Part of Phoenix Group Part of Phoenix Group Part of Phoenix Group
Helping people
secure a life
of possibilities
Annual Report and Accounts 2023
Phoenix Group Holdings plc
Annual Report and Accounts 2023 Phoenix Group Holdings plc
Climate Report
ESG Data Appendix
Sustainability Report
Online Summary
We’re the UK’s largest long-term savings
and retirement business. Our purpose
is helping people secure a life of
possibilities, making better longer
lives a reality for all of us.
Who we are
We’re here to create long-term value for
all our stakeholders, including our customers,
colleagues, investors and wider society.
We’re achieving this in many ways including
helping people engage with their financial
futures and using our voice to advocate on
their behalf. We’re focused on managing the risks
and maximising the opportunities presented by
the transition to net zero by 2050 to deliver good
outcomes for our customers and shareholders.
Our reporting
You can find out more about our activities,
financial performance, sustainability strategy
and our progress towards becoming a net
zero business by 2050 by visiting our website:
www.thephoenixgroup.com
Look out for these icons in the annual report:
For further reading in
the Annual Report
For more information read
our supplementary reports
Reference to further
reading online
See How we deliver our purpose-led business on pages 4 to 9 to find out more
1Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
In this report
2 Strategic report
2 At a glance
4 How we deliver our purpose-led business
10 Chair’s statement
12 Group Chief Executive Officer’s report
16 Investment case
18 Our growth drivers
20 Our business model
24 Our strategic priorities and KPIs
30 Business review
40 Non-financial and sustainability
information (‘NFSI’) statement
42 Streamlined Energy and Carbon
Reporting (‘SECR’) statement
44 Task Force on Climate-Related
Financial Disclosures (‘TCFD’)
summary report
46 Risk management
58 Viability statement
60 Corporate governance
60 Chair of the Group Board’s introduction
to governance
64 Board leadership and Company purpose
69 Division of responsibilities
74 Stakeholder engagement
78 Composition, succession and evaluation
92 Audit, risk and internal controls
104 Sustainability governance
108 Workforce engagement
111 Directors’ Remuneration report
141 Directors’ report
147 Statement of Directors’ responsibilities
149 Financials
316 Additional information
All amounts throughout the
report marked with
REM are KPIs
linked to Executive remuneration.
See Directors’ Remuneration report
on pages 111 to 140. All amounts
throughout the report marked with
APM are alternative performance
measures. Read more on page 312.
Total cash generation
£2,024m
(2022: £1,504m) REM APM
Group Solvency II surplus
(estimated)
£3.9bn
(2022: £4.4bn)
Group Solvency II shareholder
capital coverage ratio (estimated)
176%
(2022: 189%) APM
Incremental new business
long-term cash generation
£1,514m
(2022: £1,233m) REM APM
Total ordinary dividend per share
52.65p
(2022: 50.8p)
IFRS adjusted operating profit
£617m
(2022: £544m
1,2
) APM
IFRS loss after tax
£(88)m
(2022: £(2,657
1,2
)m)
Solvency II leverage ratio
36%
(2022: 34%) APM
New business net fund flows
£6.7bn
(2022: £3.9bn) APM
2023 Performance
Key performance
indicators
Other performance
indicators
The Strategic report was approved by the Board of Directors
on 21 March 2024 and signed on its behalf by
Andy Briggs
Group Chief Executive Officer
1 2022 restated comparative to reflect adoption of IFRS 17.
2 Incorporates changes to the Group’s methodology for determining
IFRS adjusted operating profit since HY 2023.
2 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Our business
Our vision is to be the UK’s leading retirement savings
and income business. We offer a broad range of
savings and retirement income products to support
people across all stages of the savings life cycle from
18 to 80+, through our family of brands.
At a glance
c.£283bn
total assets under administration APM
c.12m
customers
c.7,800
colleagues as at 31 December 2023
c.£530m
annual dividend paid to shareholders
FTSE 100
and FTSE All World
Standard Life has been trusted
to look after people’s life savings
and retirement needs for nearly
200 years.
For more information visit
thephoenixgroup.com/about-us/our-brands/
Phoenix Life is a closed book
consolidator that has grown
from a series of acquisitions
and policy transfers throughout
their 200-year history.
ReAssure is a major life
and pensions consolidator
in the UK market.
SunLife’s straightforward
and affordable financial
products and services
are designed to meet the
needs of the over 50s.
Our family of brands
3
Strategic report
Phoenix Group Holdings plc Annual Report and Accounts 2023
We offer a range of customer solutions across our businesses
Business areas
Savings for retirement Retirement income
Products and solutions that secure an income
for customers in their retirement:
• Income drawdown and individual annuities.
• Defined benefit pension income.
• Home equity release.
Products and solutions that support customers
as they save for and transition to retirement:
• Defined contribution workplace pensions.
• Retail savings for retirement.
• Pension consolidation.
• Legacy pensions and savings products.
We help customers journey ‘to and
through’ retirement. Our Workplace
business supports people who save
through their Defined contribution
workplace pension scheme, and our
Retail business supports individual
customers to save for, transition to,
and secure an income in retirement.
Financial metrics shown refer to the assets under administration by segment type APM.
Pensions and Savingsc.£175bn
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.
Retirement Solutionsc.£40bn
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.
Europe and Otherc.£29bn
We are a market leader in the safe
and efficient management of legacy
pensions and savings policies to deliver
better customer outcomes, with a range
of legacy With-Profits savings products
that are closed to new business that we
manage for our customers.
With-Profits c.£39bn
See Our business model on pages 20 to 23 for more information
4 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Enhance
Transforming our operating model
and culture.
See pages 28 to 29
Building a
sustainable business
We are committed to embedding sustainability
and best practice governance to maintain high
standards of oversight, integrity and ethics.
Optimise
Optimise our scale in-force business.
See pages 26 to 27
Grow
Meeting more of our existing customers’
needs and acquiring new customers.
See pages 24 to 25
Our strategic priorities Our sustainability strategy
How we deliver our
purpose-led business
People
We want to help people live better longer lives.
This means tackling the pension savings gap
and supporting people to have better financial
futures through promoting financial wellness
and the role of good work and skills.
Our purpose
Helping people secure a life of possibilities
Our vision
To be the UK’s leading retirement savings and income business.
Planet
We want to help shape a better future.
This means delivering better outcomes for
our customers, playing a key role in delivering
a net zero economy by 2050 and reducing
our impact and dependency on nature.
For more information view our reports
Sustainability Report
Climate Report
5Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Better and
long-term
value for all
Our purpose drives everything
we do. It reflects our aim to make
better longer lives a reality for us all.
6 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Helping people
secure a life of
possibilities
With 9 in 10 people saying
income certainty in retirement
is important to them
1
, an annuity
is likely to be an ideal solution
for many.
Claire Altman, MD Individual Retirement Solutions
Providing certainty
in retirement
We are delivering new products and solutions
to provide more support to new and existing
customers as they journey to and through
retirement. In September, we launched a new
individual annuity product, the Standard Life
Pension Annuity, that pays customers a
guaranteed income for the rest of their life,
bought with some or all of the proceeds from
their pension plan. Available on the open market
to both new and existing customers, the launch
of this product has been welcomed by both
advisers and customers and we have seen
a strong pipeline of applications building.
1 Retirement Voice | Standard Life.
As a purpose-led business we seek to
address the needs of a broad range of
stakeholders. Positive engagement and
successful outcomes are key to ensuring
a strong and sustainable business.
7Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Supporting financial wellbeing
We want to help our customers to be empowered to take
charge of their finances, so that is why we’ve rolled out
Our Money Mindset solution to over 1.5 million Standard
Life Workplace pension scheme members. Money Mindset
is a digital platform that allows customers to monitor their
financial position. This better understanding helps put
them in a position to improve their financial wellbeing,
and the app provides the information they need to help
plan for the future.
Bridging the digital divide
We believe digital inclusion is a collective
responsibility and it’s vital we work in partnership
across the public, private and third sectors to
achieve it. We have successfully launched Digital
Skills Hubs across our customer brands, which
include online training videos and how-to guides.
This enables our customers to access and learn online
in their own time and at their own pace. We’re also
making sure our colleagues are fully informed about
digital inclusion, so that they can support our customers
better, and ensure we design and aim to deliver an
inclusive service for all our customers.
1 Standard Life partners with Moneyhub press release.
Through our Let’s Start Talking
campaign we reached over
4 million people, which inspired
conversations about how we live,
work, learn and save for the longer
lives we lead.
Ben Rhodes, Brand Director
75%
1
of people don’t know
how much they have
in pension savings
Encouraging a
national conversation
At Phoenix Group we recognise that we all need to
think differently about our futures, and the futures
of those we care about, if we are to lead better longer
lives. Research from our think tank, Phoenix Insights,
continues to highlight the scale and severity of under
saving for retirement in the UK. To encourage a national
conversation, we launched our ‘Let’s Start Talking’
campaign in 2023. It is designed to get people talking
about the need to think about how we live, work,
and save for the longer lives we are now leading.
The campaign features real people sharing their stories
and perspectives on preparing for the retirement they
want, and emphasises the need to take steps now to
make better longer lives a reality for all of us.
16–25
9%
26–35
28%
36–45
29%
46–55
25%
56–65+
9%
Age of Phoenix Group’s workforce
8 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Together we’re building a
purpose-led business, where
our people are proud of the
difference they make to our
customers and communities.
Sara Thompson, Group HR Director
Empowering
and inspiring
colleagues
Midlife MOT
Wealth, work and wellbeing
As average life expectancy continues to rise, many of
us will live and work for longer. Thedecisions we make
now will affect us for the rest ofour lives, so there’s no
better time to start looking after our future. Launched
in 2023, our Midlife MOT assessment helps colleagues
take stock: to see where they’re going, where they
want to be and how to get there. It’s designed to help
colleagues, regardless of age, and focuses on the key
areas of wealth, work andwellbeing.
9Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Delivering
attractive returns
for investors
For details on our investment
case see pages 16 to 17
Executing against our strategy
is driving growth which
underpins our progressive and
sustainable ordinary dividend
policy. This delivers a reliable
and attractive income for
our shareholders.
Rakesh Thakrar, Group Chief Financial Officer
Investing
in a better
future
As the UK’s largest long-term savings and retirement
business, we recognise our responsibility to tackle climate
change. By taking the right actions to decarbonise,
we believe that we can manage the risks and maximise
the opportunities of climate change on behalf of our
12 million customers. And with £283 billion of assets
under administration, our scale means we can make
a real difference. This year we published our Net Zero
Transition Plan, which outlined the tangible steps we
will take to become a net zero business by 2050.
We believe that better career support, at all ages, allows
people to build and develop long and fulfilling careers.
Phoenix Insights is leading the way with a new campaign,
‘Careers can change’, to inspire people to see that their
careers can change successfully, by small incremental shifts
or total pivots. At the heart of this campaign is a new coalition
of experts and partners working with us. Together, we will
raise awareness of good quality, accessible career support
and make sure people are connected to it.
Inspiring career
changes and
offering support
For more information view our
Net Zero Transition Plan
10
Strategic report
Phoenix Group Holdings plc Annual Report and Accounts 2023
Sabbatical reflections
1 December 2023 marked my return as Chair
of Phoenix Group, following a 14-month
sabbatical where I fulfilled the role of Lord
Mayor of the City of London. I am delighted
to be back and look forward to supporting
the continued evolution of our business.
As Lord Mayor it was my great privilege
and responsibility to represent and promote
the UK financial services industry. In doing
so, my sabbatical confirmed to me that
this industry is an essential element of the
UK economy, with a critical role to play in
supporting both economic growth and the
trajectory to net zero by 2050 through
sustainable investment. The clear feedback
from my international travels is that the UK
financial services industry is perceived as
market-leading and there is great optimism
about its future.
I would like to thank Alastair Barbour who
assumed the role of Chair in my absence.
He has made an enormous contribution
to Phoenix over his ten-year tenure as a
Director, and I wish him well for the future
now that he has stepped down from
the Board.
We want to help people journey
to and through retirement while
investing in a better future for us all.
Our approach focuses on two key
areas: People and Planet. We are
looking to address the UK pensions
savings gap and manage the risk and
opportunities of climate change.
Delivering
on our purpose
Chair’s statement
11Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Delivering on our purpose
The pensions savings gap in the UK is
a growing societal problem. As the UK’s
largest long-term savings and retirement
business, we are striving to raise awareness
of this problem and advocate for the
changes needed to deliver the solutions
and help people secure a life of possibilities.
We know that people can only save for
their retirement if they have access to
good work over their longer lives. That is
why we are playing a role in promoting
good work through Phoenix Insights,
working in collaboration with others
to influence government policy.
We are committed to innovating to
develop the retirement income solutions
of the future and we are advocating for
the removal of policy barriers to enable
us to support customers as they save for,
journey to, and secure income in, retirement.
More specifically we have recommended
a framework to support an increase in
auto-enrolment contributions from 8% to
12%, and we believe that guidance and
advice should be available for everyone,
not just those who can afford to pay for it.
We can drive good outcomes for our
customers and manage the risks of climate
change by delivering on our Net Zero
Transition Plan commitments, outlined in
our plan published in May, and by helping
to unlock the barriers to allow capital
to flow at scale into productive and
sustainable investments.
I was delighted that we were a leading
signatory and vocal proponent of the
Mansion House Compact when it was
unveiled in July. This seeks to address some
of the issues around investing in unlisted
equity, and the growth of UK companies
of the future. I have every confidence the
Compact will accomplish the dual aim of
securing a brighter future for retirees and
helping to channel billions of pounds into
the UK economy.
Strong cash generation provides
opportunity to invest and realise
our vision
The team has delivered strong cash
generation in 2023 with an acceleration
in the organic growth story clearly evident,
whilst at the same time maintaining a
resilient balance sheet.
We are on a journey to deliver our vision
of becoming the UK’s leading retirement
savings and income business. The clear
strategic success in building the organic
growth business over the last three years
means we have reached a key milestone
on our journey, as we evolve the business.
The focus is now on investing to grow, optimise
and enhance the business even further.
Strategic outcomes support a new
dividend policy
I am delighted to announce that the Board is
recommending a 2.5% increase in the Group’s
2023 Final dividend to 26.65 pence per
share. This means the Group’s Total dividend
for 2023 will be 52.65 pence per share.
The Board is confident in the Group’s ability
to deliver the next phase of our strategic
journey, as we transition to our vision of
becoming the UK’s leading retirement savings
and income business. This has supported
our decision to move to a progressive and
sustainable ordinary dividend policy, which
is underpinned by the sustainable growth in
Operating Cash Generation we now expect
to deliver.
Thank you
Finally, I would like to take this opportunity to
thank the Board, our colleagues, our partners
and our wider stakeholders for their hard
work, dedication and support in delivering
another year of strong progress.
Nicholas Lyons
Chair of the Group Board
At Phoenix our purpose is our North Star and
it drives all that we do. I am delighted with the
progress we have made this year to bring about
better outcomes for all our stakeholders.
Nicholas Lyons, Chair of the Group Board
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.
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 any of the
Company’s employees;
• the need to foster the Company’s
business relationships with
suppliers, customers and others;
• the impact of the Company’s
operations on the community
and the environment;
• the desirability of maintaining the
Company’s 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 74 to 77 of
the Corporate governance report.
12 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Group Chief Executive Officer’s report
Successfully
delivering
our strategy
2023 has seen Phoenix Group
deliver significant strategic
progress and strong results,
further supporting our track
record of dividend growth.
• We are on a journey from being a closed-
book life consolidator to a purpose-led
retirement savings and income business
• Strong 2023 results delivered through
strategic execution
• We are balancing our investment to grow,
optimise and enhance our business
• Our strategy delivers sustainable,
growing Operating Cash Generation
that more than covers our recurring uses
and a growing dividend
• Phoenix will now operate a progressive
and sustainable ordinary dividend policy
£2.0bn
2023 Total cash generation
(2022: £1.5bn)
REM APM
+2.5%
2023 Final dividend increase
13Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Delivering strong results
2023 has been another year of clear
strategic delivery for Phoenix.
We’re a highly cash generative business,
as demonstrated by the delivery of £2.0 billion
of total cash generation in 2023 (2022:
£1.5 billion), exceeding our upgraded target
of c.£1.8 billion target for the year. This was
supported by the completion of one of the
largest ever UK insurance Part VII transfers.
Executing against our strategic priorities
enabled us to deliver another record year
of new business long-term cash generation
(‘NB LTCG’) of £1.5 billion (2022: £1.2 billion).
This was supported by a c.70% increase
in new business net fund flows in 2023 to
£6.7 billion (2022: £3.9 billion). Performance in
our Pensions and Savings business included
the transfer of the Siemens workplace
scheme, one of the largest workplace
scheme transfers to have been tendered
in the UK market in recent years. This clearly
demonstrates the success we have had in
re-establishing the Standard Life brand
as a major workplace player. Growth in
our Retirement Solutions business was also
strong, driven by our Bulk Purchase Annuities
(‘BPA’) business, which saw the Group write
£6.2 billion of premiums during the year
(FY22: £4.8 billion) at a reduced capital strain.
From a capital perspective, we saw
a reduction in our Solvency II surplus
to £3.9 billion (2022: £4.4 billion) and
our Shareholder Capital Coverage
Ratio (‘SCCR’) to 176% (2022: 189%)
after allocating capital into growth
opportunities. However, we continue to
operate towards the upper-end of our
140–180% SCCR operating range.
In terms of our earnings, our IFRS adjusted
operating profit increased by 13% to £617
million (2022: £544 million) supported
by growth in our Pensions and Savings
business. However, we reported an IFRS
loss after tax of £(88) million, reflecting
our investment into growth opportunities,
as well as integration and transformation
expenses in the period. However, this
was significantly lower than the 2022 loss
of £(2,657) million, benefiting from less
accounting volatility from market movements.
As a result of this strong strategic and
financial performance, the Board has
recommended a 2.5% increase in the
Final dividend of 26.65 pence per share,
bringing the Total 2023 dividend to
52.65 pence per share, extending our
strong track record of dividend growth.
A strategy supported by existing large
and growing markets
Phoenix Group is the UK’s largest long-term
savings and retirement business, managing
c.£283 billion of assets for c.12 million
customers. Our purpose of ‘helping people
secure a life of possibilities’ is embedded in
everything that we do and informs our single
strategic focus, which is to help customers
journey to and through retirement.
We have a diversified and balanced
business mix, across the long-term savings
and retirement market, which can be largely
categorised as ‘Pensions and Savings’ and
‘Retirement Solutions’. Around two-thirds
of our business is Pensions and Savings,
which principally consists of capital-light
fee-based products.
I am delighted that 2023 was another year of strong
new business growth for Phoenix Group. Having now
built the component parts of a sustainably growing
business, the next stage on our journey will see us
grow, optimise and enhance our business so we can
meet more of our customers’ retirement needs and
deliver more value for our stakeholders.
Andy Briggs, Group Chief Executive Officer
Investing in 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 our
Retirement Solutions, Pensions and
Savings and European businesses.
The Standard Life brand has a deep
history and heritage, and is well known
and trusted by 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. As part
of our drive to deliver our growth
targets, we are committed to investing
in the brand through initiatives like our
Race for Life partnership and recent
advertising campaigns.
2020: closed-book life consolidator
Run-off
Cash generation
Proven the wedge Sustainable cash generation
Integrate and Build
Phoenix
Life
Standard
Life
ReAssure
Heritage
business
Open
business
2021–2023
2024–2026
Grow, Optimise and Enhance
2023: today 2026: purpose-led retirement savings
and income business
Pensions
and Savings
Retirement
Solutions
HeritageHeritage
Open
Growing Operating
Cash Generation
Innovative retirement income solutions
14 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Group Chief Executive Officer’s report continued
The UK long-term savings and retirement
market is already large, with c.£3 trillion
of total stock, but it is also growing fast,
with annual flows of c.£150–200 billion.
The breadth of our product portfolio
means we are able to take advantage of
a number of growing market opportunities.
See pages 18 to 19 for ‘Our growth drivers’.
Embarking on the next stage of our journey
Back in 2020, we had a single core
capability, which was executing M&A
and integrating those businesses.
However, over the past three years
we have built a number of sustainably
growing organic businesses too.
This has seen us acquire and invest into the
trusted Standard Life brand, and re-establish
it amongst customers, corporates and advisers.
We have used that brand to help turbo-
charge our growth as we built a competitive
and capital efficient annuities business,
followed by our now large and rapidly
growing capital-light Workplace business.
In addition, we have built a highly-skilled
in-house asset management capability,
enabling us to efficiently manage our
third-party asset managers, and to create
long-term value through optimising our
c.£38 billion shareholder credit portfolio.
We have an ongoing programme of initiatives
to review our products and services and
over the past seven years, we have invested
significantly in focusing on good customer
treatments and outcomes across our
businesses. During that time, we have set
aside over £200m on reducing charges and
we are making planned investment to migrate
customers to more modern technology.
We are actively working to ensure we are well
positioned to comply fully with the upcoming
Consumer Duty requirements which come
into effect on 31 July 2024, for which we
set aside £70 million of Solvency II capital.
Our successful execution has enabled
us to prove “the wedge” hypothesis,
with the new business cash from our
Open businesses more than offsetting
the Heritage run-off. That means we are
today a sustainably growing business,
and no longer reliant on M&A.
The next phase of our strategy is therefore
about building on the strong foundations
we have developed, and completing
our full-service customer offering.
176%
Shareholder Capital
Coverage Ratio
(2022: 189%)
APM
£6.7bn
New business net fund flows
(2022: £3.9bn)
APM
£1.5bn
Incremental new business
long-term cash generation
(2022: £1.2bn)
REM APM
Phoenix Group is transitioning from a closed-book life consolidator
to a purpose-led retirement savings and income business
15Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
We will do this by building an innovative
range of retirement income solutions and
a compelling set of retail propositions,
supported by a digital customer interface
with personalised data, guidance and advice.
We are also now at the stage where we
can further simplify our organisational
structure, through integrating our Heritage
and Open businesses onto a single
Group-wide operating model. This will
enable us to grow faster, by offering all
of our customers, whether in an Open or
Heritage product, a seamless journey across
their savings life cycle. It will also further
enhance our existing cost efficiency.
The successful execution of our strategy
will enable us to win market share and grow
our business sustainably over time as we
journey towards our vision of becoming
the UK’s leading retirement savings and
income business.
Balancing investment across our
strategic priorities
To support us on our journey we have a
clear set of strategic priorities to 1) Grow
2) Optimise and 3) Enhance, which are
informed by – and in support – of our
ESG themes of Planet and People and
are underpinned by robust investment
programmes within our new capital
allocation framework. See pages 24 to 29
for more detail on our strategic priorities.
Firstly, we will Grow through building an
innovative range of retirement income
solutions, and a compelling set of Retail
propositions, supported by a digital customer
interface, with personalised data, guidance
and advice. We will also further strengthen
our Workplace proposition and optimise
our annuities business. This will require
c.£100 million of investment into our growth
propositions, alongside c.£200 million of
capital per annum into annuities, the outcome
of which is to support mid-single digit growth
in Operating Cash Generation over the
long term.
Our second priority is to Optimise. As part
of this we plan to continue our approach
of repaying M&A-related debt with surplus
cash. We expect to repay at least £500 million
of debt by the end of 2026, on top of the
c.£800 million we have repaid since 2020.
This will support us in getting to a c.30%
Solvency II leverage ratio by the end of 2026,
which we believe is an appropriate steady-
state level for our business, absent M&A.
We will also invest c.£100 million to enhance
our asset and liability optimisation capabilities.
This, alongside strong business growth, will
support us in delivering increased recurring
management actions of c.£400 million by 2026.
Our Enhance priority is designed to
support us in transforming our operating
model and culture, to create a leading,
cost efficient and modern organisation.
We continue to invest to complete our
remaining customer migrations onto TCS
Diligenta. In addition, we intend to invest to
improve the support we give our customers
throughout their lives and to drive scale cost
efficiencies by integrating our business
onto a single Group-wide operating model.
Together, these migration, transformation
and cost efficiency programmes will
require c.£500 million of investment.
Our focus on driving cost efficiency will
enable us to deliver c.£250 million of annual
cost savings by the end of 2026, which will
enhance all of our key reporting metrics.
We also continue to strive to make Phoenix
Group ‘the best place any of us have ever
worked’; through providing a great colleague
experience. We passionately believe that by
being diverse and inclusive we’ll be a better
organisation, we’ll make better decisions,
and we’ll do a better job of representing
our customers and communities.
Our new simplified, diverse and inclusive
organisational structure will better empower
our colleagues to make the right decisions
for our customers.
Demonstrating the long-term
sustainability of our business
Our strategy will support the delivery
of sustainable, growing cash generation,
a resilient capital position and
improved earnings.
As part of our evolved financial
framework we are introducing Operating
Cash Generation (‘OCG’) as a new
metric, to demonstrate the long-term
sustainability of our business.
OCG is the sustainable level of surplus
generation in our Life Companies, each and
every year, that is also then remitted as cash
to our Group Holding Company. See page
33 in our Business Review for more detail.
Executing against our strategic priorities
will help us to grow OCG by c.25% over
the next three years, from £1.1bn in 2023
to £1.4bn in 2026. After this time, we expect
it to grow at a sustainable, mid-single digit
growth rate over the long term.
Importantly, this OCG more than covers
our recurring uses, and a growing
dividend. Which generates excess
cash that can support additional
investment back into the business and/
or additional shareholder returns.
M&A can add further scale to our business
Our existing scale and the success of our
organic growth strategy mean that we
are no longer reliant on M&A to grow our
business and dividend, in the way we were
when I joined.
We continue to believe that M&A can
generate significant shareholder value,
as demonstrated by our strong track
record, and we see it as a potential lever
to add further scale to our business.
However, we now have a range of organic
growth opportunities available, in which to
deploy our excess cash at very attractive
returns, and so the bar for acquisitions is
now higher than it has ever been.
Outlook
The economic backdrop in the UK
means our societal purpose of helping
people secure a life of possibilities
has never been more important.
As we continue to strive to meet the needs
of our customers, colleagues and other key
stakeholders, this will support us in achieving
our vision of becoming the UK’s leading
retirement savings and income business.
We are investing to grow, optimise and
enhance our business to deliver this vision,
which will enable us to win market share and
grow our business sustainably over time.
As a result, the Board believes it is
now appropriate for us to move to a
progressive and sustainable ordinary
dividend policy, which is underpinned
by the sustainable, growing OCG we
expect to deliver over the long term.
We see this as a pivotal step in the
evolution of Phoenix Group’s investment
case, and it is a reflection of the Board’s
confidence in our future strategy.
Thank you
The fantastic progress Phoenix Group
has made this year could not have
been achieved without our exceptional
people. I would therefore like to thank my
colleagues throughout the Group for their
continued contribution and dedication.
I look forward to our team delivering another
year of significant progress in 2024.
Andy Briggs
Group Chief Executive Officer
16 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Investment case
How we generate
shareholder value
Enabling our financial framework
and delivering a clear set of financial
outcomes for our shareholders
Our strategic priorities
will strengthen our
competitive advantages
Customer access
With c.12 million customers, we have an unrivalled level of customer
access. This gives us deep customer insights that underpin our
developing propositions, enabling us to better meet their evolving
needs on their journey to and through retirement.
Capital efficiency
As a genuinely diversified long-term savings and retirement
business, we get greater diversification from our breadth of
products. Our capital position is also highly resilient, through our
core capabilities in risk management, and capital optimisation.
Cost efficiency
We have a significant cost efficiency advantage, which is enabled
through our customer administration and IT partnership with TCS.
We are looking to further improve our cost efficiency through the next
stage of our journey as we roll out our cost efficiency programme.
Cash
Growing Operating Cash Generation
that more than covers our recurring
uses and progressive dividend
Capital
Resilient balance sheet that supports
investment to grow, optimise and
enhance our business
Earnings
Growing IFRS adjusted operating profit
For more information see our
Strategic priorities on pages 24 to 29
For more information see the
Business review on pages 30 to 39
Grow
Optimise
Enhance
2023 2026
Recurring
uses
Dividend
£1.1bn
£1.4bn
Excess
cash
+c.25%
Mid-single digit
percentage growth over
the long term
2023 2026
target
£617m
£900m
+c.50%
17Phoenix Group Holdings plc Annual Report and Accounts 2023
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Phoenix Group’s dividend policy
Supporting our new progressive
dividend policy
IFRS adjusted operating profit
Operating Cash Generation
140–180%
Shareholder Capital Coverage
Ratio operating range
26.65p
2023 Final dividend per share
52.65p
2023 Total dividend per share
+2.5%
Increase in 2023 Final dividend
c.4%
13-year CAGR
c.30%
1
Solvency II leverage ratio target
by the end of 2026
1 Assuming economic conditions in line with 31 December 2023.
The Group operates a progressive and sustainable
ordinary dividend policy
The move to our new dividend
policy is supported by our strategy
to deliver sustainable, growing
Operating Cash Generation over the
long term, which more than covers
our uses and generates excess cash.
18 Phoenix Group Holdings plc Annual Report and Accounts 2023
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Our growth drivers
There is a huge societal need for what we do, as only c.10%
of individuals take advice on their journey to and through retirement,
and only 1-in-7 defined contribution (‘DC’) pension savers are on
track for a retirement income that maintains their current living
standards. Significant growth opportunities are available through
the provision of retirement income and savings solutions.
Workplace
The Workplace pension scheme market is growing
rapidly, driven by auto-enrolment, an ageing population,
the shift to Master Trust schemes, and the move from
defined benefit pension schemes to defined contribution
pension schemes.
Salary inflation and
full employment
Lower market flows
Retail
People are increasingly seeking advice and guidance
on their journey to and through retirement, as responsibility
for retirement planning has now shifted towards individuals
away from corporates.
c.£40–50bn
of annual flows
c.£80–100bn
of annual flows
Higher salary inflation and high levels
of employment have accelerated growth
from our existing Workplace pension
schemes. Despite cost-of-living pressures
the vast majority of consumers are not
opting out of making contributions into
their workplace schemes.
The Retail market has slowed down in
this economic environment, with less
switching of flows between providers.
For Phoenix Group this is helpful,
given our scale in-force book, as it
helps us retain customers and extends
their savings life cycle with us.
We have clear structural growth opportunities in the market…
Organic growth
…which are accelerated by the current economic environment
19Phoenix Group Holdings plc Annual Report and Accounts 2023
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Higher interest rates
Bulk Purchase Annuities
Corporates are de-risking their defined benefit pension
scheme liabilities through Bulk Purchase Annuities (‘BPA’)
transactions in order to focus on their core businesses.
This is fuelling increased demand for BPAs.
Heritage M&A
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 over time.
c.£40–60bn
of annual flows
c.£435bn
market opportunity
Higher interest rates mean BPAs,
both buy-ins and buy-outs, are more
affordable for trustees, driving record
levels of demand.
Opportunistic M&A
M&A can add further
scale to our business
We can undertake M&A to:
• Acquire new customers
• Acquire capabilities
See our Strategic priorities section
on pages 24 to 29 for more information
20 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Our business model
A growing
and
sustainable
business
What we doOur purpose
Helping people secure
a life of possibilities
As the UK’s largest long-term savings
and retirement business, our focus is
on offering the right retirement savings
and income products that meet the
needs of our customers today and
in the future.
How we do it
We have made excellent progress in
developing our capabilities to support
organic growth. We are now investing
to grow, optimise and enhance to build
out our capabilities even further and
increase efficiency.
We want to improve the financial futures
of our customers by offering a simple range
of innovative retirement products and solutions
to support them through their adult lives.
Creating long-term value
Using our scale and ambition, we are
committed to creating long-term value
for all our stakeholders.
See pages 24 to 29 for Our strategic priorities
See pages 22 to 23 for our products and solutions
For more information on our family of brands visit
thephoenixgroup.com/about-us/our-brands/
Our vision
To be the UK’s leading retirement
savings and income business.
Wealth
Lifetime
21Phoenix Group Holdings plc Annual Report and Accounts 2023
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Saving for
retirement
• Defined contribution
workplace pensions
• Retail savings for retirement
• Legacy pensions
and savings products
Transitioning
to retirement
• Pension
consolidation
Securing income
in retirement
• Income drawdown
and individual annuities
• Defined benefit
pension income
• Home equity release
See our Investment case on pages 16 to 17
Strong financial outcomes
for our shareholders
• Sustainable, growing Operating Cash Generation
that more than covers our recurring uses and
progressive dividend
• Resilient balance sheet that supports investment,
underpinned by our 140–180% Shareholder Capital
Coverage Ratio operating range
• Growth in IFRS adjusted operating profit
• A progressive and sustainable ordinary dividend policy
Additional positive outcomes
for our other stakeholders
• Helping millions of people achieve a better longer life
• Managing the risks and opportunities presented by
climate change to deliver good customer outcomes
• Inspiring colleagues and attracting and developing
new top talent
See our Sustainability Report
Key capabilities on the journey to our vision
2020 2023 2026
M&A execution and integration
A trusted and well-known consumer brand in Standard Life
Competitive and capital-efficient BPA business
Established and growing capital-light Workplace business
In-house asset management capability
Innovative retirement income solutions
Attractive Retail market propositions
Digital customer interface with personalised data, guidance and advice
Single and efficient Group-wide operating model
22 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Our business model continued
Helping customers
journey to and
through retirement
We focus on meeting the long-term savings
and retirement needs of our customers by
providing the products they need through
our family of brands, as they accumulate wealth
through the savings phase, then transition
to securing income in retirement.
Saving for retirement
Defined contribution
workplace pensions
With a Defined Contribution (‘DC’)
workplace scheme individuals and typically
their employer pay into their pension on a
regular basis as they work. Standard Life is
one of the leading UK providers that help
employers and trustees set up high-quality,
easy-to-run workplace pension schemes for
their employees, and offer a leading digital
interface for their employees to track and
engage with their pension.
Saving for retirement
Legacy pensions and
savings products
Over the years, Phoenix Group has grown
through the acquisition of closed books of
legacy pension and insurance policies from
a number of companies. We are the market
leader in the safe and efficient management
of legacy pensions and savings policies, with
a strong track record of delivering better
outcomes for customers of longstanding
policies that are no longer sold in the
wider market.
Saving for retirement
Retail savings
for retirement
We help retail customers both directly
and indirectly via financial advisers
by providing a range of pension and
investment solutions to support their
retirement ambitions, with a number
of innovative new products and
services in development that will
be launched shortly.
Customer engagement is at the heart of our
proposition and its why we’ve invested heavily
in our app which is consistently highlighted by
clients as a strength. Similarly, our dedicated
Vulnerable Customer team means we’re set up
to support the customers who need us most.
Gail Izat, Managing Director of Workplace
23Phoenix Group Holdings plc Annual Report and Accounts 2023
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Securing income in retirement
Home equity release
Our Mortgage Solutions business seeks
to enable homeowners to access their
property wealth in later life to financially
support their retirement aspirations, by
partnering with established lenders to fund
innovative mortgage solutions in the market.
Securing income in retirement
Income drawdown
and individual
annuities
Income drawdown provides a flexible way
for our customers to take income from their
pension pot as they can take out money
whenever they like, while our individual
annuity product offers pension savers secure
guaranteed regular income certainty in
retirement. Many customers have the need
for a blend of both and Standard Life is
working on a range of innovative products
to address this.
We are delighted to have
partnered with Standard
Life, to provide long-term
security and financial
certainty for all members.
Brian McGowan, Chairman of Chubb
Pension Plan and Chubb Security
Pension Fund Trustee Boards
Securing income in retirement
Defined benefit
pension income
Also known as a ‘final salary’ pension,
a Defined Benefit (‘DB’) pension pays out
a guaranteed income to members for life
through retirement, but they are generally no
longer offered to employees. The remaining
DB pension schemes are exposed to a range
of market and demographic risks that the
sponsoring employer is responsible for.
To remove these risks and enhance benefit
security for scheme members, sponsors and
trustees look to insure some or all of their
pension scheme obligations with a specialist
insurance company like Standard Life.
Transitioning to retirement
Pension
consolidation
For people who have worked multiple
jobs over the years, they may have been
auto-enrolled into a number of pension
plans by past employers, alongside any
pension plans that they may have
opened directly. With Standard Life’s
pension transfer and consolidation
expertise, customers can combine their
pension plans into a single plan, making
things easier to track and manage.
Standard Life has plans to launch
direct advisory capability in the near
future and continues to develop
close relationships with third party
financial advisers.
For more information visit
standardlife.co.uk
A key part of our growth strategy
is leveraging the power of the
Standard Life brand which we utilise
across our products to support
customers as they save for, transition
to and secure income in retirement.
24 Phoenix Group Holdings plc Annual Report and Accounts 2023
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Phoenix Group has significant growth
opportunities available, both through meeting
more of our existing customers’ needs, on their
journey to and through retirement, and by
acquiring new customers as well. Given the
significant market opportunities available to
us (see our growth drivers on pages 18 and 19)
we have consciously chosen to invest heavily
in order to accelerate our organic growth.
We also continue to engage people in their
financial futures, and to advocate for broader
societal action to tackle under saving and
encourage financial inclusion, which is a
critical part of our commitment to our purpose.
Delivering strong growth in our
capital-light fee-based businesses
Strong performance in Workplace has
underpinned the growth in our capital-light
fee-based business.
Workplace has a unique attractive characteristic
whereby the growth is principally driven
by high retention of existing customers.
This enables us to benefit from the natural
compounding effect of this business model,
which comes from new joiners and salary
inflation increases within existing schemes.
Given this characteristic it is extremely
encouraging that we have not seen any
material scheme losses in 2023 and do
not anticipate any in 2024 either.
In parallel our new scheme wins continue
to accelerate, as we focus on the fast
growing Master Trust segment of the
market. Importantly we continue to win
larger schemes, in addition to the smaller
ones. For example, in 2023 our c.£2 billion
of new Workplace scheme assets transferred
included the transfer of the Siemens
workplace scheme, one of largest scheme
transfers to have been tendered in the UK
market in recent years.
We also expect to see further new scheme
assets transfer to Phoenix Group in 2024
and 2025 based on secured scheme
wins, but this will grow as we win more
schemes over the course of 2024, providing
further momentum in both fund inflows
and cash generation. We are confident
of winning further schemes over time
and are currently quoting on a significant
pipeline of new workplace schemes.
Disciplined participation in a busy
annuity market
Within our Retirement Solutions business,
the majority of the growth came from
BPA, supported by a busy annuity market.
We have been an active participant, writing
£6.2 billion of premiums (2022: £4.8 billion),
but remain disciplined in our approach.
We will continue to grow our annuities
business, to take advantage of the strong
demand from corporates and consumers
in this market.
Grow
Our strategic priorities and KPIs
Meeting more of our existing customers’
needs and acquiring new customers
+72%
2023 year-on-year increase in
new business net fund flows
(2022: £3.9bn)
APM
£6.2bn
Bulk Purchase Annuity (‘BPA’)
premiums written
(2022: £4.8 billion)
APM
113
New Workplace scheme wins
(2022: 76)
2.7%
BPA capital strain (pre-Capital
Management Policy basis)
(2022: 3.2%)
APM
2023 highlights
• £1.5bn of new business long-term cash generation in 2023,
achieving our 2025 target two years early
• Won one of the largest UK workplace transfers in recent years
• Successful launch of new individual annuity product
• Reached over 4 million people with our awareness campaign
on longer lives and under saving for retirement
25Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
However, due to the success we have had
in building our scale and driving capital
efficiency, we can now invest less capital
going forward, while broadly maintaining
our current volumes. We therefore expect
to invest c.£200 million of capital annually
from 2024. This also reflects our strategy
of driving balanced growth and reflects the
confidence we have in our future capital-
light Pensions and Savings growth.
We also successfully launched our Standard
Life annuity product in September, for which
initial feedback has been encouraging,
demonstrating our ability to supplement
our existing customer solutions.
Investing in new and innovative products
We have been investing to establish
strong foundations and develop attractive
propositions in the Retail market to become
a leading consolidator for our customers.
Our Retail business remains in net fund
outflow at present, but through better
supporting the 1-in-5 UK adults who are
already Phoenix Group customers, we will
be able to make significant inroads into
stemming the annual outflows from our
legacy products. Our commitment to invest
a further c.£100 million into our growth
propositions across 2024–2026 will enable
us to turn these outflows into inflows, as we
leverage the changing market dynamics.
For instance, we are optimistic that the FCA’s
recent Advice Guidance Boundary Review
represents a step forward in addressing
the persistent advice and guidance gap.
The proposals outlined create the potential
for financial services providers like us to
offer a greater level of customer support
and we will continue to engage with the
regulator on this subject and review the
services we are able to provide as a result
of the ongoing consultation.
In March 2024 we started piloting the
Standard Life Smoothed Return Pension
Fund exclusively through the Fidelity
Adviser Solutions platform, ahead of a full
market launch later this year. We are also
in the process of developing a number of
new retirement income solutions which we
hope to bring to market this year which will
address customers’ needs for a combination
of income certainty and flexibility.
Engaging people in better
financialfutures
We set ourselves a 2023 target to deliver
an awareness campaign reaching four
million people on longer lives and under
saving for retirement. We surpassed
this target with our ‘Let’s Start Talking’
campaign reaching over 4 million people.
Promoting financial wellness
Standard Life partnered with Moneyhub,
to enhance our Money Mindset digital app
and dashboard, providing access to over
1.5 million Workplace pension scheme
members. By providing members with the
relevant tools, content and information,
Money Mindset allows customers to link,
track and monitor their finances with the
aim of improving their financial wellbeing.
Priorities for 2024
• Build a range of attractive Retail
market propositions and innovative
retirement income solutions
• Invest c.£200m p.a. into annuities
• Increase awareness of the
pensions savings gap and
motivate at least one million
people to action through our
brand campaign
Supporting
vulnerable customers
The needs of our customers are always
changing and so it is important our
services can adapt to meet these changing
needs. Our vulnerability strategy provides
support for those most at risk of harm, and
aims to continually raise standards across
our industry.
Our annual Vulnerable Customer Summits
share best practice on how the industry
can tackle the increasing issue of financial
vulnerability in the UK. Our most recent
one, in February 2024, was attended by
over 80 institutions.
Read the whitepaper here
26 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Optimise
Our strategic priorities and KPIs continued
Optimise our in-force business
2023 highlights
• Continued to deliver value accretive recurring management
actions through our in-house asset management capability
and by optimising our in-force balance sheet
• Strong capability developed for liquid and illiquid credit
portfolio optimisation
• Published and implementing our Net Zero Transition Plan
£303m
Recurring management actions
(2022: £270m)
APM
176%
Solvency II Shareholder Capital
Coverage Ratio (‘SCCR’)
(2022: 189%)
APM
87%
Illiquid asset origination in sustainable
and transition assets
REM
£3.9bn
Solvency II surplus (estimated)
(2022: £4.4bn)
Phoenix Group is a market leader in
managing its in-force business for cash
and ensuring a resilient capital position.
The Group’s cash generation stems from
the emergence of surplus from our in-force
business, which we enhance through the
delivery of value accretive management
actions, underpinned by the diversification
of our portfolio and increasingly supported
by the investments we’re making to enhance
our asset management capabilities.
In parallel, we deploy a comprehensive
approach to risk management across our
in-force business and we hedge the majority
of our market risks including equity, interest
rates and inflation. This brings resilience
to our Solvency II capital position.
We are embedding sustainability throughout
our business and across our strategic priorities.
As a result, investing in a better future is a
key part of optimising our in-force business,
as we look to protect our customers from
the risk of and maximise the opportunities
presented by climate change.
Delivering recurring managementactions
In 2023 we delivered £663 million (2022:
£739 million) of total management actions.
Importantly though, £303 million of these
were recurring management actions.
These are the day-to-day actions that we,
and every other life insurance company
take, to optimise our in-force balance
sheets. They “add value” which means
they increase cash, capital and earnings.
Over the last three years, we have invested
in developing a highly-skilled in-house
asset management team, whose day job
is to optimise our assets and liabilities,
and improve shareholder returns.
The continuous portfolio optimisation actions
we undertake to optimise our assets, and the
balance sheet efficiency actions to optimise
our liabilities, mean that a significant, and
growing proportion of our management
actions, will be recurring over the long term.
This includes the optimisation of our
£38 billion shareholder credit portfolio
(2022: £31 billion), where we can capture
pricing dislocations across geographies,
ratings and sectors. This is a sustainable
source of recurring management actions,
due to the dynamic nature of markets
which will always create opportunities
for us to enhance our risk adjusted returns.
For instance, in 2023, our asset management
team completed c.$1 billion of bond rotations
to and from sterling and dollar bonds,
to enhance our risk adjusted returns and
generate management actions.
Our annuity asset allocation approach is
another key area and this includes the rapid
27Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Priorities for 2024
• Enhance our asset and liability
optimisation capabilities to
support recurring management
actions of c.£400m per annum
by 2026
• Continued diversification of
our asset portfolio and build-out
of our directly sourced illiquid
asset capability
• Begin deleveraging our balance
sheet towards our c.30%
Solvency II leverage ratio target
by the end of 2026
• Ensuring that we remain on
track to meet our 2025 and
2030 interim targets on our
way to net zero by 2050
Taking action to reach
net zero by 2050
In 2023 we published our first Net Zero
Transition Plan. This recognises the impact
we can have as the UK’s largest long-term
savings and retirement business and puts
the needs of our customers at its centre.
We are focused on managing the risks
whilst maximising the opportunities of
climate change for customers. One of the
key actions that we can take towards net
zero is to invest in climate solutions, but
there are currently a number of barriers
limiting both supply and demand of
finance. That is why we partnered with
campaign group Make My Money Matter
to publish a report which outlined seven
strategies for policymakers and regulators
to unlock greater investment by the UK
pensions industry.
See our Unlocking Climate
Solutions report
deployment of new business BPA transition
asset portfolios, that are received from
corporates. Here we can reinvest these
individual portfolios, which are typically cash
and gilts, into higher yielding liquid credit,
and deliver enhanced risk adjusted returns.
We also have a significant medium-term
opportunity for recurring actions as
we trade-up to our long-term illiquid asset
allocation. Over the long-term we will also
be able to source a wider range of illiquid
assets through both our expanding strategic
partnerships and the in-house direct
origination capability we have now built.
There is also a range of ongoing balance
sheet efficiency actions available to us over
time, including the regular ongoing capital
model efficiencies we can deliver, as our
risk profile changes and regulations evolve.
Looking forward, we are very confident that
we can deliver a growing level of recurring
management actions to c.£400million
per annum by 2026. This is supported by
the further c.£100 million investment we
are making to enhance our asset and liability
optimisation capabilities and the strong
growth we expect across our business.
Using our scale to help create
a better future
Our certification as a signatory to the UK
Stewardship Code in 2023 is a clear statement
of our intent to manage the Environmental,
Social and Governance (‘ESG’) risks to which
our business is exposed through active
stewardship. We continue to be committed
to integrating decarbonisation strategies into
our portfolios.
We see this commitment 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 being net zero
by 2050. We have worked with leading index
providers to design customised equity
benchmarks which will apply a decarbonisation
tilt to our policyholder listed equity portfolio,
with implementation commencing in 2024
and continuing in 2025.
Building on the progress with decarbonising
our policyholder assets, in 2023 we developed
a decarbonisation strategy for our £12.5 billion
shareholder corporate credit portfolio
1
.
We intend to increase investments in net
zero-aligned assets to 40–50% of this
portfolio by 2025, and 50–70% by 2030.
Finally, we exceeded our 50–70% target
with 87% of our illiquid asset origination
in the shareholder portfolio that are
sustainable or transition assets in 2023
2
Maintaining a resilient balance sheet
The high levels of cash generated in our
business not only gives us the ability and
flexibility to invest but also to maintain
a resilient balance sheet.
In line with recent years, we plan to continue
our approach of repaying M&A-related debt
with surplus cash, and intend to repay at least
£500 million of debt by the end of 2026.
This will support us in targeting a Solvency II
leverage ratio of c.30%
3
by the end of 2026.
1 AUA as at year-end 2021.
2 For definition of sustainable and transition
assets see: Sustainable Finance: Classification
Framework for Private Markets.
3 Assuming economic conditions in line with
31 December 2023.
28 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Enhance
Our strategic priorities and KPIs continued
Transforming our operating
model and culture
2023 highlights
• Completion of one of the largest ever UK Insurance
Part VII transfers, of Standard Life and Phoenix Life
• Continued customer migrations to TCS Diligenta’s
BaNCS platform
• Launched Phoenix Flex, our new approach
to flexible working
c.700k
Customers migrated to TCS
Diligenta in 2023
+32
Colleague engagement
employee Net Promoter Score
(2022: +30)
REM
Enhancing our operating model and
culture are key to our success.
We do this by completing our planned
integrations and migrations, and through
driving simplification to a single, Group-wide
operating model that benefits both our
customers and our colleagues. This supports
us in delivering a seamless customer
experience and enables us to further
enhance our cost efficiency.
Alongside this, 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.
Progressing our integrations and migrations
M&A activity and any subsequent integrations
have historically created the most significant
opportunities to enhance our operating
model, above and beyond the management
actions we take on a recurring basis
to optimise the business.
In November we reached a significant
milestone by completing the Part VII transfer
of Standard Life
1
and Phoenix Life Assurance
Limited businesses into Phoenix Life Limited.
This was one of the largest UK insurance
Part VII transfers ever completed, bringing
together the businesses of four legal
entities, comprising c.8 million policies and
c.£200billion
2
of assets into a single entity.
We have a number of Part VII transfers
in our plans as a result of other previous
acquisitions, including ReAssure and Sun
Life of Canada UK. However, we are not
expecting a similar scale of benefit for those
Part VII transfers, as the business mixes are
relatively similar to Phoenix Life Limited.
During the year we successfully completed
the migration of another c.700,000
Phoenix Life customers from Capita to TCS
Diligenta’s BaNCS platform. We’re now
well over half way through this project with
a total of over 1.2 million policies moved to
BaNCS from the nearly 2 million in scope.
We also delivered another significant
milestone on our journey towards
harmonised investment administration
processes, as we migrated £12.3 billion of
Phoenix Wealth Funds (c.700 funds) from
our Investment Operations centre to HSBC
Security Services. The objective was to
harmonise our internal oversight model
whilst ensuring the accurate and timely
delivery of unit pricing, a key component
in the end-to-end servicing of all our
Pension and Savings unit linked products.
This allows us to deliver better value to our
customers and shareholders by simplifying
complex processes and systems.
29Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Priorities for 2024
• Progress our ongoing migrations
to Diligenta’s BaNCS platform
• Deliver initial cost savings as we
simplify our operating model
Creating a way of
working that works
for our colleagues
We know that people are generally
looking for flexibility in the way they
work as they navigate different stages
of their life. We also recognise the
importance of having a diverse
intergenerational workforce.
Phoenix Flex, our new approach to
flexible working, is a key enabler by
encouraging and celebrating flexibility
at work, embracing our differences and
helping each of us to thrive. It can help
those people raising families, those with
caring responsibilities and those who
are phasing up or down in their career.
Continued migrations and driving
scale efficiencies
Looking forward, we will continue to progress
our remaining migrations across Standard
Life, ReAssure and Sun Life of Canada UK.
In addition, as we progress on our strategic
journey we are very focused on being more
effective and more efficient across our
organisation, from both a customer and
colleague perspective. This next phase is
about building off the success of what we’ve
had, taking the best from both ‘Heritage’
and ‘Open’ to create something new
and improved.
We will therefore invest c.£500 million in our
migration, transformation and cost efficiency
programmes across 2024–2026, with around
c.£300m having been guided to previously.
Importantly, these programmes will deliver
cost efficiencies at scale as we bring together
all of our businesses onto a single Group-wide
operating model. Integral to this will be
delivering further Group cost efficiency
activities, such as a range of organisational
and governance simplification actions,
and product and supplier rationalisation.
Our focus on driving cost efficiencies will
support c.£250 million of annual cost savings
by the end of 2026. Importantly, these cost
savings will flow through to all of our key
metrics, across our financial framework
of cash, capital and earnings.
Creating the best place any
of us have ever worked
At Phoenix Group we want to be the best
place any of us have ever worked, which
means we need to provide a great colleague
experience. To support this ambition we
implemented Phoenix Flex earlier this
year. This is our new approach to flexible
working, empowering all of our colleagues
to agree the flexible working arrangements
that work for them and their teams.
We also want Phoenix Group to reflect the
customers we serve and the communities
we operate in, and so we are striving to make
sure our workplace is diverse. Building a
diverse workforce allows us to attract the best
talent, broaden our skill sets and widen our
thinking. We made strong progress against
our end-of-2023 Diversity, Equity and
Inclusion targets although we did fall short
on our gender diversity in senior leaders
target; see pages of 32 and 33 of our
Sustainability report for more detail.
We report on our colleague engagement
through an employee Net Promoter Score
(‘eNPS’), a broadly used and holistic metric
that indicates how colleagues feel about
working for Phoenix. We ended 2023 with
an eNPS score of +32, our highest ever eNPS
score and +2 higher than our end-of-year
2022 score.
1 Standard Life refers to Standard Life Assurance Limited
and Standard Life Pension Funds Limited.
2 Year end 2022 values.
30 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
A strong performance in 2023
Key financial performance metrics: 2023 2022 YOY change
Cash Total cash generation £2,024m £1,504m +35%
New business Incremental new business
long-term cash generation £1,514m £1,233m +23%
Net fund flows £6.7bn £3.9bn +72%
Dividends Total dividend per share 52.65p 50.8p +3.6%
Final dividend per share 26.65p 26.0p +2.5%
IFRS Adjusted operating profit
before tax
1,2
£617m £544m +13%
Loss after tax
1,2
£(88)m £(2,657)m N/A
Solvency II capital PGH Solvency II surplus £3.9bn £4.4bn -11%
PGH Shareholder Capital
Coverage Ratio 176% 189% -13%pts
Assets Assets under administration £283bn £259bn +9%
Leverage Solvency II leverage ratio 36% 34% +2%pts
1 2022 restated comparative to reflect adoption of IFRS 17
2 Incorporates changes to the Group’s methodology for determining adjusted operating profit since Half Year 2023
(see Note B.1 to the consolidated financial statements for further details).
In 2023 we have once
again delivered a year
of strong performance,
as we execute on our
strategy and fulfil
our purpose.
We have delivered another year of resilient
cash generation, with £2.0 billion of total cash
generated in 2023, exceeding our upgraded
target of c.£1.8 billion. With £5.2 billion
delivered across 2021 to 2023, we have
also therefore over-delivered our three-year
cash generation target of £4.4 billion,
by c.£0.8billion.
We saw a strong performance in our
growth businesses, which increased our
incremental new business long-term cash
generation (‘NB LTCG’) by 23% year-on-year
to £1,514 million, and therefore have achieved
our 2025 target two years early. This was
supported by new business net fund flows that
grew 72% to £6.7 billion (2022: £3.9 billion).
Our Shareholder Capital Coverage Ratio
(‘SCCR’) of 176% remains towards the
upper-end of our operating range of
140–180%, but reduced given our investment
into growth, as well as our integration
and transformation expenses. Similarly,
our Solvency II (‘SII’) surplus reduced
to £3.9 billion, but remains resilient.
Our strong overall performance this year has
therefore enabled the Board to recommend
a dividend increase of 2.5% for the year.
In terms of our IFRS earnings, the Group’s
adjusted operating profit grew 13% to
£617 million, supported by 27% growth
in our Pensions and Savings business and
an 8% increase in our Retirement Solutions
business. While we reported an IFRS loss
after tax of £88 million, this was a £2,569
million improvement on 2022. The loss in
2023 was primarily driven by £(781) million
of non-operating items, as outlined on page 36.
The segmental information given reflects
the Group’s new operating segments,
further information is provided in note B.1
on page 180.
Clear strategic progress
We have made significant strategic progress
in delivering sustainable organic growth.
In Pensions and Savings, our Workplace
business continues to see an attractive retention
rate with existing clients but is also now
winning new larger schemes. Our Retail
business remains in net outflow, but we have
a clear strategy to address this over the coming
years, by investing to deliver compelling
customer propositions.
Delivering
sustainable cash
generation
Business review
31Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Our key performance indicators
With our financial framework designed
to deliver cash, capital and earnings,
we recognise the need to use a broad
range of metrics to measure and
report the performance of the Group,
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 36 to 37
and the IFRS financial statements are
set out from page 164 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,
including the below. Please see the APM
section on page 312 for further details.
Total cash generation
Cash generation represents the total
cash remitted from the operating entities
to the Group, supported by the Operating
Cash Generation (see below) and the
release of 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.
Operating Cash Generation
Operating Cash Generation (’OCG’)
is a new reporting metric. It represents
the sustainable level of cash generation
in our life companies each and every
year, that is remitted from our underlying
business operations. It comprises the
emergence of cash as in-force business
runs off over time and capital unwinds,
plus day one surplus from writing new
business (net of day one strain for
fee-based business), group tax relief and
recurring management actions. In addition,
it includes a small cash contribution from
the release of the Capital Management
Policy that we hold in our Life Companies.
The measure provides the sources of
recurring organic cash generated which
can be used to support sustainable cash
remittances from the Life Companies,
which in turn supports the Group’s
dividend, group costs and debt interest
as well as funding investment to generate
sustainable growth.
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.
New business net fund flows
Represents the aggregate net position
of assets under administration inflows
less outflows for new business.
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 36) and non-recurring items than
IFRS profit. A more detailed definition
of adjusted operating profit is set out
on page 312.
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’)’.
Solvency II leverage
The Group seeks to manage the level of
debt on its balance sheet by monitoring
its financial leverage ratio. Solvency II
leverage is calculated as the Solvency II
value of debt divided by the value of
Solvency II Regulatory Own Funds.
Values for debt are adjusted to allow for
the impact of currency hedges in place
over foreign currency denominated debt.
The progress we have
made in executing our
strategic priorities has
enabled us to deliver
a strong set of results
in 2023, and supported
the Board’s decision
to recommend a 2.5%
increase in the Final
2023 dividend.
Rakesh Thakrar,
Group Chief Financial Officer
In Retirement Solutions, we continue to adopt
a disciplined approach to Bulk Purchase
Annuities (‘BPA’) and have been successful
in reducing our capital strain. In September,
we also launched a new individual annuity
product, our first that is available in the
openmarket.
From an M&A perspective, we successfully
completed the acquisition of Sun Life
of Canada UK (‘SLOC’) in April with the
integration progressing well.
In summary, 2023 has been another year of
clear strategic progress, that has supported
the delivery of a strong set of results.
We continue to deliver sustainable and
resilient cash generation, which underpins
our new progressive and sustainable ordinary
dividend policy. Our Solvency capital position
also remains highly resilient, and can support
the investment to grow, optimise and enhance
our business going forward.
An evolved financial framework for the
next phase of our journey
We are introducing our evolved financial
framework that focuses on the three financial
outcomes we deliver for our shareholders:
cash, capital and earnings.
Phoenix has always managed its business
for cash and capital, but our evolved key
metrics provide clearer line of sight to the
underlying business performance and
more comparability with peers. We are also
elevating the importance of IFRS earnings
in our framework, following the transition
to IFRS 17.
The key metrics we use can be seen here
2022 2023 2025 target
£1,066m£934m
£249m
£50m
£53m
£395m
£1,233m
£1,514m
c.£1.5bn
+23%
Retirement Solutions
Pensions and Savings
Europe and Other
32 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
£2,024m
Total cash generation REM APM
£1,514m
Incremental new business long-term
cash generation
REM APM
Cash
Business review continued
Non-operating cash outflows were £111 million
(2022: £395 million). This primarily comprises
centrally funded projects and investments
totalling £307 million. Of this, £129 million
relates to Group project expenses for the
transition activity in relation to legacy platform
migrations, £18 million for other ongoing
integration programmes including ReAssure
and SLOC, £56 million of investment related
to our growth propositions, and £12 million
for our Finance Transformation. These costs
were partially offset by a £196 million
inflow in respect of net collateral cash
and hedge close-outs.
Debt repayments and issuance in 2023
reflect the debt re-terming exercise we
undertook in the fourth quarter.
The shareholder dividend of £520 million
represents the payment of £260 million
in May for the 2022 Final dividend and
the payment of the 2023 Interim dividend
of £260 million in September.
Funding of £288 million (2022: £285 million)
has been provided to the Life companies
to support another strong year in BPA with
£6.2 billion of premiums written (2022:
£4.8 billion). The Group’s success in further
optimising its capital efficiency is reflected
in the reduction of the Group’s capital strain
on BPA to 2.7% (2022: 3.2%) on a pre-Capital
Management Policy (‘CMP’) basis, including
the benefit of the Solvency II reform risk
margin reduction. This enabled the Group
to write increased NB LTCG but with a similar
level of capital invested.
Strong incremental new business
long-term cash generation
Group cash flow analysis
£m 2023 2022
Cash and cash equivalents at 1 January 503 963
Total cash generation
1
2,024 1,504
Uses of cash:
Operating expenses (97) (78)
Pension scheme contributions (16) (16)
Debt interest (229) (244)
Non-operating cash outflows (111) (395)
Debt repayments (350) (450)
Debt issuance 346 –
Shareholder dividend (520) (496)
Total uses of cash (977) (1,679)
Support of BPA activity (288) (285)
Cost of Sun Life of Canada UK acquisition (250) –
Closing cash and cash equivalents at 31 December 1,012 503
1 Total cash receipts include £219 million received by the holding companies in respect of tax losses surrendered (2022: £55 million).
Total cash generation
Cash generation represents cash remitted
by the Group’s operating companies to the
holding companies. Please see the APM
section on page 312 for further details
of this measure.
Cash generation is principally used to fund
the Group’s operating costs, debt interest
and repayments, investment into growth
and shareholder dividends. Excess cash is
available for investment into the business
and/or additional shareholder returns.
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
Total cash generated by the operating
companies during 2023 was £2,024 million
(2022: £1,504 million). This exceeded the
Group’s upgraded target of c.£1.8 billion
for the year, due to additional management
actions being delivered.
Uses of cash
Operating expenses of £97 million
(2022: £78 million) represent corporate
office costs, net of income earned on
holding company cash and investment
balances. The increase compared to 2022
reflects the investment we have made in
our Group capabilities to support our
growth strategy,
Debt interest of £229 million (2022:
£244 million) reflects interest paid in the
period on the Group’s debt instruments.
The decrease year-on-year is due to the
repayment of debt in July 2022.
Incremental new business long-term
cash generation
NB LTCG 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.
In 2023 we delivered another record year
of organic new business growth including
NB LTCG of £1,514 million (2022: £1,233
million), enabling us to achieve our 2025
target two years early.
Strong growth in our capital-light fee-based
business, Pensions and Savings, led to a
contribution of £395 million (2022: £249
million). Our disciplined approach in a
buoyant BPA market drove an increase
in NB LTCG in our Retirement Solutions
business to £1,066 million (2022: £934
million). Europe and Other contributed
£53 million (2022: £50 million).
Surplus
emergence
Recurring
management
actions
Release
of Capital
Management
Policy
Other
management
actions
Release of
excess capital
Total cash
generation
Operating Cash Generation
Operating surplus generation
Non-operating
cash generation
Dividend, operating costs and debt interest
Annuities capital
c.£0.1bn Growth propositions
Migration, transformation
and cost efficiency
c.£0.1bn Asset and liability optimisation capabilities
Debt repayment
HoldCo cash
HoldCo cash
Non-operating
cash generationOperating Cash Generation
Recurring uses
c.£0.9bn
c.£0.5bn
c.£0.5bn
c.£0.6bn
c.£2.7bn
c.£3.7bn
c.£0.7bn
£1.0bn
Grow
Optimise
Enhance
Investment priorities:
2024–2026 Total Cash Generation of £4.4bn
33Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Operating Cash Generation is expected to more than cover our recurring uses and generates surplus to invest into our business
We are introducing Operating Cash Generation as a new metric to demonstrate the long-term sustainability of our business model
Introducing Operating Cash Generation
As part of our evolved financial framework
we are introducing Operating Cash Generation
(‘OCG’) as a new alternative performance
metric to demonstrate the long-term
sustainability of our cash generation.
OCG is the combination of the operating
surplus emerging and recurring management
actions. It represents the sustainable surplus
generation remitted from our Life Companies
to the Group Holding Company. OCG can
be easily reconciled to operating surplus
generation (‘OSG’), with the bridge being
the small release of the Capital Management
Policy (‘CMP’) held in our Life companies.
OCG totalled £1.1 billion in 2023, comprising
£0.8 billion of surplus emergence and
£0.3 billion of recurring management actions.
Outlook
We will grow OCG sustainably over the
long term through investing our surplus cash
across our three strategic priorities of Grow,
Optimise and Enhance.
We will Grow by investing c.£100 million
into our growth propositions and by
continuing to grow our annuities business
with c.£200 million of capital invested
annually. This will support strong growth
across our Pensions and Savings and
Retirement Solutions businesses.
As we Optimise, we will deliver
recurring management actions of
c.£400 million per annum by 2026,
supported by c.£100 million investment
in our asset and liability optimisation
capabilities and as our business grows.
As we Enhance our business, we will continue
to migrate customers and drive through cost
efficiencies that will deliver c.£250 million
of annual cost savings by the end of 2026.
Together these will increase OCG by c.25%
from £1.1 billion in 2023 to £1.4 billion in
2026. After which we expect it to grow at
a sustainable mid-single digit growth rate
over the long term.
Future sources and uses of total
cash generation
While OCG is our new primary metric,
total cash generation remains very important,
as we invest across our strategic priorities.
We have set a new total cash generation target
of £4.4 billion across 2024–2026, that will
enable us to cover our recurring uses, pay our
growing dividend and invest in our business.
We expect to generate c.£3.7 billion of OCG
over this period, which will more than cover
our recurring uses and our planned investment
of capital into annuities each year.
In addition we expect to generate a
further c.£0.7 billion of non-operating cash
generation across 2024–2026 comprising
other management actions and the release
of historic excess capital that has built up in
our Life Companies. That provides us with
a significant amount of surplus cash that we
can invest across our strategic priorities.
Our HoldCo cash position is a healthy
£1billion today, which we expect to remain
broadly consistent over 2024 to 2026.
FY23FY22
£6.7b n
£7.2bn
£11.1bn
£11.1bn
Own Funds
SCR
Own Funds
SCR
153%166%
Surplus
£4.4bn
Surplus
£3.9bn
FY23FY22
£4.9bn
£5.0b n
£9.3bn
£8.9bn
176%189%
Surplus
£4.4bn
Surplus
£3.9bn
Surplus as
at FY22
Recurring
management
actions
Surplus
emergence
Other
management
actions
Operating costs,
debt interest
and dividend
New business
strain
Economics Investment in
growth
Consumer
Duty
Other Surplus as
at FY23
£4.4bn
£3.9bn
£0.8bn
£0.3bn
Operating surplus generation
(’OSG’)
£0.4bn
£(0.9)bn
£(0.3)bn
£(0.3)bn
£(0.1)bn
£(0.1)bn
£(0.3)bn
189% +20% +7% +16% (19)% (10)% (9)% (3)%
(2)% (13)% 176%
34 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
£3.9bn
Group Solvency II surplus (estimated)
176%
Group Solvency II shareholder capital
Coverage Ratio (estimated)
APM
Capital
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-Profits
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
and resilient, with a surplus of £3.9 billion
(2022: £4.4 billion), after the accrual for the
deduction of our 2023 Final dividend of
£267 million. Our SCCR reduced marginally
to 176% (2022: 189%) but remains towards the
upper-end of our 140–180% operating range,
providing the capacity to continue investing
to grow, optimise and enhance our business.
Change in Group Solvency II surplus
and SCCR
Operating surplus generation increased
the SII surplus by £1.1 billion, contributing
to an increase in the SCCR of 27%pts.
This was comprised of our ongoing surplus
emergence which increased the SII surplus
by £0.8 billion during the year and recurring
management actions of £0.3 billion.
Other management actions increased the
SII surplus further by £0.4 billion and added
16%pts to the SCCR.
Business review continued
Operating costs, debt interest and dividend
totalled £0.9 billion, reducing the SCCR
by 19%pts.
We have also chosen to invest £0.4 billion
of surplus capital into growth. This includes
£0.3 billion of capital investment to fund
£6.2 billion of BPA premiums written in
the year, reducing the SCCR by 10%pts,
and £0.1bn of investment into our organic
growth propositions, reducing the SCCR
by a further 3%pts.
Our comprehensive hedging strategy is
designed to protect our capital position.
In 2023 this led to a small adverse impact
from economic variances of £(0.3) billion
on our Solvency II surplus. This included a
£(0.1) billion adverse impact from unhedged
gilt-swap spread movements, as well as
adverse currency movements and some
other smaller adverse impacts.
We are on track for the effective date for
Consumer Duty on back-book products in
July. Our ongoing focus on ensuring good
outcomes for Heritage customers means
we have identified only a small number of
products that we believe need addressing
in advance of the compliance date. We have
set aside a prudent c.£70 million of Solvency II
capital to reflect the impact of the possibility of
introducing further charging caps on certain
products, reducing the SCCR by 2%pts.
Other movements include the benefit of the
Solvency II risk margin reform and favourable
longevity assumption changes. These were
offset by the strengthening of expense provisions
associated with our transformation projects,
in addition to a net adverse impact arising
on the completion of the SLOC acquisition.
Overall, these movements decreased Solvency II
surplus by £0.3 billion and the SCCR by 13%.
£3.9 billion Group Regulatory Solvency II surplus £3.9 billion Group Shareholder Solvency II surplus
2023 change in Group Solvency II surplus
35Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
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 market 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 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 Solvency II 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 exposures arises from
both cost inflation expectations and
inflation-linked policies.
Rewarded market risk sensitivities
We do however retain the credit risk
in our c.£38 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 actively manage our portfolio to ensure
it remains high quality and diversified,
and to maintain our sensitivities within risk
appetite. Our portfolio is c.99% investment
grade and we have suffered no defaults,
testament to the proactive approach taken
by our in-house asset management team.
We also remain conservative in our property
exposure. We have c.£4.5 billion of our
credit portfolio exposed to equity release
mortgages, which are all UK-based with an
average rating of AA and average loan-to-
value (‘LTV’) of 33%, and c.£1.1 billion in
commercial real estate which is high quality
and all UK-based with an average LTV of 47%.
The full 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
£3.9 billion Solvency II surplus.
Managing demographic risks
We have three key demographic risks
– lapse risk from early surrenders, longevity
risk on our annuity portfolio and mortality risk
on our protection book. We manage lapse
risk through our strong customer proposition.
Our longevity risk principally arises from our
annuity book, but this is managed through
reinsurance. We retain around half of this
risk across our current in-force book, and
reinsure most of this risk on new business.
Mortality risk arises from our protection
business and we seek to manage this as
part of a well-diversified portfolio.
Life Company Free Surplus
Life Company Free Surplus represents the
Solvency II surplus for the Life Companies
that is in excess of their Board-approved
CMPs. It is this Free Surplus from which
the Life Companies remit cash to Group.
We retain a significant Life Company
Free Surplus of £2.2 billion which provides
resilience to the Group’s long-term
cash generation.
Solvency II capital outlook
We maintain a 140–180% SCCR
operating range, which reflects our low
sensitivity to economic volatility due to
our comprehensive hedging.
We have been at the top-end of our range
for the past three years, but will invest some
of this surplus as we transform our business,
with the investment more front-end weighted
across 2024–2026. In addition, our intention
to repay at least c.£500 million of debt by the
end of 2026 will also reduce our SCCR over
the coming years.
Leverage
We manage our leverage position by
considering a range of factors including
our cash interest cover, the interplay of our
balance sheet hedging, and our capital
tiering headroom. It also includes a number
of output metrics that we monitor, such as
the Fitch leverage ratio and Solvency II
leverage ratio.
Our approach to leverage has always
been to increase leverage to support M&A
and then pay down that debt with surplus
cash as it emerges. Since 2020 the Group
has repaid c.£800 million of debt through
this approach.
As at 31 December 2023, our Solvency
II leverage ratio was 36% (2022: 34%).
This increased in 2023, largely due to
our investment in growth, integration
and transformation. The Group’s Fitch
leverage ratio was 23% compared to
full year 2022 on a restated basis of 23%,
and is favourably below Fitch’s stated
range of 25–30% for an investment
grade credit rating.
We plan to continue our approach of
repaying M&A-related debt with surplus
cash, and subject to regulatory approval,
we intend to repay at least £500 million
of debt by the end of 2026, including the
£250 million Tier 2 bond that is callable in
June 2024. This will support us in achieving
a c.30%
1
Solvency II leverage ratio by the
end of 2026. This is a steady-state level
of leverage that we will believe is the
appropriate for our business, absent M&A.
1 Assuming economic conditions in line with
31 December 2023.
Estimated impact on PGH Solvency II
1
Surplus
£bn
SCCR
%
Solvency II base 3.9 176
Equities: 20% fall in markets 0.1 5
Long-term rates: 100bps rise in interest rates
2
0.1 6
Long-term rates: 100bps fall in interest rates
2
(0.1) (5)
Long-term inflation: 50bps rise in inflation
3
(0.1) (1)
Property: 12% fall in values
4
(0.2) (5)
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) (9)
Lapse: 10% increase/decrease in rates
7
(0.1) (1)
Longevity: 6 months increase
8
(0.4) (8)
1 Illustrative impacts assume changing one assumption on 1 January 2024, while keeping others unchanged, and that there is no
market recovery. They should not be used to predict the impact of future events as this will not fully capture the impact of economic
or business changes. Given recent volatile markets, we caution against extrapolating results as exposures are not all 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 Rise in inflation: 15yr inflation +50bps.
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 Only applied to the annuity portfolio.
36 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
£617m
Adjusted operating profit before tax APM
£4.6bn
Adjusted shareholders’ equity APM
Earnings
IFRS results
IFRS (loss)/profit is a GAAP measure of
financial performance and is reported in our
statutory financial statements on page 164
onwards. Adjusted operating profit before
tax 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 312 for further details of this measure.
On 1 January 2023, the Group adopted the
new accounting standard, IFRS 17: ‘Insurance
Contracts’, with comparatives restated from
1 January 2022. IFRS 17 requires a company
to recognise profits as it delivers insurance
services (rather than when it receives
premiums) and to provide information
about insurance contract profits the
company expects to recognise in the
future. The impact of the transition to
IFRS 17 is set out in note A2.1.
IFRS loss after tax attributable to owners
The Group generated an IFRS loss after
tax attributable to owners of £88 million
(2022: loss of £2,657 million). The improvement
versus 2022, primarily reflects a £3,456 million
improvement in economic variances due to
a much lower level of market volatility in the
period, particularly interest rates. This has
been partially offset by an increase in
non-operating items as a result of our
investment into growth in the period and
ongoing migrations and transformation.
Basis of adjusted operating profit
Adjusted operating profit is based on
expected investment returns on financial
investments backing business where asset
returns accrue to the shareholder and
surplus assets over the reporting period,
with allowance for the corresponding
expected movements in liabilities (being
the interest cost of unwinding the discount
on the liabilities). Adjusted operating profit
includes the unwind of the Contractual
Business review continued
Service Margin (‘CSM’) and risk adjustment
attributable to the shareholder. The principal
assumptions underlying the calculation
of the long-term investment return are set
out in note B 2.1 to the IFRS consolidated
financial statements.
Adjusted operating profit includes the
effect of variances in experience relating
to the current period for non-economic
items, such as mortality and expenses.
It also incorporates the impacts of asset
trading optimisation and portfolio
rebalancing where not reflected in the
discount rate used in calculating expected
return. Any difference between expected
and actual investment return, along with
other economic variances described further
in note B1.1 are shown outside of adjusted
operating profit. Adjusted operating profit
is net of policyholder finance charges and
policyholder tax.
Adjusted operating profit
The Group increased adjusted operating profit
by 13% to £617 million (2022: £544 million).
This primarily reflects strong growth in
our Pensions and Savings business, which
delivered adjusted operating profit of
£190 million, an increase of 27% year-on-year
(2022: £150 million). This was largely driven
by higher AUA resulting in increased
charges, and an improved margin through
operating leverage.
Our Retirement Solutions business delivered
an adjusted operating profit of £378 million
(2022: £349 million). The 8% increase
year-on-year primarily reflects a higher
expected investment margin as a result of
higher risk-free rates. The positive impact of
BPA new business on CSM amortisation has
offset the run-off of the remaining annuity
book despite the phasing of a significant
proportion of new business in late 2023.
With-Profits adjusted operating profit
declined to £10 million (2022: £54 million)
IFRS profit and loss statement 2023 2022
1,2
Pensions and Savings £190m £150m
Retirement Solutions £378m £349m
With-Profits £10m £54m
Europe and Other £132m £60m
Corporate Centre £(93)m £(69)m
Adjusted operating profit before tax £617m £544m
Investment return variances and economic assumption changes £147m £(3,309)m
Amortisation and impairment of intangibles £(322)m £(353)m
Other non-operating items £(439)m £(262)m
Finance costs £(195)m £(199)m
Profit before tax attributable to non-controlling interest £28m £67m
Loss before tax attributable to owners £(164)m £(3,512)m
Tax credit attributable to owners £76m £855m
Loss after tax attributable to owners £(88)m £(2,657)m
1 2022 restated comparative to reflect adoption of IFRS 17.
2 Incorporates changes to the Group’s methodology for determining adjusted operating profit since Half Year 2023
(see note B1 to the consolidated financial statements for further details).
principally as a result of the run-off of
this business and the adverse impacts
of modelling refinements in the period.
Europe and Other adjusted operating
profit increased to £132 million (2022:
£60 million). This segment includes the
expected investment margin from surplus
assets within shareholder funds, which has
increased due to the significant increases
in interest rates over 2022. This has been
partially offset by a reduction in CSM
amortisation following the strengthening
of the mortality assumptions on our
Protection business.
The Group’s Corporate Centre includes net
operating costs in the period of £93 million
(2022: £69 million), which increased due to
investment in central functions to support
our growth ambitions in the first phase of
our journey, partially offset by increased
interest income on Holding Company cash.
Investment return variances and economic
assumption changes
The net positive economic variances of
£147 million (2022: £3,309 million loss) results
from a more stable market environment
compared with the significant volatility
experienced during 2022. The impact of
positive changes to discount rates, primarily
on annuities and including the impact of
methodology refinements, more than offsets
the losses arising from the impact of positive
equity market movements on the hedges
the Group holds to protect the Solvency II
position. As the full value of future profits
impacted by equity markets is not held
on the IFRS balance sheet, this results in
an ‘over-hedged’ position on an IFRS basis.
Amortisation and impairment
of intangibles
The previously acquired in-force business,
relating to IFRS 9 accounted capital-light
fee-based products, is being amortised
As at
FY22
CSM
(net of tax)
Shareholders’
equity
Adjusted
operating profit
before tax
Non-operating
items
Tax credit Other
comprehensive
income (’OCI’)
for the period
Dividends paid
on ordinary
shares
Movement
in CSM
(net of tax)
As at
FY23
£5. 2bn
£2.0bn
£3.2bn
£2.5bn
£2.1bn
£4.6bn
£0.6bn
£0.1bn
£(0.8)bn
£(0.1)bn
£0.2bn
£(0.5)bn
37Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
in line with the expected run-off profile of the
investment contract profits to which it relates.
The amortisation and impairment of acquired
in-force business during the period of £316
million (2022: £347 million) has decreased
year-on-year reflecting the impact of
the business run-off. Amortisation and
impairment of other intangible assets totalled
£6 million in the period (2022: £6 million).
Other non-operating items
Other non-operating items in the period
totalled a £439 million loss (2022: £262
million loss), inclusive of a £66 million gain
recognised on the Sun Life of Canada UK
acquisition. This includes £169 million
expenditure to support our growth strategy
and £36 million impact from setting up a
new European subsidiary that was required
post-Brexit to continue serving some
of our overseas Heritage customers.
Other items include £217 million of costs
relating to finance transformation activities,
£111 million in respect of ongoing integration,
transition and transformation projects,
£12 million of other corporate project
costs, and net other one-off items totalling
£74 million, including costs associated
with the Part VII transfer of three of the
Group’s Life insurance entities.
Lastly, finance costs of £195 million
reflect interest borne on the Group debt
instruments and were broadly stable
year-on-year (2022: £199 million).
Tax charge attributable to owners
The Group’s approach to the management
of its tax affairs is set out in its Tax Strategy
document which is available in the corporate
responsibility section of the Group’s website.
The Group tax credit for the period attributable
to owners is £76 million (2022: £855 million tax
credit) based on a loss (after policyholder tax)
of £(164) million (2022: loss of £(3,512) million).
Note: Numbers in the graph above do not sum due to rounding.
A reconciliation of the tax charge is set out in
note C8 to the Group financial statements.
Contractual Service Margin (‘CSM’)
The CSM represents a stock of future profits
that will unwind into the P&L in future years.
The Group had a CSM (gross of tax) of
£2.9 billion as at 31 December 2023, which
grew by 10% in 2023 (2022: £2.6 billion)
primarily due to new BPA business written,
the acquisition of the SLOC in 2023, interest
accretion and assumption changes, which
was partly offset by the CSM release into
the income statement.
The CSM release in the period represents
c.8% of the closing CSM (gross of tax) pre
release of £3.1 billion. We expect the release
of the CSM (gross of tax) to be c.5–7% over
time, primarily driven by annuities.
Assets under administration
AUA provides 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.
Group AUA as at 31 December 2023 was
£282.5 billion (2022: £259.0 billion), an
increase of 9% year-on-year. This increase
was primarily driven by an £18.7 billion
benefit from positive market and other
movements and £8.0 billion relating to the
SLOC acquisition. Net inflows in Workplace,
Retirement Solutions, Europe and Other
were £4.7 billion, £3.3 billion and £0.3 billion
respectively, but these were offset by £1.6
billion of outflows in Retail and £9.9 billion
of legacy outflows.
Outlook
The investments we are making across our
strategic priorities will support strong growth
in our IFRS adjusted operating profit before
tax over the next few years.
We are targeting £900 million of IFRS
adjusted operating profit in 2026, up from
£617 million in 2023, reflecting a c.50%
increase. This includes the majority of the
£250 million cost savings as well as the
impact of our organic growth and
management actions.
We have an elevated level of non-operating
costs at present, but we expect these to
normalise after we are through our three-
year investment programme. We have also
suffered significant headwinds to shareholders
equity from adverse economics over the past
two years, primarily related to the significant
rise in long-term interest rates and rise in
equities. While future economic impacts are
hard to forecast, we would expect to see
some unwind of this adverse impact if interest
rates return to normalised levels. We would
also earn higher revenue from higher asset
values in our Pensions and Savings business.
The other below the line items are more
predictable and while we expect our
shareholders’ equity to decline over the
coming years, we expect it to remain
positive over the long term.
Our adjusted shareholders’ equity,
inclusive of the CSM, will remain broadly
stable near-term and then begin to grow.
Supported by strong CSM growth from
our annuities business and other
management actions.
As a reminder, our Group consolidated
shareholders’ equity is not a constraint to
the payment of our dividends. This is because
our dividends are paid from the Phoenix
Group Holding Company, which is not
impacted by IFRS 17 and has c.£4.6 billion
of distributable reserves.
Movement of IFRS adjusted shareholders’ equity over 2023
• c.£100m into growth propositions
• c.£200m of capital per annum into annuities
Surplus capital allocation approach:
2024–2026 investment priorities:
• Debt repayment of at least £500m by the
end of 2026
• c.£100m to enhance our asset and liability
optimisation capabilities
• c.£500m of migration, transformation
and cost efficiency investment
• Investment into growth
• Further deleveraging
• M&A
• Return capital to shareholders
Invest to grow
• Operate a progressive and sustainable ordinary dividend policy
• Strong and resilient balance sheet: 140–180% Shareholder Capital Coverage Ratio operating range
Invest to optimise
Invest to enhance
Allocate surplus capital to the highest return opportunities
38 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
52.65p
Total 2023 dividend per share
+2.5%
Final 2023 dividend increase
Capital
allocation
2023 dividend increase
Phoenix has demonstrated a strong dividend
track record over the past 13 years, with a
c.4% compound annual growth rate (‘CAGR’)
since 2011. Our strong strategic and financial
performance in 2023 has supported a 2.5%
recommended increase in the Final 2023
dividend to 26.65p per share, taking the
Total dividend to 52.65p per share.
New capital allocation framework for
the next phase of our journey
As we embark on the next stage of our
journey, we are outlining a new capital
allocation framework.
There are two key underpins to our
framework. The first is that we will operate
a progressive and sustainable ordinary
dividend policy. The second is that we will
maintain our strong and resilient balance
sheet, by operating within a 140–180%
Shareholder Capital Coverage Ratio range.
We will seek to balance the investment of our
2024–2026 surplus capital across our strategic
priorities of grow, optimise and enhance.
In our Grow strategic priority, we will invest
c.£100 million into developing our growth
propositions and c.£200 million of capital
per annum to grow our annuities.
In our Optimise strategic priority, we will
continue our approach of repaying
M&A-related debt using surplus cash, with
an intention to repay at least £500 million
of debt by the end of 2026. This will support
a Solvency II leverage ratio of c.30%
1
by the
end of 2026.
Business review continued
We will also invest c.£100 million into our
asset and liability optimisation capabilities
to support recurring managements over
the long term.
In our Enhance strategic priority, we will invest
c.£500 million on migration, transformation
and cost efficiency programmes bringing
our businesses onto a single Group-wide
operating model that will further enhance
our cost efficiency.
Additional surplus capital, over and above
these committed investments, will be
allocated to the highest return opportunities.
This could include additional investment into
growth, further deleveraging, M&A, and/or
additional capital return to shareholders.
New progressive dividend policy
The Board has evolved Phoenix’s dividend
policy to reflect the confidence it has in the
Group’s strategy. The Group will now operate
a progressive and sustainable ordinary
dividend policy.
The Board will continue to announce any
potential annual dividend increase alongside
the Group’s Full Year results and expects the
Interim dividend to be in-line with the previous
year’s Final dividend. The Board will continue
to prioritise the sustainability of our dividend
over the very long term. Future dividends and
annual increases will continue to be subject
to the discretion of the Board, following
assessment of longer-term affordability.
1 Assuming economic conditions in line with 31 December 2023.
Capital allocation framework:
2023 Grow Optimise
Phoenix Group’s new dividend policy
The Group operates a progressive and sustainable ordinary dividend policy
Enhance 2026
Recurring
uses
Dividend
Excess
cash
£1.1bn
£1.4bn
c.25%
Mid-single digit
percentage growth
over the long term
39Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Growing Operating
Cash Generation
that more than covers
our recurring uses
and supports our
new progressive and
sustainable ordinary
dividend policy.
Outlook
Looking ahead
Our purpose is to help people secure a life
of possibilities. The continued execution
against our three strategic priorities of Grow,
Optimise and Enhance, will support us in
delivering strong financial outcomes for
our shareholders.
Clear financial outcomes for shareholders
We have a new set of ambitious 2026 targets,
across our evolved financial framework of
cash, capital and earnings.
Starting with cash, Phoenix has set three new
cash generation targets. The first is that we
expect Operating Cash Generation to grow
to £1.4 billion in 2026, a c.25% increase from
2023. This growth underpins our Total cash
generation target, with a one-year target
for 2024 of £1.4–1.5 billion, and a three-year
target of £4.4 billion across 2024–2026.
Our cash targets demonstrate our confidence
in our ability to deliver sustainable, growing
cash generation over time.
In terms of capital, we will continue to maintain
a strong Solvency II balance sheet through
our comprehensive hedging approach.
This will see us continue to operate within
our Solvency II SCCR operating range of
140–180% and continue to manage our key
individual risk sensitivities on a Solvency II
surplus basis.
Our intention to repay at least £500 million
of debt by the end of 2026. This will support
us on our path towards a c.30% Solvency II
leverage ratio by the end of 2026, which is an
appropriate steady-state level for our business
absent M&A.
Turning to earnings, we are targeting IFRS
adjusted operating profit to grow c.50% to
£900 million in 2026, as we grow, optimise
and enhance our business. This will include
the majority of the c.£250 million of annual
cost savings we aim to deliver by the end
of 2026.
We expect the improving macroeconomic
outlook, with interest rates and inflation
normalising, to support our future growth
ambitions and targets.
Delivering against the targets across
our evolved financial framework of cash,
capital and earnings, in turn supports our
new progressive and sustainable ordinary
dividend policy.
2024 will be another exciting year for
Phoenix Group on our journey and as we
continue to deliver on our purpose and
our strategy.
Rakesh Thakrar
Group Chief Financial Officer
Growing Operating Cash Generation supports
our new progressive dividend policy
Cash
• £1.4 billion Operating Cash
Generation in 2026
• £4.4 billion of Total cash
generation across 2024–2026
• £1.4-to-£1.5 billion of Total cash
generation in 2024
We have a clear set of supporting targets:
Capital
• 140–180% Shareholder Capital
Coverage Ratio operating range
• Solvency II leverage ratio of c.30%
by the end of 2026
Earnings
• Targeting £900 million of IFRS
adjusted operating profit in 2026
• c.£250m of annual cost
savings by 2026
40 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
NFSI statement
As required by the
Companies Act 2006
sections 414CA and
414CB, this table
outlines our non-financial
and sustainability
information statement
with a reference to
relevant policies and
additional documents.
Non-
financial and
sustainability
information
statement
This section primarily covers our non-financial
and sustainability information as required
by the regulations. Other related information
can be found as follows:
For further details on our business
model see pages 20 to 23.
For further details on our climate-
related financial disclosures see our
TCFD statement on pages 44 to 45.
For further details on our principal
risks and how they are managed,
see pages 46 to 57.
Environment Colleagues Social and community Human rights Anti-bribery
and corruption
Our policies
Phoenix Group is committed to protecting the
environment; the health and wellbeing 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 our
Environmental Management System certified
to ISO 14001 will help us achieve this. We aim to
demonstrate leadership in minimising emissions
that contribute to climate change, including our
direct emissions and working collaboratively with
our suppliers. We are taking steps to decarbonise
our investment portfolio, undertaking effective
stewardship of our assets, and investing in climate
solutions. We are working with decision makers and
peers to driver wider system change, and engaging
customers and colleagues on climate action.
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,
Our Approach to Integrating Environmental,
Social and Governance Considerations 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 wellbeing of colleagues is a key enabler to
build an inclusive, attractive, and safe working environment
that can adapt and respond quickly to change.
We 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 create a workplace
that is diverse, inclusive and reflective of our customers
and communities, where colleagues can bring their whole
selves to work.
The table below outlines our gender diversity metrics
at 31 December 2023
1
:
Customers
Phoenix Group’s Customer Outcomes Risk policy covers the Customer Lifecycle
which includes customer experience and vulnerable customer support, to ensure good
outcomes are being achieved in line with regulatory requirements. The Group continually
improves communications with customers to prevent any potential barriers during
their interactions with us in relation to their policy, empowering them to make informed
decisions should they wish to take any actions. Processes and controls are in place,
facilitating ongoing customer monitoring and oversight, to support the delivery of good
customer outcomes.
Suppliers
Our ESG Supply Chain Standards reinforce our commitment to embedding sustainable
best practice into our supply chain operations, so that our partners are aligned with
Phoenix Group’s values and commitments. We are looking to all our partners and suppliers
to implement requirements and targets which reflect our own standards as a minimum.
By working with partners that share our values and ambitions around sustainability,
we can establish long-term relationships that are both mutually beneficial and which help
to protect the interconnected interests of people and planet. We have focused on the
environmental, social and governance commitments which are connected to the most
material issues in our supply chain, represent best practice, and will have a significant
positive impact in terms of long-term behaviour change.
The Supplier Code of Conduct (‘Code of Conduct’) applies to all suppliers which
provide goods or services to us and/or any of our subsidiaries. The terms of the Code
of Conduct are in addition to any other commercial or contractual terms or obligations
agreed and outline the minimum conduct standards to which suppliers must adhere
when doing business with us, as well as supporting operational resilience and supporting
strategic growth.
Communities
We aim to make a positive and lasting difference to the communities in which we are
based, addressing social issues identified. Through our commitment to being a responsible
business our colleagues can participate in a range of community-based activities, utilising
their collective time, skills and resources. All colleagues across the UK and Ireland are
entitled to three days’ volunteering during business hours for individual activities or team
volunteering. We match fundraising donations colleagues make to approved registered
charities of their choosing across the year, in line with our community approach. We also
give our colleagues the opportunity to donate to registered charities across the UK and
Europe through the payroll giving scheme Give as You Earn where they can support their
chosen charities.
At Phoenix Group, we recognise our
responsibility to respect human rights
and do this in accordance with:
• the International Bill of Human Rights; and
• 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 multinational
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 2023 we published our Human Rights
policy, which is Group-wide, and applies to all
entities, business units and operations and we
expect all employees to adhere to the policy
in their work. We are committed to working
with our partners to multiply our impact and
we expect our suppliers, contractors, asset
managers and investee companies to be
aware of our policy and respect human rights
in their business operations.
We are committed to updating our Human
Rights policy at least every three years.
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. This includes,
for example:
• a Group Financial Crime
Prevention Policy that
covers Anti-Bribery and
Corruption risk;
• a Code of Ethics for
ethical behaviour and
general standards;
• a Group Stewardship
policy which details our
stewardship approach; and
• mandatory training for
our employees covering
compliance with the
Bribery Act.
The Group’s Financial Crime
Prevention 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.
Board members
1
Female 5 36%
Male 9 64%
Senior managers
2
Female 31 32%
Male 66 68%
All employees
3
Female 3,986 51%
Male 3,771 49%
Senior managers and
their direct reports
4
Female 129 41%
Male 161 59%
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, see page 85.
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.
Adherence to the HR policy is managed by Group
HR via quarterly control assessments. Furthermore,
during 2023, control testing was integrated as part
of the Risk Management Framework and HR controls
will now additionally be tested on a cyclical basis.
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 wellbeing.
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 oversees the delivery of and compliance to our Information Security
policy, utilising capabilities such as Threat Intelligence, Penetration Testing and
Vulnerability Management to identify and control cyber risks. We manage a
comprehensive programme of continuous improvement to our Information Security
Framework collaborating with industry experts and the UK authorities to embed best
practices throughout. The Group is well positioned to resist cyber-attacks with no
significant cyber-related incidents in 2023, and there was no compromise to our data
as a result of any cyber events within our supply chain.
Complaint activity including those referred to the Financial Ombudsman Service and
the Pensions Ombudsman is monitored, and we also resolve a significant proportion
of complaints across the Group in fewer than three days.
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 developed a three-year
roadmap to address gaps, which we have
been progressing over 2023.
We continue to identify and assess the salient
human rights issues that we intend to prioritise
for further action across our operations and
value chain as part of our due diligence
processes. This two-year process includes
a portfolio-level human rights assessment
and an assessment of 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 in all aspects of
financial crime prevention and
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 44
to 45 and our sustainability actions in our 2023
Sustainability Report and Climate Report.
Our GHG emissions and energy consumption
disclosure can be found in the ESG data appendix.
Other relevant colleague engagement, including
Diversity, Equity and Inclusion data can be found
on pages 32 to 33 as well as in the ‘Supporting our
colleagues’ and ‘Diversity, equity and inclusion’
sections of our 2023 Sustainability Report.
Information on our customer satisfaction scores and initiatives can be found on page 25
in our 2023 Sustainability Report.
Information on relevant supply chain metrics and communities metrics can be found
in our 2023 Sustainability Report.
During 2023 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:
www.thephoenixgroup.com/our-impact/
responsible-business/reports-policies/
• Health and wellbeing approach:
www.thephoenixgroup.com/careers/wellbeing/
• Reward and benefits: www.thephoenixgroup.com/
careers/reward-benefits/
• Diversity, equity and inclusion: www.thephoenixgroup.
com/about-us/our-team/diversity-equity-inclusion/
• Privacy policy: www.thephoenixgroup.com/site-services/privacy-hub/
• ESG Supply Chain Standards: www.thephoenixgroup.com/media/oynbf12x/
esg-supply-chain-standard.pdf
• Community Statement: www.thephoenixgroup.com/media/pfmo132f/
community-statement/
• Phoenix Group 2023 Modern Slavery
Statement: www.thephoenixgroup.com/
media/bgdokpfp/phoenix_modern_
slavery_statement_2023.pdf
• Phoenix Group 2023 Human Rights policy:
www.thephoenixgroup.com/media/
x2hnlgkq/human_rights_policy_2023.pdf
• Governance: www.
thephoenixgroup.com/
investors/governance/
• Anti-bribery statement:
www.thephoenixgroup.com/
investors/governance/
anti-bribery/
41Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Environment Colleagues Social and community Human rights Anti-bribery
and corruption
Our policies
Phoenix Group is committed to protecting the
environment; the health and wellbeing 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 our
Environmental Management System certified
to ISO 14001 will help us achieve this. We aim to
demonstrate leadership in minimising emissions
that contribute to climate change, including our
direct emissions and working collaboratively with
our suppliers. We are taking steps to decarbonise
our investment portfolio, undertaking effective
stewardship of our assets, and investing in climate
solutions. We are working with decision makers and
peers to driver wider system change, and engaging
customers and colleagues on climate action.
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,
Our Approach to Integrating Environmental,
Social and Governance Considerations 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 wellbeing of colleagues is a key enabler to
build an inclusive, attractive, and safe working environment
that can adapt and respond quickly to change.
We 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 create a workplace
that is diverse, inclusive and reflective of our customers
and communities, where colleagues can bring their whole
selves to work.
The table below outlines our gender diversity metrics
at 31 December 2023
1
:
Customers
Phoenix Group’s Customer Outcomes Risk policy covers the Customer Lifecycle
which includes customer experience and vulnerable customer support, to ensure good
outcomes are being achieved in line with regulatory requirements. The Group continually
improves communications with customers to prevent any potential barriers during
their interactions with us in relation to their policy, empowering them to make informed
decisions should they wish to take any actions. Processes and controls are in place,
facilitating ongoing customer monitoring and oversight, to support the delivery of good
customer outcomes.
Suppliers
Our ESG Supply Chain Standards reinforce our commitment to embedding sustainable
best practice into our supply chain operations, so that our partners are aligned with
Phoenix Group’s values and commitments. We are looking to all our partners and suppliers
to implement requirements and targets which reflect our own standards as a minimum.
By working with partners that share our values and ambitions around sustainability,
we can establish long-term relationships that are both mutually beneficial and which help
to protect the interconnected interests of people and planet. We have focused on the
environmental, social and governance commitments which are connected to the most
material issues in our supply chain, represent best practice, and will have a significant
positive impact in terms of long-term behaviour change.
The Supplier Code of Conduct (‘Code of Conduct’) applies to all suppliers which
provide goods or services to us and/or any of our subsidiaries. The terms of the Code
of Conduct are in addition to any other commercial or contractual terms or obligations
agreed and outline the minimum conduct standards to which suppliers must adhere
when doing business with us, as well as supporting operational resilience and supporting
strategic growth.
Communities
We aim to make a positive and lasting difference to the communities in which we are
based, addressing social issues identified. Through our commitment to being a responsible
business our colleagues can participate in a range of community-based activities, utilising
their collective time, skills and resources. All colleagues across the UK and Ireland are
entitled to three days’ volunteering during business hours for individual activities or team
volunteering. We match fundraising donations colleagues make to approved registered
charities of their choosing across the year, in line with our community approach. We also
give our colleagues the opportunity to donate to registered charities across the UK and
Europe through the payroll giving scheme Give as You Earn where they can support their
chosen charities.
At Phoenix Group, we recognise our
responsibility to respect human rights
and do this in accordance with:
• the International Bill of Human Rights; and
• 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 multinational
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 2023 we published our Human Rights
policy, which is Group-wide, and applies to all
entities, business units and operations and we
expect all employees to adhere to the policy
in their work. We are committed to working
with our partners to multiply our impact and
we expect our suppliers, contractors, asset
managers and investee companies to be
aware of our policy and respect human rights
in their business operations.
We are committed to updating our Human
Rights policy at least every three years.
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. This includes,
for example:
• a Group Financial Crime
Prevention Policy that
covers Anti-Bribery and
Corruption risk;
• a Code of Ethics for
ethical behaviour and
general standards;
• a Group Stewardship
policy which details our
stewardship approach; and
• mandatory training for
our employees covering
compliance with the
Bribery Act.
The Group’s Financial Crime
Prevention 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.
Board members
1
Female 5 36%
Male 9 64%
Senior managers
2
Female 31 32%
Male 66 68%
All employees
3
Female 3,986 51%
Male 3,771 49%
Senior managers and
their direct reports
4
Female 129 41%
Male 161 59%
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, see page 85.
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.
Adherence to the HR policy is managed by Group
HR via quarterly control assessments. Furthermore,
during 2023, control testing was integrated as part
of the Risk Management Framework and HR controls
will now additionally be tested on a cyclical basis.
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 wellbeing.
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 oversees the delivery of and compliance to our Information Security
policy, utilising capabilities such as Threat Intelligence, Penetration Testing and
Vulnerability Management to identify and control cyber risks. We manage a
comprehensive programme of continuous improvement to our Information Security
Framework collaborating with industry experts and the UK authorities to embed best
practices throughout. The Group is well positioned to resist cyber-attacks with no
significant cyber-related incidents in 2023, and there was no compromise to our data
as a result of any cyber events within our supply chain.
Complaint activity including those referred to the Financial Ombudsman Service and
the Pensions Ombudsman is monitored, and we also resolve a significant proportion
of complaints across the Group in fewer than three days.
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 developed a three-year
roadmap to address gaps, which we have
been progressing over 2023.
We continue to identify and assess the salient
human rights issues that we intend to prioritise
for further action across our operations and
value chain as part of our due diligence
processes. This two-year process includes
a portfolio-level human rights assessment
and an assessment of 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 in all aspects of
financial crime prevention and
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 44
to 45 and our sustainability actions in our 2023
Sustainability Report and Climate Report.
Our GHG emissions and energy consumption
disclosure can be found in the ESG data appendix.
Other relevant colleague engagement, including
Diversity, Equity and Inclusion data can be found
on pages 32 to 33 as well as in the ‘Supporting our
colleagues’ and ‘Diversity, equity and inclusion’
sections of our 2023 Sustainability Report.
Information on our customer satisfaction scores and initiatives can be found on page 25
in our 2023 Sustainability Report.
Information on relevant supply chain metrics and communities metrics can be found
in our 2023 Sustainability Report.
During 2023 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:
www.thephoenixgroup.com/our-impact/
responsible-business/reports-policies/
• Health and wellbeing approach:
www.thephoenixgroup.com/careers/wellbeing/
• Reward and benefits: www.thephoenixgroup.com/
careers/reward-benefits/
• Diversity, equity and inclusion: www.thephoenixgroup.
com/about-us/our-team/diversity-equity-inclusion/
• Privacy policy: www.thephoenixgroup.com/site-services/privacy-hub/
• ESG Supply Chain Standards: www.thephoenixgroup.com/media/oynbf12x/
esg-supply-chain-standard.pdf
• Community Statement: www.thephoenixgroup.com/media/pfmo132f/
community-statement/
• Phoenix Group 2023 Modern Slavery
Statement: www.thephoenixgroup.com/
media/bgdokpfp/phoenix_modern_
slavery_statement_2023.pdf
• Phoenix Group 2023 Human Rights policy:
www.thephoenixgroup.com/media/
x2hnlgkq/human_rights_policy_2023.pdf
• Governance: www.
thephoenixgroup.com/
investors/governance/
• Anti-bribery statement:
www.thephoenixgroup.com/
investors/governance/
anti-bribery/
42 Phoenix Group Holdings plc Annual Report and Accounts 2023
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 1 January 2023 to 31 December 2023,
and the 2022 comparative year. Emissions disclosed here relate to energy
consumption, facilities and activities where the Group has operational control
1
.
Methodology
The 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
(using the EcoAct Homeworking Emissions
Whitepaper 2020) 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
fall 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:
• a location-based method that reflects the
average emissions intensity of the national
electricity grids from which energy is drawn.
• a market-based method that 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, or location-based factors where
residual mixes are unavailable.
This year, market-based emissions have
shifted above location-based as the
primary measure of GHG emissions to
focus on the actual carbon impact of
energy consumption. This recognises
the organisation’s actions to procure
renewable electricity through robust
contractual agreements.
An exclusion has been made under
business travel for the Group’s owned fleet,
whereby no data was recorded in 2023 for
two electric vans that were transferred out
of the Group’s control in August 2023. It is
estimated that this would account for less
than 0.1% of Scope 1 GHG emissions.
Energy consumption and greenhouse
gasemissions
2
Table 1: Absolute energy consumption
inGWh
Consumption (GWh)
1
from: 2023 2022
Building Electricity 22.6 24.1
Building Natural Gas 16.2 18.7
Business Travel
3
0.1 0.4
Homeworking Electricity 1.6 1.5
Homeworking Natural Gas 24.3 22.9
Total Consumption 64.8 67.6
1 Energy units: 1 GWh = 1,000,000 kWh.
Table 2: Absolute GHG emissions in tonnes of CO
2
e
Emissions
1
(tCO
2
e) from: 2023 2022
(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 2,433 2,433 2,684 2,684
Scope 2 – Electricity purchased for landlord shared services
and own use (purchase of heat, steam and cooling not applicable) 23 3,856 7 4,437
Scopes 1 + 2 – Mandatory carbon footprint disclosure 2,456 6,289 2,692 7,121
Scope 3 – Category 3: Fuel and Energy Related Activities (T&D) 310 310 356 356
Scope 3 – Category 6: Business Travel 2,746 2,746 1,149 1,149
Scope 3 – Category 7: Employee Commuting (incl. Homeworking Emissions) 5,083 4,884 4,847 4,631
Scope 3 – Category 8: Upstream Leased Assets 762 1,579 2,018 1,826
Scope 3 – Category 13: Downstream Leased Assets 0 242 0 313
Scopes 1 + 2 + 3 – Voluntary carbon footprint 11,357 16,050 11,062 15,395
Carbon Offsets Purchased
2
1,870 1,994
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 – 2023 factors will not be published until late 2024. Therefore all 2023 consumption data are converted using the factors actually arising
in 2019 (except business travel which uses DEFRA factors as published in 2023).
2 Carbon Offsets Purchased relate to Phoenix Group’s natural gas procured for and consumed within its directly managed sites, which is certified as ‘carbon neutral’ by the supplier.
1 EY has provided limited assurance over a selection of our 2023 ESG metrics, including operational Greenhouse gas emissions.
For the full scope of assured ESG metrics please refer to our Sustainability Report on page 47 for EY’s Assurance Statement.
2 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).
3 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.
43Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Commentary on Phoenix
Group’sperformance
Overall, in 2023 there was 38.9 GWh of
Phoenix Group global energy consumption
(building energy and business travel in
employees or company owned vehicles) as
shown in Table 1, 95% of which was from UK
operations. This is a slight decrease on the
43.2 GWh of global energy consumption
reported in 2022 and is primarily due to the
impacts of ongoing energy efficiency actions
being recognised. The de-occupation and
closure of multiple sites in 2022 has also
contributed to this decrease. Furthermore,
25.9 GWh of energy consumption from
employee homeworking has been estimated
in 2023, of which 92% occurred within the
UK. This is a slight increase compared to
2022, which has been primarily driven by
a small reduction in office attendance for
Group employees in 2023.
The Group’s GHG emissions (location-based
Scope 1 and 2, per Table 2) have decreased
12% in 2023. In contrast, business travel has
seen a significant increase of 139% over the
same period, which is a result of the return
to in-person activities, as business continues
to return to normal following the COVID-19
pandemic and virtual ways of working.
A refreshed travel carbon reduction plan
is in progress to address this increase.
The Group continues to procure
approximately 100% of its electricity from
certified renewable sources, which is why
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
avoidance offsets for natural gas consumed
in its owned and occupied assets. Whilst
exact data is unavailable, this has been
estimated as 1,870 tCO
2
e in 2023.
Energy intensity metrics
The Group’s chosen operational intensity
metrics detail GHG emissions per occupied
floor area (m
2
) and per full-time employee
(‘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 12 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 total Scope 1 and 2 emissions for these
buildings were divided by the applicable
occupied floor area and FTEs respectively.
The m
2
intensity has continued to decrease
in 2023, which is the result of the Group’s
ongoing efforts to improve energy efficiency
and reduce its impact on the environment
through its operations, as described below
in the Energy Efficiency Action section.
The FTE intensity metric has also continued
to decrease, with a 13% reduction in the
location-based intensity metric and a 15%
decrease in the market-based intensity
metric. As of 2023, market-based emissions
are the Group’s primary intensity metric,
as this recognises the impact of renewable
energy on the Company’s transition to
net zero.
In February 2023, approximately 1,222
colleagues in Standard Life House were
TUPE transferred to TCS/Diligenta. To
reflect this change more accurately, these
staff have been retained within the FTE
number as they are undertaking work
exclusively for PhoenixGroup, which is
contractually obliged to provide them with
space. Using the previous methodology,
which does not include these additional
FTEs, the Group’s market and location-based
FTE intensity metrics in 2023 were 0.35
tCO
2
/FTE and 0.75 tCO
2
/FTE, respectively.
However, using the new methodology,
the Group’s market and location-based
FTE intensity metric in 2023 is 0.29 tCO
2
/
FTE and 0.63 tCO
2
/FTE, respectively.
These figures represent a significant
reduction compared to 2022, highlighting
the progress made by the Group to improve
its efficiency and reduce GHG emissions.
Table 3: Phoenix Group’s chosen intensity measurement
Emissions (kilogrammes and tonnes) of CO
2
e per chosen intensity metric: 2023 2022
(market-based) (location-based) (market-based) (location-based)
Scope 1+2 emissions from occupied premises per floor area (kg CO
2
e/m
2
) 24 51 26 57
Scope 1+2 emissions from occupied premises per full-time equivalent employee (tCO
2
e/FTE) 0.29 0.63 0.34 0.73
Energy efficiency action
(climate change actions)
To maximise the environmental impact of
capital expenditure, spending has been
prioritised based on the potential carbon
impact of projects across the operational
estate. As in previous years, projects were
often 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 conducted in a particular year.
The following is a selection of key projects
and actions undertaken by the Group
in 2023:
• Completed the final stage of the
Wythall PV integrated glass roof project,
which is now generating at full capacity.
• Consolidated facilities management
service providers, allowing for a more
optimised and efficient workstream
to target energy and carbon saving
projects with dedicated contract
energy professionals.
• Began the process for collecting more
frequent energy data across the estate
to measure, monitor and identify energy
saving measures more accurately.
• Achieved ISO 14001 certification,
providing an effective structure to allow
for continual improvement in relation to
our premises’ environmental performance.
In line with the Group’s Eliminate-Reduce-
Substitute-Compensate carbon reduction
model, applicable opportunities will
continue to be reviewed. Additionally,
further technological solutions are being
investigated to continue 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.
Previous year actions:
• Continued to roll out higher efficiency
LED lighting across applicable buildings,
ensuring that any new installations are the
most energy efficient available by default.
• 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. This has resulted in gas
consumption savings of 1,950 MWh
per year over the applicable buildings.
• Feasibility studies and design work
continue to assess options for heat
pumps, electric boilers or hybrid
combinations to replace gas boilers
in two applicable properties.
44 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Task Force on Climate-Related Financial Disclosures (‘TCFD’) – summary report
The Group fully supports the recommendations of the TCFD and has published
a Climate Report – prepared in line with the recommended disclosures of the TCFD
– to allow all stakeholders to better understand the impact of climate-related risks
and opportunities on the Group and how these are measured and managed.
TCFD compliance summary
We continue to disclose in line with the
recommendations of the Task Force on
Climate-related Financial Disclosures
(‘TCFD’), in compliance with the Financial
Conduct Authority (‘FCA’) Listing Rule
9.8.6R(8). The Group has obtained limited
assurance on certain figures presented
in the Climate Report – further information
on page 63.
Governance
Disclose the organisation’s governance around climate-related risks and opportunities.
Recommended disclosure Summary of progress Further information
a. describe the
board’s oversight
of climate-related risks
and opportunities.
• The Board has oversight of the Group’s overall approach to climate change; the Board Sustainability Committee
monitors performance against the Group’s sustainability strategy, including climate; and the Board Risk Committee
has oversight of climate-related risks and opportunities.
• Climate risks continue to be identified and monitored via the Group’s established Risk Management Framework.
• A dashboard covering key climate risks is integrated into regular risk reporting for the Life and Group
Board committees.
• The Board met seven times and all meetings considered climate-related matters discussed at relevant committees.
Climate
Report
pages
21 – 22
b. describe
management’s
role in assessing
and managing
climate-related risks
and opportunities.
• Management have clearly defined roles and responsibilities relating to the management, oversight and reporting
of climate-related matters.
• The Group’s Chief Executive Officer, Andy Briggs, is the Executive Board Director responsible for implementation
and delivery of the Group’s overall strategy (including climate).
• Senior Management Function holders (‘SMF’s) have been assigned responsibilities for climate-related financial risk
under the Senior Managers and Certification Regime.
• Individual responsibility for ensuring the appropriate identification, assessment, management and reporting of
climate-related financial risks and opportunities that could impact the Group sits with the Group’s Chief Financial
Officer (‘CFO’) and the Group’s Chief Risk Officer (‘CRO’).
Climate
Report
pages
23 – 24
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning where such information is material.
Recommended disclosure Summary of progress Further information
a. describe the
climate-related
risks and opportunities
the organisation has
identified over the short,
medium and long-term.
• The Group undertakes qualitative analysis to identify and assess the climate-related risks and opportunities,
both physical and transition, which could materially impact different areas of the business over short-, medium-,
and long-term time horizons.
• Short-term: 0–1 year – this is consistent with the liquidity monitoring time horizon for setting capital requirements
under Solvency II; Medium-term: 1–5 years – this is consistent with the Group financial planning process which
considers the medium-term plans and strategy for the business; and Long-term: over 5 years – this captures
the long-term nature of the business and the risks that may emerge beyond the financial planning process.
• The material risks and opportunities indentified as likely to crystallise over the short-, medium- and long-term
are: climate risk exposure in the investment portfolio; emerging government policy, regulatory and legal changes;
reputational damage if climate risks are not appropriately managed; disruptions to business operations from
climate impacts; and changing demand for products, funds and solutions.
Climate
Report
pages
26 – 27
b. describe the impact
of climate-related risks
and opportunities on
the organisation’s
businesses strategy,
and financial planning.
• The Group has assessed the impact of climate-related risks and opportunities on the business, strategy and
financial planning.
• The management of material climate-related risks and opportunities has been embedded into the businesses
strategy and financial planning process, recognising that this is an important process in delivering the Group’s
strategic ambition to meet more of the long-term savings and retirement needs of existing and new customers.
• The Group’s medium- to long-term strategic planning incorporates the consideration of the financial impacts
of climate-related risks and opportunities. This includes: the increased operational costs associated with
regulatory compliance; the impact of physical risk on Group assets; and shifts in consumer behaviours driven
by environmental concerns.
Climate
Report
pages
26 – 34
Given the progress we have made
with embedding the recommendations
of the TCFD across the business and the
increasing need for transparent reporting,
we have opted to publish a standalone
Climate Report which is available on our
Group website.
The table below provides a summary of
how we have complied with each of the
recommendations of the TCFD framework.
We have included references to other
sections of the Annual Report or the Climate
Report, where further information relating
to our compliance with the each of the
TCFD recommendations can be found.
In response to FCA guidance 9.8.6FG,
we have also published a standalone
Net Zero Transition Plan which sets out
our approach to achieving net zero across
our business by 2050.
For more information see our
Climate Report
45Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Strategy continued
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning where such information is material.
Recommended disclosure Summary of progress Further information
c. describe the
resilience of the
organisation’s strategy,
taking into consideration
different climate-related
scenarios including a 2C
or lower scenario.
• Both quantitative and qualitative scenario analysis are used to model the impact of different temperature
pathways on the business to gain insight into how climate-related risks may materialise over time.
• The two quantitative scenarios are from the Network for Greening the Financial System (‘NGFS’) Phase III:
an orderly transition to net zero by 2050 which starts immediately (1.5°C or below); and a delayed transition
to net zero (2°C or below). Physical risk exposure is also assessed in sub-sections of the investment portfolio
and qualitative scenarios used to assess the impact of potential extreme events on the business that are not
easily quantifiable through financial modelling.
• The analysis indicated no significant threat to the Group’s business strategy or processes in the near-term.
However, they do indicate a potential reduction in investment returns and disruption to the operations and
strategy of the business if action does not continue to be taken to manage and mitigate the risk.
• There are a number of limitations/assumptions to the Group’s scenario analysis approach, including the changing
asset mix of the Group and the quality/coverage of data. Only a subset of climate outcomes have been assessed
and there remain infinite possible pathways that could emerge and pose new possible threats to the Group.
Climate
Report
pages
35 – 39
Risk management
Disclose how the organisation identifies, assesses, and manages climate-related risks.
Recommended disclosure Summary of progress Further information
a. describe the
organisations processes
for identifying and
assessing climate-
related risks.
• A number of tools are used to understand our climate risk exposures, including: annual stress testing; carbon
footprinting exercises for our assets and operations; horizon scanning; and monitoring and reporting progress
against climate risk metrics and targets.
• The materiality of climate risks are assessed qualitatively on an ongoing basis, building on the processes noted
above. Individual business areas ensure strategies are in place to manage climate risk given the materiality.
• Climate-related risks continue to be monitored via the Group’s established emerging risk processes.
Climate
Report
pages
41 – 43
b. describe the
organisation’s processes
for managing
climate-related risks.
• Examples of how key components of our strategy and wider business processes are considering and actively
reducing material climate risks include: decarbonising our investment portfolio; investing in climate solutions;
stewardship; engaging with our customers; engaging with policymakers and regulators; decarbonising our
operations and supply chain; scenario analysis; and the monitoring and measurement of climate metrics.
Climate
Report
pages
26 – 34
c. describe how
processes for
identifying, assessing
and managing
climate-related risks
are integrated into the
organisations overall
risk management.
• The Group Risk Management Framework (‘RMF’) sets out how we identify, assess, control, monitor, manage
and report on the risks to which the Group is, or could be, exposed. This includes climate-related risks.
• The RMF supports the identification of risks both quantitatively and qualitatively, and from a top-down and
bottom-up perspective at the Group-level.
• The Group continually reviews the forward-looking landscape to ensure it sufficiently identifies, assesses,
controls, monitors, manages, and reports on emerging risks.
• The Group continues to develop its internal climate risk reporting to reflect market best practice and enable
effective measurement of climate risk and tracking of progress made against the Group’s net zero targets.
Climate
Report
pages
41 – 43
Metrics and targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where
such information is material.
Recommended disclosure Summary of progress Further information
a. disclose the
metrics used by the
organisation to assess
climate-related risks
and opportunities
in line with its
strategy and risk
management process.
• A number of metrics are used across the Group’s investment portfolio and operations to help measure and manage
exposure to climate risk.
• The following metrics are used to understand how aligned the Group’s investment portfolio is to a net zero economy
and how resilient it is to transition risk: absolute portfolio emissions; economic and revenue intensity; percentage
of listed asset portfolio exposed to high transition risk industries; proportion of investee companies that have set
science-based targets.
• Physical risk metrics are being determined to understand which sectors and geographies are susceptible to
physical risk.
• Operational emissions are tracked through intensity metrics per full time employee (‘FTE’) and the Group reports
both market-based performance as well as location-based performance. In addition, a location-based per floor area
metric is used track the impact of efficiency initiatives undertaken within Group buildings.
• Our Scope 3 (purchased goods and services and capital goods) have been indicatively modelled using spend data
alongside average industry emissions factors and enhanced with supplier data.
Climate
Report
pages
45 – 57
SECR
pages
42 – 43
b. disclose Scope 1, 2, 3
GHG emissions and the
related risks.
• The Group’s absolute Scope 1, 2 and 3 emissions calculated at year-end 2023 are as follows:
• Investment portfolio (financed) emissions: 18.1 MtCO
2
e^ (for assets footprinted at year-end 2023).
• Operations emissions: 11,357 tCO
2
e (Scopes 1, 2 and 3, voluntary carbon footprint, market-based).
• Supply chain emissions: 124,943 tCO
2
e (indicatively modelled emissions based on supplier spend data).
• A phased approach has been taken to measuring the baseline of the Group’s investment portfolio.
The baseline will continue to be expanded to cover the assets in scope of our 2030 interim target.
Climate
Report
pages
45 – 57
SECR
pages
42 – 43
c. describe the
targets used by
the organisation to
manage climate-related
risks and opportunities
and performance
against targets.
• Ambitious targets have been set across the Group’s investment portfolio, operations and supply chain to help
navigate progress towards meeting the Group’s net zero by 2050 ambition.
• Targets include: net zero business by 2050; net zero investment portfolio and supply chain by 2050; net zero
operations by 2025; a 25% reduction in investment portfolio emissions by 2025; and at least a 50% reduction
by 2030.
• Scenario analysis indicates that the Group is on track to achieve its 2025 targets under most scenarios,
if the actions committed to are implemented.
• Achieving set targets beyond 2025 is less certain as the Group will become increasingly dependent on
decarbonisation in the wider economy and actions by others, in particular government, regulators and
high transition risk sectors.
Climate
Report
pages
45 – 57
SECR
pages
42 – 43
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
46 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
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 strategy.
Risk management
Our Risk Management Framework
The RMF is aligned to the principles
of the International Organization
for Standardizations’ (’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 Group continues to operate in a volatile
risk environment with multiple external
factors requiring navigation to enable the
Group to deliver on its strategic priorities.
Geopolitical risk remains most prominent.
Tensions in the Middle East have escalated,
and whilst the Group has low exposure
to assets heavily influenced by the price
of gas and oil, it is closely monitoring
impacts to inflation or interest rates which
may occur from disruption to Red Sea
shipping. The Group’s Stress and Scenario
testing programme continues to consider
a range of adverse circumstances to
help the Group and its Life Companies
determine any actions needed to
respond to economic pressures.
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 and continues to engage in industry
consultations as the draft regulations
are refined. Progressing key tasks on
the implementation plan for the Financial
Conduct Authority’s (‘FCA’) new Consumer
Duty is another key area of focus, which
is well aligned to the Group’s purpose
of helping customers achieve a life of
possibilities. The Group supports the FCA’s
Sustainability Disclosure Requirements
(‘SDR’) and investment labelling
requirements and has mobilised a project
to ensure its practices align with the new
regulations. Additionally, work is underway
to provide a response to the FCA following
the Advice Guidance Boundary Review
consultation paper. The Group recognises
the importance of this review, which aligns
well to the Group’s purpose and strategy.
The Group monitors developments across
the political environment and engages with
political parties, regulators and industry
bodies on reforms which could help
people live better, longer lives. In order
to support customers on their journey
to and through retirement, the Group
places significant focus on monitoring and
managing sustainability risks, including
climate change, to ensure ongoing
resilience over the long term to such risks.
The Group remains alert to the risk of cyber-
attacks which could impact the Group or
its strategic partners directly, or indirectly
via impact to customers and colleagues
should state infrastructure be targeted.
Risk Management Framework
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47Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
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
ofthe 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
theGroup’s ORSA cycle outlined to the
right. The Group’s ORSA cycle brings
together interlinked 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 strategy.
The Group’s risk strategy supports a
more stable, well-managed business
with improvedcustomer, shareholder,
colleague and societal outcomes in
line with Phoenix Group’ strategy.
The Group achieves its overall purpose
and 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
risksthat are taken. To help bring focus
to therisks that it seeks to mitigate, the
Group has categorised its Risk Universe
into ‘Fundamental’, ‘Consequential –
Active’ or ‘Consequential – Passive’.
Risk culture
The Group defines its vision for risk culture
as an environment that supports informed
decision-making and controlled risk-taking.
Through nurturing a good risk culture, the
business can foster innovation, embrace
change, and strategically differentiate itself
from its competitors.
This vision is supported by the Group’s
Risk Culture Framework, which articulates
an ambition to support colleagues to
demonstrate attitudes and behaviours
that are in line with this vision through
comprehensive measurement
and proactive management.
A Risk Culture Report is provided to Phoenix
Group’s Board Risk Committee twice a year,
capturing qualitative observations from
across the business and a dashboard of
quantitative data to measure the Group’s risk
culture and identify areas for improvement.
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 strategic objectives.
The Group’s risk appetite statements
establish the amount and type of risk
that the Group is willing to take in order
to meet our strategic objectives, and
are a key tool in balancing the interests
of different stakeholders. The Group’s
Risk Appetite Framework operates using
a three tiers approach to cascade the
Board’s risk appetites through to lower
level risk policies. The Risk Appetite
Framework is reviewed on an annual basis.
The following Board-approved risk appetite
statements are adopted by the Group:
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 our
customers, employees, shareholders
and other stakeholders by operating a
robust control environment that meets
the requirements of the approved
controls objectives for all risks within
the Group’s Risk Universe.
ORSA process cycle
48 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Risk management continued
Conduct – The Group acts to deliver good
outcomes for customers and maintains high
conduct standards in line with regulatory,
customer and market expectations. If good
outcomes and/or high conduct standards
are not being delivered, the Group will
put it right in a fair and prompt manner.
The standards all colleagues are expected
to achieve are detailed in our Group Code
of Conduct. The Group takes breaches of
our code seriously and they may result in
disciplinary action being taken. The Group
has no tolerance for deliberate misconduct.
Sustainability – The Group seeks to be
a leader in informing system change on
the key sustainability issues linked to our
purpose and strategy. We want to use
our position in the market to drive positive
change for customers and wider society
over the long term. Our Sustainability
Strategy is designed to take advantage of
sustainability opportunities and manage
sustainability risks in a way that is transparent,
affordable, and aligned with good customer
outcomes and regulatory requirements.
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 risk taxonomy
and 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 its
Conduct Strategy and sustainability risk
management 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
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 risk
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 Sustainability
Risk Management Framework overarch all
risk policies to provide a holistic view of
conduct and sustainability risks. 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
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. Measures are in place during each
Framework refresh to allow for continuous
improvement in risk management
throughout the business by seeking input
from colleagues and industry bodies.
First line: Management
Management of risk is delegated from the
Board to the Group Chief Executive Officer,
the Executive Committee (‘ExCo’) 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
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. Each annual audit
plan includes focus on different components
of the RMF, and each individual audit provides
an opinion on the Control Environment
and RMF Operation for the area in focus.
Following each audit, ratings and output
are reported to the Board Audit Committee.
The Governance framework in operation
throughout the Group can be found in the
chart overleaf.
Governance framework
Board
Second line
of defence
Executives
Chief Risk Officer
Jonathan Pears
First line
of defence
Management
Third line
of defence
Phoenix Group
Holdings plc
Board
Group Chief Executive Officer
Andy Briggs
Group Chief Financial Officer
Rakesh Thakrar
Group
Functions
Group
Internal Audit
Group Risk
and Compliance
Board
Remuneration
Committee
See page 71 See page 71 See page 71 See page 71 See page 71
Board
Nomination
Committee
Board
Sustainability
Committee
Board
Audit
Committee
Board
Risk
Committee
Business Unit
Management
49Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
Emerging risk
The Group defines an emerging risk (or
opportunity) as an event that is perceived
to be potentially material but is not yet fully
understood. Emerging risks could either
be novel or connected with existing risks
but where the context, conditions and/or
constraints are subject to material changes.
The distinction between a current risk and
an emerging risk predominantly relates to the
amount of available information, with fewer
details available for emerging risks meaning
that likelihood and severity impacts are more
uncertain. Emerging risks or opportunities
do typically take longer to crystallise, but in
many cases immediate actions are needed
so that risks can be pre-emptively mitigated,
or opportunities can be fully maximised.
Regular conversations at Board level
help to drive out potential new risks and
opportunities, pulling on the collective
expertise and experiences of senior
individuals. It is a requirement under
the Strategic Risk policy for business
unit or function management Boards
and ExCo to receive an emerging risks
and opportunities dashboard at regular
intervals and be asked to consider
whether any item should be considered
within existing strategic ambitions.
Strategic risk management
Strategic risks threaten the achievement of
the Group’s purpose and 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
The Group uses a partial Internal Model
for calculation of its solvency capital
requirement. 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.
The Group uses the Governance and
Compliance Manager (‘GCM’) system,
allowing colleagues across the three lines of
defence to identify and report any potential
emerging or material risks formally, enabling
suitable owners to be assigned to manage
these risks and facilitates tracking to closure.
50 Phoenix Group Holdings plc Annual Report and Accounts 2023
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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
2022 Annual Report and Accounts, published in March 2023.
Principal risks and uncertainties
facing the Group
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, 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 2022
Annual Report and Accounts have been
retained. The articulation of the principal
risks related to transitioning acquired
businesses and Environmental, Social and
Governance (‘ESG’) has been refined to
reflect the evolution of how these risks could
impact the Group. The overall level of risk
exposure for ESG risks is now reported
as ‘Heightened’ for the first time since
introduction in 2019, in recognition of the
external headwinds which could impact
the Group’s ability to effectively manage
sustainability risks.
Both strategic and operational risk categories
contain multiple principal risks; risks in these
categories are broadly ordered for their
relevance to enabling the Group to achieve
its strategic priorities.
Further details of the Group’s exposure to
financial and insurance risks and how these
are managed are provided in note E6 and F11
to the IFRS consolidated financial statements.
Impact Mitigation Change from 2022 Annual Report and Accounts
Strategic risk
The Group fails to deliver long-term organic cash generation in line with its Annual Operating Plan
Confidence in the Group might be
diminished if it fails to deliver organic
cash generation in line with targets
shared, particularly as the Group seeks
to support people by offering a wide
range of solutions to help customers
journey to and through retirement.
The Group’s business unit structure
brings focus and accountability.
The key areas of growth are Pensions
and Savings and Retirement Solutions.
Each business unit holds an annual
strategy setting exercise to consider
the needs of potential and existing
customers, 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 growth businesses,
including propositional enhancements
driven by customer insight.
The Group is established in the
Bulk Purchase Annuity (‘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.
Unchanged
The Group viewed this risk as ‘Improving’ in the 2022 Annual Report and
Accounts, reflecting the demonstrated success of the strategy to pursue
organic cash generation; this view of the level of risk exposure is unchanged.
The Group has delivered strong organic growth in 2023, with new
business net fund flows of c. £7bn, compared to £3.9bn in 2022.
This is in line with the Group’s strategy to deliver a balanced business
mix through leveraging its scale in the capital-light fee-based
businesses and maintaining a disciplined level of growth in annuities.
As a result of this strong performance, the Group has delivered
c. £1.5bn of total new business long-term cash generation in 2023,
achieving its 2025 target two years early.
During 2023, the Group completed BPA transactions with a combined
premium of c. £6bn, compared to £4.8bn in 2022. This continues to
demonstrate that the Group has the ability to compete and win in the
BPA market.
In September, the Group launched the Standard Life Pension Annuity
to the open market in the UK, becoming the first new provider to enter
the annuity market since the introduction of Pension Freedoms
legislation in 2015.
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.
The Workplace business continues to attract good flows in, delivering
net fund flows of c. £4.5bn in 2023, nearly double the £2.4bn delivered
in 2022. This is supported by c. £2bn of new scheme assets transferred
in 2023, including the Siemens workplace scheme, which represents one
of the largest scheme transfers to have been tendered in the UK market
in recent years, demonstrating the strength of the Group’s proposition.
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 and through advisers, from new
and existing customers. During 2023, £1.079bn of assets were internally
transferred to Retail direct to enable existing customers to access
modern pension offerings to support them to and through retirement.
The Group is looking to expand the current offering of financial guidance
and advice to support customers in better preparing for their retirement.
Risk management continued
Optimise
Enhance
Grow
Strategic priorities
51Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Strategic risk continued
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 to 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. £154bn of the Group’s assets
under administration, at December 2023.
HSBC plc: Provides custody and
fund accounting services to the
Group to manage c. £165bn of its
unit linked operations.
TCS Diligenta: The Group’s partnership
covers a range of services including
customer administration and digital and
technology capabilities to support
customer outcomes.
The Group has in place established
engagement processes and a rigorous
governance structure to manage
relationships with its strategic partners,
inline with the Group’s 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.
Unchanged
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 Diligenta to
support its strategic deliverables. The successful migration of another
700,000 Phoenix Life customer policies to TCS Diligenta’s BaNCS
platform was completed in November 2023. Planning for further
migrations in 2024 and beyond is underway.
During 2023 the Group successfully transferred the custody and fund
accounting services for £12.3bn of assets to HSBC plc. This is a key
milestone in the Group’s journey towards implementing harmonised
investment administration processes, and boosts its strategic
partnership with HSBC plc.
Strategic risk continued
The Group fails to effectively transition acquired businesses
The Group is exposed to the risk of
failing to transform, simplify and better
integrate the component parts of our
acquired businesses to deliver leading
customer experiences and realise scale
efficiencies successfully and efficiently.
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 achieve the
efficiencies of its target operating model.
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.
The Group views future M&A activity as
an optional strategy accelerant and will
assess new inorganic growth opportunities
against a clear set of criteria and seeks
to execute those opportunities which
score positively against these criteria.
The Group’s acquisition strategy is
supported by the Group’s financial
strength and flexibility, strong regulatory
relationships and its track record of
generating shareholder value and
delivering good customer outcomes.
The financial and operational risks of
target businesses are assessed in the
acquisition phase and potential mitigants
are identified which may include
temporary capital or liquidity buffers.
Unchanged
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 volume
of ongoing transition and integration activity.
The Group has worked to transform from a financial engineering
business to a purpose-led, organically growing business. Focus is
now on pivoting to transform and simplify the business in the next
phase of our journey.
The Group continues to develop its partnership with TCS Diligenta
to support its target operating model. Further customer migrations
to TCS Diligenta’s BaNCS platform are planned in upcoming years,
which will support delivery of the Group’s target operating model
and enable all Phoenix policies to benefit from a more advanced
administration platform. The key risk in respect of migration activity
is that the time, and associated cost, to deliver these whilst protecting
customer outcomes is greater than expected and the Group regularly
assesses its reserving basis as a result.
In April 2023 the Group completed the acquisition of Sun Life of
Canada UK, a closed book UK life insurance company, from Sun Life
Assurance Company of Canada. The integration is progressing well,
with the majority of functions due to complete activity in April 2024.
The Group has now delivered c. 20% of the targeted c. £500m
incremental long-term cash generation target from this acquisition,
with the remainder due to emerge in 2025 and 2026.
52 Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Strategic risk continued
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 within
both 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 change in line with
capacity and risk appetite and to strengthen
business readiness processes to deliver
change safely into the operational
environment. These prioritisation
principles are a core part of the Annual
Operating Plan process, alongside a
significant focus on the deliverability
of the change portfolio in 2024.
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.
This aims to ensure that all material risks
to project delivery are appropriately
identified, assessed, managed,
monitored and reported.
Unchanged
Whilst significant progress has been made on developing the change
capability and capacity, there has been no change to the assessment
of exposure to this risk since its introduction in the 2020 Annual Report
and Accounts, which reflects the potential impact of failing to deliver
the Group’s significant strategic and regulatory change agenda.
The Group has continued to strengthen its Change Management
Framework during 2023 and expects to see an improving trend in this
risk as those enhancements are seen in project delivery, noting that the
Group has a number of multi-year change programmes so benefits will
emerge in 2024 and beyond. The Group’s Chief Operating Officer
is driving further enhancements to evolve and mature the Group’s
change operating model. In 2023 this included significant effort being
put into the recruitment of senior change professionals, alongside the
assessment and further development of all internal change resources.
Strategic risk continued
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 adequately to ESG risks and
delivering on its purpose; for example,
failing to meet and make its sustainability
commitments.
A failure to manage ESG risk could
result in adverse customer outcomes,
reduced colleague engagement,
reduced proposition attractiveness,
reputational risks and litigation.
The Group is exposed to risks arising
from the transition to a lower-carbon
economy, which could result in a loss
in the value of policyholder and
shareholder assets.
In addition, physical risk can give rise
to financial implications, such as direct
damage to assets, operational impacts
either direct or due to supply chain
disruption, and impacts on policyholder
health and wellbeing, impacting
demographic experience.
The Group has a clear sustainability
strategy in place which is updated annually
to reflect the Group’s latest plans and risk
exposures, with key metrics on progress
monitored throughout the year.
Sustainability risk and climate risk are both
embedded into the Group’s RMF.
Sustainability risk ‘cross-cuts’ the
Group’s Risk Universe. This means the
consideration of material sustainability-
related risks is embedded in the Group’s
risk policies, with regular reporting
undertaken to ensure ongoing visibility
of its exposure to these risks. Several
sustainability-related risk policies are
also in place to cover the main sources
of sustainability risk.
The Group is making good progress on
integrating the management of climate
change and wider ESG risks across the
business, including in investment
portfolios, with further work underway
to embed its consideration fully across
the business.
The Group continues to engage with
suppliers and asset managers on their
progress and approach to managing
climate change and wider ESG risks.
The Group undertakes annual climate-
related stress and scenario testing and
continues to build its climate scenario
modelling capabilities.
The Group undertakes deep dives
on emerging ESG risk areas (such as
greenwashing and ESG litigation risk)
to increase understanding and awareness
for Boards and Management, and facilitate
control improvements where required.
Heightened
This risk is considered ‘Heightened’ for the first time since its introduction
as a principal risk in the 2019 Annual Report and Accounts.
The key driver for this change is the rapidly evolving external ESG
environment. In particular, the increasing politicalisation and weakening
of government policies in relation to ESG risk (such as that of the UK
Government) as this could delay the necessary actions to transition
to a low carbon economy, making the potential future crystallisation
of physical climate events increasingly likely.
Anti-climate change and ESG sentiment, particularly in high
carbon-emitting countries, could have far-reaching consequences
for the pace and effectiveness of climate action and continue to
slow down policy changes. This could limit future ESG-aligned
investment opportunities and make it more difficult for the Group
to manage ESG risk and meet its climate commitments.
Recent reports from bodies such as the Intergovernmental Panel
on Climate Change and the United Nations Environment Programme
highlight the slow progress and significant scale of the challenge in
restricting global warming below 1.5°C. Real world events are occurring
at a high rate, with 2023 setting the record for the hottest year ever
on record.
The Group is cognisant of this changing environment and undertakes
thought leadership and wide engagement with policymakers
and market participants to actively raise the debate around key
sustainability themes.
Analysis indicates the Group is on track to achieve its 2025 targets if
planned actions are implemented. However, further internal actions will
likely be needed to achieve the 2030 targets, which are also increasingly
dependent on external factors such as the decarbonisation of the wider
economy and actions by others – in particular government, regulators,
and the high transition risk sector.
Risk management continued
53Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Customer risk
The Group fails to deliver good 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 good 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 financiallosses.
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
that 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.
Unchanged
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.
The FCA’s Consumer Duty represents a step change in approach
for the industry, re-enforcing a shift away from a rules-based regime
to principles-based regulation. The Duty introduces an overarching
requirement that firms, and their employees, must act to deliver good
outcomes for retail customers. In response, the Group mobilised
a programme of work to implement the changes required to achieve
its interpretation of compliance in line with the key regulatory
deadlines of end-April 2023, end-July 2023 and end-July 2024.
Despite having met the first two deadlines, the Group’s view is that
the risk exposure around the Duty is elevated whilst the supervisory
approach matures, and closed products are reviewed against the
Duty’s principles, most notably fair value, ahead of the end-July 2024
deadline. The Group has built on its strong foundations, enhancing
existing and creating new Group frameworks, processes and strategies
to meet Duty requirements. This includes a Fair Value Framework
designed to assess value in its broadest definition and refreshing the
Conduct Strategy to embed and maintain the culture of the Group,
informed by monitoring behaviours and customer outcomes.
The FCA is raising the bar in terms of expectations on firms to ensure
and evidence good outcomes are being achieved for their customers.
The FCA continues to provide guidance to the industry to support
firms’ plans to embed the Duty within their businesses. It also recognises
that its own understanding and development of guidance and its
supervisory approach will continue to evolve.
The Group continues to monitor the impacts of the cost-of-living crisis
on its customers. Proactive action to support customers, including
those most vulnerable, is a priority. The Group is using customer
behaviour research and analysis to provide customers with the support
and help that they need. This has included improving all brand websites
to provide general cost-of-living support, encouraging customers to
get in touch for help and including links to external support websites.
Operational risk
The Group or its outsource partners 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 outsource
partners, 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 determine that the cause
was a breach of existing regulation.
The Group’s Operational Resilience
Framework enhances the protection
of customers and stakeholders. It is
designed to prevent intolerable harm and
supports compliance with the regulations.
The Group continues to work closely with
its outsource partners to ensure that the
level of resilience delivered is aligned
to the Group’s impact tolerances.
The Group has already taken some action,
through previous strategic transformation
activity, to reduce exposure to technological
redundancy and key person dependency
risk, increasing the resilience of its customer
service. It continues to do so where further
exposure is identified.
The Group regularly reviews important
business service MI to ensure appropriate
action is taken to rectify and prevent
customer harm. The Group is working
to further strengthen and enhance the
overall resilience of the Group and
its outsource partners by March 2025
through its Operational Resilience
Remediation Project.
The Group and its outsource partners
have well-established business continuity
management and disaster recovery
frameworks that are annually refreshed
and regularly tested. Disruption events are
used to assess lessons learned to identify
any continual improvements to be made.
Unchanged
This strategic risk has been assessed as ‘Heightened’ in the Group’s
Annual Report and Accounts since 2020.
Key drivers of this assessment are the increasing threat of cyber-attacks
and the Group’s dependency on its outsource partners to have
appropriate resilience to operational disruption.
The Group has a significant change and customer migration agenda
over the next three to five years, effective completion of which is
required to deliver planned strengthening of its operational resilience
both internally and with some material outsourced service providers.
This exposes the Group to increased risk. However, this is mitigated
through strengthened Operational Resilience and Change
Management Frameworks, where the risk of late delivery is actively
managed by both the relevant change programme and separate
operational resilience remediation governance and reporting.
The quantum of strategic customer transformation activity requires
subject matter expertise to execute successfully. The Group’s
operational resilience, internally and with material third parties,
would be impacted by a large-scale loss of colleagues, for example
due to illness or incapacity such as influenza, in the UK or globally.
Such impacts are difficult to mitigate in the short-term; however,
the Group and material suppliers made substantial investments
in remote working capability to manage the impacts of COVID-19,
which would be expected to help mitigate the impacts of a further
pandemic to service continuity.
54 Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Operational risk continued
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.
The Group engages with many political
parties and industry bodies to foster
collaboration and inspire change which
supports the Group’s purpose of helping
customers secure a life of possibilities.
Unchanged
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, were the key
drivers of the assessment of risk as further ‘Heightened’ in the 2022
Annual Report and Accounts and the current assessment is unchanged
from that position.
The volatile political environment remains ‘Heightened’ ahead
of worldwide elections in 2024, including an expected UK General
Election. The current administration continues to face economic
headwinds, management of which has implications for the Group’s
customer base, including the cost-of-living crisis, increased borrowing
costs and the potential increase in vulnerability.
In June 2023, HMT published draft legislation related to the
Solvency II reforms, indicating the reform implementation would be
staged with some reforms coming into force on 31 December 2023
and the remainder on 30 June 2024. The Prudential Regulation
Authority (‘PRA’) has since issued two of three anticipated consultations
on the rules to implement those reforms in H2 2023, and its near
final policy to go live at year-end 2024, relating to Internal Models,
Transitional measures on Technical Provisions and Group supervision.
Internal teams are reviewing the detail to assess what actions are
needed to ensure the Group is compliant with the new rules.
The Group supports the PRA and HMT’s objectives to reform the
regulations to better suit the UK market whilst maintaining appropriate
safeguards for policyholders. The financial impact of the reforms
will depend on the exact detail of the final legislation. The relatively
short time period between the PRA’s final Policy Statement and the
implementation date of the new rules contributes to the status of
this risk. The Group will therefore remain actively involved in industry
lobbying on Solvency II and is preparing as much as possible ahead of
time to ensure compliance with new rules at the point of implementation.
The Group views the FCA’s Consumer Duty as well aligned to its
strategic priority of helping people secure a life of possibilities
and, from 31 July 2023, the Group is materially compliant with the
Duty for its open products. Focus remains on reviewing customer
journeys and fair value assessments for closed products to achieve
compliance with the Duty’s principles for these products ahead
of the 31 July 2024 deadline.
In November 2023 the FCA issued Sustainability Disclosure
Requirements and investment labelling requirements which aim
to inform and protect consumers and improve trust in the market
for sustainable investments. The Group supports the FCA’s aims noting
that terminology used and a lack of consistency between providers
makes it difficult for consumers to navigate. The Group has mobilised
a project to ensure its practices align with the new regulation.
In December 2023, the FCA issued the Advice Guidance Boundary
Review consultation paper. The consultation could lead to a significant
change in the way that people who cannot access advice are supported
in the industry and the Group is actively engaging with the FCA
on this topic.
IFRS 17 aims to standardise insurance accounting across the industry
and achieving compliance has been a significant undertaking.
The Group will continue its finance transformation programme
in 2024 to further streamline and automate IFRS 17 processes
to support efficient financial reporting in the future.
Risk management continued
55Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Operational risk continued
The Group or its supply chain are not sufficiently cyber resilient
Phoenix Group is the UK’s largest
long-term savings and retirement business,
with a significant profile, which leads to
greater interest from cyber criminals.
The world continues to become increasingly
digitally connected and cyber-attacks
remain a major threat to the Group.
Over the past five years the Group has
grown from 5m to 12m customers, while
the number of colleagues in the Group
has grown from 900 to over 7,500,
not including contractors. In addition,
the Group’s footprint includes engagement
with c. 1,800 suppliers which increases the
attack surface significantly. This continual
growth poses a greater risk of cyber-attack
which could have a 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 pace of change is accelerating due to
the rapid rise of artificial intelligence (‘AI’),
which in turn is compounding the threats
and as a result, the cyber world is a more
dangerous place than ever before. AI also
has the potential to improve cyber security
by dramatically increasing the timeliness
and accuracy of threat detection and
response. Cyber security is an essential
pre-condition for the safety of AI systems
and is required to ensure resilience, privacy,
fairness, reliability and predictability.
The Group is continually strengthening its
cyber security controls, attack detection
and response processes, identifying
weaknesses through ongoing assessment
and review.
The Enterprise Information Security
Strategy includes a continuous Information
Security and Cyber Improvement
Programme, which is driven by input
from the Annual Cyber Risk Assessment
and Annual Cyber Threat Assessment
that utilises internal and external threat
intelligence sources.
The Group continues to consolidate
its cyber security tools and capabilities
and the Enterprise Information Security
Strategy 2023–2025 includes delivery
of a Group Identity Platform and Zero
Trust model, Supplier Assurance Platform,
Secure Cloud Adoption and proactive
Data Loss Prevention.
The specialist second line Information
Security and 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.
The Group holds ISO 27001 Information
Security Management Certification for its
Workplace Pension and Benefits schemes,
which provides confidence to both
clients and internal stakeholders that
it is committed to managing security.
Unchanged
This risk was assessed as ‘Heightened’ in the Group’s 2022
Annual Report and Accounts and this remains unchanged.
The UK cyber threat level remains elevated, due to the sustained
Russia/Ukraine war, China/Taiwan tensions, and the addition of the
Israel/Palestine armed conflict. Cyber threat levels remain high with
increased likelihood of a cyber-attack from a State actor; however it
is highly unlikely that a Nation State actor would directly target the
Group and any impact would be as a result of indirect cyber-attacks
against the UK’s critical national infrastructure, IT or information
security service providers or global financial services companies.
Cyber criminals continue to be the Group’s most likely threat, primarily
due to the type of data held by financial sector organisations being
attractive to criminal actors.
On 19 April 2023, the UK’s National Cyber Security Centre issued
an alert warning of a heightened risk from attacks by state-aligned
Russian hacktivists, urging all organisations in the country to apply
recommended security measures.
The Group’s cyber controls are designed and maintained to repel
the full range of cyber-attack scenarios; whilst 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.
The single consolidated Group Supplier Information Security Framework,
which is improving the Security Oversight and Assurance of the Group’s
large portfolio of Outsourced Service Providers (‘OSP’), third- and
fourth-party suppliers, continues to mature. Further embedding and
maturing over the next 12 months will help mitigate the risks associated
with supply chain cyber security, which is considered the Group’s top
cyber security threat.
Vulnerability management continued to mature throughout 2023
with the Enterprise Cyber Exposure Score (‘CES’) remaining steady.
The Group received formal approval from the FCA and PRA in July
2023 for closure of the Cybersecurity Best Practice Evaluation and
Testing (‘CBEST’) remediation programme.
Operational risk continued
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 Diligenta 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 from all backgrounds by
creating a shared sense of purpose and
commitment to our strategy, supported by
offering competitive terms and conditions,
benefits, and flexibility. Monthly colleague
surveys promote continuous listening,
allow rapid identification of concerns and
actions that help improve engagement.
The Group looks to respond proactively to
external social, economic and marketplace
events that impact colleagues.
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 and early career programmes
helps to support the talent pipeline.
Unchanged
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. The Group monitors this
closely and continues to remain confident in the attractiveness of
its colleague proposition.
The Group launched Midlife MOT assessments to help colleagues take
stock in the key areas of wealth, work and wellbeing.
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 Group introduced Phoenix Flex as a
core part of its employee offering in 2023, to help support colleagues
in balancing their personal and professional lives, by encouraging and
celebrating flexibility at work, embracing differences, and helping
colleagues to thrive.
56 Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 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
financialrisks of climate change,
includingrisks from the transition
to a lowcarbon 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.
Unchanged
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. Whilst some of these have
lessened, they remain the key drivers for the current assessment of
exposure to this risk.
The global macro-economic environment remains highly uncertain;
although prices continue to rise, the rate of inflation is lower. The UK
Consumer Price Index is down to 4.0% in January 2024 from a peak
of 11.1% in October 2022. There is an increased expectation that the
Bank of England will achieve its target of 2% by the end of 2025.
The Bank of England base rate has increased from 0.1% in December
2021 to 5.25% in August 2023, and remains at this level, with the
outlook for this to remain stable until summer 2024 before reductions
can be expected. Higher interest rates, coupled with cost-of-living
rises, have suppressed residential property prices. These are expected
to bottom out in summer 2024 and see a return to growth after interest
rates start to come down. UK gilt yields remain high, rivalling the levels
seen during the 2022 mini-budget market event. The Group continues
to monitor and manage its market risk exposures, including to interest
rates and inflation, and to markets affected by the increasing number of
geopolitical conflicts and concerns. For example, continued attacks on
shipping in the Red Sea pose a risk of worsening inflationary pressures
and the downstream effects on interest rates. The Group’s strategy
continues to involve hedging the major market risks and, in 2023, 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.
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 demographic experience and monitors
exposure relative to quantitative risk
appetite limits.
Monitoring includes identifying any trends
or variances in experience, in order to
appropriately reflect these in assumptions.
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.
Where required, the Group continues to
take capital management actions to mitigate
adverse demographic experience.
Unchanged
This risk was assessed as ‘Heightened’ in the 2020 Annual Report
and remains ‘Heightened’. The assessment is driven by continued
uncertainty around future demographic experience driven primarily by
the long-term effects of COVID-19 on life expectancy; potential health
risks from rising NHS waiting times; the rise in long-term sickness rates
observed across the UK workforce; and health and customer behaviour
implications from the cost-of-living crisis.
Demographic experience and the latest assessment of future trends
continue to be considered in regular assumption reviews, including
making appropriate allowance for the impacts of COVID-19 on both
longevity and mortality as part of the 2023 assumption reviews.
The Group continues to monitor customer behaviour as a result of the
cost-of-living crisis to ensure its impact on demographic assumptions
is appropriately reflected in regular assumption reviews. Proactive
action is being taken 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 c. £6bn in 2023. Furthermore, the launch of the new Standard
Life Pension Annuity (‘SLPA’) product in the second half of 2023
is a significant milestone for the Group. Consistent with previous
transactions, the Group continues to reinsure the vast majority of
the longevity risk using longevity swaps and reinsurance contracts
that are reviewed regularly.
Risk management continued
57Phoenix Group Holdings plc Annual Report and Accounts 2023
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Impact Mitigation Change from 2022 Annual Report and Accounts
Credit risk
The Group is exposed to the risk of downgrade or failure of a significant counterparty
The Group seeks rewarded credit risk
in order to drive value for shareholders
and invests in a wide range of credit risky
assets in accordance with its strategic
asset allocation.
The Group is exposed to the risk of
downgrades and deterioration in the
creditworthiness or default of investments,
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
that may in turn have adverse effects on
customer relationships and may lead to
financialloss.
The Group seeks to take credit risk by
maintaining a high quality and diversified
credit investment portfolio and ensuring
relationships are with highly rated
counterparties.
The Credit Risk Policy and Counterparty
Limit Framework sets out a system of
controls to manage this risk within appetite
with early warning indicators to manage the
most material exposures within acceptable
tolerances. This includes the management
of risks linked to climate change, including
the impact on assets from transitioning to
a low carbon economy.
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,
geographies and asset class. Limits also
restrict exposure to BBB+ and below
rated assets.
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 second line Risk oversight provided.
For mitigation of risks associated with
stock-lending, additional protection
is provided through collateral and
indemnityinsurance.
Unchanged
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. While the residual risks
from COVID-19 have receded, the current assessment of the level of
exposure to this risk is unchanged from the 2020 position, driven by
the ongoing geopolitical tensions, economic uncertainty and persistent
high inflation.
Over 2023 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. This positive progress is balanced
by risks arising from geopolitical conflicts such as those in Ukraine
and the Middle East, and supply chain disruptions arising from the
risk of deterioration in the relationship between the USA and China.
Uncertainties over the global economic outlook, persistent high
inflation and higher for longer interest rates present an increased risk
of defaults and downgrades. However, a UK sovereign downgrade is
less probable than at the end of 2022, following both Moody’s and
S&P’s revision of the UK credit rating’s outlook from ‘negative’ to ‘stable’
during 2023. This has a positive impact on UK-related assets including
Gilts, Housing Associations and Local Authority Loans.
Despite the failure of a number of US regional banks and a regulator-
facilitated merger of Credit Suisse with UBS in early 2023, the Group’s
view is that a full-blown banking crisis will not follow. In addition,
the Group has limited exposure to banks with idiosyncratic risks.
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.
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 2023 are:
Description Risk Universe category
Quantum computing
Quantum computing has the potential to deliver improved actuarial analysis, portfolio optimisation, risk modelling and
management, forecasting and enhanced fraud prevention. It has the ability to arrive at feasible solutions for optimisation
problems, or find better accuracies for machine learning problems, or run simulations exponentially faster. However,
there are significant risks to consider, such as the potential for quantum computing to be used with malicious intent against
the Group. The Group will seek to get ‘quantum-safe’ as soon as possible, to minimise the magnitude of emerging threats,
including the potential of breaking current encryption systems, which would leave personal data of the Group’s customers
vulnerable to hackers. Switching from one encryption regime to another will take years to implement with the payoff timeline
for incorporating quantum resources currently perceived as being in excess of three years. It is crucial for the Group to
develop quantum-resistant encryption algorithms and implement robust security measures to protect sensitive information.
There is a potential opportunity to maximise capital preservation and commercial differentiation, by leveraging the
exponential growth in data available to the market.
Operational
Pensions innovation
Changing customer expectations around simplicity of products, personalisation and increasing technology-based
interaction presents greater risk from market disruptions. Customers are increasingly looking for frictionless services,
which will heighten competition in offering a complete experience and solutions to customer needs. Aside from these
risks, this does represent a significant opportunity for the Group to meet ever-evolving customer needs to become a
trusted partner to and through retirement.
The Group continues to partner with innovative start-ups, providing user experience and technical delivery support
for priority proposition initiatives. Digital and Workplace successfully launched Phoenix Group’s Innovation Forum,
inviting new partners from TCS COIN and FinTech Scotland networks to apply to work with the Group on defined
challenges. The Group tracks industry change including on the use of analytics; ensuring compliance with cookies
regulation; simplifying the process to gather permissions to market; and changes via Consumer Duty. The Group has
an opportunity around future ways of working and innovation, leading to improved and enhanced customer experiences
whilst ensuring that regulatory work fully supports good customer outcomes within the next one to three years.
Customer
58 Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
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.
Viability statement
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 2026
is an appropriate period for the assessment
which aligns to the period covered by the
Group’s latest Board-approved Annual
Operating Plan (“AOP”), and 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 February 2024;
• 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, 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
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. Plausible downside stress – a more
onerous combined market stress
reflecting tighter credit conditions
and 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 1.27 year increase in
life expectancy for a 65 year old male and
1.3 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;
• Operational disruption or failure
of key third party service providers;
• Cyber-attack, 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.
59Phoenix Group Holdings plc Annual Report and Accounts 2023
Strategic report
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 2023, the Stress and Scenario Testing
Programme included separate consideration
of the impact of a severe market stress and a
severe longevity and yields stress. The market
stress was designed to replicate a severe
recession (downgrade across 21% of the
total shareholder liquid/illiquid credit asset
portfolio, House Prices falling 15%, Equities
c.30% and GBP depreciating c.10% vs
USD), while the longevity stress combined
a significant longevity risk event emerging
over 3 years (e.g. medical advancement)
with a 100bps fall in yields. The analysis
concluded that the severity of these stresses
was not sufficient to reduce Phoenix Group’s
capital coverage to close to SCR.
A severe scenario testing a combination
of all risks within the internal model was
also considered and showed the severity
of stress required to reduce the Group’s
capital coverage to the Recovery Zone
and also the severity of event needed
to reduce capital coverage to close to
SCR. This informed the Group Recovery
Plan which also included an extreme
liquidity event and a range of contingency
actions that could be used to recover.
These scenarios are deemed extreme
and the Recovery Plan demonstrated
the ability to restore coverage above
risk appetites.
Over 2023, we have continued to embed
climate scenario analysis 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, our reputation and our
operations. Phoenix is actively managing
this risk using a range of actions, including
gradual decarbonisation of the investment
portfolio and engagement with key emitters
within the portfolio, key suppliers, customers
and policymakers.
Risk Assessment
The Board reviewed the Group’s
principal risks and uncertainties as set out
on pages 50 to 57 of the 2023 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 Risk Management
Framework (‘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.
2023 Financial Results
The latest financial results for the Group
as included within the 2023 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 £3.9 billion
and a Shareholder Capital Coverage
Ratio of 176%, 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;
• Holding company cash of £1.012 million
at the end of 2023, 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 an IFRS basis,
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
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.
60 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Chair of the Group Board’s introduction to governance
Our values of passion,
responsibility, growth,
courage and difference
are demonstrated
daily by our colleagues,
and importantly
through the leadership
of the Board.
I am delighted to return as Chair of the
Group Board (‘Chair’) on 1 December 2023.
During my sabbatical as Lord Mayor of the
City of London, Alastair Barbour fulfilled the
role of Chair with effect from 1 September
2022 until 30 November 2023. Following
ten years on the Board, Alastair stepped
down from the position as Chair of the Group
Board and Chair of the Nomination Committee
with effect from 30 November 2023, and
remained on the Board until 31 December
2023 to ensure a comprehensive handover.
I would like to thank Alastair for his
commitment as Chair during my sabbatical,
as well as for his enormous contribution and
support to Phoenix Group throughout his
tenure. He will be missed as a colleague and
trusted adviser. His historical knowledge was
invaluable to the Group Board and the wider
organisation during my sabbatical, hence his
tenure beyond the usual nine-year period.
Board activities during 2023
Our strategy is set to ensure we continually
progress towards the achievement of our
purpose and 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. As a
result of a strong performance, the Board
has recommended a Final dividend of
26.65 pence per share, bringing the total
2023 dividend to 52.65 pence per share.
There were a number of focus areas for the
Board again this year, such as the integration
and completion of SLF of Canada UK Limited
(‘Sun Life of Canada UK’) from Sun Life
Financial Inc. acquired in 2022. The Phoenix
Life Companies Board has worked hard
to integrate this new acquisition into its
Nicholas Lyons
Chair of the Group Board
Board highlights 2023
Board induction
Mark Gregory and Eleanor Bucks share their experience
ofthe Phoenix Group Board induction programme.
Read more on pages 90 and 91
Board review
The 2023 Board review was carried out by an
externalBoard Reviewer. Following discussion,
theBoardhas agreed a few areas of enhancement.
Read more on pages 78 and 79
Board education sessions
These provided both insight and outcomes
that the Boardimplemented.
Read more on pages 80 and 81
Board engagement with the wider workforce
The Board as a whole was able to meet Phoenix Group
colleagues in two focused sessions in May and November
2023. In May, the Board met members of the Phoenix
Group graduate programme and in November it met with
female colleagues in their 50s, with a focus on the working
environment. These groups provided insight into their
specific roles at Phoenix Group.
Read more on pages 108 to 110
61Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
governance framework and current board
schedule during the year, which has been
monitored by the Phoenix Group Board.
The IFRS 17 accounting change has been
a key focus for Management and in turn the
Board, in particular its Audit Committee and
I must thank both the Audit Committee Chair
and its members for the robust challenge.
The relationship with our regulators,
not just in the UK, but also in Ireland and
Bermuda, is of importance to the Board
and we receive regular updates from
our Regulatory Relationships Director to
understand their views and the impact this
can have on strategy, a focus at our Strategy
Day in June. Our Chief Risk Officer plays
an important part in the delivery of our
strategy and the Board receives regular
updates from him. Both Line 1 and 2 opinions
are provided on all strategic initiatives.
In addition, Phoenix Group published its
Net Zero Transition Plan on 24 May 2023.
The Board wants the execution of our
strategy to have a positive impact upon
our Net Zero Transition Plan and climate
change as a whole. This is just one way
we can help to provide our customers
with the best possible outcomes. You can
find our Net Zero Transition Plan at
www.thephoenixgroup.com.
Phoenix Group Holdings plc’s
compliance with the UK Corporate
Governance Code 2018 (the ‘2018
Code’) can be found on page 68.
Purpose, values and culture
Phoenix Group’s purpose is to help
people secure a life of possibilities. As the
pensions landscape and societal needs
evolve, Phoenix Group has an important
role to play 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.
The Board monitors that purpose and the
Company’s values regularly throughout the
execution of its strategy. A proportion of
the agenda is always dedicated to strategy
and before reviewing and approving such
strategic items, the Board must always come
back to Phoenix Group’s core purpose
and values.
The Board’s role is to set the cultural tone
from the top and act as the guardian of our
values and culture, which together supports
our strategy and drives our purpose. We as
a Board must reinforce our culture and
values through our conduct, decision-making
process and the outcomes upon us as a
Board and the Group’s strategy, which the
Executive Committee (‘ExCo’) implements.
The Sustainability Committee monitors
culture on behalf of the Board and this is
discussed further on page 107.
Board review
This year, the Board effectiveness review
was undertaken externally by Bvalco Ltd
(the ‘Board Reviewer’). It conducted a
number of independent interviews with
Board members and key stakeholders.
This review found the Board to be capable,
reflective and supportive of Phoenix Group’s
culture. The culture of the Board was
found to be constructive, challenging
and respectful. Further information on
the outcomes of the review can be found
on pages 78 and 79.
Before reviewing and approving
strategic items, the Board must always
come back to Phoenix Group’s core
purpose and values.
2024 priorities
During 2024, the Board intends
to focus on:
• Risk management items.
• Relationship with the regulators.
• Financial framework.
62 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Chair of the Group Board’s introduction to governance continued
Wider workforce
The Board has particularly enjoyed the
colleague engagement sessions that have
taken place during 2023. Meeting both
members of our graduate programme and
female colleagues in their 50s, with a focus
on the working environment, has been
insightful, especially for our new Board
members. This is discussed further by
Maggie Semple, our Designated Non-
Executive Director (‘NED’) for Workforce
Engagement on pages 108 to 110. Choosing
two diverse groups of colleagues has helped
us to understand the opportunities and
challenges the wider workforce faces at
Phoenix Group. Through Maggie’s work as
Designated NED for Workforce Engagement,
the Board has been able to implement some
outcomes which we hope will enhance the
working environment for our colleagues and
reach Phoenix Group’s strategic ambition
to be the “best place any of us have ever
worked”. The process of feedback between
Maggie Semple and the Board following
sessions with the Phoenix Colleague
Representation Forum (‘PCRF’) has also
been enhanced to ensure outcomes are
discussed at Board level and appropriate
actions are taken.
Our colleagues are not our only
stakeholders and the Board is mindful of
all our stakeholders when making decisions.
This is further explained on pages 74 to 77
by demonstrating any impact on Board
decisions as a result of engagement
of our stakeholders. You will see that,
as a regulated business, our customer
outcomes and Consumer Duty have
received greater focus during 2023.
Board changes
During the year, there were a number of
changes to the Board. Mark Gregory joined
the Phoenix Group Board on 1 April 2023.
He possesses a wealth of experience in
the insurance, financial services and retail
sectors, having worked as Group CFO at
Legal & General Group plc and through
non-executive roles, including at Direct Line
Insurance Group plc. He has made a strong
contribution to date, not only as a member
of the Risk Committee, but also an attendee
and now member of the Audit Committee
with effect from 1 January 2024. David
Scott was nominated as the shareholder
representative of abrdn plc (‘abrdn’) on
11 May 2023 in accordance with the terms
of the relationship agreement between
Phoenix Group and abrdn. The previous
Shareholder Nominated Director
representing abrdn was Stephanie Bruce
whose contribution to the Board since
joining on 1 July 2022 was excellent and also
helped to enhance diversity on the Board.
Finally, Eleanor Bucks joined the Phoenix
Group Board on 1 December 2023. Eleanor
is an actuary with strong asset management
and financial services experience and brings
a fresh skillset and capability to the Board
as well as broader diversity. You can find
the Board’s skills matrix on page 89 and
Directors’ biographies on pages 64 to 67.
Kory Sorenson reached her nine-year
tenure on the Phoenix Group Board on
30 June 2023. She had been Chair of
the Remuneration Committee for the
past five years and was succeeded in that
appointment by Nicholas Shott on 4 May
2023 following the 2023 Annual General
Meeting (‘AGM’). Nicholas has been a
member of the Remuneration Committee
since 2016. Kory provided a diligent
handover to Nicholas and the Board is
grateful for her robust challenge, knowledge
and tenacity over the years, in particular
during challenging times such as COVID-19.
Diversity and inclusion
The Phoenix Group Board had 36% female
Board representation, three ethnic minority
Board members and a female Senior
Independent Director at 31 December 2023.
The Nomination Committee report explains
further the reason for these results and its
aim to comply with the Listing Rules. As ever,
there is always more to do and we are mindful
of diversity when succession planning
for those appointments we can control.
Succession planning remains a focus for
some of our longer serving Board members,
but also for our Executive Directors and
ExCo members. The Talent and Succession
Plan was reviewed during 2023 for Executive
Directors and the ExCo members and will
continue to be a key matter for 2024.
Board schedule
I work closely with our Group Company
Secretary to plan the Board schedule well
in advance of the year. Each meeting is
balanced with governance, strategy
including Environmental, Social and
Governance (‘ESG’), financial performance
and emerging matters as regular items.
The Board as a whole places great
importance on promoting the success
of the Company. Each member must have
sufficient time to devote to the Board
in order to contribute fully to meetings
and the operation of its Committees as
discussed further on page 87. During the
year, additional meeting time may be
needed and I am pleased that each Director
endeavours to be available as and when
required. Alastair Barbour was particularly
grateful to those Directors who found
additional meeting time for the
implementation of the IFRS 17 standard
and related education sessions.
Keeping the Board abreast of key areas of
focus for the Company is important and the
Board as a whole takes comfort from the
education sessions Phoenix Group provides.
Each member must have sufficient
time to devote to the Board in order
to contribute fully to meetings.
Male 50%
(Two)
Female 50%
(Two)
63Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
AGM votes in favour of
all resolutions May 2023
97%
97% in 2022
Board ethnic minority
Director representation
1
23%
25% as at 10 March 2023
Board ethnic minority Director
representation for those appointments
controlled by Phoenix Group
1
18%
Board female Director representation
1
38%
50% as at 10 March 2023
Board female Director representation
for those appointments controlled
by Phoenix Group
1
45%
Independent Board Directors¹
62%
FTSE Women Leaders ranking
(February 2024)
12th
12th in 2023
See page 68 for a summary
of how the Company complied
with the 2018 Code during 2023
1 As at 21 March 2024.
Committee Chairs
UK Corporate Governance Code
Fully compliant,
but areas of
enhancement
Fully compliant in 2022
Education sessions are a significant part of
our Board calendar and are often facilitated
by external providers or Management
outside of the Board meeting schedule to
ensure the required focus and attention is
given to the sessions. During 2023, education
sessions were held on topics such as the
Annual Operating Plan (‘AOP’) 2023, key
projects, IFRS 17, the customer view (of
particular importance for Phoenix Group
with the implementation of Consumer Duty
by the Financial Conduct Authority (‘FCA’))
and the Net Zero Transition Plan that was
published in May 2023. The Remuneration
Committee introduced its first focused
education session facilitated by its external
adviser, PwC, and supported by the
Executive Reward Director which was well
received by all members. Please see pages
80 and 81 for education sessions delivered
in 2023 and any outcomes.
Annual General Meeting
In 2023, Phoenix Group was pleased to
return to an ‘in person’ AGM. This allowed
the Board to meet and greet our shareholders
face-to-face and to answer any questions.
During 2023, the Board and Committee
Chairs met with our largest shareholders,
representing approximately 43% of our
share register. In his capacity as Chair of the
Group Board, Alastair Barbour met with nine
shareholders, representing approximately
41% of our share register in January 2023
to discuss the 2023 annual institutional
roadshow. The Chair of the Remuneration
Committee engaged with a broader group
of shareholders representing approximately
70% of our share register to discuss the
2023 Remuneration policy that was then
approved with a 98% vote in favour by our
shareholders at the AGM on 4 May 2023.
As Chair of the Group Board, I undertook
the Group’s annual institutional roadshow
during February 2024, which is intended
to reinforce the dialogue with our major
shareholders, particularly concerning
corporate governance issues. I met with
12 of Phoenix Group’s largest shareholders
who in aggregate own approximately
45% of the Company’s issued share capital.
The meetings covered a range of topics,
including the strategic progress and
outlook of the Company, the Board’s
effectiveness review and the recent
share price performance.
The Board was pleased with the support
from Phoenix Group’s shareholders
throughout 2023 and we hope to receive
similar support in 2024. As ever, the Board is
here to engage and respond to any questions
our shareholders or stakeholders may have.
Nicholas Lyons
Chair of the Group Board
64 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Nicholas Lyons
Chair of the Group Board
Appointed: 1 September 2018
to 1 September 2022, re-appointed
on 1 December 2023
Committee:
N
Chair of the Nomination Committee
Career and experience
Nicholas has wide-ranging experience
across the financial services industry,
both in executive and non-executive
roles. He started his career in banking
at Morgan Guaranty Trust Company
of New York UK (later JP Morgan LLP),
where he held various roles including
Assistant Vice President of Equity
Capital Markets, he later moved to
Lehman Brothers International Limited
where he was Global Co-Head of
Recruitment, Training and Career
Development and Managing Director
of the Financial Institutions Group.
Nicholas has extensive Non-Executive
Director (‘NED’) experience, including
Chair of Miller Insurance Services
LLP, Senior Independent Director of
Pension Insurance Corporation plc
and Catlin Group Limited and NED of
Friends Life Group Limited and Convex
Group Limited. Nicholas is a member
of the Chartered Insurance Institute.
Having taken a sabbatical to complete
a year long term as Lord Mayor of
the City of London, Nicholas returned
to his role as Group Chair of the
Board on 1 December 2023.
Key skills and competencies
• Seasoned business leader with
experience and understanding
of insurance and the financial
services industry, including the
regulatory environment.
• Strong communicator, bringing a
sharp focus to people leadership,
succession planning and development.
• Experience in the governance of
large-scale business operations,
leading mergers and acquisitions
and managing complex projects
which are skills key to the fulfilment
of Phoenix Group’s vision and purpose
supporting his role as an experienced
Chair of the Group Board.
Current external appointments
NED at Miller Insurance Services
LLP and Convex Group Limited and
Alderman in the City of London.
Andy Briggs, MBE
Group Chief
Executive Officer (‘CEO’)
Appointed: 10 February 2020
Career and experience
Andy joined Phoenix Group in 2020
with over 30 years of experience in
the insurance industry. He has held
senior executive roles across multiple
business areas in the industry including
CEO of UK Insurance and Global
Life and Health at Aviva plc; CEO
of Friends Life Group Limited;
Managing Director of Scottish Widows;
CEO of the Retirement Income Division
at Prudential plc and Chair of the
Association of British Insurers (‘ABI’).
Andy is a Fellow of the Institute of
Actuaries and also acts as the UK
Government’s Business Champion
for Older Workers.
Key skills and competencies
• Sound executive leadership and a
considered approach to strategy,
demonstrated through continued
delivery of Phoenix Group’s
operating model, delivering strategic
growth through the acquisition of
SLF of Canada UK Limited. Andy has
a strong history of high-profile M&A
work in his previous roles.
• Broad knowledge of the global
insurance industry which helps
inform views on long-term
strategic direction.
• Proactive approach to understanding
stakeholder priorities, which closely
aligns to Phoenix Group’s core
social purpose and strategy,
including work on developing
initiatives such as Midlife MOT,
financial and digital inclusion.
Current external appointments
Board member of the ABI and
the UK Government’s Business
Champion for Older Workers.
Leading from the top
to drive robust governance
and a clear social purpose.
At 21 March 2024, the Board comprises
the Chair of the Group Board, Group Chief
Executive Officer, the Group Chief Financial
Officer, one abrdn plc Nominated Director,
one MS&AD Insurance Group Holdings, Inc.
(‘MS&AD’) Nominated Director and eight
Independent Non-Executive Directors.
2023 Board changes
• Mark Gregory was appointed
to the Board on 1 April 2023
• Stephanie Bruce retired from
the Board on 11 May 2023
• David Scott was appointed
to the Board on 11 May 2023
• Kory Sorenson retired from
the Board on 30 June 2023
• Nicholas Lyons was re-appointed
to the Board on 1 December 2023
• Eleanor Bucks was appointed
to the Board on 1 December 2023
• Alastair Barbour retired from
the Board on 31 December 2023
Committee membership key
A
Audit
N
Nomination
Re
Remuneration
Ri
Risk
S
Sustainability
Board leadership and Company purpose
Our Board of Directors
65Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Rakesh Thakrar
Group Chief
Financial Officer (‘CFO’)
Appointed: 15 May 2020
Career and experience
Rakesh joined Phoenix Group in
2001 and has been Group CFO since
2020. He held several finance and
strategy-related roles and was Deputy
Group CFO for six years prior to being
appointed as Group CFO. Rakesh is
a Non-Executive Director (‘NED’),
Chair of the Audit Committee and
member of the Risk Committee of
Bupa Insurance Limited. He is an
Associate of the Chartered Institute
of Management Accountants and the
Association of Corporate Treasurers.
Key skills and competencies
• Detailed knowledge of financial
markets as leader of Phoenix Group’s
financial strategy, which supports
achievement of strong financial
results in line with the financial
framework of Cash, Capital
and Earnings.
• Experienced in directing and
delivering significant corporate
projects and major transactions
which drives delivery of
Phoenix Group’s strategy.
• Focused on people development
to support culture, capabilities for
future growth and a diverse pipeline
of talent as sponsor of social mobility
within the organisation.
Current external appointments
NED, Chair of the Audit Committee
and member of the Risk Committee
of Bupa Insurance Limited and the
service company Bupa Insurance
Services Limited.
Karen Green
Senior Independent
Director (‘SID’)
Appointed: 1 July 2017
Committee:
N
Re
S
Chair of the Sustainability Committee
Career and experience
Karen has significant financial
services experience. She has held
a number of senior executive roles
including Chief Executive Officer of
Aspen UK (comprising the principal
insurance and reinsurance companies
of the Aspen Insurance Holdings),
Principal of MMC Capital Ltd
(now Stonepoint Capital LLC) and
Director of Corporate Development
of GE Capital Europe Ltd. Karen has
significant NED experience, including
as Chair of the Audit Committee at
Admiral Insurance Group plc, a former
Council member and Chair of the
Investment Committee at Lloyd’s of
London, NED at Great Portland Estates
plc and Risk and Audit Committee
Chairs at Miller Insurance Services LLP.
Key skills and competencies
• Deep knowledge of the insurance
industry which supports oversight
of Phoenix Group’s activity, aligned
with market expectations and
stakeholder needs.
• A strong background in strategic
planning and corporate development
including M&A which complements
the development of Phoenix Group’s
growth strategy and facilitates informed
oversight and constructive challenge.
• Engagement in ESG which supports
her role as Chair of the Sustainability
Committee.
• Significant leadership experience
and understanding of Phoenix Group
allowing the provision of support to
the Chair of the Group Board and the
Board as a whole as SID.
Current external appointments
NED and Chair of the Audit Committee
at Admiral Group plc, Supervisory
Board member and Chair of the
Audit Committee of TMF Group
BV, NED and Chair of the Audit and
Risk Committees at Miller Insurance
Services LLP, NED and Chair of the
Risk Committee at Asta Managing
Agency Limited, NED at Great Portland
Estates plc, Adviser at Cytora Limited
and Trustee of Wellbeing of Women.
Eleanor Bucks
Independent Non-Executive
Director (‘NED’)
Appointed: 1 December 2023
Career and experience
Since 2021, Eleanor has been
Chief Investment Officer of Lloyd’s
of London. Prior to this, she was at
Legal & General plc holding several
roles including: Chief Operating
Officer of Legal & General Capital,
Managing Director of Direct
Investments and Real Assets and
Chief Investment Officer of Legal
& General Retirement. Eleanor
serves as Chair on the suite of Lloyd’s
Investment Platform funds and has
held executive directorships as
Chair of Legal & General Investment
Management Alternative Investment
Fund Manager and Director of Legal
& General’s Single-Family Build-to-Rent
business. Eleanor is a Fellow of the
Institute of Actuaries.
Key skills and competencies
• Seasoned investment professional,
experienced in leading high-
performing investment teams and
setting investment strategy for
both insurance and pension funds.
• Deep understanding of the life
insurance sector and the investment
approaches that underpin those
businesses, which brings an external
perspective and supports the
delivery of robust, constructive
challenge and guidance during
Board discussions.
Current external appointment
Chief Investment Officer
of Lloyd’s of London.
Mark Gregory
Independent Non-Executive
Director (‘NED’)
Appointed: 1 April 2023
Committee:
A
Ri
Career and experience
Mark has 25 years of experience in
the financial services industry. Most
recently, Mark was CEO of Merian
Global Investors Limited (‘Merian’).
Preceding this, he held roles at Legal
& General Group plc including:
Group CFO, CEO of Savings and
Managing Director of With Profits,
at Asda Limited as the Divisional
Director for Finance and the Business
Development Director and at Kingfisher
plc as a Senior Financial Analyst. His
NED experience consists of roles as
NED and Chair of the Risk Committee
at Direct Line Insurance Group plc
and NED at Entain plc and Merian.
Key skills and competencies
• A wealth of executive finance
experience and acumen and a
deep knowledge of the insurance
industry, particularly life and general
insurance, which contribute to
his effectiveness as a member
of the Risk and Audit Committees.
• Highly qualified to appraise strategy
development and execution,
having led corporate projects and
transactions with added appreciation
of the retail sector and customer
service activity.
Current external appointments
NED and Chair of the Risk Committee
at Direct Line Insurance Group plc,
NED of Churchill Insurance Company
Limited, UK Insurance Limited
and Westdown Park Management
Company Limited.
66 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Hiroyuki Iioka
Non-Executive
Director (‘NED’)
Appointed: 23 July 2020
Shareholder Nominated Director
Career and experience
Hiroyuki is the appointed representative
of one of Phoenix Group’s major
shareholders, MS&AD Insurance
Group Holdings, Inc (‘MS&AD’).
He has over 35 years of experience
and is currently Senior General
Manager for the International Business
Planning Department at MS&AD.
His previous roles include General
Manager for the Asian Life Insurance
Business Department at Mitsui
Sumitomo Insurance Company Limited
(Japan) and Assistant General Manager
for MSIG Holdings (Europe) Limited.
Hiroyuki’s NED experience includes
roles as NED of ReAssure Group plc,
Mitsui Sumitomo Insurance (London
Management) Limited and an Alternate
NED of Challenger Limited (Australia).
Hiroyuki is a Chartered Member of
the Securities Analysts Association
of Japan and Certified International
Investment Analysts.
Key skills and competencies
• Commercial business leader,
providing an international business
perspective, with strong global
insurance and financial services
industry experience.
• Responsible for general
management, including managing
efficient and effective operations
and business development within
the financial services industry.
Current external appointments
Senior General Manager of
International Business Planning
Department for MS&AD Insurance
Group Holdings, Inc. and Alternate
NED of Challenger Limited, listed
on the Australian Stock Exchange.
John Pollock
Independent Non-Executive
Director (‘NED’)
Appointed: 1 September 2016
Committee:
A
N
Ri
Chair of the Risk Committee
Career and experience
John has vast financial services
experience from a career of over
35 years at Legal & General Group plc
(‘L&G’), most recently as CEO of
Legal & General Assurance Society.
John’s previous positions at L&G
include CEO of Protection & Annuities,
Group Executive Director of Product
& Corporate and Director of UK
Operations. His NED experience
includes roles as Chair of Cofunds
Limited and Suffolk Life Limited and
NED of Cala Group (Holdings) Limited.
John has also acted as Deputy Chair
of the Financial Conduct Authority
(‘FCA’) Practitioner Panel, Life
Insurance Member of the Financial
Ombudsmen Service Industry Panel
and has been a member of the Life
Insurance Committee of the Association
of British Insurers. John is a Fellow of
the Royal Geographical Society.
Key skills and competencies
• Extensive UK and European
insurance and financial services
experience which enhances Board
understanding of related issues and
trends applicable to Phoenix Group’s
operations and strategy.
• Proven track record of establishing
and delivering strategy whilst
managing risk appetite and
compliance within a regulated
marketplace, which contributes
to his ability to effectively chair
the Risk Committee.
• Previous business leader with
expert understanding of the wider
organisational responsibilities to
employees and society allowing
him to provide robust challenge
on executive decision-making.
Current external appointments
None.
Katie Murray
Independent Non-Executive
Director (‘NED’)
Appointed: 1 April 2022
Committee:
A
N
Chair of the Audit Committee
Career and experience
Katie has over 30 years of experience
gained across the financial services
industry and is currently Group Chief
Financial Officer (‘CFO’) of NatWest
Group plc, having also acted as Deputy
Group CFO. Prior to this, Katie spent
a number of years at Old Mutual plc,
where she held various senior executive
roles including Group Finance Director
of Old Mutual Emerging Markets,
Director of Finance – Group Chief
Accountant and Head of Group
Planning and Analysis. She was also
a Senior Audit Manager at KPMG LLP.
Katie is a member of the Institute of
Chartered Accountants in Scotland.
Key skills and competencies
• Vast financial services experience
meaning that she is well placed
to provide valuable and technical
input in both Board discussions
and in her capacity as Chair
of the Audit Committee.
• Current business leader with recent
and relevant financial experience
and deep understanding of
industry complexities.
• Valuable knowledge and executive
director experience within global
financial services organisations.
• Plays an active role in the
development and reporting
of climate reporting across the
financial services sector.
Current external appointment
Group Chief Financial Officer
of NatWest Group plc.
Belinda Richards
Independent Non-Executive
Director (‘NED’)
Appointed: 1 October 2017
Committee:
Re
Ri
Career and experience
Belinda has extensive financial services
and strategy experience from a 30-year
career. She was Senior Partner and
Global Head of Merger Integration
and Separation Advisory Services at
Deloitte LLP. Prior to this, Belinda was
Vice President of Post-Acquisition
Integration and Separation Services
at Ernst & Young LLP and Principal
of Corporate Finance and Strategic
Advisory Services at KPMG LLP.
Her NED experience includes roles
as NED and Chair of the Audit
Committee of Avast plc and William
Morrison Supermarkets plc, SID
of Grainger plc and NED of Aviva
Life & Pensions UK Limited and
Friends Life Group Limited.
Key skills and competencies
• Highly qualified to appraise
corporate growth opportunities,
integration processes and the
post-acquisition environment
allowing the provision of robust
challenge and guidance in relation
to Phoenix Group’s strategy.
• Extensive leadership experience
and technical perspective
enabling contribution to Risk
and Remuneration Committee
discussions and debate.
Current external appointments
NED at The Monks Investment Trust
plc, NED and Chair of the Audit
Committee at Schroder Japan Trust
plc, SID and Chair of the Sustainability
and Governance Committee
of Olam Food Ingredients.
Board leadership and Company purpose continued
Our Board of Directors
67Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Nicholas Shott
Independent Non-Executive
Director (‘NED’)
Appointed: 1 September 2016
Committee:
A
N
Re
S
Chair of the Remuneration Committee
Career and experience
Nicholas brings recent and relevant
financial services experience having
retired in 2021 from Lazard & Co
Limited, where he spent over 30
years. There he held various positions
including, European Vice Chairman
and Head of UK Investment Banking.
In his early years, Nicholas worked
in the national newspaper sector in
various management positions such
as General Manager of the Evening
Standard and Sunday Express and
Group Marketing Director of Express
Newspapers. Nicholas is a Special
Adviser to the Chair and Board of the
Daily Mail and General Trust plc and
has been a NED for the Home Office.
Key skills and competencies
• Extensive M&A experience in
multiple sectors through investment
banking, enabling the provision of
support and insight to the Board.
He is also Chair of Phoenix Group’s
M&A Advisory Group.
• Knowledge of a broad range
of investor and stakeholder
perspectives, providing insight that
enables him to lead well informed
and productive discussions at the
Remuneration Committee.
Current external appointment
Special Adviser to the Chair and Board
of the Daily Mail General Trust.
Maggie Semple, OBE
Independent Non-Executive
Director (‘NED’)
Appointed: 1 June 2022
Committee:
Re
Ri
S
Designated NED for
Workforce Engagement
Career and experience
Maggie is currently a business owner
and co-founder of three businesses;
The Experience Corps, Maggie
Semple Limited and I-Cubed Group
Ltd. Prior to this, Maggie acted as
Director of Learning Experience at the
New Millennium Experience Co and
Director of Education and Training for
the Arts Council England. She began
her career in education as a teacher
and later an education inspector and
has received an OBE for her services
to learning. Maggie’s NED experience
includes roles as NED of PwC Business
Restructuring Services, JN Bank UK
Limited, McDonald’s Restaurants
Limited and as an Ambassador of
the Black British Voices Project.
Key skills and competencies
• A combination of experience and
passion for sustainability, ethics and
inclusivity which brings a breadth
of knowledge across the broad ESG
agenda and informs development
of operations and strategy in this area.
• Brings a strong sense of social
purpose and depth of perspective
to Board considerations and
distinguished stakeholder
engagement with a highly
personable style, as is evident
in her role as Designated NED
for Workforce Engagement.
Current external appointments
NED of JN Bank UK Limited and
Crest Nicholson Holdings plc; HR
Committee Member at the University
of Cambridge; and Ambassador
of Black British Voices Project.
Our business, led by the Executive
Committee (‘ExCo’).
The Executive Management of the
Group is led by the Group CEO,
who is supported by the ExCo.
During 2023, ExCo played a key role
in driving Phoenix Group’s year of
significant progress, striving to help
people secure a life of possibilities.
The roles and responsibilities of
each member of ExCo can be
found on the Company’s website.
Andy Briggs
Group Chief Executive Officer
Rakesh Thakrar
Group Chief Financial Officer
Andy Curran
Chief Executive, Savings and
Retirement, UK and Europe
Mike Eakins
Group Chief Investment Officer
Anna Franekova
Corporate Development Director
Claire Hawkins
Corporate Affairs and Investor
Relations Director
Brid Meaney
Chief Executive, Heritage Division
Jackie Noakes
Chief Operating Officer
Jonathan Pears
Group Chief Risk Officer
Sara Thompson
Group HR Director
Quentin Zentner
General Counsel
Kulbinder Dosanjh
Group Company Secretary
(Secretary to ExCo)
David Scott
Non-Executive Director
(‘NED’)
Appointed: 11 May 2023
Shareholder Nominated Director
Career and experience
David is the appointed representative
of one of Phoenix Group’s major
shareholders, abrdn plc (‘abrdn’).
He has over 35 years of financial
services experience and is currently
Chief Enterprise Technology Officer
at abrdn. His previous roles include
Chief Security and Resilience Officer
and Group Digital & IT Strategy
Director at abrdn, Group Operations
& IT Director at Bankhall Investment
Management and Head of IT at Aegon
Asset Management UK. David’s NED
experience includes roles as NED
of Origo Services plc and Chair of
the University of St Andrews Students
Association. He is a Fellow of the
Institute of Directors, a Full Professional
Member of the British Computer
Society, and a Chartered IT Professional.
Key skills and competencies
• Expert understanding of the current
and future role of technology across
the financial services industry,
and the impact of disruptive trends
and resultant transformation.
• Knowledge of leading and driving
enterprise technology strategies
and operating models, innovating
and digitising for the future, which
is invaluable to Phoenix Group’s
aim of organic growth.
• Understanding of operations,
strategic development and
implementation and customer
experience which relates closely
to Phoenix Group’s objectives.
Current external appointment
Chief Enterprise Technology
Officer of abrdn plc.
68 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
The Board continues to robustly assess its compliance with the 2018 Code. The Group Company Secretary has supported a full review
of compliance since her appointment in 2022 and has identified areas for enhancement against the provisions.
Areas for enhancement
Provision or principle Action currently undertaken Enhancement for 2024
L. Annual evaluation of the Board should consider
its composition, diversity and how effectively
members work together to achieve objectives.
Individual evaluation should demonstrate whether
each director continues to contribute effectively.
Individual formal evaluation was included as part
of the 2023 effectiveness review, but this was less
formal in previous years.
Individual evaluation will continue to form part of the
formal internal effectiveness reviews from 2024 onwards.
41. There should be a description of the work of
the Remuneration Committee in the Annual Report,
including: what engagement with the workforce has
taken place to explain how executive remuneration
aligns with wider company pay policy.
The Company provided an intranet announcement
to the wider workforce on how executive
remuneration aligns with the wider workforce
pay policy following the approval of the 2023
Directors’ Remuneration policy at the AGM on
4 May 2023. It outlined the changes to the policy
and how Directors’ remuneration as a whole
aligned with the wider workforce.
Following a Board education session on 2 October 2023,
it was decided that Maggie Semple would become a member
of the Remuneration Committee on 1 January 2024. This
would allow her to discuss the alignment of Directors’ pay
with the wider workforce and when appropriate get input
from the wider workforce on any changes to the Directors’
Remuneration policy or remuneration outcomes in her role
as Designated NED for Workforce Engagement and her
work with the PCRF.
The 2018 Code continues to be upheld through the work of the Board and its Committees, which includes application of the 2018 Code’s
principles. Thebelow table confirms where disclosures to evidence this approach are located:
Composition, succession and evaluation
Nomination Committee report
Principles J, K and L Provisions 17, 18, 19, 20 to 23
(see also Non-financial information statement on page 40
of the Strategic report for information on gender balance
of those in Senior Management and their direct reports)
pages 82 to 87
Audit, risk and internal control
Audit Committee report
Principles M and N Provisions 24, 25, 26 and 29 Provisions 27
and 30 (see also Directors’ report on pages 141 to 146
and Statement of Directors’ responsibilities on page 147)
Provision 31 (see also Directors’ report on pages 141 to 146
and the Group’s Viability statement on pages 58 to 59 of the
Strategic report)
pages 92 to 99
Risk Committee report
Principle O Provisions 28 and 29 (see also Principal risks
and uncertainties faced by the Group on pages 50 to 57
of the Strategic report)
pages 100 to 103
Remuneration
Directors’ Remuneration report
Provisions 34 to 39 and Principles P, Q and R
Provisions 32, 33, 40 and 41 (see also Remuneration
Committee Chair’s letter on pages 113 and 114 and
Remuneration Committee governance and activities
on pages 111 and 112)
pages 111 to 140
Board leadership and Company purpose
Our Board of Directors
Principle A
pages 64 to 67
Our governance framework
Principle C Provision 1 (see also Audit Committee report
on pages 92 to 99 and Risk Committee report on pages
100 to 103)
page 71
Conflicts of interest
Provision 7
page 70
Monitoring our culture
Principle B Provision 2 (see also Directors’ Remuneration
report on pages 113 to 114)
page 107
Stakeholder engagement
Principle D and E
Provision 3 see Section 172 Statement on page 74.
Provision 5 see Section 172 Statement on page 74
(see also Sustainability Committee report on page 104
and Workforce engagement on pages 108 to 110)
pages 74 to 77
Whistleblowing arrangements
Provision 6 (see also Board Activities on page 73
and Audit Committee report onpages 92 to 99)
page 97
Division of responsibilities
Division of responsibilities on the Board
Principles F and G and Provisions 9, 10, 12 and 14
(see also Our Board of Directors on pages 64 to 67)
Provision 11 (see also Board diversity on page 85)
page 69
2023 Board and Committee meeting attendance
Principle H Provision 13
page 72
Board support
Principle I; Provisions 8 and 16
page 71
Board member appointment terms
Provision 15 (see also Directors’ report on page 142)
page 87
Board leadership and Company purpose continued
Compliance during 2023 with the UK Corporate Governance Code 2018
(the ‘2018 Code’).
69Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Clear roles and responsibilities to drive
forward our purpose and strategy
The Directors understand their role as
individuals, and as a collective, to ensure
the long-term success of the Company and
achievement of Phoenix Group’s purpose.
The Board ensures the appropriate
division of responsibilities on the Board.
Chair of the Group Board
Nicholas Lyons is the Chair of the Group
Board (‘Chair’).
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; and
• ensuring an orderly succession process for
the Group CEO and the Board as a whole.
The Chair’s external commitments are set out
on page 87 within this report.
Independent Non-Executive Directors
The Board considers the following NEDs
to be independent:
• Eleanor Bucks
• Karen Green
• Mark Gregory
• Katie Murray
• John Pollock
• Belinda Richards
• Maggie Semple
• Nicholas Shott
As at 21 March 2024, 62% of the Board are
considered to be independent. The Board uses
the independence criteria as set out in the 2018
Code to assess and confirm independence.
Designated Non-Executive Director for
Workforce Engagement
Maggie Semple is the Designated NED for
Workforce Engagement.
The Designated NED for Workforce Engagement
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.
Shareholder Nominated Directors
Hiroyuki Iioka and David Scott are Shareholder
Nominated Directors. Hiroyuki Iioka is appointed
to the Board on behalf of MS&AD and David Scott
is appointed to the Board on behalf of abrdn.
In accordance with the Phoenix Group acquisition
of ReAssure from Swiss Re in July 2020, MS&AD
was entitled to appoint a representative NED to the
Phoenix Group Board. A relationship agreement
between Phoenix Group and abrdn includes the
right for abrdn to appoint a representative NED,
provided abrdn continues to hold 10% or more
of Phoenix Group’s shares.
Full descriptions of the roles and responsibilities
of the Chair, CEO, SID and Designated NED for
Workforce Engagement are available on the
Company’s website.
Group Chief Executive Officer
Andy Briggs is the Group Chief Executive
Officer (‘CEO’).
The CEO 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; and
– HR policies.
The CEO’s external commitments are set out
on page 87 within this report.
Senior Independent Director
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 NEDs;
• 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 87 within this report.
The Board ensures that there is 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.
The Board considers all NEDs to
be independent, except for the
Shareholder Nominated Directors
and the Chair of theGroup Board.
Division of responsibilities
Division of responsibilities on the Board
70 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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.
The independence criteria set out in the
2018 Code was taken into account as part
of the selection process for Mark Gregory
and Eleanor Bucks who joined Phoenix
Group during 2023, both of whom were
considered to be independent.
During 2023, 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 2018 Code, over half of
our Board members, excluding the Chair,
are independent NEDs. The Shareholder
Nominated Directors, Hiroyuki Iioka and
David Scott, do not meet the independence
criteria under the 2018 Code. The Chair
of the Group Board, Nicholas Lyons,
is not considered to be independent on
his re-appointment, having previously
held the role from 2018 to 2022 before
his sabbatical but was independent on
his original appointment.
Conflicts of interest
A register of conflicts of interest is
maintained by the Group Company
Secretary. Each Director has a duty under
the Companies Act 2006 to avoid a situation
in which they have or may have a direct
or indirect interest that conflicts or might
conflict with the interests of the Company.
Andy Briggs is a board member of
the Association of British Insurers
and is the UK Government’s Business
Champion for Older Workers.
If any Director becomes aware of any
situation which might give rise to a conflict
of interest, they must, and do, inform the
rest of the Board immediately and the Board
is then permitted under the Company’s
Articles of Association to authorise such
conflict. This information is then recorded
in the Company’s Register of Conflicts,
together with the date on which authorisation
was given. In addition, each Director certifies
on an annual basis that the information
contained in the Register of Conflicts
is correct and completes an annual
questionnaire to ensure any conflict
of interest has been disclosed.
When the Board decides whether or not to
authorise a conflict, only the Directors who
have no interest in the matter are permitted
to participate in the discussion and a conflict
is only authorised if the Board believes
that it would not have an impact on the
Board’s ability to promote the success of
the Company in the long-term. Additionally,
the Board may determine that certain
limits or conditions must be imposed when
giving authorisation. At 31 December 2023,
no actual conflicts have been identified
which have required approval by the Board.
However, the situations that could potentially
give rise to a conflict of interest have been
identified and duly authorised by the Board
and are reviewed at least on an annual basis.
Due care and process is, of course, applied in
respect of the two Shareholder Nominated
Directors for abrdn and MS&AD and when
the Group CEO and Group CFO declare
any conflict relating to their appointments
on subsidiary boards of the Phoenix Group.
Outside directorships
Executive Directors are encouraged to
serve as NEDs of external companies,
dependent upon time commitment in
accordance with the 2018 Code. 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 NED, Chair of the
Audit Committee and member of the Risk
Committee of Bupa Insurance Services
Limited and Bupa Insurance Limited.
Re-appointment of Directors
In accordance with the 2018 Code,
all Directors offer themselves individually
to shareholders for initial election or
re-election annually, unless retiring
immediately following the AGM.
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 142.
Division of responsibilities continued
Division of responsibilities on the Board
Board oversight and delegation to Committees and Management
Committees and Management accountability and performance measuring
Phoenix Group Holdings plc ExCo
Chair, Andy Briggs
Nomination
Committee
Chair,
Nicholas Lyons
• Board and
senior executive
appointments
• Diversity
and inclusion
• Board and
senior executive
succession
planning
See pages 82 to 87
Terms of Reference for all Committees can be found at: www.thephoenixgroup.com
Audit
Committee
Chair,
Katie Murray
See pages 92 to 99
• Financial
reporting
• Internal Controls
• External Audit
• Internal Audit
• Whistleblowing
Phoenix Group Holdings plc Board
Chair of the Group Board, Nicholas Lyons
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 can be found at: www.thephoenixgroup.com
See pages 100 to 103
• Risk appetite
and high-level
risk matters
• The Group’s Risk
Management
Framework
Risk
Committee
Chair,
John Pollock
See pages 104 to 107
• Sustainability
strategy
• ESG reporting
• Culture
monitoring
Sustainability
Committee
Chair,
Karen Green
See pages 111 to 114
• Group
remuneration
framework
• Executive
Director
remuneration
• Employee share
schemes
• Wider workforce
remuneration
Remuneration
Committee
Chair,
Nicholas Shott
• 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
• ESG is monitored at Management
Committee level before the Audit/
Risk/Sustainability Committees
and finally the Board
Market Disclosure Committee (‘MDC’)
(Management Committee that reports into the Group CEO)
• Oversight of the Group’s compliance
with its disclosure obligations
• Considering the materiality, accuracy,
reliability and timelines of information
to be disclosed to the market.
71Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Our governance framework
The Board provides strong challenge to Management through a robust governance framework enabling cohesion of our purpose,
strategy,values and culture. We maintain high standards of corporate governance to enable the successful delivery of our strategy.
Ourgovernance framework ensures that the Board is effective in both making decisions and maintaining oversight of those Committees
it delegates to. EachCommittee reports into the Board at the end of each Board meeting cycle.
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 of the Group Board, ensuring that the
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 2023.
72 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Division of responsibilities continued
2023 Board and Committee meeting attendance
The Board met formally seven times during
2023, including a two-day strategy setting
meeting. 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 continued
with the briefing calls that were set up
during the pandemic as they serve as a
valuable bridge outside of formal Board
meetings and often facilitate education
sessions. Additional meetings have also
been held inrespect of M&A activity.
The NEDs met with the Chair of the
Group Board on at least seven occasions
without Executive Directors present, which
normally take place at each Board meeting.
The following Board and Board
Committee attendance table below
details all formal Board and Board
Committee meetings held during 2023.
Board
Audit
Committee
1
Risk
Committee
Remuneration
Committee
Nomination
Committee
Sustainability
Committee
Actual/Max Actual/Max Actual/Max Actual/Max Actual/Max Actual/Max
Chair
Nicholas Lyons
2
– – – – – –
Alastair Barbour
3
7/7 – – – 7/7 –
Executive Directors
Andy Briggs (Group CEO) 7/7 – – – – –
Rakesh Thakrar (Group CFO) 7/7 – – – – –
Non-Executive Directors
Karen Green
4
7/7 8/9 – 5/5 7/7 6/6
Stephanie Bruce
5
3/3 – – – – –
Eleanor Bucks
6
– – – – – –
Mark Gregory
7
5/5 – 6/6 – – –
Hiroyuki Iioka 7/7 – – – – –
Katie Murray
8
7/7 9/9 – – 4/4 –
John Pollock 7/7 9/9 8/8 – 7/7 –
Belinda Richards
9
7/7 – 7/8 5/5 – –
David Scott
10
4/4 – – – – –
Maggie Semple 7/7 – 8/8 – – 6/6
Nicholas Shott
11
7/7 9/9 – 5/5 7/7 6/6
Kory Sorenson
12
4/4 – 5/5 3/3 4/4 3/3
1 Additional Audit Committee meetings were held due to the introduction of the new accounting standard IFRS 17.
2 Nicholas Lyons stepped down from the Board on 1 September 2022 and commenced his sabbatical. He returned as Chair of the Group Board on 1 December 2023.
3 Alastair Barbour became Chair of the Group Board on 1 September 2022 and stepped down from the position of Chair of the Group Board and the Nomination Committee on 30 November 2023.
Alastair Barbour then retired from the Board on 31 December 2023.
4 Karen Green was unable to attend a joint Audit and Risk Committee meeting due to attending a funeral.
5 Stephanie Bruce retired from the Board on 11 May 2023.
6 Eleanor Bucks was appointed as a Director on 1 December 2023.
7 Mark Gregory was appointed as a Director and became a member of the Risk Committee on 1 April 2023.
8 Katie Murray became a member of the Nomination Committee on 29 June 2023.
9 Belinda Richards was unable to attend a joint Audit and Risk Committee meeting due to attending a funeral.
10 David Scott was appointed as a Director on 11 May 2023.
11 Nicholas Shott became Chair of the Remuneration Committee on 4 May 2023.
12 Kory Sorenson retired from the Board on 30 June 2023.
Board members are expected to
attend all formal Board meetings
with the aim of 100% attendance.
The Nomination Committee has confirmed
its satisfaction with the time and commitment
given to the Phoenix Group Board and
its Committees by all Directors.
73Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Purpose, values and strategy
Approval of Annual Operating Plan 2023.
Approval of new and reviewed policies:
• Board Diversity policy;
• Voting policy and strategy;
• Market Abuse Disclosure policy; and
• Share Dealing Code.
Meeting the Sun Life of Canada UK team
to discuss its strategy.
Two-day strategy meeting in June 2023.
Oversight of the transformation agenda.
Oversight of Phoenix Asset Management.
Monitoring of internal perception of culture and
alignment with the Phoenix Group’s purpose and values.
Update on Mansion House Compact.
Update from Phoenix Re, Bermuda.
Workforce policies and culture oversight
Approval of the Group’s Human Rights policy.
Whistleblowing oversight.
Oversight of insights from colleague engagement
surveys and culture dashboards.
Monitoring of colleague engagement initiatives.
Regular updates from the Designated NED for
Workforce Engagement.
Risk management and assurance
Climate change stress and scenario testing.
Monitoring of the Group’s risk culture.
Approval of Phoenix Group’s risk appetite
and assessment of the approach to identifying
and managing emerging risks.
Approval of Principal Risks and
Uncertainties disclosures.
Monitoring performance against Phoenix 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 2018 Code.
Review of corporate governance reforms.
External Board effectiveness review.
Subsidiary governance oversight.
External reporting including the Annual Report
and the Sustainability and Climate Reports and the
Solvency and Financial Condition Report (‘SFCR’).
2023 Annual General Meeting.
Stakeholder engagement
Monitoring of customer service, operational
resilience and colleague wellbeing.
Monitoring of investor engagement activities, and
oversight of the year end investor presentation.
Consideration of investor and media reaction
to Full Year 2022 and Half Year 2023 results,
including IFRS 17 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 NED for Workforce Engagement
(see pages 108 to 110 for more detail) and the
Colleague Interaction Session between theBoard
and colleagues at various stages of theircareer.
Consultation with major shareholders on the
Directors’ Remuneration policy.
People strategy, diversity,
equity & inclusion (‘DE&I’)
and succession planning
Monitoring of data collation through the ‘Who We
Are’ application from which a 2024 DE&I action
plan was produced spanning: inclusive leadership,
diversity data and reports, social mobility, race
and ethnicity and disability and neurodiversity.
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
and succession planning.
Sustainability
Approval of Phoenix Group’s 2023
sustainability strategy.
Monitoring progress against Phoenix Group’s
sustainability agenda and strategy.
Approval of Phoenix Group’s 2023 Modern
Slavery Statement.
Approval of the Net Zero Transition Plan published
on 24 May 2023.
Oversight of Phoenix Group’s progress against
the Stewardship Code.
Receiving and considering regular updates from
the Board Sustainability Committee.
Financial management and performance
Monitoring of Phoenix Group’s solvency
and liquidity positions.
Monitoring of capital resilience, financial
performance and growth of Phoenix Group.
Approval of Phoenix Group’s dividend policy.
Recommendation of the 2022 Final dividend
and 2023 Interim dividend.
Approval of Phoenix Group’s funding
and capital strategy.
Approval of the Group’s tax strategy.
Board activities
74 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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.
Setting our culture, values and strategy
The Board sets the strategic direction,
culture and values for Phoenix Group;
these are key to how we do business
and how we achieve our purpose.
Diverse set of skills, knowledge
andexperience
The Phoenix Group Directors collectively
have a diverse set of skills, knowledge,
experience and stakeholder expertise
which assists the Board in making decisions.
This contributes to their ability to make
well-informed decisions which, in turn,
promotes long-term, sustainable success
for all stakeholders. As part of their induction
when joining the Group, all Directors
receive a detailed briefing on their duties
as a Director.
Board information
At each Board meeting, detailed papers
from Management are submitted. These
provide information on the likely long-term
impacts of decisions on stakeholders and
how they have been considered during
the discussion process, including any
engagement with relevant groups. See
pages 74 to 77 for further information.
The Board also has an annual schedule
of ‘Board education’ topics where the
Board, in collaboration with Senior
Management, establish key activities that
will be undertaken during the coming
year and arrange for Heads of Functions
to deliver education sessions which feed
into the decision-making process.
Board discussion and decision-making
During their discussions, the Board provides
rigorous risk management, assessment and
challenges Senior Management to ensure
a decision promotes long-term, sustainable
success for the Group and that all relevant
stakeholders have been appropriately
considered. See page 77 for examples.
Monitoring
The Board receives regular updates on
key actions taken from outcomes. This is
done through regular reports from Senior
Management at each Board meeting, and if
necessary, verbal updates are also provided.
S.172 Key to decision criteria
A. Likely consequences of any decisions
in the long-term.
B. Interests of the Company’s employees.
C. Need to foster the Company’s business
relationships with suppliers, customers,
and others.
D. Impact of the Company’s operations
on the community and the environment.
E. Desirability of the Company maintaining
a reputation for high standards of
business conduct.
F. Need to act fairly 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 considering
the factors contained in Section 172.
Page 77 contains 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.
Stakeholder engagement
Stakeholder engagement from the top
75Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Key stakeholder groups
Customers Suppliers Colleagues
A, C, D, E, F A, C, D, E A, B, D, E, F
Understanding our customers and their requirements is
core to our purpose and strategic priorities. By listening
to their needs and what matters most, the Group can
improve our services. The Group continually strives
to develop and refresh the product offering to assist
customers in making the most of their retirement.
The Board acknowledges its responsibility and duty
toensure the success of the business for all customers.
Suppliers are important to Phoenix Group’s success as
they provide operational support, working in partnership
withus, so that we can achieve our strategic priorities
including the delivery of services to our customers.
Developing and maintaining quality relationships with
our suppliers, strategic or otherwise, is core to Phoenix
Group fulfilling our ultimate purpose of helping people
secure a life of possibilities.
Phoenix Group takes great pride in being a
people business and engagement with our
stakeholders is through its people. Our colleagues
are, therefore, vital for 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.
Oversight of our culture, purpose, values and
colleague initiatives 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.
Link to strategic priorities
How the Board has engaged with and had oversight of stakeholder views during the year
• Received formal training regarding their
responsibilities regarding the implementation of
the new Consumer Duty regulations implemented
in July 2023 for open book products and July 2024
for closed books. See page 77 for more details.
• Received regular updates from Management on the
potential impact any ongoing project may have on
customer service, with detailed oversight of customer
service being undertaken by the subsidiary board
for the Phoenix Life Companies and its committees.
• Spent time during their annual strategy session
discussing customer needs and customer desire
for sustainably driven products.
• Together with the Board 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 Group’s focus on positive customer outcomes.
• The Board Risk Committee received updates from the
Group Chief Risk Officer (‘CRO’) 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 Life
Companies and its committees.
• Members held regular colleague engagement
sessions and met with a range of colleagues,
listening to their views, ideas and experiences.
This input was then used to assist the Board
decision-making process.
• Received updates on colleague wellbeing and
engagement levels from the regular employee
surveys completed by colleagues throughout
theyear.
• Monitored the impact of projects and the Group’s
change agenda on colleagues, including potential
areas of stretch on resource.
• Together with the Board Sustainability Committee
received updates from the Designated NED for
Workforce Engagement following engagement
sessions with colleagues, including meetings with
the PCRF.
• Additional information on colleague engagement
can be found on pages 108 to 110.
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 implementing the new regulations required
for Consumer Duty.
The reward of the Executive Directors include customer
metrics which they measure against as part of the
Annual Incentive Plan (‘AIP’).Please see page 120
of the Directors’ Remuneration report.
The Board, via regular reports from the Board Risk
Committee, scrutinises the performance of key suppliers
to ensure Phoenix Group can provide the best customer
outcomes to deliver its operational and financial targets.
Ensuring that relationships with suppliers are mutually
beneficial and progressive is essential to the success
of both Phoenix Group and our suppliers.
The Board strongly believes in leading by example
and sets the cultural tone from the top, engaging
with colleagues (both directly and indirectly) which
is key to ensuring positive relationships. Two-way
engagement, via the Designated NED for Workforce
Engagement and the PCRF, gives colleagues
a direct link to the Group Board to keep them
informed on how the Board is driving Group strategy
while enabling the Board to stay connected to what’s
important to colleagues and how the decisions it
makes impact their working lives.
The Board takes its responsibilities seriously in
promoting positive stakeholder relationships
and has included People metrics in the reward
framework for Executive Directors; further details
on the outcomes against these metrics can be
found in the Directors’ Remuneration report on
page 111 to 140.
Optimise Enhance
Strategic priorities key
Grow
76 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Stakeholder engagement continued
Key stakeholder groups
Community and the environment Investors Government, trade bodies and regulators
A, C, D, E, F A, C, D, E, F A, C, D, E, F
We are working collaboratively to drive a stable investment
policy that enables us to invest at scale in productive assets
to support economic growth, levelling up and the climate
change agenda. This benefits customers and their
communities in the short and longer term.
Building trust and inspiring confidence through
community engagement and partnerships is important
tothe Board for the continued good reputation of the
Group. To achieve this, we are expanding our work on
nature, by setting out priority areas of focus to drive on
nature investment opportunities.
Our investors continue to be crucial to the growth and
achievements of the Group. Phoenix Group 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 is cognisant of the value our investors
add tosafeguarding the Group’s governance through
monitoring of performance and engagement with
the Board throughout the year.
Phoenix Group is the UK’s largest long-term savings
and retirement business and is subject to both
financial services regulations and to listed entity
regulation. The way we operate and interact with
our regulators provides the trust and reassurance
needed by stakeholders to enable Phoenix Group
to deliver its purpose.
The Board recognises the importance of maintaining
positive relationships with the UK Government,
trade bodies and regulators to enable the Group
to communicate the views and concerns of our
customers and society generally, while providing
reassurance to customers that Phoenix Group is
transparent and compliant with all its transactions.
Link to strategic priorities
How the Board has engaged with and had oversight of stakeholder views during the year
• Together with 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.
• Together with the Board Audit Committee, the Board
attended a training session on TCFD and climate
change in relation to the financial statements.
• Received training on the proposed plans for net
zero transition in advance of the Board being asked
to approve the plan.
• The Group HR Director provided regular updates
on colleague engagement activities, initiatives,
and progress on community-related KPIs which
can be found in the Sustainability Report at:
www.thephoenixgroup.com.
• Received feedback from the Chair of the Group Board
on investor relations roadshow meetings.
• Received regular updates from the Group CEO on
investor relations activities and feedback/questions
received from investors.
• Received investor feedback from the Group’s results
announcements and investor roadshows.
• Considered key concerns relating to investor messaging
and various investor communication approaches.
• Considered and provided feedback on the contents
of the year end investor presentation.
• Members, including the Chair of the Group Board
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.
• Received updates at every Board meeting on
Management’s progress with regulators’ requests
for information and any feedback received.
• Formally met with the FCA and Prudential
Regulation Authority (‘PRA’) during the year
on a range of issues relating to the impact of
each regulators’ strategic objectives and routine
regulatory matters.
• Both the FCA and PRA requested more formal
meetings with certain Board Directors and
Senior Managers as part of their respective
supervisory strategies.
• Continually challenged Management on ensuring
that Phoenix Group maintains open and honest
dialogue with the FCA, PRA, Central Bank
of Ireland, The Pensions Regulator and other
jurisdictional regulators.
The Board’s role in promoting positive stakeholder relationships
The Board, through the Board Sustainability Committee,
has monitored Management’s engagement activities
with our communities and the environment, ensuring
that the Group is able to fulfil its purpose and colleagues
have the opportunity to participate in charitable giving
and volunteering both within their communities and also
with environmental projects. It is the Board’s role to hold
Management to account in maintaining sufficient
resources needed to support our communities.
Reaching our Net Zero Transition Plan ambitions
features highlyon the Board’s agenda through the
Sustainability Committee and metrics are included in
the reward framework. For further details see page 117
of the Directors’ Remuneration report.
The Board monitors investor sentiment and feedback
throughout the year to ensure the Group can respond
toinvestor concerns, which is key to the success of
theGroup.
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 Group’s custodian, ensuring robust
governance, controls and risk management,
theBoard is responsible for holding Management
to account for the day-to-day compliance with
regulation and legislation; ensuring transparent
communication of such compliance to maintain
trust in Phoenix Group. The SID is also available
to meet shareholders as she did in 2023.
Optimise Enhance
Strategic priorities key
Grow
77Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
How the Board considered stakeholders during the year
Consumer Duty
How the Board reached its decision
Consideration of Section 172 matters
During the year, the Board considered the steps necessary for the implementation of the new Consumer Duty regulations, which came/will
come into force in July 2023 for open book products and July 2024 for closed book ones.
The Board identified customers, colleagues, investors, regulators and community as key stakeholders in the decision-making process.
Discussions of the potential risks and opportunities for each category of stakeholders were considered throughout the process.
The Consumer Duty programme had been established within the Life Companies, with the Life Companies Board acting as the key decision-making
forum for material decisions, as well as overseeing progress to the regulatory deadline in July 2024. As a result, the Life Companies Board and
Group Board Risk Committee received regular updates on progress, with Rosie Harris, NED on the Life Companies Board, appointed as the
Group’s NED sponsor for this work. Consumer Duty, however, is a significant programme of work for the Group and the changes introduced
by the programme had the potential to have a material impact on the Group, and as a flagship initiative by the FCA to enhance standards
across the industry and increase levels of consumer protection, it was therefore important that the Group Board was appropriately engaged
in the programme.
While the Life Companies, as the regulated entities, are accountable for the successful delivery of the Consumer Duty programme, there are
a number ofsections where it is appropriate for the Group Board to have oversight to ensure the best outcome for all stakeholders.
These sections are that the Group Board:
• approves the overall strategy in pursuit of good customer outcomes, and should be kept informed of key developments;
• is provided with regular updates to ensure it is satisfied that the Life Companies Board have reviewed and fulfilled their Directors’ duties
and are meeting the compliance requirements of Consumer Duty;
• is made aware of, and provided with all relevant information regarding any matters relating to the Consumer Duty programme which trigger
the Matters Reserved for the Board; and
• as Consumer Duty is a material programme for the Group, the Group Board should have oversight of the overall progress of the work and
assurance that the Group is adhering to the spirit of the rules.
To ensure that it was fully aware of its responsibilities to the Group regarding the Consumer Duty programme, the Group Board undertook
a formal training sessions arranged by the Group Company Secretary and delivered by the Chief Risk Officer for the Life Companies.
Outcome
Following due consideration of all the matters set out in Section 172 of the Act, the Group Board agreed that it would receive regular updates
via the Group CEO report, and regular training sessions would be scheduled on material matters as they arose.
IFRS 17 implementation
How the Board reached its decision
Consideration of Section 172 matters
During the year, the Board was required to monitor the implementation of the new accounting standard IFRS 17 for insurance contracts issued
by the International Accounting Standards Boards (‘IASB’). This supports efficient risk management and allows stakeholders to gain important
insights into the entity’s business model, exposures, and performance. As this was a new accounting standard, the Board dedicated significant
time to the matter to ensure that regulatory deadlines were met for the successful announcement of the Half Year 2023 results, which would
have a positive outcome for customers, investors, regulators and colleagues.
This required the following steps to be taken at meetings held during 2023:
• Consideration of the impact of work required for this project on others within the Group, due to the significant internal resources required
to ensure delivery. The Board was required to consider other projects in the pipeline and the impact on colleagues toensure a balanced and
manageable workload for all.
• Successful execution of the plan would be based on careful management of a number of key operational risks. The risks relating to
judgements or technical assumptions were considered and Management regularly reported the results of testing through the Transition
Balance Sheet and Comparatives process.
• Regular updates were received from both the Board Audit Committee and the Board Risk Committee to ensure that all steps and risks were
being carefully monitored and progress was appropriately reported to the Group Board to enable its decision-making process.
• Updates were provided at every meeting throughout the year from Management.
To ensure that it was fully aware of its responsibilities to the Group regarding the implementation of the IFRS 17 standard, the Group Board
undertook several formal training sessions delivered by the Group CFO and Heritage CEO.
Outcome
Following due consideration of all the matters set out in Section 172 of the Act, the Board announced the Half Year 2023 results in September
2023. In addition, significant time was spent during Board meetings discussing the project’s progress, receiving frank reports from Management.
As a result, consideration was given to customers, investors, colleagues, government bodies and regulators, together with the wider market,
to ensure that suitable triggers were in place to take action based on investor sentiment.
78 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Following internal Board effectiveness reviews in 2021 and 2022, an external
Board effectiveness review was facilitated by the Board Reviewer in 2023.
The Board confirms the external Board Reviewer has no other connection
with Phoenix Group or individual Directors. Its work is guided by a Code of
Practice published by the Board Effectiveness Guild of which it is a member.
4. The external Board Reviewer observed
the meetings held on 2 and 3 October
2023, which included reviewing the
Board and Committee papers for
those meetings.
5. Draft reports were circulated to the
Chair of the Group Board and each
Committee Chair, noting that the
October Remuneration Committee
meeting was an education session.
These were then individually discussed
with each Chair.
6. Observations were presented at
the November Board and Committee
meetings by the Board Reviewer.
Results and potential actions were
discussed at each Committee meeting.
External Board review process:
Composition, succession and evaluation
Board review
1. The format and scope of the review
were discussed by the Board Reviewer,
the Chair of the Group Board and the
Group Company Secretary, the Senior
Independent Director and the
CommitteeChairs.
2. The Board Reviewer sent a questionnaire,
firstly reviewed and approved by the
Chair of the Group Board and Group
Company Secretary, to every member
of the ExCo, Board and the Group
Company Secretary.
3. Each member of the ExCo, the NEDs,
the Chair of the Group Board and
the Group Company Secretary had
a confidential interview with the Board
Reviewer to thoroughly discuss their
answers to the questionnaire andany
other topics individuals felt werepertinent.
Action 1
Management to continue
to consult with the NED’s in
preparation of the annual
strategy session to ensure
that extensive experience
of strategy development
on the Board is leveraged
appropriately.
Action 2
The Chair of the Group
Board, Group Chief
Executive Officer, Group
Company Secretary and
Committee Chairs to ensure
adequate time is given to
debate strategic objectives.
Action 3
The Chair of the Group
Board to continue to
provide regular individual
performance feedback to
each Director as appropriate
and at least annually.
Action 4
Continued Board focus on
key material and relevant
issues with support from the
Chair of the Group Board.
To enhance the timeliness
and succinctness of papers.
7. The Group Company Secretary, or her
designate, worked with each individual
Chair of the Committees to finalise
actions and any potential 2024 education
sessions. These were then added to
the 2024 education session calendar.
Actions were approved at the early
February 2024 meeting and will be
monitored by the Board and Committees
throughout theyear.
Board review
The 2023 Board effectiveness review concluded that the Board is capable, hard-working with a large workload, is reflective and has strong
360-degree challenge between both Non-Executive Directors and Management. It scored itself as effective, whilst acknowledging there
was always room for improvement to maintain high performance. The 2023 review by the Board Reviewer concluded that the Board and its
Committees operated and were chaired effectively. However, the Board Reviewer did identify a few areas for enhancement for the Board
and these are highlighted below:
79Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Committees’ effectiveness
The Committees’ effectiveness review was
undertaken as part of the Board review
process and concluded that they operate
effectively and Chairs performed strongly.
All duties set out in the Committees’ Terms of
References were addressed during the year.
The areas of enhancement for Committees
for 2024 are set out in each committee report
in a similar format to the previous page for ease.
Individual effectiveness
Executive Directors are evaluated annually
to ensure they have performed against
their strategic targets (see page 114 of the
Directors’ Remuneration report ). The Group
Company Secretary was appointed on
1 April 2022 to ensure Phoenix Group’s
governance is in line with its FTSE 100 peers.
It has become apparent that compliance with
The 2022 Board review
The 2022 Board review was internally facilitated by the then Chair of the Group Board, Alastair Barbour, who was supported by the Group
Company Secretary. The following progress against actions identified during that review has taken place during 2023:
Action identified Action taken
Strategic Topics – further deep dives into the Open Business,
including the existing European business strategy.
This was an agenda item at the Strategy Day in June.
Education/Training – determination of the topics to be included
in 2023 and ensure compliance/regulatory required matters are
covered in the most efficient manner.
An annual education/training plan was agreed on regular training
sessions for the Board during 2023 and included the Annual Operating
Plan 2023, various projects, IFRS 17, the customer view, Internal Model,
Net Zero Transition Plan, as well as mandatory training.
Colleague Engagement – to enhance colleague engagement for
Directors working with the Designated NED for Workforce Engagement.
The Board met colleagues in May and November 2023. The first
session was with graduates and the second was with female
colleagues over 50. See pages 108 to 110 for more details.
Talent and Succession Planning – closer focus as the Group continues
to build its capabilities and strengthens the succession pipeline.
A review of talent and succession planning was undertaken twice
in 2023. A talent grid has been developed for consideration.
Board Information – ongoing improvement in the quality and content
of information to the Board, building on the progress made in 2022.
The paper template was further enhanced, and the Company
Secretariat Team provided education sessions to colleagues on
how to draft good quality papers.
Principle L of the 2018 Code could be
enhanced. Therefore, NEDs will be subject
to a formal and rigorous individual evaluation
as part of both internal and external evaluations
going forward. As part of this process, the
Board Reviewer appraised each Director’s
performance, this was reviewed by the
Chair and then discussed with each Director.
The Board Reviewer found the Board to be
effective and individuals specifically provided
strong support, belief and optimism in the
Phoenix Group strategy.
Assessment of the Chair’s performance
Feedback was provided by the Board,
ExCo and Group Company Secretary on the
effectiveness of the Chair, who was found to
be thorough, competent and unhindered by
the interim nature of his role. He was found
to be capable of both challenging
Management whilst also being a critical
friend when required. Alastair Barbour made
a seamless transition from Non-Executive
Director to Chair of the Group Board during
2023 and back again to provide Nicholas
Lyons with a diligent handover, providing the
Board with much confidence. The Board
has valued Alastair’s challenge, leadership,
inclusivity and support for all Directors,
and of course, his historical knowledge.
80 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 to
the Board during 2023. Board Committees may have specific educational
or deep dive sessions relevant to the work of each Committee.
Q1
Annual Operating Plan (‘AOP’) 23 and expenses
Deep dive focusing on:
1. planned investment over the next three years
and expectedbenefits;
2. Management’s view on the prioritisation of projects
and planned spend; and
3. balance sheet focus.
IFRS 17
Review of timeline to announce IFRS 17 and Half Year 2023
results to the market. Providing an update on the progression
of Full Year 2022, Half Year 2022, Half Year 2023 IFRS 17 results
and anychallenges faced by Management. A planning update
was alsoprovided.
Sun Life of Canada
Update on business and governance integration post-acquisition
including a 2023 timeline.
Outcome: Day one vision to be provided to the Board.
Joint Audit Committee and Risk Committee
IFRS 17
Review of governance path, status update and identification of
the requirement for any further education sessions. Review of
the Transition (opening) Balance Sheet, IFRS 17 liabilities, key
judgements, controls and validations required, plus an update
from the External Auditor, EY LLP (‘EY’), on progress and where
challenge may be needed.
Sustainability Committee
Stewardship Code
Overview of Phoenix Group’s approach to the Stewardship Code.
Human rights
Teach-in by the business for Social Responsibility.
Remuneration Committee
Benchmarking
External adviser PwC provided a benchmarking session
on CEO and CFO pay for the financial services sector.
Sustainability Committee
Phoenix Insights
Update on how the ‘Think Tank’ was focusing on consumers,
the undersavings crisis, female re-skilling opportunities in the
workplace and broadening methods of financial education.
Digital inclusion
Overview of the development and delivery of Phoenix Group’s
digital inclusion strategy which formed part of the wider
customer sustainability strategy and ambitions.
‘Let’s Start Talking’ Campaign
Work undertaken by colleagues to ensure that the Company
continued to be a purpose-led organisation.
Outcome: To find a more accurate method of tracking
engagement with the website.
Committee deep dives and education sessions Committee deep dives and education sessions
Q2
IFRS 17 programme update
Programme update and deep dive into current end-to-end
controls for the production of IFRS 17 results.
Net Zero Transition Plan
In advance of its May 2023 publication, a deep dive focusing
on the balance between ESG ambition and any false sense
of progress. The risks of greenwashing and greenhushing
were also highlighted to the Board.
Brand engagement
Focus on digital and the impact of Artificial Intelligence
(‘AI’) on future engagement with our customers.
Customer trends
Strategy session on customer views, what is driving
customers’ behaviours and how these can be embedded
within Phoenix Group’s strategy.
Composition, succession and evaluation continued
Board development
81Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Sustainability Committee
Climate litigation
Insight into current trends and how climate change litigation
wasexpected to develop over time. Particular focus on human
rights protection and derivative actions.
Nature and The Taskforce on Nature-related Financial
Disclosures
Overview of the science-based foundation for
understanding nature, and how this was incorporated
into the TNFD framework’scomponents.
Money Mindset
Deep dive into the workplace pension platform
for StandardLifecustomers.
Financial inclusion
Overview of work undertaken to increase financial
inclusion forall customers, as well as wider society.
Audit Committee
IFRS 17 disclosure as the publication date approached.
Audit Committee
Disclosure of climate reporting on financial disclosures
Deloitte provided a session on the financial impact of the new
sustainability and climate change regulations. Feedback on any
potential gaps with the new regulations in Phoenix Group’s own
Sustainability Report and appropriate assurance.
Outcome: A further education session scheduled for Q1 2024
was identified to review an assurance timeline, for the impact
climate reporting had upon financial statements.
Remuneration Committee
Current and potential changes under the UK Corporate Governance
Code 2024 (‘the 2024 Code’) and the impact for the Committee
were provided by PwC, the Committee’s external adviser.
Consumer Duty was also outlined in relation to remuneration.
Outcome: Maggie Semple to join the Remuneration
Committee as a member on 1 January 2024 to assist
the Committee to better understand the voice of the
wider workforce.
Outcome: The Committee to receive an annual
wider workforce dashboard at each October
education session.
Committee deep dives and education sessions Committee deep dives and education sessions
Q3
Group CEO and Group CFO update
Review of current bank loans and facilities, cash generation,
controls and potential M&A. In addition, a reflection of
inadvertent consumer exclusion, except for financial crime.
IFRS 17
Two further sessions on the programme update for IFRS 17
and market disclosure considerations.
Consumer Duty
Deep dive focused on the implementation of Consumer Duty
at the Life Companies Board ready for regulatory implementation
in June2024.
Outcome: More regular updates to the Phoenix Group Board
from the Life Companies Board on its role and actions relating
to Consumer Duty. There had been particular focus on the
With-Profits Committee as this was a complex area.
Q4
Investor Relations
Investor feedback from brokers on the Half Year 2023 results.
Major Model Change
Understanding of the Major Model Change 2022 changes from
the previous Major Model Change and the liaison with the PRA.
Market Abuse Regulations
Refresher training on UK Market Abuse Regulations.
Including recently implemented systems to monitor share
dealing, project lists and closed periods for both the asset
management business and PDMRs and employees dealing
in Phoenix Group Holdings plc’s shares.
Internal Model
Review of how the Internal Model supports the
Risk Management Framework.
The Board received specific mandatory training:
• Code of Conduct
• Data Protection
• Financial Crime
• Information Security
• Internal Model Validation
• Consumer Duty
Male 60%
Female 40%
Committee gender
82 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Gender diversity
will be considered
when succession
planning over the
next two years for
the appointments
that the Board
can influence.
Role of the Committee
The Committee is responsible for
considering the size, composition and
balance of the Board, the retirement
and appointment of Directors and
Senior Management, succession planning
for the Board and Executive Committee
and monitoring of diversity metrics. It is
focused on the development of a diverse
pipeline and making recommendations
to the Board on these matters.
Following each meeting, the Chair
of the Committee provides a summary
of discussion, outcomes and where
relevant makes recommendations to
the Board in line with the Committee’s
Terms of Reference, which can be
found at: www.thephoenixgroup.com.
Composition of the Committee
The Board confirms that with the exception of the Chair, all of the members
of the Committee are Independent Non-Executive Directors.
Regular attendees include the Group CEO and Group HR Director.
Committee meetings and membership
Under the Committee’s Terms of Reference it should meet at least twice a year.
During 2023 there were seven formal meetings.
Member
from
2023 meeting
attendance
2023 %
attendance
Nicholas Lyons
1
1 December 2023 – –
Alastair Barbour
2
11 May 2016 7/7 100%
Karen Green
5 May 2022 7/7 100%
Katie Murray
3
29 June 2023 4/4 100%
John Pollock
1 November 2022 7/7 100%
Nicholas Shott
11 May 2017 7/7 100%
Kory Sorenson
4
2 May 2018 4/4 100%
1 Nicholas Lyons stepped down from the Board on 1 September 2022 to commence his sabbatical.
He returned as Chair of the Group Board on 1 December 2023.
2 Alastair Barbour became Chair of the Group Board on 1 September 2022 and stepped down from
the position of Chair of the Group Board and the Nomination Committee on 30 November 2023.
Alastair Barbour then retired from the Board on 31 December 2023.
3 Katie Murray became a member of the Nomination Committee on 29 June 2023.
4 Kory Sorenson retired from the Board on 30 June 2023.
7
Number of Committee
meetings held this year
Nicholas Lyons
Nomination Committee Chair
Composition, succession and evaluation continued
Nomination Committee report
83Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview of the year
Key Committee activities during 2023
Succession planning for the NEDs leading to the appointment of two new NEDs.
The appointment of Mark Gregory with effect from 1 April 2023.
The review of Committee membership and the approval of Katie Murray as a member of the Nomination Committee effective 29 June 2023
and Nicholas Shott as Chair of the Remuneration Committee effective 4 May 2023. Mark Gregory became a member of the Audit Committee
and Maggie Semple the Remuneration Committee both with effect from 1 January 2024.
Monitoring our DE&I targets at Board, Executive Committee and Business Leadership level.
Appointment of Bvalco Ltd (the external Board Reviewer) to review the performance of the Phoenix Group Board for 2023.
Approve any changes to the Life Companies Board and direct subsidiaries of Phoenix Group Holdings plc.
The appointment of Eleanor Bucks with effect from 1 December 2023.
2024 focus
Succession planning for the Board, recognising that John Pollock and Nicholas Shott conclude their nine-year terms in 2025.
Continue to consider the succession planning for Executive Directors and Executive Committee members, closely reviewing the talent grid.
Review of the Board Diversity policy and monitor against the Listing Rules, Parker Review and FTSE Women Leaders.
Action 1
Continued focus on the
executive succession plan
and talent grid.
Action 2
Review the Committee
memberships on an
ongoing basis to ensure
skills and experience are
being utilised effectively.
Committee review
The 2023 effectiveness review was externally
facilitated by an external Board Reviewer.
The review concluded that the Committee was
functioning extremely effectively, there was
good respect and trust between the Board
and members, new appointments including the
interim Chair of the Group Board had been dealt
with strongly. There was good diversity on the
Board which was continuously improving and
new NEDs had commented on the quality of the
appointment process, particularly at the interview
stage. However, the Board Reviewer did identify
a few areas of enhancement by the Committee,
and these are highlighted to the right:
84 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Outcomes from Nomination Committee discussions
On an annual basis, a review of the Committee’s activities is undertaken. In 2023, it was concluded that all elements of responsibility detailed
in the Committee’s Terms of Reference had been addressed. An overview of some of the key activities undertaken during the year and the way
in which they contributed to important outcomes is detailed in the following table:
Outcomes from Nomination Committee agenda items
Time commitment Outcome
Full assessment that each of the NEDs continue to
be appropriately defined as ‘independent’ and have
offered and continue to offer the appropriate time
commitment expected in their role.
The Nomination Committee has confirmed its satisfaction with the time and commitment given to Phoenix Group
by all Directors.
All Directors should be proposed for election or re-election by shareholders at the AGM being held on 14 May 2024.
Time commitments were also reviewed on the appointment of two new NEDs and as NEDs take on new roles.
Emergency cover for Board Committees
should a Chair be unable to attend a meeting.
Role Emergency cover
Chair of the Group Board and Nomination Committee SID
Chair of the Audit Committee Chair of the Risk Committee
Chair of the Risk Committee Member of the Risk Committee
Chair of the Remuneration Committee SID or member of the Committee who has been
a member for at least 12 months
Chair of the Sustainability Committee Chair of the Remuneration Committee
Appointment process Outcome
Scoring by NEDs when interviewing candidates had
to be consistent.
Focusing on continuous improvement through HR reviewing the scoring process, incorporating feedback from
the last recruitment campaign to ensure it was relevant for the skills and experience being sought, whilst ensuring
consistent assessment for all candidates. The scoring methodology was being updated to encompass learnings
from the recruitment campaigns undertaken in 2023 and would ensure appropriateness for the next campaign.
The Committee also received education sessions as shown on pages 80 to 81.
Appointment process
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. A role
profile is drafted by the Group Company
Secretary and reviewed for approval by
the Nomination Committee and other
members of the ExCo as appropriate.
The Nomination Committee appointed
Hedley May for the appointment of
Mark Gregory and Korn Ferry for the
appointment of Eleanor Bucks.
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.
Detailed assessments of short-listed
candidates are undertaken by the
search consultancy and the Committee.
The Committee requires search firms to
ensure that both long-lists and short-lists
are balanced from a diversity and inclusion
perspective. If not, the Committee will
insist on a refresh.
Each member of the Nomination
Committee interviews short-listed
candidates individually or jointly with
other members of the Committee.
A pre-prepared list of questions are
used to ensure continuity. Interviewers
are mindful of the skills matrix, diversity
of thought and how Phoenix Group
values are demonstrated openly for
culture fit, which must always come
from the Board and Leadership Team.
Interviews are also held with the Group
CEO and Group HR Director as part of
the process and other members of the
ExCo as appropriate.
References are then obtained prior
to the Committee recommending the
appointment to the Board. Once the
Board has approved the recommendation
a market announcement is made
immediately, and the onboarding process
begins. Please see pages 90 to 91 for more
information on the induction programme.
A similar process is followed for executive
succession planning, which is undertaken
by the Committee for Executive Directors
and for ‘ExCo’ roles to ensure appropriate
succession in an emergency situation with
at least one internal successor, who is
ready now or expected to be ready in one
to two years. External candidates are also
included in the process. ExCo succession
planning remains a focus for 2024,
considering talent, capabilities and the
broader diversity agenda. Much work
has been undertaken to strengthen the
capabilities and skillset at ExCo level,
with focus now on successors for
all ExCo members to ensure there
is a strong pipeline of talent.
Composition, succession and evaluation continued
Nomination Committee report
Board succession
During 2023, the Committee has remained
active in its consideration of NED succession,
which, following further consideration by the
Board, has led to:
• the appointment of Nicholas Lyons on
1 December 2023 following his return from
sabbatical between 1 September 2022
and 30 November 2023 to take on the
prestigious role of Lord Mayor of the City
of London. Alastair Barbour was interim
Chair of the Group Board for that duration.
During this period, Alastair reached his
ten-year tenure and therefore retired
from the Board on 31 December 2023;
• the appointment of Mark Gregory to the
Board and member of the Risk Committee
on 1 April 2023. Mark was appointed as
a member of the Audit Committee on
1 January 2024, in place of Karen Green
who stepped down on 31 December 2023;
• the appointment of Katie Murray as a
member of the Nomination Committee
on 29 June 2023;
• the appointment of Nicholas Shott as
Chair of the Remuneration Committee
on 4 May 2023, following the conclusion
of the 2023 AGM;
• support for the appointment of David Scott
as the Shareholder Nominated Director
of abrdn on 11 May 2023, adding valuable
and relevant skills through his role as
Chief Enterprise Technology Officer,
having worked in financial services for
over 35 years;
• the appointment of Maggie Semple
as a member of the Remuneration
Committee on 1 January 2024; and
• the appointment of Eleanor Bucks
to the Board on 1 December 2023.
85Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Board skills
A Board skills review was undertaken by the
external Board Reviewer as part of its 2023
effectiveness review. It concluded that skills
could be expanded further as well as
experience in the banking sector, where
complex transformational experience could
be advantageous along with a focus on
digitisation. Eleanor Bucks’ recent appointment
has brought the wider actuarial and asset
management financial services experience
identified by the Board Reviewer. Future
succession planning will take this criterion
into account as well as proven experience in
AI, which will be an imminent requirement.
Board skills are separated into core and
secondary skills and can be found on page 89.
Board diversity
The Board supports and aims to fully comply
with the FTSE Women Leaders Review
guidance for FTSE 350 companies,
which is aligned with the FCA’s Listing Rules
(LR 9.8.6(9)) on diversity, being:
• 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); and
• at least one member of the board is from
a minority ethnic background.
As at 21 March 2024, the Board is comprised
of 38% female Directors. The Board has two
Shareholder Nominated Directors. The
Board is unable to choose these candidates
as these are nominated and therefore is
unable to influence its composition entirely.
David Scott from abrdn replaced Stephanie
Bruce, which has impacted the female
representation of the Board. The Board
is comprised of 45% female Directors when
considering appointments, the Board has
independently made.
The Board is mindful that when female
representation is reported as a whole and
includes the Shareholder Nominated
Directors, it falls short of the Listing Rules.
This will be taken into account when planning
the succession of retiring Directors over the
next two years for the appointments that the
Board can influence from a diversity perspective.
In relation to the second part of the Listing Rule,
Karen Green is the Senior Independent
Director of the Board. Again the Board will
be mindful of gender diversity when making
future senior board appointments.
In addition, the Board met the recommendation
of the Parker Review for FTSE 100 companies
in relation to there being at least one director
from an ethnic minority background on the
Board by 2021. Phoenix Group’s target for
Senior Management
1
ethnic minority
representation is 13% by 2027 as submitted
to the Parker Review in December 2023.
As at 21 March 2024, the Board has three
members of an ethnic minority background,
representing 23% of the total Board
composition. If the Shareholder Nominated
Directors are excluded, the Board has two
members of an ethnic minority background
representing 18% of the total Board
composition. Further information can be
found below.
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 Group
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 40.
1 Definition of Senior Management is in line with the
Parker Review of ExCo and ExCo minus 1, excluding those
not in senior management roles.
Gender diversity
Number
of Board
members
Percentage
of the Board
Number of
Board members
appointed by
Phoenix Group
Percentage
of the Board
appointed by
Phoenix Group
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number in
Executive
Management
Percentage
of Executive
Management
Number
of total
employees
Percentage
of total
employees
As at 21 March 2024
Men 8 62% 6 55% 3 6 50 3830 49%
Women 5 38% 5 45% 1 6 50 4,031 51%
As at 31 December 2023
Men 9 64% 7 58% 3 6 50 3,771 49%
Women 5 36% 5 42% 1 6 50 3,986 51%
Please note the definition of Executive Management includes the Group Company Secretary in line with that under LR 9.8.6(10) and Provision 23 of the 2018 Code.
Ethnic diversity
Number
of Board
members
Percentage
of the Board
Number of
Board members
appointed by
Phoenix Group
Percentage
of the Board
appointed by
Phoenix Group
Number
of senior
positions on
the Board
(CEO, CFO,
SID and Chair)
Number
in ExCo
Percentage
2
of ExCo
Number
of total
employees
2,3
Percentage
of total
employees
As at 21 March 2024
1
White British or other White
(including minority White groups) 10 77% 9 82% 3 10 91% – –
Mixed/Multiple Ethnic Groups 0 – 0 – 0 0 – – –
Asian/Asian British 2 15% 1 9% 1 1 9% – –
Black/African/Caribbean/
Black British 1 8% 1 9% 0 0 0% – –
Other ethnic group, including Arab 0 0% 0 0% 0 0 0% – –
Not specified/prefer not to say 0 0% 0 0% 0 0 0% – –
As at 31 December 2023
1
White British or other White
(including minority White groups) 11 79% 10 83% 3 10 91% 4,279³ 55%
Mixed/Multiple Ethnic Groups – – – – – 0 – 98 1%
Asian/Asian British 2 14% 1 8.5% 1 1 9% 502 6%
Black/African/Caribbean/
Black British 1 7% 1 8.5% 0 0 – 121 2%
Other ethnic group, including Arab – – – – – – – 24 0%
Not specified/prefer not to say – – – – – – – 2,733 36%
1 Based on the Office for National Statistics classification and included: Asian, Black, Mixed/multiple ethnic groups, Other ethnic groups, White and Prefer not to say.
2 In January 2024, Phoenix Group moved from an annual diversity data survey collected via an app to data collection through our internal HR platform.
This will provide an up-to-date view of the diversity of our colleagues and allow us data analysis on an intersectional basis, providing better data insights than an annual survey.
Currently the participation rate is 42%. When it is at 50%, high level results can be shared and at 65% detailed data analysis can be provided.
It is not known when these targets will be hit. A full programme of employment engagement is in place to help colleagues increase its participation.
3 Data collected, permissible and volunteered by colleagues.
86 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Composition, succession and evaluation continued
Nomination Committee report
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, Mark Gregory and Eleanor Bucks joined the Group Board.
Their experience, background and skills are aligned with the Group’s strategy.
The Board will endeavour to appoint the right candidate for each Board role
and consistently seeks to enhance diversity in the broadestsense.
Board policy Progress
The Board promotes the enhancement of
diversity, inclusion and equal opportunity,
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 long-lists demonstrating
diversity in the broader sense, including gender, ethnicity and other diversity
attributes and will challenge search firms toensure this aim is achieved.
Board policy Progress
The Board will undertake regular skills
audits to ensure the Board’s skills remain
appropriate for its strategy and provide
diversity where possible.
The Board skills review was carried out during 2023 and concluded that enhancing
the skills in the areas of digitisation and banking transformation would be valuable
going forward. Other skills such as actuarial and asset management have been
provided by the recent appointment of Eleanor Bucks. The skills required on the
Board will be reviewed when considering the replacement of the two Directors due
to retire in 2025 and the retirement of Alastair Barbour.
Board policy Progress
The Board intends to comply or explain
why on a continual basis whether the FTSE
Women Leaders Review, Listing Rule 9.8.6(9)
and Parker Review targets have been met:
• that the board should be comprised
ofat least 40% female directors;
• that at least one of the chair, the chief
executive officer, the senior independent
director, or the chief finance officer is
a woman; and
• at least one member of the board is from
a minority ethnic background as per
the Parker Review.
As at 21 March 2024:
• Five female Directors representing 38% of Board composition.
When excluding Shareholder Nominated Directors this is 45%.
• The Senior Independent Director is female.
• Three minority ethnic Directors representing 23% of Board composition.
When excluding Shareholder Nominated Directors this is 18%.
• Phoenix Group’s target for ethnic minority representation at Senior Management
level is 13% by 2027.
87Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 and this has been an area of
focus during 2023.
The Group Company Secretary maintains
a register of Directors’ commitments which
is regularly reviewed by the Committee.
As part of the Board review process,
the Board, 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
2023 exceeded the level expected in their
appointment terms.
The Group Company Secretary completed
a full review of Directors’ non-listed
appointments. The following table outlines
the number of appointments held by Directors.
Name
Number of
boards including
Phoenix Group
Holdings plc
Number of
Directorships of public
limited companies
Number of
directorships of private
limited companies
Number of
directorships of trusts,
charities and other
companies
Nicholas Lyons
1,2
8 2 5 1
Karen Green
1
7 3 3 1
Eleanor Bucks
3
1 1 – –
Mark Gregory 5 2 3 –
Katie Murray
4
4 4 – –
John Pollock
1 1 – –
Belinda Richards
4 3 1 –
Maggie Semple
9 2 6 1
Nicholas Shott 3 1 2 –
Andy Briggs
5
5 3 – 2
Rakesh Thakrar
5,6
6 3 3 –
1 Nicholas Lyons and Karen Green are both Non-Executive Directors of Miller Insurance Services LLP. Nicholas Lyons will retire from that board in 2024.
2 Nicholas Lyons is the Chair of the Group Board of Phoenix Group Holdings plc which proxy advisers count as two listed companies.
3 Eleanor Bucks has one listed role at Phoenix Group Holdings plc in addition to her role as Chief Investment Officer at Lloyd’s of London.
Any subsidiary appointments which are a result of Eleanor’s executive role have been excluded from the table above.
4 Katie Murray is an Executive Director at NatWest Group plc which proxy advisers count as three listed companies.
Any subsidiary appointments which are as a result of Katie’s executive role have been excluded from the table above.
5 Andy Briggs and Rakesh Thakrar are Executive Directors of Phoenix Group Holdings plc which proxy advisers count as three listed companies.
6 Two of Rakesh Thakrar’s private limited company appointments relate to his appointment at Bupa Regulated Entities.
Board independence
With the exception of the Chair of the
Group Board and Shareholder Nominated
Directors, all NEDs are considered
independent in character and judgement.
The independence criteria set out in the
2018 Code was taken into account as part
of the selection process for the NEDs
who joined Phoenix Group during the year.
Mark Gregory and Eleanor Bucks were
considered to be independent. David Scott
was not considered to be independent
due to his capacity as a Shareholder
Nominated Director. Over half of our
Board members, excluding the Chair of
the Group Board, are Independent NEDs.
The independence of NEDs is reviewed
and confirmed annually by the Committee.
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.
Time commitment
All Directors are expected to commit
sufficient time to the Board, and the
Company. 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. It is expected that
on average, each of the seven scheduled
Board meetings is likely to require two days
of participation (including Committee
meetings, education sessions, travel and
I am pleased to be back in my role
as Chair of the Group Board and its
Nomination Committee and look
forward to a year of continually
enhancing governance during 2024.
Nicholas Lyons
Chair
Male 62%
Female 38%
Board gender balance
¹
(including
Shareholder Nominated Directors)
Male 55%
Female 45%
Board gender balance
¹
(excluding
Shareholder Nominated Directors)
Less than 1 year 23%
1–3 years 15%
3–6 years 31%
6–9 years 31%
9 years or more 0%
Board tenure
¹
Target
FTSE Women
Leaders target
FCA Listing Rules
target – gender
Parker Review
target
FCA Listing Rules
target – ethnicity
FCA Listing Rules
target – female
Chair, CEO,
CFO or SID
40%
38%
1
3
40%
38%
1
3
1
1
Achieved
Target
Target
Achieved
Target
Achieved
Target
Achieved
Achieved
Overall diversity progress for the Board¹
Target
FTSE Women
Leaders target
FCA Listing Rules
target – gender
Parker Review
target
FCA Listing Rules
target – ethnicity
FCA Listing Rules
target – female
Chair, CEO,
CFO or SID
40%
45%
1
2
40%
45%
1
2
1
1
Achieved
Target
Target
Achieved
Target
Achieved
Target
Achieved
Achieved
Overall diversity progress for the Board
members appointed by Phoenix Group
¹
White (English) 50%
White (Scottish) 17%
Asian (Indian) 9%
Asian (Japanese) 8%
Black (Caribbean) 8%
White (Other) 8%
Board ethnicity
¹ (including
Shareholder Nominated Directors)
White (English) 55%
White (Scottish) 18%
Asian (Indian) 9%
Black (Caribbean) 9%
White (Other) 9%
Board ethnicity
¹ (excluding
Shareholder Nominated Directors)
88 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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.
1 As at 21 March 2024.
59
Average age
of the Board
Composition, succession and evaluation continued
Board diversity
89Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 NEDs, with action
being taken to address areas highlighted for strengthening.
Mergers & Acquisitions
Capital markets
Regulatory
Financial
Life assurance
Asset management
Actuarial
Investment management
Risk management
Customer service & solutions
Sustainability/ESG
Change
IT/Digital
Sales/Distribution
Marketing
Operations
Human resources
FTSE 100 board experience
Nicholas Lyons
Chair of the Group Board
Andy Briggs, MBE
Group Chief Executive Officer
Rakesh Thakrar
Group Chief Financial Officer
Karen Green
Senior Independent Director
Belinda Richards
Independent Non-Executive Director
David Scott
Non-Executive Director
Hiroyuki Iioka
Non-Executive Director
Nicholas Shott
Independent Non-Executive Director
John Pollock
Independent Non-Executive Director
Katie Murray
Independent Non-Executive Director
Maggie Semple, OBE
Independent Non-Executive Director
Mark Gregory
Independent Non-Executive Director
Eleanor Bucks
Independent Non-Executive Director
Total core skills
9 8 11 9 8 5 4 7 10 6 6 6 5 4 5 6 3 10
Total secondary skills
1 3 1 2 3 6 2 3 2 1 4 3 1 3 1 3 8 0
90 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 of the Group Board discusses
training with each NED at least annually.
The Group Company Secretary supports
the Chair of the Group Board in the oversight
of the induction and development plans
for the NEDs following either an internal
or external Board effectiveness review.
All NEDs are encouraged to suggest
training topics of interest and all Directors
are able to access a Board portal where
additional resources are available.
The induction programme at Phoenix Group
has been well structured and given me a
strong grounding to confidently commence
my NED role here. I’ve had meetings
with relevant stakeholders, who have
been transparent and given me comfort
in the Group, its strategy and people.
Management was open and well-prepared
for each session and I was provided with
useful reading material and a detailed
overview of the key matters for which
Executives were accountable. For me, joining
in April and attending the Board Strategy
Days in June 2023 was extremely helpful.
I learnt a lot within the two days as I had an
informal environment to ask lots of questions.
I tend to join some Committee meetings as
an attendee to gain as much information to
help me understand the wider Board matters,
risks and opportunities, key areas of focus
and to meet other presenters. I find the
Phoenix Group offices welcoming when
I visit outside of the Board schedule,
Mark Gregory
Joined the Board on 1 April 2023
Composition, succession and evaluation continued
Board induction
A strong induction programme, including the
interview process, is integral to a Director’s
ability to quickly thrive in their role.
I’ve had meetings with
relevant stakeholders,
who have been transparent
and given me comfort in
Phoenix Group, its strategy
and people.
which gives me the opportunity to observe
Phoenix Group’s culture independently
and to build relationships.
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’ve enjoyed the two colleague engagement
sessions. At the first, I was able to meet some
Phoenix Group graduates and understand
their training programme and roles better.
At the second, our female colleagues who
were over 50 provided insight into their
working life at Phoenix Group. The Board
found both sessions insightful and at the
same time comforting. It was great to meet
such different demographics and learn
about their roles and how the Group was
providing a clear career path for those
that wanted it.
91Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
I recently joined the Board and both the
appointment and induction processes were
seamless. Meeting so many of the Board at
interview stage helped me form an opinion
quickly on the culture at Phoenix Group and
whether this was a company where I felt
I could add value.
My induction programme has been well
structured and the reading material in
advance comprehensive. There were
detailed overviews of the key matters
for which Executives were accountable
which was useful. I felt encouraged by
Management’s preparation and candid
response to my questions when meeting
individuals during my induction process.
This is my first listed NED role and it’s
important to feel supported by the Group
Company Secretary and other Board
members, who have all been exemplary.
I am particularly excited by the two-day
strategy away day in June 2024. Feedback
from the external Board review was that this
provides the time to get to know the Board
members and Management in a more
Typical induction
programme features
Meetings
• Chair of the Group Board.
• Group Chief Executive Officer.
• Group Chief Financial Officer.
• Group Company Secretary.
• Group Head of Internal Audit.
• Chief Risk Officer.
• Head of M&A and Corporate Development.
• Group Treasurer.
• Corporate Affairs & Investor Relations
Director, who also has responsibility
for Sustainability.
• Other members of the ExCo, as appropriate.
• External stakeholders which may include the
External Auditor, brokers, major shareholders
or remuneration consultants.
Site tours and meetings
with Management
• London
• Edinburgh
• Birmingham
• Telford
• Ireland
Key documents
• Board operations, minutes and
meeting packs, governance framework,
policies, delegations ofauthority,
conduct/regulatory responsibilities.
• Financial, strategic and operation
plans andpriorities.
• Directors’ & Officers’ liability
insurance summary.
• Market Abuse Regulations training.
• Listed Company and Life Companies
governancetraining.
• Other documents as appropriate
in relation to the level of Board
or Board Committee responsibilities.
• Mandatory training.
Eleanor Bucks
Joined the Board on 1 December 2023
I felt encouraged by
Management’s preparation
and candid response to my
questions when meeting
individuals during my
induction process.
informal environment, being a combination
of business and relationship immersion.
This will provide an opportunity to help
Board members appreciate individual
strengths and the collective capability
of the Board which can only ever enhance
Board performance. It’s encouraging that the
Board and Phoenix Group are so focused
on such strategy meetings. I am personally
excited by the NED mentoring programme
to those Phoenix Group employees
identified by Management.
In addition, meeting the wider workforce
and supporting the implementation of
Phoenix Group’s strategic journey will be
a focus for me in 2024. How sustainability
is embedded not only into the strategy
but every day has been a focus for me and
I enjoyed meeting the Sustainability Team
soon into my induction. The impact of these
meetings has enabled me to accelerate my
understanding of the business, its values
and culture, key stakeholders, risks and
opportunities. I look forward to continuing
my induction during 2024.
Male 75%
Female 25%
Committee gender
92 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
The Audit
Committee has
robustly challenged
on the IFRS 17
standard, climate
risk and controls
during 2024.
Role of the Committee
The Committee is responsible for
reviewing and monitoring the integrity
of the Group’s financial reporting and
judgements applied to that reporting,
Internal Control Framework, whistleblowing,
monitoring the effectiveness of the
Internal Audit function and framework,
changes in regulatory requirements and
managing its duties in relation to the
External Auditor and any tender process.
Following each meeting, the Chair of
the Committee provides a summary of
discussion, outcomes and where relevant
makes recommendations to the Board
on matters such as Solvency II reporting,
Full Year and Half Year financial statements,
finance-related risk policies, External Auditor
appointment, resignation or dismissal and
fees, in line with the Committee’s Terms
of Reference which can be found at
www.thephoenixgroup.com. These have
been updated in line with the Minimum
Standards for Audit Committees published
by the Financial Reporting Council (‘FRC’)
in May2023.
Composition of the Committee
The Board confirms that all members of the Committee are Independent Non-Executive
Directors and as a whole have the competence relevant to the financial services sector
and the insurance and pensions sector in which Phoenix Group operates. The Board is
satisfied that Katie Murray, as Chair of the Committee has recent and relevant financial
experience to chair the Committee through her current role as Group Chief Financial
Officer of NatWest plc. Further information on the experience, skills and competencies
of the Committee members can be found on pages 64 to 67.
Regular attendees include the Chair of the Life Companies Board Audit Committee,
the Group Chief Financial Officer, Group Head of Internal Audit, Group CRO,
Group Chief Actuary and the External Auditor. The Chair meets regularly with the
Group Chief Financial Officer and the External Auditor to discuss priorities and
track key actions.
Committee meetings and membership
Under the Committee’s Terms of Reference it should meet at least four times a year.
During 2023 there were nine formal meetings.
Member
from
2023 meeting
attendance
2023 %
attendance
Katie Murray
1 April 2022 9/9 100%
Karen Green
1
1 July 2017 8/9 89%
Mark Gregory
2
1 January 2024 – –
John Pollock
11 May 2017 9/9 100%
Nicholas Shott 2 July 2019 9/9 100%
1 Karen Green was unable to attend a joint Audit and Risk Committee meeting due to attending a funeral.
2 Mark Gregory became a member of the Committee on 1 January 2024 in place of Karen Green who stepped
down as a member of the Committee on 31 December 2023.
Katie Murray
Audit Committee Chair
9
Number of Committee
meetings held this year
(12 including ad hoc meetings)
Audit, risk and internal controls
Audit Committee report
93Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview of the year
Key Committee activities during 2023
Publication of the Half Year 2023 results following the adoption of the new IFRS 17 standard.
Continued oversight on UK Corporate Governance reforms and Solvency II.
Reviewed the adequacy of the control environment considering both Business As Usual (‘BAU’) and in light of economic volatility.
Transition commenced from EY to KPMG LLP as External Auditor of Phoenix Group.
2024 focus
Monitoring the transition of IFRS 17 processes to BAU and review lessons learnt from the implementation of the standard.
Further focus on reviewing Phoenix Group’s risk management and internal control framework in anticipation of the Board’s declaration
of effectiveness in line with the UK Corporate Governance Code 2024 (the ‘2024 Code’).
Monitoring the transition of KPMG LLP as the Company’s External Auditor from EY LLP.
Further consideration of financial reporting and disclosure impacts of UK Solvency II reform.
Preparing for the new corporate sustainability requirements, with an added focus on controls published by the International Sustainability
Standards Board (‘ISSB’).
Committee review
The 2023 effectiveness review was facilitated by an external Board Reviewer. The review concluded
that the Committee is functioning effectively. NEDs were well prepared, providing strong challenge
to Management with a very capable Chair. However, the Board Reviewer did identify a few areas of
enhancement by the Committee and these are highlighted below:
Action 1
Subsidiary companies
to provide a one-page
summary only, rather than
a full set of minutes.
Action 3
Papers to be published
no less than five days before
the meeting.
Action 2
Number of attendees
to be streamlined.
94 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Where relevant, all papers receive a Line 1, 2
and regulatory review.
The Committee also received education
sessions as shown on pages 80 and 81.
Connectivity with other relevant
Committees
The following joint Committees promoted
the sharing of information and best practices.
The Committees were able to review,
approve and recommend for Board approval
the following items:
Audit and Risk Committees
• Solvency & Financial Condition Report
(‘SFCR’) approval (including Risk
Disclosures in Solvency II Pillar III
Reporting) – April 2023.
• Own Risk & Solvency Assessment (‘ORSA’)
approval – June 2023.
Audit, Risk and Sustainability Committees
• Review of Year End 2023 Climate and
Sustainability Reports – March 2024.
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’).
The External Audit partner attended all
Committee meetings during 2023 and to
the date of this report, presenting reports
on the external audit process, IT controls,
internal controls, audit differences, fraud risk
areas, audit improvements, planning report,
any pre-approval for non-audit services
and the 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 2023, including the 2023 Audit
Plan, progress reports against that plan,
a report on their audit procedures on the
2022 annual IFRS and Solvency II results,
their interim review of the Half Year 2023
IFRS results. EY have provided exceptional
support and challenge to the Group during
its transition to IFRS 17 and the collaborative,
yet robust approach should be commended.
The Committee considered throughout
2023 and for the 2023 audit, the effectiveness,
engagement and remuneration of the current
External Auditor. The Committee did not
request the External Auditor to specifically
audit a certain area of concern during 2023.
Assessment of the effectiveness of the
external audit process
Part of the Committee’s role is to oversee
the Group’s relationship with the External
Auditor to ensure independence, quality,
rigour, objectivity and robust challenge of
the external audit process. The Committee
does this throughout the year by:
• Reviewing EY’s UK Audit Quality Reports
including the FRC’s audit quality review,
the Institute of Chartered Accountants
of England and Wales (‘ICAEW’) Quality
Assurance Department (‘QAD’) review and
Internal reviews, outlining its response to
those reviews and actions to be taken.
Within those reports there is a key focus
Outcomes from Audit Committee discussions
On an annual basis, a review of the Committee’s activities is undertaken. In 2023, it was concluded that all elements of responsibility detailed
in the Committee’s Terms of Reference had been addressed. An overview of some of the key activities undertaken during the year and the way
in which they contributed to important outcomes are detailed in the following table:
Key activities
Financial reporting Outcome
Group CFO update. Implementation of private sessions between the Group CFO and the Committee.
Receiving and reviewing the Group’s external Full Year and Half Year
financial reports.
Half Year reporting was impacted by IFRS 17 and this was a major focus for the
Committee in 2023. Usual Phoenix Group practice is to complete a lessons learnt
for 2023 following the implementation of such a large project.
Ensuring accounts are fair, balanced and understandable as a whole and
recommending their approval to the Board, taking into account shareholders’
ability to assess the Group’s position, performance, business model and strategy.
Strong challenge from the Committee to ensure the news was balanced with both positive
and negative news reported. Cash generation was countered by the highlight of total
funds flow target to provide appropriate balance.
IFRS 17 accounting standard. Strong challenge at Half Year 2023 ensuring the process, methodology and assumptions
were appropriate, ready for Full Year 2023. Three additional ad hoc meetings were held.
External audit Outcome
Recommend to the Board the appointment of the External Auditor, their
terms of engagement including approval of their fees and non-audit services and for
reviewing the performance, objectivity and independence of the External Auditor.
Particularly strong challenge from the Committee on the External Auditor’s fees.
Internal control, risk management & compliance Outcome
Monitoring the overall integrity of financial reporting by the Company and its
subsidiaries and the effectiveness of the Group’s internalcontrols.
Further enhancement and focus in 2023 and 2024 on internal controls and
end-to-end processes. Robust challenge to ensure risk management and internal
controls effectiveness review is appropriate for Provision 29 of the 2024 Code.
Climate change risk. Decided to implement a joint Audit/Risk/Sustainability Committee bi-annually
to review disclosures and monitor changes in climate risk.
Sustainability Reporting Outcome
Received and reviewed the Group’s Sustainability and Climate Reports and Net
Zero Transition Plan published in May 2023.
Education session on the financial impact of new sustainability and climate
change regulations.
Private meetings Outcome
Private meeting with External Audit partner.
More private meetings required with the transition to KPMG LLP in 2024.
Audit, risk and internal controls continued
Audit Committee report
95Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
on EY’s people around understanding
their role, asking for help and resources,
a review of the detailed Audit Plan and
consideration of its coverage and approach
to identified risks.
• Assessing the quality of interactions
between the Audit Team and the
Committee, including the provision
of technical and industry knowledge.
• Considering the level of insight provided
by the audit findings in the key areas
of judgement, 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.
• Comprehensive assessment and review
of the External Auditor where feedback
was received from Life Companies’
Directors as well as members of the
Committee, Management and teams that
supported the audit such as Group and
Service company teams, FRC, IT, Internal
Audit, Tax, Actuarial and Operations.
• Meeting privately with EY to discuss in
depth its approach to quality assurance
and internal assurance processes across
the audit firm that ensure the quality of
the audit service. These meetings provide
an opportunity to discuss freely without
Management present on the most
significant areas of challenge by EY.
• Considering the findings of external
evaluations of EY, notably the findings
from the FRC’s Audit Quality
Inspection Report.
• Reviewing the findings from EY’s UK
2023 Transparency Report which outlines
the key policies and processes in place
within EY for maintaining objectivity
and independence for EY’s year ended
30 June 2023.
• Reviewing EY’s impact of ISOM1 ensuring
firms implement an agreed process to
design, implement and operate a system
of quality management. Aligning with EY’s
commitment to deliver high-quality audits
to serve the public.
• In addition, from 2023 EY have included
Engagement Level Audit Quality Indicators
(‘AQIs’). A measure of audit quality, AQIs
cover topics such as most recent firmwide
inspection results, hours an audit takes and
timeliness of reporting. The Committee has
found this information useful during the
year to monitor audit quality.
Overall, the Audit Committee concluded
that EY had carried out its 2022 audit
effectively. Stakeholders do not review
the effectiveness of the audit until June
the following year. The additional criteria
included in the Minimum Standards for
Audit Committees published in May 2023
will be included in the audit review for year
ended 31 December 2023 which will be
completed in June 2024.
Independence and objectivity of the
External Auditor
The External Auditor’s independence
was reviewed and monitored against the
Group’s External Auditor policy, including its
provision of non-audit services. This included
an assessment of its independence and a
review of services provided by EY during the
2022 and 2023 financial years. The Committee
is satisfied with EY’s objectivity and that EY
is fully independent from Management and
free from conflicts of interest. EY continually
monitors its own independence throughout
the year and voluntarily brings any potential
matter to the Committee. EY has confirmed
that between 1 January 2023 to 21 March
2024 there were no relationships that would
be thought to bear on EY’s independence
and objectivity. It outlines to the Committee
its independent approach, including threats
and safeguards when the audit plan for that
year is approved by the Committee.
Re-appointment of External Auditor
As previously announced, the Committee
concluded an audit tender process in 2021
resulting in KPMG LLP (‘KPMG’) being
appointed as the Group’s External Auditor
commencing from the financial period
starting 1 January 2024. A transition process
was undertaken from 30 June 2023, including
regular review meetings with Management,
EY, Internal Audit and Committee members,
prior to their formal appointment at the 2024
AGM on 14 May 2024, subject to shareholder
approval. KPMG has attended all Audit
Committee meetings from 30 June 2023 and
had access to papers presented to the
Committee at each meeting. The Committee
has received updates on the transition from
EY to KPMG as External Auditor and provided
challenge to ensure KPMG is receiving an
appropriate handover with sufficient input
from Management and EY itself. The Committee
confirms that it 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 (‘CMA Order 2014’) for that tender.
However, the Committee is mindful of the
Minimum Standards for Audit Committees
published by the FRC in May 2023 and that
this particular tender had been completed
before that publication. Within the previous
tender process, challenger firms were
included. Those challenger firms with
adequate insurance capability will again
be included and the Committee may
consider a price-blind tender in 2031.
The Group’s External Auditor policy includes
audit partner rotation with the expectation
that the audit partner will rotate at least every
five years. EY has served as External 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
and in light of the Group’s extensive change
programme, particularly the implementation
of IFRS 17 and the acquisition of SunLife of
Canada UK, the Committee requested a
further tenure extension for Stuart Wilson
as a result of reaching his sixth year of
tenure associated with the Group following
completion of the 2022 audit. In total,
Stuart Wilson acted as audit partner for
Phoenix Life Limited for two years, and then
lead audit partner for Phoenix Group for five
years. Such an extension is permissible under
the Audit Ethical Standards for a maximum
of two additional years until 2023, when EY
will retire as External Auditor of the Group.
External Auditor review
Action 1
Enhance the process for
recognition and escalation
of any significant issue.
Action 3
Review subsidiary audits
and consider including the
service companies within
the same Audit Team.
Action 2
Continue to understand
Phoenix Group’s
complex business.
Actions to be undertaken
during the year following the
effectiveness review, which
will provide KPMG with further
insight during its transition
as External Auditor are
highlighted to the right.
96 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Appointment of External Auditor
at Annual General Meeting
Resolutions will be put to the AGM to
be held on 14 May 2024 proposing the
appointment of KPMG as the Company’s
External Auditor and authorising the Board
to determine its remuneration, on the
recommendation of the Audit Committee
in accordance with the CMA Order 2014.
External Auditor policy
The Company has an External Auditor
policy which requires the Company and
the External Auditor to take measures to
safeguard the integrity, objectivity and
independence of the External Auditor and
cap the level of any non-audit fee paid to its
External Auditor at 70% of the average audit
fees paid in the previous three consecutive
financial years. The External Auditor policy
can be found on the website at
www.thephoenixgroup.com.
The External Auditor policy covers
matters such as the rotation of audit partner,
employment of external auditor employees,
permitted non-audit services and
audit-related services.
Permitted non-audit services are those
contained in the Revised Ethical Standard
2019 of the FRC. For 2023 these related
to Phoenix Re and Standard Life
International Dac.
Audit-related services are a subset of
permitted non-audit services that are largely
carried out by the Audit Engagement Team
and where the work involved is closely
related to the work performed in the
audit. For 2023 this included work on the
Sustainability Report and the collateral
audit for Standard Life International Dac.
The Committee is satisfied that there are
no circumstances that could affect the
independence or objectivity of the Auditor.
The External Auditor policy is refreshed
annually and in May 2023 was updated
to note that audit services provided to
investment funds, where wholly managed
by third parties, and which the Group
consolidates in its IFRS financial statements
would be exempt from the requirements
for fees to be approved by the Audit
Committee, and are instead considered
a pre-approved service. Related fees
continue to be reported to the Audit
Committee on at least an annual basis.
External Auditor’s 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 External Auditor’s objectivity and
independence and the prescribed limit set
out above in line with statutory requirements.
Internal Audit
During 2023, the Committee continued to receive regular updates from the Group Head of Internal Audit on all Internal Audit related matters.
Thisincluded
Item Outcome
Regular updates on the progress of the 2023 Internal Audit Plan
approved in late 2022.
Group Internal Audit provided regular progress reports on plan delivery.
At the end of the year plan finalisation was at an advanced stage.
Budget and resource. Robustly challenged by the Committee to ensure appropriate
and adequate.
Annual update of the Group Internal Audit Charter
and independence.
The Internal Audit Charter was approved by the Committee
in November 2023.
Control environment opinion which included Internal Audit’s
view of the Risk Management Framework, Governance and
Control Frameworks across the Group at both the Half Year
and Full Year end.
Control opinions were provided by Internal Audit in March and August
which provided Internal Audit’s view of the Risk Management Framework,
Governance and Control Frameworks.
Performance evaluation: the next externally facilitated EQA
is due not later than 2025.
Internal Audits were assessed as effective. The process included
self-assessment against CIIA standards, with consideration of the
Internal Audit Quality and Improvement Programme. QA results were
independently completed by Grant Thornton UK LLP, and the results
of a stakeholder survey were also reviewed by the Committee.
All areas of Internal Audit’s plan were aligned with Phoenix Group’s strategic priorities. For 2024, the use of data analytics by Internal Audit is
expected to be a key development area.
2023
£m
2022
£m
2021
£m
Non-audit fees – –
Audit fees 25.6 15.5 11.6
Audit-related fees 2.8 2.4 2.3
Total 28.4 17.9 13.9
Ratio of non-audit:
audit fees 3% 4% 6%
Rolling 3-year
average audit fee 6% 6% 8%
In 2023, total fees of £28.4 million were paid
to EY. Of this amount £25.6million related
to statutory audit fees of the parent and its
subsidiaries, with a further £2.2 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 and Sustainability
Report. This gives rise to a non-audit to
audit fee ratio under the EU Directive
and Regulations of 3% for the 2023 year,
and 6% based on a three-year average audit
fee. This lies well within the limits prescribed
in the Group’spolicy. The increase in the
audit fee principally reflects the additional
work undertaken in connection with the
transition to IFRS 17.
In light of the above, the Committee
is satisfied that the non-audit services
performed during 2023 have not impaired
the independence of EY in its role as
ExternalAuditor.
Audit, risk and internal controls continued
Audit Committee report
97Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Internal control
The Committee, alongside the Risk
Committee, supports the Board in ensuring
a robust system of internal control and risk
management is in place across the Group.
The Committee receives reports from the
Group Head of Internal Audit on the status
of the control environment and management
of the Group’s principal risks and controls
across the Group’s Risk Universe.
The Committee also considers bi-annual
Internal Control Self-Assessment reports
in which Line 1 risk owners self-assess
the design and operation of their control
environments. These assessments are
independently validated by Line 2
(Risk) and supplemented by an Annual
Internal Control Environment Opinion
Report from Line 3 (Internal Audit).
During 2023, the Committee regularly
challenged Management to ensure, where
any control weaknesses were identified, that
there are robust and timely action plans to
address these. In performing this review and
challenge of the control environment, the
Committee has assessed and confirms that
in 2023 it has complied with Principle O
and Provisions 25 and 29 of the 2018 Code.
Looking ahead to 2024, the Committee
will maintain its scrutiny of the Group’s
control environment, including overseeing
necessary modifications to the Internal
Control Framework to meet the new
requirements of the 2024 Code.
Climate change risk
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. The Sustainability Committee
works closely with both the Audit Committee
and Risk Committee to review climate
change risk, target setting and disclosure
requirements to ensure that our reporting
is aligned with strategy and regulatory
requirements. The Committee received
confirmation from Management of the
KPIs and metrics the External Auditor had
provided assurance over when reviewing,
approving and recommending both the
Net Zero Transition Plan published on
24 May 2023 and the Sustainability and
Climate Reports. An outcome following an
education session on climate change risk
was to continually assess the assurance
level of TCFD reporting. Risk of incorrectly
disclosing the financial impact of climate
change is at the forefront for the Committee
and will continue to be a focus for 2024.
Both greenwashing and greenhushing
that could lead to climate litigation is a
focus for the Audit, Risk and Sustainability
Committees. See pages 103 and 107
where climate risk is discussed in the Risk
and Sustainability Committee reports.
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; involvement in the
assessment and resolution of individual
matters raised in accordance with our
established policy; whistleblowing
arrangements within the Group; and any
whistleblowing activity where an employee
raised concerns in confidence about any
possible improprieties.
During 2023, there were a total of seven
notifications reported to the Speak Up
Office, of which two were triaged as
‘whistleblows’ and five notifications related to
people policy matters. Of the two Speak Up
matters, both are closed and no material
wrongdoing or control failures were
found. Employee survey scores indicated
colleagues generally felt that Phoenix Group
was a psychologically safe environment
where they can speak up freely and had
a strong belief that serious misconduct
would be dealt with appropriately.
Fair, balanced and understandable
assurance framework.
The Committee has satisfied itself that the
Phoenix Group Holdings plc 2023 Annual
Report and Accounts is fair, balanced and
understandable. It has done so by taking
relevant FRC guidance into consideration
and feedback from various sources, then
robust challenge by the Committee.
The External Auditor also considered
the fair, balanced and understandable
statement as part of the year end processes
and concurred with its approval by the
Committee. The Committee can therefore
concur with the statement made by the
Board of Directors on page 147 in line
with Principle N of the 2018 Code.
Going concern
Please see page 143 for Phoenix
Group’s Going concern statement.
IFRS 17 implementation
During 2023, Management provided
the Committee with regular updates
and education sessions regarding the
implementation of IFRS 17, the new
accounting standard for insurance contracts
that came into effect from 1 January 2023
and its impact on the Group’s financial
reporting and internal control framework.
In dedicated sessions, the Committee has
discussed in detail the financial impacts
of IFRS 17, together with the operational
considerations of the implementation
programme including timetable, resourcing
and internal control matters. The Committee
reviewed and approved Phoenix Group’s
revised accounting policies to reflect the
new standard together with the underlying
significant judgements involved in the
preparation of the Half Year 2023 results
and comparative information. These
processes underpinned the Committee’s
recommendation that the Board approve
the Interim report in September 2023.
Following publication of the Half Year 2023
results, the Committee’s focus on IFRS 17
shifted to the transfer of processes and
controls from a programme-led environment
to BAU activity. It will continue to be a
focus for 2024, whilst IFRS 17 is further
embedded into the Group’s financial
reporting framework. Work will continue
to streamline and automate reporting
under the new standard and enhance
the related internal control environment.
The Committee has been supportive of
Management during the transition, whilst
executing its professional scepticism through
deep dives and robustly challenging both
Management and the External Auditor.
Department for Business & Trade
A focus for Management during much
of 2023 was the ongoing Government
proposals regarding the Department for
Business & Trade reforms on Corporate
Governance and Audit. Management
provided regular updates to the
Committee and has continued to do so
following the Government’s withdrawal
on primary and secondary legislation,
now focusing on how Phoenix Group will
implement the 2024 Code principles and
provisions by 1 January 2025 and 2026.
Finally, I’d like to thank the Finance Team
for what has been a busy year with the
implementation of the new IFRS 17 standard.
Katie Murray
Chair of the Audit Committee
98 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Significant matters considered by the Committee in relation to the financial statements,
where EY was invited to provide robust challenge.
Significant matters in relation to
the 2023 IFRS financial statements
How these issues were addressed
Implementation of IFRS 17 and IFRS 9 The Committee devoted a significant amount of time to the oversight of the final
aspects of the implementation of the new accounting standard for insurance contracts,
IFRS 17. Having commenced its oversight of technical implementation matters in 2021,
the Committee finalised its review and approval of the Group’s revised accounting policies
to reflect adoption of the new standard, and evaluated the key judgements utilised in the
application of those policies.
The Committee received regular updates as to the impact of the implementation
of the standard on the Group’s systems, processes and control environment, and
provided oversight on the achievement of key milestones in the delivery of the IFRS 17
implementation programme.
Working closely with the Phoenix Life Companies Board Audit Committee, and having
considered findings from the Group’s External Auditor and specific assurance provided
by Group Risk and Group Internal Audit, the Committee approved restatements of
the Group’s transition balance sheet as at 1 January 2022 and its results for the year
ended 31 December 2022 in accordance with the new standard.
Although significantly less material to the Group’s results, the Committee also provided
oversight on the implementation of IFRS 9, the new accounting standard for financial
instruments which has been adopted for the first time alongside IFRS 17.
The Committee concluded that the disclosures included in Note A as to the impact
of new accounting standards adopted in the period were appropriate.
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 Committee
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 Committee, prior to their approval, including consideration of the impacts of
continued economic volatility, expense inflation and data quality.
A summary of these papers was presented for oversight review by the Committee,
and the Phoenix Life Companies Board Audit Committee’s 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 the valuation for adjustments to
actuarial provisions that arise at a consolidated Group level, including the methodology
and derivation of certain IFRS 17 assumptions where calibrated on a Group basis.
This included consideration of the results of a detailed review of the Group’s maintenance
expense assumptions in light of the continuing investment in the Group’s growth strategy
and the re-planning of strategic transformation initiatives. The Committee also evaluated the
determination of the IFRS 17 discount rate, including the appropriateness of the allowances
for illiquidity and credit risk, together with the calibration of the risk adjustment assumption.
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 Auditor setting out their observations and conclusions in respect of the assumptions,
methodologies and actuarial models, including benchmarking analysis.
Audit, risk and internal controls continued
Audit Committee report
99Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Significant matters considered by the Committee in relation to the financial statements,
where EY was invited to provide robust challenge.
Significant matters in relation to
the 2023 IFRS financial statements
How these issues were addressed
Valuation of complex and
illiquid financial assets
Management presented papers setting out the basis of the 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 Committee. 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 which
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 the measurements adopted and
confirmed the appropriateness of the conclusions reached.
Alternative performance measures (‘APMs’) The Committee reviewed the use of APMs in the Group’s financial reporting, understanding
the basis for determining the metrics and considering the clarity and explanation of their
usage within the Group’s Annual and Interim Reports.
Specifically, the Committee considered the usage of new APMs such as Adjusted Shareholder
Equity and amendments to existing APMs such as Adjusted Operating Profit, where necessary
to reflect the implementation of IFRS 17. On reviewing the results, the Committee provided
challenge as to the allocation of amounts to either Adjusted Operating Profit or to non-operating
items for consistency with the Group’s Adjusted Operating Profit framework.
The Committee concluded that the usage, disclosure and prominence of APMs within the
Group’s Annual Report and Accounts was appropriate.
Assessment of whether the
Annual Report and Accounts are
fair, balanced and understandable
The Committee considered and confirmed agreement with the analysis 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.
Male 50%
Female 50%
Committee gender
100 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
The Committee
has remained
conscious of
high-profile cyber
security incidents
that continue to
impact corporates
globally.
Role of the Committee
The Committee is responsible for oversight
of risk by assessing the effectiveness of the
Group’s Risk Management Framework, risk
strategy, risk appetite and profile; risk culture,
the methodology used in determining the
Group’s capital requirements and stress
testing these requirements; assessing the
adequacy of the Group’s system of non-
financial reporting controls and compliance
with regulatory requirements. The Committee
advises the Board on all high-level risk matters.
Following each meeting, the Chair provides
a summary of discussions and outcomes and,
where relevant, makes recommendations to the
Board on matters such as the Annual Operating
Plan, specific investment limits, ORSA and
Final and Interim dividends in line with the
Committee’s Terms of Reference, which can
be found at www.thephoenixgroup.com.
Composition of the Committee
The Board confirms that all members of the Committee are Independent Non-Executive
Directors. Mark Gregory joined the Committee on 1 April 2023 and Kory Sorenson
retired from the Board on 30 June 2023. Further information on the experience,
skills and competencies of the Committee members can be found on pages 64 to 67.
Regular attendees include the Group Chief Financial Officer, the Group Chief
Executive Officer, the Chair of the Life Companies Board Risk Committee, the
Group CRO, the Group Head of Internal Audit and the Group Chief Actuary.
The Chair meets regularly with the Group CRO to discuss priorities and track
progress on key actions.
Committee meetings and membership
Under the Committee’s Terms of Reference, the Committee should meet at least five
times a year. During 2023 there were eight formal meetings.
Member
from
2023 meeting
attendance
2023 %
attendance
John Pollock
20 October 2016 8/8 100%
Belinda Richards
1
1 October 2017 7/8 87.5%
Kory Sorenson
2
2 July 2019 5/5 100%
Maggie Semple
1 September 2022 8/8 100%
Mark Gregory
3
1 April 2023 6/6 100%
1 Belinda Richards was unable to attend a joint Audit and Risk Committee meeting due to attending a funeral.
2 Kory Sorenson retired from the Board on 30 June 2023.
3 Mark Gregory was appointed as a Director and became a member of the Risk Committee on 1 April 2023.
John Pollock
Risk Committee Chair
8
Number of Committee
meetings held this year
(including ad hoc)
Audit, risk and internal controls continued
Risk Committee report
101Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview of the year
Key Committee activities during 2023
Monitoring the risks created by the macro-economic environment, particularly capital and liquidity risks.
Oversight of conduct risk and the implementation of regulations in relation to Consumer Duty.
The application of the Group’s Risk Management Framework which is reviewed and recommended to the Board for approval.
Monitoring the implementation of IFRS 17.
Assessing the risks in relation to the Group publishing its Net Zero Transition Plan.
Maintaining operational resilience through stress testing.
2024 focus
Continue oversight of capital and liquidity.
Maintain oversight over the implementation of regulations on Consumer Duty.
Monitor legal and regulatory developments in relation to anti-greenwashing and the impact on Group practices.
Continue to monitor the Group’s control environment.
Oversight of change across the Group.
Action 1
Drive improvements in
the quality of papers to
ensure they are on time
and more succinct.
Action 2
To ensure that
supplementary papers are
clearly signposted so that
members are clear on what
they should read and why.
Committee review
The 2023 effectiveness review was facilitated by an external
Board Reviewer. The review concluded that the Committee is
functioning effectively, with both the Chair and Group CRO
leading strong discussions and providing detailed insight into the
business. However, the Board Reviewer did identify a few areas of
enhancement by the Committee and these are highlighted below:
102 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Outcomes from Risk Committee discussions:
On an annual basis, a review of the Committee’s activities is undertaken. In 2023, it was concluded that all elements of responsibility detailed
in the Committee’s Terms of Reference had been addressed. An overview of some of the key activities undertaken during the year and the way
in which they contributed to important outcomes are detailed in the following table:
Key activities
Key Committee activity Outcome
Regular reporting. Following changes to the membership of the Model Governance Committee, it was decided
that the Chair of that Committee should attend each meeting to provide an update and answer
any questions from members.
Operational and conduct risk
Change delivery, project update and
operational capacity.
Following the set-up of the Transformation Advisory Group (‘TAG’), the Committee requested
that a summary of the TAG meetings be presented at the next possible Committee meeting.
The first TAG update was provided in November 2023.
Cyber risk, data protection and AI. Following the rise of AI and its usage across the industry, the Committee requested a deep
dive on AI, its opportunities and risks.
Customer and conduct risk. The Committee requested a deep dive on Consumer Duty and the preparation that had been
undertaken to ensure that Phoenix Group will meet the requirements. This presentation was
delivered to the Board in October 2023.
Financial and strategic risk
Liquidity risk.
Following industry liquidity stress tests in September/October 2022, the Company
commissioned an external review of the liquidity management framework across the
Group. These recommendations were presented to the Committee in June 2023 and
the Committee requested a standing agenda item until such time that the recommendations
were implemented.
Climate and sustainability risk. Noting the rise in climate litigation and the introduction of anti-greenwashing regulations,
the Committee requested that a deep dive on reputational risk be provided to better
understand the potential impact on the Company. This was delivered in May 2023.
Risk Management Framework
Risk appetite review and oversight.
The Committee requested to receive regular updates as the proposed improvements were
implemented to ensure continued focus on risk appetite. This will be actioned in 2024.
Audit, risk and internal controls continued
Risk Committee report
103Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Connectivity with principal subsidiaries
and relevant Committees
During 2023, the Committee continued to
actively engage with principal subsidiaries
and relevant Committees to keep abreast
of key workstreams and to monitor the
principal risks relevant to the Group.
Examples of this engagement include:
• the Chair of the Life Companies Board
Risk Committee attending all meetings
to provide update on discussions such as
Consumer Duty and the Internal Model;
• the Chair of the Risk Committee of
Standard Life International Dac attending
two meetings to provide formal updates
to the Committee;
• a member of the Model Governance
Committee attending all meetings to
provide updates on discussions to the
Committee; and
• the Chair of the Board Investment
Committee attending on two occasions
to provide an update on investment
decision-making and oversight.
This participation and connectivity
promoted the sharing of information and
best practices between the Group and its
subsidiaries and allows the Committee to
appropriately assess a broad range of risks
and their impact across all stakeholders.
All interactions between the Group, its
subsidiaries and other committees continue
to further the Committee’s understanding
of the risk profile of the Group’s principal
subsidiaries, leading to more comprehensive
review and challenge by members.
A set of Operating Principles are in
place to define the responsibilities and
accountabilities of all relevant subsidiary
Committees and Boards to mitigate
the overlap of focus or assurance
activity and are reviewed annually
to ensure they remain appropriate.
See pages 94 and 107 of the Audit
Committee report and Sustainability
Committee report, respectively, for examples
of collaborative governance between the
Audit, Sustainability and Risk Committees.
Group CRO report
At each meeting, the Committee receives
a formal report from the Group CRO
which highlights key factors impacting the
Group’s operating environment as well
as an assessment of emerging risks. The
review includes analysis of risks arising
from the macro-economic outlook and
conditions in financial markets, together
with geopolitical, legislative and regulatory
change risks that may impact the Group
and its customers as well as risks associated
with the implementation of the Group’s
business strategy. A summary of the
principal risks and uncertainties facing the
Group can be found on pages 50 to 57.
Cyber risk
The Committee has remained conscious of
high-profile cyber security incidents that
continue to impact corporates globally,
driven by the use of destructive malware
and ransomware. The Group is continually
improving its controls, attack detection
and response processes, identifying
weaknesses through ongoing assessment
and review. Supplier-related cyber attacks
were detailed to the Committee through
the Group CRO report along with the
oversight and assurance processes in place
to mitigate the impact on the Group.
In 2023, the Committee received two cyber
security updates which covered the threat
landscape; cyber awareness and defence;
and actions being undertaken to support
and continually improve Phoenix Group’s
security culture. The Committee found this
session extremely informative and, as such,
another session will be presented to the
Board as part of its continued education
in 2024. For more information on the
classification of cyber risk and the controls
in place to monitor and mitigate the impact
on the business, please see page 55.
Climate risk
The Committee remained cognisant of the
continued prevalence of climate risk and the
need to ensure collaboration across Board
Committees. The Terms of Reference of the
Audit, Risk and Sustainability Committees
divide accountability for oversight and
monitoring of work undertaken. During 2023,
the Risk Committee received climate risk
updates as well as reviewing disclosures in
the Sustainability Report and Climate Report,
which can be found on the Company’s website.
The Committee worked in close collaboration
with the Sustainability Committee on the
Group’s first Net Zero Transition Plan.
The Committee also remained vigilant in
relation to anti-greenwashing and ensured
that the Group’s labelling of investment funds
was appropriate for future compliance.
Individual responsibility for ensuring
appropriate identification, assessment,
management and reporting of
climate-related financial risks and
opportunities that could impact the Group
sits with the Group’s CFO and CRO,
both appointed as joint Senior Managers
responsible for climate-related financial risk
under the PRA and FCA’s Senior Managers
and Certification Regime.
Consumer Duty
The Committee received regular updates in
the delivery phase of the Group’s Consumer
Duty plans, assessments of fair value and
improvements to the customer journey.
Updates were also provided by the Chair of
the Life Companies Board Risk Committee as
to the work being undertaken by subsidiaries
to ensure that the customers’ best interests
remain at the heart of decision-making at
every level of the organisation. This focus
and vigilance will continue into 2024.
John Pollock
Chair of the Risk Committee
Male 33%
Female 67%
Committee gender
104 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
The Committee is
delighted that the
first edition of
Phoenix Group’s
Net Zero Transition
Plan was published
in May 2023.
Role of the Committee
The Committee is responsible for assisting
the Board in overseeing the Group’s
sustainability strategy and related activity,
and approach to ESG matters.
Following each meeting, the Chair provides
a summary of discussions, outcomes and
where relevant, makes recommendations
to the Board on matters such as the Group’s
sustainability strategy, Net Zero Transition
Plan and TCFD disclosures, in line with the
Committee’s Terms of Reference, which can
be found at www.thephoenixgroup.com.
Composition of the Committee
The Board confirms that all of the members of the Committee are Independent
Non-Executive Directors and have been selected to ensure cross-Board
Committee membership to facilitate engagement on sustainability matters across
the Group’s governance framework. Further information on the experience, skills
and competencies of the Committee members can be found on pages 64 to 67.
Regular attendees at the Committee include the Chair of the Board, Group
CEO, Group HR Director, Director of Corporate Affairs and Investor Relations
and the Chief Sustainability Officer. During 2023, a nominated NED from
the Phoenix Life Companies Board was also a standing attendee.
Committee meetings and membership
Under the Committee’s Terms of Reference, the Committee should meet at least five
times a year. During 2023 there were six formal meetings.
Member
from
2023 meeting
attendance
2023 %
attendance
Karen Green (Chair)
1 December 2020 6/6 100%
Maggie Semple
1 September 2022 6/6 100%
Nicholas Shott
1 December 2020 6/6 100%
Kory Sorenson
1
1 December 2020 3/3 100%
1 Kory Sorenson retired from the Board on 30 June 2023.
Karen Green
Sustainability Committee Chair
6
Number of Committee
meetings held this year.
Sustainability governance
Sustainability Committee report
105Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview of the year
Key Committee activities during 2023
Overseeing the Group’s aim to be a leader in sustainability.
Ensuring tangible, measurable progress against the Group’s sustainability strategy.
Monitoring the development, publication and progress of the Group’s Net Zero Transition Plan.
Supporting the Board and Board Audit Committee in respect of the Group’s sustainability related reporting e.g. TCFD.
Monitoring developments in sustainability and emerging best practice.
Providing oversight of regulatory compliance and actions being taken to enhance the Group’s contribution to a more sustainable world.
2024 focus
Continue to monitor the progress of the Group’s Net Zero Transition Plan.
Support and oversee thought leadership initiatives throughout the organisation.
Continue to monitor the Group’s culture and review key people metrics including diversity.
Activity related to closing the UK pension savings gap.
Continue to consider how the Group can further support customers using wider social initiatives.
Continue to review the ways in which wider macro-economic factors will impact customers and colleagues.
Oversee the development of the Group’s nature and biodiversity strategy.
Action 1
Maintain focus on how to
help customers through
retirement and ensuring
Consumer Duty remains
a key consideration
in all discussions.
Action 2
Continue to address current
affairs and how they impact
the organisation’s strategy
and culture.
Action 3
Consider whether training
sessions should be held as
strategic deep dives with
consideration of impact
on the Group strategy.
Committee review
The 2023 effectiveness review was facilitated by an external Board Reviewer. The review concluded that
the Committee is functioning very effectively. Members of the Committee agreed that the meetings are
constructive, with all members demonstrating a high level of engagement in topics throughout the year.
It was noted that the agenda remains well balanced with appropriate information and insight and the rolling
schedule of education on sustainability-related matters and external perspective sessions is valued and
increases knowledge of emerging best practice. The Board Reviewer identified the following areas
of enhancement by the Committee and these are highlighted below:
106 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Sustainability governance continued
Sustainability Committee report
Outcomes from Sustainability Committee discussions:
On an annual basis, a review of the Committee’s activities is undertaken. In 2023, it was concluded that all elements of responsibility detailed in
the Committee’s Terms of Reference had been addressed. In addition, all elements of the Group’s sustainability strategy are covered throughout
the year. The sustainability strategy in 2023 was divided into ‘Planet’ and ‘People’ with key themes falling below each pillar. These themes were
‘Investing in a sustainable future’, ‘Engaging people in better financial futures’ and ‘Building a leading responsible business’. An overview of some
key activities undertaken during the year and the way in which they contributed to the sustainability strategy are detailed in the following table:
Key activities
Key Committee activity Outcome
Investing in a sustainable future
Multiple discussions on all aspects
of stewardship and the Stewardship
Code including: the Stewardship
Report, proxy voting guidelines and
asset management commitments.
Following rigorous challenge, the organisation was formally accepted as a signatory to the
Stewardship Code in August 2023.
Review and consideration of the
Group’s Net Zero Transition Plan.
Improved clarity following Committee challenge on managerial decisions for the pathway
to decarbonising investments. The Committee requested further oversight of this aspect
of the plan and its development, and this has become a standing agenda item in 2024.
Monitored progress against proposals
for TNFD regulation.
Following a presentation from the Co-Chair of The Taskforce on Nature-related Financial
Disclosures (‘TNFD’), the Committee decided that close engagement with that organisation
should continue to allow the Company to disclose against the regulations once finalised.
The Committee will continue to oversee engagement throughout 2024.
Engaging people in better financial futures
Review and oversight of the Money
Mindset digital platform, which provides
a holistic financial wellness solution to
Standard Life Workplace customers.
As a result of several updates throughout the year, the Committee developed a deeper
understanding of the technological products being developed within the Group
to support consumers.
Monitoring the ongoing work
of Phoenix Insights.
In-depth understanding of areas of investigation for the Company and how these might be
disclosed to better provide a future of possibilities for consumers. The Committee requested
an annual update on the proposition of collaborating with other think tanks to progress research
and initiatives.
Oversight of the launch of the Midlife
MOT, a colleague initiative to help
members of the Group workforce plan
for the future.
Following discussion and challenge, the Committee requested an investigation into the ways in
which the product could be extended for those interested, and how engagement with the initiative
would be sustained to make a long-term, meaningful difference. The 2024 Committee agenda will
include an update on engagement and statistics around uptake, alongside a view on how this
product could be extended to customers.
Building a leading responsible business
Oversight of the research phases of a
proposed five-year Race and Ethnicity
Action Plan which sets out the roadmap for
how the Company will increase ethnicity
representation at all levels of Phoenix Group
and more broadly within financial services.
The Committee discussed research into views on diversity and the introduction of a
framework on cultural intelligence and fluency training. The Committee requested oversight
of the development of the framework to ensure the intended cultural development was
embedded and sustained.
Oversight of collaboration with a third-party
consultancy to determine actions required
to align to international best practice in
human rights.
The Committee reviewed and recommended to the Board for approval the first Human Rights
policy for the Group, which sets out commitments to respect human rights in alignment with the
international framework of the United Nations Guiding Principles on Business and Human Rights.
More information about how the Company delivered against the specific pillars of the sustainability strategy can be found the Group’s
Sustainability Report. This is available on the Company’s website at www.thephoenixgroup.com.
The Committee also received education sessions as shown on pages 80 and 81.
107Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Connectivity with other
relevantCommittees
The following joint Committees promoted
the sharing of information and best
practices. The Committees were able
to review, approve and recommend for
Board approval the following items:
Sustainability and Risk Committees
• Net Zero Transition Plan – May 2023.
• Annual Report disclosures relating
to climate and sustainability –
February 2023.
Audit, Risk and Sustainability Committees
• Review of Year End 2023 Climate and
Sustainability Reports – March 2024.
The Committee ensures that collaboration
with other Board Committees (Audit
and Risk) takes place to provide holistic
challenge on publicly communicated
targets and statistics and to monitor
changes in climate risk.
The Group’s CEO, Andy Briggs, regularly
attends meetings to provide insight
into executive decision making and
assurance. The Group’s External Auditor,
EY, provides external limited assurance
on both TCFD data and the disclosures
made in the Sustainability Report, which
can be found on the Company’s website.
Net Zero Transition Plan
The Committee is delighted that the
first edition of Phoenix Group’s Net Zero
Transition Plan was published in May 2023.
The plan sets out the actions the Company
will take on its journey to becoming net zero
by 2050 and to support achievement of its
stretching interim targets in 2025 and 2030
across its investment portfolio, operations
and supply chain. The plan helps to ensure
that our decarbonisation strategy is aligned
with our wider business objectives and to
deliver the right outcomes for our customers.
The Net Zero Transition Plan is in line
with the latest industry guidance from the
Transition Plan Taskforce and Glasgow
Financial Alliance for Net Zero. However,
it is important to acknowledge that related
policy setting and global decarbonisation
are still evolving and that the Group is in the
early stages of its net zero transition. As such,
our Net Zero Transition Plan will continue
to be developed and refined with customer
outcomes at the heart of all decision-making.
Monitoring culture and the
EmployeeVoice
In accordance with Provision 5 of the
2018 Code, the Board is required to
maintain an effective mechanism to engage
with the workforce. Committee member
Maggie Semple is the Designated NED
for Workforce Engagement and provides
regular updates to the Committee and the
Board on the outcomes of her interactions
with the Phoenix Colleague Representation
Forum (‘PCRF’) and the actions being
undertaken as a result. This mechanism
provides the Committee and the Board with
an in-depth understanding of colleagues’
perspectives in relation to topics such as
mental wellbeing, flexible working, diversity
and inclusion and insights into the tone
of the Group’s culture from the ground
up. In 2023, the Committee noted that
there should be more interaction with the
workforce following Board discussions
to communicate outcomes and to ensure
that colleagues are aware that the Board
takes concerns seriously. This is something
that will be improved and made standard
practice in 2024. More information on
how Maggie Semple and other Board
members engage with the workforce
can be found on pages 108 to 110.
The Committee also receives updates
from the Group HR Director on people
and culture metrics, which allows members
to review the Group’s people strategy and
to monitor culture. This dashboard includes
information on turnover and absenteeism
rates, employee surveys, whistleblowing and
‘Speak Up’ data, and diversity and inclusion
statistics. The Committee will continue
to follow best practice guidance and to
identify both qualitative and quantitative
data that should be reviewed to assess the
development of culture in the organisation.
Karen Green
Chair of the Sustainability Committee
108 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Workforce engagement
Engagement in
action – listening to
the colleague voice
Our growth and success at Phoenix
Group are down to our amazing
colleagues. They drive our business
performance and help us to achieve
our purpose. Having regular engagement
with colleagues is integral to our strategy
and vision to be the best company
that colleagues have ever worked for.
Through regular two-way dialogue,
the Board seeks to understand the issues
that matter most to our colleagues.
Board engagement with colleagues
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.
Across 2023, the Phoenix Group Board
members, including the Chair of the
Group Board, myself and our Executive
Directors, held two dedicated sessions
as part of our Board agenda to meet with
colleagues. We held these in May and
November, and we invited targeted groups
of individuals to join us in an open and
transparent conversation so that we could
hear first-hand their experiences of
working at Phoenix Group.
At our session in May, we met with
17 members of the Group’s graduate
programme, and the primary focus of
our conversations were around career
and leadership. We thoroughly enjoyed
the dynamic attitudes of the graduates,
and how comfortable they were in
speaking up and sharing their thoughts.
Our discussions showcased that our
graduates have come from varied
backgrounds with a wide plethora of
degrees, and they valued the approach
to the Phoenix Group graduate programme
as it provided them with an opportunity
to rotate into many different business areas,
giving them lots of exciting opportunities
and experiences.
Maggie Semple
Designated Non-Executive Director
for Workforce Engagement
109Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
A key learning on the day was the approach
for managing ‘home’ seats, which is the
first seat the graduate rotates into and,
at the end of the programme, if they’ve
not secured an alternative role they will
be guaranteed a role in their home seat.
On the surface of it, this sounded positive
and gave job security to the graduates;
however, they shared that they have limited
choice in where they start their graduate
career with us, and so often their home seat
was not an area they wanted to return to.
This learning from our engagement with the
graduate programme was discussed at
the Board.
Outcome: was a management action
set by the Board to review the approach
to rotations and home seats, which is
currently being considered by the Group.
This would facilitate greater choice for
the graduates when they come to the end
of their two-year programme.
Our Board session in November focused
on the experiences of females in their 50s,
with a focus on the working environment.
This session was attended by 12 women
from across the Group, covering many of
our locations and our corporate grades.
We had a very engaging conversation
covering their experiences at Phoenix Group
and previous roles. What was incredibly
pleasing to hear was that many of the women
in the room said that, at Phoenix Group,
they didn’t feel like they were treated
as a ‘stereotype’. They spoke positively
and favourably about the support and
importance that the Group has placed on
critical areas such as menopause and carers.
It’s insightful to have Maggie’s experience
and fresh perspective on our people
agenda items. Maggie’s input and challenge
ensures we discuss items from a 360-degree
perspective which results in in-depth
discussions and tangible outcomes we
can work towards together to benefit
both colleagues and thebusiness.
David Berry, PCRF Lead Rep, Operations.
They were also supportive of the focus
Phoenix Group and Phoenix Insights has
been placing on later working life, through
their research and reporting and through
initiatives such as the Over 50s jobs fair
andthe colleague Midlife MOT, which
has helped them to feel comfortable and
confident of their futures with the Group.
Hearing the wider colleague voice
In addition to the two sessions held
with the wider Board members this year,
I have spent time with colleagues across
our sites to hear more from them about
their experiences atPhoenix Group.
One of my key points of connection with
colleagues has been meeting with the 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.
One topic of note which came up frequently
in our discussions was the colleague
understanding of the Phoenix Group reward
framework. With the backdrop of the
economic situation, this was a particularly
important topic which colleagues wanted
to speak about. Through my discussions with
the PCRF, it was agreed with Sara Thompson,
Group HR Director, that a more proactive
approach to communicating updates on
the reward framework would be shared
with colleagues.
Outcome: was a common theme when
the Remuneration Committee completed
its education session on the 2018 Code
in October. Particular attention was given
to Provision 41 relating to the impact of
engaging with the wider workforce on
Executive Directors’ Remuneration policy
and outcome. From that education session
and my feedback on the PCRF to the Board,
the outcome was that I should join the
Remuneration Committee as a member
with effect from 1 January 2024. This would
allow me to provide a better link between
the PCRF on wider workforce remuneration
matters and the Remuneration Committee.
Changes to the Executive Directors’
Remuneration policy or discretion applied
to their remuneration outcomes would also
be better understood and communicated
to the wider workforce through the PCRF.
In addition to regularly meetings with
the PCRF, I hear from the colleague-led
networks and I have taken the opportunity
to invite wider colleagues to informal
meetings to enable them to share what
is on their mind in the moment, including
a trip to visit colleagues in Dublin to hear
more from them. At this visit, I also informally
met with the representatives from Unite.
Through this discussion, I took away that
they were looking for greater clarity and
communication when strategic decisions
were made affecting their work.
This comment related to a decision on
Phoenix Group’s strategic partnership
with TCS Diligenta that had been taken
in a previous year. I provided this feedback
to the Board.
Outcome: was for the Group to ensure that
communication relating to strategic decisions
is clear and well understood by colleagues
and their relevant representative bodies.
110 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Workforce engagement continued
Reflecting on 2023
In my role as the Designated NED for
Workforce Engagement I get to witness
the power of two-way conversation. I share
regular feedback from my sessions with
colleagues to the Board, which provides
additional perspective and insights on
colleagues and can lead to outcomes
that improve the experience of our wider
workforce at Phoenix Group. I share key
aspects of our Board discussions with
colleagues when I meet with them and ask
for their opinions, again relaying these back
to the Board for potential outcomes. I have
also this year created a blog which I share
with colleagues, focusing on topics that
they have told me are important to them.
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 NED for Workforce Engagement
Each quarter, our colleague-led forum, made
up of the PCRF central team and colleague
representatives from each UK business function,
meet with Maggie Semple to discuss key themes
we’re hearing from colleagues. Partnering together
has resulted in enabling direct honest and open
conversations, more frequent feedback, and
continuous listening through a variety of channels.
We’re also able to hear first-hand about the Board’s
priorities and provide representation and insights
from colleagues.
After the quarterly meetings, the PCRF shares
the key themes and discussions from the meeting
with colleagues. Maggie also shares feedback from
these sessions with the Board, which has allowed
it to gain additional perspective and insights on
colleagues’ working lives and the colleague voice on
Phoenix Group’s strategic priorities and initiatives.
Continuing to develop this two-way communication
enables colleagues to be kept informed of how the
Board is driving the Group, and connects the Board
to what’s important to colleagues and how their
decisions impact their working lives.
Steph Jones, PCRF Colleague Consultant.
Male 25%
Female 75%
Committee gender
111Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
In my first year
as Remuneration
Committee chair, the
Committee’s focus has
been on implementing
our new Policy to ensure
that remuneration aligns
with our purpose and
strategic priorities and
has regard to the wider
stakeholder experience.
Role of the Committee
The Committee is responsible for
establishing, implementing, overseeing
and reviewing the Group-wide Remuneration
policy in the context of business strategy
and changing risk conditions. This is
consistent with Solvency II requirements.
The Group-wide Remuneration policy
focuses on ensuring sound and effective
risk management so as not to encourage
risk-taking outside of the Group’s risk
appetite. The Committee ensures the
remuneration of our Executive Officers
is aligned to the Group’s purpose and
values and that our wider workforce are
also engaged and an overview is provided
of executive remuneration. None of the
Committee’s members has any personal
financial interest (other than as shareholders),
conflicts of interest arising from cross-
directorships or day-to-day involvement
with running the business. The Committee’s
Terms of Reference can be found at
www.thephoenixgroup.com. No Director
is involved with any discussion about their
own remuneration. The Committee makes
recommendations to the Group Board on
the Remuneration policy and Shareholder
Consultation every three years and on
the Committee’s Terms of Reference.
Composition of the Committee
The Board confirms that all of the members of the Committee are Independent
Non-Executive Directors. Before Nicholas Shott was appointed Chair of the
Remuneration Committee on 4 May 2023, he had served on the Committee
since 2016.
Regular attendees include the Group HR Director, Executive Reward Director,
Group Reward Director, Group Company Secretary, Group Chief Executive Officer
and external adviser, PwC LLP. The Group CRO also attends to discuss his report at
Full Year and Half Year. The Chair meets regularly with the Executive Reward Director
to discuss priorities and track key actions.
Committee meetings and membership
Under the Committee’s Terms of Reference it should meet at least four times a year.
During 2023 there were five formal meetings and one education session.
Member
from
2023 meeting
attendance
2023 %
attendance
Nicholas Shott
1
20 October 2016 5/5 100%
Kory Sorenson
2
3July 2014 3/3 100%
Karen Green
1 July 2017 5/5 100%
Belinda Richards
2 July 2019 5/5 100%
Maggie Semple
3
1 January 2024 – –
1 Nicholas Shott became Chair of the Committee on 4 May 2023.
2 Kory Sorenson retired as Chair of the Committee at the close of the Annual General Meeting
on 4 May 2023 and from the Board on 30 June 2023.
3 Maggie Semple was appointed as a member of the Committee on 1 January 2024.
Nicholas Shott
Remuneration Committee Chair
5
Committee meetings
and one education
session held in 2023
Directors’ Remuneration report
112 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview of the year
Key Committee activities during 2023
Approval of incentive outcomes for the 2022 AIP and 2020 LTIP.
Approval of remuneration for all colleagues within the Committee’s remit.
Consideration and approval of metrics for 2023 variable pay schemes to align with the Group’s evolving business strategy.
Full benchmarking exercise of remuneration undertaken for the Business Leadership population.
2024 focus
Approval of incentive outcomes for 2023 AIP and 2021 LTIP.
Review the good leaver process as part of Phoenix Group’s review of its strategic requirements
Monitoring the take-up of all-employee plans.
Listening to the voice of the wider workforce through the appointment of Maggie Semple, the Board’s Designated NED for
Workforce Engagement, to the Committee and through her work with the Phoenix Colleague Representation Forum (‘PCRF’).
Further review on the impact on remuneration and the work of the Committee now that the 2024 Code has been published.
Action 1
The Chair had instigated a
process of agreeing with the
Committee what the priority
items of focus would be
for each meeting. This had
worked well and would be
maintained going forward.
Action 2
To continue with the
Chief Risk Officer’s (‘CRO’)
report which was deemed
to be best practice and
to be commended in
supporting the Committee’s
consideration of variable
remuneration adjustments
for senior leadership.
Committee effectiveness
The 2023 effectiveness review was facilitated by an external Board
Reviewer. The review concluded that the Committee is functioning
effectively, though the Board Reviewer did not observe a regular
meeting, as the October one was an education session. Nevertheless,
the external Board Reviewer did suggest that the effectiveness could
be enhanced by building on some of the practices that had already
been put in place and these are highlighted to the right.
Outcomes from Remuneration Committee discussions:
On an annual basis, a review of the Committee’s activities is undertaken. In 2023, it was concluded that all elements of responsibility detailed
in the Committee’s Terms of Reference had been addressed. An overview of some of the key activities undertaken during the year and the way
in which they contributed to important outcomes is detailed in the following table:
Key activities
Key Committee activity Outcome
Review of Executive Directors’ pay against
wider workforce in line with 2023 and 2024
proxy advisers’ reports.
With effect from 1 April 2023 Executive Directors received a pay increase of 4%,
compared to the wider workforce of 6%. For 2024 it was agreed the Executive Directors
would receive no pay increase, compared to the pay budget for the wider workforce
of 4.4%. Wider workforce increases will be applied with effect from 1 April 2024.
Engagement with shareholders to explain
and receive feedback on the 2023 Directors’
Remuneration policy.
2023 Directors’ Remuneration policy approved by shareholders at the AGM on
4 May 2023 with 98.8% of votes in favour by our shareholders and the 2023 Directors’
Remuneration report approved with over 99% of votes in favour by our shareholders.
Review of Full Year and Half Year 2023 CRO report. The CRO Reports provided positive guidance to individuals whose remuneration may
require adjustment.
Education session – Proposals under the 2024 UK
Corporate Governance Code, wider workforce
engagement and Consumer Duty.
Education session to become an annual event.
A dashboard on wider workforce metrics to be provided at each education session.
Maggie Semple joined the Committee with effect from 1 January 2024. Given her
role as Designated NED for Workforce Engagement, she will be able to communicate
the views of the wider workforce on pay and its alignment with Executive Directors’
remuneration to the Committee, as well as her deep ESG and sustainability knowledge.
Directors’ Remuneration report continued
113Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Dear Shareholder,
I am pleased to present my first
Directors’ Remuneration Report as
Chair of the Remuneration Committee
(the ‘Committee’), having taken over the
role from Kory Sorenson on 4 May 2023.
On behalf of the Committee I should like
to take this opportunity to thank Kory on
behalf of the Committee for her work as
Chair and, in particular, her work last year
engaging with our shareholders over
our new Directors’ Remuneration policy
(‘Policy’), which received 98.8% support
at the 2023 AGM.
Summary of the year
Phoenix has again performed well in 2023,
as we continued to execute against our
strategy priorities, and which has supported
strong financial results across our financial
framework of cash, capital and earnings.
We have delivered over £2 billion of cash
generation in 2023, supported by strong
business performance and the impact of the
Part VII transfer of Standard Life and Phoenix
Life. Our organic growth continues at pace,
with new business net fund flows increasing
72% year-on-year, which helped to support
us in delivering £1.5bn of new business
long-term cash generation. This means
we have achieved our 2025 new business
long-term cash target two years early,
reflecting the focus and investment we have
put into our growth strategy. Our balance
sheet also remains resilient with a Solvency II
(‘SII’) surplus of £3.9 billion and Shareholder
Capital Coverage Ratio of 176%. Our IFRS
earnings have also improved during the year,
with adjusted operating profit before tax
increasing 13% year-on-year to £617m.
Executive remuneration outcomes for 2023
Based on its assessment of the corporate
metrics, the Committee determined that
the Annual Incentive Plan (‘AIP’) outcome
should be 78.2% of the maximum opportunity.
This outcome was driven by exceptional
cash generation performance in the year,
which benefited from particularly strong
management actions delivery including
the completion of one of the largest UK
insurance Part VII transfers ever completed,
with the funds merger of the Standard Life
and Phoenix Life businesses into Phoenix Life
Limited. With regard to the achievements
under the Strategic Scorecard which
represents 20% of the Executive Directors’
AIP, the Committee determined outcomes
should be 69.0% for Andy Briggs and 69.8%
for Rakesh Thakrar. This results in a formulaic
outcome of 76.4% and 76.5% respectively
of the maximum AIP opportunity.
Each year the Committee reviews the
AIP outcomes in the context of the Group’s
management of risk, overall business
performance and the broader stakeholder
experience. In reviewing the 2023 AIP
outcome, the Committee considered the
delays faced during the year relating to
the IFRS 17 project. As Group CFO, Rakesh
Thakrar had the principal responsibility for
delivering the project in a timely manner,
so the Committee decided it was appropriate
to use its discretion to reduce his AIP
outcome by £75k (10%).
Andy Briggs recognises that, as Group CEO,
he has ultimate accountability for all projects,
including IFRS 17. Accordingly, in discussion
with the Committee, he suggested – and the
Committee agreed – that he should forgo
£50k (4%) of his AIP outcome.
As a result of these discretionary adjustments,
overall outcomes under the AIP were 73.4%
of maximum for the Group CEO, and 69.0%
of maximum for the Group CFO.
The 2021 Long Term Incentive Plan (‘LTIP’)
award covering the years 2021–2023 was
based on Net Operating Cash Receipts,
Return on Shareholder Value, Persistency,
and Relative Total Shareholder Return (‘TSR’).
The overall vesting outcome is 41.1% of the
maximum opportunity. Further details are
set out on page 122.
The resulting single total figure of remuneration
for Andy Briggs is £2,901k and for Rakesh
Thakrar is £1,543k. Full details are set out
on page 121.
Updated metrics to align remuneration
with our evolving strategy
The Committee approved a number of
changes to the metrics for the AIP and LTIP
in 2024 to ensure continued alignment
to business priorities.
For the 2024 AIP, the Committee has
decided to replace the Incremental
New Business Long-Term Cash Generation
(less strain) plus Own Funds impacting
management actions metric with a New
Business Contribution (‘NBC’) metric.
NBC is a measure of the day one value
of writing new business on a discounted
basis. The metric is more aligned to peer
disclosures and reflects feedback from
the market over a preference for the use
of a discounted metric within the business.
A new Cost Savings metric will also be
included which reflects the criticality of
reducing our cost base in order to improve
performance across our financial metrics.
The targets are aligned to those defined as
part of our strategic cost review. The Open
Net Flows metric that was used in 2023
to incentivise growth in our Pensions and
Savings business will now be a Group
Net Flows metric, which aligns with our
external reporting and supports our focus
on improving overall Group net funds flows.
No changes are proposed to the definitions
or weightings of our Customer metrics in
the AIP assessment.
For the 2024 LTIP, the Group In-force
Long Term Free Cash metric will be
replaced by a Return on Capital metric to
provide a measure of the efficiency of the
Company’s use of capital. The Persistency
metric in the previous year’s LTIP will be
replaced by a Cumulative Net Flows metric,
which demonstrates our commitment to
incentivising growth in new business and
retention of existing business. Following
a significant reduction in emissions from
operations, the Decarbonisation from
Operations metric (10% weighting) will be
replaced by a Diversity, Equity & Inclusion
metric measuring ethnicity representation
amongst our senior leadership population.
Consistent with previous years, targets have
been set with reference to the Group Annual
Operating Plan and maximum payouts will
only be delivered in the event of exceptional
performance. The LTIP targets are disclosed
prospectively on page 127.
114 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Implementation of pay in 2024
The Committee decided that there will
be no increase to the base salary of either
Andy Briggs and Rakesh Thakrar in 2024.
The Company continues to target increases
to more junior and lower paid colleagues
this year with a pay award budget of 4.4%.
Further details on how we implement pay for
the wider workforce is set out on page 133.
Consistent with the approach for executive
directors, there will be no increases to
Non-Executive Director base fees in 2024.
The Chair’s fee was last reviewed in August
2021 with the next review due to take place
in August 2024. For simplicity, it has been
decided not to proceed with the review in
2024 and instead to consider the Chair’s
fee at the same time as the annual review
of Non-Executive Director fees from 2025,
which is normally in quarter one.
Looking forward
I hope that the implementation of pay as set
out in this report will meet our shareholders’
expectations and will receive a favourable
voting outcome in the resolution proposed
at the 2024 AGM. I would welcome any
comments you may have on this report
as I begin my first full year as Chair of
the Committee.
Nicholas Shott
Remuneration Committee Chair
21 March 2024
Directors’ Remuneration report continued
Annual Incentive Plan
Long Term Incentive Plan
Total Cash
Generation
16%
2023
2024
Total Cash
Generation
1
24%
Pension &
Savings Net
Flows –
Workplace
& Retail
2
12%
Customer
Experience
20%
Incremental New Business
Long-term Cash Generation
(less strain) plus Own Funds
impacting management actions
24%
New Business
Contribution
16%
Cost
Savings
16%
Group
Net Flows
12%
Customer
Experience
20%
Strategic
Scorecard
20%
Deferral 50%
for a period
of 3 years
Corporate element
Corporate element
Deferral 50%
for a period
of 3 years
Strategic
Scorecard
20%
2023
2024
Net Operating
Cash Receipts
20%
Return
on Capital
20%
Relative TSR
20%
Cumulative
Net Flows
20%
Diversity
and
Inclusion
10%
Decarbon-
isation –
Investment
Portfolio
10%
Net Operating
Cash Receipts
20%
Persistency
20%
Decarbonisation
20%
Group In-force
Long-Term Free Cash
20%
Relative TSR
20%
1 Total Cash Generation was previously referred to as Cash Generation.
2 Pensions and Savings Net Flows – Workplace and Retail was previously referred to as Open (Pensions and Savings ) Net Flows.
115Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Overview
Remuneration structure
Base salary
Base salaries are reviewed each year against companies of similar
size and complexity.
Pension
Competitive employer sponsored defined contribution pension
plan with contributions at the same level as the wider workforce.
Benefits
Market competitive benefits are provided in a consistent manner
with the wider workforce.
Annual Incentive Plan
AIP to motivate employees and incentivise delivery of annual
performance targets aligned to strategy.
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.
Statement of intent
The Committee adopts a simple and transparent approach
to remuneration to support the Group’s purpose, values and
strategic priorities, in order to ensure the sustainability of the
business. When setting the remuneration for Executive Directors,
the Committee carefully considers wider workforce pay across
the whole organisation.
Company performance snapshot
78.2%
Outturn of 2023 AIP
41.1%
Outturn of 2021 LTIP
Alignment to purpose and strategy
Our Remuneration policy is designed to align to our purpose and
focused on the delivery of our strategy and long-term value creation
for our stakeholders.
Our variable pay plans ensure remuneration outcomes are directly
aligned to our core strategic priorities as shown on page 117 and to
deliver long-term sustainable value. A significant portion of Executive
remuneration is delivered in shares and deferred for up to five years.
Our purpose
Our strategy
Pay for performance
A material portion of total remuneration is based on variable
pay (c.80% of total maximum remuneration for the Group CEO
and Group CFO). Performance targets are set with reference to
Annual Operating Plan (‘AOP’) and consensus such that maximum
payouts can only be achieved for exceptional performance.
Under the maximum scenario, over 63% of the Group’s CEO
maximum remuneration is delivered in shares, deferred for three
years under the DBSS and subject to a combined vesting and
holding period of 5 years for LTIP. This ensures strong alignment
between Executive Directors and shareholders.
For more information
see page 118
Helping people secure
a life of possibilities
Enhance
Building a
sustainable
business
Grow People
Optimise Planet
Remuneration at a glance
Fixed pay 32%
Salary 29%
Benefits 0%
Pension 3%
Variable pay 68%
AIP 42%
LTIP 25%
Fixed Pay
32%
£836k
£11k
£88k
£1,227k
£739k
Variable Pay
68%
O
u
t
t
u
r
n
2
4
.
0
%
O
u
t
t
u
r
n
1
3
.
8
%
24%
weighting
24%
weighting
20%
weighting
20%
weighting
12%
weighting
O
u
t
t
u
r
n
8
.
8
%
O
u
t
t
u
r
n
5
.
8
%
O
u
t
t
u
r
n
2
4
.
0
%
O
u
t
t
u
r
n
3
5
.
0
%
O
u
t
t
u
r
n
0
.
0
%
35%
weighting
25%
weighting
20%
weighting
20%
weighting
O
u
t
t
u
r
n
6
.
1
%
O
u
t
t
u
r
n
0
.
0
%
O
u
t
t
u
r
n
2
4
.
0
%
O
u
t
t
u
r
n
1
4
.
0
%
24%
weighting
24%
weighting
20%
weighting
20%
weighting
12%
weighting
O
u
t
t
u
r
n
8
.
8
%
O
u
t
t
u
r
n
5
.
8
%
O
u
t
t
u
r
n
2
4
.
0
%
Fixed pay
37%
Salary
32%
Benefits
1%
Pension
3%
Variable pay
63%
AIP
45%
LTIP
19%
Fixed Pay
37%
Variable Pay
63%
£500k
£11k
£54k
£289k
£689k
116 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
2023 at a glance
Remuneration for 2023
2023 single figure
The outcomes under the AIP and LTIP
resulted in a single figure outcome
for Andy Briggs of £2.901m and
for Rakesh Thakrar of £1.543m.
Further details are on page 119.
CEO total pay
£2.9m
CFO total pay
£1.5m
Group CEO
73.4%
The above figures and charts opposite reflect AIP outcomes after
discretionary adjustment (see page 120 to 121 for further details).
(See page 122 for further details).
Total Cash Generation
1
Incremental New Business Long-term Cash
Generation (less strain) plus Own Funds
impacting management actions
Pension & Savings Net Flows – Workplace & Retail
2
Customer Experience
Strategic Scorecard
Net Operating Cash Receipts
Return on Shareholder Value
Persistency
Relative TSR
Group CFO
69.0%
Group CEO
Fixed vs variable pay (% weighting)
Group CFO
Fixed vs variable pay (% weighting)
2023 AIP weighted performance outturn
2021 LTIP weighted performance outturn
Group CEO Group CFOTotal AIP out of maximum opportunity
Group CEO
41.1%
Group CFO
41.1%
Total LTIP
1 Previously referred to as Cash Generation.
2 Previously referred to as Open (Pensions and Savings ) Net Flows.
Directors’ Remuneration report continued
Remuneration at a glance
Group CEO Group CFO
350%
384%
300%
268%
Shareholding guideline
Shares held at 31 December 2023
117Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 2023, shareholdings
for Andy Briggs and Rakesh Thakrar are
shown to the right.
Further details on SOGs, including
post-cessation requirements are included
in the Remuneration policy on page 140.
The SOGs increased from 2023 under
the new Remuneration policy.
SOGs percentages shown for Andy Briggs and Rakesh Thakrar include the value of shares held based on a share
price of £5.352 (as at close of business on 29 December 2023). Shares included are those shares held directly and
beneficially, any vested LTIP awards that have not been exercised and unvested Deferred Bonus Share Scheme
options taking into account tax liabilities.
2024 at a glance
Group CEO
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 2024
Strategic priorities
Grow
Optimise
Enhance
AIP
Total Cash Generation
New Business Contribution
–
Cost Savings
–
Group Net Flows
–
Customer Experience
–
Strategic Scorecard
LTIP
Net Operating Cash Receipts
Return on Capital
Relative TSR
Cumulative Net Flows
–
Diversity and Inclusion
– –
Decarbonisation – Investment Portfolio
– –
All employees, with the exception of certain colleagues in our Asset Management function, participate in a common incentive plan ensuring
consistency of corporate goals and individual performance management. Certain colleagues in our growth centres have additional functional
metrics, and our Asset Management colleagues participate in a separate bonus plan more aligned to their external market.
Group CFO
Minimum On-target Maximum Maximum
with growth
100% 43%
38%
19%
19%
34%
47%
944
2,219
4,964
6,129
15%
28%
38%
19%
Total fixed pay
AIP
LTIP
Share price growth
and dividends
Minimum On-target Maximum Maximum
with growth
100% 43%
38%
20%
22%
39%
39%
567
1,332
2,593
3,101
18%
33%
33%
16%
Total fixed pay
AIP
LTIP
Share price growth
and dividends
Maximum 2024 2025 2026 2027 2028 2029
3 year performance period
LTIP
CEO – 275%
CFO – 200%
AIP
CEO – 200%
CFO – 200%
Pension
CEO – 12%
CFO – 12%
Pension
CEO – 12%
CFO – 12%
Benefits Benefits
Salary
CEO – £844k
CFO – £504k
Salary
CEO – £844k
CFO – £504k
1 year performance period
50% awarded
in cash
50% awarded
in shares
3 year deferral period
2 year
holding
period
Shares released
Shares vest
Shares vestShares vest
118 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 2024.
• Benefits measured as benefits to be paid in 2024.
• 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.
Maximum
with
Growth
Based on the maximum remuneration receivable assuming share price growth of 50%:
• 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) and assumes 50% share price growth. ShareSave and SIP valued on the same basis as in the on-target row.
Group CFO – Rakesh Thakrar
£000
Group CEO – Andy Briggs
£000
Scenario charts
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.
Directors’ Remuneration report continued
Remuneration at a glance
119Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
This section of the Directors’ Remuneration report sets out the
Executive Directors’ remuneration for 2023. It contains the annual
report on remuneration which forms part of the Directors’
Remuneration report to be proposed for approval by the Group’s
shareholders at the Group’s 2024 AGM on 14 May 2024.
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
A summary of the Remuneration policy approved by the shareholders at the 2023 AGM is set out on pages 136 to 140 of this Remuneration
report. The full policy can be found on the company’s website and on pages 118 to 126 of the 2022 Annual Report and Accounts.
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 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023
6
2022
7
(restated) 2023
2022
7
(restated) 2023
2022
7
(restated)
Executive
Directors
Andy
Briggs 836 809 11 11 88 85 935 905 1,227 1,053 739 1,154 1,966 2,207 2,901 3,112
Rakesh
Thakrar 500 471 11 13 54 50 565 534 689 601 289 441 978 1,042 1,543 1,576
1 Andy Briggs’ salary increased to £844,480 with effect from 1 April 2023. Rakesh Thakrar’s salary increased to £504,400 with effect from 1 April 2023.
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.
No individual benefit provided has a value which is significant enough to warrant separate disclosure.
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 (10.6%) and Rakesh Thakrar received a combination of cash supplement and contribution (10.8%).
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 2023). In 2023 £613,644 of Andy Briggs’s incentive payment is subject to three-year deferral delivered in shares (2022: deferral of £526,416), and £344,706 of Rakesh Thakrar’s incentive payment
is subject to a similar deferral (2022: deferral of £300,280).
6 The 2023 value for long-term incentives is an estimate of the vesting outcomes for LTIP awards granted in 2021 which are due to vest once the Full Year results are announced. This vesting level
is at 41.1% reflecting outcomes against the Net Operating Cash Receipts, Return on Shareholder Value, Persistency and Relative TSR performance measures to 31 December 2023 (see page 122).
This vesting outcome is then applied to the average share price between 2 October 2023 and 29 December 2023 (478.621 pence) to produce the estimated long-term incentives figures shown
for 2023 in the above table. The assumptions will be trued up for actual share price at the day of vesting in the Directors’ Remuneration report for 2024. For Andy Briggs, the disclosed LTIP figure
of £739k comprises the disclosed LTIP figure of £587,837 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 £150,679. All values are calculated using the three-month average share price to 29 December 2023 (478.621 pence). For Rakesh Thakrar, the disclosed LTIP figure of £289k comprises the
disclosed LTIP figure of £229,791 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 £58,899. No portion
of the awards for Andy or Rakesh related to share price appreciation.
7 For 2020’s LTIP awards which are reflected in the 2022 long-term incentives column above, the performance conditions were met as to 44.3% of maximum. The 2022 long-term incentives values in
the above table reflect the value of the Company’s shares on the date of vesting which was 13 March 2023 (598.4 pence per share) multiplied by the number of shares vesting whereas the equivalent
figure within the published 2022 Single Figure Table was an estimate which reflected the average share price between 1 October 2022 and 31 December 2022 (570.5 pence per share) and certain
assumptions regarding the cumulative value of dividends on the number of shares vesting.
Annual report on remuneration
120 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
AIP outcomes for 2023 – Audited information
The overall weightings between Corporate measures and Strategic Scorecard for AIP in 2023 were:
• 80% – Corporate (financial and customer) performance measures.
• 20% – Strategic Scorecard (strategic company priorities).
As described in the Remuneration policy, 50% of 2023 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.
Corporate (financial and customer) performance measures
The Corporate (financial and customer) measures represent 80% of the overall incentive opportunity. The table below details the outcome
against the measures and targets that were agreed by the Remuneration Committee at the start of the year.
2023 performance targets and outcomes
Performance measure
Threshold
performance
level of
2023 AIP
Target
performance
level for
2023 AIP
Maximum
performance
level for
2023 AIP
Performance
level attained
for 2023
AIP
% of
Corporate
element
based on
performance
measure
%
achieved
Total Cash Generation (£m)
1
1,300 1,400 1,500 2,024 30.00% 30.00%
Incremental New Business Long-Term Cash
Generation (less strain) plus Own Funds impacting
management actions (£m) 905 1,091 1,277 1,595 30.00% 30.00%
Pensions and Savings Net Flows – Workplace
and Retail (£m)
2
2,742 3,142 3,542 3,130 15.00% 7.28%
Customer Satisfaction – Telephony (%)
3
86% 88% 90% 87% 6.25% 1.56%
Customer Satisfaction – Digital (%)
4
92% 94% 96% 93% 6.25% 1.56%
Service Levels (Demand Processed) (%)
5
88% 90% 92% 91% 6.25% 4.69%
Complaints Resolved in < 3 days (%)
6
33% 35% 37% 35% 6.25% 3.13%
Total of Corporate element 100% 78.22%
1 Total Cash Generation was previously referred to as Cash Generation
2 Pensions and Savings Net Flows – Workplace and Retail was previously referred to as Open (Pensions and Savings ) Net Flows.
3 Customer Feedback scores as reported through a survey following telephony service, where customers can rate us between 1–5. The approach is now consistent across each platform/entity for 2023.
The target was reduced from 91% in 2022 to 88% in 2023 in light of implementing this consistent survey approach across Phoenix Group; the Committee was satisfied the targets remained
equivalently stretching to prior years.
4 Customer Satisfaction scores as gathered immediately following Customer Digital journeys, where customers can rate their experience between 1–5. For Standard Life, all transactional journeys for
which feedback is live on our secure site including all transactional journeys for which feedback is live on our mobile app. For Phoenix Life, encashment journey for which survey is live on MyPhoenix.
5 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 and straight through processing. The target was reduced from 92% in 2022 to 90% in 2023 to align with our in-house manpower model and contractual agreements with
OSPs which have a 90% target; the Committee was satisfied the targets remained equivalently stretching to prior years.
6 Percentage of complaints that were closed within three days of the date of receipt.
Total Cash generation in 2023 benefitted from particularly strong management actions delivery including the completion of one of the largest
UK insurance Part VII transfers ever completed, with the funds merger of the Standard Life and Phoenix Life businesses into Phoenix Life Limited.
The Part VII transfer created additional free surplus within our life companies through the realisation of the diversification benefit, which enabled
the Group to significantly increase total cash generation in 2023.
Incremental New Business Long-Term Cash Generation (less strain) plus Own Funds impacting Management Actions benefitted from a
strong year of organic growth and management actions delivery. Our organic growth was supported by targeted participation in a growing
BPA market, and strong growth in our Workplace business, as we retain our existing schemes and win new schemes in the market.
As described in the Committee Chair’s covering letter (page 113), 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 2023 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 2023 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 2023 formulaic outcome was necessary. Separately, the Committee made individual adjustments to the
AIP outcomes which are set out on page 121.
Whilst the performance measures for the 2024 AIP have been disclosed (see Implementation of Remuneration policy for 2024 on page 126),
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 2024’s AIP retrospectively in next year’s Remuneration
report on a similar basis to the disclosures made above in respect of 2023’s AIP.
121Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Strategic Scorecard
The Strategic Scorecard represents 20% of the overall incentive opportunity. 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 together with
respective weightings and outturns for the Group CEO and Group CFO.
2023 performance targets and outcomes
Strategic priority CEO CFO Description Base Performance Outcome
CEO
outcome
CFO
outcome
Optimise our
in-force business
15% 20% % range for all sustainable
illiquid asset origination and
transition assets
50 –70 % 87% 100% 15.00% 20.00%
Publish Net Zero
Transition Plan
Plan published Plan published
BPA NB strain (%) 5.50% 4.7%
BPA Cash Multiple (x) 2.8x 3.7x
Enhance our
operating model…
30% 30% ReAssure integration –
Capital synergies lifetime
£1,064m £1,089m 75% 22.50% 22.50%
SLOC integration – Cost
synergies lifetime
1
£16m £16m
Risk culture dashboard Green Green
Action Plan delivery Green Amber
… and our culture 20% 15% Employee Engagement eNPS 13 32 75% 15.00% 11.25%
Female senior leaders (%) 40% 39%
Grow organically
and through M&A
by better addressing
customer needs
25% 20% Phoenix Group corporate
reputation score
25% 21% 50% 12.50% 10.00%
Provide access for
at least 1.5m Standard Life
customers to an integrated
financial wellness hub,
Money Mindset
1.5m
Standard Life
customers
Complete
Reach 1.5m customers to raise
awareness about the impact
of their investments
1.5m
customers
reached
1.65m
customers
reached
Complaints resolved
in 8 weeks
91% 87%
Financial framework
– Cash, Resilience
and Growth
10% 15% New Business Contribution £372m £354m 40% 4.00% 6.00%
Total 69.00% 69.75%
1 The SLOC integration target was reduced from £19m to £16m following a review of the definition of activity in scope. The Committee was satisfied that the revised base was equally stretching
as originally intended.
Each year the Committee reviews the AIP outcomes in the context of the Group’s management of risk, overall business performance and the
broader stakeholder experience. In reviewing the 2023 AIP outcome, the Committee considered the delays faced during the year relating
to the IFRS 17 project. As Group CFO, Rakesh Thakrar had the principal responsibility for delivering the project in a timely manner, so the
Committee decided it was appropriate to use its discretion to reduce his AIP outcome by £75,000 (10%). Andy Briggs recognises that,
as Group CEO, he has ultimate accountability for all projects, including IFRS 17. Accordingly, in discussion with the Committee, he suggested
– and the Committee agreed – that he should forgo £50,000 (4%) of his AIP outcome.
As a result of these reductions, the Committee determined it was appropriate to pay the following outcomes under the AIP:
Name
Corporate
element outcome
(80% weighting)
% and £000
Scorecard
element outcome
(20% weighting)
% and £000
Total
outcome
% and £000
Discretionary
adjustment
% and £000
Actual
outcome
% and £000
Maximum
opportunity as
% of salary
% and £000
Andy Briggs 78.2% 69.0% 76.4%
4% of
outcome 73.4% 200%
£1,046 £230 £1,277 £50 £1,227 £1,673
Rakesh Thakrar 78.2% 69.8% 76.5%
10% of
outcome 69.0% 200%
£625 £139 £764 £75 £689 £999
122 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
LTIP outcomes for 2021 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 £4.330bn and Net Operating Cash Receipts of £4.780bn £4.966bn 100.0% 35.0%
Return on Shareholder
Value (25%) Target range between 2% CAGR and 4% CAGR (6.3)% 0.0% 0.0%
Persistency (20%) Target range between 7.4% and 6.1% 7.3% 31.0% 6.1%
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
32nd
percentile
0.0% 0.0%
Total 41.1%
The above targets were all measured over the period of three financial years 1 January 2021 to 31 December 2023.
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
The Committee reviewed the grant price of the 2021 LTIP (736.2 pence) compared to the grant price of the 2020 LTIP (620.54 pence) 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 Phoenix Group’s share price as at 29 February 2024 (496.35 pence) and is satisfied that no windfall gains have
occurred and that no adjustment is required on vesting.
Share-based awards
LTIP targets
The performance conditions for the 2021, 2022 and 2023 awards are set out below.
2021 award 2022 award 2023 award
Performance measure
1
35% Net Operating Cash Receipts
25% Return on Shareholder Value
20% Relative TSR
20% Persistency
20% Net Operating Cash Receipts
20% Return on Shareholder Value
20% Relative TSR
20% Persistency
20% Decarbonisation
20% Net Operating Cash Receipts
20% Group In-Force Long-Term Free Cash
20% Relative TSR
20% Persistency
20% Decarbonisation
Net Operating Cash Receipts Target range of £4.330bn
to £4.780bn
Target range of £3.800bn
to £4.100bn
Target range of £3.556bn
to £4.006bn
Return on Shareholder Value Between 2% CAGR and 4% CAGR Between 3% CAGR and 5% CAGR n/a
Group In-Force Long-Term Free Cash n/a n/a Target range between £14.7bn
and £15.4bn
Persistency Target range between 7.4%
and 6.1%
Target range between 7.6%
and 6.2%
Target range between 7.10%
and 6.08%
Decarbonisation – Investment Portfolio n/a 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
Net zero strategy applied to target
range of 80%–90% of in-scope
assets and 25% reduction in
carbon intensity (provided in the
best interests of customers)
Decarbonisation – Operations n/a 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
Target range of 75% to 85%
reduction pre-offset,
plus net zero post offset
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.
123Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
A consistent approach to target setting for the LTIP metrics has been taken each year with reference to the Group’s long range plan so that
delivery of target performance is considered to be comparably stretching for each award. As a result, the cash targets have not always increased
and did indeed reduce in 2022 and 2023 reflecting our business model shifting from being a closed life consolidator to an organic growth
business. The 2024 LTIP cash targets disclosed on page 127 have again been set with reference to the Group’s business plan and are higher than
in 2023.
LTIP underpin
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.
Share-based awards – Audited information
As at 31 December 2023, Directors’ interests under long-term share-based arrangements were as follows:
LTIP
Name Date of grant
Share price
on grant
No. of
shares
granted as at
1 Jan 2023
No. of
shares
granted in
2023
No. of
dividend
shares
accumulating
at vesting
1
No. of
shares
exercised
2
No. of
shares
lapsed
3
No. of
shares as at
31 Dec 2023
Vesting
date
4
Andy Briggs
LTIP 13 Mar 2020 620.5p 354,529 – 80,777 – (242,466) 192,840 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
LTIP 17 Mar 2023 576.6p – 402,712 – – – 402,712 17 Mar 2026
1,004,493 402,712 80,777 – (242,466) 1,245,516
Rakesh Thakrar
LTIP 11 Mar 2019 700.4p 39,259 – 8,530 – (10,323) 37,466 11 Mar 2022
LTIP 13 Mar 2020 620.5p 135,365 – 30,840 – (92,577) 73,628 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
LTIP 17 Mar 2023 576.6p – 174,935 – – – 174,935 17 Mar 2026
443,970 174,935 39,370 – (102,900) 555,375
1 In addition to the share options awarded under the LTIP shown above, dividends are awarded as additional options at vest. Dividends calculated are based on the final vesting figure
(post-performance) to reflect dividends paid from the date of award to the date of vest. Once the additional holding period of two years has been reached, further dividends are awarded
to reflect dividends paid from the date of vest to the end of the holding period.
2 Whilst both Andy Briggs and Rakesh Thakrar had LTIP awards which have vested, they cannot be exercised due to the additional two-year holding requirement resulting in an overall gain
of £nil in 2023 (2022: £645,224).
3 The 2020 LTIP award vested at 44.3% of maximum. The 2019 LTIP award vested at 78.4% of maximum.
4 LTIP awards granted on 12 March 2021 will vest after the 2023 Full year results are announced. LTIP awards made to all members of the Executive Committee are subject to a three-year
performance period and a two-year holding period.
DBSS
The DBSS is the share scheme used for the deferral of the AIP. Whilst no performance conditions are applicable, awards are subject to continued
employment or a good leaver status.
Name Date of grant
Share price
on grant
No. of
shares
granted as at
1 Jan 2023
No. of
shares
granted in
2023
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 2023
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
DBSS 17 Mar 2023 576.6p – 91,285 – – – 91,285 17 Mar 2026
140,879 91,285 – – – 232,164
Rakesh Thakrar
DBSS 13 Mar 2020 620.5p 15,262 – 3,476 (18,738) – – 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
DBSS 17 Mar 2023 576.6p – 52,071 – – – 52,071 17 Mar 2026
81,852 52,071 3,476 (18,738) – 118,661
1 In addition to the share options awarded under the DBSS shown above, dividends are awarded as additional options at vest. Dividends calculated are based the final vesting figure to reflect
dividends paid from the date of award to the date of vest.
2 Gains of Directors (Rakesh Thakrar only) from share options exercised and vesting shares under the DBSS in 2023 was £102,537.03 (2022: £91,800.33) arising from an award exercised
on 27 March 2023 at a share price of 547.2 pence.
124 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
Scheme interests awarded in the year – Audited information
Name
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 17 Mar 2023 LTIP Nil Cost Option 275% of salary £2,322,320 25% 17 Mar 2026 See page 122
Andy Briggs 17 Mar 2023 DBSS Nil Cost Option 50% of AIP £526,416 – 17 Mar 2026 None
Rakesh Thakrar 17 Mar 2023 LTIP Nil Cost Option 200% of salary £1,008,800 25% 17 Mar 2026 See page 122
Rakesh Thakrar 17 Mar 2023 DBSS Nil Cost Option 50% of AIP £300,281 – 17 Mar 2026 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 (2023 LTIP and DBSS award share price was 576.6 pence).
ShareSave – Audited information
Name
As at
1 Jan 2023
Options
granted
Options
exercised
Options
lapsed
As at
31 Dec 2023
Exercise
price
Exercisable
from Date of expiry
Andy Briggs 3,056 – – – 3,056 £5.89 01 Jun 2024 01 Dec 2024
Rakesh Thakrar 1,768 – – 1,768 – £5.09 – –
Rakesh Thakrar 2,546 – – 2,546 – £5.89 – –
Rakesh Thakrar – 8,359 – – 8,359 £3.78 01 Dec 2028 01 Jun 2029
ShareSave options are granted at a 20% discounted option price, calculated using the three-day average share price immediately before
the invitation date.
Rakesh Thakrar closed his 2021 and 2022 ShareSave plans and elected to save the maximum amount into ShareSave 2023 for an increased
five-year term. There was nil gain in 2023. (2022: £1,963).
Aggregate gains of Directors from share options exercised under all share plans in 2023 was £102,537 (2022: £738,988). This figure relates
to Rakesh Thakrar’s 2020 DBSS share option exercise.
During the year ended 31 December 2023, the highest mid-market price of the Company’s shares was 647.0 pence and the lowest mid-market
price was 441.6 pence. At 31 December 2023, the Company’s share price was 535.2 pence (29 December 2023 price).
Executive Directors’ interests – Audited information
The number of shares and share plan interests held by each Director and their connected persons are shown below:
Name
Share interests
as at 1 January
2023 or date
of appointment
if later
1
Share
interests as at
31 December
2023 or
retirement
if earlier
Total
share plan
interests as at
31 December
2023 – Subject
to performance
measures
Total
share plan
interests as at
31 December
2023 – Not
subject to
performance
measures
Total
share plan
interests as at
31 December
2023 – Vested
but unexercised
scheme interest
Andy Briggs 358,839 380,274 1,052,676 232,164 192,840
Rakesh Thakrar 115,441 130,556 444,281 118,661 111,094
1
Share interests values have reduced due to SIP matching shares being included previously.
The Directors’ share interests of the following Directors have increased between 31 December 2023 and 21 March 2024 (being the latest
practicable date prior to the release of this Annual Report). Andy Briggs and Rakesh Thakrar acquired an additional 89 shares each following
purchases under the Group’s Share Incentive Plan. There were no other changes between these dates.
125Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Shareholding requirements – Audited information
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 2023 (using the share price of 535.2 pence as at 29 December 2023) is summarised below. Unvested share awards no longer
subject to performance conditions (discounted for tax liabilities) are included within the SOGs.
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 2023 (using the share price of 535.2 pence as at 29 December 2023) is summarised below. Unvested share awards no longer
subject to performance conditions (discounted for tax liabilities) are included within the SOGs. In addition to the unvested share awards and
shares previously acquired, during 2023, Andy Brigs and his connected persons purchased 20,964 shares privately and a total of 471 shares
were purchased and/or awarded under the Phoenix Group UK SIP (partnership and dividend shares). During 2023, Rakesh Thakrar purchased
3,566 shares privately, received an additional 737 dividend shares based on his ISA holdings, retained 9,860 net shares following his 2020
DBSS exercise and a total of 952 shares were purchased and/or awarded under Phoenix Group UK SIP (partnership and dividend shares).
The extent to which the Executive Directors have achieved their SOG percentage is shown below:
Name
SOG
(minimum %
of salary)
Value of
shares held at
31 December
2023
(% of salary)
Andy Briggs 350% 384%
Rakesh Thakrar 300% 268%
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 notified to the Group by the relevant Director and registered accordingly.
The Executive Directors are required to sign a declaration that they have not, and will not at any time during their employment with Phoenix Group,
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.
Non-Executive Directors’ interests – Audited information
The number of shares held by each Director and their connected persons are shown below:
Name
Share
interests as at
1 January
2023 or date
of appointment
if later
Share
interests as at
31 December
2023 or
retirement
if earlier
Nicholas Lyons 65,990 105,990
Alastair Barbour 9,716 17,966
Karen Green – –
Stephanie Bruce – 11,054
Eleanor Bucks – –
Hiroyuki Iioka – –
Mark Gregory – –
Katie Murray 4,600 9,780
John Pollock 14,666 14,666
Belinda Richards – –
David Scott – –
Maggie Semple – –
Nicholas Shott 69,473 182,146
Kory Sorenson 45,000 45,000
126 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
Implementation of Remuneration policy in 2024 – 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, no change to 2023. £504,400, no change to 2023.
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 2024 AIP are set out below.
LTIP 275% of base salary. 200% of base salary.
Details of the 2024 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, are appropriately challenging, support the Company’s culture and values, and create value for stakeholders.
As detailed in the Committee Chair’s covering letter on page 114 the metrics for the 2024 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 metrics continue to form part
of the Strategic Scorecard elements of the Executive Directors.
The overall weightings between Corporate measures and Strategic Scorecard for AIP in 2024 are:
• Corporate (financial and customer) performance measures – 80%; no change from 2023.
• Strategic Scorecard (strategic Company priorities ) – 20%; no change from 2023.
The weightings of the AIP performance measures for 2024 are summarised below:
Performance measure
Corporate measure % of incentive potential
Total Cash Generation 16% (20% of Corporate element)
New Business Contribution 16% (20% of Corporate element)
Cost Savings 16% (20% of Corporate element)
Group Net Flows 12% (15% of Corporate element)
Customer Experience 20% (25% of Corporate element)
Strategic Scorecard 20%
Total 100%
Whilst the performance measures for the 2024 AIP are disclosed above, 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 2024’s AIP retrospectively
in next year’s Remuneration report on a similar basis to the disclosures made above in respect of 2023’s AIP.
Outcomes from performance measures for 2024’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 2024 AIP outcomes are confirmed. The targets for the specific performance
measures for the AIP in 2024 are regarded as commercially sensitive by the Group but will be disclosed retrospectively
in the Remuneration report for 2024.
50% of AIP outcomes for 2024 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 2024 (in respect of 2023’s AIP outcome) will be made automatically on the fourth dealing day
following the announcement of the Group’s 2023 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.
127Phoenix Group Holdings plc Annual Report and Accounts 2023
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
Full or Half year 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 Committee reviews the performance measures and targets of the LTIP each year to ensure these are aligned
to Phoenix Group’s strategic priorities, are appropriately challenging, support the Company’s culture and values,
and create value for stakeholders. For the 2024 LTIP, the Long-Term Free Cash metric will be replaced by a Return
on Capital metric to provide a measure of the efficiency of the Company’s use of capital. The Persistency metric in
the previous year’s LTIP will be replaced by a Cumulative Net Flows metric, which demonstrates our commitment to
incentivising growth in new business and retention of existing business. Following a significant reduction in emissions
from operations, the Decarbonisation from Operations metric (10% weighting) will be replaced by a Diversity,
Equity & Inclusion metric measuring ethnicity representation amongst our senior leadership population.
The targets are measured over a period of three financial years, commencing with financial year 2024.
As detailed in the Committee Chair’s covering letter on page 114 the 2024 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%) £3,848m £4,298m
Return on Capital (20%) 12.6% 14.7%
Cumulative Net Flows (20%) £(7.1)bn £3.8bn
Decarbonisation – Investment Portfolio
1
(10%) 29% carbon intensity
reduction of equity and
credit portfolio and 87.5%
of assets to have an agreed
decarbonisation approach
taken through governance
2
35% carbon intensity
reduction of equity and
credit portfolio and 100%
of assets to have an agreed
decarbonisation approach
taken through governance
2
Diversity and Inclusion – Senior Leadership Black,
Asian and Ethnic Minority Representation
3
(10%)
>12.0% >14.0%
Relative TSR (20%) measured 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
1 For the investment portfolio that is within control and influence.
2 Includes where the approved strategy can be to take no further action.
3 The current Race and Ethnicity % senior leadership figure is based on c. 68% workforce coverage/respondents at the time the targets were set.
A new data capture exercise is underway and as part of this the starting point will be assessed in H2 and any impact on target considered.
As described on page 123, the 2024 LTIP cash targets are higher than in 2023. A consistent approach to target setting
is taken each year with reference to the Group’s business plan so that delivery of target performance is considered to
be comparably stretching for each award.
All 2024 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 reserve 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.
With regard to the 2024 LTIP grants to be made in March, the Committee will review the outcome at the point of vesting
in 2027 to consider if any windfall gains have been made.
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. Employees based in the Republic of Ireland and Germany have the
opportunity to join the Irish SIP and International Purchase Plan.
All incentive plans are subject to malus/clawback. See ‘Notes to the Remuneration policy table’ on pages 122 to 125 of the 2022 Annual Report
for details.
128 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
Non-executive fees – Audited information
The emoluments of the Non-Executive Directors for 2023 based on the current disclosure requirements were as follows:
Directors’ salaries/fees Benefits
1
Total
Name
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
Non-Executive Chair
Nicholas Lyons
2
38 307 – 8 38 315
Alastair Barbour
3
430 307 30 21 460 276
Non-Executive Directors
Karen Green 173 159 2 3 175 162
Stephanie Bruce
4
– – – – – –
Eleanor Bucks
5
7 – – – 7 –
Mark Gregory
6
86 – 3 – 89 –
Hiroyuki Iioka
7
– – – – – –
Katie Murray 107 74 2 2 109 76
John Pollock 146 141 4 3 150 144
Belinda Richards 126 116 2 2 128 118
David Scott
8
– – – – – –
Maggie Semple 128 63 3 1 131 64
Nicholas Shott
9
159 139 2 2 161 141
Kory Sorenson
10
71 141 – 1 71 142
Total
11
1,471 1,395 48 43 1,519 1,438
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 Nicholas Lyons stepped down from the Board on 1 September 2022 and commenced his sabbatical. He returned as Chair of the Group Board on 1 December 2023.
3 Alastair Barbour became Chair of the Group Board on 1 September 2022 and stepped down from the position of Chair of the Group Board and the Nomination Committee on 30 November 2023.
Alastair Barbour then retired from the Board on 31 December 2023.
4 Stephanie Bruce retired from the Board on 11 May 2023 and waived all emoluments with regard to her Directors’ fees.
5 Eleanor Bucks was appointed as a Director on 1 December 2023.
6 Mark Gregory was appointed as a Director on 1 April 2023 and became a member of the Risk Committee on 1 April 2023.
7 Hiroyuki Iioka has waived all current and future emoluments with regard to his Directors’ fees.
8 David Scott was appointed as a Director on 11 May 2023 and has waived all current and future emoluments with regard to his Directors’ fees.
9 Nicholas Shott became Chair of the Remuneration Committee on 4 May 2023.
10 Kory Sorenson retired from the Board on 30 June 2023.
11 The increase in fees for Non-Executive Directors of the Company reflect the increase in base fee from 2022 to 2023 and fees in relation to chairing a committee as well as changes
to committee membership.
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in lieu of pensions
and annual incentive was £5.963 million (2022: £6.181 million).
Implementation of Remuneration policy in 2024 – Non-auditable
A summary of the annual base fees of the Non-Executive Directors are set out below.
Fee from
1 April 2023
£000
Fee from
1 April 2024
£000
Chair of the Group Board 460 460
Non-Executive Director 78 78
Senior Independent Director 20 20
Designated NED for Workforce Engagement 15 15
Committee Chair 30 30
Committee Member 18 18
On 1 April 2023 the base fee for Non-Executive Directors increased by 4%, lower than that of the wider workforce. Consistent with the approach
for executive directors, there will be no increases to Non-Executive Directors’ base fees in 2024.
The Chair’s fee was last reviewed in August 2021 with the next review due to take place in August 2024. For simplicity, it has been decided not
to proceed with the review in 2024 and instead to consider the Chair’s fee at the same time as the annual review of Non-Executive Director fees
from 2025, which is normally in quarter one.
129Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Performance graph and table
The graph below shows the value to 31 December 2023 on a TSR basis, of £100 invested in Phoenix Group Holdings plc on 31 December 2013
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 Group is a constituent.
Total Shareholder Return
Value of a 100 unit investment made on 31 December 2013.
250
200
150
100
50
0
Dec 2013
CEO single figure of total remuneration Phoenix Group Holdings FTSE 100 Index
Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018
Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
CEO single figure
of total 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 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 CEO 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 ’)
2023 Andy Briggs 2,901 73% 41.1%
2022 Andy Briggs 3,112 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
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 CEO 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 of the 2022 Annual Report and Accounts 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, 557.4 pence per share) rather than
the three-month average share price to 31 December 2019 (717.09 pence per share) which was required to be used last year for the single figure of total remuneration.
7 The long-term incentive vesting rate is shown as 57%. The group CEO decided to voluntarily waive any entitlement in excess of two-thirds of the shares which would otherwise have vested.
130 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
CEO pay ratio
The table below details the CEO pay ratio for the year ended 31 December 2023, 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 2023 (as detailed on page 119). For the 2023 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 the 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 2023 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 2023 Option A 836,360 26,640 40,453 61,858
Total remuneration (single figure) 2,901,513 33,217 53,493 85,926
2023 ratio (total compensation) 87:1 54:1 34:1
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 reduction in ratio for 2023 reflects the lower level of total compensation for the CEO compared to 2022 due in part to the lower AIP outturn
and LTIP vesting figures. Additionally, salary and total compensation levels at the relevant data points have increased reflecting our changed
demographic as result of the Group-wide organisational review and capability uplift to deliver on our future strategy, in particular in our growth
centres. The figures are also impacted by a number of lower earners transferring out of the Group as part of our ongoing outsource strategy.
Colleagues are also eligible to participate in our all-employee share plans, which were not included in the values in the employee single figure.
Nearly half of all employees participate in Phoenix Group’s growth and success through either the ShareSave Scheme, the Share Incentive Plan
or the International Purchase Plan.
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 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 Group, ensuring we create an environment for everyone to feel it is the best place our
colleagues have ever worked.
131Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ percentage change in pay 2022 to 2023
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 2022
and 2023 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 % Taxable benefits % Annual incentive %
Year-on-year % change 2023 2022 2021 2020 2023 2022 2021 2020 2023 2022 2021 2020
Executive Directors
1
Andy Briggs
2
3.4 1.1 0.0 – (0.96) 2.6 3.3 – 16.6% 12.4 (5.5) –
Rakesh Thakrar
2
6.0 10.2 2.3 – (15.8) 20.7 3.3 – 14.8% 20.4 (3.3) –
Chair
Nicholas Lyons (87.5) (17.1) 13.8 0.0 (100) 897.6 0.0 (100) n/a n/a n/a n/a
Alastair Barbour
6
68.8 58.4 11.0 0.0 41.7 109.1 66.6 (60) n/a n/a n/a n/a
Non-Executive Directors
3
Karen Green 8.9 12.8 12.8 6.8 (26.2) 362.9 0.0 (100) n/a n/a n/a n/a
Stephanie Bruce
6
0.0 n/a
4
– – 0.0 n/a
4
– – n/a n/a n/a n/a
Eleanor Bucks
5
n/a
4
– – – n/a
4
– – – n/a n/a n/a n/a
Mark Gregory
5
n/a
4
– – – n/a
4
– – – n/a n/a n/a n/a
Hiroyuki Iioka 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n/a n/a n/a n/a
Katie Murray 45.4 0.0 – – (3.3) 0.0 – – n/a n/a n/a n/a
John Pollock 3.4 0.0 4.4 0.7 56.0 0.0 0.0 (100) n/a n/a n/a n/a
Belinda Richards 8.4 4.5 5.7 0.0 (10.7) 0.0 0.0 (100) n/a n/a n/a n/a
David Scott
5
n/a
4
– – – n/a
4
– – – n/a n/a n/a n/a
Maggie Semple 102.8 0.0 – – 106.4 0.0 – – n/a n/a n/a n/a
Nicholas Shott 14.5 7.7 22.8 0.0 42.8 208.3 (100) (80) n/a n/a n/a n/a
Kory Sorenson
6
0.0 0.0 12.8 0.0 0.0 0.0 0.0 (100) n/a n/a n/a n/a
Wider employee population 8.9 4.4 4.7 3.9 (55.3) 57.2 1.4 7.4 11.5 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 from 2022 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.
3 The increase in fees for Non-Executive Directors of the company reflects the increases in base fees from 2022 to 2023 and fees in relation to chairing a committee and membership of a committee
as well as changes to the membership of a committee. See page 128 for further details on fees and taxable benefits for Non-Executive Directors. Non-Executive Directors do not participate in the AIP.
4 No taxable benefit received in the prior year and therefore not possible to calculate a percentage change.
5 Eleanor Bucks, Mark Gregory and David Scott, are newly appointed Directors and therefore it is not possible to calculate a percentage change.
6 Whilst Alistair Barbour, Kory Sorenson and Stephanie Bruce resigned from the Board in 2023, their details have been included as they were active members during the year.
For both Executive Directors the figures shown above reflect the change in the total salary figures as disclosed in the Single Figure Table for
the years 2022 and 2023. As the disclosures reflect salary earned during 2023 compared to salary earned during 2022 the figures shown above
do not therefore equate to 4%. The agreed increase of 4% of salary was applied to the salaries of both Executive Directors in April 2023.
The reduction in taxable benefits figure reflects a lower premium for private medical cover in 2023 (whilst retaining the same level of cover).
The reduction for Rakesh also reflects that the 2022 figure included a gain under his ShareSave Scheme; there was no such gain in 2023.
The change in Annual Incentive for both Executive Directors reflects the increase in maximum potential incentive for the 2023 performance year
from 150% to 200% of salary.
With regard to the figures for the wider employee population:
• The pay review in April 2023 was operated using a consistent approach with a pay budget of 6%. As in 2022, the pay budget was focused
on colleagues at lower grades ensuring a higher 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. A separate exercise
was also undertaken to review all senior management compensation to ensure market alignment. As part of this review, car allowance was
removed and an appropriate sum in lieu of this was added to base salary. The changes made as a result of this exercise have impacted the
figure shown above.
• The change to the taxable benefits figure compared to 2022 is largely as a result of: (i) a reduction in the PMI premium for 2023; (ii) the removal
of car allowance where appropriate; and (iii) the post-pandemic £1,000 payment to all colleagues below senior management and the working
from home allowance were not continued beyond 2022. As in previous years, ShareSave and Share Incentive Plan values are not included
in the wider employee population figures.
• The increase in annual incentive payments compared to 2022 relates primarily to the fact that bonuses are salary linked. Over 2023 base
salaries increased on average by 8.9% driven by the high inflation environment in the UK over this period and other factors described under
both the pay review paragraph above and the CEO Ratio on page 130.
132 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
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)
2022 2023
508
611
527
664
Profits distributed by way of dividend (% change +4%)
Overall expenditure on pay (% change +9%)
Profit distributed by way of dividend has been taken as the dividend paid and proposed in respect of the relevant financial year. For 2023 this
is the Interim dividend paid (£260 million) and the recommended Final dividend of 26.65 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 C5 ‘Expenses’ in the notes to the consolidated financial statements.
Expenditure on pay has increased by 9% in the period reflecting the impact of the continued planned expansion of key areas in the Pensions
and Savings and Retirement Solutions business, the acquisition of the Sun Life of Canada UK business, as well as the impact of a 6% pay increase
to the wider workforce and the resulting higher share scheme costs. These increases have been partly offset by the impact from the Group’s
Transition and Transformation programme which has reduced headcount within the customer teams in 2023.
133Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Wider workforce pay
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.
Executive Directors and 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 and 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 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.
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
for a three-year period.
Malus and clawback
provisions apply.
Deferral where required on an
individual basis for Solvency II purposes.
Malus and clawback
provisions apply.
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 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.
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 ExCo members
No SOGs required. Not applicable.
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.
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 the 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.
134 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
We offer benefits which engage and retain our existing colleagues, as well as attract new talent to the organisation. To support this, we offer a
transparent flexible and tailored reward package that is competitive in the market, with clear principles around pay, alongside comprehensive
benefits and wellbeing support. Our Diversity, Equity and Inclusion agenda remains an integral underpin to our approach to reward and to support
colleague we have extended our Private Medical Insurance for all colleagues to include the addition of IVF treatment and neurodiversity support.
In 2023 we completed a holistic review of our reward framework to ensure it is appropriate for a business of our size, scale and potential.
This work included externally benchmarking all roles and career levels to ensure alignment with the external market. A thorough process
of validation and independent review was undertaken to ensure all colleagues are treated fairly. A number of changes to our grade structure
were introduced to help accurately define and reward the contribution every role makes. In response to colleague feedback, we also
published a refreshed and Group-wide set of pay ranges for 2024, rigorously benchmarked using external pay data and designed to give
greater transparency and confidence on pay at Phoenix Group. To conclude this extensive remuneration review, we have committed that
any colleague below the minimum of their pay range will have their fixed pay increased to that minimum level, as a priority, in the 2024 fixed
pay review. We are a proud Real Living Wage employer, and are committed to ensuring that these pay ranges, which are reviewed annually,
will always be at or above the Real Living Wage.
Equal pay and consistency of treatment for all colleagues, irrespective of gender 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. Maggie Semple, our Designated Non-Executive Director for Workforce Engagement,
has joined the Remuneration Committee in 2024 and will provide additional input to the Committee on the views of the wider workforce.
Further details of Maggie Semple’s engagement with the workforce throughout 2023 are shown on pages 108 to 110 of the Corporate
governance report.
Payments for loss of office – Audited information
No payments were made to Directors in 2023 for loss of office.
Payments to past directors – Audited information
No payments were made to past Directors in 2023.
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 service contract Notice period from either party (months)
Andy Briggs 07 November 2019 12
Rakesh Thakrar 06 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.
He received no payment for either appointment.
Rakesh Thakrar is a Non-Executive Director, Chair of the Board Audit Committee and a member of the Risk Committee of Bupa Insurance
Limited and Bupa Insurance Services Limited for which he received payment of £76,959 in 2023 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 current appointment
/re-appointment letter
Date of expiry of current
appointment/
re-appointment letter
1
Unexpired term
(months)
Nicholas Lyons 8 November 2023 1 December 2026 6
Karen Green 12 May 2023 30 June 2026 1
Eleanor Bucks 23 November 2023 1 December 2026 1
Mark Gregory 9 March 2023 31 March 2026 1
Hiroyuki Iioka 24 July 2023 23 July 2026 1
Katie Murray 1 April 2022 1 April 2025 1
John Pollock 31 October 2022 30 August 2025 1
Belinda Richards 1 October 2023 30 September 2026 1
David Scott 11 May 2023 10 May 2026 1
Maggie Semple 9 May 2022 31 May 2025 1
Nicholas Shott 31 October 2022 30 August 2025 1
1 The 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 14 May 2024.
135Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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 of the Group Board) they would be entitled to a one-month notice period. The Chair of the Group Board, as detailed in his
letter of appointment, would be entitled to a six-month notice period.
Dilution
The Group monitors the number of shares issued under the Group’s employee share plans and their impact on dilution limits. The Group’s
current practice is for all the executive share plans to use market purchase shares which are held in the Employee Benefit Trust (the Trust) on
exercise of any awards. There is a dividend waiver in place for all shares held in the Trust. For the Group’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 2023 is 1.39% and no shares count towards the dilution limit for executive plans only
(5% in any rolling ten-year period).
Advice provided to the Committee
During the year, the Committee received independent remuneration advice from its appointed adviser, PwC, which 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 2023 were £142,844 which included continued 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 Group CEO, Group HR Director, Executive Reward Director and Group Finance Director, 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.
Voting outcomes on remuneration matters
The table below shows the votes cast to approve the Directors’ Remuneration report for the year ended 31 December 2022 and the Directors’
Remuneration policy at the 2023 AGM held on 4 May 2023.
For Against Abstentions
Number % of votes cast Number % of votes cast Number
To approve the Directors’ Remuneration report for the year
ended 31 December 2023 (2023 AGM) 767,333,037 99.20 6,157,257 0.80 152,575
To approve the Directors’ Remuneration policy (2023 AGM) 764,184,513 98.81 9,241,995 1.19 216,361
Approval
This report in its entirety has been approved by the Remuneration Committee and the Board of Directors and signed on its behalf by:
Nicholas Shott
Remuneration Committee Chair
Approved by the Board on 21 March 2024
136 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ Remuneration report continued
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. Further details on the Remuneration policy can be found in the 2022 Annual Report and Accounts on pages 122 to 125.
Remuneration principles
The Group’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 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.
How our Remuneration 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 in the 2022 Annual Report and Accounts 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.
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.
Predictability
• The range of potential award levels to individual Executive Directors is set out in the scenario chart on page 118 which also demonstrates
the impact of potential share price growth by 50% over the three-year performance period until LTIP vesting.
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 Non-Executive Director for Workforce Engagement 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.
This appendix contains the Directors’ Remuneration policy approved
by the Group’s shareholders at the Group’s 2023 AGM. It applies for
a period of three years, until the 2026 AGM, unless a revised policy
is approved by shareholders before then.
The Directors’ Remuneration policy
137Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
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
138 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Remuneration policy table
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:
– either 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.
– 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.
Directors’ Remuneration report continued
139Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Remuneration policy table
Element and purpose in
supporting strategic objectives
Policy and operation Maximum Performance measures
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.
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 Group 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 Group and
receive one matching share for every
purchased share up to a maximum of
£50. The maximum saving is £150 each
month (or up to such level as permitted
by the Group 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).
1
• Consistent with normal practice,
such awards are not subject to
performance conditions.
1 Updated from two matching shares to correct a typographical error.
140 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Remuneration policy table
Element and purpose in
supporting strategic objectives
Policy and operation Maximum Performance measures
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
Chair of the Group Board and
Non-Executive Director fees
• The fees paid to the Chair of the
Group Board 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 NED 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 of
the Group Board and Non-Executive
Directors will not exceed the limit from
time to time prescribed within the
Group’s Articles of Association for
such fees (currently £2 million per
annum in aggregate).
• The Group 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
Directors’ Remuneration report continued
141Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ report
Shareholders
Dividends
Dividends for the year ended
31 December 2023
Dividends for the year are as follows:
Ordinary shares
Paid Interim dividend 26.0p per share (2022: 24.8p per share)
Recommended Final dividend 26.65p per share (2022: 26.0p per share)
Total ordinary dividend 52.65p per share (2022: 50.8p 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 1,185,942 shares during 2023 which related to shares
issued under the Company’s ShareSave Scheme.
At 31 December 2023, the issued ordinary share capital totalled 1,001,538,419. Subsequently, 9,467 ordinary
shares have been issued in 2024 in connection with the Company’s ShareSave Scheme to bring the total
in issue to 1,001,547,886 at the date of this Directors’ report. Full details of the issued and fully paid share
capital as at 31December 2023 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 2023 AGM, shareholders approved the renewal of the Company’s authority to make
purchases of up to 100,045,720 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 2023. The authority will expire at the
2024 AGM. A resolution to renew this authority shall be proposed in the 2024 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 ‘Articles’) which are available on the Company’s website at
www.thephoenixgroup.com.
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 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 Phoenix 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.
Substantial shareholdings
Information provided to the Company pursuant to Chapter 5 of the FCA’s Disclosure Guidance and
Transparency Rules (‘DTR’) is published on a Regulatory Information Service and on the Company’s
website. As at 31 December 2023, 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 2023 and 21 March 2024.
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 10.70%
BlackRock, Inc. 51,251,518 5.12%
Kingdom Holding Company 50,051,192 5.00%
The Directors present their report for the year ended 31 December 2023.
Phoenix Group Holdings plc is incorporated in England and Wales (registered
no. 11606773) and has a premium listing on the London Stock Exchange.
142 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Shareholders continued
AGM
2024 AGM The AGM of the Company will be held at Floor 22, Freshfields Bruckhaus Deringer LLP, 100 Bishopsgate,
London, EC2P 2SR on 14 May 2024 at 10am. A separate Notice of Meeting convening this AGM 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, together with the Company’s Half Year Report and other public
announcements and presentations, are designed to present a fair, balanced and understandable
view of Phoenix 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 2023 is given within the Corporate governance report
on pages 64 to 67, which is incorporated by reference into this Directors’ report.
During 2023, and up to the date of this Directors’ report, the following changes to the Board took place:
• Mark Gregory was appointed as a Director on 1 April 2023.
• Stephanie Bruce, abrdn plc Shareholder Nominated Director, retired as a Director on 11 May 2023.
• David Scott, abrdn plc Shareholder Nominated Director, was appointed as a Director on 11 May 2023.
• Kory Sorenson retired as a Director on 30 June 2023.
• Nicholas Lyons returned from his sabbatical as Chair of the Group Board on 1 December 2023.
• Alastair Barbour stepped down as Chair of the Group Board on 30 November 2023 and retired
as a Director on 31 December 2023.
• Eleanor Bucks was appointed as a Director on 1 December 2023.
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 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 2018 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 14 May 2024.
The 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 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 Articles.
Directors’ remuneration
and interests
A report on Directors’ remuneration is presented within the Directors’ Remuneration report on pages
111 to 140 including details of their interests in shares and share options or any rights to subscribe
for shares in the Company.
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 Articles. See page 70 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.
Directors’ report continued
143Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
As part of its comprehensive assessment
as to whether Phoenix Group is a Going
concern, the Board has considered
financial projections over the period to
31 March 2025, which demonstrate the
ability of Phoenix Group to withstand
market shocks in a range of severe but
plausible stress scenarios.
Rakesh Thakrar, Group Chief Financial Officer
Governance
Going concern
Phoenix 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 Phoenix 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 50 to 57. In addition, the IFRS consolidated financial statements include, amongst other things, notes
on Phoenix 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 20 to 23) sets out the business model
and how Phoenix Group creates value for shareholders and policyholders.
As part of its comprehensive assessment as to whether Phoenix Group is a Going concern, the Board has considered financial projections
over the period to 31 March 2025, which demonstrate the ability of Phoenix 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 58 and 59, 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 Phoenix Group’s
access to additional funding through its undrawn £1.75 billion revolving credit facility. The stresses do not give rise to any material uncertainties
over Phoenix Group’s ability to continue as a Going concern.
The Directors therefore have a reasonable expectation that Phoenix Group has adequate resources to meet its liabilities as they fall due and
continue in operational existence over the period to 31 March 2025, 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 2023.
Viability statement
The Viability statement, as required by the 2018 Code, has been undertaken for a period of three years to align to Phoenix Group’s business
planning and is detailed on pages 58 and 59.
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 60 to 147 which is incorporated by reference into this Directors’ report and comprises the Company’s
Corporate governance statement.
The 2018 Code applies to the Company and details on the Company’s compliance with the Code are included in the Corporate governance
report on page 68. The 2018 Code is available on the website of the FRC – www.frc.org.uk. The new UK Corporate Governance Code 2024
was published in January 2024 and will become effective 1 January 2025 and 1 January 2026 for Provision 29. Phoenix Group will ensure
that compliance with the 2024 Code is appropriately measured and disclosed.
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 2023 are highlighted
in the ‘Our strategic priorities’ section of the Strategic report.
• See pages 24 to 29 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 28, 29 and 63.
• See the Sustainability Report
on the Company’s website.
144 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ report continued
Governance continued
Disability Phoenix 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. Phoenix Group also has a Reasonable
Adjustments guidelines which sets out Phoenix Group’s duty to
make reasonable adjustments to help ensure that all colleagues
can access opportunities and thrive in employment. In addition,
Phoenix Group has a Dignity at Work policy which sets out its
commitment to creating a work environment free of discrimination
where everyone is treated with dignity and respect. One of our
colleague inclusion networks, ‘Enable’ 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 Phoenix Group’s performance
and market trends impacting Phoenix Group was shared via an
all-employee intranet. In addition, colleagues were invited to
participate in Phoenix Group’s ShareSave Scheme, advertised
through the all-employee intranet.
• See page 11 of the Strategic
report and pages 108 to 110 of the
Corporate governance report (for
colleague engagement) and pages
74 to 77 (for Section 172 statement).
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 11 and Corporate governance report on pages 74 to 77.
• See pages 74 to 77
(for Section 172 statement).
Greenhouse gas
(‘GHG’) emissions
All disclosures concerning Phoenix Group’s GHG emissions
are contained in the Group’s Streamlined Energy and Carbon
Reporting (‘SECR’) Statement forming part of the Strategic report.
• See pages 42 and 43
of the Strategic report.
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 Climate Report, a summary of which has been included
in the Strategic report on pages 44 and 45 due to their strategic importance.
During 2023, 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 Group 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 85. Data was collated through the standard process for preparing Phoenix Group’s
annual submission to the Department for Business & Trade (formerly BEIS) in respect of the Parker Review:
FTSE 350 Ethnic Diversity Data Submission and FTSE Women Leaders review, under applicable data
protection laws.
145Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Governance continued
Energy usage and Carbon
Emissions under the
Companies (Directors’
Report) and Limited Liability
Partnerships (Energy and
Carbon Report) Regulations
2018 (SI 2018/1155)
Phoenix Group’s SECR statement on the Group’s UK and global energy consumption and GHG emissions
for the financial year 1 January 2023 to 31 December 2023, and the 2022 comparative year is contained
in the Strategic report on pages 42 and 43.
Branches The Company, through its subsidiaries, has established branches in Germany, Hong Kong and Ireland.
Political donations Phoenix Group is a politically neutral organisation and, as further explained below, did not make any
political donations or incur any political expenditure (within the ordinary meaning of those words) in
2023. The Company regularly engages with regulators and policymakers (including those associated
with political parties and governments) to listen and to contribute to discussions on a wide range of matters.
Such engagement is an important part of our strategy and contributes to initiatives enabling the UK in its
goal of reaching net zero by 2050. Further information on how we engage with stakeholders can be found
on pages 74 to 77; and our Sustainability and Climate Reports, which include information on our own net
zero ambitions can be found on our website at www.thephoenixgroup.com.
Due to the broad definition of political donations under the Companies Act 2006 (the ‘Act’) and as a matter
of good governance and transparency, we have provided information on areas of expenditure incurred as
a result of this engagement which may be regarded as falling within the scope of the Companies Act 2006.
During the year ended 31 December 2023, Phoenix Group exhibited at, sponsored, and held events at,
conferences organised by political parties, spending a total of £63,982.40. This included sponsorship
of events at the Labour Party Annual Conference (£24,000), Conservative Party Annual Conference
(£29,396.40) and Scottish National Party Annual Conference (£9,936). The Company also contributed
£650 to a pensioners fair run the Member of Parliament for the Wythall region, in which the Group has
an office. These events allow Phoenix Group to present its views on a non-partisan basis to politicians from
across thepolitical spectrum and non-political stakeholders such as NGOs and other listed and non-listed
companies. These payments do not indicate support for any political party. At the 2024 AGM, Phoenix
Group will be seeking renewal from shareholders of the existing authority approved at the 2023 AGM.
Moredetails are contained in the Notice of Meeting which can be found on the Company’s website at
www.thephoenixgroup.com.
Articles of Association Changes to the Articles require prior shareholder approval by special resolution.
The Articles are available on the Company’s website at www.thephoenixgroup.com/about-us/governance.
Re-appointment of
the External Auditor
Following a full tender process in respect of external audit services that took place in 2021, the Audit Committee
recommended to the Board that KPMG be appointed as the Company’s Auditor, commencing with the
financial period starting from 1 January 2024. As outgoing Auditor, EY will provide the Company with
a Statement of Reasons, as required by the 2006 Act, which will be circulated to shareholders as a
supplement to the Notice of Meeting ahead of the 2024 AGM on 14 May 2024.
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 2023 for audit and non-audit work are disclosed in note C6 to the IFRS
consolidated financial statements.
Disclosure of information
to External Auditor
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 External 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 External Auditor is aware of
that information.
Group Company Secretary The Group Company Secretary during the period was Kulbinder Dosanjh.
Fair, balanced and
understandable
In accordance with the 2018 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 Phoenix Group’s position, performance, business model and strategy.
146 Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Directors’ report continued
Contractual/Other
Significant agreements
impacted by a change
of control of the Company
The £1.75 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 Phoenix 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 by Listing Rule 9.8.4R,
where applicable, can be found within the following sections of the Annual Report:
Requirement Location
Statement of interest capitalised Note E5 to the consolidated financial statements
Details of long-term incentive schemes Directors’ Remuneration report
Waiver of emoluments by a Director Directors’ Remuneration report
Waiver of any future emoluments by a Director Directors’ Remuneration report
147Phoenix Group Holdings plc Annual Report and Accounts 2023
Corporate governance
Statement of Directors’ responsibilities
Statement of Directors’ responsibilities in respect of the
Annual Report 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
andregulations.
The Board has prepared a Strategic report which provides an
overview of the development and performance of Phoenix Group’s
business for the year ended 31 December 2023, covers the future
developments in the business of Phoenix Group and its consolidated
subsidiaries and provides details of any important events affecting
the Company and its subsidiaries after the year end. The Strategic
report and the Directors’ report together constitute the management
report as required under DTR 4.1.8R.
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 Phoenix Group and of the profit
or loss of Phoenix 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,
relevant and reliable;
• 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 Phoenix Group financial position and financial performance;
• in respect of Phoenix Group financial statements, state whether
UK-adopted IASs have been followed, subject to any material
departures disclosed and explained in the financial statements;
• in respect of the parent Company financial statements,
state whether applicable UK 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 Phoenix Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain Phoenix Group’s
transactions and disclose with reasonable accuracy at any time
the financial position of Phoenix 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 Phoenix Group 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 the maintenance and integrity
of the corporate and financial information included 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
64 to 67, confirm that, to the best of their knowledge:
• the consolidated financial statements, prepared in accordance
with UK-adopted IASs 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
• 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 20 March 2024.
By order of the Board
Andy Briggs Rakesh Thakrar
Group Chief Group Chief
Executive Officer Financial Officer
21 March 2024
148 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
149Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Financials
150 Independent auditor’s report
164 IFRS consolidated financial statements
171 Notes to the consolidated financial statements
291 Parent company financial statements
294 Notes to the parent company financial statements
306 Additional life company asset disclosures
310 Additional capital disclosures
312 Alternative performance measures
Additional information
316 Shareholder information
318 Glossary
324 Forward looking statements
150 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
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 2023
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 2023 which comprise:
Group Parent Company
Consolidated income
statement for the year
ended 31 December 2023
Statement of financial position
as at December 2023
Statement of comprehensive
income for the year ended
31 December 2023
Statement of changes in
equity for the year ended
31 December 2023
Statement of consolidated
financial position as at
31 December 2023
Statement of cash flows
for the year ended
31 December 2023
Statement of consolidated
changes in equity for the year
ended 31 December 2023
Related notes 1 to 22
to the financial statements,
including material accounting
policy information
Statement of consolidated
cash flows for the year ended
31 December 2023
Related notes A1 to I7 to the
consolidated financial statements
(except for note I3 where it is marked
as unaudited), including material
accounting policy information
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 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.
Our evaluation of the Directors’ assessment of the Group and
Parent Company’s ability to continue to adopt the going concern
basis of accounting included:
• confirming our understanding of management’s going concern
assessment process and obtaining management’s assessment
which covers the period to 31 March 2025;
• with support from our actuarial team, challenging the key
actuarial assumptions used in management’s three-year Annual
Operating Plan (‘AOP’), which forms the basis for management’s
going concern projections and determining that the models are
appropriate to enable management to make an assessment
on the going concern of the Group;
• assessing the accuracy of management’s analysis by testing
the inputs and the clerical accuracy of the models used;
• assessing 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;
Independent auditor’s report
151Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
• challenging the key assumptions underlying the mandatory
obligations of the Group up to 31 March 2025, used in
management’s stress scenarios based on our understanding
of the Group and the available external data, respectively;
• evaluating management’s forecast analysis to understand
how severe the downside scenarios would have to be to result
in the elimination of solvency headroom;
• assessing management’s considerations of operational risks,
including those related to Outsourced Service Providers
(‘OSPs’) and their impact on the going concern assessment;
• assessing 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;
• checking 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;
• performing 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 obtained
management’s assessment approved by the Board, minutes of
meetings of the Board and its committees; and
• testing 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 2025.
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’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
Limited (which includes Phoenix Life Assurance
Limited and Standard Life Assurance Limited)
and ReAssure Limited and audit procedures
on specific balances for Other Companies (the
‘reporting components’). Our scope is explained
further on pages 151 to 152.
• The components where we performed full or
specific audit procedures accounted for 99%
(2022: 99%) of the equity and 95% (2022: 98%)
of the profit before tax of the Group.
Key audit
matters
• Valuation of insurance contract liabilities,
comprising the following risk areas:
– actuarial assumptions; and
– actuarial modelling.
• Valuation of contractual service margin
and its subsequent release.
• 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.
• Transition to IFRS 17 Insurance contracts,
including the selection and application of
accounting policies and financial statement
and other disclosures.
• Recoverability of the Parent Company’s
investments in Group undertakings.
Materiality • Overall Group materiality of £93 million (2022:
£83 million) which represents 2% of total equity
attributable to owners of the Parent plus the
contractual service margin (‘CSM’) net of tax
(‘adjusted Group equity’) (2022: 2% of total
equity attributable to owners of the Parent).
152 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
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, of the
four reporting components of the Group. The Group reporting
components consist of Phoenix Life Limited, ReAssure Limited,
the Group Function and Other Companies.
The Phoenix Life Limited component includes Phoenix Life Limited
(‘PLL’), Phoenix Life Assurance Limited (‘PLAL’), and Standard Life
Assurance Limited (‘SLAL’), which are the most significant insurance
companies of the component. ReAssure Limited (‘RAL’) is the
most significant company in the ReAssure component. 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, Standard Life International Designated Activity
Company (‘SLIDAC’) and Sun Life Assurance Company of
Canada UK Limited (‘SLOC’).
Three of the reporting components were audited by component
teams as set out below:
Component Scope Auditor
Phoenix Life Limited
(includes Phoenix Life
Limited, Phoenix Life
Assurance Limited
and Standard Life
Assurance Limited)
Full (including
specified
procedures)
EY component
team
ReAssure Limited Full EY component
team
Group Function Full EY primary team
Other Companies Specific (including
specified
procedures)
EY primary team
and component
teams
Of the four components selected, we performed an audit of the
complete financial information of three 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 within that
component that we considered had the potential for the greatest
impact on the significant accounts in the financial statements
either because of the size of these accounts or their risk profile.
Additionally, the acquisition balance sheet in respect of SLOC
was in the scope of the SLOC component team.
The reporting components where we performed audit procedures
accounted for 99% (2022: 99%) of the adjusted Group equity and
95% (2022: 98%) of the Group’s profit before tax. For the current
year, the full scope components contributed 81% (2022: 98%) of
the adjusted Group equity and 81% (2022: 94%) of the Group’s
profit before tax. The specific scope components, including the
components with specified procedures contributed 18% (2022: 1%)
of the adjusted Group equity and 14% (2022: 4%) of the Group’s
profit 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 components
81%
Specific scope components
18%
Other procedures
1%
Equity
Full scope components 81%
Specific scope components 14%
Other procedures 5%
Profit before tax
Changes from the prior year
During the year the Group acquired SLOC which is now part of the
specific scope of other companies. Furthermore, the EY primary
team have audited all the IFRS 17 adjustments for the Group.
Independent auditor’s report continued
153Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
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 from other EY global network firms
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. For the 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 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
Stakeholders are increasingly interested in how climate change
will impact the Group. The Group has determined that the most
significant future impacts from climate change on its operations will
be from financial assets and in insurance and investment contract
liabilities. These are explained on pages 44 to 45 in the required Task
Force On Climate Related Financial Disclosures, and on page 52 in
the principal risks and uncertainties. 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 or otherwise appear to be materially misstated, 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.
The Group has explained in their Significant Accounting Policies
how they have reflected the impact of climate change in their
financial statements. Judgements and estimates relating to climate
change are included in note A4.6. 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.
We also challenged the Directors’ considerations of climate
change in their assessment of going concern and viability and
associated disclosures.
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 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.
154 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area
Valuation of insurance contract liabilities (£115.8bn; 2022: £107.6bn).
Refer to the Critical accounting estimates (pages 177 to 178); Accounting policies and note F1 of the consolidated financial statements
(pages 221 to 226).
We consider the valuation of the best estimate liabilities, risk adjustment and Contractual Service Margin (CSM) included in determining the
insurance contract assets and liabilities at each reporting date to be a fraud risk, due to the risk of management bias and override along with the
significant level of judgement involved in relation to uncertain future events which could be susceptible to misstatement as a result of intentional acts
by management. Assumptions are both internal and external to the business, and small changes can result in a material impact to the resultant valuation.
Consistent with previous periods, we have split the risks relating to the valuation of insurance contract assets and liabilities into component parts.
However, this year we have removed the significant risk around actuarial data used within the valuation models because the data itself is not
inherently complex or subject to judgment.
The specific audit procedures performed to address the significant risk are set out below. In addition, we corroborated management’s analysis of
movements in insurance contract assets and liabilities by obtaining evidence to support large or unexpected movements as this provided
important audit evidence over the valuation of insurance contract assets and liabilities.
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Actuarial assumptions (Group)
Refer to the Audit Committee Report
(page 98).
Economic assumptions are set by
management taking into account
market conditions as at the valuation
date. 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 have
historically determined to have the
most significant impact are the base
and trend longevity, persistency,
assured mortality and expenses.
Under IFRS 17 these assumptions
continue to be important.
Given the recent economic volatility
we continue to place additional focus
on future economic assumptions such
as inflation assumptions at the 2023
year-end date.
Additionally, the introduction of IFRS 17
has increased the importance of
economic assumptions, in particular
the setting of discount rates.
Finally, IFRS 17 explicitly requires that
a risk adjustment (‘RA’) be included
above the best estimate cashflows
within the liability for incurred claims.
IFRS 17 does not specify the
estimation technique that should be
used to determine the risk adjustment,
so management must develop an
appropriate estimation technique.
Therefore, due to the inherent
judgment required to determine both
an appropriate technique and the
relevant inputs, we consider the RA
to be susceptible to management bias.
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;
• determined whether the methodology and assumptions applied are
appropriate by comparing it to our knowledge of ’industry standards
and the Groups’ regulatory and financial reporting requirements;
• corroborated the results of management’s experience analysis,
including the base longevity, persistency and assured mortality,
to agree whether these justified the adopted assumptions;
• evaluated and corroborated the methodology used in determining
the discount rate applied;
• discussed management’s decisions on the inclusion or exclusion of
data from the period impacted by COVID-19 when setting individual
assumptions, including longevity, mortality, morbidity and persistency;
• evaluated the results of management’s analysis with respect to longevity
improvements using the results from the industry standard Continuous
Mortality Investigation (‘CMI’) on longevity trend, and benchmarked
the output against other industry participants;
• benchmarked the significant assumptions against those of other
comparable industry participants;
• performed procedures to test that the assumptions used in the year
end valuation are consistent with the approved basis; and
• corroborated the expense assumptions adopted by management
considering an impact of the recent economic volatility (including
inflation), the impact of the increase in volumes of new insurance
business written and the inclusion of benefits arising from planned
future management actions.
We determined that the
actuarial assumptions
and risk adjustment used
by management are
reasonable based on the
analysis of experience to
date, industry practice
and the financial and
regulatory requirements.
Independent auditor’s report continued
155Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Actuarial modelling (Group)
Refer to Audit Committee Report
(page 98).
We consider the integrity
and appropriateness of models
to be critical to the overall
valuation of insurance contract
assets and liabilities.
The majority of 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) the appropriateness of the core
actuarial model;
ii) model developments applied to
the core actuarial models; and
iii) the appropriateness of out of
model adjustments and the
movement of the out of model
adjustments to core actuarial
modelling systems.
In addition, the migration of a portion
of the ReAssure business to a new
actuarial model was a key risk area for
2023, as was the transition to IFRS 17
which is discussed in the Key Audit
Matter below.
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 (including the
governance over model change);
• tested the IT general controls of the core actuarial models;
• evaluated and corroborated the methodology, inputs and assumptions
applied to model changes made in the core actuarial modelling systems
over the year;
• with respect to the migration of ReAssure business onto a new model
we tested management’s migration process with a focus on both the
robustness of the outputs and ensuring that the differences between
current and previous models were understood;
• validated the results of management’s analysis of movements in insurance
contract assets and 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, presented 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
validated the appropriateness of the applied calculation methodology.
In addition, we also performed an independent valuation of a sample of
insurance contract assets and 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
assets and liabilities
using the core actuarial
modelling systems were
operating effectively.
We also determined
that liabilities modelled
outside these core
actuarial modelling
systems are reasonable.
156 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Revenue recognition (Valuation
of Contractual Service Margin
(‘CSM’), and it’s subsequent release)
(Group) £409m (2022: £386m)
Refer to the Critical accounting
estimates (pages 177 to 178);
Accounting policies and note C1
of the consolidated financial
statements (pages 185 to 186).
At initial recognition, the CSM
relates to the unearned profit
under insurance contracts issued.
As services are provided under the
terms of these contracts, the CSM
is released to the Statement of
Comprehensive Income, reflecting
the profit relating to services
performed in the period.
There is a high degree of
complexity and estimation involved
in deriving the release patterns.
Additionally, it is necessary to
consider whether each contract
group is onerous, resulting in a
charge to the income statement.
To obtain sufficient audit evidence to conclude on the appropriateness
of revenue recognition, we engaged our actuaries as part of our audit
team and performed the following procedures:
• performed walkthroughs of the process implemented by management
to determine the CSM (including both the derivation of the source data,
input of the data into the CSM model and output from the model) and
tested the design and operating effectiveness of key controls;
• compared the appropriateness of evaluated the methodology proposed
by management for the used to determine coverage units and tested the
appropriateness of the release of the CSM to the consolidated income
statement and tested the appropriateness of the coverage units;
• leveraged our audit of the CSM at each statement of consolidated
financial position date to confirm that amounts released to the
consolidated income statement was reasonable and in line with
requirements of the standard;
• performed analytical procedures to identify unusual release patterns
and discussed these with management to understand and validate the
appropriateness of their selection;
• validated the actual and projected cashflows which are input into the
model on a sample basis by vouching back to source information; and
• substantively tested management’s assessment of onerous contracts to
confirm the completeness of those contracts designated as onerous and
ensure they have been calculated accurately.
Based on our
procedures performed
we are satisfied that
revenue has been
recognised in-line
with the requirements
of IFRS17.
Independent auditor’s report continued
157Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Valuation of certain complex and
illiquid financial investments
(Group) (Equity release mortgages
£4.5bn; 2022: £3.9bn); (Modelled
debt securities £8.2bn; 2022: £6.4bn)
Refer to the Audit Committee Report
(page 99); Critical accounting
estimates (page 178); Accounting
policies and notes E1 and E2 of the
consolidated financial statements
(pages 195 to 205).
There has been no change in
our assessment of this risk from
the prior year.
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 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.
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;
• corroborated 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:
• obtained the ISAE 3402 SOC report of the OSPs covering the period
to 30 September 2023, 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 2023 to 31
December 2023 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 Limited and ReAssure Limited components
and validated 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 test 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 compared 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
• discussed 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.
158 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Recoverability of intangibles from
the historical acquisitions of SLAL,
ReAssure and other associated
entities (Group) (AVIF £1.9bn;
2022: £2.2bn)
Refer to the Audit committee report
(page 99), the accounting policies and
note G2 of the consolidated financial
statements (pages 260 to 262)
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.
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:
• obtained and understood management’s process, model and assumptions
supporting the recoverability assessment;
• tested design and implementation of the controls over the completeness
and accuracy of the data used in the recoverability assessment;
• validated management’s assessment of impairment indicators by
considering current market factors and evaluated their impact on the
ReAssure and Standard Life AVIF values as at 31 December 2023; and
• obtained management’s expectations of future profitability of the
acquired entities and validated the assumptions applied by management
by comparing key assumptions and judgments with experience of the
wider market and that of Phoenix.
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 2023.
Independent auditor’s report continued
159Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Transition to IFRS 17 Insurance
contracts, including the selection
and application of accounting
policies and financial statement
and other disclosures (Group)
Refer to the Audit Committee Report
(page 98); Accounting policy note
A2.1 of the consolidated financial
statements (pages 172 to 174).
The transition to IFRS 17, the new
insurance accounting standard,
effective for annual reporting periods
beginning on or after 1 January 2023,
has resulted in significant change to
the Group’s reporting processes and
consolidated financial statements.
IFRS 17 has introduced new financial
statement line items and disclosures
and has required significant changes
to the measurement of insurance
contract assets and liabilities.
This has also resulted in the additional
disclosure of the transition Statement
of consolidated financial position as at
1 January 2022 and the restatement
of the comparative Statement of
consolidated financial position and
Statement of comprehensive income
for 2022. New systems, data flows,
system interfaces and models have
been implemented, increasing the
risks of material misstatement.
We consider the key risks in relation to
the implementation of IFRS 17 include:
i) the risk of management’s
methodology and
assumptions being out
of line with the standard;
ii) the risk of management’s
transition approach (including
use of the Full Retrospective or
Fair Value Approach) being out
of line with the standard;
iii) the implementation of new
models to produce the IFRS 17
results, including the CSM
calculation engine;
iv) the new data flows and system
interfaces arising from the
implementation of IFRS 17; and
v) the risk of management’s
application of units of account
being inappropriate.
To obtain sufficient audit evidence to conclude on the transition
to IFRS 17, we:
• tested the design and implementation of key controls implemented
by management over the transition;
• assessed the appropriateness of the transition approach adopted
for each group of insurance contracts, including the judgements and
supporting estimates used to determine the Full Retrospective
Approach or Fair Value Approach, as applicable;
• assessed whether the judgements, methodology and assumptions applied
by management in determining their accounting policies, including
simplifications, are in compliance with the IFRS 17 accounting standard
and have been implemented as intended;
• confirmed on a sample basis that the criteria used by management
in determining the units of account were in line with the requirements
of IFRS 17 and had been applied as intended;
• validated the integrity of new models implemented on transition by
considering the testing performed by management and, where necessary,
performing independent model validation activity on a sample basis,
comparing the output between our calculations and those produced
by management;
• tested the completeness and accuracy of new data flows and system
interfaces incorporated within the IFRS 17 production process; and
• corroborated the completeness of management’s estimate of the
impact of implementing IFRS 17 on equity and profit before tax.
Through the procedures
performed, we have
determined that
management have
appropriately
implemented the IFRS 17
Insurance contracts
accounting standard
within their financial
reporting and this is
reflected within the
transition Statement of
consolidated financial
position as at 1 January
2022 and the
restatement of the
comparative Statement
of consolidated financial
position and Statement
of comprehensive
income for 2022
incorporated within
the consolidated
financial statements.
160 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Risk area Our response to the risk Key observations
communicated to the
Audit Committee
Recoverability of the Parent
Company’s investments in Group
undertakings (Company)
Refer to the Parent Company
accounting policy on Investments
in Group entities (page 294) and
the Parent Company’s financial
statements – Investments in Group
entities (page 301).
The carrying amount of the Parent
Company’s investments in subsidiaries
is significant and in excess of the
market capitalisation of the Group.
This gives rise to an indicator of
impairment. The estimated recoverable
amount of these balances is subjective
due to the inherent uncertainty in
forecasting trading conditions and
discounting future cash flows. The
effect of these matters is that, as part
of our risk assessment, we determined
that the recoverable amount of
investment in subsidiaries has a high
degree of estimation uncertainty.
Under IAS 36 the recoverable amount
is the higher of value in use (‘VIU’)
and fair value less costs of disposal
(‘FVLCD’) and calculating both the
VIU and the FVLCD is not necessary
if either of these amounts exceeds the
asset’s carrying amount. Management
calculated a VIU which exceeded the
carrying amount of the investment
at year end, indicating no impairment
is required.
We performed the following audit procedures related to the recoverability of
the parent company’s investments in group undertakings:
• tested the reasonableness and appropriateness of the assumptions used
in the cash flows based on our knowledge of the Group and the markets
in which the subsidiaries operate;
• evaluated and corroborated the methodology used in determining the
discount rate applied, including engaging our valuation experts to assess
the appropriateness of the inputs into the discount rate;
• obtained management’s assessment of the terminal value and validated the
assumptions applied by management by comparing key assumptions and
judgments with experience of the wider market and that of Phoenix; and
• evaluated the adequacy of the Company’s disclosures.
Based on the work
performed and the
evidence obtained, we
consider the carrying
amount of the company’s
investments in Group
entities to be appropriate.
Independent auditor’s report continued
161Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
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 £93 million
(2022: £83 million), which is 2% of Group IFRS adjusted shareholders’
equity (2022: 2% of total equity attributable to owners of the Parent).
Prior to the implementation of IFRS 17, we set materiality at 2%
of equity attributable to owners of the Parent on the basis that
it most closely correlated with key Group performance metrics
of Solvency II surplus and Own Funds.
Under IFRS 17, revenue and profit recognition of day 1 gains on
annuity contracts is deferred into recognition at a point in the future,
by being added to the contractual service margin (‘CSM’). This has
seen the development of an APM, IFRS adjusted shareholder equity
(“Adjusted Equity”) across the UK life insurance industry. Whilst this
is an APM, it is the addition of two IFRS measures from the IFRS
Statement of financial position. These considerations have led us
to conclude that Adjusted Equity is the most appropriate measure
on which to base our materiality under IFRS 17 since this measure
is the closest IFRS measure to Solvency II Own Funds.
We determined materiality for the Parent Company to be £131 million
(2022: £139 million), which is 2% (2022: 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. 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 – £2.50bn (Total equity attributable to parent)
• Based on 31 December 2023
• Addition of CSM – net of tax £2.14bn
• Totals £4.64bn (Adjusted equity)
• Materiality of £93m (2% of Adjusted equity)
Starting
basis
Adjustments
Materiality
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% (2022: 50%) of our planning
materiality, namely £46 million (2022: £41 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 £10 million to
£36 million (2022: £8 million to £27 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 £5 million
(2022: £4 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 324, 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.
162 Phoenix Group Holdings plc Annual Report and Accounts 2023
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 143;
• 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 58;
• 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 59;
• Directors’ statement on fair, balanced and understandable set
out on page 145;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 57;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems
set out on page 97; and;
• The section describing the work of the audit committee set out
on page 92 to 99.
Responsibilities of Directors
As explained more fully in the Directors’ statement of responsibilities
set out on page 147, 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 most significant are 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’).
• 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.
Independent auditor’s report continued
163Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
• The fraud risk was considered to be higher within the valuation
of insurance contract assets and 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;
– 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.
• 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 https://www.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 year ending 31 December 2018 and
subsequent financial periods.
The period of total uninterrupted engagement including previous
renewals and reappointments is six years, covering the years
ending 31 December 2018 to 31 December 2023.
• 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
22 March 2024
Financials
Consolidated income statement
For the year ended 31 December 2023
2023
| 2022 | |||
| restated | |||
Notes | £m | £m | |
Insurance revenue | C1 | ||
Insurance service expenses | C5 | ( | ( |
Insurance service result before reinsurance contracts | ( | ||
Net expenses from reinsurance contracts | ( | ( | |
Insurance service result | C5 | ( | |
Fees and commissions | C2 | ||
Net investment income/(expense) | C3 | ( | |
Other operating income | |||
Gain on acquisition | H2 | ||
Total income/(expense) | ( | ||
Net finance (expense)/income from insurance contracts | C4 | ( | |
Net finance income/(expense) from reinsurance contracts | C4 | ( | |
Net insurance finance (expense)/income | ( | ||
Change in investment contract liabilities | ( | ||
Change in reinsurers’ share of investment contract liabilities | ( | ||
Amortisation and impairment of acquired in-force business | G2 | ( | ( |
Amortisation of other intangibles | G2 | ( | ( |
Administrative expenses | C5 | ( | ( |
Net (expense)/income attributable to unitholders | ( | ||
Profit/(loss) before finance costs and tax | ( | ||
Finance costs | C7 | ( | ( |
Profit/(loss) for the year before tax | ( | ||
Tax (charge)/credit attributable to policyholders’ returns | C8 | ( | |
Loss before the tax attributable to owners | ( | ( | |
Tax (charge)/credit | C8 | ( | |
Add: tax attributable to policyholders’ returns | C8 | ( | |
Tax credit attributable to owners | C8 | ||
Loss for the year attributable to owners | ( | ( | |
| Attributable to: | |||
Owners of the parent | ( | ( | |
Non-controlling interests | D5 | ||
( | ( | ||
| Earnings per ordinary share | |||
Basic (pence per share) | B3 | ( | ( |
Diluted (pence per share) | B3 | ( | ( |
1
1 Prior period comparatives have been restated on transition to IFRS 17
Insurance Contracts
(see note A2.1 for further details).
Phoenix Group Holdings plc Annual Report and Accounts 2023164
Financials
Notes 2023
| 2022 | |||
| restated | |||
Loss for the year | ( | ( | |
| Other comprehensive (expense)/income: | |||
| Items that are or may be reclassified to profit or loss: | |||
| Cash flow hedges: | |||
Fair value (losses)/gains arising during the year | D3 | ( | |
Reclassification adjustments for amounts recognised in profit or loss | D3 | ( | |
Exchange differences on translating foreign operations | |||
| Items that will not be reclassified to profit or loss: | |||
Remeasurement of owner-occupied property | D3 | ( | |
Remeasurements of net defined benefit asset/liability | G1 | ( | |
Tax credit/(charge) relating to other comprehensive income items | C8 | ( | |
Total other comprehensive (expense)/income for the year | ( | ||
Total comprehensive expense for the year | ( | ( | |
| Attributable to: | |||
Owners of the parent | ( | ( | |
Non-controlling interests | D5 | ||
( | ( |
1
1 Prior period comparatives have been restated on transition to IFRS 17
Insurance Contracts
(see note A2.1 for further details).
Statement of comprehensive income
For the year ended 31 December 2023
Phoenix Group Holdings plc Annual Report and Accounts 2023 165
Financials
Statement of consolidated financial position
As at 31 December 2023
Notes
31 December 2023
£m
| 31 December 2022 | 1 January 2022 | |||
| restated | restated | |||
| £m | £m | |||
| ASSETS | ||||
Pension scheme asset | G1 | |||
Reimbursement rights | G1 | |||
| Intangible assets | ||||
Goodwill | ||||
Acquired in-force business | ||||
Brands | ||||
G2 | ||||
Property, plant and equipment | G3 | |||
Investment property | G4 | |||
| Financial assets | ||||
Loans and deposits | ||||
Derivatives | E3 | |||
Equities | ||||
Investment in associate | H4 | |||
Debt securities | ||||
Collective investment schemes | ||||
Reinsurers' share of investment contract liabilities | ||||
| Insurance assets | E1 | |||
Insurance contract assets | F1 | |||
Reinsurance contract assets | F1 | |||
Deferred tax asset | G8 | |||
Current tax receivable | G8 | |||
Prepayments and accrued income | ||||
Other receivables | G5 | |||
Cash and cash equivalents | G6 | |||
Assets classified as held for sale | H3 | |||
Total assets |
1
1
1 Prior period comparatives have been restated on transition to IFRS 17 Insurance Contracts (see note A2.1 for further details).
Approved by the Board on 21 March 2024.
Andy Briggs Rakesh Thakrar
Chief Executive Officer Chief Financial Officer
Company registration number 11606773.
Phoenix Group Holdings plc Annual Report and Accounts 2023166
Financials
Notes
31 December 2023
£m
| 31 December 2022 | 1 January 2022 | |||
| restated | restated | |||
| £m | £m | |||
| EQUITY AND LIABILITIES | ||||
| Equity attributable to owners of the parent | ||||
Share capital | D1 | |||
Share premium | ||||
Shares held by employee benefit trust | D2 | ( | ( | ( |
Foreign currency translation reserve | ||||
Merger relief reserve | D1 | |||
Other reserves | D3 | |||
Retained earnings | ||||
Total equity attributable to owners of the parent | ||||
Tier 1 Notes | D4 | |||
Non-controlling interests | D5 | |||
Total equity | ||||
| Liabilities | ||||
Pension scheme liability | G1 | |||
| Insurance liabilities | ||||
Insurance contract liabilities | F1 | |||
Reinsurance contract liabilities | F1 | |||
| Financial liabilities | ||||
Investment contracts | ||||
Borrowings | E5 | |||
Derivatives | E3 | |||
Net asset value attributable to unitholders | ||||
Obligations for repayment of collateral received | ||||
E1 | ||||
Provisions | G7 | |||
Deferred tax liabilities | G8 | |||
Current tax payable | G8 | |||
Lease liabilities | G9 | |||
Accruals and deferred income | G10 | |||
Other payables | G11 | |||
Liabilities classified as held for sale | H3 | |||
Total liabilities | ||||
Total equity and liabilities |
1
1
1 Prior period comparatives have been restated on transition to IFRS 17
Insurance Contracts
(see note A2.1 for further details).
Phoenix Group Holdings plc Annual Report and Accounts 2023 167
Financials
Statement of consolidated changes in equity
For the year ended 31 December 2023
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 2023 | ( | ||||||||||
(Loss)/profit for the year | ( | ( | ( | ||||||||
Other comprehensive income/(expense) for theyear | ( | ( | ( | ( | |||||||
Total comprehensive income/(expense) for theyear | ( | ( | ( | ( | |||||||
| Issue of ordinary share | |||||||||||
| capital, net of associated | |||||||||||
commissions and expenses | |||||||||||
Dividends paid on ordinaryshares | ( | ( | ( | ||||||||
Dividends paid to non- controlling interests | ( | ( | |||||||||
Credit to equity for equity-settled share- basedpayments | |||||||||||
Shares distributed by the employee benefit trust | ( | ||||||||||
Shares acquired by the employee benefit trust | ( | ( | ( | ||||||||
| Coupon paid on Tier 1 | |||||||||||
Notes, net of tax relief | ( | ( | ( | ||||||||
At 31 December 2023 | ( |
1
1 There has been no impact on equity from the transition to IFRS 9
Financial Instruments
(see note A2.2 for further details).
Phoenix Group Holdings plc Annual Report and Accounts 2023168
Financials
Statement of consolidated changes in equity
For the year ended 31 December 2022
Shares held
Foreign
by
currency
Merger
Non-
Share
Share
employee
translation
relief
Other
Retained
controlling
capital
premium
benefit trust
reserve
reserve
reserves
earnings
Tier 1 Notes
interests
Total equity
(note D1)
(note D1)
(note D2)
restated
1
(note D1)
(note D3)
restated
1
Total
(note D4)
(note D5)
restated
1
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
| At 1 January 2022 | |||||||||||||||||
(asreported) | ( | ||||||||||||||||
Impact of transition to IFRS17 (note A2.1) | ( | ( | ( | ( | |||||||||||||
At 1 January 2022 (restated) | ( | ||||||||||||||||
(Loss)/profit for the year | ( | ( | ( | ||||||||||||||
Other comprehensive income/(expense) for the year | ( | ||||||||||||||||
Total comprehensive income/(expense) for theyear | ( | ( | ( | ( | |||||||||||||
| Issue of ordinary share | |||||||||||||||||
| capital, net of associated | |||||||||||||||||
commissions and expenses | |||||||||||||||||
Dividends paid on ordinaryshares | ( | ( | ( | ||||||||||||||
Dividends paid to non- controlling interests | ( | ( | |||||||||||||||
Credit to equity for equity-settled share | |||||||||||||||||
basedpayments | |||||||||||||||||
Shares distributed by employee benefit trust | ( | ||||||||||||||||
Shares acquired by employee benefit trust | ( | ( | ( | ||||||||||||||
| Non-controlling interests | |||||||||||||||||
recognised on acquisition | |||||||||||||||||
| Coupon paid on Tier 1 | |||||||||||||||||
Notes, net of tax relief | ( | ( | ( | ||||||||||||||
At 31 December 2022 | ( |
1 Prior period comparatives have been restated on transition to IFRS 17
Insurance Contracts
(see note A2.1 for further details).
Phoenix Group Holdings plc Annual Report and Accounts 2023 169
Financials
Statement of consolidated cash flows
For the year ended 31 December 2023
Notes
| 2023 | 2022 | ||
| £m | £m | ||
| Cash flows from operating activities | |||
Cash (utilised)/generated by operations | I2 | ( | |
Taxation paid | ( | ( | |
Net cash flows from operating activities | ( | ||
| Cash flows from investing activities | |||
Acquisition of SLF of Canada UK Limited, net of cash acquired | H2 | ( | |
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 | ( | ( |
Dividends paid to non-controlling interests | D5 | ( | ( |
Repayment of policyholder borrowings | E5.2 | ( | ( |
Repayment of shareholder borrowings | E5.2 | ( | ( |
Repayment of lease liabilities | G9 | ( | ( |
Proceeds from new shareholder borrowings, net of associated expenses | E5.2 | ||
Proceeds from new policyholder borrowings, net of associated expenses | E5.2 | ||
Coupon paid on Tier 1 Notes | ( | ( | |
Interest paid on policyholder borrowings | ( | ( | |
Interest paid on shareholder borrowings | ( | ( | |
Net cash flows from financing activities | ( | ( | |
Net decrease in cash and cash equivalents | ( | ( | |
| 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 | H3 | ( | ( |
Cash and cash equivalents at the end of the year |
Phoenix Group Holdings plc Annual Report and Accounts 2023170
Financials
Notes to the consolidated financial statements
Phoenix Group Holdings plc Annual Report and Accounts 2023 171
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023172
A. Significant accounting policies continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 173
| Derecognition of intangible | On adoption of IFRS 17, the acquired in force business (‘AVIF’) and customer relationship | (2,030) | |
| assets related to contracts | intangibles and deferred acquisition cost assets associated with the acquisition of insurance | ||
| measured under IFRS 17 | contracts are no longer held as separate assets and instead are included implicitly in the | ||
| measurement of insurance contract assets and liabilities. | |||
| Remeasurement of | The remeasurement of insurance contract liabilities primarily includes the following items: | 5,481 | |
| insurance contract liabilities | • | removal of IFRS 4 margins as IFRS 17 requires cash flows to be measured on a best estimate | |
| (netof reinsurance) | basis with the addition of an explicit adjustment for risk; | ||
• | inclusion of future shareholder profits from with-profit and unit-linked business that are not | ||
| fully recognised under IFRS 4; and | |||
• | changes in the discount rate, most materially impacting annuity contracts. | ||
| Also included is the impact of a change in treatment in respect of hybrid contracts. These are | |||
| typically contracts which contain elements of unit-linked and with-profits. Under IFRS 4 these | |||
| components were separated and reported under IAS 39 and IFRS 4 respectively. Under IFRS | |||
| 17 if the contract as a whole meets the definition of an investment with DPF contract, the whole | |||
| contract falls within the scope of IFRS 17 unless the criteria for a distinct investment component | |||
| is met. If it does not, the whole contract falls within the scope of IFRS 9. On transition a | |||
| significant proportion of the Group’s hybrid contracts were determined to fall within the scope | |||
| of IFRS 17 and did not meet the criteria to be separated into its components. A small portion of | |||
| hybrid contracts are accounted for under IFRS 9. | |||
| Recognition of a risk adjustment | IFRS 17 requires an explicit adjustment in respect of non-financial risk, this replaces some of the | (1,061) | |
| (net of reinsurance) | margins for uncertainty implicitly included in the measurement of cash flows under IFRS 4. | ||
| Recognition of a | The contractual service margin reflects the unearned profit to be recognised in profit or loss as | (2,430) | |
| contractual service margin | services are provided. | ||
| (net of reinsurance) | |||
| Changes in deferred tax | (8) | ||
| from the above items | |||
| Change in total equity | (48) | ||
attributable to owners of the parent | |||
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023174
| 31 December 2021 | Impact of | ||
| as previously | implementation of | 1 January 2022 | |
| reported £m | IFRS 17 £m | restated £m | |
Intangible assets | 4,565 | (1,928) | 2,637 |
Financial assets | 293,192 | (31) | 293,161 |
Insurance contract assets | – | 65 | 65 |
Reinsurance contract assets | 8,587 | (3,867) | 4,720 |
Other insurance/reinsurance receivables | 139 | (139) | – |
Other assets | 27,316 | (131) | 27,185 |
Total assets | 333,799 | (6,031) | 327,768 |
Insurance contract liabilities | 128,864 | 3,633 | 132,497 |
Unallocated surplus | 1,801 | (1,801) | – |
| Financial liabilities | |||
Investment contracts | 160,417 | (2,968) | 157,449 |
Deposits received from reinsurers | 3,569 | (3,569) | – |
Provisions | 235 | (51) | 184 |
Deferred tax liabilities | 1,399 | 8 | 1,407 |
Other insurance/reinsurance payables | 2,007 | (2,007) | – |
Other liabilities | 28,738 | 772 | 29,510 |
Total liabilities | 327,030 | (5,983) | 321,047 |
Total equity | 6,769 | (48) | 6,721 |
| As previously | |||
| reported | Restated | Change | |
| £m | £m | £m | |
Adjusted operating profit before tax | 1,245 | 544 | (701) |
Economic variances | (2,673) | (3,309) | (636) |
Amortisation and impairment of acquired in-force business | (501) | (347) | 154 |
Amortisation and impairment of other intangibles | (21) | (6) | 15 |
Other non-operating items | (179) | (262) | (83) |
Finance costs attributable to owners | (199) | (199) | – |
Loss before tax attributable to owners of the parent | (2,328) | (3,579) | (1,251) |
Profit before tax attributable to non-controlling interest | 67 | 67 | – |
Loss before tax attributable to owners | (2,261) | (3,512) | (1,251) |
Tax credit attributable to owners | 499 | 855 | 356 |
Loss after tax attributable to owners | (1,762) | (2,657) | (895) |
A. Significant accounting policies continued
A2.1.2 Impact of transition continued
Loss attributable to owners for the year ended 31 December 2022 continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 175
IAS 39 | IFRS 9 | |||
| Carrying amount | Carrying amount | |||
Financial assets | Measurement category | £m | Measurement category | £m |
| Loans and deposits | Amortised cost | 254 | FVTPL | 254 |
| Cash and cash equivalent | Amortised cost | 8,423 | FVTPL | 8,423 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023176
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 | Amount is written off |
| and the Group has no realistic prospect of recovery |
A3. Accounting policies
The principal accounting policies have been consistently applied in these consolidated financial statements. An exception to this is where IFRS 9
has been adopted prospectively from 1 January 2023 and IAS 39 has been applied in the comparative period. Where an accounting policy can
be directly attributed to a specific note to the consolidated financial statements, the policy is presented within that note, with a view to enabling
greater understanding of the results and financial position of the Group. All other significant accounting policies are disclosed below.
A. Significant accounting policies continued
A2.2.2 Impairment continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 177
Type of business/products | Coverage unit (quantity of benefits) |
| Term life assurance | Sum assured in force |
| Endowment | |
| Non-participating whole-life | |
| Other protection products | |
Immediate annuity | Annuity payments |
Deferred annuity | Fund size during deferred period and annuity payments for the |
| payment period | |
Unit linked | Annual management charge and insurance charges |
Conventional with-profits (‘CWP’) & Unitised with-profits (‘UWP’) | Maximum of the guaranteed benefit and asset share |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023178
A. Significant accounting policies continued
A4.1 Insurance contract and investment contract with DPF liabilities continued
Amortisation of the CSM continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 179
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023180
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 181
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023182
| 2022 | |||
| 2023 | restated | ||
| Notes | £m | £m | |
| Adjusted operating profit | |||
Retirement Solutions | 378 | 349 | |
Pensions & Savings | 190 | 150 | |
With-Profits | 10 | 54 | |
Europe & Other | 132 | 60 | |
Corporate Centre | (93) | (69) | |
Total segmental adjusted operating profit | 617 | 544 | |
Economic variances | B2.2 | 147 | (3,309) |
Amortisation and impairment of acquired in-force business | (316) | (347) | |
Amortisation and impairment of other intangibles and goodwill | G2 | (6) | (6) |
Other non-operating items | (439) | (262) | |
Finance costs on borrowing attributable to owners | (195) | (199) | |
Loss before the tax attributable to owners of the parent | (192) | (3,579) | |
Profit before tax attributable to non-controlling interests | 28 | 67 | |
Loss before the tax attributable to owners | (164) | (3,512) |
B. Earnings performance continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 183
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Revenue from external customers: | |||||
Insurance revenue | 3,751 | 272 | 267 | 571 | 4,861 |
Fees and commissions | – | 828 | 52 | 87 | 967 |
Total segmental revenue | 3,751 | 1,100 | 319 | 658 | 5,828 |
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
2022 restated 1 | £m | £m | £m | £m | £m |
| Revenue from external customers: | |||||
Insurance revenue | 3,544 | 307 | 636 | 655 | 5,142 |
Fees and commissions | – | 733 | 35 | 90 | 858 |
Total segmental revenue | 3,544 | 1,040 | 671 | 745 | 6,000 |
| 2023 | 2022 | |
| % | % | |
Equities | 7.4 | 4.6 |
Properties | 4.1 | 3.7 |
Debt securities | 4.9 | 1.7 |
| 2023 | 2022 | |
| £m | £m | |
Economic variances | 147 | (3,309) |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023184
| Adjusted operating | Other | ||||
| earnings net of | non-operating | ||||
| financing costs | items | Total | |||
| £m | £m | £m | |||
Profit/(loss) before the tax attributable to owners | 617 | (195) | 422 | (586) | (164) |
Tax (charge)/credit attributable to owners | (119) | 46 | (73) | 149 | 76 |
Profit/(loss) for the year attributable to owners | 498 | (149) | 349 | (437) | (88) |
Coupon paid on Tier 1 notes, net of tax relief | – | (22) | (22) | – | (22) |
Deduct: Share of result attributable to non-controlling interests | – | – | – | (28) | (28) |
| Profit/(loss) for the year attributable to ordinary equity | |||||
holders of the parent | 498 | (171) | 327 | (465) | (138) |
| Adjusted operating | |||||
| Adjusted | earnings net of | Other | |||
| operating profit | Financing costs | financing costs | non-operating items | Total | |
2022 (restated) 1 | £m | £m | £m | £m | £m |
Profit/(loss) before the tax attributable to owners | 544 | (199) | 345 | (3,857) | (3,512) |
Tax (charge)/credit attributable to owners | (119) | 43 | (76) | 931 | 855 |
Profit/(loss) for the year attributable to owners | 425 | (156) | 269 | (2,926) | (2,657) |
Coupon paid on Tier 1 notes, net of tax relief | – | (22) | (22) | – | (22) |
Deduct: Share of result attributable to non-controlling interests | – | – | – | (67) | (67) |
| Profit/(loss) for the year attributable to ordinary equity | |||||
holders of the parent | 425 | (178) | 247 | (2,993) | (2,746) |
| 2023 | 2022 | |
| Number | Number | |
| million | million | |
Issued ordinary shares at beginning of the year | 1,000 | 1,000 |
Effect of ordinary shares issued | 1 | – |
Effect of non-contingently issuable shares in respect of Group's long-term incentive plan | 2 | 1 |
Own shares held by the employee benefit trust | (2) | (2) |
Weighted average number of ordinary shares | 1,001 | 999 |
| 2022 | ||
| 2023 | restated | |
| pence | pence | |
Basic earnings per share | (13.8) | (274.9) |
Diluted earnings per share | (13.8) | (274.9) |
Basic adjusted operating earnings net of financing costs per share | 32.7 | 24.7 |
Diluted adjusted operating earnings net of financing costs per share | 32.6 | 24.7 |
B. Earnings performance continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 185
| 2023 | 2022 | |
| £m | £m | |
Dividends declared and paid in the year | 520 | 496 |
C. Other Income Statement notes
| Retirement | Pensions & | ||||
| Solutions | Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Amounts relating to changes in liabilities for remaining coverage: | |||||
CSM recognised in period for services provided | 260 | 25 | 77 | 47 | 409 |
Change in risk adjustment for non-financial risk | 39 | 8 | 4 | 12 | 63 |
Expected incurred claims and other insurance service expenses | 3,450 | 233 | 169 | 497 | 4,349 |
Policyholder tax charges | 1 | 6 | 17 | 1 | 25 |
Amounts relating to recovery of insurance acquisition cash flows | 1 | – | – | 14 | 15 |
Insurance revenue | 3,751 | 272 | 267 | 571 | 4,861 |
| Comprising contracts measured using: | |||||
Fair value approach at transition | 1,887 | 262 | 257 | 420 | 2,826 |
Fully retrospective approach at transition and new contracts | 1,864 | 10 | 10 | 151 | 2,035 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023186
2022
| Retirement | Pensions & | ||||
| Solutions | Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Amounts relating to changes in liabilities for remaining coverage: | |||||
CSM recognised in period for services provided | 207 | 13 | 99 | 67 | 386 |
Change in risk adjustment for non-financial risk | 76 | 11 | 8 | 7 | 102 |
Expected incurred claims and other insurance service expenses | 3,260 | 300 | 546 | 564 | 4,670 |
Policyholder tax charges | – | (17) | (17) | 1 | (33) |
Amounts relating to recovery of insurance acquisition cash flows | 1 | – | – | 16 | 17 |
Insurance revenue | 3,544 | 307 | 636 | 655 | 5,142 |
| Comprising contracts measured using: | |||||
Fair value approach at transition | 1,828 | 307 | 602 | 479 | 3,216 |
Fully retrospective approach at transition and new contracts | 1,716 | – | 34 | 176 | 1,926 |
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
Fee income from investment contracts without DPF | – | 814 | 52 | 60 | 926 |
Initial fees deferred during the year | – | – | – | (9) | (9) |
Revenue from investment contracts without DPF | – | 814 | 52 | 51 | 917 |
Other revenue from contracts with customers | – | 14 | – | 36 | 50 |
Fees and commissions | – | 828 | 52 | 87 | 967 |
| Retirement | |||||
| 2022 | Solutions | Pensions & Savings | With-Profits | Europe & Other | Total |
| restated | £m | £m | £m | £m | £m |
Fee income from investment contracts without DPF | – | 727 | 35 | 72 | 834 |
Initial fees deferred during the year | – | – | – | (9) | (9) |
Revenue from investment contracts without DPF | – | 727 | 35 | 63 | 825 |
Other revenue from contracts with customers | – | 6 | – | 27 | 33 |
Fees and commissions | – | 733 | 35 | 90 | 858 |
C. Other Income Statement notes continued
C1. Insurance Revenue continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 187
| 2022 | ||
| 2023 | restated | |
| £m | £m | |
| Investment income | ||
Interest income on financial assets at amortised cost | 37 | 21 |
Interest income on financial assets at FVTPL | 3,901 | 2,888 |
Dividend income | 5,923 | 5,409 |
Rental income | 324 | 343 |
Net interest expense on Group defined benefit pension scheme (liability)/asset | (109) | (64) |
10,076 | 8,597 | |
| Fair value gains/(losses) | ||
| Financial assets and financial liabilities at FVTPL: | ||
Designated upon initial recognition | 11,117 | (38,539) |
Mandatorily held | 9 | (6,707) |
Investment property | (362) | (1,363) |
10,764 | (46,609) | |
Net investment income | 20,840 | (38,012) |
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Insurance contracts issued | |||||
| Changes in fair value of underlying items of direct | |||||
participating contracts | – | (581) | (629) | (376) | (1,586) |
| Group's share of changes in fair value of underlying items | |||||
or fulfilment cash flows that do not adjust the CSM | – | 10 | – | – | 10 |
Unwind of discount on fulfilment cash flows | (1,930) | (902) | (1,320) | (1,040) | (5,192) |
Interest accreted on the CSM | (62) | – | (10) | (5) | (77) |
Effect of changes in interest rates and other financial assumptions | 31 | (117) | 45 | (96) | (137) |
Insurance finance expense | (1,961) | (1,590) | (1,914) | (1,517) | (6,982) |
| Reinsurance contracts held | |||||
Unwind of discount on fulfilment cash flows | 272 | – | 47 | 6 | 325 |
Interest accreted on the CSM | 23 | – | 3 | – | 26 |
Effect of changes in interest rates and other financial assumptions | (173) | – | (5) | 6 | (172) |
Reinsurance finance income | 122 | – | 45 | 12 | 179 |
Net insurance finance expense | (1,839) | (1,590) | (1,869) | (1,505) | (6,803) |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023188
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| 2022 | £m | £m | £m | £m | £m |
| Insurance contracts issued | |||||
| Changes in fair value of underlying items of direct | |||||
participating contracts | – | 2,066 | 3,235 | 4,402 | 9,703 |
Unwind of discount on fulfilment cash flows | (698) | (9) | (144) | (8) | (859) |
Interest accreted on the CSM | (44) | – | (6) | (5) | (55) |
| Effect of changes in interest rates and other financial | |||||
assumptions | 10,328 | 8 | 2,373 | 1,182 | 13,891 |
Policyholder tax | – | (42) | (15) | 256 | 199 |
Insurance finance income | 9,586 | 2,023 | 5,443 | 5,827 | 22,879 |
| – | |||||
Reinsurance contracts held | – | ||||
Unwind of discount on fulfilment cash flows | 87 | – | 43 | 12 | 142 |
Interest accreted on the CSM | 15 | – | 3 | – | 18 |
| Effect of changes in interest rates and other financial | |||||
assumptions | (423) | – | (439) | (351) | (1,213) |
Reinsurance finance expense | (321) | – | (393) | (339) | (1,053) |
Net insurance finance income | 9,265 | 2,023 | 5,050 | 5,488 | 21,826 |
There is a close relationship between the net investment income in note C3, as it relates to assets backing contracts within the scope of IFRS 17,
and net insurance finance (expense)/income. Net investment income includes the results for all investment assets including those backing
investment contracts and surplus assets.
For Retirement Solutions the principal product is annuities. The insurance finance (expense)/income primarily reflects the unwind of the discount
rate on the liabilities. This is largely offset by the interest income earned, included within net investment income, on the assets backing the
annuity contracts which primarily consist of debt securities and equity release mortgages. Changes in the discount rates used to discount the
annuity cash flows in the measurement of the insurance contract liabilities are largely offset by changes in the fair value of the backing assets,
included in net investment income, in respect of BEL and risk adjustment.
Mismatches between net investment income and insurance finance expense arises for the following reason:
• the annuity business within the Retirement Solutions segment uses the General Model for measurement. As a result, the CSM is measured
using discount rates locked in at inception, whereas the assets backing the CSM are based on current economic assumptions.
• the discount rate for annuity business uses the Strategic Asset Allocation as set out in Note F11.2.1, and therefore insurance finance expenses
are impacted by changes to this reference portfolio where the asset mix is based on the strategic investment objectives of the Group. Net
investment income is determined with reference to the actual assets held by the Group during the reporting period.
• changes in non-economic assumptions for General Model business impacts BEL and risk adjustment using current discount rates and CSM
using locked in discount rates. This gives rise to a mismatch for which there is no corresponding item within net investment income.
For Pensions & Savings the principal products are unit-linked and hybrid contracts which contain an element of unit-linked and unitised
with-profits within a single contract. These contracts are measured primarily using the Variable Fee Approach as the amounts payable to
policyholders reflect a substantial share of the fair value returns on the backing assets. As a result the change in fair value of underlying items
within insurance finance (expense)/income will be closely matched by changes in the backing assets which are also measured at fair value.
The unwind of discount rate on cash flows within insurance finance (expenses)/income is offset by the investment income recognised in respect
of backing assets. The discount rate used for BEL and risk adjustment is determined on a bottom-up basis, as set out in note F11.2.1, based on the
liquidity characteristics of the liabilities rather than with reference to the backing assets and therefore a mismatch occurs.
For With-Profits business there are differing impacts dependent on the nature of the liabilities within the fund. For with-profit business without
guarantees the relationship between net investment income and insurance finance (expense)/income will be consistent with that for the business
within Pensions & Savings. In respect of guarantees, the value of these is typically influenced by changes in interest rates. The Group hedges its
interest rate risk in respect of these guarantees with derivatives such that the effect of changes in interest rates on guarantees within insurance
finance (expense)/income are largely offset by changes in the fair value of the derivatives used for hedging in net investment income.
For non-profit business in a with-profit fund where profits from these contracts accrue to the with-profit policyholders or to the with-profit fund
estate, the non-profit contracts and their backing assets are considered to be an underlying item of the with-profit contracts and therefore
changes in their fair value are included within insurance finance (expense)/income.
The non-profit contracts are measured based on their substance. For non-profit annuities which fall within the scope of IFRS 17, they are
measured using the IFRS 17 General Model and the treatment of the non-profit contract is consistent with the non-profit annuities within the
Retirement Solutions segment. The effect of these non-profit annuities on the income statement does not match the change in fair value
measurement used to measure their effect on the with-profit policyholders and therefore a mismatch arises. For unit-linked business which falls
within the scope of IFRS 9 it is measured in line with the Group’s accounting policy for investment contracts with this impact being taken through
‘change in investment contract liabilities’ and therefore is not included in net investment income. The assets backing the non-profit business in
the with-profit fund are typically measured at fair value with investment income and changes in fair value being included within net
investment income.
C. Other Income Statement notes continued
C4. Net finance (expense)/income from insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 189
| 2022 | ||
| 2023 | restated | |
| £m | £m | |
Claim and benefits | 1,441 | 2,290 |
(Reversal of losses)/losses on onerous insurance contracts | (22) | 531 |
Cost of retroactive cover on reinsurance contracts held | 3 | 2 |
Employee costs | 664 | 611 |
Outsourcer expenses | 308 | 247 |
Professional fees | 571 | 441 |
Commission expenses | 155 | 145 |
Office and IT costs | 260 | 172 |
Investment management expenses and transaction costs | 413 | 569 |
Direct costs of collective investment schemes | 20 | 25 |
Depreciation | 21 | 19 |
Pension past service costs | 13 | 15 |
Pension administrative expenses | 7 | 7 |
Advertising and sponsorship | 66 | 63 |
Other | 78 | 26 |
3,998 | 5,163 | |
Amounts attributed to Insurance acquisition cash flows incurred during the year | (154) | (128) |
Amortisation of insurance acquisition cash flows | 15 | 17 |
Total expenses | 3,859 | 5,052 |
| Reported within: | ||
Insurance service expenses | 4,354 | 5,248 |
| Net expenses from reinsurance contracts | (2,169) | (1,617) |
Administrative expenses | 1,674 | 1,421 |
Total expenses | 3,859 | 5,052 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023190
| 2023 | 2022 | |
| £m | £m | |
Wages and salaries | 603 | 554 |
Social security contributions | 61 | 57 |
664 | 611 | |
2023 | 2022 | |
Number | Number | |
Average number of persons employed | 7,512 | 8,165 |
| 2023 | 2022 | |
| £m | £m | |
Audit of the consolidated financial statements | 12.7 | 4.8 |
Audit of the Company’s subsidiaries | 12.9 | 10.7 |
25.6 | 15.5 | |
Audit-related assurance services | 2.8 | 2.4 |
Total fee for assurance services | 28.4 | 17.9 |
Total auditor’s remuneration | 28.4 | 17.9 |
| 2023 | 2022 | |
| £m | £m | |
| Interest expense | ||
On financial liabilities at amortised cost | 256 | 227 |
On leases | 2 | 3 |
258 | 230 | |
| Attributable to: | ||
– policyholders | 8 | 3 |
– owners | 250 | 227 |
258 | 230 |
C. Other Income Statement notes continued
C5. Expenses continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 191
| 2022 | ||
| 2023 | restated | |
| £m | £m | |
| Current tax: | ||
UK corporation tax | 28 | 36 |
Overseas tax | 110 | 86 |
138 | 122 | |
Adjustment in respect of prior years | (16) | (23) |
Total current tax charge | 122 | 99 |
| Deferred tax: | ||
Origination and reversal of temporary differences | (14) | (1,348) |
Change in the rate of UK corporation tax | (6) | (206) |
Write down/(up) of deferred tax assets | 6 | 23 |
Total deferred tax credit | (14) | (1,531) |
Total tax charge/(credit) | 108 | (1,432) |
| Attributable to: | ||
– policyholders | 184 | (577) |
– owners | (76) | (855) |
Total tax charge/(credit) | 108 | (1,432) |
| 2023 | 2022 | |
| £m | £m | |
Current tax credit | (8) | – |
Deferred tax (credit)/charge on defined benefit schemes | (13) | 283 |
(21) | 283 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023192
| 2022 | |||
| 2023 | restated | ||
| £m | £m | ||
Profit/(loss) for the year before tax | 20 | (4,089) | |
Policyholder tax (charge)/credit | (184) | 577 | |
Loss before the tax attributable to owners | (164) | (3,512) | |
| Tax credit at standard UK rate of 23.5% (2022:19%) | 1 | (39) | (668) |
| Non-taxable gains | (16) | (4) | |
Disallowable expenses | 1 | 3 | |
| Prior year tax charge/(credit) for shareholders | 12 | (7) | |
Movement on acquired in-force amortisation at rates other than 23.5% (2022: 19%) | 12 | 20 | |
| Profits taxed at rates other than 23.5% (2022: 19%) | 4 | (25) | 12 |
| Derecognition of previously recognised deferred tax assets | (39) | 10 | |
| Deferred tax rate change | (6) | (206) | |
| Current year losses not valued | 18 | (17) | |
Other | 6 | 2 | |
Owners’ tax charge/(credit) | (76) | (855) | |
Policyholder tax charge/(credit) | 184 | (577) | |
Total tax charge/(credit) for the year | 108 | (1,432) |
D. Equity
| 2023 | 2022 | |
| £m | £m | |
| Issued and fully paid: | ||
1,001.5 million ordinary shares of £0.10 each (2022: 1,000.4 million) | 100 | 100 |
| 2023 | 2023 | 2022 | 2022 | |
| Number | £ | Number | £ | |
Shares in issue at 1 January | 1,000,352,477 | 100,035,247 | 999,536,058 | 99,953,605 |
Ordinary shares issued in the year | 1,185,942 | 118,594 | 816,419 | 81,642 |
Shares in issue at 31 December | 1,001,538,419 | 100,153,841 | 1,000,352,477 | 100,035,247 |
C. Other Income Statement notes continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 193
| 2023 | 2022 | |
| £m | £m | |
At 1 January | 13 | 12 |
Shares acquired by the EBT | 14 | 13 |
Shares awarded to employees by the EBT | (12) | (12) |
At 31 December | 15 | 13 |
| Owner-occupied | |||
| property | Cash flow hedging | ||
| revaluation reserve | reserve | Total other reserves | |
2023 | £m | £m | £m |
At 1 January 2023 | – | 46 | 46 |
Other comprehensive income/(expense) for the year | 2 | (32) | (30) |
At 31 December 2023 | 2 | 14 | 16 |
| Owner-occupied | |||
| property revaluation | Cash flow hedging | ||
| reserve | reserve | Total other reserves | |
2022 | £m | £m | £m |
At 1 January 2022 | 5 | 51 | 56 |
Other comprehensive expense for the year | (5) | (5) | (10) |
At 31 December 2022 | – | 46 | 46 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023194
| 2023 | 2022 | |
| £m | £m | |
Tier 1 Notes | 494 | 494 |
| APEOT | APEOT | |
| 2023 | 2022 | |
| £m | £m | |
At 1 January | 532 | 460 |
Profit for the year | 28 | 67 |
Dividends paid | (11) | (10) |
Increase in non-controlling interests | – | 15 |
At 31 December | 549 | 532 |
| 2023 | 2022 | |
| £m | £m | |
| Statement of financial position: | ||
Financial assets | 586 | 554 |
Other assets | 10 | 12 |
Total assets | 596 | 566 |
Total liabilities | 47 | 34 |
| Income statement: | ||
Net income | 37 | 74 |
Profit after tax | 28 | 67 |
Comprehensive income | 28 | 67 |
| Cash flows: | ||
Net decrease in cash and cash equivalents | (1) | (7) |
D. Equity continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 195
E. Financial assets & liabilities
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023196
E. Financial assets & liabilities continued
E1. Fair values continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 197
| Carrying value | ||||
| Amounts due for | ||||
| settlement after 12 | ||||
| Total | months | Fair value | ||
| 2023 | £m | £m | £m | |
| Financial assets | ||||
| Financial assets mandatorily held at fair value through profit or loss (‘FVTPL’): | ||||
Loans and deposits | 231 | 4 | 231 | |
Derivatives | 2,769 | 2,338 | 2,769 | |
| Equities | 87,656 | – | 87,656 | |
| Investment in associate | (see note H4) | 349 | – | 349 |
Debt securities | 94,785 | 79,994 | 94,785 | |
| Collective investment schemes | 79,937 | – | 79,937 | |
| Reinsurers' share of investment contract liabilities | 9,700 | – | 9,700 | |
| Financial assets measured at amortised cost: | ||||
Loans and deposits | 17 | 17 | 17 | |
Total financial assets | 275,444 | 275,444 | ||
| Less amounts classified as financial assets held for sale (see note H3) | (2,498) | (2,498) | ||
Total financial assets less financial assets classified as held for sale | 272,946 | 272,946 |
| Carrying value | |||
| Amounts due for | |||
| settlement after 12 | |||
| Total | months | Fair value | |
| 2023 | £m | £m | £m |
| Financial liabilities | |||
| Financial liabilities mandatorily held at FVTPL: | |||
Derivatives | 3,344 | 2,976 | 3,344 |
| Financial liabilities designated at FVTPL upon initial recognition: | |||
Borrowings | 45 | 45 | 45 |
| Net asset value attributable to unitholders | 2,921 | – | 2,921 |
| Investment contract liabilities | 162,784 | – | 162,784 |
| Financial liabilities measured at amortised cost: | |||
Borrowings | 3,847 | 3,757 | 3,739 |
Obligations for repayment of collateral received | 1,005 | – | 1,005 |
Total financial liabilities | 173,946 | 173,838 | |
| Less amounts classified as financial liabilities held for sale (see note H3) | (4,782) | (4,782) | |
Total financial liabilities less financial liabilities held for sale | 169,164 | 169,056 |
| Carrying value | ||||
| Amounts due for | ||||
| settlement after 12 | ||||
| Total | months | Fair value | ||
2022 restated 1 | £m | £m | £m | |
| Financial assets | ||||
| Financial assets mandatorily held at FVTPL: | ||||
Held for trading – derivatives | 4,071 | 3,353 | 4,071 | |
| Financial assets designated at FVTPL upon initial recognition: | ||||
| Equities | 76,780 | – | 76,780 | |
| Investment in associate | (see note H4) | 329 | – | 329 |
Debt securities | 84,710 | 70,115 | 84,710 | |
| Collective investment schemes | 78,353 | – | 78,353 | |
| Reinsurers' share of investment contract liabilities | 9,090 | – | 9,090 | |
| Financial assets measured at amortised cost: | ||||
Loans and deposits | 268 | 89 | 268 | |
Total financial assets | 253,601 | 253,601 | ||
| Less amounts classified as financial assets held for sale (see note H3) | (4,629) | (4,629) | ||
Total financial assets less financial assets classified as held for sale | 248,972 | 248,972 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023198
| Carrying value | |||
| Amounts | |||
| due for settlement | |||
| Total | after 12 months | Fair value | |
2022 restated 1 | £m | £m | £m |
| Financial liabilities | |||
| Financial liabilities mandatorily held at FVTPL: | |||
Held for trading – derivatives | 5,879 | 5,118 | 5,879 |
| Financial liabilities designated upon initial recognition: | |||
Borrowings | 64 | 64 | 64 |
| Net asset value attributable to unitholders | 3,042 | – | 3,042 |
| Investment contract liabilities | 149,481 | – | 149,481 |
| Financial liabilities measured at amortised cost: | |||
Borrowings | 3,916 | 3,648 | 3,644 |
Obligations for repayment of collateral received | 1,706 | – | 1,706 |
Total financial liabilities | 164,088 | 163,816 | |
| Less amounts classified as financial liabilities held for sale(see note H3) | (8,316) | (8,316) | |
Total financial liabilities less financial liabilities held for sale | 155,772 | 155,500 |
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 | Amount is written off |
| and the Group has no realistic prospect of recovery |
E. Financial assets & liabilities continued
E1.1 Fair value analysis continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 199
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023200
| Level 1 | Level 2 | Level 3 | Total fair value | |
| £m | £m | £m | £m | |
| Financial assets measured at fair value | ||||
| Financial assets mandatorily held at FVTPL | ||||
Loans and deposits | – | 231 | – | 231 |
Derivatives | 139 | 2,398 | 232 | 2,769 |
Equities | 85,029 | 132 | 2,495 | 87,656 |
Investment in associate | 349 | – | – | 349 |
Debt securities | 45,529 | 35,438 | 13,818 | 94,785 |
Collective investment schemes | 76,343 | 3,193 | 401 | 79,937 |
Reinsurers' share of investment contract liabilities | 9,700 | – | – | 9,700 |
Total financial assets measured at fair value | 217,089 | 41,392 | 16,946 | 275,427 |
Less amounts classified as held for sale | (1,639) | (181) | (678) | (2,498) |
Total financial assets measured at fair value, excluding amounts classified as held for sale | 215,450 | 41,211 | 16,268 | 272,929 |
| Financial assets measured at amortised cost for which fair values are disclosed | ||||
Loans and deposits | – | 17 | – | 17 |
215,450 | 41,228 | 16,268 | 272,946 |
| Level 1 | Level 2 | Level 3 | Total fair value | |
| £m | £m | £m | £m | |
| Financial liabilities measured at fair value | ||||
| Financial liabilities designated at FVTPL | ||||
Derivatives | 152 | 2,986 | 206 | 3,344 |
| Financial liabilities designated at FVTPL upon initial recognition: | ||||
Borrowings | – | – | 45 | 45 |
Net asset value attributable to unitholders | 2,921 | – | – | 2,921 |
Investment contract liabilities | – | 162,784 | – | 162,784 |
2,921 | 162,784 | 45 | 165,750 | |
Total financial liabilities measured at fair value | 3,073 | 165,770 | 251 | 169,094 |
Less amounts classified as held for sale | – | (4,782) | – | (4,782) |
Total financial liabilities measured at fair value, excluding amounts classified as held for sale | 3,073 | 160,988 | 251 | 164,312 |
| Financial liabilities measured at amortised cost for which fair values are disclosed | ||||
Borrowings | – | 3,739 | – | 3,739 |
Obligations for repayment of collateral received | – | 1,005 | – | 1,005 |
Total financial liabilities measured at amortised cost for which fair values are disclosed | – | 4,744 | – | 4,744 |
3,073 | 165,732 | 251 | 169,056 |
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 201
| Level 1 | Level 2 | Level 3 | Total fair value | |
| £m | £m | £m | £m | |
| Financial assets measured at fair value | ||||
| Financial assets mandatorily held at FVTPL | ||||
Derivatives | 165 | 3,754 | 152 | 4,071 |
| Financial assets designated at FVTPL upon initial recognition: | ||||
Equities | 74,464 | 124 | 2,192 | 76,780 |
Investment in associate | 329 | – | – | 329 |
Debt securities | 48,151 | 25,094 | 11,465 | 84,710 |
Collective investment schemes | 75,962 | 2,079 | 312 | 78,353 |
Reinsurers' share of investment contract liabilities | 9,090 | – | – | 9,090 |
207,996 | 27,297 | 13,969 | 249,262 | |
Total financial assets measured at fair value | 208,161 | 31,051 | 14,121 | 253,333 |
Less amounts classified as held for sale | (3,661) | (179) | (789) | (4,629) |
Total financial assets measured at fair value, excluding amounts classified as held for sale | 204,500 | 30,872 | 13,332 | 248,704 |
| Financial assets measured at amortised cost for which fair values are disclosed | ||||
Loans and deposits | – | 261 | 7 | 268 |
204,500 | 31,133 | 13,339 | 248,972 | |
| Level 1 | Level 2 | Level 3 | Total fair value | |
2022 restated 1 | £m | £m | £m | £m |
| Financial liabilities measured at fair value | ||||
| Financial liabilities mandatorily at FVTPL | ||||
Derivatives | 98 | 5,538 | 243 | 5,879 |
| Financial liabilities designated at FVTPL upon initial recognition: | ||||
Borrowings | – | – | 64 | 64 |
Net asset value attributable to unitholders | 3,042 | – | – | 3,042 |
Investment contract liabilities | – | 149,481 | – | 149,481 |
3,042 | 149,481 | 64 | 152,587 | |
Total financial liabilities measured at fair value | 3,140 | 155,019 | 307 | 158,466 |
Less amounts classified as held for sale | – | (8,316) | – | (8,316) |
Total financial liabilities measured at fair value, excluding amounts classified as held for sale | 3,140 | 146,703 | 307 | 150,150 |
| Financial liabilities measured at amortised cost for which fair values are disclosed | ||||
Borrowings | – | 3,644 | – | 3,644 |
Obligations for repayment of collateral received | – | 1,706 | – | 1,706 |
Total financial liabilities measured at amortised cost for which fair values are disclosed | – | 5,350 | – | 5,350 |
3,140 | 152,053 | 307 | 155,500 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023202
| Key unobservable input value | ||||
Description | Valuation technique | Significant inputs | 2023 | 2022 |
Equities | Single broker 1 and | Single broker | N/A | N/A |
| net asset value | indicative price | |||
| Debt securities (see E2.3.1 for further details) | ||||
| Loans guaranteed by export credit agencies | DCF model | Credit spread | 78bps | 111bps |
| & supranationals | (weighted average) | (weighted average) | ||
Private corporate credit | DCF model | Credit spread | 145bps | 169bps |
| (weighted average) | (weighted average) | |||
Infrastructure loans | DCF model | Credit spread | 160bps | 220bps |
| (weighted average) | (weighted average) | |||
Loans to housing associations | DCF model | Credit spread | 139bps | 164bps |
| (weighted average) | (weighted average) | |||
Local authority loans | DCF model | Credit spread | 130bps | 137bps |
| (weighted average) | (weighted average) | |||
Equity Release Mortgage loans (‘ERM’) | DCF model and | Spread | 256bps over Sonia plus | 260bps over the IFRS |
| Black-Scholes | 36bps | reference curve | ||
| model | House price inflation | +75bps adjustment to RPI | +75bps adjustment to RPI | |
House prices | £280,316 (average) | £304,088 (average) | ||
Mortality | Average life expectancy | Average life expectancy | ||
| of a male and female | of a male and female | |||
| currently aged 75 is | currently aged 75 is | |||
| 14.1 years and 15.6 years | 14.5 years and 15.9 years | |||
| respectively | respectively | |||
| Voluntary | 190bps to 650bps | 150bps to 700bps | ||
| redemption rate | ||||
Commercial real estate loans | DCF model | Credit spread | 253bps | 253bps |
| (weighted average) | (weighted average) | |||
| Income strips | Income capitalisation | Credit spread | 613bps | 661bps |
Collective investment schemes | Net asset value | N/A | N/A | N/A |
| statements | ||||
| Borrowings | ||||
Property reversions loans (see note E5) | Internally developed | Mortality rate | 130% IFL92C15 | 130% IFL92C15 |
| model | (Female) | (Female) | ||
| 130% IML92C15 (Male) | 130% IML92C15 (Male) | |||
| House price | 3-year RPI rate plus | 3-year RPI rate plus | ||
| inflation | 75bps | 75bps | ||
Discount rate | 3-year swap rate plus | 3-year swap rate plus | ||
| 170 bps | 170 bps | |||
| Deferred possession | 370bps | 370bps | ||
| rate | ||||
| Derivative assets and liabilities | ||||
| Forward private placements, infrastructure | DCF model | Credit spread | 111bps | 145bps |
| and local authority loans | (weighted average) | (weighted average) | ||
| Longevity swaps | DCF model | Swap curve | swap curve | swap curve + 36bps |
| Equity Release Income Plan total return swap | DCF model | Credit spread | 500bps | 500bps |
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 203
| 2023 | 2022 | |
| £m | £m | |
| Unquoted corporate bonds: | ||
Loans guaranteed by export credit agencies & supranationals | 486 | 402 |
Private corporate credit | 1,829 | 1,422 |
Infrastructure loans – project finance | 1,097 | 882 |
Infrastructure loans – corporate | 1,493 | 1,175 |
Loans to housing associations | 1,186 | 691 |
Local authority loans | 932 | 596 |
Equity release mortgages | 4,486 | 3,934 |
Commercial real estate loans | 1,147 | 1,104 |
Income strips | 674 | 786 |
Bridging loans to private equity funds | 470 | 462 |
Other | 18 | 11 |
Total Level 3 debt securities | 13,818 | 11,465 |
| Less amounts classified as held for sale | (674) | (786) |
Total Level 3 debt securities excluding amounts classified as held for sale | 13,144 | 10,679 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023204
| From Level 1 to | From Level 2 to | |
| Level 2 | Level 1 | |
| £m | £m | |
| Financial assets measured at fair value | ||
| Financial assets mandatorily held at FVTPL | ||
Derivatives | – | 21 |
Equities | 10 | 12 |
Debt securities | 1,023 | 725 |
| Collective investment schemes | 1,188 | 16 |
| From Level 1 to | From Level 2 to | |
| Level 2 | Level 1 | |
| £m | £m | |
| Financial assets measured at fair value | ||
| Financial assets mandatorily held at FVTPL | ||
Derivatives | 48 | – |
| Financial assets designated at FVTPL upon initial recognition: | ||
Equities | 73 | 5 |
Debt securities | 1,478 | 1,267 |
Collective investment schemes | 28 | – |
| Unrealised | ||||||||||
| Reclassification | At | Net (losses)/ | Transfers | gains on | ||||||
| of balances on | 1 January | gains in | from | Transfers to | At | assets held | ||||
| transition to | 2023 | income | Level 1 | Level 1 and | 31 December | at end of | ||||
| IFRS 9 | (restated) | statement | Purchases | Sales | and Level 2 | Level 2 | 2023 2 | period | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Financial assets | ||||||||||
| measured at fair value | ||||||||||
| Financial assets | ||||||||||
| mandatorily held | ||||||||||
| at FVTPL: | ||||||||||
Loans and deposits | – | 7 | 7 | (1) | – | (6) | – | – | – | – |
Derivatives | 152 | – | 152 | 80 | – | – | – | – | 232 | 80 |
Equities | 2,192 | – | 2,192 | 163 | 433 | (293) | 2 | (2) | 2,495 | 14 |
Debt securities | 11,465 | – | 11,465 | 416 | 7,011 | (5,224) | 150 | – | 13,818 | 475 |
| Collective | ||||||||||
| investment | ||||||||||
schemes | 312 | – | 312 | 46 | 47 | (5) | 1 | – | 401 | 46 |
| Total financial assets | ||||||||||
measured at fair value | 14,121 | 7 | 14,128 | 704 | 7,491 | (5,528) | 153 | (2) | 16,946 | 615 |
E. Financial assets & liabilities continued
E2.4 Sensitivities of Level 3 instruments continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 205
| 2 | ||||||||
| Unrealised | ||||||||
| Net (losses)/ | Transfers | (losses)/gains | ||||||
| gains in | from | Transfers to | At | on assets held | ||||
| At 1 January | income | Level 1 | Level 1 and | 31 December | at end of | |||
| 2022 | statement | Purchases | Sales | and Level 2 | Level 2 | 2022 1 | period | |
| 2022 | £m | £m | £m | £m | £m | £m | £m | £m |
| Financial assets measured at fair value | ||||||||
| Financial assets mandatorily held at FVTPL: | ||||||||
Derivatives | 237 | (85) | – | – | – | – | 152 | (85) |
| Financial assets designated at FVTPL upon | ||||||||
| initial recognition: | ||||||||
Equities | 1,899 | 177 | 438 | (369) | 47 | – | 2,192 | 12 |
Debt securities | 12,452 | (3,544) | 6,838 | (4,277) | 2 | (6) | 11,465 | (3,595) |
Collective investment schemes | 286 | (79) | 108 | (3) | – | – | 312 | (73) |
14,637 | (3,446) | 7,384 | (4,649) | 49 | (6) | 13,969 | (3,656) | |
Total financial assets measured at fair value | 14,874 | (3,531) | 7,384 | (4,649) | 49 | (6) | 14,121 | (3,741) |
| Unrealised | ||||||||
| losses on | ||||||||
| Net losses in | Transfers from | Transfers to | At | liabilities held | ||||
| At 1 January | income | Sales/ | Level 1 and | Level 1 and | 31 December | at end of | ||
| 2022 | statement | Purchases | Repayments | Level 2 | Level 2 | 2022 1 | period | |
| 2022 | £m | £m | £m | £m | £m | £m | £m | £m |
| Financial liabilities measured at fair value | ||||||||
| Financial liabilities mandatorily held | ||||||||
| at FVTPL: | ||||||||
Derivatives | 125 | 130 | – | (12) | – | – | 243 | 123 |
| Financial liabilities designated at FVTPL | ||||||||
| upon initial recognition: | ||||||||
Borrowings | 70 | 9 | – | (15) | – | – | 64 | 9 |
Total financial liabilities measured at fair value | 195 | 139 | – | (27) | – | – | 307 | 132 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023206
| Assets | Liabilities | Assets | Liabilities | |
| 2023 | 2023 | 2022 | 2022 | |
| £m | £m | £m | £m | |
Forward currency | 265 | 97 | 327 | 221 |
Credit default swaps | 9 | 2 | 4 | 18 |
Contracts for difference | 2 | 1 | 3 | 3 |
Interest rate swaps | 1,456 | 2,290 | 2,281 | 4,313 |
Swaptions | 164 | 65 | 187 | 46 |
Inflation swaps | 187 | 142 | 295 | 104 |
Equity options | 107 | 106 | 334 | 147 |
Stock index futures | 18 | 87 | 162 | 36 |
Fixed income futures | 84 | 124 | 95 | 231 |
Longevity swap contracts | 230 | 100 | 152 | 34 |
Currency futures | 15 | 5 | 4 | 8 |
Cross currency swaps | 232 | 274 | 227 | 653 |
Equity Release Income Plan total return swap | – | 50 | – | 63 |
Other | – | 1 | – | 2 |
2,769 | 3,344 | 4,071 | 5,879 | |
Less amounts classified as held for sale | (3) | (2) | (3) | (4) |
2,766 | 3,342 | 4,068 | 5,875 |
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 207
| Related amounts not offset | ||||
| Gross and net | Financial | |||
| amounts of | instruments and | |||
| recognised | cash collateral | Net | ||
| financial assets | received | Derivative liabilities | amount | |
2023 | £m | £m | £m | £m |
| Financial assets | ||||
OTC derivatives | 2,629 | 976 | 1,459 | 194 |
Exchange traded derivatives | 137 | 33 | 28 | 76 |
Stock lending | 836 | 836 | – | – |
Repurchase arrangement | 100 | 100 | – | – |
Total | 3,702 | 1,945 | 1,487 | 270 |
| Related amounts not offset | ||||
| Gross and net | Financial | |||
| amounts of | instruments and | |||
| recognised | cash collateral | Net | ||
| financial liabilities | pledged | Derivative assets | amount | |
£m | £m | £m | £m | |
| Financial liabilities | ||||
OTC derivatives | 3,126 | 1,520 | 1,459 | 147 |
Exchange traded derivatives | 216 | 68 | 28 | 120 |
Total | 3,342 | 1,588 | 1,487 | 267 |
| Related amounts not offset | ||||
| Gross and net | Financial | |||
| amounts of | instruments and | |||
| recognised | cash collateral | Net | ||
| financial assets | received | Derivative liabilities | amount | |
2022 | £m | £m | £m | £m |
| Financial assets | ||||
OTC derivatives | 3,747 | 1,055 | 2,293 | 399 |
Exchange traded derivatives | 324 | 193 | 28 | 103 |
Stock lending | 1,451 | 1,451 | – | – |
Total | 5,522 | 2,699 | 2,321 | 502 |
| Related amounts not offset | ||||
| Gross and net | Financial | |||
| amounts of | instruments and | |||
| recognised | cash collateral | Net | ||
| financial liabilities | pledged | Derivative assets | amount | |
£m | £m | £m | £m | |
| Financial liabilities | ||||
OTC derivatives | 5,606 | 2,206 | 2,293 | 1,107 |
Exchange traded derivatives | 273 | 36 | 28 | 209 |
Total | 5,879 | 2,242 | 2,321 | 1,316 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023208
| OTC derivatives | ||
2023 | 2022 | |
£m | £m | |
Financial assets | 971 | 1,513 |
Financial liabilities | (971) | (1,513) |
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 209
Carrying value | Fair value | |||
| 2023 | 2022 | 2023 | 2022 | |
| £m | £m | £m | £m | |
£300 million multi-currency revolving credit facility (note a) | 90 | 62 | 90 | 62 |
Property reversions loan (note b) | 45 | 64 | 45 | 64 |
Total policyholder borrowings | 135 | 126 | 135 | 126 |
£428 million Tier 2 subordinated notes (note c) | 197 | 427 | 202 | 429 |
US $500 million Tier 2 notes (note d) | 391 | 413 | 377 | 390 |
€500 million Tier 2 bonds (note e) | 430 | 439 | 419 | 416 |
US $750 million Contingent Convertible Tier 1 notes (note f) | 587 | 618 | 563 | 580 |
£500 million Tier 2 notes (note g) | 489 | 487 | 476 | 445 |
US $500 million Fixed Rate Reset Tier 2 notes (note h) | 274 | 412 | 262 | 382 |
£500 million 5.867% Tier 2 subordinated notes (note i) | 536 | 543 | 493 | 465 |
£250 million Fixed Rate Reset Callable Tier 2 subordinated notes (note j) | 254 | 259 | 239 | 244 |
£250 million 4.016% Tier 3 subordinated notes (note k) | 253 | 256 | 250 | 231 |
£350 million Fixed Rate Reset Callable Tier 2 subordinated notes (note l) | 346 | – | 368 | – |
Total shareholder borrowings | 3,757 | 3,854 | 3,649 | 3,582 |
Total borrowings | 3,892 | 3,980 | 3,784 | 3,708 |
Amount due for settlement after 12 months | 3,802 | 3,918 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023210
f On 29 January 2020, the Company issued US $750 million fixed rate reset perpetual restricted Tier 1 contingent convertible notes (the
E. Financial assets & liabilities continued
E5.1 Analysis of borrowings continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 211
Cash movements | Non-cash movements | ||||||
| New | Movement in | ||||||
| At 1 January | borrowings, net | Changes in fair | foreign | Other | At 31 December | ||
| 2023 | of costs | Repayments | value | exchange | movements 1 | 2023 | |
| £m | £m | £m | £m | £m | £m | £m | |
| £300 million multi-currency revolving | |||||||
credit facility | 62 | 64 | (37) | – | – | 1 | 90 |
Property Reversions loan | 64 | – | (21) | 2 | – | – | 45 |
£428 million Tier 2 subordinated notes | 427 | – | (231) | – | – | 1 | 197 |
US $500 million Tier 2 bonds | 413 | – | – | – | (22) | – | 391 |
€500 million Tier 2 notes | 439 | – | – | – | (10) | 1 | 430 |
| US $750 million Contingent Convertible | |||||||
Tier 1 notes | 618 | – | – | – | (32) | 1 | 587 |
£500 million Tier 2 notes | 487 | – | – | – | – | 2 | 489 |
US $500 million Fixed Rate Reset Tier 2 notes | 412 | – | (119) | – | (20) | 1 | 274 |
| £500 million 5.867% Tier 2 subordinated | |||||||
notes | 543 | – | – | – | – | (7) | 536 |
| £250 million Fixed Rate Reset Callable Tier 2 | |||||||
subordinated notes | 259 | – | – | – | – | (5) | 254 |
| £250 million 4.016% Tier 3 subordinated | |||||||
notes | 256 | – | – | – | – | (3) | 253 |
| £350 million Fixed Rate Reset Callable Tier 2 | |||||||
subordinated notes | – | 346 | – | – | – | – | 346 |
| Derivative assets | (225) | – | – | 108 | – | (1) | (118) |
3,755 | 410 | (408) | 110 | (84) | (9) | 3,774 |
Cash movements | Non-cash movements | ||||||
| Movement in | |||||||
| At 1 January | New borrowings, | Changes in fair | foreign | Other | At 31 December | ||
| 2022 | net of costs | Repayments | value | exchange | movements 1 | 2022 | |
£m | £m | £m | £m | £m | £m | £m | |
| £300 million multi-currency revolving | |||||||
credit facility | 17 | 61 | (17) | – | 1 | – | 62 |
Property Reversions loan | 70 | – | (15) | 9 | – | – | 64 |
£428 million Tier 2 subordinated notes | 427 | – | – | – | – | – | 427 |
£450 million Tier 3 subordinated notes | 450 | – | (450) | – | – | – | – |
US $500 million Tier 2 bonds | 368 | – | – | – | 45 | – | 413 |
€500 million Tier 2 notes | 416 | – | – | – | 22 | 1 | 439 |
| 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 Fixed Rate Reset Callable Tier 2 | |||||||
subordinated notes | 266 | – | – | – | – | (7) | 259 |
| £250 million 4.016% Tier 3 subordinated | |||||||
notes | 257 | – | – | – | – | (1) | 256 |
| Derivative assets | (48) | – | – | (177) | – | – | (225) |
| Derivative liabilities | 5 | – | – | (5) | – | – | – |
4,182 | 61 | (482) | (173) | 178 | (11) | 3,755 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023212
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 213
| Less | ||||||||||
| amounts | ||||||||||
| classified | ||||||||||
| BB and | as held for | |||||||||
| AAA | AA | A | BBB | below | Non-rated | Unit-linked | Total | sale | Total | |
| 2023 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
Loans and deposits | – | 3 | – | – | – | 245 | – | 248 | – | 248 |
Derivatives | – | 1,314 | 736 | – | – | 662 | 57 | 2,769 | (3) | 2,766 |
| Debt securities | 7,427 | 34,133 | 21,170 | 14,769 | 2,933 | 7,332 | 7,021 | 94,785 | (1,411) | 93,374 |
Reinsurance contract assets | – | 2,690 | 2,163 | – | – | 23 | – | 4,876 | – | 4,876 |
| Reinsurers’ share of investment | ||||||||||
contract liabilities | – | – | – | – | – | – | 9,700 | 9,700 | (28) | 9,672 |
Cash and cash equivalents | – | 1,254 | 4,383 | 88 | – | – | 1,495 | 7,220 | (52) | 7,168 |
7,427 | 39,394 | 28,452 | 14,857 | 2,933 | 8,262 | 18,273 | 119,598 | (1,494) | 118,104 |
| Less | ||||||||||
| amounts | ||||||||||
| BB and | classified as | |||||||||
| AAA | AA | A | BBB | below | Non-rated | Unit-linked | Total | held for sale | Total | |
| 2022 restated | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
Loans and deposits | – | 4 | – | – | – | 193 | 71 | 268 | – | 268 |
Derivatives | – | 1,500 | 1,060 | 28 | – | 1,370 | 113 | 4,071 | (3) | 4,068 |
| Debt securities | 6,834 | 26,095 | 19,045 | 16,238 | 1,929 | 7,182 | 7,387 | 84,710 | (1,594) | 83,116 |
Reinsurance contract assets | – | 2,418 | 1,579 | – | – | 74 | – | 4,071 | – | 4,071 |
| Reinsurers’ share of investment | ||||||||||
contract liabilities | – | – | – | – | – | – | 9,090 | 9,090 | (25) | 9,065 |
Cash and cash equivalents | 339 | 1,160 | 5,749 | 63 | – | 5 | 1,556 | 8,872 | (33) | 8,839 |
7,173 | 31,177 | 27,433 | 16,329 | 1,929 | 8,824 | 18,217 | 111,082 | (1,655) | 109,427 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023214
E. Financial assets & liabilities continued
E6.2.1 Credit risk continued
Credit quality of assets continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 215
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023216
2023 | 2022 restated | ||||
| Impact on | Impact on | ||||
| profit after tax | Impact | profit after tax | Impact | ||
| Change in | and equity | on CSM | and equity | on CSM | |
| interest rate | £m | £m | £m | £m | |
Insurance contract and reinsurance contract balances | +1% | 3,682 | (51) | 3,321 | (52) |
Investment contract without DPF balances | +1% | 1,551 | – | 1,451 | – |
Financial assets subject to interest rate risk backing insurance and reinsurance contract balances | +1% | (3,988) | – | (3,599) | – |
| Financial assets subject to interest rate risk backing investment contract | |||||
without DPF balances | +1% | (1,550) | – | (1,451) | – |
Other financial assets subject to interest rate risk | +1% | (222) | – | (317) | – |
Insurance contract and reinsurance contract balances | -1% | (4,873) | 103 | (4,503) | 123 |
Investment contract without DPF balances | -1% | (2,051) | – | (1,921) | – |
Financial assets subject to interest rate risk backing insurance and reinsurance contract balances | -1% | 5,253 | – | 4,927 | – |
| Financial assets subject to interest rate risk backing investment contract | |||||
without DPF balances | -1% | 2,049 | – | 1,921 | – |
Other financial assets subject to interest rate risk | -1% | 222 | – | 317 | – |
2023 | 2022 restated | ||||
| Impact on | Impact on | ||||
| profit after tax | Impact | profit after tax | Impact | ||
| Change in | and equity | on CSM | and equity | on CSM | |
| inflation | £m | £m | £m | £m | |
Insurance contract and reinsurance contract balances | +1% | (944) | (7) | (683) | (7) |
Investment contract without DPF balances | +1% | (173) | – | (165) | – |
Financial assets subject to inflation risk backing insurance and reinsurance contract balances | +1% | 983 | – | 692 | – |
| Financial assets subject to inflation risk backing investment contract | |||||
without DPF balances | +1% | 173 | – | 165 | – |
Other financial assets subject to inflation risk | +1% | 9 | – | 22 | – |
Insurance contract and reinsurance contract balances | -1% | 840 | 37 | 598 | 35 |
Investment contract without DPF balances | -1% | 145 | – | 135 | – |
| Financial assets subject inflation risk backing insurance and reinsurance | |||||
contract balances | -1% | (868) | – | (597) | – |
| Financial assets subject to inflation risk backing investment contract | |||||
without DPF balances | -1% | (145) | – | (135) | – |
Other financial assets subject to inflation risk | -1% | (7) | – | (18) | – |
E. Financial assets & liabilities continued
E6.2.2 Market risk continued
Interest rate and inflation risk continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 217
2023 | 2022 restated 1 | ||||
| Impact on | Impact on | ||||
| profit after tax | Impact | profit after tax | Impact | ||
| Change in | and equity | on CSM | and equity | on CSM | |
| equity prices | £m | £m | £m | £m | |
Insurance contract and reinsurance contract balances | +10% | (2,079) | 117 | (2,082) | 124 |
Investment contract without DPF balances | +10% | (7,636) | – | (7,031) | – |
Financial assets subject to equity price risk backing insurance and reinsurance contract balances | +10% | 2,159 | – | 2,205 | – |
| Financial assets subject to equity price risk backing Investment contract | |||||
without DPF balances | +10% | 7,636 | – | 7,031 | – |
Other financial assets subject to equity price risk | +10% | (335) | – | (299) | – |
Insurance contract and reinsurance contract balances | -10% | 2,039 | (30) | 2,040 | (31) |
Investment contract without DPF balances | -10% | 7,740 | – | 7,121 | – |
Financial assets subject to equity price risk backing insurance and reinsurance contract balances | -10% | (2,128) | – | (2,169) | – |
| Financial assets subject to equity price risk backing Investment contract | |||||
without DPF balances | -10% | (7,740) | – | (7,121) | – |
Other financial assets subject to equity price risk | -10% | 335 | – | 299 | – |
2023 | 2022 restated 1 | ||||
| Impact on | Impact on | ||||
| profit after tax | Impact | profit after tax | Impact | ||
| Change in | and equity | on CSM | and equity | on CSM | |
| property prices | £m | £m | £m | £m | |
Insurance contract and reinsurance contract balances | +10% | (199) | 5 | (201) | 3 |
Investment contract without DPF balances | +10% | (431) | – | (410) | – |
Financial assets subject to property price risk backing insurance and reinsurance contract balances | +10% | 205 | – | 199 | – |
| Financial assets subject to property price risk backing Investment | |||||
contract without DPF balances | +10% | 431 | – | 410 | – |
Other financial assets subject to property price risk | +10% | 3 | – | 11 | – |
Insurance contract and reinsurance contract balances | -10% | 191 | (3) | 194 | (2) |
Investment contract without DPF balances | -10% | 407 | – | 388 | – |
Financial assets subject to property price risk backing insurance and reinsurance contract balances | -10% | 197 | – | (192) | – |
| Financial assets subject to property price risk backing Investment | |||||
contract without DPF balances | -10% | (407) | – | (388) | – |
Other financial assets subject to property price risk | -10% | (2) | – | (10) | – |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023218
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 219
| Less amounts | |||||||
| classified as | |||||||
| 1 year or less or | Greater than 5 | held for sale | |||||
| on demand | 1–5 years | years | No fixed term | Total | (see note H3) | Total | |
| 2023 | £m | £m | £m | £m | £m | £m | £m |
Investment contracts | 162,784 | – | – | – | 162,784 | (4,780) | 158,004 |
| Borrowings | 298 | 2,065 | 2,563 | 45 | 4,971 | – | 4,971 |
Derivatives 1 | 366 | 403 | 5,718 | – | 6,487 | (2) | 6,485 |
Net asset value attributable to unitholders | 2,921 | – | – | – | 2,921 | – | 2,921 |
| Obligations for repayment of collateral | |||||||
received | 1,005 | – | – | – | 1,005 | – | 1,005 |
| Lease liabilities | 9 | 35 | 63 | – | 107 | – | 107 |
Accruals and deferred income | 536 | 29 | 14 | – | 579 | – | 579 |
Other payables | 2,272 | – | – | – | 2,272 | – | 2,272 |
| Less amounts | |||||||
| classified as held | |||||||
| 1 year or less or | Greater than 5 | for sale (see note | |||||
| on demand | 1–5 years | years | No fixed term | Total | H3) | Total | |
2022 restated 2 | £m | £m | £m | £m | £m | £m | £m |
Investment contracts | 149,481 | – | – | – | 149,481 | (8,312) | 141,169 |
| Borrowings | 268 | 1,326 | 2,357 | 64 | 4,015 | – | 4,015 |
Derivatives 1 | 757 | 794 | 9,335 | – | 10,886 | (4) | 10,882 |
Net asset value attributable to unitholders | 3,042 | – | – | – | 3,042 | – | 3,042 |
| Obligations for repayment of collateral | |||||||
received | 1,706 | – | – | – | 1,706 | – | 1,706 |
| Lease liabilities | 11 | 37 | 95 | – | 143 | – | 143 |
Accruals and deferred income | 527 | 42 | 12 | – | 581 | (37) | 544 |
Other payables | 1,373 | – | – | – | 1,373 | – | 1,373 |
| Up to 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | >5 years | Total | |
| £m | £m | £m | £m | £m | £m | £m | |
Insurance contract liabilities | 8,468 | 4,987 | 4,959 | 5,292 | 5,633 | 80,447 | 109,786 |
| Up to 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | >5 years | Total | |
2022 restated 1 | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities | 7,381 | 4,470 | 4,486 | 4,720 | 5,956 | 75,551 | 102,564 |
2023 | 2022 restated | |||
| Amounts payable | Carrying value of | Amounts payable on | Carrying value of | |
| on demand | portfolio | demand | portfolio | |
| £m | £m | £m | £m | |
With-profits | (44,076) | (51,709) | (44,319) | (52,026) |
Annuities | (5,163) | (34,217) | (2,094) | (29,277) |
Unit-linked | (15,820) | (16,431) | (13,442) | (13,740) |
Protection | (612) | (1,947) | (330) | (1,474) |
Other | – | 225 | – | 297 |
Short-term payables and receivables (including deposits from reinsurers) | (3,541) | (3,541) | (4,067) | (4,067) |
(69,212) | (107,620) | (64,252) | (100,287) |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023220
E. Financial assets & liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 221
F. Insurance contracts, investment contracts with DPF and reinsurance
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023222
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F1. Liabilities under insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 223
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023224
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F1. Liabilities under insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 225
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023226
The table below shows a summary of the carrying amount of insurance contracts and the related reinsurance contracts in the statement of
consolidated financial position.
2023
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Insurance contracts issued | |||||
Estimates of present value of future cash flows | (35,036) | (22,041) | (29,880) | (22,829) | (109,786) |
Risk adjustment | (767) | (84) | (104) | (217) | (1,172) |
CSM | (3,741) | (201) | (597) | (244) | (4,783) |
Net insurance contract liabilities issued | (39,544) | (22,326) | (30,581) | (23,290) | (115,741) |
Insurance contract liabilities | (39,544) | (22,326) | (30,581) | (23,290) | (115,741) |
Insurance contract assets | – | – | – | – | – |
Net insurance contract liabilities issued | (39,544) | (22,326) | (30,581) | (23,290) | (115,741) |
| Reinsurance contracts held | |||||
Estimates of present value of future cash flows | 935 | 20 | 820 | 391 | 2,166 |
Risk adjustment | 537 | 2 | 46 | 48 | 633 |
CSM | 1,604 | – | 147 | 179 | 1,930 |
Net reinsurance contract assets held | 3,076 | 22 | 1,013 | 618 | 4,729 |
Reinsurance contract assets | 3,223 | 22 | 1,013 | 618 | 4,876 |
Reinsurance contract liabilities | (147) | – | – | – | (147) |
Net reinsurance contract assets held | 3,076 | 22 | 1,013 | 618 | 4,729 |
2022
| Retirement | |||||
| Solutions | Pensions & Savings | With-Profits | Europe & Other | Total | |
| £m | £m | £m | £m | £m | |
| Insurance contracts issued | |||||
Estimates of present value of future cash flows | (30,779) | (21,302) | (28,282) | (22,201) | (102,564) |
Risk adjustment | (681) | (89) | (158) | (169) | (1,097) |
CSM | (2,821) | (94) | (565) | (419) | (3,899) |
Net insurance contract liabilities issued | (34,281) | (21,485) | (29,005) | (22,789) | (107,560) |
Insurance contract liabilities | (34,281) | (21,533) | (29,005) | (22,789) | (107,608) |
Insurance contract assets | – | 48 | – | – | 48 |
Net insurance contract liabilities issued | (34,281) | (21,485) | (29,005) | (22,789) | (107,560) |
| Reinsurance contracts held | |||||
Estimates of present value of future cash flows | 1,132 | – | 869 | 276 | 2,277 |
Risk adjustment | 379 | – | 38 | 61 | 478 |
CSM | 952 | – | 142 | 215 | 1,309 |
Net reinsurance contract assets held | 2,463 | – | 1,049 | 552 | 4,064 |
Reinsurance contract assets | 2,463 | – | 1,056 | 552 | 4,071 |
Reinsurance contract liabilities | – | – | (7) | – | (7) |
Net reinsurance contract assets held | 2,463 | – | 1,049 | 552 | 4,064 |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F1. Liabilities under insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 227
F2. Movements in present value of future cash flows, risk adjustment and CSM of insurance contracts
The reconciliations below provide a roll-forward of the net asset or liability for insurance contracts issued by measurement component showing
estimates of the present value of future cash flows, the risk adjustment for non-financial risk and the CSM.
Retirement Solutions
2023 | 2022 | |||||||
| Estimates of | Estimates of | |||||||
| the present | the present | |||||||
| value of | Contractual | value of | Contractual | |||||
| future cash | Risk | service | future cash | Risk | service | |||
| flows | adjustment | margin | Total | flows | adjustment | margin | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
Insurance contract liabilities as at 1 January | 30,779 | 681 | 2,821 | 34,281 | 39,028 | 1,161 | 2,671 | 42,860 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 30,779 | 681 | 2,821 | 34,281 | 39,028 | 1,161 | 2,671 | 42,860 |
| Changes in profit or loss: | ||||||||
CSM recognised for services provided | – | – | (260) | (260) | – | – | (207) | (207) |
Risk adjustment for the risk expired | – | (39) | – | (39) | – | (76) | – | (76) |
Experience adjustments | (8) | – | – | (8) | (13) | – | – | (13) |
Policyholder tax charges | (1) | – | – | (1) | – | – | – | – |
Total change relating to current service | (9) | (39) | (260) | (308) | (13) | (76) | (207) | (296) |
Contracts initially recognised in the period | (602) | 167 | 435 | – | (357) | 128 | 232 | 3 |
Changes in estimates that adjust the CSM | (566) | (92) | 658 | – | (88) | 7 | 81 | – |
| Changes in estimates that do not adjust | ||||||||
the CSM | 1 | – | – | 1 | 4 | (1) | – | 3 |
Total change relating to future service | (1,167) | 75 | 1,093 | 1 | (441) | 134 | 313 | 6 |
| Adjustments to liabilities for incurred claims | ||||||||
(past service) | 106 | – | – | 106 | – | – | – | – |
| Impairment of assets for insurance | ||||||||
acquisition cash flows | (1) | – | – | (1) | – | – | – | – |
Insurance service result | (1,071) | 36 | 833 | (202) | (454) | 58 | 106 | (290) |
Insurance finance expense/(income) | 1,895 | 4 | 62 | 1,961 | (9,096) | (534) | 44 | (9,586) |
Total changes in profit or loss | 824 | 40 | 895 | 1,759 | (9,550) | (476) | 150 | (9,876) |
| Cash flows: | ||||||||
Premiums received | 6,421 | – | – | 6,421 | 4,596 | – | – | 4,596 |
Claims and other expenses paid | (4,380) | – | – | (4,380) | (3,272) | – | – | (3,272) |
Insurance acquisition cash flows | (38) | – | – | (38) | (26) | – | – | (26) |
Total cash flows | 2,003 | – | – | 2,003 | 1,298 | – | – | 1,298 |
| Other movements | 1,430 | 46 | 25 | 1,501 | 3 | (4) | – | (1) |
Net insurance contract liabilities as at 31 December | 35,036 | 767 | 3,741 | 39,544 | 30,779 | 681 | 2,821 | 34,281 |
Insurance contract liabilities as at 31 December | 35,036 | 767 | 3,741 | 39,544 | 30,779 | 681 | 2,821 | 34,281 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 35,036 | 767 | 3,741 | 39,544 | 30,779 | 681 | 2,821 | 34,281 |
1
1 £1,514 million included in ‘estimates of the present value of future cash flows’ relates to the fair value of insurance contracts acquired as part of the acquisition of SLF of Canada UK Limited in the
period (see note H2).
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023228
Pensions & Savings
2023 | 2022 | |||||||
| Estimates of | Estimates of | |||||||
| the present | the present | |||||||
| value of | Contractual | value of | Contractual | |||||
| future cash | Risk | service | future cash | Risk | service | |||
| flows | adjustment | margin | Total | flows | adjustment | margin | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
Insurance contract liabilities as at 1 January | 21,350 | 89 | 94 | 21,533 | 25,059 | 88 | 96 | 25,243 |
Insurance contract assets as at 1 January | (48) | – | – | (48) | (65) | – | – | (65) |
Net insurance contract liabilities as at 1 January | 21,302 | 89 | 94 | 21,485 | 24,994 | 88 | 96 | 25,178 |
| Changes in profit or loss: | ||||||||
CSM recognised for services provided | – | – | (25) | (25) | – | – | (13) | (13) |
Risk adjustment for the risk expired | – | (8) | – | (8) | – | (11) | – | (11) |
Experience adjustments | 10 | – | – | 10 | 33 | – | – | 33 |
Policyholder tax charges | (6) | – | – | (6) | 18 | – | – | 18 |
Total change relating to current service | 4 | (8) | (25) | (29) | 51 | (11) | (13) | 27 |
Contracts initially recognised in the period | (67) | 33 | 34 | – | – | – | – | – |
Changes in estimates that adjust the CSM | (103) | (1) | 104 | – | (9) | (2) | 11 | – |
| Changes in estimates that do not adjust | ||||||||
the CSM | (10) | 2 | – | (8) | 119 | 13 | – | 132 |
Total change relating to future service | (180) | 34 | 138 | (8) | 110 | 11 | 11 | 132 |
| Adjustments to liabilities for incurred claims | ||||||||
(past service) | 14 | – | – | 14 | 5 | – | – | 5 |
Insurance service result | (162) | 26 | 113 | (23) | 166 | – | (2) | 164 |
Insurance finance expense/(income) | 1,593 | 1 | (4) | 1,590 | (2,024) | 1 | – | (2,023) |
Total changes in profit or loss | 1,431 | 27 | 109 | 1,567 | (1,858) | 1 | (2) | (1,859) |
| Cash flows: | ||||||||
Premiums received | 389 | – | – | 389 | 443 | – | – | 443 |
Claims and other expenses paid | (3,488) | – | – | (3,488) | (2,277) | – | – | (2,277) |
| Total cash flows | (3,099) | – | – | (3,099) | (1,834) | – | – | (1,834) |
Other movements 1 | 2,407 | (32) | (2) | 2,373 | – | – | – | – |
Net insurance contract liabilities as at 31 December | 22,041 | 84 | 201 | 22,326 | 21,302 | 89 | 94 | 21,485 |
Insurance contract liabilities as at 31 December | 22,041 | 84 | 201 | 22,326 | 21,350 | 89 | 94 | 21,533 |
Insurance contract assets as at 31 December | – | – | – | – | (48) | – | – | (48) |
Net insurance contract liabilities as at 31 December | 22,041 | 84 | 201 | 22,326 | 21,302 | 89 | 94 | 21,485 |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F2. Movements in present value of future cash flows, risk adjustment and CSM of insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 229
With-Profits
2023 | 2022 | |||||||
| Estimates of | Estimates of | |||||||
| the present | the present | |||||||
| value of | Contractual | value of | Contractual | |||||
| future cash | Risk | service | future cash | Risk | service | |||
| flows | adjustment | margin | Total | flows | adjustment | margin | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
Insurance contract liabilities as at 1 January | 28,282 | 158 | 565 | 29,005 | 35,838 | 252 | 433 | 36,523 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 28,282 | 158 | 565 | 29,005 | 35,838 | 252 | 433 | 36,523 |
| Changes in profit or loss: | ||||||||
CSM recognised for services provided | – | – | (77) | (77) | – | – | (99) | (99) |
Risk adjustment for the risk expired | – | (4) | – | (4) | – | (8) | – | (8) |
Experience adjustments | 23 | – | – | 23 | 4 | – | – | 4 |
Policyholder tax charges | (17) | – | – | (17) | 17 | – | – | 17 |
Total change relating to current service | 6 | (4) | (77) | (75) | 21 | (8) | (99) | (86) |
Changes in estimates that adjust the CSM | (99) | (20) | 119 | – | (182) | (43) | 225 | – |
| Changes in estimates that do not adjust | ||||||||
the CSM | (52) | (12) | – | (64) | 354 | 27 | – | 381 |
Total change relating to future service | (151) | (32) | 119 | (64) | 172 | (16) | 225 | 381 |
| Adjustments to liabilities for incurred claims | ||||||||
(past service) | (33) | – | – | (33) | (41) | – | – | (41) |
Insurance service result | (178) | (36) | 42 | (172) | 152 | (24) | 126 | 254 |
Insurance finance expense/(income) | 1,891 | 13 | 10 | 1,914 | (5,379) | (70) | 6 | (5,443) |
Total changes in profit or loss | 1,713 | (23) | 52 | 1,742 | (5,227) | (94) | 132 | (5,189) |
| Cash flows: | ||||||||
Premiums received | 121 | – | – | 121 | 136 | – | – | 136 |
Claims and other expenses paid | (694) | – | – | (694) | (2,468) | – | – | (2,468) |
Total cash flows | (573) | – | – | (573) | (2,332) | – | – | (2,332) |
Other movements 1 | 458 | (31) | (20) | 407 | 3 | – | – | 3 |
Net insurance contract liabilities as at 31 December | 29,880 | 104 | 597 | 30,581 | 28,282 | 158 | 565 | 29,005 |
Insurance contract liabilities as at 31 December | 29,880 | 104 | 597 | 30,581 | 28,282 | 158 | 565 | 29,005 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 29,880 | 104 | 597 | 30,581 | 28,282 | 158 | 565 | 29,005 |
1 £349 million included in ‘estimates of the present value of future cash flows’ relates to the fair value of insurance contracts acquired as part of the acquisition of SLF of Canada UK Limited
(see note H2).
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023230
2023 | 2022 | |||||||
| Estimates of | Estimates of | |||||||
| the present | the present | |||||||
| value of | Contractual | value of | Contractual | |||||
| future cash | Risk | service | future cash | Risk | service | |||
| flows | adjustment | margin | Total | flows | adjustment | margin | Total | |
| Europe & Other | £m | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities as at 1 January | 22,201 | 169 | 419 | 22,789 | 27,394 | 220 | 257 | 27,871 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 22,201 | 169 | 419 | 22,789 | 27,394 | 220 | 257 | 27,871 |
| Changes in profit or loss: | ||||||||
CSM recognised for services provided | – | – | (47) | (47) | – | – | (67) | (67) |
Risk adjustment for the risk expired | – | (12) | – | (12) | – | (7) | – | (7) |
Experience adjustments | 18 | – | – | 18 | 36 | – | – | 36 |
Policyholder tax charges | (1) | – | – | (1) | (1) | – | – | (1) |
Total change relating to current service | 17 | (12) | (47) | (42) | 35 | (7) | (67) | (39) |
Contracts initially recognised in the period | (57) | 8 | 53 | 4 | (47) | 4 | 46 | 3 |
Changes in estimates that adjust the CSM | 116 | 27 | (143) | – | (134) | (21) | 155 | – |
| Changes in estimates that do not adjust | ||||||||
the CSM | 10 | 25 | – | 35 | 21 | (15) | – | 6 |
Total change relating to future service | 69 | 60 | (90) | 39 | (160) | (32) | 201 | 9 |
| Adjustments to liabilities for incurred claims | ||||||||
(past service) | (104) | – | – | (104) | 8 | – | – | 8 |
| Impairment of assets for insurance | ||||||||
acquisition cash flows | (3) | – | – | (3) | – | – | – | – |
Insurance service result | (21) | 48 | (137) | (110) | (117) | (39) | 134 | (22) |
Insurance finance expense/(income) | 1,550 | (13) | (20) | 1,517 | (5,820) | (12) | 5 | (5,827) |
Total changes in profit or loss | 1,529 | 35 | (157) | 1,407 | (5,937) | (51) | 139 | (5,849) |
| Cash flows: | ||||||||
Premiums received | 1,673 | – | – | 1,673 | 1,731 | – | – | 1,731 |
Claims and other expenses paid | (2,259) | – | – | (2,259) | (1,666) | – | – | (1,666) |
Insurance acquisition cash flows | (116) | – | – | (116) | (102) | – | – | (102) |
Total cash flows | (702) | – | – | (702) | (37) | – | – | (37) |
Other movements 1 | (199) | 13 | (18) | (204) | 781 | – | 23 | 804 |
Net insurance contract liabilities as at 31 December | 22,829 | 217 | 244 | 23,290 | 22,201 | 169 | 419 | 22,789 |
Insurance contract liabilities as at 31 December | 22,829 | 217 | 244 | 23,290 | 22,201 | 169 | 419 | 22,789 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 22,829 | 217 | 244 | 23,290 | 22,201 | 169 | 419 | 22,789 |
1 £112 million included in ‘estimates of the present value of future cash flows’ relates to the fair value of insurance contracts acquired as part of the acquisition of SLF of Canada UK Limited (see note H2).
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F2. Movements in present value of future cash flows, risk adjustment and CSM of insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 231
F3. Movements in liabilities for remaining coverage and liabilities for incurred claims for insurance contracts
The following reconciliations show how the net carrying amounts of insurance contracts issued changed over the year as a result of cash flows,
amounts recognised in the consolidated income statement and other movements, analysed by remaining coverage and incurred claims.
2023 | 2022 | |||||||
Liabilities for remaining coverage | Liabilities for remaining coverage | |||||||
| Liabilities for | Liabilities for | |||||||
| Excluding loss | Loss | incurred | Excluding loss | Loss | incurred | |||
| component | component | claims | Total | component | component | claims | Total | |
| Retirement Solutions | £m | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities as at 1 January | 34,189 | 56 | 36 | 34,281 | 42,742 | 54 | 64 | 42,860 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 34,189 | 56 | 36 | 34,281 | 42,742 | 54 | 64 | 42,860 |
Insurance revenue (note C1) | (3,751) | – | – | (3,751) | (3,544) | – | – | (3,544) |
| Insurance service expenses | ||||||||
Incurred claims and other expenses | – | (4) | 3,446 | 3,442 | – | (3) | 3,252 | 3,249 |
| Amortisation of insurance acquisition | ||||||||
cash flows | 1 | – | – | 1 | 1 | – | – | 1 |
| Losses on onerous contracts and reversals | ||||||||
of those losses | – | 1 | – | 1 | – | 4 | – | 4 |
| Changes to liabilities for incurred claims | ||||||||
(past service) | – | – | 106 | 106 | – | – | – | – |
| Impairment of assets for insurance | ||||||||
acquisition cash flows | (1) | – | – | (1) | – | – | – | – |
Insurance service result | (3,751) | (3) | 3,552 | (202) | (3,543) | 1 | 3,252 | (290) |
Insurance finance expense/(income) | 1,960 | 1 | – | 1,961 | (9,587) | 1 | – | (9,586) |
| Total changes in the consolidated | ||||||||
income statement | (1,791) | (2) | 3,552 | 1,759 | (13,130) | 2 | 3,252 | (9,876) |
Investment components | (160) | – | 160 | – | 7 | – | (7) | – |
| Cash flows: | ||||||||
Premiums received | 6,421 | – | – | 6,421 | 4,596 | – | – | 4,596 |
Claims and other expenses paid | – | – | (4,380) | (4,380) | – | – | (3,272) | (3,272) |
Insurance acquisition cash flows | (38) | – | – | (38) | (26) | – | – | (26) |
Total cash flows | 6,383 | – | (4,380) | 2,003 | 4,570 | – | (3,272) | 1,298 |
| Other movements | 1,429 | – | 72 | 1,501 | – | – | (1) | (1) |
Net insurance contract liabilities as at 31 December | 40,050 | 54 | (560) | 39,544 | 34,189 | 56 | 36 | 34,281 |
Insurance contract liabilities as at 31 December | 40,050 | 54 | (560) | 39,544 | 34,189 | 56 | 36 | 34,281 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 40,050 | 54 | (560) | 39,544 | 34,189 | 56 | 36 | 34,281 |
1
1 £1,514 million relates to the fair value of insurance contracts acquired as part of the acquisition of SLF Canada UK Limited (see note H2).
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023232
2023 | 2022 | |||||||
Liabilities for remaining coverage | Liabilities for remaining coverage | |||||||
| Liabilities for | Liabilities for | |||||||
| Excluding loss | Loss | incurred | Excluding loss | Loss | incurred | |||
| component | component | claims | Total | component | component | claims | Total | |
| Pensions & Savings | £m | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities as at 1 January | 21,359 | 131 | 43 | 21,533 | 25,117 | – | 126 | 25,243 |
Insurance contract assets as at 1 January | (50) | 2 | – | (48) | (65) | – | – | (65) |
Net insurance contract liabilities as at 1 January | 21,309 | 133 | 43 | 21,485 | 25,052 | – | 126 | 25,178 |
Insurance revenue (note C1) | (272) | – | – | (272) | (307) | – | – | (307) |
| Insurance service expenses | ||||||||
Incurred claims and other expenses | – | (14) | 257 | 243 | – | – | 333 | 333 |
| Amortisation of insurance acquisition | ||||||||
cash flows | – | – | – | – | – | – | – | – |
| Losses on onerous contracts and reversals | ||||||||
of those losses | – | (8) | – | (8) | – | 133 | – | 133 |
| Changes to liabilities for incurred claims | ||||||||
(past service) | – | – | 14 | 14 | – | – | 5 | 5 |
Insurance service result | (272) | (22) | 271 | (23) | (307) | 133 | 338 | 164 |
Insurance finance expense/(income) | 1,576 | 5 | 9 | 1,590 | (2,025) | – | 2 | (2,023) |
| Total changes in the consolidated | ||||||||
income statement | 1,304 | (17) | 280 | 1,567 | (2,332) | 133 | 340 | (1,859) |
Investment components | (2,207) | – | 2,207 | – | (1,854) | – | 1,854 | – |
| Cash flows: | ||||||||
Premiums received | 389 | – | – | 389 | 443 | – | – | 443 |
Claims and other expenses paid | – | – | (3,488) | (3,488) | – | – | (2,277) | (2,277) |
Total cash flows | 389 | – | (3,488) | (3,099) | 443 | – | (2,277) | (1,834) |
Other movements 1 | 2,097 | (1) | 277 | 2,373 | – | – | – | – |
Net insurance contract liabilities as at 31 December | 22,892 | 115 | (681) | 22,326 | 21,309 | 133 | 43 | 21,485 |
Insurance contract liabilities as at 31 December | 22,892 | 115 | (681) | 22,326 | 21,359 | 131 | 43 | 21,533 |
Insurance contract assets as at 31 December | – | – | – | – | (50) | 2 | – | (48) |
Net insurance contract liabilities as at 31 December | 22,892 | 115 | (681) | 22,326 | 21,309 | 133 | 43 | 21,485 |
1 £2,411 million relates to the fair value of insurance contracts acquired as part of the acquisition of SLF Canada UK Limited (see note H2).
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F3. Movements in liabilities for remaining coverage and liabilities for incurred claims for insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 233
2023 | 2022 | |||||||
Liabilities for remaining coverage | Liabilities for remaining coverage | |||||||
| Liabilities for | Liabilities for | |||||||
| Excluding loss | Loss | incurred | Excluding loss | Loss | incurred | |||
| component | component | claims | Total | component | component | claims | Total | |
| With-Profits | £m | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities as at 1 January | 27,812 | 397 | 796 | 29,005 | 35,908 | 17 | 598 | 36,523 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 27,812 | 397 | 796 | 29,005 | 35,908 | 17 | 598 | 36,523 |
Insurance revenue (note C1) | (267) | – | – | (267) | (636) | – | – | (636) |
| Insurance service expenses | ||||||||
Incurred claims and other expenses | – | (61) | 253 | 192 | – | (1) | 551 | 550 |
| Losses on onerous contracts and reversals | ||||||||
of those losses | – | (64) | – | (64) | – | 381 | – | 381 |
| Changes to liabilities for incurred claims | ||||||||
(past service) | – | – | (33) | (33) | – | – | (41) | (41) |
Insurance service result | (267) | (125) | 220 | (172) | (636) | 380 | 510 | 254 |
Insurance finance expense/(income) | 1,883 | 14 | 17 | 1,914 | (5,447) | – | 4 | (5,443) |
| Total changes in the consolidated | ||||||||
income statement | 1,616 | (111) | 237 | 1,742 | (6,083) | 380 | 514 | (5,189) |
Investment components | (2,360) | – | 2,360 | – | (2,148) | – | 2,148 | – |
| Cash flows: | ||||||||
Premiums received | 121 | – | – | 121 | 136 | – | – | 136 |
Claims and other expenses paid | – | – | (694) | (694) | – | – | (2,468) | (2,468) |
Total cash flows | 121 | – | (694) | (573) | 136 | – | (2,468) | (2,332) |
| Other movements | 402 | 26 | (21) | 407 | (1) | – | 4 | 3 |
Net insurance contract liabilities as at 31 December | 27,591 | 312 | 2,678 | 30,581 | 27,812 | 397 | 796 | 29,005 |
Insurance contract liabilities as at 31 December | 27,591 | 312 | 2,678 | 30,581 | 27,812 | 397 | 796 | 29,005 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 27,591 | 312 | 2,678 | 30,581 | 27,812 | 397 | 796 | 29,005 |
1
1 £349 million relates to the fair value of insurance contracts acquired as part of the acquisition of SLF Canada UK Limited (see note H2).
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023234
2023 | 2022 | |||||||
Liabilities for remaining coverage | Liabilities for remaining coverage | |||||||
| Liabilities for | Liabilities for | |||||||
| Excluding loss | Loss | incurred | Excluding loss | Loss | incurred | |||
| component | component | claims | Total | component | component | claims | Total | |
| Europe & Other | £m | £m | £m | £m | £m | £m | £m | £m |
Insurance contract liabilities as at 1 January | 22,271 | 72 | 446 | 22,789 | 27,488 | 64 | 319 | 27,871 |
Insurance contract assets as at 1 January | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 1 January | 22,271 | 72 | 446 | 22,789 | 27,488 | 64 | 319 | 27,871 |
Insurance revenue (note C1) | (571) | – | – | (571) | (655) | – | – | (655) |
| Insurance service expenses | ||||||||
Incurred claims and other expenses | – | (11) | 526 | 515 | – | (3) | 603 | 600 |
| Amortisation of insurance acquisition | ||||||||
cash flows | 14 | – | – | 14 | 16 | – | – | 16 |
| Losses on onerous contracts and reversals | ||||||||
of those losses | – | 39 | – | 39 | – | 9 | – | 9 |
| Changes to liabilities for incurred claims | ||||||||
(past service) | – | – | (104) | (104) | – | – | 8 | 8 |
| Impairment of assets for insurance | ||||||||
acquisition cash flows | (3) | – | – | (3) | – | – | – | – |
Insurance service result | (560) | 28 | 422 | (110) | (639) | 6 | 611 | (22) |
Insurance finance income/expense | 1,488 | 14 | 15 | 1,517 | (5,830) | 2 | 1 | (5,827) |
| Total changes in the consolidated | ||||||||
income statement | 928 | 42 | 437 | 1,407 | (6,469) | 8 | 612 | (5,849) |
Investment components | (1,483) | – | 1,483 | – | (1,172) | – | 1,172 | – |
| Cash flows: | ||||||||
Premiums received | 1,673 | – | – | 1,673 | 1,731 | – | – | 1,731 |
Claims and other expenses paid | – | – | (2,259) | (2,259) | – | – | (1,666) | (1,666) |
Insurance acquisition cash flows | (116) | – | – | (116) | (102) | – | – | (102) |
Total cash flows | 1,557 | – | (2,259) | (702) | 1,629 | – | (1,666) | (37) |
Other movements 1 | (218) | 28 | (14) | (204) | 795 | – | 9 | 804 |
Net insurance contract liabilities as at 31 December | 23,055 | 142 | 93 | 23,290 | 22,271 | 72 | 446 | 22,789 |
Insurance contract liabilities as at 31 December | 23,055 | 142 | 93 | 23,290 | 22,271 | 72 | 446 | 22,789 |
Insurance contract assets as at 31 December | – | – | – | – | – | – | – | – |
Net insurance contract liabilities as at 31 December | 23,055 | 142 | 93 | 23,290 | 22,271 | 72 | 446 | 22,789 |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F3. Movements in liabilities for remaining coverage and liabilities for incurred claims for insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 235
2023 | 2022 | ||||||||
| Estimates of | Estimates of | ||||||||
| the present | the present | ||||||||
| value of future | Risk | Contractual | value of future | Risk | Contractual | ||||
| cash flows | adjustment | service margin | Total | cash flows | adjustment | service margin | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | ||
Reinsurance contract liabilities as at 1 January | (8) | – | 1 | (7) | – | – | – | – | |
Reinsurance contract assets as at 1 January | 2,285 | 478 | 1,308 | 4,071 | 3,032 | 659 | 1,028 | 4,719 | |
Net reinsurance contract assets as at 1 January | 2,277 | 478 | 1,309 | 4,064 | 3,032 | 659 | 1,028 | 4,719 | |
| Changes in profit or loss: | |||||||||
CSM recognised for services received | – | – | (168) | (168) | – | – | (113) | (113) | |
Risk adjustment for the risk expired | – | (30) | – | (30) | (42) | (42) | |||
Experience adjustments | 27 | – | – | 27 | (13) | – | (13) | ||
Total change relating to current service | 27 | (30) | (168) | (171) | (13) | (42) | (113) | (168) | |
Contracts initially recognised in the period | (351) | 229 | 122 | – | (193) | 120 | 73 | – | |
Changes in estimates that adjust the CSM | (610) | (49) | 659 | – | (285) | 9 | 276 | – | |
| Changes in estimates that do not adjust | |||||||||
the CSM | (17) | 7 | – | (10) | – | (5) | – | (5) | |
Reversal of impairment of assets for reinsurance acquisition cash flows | 2 | – | – | 2 | – | – | – | – | |
Total change relating to future service | (976) | 187 | 781 | (8) | (478) | 124 | 349 | (5) | |
| Changes in amounts recoverable arising | |||||||||
| from changes in liabilities for incurred | |||||||||
claims (past service) | (1) | – | – | (1) | 11 | – | – | 11 | |
Net expenses from reinsurance contracts | (950) | 157 | 613 | (180) | (480) | 82 | 236 | (162) | |
| – | |||||||||
Reinsurance finance (expense)/income | 156 | (3) | 26 | 179 | (808) | (263) | 18 | (1,053) | |
Total changes in the profit or loss | (794) | 154 | 639 | (1) | (1,288) | (181) | 254 | (1,215) | |
| Cash flows: | |||||||||
Premiums paid | 3,085 | – | – | 3,085 | 1,656 | – | – | 1,656 | |
Claims recovered and other expenses paid | (2,280) | – | – | (2,280) | (1,090) | – | – | (1,090) | |
Total cash flows | 805 | – | – | 805 | 566 | – | – | 566 | |
Other movements 1 | (122) | 1 | (18) | (139) | (33) | – | 27 | (6) | |
Net reinsurance contract assets as at 31 December | 2,166 | 633 | 1,930 | 4,729 | 2,277 | 478 | 1,309 | 4,064 | |
Reinsurance contract liabilities as at 31 December | (244) | 37 | 60 | (147) | (8) | 1 | (7) | ||
Reinsurance contract assets as at 31 December | 2,410 | 596 | 1,870 | 4,876 | 2,285 | 478 | 1,308 | 4,071 | |
Net reinsurance contract assets as at 31 December | 2,166 | 633 | 1,930 | 4,729 | 2,277 | 478 | 1,309 | 4,064 | |
| Analysed by segment as follows: | |||||||||
Retirement Solutions | 935 | 537 | 1,604 | 3,076 | 1,132 | 379 | 952 | 2,463 | |
Pensions & Savings | 20 | 2 | – | 22 | – | – | – | – | |
With-profits | 820 | 46 | 147 | 1,013 | 869 | 38 | 142 | 1,049 | |
Europe & Other Net reinsurance contract assets as at | 391 | 48 | 179 | 618 | 276 | 61 | 215 | 552 | |
31 December | 2,166 | 633 | 1,930 | 4,729 | 2,277 | 478 | 1,309 | 4,064 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023236
F5. Movements in liabilities for remaining coverage and liabilities for incurred claims for reinsurance contracts held
The following reconciliations show how the net carrying amounts of reinsurance contracts held changed over the year as a result of cash flows,
amounts recognised in the consolidated income statement and other movements, analysed by remaining coverage and incurred claims.
2023 | 2022 | ||||||||
Assets for remaining coverage | Assets for remaining coverage | ||||||||
| Excluding loss | Assets for | Excluding loss | Assets for | ||||||
| recovery | Loss recovery | incurred | recovery | Loss recovery | incurred | ||||
| component | component | claims | Total | component | component | claims | Total | ||
£m | £m | £m | £m | £m | £m | £m | £m | ||
Reinsurance contract liabilities as at 1 January | (7) | – | – | (7) | – | – | – | – | |
Reinsurance contract assets as at 1 January | 6,705 | 47 | (2,681) | 4,071 | 7,915 | 52 | (3,248) | 4,719 | |
Net reinsurance contract assets as at 1 January | 6,698 | 47 | (2,681) | 4,064 | 7,915 | 52 | (3,248) | 4,719 | |
| – | |||||||||
Reinsurance expenses | (2,349) | – | – | (2,349) | (1,779) | – | – | (1,779) | |
| Claims recoverable and other expenses | |||||||||
incurred | – | – | 2,181 | 2,181 | – | – | 1,612 | 1,612 | |
| Changes in the CSM due to recognition | |||||||||
| and reversal of a loss-recovery component | |||||||||
from onerous underlying contracts | – | (10) | – | (10) | – | (4) | – | (4) | |
| Changes to assets for incurred claims | |||||||||
(past service) | – | – | (1) | (1) | – | – | 11 | 11 | |
| Cost of retroactive cover on reinsurance | |||||||||
contracts held | – | (3) | – | (3) | – | (2) | – | (2) | |
Reversal of impairment of assets for insurance acquisition cash flows | 2 | – | – | 2 | – | – | – | – | |
| Net income/(expenses) from reinsurance | |||||||||
contracts held | (2,347) | (13) | 2,180 | (180) | (1,779) | (6) | 1,623 | (162) | |
Reinsurance finance income/expense | 179 | – | – | 179 | (1,054) | 1 | – | (1,053) | |
| Total changes in the consolidated | |||||||||
income statement | (2,168) | (13) | 2,180 | (1) | (2,833) | (5) | 1,623 | (1,215) | |
Investment components | (35) | – | 35 | – | (32) | – | 32 | – | |
Cash flows: | – | ||||||||
Premiums paid | 3,085 | – | – | 3,085 | 1,656 | – | – | 1,656 | |
Claims recovered and other expenses paid | – | – | (2,280) | (2,280) | – | – | (1,090) | (1,090) | |
Reinsurance acquisition cash flows | – | – | – | – | – | – | – | – | |
Total cash flows | 3,085 | – | (2,280) | 805 | 1,656 | – | (1,090) | 566 | |
| Other movements | (585) | 3 | 443 | (139) | (8) | – | 2 | (6) | |
Net reinsurance contract assets as at 31 December | 6,995 | 37 | (2,303) | 4,729 | 6,698 | 47 | (2,681) | 4,064 | |
Reinsurance contract liabilities as at 31 December | (152) | – | 5 | (147) | (7) | – | – | (7) | |
Reinsurance contract assets as at 31 December | 7,147 | 37 | (2,308) | 4,876 | 6,705 | 47 | (2,681) | 4,071 | |
Net reinsurance contract assets as at 31 December | 6,995 | 37 | (2,303) | 4,729 | 6,698 | 47 | (2,681) | 4,064 | |
| Analysed by segment as follows: | |||||||||
Retirement Solutions | 5,421 | 36 | (2,381) | 3,076 | 5,148 | 46 | (2,731) | 2,463 | |
Pensions & Savings | 6 | – | 16 | 22 | – | – | – | – | |
With-Profits | 984 | – | 29 | 1,013 | 1,025 | – | 24 | 1,049 | |
Europe & Other Net reinsurance contract assets as at | 584 | 1 | 33 | 618 | 525 | 1 | 26 | 552 | |
31 December | 6,995 | 37 | (2,303) | 4,729 | 6,698 | 47 | (2,681) | 4,064 | |
1
1 £(153) million relates to the fair value of insurance contracts acquired as part of the acquisition of SLF of Canada UK Limited (see note H2).
F. Insurance contracts, investment contracts with DPF and reinsurance continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 237
F6. The impact on the current period of transition approaches adopted in establishing CSMs
The impact on the current period of the transition approaches adopted in establishing CSMs for insurance contracts issued and reinsurance
contracts held is shown in the tables below. For further details of the transition approaches applied see note A2.1.1.
F6.1 Insurance contracts
Retirement Solutions
2023 | 2022 | |||||
| Fully retrospective | Fully retrospective | |||||
| approach at | approach at | |||||
| Fair value approach | transition and new | Fair value approach | transition and new | |||
| at transition | contracts | Total | at transition | contracts | Total | |
| £m | £m | £m | £m | £m | £m | |
CSM as at 1 January | 784 | 2,037 | 2,821 | 817 | 1,854 | 2,671 |
| Changes that relate to current service: | ||||||
CSM recognised for services provided | (103) | (157) | (260) | (77) | (130) | (207) |
| Changes that relate to future service: | ||||||
Contracts initially recognised in the period | – | 435 | 435 | – | 232 | 232 |
Changes in estimates that adjust the CSM | 438 | 220 | 658 | 30 | 51 | 81 |
Insurance service result | 335 | 498 | 833 | (47) | 153 | 106 |
Insurance finance expenses | 18 | 44 | 62 | 14 | 30 | 44 |
Total changes in profit or loss | 353 | 542 | 895 | (33) | 183 | 150 |
Other movements | 25 | – | 25 | – | – | – |
CSM as at 31 December | 1,162 | 2,579 | 3,741 | 784 | 2,037 | 2,821 |
2023 | 2022 | |||||
| Fully retrospective | Fully retrospective | |||||
| approach at | approach at | |||||
| Fair value approach | transition and new | Fair value approach | transition and new | |||
| at transition | contracts | Total | at transition | contracts | Total | |
| Pensions & Savings | £m | £m | £m | £m | £m | £m |
CSM as at 1 January | 94 | – | 94 | 96 | – | 96 |
| Changes that relate to current service: | ||||||
CSM recognised for services provided | (17) | (8) | (25) | (13) | – | (13) |
| Changes that relate to future service: | ||||||
Contracts initially recognised in the period | – | 34 | 34 | – | – | – |
Changes in estimates that adjust the CSM | 54 | 50 | 104 | 11 | – | 11 |
Insurance service result | 37 | 76 | 113 | (2) | – | (2) |
Insurance finance income | – | (4) | (4) | – | – | – |
Total changes in profit or loss | 37 | 72 | 109 | (2) | – | (2) |
Other movements | (2) | – | (2) | – | – | – |
CSM as at 31 December | 129 | 72 | 201 | 94 | – | 94 |
2023 | 2022 | |||||
| Fully retrospective | Fully retrospective | |||||
| approach at | approach at | |||||
| Fair value approach | transition and new | Fair value approach | transition and new | |||
| at transition | contracts | Total | at transition | contracts | Total | |
| With-Profits | £m | £m | £m | £m | £m | £m |
CSM as at 1 January | 514 | 51 | 565 | 417 | 16 | 433 |
| Changes that relate to current service: | ||||||
CSM recognised for services provided | (69) | (8) | (77) | (89) | (10) | (99) |
| Changes that relate to future service: | ||||||
Contracts initially recognised in the period | – | – | – | – | – | – |
Changes in estimates that adjust the CSM | 90 | 29 | 119 | 180 | 45 | 225 |
Insurance service result | 21 | 21 | 42 | 91 | 35 | 126 |
Insurance finance expenses | 9 | 1 | 10 | 6 | – | 6 |
Total changes in profit or loss | 30 | 22 | 52 | 97 | 35 | 132 |
Other movements | (19) | (1) | (20) | – | – | – |
CSM as at 31 December | 525 | 72 | 597 | 514 | 51 | 565 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023238
| Europe & Other | ||||||
2023 | 2022 | |||||
| Fully retrospective | Fully retrospective | |||||
| approach at | approach at | |||||
| Fair value approach | transition and new | Fair value approach | transition and new | |||
| at transition | contracts | Total | at transition | contracts | Total | |
| £m | £m | £m | £m | £m | £m | |
CSM as at 1 January | 697 | 612 | 1,309 | 498 | 530 | 1,028 |
| Changes that relate to current service: | ||||||
CSM recognised for services received | (99) | (69) | (168) | (67) | (46) | (113) |
| Changes that relate to future service: | ||||||
Contracts initially recognised in the period | – | 122 | 122 | – | 73 | 73 |
Changes in estimates that adjust the CSM | 254 | 405 | 659 | 219 | 56 | 275 |
Net expenses from reinsurance contracts | 155 | 458 | 613 | 152 | 83 | 235 |
Reinsurance finance income | 10 | 16 | 26 | 9 | 9 | 18 |
Total changes in profit or loss | 165 | 474 | 639 | 161 | 92 | 253 |
Other movements | (39) | 21 | (18) | 38 | (10) | 28 |
CSM as at 31 December | 823 | 1,107 | 1,930 | 697 | 612 | 1,309 |
| Analysed by segment as follows: | ||||||
Retirement Solutions | 497 | 1,107 | 1,604 | 339 | 613 | 952 |
With-Profits | 147 | – | 147 | 143 | (1) | 142 |
Europe & Other | 179 | – | 179 | 215 | – | 215 |
CSM as at 31 December | 823 | 1,107 | 1,930 | 697 | 612 | 1,309 |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F6.1 Insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 239
| More than 10 | ||||||||
| Less than 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | 5-10 years | years | Total | |
| 2023 | £m | £m | £m | £m | £m | £m | £m | £m |
| Insurance contracts issued | ||||||||
Retirement Solutions | 243 | 236 | 225 | 214 | 205 | 877 | 1,741 | 3,741 |
Pensions & Savings | 26 | 21 | 18 | 16 | 14 | 49 | 57 | 201 |
With-Profits | 66 | 56 | 50 | 44 | 37 | 126 | 218 | 597 |
Europe & Other | 33 | 25 | 23 | 20 | 18 | 64 | 61 | 244 |
Total CSM | 368 | 338 | 316 | 294 | 274 | 1,116 | 2,077 | 4,783 |
| Reinsurance contracts held | ||||||||
Retirement Solutions | (116) | (111) | (105) | (99) | (93) | (383) | (697) | (1,604) |
Pensions & Savings | – | – | – | – | – | – | – | – |
With-Profits | (14) | (13) | (12) | (11) | (9) | (32) | (56) | (147) |
Europe & Other | (16) | (15) | (14) | (13) | (13) | (51) | (57) | (179) |
Total CSM | (146) | (139) | (131) | (123) | (115) | (466) | (810) | (1,930) |
F8. Effect of contracts initially recognised in the year
The effect on the measurement components arising from the initial recognition of insurance and reinsurance contracts in the year is disclosed in
the tables below. Contracts issued mainly comprise of bulk purchase annuity transactions completed in the year and protection business.
Contracts acquired in the year relate to the acquisition of SLF of Canada UK Limited (see note H2).
F8.1 Insurance contracts
Retirement Solutions
2023 | 2022 | |||||||||
Contracts issued | Contracts acquired | Contracts issued | Contracts acquired | |||||||
| Profitable | Onerous | Profitable | Onerous | Total | Profitable | Onerous | Profitable | Onerous | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Estimate of present value of future | ||||||||||
| cash outflows: | ||||||||||
Insurance acquisition cash flows | 39 | – | – | – | 39 | 2 | 1 | – | – | 3 |
| Claims and other directly | ||||||||||
attributable expenses | 5,710 | – | 1,443 | – | 7,153 | 3,881 | 106 | – | – | 3,987 |
| Estimates of present value of future | ||||||||||
cash outflows | 5,749 | – | 1,443 | – | 7,192 | 3,883 | 107 | – | – | 3,990 |
| Estimates of present value of future | ||||||||||
cash inflows | (6,280) | – | (1,514) | – | ( 7,794) | (4,238) | (109) | – | – | (4,347) |
Risk adjustment incurred | 132 | – | 35 | – | 167 | 123 | 5 | – | – | 128 |
CSM | 399 | – | 36 | – | 435 | 232 | – | – | – | 232 |
Losses on onerous contracts at initial recognition | – | – | – | – | – | – | 3 | – | – | 3 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023240
2023 | 2022 | |||||||||
Contracts issued | Contracts acquired | Contracts issued | Contracts acquired | |||||||
| Profitable | Onerous | Profitable | Onerous | Total | Profitable | Onerous | Profitable | Onerous | Total | |
| Pension & Savings | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Estimate of present value of future | ||||||||||
| cash outflows: | ||||||||||
| Claims and other directly | ||||||||||
attributable expenses | – | – | 2,344 | – | 2,344 | – | – | – | – | – |
| Estimates of present value of future | ||||||||||
cash outflows | – | – | 2,344 | – | 2,344 | – | – | – | – | – |
| Estimates of present value of future | ||||||||||
cash inflows | – | – | (2,411) | – | (2,411) | – | – | – | – | – |
Risk adjustment | – | – | 33 | – | 33 | – | – | – | – | – |
CSM | – | – | 34 | – | 34 | – | – | – | – | – |
Losses on onerous contracts at initial recognition | – | – | – | – | – | – | – | – | – | – |
2023 | 2022 | |||||||||
Contracts issued | Contracts acquired | Contracts issued | Contracts acquired | |||||||
| Profitable | Onerous | Profitable | Onerous | Total | Profitable | Onerous | Profitable | Onerous | Total | |
| With-Profits | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Estimate of present value of future | ||||||||||
| cash outflows: | ||||||||||
| Claims and other directly | ||||||||||
attributable expenses | – | – | 349 | – | 349 | – | – | – | – | – |
| Estimates of present value of future | ||||||||||
cash outflows | – | – | 349 | – | 349 | – | – | – | – | – |
| Estimates of present value of future | ||||||||||
cash inflows | – | – | (349) | – | (349) | – | – | – | – | – |
Risk adjustment | – | – | – | – | – | – | – | – | – | – |
CSM | – | – | – | – | – | – | – | – | – | – |
Losses on onerous contracts at initial recognition | – | – | – | – | – | – | – | – | – | – |
2023 | 2022 | |||||||||
Contracts issued | Contracts acquired | Contracts issued | Contracts acquired | |||||||
Profitable | Onerous | Profitable | Onerous | Total | Profitable | Onerous | Profitable | Onerous | Total | |
Europe & Other Estimate of present value of future | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| cash outflows: | ||||||||||
Insurance acquisition cash flows | 80 | – | – | – | 80 | 86 | – | – | – | 86 |
| Claims and other directly | ||||||||||
attributable expenses | 172 | 270 | 109 | – | 551 | 423 | 215 | – | – | 638 |
| Estimates of present value of future | ||||||||||
cash outflows | 252 | 270 | 109 | – | 631 | 509 | 215 | – | – | 724 |
| Estimates of present value of future | ||||||||||
cash inflows | (308) | (268) | (112) | – | (688) | (559) | (212) | – | – | (771) |
Risk adjustment | 5 | 2 | 1 | – | 8 | 4 | – | – | – | 4 |
CSM | 51 | – | 2 | – | 53 | 46 | – | – | – | 46 |
Losses on onerous contracts at initial recognition | – | 4 | – | – | 4 | – | 3 | – | – | 3 |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F8.1 Insurance contracts continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 241
2023 | 2022 | |||||||||
Contracts originated | Contracts acquired | Contracts originated | Contracts acquired | |||||||
| Without a | Without a | Without a | Without a | |||||||
| loss | With a loss | loss | With a loss | loss | With a loss | loss | With a loss | |||
| recovery | recovery | recovery | recovery | recovery | recovery | recovery | recovery | |||
| component | component | component | component | Total | component | component | component | component | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Estimates of present value of future | ||||||||||
cash inflows | 8,287 | – | 153 | – | 8,440 | 3,650 | – | – | – | 3,650 |
| Estimates of present value of future | ||||||||||
cash outflows | (8,584) | – | (207) | – | (8,791) | (3,843) | – | – | – | (3,843) |
Risk adjustment incurred | 195 | – | 34 | – | 229 | 120 | – | – | – | 120 |
CSM | 102 | – | 20 | – | 122 | 73 | – | – | – | 73 |
Income recognised on initial recognition | – | – | – | – | – | – | – | – | – | – |
F9. Underlying items
The following table sets out the composition and the fair value of underlying items of the Group’s participating contracts which are measured
using the variable fee approach.
2023 | 2022 | |||||||
| Pensions & | Europe & | Pensions & | Europe & | |||||
| Savings | With-Profits | Other | Total | Savings | With-Profits | Other | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
Collective investment schemes | 17,572 | 17,027 | 15,549 | 50,148 | 17,068 | 17,442 | 14,268 | 48,778 |
Debt securities | 2,860 | 8,095 | 3,910 | 14,865 | 2,711 | 7,956 | 3,605 | 14,272 |
Equities | 2,390 | 5,846 | 966 | 9,202 | 1,562 | 5,824 | 942 | 8,328 |
Investment property | 319 | 798 | 18 | 1,135 | 277 | 872 | 19 | 1,168 |
Derivative assets | 3 | 263 | 1,019 | 1,285 | 5 | 295 | 1,287 | 1,587 |
Cash and cash equivalents | 47 | 81 | 329 | 457 | 48 | 122 | 365 | 535 |
Loans and deposits | – | 3 | 199 | 202 | – | 2 | 238 | 240 |
Other assets | 81 | 633 | 174 | 888 | 67 | 1,026 | 382 | 1,475 |
Derivative liabilities | (1) | (459) | (430) | (890) | (6) | (613) | (536) | (1,155) |
Obligation for repayment of collateral received | (1) | (125) | (231) | (357) | (3) | (127) | (254) | (384) |
Insurance contract liabilities | – | (2,034) | (4) | (2,038) | – | (2,148) | – | (2,148) |
Investment contract liabilities | – | (6,628) | – | (6,628) | – | (6,907) | – | (6,907) |
Other liabilities | (31) | (703) | (550) | (1,284) | (12) | (617) | (186) | (815) |
23,239 | 22,797 | 20,949 | 66,985 | 21,717 | 23,127 | 20,130 | 64,974 |
F10. Collateral arrangements
It is the Group’s practice to obtain collateral to mitigate the counterparty risk related to reinsurance transactions usually in the form of cash
or marketable financial instruments.
Where the Group receives collateral in the form of marketable financial instruments which it is not permitted to sell or re-pledge except in the
case of default, it is not recognised in the statement of consolidated financial position. The fair value of financial assets accepted as collateral for
reinsurance transactions but not recognised in the statement of consolidated financial position amounts to £4,880 million (2022: £4,002 million).
Where the Group receives collateral on reinsurance transactions in the form of cash it is recognised in the statement of consolidated financial
position along with a corresponding liability to repay the amount of collateral received, disclosed as part of ‘Reinsurance contract assets’. Where
there is interest payable on such collateral, it is recognised within Net finance income/(expense) from reinsurance contracts. The amounts
recognised as financial assets and liabilities from cash collateral received at 31 December 2023 are set out below.
| Reinsurance transactions | ||
| 2023 | 2022 | |
| £m | £m | |
Financial assets | 208 | 267 |
Financial liabilities | 208 | 267 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023242
F. Insurance contracts, investment contracts with DPF and reinsurance continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 243
Impact on profit after tax and equity | Impact on CSM | |||||
Gross of reinsurance | Net of reinsurance | Gross of reinsurance | Net of reinsurance | |||
2023 | Change in risk variable | £m | £m | £m | £m | |
| Assurance mortality | +5% | (33) | (49) | (112) | (54) | |
-5% | (24) | (6) | 211 | 149 | ||
| Annuitant longevity | +5% | 91 | (30) | (946) | (230) | |
-5% | (101) | 10 | 896 | 236 | ||
| Lapse rates | +10% | (5) | – | 33 | 20 | |
-10% | (8) | (13) | (11) | 4 | ||
| Expenses | +10% | (68) | (67) | (302) | (302) | |
-10% | 32 | 32 | 349 | 349 | ||
Impact on profit after tax and equity | Impact on CSM | |||||
Gross of reinsurance | Net of reinsurance | Gross of reinsurance | Net of reinsurance | |||
2022 | Change in risk variable | £m | £m | £m | £m | |
| Assurance mortality | +5% | (9) | (13) | (180) | (118) | |
-5% | (16) | 8 | 216 | 147 | ||
| Annuitant longevity | +5% | 54 | (62) | (835) | (250) | |
-5% | (108) | – | 845 | 304 | ||
| Lapse rates | +10% | 1 | 5 | 20 | 8 | |
-10% | (12) | (16) | – | 12 | ||
| Expenses | +10% | (57) | (57) | (275) | (274) | |
-10% | 27 | 27 | 315 | 314 | ||
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023244
The top-down approach was further refined as at 31 December 2023. This refinement related to the determination of the yield used in relation to
the Equity Release Mortgages asset class. The previous approach calculated the yield by reference to the internal securitisation structure
established for this asset class for Solvency II purposes. This was amended as at the reporting date to determine the yield based on the
underlying Equity Release Mortgage loans themselves. This refinement had the impact of increasing the liquidity premium applied at
31 December 2023 for GBP Annuities by circa 19bps.
Under the bottom-up approach, the discount rate is determined as the risk-free yield curve, adjusted for differences in liquidity characteristics
by adding an illiquidity premium. For with-profits business a single illiquidity premium is determined for each fund based on the cash flow
characteristics of the contracts within the fund and applied to all contracts within the fund.
The tables below set out the yield curves used to discount the cash flows of insurance contracts for major currencies.
| Risk-free rate (bps) | |||||
2023 | 1 year | 5 years | 10 years | 20 years | 30 years |
GBP | 474 | 336 | 328 | 343 | 336 |
Euro | 336 | 232 | 239 | 240 | 218 |
| Risk-free rate (bps) | |||||
2022 | 1 year | 5 years | 10 years | 20 years | 30 years |
GBP | 446 | 406 | 371 | 354 | 335 |
Euro | 318 | 313 | 309 | 276 | 229 |
| Liquidity premium over risk-free rate | ||
2023 | 2022 | |
bps | bps | |
Annuities GBP | 173 | 151 |
Annuities Euro | 49 | 44 |
With-Profits GBP – liquid liabilities | 20 | 10 |
With-Profits Euro – liquid liabilities | 20 | 10 |
With-Profits GBP – illiquid liabilities | 107 – 173 | 100 – 151 |
F11.2.2 Risk adjustment
The Group has used the confidence level technique to derive the risk adjustment for non-financial risk. The risk adjustment percentile is
determined based on the Group’s view of the compensation required in respect of non-financial risk. The diversification benefit included in the
risk adjustment reflects diversification between contracts within the perimeter of the Group’s Internal Model. There is no diversification allowed
for between contracts measured under standard formula and the internal model. The confidence level percentile is calculated on a one year
basis. The risk adjustment calibration is set at least annually, off-cycle, based on the Group’s current view of risk. The risk adjustment calculation is
reassessed at each reporting date, i.e. the risk adjustment is not locked-in at initial recognition.
For with-profit business, the shareholder’s portion of non-financial risks (including an allowance for burn-through costs to the shareholder) is
allowed for in the derivation of the risk adjustment. For non-profit business held within a with-profit fund, the risk adjustment takes into account
the compensation required by both the shareholder and the participating policyholders.
Confidence level techniques are used to derive the overall risk adjustment for non-financial risk and this is allocated down to each group of
contracts in accordance with their risk profiles. The confidence level percentile input used to determine the risk adjustment is as follows:
2023 | 2022 | |
Insurance contracts (gross of reinsurance) | 80th | 80th |
The one year confidence level used to determine the risk adjustment has been converted to an approximate lifetime confidence level using an
approach which involves dividing by the square root of the lifetime duration of the insurance business.
Lifetime confidence level | 2023 | 2022 |
Insurance contracts (gross of reinsurance) | 61st | 61st |
F11.2.3 Other assumptions
Other assumptions such as policyholder behaviours (lapses and surrender rates), expense inflation and demographic assumptions (i.e. longevity,
mortality) are a key component of determining the cash flows related to the insurance contract liabilities. The underwriting risk variables and
assumptions are set based on past experience and/or relevant industry data, market practice, regulations and expectations about future trends.
Economic assumptions used in the measurement of fulfilment cash flows are market consistent.
Expenses and expense inflation
Insurance contract liabilities include an allowance for the best estimate of future expenses associated with the administration of in-force policies.
This requires the allocation of the Group’s future expenses between those that relate to the administration of in-force policies, those attributable
to the acquisition of new business and other costs, such as corporate costs. There is a level of judgement applied in the analysis that supports this
allocation. Additionally, judgement is applied in the determination of the projected costs of the Group, in particular where those projections
include the impact of transition and integration activity.
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F11.2.1 Discount rates continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 245
Expenses are assumed to increase at either the rate of increase in the Retail Price Index (‘RPI’), or a rate derived from the UK inflation swaps curve,
plus fixed margins in accordance with the various management service agreements (‘MSAs’) the Group has in place with outsource partners. For
with-profit business the rate of RPI inflation is determined within each stochastic scenario. For other business it is based on the Bank of England
inflation spot curve. For MSAs with contractual increases set by reference to national average earnings inflation, this is approximated as RPI
inflation or RPI inflation plus 1%. In instances in which inflation risk is not mitigated, appropriate margins are applied to reflect central
expectations of earnings inflation in excess of RPI.
Mortality and longevity rates
Mortality rates are based on company experience and published tables, adjusted appropriately to take account of changes in the underlying
population mortality since the table was published, company experience and forecast changes in future mortality. Where appropriate, a margin
is added to assurance mortality rates to allow for adverse future deviations. Annuitant mortality rates are adjusted to make allowance for future
improvements in pensioner longevity.
Lapse and surrender rates (persistency)
The assumed rates for surrender and voluntary premium discontinuance depend on the length of time a policy has been in force and the relevant
company experience. Surrender or voluntary premium discontinuances are only assumed for realistic basis funds. Withdrawal rates used in the
valuation of with-profit policies are based on observed experience and adjusted when it is considered that future policyholder behaviour will be
influenced by different considerations than in the past. In particular, it is assumed that withdrawal rates for unitised with-profit contracts will be
higher on policy anniversaries on which Market Value Adjustments do not apply.
Discretionary participating bonus rate
The regular bonus rates assumed in each scenario are determined in accordance with each company’s Principles and Practices of Financial
Management (‘PPFM’). Final bonuses are assumed at a level such that maturity payments will equal asset shares subject to smoothing rules set out
in the PPFM and the value of guaranteed benefits.
Policyholder options and guarantees
Some of the Group’s products give potentially valuable guarantees, or give options to change policy benefits which can be exercised at the
policyholders’ discretion. These products are described below:
Most with-profit contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that date or dates. For
pensions contracts, the specified date is the policyholder’s chosen retirement date or a range of dates around that date. For endowment
contracts, it is the maturity date of the contract. For with-profit bonds it is often a specified anniversary of commencement, in some cases with
further dates thereafter. Annual bonuses when added to with-profit contracts usually increase the guaranteed amount.
There are guaranteed surrender values on a small number of older contracts.
Some pensions contracts include guaranteed annuity options. The total amounts provided in the with-profit and non-profit funds in respect of
the future costs of guaranteed annuity options are £860 million (2022: £922 million) and £61 million (2022: £61 million) respectively.
In common with other life companies in the UK which have written pension transfer and opt-out business, the Group has set up provisions for the
review and possible redress relating to personal pension policies. These provisions, which have been calculated from data derived from detailed
file reviews of specific cases and using a certainty equivalent approach, which give a result very similar to a market consistent valuation, are
included in liabilities arising under insurance contracts. The total amount provided in the with-profit funds and non-profit funds in respect of the
review and possible redress relating to pension policies, including associated costs, are £191 million (2022: £195 million) and £2 million (2022:
£2 million) respectively.
With-profit deferred annuities participate in profits only up to the date of retirement. At retirement, a guaranteed cash option allows the
policyholder to commute the annuity benefit into cash on guaranteed terms.
Assumption changes
During the year a number of changes were made to assumptions to reflect changes in expected experience. The impact of material changes
during the year was as follows:
| (Decrease)/ | (Decrease)/ | |||
| Increase/ | increase in loss | Increase/ | increase in loss | |
| (decrease) in CSM | component | (decrease) in CSM | component | |
| For insurance contracts: | ||||
Change in longevity assumptions | 918 | (1) | 239 | (17) |
Change in persistency assumptions | (6) | 17 | – | 5 |
Change in mortality assumptions | (102) | 12 | 127 | (1) |
Change in expenses assumptions | (170) | (35) | (172) | 59 |
| For reinsurance contracts: | ||||
Change in longevity assumptions | (598) | – | (122) | – |
Change in persistency assumptions | – | – | (10) | – |
Change in mortality assumptions | 15 | – | (40) | – |
Change in expenses assumptions | (13) | – | (33) | – |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023246
Product | Primary segment | Main insurance risks |
| With-Profit: | ||
Unitised & Traditional – without guarantees | With-Profits | Longevity & Lapse |
Unitised & Traditional – with guarantees | With-Profits | Lapse |
Annuities | With-Profits | Longevity |
| Non-profit: | ||
Deferred annuities – with guarantees | Retirement Solutions | Longevity |
Deferred annuities – without guarantees | Retirement Solutions | Longevity |
Immediate annuities | Retirement Solutions | Longevity |
Protection | Europe & Other | Mortality, Morbidity & Lapse |
Unit-linked – with guarantees | Pensions & Savings | Longevity & Lapse |
Unit-linked – without guarantees | Pensions & Savings | Mortality, Morbidity & Lapse |
F. Insurance contracts, investment contracts with DPF and reinsurance continued
F11.2.3 Other assumptions continued
Assumption changes continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 247
Deferred annuities
Deferred annuity policies are written to provide either a cash benefit at retirement, which the policyholder can use to buy an annuity on the terms
then applicable, or an annuity payable from retirement. The policies contain an element of guarantee expressed in the form that the contract is
written in, i.e. to provide cash or an annuity. Deferred annuity policies written to provide a cash benefit may also contain an option to convert the
cash benefit to an annuity benefit on guaranteed terms; these are known as GAR policies. Deferred annuity policies written to provide an annuity
benefit may also contain an option to convert the annuity benefit into cash benefits on guaranteed terms; these are known as Guaranteed Cash
Option (‘GCO’) policies. In addition, certain unit prices in the HWPF are guaranteed not to decrease.
Long-term interest rates remain relatively low compared to historical levels and life expectancy has increased more rapidly than originally
anticipated. The guaranteed terms on GAR policies are more favourable than the annuity rates currently available in the market available for cash
benefits. The guaranteed terms on GCO policies are currently not valuable. Deferred annuity policies which are written to provide annuity
benefits are managed in a similar manner to immediate annuities and are exposed to the same risks.
The option provisions on GAR policies are particularly sensitive to downward movements in interest rates, increasing life expectancy and the
proportion of customers exercising their option. Adverse movements in these factors could lead to a requirement to increase reserves which
could adversely impact profit and potentially require additional capital. In order to address the interest rate risk (but not the risk of increasing life
expectancy or changing customer behaviour with regard to exercise of the option), insurance subsidiaries within the Group have purchased
derivatives that provide protection against an increase in liabilities and have thus reduced the sensitivity of profit to movements in interest rates
(see note E6.2.2).
The Group seeks to manage this risk in accordance with both the terms of the issued policies and the interests of customers, and has obtained
external advice supporting the manner in which it operates the long-term funds in this respect.
Immediate annuities
This type of annuity is purchased with a single premium at the outset, and is paid to the policyholder for the remainder of their lifetime. Payments
may also continue for the benefit of a surviving spouse or partner after the annuitant’s death. Annuities may be level, or escalate at a fixed rate, or
may escalate in line with a price index and may be payable for a minimum period irrespective of whether the policyholder remains alive.
The main risks associated with this product are longevity and investment risks. Longevity risk arises where the annuities are paid for the lifetime of
the policyholder, and is managed through the initial pricing of the annuity and through reinsurance (appropriately collateralised) or transfer of
existing liabilities. Annuities may also be a partial ‘natural hedge’ against losses incurred in protection business in the event of increased mortality
(and vice versa) although the extent to which this occurs will depend on the similarity of the demographic profile of each book of business. In
addition, the Group has in place longevity swaps that provide downside protection over longevity risk.
The pricing assumption for mortality risk is based on both historic internal information and externally-generated information on mortality
experience, including allowances for future mortality improvements. Pricing will also include a contingency margin for adverse deviations
in assumptions.
Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is
managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis.
Protection
These contracts are typically secured by the payment of a regular premium payable for a period of years providing benefits payable on certain
events occurring within the period. The benefits may be a single lump sum or a series of payments and may be payable on death, serious
illness or sickness.
The main risk associated with this product is the claims experience and this risk is managed through the initial pricing of the policy (based
on actuarial principles), the use of reinsurance and a clear process for administering claims.
Market and credit risk is influenced by the extent to which the cash flows under the contracts have been matched by suitable assets which is
managed under the ALM framework. Asset/liability modelling is used to monitor this position on a regular basis.
G. Other statement of consolidated financial position notes
G1. Pension schemes
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023248
| 2023 | 2022 | |
| £m | £m | |
| Pearl Group Staff Pension Scheme | ||
Economic surplus | 50 | 46 |
Adjustment for insurance policies eliminated on consolidation | (1,507) | (1,501) |
Net pension scheme liability, as reported | (1,457) | (1,455) |
Reimbursement right in respect of reinsurance, as reported | 202 | 205 |
Add: value attributed to assets held by PLL within financial assets 1 | 1,506 | 1,576 |
Adjusted net pension scheme liabilities | 251 | 326 |
| PGL Pension Scheme | ||
Economic surplus | 20 | 23 |
Adjustment for insurance policies eliminated on consolidation | (1,093) | (1,079) |
Amounts due from subsidiary eliminated on consolidation | (18) | – |
Net pension scheme liability, as reported | (1,091) | (1,056) |
| Add: assets held by PLL within financial assets | 1,206 | 1,246 |
Adjusted net pension scheme asset | 115 | 190 |
| Abbey Life Staff Pension Scheme | ||
Economic deficit | (7) | (5) |
Minimum funding requirement obligation | (2) | (3) |
Net pension scheme liability | (9) | (8) |
| ReAssure Staff Pension Scheme | ||
Economic surplus | 14 | 22 |
Provision for tax on that part of the economic surplus available as a refund on a winding-up of the Scheme | (5) | (8) |
Net pension scheme asset | 9 | 14 |
| Sun Life of Canada Scheme | ||
Net pension scheme asset | 17 | – |
Reimbursement right | 2 | – |
G. Other statement of consolidated financial position notes continued
G1. Pension schemes continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 249
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023250
| Fair value of | Defined benefit | Pension Scheme | Reimburse-ment | |
| scheme assets | obligation | Liability | right | |
| 2023 | £m | £m | £m | £m |
At 1 January | 46 | (1,501) | (1,455) | 205 |
Interest income/(expense) | 2 | (72) | (70) | 10 |
Past service cost | – | (12) | (12) | – |
Included in profit or loss | 2 | (84) | (82) | 10 |
| Remeasurements: | ||||
Return on plan assets excluding amounts included in interest income | 2 | – | 2 | – |
Gain from changes in demographic assumptions | – | 12 | 12 | – |
Loss from changes in financial assumptions | – | (51) | (51) | – |
Experience gain | – | 15 | 15 | – |
Included in other comprehensive income | 2 | (24) | (22) | – |
Income received from insurance policies | 102 | – | 102 | – |
Benefit payments | (102) | 102 | – | (13) |
At 31 December | 50 | (1,507) | (1,457) | 202 |
G. Other statement of consolidated financial position notes continued
G1.1 Pearl Group Staff Pension Scheme continued
Pension Scheme Commitment Agreement and buy-in transactions continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 251
| Provision for tax on | |||||
| the economic | |||||
| Fair value of scheme | Defined benefit | surplus available as a | Pension Scheme | Reimbursement | |
| assets | obligation | refund | Liability | right asset | |
| 2022 | £m | £m | £m | £m | £m |
At 1 January | 807 | (2,224) | (92) | (1,509) | 212 |
Interest income/(expense) | 16 | (52) | (2) | (38) | 4 |
Past service cost | – | (15) | – | (15) | – |
Included in profit or loss | 16 | (67) | (2) | (53) | 4 |
| Remeasurements: | |||||
Return on plan assets excluding amounts included in interest income | (208) | – | – | (208) | (101) |
Gain from changes in demographic assumptions | – | 3 | – | 3 | – |
Gain from changes in financial assumptions | – | 805 | – | 805 | – |
Experience loss | – | (116) | – | (116) | – |
| Change in provision for tax on economic surplus available | |||||
as a refund | – | – | 94 | 94 | – |
Included in other comprehensive income | (208) | 692 | 94 | 578 | (101) |
Income received from insurance policies | 89 | – | – | 89 | – |
Benefit payments | (98) | 98 | – | – | (14) |
Assets transferred as premium for Scheme buy-in | (560) | – | – | (560) | – |
Assets transferred as premium for reinsurance arrangement | – | – | – | – | 104 |
At 31 December | 46 | (1,501) | – | (1,455) | 205 |
2023 | 2022 | |||
| Of which not | Of which not | |||
| quoted in an active | quoted in an active | |||
| Total | market | Total | market | |
| £m | £m | £m | £m | |
Properties | – | – | 5 | 5 |
Private equities | 5 | 5 | 4 | 4 |
Hedge funds | 3 | 3 | 3 | 3 |
Cash and other | 42 | – | 34 | – |
Obligations for repayment of stock lending collateral received | – | – | – | – |
Reported scheme assets | 50 | 8 | 46 | 12 |
| Add back: | ||||
Insurance policies eliminated on consolidation | 1,507 | 1,507 | 1,501 | 1,501 |
Economic value of assets | 1,557 | 1,515 | 1,547 | 1,513 |
| 2023 | 2022 | |
| % | % | |
Rate of increase for pensions in payment (5% per annum or RPI if lower) | 2.90 | 3.05 |
Rate of increase for deferred pensions ('CPI') | 2.60 | 2.70 |
Discount rate | 4.60 | 4.95 |
Inflation – RPI | 3.10 | 3.30 |
Inflation – CPI | 2.60 | 2.70 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023252
| 2023 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 1,507 | (41) | 43 | 23 | (22) | 37 | (37) | |
| 2022 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 1,501 | (40) | 42 | 26 | (25) | 37 | (37) |
G. Other statement of consolidated financial position notes continued
G1.1 Pearl Group Staff Pension Scheme continued
Principal assumptions continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 253
| Fair value of | Defined benefit | ||
| scheme assets | obligation | Total | |
| £m | £m | £m | |
At 1 January | 27 | (1,083) | (1,056) |
Interest income/(expense) | 1 | (52) | (51) |
Administrative expenses | (3) | – | (3) |
Included in profit or loss | (2) | (52) | (54) |
| Remeasurements: | |||
Return on plan assets excluding amounts included in interest income | (1) | – | (1) |
Gain from changes in demographic assumptions | – | 13 | 13 |
Loss from changes in financial assumptions | – | (27) | (27) |
Experience loss | – | (17) | (17) |
Included in other comprehensive income | (1) | (31) | (32) |
Income received from insurance policies | 69 | – | 69 |
Benefit payments | (69) | 69 | – |
Assets transferred as premium for scheme buy-out | (18) | – | (18) |
At 31 December | 6 | (1,097) | (1,091) |
| Fair value of scheme | Defined benefit | ||
| assets | obligation | Total | |
| 2022 | £m | £m | £m |
At 1 January | 31 | (1,623) | (1,592) |
Interest income/(expense) | 1 | (32) | (31) |
Administrative expenses | (4) | – | (4) |
Included in profit or loss | (3) | (32) | (35) |
| Remeasurements: | |||
Return on plan assets excluding amounts included in interest income | (1) | – | (1) |
Gain from changes in demographic assumptions | – | 5 | 5 |
Gain from changes in financial assumptions | – | 531 | 531 |
Experience loss | – | (36) | (36) |
Included in other comprehensive income | (1) | 500 | 499 |
Income received from insurance policies | 72 | – | 72 |
Benefit payments | (72) | 72 | – |
At 31 December | 27 | (1,083) | (1,056) |
2023 | 2022 | |||
| Of which not | Of which not | |||
| quoted in an active | quoted in an active | |||
| Total | market | Total | market | |
| £m | £m | £m | £m | |
Cash and other | 6 | – | 27 | – |
Reported scheme assets | 6 | – | 27 | – |
| Add back: | ||||
Insurance policies eliminated on consolidation | 1,093 | 1,093 | 1,079 | 1,079 |
Amounts due from subsidiary eliminated on consolidation | 18 | 18 | – | – |
Economic value of assets | 1,117 | 1,111 | 1,106 | 1,079 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023254
| 2023 | 2022 | |
| % | % | |
Rate of increase for pensions in payment (7.5% per annum or RPI if lower) | 3.10 | 3.30 |
Rate of increase for deferred pensions ('CPI') | 2.60 | 2.70 |
Discount rate | 4.60 | 4.95 |
Inflation – RPI | 3.10 | 3.30 |
Inflation – CPI | 2.60 | 2.70 |
| 2023 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 1,097 | (32) | 33 | 22 | (21) | 31 | (31) | |
| 2022 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 1,083 | (31) | 33 | 23 | (22) | 30 | (30) |
G. Other statement of consolidated financial position notes continued
G1.2 PGL Pension Scheme continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 255
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023256
2023 | 2022 | |||
| Of which not | Of which not | |||
| quoted in an active | quoted in an active | |||
| Total | market | Total | market | |
| £m | £m | £m | £m | |
Diversified income fund | 45 | – | 44 | – |
Fixed interest government bonds | 148 | – | 86 | – |
Corporate bonds | 97 | – | 87 | – |
Derivatives | (85) | (85) | (15) | (15) |
Cash and cash equivalents | 6 | – | 4 | – |
Pension scheme assets | 211 | (85) | 206 | (15) |
| 2023 | 2022 | |
| % | % | |
Rate of increase for pensions in payment (5% per annum or RPI if lower) | 2.90 | 3.05 |
Rate of increase for deferred pensions ('CPI' subject to caps) | 2.60 | 2.70 |
Discount rate | 4.60 | 4.95 |
Inflation – RPI | 3.10 | 3.30 |
Inflation – CPI | 2.60 | 2.70 |
| 2023 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 218 | (7) | 7 | 5 | (5) | 7 | (7) | |
| 2022 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 211 | (7) | 7 | 4 | (4) | 7 | (7) |
G. Other statement of consolidated financial position notes continued
G1.3 Abbey Life Staff Pension Scheme continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 257
| Provision for tax on | ||||
| the economic | ||||
| Fair value of | Defined benefit | surplus available as | ||
| scheme assets | obligation | a refund | Total | |
| 2023 | £m | £m | £m | £m |
At 1 January | 288 | (266) | (8) | 14 |
| – | ||||
Interest income/(expense) | 14 | (13) | – | 1 |
Administrative expenses | (1) | – | – | (1) |
Included in profit or loss | 13 | (13) | – | – |
| Remeasurements: | ||||
Return on plan assets excluding amounts included in interest income | (7) | – | – | (7) |
Gain from changes in demographic assumptions | – | 13 | – | 13 |
Loss from changes in financial assumptions | – | (10) | – | (10) |
Experience loss | – | (7) | – | (7) |
Change in provision for tax on economic surplus available as a refund | – | – | 3 | 3 |
Included in other comprehensive income | (7) | (4) | 3 | (8) |
Employer's contributions | 3 | – | – | 3 |
Benefit payments | (10) | 10 | – | – |
At 31 December | 287 | (273) | (5) | 9 |
| Provision for tax on | ||||
| the economic | ||||
| Fair value of scheme | Defined benefit | surplus available as a | ||
| assets | obligation | refund | Total | |
| 2022 | £m | £m | £m | £m |
At 1 January | 492 | (438) | (19) | 35 |
Interest income/(expense) | 9 | (9) | – | – |
Administrative expenses | (1) | – | – | (1) |
Included in profit or loss | 8 | (9) | – | (1) |
| Remeasurements: | ||||
Return on plan assets excluding amounts included in interest income | (203) | – | – | (203) |
Gain from changes in financial assumptions | – | 188 | – | 188 |
Experience loss | – | (19) | – | (19) |
Change in provision for tax on economic surplus available as a refund | – | – | 11 | 11 |
Included in other comprehensive income | (203) | 169 | 11 | (23) |
Employer's contributions | 3 | – | – | 3 |
Benefit payments | (12) | 12 | – | – |
At 31 December | 288 | (266) | (8) | 14 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023258
2023 | 2022 | |||
| Of which not quoted | Of which not quoted | |||
| Total | in an active market | Total | in an active market | |
| £m | £m | £m | £m | |
Equities | 32 | – | 31 | – |
Government bonds | 118 | – | 121 | – |
Corporate bonds | 92 | – | 83 | – |
Managed funds | – | – | – | – |
Other quoted securities | 41 | – | 45 | – |
Cash and cash equivalents | 4 | – | 8 | – |
Pension scheme assets | 287 | – | 288 | – |
| 2023 | 2022 | |
| % | % | |
Rate of increase for pensions in payment (5% per annum or RPI if lower) | 2.90 | 3.05 |
Rate of increase for deferred pensions | 2.60 | 2.70 |
Rate of increase in salaries | 3.60 | 3.70 |
Discount rate | 4.60 | 4.95 |
Inflation – RPI | 3.10 | 3.30 |
Inflation – CPI | 2.60 | 2.70 |
| 2023 | ||||||||
| Assumptions | Base | Discount rate | RPI | Life expectancy | ||||
| 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | |||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 273 | (11) | 11 | 9 | (9) | 7 | (7) | |
| 2022 | Base | Discount rate | RPI | Life expectancy | ||||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | ||
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | ||
Impact on the defined benefit obligation (£m) | 266 | (10) | 11 | 8 | (8) | 7 | (7) |
G. Other statement of consolidated financial position notes continued
G1.4 ReAssure Life Staff Pension Scheme continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 259
| Fair value of | Defined benefit | Reimbursement | ||
| scheme assets | obligation | Total | right | |
| £m | £m | £m | £m | |
On acquisition of SLF of Canada UK Limited (note H2) | 302 | (286) | 16 | 2 |
Interest income/(expense) | 14 | (13) | 1 | – |
Included in profit or loss | 14 | (13) | 1 | – |
| Remeasurements: | ||||
Return on plan assets excluding amounts included in interest income | (5) | – | (5) | – |
Gain from changes in demographic assumptions | – | 5 | 5 | – |
Loss from changes in financial assumptions | – | (4) | (4) | – |
Experience gain | – | 4 | 4 | – |
Included in other comprehensive income | (5) | 5 | – | – |
Benefit payments | (14) | 14 | – | – |
At 31 December | 297 | (280) | 17 | 2 |
| 2023 | ||
| Of which not | ||
| quoted in an active | ||
| Total | market | |
| £m | £m | |
Debt securities | 36 | – |
Cash and cash equivalents | 4 | – |
| Qualifying insurance contracts | 257 | 257 |
Pension scheme assets | 297 | 257 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023260
| 2023 | |
| % | |
Rate of increase for pensions in payment | 3.05 |
Rate of increase for deferred pensions | 2.15 |
Discount rate | 4.60 |
Inflation – RPI | 3.10 |
Inflation – CPI | 2.30 |
| 2023 | Base | Discount rate | RPI | Life expectancy | |||
| Assumptions | 25bps | 25bps | 25bps | 25bps | 1 year | 1 year | |
| Sensitivity level | increase | decrease | increase | decrease | increase | decrease | |
Impact on the defined benefit obligation (£m) | 280 | (9) | 9 | 7 | (8) | 11 | (11) |
G. Other statement of consolidated financial position notes continued
G1.5 Sun Life Assurance Company of Canada 1988 UK and Irish Employee Benefits scheme continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 261
| Acquired in-force | ||||
| Goodwill | business | Brands | Total | |
| 2023 | £m | £m | £m | £m |
| Cost or valuation | ||||
At 1 January | 57 | 4,180 | 131 | 4,368 |
Acquisition of SLF of Canada UK Limited | – | 16 | – | 16 |
At 31 December | 57 | 4,196 | 131 | 4,384 |
| Amortisation and impairment | ||||
At 1 January | (47) | (1,966) | (19) | (2,032) |
Amortisation charge for the year | – | (290) | (6) | (296) |
Impairment charge for the year | – | (28) | – | (28) |
At 31 December | (47) | (2,284) | (25) | (2,356) |
Carrying amount at 31 December | 10 | 1,912 | 106 | 2,028 |
Amount recoverable after 12 months | 10 | 1,654 | 100 | 1,764 |
| Acquired in-force | ||||
| Goodwill | business | Brands | Total | |
2022 restated 1 | £m | £m | £m | £m |
Cost or valuation at 1 January and 31 December | 57 | 4,180 | 131 | 4,368 |
| Amortisation and impairment | ||||
At 1 January | (47) | (1,617) | (13) | (1,677) |
Amortisation charge for the year | – | (332) | (6) | (338) |
Impairment charge for the year | – | (17) | – | (17) |
At 31 December | (47) | (1,966) | (19) | (2,032) |
Carrying amount | 10 | 2,214 | 112 | 2,336 |
Less amounts classified as held for sale (see note H3) | – | (37) | – | (37) |
Carrying amount at 31 December | 10 | 2,177 | 112 | 2,299 |
Amount recoverable after 12 months | 10 | 1,912 | 106 | 2,028 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023262
| Owner-occupied | Right-of-use assets | |||
| properties | – property | Equipment | Total | |
| 2023 | £m | £m | £m | £m |
| Cost or valuation | ||||
At 1 January | 32 | 96 | 67 | 195 |
Additions | 1 | – | 8 | 9 |
Revaluation losses | (5) | – | – | (5) |
At 31 December | 28 | 96 | 75 | 199 |
| Depreciation | ||||
At 1 January | – | (32) | (38) | (70) |
Depreciation | – | (10) | (13) | (23) |
At 31 December | – | (42) | (51) | (93) |
Carrying amount at 31 December | 28 | 54 | 24 | 106 |
G. Other statement of consolidated financial position notes continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 263
| 2022 | ||||
G4. Investment property
| 2023 | 2022 | |
| £m | £m | |
At 1 January | 6,233 | 8,592 |
Additions | 49 | 104 |
Acquisition of SLF of Canada UK Limited (note H2) | 283 | – |
Improvements | 27 | 27 |
Disposals | (484) | (1,141) |
Remeasurement of right-of-use asset | – | 2 |
Movement in foreign exchange | (4) | 12 |
Losses on adjustments to fair value (recognised in consolidated income statement) | (362) | (1,363) |
5,742 | 6,233 | |
Less amounts classified as held for sale (see note H3) | (2,044) | (2,506) |
At 31 December | 3,698 | 3,727 |
Unrealised losses on properties held at end of year | (180) | (1,582) |
As at 31 December 2023, a property portfolio including amounts classified held for sale of £5,621 million (2022: £6,070 million) is held by the life
companies in a mix of commercial sectors, spread geographically throughout the UK and Europe.
Investment properties also includes £42 million (2022: £62 million) of property reversions arising from sales of the NPI Extra Income Plan (see
note E5 for further details) and £64 million (2022: £80 million) from the Group’s interest in the residential property of policyholders who have
previously entered into an Equity Release Income Plan (‘ERIP’) policy.
Certain investment properties held by the life companies possess a ground rent obligation which gives rise to both a right-of-use asset and a
lease liability. The right-of-use asset associated with the ground rent obligation is valued at fair value and is included within the total investment
property valuation. The value of the ground rent right-of-use asset as at 31 December 2023 was £15 million (2022: £21 million). The
remeasurement resulted in no change in value of the ground rent right-of-use asset (2022: increase of £2 million). There were no additions (2022:
£2 million) and £6 million disposals (2022: £4 million) of ground rent right-of-use assets during the period.
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023264
Commercial investment property is measured at fair value by independent property valuers having appropriate recognised professional
qualifications and recent experiences in the location and category of the property being valued. The valuations are carried out in accordance
with the Royal Institute of Chartered Surveyors (‘RICS’) guidelines with expected income and capitalisation rate as the key non-observable inputs.
The NPI residential property reversions, an interest in customers’ properties which the Group will realise upon their death, are valued using
a discounted cash flow model based on the Group’s proportion of the current open market value, and discounted for the expected lifetime of
the policyholder derived from published mortality tables, the mortality rates are 130% for both males and females based on the IFL92C15 table
for males and the IML92C15 table for females. The open market value is measured by independent local property surveyors having appropriate
recognised professional qualifications with reference to the assumed condition of the property and local market conditions. The individual
properties are valued triennially and indexed using regional house price indices to the year end date. The discount rate is a 3 year swap rate plus
1.7% margin (2022: 3 year swap rate plus 1.7% margin), and adjusted for the deferred possession rate of 3.7% (2022: 3.7%). Assumptions are also
made in the valuation for future movements in property prices, based on a risk free rate. The residential property reversions have been
substantially refinanced under the arrangements with Santander as described in note E5.
The ERIP residential property reversions, an interest in the residential property of policyholders who have previously entered into an ERIP policy
and been provided with a lifetime annuity in return for the legal title to their property, are valued using unobservable inputs and management’s
best estimates. As the inward cash flows on these properties will not be received until the lifetime lease is no longer in force, which is usually upon
the death of the policyholder, these interests are valued on a reversionary basis which is a discounted current open market value.
The open market values of the properties are independently revalued every two years by members of the Royal Institution of Chartered
Surveyors and in the intervening period are adjusted by reference to the Nationwide Building Society regional indices of house prices. The
discount period is based on the best estimates of the likely date the property will become available for sale and the discount rate applied is
determined by the general partner as its best estimate of the appropriate discount rate. The mortality assumption is based on the PMLO8HAWP
table for males and the PFLO8HAWP table for females, adjusted to reflect the historic experience of the business concerned. The mortality rates
are projected using future mortality improvements from the CMI Mortality Projection Model. No explicit allowance is made for house price
inflation in the year through to their realisation. Therefore, the key assumptions used in the valuation of the reversionary interests are the interest
discount rate and the mortality assumption. The discount rate was 5% (2022: 5%).
The fair value measurement of the investment properties has been categorised as Level 3 based on the inputs to the valuation techniques used.
The following table shows the valuation techniques used in measuring the fair value of the investment properties, the significant non-observable
inputs used, the inter-relationship between the key non-observable inputs and the fair value measurement of the investment properties:
| Weighted average | Weighted average | |||
Description | Valuation techniques | Significant non-observable inputs | 2023 | 2022 |
Commercial Investment Property | RICS valuation | Expected income per sq. ft. | £23.41 | £22.41 |
| Estimated rental value per hotel room | £7,156 | £7,043 | ||
Estimated rental value per parking space | £1,123 | £1,115 | ||
Capitalisation rate | 5.13% | 5.01% |
The estimated fair value of commercial properties would increase (decrease) if:
• the expected income were to be higher (lower); or
• the capitalisation rate were to be lower (higher).
The estimated fair value of the NPI residential property reversions would increase (decrease) if:
• the deferred possession rate were to be lower (higher);
• the mortality rate were to be higher (lower).
The estimated fair value of the ERIP residential property reversions would increase (decrease) if:
• the discount rate were to be lower (higher);
• the mortality rate were to be higher (lower).
Direct operating expenses (offset against rental income in the consolidated income statement) in respect of investment properties that
generated rental income during the year amounted to £36 million (2022: £27 million). The direct operating expenses arising from investment
property that did not generate rental income during the year amounted to £5 million (2022: £5 million).
Future minimum lease rental receivables in respect of non-cancellable operating leases on investment properties were as follows:
| 2023 | 2022 | |
| £m | £m | |
Not later than 1 year | 278 | 356 |
Later than 1 year and not later than 5 years | 919 | 1,131 |
Later than 5 years | 2,903 | 3,345 |
G. Other statement of consolidated financial position notes continued
G4. Investment property continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 265
| 2022 | ||
| 2023 | restated | |
| £m | £m | |
Investment broker balances | 115 | 312 |
Cash collateral pledged and initial margins posted | 1,728 | 3,698 |
Property related receivables | 165 | 145 |
Deferred acquisition costs relating to investment contracts without DPF | 8 | 7 |
Other debtors | 562 | 293 |
At 31 December | 2,578 | 4,455 |
Amount recoverable after 12 months | 13 | 6 |
G6. Cash and cash equivalents
| 2023 | 2022 | |
| £m | £m | |
Bank and cash balances | 2,751 | 2,716 |
Short-term deposits (including notice accounts and term deposits) | 4,469 | 6,156 |
7,220 | 8,872 | |
Less amounts classified as held for sale | (52) | (33) |
At 31 December | 7,168 | 8,839 |
Deposits are subject to a combination of fixed and variable interest rates. The carrying amounts of balances held at amortised cost approximate
to fair value at the period end. Cash and cash equivalents in long-term business operations and consolidated collective investment schemes of
£6,994 million (2022: £8,597 million) are primarily held for the benefit of policyholders and so are not generally available for use by the owners.
| Restructuring provisions | ||||||||
| Transition and | Transfer of policy | |||||||
| Leasehold | Known | Indirect tax | Transformation | administration | ||||
| properties | Staff related | incidents | provisions | provision | provision | Other | Total | |
| 2023 | £m | £m | £m | £m | £m | £m | £m | £m |
At 1 January restated 1 | 9 | 7 | 48 | 29 | 72 | 8 | 11 | 184 |
Additions in the year | 2 | 1 | 9 | 43 | 6 | 1 | 10 | 72 |
| Acquisition of SLF of Canada | ||||||||
UK Limited (note H2) | – | 4 | – | – | – | – | 1 | 5 |
Utilised during the year | – | – | (24) | (3) | (20) | (4) | (9) | (60) |
Released during the year | (2) | (1) | (18) | (10) | (11) | – | (4) | (46) |
At 31 December | 9 | 11 | 15 | 59 | 47 | 5 | 9 | 155 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023266
Leasehold properties
The leasehold properties provision includes a £9 million (2022: £7 million) dilapidations provision in respect of obligations under operating leases
and £nil (2022: £2 million) in respect of the excess of lease rentals and other payments on properties that are currently vacant or are expected to
become vacant, over the amounts to be recovered from subletting these properties.
Staff related
Staff related provisions include provisions for unfunded pensions of £8 million (2022: £4 million), and private medical and other insurance costs
for former employees of £3 million (2022: £3 million).
Known incidents
The known incidents provision was created for historical data quality, administration systems problems and process deficiencies on the policy
administration, financial reconciliations and operational finance aspects of business outsourced. These balances represent the best estimates of
costs payable to customers. Additional information has been given below in respect of the more significant balances within this provision.
During 2021, a £15 million provision was recognised in relation to errors in final encashment calculations for With Profits Trustee Investment Plans
and in 2022 it was increased to £29 million. During 2023, £18 million (2022: £nil) was utilised and £7 million was released. The remaining balance
at 31 December 2023 is £4 million (2022: £29 million). An £11 million provision was also recognised in April 2021 following identification that
certain customers who have a Protected Pension Age or a Protected Tax Free Lump Sum may not have had their benefits settled correctly.
During 2023, £4 million (2022: £4 million) was released and the remaining balance at 31 December 2023 is £3 million (2022: £7 million). These
provisions will be utilised within one to four years.
In 2020, following completion of the Part VII transfer of the Legal & General business, a £12 million provision was recognised in respect of
amounts owed to customers due to various system and processing errors resulting in incorrect rules having been applied to policies. During the
year, the provision was increased by £2 million (2022: £nil) and a further £1 million (2022: £4 million) was released. The remaining balance at
31 December 2023 is £3 million (2022: £2 million). A new provision of £5 million was created during 2023 in relation to a pricing error within the
same business transfer caused by incorrect static data. During the year, £4 million was utilised and the remaining balance at 31 December 2023
is £1 million. These provisions will be utilised within one to two years.
The remaining provisions of £4 million as at 31 December 2023 (2022: £10 million) are expected to be utilised within one to four years. As at
31 December 2023, there are no significant uncertainties which could give rise to a material change to the value of the provisions held for current
known incidents.
Indirect tax provision
The indirect tax provision relates to various indirect tax matters across operational taxes, employment taxes and VAT. During the year, the
provision was strengthened by £43 million (2022: £nil). £3 million (2022: £nil) was utilised and a further £10 million (2022: £nil) was released.
The remaining balance at 31 December 2023, of £59 million (2022: £29 million) represents the Group’s estimate of the maximum exposure
as at the reporting date and is expected to be utilised in one to three years.
Restructuring provisions
Transition and transformation provision
Following the acquisition of the Standard Life Assurance businesses in August 2018, the Group established a transition and transformation
programme which aims to deliver the integration of the Group’s operating models via a series of phases. During 2019, the Group announced its
intention to extend its strategic partnership with TCS to provide customer servicing, to develop a digital platform and for migration of existing
Standard Life policies to this platform which raised a valid expectation of the impacts in those likely to be affected.
The initial provision was established in 2019 and included migration costs, severance costs and other expenses. Migration costs are considered a
direct expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during
2019. No costs have been provided for that relate to the ongoing servicing of policies. Migration costs payable to TCS are subject to limited
uncertainty as they are fixed under the terms of the agreement entered into. There was an increase in costs during 2022 following on from a
strategic decision to re-phase the programme. The severance costs are subject to uncertainty and will be impacted by the number of staff that
transfer to TCS, and the average salaries and number of years’ service of those affected.
During the year, the provision was increased by £6 million (2022: £33 million), a further £20 million (2022: £19 million) was utilised and £11 million
(2022: nil) was released. The remaining £47 million (2022: £72 million) is expected to be utilised within one to three years.
Transfer of policy administration
A significant proportion of the Group’s policy administration is outsourced to Diligenta Limited (‘Diligenta’), a UK-based subsidiary of Tata
Consultancy Services (‘TCS’). Diligenta provide life and pension business process services to a large number of the Group’s policyholders.
During 2018, the Group announced its intention to move to a single outsourcer platform and to transfer a further 2 million of the Group’s legacy
policies to Diligenta.
An initial provision was recognised in 2018 for the expected cost of the platform migration and for severance and other costs associated with
exiting from the current arrangements. Migration costs are considered a direct expenditure necessarily entailed by the restructuring and
represent an obligation arising from arrangements entered into with TCS during 2018. No costs have been provided for that relate to the
ongoing servicing of policies. The migration elements of the provision are subject to limited uncertainty as a consequence of the signed
agreements that are in place. The uncertainty in relation to the severance and associated exit costs is limited as the restructuring programme is
nearing completion. During the year the provision was increased by £1 million (2022: £4 million) and a further £4 million (2022: £4 million) was
utilised. The remaining provision of £5 million (2022: £8 million) is expected to be utilised within one year.
G. Other statement of consolidated financial position notes continued
G7. Provisions continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 267
Other provisions
Other provisions includes £3 million (2022: £4 million) of obligations arising under a gift voucher scheme operated by the SunLife business and
a commission clawback provision which represents the expected future clawback of commission income earned by the SunLife business as a
result of assumed lapses of policies or associated benefits.
Another provision of £1 million was also recognised during the year upon acquisition of SLF of Canada UK Limited in relation to restructuring
and litigation.
The remaining other provisions of £5 million (2022: £7 million) consist of a number of small balances, all of which are less than £3 million in value.
Discounting
The impact of discounting on all provisions during the year from either the passage of time or from a change in the discount rate is not material.
| 2022 | ||
| 2023 | restated | |
| £m | £m | |
| Current tax: | ||
Current tax receivable | 502 | 519 |
Current tax payable | (41) | (34) |
| Deferred tax: | ||
Deferred tax assets | 143 | 158 |
Deferred tax liabilities | (257) | (309) |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023268
| Recognised in | SLF of | Less | |||||
| consolidated | Recognised in other | Canada UK | amounts | ||||
| income | comprehensive | Limited | Other | classified as | |||
| 1 January | statement | income | acquisition | movements | held for sale | 31 December | |
| 2022 (restated) | £m | £m | £m | £m | £m | £m | £m |
Trading losses | 103 | 86 | – | – | 7 | – | 196 |
Capital losses | 32 | (8) | – | – | – | – | 24 |
| Expenses and deferred acquisition | |||||||
costs carried forward | 81 | 318 | – | – | (2) | – | 397 |
Provisions and other temporary differences | 28 | 6 | – | – | (2) | – | 32 |
Non-refundable pension scheme surplus | (255) | 392 | (288) | – | – | – | (151) |
Committed future pension contributions | – | 5 | 4 | – | – | – | 9 |
Accelerated capital allowances | 16 | 1 | – | – | – | – | 17 |
Intangibles | 2 | 11 | – | – | 1 | – | 14 |
Acquired in-force business | (445) | 43 | – | – | – | (3) | (405) |
| Actuarial liability differences between local GAAP | |||||||
and IFRS 17 | (341) | 339 | – | – | 4 | – | 2 |
Customer relationships | (30) | 2 | – | – | – | – | (28) |
Unrealised gains | (593) | 333 | 1 | – | (2) | – | (261) |
IFRS transitional adjustments | (5) | 5 | – | – | – | – | – |
| Other | – | 1 | – | – | 2 | – | 3 |
(1,407) | 1,534 | (283) | – | 8 | (3) | (151) |
| 2023 | 2022 | |
| £m | £m | |
| Deferred tax assets have not been recognised in respect of: | ||
Tax losses carried forward | 110 | 82 |
Excess expenses and deferred acquisition costs | 9 | 116 |
Actuarial liability differences between local GAAP and IFRS 17 | 14 | 27 |
Intangibles | 12 | 29 |
Deferred tax assets not recognised on capital losses | 312 | 40 |
G. Other statement of consolidated financial position notes continued
G8. Tax assets and liabilities continued
Movement in deferred tax liabilities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 269
| 2023 | 2022 | |
| £m | £m | |
At 1 January | 92 | 99 |
Leases incepted during the year | 1 | 6 |
Termination of leases following the disposal of associated investment properties | (7) | (4) |
Interest expense | 2 | 3 |
Lease payments | (14) | (14) |
Remeasurement of leases | – | 2 |
At 31 December | 74 | 92 |
Amount due within twelve months | 9 | 11 |
Amount due after twelve months | 65 | 81 |
| 2022 | ||
| restated | ||
| £m | ||
Accruals | 545 | 476 |
Deferred income | 34 | 105 |
Accruals and deferred income including amounts classified as held for sale | 579 | 581 |
Less amounts classified as held for sale | – | (37) |
At 31 December | 579 | 544 |
Amount due for settlement after 12 months | 42 | 35 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023270
| 2022 | ||
| restated | ||
| £m | ||
Investment broker balances | 727 | 513 |
Property related payables | 51 | 53 |
Investment management fees | 16 | 48 |
Other payables | 1,478 | 759 |
At 31 December | 2,272 | 1,373 |
Amount due for settlement after 12 months | – | – |
H. Interests in subsidiaries and associates
G. Other statement of consolidated financial position notes continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 271
H1.1 Significant restrictions
The ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans and advances is subject to local laws,
regulations and solvency requirements.
Each UK life company and the Group must retain sufficient capital at all times to meet the regulatory capital requirements mandated by or
otherwise agreed with the relevant national supervisory authority. Further information on the capital requirements applicable to Group entities
are set out in the Capital Management section (note I3). Under UK company law, dividends can only be paid if a UK company has distributable
reserves sufficient to cover the dividend.
In addition, contractual requirements may place restrictions on the transfer of funds as follows:
• Pearl Life Holdings Limited (‘PeLHL’) is required to make payments of contributions into charged accounts on behalf of the Abbey Life
Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2023, PeLHL held £9 million (2022: £9 million)
within debt securities and £24 million (2022: £18 million) within cash and cash equivalents in respect of these charged accounts. Further details
of when the remaining amounts may become payable to the pensions scheme are included in note G1.3.
• ReAssure Midco Limited (‘RML’) is required to make payments of contributions into a ring-fenced account on behalf of the ReAssure Staff
Pension Scheme. These amounts do not form part of the pension scheme assets and at 31 December 2023, RML held £44 million (2022:
£40 million) within debt securities in respect of this account. Further details of when these amounts may become payable to the pensions
scheme are included in note G1.4.
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023272
Acquired in-force business (AVIF)
An asset of £16 million arises reflecting the present value of future profits associated with the acquired in-force business. The AVIF has been
determined by reference to the fair value of investment contract rights acquired.
The valuation of AVIF has been determined by reference to the assumptions expected to be applied by a market participant in an orderly
transaction. The valuation approach uses present value techniques applied to the best estimate cash flows expected to arise from policies that
were in-force at the acquisition date, adjusted to reflect the price of bearing the uncertainty inherent in those cash flows. This approach
incorporates a number of judgements and assumptions which have impacted on the resultant valuation, the most significant of which include
expected policy lapses and surrender costs, and the expenses associated with servicing the policies, together with economic assumptions such
as future investment returns and the discount rate. The determination of the majority of these assumptions is carried out on a consistent basis with
those used in financial reporting with appropriate adjustments to reflect a market participant’s view. The adjustment for risk for the uncertainty in
the cash flows has been determined using a cost of capital approach.
The valuation of insurance contract liabilities and associated reinsurance assets has been carried out on a consistent basis with that applied by
the Group under the fair value approach on the transition to IFRS 17. Further information on the fair value approach used for the transition to IFRS
17 is set out in note A4.1 Determination of transition method and its application.
Deferred acquisition costs of £1 million and a deferred income liability of £2 million have been derecognised on acquisition and replaced as part
of the AVIF balance.
Other receivables
The financial assets acquired include other receivables with a fair value of £64 million. The gross amount due under the contracts is £64 million,
of which no balances are expected to be uncollectable.
Tax
The tax impact of the fair value adjustments recognised on acquisition has been reflected in the acquisition balance sheet.
Gain on acquisition
A gain on acquisition of £66 million has been recognised in the Group’s consolidated income statement for the year ended 31 December 2023,
reflecting the excess of the fair value of the net assets acquired over the consideration paid for the acquisition of the SLF of Canada UK businesses.
The consideration for the acquisition was fixed and determined using a ‘locked box’ pricing mechanism as at 31 December 2021. Over the period
between 31 December 2021 and the completion date, the value of the net assets acquired increased. This principally reflects a negative impact
on assets from increasing yields being more than offset by a reduction in liabilities as a result of favourable assumption changes and
demographic experience.
Additionally, in accordance with IFRS 3 Business Combinations, the acquired defined benefit pension schemes has been measured on
acquisition in accordance with the Group’s accounting policies as set out in note G1, as opposed to a fair value basis.
Transaction costs
Transaction costs of £4 million have been expensed and are included in administrative expenses in the consolidated income statement. All of
these costs were paid.
Impact of the acquisition on results
From the date of acquisition, the SLF of Canada UK business contributed £199 million to revenue and £24 million of profit after tax
attributable to owners.
It is not possible to provide revenue and profit after tax attributable to owners for the Group had the acquisition taken place at the beginning of
the year as key income statement items such as the amortisation of the contractual service margin recognised under IFRS 17 are calculated with
reference to the fair value as at the date of acquisition.
H. Interests in subsidiaries and associates continued
H2. Acquisition of SLF of Canada UK Limited continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 273
| 2023 | 2022 | |
| £m | £m | |
Acquired in-force business | – | 37 |
Investment property | 2,044 | 2,506 |
Financial assets | 2,498 | 4,629 |
Cash and cash equivalents | 52 | 33 |
Assets classified as held for sale | 4,594 | 7,205 |
| Assets in consolidated funds | 188 | 1,147 |
Total assets of the disposal group | 4,782 | 8,352 |
Investment contract liabilities | (4,780) | (8,312) |
Other financial liabilities | (2) | (4) |
Deferred tax liabilities | – | (7) |
Accruals and deferred income | – | (37) |
Liabilities classified as held for sale | (4,782) | (8,360) |
H4. Associates: Investment in UK commercial property REIT (‘UKCPR’)
UKCPR is a property investment company which is domiciled in Guernsey and is admitted to the official list of the UK Listing Authority and to
trading on the London Stock Exchange.
The Group’s interest in UKCPR is held in the with-profit funds of the Group’s life companies. Therefore, the shareholder exposure to fair value
movements in the Group’s investment in UKCPR is limited to the impact of those movements on the shareholder share of distributed profits of the
relevant fund.
As at 31 December 2023, the Group held 43.4% (2022: 44.6%) of the issued share capital of UKCPR and the value of this investment, measured
at fair value and included within financial assets, was £349 million (2022: £329 million). Management has concluded that the Group did not
control UKCPR in either the current or comparative periods. The Group does not hold a unilateral power of veto in general meetings and voting
is subject to certain restrictions in accordance with the terms of an existing relationship agreement it has with UKCPR.
Summary consolidated financial information (at 100%) for UKCPR group is shown below:
2023 2022
Non-current assets 1,224 1,276
Current assets 64 83
Non-current liabilities (236) (291)
Current liabilities (28) (32)
1,024 1,036
Revenue 68 71
Profit/(loss) for the year after tax 32 (222)
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023274
2023 | 2022 | |
| Carrying value of | Carrying value of | |
| financial assets | financial assets | |
| £m | £m | |
Equities | 1,051 | 968 |
Collective investment schemes | 78,909 | 75,389 |
Debt securities | 8,264 | 8,062 |
88,224 | 84,419 |
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
| Subsidiaries: | ||||
Phoenix Life Limited (life assurance company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Life Assurance Limited (life assurance company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Life Assurance Europe DAC (life assurance company) | Dublin | Ordinary Shares | 100.00% | |
| Standard Life Assurance Limited (life assurance company – directly | ||||
owned by the Company) | Edinburgh | Ordinary Shares | 100.00% | |
| Standard Life International Designated Activity Company | ||||
(life assurance company – directly owned by the Company) | Dublin | Ordinary Shares | 100.00% | |
Standard Life Pension Funds Limited (life assurance company) | Edinburgh | Limited by Guarantee | 100.00% | |
| Sun Life Assurance Company of Canada (U.K.) Limited | ||||
(life assurance company) | Hampshire | Ordinary Shares | 100.00% | |
ReAssure Life Limited (life assurance company) | Telford | Ordinary Shares | 100.00% |
H. Interests in subsidiaries and associates continued
H5. Structured entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 275
| If unincorporated, | |||||
| address of principal | Type of investment (including | % of shares / | |||
| place of business | class of shares held) | units held | |||
ReAssure Limited (life assurance company) | Telford | Ordinary Shares | 100.00% | ||
Phoenix Re Limited (life assurance company) | Bermuda | Ordinary Shares | 100.00% | ||
| Phoenix Group Management Services Limited (management | |||||
services company) | Wythall | Ordinary Shares | 100.00% | ||
Pearl Group Services Limited (management services company) | Wythall | Ordinary Shares | 100.00% | ||
| Standard Life Assets and Employee Services Limited | |||||
(management services company) | Edinburgh | Ordinary Shares | 100.00% | ||
ReAssure Companies Services Limited (management services company) | Telford | Ordinary Shares | 100.00% | ||
PGMS (Ireland) Limited (management services company) | Dublin | Ordinary Shares | 100.00% | ||
ReAssure UK Services Limited (management services company) | Telford | Ordinary Shares | 100.00% | ||
| Phoenix Management Services (Bermuda) Limited (management services | |||||
company) | Bermuda | Ordinary Shares | 100.00% | ||
SLFC Services Company (UK) Limited (management services company) | Hampshire | Ordinary Shares | 100.00% | ||
PA (GI) Limited (non-trading company) | Wythall | Ordinary Shares | 100.00% | ||
103 | Wardour Street Retail Investment Company Limited (investment | ||||
company) | Telford | Ordinary Shares | 100.00% | ||
28 Riberia de Loira SL (property management company) | Madrid | Ordinary Shares | 100.00% | ||
| 3 St Andrew Square Apartments Limited (property management | |||||
company) | Edinburgh | Ordinary Shares | 100.00% | ||
330 | Avenida de Aragon SL (property management company) | Madrid | Ordinary Shares | 100.00% | |
Abbey Life Assurance Company Limited (non-trading company) | Wythall | Ordinary Shares | 100.00% | ||
Abbey Life Trust Securities Limited (pension trustee company) | Wythall | Ordinary Shares | 100.00% | ||
Abbey Life Trustee Services Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
Abrdn Private Equity Opportunities Trust plc (investment company) | Edinburgh | Ordinary Shares | 56.01% | ||
Alba LAS Pensions Management Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | ||
Alba Life Trustees Limited (non-trading company) | Edinburgh | Ordinary Shares | 100.00% | ||
| Limited Liability | |||||
Axial Fundamental Strategies (US Investments) LLC (investment company) | Delaware | Company | 100.00% | ||
BA (FURBS) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
Barnwood Properties Limited (property investment company) | Hampshire | Ordinary Shares | 100.00% | ||
BL Telford Limited (dormant company) | Telford | Ordinary Shares | 100.00% | ||
Britannic Finance Limited (finance and insurance services company) | Wythall | Ordinary Shares | 100.00% | ||
Britannic Group Services Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
| Britannic Money Investment Services Limited (investment advice | |||||
company) | Wythall | Ordinary Shares | 100.00% | ||
Century Trustee Services Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
| CGE Management Company Limited (formerly known as Clyde Gateway | |||||
Management Company Limited) | Edinburgh | Ordinary Shares | 100.00% | ||
CH Management Limited (investment company) | Delaware | Ordinary Shares | 100.00% | ||
Cityfourinc (dormant company) | Wythall | Unlimited with Shares | 100.00% | ||
| ERIP General Partner Limited (General Partner to ERIP Limited | |||||
Partnership) | Telford | Ordinary Shares | 80.00% | ||
ERIP Limited Partnership (Limited Partnership) | Telford | Ordinary Shares | 100.00% | ||
G Assurance & Pensions Services Limited (non-trading company) | Telford | Ordinary Shares | 100.00% | ||
G Financial Services Limited (dormant company) | Telford | Ordinary Shares | 100.00% | ||
G Life H Limited (holding company) | Telford | Ordinary Shares | 100.00% | ||
G Park Management Company Limited (property management company) | London | Ordinary Shares | 100.00% | ||
G Trustees Limited (trustee company) | Telford | Ordinary Shares | 100.00% | ||
Gallions Reach Shopping Park (Nominee) Limited (dormant company) | London | Ordinary Shares | 100.00% | ||
Gresham Life Assurance Society Limited (dormant company) | Telford | Ordinary Shares | 100.00% | ||
Iceni Nominees (No. 2) Limited (dormant company) | London | Ordinary Shares | 100.00% | ||
IH (Jersey) Limited (dormant company) | Jersey | Ordinary Shares | 100.00% | ||
Impala Holdings Limited (holding company) | Wythall | Ordinary Shares | 100.00% | ||
Impala Loan Company 1 Limited (dormant company) | Edinburgh 2 | Ordinary Shares | 100.00% | ||
Inhoco 3107 Limited (dormant company) | London 44 | Ordinary Shares | 100.00% | ||
Laurtrust Limited (dormant company) | Hampshire | Ordinary Shares | 100.00% | ||
London Life Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
London Life Trustees Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | ||
Namulas Pension Trustees Limited (trustee company) | Telford | Ordinary Shares | 100.00% | ||
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023276
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
| Unlimited without | ||||
National Provident Institution (dormant company) | Wythall | Shares | 100.00% | |
National Provident Life Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
NM Life Trustees Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
NM Pensions Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
NP Life Holdings Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
NPI (Printworks) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
NPI (Westgate) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
PC Management Limited (property management company) | Dublin | Ordinary Shares | 69.00% | |
Pearl (Covent Garden) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Pearl (Martineau Phase 1) Limited (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
Pearl (Martineau Phase 2) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Pearl (Moor House) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
| Limited Liability | ||||
Pearl (WP) Investments LLC (investment company) | Delaware | Company | 100.00% | |
Pearl AL Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
Pearl Assurance Group Holdings Limited (investment company) | Wythall | Ordinary Shares | 100.00% | |
Pearl Customer Care Limited (financial services company) | Wythall | Ordinary Shares | 100.00% | |
Pearl Group Holdings (No. 1) Limited (finance company) | London 10 | Ordinary Shares | 100.00% | |
Pearl Group Holdings (No. 2) Limited (holding company) | Wythall 1 | Ordinary Shares | 100.00% | |
Pearl Group Secretariat Services Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Pearl Life Holdings Limited (holding company) | Wythall | Ordinary Shares | 100.00% | |
Pearl MP Birmingham Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Pearl RLG Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Pearl Trustees Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
| Phoenix Life CA Holdings Limited (formerly known as PG Dormant (No 4) | ||||
Limited) (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Group CA Services Limited (formerly known as PG Dormant (No 5) Limited) (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
| Phoenix Life CA Limited (formerly known as PG Dormant (No 6) Limited) | ||||
(dormant company) | Wythall | Ordinary Shares | 100.00% | |
PGMS (Glasgow) Limited (investment company) | Edinburgh | Ordinary Shares | 100.00% | |
PGMS (Ireland) Holdings Unlimited Company (holding company) | Dublin | Unlimited with Shares | 100.00% | |
PGS 2 Limited (investment company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix & London Assurance Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix (Barwell 2) Limited (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix (Chiswick House) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix (Moor House 1) Limited (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix (Moor House 2) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix (Printworks) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix (Stockley Park) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Advisers Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix AW Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Customer Care Limited (financial services company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix ER1 Limited (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix ER2 Limited (finance company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix ER3 Limited (dormant company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix ER4 Limited (finance company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix ER5 Limited (finance company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix ER6 Limited (finance company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Group Capital Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Group Employee Benefit Trust | Jersey | Trust | 100.00% | |
| Phoenix Group Holdings (Bermuda) Limited (holding company – directly | ||||
owned by the Company) | Bermuda | Ordinary Shares | 100.00% | |
| Cayman | ||||
| Phoenix Group Holdings (non-trading company) | Islands 10 | Private Company | 100.00% | |
Phoenix Group Management Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
| PGH CA Limited (formerly known as Pearl Group Management Services | ||||
Limited) (dormant company) | London | Ordinary Shares | 100.00% |
H. Interests in subsidiaries and associates continued
H6. Group entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 277
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
Phoenix Holdings (Bermuda) Limited (holding company) | Bermuda | Ordinary Shares | 100.00% | |
Phoenix Life Holdings Limited (holding company – directly owned by the Company) | Wythall | Ordinary Shares | 100.00% | |
| Phoenix Management Services Holdings (Bermuda) Limited (holding | ||||
company) | Bermuda | Ordinary Shares | 100.00% | |
Phoenix Pension Scheme (Trustees) Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Pensions Trustee Services Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SCP Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SCP Pensions Trustees Limited (trustee company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SCP Trustees Limited (trustee company) | Edinburgh | Ordinary Shares | 100.00% | |
Phoenix SL Direct Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SPV1 Limited (investment company) | Wythall 1 | Ordinary Shares | 100.00% | |
Phoenix SPV2 Limited (investment company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SPV3 Limited (investment company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix SPV4 Limited (investment company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix ULA Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Unit Trust Managers Limited (unit trust manager) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Wealth Holdings Limited (holding company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Wealth Services Limited (financial services company) | Wythall | Ordinary Shares | 100.00% | |
Phoenix Wealth Trustee Services Limited (trustee company) | Wythall | Ordinary Shares | 100.00% | |
Pilangen Logistik AB (investment company) | Stockholm | Ordinary Shares | 100.00% | |
Pilangen Logistik I AB (investment company) | Stockholm | Ordinary Shares | 100.00% | |
ReAssure FS Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure FSH UK Limited (holding company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Group plc (holding company – directly owned by the Company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Life Pension Trustees Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure LL Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Midco Limited (holding company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Nominees Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Pension Trustees Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure PM Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Trustees Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure Two Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
ReAssure UK Life Assurance Company Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
Scottish Mutual Assurance Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
Scottish Mutual Nominees Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
Scottish Mutual Pension Funds Investment Limited (trustee company) | Edinburgh | Ordinary Shares | 100.00% | |
SL (NEWCO) Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
| SL Liverpool limited (formerly known as SL Liverpool PLC) (dormant | ||||
company) | Wythall | Ordinary Shares | 100.00% | |
SLA Belgium No.1 SA (investment company) | Brussels 11 | Société Anonyme | 100.00% | |
SLA Denmark No.1 ApS (investment company) | Copenhagen 14 | Ordinary Shares | 100.00% | |
SLA Denmark No.2 ApS (investment company) | Copenhagen | Ordinary Shares | 100.00% | |
SLA Germany No.1 S.à.r.l. (investment company) | Luxembourg 20 | Ordinary Shares | 100.00% | |
SLA Germany No.2 S.à.r.l. (investment company) | Luxembourg | Ordinary Shares | 100.00% | |
SLA Germany No.3 S.à.r.l. (investment company) | Luxembourg | Ordinary Shares | 100.00% | |
SLA Ireland No.1 S.à.r.l. (investment company) | Luxembourg 20 | Ordinary Shares | 100.00% | |
SLA Netherlands No.1 B.V. (investment company) | Amsterdam 12 | Ordinary Shares | 100.00% | |
SLACOM (No. 10) Limited (dormant company) | Edinburgh 2 | Ordinary Shares | 100.00% | |
SLACOM (No. 8) Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
SLACOM (No. 9) Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
SLF of Canada UK Limited (holding company – directly owned by the Company) | Hampshire | Ordinary Shares | 100.00% | |
| SLIF Property Investment GP Limited (General Partner to SLIF Property | ||||
Investment) | Edinburgh | Ordinary Shares | 100.00% | |
Standard Life Agency Services Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
| Standard Life Assurance (HWPF) Luxembourg S.à.r.l. (investment | ||||
company) | Luxembourg | Ordinary Shares | 100.00% | |
Standard Life Investment Funds Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
Standard Life Lifetime Mortgages Limited (mortgage provider company) | Edinburgh | Ordinary Shares | 100.00% |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023278
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
Standard Life Master Trust Co. Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Standard Life Mortgages Limited (dormant company) | Wythall | Ordinary Shares | 100.00% | |
Standard Life Property Company Limited (dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
Standard Life Trustee Company Limited (trustee company) | Edinburgh | Ordinary Shares | 100.00% | |
Sun Life of Canada UK Holdings Limited (dormant company) | Hampshire | Ordinary Shares | 100.00% | |
SunLife Limited (financial services distribution company) | Wythall | Ordinary Shares | 100.00% | |
| The Heritable Securities and Mortgage Investment Association Ltd | ||||
(dormant company) | Edinburgh | Ordinary Shares | 100.00% | |
The London Life Association Limited (dormant company) | Wythall | Limited by Guarantee | 100.00% | |
The Pathe Building Management Company Limited (dormant company) | Telford | Ordinary Shares | 100.00% | |
The Phoenix Life SCP Institution (dormant company) | Edinburgh | Limited by Guarantee | 100.00% | |
The Scottish Mutual Assurance Society (dormant company) | Edinburgh | Limited by Guarantee | 100.00% | |
| The Standard Life Assurance Company of Europe B.V. (financial holding | ||||
company) | Amsterdam | Ordinary Shares | 100.00% | |
Vebnet (Holdings) Limited (holding company) | Wythall | Ordinary Shares | 100.00% | |
Vebnet Limited (services company) | Edinburgh | Ordinary Shares | 100.00% | |
Welbrent Property Investment Company Limited (dormant company) | London | Ordinary Shares | 100.00% | |
SLIF Property Investment LP | Edinburgh | Limited Partnership | 100.00% | |
Pearl Private Equity LP | Edinburgh | Limited Partnership | 100.00% | |
Pearl Strategic Credit LP | Edinburgh | Limited Partnership | 100.00% | |
European Strategic Partners LP | Edinburgh | Limited Partnership | 72.70% | |
ASI Phoenix Global Private Equity III LP | Edinburgh | Limited Partnership | 100.00% | |
Janus Henderson Institutional Short Duration Bond Fund | London | Unit Trust | 100.00% | |
Janus Henderson Institutional Mainstream UK Equity Trust | London | Unit Trust | 100.00% | |
Janus Henderson Institutional UK Equity Tracker Trust | London | Unit Trust | 100.00% | |
Janus Henderson Institutional High Alpha UK Equity Fund | London | Unit Trust | 84.56% | |
| Janus Henderson Global Funds – Janus Henderson Institutional Overseas | ||||
Bond Fund | London | OEIC, sub fund | 99.20% | |
| Janus Henderson Strategic Investment Funds – Janus Henderson | ||||
Institutional North American Index Opportunities Fund | London | OEIC, sub fund | 82.73% | |
| Janus Henderson Strategic Investment Funds – Janus Henderson | ||||
Institutional Asia Pacific ex Japan Index Opportunities Fund | London | OEIC, sub fund | 96.27% | |
| Janus Henderson Strategic Investment Funds – Janus Henderson | ||||
Institutional Japan Index Opportunities Fund | London | OEIC, sub fund | 86.79% | |
PUTM ACS Asia Pacific ex Japan Fund | Wythall | Unit Trust | 99.95% | |
PUTM ACS Emerging Market Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS European ex UK Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Japan Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Lothian European Ex UK Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Lothian North American Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Lothian UK Gilt Fund | Wythall | Unit Trust | 100.00% | |
| PUTM ACS Lothian UK Listed Smaller Companies Fund (formerly known | ||||
as PUTM ACS UK Smaller Companies Fund) | Wythall | Unit Trust | 99.90% | |
PUTM ACS North American 2 Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS North American Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index Asia Pacific ex Japan Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index Emerging Markets Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index European Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index Japan Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index UK Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS Sustainable Index US Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM ACS UK All Share Listed Equity Multi Manager Fund | Wythall1 | Unit Trust | 100.00% | |
PUTM ACS US Dollar Credit Fund | Wythall1 | Unit Trust | 100.00% | |
PUTM Bothwell Asia Pacific (Excluding Japan) Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Emerging Market Debt Unconstrained Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Emerging Markets Equity Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Euro Sovereign Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell European Credit Fund | Wythall | Unit Trust | 100.00% |
H. Interests in subsidiaries and associates continued
H6. Group entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 279
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
PUTM Bothwell Floating Rate ABS Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Global Bond Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Global Credit Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Index-Linked Sterling Hedged Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Long Gilt Sterling Hedged Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Short Duration Credit Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Sterling Credit Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Sterling Government Bond Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Sub-Sovereign A Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Tactical Asset Allocation Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Uk Equity Income Fund | Wythall | Unit Trust | 100.00% | |
PUTM Bothwell Ultra Short Duration Fund | Wythall | Unit Trust | 100.00% | |
PUTM Far Eastern Unit Trust | Wythall | Unit Trust | 99.64% | |
PUTM UK All-Share Index Unit Trust | Wythall | Unit Trust | 100.00% | |
PUTM UK Stock Market Fund | Wythall | Unit Trust | 100.00% | |
PUTM UK Stock Market Fund (Series 3) | Wythall | Unit Trust | 100.00% | |
abrdn (Lothian) European Trust II (formerly known as abrdn European Trust II) | London | Unit Trust | 100.00% | |
abrdn (Lothian) European Trust (formerly known as abrdn European Trust) | London | Unit Trust | 95.65% | |
| abrdn (Lothian) International Trust (formerly known as abrdn International | ||||
Trust) | London | Unit Trust | 100.00% | |
abrdn (Lothian) Japan Trust (formerly known as Abrdn Japan Trust) | London | Unit Trust | 78.05% | |
| abrdn (Lothian) North American Trust (formerly known as abrdn North | ||||
American Trust) | London | Unit Trust | 99.47% | |
| abrdn (Lothian) Pacific Basin Trust (formerly known as abrdn Pacific Basin | ||||
Trust) | London | Unit Trust | 98.51% | |
| abrdn (Lothian) UK Corporate Bond Trust (formerly known as abrdn UK | ||||
Corporate Bond Trust) | London | Unit Trust | 100.00% | |
| abrdn (Lothian) UK Equity General Trust (formerly known as abrdn UK | ||||
Equity General Trust) | London | Unit Trust | 99.67% | |
abrdn Emerging Markets Income Equity Fund | London | OEIC, sub fund | 74.36% | |
abrdn Europe ex UK Ethical Equity Fund | London | OEIC, sub fund | 78.61% | |
abrdn MT American Equity Unconstrained Fund (formerly known as ASIMT American Equity Unconstrained Fund) | London | Unit Trust | 78.13% | |
abrdn MT Global REIT Fund (formerly known as ASIMT Global REIT Fund) | London | Unit Trust | 80.49% | |
abrdn MT Japan Fund (formerly known as ASIMT Japan Fund) | London | Unit Trust | 77.55% | |
| abrdn MT Sterling Intermediate Credit Fund (formerly known as ASIMT | ||||
Sterling Intermediate Credit Fund Launch Fund) | London | Unit Trust | 93.63% | |
abrdn MyFolio Managed I Fund | London | OEIC, sub fund | 77.50% | |
abrdn MyFolio Managed II Fund | London | OEIC, sub fund | 76.92% | |
abrdn MyFolio Managed III Fund | London | OEIC, sub fund | 84.49% | |
abrdn MyFolio Managed V Fund | London | OEIC, sub fund | 76.75% | |
abrdn Short Dated Global Corporate Bond Tracker Fund | London | OEIC, sub fund | 95.85% | |
abrdn Short Dated Sterling Corporate Bond Tracker Fund | London | OEIC, sub fund | 91.26% | |
abrdn SICAV I – Europe ex UK Sustainable Equity Fund | Luxembourg | SICAV, sub fund | 68.91% | |
abrdn SICAV I – GDP Weighted Global Government Bond Fund | Luxembourg | SICAV, sub fund | 73.21% | |
abrdn SICAV I – Global Bond Fund | Luxembourg | SICAV, sub fund | 99.60% | |
abrdn SICAV I – Global Government Bond Fund | Luxembourg | SICAV, sub fund | 80.21% | |
abrdn SICAV II – Global Equity Impact Fund | Luxembourg | SICAV, sub fund | 61.26% | |
abrdn SICAV II – Global Inflation-linked Bond Fund | Luxembourg | SICAV, sub fund | 51.42% | |
abrdn SICAV II – Global Short Duration Corporate Bond Fund | Luxembourg | SICAV, sub fund | 98.25% | |
abrdn SICAV II – Absolute Return Global Bond Strategies Fund | Luxembourg | SICAV, sub fund | 92.46% | |
abrdn SICAV II – European Government All Stocks Fund | Luxembourg | SICAV, sub fund | 100.00% | |
abrdn SICAV II – Global Emerging Markets Local Currency Debt Fund | Luxembourg | SICAV, sub fund | 89.59% | |
abrdn SICAV II – Global High Yield Bond Fund | Luxembourg | SICAV, sub fund | 54.75% | |
| abrdn SICAV II Global Real Estate Securities Sustainable Fund (formerly | ||||
known as abrdn SICAV II Global REIT Focus Fund) | Luxembourg | SICAV, sub fund | 97.10% | |
abrdn Standard Liquidity Fund (Lux) – Seabury Euro Liquidity 1 Fund | Luxembourg 20 | UCITS, sub fund | 100.00% | |
abrdn Standard Liquidity Fund (Lux) – Seabury Sterling Liquidity 2 Fund | Luxembourg | UCITS, sub fund | 100.00% | |
abrdn Standard Liquidity Fund (Lux) – Seabury Sterling Liquidity 3 Fund | Luxembourg | UCITS, sub fund | 99.45% | |
abrdn Standard SICAV I – China Onshore Bond Fund | Luxembourg | SICAV, sub fund | 60.75% |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023280
| If unincorporated, | ||||
| Registered address of | address of principal | Type of investment (including | % of shares / | |
| incorporated entities | place of business | class of shares held) | units held | |
abrdn Sustainable Index World Equity Fund | London | Unit Trust | 90.61% | |
abrdn Sustainable Index American Equity Fund | London | OEIC, sub fund | 60.53% | |
| abrdn Phoenix Fund Financing SCSP (formerly known as ASI Phoenix | Special Limited | |||
Fund Financing SCSP (PLFF)) | Luxembourg | Partnership | 100.00% | |
| Cayman | ||||
| Ignis Private Equity Fund LP | Islands | Limited Partnership | 100.00% | |
| Cayman | ||||
| Ignis Strategic Credit Fund LP | Islands | Limited Partnership | 100.00% | |
North American Strategic Partners (Feeder) 2008 Limited Partnership | Edinburgh | Limited Partnership | 100.00% | |
North American Strategic Partners 2008 L.P. | Delaware 7 | Limited Partnership | 100.00% | |
Ignis Strategic Solutions Funds plc – Fundamental Strategies Fund | Dublin | OEIC, sub fund | 100.00% | |
Ignis Strategic Solutions Funds plc – Systematic Strategies Fund | Dublin | OEIC, sub fund | 100.00% | |
| Phoenix Highvista Venture Capital Partners LP (formerly known as ASI | ||||
Phoenix Venture Capital Partners LP) | USA | Limited Partnership | 100.00% | |
BNY Mellon 50/50 Global Equity Fund | London 40 | UCITS, sub fund | 73.99% | |
HSBC Investment Funds – Balanced Fund | London | OEIC, sub fund | 81.64% | |
IFSL AMR OEIC – IFSL AMR Diversified Portfolio | Bolton | OEIC, sub fund | 72.83% | |
iShares 350 UK Equity Index Fund UK | London 25 | OEIC, sub fund | 99.46% | |
Legal & General European Equity Income Fund | London | Unit Trust | 86.50% | |
Legal & General Growth Trust | London | Unit Trust | 84.77% | |
Quilter Investors Global Dynamic Equity Fund | London | OEIC, sub fund | 87.03% | |
UBS Global Optimal Fund | London | OEIC, sub fund | 78.77% | |
Amundi MSCI World Climate Transition CTB | Luxembourg | SICAV, sub fund | 51.95% | |
| Special Limited | ||||
Stonepeak Core Fund (Lux) SCSp | Luxembourg | Partnership | 83.30% | |
Partners Group Phoenix, L.P. Inc. | Guernsey | Limited Partnership | 100.00% | |
ESP General Partner Limited Partnership | Edinburgh | Limited Partnership | 100.00% | |
Aviva Investors UK Property Feeder Trust | London | Unit Trust | 100.00% | |
| Associates: | ||||
UK Commercial Property REIT Limited (property investment company) | Guernsey | Ordinary Shares | 43.39% | |
| UK Commercial Property Estates Holdings Limited (property investment | ||||
company) | Guernsey | Ordinary Shares | 43.39% | |
UK Commercial Property Estates Limited (property investment company) | Guernsey | Ordinary Shares | 43.39% | |
| UK Commercial Property Finance Holdings Limited (property investment | ||||
company) | Guernsey | Ordinary Shares | 43.39% | |
Duke Distribution Centres S.à.r.l. (investment company) | Luxembourg | Ordinary Shares | 43.39% | |
Duke Offices & Developments S.à.r.l. (investment company) | Luxembourg | Ordinary Shares | 43.39% | |
| Significant holdings: | ||||
Janus Henderson Institutional Global Responsible Managed Fund | London | OEIC, sub fund | 31.10% | |
Janus Henderson Institutional UK Index Opportunities Fund | London | OEIC, sub fund | 58.64% | |
aberdeen Standard Liquidity Fund (Lux) – Sterling Fund | Luxembourg | UCITS, sub fund | 30.05% | |
abrdn American Equity Enhanced Index Fund | London | OEIC, sub fund | 48.23% | |
abrdn American Income Equity Fund | London | OEIC, sub fund | 65.26% | |
abrdn Asia Pacific Equity Enhanced Index Fund | London | OEIC, sub fund | 35.99% | |
abrdn Asia Pacific Equity Fund | London | OEIC, sub fund | 22.83% | |
abrdn Dynamic Distribution Fund | London | Unit Trust | 63.23% | |
abrdn Emerging Markets Equity Enhanced Index Fund | London | OEIC, sub fund | 25.45% | |
abrdn Emerging Markets Equity Fund | London | OEIC, sub fund | 22.06% | |
abrdn Emerging Markets Local Currency Bond Tracker Fund | London | OEIC, sub fund | 42.19% | |
abrdn Ethical Corporate Bond Fund | London | OEIC, sub fund | 57.34% | |
abrdn Europe ex UK Income Equity Fund | London | OEIC, sub fund | 26.24% | |
abrdn Europe Equity Enhanced Index Fund | London | OEIC, sub fund | 25.37% | |
abrdn European Equity Tracker Fund | London | OEIC, sub fund | 23.14% | |
abrdn Global Equity Fund | London | OEIC, sub fund | 22.99% | |
abrdn Global Inflation-Linked Bond Fund | London | OEIC, sub fund | 24.13% | |
abrdn Global Inflation-Linked Bond Tracker Fund | London | OEIC, sub fund | 52.87% | |
abrdn Global Government Bond Tracker Fund | London | OEIC, sub fund | 31.90% |
H. Interests in subsidiaries and associates continued
H6. Group entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 281
| R | ||||
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023282
H. Interests in subsidiaries and associates continued
H6. Group entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 283
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023284
H. Interests in subsidiaries and associates continued
H6. Group entities continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 285
I. Other notes
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023286
Sharesave scheme
The sharesave scheme allows participating employees to save up to £500 each month for the UK scheme and up to €500 per month for the Irish
scheme over a period of either three or five years. The 2023 sharesave options were granted on 25 October 2023. Irish Sharesave options are no
longer granted.
Under the sharesave arrangement, participants remaining in the Group’s employment at the end of the three or five year saving period are
entitled to use their savings to purchase shares at an exercise price at a discount to the share price on the date of grant. Employees leaving the
Group for certain reasons are able to use their savings to purchase shares if they leave prior to the end of their three or five year period.
The fair value of the options has been determined using a Black-Scholes valuation model. Key assumptions within this valuation model include
expected share price volatility and expected dividend yield.
The following information was relevant in the determination of the fair value of the 2019 to 2023 UK sharesave options:
| 2023 | 2022 | 2021 | 2020 | 2019 | |
| sharesave | sharesave | sharesave | sharesave | sharesave | |
Share price (£) | 4.448 | 6.142 | 7.486 | 5.664 | 6.800 |
Exercise price (£) | 3.78 | 5.09 | 5.89 | 4.97 | 5.61 |
Expected life (years) | 3.1 and 5,1 | 3.25 and 5.25 | 3.25 and 5.25 | 3.25 and 5.25 | 3.25 and 5.25 |
| Risk-free rate (%) – based on UK | 4.7 (for 3.1 year | 2.0 (for 3.25 year | 0.5 (for 3.25 year | 0.5 (for 3.25 year | 1.0 (for 3.25 year |
| government gilts commensurate with | scheme) and 4.5 | scheme) and 1.9 | scheme) and 0.7 | scheme) and 0.5 | scheme) and 1.1 |
| the expected term of the award | (for 5.25 year | (for 5.25 year | (for 5.25 year | (for 5.25 year | (for 5.25 year |
| Expected volatility (%) based on the | scheme) | scheme) | scheme) | scheme) | scheme) |
Company’s share price volatility to date | 23.0 | 30.0 | 30.0 | 30.0 | 30.0 |
Dividend yield (%) | 11.5 | 8.0 | 6.3 | 8.2 | 6.8 |
The information for determining the fair value of the 2021 Irish sharesave options differed from that included in the table above as follows:
- Share price (€): 8.618
- Exercise price (€): 6.880
- Risk-free rate (%): (0.4) (for 3.25 year scheme) and (0.3) (for 5.25 year scheme)
- No Sharesave awards were granted to Irish employees during either 2022 or 2023.
Share Incentive Plan
The Group operates two Share Incentive Plans (‘SIP’) open to UK and Irish employees which allows participating employees to purchase
‘Partnership shares’ in the Company through monthly contributions. In respect of the UK SIP, the contributions are limited to the lower of £150
per month and 10% gross monthly salary. In 2019 the matching element of the UK SIP was amended to give the employee one ‘Matching share’
for each ‘Partnership share’ purchased limited to £50. Contributions above £50 are not matched. The Irish SIP, which was launched in 2019, gives
the employee 1.4 ‘Matching shares’ for each ‘Partnership share’ purchased. For this plan monthly contributions are limited to the lower of €40
per month and 7.5% of gross monthly salary.
The fair value of the Matching shares granted is estimated as the share price at date of grant, taking into account terms and conditions upon
which the instruments were granted. At 31 December 2023, 546,430 matching shares (excluding unrestricted shares) were conditionally
awarded to employees (2022: 543,995).
I1.3 Movements in the year
The following tables illustrate the number of, and movements in, LTIP, Sharesave and DBSS share options during the year:
| 2023 | |||
| Number of share options | |||
LTIP | Sharesave | DBSS | |
Outstanding at the beginning of the year, including dividend shares | 9,387,235 | 5,001,906 | 2,301,801 |
Granted during the year | 4,202,695 | 5,038,820 | 1,675,548 |
Forfeited during the year | (1,750,509) | (223,565) | (29,932) |
Cancelled during the year | – | (1,371,617) | – |
Exercised during the year | (1,217,227) | (1,184,132) | (701,644) |
Expired during the year | (13,908) | (416,547) | (11,227) |
Dividends on vested awards | 503,119 | – | 133,420 |
Outstanding at the end of the year | 11,111,405 | 6,844,865 | 3,367,966 |
| 2022 | |||
| Number of share options | |||
LTIP | Sharesave | DBSS | |
Outstanding at the beginning of the year | 7,613,036 | 4,750,822 | 1,551,935 |
Granted during the year | 3,350,169 | 1,827,291 | 1,121,085 |
Forfeited during the year | (523,125) | (252,992) | (4,917) |
Cancelled during the year | – | (506,796) | – |
Exercised during the year | (1,328,703) | (816,419) | (443,747) |
Dividends on vested awards | 275,858 | – | 77,445 |
Outstanding at the end of the year | 9,387,235 | 5,001,906 | 2,301,801 |
I. Other notes continued
I1.2 Share-based payment expense continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 287
The weighted average fair value of options granted during the year was £2.92 (2022: £4.34).
The weighted average share price at the date of exercise for the rewards exercised is £5.46 (2022: £6.13).
The weighted average remaining contractual life for the awards outstanding as at 31 December 2023 is 5.3 years (2022: 5.7 years).
| 2022 | |||
| restated | |||
| £m | |||
Profit/(loss) for the year before tax | 20 | (4,089) | |
| Adjustments for non-cash movements in profit/(loss) before tax for the year: | |||
Gain on acquisition of SLF of Canada UK Limited | H2 | (66) | – |
| Fair value losses/(gains) on: | |||
Investment property | G4 | 362 | 1,363 |
Financial assets and derivative liabilities | (11,045) | 45,197 | |
Change in fair value of borrowings | E5.2 | (82) | 186 |
Amortisation and impairment of intangible assets | G2 | 324 | 355 |
Share-based payment charge | I1.1 | 22 | 16 |
Finance costs | C7 | 258 | 230 |
Net interest expense on Group defined benefit pension scheme liability/asset | G1 | 109 | 64 |
Pension past service costs | G1 | 12 | 15 |
Other costs of pension schemes | G1 | 6 | 7 |
| Movement in assets and liabilities relating to operations: | |||
(Increase)/decrease in investment assets | (7,986) | 3,974 | |
(Increase)/decrease in reinsurers’ share of investment contract liabilities | (621) | 896 | |
(Increase)/decrease in reinsurance contract assets/liabilities | (818) | 657 | |
Decrease in assets classified as held for sale | 2,593 | 2,741 | |
Increase/(decrease) in insurance contract liabilities/assets | 3,980 | (25,597) | |
Increase/(decrease) in investment contract liabilities | 13,673 | (16,549) | |
Decrease in obligation for repayment of collateral received | (703) | (1,740) | |
Decrease in liabilities classified as held for sale | (3,571) | (3,386) | |
Net decrease/(increase) in working capital | 2,772 | (3,312) | |
| Other cash movements relating to operations: | |||
Contributions to defined benefit pension schemes | G1 | (9) | (9) |
Cash (utilised)/generated by operations | (770) | 1,019 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023288
| 2023 | 2022 | |
| £bn | £bn | |
PGH plc Eligible Own Funds | 11.1 | 11.1 |
Remove Own Funds pertaining to unsupported with-profit funds and pension schemes | (2.2) | (1.8) |
Group capital resources | 8.9 | 9.3 |
I. Other notes continued
I3. Capital management continued
Risk and capital management objectives continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 289
I4. Related party transactions
Transactions | Transactions | |
| 2023 | 2022 | |
| £m | £m | |
| Pearl Group Staff Pension Scheme | ||
Payment of administrative expenses | (4) | (4) |
| UK Commercial Property REIT | ||
Dividend income | 19 | 29 |
Financials
Notes to the consolidated financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023290
I7. Events after the reporting period
The financial statements are adjusted to reflect significant events that have a material effect on the financial results and that have occurred
between the period end and the date when the financial statements are authorised for issue, provided they give evidence of conditions that
existed at the period end. Events that are indicative of conditions that arise after the period end that do not result in an adjustment to the
financial statements are disclosed.
On 19 January 2024, the Group completed a buy-out transaction with the PGL Pension Scheme, one of the Group’s defined benefit schemes.
The impact of this transaction is being determined and will be included in the Group’s results for 2024.
On 6 February 2024, the Board approved the redemption of the £250 million 5.766% Fixed Rate Reset Callable Tier 2 Subordinated Notes due
2029 on the first call date of 13 June 2024 (subject to regulatory approval).
On 21 March 2024, UK Commercial Property REIT Limited (‘UKCPR’), an associate of the Group, and Tritax Big Box REIT plc (‘BBOX’) announced
a recommended all-share combination whereby BBOX will acquire the entire share capital of UKCPR for consideration of 0.444 new shares of
BBOX for each share of UKCPR held. The transaction is expected to complete in May 2024, subject to the approval of both UKCPR and BBOX
shareholders, and Court sanction of the scheme of arrangement under Part VIII of the Companies Law of Guernsey. On the date of
announcement, Phoenix Life Limited (‘PLL’), a subsidiary of the Group, held 43.3% of UKCPR’s issued ordinary share capital and had irrevocably
undertaken to vote in favour of the transaction. Upon completion, PLL is expected to hold shares representing 10.1% of BBOX’s total issued share
capital. It is anticipated that this transaction, on completion, will result in the Group accounting for its ownership in BBOX as an investment, rather
than the current associate treatment of UKCPR, as the Group will not have significant influence over BBOX.
On 21 March 2024, the Board recommended a final dividend of 26.65p per share for the year ended 31 December 2023 (2022: 26.0p). Payment
of the final dividend is subject to shareholder approval at the AGM. The cost of this dividend has not been recognised as a liability in the
consolidated financial statements for 2023 and will be charged to the statement of consolidated changes in equity in 2024.
N Lyons
A Briggs
R Thakrar
K Green
H Iioka
K Murray
E Bucks
M Gregory
J Pollock
B Richards
D Scott
M Semple
N Shott
21 March 2024
I. Other notes continued
Financials
Parent company financial statements
Phoenix Group Holdings plc Annual Report and Accounts 2023 291
Statement of financial position
As at 31 December 2023
2023 2022
Notes £m £m
ASSETS
Property, plant and equipment 10 17 19
Investments in Group entities 11 10,536 10,231
Financial assets
Loans and deposits 12 1,302 2,550
Derivatives 6 119 257
Debt securities 13 1 1
Collective investment schemes 13 1,017 775
Deferred tax 14 159 113
Prepayments and accrued income 50 54
Other amounts due from Group entities 20 25 19
Cash and cash equivalents 15 1 –
Total assets 13,227 14,019
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders
Share capital 3 100 100
Share premium 3 16 10
Merger relief reserve 3 1,819 1,819
Other reserve 3 (4) (4)
Retained earnings 4,621 5,062
Total equity attributable to ordinary shareholders 6,552 6,987
Tier 1 Notes 4 411 411
Total equity 6,963 7,398
Liabilities
Financial liabilities
Borrowings 5 5,813 6,229
Derivatives 6 1 22
Obligations for repayment of collateral received 6 30 86
Other amounts due to Group entities 20 62 43
Provisions 7 222 97
Lease liabilities 8 18 20
Accruals and deferred income 9 118 124
Total liabilities 6,264 6,621
Total equity and liabilities 13,227 14,019
The notes identified numerically on pages 294 to 305 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 171 to 290.
Approved by the Board on 21 March 2024.
Andy Briggs Rakesh Thakrar
Chief Executive Officer Chief Financial Officer
Company registration number 11606773.
Financials
Parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023292
Statement of changes in equity
For the year ended 31 December 2023
Share capital
(note 3)
Share
premium
(note 3)
Merger relief
reserve (note
3)
Other
reserve (note
3)
Retained
earnings Total
Tier 1 Notes
(note 4)
Total
equity
£m £m £m £m £m £m £m £m
At 1 January 2023 100 10 1,819 (4) 5,062 6,987 411 7,398
Total comprehensive income for the year
attributable to owners – – – – 79 79 – 79
Issue of ordinary share capital, net of
associated commissions and expenses – 6 – – – 6 – 6
Dividends paid on ordinary shares (note B4) – – – – (520) (520) – (520)
Coupon paid on Tier 1 Notes, net of tax relief – – – – (22) (22) – (22)
Credit to equity for equity-settled share-
based payments (note I1) – – – – 22 22 – 22
At 31 December 2023 100 16 1,819 (4) 4,621 6,552 411 6,963
For the year ended 31 December 2022
Share capital
(note 3)
Share
premium
(note 3)
Merger relief
reserve (note
3)
Other
reserve (note
3)
Retained
earnings Total
Tier 1 Notes
(note 4)
Total
equity
£m £m £m £m £m £m £m
At 1 January 2022 100 6 1,819 (4) 5,448 7,369 411 7,780
Total comprehensive income for the period
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
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 293
Statement of cash flows
For the year ended 31 December 2023
Notes
2023
£m
2022
£m
Cash flows from operating activities
Cash utilised by operations 16 (589) (417)
Net cash flows from operating activities (589) (417)
Cash flows from investing activities
Acquisition of SLF of Canada UK Limited (250) –
Advances to Group entities (129) (852)
Dividends received from Group entities 103 455
Interest received from Group entities 219 162
Capital contribution to subsidiary (note 11) (55) (200)
Repayment of amounts due from Group entities 1,425 2
Derivative settlements 72 (70)
Net cash flows from investing activities 1,385 (503)
Cash flows from financing activities
Proceeds from issuing ordinary shares 3 6 4
Proceeds from new shareholder borrowings, net of associated expenses 5 1,450 2,274
Repayment of shareholder borrowings 5 (1,362) (616)
Ordinary share dividends paid (520) (496)
Interest paid on borrowings (338) (311)
Lease payments (2) (1)
Coupon paid on Tier 1 Notes (29) (29)
Net cash flows from financing activities (795) 825
Net increase/(decrease) in cash and cash equivalents 1 (95)
Cash and cash equivalents at the beginning of the year – 95
Cash and cash equivalents at the end of the year 1 –
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023294
Notes to the parent company financial statements
1. Accounting policies
(a) Basis of preparation
The financial statements have been prepared on a going concern basis and under the historical cost convention, except for those financial assets
and financial liabilities (including derivative instruments) 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 2023 was £79 million (2022: £116 million).
Statement of Compliance
The Company’s financial statements have been prepared in accordance with UK – adopted international accounting standards as applied in
accordance with section 408 of 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 171 to 290 with the exception of the one policy whereby 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 A3.1 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.
(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. The value in use 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.
3. Share capital, share premium, merger relief reserve and other reserve
2023
£m
2022
£m
Issued and fully paid:
1,001.5 million ordinary shares of £0.10 each (2022: 1,000.4 million) 100 100
2023
Number
2023
£
2022
Number
2022
£
Shares in issue at 1 January 1,000,352,477 100,035,247 999,536,058 99,953,605
Ordinary shares issued in the period 1,185,942 118,594 816,419 81,642
Shares in issue at 31 December 1,001,538,419 100,153,841 1,000,352,477 100,035,247
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 295
During 2023, the Company issued 1,185,942 shares (2022: 816,419 shares) with a premium of £6 million (2022: £4 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.
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.
2023 2022
£m £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.
5. Borrowings
The accounting policy for borrowings is included in note E5 to the consolidated financial statements.
Carrying value Fair value
2023 2022 2023 2022
£m £m £m £m
Loans due to third-parties:
£428 million subordinated loans (note a) 199 433 202 429
US $500 million Tier 2 bonds (note b) 368 383 377 390
€500 million Tier 2 notes (note c) 409 414 419 416
US $750 million Contingent Convertible Tier 1 notes (note d) 587 618 563 580
£500 million Tier 2 notes (note e) 489 487 476 445
US $500 million Fixed Rate Reset Tier 2 notes (note f) 274 412 262 382
£500 million 5.867% Tier 2 subordinated notes (note g) 536 543 493 465
£250 million Fixed Rate Reset Callable Tier 2 subordinated notes (note h) 254 259 239 244
£250 million 4.016% Tier 3 subordinated notes (note i) 253 256 250 231
£350 million Fixed Rate Reset Callable Tier 2 subordinated notes (note j) 346 – 368 –
3,715 3,805 3,649 3,582
Loans due to Group companies:
Loan due to Standard Life Assurance Limited (note k) – 309 – 309
Senior loan due to ReAssure Limited (note l) – 718 – 718
€100 million loan due to Standard Life International DAC (note m) 90 89 90 89
£130 million floating term loan due to ReAssure Life Limited (note n) 138 130 138 130
£250 million loan due to ReAssure Limited (note o) 261 – 261 –
£250 million remittance loan due to ReAssure Limited (note p) 257 – 257 –
€50 million loan due to Standard Life International DAC (note q) 44 – 44 –
Cash-pooling with other Group entities (note t) 1,308 1,178 1,308 1,178
2,098 2,424 2,098 2,424
Total borrowings 5,813 6,229 5,747 6,006
Amount due for settlement after 12 months 4,505 5,051
Financials
Notes to the parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023296
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 £439million. On 7 December 2023, the Company repurchased
£231 million of the principal amount of the notes via a tender offer. The remaining principal amount of the notes at 31 December 2023 is
£199 million.
b 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.
c 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.
d 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.
e 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.
f 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. On 7 December 2023, the Company repurchased US $150 million of the
principal amount of the Fixed Rate Reset Tier 2 notes via a tender offer. The remaining principal amount of the notes at 31 December 2023 is
US $350 million.
g 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 are being amortised over the remaining life of the notes. Interest is payable semi-annually in arrears on 13 June and 13 December.
h 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 are being 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.
i 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.
j On 6 December 2023, the Company issued £350 million fixed rate reset callable Tier 2 notes which are unsecured and subordinated. The
notes have a maturity date of 6 December 2053 with an optional issuer par call right on any day in the six-month period up to and including
6 December 2033. The notes bear interest on the principal amount at a fixed rate of 7.75% per annum up to the interest rate reset date of
6 December 2033. If the notes are not redeemed before that date, the interest rate resets to the sum of the 5 year benchmark Gilt rate plus a
margin of 4.65%, being the sum of the initial credit spread used in pricing the notes and a 1% margin step-up. Interest is payable on the notes
semi-annually in arrears on 6 June and 6 December each year.
k 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 (2022: £6 million) was
capitalised. On 21 December 2023, the Company received a distribution of the loan, extinguishing the Company’s obligations
under the loan.
5. Borrowings continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 297
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 (d) 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. The Company made the
quarterly loan repayments due on 30 June and 30 September 2023, and repaid the loan in full on 21 December 2023.
m On 20 December 2022, SLIDAC issued a €100 million floating term loan to the Company with a maturity date of 31 March 2024. Interest
accrues on the term loan at a rate of EURIBOR plus 0.78%. As at 31 December 2023, the interest rate was 4.67%.
n On 16 December 2022, ReAssure Life Limited (‘RLL’) issued a £130 million floating term loan to the Company for a term of 5 years. Interest
accrues on the term loan at a rate of SONIA plus 1.49%. As at 31 December 2023, the interest rate was 4.95%.
o On 5 May 2023, RAL issued a £250 million floating term loan to the Company for a term of 5 years. Interest accrues on the term loan at a rate
of SONIA plus 1.62%. As at 31 December 2023, the interest rate was 5.08%.
p On 21 July 2023, RAL issued a £250 million remittance loan to the Company for a term of 5 years. Interest accrues on the term loan at a rate
of SONIA plus 1.51%. As at 31 December 2023, the interest rate was 6.69%.
q On 21 July 2023, SLIDAC issued a €50 million floating term loan to the Company with a maturity date of 31 March 2025. Interest accrues on
the term loan at a rate of EURIBOR plus 0.79%. As at 31 December 2023, the interest rate was 4.68%.
r On 21 July 2023, Phoenix Life Assurance Limited issued a £150 million floating term loan to the Company at an interest rate of 6.68% for a
term of 5 years. On 21 December 2023, the Company received a distribution of the loan, extinguishing the Company’s obligations
under the loan.
s On 21 July 2023, SLAL issued a £50 million floating term loan to the Company at an interest rate of 6.68% for a term of 5 years. On
21 December 2023, the Company received a distribution of the loan, extinguishing the Company’s obligations under the loan.
t 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.
u The Group has in place a £1.75 billion unsecured revolving credit facility (the ‘revolving facility’), maturing in June 2026. The facility accrues
interest at a margin over SONIA that is based on credit rating. The facility remains undrawn as at 31 December 2023.
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.
Further details of the loans due to third parties (loans a. to j.) are contained in note E5 to the consolidated financial statements.
Financials
Notes to the parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023298
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 inthe Company’s statement
of cash flows as cash flows from financing activities.
Cash Non-cashflow
At 1 January
2023
£m
New
borrowings,
net of costs
£m
Repayments
£m
Dividend in
specie
payment
£m
Movement in
foreign
exchange
£m
(Amortisation)/
accretion
£m
Capitalised
interest
£m
Movement in
fair value
£m
At
31 December
2023
£m
£428 million subordinated notes 433 – (231) – – (3) – – 199
US $500 million Tier 2 bonds 383 – – – (21) 6 – – 368
€500 million Tier 2 notes 414 – – – (9) 4 – – 409
US $750 million Contingent
Convertible Tier 1 notes 618 – – – (32) 1 – – 587
£500 million Tier 2 notes 487 – – – – 2 – – 489
US $500 million Fixed
Rate Reset Tier 2 notes 412 – (119) – (20) 1 – – 274
£500 million 5.867% Tier
2 subordinated notes 543 – – – – (7) – – 536
£250 million Fixed Rate
Reset Callable Tier 2
subordinated notes 259 – – – – (5) – – 254
£250 million 4.016% Tier
3 subordinated notes 256 – – – – (3) – – 253
£350 million Fixed Rate
Reset Callable Tier 2
subordinated notes – 346 – – – – – – 346
Loan due to Standard Life
Assurance Limited
1
309 – – (318) – – 9 – –
Senior loan due to
ReAssure Limited 718 – (718) – – – – – –
€100 million loan due to
Standard Life International DAC 89 – – – (2) – 3 – 90
£130 million floating term loan
due to ReAssure Life Limited 130 – – – – – 8 – 138
£250 million loan due
to ReAssure Limited – 250 – – – – 11 – 261
£250 million remittance loan
due to ReAssure Limited – 250 – – – – 7 – 257
€50 million loan due to
Standard Life International DAC – 43 – – – – 1 – 44
£150 million remittance
loan due to Phoenix Life
Assurance Limited
1
– 150 – (146) – (4) – – –
£50 million remittance
loan due to Standard Life
Assurance Limited
1
– 50 – (49) – (1) – – –
Cash-pooling with other
Group entities 1,178 361 (294) – – – 63 – 1,308
Derivative assets
2
(225) – – – – (1) – 108 (118)
6,004 1,450 (1,362) (513) (84) (10) 102 108 5,695
1 The liability has been discharged via a dividend in specie payment.
2 Cross currency swaps to hedge against adverse currency movements in respect of the Group’s Euro and US Dollar denominated borrowings (see note 6 for further details).
5. Borrowings continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 299
Cash Non-cashflow
At 1 January
2022
£m
New
borrowings,
net of costs
£m
Repayments
£m
Movement in
foreign
exchange
£m
(Amortisation)/
accretion
£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
2
– 718 – – – – – 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 currency movements in respect of the 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.
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, US Dollar, Japanese Yen and Hong Kong Dollar exposures to adverse foreign
currency movements in respect of underlying business within its subsidiaries.
The fair value of the derivative financial instruments is as follows:
Asset Liability
2023 2022 2023 2022
£m £m £m £m
Cross currency swaps 118 225 – –
Foreign currency swaps 1 32 1 22
119 257 1 22
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 £119 million (2022: £257 million) of which credit
risk of £30 million (2022: £86 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
The accounting policy for provisions is included in note G7 to the consolidated financial statements.
In 2019, the Company recognised an initial Standard Life transition and transformation restructuring provision of £159 million. During the year,
£27 million (2022: £28 million) of the restructuring provision was utilised and the provision was decreased by £7 million (2022: increased by
£33 million). The remaining provision of £63 million (2022: £97 million) is expected to be utilised within one to three years. See note G7 to the
consolidated financial statements for further details.
Financials
Notes to the parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023300
Following the acquisition of the ReAssure businesses in 2020, the Group established a transition and transformation programme which aims to
deliver the integration of the Group’s operating models via a series of phases. During 2023, the Group announced its intention to migrate existing
ReAssure policies to the TCS platform which raised a valid expectation of the impacts in those likely to be affected.
The initial provision of £127 million included migration costs, severance costs and other expenses. Migration costs are considered a direct
expenditure necessarily entailed by the restructuring and represent an obligation arising from arrangements entered into with TCS during 2023.
No costs have been provided for that relate to the ongoing servicing of policies. Migration costs payable to TCS are subject to limited
uncertainty as they are fixed under the terms of the agreement entered into. The severance costs are subject to uncertainty and will be impacted
by the number of staff that transfer to TCS, and the average salaries and number of years’ service of those affected.
During the year, the provision was increased by £65 million and £33 million was utilised. The remaining provision of £159 million is expected to be
utilised within one to five years.
8. Lease liabilities
The accounting policy for lease liabilities is included in note G9 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.
2023
£m
2022
£m
At 1 January 20 21
Lease payments (2) (1)
At 31 December 18 20
Amount due within twelve months 2 1
Amount due after twelve months 16 19
9. Accruals and deferred income
The accounting policy for accruals and deferred income is included in note G10 to the consolidated financial statements.
2023
£m
2022
£m
Accruals and deferred income 118 124
Amount due for settlement after 12 months 5 –
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
2023
£m
Cost or valuation
At 1 January and 31 December 22
Depreciation
At 1 January (3)
Depreciation (2)
At 31 December (5)
Carrying amount at 31 December 17
Total Property, Plant
andEquipment
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
7. Provisions continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 301
11. Investment in group entities
2023
£m
2022
£m
Cost
At 1 January 14,420 14,220
Additions 305 200
At 31 December 14,725 14,420
Impairment
At 1 January and 31 December (4,189) (4,189)
Carrying amount
At 31 December 10,536 10,231
In April 2023, the Company acquired 100% of the issued share capital of SLF of Canada UK Limited business for a cost of £250 million. In
addition, during the year the Company established a Bermuda based entity, Phoenix Group Holdings (Bermuda) Limited, and capital
contributions totaling £55 million were paid to the entity.
During 2023, the following Part VII schemes (transfer of insurance business) were undertaken which had the effect of reallocating the value of
the Company’s investment in Group entities between certain subsidiaries:
• the PLL and RLL EU business policies were transferred into a new EU regulated life company, Phoenix Life Assurance Europe DAC (‘PLAE’),
within the Group.
• the business of PLAL, SLAL and Standard Life Pension Funds Limited (‘SLPF’) was transferred to PLL. In line with the strategic objectives of the
Group, the transfer simplifies the operating model whilst resulting in financial, operational and liquidity benefits with the excess capital
position, after allowing for costs and capital policy, of the life companies improving significantly.
• Additionally, during 2023 the servicing activities of Pearl Group Services Limited and Standard Life Asset and Employee Services Limited
were transferred to Phoenix Group Management Services Limited. In line with the strategic objectives of the Group, the transfer simplifies the
operating model resulting in operational benefits.
As at 31 December 2023 and 31 December 2022, 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 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 of cash flows for 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 with the dividend paying capacity of the life insurance subsidiaries, which
included the removal of the surplus attributable to policyholders in the with-profit funds. Where the Solvency II Own Funds exceeded the
carrying value of the investment in subsidiary, management has concluded that no impairment is required.
For one of its subsidiaries, Phoenix Life Holdings Limited (“PLHL”), the carrying value of the investment exceeded the Solvency II Own Funds as
at 31 December 2023. Accordingly, a value in use test was applied that utilises cash flow projections based on the emergence of surplus for
in-force business on a Solvency II basis, together with new business cash flows on a Solvency II basis. This analysis has been informed by dividend
projections on a consistent basis to that set out in the Group’s business plan approved by the Board. The value in use calculation has used a
discount rate of 10%, calculated using a risk adjusted weighted average cost of capital approach, and a long term growth rate after the initial five
year business plan period of 2%. A 1% increase in the discount rate would reduce the recoverable amount by £920 million and would not result
in any impairment being recognised in respect of PLHL. A 1% reduction in the long-term growth rate would reduce the recoverable amount by
£684 million and would also not result in any impairment being recognised in respect of PLHL.
Based on the assessment above, no impairment has been recorded in 2023 in respect of the investment in Group entities (2022: £nil).
For a list of principal Group entities, refer to note H6 of the consolidated financial statements in which the entities directly held by the Company
are separately identified.
12. Loans and deposits
Carrying value Fair value
2023
£m
2022
£m
2023
£m
2022
£m
Loans due from Phoenix Life Holdings Limited (note a) 1,284 1,273 1,299 1,279
Cash-pooling to other Group entities (note b) 5 546 5 546
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 1,302 2,550 1,317 2,556
Total loans and deposits 1,302 2,550 1,317 2,556
Amounts due after 12 months 1,297 2,004
Financials
Notes to the parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023302
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 anddeposits 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
amortised to par over the period to 2025. At 31 December 2023, the carrying value of the loan was £432 million (2022: £433 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 accrues interest at a compounded rate of SONIA rate plus a margin of 1.30% and is capitalised.
During the year interest of £27 million (2022: £7 million) was capitalised. The loan matures on 31 December 2027. At 31 December 2023, the
carrying value of the loan was £484 million (2022: £457 million due under the subordinated loan).
On 12 December 2018, the Company was assigned a US $500 million loan by PLHL due to mature in 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 decreased the carrying value by £20 million (2022: £41 million increase). At 31 December 2023, the carrying value of the
loan was £368 million (2022: £383 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 2023, the carrying value of the loan was £13 million (2022: £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 (2022: £12 million) was provided to the EBT and
£12 million of the loan was impaired (2022: £12 million).
d On 31 December 2022, the Company issued a contingent loan of £718 million with 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. RAL made the quarterly loan repayments due
on 30 June and 30 September 2023, and repaid the loan in full on 21 December 2023.
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.
13. Financial assets
2023 2022
£m £m
Financial assets at fair value through profit or loss
Derivatives 119 257
Debt securities 1 1
Collective investment schemes 1,017 775
1,137 1,033
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 2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets at fair value through profit or loss
Derivatives – 119 – 119
Debt securities – – 1 1
Collective investment schemes 1,017 – – 1,017
1,017 119 1 1,137
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
There were no transfers between levels in either 2023 or 2022.
12. Loans and deposits continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 303
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 2023
£m
Credit for the year
£m
31 December 2023
£m
Provisions and other temporary differences 113 46 159
1 January 2022
£m
Credit for the year
£m
31 December 2022
£m
Provisions and other temporary differences 82 31 113
The standard rate of UK corporation tax for the accounting period is 23.5% (2022: 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 April 2023 was announced in the Budget of 3 March 2021. Accordingly, deferred tax assets and liabilities are
provided at the rate of 25%.
15. Cash and cash equivalents
The accounting policy for cash and cash equivalents is included in note G6 to the consolidated financial statements.
2023
£m
2022
£m
Bank and cash balances 1 –
16. Cash flows from operating activities
2023 2022
£m £m
(Loss)/profit for the year before tax (89) 26
Non-cash movements in loss/profit for the year before tax:
Impairment of loan due from subsidiary 12 12
Investment income (965) (127)
Finance costs 399 287
Fair value losses/(gains) on financial assets 117 (171)
Foreign exchange movement on borrowings at amortised cost (63) 173
Share-based payment charge 22 16
Depreciation 2 2
(Increase)/decrease in investment assets (242) 290
Net decrease/(increase) in working capital 218 (925)
Cash utilised by operations (589) (417)
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 2023
were £4,621 million (2022: £5,062 million).
At 31 December 2023, total capital was £6,963 million (2022: £7,398 million). The movement in capital in the period comprises the total
comprehensive income for the period attributable to owners of £79 million (2022: £116 million), dividends paid of £520 million (2022:
£496 million), coupon paid on Tier 1 Notes, net of tax relief of £22 million (2022: £22 million), credit to equity for equity-settled share-based
payments of £22 million (2022: £16 million) and issue of ordinary share capital of £6 million (2022: £4 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.
Financials
Notes to the parent company financial statements continued
Phoenix Group Holdings plc Annual Report and Accounts 2023304
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
andtheCompany has no realistic prospect of recovery
Amount is written off
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:
2023
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 1,302 – 1,302
Other amounts due from Group entities
(note 20) N/A Performing 12 month ECL 25 – 25
Cash and cash equivalents (note 15) A N/A 12 month ECL 1 – 1
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
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 are held with bank and financial institution counterparties which have
investment grade ‘A’ credit ratings. The Company considers the associated credit risk is 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 111 to 140
of the Annual Report and Accounts.
17. Capital and risk management continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 305
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 2023, the Company entered into the following transactions with related parties.
2023
£m
2022
£m
Dividend income from other Group entities 655 455
Interest income from other Group entities 210 124
865 579
Expense to other Group entities 561 246
Interest expense to other Group entities 196 60
757 306
Amounts due from related parties at the end of the year:
2023
£m
2022
£m
Loans due from Group entities 1,302 2,550
Interest accrued on loans due from Group entities 28 29
Other amounts due from Group entities 25 19
1,355 2,598
Amount due for settlement after 12 months 1,297 2,004
Amounts due to related parties at the end of the year:
2023
£m
2022
£m
Loans due to Group entities 2,098 2,424
Interest accrued on loans due to Group entities 15 14
Other amounts due to Group entities 62 43
2,175 2,481
Amount due for settlement after 12 months 700 1,246
21. Auditor’s remuneration
Details of auditor’s remuneration for Phoenix Group Holdings plc and its subsidiaries is included in note C6 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.
N Lyons
A Briggs
R Thakrar
K Green
H Iioka
K Murray
E Bucks
M Gregory
J Pollock
B Richards
D Scott
M Semple
N Shott
21 March 2024
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023306
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 information is presented on a look-through basis into the
underlying funds.
The following table provides an overview of the exposure by asset category of the Group’s life companies’ shareholder and policyholder funds:
31 December 2023
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 4,129 1,085 5,309 8,002 18,525
Debt securities – gilts and foreign government bonds 7,753 286 15,039 12,312 35,390
Debt securities – other government and supranationals 2,021 230 2,175 3,253 7,679
Debt securities – infrastructure loans – project finance
3
1,137 – – – 1,137
Debt securities – infrastructure loans – corporate
4
1,523 – 1 – 1,524
Debt securities – local authority loans
5
1,032 1 2 4 1,039
Debt securities – loans guaranteed by export credit agencies
and supranationals
6
733 – – – 733
Debt securities – private corporate credit
7
2,271 – 106 8 2,385
Debt securities – loans to housing association
8
1,243 – 8 2 1,253
Debt securities – commercial real estate loans
9
1,147 – – – 1,147
Debt securities – equity release mortgages
9
4,486 – – – 4,486
Debt securities – other debt securities 15,097 1,152 12,397 27,688 56,334
38,443 1,669 29,728 43,267 113,107
Equity securities 117 50 17,227 112,122 129,516
Property investments 47 16 1,677 5,062 6,802
Income strips
9
– – – 674 674
Other investments
10
(371) (529) 822 10,800 10,722
Total Life Company assets 42,365 2,291 54,763 179,927 279,346
Less assets held by disposal groups
11
– – – (4,780) (4,780)
At 31 December 2023 42,365 2,291 54,763 175,147 274,566
Cash and cash equivalents in Group holding companies 1,012
Cash and financial assets in other Group companies 686
Financial assets held by the non-controlling interest in
consolidated collective investment schemes 4,018
Financial assets in consolidated funds held by disposalgroups
11
188
Total Group consolidated assets excluding amounts classified as held for sale 280,470
Comprised of:
Investment property 3,698
Financial assets 272,946
Cash and cash equivalents 7,168
Derivative liabilities (3,342)
280,470
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 £1,137 million include £1,097 million classified as Level 3 debt securities in the fair value hierarchy.
4 Total infrastructure loans – corporate of £1,524 million include £1,493 million classified as Level 3 debt securities in the fair value hierarchy.
5 Total local authority loans of £1,039 million include £932 million classified as Level 3 debt securities in the fair value hierarchy.
6 Total loans guaranteed by export credit agencies and supranationals of £733 million include £486 million classified as Level 3 debt securities in the fair value hierarchy.
7 Total private corporate credit of £2,385 million include £1,829 million classified as Level 3 debt securities in the fair value hierarchy.
8 Total loans to housing associations of £1,253 million include £1,186 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 £1 million, other loans of £189 million, net derivative liabilities of £(770) million, reinsurers’ share of investment contracts of £9,700 million and other investments of £1,602 million.
11 See note H3 to the consolidated financial statements for further details.
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 307
31 December 2022 restated
1
Carrying value
Shareholder and
non-profit funds
2
£m
Participating
supported
2
£m
Participating
non-supported
3
£m
Unit-linked
3
£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
4
922 – – – 922
Debt securities – infrastructure loans – corporate
5
1,205 – 1 – 1,206
Debt securities – local authority loans
6
686 1 2 4 693
Debt securities – loans guaranteed by export credit agencies
and supranationals
7
509 – – – 509
Debt securities – private corporate credit
8
1,660 – 100 8 1,768
Debt securities – loans to housing associations
9
769 – 8 2 779
Debt securities – commercial real estate loans
10
1,104 – – – 1,104
Debt securities – equity release mortgages
10
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
10
– – – 786 786
Other investments
11
(1,241) (508) 732 9,273 8,256
Total Life Company assets 34,609 2,208 54,816 165,409 257,042
Less assets held by disposal groups
12
– – – (8,312) (8,312)
At 31 December 2022 34,609 2,208 54,816 157,097 248,730
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
12
1,147
Total Group consolidated assets excluding amounts
classified as held for sale 255,663
Comprised of:
Investment property 3,727
Financial assets 248,972
Cash and cash equivalents 8,839
Derivative liabilities (5,875)
255,663
1 Prior period comparatives have been restated on transition to IFRS 17 Insurance Contracts (see note A2.1 for further details). This has resulted in a net reduction of £(9) million as result of moving £(11)
million policy loans to insurance contracts along with a £2 million increase in reinsurance share of investment contracts.
2 Includes assets where shareholders of the life companies bear the investment risk.
3 Includes assets where policyholders bear most of the investment risk.
4 Total infrastructure loans – project finance of £922 million include £882 million classified as Level 3 debt securities in the fair value hierarchy.
5 Total infrastructure loans – corporate of £1,206 million include £1,175 million classified as Level 3 debt securities in the fair value hierarchy.
6 Total local authority loans of £693 million include £596 million classified as Level 3 debt securities in the fair value hierarchy.
7 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.
8 Total private corporate credit of £1,768 million include £1,422 million classified as Level 3 debt securities in the fair value hierarchy.
9 Total loans to housing associations of £779 million include £691 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 other loans of £398 million, net derivative liabilities of £(1,837) million, reinsurers’ share of investment contracts of £9,090 million and other investments of £605 million.
12 See note H3 to the consolidated financial statements for further details.
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023308
The following table provides a reconciliation of the total life company assets to the Assets under Administration (‘AUA’) as at 31 December 2023
detailed in the Business Review on page 37.
2023
£bn
2022
£bn
Total Life Company assets excluding amounts classified as held for sale 274.6 248.7
Off-balance sheet AUA
1
10.3 10.3
Less: Wrap SIPP and Onshore Bond assets
2
(2.4) –
Assets Under Administration 282.5 259.0
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.
2 Assets held in Wrap Self-Invested Personal Pension (‘Wrap SIPP’) and Onshore Bond products the associated profits of which accrue to abrdn plc under a profit transfer arrangement have been
excluded from AUA (see note H3 to the consolidated financial statements for further details).
All of the life companies’ debt securities are held at fair value through profit or loss under IFRS 9 Financial Instruments (2022: IAS 39 Financial
Instruments: Recognition & Measurement), 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 shareholder debt portfolio, which comprises of 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 – 127 216 520 10 873
Basic materials – 1 126 55 – 182
Consumer, cyclical 10 227 344 82 70 733
Technology and telecoms 118 142 644 706 1 1,611
Consumer, non-cyclical 197 334 677 240 – 1,448
Structured finance – – 37 – – 37
Banks
2
314 749 2,915 682 13 4,673
Financial services 65 558 197 69 14 903
Diversified – 4 17 6 – 27
Utilities 14 515 979 1,208 10 2,726
Sovereign, sub-sovereign and supranational
3
1,348 8,932 658 152 – 11,090
Real estate 132 588 3,334 1,259 92 5,405
Investment companies – 91 48 8 – 147
Insurance 18 325 176 106 – 625
Oil and gas – 218 330 149 – 697
Collateralised debt obligations – 7 2 – – 9
Private equity loans – – 18 105 – 123
Equity release mortgages
4
2,504 991 864 127 – 4,486
Infrastructure – 467 243 1,881 57 2,648
At 31 December 2023 4,720 14,276 11,825 7,355 267 38,443
1 Includes unrated holdings of £17 million.
2 The £4,673 million total shareholder exposure to bank debt comprised £3,730 million senior debt and £943 million subordinated debt.
3 Includes £762 million reported as local authority loans, £467 million reported as loans guaranteed by export credit agencies and supranationals and £87 million reported as private corporate credit in
the summary table on page 306.
4 The credit ratings attributed to equity release mortgages are based on the ratings assigned to the internal securitised loan notes.
Additional life company asset disclosures continued
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 309
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
Equity release mortgages
4
2,216 852 810 56 – 3,934
Infrastructure – 123 60 1,208 155 1,546
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 and £107 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.
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
2023
£m
Corporate and
other
2023
£m
Total
2023
£m
Sovereign,
sub-sovereign and
supranational
2022
£m
Corporate and
other
2022
£m
Total
2022
£m
UK 9,046 16,169 25,215 5,914 13,781 19,695
Supranationals 704 – 704 541 45 586
USA 274 4,764 5,038 317 5,122 5,439
Germany 133 811 944 46 716 762
France 169 1,724 1,893 153 921 1,074
Netherlands 79 457 536 24 417 441
Italy – 304 304 – 145 145
Ireland 35 88 123 – 74 74
Spain 12 253 265 17 103 120
Luxembourg 55 133 188 56 118 174
Belgium 89 134 223 28 83 111
Australia 1 477 478 1 386 387
Canada 45 410 455 6 385 391
Mexico 2 157 159 2 137 139
Other – non-Eurozone
1
356 1,125 1,481 252 1,241 1,493
Other – Eurozone 90 347 437 40 217 257
Total shareholder debt securities 11,090 27,353 38,443 7,397 23,891 31,288
1 There was no shareholder exposure to Russia, Ukraine and Belarus at 31 December 2023 and 31 December 2022.
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023310
Additional capital disclosures
PGH PLC Solvency II surplus
The PGH plc surplus at 31 December 2023 is £3.9 billion (2022: £4.5 billion).
31 December
2023
Estimated
£bn
31 December
2022
£bn
Own Funds 11.1 11.1
SCR (7.2) (6.6)
Surplus 3.9 4.5
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
2023
Estimated
£bn
31 December
2022
£bn
Tier 1 – Unrestricted 6.7 6.8
Tier 1 – Restricted 1.1 1.1
Tier 2 2.7 2.6
Tier 3 0.6 0.6
Total Own Funds 11.1 11.1
PGH plc’s unrestricted Tier 1 capital accounts for 60% (2022: 61%) 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 (2022: £0.2 billion) and the deferred tax asset of £0.4 billion (2022: £0.4 billion).
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’), the acquired ReAssure and SLF Canada UK Limited businesses. SLIDAC, ReAssure and
SLF Canada UK Limited 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 2023 Estimated 31 December 2022
Internal Model
%
ReAssure, SLIDAC and
SLF Canada UK Limited
Standard Formula
%
Internal Model
%
ReAssure, and SLIDAC
Standard Formula
%
Longevity 17 10 15 17
Credit 19 19 17 19
Persistency 19 33 18 28
Interest rates 5 3 8 6
Operational 8 4 8 4
Swap spreads 2 – 2 –
Property 6 1 4 1
Other market risks 10 18 15 14
Other non-market risks 14 12 13 11
Total pre-diversified SCR 100 100 100 100
The principal risks of the Group are described in detail in note E6 and F11 in the IFRS consolidated financial statements.
Financials
Phoenix Group Holdings plc Annual Report and Accounts 2023 311
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
€4.0 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 MCRs of the underlying insurance companies.
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 2023 is £1.8 billion (2022: £2.3 billion).
PGH plc’s Eligible Own Funds to cover MGSCR is £7.9 billion (2022: £8.2 billion) leaving an excess of Eligible Own Funds over MGSCR of
£6.1billion (2022: £5.9 billion), which translates to an MGSCR coverage ratio of 432% (2022: 361%).
312 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
Alternative performance measures
The Group assesses its financial performance based on a number of measures. Some measures are management derived measures of historic
or future financial performance, position or cash flows of the Group; which 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 30.
APMs marked with ‘NEW’ have been introduced in the period. IFRS adjusted shareholders’ equity has been introduced following the adoption
of IFRS 17. New business net funds flows, Operating Cash Generation (‘OCG’), recurring management actions, Return on Capital (‘RoC’) and
Solvency II leverage have been introduced to reflect the evolution of the Group’s strategy as described in the CEO’s Report and Our strategic
priorities and KPIs and Directors Remuneration Report sections of the Annual Report. New business contribution (‘NBC’), BPA Capital Strain
(Pre-Capital Management Policy) and BPA premiums written have been described in previous annual reports but as these have taken on more
prominence are also marked as new.
APMs marked with ‘CHANGED’ have been amended from that disclosed in the Annual Report and Accounts 2022. Fitch leverage ratio and
adjusted operating profit have been amended to reflect the adoption of IFRS 17.
APM Definition Why this measure is used Reconciliation to financial statements
Adjusted
operating profit
CHANGED
Adjusted operating profit is a financial
performance measure based on expected
long-term investment returns. It is stated
before tax and non-operating items including
amortisation and impairments of intangibles,
finance costs attributable to owners and
other non-operating items which in the
Director’s view should be excluded by
their nature or incidence to enable a full
understanding of financial performance.
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 36.
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 308.
Bulk Purchase
Annuity (‘BPA’)
Capital Strain
(Pre-Capital
Management
Policy)
NEW
Represents the capital deployment on BPA
measured on a Solvency II basis, before capital
management policy, expressed as a proportion of
the BPA Premium.
It is calculated as the capital deployed (being the
Solvency II Technical Provisions plus SCR plus
acquisition costs plus reinsurance premium less
BPA Premium, net of tax) as a proportion of the
BPA Premium.
BPA Capital Strain (Pre-Capital
Management Policy) reflects how
efficiently capital is deployed on
BPA to deliver new business growth.
The capital deployed in writing BPA business
is included within the new business strain
component of the change in Solvency SII
surplus in the period, as set out in the
diagram on page 34.
BPA premiums
written
NEW
Represents the aggregate, gross of reinsurance,
new business premium volume for BPA business,
measured at the risk transfer date, written in
the period.
BPA premiums written provides a
measure of the Group’s ability to
deliver new business growth.
BPA premiums written is not directly
reconcilable to the financial statements as
premiums are no longer reported on the IFRS
income statement. BPA premium written is
included within the ‘Estimates of present value
of future cash flows’ line on the effect of
contracts initially recognised in the year in
Note F8.1 for the Retirement Solutions
disclosure group.
313Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
APM Definition Why this measure is used Reconciliation to financial statements
Fitch leverage
ratio
CHANGED
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. Equity is defined as the
sum of equity attributable to the owners of the
parent, non-controlling interests, contractual
service margin (‘CSM’) (net of tax), policyholders’
share of the estate and the Tier 1 Notes.
The Group seeks to manage the level of
debt on its balance sheet by monitoring
its financial leverage position. One of the
output metrics used in this regard is the
Fitch leverage ratio. This is to ensure the
Group maintains its investment grade
credit rating as issued by Fitch Ratings.
The adjusted equity component of the Fitch
leverage ratio is as set out below for the IFRS
adjusted shareholders’ equity metric.
Fitch Leverage
FY
2023
Total equity attributable
to owners of the parent
2.5
CSM (net of tax)
2.1
Adjusted shareholders’ equity
4.6
Non controlling interests
0.5
Policyholder surplus in
with profit funds
4.2
Tier 1 notes
1.0
Total Shareholders’ Equity
– Fitch basis
A
10.3
Total Shareholder debt
B
3.1
Fitch Leverage (B/A + B)
23%
Non-controlling interests is directly
sourced from the Group’s IFRS statement
of consolidated financial position and Tier 1
notes from the borrowings note E5 on pages
209 to 211. Policyholder surplus in with-profit
funds is a subset of Estimates of present value
of future cash flows within insurance contract
liabilities in Note F1 on page 226.
Group in force
Long-term Free
Cash (‘LTFC ’ )
Group in force Long-term Free Cash (‘LTFC’)
comprised of long-term cash to emerge from
in-force business, plus holding company cash,
less an allowance for costs associated with
in-flight mergers and acquisitions and the
related transition activities, and a deduction
for shareholder debt outstanding.
The calculation for the LTIP performance
metric excludes any future shareholder dividends
and is before interest on debt until maturity.
LTFC provides a measure of the Group’s
total long-term cash available for operating
costs, interest, growth and shareholder
returns. Increases in LTFC will be driven by
sources of long-term cash i.e. new business
and over-delivery of management actions.
Decreases in LTFC will reflect the uses of
cash at holding company level, including
expenses, interest, investment in BPA and
dividends. Is a measure in the 2023 LTIP.
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 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 209.
IFRS adjusted
shareholders’
equity
NEW
IFRS adjusted shareholders’ equity is calculated
as IFRS Total equity attributable to owners of the
parent plus the CSM, net of tax.
Adjusted shareholders’ equity provides
a meaningful measure of the value
generated by the Group, including the
value held in the CSM for IFRS 17 contracts.
Adjusted shareholders’ equity reconciles to
the IFRS balance sheet as follows:
FY
2023
Total equity attributable
to owners of the parent 2,496
Add: CSM
2,853
Less: Tax on CSM
(713)
Adjusted shareholders’ equity
4,636
Total equity attributable to owners of the
parent is directly sourced from the Group’s
IFRS statement of consolidated financial
position on pages 166 and 167. CSM is set out
in note F1 on page 227. Tax is reflected at the
deferred tax rate of 25%.
Incremental new
business long-term
cash generation
Incremental new business long-term cash
generation represents the operating companies’
total cash generation that is expected to arise in
future years as a result of new business transacted
in the current period. It excludes any costs
associated with the acquisition of the new business.
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 legacy 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 (‘OCG’).
Life Company Free Surplus is a subset of the
change in Solvency II surplus over the period
set out in the diagram on page 34. It can be
reconciled as follows:
FY
2023
Group Solvency II surplus
3.9
Less: Non-life company components
0.7
Less: Capital Management Policy
(2.4)
Life Company Free Surplus
2.2
314 Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
APM Definition Why this measure is used Reconciliation to financial statements
Net fund flows Represents the aggregate net position of gross
AUA inflows less gross outflows. It is an in-year
movement in the Group’s AUA.
Net fund flows provides a measure
of the Group’s ability to deliver new
business growth.
Net fund flows is not directly reconcilable
to the financial statements as it includes
movements in AUA which do not flow directly
to the Group’s IFRS consolidated income
statement. However, a reconciliation from
the Group’s IFRS statement of consolidated
financial position to the Group’s AUA is
provided on page 308.
New business
contribution
(‘NBC’)
NEW
Represents the increase in Solvency II
Shareholder Own funds arising from new
business written in the year, assuming assets
have been fully transitioned in to the pricing
portfolio, and provides an assessment of the
day one value (excluding a cost of capital)
arising on the writing of new business on a
discounted basis. It is adjusted to exclude
(i) prudence in the Fundamental Spread,
(ii) the associated risk margin and (iii) any
restrictions in respect of contract boundaries.
Is stated on a net of tax basis, is after acquisition
costs and includes future year cash flows
in which long term maintenance costs are
deducted and therefore it excludes any
short term cost overruns.
The measure provides an assessment
of the day one value (excluding a cost
of capital) arising on the writing of new
business, and is stated after applicable
tax and acquisition costs. This measure
is a 2024 AIP metric.
NBC is a subset of the new business element
within Group’s Solvency II analysis of movement
set out on page 34 and is adjusted for the
items stated.
New business
net fund flows
NEW
Represents the aggregate net position of AUA
inflows less outflows for new business written in
the period.
New business net fund flows provides a
measure of the Group’s ability to deliver
new business growth
New business net fund flows is not
directly reconcilable to the financial
statements. It is a subset of Net fund flows
described below.
Operating Cash
Generation
(’OCG’)
And
Operating
Surplus
Generation
(‘OSG’)
NEW
Operating Cash Generation (’OCG’) is the
emergence of cash on a Solvency II basis as
surplus emerges (being the in-force business run
off over time and capital unwind, plus day one
surplus from writing new business (net of day
1 strain for fee based business) plus group tax
relief), plus recurring management actions.
As a cash measure it will be reported in line with
Life Company Free Surplus view and therefore
is the excess of their Board approved capital
according to their capital management policies.
OCG before adjustment to reflect the release
of capital management policy is referred to as
Operating Surplus Generation (‘OSG’).
The measure provides the sources of
recurring organic cash generated which
can be used to support sustainable cash
remittances from the Life Companies,
which in turn supports the Group’s
dividend as well as funding investment
to generate sustainable growth.
The components of the OCG are:
FY23
£bn
Surplus generation
0.8
Recurring management actions
0.3
OSG
1.1
Release of capital
management policy
–
OCG
1.1
OSG forms a component of the change in
Solvency II surplus in the period as set out
in the diagram on page 34.
Recurring
management
actions
NEW
Recurring management actions are measured on
a Solvency II basis and represent the Day 1 impact
on Own Funds and SCR. They are management
actions that are either genuinely repeatable,
repeatable in nature but subject to diminishing
returns or not repeatable but benefits are
expected from similar types of actions
The measure is a key component of OCG
and one of the sources which can be used
to support sustainable cash remittances
from the Life Companies
Recurring management actions are a subset
of the Solvency II surplus generated in the
period as shown in the diagram on page 34.
Alternative performance measures continued
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.
315Phoenix Group Holdings plc Annual Report and Accounts 2023
Financials
APM Definition Why this measure is used Reconciliation to financial statements
Return on
Capital (’RoC’)
NEW
Reflects the Solvency II Own Funds component
of the Operating Cash Generation (i.e. the
inforce and new business surplus generation
and group tax relief), less financing costs plus
recurring management actions divided by
Opening Unrestricted Core Tier 1 Shareholder
Capital (‘UT1’) + Deferred tax assets (‘DTA’).
At a high level, this could be more simply
described as the operating growth in own
funds less financing costs as a percentage
of opening own funds excluding debt.
The RoC measure is intended to
demonstrate our efficiency in allocating
capital to generate returns for our
shareholders. It will demonstrate if we are
using our capital efficiently to generate
optimal returns, performance and growth
to deliver long term shareholder value.
This measure is included in the 2024 LTIP.
FY23
£bn
Own Funds component
of OCG
0.6
Less Financing Costs
(0.2)
Recurring
Management actions
0.3
Total Own Funds
0.7
Divided by
Opening Shareholder UT1 +
5.0
Opening DTA
0.4
Opening Total Capital
5.4
ROC=
12.8%
The Own Funds component of OCG and
recurring management actions are a subset
of OCG as described previously. Financing
costs are sourced directly from the segmental
result on page 182.
Opening Shareholder UT1 is directly sourced
from the borrowings analysis on page 209 and
the Tier 1 notes classified as equity on page
194. The opening DTA is a component of the
Solvency II balance sheet within the Own Funds
balance in the diagram on page 34.
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 pages
34 and 35.
Solvency II
Leverage
NEW
Solvency II leverage is calculated as the Solvency
II value of debt divided by the value of Solvency II
Regulatory Own Funds. Values for debt are
adjusted to allow for the impact of currency
hedges in place over foreign currency
denominated debt.
The Group are targeting a £500m
reduction in debt over the medium term
to deliver a SII leverage ratio of c30%
FY2023
Solvency II Leverage
Regulatory Eligible Own
Funds (£bn)
10.9
Total Debt (£bn)
3.9
Solvency II Leverage
36%
Regulatory Eligible Own Funds is a component
of the calculation of the Group’s regulatory
Solvency II surplus as set out on page 34.
Total debt is that taken from borrowings
analysis on page 209.
Both amounts are adjusted for the value of the
foreign currency hedges used to hedge foreign
currency exposure on the Group’s borrowings
as described on page 193.
Total cash
generation
(formerly referred
to as operating
companies’ cash
generation)
Cash remitted by the Group’s operating
companies to the Group’s holding companies.
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.
Total cash generation is a key performance
indicator used by management for planning,
reporting and executive remuneration.
Total 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 32 to 33, 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 306.
316 Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
Shareholder information
Electronic communications
Phoenix Group is committed to reducing the volume of paper used
in communications to shareholders and other stakeholders to improve
sustainability. Shareholders are therefore able to access a wide range
of information and documentation on the Investor section of the
Group’s website at www.thephoenixgroup.com.
You can access electronic copies of Phoenix Group’s financial reports
and presentations on the website at: www.thephoenixgroup.com.
We strongly encourage shareholders to register to receive
notification of shareholder mailings via email and to choose this
as their default method of communication. You can register for
electronic communication through the Investor Centre.
Online news
Phoenix Group has a dedicated ‘News and Views’ section on
its website, www.thephoenixgroup.com, to keep shareholders,
investors, journalists and employees up to date and informed
on news.
Dividend information
Typically, Phoenix Group pays dividends twice a year. The Interim
dividend is usually paid in October and the Final dividend is paid
in May following approval by shareholders at the AGM.
Information about the 2023 Final dividend will be included in the
2023 Full Year Results Announcement.
Payment method
Shareholders may find it convenient to have their dividends paid
directly to their bank or building society account.
You can use Computershare’s web-based enquiry service at
www.investorcentre.co.uk to download forms such as a dividend
mandate form or submit dividend mandate details online.
Alternatively, contact Computershare using the details found under
the ‘Useful contact information’ section on page 317.
Scrip dividend alternative
The Company does not currently offer a scrip dividend alternative.
Dividend reinvestment plan
The Company does not currently offer a dividend reinvestment plan.
Annual General Meeting (‘AGM’)
Our AGM will be held on 14 May 2024 at 10am at Floor 22,
Freshfields Bruckhaus Deringer LLP, 100 Bishopsgate,
London, EC2P 2SR.
Full details of the business to be considered at the meeting will be
included in the Notice of Meeting which, along with all other details
relating to the AGM, will be available at: www.thephoenixgroup.com.
We do encourage shareholders to submit any questions
to the Company in advance of the AGM by email to
Investor.Relations@thephoenixgroup.com. Please note that
questions must be received no later than 10am on 10 May 2024.
Following the meeting, the voting results for our 2024 AGM,
including proxy votes and votes withheld will be available
on our website at: www.thephoenixgroup.com.
Shareholder services
Managing your shareholding
Our registrar, Computershare, maintains Phoenix Group’s
register of members. Shareholders may request a hard copy of
this Annual Report and Accounts from our registrar and should you
have any queries in respect of your shareholding, please contact
Computershare directly using the contact details set out under
the ‘Useful contact information’ section on page 317.
Investor Centre
The Investor Centre is an online enquiry service, provided by
Computershare, which allows you to manage your shareholding
with ease. Visit the Investor Centre at www-uk.computershare.com/
Investor/#Home. Once logged in, you can:
• view details of your Phoenix Group shareholding;
• view your recent dividend payments;
• update your address details;
• change your payment method; and
• register for electronic communications.
You can also use Computershare’s web-based enquiry service at
www.investorcentre.co.uk to download forms such as a dividend
mandate form or submit dividend mandate details online.
Alternatively, contact Computershare using the details found under
the ‘Useful contact information’ section on page 317.
317Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
2024 Financial calendar
Ordinary shares – 2023 Final dividend
Ex-dividend date 11 April 2024
Record date 12 April 2024
Payment date for the recommended Final dividend 22 May 2024
Group Financial calendar for 2024
Annual General Meeting 14 May 2024
Announcement of unaudited Interim Results Sept 2024
1
1 See website for announcement dates.
Share price
For a more detailed look at the share price of Phoenix Group
Holdings plc, including current share price and the share price
over time, please see the ‘Share Monitor’ section of the Group’s
website at www.thephoenixgroup.com.
Please be mindful that the share price data on the website is delayed
by 15 minutes.
Share fraud warning to shareholders
Over recent years, many companies have been informed 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 turns 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
Phoenix Group:
• 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 +44 (0)800 111 6768.
• 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. 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
Phoenix Group endorses will be included in our shareholder mailings.
More detailed information on this or similar activity can be found
on the FCA website available at www.fca.org.uk/consumers.
Useful contact information
Computershare
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
United Kingdom
Computershare general helpline:
Shareholder helpline number: +44 (0) 370 702 0181
Lines open from 8.30am to 5.30pm Monday to Friday,
excluding public holidays in England and Wales.
Phoenix Group Holdings plc
For Company Secretariat or Investor enquiries:
Kulbinder Dosanjh
Group Company Secretary
Telephone: +44 (0)20 4559 4513
Email: kulbinder.dosanjh@thephoenixgroup.com
Claire Hawkins
Director of Corporate Affairs and Investor Relations
Telephone: +44 (0)20 4559 3161
Email: claire.hawkins@thephoenixgroup.com
318 Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
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 else where.
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.
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.
Glossary
319Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
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.
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 (Fitch)
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,
contractual service margin (‘CSM’) (net of tax), policyholders’ share
of the estate and subordinated liabilities qualifying as 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 annuity
at a contractually guaranteed conversion rate.
HMRC
His Majesty’s Revenue and Customs.
320 Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
LTIP
Long-Term Incentive Plan – The part of an executive’s remuneration
designed to incentivise 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 (therefore
accelerating expected cash generation). Examples of management
action activities include investment into higher yielding asset types,
optimisation of asset and liabilities matching positions, and cost
reduction initiatives. Certain management actions are classified as
recurring and form part of OCG. These are actions which are either
genuinely repeatable, repeatable in nature but subject to diminishing
returns or not repeatable but benefits are expected from similar
types of actions.
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 and excludes market movements. Net flows may be
reported for the Group as a whole, for a specific part of the Group
or for different time periods. Group net flows are included as a
measure in the 2024 AIP scheme. Pensions and Savings Net Flows
– Workplace and Retail is included as a measure in the 2023 AIP
scheme. Cumulative net flows, being net flows over the 3 year LTIP
performance period, are included in the 2024 LTIP grant.
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.
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.
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 2023 AIP performance metric measures value creation with
incremental new business long-term cash generation (less strain)
representing the increase in the expected future operation
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.
Glossary continued
321Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
New business contribution
Represents the increase in Solvency II Shareholder Own funds arising
from new business written in the year, assuming assets have been fully
transitioned in to the pricing portfolio, and provides an assessment
of the day one value (excluding a cost of capital) arising on the writing
of new business on a discounted basis. It is adjusted to exclude (i)
prudence in the Fundamental Spread, (ii) the associated risk margin
and (iii) any restrictions in respect of contract boundaries. Is stated
on a net of tax basis, is after acquisition costs and includes future year
cash flows in which long term maintenance costs are deducted and
therefore it excludes any short term cost overruns. This measure is
included in the 2024 AIP scheme.
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.
Operating Cash Generation
Operating Cash Generation (’OCG’) is the emergence of cash as
in-force business runs off over time and capital unwinds, plus day
one surplus from writing new business (net of day 1 strain for fee
based business) plus group tax relief, plus recurring management
actions. As a cash measure it will be reported on an Excess over
CMP view.
Operating companies
Refers to the trading companies within Phoenix Group.
Operating companies’ total cash generation
Operating companies’ cash generation represents cash remitted
by the Group’s operating companies to the holding companies.
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.
Each FTSE 100 Board should 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 specific Pensions &
Savings products 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 risks are covers in section F11 of the
consolidated financial statements. This is a LTIP performance metric
for the 2021, 2022 and 2023 grants.
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.
322 Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
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 Task Force on Climate-Related Financial Disclosures (‘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 corporate 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 Tate 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
Transitional Measures on Technical Provisions (’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.
ReAssure
The companies comprising ReAssure Limited, ReAssure Life Limited
and Ark Life Assurance Company dac businesses which were
acquired on 22 July 2020.
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 2021 and 2022 grants.
Return on Capital (’RoC’)
Reflects the Own Funds component of the Operating Cash
Generation (i.e. the inforce and new business surplus generation
and group tax relief), less financing costs plus recurring management
actions divided by Opening Unrestricted Core Tier 1 Shareholder
Capital (UT1) + Deferred tax assets. At a high level, this could be more
simply described as the operating growth in own funds less financing
costs/opening own funds excluding debt. This is a LTIP performance
metric for the 2024 grant.
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’).
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.
Solvency II Leverage
Solvency II leverage is calculated as the Solvency II value of debt
divided by the value of Solvency II Regulatory Own Funds. Values for
debt are adjusted to allow for the impact of currency hedges in place
over foreign currency denominated debt.
Glossary continued
323Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
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).
This is a LTIP performance metric.
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 received significantly more share 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.
324 Phoenix Group Holdings plc Annual Report and Accounts 2023
Additional information
Forward looking statements
Forward looking statements
The 2023 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, ambitions,outlook, guidance 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, climate change and the
effect of the UK’s version of the ‘Solvency II’ regulations on
the Group’s capital maintenance requirements;
• developments in the UK’s relationship with the European Union;
• the direct and indirect consequences for European and global
macroeconomic conditions of the conflicts in Ukraine and the
Middle East, and related or other geopolitical conflicts;
• political uncertainty and instability;
• the impact of changing inflation rates (including high inflation)
and/or deflation;
• information technology or data security breaches (including
the Group being subject to cyber-attacks);
• 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);
• the Group’s ability along with governments and other
stakeholders to measure, manage and mitigate the impacts
of climate change effectively;
• 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 any acquisitions,
disposals or other strategic transactions;
• 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, ambitions,outlook, guidance and expectations set out
in the forward-looking statements and other financial and/or
statistical data within the 2023 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 2023 Annual Report and Accounts.
The Group undertakes no obligation to update any of the
forward-looking statements or data contained within the
2023 Annual Report and Accounts or any other forward-looking
statements or data it may make or publish.
The 2023 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
2023 Annual Report and Accounts is or should be construed as
a profit forecast or estimate.
Caution about climate and sustainability related disclosures
Climate and sustainability disclosures in the 2023 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 sustainability disclosures made in the 2023
Annual Report and Accounts are likely to be amended, updated,
recalculated or restated in the future.
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Annual Report and Accounts 2023 Phoenix Group Holdings plc
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Registered Number 11606773