Phoenix : Capital Markets Day 2020

Capital Markets Day, strong trading update exceeding 2020 cash generation target, and setting net-zero carbon targets

Phoenix Group ("Phoenix"), the UK's largest long-term savings and retirement business, is today hosting a Capital Markets Day for investors and analysts, which will include presentations by Phoenix's management team.

The purpose of the event is to provide greater insight into Phoenix's strategy and financial framework. The presentations will also include a series of deep dives into how its businesses are being managed to deliver sustainable cash, resilience and growth for investors.

Alongside this, Phoenix today announces a strong trading update with 2020 cash generation ahead of target.

Commenting on the results, Group CEO, Andy Briggs said:

"Phoenix has continued to perform strongly with full year cash generation of £1.7 billion now complete, exceeding the top end of our target range. Our balance sheet remains resilient, underpinned by our high-quality portfolio of assets and unique approach to risk management, and our shareholder capital coverage ratio of 159% remains robust.

As we execute successfully against our strategy, I am confident that we will continue to deliver cash, resilience and growth, and therefore sustainable cash generation for investors.

We also recognise that Phoenix has an important role to play in society and today we are announcing our commitment for our operations to become net-zero carbon by 2025 and for our investment portfolio to do so by 2050. Sustainability is at the core of our purpose and reducing our environmental impact will be integral to delivering long-term value for all of our stakeholders."

Financial Highlights - Phoenix continues to deliver cash, resilience and growth

Strong cash generation

•  £1,713 million of cash generation1 in 2020 (2019: £707 million) exceeding the upper end of the 2020 cash generation target range of £1.5 billion - £1.6 billion.

Resilient Solvency II balance sheet with increased surplus

•  Solvency II surplus increased by £0.6 billion to £5.0 billion2 as at 30 September 2020 from £4.4 billion3 at 30 June 2020 on a pro-forma basis, driven in part by the successful delivery of management actions.

•  Shareholder Capital Coverage Ratio4 of 159% as at 30 September 2020 (150% as at 30 June 2020 on a pro-forma basis), at the midpoint of the Group's target range of 140% - 180%.

Robust, high-quality credit portfolio

•  98% of £35 billion shareholder debt portfolio is investment grade; 21% is rated as BBB with only 2% of the portfolio rated as BBB- as at 30 September 2020.

•  Limited downgrade experience to date with only £1.6 billion (4.5%) of bonds in the £35 billion shareholder debt portfolio subject to a downgrade which changed the letter rating, and £148 million of bonds (0.4%) being downgraded to sub-investment grade.

•  99.3% of all contractual cashflows paid on the £9.3 billion illiquid asset portfolio.

Growth through Open business

•  £472 million incremental long-term cash generation from new business in the 9 months ended 30 September 2020 (FY 2019: £483 million5) including:

  • - £300 million from BPA (FY 2019: £235 million);

  • - £94 million from Workplace (FY 2019: £155 million); and

  • - £42 million from Customer Savings and Investments (includes Wrap and Retail business) (FY 2019: £59 million).

Further financial disclosures are provided in the appendix to this announcement and all financial results are available in the financial supplement which can be accessed through the following link:

www.thephoenixgroup.com/investor-relations/capital-markets-day-2020

Phoenix has committed to becoming net-zero carbon by 2050

Phoenix recognises its responsibility in driving forward its commitment to sustainability, and in particular the importance of reducing greenhouse gas ("GHG") emissions and accelerating the transition to a low carbon economy. As such, today we are setting net-zero carbon targets in two phases:

•  Phase 1: Operations: we are committing to ensuring the Scope 1 and 2 emissions of our occupied premises and the Scope 3 emissions from business travel are net-zero carbon by 2025.

•  Phase 2: Investment portfolio: setting a net-zero by 2050 target for our investment portfolio.

We will take into account the best available scientific knowledge in this process. Therefore, in relation to our operations, we will set and pursue a 1.5°C aligned science-based emissions reduction target, with any remaining hard-to-decarbonise emissions compensated using certified GHG removal projects.

In relation to our investment portfolios, where we have the ability to influence the investment strategy or investment solution, we will aim to reduce the emission intensity to net-zero GHG emissions by 2050. This is also consistent with the objective of limiting the temperature rise to no more than 1.5°C above pre-industrial temperatures and is in line with the Paris Agreement and the commitment of the UK Government.

We will do this by:

•  Increasing our investment in assets that support the transition to a low carbon economy; and

•  Using our position as a significant asset owner to engage with investee companies and promote alignment to the Paris Agreement. We will reduce or ultimately eliminate our exposure from companies that show little progress following sustained engagement.

Presentation

We will be hosting our live virtual Capital Markets Day for analysts and investors today at 2.00 pm (GMT).

A link to the live webcast of the presentation, with the facility to raise questions, and a copy of the presentation will be available atwww.thephoenixgroup.com

You can register for the live webcast at the link below:https://phoenixgroup.virtualhub.events

A video replay of the presentation will be available through the Phoenix Group website post-event.

Enquiries

Investors/analysts:

Claire Hawkins, Corporate Affairs and Investor Relations Director, Phoenix Group [phone]

Media:

Douglas Campbell, Teneo [phone]

Haya Herbert Burns, Teneo [phone]

Shellie Wells, Head of Corporate Communications, Phoenix Group [phone]

Appendices

Appendix 1: Estimated PGH Shareholder Solvency II surplus

£bn

Own Funds

SCR

Surplus

Shareholder Capital Coverage Ratio4

30-Sep-202

30-Jun-20 Pro-forma3

13.6

13.2

8.6

8.8

5.0

4.4

159%

150%

Appendix 2: Estimated PGH Regulatory Solvency II surplus

£bn

Own Funds

SCR

Surplus

Shareholder Capital Coverage Ratio4

30-Sep-202

30-Jun-20 Pro-forma3

17.0

16.3

12.0

11.9

5.0

4.4

142%

137%

Appendix 3: Change in estimated PGH Solvency II surplus

PGH Solvency II surplus as at 31 December 2019 Pro-forma6

Surplus emerging and release of capital requirements

Debt raise

Management actions

New business strain7

Dividend, financing, corporate costs & pension contributions

Assumption changes

Economic variances and other

PGH Solvency II surplus as at 30 September 20202

£bn

31-Dec-19 Pro-forma6

13.0

8.6

4.4

152%

31-Dec-19 Pro-forma6

15.5

11.1

4.4

140%

SCCR4

4.4 152%

0.5 9%

0.2

0.6

(0.1)

(0.5)

0.1

(0.2)

5.0

3%

8%

(3)%

(7)%

1%

(4)%

159%