Aberdeen Group Plc · LSE:ABDN
Aberdeen — Standard Life Aberdeen — Investor Day (December 2017)
58 slides from Aberdeen's investor day presentation, December 2017
Slide 1: Analyst seminar
Standard Life Aberdeen plc Analyst seminar December 2017
Slide 2: Forward-looking statements
This presentation may contain certain “forward-looking statements” with respect to the financial condition, performance, results, strategy, objectives, plans, goals and expectations of Standard Life Aberdeen plc (“Standard Life Aberdeen”) and its affiliates. These forward-looking statements can be i
Slide 3: Agenda
Agenda • Assets and flows update • Modelling Standard Life Aberdeen • Solvency II and how we think about capital Financially strong and stable business well positioned for future growth 3
Slide 4: Assets and flows update
Assets and flows update Standard Life’ Aberdeen
Slide 5: Introducing AUMA
Introducing AUMA 31 December 31 December Previous AUA basis 2016 New AUMA basis 2016 £bn £bn Pensions and Savings AUA 171.6 ASI total AUM 580.6 ASI third party AUM 490.4 Pensions and Savings AUA 171.6 India and China 4.6 India and China 4.6 Other 12.2 Other corporate assets n/a AUA pre-eliminations
Slide 6: Stable assets with positive market movements offsetting net outflows
Stable assets with positive market movements offsetting net outflows Net outflows: (£23.0bn) £25.3bn £647.6bn £646.2bn (£3.7bn) £6.3bn (£16.4bn) (£11.7bn) (£3.2bn) £2.0bn FY 2016 ASI SL P&S ASI SL P&S Other Markets and Corporate Q3 2017 AUMA growth growth mature mature net flows1 performance actions
Slide 7: Aberdeen Standard Investments outflows partly offset by market movements
Aberdeen Standard Investments outflows partly offset by market movements Growth net flows: (£16.4bn) £580.6bn £20.9bn (£5.3bn) £569.7bn (£2.7bn) £2.5bn (£3.7bn) (£0.7bn) (£0.9bn) (£8.1bn) (£0.5bn) (£0.7bn) (£11.7bn) FY 2016 Equities Fixed income GARS Multi-asset Private Real estate Quant Cash/liquid
Slide 8: Stable or improved picture across most asset classes
Stable or improved picture across most asset classes Q1 2017 Q2 2017 Q3 2017 YTD 2017 YTD 2016 Net flows Net flows Net flows Net flows Net flows £bn £bn £bn £bn £bn Equities (1.5) (1.9) (1.9) (5.3) (7.5) Fixed income (0.2) (1.4) (1.1) (2.7) (4.7) Multi-asset (2.0) (1.8) (1.8) (5.6) (0.7) Private mar
Slide 9: Continued strong growth in P&S AUA driven by Retail and Workplace
Continued strong growth in P&S AUA driven by Retail and Workplace Growth net flows: £6.3bn (8%1 of opening growth AUA) £7.6bn £182.3bn £5.0bn £1.1bn £0.2bn £0.1bn £171.6bn (£2.6bn) (£0.7bn) FY 2016 UK Retail UK Workplace Europe growth UK Mature Europe mature Spread/risk Markets and Q3 2017 AUA net f
Slide 10: Continuing Pensions and Savings' track record of steady flows
Continuing Pensions and Savings’ track record of steady flows Steady net inflows throughout the investment cycle £2.5bn net inflows Workplace and Retail £0bn Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 2015 2016 2017 Growing AUA throughout the investment cycle
Slide 11: Assets and flows update – Q&A
Assets and flows update – Q&A 11
Slide 12: Modelling Standard Life Aberdeen
Modelling Standard Life Aberdeen 12
Slide 13: Modelling Standard Life Aberdeen
Modelling Standard Life Aberdeen • New key performance metric: adjusted profit • Pro forma results • Modelling insights 13
Slide 14: Adjusted profit before tax – introducing our new key performance metric
Adjusted profit before tax – introducing our new key performance metric Adjusted profit before tax • Replaces the previous legacy KPIs: • Standard Life: Operating profit before tax • Aberdeen: Underlying profit before tax • Two key differences: • Coupons payable on Aberdeen perpetual notes now inclu
Slide 15: Adjusted profit before tax – introducing our new key performance metric
Adjusted profit before tax – introducing our new key performance metric Aberdeen Asset Standard Life Standard Life Management Aberdeen 12 months to 31 December 2016 £m £m £m Profit before tax expense attributable to equity holders’ profits (amended) 4491 2242 673 Non-operating items: Short-term fluc
Slide 16: Other pro forma adjustments
Other Pro forma adjustments Calendarisation adjustment • Brings previously reported Aberdeen results in line with annual reporting period ending on 31 December Acquisition adjustments • No account has yet been taken of the change to amortisation which may result from the remeasurement on the merger
Slide 17: Reconciliation of operating profit to adjusted profit for 2016
Reconciliation of operating profit to adjusted profit for 2016 Adjustments: (£31m) £362m £1,085m £3m £1,054m (£26m) (£8m) £723m Standard Life Aberdeen Combined Perpetual note SLI gain on FX Other segment Pro forma 2016 2016 calendarised coupons no longer investment 2016 operating profit underlying p
Slide 18: Adjusted profit by business unit for 2016
Adjusted profit by business unit for 2016 Adjustments: (£31m) £362m £3m £1,054m (£26m) (£8m) Pre-merger Post-merger Aberdeen Asset Management £723m Aberdeen Standard Investments Standard Life Investments £722m India and China Life India and China Standard Life Pensions and Savings Pensions and Savin
Slide 19: Modelling of cost synergies and integration costs
Modelling of cost synergies and integration costs Annualised cost synergies of approximately Integration progressing well: £200m on a pre-tax basis: • Integration progressing well across all major cross • Run-rate expected to be achieved by end of year 3 functional workstreams • 75% of run-rate expe
Slide 20: Modelling: ASI – Revenue
Modelling: ASI – Revenue Average AUM Revenue Fee revenue yield1,2 YTD 2017 2016 2016 2016 £bn £bn £m bps Equities 103.5 95.0 637 67.7 Fixed income 52.5 54.4 163 31.5 Multi-asset 75.1 78.0 458 58.6 Private markets and alternatives 25.1 24.3 108 41.4 Real estate 28.0 28.7 165 56.5 Quantitative 2.3 2.3
Slide 21: Modelling: ASI – 2017 Growth AUM
Modelling: ASI – 2017 Growth AUM Opening AUM as Gross Markets and Corporate Closing AUM as Analysis by asset classes at 1 Jan 2017 inflows Redemptions Net flows performance actions at 30 Sep 2017 £bn £bn £bn £bn £bn £bn £bn Developed market equities 15.8 1.9 (2.5) (0.6) 0.9 - 16.1 EM equities 33.9 4
Slide 22: Modelling: SL – Revenue
Modelling: SL – Revenue Average AUA Revenue Fee revenue yield YTD 2017 2016 2016 2016 £bn £bn £m bps UK Retail1 68.0 47.9 228 46.3 UK Workplace 38.9 34.5 185 53.6 Europe growth2 10.9 9.9 95 95.8 Growth 117.8 92.3 508 54.3 UK Mature Retail3 35.3 33.7 251 76.7 Europe mature fee2 9.6 9.3 102 109.7 Matu
Slide 23: Modelling: SL – Spread/risk margin
Modelling: SL – Spread/risk margin 2014 2015 2016 H1 2017 £m £m £m £m Comments Largely closed to new business therefore new New business 22 6 5 1 business profit will be minimal going forward Release of prudent reserves/unwind of back book with passage of time – can include some more lumpy items Exi
Slide 24: Modelling: IPO of HDFC Life
Modelling: IPO of HDFC Life Successful IPO of HDFC Life completed • Priced at 290Rs per share – top of 275Rs-290Rs price range • Commenced trading on 17 November 2017 • Share price performance: • Day 1: +18.6% • IPO to 13 December 2017: +31.3% Proceeds from IPO of c£370m • Gain on sale c£300m will b
Slide 25: Modelling: Miscellaneous
Modelling: Miscellaneous Issuance of sub-debt on 13 October 2017 • $750m 4.25% fixed rate subordinated notes, swapped to GBP at 3.2% • Issue by SLA plc therefore interest expenses included in “Other” segment MiFID II • Small impact in 2017 • c£25m impact expected in 2018 onwards Acquisition adjustme
Slide 26: Modelling Standard Life Aberdeen – Q&A
Modelling Standard Life Aberdeen – Q&A 26
Slide 27: Solvency II and how we think about capital
Solvency II and how we think about capital 27
Slide 28: Well capitalised with a stable Solvency II surplus
Well capitalised with a stable Solvency II surplus • Standard Life Aberdeen is well capitalised with a stable Solvency II surplus • Solvency II capital position reflects our focus on fee business – it is not a constraint • Shareholders’ equity is used efficiently • Our business model and IFRS earnin
Slide 29: Well capitalised with a strong regulatory solvency position
Well capitalised with a strong regulatory solvency position Regulatory view Regulatory view surplus (31 Dec 16): Tier 2 capital1 Restricted Tier 1 capital1 Surplus £3.2bn £3.2bn Regulatory view solvency ratio: £7.4bn 177% Group Unrestricted Solvency II Tier 1 capital1 Capital £4.2bn Group Solvency C
Slide 30: Investor view better reflects the strength of our solvency position
Investor view better reflects the strength of our solvency position Regulatory view Investor view 177% £7.4bn £0.1bn 208% entity-level capital not recognised at Group £6.3bn Surplus Group £3.2bn Solvency II Entity-level capital of Surplus £0.1bn that cannot yet be Capital transferred to SLA plc £3.3
Slide 31: Large With Profit Funds surplus dilutes our Solvency II ratio
Large With Profit Funds surplus dilutes our Solvency II ratio Even after adverse event Nevertheless, Solvency II requires a Large surplus in WPFs surplus remains large capital requirement to be recognised £0.8bn impact £0.8bn £0.8bn Capital Regulatory requirement capital £1.5bn WPFs surplus Capital
Slide 32: Strong solvency position
Strong solvency position Investor view Investor view surplus (31 Dec 16): £0.1bn SLAL entity-level capital not recognised at Group 208%1 £6.3bn £3.3bn 9% Investor view solvency ratio: 18% Surplus £3.3bn 208%1 Group Solvency II Capital • Stable surplus over a wide range of stress (Excluding WPFs scen
Slide 33: Stable investor view surplus over a wide range of stress scenarios
Stable investor view surplus over a wide range of stress scenarios £3.3bn £3.5bn £3.3bn £3.3bn £3.3bn £3.5bn £3.1bn £3.2bn £3.1bn £3.2bn 31 Dec 16 Up 20% Down 20% Up 1.0% Down 1.0% Up 0.5% Down 0.5% Up 5.0% Down 5.0%3 10% one-off Equities Fixed interest yields1,2 Credit spreads Mortality rates Surre
Slide 34: What are Solvency II capital and capital requirements?
What are Solvency II capital and capital requirements? Investor view £6.3bn Our Solvency II assets less liabilities and other capital items capital Investor view Amount of capital resources we must hold to protect against capital £3.0bn 1-in-200 year adverse event requirement Example 1-in-200 standa
Slide 35: Regulatory capital landscape
Regulatory capital landscape Regulatory framework Entity level Contribution to Group SII position Standard Life Investments BIPRU BIPRU Aberdeen Asset Management IFPRU IFPRU SLAL: SII internal model SLAL: SII internal model Standard Life Pensions and Savings SL Intl: SII standard formula SL Intl: SI
Slide 36: Minimal impact from merger on solvency position
Minimal impact from merger on solvency position £0.1bn £3.3bn £3.2bn SLI £0.2bn ASI £0.3bn Standard Life Standard Life Pensions and Pensions and Savings Savings £2.2bn £2.2bn SLA plc SLA plc and Other and Other £0.8bn £0.8bn Pre-merger Aberdeen Asset Post-merger investor view surplus Management PLC
Slide 37: Capital requirements reflect well diversified set of risks
Capital requirements reflect well diversified set of risks Fixed interest 7% Other1 25% Spread business, pension scheme, Credit shareholder assets Credit 20% Longevity Spread business, pension scheme £3.0bn Investor view Equity Fee business, with-profit fund Operational Sovereign risk Group SCR debt
Slide 38: Capital requirements reflect focus on fee business
Capital requirements reflect focus on fee business Other1 23% Spread business 29% £3.0bn Operational Investor view 6% Group SCR Fee business 42% Fee business and spread business are both major drivers of SCR … 1. Includes 10% from entities included under Solvency II standard formula and 8% from enti
Slide 39: Fee business generates regulatory capital in the form of VIF
… but fee business generates regulatory capital in the form of VIF VIF is the value of future profits that contributes to capital Impact of VIF on our Solvency II position Example… Premium paid of £1,000 Future income Time less expenses: £5 … £5 … VIF contribution to Solvency II VIF (contribution to
Slide 40: Shareholders' equity used efficiently
Shareholders’ equity used efficiently £1.1bn £8.6bn £5.4bn £8.3bn Investments in JVs & Assoc. £0.6bn £7.4bn £0.1bn Pension scheme surplus £1.1bn (£2.0bn) Intangibles (incl. DAC/DIR) £4.8bn (£2.9bn) (£0.8bn) £1.8bn Group Entity- Other Total Remove Remove Remove Add valuation IFRS equity Solvency II l
Slide 41: Cash generation
Subsidiary IFRS profits drive dividends to SLA plc Cash generation post interest and tax Dividends not constrained by regulatory capital £1,000m £824m £806m post interest and tax Cash generation Dividends to Cash IFRS profit SLA plc and generation shareholders £0m 20151 20161 Driving dividends to sh
Slide 42: Capital in SLA plc supports strategy and progressive dividend
Capital in SLA plc supports strategy and progressive dividend Continued focus on SLA plc liquid resources £1.5bn and liquid resources £1.0bn £0.9bn £0.9bn SLA plc cash £0.8bn £0.7bn £0bn 2013 2014 2015 2016 H1 2017 Liquid resources supporting: Further strengthened in H2 2017: • Progressive dividend
Slide 43: Summary
Summary • Standard Life Aberdeen is well capitalised with a stable Solvency II surplus • Solvency II capital position reflects our focus on fee business – it is not a constraint • Shareholders’ equity is used efficiently • Our business model and IFRS earnings support cash generation and our progress
Slide 44: Solvency II and how we think about capital – Q&A
Solvency II and how we think about capital – Q&A 44
Slide 45: Appendix
Appendix Standard Life’ Aberdeen
Slide 46: 2016 Pro forma profit by business unit
2016 Pro forma profit by business unit Total for the Group for the year ended 31 December 2016 Aberdeen Standard Pensions and India and Investments Savings China Life Other Eliminations Total £m £m £m £m £m £m Fee based revenue 1,920 861 17 - (112) 2,686 Spread/risk margin - 134 - - - 134 Total adju
Slide 47: 2015 Pro forma adjusted profit by business unit
2015 Pro forma adjusted profit by business unit Total for the Group for the year ended 31 December 2015 Aberdeen Standard Pensions India and Investments and Savings China Life Other Eliminations Total £m £m £m £m £m £m Fee based revenue 1,950 808 38 - (110) 2,686 Spread/risk margin - 145 - - - 145 T
Slide 48: Perpetual note coupons will be treated as an expense in adjusted profit
Perpetual note coupons will be treated as an expense in adjusted profit Aberdeen perpetual notes • Nominal $500m Perpetual Cumulative Capital Notes • Tier 2 notes with first call date in March 2018 • Coupon of 7.0% • Interest cost of £26m in 2016 and £23m in 2015 Coupons payable on perpetual notes c
Slide 49: Short-term fluctuations in investment return and economic assumption changes
Short-term fluctuations in investment return and economic assumption changes Previous policy • Difference between expected returns on investments backing equity holder funds and the actual return on investment was excluded from operating profit before tax and included in non-operating items as “Shor
Slide 50: Reconciliation of operating profit to adjusted profit for 2015
Reconciliation of operating profit to adjusted profit for 2015 Adjustments: (£32m) £441m £1,106m £1,074m (£23m) (£9m) £665m Standard Life Aberdeen Combined Aberdeen Other segment Pro forma 2015 2015 calendarised coupons capital 2015 operating profit underlying payable management adjusted before tax
Slide 51: Adjusted profit by business unit for 2015
Adjusted profit by business unit for 2015 Adjustments: (£32m) £441m £1,074m (£23m) (£9m) Pre-merger Post-merger Aberdeen Asset Management Aberdeen Standard Investments Standard Life Investments £760m India and China life £665m India and China Standard Life Pensions and Savings Pensions and Savings O
Slide 52: Adjustments to Aberdeen Asset Management profit before tax for 2016
Adjustments to Aberdeen Asset Management profit before tax for 2016 Reconciliation of underlying profit before tax Analysis of Aberdeen adjusted profit before tax to adjusted profit before tax Adjusted Aberdeen profit methodology profit £353m £99m £362m Year ended Year ended Year ended £336m 30 Sep
Slide 53: Adjustments to Aberdeen Asset Management profit before tax for 2015
Adjustments to Aberdeen Asset Management profit before tax for 2015 Reconciliation of underlying profit before tax Analysis of Aberdeen adjusted profit before tax to adjusted profit before tax £492m Adjusted Aberdeen profit methodology profit £90m £441m Year ended Year ended Year ended £418m 30 Sep
Slide 54: Well diversified by asset class
Well diversified by asset class Growth Mature Total As at 30 Sep 2017 £bn £bn £bn Cash/liquidity Equities 102.8 52.0 154.8 9% Quantitative Equities Fixed income 50.6 94.1 144.7 11% 27% Multi-asset 72.0 17.4 89.4 Real Estate Q3 2017 7% Total AUM Private Markets and Alternatives 24.8 1.3 26.1 Private
Slide 55: Well diversified by geography
Well diversified by geography North America North America £63.9bn £61.4bn (21%) (20%) APAC APAC 2016 UK £22.7bn Q3 2017 UK £25.2bn £150.5bn £144.9bn (8%) Growth AUM (8%) Growth AUM (49%) (48%) £309.1bn £302.2bn India India £10.5bn £12.3bn (3%) (4%) EMEA EMEA £59.0bn £60.9bn (19%) (20%) With opportun
Slide 56: Annuities – SLA facts
Annuities – SLA facts Total annuity best estimate liabilities: £15bn • Reinsured to Canada Life in 2008: £5bn • Shareholder exposure includes: • £5bn of annuities outside WPF; and • Longevity risk on £5bn of annuities inside WPF SCR: £0.9bn • Relating largely to longevity risk and investment/credit
Slide 57: Annuities – capital and economic considerations
Annuities – capital and economic considerations What makes SLA different to other annuity providers: • Our book is in run-off as we no longer sell new annuities1 • Therefore transitional arrangements run off as the book runs off – Solvency II does not give rise to significant additional capital stra
Slide 58: www.standardlifeaberdeen.com
www.standardlifeaberdeen.com Standard Life Aberdeen plc is registered in Scotland (SC286832) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. www.standardlifeaberdeen.com © 2017 Standard Life Aberdeen, images reproduced under licence. All rights reserved. 58
Standard Life Aberdeen — Investor Day (December 2017) on 6ix