Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2023 Earnings Presentation
50 slides from Standard Life's earnings presentation, Sep 18, 2023
Slide 1: Half year 2023 results
Half year 2023 results Phoenix Group Holdings plc 18 September 2023
Slide 2: Agenda
Agenda 09:00 - 09:30 Half year 2023 results presentation Andy Briggs | Group CEO Rakesh Thakrar | Group CFO 09:30 - 10:15 Half year 2023 results Q&A Andy Briggs | Group CEO Rakesh Thakrar | Group CFO 10:15 - 10:30 Coffee break 10:30 - 11:00 IFRS 17 transition analyst education Rakesh Thakrar | Group
Slide 3: Business review
Business review Andy Briggs Group Chief Executive Officer
Slide 4: Executing on our strategy, delivering strong growth and resilient cash generation
Executing on our strategy, delivering strong growth and resilient cash generation +106% £885m £1.3bn-1.4bn Cash generation More than doubled on track to deliver at £0.9bn new business long- £430m the top-end of our term cash† target range HY22 HY23 HY23††† 2023 target range +72% £3.1bn New business
Slide 5: Phoenix has a single strategic focus: helping customers journey to and through retirement
Phoenix has a single strategic focus: helping customers journey to and through retirement There is a huge societal need… Wealth We are meeting our customers’ needs across the savings life cycle of people take advice on their Only c.10% journey to and through retirement(3) DC savers are on track for
Slide 6: Our structural growth opportunities are being accelerated by the current economic environment
Our structural growth opportunities are being accelerated by the current economic environment We have clear structural growth opportunities in the market… …which are accelerated by the current economic environment Auto-enrolment is driving strong Workplace growth Salary inflation and full employment
Slide 7: We are the UK's largest long-term savings and retirement business
We are the UK’s largest long-term savings and retirement business, with a balanced business mix 67% capital-light fee-based 1% • Our strategy is designed to maintain a diversified and 13% balanced business mix • We will leverage our existing scale in capital-light fee- based products and grow them o
Slide 8: We are delivering our strategy and purpose through our family of brands
We are delivering our strategy and purpose through our family of brands Our organic growth brands: Our purpose: Helping people secure Our core heritage brands: a life of possibilities 8
Slide 9: Executing our strategic priorities strengthens our competitive advantages
Executing our strategic priorities strengthens our competitive advantages and enhances everything we do Our strategic priorities Our competitive advantages Strong financial outcomes Capital efficiency Grow organically and through M&A Increased cash Customer access Optimise Enhance Better returns our
Slide 10: Growing organically: strong growth in capital-light fee-based businesses
Growing organically: strong growth in our capital-light fee-based businesses as we leverage the Standard Life brand Grow Record H1 new business long-term cash† Competitive advantages of customer access and cost efficiency drive Workplace success +49% Workplace – existing schemes – strong retention e
Slide 11: Growing organically: Retirement Solutions is delivering sustainable growth
Growing organically: Retirement Solutions is delivering sustainable growth Grow Record H1 new business long-term cash† Meeting more of our customers’ needs and acquiring new customers +136% Winning in a competitive market with a strong proposition and Standard Life brand £665m Maintained our discipl
Slide 12: Growing through M&A: delivering attractive shareholder returns
Growing through M&A: delivering attractive shareholder returns Grow M&A delivers accelerated cash generation Optimistic outlook for M&A and financial flexibility to fund deals c.£7.0bn target Future releases c.£470m target c.£435bn c.£200bn £3.2bn potentially £250m Future c.£235bn Large acquisitions
Slide 13: Optimise and Enhance: clear progress against our strategic priorities in H1
Optimise and Enhance: clear progress against our strategic priorities in H1 Optimise our in-force business Enhance our operating model and culture Continued to deliver management actions with £412 million Progressed our ongoing migrations, with c.80% of our digital delivered customer journeys transi
Slide 14: Executing on our strategy to deliver a dividend that is sustainable and grows
We are executing on our strategy to deliver a dividend that is sustainable and grows over time Strong H1 2023 progress… …and an ambitious trajectory ahead More than doubled new business long-term On track for £1.5bn p.a. of new business long-term cash† by 2025 Growing organically cash† Now expect to
Slide 15: H1 2023 financial results
H1 2023 financial results Rakesh Thakrar Group Chief Financial Officer
Slide 16: Our financial framework supports business growth to deliver enhanced shareholder returns
Our financial framework supports business growth to deliver enhanced shareholder returns Growth is accelerating, as we maintain a balanced business mix We are investing in growth… Resilience maintained through …which is …funded by high Cash provides financial active risk management and our underpinn
Slide 17: Summary of our H1 2023 financial results
Summary of our H1 2023 financial results Incremental Incrementalnew newbusiness businesslong-term long-term Group in-force long-term Cash generation cash cashgeneration generation free cash £898m† £885m £885m £12.5bn HY22: £950m HY22: HY22:£430m £430m FY22: £12.1bn PGH PGHShareholder ShareholderCapi
Slide 18: We expect to deliver at the top-end of our cash generation target range for 2023
We expect to deliver at the top-end of our cash generation target range Cash for 2023 Strong H1 cash generation of £898 million Key messages £0.4-0.5bn £1.3-1.4bn • On track to extend our 13 year track record of meeting or exceeding our cash generation targets since listing £0.9bn • Increased HoldCo
Slide 19: Our business is growing, which ensures the long-term sustainability of our dividend
Our business is growing, which ensures the long-term sustainability of our Cash dividend and will enable it to grow over time £0.4 billion increase in Group in-force long-term free cash Growing through M&A Growing organically £0.5bn £0.9bn £(0.3)bn £12.5bn £(0.2)bn £(0.3)bn £12.1bn £(0.2)bn In-force
Slide 20: We are investing surplus capital to deliver our growth strategy
We are investing surplus capital to deliver our growth strategy Resilience +16% (9)% (3)% 189%(2,10) +10% (5)% 198% SCCR (10)% 180%(1,2) (2)% (6)% SCCR 140-180% Target range £0.4bn £0.3bn Investment into growth £4.4bn £4.3bn £(0.4)bn £(0.2)bn £3.9bn £(0.2)bn £(0.2)bn £(0.1)bn £(0.1)bn Surplus as Sur
Slide 21: We continue to optimise and enhance our business, driving ongoing management actions
We continue to optimise and enhance our business, driving ongoing Resilience management actions H1 2023 Solvency II management actions Key messages £151m asset management actions • We continue to optimise and enhance our business, which underpins our strong delivery Including: of BAU management acti
Slide 22: Enhanced asset management capabilities support the delivery of management actions
Enhanced asset management capabilities support the delivery of Resilience management actions into the very long term Our capability build… ….is delivering strong outcomes Optimal fund-level strategic asset Differentiated strategic partnership c.£151 million of management actions delivered in H1 allo
Slide 23: We invest our credit portfolio prudently and seek to optimise our risk-adjusted returns
We invest our credit portfolio prudently and seek to optimise our Resilience risk-adjusted returns Prudently positioned shareholder credit portfolio More upgrades than downgrades in H1, with no credit defaults in H1 AAA AA A BBB BB & below 12% 14% 34% 33% 18% 1% 25% Shareholder credit assets are a s
Slide 24: We are delivering sustainable organic growth
We are delivering sustainable organic growth Growth On track for positive Group net fund flows from 2024… ...and to deliver our c.£1.5bn new cash generation target by 2025 Group net Indicative Strong H2 c.£1.5bn inflow 2024 pipeline £1,233m £1,184m H1: £(1.5)bn Group net outflow £766m Indicative H2
Slide 25: We have doubled incremental new business long-term cash generation in H1
We have doubled incremental new business long-term cash generation in H1 Growth Incremental new business long-term YOY cash generation HY22 HY23 change +106% £885m Workplace £112m £184m 64% Retail £12m £11m (8)% Europe and SunLife £24m £25m 4% £430m Capital-light fee-based businesses £148m £220m 49%
Slide 26: Workplace: Our enhanced Standard Life proposition is driving growth in net fund flows
Workplace: Our enhanced Standard Life proposition is driving growth in net Growth fund flows We are driving improved net fund flows… …and have a strong future pipeline • Enhanced Workplace proposition has improved £2.4bn retention of existing clients and attracted new £0.2bn(12) Won a major c.£2bn c
Slide 27: Retirement Solutions: Disciplined participation in a buoyant BPA market
Retirement Solutions: Disciplined participation in a buoyant BPA market Growth Our strong BPA proposition and the Standard Life brand Record H1 performance is helping us win new business • Invested £195 million of capital across 10 external transactions, covering +100% +136% £3.2 billion of premiums
Slide 28: IFRS 17 has no impact on our strategy or dividend
IFRS 17 has no impact on our strategy or dividend No change to No impact on our We remain focused on our clear strategy sustainable dividend delivering cash and capital Our strategy of growing our in-force The long-term sustainability of our We will continue to focus on the delivery business over ti
Slide 29: The impact of IFRS 17 is different for Phoenix
The impact of IFRS 17 is different for Phoenix Transition As a result of our successful track record of delivering value-accretive M&A, c.95% of our business was recognised at Fair Value on transition, which results methodology in the establishment of a lower Contractual Service Margin (CSM) and inc
Slide 30: Updating our Fitch leverage ratio calculation for IFRS 17 and market consistency
Alongside updating our Fitch leverage ratio calculation for IFRS 17, we have also updated the calculation for market consistency Restatement of FY22 Fitch leverage ratio FY22 Fitch leverage ratio calculation Key messages 30% 1% • The transition to IFRS 17 was an opportunity to (6)% apply the leverag
Slide 31: We have de-levered our balance sheet and have the capacity to raise debt
We have de-levered our balance sheet and have the capacity to raise debt £772 million of debt repaid since FY20 Key messages £4.9bn • Our strong capital position has enabled us to repay £772 million of £(0.3)bn debt since the end of 2020 £(0.5)bn £4.1bn • We are growing, with £12.5 billion of Group
Slide 32: We are executing on our strategy and delivering on our financial framework
We are executing on our strategy and delivering on our financial framework Cash Resilience Growth Cash Resilience Growth Covers dividend over the very long term Resilient balance sheet supports growth Clear momentum in Workplace and BPA Clear targets Clear targets Clear targets • On track to deliver
Slide 33: Summary
Summary Andy Briggs Group Chief Executive Officer
Slide 34: We are successfully executing on our single strategic focus
We are successfully executing on our single strategic focus – helping customers journey to and through retirement We are the UK’s largest We are a focused player We are delivering strong We are confident of long-term savings and in a large and structurally organic growth by further M&A emerging reti
Slide 35: Q&A
Q&A ail Phoenix
Slide 36: Appendices
Appendices ail Phoenix
Slide 37: Appendices
Appendices 1. Debt maturity profile as at 30 June 2023 2. Movement in assets under administration 3. Open new business segments movement in assets under administration 4. Group cash flow analysis 5. Change in Life Company Free Surplus 6. Estimated PGH Solvency II Surplus and coverage ratios 7. PGH S
Slide 38: Appendix 1: Debt maturity profile as at 30 June 2023
Appendix 1: Debt maturity profile as at 30 June 2023 £500m £250m $750m (1.2) £500m (1) £500m (1) £428m $500m (1,2) $500m (2) €500m (2) £250m (1) 1H23 2H23 1H24 2H24 1H25 2H25 1H26 2H26 1H27 2H27 1H28 2H28 1H29 2H29 1H30 2H30 1H31 2H31 RT1 bond Tier 2 bond Tier 3 bond (1) First call date (2) All curr
Slide 39: Appendix 2: Movement in assets under administration
Appendix 2: Movement in assets under administration £10.2bn £3.5bn £269.0bn £8.0bn £9.0bn £(5.9)bn £259.0bn £8.0bn £1.2bn £(5.8)bn £3.1bn £0.4bn £(11.7)bn Net flows £146.9bn £143.4bn Open new business £3.1bn Heritage run-off £(4.6)bn £115.6bn £122.1bn Opening AUA Sun Life of Canada Gross inflows Gro
Slide 40: Appendix 3: Open new business segments movement in AUA
Appendix 3: Open new business segments movement in assets under administration Retirement Solutions Pensions and Savings - Workplace Pensions and Savings - Retail Europe and SunLife FY22 AUA(1) £36.1bn FY22 AUA £50.7bn FY22 AUA £31.4bn FY22 AUA £25.2bn Gross inflows Gross inflows Gross inflows £1.3b
Slide 41: Appendix 4: Group cash flow analysis
Appendix 4: Group cash flow analysis HY23 Key messages Cash and cash equivalents at 1 January £503m • Strong ongoing cash generation of £898m in the period funds our ongoing Net cash receipts from operating companies(1,2) £898m uses of cash Uses of cash: • Non-operating net cash inflows of £178m (HY
Slide 42: Appendix 5: Change in Life Company Free Surplus
Appendix 5: Change in Life Company Free Surplus £0.5bn £(0.8)bn £0.3bn £(0.3)bn £0.2bn £(0.2)bn £(0.3)bn £2.3bn £1.7bn Free surplus Surplus generation Management Cash New Cash remittances from Economics Other Free surplus as at FY22(1) and release of actions remittances to business strain Group to f
Slide 43: Appendix 6: Estimated PGH Solvency II Surplus and coverage ratios
Appendix 6: Estimated PGH Solvency II Surplus and coverage ratios PGH Solvency II Regulatory Coverage Ratio(1) PGH Shareholder Capital Coverage Ratio(1,2) 166% 160% 189% 180% Surplus Surplus Surplus £4.4bn Surplus £3.9bn £4.4bn £3.9bn £11.1bn £9.3bn £8.7bn £10.3bn £6.7bn £6.4bn £4.9bn £4.8bn FY22(10
Slide 44: Appendix 7: Solvency II SCCR sensitivities
Appendix 7: PGH Solvency II Shareholder Capital Coverage Ratio sensitivities Unrewarded market risks(14) Demographic risks(14) Rewarded market risks(14) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property† Credit Credit†† 20% fall in rates rates inflation
Slide 45: Appendix 8: Diversification of illiquid asset portfolio
Appendix 8: Diversification of illiquid asset portfolio as at 30 June 2023 Equity Release Mortgages Commercial Real Estate £4.1bn with AA rating £0.6bn £1.0bn with BBB rating £0.9bn • Structured with robust covenant protection, a • Broad regional spread with average LTV of 33% combination of loan-to
Slide 46: Appendix 9: ESG ratings and collaborations
Appendix 9: ESG ratings and collaborations Strong ESG ratings Collaborations and Commitments Ratings agency FY22 HY23 Change MSCI A AA Sustainalytics 19.8 / low risk 19.9 / low risk CDP A- A- Dow Jones Sustainability 84th percentile 84th percentile Index Tortoise Responsibility100 12th 12th Index IS
Slide 47: Appendix 10: 2023 sustainability targets
Appendix 10: 2023 sustainability targets ESG Theme: Planet ESG Theme: People By transitioning our business to net zero and nature positive, we aim to We want to help people live better longer lives. This means tackling the deliver better outcomes for our customers and stakeholders and play our pensi
Slide 48: Appendix 11: Footnotes
Appendix 11: Footnotes 1. 30 June 2023 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitionals for the Group’s Life companies and recognition of the foreseeable 2023 interim shareholder dividend of £260 million. Had the dynamic recalculation not be
Slide 49: Appendix 11: Footnotes cont.
Appendix 11: Footnotes cont. 13. Restated comparative to reflect adoption of IFRS 17 14. Scenario assumes stress occurs on 1 July 2023 and that there is no market recovery. As part of the Group’s internal risk management processes, the Own Funds and regulatory SCR are regularly tested against a numb
Slide 50: Legal disclaimer
Legal disclaimer All information in this presentation is unaudited. 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/o
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