0 0.9 3.2 3.0 0.8 Illustrative holding company 2021+ cash generation Payment of outstanding Outstanding shareholder Illustrative holding company cash at FY20 (2) pension costs bo
Slide 24: Phoenix Life
Phoenix Life Andy Moss 24
Slide 25: Phoenix Way continued enhancement and success during 2015
Phoenix Way continued enhancement and success during 2015 FY15 achievements The Phoenix Way Solvency II RESTRUCTURING OPERATIONAL MANAGEMENT Restructure of Opal Re internal Further reinsurance operational NPL fund merger into PLAL progress Equity release mortgage portfolio acquired Disposa
Slide 26: We will build on our strong track record of management actions
We will build on our strong track record of management actions now we have transitioned to Solvency II Incremental MCEV Accelerated cashflow Total £359m Total £296m £1.4bn £332m £1.6bn £261m £275m £205m £242m £209m £165m £167m £170m £155m £180m £20m 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011
Slide 27: Ongoing focus on maximising operational efficiency
Ongoing focus on maximising operational efficiency Costs reductions track policy run-off Cumulative 2010 – 2011 2011 – 2012 2012 – 2013 2013 – 2014 2014 – 2015 since 2010 Policy 6.9% 6.7% 10.4%(2) 8.5% 4.5% 32.0% run-off Costs(1) 9.2% 7.2% 9.6% 9.8% 6.9% 36.1% run-off • Underpinned by outsourcer var
Slide 28: Phoenix is well positioned to respond to an emerging government and regulatory agenda
Phoenix is well positioned to respond to an emerging government and regulatory agenda • Significant evolution and increasing focus on conduct risk following FSA split Conduct • FCA review on legacy customers published Regulation • Other reviews ongoing as well as new FCA powers over excessive exit c
Slide 29: Impact of Pension Freedoms on Phoenix Life
Impact of Pension Freedoms on Phoenix Life • Initial “dash for cash” in April 2015 due to number of customers who had deferred taking a decision during 2014 • Demand for full encashment has been for smaller pension pots, with around 43,000 customers requesting full encashment at an average pot size
Slide 30: Delivering improved service for customers
Delivering improved service for customers Customer 2015 actions Customer metrics • Increased scope and volume of pensions Full year 2015 target(1) transfers through ORIGO Speed of Pension Transfer 10.97 days <12 days pay-outs (ORIGO) • Reinforced programme of reminding customers of key benefits unde
Slide 31: Outlook and Q&A
Outlook and Q&A Clive Bannister 31
Slide 32: New cash generation targets for period to 2020
New cash generation targets for period to 2020 Illustrative future cash generation(1) £2.0 billion target £3.2bn £20m £350-450m £205m target 2015 2016 2017 2018 2019 2020 2021+ Organic cash generation Management actions Illustrative future cash generation (excluding any management actions) Notes: (1
Slide 33: Consolidation will be driven by changes to the UK life industry
Consolidation will be driven by changes to the UK life industry Market size is over £300bn Vendor motivations M&A criteria Market opportunities by owner • Loss of new business value • Closed life focus from annuities 17% Bank owned • Fixed cost pressures of legacy • Value accretive 35% UK life books
Slide 34: Phoenix Group now repositioned for future growth
Phoenix Group now repositioned for future growth Future aims Supported by Retirement Strategy and third party • Enhancing customer service, partnerships communication and outcomes Robust life company solvency • Additional management actions to Further options to simplify life and add value and
Slide 35: Q&A
Q&A 35
Slide 36: Appendices
Appendices I Management actions VI Asset mix of life companies II Cash generation sensitivities VII Total debt exposure by country III Phoenix Life IFRS operating profit drivers VIII Credit rating analysis of debt portfolio IV MCEV sensitivities IX Current corporate structure V Maturity profile of b
Slide 37: Appendix I: Management actions
Appendix I: Management actions Incremental MCEV Accelerated cashflow FY15 FY15 Operational management £205m Operational management £8m Restructuring £0m Restructuring £0m Risk management £0m Risk management £12m Total £205m Total £20m 37
Slide 38: Appendix II: Cash generation sensitivities
Appendix II: Cash generation sensitivities Cash generation sensitivities 1 Jan 2016-31 Dec 2020 Base case – 1 January 2016 £2.0bn Following a 20% fall in equity markets £2.0bn Following a 15% fall in property values £2.0bn Following 75bps interest rates rise(1) £2.1bn Following 75bps interest rates
Slide 39: Appendix III: Phoenix Life IFRS operating profit drivers
Appendix III: Phoenix Life IFRS operating profit drivers FY15 FY14 Reported Opening Closing Expected Reported Opening Closing Expected IFRS Op liability/ liability/ return IFRS Op liability/ liability/ return Profit Equity(2) Equity(2) margin(1) Profit equity(2) Equity(2) margin(1) Fund type How pro
Slide 40: Appendix IV: MCEV sensitivities
Appendix IV: MCEV sensitivities £m FY15 Base (MCEV of covered business) 2,674 1% decrease in risk-free rates 194 1% increase in risk-free rates (157) 10% decrease in equity market values (25) 10% increase in equity market values 27 10% decrease in property market values (19) 10% increase in property
Slide 41: Appendix V: Maturity profile of business
Appendix V: Maturity profile of business 1-5 6-10 11-15 16-20 20+ Total £m years years years years years MCEV present value of future profits 31 December 2015 845 533 322 194 131 2,025 31 December 2014 859 556 387 250 186 2,238 31 December 2013 997 576 344 212 172 2,301 31 December 2012 1,058 596 36
Slide 42: Appendix VI: Asset mix of life companies
Appendix VI: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 31 Dec 2015 supported with- with-profits Unit Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 3,734 28 3,921 1,065 4,986 8,720 Debt
Slide 43: Appendix VII: Total debt exposure by country
Appendix VII: Total debt exposure by country Corporate: Sovereign Financial Corporate: Asset backed Total debt At 31 Dec 2015 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareh
Slide 44: Appendix VIII: Credit rating analysis of debt portfolio
Appendix VIII: Credit rating analysis of debt portfolio Policyholder funds Total shareholder, Non- non-profit and supported At 31 December 2015 supported with- with-profits Total £m profits funds Unit-linked Policyholder Total assets AAA 1,371 1,740 72 1,812 3,183 AA 3,608 8,443 487 8,930 12,538 A 1
Slide 45: Appendix IX: Current corporate structure
Appendix IX: Current corporate structure Phoenix Group Holdings £650m unsecured bank debt Key: Intermediate PGH Capital £300m senior Listed top company holdcos Limited bond Holding companies Phoenix Life £428m Holdings subordinated Operating companies (PLHL) notes Finance company Impala PGH2 Holding
Slide 46: Appendix X: Outline of current debt structure
Appendix X: Outline of current debt structure Instrument Issuer/borrower Face value Maturity Unsecured Revolving Credit Facility (L+175bps) PGH Capital Limited £650m June 2020 Unsecured senior bond (5.75%) PGH Capital Limited £300m July 2021 Subordinated notes (6.625%) PGH Capital Limited £428m(1) D
Slide 47: 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 and other financial and/or statistical data about the Group’s current
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