Aberdeen Group Plc · LSE:ABDN
Aberdeen — Standard Life — Debt Investor Presentation (October 2004)
41 slides from Aberdeen's debt investor presentation, October 2004
Slide 1: Presentation to Fixed Income Investors
Presentation to Fixed Income Investors October 2004
Slide 2: Disclaimer
Disclaimer NOT FOR DISTRIBUTION IN THE UNITED STATES OR CANADA. BY RECEIVING THIS PRESENTATION, EACH RECIPIENT (I) ACKNOWLEDGES THAT THE OFFERING IS BEING MADE ONLY OUTSIDE THE UNITED STATES TO NON-U.S. PERSONS IN RELIANCE UPON REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933 AND (II) IS DEEMED TO
Slide 3: Agenda
Agenda Overview of Standard Life Group Standard Life Considerations Hybrid Capital Offering Questions & Answers Appendices 2
Slide 4: Overview of Standard Life Group
Overview of Standard Life Group
Slide 5: Key Credit Strengths
Key Credit Strengths Largest European mutual life assurance company – £9.5bn gross assurance premium worldwide in Y/E 15/11/2003 Second largest UK life assurance office by new business APE* – 9.3% share of new business in first half 2004 Leading UK IFA-based life and pension company – 12.5% market s
Slide 6: Group Structure
Group Structure The Standard Life Assurance Company (UK, Canada, Ireland and Germany Branches) Other UK Standard Standard Standard and Life Life Life Bank Overseas Investments Healthcare Subsidiaries Domestication Domestication of of the the Canadian Canadian branch branch by by the the end end of o
Slide 7: Trading Summary
Trading Summary Increasing diversification of revenues, Group trading overall has held up well despite challenges Worldwide new business APE of £691m in 1H 2004 (in line with 1H last year) Increases of 98% and 5% respectively in worldwide investment and general insurance business, offsets 6% decline
Slide 8: Increasing Geographic Diversification
Increasing Geographic Diversification UK and Canadian markets remain core with others increasing in importance YE 2002 YE 2003 H1 2004 Europe Asia Europe Asia Asia Canada 4% 1% 5% 2% Europe 2% 14% Canada 6% 14% Canada 15% UK UK UK 81% 79% 77% Life Life && Pensions Pensions gross gross written writte
Slide 9: Increasing Product Diversification
Increasing Product Diversification Re-alignment Re-alignment of of business business mix mix towards towards higher higher margin margin products products and and reduced reduced reliance reliance on on L&P L&P business. business. This This trend trend isis expected expected to to continue continue
Slide 10: Key Financials
Key Financials Year end (15 Nov) 2001 2002 2003 H1 2003 H1 2004 Total group new business £8,339m £10,320m £7,818m £3,537m £3,452m Group Annual Premium Equivalent £1,571m £1,819m £1,426m £691m £691m Acquisition expense ratio 45.2% 47.9% 59.6% 55.7% 62.6% Maintenance expense ratio 3.4% 3.8% 4.7% 4.7%
Slide 11: Key Financials
Key Financials 45% Total Expense Ratio 40% 35% 30% 25% 20% 15% 10% 5% 0% 2000 2001 2002 2003 Friends Provident Royal & Sun Alliance Life Standard Life Clerical Medical Scottish Widows Legal & General Prudential (1) Aviva (2) Source: Insurance Statistical Supplement, UK Life Insurance (Moody’s, July
Slide 12: Group Funds Under Management £94.8bn
Group Funds Under Management £94.8bn Group FuM 3rd Party £bn FuM £bn 100 Group Funds under Management 18 3rd party Funds under Management 94.1 94.8 95 16 15.9 90 15.3 14 86.2 83.4 83.0 85 12 79.6 11.2 80 10 9.5 75 7.1 8 8.6 70 6 99 00 01 02 03 1 19 20 20 20 20 04H 20 11
Slide 13: Secure Financial Position - Under Current Framework
Secure Financial Position - Under Current Framework H1 Healthy Healthy and and stable stable cover cover 2001 2002 2003 2004 and and solvency solvency ratios ratios A Total long term admissible 67,682 65,519 72,882 73,443 assets (£m) Standard Standard Life Life currently currently has has aa B Total
Slide 14: Developments in Prudential Supervision – New Framework
Developments in Prudential Supervision – New Framework Regulatory Peak Realistic Peak PS PS 04/16 04/16 introduces introduces aa Twin Twin Peaks Peaks approach approach to to determine determine regulatory capital resources required for regulatory capital resources required for Realistic with-profit
Slide 15: Secure Financial Position - Under New Framework
Secure Financial Position - Under New Framework Nov-2003 Illustrative Position Nov-2003 (Post SMA) Strong position on new Capital Requirements: “twin peaks” basis – Minimum Capital Requirement 2,520 2,520 – Regulatory excess capital 1,486 1,486 Realistic balance sheet – Realistic excess capital 2,52
Slide 16: Rating Agency Opinions
Rating Agency Opinions Financial Strength Rating Outlook Comment Standard & A+ Negative “The ratings on Standard Life Assurance Co. reflect the Poor’s company’s very strong competitive position and reduced financial risk tolerance [….]. A significant reduction of equity risk in the balance sheet and
Slide 17: Strategy-Building on Strengths
Strategy-Building on Strengths Strengths:- Secure Financial Position Single brand with high visibility Market leader for customer service Strong IFA relationships Well placed to meet new UK regulatory challenges 5 million customers worldwide (of which approximately 1 million are from core subsidiari
Slide 18: Strategy-Building on Strengths
Strategy-Building on Strengths Strategy:- Maintain a leading position in the UK L&P market, diversifying product mix by segment and market Leverage leading positions in Canadian and Irish life and pensions markets Continue diversification into asset management, retail banking, international life ins
Slide 19: Standard Life Considerations
Standard Life Considerations
Slide 20: Realistic Balance Sheet
Realistic Balance Sheet Proposed realistic balance sheet implementation led to discussions with FSA – Agreement reached that was satisfactory to both SLAC / FSA – “Skilled persons review” completed satisfactorily Management actions taken: – Removed benefits of mutuality from projections – Strategic
Slide 21: Strategic Review
Strategic Review Driven by changes in industry, new regulatory reporting requirements and decline in proportion of with profits business Wide-ranging review, covering all UK and overseas businesses Recognised that existing structure imposed limitations on access to capital and ability to grow Main c
Slide 22: Progress Towards Demutualisation
Progress Towards Demutualisation Aim to put proposal for demutualisation before members by 2006 AGM UK L&P re-positioning, key to successful demutualisation, is progressing well Strategic review of overseas business completed New internal Group structure, separating Group functions and UK L&P Year e
Slide 23: UK L&P Repositioning
UK L&P Repositioning Appointment of Trevor Matthews as Chief Executive L&P being re-positioned for profitability and growth: – Cost cutting programme on track (£87m annualized savings realised to date this year) – Headcount reductions - over 1,700 since 15thth Nov. 2003 – Commission and product term
Slide 24: Other Businesses
Other Businesses SLI and the Bank performing well Convert Canada, a significant contributor to the Group, from branch to subsidiary •• Improved Improved operating operating efficiency efficiency •• Improve Improve capital capital position position of of Group Group •• Enhance Enhance local local com
Slide 25: Asset Re-alignment
Asset Re-alignment Part of management actions announced early 2004 Reduction in overall proportion of investment portfolio in equities and property and increasing proportion of bonds and cash Equity disposal of £7.5bn Largest single ever asset allocation change in the UK that won plaudits from marke
Slide 26: Equity Investments in the With-Profit Fund
Equity Investments in the With-Profit Fund Reduced Exposure to Equities YE 2003 H1 2004 Cash Cash & Other & Other 12% 10% Equities Property Property 33% 15% 15% Equities 56% Fixed Interest Fixed 17% Interest 42% 25
Slide 27: Differential EBR
Differential EBR Category 1 WP Category Category 22 WP WP Policies Policies Policies Cash Cash & Other & Other 11.8% Equities 7.0% Equities Property 23.1% Property 42.4% 9.8% 17.9% Fixed Fixed Interest Interest 55.3% 32.7% Asset Asset mix mix for for main main categories categories of of with with p
Slide 28: Asset Quality
Asset Quality Fixed Income Portfolio Breakdown Equity Portfolio Breakdown By Credit Rating By Geography B to BBB Not Rated Rest of World Secured 5% 4% 11% AAA UK Debentures Europe 74% 60% 11% 9% US YE 2003 4% A or AA 22% Not Rated B to BBB 6% Rest of World Secured 4% Europe 11% AAA UK Debentures 11%
Slide 29: Summary
Summary Standard Life is well positioned in challenging times: – Strong focused franchise – Well diversified group of businesses and focus on increasing diversification – UK L&P re-positioning progressing well – Strong growth outside UK L&P business – Good progress towards demutualisation – Secure f
Slide 30: Hybrid Capital Offering
Hybrid Capital Offering
Slide 31: Rationale for Hybrid Capital Offering
Rationale for Hybrid Capital Offering Standard Life has strong financial strength rating – A1/A+ Group aims to consolidate its capital position in a changing regulatory environment Hybrid Capital offers efficient form of capital consistent with maintaining a balanced capital structure Long maturity
Slide 32: Structural Diagram
Structural Diagram THE STANDARD LIFE ASSURANCE COMPANY (“Standard Life”) SL MACS plc / Subordinated SL MACS (No.2) Member’s Proceeds plc becomes a Account (“SMA”) member of Standard Life by holding the Policy SL MACS plc / SL MACS (No.2) plc (the “Issuer” and the “Member”) Mutual Assurance Proceeds
Slide 33: Terms and Conditions
Terms and Conditions Securities Mutual Assurance Capital Securities (MACS) Amount EUR [z] million, GBP [z] million Each Issuer, SL MACS plc (€ tranche) & SL MACS (No.2) plc (£ tranche), is a member of Structure Standard Life by virtue of holding a policy. The issue proceeds are advanced to Standard
Slide 34: Terms and Conditions (cont'd)
Terms and Conditions (cont’d) • Mandatory - upon regulatory insolvency Coupon Deferral • Optional - at Standard Life’s sole discretion and upon breach of Minimum Coverage Ratio of 125 per cent • Deferred Coupons will be payable upon redemption or liquidation • Standard Life may capitalise deferred c
Slide 35: Comparative Agency Opinions
Comparative Agency Opinions Hybrid Tier 1 ratings in line with its peer group Agency Subordinated Rating Outlook Standard Life S&P A- Negative Moody’s Baa1 Negative Prudential S&P A Negative Moody’s Baa1 Stable Aviva S&P A- (1) Stable Moody’s A3(1) Negative Allianz S&P A- Negative Moody’s A2 Stable
Slide 36: Questions & Answers
Questions & Answers
Slide 37: Appendices
Appendices
Slide 38: UK Life & Pensions Business
UK Life & Pensions Business Products Group & individual pensions Bonds and savings (including fixed term capital protected bond) Annuities Life and protection Accounts for 80% of the Group’s life assurance and pension gross written premium as at 15 November 2003 Distribution 95% - Independent Financ
Slide 39: Canadian Business
Canadian Business Products Group and individual annuities Group and individual life assurance Healthcare Accounts for 13% of the Group’s life assurance and pension gross written premium as at 15 November 2003 Distribution Predominantly intermediaries, writing 95% of total business Market Share Overa
Slide 40: Other Overseas Business
Other Overseas Business Operations in Ireland, Germany, Austria, Spain, Hong Kong and China account for remaining 7% of the Group’s life assurance and pension gross written premium as at 15 November 2003 Ireland: – Sells through independent insurance brokers – Intention to offset reduction in demand
Slide 41: Other Businesses
Other Businesses Standard Life Healthcare Standard Life Investments Standard Life Bank Products Personal and corporate private Corporate Pensions Individual/ Retail Deposit Accounts healthcare insurance in UK Segregated Funds Business Saving Accounts Accident and sickness business in Mutual Funds Re
Standard Life — Debt Investor Presentation (October 2004) on 6ix