Slide 1: Full Year Results 2013
Full Year Results 2013 26 March 2014
Slide 2: Agenda
Agenda Introduction Howard Davies | Chairman Business update Clive Bannister | Group Chief Executive Financial review Jim McConville | Group Finance Director Outlook Clive Bannister Q&A Howard Davies 2
Slide 3: Introduction
Introduction Howard Davies
Slide 4: Business update
Business update Clive Bannister
Slide 5: An outstanding year of progress for Phoenix
An outstanding year of progress for Phoenix P Achieved capital raising and debt re- terming P 2013 final dividend of 26.7p, in line with 2013 interim dividend P Delivered cash generation above top end of target range P Completed Part VII transfer of annuity liabilities and assets £1.9bn of net third
Slide 6: Target beating financial performance in 2013
Target beating financial performance in 2013 Delivery Target 2011 – 2013: 2011 – 2016: Achieved 2/3 of long term cash generation £2.3 billion £3.5 billion target half way through target period Cash generation 2013: 2013: Delivered cash generation in excess of 2013 £817m £650m to 750m target rang
Slide 7: Divestment of Ignis supports delivery of our long term strategy of closed life fund consolidation
Divestment of Ignis supports delivery of our long term strategy of closed life fund consolidation Supporting the delivery of our long term Divestment of Ignis allows us to… strategy… Increase MCEV by £237 million Consider M&A opportunities Use sale proceeds to fund £250 million • Deleveraging
Slide 8: Transaction highlights
Transaction highlights Consideration £390 million in cash consideration Long term strategic asset management alliance with Standard Life Investments, a top class manager of the assets of the Group Life Company assets allowing policyholders and shareholders to benefit from future investment outpe
Slide 9: Divestment of Ignis and subsequent debt prepayment deliver compelling financial benefits
Divestment of Ignis and subsequent debt prepayment deliver compelling financial benefits MCEV increased Balance sheet strengthened Capital protected MCEV increased by £237 Gearing reduced by 5 IGD neutral million to £2.6 billion percentage points to 39% PLHL ICA surplus reduced MCEV per sh
Slide 10: Financial targets for 2014 and beyond
Financial targets for 2014 and beyond • New cumulative target of £2.8bn between 2014 and 2019, Cash including proceeds from the divestment of Ignis generation • 2014 target of £500m to £550m. Ignis sale proceeds are in addition to this target Incremental • New cumulative target of £300m incremental
Slide 11: Four proven areas of management actions
Four proven areas of management actions will continue to accelerate cash and generate incremental value Cash RESTRUCTURING OPERATIONAL acceleration MANAGEMENT Incremental MCEV Improved group solvency RISK MANAGEMENT OUTSOURCING Increased IFRS operating profits 11
Slide 12: Achieved further operational progress and continued to enhance our customer experience
Achieved further operational progress and continued to enhance our customer experience Completed Part VII transfer of £5 billion of annuity liabilities and related assets to Guardian Progressed Actuarial Systems Transformation project, with new model run in parallel with Further existing models
Slide 13: Financial review
Financial review Jim McConville
Slide 14: Financial highlights
Financial highlights FY13 FY13 FY12 £ proforma(1) Operating companies cash generation n/a 817m 690m Cash Holding company cash 1,129m(2) 995m 1,066m MCEV Group MCEV 2.6bn 2.4bn 2.3bn(3) Gearing Gearing(4) 39% 44% 55% IFRS Group operating profit(5) n/a 439m 410m AUM Group assets under management(6) n/
Slide 15: Generated £0.8bn of free surplus in 2013
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Generated £0.8bn of free surplus in 2013 £m FY13 FY12 • £371 million of movements in Opening Phoenix Life free surplus 514 93 capital requirements and policy in 2013 reflect release of capital Emergence of free surplus through run-off and the benef
Slide 16: Achieved £817m of cash generation, above top end of target range
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Achieved £817m of cash generation, above top end of target range £m FY13 FY12 • £332m of cash generated through Opening cash and cash equivalents 1,066 837 management actions Cash receipts • Pension scheme contributions reflect new Pearl and PGL Sc
Slide 17: £1.1bn of cash generated through management actions since 2010
Mgt Cash MCEV Gearing IFRS Capital Dividend actions £1.1bn of cash generated through management actions since 2010 £1.1bn of cash generated through FY13 management actions management actions since 2010 £810m £817m £734m Type Value £690m £332m Annuity transfer Restructuring £252m £242m £359m £209m Ri
Slide 18: £502 million of incremental MCEV achieved in 3 years
Mgt Cash MCEV Gearing IFRS Capital Dividend actions £502 million of incremental MCEV achieved in 3 years vs. 4 year £400 million target Incremental MCEV FY13 management actions Type Value £502m Balance sheet reviews Operational £57m £400m FY13 £170m Actuarial Systems Transformation modelling Operati
Slide 19: Embedded value increased to £10.58 per share at FY13
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Embedded value increased to £10.58 per share at FY13, divestment of Ignis further enhances value per share to £11.63 Group MCEV(1) (£m) £11.63 per share 170 48 116 £10.39 £10.58 263 237 per share 222 per share 211 16 2,615 2,333 2,378 2,122 MCEV at
Slide 20: Gearing reduced by 11 percentage points to 44%
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Gearing reduced by 11 percentage points since FY13 to 44%, divestment of Ignis reduces gearing to 39% Gearing trajectory 63% 58% 57% 55% 44% 39% 40% Divestment of Ignis and debt prepayment accelerates achievement of gearing target FY09 FY10 FY11 FY
Slide 21: Delivered strong Group IFRS operating profit of £439m
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Delivered strong Group IFRS operating profit of £439m £m FY13 FY12(1) • Phoenix Life recurring operating Phoenix Life 414 399 profits enhanced by £98m of management actions including Ignis 49 43 modelling improvements and Group costs (24) (13) poli
Slide 22: Ignis operating profit growth driven by strong investment performance
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Ignis operating profit growth driven by strong investment performance and accelerating high quality TPA inflows Ignis operating profits and third party assets Third party net inflows FY12 - £1.6bn FY13 - £1.9bn(1) £49m £46m £46m £43m 0.5bn 0.4bn 1.
Slide 23: Robust IGD surplus of £1.2bn
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Robust IGD surplus of £1.2bn IGD and sensitivities at FY13 (£bn) £1.4bn 0.2 0.3 0.2 0.2 £1.2bn 0.0 £1.2bn £1.2bn 0.1 0.6 0.4 0.5 0.5 IGD headroom IGD capital policy 0.8 0.8 0.7 0.7 IGD surplus Capital Proforma Capital Annuity Debt Shareholder IGD s
Slide 24: £1.2 billion PLHL ICA surplus
Mgt Cash MCEV Gearing IFRS Capital Dividend actions £1.2 billion PLHL ICA surplus PLHL ICA and sensitivities at FY13 (£bn) 0.3 0.4 0.1 £1.2bn £1bn 0.6 0.1 £1.1bn PLHL ICA 0.2 £0.8bn headroom PLHL 1.1 1.0 capital 0.9 policy 0.7 0.1 0.1 0.1 0.1 PLHL ICA Capital Proforma Capital Annuity Debt Shareholde
Slide 25: Final dividend per share of 26.7 pence
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Final dividend per share of 26.7 pence Dividend per share • Dividend in line with 2012 final 53.4p and 2013 interim dividends 47.7p • Sustainable dividend policy, 42p 42p reflecting run-off nature of 26.7p business model 26.7p Interim 21p 21p Final
Slide 26: Strong cash generation expected to continue for many years
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Strong cash generation expected to continue for many years Illustrative annual Holding Company cash generation(1) (£m) 2011 – 2013 £2.3bn FY10 2014 – 2019 £2.8 billion target Approx. £470m p.a. including management actions 810 817 390 3.6bn+ 359 69
Slide 27: Future dividends met by strong and predictable cash generation
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Future dividends met by strong and predictable cash generation Illustrative annual Holding Company cashflow 2014 to 2019 (£m) £2.8bn 6 year target £995m £130m £160m £470m £55m £90m £35m Illustrative Illustrative Illustrative debt Ilustrative debt I
Slide 28: Financial targets not expected to be materially impacted by Budget proposals on annuities
Mgt Cash MCEV Gearing IFRS Capital Dividend actions Financial targets not expected to be materially impacted by Budget proposals on annuities £1.25bn of FY13 pensions vesting Overview • £791m of annuities written in 2013 • £505m with guaranteed annuity rates (GARs) Tax free cash • £286m without GARs
Slide 29: Outlook
Outlook Clive Bannister
Slide 30: Financial targets for 2014 and beyond
Financial targets for 2014 and beyond • New cumulative target of £2.8bn between 2014 and 2019, Cash including proceeds from the divestment of Ignis generation • 2014 target of £500m to £550m. Ignis sale proceeds are in addition to this target Incremental • New cumulative target of £300m incremental
Slide 31: Clear strategy to deliver stakeholder value
Clear strategy to deliver stakeholder value as the UK’s largest specialist closed life fund consolidator Growth through value accretive M&A A saver-friendly Stable and predictable long-term cash solution for the safe, generation Incremental value through innovative and management actions profi
Slide 32: Q&A
Q&A
Slide 33: Appendices
Appendices I Evolution of cash generation targets VIII Capital management framework II Management actions IX Asset mix of life companies III Cash sensitivities X Total debt exposure by country IV Phoenix Life IFRS operating profit drivers XI MCEV sensitivities V Ignis IFRS operating profit drivers X
Slide 34: Appendix I: Evolution of cash generation targets
Appendix I: Evolution of cash generation targets 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total 2010 £2.7bn prospectus (published £2.7bn 2010- June 2010) 2014 FY10 £3.2bn results £750 - (published £734m £3.2bn 2011- £850m 2016 March 2011) FY11 £3.2bn results £500 - (published £810m £3.2bn 2
Slide 35: Appendix II: Management actions
Appendix II: Management actions Cash acceleration FY13 FY12 FY11 FY10 Restructuring £267m £24m £173m £45m Risk management £51m £43m £104m £109m Operational management £14m £142m £82m £88m Total £332m £209m £359m £242m Incremental EV FY13 FY12 FY11 FY10 Restructuring £28m £20m £32m £262m Risk managem
Slide 36: Appendix III: Cash sensitivities
Appendix III: Cash sensitivities Cash sensitivities(1) 1 Jan 2014-31 Dec 2019 Base case – 6 year target £2.8bn 20% fall in equity markets £2.7bn 15% fall in property values £2.7bn Following 75bps increase in nominal yields £2.8bn Following 75bps decrease in nominal yields £2.8bn Credit spreads widen
Slide 37: Appendix IV: Phoenix Life IFRS operating profit drivers
Appendix IV: Phoenix Life IFRS operating profit drivers FY13 FY12 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 profit
Slide 38: Appendix V: Ignis IFRS operating profit drivers
Appendix V: Ignis IFRS operating profit drivers FY13 FY12 IFRS Closing IFRS Closing results AUM Margin(1) results AUM Margin(1) £m £bn bps £m £bn bps Third party(2) 45 15.0 33 32 11.9 33 Life funds(3) 102 50.9 19 108 54.1 18 Other 3 n/a n/a 3 n/a n/a Total revenue/Ignis AUM 150 65.9(4) 143 66.0bn(4)
Slide 39: Appendix VI: Ignis 3rd party new business flows
Appendix VI: Ignis 3rd party new business flows £m FY13 FY12 Gross flows(1) UK wholesale 1,007 577 Institutional 8 149 European 1,363 585 Global 1 0 Liquidity funds (net) 420 1,095 Total 2,799 2,406 Net flows(1) UK wholesale 607 58 Institutional (107) 40 European 972 384 Global 1 0 Total excluding l
Slide 40: Appendix VII: Group assets under management
Appendix VII: Group assets under management Group AUM(1) (£bn) £1.2bn £4.4bn £1.9bn 3.0bn £68.6bn £1.4bn £68.6bn £0.3bn £11.9bn £15.0bn £56.7bn £53.6bn AuM at Net Guardian Net Life Return of derivative Net new third Market Other (2) AuM at 31 Dec 12 Assurance Assets Company run off collateral, party
Slide 41: Appendix VIII: Recap of Phoenix Capital Management Framework
Appendix VIII: Recap of Phoenix Capital Management Framework Phoenix Group Holdings PLHL ICA calculation IGD • Pillar 2 assessment of capital resources and • Pillar 1 group capital calculation risks outside the life companies UK Holding • Includes net assets of holding companies and • Aggregated vie
Slide 42: Appendix IX: Asset mix of life companies
Appendix IX: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 31 Dec 2013 supported with- with-profits Unit Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 2,288 16 6,221 994 7,215 9,503 Debt se
Slide 43: Appendix X: Total debt exposure by country
Appendix X: Total debt exposure by country Corporate: Sovereign Financial Corporate: Asset backed Total debt At 31 Dec 2013 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Sharehol
Slide 44: Appendix XI: MCEV sensitivities
Appendix XI: MCEV sensitivities £m FY13 Base at 31 December 2013 3,059 1% decrease in risk free rates 11 1% increase in risk free rates 7 10% decrease in equity market values (41) 10% increase in equity market values 47 10% decrease in property market values (46) 10% increase in property market valu
Slide 45: Appendix XII: Maturity profile of business
Appendix XII: 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 2013 997 576 344 212 172 2,301 31 December 2012 1,058 596 369 231 196 2,450 31 December 2011 1,135 683 455 291 282 2,846 31 December 2010 1,147
Slide 46: Appendix XIII: Summary of bank facilities
Appendix XIII: Summary of bank facilities Balance at Amortisation FY13 £m Coupon FY13 2014 2015 2016 2017 2018 2019 Total Pearl facility Pearl bank facility mandatory L+125bps 350 25 25 300 - - - 350 amortisation Subordinated Lender Loan L+100bps 81 - - - - - - 81(1) Notes Total Pearl 431 25 25 300
Slide 47: Appendix XIV: Overview of dividend payment arrangements
Appendix XIV: Overview of dividend payment arrangements Group dividend formula • Dividend capacity of £125m for dividends declared in respect of 2013, with capacity to increase by £10m p.a. thereafter • Additional dividend payments are subject to making debt repayments in excess of the target amorti
Slide 48: 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