Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — FY2022 Earnings Presentation
66 slides from Standard Life's earnings presentation, Mar 13, 2023
Slide 1: Full year 2022 results
Full year 2022 results Phoenix Group Holdings plc 13 March 2023
Slide 2: 2022 review
2022 review Andy Briggs Group Chief Executive Officer
Slide 3: Phoenix is a growing, sustainable business
Phoenix is a growing, sustainable business Strong financial results Strategic progress Growing organically Growing through M&A Dividend growth across cash, resilience with strong execution and set our first ever with the cash funded with a 5% increase and growth across our strategic organic growth t
Slide 4: We have delivered another strong financial performance
We have delivered another strong financial performance Cash Resilience Growth £1,504 million £4.4 billion 189% £1,233 million Cash generation PGH SII Surplus(1) Shareholder Capital Incremental new business long-term (2021: £1,717m) (2021: £5.3bn(3)) Coverage Ratio (SCCR)(1,2) cash generation (2021:
Slide 5: Cash funded M&A supports growth in our dividend
Cash funded M&A supports growth in our dividend We are acquiring Sun Life of Canada UK for £248 million… …as we demonstrate the value of smaller, cash funded M&A • Brings c.£10bn of assets under administration and c.480,000 policies c.£470m(†) +2.5% • Transaction completion expected in April 2023, w
Slide 6: Organic growth and M&A supports a dividend increase of 5%
Organic growth and M&A supports a dividend increase of 5% Organic dividend increase Phoenix Group’s dividend policy 2.5% reflects strong strategic and The Board intends to pay a dividend that is financial performance in 2022 sustainable and grows over time + Inorganic dividend increase 2.5% for the
Slide 7: We have a clear set of strategic priorities, underpinned by our key ESG themes
We have a clear set of strategic priorities, underpinned by our key ESG themes Optimise our in-force business Grow organically and through M&A Leveraging our scale in-force business to Meeting more of our existing customers’ needs deliver capital efficiency and returns Optimise Grow and acquiring ne
Slide 8: Phoenix is focused on playing its part in addressing climate change
Phoenix is focused on playing its part in addressing climate change By transitioning our business to net zero, we aim to deliver better outcomes ESG Theme: Planet for our customers and play our part in tackling the climate emergency Areas of focus and targets Key priorities 2022 progress • Decarboni
Slide 9: UK's largest long-term savings and retirement business: tackling the pension savings gap
As the UK’s largest long-term savings and retirement business, we have a critical role to play in tackling the pension savings gap We want to help people live better, longer lives. This means tackling the pension ESG Theme: People savings gap and supporting people to have better financial futures th
Slide 10: We are optimising our in-force business
We are optimising our in-force business Our priority Areas of focus 2022 delivery • £570m of BAU management actions, including ongoing balance sheet Delivering ongoing management actions efficiency actions that remain a differentiating capability of Phoenix • £169m of integration synergies from the
Slide 11: We are growing organically and through M&A
We are growing organically and through M&A Our priority Areas of focus 2022 delivery Developing innovative retirement income • Launched Standard Life Home Finance lifetime mortgages proposition solutions • Ongoing development of open market annuity product for launch in 2023 • Significant increase i
Slide 12: We are enhancing our operating model and culture
We are enhancing our operating model and culture Our priority Areas of focus 2022 delivery • Completed transfer of >400k Standard Life annuities to TCS BaNCS Completing our migrations • Announced transfer of all c.3m ReAssure policies, delivering a further £180m of net cost synergies • Delivering a
Slide 13: 2022 financial results
2022 financial results Rakesh Thakrar Group Chief Financial Officer
Slide 14: Our financial framework delivers predictable cash generation and resilient capital
Our financial framework delivers predictable cash generation and a Cash Resilience Growth resilient capital position, which underpins our sustainable dividend Group in-force long-term free cash is growing… …and our Shareholder Capital Coverage Ratio(1,2) has increased +£0.3bn +9%pts £12.1bn 189% £11
Slide 15: We delivered a strong financial performance in 2022
We delivered a strong financial performance in 2022 Cash Resilience Growth Financial performance: FY21 FY22 Cash Cash generation £1,717m £1,504m New business Incremental new business long-term cash generation £1,184m £1,233m Total dividend per share 48.9p 50.8p Dividend of which: Final dividend per
Slide 16: Cash generation of £1.5 billion exceeds top-end of our target range
Cash generation of £1.5 billion exceeds top-end of our target range Cash Strong cash generation in 2022 Phoenix delivers resilient cash generation over the very long term £1.5bn £1.3-£1.4bn • Over-delivery of management actions supports outperformance against our 2022 target range £0.6bn • Free surp
Slide 17: Phoenix sets new cash generation target that includes future organic growth
Phoenix sets new cash generation target that includes future organic growth Cash Our 3-year target now includes future new business We have set our first ever target for organic growth Incremental new business long-term cash generation £4.1bn 3-year target c.+25% £1.3-£1.4bn c.£1.5bn 1-year target c
Slide 18: Phoenix offers a superior Free Cash Flow yield
Phoenix offers a superior Free Cash Flow yield Cash 2023-2025 estimated Free Cash Flow (‘FCF’) Phoenix offers a superior 3-year average FCF(10) yield compared to the FTSE 100 £4.1bn £(1.0)bn £3.1bn c.16% c.8% 3-year cash Operating costs Free generation target and interest Cash Flow Phoenix FTSE 100(
Slide 19: We have significant capacity to invest into future growth opportunities
We have significant capacity to invest into future growth opportunities Cash Illustrative 2023-2025 HoldCo sources and uses of cash £1.45 billion of surplus cash is available to invest into growth across 2023-2025 £0.5bn £4.1bn • We will continue to invest into organic growth through BPA £1.0bn Oper
Slide 20: £12.1 billion of Group in-force long-term free cash available to shareholders
£12.1 billion of Group in-force long-term free cash will be available Cash to shareholders over time… +£0.3bn Why it is important £12.1bn • Group in-force long-term free cash is a measure to demonstrate the sustainability of £11.8bn our dividend over the very long term Group in-force long-term free
Slide 21: …and is growing to support a dividend that is sustainable
…and is growing to support a dividend that is sustainable and grows Cash over time 2022 increase in Group in-force long-term free cash Key messages • We have increased Group in-force £0.3bn long-term free cash by £0.3bn in 2022, £1.2bn which will emerge over time £(0.8)bn • This demonstrates that Ph
Slide 22: We have maintained our resilient Solvency II balance sheet
We have maintained our resilient Solvency II balance sheet despite Resilience market volatility £4.4bn Solvency II Surplus 189% Shareholder Capital Coverage Ratio(1,2) 189% 200% Surplus 180% £5.3bn Surplus Target 160% £4.4bn range £11.9bn £9.3bn 140% £6.6bn £4.9bn 120% 100% FY21(3) FY22(1) FY18 FY19
Slide 23: Generation of surplus supports repayment of debt and investment into growth
Generation of surplus supports repayment of debt and investment Resilience into growth 180% +16% +7% (16)% (9)% (7)% +18% 0% 189% £0.7bn £0.7bn £5.3bn £(0.8)bn £(0.5)bn £(0.3)bn £4.4bn £(0.4)bn £(0.3)bn Surplus as Surplus emerging Management Financing and Debt New business Economics Other Surplus as
Slide 24: We manage £259 billion of assets on behalf of our customers
We manage £259 billion of assets on behalf of our customers and Resilience retain a high quality shareholder credit portfolio Assets under administration Shareholder credit portfolio Total illiquid asset origination +17% £31.3bn £3.9bn (13%) £3.5bn £3.3bn £2.3bn £7.4bn (24%) £3.0bn £1.6bn £52.4bn £1
Slide 25: £739 million of management actions delivered
£739 million of management actions delivered, creating value Resilience for shareholders 2022 Solvency II management actions Integration synergies £570m of BAU Further integration synergies from the ReAssure integration management actions £169m Illiquid asset origination Sourcing assets to deliver c
Slide 26: We continue to simplify our business to improve the customer experience
We continue to simplify our business to improve the customer Resilience experience and enhance our cost efficiency Driving simplification with a single customer administration platform Strong progress with our integration programmes Standard Life Standard Life • Successful transfer of >400k annuity
Slide 27: Record incremental new business long-term cash generation of c.£1.2 billion
We delivered record incremental new business long-term cash Growth generation of c.£1.2 billion through organic growth Incremental new business long-term cash YOY generation FY21 FY22 change +4% £1,233m Retirement Solutions £950m £934m -2% £1,184m Pensions and Savings - Workplace £139m £212m +53% Pe
Slide 28: Established player in the BPA market, focused on optimising capital
We are an established player in the BPA market, focused on optimising Growth our capital and improving our returns Improved BPA capital efficiency drives a mid-teens IRR 2022 performance £950m £934m c.(20)% 3.4x • Completed 12 external transactions, covering £4.2 billion of premiums 2.6x £359m • Als
Slide 29: Clear momentum in our fee-based Workplace business
Our investment is delivering clear momentum in our fee-based Growth Workplace business We have increased net fund flows by Retaining existing schemes supports growth Standard Life is re-established as a major growing inflows and stemming outflows in incremental long-term cash generation player in th
Slide 30: Our IFRS adjusted operating profit remained strong at £1,245 million
Our IFRS adjusted operating profit remained strong at £1,245 million Cash Resilience Growth FY21 FY22 Key messages Heritage £537m £601m • Heritage operating profit has increased primarily Open £788m £761m due to adverse assumption changes in 2021 Service company £(24)m £(48)m • Open operating profit
Slide 31: Our business strategy and financial framework are not impacted by IFRS 17
Our business strategy and financial framework are not impacted Cash Resilience Growth by IFRS 17 No impact on strategy • Our strategy of growing our in-force business over time as we support customers on their journey to and through retirement is unchanged No impact on our financial • Our key financ
Slide 32: Broadly neutral impact from IFRS 17 on shareholder equity
We expect a broadly neutral impact from IFRS 17 on our shareholder Cash Resilience Growth equity Illustrative change in shareholder equity and recognition of CSM Key messages • Broadly neutral impact on IFRS shareholder equity due to: – Increase in equity from our with-profits business, with CSM acc
Slide 33: Phoenix continues to deliver on its financial framework
Phoenix continues to deliver on its financial framework Cash Resilience Growth Strong 2022 results Clear future targets Strong cash generation of £1.5bn exceeded target range • Deliver £1.3bn-£1.4bn of cash generation in 2023 £0.3bn growth in Group in-force long-term free cash to £12.1bn • Deliv
Slide 34: Outlook
Outlook Andy Briggs Group Chief Executive Officer
Slide 35: Our strategy is focused on the UK long-term savings and retirement market
Our strategy is focused on the UK long-term savings and retirement market ORGANIC GROWTH M&A GROWTH Meet more of our existing customers’ needs We will undertake M&A to: and acquire new customers by helping them to: • Acquire new customers and transform • Save for retirement backbook businesses to de
Slide 36: Helping customers journey to and through retirement
In line with our purpose, we help customers journey to and through retirement by meeting their needs Saving for retirement Transitioning to retirement Securing income in retirement Wealth Pension consolidation Income drawdown and Retail individual annuities savings for retirement Savings in defined
Slide 37: Organic growth opportunities align to the largest flows in the market
Our organic growth opportunities align to the largest flows in the market, where we already have scale businesses Long-term savings Retirement Our customer solutions Defined contribution Retail savings Pension Income drawdown and Home equity Defined benefit workplace pensions for retirement consolid
Slide 38: We continue to target further M&A
We continue to target further M&A, which remains a key part of our growth strategy Significant backbook M&A opportunities remain available Key messages • We continue to target further backbook M&A in line Large acquisitions with our strategy and will look at all sizes of acquisition c.£225bn • Small
Slide 39: Clear set of deliverables against our strategic priorities in 2023
We have a clear set of deliverables against our strategic priorities in 2023 Optimise our in-force Grow organically and Enhance our operating business through M&A model and culture • Continue to deliver value-accretive • Grow Retirement Solutions with annual • Progress our ongoing migrations to the
Slide 40: A growing business that offers a uniquely reliable dividend
Phoenix is a growing business that offers a uniquely reliable dividend that is sustainable and grows over time We have three unique competitive advantages… …that support the delivery of our clear financial framework Cash In-force business covers our dividend over the very long term Capital efficienc
Slide 41: Q&A
Q&A ail Phoenix
Slide 42: Investor Relations activity and contacts
Investor Relations activity and contacts March / April Full Year 2022 results investor roadshow Claire Hawkins Director of Corporate Affairs & Investor Relations 15 March Morgan Stanley European Financials Conference Email: claire.hawkins@thephoenixgroup.com Tel: +442045593161 30 March Ex-dividend d
Slide 43: Appendices
Appendices ail Phoenix
Slide 44: Appendices
Appendices 1. Leverage ratios 14. ReAssure integration synergies 2. Debt maturity profile as at 31 December 2022 15. Change in insurance accounting from IFRS 17 3. Movement in assets under administration 16. IFRS statement of comprehensive income 4. Growth business segments movement in assets under
Slide 45: Appendix 1: Leverage ratios
Appendix 1: Leverage ratios Fitch leverage ratio Leverage ratios 35% FY21 FY22 Fitch basis(2,5) 28% 30% 30%(1,5) 30% 29% 28% 28% IFRS basis(3,5) 44% 50% Fitch target 27% range SII leverage(4,5) 31% 34% 25% 22% Note: IFRS leverage ratio classifies RT1 as debt 22% 20% FY16 FY17 FY18 FY19 FY20 FY21 FY2
Slide 46: Appendix 2: Debt maturity profile
Appendix 2: Debt maturity profile as at 31 December 2022 £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
Slide 47: Appendix 3: Movement in assets under administration
Appendix 3: Movement in assets under administration £17.6bn £1.9bn £(11.5)bn £310.4bn £15.7bn £(11.8)bn £(23.3)bn £(19.3)bn £(26.4)bn £259.0bn Net flows £(45.7)bn £147.7bn Heritage £(9.6)bn £118.8bn Growth businesses £3.9bn £162.7bn £140.2bn Opening AUA Gross inflows Gross outflows Market movements
Slide 48: Appendix 4: Growth business segments movement in AUA
Appendix 4: Growth business segments movement in assets under administration Retirement Solutions Pensions & Savings - Workplace Pensions & Savings - Retail Europe FY21 AUA £44.3bn FY21 AUA(1) £55.9bn FY21 AUA £33.5bn FY21 AUA £29.0bn Gross inflows Gross inflows £2.1bn £1.6bn Gross inflows - new - n
Slide 49: Appendix 5: Breakdown of growth business segments
Appendix 5: Breakdown of growth business segments as at 31 December 2022 Assets under administration New business long-term cash generation New business contribution £21m £19m £37m £8m £25bn £29m £33bn £7m £212m £84m £140bn £1,233m £386m £31bn £268m £934m £51bn Retirement Solutions Pensions and Savi
Slide 50: Appendix 6: Change in Life Company Free Surplus
Appendix 6: Change in Life Company Free Surplus £(0.3)bn £0.6bn £(0.2)bn Nil £0.8bn £(1.5)bn £0.3bn £3.5bn £2.6bn £2.3bn Free surplus Surplus generation Management actions New Economic variances Other Free surplus before Cash Cash remittances Free surplus as at FY21(1) and release of business strain
Slide 51: Appendix 7: Estimated PGH Solvency II Surplus and coverage ratios
Appendix 7: Estimated PGH Solvency II Surplus and coverage ratios PGH SII Regulatory Coverage Ratio(1) PGH Shareholder Capital Coverage Ratio(1,2) 156% 166% 180% 189% Surplus Surplus £5.3bn £5.3bn Surplus Surplus £4.4bn £4.4bn £14.8bn £11.9bn £11.1bn £9.3bn £9.5bn £6.6bn £6.7bn £4.9bn FY21(3) FY22(1
Slide 52: Appendix 8: Additional Solvency II disclosures
Appendix 8: Additional Solvency II disclosures Estimated FY22 SCR by risk type(1) FY22 PGH Own Funds by capital tier(2) £9.3bn 4% 3% Tier 3 5% 20% Tier 2 7% 8% of SCR £4.9bn 53% of SCR 8% 128% of SCR Tier 1 17% 8% PGH tiering of Own Funds PGH SCR 12% 16% Share of SII Own Funds by capital tier £bn %
Slide 53: Appendix 9: Capital sensitivities comparison to peers
Appendix 9: Capital sensitivities comparison to peers 2022 Phoenix Shareholder Capital Coverage Ratio (SCCR) sensitivities relative to Key messages UK life peers(19) % points change in FY22 SCCR • Our comprehensive hedging approach 40% makes us more resilient to the major SCCR: 189% 30% Target Range
Slide 54: Appendix 10: SCCR sensitivities
Appendix 10: PGH Solvency II Shareholder Capital Coverage Ratio sensitivities Unrewarded market risks(20) Demographic risks(20) Rewarded market risks(20) Base position Equities Long-term Long-term Long-term Currency Currency Lapse Longevity Property(†) Credit Credit(††) 20% fall in rates rates infla
Slide 55: Appendix 11: 2022 operating profit drivers
Appendix 11: 2022 operating profit drivers Heritage Growth businesses Expected return £635m Expected return £237m Experience £(115)m Experience £131m New business N/A New business £248m Modelling & Modelling & £56m £99m methodology methodology Assumptions £25m Assumptions £46m Operating profit £601m
Slide 56: Appendix 12: Diversification of illiquid asset portfolio
Appendix 12: Diversification of illiquid asset portfolio as at 31 December 2022 Equity Release Mortgages Infrastructure – project finance debt £3.9bn with AA rating £0.5bn £0.9bn with BBB+ rating £0.7bn • Secured on cash flows from long-term contracts with • Broad regional spread with average LTV of
Slide 57: Appendix 13: Credit quality by sector
Appendix 13: Credit quality by sector for shareholder credit portfolio Average credit rating by sector (FY22 vs FY21) Sector FY22 FY22 AA A BBB ∆ vs FY21 Gilts/Sovereign/Supra/Sub-sovereign £7.4bn 24% Banks £4.3bn 14% Real Estate £4.1bn 13% ERM £3.9bn 13% Utilities £2.3bn 7% Consumer, non-cyclical £
Slide 58: Appendix 14: ReAssure integration synergies
Appendix 14: ReAssure integration synergies ReAssure 2022 Cumulative Previous target Revised target % of revised target Capital synergies (net of costs) £169m £857m £600m £600m 143% Net cost synergies(29) (per annum) £18m £45m £50m £85m 53% Integration costs(30) (net of tax) £18m £46m £50m £220m 21%
Slide 59: Appendix 15: Change in insurance accounting from IFRS 17
Appendix 15: Change in insurance accounting from IFRS 17 Key messages • Under IFRS 4, the Group holds insurance contract AVIF on liabilities that include a prudent margin. A liability is Prudent insurance also recognised for expected future shareholder margins contracts profits arising from our with
Slide 60: Appendix 16: IFRS statement of comprehensive income
Appendix 16: IFRS statement of comprehensive income FY21 FY22 Loss after tax attributable to owners £(709)m £(1,762)m Remeasurements of net defined benefit asset/liability £281m £940m Other £(23)m £26m Tax charge relating to other comprehensive income items £(138)m £(280)m Total comprehensive expens
Slide 61: Appendix 17: ESG ratings and collaborations
Appendix 17: ESG ratings and collaborations Strong ESG ratings Collaborations and Commitments Ratings agency FY21 FY22 Change MSCI A A Sustainalytics 20.0 / low risk 19.8 / low risk CDP B A- Dow Jones Sustainability 80th percentile 83rd percentile Index Tortoise Responsibility100 27th 12th Index 61
Slide 62: Appendix 18: 2023 sustainability targets
Appendix 18: 2023 sustainability targets ESG Theme: Planet ESG Theme: People We want to help people live better longer lives. This means tackling By transitioning our business to net zero and nature positive, we aim the pension savings gap and supporting people to have better to deliver better outco
Slide 63: Appendix 19: Footnotes
Appendix 19: Footnotes 1. 31 December 2022 Solvency II capital position is an estimated position and reflects a dynamic recalculation of transitionals for the Group’s Life companies and the foreseeable Final dividend of £260m. Had the dynamic recalculation not been assumed, the Solvency II Surplus a
Slide 64: Appendix 19: Footnotes cont.
Appendix 19: Footnotes cont. 14. New business strain reflects capital invested into BPA 15. 2021 restated to include the Corporate Trustee Investment Plan product which was transferred to the Workplace business in 2022 16. Source: Broadridge report (Navigator - UK Defined Contribution and Retirement
Slide 65: Appendix 19: Footnotes cont.
Appendix 19: Footnotes cont. 26. Property stress represents an overall average fall in property values of 12% 27. Credit stress varies by rating and term and is equivalent to an average 135bps spread widening. It assumes the impact of a dynamic recalculation of transitionals (subject to PRA approval
Slide 66: Legal disclaimer
Legal disclaimer 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 current plans,
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