Standard Life Plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — Merger or Acquisition (December 2019)
31 slides from Standard Life's merger presentation, Dec 6, 2019
Slide 1: Proposed acquisition of ReAssure Group plc
Proposed acquisition of ReAssure Group plc 6 December 2019 Classification: Confidential 1
Slide 2: Agenda
Agenda Transaction overview Clive Bannister | Group Chief Executive Financial benefits of transaction Jim McConville | Group Finance Director Conclusion and Q&A Clive Bannister | Group Chief Executive 2
Slide 3: Transaction overview
Transaction overview Clive Bannister 3
Slide 4: The transaction confirms Phoenix as Europe's largest life and pensions consolidator
The transaction confirms Phoenix as Europe’s largest life and pensions consolidator Strategically compelling Meets all acquisition criteria • Delivers significant scale to Value • Price to own funds(1) ratio of 0.91x Heritage business in the UK accretive • Cost and capital synergies of £800 millio
Slide 5: Phoenix is acquiring 100% of ReAssure Group plc
Phoenix is acquiring 100% of ReAssure Group plc (“ReAssure”) Assets under administration(5) • Consolidator of Heritage life businesses with 23 £84bn transactions By business £10bn • Circa 2,900 employees(4) with principal operations in £44bn £30bn Telford and Hitchin • Policy administration mainly i
Slide 6: Enhances Phoenix's key attributes of Cash, Resilience and Growth
Enhances Phoenix’s key attributes of Cash, Resilience and Growth Cash Resilience Growth Total cash generation (2019+) Solvency II surplus Assets under administration +58% +40% +34% (8) £19.0bn £4.2bn £329bn £3.0bn (7) £245bn £12.0bn Phoenix Combined Group Phoenix Q319 Combined Group Phoenix HY19 Com
Slide 7: Incremental cash generation supports 3% dividend increase
Incremental cash generation supports 3% dividend increase Dividend per share Annual dividend +3% +43% 48.2p £475m £482m 47.5p 46.8p £338m 2019e 2020e 2021e 2019e 2020e 2021e • Proposed 3% dividend per share increase effective from the 2020 final dividend • Increase of c. 40% in annualised dividend f
Slide 8: Aligned approach to integration to ensure enterprise stability
We will take an aligned approach to integration to ensure enterprise stability 2019 2020 2021 2022 2023+ Assumptions Group Standard functions • Transition progressing to plan Life and on track to meet £1.2 Assurance Finance and Actuarial billion cost and capital synergy - targets standalone Customer
Slide 9: Financial benefits of transaction
Financial benefits of transaction Jim McConville 9
Slide 10: Acquisition delivers Cash and Resilience with all metrics within target range
Acquisition delivers Cash and Resilience with all metrics within target range Impact of Phoenix Pro-forma Key metrics acquisition 2019-2023 target £3.8bn + £2.7bn(2) £6.5bn Cash generation Total cash generation £12.0bn + £7.0bn(2) £19.0bn Q319 Group Solvency II surplus £3.0bn + £1.2bn £4.2bn Q319 Sh
Slide 11: Significant increase in total future in-force cash flows to £19 billion
Significant increase in total future in-force cash flows to £19 billion Illustrative future cash generation from in-force business Cash generation (2) Combined Combined Group £19.0 billion guidance over life of business Phoenix ReAssure guidance Group £12.5bn Cash generation £3.8bn +£2.7bn £6.5bn (2
Slide 12: Expected cost and capital synergies from the transaction are substantial
Expected cost and capital synergies from the transaction are substantial Indicative net value of synergies Sources of synergies £(50)m £800m • Cost synergies of £40 million p.a. (post tax): • Combination of group functions and integration of finance and actuarial functions £450m • Does not include s
Slide 13: Attractive transaction pricing with price to own funds ratio of 0.91x
Attractive transaction pricing with price to own funds ratio of 0.91x Price to own funds ratio ReAssure own funds(1) 0.91x (1) £3.5bn £3.2bn • £3.2 billion consideration is 0.91x own funds for ReAssure as at 30 September 2019 • ReAssure own funds are defined as: Price Own funds • Shareholder own fun
Slide 14: £3.5 billion ReAssure pro-forma own funds reflects positive variances during 2019
£3.5 billion ReAssure pro-forma own funds reflects positive variances during 2019 ReAssure pro-forma shareholder own funds (£bn)(1) • Model and assumption changes include a £0.1 billion release from a change in annuitant 0.2 (0.2) 3.6 3.5 mortality base table (0.1) 0.3 0.3 • Market movements reflect
Slide 15: Efficient financing structure that utilises debt capacity
Efficient financing structure that utilises debt capacity £3.2 billion total consideration £2.0 billion equity £1.2 billion cash • Equity issuance to Swiss Re • Cash consideration to be funded Group (“Swiss Re”), part of through issuance of debt plus which will be transferred to own resources MS&AD
Slide 16: Clear governance structure with support from strategic shareholders
Clear governance structure with support from strategic shareholders Expected shareholder composition post completion Governance • Swiss Re and MS&AD will be subject to 12 month lock-up agreements and 2 year Swiss Re standstills once holding greater than 10% 13% - 17% • Standard Life Aberdeen Strateg
Slide 17: Our outstanding debt will reduce over the coming years
Our outstanding debt will reduce over the coming years Illustrative Combined Group outstanding debt • £1.2 billion underwritten hybrid facility reflected in pro-forma £4.7bn position £4.3bn £4.0bn • Debt issuance plans assume £1.2bn £0.8bn £3.5bn £800 million hybrid and £400 £0.8bn £3.3bn million RC
Slide 18: Enhanced balance sheet strength with resilience maintained
Enhanced balance sheet strength with resilience maintained Solvency II surplus(7,8,9) • Combined group Solvency Capital Coverage Ratio comfortably within target range of 140% - 180% 156% 148% • Pro-forma solvency reflects £1.2 billion +£1.2bn underwritten hybrid facility £4.2bn • Pro-forma Q3 2019 R
Slide 19: Cash generation builds holding company cash and supports dividend
Cash generation builds holding company cash and supports dividend Combined Group: Illustrative uses of cash from 2019 – 2023 • Uses of cash reflect £(0.6)bn those of enlarged Group £(1.0)bn • Debt repayments assume full repayment of debt on the earlier of first £(2.3)bn call date or maturity £6.5bn
Slide 20: Beyond 2023, we will deliver a further £12.5 billion of cash generation
Beyond 2023, we will deliver a further £12.5 billion of cash generation Combined Group: Illustrative uses of cash from 2023 onward • 2024+ cash generation excludes new Open business, BPA, M&A and £(3.5)bn management actions £10.7bn • Following repayment of remaining outstanding £12.5bn shareholder b
Slide 21: Conclusion
Conclusion Clive Bannister 21
Slide 22: The acquisition of ReAssure is strategically compelling
The acquisition of ReAssure is strategically compelling Acquisition is value accretive with significant potential for cost and capital synergies Incremental long-term cash generation supports 3% increase in dividend Resilience of the Group maintained with solvency and leverage ratios within target r
Slide 23: A Sustainable Phoenix
Phoenix will deliver enhanced Cash, Resilience and Growth CASH RESILIENCE GROWTH £19 billion of future £4.2 billion SII surplus; £84 billion(5) of cash generation from in-force business 148% shareholder ratio(8,9) additional Heritage assets Incremental cash Hedging provides Growth through new
Slide 24: Q&A
Q&A 24
Slide 25: Appendices
Appendices I Q3 2019 Solvency II Own Funds and SCR (Shareholder Capital basis) II Q3 2019 Solvency II Own Funds and SCR (Regulatory Capital basis) III Outline of pro-forma debt structure IV Footnotes 25
Slide 26: Q3 2019 Solvency II Own Funds and SCR (Shareholder Capital basis)
I. Q3 2019 Solvency II Own Funds and SCR (Shareholder Capital basis) Phoenix(7,9) ReAssure(1,9) Pro-forma(8,9) 156% 141% 148% £8.4bn £4.5bn £13.0bn Surplus Surplus Surplus £1.3bn £4.2bn £3.0bn £3.2bn £5.4bn £8.8bn Own funds SCR Own funds SCR Own funds SCR • Calculated by aggregating the output of •
Slide 27: Q3 2019 Solvency II Own Funds and SCR (Regulatory Capital basis)
II. Q3 2019 Solvency II Own Funds and SCR (Regulatory Capital basis) Phoenix(7) ReAssure(1) Pro-forma(8) 136% 133% 134% £11.4bn £5.2bn £16.6bn Surplus Surplus Surplus £3.0bn £1.3bn £4.2bn £8.4bn £3.9bn £12.4bn Own funds SCR Own funds SCR Own funds SCR Q3 2019 (£bn) Q3 2019 (£bn) Q3 2019 (£bn) PGH So
Slide 28: Outline of pro-forma debt maturity profile
III. Outline of pro-forma debt maturity profile £445m £500m £450m £428m £385m £250m £250m £122m £500m £200m 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Phoenix Unsecured Senior bond Phoenix Restricted Tier 1 bond ReAssure Tier 3 bond Phoenix Tier 3 bond ReAssure Tier 2 bond Phoenix Tier 2
Slide 29: Footnotes
IV. Footnotes (1) ReAssure’s Solvency II Own Funds as at 30 September 2019 have been derived from ReAssure Solvency II figures and have been adjusted to be presented on a shareholder basis, excluding debt and assuming a dynamic recalculation of transitionals (subject to PRA approval), and including
Slide 30: Disclaimer and other information
Disclaimer and other information NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REG
Slide 31: Disclaimer and other information (cont'd)
Disclaimer and other information (cont’d) Nothing in this presentation is intended as a profit forecast or profit estimate and no statement in this presentation should be interpreted to mean that the financial performance of the Company for the current or future financial years would necessarily mat
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