Aberdeen Group Plc · LSE:ABDN
Aberdeen — Standard Life — H1 2007 Earnings Presentation
38 slides from Aberdeen's earnings presentation, Sep 4, 2007
Slide 1: Standard Life 2007 Interim Results
Standard Life 2007 Interim Results 4 September 2007
Slide 2: Please turn off your mobile phone and BlackBerry
Please turn off your mobile phone and BlackBerry
Slide 3: Disclaimer
Disclaimer This presentation may contain certain “forward-looking statements” with respect to certain of Standard Life's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”,
Slide 4: Agenda
Agenda Group overview Sandy Crombie Financial highlights David Nish Delivering value Sandy Crombie Questions and answers Executive team 4
Slide 5: Group overview
Group overview Sandy Crombie Group Chief Executive
Slide 6: Driving shareholder value is our objective
Driving shareholder value is our objective Delivery Driving Efficiency shareholder value Opportunity On track to achieve our return on embedded value target for 2007 of 9-10% – and increasing thereafter 6
Slide 7: Financial highlights
Financial highlights David Nish Group Finance Director
Slide 8: Financial highlights
Financial highlights EEV operating profit before tax up 71% to £353m (H1 2006: £206m) New business contribution before tax up 66% to £151m (H1 2006: £91m) New business margin up to 1.8% (FY 2006: 1.4%) EEV up 5% to £5,911m (FY 2006: £5,608m), equivalent to 271p1 per share EEV cash generation up 68%
Slide 9: Improving RoEV
Improving RoEV H1 2006 RoEV 6.8% 6.8% New business contribution 1.5% Expected return (0.2%) In-force movements (0.4%) Non-life business units 0.9% Corporate costs 0.5% H1 2007 RoEV 9.1% 9.1% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 2.3% points increase in return on embedded value to 9.1% RoEV in H1 2006
Slide 10: EEV operating profit
EEV operating profit Pro forma H1 2007 H1 2006 Asia- HWPF UK Canada Europe Pacific TVOG Total Total £m £m £m £m £m £m £m Contribution from new business 133 14 4 - - 151 91 Contribution from in-force business: Expected return on existing business 145 43 13 - - 201 189 Experience variances (28) 19 (4)
Slide 11: New business
New business 1 31% increase in PVNBP Margin improvement at group level H1 2007 FY 2006 H1 2006 6,954 7,000 UK 1.9% 1.5% 1.8% Canada 2.3% 1.6% 1.1% 6,000 Europe 0.8% 1.2% 0.6% 5,000 4,802 Group 1.8% 1.4% 1.6% 4,000 2 £m NBC increasing 66% 3,000 H1 2007 FY 2006 H1 2006 2,000 £m £m £m 1,025 UK 133 167
Slide 12: UK individual pensions – improving mix
UK individual pensions – improving mix Strong growth in higher margin individual SIPP Passive approach to low margin traditional products Lower new business strain resulting in shorter payback period SIPP vs personal pension Comparison of cumulative undiscounted profit H1 2006 H1 2007 £2.0bn PVNBP s
Slide 13: IFRS underlying profits
IFRS underlying profits Prior year IFRS result boosted by a number of exceptional items IFRS underlying profit up 11% on a normalised basis IFRS underlying profit before tax 250 £243m 225 £219m 200 £197m £m 175 150 125 H1 2006 Release of Canadian Profits from Normalised Increased New Reduction in Ot
Slide 14: New business strain
New business strain Focus on products with lower new 9 3.3% business strain (NBS) 8 3.1% Strain reduced to 1.9% of PVNBP 7 2.9% (H1 2006: 2.2%) 6 2.7% Our practice within our UK platform 5 2.5% £bn range 4 2.3% – Commission, where paid, is 3 2.1% recouped from customer funds 2 1.9% – Shift towards o
Slide 15: Cash generation
Cash generation H1 2007 H1 2006 £m £m New business strain (153) (127) Cash generation from existing business 265 201 112 74 Cash generation from operating variances and assumption changes and development costs 24 29 Cash generation from non-operating variances and assumption changes 45 53 Life and p
Slide 16: EEV capital generation
EEV capital generation Net worth PVIF Group EEV £m £m £m 31 December 2006 2,391 3,217 5,608 Cash generation 207 - 207 PVIF income statement movement - 114 114 Profit after tax 207 114 321 Dividends (114) - (114) Other non-trading movements 74 22 96 30 June 2007 2,558 3,353 5,911 Group EEV up 5%, net
Slide 17: Strong first half results
Strong first half results EEV operating profit 71% to £353m New business contribution 66% to £151m 1 PVNBP margin 0.4% pts to 1.8% Embedded value 5% to £5,911m EEV cash generation 68% to £207m IFRS normalised profit 11% to £219m 2 Interim dividend 5.6% to 3.8p Strong improvement in our financial per
Slide 18: Delivering value
Delivering value Sandy Crombie Group Chief Executive
Slide 19: How we deliver value
How we deliver value Building valuable customer relationships with leading service and compelling propositions Creating capital efficient innovative products Opening new routes to markets Leveraging investment management expertise and performance Driving for operational excellence Delivering shareho
Slide 20: The SIPP opportunity
The SIPP opportunity SIPP FUM in the UK market expected to triple by 2011 SIPP Funds Under Administration Leveraging SIPP across 7,000 £6.3bn the group 6,000 921 Post retirement market 5,000 334 463 Non-Insured Funds 37% £4.3bn 632 Corporate market 4,000 598 223 Non-Insured £m 234 Funds 33% 1,445 In
Slide 21: Corporate pensions – UK
Corporate pensions – UK 1.1m UK DC scheme members – a 38% increase since end of 2003 Strong sales growth driving a 115% increase in funds under management since end of 2003 10% growth in funds under management during H1 2007 UK Corporate Pensions Funds Under Management FUM per Customer Service Staff
Slide 22: UK Corporate pensions – improving mix
UK Corporate pensions – improving mix First major player to enter group SIPP market in January 2006 An innovative product with a wide range of applications Greater resilience to Personal Accounts H1 2006 H1 2007 £1.0bn PVNBP sales £1.5bn PVNBP sales 12% 31% 88% 69% Group SIPP Group pensions Improvin
Slide 23: Leveraging scale – UK
Leveraging scale – UK NBC Development H1 2006 - H1 2007 UK PVNBP has increased by 250 45% compared to H1 2006 200 Excluding non-insured SIPP acquisition costs increased 150 218 133 from £73m in H1 2006 to £m 78 £76m in H1 2007 100 151 71% increase in post 50 acquisition cost new business 85 73 contr
Slide 24: Canada – a strong pensions franchise
Canada – a strong pensions franchise Turnaround continues Disciplined approach to pricing 86% growth in funds under management since December 2003 Canada Corporate Pensions Funds Under Management 14.0 12.0 11.7 19% CAGR1 11.0 10.0 9.3 8.0 7.8 Total FUM Can$bn 6.3 6.0 4.0 2.0 0.0 31 December 2003 31
Slide 25: Asia-Pacific – potential from growing markets
Asia-Pacific – potential from growing markets Asia-Pacific new business growth1 Sales have more than doubled Further strong growth expected – driven by new product launches, 250 wider distribution and market 108% growth expansion 200 Agreement to increase our PVNBP £m 150 shareholding in our Indian
Slide 26: Standard Life Investments
Standard Life Investments Third party funds under management 48 £7.2bn £2.0bn £46.1bn £(1.6)bn 46 44 42 40 £38.5bn £bn 38 36 34 32 30 Third Party FUM at Inflows Outflows Market & other Third Party FUM at 31 Dec 06 movements 30 Jun 07 Sustained outperformance is driving asset growth 26
Slide 27: Alpha delivered across all assets
Alpha delivered across all assets Active Investment Performance – by Product Group % Rank at 30 June 2007 0 25 50 75 100 Weighted Par Funds Non Par Funds Mutual Funds SLIF Net SLIF Gross Corporate SLPF Irish & MWA Third Average German Ex Party Assets Group Life Funds 1 year 3 years 5 years 10 years
Slide 28: Standard Life Investments EBIT margin
Standard Life Investments IFRS PBT up 43% to £40m Standard Life Investments IFRS PBT and EBIT margin EBIT margin 29.3% (H1 2006: 24.5%) 45 35.0% EBIT margin target of 35% 40 30.0% 35 Increased volume, improved mix 25.0% and focus on efficiency drive 30 EBIT margin % higher margin 25 20.0% £m 20 15.0
Slide 29: Driving efficiency – benefit profile
Driving efficiency – benefit profile £m 180 160 £146m 140 £131m 120 100 80 £61m 60 40 20 0 2007 2008 2009 Reduction in corporate costs Reduction in UK L&P costs Additional cost savings All figures reported pre-tax 29
Slide 30: Continuous improvement programme
Continuous improvement programme Improvements to date include: The creation of UK Financial Services to integrate UK Life and Pensions, Standard Life Bank and Standard Life Healthcare Established a Finance Shared Service Centre Improved processing capacity in Customer Services to support SIPP growth
Slide 31: Driving shareholder value is our objective
Driving shareholder value is our objective Delivery Driving Efficiency shareholder value Opportunity On track to achieve our return on embedded value target for 2007 of 9-10% – and increasing thereafter 31
Slide 32: Your questions
Your questions
Slide 33: Appendix
Appendix
Slide 34: Focus on increasing embedded value
Focus on increasing embedded value Jan 2007 opening EEV 5,608 New business 151 Expected return 201 In-force movements (14) Development costs & other (5) Non-life operating units 46 Corporate costs (26) Taxation and non-operating items 64 Dividends paid (114) June 2007 closing EEV 5,911 5,000 5,200 5
Slide 35: EEV experience variances and operating assumption changes
EEV experience variances and operating assumption changes Pro forma H1 2007 H1 2006 HW PF UK Canada Europe TVOG Total Total £m £m £m £m £m £m Lapses (25) - (3) - (28) 4 Maintenance expenses 1 (2) (1) - (2) 1 Mortality and morbidity - - - - - (1) Tax & other (4) 21 - (2) 15 18 Experience variances (2
Slide 36: EEV profit after tax
EEV profit after tax Pro forma H1 2007 H1 2006 £m £m EEV operating profit before tax 353 206 Other non-operating items Long-term investment return and tax variances 31 58 Effect of economic assumption changes 52 (111) Movement in TVOG - 6 Mark to market movement on subordinated debt - 110 Movement i
Slide 37: IFRS underlying profits
IFRS underlying profits Proforma H1 2007 H1 2006 £m £m Life and pensions UK 91 119 Canada 64 68 Europe 19 52 Other life (6) (2) Total life and pensions 168 237 Investment management 40 28 Banking 14 17 Healthcare and general insurance 4 3 Total non-life excluding corporate costs and other 58 48 Grou
Slide 38: IFRS profit after tax
IFRS profit after tax Proforma H1 2007 H1 2006 £m £m IFRS underlying profit before tax 219 243 Profit attributable to minority interest 58 82 Underlying profit before tax attributable to equity holders and adjustments 277 325 Adjusted for the following items: Volatility arising on different asset an