CASH RESILIENCE GROWTH Full Year 2019 Results 9 March 2020 1
Nicholas Lyons Chairman 2
Phoenix’s growth journey continues 2010 2013 2015 2018 Premium Listing on Debt re-terming Investment grade Acquisition of Standard Life Assurance Limited (“ SLAL ”) London Stock and £250m credit rating from Exchange equity raising Fitch Ratings 2014 2011 2016 2019 Acquisition of AXA Wealth’s £5bn annuity liability Divestment of Ignis Asset Announced acquisition transfer to Guardian Management pension and protection of ReAssure Group plc Assurance businesses and Abbey Life Market capitalisation (£bn) Annual dividend (£m) 6.0 500 5.0 400 4.0 300 3.0 200 2.0 100 1.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3
Committing to a sustainable future FOCUS ON FOCUS ON FOCUS ON OUR CUSTOMERS OUR CUSTOMERS OUR CUSTOMERS 1 2 3 4 DELIVER FOR FOSTER REDUCE OUR BE A GOOD OUR CUSTOMERS RESPONSIBLE ENVIRONMENTAL CORPORATE CITIZEN INVESTMENT IMPACT WORK ETHICALLY WITH OUR SUPPLY CHAIN GOVERNANCE AND GOOD BUSINESS PRACTICE 4
Agenda Nicholas Lyons 1 Welcome Chairman Clive Bannister 2 Introduction Group Chief Executive Jim McConville Group Finance Director and Group Director, Scotland 3 2019 strategic priorities Rakesh Thakrar Deputy Group Finance Director Andy Briggs 4 Outlook Group Chief Executive Designate Nicholas Lyons 5 Concluding remarks and Q&A Chairman 5
Clive Bannister Group Chief Executive 6
Strong results across all Key Financial Performance Indicators PGH SHAREHOLDER CASH PGH SOLVENCY II CAPITAL SURPLUS (1) GENERATION COVERAGE RATIO (1)(2) £707m £3.1bn 161% DIVIDEND PER IFRS OPERATING SHARE PROFIT 46.8p £810m See Appendix XIX for footnotes 7
Phoenix delivered against all 2019 strategic priorities • Strong cash generation of £707 million, exceeding upper end of target range Financial targets • Maintained strong solvency position and investment grade rating • Strong progress across all phases and on track to deliver £1.2 billion Standard Life Assurance synergy targets transition • Enlarged partnership with Tata Consultancy Services (“ TCS ”) announced • Exceeded all customer service metric targets Customer outcomes • Expanded digital proposition and progressed a range of customer initiatives • £240 million incremental long-term cash generation from Open businesses New business • £235 million incremental long-term cash generation from Bulk Purchase Annuities • £3.2 billion acquisition of ReAssure Group plc announced Growth • 2019 new business brings sustainability to cash generation 8
Unchanged long-term cash generation of £12 billion demonstrates sustainability Illustrative future cash generation from in-force business Cash generation roll forward £12.7bn £12.0 billion guidance over life of business £0.2bn £12.0bn £0.4bn £8.8bn £3.2 billion 4-year target £8.8bn 2024+ £8.2bn £800 - 900m 1yr target £0.1bn £707m £3.2bn 2020 - 2023 £3.8bn 2019 actual £0.7bn 2019 2020 2021 2022 2023 2024+ As at FY18 New Other As at FY19 business Actual cash generation Net cash generation Illustrative future cash generation By 2023 2024+ Charts not to scale 9
Acquisition of ReAssure Group plc is strategically compelling, and will deliver £7 billion of long-term cash generation ReAssure Group plc (“ ReAssure ”) Meets all acquisition criteria • £7 billion incremental cash generation (3) • Acquiring 100% of ReAssure, a consolidator of Value • Consideration represents 91% of own funds (6) Heritage life businesses accretive and £800 million of cost and capital synergies • anticipated Acquisition of Old Mutual Wealth Life Assurance Limited (“ OMW ”) completed on 31 December 2019 • Part VII transfer of the L&G mature savings • 3% dividend increase Supports the business expected to complete in H1 2020 dividend policy • Enhanced dividend sustainability Cash AUA (4) Policies (5) generation (3) Maintains • Efficient funding structure ensures leverage investment grade ratio remains within target range over the medium term rating £7 billion £84 billion 4.1 million See Appendix XIX for footnotes 10
We expect the ReAssure acquisition to complete mid-2020 6 Dec Transaction announced • Fitch rating outlook revised from “stable” to “positive” 2019 • 31 Dec £200 million of additional synergies reduces price to own ReAssure completes OMW acquisition 2019 funds ratio of ReAssure acquisition by 4% to 87% 22 Jan $750 million RT1 bond issued • Reduces pro-forma Fitch leverage ratio by 4% to 26% 2020 13 Feb • Shareholder approval 99.99% votes in favour 2020 End Mar Change in control application • Pre-application already submitted 2020 Jul • Target completion date Subject to regulatory approvals 2020 11
Phoenix has a strong track record of delivering cost synergies Inherited £318m (7) £32m £26m £336m cost base 13% 15% 27% 31% +7% Cost £17m £10m £75m £40m 22% synergies total +11% +22% 38% 53% total total Residual £15m £16m £261m £278m cost base See Appendix XIX for footnotes Target at announcement Actual Revised target 12
ReAssure transaction supports 3% dividend increase and delivers 50% uplift in dividend over 10 years Dividend per share (8) Key messages 1 3% dividend increase 50% increase in the dividend over 10 years triggered by ReAssure transaction 48.2p 47.5p 46.8p 46.0p 45.2p 41.9p 2 40.8p 40.8p 40.8p 5 th dividend increase in 9 36.5p years 32.2p 3 Dividend increases equivalent to CAGR of 4.1% over 10 years 4 Dividend policy remains 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e stable and sustainable Interim Final See Appendix XIX for footnotes 13
Jim McConville Group Finance Director and Group Director, Scotland 14
Phoenix has delivered on its 2019 strategic priorities FINANCIAL TARGETS 1 TRANSITION 2 CUSTOMER OUTCOMES 3 4 NEW BUSINESS 5 GROWTH 15
Financial highlights Financial performance: FY19 FY18 Cash Cash generation £707m £664m Dividend per share 46.0p (8) Dividends 46.8p Operating profit before tax IFRS £810m £708m Incremental long-term cash generation £530m (9) £475m New business New business contribution (10) – UK Open and Europe £158m £154m (9) Financial position: FY19 FY18 PGH Solvency II surplus £3.1bn (1) £3.2bn (11) Group capital Shareholder Capital Coverage Ratio (2) 161% (1) 167% (11) AuA Assets under Administration (see Appendix II) £248bn £226bn Leverage ratio (see Appendix I) Leverage 22% 22% See Appendix XIX for footnotes 16
Phoenix delivered £707 million cash generation in 2019, exceeding the upper end of the target range 2019 cash generation Key messages Management actions comprise c. £957m 1/3 rd of 2019 cash and supplement organic cash generation £(250)m £707m £600m- £338 million 2019 annual dividend SLAL £565m £700m covered 2.8x by gross cash target Management generation range £286m actions £250 million Brexit preparations will emerge as future cash generation Organic £421m Phoenix Life £367m Service company £25m First dividends from SLAL Gross cash Brexit preparations Cash generation Target generation 17
£19 billion of predictable long-term cash generation from Combined Group Illustrative future cash generation from Combined Group in-force business Cash generation ReAssure Combined (3) Phoenix £19.0 billion guidance over life of business guidance Group £13.1bn Cash generation £3.2bn +£2.7bn £5.9bn (2020 – 2023) £5.9 billion 4-year guidance Cash generation £8.8bn +£4.3bn £13.1bn (2024+) £800 - 900m 1yr target Total cash £12.0bn +£7.0bn £19.0bn generation Cash generation excludes new Open business, 2020 2021 2022 2023 2024+ BPA, further M&A and management actions Phoenix ReAssure after 2023 Chart not to scale See Appendix XIX for footnotes 18
Additional cash generation from ReAssure acquisition supports growth options Combined Group: Illustrative uses of cash from 2020 - 2023 £5.9bn £(0.1)bn £(0.4)bn £(0.4)bn £(0.5)bn £(0.5)bn £2.7bn £(0.9)bn £(0.6)bn £(1.3)bn £(0.4)bn £(1.9)bn £(0.8)bn £1.7bn £3.2bn £(1.2)bn £1.2bn £0.3bn £0.5bn FY19 holding Cash generation Operating and Debt interest over Dividends over Debt maturities Illustrative holding company cash over 2020 - 2023 pension costs over 2020 - 2023 (13) 2020 - 2023 (14) and call dates company cash at FY23 2020 - 2023 (12) Phoenix Group Impact of ReAssure acquisition See Appendix XIX for footnotes 19
Resilience of cash generation increases confidence in our dividend Phoenix sensitivities for £3.2 billion 2020 - 2023 cash generation target (15) Impact on cash Uses of cash Op cost & interest: £0.9bn Dividend: £1.3bn generation 2020-23 cash generation target £3.2bn Equities : 20% fall in markets £3.3bn £0.1bn Property : 15% fall in values (16) £2.9bn £(0.3)bn Rates : 73bps rise in interest rates (17) £3.3bn £0.1bn Rates: 88bps fall in interest rates (17) £(0.2)bn £3.0bn Credit spreads : 120bps widening (18) £2.9bn £(0.3)bn Lapse: 10% increase/decrease in rates (19) £(0.4)bn £2.8bn Longevity : 6 months increase (20) £(0.6)bn £2.6bn See Appendix XIX for footnotes 20
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