Cash Resilience Growth A Sustainable Phoenix Interim Results 2019 7 August 2019 1
Strong results across all Key Performance Indicators PGH PGH SOLVENCY II SHAREHOLDER CASH GENERATION SURPLUS ( † ) CAPITAL COVERAGE RATIO ( † ) 160% £287m £3.0bn DIVIDEND PER IFRS OPERATING SHARE PROFIT 23.4p £325m ( † ) Estimated HY19 Solvency II capital position assumes a dynamic recalculation of transitionals as at 30 June 2019. Had a dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Ratio would decrease by £0.2 billion and 5% respectively. 2
Phoenix is delivering on its 2019 strategic priorities • Expect to be towards the upper end of the 2019 cash generation target of £600 - £700 million Financial targets • Maintained strong solvency position and investment grade rating • On track to deliver £1.2 billion total synergy targets Transition • Strong delivery across all phases of the transition programme • £116 million new business contribution from UK Open and Europe New business • £250 million incremental long-term cash generation • Continue on digital journey and progressing customer initiatives Customer outcomes • Meeting or exceeding all customer service metric targets • Growth opportunities bring sustainability to cash generation Growth • M&A pipeline remains strong and we are ready to engage 3
Stable and sustainable dividend with corporate transactions the trigger for uplifts Dividend per share (1) Key messages 1 2011 16.1p 16.1p Dividend policy remains 27% DPS uplift due to equity raising stable and sustainable and debt re-terming in Jan 2013 2012 16.1p 20.4p 2013 20.4p 20.4p 2 Dividend increased 4 2014 20.4p 20.4p times in 7 years 2015 20.4p 20.4p 5% DPS uplift following AXA Wealth acquisition 3 2016 20.4p 21.5p Increases equivalent to 5% DPS uplift following Abbey Life acquisition 4.8% p.a. over 8 years 2017 22.6p 22.6p 3.5% DPS uplift following Standard Life Assurance acquisition 2018 22.6p 23.4p 4 2019 expected cash 2019e 23.4p 23.4p generation dividend coverage ratio of c.2x Interim Final See Appendix XV for footnotes 4
Phoenix is delivering on its 2019 strategic priorities 1 FINANCIAL TARGETS TRANSITION 2 3 NEW BUSINESS 4 CUSTOMER OUTCOMES 5 GROWTH 5
Financial highlights Financial performance: HY19 HY18 Cash generation £287m £349m Cash Dividend per share 23.4p 22.6p (1) Dividends Operating profit before tax IFRS £325m £216m New business contribution (2) – UK Open and Europe £100m (3) New business £116m HY19 FY18 Financial position: £3.0bn ( † ) PGH Solvency II surplus £3.2bn (4) Group capital 160% ( † ) Shareholder Capital Coverage Ratio (5) 167% (4) Assets under Administration (see Appendix II) £245bn £226bn AuA Leverage ratio (see Appendix I) 23% 22% Leverage ( † ) Estimated HY19 Solvency II capital position assumes a dynamic recalculation of transitionals as at 30 June 2019. Had a dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Ratio would decrease by £0.2 billion and 5% respectively. See Appendix XV for footnotes 6 “New business contribution” is the increase in Solvency II Own Funds arising from new business written in the period excluding ris
Phoenix is on track to meet its future cash generation targets Illustrative future cash generation Included in £12 billion cash generation: • Regular premiums on in-force £12.0 billion guidance over life of business policies • Vesting annuities £8.2bn • £8.2bn Management actions in 2019-23 £3.8 billion 5-year target Excluded from £12 billion cash generation: £600-700m 1-year • target (6) Incremental premiums on in- force policies • New business from Strategic Partnership with Standard Life Aberdeen • Management actions 2024+ • Future BPA 2019 2020 2021 2022 2023 2024+ • Future M&A Cash generation targets Illustrative future cash generation 7
Phoenix expects to be towards the upper end of the 2019 cash generation target range 2019 cash generation £600m- £700m target range £537m SLAL £179m £(250)m Phoenix Life £358m £287m Gross cash generation Brexit preparations Cash generation H2 2019 2019 target H1 2019 8
Cash generation more than supports the dividend and builds cash available for growth through BPA and M&A Illustrative uses of cash from 2019-2023 £(0.5)bn £(0.6)bn £3.8bn £(1.7)bn £1.3bn £0.3bn FY18 holding Cash generation Operating and pension Debt interest Dividends over Illustrative holding company cash over 2019-2023 costs over 2019-2023 over 2019-2023 2019-2023 company cash at FY23 (7) (8) (9) See Appendix XV for footnotes 9
Resilience of cash generation increases confidence in our dividend Sensitivities for £3.8 billion 2019-2023 cash generation target (10) Impact on cash Operating & interest Uses of cash Dividend of £1.7bn generation costs of £1.1bn 2019-23 cash generation target £3.8bn Equities : 20% fall in markets £3.8bn nil (11) Property : 15% fall in values £(0.2)bn £3.6bn (12) Rates : 60bps rise in interest rates £0.1bn £3.9bn (12) £(0.2)bn Rates: 80bps fall in interest rates £3.6bn (13) Credit spreads : 120bps widening £3.6bn £(0.2)bn (14) Lapse: 10% increase/decrease in rates £(0.4)bn £3.4bn (15) Longevity : 6 months increase £(0.5)bn £3.3bn See Appendix XV for footnotes 10
Beyond 2023, additional cash generation enhances dividend sustainability Illustrative uses of cash from 2024 onward • 2024+ illustrative £(2.5)bn cash generation excludes management actions, new business and £8.2bn growth through BPA and M&A £7.0bn • £7.0 billion net cash generation beyond 2024+ is available to meet £1.3bn future dividends, Illustrative holding 2024+ cash generation Outstanding Illustrative holding interest and company cash at FY23 shareholder borrowings company cash over (Appendix XIII) expenses and fund 2024+ available to meet dividends, growth interest and expenses and fund growth 11
Phoenix maintains a strong capital position with a £3.0bn Solvency II surplus “Shareholder value” per share Estimated PGH Shareholder capital position Shareholder own funds £8.2bn 167% 160% Less: Tier 2 and Tier 3 debt £(2.0)bn Less: Restricted Tier 1 debt £(0.5)bn Surplus Surplus £3.0bn Unrestricted Tier 1 (“UT1”) £5.7bn £3.2bn Add: Contract boundaries £0.2bn Add: Shareholders share of £0.2bn £8.2bn £8.0bn with-profit estate Proxy to shareholder value £6.1bn £5.2bn £4.8bn SHAREHOLDER £8.46 VALUE PER SHARE HY19 (†) FY18 (4) Own funds SCR • £2.0 billion of surplus in unsupported with-profit funds and staff pension schemes is unrecognised • £169 million interim 2019 dividend deducted from HY19 Solvency II own funds ( † ) Estimated HY19 Solvency II capital position assumes a dynamic recalculation of transitionals as at 30 June 2019. Had a dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Ratio would decrease by £0.2 billion and 5% respectively 12
New business strain offset by surplus emergence and management actions Change in PGH Solvency II surplus (†) 167% £(0.1)bn 160% £0.3bn £(0.2)bn £0.2bn £(0.2)bn £(0.2)bn £3.2bn £3.0bn Group surplus Surplus Management New business Brexit Financing Economic Group surplus (†) (4) (16) as at FY18 emerging & actions strain preparations costs, pension variances, as at HY19 release of capital contributions assumption requirements and 2019 changes interim dividend and other ( † ) Estimated HY19 Solvency II capital position assumes a dynamic recalculation of transitionals as at 30 June 2019. Had a dynamic recalculation not been assumed, the Solvency II surplus and the Shareholder Capital Coverage Ratio would decrease by £0.2 billion and 5% respectively See Appendix XV for footnotes 13
Management actions of £350 million include £115 million of SLAL capital synergies Solvency impact of management actions HY19 management actions Investment of annuity backing assets in illiquid asset classes £110m Expense reductions £350m £240m Matching adjustment fund optimisation (17) Own funds SCR Surplus Intra-group restructuring Increasing SII ERM securitisation own funds Reducing SII SCR increases accelerates cash overall cash flows Closure of FCA investigations flows See Appendix XV for footnotes 14
Illiquid asset strategy is a key management action and supports BPA Illiquid assets constitute 22% of £19 billion annuity portfolio HY19 Origination Illiquids portfolio by asset class Illiquids portfolio by credit as at HY19 rating as at HY19 c.£500m c.£80m 7% 8% Illiquid assets SII benefit 5% originated 11% • £50 million private placement 30% £4.2bn £4.2bn with A2Dominion Housing Group supporting social 59% 63% 17% housing opportunities • £250 million of ERM originated through our third AAA-AA ERM party funding agreements Private placements A 9%, CRE loans BBB and other BBB • Since 2016, ERM origination Infrastructure debt 24%, A Local authority loans reached £1.1 billion of 67%, • Target of 40% illiquid assets backing annuity liabilities cumulative lending, helping AAA-AA over 12,000 households to • Growth in annuities liabilities from BPA, vestings and buy-ins unlock equity in their homes 15
Recommend
More recommend
