Standard Life (LSE:SDLF) — Investor Presentation

0:00 Good afternoon, ladies and gentlemen, and welcome to the Phoenix Group Holdings PLC Half Year Results Investor Presentation. Company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses on the Investor League company platform. Before we begin, we'd like to submit the following poll, and I'm sure the company will

0:31 be most grateful for your participation. And I'd now like to hand over to Andy Briggs, CEO. Andy, good afternoon. Good morning, everyone, and welcome to Pfenex's 2025 half year results. Today, I'll start with a summary of the progress we've made. Nick will then take you through the first half financial performance, and I will close with an overview of some of the strategic developments we'll be delivering over the coming months before taking your questions. Last March, I set out our vision to become The UK's leading retirement savings and income business, helping more people on their journey to and through retirement. Today marks the halfway point of our three year strategy, and there are three key messages I'd like you to take away. The first is that we're making strong progress on executing against our strategic priorities.

1:21 We're meeting more of our customers' needs and driving organic growth. Second, I'm particularly pleased that this set of results evidences that the balance sheet pivot is beginning to show. We can confidently say we're on track to deliver all of our financial targets. And third, what I'm most excited about is that we're uniquely positioned to capture the momentum in our structurally growing markets.

1:52 Progress towards achieving our vision is delivered through our strategic priorities of grow, optimize and enhance. We've achieved a number of material strategic milestones already this year. To grow, we need the products which meet the needs of our customers and build out our ability to engage with them both directly and through advisers. From an engagement perspective, it's great that we've received approval from the FCA for our in house advice proposition, which we'll launch later this year. And from a product perspective, we've launched the STANDARD LIFE Guaranteed Lifetime Income Fund, completing our full product suite. So we're now able to help customers at every stage of their retirement journey from when they first start saving right into later life.

2:41 Within Optimize, we've taken a material step forward on the journey to in housing the asset management of annuity backing assets that I spoke to you about back in March, and we're currently preparing to in house a further £20,000,000,000, which I'll come on to later. Lastly, Enhance. Key here is completing the migration of customer administration to modern technology enabled platforms. We migrated a further 800,000 policies onto the TCS Banks platform in the first half. We also entered into a new strategic partnership with Wipro to manage an additional 1,900,000 policies. This delivers an acceleration in our cost savings run rate and increases execution certainty as we are no longer migrating these policies.

3:30 Progress against our strategic priorities is translating directly into attractive financial outcomes. And hence, our first half performance has been strong across our financial framework of cash, capital and earnings. Operating momentum is excellent with 9% growth in operating cash generation and 25% growth in IFRS adjusted operating profit. And I'm particularly pleased with capital where our solvency capital coverage ratio grew from 172% at the end of last year to 175% at the half year even after retiring £200,000,000 of debt. Our leverage ratio improved from 36% to 34%, taking us a step closer to our 30% target.

4:19 And we are materially accelerating delivery of our cost savings target, So firmly on track across the board. The UK retirement savings and income market is already huge with over £3,500,000,000,000 of stock. It's also structurally growing, driven by a range of demographic and socioeconomic trends. Summarizing the gray boxes across the top, there are two themes I'll draw out. Firstly, the structural growth is driven by the aging population and the shift from defined benefit to defined contribution. Secondly, people simply are not on track to have saved enough for a decent standard of living in retirement, and most are doing this without any advice or guidance.

5:09 We feel passionate about helping everyone achieve financial security in retirement, and it's a huge opportunity for us. We will continue to advocate for the changes that will make the biggest difference to our customers. So I'm really encouraged by recent regulatory and political proposals that create additional tailwinds to our industry as outlined in the orange boxes on the slide. These will accelerate the existing structural growth drivers in the market. As a top three player in workplace, we're already well in excess of the £25,000,000,000 minimum threshold requirement for default funds as set out in the government's pension scheme bill. So we are ready to take on business from corporates who need a secure provider.

5:58 We think the pension adequacy review must raise savings levels through an increase in auto enrollment contribution rates to help close the pension savings gap. And the introduction of targeted support and pensions dashboard has the potential to be a game changer for engaging customers and helping them make better financial decisions. We are well positioned to benefit from these structural market drivers. Turning to Slide eight. The top of the slide shows how those market trends are driving substantial flows across the savings and retirement market. The bottom half of the slide sets out our ambition and strategy where our business mix is diversified and balanced across the key markets we operate in.

6:44 We are the only at scale UK player focused solely on the retirement savings and income market via Workplace, Retail and Annuities. And we're already taking a good share of flows in each, but with plenty of upside potential. Specifically in Workplace, our ambition is to consolidate our top three position as that market grows strongly and consolidates down. In Retail, we're looking to move from a top 10 to a top five position, and we'll continue to focus on this. And in Retirement Solutions, we aim to maintain a top five position. These clear ambitions are underpinned by robust strategies supported by the strength of our franchise, brand, customer base, and product set.

7:34 Essential to a robust strategy is being crystal clear on how we are well positioned to win share in these growing markets, and this starts with the three competitive advantages of the group. Customer engagement is key, and with one in five UK adults being customers of Phoenix, including a large existing workplace book, we have an exceptional level of customer access. This gives us deep customer insights, which in turn supports how we develop and design propositions.

8:04 We also benefit from capital efficiency from our diversified business model, comprising both capital light fee based and capital utilizing spread based businesses. And we have cost advantages underpinned by our scale with 12,000,000,000 customers and which have been achieved by leveraging technology across our business. This will increase further through our cost savings program. These three group advantages then transact direct directly translate to the specifics needed in our customer offerings in each market. Taking workplace as example, on the bottom left of the slide where we're one of the top three players in the market. I regularly meet our employee benefit consultant partners, and they consistently tell me that we win by having excellent customer engagement through offering leading employer propositions as we truly understand what customers, both employers and their employees, want and need.

9:02 Offering excellent service is also key to winning. When I was in Edinburgh, a workplace pitch last week, it was clear that providing their employees with exceptional service is critical. Our ability to succeed here is underpinned by our strong digital capabilities, which include our market leading app rated 4.7 stars on the App Store. Alongside this, our capital and cost efficiency and inherent scale mean we can offer our products at competitive prices while delivering attractive margins. Let me now touch on some of the activity the teams have been doing to enable us to keep winning in these markets from both an engagement and product perspective, starting with pensions and savings.

9:52 Engagement is key here. On this slide, I call out the imminent launch of our retail advice proposition that I mentioned earlier. So as we start to roll out trusted in house advice, we'll provide customers with a compelling reason to stay with STANDARD LIFE. To be clear, we'll start small here and scale over time. In partnership with digital engagement specialist, LIFE Moments, we've launched Family Finance Hub, and STANDARD LIFE also completed its connection to the pension dashboard ecosystem, both being examples of ways we've looked to empower our customers and increase engagement with them. Testament to our commitment to excellent service, we are the first workplace provider to win the Master Trust Treble across the Pensions Corporate Advisor, PensionsAge, and Professional Pensions awards.

10:44 I'm really proud of the team for this external recognition. From a financial perspective, our pensions and savings business is simple. It's about growing assets, which we've done, and it's about expanding margins, which we've also done. Together, this delivered 20% growth in operating profit.

11:05 We've also continued to develop winning products for customers in retirement solutions. We launched a standard life guaranteed lifetime income plan for advisers on the Fidelity platform in March. Separately, we've enhanced our BPA offering. Many DB schemes have existing longevity reinsurance, and we've leveraged our extensive expertise to novate these into a BPA transaction. What does this mean? It means we're better placed to win by helping corporates with their broad range of requirements. As proof, this, among other innovations, enable us to complete our largest ever BPA deal in July worth £1,900,000,000. This particular transaction was the in house scheme of a large employee benefit consultant, so a really positive testament to our proposition.

11:57 The other item I'd call out on this slide is the launch of The UK's first fully digital signature free application for annuities. As you'll know from your own experiences, having a hassle free digital experience is increasingly important, so we're always looking at ways to make our customer journeys easier. Looking at the financials, Nick will come on to the actual annuity volumes in the first half, which were relatively modest, but we've now secured over 3,000,000,000 of BPAs with individual annuities performing strongly too. Of course, our focus remains on value, not volume, and our execution here enabled 36% growth in profits. To optimize customer outcomes and enhance returns, we've been evolving our approach to asset management.

12:46 Historically, we've had an outsourced operating model for all assets. For our pensions and savings business, which represents the majority of our assets, this strategy is unchanged. Moving forward, we expect to consolidate the number of asset managers we partner with, and Aberdeen continues to be our key asset management strategic partner, potentially attracting a greater share of these assets. As singled in March, our strategy for the management of the annuity backing assets is evolving to one which is predominantly in house. We will leverage the internal capabilities we have built to manage public credit and private assets alongside partnering to source differentiated and unique private assets.

13:31 We're now managing 5,000,000,000 of our 39,000,000,000 portfolio in house and are preparing to in house a further 20,000,000,000. To be clear, this in housing only covers our annuity backing assets. We have no intention of becoming a fully fledged asset manager nor are we looking to manage third party assets. But we're excited about the benefits this brings by underpinning the delivery of management actions in annuity portfolio re optimization and with greater cost efficiency. Our strategic execution is creating financial flexibility for the future. This chart focuses on operating cash generation. This is the most important way to look at our financials because it's the sustainable surplus generation in our life operating companies that's also remitted as dividends up to the holdco.

14:24 Hence, it's the primary driver of shareholder dividends. We reiterate our ongoing target of mid single digit percentage growth for the full year and going forwards. This level of cash generation not only means that our dividend of circa £550,000,000 is well covered and secure, but also generates at least £300,000,000 of excess cash per annum after financing our recurring uses. We will deploy this excess in accordance with our capital allocation framework with our current focus continuing to be on deleveraging as we remain laser focused on achieving our 30% target. As you would expect, the board would look to allocate capital to the highest returning opportunity, and we are excited about the optionality our strategy is creating.

15:13 With that, I'll hand over to Nick who will talk in detail about our financial performance. Nick?

15:26 Thank you, Andy. Good morning, everyone, and may I extend my own welcome to all of you joining us today. I am pleased to be reporting strong operational performance in the first half, evidenced by the profitable growth in both our pension and savings and our retirement solutions operations, by the execution of sizable recurring management actions and by the acceleration of our cost savings initiatives. This operational momentum is driving strong value creation with improvements across all three pillars of our financial framework, with growth in operating cash generation of 9%, growth in net recurring capital generation of four percentage points and growth in IFRS operating profit of 25%.

16:20 It is also supporting the emerging balance sheet pivot with both leverage and overall solvency capital levels improving. This means that we are firmly on track to achieve all of our 2026 targets. Turning to the financial highlights, operating cash generation grew to CHF $7.00 5,000,000 and we delivered total cash generation of CHF $784,000,000. The shareholder solvency coverage ratio increased to 175%, remaining in the top half of our operating range, and our Solvency II leverage ratio improved to 34%. IFRS operating profit increased to CHF451 million, and whilst the IFRS loss after tax was CHF156 million, the impact of this loss was cushioned by CSM growth of 10%, with IFRS adjusted shareholders' equity closing at €3,400,000,000 In line with our policy, the Board declared a 2.6% increase in the interim dividend to 27.35p per share.

17:33 Let me now take you through these results in more detail. Operating cash generation shown on the left was up 9% to EUR $7.00 5,000,000, supported by growth in surplus emergence to EUR $411,000,000, and an increase in recurring management actions to EUR $294,000,000. I am committed to providing you with the segmental OCG analysis by business, and we'll do so with the full year results. For now, I continue to share an indicative split. As you can see, the contribution from Retirement Solutions is greatest, given the capital heavy nature of this business. The contribution from the capital light pensions and savings business is lower, but is growing fast, benefiting from new business flows and cost savings.

18:28 On the right, you can see that operating cash generation more than covered our dividends and recurring uses, generating excess cash of EUR $246,000,000 in the period. This result has been flattered by the relatively low level of annuity investment in the first half, reflecting timing of BPA deals. At the full year, we expect excess cash to be at least in line with the 300,000,000 reported last year.

18:58 Turning next to recurring management actions, these represent repeatable sources of value that we deliver year after year across our business. In any given period, these will vary in quantum between the three categories we first highlighted in March, which are repeated on this slide. On the left, the largest component relates to annuity portfolio actions, which generated EUR 189,000,000 of OCG in the first half. By way of reminder, we capture such opportunities by making frequent small sized trades through market cycles, which optimize the risk adjusted return of our portfolio without taking on more risk, whilst remaining duration and cash flow matched.

19:48 We delivered EUR 81,000,000 of OCG through capital improvement actions, representing a long standing Phoenix capability of extracting recurring value from model and data improvements, primarily from our capital heavy business. On the right, you can see the EUR 24,000,000 OCG contribution from ongoing fund simplification. In the first half, we closed 65 out of a total of around 5,000 funds, delivering further operational and service fee reductions. This component represents an enduring source of value as we continue to simplify our fund range with further fund closures expected in the second half.

20:34 Our half year performance puts us firmly on track to deliver recurring management actions in the order of EUR 500,000,000 at the full year, in line with our guidance. Having delivered EUR $7.00 5,000,000 of OCG in the first six months, going forward, we expect a more even half on half profile compared to 2024, which was second half weighted. And so we reiterate the mid single digit percentage annual OCG growth guidance. On the right, you can see that total cash generation over the last eighteen months of EUR 2,600,000,000 is also tracking towards our EUR 5,100,000,000 cumulative three year target.

21:21 Turning from cash to capital, I set out on this slide the shareholder solvency walk, which I will step through in some detail. Looking at the two book ends of the chart, you can see that we increased both our solvency surplus to EUR 3,600,000,000 and our solvency coverage ratio to 175% after repaying €200,000,000 of debt in February.

21:47 In between these bookends, we analyze the various recurring and non recurring components of the walk and show the corresponding own funds and SCR values in the table below. You will see that our recurring net capital generation, represented by the items grouped in the top left box of the chart, was positive point 2,000,000,000, equivalent to four percentage points of solvency coverage ratio. The corresponding recurring own funds generation, shown in the bottom left box, was also positive 200,000,000, supporting the favorable evolution of our leverage ratio. The items grouped in the top right box show a net positive generation from non recurring items of 100,000,000.

22:40 Stepping through each component in turn, other management actions were 100,000,000 positive, and include benefits arising from two sources. The first relates to the expense savings from in housing annuity backing assets, and the second results from selling the shareholders 10% share of future income in one of our ninetyten funds to the estate of this fund. We have initiated a program covering 12 with profit funds, which over the next two years, would release total surplus of around 150,000,000. There is more detail in the appendix for those who are interested. Economics and temporary strain were neutral overall.

23:26 Our hedging strategy delivered as expected, producing 8,100,000,000 negative, which was offset by the unwind of the annuity temporary strain that we carried over from full year 2024. The investment spend and other component reflects continued spending on our investment program, offset by the beneficial impact of the Wipro strategic partnership, which has accelerated the start point from which the lower per policy administration charges apply on the 1,900,000,000 impacted policies. Before leaving the slide, I would note that the capital improvement in the period is flattered by the timing of BPA deals.

24:13 By way of illustration, if we had written the same BPA volumes as in the first half of twenty twenty four, the coverage ratio would have been around three points lower, reflecting both the day one capital investment and the related temporary strain. Notwithstanding this, the underlying capital improvement in the first half remains strong.

24:38 Turning to leverage, we made a clear commitment to bring this ratio down to 30% by the end of twenty twenty six. Leverage improved to 34% in the period, supported by the €200,000,000 debt repayment and the growth of regulatory owned funds, reflecting the drivers that are covered in the previous slide. We remain firmly in control of our path to 30%, supported by the $650,000,000 of excess cash that we expect to generate over the next eighteen months. As I said before, the path to 30% will not be linear and deleveraging will be managed within the upper half of our 140,000,000 to 180,000,000 operating range.

25:27 Our IFRS adjusted operating profit increased by 25%, with our two main business divisions growing at a strong double digit rate. I will come back to their respective performances shortly. The overall increase to EUR $451,000,000 is supported by business growth, which has driven our asset base higher and increased both investment contract revenues and insurance contract CSM releases. It is also supported by a high level of investment margins, reflecting the value added by Phoenix Asset Management and by cost savings, which I will cover on the next slide. Our successful delivery of our grow, optimize and enhance strategic initiatives puts us well on track to achieve our EUR 1,100,000,000 operating profit target by full year 2026.

26:22 Consistent with the comment I made earlier on OCG in year profile, IFRS operating profit will also be more even first half on second half going forward. In March, I shared my assessment that our cost savings target of $250,000,000 was credible and that I was looking for opportunities to accelerate its delivery. The actions we have taken in the period, namely the introduction of Wipro as a strategic partner for customer administration and other changes to our operating model have accelerated the delivery profile with EUR 160,000,000 cumulative run rate savings now expected to be achieved by full year 2025, some EUR 35,000,000 higher than our previous guidance.

27:10 At the end of the half, cumulative run rate savings reached EUR 100,000,000, with actions taken in the period adding EUR 37,000,000 to the full year 2024 total. Some EUR 40,000,000 of this run rate total was earned in the period.

27:29 Our cost savings initiatives remain a key underpin to delivering the 2026 operating profit target and to supporting ongoing business margin improvements. Our pensions and savings business continues to grow in assets, profitability and margins.

27:49 As Andy outlined earlier, we continue to win in workplace with a leading employer proposition, excellent customer service, and competitive pricing. This translated into 4,900,000,000 in workplace gross inflows, including 700,000,000 in new scheme wins. You may recall that last year, we won a $900,000,000 large scheme, which are relatively infrequent, boosting the prior year comparator. Excluding new scheme wins, we reported robust growth in gross inflows to EUR 4,200,000,000, highlighting the workplace flywheel effect, as the combination of strong new business flows in recent periods and low bulk losses expands our overall regular premium base.

28:39 Our workplace pipeline is at a very healthy level, reinforcing our optimism of sustained business growth. Workplace outflows were slightly up year on year, reflecting higher base AUA and the natural attrition from those taking their pensions or porting their workplace schemes to their new employer. Moving across the slide to retail business flows, it is pleasing to see an uptick in gross inflows with outflows stabilizing. Positive market effects have more than offset the overall net fund outflows, with average AUA closing up year on year. Looking at the bottom half of the slide, IFRS operating profit increased 20% to EUR 179,000,000.

29:31 The improved investment contract result is supported by higher fee revenues from the 5% growth in average AUA and continued cost discipline. Our scale and operating leverage supported an improved operating margin of 19 basis points. Our Retirement Solutions business also delivered a strong operating performance in the first half. As a reminder, new volumes are not the primary driver of profits here. We run EUR 39,000,000,000 of annuity assets, so it is the management of this large book of business that drives most of our profitability. Stepping through the slide, starting in the top left, BPA volumes were 300,000,000 in the first half, reflecting market factors and our selective participation.

30:26 We have since completed a EUR 1,900,000,000 deal, and we are at an exclusive stage for deals totaling 1,000,000,000. So at 3,200,000,000 year to date, our BPA volumes are robust. In individual annuities, new premiums grew by 20% to 600,000,000, with our market share rising to 13%. In the bottom right, you can see that operating profit increased strongly in the period, up 36% to EUR $286,000,000. The improvement is supported by higher CSM releases, reflecting growing business scale, higher investment margins, reflecting the value add by Phoenix Asset Management and ongoing operational leverage.

31:16 We have maintained pricing discipline with business incepted at a similar level of strain to last year of around 3%, generating mid teen IRRs. We remain committed to deploying up to EUR 200,000,000 of capital this year, provided we secure sufficiently attractive returns. The 10% increase in our store of insurance contract value recorded in the CSM represents another key underpin to our future operating profitability. This increase reflects ongoing contributions from the usual sources, as well as a sizable contribution in this period from strategic projects, namely the expense savings benefit from in housing annuity backing assets and the impact of the Wipro strategic partnership on associated contracts.

32:09 Completing the IFRS picture, this next slide shows the first half movement in IFRS adjusted shareholders' equity. Our higher operating profitability means that we continue to close the gap between recurring sources and uses, being negative EUR 36,000,000 in the period compared to negative EUR 139,000,000 period last year.

32:34 Non operating expenses reduced to $184,000,000 reflecting the tapering of our planned investment spend. We reported adverse economic variances of $275,000,000 driven primarily by the negative marks on equity hedges, following a 7% rise in markets. As I illustrated back in March, this is a known consequence of our hedging strategy, which protects cash and solvency capital, but gives rise to an accounting mismatch under IFRS. The slide which accompanied the explanations provided in March, is included in the appendix. Actions such as the with profits initiative to sell 700,000,000 of future shareholder transfers to the estate will reduce our overall equity risk exposure, allowing us to shrink the size of the equity hedging program by around 10%.

33:30 On the right of the chart, you will see that we closed the period with an adjusted shareholders' equity of EUR 3,400,000,000. Before leaving this slide, I reiterate that our aim is for IFRS shareholders' equity, ex economics, to grow from 2027. Moving next to dividend. Phoenix is a highly cash generative business. We have a strong track record of consistent dividend growth and operate a sustainable and progressive dividend policy. I outlined in March the financial metrics that the Board considers when undertaking the annual dividend assessment. These are repeated on this slide, being namely OCG, the solvency coverage ratio and the parent company distributable reserves, all of which remain healthy.

34:24 Consistent with previous guidance, the Board continues to consider that the group's consolidated IFRS shareholders' equity does not give rise to any practical limitations to dividend payments. To conclude, we have made positive progress at the midpoint of our three year strategy, and we have increased execution certainty across all of our 2026 financial framework targets. We have positioned the business to generate mid single digit percentage annual OCG growth, producing a level of OCG, which more than covers our recurring uses and delivers excess cash of 300,000,000 or more per annum.

35:09 We're on track to reduce our leverage ratio to 30% by 2026, with all the levers required to achieving this being firmly within our control. Finally, supported by the acceleration of our cost saving plans, we are on track to deliver EUR 1,100,000,000 of IFRS operating profit in 2026, enabling us to cover our recurring uses on this reporting basis as well. Thank you for your attention. I will now hand you back to Andy. Thank you, Nick. Our vision is simple, to become The UK's leading retirement savings and income business, serving customers of all stages of their life cycle from 18 to 80, and we're making great progress.

36:04 We have built leading propositions across our pensions and savings and retirement solutions businesses and enhanced our asset management capabilities. Our focus will now turn to further building out our customer engagement tools, which will be enhanced by our increasingly digitally enabled customer interface shown in the lighter purple. Our strategic priorities are clear, and we're excited about what comes next. Looking forward, we expect the second half of twenty twenty five to be just as busy as the first as we continue to execute against our strategic priorities. For Grow, while we'll continue to consolidate our excellent position in workplace and annuities, the focus of our investment is in retail as we build out our capabilities.

36:53 Priorities here are engaging our customers, so I'm particularly excited about the imminent launch of our retail advice proposition. Also connecting our full range of products into key platforms, and so the launch of our smooth managed fund on the Quilter platform, one of the largest in the market, is a key step forward to reach more customers. For Optimize, we will progress our shift to in housing annuity backing assets. And for Enhance, by the end of the year, 75% of policies will be on their end state platform. Today, we're announcing our intention to change our group name from Phoenix to STANDARD LIFE PLC in March 2026. Our move to STANDARD LIFE brings our most trusted brand to the forefront and demonstrates our commitment to helping customers secure a better retirement.

37:46 It's a brand known to all of you and the brand we are already using for new business in the pensions and savings and retirement solutions markets. The move aligns our brand strategy with our group strategy, supporting our focus on organic growth. It unifies our colleagues and strengthens our employer brand. And it simplifies our business, reducing duplication and cost. In summary, we are executing successfully executing on our vision to be The UK's leading retirement savings and income business. Let me recap the three key messages. I'm delighted with the progress we're making against our strategic priorities. I'm pleased that the balance sheet pivot is beginning to emerge, and I'm optimistic about the future.

38:38 Delivery on our strategy is enabling us to meet more customer needs and in turn deliver strong shareholder returns. So with that, let us move to questions. That's great, Nick. Andy, thank you very much indeed for updating investors. I will now just bring back up your camera, if I may. Ladies and gentlemen, please do continue to submit your questions just using the Q and A tab situated on the right hand corner of the questions submitted already. I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, will be accessible via your Investor Me company dashboard. Joe, thank you very much kindly for hosting the Q and A. As you can see, you had a number of questions from investors this afternoon. Thank you to everybody for your engagement. If I may, Joe, just hand back to you. If I could, just ask you to navigate us through the Q and A, and I'll pick up from you at the end.

39:32 I'll just ask you to unmute as well. Thank you. Thank you, Mark. Starting with question on brand. How much will it cost to change the name to STANDARD LIFE? And what impact do you expect it to have on profits? So I'll I'll take that one, Joe. Good afternoon, everyone. Thank you very much indeed for taking your time to to to join us. Really plea pleased that so many of you joining the session today. So, actually, we're gonna save money by by doing this because we already spend on developing the STANDARD LIFE brand because it's our brand for new business in our two big businesses, pensions and savings, retirement solutions. But then we also spend money on the Phoenix Group brand as as as the listed brand. So by bringing them together, bringing that strongest brand, most trusted brand to the forefront of STANDARD LIFE, it will actually cost us less.

40:22 I wouldn't put a particular revenue number on on on the brand change because it is the listed brand that that that is changing, but it will be easier. So, for example, if you're currently, if a customer has a ReAssure branded policy with us, it'll be ReAssure part of Phoenix Group. And our strategy, whenever we engage our customers to journey into retirement income with us, is to move them across into the standard life side of the house, the standard life branded products. So that's a it's a relatively complicated journey to go to a reassure part of Phoenix Group customer and say, come over across the STANDARD LIFE. Of course, if they're a ReAssure part of STANDARD LIFE customer, coming across the STANDARD LIFE will be an easier conversation. So I think it will be beneficial, but I wouldn't put a a particular revenue number on it. This is really about just simplifying down.

41:13 Thank you. How well positioned is Phoenix to capture market share as The UK retirement and pension market continues to grow? So we're we're exceptionally placed to to do that. So, I mean, Mark, is it possible to go back to specific slides, or is that is that that's feasible? If can maybe go to slide slide nine for us, please. Yeah. So so I think we made the point before earlier in the presentation about how big the market is and the structural growth and the regulatory tailwinds and the like. But slide nine is specifically trying to articulate why we are well positioned to win in those structurally growing markets. And and the three group wide advantages we have, one one is around customer engagement. So one in the five adults in The UK customers of Phoenix Group. For each pound they have with us, they have £3 elsewhere.

42:05 So so we have a a a massive advantage in terms of being able to to engage those customers, be the place they turn to first. One of our competitors in this space, very capable start up business called Pensions b, I'm I'm told that it cost them a thousand pounds acquire a new customer. They don't have any existing customers. They have to acquire new ones. We have 12,000,000 customers. So we have a £12,000,000,000 advantage on over them for for for example. The the second reason is that many of our competitors don't don't play across the breadth of retirement savings and income in the way that we do. And therefore, because we're more diversified between the the fee based capital light business and the the capital utilizing spread business, We get a capital efficiency benefit from the diversification across those businesses.

42:55 And then finally, our huge scale, the means and the fact we're very good at leveraging technology within that means that we're more cost efficient. And and those those three group wide advantages basically play through each of the individual markets so that we've got great access to customers, great engagement with customers, and the cost of capital efficiency means we can be competitive on price, but then make better margins than our than our peers do, and that that's evidenced in our results. What are you doing to deepen relationships with your 12,000,000 customers and build loyalty? Yeah. So that that's sort of the net the next big big big step on the journey for us. So if you go back, you know, several years ago, Phoenix was a closed book consolidator, and we bought STANDARD LIFE business. I I've actually just passed my thirty eighth anniversary in the industry on the September 1. So I know you're all sat there thinking I don't look old enough, but I have worked in the industry for thirty eight years.

43:52 And through most of that time, I've competed against STANDARD LIFE as as the best, toughest competitor. So the opportunity to join Phoenix five and a half years ago and reinvigorate that STANDARD LIFE brand and business has been a, you know, a huge, you know, huge pre provisional, a lot a lot of fun. The approach we've taken to that is that we started off with bulk purchase annuities, so retirement solutions business. And then we moved on to workplace, and those are both going really, really well for us. And and the reason we did that was that in those markets, you have a small number of professional buyers, and therefore, the the employee benefit consultants, the corporates themselves. So you can get to them quite quickly, and and and we, you know, made made a lot of progress there. The next step of the journey for us, and we've sort of done this sequentially, is is on the retail side. And and where we are on the retail side is we now have a full suite of products to offer customers.

44:48 But, basically, part of the market is intermediated through independent financial advisers. What we need to do there is connect our products into the platforms that those advisers use. So we've got a program of work to do that. And then, for those customers that choose to come direct, which is about 90% of customers, but roughly half of the assets from a a kind of value perspective, We're now building out our engagement tools. So so we have an excellent digital front end. The the the standard life for app is as you heard in in the presentation a moment ago has 4.7 stars on the on the App Store, so an excellent app. But we tend to use it reactively. We want to make it much more proactive. We're also launching in the fourth quarter in house advice so that we can offer our customers advice as they journey to and through retirement. So at the moment, only 10% of The UK population get advice on that journey to and through retirement. So so a series of initiatives around around around engagement, which, you know, builds on the work we've done to date.

45:49 Do you think the recent inheritance tax discussion acts as a disincentive to pension savings? And how significant might that be on future business with Phoenix? Yeah. So I I the first thing I'd say is is I do worry about the the sort of the speculation and the chopping and changing. And if any of you are are daily readers, we talk to all of the journalists. We're we're so journalists are publication agnostic on the results day, but the Daily Mail picked up on this and did quite quite a piece around it. It was a bit of a Daily Mail on Tuesday. But because pensions is a long term game. It's something that go you know, goes over multiple decades. And if it's always chopping and changing, there's a real risk that it it undermines consumer confidence. And as, you know, as retail investors, I'm sure you would you'd you'd you'd appreciate that that that risk, that concern.

46:41 So so stability is important. Having said that, if you take the specific, we we have seen sort of ultra high net worth individuals doing a bit less in pensions over the last year. We've then seen about a £500,000,000 uplift in the inflows to our international bond, which is our our offshore bond. So what's important from our perspective as as Phoenix Group is that we have the full range of products and tax wrappers. Ultimately, people will save for retirement, but but that will be an important thing for people to do. And if we have a full range of the different tax wrappers, then as the tax rules change around things, customers can, you know, redirect their their their money against whatever is the the the the most tax efficient range of tax wrappers based on the rules at the time. So so it shouldn't have that significant impact on our business.

47:34 Thank you. Looking at pensions and savings operating margins and the improvement to 19 bps, where do you see the ceiling for margins by 2026? Do want say that, Nick? I've been doing all the work. It's not normally that way around in focus. So you would have seen, as we covered earlier in the presentation, the margin improved from 17 basis points to 19 basis points. It was substantially driven by our cost savings initiatives. So revenues our revenues for that business went up by 5%, and the cost base was static, and the operational leverage that is effectively embedded in these numbers gave the improvement of margins. We're only one third, if you like, 40% of the way through our cost savings initiatives.

48:23 We said that we've targeted 250,000,000. A 100,000,000 run rate has already been achieved. As we deliver the remainder of our cost of cost program, you will see further savings come through, and the vast majority of those savings will come through the pensions and savings. So we expect just the cost savings initiative alone to push the margins north of the 20p mark somewhere in somewhere in the mid to low twenties. So there's there's plenty of runway. Beyond that, of course, we will continue to see growth in our in our asset base as we continue to write more workplace pensions as we broaden our offering in retail that Andy just covered. So there's there's plenty of tailwinds in relation to that business, and and and and we're looking forward to delivering the improvements in margins and overall profits.

49:17 Thank you. Turning to retirement solutions. What impact will the recently completed 1,900,000,000 bulk purchase a I the attractive important internal rates of returns. Question. I So the 1,900,000,000, the future profits that we expect to generate will augment the operating capital generation that we expect to deliver. As we trade up the very as we back those commitments with with the appropriate assets, and then as we as we look for opportunities to enhance the yield, you should we should see some incremental profits come through in in future periods.

50:08 So it's part and parcel of increasing the profitability that is delivered from a business, both through the the solvency lens, the operating capital lens, but also through the IFRS lens. On that latter basis, the improvements in profitability will come in on a on a on a slow at a slower rate, just the feature of of the accounting rules that we have to follow. Thank you. You also announced an extra 20,000,000,000 of annuity backing assets as being in house. Will there be a commensurate increase in annuity portfolio optimization management actions? Do do that one or between us. So so so the answer is that that, yes, we do expect it will enable us to do more annuity portfolio re optimization actions.

50:59 Because, ultimately, having it in house means that we can, you know, trade in instantaneously when there are these market dislocations that we take take advantage of in in doing that annuity portfolio optimization. So so it it definitely will will help do more of those. What we're not doing, though, is we're not increasing our guidance from the £500,000,000. So effectively, the way to think about it is, you know, some commentators in the market are are you know, in fairness, we didn't really get any of this on on Monday. But prior to Monday, where, you know, is that really gonna be repeatable every year, year in, year out? And and those commentators are now saying, okay. Well, if you've got more kind of source of doing this, then I'm actually more convinced it's gonna be repeatable year in, year out. So it just gives more confidence in the in in that trajectory going forward.

51:50 Turning to the balance sheet. How do you view balancing deleveraging, reinvestment into growth initiatives, and potential returns to shareholders? It's good. I'll I'll I'll kick off with that, but then, I'm sure Nick may well chip in as well. Ultimately, I mean, the first thing I'd say is we're in a really good positive position in that every year, we're generating in excess of 300,000,000 of excess cash. So you all know as investors that we have a very attractive dividend. Our dividend costs us £550,000,000 a year to pay. That's the sort of the over 8% dividend yield that we have. But then on top of that £550,000,000 each year, we're generating in excess of 300,000,000 excess repeatable cash on on top. It makes our overall, if you like, free cash flow yield more like more like 14%.

52:38 So we then look to deploy that excess of 300,000,000 using a capital allocation framework where we'll deploy it against the highest returning opportunity. And what we do is we tend to set out four potential opportunities. One is reducing debt. Another is investing in organic growth. A third would be m and a, and a fourth would be considering additional capital returns such as share buybacks to to shareholders. And what I should say is in those base numbers, that dividend of that 300,000,000 excess, we're already making significant investment back into organic growth embedded in those numbers. So it'll be cases that we wanna do even more of that, but we're already growing strongly. We've already embedded growth in it. What what we're basically saying at the moment is that the highest returning opportunity for that excess cash is to you to use it to delever because our leverage ratio at the end of last year was at 36%, which was a typical leverage ratio for a closed book consolidator.

53:40 But now we're a strongly organically growing business. You the the broader market has said, okay. You really need to bring your leverage ratio down in line with peers, which would be a leverage ratio around 30%. So we've made good progress in the first half. We've taken that leverage ratio down from 36 to 34%, but the market would like to see it at 30%. And I would have said that, you know, that those who've been investors through this year have seen a a big increase in our share price this year. I think that a lot of that is because the market has looked at what we're saying we're looking to do on beverages and said, okay. We're confident you're gonna get there, and we're really pleased about that. And hence, the the shares have have have reweighted as a result of that trajectory on bringing leverage down, which is, I guess, almost sort of the proof that that that we're we're right in thinking that was the the highest value use for our excess cash.

54:31 As a follow-up to that, what is your appetite for closed book m and a at today's multiples? So what we're basically looking to do is deploy excess cash and excess resources at the highest available return. So so had you asked me that question, Joe, sort of seven years ago, my my answer would would have been, you know, that that's the the sort of one real option we've got to deploy excess capital. So we would have we would have been, you know, very much queuing up to do everything we we possibly could. Obviously, now we're growing strongly organically. We're we're we're in a very fortunate position as we have multiple ways that we can use excess excess cash and capital, and we will deploy against the highest return opportunities. So we have seen some m and a opportunities come come our way over the last, couple of years.

55:21 But what we've actually concluded is the alternative uses of excess capital capital get higher return and deleveraging its higher return. So so if back book consolidation opportunities came along and the returns were higher than alternatives, we absolutely would consider those. But but we're we're clear in the short term, the focus is on deleveraging and giving that leverage ratio down to 30%, and we won't be we won't be knocked off that course. We will get that leverage ratio down to 30%. Sticking with the balance sheet, is it possible that IFRS shareholders' equity could go much lower and even below zero if interest rates and or equities move higher? How would you react if that if this happened, and what would it mean for shareholder returns? Yeah.

56:09 The the directionality of our IFRS shareholder equity is caused by an accounting mismatch that comes through that reporting basis. We we we are resolute in ensuring that we have a very stable and predictable level of capital, a very stable and predictable level of cash. And the hedging program that we have in place delivers that. Hence, the the highly sort of predictable dividends that we've been able to pay our shareholders. However, when you when you move from the solvency view of the world to the IFRS world world of the world, view of the world, many of the components that we're hedging don't appear on that balance sheet, hence giving rise to accounting volatility. And I wanted to to make sure that that context was given.

57:01 So to to the extent that it is this hedge relating noise or mismatch, if you like, that is that is driving the reported IFRS shareholder equity, we are unconcerned. There are no it imposes no practical limitations to what we need to do to where we deploy capital for growth. No practical limitations on the decisions that we make around dividend. And therefore, if it continued to reduce because of the interplay of markets and the hedging program that I said delivers very important stable cash flows and solvency, then then we'll be unconcerned even if it was lower, even if it was zero. No. There is it is not a representative view of the of the underlying capital strength of our business due to those limitations that I've referenced earlier in my answer.

57:58 Thank you. And the final question, total cash generation was short of expectations for the half. However, you said that you're on track for 2026 targets. Why was it so low at the half year, and why are you so confident going forward? Well, thank you. Thank you for that question. Total cash, I mean, the the simple answer is it's due to timing effects, which which will throw up by the end of the year. And just just to give you some more context, total cash generation is the sum of operating cash generation. This is the capital get gets thrown out by us managing our business well, controlling costs, you know, control retaining customers, running our business well, generating yield optimization actions. These are all items within our control. We we regard them as repeatable.

58:46 And as you saw earlier, that has grown year on year by 9% to 705,000,000. But but this total cash generation is the sum of that plus nonoperating components. Those don't recur every year. They reflect opportunities to optimize pockets of balance sheet. Those have been delivered in the course of the first half of twenty twenty five. But for them to count as part of total cash generation, they have to be additionally remitted from a live company's backup to the to the to the holding company, to the group company. And that hasn't yet happened. So we are extracting those pockets of nonrecurring value. They just haven't been pushed up all the way out to the top. Hence, my point that it's timing decisions of timings of when remittances are made and why they will be trued up at the end by the end of full year 2025.

59:40 Thank you very much. That's all we have time for today. Mark? That's great, Joe. Thank you very much indeed for taking us through the Q and A. Nick, Andy, thank you very much indeed for your time also. Before I redirect investors, Andy, who are on today's call for their feedback, I thought I'd just ask if I may just for a couple of closing comments and then I'll send investors to give you their thoughts and their expectations. Perfect. Thank thank you, Mark. So so look. The summary for me would be our vision is to be The UK's leading retirement savings and income business, and we have a clear strategy to achieve that, and we're executing really well against that strategy. We're delivering on our strategic priorities. That, in turn, is driving the strong financial performance of the business, So the growth in the operating cash generation, the growth in the operating profit, the strengthening of the balance sheet, the reducing of the leverage is all coming as a result of executing on on on that strategy.

1:00:34 What what that means is that you have a very secure dividend of over 8%. That dividend is growing, and we have this excess cash on on on top, which gives us a lot of financial flexibility. But then in particular, if I sort of look look forward into the medium term, you know, there there's really strong market drivers in in our chosen market, The UK savings and retirement markets. The the structural and demographic, socioeconomic drivers of growth together with attractive political and regulatory tailwinds, and therefore, we feel very optimistic that we're really well placed to take advantage of of of those, and and our business will keep continue to thrive and grow. So that that that would be a a summary. But but as you say, Mark, we'll be very keen to hear peep people's feedback. That's great. Andy, Nick, thank you once again for your time this afternoon. Can I please ask investors not to close this session as we're now automatically redirect you so you can provide your feedback in order that the management team can really better understand your views and expectations?

1:01:32 This will only take a couple of moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Phoenix Group Holdings PLC, we'd like to thank you for attending today's presentation. Wish you all well for the rest