Annual Report and
Accounts 2022
Phoenix Group Holdings plc
We are proud to be the UK’s largest long-term
savings and retirement business. With
approximately £260 billion of assets under
administration, we offer our c.12 million
customers a comprehensive range of products
across our market-leading pensions, savings
and life insurance brands. Together, we’re
helping people secure a life of possibilities.
Access the full reporting suite at thephoenixgroup.com
Find out more on
our website
Our 2022 reporting suite
You can find out more about our activities, financial performance,
sustainability strategy and our progress to becoming a net-zero
business by 2050 on our website and in our reporting suite.
Topics covered Annual Report Sustainability Report Climate Report
Business strategy & performance
Risk management
Board governance
Financial performance
Sustainability strategy
Sustainability governance
ESG materiality
Social issues
Climate-related risks
Climate-related opportunities
Performance In this report
Key
performance
indicators
Other
performance
indicators
Operating companies’
cash generation
£1,504m
(2021: £1,717m)
REM
APM
Total ordinary dividend
per share
50.8p
(2021: 48.9p)
Group Solvency II surplus
(estimated)
£4.4bn
(2021: £5.3bn)
REM
Adjusted operating profit
£1,245m
(2021: £1,230m)
APM
Group Solvency II shareholder
capital coverage ratio (estimated)
189%
(2021: 180%)
REM
APM
IFRS loss after tax
£(1,762)m
(2021: £(709)m)
Incremental new business
long-term cash generation
£1,233m
(2021: £1,184m)
REM
APM
Fitch financial leverage ratio
30%
(2021: 28%)
REM
APM
Strategic report
About Phoenix Group 4
Our investment case 6
Chair’s statement 8
Group Chief Executive Officer’s report 10
Our business model 14
Our strategic priorities and KPIs 18
Business review 28
Stakeholder engagement 42
Non-financial information statement 44
Streamlined Energy and Carbon
Reporting (‘SECR’) statement 46
Task Force on Climate-Related Financial Disclosures 48
Risk management 52
Viability statement 68
Corporate governance
Chair’s introduction to governance 72
Board leadership and Company purpose 74
Division of responsibilities 82
Stakeholder engagement 84
Composition, succession and evaluation 88
Audit, risk and internal controls 96
Sustainability governance 105
Workforce engagement 108
Directors’ remuneration report 110
Directors’ report 147
Statement of Directors’ responsibilities 153
Financials
Independent auditor’s report 156
IFRS consolidated financial statements 168
Notes to the consolidated financial statements 175
Parent company financial statements 290
Notes to the parent company financial statements 293
Additional Life Company asset disclosures 307
Additional capital disclosures 312
Alternative performance measures 314
Additional information
Shareholder information 318
Glossary 320
Online resources 325
Forward-looking statements 326
The Strategic report was approved by the Board of Directors
on 10 March 2023 and signed on its behalf by
Andy Briggs
Group Chief Executive Officer
Assets under administration
£259bn
(2021: £310bn)
APM
All amounts throughout the report
marked with
REM are KPIs linked to
Executive remuneration. See Directors’
remuneration report on page 110.
All amounts throughout the report
marked with
APM are alternative
performance measures. Read more
on page 314.
Phoenix Group Holdings plc Annual Report and Accounts 2022 1
Strategic report
Strategic
report
2 Phoenix Group Holdings plc Annual Report and Accounts 2022
About Phoenix Group 4
Our investment case 6
Chair’s statement 8
Group Chief Executive Officer’s report 10
Our business model 14
Our strategic priorities and KPIs 18
Business review 28
Stakeholder engagement 42
Non-financial information statement 44
Streamlined Energy and Carbon
Reporting (‘SECR’) statement 46
Task Force on Climate-Related Financial Disclosures 48
Risk management 52
Viability statement 68
3Phoenix Group Holdings plc Annual Report and Accounts 2022
Strategic report
About Phoenix Group
At a glance
£259bn c.12m
total assets under
administration
customers
c.6,800 FTSE 100
colleagues
as at 1 March 2023
and FTSE All World
c.£6.4bn £12.1bn
market capitalisation
as at 1 March 2023
of Group in-force long-term
free cash to emerge over time
Our vision
To grow a strong and sustainable
business to help more people on their
journey to and through retirement.
Our purpose drives everything we do:
Helping people
secure a life of
possibilities
Our business Our family of brands
Who we are
Our values
Growth
We grow our
business through
finding new ways
to develop
our expertise
and innovate.
Passion
We are passionate
about understanding
and acting on what’s
important to our
customers, colleagues
and society.
Responsibility
We build trust by
taking accountability
and empowering
others to do the
right thing.
Courage
We’re ambitious
in the challenges
we solve and we
always speak up.
Difference
We collaborate
across boundaries
and embrace
difference to
deliver the best
customer and
colleague outcomes.
Phoenix Group Holdings plc Annual Report and Accounts 20224
Home
equity
release
Retail
savings for
retirement
Income
drawdown
and individual
annuities
Legacy
pensions
and savings
products
Pension
consolidation
Long-term savings Retirement
We offer a range of customer solutions across our businesses
Heritage Pensions
and savings
Retirement
solutions
Europe
and SunLife
We are the market leader in
the safe and efficient
management of legacy
pensions and savings policies
to deliver better customer
outcomes, and in realising
significant cost and capital
synergies through Heritage
backbook M&A.
We help customers journey
“to and through” retirement. Our
Workplace business supports
people who save through their
workplace pension, and our
Retail business supports
individual customers to save
for, transition to, and earn
income in retirement.
We participate across the
key retirement markets, as
we seek to help customers
secure income certainty in
retirement, including Defined
Benefit pensions (including
Bulk Purchase Annuities),
individual annuities, and
home equity release.
Standard Life International,
which operates in Ireland
and Germany, offers a range
of pensions and savings
products, including
international bonds. SunLife
offers protection solutions and
funeral plans direct to the over
50s market in the UK.
c.5.5m c.3m c.1.5m c.2m
customers customers customers customers
Our in-force business has
c.12m customers, with scale
businesses across the long-
term savings and retirement
markets
c.£140bn
growth
businesses
£259bn
AUA
c.£25bn
c.£119bn
c.£82bn
c.£33bn
Defined
contribution
workplace
pensions
Defined
Benefit
pensions
Protection
solutions
and funeral
plans
Phoenix Group Holdings plc Annual Report and Accounts 2022 5
Strategic report
Our investment case
How we generate shareholder value
We have a clear and differentiated strategy: we are growing
our in-force business both organically and through M&A…
In-force business
Our in-force business provides
three competitive advantages
Capital
efficiency
Customer
access
Cost
efficiency
Further
in-force
Further
in-force
Reinvest
surplus
cash
Reinvest
surplus
cash
M&A growth
Capability
M&A
• Accelerates
capability
build
Backbook
M&A
• Cost and
capital
synergies
Organic growth
Retirement
solutions
• DB Solutions
• Retirement
Income
Fee-based
businesses
• Workplace
• Retail
• Other
Phoenix Group Holdings plc Annual Report and Accounts 20226
Dividend per share
32.2p
36.5p
40.8p 40.8p 40.8p
41.9p
45.2p
46.0p
46.8p
47.5p
48.9p
50.8p
H1: 24.8p
H2: 26.0p
+5%
20122011
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cash
In-force business
covers our dividend
over the very long term
Resilience
Highly resilient
capital position
Growth
Growing organically
and through M&A
…which underpins our
sustainable dividend approach
...to deliver on our
financial framework...
+4% CAGR
Our strong dividend track record
Phoenix Group’s
dividend policy
The Board intends to pay
a dividend that is sustainable
and grows over time
Phoenix Group Holdings plc Annual Report and Accounts 2022 7
Strategic report
Chair’s statement
A truly purpose-led
business
“Phoenix is fully embracing its purpose
as we help more people on their journey
to and through retirement, while delivering
better outcomes for all of our stakeholders.”
Alastair Barbour, Chair
I am delighted to report that 2022 has
been another year in which Phoenix Group
has delivered both clear strategic progress
and strong financial performance.
During the year, Phoenix Group has once
again continued to produce the high levels
of predictable cash generation it has
always been known for and maintained
its resilient balance sheet despite the
economic turbulence. The Group has also
delivered strong organic growth through
our Standard Life branded businesses and
M&A growth with the announcement of
our first ever cash-funded acquisition of
SLF of Canada UK Limited (‘Sun Life of
Canada UK’). All of which has enabled the
Board to recommend a dividend increase
of 5% for 2022.
At the Group’s Capital Markets Event in
December 2022 the executive team
detailed their clear strategy to meet more
of the needs of our existing customers and
to attract new customers, enabling us to
continue delivering cash, resilience and
growth going forward. The Group also set
its first ever organic growth target, which
reflects both the Board and executive
team’s confidence in Phoenix Group’s
future growth prospects, despite the
challenging economic outlook for 2023.
I am proud to see that the journey Phoenix
Group has been on during the ten years I
have served on its Board is delivering such
clear value to our customers, colleagues,
shareholders and wider society, as we fully
embrace our purpose of ‘helping people
secure a life of possibilities’.
Our purpose drives all that we do
As the UK’s largest long-term savings and
retirement business, managing £259 billion
of assets on behalf of our c.12 million
customers, we have the responsibility and
opportunity to make a real difference to
our customers and to help drive a low
carbon, fair and more secure future.
That is why we are fully embedding ESG
considerations across our business. Our
strategic priorities are therefore informed
by, and in support of, the key ESG themes
where we can make the most difference,
to both the planet, and to people.
If we are really going to help people secure
a life of possibilities, we need to play our
part in tackling the climate crisis affecting
our planet. This means managing the
financial risks that climate change poses to
our customers, as well as maximising the
opportunities it creates. We will do this by
transitioning our business to net zero.
And by being a leading voice, in calling
for action, and driving system change.
We have therefore set clear targets for our
journey to net zero across our investment
portfolio, supply chain and operations, and
with an estimated 24 million tonnes of CO
2
emissions from our investment portfolio,
we really can make a difference.
We are taking an active approach
to protecting our customers, by
decarbonising our portfolios at scale, and
through stewardship engagement. We also
want to take advantage of the substantial
investment opportunities, that moving to
a green economy presents, such as
renewable energy and sustainable
transport. A great example of which
is the £330m of policyholders assets
we have invested into an innovative
multi-asset ‘climate solutions’ mandate.
I am also delighted with the progress we
are making to decarbonise our supply
chain and operations, with 82% of our
suppliers committed to science-based
or Race to Zero based targets, and an
80% reduction in the emissions intensity
of our own operations since 2019.
Our second key theme is focused on
people, through promoting financial
wellness and the role of good work and
skills. We are facing a growing pension
savings gap, with research from our think
tank, Phoenix Insights, revealing that only
14% of defined contribution pension
savers are on track for a retirement income
that maintains their current standard of
living. Engaging people in their financial
futures, and advocating for broader
societal action to tackle under-saving,
is a critical part of our commitment to
our purpose. Phoenix is supporting better
financial futures by meeting more of our
customers’ evolving needs on their journey
to and through retirement, through our
range of innovative products and services.
However, for people to have better, longer
lives they also need access to good work
and opportunities to upskill throughout
their careers, increasing their incomes and
ability to save for retirement. Phoenix
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Phoenix Group Holdings plc Annual Report and Accounts 20228
Insights advocates for change in working
practices, careers advice and lifelong
learning, as explained in more detail
on pages 24–25. And as an employer,
Phoenix is committed to being an exemplar
inclusive, age-friendly workplace.
Supporting our colleagues
We also have a broader role to play in
society and against the backdrop of
economic uncertainty, a key issue over
the past year has been the Cost of Living
Crisis. The Board has therefore been
focused on ensuring our colleagues are
supported throughout. Central to this has
been a wide-ranging support package to
help colleagues navigate the cost of living
challenges, which included giving all
colleagues, except our most senior staff,
a net £1,000 payment in August 2022.
Shareholder dividend increase
The Group has a clear dividend policy
which is to pay a dividend that is
sustainable and grows over time, with the
Board prioritising the Group’s long-term
dividend sustainability at all times.
I am delighted to announce that the Board
is recommending a 5% increase in the
Group’s 2022 Final dividend to 26.0
pence per share, meaning the Group’s
Total dividend for 2022 will be 50.8 pence
per share. This reflects the Group’s strong
performance across a range of strategic
and financial performance measures. It
comprises a 2.5% organic dividend
increase, and a 2.5% inorganic increase,
reflecting the value from the acquisition of
Sun Life of Canada UK.
Going forward, we expect the business to
continue growing organically and we also
remain committed to M&A. This in turn is
expected to support a dividend that is
sustainable and grows over time.
Board changes
I am delighted to be fulfilling the role
of Chair while Nicholas Lyons is on a
14-month sabbatical, which is enabling him
to undertake the role of Lord Mayor of the
City of London. Nicholas has resigned
from the Board on a temporary basis for his
sabbatical, but remains in contact with
myself and our CEO, Andy Briggs, so that
he can seamlessly resume his role as Chair
from November 2023. In line with good
corporate governance as it relates to the
independence of Non-Executive Directors,
having served ten years on the Phoenix
Group Board, I will sadly be leaving the
Board when Nicholas returns in November.
Elsewhere, during 2022 the Board was
delighted to welcome Katie Murray as an
independent Non-Executive Director and
Chair of the Board Audit Committee, and
The success of our
“Let’s Get Ready” campaign
We’re living longer than our parents and grandparents’ generations,
which presents huge opportunities for us all. To make the most of these
opportunities, we need to think differently about how we work, learn,
save and care for our families, and retire.
We need to reshape the systems that support and enable people to live
better, longer lives. As the UK’s largest long-term savings and retirement
business, we believe we have a critical role to play in helping to achieve this
and are committed to advocating on behalf of our customers to deliver it.
That is why we launched a multi-media campaign during 2022 on
stereotypes and perceptions of retirement to kickstart a national
conversation on retirement and the impact of people living longer
lives, with positive feedback across a variety of stakeholders.
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Maggie Semple as an independent
Non-Executive Director and the Group’s
Designated Non-Executive Director for
Workforce Engagement. Katie and Maggie
have brought a diversity of experience and
new perspectives, and both are already
making valuable contributions. We also
wished Wendy Mayall a fond farewell, as
she retired from the Board in 2022, after
diligently serving two three year terms and
supporting us in navigating a number of
key strategic initiatives during her time.
Outlook
As we enter a challenging economic
environment in 2023, the Board and I are
confident that Phoenix’s business model
and risk management approach will ensure
that we remain highly resilient to any
economic volatility. While our strategy will
support us in delivering future growth, as
we meet more of the needs of our existing
customers and acquire new customers.
Thank you
Finally, I would like to take the opportunity
to thank the Board, our colleagues, our
partners and all of our wider stakeholders
for their hard work and dedication in
delivering what has been another
successful year for Phoenix Group.
Alastair Barbour
Phoenix Group Chair
Phoenix Group Holdings plc Annual Report and Accounts 2022 9
Strategic report
Group Chief Executive Officer’s report
Phoenix is delivering
sustainable growth
“2022 has seen us execute against all of our
strategic priorities as we delivered both
organic and M&A growth, which demonstrates
that Phoenix is truly a growing business.”
Andy Briggs, Group Chief Executive Officer
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Group CEO
2022 has been a strong year of delivery for
Phoenix Group, despite the challenging
economic environment. As we have made
significant progress against our strategic
priorities during the year by continuing to
embrace our purpose. This has supported
us in delivering a strong set of financial
results, in line with our financial framework
of Cash, Resilience and Growth.
Delivering Cash, Resilience and Growth
supports an increased dividend
During 2022, our in-force business
delivered cash generation of £1.5 billion,
exceeding our 2021 target range of
£1.3-to-£1.4billion. Our resilient Solvency II
(‘SII’) capital position was maintained with a
SII Surplus of £4.4billion (2021: £5.3billion)
and an increased Shareholder Capital
Coverage Ratio (‘SCCR’) of 189% (2021:
180%), which is currently above our target
range of 140–180%, providing capacity
for us to invest into growth.
I am delighted we have delivered a second
consecutive year of organic growth with
record incremental new business long-
term cash generation of £1,233million
(2021: £1,184million). This means that we
have once again more than offset the
run-off of our in-force business and firmly
established Phoenix as a business that is
growing and sustainable. We are now
confident of growing our incremental new
business long-term cash generation going
forward and have set a target of c.£1.5
billion per annum by 2025, which is the
first organic growth target we have ever
set, which is a clear signal of our ambition.
We have also delivered M&A growth in
2022, with the announcement of our cash
funded acquisition of Sun Life of Canada
UK. This is expected to complete in April
2023, with the key regulatory approvals
now received. The significant value that
will be generated by this transaction has
enabled the Board to recommend a 2.5%
inorganic dividend increase this year,
which demonstrates the significant value to
shareholders of smaller, cash funded M&A.
As a result of our strong overall
performance, I am pleased that the Board
is recommending a dividend increase of
5%, in line with our dividend policy.
This reflects the Board’s determination
to reward our shareholders when our
business performs well.
The sustainability of this increased level of
dividend is underpinned by the £0.3 billion
increase in our Group in-force long-term
free cash to £12.1 billion (2021: £11.8 billion).
This is the cash that will emerge from our
in-force business and will be available to
our shareholders over time. It ensures our
increased level of dividend remains just
as sustainable over the very long term.
In terms of our IFRS reporting, we have
reported an increased adjusted operating
profit of £1,245m for the year (2021:
£1,230m), but the impact of our hedging
approach results in an IFRS loss after tax of
£(1,762)m (2021: £(709)m). As a reminder,
we hedge our Solvency balance sheet
with the aim of delivering resilient cash
generation over the long term, but this
does create IFRS accounting volatility.
This impact has been accentuated by
the significant increase in yields last year,
driving the large accounting loss, but this
does not impact our cash generation or
dividend capacity in any way.
Executing on our clear strategy
Phoenix’s role in society is to help
our customers journey to and
through retirement by meeting their
evolving needs.
Phoenix has a clear and differentiated
strategy as outlined on pages 14–15, which
is in support of our purpose of helping
people secure a life of possibilities.
Our strategy is simple. We are the experts
in optimising a scale in-force business for
cash and resilience, and we grow this both
organically and through M&A.
Our in-force business is the £259 billion
of assets we look after for our c.12 million
existing customers. It is highly cash
generative, and provides surplus cash,
that we can reinvest into growth.
Organic growth comes from meeting more
of our existing customers’ needs as they
save for, transition to, and secure an
income in retirement. We also acquire new
customers, who we can then help through
their life cycles.
In addition, we have attractive M&A growth
opportunities, where we acquire new
customers at scale and deliver better
Phoenix Group Holdings plc Annual Report and Accounts 202210
outcomes for customers with legacy
products. In the process, we transform the
acquired businesses, to deliver significant
cost and capital synergies.
But what’s particularly attractive about our
business model, is that the whole really is
more than the sum of the parts. With our
organic and M&A growth generating more
in-force business, that we then optimise.
We are confident of delivering our strategy
because our scale in-force gives us three
unique competitive advantages.
The first is capital efficiency, where we get
greater diversification from the breadth of
in-force products across our £259 billion of
customer assets. We are also highly
resilient, through our core capabilities in
risk management and capital optimisation.
Secondly, with c.12 million customers we
have an unrivalled level of customer
access, with around 1-in-5 UK adults being
a Phoenix Group customer. This provides
us with deep customer insights and clear
growth opportunities as we look to meet
more of their evolving needs over time.
And thirdly, we have a significant cost
efficiency advantage. This is enabled
through our customer administration and
IT partnership with Tata Consultancy
Services (‘TCS’), and our focus on
delivering a simplified operating model.
Our in-force business therefore gives us
real competitive advantages, that are very
hard to replicate. Which means we are
confident that we can, and will, win in our
chosen markets.
All of which provides us with the
opportunity to drive both organic and
M&A growth through meeting our
customers’ needs, as outlined in the
spotlight box to the left.
Delivering our strategic priorities
Our strategy is delivered on a day-to-day
basis through our three strategic priorities,
which cover the investments and the
programmes of work, that will further
enhance our competitive advantages, and
enable us to help people secure a life of
possibilities. Our progress this year against
each of these priorities is outlined below.
Optimise our in-force business
Our first strategic priority is all about
leveraging our scale in-force business to
deliver capital efficiency and better
returns on our capital, with a strong 2022
performance across our key areas of focus.
Delivering cost and capital synergies,
which we refer to as ‘management actions’,
Significant growth opportunities are available by
meeting more of the evolving needs of our existing
customers and acquiring new customers:
Supporting
corporates to de-risk
through BPAs
Corporates are de-risking their defined
benefit pension scheme liabilities
through Bulk Purchase Annuity (‘BPA’)
transactions in order to focus on their
core businesses. This is fuelling
increased demand for BPAs.
c.£1.4 trillion stock
Phoenix response
We are now an established player in
the BPA market reflecting the
investment we have made to build a
comprehensive market proposition.
This is enabled by the strong asset
management and other supporting
capabilities we have built.
£30–60 billion
Market flows per annum
Phoenix response
We have re-established ourselves as a
significant player in the Workplace
market. We are investing in this
business and will leverage the Standard
Life brand and our improved
capabilities to retain and grow our
customer assets over time.
£40–50 billion
Market flows per annum
Phoenix response
By engaging our c.12 million customers
to better understand their needs and
delivering the solutions they require,
we have the opportunity to encourage
customers to save with us, consolidate
their pensions with us, and to
decumulate through retirement with us.
£80–100 billion
Market flows per annum
Phoenix response
As the market leader in Heritage M&A
we have the capability and scale to
integrate businesses onto our modern
platform to deliver better outcomes for
customers with legacy products. We
also unlock significant cost and capital
synergies to create shareholder value.
Further M&A
Market activity to continue over time
Enabling customers to
save for retirement in
Workplace schemes
The Workplace pension scheme
market is growing rapidly, driven by
auto-enrolment, an ageing population
and the move from defined benefit
pension schemes to defined
contribution pension schemes.
c.£0.5 trillion stock
Enabling individuals
to save for, transition
to, and secure
income, in retirement
People are seeking guidance on their
journey to and through retirement, as
responsibility for retirement planning
has now shifted towards individuals.
c.£1.0 trillion stock
Supporting customers
with legacy pensions
and savings products
Pressure on insurance companies to
focus their strategies, free-up capital
trapped in Heritage books, and to deal
with cost inefficient legacy products
and platforms, makes further
consolidation in the UK market likely.
c.£470 billion market
Phoenix Group Holdings plc Annual Report and Accounts 2022 11
Strategic report
Group Chief Executive Officer’s report continued
remains a core capability of Phoenix.
In 2022, we have once again delivered
a significant level of management actions,
with £739 million of actions achieved.
This was primarily from business-as-usual
management actions, which are not reliant
on cost and capital synergies from M&A
transactions, and are therefore sustainable
over the long term. This included the
ongoing delivery of a range of balance
sheet efficiencies, which remains a
differentiating capability for us, as well
as further illiquid asset origination and
optimisation of our liquid credit portfolio.
Our comprehensive risk management
framework includes our hedging approach,
which differentiates us from other insurance
companies. We hedge the vast majority of
the market risks we are exposed to including
equities, interest rates, inflation and
currency, to minimise volatility in our capital
position during volatile economic periods.
We also operate a conservative credit
portfolio to manage our exposure to credit
risk. This approach enabled us to limit our SII
surplus economic variance to £(0.4) billion
during a volatile economic environment.
We have also continued to enhance our
asset management capabilities, to support
our growth ambitions and efficiently
oversee the management of our customer
assets, and continued to expand our range
of asset management partners to 21, as we
seek to diversify our portfolio globally.
Investing in a sustainable future is the first
key pillar of our sustainability strategy and
we have continued our investment into
sustainable assets with c.£1 billion invested
to support affordable housing, access to
healthcare, and projects with a positive
environmental or social impact.
Last year we also started to integrate
decarbonisation strategies into our listed
equity portfolios and we are now in the
process of designing decarbonising equity
benchmarks for UK and US listed equity
exposures. This will help manage our
customers’ exposure to climate risk and
reduce the carbon intensity of our
investment portfolio.
I am also delighted that the work Phoenix
and our peers have done to influence the
SII reform proposals means the insurance
industry should be better placed to help
accelerate the path to net zero by investing
to develop a low carbon economy.
Grow organically and through M&A
Our second strategic priority is focused on
meeting more of our existing customer
needs and acquiring new customers, with
a significant year of achievements in 2022.
Our Retirement Solutions business had
another strong year. Our focus on
improving our capital efficiency in the Bulk
Purchase Annuity (‘BPA’) business enabled
us to generate a broadly similar amount of
incremental new business long-term cash
generation with less capital invested. This
in turn enabled us to deliver an improved
mid-teens IRR. It was also great to see the
success of our launch of the Standard Life
Home Finance products and the ongoing
development of our open market annuity
product, supporting a launch in 2023.
I am also delighted that the significant
progress we have made in developing our
Workplace proposition and the investment
we have made into the Standard Life brand
is delivering improved performance. We
achieved net flows of £2.4 billion, as we
retained our existing schemes and saw new
members join our existing schemes. This
supported us in delivering a c.50% annual
increase in new business long-term cash
generation. We also won 76 new schemes
across all parts of the market including
small, medium and large schemes.
Elsewhere, our other fee-based businesses
(Retail, Europe and SunLife) remained
resilient during the year.
We are also growing through M&A, having
announced our first ever cash-funded
acquisition, of Sun Life of Canada UK for
consideration of £248 million. This
transaction, which is due to complete in
April 2023, is expected to deliver c.£0.5
billion of incremental long-term cash
generation. This transaction also benefits
from a simplified operational integration
programme, as the majority of their policy
administration is already being outsourced
to our strategic partner (TCS Diligenta).
Engaging people in better financial
futures is the second key pillar of our
sustainability strategy and we have
continued to make great progress here.
In 2022, we transitioned c.1.5 million
customers and c.£15 billion of assets from
our existing default funds to our flagship
Sustainable Multi-Asset default fund, as
we seek to support our customers in
investing their pension assets sustainably.
We also continued to use our influence on
behalf of our customers and colleagues. As
the UK Government’s Business Champion
for Ageing Society, I am passionate about
encouraging older workers to stay in work
or come back to work. Good examples of
Phoenix leading in this area were our
high-profile initiative to make our job
adverts age neutral and the Phoenix
Scan the code to
watch the Capital
Markets Event
presentation
replay
Capital Markets Event: delivering sustainable organic growth
At the event, Phoenix announced its first ever organic growth target of c.£1.5 billion p.a. of incremental new business long-term
cash generation by 2025, comprising c.£1.0 billion from Retirement Solutions and c.£0.5 billion from Pensions & Savings.
In Retirement Solutions, our strategy is to deliver a market-leading customer proposition and to optimise our capital to drive
strong returns for our shareholders. We will remain disciplined in allocating
c.£300 million p.a. of capital into BPA, which will support us in meeting the
growing demand for BPAs from corporates.
In Pensions and Savings, our strategy is to deliver market-leading, comprehensive
and convenient propositions across our Workplace and Retail businesses,
which leverage the Standard Life brand. This will support us in delivering annual
net fund flows of c.£5 billion in Workplace and c.£2 billion in Retail, by 2025.
Phoenix Group Holdings plc Annual Report and Accounts 202212
Insights ‘The Great Retirement’ report
which identified some of the key factors
driving rising levels of economic inactivity
among the over 50s in the UK.
Enhance our operating model
and culture
Our third strategic priority is focused
on delivering leading cost efficiency and
a modern organisation.
We continued to make great progress with
our integration work, with the migration of
c.400,000 Standard Life annuities to the
TCS BaNCS platform and we transferred
the custody and fund accounting services
for £90 billion of assets to HSBC.
We have also recently announced the
extension of our partnership with TCS, as
we plan to move all c.3 million ReAssure
policies from our Alpha platform to the
TCS BaNCS platform by 2026. This will
enable our customers to benefit from the
clear digital focus, consistent customer
journeys and proposition provided by the
BaNCS platform. It is also fully aligned with
our model of enhancing long-term cost
efficiency, with a further c.£180 million
of ReAssure net cost synergies expected.
As ever, we remain focused on attracting,
developing and retaining the best talent to
drive our business forward. With a range
of initiatives in the year that has supported
an increase in our colleague engagement
eNPS score to +30 (2021: +23). It is also
pleasing to see that we have balanced
female representation on our Group Board
and Executive Committee, in line with our
diversity and inclusion goals.
Leading as a responsible business is the
third key pillar of our sustainability strategy.
Here we are committed to adopting the
highest sustainability standards across our
business and will lead by example for the
stakeholders we engage with to drive real
world change and deliver positive impact
We are committed to being net zero in our
own operations by 2025, which we remain
on track to achieve, with an 80% reduction
in emissions intensity across our own
operations since 2019.
We are also leading the industry with our
approach to our supply chain, where we
have set our pathway to decarbonisation
and launched stretching new ESG supply
chain standards for our partners.
Outlook
Looking forward, it is clear that 2023 will
present a challenging economic backdrop.
However, our business model is designed
to be resilient throughout the economic
cycle. Our comprehensive hedging
approach is designed to protect our
Solvency capital position from the majority
of the market risks we are exposed, while
the key areas of structural market growth
we are focused on remain attractive.
In particular, we expect to see a strong year
of volumes in the BPA market during 2023,
with the recent yields increase having
improved the funding positions of many
schemes, driving increased demand.
Workplace is also a very resilient business
during an economic downturn, with
pension contributions being deducted
direct from salaries by employers, leading
to stable flows through economic cycles.
Finally, there remains c.£470 billion of
UK Heritage assets that we believe
could come to market over time and we
expect further opportunities for M&A
consolidation due to the impact of cost
inflation on backbook portfolios.
All of which means we expect to see
continued organic and M&A growth, to
support us in delivering Cash, Resilience
and Growth, enabling us to pay a dividend
that is sustainable and grows over time.
We are confident in our future growth as
demonstrated by setting our first ever
organic growth target of c.£1.5 billion of
incremental new business long-term cash
generation by 2025.
Thank you
The progress we have made this year is
all down to our exceptional people and
I would like to thank my colleagues
throughout the Group for their continued
contribution and dedication in 2022.
Andy Briggs
Group Chief Executive Officer
Leveraging the
Standard Life brand
A key part of our growth strategy is leveraging the power
of the Standard Life brand that we acquired in 2021.
We now utilise the brand across the majority of our
growth businesses, including our Retirement Solutions,
Pensions & Savings and European businesses.
The Standard Life brand has a deep history and heritage,
and is well known and trusted by both advisers and
customers. It has been a key factor in supporting our
strong organic growth over the past few years and will
support us in our future growth ambitions. We are
committed to investing into the brand to support us in
delivering on our future ambitions and growth targets.
Phoenix Group Holdings plc Annual Report and Accounts 2022 13
Strategic report
Our strategy drives growth by meeting more of the evolving needs
of our existing customers and through acquiring new customers
Significant growth opportunities from supporting customers at every stage of their lifecycle
Defined contribution
workplace pensions
Legacy
pensions
and savings
products
Lifetime
Wealth
Retail savings
for retirement
Income drawdown and
individual annuities
Defined benefit
pension income
Home
equity
release
Pension
consolidation
Saving for retirement Securing income in retirementTransitioning to retirement
Guidance and advice
Financial wellness
Our business model
Building a growing, sustainable business
Organic growth
Meet more of our existing customers’
needs and acquire new customers
by helping them to:
• Save for retirement
• Transition to retirement
• Secure income in retirement
M&A growth
We will undertake M&A to:
• Acquire new customers and
transform businesses to deliver
cost and capital synergies
• Accelerate our capability build
Further
in-force
Further
in-force
Reinvest
surplus
cash
Reinvest
surplus
cash
In-force business
Supporting our existing in-force customers’ journey to and through retirement
c.12m
existing in-force
customers
£259bn
customer assets
under administration
£12.1bn
of Group in-force
long-term free cash
to emerge over time
Phoenix Group Holdings plc Annual Report and Accounts 202214
1
2
3
Find out about our
strategic priorities on
pages 18–27
Our scale in-force business provides us with three competitive
advantages which enable us to deliver our strategic priorities
Capital efficiency
• Diversification of risk
• Highly resilient
• Single internal capital model
As a genuinely diversified long-term
savings and retirement business, we
get greater diversification from our
breadth of in-force products. Our
capital position is also highly resilient,
through our core capabilities in risk
management, and capital optimisation,
underpinned by a single internal model.
Customer access
• c.12 million existing customers
• Deep customer insight
• Excellent customer service
With c.12 million customers, we have an
unrivalled level of customer access, with
around 1-in-5 UK adults being a Phoenix
Group customer. This give us deep
customer insights that underpin our
developing propositions, enabling us
to better meet their evolving needs on
their journey to and through retirement.
Cost efficiency
• Market leading
administration & IT
• Simple operating model
• Market-leading
operating costs
We have a significant cost efficiency
advantage, which is enabled through
our customer administration and IT
partnership with TCS, and our focus
on delivering a simplified operating
model. This cost efficiency is
demonstrated in the significant cost
per policy savings we are delivering
across our recent acquisitions.
Phoenix Group Holdings plc Annual Report and Accounts 2022 15
Strategic report
How we
generate cash
Our business model continued
Opening free
surplus
Cash generation within our Life Companies
Sources of Life Company
cash generation
Opening
free
surplus
Organic
surplus
emergence
Management
actions
Cash remitted to
the holding
companies
Closing
free
surplus
Any assets which the Life
Companies hold in excess
of overall internal capital
buffers required are
known as free surplus
What is the opening free surplus?
Life Company Own Funds
Life Companies hold capital in accordance with Solvency II
regulations, providing appropriate security for policyholders.
This capital is known as Solvency II Own Funds.
Less Solvency Capital Requirement
The level of regulatory capital required is known as
the Solvency Capital Requirement.
Less Capital Management Policy
The Life Companies hold internal capital buffers above
the regulatory capital requirement for prudence.
How is free surplus generated?
Organic surplus emergence
Life Companies earn margins on different types of life
and pensions products increasing Own Funds. In addition,
as our in-force business runs off the Solvency Capital
Requirements reduce as they are released.
Management actions
These can either increase Own Funds or reduce Solvency
Capital Requirements.
Phoenix Group Holdings plc Annual Report and Accounts 202216
Cash utilisation at holding company level
Uses of holding company
cash generation
Uses of remaining cash –
growth opportunities
Opening
cash at
holding
company
level
Cash remitted
from the Life
Companies
Head office
costs
Debt
interest
Dividends
Remaining
cash at
holding
company
level
Cash at the holding
company level provides
resources for future
growth and resilience
for the Group
What is the cash remitted from the
life companies used for?
Head office costs
Including salaries and other administration costs.
Debt interest
On outstanding Group shareholder debt.
Dividends
The Group operates a dividend policy which is to pay
a dividend that is sustainable and grows over time.
What is the remaining cash used for?
M&A
As well as providing a clear strategic fit, M&A transactions must
meet our key criteria of being value accretive, supporting the
dividend level and maintaining our investment grade rating.
BPA transactions
We have a disciplined approach to investing capital into BPA
transactions that generate increased long-term cash flows
and we target a mid-teens Internal Rate of Return (‘IRR’).
Investment into our growth capabilities
Investment into our propositions and capabilities that
will support us in growing our business over time.
Phoenix Group Holdings plc Annual Report and Accounts 2022 17
Strategic report
Our strategic priorities and KPIs
Optimise our
in-force business
Leveraging our scale in-force business to
deliver capital efficiency and better returns
Phoenix is the market leader in managing
in-force business for cash and ensuring
a resilient capital position, which in turn
underpins our sustainable dividend over
the long term. The Group’s cash generation
stems from the run-off of our in-force
business, which we further enhance by
delivering management actions and
through realising integration synergies
from completing value-accretive M&A.
In parallel, we deploy our comprehensive
approach to risk management across our
in-force business and we hedge the
majority of our market risks. This brings
resilience to our Solvency II capital
position, and in turn helps us deliver
dependable cash generation. We are
also focused on optimising our capital to
ensure we deliver enhanced returns for
our shareholders.
Sustainability is embedded throughout our
business and across our strategic priorities.
As a result, investing in a sustainable future
is a key part of optimising our in-force
business, as we are seek to invest our
£259bn of customer assets responsibly.
Strong cash generation in 2022
Phoenix delivered strong cash generation
in 2022 of £1,504m (2021: £1,717m), which
exceeded the Group’s 2022 target range
of £1.3bn to £1.4bn. This reflects our
continued focus on optimising our in-force
business to deliver dependable cash.
Group in-force long-term free cash
underpins our dividend sustainability
The Group increased its in-force long-term
free cash by c.£0.3bn during 2022, driven
by our increased new business long-term
cash generation and management actions,
which more than offset our annual uses
of cash. With £12.1bn of Group in-force
long-term free cash available to our
shareholders over time, our increased
dividend is every bit as sustainable over
the very long term.
Maintaining our comprehensive risk
management approach
The Group maintained a resilient Solvency
II surplus of £4.4bn during the year (2021:
£5.3bn). The reduction in the year primarily
reflects the pro-active management of our
leverage with a £450m debt repayment
and our continued investment into growth.
There was also a small impact from the
significant rise in interest rates during the
second half of the year. However, our
hedging approach mitigated the majority
of the impact, with only a c.£0.4bn adverse
economic variance that was in line with our
expectations, despite a >1-in-1,000
economic shock being experienced.
Our increased Solvency II Shareholder
Capital Coverage Ratio (‘SCCR’) of 189%
(2021: 180%) is above our target range
of 140% to 180%, providing capacity
to invest into growth both organically
and through M&A.
Delivering ongoing management actions
We enhance cash generation from our
in-force business by delivering value-
accretive management actions, and in
2022 we delivered total management
actions of £739m. This included £570m
of actions from BAU activities including
the ongoing delivery of balance sheet
efficiencies, further illiquid asset
origination and the optimisation of our
liquid credit portfolio. This demonstrates
the sustainability of BAU management
actions over the long term, in the absence
of further M&A.
We also realised a further £169m of M&A
synergies from the ReAssure acquisition, as
we delivered the integration programme
across the ReAssure Group Functions and
Finance & Actuarial teams, to deliver
further synergies in line with our plan.
Enhancing our differentiated asset
management model
We continued to invest into developing
a leading in-house asset management
function, which sets the Group’s strategic
asset allocation approach and centrally
oversees the performance of our third
party asset managers.
During 2022, our team helped to originate
c.£3.5 billion of illiquid assets, an increase
of 17% compared to 2021 (c.£3.0 billion).
We also maintained a strong illiquidity
premium (the spread over corporate
bonds) of c.70bps on private debt, despite
the increase in interest rates. This was
enabled by the strong asset management
capability we are building.
Investing in a sustainable future
We are committed to integrating
decarbonisation strategies into both our
listed equity and listed credit portfolios.
We see this as essential to managing the
risk that climate change poses to our
customers and a key step in meeting our
interim 2025 and 2030 decarbonisation
targets on our journey to net-zero.
We have also continued our investment
into sustainable assets within our
shareholder credit portfolio during the
year, with c.£1.0bn invested. This included
£483m into projects with a positive
environmental impact, £228m into
affordable housing, £75m into healthcare/
education, and £207m into social impact
investments and sustainability-linked loans.
We are also investing to scale the required
decarbonisation technology and support
low carbon businesses, such as our recent
£338 million investment into a new multi
asset ‘climate solutions’ mandate.
And we have also implemented a new
stewardship programme to encourage
net zero aligned strategies across the
companies we invest in, with a priority
focus on 25 high emitting companies
that account for c.32% of our total
financed emissions.
Phoenix Group Holdings plc Annual Report and Accounts 202218
Priorities for 2023
• Continue to deliver value-accretive
management actions.
• Diversify our asset portfolio into North America
and directly source illiquid assets.
• Continue to deliver balance sheet resilience through
our comprehensive risk management approach.
• Publish and implement the Phoenix Group Net Zero
Transition Plan.
Optimise our in-force business – how we measure our delivery
Cash generation Solvency II surplus Solvency II Shareholder Capital
Coverage Ratio (‘SCCR’)
Group in-force long-term
free cash
£1,504m £4.4bn 189% £12.1bn
2022 target:
£1.3bn to £1.4bn
2022 target:
No target
2022 target:
140% to 180%
2022 target:
No target
£1,713m
£1,717m
£1,504m
2022
2021
2020
£5.3bn
£5.3bn
£4.4bn
2022
2021
2020
164%
180%
189%
2022
2021
2020
N/A
£11.8bn
£12.1bn
2022
2021
2020
Definition
Cash generation represents
cash remitted by the Group’s
operating companies to the
Group holding company in
the current period. Cash
remitted principally reflects
the generation of Free
Surplus within the life
companies and the benefit of
value-accretive management
remitted in the period.
Definition
The Solvency II surplus
is calculated as the excess
of eligible Solvency II Own
Funds over the Group’s
Solvency Capital Requirements.
Definition
The Solvency II SCCR is
defined as the ratio of the
Group Own Funds to Group
Solvency Capital
Requirements, after adjusting
to exclude amounts relating
to unsupported with-profit
funds and unsupported
Group Pension Schemes.
Definition
Group in-force long-term free
cash is the cash available to
shareholders over time. It is
defined as the estimated
lifetime cash generation from
our in-force business, plus
Group cash held in the
HoldCo, less outstanding
shareholder debt, committed
M&A and transition costs, and
interest on debt until maturity.
Why it matters?
Cash at the Group holding
company is used to pay
dividends, interest and
various corporate costs, with
surplus cash reinvested into a
range of organic and M&A
growth opportunities.
Why it matters?
The Solvency II surplus is
the regulatory assessment
of capital adequacy of the
Group. We pay our dividends
from our surplus and so
retaining a significant surplus
ensures the sustainability
of our dividend over the
long term.
Why it matters?
The SCCR demonstrates the
extent to which shareholders’
Eligible Own Funds cover
the Solvency Capital
Requirements. It therefore
measures the capital
adequacy of the Group from
a shareholder perspective.
Why it matters?
Group in-force long-term
free cash is a measure to
demonstrate the sustainability
of our dividend over the
very long term.
Future target
• 2023 cash generation of
£1.3bn to £1.4bn.
• Three-year 2023–2025
cash generation of £4.1bn.
Future target
Maintain a Solvency II surplus
that enables us to operate
within or above our SCCR
target range.
Future target
Maintain a SCCR within or
above our target range of
140% to 180%.
Future target
Grow our Group in-force
long-term free cash over time,
to support a dividend that is
sustainable and grows over
time.
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Phoenix Group Holdings plc Annual Report and Accounts 2022 19
Strategic report
Planet: Addressing
climate change and
supporting nature
and bio-diversity
James Wilde, Chief Sustainability Officer
Our strategic priorities and KPIs continued
Can you introduce your role and
how Sustainability is embedded
across the company?
My role is to set the direction of our
sustainability strategy and ensure we are
challenging ourselves to drive forward
meaningful action that enables us to
deliver on our purpose. It is incredibly
exciting to be part of Phoenix, with our
scale and ambition, meaning we can truly
make an impact and drive up sustainability
standards across the whole market.
I head up a central sustainability strategy
team and the delivery of our ambitious
programme is carried out across the
business by experts in our functions
embedding our approach business-wide
– from our sustainable investments team
to our sustainable procurement team.
What are the key sustainability
themes that we have the ability
to make the biggest impact on?
Sustainability is now embedded into the
core fabric of our business, and in 2022
we reviewed our areas of focus to ensure
we are directing our attention to the most
material ESG issues that we impact on and
that can impact us. The top environmental
issues for us to take action on are climate
change and nature loss. The most material
social issues are financial wellness and
longevity which together create the need
to tackle the pensions savings gap and
support people to have better financial
futures. These material issues are all clearly
aligned with, and enable us, to deliver on
our purpose of helping people secure a life
of possibilities.
Through having a focus on the risks and
opportunities related to climate change
and nature loss, we can also make a
difference to our customers as we manage
the risk that they are exposed to by climate
change and nature, while creating a better,
more sustainable future for them.
We have set ourselves a number of
stretching targets to achieve these
aims which are outlined in our 2022
Sustainability Report.
I’m really pleased that our approach
has been recognised by independent
organisations. We have been awarded
the Terra Carta Seal for our commitment
to sustainability and the Tortoise
Responsibility 100 index have placed us
at 12th in the FTSE100 for our approach.
Phoenix manages £259bn of
customer assets – how are you
considering the risks and
opportunities of climate change
and the transition to net zero?
Our core role is to invest and manage
assets on behalf of our customers and
shareholders. In doing so, we must balance
the need for returns with the right level of
risk. Both of those elements – risk and
return – point towards decarbonising our
investments in a way that manages our
customers’ exposure to climate-related risk;
unlocking the financial opportunities the
transition presents and ensures continued
stable financial returns.
We have put addressing climate change
at the heart of our investment strategy
and are committed to transitioning our
investment portfolio to net zero by 2050,
as well as hitting ambitious targets to cut
emissions in the next decade.
Our investment portfolio constitutes the
vast majority of our carbon footprint –
around 99% – so we are firmly focusing
on our investments as a priority. We look
at this in three ways: how we decarbonise
our portfolios, active stewardship of our
assets, and investing in climate solutions.
But we can’t do this alone. We need to
accelerate change to transform economies
to combat the climate crisis and so work
with peers and policymakers with the aim
of removing barriers to net zero investment
and defining best practice. We are
an active member of a number of
collaborations and groups including
Climate Action 100+ and the Sustainable
Markets Initiative, and have published
research articles raising awareness of
challenges faced by us and peers and
proposing solutions to overcome these.
It is important we practice what we
preach so we are also very focused on
reducing emissions in our operations
and working with our supply chain.
We have set the goal of being net zero
in our operations by 2025.
Phoenix Group Holdings plc Annual Report and Accounts 202220
Transitioning our customers to a
Sustainability Multi-Asset Default Fund
The vast majority of our customers keep their money in a default pension
option. In 2022 we transitioned c.1.5m customers and c.£15bn of assets from
our existing default funds to our default Sustainable Multi Asset Universal
Strategic Lifestyle Profile.
We aim to give customers the income they need in retirement and focus on
ESG factors that can positively or negatively affect returns. We have also set
clear targets that aim to:
1. Reduce the carbon intensity (a measure of the carbon emissions of all
companies invested in) by 50% compared to the parent index;
2. Increase green technology revenues by 50% compared to the parent
index; and
3. Enhance ESG scores by 10%–20%.
Our strategy to change members to our
sustainable default solution won ‘ESG
initiative of the year (for corporates)’ at
Environmental Finance’s Sustainable
Investment Awards 2022.
Our work has been recognised, with a
move from B to A- for the CDP Climate
Change Questionnaire, putting us in the
“leadership category on climate”.
What progress has Phoenix
made in 2022?
We are committed to integrating
decarbonisation strategies into both our
listed equity and listed credit portfolios.
We see this as essential to managing the
risk that climate change poses to our
customers and a key step in meeting our
interim 2025 and 2030 decarbonisation
targets on our journey to net-zero.
We started this journey in 2022 with the
move of £15bn AUA to our Sustainable
Multi-Asset fund and the development of a
climate transition strategy for liquid credit
assets in our shareholder portfolio (c£13bn
AUA). We expect to expand our scope by
applying customised decarbonising equity
benchmarks to all our equity funds in our
control where this is in the best interest of our
customers, beginning with UK and US-listed
equities. It is critical that all such changes to
listed equity benchmarks are well tested and
managed so that we can continue to protect
customers’ financial outcomes.
During COP15 we also published a nature
statement, confirming our commitment
to act, and we have been piloting the
Taskforce for Nature-related Financial
Disclosures (‘TNFD’) in collaboration with
stakeholders across the industry, with the
aim of producing our first TNFD report.
What should we expect from
Phoenix Group in 2023 in relation
to its Sustainability strategy?
Industry wide, we need to move from a
focus on setting targets, to defining clear
plans of action and delivering impact at
scale. We have already defined our net
zero targets, and in 2023 we will be
publishing our first Net Zero Transition
Plan. This will set out our science-based
decarbonisation trajectory consistent with
our interim targets and how we will track
this using a robust framework.
Using a central lens on customer interest,
it will highlight how we will build on the
actions we have taken to date, to deliver
change at the scale and pace required by
the net zero transition both through our
own direct actions and by helping to
inform the system-wide change required
to unlock investment.
We will pull the key levers we have at our
disposal to both drive real economy
change and optimise financial outcomes
for our customers – including stewardship
– and we will work with peers and
policymakers to drive stable policy that
enables us to invest at scale in the sectors
and companies of the future in the best
financial interest of our customers. For
example, we have committed to c.£10bn
of sustainable asset investment between
2022 and 2026.
We are also expanding our work on
nature, setting out our priority areas of
2023 key targets
• 50–70% of illiquid asset
origination in the shareholder
portfolio to be sustainable and
transition assets
• Implement decarbonisation for
shareholder liquid credit portfolio
c.£13bn to meet our carbon
reduction targets
• 90% of key suppliers commit to
SBTi or Race to Zero
• Develop our nature strategy
long-term targets.
focus to drive our nature investment
opportunities and our activity in our
offices and communities.
From an investment perspective, we are
continuing to enhance our stewardship
capabilities to hold companies to account,
with defined expectations. In 2023 we are
publishing our first Stewardship Report
with the aim of being a signatory to the
UK Stewardship Code.
I’m looking forward to 2023 and beyond,
and all that we can achieve together.
Phoenix Group Holdings plc Annual Report and Accounts 2022 21
Strategic report
Our strategic priorities and KPIs continued
Grow organically
and through M&A
Meeting more of our existing customers’
needs and acquiring new customers
Phoenix has significant growth
opportunities available, both through
meeting more of the evolving needs of
our existing customers, on their journey to
and through retirement, and by acquiring
new customers, both organically, and
through M&A.
We are also engaging people in their
financial futures, and advocating for
broader societal action to tackle under-
saving, which is a critical part of
our commitment to our purpose.
Record new business growth in 2022
We delivered record new business
long-term cash generation (‘LTCG’) of
£1,233m in 2022 (2021: £1,184m). This
strong performance means the Group
has, once again, more than offset the
run-off of our in-force business and
demonstrates that Phoenix is a growing,
sustainable business.
Developing innovative retirement
income solutions
Retirement Solutions, which includes our
BPA business, was the largest contributor
to our 2022 new business LTCG with
£934m written in 2022. This was broadly
similar to 2021 (£950m), but was achieved
with investing 20% less capital and reflects
our progress in optimising our capital
efficiency in BPA. This enabled us to
deliver an improved mid-teens IRR for the
year. We also continued to develop our
proposition, with the launch of our
Standard Life Home Finance offering, and
development of an open market annuity
product that will be launched in 2023.
Enhancing our Workplace proposition
and developing our Retail channels
Our Pensions and Savings business
comprises our Workplace and Retail
businesses, both of which are capital-light
fee-based businesses that we are looking
to grow over time. In Workplace, the
investment we have made into developing
our proposition and the impact of the
reinvigorated Standard Life brand has
driven a strong year of performance.
Workplace has contributed £212m of new
business LTCG in 2022, up 53% on 2021
(£139m), with positive net fund flows of
£2.4bn in the year, which is an elevenfold
increase on the £0.2bn seen in 2021. This
reflects the strength of our customer
proposition that is enabling us to retain our
existing schemes. Which in turn enables us
to benefit from the natural compounding
growth of the Workplace business model,
with new joiners to existing schemes and
salary inflation increases on contributions.
We are also now consistently winning new
schemes in the market across small,
medium and large-sized schemes, with
76 new schemes won in 2022 covering
c.£2bn of assets (2021: £0.2bn).
In our Retail business, we have now firmly
established our team with our key
leadership hires made and we outlined our
strategy to drive net flows across both the
Retail Direct and Retail intermediated
markets at the Capital Markets Event in
December 2022. The Retail business
remains in net fund outflow at present
(£(1.4)bn), but contributed an increased
new business LTCG of £37m in 2022 (2021:
£29m). As we fully develop our Retail
channels and deliver our strategy this is
expected to grow over the coming years.
Finally, both our European business,
Standard Life International, and SunLife,
continued to deliver for their customers
and contributed LTCG of £29m and £21m
respectively (2021: £31m and £35m).
Executing M&A
We were delighted to announce our first
ever cash funded acquisition, of Sun Life of
Canada UK, for consideration of £248m
during 2022. This transaction, which is
expected to complete in April 2023, adds
c.£10bn of assets under administration and
c.480k policies to Phoenix. It is expected
to deliver c.£0.5bn of incremental
long-term cash generation, which includes
c.£0.1bn of integration synergies, net of
costs. The transaction also benefits from a
simplified operational integration
programme, with the majority of their
policy administration already being
outsourced to our strategic partner TCS
Diligenta. In addition, as part of the
transaction we have agreed a new strategic
asset management partnership with the
Sun Life Financial Inc. Group, which will
support further diversification of our credit
portfolio in North America.
Engaging people in better
financial futures
We are focused on meeting more of our
customers evolving needs on their journey
to and through retirement to support them
in achieving financial wellness.
We offered 1.2 million customers the
chance to review our digital literacy
material: Digital Essentials. Here we
targeted customers of all ages to offer help
to those who need digital assistance and
aid the more digitally savvy who might
want to use these materials to help
someone they know. We also continued
to advocate on behalf of our customers
through the work of our think tank, Phoenix
Insights, with more detail on pages 24–25.
Maintaining strong customer satisfaction
Our focus on delivering better customer
outcomes is reflected in our continued
strong customer satisfaction scores.
Our Combined Group customer
satisfaction telephony score was 92% and
our Standard Life digital journeys score
was 94%, both of which exceeded their
respective targets. This is due to the
investment we are making to deliver a
market-leading customer service offering
and strong product propositions.
Phoenix Group Holdings plc Annual Report and Accounts 202222
Priorities for 2023
• Grow Retirement Solutions with BPA capital investment of
c.£300m in 2023 and launch an open market annuity.
• Deliver increased net fund flows in Pensions & Savings to
drive our fee-based growth.
• Complete the Sun Life of Canada UK acquisition and
assess further M&A opportunities.
• Launch an awareness campaign to reach 4m people on
longer lives and under-saving
Grow organically and through M&A – how we measure delivery
New business long-term
cash generation (‘LTCG’)
Pensions and Savings
net fund flows
Combined Group customer
satisfaction – telephony
Customer satisfaction Standard
Life – digital journeys
£1,233m £1.0bn 92% 94%
2022 target:
>£800m
2022 target:
No target
2022 target:
90%
2022 target:
92%
£766m
£1,184m
£1,233m
2022
2021
2020
N/A
£(1.4)bn
£1.0bn
2022
2021
2020
N/A
92%
92%
2022
2021
2020
94%
95%
94%
2022
2021
2020
Definition
New business LTCG
represents the operating
companies’ cash generation
that is expected to arise in
future years as a result of
new business transacted in
the current period.
Definition
Net fund flows are the gross
inflow less gross outflow
of customers’ assets
across our capital-light
fee-based businesses.
Definition
Customer satisfaction as
reported through a survey
following a telephony call,
where customers can rate
us between 1 and 5.
Definition
Customer satisfaction as
reported through a survey
following an online
interaction, where customers
can rate us between 1 and 5.
Why it matters?
Our strategy seeks to
leverage the significant
growth opportunities from
meeting more of the evolving
needs of our existing
customers across their life
cycle and through acquiring
new customers. This will
enable Phoenix to be a
growing, sustainable business.
Why it matters?
This measure quantifies the
annual level of growth in
customer assets within our
Pensions and Savings
business, with increased
net fund flows driving
increased fee income
from the businesses.
Why it matters?
This measure highlights how
satisfied our customers are
with Phoenix Group’s
telephony servicing
propositions across
our various brands.
Why it matters?
This measure highlights how
satisfied our customers are
with Standard Life’s digital
service proposition.
Future target
Grow our new business
long-term cash generation
from c.£1.2bn in 2022 to
c.£1.5bn per annum by 2025.
Future target
Grow our Pensions and
Savings annual net fund flows
with a target for c.£5bn in
Workplace by 2025 and
c.£2bn in Retail by 2025.
Future target
To deliver a customer
satisfaction score of 88%
or above in 2023.
Future target
To deliver a customer
satisfaction score of 94%
or above in 2023.
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Phoenix Group Holdings plc Annual Report and Accounts 2022 23
Strategic report
People: Promoting
financial wellness
and the role of good
work and skills
Catherine Foot, Director of Phoenix Insights
Our strategic priorities and KPIs continued
Can you introduce yourself and
explain what Phoenix Insights is?
I’m Catherine Foot, Director of Phoenix
Insights, our in-house longevity think tank
set up to help catalyse the changes
necessary across society to enable
more of us to live better, longer lives.
Why did Phoenix Group choose
to set up Phoenix Insights?
Phoenix Insights is a cornerstone in
our commitment to delivering on our
purpose, of helping people secure
a life of possibilities.
As a country, we need to close the
pensions saving gap, with as many as
18 million UK adults not saving enough
for the retirements they want.
Phoenix Group is uniquely placed to
make a difference here, by innovating for
customers and supporting people to save
and make the most of their retirement
income. But to help many millions more
to be able to save enough for their future,
we also need action in areas like
employment, skills and social security.
Phoenix Insights has been set up to explore
these broader solutions to the under-
saving issue, and to advocate for change.
We use impactful research to drive forward
ideas and greater public engagement
with the need for action, not just from
government, industry or civil society,
but from everyone.
Why is Phoenix Insights interested
in employment and skills?
In a major piece of research we published
last year in partnership with Frontier
Economics, we established that only 14%
of defined contribution pension savers
over 25 are currently on track for the
retirement incomes they expect. We also
found that millions of savers simply cannot
afford to save at the sorts of rates that
would bring them on track for a decent
retirement. If we are to tackle the under-
saving issue, it’s therefore critical that we
support people to get and remain in good
quality work and provide more
opportunities for people to upskill, switch
careers, and grow their incomes over their
working lives. You simply can’t improve the
adequacy of retirement incomes for
people without focusing on jobs and skills.
However, we have a situation at the moment
in this country where many people in their
50s and 60s fall out of work before they
are ready to retire, and rates of
participation in adult education and
retraining programmes are much too low.
Part of our work this year is therefore
looking at the actions that government,
employers and others need to take to
enable people to remain in decent
work, return to work when they need
and want to, and get access to
opportunities to re-skill.
What have you learnt from your
research in the first year since
Phoenix Insights was set up?
One of the things we were keen to do in
setting up Phoenix Insights was to ground
our work in real understanding of how
people feel about retirement and living
longer, and what really matters to them.
In partnership with the National Centre
for Social Research and the Policy Institute
at King’s College London, we spent six
months working with people from all walks
of life across the UK to understand their
experiences and attitudes, and work
directly with them to identify the key
actions needed in society to respond to
longer lives. Part of what drives our work
now is these priorities that people
identified for themselves, which is better
access to careers advice, financial advice,
and retraining.
What are the potential solutions
to help solve some of the issues
you have identified?
I think that good information and guidance
for people is absolutely critical. Whether its
our finances and pensions, our careers and
working life, or our wider well-being,
navigating through and actively planning
and preparing for longer lives is not easy.
We need a step change in the accessibility
of good information and guidance about
key decisions during adult life.
We also need to get serious about skills
and adult education in this country. A 40
Phoenix Group Holdings plc Annual Report and Accounts 202224
or 50 year working life in a world of rapid
technological, economic and ecological
change requires us to re-skill and retrain
throughout life.
And we need to make some changes to
our social security safety net. With a state
pension age rising in line with average life
expectancy, we must do more to provide
sufficient state support to those people
who have faced multiple disadvantages
throughout life and who simply cannot
work up until their late sixties.
What can we expect to see from
Phoenix Insights in 2023?
We’ve got a lot of exciting work underway.
We’re working with the Policy Institute at
King’s College London to take a closer look
at the future of the State Pension, using
deliberative work with the public to
explore how this critical element of our
intergenerational social contract can adapt
to the situation we find ourselves in where
healthy life expectancy varies by almost
20 years between the richest and poorest.
In partnership with the Learning and Work
Institute we’ll be setting out the economic
case for investment in lifelong learning and
skills, for individuals, for employers, and
for government, and working with the
International Longevity Centre, Business in
the Community and others to explore how
we can achieve a much-needed radical
increase in adult participation in learning
and retraining in this country.
What is Phoenix Group doing
to help close the pensions
saving gap?
I think Phoenix Group, as the UK’s largest
long-term savings and retirement business,
has a critical role to play in tackling the
pension savings gap, with four key levers
we believe can help to drive real change.
Firstly, we need to raise awareness of the
under-saving issue, which Phoenix Insights
is doing through its ongoing research
programme which is designed to
contribute to the public debate.
Secondly, Phoenix Group is uniquely
placed to help its customers journey
to and through retirement. Here we can
support millions of customers with their
financial wellness throughout their working
lives, engage them in planning for their
future, and ensure they make the most
of their retirement income. We will do this
by developing innovative products and
services, that support their evolving needs.
Which we can distribute through our
well known and trusted consumer brands
such as Standard Life and SunLife.
Thirdly, we need to promote the role of
good work and skills, as to help people
save more, we need to support them to
stay in good work for longer. As an
employer, we can ensure that Phoenix
Group is a fantastic place to work for
people of all ages, and take active steps
to attract, retain and retrain older workers.
For instance, we are working to trial new
ways to support our colleagues to have
career conversations and consider career
switching, advocating for the importance
of increasing access to good quality
flexible and part-time work, and working
with our Behavioural Insights Team on how
holistic advice and support interventions at
mid-life can help people take action on
their finances, work and well-being.
And finally, we need to advocate for and
support societal change for those who
cannot afford to save, or save enough,
We can do this through the work of
Phoenix Insights, and through our work
supporting financial inclusion.
Great Expectations: Are people’s
retirement income expectations adequate
and achievable?
We explored the adequacy and achievability of people’s retirement income
expectations. And we found causes for concern, for different reasons, about most
savers in defined contribution pension schemes.
To bring people on track for their retirement income targets, we explored whether
working longer (to 68) or saving more (12% of salary pension contributions) could be
sufficient, or whether other actions or policies may be needed.
We found that whilst this would bring many more in line with their expectations it mainly
benefits middle and higher earners, and may not be realistic for many. Nearly four in ten
people worry about working for longer because of the impact on their physical health.
We identified that industry and Government must do more to address this mismatch
between expectation and likely reality, including engaging people much more
effectively in their future finances; making working for longer more feasible, attractive
and rewarding; and creating a safety net of support for those unable to work longer
or save more.
2023 key targets
• Provide access for 1.5 million
Standard Life customers to an
integrated financial wellness
hub, Money Mindset
• All customers supported by
digital literacy hubs.
• Reach 1.5 million customers to
raise awareness about the
impact of their investments.
• 40% of senior leaders will be
women and 13% ethnic
minority representation
in our workforce
Phoenix Group Holdings plc Annual Report and Accounts 2022 25
Strategic report
Enhance our operating
model and culture
Delivering leading cost efficiency and a
modern organisation
Enhancing our operating model and
culture are key to our success. We will do
this firstly by completing our planned
migrations, and through driving
simplification to a “single best way of doing
things”. This will support us in maintaining
and enhancing our cost efficiency. We are
also committed to being a leading
responsible business, which attracts and
retains the best talent, through a diverse
and inclusive, high-performance culture.
We are also committed to adopting the
highest sustainability standards across our
business and will lead by example for the
stakeholders we engage with to drive real
world change and deliver positive impact.
Completing our migrations
We have made good progress in delivering
our Customer & IT integration in Standard
Life. For instance, during 2022 we have
successfully migrated c.400k annuity
policies onto the TCS BaNCS platform.
We also transferred c.1,200 colleagues to
TCS Diligenta in February 2023 as we
simplify our operational structure, improve
the customer experience and realise cost
synergies. TCS are also now developing
new capabilities for us that will significantly
enhance our Workplace proposition and
help drive our future Workplace growth.
On the ReAssure integration, we have
completed the Group Functions
integration and are making strong progress
with the integration of the Finance &
Actuarial functions. This helped realise
£331m of further cost and capital
synergies in the year, with total synergies
delivered to date of £1,262m (103%
of our revised target).
We have also recently announced our
decision to transfer all c.3 million ReAssure
policies from our in-house Alpha platform
to the outsourced TCS BaNCS platform
by 2026.
Consolidating all policies onto TCS
BaNCS will allow the business to benefit
from TCS’s significant ongoing investment
in the platform, with Phoenix customers
benefiting from the clear digital focus,
consistent customer journeys and
customer proposition provided by one
platform. This decision is also fully aligned
with our model of enhancing long-term
cost efficiency, with a further c.£180
million of ReAssure net cost synergies
now expected. This increased our target
M&A integration synergies from ReAssure
to £1,230m.
Driving simplification in our business
A key aspect of enhancing our operating
model is driving simplification across our
business, by migrating to a ‘single best
way of doing things’.
For instance, during 2022 we have
progressed towards a single unified
employee experience for our colleagues
with a single payroll system and a single,
enhanced Phoenix Group intranet.
We have also transferred the custody and
fund accounting for c.£90bn of assets to
HSBC, as we simplify and centralise our
asset custody model.
Attracting, developing and retaining
the best talent, and building our culture
A crucial component for delivering on
our purpose and strategy is attracting and
retaining the best talent. That is why we
are committed to our ambition of making
Phoenix the best place our colleagues
have ever worked.
In 2022 we continued to deliver against
our people strategy which is structured
around driving organisational
effectiveness, evolving our culture,
and building talent.
We have continued to build our people
capabilities and have evolved our talent
acquisition model to better enable that.
In 2022 we also launched our leadership
capabilities framework, which articulates
eight core capabilities we need our leaders
to demonstrate.
We’ve made good progress against our
targets for female and ethnic minorities,
which are based on the deep insight
gathered from our Group-wide ‘Who
We Are’ survey, which provides us with
a clear understanding of our colleague
demographic and will support us in
better targeting our diversity and
inclusion initiatives.
The overall progress we are making is
also reflected in our increased employee
engagement eNPS score of +30 in 2022
(2021: +23), and which was significantly
ahead of our target of +24 for the year.
Leading as a responsible business
Our objective is for our operations to
be net zero carbon by 2025. This target
covers Scope 1 and 2 emissions from our
occupied premises and Scope 3 emissions
from our business travel. We remain on
track to achieve it with an 80% reduction
in the emissions intensity of our own
operations since 2019.
We also want to work with our supply chain
to generate value for all of our partners
and stakeholders. Central to this is the
transition to a net zero supply chain by
2050 with an interim objective to halve
supply chain emissions by 2030. We
have therefore developed our ESG
Supply Chain Standards to reflect our
expectations for partners around net
zero and ongoing commitments.
During 2022 we have engaged with our
key suppliers to ensure they set out a
climate change plan and targets for their
business, with 82% of our suppliers now
committed to either a Science Based
Target Initiative (‘SBTi’) target, or a target
based on the UN’s Race to Zero initiative.
Our strategic priorities and KPIs continued
Phoenix Group Holdings plc Annual Report and Accounts 202226
Priorities for 2023
• Progress our ongoing migrations to TCS BaNCS and
realise further cost synergies.
• Further develop our internal talent pool and improve
our colleague engagement.
• Execute on our regulatory change agenda including the
IFRS 17 accounting change and the Solvency II reforms.
• Deliver our ambitious sustainability targets including
for Diversity, Equity and Inclusion.
Enhance our operating model and culture –
how we measure delivery
Total ReAssure
integration synergies
Colleague engagement
eNPS score
Female senior leaders
(%)
Ethnic minorities
representation (%)
£1,262m +30 39% 12%
Total target: £1,230m
(103% delivered to date)
2022 target: +24 2022 target: none 2022 target: none
£696m
£930m
£1,262m
2022
2021
2020
N/A
+23
+30
2022
2021
2020
N/A
38%
39%
2022
2021
2020
N/A
9%
12%
2022
2021
2020
Definition
The total cost and capital
integration synergies realised
from the acquisition of
ReAssure which completed
in 2020.
Definition
Colleague engagement is
a holistic measure of how
our colleagues feel about
working at Phoenix Group
which is assessed monthly.
Definition
The proportion of
females represented
in leadership roles.
Definition
The proportion of people
from an ethnic minority
background in our total
colleague population.
Why it matters?
We acquire companies which
we then integrate onto our
operating platform in order to
realise significant cost and
capital synergies, which in
turn deliver incremental cash
and capital to increase
shareholder value.
Why it matters?
We are seeking to make
Phoenix the ‘best place our
colleagues have ever worked’
and so getting regular
colleague feedback is
important to enable us to
track progress and respond
to feedback as we deliver
on our ambition.
Why it matters?
At Phoenix Group we want
to ensure our colleagues
represent our wider
community and so we are
committed to promoting
diversity and inclusion across
the business, which enables
colleagues to bring their
whole self to work.
Why it matters?
At Phoenix Group we want
to ensure our colleagues
represent our wider
community and so we are
committed to promoting
diversity and inclusion across
the business, which enables
colleagues to bring their
whole self to work.
Future target
We have a target to realise
total cost and capital
integration synergies of
£1,230m from the ReAssure
acquisition, which we have
already exceeded with 103%
delivered to date.
Future target
Our colleague engagement
eNPS score target for 2023
is +13, which is lower than
2022 due to the expected
impact of the recent
ReAssure integration
organisational changes.
Future targets
40% of women in leadership
roles by the end of 2023.
Future targets
Increase our ethnic minorities
representation to 13% by
the end of 2023.
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Phoenix Group Holdings plc Annual Report and Accounts 2022 27
Strategic report
Delivering cash,
resilience and growth
“The strong strategic progress we have made
during 2022 has enabled us to continue delivering
on our financial framework and to recommend
a 5% dividend increase for the year.”
Rakesh Thakrar, Group Chief Financial Officer
Business review
I am delighted that we have once again
delivered a year of strong financial
performance, as we execute on our
strategy and fulfil our purpose.
We have delivered another year of resilient
cash generation, with £1.5 billion
generated in 2022, exceeding our target
range of £1.3-to-£1.4 billion for the year.
We have also maintained our resilient
capital position with a Solvency II (‘SII’)
surplus of £4.4 billion and a SCCR of 189%,
which is above our target ratio range of
140% to 180%.
In terms of new business growth, we have
delivered record incremental new business
long-term cash generation of £1,233 million.
This means that for the second consecutive
year we have more than offset the run-off
of our in-force business.
We have also grown inorganically through
M&A, having announced our first ever cash
funded acquisition of Sun Life of Canada
UK, which we expect to complete in April.
Our strong strategic and financial
performance this year has therefore
enabled the Board to recommend a
dividend increase of 5% for the year.
With £0.3 billion growth in our Group
in-force long-term free cash to
£12.1 billion, our increased level of dividend
remains every bit as sustainable over
the very long term. With this increased
long-term free cash, which will be available
to shareholders over time, proof that
Phoenix is a sustainable, growing business.
In terms of our IFRS reporting, the Group’s
adjusted operating profit remained strong
at £1,245 million, but we have reported
an IFRS loss after tax of £(1,762) million.
This primarily reflects £(2,673) million of
adverse investment return variances from
accounting volatility in relation to our
hedging instruments and includes
economic movements on assets within
our corporate pension schemes that
have been subject to a buy-in. Taking into
account the corresponding decrease in
A strong financial performance in 2022
Financial performance metrics: 2022 2021 YOY change
Cash Cash generation £1,504m £1,717m -12%
New Business Incremental long-term cash generation £1,233m £1,184m +4%
Dividends Total dividend per share 50.8p 48.9p +4%
Final dividend per share 26.0p 24.8p +5%
IFRS Adjusted operating profit before tax £1,245m £1,230m +1%
Loss after tax £(1,762)m £(709)m -149%
Other financial metrics: 2022 2021 YOY change
Solvency II Capital PGH Solvency II surplus £4.4bn £5.3bn -17%
PGH Shareholder Capital Coverage Ratio (‘SCCR’) 189% 180% +9%pts
In-force cash Group in-force long-term free cash £12.1bn £11.8bn +3%
Assets Assets under administration £259bn £310bn -16%
Leverage Fitch leverage ratio 30% 28% +2%pts
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Phoenix Group Holdings plc Annual Report and Accounts 202228
our pension scheme liabilities of £940
million, Total Comprehensive Expense for
the year was £(1,076) million. This impact
has, in turn, increased our Fitch leverage
ratio to 30%, which remains within our
target operating range of 25–30%.
As a reminder, our hedging approach is
designed to stabilise our SII Surplus and
Group in-force long-term free cash, which
in turn protects our dividend paying
capacity. However, this does cause
significant IFRS volatility due to a mismatch
between our IFRS balance sheet, and the
Solvency balance sheet that we are
hedging (see page 31 for more detail).
However, we accept this as the trade-off
to deliver the resilient cash generation
and dividend we are known for.
I am proud of the strategic progress we
have made this year, particularly in driving
forward our organic growth strategy. At
our Capital Markets Event in December we
outlined the journey we have been on and
our future ambitions.
In Retirement Solutions, we have now firmly
established ourself as a key player in the
BPA market, with another really successful
year of growing our BPA business.
We have also been focused on cultivating
our fee-based businesses, to develop more
balanced organic growth, in particular in
our Pensions and Savings business. I am
therefore delighted to see the progress we
are making in our Workplace business,
where we have seen a renewed trust in our
proposition, enabling us to both retain our
existing schemes and attract new clients.
Our confidence in our future organic
growth strategy has enabled us to set our
first ever incremental new business
long-term cash generation target, of
c.£1.5 billion per annum by 2025.
So looking back on 2022, it has been a
year of clear strategic progress, that
supported us to deliver a strong set of
financial results. Importantly, our business
is growing, as demonstrated by the growth
in our Group in-force long-term free cash
to £12.1 billion, which sustains our increased
dividend over the very long term. Our
Solvency capital position also remains
highly resilient, despite the unprecedented
economic volatility last year, with our
SCCR of 189%. This supports provides us
with significant capacity to invest into growth.
This is Phoenix’s financial framework in
action, as we deliver resilient and
predictable cash generation, which
underpins a dividend that is sustainable
and grows over time.
Our key performance indicators
With our financial framework designed
to deliver cash, resilience and growth,
we recognise the need to use a broad
range of metrics to measure and report
the performance of our company, some
of which are not defined or specified in
accordance with Generally Accepted
Accounting Principles (‘GAAP’) or the
statutory reporting framework. The IFRS
results are discussed on pages 38-39
and the IFRS financial statements are
set out from page 168 onwards.
Alternative performance measures
In prioritising the generation of
sustainable cash flows from our
operating companies, performance
metrics are monitored where they
support this strategic purpose, which
includes ensuring that the Solvency II
capital strength of the Group is
maintained. We use a range of
alternative performance measures
(‘APMs’) to evaluate our business, which
are summarised below.
Cash generation
Cash generation remains our key
performance metric. It represents the
net cash remitted from the operating
entities to the Group, supported by the
free surplus above capital requirements
in the life companies, which is
generated through margins earned
on life and pension products and the
release of capital requirements, and
group tax relief.
This cash generation is used by the
Group to fund expenses, interest
costs and shareholder dividends,
with any surplus then available to
reinvest into organic and inorganic
growth opportunities.
Solvency II
Solvency II is a key metric by which the
Group makes business decisions and
measures capital resilience. It is a
regulatory measure that prescribes the
measurement of value on a Solvency II
basis and the calculation of the solvency
capital requirement (‘SCR’). The excess
value above the SCR is reported as both
a financial amount, “Solvency II surplus”,
and as a ratio “Solvency II Shareholder
Capital Coverage Ratio (‘SCCR’)”.
Fitch leverage
The Group seeks to manage the level of
debt on its balance sheet by monitoring
its financial leverage ratio. This is to
ensure we maintain our investment
grade rating issued by Fitch Ratings and
optimise our financial flexibility to
support future acquisitions. Our
financial leverage is calculated (using
Fitch Ratings’ stated methodology)
as debt as a percentage of the sum
of debt and equity.
Incremental new business long-term
cash generation
Incremental new business long-term
cash generation is a key metric for
measuring growth. It represents the
operating companies’ cash generation
that is expected to arise in future years
as a result of new business transacted in
the period. By generating sufficient
incremental long-term cash generation
to offset the run-off of our in-force
business cash flows, we can bring
long-term sustainability to future cash
generation to grow the value of our
in-force business.
Group in-force long-term free cash
This represents the cash expected to be
available over time to fund future
dividends from existing business and
supports the sustainability of our
dividend over the very long term. It
comprises the cash expected to emerge
from our in-force business over its
lifetime, plus existing Group holding
company cash, less committed costs
associated with our M&A integration
activity, the repayment of all
shareholder debt and servicing of
interest costs to maturity.
Assets under Administration
The Group’s Assets under
Administration (‘AUA’) represents our
assets administered by or on behalf of
the Group, covering both shareholder
and policyholder, and indicates the
potential long-term earnings capability
of the Group arising from its insurance
and investment business. Positive net
flows in AUA is another indicator of
growth for the Group.
Adjusted operating profit
The Group uses adjusted operating
profit as a measure of IFRS performance
based on long-term assumptions.
Adjusted operating profit is less
affected by the short-term market
volatility driven by Solvency II hedging
(as illustrated on page 31) and non-
recurring items than IFRS profit.
A more detailed definition of adjusted
operating profit is set out on page 314.
Phoenix Group Holdings plc Annual Report and Accounts 2022 29
Strategic report
Shareholder
capital available
Own funds =
SII assets less
liabilities
Group
Shareholder SII
Own Funds
Group SII
surplus
Group
SCR
Solvency Capital
Requirement (‘SCR’)
Business review continued
Why is Solvency II important to
us in measuring performance?
Solvency II Own Funds represent the
Group’s net assets on a regulatory basis.
Assets and non-technical liabilities are
valued on a fair value basis, and technical
provisions (policyholder liabilities) are
calculated on a best estimate basis
(weighted average of future cash flows),
with an adjustment for risk known as the
‘risk margin’.
Own Funds also include a value for
future profits expected to arise from
in-force policies, and any debt that
meets the definition of capital under
Solvency II rules.
Shareholder Own Funds reflects a
restriction for any excess over SCR in the
Group’s with-profit funds and pension
schemes as this excess doesn’t belong to
shareholders and so cannot be included.
The SCR is a capital buffer held to ensure
that the Group can meet its obligations over
the next 12 months with a probability of at
least 99.5%. The calculation stresses both
assets and liabilities in line with 1-in-200 year
risk events to establish how much additional
capital we would require to remain solvent. It
is a risk-based approach, requiring Phoenix
to hold capital against a range of risks, not
just insurance risks.
The SCR can be calculated using a ‘standard
formula’ or ‘internal model’. We use an
approved internal model for Phoenix Life
and Standard Life, with Standard Life
International DAC on a partial internal model
and ReAssure currently on standard formula.
The excess of Group Own Funds above
the Group SCR is the Solvency II surplus.
It indicates how much shareholder
capital we have available to deliver
shareholder returns in the form of
dividends, and to reinvest to grow the
business organically and inorganically.
In order to maintain a resilient Solvency II
balance sheet to protect our sustainable
dividend, Phoenix operates a dynamic
risk management framework which seeks
to manage our exposure to each of the
risks that the Group faces within its
risk appetite.
What are Own Funds?
What is the Solvency Capital
Requirement (‘SCR’)?
Why is Solvency II surplus a key
measure for Phoenix?
The SCCR represents Group Own Funds
divided by the SCR, adjusted to a
shareholder view through the exclusion
of amounts relating to ring-fenced
with-profit funds and Group pension
schemes whose Own Funds exceed their
SCR. This is because these Own Funds
do not belong to the shareholder and the
corresponding SCR is not in respect of
shareholder risk. We articulate our risk
appetite through an SCCR target
operating range of 140%–180%.
This allows us to focus on a shareholder
view of the capital coverage ratio that
provides a more accurate reflection of
the capital strength of the Group.
Shareholder Capital Coverage
Ratio (‘SCCR’)
SCR is impacted by both market risk and
demographic risk in roughly equal
proportions (see page 313 for a breakdown).
Markets will cause changes in SCR as our
investment mix changes (some assets are
more risky than others) or asset values
change (increased assets can mean
increased risk). Demographic risks, such as
longevity or persistency, can change the
SCR depending on experience, assumption
changes or any change in business mix.
What causes the SCR to change?
Own Funds can grow through writing
profitable new business and through the
delivery of value accretive management
actions and synergies. Group expenses,
financing costs, and dividends cause own
funds to fall. Changes in demographic
assumptions and experience will also
impact own funds.
Own Funds are also sensitive to market
movements. Our hedging strategy seeks
to stabilise the Solvency II surplus, but
this means hedge values can move Own
Funds up or down, to offset the market
movements impact on surplus, which can
also arise from movements in the SCR.
What causes Own Funds
to change?
Phoenix Group Holdings plc Annual Report and Accounts 202230
Solvency II
balance
sheet
Illustrative hedge offset to
mitigate market risk volatility
IFRS balance sheet is, in effect,
‘over-hedged’ as the additional SII
balance sheet items are not valued
on the IFRS balance sheet.
IFRS balance
sheet
• Assets
• Liabilities
• Assets
• Liabilities
• SII future profits
• SII Solvency
Capital
Requirements
Our risk management in action
Our comprehensive risk management approach
ensures we remain resilient through the economic cycle.
During 2022, we have seen unprecedented economic
volatility, with UK political instability leading to
government bond yield increases that were equivalent
to a 1-in-1,000 year economic shock event.
However, our comprehensive hedging approach
resulted in only a limited impact on our capital position,
with a £(0.4) billion SII surplus adverse economic
variance. By protecting the SII capital position in our
life companies, we are able to deliver resilient cash
generation and ensure the long-term sustainability
of our dividend.
We also continue to maintain surplus liquidity in line with
our conservative liquidity framework, which enabled us
to meet all collateral calls on our hedging instruments
during the turbulent markets in the second half of 2022,
with no forced selling of assets required at any point.
Phoenix also has a focused business strategy and does
not participate in the Liability Driven Investment (‘LDI’)
in any way, meaning we were not directly impacted by
the ‘LDI crisis’ during 2022.
Phoenix Group’s comprehensive hedging approach
We hedge what we deem to be the unrewarded market risks from equities, currency, inflation and interest rates. This is designed to protect our
Solvency II capital position to deliver dependable cash generation and balance sheet resilience, which underpins our sustainable dividend over
the long-term. We see this as a key differentiator for Phoenix compared to other insurance companies and this is evidenced by our significantly
lower sensitivities to these market risks than our UK peers. However, as a result of our hedging approach, we do see significant accounting
volatility (as illustrated below) which distort most of the Group’s IFRS metrics. Importantly though this does not impact our cash generation
delivery or dividend paying capacity, which is funded from our Solvency capital position.
Impact of market rise
• Solvency II – loss on hedge provides an offset to the
positive market risk impact to stabilise our Solvency II
capital position.
• IFRS – loss on the hedging instrument is recognised but the
gain on revaluation of the additional Solvency II balance
sheet items is not.
Impact of market fall
• Solvency II – gain on hedge provides an offset to the
adverse market risk impact to stabilise our Solvency II
capital position.
• IFRS – gain on the hedging instrument is recognised but
the loss on revaluation of the additional Solvency II balance
sheet items is not.
Phoenix Group Holdings plc Annual Report and Accounts 2022 31
Strategic report
Business review continued
Cash
Operating companies’
cash generation
£1.5bn
Group in-force long-term free
cash
£12.1bn
Group cash flow analysis
£m 2022 2021
Cash and cash equivalents at 1 January 963 1,055
Operating companies cash generation:
Cash receipts from life companies
1
1,504 1,717
Uses of cash:
Operating expenses (78) (80)
Pension scheme contributions (16) (11)
Debt interest (244) (250)
Non-operating cash outflows (395) (305)
Debt repayments (450) (322)
Shareholder dividend (496) (482)
Total uses of cash (1,679) (1,450)
Support of BPA activity (285) (359)
Closing cash and cash equivalents at 31 December 503 963
1 Total cash receipts include £55 million received by the holding companies in respect of tax losses
surrendered (2021: £95 million).
Cash generation
Operating companies’ cash generation
represents cash remitted by the Group’s
operating companies to the holding
companies. Please see the APM section on
page 314 for further details of this measure.
Cash generation from the operating
companies’ is principally used to fund the
Group’s shareholder dividends, debt
interest and repayments, and its various
operating costs. Any surplus remaining
is available for reinvestment into organic
and M&A growth opportunities.
The cash flow analysis that follows reflects
the cash paid by the operating companies
to the Group’s holding companies, as well
as the uses of those cash receipts.
Cash receipts
Cash generated by the operating
companies during 2022 was £1,504 million
(2021: £1,717 million). This exceeded the
Group’s target range of £1.3-to-£1.4 billion
for the year.
Uses of cash
Operating expenses of £78 million (2021:
£80 million) represent corporate office
costs, net of income earned on holding
company cash and investment balances.
Pension scheme contributions of
£16 million were made in 2022 (2021:
£11 million) with the increase on 2021 due
to the inclusion of a £5 million contribution
into the ReAssure pension scheme
following a triennial review.
Debt interest of £244 million (2021:
£250 million) reflects interest paid in the
period on the Group’s debt instruments.
The small decrease year-on-year is due
to the repayment of debt in June 2022
and elimination of interest thereon.
Non-operating cash outflows of
£395 million (2021: £305 million) primarily
comprises centrally funded projects and
investments. £90 million relates to Group
project expenses for the transition activity
in relation to the Standard Life platform
migration, £40 million for other ongoing
integration programmes including
ReAssure, and £33 million for our Finance
Transformation including implementing
the new IFRS 17 accounting standard.
We also incurred £15 million of costs
related to our cost of living colleague
support, £12 million of acquisition costs
related to the Sun Life of Canada UK
transaction, and made a £15 million
equity investment into the open finance
platform Moneyhub.
There was also a further £77 million of
other project costs, £68 million from the
close-outs in respect of Group hedging
instruments and £45 million of other items.
Debt repayments
Debt repayments in 2022 reflect the
repayment of the £450 million Tier 3
subordinated bond in July (2021: £322
million), as the Group manages its leverage.
Shareholder dividend
The shareholder dividend of £496 million
represents the payment of £248 million in
May for the 2021 final dividend and the
payment of the 2022 interim dividend of
£248 million in September.
Support of BPA activity
Funding of £285 million (2021: £359 million)
has been provided to the life companies
to support a strong year in BPA with
£4.8 billion of premiums written (2021:
£5.6 billion).
The decrease relative to 2021 reflects the
Group’s success in optimising its capital
with a reduction in the Group’s capital
strain on BPAs to 5.8% in 2022 (2021:
6.5%). This enabled the Group to write a
similar amount of incremental new business
long-term cash generation, but with 20%
less capital invested.
Future cash targets set
Our business model is designed to deliver
high levels of predictable cash generation,
enabling us to set very clear targets.
We are therefore setting a one-year
target of £1.3 to £1.4 billion again in 2023.
We have also set an increased three-year
cash generation target of £4.1 billion for
2023–2025. This includes £0.1 billion
of expected cash emergence from the
Sun Life of Canada UK acquisition and,
for the first time, cash emergence from
new business we expect to write in 2023
and 2024 of £0.2 billion.
Phoenix Group Holdings plc Annual Report and Accounts 202232
Sources
Uses
FY22 HoldCo cash
£4.1bn
£1.45bn
£0.4bn
£0.25bn
£0.5bn
£1.0bn
£1.5bn
2023–2025 cash generation
Operating costs and interest
Dividend
Planned integration costs
Sun Life of Canada UK acquisition
Available
for investment
into growth
£1.2bn
£1.2bn
£(0.8)bn
£(0.3)bn
£0.3bn
£(0.1)bn
£0.3bn
Incremental
new business
long-term
cash generation
Own Funds
management actions
Annual operating
costs, interest &
dividend
Total capital
invested into BPA
Other Increase in Group
in-force long-term
free cash
Group in-force long-term free cash
£bn
Group in-force
LTFC
Year ended
31 December 2022
Group in-force
LTFC
Year ended
31 December 2021
Long-term in-force cash generation 17.3 17.0
Plus closing Holding Company cash 0.5 1.0
Less M&A and transition costs (0.4) (0.2)
Group in-force long-term cash 17.4 17.8
Less shareholder debt (4.1) (4.6)
Less interest on debt to maturity (1.2) (1.4)
Group in-force Long-Term Free Cash 12.1 11.8
Illustrative 2023–2025 HoldCo sources and uses of cash
Increase in Group in-force long-term free cash (£bn)
Future sources and uses of cash
Looking over the period 2023–2025, and
after we have invested £248 million to fund
the acquisition of Sun Life of Canada UK,
we expect to have surplus cash of around
£1.45 billion available to invest into growth.
We will therefore continue to invest
into organic growth through BPA and
our fee-based businesses, and will
also continue to assess further
M&A opportunities.
Group in-force long-term free cash
Group in-force Long-Term Free Cash
(‘LTFC’) represents the cash expected
to be available over time to fund future
dividends from today’s in-force business.
This underpins the sustainability of our
c.£0.5 billion annual dividend cost over
the very long term.
Group in-force LTFC was £12.1 billion as
at 31 December 2022 (2021: £11.8 billion).
It comprises long-term cash generation
expected to emerge from our in-force
business plus existing Group holding
company cash, less an allowance for
costs associated with our M&A integration
activity and a deduction for our shareholder
debt outstanding and interest to maturity.
Growing our Group in-force LTFC allows
us to demonstrate that we are a growing,
sustainable business. I am therefore
pleased that in 2022 we have increased
our Group in-force LTFC by c.£0.3 billion.
The movement in the year is driven by
c.£1.2 billion of incremental new business
long-term cash generation written in 2022
from organic growth and c.£0.3 billion of
value-creating Solvency II own funds
management actions.
This more than offsets the Group’s
c.£0.8 billion of annual operating costs,
debt interest and dividends, c.£0.3 billion
of capital invested into BPA in 2022, and
c.£0.1 billion of net other uses of cash.
Growth in the Group’s in-force LTFC
supports us in delivering a dividend
that is sustainable and grows over time.
Phoenix Group Holdings plc Annual Report and Accounts 2022 33
Strategic report
Own Funds SCR Own Funds SCR
Surplus as
at FY21
Surplus
as at FY22
Management
actions
Surplus
emerging and
release of capital
requirements
Economics
Financing and
corporate
costs and
2021 dividends
Debt
repayment
New business
strain
Other
£5.3bn
£0.7bn
£(0.4)bn
£(0.8)bn
£(0.3)bn
£(0.5)bn
£4.4bn
£(0.3)bn
£0.7bn
180%
16% 7% (16)% (7)% 18% (9)% 0%
189%
FY21
Surplus
£4.4bn
FY22
£4.9bn
£9.3bn
Surplus
£5.3bn
£6.6bn
£11.9bn
189%180%
FY21
Surplus
£X.Xbn
FY22
£X.Xbn
£XX.Xbn
Surplus
£5.3bn
£6.6bn
£11.9bn
FY21
FY22
£6.7bn
£11.1bn
Surplus
£4.4bn
Surplus
£5.3bn
£9.5bn
£14.8bn
FY21
Surplus
£X.Xbn
FY22
£x.xbn
£XX.Xbn
Surplus
£5.3bn
£9.5bn
£14.8bn
166%156%
Group Solvency II
surplus (estimated)
£4.4bn
Group Shareholder Capital
Coverage ratio (estimated)
189%
Capital management
A Solvency II capital assessment involves a
valuation in line with Solvency II principles
of the Group’s Own Funds and a risk-based
assessment of the Group’s Solvency
Capital Requirement (‘SCR’).
The Group’s Own Funds differ materially
from the Group’s IFRS equity for a number
of reasons, including the recognition of
future shareholder transfers from the
with-profit funds and future management
charges on investment contracts, the
treatment of certain subordinated debt
instruments as capital items, and a number
of valuation differences, most notably in
respect of insurance contract liabilities,
taxation and intangible assets.
Group Solvency II capital position
Our Solvency II capital position remains
strong, with a resilient surplus of £4.4 billion
(2021: £5.3 billion), which includes the
accrual for the deduction of our 2022 final
dividend of £260 million. Our Shareholder
Capital Coverage Ratio (‘SCCR’) increased
to 189% (2021: 180%). This is currently
above the top-end of our 140%-to-180%
target range, providing the capacity to
invest into both organic and M&A
growth opportunities.
Change in Group Solvency II surplus
and SCCR
Our ongoing surplus emergence and
release of capital requirement increased
the SII surplus by £0.7 billion during the
year, contributing to an increase in the
SCCR of 16%pts.
We delivered strong management actions
in the period, primarily from ‘business as
usual’ actions as we continue to optimise
our in-force business. Management actions
contributed a further £0.7 billion of surplus
increase and added 7%pts to the SCCR.
Operating costs, dividends and interest
totalled £(0.8) billion, reducing the SCCR
by 16%pts. We also repaid a c.£0.5 billion
Tier 3 bond from our own cash resources in
July 2022, reducing the SCCR by 9%pts.
As a result of our comprehensive hedging
strategy, designed to stabilise our capital
position, we have minimised the adverse
impact from economic variances to just a
£(0.4) billion impact on our Solvency II
surplus, despite unprecedented market
turbulence last year. While this surplus
movement from economics was relatively
small, a consequence of our hedging
approach is that we do see volatility in
the Group’s Own Funds, to offset against
movements in the SCR, and this led to
an 18%pts increase in the SCCR.
Importantly though, both the SII Surplus and
SCCR impacts were broadly in line with our
published sensitivities, which means our
hedging operated as we expected it to.
We also invested £0.3 billion of capital into
growth, primarily for the funding of £4.8
billion of BPA premiums written in the year,
which decreased the SCCR by 7%pts.
Other movements represent project
spend to deliver Group initiatives, and a
Resilience
Business review continued
£4.4 billion Group Regulatory Solvency II surplus £4.4 billion Group Shareholder Solvency II surplus
2022 change in Group Solvency II Surplus (£bn)
Phoenix Group Holdings plc Annual Report and Accounts 202234
strengthening of expense assumptions for
the IFRS 17 project and integration delivery.
These movements decreased Solvency II
surplus by £0.3 billion, but had a neutral
impact on the SCCR, due to other
assumption changes providing an offset.
Sensitivity and scenario analysis
As part of the Group’s internal risk
management processes, the Own Funds
and regulatory SCR are regularly tested
against a number of financial scenarios.
The table provides illustrative impacts of
changing one assumption while keeping
others unchanged and reflects the
business mix at the balance sheet date.
Extreme markets movements outside of
these sensitivities may not be linear.
While there is no value captured in the
Group stress scenarios for recovery
management actions, the Group does
proactively manage its risk exposure.
Therefore in the event of a stress, we
would expect to recover some of the loss
reflected in the stress impacts shown.
Unrewarded market risk sensitivities
We have a particularly low appetite to
equity, interest rate, inflation and currency
risks, which we see as unrewarded, i.e. the
return on capital for retaining the risk is
lower than for hedging it.
In order to stabilise our SII surplus, we
regularly monitor risk exposures and use a
range of hedging instruments to remain
within a Board approved target range.
Equity risk primarily arises from our
exposure to a variation in future
management fees on policyholder assets
exposed to equities, while our currency
exposure primarily arises from our foreign
currency denominated debt.
Our interest rate exposure principally
relates to our shareholder credit portfolio,
while our inflation exposure arises from
both cost inflation expectations and
inflation-linked policies.
Rewarded credit risk sensitivities
We do however retain the credit risk in our
c.£31 billion shareholder credit portfolio,
and property risk in Equity Release
Mortgages, where we see these risks as
rewarded. The shareholder credit assets
are primarily used to back the Group’s
annuity portfolio. Exposure to these risks
is needed to back growth in the Group’s
annuity portfolio. Stress testing is used to
inform the level of risk to accept and to
monitor exposures against risk appetite.
We also actively manage our portfolio to
ensure it remains high quality and diversified,
and to maintain our sensitivities within risk
appetite. Our BBB exposure is just 19% and
we also remain conservative in the sector
positioning of our credit portfolio, with only
3% of our credit portfolio exposed to
cyclical sectors, with an average rating of A-.
The key sensitivity we focus on for credit is
a full letter downgrade of 20% of our
credit portfolio, which is £0.3 billion and
is therefore small relative to the Group’s
£4.4 billion Solvency II surplus.
Demographic risk sensitivities
We also have two key demographic risks
that we manage. Lapse risk arises from
customers surrendering policies early or
keeping policies with valuable guarantees
for longer.
Our longevity risk principally arises from
our annuity book, but this is managed
through reinsurance, where we retain
around half of the risk across our current
in-force book, and reinsure most of this
risk on new business.
Illustrative risk exposure stress testing
Estimated impact
1
on PGH Solvency II
Surplus
£bn
SCCR
%
Solvency II base 4.4 189
Equities: 20% fall in markets nil 3
Long-term rates: 80bps rise in interest rates
2
0.1 5
Long-term rates: 70bps fall in interest rates
2
(0.1) (5)
Long-term inflation: 60bps rise in inflation
3
Nil –
Property: 12% fall in values
4
(0.2) (4)
Credit spreads: 135bps widening with no allowance for downgrades
5
(0.2) (4)
Credit downgrade: immediate full letter downgrade
on 20% of portfolio
6
(0.3) (7)
Lapse: 10% increase/decrease in rates
7
(0.1) (1)
Longevity: 6 months increase
8
(0.5) (10)
1 Illustrative impacts as at 1 January 2022 assume changing one assumption while keeping others
unchanged, and reflects the business mix at the balance sheet date, and that there is no market
recovery. Extreme markets movements outside of these sensitivities may not be linear.
2 Assumes the impact of a dynamic recalculation of transitionals and an element of dynamic hedging
which is performed on a continuous basis to minimise exposure to the interaction of rates with other
correlated risks including longevity.
3 Stress reflects a structural change in long-term inflation with an increase of 60bps across the curve.
4 Property stress represents an overall average fall in property values of 12%.
5 Credit stress varies by rating and term and is equivalent to an average 135bps spread widening. It assumes
the impact of a dynamic recalculation of transitionals and makes no allowance for the cost of defaults/
downgrades.
6 Impact of an immediate full letter downgrade across 20% of the shareholder exposure to the bond
portfolio (e.g. from AAA to AA, AA to A, etc). This sensitivity assumes management actions are taken to
rebalance the annuity portfolio back to the original average credit rating and makes no allowance for
the spread widening which would be associated with a downgrade.
7 Assumes most onerous impact of a 10% increase/decrease in lapse rates across different product groups.
8 Applied to the annuity portfolio.
Estimated position as at
31 December 2022
£bn
Opening Free Surplus 2.6
Surplus generation and run-off of capital requirements 0.8
Management actions 0.6
Economics, financing and other (0.2)
Free Surplus before cash remittances 3.8
Cash remittances to holding companies 1.5
Closing Free Surplus 2.3
Life Company Free Surplus
Life Company Free Surplus represents
the Solvency II surplus of the Life
Companies that is in excess of their
Board-approved capital management
policies. It is this Free Surplus from
which the life companies remit cash to
Group. We retain a significant Life
Company Free Surplus of £2.3 billion
which provides resilience to the Group’s
long-term cash generation. The table
shown analyses the movements in 2022.
Phoenix Group Holdings plc Annual Report and Accounts 2022 35
Strategic report
FY21
£1,233m
FY22
£234m
£950m
£1,184m
+4%
£934m
£299m
Fee-based businesses Retirement Solutions
Incremental new business
long-term cash generation
£1.2bn
Assets under
Administration
£259bn
Incremental new business long-term cash
generation reflects the impact on the
Group’s future cash generation arising as a
result of new business transacted in the
year. It is stated on an undiscounted basis.
Assets under administration (‘AUA’) provide
an indication of the potential earnings
capability of the Group arising from its
insurance and investment business, whilst
AUA flows provide a measure of the
Group’s success in achieving growth
from new business.
A reconciliation from the Group’s IFRS
statement of consolidated financial
position to the Group’s AUA is provided
on page 309.
Please see the APM section on page 314
for further details of these measures.
Incremental new business long-term
cash generation
We have delivered a record level of
incremental new business long-term cash
generation of £1,233 million in 2022 (2021:
£1,184 million).
This means that we have once again
delivered new business growth which
allows us to more than offset the
natural run-off of the in-force business
cash generation of c.£800 million,
demonstrating that Phoenix is a business
that is growing organically.
Retirement Solutions
We have written £4.8 billion of BPA
premiums in 2022. While this is a reduction
on £5.6 billion written in 2021, we have
maintained broadly the same level of
incremental new business cash generation
at £934 million (2021: £950 million) with
20% less capital invested. This in turn
supported an increase in the cash multiple
from 2.6x in 2021 to 3.4x in 2022.
We successfully reduced our capital strain
from 6.5% in 2021 to 5.8% in 2022, and
maintained our pricing discipline which is
evidenced by our delivery of an increased
Growth
Business review continued
Incremental new business long-term cash generation
mid-teens IRR and shorter payback of
5.8 years (2021: 8.6 years).
Importantly though, we are not growing in
BPA at the expense of our resilience, with
a balanced portfolio and low credit risk
sensitivity remaining our long-term
ambition here.
Fee-based businesses
This comprises our capital-light fee-based
businesses of Pensions & Savings, Europe
and SunLife.
Pensions & Savings: Workplace
Our Workplace business has delivered an
improved level of incremental long-term
cash generation at £212 million in the year,
an increase of 53% on 2021 (2021: £139
million). This reflects the increased new
business we get from retaining our existing
corporate customers, through the natural
growth from new members joining existing
schemes and the impact of wage inflation
on contributions. In addition, as part of
TCS Diligenta’s build out of our Workplace
capabilities we have moved to a lower cost
per policy, improving our cost efficiency
further. This reduces the expenses
accounted for in incremental long-term
cash generation and is therefore a
recurring benefit for all future new
business too.
Pensions & Savings: Retail
The 2022 incremental new business
long-term cash generation of £37 million
from our Retail business has increased by
28% on 2021 (2021: £29 million). This
increase has been driven by the move to
a lower cost per policy with TCS Diligenta,
as with the Workplace business, thereby
enhancing cost efficiency here too.
Europe
There was a small decrease in the
incremental new business long-term cash
generation of our European business to
£29 million (2021: £31 million), due to lower
margins on new business in 2022.
SunLife
Our incremental long-term cash
generation from SunLife of £21 million has
decreased year-on-year (2021: £35 million)
reflecting the impact of the cost of living
crisis on our SunLife customer base
leading to lower sales.
Phoenix Group Holdings plc Annual Report and Accounts 202236
AUA
as at
1 Jan 2022
UK Heritage
Net Flows
Retirement
Solutions
Net Flows
Workplace
Net Flows
Retail
Net Flows
Other
fee-based
Net Flows
Other
movement
including
markets
AUA as at
31 Dec 2022
(9.6)
2.3
(1.4)
0.6
(45.7)
2.4
259.0
310.4
Group AUA
Group AUA as at 31 December 2022 was
£259.0 billion (2021: £310.4 billion).
The decrease in the period is largely
driven by £45.7 billion of adverse market
movements, but importantly there is
limited impact from these market
movements on the fees we earn, as they
are hedged, which results in predictable
cash generation.
Heritage net flows
UK Heritage net outflows of £9.6 billion
(2021: £10.8 billion
1
) reflect policyholder
outflows on claims such as maturities and
surrenders, net of total premiums received
in the period from in-force contracts.
This improvement year-on-year is due to
elevated outflows in 2021 relating to
one-off challenges following the migration
of L&G business to ReAssure. With these
challenges all now resolved, outflows are
reflective of a more normalised steady-
state run-rate.
Retirement Solutions net flows
Net flows in Retirement Solutions, which
encompasses our BPA and individual
annuity businesses, were £2.3 billion (2021:
£3.3 billion). This year-on-year reduction is
due to reduced BPA premiums written, as a
result of our improved capital efficiency
and the impact of higher rates.
Gross inflows during the period were
£5.3 billion (2021: £6.3 billion), inclusive of
£4.8 billion of new BPA premiums written
in the year. This included 12 external
transactions accounting for £4.2 billion
of premiums and £0.6 billion for the
last tranche of the Pearl Pension
Scheme buy-in.
Outflows of £3.0 billion in the period (2021:
£2.9 billion) primarily reflect the natural
run-off of our in-payment annuity policies.
Pensions & Savings: Workplace net flows
Net fund flows within our Workplace
business were £2.4 billion in 2022 (2021:
£0.2
1
billion), a significant improvement
year-on-year. The investment we have
made into our proposition and our
Standard Life brand has enabled us
to improve the retention of our existing
schemes to benefit from the embedded
growth in Workplace schemes and drive
stronger net fund flows in the year.
Gross inflows were £6.2 billion, up 7%
on 2021 (£5.8 billion
1
), primarily
reflecting increased flows due to
annual salary increases.
2022 outflows of £3.8 billion improved on
2021 (£5.6 billion
1
), as we retained more
customers with our enhanced proposition
and the success of our Standard Life
Sustainable Multi-Asset default fund.
Pensions & Savings: Retail net flows
Net fund outflows within our Retail
business were £1.4 billion in 2022 (2021:
£1.6 billion net outflow), a slight
improvement year-on-year.
Gross inflows during the period were
slightly reduced on 2021 at £1.7 billion
(2021: £1.9 billion) due to lower
consolidation into our Self Invested
Personal Pension (‘SIPP’) products.
Importantly, we did see a more significant
decrease in outflows of 11% to £3.1 billion
(2021: £3.5 billion). This demonstrates that
more customers are staying with us as our
proposition is improving.
Other fee-based businesses net
fund flows
We have seen net fund flows of £0.6 billion
in 2022 (2021: £0.8 billion net inflows) from
our Europe and SunLife businesses.
Gross inflows were £2.5 billion in the year
(2021: £2.8 billion), primarily reflecting
our individual retirement products sold
in Europe, while outflows of £1.9 billion
in the year (2021: £2.0 billion) are
largely due to the natural run-off of our
European business.
Other movements including markets
AUA decreased by £45.7 billion (2021:
£11.6 billion increase) driven by the net
adverse impacts of market movements,
largely due to rising yields. This impact
has been seen across the market, but
Phoenix is different to other insurers due
to our comprehensive hedging approach
which mitigates the impact on our Annual
Management Charge, to deliver
predictable fee-based revenues and
underpin our resilient cash generation.
1. The opening AUA position has been restated for a
reclassification of £10.1 billon in respect of the
Group’s Corporate Trustee Investment Plan (‘CTIP’)
from the Heritage business to the Pensions &
Savings: Workplace business, as this product is
open for new business. Subsequent flows on the
CTIP business in 2022 have been captured within
the Pensions & Savings: Workplace business, with
2021 associated flows restated to reflect this
reclassification and provide a more accurate
reflection of year-on-year comparatives.
Movement in AUA (£bn)
Phoenix Group Holdings plc Annual Report and Accounts 2022 37
Strategic report
Fitch leverage ratio
30%
Adjusted operating profit
£1,245m
IFRS loss after tax
£(1,762)m
IFRS
results
Business review continued
IFRS (loss)/profit is a GAAP measure of
financial performance and is reported in
our statutory financial statements on page
168 onwards.
Adjusted operating profit is a non-GAAP
financial performance measure based on
expected long-term investment returns. It is
stated before amortisation and impairment
of intangibles, other non-operating items,
finance costs and tax.
Please see the APM section on page 314
for further details of this measure.
IFRS loss after tax attributable to owners
The Group generated an IFRS loss after tax
attributable to owners of £1,762 million
(2021: loss of £709 million), which primarily
reflects £2,673 million of adverse
investment return variances and £522
million of charges for amortisation and
impairment of intangibles.
Investment return variances includes net
losses as a result of economic movements
in the value of assets backing Group
employee pension schemes, where they
are subject to insurance policies with
Group entities. An accounting mismatch
arises as the related decrease in the
defined benefit pension obligation is
recognised in ‘Other Comprehensive
Income’ (‘OCI’), which has seen a gain of
£686 million in the period that partly
offsets the loss.
Basis of adjusted operating profit
Adjusted operating profit is based on
expected investment returns on financial
investments backing shareholder and
policyholder funds over the reporting
period, with consistent allowance for the
corresponding expected movements in
liabilities (being the release of prudent
margins and the interest cost of unwinding
the discount on the liabilities).
The principal assumptions underlying the
calculation of the long-term investment
return are set out in note B2.1 to the IFRS
consolidated financial statements.
Adjusted operating profit includes the
effect of variances in experience for
non-economic items, such as mortality and
persistency, and the effect of changes in
non-economic assumptions. Any impact
from market movements is shown outside
of adjusted operating profit. Adjusted
operating profit is net of policyholder
finance charges and policyholder tax.
Adjusted operating profit
The Group has reported an increased
adjusted operating profit of £1,245 million
for the year (2021: £1,230 million).
Heritage adjusted operating profit
Our Heritage business segment does not
actively sell new life or pension policies
and runs-off gradually over time.
Our Heritage segment delivered adjusted
operating profit of £601 million (2021:
£537 million), which increased year-on-
year. This was primarily due to the
non-recurrence of adverse one-off
assumption changes recognised in 2021.
Open adjusted operating profit
Open adjusted operating profit includes
Retirement Solutions, Pensions and
Savings, SunLife, and is shown here
inclusive of our Europe business segment.
Our Open business delivered an adjusted
operating profit of £761 million (2021:
£788 million). The reduction compared to
the prior year primarily reflects lower new
business profit on BPA due to a lower level
of premiums.
Service company
The adjusted operating loss from the
service company of £48 million (2021: loss
of £24 million) comprises income from the
life and holding companies in accordance
with the respective management services
agreements less fees related to the
outsourcing of services and other
operating costs.
The decrease compared to the prior
period reflects additional costs incurred,
driven by investment in our growth
strategy, including the development of
asset management capabilities.
IFRS profit and loss statement
£m 2022 2021
Heritage 601 537
Open 761 788
Service company (48) (24)
Group costs (69) (71)
Adjusted operating profit before tax 1,245 1,230
Investment return variances and economic assumption changes (2,673) (1,125)
Amortisation and impairment of intangibles (522) (639)
Other non-operating items (179) (65)
Finance costs (199) (217)
Profit before tax attributable to non-controlling interest 67 128
Loss before tax attributable to owners (2,261) (688)
Tax credit / (charge) attributable to owners 499 (21)
Loss after tax attributable to owners (1,762) (709)
Phoenix Group Holdings plc Annual Report and Accounts 202238
IFRS 4 shareholder
equity
1 January 2022
Broadly neutral
impact expected
Indicative IFRS 17
shareholder equity
1 January 2022
CSM
Group costs
Group costs in the period were £69 million
(2021: £71 million). They mainly comprise
project recharges from the service
companies and the returns on the scheme
surpluses/deficits of the Group staff
pension schemes.
Investment return variances and
economic assumption changes
Movements in yields, inflation, currency
and equity markets are hedged to protect
our Solvency II surplus from volatility, but
our IFRS balance sheet is, in effect,
‘over-hedged’. This is because it does not
recognise the additional Solvency II
balance sheet items such as certain future
profits and the Solvency Capital
Requirements (see diagram on page 31).
Therefore, the movements in the value of
certain hedging instruments offset the
market movements in the period, and
gives rise to profits or losses in the IFRS
results. However, importantly the Group’s
cash generation and dividend capacity
are unaffected by this due to the
Group’s continued resilient Solvency
balance sheet.
As a result, the net adverse investment
return variances of £2,673 million (2021:
£1,125 million negative) have primarily
arisen as a result of rising yields, which has
been hedged, and a widening of credit
spreads. This includes economic
movements on assets within our corporate
pension schemes that have been subject
to a buy-in. Taking into account the
corresponding decrease in our pension
scheme liabilities of £940 million, Total
Comprehensive Expense for the year
was £(1,076)m.
Amortisation and impairment of acquired
in-force business and other intangibles
The previously acquired in-force business
is being amortised in line with the
expected run-off profile of the profits to
which it relates. The amortisation and
impairment of acquired in-force business
during the year of £501 million (2021:
£572 million) has decreased year-on-year
reflecting the impact of the run-off.
Amortisation and impairment of other
intangible assets totalled £21 million in
the period (2021: £67 million).
Other non-operating items
Other non-operating items totalled a
£179 million loss (2021: £65 million loss,
inclusive of a £110 million gain
on the Standard Life brand acquisition).
This includes £187 million of integration
costs related to the strategic decision to
re-phase our Standard Life customer & IT
migration programme to build out our
Open business capabilities on the TCS
Diligenta (‘TCS’) platform. Also included
are costs associated with the implementation
of IFRS 17, ongoing costs in relation to the
ReAssure integration programme,
acquisition costs relating to Sun Life of
Canada UK, as well as other corporate
project costs and other net one-off items.
Finance costs
Finance costs of £199 million (2021: £217
million) reflects the interest paid on the
Group debt instruments. The year-on-year
reduction reflects the removal of interest
on instruments settled in 2021, and
therefore no cost incurred this year.
Tax credit attributable to owners
The Group’s approach to the management
of its tax affairs is set out in its Tax Strategy
document that is available on our website.
The Group tax credit for the period
attributable to owners is £499 million
(2021: £21 million tax charge) based on
a loss (after policyholder tax) of £2,261
million (2021: £688 million loss).
The tax credit of £499 million arising on
the loss (after policyholder tax) includes
a £119 million tax credit arising from the
impact of the 25% corporate tax rate
effective from 1 April 2023 on deferred tax.
A reconciliation of the tax charge is
set out in note C6.4 to the Group
financial statements.
Financial leverage
The Group seeks to manage the level of
debt on its balance sheet by monitoring
its financial leverage ratio. The financial
leverage ratio as at 31 December 2022
is 30% (31 December 2021: 28%).
The increase in leverage year-on-year is
predominantly a result of the material
adverse investment return variance
following significant movements in yields
and credit spreads. As markets recover in
future periods, we would expect to see
positive investment variances to unwind
some of this unrealised loss. In turn this
will result in a reduction in leverage.
The leverage ratio is currently within our
target range of 25% to 30%, and we will
continue to monitor our leverage and
manage it appropriately.
During July 2022, we repaid a £450 million
Tier 3 bond from our own cash resources,
which contributed to a reduction in
outstanding debt leverage to £4.1 billion
at the end of 2022.
Our business strategy and financial framework
are not impacted by IFRS 17
IFRS 17 is a new Financial Reporting Standard that replaces IFRS 4
on accounting for insurance contracts. IFRS 17 is effective from
1 January 2023.
Our strategy of growing our in-force business over time as we
support customers journey to and through retirement remains
unaffected. Our key metrics continue to focus on cash generation
and Solvency II capital resilience, with our dividend paying
capacity and long-term coverage remaining unchanged.
We expect the introduction of IFRS 17 to result in a broadly
neutral impact on IFRS shareholder equity, with a Contractual
Service Margin (‘CSM’) of at least £2 billion to be established.
Illustrative change in shareholder equity and
recognition of CSM
Phoenix Group Holdings plc Annual Report and Accounts 2022 39
Strategic report
Total 2022 dividend per share
50.8p
dividend increase in
the Final 2022 dividend
+5%
Organic growth and M&A supports
a sustainable dividend increase
Phoenix has demonstrated a strong
dividend track record over the past
12 years, with a 4% compound annual
growth rate (‘CAGR’) since 2011.
2021 was pivotal in evolving our dividend
story as, for the first time, our dividend
increase came from the strong organic
performance of our new business. It was
a proof of concept that we could deliver
dividend increases outside of M&A.
However, we have always been clear that
we are focused on delivering dividend
growth both organically through our new
business, and through M&A. Which is why
I am delighted that in 2022 we have
achieved both.
Firstly, we announced our first ever
cash funded acquisition of Sun Life
of Canada UK, which we expect to
complete in April 2023. We said on
announcement that the Board had
proposed a dividend increase of 2.5%
for this inorganic growth, funded from
the c.£0.5 billion of cash emerging from
this business over its lifetime.
In terms of organic growth, we said we
were confident we could deliver new
business long-term cash generation to
more than offset the natural run-off of
our business in 2022, and we have.
With a strong strategic and financial
performance in 2022 including record
new business long-term cash generation
of £1.2 billion, we have delivered organic
growth that supports a 2.5% organic
dividend increase.
As a result, the Board has recommended a
dividend increase of 5% in the Final 2022
dividend to 26.0 pence per share, This
equates to a Total 2022 dividend of
50.8 pence per share.
Our increased level of dividend remains
just as sustainable as it was previously,
thanks to the significant levels of cash
generation that will emerge from our
current in-force business, with £12.1 billion
of Group in-force long-term cash that will
be available to fund future dividends.
Dividend policy and approach
We operate a dividend policy which is
to pay a dividend that is sustainable and
grows over time.
It is important to emphasise that the Board
will continue to, above all else, prioritise
Dividend
Business review continued
the sustainability of our dividend over the
very long term.
We have now demonstrated that
Phoenix can grow both organically and
through M&A. Therefore, going forward,
we will simplify our dividend
communication, with the Board
announcing any potential annual dividend
increase at our full year results, which will
combine both organic growth and
inorganic M&A growth.
Phoenix Group’s dividend policy: The Board intends to pay
a dividend that is sustainable and grows over time
32.2p
36.5p
40.8p 40.8p 40.8p
41.9p
45.2p
46.0p
46.8p
47.5p
48.9p
50.8p
H1: 24.8p
H2: 26.0p
+5%
20122011
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
+4% CAGR
Strong dividend track record
Dividend per share
2.5% + 2.5% = 5%
Organic dividend
increase
reflects our strong
strategic and financial
performance in 2022
Inorganic dividend
increase
for the Sun Life
of Canada
UK acquisition
Final dividend
increase
effective from,
and including, the
2022 Final dividend
Phoenix Group Holdings plc Annual Report and Accounts 202240
Retirement Solutions Fee-based businesses
2025 target
We are confident of growing incremental new business
long-term cash generation to £1.5bn per annum in 2025.
2022 2025 target
c.£1.2bn
c.£0.3bn
c.£0.9bn c.£1bn
c.£0.5bn
c.£1.5bn
c.+25%
Looking ahead
We are helping people secure a life
of possibilities through our clear and
differentiated strategy, as we support
our customers on their journey to and
through retirement.
The scale of the Group’s in-force business
brings three key competitive advantages
of capital efficiency, customer access and
cost efficiency. We will leverage these
to grow our in-force cash generation over
time, both organically and through M&A.
Clear financial targets
We have a clear set of targets as we continue
to prioritise the delivery of cash, resilience
and growth.
Starting with cash, Phoenix has set two
new cash generation targets. The first is
a one-year target range for 2023 of
£1.3-to-£1.4 billion. The second is a
three-year target of £4.1 billion across
2023–2025, which includes the cash
emergence from the new business we
expect to write in 2023 and 2024, of
c.£0.2 billion.
This evolution in how we set our cash
targets demonstrates our confidence in
our ability to deliver future organic growth.
In terms of resilience, we will continue to
maintain a strong SII surplus through our
comprehensive hedging approach. This
will see us continue to operate within or
above our Solvency II SCCR target range
of 140%-to-180% and continue to manage
our key individual risk sensitivities on
a Solvency II surplus basis.
Despite the difficult ongoing economic
backdrop and volatile markets, our
uniquely resilient Solvency II balance
sheet is strongly positioned to enable
us to deliver on our ambitions in 2023.
In addition, we will look to manage the
Group’s gearing level by operating within
our Fitch financial leverage ratio target
our target range of 25%–30% over
the long term.
Turning to growth, Phoenix is now
confident of growing its incremental new
business long-term cash generation, and
has set a new target of £1.5 billion per
annum by 2025, which is a 25% increase
on the Group’s strong 2022 performance.
This new target is expected to
comprise c.£1.0 billion from Retirement
Solutions and c.£0.5 billion from our
Fee-based businesses.
In Retirement Solutions, we will continue
our strategy of optimising our capital and
returns, by investing c.£300 million of
capital per annum into BPA and targeting
mid-teens IRRs.
While in our Fee-based Pensions and
Savings business, we are investing in our
proposition and the Standard Life brand,
to support our target for growth in our net
fund flows. With an ambition for c.£5 billion
of annual net fund flows in our Workplace
business by 2025 and c.£2 billion in our
Retail business by 2025.
Delivering these new growth targets will
enable the Group to generate significant
net growth in our £12.1 billion of Group
in-force long-term free cash, which can
support a dividend that is sustainable and
grows over time, in line with our policy.
I look forward to an exciting year in 2023
as we continue to deliver on our purpose
and our strategy.
Rakesh Thakrar
Group Chief Financial Officer
Outlook
Phoenix is a growing,
sustainable business
2023 targets
Cash
• Deliver £1.3bn–£1.4 billion of cash generation in 2023
• Deliver £4.1 billion of cash generation across
2023–2025
Resilience
• Maintain SII SCCR within or above our 140%–180%
target range
• Manage Fitch leverage ratio within our 25%–30%
target range
Growth
• Deliver c.£1.5 billion per annum of incremental
new business long-term cash generation by 2025
• Complete Sun Life of Canada UK acquisition in
April 2023
Phoenix Group Holdings plc Annual Report and Accounts 2022 41
Strategic report
Improving stakeholder outcomes
As a purpose-led business we seek to address the needs of a broad group
of stakeholders. Positive engagement and meaningful outcomes are key
to ensuring a strong and sustainable business. All of our interactions are
governed by the Group’s Code of Business Ethics and Ethical Conduct which
sets out how we maintain a high standard of integrity across all engagements.
Stakeholder engagement
Key stakeholder groups
Customers Suppliers Colleagues Community Investors Government, trade
bodies and regulators
Phoenix Group has c.12 million customers and
manages £259 billion of assets. We offer a broad
range of pensions and savings products to support
people across all stages of the savings life cycle.
We seek to ensure that our c.1,500 partners and
suppliers adhere to the highest environmental
and ethical standards.
We have colleagues based across the UK, Ireland
and Germany. Our operational sites include
London, Wythall, Edinburgh, Telford, Hitchin,
Norwich, Bristol, Dublin and Frankfurt.
We are committed to making a difference in the
communities in which we are based, interacting
with educational institutions, charities and local
community groups.
We maintain an active dialogue with institutional
equity and debt investors, individual investors,
rating agencies and sell side research analysts.
We engage with various political stakeholders at
Westminster and Holyrood, along with key trade
bodies representing the industry, and regulators
including the PRA, FCA ,CBI and TPR
What matters to them
• Products and services that meet their needs at
different stages of their savings life cycle
• Clear communication and integrity as well as trust
in their funds being managed safely
• Customer service and support that promotes
positive outcomes and empowers better financial
decision making
• Understanding and support for those experiencing
vulnerability, particularly through key life events
and moments of heightened pressures
• A collaborative approach and long-term
relationships based on trust
• Clear mutual expectations and ESG standards
for all suppliers covering carbon reduction
targets, modern slavery and health and safety
• Enabling entity consistency in social
responsibility through supply chain
• Having a sense of belonging and connection
to Phoenix’s purpose and values, and being
empowered to make a difference
• A diverse and inclusive workplace
• Flexible ways of working that best suit their needs
• Opportunities for personal and career development
• Recognition and reward for performance
• Engaging in effective two-way feedback
• Support to help navigate the cost of living crisis
• Investment into local innovation, infrastructure
and sustainable communities
• Providing fulfilling work and economic growth,
including social mobility
• Financial and volunteering support to our
local charities
• Educational support to our local schools
• Using our scale and influence to take action on
key societal and environmental concerns
• Regular updates on the Group’s strategy,
operations and performance
• Clear communication of investment proposition
and comprehensive financial disclosures to
enable investors and analysts to appropriately
evaluate Phoenix Group as an investment
• Regular engagement with management on
business performance and governance matters
• Annual review meeting with Fitch Ratings
• Named and clear points of contact for queries
• Effective regulatory engagement, transparency
and compliance
• Evidencing the regulators’ key areas of interest
(outlined annually) have been addressed
• Actively contributing to policy developments
impacting long-term savings and insurance
• Collaboration with a range of trade associations,
such as the Association of British Insurers,
Confederation of British Industry, and TheCityUK
How we engage
• We engage through a variety of channels
and are adapting our service and product
propositions to help more customers journey
to and through retirement
• We continuously seek new ways to better identify,
manage, and support vulnerable customers, driving
consistency and excellence across the Group
• We conduct direct customer research, and
regularly review and integrate feedback into
our decision making
• We continue to integrate ESG into our
investment solutions
• We maintain an active dialogue to identify areas
for collaboration and support our suppliers’
progress towards our standards
• In 2022, we developed our ESG Supply Chain
Standards for key suppliers in line with best
practice, detailing our expectations of them. The
Standards are due for publication in late March/
early April 2023 and will support the current
Code of Practice
• We continue to engage with the ABI Sustainable
Supply Chain Working Group, the CDP Supplier
Survey and the Indirect Spend Alliance.
• We embed our purpose and ambition through
clear colleague objectives and career goals
• Our colleagues are enabled to speak up through
a continuous listening culture, including regular
engagement surveys
• We also engage through our colleague
representation groups, colleague-led networks,
regular intranet communications and Phoenix
Together events
• Phoenix Colleague Representation Forum have
quarterly engagement meetings with Maggie
Semple, our Director of Workforce Engagement
• We hold regular meetings with charity partners
and partnership schools, and stay connected
with other causes
• We invite our colleagues to input on matters
important to them in their communities
• We routinely undertake surveys and
collect feedback
• Comprehensive engagement programme,
including regular investor roadshows, results
presentations, sales briefings and conferences
• We held a Capital Markets Event in December
to provide a deep-dive into the Group’s organic
growth opportunities and showcase the depth
of our senior management
• We conducted >200 interactions with
shareholders, debt investors and financial analysts,
and also attended numerous conferences in the UK
and overseas
• Our Chair held a Stewardship roadshow in January
2023 with our major institutional investors
• Comprehensive and robust regulatory
engagement programme, co-ordinated through
centralised Regulatory Relationships Team
• Colleagues from all over our business actively
engage on trade association committees
• Andy Briggs, Group CEO, chairs the ABI Climate
Change Board Committee, co-chairs an employer
trade organisation round-table with the Minister
for Employment and sits on a number of other
industry forums
• Andy Curran, CEO Standard Life, chairs the ABI’s
Long-Term Savings Committee, and also sits on
the ABI Board
Outcomes of engagement
• Sustained high customer satisfaction scores of 92%
for Combined Group telephony and 94% for
Standard Life digital journeys, exceeding our
2022 targets of 90% and 92% respectively
• Launched our Vulnerable Customer Centre of
Excellence, receiving industry awards
• 1.2m customers directly offered digital
literacy materials
• Responded to cost of living crisis, including
financial difficulty pages on our websites and
reviewing products to provide flexibility
• Transitioned 1.5m customers and c.£15bn of assets
into our new default Sustainable Multi Asset solution
• Launched financial inclusion strategy
• 82% of our key suppliers have now committed
to Science Based targets (‘SBTi’) or UN Race
to Zero targets
• 96% of key suppliers have published a Modern
Slavery Statement
• 92% of our suppliers were paid within 60 days
in 2022
• 93% of assigned operations colleagues have
been trained in ESG
• Our 2021 and 2022 Scope 3 emissions have
been mapped against the 2019 baseline
• A people strategy aligned to our vision of being
the best place colleagues have ever worked
• Initiatives to progress Diversity, Equity & Inclusion
• Access to mental health & well-being tools
• Provision of mobile technology to all colleagues
to support our flexible ways of working
• In 2022, we ranked 24th on the Social Mobility
index (41st in 2021) and we won Employer of the
Year at the FTAdviser Diversity in Finance Awards
• Comprehensive cost of living support package,
including one-off net payment of £1,000 to all
colleagues
1
, access to free money coaching, free
meals and support with cost of parking
1 Payment made in August to all employees except our
most senior staff
• c.£815,000 collectively donated to registered
charities by the Group, our colleagues and
third parties
• During the year, colleagues have volunteered
c.6,455 hours to support our communities, up
from c.2,650 hours in 2021
• 42% of colleagues involved in community
engagement activities throughout 2022
• Standard Life became a founding partner for the
new Samaritans Training School, with a donation
enabling around 400 more listening volunteers
to be trained
• Ongoing engagement enables a two-way
dialogue between Phoenix and its investors,
analysts and ratings agencies, ensuring a good
understanding of the company strategy in the
market, and enabling feedback to be considered
in our strategic decision-making
• The Directors recommended a 5% increase in
the Group’s 2022 Final Dividend to 26.0p (total
dividend of 50.8p), comprising both organic
and inorganic growth
• The Group’s Insurer Financial Strength rating
is AA- (Fitch rated)
• Positive industry outcome on Solvency II,
which will help government meet its objective
of increasing insurance capital deployment into
the real economy
• Our regulated subsidiaries have approved capital
policies for distributions which protect customers
• Approval of a new Irish entity (PLAE) by the CBI,
followed by a Part VII transfer of the Irish branch
business, Icelandic, German, Swedish and
Norwegian business which was approved by the
UK and relevant EU regulators and the Courts,
meeting the post-Brexit deadline of YE 2022.
Read more
• On pages 22 to 25
• In our 2022 Sustainability Report
• standardlife.co.uk
• phoenixlife.co.uk
• reassure.co.uk
• sunlife.co.uk
• In our 2022 Sustainability Report and 2022
Climate Report, along with our ESG Supply
Chain Standards
• Our website: thephoenixgroup.com/
sustainability/working-responsibly-suppliers
• On pages 108 to 109
• In our 2022 Sustainability Report
• Our website:
thephoenixgroup.com/sustainability/
people-and-culture
• In our 2022 Sustainability Report • On our website:
thephoenixgroup.com/investor-relations
• In our 2022 Sustainability Report
Phoenix Group Holdings plc Annual Report and Accounts 202242
Section 172 statement
During the year, Directors have applied section 172 of the
Companies Act 2006 in a manner consistent with the Group’s
purpose, values and strategic priorities. When, the Directors
have acted in a way which they consider, in good faith, is most
likely to promote the success of the Company for the benefit of
its members as a whole. In doing so the Directors have paid due
regard to the matters set out in section 172(1) (a) to (f), namely:
• the likely consequences of decisions in the long term;
• the interests of our employees;
• the need to foster business relationships with suppliers,
customers and others;
• the impact of our operations on the community
and the environment;
• the desirability of maintaining our reputation for
high standards of business conduct; and
• the need to act fairly between members of the Company.
Examples of how Directors have considered these matters
in connection with key decisions linked to our strategic
priorities are detailed on pages 84 to 87 of the Corporate
Governance Report.
Key stakeholder groups
Customers Suppliers Colleagues Community Investors Government, trade
bodies and regulators
Phoenix Group has c.12 million customers and
manages £259 billion of assets. We offer a broad
range of pensions and savings products to support
people across all stages of the savings life cycle.
We seek to ensure that our c.1,500 partners and
suppliers adhere to the highest environmental
and ethical standards.
We have colleagues based across the UK, Ireland
and Germany. Our operational sites include
London, Wythall, Edinburgh, Telford, Hitchin,
Norwich, Bristol, Dublin and Frankfurt.
We are committed to making a difference in the
communities in which we are based, interacting
with educational institutions, charities and local
community groups.
We maintain an active dialogue with institutional
equity and debt investors, individual investors,
rating agencies and sell side research analysts.
We engage with various political stakeholders at
Westminster and Holyrood, along with key trade
bodies representing the industry, and regulators
including the PRA, FCA ,CBI and TPR
What matters to them
• Products and services that meet their needs at
different stages of their savings life cycle
• Clear communication and integrity as well as trust
in their funds being managed safely
• Customer service and support that promotes
positive outcomes and empowers better financial
decision making
• Understanding and support for those experiencing
vulnerability, particularly through key life events
and moments of heightened pressures
• A collaborative approach and long-term
relationships based on trust
• Clear mutual expectations and ESG standards
for all suppliers covering carbon reduction
targets, modern slavery and health and safety
• Enabling entity consistency in social
responsibility through supply chain
• Having a sense of belonging and connection
to Phoenix’s purpose and values, and being
empowered to make a difference
• A diverse and inclusive workplace
• Flexible ways of working that best suit their needs
• Opportunities for personal and career development
• Recognition and reward for performance
• Engaging in effective two-way feedback
• Support to help navigate the cost of living crisis
• Investment into local innovation, infrastructure
and sustainable communities
• Providing fulfilling work and economic growth,
including social mobility
• Financial and volunteering support to our
local charities
• Educational support to our local schools
• Using our scale and influence to take action on
key societal and environmental concerns
• Regular updates on the Group’s strategy,
operations and performance
• Clear communication of investment proposition
and comprehensive financial disclosures to
enable investors and analysts to appropriately
evaluate Phoenix Group as an investment
• Regular engagement with management on
business performance and governance matters
• Annual review meeting with Fitch Ratings
• Named and clear points of contact for queries
• Effective regulatory engagement, transparency
and compliance
• Evidencing the regulators’ key areas of interest
(outlined annually) have been addressed
• Actively contributing to policy developments
impacting long-term savings and insurance
• Collaboration with a range of trade associations,
such as the Association of British Insurers,
Confederation of British Industry, and TheCityUK
How we engage
• We engage through a variety of channels
and are adapting our service and product
propositions to help more customers journey
to and through retirement
• We continuously seek new ways to better identify,
manage, and support vulnerable customers, driving
consistency and excellence across the Group
• We conduct direct customer research, and
regularly review and integrate feedback into
our decision making
• We continue to integrate ESG into our
investment solutions
• We maintain an active dialogue to identify areas
for collaboration and support our suppliers’
progress towards our standards
• In 2022, we developed our ESG Supply Chain
Standards for key suppliers in line with best
practice, detailing our expectations of them. The
Standards are due for publication in late March/
early April 2023 and will support the current
Code of Practice
• We continue to engage with the ABI Sustainable
Supply Chain Working Group, the CDP Supplier
Survey and the Indirect Spend Alliance.
• We embed our purpose and ambition through
clear colleague objectives and career goals
• Our colleagues are enabled to speak up through
a continuous listening culture, including regular
engagement surveys
• We also engage through our colleague
representation groups, colleague-led networks,
regular intranet communications and Phoenix
Together events
• Phoenix Colleague Representation Forum have
quarterly engagement meetings with Maggie
Semple, our Director of Workforce Engagement
• We hold regular meetings with charity partners
and partnership schools, and stay connected
with other causes
• We invite our colleagues to input on matters
important to them in their communities
• We routinely undertake surveys and
collect feedback
• Comprehensive engagement programme,
including regular investor roadshows, results
presentations, sales briefings and conferences
• We held a Capital Markets Event in December
to provide a deep-dive into the Group’s organic
growth opportunities and showcase the depth
of our senior management
• We conducted >200 interactions with
shareholders, debt investors and financial analysts,
and also attended numerous conferences in the UK
and overseas
• Our Chair held a Stewardship roadshow in January
2023 with our major institutional investors
• Comprehensive and robust regulatory
engagement programme, co-ordinated through
centralised Regulatory Relationships Team
• Colleagues from all over our business actively
engage on trade association committees
• Andy Briggs, Group CEO, chairs the ABI Climate
Change Board Committee, co-chairs an employer
trade organisation round-table with the Minister
for Employment and sits on a number of other
industry forums
• Andy Curran, CEO Standard Life, chairs the ABI’s
Long-Term Savings Committee, and also sits on
the ABI Board
Outcomes of engagement
• Sustained high customer satisfaction scores of 92%
for Combined Group telephony and 94% for
Standard Life digital journeys, exceeding our
2022 targets of 90% and 92% respectively
• Launched our Vulnerable Customer Centre of
Excellence, receiving industry awards
• 1.2m customers directly offered digital
literacy materials
• Responded to cost of living crisis, including
financial difficulty pages on our websites and
reviewing products to provide flexibility
• Transitioned 1.5m customers and c.£15bn of assets
into our new default Sustainable Multi Asset solution
• Launched financial inclusion strategy
• 82% of our key suppliers have now committed
to Science Based targets (‘SBTi’) or UN Race
to Zero targets
• 96% of key suppliers have published a Modern
Slavery Statement
• 92% of our suppliers were paid within 60 days
in 2022
• 93% of assigned operations colleagues have
been trained in ESG
• Our 2021 and 2022 Scope 3 emissions have
been mapped against the 2019 baseline
• A people strategy aligned to our vision of being
the best place colleagues have ever worked
• Initiatives to progress Diversity, Equity & Inclusion
• Access to mental health & well-being tools
• Provision of mobile technology to all colleagues
to support our flexible ways of working
• In 2022, we ranked 24th on the Social Mobility
index (41st in 2021) and we won Employer of the
Year at the FTAdviser Diversity in Finance Awards
• Comprehensive cost of living support package,
including one-off net payment of £1,000 to all
colleagues
1
, access to free money coaching, free
meals and support with cost of parking
1 Payment made in August to all employees except our
most senior staff
• c.£815,000 collectively donated to registered
charities by the Group, our colleagues and
third parties
• During the year, colleagues have volunteered
c.6,455 hours to support our communities, up
from c.2,650 hours in 2021
• 42% of colleagues involved in community
engagement activities throughout 2022
• Standard Life became a founding partner for the
new Samaritans Training School, with a donation
enabling around 400 more listening volunteers
to be trained
• Ongoing engagement enables a two-way
dialogue between Phoenix and its investors,
analysts and ratings agencies, ensuring a good
understanding of the company strategy in the
market, and enabling feedback to be considered
in our strategic decision-making
• The Directors recommended a 5% increase in
the Group’s 2022 Final Dividend to 26.0p (total
dividend of 50.8p), comprising both organic
and inorganic growth
• The Group’s Insurer Financial Strength rating
is AA- (Fitch rated)
• Positive industry outcome on Solvency II,
which will help government meet its objective
of increasing insurance capital deployment into
the real economy
• Our regulated subsidiaries have approved capital
policies for distributions which protect customers
• Approval of a new Irish entity (PLAE) by the CBI,
followed by a Part VII transfer of the Irish branch
business, Icelandic, German, Swedish and
Norwegian business which was approved by the
UK and relevant EU regulators and the Courts,
meeting the post-Brexit deadline of YE 2022.
Read more
• On pages 22 to 25
• In our 2022 Sustainability Report
• standardlife.co.uk
• phoenixlife.co.uk
• reassure.co.uk
• sunlife.co.uk
• In our 2022 Sustainability Report and 2022
Climate Report, along with our ESG Supply
Chain Standards
• Our website: thephoenixgroup.com/
sustainability/working-responsibly-suppliers
• On pages 108 to 109
• In our 2022 Sustainability Report
• Our website:
thephoenixgroup.com/sustainability/
people-and-culture
• In our 2022 Sustainability Report • On our website:
thephoenixgroup.com/investor-relations
• In our 2022 Sustainability Report
Phoenix Group Holdings plc Annual Report and Accounts 2022 43
Strategic report
Non-
financial
information
statement
As required by the
Companies Act 2006
sections 414CA and 414CB,
this table outlines our
non-financial information
statement with a reference
to relevant policies and
additional documents.
Non-financial information statement
Environment Colleagues Social and community Human rights Anti-bribery and corruption
Our policies
Phoenix Group is committed to protecting
the environment; the health and well-being
of our colleagues and the customers and
communities in which we operate. We aim to
reduce the impact on the environment from
our operations and demonstrate leadership
in minimising emissions that contribute
to climate change.
Our environmental strategy focuses on
four key areas:
Our Net Zero Commitment – We are
committed to addressing climate change
and limiting global warming to 1.5°C.
Our objective is for our operations to be net
zero by 2025.
Waste and Recycling – We will implement
sustainable waste management practices
including the removal of all single use plastics
from our operations by 2030.
Conservation – We are committed to
supporting conservation in our communities.
Employee Engagement – We will support
colleague understanding of environmental
issues and promote engagement in
environmental action.
We have a range of policies including our
Group Environmental policy, Environment
Risk policy, Supplier Code of Conduct,
Responsible Investment Philosophy and
Sustainability Risk policy.
In addition, an exercise is ongoing to update
all Group risk policies to consider
sustainability matters.
The Group’s Human Resources (‘HR’) policy defines people risk, which,
if unmanaged, could result in a reduction in earnings or value, through
financial or reputational loss. Our Group approach to support the health
and well-being of colleagues is a key enabler to build an inclusive, attractive,
and safe working environment that can adapt and respond quickly to
change. We are keen to create a sense of belonging, so colleagues feel
connected to our purpose and values, empowered to
make a difference and motivated and proud to be part of our story.
A key priority for our business is to ensure diversity at the Phoenix Group
to create a workplace that is inclusive and reflective of our communities
and enables colleagues to bring their whole self to work.
We champion gender equity through promoting a strong pipeline
of female executive talent for the future.
The table below outlines our gender diversity metrics as at 31 December 2022
1
:
Board members
1
Female 7 54%
Male 6 46%
Senior managers
2
Female 27 36%
Male 47 64%
All employees
3
Female 4,301 52%
Male 4,032 48%
Senior managers and their
direct reports
4
Female 44 54%
Male 38 46%
1 Companies Act 2006, s.414C(8)(c)(i)
2 Companies Act 2006, s.414C(8)(c)(ii)
3 Companies Act 2006, s.414C(8)(c)(iii)
4 Provision 23, UK Corporate Governance Code
Customers
The Group’s Customer Outcomes Risk policy covers risks arising from the design
or management of products, or from the failure to meet or exceed reasonable
customer expectations, taking account of regulatory requirements.
The Group continually improves communications with customers to make it easy
for them to interact with us in connection with their policy and go on to make an
informed decision should they wish to take any action. This includes enhancing
the customer experience and vulnerable customer support.
Suppliers
We set out strict standards of corporate behaviour for all our people to follow.
This includes complying with all applicable laws and regulations, protecting
human rights, providing a safe place of work, and minimising our direct and indirect
environmental impact. We also expect our suppliers to adhere to high standards
in the way that they operate. The Supplier Code of Conduct outlines the minimum
conduct standards to which suppliers must adhere when doing business with us.
Suppliers must be able to demonstrate adherence to this Code of Conduct
if requested and failure to demonstrate compliance will lead to a review of
the supplier contract.
We expect robust health and safety conditions for all workers in the supply chain,
and to comply with the Health and Safety at Work Act UK or local equivalent.
Suppliers are expected to have health and safety staff training and management
systems in place and to publish their health and safety performance externally.
Suppliers must meet and evidence the standards and obligations in the Modern
Slavery Act 2015 and must respect the human rights of their employees and
comply with all relevant legislation, regulations and directives in the countries
and communities in which they operate.
Communities
We aim to make a positive and lasting difference in the communities in which we
are based, addressing societal issues identified at a micro level. Through our
commitment to being a responsible business our colleagues can participate in
a range of community-based activities, utilising their collective time, skills,
knowledge and resources. Colleagues can take two days for individual
volunteering and a further day with their team, and support any charity of their
choice across the UK and Europe through fundraising and payroll giving schemes.
At Phoenix, we are ambitious in our desire
to lead the way in respecting human rights
and recognise our responsibility to do this
in accordance with:
• The International Bill of Human Rights.
• The International Labour Organization’s
(‘ILO’) Core Conventions.
As an asset owner, we also align with the
Organisation for Economic Co-Operation
and Development (‘OECD’) Guidelines for
Multinational Enterprises, a set of responsible
business conduct standards for multi-national
enterprises, as well as the OECD guidance
on responsible business conduct for
institutional investors.
We are committed to fully aligning with
the United Nations Guiding Principles on
Business and Human Rights (‘UNGPs’), the
authoritative global framework on business
and human rights, and our ambition is to
encourage other organisations to do
the same.
During 2022 we appointed a human rights
consultant to review our alignment to the
UNGPs by conducting an assessment and
identifying opportunities for improvement.
As a result, we have developed a roadmap to
address gaps and are committed to closing
these within the next three years.
During 2023 we will further develop existing
policies and procedures to include human
rights considerations.
Phoenix Group has a zero-tolerance policy to bribery
and corruption in all its forms.
Phoenix Group is committed to countering bribery
and corruption with suitable policies and procedures.
We have an anti-bribery programme in place designed
to prevent the occurrence of bribery. This includes,
for example:
• An Anti-Bribery Policy at Group level.
• A Code of Ethics for ethical behaviour
and general standards.
• A Group Stewardship Policy which details
our stewardship approach.
• Mandatory training for our employees covering
compliance with the Bribery Act.
The Group’s Financial Crime Prevention and
Anti-Bribery policy addresses risks such as money
laundering, terrorist financing, fraud, bribery and
corruption risks and the facilitation of tax evasion.
The Group also operates a Whistleblowing policy,
prompting colleagues to disclose information where
they believe wrongdoing, malpractice or risk exists
across any of Phoenix Group’s operations.
Due diligence
Andy Briggs, Group CEO, is responsible for
embedding sustainability within the Group, in
line with the strategy set by the Group Board.
The Group CEO reports directly to the Board
on all sustainability activity across the
business including the environmental policy.
We will monitor and review our environmental
performance against our environmental
commitments set out in our policy and the
net zero requirements.
We report on our environmental performance
annually and review the policy to ensure it
remains relevant and appropriate. We work
with our key suppliers to develop best
practice carbon management, including
science-based net zero targets, and robust
waste minimisation including reduction of
single-use plastic strategies.
Adherence to the HR policy is managed by the Group’s HR function
via quarterly assessment of the minimum control standards. There were
no material issues raised during the year.
All colleagues are required to complete annual computer-based health
and safety training. Arrangements are in place to manage on-site facilities
across all sites, ensuring the working environment is compliant and fit
for purpose.
We have a range of tools and resources available to support our colleagues,
their dependents, family members and loved ones to help look after their
personal health and well-being.
Our Data Protection Officer monitors compliance with the GDPR and DPA 2018
and owns the Group Privacy policy and Data Protection Risk policy. Our Chief
Information Security Officer monitors Cyber risks and manages a comprehensive
programme of continuous improvement of Security Controls and a dedicated
Security Operations team to respond to emerging cyber threats. The Group is
well-positioned to resist cyber-attacks and has had no significant cyber-related
incidents in 2022, and there was no compromise to our systems or data as a result
of any cyber events within our supply chain.
Complaint activity including those referred to the Financial Ombudsman Service
or the Pensions Ombudsman Service is monitored, and a significant proportion
of complaints are resolved across the Group in less than three days.
The Supplier Code of Conduct outlines the minimum ESG requirements for all our
suppliers. We accelerated our expectations of all 1,500 partners and suppliers and
published our Supplier Open Letter which set out our ESG requirements that
include adoption of Science-Basted Target initiative (‘SBTi’) carbon reduction
targets; implementing a plan to tackle and report on modern slavery, and meeting
best practice health and safety standards.
During 2022, we commissioned a high-level
saliency scan by an independent third party
to identify and assess our potentially salient
human rights issues that we should prioritise
for further action.
We intend to further advance our ability to
identify and manage our human rights risks,
through conducting human rights saliency
assessments of our operations and value chain
as part of our due diligence processes in the
next two years. This includes undertaking a
supply chain field assessment, portfolio-level
human rights assessment, as well as assessing
human rights risks in countries of operations
and high-risk business relationships on an
ongoing basis.
Colleagues are required to complete annual
computer-based training around both financial crime
prevention and adherence with the Code of Business
Ethics and Ethical Conduct.
Colleagues are also required to complete a Gifts and
Hospitality Register which is overseen and managed
by the Financial Crime team.
Outcomes
Read more about our net zero and
climate-related reporting commitments and
KPIs on pages 48-51 and our sustainability
actions in the 2022 Sustainability Report.
Our GHG emissions and energy consumption
disclosure can be found on pages 46–47.
Other relevant colleague engagement, including Diversity, Equity and
Inclusion data can be found on pages 26 to 27 as well as in our 2022
Sustainability Report.
Information on our customer satisfaction scores and initiatives can be found on
pages 22 to 23 and in our Sustainability Report.
Information on relevant supply chain metrics and communities metrics can
be found in our 2022 Sustainability Report.
During 2022, the Group effectively resolved
all colleague disputes and as a result has not
been subject to any adverse Employment
Tribunals judgements or awards.
Reporting on our salient human right issues,
actions, and progress to align with the UNGPs
through our annual sustainability report.
The Group’s governance processes for financial crime
prevention, anti-bribery and anti-corruption, ethics
and compliance training, whistleblowing and speaking
up can be found on our Group website.
For further information
• Our sustainability policies:
thephoenixgroup.com/sustainability/
reports-and-policies
• Health and Well-being approach: thephoenixgroup.com/sustainability/
people-and-culture/wellbeing
• Health and Well-being Statement: thephoenixgroup.com/
HealthWellbeingStatement
• Diversity, Equity and Inclusion: thephoenixgroup.com/sustainability/
people-and-culture/diversity-and-inclusion
• HR Frameworks: thephoenixgroup.com/HRFrameworks
• Privacy Policy: thephoenixgroup.com/site-services/privacy
• Supplier Code of Conduct: thephoenixgroup.com/sustainability/
working-responsibly-suppliers
• Supplier Open Letter: thephoenixgroup.com/SupplierOpenLetter
• Community Statement: thephoenixgroup.com/CommunityStatement
• Phoenix Group 2022 Modern Slavery and
Human Rights Statement:
thephoenixgroup.com/site-services/
modern-slavery-and-human-trafficking
• Governance: thephoenixgroup.com/about-us/
governance
• Anti-bribery statement: thephoenixgroup.com/
about-us/governance/anti-bribery
This section primarily covers our
non-financial information as required
by the regulations. Other related
information can be found as follows:
For further details on our key
performance indicators,
see pages 18 to 27
For further details on our business
model see pages 14 to 17
For further details on our principal
risks and how they are managed,
see pages 52 to 67
Phoenix Group Holdings plc Annual Report and Accounts 202244
Environment Colleagues Social and community Human rights Anti-bribery and corruption
Our policies
Phoenix Group is committed to protecting
the environment; the health and well-being
of our colleagues and the customers and
communities in which we operate. We aim to
reduce the impact on the environment from
our operations and demonstrate leadership
in minimising emissions that contribute
to climate change.
Our environmental strategy focuses on
four key areas:
Our Net Zero Commitment – We are
committed to addressing climate change
and limiting global warming to 1.5°C.
Our objective is for our operations to be net
zero by 2025.
Waste and Recycling – We will implement
sustainable waste management practices
including the removal of all single use plastics
from our operations by 2030.
Conservation – We are committed to
supporting conservation in our communities.
Employee Engagement – We will support
colleague understanding of environmental
issues and promote engagement in
environmental action.
We have a range of policies including our
Group Environmental policy, Environment
Risk policy, Supplier Code of Conduct,
Responsible Investment Philosophy and
Sustainability Risk policy.
In addition, an exercise is ongoing to update
all Group risk policies to consider
sustainability matters.
The Group’s Human Resources (‘HR’) policy defines people risk, which,
if unmanaged, could result in a reduction in earnings or value, through
financial or reputational loss. Our Group approach to support the health
and well-being of colleagues is a key enabler to build an inclusive, attractive,
and safe working environment that can adapt and respond quickly to
change. We are keen to create a sense of belonging, so colleagues feel
connected to our purpose and values, empowered to
make a difference and motivated and proud to be part of our story.
A key priority for our business is to ensure diversity at the Phoenix Group
to create a workplace that is inclusive and reflective of our communities
and enables colleagues to bring their whole self to work.
We champion gender equity through promoting a strong pipeline
of female executive talent for the future.
The table below outlines our gender diversity metrics as at 31 December 2022
1
:
Board members
1
Female 7 54%
Male 6 46%
Senior managers
2
Female 27 36%
Male 47 64%
All employees
3
Female 4,301 52%
Male 4,032 48%
Senior managers and their
direct reports
4
Female 44 54%
Male 38 46%
1 Companies Act 2006, s.414C(8)(c)(i)
2 Companies Act 2006, s.414C(8)(c)(ii)
3 Companies Act 2006, s.414C(8)(c)(iii)
4 Provision 23, UK Corporate Governance Code
Customers
The Group’s Customer Outcomes Risk policy covers risks arising from the design
or management of products, or from the failure to meet or exceed reasonable
customer expectations, taking account of regulatory requirements.
The Group continually improves communications with customers to make it easy
for them to interact with us in connection with their policy and go on to make an
informed decision should they wish to take any action. This includes enhancing
the customer experience and vulnerable customer support.
Suppliers
We set out strict standards of corporate behaviour for all our people to follow.
This includes complying with all applicable laws and regulations, protecting
human rights, providing a safe place of work, and minimising our direct and indirect
environmental impact. We also expect our suppliers to adhere to high standards
in the way that they operate. The Supplier Code of Conduct outlines the minimum
conduct standards to which suppliers must adhere when doing business with us.
Suppliers must be able to demonstrate adherence to this Code of Conduct
if requested and failure to demonstrate compliance will lead to a review of
the supplier contract.
We expect robust health and safety conditions for all workers in the supply chain,
and to comply with the Health and Safety at Work Act UK or local equivalent.
Suppliers are expected to have health and safety staff training and management
systems in place and to publish their health and safety performance externally.
Suppliers must meet and evidence the standards and obligations in the Modern
Slavery Act 2015 and must respect the human rights of their employees and
comply with all relevant legislation, regulations and directives in the countries
and communities in which they operate.
Communities
We aim to make a positive and lasting difference in the communities in which we
are based, addressing societal issues identified at a micro level. Through our
commitment to being a responsible business our colleagues can participate in
a range of community-based activities, utilising their collective time, skills,
knowledge and resources. Colleagues can take two days for individual
volunteering and a further day with their team, and support any charity of their
choice across the UK and Europe through fundraising and payroll giving schemes.
At Phoenix, we are ambitious in our desire
to lead the way in respecting human rights
and recognise our responsibility to do this
in accordance with:
• The International Bill of Human Rights.
• The International Labour Organization’s
(‘ILO’) Core Conventions.
As an asset owner, we also align with the
Organisation for Economic Co-Operation
and Development (‘OECD’) Guidelines for
Multinational Enterprises, a set of responsible
business conduct standards for multi-national
enterprises, as well as the OECD guidance
on responsible business conduct for
institutional investors.
We are committed to fully aligning with
the United Nations Guiding Principles on
Business and Human Rights (‘UNGPs’), the
authoritative global framework on business
and human rights, and our ambition is to
encourage other organisations to do
the same.
During 2022 we appointed a human rights
consultant to review our alignment to the
UNGPs by conducting an assessment and
identifying opportunities for improvement.
As a result, we have developed a roadmap to
address gaps and are committed to closing
these within the next three years.
During 2023 we will further develop existing
policies and procedures to include human
rights considerations.
Phoenix Group has a zero-tolerance policy to bribery
and corruption in all its forms.
Phoenix Group is committed to countering bribery
and corruption with suitable policies and procedures.
We have an anti-bribery programme in place designed
to prevent the occurrence of bribery. This includes,
for example:
• An Anti-Bribery Policy at Group level.
• A Code of Ethics for ethical behaviour
and general standards.
• A Group Stewardship Policy which details
our stewardship approach.
• Mandatory training for our employees covering
compliance with the Bribery Act.
The Group’s Financial Crime Prevention and
Anti-Bribery policy addresses risks such as money
laundering, terrorist financing, fraud, bribery and
corruption risks and the facilitation of tax evasion.
The Group also operates a Whistleblowing policy,
prompting colleagues to disclose information where
they believe wrongdoing, malpractice or risk exists
across any of Phoenix Group’s operations.
Due diligence
Andy Briggs, Group CEO, is responsible for
embedding sustainability within the Group, in
line with the strategy set by the Group Board.
The Group CEO reports directly to the Board
on all sustainability activity across the
business including the environmental policy.
We will monitor and review our environmental
performance against our environmental
commitments set out in our policy and the
net zero requirements.
We report on our environmental performance
annually and review the policy to ensure it
remains relevant and appropriate. We work
with our key suppliers to develop best
practice carbon management, including
science-based net zero targets, and robust
waste minimisation including reduction of
single-use plastic strategies.
Adherence to the HR policy is managed by the Group’s HR function
via quarterly assessment of the minimum control standards. There were
no material issues raised during the year.
All colleagues are required to complete annual computer-based health
and safety training. Arrangements are in place to manage on-site facilities
across all sites, ensuring the working environment is compliant and fit
for purpose.
We have a range of tools and resources available to support our colleagues,
their dependents, family members and loved ones to help look after their
personal health and well-being.
Our Data Protection Officer monitors compliance with the GDPR and DPA 2018
and owns the Group Privacy policy and Data Protection Risk policy. Our Chief
Information Security Officer monitors Cyber risks and manages a comprehensive
programme of continuous improvement of Security Controls and a dedicated
Security Operations team to respond to emerging cyber threats. The Group is
well-positioned to resist cyber-attacks and has had no significant cyber-related
incidents in 2022, and there was no compromise to our systems or data as a result
of any cyber events within our supply chain.
Complaint activity including those referred to the Financial Ombudsman Service
or the Pensions Ombudsman Service is monitored, and a significant proportion
of complaints are resolved across the Group in less than three days.
The Supplier Code of Conduct outlines the minimum ESG requirements for all our
suppliers. We accelerated our expectations of all 1,500 partners and suppliers and
published our Supplier Open Letter which set out our ESG requirements that
include adoption of Science-Basted Target initiative (‘SBTi’) carbon reduction
targets; implementing a plan to tackle and report on modern slavery, and meeting
best practice health and safety standards.
During 2022, we commissioned a high-level
saliency scan by an independent third party
to identify and assess our potentially salient
human rights issues that we should prioritise
for further action.
We intend to further advance our ability to
identify and manage our human rights risks,
through conducting human rights saliency
assessments of our operations and value chain
as part of our due diligence processes in the
next two years. This includes undertaking a
supply chain field assessment, portfolio-level
human rights assessment, as well as assessing
human rights risks in countries of operations
and high-risk business relationships on an
ongoing basis.
Colleagues are required to complete annual
computer-based training around both financial crime
prevention and adherence with the Code of Business
Ethics and Ethical Conduct.
Colleagues are also required to complete a Gifts and
Hospitality Register which is overseen and managed
by the Financial Crime team.
Outcomes
Read more about our net zero and
climate-related reporting commitments and
KPIs on pages 48-51 and our sustainability
actions in the 2022 Sustainability Report.
Our GHG emissions and energy consumption
disclosure can be found on pages 46–47.
Other relevant colleague engagement, including Diversity, Equity and
Inclusion data can be found on pages 26 to 27 as well as in our 2022
Sustainability Report.
Information on our customer satisfaction scores and initiatives can be found on
pages 22 to 23 and in our Sustainability Report.
Information on relevant supply chain metrics and communities metrics can
be found in our 2022 Sustainability Report.
During 2022, the Group effectively resolved
all colleague disputes and as a result has not
been subject to any adverse Employment
Tribunals judgements or awards.
Reporting on our salient human right issues,
actions, and progress to align with the UNGPs
through our annual sustainability report.
The Group’s governance processes for financial crime
prevention, anti-bribery and anti-corruption, ethics
and compliance training, whistleblowing and speaking
up can be found on our Group website.
For further information
• Our sustainability policies:
thephoenixgroup.com/sustainability/
reports-and-policies
• Health and Well-being approach: thephoenixgroup.com/sustainability/
people-and-culture/wellbeing
• Health and Well-being Statement: thephoenixgroup.com/
HealthWellbeingStatement
• Diversity, Equity and Inclusion: thephoenixgroup.com/sustainability/
people-and-culture/diversity-and-inclusion
• HR Frameworks: thephoenixgroup.com/HRFrameworks
• Privacy Policy: thephoenixgroup.com/site-services/privacy
• Supplier Code of Conduct: thephoenixgroup.com/sustainability/
working-responsibly-suppliers
• Supplier Open Letter: thephoenixgroup.com/SupplierOpenLetter
• Community Statement: thephoenixgroup.com/CommunityStatement
• Phoenix Group 2022 Modern Slavery and
Human Rights Statement:
thephoenixgroup.com/site-services/
modern-slavery-and-human-trafficking
• Governance: thephoenixgroup.com/about-us/
governance
• Anti-bribery statement: thephoenixgroup.com/
about-us/governance/anti-bribery
Phoenix Group Holdings plc Annual Report and Accounts 2022 45
Strategic report
Streamlined Energy and Carbon Reporting (‘SECR’) statement
Greenhouse Gas (‘GHG’) Emissions
and Energy Consumption Disclosure
This is Phoenix Group’s Streamlined Energy and Carbon Reporting (‘SECR’) statement
on the Group’s UK and global energy consumption and GHG emissions for the financial
year 1st January 2022 to 31st December 2022, and the 2021 comparative year. Emissions
disclosed here relate to energy consumption, facilities, and activities where Phoenix
Group has operational control.
Methodology
Phoenix Group has used the GHG
Protocol Corporate Standard (revised
edition) and emissions factors from the
International Energy Agency (‘IEA’), DEFRA
UK Government Conversion Factors, and
Association of Issuing Bodies (‘AIB’)
European Residual Mix as the basis to
report on any GHG emissions in tonnes of
carbon dioxide equivalent (tCO
2
e). This
expresses multiple greenhouse gases in
terms of carbon dioxide based on their
global warming potential (including
methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons and sulphur hexafluoride).
Emissions considered relate to activities
both in the UK and globally for which the
Group is responsible and include as
applicable: combustion of any fuel and
operation of its facilities; fugitive emissions
released from refrigerants purchased
(based on refrigerant top-ups); and annual
emissions from the purchase of electricity,
heat, steam or cooling by the Group for its
own use. In addition, the Group estimates
Scope 3 emissions associated with
employee homeworking and employee
commuting, as well as business travel from
other third party owned/operated sources,
including air, taxi and rail travel.
Reported data relates to occupied
premises in UK, Ireland, Germany, Austria
and Bermuda, where the Group procures
energy. Where energy consumption is
sub-metered to tenants and in occupied
assets that the Group does not directly
own or operate (i.e. serviced offices),
GHG emissions falls into Scope 3
reporting, whereas all other landlord-
obtained consumption remains as Scope 1
or 2 emissions.
The Group reports Scope 2 emissions
using the GHG Protocol dual-reporting
methodology, stating two figures,
to reflect the GHG emissions from
purchased electricity:
• A location-based method – reflects
the average emissions intensity of the
national electricity grids from which
consumption is drawn.
• A market-based method – reflects
emissions from electricity specific to
each supply/contract. Where electricity
supplies are known to be from a certified
renewable source, a zero emissions
factor is used, otherwise residual mix
factors are used.
In future, the Group will prioritise market-
based emissions reporting to focus on
the actual carbon impact of its energy
consumption, recognising the organisation’s
actions to promote sustainable procurement
and improve environmental outcomes.
Prior to 2022, emissions from a number of
the Group’s investment properties were
considered Scope 1 and 2, as the approach
for those assets was historically that of
financial control. Properties managed by
other asset management partners were
reported under operational control. As of
2022, to provide a consistent reporting
framework, any direct investment assets
that historically adopted a financial control
approach will now be considered under
operational control and will therefore be
reported within investment related carbon
(scope 3) within the TCFD report.
Commentary on Performance
Overall, in 2022 there was 43.2 GWh of
Group global energy consumption
(building energy and business travel) as
shown in Table 1, 97% of which was from
UK operations. This is a substantial
decrease on the 76.4 GWh of global
energy consumption reported in 2021, and
is primarily due to the change in reporting
methodology. In addition, 24.4 GWh of
energy consumption from employee
homeworking has been estimated in 2022,
of which 92% occurred within the UK.
In GHG emissions terms (Scopes 1+2+3),
94% of Phoenix Group’s emissions
occurred at UK sites.
Due to the continued development and
improvement in the Group’s reporting
methodology, meaningful comparisons
with previous years’ energy consumption
and GHG emission is not possible.
However, in absolute terms, the Group’s
GHG emissions (location-based Scope 1 +
2, per Table 2) have decreased 46%.
Business travel remains comparable with
2021, and a significant increase of 222%
can be observed in 2022. This is the result
of continued easing of worldwide travel
restrictions, following two years of
limitations. The Group is addressing this
opportunity for improvement, and is
continuing to investigate technological
solutions to reduce business travel where
possible. In addition, both intensity metrics
reported in Table 3 show continued
decreases; by 10% on an FTE basis and 9%
on a m
2
basis. This reduction shows that the
Group continues to remain on its pathway
to net zero carbon in operations by 2025.
The Group continues to procure
approximately 100% of its electricity from
certified renewable sources meaning
market-based Scope 2 emissions are
significantly less than the location-based
emissions as shown in Table 2. To recognise
the importance of addressing remaining
carbon emissions which cannot yet be
eliminated, the Group has continued to
purchase gold standard certified carbon
offsets for natural gas consumed in its
owned and occupied assets, constituting
an estimated 1,994 tCO
2
e in 2022.
Phoenix Group Holdings plc Annual Report and Accounts 202246
Energy Intensity Metrics
The Group’s chosen operational intensity
metrics detail GHG emissions per
occupied floor area (m
2
) and per FTE in
occupied premises (Table 3). The
methodology to establish whether
buildings should be included in the
intensity metric only covers occupied
buildings where emissions are considered
Scope 1 and 2 and where twelve months of
data is available in the current reporting
year, meaning some sites were excluded
from this calculation. To calculate the
intensity for both per occupied floor area
and per FTE per occupied premises, the
applicable occupied floor area and FTEs
respectively were summed and then
divided by the total Scope 1 and 2
emissions for these buildings.
Both the m
2
and FTEs intensities have
continued to decrease in 2022, which is
the result of the Group’s ongoing efforts to
improve energy efficiency and reduce it’s
impact on the environment through it’s
operations, as described below in the
Energy Efficiency Action section.
Energy Action (Climate Change Actions)
To maximise the environmental impact of
capital expenditure, spending was
prioritised based on the potential carbon
impact of projects across the operational
estate. Many projects were undertaken in
offices that need to stay operational
throughout the year; thus, the work has
been phased over a number of years.
This means that energy and carbon savings
may fluctuate depending on the extent of
works carried out in a particular year.
The following is a selection of projects
for 2022:
• Completed the replacement of roof
glazing with photovoltaic glass. To date
this has produced 1,880 kWh of on-site
renewable electricity.
• Continued to roll out higher efficiency
LED lighting across applicable buildings.
• Upgraded building control systems to
allow for greater flexibility and
operational efficiency.
• Upgraded fans and retrofitted inverter
controls within ventilation systems.
• Replaced inefficient gas boilers in
two buildings giving savings of
1,950 MWh per year.
In line with the Group’s Eliminate-Reduce-
Substitute-Compensate carbon reduction
model, applicable opportunities will continue
to be reviewed. Additionally, technological
solutions are also being investigated in order
to facilitate and improve remote
collaborations between colleagues, enabling
the Group to reduce business travel.
Building improvement works will continue
as needed to include efficiency measures
such as improved controls (to switch
unnecessary equipment and lighting off),
more efficient equipment, and improved
building fabric where necessary.
Energy consumption and greenhouse gas emissions
1
Table 1. Absolute energy consumption in GWh
Consumption, GWh
2
from: 2022 2021
Building Electricity 24.1 45.4
Building Natural Gas 18.7 31.0
Business Travel 0.4 0.1
Homeworking Electricity 1.5 1.7
Homeworking Natural Gas 22.9 26.1
Total Consumption 67.6 104.3
a GHG emissions and energy consumption statement pursuant to the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018 (the SECR Regulations)
b Business travel (GWh) does not include air, taxi or rail due to lack of applicable conversion factors for this data, however GHG emissions from these sources are still
included in Table 2
Table 2. Absolute GHG emissions in tonnes of CO
2
e
2022 2021
Emissions, tonnes of CO
2
e, from:
(market-
based)
(location-
based)
(market-
based)
(location-
based)
Scope 1 — Combustion of fuels, business travel (in company owned and operated vehicles), and
fugitive emissions of refrigerant gases 2,684 2,684 4,812 4,812
Scope 2 — Electricity purchased for landlord shared services and own use (purchase of heat,
steam and cooling not applicable) 7 4,437 21 8,342
Scopes 1 + 2 — Mandatory carbon footprint disclosure 2,692 7,121 4,833 13,154
Scope 3 — Category 3: Fuel and Energy Related Activities (T&D) 356 356 1 722
Scope 3 — Category 6: Business Travel 1,149 1,149 356 356
Scope 3 — Category 7: Employee Commuting (incl. Homeworking Emissions) 4,847 4,631 5,487 5,294
Scope 3 — Category 8: Upstream Leased Assets 2,018 1,826 2,051 1,765
Scope 3 — Category 13: Downstream Leased Assets 0 313 312 2,723
Scopes 1 + 2 + 3 — Voluntary carbon footprint 11,062 15,395 13,040 24,014
Carbon Offsets Purchased 1,994 2,453
1 Emissions factors – IEA (for location-based Scope 2 and Scope 3 T&D losses), AIB (for market-based residual mix factors for non-renewable electricity), and DEFRA
(fuels, refrigerants and travel). There is a significant time-lag in the availability of IEA factors –2022 factors will not be published until late 2023. Therefore all 2022
consumption data are converted using the factors actually arising in 2018 (except business travel which uses DEFRA factors as published in 2022).
2 Energy Units: 1 GWh = 1,000,000 kWh
Table 3. Phoenix Group’s chosen intensity measurement
2022 2021
Emissions (kilogrammes and tonnes) of CO
2
e per chosen intensity metric:
(market-
based)
(location-
based)
(market-
based)
(location-
based)
Scope 1+2 emissions from occupied premises per floor area (kg CO
2
e/m
2
) 26 57 30 62
Scope 1+2 emissions from occupied premises per full-time equivalent employee (tCO
2
e/FTE) 0.34 0.73 0.38 0.81
Phoenix Group Holdings plc Annual Report and Accounts 2022 47
Strategic report
Governance
The Group’s strategic approach to
sustainability (including climate change)
is overseen by the Group Board and
climate related responsibilities are
delegated to certain Board Committees
dependent on their overall purpose and
remit. The allocation of responsibilities
is summarised below:
• The Board Risk Committee considers
climate risk as part of its bi-annual
review of principal and emerging
risks and oversees climate related
risks within the Group Risk
Management Framework (including
oversight of the Group’s climate
related stress and scenario testing).
• The Board Audit Committee is
responsible for overseeing material
Environmental, Social and Governance
(‘ESG’) reporting, including climate-
related reporting.
• The Board Sustainability Committee
is responsible for monitoring
performance against the Group’s
sustainability strategy, including climate
strategy and related opportunities.
• The Board Remuneration Committee
is responsible for ensuring appropriate
ESG elements (including climate-related
targets) are included within the
Group remuneration framework.
More detail on these targets can be
found on pages 129 to 130 of the
Directors’ Remuneration Report.
Cross-committee membership and
engagement between the Board
Committees listed above drive
consistency of climate strategy and
risk management across the Group’s
governance framework.
Task Force on Climate-Related
Financial Disclosures (‘TCFD’) –
summary report
Climate change is one of the greatest global challenges we face today and
we believe Phoenix has a significant role to play in helping to address the
climate emergency, accelerating the transition to a net zero economy and
managing financial risk for our customers and shareholders. We aim to
be a net zero business by 2050.
The Group’s Chief Executive Officer is
responsible for implementation and
delivery of the Group’s overall strategy.
The sustainability strategy, including
climate strategy (to address risks and
opportunities), forms part of the Group
strategy. The Group’s Chief Financial
Officer (‘CFO’) and Chief Risk Officer
(‘CRO’) are appointed as joint Senior
Management Function holders (‘SMF’s)
responsible for climate-related financial
risk under the Senior Managers and
Certification Regime. The Group CFO
is responsible for reporting metrics
and targets and external disclosures;
and as part of wider risk responsibilities,
the Group CRO is responsible for
ensuring that climate-related risks are
incorporated into the existing risk
management framework.
A number of key management and
operational groups also have specific
responsibilities for climate-related activities.
Enterprise Sustainability Committee –
comprised of key executives who meet at
least six times a year and are responsible
for ensuring implementation of the
Phoenix sustainability strategy and
associated opportunities (including related
to climate change); and monitoring
progress against strategy, KPIs and targets;
and supporting Board Committees.
TCFD Working Group – responsible
for ensuring the implementation and
embedding of the recommendations of
the TCFD and delivery of locally agreed
climate-related action.
During 2022, we evolved our governance
framework to drive greater empowerment,
efficiency and agility across the business.
This resulted in simplifying our
management committee structure which
provide a means for our executive decision
makers, SMFs and controlled function role
holders to gain the information they need
and opportunity to challenge options for
action before signing off important
decisions on behalf of the Group.
As a result, the Enterprise Sustainability
Committee was established to provide
oversight of the implementation and
achievement of the Phoenix Group’s
sustainability and climate strategies,
driving forward the Group’s agenda
covering the breadth of those strategies
and related initiatives.
The TCFD Steering Committee (which was
operational until March 2022 when the
TCFD Implementation Programme
concluded) and TCFD working group
mentioned above now form part of our
on-going local governance forums.
These groups do not have delegated
decision making authority from the Board or
its Committees. They operate to ensure the
day-to-day embedding of climate-related
activities across the business, aligned with
the Group sustainability strategy.
During the year, the Board approved the
Group’s 2022 Sustainability Strategy,
including key climate-related targets. The
Board considered climate change on
seven occasions (including education
sessions and updates on TCFD
implementation and the Net Zero
Transition Plan). At each meeting the Chair
of the Board Sustainability Committee
provides a verbal report on the
considerations of the Committee.
Task Force on Climate-Related Financial Disclosures
Phoenix Group Holdings plc Annual Report and Accounts 202248
Scan the code to find out
more in our Climate Report
Climate Report –
prepared in line with
Recommendations and
Recommended
Disclosures of the
Taskforce on Climate-
Related Financial
Disclosures (‘TCFD’)
Phoenix fully supports the
recommendations of the TCFD and
transparent climate reporting to
allow all stakeholders to better
understand the impact of climate-
related risks and opportunities
and how these are measured
and managed.
In 2022, we have made further
progress in embedding the
recommendations of the taskforce.
Given our progress and the
increasing need for transparent
climate reporting, we have opted
to publish a standalone Climate
Report which is available on our
Group website.
We have therefore included a
summary in this Annual Report of
how we have complied with all of the
recommendations of the TCFD
framework, the progress we have
made during 2022 and the key
priorities for the future. For any
recommendations where we have
further detail in other sections of
the Annual Report or the Climate
Report, we have included the
required cross references.
A positive effectiveness review of the
Board Sustainability Committee was
completed and enhancements were made
to the Group’s remuneration framework by
integrating climate-related targets within
the Executive Directors’ Strategic
Scorecard. Further enhancements are
expected for 2023 targets and these will
be disclosed in the Director’s
Remuneration Report for 2023. Phoenix
has continued to upskill the Board,
Executive and the wider Group through
tailored education sessions on
sustainability and climate change and in
2022, sessions were held to deepen
understanding of decarbonisation targets
as part of the SBTi process and
developments in the energy market.
Looking ahead
Ongoing enhancement of the governance
framework and embedding of climate with
decision making across the Group will
continue, ensuring our governance is
future fit, in addition to a continued focus
on education and developing expertise.
There will be further support of the 2023
sustainability targets and priorities
including approval of the Net Zero
Transition Plan and oversight of the
Group’s nature approach and strategy
development and implementation
Strategy
We have identified climate change risks
and opportunities as those derived from:
transition risks (arising from exposure to the
transition to a net zero economy through
policy, legal, market, technology changes
and reputational impacts); and physical
risks (arising from the acute and chronic
impacts of changing climate on the short
and long term). For Phoenix, we have
identified four areas of climate risk/
opportunity considered most material: our
investment portfolio; the changing
demand for products, funds and solutions
given evolving customer needs; emerging
government policy, regulatory and legal
changes; and reputational damage if
climate risks not appropriately managed.
Further details of the risks identified and
their potential impacts on Phoenix are
included in the Risk and Strategy sections
of the Climate Report.
In developing our strategy, we have
considered the risks/opportunities across
three time horizons: short-term ( 0–1 year),
medium-term (1–5 years) and long-term
(over 5 years). To deliver our 2050 net zero
ambition, we have set three key priorities in
response to climate response to climate
change to consider both risks and
opportunities. This has been used to
guide our financial planning and
decision making in 2022.
Invest
Invest for the future by decarbonising our
investment portfolio and applying our
exclusions policy, being an effective
steward of our assets by supporting
investee companies’ action towards
transitioning to net zero; and investing in
climate solutions. We are focused on
managing the financial risks from climate
change for our policyholders and
providing savings and insurance products
that can enable our policyholders to direct
finance to help accelerate the transition
to a low carbon economy.
Engage
Engage to multiply our impact by working
collaboratively with partners to deliver
cross-sector change and thought
leadership; and engaging with our
customers and employees on the role
they can play in delivering net zero.
This priority in particular helps mitigate
our reputational risk as we take a positive
public stance on climate change and
continue to work collaboratively with
peers and industry bodies.
Lead
Lead by example by decarbonising our
operations through energy efficiency,
technology and financial planning through
the delivery of specific projects; and
cutting emissions from our supply chain,
by requiring that all suppliers have a
carbon reduction target and that our key
suppliers have a SBTi committed target
and procure renewable energy.
These are anchored by the strength of our
people capabilities in investment, risk
management, scenario analysis and
governance and the ongoing investment in
our climate data and technology platforms.
In particular, for regulatory risk, our Group
Risk Management Framework (‘RMF’)
ensures appropriate monitoring within
existing regulatory horizon scanning
frameworks and metrics are updated as
required for adjustments to risk appetite
and tolerances.
Phoenix Group Holdings plc Annual Report and Accounts 2022 49
Strategic report
During the year we commenced a
quantitative climate scenario exercise to
further develop our methodology and
modelling capabilities and assess the
resilience of our climate strategy. We have
used five climate scenarios to model the
potential impact of a range of possible
future climate pathways and help inform
actions needed to reduce the impact of
climate change risks on our investment
portfolio (considered the most material
risk area for the Group). Details of
these impacts are included within the
Climate Report.
Our analysis indicates there is a need to
transition our investment portfolio to align
to a net zero position at a suitable pace.
This action will be delivered through our
Net Zero Transition Plan and will help
mitigate the Group exposure to transition
risk in particular. It will also position the
Group to better exploit the new investment
opportunities that will arise in a net
zero world.
Looking ahead
We will be rolling out our decarbonisation
strategy, increasing stewardship activity
and investing in sustainable opportunities;
in addition to working with industry and
Government to advocate for sustainable
policy and regulation.
We will further develop our internal
scenario analysis process, addressing
known limitations and reflecting evolving
market best practice. This will include
enhancing our analysis of physical risk.
Risk management
Climate change was identified as an
emerging risk in 2018 and sustainability
risk, of which climate risk is a sub-category,
has been classified as a principal risk by the
Board since 2019 to recognise the
potential adverse impacts it can have on
our business.
Climate change is considered cross-
cutting as it impacts all categories of our
Risk Universe and our approach to climate
risk (including how it is identified,
managed, monitored and reported on) is
integrated into the overall Group RMF.
Further details of climate as a principal risk,
its impact and our mitigating actions are
included within the Risk Management
Report on page 52.
In 2022, we have further developed our
internal climate risk reporting, reflecting
the evolution of market best practice and
tracking the progress made in terms of the
Group’s interim net zero targets for both
internal operations and the investment
portfolio. We have continued to review and
enhance the RMF as further information is
developed, including through scenario
analysis work and have enhanced the data
strategy and model for collecting and
reporting on climate risk.
Looking ahead
We aim to enhance the data strategy and
model for collecting and reporting on
climate change risk and further develop
our internal physical risk reporting.
Ongoing review and enhancement of the
RMF will continue as further information is
developed, including through scenario
analysis work.
Metrics and targets
In 2022, we expanded our Scope 3
financed emission baseline to include
sovereign debt and real estate assets. For
the investment portfolio, we measured the
absolute emissions and emissions intensity
for our listed equity, listed credit, sovereign
debt and real estate assets, the percentage
of this portfolio exposed to high-carbon
risk sectors and the fossil fuel industry; and
the percentage of this portfolio aligned
with science-based targets.
Using this expanded baseline Scope 3
investment portfolio absolute emissions
decreased from 24 million tons of carbon
dioxide equivalent (‘tCO
2
e’) in 2019 to 21
mtCO
2
e in 2021. The revenue emissions
intensity for listed equity and credit assets
decreased from 158 tCO
2
e per $1 million
revenue in 2019 to 139 tCO
2
e per $1 million
revenue in 2021.
The four high transition risk sectors
(energy, utilities, materials and industrials)
only account for 20% of the listed
portfolio AUM, however they account for
71% of all listed portfolio emissions. As at
year end 2021, almost half of the listed
portfolio was invested in counterparties
that had committed to set or already set
approved science-based targets.
Our operational carbon footprint is detailed
in the SECR report on pages 46 to 47.
We have worked with our partners Carbon
Intelligence to set an indicative 2019
baseline for our supply chain of circa 0.2
million tCO
2
e. We calculated our indicative
2019 baseline using a hybrid methodology,
which involved a combination of extended
input-output (‘EEIO’) analysis, where an
industry average emissions factor is
applied per pound spend. This was
supplemented with (‘CDP’) data inputs
from suppliers where available. Based on
our estimated emissions footprint work
to date using available data, we have
identified that our supply chain emissions
seem to be heavily concentrated in the
top 10 suppliers, with the top 100
suppliers likely accounting for
approximately 95% of our Purchased
Goods and Services emissions.
Phoenix has set a number of targets to
align to the goals of the Paris agreement.
We have committed to reach net zero
across our Group by 2050 and we are
committed to reach net zero in our direct
operations (Scope 1 , 2 and selected Scope
3 business travel) by 2025.
For our supply chain, we have set a 50%
emissions intensity reduction target by
2030 and a net zero target by 2050. For
our investment portfolio, we are targeting:
• A 25% reduction in the carbon emission
intensity of our listed equity and credit
assets where we exercise influence and
control by 2025.
• A 50% reduction in the carbon emission
intensity of all assets where we exercise
influence and control by 2030 to be net
zero by 2050.
In 2022 we submitted our internal
decarbonisation targets (which support
the delivery of our external interim
decarbonisation targets) to the
Science Based Targets Initiaitve (‘SBTi’)
for validation.
Looking ahead
We will review our decarbonisation
performance against a net-zero glide path
for 2023 and aim to expand our Scope 3
finance emissions baseline to include
illiquid credit assets in 2023. As data
quality improves, we want to broaden the
scope to consider the Scope 3 emissions
of investee companies.
We will further develop operational and
investment metrics with a focus on physical
risk. We will continue to help set and track
their carbon reduction targets. We will
be publishing our Net Zero Transition
Plan in 2023.
Task Force on Climate-Related Financial Disclosures continued
Phoenix Group Holdings plc Annual Report and Accounts 202250
Timeline of climate action
• Supported TCFD framework
• First TCFD disclosure published
• Established a TCFD Implementation Programme
• Establishment of Responsible Investment Philosophy
• Committed to be a net zero business by 2050
• Committed to becoming operationally net zero by 2025
• Signatory to the Principles of Responsible Investment
• Achieved 34% reduction in operational emissions intensity from 2020
• Became member of Net Zero Asset Owners Alliance
• First life insurer to sign up to UK Partnership for Carbon Accounting Financials
• Published open letter to financial partners, including asset management partners.
• First insurer to publish open letter on ESG to 1,500 suppliers
• Published Investments exclusion policy
• Set 2025 and 2030 investments decarbonisation targets
• Completed Bank of England’s Climate Biennial Exploratory Scenario (‘CBES’) exercise
• Strategic partner for Green Horizon Summit at United Nations Climate Change Conference
• ‘B’ Carbon Disclosure Project (‘CDP’) grade awarded
• Published first standalone Climate report
• Completed Round II of CBES exercise
• Rolled out decarbonisation investment strategy and increased stewardship activity
• Transferred c.1.5 million customers and c. £15 billion of assets into our sustainable
multi-asset default solution
• Invested £483 million in illiquid assets with positive environmental impact
• £338 million multi-asset climate solutions mandate to deploy policyholder assets
• 80% reduction in operational carbon emissions intensity (per FTE against 2019)
• 82% of suppliers committed to either a SBTi or Race to Zero target
• Developed SBTi targets for validation
• A- CDP grade awarded
• Develop and publish Net Zero Transition Plan capturing investments,
operations and supply chain
• Aim to meet all interim net zero targets across investments, operations and supply chain
• Net Zero Group by 2050
2020
2021
2022
2023
And beyond
Phoenix Group Holdings plc Annual Report and Accounts 2022 51
Strategic report
Our risk
management framework
The Group’s Risk Management Framework (‘RMF’) seeks to ensure
that all material risks are identified, assessed, controlled, monitored
and managed within approved risk appetites and reported through
agreed governance routes in line with delegated authorities. The RMF
is an enabler to delivering the Group’s risk strategy; to take rewarded
risks that are understood, managed effectively and consistent with
its purpose and enterprise strategy.
Risk management
The RMF is aligned to the principles of
the International Organisation of
Standardisations’ (‘ISO’) risk management
guidelines, ISO 31000.
The nine components of the RMF are
outlined in the diagram below, with further
information in the sections below.
Risk environment
The overall risk environment remains
uncertain and is dominated by ongoing
inflationary pressures, with implications for
economic stability and the welfare of the
Group’s customers and colleagues. The cost
of living crisis and sustained high inflation
are impacting the lives of the Group’s
customers, particularly those that are most
vulnerable. Increased taxes and reduced
public spending announced in the Autumn
Budget are likely to exacerbate these
impacts. The Group remains focused on
finding ways to support its customers and
has also introduced a number of initiatives
to support colleagues. Central Banks face a
challenging balancing act to control
inflation whilst managing the risk of global
recession. The Group’s Stress and Scenario
Testing programme continues to consider a
range of adverse circumstances to help it
determine any actions needed to respond
to economic pressures.
Geopolitical risk remains prominent, including
the effects arising from the ongoing conflict in
Ukraine and post-Brexit factors. The Group
continues to monitor developments across
the political environment.
The regulatory change agenda continues
to have potentially significant implications
for the Group achieving its strategic
priorities. The Group is supportive of the
Solvency II Reforms, but requires detail
on the final rules to determine the
implications for its strategic asset
allocation. Progressing key tasks on the
implementation plan for the FCA’s new
Consumer Duty is another area of primary
focus in order to demonstrate the Group’s
priority of helping customers achieve a life
of possibilities.
The Group is working to implement the
requirements of International Financial
Reporting Standard 17 (‘IFRS 17’). Whilst
plans are in place to deliver the required
disclosures in the interim accounts, there
remain significant delivery risks given the
complexity of the business. The Group
recognises that should it not deliver IFRS 17
reporting for the interim accounts, certain
reputational, regulatory and other market
consequences would arise that could be
material. Management has considered the
risks to executing the plans and identified
actions that could be taken should these
risks materialise.
The Group also maintains a significant
self-initiated change agenda in order to
deliver on its strategic priorities. In 2022 a
number of enhancements were made to the
Group’s Change Management Framework
including to the prioritisation and
scheduling of change, and strengthened
controls around change delivery.
Phoenix Group Holdings plc Annual Report and Accounts 202252
Risk
strategy
and culture
Risk appetite
Risk universe
Risk
policies
Governance and
organisation
Strategic risk
management
Risk and control processes and reporting
Emerging
risk
Risk and
capital
models
Risk Management Framework
The Group retains focus on delivering on
its strategic operating model. In 2022 this
included migration of a further 530,000
customer policies to Tata Consultancy
Services (‘TCS’) Diligenta, the transfer of
custody and fund accounting services for
£90 billion of assets to HSBC and progress
towards the simplified operating model
with abrdn plc. The Group places
significant focus on the operation of these
partnerships, including the operational
resilience of each, in order to protect the
efficient operation of the business and
delivery of service to its customers.
Own risk and solvency assessment (‘ORSA’)
The ORSA plays an important role in
supporting strategic decision-making and
strategy development at the Group’s
Boards and risk committees. It provides:
• a linkage between strategy, risk, capital
and stress testing, as well as the
effectiveness of management actions
required to meet strategic objectives;
• processes to identify, assess, control and
monitor risks that the Group faces;
• an understanding of current and
potential risks to the business, including
financial and non-financial risks under
base and stressed scenarios;
• the Group’s agreed appetite to accept
these risks and how it manages them; and
• a forward-looking internal assessment of
the Group’s solvency position in respect
of its current risk profile and how it is
likely to change with the proposed
business plans, strategy, or changes
in the external environment.
ORSA processes are run regularly
throughout the year and operate within
the Group’s ORSA cycle outlined below.
The Group’s ORSA cycle brings together
inter-linked risk management, capital and
strategic processes.
Risk strategy and culture
Risk strategy
The Group’s risk strategy is to take
rewarded risks that are understood,
managed effectively and consistent
with its purpose and enterprise strategy.
The Group’s risk strategy supports a
more stable, well-managed business
with improved customer, shareholder,
colleague and societal outcomes in
line with the Phoenix strategy.
The Group achieves its overall purpose
and enterprise strategy goals not by
avoiding risks, but through the
identification and management of an
acceptable level of risk (the Group’s ‘risk
appetite’) which ensures that it is
appropriately rewarded for the risks that
are taken. To help bring focus to the risks
that it seeks to mitigate, the Group has
categorised its risk universe into
‘Fundamental’, ‘Consequential – Active’
or ‘Consequential – Passive’.
Risk culture
Risk culture is the sum of the Group’s
shared values, behaviours and attitudes
towards the risks faced by its customers,
shareholders, colleagues and society. The
Group’s risk culture reflects the way its
colleagues think and act, both individually
and collectively. The Group’s risk culture
vision is to promote an environment that
supports informed decision-making and
controlled risk-taking.
The creation of this environment is enabled
through the Group’s values of passion,
responsibility, growth, courage and
difference. Underpinning each of these are
the individual and collective attitudes and
behaviours that support the realisation of this
environment. The Group regularly assesses
itself against its risk culture vision, doing this
through a comprehensive dashboard with a
suite of measures on people, governance,
customers and leadership.
The Group utilises qualitative observations
and structured monthly surveys as a rich
quantitative data source to monitor
colleague engagement, health and
well-being, as well as providing a safe
platform to allow colleagues to proactively
identify and report upon potential cultural
risks. To help provide the Group with a more
comprehensive view of culture, a colleague
risk culture self-assessment mechanism is
currently being tested, which aims to
improve the Group’s insight and capability
to better understand risk culture strengths
and development areas. The Group is
working hard to ensure that a psychologically
safe environment exists within Phoenix,
where colleagues are empowered to share
different viewpoints and have an ability to
speak up freely. The Group’s Board of
Directors reinforces its culture and values
through their conduct (individually and
collectively), decisions and strategic oversight.
Risk appetite
Risk appetite is used to define the amount
of risk that the Group is willing to accept
in the pursuit of enhancing customer and
shareholder value, and the attainment of
its strategic objectives. The Group’s risk
appetite statements establish the risk
boundaries within which it is prepared
to operate, set the tolerance for delivery
against Group objectives, and are a key
tool in balancing the interests of different
stakeholders. The following risk appetite
statements are adopted by the Group:
Phoenix Group Holdings plc Annual Report and Accounts 2022 53
Strategic report
ORSA process cycle
Stress and
scenario testing
Risk management
and monitoring
Risk capital
Assessment
Risk exposure
and appetite
Strategy and
business plan
ORSA
reporting
Risk management continued
Capital – The Group and each Life
Company will hold sufficient capital to meet
business requirements including those of
key stakeholders in a number of Board
approved asset and liability stress scenarios.
Liquidity – The Group and each Life
Company will seek to ensure that it has
sufficient liquidity to meet its financial
obligations under a range of Board
approved scenarios.
Shareholder Value – The Group only
has appetite for risks that are rewarded,
adequately understood and managed, and
deliver added value. The Group will take
action to deliver shareholder value in line with
the Group’s strategy and financial targets.
Control – The Group, including all legal
entities, will protect the interests of its
customers, colleagues, shareholders and
other stakeholders by operating a robust
control environment that meets the
requirements of the approved controls
objectives for all risks within the Phoenix
Risk Universe.
Conduct – The Group maintains the
highest conduct standards which are in
line with customer, market and regulatory
expectations. The standards the Group is
expected to achieve are included in the
Group Code of Conduct. Any deliberate
or negligent actions leading to unfair
customer outcomes, poor market conduct,
reputational damage or regulatory
censures are not acceptable. If unfair
outcomes should arise, the Group will
address them in a fair and prompt manner.
Sustainability – The Group is committed
to being a leader on sustainability to
help deliver its purpose and to protect
the long-term financial interests
of its customers, colleagues and
shareholders. To manage the risks in
the delivery of its sustainability strategy,
the Group will monitor and take action
to achieve its targets and invest in a
sustainable future, engage people
in better financial futures and build a
leading responsible business.
Risk universe
A key element of effective risk management
is ensuring the business understands the
risks it faces. The Group’s Risk Universe
summarises the comprehensive set of risks
to which the Group is exposed. The Risk
Universe allows the Group to deploy
a common language, allowing for
meaningful comparison to be made across
the business. The risk profile of each is an
assessment of the impact and likelihood
of those risks crystallising and the Group
failing to achieve its strategic objectives.
Changes in the risk profile are influenced
by the commercial, economic and
non-economic environment and are
identified, assessed, managed, monitored
and reported through the Group’s RMF
processes. The Risk Universe presents the
complete set of risks across the Group in
increasing levels of granularity, i.e. Level 1
risks are the high level risk categories,
Level 2 risks are the components of these
categories and, in some instances, Level 3
risks are included, where considered
necessary, as sub-components. The Group
treats climate change risk and conduct risk
as cross-cutting risks that impact all
aspects of the Risk Universe.
Risk policies
The Group Risk Policy Framework supports
the delivery of the Group’s purpose and
enterprise strategy by establishing the
operating principles and expectations for
managing the key risks to the Group’s
business day-to-day. Each of the risk
policies defines:
• the individual risks the policy is intended
to manage;
• the degree of risk the Group is willing to
accept, which is set out in the policy risk
appetite statements; and
• the Control Objectives that determine
the Key Controls required to manage
each risk to an acceptable level.
Risk policies are mapped to either
Level 1 or Level 2 Risk Universe categories
to ensure complete coverage of all
material risks.
The Group Risk Policy Framework further
supports the Group in operating within the
boundaries of its risk appetite statements
by seeking to limit volatility under a range
of Board approved adverse scenarios.
Quantitative and qualitative appetite limits
are chosen which specify the acceptable
likelihood for breaching the agreed
appetite statements (for example
less than x% chance of a breach in
regulatory capital) and assessment against
appetite targets is undertaken through
scenario testing.
Breaches of appetite are corrected
through management actions where
appropriate. The effective use of risk
mitigation techniques, such as reinsurance,
hedging and outsourcing, are key to
ensuring the Group remains within risk
appetite and are described in the relevant
Group Risk Policies.
A Group Conduct Strategy and Climate
Change Risk Management Framework
overarch all risk policies to provide a
holistic view of conduct and climate
change risk. This provides a consistent
and comprehensive approach in the
application of the RMF to manage
these risks across the Group.
Governance and organisation
The RMF delivers a consistent three lines
of defence model with clearly defined
roles and responsibilities for all
components. Risk accountability and
ownership are embedded in the first line,
with first line assurance teams established
to support the business by providing
substantiated evidence that controls are
fit for purpose.
Overall responsibility for approving the
RMF rests with the Board, with
maintenance and review of the effective
operation of the RMF delegated to the
Group Board Risk Committee. This
delegation also includes approval of the
overall risk management strategy and the
review and recommendation to the Board
of the relevant risk policies, risk appetite
statements, risk profile and any relevant
emerging risks.
Group Risk conducts an annual assessment
of the effectiveness of each function in the
business in adhering to the requirements
of the RMF. This provides assurance to
management and the Boards that the RMF
has been implemented consistently and is
operating effectively across the Group.
First line: Management
Management of risk is delegated from
the Board to the Group Chief Executive
Officer, the Executive Committee
members and through to business
managers. The first line is responsible for
implementation of the RMF, ensuring risks
to the Group and its customers,
shareholders, colleagues and society are
identified, assessed, controlled, monitored,
managed and reported.
Second line: Risk oversight
Independent oversight of risk management
is provided by the Group Risk Function
through advice, guidance, review,
challenge, opinion and assurance; its views
are reported to the Board Risk Committee.
Group Risk’s purpose and responsibilities
are set out in the Risk Mission, Mandate
Phoenix Group Holdings plc Annual Report and Accounts 202254
and Plan, which is presented to the Board
Risk Committee for approval annually.
Third line: Independent assurance
Independent verification of the adequacy
and effectiveness of internal controls and
risk management is provided by the Group
Internal Audit function, reporting its output
to the Group Board Audit Committee.
The governance framework in operation
throughout the Group can be found in
the chart below.
Emerging risk
The Group defines an emerging risk (or
opportunity) as an event that is perceived
to be potentially significant but is not yet
fully understood. Mitigating action may
not be necessary until further information
is known about the possible impact.
Emerging risks could either be completely
new risks or connected with existing risks
in unfamiliar conditions.
The distinction between a current risk and
an emerging risk predominantly relates to
the amount of available information.
Emerging Risks draw upon potential
internal and external change drivers to the
organisation, and often stem from changes
in economic, environmental, societal,
technological or political circumstances.
Fewer details tend to be available for
emerging risks meaning the likelihood and
severity impacts must be estimated.
Emerging risks or opportunities can take
longer to crystallise, but in many cases
immediate action is required to
pre-emptively mitigate risks or fully
maximise opportunities.
Whilst any estimates have an element of
subjectivity, they are validated during
Management Board and Board Risk
Committee discussions. These
conversations help drive out a
comprehensive understanding of potential
new risks and opportunities to which the
organisation is exposed, drawing on the
collective expertise and experiences of
subject matter experts. The Group
routinely captures emerging risks and
opportunities in a detailed log.
Strategic risk management
Strategic risks threaten the achievement
of the Group’s purpose and enterprise
strategy. The Group recognises that core
strategic activity brings with it exposure to
strategic risk, however it seeks to
proactively identify, manage and monitor
these exposures. A Strategic Risk Policy is
maintained and reported against regularly,
with a particular focus on risk management,
stakeholder management and corporate
activity and against the Life Companies’
and Group’s strategic ambitions.
Risk and capital models
A continuous process is followed for
identification and assessment of risk types
and the corresponding resilience of the
Group’s capital position. The Group
continually strives to enhance its internal
risk and capital models and the related
modelling must be sufficiently accurate
to enable appropriate ranking and
management of risks. It is a requirement
that all material risks, and the interactions
between them, are in scope of the Group’s
risk and capital models.
Under Solvency II, the development and
production of any Internal Model output
contributing to regulatory capital
requirements must comply with validation
standards, supported with documentation
standards. This is supported by a Model
Governance Policy, which sets out the
standards that must be satisfied to
demonstrate meeting Solvency II
requirements. The Internal Model output is
used within the ORSA process to provide
insight into risks associated with the
Group’s objectives.
The Group’s Stress and Scenario Testing
Programme uses the Internal Model to
assess the capital impact of a range of
plausible and extreme stresses.
Risk control processes and reporting
Identification, assessment, measurement,
management and reporting of risks,
including learning lessons from incidents,
is undertaken across the three lines of
defence, and is reported through business
and management governance to the
relevant Boards and Committees.
Phoenix Group Holdings plc Annual Report and Accounts 2022 55
Strategic report
Phoenix Group
Holdings plc Board
Board
Remuneration
Committee
Board
Nomination
Committee
Board
Sustainability
Committee
Board Risk
Committee
Chief Risk
Officer
Group Chief
Executive Officer
Group Chief
Financial Officer
Group
Functions
Management
Executives
Board
First Line of Defence
Business Unit
Management
Group
Risk and
Compliance
Group
Internal
Audit
Second Line
of Defence
Third Line
of Defence
Board Audit
Committee
Governance framework
Risk management continued
Principal risks and uncertainties
facing the Group
The Group’s principal risks and uncertainties are detailed in this section,
together with their potential impact, mitigating actions in place and any
change in risk exposure since the Group’s 2021 Annual Report and
Accounts, published in March 2022.
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Strategic risk
The Group fails
to make further
value adding
acquisitions or
effectively
transition
acquired
businesses
The Group is exposed to the risk
of failing to drive value through
inorganic growth opportunities,
including acquisitions of life and
pensions books of business.
The transition of acquired
businesses into the Group,
including customer migrations,
could introduce structural or
operational challenges that,
without sufficient controls,
could result in the Group failing
to deliver the expected
outcomes for customers or
value for shareholders.
The Group continues to assess
and execute new inorganic
growth opportunities and
applies a clear set of criteria to
assessing these opportunities.
The Group’s acquisition
strategy is supported by the
Group’s financial strength and
flexibility, strong regulatory
relationships and its track
record of generating value
and delivering good customer
outcomes that are in line
with expectations.
The financial and operational
risks of target businesses are
assessed in the acquisition
phase and potential mitigants
are identified.
Integration plans are
developed and resourced with
appropriately skilled staff to
ensure target operating
models are delivered in line
with expectations. The
Group’s priority at all times is
on delivering for its customers.
Customer migrations are
planned thoroughly with
robust execution controls in
place. Lessons learned from
previous migrations are
applied to future activity to
continuously strengthen the
Group’s processes.
This risk was assessed as ‘Heightened’ in the Group’s 2018
Annual Report and Accounts due to the transformational
nature of the Standard Life acquisition. The assessment
of the level of exposure to this risk is unchanged from the
2018 position due to the impact of ongoing acquisition and
transition activity.
The integration of ReAssure Ltd is continuing as planned,
with the integration of key functions, such as Finance and
Actuarial, progressing well.
The Group continues to develop its partnership with TCS
to support its strategic deliverables. The successful
migration of around 400,000 Standard Life Assurance
customer policies to the TCS BaNCS platform was
completed in May 2022, with the migration of a further
130,000 Scottish Mutual customer policies completed in
November 2022. Further customer migrations are planned
through to 2026, which will support delivery of the Group’s
strategic objectives.
On 7 February 2023 the Group announced that a further c.
3 million policies, currently administered on the Alpha
platform, will be transitioned to the BaNCS platform by
2026. This will enable all Phoenix policies to benefit from
TCS’ significant ongoing investment in the platform.
In August 2022 the Group announced the acquisition of
Sun Life of Canada UK, a closed book UK life insurance
company, from Sun Life Assurance Company of Canada
for cash consideration of £248 million. This equates to an
attractive price to shareholder Own Funds ratio of 83%,
in line with the Board’s disciplined approach to the
deployment of shareholder capital. The acquisition is
expected to complete in April 2023.
A principal risk is a risk or combination of
risks that can seriously affect the
performance, future prospects or
reputation of the Group, including risks
that would threaten its business model,
future performance, solvency or liquidity.
The Board Risk Committee has carried out
a robust assessment of principal risks and
emerging risks. As a result of this review,
the 13 risks noted in the Group’s 2021
Annual Report and Accounts have been
retained. The description of one risk has
been refined to reflect the evolution of
the Group’s strategic priorities to focus
on organic growth.
Further details of the Group’s exposure to
financial and insurance risks and how these
are managed are provided in note E6 and F4
to the IFRS consolidated financial statements.
Strategic priorities
Optimise our
in-force business
Grow organically and
through M&A
Enhance our operating model
and culture
Phoenix Group Holdings plc Annual Report and Accounts 202256
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Strategic risk
Sun Life of Canada UK operates a predominantly
outsourced business model with the majority of its policy
administration already undertaken by the Group’s strategic
outsourcing partner (TCS Diligenta), which supports a
simplified operational integration programme.
The Sun Life of Canada UK acquisition is expected to
deliver c. £500 million of incremental long-term cash
generation, with 30% expected to emerge in the first
three years.
The Group’s
strategic
partnerships fail
to deliver the
expected
benefits
Strategic partnerships are a core
enabler for delivery of the
Group’s strategy; they allow it to
meet the needs of its customers
and clients and deliver value for
its shareholders. The Group’s end
state operating model will
leverage the strengths of its
strategic partners whilst retaining
in-house key skills which
differentiate it from the market.
However, there is a risk that the
Group’s strategic partnerships
do not deliver the expected
benefits leading to adverse
impacts on customer outcomes,
strategic objectives, regulatory
obligations and the Group’s
reputation and brand.
Some of the Group’s key
strategic partnerships include:
abrdn plc: Provides investment
management services to
the Group including the
development of investment
solutions for customers. abrdn plc
manages c. £145 billion of
the Group’s assets under
administration, at February 2023.
TCS: The Group’s enlarged
partnership with TCS is
expected to support growth
plans for the Retirement
Solutions and Pensions and
Savings businesses, enabling
further market-leading digital
and technology capabilities to
be developed to support
enhanced customer outcomes.
HSBC: Provides custody and
fund accounting services to the
Group to manage c. £148 billion
of its unit linked operations.
The Group has in place
established engagement
processes with abrdn plc
to oversee and develop the
strategic partnership.
These processes reflect the
simplified and extended
strategic partnership between
the Group and abrdn plc
that was announced in
February 2021.
The Group’s engagement
with Diligenta, and its parent
TCS, adheres to a rigorous
governance structure, in line
with the Group’s Supplier
Management Model. As
a result, productive and
consistent relationships have
been developed with TCS,
which will continue to develop
throughout future phases of
the enlarged partnership.
The Group has in place
established processes to
oversee services provided by
HSBC in line with its Supplier
Management Model.
The Group takes steps
to monitor its supplier
concentration risks and has
business continuity plans
to deploy should there be
a significant failure of
a strategic partner.
The Group assessed this risk as ‘Heightened’ in the 2019
Annual Report and Accounts due to the increased
dependency it placed on its strategic partnerships, and
then ‘Improved’ in 2020 due to strengthening controls
around the operation of those partnerships. Whilst the
Group has further strengthened and simplified its strategic
partnerships since that time, its assessment of the level of
risk exposure is unchanged from the 2020 position,
reflecting the Group’s ongoing reliance on its strategic
partners to deliver the volume of change needed to
advance the Group’s strategic objectives.
The Group continues to develop its partnership with
TCS to support its strategic deliverables. The successful
migration of around 400,000 Standard Life Assurance
customer policies to the TCS BaNCS platform was
completed in May 2022, with the migration of a further
130,000 Scottish Mutual customer policies completed in
November 2022. Planning for further migrations in 2023
and beyond is underway, including the further c. 3 million
policies to be transferred from the Group’s Alpha
administration platform as the Group progresses towards
BaNCS being the sole administration platform for all
customer policies.
During 2022 the Group successfully transferred the
custody and fund accounting services for £90 billion
of assets to HSBC. This is a key milestone in the Group’s
journey towards implementing harmonised investment
administration processes, and boosts its strategic
partnership with HSBC.
The simplified and extended partnership with abrdn plc
continues to advance towards the Target Operating Model
with significant progress towards the transfer of Wrap
platform products expected in 2023 ahead of the transfer
occurring in subsequent years.
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 2022 57
Strategic report
Risk management continued
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Strategic risk
The Group fails to
deliver long-term
organic growth
The Group aims to deliver
sustainable cash generation
by achieving organic growth
in excess of the run-off from
its in-force business.
Confidence in the Group might
be diminished if it fails to deliver
organic growth in line with
targets shared, particularly as
the Group seeks to promote
a ‘customer obsessed’ mind-set
underpinned by strong retention
and consolidation as
customers journey to and
through retirement.
The Group’s Business Unit
structure brings renewed
focus and accountability.
The key areas of growth
are Pensions & Savings
and Retirement Solutions.
Each Business Unit holds an
annual strategy setting exercise
to consider customer needs,
the interests of shareholders,
the competitive landscape and
the Group’s overall purpose
and objectives.
The Group’s Annual
Operating Plan commits it to
making significant investment
in its Pensions & Savings and
Retirement Solutions
businesses, which will include
propositions that are driven
by customer insight.
The Group is established in
the Bulk Purchase Annuities
(‘BPA’) market and continues
to invest in its operating model
to further strengthen
its capability to support
its growth plans.
For new BPA business, the
Group continues to be
selective and proportionate,
focusing on value not volume,
by applying its rigorous
Capital Allocation Framework.
Improving
For the second consecutive year the Group has delivered
sustainable organic growth which more than offset the
run-off of in-force business. At its Capital Markets Event the
Group set its first incremental new business long-term cash
generation target as a result of the significant progress
made by both Pensions & Savings and Retirement Solutions.
As a result of this development, the Group views this risk as
‘Improving’, which reflects both the demonstrated success
of the strategy to pursue organic and inorganic growth, and
the challenging nature of the target set.
During 2022, the Group completed BPA transactions
with a combined premium of £4.8 billion. This continues
to demonstrate that the Group has the ability to compete
and win in the BPA market.
The Pensions and Savings Business, operating under the
Standard Life brand, has developed its operating model
to centre around three Trading Channels: Workplace,
Retail Intermediated and Retail Direct.
In Workplace, the Group continues to make progress in
the market, launching new propositional features such as
Workplace ISA. The Group continues to recruit to increase
its capability in terms of proposition and distribution; 76
new scheme wins have been confirmed during 2022
(compared with 41 for 2021), and the Group is actively
managing a number of enquiries.
The operating model and organisational design are being
developed and implemented for the Retail businesses, with
the aim of maximising opportunities for growth, both
directly with customers and through advisers. The Group
is looking to expand the current offering of financial
guidance and advice to support customers in better
preparing for their retirement. The Pensions and Savings
business has established, alongside the Workplace
Business, a Retail Direct Function to mobilise this.
The Group does
not have
sufficient
capacity and
capability to
fully deliver
its significant
change agenda
which is required
to execute the
Group’s strategic
objectives
The Group’s ability to deliver
change on time and within
budget could be adversely
impacted by insufficient
resource and capabilities as well
as inefficient prioritisation,
scheduling and oversight of
projects. The risk could
materialise both within the
Group and its strategic partners.
This could result in the benefits
of change not being realised by
the Group in the time frame
assumed in its business plans
and may result in the Group
being unable to deliver its
strategic objectives. Poor
change delivery could affect the
Group’s ability to operate its core
processes in a controlled
and timely manner.
The Group’s Change
Management Framework
defines a clear set of
prioritisation criteria and
scheduling principles for new
projects. This is to support
the safe and controlled
mobilisation of new change
in line with capacity and risk
appetite and to strengthen
business readiness processes
to deliver change safely into
the operational environment.
Information setting out the
current and forecast levels of
resource supply and demand
continues to be provided
to accountable senior
management to enable
informed decision-making
to take place. This aims to
ensure that all material risks
to project delivery are
appropriately identified,
assessed, managed,
monitored and reported.
There has been no change to the assessment of exposure
to this risk, which reflects the potential impact of failing
to deliver the Group’s significant strategic and regulatory
change agenda, since its introduction in the 2020 Annual
Report and Accounts.
The Group strengthened its Change Management
Framework during 2022, and expects to see an improving
trend in this risk as those enhancements are seen in project
delivery. In September 2022 the Group appointed Jackie
Noakes as Group Chief Transformation Officer and,
subsequently, as Group Chief Operating Officer. Jackie
will drive further enhancements to evolve and mature the
Group’s change operating model that are planned in 2023.
These should also have a positive impact on this risk.
However, exposure remains until this work is complete.
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 202258
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Strategic risk
The Group fails
to appropriately
prepare for and
manage the
effects of climate
change and wider
ESG risks
The Group is exposed to the risk
of failing to respond to
Environmental, Social and
Governance (‘ESG’) risks and
delivering on its social purpose;
for example, failing to meet its
sustainability commitments.
A failure to deliver could result
in adverse customer
outcomes, reduced colleague
engagement, reduced
proposition attractiveness,
reputational risks and litigation.
The Group is exposed to market
risk and credit risk related to
climate change as a result of
the potential implications of
a transition to a low carbon
economy. A failure to manage
these risks could result in a loss in
the value of policyholder and
shareholder assets.
In addition, there are long-term
market, credit, insurance,
reputational, propositional and
operational implications of
physical risks resulting from
climate change (e.g. the impact
of physical risks on the
prospects of current and future
investment holdings, along with
potential impacts on future
actuarial assumptions).
Sustainability risk and Climate
risk are both embedded into
the Group’s RMF. Its approach
to climate risk management is
in line with the requirements
of the PRA Supervisory
Statement 3/19 (‘SS3/19’).
The Group publishes an
annual Sustainability Report
and an annual Climate Report,
the latter of which is prepared
in line with the Task Force on
Climate-related Financial
Disclosures (‘TCFD’) guidance.
A Sustainability Risk Policy is
in place and updated annually.
Consideration of material
climate-related risks is
embedded across the Group’s
risk policies, with regular
reporting undertaken to
ensure ongoing visibility of
its exposure to these risks.
The Group undertakes annual
climate-related stress and
scenario testing and continues
to build its climate scenario
modelling capabilities.
The Group continues to evolve
its sustainability strategy in
response to the changing
needs of stakeholders and
sets targets to monitor
progress towards its
sustainability commitments.
Further details are available in
the Sustainability Report.
The Group continues
to actively engage with
regulators, suppliers and
asset managers on progress
with all climate change
and sustainability-related
deliverables.
There has been no change to the assessment of the overall
level of this risk since its introduction in the 2019 Annual
Report and Accounts. While significant progress is being
made to deliver against the Group’s Net-Zero targets and
social purpose, the assessment is driven by the Group’s
recognition that significant work, over a number of years,
is required to deliver on these targets.
The Group is committed to a 50% reduction in the carbon
economic emissions intensity of all assets within its
investment portfolio over which it has control and
influence by 2030. The Group is also committed to
a 25% reduction in the carbon economic emissions
intensity of all listed equity and credit investments over
which it has control and influence by 2025. The Group
has been working with its key partners and suppliers
to encourage them to adopt Science Based Targets
initiative carbon reduction targets.
A Net-Zero Transition Plan, which reflects potential future
management actions and forward-looking investee
company emission objectives, is in development.
The Group is in the process of piloting the Task Force
on Nature-related Financial Disclosures guidance ahead
of the launch of the framework in 2023.
The TCFD disclosures in the Group’s Climate Report
provide an overview of how it is compliant with SS3/19
and its planned future priorities across each of the TCFD
focus areas.
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 2022 59
Strategic report
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Customer risk
The Group fails
to deliver fair
outcomes for its
customers or fails
to deliver
propositions that
continue to meet
the evolving
needs of
customers
The Group is exposed to the risk
that it fails to deliver fair
outcomes for its customers,
leading to adverse customer
experience and potential
customer harm. This could
also lead to reputational
damage for the Group and/or
financial losses.
In addition, a failure to deliver
propositions that meet the
evolving needs of customers
may result in the Group’s failure
to deliver its purpose of
helping people secure a life
of possibilities.
The Group’s Conduct Risk
Appetite sets the boundaries
within which the Group
expects customer outcomes
to be managed.
The Group’s Conduct
Strategy, which overarches
the Risk Universe and all risk
policies, is designed to detect
where customers are at risk
of poor outcomes, minimise
conduct risks, and respond
with timely and appropriate
mitigating actions.
The Group has a suite of
customer policies which set
out key customer risks and the
Control Objectives that
determine the Key Controls
required to mitigate them.
The Group maintains a strong
and open relationship with the
FCA and other regulators,
particularly on matters
involving customer outcomes.
The Group’s Proposition
Development Process ensures
consideration of customer
needs and conduct risk when
developing propositions.
Since the introduction of this risk in the 2018 Annual
Report and Accounts there has been no change to the
assessment of the overall level of this risk, reflecting
ongoing improvements and challenges.
In 2022, the Group continued to make significant
investments in its propositions, and completed embedding
a range of responsibly invested, sustainable multi asset
funds for Standard Life’s 1.5 million workplace pension
scheme members, with assets of circa £15 billion now
invested in sustainable solutions on their behalf. The
programme to introduce sustainable investment strategies
that are designed to help employers and trustees meet
their member and regulatory needs, and pension
customers to achieve good outcomes, was completed two
months earlier than the end-of-year timeline previously
announced in January 2022. The Group is preparing for
the introduction of the FCA’s Consumer Duty requirements
which set higher and clearer standards of consumer
protection across financial services and require firms to
prioritise their customers’ needs. The Consumer Duty initial
implementation plan was agreed by the Group.
The Group is monitoring the impacts of the cost of living
crisis on its customers, using customer behaviour research
and analysis, to ensure that it provides them with the
support and help that they need during this period of
economic uncertainty. The Group continues to provide
support to customers both when paying out on their
protection plans and when making decisions about their
life savings. Proactive action to support customers,
including those most vulnerable, is a priority.
Risk management continued
Phoenix Group Holdings plc Annual Report and Accounts 202260
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Operational risk
The Group or its
outsourcers are
not sufficiently
operationally
resilient
The Group is exposed to the risk
of causing intolerable levels of
disruption to its customers and
stakeholders if it cannot maintain
the provision of important
business services when faced
with a major operational
disruption. This could occur
either in-house or within the
Group’s primary and
downstream outsourcers and
be triggered by a range of
environmental and climatic
factors such as the cost of
living crisis and adverse
weather phenomena.
The Group regularly conducts
customer migrations as part of
transition activities in delivering
against its strategic objectives.
In doing so, it faces the risk of
interruption to its customer
services, which may result in
the failure to deliver expected
customer outcomes.
Regulatory requirements for
operational resilience, and a
timetable to achieve full
compliance, were published in
March 2021. Whilst the specific
requirement to work within set
impact tolerances takes effect in
March 2025, the Group is
already exposed to regulatory
censure in the event of
operational disruption should
the regulator determines that
the cause was a breach of
existing regulation.
The Group’s Operational
Resilience Framework
enhances the protection of
customers and stakeholders,
preventing intolerable harm,
and supports compliance with
the regulations. The Group
works closely with its
outsourcers to ensure that
the level of resilience
delivered is aligned to the
Group’s impact tolerances.
The Group and its outsourcers
have well established business
continuity management and
disaster recovery frameworks
that are subject to an annual
refresh and regular testing.
For example, extensive testing
of the power capabilities of
the Group and its critical
suppliers has shown they are
resilient to power cuts from
the National Grid.
The Group continues to
actively manage operational
capacity and monitor service
continuity required to deliver
its strategy, including
transition activities. Rigorous
planning and stress testing
is in place to identify and
develop pre-emptive
management strategies should
services be impacted as a
result of customer migrations.
The Group and its outsourcers
have a flexible working model
in place. This significantly
reduces exposure to
intolerable disruption
for its customers.
This risk was assessed as ‘Heightened’ in the Group’s 2020
Annual Report and Accounts due to COVID-19 uncertainty
and strategic customer transformation activity. These
factors remain the key drivers of the current assessment
of the level of exposure to this risk, which is unchanged
since the 2020 position.
Whilst uncertainty regarding further COVID-19 related
implications for the Group’s operational resilience has
continued to reduce, the Group has a significant change
and customer migration agenda, effective completion of
which is required to deliver planned strengthening of its
operational resilience both internally and with some
outsourced service providers.
The Group has a programme of work to strengthen
operational resilience ahead of the next key regulatory
deadline of March 2025. Where this is dependent upon
customer migration to an alternative administration
platform, the risk of late delivery is actively managed
by both the relevant change programme and
separate operational resilience remediation
governance and reporting.
As noted in the Group’s 2021 Annual Report and Accounts,
whilst many potential exposures to COVID-19 can now be
effectively mitigated, a large-scale loss of colleagues due
to illness or incapacity, in the UK or globally, is more
challenging to resolve in the short-term as there remains
uncertainty around the efficacy of vaccines against future
COVID-19 variants.
The Group aims to deliver considerable customer
transformation activity in 2023. Although the scale
of change exposes the Group to significant risk, this
is mitigated through strengthened Resilience and
Change Management Frameworks.
The Group has taken action through previous strategic
transformation activity to reduce exposure to
technological redundancy and key person dependency
risk, increasing the resilience of its customer service.
Phoenix Group Holdings plc Annual Report and Accounts 2022 61
Strategic report
Risk management continued
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Operational risk
The Group is
impacted by
significant
changes in the
regulatory,
legislative or
political
environment
Changes in regulation could
lead to non-compliance with
new requirements that could
impact the quality of customer
outcomes, lead to regulatory
sanction, impact financial
performance or cause
reputational damage. These
could require changes to
working practices and have
an adverse impact on resources
and financial performance.
Political uncertainty or changes
in the government could see
changes in policy that could
impact the industry in which
the Group operates.
The Group undertakes
proactive horizon scanning
to understand potential
changes to the regulatory
and legislative landscape.
This allows the Group to
understand the potential
impact of these changes to
amend working practices to
meet the new requirements
by the deadline.
Heightened
This risk was assessed as ‘Heightened’ in the Group’s 2021
Annual Report and Accounts due to the uncertainty
around Solvency II Reforms and the FCA’s proposed
Consumer Duty. These, and the significant undertaking
to achieve compliance with IFRS 17 in 2023, are the key
drivers of the assessment of risk as further ‘Heightened’
from that position.
The volatile political environment following the UK
Government’s ‘mini-budget’ has stabilised with the election
of Rishi Sunak as Prime Minister, but remains ‘heightened’
due to the economic headwinds facing the new
administration and the implications for the Group’s
customer base, including the cost of living, energy
crisis and the potential increase in vulnerability.
In November 2022, HM Treasury issued a consultation
response that confirmed the UK Government’s intended
Solvency II reforms. The Group supports the PRA and HM
Treasury’s objectives to reform the regulations to better suit
the UK market whilst maintaining the right safeguards for
policyholders. These regulations are an important
component of the changes needed to the wider UK
investment landscape which will enable the Group to
meet its ambition to invest more in the future. However,
uncertainty remains over when the reforms will be
implemented and the quantitative impacts will depend
on the exact detail of the final legislation. The Group will
therefore remain actively involved in industry lobbying
on Solvency II.
The FCA’s proposed new Consumer Duty’s objectives are
to deliver a higher and more consistent level of consumer
protection and for the industry to do more to foresee and
prevent harm before it happens. In July 2022 the FCA
published final rules and guidance, the impact of which the
Group has assessed. As part of Phoenix’s implementation
plan, key priorities have been identified that must be
addressed to ensure compliance with the Consumer Duty
requirements within the relevant timescales. This plan has
been approved by the Board and shared with the FCA.
IFRS 17 aims to standardise insurance accounting across
the industry. Compliance with IFRS 17 is a significant
undertaking, and a complex programme of work to deliver
the Group’s 2023 interim accounts is ongoing and reliant
on the successful completion of significant workstreams
across the Group, resulting in a number of delivery risks.
The Group recognises that, should it not deliver IFRS 17
reporting for the interim accounts, certain reputational,
regulatory and other market consequences would arise
that could be material. Management has considered the
risks to executing the Group’s delivery plans and identified
actions that could be taken should these risks materialise.
The Group expects to continue its finance transformation
programme beyond delivery of the 2023 interim accounts
to further streamline and automate IFRS 17 processes to
support efficient financial reporting in the future.
Following the UK’s Supreme Court judgement in
November 2022 not to allow the Scottish Government to
call a referendum without consent from Westminster, and
the decision of Nicola Sturgeon to resign as Scotland’s First
Minister and leader of the Scottish National Party, the
Group continues to keep a watching brief on how this issue
progresses. As it is not yet clear what impact the death of
Her Majesty Queen Elizabeth II and the succession of His
Majesty King Charles III will have on public sentiment to the
Union, the risk remains under review in the Emerging Risk
and Opportunities Framework.
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 202262
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Operational risk
The Group or its
Supply Chain are
not sufficiently
cyber resilient
As the Group continues to grow
in size and profile this could lead
to increased interest from cyber
criminals and a greater risk of
cyber-attack which could have
significant impact on customer
outcomes, strategic objectives,
regulatory obligations and the
Group’s reputation and brand.
Based on external events and
trends, the threat posed by a
cyber-security breach remains
high and the complexity of
the Group’s increasingly
interconnected digital
ecosystem exposes it to
multiple attack vectors.
These include phishing and
business email compromise,
hacking, data breach and
supply chain compromise.
Increased use of online
functionality to meet customer
preferences and flexible ways
of working, including remote
access to business systems,
adds additional challenges to
cyber resilience and could
impact service provision and
customer security.
The Group is continually
strengthening its cyber
security controls, attack
detection and response
processes, identifying
weaknesses through ongoing
assessment and review.
The Information/Cyber
Security Strategy includes
a continuous Information
Security and Cyber
Improvement Programme,
which is driven by input from
the Annual Cyber Risk
Assessment and external
threat intelligence sources.
The Group continues to
consolidate its cyber security
tools and capabilities. The
specialist Line 2 Information
Security & Cyber Risk team
provides independent
oversight and challenge of
information security controls;
identifying trends, internal
and external threats and
advising on appropriate
mitigation solutions.
The Group continues to
enhance and strengthen its
outsourced service provider
and third party oversight and
assurance processes. Regular
Board, Executive, Risk and
Audit Committee engagement
occurs within the Group.
This risk was assessed as ‘Heightened’ in the Group’s 2021
Annual Report and Accounts due to the conflict in Ukraine.
This remains the key driver for the assessment of the
exposure to this risk, which is unchanged from the 2021
position. The ongoing conflict in Ukraine has resulted in
increased cyber threat levels and the increased likelihood
of a cyber-attack from a State actor; this would most likely
be against the UK’s Critical National Infrastructure,
particularly on supply chains and the wider Financial
Services industry which the Group relies upon. The Group
improved its Threat Intelligence capabilities in 2022 and
monitors National Cyber Security Centre guidance and
other threat intelligence sources on a daily basis. To date,
the Group has not seen a material increase in cyber-attacks
since the conflict started.
The Group’s cyber controls are designed and maintained
to repel the full range of the cyber-attack scenarios;
although the Group’s main threat is considered to be
Cyber Crime, from Individuals or Organised Crime
Groups, the same controls are utilised to defend against a
Nation-State level cyber-attack. Having strengthened and
consolidated its cyber controls, including in areas such as
Vulnerability and Patch Management, Detect and Respond
and infrastructure scanning capabilities in the first half of
2022, the main improvement in the second half of the year
was strengthening the Supply Chain Security Oversight
and Assurance framework. New Cyber Bandings,
Processes and Controls have been implemented and
will continue to be embedded and matured in 2023.
Following a Final Stage Assessment in late June 2022
and recommendation by the British Standards Institution,
Phoenix Group now holds ISO 27001 Information Security
Management Certification for its Workplace Pension
and Benefits schemes.
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 2022 63
Strategic report
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Operational risk
The Group fails to
retain or attract
a diverse and
engaged
workforce with
the skills needed
to deliver
its strategy
Delivery of the Group’s strategy
is dependent on a talented,
diverse and engaged workforce.
This risk is inherent in the Group’s
business model given the nature
of acquisition activity and
specialist skill sets.
Potential areas of uncertainty
include: the ongoing transition
of ReAssure businesses into the
Group, the expanded strategic
partnership with TCS and the
introduction of the flexible
working model.
Potential periods of uncertainty
could result in a loss of critical
corporate knowledge,
unplanned departures of key
individuals, or the failure to
attract and retain individuals with
the appropriate skills to help
deliver the Group’s strategy.
This could ultimately impact the
Group’s operational capability,
its customer relationships and
financial performance.
The Group aims to attract and
retain colleagues, building a
sense of belonging by
providing timely
communications to colleagues
that aim to provide clarity and
support employee
engagement for corporate
activities, including details of
key milestones to deliver
against the Group’s plans.
In addition, the Group
regularly benchmarks terms
and conditions against the
market and maintains dynamic
succession plans for key
individuals, ensuring
successors bring appropriate
diversity of thought, capability
and experience. Every six
months, the Group’s CEO and
HR Director meet with the
Executive Committee to
discuss talent, succession
and diversity.
Monthly colleague surveys
help to improve engagement
whilst promoting continuous
listening and rapid
identification of concerns
and actions.
The Group continues to
actively manage operational
capacity required to deliver
its strategy with ongoing focus
on senior bandwidth, attrition
and sickness.
Flexible working offers
colleagues greater flexibility
in their working practices.
The Group looks to
proactively respond to
external social, economic
and marketplace events
that impact colleagues.
Whilst there have been strong engagement scores in
colleague surveys during 2021 and 2022, there has been
no change to the overall level of exposure to this risk since
it was introduced in the 2018 Annual Report and Accounts.
This is driven by acknowledgement of the significant
amount of integration activity within the Group and
uncertainty regarding the longer-term social and
marketplace impacts of the pandemic and cost of living
crisis on colleague attrition, sickness, motivation and
engagement. Skills essential to the Group continue to be
in high-demand in the wider marketplace and recruitment
and retention still has the potential to be impacted by
post-Brexit, COVID-19 and inflationary factors. The Group
monitors this closely and continues to remain confident in
the attractiveness of its colleague proposition.
The Group continues to leverage apprenticeships to
support workforce diversity and to fill key skills, creating
bespoke graduate and early careers programmes for
specialist technical areas.
The Group continues to successfully operate a flexible
working model, with strategic investments in technology
and other resources maximising its effectiveness. The
model focuses on empowerment by enabling leaders and
colleagues to agree working arrangements that meet
individual, team and business needs.
The increased scale and presence of the Group, and
success in multi-site and remote working, gives greater
access to a larger talent pool to attract and retain in the
future. In addition, the Group’s Graduate Programmes
helps to support the talent pipeline.
Risk management continued
(continued)
Phoenix Group Holdings plc Annual Report and Accounts 202264
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Market risk
Adverse
investment
market
movements or
broader
economic forces
can impact the
Group’s ability to
meet its cash flow
targets, along
with the potential
to negatively
impact customer
investments or
sentiment
The Group and its customers are
exposed to the implications of
adverse market movements. This
can impact the Group’s capital,
solvency, profitability and
liquidity position, fees earned on
assets held, the certainty and
timing of future cash flows and
long-term investment
performance for shareholders
and customers.
There are a number of drivers for
market movements including
government and central bank
policies, geopolitical events,
market sentiment, sector specific
sentiment, global pandemics and
financial risks of climate change,
including risks from the transition
to a low carbon economy.
The Group undertakes regular
monitoring activities in relation
to market risk exposure,
including limits in each asset
class, cash flow forecasting
and stress and scenario
testing. In particular, the
Group’s increase in exposure
to residential property and
private investments, as a result
of its BPA investment strategy,
is actively monitored.
The Group continues to
implement de-risking
strategies and control
enhancements to mitigate
unwanted customer and
shareholder outcomes from
certain market movements,
such as equities, interest
rates, inflation and
foreign currencies.
The Group maintains cash
buffers in its holding
companies and has access to
a credit facility to reduce
reliance on emerging
cash flows.
The Group closely monitors
and manages its excess capital
position and it regularly
discusses market outlook
with its asset managers.
This risk was assessed as ‘Heightened’ in the Group’s 2019
Annual Report and Accounts, and then again in 2020 due
to ongoing economic uncertainty, geopolitical tensions,
the impacts of COVID-19 and uncertainty around interest
rates. These remain the key drivers for the current
assessment of exposure to this risk, which is unchanged
from the 2020 position.
The global macro-economic environment remains highly
uncertain, as it did throughout 2022.
The Ukraine conflict and rapid increase in inflation
increased market volatility throughout 2022, with
recession expected throughout Europe and possibly
the wider world. The longer-term impacts of the conflict
have affected the cost and availability of food and
vital commodities such as oil and gas, driving
inflationary pressures.
Inflation is considered a material short to medium-term risk.
Pressures continue and the UK Consumer Price Index hit
11.1% in October 2022, before retreating slightly to 10.1%
in January 2023. The Bank of England base rate increased
from 0.1% in December 2021 to 4% at the time of writing,
with further rate rises expected during 2023. Higher
interest rates, coupled with cost of living rises, are likely
to suppress property prices over the coming year.
The UK mini-budget added further pressure to yield
rises, squeezing liquidity throughout the long-term
savings sector. The tax increases and government
spending cuts announced in the Chancellor’s Autumn
statement helped to stabilise markets but have the
potential to worsen customer sentiment, which may
deepen the expected recession in the UK and affect
the ability of households to save.
The Group continues to monitor and manage its market risk
exposures, including to interest rates and inflation, and to
markets affected by the conflict in Ukraine. The Group’s
strategy continues to involve hedging the major market
risks and in 2022 the Group’s Stress and Scenario Testing
Programme continued to demonstrate the resilience of its
balance sheet to market stresses. Contingency actions
remain available to help manage the Group’s capital and
liquidity position in the event of unanticipated market
movements such as those following the mini-budget.
As noted in the ‘Customer’ risk above, work is underway
across the Group to ensure customers are supported as
the impacts of the cost of living crisis continue to crystallise.
Phoenix Group Holdings plc Annual Report and Accounts 2022 65
Strategic report
Risk Impact Mitigation
Strategic
priorities Change from 2021 Annual Report and Accounts
Insurance risk
The Group may
be exposed to
adverse
demographic
experience which
is out of line with
expectations
The Group has guaranteed
liabilities, annuities and other
policies that are sensitive to
future longevity, persistency and
mortality rates. For example, if
annuity policyholders live for
longer than expected, then the
Group will need to pay their
benefits for longer.
The amount of additional
capital required to meet
additional liabilities could have
a material adverse impact on
the Group’s ability to meet
its cash flow targets.
The Group undertakes regular
reviews of experience and
annuitant survival checks to
identify any trends or
variances in assumptions.
The Group regularly reviews
assumptions to reflect the
continued trend of
reductions in future
mortality improvements.
The Group continues to
manage its longevity risk
exposures, which includes
the use of longevity swaps
and reinsurance contracts
to maintain this risk
within appetite.
The Group actively monitors
persistency risk metrics and
exposures against appetite
across the Open and
Heritage businesses.
Where required, the
Group continues to take
capital management actions
to mitigate adverse
demographic experience.
This risk was assessed as ‘Heightened’ in the Group’s 2020
Annual Report and Accounts due to the uncertainty
around future demographic experience as a result of
COVID-19 impacts. The residual risks from COVID-19,
in addition to the implications arising from the cost of
living crisis, are key drivers of the assessment of the level
of exposure to this risk, which is unchanged from the
2020 position.
Demographic experience and the latest views on future
trends continue to be considered in regular assumption
reviews although, for most products, experience over the
COVID-19 pandemic has still been given little weight given
its anomalous nature.
The Group is actively monitoring customer behaviour as a
result of the cost of living crisis; this includes the impact
that any change in behaviour could have on demographic
assumptions. As noted elsewhere in this section, work
is underway to ensure support is provided to customers
as the impacts from the cost of living crisis continue
to materialise.
The Group completed BPA transactions with a combined
premium of £4.8 billion in 2022. Consistent with previous
transactions, the Group continues to reinsure the vast
majority of the longevity risk with existing arrangements
that are reviewed regularly.
Credit risk
The Group is
exposed to the
risk of downgrade
or failure of a
significant
counterparty
The Group is exposed to the risk
of downgrades and deterioration
in the creditworthiness or default
of investment, derivatives or
banking counterparties.
This could cause immediate
financial loss, or a reduction
in future profits.
The Group is also exposed to
trading counterparties, such as
reinsurers or service providers,
failing to meet all or part of their
obligations. This would
negatively impact the Group’s
operations which may in turn
have adverse effects on
customer relationships and
may lead to financial loss.
The Group regularly monitors
its counterparty exposures
and has specific limits in place
relating to individual
counterparties (with sub-limits
for each credit risk exposure),
sector concentration
and geographies.
The Group undertakes regular
stress and scenario testing of
the credit portfolio. Where
possible, exposures are
diversified using a range of
counterparty providers. All
material reinsurance and
derivative positions are
appropriately collateralised.
The Group regularly discusses
market outlook with its asset
managers in addition to the
Line 2 Risk oversight provided.
For mitigation of risks
associated with stock-lending,
additional protection is
provided through collateral
and indemnity insurance.
In the Group’s 2020 Annual Report and Accounts, this risk
was assessed as ‘Heightened’ as a result of the market
volatility and wider economic and social impacts arising
from COVID-19. The residual risks from COVID-19 are a
driver of the current assessment of the level of exposure
to this risk, which is unchanged from the 2020 position,
in addition to ongoing geopolitical tensions and
economic uncertainty.
Over 2022 the Group continued to undertake actions to
increase the overall credit quality of its portfolio and
mitigate the impact on risk capital of future downgrades.
Furthermore, the Group Credit Limit framework was
updated to better manage counterparty failure risk. This
positive progress, and the easing of the economic and
social impacts of COVID-19, is balanced by risks arising
from the Ukraine conflict and UK Government policy.
Uncertainties over the global economic outlook and high
inflation present an increased risk of downgrades and
defaults. In addition, a UK sovereign downgrade, which
is now more probable, would have a negative impact on
UK-related assets including Gilts, Housing Associations
and Local Authority Loans.
The Group has no direct shareholder credit exposure to
Russia or Ukraine and no exposure to sanctioned entities.
The Group continues to increase investment in illiquid
credit assets as a result of BPA transactions. This is within
appetite and in line with the Group’s strategic asset
allocation plans. The growth in illiquid assets will be met
by growth in the overall Group credit portfolio.
Risk management continued
Phoenix Group Holdings plc Annual Report and Accounts 202266
Risk Title Description Risk universe category
ESG Litigation The growth of ESG-related litigation is becoming a risk. Given the growing prominence of ESG on government,
regulator and corporate agendas, it is increasingly important that all businesses understand and take steps to
mitigate the risks of ESG-related litigation. ESG-related litigation covers a broad range of potential actions,
including those that result from climate-related issues (such as claims of “Greenwashing”), where claimants see the
potential to drive an increase in climate change mitigation activity, and those that are brought by diversity
campaigners seeking to drive faster progress by corporations towards their stated commitments. These actions
could result in legal penalties and reputational damage to the Group if the underlying risks are not mitigated.
The Group has undertaken a risk assessment exercise to identify and collate all potential ESG-related litigation risks.
SMEs are currently assessing these and will report back with recommendations on those risks that are either not
mitigated, have a higher chance of occurring or a greater impact if they do occur. The Group views these risks as
cross-cutting the risk universe, with strategic, financial, operational, reputational and customer implications.
Environmental
Ethical Data
Driven Decisions
As computing power advances, the use of automated decision making (be that machine learning, Artificial
Intelligence or complex decision trees) has increased throughout the industry, including the use of algorithms to
help customers make decisions about their future. There is a risk that the data used to drive these decisions contains
biases which are not identified or the implications not understood and that, as a result, there is artificial discrimination
in the recommended outcomes. For Phoenix Group, this could manifest through customers failing to achieve good
outcomes and expose the Group to reputational damage and the need to remediate for inappropriate decisions
made following the use of such tools. There is also the risk of regulatory sanction, most notably from the Information
Commissioner’s Office but also from the FCA.
The Group’s priority in this area is in establishing the ethical guardrails and controls which are essential to setting
both expectations and culture of how data is consumed and processed. The principles of the FCA’s new Consumer
Duty, and the Group’s Code of Conduct, will be placed at the heart of the framework.
Strategic
Emerging risks and opportunities
The Group’s senior management and Board take emerging risks and opportunities into account when considering potential outcomes.
This determines if appropriate management actions are in place to manage the risk or take advantage of the opportunity. Two examples
of key risks and opportunities discussed by senior management and the Board during 2022 are:
Phoenix Group Holdings plc Annual Report and Accounts 2022 67
Strategic report
Viability statement
Viability statement
In accordance with provision 31 of the 2018 UK Corporate Governance
Code, the Board is required to conduct an assessment of the viability of
the Group over a specified time horizon.
Assessment Process
In assessing the future viability of the
Phoenix Group, the Board has defined
‘viability’ as maintaining the capability
to satisfy mandatory liabilities and meet
external targets for cash generation.
In doing so, the Board considered whether
the definition of viability should reflect the
success of the Group in delivering against
its strategic priority to invest in the growth
of the business on an organic and
inorganic basis. It concluded that any such
investment needs to comply with the
Group’s capital allocation framework and
risk appetite, and that the Board retains
flexibility to manage the level of investment
to support the Group’s strategic priorities.
In the absence of new business growth,
the Group maintains a significant cash
generation capacity from its in-force
business which remains resilient under
stress, supporting longer-term viability.
The Board has determined that the
three-year time horizon to December 2025
is an appropriate period for the
assessment. The previous year’s viability
statement considered a five year time
horizon but this has been amended to
reflect the period covered by the Group’s
latest Board-approved Annual Operating
Plan (‘AOP’), and align to the period for
which the Group establishes its internal
and external targets.
In making its assessment and assessing
the prospects of the Group over the
short, medium and longer-term, the
Board considered a large range of
information including:
• The Group’s strategic and operational
plans as set out in the AOP, approved
by the Board in January 2023;
• The latest financial results for the Group;
• Financial projections of the Group’s
capital, liquidity and funding positions
over the viability assessment period.
These projections have considered both
base assumptions and severe but
plausible stress scenarios, reflecting the
major risks to which the Group is exposed;
• The results of wider stress and scenario
testing activity, including reverse stress
testing, capturing non-financial risks as
well as more onerous scenarios with
a low likelihood of occurrence;
• The operation of the Group’s Risk
Management Framework (‘RMF’),
including any breaches of risk appetite;
• The principal risks and uncertainties
impacting the Group, together with
an assessment of emerging risks
that may impact on the Group’s
future performance;
• The Own Risk and Solvency Assessment
(‘ORSA’) process which provides a
forward-looking assessment of the
Group’s risk and capital profile as a result
of its business strategy, AOP and the
overall risk environment; and
• An assessment of the wider operating
environment for the Group, including
legal, regulatory, political, climate
and competitive factors.
Assessment of Viability
The Phoenix Group AOP is reviewed and
approved by the Board on an at least
annual basis and results in a set of strategic
priorities, detailed financial forecasts
across multi-year periods, risk assessments
and associated resilience, and available
contingent actions. Those strategic
priorities are outlined in the Strategic
report of the Group’s Annual Report and
Accounts, and progress against the AOP
is reviewed monthly by the Board.
The Board reviewed the results of stress
testing to assess viability under severe
but plausible scenarios, including three
adverse stresses as follows, which are
deemed to be representative of the
key financial risks to the Group:
1. Market stress – a combined market
stress broadly equivalent to a 1 in
10-year event, calibrated to the
Phoenix Internal Model, incorporating
a fall in equity, property values
and yields, with a widening of
credit spreads;
2. Recessionary economic stress – a
more onerous combined market stress
reflecting a deep recession driven
by a further short-term increase in
inflation and cost of living crisis, falls in
equities, properties, increased credit
spreads, a UK sovereign downgrade
and credit asset downgrades; and
3. Longevity stress – longevity and yield
stress broadly equivalent to a 1 in
10-year event, which implies a 1.2 year
increase in life expectancy for a 65
year old male and 1.0 year increase
for a 65 year old female, alongside
a fall in yields.
The calibration and assessment of the
stresses is informed by the Group’s
Solvency II Internal Model. The projections
take into account the impact of any
appropriate Solvency II recalculation
of transitional benefits and allow for
refinancing of certain of the Group’s debt
obligations. In considering the projections,
the Board has assessed the availability of
contingent actions to increase resilience.
The scenarios were applied to the
Solvency II capital, liquidity and funding
positions of the Group, and demonstrated
that the Group could continue to meet its
mandatory obligations without any breach
to regulatory capital requirements, whilst
continuing to track towards meeting
external targets.
Additional stress testing
In addition, through the ORSA and wider
financial resilience processes, the Board
has reviewed a wide range of stress and
scenario testing which has provided
additional insight with regard to the
defined viability assessment period. The
scope of this testing covers the Group’s risk
universe and includes scenarios such as:
• Additional severe downside economic
scenarios with a low likelihood
of occurrence;
Phoenix Group Holdings plc Annual Report and Accounts 202268
• Operational disruption or failure of
key third party service providers;
• Cyberattack, and resultant denial of
service to key systems or applications;
• Failure to execute and deliver key
change activities within the Group; and
• Climate-related risks, including those
related to a disorderly climate transition.
In so doing, the Board has considered the
results of reverse stress testing that has
been performed to analyse scenarios that
have a low probability but where, if they
occurred, have the potential to render the
business model unviable. Reverse stress
testing validates and improves, where
necessary, mitigating actions in place to
deal with threats to the Group’s viability
by starting at the point of business failure
and working backwards to identify the
sequence of events that would lead to
that outcome. It supports the development
of actions that can be implemented now
to avoid the failure.
During 2022, reverse stress testing
considered the impact of severe market
stress combined with a longevity stress.
The analysis concluded that a significant
increase in life expectancy (M65 +1.9yrs)
combined with a downgrade of 1 credit
quality step (1 letter) across the whole
portfolio and a widespread market stress to
replicate a severe recession (house prices
falling 10%, equities c.30% and GBP
depreciating c.10% vs USD) is required for
Phoenix Group’s capital coverage to
reduce close to SCR in the absence of
mitigating actions. Such a scenario is
deemed extreme and in the event of such a
scenario, contingency actions are available
to restore coverage above risk appetites
and would be initiated as the stress emerged.
The Board also approved an updated
Group Recovery plan in January 2023.
This plan includes a range of contingency
actions and demonstrated how these
could be used to recover from extreme
market, longevity, liquidity and
operational scenarios.
Over 2022, we have continued to embed
Climate scenarios within the Group’s stress
and scenario testing programme and
carried out a range of quantitative and
qualitative scenario analysis. The results
show that although how and when climate
risk could crystallise continues to be highly
uncertain, it could have a significant
impact on the value of our assets, the assets
of our customers, and our operations.
Phoenix is actively managing this risk
through taking action to appropriately
decarbonise the investment portfolio,
engage with key emitters within the
portfolio, and ensure the portfolio
remains well diversified.
Risk Assessment
The Board reviewed the Group’s principal
risks and uncertainties as set out on pages
56 to 67 of the 2022 Annual Report and
Accounts, and considered the impacts of
changes in the related impact assessments
and the mitigating actions implemented.
This included an assessment of the
potential impacts of emerging risks on
the Group’s business during the viability
assessment period.
As noted in the Risk Management section
of the Annual Report and Accounts, the
Group identifies, assesses and manages
risk through the operation of its RMF.
The Board approves the RMF and monitors
its operation against established risk
appetites through regular reporting
that comes from across the three lines
of defence.
Whilst noting continued macroeconomic
uncertainty and an evolving political and
regulatory landscape, the Board will
continue to monitor risk exposures relative
to risk appetites to ensure the risks are
proactively managed and do not present
a material threat to the Group’s viability.
2022 Financial Results
The latest financial results for the Group
as included within the 2022 Annual
Report and Accounts have been
considered as part of the assessment.
Key factors included:
• The Group’s strong capital position with
a Solvency II surplus of £4.4 billion and
a Shareholder Capital Coverage Ratio
of 189%, providing significant
headroom above regulatory minimum
capital requirements and the Group’s
risk appetite;
• The resilience of the Group’s capital
position and cash generation to
movements in market factors,
as indicated in the sensitivity
analysis included on page 35,
which is reflective of the Group’s
hedging approach;
• Long-term free cash of £12.1 billion after
deduction of debt interest to maturity,
which provides a significant amount of
dependable future cash generation to
meet mandatory obligations and fund
a sustainable dividend;
• Holding company cash of £503m at
the end of 2022, as well as access
to the Group’s undrawn £1.25 billion
unsecured revolving credit facility,
provides assurance over the Group’s
ability to meet mandatory obligations
as they fall due;
• The impact of losses on the IFRS basis
and the implementation of the new
insurance contract accounting standard,
IFRS 17, were considered as part of the
assessment. It was noted that the
Group’s hedging approach prioritises
the protection of the Solvency II capital
position and therefore the dependable
delivery of future cash generation. It is
accepted that this results in volatility in
the IFRS metrics, but this was not
considered to represent a material
threat to the Group’s viability.
Statement of Viability
Based on the factors outlined above,
the output of the Group’s financial
projections and its resilience under
severe but plausible stressed conditions,
and the management of the Group’s
principal risks and associated mitigating
actions, the Board has a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the
three-year period of assessment.
Phoenix Group Holdings plc Annual Report and Accounts 2022 69
Strategic report
Corporate
governance
70 Phoenix Group Holdings plc Annual Report and Accounts 2022
Chair’s introduction to governance 72
Board leadership and Company purpose 74
Division of responsibilities 82
Stakeholder engagement 84
Composition, succession and evaluation 88
Audit, risk and internal control 96
Sustainability governance 105
Workforce engagement 108
Directors’ remuneration report 110
Directors’ report 147
Statement of Directors’ responsibilities 153
Phoenix Group Holdings plc Annual Report and Accounts 2022 71
Corporate governance
Chair’s introduction to governance
As I mentioned earlier, I am delighted to
serve as Chair of the Board whilst Nicholas
Lyons is on sabbatical.
During the year, Phoenix Group has
delivered high levels of cash generation
and maintained its resilient balance sheet
despite the economic turbulence. The
Group has also delivered both strong
organic growth through our Standard Life
branded businesses and inorganic growth
with the announcement of our first ever
cash funded acquisition of Sun Life of
Canada UK. All of which has enabled the
Board to recommend another year of
strong dividend growth in 2022.
As I reflect on the strategic achievements,
board succession activities and high
quality nature of board discussion, I believe
the Board has performed well with
particular reference to the transition of
roles amongst the Board. I am pleased
that these changes have been well-
managed and enabled the Board to
operate effectively.
The Board schedule is planned a year
in advance. Each meeting is balanced
with governance, strategy, financial
performance and emerging matters. The
Board as a whole places great importance
on promoting the success of the Company.
Each member significantly contributes to
board discussions and has sufficient time
to devote to the Board and operation of its
Committees. There are often points during
the year when additional meeting time
is required and I am pleased that each
Director endeavours to be available as
and when required.
The Board have also overseen the
acquisition activities of the Sun Life of
Canada UK transaction which is expected
to complete in April 2023. The Board and
its Committees played an important role in
the decision making process of this
transaction and I thank each of the Board
members for being available to respond to
emerging matters when required.
During the year, Wendy Mayall and Mike
Tumilty (abrdn plc, shareholder nominated
director) retired from the Board and
Maggie Semple, Katie Murray and
Stephanie Bruce (abrdn plc, shareholder
nominated director) joined the Board.
Their induction programme has been
tailored to enable each of them to start
their respective Board roles well
prepared to contribute to the Phoenix
strategy and wider initiatives. Each of
these Board members brings additional
capability, perspective and expertise
to Board discussions and decision
making processes.
Maggie Semple succeeded Karen Green
as Designated Non-Executive Director for
Workforce Engagement and I am
delighted to report that this transition has
been smooth with Maggie being able to
interact with colleagues through the last
quarter of the year. Karen Green
succeeded me as Senior Independent
Director on 1 September 2022 and Katie
Murray succeeded me as Chair of the
Audit Committee on 1 September 2022.
Further information can be found in the
Nomination Committee report on pages
88 to 91.
Continued resilience
in a dynamic
environment
This report sets out our approach to governance,
our key areas of focus during the year, our ways
of working and how we, as your Board, remain
effective as stewards of your company.
I am delighted that Mark Gregory has
agreed to join the Phoenix Board, effective
1 April 2023. Mark possesses a wealth of
experience in insurance, financial services
and retail sectors, having worked as Group
CFO at Legal & General Group plc and
through non-executive roles, including
Direct Line Insurance Group plc.
Kory Sorenson will have reached her ninth
year of tenure on 30 June 2023. Kory has
made a significant contribution during her
time on the Board, in particular as Chair of
the Remuneration Committee for the past
5 years. Nicholas Shott will succeed Kory
as Chair of the Remuneration Committee
with effect from the conclusion of the
AGM on 4 May 2023, subject to
shareholder and regulatory approval.
Nicholas is an experienced chair and has
a comprehensive grasp of the executive
remuneration landscape having served on
the Remuneration Committee for almost
7 years. Kory will remain a member of the
Board until she retires on 30 June 2023.
The Nomination Committee has had a
busy year characterised by a focus on
Board progress on diversity (including
gender and ethnicity), board succession
and board evaluation. I am proud to serve
as a Chair of a Board with 50% female
board representation, 25% ethnicity board
representation and a female Senior
Independent Director. This year our board
evaluation was conducted internally
through completion of questionnaires and
individual discussion for each director with
myself, and concluded that the Board is
cohesive, well-balanced and operates as a
team and that the Board and its
Committees operate and are chaired
effectively with appropriate balance of
material discussed at each meeting.
Phoenix Group Holdings plc Annual Report and Accounts 202272
Female 60%
Karen Green
Chair of the Sustainability Committee
Katie Murray
Chair of the Audit Committee
Kory Sorenson
Chair of the Remuneration Committee
Male 40%
Alastair Barbour
Chair of the Nomination Committee
John Pollock
Chair of the Risk Committee
1
As at 10 March 2023
Board highlights 2022
Board evaluation
An internal evaluation of the Board was carried out during
the year. Following discussion, the Board have agreed
several development areas.
Read more on page 91
Board induction
Katie Murray and Maggie Semple share their experiences of
the Phoenix Board induction programme.
Read more on page 93
Engagement in action – listening to the colleague voice
Maggie Semple was appointed as the Designated Non-
Executive Director for Workforce Engagement.
Read more on pages 108 to 109
Board composition and diversity
The composition of the Board is designed to ensure a nix of
backgrounds, skils, knowledge and expertise to enhance
decision-making.
Read more on pages 74 and 92
AGM votes in favour of all
resolutions May 2022
97%
96% in 2021
Board ethnic minority director
representation
1
25%
Board female director
representation
1
50%
UK Corporate Governance Code
Fully compliant
in 2022
Fully compliant in 2021
UK Corporate Governance Code
See page 77 for a summary of how
the Company has complied with
the UK Corporate Governance
Code (‘Code’) during 2022 on
pages 72 to 146.
Further information on the outcomes of the
evaluation can be found on page 91.
Turning to the work of the Remuneration
Committee, our new 3 year Remuneration
Policy will be put to shareholders at our
Annual General Meeting (‘AGM’) on 4 May
2023. The Remuneration Committee has
carried out a review of our current
Remuneration Policy (‘Policy’) and
consulted with our top shareholders on
proposed changes to the current Policy.
The outcome of the consultation exercise
demonstrated that there is strong support
for the changes. Further information can
be found in the Directors’ Remuneration
report on pages 110 to 146.
The Audit Committee continues to focus
on the controls and systems which ensure
delivery of reliable and consistent financial
information and developments in reporting
with a specific focus on IFRS 17
implementation during the year. In
addition, we continue to monitor the
developing outcomes of the Department
for Business & Trade consultation
on “Restoring trust in audit and
corporate governance”.
The Sustainability Committee has had a
very active year in driving our ambitious
ESG agenda. There has been a strong
focus on education matters relating to
sustainability, people, culture and
climate- related topics during the year and
this Committee plays an important role in
shaping the Group’s sustainability strategy,
targets and initiatives.
Alastair Barbour
Chair
FTSE100 ranking – FTSE Women
Leaders ( February 2023)
12th
13th in 2021
Committee Chairs
1
Phoenix Group Holdings plc Annual Report and Accounts 2022 73
Corporate governance
Board leadership and Company purpose
Our Board of Directors
Leading from the top to drive robust governance and a clear social purpose.
Alastair Barbour
Chair
Appointed 1 October 2013
Appointed as Chair, 1 September 2022
Committee:
Experience and role on the Board
“I have extensive experience in advising
on accounting and financial reporting,
corporate governance and
management in the financial service
sector with a primary focus on
insurance and investment management.
This in depth knowledge and
understanding combined with my prior
board roles having served as Senior
Independent Director and Chair of the
Audit Committee enables me to
effectively lead as Chair of the Board
and to perform the role of the Chair
with clear responsibility for boardroom
culture, leadership and stewardship.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
mergers and acquisitions;
governance; auditing; capital
markets; regulation; finance; asset
management; risk management and
FTSE 100 Board experience.
• Over 30 years of audit experience.
External appointments
Chairman of Liontrust Asset
Management plc; Lead Indepdent
Director of The Bank of N. T. Butterfield
& Son Limited.
Andy Briggs, MBE
Group Chief
Executive Officer
Appointed 10 February 2020
Experience and role on the Board
“As Group Chief Executive Officer
(‘CEO’) of Phoenix, I am passionate
about our core social purpose and
believe that my experience in the
insurance industry will help drive our
achievement thereof. Prior to Phoenix,
I was CEO, UK Insurance at Aviva plc;
and prior to that worked as Group Chief
Executive of Friends Life; Managing
Director of Scottish Widows; Chief
Executive of the Retirement Income
division at Prudential; and Chair of
the ABI.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
mergers and acquisitions; capital
markets; regulation; finance; life
assurance; risk management;
customer service and solutions;
change; IT/digital; sales/distribution;
marketing and operations.
• FTSE 100 Board experience.
• Over 30 years of experience in the
insurance industry.
External appointments
Board member of the Association of
British Insurers.
UK Government’s Business Champion
for Older Workers.
Rakesh Thakrar
Group Chief
Financial Officer
Appointed 15 May 2020
Experience and role on the Board
“With over 25 years of my career at
Phoenix, my experience has spanned a
breadth of finance and strategy-related
roles, as well as numerous acquisitions
and integrations, enabling me to
develop a deep understanding of both
Phoenix and the wider insurance
industry. I see my primary role as being
to ensure Phoenix continues to deliver
the dependable cash generation and
resilient balance sheet that we are
known for, while overseeing the
disciplined capital allocation and
investment into our growing Open
business, the outcome of which will
fund our sustainable shareholder
dividend, which now has the
opportunity for both organic and
inorganic growth over time.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
mergers and acquisitions; capital
markets; regulation; finance; life
assurance; asset management; and
risk management.
• FTSE 100 Board experience.
• Over 20 years’ experience working
in insurance.
External appointments
Non-Executive Director (‘NED’) and
Chair of the Audit Committee of Bupa
Insurance Services Limited and Bupa
Insurance Limited.
Karen Green
Senior Independent
Director
Chair of the Sustainability Committee
Appointed 1 July 2017
Committee:
Experience and role on the Board
“I have a broad experience base in
financial services and insurance,
encompassing M&A, corporate finance
and private equity (Baring Brothers,
Schroders, GE Capital and MMC
Capital) and senior executive roles in
the insurance industry (Aspen
Insurance Holdings) including strategy,
corporate development and as CEO of
Aspen UK. This enables me to
contribute to the development of the
Group’s strategy. In addition, the
experience I have gained from my
various non-executive director, advisory
and senior executive roles enables me
to act as a strong support and sounding
board for the Chair and the Board as
a whole.“
Skills, competencies and contribution
to the Board
• Core skills and expertise in the areas
of mergers and acquisitions; strategy
and corporate development; finance
and risk management and FTSE 100
Board experience.
• Over 30 years of experience in
financial services and insurance.
External appointments
NED at Admiral Group plc; NED of
Miller Insurance Services LLP; NED
of Asta Managing Agency Limited;
Council Member of Lloyd’s of London;
and Adviser at Cytora Limited.
Phoenix Group Holdings plc Annual Report and Accounts 202274
At 10 March 2023, the Board comprises
the Chair, Group Chief Executive Officer,
the Group Chief Financial Officer, one
abrdn-nominated Director, one
MS&AD-nominated Director and seven
independent Non-Executive Directors.
2022 Board changes
• Mike Tumilty retired from the Board on
30 June 2022
• Wendy Mayall retired from the Board
on 31 December 2022
Audit
Nomination
Remuneration
Risk
Sustainability
Chair
Committee membership key
Hiroyuki Iioka
Non-Executive
Director
Shareholder appointee
Appointed 23 July 2020
Experience and role on the Board
“Since becoming a Non-Executive
Director of Phoenix in 2020, the
Group’s purpose and values have
resonated strongly with me and I
believe that my experience in the global
insurance industry supports the
achievement of Phoenix’s expansion
strategy. I have held a series of senior
roles within the MS&AD (a global
insurance group), including executive
and director positions at its UK
insurance subsidiaries.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas
of mergers and acquisitions; capital
markets; finance; asset management;
and risk management.
• Experience in the global insurance
industry.
External appointments
Senior General Manager, Head of
Global Business Development
Department for MS&AD Insurance
Group Holdings, Inc.
Alternate NED of Challenger Limited,
listed on the Australian Stock Exchange.
John Pollock
Independent Non-
Executive Director
Chair of the Risk Committee
Appointed 1 September 2016
Committee:
Experience and role on the Board
“After 35 years in insurance with Legal &
General, ultimately as CEO of LGAS, my
appointment to Phoenix in 2016 was a
very natural next step for me. It has
been extremely rewarding, helping
Phoenix grow from the FTSE250 when
I joined. My position as Chair of the Risk
Committee has allowed me to be
closely involved in helping govern this
growth, ensuring sustainability for
our stakeholders.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
regulation; life assurance; risk
management; customer service and
solutions; operations and FTSE 100
Board experience.
• Over 35 years of experience in
insurance.
External appointments
None.
Belinda Richards
Independent Non-
Executive Director
Appointed 1 October 2017
Committee:
Experience and role on the Board
“My position as a Non-Executive
Director of the Phoenix Board enables
me to use my strategic and operational
experience gained in both an executive
and non-executive capacity. As the
Global Head of Merger Integration
Services at Deloitte, and previously at
EY, I have led over 50 major acquisition
integrations – many of which were in
the insurance and banking sectors.
This experience has helped me to add
value to Phoenix and its stakeholders;
and support the achievement of the
Group’s purpose.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
mergers and acquisitions; regulation;
finance; life assurance; risk
management; customer service and
solutions; change; IT/digital; sales/
distribution; marketing; operations;
and FTSE 100 Board experience.
• Strategic and operational
experience; and previous history
leading over 50 major acquisition
integrations.
External appointments
NED at The Monks Investment Trust plc
and NED at Schroder Japan Growth
Fund plc.
Nicholas Shott
Independent Non-
Executive Director
Appointed 1 September 2016
Committee:
Experience and role on the Board
“My experience includes 31 years as an
investment banker at Lazard.
Specifically, this experience included
running the European Media practice,
and acting as a generalist banker in a
wide range of sectors and countries.
My roles at Lazard included serving
as European Vice Chairman, Head
of UK Investment Banking and until
most recently as Senior Adviser and
the Consultant to the firm. My M&A
experience has been very relevant
to Phoenix since I joined the Board
and has supported the Group’s purpose
and strategy.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas
of mergers and acquisitions; and
capital markets.
• 31 years of experience as an
investment banker.
External appointments
None.
Phoenix Group Holdings plc Annual Report and Accounts 2022 75
Corporate governance
Board leadership and Company purpose continued
Kory Sorenson
Independent Non-
Executive Director
Chair of the Remuneration Committee
Appointed 1 July 2014
Committee:
Experience and role on the Board
“My experience and expertise in
insurance, financial services,
governance, and human capital enable
me to effectively serve Phoenix and its
stakeholders as a Non-Executive
Director and Chair of the Remuneration
Committee. My executive career in
investment banking was focused on
financial services, the optimisation of
capital resources via equity, hybrid and
debt capital management as well as
M&A, risk management, and life
insurance securitisation. My non-
executive portfolio provides me with a
wide perspective on the insurance
market as well as best practice
governance in several jurisdictions and
key issues in audit, risk, investment,
remuneration and sustainability.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of
mergers and acquisitions; capital
markets; regulation; finance; life
assurance; risk management; and
FTSE 100 Board experience.
• Close to 30 years of experience
in finance.
External appointments
NED and Chair of the Remuneration
Committee of Pernod Ricard SA; NED
and Chair of the Audit and
Sustainability Committees of SGS SA;
member of the supervisory board of the
privately-owned bank Gutmann AG;
member of the Board of Partners of
privately-owned COMGEST; NED and
Chair of the Audit and Risk Committees
of Premium Credit Ltd; NED and Chair
of the Audit and Risk Committees of
the AA.
Katie Murray
Non-Executive
Director
Chair of the Audit Committee
Appointed 1 April 2022
Committee:
Experience and role on the Board
“I am a Chartered Accountant with
nearly 30 years’ experience in finance
and accounting gained through several
roles across the financial services
industry. I have extensive knowledge
and experience in specialist areas
including capital management, investor
relations and financial planning which
enable me to provide valuable input
and expertise during Board discussions.
I joined NatWest Group as Director of
Finance in 2015 and was appointed as
Deputy Chief Financial Officer in
March 2017 and Chief Financial Officer
in January 2019. I was previously the
Group Finance Director for Old Mutual
Emerging Markets, based in
Johannesburg (2011 to 2015), having
held various roles across Old Mutual
from 2002. Prior to this I worked at
KPMG for 13 years. I am also a member
of the Institute of Chartered
Accountants in Scotland.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas
of capital management, investor
relations, regulation; finance;
risk management; and FTSE 100
Board experience.
• Close to 30 years of experience in
finance and accounting.
External appointments
Group Chief Financial Officer of
NatWest Group plc.
Maggie Semple, OBE
Non-Executive
Director
Designated Non-Executive Director for
Workforce Engagement
Appointed 1 June 2022
Committee:
Experience and role on the Board
“I have a breadth of experience in
executive and non-executive roles and
have enjoyed a varied career to date
across education, government,
non-profit and commercial roles. I am
the co-founder of I-Cubed Group,
which offers one to one coaching to
enhance and release potential of
individuals; I am also the owner of
Maggie Semple Limited, a luxury
bespoke womenswear business; and I
am Chief Executive of The Experience
Corps Limited, a global niche
consultancy firm which provides
strategic advice on leadership learning
products. As a result of my career-long
passion for sustainability, ethics and
inclusivity, I aim to bring a breadth of
experience to support the Group’s ESG
agenda whilst a member of the Board
and also add value on customer, people
and culture related matters.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in public
and private sector organisations as
executive and non-executive roles
with strengths in leadership
development, cultural change,
diversity & inclusion and
organisational development.
External appointments
NED of Jamaica National Bank UK
Limited; HR Committee Member,
University of Cambridge; and
Ambassador, Black British Voices Project.
Stephanie Bruce
Non-Executive
Director
Shareholder appointee
Appointed 1 July 2022
Experience and role on the Board
“I have gained significant experience of
the financial services industry at a
senior management level and bring
experience of working with boards and
managements teams in respect of
financial and commercial management,
reporting, risk and control frameworks,
assurance and regulatory requirements.
During my career, I have specialised
in the financial services sector
working with organisations across
asset management, insurance and
banking, with national and
international operations.”
Skills, competencies and contribution
to the Board
• Core skills and expertise in areas of;
capital markets; finance; treasury;
reporting; asset management; and
risk management.
• Experience in the global insurance
industry and financial services
sector.
External appointments
Chief Financial Officer of abrdn plc.
Our business, led by
the Executive Committee (‘ExCo’)
The Executive Management of the
Group is led by the CEO, who is
supported by the ExCo.
During 2022, ExCo played a key
role in driving Phoenix’s year of
significant progress, striving to help
people secure a life of possibilities.
Roles and responsibilities of each
member of ExCo can be found on
the Company’s website.
Andy Briggs
CEO
Rakesh Thakrar
CFO
Andy Curran
Chief Executive, Savings and
Retirement, UK and Europe
Brid Meaney
Chief Executive, Heritage Division
Jackie Noakes
Chief Operating Officer
Mike Eakins
Group Chief Investment Officer
Anna Franekova
Corporate Development Director
Claire Hawkins
Corporate Affairs and Investor
Relations Director
Jonathan Pears
Group Chief Risk Officer
Sara Thompson
Group HR Director
Quentin Zentner
General Counsel
Kulbinder Dosanjh
Group Company Secretary
(Secretary to ExCo)
Phoenix Group Holdings plc Annual Report and Accounts 202276
Corporate governance
Compliance with the UK corporate
governance code in 2022
During 2022 the Company has been fully compliant with the
principles and provisions set out in the Code. The tables below
summarise how the Company has complied with the principles
and provisions of the FRC’s 2018 UK Corporate Governance
Code (the ‘Code’) for the year ended 31 December 2022.
The five core elements of the Code are detailed below along
with a high level overview of the Company’s compliance with
the Code
Our Board of Directors pages 74 to 76
Principle A
Our governance framework and the Board’s role page 78
Principle C
Provision 1
(see also: ‘Purpose led and integrated governance’ on page 80, Audit Committee
report on pages 96 to 101 and Risk Committee report on pages 102 to 104;
Conflicts of interest page 79
Provision 7
Purpose-led and integrated governance page 80
Principle B
Provision 2
(see also: ‘Matters Reserved’ on page 78)
Stakeholder engagement pages 84 to 87
Principle D
Provision 3 (see also: ‘Purpose-led and integrated governance’ on page 80.
Provision 5
(see also Section 172 Statement on page 43 of the Strategic Report)
Engagement in action pages 108 to 109
Principle E
Provision 5
(see also ‘Stakeholder Engagement From The Top’ on page 84, and ‘Audit
Committee report on pages 96 to 101
Whistleblowing arrangements page 100
Provision 6
(see also: ‘Purpose-led and integrated governance’ on page 80 and Audit
Committee report on pages 96 to 101
Board leadership
and company purpose
Nomination Committee report pages 88 to 91
Principless J, K and L
Provisions 17, 18, 19, 20 to 23
(see also: ‘Non-financial information statement’ page 44 of the Strategic Report
for information on gender balance of those in senior management and their
direct reports)
Composition, succession
and evaluation
Audit Committee report pages 96 to 101
Principles M and N
Provisions 24, 25, 26 and 29
Provisions 27 and 30
(see also Directors’ Report on pages 147 to 152 and Statement of Directors’
Responsibilities on page 153)
Provision 31
(see also Directors’ Report on pages 147 to 152 and the Group’s Viability Statement
on pages 68 to 69 of the Strategic Report)
Risk Committee report pages 102 to 104
Principle O
Provision 28 and 29
(see also Principal risks and uncertainties faced the Group on pages 56 to 67 of
the Strategic Report)
Audit, risk and internal control
Directors’ remuneration report pages 110 to 146
Principles P, Q and R
(see also Directors’ Remuneration Report on pages 110 to 146)
Provisions 32, 33, 40 and 41
(see also Remuneration Committee Chair’s letter on pages 110to 112 and
Remuneration Committee governance and activities on pages 145 to 146)
Provisions 34 to 39
(see Directors’ Remuneration Report on pages 110 to 146)
Remuneration
Division of responsibilities on the Board page 82
Principles F and G and Provisions 9, 10, 12 and 14
(see also: ‘Our Board of Directors on pages 74 to 76’)
Provision 11
(see also: ‘Board Composition and Diversity, on page 92)
2022 Board and committee meeting attendance page 83
Principle H
Provision 13
Board support page 83
Principle I; and Provisions 8 and 16
Board member appointment terms pages 78 to 79
Provision 15
Division of responsibilities
Phoenix Group Holdings plc Annual Report and Accounts 2022 77
Corporate governance
Board leadership and Company purpose continued
Robust governance
The Board provides strong leadership underpinned by a robust governance
framework enabling cohesion of our purpose, strategy, values and culture.
Our Governance framework
The Phoenix Group Holdings plc
(‘Phoenix’, ‘Group’ or ‘Company’)
governance framework is the foundation
upon which the Group is directed and
controlled. Our framework provides
adaptability and agility to enable Phoenix
to operate as a successful and sustainable
business, responding to the needs of
stakeholders (including future generations
of stakeholders) and evolving market
conditions in which we operate.
To ensure the adaptability, agility and
accountability required to achieve our
purpose, the Board drives a culture of
empowerment through delegation to its
Board Committees and other individuals
within Management. Empowerment fosters
diversity of thought and innovation
to ensure we achieve our strategy
and purpose, under the stewardship
of our Board.
The Group’s high standards of corporate
governance and our governance
framework are anchored to compliance
with the Code which sets standards of
good governance for UK listed companies.
Phoenix’s governance framework is
structured in three layers. The Board
oversees the Group – setting the purpose
and strategy; ensuring appropriate
resources are in place to achieve that
strategy; establishing a framework of
effective controls aligned with suitable risk
appetites; holding Management to
account (including through monitoring of
behaviours and culture); and, ultimately,
promote the long-term sustainable success
of the Group.
The Board delegates certain matters to
its five Board Committees. The Board
Committees support the Board in line with
the Code and have established roles and
responsibilities prescribed in terms of
reference, approved by the Board. High
level roles and responsibilities of Board
Committees can be found within the
governance framework diagram on
page 79.
Terms of reference for each of the
Board Committees are available on
the Company’s website.
Matters which are not reserved for the
Board, delegated to its Board Committees
or for shareholders in general meetings,
are delegated to the executive
Management team under a schedule
of delegated authorities approved by
the Board.
More detailed operational and
policyholder matters are addressed at the
subsidiary board and committee level,
including the Phoenix Life Companies
Board and Board Committees.
Role of the Board
The Board is responsible to the
shareholders and wider stakeholders for
the overall performance of the Group. The
Board’s role is to provide leadership,
promoting the long-term sustainable
success of the Company, generating value
for shareholders and positively
contributing to wider society, within a
framework of prudent and effective
controls, which enables risk to be assessed
and managed.
Matters reserved for the Board
The Board has a schedule of matters
reserved for its consideration and approval
supported by a set of operating principles.
These matters include:
• Group strategy and business plan;
• oversight of the Group’s culture;
• major acquisitions, investments and
capital expenditure;
• financial reporting and controls;
• dividend policy;
• capital structure;
• the constitution of Board committees;
• appointments to the Board and Board
committees;
• senior executive appointments; and
• key Group policies.
Throughout 2022, the Board has acted in
accordance with its matters reserved. The
full schedule of matters reserved for the
Board is available on the Company’s website.
Time Commitment
In order to ensure that the Board and
each of its Committees is able to function
effectively, each Non-Executive Director
(‘NED’) must commit sufficient time to their
respective roles in order to discharge their
responsibilities. Time commitment is
considered on an ongoing basis, for
example, where a new Director is being
considered for appointment to the Board,
any additional external appointments or
an increase in Board responsibilities.
Following an assessment by the
Nomination Committee during the year, it
is expected that on average, each of the
eight scheduled Board meetings is likely to
require two days of participation (including
Committee meetings, education sessions,
travel and Board dinners) and at least a
further day of preparation time. It is further
estimated that each Director is required to
spend at least an additional day each
month reviewing information supplied by
the Company. In addition, a two day
strategy session is held and there are also
regular briefing sessions for the Board
Committees. On this basis, the basic time
commitment required of each Board
member is estimated to be at least 40 days
each year (unless agreed as 24 days for a
full-time executive undertaking a NED role
and chairing one Committee). The basic
time commitment can be significantly
increased on account of transactional or
other activity. The Nomination Committee
confirms that all NEDs have demonstrated
they have sufficient time to devote to their
present roles.
Independence
During the year the Nomination
Committee assessed the independence of
the NEDs to ensure that they are able to
properly fulfil their roles on the Board and
provide constructive challenge to the
Executive Directors.
Phoenix Group Holdings plc Annual Report and Accounts 202278
The independence criteria set out in the
Code were taken into account as part of
the selection process for Katie Murray and
Maggie Semple who joined Phoenix during
2022, both of whom were considered to
be independent.
During 2022, the Committee determined
that all NEDs were free from any
relationship or circumstances that could
affect, or appear to affect, their
independent judgement. In line with the
Code, over half of our Board members,
excluding the Chair, are independent
NEDs. The shareholder nominated
Directors, Hiroyuki Iioka and Stephanie
Bruce do not meet the independence
criteria under the Code. The Chair, Alastair
Barbour was independent on appointment.
However, as a consequence of becoming
Chair whilst Nicholas Lyons is on
sabbatical, Alastair will have served
on the Board for more than nine years
from the date of his first appointment
(1 October 2013). Alastair Barbour will
retire when Nicholas Lyons returns from
his sabbatical which is expected in early
November 2023.
Conflicts of interest
A register of conflicts of interest is
maintained by the Group Company
Secretary. The Directors each understand
their responsibility to identify and manage
conflicts of interest, bringing conflicts to
the attention of the Board and the Group
Company Secretary as required under the
Companies Act 2006. Conflicts of interest
are managed through individual director
declarations, through discussion whereby
the conflicted Director does not
participate in discussions relating to the
conflict and, where the conflicted Director
does not participate in any decision
making relating to the conflict.
The Board continues to monitor and note
any potential conflicts of interest that each
Director may have and recommends to the
Board whether these should be authorised
and whether conditions should be attached
to any such authorisation. Due care and
process is, of course, applied in respect of
shareholder nominated Board Directors.
Additional appointments
If any Director wishes to take on an
additional external appointment, they
are required to seek permission from
the Board. The Board will take into
consideration the additional time
commitments, independence and any
potential conflicts of interest in relation
to the Directors’ current roles and
responsibilities before any permission
is given.
Independent advice
All directors have access to the advice and
services of the Group Company Secretary
in relation to the discharge of their duties
on the Board and any committees they
serve on. Furthermore, any directors may
take independent professional advice at
the Company’s expense. During the year,
no directors sought to do so.
The Company arranges appropriate
insurance cover in respect of legal actions
against its directors and has also entered
into indemnities with its directors as described
in the Directors’ report on page 149.
Board oversight and delegation to committees and management
Committee and management accountability and performance measuring
Phoenix Group Holdings plc ExCo
Chair, Andy Briggs
• Formulation of objectives and strategy
• Embedding of culture
• Management development
and succession
• Business division objectives and budgets
• Business performance
• Recommendation of major capital
expenditure proposals
• Operational capacity, resourcing
and priorities monitoring
Phoenix Group Holdings plc Board
Chair, Alastair Barbour
• Group Strategy
• Group Risk Appetite
• Performance Monitoring
• Major Transactions
• External Debt
• Group Budget
• External/Shareholder Reporting
Risk
Committee
Chair,
John Pollock
• Risk Appetite and
high-level risk
matters
• The Group’s Risk
Management
Framework
Remuneration
Committee
Chair,
Kory Sorenson
• Group remuneration
framework
• Executive director
remuneration
• Employee share
schemes
Sustainability
Committee
Chair,
Karen Green
• Sustainability
strategy
• ESG reporting
• Culture monitoring
Audit
Committee
Chair,
Katie Murray
• Financial Reporting
• Internal Controls
• External Audit
• Internal Audit
• Whistleblowing
Nomination
Committee
Chair,
Alastair Barbour
• Board and
senior executive
appointments
• Diversity and
inclusion
• Board and senior
executive succession
planning
See pages 96 to 101 See pages 88 to 91 See pages 102 to 104 See pages 110 to 146 See pages 105 to 107
Our governance framework
Phoenix Group Holdings plc Annual Report and Accounts 2022 79
Corporate governanceCorporate governance
Governance
Governance
Board leadership and Company purpose continued
Purpose-led and
integrated governance
Governance unites our purpose, strategy, values and culture.
The Board has continued to oversee the Group’s high standards
of corporate governance and business performance throughout 2022.
The Group’s purpose is to help people
secure a life of possibilities which is at the
centre of decision-making processes.
The Board considers relevant stakeholder
groups in the decision-making process
whilst remaining focused on ensuring that
outcomes are aligned with the Group’s
purpose, strategy, culture and values.
Purpose
Helping people secure a life of possibilities
As the pensions landscape and societal needs evolve,
Phoenix has an important role in society through its
long-term savings and retirement business. Robust and
purpose-led decision-making from the Board and
throughout the Group drives responsible and sustainable
investment, a strong sustainability strategy and enables
long-lasting impact for our customers.
Strategy
Our strategy is set to ensure we continually progress
towards the achievement of our purpose and our aim
to provide customers with the best possible outcomes.
The Board is responsible for establishing the strategy
for the Group, ensuring that this is aligned with not
only our purpose but also with the values and culture
of the business.
Values
Our values articulate the behaviours and qualities Phoenix
colleagues are expected to demonstrate throughout
the Group. Our values are embedded within our
policies (approved by the Board), operational practices
(overseen by the Board) and our culture (role modelled
by the Board).
Culture
Our culture defines us and has, and continues to be,
developed through our values being lived by colleagues
each day. The Board sets the cultural tone from the top
and acts as the guardian of our values and culture which,
together, support the achievement of our strategy, driving
our purpose to help people secure a life of possibilities.
Board Directors reinforce our culture and values through
their conduct (individually and collectively), decisions
and strategic oversight.
Phoenix Group Holdings plc Annual Report and Accounts 202280
Corporate governance
Purpose, values and strategy
• Approval of Annual Operating Plan.
• Oversight of the launch of the Phoenix Master Brand Visual Identity.
• Approval of the acquisition of Sun Life of Canada UK.
• Two day strategy meeting.
• Monitoring of internal perception of culture and alignment with the
Phoenix purpose and values.
Sustainability
• Approval of the Group’s 2022 sustainability strategy.
• Monitoring progress against the Group’s sustainability agenda
and strategy.
• Approval of the Group’s 2022 Modern Slavery Statement.
• Approval of Phoenix’s Climate Biennial Exploratory Scenario
round 2 submission.
• Approval of Phoenix’s SBTi targets for submission and
subsequent validation.
• Participation in a significant programme of education on climate
change, decarbonisation, and sustainability. See pages 94 and 95
for further information on Board education activities.
Financial management and performance
• Monitoring of the Group’s solvency and liquidity positions.
• Monitoring of capital resilience, financial performance and
growth in Heritage and Open divisions.
• Approval of the Group’s dividend policy.
• Recommendation of the 2021 Final Dividend and 2022
Interim Dividend.
• Approval of the Group’s funding and capital strategy.
• Approval of the Group’s tax strategy.
Workforce policies and culture oversight
• Approval of Group risk policies.
• Whistleblowing oversight.
• Oversight of insights from colleague engagement surveys and
culture dashboards.
• Monitoring of colleague engagement initiatives.
• Regular updates from the Designated Non-Executive Director
for Workforce Engagement.
Stakeholder engagement
• Monitoring of customer service, operational resilience and
colleague well-being.
• Monitoring of investor engagement activities, oversight of the
year-end investor presentation and Capital Markets Event
presentation materials.
• Consideration of investor and media reaction to YE21 and
HY22 results.
• Consideration of investor feedback and analyst reports, including
investor sentiment and deep dive session with the corporate brokers.
• Participating in open and honest dialogue with all
applicable regulators.
• Interaction with colleagues, through the PCRF and Designated
Non-Executive Director for Workforce Engagement (see pages 108 to
109 for more detail) and the Colleague Interaction Session between
the Board and colleagues at various stages of their career.
• Annual General Meeting.
• Consultation with major shareholders on executive
remuneration policy.
• Monitoring of data collation through the ‘Who We Are’ application
(including data on social mobility, ethnicity, gender and sexual
orientation within Phoenix).
• Oversight of people capability requirements and management
actions to enhance capabilities.
• Monitoring of diversity in ExCo +1 (Business Leadership) and ExCo +2
(Senior Leadership) role hires and challenge to the hiring process.
• Approval of Board and Executive Succession Plans.
• Approval of appointment of Group and material subsidiary
Board changes.
• Reviewing changes to the Executive Management Team and
succession planning.
Risk management and assurance
• Climate change Stress and Scenario Testing.
• Monitoring of the Group’s risk culture.
• Approval of the Group’s Risk Appetite and assessment of the
approach to identifying and managing emerging risks.
• Approval of Principal Risk and Uncertainties disclosures.
• Monitoring performance against the Group’s operational risk
management framework.
• Receiving and considering regular updates from the Board Audit
and Risk Committees.
Corporate governance and reporting
• Simplification of governance continued.
• Monitoring compliance with the Code.
• Internal Board effectiveness review.
• Subsidiary governance oversight.
• External reporting including Annual Report & Accounts,
Sustainability and Climate reports.
• 2022 Annual General Meeting.
People strategy, diversity & inclusion
and succession planning
Phoenix Group Holdings plc Annual Report and Accounts 2022 81
Corporate governance
Valuing diversity of thought and
independence on the Board
Clear roles and responsibilities to drive forward our purpose and strategy
The Directors of Phoenix Group Holdings
plc (‘Phoenix ’ or the ‘Company’)
understand their role as individuals, and as
a collective, to ensure the long-term
success of the Company and achievement
of the Group’s purpose. The Board ensures
the appropriate division of responsibilities
on the Board, ensuring no existence of
unfettered power nor over-reliance on any
one person.
The independence of Directors not
only supports good governance, but
also facilitates diversity of thought and
inclusion on the Board.
Division of responsibilities on the Board
Alastair Barbour is Chair of the Board
of Phoenix.
The Chair is responsible for:
• the leadership and effective operation
of the Board;
• chairing, and overseeing the
performance of the role of the
governing body of the firm;
• leading the development of and
monitoring the effective
implementation of policies and
procedures for the induction, training
and professional development of all
members of the firm’s governing body;
• leading the development of the firm’s
culture by the governing body as a
whole; and
• ensuring an orderly succession process
for the Group Chief Executive Officer
and the Board as a whole.
The Chair’s external commitments are set
out on page 74 within this report.
Chair
Karen Green is the Senior Independent Director (‘SID’)
of the Board.
The SID is responsible for:
• being available to shareholders whose concerns
are not resolved through the normal channels or
when such channels are inappropriate;
• leading the annual appraisal of the Chair’s
performance by the Non-Executive Directors ;
• acting as the sounding board for the Chair;
• serving as an intermediary between the Chair
and the other Directors as necessary; and
• ensuring an orderly succession process for
the Chair.
The SID’s external commitments are set out on page 74
within this report.
Senior Independent Director
Andy Briggs is Group Chief Executive Officer
(‘CEO’) of Phoenix.
The Chief Executive Officer is responsible for:
• overall management and operation of the
Group within the limits delegated by the
Board; and
• operational matters relating to:
- Business Strategy and Management
- Investment and Financing
- Risk Management and Controls
- Regulation
- Communication
- HR Policies.
The CEO’s external commitments are set out
on page 74 within this report.
Chief Executive Officer
Hiroyuki Iioka and Stephanie Bruce are shareholder
nominated NEDs. Hiroyuki Iioka is appointed to the
Board on behalf of MS&AD Insurance Group Holdings
Inc. and Stephanie Bruce is appointed to the Board on
behalf of abrdn plc.
In accordance with the Phoenix acquisition of
ReAssure from Swiss Re in July 2020, MS&AD were
entitled to appoint a representative Non-Executive
Director to the Phoenix Board. A relationship
agreement between Phoenix and abrdn plc (‘abrdn’)
includes the right for abrdn to appoint a
representative Non-Executive Director, provided they
continue to hold 10% or more of Phoenix’s shares.
Full descriptions of the roles and responsibilities of
the Chair, CEO, SID and DNED are available on the
Company’s website.
Shareholder nominated
Non-Executive Directors
The Board considers the following
Non-Executive Directors (‘NEDs’) to
be independent:
• Karen Green
• Katie Murray
• John Pollock
• Belinda Richards
• Maggie Semple
• Nicholas Shott
• Kory Sorenson
As at 10 March 2023, 58% of the Board
are considered to be independent.
The Board uses the independence criteria
as set out in the Code to assess and
confirm independence.
Independent Non-Executive
Directors
Maggie Semple is the Designated Non-
Executive Director for Workforce Engagement
(‘DNED’).
The DNED is responsible for:
• acting as the primary Board contact in
facilitating and developing communication
between colleagues across the Group and
the Board;
• providing the Employee Voice to the Board
by raising relevant matters, or issues of
concern, highlighted by engagement with
the workforce; and
• challenging the Executive Directors, as
needed, as to the way in which workforce
engagement is undertaken and steps taken
to address workforce concerns.
Designated Non-Executive Director
for Workforce Engagement
Division of responsibilities
Phoenix Group Holdings plc Annual Report and Accounts 202282
Corporate governance
Board
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination
Committee
Sustainability
Committee
Actual/Max Actual/Max Actual/Max Actual/Max Actual/Max Actual/Max
Chair
Nicholas Lyons
1
6/6 4/4
Alastair Barbour
2
8/8 7/7 7/7 5/6
Executive Directors
Andy Briggs (CEO) 8/8
Rakesh Thakrar (Group CFO) 8/8
Non-Executive Directors
Karen Green
3
8/8 8/9 7/8 2/3 5/6
Hiroyuki Iioka 8/8
Wendy Mayall 8/8 9/9 6/6
Maggie Semple
4
4/4 2/2 2/2
John Pollock
5
8/8 9/9 9/9 1/1
Katie Murray
6
4/5 3/4
Belinda Richards
7
8/8 7/9 8/8
Nicholas Shott 8/8 9/9 8/8 6/6 6/6
Kory Sorenson
8
8/8 8/9 8/8 6/6 6/6
Mike Tumilty
9
5/5 3/3
Stephanie Bruce
10
3/3
1 Nicholas Lyons commenced his sabbatical on 1 September 2022.
2 Alastair Barbour commenced his position as Chair on 1 September 2022. Alastair was unable to attend a Nomination Committee meeting due to a
scheduling conflict.
3 Karen Green was appointed as SID following the conclusion of the Annual General Meeting in May 2022. Karen was unable to attend Committee meetings in
October 2022 due to illness.
4 Maggie Semple was appointed as a director on 1 June 2022 and became DNED on 1 July 2022 and a member of the Risk and Sustainability Committees on
1 September 2022.
5 John Pollock joined the Nomination Committee on 1 November 2022 and was unable to attend one Nomination Committee meeting due a pre-existing commitment.
6 Katie Murray was appointed as a director on 1 April 2022 and became Chair of the Audit Committee on 1 September 2022 . Katie was unable to attend a Board
and Committee meeting due to pre-existing commitments arranged prior to joining the Phoenix Board.
7 Belinda Richards was unable to attend two meetings of the Risk Committee due to a scheduling conflict and delayed travel.
8 Kory Sorenson was unable to attend a Risk Committee meeting due to the meeting being held at short notice and conflict with a previously scheduled engagement.
9 Mike Tumilty retired from the Board on 30 June 2022.
10 Stephanie Bruce was appointed as a director on 1 July 2022.
The above table excludes ad-hoc or additional meetings. In addition to the above, the Board’s ad-hoc M&A Advisory Committee, comprised
of Nicholas Shott (Chair), Alastair Barbour, Karen Green and Belinda Richards, met three times during 2022. The Board’s ad-hoc Advisory
Committee comprised of Alastair Barbour, Karen Green and Rakesh Thakrar met twice during 2022.
The Board met formally eight times
during 2022, including a two-day
strategy setting meeting. During the
pandemic, the Board met additionally
for regular briefing meetings to
continue to monitor the volatile
macro-economic environment
and oversight of the Group’s
strategic objectives.
The Board have continued with these
briefing calls which serve as a valuable
bridge outside of formal Board meetings.
Additional meetings have also been held
in respect of M&A activity.
The NEDs met with the Chair on
seven occasions without Executive
Directors present.
The following Board and Board
Committee attendance table below
details all formal Board and Board
Committee meetings held during 2022.
The Nomination Committee has
confirmed its absolute satisfaction
with the time and commitment given
to the Phoenix Board and its
Committees by all Directors.
2022 Board and Committee meeting attendance
Board support
All Board Directors have access to the
advice and services of the Group
Company Secretary to support the
discharge of their duties and on matters
of governance.
The Group Company Secretary supports
the Chair, ensuring that directors receive
accurate, timely and clear information.
Appropriate policies, processes, time and
resources are available to the Board to
ensure its effective and efficient operation.
The Group Company Secretary ensures
that accurate records of Board and
Committee meetings are prepared on a
timely basis enabling unresolved concerns
of Directors to be duly recorded. No
concerns were recorded during 2022.
Phoenix Group Holdings plc Annual Report and Accounts 2022 83
Corporate governance
Stakeholder engagement
Stakeholder engagement from the top
Key stakeholder groups
Customers Suppliers Colleagues Community Investors Government, trade
bodies and regulators
Our customers are core to our purpose and
strategic priorities. By listening to their needs and
what matters most, the Group is able to truly
progress towards helping people to secure a
life of possibilities.
The Board recognises its responsibility and
duty to oversee the success of the business for
all customers.
We depend on our suppliers in order to deliver services
to our customers and provide the Group with operational
support, working in partnership with Phoenix to achieve
our strategic priorities.
The Board understands that the quality of relationships we
maintain and develop with our suppliers, strategic or otherwise
is a core objective as we seek to fulfil our ultimate purpose of
helping people secure a life of possibilities.
Our colleagues are a key asset to the Group and to
the achievement of our strategic priorities and
long-term success. Their dedication, commitment
and capabilities are integral to the Group’s success.
Our values unite our colleagues enabling a
champion led culture to reach our purpose and
achieve our strategy. Oversight of our culture,
purpose, values and colleague initiatives and is a
core focus for the Board. The Board considers
colleagues in the widest sense, including the
Group’s relationships with its pension schemes and
members who are former colleagues as well as
members of the Group’s workforce who are not
employed directly by the Group.
Our purpose to help people secure a life of
possibilities extends to our communities. These
communities comprise our colleagues (including
future colleagues), customers (including future
generations of customers), suppliers and many
other stakeholders.
The Board understands the importance of
building trust and inspiring confidence through
community engagement and partnerships.
Our investors continue to be crucial to the growth and
achievements of the Group. Phoenix is dedicated to
delivering long-term value to our shareholders and intends to
provide a dividend that is sustainable and grows over time.
The Board understands the value our investors add to
safeguarding the Group’s governance through monitoring
of performance and engagement with the Board
throughout the year.
As the UK’s largest long-term savings and retirement
business, our business is subject to financial services
regulation. Phoenix Group Holdings plc is also subject
to listed entity regulation. The way we operate and
interact with our regulators provides the trust and
reassurance needed by stakeholders to enable
Phoenix to deliver its purpose.
The Board acknowledges the importance of
maintaining positive relationships with the Government,
trade bodies and regulators to enable the Group to act
as a thought leader and to communicate the views and
concerns of our customers and society generally.
Link to strategic priorities
How the Board has engaged with and had oversight of stakeholder views during the year?
• The Board received regular updates from
management on the potential impact on
customer service as a result of projects
undertaken, with detailed oversight of
customer service being undertaken by
the subsidiary Board for the Phoenix Life
Companies and its committees.
• The Board monitored the impact of the
Group’s change agenda, including sufficient
resource to maintain focus on customer
outcomes and conduct risk management.
• The Board approved the Customer
Acceptance Criteria as a part of Phoenix’s
toolkit for future acquisition which provide
details of Group’s plans for inclusion of
an assessment of customer impact and
customer fair treatment benefits in its
acquisition strategy
• The Board Remuneration Committee (which
reported to the Board on a regular basis)
focused on customer outcomes during the
year, allocating 25% of the 2022 Annual
Incentive Plan to be aligned with customer
satisfaction metrics (see the Directors’
Remuneration Report on pages 110 to 146 for
more detail).
• The Board received regular updates from the CEO on
customer service performance and outsourced services
(including any ongoing impact of COVID-19), with
additional detailed oversight being undertaken by the
subsidiary Board for the Phoenix Life Companies and
its committees.
• The Board and its Risk Committee monitored risks related
to suppliers, including the potential for poor customer
service and risks connected with the migration of acquired
books of business. Such monitoring included discussions
with regulators to ensure clarity of Phoenix’s focus on
positive customer outcomes.
• The Board Risk Committee received updates from the
Group Chief Risk Officer on service levels provided by
suppliers and considered fulfilment of Service Level
Agreement terms in the year, with detailed oversight of
customer service being undertaken by the subsidiary
Board for the Phoenix Life Companies and its committees.
• The Board approved the Group’s Modern Slavery and
Human Rights Statement (‘Modern Slavery statement’)
which outlines steps that Phoenix took, in the financial year
ended 31 December 2021, to ensure slavery and human
trafficking has not taken place in our supply chain; and sets
out an expectation for suppliers to meet the Group’s
Supplier Code of Conduct. The Modern Slavery
statement is available on the Company’s website.
• The Board received updates on colleague
well-being and engagement levels.
• The Board monitored the impact of projects
and the Group’s change agenda on
colleagues, including potential areas of
stretch on resource.
• Members of management, beyond the ExCo,
were invited to join the Board to present and
take part in discussions at meetings
throughout the year.
• The Board and Board Sustainability
Committee received updates from the DNED
following engagement sessions with
colleagues, including meetings with the PCRF.
The Board members met a range of colleagues
and listened to their views, ideas and
experiences which will inform Board agenda
and decision-making as a part of the
Colleague Interaction Session.
• Received updates on the cost of living crisis
and the impact on colleagues, including
establishment of cost of living working group
and implementation of a number of incentives
such as free lunches and bonuses.
• The Board Sustainability Committee
received updates on progress against KPIs
and targets aligned with the Group’s
community engagement strategy, with
relevant highlights reported to the Board.
• Through educational deep dives and
external perspectives, the Board
Sustainability Committee has continued to
broaden and develop Committee members’
understanding of specific community-
related themes such as financial inclusion,
stewardship and public awareness building
activities in sustainability-related areas.
• The Group HR Director provides regular
updates on colleague engagement
activities, initiatives and progress on
community related KPIs which can be found
in the Sustainability Report.
• The Board received regular updates from the CEO on
investor relations activities and feedback/questions
received from investors.
• Investor feedback from the Group’s results
announcements and investor roadshows was
reported to the Board during the year.
• The Board considered key considerations relating
to investor messaging and various investor
communication approaches.
• The Board considered and provided feedback on
the contents of the year-end investor presentation.
• Board members, including the Board Chair and
Non-Executive Directors acting in the capacity of
Committee Chairs, were available to investors for
engagement, including to answer questions on
significant matters related to their areas of
responsibility. Prior to, and at, the Company’s AGM,
investors were able to submit questions to be answered
by each of the above.
• The Capital Markets Event held in December 2022
enabled the Board and Executive management team
to interact with potential and existing investors.
• The Chair has, since the end of 2022 (January 2023),
undertaken a schedule of meetings with major investors
to discuss topical matters of importance to them.
• Major shareholders were consulted as part of the
process in developing Directors’ remuneration policy
• During the year, the Board as a whole met with the
FCA and PRA during the year on a range of issues
relating to the impact of each regulators’ strategic
objectives and routine regulatory matters.
• At the request of the PRA and FCA, certain
Board directors may be required to meet on a
formal basis.
• The Board received updates on management’s
interactions with regulators and any feedback
received from those bodies.
• The Board challenges Management on ensuring
that Phoenix maintains open and honest dialogue
with the FCA, PRA, Central Bank of Ireland, TPR
and other jurisdictional regulators.
The Board’s role in promoting positive stakeholder relationships
The Board held management to account
throughout the year, ensuring due care and
attention was given to customer outcomes and
needs, especially in the context of data and
platform migration work and projects to grow
and develop the Group.
The Board monitors the performance of suppliers to ensure
Phoenix is able to provide the best customer outcomes to
deliver its operational and financial targets. Positive
relationships with suppliers are vital to the success of both
Phoenix and our suppliers.
The Board sets the cultural tone from the top and
engages with colleagues (both directly and
indirectly) which is key to ensuring positive
relationships. Two-way engagement enables
colleagues to be kept informed of how the Board
is driving the Group in the right direction and
enables the Board to stay connected to what’s
important to colleagues and how the decisions it
makes impacts their working lives.
The Board, through the Board Sustainability
Committee, has monitored management’s
engagement activities with our communities,
ensuring that Phoenix is able to fulfil its
purpose and colleagues have the opportunity
to participate in charitable giving and
volunteering within the community. It is the
Board’s role to hold management to account
in maintaining sufficient resources needed
to support our communities.
The Board monitors investor sentiment and feedback
throughout the year to ensure Phoenix is able to respond to
investor concerns, which is key to the success of the Group.
The Board also ensures that the Group’s strategy and
purpose are set to ensure the long-term success of the
business and generation of value for shareholders.
As the guardian of the Group, (ensuring robust
governance, controls and risk management) the
Board is responsible for holding management to
account for day to day compliance with regulation
and legislation; ensuring transparent communication
of such compliance to maintain trust in Phoenix.
Strategic priorities key
Grow our business to support
both new and existing customers
Enhance our operating
model and culture
Optimise our
in-force business
Phoenix Group Holdings plc Annual Report and Accounts 202284
Details of the Group’s broader stakeholder engagement and related
outcomes can be found in the Strategic Report on pages 42 to 43.
Section 172 of the Companies Act 2006 (the ‘Act’) requires each director of a
company to act in the way they consider, in good faith, would most likely promote
the success of the company for the benefit of its members as a whole. In doing so,
each director must have regard, amongst other matters, to the:
• likely consequences of any decisions in the long term;
• interests of the company’s employees;
• need to foster the company’s business relationships with suppliers,
customers and others;
• impact of the company’s operations on the community and the environment;
• desirability of the company maintaining a reputation for high standards of
business conduct; and
• need to act fairly as between members of the company.
The Directors have applied Section 172 of the Act in a manner consistent with
the Group’s purpose, values and strategic priorities, having due regard to the
Group’s ongoing regulatory responsibilities as a financial services operation.
To support the fulfilment of the Directors’ duties outlined above, each paper
prepared for consideration by the Board contains an analysis of the potential
impact of proposals to be considered by the Board in light of the factors
contained in Section 172.
Pages 86 to 87 contain examples of key decisions of the Board, their alignment to
the Group’s strategy, how the Board reached its decision (including
consideration of matters set out in Section 172; the interests of stakeholders;
related risks and opportunities; and challenges it faced) and the outcome of
those considerations. The examples shown are provided to demonstrate how
the Directors of the Company have carried out their duties under Section 172
of the Act.
Key stakeholder groups
Customers Suppliers Colleagues Community Investors Government, trade
bodies and regulators
Our customers are core to our purpose and
strategic priorities. By listening to their needs and
what matters most, the Group is able to truly
progress towards helping people to secure a
life of possibilities.
The Board recognises its responsibility and
duty to oversee the success of the business for
all customers.
We depend on our suppliers in order to deliver services
to our customers and provide the Group with operational
support, working in partnership with Phoenix to achieve
our strategic priorities.
The Board understands that the quality of relationships we
maintain and develop with our suppliers, strategic or otherwise
is a core objective as we seek to fulfil our ultimate purpose of
helping people secure a life of possibilities.
Our colleagues are a key asset to the Group and to
the achievement of our strategic priorities and
long-term success. Their dedication, commitment
and capabilities are integral to the Group’s success.
Our values unite our colleagues enabling a
champion led culture to reach our purpose and
achieve our strategy. Oversight of our culture,
purpose, values and colleague initiatives and is a
core focus for the Board. The Board considers
colleagues in the widest sense, including the
Group’s relationships with its pension schemes and
members who are former colleagues as well as
members of the Group’s workforce who are not
employed directly by the Group.
Our purpose to help people secure a life of
possibilities extends to our communities. These
communities comprise our colleagues (including
future colleagues), customers (including future
generations of customers), suppliers and many
other stakeholders.
The Board understands the importance of
building trust and inspiring confidence through
community engagement and partnerships.
Our investors continue to be crucial to the growth and
achievements of the Group. Phoenix is dedicated to
delivering long-term value to our shareholders and intends to
provide a dividend that is sustainable and grows over time.
The Board understands the value our investors add to
safeguarding the Group’s governance through monitoring
of performance and engagement with the Board
throughout the year.
As the UK’s largest long-term savings and retirement
business, our business is subject to financial services
regulation. Phoenix Group Holdings plc is also subject
to listed entity regulation. The way we operate and
interact with our regulators provides the trust and
reassurance needed by stakeholders to enable
Phoenix to deliver its purpose.
The Board acknowledges the importance of
maintaining positive relationships with the Government,
trade bodies and regulators to enable the Group to act
as a thought leader and to communicate the views and
concerns of our customers and society generally.
Link to strategic priorities
How the Board has engaged with and had oversight of stakeholder views during the year?
• The Board received regular updates from
management on the potential impact on
customer service as a result of projects
undertaken, with detailed oversight of
customer service being undertaken by
the subsidiary Board for the Phoenix Life
Companies and its committees.
• The Board monitored the impact of the
Group’s change agenda, including sufficient
resource to maintain focus on customer
outcomes and conduct risk management.
• The Board approved the Customer
Acceptance Criteria as a part of Phoenix’s
toolkit for future acquisition which provide
details of Group’s plans for inclusion of
an assessment of customer impact and
customer fair treatment benefits in its
acquisition strategy
• The Board Remuneration Committee (which
reported to the Board on a regular basis)
focused on customer outcomes during the
year, allocating 25% of the 2022 Annual
Incentive Plan to be aligned with customer
satisfaction metrics (see the Directors’
Remuneration Report on pages 110 to 146 for
more detail).
• The Board received regular updates from the CEO on
customer service performance and outsourced services
(including any ongoing impact of COVID-19), with
additional detailed oversight being undertaken by the
subsidiary Board for the Phoenix Life Companies and
its committees.
• The Board and its Risk Committee monitored risks related
to suppliers, including the potential for poor customer
service and risks connected with the migration of acquired
books of business. Such monitoring included discussions
with regulators to ensure clarity of Phoenix’s focus on
positive customer outcomes.
• The Board Risk Committee received updates from the
Group Chief Risk Officer on service levels provided by
suppliers and considered fulfilment of Service Level
Agreement terms in the year, with detailed oversight of
customer service being undertaken by the subsidiary
Board for the Phoenix Life Companies and its committees.
• The Board approved the Group’s Modern Slavery and
Human Rights Statement (‘Modern Slavery statement’)
which outlines steps that Phoenix took, in the financial year
ended 31 December 2021, to ensure slavery and human
trafficking has not taken place in our supply chain; and sets
out an expectation for suppliers to meet the Group’s
Supplier Code of Conduct. The Modern Slavery
statement is available on the Company’s website.
• The Board received updates on colleague
well-being and engagement levels.
• The Board monitored the impact of projects
and the Group’s change agenda on
colleagues, including potential areas of
stretch on resource.
• Members of management, beyond the ExCo,
were invited to join the Board to present and
take part in discussions at meetings
throughout the year.
• The Board and Board Sustainability
Committee received updates from the DNED
following engagement sessions with
colleagues, including meetings with the PCRF.
The Board members met a range of colleagues
and listened to their views, ideas and
experiences which will inform Board agenda
and decision-making as a part of the
Colleague Interaction Session.
• Received updates on the cost of living crisis
and the impact on colleagues, including
establishment of cost of living working group
and implementation of a number of incentives
such as free lunches and bonuses.
• The Board Sustainability Committee
received updates on progress against KPIs
and targets aligned with the Group’s
community engagement strategy, with
relevant highlights reported to the Board.
• Through educational deep dives and
external perspectives, the Board
Sustainability Committee has continued to
broaden and develop Committee members’
understanding of specific community-
related themes such as financial inclusion,
stewardship and public awareness building
activities in sustainability-related areas.
• The Group HR Director provides regular
updates on colleague engagement
activities, initiatives and progress on
community related KPIs which can be found
in the Sustainability Report.
• The Board received regular updates from the CEO on
investor relations activities and feedback/questions
received from investors.
• Investor feedback from the Group’s results
announcements and investor roadshows was
reported to the Board during the year.
• The Board considered key considerations relating
to investor messaging and various investor
communication approaches.
• The Board considered and provided feedback on
the contents of the year-end investor presentation.
• Board members, including the Board Chair and
Non-Executive Directors acting in the capacity of
Committee Chairs, were available to investors for
engagement, including to answer questions on
significant matters related to their areas of
responsibility. Prior to, and at, the Company’s AGM,
investors were able to submit questions to be answered
by each of the above.
• The Capital Markets Event held in December 2022
enabled the Board and Executive management team
to interact with potential and existing investors.
• The Chair has, since the end of 2022 (January 2023),
undertaken a schedule of meetings with major investors
to discuss topical matters of importance to them.
• Major shareholders were consulted as part of the
process in developing Directors’ remuneration policy
• During the year, the Board as a whole met with the
FCA and PRA during the year on a range of issues
relating to the impact of each regulators’ strategic
objectives and routine regulatory matters.
• At the request of the PRA and FCA, certain
Board directors may be required to meet on a
formal basis.
• The Board received updates on management’s
interactions with regulators and any feedback
received from those bodies.
• The Board challenges Management on ensuring
that Phoenix maintains open and honest dialogue
with the FCA, PRA, Central Bank of Ireland, TPR
and other jurisdictional regulators.
The Board’s role in promoting positive stakeholder relationships
The Board held management to account
throughout the year, ensuring due care and
attention was given to customer outcomes and
needs, especially in the context of data and
platform migration work and projects to grow
and develop the Group.
The Board monitors the performance of suppliers to ensure
Phoenix is able to provide the best customer outcomes to
deliver its operational and financial targets. Positive
relationships with suppliers are vital to the success of both
Phoenix and our suppliers.
The Board sets the cultural tone from the top and
engages with colleagues (both directly and
indirectly) which is key to ensuring positive
relationships. Two-way engagement enables
colleagues to be kept informed of how the Board
is driving the Group in the right direction and
enables the Board to stay connected to what’s
important to colleagues and how the decisions it
makes impacts their working lives.
The Board, through the Board Sustainability
Committee, has monitored management’s
engagement activities with our communities,
ensuring that Phoenix is able to fulfil its
purpose and colleagues have the opportunity
to participate in charitable giving and
volunteering within the community. It is the
Board’s role to hold management to account
in maintaining sufficient resources needed
to support our communities.
The Board monitors investor sentiment and feedback
throughout the year to ensure Phoenix is able to respond to
investor concerns, which is key to the success of the Group.
The Board also ensures that the Group’s strategy and
purpose are set to ensure the long-term success of the
business and generation of value for shareholders.
As the guardian of the Group, (ensuring robust
governance, controls and risk management) the
Board is responsible for holding management to
account for day to day compliance with regulation
and legislation; ensuring transparent communication
of such compliance to maintain trust in Phoenix.
Phoenix Group Holdings plc Annual Report and Accounts 2022 85
Corporate governance
Stakeholder engagement continued
Key board decisions
Example key Board decision Acquisition of Sun Life of Canada UK
Link to strategic priorities How the Board reached its decision
Consideration of section 172 matters
During the year, the Board considered and agreed to acquire the business of SLF of Canada
UK Limited (‘Sun Life of Canada UK’). It was agreed that the Risk Committee and the M&A Advisory
Committee would have oversight of specific elements of the transaction to support the Board in
reaching its decision.
The Board identified customers, colleagues, investors, regulators and suppliers as key stakeholders
in the decision making process. Discussions of the potential risks and opportunities for each
category of stakeholders were considered throughout the acquisition process. During the due
diligence process, the Risk Committee and M&A Advisory Committee had oversight of various risks
including market risks, counterparty risks, regulatory risks, conduct risks and operational risks with
updates provided to the Board on intended mitigation actions being or due to be taken in advance
of the final Board decision. Furthermore, supported by appropriate opinions from the Group Risk
function, a formal acquisition impact assessment and an assessment of any potential barriers to
completion and integration were reviewed. The Board fully considered the Group’s strategic
priorities and duty to promote the success of the Company.
The Board considered the impact of the decision to acquire Sun Life of Canada UK on customers,
existing and future, taking into account Sun Life of Canada UK’s products and the potential to
access a larger portfolio of product choices under the Phoenix brand. The Board also considered
outcomes for Sun Life of Canada UK employees and reflected on the principles of Consumer Duty.
In the wider context of customers and suppliers, the Board sought to understand the viability of
integrating operations, outsourcing partners and potential expense synergies whilst maintaining
appropriate levels of customer service and customer experience. The Board also considered the
long-term interests of shareholders and value creation from smaller M&A transactions with key focus
on valuation and financing (including solvency projections).
Outcome Announced the Group’s first ever cash-funded acquisition of Sun Life of Canada UK for
consideration of £248 million. This transaction, which is expected to complete in April 2023, is
expected to deliver c.£0.5 billion of incremental long-term cash generation, including c.£0.1 billion
of integration synergies, net of costs. This transaction also benefits from a simplified operational
integration programme, due to the majority of policy administration already being undertaken by
our strategic outsourcing partner (TCS Diligenta).
The significant value we expect to generate from this transaction enabled the Board to recommend
a 2.5% inorganic dividend increase this year (as part of the 2022 final dividend) which demonstrates
the significant value to shareholders of smaller, cash funded M&A that provides a sustainable
dividend that is growing over time.
Strategic priorities key
Grow our business to support
both new and existing customers
Enhance our operating
model and culture
Optimise our
in-force business
Phoenix Group Holdings plc Annual Report and Accounts 202286
Example key Board decision Payment of 2021 final dividend
Link to strategic priorities How the Board reached its decision
Consideration of section 172 matters
The Board considered the long-term impact of paying the 2021 Final Dividend on the
Group’s liquidity and solvency positions by reviewing the outcome of market sensitivities
and stress scenarios. The stress scenarios included COVID-19 related uncertainties,
associated economic recovery periods, credit downgrades and impact of a one in ten
market stress calibrated to the Group’s internal model. The Board also considered reverse
stress testing and market volatility associated with the inflationary pressures and impact
of the Ukraine-Russia conflict. The Board also considered the impact of the dividend
decision on shareholder expectations as it relates to the Group’s dividend policy.
In reviewing the appropriateness of the payment or non-payment of the dividend, the
Board considered the impact of its decision on the wider economy, the investment case
and business model.
The Board focused on ensuring a robust review was carried out before making its final
decision to ensure the highest standards of business conduct were maintained, as
expected by all our stakeholders.
Outcome Following due consideration of all the matters set out in section 172 of the Act, the Board
determined that the payment of the 2021 Final Dividend was consistent with the Group’s
risk appetite having assessed the likely impact on the business and its stakeholders
(including in the long term).
Phoenix Group Holdings plc Annual Report and Accounts 2022 87
Corporate governance
Composition, succession and evaluation
Nomination Committee report
What were the key highlights of
the Nomination Committee activity
during 2022?
2022 has been a year characterised
by further progress and focus on
succession planning activities taking
into account the skills, experience and
diversity required at Board level. This
progress is underpinned by a clear
intention to continue to harness the
capability, skills and experience of the
Board as a whole in the spirit of
continuous improvement. Further steps
have been taken to enhance diversity in
the broadest sense through the
appointment of Maggie Semple.
What were the key considerations
for the Nomination Committee
during 2022?
The Board was cognisant of the number
of changes that were taking place to the
membership of the Board during the
year, with Nicholas Lyons going on
sabbatical, Wendy Mayall retiring, myself
taking over as Chair, Karen Green
assuming the role of the SID, Katie
Murray becoming the Chair of the Audit
Committee and two new directors
joining the Board; Maggie Semple and
Stephanie Bruce. The Board worked
hard to ensure there was a smooth
handover process with minimum
disruption. All Board members have
adapted to their new roles extremely
efficiently with positive feedback.
How has the Nomination Committee
approached succession planning
during 2022?
In 2021, the Nomination Committee
(‘Committee’) recognised that the skills
and experience on the Board could be
enhanced in respect of the oversight of
our growing Open business, digital and
customer focused businesses and at the
same time continue to develop diversity
in the broadest sense (skills, experience,
ethnicity, gender, background and age)
to support robust decision making,
avoiding ‘group think’ and enabling
consideration of different perspectives
when taking action to drive forward the
Group’s strategic priorities. This process
continued into 2022 and when
appointments were made in the year,
feedback on the succession planning
activities was sought through the Board
Evaluation exercise conducted in late
2022. Additionally, the Committee was
mindful that a number of Board
members would reach their nine year
tenure over the next three years and
has taken steps to maintain orderly
succession where possible by staggering
Board member retirements. This
approach enables the Board to benefit
from stability as well as continuing
to ensure the most appropriate balance
of skills and experience, diversity in
the broadest sense and remains
forward looking.
What do you see as the Committee’s
key areas of focus in 2023?
Continued focus on forward-looking
Board succession planning, enhancing
talent and succession planning for
Executive Directors and senior
Management and continuing to focus on
developing Board skills, capability and
experience in actuarial/life and
investment in line with strategic priorities
to grow the asset Management business.
How has the Committee considered
Board composition and diversity and
inclusion during the year?
A Board skills review was carried out to
ensure we have the right breadth of skills
and capability needed to oversee our
strategic priorities and we have
enhanced the quality of the Board and
senior Management through hiring
individuals that bring additional valued
attributes such as diversity of experience,
skills and perspective. We prioritise this
in all our engagements with search firms
and ensure that they, as suppliers of
services to Phoenix, are aligned with
these aims. In 2022 the focus was on
enhancing diversity in the broadest
sense and the Board continues to focus
on improving diversity and inclusion in
the Boardroom and will continually
mandate search firms to produce diverse
and balanced short lists whilst
recognising at all times that the best
candidate for the role will be appointed.
Q&A
with the Nomination Committee
Chair, Alastair Barbour
Phoenix Group Holdings plc Annual Report and Accounts 202288
Members Attendance at
Committee meetings
(actual/maximum eligibility)
Alastair Barbour
1
5/6
Nicholas Lyons
1
4/4
Karen Green
2
2/3
Nicholas Shott 6/6
Kory Sorenson 6/6
John Pollock
3
1/2
1 Alastair Barbour was appointed Chair of the
Committee on 1 September 2022 and was unable
to attend a meeting due to a scheduling conflict.
Nicholas Lyons took up his sabbatical effective 1
September 2022.
2 Karen Green became a member of the Committee
on 5 May 2022 and was unable to attend a meeting
in October 2022 due to illness.
3 John Pollock became a member of the Committee
on 1 November 2022 and was unable to attend a
meeting due to a pre-existing arrangement.
• The appointment of Alastair Barbour as
Chair for the duration of Nicholas Lyons’
sabbatical as Lord Mayor of the City of
London from September 2022 to
November 2023. Alastair reached a
tenure of nine years on the Board in
October 2022 and is therefore not
considered independent. However, his
appointment as Chair is considered to
be in line with Provision 19 of the Code
where an extension past the nine year
period is deemed acceptable for a
limited time particularly where the Chair
is an existing non-executive director.
• The appointment of Karen Green as
Senior Independent Director from the
conclusion of our AGM on 5 May 2022.
• The appointment of Katie Murray
as a NED from 1 April 2022 and as a
Chair of the Audit Committee from
1 September 2022.
• The appointment of Maggie Semple as
a NED from 1 June 2022 and her
subsequent appointments as Designated
NED for Workforce Engagement on 1
July 2022 and as a member of the Risk
and Sustainability Committees from 1
September 2022.
• The retirement of Wendy Mayall from
the Board from 31 December 2022
and associated succession activity.
• Support for the appointment of
Stephanie Bruce as the nominated
representative of abrdn adding
valuable and relevant skills through
her executive role as CFO of a major
financial institution.
The standard process used by the
Committee for Board appointments
involves the use of an external search
consultancy to source external candidates
and, in the case of executive appointments,
also considers internal candidates.
Detailed assessments of shortlisted
candidates are undertaken by the search
consultancy and the Committee ensuring
there is a balanced shortlist from a diversity
perspective, followed by interviews with
Committee members and other Directors
and obtaining references prior to the
Committee recommending the
appointment to the Board. The Committee
requires search firms to ensure that both
long-lists and short-lists are balanced from
a diversity and inclusion perspective.
This process was followed for the
appointment of Katie Murray and Maggie
Semple and the search firms engaged
were Sainty Hird & Partners and Korn
Ferry, respectively. Both search firms are
signatories to the Executive Search Firms’
Voluntary Code of Conduct and neither
firm had any other connections with the
Company or its directors during the year.
Executive succession planning is
undertaken by the Committee for
Executive Directors and for ExCo roles
ensuring appropriate succession in an
emergency situation with at least one
successor who is ready now or expected to
be ready in one to two years. The Board
also had a deep dive into the broader
talent, capabilities and broader diversity
agenda. It remains a particular ongoing
area of focus and interest as the Company
continues to build its capabilities and
strengthens the succession pipeline.
Board skills
A Board skills review was undertaken
during the second half of 2022 and
concluded that skills could be expanded
further in actuarial/life company
experience, investment and wider financial
services experience. The search for Wendy
Mayall’s successor was based on this
criteria. Board skills are separated into core
and secondary skills which can be found
on page 92.
Board diversity
The Board supports and complies with the
FTSE Women Leaders Review (formerly
known as the Hampton-Alexander Review)
guidance for FTSE 350 companies that the
Board should be comprised of at least 33%
female directors. As at 10 March 2023,
the Board is comprised of 50% female
directors. In addition, the Board met the
recommendations of the Parker Review
for FTSE 100 companies that there should
be at least one director from an ethnic
minority background on the Board by
2021. As at 10 March 2023, the Board has
three Board members of an ethnic minority
background representing 25% of the total
Board composition. Further information
can be found on page 92.
The Committee meets the requirements
set out in the FCA’s Listing Rules (LR
9.8.6(9)) on diversity, the targets are:
• At least 40% of the board are women
• At least one of the senior board positions
(Chair, Chief Executive Officer, Senior
Independent Director or Chief Financial
Officer is a woman
• At least one member of the board is from
a minority ethnic background
The tables are over the page:
2022 highlights
• Board and Executive Director
succession planning
• Board skills review and renewal
of terms of appointment
• Non-Executive Director
recruitment – actual and planned
• Talent, capability, diversity and
inclusion reviews
• Review of Directors’ time
commitments and independence
Role of the Committee
The Committee is responsible for
considering the size, composition and
balance of the Board; the retirement and
appointment of Directors; succession
planning for the Board and senior
Management, focused on the development
of a diverse succession pipeline; and
making recommendations to the Board
on these matters.
Composition of the Committee
With the exception of the Chair, all of
the members of the Committee are
Independent Non-Executive Directors.
Board succession
During 2022, the Committee has remained
active in its consideration of Non-Executive
Director (‘NED’) succession, which
following further consideration by the
full Board, has led to:
Phoenix Group Holdings plc Annual Report and Accounts 2022 89
Corporate governance
Composition, succession and evaluation
Gender diversity
Number of
board members
Percentage
of the board
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
Number in
executive
Management
Percentage
of executive
Management
As at 10 March 2023
Men 6 50% 3 6 55%
Women 6 50% 1 5 45%
As at 31 December 2022
Men 6 46% 3 7 58%
Women 7 54% 1 5 42%
Ethnic diversity
Number of
board members
Percentage
of the board
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
Number in
executive
Management
Percentage
of executive
Management
As at 10 March 2023
1
White British or other White (including minority-white groups) 9 75% 3 10 91%
Mixed/Multiple Ethnic Groups – – – – –
Asian/Asian British 2 17% 1 1 9%
Black/African/Caribbean/Black British 1 8% – – –
Other ethnic group, including Arab – – – – –
Not specified/ prefer not to say – – – – –
As at 31 December 2022
1
White British or other White (including minority-white groups) 10 77% 3 11 92%
Mixed/Multiple Ethnic Groups – – – – –
Asian/Asian British 2 15% 1 1 8%
Black/African/Caribbean/Black British 1 8% – – 0%
Other ethnic group, including Arab – – – – –
Not specified/ prefer not to say – – – – –
1 Based on the ONS classification and included: Asian, Black, Mixed/multiple ethnic groups, Other ethnic groups, White and Prefer not to say.
Board diversity policy
Board policy Progress
The Board’s overriding aim is to appoint the right
Directors to the Board to drive forward the Group’s
strategy within a compliant framework.
During the year, Katie Murray and Maggie Semple joined the Board. Both of their experience,
background and skills are aligned with the Group’s strategy. The Board will endeavour to
appoint the right candidate for the role and seeks to enhance diversity in the broadest sense
at all times.
The Board promotes the enhancement of diversity,
including gender and ethnicity, as a consideration
when recruiting new Directors.
In line with our succession planning processes, we undertake a formal, rigorous and
transparent search process for each appointment, considering the current balance of skills,
experience and diversity amongst our directors. Each appointment is made subject to receipt
of the requisite regulatory approvals (where required).
The Committee strives to achieve balanced recruitment longlists demonstrating diversity
in the broader sense, including gender, ethnicity and other diversity attributes and will
challenge search firms to ensure this aim is achieved.
The Board intends to comply on a continual basis
with the FTSE Women Leaders Review that the
Board should be comprised of at least 33% female
directors and with the guidance of the Parker
Review for FTSE 100 companies that there should
be at least one director of a minority ethnic group
on the Board.
As at 10 March 2023:
• 6 female directors representing 50% of Board composition.
• 3 minority ethnic directors representing 25% of Board composition.
The Board will undertake regular skills audits to
ensure the Board’s skills remain appropriate for its
strategy and providing diversity where possible.
The Board skills review has been carried out during 2022 and concluded that enhancing the
skills in the following areas, actuarial/life company, investment and wider financial services
experience would be valuable going forward.
Phoenix Group Holdings plc Annual Report and Accounts 202290
The Committee has been active in
promoting gender and ethnic diversity on
the Board and continues to take an active
role in oversight and guidance of the
executive diversity and inclusion process
including a focus on the development of a
diverse succession pipeline. Details of the
diversity and inclusion initiatives for
Phoenix colleagues (including the
executives) are contained in the Group’s
Sustainability Report. The Group’s senior
Management gender diversity data
(including statutory requirements) is
contained in the Strategic Report
on page 44.
Board independence
With the exception of the Chair and
shareholder appointee directors, all NEDs
are considered independent in character
and judgement. The independence criteria
set out in the Code were taken into
account as part of the selection process for
the NEDs who joined Phoenix during the
year, Katie Murray and Maggie Semple
were considered to be independent.
Stephanie Bruce was not considered to
be independent in her capacity as a
shareholder nominated director. Over
half of our Board members, excluding
the Chair, are independent NEDs. The
independence of NEDs is reviewed and
confirmed annually by the Committee.
Time commitment
All Directors are expected to commit
sufficient time tothe Board, and the
Company, as is necessary to carry out their
duties as a Director. Time commitments for
directors are reviewed by the Committee
on a regular basis including: prior to
recommendation for appointment to
the Board, on changes in role (joining
additional committees or taking on further
responsibility) and prior to approving
external appointments.
The Company Secretary maintains a
register of Directors’ commitments which
is regularly reviewed by the Committee.
As part of the Board evaluation process,
theBoard, supported by the Committee
considered each individual Director’s
attendance, contribution and external
appointments, and has concluded that the
time given by individual Directors during
2022 exceeded the level expected in their
appointment terms. It is expected that on
average, each of the eight scheduled
Board meetings is likely to require two days
of participation (including Committee
meetings, education sessions, travel
and Board dinners) and at least a day
of preparation time.
Each Director is required to spend at least
an additional day each month reviewing
information provided by the Company. In
addition, a two day strategy session is held
and there are regular briefings for the
Board Committees. On this basis, the
estimated time commitment of each Board
member is approximately 40 days each
year (who serves on more than one
committee). This basic time commitment
can be significantly increased on account
of transaction or other activity.
Board evaluation
An evaluation of the performance of the
Board and its Committees and individual
Directors was carried out in the latter part
of 2022. The process, which was led by
the Chair with the support of the Group
Company Secretary, involved completion
by Directors of a questionnaire covering
all aspects of Board and Committee
operations and Director effectiveness,
education and training followed by
individual meetings with each Director.
The findings were discussed by the Board
in November 2022. The focus of the review
was on ways for the Board to manage
its time effectively, drive strategy and
monitor performance.
The review concluded that the Board is
cohesive, well-balanced and operates as a
team. Management value the nature of
challenge and support from the Board which
is considered to be open, constructive and
respectful. The 2022 review concluded that
the Board and its Committees operated and
were chaired effectively and the balance of
material discussed at the Committee level
was appropriate.
In line with the recommendations from the
2021 review, the Board continued to focus
and make progress on the strategy and
appropriate time was allocated to
understanding and review of key areas of
business during the Board’s strategy
meeting in June 2022 as well as having
regular strategic matters presented to the
Board during the course of the year.
Information provided to the Board has
improved with a new Board paper template
introduced, clearer executive summaries
and signposting whether papers are for
information, discussion or approval and
short written summaries of Committee
activities provided by the respective Chairs.
Committee Effectiveness
The Committee effectiveness was
undertaken as part of the Board Evaluation
process and concluded that it operates
effectively and performs strongly. All
duties set out in the Committee’s Terms of
Reference were addressed during the year.
The areas of enhancement for the
Committee for 2023 are focused on
continuing to strengthen the talent and
succession planning for the Board,
Executive Directors and the Executive
Committee and ongoing improvement
of information to the Committee.
Assessment of the Chair’s Performance
Led by the SID, two assessments were
conducted to reflect the transition
between Nicholas Lyons and Alastair
Barbour for the respective periods served
as Chair during 2022. A questionnaire was
circulated to the Board and followed by a
Board meeting to assess performance
without the Chair present. Following the
meeting, feedback was provided by the
SID to Nicholas Lyons and Alastair Barbour.
The Board consider Nicholas Lyons to
be a high performing Chair who has made
a significant impact on the Management
of Phoenix. Directors believe Alastair
Barbour has transitioned very effectively
into the role of Chair.
Alastair Barbour
Chair
Board evaluation –
areas of development
for 2023
• Strategic Topics – further deep dives
into the Open Business, including the
existing European business’ strategy.
• Education/Training – determination of
the topics to be included in 2023 and
ensure compliance/regular required
matters are covered in the most
efficient manner.
• Colleague Engagement – to enhance
colleague engagement for Directors
working with the Designated NED for
Workforce Engagement.
• Talent and Succession Planning –
closer focus as the Group continues to
build its capabilities and strengthens
the succession pipeline.
• Board Information – ongoing
improvement in the quality and
content of information to the Board
building on the progress made
in 2022.
Phoenix Group Holdings plc Annual Report and Accounts 2022 91
Corporate governance
Female 50%
Male 50%
1 As at 10 March 2023, 50%
Female Board
representation which
exceeds recommendations
of FTSE Women Leaders
and new FCA Listing Rules
White (English) 50%
White (Scottish) 17%
Asian (Indian) 9%
Asian (Japanese) 8%
Black (Caribbean) 8%
White (Other) 8%
Directors of colour 25%
Directors of non-colour 75%
Less than 1 year 25%
1–3 years 25%
3–6 years 34%
6–9 years 8%
9 years or more 8%
0
2
4
6
8
10
12
Mergers & Acquisitions
Regulatory
Risk management
Capital Markets
FTSE 100 Board
Experience
Financial
Life assurance
Asset management
Change
Operations
Sustainability / ESG
Customer service
& solutions
Human resources
IT/Digital
Marketing
Sales / Distribution
Core Skills
Secondary Skills
Overall diversity progress
FTSE Women Leaders
target – female board
representation
FCA Listing Rules
target – female board
representation
Minority ethnic
background
Female Chair,
CEO, CFO or SID
33%Target
50%
Achieved
40%Target
50%
Achieved
Target
Achieved
Target
Achieved
Composition, succession and evaluation continued
Board diversity
Board Skills and Expertise
The Board skills and expertise below shows a high level of skills in the expected categories and a wide
breadth of skills across the Board. The assessment of Board skills and areas of expertise feeds into its
succession planning and the ongoing recruitment of Non-Executive Directors, with action being taken
to address areas highlighted for strengthening.
The composition of the
Board ensures a diverse
mix of backgrounds, skills,
knowledge and expertise to
enhance decision-making;
reduce the risk of ‘group-
think’; and support robust
Management of risk.
Average age of the Board
59
Board gender balance
1
Board ethnicity Board tenure
Phoenix Group Holdings plc Annual Report and Accounts 202292
Board induction
The Chair is responsible for leading the
development of, and monitoring the
effective implementation of, training
policies and procedures for the
Directors. On appointment, each
Director receives a formal and tailored
induction. In addition, there is a
programme of ongoing education
and deep dives for Directors.
The Directors are committed to their own
ongoing professional development and
the Chair discusses training with each
NED at least annually. The Group
Company Secretary supports the Chair
in the oversight of the induction and
development plans for the NEDs.
All NEDs are encouraged to suggest
training topics of interest.
All directors are able to access a Board
portal where additional resources
are available.
Meetings Site tours and meetings with Management Key documents
• Chair
• Group Company Secretary
• Group Head of Internal Audit
• Head of M&A and Corporate Development
• Group treasurer
• Other members of the ExCo, as appropriate
• External stakeholders which may include
Group auditor, brokers, major shareholders or
remuneration consultants.
• London
• Edinburgh
• Birmingham
• Telford
• Board operations, minutes and meeting packs,
framework, policies, delegations of authority,
conduct/regulatory responsibilities
• Financial, strategic and operation plans and priorities
• Directors’ & officers’ liability insurance summary
• Other documents as appropriate in relation to the
level of Board or Board Committee responsibilities
Typical induction programme features
Katie Murray
Joined the Board on 1 April 2022
Board responsibilities:
• Chair of the Audit Committee
“My onboarding experience at
Phoenix was well-structured
and has been characterised
by meetings with relevant
stakeholders and absorbing
relevant information to help me
understand Board and Group
operations, risks and opportunities
and key areas of focus.
The schedule of meetings with
senior Management and other key
internal stakeholders was well-
managed. In addition during my
first year of joining the Board, I
was appointed as Chair of the
Audit Committee and I am grateful
to Alastair Barbour for the smooth
handover of responsibilities. ”
Maggie Semple, OBE
Joined the Board on 1 June 2022
• Designated NED for Workforce
Engagement
• Member of Risk Committee
• Member of Sustainability Committee
“The induction programme at
Phoenix has been exemplary.
I have been impressed by the
quality of the information and
level of preparation by my new
colleagues in advance of the
meetings. Each person had read
my CV and encouraged me to
contact them after the meeting
for follow up discussions. Each
meeting left me with a strong
sense of support and eagerness
to succeed in my new role.
The impact of these meetings
has enabled me to accelerate
my understanding of the
business, key stakeholders,
risks and opportunities.
In my first year at Phoenix and in
my role as Designated NED for
Workforce Engagement, I continue
to develop my knowledge of the
business and in my interactions
with colleagues, the theme
of living Phoenix values is
regularly demonstrated.”
Phoenix Group Holdings plc Annual Report and Accounts 2022 93
Corporate governance
Q2Q1
Board development
Each year, through its annual performance review, the Board ensures a continuous improvement cycle
and clear focus on personal and collective development through a formal programme of education/
deep-dive sessions. The following education/deep dive sessions were provided for the Board during
2022. Board Committees may have specific educational or deep dive session which are relevant to the
work of each Committee.
Composition, succession and evaluation continued
Customer migration programmes
Programme structure; migration sequencing; new
business enhancements, financial metrics; and
programme costs.
Phoenix Asset Management
Portfolio overview; asset Management strategy;
overview of credit risk governance and oversight;
sustainable investments; and shareholder assets
and direct investments.
Cyber & data security
Bi-annual update of most significant threats,
enhancements to controls implemented in 2022
and intended key areas of focus in 2023.
Colleague insight & engagement
The Group’s strategy and approach to colleague
engagement; dashboard functionality; scoring;
employee engagement and engagement drivers;
benchmarking; key areas of future focus.
Strategy
Various matters considered within the context of the
two-day strategy off-site including Digital and fintech
landscape and Sustainability: decarbonisation and
engaging people in better financial futures.
Cyber & data security
Bi-annual update of most significant threats,
enhancements to controls implemented in 2022
and intended key areas of focus in 2023.
Third Party Risk Management
Supply chain overview; Phoenix’s supplier
Management model; life cycle and risk Management;
Management reporting and escalation; supplier
classification and segmentation.
Solvency II Reforms
Key objectives of PRA and HMT consultations and key
messages underpinning response from Phoenix, BPA
pricing impacts, balance sheet impacts and next steps.
Sustainable supply chain & operations
ESG supply chain strategy, its evolution and standards;
operational climate and environmental strategy;
operational carbon emissions; supply chain emissions;
and the Science Based Target initiative.
Consumer Duty Programme
Background of the new consumer duty and FCA
proposals; gap analysis including recommendations
and observations; strategic issues; next steps and top
priorities for the programme.
Internal Model
Building on previous Board education sessions
and the approach used to calculate Solvency
Capital Requirements and demonstrate effective
risk Management and decision making.
Committee deep dives and education sessions
Sustainability Committee:
• Diversity and inclusion strategy
• Stewardship code and proxy voting policy
Sustainability Committee:
• Social and economic impact of increased
longevity for UK society
Audit Committee:
• IFRS 17 Methodology
• IFRS 17 Impact assessment
Remuneration Committee:
• Remuneration policy review
Sustainability Committee:
• Financial inclusion
• SBTi targets
Audit Committee:
• Solvency II regime reforms
Risk Committee:
• Solvency II regime reforms
Remuneration Committee:
• Directors’ remuneration policy
• Wider remuneration review of remuneration
structure and practices
Sustainability Committee:
• Culture & values
Audit Committee:
• IFRS 17 transition balance sheet
Remuneration Committee:
• Investor and proxy guidelines and
remuneration principles
Phoenix Group Holdings plc Annual Report and Accounts 202294
Q3 Q4
Customer migration programmes
Programme structure; migration sequencing; new
business enhancements, financial metrics; and
programme costs.
Phoenix Asset Management
Portfolio overview; asset Management strategy;
overview of credit risk governance and oversight;
sustainable investments; and shareholder assets
and direct investments.
Cyber & data security
Bi-annual update of most significant threats,
enhancements to controls implemented in 2022
and intended key areas of focus in 2023.
Colleague insight & engagement
The Group’s strategy and approach to colleague
engagement; dashboard functionality; scoring;
employee engagement and engagement drivers;
benchmarking; key areas of future focus.
Strategy
Various matters considered within the context of the
two-day strategy off-site including Digital and fintech
landscape and Sustainability: decarbonisation and
engaging people in better financial futures.
Cyber & data security
Bi-annual update of most significant threats,
enhancements to controls implemented in 2022
and intended key areas of focus in 2023.
Third Party Risk Management
Supply chain overview; Phoenix’s supplier
Management model; life cycle and risk Management;
Management reporting and escalation; supplier
classification and segmentation.
Solvency II Reforms
Key objectives of PRA and HMT consultations and key
messages underpinning response from Phoenix, BPA
pricing impacts, balance sheet impacts and next steps.
Sustainable supply chain & operations
ESG supply chain strategy, its evolution and standards;
operational climate and environmental strategy;
operational carbon emissions; supply chain emissions;
and the Science Based Target initiative.
Consumer Duty Programme
Background of the new consumer duty and FCA
proposals; gap analysis including recommendations
and observations; strategic issues; next steps and top
priorities for the programme.
Internal Model
Building on previous Board education sessions
and the approach used to calculate Solvency
Capital Requirements and demonstrate effective
risk Management and decision making.
Committee deep dives and education sessions
Sustainability Committee:
• Diversity and inclusion strategy
• Stewardship code and proxy voting policy
Sustainability Committee:
• Social and economic impact of increased
longevity for UK society
Audit Committee:
• IFRS 17 Methodology
• IFRS 17 Impact assessment
Remuneration Committee:
• Remuneration policy review
Sustainability Committee:
• Financial inclusion
• SBTi targets
Audit Committee:
• Solvency II regime reforms
Risk Committee:
• Solvency II regime reforms
Remuneration Committee:
• Directors’ remuneration policy
• Wider remuneration review of remuneration
structure and practices
Sustainability Committee:
• Culture & values
Audit Committee:
• IFRS 17 transition balance sheet
Remuneration Committee:
• Investor and proxy guidelines and
remuneration principles
Phoenix Group Holdings plc Annual Report and Accounts 2022 95
Corporate governance
Q&A
with the Audit Committee Chair,
Katie Murray
Audit, risk and internal controls
Audit Committee report
How did you navigate the
handover process?
I was appointed on 1 April 2022 to the
Board and on 1 September as Chair of
the Audit Committee (‘Committee’). I
would like to thank the Board for their
support and Alastair Barbour for such
a smooth transition and handover
allowing me to assume the role of Chair
of the Committee.
What were the key activities of the
Committee during 2022?
Financial reporting continues to be a
key focus alongside ensuring that the
internal control environment remains
robust as the Group delivers its strategic
agenda whilst navigating volatile
economic conditions. Through our
calendar of scheduled meetings we
actively engage with Management and
the risk and internal audit functions to
ensure that the Group’s financial results
and accompanying disclosures are
accurate, fair, balanced and
understandable. Underpinning this, the
Committee has continued to monitor
the control environment through
regular reporting of the Internal Control
Self Assessment which provides an
important level of assurance. The
Committee is responsible for
monitoring the impacts of new
governance and financial reporting
requirements for the Group, which
during 2022 included oversight of the
implementation of the new accounting
standard IFRS 17, updates on the reform
of Solvency II rules and the Department
for Business & Trade proposals on
changes to the audit regime and
corporate transparency.
What challenges has the Committee
faced during 2022?
The volatile economic environment has
produced a variety of challenges for
Group, and the Committee has played a
key role in ensuring that the impact on
the Group’s financial results and internal
control environment has been carefully
monitored and managed. The year has
also seen the further growth of the
Group and with an increased number of
initiatives being undertaken in support
of the Group’s Strategy, clear oversight
of the Risk Management Framework has
been required, especially when
considering the prioritisation of
resources across the various projects.
What do you see as the Committee’s
key areas of focus in 2023?
To ensure the implementation of IFRS 17
reporting processes and a safe landing
of the first Group results under the new
standard. The Committee will also
consider the reporting and control
implications of the inclusion of the
acquired Sun Life of Canada UK
business for the first time within the
Group financial results, and will
continue to monitor the impacts of
anticipated developments in the
regimes for financial reporting,
corporate governance and audit.
Role of the Committee
To assist the Board by establishing,
reviewing and monitoring the Group’s
financial reporting, internal controls
framework, internal audit framework and
changes in regulatory requirements.
The Committee’s terms of reference set
out the responsibilities and duties of the
Committee, which are reviewed and
approved annually, are available on the
Phoenix Group website.
Members attendance at Committee
meetings (actual/maximum eligibility)
Alastair Barbour
1
7/7
Katie Murray
2
3/4
Karen Green
3
8/9
John Pollock
4
9/9
Nicholas Shott 9/9
1 Alastair Barbour stepped down as Chair of the
Committee on 1 September 2022 on his
appointment as Chair of the Board
2 Katie Murray joined the Board on 1 April 2022 and
became Chair of the Committee on 1 September.
Katie was unable to attend a meeting due to
pre-existing travel commitments arranged prior
to joining Phoenix.
3 Karen Green was unable to attend a meeting due
to illness.
4 John Pollock is Chair of the Risk Committee and
member of the Committee
2022 highlights
• Recommended approval
of the Company’s 2022 Annual
Report and 2022 Interim
Financial Statements.
• Approval of audit plans (external
and internal for 2022)
• Monitored the progress of the
IFRS 17 implementation
• Continued oversight on
government reforms relating to
Solvency II and Department for
Business & Trade
• Reviewed and monitored
the effectiveness and
independence of the
Company’s External Auditors.
• Reviewed the adequacy of the
control environment in light of
economic volatility
Phoenix Group Holdings plc Annual Report and Accounts 202296
Committee composition
The Board confirms that all members of
the Committee are Independent Non-
Executive Directors and have been
appointed to the Committee based on
their individual finance and commercial
experience. The Board is satisfied that
Katie Murray, as Chair of the Committee
has recent and relevant financial
experience to chair this Committee
through her current Chief Financial
Officer role at Natwest plc and career
experience. The Committee, as a whole,
has financial and commercial competence
relevant to the insurance sector in which
the Group operates. Further information
on the skills, expertise and experience of
the Committee members can be found
on pages 74 to 76.
Committee meetings
The Committee met nine times during
2022. Meetings are attended by the Chair
of the Risk Committee (who is also a
member of the Committee), the Group
Chief Financial Officer, the Group
Financial Controller, the Group Head of
Internal Audit, the external auditors and
usually also by the Group Board Chair and
Group Chief Executive Officer. The
Committee holds private meetings at least
annually with each of the Group Chief
Financial Officer, the Group Head of
Internal Audit and the External Auditors.
The Committee acts independently of
Management, and engages closely with
both the Group Risk Committee and the
Phoenix Life Companies Board Audit
Committee to ensure there is a good
understanding of the work undertaken by
each and enable efficient communication
between the committees.
During the year, the Committee has also
met jointly with the Risk Committee and/or
Sustainability Committees to consider and
recommend certain matters to the Board.
This collaborative form of governance has
enabled greater agility and effectiveness
around decision making across different
committees. Examples of the collaborative
and integrated approach to governance is
shown in the table at the top of the page.
Activities during 2022
2022 has seen a number of challenges for
the Group, reflective of the volatile
economic and inflationary backdrop, as
well as the ongoing impact of the Russia/
Ukraine conflict.
These events have had a significant impact
on the financial markets which in turn has
implications for the Group’s financial
position and operating environment. As a
result, one of the key areas of focus of the
Committee has been to ensure that careful
monitoring and oversight of the financials
of the Group has occurred and the control
environment has continued to work
effectively. The support of the Risk and
Internal Audit functions as well as the
independent review by the External
Auditors has provided the Committee with
further assurance as to the integrity of the
Company’s financial reporting and the
soundness of its internal controls.
The following were the key areas of focus
for the Audit Committee during 2022 and
to the date of this report:
• Receiving and reviewing the Group’s
external financial reporting, and
recommending their approval to
the Board.
• Received and reviewed the Group’s
sustainability and climate reporting.
• Monitoring the overall integrity of
financial reporting by the Company and
its subsidiaries and the effectiveness of
the Group’s internal controls.
• Provision of advice to the Board to
enable the Board to report on whether
the Annual Report and Accounts, taken
as a whole, are fair, balanced and
understandable and provide the
information necessary for shareholders
to assess the Group’s position,
performance, business model
and strategy.
• Making recommendations to the Board
on the appointment of the External
Auditors and their terms of engagement
including approval of External Auditor
fees and non-audit services and for
reviewing the performance,
objectivity and independence of
the External Auditors.
• Considering and approving the remit of
the Internal Audit function and
reviewing its effectiveness.
• Receiving regular updates on the
implementation of IFRS 17 and
reviewing key judgements and
accounting policy decisions.
• Monitoring the change activities within
the Finance and Actuarial function to
ensure that the resource framework
aligns with the strategic direction
of the Group.
• Oversight of activities of subsidiary audit
committees through a review of minutes,
discussions between the Chairs of
the Committee and subsidiary audit
committees, and the Committee
Chair’s attendance at the Phoenix Life
Companies Board Audit Committee on
an occasional basis, as well as all Phoenix
Life Companies Board Audit Committee
papers. This oversight has been
enhanced further through the
attendance at the Committee’s
meetings, at least annually, by the
Chair of the Phoenix Life Companies
Board Audit Committee.
External reporting and controls
Throughout 2022 and up to the date of this
report, the Committee has carried out the
following activities in relation to the
Group’s external reporting and the
effectiveness of its internal controls:
• Reviewed the Company’s 2021 and
2022 Annual Report and Accounts,
2022 Interim Financial Statements, and
related disclosures recommending their
approval to the Board, supported by
reports from Management and the
External Auditors.
• Reviewed the Group’s annual Solvency II
results and the Solvency and Financial
Condition Report, recommending their
approval by the Board.
• Reviewed a number of significant
matters in relation to the Group’s IFRS
and Solvency II reporting as summarised
in the table on page 101. These matters
were considered by the Committee to
be areas subject to the most significant
levels of judgement or estimation, and
identified with regard to the key audit
Examples of collaborative governance:
Audit, Risk & Sustainability Committees (February 2022) Audit & Risk Committees (April 2022)
• Year end 2021 reporting, including proposed
2021 final dividend, going concern and
investor presentation
• Sustainability related reporting and disclosures,
including, TCFD update/Climate report and
Sustainability report
• SFCR approval (including Risk
Disclosures in Solvency II Pillar III
Reporting)
• Interim year reporting and
interim dividend
• IFRS17 education sessions
Phoenix Group Holdings plc Annual Report and Accounts 2022 97
Corporate governance
matters assessed by the Group’s
External Auditors as set out in their audit
opinion on pages 156 to 167. They were
assessed by the Committee in
conjunction with the External Auditors
and on the basis of initial review by
the Phoenix Life Companies Board
Audit Committee.
• Reviewed the financial forecasts and
target setting prepared by Management,
supported by the sensitivity analysis on
the key assumptions underpinning the
forecasts and the impacts of IFRS 17, in
support of the assumption that the
Group will continue as a going concern,
the Group’s ongoing viability and in
support of dividend payments.
• Reviewed Line 1 risk and controls reports
from Management, Line 2 internal
control assessments from Group Risk,
and Line 3 internal control environment
opinions from Internal Audit and
considered the appropriateness of
consequential proposed actions.
• Reviewed reports from Internal Audit on
the control environment in the Group’s
outsource service providers and on the
effectiveness of the Internal Audit work
undertaken within the outsourced
service providers, noting that this
was addressed in more detail by
the Phoenix Life Companies Board
Audit Committee.
• Received dedicated briefings on matters
including Business Readiness, Life
Finance Change, Taskforce on Climate-
related Financial Disclosures reporting
and BPA Annuity Buy-Out.
• Through regular briefings during
scheduled meetings and a series of
additional education sessions, the
Committee has overseen the progress
of the IFRS 17 implementation project
and the preparedness for first time
reporting in 2023.
• Reviewed a number of policy,
methodology and assumption related
matters pertinent to the implementation
of IFRS 17, including judgments with
regard to the approach to transition and
the application of the different
measurement models within IFRS 17
to the Group’s insurance contracts.
• Considered and approved the
disclosures on IFRS 17 in Note A.5 of the
IFRS financial statements as appropriate
to be included in the 2022 Annual
report and accounts.
• Reviewed and approved updates to the
Group Tax strategy, Group External
Auditor policy and the Group Liquidity
& Funding policy.
Committee effectiveness
In 2022, the Committee carried out an
internal effectiveness review whereby
aside from the members of the Committee,
members of Management and regular
attendees were also requested to provide
feedback. From the review it was
concluded that overall the Committee
works effectively and focuses on the right
issues. In addition, the transition of the
Committee Chair from Alastair Barbour to
Katie Murray during the year had been a
smooth process and the operation of the
Committee remains constructive. Further
information of the Board evaluation can
be found on page 91.
External Auditor
A key part of the role of the Audit
Committee is the review and oversight of
the work of the Group’s External Auditor.
EY LLP (‘EY’) is the Group’s External
Auditor. The External Auditor partner
attended all Committee meetings during
2022 and to the date of this report,
presenting reports on the external audit
process, a hot-topics survey and
assessments on methodology and actuarial
assumptions. The External Auditor
provided details on benchmarking with
regard to assumptions setting as well as
challenging and providing guidance
on reporting matters and disclosure
requirements. Where necessary
the External Auditor challenged
Management’s view on certain
assumptions and reporting requirements
which were reported to and discussed
with the Committee.
The Committee reviewed and discussed
various reports from the External Auditor
throughout 2022, including the 2022
Audit Plan, progress reports against
that plan, and a report on their audit
procedures on the 2022 annual IFRS and
Solvency II results, and their interim review
of the half year 2022 IFRS results. The
Committee considered throughout 2022
and for the 2022 audit, the effectiveness,
engagement and remuneration of the
current External Auditors.
Assessment of the effectiveness of
the external audit process
Overall, the Committee has concluded
that EY have carried out their audit
for 2022 effectively. Effectiveness of
the external audit process has been
considered throughout the year
by the Committee and included
the following activities:
• a review of the detailed audit plan
and consideration of its coverage
and approach to identified risks;
• an assessment of the quality of
interactions between the Audit
team and the Committee, including
the provision of technical and
industry knowledge;
• consideration of the level of insight
provided by the audit findings in the key
areas of judgment, including quality of
benchmarking with regard to valuation
assumptions and supporting analysis,
and the ability of the audit team to
demonstrate that they had applied
professional scepticism in their dealings
with Management;
• a comprehensive assessment and review
of the External Auditor where feedback
was received from Management,
Phoenix Life Companies Directors as
well as members of the Committee;
• meeting privately with EY to discuss
in depth their approach to quality
assurance and internal assurance
processes across the audit firm that
ensure the quality of the audit service;
• consideration of the findings of external
evaluations of EY, notably the findings
from the Financial Reporting Council’s
Audit Quality Inspection Report; and
• consideration of the findings of EY’s
‘Transparency and Report and
Audit Quality Report’ which
outlines their governance and risk
Management practices.
Independence of the External Auditor
The External Auditor’s independence
was reviewed and monitored against the
Group’s External Auditor policy, including
their provision of non-audit services.
This included an assessment of their
independence and a review of services
provided by EY during the 2021 and 2022
financial years. The Committee is
satisfied that EY are fully independent
from Management and free from
conflicts of interest.
Audit, risk and control continued
Phoenix Group Holdings plc Annual Report and Accounts 202298
Statement of compliance – audit partner
rotation and tender of external audit
The Group’s External Auditor policy also
governs the policy regarding audit partner
rotation with the expectation that the audit
partner will rotate at least every 5 years.
EY have served as auditor to the Company
since December 2018.
Under the Audit Ethical Standards, signing
audit partners for public interest entities
should retain the role for up to five years. In
order to safeguard the quality of the audit,
in light of the Group’s extensive change
programme, the Committee requested a
tenure extension for Stuart Wilson as a
result of reaching his fifth year of tenure
associated with the Group following
completion of the 2021 audit. For two of
those years Stuart Wilson acted as audit
partner for Phoenix Life Limited, with the
remainder as lead audit partner for the
Phoenix Group. Such an extension is
permissible under the Audit Ethical
Standards for a maximum of two additional
years. EY confirmed that Stuart Wilson is
able to continue as lead audit engagement
partner for the 2022 financial period
which was approved by shareholders
at the 2022 AGM. In view of the Group’s
extensive change programme and the
forthcoming acquisition of Sun Life of
Canada UK, a request for a further
extension to allow Stuart Wilson to
continue as lead audit partner for the
Group for the 2023 audit has been made
and confirmed by EY. We note that 2023
will be the last year of EY’s appointment as
Group auditors. EY have confirmed their
willingness to continue in office for 2023
and shareholders’ approval will be sought
at the AGM on 4 May 2023.
As announced, the Committee concluded
an audit tender process in 2021 resulting in
KPMP LLP being appointed as the Group’s
External Auditors commencing for the
financial period starting 1 January 2024.
A transition process will be undertaken in
2023 including regular review meetings
with Management, EY, Internal Audit and
Committee members, prior to their formal
appointment at the AGM in 2024.
The Committee confirms that it has
complied with the provision of The
Statutory Audit Services for Large
Companies Market Investigation
(Mandatory Use Of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 for the
year ended 31 December 2022.
Auditor’s independence and External
Auditor policy
The Company has an External Auditor
policy which requires the Company and
the external auditors to take measures to
safeguard the objectivity and
independence of the External Auditors.
These measures are in respect of specific
areas, such as secondments to
Management positions, or those which
could create a conflict or perceived
conflict. During the year, the Committee
has continued to monitor matters which
could impair the objectivity and
independence of the external audit and is
satisfied that there are no circumstances
that could affect the independence or
objectivity of the auditors.
External Auditor fees
The engagement of EY to perform any
non-audit service is subject to a process of
pre-approval by the Committee to
safeguard the auditor’s objectivity and
independence. Furthermore, the Group’s
External Auditor policy prescribes a limit
for fees associated with non-audit services
of 70% of the average statutory audit fee
for the three preceding years in line with
statutory requirements.
2022
£m
2021
£m
2020
£m
Non-audit fees – – 0.5
Audit fees 15.5 11.6 11.7
Audit related fees 2.4 2.3 2.3
Total 17.9 13.9 14.5
Ratio of non-
audit:audit fees 4% 6% 9%
Rolling 3 year
average audit fee 6% 8% 17%
In 2022, total fees of £17.9 million were
paid to EY. Of this amount £15.5 million
related to statutory audit fees of the
parent and its subsidiaries, with a further
£1.8 million incurred in relation to services
provided pursuant to legal or regulatory
requirements.
The remaining fees of £0.6 million relate to
other services including review of the
Group’s interim report, sustainability report
and provision of assurance services over
the internal controls relevant to financial
reporting operating within certain of the
Group’s outsourced services providers.
This gives rise to a non-audit to audit fee
ratio under the EU Directive and
Regulations of 4% for the 2022 year, and
6% based on a three year average audit
fee. This lies well within the limits
prescribed in the Group’s policy.
In light of the above, the Committee
is satisfied that the non-audit services
performed during 2022 have not
impaired the independence of EY in
its role as External Auditor.
Internal audit
During 2022, the Committee continued to
receive regular updates from the Head of
Internal Audit on all Internal Audit-related
matters. This included the annual update
of the Group Internal Audit Charter and
the Group Internal Audit Plan, both of
which were approved as well as
developments in the use of data analytical
techniques to support and enhance
Internal Audit’s operations. The Committee
received regular reports to monitor
progress against the plan and are satisfied
that the internal audit function has
adequate resources to deliver the in-year
plan. The Committee also reviewed the
Internal Audit control environment opinion
which included Internal Audit’s view of the
Risk Management Framework across the
Group at both the half year and full year
end in 2022.
Phoenix Group Holdings plc Annual Report and Accounts 2022 99
Corporate governance
Audit, risk and control continued
Internal controls
The Committee, alongside the Risk
Committee, is responsible for supporting
the Board in ensuring a robust system of
internal control and risk Management is in
place. In supporting this framework, the
Committee receives regular reports on the
status of the control environment and
updates on the Management of the risks
and controls across the Group’s Risk
Management Framework. The Committee
considers bi-annual control reports from
Lines 1 and Line 2 (Risk) as well as the
annual Line 3 (Internal Audit) internal
control environment opinion. These
reports provide assessments of the design
and operation of the control environment
across the Group’s risk universe.
The Committee throughout 2022
reviewed the internal control environment
regularly and challenged Management to
ensure clear rectification plans were
incorporated where there were any
weaknesses or failings reported. In 2022,
this included a focus on the Group’s
control environment with regard to the
hedging of interest rate risks. In light of the
extent of the economic volatility
experienced in the period, the Committee
considered Management’s findings and
proposed enhancements that will ensure
the control environment in this regard
appropriately reflects the complexity of
the Group’s operations and the macro-
economic outlook. The Committee will
continue to monitor closely the internal
control framework throughout 2023 to
ensure it is appropriate as the Company
continues to deliver on its strategic aims.
Whistleblowing
Bi-annually, the Committee receives formal
updates from the Group’s General
Counsel on whistleblowing activities and
the operation of our processes to enable
confidential reporting. If necessary,
involvement in the assessment and
resolution of individual matters raised in
accordance with our established policy.
Whistleblowing arrangements within the
Group as well as any whistleblowing
activity where an employee raised
concerns, in confidence, about any
possible improprieties.
During 2022 there were a total of 18
notifications reported to the Speak-Up
Office of which five were triaged as
“whistleblows”, 11 notifications related to
people policy matters and two customer
complaints were notified using the system.
Of the five Speak Up matters, one remains
currently open and under investigation.
For the others, no material wrongdoing or
control failures were found, however
on-going oversight/monitoring has
been put in place.
Climate change
Sustainability is a significant area of focus
for the Group. The Committee has a key
oversight role of climate-related reporting
including TCFD and other sustainability
disclosures. Regular updates are received
from our Sustainability team on target
setting and disclosure requirements. The
Committee works with other committees to
ensure our reporting is aligned with
strategy and regulatory requirements.
There will be continued focus on ESG in
2023 with regular updates being provided
on the Group’s Net Zero Transition Plan
and approach to the implementation of
TNFD as well as updates on regulatory
disclosures.
FRC review
During the year, the Company received a
letter from the FRC’s Corporate Reporting
Review team requesting information in
relation to their review of the 2021 financial
statements. The request was for provision
of quantitative details of the significant
unobservable inputs used to measure the
fair value of assets held at level 3 in the fair
value hierarchy. The FRC Review team was
satisfied with the response from the
Company and the proposed
enhancements to disclosures which have
been reflected in the 2022 IFRS financial
statements. The scope of the review by the
FRC was limited to reviewing the 2021
Annual Report to consider compliance
with reporting requirements and does not
provide assurance that the report and
accounts are correct in all material
respects. Letters are written on the basis
that the FRC (which includes the FRC’s
officers, employees and agents) accept no
liability on them by the Group or any third
party, including but not limited to investors
and shareholders.
IFRS 17 implementation
During 2022, Management provided the
Committee with regular updates regarding
its progress with the implementation of
IFRS 17 and its impact on the financial
statements in relation to insurance
contracts, that came into effect from 1
January 2023. The Committee has held
sessions dedicated to IFRS 17, where there
has been discussion of the judgements in
methodology, the financial impacts and
the controls around the transformation
programme. Transition to IFRS 17 will
continue to receive continuous attention
from the Committee through 2023. This
will include oversight of the control
environment as it relates to the transfer of
IFRS 17 into a business as usual production
environment, and also relating to the
continuing transformation activities as the
Group looks to further streamline and
automate its reporting under the new
standard.
Department for Business & Trade
The Committee continues to receive
updates from Management in relation to
the ongoing government proposals
regarding the Department for Business &
Trade reforms on Corporate Governance
and Audit. Management continue to
monitor FRC announcements and maintain
dialogue with external advisers. An internal
cross-functional working group has been
established to prepare for the changes
once published by the FRC.
Audit Committee Standard consultation
Management continue to monitor FRC
announcements and the Group issued a
supportive response in February to the
consultation on a minimum standard for
Audit Committees, the requirements of
which we were already substantively
complying with.
Katie Murray
Chair of the Audit Committee
Phoenix Group Holdings plc Annual Report and Accounts 2022100
Significant matters considered by the Committee in relation to the financial statements
Significant matters in
relation to the 2022 IFRS
financial statements
How these issues were addressed
Review of the IFRS and
Solvency II actuarial
valuation process, to
include the setting of
actuarial assumptions
and methodologies,
and the robustness of
actuarial data
Management presented papers to the Phoenix Life Companies Board Audit Committees detailing recommendations for
the actuarial assumptions and methodologies to be used for the interim and year end reporting periods with justification
and benchmarking as appropriate. This included assumptions related to longevity, mortality, expenses, persistency and
policyholder behaviour, as well as economic assumptions. These assumptions and methodologies were debated and
challenged by the Phoenix Life Companies Board Audit Committees, prior to their approval, including consideration
of the impacts of continued economic volatility, expense inflation and the COVID-19 pandemic.
A summary of these papers was presented for oversight review by the Committee, and the Life Companies Board Audit
Committees’ conclusions were reported to the Committee through minutes of its meeting and a discussion between
the Chairs of the committees. The Committee discussed, and questioned Management and EY on, the content of the
summary papers and the Phoenix Life Companies Board Audit Committee’s conclusions.
The Committee considered and debated the basis of valuation for adjustments to actuarial provisions that
arise at a consolidated Group level. This included consideraton of the results of a detailed review of the Group’s
maintenance expense assumptions in light of the increased investment in the Group’s growth strategy and strategic
transformation initiatives.
Pension assumptions for use in the IAS 19 Employee Benefits valuations were reviewed and approved by the Committee.
The Committee received and considered detailed written and verbal reporting from the External Auditors setting
out their observations and conclusions in respect of the assumptions, methodologies and actuarial models including
benchmarking analysis.
Valuation of
complex and illiquid
financial assets
Management presented papers setting out the basis of valuation of financial assets, including changes in methodology
and assumptions, for the interim and year-end reporting periods to the Phoenix Life Companies Board Audit Committees.
The assumptions, valuations and processes, particularly for financial assets determined by valuation techniques using
significant non-observable inputs (Level 3), were debated and challenged by the Phoenix Life Companies Board Audit
Committee prior to being approved. This included a review of judgements made in respect of data and inputs driving
the valuation of equity release mortgages, assumptions utilised in the valuation of modelled debt securities such as bond
spreads, and the impacts of continued economic uncertainty.
The valuation information was then presented for oversight review by the Committee who considered and further
challenged the information prior to confirmation of the appropriateness of the basis of valuation.
Valuation and
recoverability of
intangible assets
Management presented papers detailing the results of annual impairment testing carried out in respect of goodwill
balances and reviews for indicators of impairment performed in respect of finite life intangibles. This included
assessing the potential impact of the risk of climate change.
The Committee considered the results of the work performed and confirmed the appropriateness of the
conclusions reached.
Provisions Management presented papers detailing the basis of recognition and measurement of accounting provisions
recognised by the Group. The Committee considered the results of the analysis performed, the uncertainties
surrounding measurement adopted and confirmed the appropriateness of the conclusions reached.
Adjusted
operating profit
The Committee reviewed the allocation of key items to adjusted operating profit to ensure the allocations were in line with
the Group’s adjusted operating profit framework and consistent with previous practice. The Committee also considered
the treatment upon consolidation of the buy in transactions between one of the Group’s Life companies and its staff
pension schemes and the impact this has had on the IFRS loss for the period. The Committee confirmed the approach
to disclosure to explain the resultant movements in the IFRS financial statements and accompanying commentary.
Climate risk The Committee considered a paper from Management as to the consideration of the effects of climate-related matters
on the financial statements and the resultant disclosures.
Assessment of
whether the Annual
Report and Accounts
are fair, balanced and
understandable
The Committee considered and confirmed agreement with the analysis of the processes and conclusions in support of
Management’s conclusions that the Annual Report and Accounts are fair, balanced and understandable. As part of the
year-end procedures, the Committee discussed with Management and EY the review processes that operated over
the production of the Annual Report and Accounts.
Going concern and
viability analysis
The Committee reviewed information on the capital and liquidity position of the Group, together with a review of the
associated risks and supporting stress and scenario testing. This was part of a comprehensive assessment undertaken
prior to the Committee recommending to the Board that the Group financial statements should be prepared on a going
concern basis and that the disclosures with regard to the long-term viability of the Group were sufficient and appropriate.
Phoenix Group Holdings plc Annual Report and Accounts 2022 101
Corporate governance
Audit, risk and control continued
Risk Committee report
What were the key highlights of the
Risk Committee activity during 2022?
The Risk Committee (‘Committee’) has
continued to focus on the key risks
impacting operational resilience and the
control environment, including oversight
of capital and liquidity Management
in light of market volatility in 2022.
Oversight and review of strategic
and emerging risks has also been
important to ensure that the Group
meets it strategic priorities whilst
ensuring delivery of appropriate
customer outcomes.
What challenges has the Committee
faced during 2022?
2022 has been a challenging year for the
Group with the economy, customers and
colleagues all being impacted by the
Ukraine-Russian conflict, the impact of
inflation and the Cost of Living crisis and
the economic turbulence in autumn
2022. The Committee has continued to
monitor our Risk Management
Framework ensuring that it remains
robust and where necessary enhanced
to ensure that the Group’s evolving
business operating model provides
support and delivers for our new and
existing customers. The Group’s
sustainability initiatives (including climate
change) and associated customer and
conduct risks have remained high on the
agenda. Remote working and the Cost of
Living crisis have been key features of
the operating model this year and
emphasis has been placed on
colleagues’ well-being and ensuring that
the risk culture remains strong and
embedded in managing internal risk and
internal controls. There will be continued
focus by the Committee on ensuring
these key challenges are monitored
going forward into 2023.
How has the Committee approached
the Group’s risk appetite monitoring
during 2022?
The Group’s risk appetite framework
comprises of six risk appetite statements
that are adopted by the Group. The
Committee receives and regularly
reviews the consolidated risk report
which provides a view of the overall
principal risks, risk environment,
risk profile and assessment against
the risk appetite.
What do you see as the Committee’s
key areas of focus in 2023?
The Committee will continue to focus on
the application of the Risk Management
Framework, taking into account the
strategic direction and priorities for the
Group throughout 2023 as well as the
changing economic environment
resulting from the macro economic
impact from the Ukraine-Russian conflict.
In addition, the Committee will continue
to monitor the impacts and associated
risks arising from the regulatory
landscape, including oversight of risks
associated with the implementation of
IFRS 17,climate change and sustainability,
with a particular focus on consideration
of emerging risks.
How has the Committee monitored the
Group’s Operational Resilience during
the year?
We receive regular updates from the
Group Chief Risk Officer (‘CRO’) and
the Chief Operating Officer in respect
of the Group’s operational resilience.
The Group’s scenario and stress testing
programme is regularly reviewed by
the Committee to also help identify
operational resilience vulnerabilities
and drive improvement where
weaknesses are found. Our Group’s
Recovery and Resolution Plan was
considered by the Committee during
the year and adds a further layer to
the robustness of the framework.
Read more on Our Risk Management
Framework on pages 52 to 55
of the Strategic Report
Read more on Principal risks &
uncertainties on pages 56 to 67
of the Strategic Report
Q&A
with the Risk Committee Chair,
John Pollock
Phoenix Group Holdings plc Annual Report and Accounts 2022102
Members attendance at
Risk Committee meetings
(actual/maximum eligibility)
Members
Attendance
(actual/
maximum
eligibility)
John Pollock (Chair) 9/9
Alastair Barbour
1,3
7/7
Belinda Richards
1
7/9
Kory Sorenson
1
8/9
Maggie Semple
2
2/2
Wendy Mayall
4
9/9
1 Belinda Richards was unable to attend two
meetings of the Risk Committee due to a
scheduling conflict and delayed travel. Kory
Sorenson was unable to attend a meeting due
to a scheduling conflict.
2 Maggie Semple became a member of the
Committee on 1 September 2022.
3 Alastair Barbour stepped down as a member of
the Committee on 1 September 2022 on assuming
the role of Board Chair.
4 Wendy Mayall retired from the Board on
31 December 2022.
The role of the Committee
The role of the Committee is to advise
the Board on risk appetite and tolerance
in setting the future strategy, taking
account of the Board’s overall degree of
risk aversion, the current financial situation
of the Group and the Group’s capacity
to manage and control risks within the
agreed strategy. It advises the Board on
all high-level risk matters.
Committee meetings
The Committee met formally nine times in
2022 and an additional four meetings were
held. The Committee is comprised of four
Independent NEDs.
The majority of the Committee’s meetings
were attended by the Chair of the Audit
Committee which allows the review of
internal control effectiveness to be
managed through collaborative working
and oversight.
A set of ‘Operating Principles’ are in place
to define the responsibilities and
accountabilities of the Risk Committees
of Phoenix Group and its subsidiary
company boards to mitigate overlap of
focus or assurance activity and reviewed
on annual basis to ensure that they
remain appropriate.
The Chair of the Phoenix Life Companies
Board Risk Committees and Model
Governance Committee is a regular
attendee to the Committee’s meetings and
provides members with regular updates
on the risk matters pertinent to relevant
subsidiaries and the matters being dealt
with at the Model Governance Committee.
The Chair of the Phoenix Life Companies
Board Investment Committee, also
periodically attends the Committee
meetings to provide key updates, which
helps to facilitate discussions relating
to investment risk.
The CRO has full access to the Chair and
the Committee and attends all Committee
meetings. The Committee receives
frequent reporting from the CRO and
Group risk function on consolidated risk
matters affecting Phoenix including risk
profile assessments and emerging risks.
Other regular attendees to the Committee
include the Group Chief Actuary, Group
Chief Financial Officer, the Chief
Executives of the Phoenix Life Companies,
the General Counsel and the Group Head
of Internal Audit.
The evaluation of the performance of the
Committee during 2022 was an internally
facilitated review. The conclusions
demonstrate that the Committee continues
to operate effectively, has the appropriate
skills set and structure with good
interaction between Group and the
Phoenix Life Companies Board Risk
Committee. Further information on the
internal review can be found on page 91.
Risk Committee’s principal activities
during 2022
In addition to the key activities discussed
in 2022, the Committee also:
• Considered and recommended Terms
of Reference for the Committee.
• Reviewed Conflicts of Interest registers.
• Reviewed and approved the
principal risks disclosures in the
2021 Annual report.
• Considered and recommended the
scenario analysis and risk Management
content of the TCFD report.
• Reviewed the risks associated with the
acquisition of Sun Life of Canada UK
in light of due diligence findings,
acquisition impact assessments and the
report on the acquisition from the CRO.
• Received updates on status
of regulatory relationships.
• Reviewed adherence to the Group Risk
Management Framework (‘RMF’) and
considered the appropriateness of the
Group’s overall risk appetite statements.
• Reviewed and approved changes to
the Liquidity and Funding Policy.
• Received a number of updates which
covered cyber risk, phishing, financial
risks arising from climate change,
customer and conduct risk, and
emerging risks and opportunities that
could impact the Group.
• Approved the Group market risk
appetite limits, taking into account the
affordability of the market risk inherent
in the 2022 Annual Operating Plan.
2022 highlights
• Monitored the Group’s risk
appetite.
• Reviewed the Group’s annual
ORSA report.
• Reviewed and approved the Risk
Management strategy.
• Considered and discussed the
implications of the Ukraine/Russia
conflict and associated risks.
• Oversight of liquidity and capital
Management in the context of
significant market volatility.
• Reviewed the 2022 Group Annual
Operating Plan, considering the
extent to which it supports the
delivery of Group strategy.
• Considered enhancements arising
from an external review to further
strengthen the Internal Control
Framework, including controls in
respect of liquidity Management
and hedging.
Phoenix Group Holdings plc Annual Report and Accounts 2022 103
Corporate governance
• Considered the Group’s risk appetite
and approved the updated capital risk
appetite framework.
• Monitored compliance with, and
approved the updates to the Group’s
principal risk policies, satisfying itself
that action plans to address policy
breaches were sufficient.
• Reviewed the Group’s risk profile,
monitoring it against the risk categories
of Market, Insurance, Credit, Financial
Soundness, Customer and Operational
with particular attention to risk appetite,
risk trends, risk concentrations,
provisions, experience against budget
and key performance indicators for risk
as well as contingency planning.
• Reviewed and discussed the operation
of the RMF and approved the updated
RMF Policy. Details of the RMF, for
which the Committee has oversight,
are provided in the Risk Management
section of the Strategic Report on
pages 52 to 55.
• Considered risks, issues and matters that
are escalated from the Phoenix Life
Companies Board Risk Committee.
• Reviewed reverse stress-testing analysis
results, completed and provided
oversight of, and challenge to, the
design and execution of the Group’s
stress and scenario testing, including
any changes of assumptions.
• Informed the Remuneration Committee
regarding the Management of the
Group’s material risks to support their
consideration of executives’ Annual
Incentive Plan awards.
• Monitored and received regular updates
on the status of the current relationship
with the regulators including PRA, FCA,
TPR and Central Bank of Ireland.
• Monitored the risk culture within the
Group, including the results of the
Group Audit Annual Risk Culture
Assessment across four categories;
people and purpose, governance,
customers and leadership.
• Discussed and approved the process
and governance related to acquisition
strategy for smaller M&A activity.
• Reviewed and discussed the
performance across Change, Delivery,
Schedule Management and Operational
Capacity for the Group.
Review of system of internal controls
The Board has overall responsibility for
the Group’s risk Management and internal
control systems and for reviewing their
effectiveness in accordance with the
Code. The Group’s systems of internal
controls are designed to manage rather
than eliminate the risk of failure to achieve
business objectives and can provide only
reasonable and not absolute assurance
against material misstatement or loss.
The Board (and its subsidiary companies’
boards) monitor internal controls on
a continual basis, in particular through
the Audit and Risk Committees.
There is an ongoing process for
identifying, evaluating and managing the
significant risks faced by the Group, which
has been in place throughout the period
covered by this report and up to the date
of approval of the Annual Report and
Accounts for 2022, in accordance with the
‘Guidance on Risk Management, Internal
Control and Related Financial and
Business Reporting’ published by the FRC.
The assessment for 2022 was presented to
the Board, following review by both Group
Audit and Risk Committees. Where any
significant weaknesses were identified,
corrective actions have been taken, or are
being taken and monitored by both the
business and the Committees accordingly.
John Pollock
Chair of the Risk Committee
Audit, risk and control continued
Phoenix Group Holdings plc Annual Report and Accounts 2022104
Sustainability governance
Sustainability Committee report
What were the key highlights of the
Sustainability Committee’s activity
during 2022?
Phoenix has set a clear strategic
ambition to be a leader in sustainability.
As such, the Sustainability Committee
(the ‘Committee’) has continued to
focus on the development of its
sustainability strategy including setting
progressive sustainability KPIs. The
benchmarking and materiality review
carried out in the year enables the
Committee to remain focussed on
prioritising Environmental, Social and
Governance (‘ESG’) themes over the
next few years as well as building a view
of progress by peers and in the wider
financial services sector in sustainability
matters. The Committee has continued
to monitor and challenge the
development of the Group’s Net Zero
Transition Plan which it intends to
publish in 2023.
How has the Committee approached
monitoring the Group’s culture
during 2022?
Phoenix has a clear people vision, to
make Phoenix the best place colleagues
have ever worked. In order to ensure
tangible and measurable progress in this
area, the Committee receives regular
updates from the Group HR Director
on the Group’s people strategy and
the progress of key initiatives including;
diversity and inclusion strategy,
leadership capability, reward, ways of
working and colleague engagement.
The Committee also received regular
briefings on engagement scores and
updates on our core people and culture
metrics. These insights were further
supplemented by regular updates from
the Designated Non-Executive Director
for Workforce Engagement enabling
the Committee as a whole to understand
the views of colleagues and impact of
engagement activities.
How have Committee members
increased their knowledge
and expertise of sustainability
related matters?
In addition to regular briefings from
the Chief Sustainability Officer, Group
HR Director and Director of Corporate
Affairs and Investor Relations, the
Committee has held a number of
deep dives and external perspective
sessions to enable Committee members
to deepen their understanding of
sustainability related matters. Topics
covered during the year by external
speakers included: building
engagement and awareness around
sustainable focussed pension (Make
My Money Matter), stewardship
(Hermes EOS) and financial inclusion
(Toynbee Hall).
What do you see as the Committee’s
key areas of focus in 2023?
The Committee will continue to focus
on driving the Group’s ambition to be
a leader in sustainability and ensuring
tangible, measurable progress against
the Group’s sustainability strategy.
The Committee will remain focussed
on monitoring the development and
progress of the Groups’ Net Zero
Transition plan ahead of final
publication and ensuring oversight of
progress with TNFD. The Committee
will also continue to monitor
developments in sustainability and
emerging practice, and provide
oversight of regulatory compliance
and actions being taken to enhance
the Group’s contribution to a more
sustainable world.
Members attendance at
Committee meetings
(actual/maximum eligibility)
Karen Green (Chair)
1
5/6
Maggie Semple
2
2/2
Nicholas Shott 6/6
Kory Sorenson 6/6
Mike Tumilty
3
3/3
Wendy Mayall
4
6/6
1 Karen Green was unable to attend a meeting due to
illness, this meeting was chaired by Nicholas Shott
2 Maggie Semple joined the Committee on
1 September 2022
3 Mike Tumilty retired from the Board on
30 June 2022.
4 Wendy Mayall retired from the Board on
31 December 2022
Q&A
with the Sustainability Committee
Chair, Karen Green
2022 highlights
• Review and recommendation of the
Group’s 2022 sustainability strategy.
• Approval of the Group’s 2022
Sustainability KPIs.
• Approval of the Group’s Science Based
Targets Initiative (‘SBTi’) targets.
• Review of the Group’s people strategy
and monitoring of the Group’s culture
through regular people and culture
Management dashboards.
• Consideration of feedback from the PRA
on Phoenix’s submission for the Climate
Biennial Exploratory Scenarios (‘CBES’) and
review of the Group’s round 2 submission
(jointly with the Board Risk Committee).
• Oversight of the pilot implementation of
mid-life MOT, a new initiative intended to
help colleagues aged 45 and over to plan
for their futures, and consideration of the
impact on the Group’s culture.
• Review and recommendation of he
Group’s 2021 Modern Slavery and Human
Rights Statement.
• Education and external perspectives
sessions undertaken, covering topics
of stewardship, financial inclusion,
culture, SBTi target setting and the
Group’s Net Zero Transition Plan.
• Deep dive sessions covering: the
Group’s D&I Strategy, the strategy and
activities of Phoenix Insights (see pages 24
to 25), the Group’s approach to Stewardship
and Financial Inclusion.
• Review of the Committee’s effectiveness
and terms of reference.
• Updates from the Group’s Designated
Non-Executive for Workforce Engagement
to support two-way engagement between
colleagues and the Board.
Phoenix Group Holdings plc Annual Report and Accounts 2022 105
Corporate governance
Role of the Committee
The Committee, which met six times during
2022, is responsible for assisting the Board
in overseeing the Group’s sustainability
strategy and related activity, and approach
to ESG matters. The Committee met jointly
with the Risk Committee to discuss
Phoenix’s CBES submission and
proposed response.
The Committee’s duties include:
• ensuring the appropriateness of the
Group’s sustainability strategy.
• supporting the Board and Board Audit
and Risk Committees in respect of the
Group’s sustainability related reporting
(including TCFD reporting).
• reviewing and challenging activities
carried out within the Group to
monitor alignment with the
sustainability strategy, ensuring
the embedding thereof.
• keeping sustainability best practice
and market insights under review.
• assisting the Board with its oversight
of the Group’s culture and values.
The Committee’s terms of reference are
available on the Company’s website and
are reviewed annually.
The Committee is comprised of four
Independent NEDs of the Board, selected
to ensure cross-Board Committee
membership to facilitate engagement on
sustainability matters across the Group’s
governance framework. This is further
supported by attendance of a nominated
NED of the Phoenix Life Companies Board
as a standing attendee.
Other standing attendees of the
Committee include the CEO, Group HR
Director, Director of Corporate Affairs and
Investor Relations and the Chief
Sustainability Officer. During the year, the
Chair of the Board regularly attended
Committee meetings.
The Committee’s activities during 2022
covered all elements of the Group’s
sustainability strategy which is grouped
into three areas of focus: Investing in a
sustainable future. Engaging people in
better financial futures and Building a
leading responsible business. An overview
of the Committee’s activities is set out
on the following page(s):
Key Committee activities Impact/Outcome
Engaging people in better financial futures
Financial Inclusion Deep Dive
session, considering the ambitions
of the Group against external
research undertaken and
themes from thought leadership
on this topic.
Enhanced understanding of the Group’s
commitment to deliver a financial inclusion
strategy during 2022 and to launch a targeted
pilot for women aged 40 to 55, as an
underserved customer cohort.
Approval of the Group’s financial
inclusion strategy, as part of the
wider sustainability strategy.
Short-term and longer-term goals were set
including areas such as: (i) ensuring the Group’s
colleague offering was comprehensive, (ii)
leveraging and scaling customer initiatives
across the Group and (iii) launching targeted
initiatives for mid-career women aged 40 to 55
as an underserved customer cohort.
Approval of customer related
targets and KPIs for 2022.
Strong results were delivered against the 2022
targets (see the Group’s Sustainability Report
for more detail).
Investing in a sustainable future
Approval of responsible
investment related targets and KPIs
for 2022 and monitoring of
progress against these
commitments during the year.
Management were encouraged to set
stretching targets to enable the Group to
progress its responsible investment objectives
and delivered strong results against those
targets (see the Group’s Sustainability
Report for more detail).
Stewardship Deep Dive session,
covering the Group’s vision,
current commitments and
assessment of its strategic
asset managers.
External presentation on and
focused discussion of Stewardship.
Increased understanding of Management
actions with respect to the Group’s strategy,
approach, and governance on stewardship.
Review and consideration of the
Group’s Net Zero Transition Plan.
Improved clarity on the approach towards and
timeline for developing the Net Zero Transition-
Plan and delivery of Phoenix’s ambitious climate
targets.
Review and approval of
SBTi targets.
SBTi targets have been set for Phoenix across
investments, operations and supply chain.
Building a leading responsible business
Investing in our people and culture
Consideration of the Group’s
‘people vision’ (‘to make Phoenix
the best place any of us have ever
worked’), taking into account that
diversity, equality and inclusion
were key to realising this vision.
Enhanced understanding of the Group’s
‘people vision’ and the importance of diversity,
equality, and inclusion in achieving this vision.
Sustainability governance continued
Phoenix Group Holdings plc Annual Report and Accounts 2022106
Key Committee activities Impact/Outcome
Consideration of colleague
engagement and culture
Management information.
Understanding of colleagues’ perspectives in
relation to topics such as ‘mental well-being’,
‘flexible working’, ‘diversity and inclusion’ and
support offered by the business, and insights
into the tone of the Group’s culture from the
ground up.
Monitoring/oversight of pilot
implementation of mid-life MOT,
a new colleague initiative intended
to help colleagues aged 45 and
over to plan for their futures,
and consideration of the impact
on the culture.
Pilot launch and implementation of mid-life
MOT, helping colleagues aged 45 and over to
plan for their futures and encouraging them to
make decisions to achieve a life of possibilities
for themselves.
Received reports from the
Designated NED for Workforce
Engagement and attendance at
the PCRF.
A key element of the two-way engagement
process between the Board and colleagues
enabling colleagues to express areas of
concern and positives directly to members of
the Group Board. Further information on the
role and activities of the Designated NED for
Workforce Engagement is on pages 108 to 109.
Approval of people related targets
and KPIs for 2022.
Management delivered strong results against
the 2022 targets (see the Group’s Sustainability
Report for more detail).
Reducing our environmental impact
Approval of environment targets
and KPIs.
Management delivered strong results against
the 2022 targets (see the Group’s Sustainability
Report for more detail).
Decarbonisation targets under the
SBTi Process education.
Increased understanding of Science Based
Targets and SBTi, progress monitoring
mechanisms; and consequences of not
meeting the targets.
Working responsibly with Suppliers
Review of the Group’s Modern
Slavery and Human
Rights Statement for the year
ended 31 December 2021,
recommended for approval
by the Board.
Approval of the Group’s statement by
the Board, published in August 2022 on
the Phoenix website.
Approval of supplier targets
and KPIs.
Delivery of strong results against the 2022
targets (see the Group’s Sustainability Report
for more detail).
Review of the outcomes of the risk
assessment to identify suppliers
deemed to be high risk for
modern slavery.
Direct engagement with suppliers who were
deemed to be high risk for modern slavery
to mitigate such risks, together with action
plans being put in place for relevant
service providers.
Supporting our Communities
Approval of community related
targets and KPIs.
Management delivered strong results against
the 2022 targets (see the Group’s Sustainability
Report for more detail).
Committee effectiveness
During the year, the effectiveness of the
Committee was considered as part of the
annual Board evaluation. Overall, it was
concluded that the Committee was
operating effectively. Members of the
Committee agreed that the meetings
are constructive with all members
demonstrating a high level of engagement
in the topics throughout the year. The
agenda remains well balanced with
appropriate information and insight and
the rolling schedule of education on
sustainability related matters and external
perspective sessions remains highly valued
by the Committee to increase and broaden
their knowledge of emerging best practice
and topics. It was agreed that further time
be added for free form discussion. Further
information on the Board evaluation
activity can be found on page 91.
Climate change
In addition to the above, the Committee
received regular reports, including
updates from the Chief Sustainability
Officer, relating to the Group’s compliance
with climate change regulation and other
emerging climate change related topics.
This included continued progress made
on activities aligned to the TCFD
recommendations within the Group and
a review of the Group’s CBES submission
content in collaboration with the Board
Risk Committee. The Board Risk
Committee has monitored the Group’s
compliance with the PRA’s supervisory
statement SS3/19, supplementing the
Committee’s oversight of climate change
related activities undertaken by the Group.
The PRA’s CBES activity resulted in
enhanced Committee awareness and
understanding of climate change risks and
opportunities, and a clearer view of the
impact that different climate change
scenarios might have on Phoenix, enabling
the development of strategies and actions
to address the risk of climate change.
The Committee has played a vital role
in developing the strategic ambition of
the Group’s Net Zero Transition Plan which
is expected to be published in 2023.
The Committee is committed to ensuring
the success of the Group’s sustainability
strategy which plays a key role in the
fulfilment of the Group’s purpose to help
people secure a life of possibilities. The
strategy has been developed to align with
the Group’s enterprise strategy, our values
and culture.
Karen Green
Chair of the Sustainability Committee
Phoenix Group Holdings plc Annual Report and Accounts 2022 107
Corporate governance
Workforce engagement
Supporting colleagues
2022 has been another year where
external factors have created challenges
for businesses and for their teams. The
aftermath of the COVID-19 pandemic
together with the wider economic
backdrop and rising rates of inflation
have exacerbated challenges that
colleagues are facing.
Throughout 2022 we have continued to
support our colleagues through these
difficult periods. Central to this has been
a wide-ranging support package to help
colleagues navigate the cost of living
challenges, which included giving all
colleagues, except our most senior staff,
a net £1,000 payment in August, free
personalised financial coaching and
planning, assistance with cost of parking
at work, and assistance with cost of lunch
at work. This was in addition to the robust
well-being support that is available.
Listening to and understanding colleagues
A strategic priority has been to create a
single Phoenix purpose-led culture that
colleagues feel connected to. The creation
of a new visual identity for Phoenix, and
alignment of our customer brands within
this, has helped to enhance the sense of
belonging for colleagues. Further to this,
focus has continued on improving the
day-to-day colleague experience through
our Diversity, Equity and Inclusion strategy,
developed using a data-led approach
following the roll out of our ‘Who We Are’
app in 2021.
Through the monthly colleague
engagement survey, the Executive Team
and the Board are able to gain insight
direct from colleagues into the moments
that matter. This insight has enabled us
to proactively engage with colleagues
and create actions to support our
colleagues across the business.
How the Board has engaged with
colleagues and supported them
throughout 2022
The Board sets the cultural tone for
the organisation and seeks to engage
with colleagues, both directly and
indirectly, throughout the year. The Board
recognises that colleagues are central
to the achievement of our strategic
priorities and the Group’s ability to
provide customers and wider stakeholders
with the best outcomes possible.
I joined as the Designated NED for
Workforce Engagement on 1 July 2022,
taking over the role from Karen Green.
I would like to thank Karen for the seamless
handover and support. Between Karen
and myself we carried out a programme
of virtual and in-person visits and sessions
across the business in 2022.
One of our key points of connection with
colleagues has been in meeting with the
Phoenix Colleague Representation Forum
(‘PCRF’) on a quarterly basis. This is an
autonomous forum made up of colleague
representatives from each of our functions.
Our partnership with the PCRF enables
us to have direct, honest and open
discussions about strategic topics
and how they impact colleagues.
Engagement in action
– listening to the
colleague voice
Engagement with colleagues is integral to our
strategy and vision to be the best company that
colleagues have ever worked for. Our colleagues
are what enable Phoenix to grow and succeed,
and through regular two-way dialogue, the
Board seeks to understand the issues that
matter most to our colleagues.
“I was delighted to get the
chance to meet Maggie to
hear more about her role
and what she hoped to do for
colleagues. She spent time
listening to our experiences
and exploring ways she can
help Phoenix to innovate
and ensure it remains a
great place to work. I was
impressed by how open the
conversation was and her
willingness and excitement
to meet with colleagues on
a regular basis.”
Alannah Couper,
Sustainability Manager
Phoenix Group Holdings plc Annual Report and Accounts 2022108
After the quarterly meetings, the PCRF
representatives share a summary of
the meeting and topics discussed
with colleagues within their regular
PCRF newsletter.
In addition to regularly meeting with the
PCRF, we have taken the opportunity
to invite wider colleagues to informal
meetings to enable them to share what is
on their mind in the moment. Often similar
themes come up through both channels
of engagement, and I am encouraged that
colleagues feel that they can be honest
in these discussions.
The following key themes were discussed
with colleagues throughout the year:
• Pace and volume of change: reflecting
a combination of large-scale change
projects within the overall change
agenda, and the evolution of the
Group Operating Model.
• Ways of Working: embedding our hybrid
working model to get the best out of
people and protect our customers.
• Diversity, Equity & Inclusion: The steps
we are taking to enable everyone to
be their authentic selves at work.
• Cost of living: supporting colleagues
through challenging periods.
• Sustainability agenda: sharing aims
to make Phoenix a responsible
employer and committed to
a sustainability agenda.
In my role as the Designated NED for
Workforce Engagement I share regular
feedback from my sessions to the Board,
which provides additional perspective and
insights on colleagues.
Continuing to develop two-way
communication enables colleagues
to be kept informed of how the Board
is engaged in overseeing the development
and execution of the Group’s strategy
and enables the Board to stay connected
to what is important to our colleagues and
the impact of Board decisions.
Maggie Semple
Designated NEDfor Workforce
Engagement
“The PCRF work with Maggie, and formerly Karen,
to share the colleague voice with the Board, giving
regular updates of how colleagues feel about the topics
that affect their working lives at Phoenix. Meeting at
regular points throughout the year keeps the colleague
voice relevant and in line with strategic change and
evolution. Colleagues feel heard by the Board and
that their collective views feed into discussions
about their working environment”
PCRF
“The People and Culture agenda is of great importance
to the Phoenix Board, and a topic that I regularly speak
with them on. We have a vision to make Phoenix the
best place any of our colleagues have ever worked,
underpinned by four culture ambitions that make
Phoenix ‘our place’ – a place in which everyone dreams
to be, a place in which everyone belongs, and where they
can be authentic and happy, a place in which everyone
leads, and a place in which everyone helps to create.
Our partnership this year with Karen Green and now
Maggie Semple meant we have had a true two-way
feedback cycle that benefits our colleagues and Phoenix.
Karen and Maggie have had regular dialogue with
colleagues across Phoenix, across all levels, departments
and locations, and have shared insights on the Board’s
activities at these sessions. Alongside this, our
continuous listening approach to colleague engagement
means we can understand the areas of focus for our
colleagues and respond to the moments that matter
through the Executive Committee.
The regular interaction which our colleagues have
had with Karen and Maggie throughout 2022 have
been open, honest and transparent. This really speaks
to the culture that our Board are interested and
responsive to the challenges our colleagues may
be facing, and that our colleagues know that they are
in a safe environment to know that they will be heard
if they speak up.
Maggie has joined us from outside of the Financial
Services sector, and brings a different perspective to
discussions. Her vast experience in matters relating
to People, and her unique outlook in this area, will set
her up for great success in fulfilling the Designated
Workforce Non-Executive Director role.”
Sara Thompson,
Group HR Director
Phoenix Group Holdings plc Annual Report and Accounts 2022 109
Corporate governance
Directors’
remuneration report
Remuneration Committee Chair
Kory Sorenson
Directors’ remuneration report
Members
Kory Sorenson (Chair)
Karen Green
Belinda Richards
Nicholas Shott
Key Committee activities in 2022
• Triennial review of Directors’
Remuneration Policy
• Incentive outcomes for the 2022 AIP
and 2020 LTIP
• Executive Director and Executive
Committee salary decisions for 2023
• Metrics for 2023 variable pay schemes
to align with our/the Group’s evolving
business strategy
• Oversight of wider employee
remuneration review and cost
of living support
Dear Shareholder,
On behalf of the Board and its
Remuneration Committee (‘Committee’),
I am pleased to present the Directors’
Remuneration Report for the year ended
31 December 2022.
Summary of the year
Phoenix has again performed very strongly
in 2022, as it executed against its strategic
priorities and delivered on its financial
framework of cash, resilience and growth.
The Group delivered £1.5 billion of cash
generation, exceeding our 2022 target
range of £1.3 to £1.4 billion. Our Solvency II
balance sheet remains resilient with a £4.4
billion SII surplus and a 189% Solvency II
shareholder capital coverage ratio. We also
delivered c.£1.2 billion of incremental new
business long-term cash generation, with
the Group’s organic growth once again
more than offsetting the run-off of our
in-force business.
At the recent Capital Markets Day, Phoenix
outlined our strategy to deliver sustainable
organic growth, through both meeting
more of the evolving needs of our existing
customers and by acquiring new
customers. The Group set its first ever
organic growth target of c.£1.5 billion
of incremental new business long-term
cash generation by 2025, which is a 25%
increase on the strong performance
in 2022.
Wider workforce and actions to address
the cost of living
As the UK’s largest long-term savings and
retirement business, Phoenix is driven by
its core social purpose of helping people
secure a life of possibilities as demonstrated
by our support for our customers and
colleagues impacted by the current
macro-economic circumstances. In
particular, the Committee supported the
decision to make a £1,000 net payment to
all permanent colleagues (excluding the
Top 100 leaders) in August 2022, and since
September 2022, to provide free lunches
and parking to all UK colleagues on a
temporary basis to support them through
the current cost of living challenges. The
average salary increase for employees in
the next pay round will be 6%, to reflect
the emphasis of supporting the wider
workforce in the cost of living crisis.
Executive remuneration
outcomes for 2022
The incentive outcomes for 2022 reflect
the strong financial and non-financial
performance and progress on key strategic
objectives during the year as described
on pages 128 to 130 of this report.
Based on its assessment of the corporate
metrics, the Committee determined that
the Annual Incentive Plan (‘AIP’) outcome
should be 87.7% of the maximum
opportunity. With regard to the
achievements under the Strategic
Scorecard which represents 20% of the
Executive Directors’ AIP, the Committee
determined outcomes should be 83.0%
for Andy Briggs and 74.0% for Rakesh
Thakrar. This results in total awards of
86.8% and 85.0% respectively of the
maximum bonus opportunity in line with
the overall assessment. Further details are
set out on pages 129 to 130.
The 2020 Long-Term Incentive Plan (‘LTIP’)
award covering the years 2020–2022 was
based on Net Operating Cash Receipts,
Return on Shareholder Value, Persistency,
and Relative TSR. The overall vesting
outcome is 44.3% of the maximum
opportunity. Further details are set out
on page 131.
As reported in the FY 2020 Directors’
Remuneration Report, the Committee
reviewed the grant price of the 2020 LTIP
(620.5p) compared to the grant price of
the 2019 LTIP (700.4p) and was satisfied
that no adjustments were required to the
awards on grant for windfall gains. The
Committee has again reviewed the
position ahead of the vesting, taking into
account the Phoenix share price as at
28 February 2023 (633.69p) and is
satisfied that no windfall gains have
occurred and that no adjustment is
required on vesting (see page 131).
The resulting single total figure of
remuneration for Andy Briggs was £3,058k
and for Rakesh Thakrar was £1,555k. Full
details are set out on page 127.
Phoenix Group Holdings plc Annual Report and Accounts 2022110
Directors’
remuneration report
The Committee is satisfied that the
remuneration outcomes for 2022 are an
appropriate reflection of the year’s
business performance and its trajectory
providing strong alignment between pay
and performance and with appropriate
regard to both the management of risk
within our incentives and the broader
stakeholder experience.
Amendments to the Directors’
Remuneration Policy
This year, the Committee has conducted
its triennial review of the current Directors’
Remuneration Policy which received a vote
in favour of 99.31% at the 2020 AGM.
As part of the review, the Committee
considered market best practices, the
alignment of our existing structures with
our strategy and a comparison of both
structure and quantum to our peers.
Our objective is to ensure that the Group
continues to have a remuneration package
for Executive Directors which motivates
and retains, and is aligned with the Group’s
strategy and Shareholders’ objectives.
Based on the review, the Committee
believes that the remuneration structures
within the current Policy remain fit for
purpose and aligned to business strategy.
The core structure will therefore retain the
market-standard elements of base salary,
benefits, pension aligned to the workforce,
AIP and LTIP. The Policy continues to meet
UK best practice standards with features
such as 50% deferral of AIP outcomes into
shares for three years, 2-year post-vesting
holding periods for LTIP awards, malus
and clawback, and ambitious in-post and
post-employment share ownership
guidelines. For this reason, the Committee
is not intending to make any changes
to our remuneration structure.
Satisfied with the core remuneration
structure, the Committee analysed the
competitiveness of the package in light of
the quality of the executive management
team, their commitment to success for all
stakeholders and the strong progress
made in executing their ambitious growth
strategy. This is clearly demonstrated in the
second consecutive year of strong organic
growth delivered in 2022, as well as the
cash-funded M&A acquisition of SLF of
Canada UK Limited that was announced
in August 2022. Both demonstrate
that Phoenix is now truly a growing,
sustainable business.
The Committee reviewed market data
against a sector peer group of FTSE 350
insurers, and a sized-based peer group of
FTSE 31–100 companies from all sectors.
Phoenix ranked 68 in the FTSE 100 at the
time of the exercise, consolidating its
position since the last triennial review in
2019 broadly at the median of the FTSE
31–100 peer group in terms of market
capitalisation taking into account
market volatility.
The data evidenced that the current AIP
opportunity for the Group Chief Executive
Officer (‘CEO’) and Group Chief Financial
Officer (‘CFO’) is appreciably behind the
median of our peer group, particularly
given the quality of the executive team.
The Committee is therefore proposing to
increase the maximum AIP opportunity
under the Policy from 150% to 200% of
salary and to implement this opportunity
for both Executive Directors from FY 2023.
50% of AIP outcomes will continue to be
deferred in shares for three years and
malus and clawback provisions will
continue to apply. 80% of executive
director total remuneration is now subject
to the achievement of robust and
stretching performance targets aligned
with value delivered to shareholders.
To reflect the increased AIP opportunity
and to strengthen further the alignment
between the Executive Directors and
shareholders, the Committee proposes to
increase the Share Ownership Guidelines
(‘SOGs’) from 300% to 350% of salary for
the CEO and from 250% to 300% of
salary for the CFO and for two years
post-employment in line with best practice.
This positions the SOGs above the
upper quartile of comparably sized
FTSE companies.
By making these changes, the Committee
believes that the Policy will provide an
effective framework to ensure that the
remuneration structure for the Executive
Directors over the next three year period
is motivating and creates a strong
incentive to deliver sustainable growth
and value to shareholders.
The Committee will continue to review the
performance and development of both
roles over the next three year policy
period. Subject to the Committee’s
assessment of performance, the
Committee may consider further
adjustments to incentive levels but these
would be within the proposed Policy limits
and therefore limited to the LTIP (which has
a maximum of 300% of salary). No further
increases to the AIP would be possible
under the proposed Policy.
Updated metrics to align remuneration
with our evolving strategy
For the 2023 AIP, the Committee has
decided to replace the existing
Shareholder Value metric (25% weighting)
by a Net Flows metric for the Group’s
Pensions and Savings businesses (15%
weighting). The new metric will measure
growth and in-force business retention
within our Open business and is
stakeholder focused and aligned to our
strategy. The Long-Term Cash Generation
from New Business metric has been
amended to include Own Funds
Management Actions and increased from
20% to 30% weighting. This amended
metric will provide a wider assessment of
value creation by including Own Funds
enhancing management actions. This will
provide a holistic view on the sources of
future cash generation driving the Group’s
in-force Long-Term Free Cash metric, and
therefore underpinning the sustainability
of the dividend.
The customer metric relating to the
percentage of complaints resolved in eight
weeks will be replaced by one relating to
the percentage of claims resolved in three
days. This new measure is felt to align more
closely to the direction of travel for
published industry standards and the
Consumer Duty, whilst incentivising
appropriate behaviours for complaint
management in the Group. Resolution of
complaints in eight weeks remains an
important metric for the Group and
continues to be included in the ongoing
dashboard of management information.
Phoenix Group Holdings plc Annual Report and Accounts 2022 111
Corporate governance
Annual incentive plan
Long-te
rm incentive plan
Net Operating
Cash Receipts
20%
Net Operating
Cash Receipts
20%
Group In-force
Long-term Free Cash
20%
Return on
Shareholder Value
20%
Decarbonisation
20%
Persistency
20%
Relative TSR
20%
Decarbonisation
20%
Persistency
20%
Relative TSR
20%
2022
2023
Cash Generation
24%
Corporate Element – 80% of AIP metrics
Open (Pensions
and Savings)
net flows
12%
Incremental New Business
Long-term Cash Generation
(less strain) plus Own Funds
impacting Management Actions
24%
Shareholder Value
20%
Incremental Long-term
cash generation less
new business strain
16%
Customer Experience
20%
Strategic Scorecard
20%
Deferral 50%
for a period
of 3 years
Deferral 50%
for a period
of 3 years
2022
2023
Cash Generation
24%
Customer Experience
20%
Strate
gic Scorecard
20%
Directors’ remuneration report continued
For the 2023 LTIP, Group In-force Long-
Term Free Cash replaces the existing
Return on Shareholder Value metric.
This measures the Group’s ability to ensure
its recurring sources of long-term cash
exceed its recurring uses over the
performance period and therefore that
the Group is delivering sustainable growth.
The proposed changes to both the AIP and
LTIP metrics support the ambitions set out
at the Capital Markets Day in December
2022 and are set out above.
A salary increase of 4% effective from
1 April 2023 is proposed for the Executive
Directors, below the average increase
for all employees of 6% to reflect the
emphasis of supporting the wider
workforce in the cost of living crisis
as part of our core purpose.
Looking forward
The Board and Committee believe that our
proposed Remuneration Policy provides
strong alignment between pay and
performance and appropriately reflects
the experience of our stakeholders. We
hope that the revised Remuneration Policy
and the implementation of pay as detailed
in the Annual Report on Remuneration will
meet our shareholders’ clear expectations
for an appropriate remuneration approach
and will be voted for favourably in the
resolutions proposed at the 2023 AGM.
2022 marks my last full financial year
as Chair of the Remuneration Committee.
I will be succeeded as Chair of the
Committee by Nicholas Shott, who has
been a member of the Remuneration
Committee since 20 October 2016 and is
well qualified for this role. It has been
a privilege to serve as Committee Chair
and I am grateful for the support of the
Committee members during my tenure
as well as the valuable feedback from
our shareholders. I wish Nicholas well
in his new role.
Kory Sorenson
Remuneration Committee Chair
10 March 2023
Phoenix Group Holdings plc Annual Report and Accounts 2022112
£1,100k
£1,053k
£809k
£11k
£13k
£85k
£50k
£420k
£601k
£471k
Fixed Pay
30%
Fixed Pay
34%
Variable Pay
70%
Variable Pay
66%
At a glance 2022
Remuneration for 2022
2022 Single Figure
The outcomes under the AIP and LTIP
resulted in a single figure outcome for
Andy Briggs of £3,058k and for Rakesh
Thakrar of £1,555k. Further details are
on page 127.
Fixed vs variable pay
(% weighting)
Group CEO
Fixed vs variable pay
(% weighting)
Group CFO
Fixed Pay
Salary 30%
Benefits 1%
Pension 3%
Variable Pay
AIP 39%
LTIP 27%
Fixed Pay
Salary 27%
Benefits 0%
Pension 3%
Variable Pay
AIP 34%
LTIP 3 6%
Group performance measures
Annual Incentive Plan (‘AIP’):
Below we show the target ranges and outturn against the Group metrics within the 2022 AIP. More details of the 2022 AIP can
be found on page 128. All metrics align remuneration to the group strategy and were felt by the Committee to be reflective
of the shareholder experience. Further information on how the Committee determined the AIP outcomes in the context of
the wider stakeholder experience this year is set out on pages 129 to 130.
Weighting
Threshold for
payout Target Maximum Outcome
Formulaic
outcome (% of
maximum
incentive)
Cash generation (£m) 30.0% 1,301 1,401 1,501 1,504 30.0%
Incremental Long-term
cash generation less new
business strain (£m)
20.0% 580 630 680 890 20.0%
Shareholder
value (£m)
25.0% 6,621 6,721 6,921 6,848 20.5%
Customer satisfaction –
Telephony (%)
6.3% 90 91 92 92 6.3%
Customer satisfaction –
Digital (%)
6.3% 92 94 96 94 3.1%
Complaints resolved in <8
weeks (%)
6.3% 91 93 95 94 4.7%
Service Levels (demand
processed) (%)
6.3% 90 92 94 92 3.1%
Total 87.7%
Phoenix Group Holdings plc Annual Report and Accounts 2022 113
Corporate governance
Group CEO
Andy Briggs
300%
324%
Group CFO
Rakesh Thakrar
250%
223%
Guideline GuidelineActual Actual
Outturn
17.2%
Outturn
30%
Operating Cash generation
Incremental Long-Term Cash Generation (less New Business strain)
Shareholder value
Customer satisfaction – Telephony
Customer satisfaction – Digital
Complaints resolved in <8 weeks
Service Levels (demand processed)
25%
30%
20%
25%
Outturn
20.5%
Outturn
20%
Outturn
13.8%
Outturn
8.6%
Outturn
21.9%
Net Operating Cash Receipts
Return on Shareholder Value
Persistency
Relative TSR
20%
20%
35%
25%
Outturn
0%
2022 AIP weighted
performance outturn
2020 LTIP weighted
performance outturn
Directors’ remuneration report continued
Weighting Threshold Maximum Outcome Formulaic
outcome (%
of maximum
award)
Net Operating Cash Receipts (£m) 35.0% 4,411 4,966 4,627 21.9%
Return on Shareholder Value (%) 25.0% 2.0 4.0 (1.8) 0.0%
Persistency (%) 20.0% 8.0 6.5 7.0 13.8%
Relative TSR (percentile) 20.0% 50th 80th 57th 8.6%
Total 44.3%
Group performance measures
Long-Term Incentive Plan (‘LTIP’):
Below we show outturn against the measures which applied for the 2020 LTIP awards which are reflected in the Single Figure
Table on page 127. Net Operating Cash Receipts , Return on Shareholder Value, Persistency and Relative Total Shareholder
Return (‘TSR’) performance are shown over the three-year performance period (financial years 2020, 2021 and 2022). TSR is
measured against the constituents of the FTSE 350 (excluding Investment Trusts), with threshold vesting achieved for median
(50th percentile) performance and maximum vesting achieved for upper quintile (80th percentile) performance. Further details
are shown on page 131.
Share Ownership Guidelines (‘SOGs’)
A significant proportion of executive remuneration is delivered in shares
which are released over a period of five years. In combination with our
shareholding guidelines, this aligns Executive Directors with shareholders
over the long-term. As at 31 December 2022, shareholdings for Andy
Briggs and Rakesh Thakrar are shown below.
Further details on shareholding guidelines, including post-cessation
requirements are included in the Remuneration Policy on page 121. As set
out on page 137 the SOGs are increasing from 2023 under the new
Remuneration Policy.
Shareholding Guidelines percentage shown for Andy Briggs and Rakesh Thakrar includes the value of shares held based on a share price of £6.086 (as at close of
business on 30 December 2022). Shares included are those shares held directly and beneficially, any vested LTIP awards that have not been exercised and unvested
DBSS options taking into account tax liabilities.
Phoenix Group Holdings plc Annual Report and Accounts 2022114
Over 63% of total maximum remuneration for Group CEO is paid in shares
CEO: 12%
CFO: 12%
Pension
CEO: 12%
CFO: 12%
Pension
CEO: 200%
CFO: 200%
AIP
CEO: 275%
CFO: 200%
LTIP
CEO: £844k
CFO: £504k
Salary
CEO: £844k
CFO: £504k
Salary
Benefits Benefits
1 year
performance
period
3 year deferral period
50% awarded
in shares
Shares
vested
3 year
performance period
2 year
holding period
Shares
vested
Shares
released
50% awarded
in cash
Maximum 2023 2024 2025 2026 2027 2028
Performance period
Deferral
Holding period
At a glance 2023
Alignment to strategy
This table demonstrates how each of our performance measures for AIP and LTIP align with the Group’s strategic priorities.
Performance measures 2023
2023 Corporate metrics
Optimise
our in-force
business
Enhance our
operating model
and culture
Grow organically
and through
M&A
AIP Cash Generation –
Incremental New Business Long-Term Cash Generation (less strain)
plus Own Funds impacting Management Actions – –
Open (Pensions and Savings) Net Flows – –
Customer Experience –
Strategic Scorecard
LTIP Net Operating Cash Receipts –
Group In-force Long-Term Free Cash
Decarbonisation – Operations – –
Decarbonisation – Investment Portfolio – –
Persistency –
Relative TSR
All employees participate in a common incentive plan ensuring consistency of corporate goals and individual
performance management.
The Committee reviews the performance measures and targets of the AIP and LTIP each year to ensure these are aligned
to Phoenix’s strategic priorities, are appropriately challenging, support the Company’s culture and values, and create value
for stakeholders.
Alignment to shareholders
Our Executive remuneration is designed to align with shareholder interests to deliver long-term sustainable value. The diagram
below shows how a significant portion of Executive remuneration under the remuneration policy is delivered in shares and deferred
for up to five years. Under the maximum scenario, over 63% of the Group CEO’s maximum remuneration is delivered in shares.
Phoenix Group Holdings plc Annual Report and Accounts 2022 115
Corporate governance
Alignment to wider workforce
The Committee considers a range of factors when setting the remuneration for Executive Directors, one of which is the alignment
with remuneration practices across the wider workforce. Phoenix provides colleagues across the Group with a competitive reward
package with details of each element included in the table below. Further details on wider workforce pay are shown on page 140.
Executive Directors & Executive
Committee
Senior Management Wider workforce
Salary Salaries are reviewed annually and increases are typically in line with or less
than the wider employee population.
Base salary is the basis for a
competitive total reward package
for all employees, and these are
reviewed annually with engagement
from employee representatives.
Regular benchmarking exercises are
carried out to ensure salaries remain
competitive against the market.
We are an accredited Living Wage
employer and all employees are paid
at least the Real Living Wage.
Benefits & Pension All employees are eligible to participate in our range of flexible benefits and wellbeing initiatives in respective markets.
Core benefits include private medical cover, 12 times life assurance cover, group income protection and a range of
flexible benefits. The level of core benefits is the same across all grades.
Colleagues can participate in a share matching plan under the Phoenix Share Incentive Plan (‘SIP’) and, in the UK,
the Phoenix Sharesave Scheme.
All employees are automatically enrolled in the Company’s Mastertrust pension scheme with a 10% core
contribution and 2% matching contribution (plus salary sacrifice uplift of 10% of the employee contribution).
Payment in lieu of contribution, reduced for the impact of employer’s NIC is permitted where lifetime or annual
limits are reached. Separate occupational pension schemes with varying contribution rates operate in Ireland and
Germany.
Annual Incentive Plan
(‘AIP’)
All permanent and fixed-term employees are eligible to participate in an AIP which is based on Group measures,
business unit performance (where applicable) and personal objectives. Malus and clawback provisions apply.
Deferral Half of any AIP award is subject
to deferral into shares for a three
year period.
Malus and clawback
provisions apply.
One third of any AIP award is
subject to deferral into shares f
or a three year period.
Malus and clawback provisions apply.
Any AIP awards over £50k are subject
to deferral into shares for a three
year period. Deferral is 50% of the
excess above £50k in blocks of £5k.
Threshold varies slightly in Ireland.
Malus and clawback provisions apply.
Long-Term Incentive
Plan (‘LTIP’)
Senior executives participate in a LTIP with a three year performance
period and vesting is subject to Group performance outcomes.
Measures and targets for long-term incentive plans are consistent for all
participants and measured over a three year period.
Malus and clawback provisions apply.
A number of colleagues with
exceptional achievements and
value-aligned behaviours during the
performance year are considered for
a long-term incentive award in the
form of Phoenix shares with a vesting
period of three years.
Holding period A two-year holding period after the
vesting date also applies for LTIPs.
No holding period. Not applicable
Shareholding
requirements (‘SOGs’)
Shareholding requirements ensure
greater alignment with interests of
shareholders.
• 350% of salary for Group CEO
• 300% of salary for Group CFO
• 150% of salary for Executive
Committee members
No SOGs required. Not applicable
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022116
How our policy addresses the following factors set out in the UK Corporate Governance Code
Clarity and simplicity
• The reward framework seeks to embed simplicity and transparency
in the design and delivery of remuneration. Both the Corporate
Element and the Strategic Scorecard relating to the AIP have
transparent, measurable metrics.
• We have included diagrams and charts in this Remuneration Report
to improve clarity for readers regarding the alignment of Executive
remuneration with shareholders and our strategy.
Risk
• The Committee undertakes an annual review of risk before confirming the
outcomes for the AIP to ensure that there are no risk-related concerns that
require the moderation of AIP outcomes.
• Malus and clawback operate in respect of the AIP and LTIPs (see page 123 for
details on trigger events).
• The Committee may apply discretion to override formulaic outcomes if they
are considered inconsistent with the underlying performance of the Group.
Predictability
• The range of potential award levels to individual Executive Directors are set out
in the scenario chart on page 126 which also demonstrates the impact of
potential share price growth by 50% over the three-year performance period
until LTIP vesting.
Proportionality
• A high percentage of rewards are delivered in the form of shares,
meaning Executive Directors are strongly aligned with
shareholders. Executive Directors are required to hold shares from
LTIP awards for two years following vesting which provides focus
on sustainable share price growth. Significant deferral levels under
the AIP further align remuneration outcomes to shareholders.
• We have increased the share ownership guidelines to 350% for the
CEO and 300% for the CFO and have a post-employment
shareholding requirement for our Executive Directors to ensure
that they are aligned to the long-term performance of the Group.
Alignment to culture
• We have engaged with our employees through Peakon (our employee
engagement survey), PCRF (our colleague representative forum), our many
employee networks, and our Designated Director for Workforce Engagement
(see page 108) to develop our values and to improve our understanding of what
is required to become a high-performing organisation. Our remuneration
philosophy supports our purpose and core values.
Phoenix Group Holdings plc Annual Report and Accounts 2022 117
Corporate governance
Directors’ remuneration report continued
The Directors’ remuneration policy
(the ‘Policy’)
Subject to approval from shareholders, the 2023 Directors’ remuneration policy
set out below will be effective from the date of the 2023 AGM. It will apply for
a period of three years, until the 2026 AGM, unless a revised Policy is approved
by shareholders before then.
Comparing the new Policy with the current Policy
The main features of the 2023 Policy are summarised in the table below. The table also includes details of how the Policy is
intended to apply subject to approval by shareholders at the 2023 AGM.
Current Proposed
Base salary Base salary
Pension 12% of salary for Group CEO
and Group CFO
Pension 12% of salary for Group CEO and
Group CFO
Annual Incentive 150% of salary for
Group CEO and Group CFO
Annual Incentive 200% of salary for
Group CEO and Group CFO
Long-term Incentive
275% of salary for Group CEO
200% of salary for Group CFO
Long-term Incentive
275% of salary for Group CEO
200% of salary for Group CFO
Shareholding Guidelines
300% of salary for Group CEO
250% of salary for Group CFO
Shareholding Guidelines
350% of salary for Group CEO
300% of salary for Group CFO
General policy
The Remuneration Policy for Executive Directors is summarised in the table below along with the policy on the Chair’s and the Non-
Executive Directors’ fees.
Remuneration Principles
The Company’s overall positioning on remuneration for Executive Directors has been set with reference to the provisions of the UK
Corporate Governance Code, best practice and feedback received from shareholders during consultation.
An appropriate balance is maintained between fixed and variable components of remuneration.
Remuneration is aligned to the long-term success of the Group.
Remuneration takes account of the risk profile of the Group.
Remuneration supports a strong pay for performance culture.
Our updated Remuneration Policy benchmarks the total target remuneration for the Executive Directors using appropriate market data
sets which are consistent with those used for other roles in the Group.
This section does not form part of the Remuneration Policy and is for information only.
Phoenix Group Holdings plc Annual Report and Accounts 2022118
Remuneration policy table
Element and purpose
in supporting
strategic objectives
Policy and operation Maximum Performance measures
Base Salary
This is the core
element of pay which
supports the
recruitment and
retention of Executive
Directors and reflects
the individual’s role
and position within
the Group as well as
their capability
and contribution.
• Base salaries are reviewed each year
against companies of similar size and
complexity. Both salary levels and
overall remuneration are set by
reference to the median data of
comparators which the Remuneration
Committee considers to be suitable
based on index, size and sector.
• The Remuneration Committee uses
this data as a key reference point in
considering the appropriate level of
salary. Other relevant factors
including corporate and individual
performance and any changes in an
individual’s role and responsibilities,
and the level of salary increases
awarded to other employees of the
Group are also considered.
• Base salary is paid monthly in cash.
• Changes to base salaries normally
take effect from 1 April.
• Salary levels are specific to
the role and individual.
• Maximum salary will be the
median level of salaries for
CEOs in the FTSE31–100
(currently £812,000),
provided that this figure may
be increased in line with UK
RPI inflation for the duration
of this policy.
• However, when reviewing
salaries for Executive
Directors, the Remuneration
Committee will also review
the salaries, and salary
increases, for senior
management and employees
in relevant countries to
maintain consistency.
Percentage increases for
Executive Directors will not
exceed that of the broader
employee population, other
than in specific
circumstances identified
by the Remuneration
Committee (e.g. in response
to a substantial change in
responsibilities).
• N/A
Benefits
To provide other
benefits valued
by recipient.
• The Group provides market
competitive benefits in kind. Details of
the benefits provided in each year will
be set out in the Implementation
Report. The Remuneration Committee
reserves discretion to introduce new
benefits where it concludes that it is in
the interests of the Group to do so,
having regard to the particular
circumstances and to market practice.
• Where appropriate, the Group will
meet certain costs relating to
Executive Director relocations and
other exceptional expenses.
• It is not possible to prescribe
the likely change in the cost
of insured benefits or the
cost of some of the other
reported benefits
year-to-year, but the
provision of benefits
will normally operate.
• The Remuneration
Committee will monitor the
costs in practice and ensure
that the overall costs do not
increase by more than the
Remuneration Committee
considers to be appropriate
in all the circumstances.
• Relocation expenses are
subject to a maximum limit
of £50,000.
• N/A
Pension
To provide retirement
benefits which keep
Phoenix Group
competitive within the
marketplace and
provide for the future
of our employees.
• The Group provides a competitive
employer sponsored defined
contribution pension plan.
• All Executive Directors are eligible
to participate in the Defined
Contribution Pension Plan available
to all new joiners or they may opt to
receive the contribution in cash if they
are impacted by the relevant lifetime
or annual limits. Any such cash
payments are reduced for the
effect of employers’ National
Insurance Contributions.
• Phoenix will honour the pensions
obligations entered into under all
previous policies in accordance with
the terms of such obligations.
• Pension contributions for
Executive Directors are
aligned with the wider
workforce rate which is
currently 12% of salary
(reduced to 10.6% when
taken as cash in lieu
of contribution).
• N/A
Phoenix Group Holdings plc Annual Report and Accounts 2022 119
Corporate governance
Directors’ remuneration report continued
Element and purpose
in supporting
strategic objectives
Policy and operation Maximum Performance measures
Annual Incentive
Plan (‘AIP’) and
Deferred Bonus
Share Scheme
(‘DBSS’)
To motivate
employees and
incentivise delivery
of annual
performance targets
aligned to strategy.
• AIP levels and the appropriateness of
measures are reviewed annually to
ensure they continue to support the
Group’s strategy.
• AIP outcomes are paid in cash in
one tranche (less the deferred
share award).
• At least 50% of any annual AIP award
is to be deferred into shares for a
period of three years although the
Remuneration Committee reserves
discretion to alter the current practice
of deferral (whether by altering the
portion deferred, the period of
deferral or whether amounts are
deferred into cash or shares). Such
alterations may be required to ensure
compliance with regulatory guidelines
for pay within the insurance sector, but
will not otherwise reduce the current
deferral level or the period of deferral.
• Deferral of AIP outcomes into shares
is currently made under the DBSS.
• Awards under DBSS will be in the form
of awards to receive shares for nil-cost.
• DBSS awards are typically made
automatically each year on the fourth
dealing day following the
announcement of annual results, using
the average of the preceding three
dealing days’ share prices to calculate
the number of shares in awards.
• The three-year period of deferral
will run to the third anniversary of
the award date.
• Dividend entitlements will accrue over
the three-year deferral period and be
delivered as additional vesting shares.
• Malus/clawback provisions apply to
the AIP and to amounts deferred
under DBSS as explained in the notes
to this table.
• The maximum annual
incentive level for an
Executive Director is 200%
of base salary per annum.
• The performance measures applied to AIP will be set by the
Remuneration Committee and may be financial or
non-financial and corporate, divisional or individual and in
such proportions as it considers appropriate. However, the
weighting of financial performance measures will not be
reduced below 60% of total AIP potential in any year for the
duration of this policy.
• In respect of the financial and non-financial performance
measures, attaining the threshold performance level produces
a £nil annual incentive payment.
• On-target performance on all measures produces an outcome
of 50% of maximum annual incentive opportunity. However,
the Remuneration Committee reserves the right to adjust the
threshold and target levels for future financial years in light of
competitive practice.
• The AIP operates subject to three levels of moderation:
• i. The Committee seeks to set suitable ranges for each
measure in the context both of the Group’s own internal
budgets and of external projections (whether through
management guidance or consensus forecasts). Recognising
that the business of the Group is to engage in corporate
activity, the Remuneration Committee may adjust targets
during the year to take account of such activity and ensure
the targets continue to reflect performance as originally
intended.
• ii. There is a specific adjustment factor of 80%–120% of the
provisional outturn whereby the Remuneration Committee
may adjust the provisional figure (but subject to any
over-riding cap) to take account of its broad assessment of
performance both against pre-set targets, risk
considerations, and more generally, of the wider universe of
stakeholders. With respect to financial performance
measures, this assessment will include consideration of the
quality of how particular outcomes were achieved.
• The AIP remains a discretionary arrangement and the
Remuneration Committee reserves discretion to adjust the
outturn (from zero to any cap) should it consider that to be
appropriate. In particular, the Remuneration Committee may
operate this discretion in respect of any risk concern.
Long-Term Incentive
Plan (‘LTIP’)
To motivate and
incentivise delivery
of sustained
performance over the
long-term in line with
our strategy and
purpose, and to
promote alignment
with shareholders’
interests, the Group
operates the Phoenix
Group Holdings plc
LTIP.
• Awards under the LTIP may be in any
of the forms of awards to receive
shares for nil-cost (as described for
DBSS above).
• LTIP awards are typically made
automatically each year on the
fourth dealing day following the
announcement of annual results, using
the average of the preceding three
dealing days’ share prices to calculate
the number of shares in awards.
• The vesting period will be at least
three years and run until the third
anniversary of the award date (unless a
longer vesting period is introduced).
• A holding period will apply so that
Executive Directors may not normally
exercise vested LTIP awards until the
fifth anniversary of the award date.
• Dividend entitlements will accrue until
the end of the holding period in
respect of performance vested
shares and be delivered as additional
vesting shares.
• Malus/clawback provisions apply on a
basis consistent with the equivalent
provisions in the AIP and DBSS and as
explained in the notes to this table.
• The Group will honour the vesting of
all awards granted under previous
policies in accordance with the terms
of such awards.
• The formal limit under the
LTIP is 300% of base salary
per annum (and 400% per
annum in exceptional cases).
• The Remuneration
Committee’s practice is to
make LTIP awards to
Executive Directors each
year over shares with a value
(as at the award date) of up to
275% of the CEO’s annual
base salary and 200% of the
CFO’s annual base salary
although discretion is
reserved to make awards up
to the maximum levels for the
policy as stated above.
• The Remuneration Committee may set such performance
measures for LTIP awards as it considers appropriate
(whether financial or non-financial and whether corporate,
divisional or individual).
• The Remuneration Committee retains discretion to adjust the
weightings or substitute metrics but would expect to consult
with its major shareholders regarding any material changes
of the current performance measures applied for LTIP awards
made to Executive Directors or the relative weightings
between these performance measures.
• For every LTIP award, appropriate disclosures regarding the
proposed performance conditions will be made in the annual
Implementation Report.
• Once set, performance measures and targets will generally
remain unaltered unless events occur which, in the
Remuneration Committee’s opinion, make it appropriate
to make adjustments to the performance measures to
ensure alignment with strategic objectives, provided
that any adjusted performance measure is, in its opinion,
neither materially more nor less difficult to satisfy than
the original measure.
• For each part of an LTIP award subject to a specific
performance condition, the threshold level of vesting will
be no more than 25% of that part of the LTIP award.
• The performance period for LTIP awards will be at least three
years, but the Remuneration Committee reserves discretion to
lengthen the applicable performance periods for LTIP awards.
Phoenix Group Holdings plc Annual Report and Accounts 2022120
Element and purpose
in supporting
strategic objectives
Policy and operation Maximum Performance measures
All-employee
share plans
To encourage share
ownership by
employees, thereby
allowing them to
participate in the
long-term success of
the Group and align
their interests with
those of the
shareholders.
• Executive Directors are able to
participate in all-employee share
plans on the same terms as other
Group employees as required by
HMRC legislation.
• Sharesave – the
Remuneration Committee
has the facility to allow
individuals to save up to a
maximum of £500 each
month (or such other level as
permitted by HMRC
legislation) for a fixed period
of three or five years. At the
end of the savings period,
individuals may use their
savings to buy ordinary
shares in the Company at a
discount of up to 20% of the
market price set at the launch
of each scheme.
• Share Incentive Plan (‘SIP’)
– the Remuneration
Committee has the facility to
allow individuals to have the
opportunity to purchase, out
of their pre-tax salary, shares
in the Company and receive
up to two matching shares
for every purchased share.
Maximum saving is £150 each
month (or up to such level as
permitted by the Company
in line with HMRC
legislation). SIP also has
the facility to allow for
reinvestment of dividends in
further shares, or the award
of additional free shares (up
to the limits as permitted by
HMRC legislation).
• Consistent with normal practice, such awards are not subject
to performance conditions.
Shareholding
guidelines
To encourage share
ownership by the
Executive Directors
over the long term,
including post
cessation of
employment,
and ensure interests
are aligned.
• Executive Directors are expected to
retain all shares (net of tax) which vest
under the DBSS and under the LTIP (or
any other discretionary long-term
incentive arrangement introduced in
the future) until such time as they hold
a minimum of 350% of base salary in
shares for the CEO and 300% of base
salary in shares for the CFO.
• Only beneficially owned shares,
vested share awards, and unvested
share awards not subject to
performance conditions (discounted
for anticipated tax liabilities), may
be counted for the purposes of the
guidelines. Share awards subject
to performance conditions do not
count prior to vesting.
• Once shareholding guidelines have
been met, individuals are expected
to retain these levels as a minimum.
The Remuneration Committee will
review shareholdings annually in the
context of this policy.
• Post cessation of employment,
Executive Directors are expected to
retain the lower of their full level of
employment shareholding guideline
or their actual shareholding at
termination for a period of two years.
• N/A • N/A
Phoenix Group Holdings plc Annual Report and Accounts 2022 121
Corporate governance
Element and purpose
in supporting
strategic objectives
Policy and operation Maximum Performance measures
Chair and Non-
Executive
Director fees
• The fees paid to the Chair and the fees
of the other Non-Executive Directors
are set to be competitive with other
listed companies of equivalent size
and complexity.
• The Group does not adopt a
quantitative approach to pay
positioning and exercises judgement
as to what it considers to be
reasonable in all the circumstances
as regards quantum.
• Additional fees are paid to
Non-Executive Directors who chair or
are a member of a Board committee,
or sit on the board of a subsidiary
company or on the Solvency II Model
Governance Committee, and to the
Senior Independent Director (‘SID’)
and Designated Director for
Workforce Engagement.
• Fees are paid monthly in cash.
• Fee levels for Non-Executive Directors
are reviewed annually with any
changes normally taking effect from
1 January. Additional reviews may take
place in exceptional circumstances,
such as following major corporate
events, to ensure that fees remain
appropriate in the context of the
Group’s size and complexity and to
reflect the time commitment required.
• The aggregate fees of the
Chair and Non-Executive
Directors will not exceed
the limit from time to time
prescribed within the
Company’s Articles of
Association for such fees
(currently £2 million per
annum in aggregate).
• The Company reserves the
right to vary the structure of
fees within this limit
including, for example,
introducing time-based
fees or reflecting the
establishment of new
Board or subsidiary
company committees.
• N/A
Notes to the Remuneration Policy table
1. Differences between the Policy on Remuneration for Directors and the Policy on Remuneration of other employees
When determining Executive Directors’ remuneration, the Committee takes into account pay throughout the Group to ensure that
the arrangements in place remain appropriate.
The Group has (as required by Solvency II regulations) one consistent reward policy for all levels of employees and this policy is made
available to all staff. Therefore, the same reward principles guide reward decisions for all Phoenix employees, including Executive
Directors, although remuneration packages differ to take into account appropriate factors in different areas of the business as follows:
• AIP – all Phoenix employees participate in an annual incentive plan, although the quantum and balance of corporate to individual
objectives varies by level. The most senior staff are subject to the regulatory requirements of Solvency II, and these individuals also
receive part of their bonus in Company shares deferred for a period of three years. A different scorecard of AIP performance
measures applies for Solvency II Identified staff in ‘control functions’ (risk, compliance, internal audit and actuarial) to exclude
financial performance measures.
• LTIP – our most senior employees participate in the LTIP currently based on the same performance conditions as those for Executive
Directors, although the Committee reserves the discretion to vary the performance conditions for awards made to employees below
the Board for future awards.
• All-employee share plans – the Committee considers it is important for all employees to have the opportunity to become
shareholders in the Company. The Company offers two HMRC tax advantaged arrangements in which all UK employees can
participate and acquire shares on a discounted and tax advantaged basis (Sharesave and SIP), and equivalent arrangements in
foreign jurisdictions (including on a tax advantaged basis permitted under local laws). In addition, selected individuals may receive
ad-hoc share awards under a long-term incentive in recognition of exceptional commercial outcomes and is contingent on
continued employment.
2. Stating maximum amounts for the Remuneration Policy
The Directors’ Remuneration Report (‘DRR’) regulations and related investor guidance encourages companies to disclose a cap within
which each element of remuneration policy will operate. Where maximum amounts for elements of remuneration have been set within
the Remuneration Policy, these will operate simply as caps and are not indicative of any aspiration.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022122
3. Malus and clawback
Malus (being the forfeiture of unvested awards) and clawback (being the ability of the Company to claim repayment of paid amounts as
a debt) provisions apply to the AIP, DBSS and LTIP. These provisions may be applied where the Remuneration Committee considers it
appropriate to do so following:
• a review of the conduct, capability or performance of an individual;
• a review of the performance of the Company or a Group member;
• any material misstatement of the Company’s or a Group member’s financial results for any period;
• any material failure of Risk Management by an individual, a Group member or the Company; or
• any other circumstances that have a sufficiently significant impact on the reputation of the Company or Group.
4. Travel and hospitality
While the Remuneration Committee does not consider this to form part of benefits in the normal usage of that term, it has been advised
that corporate hospitality (whether paid for by the Company or another Group Company) and certain instances of business travel
(including any related tax liabilities settled by the Company or another Group company) for Directors may technically be considered as
benefits and so the Remuneration Committee expressly reserves the right to authorise such activities and reimbursement of associated
expenses within its agreed policies.
5. Discretions reserved in operating incentive plans
The Remuneration Committee will operate the AIP, DBSS and LTIP according to their respective rules and the above Remuneration
Policy table. The Remuneration Committee retains certain discretions, consistent with market practice, in relation to the operation
and administration of these plans including:
• (as described in the Remuneration Policy table) the determination of performance measures and targets and resulting vesting
and pay-out levels;
• (as described in the Remuneration Policy table) the ability to adjust performance measures and targets to reflect events and/or
to ensure the performance measures and targets operate as originally intended;
• (as described in the Termination Policy) determination of the treatment of individuals who leave employment, based on the rules
of the incentive plans, and the treatment of the incentive plans on exceptional events, such as a change of control of the Company;
• the ability to make adjustments to existing awards made under the incentive plans in certain circumstances (e.g. rights issues,
corporate restructurings or special dividends). Any exercise of discretion will be disclosed in the Implementation Report for the year;
• consistent with the latest Corporate Governance Code, the Remuneration Committee may apply discretion to override formulaic
outcomes if they are considered inconsistent with the underlying performance of the Group (see pages 117 and 120);
• Legacy arrangements – for the avoidance of doubt, the Committee may approve payments to satisfy commitments agreed prior
to the approval of this Remuneration Policy, for example, those outstanding and unvested incentive awards which have been
disclosed to shareholders in previous Remuneration Reports.
Recruitment remuneration policy
The Group’s recruitment remuneration policy aims to give the Remuneration Committee sufficient flexibility to secure the appointment
and promotion of high calibre executives to strengthen the management team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive Director, the starting point for the Remuneration Committee will
be to apply the general policy for Executive Directors as set out above and structure a package in accordance with that policy.
The AIP and LTIP will operate (including the maximum award levels) as detailed in the general policy in relation to any newly
appointed Executive Director.
For an internal appointment, any variable pay element awarded in respect of the prior role may either continue on its original terms
or be adjusted to reflect the new appointment as appropriate.
For external and internal appointments, the Remuneration Committee may agree that the Company will meet certain relocation
expenses as it considers appropriate subject to the limit of £50,000 set out in the policy table.
For external candidates, it may be necessary to make awards in connection with the recruitment to buy-out awards forfeited by
the individual on leaving a previous employer. For such buy-out awards, Phoenix Group will not pay more than is, in the view of
the Remuneration Committee, necessary and will in all cases seek, in the first instance, to deliver any such awards under the terms
of the existing incentive pay structure. It may, however, be necessary in some cases to make such awards on terms that are more
bespoke than the existing annual and equity-based pay structures in Phoenix Group in order to secure a candidate. Details of any
buy-out awards will be appropriately disclosed.
Phoenix Group Holdings plc Annual Report and Accounts 2022 123
Corporate governance
All such buy-out awards, whether under the AIP, LTIP or otherwise (for example, specific arrangements made under Listing Rule 9.4.2),
will take account of the service obligations and performance requirements for any remuneration relinquished by the individual when
leaving a previous employer. The Remuneration Committee will seek to make buy-out awards subject to what are, in its opinion,
comparable requirements in respect of service and performance. However, the Remuneration Committee may choose to relax this
requirement in certain cases (such as where the service and/or performance requirements are materially completed), and where the
Remuneration Committee considers it to be in the interests of shareholders and where such factors are, in the view of the Remuneration
Committee, reflected in some other way, such as a significant discount to the face value of the awards forfeited. Exceptionally, where
necessary, this may include a guaranteed or non pro-rated annual incentive in the year of joining.
• For the avoidance of doubt, such buy-out awards are not subject to a formal cap.
• A new Non-Executive Director would be recruited on the terms explained in the Remuneration Policy for such Directors.
Directors’ service contracts
Executive Directors
Executive Director service contracts, which do not contain expiry dates, provide that compensation provisions for termination without
notice will only extend to 12 months of salary, certain fixed benefits and pension (which may be payable in instalments and subject to
mitigation). By excluding any entitlement to compensation for loss of the opportunity to earn variable pay, the Remuneration Committee
believes the contracts to be consistent with best practice. The Remuneration Committee also has discretion to mitigate further by
paying on a phased basis with unpaid instalments ceasing after the initial period of six months if the Executive Director finds alternative
employment. Contracts do not contain change of control provisions. The template contract is reviewed from time to time and may
be amended provided it is not overall more generous than the terms described above.
Subject to Board approval, Executive Directors are permitted to accept outside appointments on external boards and retain associated
fees as long as these are not deemed to interfere with the business of the Group.
Non-Executive Directors
The Non-Executive Directors, including the Chair, have letters of appointment which set out their duties and responsibilities.
Appointment is for an initial fixed term of three years (which may be renewed), terminable by one month’s notice from either side
(six months in the case of the Chair). Non-Executive Directors are not eligible to participate in incentive arrangements or receive
pension provision or other benefits such as private medical insurance and life insurance.
Copies of Executive Director service contracts and Non-Executive Director letters of appointment are available for inspection at
the Company’s registered office.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022124
Termination policy summary
In practice, the facts surrounding any termination do not always fit neatly into defined categories for good or bad leavers. Therefore,
it is appropriate for the Remuneration Committee to consider the suitable treatment on a termination having regard to all of the relevant
facts and circumstances available at that time. This policy applies both to any negotiations linked to notice periods on a termination
and any treatment which the Remuneration Committee may choose to apply under the discretions available to it under the terms
of the AIP, DBSS and LTIP plans. The potential treatments on termination under these plans are summarised below.
Incentives Good Leaver
1
Bad Leaver Exceptional Events
A participant is considered a Good
Leaver if leaving through redundancy,
serious ill health or death or
otherwise at the discretion of
the Remuneration Committee
A participant would typically be
considered a Bad Leaver following
a voluntary resignation or leaving
for disciplinary reasons
For example change in control
or winding-up of the Company
AIP Pro-rated annual incentive. Pro-rating
to reflect only the period worked.
Performance metrics determined
by the Remuneration Committee
No awards made Either the AIP will continue for the
year or there will be a pro-rated
annual incentive. Performance
metrics determined by the
Remuneration Committee
DBSS Deferred awards vest at the end
of the original vesting period
Deferred awards normally lapse Deferred awards vest
LTIP Will receive a pro-rated award subject
to the application of the performance
conditions at the normal measurement
date and, generally, any holding period
will continue to apply. Remuneration
Committee discretion to disapply
pro-rating or to accelerate vesting
to the date of leaving (subject to
pro-rating and performance
conditions) and/or the release
of any holding period
All awards will normally lapse Will receive a pro-rated award subject
to the application of the performance
conditions at the date of the event.
Remuneration Committee discretion
to disapply pro-rating
1 Where the reason for leaving is retirement, the individual will be required to provide confirmation of their continued retirement before any payments are released to them
after the end of the vesting period.
The Group has power to enter into settlement agreements with executives and to pay compensation to settle potential legal claims.
In addition, and consistent with market practice, in the event of termination of an Executive Director, the Group may pay a contribution
towards the individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees would be
disclosed as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not include an explicit cap
on the cost of termination payments.
In the event of cessation of a Non-Executive Director’s appointment (excluding the Chair) they would be entitled to a one month’s
notice period. The Chair, as detailed in his letter of appointment, would be entitled to a six months’ notice period.
Consideration of employment conditions elsewhere in the Group
As explained in the notes to the Remuneration Policy table, the Remuneration Committee takes into account Group-wide pay and
employment conditions. The Remuneration Committee reviews the average Group-wide base salary increase and annual incentive
costs and is responsible for all discretionary and all-employee share arrangements.
Consistent with previous practice, the Remuneration Committee did not consult with employees in preparing the 2023 Remuneration
Policy although has established further employee engagement in accordance with the requirements under the Corporate
Governance Code.
Phoenix Group Holdings plc Annual Report and Accounts 2022 125
Corporate governance
Consideration of shareholders’ views when shaping the Remuneration policy
Each year the Remuneration Committee takes into account the approval levels of remuneration-related matters at our AGM in
determining that the current Remuneration Policy remains appropriate for the Company.
The Remuneration Committee also seeks to build an active and productive dialogue with investors on developments in the
remuneration aspects of corporate governance generally and any changes to the Company’s executive pay arrangements in particular.
The Remuneration Committee consulted with major shareholders prior to submission of this policy, we are pleased to disclose the
majority that could provide a prior voting intention were supportive. Areas of discussion were maximum AIP incentive opportunity,
FTSE peer pay, the level of stretch in performance targets and the expectation that the percentage increase of Executive Directors’
base salary would be lower than that of the wider workforce during the current economic climate.
Potential rewards under various scenarios (£000)
The charts below compare the maximum levels of Total Remuneration payable under the Directors’ Remuneration Policy.
Group CEO – Andy Briggs
£000
Minimum On-target Maximum Maximum
with growth
944
100% 43% 19% 15%
38%
34% 28%
19%
47% 38%
19%
2,219
4,964
6,129
Group CFO – Rakesh Thakrar
£000
Minimum On-target Maximum Maximum
with growth
567
100% 43% 22% 18%
38%
39% 33%
20%
39% 33%
16%
1,332
2,593
3,101
Minimum, on-target and maximum represent the scenario charts required under the Directors’ Remuneration Policy – see the data
assumptions below.
‘Maximum with growth’ is the maximum scenario, but with the LTIP element increased to reflect a 50% share price growth assumption
over the three-year period until LTIP vesting. The element of the total representing the value from these assumptions on share price
growth and dividends is shown separately.
Name
Base salary
£000
Benefits
£000
Pension
£000
Total fixed
£000
Andy Briggs 844 10 90 944
Rakesh Thakrar 504 10 53 567
Minimum Consists of base salary, benefits and pension:
• Base salary is the salary to be paid in 2023.
• Benefits measured as benefits to be paid in 2023.
• Pension measured as the full entitlement of approximately 10.6% of base salary receivable (after the reduction to payments made
in cash for employers’ National Insurance Contributions).
On-target Based on what the Executive Director would receive if performance was on-target:
• AIP: consists of the on-target annual incentive (100% of base salary).
• LTIP: consists of the threshold level of vesting (50% of base salary for Group CEO and Group CFO). In addition, the potential
value of Sharesave and Share Incentive Plan (‘SIP’) participation is also recognised.
Maximum Based on the maximum remuneration receivable:
• AIP: consists of the maximum annual incentive (200% of base salary).
• LTIP: assumes maximum vesting of awards and valued as on the date of grant (award of 275% of base salary for Group CEO and
200% of base salary for Group CFO). Sharesave and SIP valued on the same basis as in the on-target row.
Total fixed pay
AIP
LTIP
Share price growth and dividend
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022126
Annual report on Remuneration
This section of the Remuneration report sets out the Executive Directors’
remuneration for 2022. It contains the annual report on remuneration which
forms part of the Directors’ remuneration report to be proposed for approval
by the Company’s shareholders at the Company’s 2023 AGM on 4 May 2023.
Introduction
This report contains the material required to be set out as the Directors’ remuneration report (‘Remuneration Report’) for the purposes
of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2008 (as amended) (‘the
DRR regulations’).
Directors’ remuneration policy
The Remuneration Policy to be approved by the shareholders at the 2023 AGM is included in the previous section of this
remuneration report.
Implementation report – Audited information single figure table
Salary/fees
1,2
Benefits
3
Pension
4
Total Fixed Pay
Annual
Incentive
5
Long-term
incentives
Total
Variable Pay Total
£000 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022
6
2021
7
(restated) 2022 2021 2022
2021
7
(restated)
Executive
Directors
Andy Briggs 809 800 11 11 85 84 905 895 1,053 936 1,100 – 2,153 936 3,058 1,831
Rakesh Thakrar 471 428 13 11 50 46 534 485 601 499 420 234 1,021 733 1,555 1,218
1 Rakesh Thakrar’s salary increased to £485k with effect from 1 April 2022. Andy Briggs’ salary increased to £812k with effect from 1 April 2022.
2 The Executive Directors are entitled to adjust their salary/benefit combination under flexible benefits arrangements and the figures shown are before
individual elections.
3 Benefits for Executive Directors include car allowance, private medical insurance, other taxable allowances, Sharesave and matching shares awarded under the Share
Incentive Plan.
4 Executive Directors are entitled to each receive a Company pension contribution of 12% which may be paid as a cash supplement, reduced for the effect of employers’
National Insurance contributions. Andy Briggs received his whole contribution as a cash supplement (10.5%) and Rakesh Thakrar received a combination of cash
supplement and contribution (10.6%). No Director participated in a defined benefit pension arrangement in the year and none have any prospective entitlement to a
defined benefit pension arrangement.
5 Annual incentive amounts are presented inclusive of any amounts which must be deferred into shares for three years and which are subject to continued employment
(i.e. 50% of the AIP award for 2022). In 2022 £526,416 of Andy Briggs’s incentive payment is subject to three-year deferral delivered in shares (2021: deferral of
£468,120), and £300,280 of Rakesh Thakrar’s incentive payment is subject to a similar deferral (2021: deferral of £249,350).
6 In accordance with the requirements of the DRR regulations, the 2022 value for long-term incentives is an estimate of the vesting outcomes for LTIP awards granted in
2020 and which are due to vest on 13 March 2023. This vesting level is at 44.3% reflecting outcomes against the Net Operating Cash Receipts, Return on Shareholder
Value, Persistency and Relative TSR performance measures to 31 December 2022 (see page 131). This vesting outcome is then applied to the average share price between
1 October 2022 and 31 December 2022 (570.578p) to produce the estimated long-term incentives figures shown for 2022 in the above table. The assumptions will be
trued up for actual share price at the day of vesting in the report for 2023. For Andy Briggs, the disclosed LTIP figure of £1,100k comprises the disclosed LTIP figure of
£896,129 for the value of the proportion of the original LTIP award which ultimately vested, plus the value of dividend roll-up on those shares of £204,177.
All values are calculated using the three month average share price to 31 December 2022 (570.578p). For Rakesh Thakrar, the disclosed LTIP figure of
£420k comprises the disclosed LTIP figure of £342,157 for the value of the proportion of the original LTIP award which ultimately vested, plus the value of dividend roll-up
on those shares of £77,953. All values are calculated using the three month average share price to 31 December 2022 (570.578p). No portion of the awards for Andy or
Rakesh related to share price appreciation.
7 For 2019’s LTIP awards which are reflected in the 2021 long-term incentives column above, the performance conditions were met as to 78.4% of maximum. The 2021
long-term incentives values in the above table reflect the value of the Company’s shares on the date of vesting which was 11 March 2022 (626.0p per share) multiplied
by the number of shares vesting whereas the equivalent figure within the published 2021 Single Figure Table was an estimate which reflected the average share
price between 1 October 2021 and 31 December 2021 (652.406 p per share) and certain assumptions regarding the cumulative value of dividends on the number
of shares vesting.
Phoenix Group Holdings plc Annual Report and Accounts 2022 127
Corporate governance
AIP outcomes for 2022 – Audited information
Against the specific Corporate measures, outturns were as follows:
Performance measure
Threshold
performance
level of
2022 AIP
Target
performance
level for
2022 AIP
Maximum
performance
level for
2022 AIP
Performance
level attained
for 2022
AIP
% of
incentive
potential
based on
Performance
Measure
%
achieved
Cash Generation (£m) 1,301 1,401 1,501 1,504 30.0% 30.0%
Incremental Long-Term Cash Generation less
New Business Strain (£m) 580 630 680 890 20.0% 20.0%
Shareholder Value (£m) 6,621 6,721 6,921 6,848 25.0% 20.5%
Customer Experience
Customer Satisfaction – Telephony (%)
1
90% 91% 92% 92% 6.3% 6.3%
Service Levels (Demand Processed) (%)
2
90% 92% 94% 92% 6.3% 3.1%
Customer Satisfaction – Digital (%)
3
92% 94% 96% 94% 6.3% 3.1%
Complaints Resolved in < 8 weeks (%)
4
91% 93% 95% 94% 6.3% 4.7%
Total 100.00% 87.7%
1 Customer satisfaction scores from entities across the Group are combined, each entity currently takes different approaches to measurement. Standard Life telephone
customer feedback surveys are delivered to customers after key interactions using the Rant & Rave solution, either by SMS or email, the question asks “Using a scale of 5
(excellent) to 1 (very poor) reply to tell us how you would rate your call experience today?” and the score is calculated as the % of responses of 4 or 5. For Phoenix Life, the
rating is a customer satisfaction score based on the results of a satisfaction survey following telephony interaction managed by Ipsos MORI, customers surveyed were
asked to give a satisfaction rating of between 1 and 5 to a number of questions (with a rating of 4 or 5 regarded as satisfied). ReAssure surveys use the Feedback Ferret
solution to ask customers a similar question rated on a scale of 1–5, with 4 or 5 regarded as satisfactory.
2 The percentage of all back office manual workflow completed within service level (services levels vary across entities). Across entities this includes Claims & Servicing,
with Standard Life also including new business acquisition.
3 Digital customer satisfaction surveys are offered to customers on Standard Life & Phoenix Life secure customer platforms, including the Standard Life mobile app, asking
them to rate their experience after completing a key transaction. Digital transactions measured include Payments, Retirement, Subsequent Withdrawal and Fund Switch.
Customer Satisfaction (‘CSAT’) is measured as the percentage of responses rating their experience as ‘good’ or ‘excellent’.
4 The rating is a percentage based upon the total volume of all complaints resolved within eight weeks from date of receipt divided by the total number of complaints
resolved. This is a strategic requirement to allow for external benchmarking within the complaints peer group.
AIP Underpin and Discretion on Corporate element
As described in the Committee Chair’s covering letter (page 110), Phoenix has achieved strong financial and non-financial
performance and progress on key strategic objectives during the year. The Committee is satisfied that the remuneration outcomes
for 2022 are an appropriate reflection of the year’s business performance and its trajectory providing strong alignment between
pay and performance and with appropriate regard to both the management of risk within our incentives and the broader
stakeholder experience. Prior to confirming the outcomes for the 2022 AIP, the Committee reviewed in detail the extent to which
the Group had operated within its stated risk appetite during the year and determined that no moderation of the 2022 formulaic
outcome was necessary.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022128
Strategic Scorecard
The Strategic Scorecard represents 20% of the overall incentive opportunity with the Corporate (financial and customer) measures
representing 80%. Metrics and targets relating to this scorecard were agreed by the Remuneration Committee at the start of the year.
The table below details the outcome against targets of the Strategic Scorecard with the exception of those which are considered as
commercially sensitive, together with respective weightings for the Group CEO and Group CFO.
Objective CEO CFO Description Base Performance Outcome
Customer 20% 10% Net Fund flows for Group £(7.7)bn £(5.7)bn 100%
Significant outperformance
on net fund flows,
underpinned by investment
in our Workplace proposition
and continued focus
on customer outcomes.
Secured c.£2bn of new
scheme wins, with assets
scheduled to transfer over
the next 12 to 24 months.
Continued investment in our
BPA proposition to support
significant outperformance
of internal rate of return.
BPA IRR 8.60% 15.83%
New Workplace assets
won
£400m £294m
Our People 25% 20% Employee engagement
eNPS
24 30 100%
Significant outperformance
against all three employee
Net Promoter Score targets,
with Colleagues being
central to Our Purpose.
Continued improvement in
female representation as part
of the broader DE&I agenda.
Regular engagement of
managers with our Peakon
engagement tool continues
to be an area of focus.
Diversity and Inclusion
eNPS
40 47
Health and Wellbeing
eNPS
32 42
Increase female
representation (% senior
leaders)
38.9% 39%
Sustainable
Operating Model &
Business Integration
10% 20% ReAssure integration –
capital synergies in year
£62m £169m 50%
Key planned migrations
were successfully and safely
delivered, and good progress
made on the majority of
material projects, although
there remains significant
activity to be done. BAU
expenses outturn was
adverse to plan due to higher
than planned regulatory and
audit fees, with ongoing work
to deliver committed cost
savings. ReAssure integration
cost synergy delivery was
behind plan, although
capital synergies were
significantly ahead.
ReAssure integration –
cost synergies in year
£5m £18m
Safe delivery of two
planned, critical policy
migrations
Delivered Delivered
Total BAU expenses £937m £953m
Deliver/Progress five
agreed, material projects
Assessment against plan
(time, cost, benefits)
Green x2
Amber x3
Red x1
Capital, Asset & Risk
Management
15% 20% Total Group Management
Actions – Own Funds
£160m £542m 50%
Outperformance of
Management Actions,
continuing our track record
of generating further
value. Continued focus on
embedding risk management
capabilities and controls to
support our ambitions, with
good progress in the year,
but clear prioritisation of
further work in 2023
Operating with risk
appetite
Within Appetite 1 of 6 outside appetite
(Control)
Open action plans Green (<=10% actions
overdue)
Amber (86% delivered)
Customer incidents
management
80% category A
remediated in 2 months
72.5% category B
remediated in 9 months
Green (87% and 75%
respectively)
RMF effectiveness rating Green Amber
Regulatory action delivery Green Amber
Phoenix Group Holdings plc Annual Report and Accounts 2022 129
Corporate governance
Objective CEO CFO Description Base Performance Outcome
Sustainability
1
20% 10% Launch financial inclusion
strategy, focussed on a
specific underserved
customer group, providing
targeted support to
empower better
financial decisions
Launched financial
inclusion strategy
Complete 90%
Outperformance or
successful delivery against
all but one of our ambitious
targets, reflecting that our
sustainability performance
is on track, building on the
momentum from 2021. We
remain committed to being a
leading responsible business,
with sustainability embedded
throughout.
Number of Phoenix
Group customers that
are directly offered the
chance to review our
Digital Literacy materials
and/or initiatives
1m customers Complete – 1.2 million
customers
% of SLAL customers
in sustainable
multi-asset default
c.£15bn AUM and 1.5m
customers
Complete
Develop and submit
for validation emission
reduction targets in line
with the SBTi financial
sector guidance
Developed and submitted Complete
% of originated illiquid
investments into
sustainable investments
60% 53%
Reduce Scope 1 and 2
tonnes CO
2
/FTE for
occupied premises
0.79 CO
2
/FTE 0.73
% of colleagues involved
in community activities
40% 41.9%
% of key suppliers
committed to SBTi/race
to net zero
75% 82%
Financial outcomes 10% 20% Long Term Free Cash £13bn £13.3bn 75%
Strong performance against
targets for Long-Term Free
Cash and Shareholder ratio,
reflecting another year of
strong delivery against
our clear financial framework.
Fitch leverage ratio adversely
impacted by economics
from rising yields. NBC
marginally adverse largely
due to lower levels of
customer response driven
by the cost of living crisis.
Shareholder ratio 160% 189%
Fitch leverage ratio 28% 30%
NBC £408m £386m
1 All outcomes of the sustainability metrics have been independently verified.
In light of the above achievements during the year, the Committee determined it was appropriate to pay the following outcomes under
the Strategic Scorecard element for the Group CEO and Group CFO:
% outturn of
maximum
20%
opportunity
Andy Briggs 83%
Rakesh Thakrar 74%
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022130
The Committee was also satisfied that it was appropriate to pay out the incentives according to the formulaic outcomes in the context
of the experience of Phoenix’s stakeholders during the year.
The table below shows the actual outturn against the annual incentive maximum.
Corporate Strategic Scorecard Total Maximum Total
As a % of
maximum
Corporate
element
As a %
of salary
As a %
of maximum
scorecard
element
As a %
of salary
As a %
of salary
As a %
of salary
As a %
of maximum
opportunity
Andy Briggs 87.7 105.2 83.0 24.9 130.1 150.0 86.8
Rakesh Thakrar 87.7 105.2 74.0 22.2 127.4 150.0 85.0
As described in the Remuneration Policy, 50% of 2022 AIP outcomes will be delivered as an award of deferred shares under the DBSS
which will vest after a three-year deferral period subject to continued employment or good leaver status.
Whilst the performance measures for the 2023 AIP have been disclosed (see Implementation of Remuneration Policy for 2023 on page
137), the actual performance targets for these measures are regarded as commercially sensitive at the current time and accordingly are
not disclosed. However, as in previous years, the Group intends to disclose the performance targets for 2023’s AIP retrospectively in
next year’s Remuneration Report on a similar basis to the disclosures made above in respect of 2022’s AIP.
LTIP outcomes for 2020 awards – Audited information
Performance measure and
weighting Target range
Performance
achieved
Vesting
outcome
%
achieved
Net Operating Cash
Receipts (35%)
Target range between Net Operating Cash Receipts of £4.411bn and
Net Operating Cash Receipts of £4.966bn
£4.627bn 62.7% 21.9%
Return on Shareholder
Value (25%)
Target range between 2% CAGR and 4% CAGR (1.8)% 0.0% 0.0%
Persistency (20%) Target range between 8.0% and 6.5% 7.0% 69.0% 13.8%
Relative TSR (20%) Target range between median performance against the constituents
of the FTSE 350 (excluding Investment Trusts) rising on a pro rata
basis until full vesting for upper quintile performance. In addition,
the Committee must consider whether the TSR performance is
reflective of the underlying financial performance of the Company
57.1% 43.0% 8.6%
Total 44.3%
The above targets were all measured over the period of three financial years 1 January 2020 to 31 December 2022.
As detailed on page 136 of the 2020 Annual Report and Accounts, the 2020 LTIP targets were amended to reflect the new organisation
following the acquisition of ReAssure Group plc by the Group on 22 July 2020. The adjustments were made in line with the
Committee’s established principles for target setting in the event of an acquisition and the Committee was satisfied that the revised
targets were equally stretching as those originally set. The impact these adjustments had on the 2020 LTIP are as follows:
Net Operating Cash Receipts –the threshold target (where 25% of this part of the award vests) was increased from £2.375 billion to
£4.411 billion with maximum target (full vesting of this part of the award) increased from £2.725 billion to £4.966 billion.
Return on Shareholder Value – consistent with the approach taken on previous transactions and in compliance with the Group’s
documented principles established for adjusting remuneration targets to reflect the impacts of acquisitions, there were no amendments
to the target ranges for compound annual growth rates as a result of the acquisition of ReAssure. However, the opening Shareholder
Value balance used to calculate the return was rebased by the value of equity issued (£2 billion) in consideration for the acquisition.
Persistency – no changes to this target were made as Persistency relates to the Open business only and is therefore not impacted by
the ReAssure transaction.
Underpin and Discretion
In addition to the above targets, the Committee confirmed that the underpin performance condition relating to risk management within
the Group, customer satisfaction and, in exceptional cases, personal performance had been achieved in the performance period.
Windfall Gains
As reported in the FY 2020 Directors’ remuneration report, the Committee reviewed the grant price of the 2020 LTIP (620.5p)
compared to the grant price of the 2019 LTIP (700.4p) and was satisfied that no adjustments were required to the awards on grant for
windfall gains. The Committee has again reviewed the position ahead of the vesting, taking into account the Phoenix share price as at
28 February 2023 (633.69p) and is satisfied that no windfall gains have occurred and that no adjustment is required on vesting.
Phoenix Group Holdings plc Annual Report and Accounts 2022 131
Corporate governance
Payments for loss of office – Audited information
No payments were made to Directors in 2022 for loss of office.
Payments to past directors – Audited information
Clive Bannister, who resigned from the Board on 10 March 2020, received title to shares during 2022 in respect of the 2019 LTIP. The
value of these shares at the point of vesting on 11 March 2022 was £397,303. Taking into account the performance outturn of 78.4% and
time pro-rating, this reflected a grant of 52,136 shares with a value of £326,371 plus dividend accrual of 11,331 shares with a value of
£70,932. Clive also received title to shares during 2022 in respect of the 2019 DBSS. The value of these shares at the point of vesting on
11 March 2022 was £390,655. This related to the vesting of the deferred element of his 2019 AIP so there were no performance
conditions or time pro-rating. This reflected a grant of 51,265 shares with a value of £320,919 plus dividend accrual of 11,140 shares with
a value of £69,736.
James McConville, who resigned from the Board on 15 May 2020, received title to shares during 2022 in respect of the 2019 LTIP. The
value of these shares at the point of vesting on 11 March 2022 was £295,572. Taking into account the performance outturn of 78.4% and
time pro-rating, this reflected a grant of 38,786 shares with a value of £242,800 plus dividend accrual of 8,430 shares with a value of
£52,772. James also received title to shares during 2022 in respect of the 2019 DBSS. The value of these shares at the point of vesting
on 11 March 2022 was £252,729. This related to the vesting of the deferred element of his 2019 AIP so there were no performance
conditions or time pro-rating. This reflected a grant of 33,166 shares with a value of £207,619 plus dividend accrual of 7,206 shares
with a value of £45,110.
Non-executive fees – Audited information
The emoluments of the Non-Executive Directors for 2022 based on the current disclosure requirements were as follows:
Directors’ salaries/fees Benefits
1
Total
Name
2022
£000
2021
£000
2022
£000
2021
£000
2022
£000
2021
£000
Non-Executive Chair
Alastair Barbour
2
255 161 21 10 276 171
Nicholas Lyons
3
307 370 8 1 315 371
Non-Executive Directors
Stephanie Bruce
4
– – – – – –
Karen Green
5
159 141 3 1 162 142
Hiroyuki Iioka
6
– – – – – –
Wendy Mayall
7
129 111 1 – 130 111
Katie Murray
8
74 – 2 – 76 –
John Pollock 141 141 3 – 144 141
Belinda Richards 116 111 2 – 118 111
Maggie Semple
9
63 – 1 – 64 –
Nicholas Shott
10
139 129 2 – 141 129
Kory Sorenson 141 141 1 – 142 141
Mike Tumilty
11
– – – – – –
Total 1,524 1,305 44 12 1,568 1,317
1 The amounts within the benefits columns reflect the fact that the reimbursement of expenses to Non-Executive Directors for travel and accommodation costs incurred in
attending Phoenix Group Holdings plc Board and associated meetings represent a taxable benefit. This position has been clarified with HMRC and the amounts shown
are for reimbursed travel and accommodation expenses (and the related tax liability which is settled by the Group).
2 The fee for Alastair Barbour increased to £460k with effect from 1 September 2022 following his appointment as Interim Chair.
3 The fee for Nicholas Lyons reduced to zero following his sabbatical leave with effect from 1 September 2022.
4 Stephanie Bruce was appointed as a member of the Board of Directors on 1 July 2022 and has waived all current and future emoluments with regard to her Directors’
fees.
5 Karen Green was appointed as Senior Independent Director on 5 May 2022.
6 Hiroyuki IIoka has waived all current and future emoluments with regard to his Directors’ fees.
7 Wendy Mayall was appointed as a member of the Life Companies Board Investment Committee on 1 January 2022. She retired as a member of the Board of Director on
31 December 2022.
8 Katie Murray was appointed as a member of the Board of Directors on 1 April 2022 and Chair of the Group Audit Committee with effect from 1 September 2022.
9 Maggie Semple was appointed as a member of the Board of Directors on 1 June 2022 and was appointed as Designated Director for Workforce Engagement on
1 September 2022.
10 Nicholas Shott was appointed as Chair of the M&A Advisory Group on 29 June 2022.
11 Mike Tumilty waived all current and future emoluments with regard to his Directors’ fees up to his date of resignation from the Board on 30 June 2022.
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in lieu of
pensions and annual incentive was £6.181 million (2021: £4.376 million).
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022132
Share-based awards – Audited information
As at 31 December 2022, Directors’ interests under long-term share-based arrangements were as follows:
LTIP
Name
Date of
grant
Share price
on grant
No. of
shares
as at
1 Jan
2022
No. of
shares
granted
in 2022
No. of
dividend
shares
accumulating
at vesting
1
No. of
shares
exercised
2
No. of
shares not
vested
3
No. of
shares
as at
31 Dec
2022
Vesting
date
4
Andy Briggs
LTIP Buyout Award 7 Nov 2019 751.5p 87,221 – 12,760 (99,981) – – 27 Mar 2020
LTIP 13 Mar 2020 620.5p 354,529 – – – – 354,529 13 Mar 2023
LTIP 12 Mar 2021 736.2p 298,831 – – – – 298,831 12 Mar 2024
LTIP 18 Mar 2022 635.9p – 351,133 – – – 351,133 18 Mar 2025
740,581 351,133 12,760 (99,981) – 1,004,493
Rakesh Thakrar
LTIP 11 Mar 2019 700.4p 39,259 – 8,529 – (10,323) 37,465 11 Mar 2022
LTIP 13 Mar 2020 620.5p 135,365 – – – – 135,365 13 Mar 2023
LTIP 12 Mar 2021 736.2p 116,816 – – – – 116,816 12 Mar 2024
LTIP 18 Mar 2022 635.9p – 152,530 – – – 152,530 18 Mar 2025
291,440 152,530 8,529 – (10,323) 442,176
1 In addition to the shares awarded under the LTIP presented above, participants receive an additional number of shares (based on the number of LTIP awards
which actually vest) to reflect the dividends paid during the vesting period (and which for awards made from 2015, will include dividends paid during any
applicable holding period).
2 Gains of Directors from share options exercised and vesting shares under the LTIP in 2022 were £645,224 (2021: £306,053). Andy Briggs gain was £645,224 arising
from an LTIP award exercised on 29 March 2022 at a share price of £6.4534.
3 The 2019 LTIP award vested at 78.4% of maximum. The 2018 LTIP award vested at 99.9% of maximum.
4 All LTIP awards are now subject to a holding period so that any LTIP awards for which the performance vesting requirements are satisfied will not be released for
a further two years from the third anniversary of the original award date.
Phoenix Group Holdings plc Annual Report and Accounts 2022 133
Corporate governance
LTIP targets
The performance conditions for the 2020, 2021 and 2022 awards are set out below. These targets reflect adjustments made following
the acquisition of ReAssure in July 2020 as described on page 136 of the 2020 Annual Report and Accounts.
Performance measure
1
2020 award
35% Net Operating Cash Receipts
25% Return on Shareholder Value
20% Relative TSR
20% Persistency
2021 award
35% Net Operating Cash Receipts
25% Return on Shareholder Value
20% Relative TSR
20% Persistency
2022 award
20% Net Operating Cash Receipts
20% Return on Shareholder Value
20% Relative TSR
20% Persistency
20% Decarbonisation
Net Operating Cash Receipts Target range
of £4.411bn to £4.966bn
Target range
of £4.330bn to £4.780bn
Target range
of £3.800bn to £4.100bn.
Return on Shareholder Value Between 2% CAGR
and 4% CAGR
Between 2% CAGR
and 4% CAGR
Between 3% CAGR
and 5% CAGR.
Persistency Target range between
8.0% and 6.5%
Target range between
7.4% and 6.1%
Target range between
7.6% and 6.2%
De-carbonisation – Investment Portfolio Net zero strategy applied between
target range of 75% and 85% of
assets in scope by 2025
Reduction of 18%–22% in
portfolios where a Net Zero
strategy has been applied
Decarbonisation – Operations Target range of 15%–25%
reduction year on year against
2019 carbon intensity of Scope
1 and 2 emissions from occupied
premises and Scope 3 emissions
from business travel
Relative TSR
2
25% of this part vests at threshold
performance rising on a pro rata
basis until 100% vests.
Target range between median
performance against the
constituents of the FTSE 350
(excluding Investment Trusts)
rising on a pro rata basis until
full vesting for upper quintile
performance.
Target range between median
performance against the
constituents of the FTSE 350
(excluding Investment Trusts)
rising on a pro rata basis until
full vesting for upper quintile
performance.
Target range between median
performance against the
constituents of the FTSE 350
(excluding Investment Trusts)
rising on a pro rata basis until
full vesting for upper quintile
performance.
1 For each measure above, 25% of the award vests at threshold performance rising on a pro rata basis until 100% vests. Measured over three financial years commencing
with the year of award.
2 The Committee must also consider whether the TSR performance is reflective of the underlying performance of the Company measured over three financial years
commencing with the year of award.
LTIP Underpin:
2020 LTIP – notwithstanding the formulaic outcome under the above performance targets, if the Committee determines that the
Group’s debt levels and associated interest costs have not remained within parameters acceptable to the Committee over the
performance period, and that the Group has not made progress considered to be reasonable by it in executing any strategy agreed by
the Board on debt management, capital structuring and Risk Management, the level of awards vesting will either be reduced or lapse in
full. The underpin also includes consideration of customer satisfaction and, to meet Solvency II requirements, in exceptional cases,
personal performance.
2021 and 2022 LTIP – awards are subject to an underpin relating to risk management within the Group, consideration of customer
satisfaction and, to meet Solvency II requirements, in exceptional cases, personal performance. This underpin relating to the formulaic
outturn of the LTIP has been revised to better reflect the extent to which the Group has operated within its stated Risk Appetite and
ensures that management is not incentivised to accept risk outside of appetite in the pursuit of improved delivery against LTIP
performance targets. It also offers a broader assessment than the previous focus on the management of the Group’s debt position.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022134
DBSS – Audited information
Date
of grant
Share price
on grant
No. of
shares
granted
as at
1 Jan 2022
No. of
shares
granted in
2022
No. of
dividend
shares
accumulating
at vesting
1
No. of
shares
exercised
2
No. of
shares
lapsed/
waived
No. of
shares as at
31 Dec 2022
Vesting
date
Andy Briggs
DBSS
12 Mar 2021 736.2p 67,269 – – – 67,269 12 Mar 2024
DBSS 18 Mar 2022 635.9p – 73,610 – – – 73,610 18 Mar 2025
67,269 73,610 – – – 140,879
Rakesh Thakrar
DBSS
11 Mar 2019 700.4p 11,740 – 2,548 (14,288) – 11 Mar 2022
DBSS 13 Mar 2020 620.5p 15,262 – – – – 15,262 13 Mar 2023
DBSS 12 Mar 2021 736.2p 27,381 – – – 27,381 12 Mar 2024
DBSS 18 Mar 2022 635.9p – 39,209 39,209 18 Mar 2025
54,383 39,209 2,548 (14,288) – 81,852
1 In addition to the shares awarded under the DBSS presented above, participants receive an additional number of shares (based on the number of DBSS awards
which actually vest) to reflect the dividends paid during the vesting period.
2 Gains of Directors (Rakesh Thakrar only) from share options exercised and vesting shares under the DBSS in 2022 was £91,800 (2021: £59,922) arising from an
award exercised on 25 March 2022 at a share price of £6.4249.
The DBSS is the share scheme used for the deferral of AIP. No performance conditions apply therefore, although awards are subject to
continued employment or good leaver status.
Scheme interests awarded in the year – Audited information
Recipient
Date
of award
Type
of award
Nature of
the Award
How the
award is
calculated
Face value
of award
Percentage
vesting at
threshold
performance
1
Vesting
date
Performance
Measures
1
Andy Briggs 18 March 2022 LTIP Nil Cost Option 275% of salary £2,232,995 25% 18 March 2025
See page
134
Andy Briggs 18 March 2022 DBSS Nil Cost Option 50% of AIP £468,115 – 18 March 2025 None
Rakesh Thakrar 18 March 2022 LTIP Nil Cost Option 200% of salary £969,999 25% 18 March 2025
See page
134
Rakesh Thakrar 18 March 2022 DBSS Nil Cost Option 50% of AIP £249,345 – 18 March 2025 None
1 The DBSS awards have no threshold performance level.
The face value represents the maximum vesting of awards granted (but before any credit for dividends over the period to vesting)
and is calculated using a share price of the average of the closing middle market prices of Phoenix shares for the three dealing days
preceding the award date (2022 LTIP and DBSS award share price was 635.9p).
Sharesave – Audited information
As at
1 Jan 2022
Options
granted
Options
exercised
Options
lapsed
As at
31 Dec
2022
Exercise
price
Exercisable
from
Date of
expiry
Andy Briggs 3,056 – – – 3,056 £5.89 1 Jun 2024 1 Dec 2024
Rakesh Thakrar 1,604 – (1,604) – – £5.61 1 Jun 2022 1 Dec 2022
Rakesh Thakrar 2,546 – – – 2,546 £5.89 1 Jun 2026 1 Dec 2026
Rakesh Thakrar – 1,768 – – 164 £5.09 1 Jun 2025 1 Dec 2025
Sharesave options are granted with an option price that is a 20% discount to the three-day average share price when invitations are
made. This is permitted by HMRC regulations for such options. Following the exercise of 1,604 options under the 2019 Sharesave
scheme, Rakesh Thakrar received a total gain of £1,963 (2021: £nil).
Aggregate gains of Directors from share options exercised under all share plans in 2022 were £738,988 (2021: £365,975).
During the year ended 31 December 2022, the highest mid-market price of the Company’s shares was 701.4p and the lowest mid-market
price was 506.8p. At 31 December 2022, the Company’s share price was 608.6p (30 December 2022 price).
Phoenix Group Holdings plc Annual Report and Accounts 2022 135
Corporate governance
Directors’ interests – Audited information
The number of shares and share plan interests held by each Director and their connected persons are shown below:
Share interests
as at
1 January 2022
or date of
appointment
if later
Share interests
as at
31 December
2022 or
retirement
if earlier
Total share plan
interests as at
31 December
2022 – Subject
to performance
measures
Total share plan
interests as at
31 December
2022 – Not subject
to performance
measures
Total share plan
interests as at
31 December
2022 – Vested
but unexercised
scheme interest
Andy Briggs 285,897 359,111 1,004,493 140,879 –
Rakesh Thakrar 102,822 116,201 404,711 81,852 37,465
Alastair Barbour 9,716 9,716 – – –
Nicholas Lyons 65,990 65,990 – – –
Stephanie Bruce – – – – –
Karen Green – – – – –
Hiroyuki Iioka – – – – –
Wendy Mayall 55,000 55,000 – – –
Katie Murray – 4,600 – – –
John Pollock 14,666 14,666 – – –
Belinda Richards – – – – –
Maggie Semple – – – – –
Nicholas Shott 38,995 69,473 – – –
Kory Sorenson 38,300 45,000 – – –
Mike Tumilty – – – – –
The Directors’ share interests of the following Directors have increased between 31 December 2022 and 10 February 2023 (being
one month prior to the date of the notice of the AGM). Andy Briggs and Rakesh Thakrar acquired an additional 64 shares each
following purchases under the Group’s Share Incentive Plan. There were no other changes between these dates.
Shareholding requirements – Audited information
As explained in the Remuneration Policy under the Shareholding Guidelines section, the Executive Directors are subject to shareholding
requirements during their employment with the Group and for a period of two years post termination of employment.
Andy Briggs and Rakesh Thakrar are subject to a post-cessation shareholding of 100% of their in-employment shareholding for a period
of two years post-employment.
The extent to which Executive Directors have achieved the requirements by 31 December 2022 (using the share price of 608.6p pence
as at 30 December 2022) is summarised below. Unvested share awards no longer subject to performance conditions (discounted for tax
liabilities) are included within the Guidelines. In addition to the unvested share awards and shares previously acquired, Andy Briggs
purchased 20,000 shares and Rakesh Thakrar purchased 3,133 shares independently throughout 2022. As detailed in the Chair’s
covering statement, the Shareholding Guidelines are increasing to 350% for Andy Briggs and 300% for Rakesh Thakrar with effect
from 2023 as part of the 2023 Remuneration Policy.
Position
Shareholding
Guideline
(minimum %
of salary)
Value of shares
held at
31 December
2022
(% of salary)
Andy Briggs 300% 324%
Rakesh Thakrar 250% 223%
The post cessation shareholding requirement is monitored and enforced by direct liaison and confirmation with the Directors and their
brokers, all trades and transfers are discussed and notified to the Group by the relevant Director.
The Executive Directors are required to sign a declaration that they have not and will not at any time during their employment with
Phoenix, enter into any hedging contract in respect of their participation in the AIP, LTIP, Sharesave, Share Incentive Plan or any other
incentive plan of the Company, or pledge awards in such plans as collateral, and additionally that they will neither enter into a hedging
contract in respect of, nor pledge as collateral, any shares which are required to be held for the purposes of the Company’s
Shareholding requirements or any vested LTIP award shares subject to a LTIP holding period.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022136
Implementation of remuneration policy in 2023 – Non-auditable
A summary of the packages of the Executive Directors is set out in the table below.
Andy Briggs Rakesh Thakrar
Salary £844,480, a 4% increase, below the level of the wider
workforce pay budget.
£504,400, a 4% increase, below the level of the wider
workforce pay budget.
Benefits Benefits in line with the rest of the workforce including legacy car allowance of £10,000 and Private Medical Insurance cover
for self only. Executive Directors are also entitled to receive benefits in accordance with our Directors’ Remuneration Policy
which will be reported in the Single Figure Table each year.
Pension Contribution rate of 12% of base salary (reduced for the impact of employers’ NIC if taken as a cash payment), aligned to our
wider workforce.
Annual bonus 200% of base salary at maximum. Details of the 2023 AIP are set out below.
LTIP 275% of base salary. 200% of base salary.
Details of the 2023 LTIP awards are set out overleaf.
Shareholding
requirement
350% of base salary. 300% of base salary.
Where any performance vested LTIP awards are subject to a holding period requirement, the relevant LTIP award shares
(discounted for anticipated tax liabilities) will count towards the shareholding requirements. Unvested awards under the
DBSS which are not subject to performance conditions are included in this assessment on a net of tax basis. Unvested
awards under the LTIP are not included in this assessment.
Post cessation
shareholding
requirement
Executive Directors are expected to retain the lower of their shareholding on termination or their full in-employment
shareholding requirement for two years.
Element of Remuneration Policy
Annual Incentive Plan
(‘AIP’)
The Committee regularly reviews the performance measures of the incentive plans to ensure they remain aligned with our
strategy. As detailed in the Committee Chair’s covering letter on page 111 the metrics for the 2023 AIP are shown below.
The Strategic Scorecard reflects 20% of the Executive Directors’ AIP. This will include a number of the strategic priorities for
the year (but avoiding duplication with any outcomes under the Corporate element) and which can be clearly articulated
and measured. Sustainability remains at the heart of our purpose and ESG continues to form part of the Strategic Scorecard
elements of the Executive Directors.
The overall weightings between Corporate measures and Strategic Scorecard for AIP in 2023 are:
• Corporate (financial and customer) performance measures – 80%; no change from 2022.
• Strategic Scorecard (strategic company priorities ) – 20%; no change from 2022.
The weightings of the AIP performance measures for 2023 are summarised below:
Performance measure
Corporate measure % of incentive potential
Cash Generation 24% (30% of Corporate component)
Incremental New Business Long-term Cash Generation (less
strain) plus Own Funds impacting Management Actions
24% (30% of Corporate component)
Open (Pensions and Savings) net flows 12% (15% of Corporate component)
Customer Experience 20% (25% of Corporate component)
Strategic Scorecard 20%
Total 100%
Outcomes from performance measures for 2023’s AIP may be moderated by the Remuneration Committee in line with
the approved Remuneration Policy. This will include a review by the Remuneration Committee of the extent to which the
Group has operated within its stated risk appetite and that there are no other risk-related concerns that would necessitate
moderation before any 2023 AIP outcomes are confirmed. The targets for the specific performance measures for the AIP
in 2023 are regarded as commercially sensitive by the Group but will be disclosed retrospectively in the Remuneration
Report for 2023.
50% of AIP outcomes for 2023 will be delivered as an award of deferred shares under the DBSS which will vest after a three-
year deferral period.
Deferred Bonus Share
Scheme (‘DBSS’)
DBSS awards made in 2023 (in respect of 2022’s AIP outcome) will be made automatically on the fourth dealing day following
the announcement of the Group’s 2022 annual results in accordance with the Remuneration Policy.
The number of shares for DBSS awards will be calculated using the average share price for the three dealing days before the
grant of the DBSS awards. The three-year deferral period will run to the three-year anniversary of the making of the DBSS
awards. Dividend entitlements for the shares subject to DBSS awards will accrue over the three-year deferral period.
Phoenix Group Holdings plc Annual Report and Accounts 2022 137
Corporate governance
Long-Term Incentive
Plan (‘LTIP’)
Awards under the LTIP will be made automatically on the fourth dealing day following the announcement of the Group’s 2022
annual results under a procedure similar to that described above for awards under the DBSS.
The number of shares for LTIP awards will be calculated using the average share price for the three dealing days before the
grant of the LTIP awards. The initial three-year vesting period will run to the three-year anniversary of the granting of the LTIP
awards. At this time, the performance conditions will be determined.
All annual LTIP awards made to Executive Directors are subject to a holding period so that any LTIP awards for which the
performance conditions are satisfied will not be released for a further two years from the third anniversary of the original
award date. Dividend accrual for LTIP awards will continue until the end of the holding period.
The performance targets are measured over a period of three financial years, commencing with financial year 2023. As
detailed in the Committee Chair’s covering letter on page 112 the 2023 LTIP measures have changed. Measures, weightings
and targets are shown below:
Performance measure and weighting Threshold target Full vesting target
Net Operating Cash Receipts (20%) £3,556m £4,006m
Group In-force Long-Term Free Cash (20%) £14.7m £15.4m
Persistency (20%) 7.1% 6.08%
Decarbonisation – Investment Portfolio (10%) 75% reduction pre-offset,
plus net zero post offset
(provided in the best interests
of customers)
85% reduction pre-offset,
plus net zero post offset
(provided in the best interests
of customers)
Decarbonisation – Operations (10%) Net-zero strategy applied to
80% of in-scope assets and
25% reduction in carbon
intensity
Net-zero strategy applied to
90% of in-scope assets and
25% reduction in carbon
intensity
Relative TSR measure against the constituents of the FTSE
350 (excluding Investment Trusts), subject to the Committee
considering whether the TSR performance is reflective of the
underlying financial performance of the Company (20%)
50th percentile 80th percentile
All 2023 LTIP awards are subject to an underpin relating to risk management within the Group, consideration of customer
satisfaction and, to meet Solvency II requirements, in exceptional cases, personal performance. This underpin relating to
the formulaic outturn of the LTIP reflects the extent to which the Group has operated within its stated Risk Appetite and
ensures that management is not incentivised to accept risk outside of appetite in the pursuit of improved delivery against
LTIP performance targets. It also offers a broader assessment than the previous focus on the management of the Group’s
debt position.
For the Group CEO, awards vesting under the LTIP will be subject to a cap on threshold performance of the lower of 50% of
salary or 25% of maximum vesting.
The rules of the Company’s LTIP reserves discretion for the Committee to adjust the outturn for any LTIP performance
measures (from zero to any cap) should it consider that to be appropriate. The Committee may operate this discretion having
regard to such factors as it considers relevant, including the performance of the Group, any individual or business.
All-Employee
Share Plans
Executive Directors have the opportunity to participate in HMRC tax advantaged Sharesave and Share Incentive Plans on the
same basis as all other UK employees.
Chair and
Non-Executive
Directors’ fees
Fee levels from 1 April are: £460,000 for the Chair, £78,000 for the role of Non-Executive Director with additional fees of:
(i) £20,000 payable for the role of SID; and/or (ii) £30,000 payable where an individual also chairs the Audit, Remuneration,
Risk or Sustainability Committee; and £18,000 for the other members of those committees, the Model Governance
Committee and attendees to the Life Company Investment Committee. (iii) £20,000 payable where an individual chairs the
M&A Advisory board; (iv) £15,000 payable for the Designated Director for Workforce Engagement, and £10,000 for other
members of the M&A Advisory Board. The fee structure levels for Non-Executive Directors were last reviewed in December
2020 (effective 1 January 2021) with no fee increase in 2022. For 2023 the base fee will increase by 4% with effect from 1
April 2023, lower than that of the wider workforce. This is to ensure the fees reflect the time commitment and workload for the
role and they remain competitive with other listed companies of similar size and complexity.
All incentive plans are subject to malus/clawback. See page 123 ‘Notes to the Remuneration Policy Table’ for details.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022138
Distribution statement
The DRR Regulations require each quoted company to provide a comparison between profits distributed by way of dividend and overall
expenditure on pay.
Relative Importance (£m)
Profits ditributed by way of
dividend (% change +4%)
2021 2022 2021 2022
508
489
611
531
Overall expenditure on
pay (% change +15%)
Profit distributed by way of dividend has been taken as the dividend paid and proposed in respect of the relevant financial year.
For 2022 this is the interim dividend paid (£248 million) and the recommended final dividend of 26.0 pence per share multiplied
by the total share capital issued at the date of the Annual Report and Accounts as set out in note D1 in the notes to the consolidated
financial statements. No share buy-backs were made in the year.
Overall expenditure on pay has been taken as employee costs as set out in note C3 ‘Administrative expenses’ in the notes to the
consolidated financial statements. Expenditure on pay has increased by 15% in the period reflecting the impact of the expansion
of the Open business, as well as the increased headcount in Asset Management and Group areas, which has also resulted in higher
AIP and share scheme costs. One-off payments were also made in August 2022 in addition to general salary increases to help with
the impacts of the current cost of living challenges. These increases have been partly offset by the impact from the Group’s Transition
and Transformation programme which has reduced headcount in certain areas of the business.
Voting outcomes on remuneration matters
The table below shows the votes cast to approve the Directors’ remuneration report for the year ended 31 December 2021 and
the Directors’ Remuneration Policy at the 2020 AGM held on 15 May 2020
For Against Abstentions
Number % of votes cast Number % of votes cast Number
To approve the Directors’ remuneration report for
the year ended 31 December 2022 (2022 AGM) 772,702,304 98.15 14,593,901 1.85 777,768
To approve the Directors’ remuneration policy (2020 AGM) 563,455,466 99.31 3,899,742 0.69 744,467
Phoenix Group Holdings plc Annual Report and Accounts 2022 139
Corporate governance
Dilution
The Company monitors the number of shares issued under the Group’s employee share plans and their impact on dilution limits.
The Company’s current practice is for all the executive share plans to use market purchase shares on exercise of any awards. For
the Company’s all-employee Sharesave scheme only, new shares are issued. Therefore the usage of shares compared to the 10%
dilution limits (in any rolling ten-year period) set by the Investment Association in respect of all share plans as at 31 December 2022
is 0.75% and no shares count towards the dilution limit for executive plans only (5% in any rolling ten-year period).
Consideration of employee pay
When determining the Remuneration Policy and remuneration for our Executive Directors, the Committee took into consideration
the pay and benefits of the wider workforce to ensure that our reward offering remains competitive, attractive and suitably aligned
to our Group performance, while supporting our values and purpose of helping people secure a life of possibilities. Throughout
the Sustainability report (on pages 50 to 56) there are examples of how our reward proposition played an integral role in
supporting the Group culture that encourages diversity and inclusion, colleague development, rounded wellbeing, and supporting
a sustainable society.
We have a reward policy that is broadly consistent for all levels of employees, with the same remuneration principles guiding reward
decisions for all Group colleagues, including Executive Directors. The AIP and LTIP performance metrics are the same for Executive
Directors as for other eligible colleagues, with a higher proportion of total remuneration for the Executive Directors linked to corporate
performance. For certain areas, business unit aligned metrics are also included in their AIP. Pay for the wider colleague base is driven
primarily by market practice and there is a standard benefit offering across all levels, except where external market drives differences
based on role accountability. Colleagues are also eligible to participate in the Group’s success through our share schemes (Sharesave
and Share Incentive Plan) on the same basis as those offered to Executive Directors.
Diversity, Equity and Inclusion is embedded in the Group culture through our industry leading family friendly policies, holistic wellbeing
strategy that supports mental, physical and financial needs of colleagues and encouraging volunteering. Additionally, the Committee
considers feedback on pay and benefits through Peakon, a short monthly survey of colleagues’ anonymous views on various matters,
including reward. Further feedback from colleagues is received through extensive collaboration with the Phoenix Colleague
Representation Forum (‘PCRF’) and the Designated Director for Workforce Engagement (see page 108).
In response to the cost of living challenge throughout 2022, we recognised colleagues’ needs and provided a one-off £1,000 net
lump-sum payment to all colleagues below senior management. Our financial wellbeing offering was also enhanced by including free
personalised financial coaching and planning, and piloting a midlife MOT as part of our purpose to help people live better, longer lives.
Additionally, throughout 2022 we provided assistance with car parking costs, a free lunch option and free sanitary items in all offices.
We are a proud Real Living Wage employer and we made salary increases effective immediately following the announcement of the
new Real Living Wage for those impacted.
Equal pay and consistency of treatment for all colleagues, irrespective of gender
1
or ethnicity are integral guiding principles of the
reward practices across the Group. The remuneration principles and framework are reviewed on a regular basis to ensure these are
aligned with the Group’s purpose, values and sustainability strategy.
1 Further details on the Women in Finance Charter figures can be found on page 50 of the Sustainability Report. Further details on the statutory Gender Pay Gap figures
can be found on the Phoenix Group website.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022140
CEO pay ratio
The table below details the CEO pay ratio for the year ended 31 December 2022, in line with the UK regulatory requirements. The ratios
compare the CEO total pay against the pay of three UK employees, whose earnings represent the lower quartile, median, and upper
quartile positions of the UK employee population. The calculations are based on Option A of the three methodologies, which we believe
is the most statistically robust approach.
The CEO value used is the total single figure remuneration data for 2022 (as detailed on page 127). For the 2022 ratio, the total
compensation figure for UK employees follows the same methodology as for the CEO and is based on a full time equivalent of
actual earnings including amounts due from incentive plans.
The Group reviewed the pay of the three identified employees at 25th percentile, 50th percentile (median) and 75th percentile and
concluded that they were a fair representation of pay at the relevant quartiles of the UK employee base. Each individual was a direct
employee on a permanent or fixed-term contract during 2022 and received remuneration in line with Group wide remuneration
policies. None received an exceptional award that would otherwise inflate their pay figure.
The table below sets out the salary and total single figure remuneration for the Group CEO and percentile employees included in
the below ratios.
Year Methodology CEO
25th
percentile
50th
percentile
(median)
75th
percentile
Salary 2022 Option A 809,000 23,413 40,000 53,508
Total remuneration (single figure) 2022 Option A 3,058,279 30,600 44,223 75,368
2022 Ratio (total compensation) 100:1 69:1 41:1
2021 Ratio (total compensation) 66:1 46:1 26:1
2020 Ratio (total compensation) 78:1 54:1 31:1
2019 Ratio (total compensation) 94:1 62:1 40:1
The increase in the ratio for 2022 reflects the fact that the CEO’s single figure has increased compared to 2021 primarily due to the
vesting of this 2020 LTIP award. To better compare to the 2021 figure, an additional ratio has been calculated excluding the value of
LTIPs from both the CEO single figure and that of other employees, resulting in a median pay ratio of 44:1. The total compensation figure
for the three identified employees is higher than last year due to the addition of the £1,000 cost of living payment described above
under the ‘Consideration of Employee Pay’ section and our philosophy of pay progression within the Group.
UK colleagues are also eligible to participate in our Sharesave and Share Incentive Plan offerings, which were not included in the values
in the employee single figure. Around 32% and 35% of UK employees participate in Phoenix Group’s growth and success through the
Sharesave and Share Incentive Plan respectively.
Phoenix Group is committed to attracting best in class talent at all levels with a compelling and competitive total reward proposition.
This includes a holistic core and flexible suite of benefits with the ability to customise these to meet individual needs, as well as industry
leading people policies including equal parental leave. We are an accredited Living Wage employer and committed to paying
colleagues a fair rate for their role by conducting regular market reviews of salary ranges to maintain competitiveness against market.
We are confident that the median pay ratio reported this year is consistent with our approach to pay, reward, career progression and
growth for all colleagues. All colleagues have the opportunity for annual pay awards, performance driven pay and recognition as well as
access to opportunities to develop their careers at Phoenix ensuring we create an environment for everyone to feel it is the best place
our colleagues have ever worked.
Phoenix Group Holdings plc Annual Report and Accounts 2022 141
Corporate governance
Performance graph and table
The graph below shows the value to 31 December 2022 on a TSR basis, of £100 invested in Phoenix Group Holdings plc on
31 December 2012 compared with the value of £100 invested in the FTSE 100 Index (excluding Investment Trusts).
The FTSE 100 Index (excluding Investment Trusts) is considered to be an appropriate comparator for this purpose as it is a broad
equity index of which the Company is a constituent.
Total shareholder return
Value of a 100 unit investment made on 31 December 2012.
0
50
100
150
200
250
300
350
400
0
£500
£1,000
£1,500
£2,000
£2,500
£3,000
£3,500
Dec 2013
CEO remuneration £000
Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022
FTSE 100 Index
Phoenix Group Holdings / Phoenix Group Holdings plc share price
Phoenix Group CEO remuneration
The total figure of remuneration for 2020 shown above is a combination of the single figures for Clive Bannister and Andy Briggs to
reflect the change in Group CEO in 2020. The single figure for Andy Briggs for 2022 reflects the first year of vesting of his LTIP award.
The DRR regulations also require that this performance graph is supported by a table summarising aspects of the Group CEO’s
remuneration for the period covered by the above graph.
Group chief executive officer remuneration
Single figure
of total
remuneration
(£000)
Annual variable
element award
rates against
maximum
opportunity
(‘AIP’)
Long-term
incentive vesting
rates against
maximum
opportunity
(‘LTIP’)
2022 Andy Briggs 3,058 87% 44.3%
2021 Andy Briggs 1,831 78% n/a
1
2020 Andy Briggs
2
1,706 83% 0.0%
3
Clive Bannister
2,4
321 81% n/a
5
2019 Clive Bannister 2,715
6
92% 68.5%
2018 Clive Bannister 2,567 86% 49.5%
2017 Clive Bannister 2,888 86% 64.0%
2016 Clive Bannister 2,878 84% 55.0%
2015 Clive Bannister 2,867 82% 57.0%
2014 Clive Bannister 3,104 68% 57.0%
7
2013 Clive Bannister 2,737 69% 67.0%
7
1 Andy Briggs was not in receipt of a 2019 LTIP due to the timing of his appointment.
2 Clive Bannister left the role of Group Chief Executive Officer on 10 March 2020 and left Phoenix Group on the same date. Andy Briggs was appointed to the Board
on 10 February 2020 and remained as CEO-designate until 10 March 2020.
3 See footnote 11 on page 130 of the 2020 Annual Report and Accounts for details of Andy Briggs’s LTIP vesting.
4 Clive Bannister’s 2020 single figure of total remuneration does not include compensation for loss of office.
5 Clive Bannister’s 2020 single figure of total remuneration does not include any value in respect of the 2018 LTIP. LTIP awards which vested after Clive Bannister stepped
down from the Board of the Company have been reported as Payments to Past Directors on page 132 and are not included in the single figure of total remuneration, in
line with the reporting regulations.
6 The single figure of total remuneration for 2019 has been restated and now reflects the actual price of shares on the day the 2017 LTIP vested (24 March 2020, 557.4p per
share) rather than the three-month average share price to 31 December 2019 (717.09p per share) which was required to be used last year for the single figure of
total remuneration.
7 The long-term incentive vesting rate for 2013 is shown at 67% and for 2014 is shown as 57%. In both years the Group CEO decided to waive voluntarily any entitlement
in excess of two-thirds of the shares which would otherwise have vested.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022142
Percentage change in pay of the Group Chief Executive Officer 2021 to 2022
In accordance with the DRR regulations, the table below provides a comparison of the percentage change in the prescribed pay
elements of each individual who was a Director during the year (salary, taxable benefits and annual incentive outcomes) between
financial years 2021 and 2022 and the equivalent percentage changes in the average of all staff employed by Phoenix Group.
As no staff are employed directly by Phoenix Group Holdings plc, we have disclosed information for an appropriate group that
is representative of the employees of Phoenix Group and its subsidiaries, in line with the regulatory guidance for this disclosure).
This group was selected as being representative of the wider workforce using the same process as was used for this comparison
in last year’s Annual Report and Accounts.
Salary / Fees Taxable Benefits Annual incentive
Year-on-year % change 2022 2021 2020 2022 2021 2020 2022 2021 2020
Executive Directors
1
Andy Briggs 1.1% 0.0% – 2.6%
2
3.3% – 12.4% (5.5)% –
Rakesh Thakrar 10.2% 2.3% – 20.7%
2
3.3% – 20.4% (3.3)% –
Non-Executive Directors
3
Alastair Barbour
4
58.4% 11.0% 0.0% 109.1% 66.6% (60%) n/a n/a n/a
Nicholas Lyons (17.1)% 13.8% 0.0% 897.6% n/a
4
(100%) n/a n/a n/a
Stephanie Bruce
5
n/a
4
– – n/a
4
– – n/a n/a n/a
Karen Green 12.8% 12.8% 6.8% 362.9% n/a
4
(100%) n/a n/a n/a
Hiroyuki Iioka 0.0% 0.0% – 0.0% 0.0% – n/a n/a n/a
Wendy Mayall 16.2% 5.7% 0.0% n/a
4
0.0% (100%) n/a n/a n/a
Katie Murray
5
n/a
4
– – n/a
4
(100)% – n/a n/a n/a
John Pollock 0.0% 4.4% 0.7% n/a
4
0.0% (100%) n/a n/a n/a
Belinda Richards 4.5% 5.7% 0.0% n/a
4
0.0% (100%) n/a n/a n/a
Maggie Semple
5
n/a
4
– – n/a
4
(100)% – n/a n/a n/a
Nicholas Shott 7.7% 22.8% 0.0% 208.3% (100)% (80%) n/a n/a n/a
Kory Sorenson 0.0% 12.8% 0.0% n/a
4
0.0% (100%) n/a n/a n/a
Mike Tumilty 0.0% 0.0% 0.0% n/a
4
0.0% (100%) n/a n/a n/a
Wider Employee Population 4.4% 4.7% 3.9% 57.2% 1.4% 7.4% 27.6% 9.1% n/a
1 The Taxable Benefits figures used for Andy Briggs and Rakesh Thakrar includes ongoing taxable benefits only.
2 The Taxable Benefits figures reflect a change in approach to reporting whereby the benefits under the Sharesave and Share Incentive Plan (previously included within
the LTIP figure within the Single Figure Table) are now included within Taxable Benefits instead. This amounts to £2.5k for Rakesh Thakrar and £600 for Andy Briggs.
3 See page 132 for further details on fees and taxable benefits for Non-Executive Directors. Non-Executive Directors do not participate in the Annual Incentive Plan.
4 No taxable benefit received in the prior year and therefore not possible to calculate a percentage change.
5 Stephanie Bruce, Katie Murray and Maggie Semple are newly appointed Board members and therefore it is not possible to calculate a percentage change.
The Salary figures for the Executive Directors reflect the increases agreed in 2022.
Annual Incentive figures for the Executive Directors are higher than in 2021 due to the higher outturn under the 2022 AIP compared
with the 2021 AIP reflecting the strong performance of the business, and the increase to base salary in April 2022.
The fee increases for the Non-Executive Directors reflect the increases agreed in 2022 and changes in Board roles and responsibilities.
Stephanie Bruce, Katie Murray and Maggie Semple were appointed during the year and as such it is not possible to calculate a
percentage change. Taxable benefits have increased for certain Non-Executive Directors as a consequence of resuming travel
compared to the prior year.
The figures for the wider employee population are generally higher compared to 2021 due to a number of factors:
• Pay review in April 2022 was operated under a consistent approach with a pay budget of 3.5%. In the context of the economic
environment, a flat increase was given to lower graded colleagues ensuring a higher flat increase for this population compared to
more senior colleagues. Additional salary increases were awarded throughout the year, where appropriate, to ensure consistency,
internal relativities, and to retain talent.
• The change to benefits is largely as a result of the one-off lump sum payment of £1,000 to all colleagues below senior management in
response to the cost of living challenge (see page 140). By way of comparison the benefit figure excluding this one-off cost of living
payment has reduced by 3.6% as a result of a reduction in PMI premium and the ending of the working from home allowance that was
provided to colleagues during the pandemic. As in previous years, Sharesave and Share Incentive Plan values are not included in the
wider employee population figures
• As with the Executive Directors, the increase in annual incentive payments is due to the higher outturn under the corporate element
than in 2021, and reflects the strong performance achieved in 2022.
Phoenix Group Holdings plc Annual Report and Accounts 2022 143
Corporate governance
Directors’ service contracts
The dates of contracts and letters of appointment and the respective notice periods for Directors are as follows:
Executive Directors’ Service Contracts
Name
Date of
appointment
Date of
contract
Notice period
from either
party (months)
Andy Briggs 1 January 2020 7 November 2019 12
Rakesh Thakrar 15 May 2020 6 March 2020 12
Subject to Board approval, Executive Directors are permitted to accept outside appointments on external boards as long as these are
not deemed to interfere with the business of the Group. They are also entitled to retain any external fees.
Andy Briggs is a board member of the Association of British Insurers and is the UK Government’s Business Champion for Older Workers.
Rakesh Thakrar is a Non-Executive Director and Chair of the Board Audit Committee of Bupa Insurance Limited and Bupa Insurance
Services Limited for which he received payment of £37,382 in 2022 on a pro-rated basis. He remains as a Director of Mythili Magha for
which no payments are received.
Non-Executive Directors’ letters of appointment
Name
Date of letter
of appointment
Date of
joining
Phoenix Group
Holdings Plc Board
1
Date of last
re-appointment letter Date of expiry
Unexpired
term
(months)
2
Alastair Barbour 1 November 2018 1 October 2013 1 September 2022 November 2023 8
Nicholas Lyons
3
15 October 2018 31 October 2018 31 October 2021 1 September 2022 –
Stephanie Bruce 9 May 2022 1 July 2022 n/a 1 July 2025 28
Karen Green 1 November 2018 1 July 2017 1 July 2020 30 June 2023 3
Hiroyuki Iioka 23 July 2020 23 July 2020 n/a 23 July 2023 4
Wendy Mayall
4
1 November 2018 1 September 2016 1 September 2022 31 December 2022 –
Katie Murray 1 April 2022 1 April 2022 n/a 1 April 2025 24
John Pollock 31 October 2022 1 September 2016 1 September 2022 30 August 2025 29
Belinda Richards 1 November 2018 1 October 2017 1 October 2020 30 September 2023 6
Maggie Semple 9 May 2022 1 June 2022 n/a 31 May 2025 26
Nicholas Shott 1 November 2018 1 September 2016 1 September 2022 30 August 2025 29
Kory Sorenson 1 November 2018 1 July 2014 1 July 2020 30 June 2023 3
Mike Tumilty
5
14 August 2019 1 September 2019 n/a 30 June 2022 –
1 Date of expiry refers to each individual directors’ letter of appointment which covers a three year term. All Directors are subject to annual re-election at the AGM
on 4 May 2023.
2 The unexpired term is from date of the signing of these accounts to the end of each Directors’ current letter of appointment and includes whole months only.
3 Alastair Barbour is expected to retire from the Board subsequent to Nicholas Lyons resuming his role as Chair of the Board which is expected to be in November 2023.
3 Nicholas Lyons commenced his sabbatical on 1 September 2022 and is expected to rejoin the Board in November 2023.
4 Wendy Mayall retired from the Board on 31 December 2022.
5 Mike Tumilty retired from the Board on 30 June 2022.
The tables above have been included to comply with UKLA Listing Rule 9.8.8. In the event of cessation of a Non-Executive Director’s
appointment (excluding the Chair) they would be entitled to a one-month notice period. The Chair, as detailed in his letter of
appointment, would be entitled to a six-month notice period.
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022144
Remuneration Committee governance
The terms of reference of the Committee are available at www.thephoenixgroup.com. The main determinations of the Committee
in 2022 in respect of the application of the Remuneration Policy are summarised in the Committee Chair’s letter to shareholders at
the start of the Remuneration Report.
The table below shows the independent Non-Executive Directors who served on the Committee during 2022 and their date
of appointment:
Member From To
Kory Sorenson (Committee Chair from 11 May 2017) 1 July 2014 To date
Karen Green 1 July 2017 To date
Belinda Richards 2 July 2019 To date
Nicholas Shott 20 October 2016 To date
Under the Committee’s Terms of Reference, the Committee meets at least twice a year but more frequently if required. During 2022,
eight formal Committee meetings were held and details of attendance at meetings are set out in the Corporate Governance Report
on page 83.
Consistent with the requirements of Solvency II, the Committee is responsible for establishing, implementing, overseeing and reviewing
the Company-wide remuneration policy in the context of business strategy and changing risk conditions. The Group-wide remuneration
policy focuses on ensuring sound and effective risk management so as not to encourage risk-taking outside of the Company’s risk
appetite. None of the Committee members have any personal financial interest (other than as shareholders), conflicts of interests arising
from cross-directorships or day-to-day involvement in running the business.
The Committee makes recommendations to the Board. No Director plays a part in any discussion about his or her own remuneration.
Remuneration committee activities in 2022
Q1 Q2 Q3 Q4
• Chief Risk Officer report noted
• Approval of Group and
functional AIP outturns for
2021 and Group and functional
AIP metrics and targets for
2022
• Approval of LTIP outturns for
2021 and metrics and targets
for 2022
• Executive Directors and
Executive Committee salary
decisions for 2023.
• Approval of 2022 Share Plan
Awards
• Oversight of wider employee
remuneration and cost of living
support
• Group-wide Remuneration
Review
• Remuneration Policy Review
• Investor feedback on DRR
• Share schemes update
• Chief Risk Officer mid-year
Report noted
• AIP / LTIP forecasts and
outturns
• Approve LTIPs mid-year grant
• Remuneration Review update
(including Remuneration
Policy)
• 2022 AIP Phoenix Re targets
• Remuneration Review
(including Remuneration Policy
approval)
• Shareholder consultation
• Review of Group CEO / CFO
remuneration for 2023
• Shareholding Guidelines noted
• Committee Effectiveness
Review.
Phoenix Group Holdings plc Annual Report and Accounts 2022 145
Corporate governance
Advice provided to the Committee
During the year, the Committee received independent remuneration advice from its appointed adviser, PwC, who is a member
of the Remuneration Consultants Group (the professional body for remuneration consultants) and adheres to its code of conduct.
The Remuneration Committee was satisfied that the advice provided by PwC was objective and independent.
PwC also provided general consultancy services to management during the year including support on other Board and Risk matters
and technical advice regarding share schemes. Separate teams within PwC provided unrelated services in respect of tax, assurance, risk
consulting, sustainability and transaction support during the year. The Committee is satisfied that these activities did not compromise
the independence or objectivity of the advice it has received from PwC as remuneration committee advisers.
PwC’s fees for work relating to the Committee for 2022 were £191,461 which included support for the renewal of the Remuneration
Policy. These were charged on the basis of the firm’s standard terms of business for advice provided.
The Committee assesses the performance of its advisers regularly, the associated level of fees and reviews the quality of advice
provided to ensure that it is independent of any support provided to management.
The Committee completed an internal effectiveness review for 2022. From that evaluation the Committee requested focused
education sessions from PwC during 2023 on wider employee pay and how our peers and other FTSE100s are not only navigating
remuneration in the current geo-political and UK economic uncertainty, but how new Director Remuneration Policies are being
communicated to the wider workforce in line with the Corporate Governance Code. The formal review of the Committee’s
effectiveness was covered as part of this year’s internal Board and Committee evaluation process for 2022. From that evaluation it was
agreed that formal education sessions from PwC during 2023 be arranged on wider employee pay and how our peers and other
FTSE100s are not only navigating remuneration in the current geo-political and UK economic uncertainty, but how new Directors
Remuneration Policies are being communicated to the wider workforce in line with the Corporate Governance Code
The Group CEO, Group HR Director, Executive Reward Director and Group Financial Controller and delegates, attend by invitation,
various Committee meetings during the year. No executive is ever permitted to participate in discussions or decisions regarding his
or her own remuneration.
The Committee consults with the Chief Risk Officer (without management present) on a regular basis. The Chief Risk Officer is asked
to detail the extent to which the Group has operated within its stated risk appetite during the year and to keep the Committee informed
of any risk-related concerns that required the Committee to consider using its judgement to moderate incentive plan outcomes. The
Chair of the Remuneration Committee also sits on the Risk Committee to enable additional linkage between risk matters and
remuneration outcomes.
Approval
This report in its entirety has been approved by the Remuneration Committee and the Board of Directors and signed on its behalf by:
Kory Sorenson
Remuneration Committee Chair
Approved by the Board on 10 March 2023
Directors’ remuneration report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022146
Directors’ report
The Directors present their report for the year ended 31 December 2022.
Phoenix Group Holdings plc is incorporated in England and Wales (registered
no. 11606773) and has a premium listing on the London Stock Exchange.
Shareholders
Dividends
Dividends for the year
ended 31 December 2022
Dividends for the year are as follows:
Ordinary shares
Paid interim dividend 24.8p per share (2021: 24.1p per share)
Recommended final dividend 26.0p per share (2021: 24.82p per share)
Total ordinary dividend 50.8p per share (2021: 48.92p per share)
Dividends declared in respect of the Company’s ordinary shares must be capable of being cancelled and withheld or
deferred at any time prior to payment. This is so that the Company’s ordinary shares can be counted towards Group
capital. Accordingly, the final dividend will be declared on a conditional basis and the Directors reserve the right to
cancel or defer the recommended dividend. The Directors do not expect to exercise this right other than where they
believe that it may be necessary to do so as a result of legal or regulatory requirements.
Share capital
Issued Share
Capital
The issued share capital of the Company increased by 816,419 shares during 2022 which related to shares issued
under the Company’s Sharesave Scheme.
At 31 December 2022, the issued ordinary share capital totalled 1,000,352,477. Subsequently, 15,998 ordinary
shares have been issued in 2023 in connection with the Company’s Sharesave Scheme to bring the total in issue
to 1,000,368,475 at the date of this Directors’ Report. Full details of the issued and fully paid share capital as at
31 December 2022 and movements in share capital during the period are presented in note D1 to the IFRS consolidated
financial statements.
Authority to Purchase
Own Shares
At the Company’s 2022 AGM, shareholders approved the renewal of the Company’s authority to make purchases
of up to 99,955,427 of its own shares and make payment for the redemption or purchase of its own shares in any
manner permitted by the Companies Act 2006 including without limitation, out of capital, profits, share premium
or the proceeds of a new issue of shares. The authority was not used and none of the Company’s ordinary shares
were purchased by the Company during 2022. The authority will expire at the 2023 AGM. A resolution to renew this
authority shall be proposed in the 2023 AGM Notice of Meeting.
Treasury Shares The Company held no treasury shares during the year or up to the date of this Directors’ Report.
Rights and
Obligations Attached
The rights and obligations attaching to the Company’s ordinary shares are set out in the Company’s Articles of
Association (the ‘Company’s Articles’) which are available on the Company’s website at www.thephoenixgroup.com/
about-us/governance.
Phoenix Group Employee
Benefit Trust (‘EBT’)
Where the EBT holds shares for unvested awards, the voting rights for these shares are exercisable by the trustees
of the EBT at their discretion, taking into account the recommendations of the Group.
Restrictions on
transfer of shares
Under the Company’s Articles, the Directors may in certain circumstances refuse to register transfers of shares.
Certain restrictions on the transfer of shares may be imposed from time to time by applicable laws and regulations
(for example, insider trading laws), and pursuant to the Listing Rules of the FCA and the Group’s own share dealing
rules whereby Directors and certain employees of the Group require individual authorisation to deal in the
Company’s ordinary shares.
Directors’ report
Phoenix Group Holdings plc Annual Report and Accounts 2022 147
Corporate governance
Shareholders
Share capital
Substantial
shareholdings
Information provided to the Company pursuant to Chapter 5 of the FCA’s Disclosure Guidance and Transparency
Rules (‘DTR 5’) is published on a Regulatory Information Service and on the Company’s website. As at 31 December
2022, the following interests with voting rights in the Ordinary share capital of the Company had been notified
to it under DTR 5. No changes have occurred in respect of the holdings below between 31 December 2022 and
10 March 2023.
Name
Number of voting
rights in shares
Percentage of
shares in issue
MS&AD Insurance Group Holdings Inc. 144,877,304 14.48%
abrdn plc 107,025,201 10.69%
BlackRock, Inc. 51,251,518 5.14%
Annual General Meeting (‘AGM’)
2023 AGM The AGM of the Company will be held at 9th Floor, 20 The Old Bailey, London, EC4M 7AN on 4 May 2023 at 10am.
A separate notice convening this meeting will be distributed to shareholders in due course and will include an
explanation of the items of business to be considered at the meeting.
Investor communications
Investor
communications
The Company’s Annual Report and Accounts, together with the Company’s Interim Report and other public
announcements and presentations, are designed to present a fair, balanced and understandable view of the Group’s
activities and prospects. These are available on the Company’s website at www.thephoenixgroup.com, along with a
wide range of relevant information for private and institutional investors, including the Company’s financial calendar.
Board
Board membership The membership of the Board of Directors during 2022 is given within the Corporate Governance Report on pages
74 to 76, which is incorporated by reference into this Directors’ Report.
During 2022 and up to the date of this Directors’ Report, the following changes to the Board took place:
• Katie Murray was appointed as a director on 1 April 2022
• Maggie Semple was appointed as a director on 1 June 2022
• Mike Tumilty, abrdn plc Nominated Director, retired from the Board on 30 June 2022
• Stephanie Bruce, abrdn plc Nominated Director, was appointed as a director on 1 July 2022
• Nicholas Lyons commenced his sabbatical on 1 September 2022
• Alastair Barbour commenced his position as Chair on 1 September 2022
• Wendy Mayall retired from the Board on 31 December 2022
Related party
transactions
Details of related party transactions which took place during the year with Directors of the Company and
consolidated entities where Directors are deemed to have significant influence, are provided in note I4 to the IFRS
consolidated financial statements.
Appointment, re-election
and removal of Directors
The rules about the appointment and replacement of Directors are contained in the Company’s Articles. These state
that a Director may be appointed by an ordinary resolution of the shareholders or by a resolution of the Directors. If
appointed by a resolution of the Directors, the Director concerned holds office only until the conclusion of the next
AGM following their appointment.
In accordance with the UK Corporate Governance Code, Directors must stand for election/re-election annually.
The Board of Directors will be unanimously recommending that all of the Directors should be put forward for
election/re-election at the forthcoming AGM to be held on 4 May 2023.
The Company’s Articles give details of the circumstances in which Directors will be treated as having automatically
vacated their office and also state that the Company’s shareholders may remove a Director from office by passing
an ordinary resolution.
Director powers
and authorities
The powers of the Directors are determined by the Companies Act 2006, the provisions of the Company’s Articles
and by any valid directions given by shareholders by way of special resolution.
The Directors have been authorised to allot and issue securities and grant options over or otherwise dispose of shares
under the Company’s Articles.
Directors’ remuneration
and interests
A report on Directors’ remuneration is presented within the Directors’ Remuneration Report on pages 127 to 146
including details of their interests in shares and share options or any rights to subscribe for shares in the Company.
Directors’ report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022148
Placeholder for image of Rakesh
“Our Going Concern Statement, detailed on the
following page, is made following a rigorous
assessment of whether the Group and Company
have adequate resources to continue in
operational existence over the next 12 months,
based on severe but plausible scenarios.”
Rakesh Thakrar
Group Chief Financial Officer
Board
Directors’ indemnities The Company has entered into deeds of indemnity with each of its Directors whereby the Company has agreed
to indemnify each Director against all losses incurred by them in the exercise, execution or discharge of their
powers or duties as a Director of the Company, provided that the indemnity shall not apply when prohibited by
any applicable law.
The deeds of indemnity remain in-force as at the date of signature of this Directors’ Report.
Directors’ conflicts of
interest
The Board has established procedures for handling conflicts of interest in accordance with the Companies Act 2006
and the Company’s Articles. See page 79 of the Corporate Governance Report for more detail.
On an ongoing basis, Directors are responsible for informing the Group Company Secretary of any new, actual
or potential conflicts that may arise.
Directors’ and Officers’
liability insurance
The Company maintains Directors’ and Officers’ liability insurance cover which is renewed annually.
Governance
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic
Report. The Strategic Report includes details of the Group’s cash flow and solvency position, including sensitivities for both, alongside details of
any key events affecting the Company (and its consolidated subsidiaries) since the end of the financial year. Principal risks and their mitigation are
detailed on pages 56 to 67. In addition, the IFRS consolidated financial statements include, amongst other things, notes on the Group’s borrowings
(note E5), management of its financial risk including market, credit and liquidity risk (note E6), its commitments and contingent liabilities (notes I5 and
I6) and its capital management (note I3). The Strategic Report (on pages 14 to 17 ) sets out the business model and how the Group creates value for
shareholders and policyholders.
As part of its comprehensive assessment as to whether the Group and the Company are a going concern, the Board has considered financial
projections over the period to 31 March 2024, which demonstrate the ability of the Group to withstand market shocks in a range of severe but
plausible stress scenarios. Further details of these stress scenarios are included in the viability statement on pages 68 to 69, but they include
a recessionary economic stress that reflects a further increase in inflation, additional credit downgrades and falling equity and property values.
The projections demonstrate that appropriate levels of capital would remain in the Life Companies under both the base and reasonably
foreseeable stress scenarios, thus supporting cash generation in the going concern period. In addition, the Board noted the Group’s access
to additional funding through its undrawn £1.25 billion Revolving Credit Facility. The stresses do not give rise to any material uncertainties over
the Group’s ability to continue as a going concern.
The Directors therefore have a reasonable expectation that the Group and the Company have adequate resources to meet its liabilities as they
fall due and continue in operational existence over the period to 31 March 2024, the period covered by the going concern assessment. Thus, they
continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The Directors have acknowledged their responsibilities in the Statement of Directors’ Responsibilities in relation to the IFRS financial statements
for the year ended 31 December 2022.
Viability statement
The Viability Statement, as required by the UK Corporate Governance Code, has been undertaken for a period of three years to align to the Group’s
business planning and is contained in the Risk Management section on pages 52 to 67.
Phoenix Group Holdings plc Annual Report and Accounts 2022 149
Corporate governance
Corporate governance statement
The disclosures required by section 7.2 of the FCA’s Disclosure Guidance and Transparency Rules can be found in the Corporate
Governance Report on pages 72 to 146 which is incorporated by reference into this Directors’ Report and comprises the Company’s
Corporate Governance Statement.
The 2018 UK Corporate Governance Code (the ‘Code’) applies to the Company and details on the Company’s compliance with the Code
are included in the Corporate Governance Report on page 77. The Code is available on the website of the FRC – www.frc.org.uk.
The disclosures required by the Companies Act 2006 in respect of the following matters are set out in the Strategic Report, as below:
Our strategy and future
developments
The Company’s strategy and priorities for 2022 are highlighted in the
‘Strategy and KPIs’ section of the Strategic Report.
See pages 18 to 27 of the Strategic Report
Our people
and diversity
The Company’s People strategy for colleagues is detailed in the
Group’s Sustainability Report. The Company’s diversity and inclusion
targets for colleagues are also detailed in the Group Sustainability
Report, with highlights set out in the Strategic Report.
• See pages 26, 27 and 42 of the
Strategic Report
• See the Company’s supplementary
Sustainability Report
Disability The Group has an Equal Opportunities and Diversity Framework
which ensures full and fair consideration is given to applications from,
and the continuing employment and training of, disabled people.
The Group also has a Reasonable Adjustments Policy which sets out
Phoenix’s duty to make reasonable adjustments to help ensure that
all colleagues can access opportunities and thrive in employment.
In addition, the Group has a Dignity at Work policy which sets out
Phoenix’s commitment to creating a work environment free of
discrimination where everyone is treated with dignity and respect.
Our colleague inclusion networks includes a group ‘Enable’ which
promotes the interests of colleagues with disabilities and other long-
term health conditions.
• See the Company’s website
for more information
Our people and
engagement
Details of how the Company has engaged with employees during
the year can be found in the Stakeholder Engagement section of
the Strategic Report and ‘Engagement in Action’ section of the
Corporate Governance Report. In addition, details of how the Board
has considered the interests of employees in key decision making
can be found in the section 172 statement included in the Strategic
Report and the Corporate Governance Report. Information about
how the Board has engaged with the workforce can also be found in
the Corporate Governance Report.
During the year, information about the Group’s performance and
market trends impacting Phoenix was shared via an all-employee
intranet. In addition, colleagues were invited to participate
in the Group’s Sharesave scheme, advertised through the all-
employee intranet.
• See page 42 of the Strategic Report
and pages 108 to 109 of the Corporate
Governance Report (for colleague
engagement) and 84 to 87 (for section
172 statement) of the Strategic Report
Our business
relationships
Details of how the Company has engaged with its customers,
suppliers and others can be found in the Stakeholder Engagement
section of the Strategic Report. In addition, details of how the
Board has considered the need to foster the Company’s business
relationships with suppliers, customers and others can be found in
the section 172 statement included in the Strategic Report on page
43 and Corporate Governance Report on pages 84 to 87.
• See pages 42 to 43 (stakeholder
engagement) and page 43 (for section
172 statement) of the Strategic Report.
Greenhouse gas
emissions
All disclosures concerning the Group’s greenhouse emissions are
contained in the Group’s Streamlined Energy and Carbon Reporting
(‘SECR’) Statement forming part of the Strategic Report.
• See pages 46 to 47 of the
Strategic Report
Directors’ report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022150
Governance
Other disclosures required within this corporate governance statement are set out below:
Task Force on Climate-
related Financial
Disclosures (‘TCFD’)
In accordance with LR 9.8.6R, climate-related financial disclosures consistent with the TCFD Recommendations and
Recommended Disclosures are contained in the Group’s Climate Report, a summary of which has been included in
the Strategic Report on pages 48 to 51 due to their strategic importance.
During 2022, significant progress has been made in further embedding the recommendations of the TCFD and
aligned with the expectations of the PRA’s Supervisory Statement 3/19. In light of this progress, the recognised
strategic importance of climate risks and opportunities and the increasing need for transparent climate reporting,
Phoenix has published a standalone Climate Report which is available on the Company’s website.
Board diversity – gender
and ethnicity
In accordance with LR 9.8.6R, a statement on board diversity targets and numerical data on the ethnic background
and gender of the Board of Directors and Executive Committee are included in the Corporate Governance report
on page 92. Data was collated through the standard process for preparing the Group’s annual submission to the
Department for Business & Trade (forrmely BEIS) in respect of the Parker Review: FTSE 350 Ethnic Diversity Data
Submission and FTSE Women Leaders review, under applicable data protection laws.
Energy usage and
Carbon Emissions
under the Companies
(Directors’ Report)
and Limited Liability
Partnerships (Energy
and Carbon Report)
Regulations 2018 (SI
2018/1155)
The Group’s Streamlined Energy and Carbon Reporting (‘SECR’) statement on the Group’s UK and global energy
consumption and GHG emissions for the financial year 1 January 2022 to 31 December 2022, and the 2021
comparative year is contained in the Strategic Report on pages 46 to 47.
Branches The Company, through its subsidiaries, has established branches in Germany, Hong Kong and Ireland as countries
in which the Group operates.
Political donations During 2022, the Group made no political donations. (2021: no political donations made)
Articles of Association Changes to the Company’s Articles require prior shareholder approval by special resolution.
The Company’s Articles are available on the Company’s website at www.thephoenixgroup.com/about-us/
governance
Re-appointment of the
Auditors
EY has indicated its willingness to continue in office and shareholders’ approval will be sought at the AGM on
4 May 2023.
There is no cap on auditor liability in place in relation to audit work carried out on the IFRS consolidated financial
statements and the Group’s UK subsidiaries’ individual financial statements.
Details of fees paid to EY during 2022 for audit and non-audit work are disclosed in note C4 to the IFRS consolidated
financial statements.
Disclosure of information
to Auditors
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are aware,
there is no relevant audit information of which the Company’s auditor is unaware and that each Director has taken
all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware of that information.
Group Company
Secretary
The Group Company Secretaries during the 2022 financial period were Gerald Watson (until 31 March 2022)
and Kulbinder Dosanjh (since 1 April 2022).
Fair, balanced and understandable
In accordance with the UK Corporate Governance Code, the Directors confirm that they have reviewed the Annual Report and consider that it is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s position, performance, business model
and strategy.
Phoenix Group Holdings plc Annual Report and Accounts 2022 151
Corporate governance
Contractual/Other
Significant agreements
impacted by a change of
control of the Company
The £1.25 billion revolving credit facility has provisions which would enable the lending banks to require repayment
of all amounts borrowed following a change of control.
All of the Company’s employee share and incentive plans contain specific provisions relating to a change of control.
Outstanding awards and options would normally vest and become exercisable/available on the date of notification,
subject to the satisfaction of any performance conditions and pro rata reduction as may be applicable under the
rules of the employee share incentive plans.
Apart from the aforementioned, there are a number of agreements that take effect, alter or terminate upon
a change of control of the Company, such as commercial contracts. None is considered to be significant
in terms of their potential impact on the business of the Group.
Important post balance
sheet events
Details of important events affecting the Company which have occurred since the end of the financial year
are contained in note I7 to the IFRS consolidated financial statements.
Disclosures under Listing
Rule 9.8.4R
For the purposes of Listing Rule 9.8.4CR, the information required to be disclosed under Listing Rule 9.8.4R can be
found within the following sections of the Report and Accounts:
Section Requirement Location
1 Statement of interest capitalised Note E5 to the Consolidated Financial
Statements
2 Publication of unaudited financial information Not applicable
3 Deleted Not applicable
4 Details of long-term incentive schemes Directors’ Remuneration Report
5 Waiver of emoluments by a Director Directors’ Remuneration Report
6 Waiver of any future emoluments by a Director Directors’ Remuneration Report
7 Non pre-emptive issue of equity for cash Not applicable
8 As per 7, but for major subsidiary undertakings Not applicable
9 Parent participation in any placing of a
subsidiary
Not applicable
10 Contracts of significance Not applicable
11 Controlling shareholder provision of services Not applicable
12 Shareholder dividend waiver Not applicable
13 Shareholder dividend waiver – future periods Not applicable
14 Controlling shareholder agreements Not applicable
Directors’ report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022152
Statement of Directors’ responsibilities
Statement of Directors’ responsibilities in respect of the
Annual Report and Accounts of Phoenix Group Holdings plc
The Directors are responsible for preparing the Annual Report,
consolidated financial statements and the Company financial
statements in accordance with applicable United Kingdom law
and regulations.
The Board has prepared a Strategic Report which provides an
overview of the development and performance of the Group’s
business for the year ended 31 December 2022, covers the future
developments in the business of Phoenix Group Holdings plc and
its consolidated subsidiaries and provides details of any important
events affecting the Company and its subsidiaries after the
year-end. For the purposes of compliance with DTR 4.1.5R(2) and
DTR 4.1.8R, the required content of the ‘Management Report’ can
be found in the Strategic Report and this Directors’ Report,
including the sections of the Annual Report and Accounts
incorporated by reference.
Company law requires the Directors to prepare the consolidated
and the Company financial statements for each financial year.
Under that law the Directors have elected to prepare the
consolidated and Company financial statements in accordance
with UK-adopted international accounting standards (‘IASs’) in
conformity with the requirements of the Companies Act 2006.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and the Company for that period.
In preparing these financial statements the Directors are
required to:
• select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IASs is insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the Group and Company financial position
and financial performance;
• in respect of the consolidated financial statements, state
whether UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and
explained in the consolidated financial statements;
• in respect of the Company financial statements, state whether
UK-adopted international accounting standards, have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the consolidated and the Company financial
statements on the going concern basis unless it is inappropriate
to presume that the Company and/or the Group will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s and
Group’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group, and
enable them to ensure that the Company and the consolidated
financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Group and Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations. The
Directors are responsible for making, and continuing to make,
the Company’s Annual Report and Accounts available on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors as at the date of this Directors’ Report, whose names
and functions are listed in the Board of Directors section on pages
74 to 76, confirm that, to the best of their knowledge:
• the consolidated financial statements, prepared in accordance
with UK-adopted international accounting standards give a true
and fair view of the assets, liabilities, financial position and profit
or loss of the Company and undertakings included in the
consolidation taken as a whole;
• the Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business
and the position of the company and undertakings included in
the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
• they consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for users (who have a reasonable knowledge of
business and economic activities) to assess the Company’s
position, performance, business model and strategy.
The Strategic Report and the Directors’ Report were approved by
the Board of Directors on 10 March 2023.
By order of the Board
Andy Briggs Rakesh Thakrar
Group Chief Group Chief
Executive Officer Financial Officer
10 March 2023
Statement of Directors’ responsibilities
Phoenix Group Holdings plc Annual Report and Accounts 2022 153
Corporate governance
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2022154
Independent auditors’ report 156
IFRS consolidated financial statements 168
Notes to the consolidated financial statements 175
Parent company financial statements 290
Notes to the parent company financial statements 293
Additional Life Company asset disclosures 307
Additional capital disclosures 312
Alternative performance measures 314
Phoenix Group Holdings plc Annual Report and Accounts 2022 155
Financials
Independent auditor’s report
Independent auditor’s report
to the members of Phoenix
Group Holdings plc
Opinion
In our opinion:
• Phoenix Group Holdings plc’s consolidated financial statements
and Parent Company financial statements (the ‘financial
statements’) give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at 31 December 2022
and of the Group’s loss for the year then ended;
• the consolidated financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
• the Parent Company financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards as applied in accordance with section
408 of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Phoenix Group
Holdings plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2022 which comprise:
Group Parent Company
Consolidated income
statement for the year ended
31 December 2022
Statement of financial position
as at December 2022
Statement of comprehensive
income for the year ended
31 December 2022
Statement of changes in
equity for the year ended
31 December 2022
Statement of consolidated
financial position as at
31 December 2022
Statement of cash flows for the
year ended 31 December 2022
Statement of consolidated
changes in equity for the year
ended 31 December 2022
Related notes 1 to 22 to the
financial statements, including
a summary of significant
accounting policies
Statement of consolidated
cash flows for the year ended
31 December 2022
Related notes A1 to I7 to
the consolidated financial
statements (except for note I3
where it is marked as unaudited),
including a summary of
significant accounting policies
The financial reporting framework that has been applied in their
preparation is applicable law and UK-adopted international
accounting standards and as regards the Parent Company
financial statements, as applied in accordance with section 408
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance
with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in
conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. In
evaluating the Directors’ assessment of the Group and Parent
Company’s ability to continue to adopt the going concern basis
of accounting we:
• confirmed our understanding of management’s going concern
assessment process and obtained management’s assessment
which covers the period to 31 March 2024;
• with support from our actuarial team, challenged the key
actuarial assumptions used in management’s five-year Annual
Operating Plan (‘AOP’) and determined that the models are
appropriate to enable management to make an assessment on
the going concern of the Group. We have observed that
assumptions used in the five-year AOP form basis for
management’s going concern projections;
• assessed the accuracy of management’s analysis by testing the
inputs and the clerical accuracy of the models used;
Phoenix Group Holdings plc Annual Report and Accounts 2022156
• assessed management’s consideration of how solvency and
liquidity has been managed in response to the current
economic environment and evaluated the liquidity and solvency
position of the Group by reviewing base case liquidity and
solvency projections that incorporate an estimated view of
the potential future economic downturn;
• challenged the key assumptions, such as expense assumptions
underlying mandatory obligations of the Group and property
market forecasts up to 31 March 2024, used in management’s
stress scenarios based on our understanding of the Group and
the available external data, respectively;
• evaluated management’s forecast analysis to understand how
severe the downside scenarios would have to be to result in
the elimination of solvency headroom and concluded it to
be remote;
• assessed management’s considerations of operational risks,
including those related to Outsourced Service Providers
(‘OSPs’) and their impact on the going concern assessment;
• assessed the plausibility of available management actions to
mitigate the impact of the key risks by considering the success
of previous similar management actions and the robustness of
the plans in the context of our understanding of the Group;
• checked that all mandatory debt and interest payments are
forecast to be met under the base case and adverse stress
scenarios and that the Group is able to meet target debt
repayments throughout the going concern period;
• performed enquiries of management and those charged with
governance to identify risks or events that may impact the
Group’s ability to continue as a going concern. We also
reviewed management’s assessment approved by the Board,
minutes of meetings of the Board and its committees; and
• assessed the appropriateness of the going concern
disclosures by comparing the disclosures with management’s
assessment and considering their compliance with the relevant
reporting requirements.
Based on management’s assessment, we have observed that the
Group continues to have surplus cash and solvency above its
Solvency Coverage Ratio in a number of extreme downside
scenarios and the Group continues to service customers and
meet its commitments in the current environment.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group and Parent Company’s ability to continue as a going
concern for the period to 31 March 2024.
In relation to the Group and Parent Company’s reporting on how
they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the
Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future events
or conditions can be predicted, this statement is not a guarantee
as to the Group and Parent Company’s ability to continue as
a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete
financial information of the Group
Function, Phoenix Life Division (which
includes Phoenix Life Limited and Phoenix
Life Assurance Limited), Standard Life
Assurance Limited and ReAssure Limited
and audit procedures on specific balances
for Other Companies (the ‘reporting
components’). Our scope is explained
further below and on page 157 to 158.
• The components where we performed full
or specific audit procedures accounted for
more than 99% (2021: 99%) of the equity
and 98% (2021: 98%) of the loss before tax
of the Group.
Key audit matters
• Valuation of insurance contract liabilities,
comprising the following risk areas:
– actuarial assumptions;
– actuarial modelling; and
– policyholder data.
• Valuation of certain complex and illiquid
financial investments.
• Recoverability of intangible assets arising
from the acquisition of ReAssure Limited,
Standard Life Assurance Limited and other
acquired entities.
Materiality
• Overall Group materiality of £83 million (2021:
£116 million) which represents 2% (2021: 2%)
of total equity attributable to owners of the
Parent (‘adjusted Group equity’).
An overview of the scope of the Parent Company
and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our
allocation of performance materiality determine our audit scope
for each company within the Group. Taken together, this enables
us to form an opinion on the consolidated financial statements.
We take into account size, risk profile, the organisation of the
Group and effectiveness of Group-wide controls, changes in
the business environment and other factors such as recent Internal
audit results when assessing the level of work to be performed
at each company.
In assessing the risk of material misstatement to the consolidated
financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, we
identified five reporting components of the Group. The Group
reporting components consist of Phoenix Life Division, Standard
Life Assurance Limited, ReAssure Limited, the Group Function
and Other Companies.
In the Phoenix Life Division component, the most significant
insurance companies are Phoenix Life Assurance Limited and
Phoenix Life Limited. Standard Life Assurance Limited and
ReAssure Limited are the most significant companies of those
respective components. The Group Function consists of Group
entities that primarily hold external debt and the pension schemes
of the Group as well as the consolidation adjustments. The Other
Companies include the Phoenix Life and Standard Life service
companies, ReAssure Life Limited, ReAssure UK Services Limited,
ReAssure MidCo Limited, ERIP Limited Partnership and Standard
Life International Designated Activity Company (‘SLIDAC’).
Phoenix Group Holdings plc Annual Report and Accounts 2022 157
Financials
Four of the reporting components were audited by component
teams as set out below:
Component Scope Auditor
Phoenix Life
Division (includes
Phoenix Life Limited
and Phoenix Life
Assurance Limited)
Full EY component team
Standard Life
Assurance Limited
Full EY component team
ReAssure Limited Full EY component team
Group Function Full EY primary team
Other Companies Specific (including
specified
procedures)
EY component team
Of the five reporting components selected, we performed an
audit of the complete financial information of four components
(‘full scope components’) which were selected based on their size
or risk characteristics. For the remaining Other Companies
component, we performed audit procedures on specific accounts
of Phoenix Life and Standard Life service companies (cash and
cash equivalents, provisions, accruals and deferred income,
administrative expenses excluding acquisition costs), ReAssure
Life Limited (cash and cash equivalents, collective investment
schemes), ReAssure UK Services Limited (administrative expenses
excluding acquisition costs), ReAssure MidCo Limited (pension
scheme surplus) and ERIP Limited Partnership (cash and cash
equivalents, derivative liabilities). We also instructed the SLIDAC
component audit team to perform specified procedures over
insurance contract liabilities.
The reporting components where we performed audit
procedures accounted for 99% (2021: 99%) of the Group’s equity
and 98% (2021: 98%) of the Group’s loss before tax. For the
current year, the full scope components contributed 98% (2021:
87%) of the Group’s equity and 94% (2021: 75%) of the Group’s
loss before tax. The specific scope components, including the
component with specified procedures contributed 1% (2021: 12%)
of the Group’s equity and 4% (2021: 23%) of the Group’s loss
before tax. The audit scope of these components may not have
included testing of all significant accounts of the component but
will have contributed to the coverage of significant accounts
tested for the Group.
The charts below illustrate the coverage obtained from the work
performed by our audit teams.
Full Scope 98%
Specific scope 1%
Out of scope 1%
Equity
Full Scope 94%
Specific scope 4%
Out of scope 2%
Loss before tax
Involvement with component teams
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken at
each of the components by us, as the primary audit engagement
team, or by component auditors operating under our instruction.
The primary audit team provided detailed audit instructions to
the component teams which included guidance on areas of focus,
including the relevant risks of material misstatement detailed
above, and set out the information required to be reported to
the primary audit team. Of the four full scope components, audit
procedures were performed on one of these directly by the
primary audit team whilst the remaining three components were
audited by the component audit teams. For Other Companies,
where the work was performed by component auditors, we
determined the appropriate level of involvement to enable us to
determine that sufficient audit evidence had been obtained as a
basis for our opinion on the Group as a whole.
The primary audit team followed a programme of planned visits
that has been designed to ensure that the Senior Statutory Auditor
visited each of the full scope components. For all full scope
components, in addition to the component visits, the primary audit
team reviewed key working papers and participated in the
component teams’ planning, including the component teams’
discussion of fraud and error. The primary audit team attended the
closing meetings with the management of the Phoenix Life
Division, Standard Life Assurance Limited and ReAssure Limited
and the Audit Committee meetings at the components.
For the specific scope components, the primary audit team have
reviewed the audit procedures performed by the component
teams on the specific accounts, by reviewing relevant workpapers
and holding meetings with the component teams as necessary.
The work performed on the components, together with the
additional procedures performed at the Group level, gave us
appropriate evidence for our opinion on the consolidated
financial statements as a whole.
Climate change
There has been increasing interest from stakeholders as to how
climate change will impact the Group. The Group has determined
that the most significant future impacts from climate change on
their operations will be from financial assets and in insurance and
investment contract liabilities. These are explained on pages 48
to 51 in the required Task Force for Climate related Financial
Disclosures, and on page 59 in the principal risks and uncertainties.
Independent auditor’s report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022158
The Group has also explained their climate commitments on
pages 20 to 21. All of these disclosures form part of the ‘Other
information’ rather than the audited financial statements. Our
procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with
the financial statements or our knowledge obtained in the course
of the audit in line with our responsibilities on ‘Other information’.
In planning and performing our audit we assessed the potential
impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
As explained in note A3.7 within the accounting policies,
governmental and societal responses to climate change risks are
still developing, and are interdependent upon each other, and
consequently financial statements cannot capture all possible
future outcomes as these are not yet known. The degree of
certainty of these changes may also mean that they cannot be
taken into account when determining asset and liability valuations
and the timing of future cash flows in accordance with UK-
adopted international accounting standards. As explained in
the note management believe that reasonably possible changes
arising from climate risks would only have a limited impact on
asset and liability valuations at the year-end date.
Our audit effort in considering climate change was focused on
validating this assertion, through considering the potential effects
of climate risks on liability and asset valuations and associated
disclosures where values are determined through modelling future
cash flows. As part of this evaluation, we performed our own risk
assessment, supported by our climate change internal specialists,
to determine whether any risks of material misstatement in the
financial statements from climate change needed to be
considered in our audit. We also challenged the Directors’
considerations of climate change in their assessment of going
concern and viability and associated disclosures.
Whilst the Group have stated their commitment to the aspirations
of the Paris Agreement to achieve net zero emissions by 2050, the
Group are currently unable to determine the full future economic
impact on their business model, operational plans and customers
to achieve this and therefore, as set out above, the potential
impacts are not fully incorporated in these financial statements.
Based on our work we have not identified the impact of climate
change on the financial statements to be a key audit matter or to
materially impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which
had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion
on these matters.
Risk
Valuation of insurance contract liabilities (£103.4bn; 2021:
£130.7bn)
Refer to the Audit Committee Report (page 101); Critical
accounting estimates (page 176); Accounting policies and note F1
of the consolidated financial statements (pages 230 to 232)
We considered the valuation of insurance contract liabilities to be
a significant risk for the Group. Specifically, we considered the
actuarial assumptions and modelling that are applied, as these
involve complex and significant judgments about future events,
both internal and external to the business, for which small changes
can result in a material impact to the resultant valuation.
Additionally, the valuation process is reliant upon the accuracy
and completeness of the data.
We have split the risks relating to the valuation of insurance
contract liabilities into the following component parts:
• actuarial assumptions;
• actuarial modelling; and
• policyholder data.
The specific audit procedures performed to address the
significant risk are set out below. In addition, we assessed
management’s analysis of movements in insurance contract
liabilities and obtained evidence to support large or unexpected
movements as this provided important audit evidence over the
valuation of insurance contract liabilities.
Phoenix Group Holdings plc Annual Report and Accounts 2022 159
Financials
Risk area Our response to the risk
Key observations
communicated to the
Audit Committee
Actuarial assumptions
Refer to the Audit Committee
Report (page 101);
There has been no change in our
assessment of this risk from the
prior year.
Economic assumptions are set by
management taking into account
market conditions as at the
valuation date and require minimal
judgment. Non-economic
assumptions are set based on the
Group’s past experience, market
experience and practice,
regulations and expectations
about future trends.
The assumptions that we consider
to have the most significant impact
are the base and trend longevity,
persistency, assured mortality
and expenses.
Given the recent economic
volatility we place additional focus
on future economic assumptions
such as inflation assumptions at
the 2022 year-end date.
To obtain sufficient audit evidence to conclude on the appropriateness of actuarial
assumptions, using EY actuaries as part of our audit team, we performed the
following procedures:
• obtained an understanding and tested the design and operating effectiveness
of key controls over management’s process for setting and updating key
actuarial assumptions;
• challenged and assessed whether the methodology and assumptions applied
were appropriate based on our knowledge of the Group, industry standards
and regulatory and financial reporting requirements;
• reviewed and challenged the results of management’s experience analysis,
including the base longevity, persistency and assured mortality, to assess
whether these justified the adopted assumptions;
• challenged and assessed management’s decisions on the inclusion or exclusion
of data relating to COVID-19 when setting individual assumptions, including
longevity, mortality, morbidity and persistency;
• in respect of trend longevity, we evaluated the results of management’s analysis
on longevity trend, challenged the judgments applied by management in setting
the parameters and benchmarked the output against other industry participants
and the results from the industry standard Continuous Mortality Investigation
(‘CMI’);
• assessed the expense assumptions adopted by management considering an
impact of the recent economic volatility on the components of expense inflation.
Our focus has been on the change in the nature of the cost base arising in the
increase in volumes of new insurance business written. We have challenged the
assumed development of expenses including inflation across the AOP period,
the allocation of those expenses between acquisition and maintenance and the
resulting calculation of unit costs, as well as the inclusion of benefits arising from
planned future management actions;
• performed procedures to test that the assumptions used in the year end
valuation were consistent with the approved basis; and
• benchmarked the demographic and economic assumptions, against those
of other comparable industry participants.
We determined that
the actuarial
assumptions used by
management are
reasonable based on
the analysis of the
experience to date,
industry practice
and the financial
and regulatory
requirements.
We performed full and specific scope audit procedures over this risk area in four
components representing 100% of the risk amount.
Independent auditor’s report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022160
Risk area Our response to the risk
Key observations
communicated to the
Audit Committee
Actuarial modelling
The migration of the ReAssure
business to a new actuarial model
increases the risk of error this year.
We consider the integrity and
appropriateness of models to be
critical to the overall valuation of
insurance contract liabilities.
Over £92bn of the £103.4bn
(2021: over £120bn of £130.7bn)
insurance contract liabilities are
modelled using the core actuarial
modelling systems, with the
residual balance modelled outside
these systems to cater for any
additional required liabilities not
reflected in the models.
We consider the key risks to
relate to:
i) model developments applied to
the core actuarial models;
ii) liabilities modelled outside the
core actuarial modelling
systems; and
iii) the appropriateness of the core
actuarial model.
In addition, the migration of the
ReAssure business to a new
actuarial model is considered
a key risk area for 2022.
To obtain sufficient audit evidence to conclude on core actuarial modelling systems
and balances calculated outside these systems, using EY actuaries as part of our
audit team we performed the following procedures:
• obtained an understanding of management’s process for model changes to
the core actuarial system and tested the design, implementation and operating
effectiveness of key controls over that process;
• challenged and evaluated the methodology, inputs and assumptions applied
to model changes made in the core actuarial modelling systems over the year;
• reviewed the governance process around model changes by review of the
relevant committee minutes;
• with respect to the migration of ReAssure business onto a new model we tested
management’s process with a focus on both the robustness of the outputs and
ensuring that the differences between current and previous models were
understood;
• assessed the results of management’s analysis of movements in insurance
contract liabilities to corroborate that the actual impact of changes to
models was consistent with that expected when the model change was
implemented; and
• stratified the components of the balance modelled outside the core actuarial
system as at the balance sheet date and focused our testing on those that, in our
professional judgment, present a higher risk of material misstatement. As part of
the testing, we gained an understanding of the rationale for balances calculated
outside of the core actuarial system and assessed the appropriateness of the
applied calculation methodology. In addition we also perform an independent
valuation of a sample of insurance contract liabilities which are modelled outside
the core actuarial system.
We determined that
the models used are
appropriate, that
changes to the
models were
implemented as
intended, and that
controls over
management’s
processes for
modelling insurance
contract liabilities
using the core
actuarial modelling
systems were
operating effectively.
We also determined
that liabilities
modelled outside
these core actuarial
modelling systems
are reasonable.
We performed full and specific scope audit procedures over this risk area in four
components representing 100% of the risk amount.
Phoenix Group Holdings plc Annual Report and Accounts 2022 161
Financials
Risk area Our response to the risk
Key observations
communicated to the
Audit Committee
Policyholder data
There has been no change in our
assessment of this risk from the
prior year.
The insurance contract data held
on policy administration systems
(‘the policyholder data’) is a key
input into the valuation process.
The valuation of insurance contract
liabilities is therefore reliant upon
the accuracy and completeness of
the data used.
To obtain sufficient audit evidence to assess the integrity of policyholder data
we performed the following procedures:
• obtained an understanding and tested the design and operating effectiveness
of the key controls, including information technology general controls, over
management’s data collection, extraction and validation process;
• focussed our testing on the changes to the data process as a result of the
migration of the ReAssure business to a new actuarial model;
• for Outsourced Service Providers (‘OSP’) where we have placed reliance on the
ISAE 3402 Service Organisation Controls (‘SOC’) reports, we have reviewed the
ISAE 3402 SOC reports where relevant to determine the impact of any
identified control exceptions;
• for OSPs where we do not receive a ISAE 3402 SOC report we have obtained an
understanding of the process over data extraction and input into the actuarial
models and performed direct testing of the design and operating effectiveness
of the key controls;
• confirmed that the actuarial data extracted from policy administration
systems and those provided by the OSPs were those used as an input to
the actuarial model;
• assessed the appropriateness of management’s grouping of data for input
into the actuarial model;
• through the use of our data visualisation and analytics techniques, performed
focussed substantive testing over the completeness and accuracy of the
policyholder data and the appropriateness of management’s data cleansing
rules; and
• performed the comparison of policy level data between data in the actuarial
models and that contained within the policy administration systems. We
evaluated the accuracy of policyholder data by agreeing a sample back to
the policyholder documents.
We determined
based on our audit
work that the data
used for the actuarial
model inputs is
materially complete
and accurate.
We performed full and specific scope audit procedures over this risk area in four
components representing 100% of the risk amount.
Independent auditor’s report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022162
Risk area Our response to the risk
Key observations
communicated to the
Audit Committee
Valuation of certain complex and
illiquid financial investments
(Equity release mortgages £3.9bn;
2021: £4.2bn); (Modelled debt
securities £6.3bn; 2021: £7.0bn)
There has been no change in our
assessment of this risk from the
prior year.
Refer to the Audit Committee
Report (page 101); Critical
accounting estimates (page 176);
Accounting policies and notes E1
and E2 of the consolidated
financial statements (pages 201
to 213).
The extent of judgment applied by
management in valuing the
Group’s financial investments
varies with the nature of securities
held, the markets in which they are
traded and the valuation
methodology applied.
Observable inputs are not readily
available for the valuation of equity
release mortgages (‘ERM’)
financial investments and the
modelled debt securities, such as
private placements, local authority
loans, infrastructure loans and
commercial real estate loans.
Consequently, management use
models with other inputs to
estimate their value.
We consider that the key risks on
the valuation of ERM financial
investments relate to:
i) assumptions, as these are largely
based on non-observable inputs
and are highly judgmental, and
ii) the completeness and accuracy
of data feeding the valuation
model.
We consider the key risks related
to valuation of modelled debt
securities to be:
i) the use of complex valuation
methodologies as opposed to
observable prices;
ii) significant judgments involved
in setting the spread above
risk-free rate;
iii) the subjectivity surrounding the
selection of the comparable
bonds to derive that spread; and
iv) the reasonableness of credit
ratings considering the ongoing
impact of COVID-19.
Given the recent economic
volatility we place additional focus
on economic assumptions.
We used EY valuation specialists and actuaries to test the valuation of ERM financial
investments and modelled debt securities. To obtain sufficient audit evidence to
conclude on the valuation of ERM financial investments, we:
• tested the design and operating effectiveness of key controls over
management’s assumption setting processes for valuing these instruments;
• tested the completeness of the ERM financial investments and underlying data
at the period end through independent confirmations;
• tested the accuracy of mortgage data used in the valuation model by agreeing
a sample of new loans to supporting evidence and validating any movements
on static data over the period;
• evaluated the methodology, inputs and assumptions used to value the ERM
financial investments including the No Negative Equity Guarantee (‘NNEG’)
(such as house price inflation, residential house price volatility, longevity
improvement and base mortality, as well as economic assumptions such
as discount rate);
• validated the key assumptions by comparing them to published market
benchmarks and demographic and economic assumptions used by other
industry participants, to confirm that key valuation inputs were consistent
with industry norms and our understanding of the instrument type and
were appropriate considering the current economic volatility; and
• developed our own independent model to value the ERM financial investments
and compared the output to the results produced by the Group.
To obtain sufficient audit evidence to conclude on the valuation of modelled
debt securities, we:
• reviewed the ISAE 3402 SOC report of the OSPs covering the period to
30 September 2022, including those controls over the valuation of modelled
debt securities outsourced to the third party, and determined the impact of
any identified control exceptions;
• obtained the bridging letter for the period 1 October 2022 to 31 December 2022
to review that the controls over the valuation of modelled debt securities were
operating during the period;
• inspected evidence of the operation of management’s oversight controls
over the OSPs;
• understood the valuation process of modelled debt securities applied by
the OSP of the Phoenix Life Division, Standard Life Assurance Limited and
ReAssure Limited components and assessed the appropriateness of any
methodology and assumption changes during the year, including the impact
of the current economic volatility on economic assumptions;
• for modelled debt securities overseen by the in-house Independent Pricing
Valuation (‘IPV’) and Credit and Valuation Committee, we have obtained an
understanding of the valuation methodology and tested the design and
operating effectiveness of the key controls;
• engaged EY valuation specialists to evaluate the appropriateness of the
valuation methodology, calculate an independent range of comparable values
for a sample of modelled debt securities using an independent valuation
model and considered reasonable alternative key assumptions based on
comparable securities;
• validated the accuracy of security related inputs to the valuation of modelled
debt securities by tracing a sample of inputs to the underlying agreements
and documentation;
• performed independent calibration on securities by reviewing the implied
rate and sector credit spreads to validate the reasonableness of credit ratings
used in the comparable values assessment; and
• considered the downgrade of credit ratings or changes of spread in
management’s credit watchlist and known market risks in our independent
comparable values assessment.
Based on our
procedures
performed on the
ERM financial
investments and the
modelled debt
securities, we are
satisfied that the
valuation of these
complex and illiquid
assets is reasonable.
We performed full scope audit procedures over this risk area in three components,
which covered 100% of the risk amount.
Phoenix Group Holdings plc Annual Report and Accounts 2022 163
Financials
Risk area Our response to the risk
Key observations
communicated to the
Audit Committee
Recoverability of AVIF intangible
assets arising from the acquisition
of ReAssure Limited, Standard Life
Assurance Limited, and other
associated entities (AVIF £3,835m;
2021: £4,323m)
Refer to the Audit committee
report (page 101), critical
accounting estimates (page 176),
the accounting policies and note
G2 of the consolidated financial
statements (pages 256 to 259)
On 22 July 2020, the Group
acquired ReAssure Limited,
ReAssure Life Limited, ReAssure
UK Services Limited, Ark Life
Assurance Company and other
related entities (collectively
‘ReAssure’) from Swiss Re Finance
Midco (Jersey) Limited for total
consideration of £3.1bn.
On 31 August 2018, the Group
acquired Standard Life Assurance
Limited and other associated
entities (collectively ‘Standard
Life’) from Standard Life Aberdeen
plc (‘SLA plc’) for total
consideration of £3.0bn.
These acquisitions gave rise to the
recognition of intangible assets
relating to the acquired in force
business (‘AVIF’)
Each reporting period
management is required to
perform an assessment on the
acquired intangible assets to
identify any indicators of
impairment. Where such indicators
exist, management performs a
recoverability assessment.
Recoverability assessment of
these intangible assets involves
consideration of a number of
judgmental and sensitive
assumptions such as:
• market movements, especially
those arising from the current
economic volatility and their
impact on economic
assumptions such as cost
of capital; and
• significant changes to
core valuation assumptions,
being: lapses, longevity,
late retirements.
As a result, we consider valuation
of the acquired intangible assets
to have a higher risk of material
misstatement.
To obtain sufficient audit evidence to assess recoverability of AVIF intangible assets
arising from the acquisition of ReAssure and Standard Life, using EY actuaries as
part of the audit team we performed the following procedures:
• understood and evaluated management’s process, model and assumptions
supporting the recoverability assessment;
• tested design and implementation of the completeness and accuracy of the data
used in the recoverability assessment;
• challenged management’s assessment of impairment indicators by considering
current market factors including the recent economic volatility and assumption
changes not modelled in the fair value exercise at the acquisition date and
assessed their impact on the ReAssure and Standard Life AVIF values as at
31 December 2022; and
• obtained management’s expectations of future profitability of the acquired
entities, assessed appropriateness of the models used to estimate the fair value
and value in use and challenged the assumptions applied by management by
comparing key assumptions and judgments with our independent view and
experience of the wider market.
Based on our
procedures
performed on the
recoverability of
intangible assets
arising from the
acquisition of
ReAssure and
Standard Life, we are
satisfied that there
is no impairment
necessary as at
31 December 2022.
In addition, we
consider the
sensitivity ranges
disclosed in the
Annual Report and
Accounts to be
appropriate given
current economic
volatility.
Independent auditor’s report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022164
Our application of materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Group to be £83 million (2021:
£116 million), which is 2% (2021: 2%) of adjusted Group equity.
Whilst profit before tax or operating profit are common bases
used across the life insurance industry and might be an
appropriate measure for an open business, we believe that the
use of equity as the basis for assessing materiality remains more
appropriate given that the Group is primarily a closed life
assurance consolidator and as such equity provides a more stable,
long-term measure of value. We note also that equity more closely
correlates with key Group performance metrics such as Solvency
II capital requirements and Own Funds. However, as these
measures are non-GAAP measures, we consider equity to be
more appropriate.
We determined materiality for the Parent Company to be £139
million (2021: £148 million), which is 2% (2021: 2%) of equity of the
Parent Company equity attributable to owners. We have used a
capital based measure for determining materiality considering the
nature of the Parent Company as a holding company. This is
also consistent with the approach taken for the Group where
we consider equity to be the most appropriate basis when
considering against other measures such as IFRS profit before tax.
For the Group audit purposes, we performed our audit
procedures to the lower of the Parent Company and the
Group allocated performance materiality.
• Starting point – £5,187m (Total equity)
• Based on 31 December 2022
• Details of adjustments – £1,026m
• Removal of NCI and Tier 1 loan notes
• Totals £4,161m (Adjusted equity)
• Materiality of £83m (2% of equity)
Starting
basis
Adjustments
Materiality
During the course of our audit, we reassessed initial materiality for
the Group from £100 million to £83 million due to a decrease in
the Group’s total equity for 31 December 2022 between our
forecast total equity (upon which our initial materiality was based)
and the final total equity for 31 December 2022. We considered
the impact of this on the extent of our audit procedures.
We also reassessed initial materiality for the Parent Company from
£156 million to £139 million due to a decrease in the Parent
Company’s total equity for 31 December 2022 between our
forecast total equity (upon which our initial materiality was based)
and the final total equity for 31 December 2022. We considered
the impact of this on the extent of our audit procedures.
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment
of the Group’s overall control environment, our judgement was
that performance materiality was 50% (2021: 50%) of our
planning materiality, namely £41 million (2021: £58 million).
Audit work at component locations for the purpose of obtaining
audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance
materiality. The performance materiality set for each component
is based on the relative scale and risk of the component to the
Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the range of performance
materiality allocated to components was £8 million to £27 million
(2021: £12 million to £32 million).
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of £4 million
(2021: £6 million), which is set at 5% of planning materiality, as well
as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the
annual report set out on pages 1 to 153 and 307 to 326, other
than the financial statements and our auditor’s report thereon.
The Directors are responsible for the other information
contained within the Annual Report.
Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Phoenix Group Holdings plc Annual Report and Accounts 2022 165
Financials
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group
and the Parent Company and its environment obtained in the
course of the audit, we have not identified material misstatements
in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group and Company’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out on page 149;
• Directors’ explanation as to its assessment of the Group’s
prospects, the period this assessment covers and why the
period is appropriate set out on page 68;
• Director’s statement on whether it has a reasonable expectation
that the Group will be able to continue in operation and meets
its liabilities set out on page 69;
• Directors’ statement on fair, balanced and understandable set
out on page 151;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 56;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems
set out on page 100; and;
• The section describing the work of the audit committee set
out on page 96 to 101.
Responsibilities of Directors
As explained more fully in the Directors’ statement of
responsibilities set out on page 153, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group and Parent Company’s ability
to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Explanation as to what extent the audit was considered
capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including
fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance
of the Company and management.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and determined
that the relevant laws and regulations related to elements of
company law and tax legislation, and the financial reporting
framework. Our considerations of other laws and regulations
that may have a material effect on the financial statements
included permissions and supervisory requirements of the
Prudential Regulation Authority (‘PRA’), the Financial Conduct
Authority (‘FCA’) and the UK Listing Authority (‘UKLA’).
Independent auditor’s report continued
Phoenix Group Holdings plc Annual Report and Accounts 2022166
• We understood how Phoenix Group Holdings plc is complying
with those frameworks by making enquiries of management and
those responsible for legal and compliance matters. We also
reviewed correspondence between the Company and UK
regulatory bodies; reviewed minutes of the Group Board and
its Committees; and gained an understanding of the Group’s
approach to governance, demonstrated by the Board’s
approval of the Group’s governance framework.
• We assessed the susceptibility of the consolidated financial
statements to material misstatement, including how fraud
might occur by considering the controls that the Group has
established to address risks identified by the entity, or that
otherwise seek to prevent, deter or detect fraud. Our
procedures over the Group’s control environment included
assessment of the consistency of operations and controls in
place within the Group and the OSPs as they continued to
adopt a hybrid model throughout 2022.
• The fraud risk was considered to be higher within the valuation
of insurance contract liabilities We considered management
override risk to be higher in this area due to the significant
judgments and estimates involved.
Our procedures, as detailed in the key audit matters
above, included:
– Reviewing accounting estimates for evidence of management
bias. Supported by our actuarial team and specialists, we
assessed if there were any indicators of management bias
in the valuation of insurance contract liabilities;
– Testing the appropriateness of journal entries recorded in
the general ledger, with a focus on manual and non-routine
journals; and
– Evaluating the business rationale for significant and/or
unusual transactions.
• On this audit we do not believe there is a fraud risk related to
revenue recognition because there is limited management
judgement involved on the recognition and measurement of the
transaction price for all material revenue streams.
• Our procedures involved: making enquiries of those charged
with governance and senior management for their awareness of
any non-compliance of laws or regulations, enquiring about the
policies that have been established to prevent non-compliance
with laws and regulations by officers and employees, enquiring
about the Company’s methods of enforcing and monitoring
compliance with such policies, and inspecting significant
correspondence with the PRA and FCA.
• The Company operates in the insurance industry which is a
highly regulated environment. As such the Senior Statutory
Auditor considered the experience and expertise of the
engagement team to ensure that the team had the appropriate
competence and capabilities, which included the use of
specialists where appropriate.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at frc.org.uk/auditorsresponsibilities.
This description forms part of our Auditor’s Report.
Other matters we are required to address
• Following the recommendation from the Audit Committee,
we were appointed by the Company on 13 December 2018
to audit the financial statements for the period ending
31 December 2018 and subsequent financial periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is five years, covering
the years ending 31 December 2018 to 2022.
• The audit opinion is consistent with the additional report to
the Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Stuart Wilson
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
10 March 2023
Phoenix Group Holdings plc Annual Report and Accounts 2022 167
Financials
Financials
Consolidated income statement
For the year ended 31 December 2022
Notes
2022
£m
2021
£m
Gross premiums written
Less: premiums ceded to reinsurers
F3
(1,727 ) (2,079 )
Net premiums written
Fees and commissions
C1
Total revenue, net of reinsurance payable
Net investment income
C2
(38,149 ) 18,001
Other operating income
Gain on completion of abrdn plc transaction
A6.1
Loss on disposal of Ark Life
A6.2
Net income
(31,749 ) 24,541
Policyholder claims
(9,392 ) (9,656 )
Less: reinsurance recoveries
Change in insurance contract liabilities
Change in reinsurers’ share of insurance contract liabilities
(2,450 ) (177 )
Transfer from unallocated surplus
F2
Net policyholder claims and benefits incurred
Change in investment contract liabilities
Amortisation and impairment of acquired in-force business
G2
(505 ) (577 )
Amortisation of other intangibles
G2
(21 ) (20 )
Impairment of goodwill
G2
Administrative expenses
C3
(2,412 ) (2,056 )
Net income under arrangements with reinsurers
F3.3
Net income attributable to unitholders
Total operating expenses
Loss before finance costs and tax
(2,610 ) (188 )
Finance costs
C5
(230 ) (242 )
Loss for the year before tax
(2,840 ) (430 )
Tax credit/(charge) attributable to policyholders’ returns
C6
Loss before the tax attributable to owners
(2,261 ) (688 )
Tax credit/(charge)
C6
Less: tax attributable to policyholders’ returns
C6
(579 ) 258
Tax credit/(charge) attributable to owners
C6
Loss for the year attributable to owners
(1,762 ) (709 )
Attributable to:
Owners of the parent
(1,829 ) (837 )
Non-controlling interests
D5
(1,762 ) (709 )
Earnings per ordinary share
Basic (pence per share)
B3
(185.2 )p (86.4 )p
Diluted (pence per share)
B3
(185.2 )p (86.4 )p
Phoenix Group Holdings plc Annual Report and Accounts 2022168
Statement of comprehensive income
For the year ended 31 December 2022
Notes
2022
£m
2021
£m
Loss for the year (1,762 ) (709 )
Other comprehensive income/(expense):
Items that are or may be reclassified to profit or loss:
Cash flow hedges:
Fair value gains arising during the year D3 181 44
Reclassification adjustments for amounts recognised in profit or loss
D3
(186 ) (36 )
Exchange differences on translating foreign operations 36 (45 )
Reclassification of foreign currency translation reserve on disposal of Ark Life
A6.2
Items that will not be reclassified to profit or loss:
Remeasurement of owner-occupied property G3 (5 ) –
Remeasurements of net defined benefit asset/liability
G1
Tax charge relating to other comprehensive income items C6 (280 ) (138 )
Total other comprehensive income for the year
Total comprehensive expense for the year (1,076 ) (589 )
Attributable to:
Owners of the parent (1,143 ) (717 )
Non-controlling interests
D5
(1,076 ) (589 )
Phoenix Group Holdings plc Annual Report and Accounts 2022 169
Financials
Financials continued
Statement of consolidated financial position
As at 31 December 2022
Notes
2022
£m
2021
£m
ASSETS
Pension scheme asset G1 14 36
Reimbursement rights
G1
Intangible assets
Goodwill 10 10
Acquired in-force business
Other intangibles 211 232
G2
Property, plant and equipment
G3
Investment property
G4
Financial assets
Loans and deposits
Derivatives
E3
Equities
Investment in associate
Debt securities
Collective investment schemes
Reinsurers' share of investment contract liabilities
E1 248,981 293,192
Insurance assets
Reinsurers’ share of insurance contract liabilities F1 6,142 8,587
Reinsurance receivables
Insurance contract receivables 66 70
Deferred tax asset G8 158 –
Current tax receivable
G8
Prepayments and accrued income 432 373
Other receivables
G5
Cash and cash equivalents G6 8,839 9,112
Assets classified as held for sale
A6.1
Total assets
Approved by the Board on 10 March 2023.
Andy Briggs Rakesh Thakrar
Chief Executive Officer Chief Financial Officer
Company registration number 11606773.
Phoenix Group Holdings plc Annual Report and Accounts 2022170
Notes
2022
£m
2021
£m
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
D1
Share premium 10 6
Shares held by employee benefit trust
D2
(13 ) (12 )
Foreign currency translation reserve 107 71
Merger relief reserve
D1
Other reserves D3 46 56
Retained earnings
Total equity attributable to owners of the parent
Tier 1 Notes D4 494 494
Non-controlling interests
D5
Total equity
Liabilities
Pension scheme liability G1 2,520 3,103
Insurance contract liabilities
Liabilities under insurance contracts
F1
Unallocated surplus F2 1,344 1,801
Financial liabilities
Investment contracts 143,845 160,417
Borrowings
E5
Deposits received from reinsurers 2,598 3,569
Derivatives
E3
Net asset value attributable to unitholders 2 ,978 3,568
Obligations for repayment of collateral received
E1
Provisions
G7
Deferred tax liabilities
G8
Reinsurance payables
Payables related to direct insurance contracts
G9
Current tax payable
G8
Lease liabilities
G10
Accruals and deferred income
G11
Other payables
G12
Liabilities classified as held for sale
A6.1
Total liabilities 279,982 327,030
Total equity and liabilities
Phoenix Group Holdings plc Annual Report and Accounts 2022 171
Financials
Financials continued
Statement of consolidated changes in equity
As at 31 December 2022
Share
capital
(note D1)
£m
Share
premium
(note D1)
£m
Shares
held by
the
employee
benefit
trust
(note D2)
£m
Foreign
currency
translation
reserve
£m
Merger
relief
reserve
(note D1)
£m
Other
reserves
(note D3)
£m
Retained
earnings
£m
Total
£m
Tier 1
Notes
(note D4)
£m
Non-
controlling
interests
(note D5)
£m
Total
equity
£m
At 1 January 2022
(Loss)/profit for the year
Other comprehensive
income/(expense) for the year
Total comprehensive
income/(expense) for the year
Issue of ordinary share capital,
net of associated commissions
and expenses
Dividends paid on ordinary shares
Dividends paid to non-controlling
interests
Credit to equity for equity-settled
share-based payments
Shares distributed by the employee
benefit trust
Shares acquired by the employee
benefit trust
Increase in non-controlling interests
Coupon paid on Tier 1 Notes,
net of tax relief
At 31 December 2022
Phoenix Group Holdings plc Annual Report and Accounts 2022172
Statement of consolidated changes in equity
As at 31 December 2021
Share
capital
(note D1)
£m
Share
premium
(note D1)
£m
Shares
held by
employee
benefit
trust
(note D2)
£m
Foreign
currency
translation
reserve
£m
Merger
relief
reserve
(note D1)
£m
Other
reserves
(note D3)
£m
Retained
earnings
£m
Total
£m
Tier 1
Notes
(note D4)
£m
Non-
controlling
interests
(note D5)
£m
Total
equity
£m
At 1 January 2021
(Loss)/profit for the year
Other comprehensive
(expense)/income for the year
Total comprehensive
(expense)/income for the year
Issue of ordinary share capital,
net of associated commissions
and expenses
Dividends paid on ordinary shares
Dividends paid to non-controlling
interests
Credit to equity for equity-settled
share based payments
Shares distributed by employee
benefit trust
Shares acquired by employee
benefit trust
Coupon paid on Tier 1 Notes,
net of tax relief
At 31 December 2021
Phoenix Group Holdings plc Annual Report and Accounts 2022 173
Financials
Financials continued
Statement of consolidated cash flows
For the year ended 31 December 2022
Notes
2022
£m
2021
£m
Cash flows from operating activities
Cash generated/(utilised) by operations
I2
Taxation paid
(153 ) (149 )
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from completion of abrdn plc transaction
A6.1
Disposal of Ark Life, net of cash disposed
A6.2
–
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issuing ordinary shares, net of associated commission and expenses
Ordinary share dividends paid
B4
(496 ) (482 )
Dividends paid to non-controlling interests
D5
(10 ) (9 )
Repayment of policyholder borrowings
E5.2
(32 ) (18 )
Repayment of shareholder borrowings
E5.2
(450 ) (322 )
Repayment of lease liabilities
G10
(14 ) (16 )
Proceeds from new policyholder borrowings, net of associated expenses
E5.2
Coupon paid on Tier 1 Notes
(29 ) (29 )
Interest paid on policyholder borrowings
(1 ) –
Interest paid on shareholder borrowings
(215 ) (237 )
Net cash flows from financing activities
(1,182 ) (1,094 )
Net decrease in cash and cash equivalents
(316 ) (1,810 )
Cash and cash equivalents at the beginning of the year
(before reclassification of cash and cash equivalents to held for sale)
Less : cash and cash equivalents of operations classified as held for sale
A6.1
(33 ) (76 )
Cash and cash equivalents at the end of the year
Phoenix Group Holdings plc Annual Report and Accounts 2022174
Phoenix Group Holdings plc Annual Report and Accounts 2022 175
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022176
Phoenix Group Holdings plc Annual Report and Accounts 2022 177
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022178
Phoenix Group Holdings plc Annual Report and Accounts 2022 179
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022180
Phoenix Group Holdings plc Annual Report and Accounts 2022 181
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022182
Phoenix Group Holdings plc Annual Report and Accounts 2022 183
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022184
Phoenix Group Holdings plc Annual Report and Accounts 2022 185
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022186
Phoenix Group Holdings plc Annual Report and Accounts 2022 187
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022188
Phoenix Group Holdings plc Annual Report and Accounts 2022 18 9
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022190
Phoenix Group Holdings plc Annual Report and Accounts 2022 191
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022192
Phoenix Group Holdings plc Annual Report and Accounts 2022 193
Financials
Financials continued
Notes to the consolidated financial statements
continued
C. Other income statement notes continued
Phoenix Group Holdings plc Annual Report and Accounts 2022194
Phoenix Group Holdings plc Annual Report and Accounts 2022 195
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022196
Phoenix Group Holdings plc Annual Report and Accounts 2022 197
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022198
Phoenix Group Holdings plc Annual Report and Accounts 2022 199
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022200
Phoenix Group Holdings plc Annual Report and Accounts 2022 201
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022202
Phoenix Group Holdings plc Annual Report and Accounts 2022 203
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022204
Phoenix Group Holdings plc Annual Report and Accounts 2022 205
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022206
Phoenix Group Holdings plc Annual Report and Accounts 2022 207
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022208
Phoenix Group Holdings plc Annual Report and Accounts 2022 209
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022210
Phoenix Group Holdings plc Annual Report and Accounts 2022 211
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022212
Phoenix Group Holdings plc Annual Report and Accounts 2022 213
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022214
Phoenix Group Holdings plc Annual Report and Accounts 2022 215
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022216
Phoenix Group Holdings plc Annual Report and Accounts 2022 217
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022218
Phoenix Group Holdings plc Annual Report and Accounts 2022 219
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022220
Phoenix Group Holdings plc Annual Report and Accounts 2022 221
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022222
Phoenix Group Holdings plc Annual Report and Accounts 2022 223
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022224
Phoenix Group Holdings plc Annual Report and Accounts 2022 225
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022226
Phoenix Group Holdings plc Annual Report and Accounts 2022 227
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022228
Phoenix Group Holdings plc Annual Report and Accounts 2022 229
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022230
Phoenix Group Holdings plc Annual Report and Accounts 2022 23 1
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022232
Phoenix Group Holdings plc Annual Report and Accounts 2022 233
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022234
Phoenix Group Holdings plc Annual Report and Accounts 2022 235
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022236
Phoenix Group Holdings plc Annual Report and Accounts 2022 237
Financials
Financials continued
Notes to the consolidated financial statements
continued
Phoenix Group Holdings plc Annual Report and Accounts 2022238
Phoenix Group Holdings plc Annual Report and Accounts 2022 239
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022240
Phoenix Group Holdings plc Annual Report and Accounts 2022 241
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 202224 2
Phoenix Group Holdings plc Annual Report and Accounts 2022 243
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022244
Phoenix Group Holdings plc Annual Report and Accounts 2022 245
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022246
Phoenix Group Holdings plc Annual Report and Accounts 2022 247
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022248
Phoenix Group Holdings plc Annual Report and Accounts 2022 249
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022250
Phoenix Group Holdings plc Annual Report and Accounts 2022 251
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022252
Phoenix Group Holdings plc Annual Report and Accounts 2022 253
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022254
Phoenix Group Holdings plc Annual Report and Accounts 2022 255
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022256
Phoenix Group Holdings plc Annual Report and Accounts 2022 257
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022258
Phoenix Group Holdings plc Annual Report and Accounts 2022 259
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022260
Phoenix Group Holdings plc Annual Report and Accounts 2022 261
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022262
Phoenix Group Holdings plc Annual Report and Accounts 2022 263
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022264
Phoenix Group Holdings plc Annual Report and Accounts 2022 265
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022266
Phoenix Group Holdings plc Annual Report and Accounts 2022 267
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022268
Phoenix Group Holdings plc Annual Report and Accounts 2022 269
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022270
Phoenix Group Holdings plc Annual Report and Accounts 2022 271
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022272
Phoenix Group Holdings plc Annual Report and Accounts 2022 273
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022274
Phoenix Group Holdings plc Annual Report and Accounts 2022 275
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022276
Phoenix Group Holdings plc Annual Report and Accounts 2022 277
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022278
Phoenix Group Holdings plc Annual Report and Accounts 2022 279
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022280
Phoenix Group Holdings plc Annual Report and Accounts 2022 281
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022282
Phoenix Group Holdings plc Annual Report and Accounts 2022 283
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022284
Phoenix Group Holdings plc Annual Report and Accounts 2022 285
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022286
Phoenix Group Holdings plc Annual Report and Accounts 2022 287
Financials
Financials continued
Notes to the consolidated financial statements
Continued
Phoenix Group Holdings plc Annual Report and Accounts 2022288
Phoenix Group Holdings plc Annual Report and Accounts 2022 289
Financials
Financials continued
Parent company financial statements
Statement of financial position
As at 31 December 2022
Notes
2022
£m
2021
£m
ASSETS
Property, plant and equipment
10
19
21
Investments in Group entities
11
10,231
10,031
Financial assets
Loans and deposits
12
2,550
1,234
Derivatives
6
257
69
Debt securities
13
1
1
Collective investment schemes
13
775
690
Deferred tax
14
113
82
Prepayments and accrued income
54
58
Other amounts due from Group entities
20
19
616
Cash and cash equivalents
15
–
95
Total assets
14,019
12,897
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders
Share capital
3
100 100
Share premium
3
10 6
Merger relief reserve
3
1,819 1,819
Other reserve
3
(4) (4)
Retained earnings
5,062
5,448
Total equity attributable to ordinary shareholders
6,987
7,369
Tier 1 Notes
4
411
411
Total equity
7,398
7,780
Liabilities
Financial liabilities
Borrowings
5
6,229 4,387
Derivatives
6
22 5
Obligations for repayment of collateral received
6
86 66
Other amounts due to Group entities
20
43
415
Provisions
7
97
92
Lease liabilities
8
20
21
Accruals and deferred income
9
124
131
Total liabilities
6,621
5,117
Total equity and liabilities
14,019
12,897
The notes identified numerically on pages 293 to 306 are an integral part of these separate financial statements. Where items also appear in the
consolidated financial statements, reference is made to the notes (identified alphanumerically) on pages 175 to 289.
Approved by the Board on 10 March 2023.
Andy Briggs Rakesh Thakrar
Chief Executive Officer Chief Financial Officer
Company registration number 11606773.
Phoenix Group Holdings plc Annual Report and Accounts 2022290
Statement of changes in equity
For the year ended 31 December 2022
Share
capital
(note 3)
£m
Share
premium
(note 3)
£m
Merger relief
reserve
(note 3)
£m
Other
reserve
(note 3)
£m
Retained
earnings
£m
Total
£m
Tier 1 Notes
(note 4)
£m
Total
Equity
£m
At 1 January 2022
100 6 1,819 (4) 5,448 7,369 411 7,780
Total comprehensive income for the year
attributable to owners
– – – – 116 116 – 116
Issue of ordinary share capital, net of
associated commissions and expenses
– 4 – – – 4 – 4
Dividends paid on ordinary shares (note B4)
– – – – (496) (496) – (496)
Coupon paid on Tier 1 Notes, net of tax relief
– – – – (22) (22) – (22)
Credit to equity for equity-settled share-
based payments (note I1)
– – – – 16 16 – 16
At 31 December 2022
100 10 1,819 (4) 5,062 6,987 411 7,398
For the year ended 31 December 2021
Share
capital
(note 3)
£m
Share
premium
(note 3)
£m
Merger relief
reserve
(note 3)
£m
Other
reserve
(note 3)
£m
Retained
earnings
£m
Total
£m
Tier 1 Notes
(note 4)
£m
Total
Equity
£m
At 1 January 2021
100 4 1,819 (4) 5,211 7,130 411 7,541
Total comprehensive income for the period
attributable to owners
– – – – 728 728 – 728
Issue of ordinary share capital, net of
associated commissions and expenses
– – – – – 2 – 2
Dividends paid on ordinary shares (note B4)
– – – – (482) (482) – (482)
Coupon paid on Tier 1 Notes, net of tax relief
– – – – (23) (23) – (23)
Credit to equity for equity-settled share-
based payments (note I1)
– – – – 14 14 – 14
At 31 December 2021
100 6 1,819 (4) 5,448 7,369 411 7,780
Phoenix Group Holdings plc Annual Report and Accounts 2022 291
Financials
Financials continued
Parent company financial statements continued
Statement of cash flows
For the year ended 31 December 2022
Notes
2022
£m
2021
£m
Cash flows from operating activities
Cash (utilised)/generated by operations
16
(417) 897
Net cash flows from operating activities
(417) 897
Cash flows from investing activities
Advances to Group entities
(852) –
Dividends received from Group entities
455 –
Interest received from Group entities
162 111
Capital contribution to subsidiary (note 11)
(200) (63)
Repayment of amounts due from Group entities
2 –
Derivative settlements
(70) –
Net cash flows from investing activities (503) 48
Cash flows from financing activities
Proceeds from issuing ordinary shares
3
4 2
Proceeds from new shareholder borrowings, net of associated expenses 5 2,274 –
Repayment of shareholder borrowings
5
(616) (122)
Ordinary share dividends paid (496) (482)
Interest paid on borrowings
(311) (222)
Lease payments (1) (1)
Coupon paid on Tier 1 Notes
(29) (29)
Net cash flows from financing activities 825 (854)
Net (decrease)/increase in cash and cash equivalents
(95) 91
Cash and cash equivalents at the beginning of the year
95 4
Cash and cash equivalents at the end of the year
– 95
Phoenix Group Holdings plc Annual Report and Accounts 2022292
Notes to the parent company financial statements
1. Accounting policies
(a) Basis of preparation
The financial statements have been prepared under a going concern basis and on the historical cost convention, except for those financial assets and
financial liabilities that have been measured at fair value.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own income statement in these
financial statements. Profit attributable to owners for the year ended 31 December 2022 was £116 million (2021: £728 million).
Statement of Compliance
The Company’s financial statements have been prepared in accordance with UK- adopted international accounting as applied in accordance with the
Companies Act 2006.
The financial statements are presented in sterling (£) rounded to the nearest million except where otherwise stated.
Assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously.
(b) Accounting policies
Where applicable, the accounting policies in the separate financial statements are the same as those presented in the consolidated financial statements
on pages 175 to 289 with the exception of the two policies detailed below.
The Company’s accounting policy for financial assets is in accordance with the requirements of IFRS 9 Financial Instruments. As the Group has to date
applied the temporary exemption from IFRS 9 available for entities whose activities are predominantly connected with insurance contracts, a different
accounting policy has been adopted in the preparation of the consolidated financial statements. In addition, the Company has not adopted the Group’s
policy of hedge accounting.
Where an accounting policy can be directly attributed to a specific note to the consolidated financial statements, the policy is presented within that note.
Each note within the Company financial statements makes reference to the note to the consolidated financial statements containing the applicable
accounting policy. The accounting policy in relation to foreign currency transactions is included within note A2.1 to the consolidated financial statements.
Investments in Group entities
Investments in Group entities are carried in the statement of financial position at cost less impairment.
The Company assesses at each reporting date whether an investment is impaired by assessing whether any indicators of impairment exist. If objective
evidence of impairment exists, the Company calculates the amount of impairment as the difference between the recoverable amount of the Group entity
and its carrying value and recognises the amount as an expense in the income statement.
The recoverable amount is determined based on the cash flow projections of the underlying entities.
Financial assets
Classification of Financial assets
Financial assets are measured at amortised cost where they have:
• contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount
outstanding; and
• are held within a business model whose objective is achieved by holding to collect contractual cash flows.
These financial assets are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the financial asset. All transaction
costs directly attributable to the acquisition are also included in the cost of the financial asset. Subsequent to initial recognition, these financial assets are
carried at amortised cost, using the effective interest method.
Financial assets measured at amortised cost are included in notes 5, 12 and 15.
Debt securities, collective investment schemes and derivatives are measured at FVTPL as they are managed on a fair value basis.
Phoenix Group Holdings plc Annual Report and Accounts 2022 2 93
Financials
Financials continued
Notes to the parent company financial statements
Continued
1. Accounting policies continued
(b) Accounting policies continued
Impairment of financial assets
The Company assesses the expected credit losses associated with its loans and deposits, other amounts due from Group entities and cash carried at
amortised cost. The measurement of credit impairment is based on an Expected Credit Loss (‘ECL’) model and depends upon whether there has been
a significant increase in credit risk.
For those credit exposures for which credit risk has not increased significantly since initial recognition, the Company measures loss allowances at an
amount equal to the total expected credit losses resulting from default events that are possible within 12 months after the reporting date (‘12-month ECL’).
For those credit exposures for which there has been a significant increase in credit risk since initial recognition, the Company measures and recognises
an allowance at an amount equal to the expected credit losses over the remaining life of the exposure, irrespective of the timing of the default (‘Lifetime
ECL’). If the financial asset becomes ‘credit-impaired’ (following significant financial difficulty of issuer/borrower, or a default/breach of a covenant),
the Company will recognise a Lifetime ECL. ECLs are derived from unbiased and probability-weighted estimates of expected loss.
See note 17 for details of how the Company assesses whether the credit risk of a financial asset has increased since initial recognition and the approach
to estimating ECLs.
The loss allowance reduces the carrying value of the financial asset and is reassessed at each reporting date. ECLs and subsequent remeasurements
of the ECL, are recognised in the income statement. For other receivables, the ECL rate is recalculated each reporting period with reference to the
counterparties of each balance.
c) Critical accounting estimates and judgements
Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. The area of the Company’s business that
typically requires such estimates and judgement is the impairment assessment for investments in Group entities.
Impairment of investments in Group entities
The Company conducts impairment reviews of investments in subsidiaries whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. Determining whether an asset is impaired requires an estimation of the recoverable amount, which requires the
Company to estimate the value in use which uses future cash flows and a suitable discount rate in order to calculate the present value. Where the actual
future cash flows are less than expected, an impairment loss may arise. Further details are included in note 11.
2. Financial information
New accounting pronouncements not yet effective
Details of the standards, interpretations and amendments to be adopted in future periods are detailed in note A5 to the consolidated financial statements,
none of which are expected to have a significant impact on the Company’s financial statements.
Note A5 outlines that the Group has taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying IFRS 9
until 1 January 2023 as a result of meeting the exemption criteria as at 31 December 2015. As detailed above, the Company did not meet the eligibility
criteria to defer the application of IFRS 9 and the standard has therefore been adopted by the Company. The relevant disclosures are included in these
financial statements.
3. Share capital, share premium, merger relief reserve and other reserve
During 2022, the Company issued 816,419 shares (2021: 303,914 shares) with a premium of £4 million (2021: £2 million) in order to satisfy its obligations
to employees under the Group’s sharesave schemes.
The Company has applied the relief in section 612 of the Companies Act 2006 to present the difference between the consideration received and the
nominal value of the shares issued of £1,819 million in a merger reserve as opposed to in share premium. A merger reserve is required to be used as a result
of the Company having issued equity shares in 2020 as part consideration for the shares of the ReAssure Group plc and securing at least a 90% holding in
that entity.
On 12 December 2018, the Company became the ultimate parent undertaking of the Group by acquiring the entire share capital of ‘Old PGH’ (the
Group’s ultimate parent company until December 2018) via a share for share exchange. The cost of investment in Old PGH was determined as the carrying
amount of the Company’s share of the equity of Old PGH on the date of the transaction. The difference between the cost of investment and the market
capitalisation of Old PGH immediately before the share for share exchange of £4 million has been recognised as an Other reserve, and is shown as a
separate component of equity.
Phoenix Group Holdings plc Annual Report and Accounts 2022294
2022
£m
2021
£m
Issued and fully paid:
1000.4 million ordinary shares of £0.10 each (2021: 999.5 million)
100 100
2022 Number £
Shares in issue at 1 January 2022
999,536,058 99,953,605
Ordinary shares issued in the period 816,419 81,642
Ordinary shares in issue at 31 December 2022
1,000,352,477 100,035,247
2021 Number £
Shares in issue at 1 January 2021
999,232,144 99,923,214
Other ordinary shares issued in the period 303,914 30,391
Ordinary shares in issue at 31 December 2021
999,536,058 99,953,605
4. Tier 1 notes
The accounting policy and details of the terms for the Tier 1 Notes are included in note D4 to the consolidated financial statements.
2022
£m
2021
£m
Tier 1 Notes
411 411
On 12 December 2018, the Company was substituted in place of Old PGH as issuer of the Tier 1 Notes and these were recognised at the fair value of
£411 million in the form of an intragroup loan which was received as consideration.
On 27 October 2020, the terms of the Tier 1 Notes were amended and the consequence of a trigger event, linked to the Solvency II capital position,
was changed. Previously, the Tier 1 Notes were subject to a permanent write-down in value to zero. The amended terms require that the Tier 1 Notes
would automatically be subject to conversion to ordinary shares of the Company at the conversion price of £1,000 per share, subject to adjustment in
accordance with the terms and conditions of the notes and all accrued and unpaid interest would be cancelled. Following any such conversion there
would be no reinstatement of any part of the principal amount of, or interest on, the Tier 1 Notes at any time.
Phoenix Group Holdings plc Annual Report and Accounts 2022 295
Financials
Financials continued
Notes to the parent company financial statements
Continued
5. Borrowings
The accounting policy for borrowings is included in note E5 to the consolidated financial statements.
Carrying value Fair value
2022
£m
2021
£m
2022
£m
2021
£m
Loans due to third-parties:
£428 million subordinated loans (note a) 433 435 429 498
£450 million Tier 3 subordinated notes (note b)
– 449 – 457
US $500 million Tier 2 bonds (note c) 383 337 390 408
€500 million Tier 2 notes (note d)
414 389 416 490
US $750 million Contingent Convertible Tier 1 notes (note e) 618 551 580 581
£500 million Tier 2 notes (note f)
487 485 445 593
US $500 million Fixed Rate Reset Tier 2 notes (note g) 412 368 382 389
£500 million 5.867% Tier 2 subordinated notes (note h)
543 550 465 598
£250 million 4.016% Tier 3 subordinated notes (note i) 256 257 231 264
£250 million Fixed Rate Reset Callable Tier 2 subordinated notes (note j)
259 266 244 269
3,805 4,087 3,582 4,547
Loans due to Group companies:
Loan due to Standard Life Assurance Limited (note k) 309 300 309 300
Senior loan due to ReAssure Limited (note l)
718 – 718 –
€100 million loan due to Standard Life International DAC (note m) 89 – 89 –
£130 million floating term loan to ReAssure Life Limited (note n)
130 – 130 –
Cash-pooling with other Group entities (note o) 1,178 – 1,178 –
2,424 300 2,424 2,424
Total borrowings
6,229 4,387 6,006 4,847
Amount due for settlement after 12 months 5,051 4,387
a. On 12 December 2018, the Company was substituted in place of Old PGH as issuer of the £428 million Tier 2 subordinated notes due 2025 at a coupon
of 6.625%, which were initially recognised at fair value of £439 million.
b. On 12 December 2018, the Company was substituted in place of Old PGH as issuer of the £450 million Tier 3 subordinated notes due 2022 at a coupon
of 4.125%, which were initially recognised at fair value of £447 million. On 20 July 2022, the Company redeemed the £450 million Tier 3 subordinated
notes in full at their principal amount, together with interest accrued to the repayment date.
c. On 12 December 2018, the Company was substituted in place of Old PGH as issuer of the US $500 million Tier 2 bonds due 2027 with a coupon of
5.375%, which were initially recognised at fair value of £349 million.
d. On 12 December 2018, the Company was substituted in place of Old PGH as issuer of the €500 million Tier 2 notes due 2029 with a coupon of
4.375%, which were initially recognised at fair value of £407 million.
e. On 29 January 2020, the Company issued US $750 million fixed rate reset perpetual restricted Tier 1 contingent convertible notes (the ‘contingent
convertible Tier 1 Notes’) which are unsecured and subordinated. The contingent convertible Tier 1 Notes have no fixed maturity date and interest is
payable only at the sole and absolute discretion of the Company. The contingent convertible Tier 1 Notes bear interest on their principal amount at
a fixed rate of 5.625% per annum up to the ‘First Reset Date’ of 26 April 2025. Thereafter the fixed rate of interest will be reset on the First Reset Date
and on each fifth anniversary of this date by reference to the sum of the yield of the Constant Maturity Treasury (‘CMT’) rate (based on the prevailing
five year US Treasury yield) plus a margin of 4.035%, being the initial credit spread used in pricing the notes. Interest is payable on the contingent
convertible Tier 1 Notes semi-annually in arrears on 26 April and 26 October. If an interest payment is not made it is cancelled and it shall not
accumulate or be payable at any time thereafter. Further details are contained in note E5 to the consolidated financial statements.
f. On 28 April 2020, the Company issued £500 million fixed rate Tier 2 notes (the ‘Tier 2 notes’) which are unsecured and subordinated. The Tier 2 notes
have a maturity date of 28 April 2031 and include an issuer par call right for the three month period prior to maturity. The Tier 2 notes bear interest on
the principal amount at a fixed rate of 5.625% per annum payable annually in arrears on 28 April.
Phoenix Group Holdings plc Annual Report and Accounts 2022296
g. On 4 June 2020, the Company issued US $500 million fixed rate reset callable Tier 2 notes (the ‘Fixed Rate Reset Tier 2 notes’) which are unsecured
and subordinated. The Fixed Rate Reset Tier 2 notes have a maturity date of 4 September 2031 with an optional issuer par call right on any day in the
three month period up to and including 4 September 2026. The Fixed Rate Reset Tier 2 notes bear interest on the principal amount at a fixed rate of
4.75% per annum up to the interest rate reset date of 4 September 2026. If the Fixed Rate Reset Tier 2 notes are not redeemed before that date, the
interest rate resets to the sum of the applicable CMT rate (based on the prevailing five year US Treasury yield) plus a margin of 4.276%, being the initial
credit spread used in pricing the notes. Interest is payable on the Fixed Rate Reset Tier 2 notes semi-annually in arrears on 4 March and 4 September.
h. On 22 July 2020, the Company was substituted in place of ReAssure Group plc as issuer of the £500 million 5.867% Tier 2 subordinated notes.
These notes have a maturity date of 13 June 2029 and were initially recognised at their fair value of £559 million. The fair value adjustment will be
amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December.
i. On 22 July 2020, the Company was substituted in place of ReAssure Group plc as issuer of the £250 million fixed rate reset callable Tier 2
subordinated notes. The £250 million fixed rate reset callable Tier 2 subordinated notes have a maturity date of 13 June 2029 and were initially
recognised at their fair value of £275 million. The fair value adjustment will be amortised over the remaining life of the notes. The notes include an issuer
par call right exercisable on 13 June 2024. Interest is payable semi-annually in arrears on 13 June and 13 December. These notes initially bear interest at
a rate of 5.766% on the principal amount and the rate of interest will reset on 13 June 2024, and on each interest payment date thereafter, to a margin
of 5.17% plus the yield of a UK Treasury Bill of similar term.
j. On 22 February 2019, the Company recognised a loan due in 2024 to Standard Life Assurance Limited (‘SLAL’), a subsidiary undertaking, for £162 million.
This loan was the initial consideration for the acquisition from SLAL of its investment in Standard Life International Designated Activity Company
(‘SLIDAC’). On 28 March 2019 the purchase price was adjusted by £120 million, which resulted in an increase in the loan principal. Interest accrues
at SONIA plus 1.9366% and is capitalised. During the year interest of £9 million (2021: £6 million) was capitalised.
k. On 22 July 2020, the Company was substituted in place of ReAssure Group plc as issuer of the £250 million 4.016% Tier 3 subordinated notes.
The notes have a maturity date of 13 June 2026 and were initially recognised at their fair value of £259 million. The fair value adjustment is being
amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December.
l. On 31 December 2022, ReAssure Limited (‘RAL’) issued a £718 million term loan of £718 million to the Company, maturing on 31 December 2027. At the
same time, the Company issued a contingent loan to RAL for the same amount (see note 12 (c) for further details). Interest accrues on the term loan asset
at a rate of SONIA plus 1.49%. If the Company fails to make payments of principal or interest in accordance with the terms of the loan, a corresponding
amount of RAL’s obligations under the contingent loan would be offset.
m. On 20 December 2022, Standard Life International DAC (‘SLIDAC’) issued to the Company a €100 million loan at an interest rate of 2.29% with
a maturity date of 31 March 2024.
n. On 16 December 2022, ReAssure Life Limited issued a £130 million floating term loan to the Company at an interest rate of 4.72% for a term of 5 years.
o. On 13 September 2022, the Company entered into an uncommitted intra-group cash-pooling facility with certain subsidiaries, under which the
Company will either borrow funds from, or lend funds to, the relevant subsidiary. All amounts due under the facility attract interest at SONIA and are
repayable on demand.
p. The Company has in place a £1.25 billion unsecured revolving credit facility, maturing in June 2026. The facility accrues interest at a margin over SONIA
that is based on credit rating and non-cumulative compounded risk free rate. The facility remains undrawn as at 31 December 2022.
Borrowings initially recognised at fair value are being amortised to par value over the life of the borrowings.
For the purposes of the additional fair value disclosures for liabilities recognised at amortised cost, all borrowings have been categorised as Level 2
financial instruments.
Phoenix Group Holdings plc Annual Report and Accounts 2022 297
Financials
Financials continued
Notes to the parent company financial statements
Continued
5. Borrowings continued
Reconciliation of liabilities arising from financing activities
The table below details changes in the Company’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising
from financing activities are those for which cash flows were, or future cash flows will be, classified in the Company’s statement of cash flows as cash flows
from financing activities.
Cash Non-cashflow
At 1
January
2022
£m
New
borrowings,
net of costs
£m
Repayments
£m
Movement
in foreign
exchange
£m
Amortisation
£m
Capitalised
interest
£m
Movement
in fair value
£m
At 31
December
2022
£m
£428 million subordinated notes
435 – – – (2) – – 433
£450 million Tier 3 subordinated notes
449 – (450) – 1 – – –
US $500 million Tier 2 bonds
337 – – 41 5 – – 383
€500 million Tier 2 notes
389 – – 21 4 – – 414
US $750 million Contingent Convertible Tier 1 notes
551 – – 66 1 – – 618
£500 million Tier 2 notes
485 – – – 2 – – 487
US $500 million Fixed Rate Reset Tier 2 notes
368 – – 44 – – 412
£500 million 5.867% Tier 2 subordinated notes
550 – – – (7) – – 543
£250 million 4.016% Tier 3 subordinated notes
257 – – – (1) – – 256
£250 million Fixed Rate Reset Callable Tier 2
subordinated notes
266 – – – (7) – – 259
Loan due to Standard Life Assurance Limited
300
– – –
– 9 – 309
Senior loan due to ReAssure Limited – 718
2
– – – – – 718
€100 million loan due to Standard Life International
DAC
– 88 – 1 – – – 89
£130 million floating term loan to ReAssure Life Limited – 130 – – – – – 130
Cash-pooling with other Group entities
– 1,338 (166) – – 6 – 1,178
Derivative assets
1
(48) – – – – – (177) (225)
Derivative liabilities
1
5 – – – – – (5) –
4,344 2,274 (616) 173 (4) 15 (182) 6,004
1 Cross currency swaps to hedge against adverse currency movements in respect of Group’s Euro and US Dollar denominated borrowings (see note 6 for further details).
2 Settled simultaneously with the issuance of the £718 million contingent loan (see note 12(d)).
Cash Non-cashflow
At 1
January
2021
£m
New
borrowings,
net of costs
£m
Repayments
£m
Movement
in foreign
exchange
£m
Amortisatio
n
£m
Capitalised
interest
£m
Movement
in fair value
£m
At 31
December
2021
£m
£428 million subordinated notes
436 – – – (1) – – 435
£450 million Tier 3 subordinated notes
449 – – – – – – 449
US $500 million Tier 2 bonds
329
–
– 3 5 – – 337
€500 million Tier 2 notes
410
–
– (24) 3 – – 389
£300 million senior unsecured bond
123
–
(122) – (1) – – –
Loan due to Standard Life Assurance Limited
294
–
– – – 6 – 300
US $750 million Contingent Convertible Tier 1 notes
545
–
– 5 1 – – 551
£500 million Tier 2 notes
484
–
– – 1 – – 485
US $500 million Fixed Rate Reset Tier 2 notes
364
–
– 4 – – – 368
£500 million 5.867% Tier 2 subordinated notes
556
–
– – (6) – – 550
£250 million Fixed Rate Reset Callable Tier 2
subordinated notes
272
–
– – (6) – – 266
£250 million 4.016% Tier 3 subordinated notes
259
–
– – (2) – – 257
Derivative assets
1
–
–
– – – – (48) (48)
Derivative liabilities
1
–
–
– – – – 5 5
4,521 – (122) (12) (6) 6 (43) 4,344
1 Cross currency swaps to hedge against currency movements in respect of Group's Euro and US Dollar denominated borrowings (see note 6 for further details).
Phoenix Group Holdings plc Annual Report and Accounts 2022298
6. Derivatives
The accounting policy for derivatives is included in note E3 to the consolidated financial statements.
In June 2021, the Company entered into four cross currency swaps in order to hedge against adverse currency movements in respect of its Euro and
US Dollar denominated borrowings.
From December 2021, the Company also hedged certain Euro and US Dollar exposures to adverse foreign currency movements in respect of underlying
business within two of its subsidiaries, SLAL and SLIDAC.
The fair value of the derivative financial instruments are as follows:
Asset Liability
2022
£m
2021
£m
2022
£m
2021
£m
Cross currency swaps
225 48 – 5
Foreign currency swaps
32 21 22 –
257 69 22 5
Derivative collateral arrangements
The accounting policy for collateral arrangements is included in note E4 to the consolidated financial statements.
Assets accepted
The maximum exposure to credit risk in respect of over-the-counter (‘OTC’) derivative assets is £257 million (2021: £69 million) of which credit risk of
£86 million (2021: £66 million) is mitigated by use of collateral arrangements (which are settled net after taking account of any OTC derivative liabilities
owed by the counterparty).
Assets pledged
The Company has not pledged any collateral in respect of its OTC derivative liabilities.
7. Provisions
In 2019, the Company recognised a Standard Life transition and transformation restructuring provision of £159 million. During the year, £28 million
(2021: £17 million) of the restructuring provision was utilised and the provision was increased by £33 million (2021: £nil). The remaining provision of
£97 million (2021: £92 million) is expected to be utilised within one to three years.
Further details, including the accounting policy for provisions, are included in note G7 to the consolidated financial statements.
8. Lease liabilities
The accounting policy for lease liabilities is included in note G10 to the consolidated financial statements.
Lease liabilities relate to office premises at 20 Old Bailey, London. The lease was assigned on 24 March 2021 for a term of 12 years and 9 months,
with an option to break the contract on 25 December 2028. It is currently not expected that the break clause will be exercised.
2022
£m
2021
£m
At 1 January
21 –
Inception of lease
– 22
Lease payments
(1) (1)
At 31 December
20 21
Amount due within twelve months
1 2
Amount due after twelve months
19 19
Phoenix Group Holdings plc Annual Report and Accounts 2022 299
Financials
Financials continued
Notes to the parent company financial statements
Continued
9. Accruals and deferred income
The accounting policy for accruals and deferred income is included in note G11 to the consolidated financial statements.
2022
£m
2021
£m
Accruals and deferred income
124 131
Amount due for settlement after 12 months – –
10. Property, plant and equipment
The accounting policy for property, plant and equipment is included in note G3 to the consolidated financial statements.
Property, plant and equipment includes the right-of-use asset relating to office premises leased at 20 Old Bailey, London. Depreciation is being charged
on a straight line basis over the term of the lease.
Total Property, Plant
and Equipment
2022
£m
Cost or valuation
At 1 January and 31 December
22
Depreciation
At 1 January
(1)
Depreciation
(2)
At 31 December
(3)
Carrying amount at 31 December
19
Total Property, Plant
and Equipment
2021
£m
Cost or valuation
At 1 January
–
Additions
22
At 31 December
22
Depreciation
At 1 January
–
Depreciation
(1)
At 31 December
(1)
Carrying amount at 31 December
21
Phoenix Group Holdings plc Annual Report and Accounts 2022300
11. Investments in group entities
2022
£m
2021
£m
Cost
At 1 January
14,220 14,236
Additions
200 63
Acquisition Price Adjustment
– (79)
At 31 December
14,420 14,220
Impairment
At 1 January
(4,189) (4,146)
Charge for the year
– (43)
At 31 December
(4,189) (4,189)
Carrying amount
At 31 December
10,231 10,031
During 2022, a capital contribution was made to Phoenix Life Holdings Limited of £200 million.
On 23 February 2021, the Group entered into a new agreement with abrdn plc to simplify the arrangements of the Strategic Partnership, as described
further in note A6.1 to the consolidated financial statements. As part of this transaction, settlement of amounts due under the deed of indemnity by Old
PGH resulted in a reduction in the cost of investment in SLAL of £79 million and payment of a capital contribution of £55 million to Old PGH.
In March 2021, the Company subscribed for 850 million ordinary shares in SLAL at par for a consideration of £8 million.
As at 31 December 2022 and 31 December 2021, the market capitalisation of the Company was lower than the net asset value, and this was considered
to be an indicator that the Company’s investments in its subsidiaries may have been impaired. Where such indicators are identified, an impairment test is
performed. As at 31 December 2022, the recoverable amount of the investments in subsidiaries was determined to be greater than carrying value. In 2021,
an impairment charge of £43 million was recognised to align the carrying value of certain investments in subsidiaries to the recoverable amount.
As a starting point, the contribution of the life insurance subsidiaries to the recoverable amount has been determined with reference to Solvency II Own
Funds, which reflects a probability-weighted best estimate for the expected cash flows under in-force insurance and investment contracts consistent
with the Group’s operating plan with an allowance for risk, together with an economic valuation of the underlying assets and other liabilities. Suitable
adjustments were made to Solvency II Own Funds, in order to align to the expected dividends to be paid by the life insurance subsidiary, which included
the removal of the surplus attributable to policyholders in the with-profit funds. Additionally, where relevant, the recoverable amount incorporated the
value ultimately expected to accrue to the Company in respect of future new business written. The contribution of the non-insurance subsidiaries was
determined using net asset values.
For a list of principal Group entities, refer to note H4 of the consolidated financial statements in which the entities directly held by the Company are
separately identified.
Phoenix Group Holdings plc Annual Report and Accounts 2022 301
Financials
Financials continued
Notes to the parent company financial statements
Continued
12. Loans and deposits
Carrying value Fair value
2022
£m
2021
£m
2022
£m
2021
£m
Loans due from Phoenix Life Holdings Limited (note a) 1,273 1,221
1,279
1,370
Cash-pooling to other Group entities (note b)
546 –
546
–
Loan due from Phoenix Group Employee Benefit Trust (note c) 13 13
13
13
Loan due from ReAssure Limited (note d) 718 –
718
–
Loans and deposits due from Group entities
2,550 1,234
2,556
1,383
Total loans and deposits
2,550 1,234
2,556
1,383
Amounts due after 12 months
2,004 784
All loans and deposit balances are due from Group entities and are measured at amortised cost using the effective interest method. The fair value of these
loans and deposits are also disclosed. None of the loans are considered to be overdue.
a) On 12 December 2018, the Company was assigned a £428 million subordinated loan by Phoenix Life Holdings Limited (‘PLHL’). The loan accrues
interest at a rate of 6.675% and matures on 18 December 2025. This loan was initially recognised at fair value of £439 million and is accreted to par over
the period to 2025. At 31 December 2022, the carrying value of the loan was £433 million (2021: £435 million).
On 12 December 2018, the Company was assigned a £450 million subordinated loan by PLHL. The loan accrues interest at a rate of 4.158% and matured on
20 July 2022. On 20 July 2022, the amount due on the maturity of the subordinated loan of £450 million was advanced under a new loan to PLHL. The new
loan accrued interest at a rate of compounded SONIA rate plus a margin of £1.30% and matures on 31 December 2027. At 31 December 2022, the carrying
value of the loan was £457 million (2021: £449 million due under the subordinated loan).
On 12 December 2018, the Company was assigned a US $500 million loan by PLHL due 2027 with a coupon of 5.375%. This loan was initially
recognised at fair value of £349 million and is accreted to par over the period to 2027. Movement in foreign exchange during the period increased
the carrying value by £41 million (2021: £4 million (decrease)). At 31 December 2022, the carrying value of the loan was £383 million (2021: £336 million).
b) On 13 September 2022, the Company entered into an uncommitted intra-group cash-pooling facility with certain subsidiaries, under which the
Company will either borrow funds from, or lend funds to, the relevant subsidiary. All amounts due under the facility attract interest at SONIA and
are repayable on demand.
c) On 18 June 2019, the Company was assigned an interest free facility arrangement with Phoenix Group Employee Benefit Trust (‘EBT’). As at 31 December 2022,
the carrying value of the loan was £13 million (2021: £13 million). The loan is fully recoverable until the awards held in the EBT vest to the participants, at which
point the loan is reviewed for impairment. Any impairments are determined by comparing the carrying value to the estimated recoverable amount of the
loan. During the year funding of £12 million (2021: £16 million) was provided to the EBT and £12 million of the loan was impaired (2021: £10 million).
d) On 31 December 2022, the Company issued a contingent loan of £718 million with ReAssure Limited (‘RAL’) which accrues interest at a rate of SONIA
plus 2.95%. Loan repayments and interest payments are made quarterly in arrears. Repayment of principal each quarter is set at the amount of surplus
emerging from a specified block of unit-linked business in RAL, less interest payable. The best estimate for the total amount of surplus expected to
emerge from this block of business as at 31 December 2022 is £1.4 billion, giving rise to a ratio of loan-to-value of approximately 50%. The contingent
loan is expected to be fully repaid by 31 December 2027, five years from the date of issue.
For the purposes of the additional fair value disclosures for assets recognised at amortised cost, all loans and deposits are categorised as Level 3 financial
instruments. The fair value of loans and deposits with no external market is determined by internally developed discounted cash flow models using a risk
adjusted discount rate corroborated with external market data where possible.
Details of the factors considered in determination of fair value are included in note E2 to the consolidated financial statements.
Phoenix Group Holdings plc Annual Report and Accounts 2022302
13. Financial assets
2022
£m
2021
£m
Financial assets at fair value through profit or loss
Derivatives
257 69
Debt securities
1 1
Collective investment schemes
775 690
1,033 760
Amounts due after 12 months
1 1
Determination of fair value and fair value hierarchy of financial assets
Details of the factors considered in determination of the fair value are included in note E2 to the consolidated financial statements.
Year ended 31 December 2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets at fair value through profit or loss
Derivatives
– 257 – 257
Debt securities
– – 1 1
Collective investment schemes
775 – – 775
775 257 1 1,033
Year ended 31 December 2021
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets at fair value through profit or loss
Derivatives
– 69 – 69
Debt securities
– – 1 1
Collective investment schemes
690 – – 690
690 69 1 760
There were no transfers between levels in either 2022 or 2021.
Level 3 financial instrument sensitivities
The investment in debt securities is in respect of debt holdings in a property investment structure which was originally transferred to the Company via
an in-specie dividend received from Old PGH during 2019. The holding was disposed of during the year ended 31 December 2020, but a balance of
£1 million remains in respect of a potential repayment of cash reserves that may be due to the Company. The amount recognised has taken account
of both the uncertain nature of the value of the proceeds and when they will be received.
14. Deferred tax
The accounting policy for tax assets and liabilities is included in note G8 to the consolidated financial statements.
Movement in deferred tax balances
1 January 2022
£m
Credit for the year
£m
31 December 2022
£m
Provisions and other temporary differences
82 31 113
1 January 2021
£m
Credit for the year
£m
31 December 2021
£m
Provisions and other temporary differences
16 66 82
The standard rate of UK corporation tax for the accounting period is 19% (2021: 19%).
Following cancellation of the planned corporation tax rate reduction from 19% to 17% announced in the Chancellor’s Budget of March 2020, an increase
to 25% effective from 1 April 2023 was announced in the Budget of 3 March 2021. Deferred tax assets are provided at the rate of 19% for tax losses carried
forward to the extent that realisation of the related tax benefit is probable before 1 April 2023; otherwise a rate of 25% has been applied.
Phoenix Group Holdings plc Annual Report and Accounts 2022 303
Financials
Financials continued
Notes to the parent company financial statements
Continued
15. Cash and cash equivalents
The accounting policy for cash and cash equivalents is included in note G6 to the consolidated financial statements.
2022
£m
2021
£m
Bank and cash balances
– 95
16. Cash flows from operating activities
2022
£m
2021
£m
Profit for the year before tax
26 661
Non-cash movements in profit for the year before tax:
Impairment of loan due from subsidiary
12 10
Impairment of investment in subsidiaries
– 43
Investment income
(127) (111)
Finance costs
287 274
Fair value gains on financial assets
(171) (62)
Foreign exchange movement on borrowings at amortised cost
173 (11)
Share-based payment charge
16 14
Depreciation
2 1
Decrease in investment assets
290 385
Net increase in working capital
(925) (307)
Cash (utilised)/generated by operations
(417) 897
17. Capital and risk management
The Company’s capital comprises share capital, the Tier 1 Notes and all reserves as calculated in accordance with International Financial Reporting
Standards (‘IFRS’), as set out in the statement of changes in equity. Under English company law, dividends must be paid from distributable profits.
As the ultimate parent undertaking of the Group, the Company manages its capital to ensure that it has sufficient distributable profits to pay dividends
in accordance with its dividend policy. The distributable reserves of the Company as at 31 December 2022 were £5,062 million (2021: £5,448 million).
At 31 December 2022, total capital was £7,398 million (2021: £7,780 million). The movement in capital in the period comprises the total comprehensive
income for the period attributable to owners of £116 million (2021: £728 million), dividends paid of £496 million (2021: £482 million), coupon paid on Tier 1
Notes, net of tax relief of £22 million (2021: £23 million), credit to equity for equity-settled share-based payments of £16 million (2021 £14 million) and issue
of ordinary share capital of £4 million (2021: £2 million).
In addition, the Group also manages its capital on a regulatory basis as described in note I3 to the consolidated financial statements.
The principal risks and uncertainties facing the Company are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Company hedges
its currency risk exposure arising on foreign currency hybrid debt.
Details of the Group’s financial risk management policies are outlined in note E6 to the consolidated financial statements.
Credit risk management practices
The Company’s current credit risk grading framework comprises the following categories:
Category Description Basis for recognising ECL
Performing The counterparty has a low risk of default and does not have any past-due amounts 12 month ECL
Doubtful There has been a significant increase in credit risk since initial recognition
Lifetime ECL –
not credit impaired
In default There is evidence indicating the asset is credit-impaired Lifetime ECL –
credit impaired
Write-off
There is evidence indicating that the counterparty is in severe financial
difficulty and the Company has no realistic prospect of recovery
Amount is written off
Phoenix Group Holdings plc Annual Report and Accounts 2022304
The table below details the credit quality of the Company’s financial assets, as well as the Company’s maximum exposure to credit risk by credit risk
rating grades:
2022
External
credit rating
Internal credit
rating
12 month or
lifetime ECL
Gross carrying
amount
£m
Loss allowance
£m
Net carrying
amount
£m
Loans and deposits (note 12)
N/A Performing 12 month ECL 2,550 – 2,550
Other amounts due from Group entities (note 20)
N/A Performing 12 month ECL 19 – 19
2021
External
credit rating
Internal credit
rating
12 month or
lifetime ECL
Gross carrying
amount
£m
Loss allowance
£m
Net carrying
amount
£m
Loans and deposits (note 12)
N/A Performing 12 month ECL 1,234
–
1,234
Other amounts due from Group entities (note 20)
N/A Performing 12 month ECL 616
–
616
Cash and cash equivalents (note 15)
A N/A 12 month ECL 95
–
95
The Company considers reasonable and supportable information that is relevant and available without undue cost or effort to assess whether there
has been a significant increase in risk since initial recognition. This includes quantitative and qualitative information and forward-looking analysis.
Loans and deposits – The Company is exposed to credit risk relating to loans and deposits from other Group companies, which are considered to be of
low risk. Given their low risk, the loss allowance has been set at less than £1 million. The Company assesses whether there has been a significant increase in
credit risk since initial recognition by assessing whether there have been any historic defaults, by reviewing the going concern assessment of the borrower
and the ability of the Group to prevent a default by providing a capital or cash injection. Specific considerations for the loan to the Employee Benefit Trust
are discussed in note 12.
Amounts due from other Group entities – The credit risk from activities undertaken in the normal course of business is considered to be extremely low.
Given their low risk, the loss allowance has been set at less than £1 million. The Company assesses whether there has been a significant increase in credit
risk since initial recognition by assessing past credit impairments, history of defaults and the long-term stability of the Group.
Cash and cash equivalents – The Company’s cash and cash equivalents as at 31 December 2021 were held with bank and financial institution
counterparties which had investment grade ‘A’ credit ratings. The Company considered the associated credit risk was low based on the external credit
ratings of the counterparties and, there being no history of default, the impact to the net carrying amount stated in the table above is therefore considered
not to be material.
The Company writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic
prospect of recovery, e.g. when the counterparty has been placed into liquidation or has entered into bankruptcy proceedings. Financial assets written off
may still be subject to enforcement activities under the Company’s recovery procedures, taking into account legal advice where appropriate. Any
recoveries made are recognised in profit or loss.
18. Share-based payments
Detailed information on the Long-term incentive plans, Sharesave schemes and Deferred bonus share schemes is contained in note I1 in the consolidated
financial statements.
19. Directors’ remuneration
Details of the remuneration of the Directors of Phoenix Group Holdings plc is included in the Directors’ Remuneration Report on pages 110 to 146 of the
Annual Report and Accounts.
Phoenix Group Holdings plc Annual Report and Accounts 2022 305
Financials
Financials continued
Notes to the parent company financial statements
Continued
20. Related party transactions
The Company has related party transactions with Group entities and its key management personnel. Details of the total compensation of key management
personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Group, including the Executive and
Non-Executive Directors, are included in note I4 to the consolidated financial statements.
During the year ended 31 December 2022, the Company entered into the following transactions with related parties.
2022
£m
2021
£m
Dividend income from other Group entities 455 957
Interest income from other Group entities
124 111
579 1,068
Impairment of investment in subsidiaries – 43
Expense to other Group entities
246 205
Interest expense to other Group entities 60 43
306 291
Amounts due from related parties at the end of the year:
2022
£m
2021
£m
Loans due from Group entities
2,004 1,234
Interest accrued on loans due from Group entities 29 35
Other amounts due from Group entities
19 616
2,598 1,885
Amount due for settlement after 12 months
2,004 784
Amounts due to related parties at the end of the year:
2022
£m
2021
£m
Loans due to Group entities
2,424 300
Interest accrued on loans due to Group entities 14 14
Other amounts due to Group entities
43 415
2,481 729
Amount due for settlement after 12 months
1,246 300
21. Auditor’s remuneration
Details of auditor’s remuneration for Phoenix Group Holdings plc and its subsidiaries is included in note C4 to the consolidated financial statements.
22. Events after the reporting period
Details of events after the reporting date are included in note I7 to the consolidated financial statements.
A Barbour
A Briggs
R Thakrar
S Bruce
K Green
H Iioka
K Murray
J Pollock
B Richards
M Semple
N Shott
K Sorenson
10 March 2023
Phoenix Group Holdings plc Annual Report and Accounts 2022306
Additional life company asset disclosures
The analysis of the asset portfolio provided below comprises the assets held by the Group’s life companies, and it is stated net of derivative liabilities.
It excludes other Group assets such as cash held in the holding and management service companies and the assets held by the non-controlling interests
in consolidated collective investment schemes.
The following table provides an overview of the exposure by asset category of the Group’s life companies’ shareholder and policyholder funds:
31 December 2022
Carrying value
Shareholder
and non-profit
funds
1
£m
Participating
supported
1
£m
Participating
non-
supported
2
£m
Unit-linked
2
£m
Total
£m
Cash and cash equivalents
4,385
1,027
5,312
6,445
17,169
Debt securities – gilts and foreign government bonds
4,913
260
15,065
13,212
33,450
Debt securities – other government and supranational
1,691
242
1,717
2,341
5,991
Debt securities – infrastructure loans – project finance
3
922
–
–
–
922
Debt securities – infrastructure loans – corporate
4
1,205
–
1
–
1,206
Debt securities – local authority loans
5
686
1
2
4
693
Debt securities – loans guaranteed by export credit agencies and
supranationals
6
509
–
–
–
509
Debt securities – private corporate credit
7
1,660
–
100
8
1,768
Debt securities – loans to housing association
8
769
–
8
2
779
Debt securities – commercial real estate loans
9
1,104
–
–
–
1,104
Debt securities – equity release mortgages
9
3,934
–
–
–
3,934
Debt securities – other debt securities
13,895
1,118
13,067
33,515
61,595
31,288
1,621
29,960
49,082
111,951
Equity securities
109
46
17,114
94,462
111,731
Property investments
68
22
1,698
5,361
7,149
Income strips
9
–
–
–
786
786
Other investments
10
(1,238)
(506)
738
9,271
8,265
Total Life Company assets
34,612 2,210 54,822 165,407 257,051
Less assets held by disposal groups
11
– – – (8,312) (8,312)
At 31 December 2022
34,612 2,210 54,822 157,095 248,739
Cash and cash equivalents in Group holding companies
502
Cash and financial assets in other Group companies
1,071
Financial assets held by the non-controlling interest in consolidated collective
investment schemes
4,213
Financial assets in consolidated funds held by disposal groups
11
1,147
Total Group consolidated assets excluding amounts classified as held for sale
255,672
Comprised of:
Investment property
3,727
Financial assets
248,981
Cash and cash equivalents
8,839
Derivative liabilities
(5,875)
255,672
1 Includes assets where shareholders of the life companies bear the investment risk.
2 Includes assets where policyholders bear most of the investment risk.
3 Total infrastructure loans – project finance of £922 million include £882 million classified as Level 3 debt securities in the fair value hierarchy.
4 Total infrastructure loans – corporate of £1,206 million include £1,175 million classified as Level 3 debt securities in the fair value hierarchy
5 Total local authority loans of £693 million include £596 million classified as Level 3 debt securities in the fair value hierarchy.
6 Total loans guaranteed by export credit agencies and supranationals of £509 million include £402 million classified as Level 3 debt securities in the fair value hierarchy.
7 Total private corporate credit of £1,768 million include £1,422 million classified as Level 3 debt securities in the fair value hierarchy.
8 Total loans to housing associations of £779 million include £691 million classified as Level 3 debt securities in the fair value hierarchy.
9 All commercial real estate loans, equity release mortgages and income strips are classified as Level 3 debt securities in the fair value hierarchy.
10 Includes policy loans of £11 million, other loans of £398 million, net derivative liabilities of £(1,837) million, reinsurers’ share of investment contracts of £9,088 million and other investments
of £605 million.
11 See note A6.1 to the consolidated financial statements for further details.
Phoenix Group Holdings plc Annual Report and Accounts 2022 307
Financials
Financials continued
Additional life company asset disclosures
Continued
31 December 2021
Carrying value
Shareholder
and non-profit
funds
1
£m
Participating
supported
1
£m
Participating
non-
supported
2
£m
Unit-linked
2
£m
Total
3
£m
Cash and cash equivalents
5,437 1,644 7,103 9,691 23,875
Debt securities -gilts and foreign government bonds
8,687 311 20,623 14,170 43,791
Debt securities – other government and supranational
2,381 318 2,088 3,051 7,838
Debt securities - infrastructure loans - project finance
3,4
1,026 – 1 –
1,027
Debt securities - infrastructure loans - corporate
3,5
1,118
1,118
Debt securities - local authority loans and US municipal bonds
3,6
1,140 – 10 6
1,156
Debt securities - loans guaranteed by export credit agencies and
supranationals
3,7
373 – – –
373
Debt securities - private corporate credit
3,8
1,928 1 169
27 2,125
Debt securities - loans to housing associations
3,9
1,161 – 9
3 1,173
Debt securities - commercial real estate loans
3,10
1,317
1,317
Debt securities - equity release mortgages
3,10
4,214
4,214
Debt securities - other debt securities
16,713 1,432 16,274 28,218
62,637
40,058 2,062 39,174 45,475 126,769
Equity securities
122 61 20,386 113,779 134,348
Property investments
76 26 2,248 7,906 10,256
Income strips
3,10
– – – 886 886
Other investments
11
623 341 3,098 10,119 14,181
Total Life Company assets
46,316 4,134 72,009 187,856 310,315
Less assets held by disposal group
12
– – – (11,676) (11,676)
At 31 December 2021
46,316 4,134 72,009 176,180 298,639
Cash and cash equivalents in Group holding companies
964
Cash and financial assets in other Group companies
793
Financial assets held by the non-controlling interest in consolidated collective
investment schemes
4,155
Financial assets in consolidated funds held by disposal group
12
1,788
Total Group consolidated assets excluding amounts classified as held for sale
306,339
Comprised of:
Investment property
5,283
Financial assets
293,192
Cash and cash equivalents
9,112
Derivative liabilities
(1,248)
306,339
1 Includes assets where shareholders of the life companies bear the investment risk.
2 Includes assets where policyholders bear most of the investment risk.
3 The illiquid asset classes have been represented to align with those used in the Group's Internal Model.
4 Total infrastructure loans - project finance of £1,027 million include £967 million classified as Level 3 debt securities in the fair value hierarchy.
5 Total infrastructure loans - corporate of £1,118 million include £1,074 million classified as Level 3 debt securities in the fair value hierarchy.
6 Total local authority loans and US municipal bonds of £1,156 million include £917 million classified as Level 3 debt securities in the fair value hierarchy.
7 Total loans guaranteed by export credit agencies and supranationals of £373 million include £219 million classified as Level 3 debt securities in the fair value hierarchy.
8 Total private corporate credit of £2,125 million include £1,488 million classified as Level 3 debt securities in the fair value hierarchy.
9 Total loans to housing associations of £1,173 million include £1,022 million classified as Level 3 debt securities in the fair value hierarchy.
10 All commercial real estate loans, equity release mortgages and income strips are classified as Level 3 debt securities in the fair value hierarchy.
11 Includes policy loans of £11 million, other loans of £248 million, net derivative assets of £3,309 million, reinsurers’ share of investment contracts of £10,009 million and other investments
of £604 million.
12 See note A6.1 to the consolidated financial statements for further details.
Phoenix Group Holdings plc Annual Report and Accounts 2022308
The following table provides a reconciliation of the total life company assets to the Assets under Administration (‘AUA’) as at 31 December 2022 detailed
in the Business Review on page 37.
2022
£bn
2021
£bn
Total Life Company assets excluding amounts classified as held for sale
248.7 298.6
Off-balance sheet AUA
1
10.3 11.8
Assets Under Administration
259.0 310.4
1 Off-balance sheet AUA represents assets held in respect of certain Group Self-Invested Personal Pension products where the beneficial ownership interest resides with the customer
(and which are therefore not recognised in the consolidated statement of financial position) but on which the Group earns fee revenue.
All of the life companies’ debt securities are held at fair value through profit or loss under IAS 39, and therefore already reflect any reduction in value
between the date of purchase and the reporting date.
The life companies have in place a comprehensive database that consolidates credit exposures across counterparties, geographies and business lines.
This database is used for credit monitoring, stress testing and scenario planning. The life companies continue to manage their balance sheets prudently
and have taken extra measures to ensure their market exposures remain within risk appetite.
For each of the life companies’ significant financial institution counterparties, industry and other data has been used to assess the exposure of the
individual counterparties. As part of the Group’s risk appetite framework and analysis of shareholder exposure to a potential worsening of the economic
situation, this assessment has been used to identify counterparties considered to be most at risk from defaults. The financial impact on these
counterparties, and the contagion impact on the rest of the shareholder portfolio, is assessed under various scenarios and assumptions. This analysis is
regularly reviewed to reflect the latest economic outlook, economic data and changes to asset portfolios. The results are used to inform the Group’s views
on whether any management actions are required.
The table below shows the Group’s market exposure analysed by credit rating for the debt securities held in the shareholder and non-profit funds.
Sector analysis of shareholder and non-profit fund bond portfolio
AAA
£m
AA
£m
A
£m
BBB
£m
BB & below
1
£m
Total
£m
Industrials
–
395
252
643
11
1,301
Basic materials
–
1
130
6
–
137
Consumer, cyclical
–
311
314
111
67
803
Technology and telecoms
186
288
517
551
–
1,542
Consumer, non-cyclical
246
328
802
231
–
1,607
Structured finance
–
–
38
–
–
38
Banks
2
526 464 2,919 344 39 4,292
Financial services
139 401 100 68 19 727
Diversified
– 5 29 – – 34
Utilities
19 141 727 1,353 – 2,240
Sovereign, sub-sovereign and
supranational
3
932 5,838 509 116 2 7,397
Real estate
76 234 2,590 1,053 180 4,133
Investment companies
1 125 – 5 – 131
Insurance
22 354 321 70 43 810
Oil and gas
– 132 346 55 – 533
Collateralised debt obligations
– 7 – – – 7
Private equity loans
– – 7 69 – 76
Infrastructure
– 123 60 1,208 155 1,546
Equity release mortgages
4
2,216 852 810 56 – 3,934
At 31 December 2022
4,363 9,999 10,471 5,939 516 31,288
1 Includes unrated holdings of £108 million.
2 The £4,292 million total shareholder exposure to bank debt comprised £3,345 million senior debt and £947 million subordinated debt.
3 Includes £686 million reported as local authority loans, £1,660 million reported as private corporate credit and £509 million reported as loans guaranteed by export credit agencies
and supranationals in the summary table on page 307.
4 The credit ratings attributed to equity release mortgages are based on the ratings assigned to the internal securitised loan notes.
Phoenix Group Holdings plc Annual Report and Accounts 2022 309
Financials
Financials continued
Additional life company asset disclosures
Continued
Sector analysis of shareholder and non-profit fund bond portfolio
AAA
£m
AA
£m
A
£m
BBB
£m
BB & below
1
£m
Total
£m
Industrials
–
165 329 820 6 1,320
Basic materials
–
1 166 29 – 196
Consumer, cyclical
11
438 461 302 148 1,360
Technology and telecoms
165
268 592 735 3 1,763
Consumer, non-cyclical
258
271 966 338 – 1,833
Structured finance
–
– 52 – – 52
Banks
2
662
769 2,750 578 19 4,778
Financial services
51
281 382 147 5 866
Diversified
–
6 28 – – 34
Utilities
25
121 1,304 1,272 2 2,724
Sovereign, sub-sovereign and
supranational
3
1,465
9,983 827 109 – 12,384
Real estate
27
183 3,364 757 254 4,585
Investment companies
30
200 2 – – 232
Insurance
16
428 426 38 22 930
Oil and gas
–
147 381 81 – 609
Collateralised debt obligations
–
8 – – – 8
Private equity loans
–
– – 26 – 26
Infrastructure
–
84 236 1,620 204 2,144
Equity release mortgages
4
2,085
1,144 963 – 22 4,214
At 31 December 2021
4,795
14,497 13,229 6,852 685 40,058
1 Includes unrated holdings of £113 million.
2 The £4,778 million total shareholder exposure to bank debt comprised £3,732 million senior debt and £1,046 million subordinated debt.
3 Includes £1,082 million reported as local authority loans & US municipal bonds, £42 million reported as private corporate credit and £205 million reported as loans guaranteed by export
credit agencies and supranationals in the summary table on page 308.
4 The credit ratings attributed to equity release mortgages are based on the ratings assigned to the internal securitised loan notes.
5 The illiquid asset classes have been represented to align with those used I the Group's Internal Model.
Phoenix Group Holdings plc Annual Report and Accounts 2022310
The following table sets out the debt security exposure by country of the shareholder and non-profit funds of the life companies:
Analysis of shareholder debt security
exposure by country
Sovereign, sub-
sovereign and
supranational
2022
£m
Corporate
and other
2022
£m
Total
2022
£m
Sovereign, sub-
sovereign and
supranational
2021
£m
Corporate
and other
2021
£m
Total
2021
£m
UK
5,914 13,781 19,695 10,216 17,076 27,292
Supranationals
541 45 586 800 – 800
USA
317 5,122 5,439 340 4,881 5,221
Germany
46 716 762 112 418 530
France
153 921 1,074 230 1,207 1,437
Netherlands
24 417 441 117 769 886
Italy
– 145 145
–
171 171
Ireland
– 74 74
–
57 57
Spain
17 103 120 26 105 131
Luxembourg
56 118 174 60 22 82
Belgium
28 83 111 39 111 150
Australia
1 386 387 1 503 504
Canada
6 385 391 99 303 402
Mexico
2 137 139 2 192 194
Other – non-Eurozone
1
252 1,241 1,493
288 1,579 1,867
Other – Eurozone
40 217 257
54 280 334
Total shareholder debt securities
7,397 23,891 31,288
12,384 27,674 40,058
1 There was no shareholder exposure to Russia, Ukraine and Belarus at 31 December 2022. In the prior year, this included £2 million sovereign debt and £21 million corporate and other debt
with exposure to Russia only.
Phoenix Group Holdings plc Annual Report and Accounts 2022 311
Financials
Financials continued
Additional capital disclosures
PGH PLC Solvency II surplus
The PGH plc surplus at 31 December 2022 is £4.4 billion (2021: £5.3 billion).
31 December
2022
Estimated
£bn
31 December
2021
£bn
Own Funds
11.1 14.8
SCR
(6.7) (9.5)
Surplus
4.4 5.3
Calculation of group solvency
The Group wholly uses Method 1 to calculate Group solvency. The Group continues to determine its capital requirements on a partial internal model basis.
Composition of own funds
Own Funds items are classified into different Tiers based on the features of the specific items and the extent to which they possess the following
characteristics, with Tier 1 being the highest quality:
• availability to be called up on demand to fully absorb losses on a going-concern basis, as well as in the case of winding-up (‘permanent availability’); and
• in the case of winding-up, the total amount that is available to absorb losses before repayment to the holder until all obligations to policyholders and
other beneficiaries have been met (‘subordination’).
PGH plc’s total Own Funds are analysed by Tier as follows:
31 December 2022
Estimated
£bn
31 December 2021
£bn
Tier 1 – Unrestricted
7.1 9.9
Tier 1 – Restricted
1.0 1.1
Tier 2
2.6 2.9
Tier 3
0.4 0.9
Total Own Funds
11.1 14.8
PGH plc’s unrestricted Tier 1 capital accounts for 63% (2021: 67%) of total Own Funds and comprises ordinary share capital, surplus funds of
the unsupported with-profit funds which are recognised only to a maximum of the SCR, and the accumulated profits of the remaining business.
Restricted Tier 1 capital comprises the contingent convertible Tier 1 Notes issued in January 2020 and the Tier 1 Notes issued in April 2018, the terms
of which enable the instruments to qualify as restricted Tier 1 capital for regulatory reporting purposes.
Tier 2 capital is comprised of subordinated notes whose terms enable them to qualify as Tier 2 capital for regulatory reporting purposes.
Tier 3 items include the Tier 3 subordinated notes of £0.2 billion (2021: £0.7 billion) and the deferred tax asset of £0.2 billion (2021: £0.2 billion).
Phoenix Group Holdings plc Annual Report and Accounts 2022312
Breakdown of SCR
The Group operates one single PRA approved Internal Model covering all the Group entities, with the exception of the Irish entity, Standard Life
International Designated Activity Company (‘SLIDAC’) and the acquired ReAssure businesses. SLIDAC and ReAssure businesses calculate their capital
requirements in accordance with the Standard Formula. An analysis of the pre-diversified SCR of PGH plc is presented below:
31 December 2022
Estimated 31 December 2021
Internal Model
%
ReAssure and
SLIDAC
Standard Formula
%
Internal Model
%
ReAssure and
SLIDAC
Standard Formula
%
Longevity
15 17 22 21
Credit
17 19 18 21
Persistency
18 28 20 22
Interest rates
8 6 9 8
Operational
8 4 6 3
Swap spreads
2 – 3 –
Property
4 1 4 1
Other market risks
15 14 12 14
Other non-market risks
13 11 6 10
Total pre-diversified SCR
100 100 100 100
The principal risks of the Group are described in detail in note E6 and F4 in the IFRS consolidated financial statements.
Minimum capital requirements
Under the Solvency II regulations, the Minimum Capital Requirement (‘MCR’) is the minimum amount of capital an insurer is required to hold below which
policyholders and beneficiaries would become exposed to an unacceptable level of risk if an insurer was allowed to continue its operations. For Groups
this is referred to as the Minimum Consolidated Group SCR (‘MGSCR’).
The MCR is calculated according to a formula prescribed by the Solvency II regulations and is subject to a floor of 25% of the SCR or €3.7 million,
whichever is higher, and a cap of 45% of the SCR. The MCR formula is based on factors applied to technical provisions and capital at risk.
The MGSCR represents the sum of the underlying insurance companies’ MCRs of the Group. The Group wholly uses Method 1 (the default accounting
based consolidation method) to calculate Group solvency following the approval of the internal model by the PRA during the year.
The Eligible Own Funds to cover the MGSCR is subject to quantitative limits as shown below:
• the Eligible amounts of Tier 1 items should be at least 80% of the MGSCR; and
• the Eligible amounts of Tier 2 items shall not exceed 20% of the MGSCR.
PGH plc’s MGSCR at 31 December 2022 is £2.3 billion (2021: £3.0 billion).
PGH plc’s Eligible Own Funds to cover MGSCR is £8.4 billion (2021: £11.5 billion) leaving an excess of Eligible Own Funds over MGSCR of £6.1 billion
(2021: £8.5 billion), which translates to an MGSCR coverage ratio of 369% (2021: 387%).
Phoenix Group Holdings plc Annual Report and Accounts 2022 313
Financials
The Group assesses its financial position and performance based on a range of measures. Some of these are management derived
measures that are not defined or specified in accordance with relevant financial reporting frameworks such as International Financial
Reporting Standards (‘IFRS’) or Solvency II.
These measures are known as Alternative Performance Measures (‘APMs’).
APMs are disclosed to provide stakeholders with further helpful information on the performance of the Group and should be viewed as
complementary to, rather than a substitute for, the measures determined according to IFRS and Solvency II requirements. Accordingly,
these APMs may not be comparable with similarly titled measures and disclosures by other companies.
A list of the APMs used in our results as well as their definitions, why they are used and, if applicable, how they can be reconciled
to the nearest equivalent GAAP measure is provided below. Further discussion of these measures can be found in the business review
from page 28.
APM Definition Why this measure is used
Reconciliation to
financial statements
Assets under
administration
The Group’s Assets under Administration
(‘AUA’) represents assets administered by
or on behalf of the Group, covering both
policyholder fund and shareholder assets.
It includes assets recognised in the Group’s
IFRS statement of consolidated financial
position together with certain assets
administered by the Group for which
beneficial ownership resides with customers.
AUA indicates the potential earnings
capability of the Group arising from its
insurance and investment business. AUA
flows provide a measure of the Group’s
ability to deliver new business growth.
A reconciliation from the
Group’s IFRS statement of
consolidated financial position
to the Group’s AUA is provided
on page 309.
Adjusted
operating profit
Adjusted operating profit is a financial
performance measure based on expected
long-term assumptions. It is stated before tax
and excludes amortisation and impairments
of intangibles, finance costs attributable
to owners and other items which in the
Director’s view should be excluded by
their nature or incidence to enable a full
understanding of financial performance.
Items excluded from adjusted operating
profit are referred to as non-operating items.
Further details of the components of this
measure and the assumptions inherent in the
calculation of the long-term investment
return are included in note B2.1 to the
consolidated financial statements.
This measure provides a more
representative view of the Group’s
performance than the IFRS result after tax
as it provides long-term performance
information unaffected by short-term
economic volatility and one-off items,
and is stated net of policyholder
finance charges and tax.
It helps give stakeholders a better
understanding of the underlying
performance of the Group by identifying
and analysing non-operating items.
A reconciliation of adjusted
operating profit to the IFRS
result before tax attributable
to owners is included in the
business review on page 38.
Fitch
leverage ratio
The Fitch leverage ratio is calculated
by Phoenix (using Fitch Ratings’ stated
methodology) as debt as a percentage
of the sum of debt and equity. Debt is defined
as the IFRS carrying value of shareholder
borrowings excluding subordinated liabilities
qualifying as Tier 1 Own Funds under
Solvency II. Equity is defined as the sum of
equity attributable to the owners of the
parent, non-controlling interests, the
unallocated surplus, subordinated liabilities
qualifying as Tier 1 Own Funds under
Solvency II and the Tier 1 Notes. Values for
debt and equity are adjusted to allow for the
impact of currency hedges in place over
foreign currency denominated debt.
The Group seeks to manage the level of
debt on its balance sheet by monitoring its
financial leverage ratio. This is to ensure the
Group maintains its investment grade credit
rating as issued by Fitch Ratings and
optimises its funding costs and financial
flexibility for future acquisitions.
The debt and equity figures are
directly sourced from the
Group’s IFRS statement of
consolidated financial position
on pages 170 and 172 and the
analysis of borrowings note
on page 217.
Financials continued
Alternative performance measures
Phoenix Group Holdings plc Annual Report and Accounts 2022314
APM Definition Why this measure is used
Reconciliation to
financial statements
Group In-force
Long-term Free
Cash (‘Group
in-force LTFC’)
Group in-force LTFC represents the cash
expected to be available over time to fund
future dividends from today’s in-force
business. It is defined as the estimated
lifetime cash generation from our in-force
business, plus Group cash held in the
Holding Company, less outstanding
shareholder debt, committed M&A and
transition costs, and interest on debt
until maturity.
Group in-force LTFC provides a measure
of the Group’s total long-term cash
available for operating costs, interest,
growth and shareholder returns. Increases
in Group in-force LTFC will be driven by
sources of long-term cash i.e. new business
and over-delivery of management actions.
Decreases in Group in-force LTFC will
reflect the uses of cash at holding company
level, including expenses, interest,
investment in BPA and dividends.
The calculation for the LTIP performance
metric excludes any future shareholder
dividends and is before interest on debt
until maturity.
The metric is not directly
reconcilable to the financial
statements as it includes a
significant component relating to
cash that is expected to emerge
in the future. Holding company
cash included within Group
in-force LTFC is consistent with
the holding company cash and
cash equivalents as disclosed in
the cash section of the business
review. Shareholder debt
outstanding reflects the face
value of the shareholder
borrowings disclosed on
page 217.
Incremental new
business
long-term cash
generation
Incremental new business long-term cash
generation represents the operating
companies’ cash generation that is expected
to arise in future years as a result of new
business transacted in the current period
within our UK Open and Europe segments.
This measure provides an indication of
the Group’s performance in delivering
new business growth to offset the impact
of run-off of the Group’s Heritage
business and to bring sustainability
to future cash generation.
Incremental long-term cash
generation is not directly
reconcilable to the financial
statements as it relates to cash
generation expected to arise
in the future.
Life Company
Free Surplus
The Solvency II surplus of the Life
Companies that is in excess of their
Board approved capital according to
their capital management policies.
This figure provides a view of the level
of surplus capital in the Life Companies
that is available for distribution to the
holding companies, and the generation
of Free Surplus underpins future
operating cash generation.
Please see business review
section on page 35 for
further analysis of the
solvency positions of the
Life Companies.
Operating
companies’
cash generation
Represents the net cash remitted from the
operating entities to the Group, supported
by the free surplus above capital
requirements in the life companies, which
is generated through margins earned on
different life and pension products and the
release of capital requirements, and group
tax relief.
The statement of consolidated cash
flows prepared in accordance with IFRS
combines cash flows relating to shareholders
with cash flows relating to policyholders, but
the practical management of cash within the
Group maintains a distinction between the
two. The Group therefore focuses on the
cash flows of the holding companies which
relate only to shareholders. Such cash flows
are considered more representative of the
cash generation that could potentially be
distributed as dividends or used for debt
repayment and servicing, Group expenses
and pension contributions.
Operating companies’ cash generation
is a key performance indicator used by
management for planning, reporting
and executive remuneration. The AIP
performance metric ‘cash generation’
is aligned to this definition.
Operating companies’ cash
generation is not directly
reconcilable to an equivalent
GAAP measure (IFRS statement
of consolidated cash flows) as it
includes amounts that eliminate
on consolidation.
Further details of holding
companies’ cash flows are
included within the business
review on pages 28 to 41, and
a breakdown of the Group’s
cash position by type of entity
is provided in the additional
life company asset disclosures
section on page 307.
Shareholder
Capital
Coverage Ratio
Represents total Eligible Own Funds divided
by the Solvency Capital Requirements
(‘SCR’), adjusted to a shareholder view
through the exclusion of amounts relating to
those ring-fenced with-profit funds and
Group pension schemes whose Own Funds
exceed their SCR.
The unsupported with-profit funds and
Group pension funds do not contribute to
the Group Solvency II surplus. However, the
inclusion of related Own Funds and SCR
amounts dampens the implied Solvency II
capital ratio. The Group therefore focuses
on a shareholder view of the capital
coverage ratio which is considered to give
a more accurate reflection of the capital
strength of the Group.
Further details of the
Shareholder Capital Coverage
Ratio and its calculation
are included in the business
review on page 34.
Policy for making pro forma adjustments in the Annual Report and Accounts
Pro forma adjustments will be used in the Annual Report and Accounts (‘ARA’) where management considers that they allow the users
of the ARA to better understand the financial performance, financial position, cash flows or outlook of the Group.
Examples of where pro forma adjustments may be used are in relation to acquisitions or disposals which are material to the Group,
changes to the Group’s capital structure or changes in reporting frameworks the Group applies such as Solvency II or IFRS. Where pro
forma adjustments are considered necessary for the understanding of the financial performance, financial position, cash flows or
outlook of the Group these will be clearly labelled as pro forma with a clear explanation provided as to the reason for the adjustments
and the Key Performance Indicators, Alternative Performance Metrics and other performance metrics impacted.
Phoenix Group Holdings plc Annual Report and Accounts 2022 315
Financials
Additional
information
Phoenix Group Holdings plc Annual Report and Accounts 2022316
Shareholder Information 318
Glossary 320
Online resources 325
Forward looking Statements 326
Phoenix Group Holdings plc Annual Report and Accounts 2022 317
Additional Information
Shareholder information
Shareholder information
Annual General Meeting
Our Annual General Meeting (‘AGM’) will be held on 4 May 2023 at 10.00am.
The voting results for our 2023 AGM, including proxy votes and votes withheld will be
available on our website at www.thephoenixgroup.com
Share price performance
Phoenix Group Holdings plc share price performance
Price pence per share (rebased to Phoenix)
Jan
2022
Feb
2022
Mar
2022
Apr
2022
May
2022
Jun
2022
Jul
2022
Aug
2022
Sep
2022
Oct
2022
Nov
2022
Dec
2022
400
450
500
550
600
650
700
750
FTSE 350 Life Assurance
FTSE 100
Phoenix Group
Shareholder profile as at 31 December 2022
Range of shareholdings
No. of
shareholders %
No. of
shares %
1–1,000 507 24.35 231,702 0.02
1,001–5,000 593 28.48 1,450,606 0.14
5,001–10,000 177 8.50 1,261,277 0.13
10,001–250,000 516 24.78 34,177,318 3.42
250,001–500,000 83 3.99 29,606,876 2.96
500,001 and above 206 9.90 933,624,698 93.33
Total 2,082 1,000,352,477
Phoenix Group Holdings plc Annual Report and Accounts 2022318
Shareholder services
Managing your shareholding
Our registrar, Computershare, maintains the Company’s register
of members. Shareholders may request a hard copy of this Annual
Report from our registrar and should you have any queries in
respect of your shareholding, please contact them directly
using the contact details set out below.
Registrar details
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ
Shareholder helpline number +44 (0) 370 702 0181
Fax number +44 (0) 370 703 6116
www.investorcentre.co.uk/contactus
Dividend mandates
Shareholders may find it convenient to have their dividends
paid directly to their bank or building society account.
Access Computershare’s web-based enquiry service
www.investorcentre.co.uk to download forms such as a dividend
mandate form or submit dividend mandate details online; view
details of your Phoenix Group shareholding and recent dividend
payments; update your address details and register for
shareholder electronic communications to receive notification
of Phoenix Group shareholder mailings by email.
Alternatively, contact Computershare using the details above.
Scrip dividend alternative
The Company does not currently offer a scrip dividendalternative.
Dividend reinvestment plan
The Company does not currently offer a dividend
reinvestment plan.
Share price
You can access the current share price of Phoenix Group
Holdings plc on the Group’s website together with electronic
copies of the Group’s financial reports and presentations at
www.thephoenixgroup.com/investor-relations.aspx
Ordinary shares – 2022 final dividend
Ex-dividend date 30 March 2023
Record date 31 March 2023
Payment date for the recommended finaldividend 10 May 2023
Group financial calendar for 2023
Annual General Meeting 4 May 2023
Announcement of unaudited
six months’ InterimResults
September 2023
*
*see website for announcement dates
Warning to shareholders
Over recent years, many companies have become aware that
their shareholders have received unsolicited phone calls
or correspondence concerning investment matters. These
are typically from overseas-based ‘brokers’ who target UK
shareholders, offering to sell them what often turn out to
be worthless or high-risk shares in US or UK investments.
These operations are commonly known as ‘boiler rooms’.
Shareholders are advised to be wary of any unsolicited
advice, offers to buy shares at a discount or offers of free
reports about the Company.
If you receive any unsolicited investment advice:
• make sure you get the correct name of the person
and organisation;
• check that they are properly authorised by the Financial
Conduct Authority (‘FCA’) before getting involved by
visiting www.fca.org.uk/firms/systems-reporting/register;
• report the matter to the FCA by calling the FCA Consumer
Helpline on 0800 111 6768; and
• if the calls persist, hang up.
If you deal with an unauthorised firm, you will not be eligible to
receive payment under the Financial Services Compensation
Scheme (‘FSCS’). The FCA can also be contacted by completing
an online form available at www.fca.org.uk/consumers/report-
scam-unauthorised-firm. Details of any share dealing facilities that
the Company endorses will be included in Company mailings.
More detailed information on this or similar activity can be found
on the FCA website available at www.fca.org.uk/consumers.
Phoenix Group Holdings plc Annual Report and Accounts 2022 319
Additional Information
Glossary
Glossary
ABI
The Association of British Insurers (‘ABI’) is a trade association made up
of insurance companies in the United Kingdom.
ABS
Asset Backed Securities – A collateralised security whose value and
income payments are derived from a specified pool of underlying assets.
Acquired value in force (‘AVIF’)
The present value of future profits on a portfolio of long-term insurance
and investment contracts, acquired either directly or through the
purchase of, or investment in, a business.
Adjusted operating profit
Adjusted operating profit is a non-GAAP measure that is considered
a more representative measurement of performance than IFRS profit
or loss after tax as it is based on expected long-term investment returns.
ALM
Asset Liability Management – management of mismatches between
assets and liabilities within risk appetite.
Alternative Performance Measure
An Alternative Performance Measure (’APM’) is a financial measure of
historic or future financial performance, financial position or cash flows,
other than a financial measure defined under IFRS or under Solvency II
regulations. The Group uses a range of these metrics to provide a better
understanding of the underlying performance of the Group. All APMs
are defined within this glossary and the APM section on page 314.
Annuity policy
A policy that pays out regular benefit amounts, either immediately and for
the remainder of a policyholder’s lifetime (immediate annuity), or deferred
to commence at some future date (deferred annuity).
Asset management
The management of assets using a structured approach to guide the
act of acquiring and disposing of assets, with the objective of
meeting defined investment goals and maximising value for investors,
including policyholders.
Assets under administration (‘AUA’)
Assets administered by or on behalf of the Group, covering both
policyholder funds and shareholder assets. This includes assets
recognised in the Group’s IFRS consolidated statement of financial
position together with certain assets administered by the Group but
for which beneficial ownership resides with customers.
Auto-enrolment
Under the Pensions Act 2008, every employer in the UK must put certain
staff into a workplace pensions scheme and contribute towards it. This
is called auto-enrolment.
Bulk Purchase Annuities (‘BPA’)
A bulk annuity is an insurance policy that is purchased by pension
scheme trustees to better secure members’ benefits by removing
investment, inflation and longevity risk associated with defined
benefit pension schemes.
CAGR
Compound annual growth rate, or CAGR, is the mean annual growth rate
of an investment over a specified period of time longer than one year.
Carbon footprint
A carbon footprint is the total greenhouse gas (‘GHG’) emissions caused
by an individual, event, organization, service, place or product, expressed
as carbon dioxide equivalent (‘CO
2
e’).
Carbon offsets
A reduction or removal of emissions of carbon dioxide or other
greenhouse gases made in order to compensate for emissions
created elsewhere.
Carbon Disclosure Project (‘CDP’)
Global disclosure system for investors, companies, cities, states and
regions to manage their environmental impacts.
Climate Biennial Exploratory Scenario exercise (‘CBES’)
The Bank of England’s exercise to test the resilience of the current
business models of the largest banks, insurers and the financial system
to climate-related risks.
Climate-related risks
The potential negative impacts of climate change on an organisation.
Climate-related opportunities
The potential positive impacts of climate change on an organisation.
Efforts to adapt to climate change can produce opportunities for
organisations, such as through resource efficiency and cost savings
and the development of new products and services.
Climate scenario
A plausible representation of future climate that has been constructed
for explicit use in investigating the potential impacts of anthropogenic
climate change.
Closed life fund
A fund that no longer accepts new business. The fund continues to
be managed for the existing policyholders.
Confederation of British Insurers (‘CBI’)
The CBI is a not-for-profit organisation that represents 190,000
businesses. It provides a voice for firms at a regional, national and
international level to policymakers.
COP27
The 27th United Nations Climate Change Conference of the Parties held
in Sharm el Sheikh (Egypt) in November 2022.
Customer
A customer could be a lead policyholder on more than one policy and
some policies could have more than one customer, therefore the customer
number is approximate. The number of customers is measured as number
of lead policyholders.
Defined benefit pension scheme
A pension scheme that defines the benefits payable to members
irrespective of any contributions paid or investment gains made.
Defined contribution pension scheme
A pension scheme where the benefits depend on the amount and
frequency of contributions paid into the scheme, the investment gain on
those contributions, and annuity rates at the time of retirement. The exact
pension valuation will not be known until the point of retirement.
Phoenix Group Holdings plc Annual Report and Accounts 2022320
Department for Business & Trade
The Department for Business & Trade (formerly the Department for
Business, Energy & Industrial Strategy (‘BEIS’)) is a ministerial department
in the UK.
EBT
Employee Benefit Trust – A trust set up to enable its Trustee to purchase
and hold shares to satisfy employee share-based incentive plan awards.
The Company’s EBT is the Phoenix Group Holdings plc Employee
Benefit Trust.
Economic assumptions
Assumptions related to future interest rates, inflation, market value
movements and tax.
Equity release mortgage (‘ERM’)
An equity release mortgage product enables a home owner aged over
55 to draw a lump sum or regular smaller sums from the value of the home,
while remaining in their home.
ESG
Environmental, social, and governance criteria are a set of standards for
a company’s operations that investors use to screen potential investments:
how a company performs as a steward of nature; how it manages
relationships with employees, suppliers, customers, and the communities
where it operates; and a company’s leadership, executive pay, audits,
internal controls and shareholder rights.
Experience variances
Current period differences between the actual experience incurred
and the assumptions used in the calculation of IFRS insurance liabilities.
Financed emissions
Greenhouse gas emissions that occur as a result of financing, including
lending and investment activity. These activities fall within Scope 3,
category 15 of the GHG protocol.
Financial Conduct Authority (‘FCA’)
The conduct regulator for around 50,000 financial services firms and
financial markets in the UK and the prudential supervisor for 48,000 firms.
Financial leverage
The Fitch leverage ratio is calculated by Phoenix (using Fitch Ratings’
stated methodology) as debt as a percentage of the sum of debt and
equity. Debt is defined as the IFRS carrying value of shareholder
borrowings excluding subordinated liabilities qualifying as Tier 1
Own Funds under Solvency II. Equity is defined as the sum of equity
attributable to the owners of the parent, non-controlling interests, the
unallocated surplus, subordinated liabilities qualifying as Tier 1 Own
Funds under Solvency II and the Tier 1 Notes. Values for debt and equity
are adjusted to allow for the impact of currency hedges in place over
foreign currency denominated debt.
Financial Reporting Council (‘FRC’)
The UK’s independent regulator responsible for promoting high-quality
corporate governance and reporting to foster investment.
Free surplus
The amount of capital held in life companies in excess of that needed to
support their regulatory Solvency Capital Requirement, plus the capital
required under the Board approved capital management policy.
FCA
Financial Conduct Authority – The body responsible for supervising
the conduct of all financial services firms and for the prudential
regulation of those financial services firms not supervised by the
Prudential Regulation Authority (’PRA’), such as asset managers
and independent financial advisers.
FOS
Financial Ombudsman Service – An ombudsman established in 2000,
and given statutory powers in 2001 by the Financial Services and Markets
Act 2000, to help settle disputes between consumers and UK-based
businesses providing financial services.
FTE
The full-time equivalent (‘FTE’) is a measure that allows the Group to
calculate the equivalent number of full-time employees for all types
of employees.
FTSE Women Leaders review
An independent, business-led framework supported by the Government,
which sets recommendations for Britain’s largest companies to improve
the representation of women on boards and in leadership positions.
It continues the work of the Hampton-Alexander and Davies Reviews.
Greenhouse Gas (‘GHG’) emissions
GHGs are atmospheric gases that absorb and emit radiation within the
thermal infrared range and that contribute to the greenhouse effect and
global climate change. They include water vapour, carbon dioxide (‘CO
2
’),
methane (‘CH
4’
), nitrous oxide (‘N
2
O’), hydro chlorofluorocarbons (‘HCFCs’),
ozone (O
3
), hydrofluorocarbons (‘HFCs’),and perfluorocarbons (‘PFCs’).
Greenhouse Gas Protocol
Global standard for companies and organisations to measure and manage
their GHG emissions.
Group in-force Long-term Free Cash (‘Group in-force LTFC’)
Group in-force LTFC is the cash available to shareholders. It is defined as
the estimated lifetime cash generation from our in-force business, plus
Group cash held in the Holding Company, less outstanding shareholder
debt, committed M&A and transition costs, and interest on debt until
maturity. The calculation for the LTIP performance metric excludes any
future shareholder dividends and is before interest on debt until maturity.
Guaranteed Annuity Rate
A rate available to certain pension policyholders to acquire an annuity
at a contractually guaranteed conversion rate.
HMRC
His Majesty’s Revenue and Customs.
Heritage
The Group’s business segment where products are no longer marketed to
customers, for example with-profits and many legacy unit linked life and
pension products.
Holding companies
Refers to Phoenix Group Holdings plc, Phoenix Life Holdings Limited,
Pearl Group Holdings (No. 2) Limited, Impala Holdings Limited, Pearl Life
Holdings Limited, ReAssure Group plc and ReAssure Midco Limited.
IASB
International Accounting Standards Board.
Phoenix Group Holdings plc Annual Report and Accounts 2022 321
Additional Information
Glossary continued
IFRS
International Financial Reporting Standards – Accounting standards,
interpretations and the framework adopted by the International
Accounting Standards Board.
Incremental new business long-term cash generation
Represents the increase in the expected future operating companies’
cash generation to arise as a result of new business transacted in a period.
It is stated on an undiscounted basis.
Incremental new business long-term cash generation (less strain)
plus Own Funds impacting management actions
This AIP performance metric measures value creation with incremental
new business long-term cash generation (less strain) representing the
increase in the expected future operating companies’ cash generation
to arise as a result of new business transacted in a period. It is stated
on an undiscounted basis. Own Funds impacting management actions
reflect the value of actions which improve Solvency Own Funds.
In-force
Long-term business written before the period end and which has
not terminated before the period end.
Inter-governmental Panel on Climate Change (‘IPCC’)
The United Nations body created to provide policymakers with regular
scientific assessments on climate change, its implications and potential
future risks, as well as to put forward adaptation and mitigation options.
Internal Model
The Internal Model is a risk measurement system developed by an insurer
to analyse its overall risk position, to quantify risks and to determine the
economic capital required to meet those risks. Internal models are a
key feature of the Solvency II supervisory system and the Prudential
Regulation Authority (‘PRA’) has authorised certain insurance companies,
upon application, to calculate their solvency capital requirement using
their own internal models as opposed to the prescribed standard formula.
Internal rate of return (‘IRR’)
IRR is a metric used in financial analysis to estimate the profitability of
potential investments. IRR is a discount rate that makes the net present
value of all cashflows equal to zero in a discounted cashflow analysis.
Life company
A subsidiary providing life and pension products.
Longer Lives Index
The Longer Lives Index is the first piece of research by Phoenix Insights,
the Group’s think-tank, and was launched in 2022. The research provides
a rich picture of people’s financial readiness for longer lives across the UK.
LTIP
Long-Term Incentive Plan – The part of an executive’s remuneration
designed to incentivise the creation of long-term value for shareholders
through an award of shares with vesting contingent on employment
and the satisfaction of stretching performance conditions linked to
Group strategy.
M&A Advisory Committee
An ad hoc advisory PGH plc Board committee which meets to consider
proposed mergers and acquisitions, including due diligence activities
undertaken by management .
Management actions
Management actions are used to define the financial impacts of
programmes of activity instigated and undertaken by the Group to
enhance shareholder outcomes. Such actions will be undertaken to either
increase Shareholder Own Funds (and therefore increase future organic
cash generation) or to reduce SCR (thereby accelerating expected
cash generation). Examples of management action activities include
investment into higher yielding asset types, optimisation of asset and
liability matching positions, and cost reduction initiatives.
Master Trust
A master trust is a defined contribution workplace pension scheme that
is established under a trust. A master trust seeks to provide a workplace
pension that can be used by several non-associated employers, as
opposed to traditional schemes that are set up to provide a workplace
pension for a single employer. Master trusts are supervised and authorised
by the Pensions Regulator.
Minimum Capital Requirements (‘MCR’)
MCR is the minimum amount of capital that the Group needs to hold
to cover its risks under the Solvency II regulatory framework.
Net flows
Represents the difference between the inflows (premiums) and outflows
(claims) and excludes market movements.
Net operating cash receipts
This LTIP performance metric represents cash generation after allowing
for corporate expenses and pension contributions.
Net-zero carbon
A state where no incremental greenhouse gases are added to the
atmosphere, with remaining emissions output being balanced by the
removal of carbon from the atmosphere.
Network for Greening the Financial System (‘NGFS’)
A group of central banks, supervisors and observers committed to
sharing best practices, contributing to the development of climate
and environment-related risk management in the financial sector
and mobilising mainstream finance to support the transition towards
a sustainable economy.
New business contribution
Represents the increase in Solvency II shareholder Own Funds arising
from new business written in the year (net of associated tax), adjusted
to exclude the associated risk margin and any restrictions recognised
in respect of contract boundaries. It is stated net of ‘Day 1’ acquisition
costs and is calculated as the value of expected cash flows from new
business sold, discounted at the risk free rate.
Non-economic assumptions
Assumptions related to future levels of mortality, morbidity, persistency
and expenses
Non-profit fund
The portion of a life fund which is not a with-profit fund, where risks and
rewards of the fund fall wholly to shareholders.
Open business
The Group’s business segment where products are actively marketed
to new and existing customers.
Open (pensions and savings) net flows
This AIP metric measures business growth and retention in the Pensions
and Savings businesses. It reflects the movement in assets for the Pensions
and Savings business during the period. It is the difference between the
inflows (premiums) and outflows (claims) and excludes market movements.
Phoenix Group Holdings plc Annual Report and Accounts 2022322
Operating companies
Refers to the trading companies within the Phoenix Group.
Operating companies’ cash generation
Represents the net cash remitted from the operating entities to the Group,
supported by the free surplus above capital requirements in the life
companies, which is generated through margins earned on different life
and pension products and the release of capital requirements, and group
tax relief.
Operations intensity metrics
Metrics based on Scopes 1 and 2 emissions within Phoenix Group’s
occupied premises.
Origo
An electronic pensions transfer system.
OTC
Over-the-Counter financial instruments are traded directly between
two parties without a broker or exchange market.
Own funds
Under Solvency II, own funds refers to the regulatory capital available
to cover capital requirements. Basic Own Funds comprise the excess
of assets over liabilities valued in accordance with the Solvency II
principles and subordinated liabilities which qualify to be included in
Own Funds under the Solvency II rules. Eligible Own Funds are the
amount of Own Funds that are available to cover the Solvency Capital
Requirements after applying prescribed tiering limits and transferability
restrictions to Basic Own Funds.
Own Risk and Solvency Assessment (‘ORSA’)
The processes undertaken to provide a forward looking assessment of
the Group’s risk and capital profile, under normal and stress scenarios,
as a result of its proposed business strategy and Annual Operating Plan.
Paris Agreement
A legally binding international treaty on climate change. It was adopted
by 196 parties at COP 21 in Paris on 12 December 2015. Its goal is to limit
global warming to well below 2, preferably to 1.5 degrees celsius,
compared to pre-industrial levels.
Parker review and guidance
An independent review which considered how to improve the ethnic and
cultural diversity of UK boards to better reflect their employee base and
the communities they serve. The Parker guidance sets out objectives and
timescales to encourage greater diversity, and provides practical tools to
help business leaders to address the issue. This includes the objective that
each FTSE 100 board have at least one director of colour by 2021.
Partial internal model
The model used to calculate the Group Solvency Capital Requirement
pursuant to Solvency II. It aggregates outputs from the harmonised
internal model and the standard formula with no diversification
between the two.
Part VII transfer
The transfer of insurance policies under Part VII of Financial Services and
Markets Act 2000. The insurers involved can be in the same corporate
group or in different groups. Transfers require the consent of the High
Court, which will consider the views of the PRA and FCA and of an
Independent Expert.
Participating business
See with-profit fund.
Partnership for Carbon Accounting Financials (‘PCAF’)
PCAF is a global partnership of financial institutions that work together
to develop and implement a harmonised approach to assess and
disclose the greenhouse gas (‘GHG’) emissions associated with their loans
and investments.
Persistency
This LTIP performance metric is set for the open business only and based
on a principle of protecting value, with a target based on the best estimate
assumption of persistency at the start of the performance period. This is
measured on a product by product basis with the average value of each
product then used to create a single weighted average persistency rate.
Further details of persistency insurance risk are covered in section F4 of
the consolidated financial statements.
Physical risks
Risks related to the physical impacts of climate change which can either
be acute or chronic. Acute physical risks refer to those that are event-
driven, including increased severity of extreme weather events, such as
cyclones, hurricanes or floods. Chronic physical risks refer to longer-term
shifts in climate patterns (e.g., sustained higher temperatures) that may
cause sea level rise or chronic heatwaves.
PRA
Prudential Regulation Authority – The body responsible for the prudential
regulation and supervision of banks, building societies, credit unions,
insurers and major investment firms. The PRA and FCA use a
Memorandum of Understanding to co-ordinate and carry out their
respective responsibilities.
Protection policy
A policy which provides benefits payable on certain events. The benefits
may be a single lump sum or a series of payments and may be payable on
death, serious illness or sickness.
ReAssure
The companies comprising ReAssure Limited, ReAssure Life Limited and
Ark Life Assurance Company DAC businesses which were acquired on
22 July 2020. Ark Life Assurance Company DAC was subsequently
disposed of by the Group on 1 November 2021.
Representative Concentration Pathway (‘RCP’)
A GHG concentration trajectory adopted by the IPCC. The pathways
(RCP2.6, RCP4.5, RCP6, and RCP8.5) describe different climate futures,
all of which are considered possible depending on the volume of GHGs
emitted in the years to come. RCP 2.6 is a very stringent pathway.
According to the IPCC, RCP 2.6 requires that carbon dioxide emissions
start declining by 2020 and go to zero by 2100. In RCP 8.5, emissions
continue to rise throughout the 21st century. It is generally taken as the
basis for worst-case climate change scenario.
Return on shareholder value
Shareholder value reflects the Group’s Eligible Own Funds adjusted to
remove amounts pertaining to unsupported with-profit funds, Group
pension schemes, the value of Shareholder debt and adjusted to remove
the short term impact economic movements in the performance period.
The return on shareholder value reflects excess return above risk free.
This is a LTIP performance metric for the 2020, 2021 and 2022 grants.
Science Based Targets
An emissions reduction target is defined as ‘science-based’ if it is
developed in line with the scale of reductions required to keep global
warming below 2C from pre-industrial levels, under recommendations
by the SBT Institute (‘SBTi’).
Phoenix Group Holdings plc Annual Report and Accounts 2022 323
Additional Information
Glossary continued
Scope 1, 2 and 3 emissions
Greenhouse gas emissions are categorised into three groups or ‘Scopes’.
Scope 1 covers direct emissions e.g. use of natural gas, company car
vehicle emissions. Scope 2 covers indirect emissions from the generation
of purchased electricity, steam and heating. Scope 3 includes 15 other
categories of indirect emissions in a company’s value chain e.g. business
travel and investments.
Shareholder capital coverage ratio
Represents total Eligible Own Funds divided by the Solvency Capital
Requirements (‘SCR’), adjusted to a shareholder view through the
exclusion of amounts relating to those ring-fenced with-profit funds
and Group pension schemes whose Own Funds exceed their SCR.
Shareholder value
The Group’s Eligible Own Funds adjusted to remove amounts pertaining
to unsupported with-profit funds, Group pension schemes, the value of
shareholder debt and adjusted to remove the short term impact economic
movements in the performance period. This is an AIP performance metric
for the 2022 period.
Solvency II surplus
The excess of Eligible Own Funds over the Solvency Capital Requirement.
Solvency Capital Requirements (’SCR’)
SCR relates to the risks and obligations to which the Group is exposed,
and is calibrated so that the likelihood of a loss exceeding the SCR is less
than 0.5% over one year. This ensures that capital is sufficient to withstand
a broadly ’1-in-200-year event’.
SONIA
Sterling overnight interest average – The average of the interest rates that
banks pay to borrow sterling overnight from other financial institutions
and other institutional investors, administered by the Bank of England.
Standard formula
A set of calculations prescribed by the Solvency II regulations for
generating the SCR.
Standard Life Assurance businesses
Standard Life Assurance Limited, Standard Life Pensions Fund Limited,
Standard Life International Designated Activity Company, Vebnet
(Holdings) Limited, Vebnet Limited, Standard Life Lifetime Mortgages
Limited, Standard Life Assets and Employee Services Limited and
Standard Life Investment Funds Limited (together known as the Standard
Life Assurance businesses) acquired by the Group on 31 August 2018.
Stewardship Code
The Financial Reporting Council (‘FRC’) sets the UK Stewardship Code
which sets high stewardship standards for those investing money on
behalf of UK savers and pensioners, and those that support them.
Streamlined Energy and Carbon Reporting (‘SECR’)
Reporting of emissions sources required under the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018.
Task Force on Climate-related financial disclosures (‘TCFD’)
The TCFD was created in 2015 by the Financial Stability Board (‘FSB’) to
develop consistent climate-related financial risk disclosures for use by
companies in providing information to stakeholders.
Task Force on Nature-related financial disclosures (‘TNFD’)
The TNFD is a new global market-led initiative which aims to provide
financial institution and corporates with a complete picture of their
environmental risks and opportunities. The TNFD will deliver a framework
for organisations to report and act on evolving nature-related risks,
building on the success of the TCFD.
TCS BaNCS
TCS BaNCS is a state of the art Life and Pensions administration platform
operated by Tata Consultancy Services (‘TCS’).
Tier 1 Notes
The £500 million fixed rate reset perpetual restricted Tier 1 write down
Notes issued by Phoenix.
Transitional Measures on Technical Provisions (‘TMTP’)
The TMTP is an allowance, subject to the PRA’s approval, to apply a
transitional deduction to technical provisions. The transitional deduction
corresponds to the difference between net technical provisions
calculated in accordance with Solvency II principles and net technical
provisions calculated in accordance with the previous regime and is
expected to decrease linearly over a period of 16 years starting from
1 January 2016 to 1 January 2032. TMTP is subject to a mandatory
recalculation every two years or on the occurrence of certain
defined events.
Transition risks
Climate-related risks associated with the transition to a low-carbon
economy. They include risks related to policy and legal actions,
market and economic responses, technology changes and
reputational considerations.
The Pensions Regulator (‘TPR’)
A non-departmental public body which regulates work-based pension
schemes in the United Kingdom.
Total Shareholder return (‘TSR’)
TSR is the total return, over a fixed period, to an investor in terms of share
price growth and dividends (assuming that dividends paid are re-invested,
on the ex-dividend date, in acquiring further shares).
2018 UK Corporate Governance Code
Standards of good corporate governance practice in the UK relating to
issues such as board composition and development, remuneration,
accountability, audit and relations with shareholders published by the
Financial Reporting Council.
UK Endorsement Board (‘UKEB’)
The UKEB was established following the UK’s exit from the EU. The board’s
purpose is to endorse and adopt new and amended international
accounting standards issued by the IASB for use by UK Companies and
has responsibility for influencing the development of those standards.
Unit-linked policy
A policy where the benefits are determined by the investment
performance of the underlying assets in the unit-linked fund.
Windfall gains
A windfall gain may arise if the Company has experienced a significant
fall in its share price at the point of granting LTIP awards so the recipient
receives significantly more shares than in previous years, and this is
followed by a subsequent increase in share price at the point of vesting.
With-profit fund
A fund where policyholders are entitled to a share of the profits of the
fund. Normally, policyholders receive their share of the profits through
bonuses. Also known as a participating fund as policyholders have a
participating interest in the with-profit fund and any declared bonuses.
Generally, policyholder and shareholder participations in the with-profit
fund in the UK are split 90:10.
Women in Finance Charter
A charter setting out a commitment by HM Treasury and signatory firms to
work together to build a more balanced and fair industry. The Charter
reflects the government’s aspiration to see gender balance at all levels
across financial services firms.
Phoenix Group Holdings plc Annual Report and Accounts 2022324
Online resources
Online resources
Reducing our environmental impact
In line with our Corporate Responsibility programme, and as part of our desire to reduce our environmental impact, you can view
key information on our website.
Go online
www.thephoenixgroup.com
Investor relations
Our Investor Relations section includes information such as our most recent news and announcements, results presentations, annual
and interim reports, share-price performance, AGM and EGM information, UK Regulatory Returns and contact information.
Go online
www.thephoenixgroup.com/investor-relations
News and updates
To stay up-to-date with Phoenix Group news and other changes to our site’s content, you can sign up for e-mail alerts, which will notify
you when content is added.
Go online
www.thephoenixgroup.com/site-services/e-mail-alerts.aspx
Phoenix Group Holdings plc Annual Report and Accounts 2022 325
Additional Information
Forward-looking statements
The 2022 Annual Report and Accounts contains, and the Group may make other statements (verbal or otherwise) containing, forward-
looking statements and other financial and/or statistical data about the Group’s current plans, goals and expectations relating to future
financial condition, performance, results, strategy and/or objectives.
Statements containing the words: ‘believes’, ‘intends’, ‘will’, ’may’, ‘should’, ‘expects’, ‘plans’, ‘aims’, ‘seeks’, ‘targets’, ’continues’ and
‘anticipates’ or other words of similar meaning are forward looking. Such forward-looking statements and other financial and/or
statistical data involve risk and uncertainty because they relate to future events and circumstances that are beyond the Group’s
control. For example, certain insurance risk disclosures are dependent on the Group’s choices about assumptions and models, which
by their nature are estimates.
As such, actual future gains and losses could differ materially from those that the Group has estimated. Other factors which could
cause actual results to differ materially from those estimated by forward-looking statements include, but are not limited to:
• domestic and global economic, political, social, environmental and business conditions; asset prices;
• market-related risks such as fluctuations in investment yields, interest rates and exchange rates, the potential for a sustained low-
interest rate or high-interest rate environment, and the performance of financial or credit markets generally;
• the policies and actions of governmental and/or regulatory authorities, including, for example, initiatives related to the financial crisis,
the COVID-19 pandemic, climate change and the effect of the UK’s version of the ‘Solvency II’ regulations on the Group’s capital
maintenance requirements;
• the medium and long-term political, legal, social and economic effects of the COVID-19 pandemic and the UK’s exit from the
European Union;
• the direct and indirect consequences for European and global macroeconomic conditions of the Russia-Ukraine War and related or
other geopolitical conflicts;
• the impact of changing inflation rates (including high inflation) and/or deflation;
• information technology or data security breaches (including the Group being subject to cyberattacks);
• the development of standards and interpretations including evolving practices in ESG and climate reporting with regard to the
interpretation and application of accounting;
• the limitation of climate scenario analysis and the models that analyse them;
• lack of transparency and comparability of climate-related forward-looking methodologies;
• climate change and a transition to a low-carbon economy (including the risk that the Group may not achieve its targets);
• market competition;
• changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends,
gender pricing and lapse rates);
• the timing, impact and other uncertainties of proposed or future acquisitions, disposals or combinations within relevant industries;
• risks associated with arrangements with third parties;
• inability of reinsurers to meet obligations or unavailability of reinsurance coverage; and
• the impact of changes in capital and implementing changes in IFRS 17 or any other regulatory, solvency and/or accounting standards,
and tax and other legislation and regulations in the jurisdictions in which members of the Group operate.
As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and
expectations set out in the forward-looking statements and other financial and/or statistical data within the 2022 Annual Report
and Accounts. No representation is made that any of these statements will come to pass or that any future results will be achieved.
As a result, you are cautioned not to place undue reliance on such forward-looking statements contained in this 2022 Annual Report
and Accounts.
The Group undertakes no obligation to update any of the forward-looking statements or data contained within the 2022 Annual Report
and Accounts or any other forward-looking statements or data it may make or publish.
The 2022 Annual Report and Accounts has been prepared for the members of the Company and no one else. The Company, its
Directors or agents do not accept or assume responsibility to any other person in connection with this document and any such
responsibility or liability is expressly disclaimed. Nothing in the 2022 Annual Report and Accounts is or should be construed as
a profit forecast or estimate.
Caution about climate and ESG related disclosures
Climate and ESG disclosures in the 2022 Annual Report and Accounts use a greater number and level of judgements, assumptions and
estimates, including with respect to the classification of climate-related activities, than the Group’s reporting of historical financial
information. These judgements, assumptions and estimates are highly likely to change over time, and, when coupled with the longer time
frames used in these disclosures, make any assessment of materiality inherently uncertain. In addition, the Group’s climate risk analysis
and net zero transition planning will continue to evolve and the data underlying the Group’s analysis and strategy remain subject to
change over time. As a result, the Group expects that certain climate and ESG disclosures made in the 2022 Annual Report and
Accounts are likely to be amended, updated, recalculated or restated in the future.
Forward-looking statements
Phoenix Group Holdings plc Annual Report and Accounts 2022326
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Registered address
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