CASH RESILIENCE GROWTH Interim Results 2020 6 August 2020 1 - PowerPoint PPT Presentation

CASH RESILIENCE GROWTH Interim Results 2020 6 August 2020 1

Andy Briggs Group Chief Executive Officer 2

Phoenix Group: The UK’s largest long -term savings and retirement business  A CLEAR STRATEGY M&A Manage in-force business for cash and Management Actions Heritage resilience and deliver customer Cash generation outcomes Open Complete value accretive M&A, M&A accessing synergies through BPA integration Grow through new business in Open Heritage Open and BPA Time A broad range of savings and retirement CASH RESILIENCE GROWTH products, managed to deliver... 3

Phoenix’s business model has been resilient during the COVID -19 pandemic Financial • Resilient solvency position through dynamic hedging • Active management of high quality credit portfolio • Cash generation continues to be predictable with targets on track • Payment of dividend provides income stream to retail savers and the funds they invest in Phoenix has Customer proactively managed • Strong customer service with customer satisfaction remaining above 90% • the numerous Supporting customers through a range of customer initiatives • Over 9 million log-ins in 1H 2020 and 40% increase in secure messaging challenges caused • Moratorium period removed for more recent SunLife life insurance customers by the pandemic Colleagues and Communities • 99% of employees working from home within 10 days • 20 percentage point increase in colleague pride and advocacy to 73% • Charitable donations and colleague volunteering • No colleagues furloughed and no government support schemes accessed 4

Phoenix delivered a strong set of 1H 2020 results Cash Resilience Growth £433 £4.0 169% £358 million billion million Cash generation PGH Solvency II PGH Shareholder Incremental long-term cash surplus (1) Capital Coverage generation from new business Ratio (1,2) +51% +29% +41% £433m £4.0bn £358m £3.1bn £287m £254m £(0.2)bn £1.1bn FY19 (3) Economics Other HY20 HY19 (4) HY19 HY20 HY20 movements See Appendix XII for footnotes 5

ReAssure transaction completed in July and strengthens our key attributes Pro-forma 1H 2020 results Transaction highlights £1.1 billion £76 billion 3.9 million £7 billion Cash generation £4.4 billion Cash AUA (5) Policies (5) generation (6) PGH Solvency II surplus (7) 150%  Regulatory approval granted with no conditions PGH Shareholder Capital Coverage Ratio (8)  £800 million synergy target set New 2020 cash generation target of £1.5 - £1.6 billion  Supports 3% increase in 2020 final dividend See Appendix XII for footnotes 6

Resilient balance sheet supports payment of 2020 interim dividend 2020 interim dividend Strong cash dividend cover • Solvency II surplus of £4.0 billion (1) Dividend cover Capital • £5.8 billion of SCR over and above best estimate liabilities 3.2x – 3.4x + £1.5-1.6bn • Our approach to risk management ensures Resilience we remain resilient under a range of stress scenarios 2.1x 2.5x + 3.4x 3.9x • Holdco cash of £1.8 billion £707m £664m £653m Liquidity • Dependable future cash generation £486m £475m £338m £262m £193m £126m PAYMENT OF 2020 INTERIM DIVIDEND OF 2016 2017 2018 2019 2020e (9) £234 MILLION Cash generation Total annual dividend See Appendix XII for footnotes 7

Phoenix is delivering on its 2020 strategic priorities  Heritage M&A and integration Open ReAssure acquisition complete £358 million incremental long-term £1.1 billion pro-forma cash    and £227 million of synergies cash generation from new generation from Combined Group delivered on Day 1 business Dynamic hedging and active credit Launch of in-scheme draw down SLAL transition programme    management ensured resilience of and passive core within remains on track solvency position Workplace schemes Broadening proposition and illiquid Exceeded all customer satisfaction Internal Model Harmonisation pre-    asset origination underpinned metric targets application submitted strong BPA volumes  Investing in people New Executive Committee in place with market leading capabilities 8

Rakesh Thakrar Group Chief Financial Officer 9

Financial highlights - Phoenix Financial performance: HY20 HY19 Cash Cash generation £433m £287m Dividend per share 23.4p Dividends 23.4p Operating profit before tax IFRS £361m £325m Incremental long-term cash generation £254m (4) £358m New business New business contribution (10) – UK Open and Europe £70m £119m (4) Financial position: HY20 FY19 PGH Solvency II surplus (1) £3.1bn (3) £4.0bn Group capital Shareholder Capital Coverage Ratio (1,2) 161% (3) 169% AuA Assets under Administration (see Appendix II) £248bn £248bn Leverage ratio (see Appendix I) Leverage 27% 22% See Appendix XII for footnotes 10

Cash Resilience Growth Phoenix and ReAssure delivered £1.1 billion cash generation in 1H 2020 and are on track for new 2020 target 2020 cash generation Key messages £1.5-1.6bn Strong cash generation evidences Target resilience in volatile markets range £690m £1,123m On track to meet new 2020 cash generation target £433 million Phoenix cash generation is net of £50 million injection into £433m SLIntL £690 million ReAssure cash generation includes £290 million from Old Mutual Wealth business on 31 1H 2020 1H 2020 1H 2020 2H 2020 New 2020 target Phoenix ReAssure Combined Group December 2019 11

Cash Resilience Growth £19 billion of predictable long-term cash generation from Combined Group Cash generation from in-force business EXCLUDES £19.0 billion guidance over life of business • New Open business; £13.1bn £5.9 billion 4-year guidance • New BPA; £1.5 – 1.6 billion • Future M&A; and 1-year target • Management actions • after 2023 2020 2021 2022 2023 2024+ Phoenix ReAssure Chart not to scale 12

Cash Resilience Growth Resilience of cash generation provides confidence in our dividend Sensitivities for £5.9 billion 2020 - 2023 cash generation guidance (11) Impact on cash Uses of cash Op cost & interest: £1.4bn Dividend: £1.9bn generation 2020-23 cash generation guidance £5.9bn Equities : 20% fall in markets £0.0bn £5.9bn Property : 12% fall in values (12) £(0.2)bn £5.7bn Rates: 73bps rise in interest rates (13) £6.1bn £0.2bn Rates: 88bps fall in interest rates (13) £(0.3)bn £5.6bn £(0.2)bn Credit : 120bps spread widening (14) £5.7bn Credit : 20% portfolio full letter downgrade (15) £5.2bn £(0.7)bn Lapse: 10% increase/decrease in rates (16) £(0.2)bn £5.7bn Longevity : 6 months increase (17) £5.1bn £(0.8)bn See Appendix XII for footnotes 13

Cash Resilience Growth Strong HY20 operating profit of £361 million HY20 HY19 Key messages UK Heritage £281m £257m UK Open £58m £43m Increased Heritage operating profit reflecting higher new business profits Europe £20m £28m on BPA transactions Service company £19m £13m Group costs £(17)m £(16)m Increased UK Open operating profit £361m £325m due to higher SunLife volumes and Operating profit before tax positive persistency assumption Investment return variances and economic assumption £627m £(84)m changes changes Amortisation of intangibles £(184)m £(199)m Investment returns reflect gains on Other non-operating items £(65)m £(32)m equity hedges and the impact of falling Finance costs £(76)m £(63)m yields (Loss)/profit before tax attributable to non-controlling interest £(20)m £2m Profit/(loss) before tax attributable to owners £643m £(51)m Other non-operating items include £48 Tax (charge)/credit attributable to owners £(157)m £90m million of costs associated with the SLAL transition Profit after tax attributable to owners £486m £39m 14

Cash Resilience Growth Phoenix maintains a strong capital position with a £4.0 billion Solvency II surplus Estimated PGH Shareholder Capital Position HY20 PGH own funds by capital tier 169% £9.8bn PGH own funds per capital tier SCCR (2) 161% £5.5bn £1.2bn £2.5bn £0.6bn SCCR (2) Surplus 169% of SCCR £4.0bn Surplus 95% 21% 43% 10% £3.1bn £9.8bn £8.3bn Unrestricted Tier 1 Restricted Tier 1 Tier 2 Tier 3 £5.8bn £5.2bn Shareholder own funds (18) £5.8bn Contract boundaries £0.1bn Shareholder Phoenix FY19 (3) Phoenix HY20 (1) value per Own funds SCR Shareholders share of with- share: £0.2bn profit estate £8.45 • £234 million 2020 interim dividend deducted from HY20 own funds Proxy to shareholder • £2.0 billion of surplus in unsupported with-profit funds and staff £6.1bn value pension schemes is unrecognised See Appendix XII for footnotes 15

Cash Resilience Growth Phoenix’s active approach to risk management limits impact of market volatility in 1H 2020 to £0.2 billion Change in PGH Solvency II Surplus 0% (4)% 27% (7)% £(0.1)bn (9)% £0.1bn (5)% 169% £(0.4)bn £(0.2)bn 6% £1.4bn £(0.1)bn 161% £0.2bn £4.0bn £3.1bn Group surplus Surplus Debt raise Management New business Financing and Economic and Assumption Group surplus as at FY19 (3) emerging and actions strain (19) corporate costs other variances changes and as at HY20 (1) release of capital and 2020 experience requirements interim dividend variances See Appendix XII for footnotes 16