Standard Life plc · LSE:SDLF
Standard Life — Phoenix Group Holdings — H1 2017 Earnings Presentation
41 slides from Standard Life's earnings presentation, Aug 24, 2017
Slide 1: Interim results 2017
Interim results 2017 24 August 2017 1
Slide 2: Agenda
Agenda 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: Business update
Business update Clive Bannister 3
Slide 4: Key highlights in HY17
Key highlights in HY17 • Strong cash generation of £360 million in HY17 Strong financial • PGH Solvency II surplus of £1.7 billion, 166% coverage ratio(1) performance • Interim 2017 dividend of 25.1p, a 5% increase on the 2016 Final dividend Integration • Expected capital and cost synergies from acq
Slide 5: Acquisition benefits ahead of plan
Acquisition benefits ahead of plan 1 2016 - 2020 2021+ Better than expected AXA Wealth £0.3bn £0.2bn with £282m by HY17 Cash flows 2016 - 2020 2021+ Abbey Life £0.5bn £1.1bn On track, with £74m by HY17 2 Cost AXA Wealth Increased target of £13m - £15m by FY17 On track synergies Abbey Life £7m
Slide 6: Phoenix is on track to meet cash generation targets
Phoenix is on track to meet cash generation targets Illustrative future cash generation(1) £2.8 billion target £4.5bn £1.0 – £1.2 billion target £360m in HY17 £486m £265m £221m 2016 2017 2018 2019 2020 2021+ Organic cash generation Management actions Illustrative future cash generation (excluding an
Slide 7: Financial review
Financial review Jim McConville 7
Slide 8: Financial highlights
Financial highlights HY17 HY16 FY16 £ Operating companies’ cash generation 360m 147m 486m Cash Holding company cash 691m 921m 570m PGH Solvency II surplus 1.7bn(1) na 1.1bn Group capital Shareholder Capital Coverage Ratio 166%(1) na 139% IFRS Group operating profit 215m 107m 351m AuM Life company as
Slide 9: Cash generation of £360 million in HY17
Cash generation of £360 million in HY17 £m HY17 HY16 FY16 • Cash receipts include £165 Opening cash and cash equivalents 570 706 706 million from AXA and £74 million from transfer of Abbey Life pension scheme Total cash receipts 360 147 486 • Pension scheme Uses of cash contributions incorporate new
Slide 10: Phoenix has issued £835 million of subordinated debt in HY17
Phoenix has issued £835 million of subordinated debt in HY17 which has been used to refinance existing debt Debt actions in 2017 Progress since 2011 Maturity of £900 million RCF extended to 2021 Quantum and type of debt(1) Subordinated Senior Bank debt £3.2bn 19% RCF repaid in August 2017 and cu
Slide 11: Solvency II now managed at Phoenix Group Holdings level
Solvency II now managed at the level of Phoenix Group Holdings and onshoring process is progressing Solvency II structure is now simplified Next steps for onshoring Solvency II capital position HY17 reported at PGH level Group solvency (PGH) Phoenix Group • Partial Internal Model(1) Holdings • Group
Slide 12: Solvency II Shareholder Capital Coverage Ratio of 166%
Solvency II Shareholder Capital Coverage Ratio of 166% PGH Shareholder Capital position(1) • Shareholder Capital Coverage Ratio calculation excludes Own 166% 139% Funds and SCR of unsupported with-profit funds and PGL pension scheme(2) • AXA Wealth businesses incorporated into Phoenix’s Surplus Inte
Slide 13: Subordinated debt issuance has increased PGH Solvency II surplus
Subordinated debt issuance has increased PGH Solvency II surplus Change in PGH Solvency II surplus • Tier 3 tap issue and Tier 2 bond issue increased PGH surplus £0.1bn from pro forma FY16 position £0.4bn £0.2bn £0.1bn • Additional benefit from £0.1bn management actions and £0.2bn £0.1bn assumption
Slide 14: Solvency II surplus and cash generation resilient to market movements
Solvency II surplus and long term cash generation remains resilient to market movements PGH Solvency II surplus sensitivities(1) Cash generation sensitivities(1) HY17 Solvency II surplus £1.7bn 2016 - 2020 target £2.8bn Following a 20% fall in equity Following a 20% fall in equity markets £1.7bn mar
Slide 15: IFRS operating profit of £215 million in HY17
IFRS operating profit of £215 million in HY17 £m HY17 HY16 FY16 • Phoenix Life operating profits Phoenix Life 226 108 357 enhanced by assumption changes, with positive Group costs (11) (1) (6) longevity changes partly offset by impacts of persistency on Total operating profit 215 107 351 certain gua
Slide 16: The Group's access to cash supports its acquisition strategy
The Group’s access to cash supports its acquisition strategy Illustrative uses of cash from HY17 to 2020 (£bn) £0.1bn £0.2bn £0.3bn £0.2bn £2.0bn £0.7bn £1.2bn £0.7bn HY17 holding Cash generation Operating Pension Debt interest over Debt repayment Dividends over Illustrative holding company cash ove
Slide 17: Beyond 2020, expected £4.5 billion of cash flows to emerge
Beyond 2020, there is an expected £4.5 billion of cash flows to emerge, before management actions Illustrative uses of cash from 2021 onwards £0.1bn £1.6bn £4.5bn £4.1bn £1.2bn Illustrative holding company 2021+ cash generation Payment of outstanding Outstanding shareholder Illustrative holding comp
Slide 18: Phoenix Life
Phoenix Life Andy Moss 18
Slide 19: Key Phoenix Life achievements in 2017
Key Phoenix Life achievements in 2017 1 Management actions have added £317 million to Solvency II surplus in HY17 Supports Management cash flow actions Investment in illiquid asset classes, with £600 delivery million invested in ERM portfolio acquired in July 2 Strong progress on AXA and Abbey
Slide 20: Management actions have added £317 million to Solvency II surplus
Management actions have added £317 million to Solvency II surplus Increase overall cash flows Accelerate cash flows Increase Solvency II Own Funds Reduce Solvency II SCR • Investment in illiquid assets, including • Approval to include AXA business in commercial real estate and local authority Phoeni
Slide 21: AXA Wealth: Integration benefits are ahead of plan
AXA Wealth: Integration benefits are ahead of plan Key achievements to date New boards, governance and risk arrangements TSAs operating, with all BAU deliverables achieved People & Process TOM design work Internal Model application completed and approval completed achieved Outsourcers Migratio
Slide 22: Abbey Life: Simpler integration due to aligned operating model
Abbey Life: Simpler integration due to aligned operating model Key achievements to date New Board and Phoenix management team put in place Phoenix risk management framework rolled out People & Enhanced oversight of outsourcer put in place – redefinition of roles and responsibilities Process TO
Slide 23: Management of customer and regulatory issues
Management of customer and regulatory issues • Phoenix’s customer model and risk management framework are in place with oversight by established governance arrangements Abbey Life • Actions resulting from the Legacy Review are still ongoing and we continue to enforcement work with the FCA in support
Slide 24: Continued strong service for customers
Continued strong service for customers Customer actions Customer service metrics • Increasing use of Digital to improve Full year engagement, reduce conduct risk and HY17 target(1) improve efficiency Speed of Pension Transfer 11.64 days <12 days • Improved non-GAR annuity shopping pay-outs (ORIGO) a
Slide 25: Outlook and Q&A
Outlook and Q&A Clive Bannister 25
Slide 26: Industry changes make divesting closed funds more attractive for vendors
Industry changes make divesting closed funds more attractive for vendors The unbundled model of the future – deployed by Phoenix today Benefits to vendors of divesting closed funds Investment • Some major life companies have repositioned themselves as ‘capital-lite’ asset managers, Investment mana
Slide 27: Wide range of further acquisition opportunities for Phoenix
There remains a wide range of further acquisition opportunities for Phoenix Key drivers for consolidation Phoenix strengths Market size is over £300bn Trapped shareholder capital Scale offers capital efficiencies Market opportunities by owner(1) within legacy books through diversification Bank owned
Slide 28: The annuity market offers incremental assets
The annuity market offers incremental assets to Phoenix’s existing £13 billion portfolio Vesting annuities Back books Bulk annuity market • Phoenix writes annuities for • Back books of annuities may • Projected demand of £350 existing policyholders be sold as part of a more billion over next 10 year
Slide 29: Phoenix has a clear set of strategic priorities
Phoenix has a clear set of strategic priorities • Long-term cash generation target of £2.8 billion between 2016 - Cash generation 2020 delivery • Target of £1.0 – £1.2 billion of cash between 2017 - 2018 • AXA Wealth synergies of £13-15 million to be achieved by end Integration of 2017 acquisitions
Slide 30: Q&A
Q&A 30
Slide 31: Appendices
Appendices I Change in Phoenix Life Free Surplus VI Phoenix Life operating profit drivers II Solvency II surplus and SCR coverage VII Asset mix of life companies ratio VIII Total debt exposure by country III Breakdown of SCR and Own Funds IV Current corporate structure IX Credit rating analysis of d
Slide 32: Appendix I: Change in Phoenix Life Free Surplus
Appendix I: Change in Phoenix Life Free Surplus Change in Phoenix Life Free Surplus in HY17 (£bn) 0.0 0.1 0.4 0.3 0.1 1.2 0.8 0.7 Opening Free Surplus Surplus emerging & Management actions Assumption, Economic & other Free Surplus before Cash remittances Closing Free Surplus as at FY16 (pro release
Slide 33: Appendix II: Solvency II surplus and SCR coverage ratio
Appendix II: Solvency II surplus and SCR coverage ratio Solvency II Coverage Ratio Shareholder Capital Coverage Ratio 137% 123% 166% 139% Surplus Surplus Surplus £1.7bn Surplus £1.1bn £1.7bn £1.1bn £6.5bn £4.4bn £6.0bn £4.0bn £4.8bn £4.9bn £2.7bn £2.9bn HY17 (pro forma) FY16 (pro forma) HY17 (pro fo
Slide 34: Appendix III: Breakdown of SCR and Own Funds
Appendix III: Breakdown of SCR and Own Funds SCR by risk type (HY17) Own Funds by Capital Tier (HY17) £6.5bn Tier 3 £0.6bn Tier 2 £1.0bn 9% 14% 31% 7% 4% Tier 1 £4.9bn £4.8bn 8% 15% 12% PGH tiering of Own Funds PGH SCR Longevity Credit Persistency Operational Swap spreads Interest rate Other market
Slide 35: Appendix IV: Current corporate structure
Appendix IV: Current corporate structure £900m (undrawn) Unsecured £428m Tier 2 notes (2025) Revolving Credit Facility Phoenix Group Holdings £450m Tier 3 notes (2022) £122m senior notes (2021) US$500m Tier 2 notes (2027) Intermediate holdcos Phoenix Life Holdings (PLHL) Abbey Life Pearl Group Assur
Slide 36: Appendix V: Outline of current debt structure
Appendix V: Outline of current debt structure Structure of £1,585 million of outstanding debt as at 8 August 2017 Instrument Issuer/borrower Maturity Face value Bank Debt Unsecured Revolving Credit Facility (L+110bps)(1) Phoenix Group Holdings June 2021 - (2) Unsecured Senior Bond Phoenix Group Hold
Slide 37: Appendix VI: Phoenix Life operating profit drivers
Appendix VI: Phoenix Life operating profit drivers HY17 HY16 Reported Closing Expected Reported Closing Expected IFRS Op liability/ return IFRS Op liability/ return Profit equity(2) margin(1) Profit equity(2) margin(1) Fund type How profits are generated £m £bn bps £m £bn bps Our share of bonuses pa
Slide 38: Appendix VII: Asset mix of life companies
Appendix VII: Asset mix of life companies Total shareholder, Policyholder funds(3) non-profit and Non-supported At 30 June 2017 supported with- with-profits Unit Total Total £m unless otherwise stated profits(2) % funds linked Policyholder assets(1) Cash deposits 3,727 19 3,955 1,755 5,710 9,437 Deb
Slide 39: Appendix VIII: Total debt exposure by country
Appendix VIII: Total debt exposure by country Other Corporate: Government Financial Corporate: Asset backed Total debt At 30 June 2017 and Supranational Institutions Other securities securities Total £m Shareholder Policyholder Shareholder Policyholder Shareholder Policyholder Shareholder Policyhold
Slide 40: Appendix IX: Credit rating analysis of debt portfolio
Appendix IX: Credit rating analysis of debt portfolio Policyholder funds Total shareholder, Non- non-profit and supported At 30 June 2017 supported with- with-profits Total £m profits funds Unit linked Policyholder Total assets AAA 2,270 1,570 589 2,159 4,429 AA 5,409 7,507 1,322 8,829 14,238 A 3,83
Slide 41: 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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