Standard Life Plc · LSE:SDLF
Standard Life — Investor Day (2010)
118 slides from Standard Life's investor day presentation, 2010
Slide 1: Driving value from a position of strength
Driving value from a position of strength
Slide 2: 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 3: Driving value from a position of strength
Driving value from a position of strength Our strategy to drive performance and profit David Nish Standard Life Investments Keith Skeoch and Colin Walklin Our UK long-term savings business David Nish, Paul Matthews and Christian Torkington Capital and cash generation and IFRS profit drivers Jackie H
Slide 4: Our strategy to drive performance and profit
Our strategy to drive performance and profit David Nish
Slide 5: Building on a track record of delivery
Building on a track record of delivery Growth through innovation Sustainable cash generation1 EEV core capital and cash generation • 2004: SIPP launched - £13.0bn AUA £305m £307m • 2006: Wrap launched - £5.0bn AUA £276m • UK Corporate Pensions AUA doubled since 2004 - £18bn • Third Party AUM at SLI
Slide 6: Delivering consistent growth for shareholders since demutualisation
Delivering consistent growth for shareholders since demutualisation Final dividend (p) 12.24p Interim dividend (p) 11.77p 11.50p 10.80p 8.09 7.70 7.70 7.20 3.80 4.07 4.15 4.35 3.60 2006 2007 2008 2009 2010 Driving value from a position of strength Standard Life plc 6
Slide 7: Delivering real value for shareholders
Delivering real value for shareholders 19% 10% FTSE 350 Life Insurance Standard Life FTSE 100 (7)% Movement based on total shareholder return from 10 July 2006 to 17 September 2010 Driving value from a position of strength Standard Life plc 7
Slide 8: A clear strategy to take the business forward
A clear strategy to take the business forward Driving shareholder value through being a leading, Our customer-centric business focused on long-term goal savings and investment propositions in our chosen markets Trusted brand Technology and innovation Delivered through Customer insight, access and se
Slide 9: How we generate profit
How we generate profit Lowering unit costs Increasing Maximising Driving cash assets revenue profit • Fee business • Spread-based business • Capital management A simple business model Driving value from a position of strength Standard Life plc 9
Slide 10: The shape of our business
The shape of our business UK Canada International JVs Global investment management Today will focus on Standard Life Investments and UK in more detail Driving value from a position of strength Standard Life plc 10
Slide 11: Continuing to invest in our business for profit and growth
Continuing to invest in our business for profit and growth • Employee Wealth Benefits Plan • Goal-based investment propositions • Canadian Flexible Benefits and • Strengthening our adviser support ConsultAction • Diversified distribution in Canada • Irish Corporate • Direct-to-customer propositions
Slide 12: Accelerating the pace of delivery
Accelerating the pace of delivery Building valuable Developing our Making customer talent performance relationships matter Engaging our customers Recruiting, retaining and Driving accountability, through our brand, service developing the best talent to responsibility and and product propositions sup
Slide 13: Focusing our business and driving performance
Focusing our business and driving performance People • Strengthened leadership team in place • Redirected resources to focus on growth opportunities Transformation • Group-wide restructuring; simplified lines of accountability; culture of decision making and delivery Efficiency • Ongoing focus on ef
Slide 14: Over the rest of the morning, we will:
Over the rest of the morning, we will: • Demonstrate the value of Standard Life Investments • Highlight our initiatives in the UK to capture opportunities, drive asset growth and deliver unit cost efficiencies • Give greater visibility on the predictability of our cash flow and the sustainability of
Slide 15: Standard Life Investments
Standard Life Investments David Nish
Slide 16: Standard Life Investments - Key facts
Standard Life Investments - Key facts • Substantial investment manager - £143bn AUM; 850 staff • Broad based product capabilities - asset class, channel, geography • Differentiated and successful investment philosophy • Strong growth record - AUM, revenue, profit • Large third party business - 44% o
Slide 17: A valuable growth business
A valuable growth business Keith Skeoch, Colin Walklin
Slide 18: A valuable growth business
A valuable growth business Strategic strengths: • Proven focus on change philosophy • Talented and cohesive team • Reputation for innovation • Focus on financial discipline and profit • Strong institutional brand • Third party business in H12010: -> 44% of AUM (£63bn) -> 65% of revenue -> 70% of pro
Slide 19: Strong strategic positions
Strong strategic positions No. 4 in UK Institutional Pensions Increasing Global Scale 2010 2009 Pension Fund Combined value of % Ranking Sector Source ranking ranking Manager pooled and seg change funds - 2009 (£bn) IMA - Survey 2010 (UK based asset Legal & General 6 UK 1 1 221.0 19.9 managers only)
Slide 20: Building a successful and sustainable asset management business
Building a successful and sustainable asset management business we will continue to be a... Significant provider of high Major provider of wholesale margin global investment management services to institutional clients, in both developed and new markets + investment management services to the UK ret
Slide 21: Financials and Profit Drivers
Financials and Profit Drivers Colin Walklin
Slide 22: Strong and profitable growth record
Strong and profitable growth record Third party net flows 8.0 6.0 Inflows have grown steadily… £4.7bn 4.0 2.0 0 Revenue 10 300 99 00 01 02 03 04 05 06 07 08 09 20 19 20 20 20 20 20 20 20 20 20 20 H1 225 ….producing substantial revenue growth, £154m offsetting the attrition of captive assets… 150 75
Slide 23: Revenue growth driven by third party assets
Revenue growth driven by third party assets 350 Revenue (£m) 300 Captive Third Party Revenue growth has been driven 106 250 by third party business... 110 103 200 100 117 150 94 100 201 Third Party Net Inflows 153 160 158 5.0 (exc. volatile UK money market funds) (£bn) 110 4.5 50 87 4.0 0 3.5 1 2 20
Slide 24: Strong product positioning and broadening reach
Strong product positioning and broadening reach 2005 2010 India India 7% Asset class 4% Cash 10% Equities Broadening range of third of party Cash 19% 25% assets and investment strategies GARS GARS 0% 10% Equities Private Equity 45% 6% Private Equity 5% Property Property 10% Fixed Income 8% Fixed Inc
Slide 25: Expanding global footprint
Expanding global footprint Increasing penetration of Standard Life Investments’ institutional global products into international markets 2005 2010 Indicative 2015 Europe Europe India 5% India Canada 1% 4% Other 7% Canada 17% 1% Other 18% 4% US US 2% 1% UK 75% UK International 50% 50% UK UK 75% 65% D
Slide 26: We have responded well to changing client demand
We have responded well to changing client demand AUM (£bn) Fixed Income AUM and Yield Yield (bps) 25.0 24 20 20.0 AUM 16 15.0 Yield De-risking via Fixed Income 12 10.0 8 5.0 4 0 0 2005 2006 2007 2008 2009 H1 2010 GARS AUM and Yield AUM (£bn) Yield (bps) 7 80 6 AUM 60 5 Yield Emerging demand for Abso
Slide 27: Our philosophy is a premium price for a premium product
Our philosophy is “a premium price for a premium product” 120 £6.6bn £6.5bn Revenue yield bps ( Institutional only) 92 First quartile 90 88 First quartile £3.8bn 81 SLI 69 SLI 70 First quartile 66 Median 69 Median 60 SLI 60 £8.4bn 60 Median 45 First quartile 50 Last quartile £14.5bn 33 SLI 36 Last q
Slide 28: Strong and sustainable revenue base
Strong and sustainable revenue base... • Broad product range • Expanding geographical reach • Strong growth of third party business • “Premium pricing” culture for third party business • Effective and sustainable pricing for captive funds • Strong growth in high margin sectors - eg GARS; Wholesale •
Slide 29: Managing our cost base - driving our profitability
Managing our cost base - driving our profitability Cost control – c.12% reduction in headcount between mid ’08 and mid ’09 Zero pay rise in 2009 32% 314 30% 32% 30% 266 269 258 314 28% 232 266 269 EBIT Margin 22% 258 Revenue 181 (Inc. HDFC AM) 181 Costs 141 167 167 184 184 184 184 189 189 216 216 20
Slide 30: People, our greatest asset - our main cost
People, our greatest asset - our main cost £m Cost Growth 250 200 Other Staff costs maintained at around 65% of total costs; comp ratio at around 45% (2009) Out sourced costs 150 100 50 61% 65% 65% 63% 64% 66% Staff costs 0 £m Staff Costs 2 1 2005 2006 2007 2008 2009 (2) H1 2010 (1) 150 113 Variable
Slide 31: A strong set of results in H1 2010
A strong set of results in H1 2010 2010 2009 Growth Net Third Party Inflows (£bn) 4.7 3.1 52% Third Party AUM (£bn)1 63.0 56.9 11% Total AUM (£bn) 1 143.0 138.7 3% Revenue (£m) 154 125 23% Costs (£m) (108) (99) 8% HDFC Asset Management (£m) 3 4 - EBIT (£m) 49 30 63% EBIT Margin 32% 24% - (1) 2009 at
Slide 32: Growth Opportunities
Growth Opportunities Keith Skeoch
Slide 33: Growth underpinned by strong investment performance
Growth underpinned by strong investment performance Money Weighted Average Performance - Third Party AUM % Ranking 0 25 31 34 38 43 50 1 Year 3 Years 5 Years 10 Years 75 100 Solid 2nd quartile performance across all time periods Driving value from a position of strength Standard Life plc 33
Slide 34: A large, growing and increasingly global industry
A large, growing and increasingly global industry New big emerging asset pools Clients demanding Client demand for alignment of global products interests Key trends Barriers to entry are Individual replacing getting higher collective investment Separation of beta and alpha Driving value from a posit
Slide 35: Profit pools within the investment management industry
Profit pools within the investment management industry CAGR, 2009–2013 (%) Estimated size, 2009 ($trillions) Scale = $1 trillion 30 Traditional active Passive products/ETFs Passive Alternative 25 ETFs SLI pool 20 Passive fixed income Alternative products 15 Passive equity Real estate (including REIT
Slide 36: Client demands are changing
Client demands are changing What clients are buying: SLI Product Specialist Credit Absolute Return Global Diversification ETF/ Passive × Source: Morgan Stanley Raising our revenue yield Driving value from a position of strength Standard Life plc 36
Slide 37: Institutional growth opportunities
Institutional growth opportunities • Specialist Credit Traditional/Core • High Yield • Global Bonds • Global Equity • Extension of GARS to Bonds & Equity Absolute Return • Greater use as core solution by Pension Funds • Private Equity new smaller fund offerings Alternatives • Property – European Pro
Slide 38: Wholesale growth opportunities
Wholesale growth opportunities • Increase penetration with existing 3rd party platform Expanding providers and add new 3rd party platforms to list sales force • Significantly increase market share from key segments: Banks, National Discretionary Managers, Large Intermediaries and Fund of Fund Manage
Slide 39: Driving value from a position of strength Standard Life plc
Driving value from a position of strength Standard Life plc 39
Slide 40: A valuable growth business
A valuable growth business Strategic strengths • Proven focus on change philosophy • Talented and cohesive team • Reputation for innovation • Focus on financial discipline and profit • Strong institutional brand Investing to create strong and sustainable growth Driving value from a position of stren
Slide 41: Our UK long-term savings business
Our UK long-term savings business David Nish Driving value from a position of strength Standard Life plc
Slide 42: The UK is an exciting place for Standard Life to do business
The UK is an exciting place for Standard Life to do business • £2.3 trillion assets in our target retail customer segments Attractive asset pools • Total pensionable assets of £1.4 trillion • Movement from DB to DC; unbundled to bundled • Increasingly self-directed Changing customer • Demanding simp
Slide 43: Take to market focus
Take to market focus Paul Matthews Driving value from a position of strength Standard Life plc 43
Slide 44: Our new structure is channel focused (Take to Market)
Our new structure is channel focused (Take to Market) Corporate Retail Direct Market insight and expertise Product and platform development Investment solutions, tools, wealth management Distribution Distribution Distribution • Single point of responsibility and accountability for revenue and asset
Slide 45: Investing in the Future
Investing in the Future Strong in house Standard Life Standard Life Standard Life Standard Life Vebnet threesixty capability UK Int’nl (offshore) Investments Wealth Stable of high quality providers to exploit Strong proposition huge UK opportunity Tools Discretionary Investment Future to extract Pla
Slide 46: Corporate market drivers
Corporate market drivers • De-risking business by moving pension provision Movement of assets over the next 5 years (DB to DC, Unbundled to Bundled) UK Pension Assets - £bn AUA • Growing demand for employee benefit solutions £800bn Defined Benefits (no longer just pensions) Trust DC (Unbundled) • In
Slide 47: Corporate market opportunities
Corporate market opportunities We are well positioned to grow both assets and revenue • Leading pension and flexible benefits provider in • Market leading service proposition Corporate Market today (21% IFA market share1) • Proven track record of administering at scale • Integrated Employee Wealth B
Slide 48: Retail market drivers
Retail market drivers Movement of assets over the next 5 years • Customers seeking integrated view of their assets > £3 trillion ‘wrappable’ assets • Desire for simple, uncomplicated technology driven solutions; accessed through one easy route (eg iPhone) £m • Efficiency and compliance needs plus va
Slide 49: Retail market opportunities
Retail market opportunities Why we are well positioned to grow assets and revenue • Focused on non commission, ‘new model advisers’ • Ownership of threesixty - No 1 service provider/ since 2004 adviser to intermediary marketplace • IFA market share - 16.4% (growth at twice the rate • Standard Life I
Slide 50: Direct channel opportunities
Direct channel opportunities Why we are well positioned to grow assets and revenue • Existing customer base of 1.5m customers • Growing customer insight • Established telephone and face to face capability • Link with Retail and Corporate channels • Growing number DIY customers Investing to strengthe
Slide 51: Investing in the Future
Investing in the Future Strong in house Standard Life Standard Life Standard Life Standard Life Vebnet threesixty capability UK Int’nl (offshore) Investments Wealth Stable of high quality providers to exploit Strong proposition huge UK opportunity Tools Discretionary Investment Future to extract Pla
Slide 52: In Summary – Take to Market
In Summary – Take to Market • There is unprecedented change and growth opportunities in the UK market • We have strong, advantaged positions in both the Retail and Corporate markets • Our strategy is driven from deep insight into consumer and intermediary needs • We have a track record of anticipati
Slide 53: Creating a scalable business for growth
Creating a scalable business for growth Christian Torkington Driving value from a position of strength Standard Life plc
Slide 54: Compelling drivers for transforming our operations
Compelling drivers for transforming our operations • Deliver propositions to support asset growth Asset growth • Extend architecture to support multi-channel model • Build customer value management capabilities and increase retention • Simplify and drive scale economies from structure Reduced cost •
Slide 55: We have a blueprint and plan
We have a blueprint and plan • Fit for purpose operating structures Right organisation • Investing in capability gaps, remove duplication Asset growth and capabilities • Building on talents and change culture • Flexible sourcing models • Delivering digital platforms and tools that drive growth in as
Slide 56: Here is the plan
Here is the plan… H2 2010 H1 2011 H2 2011 Trust Based Pensions final launch release Customer Contact & Value Management Tools Customer Contact Programme Asset Growth Product Enhancements Product Enhancements Product Enhancements Intermediary release release release release Employee Wealth Plan launc
Slide 57: We are building capacity and capability to deliver
We are building capacity and capability to deliver Right organisation and Customer value Leverage regulatory capabilities management change Platforms and infrastructure to drive Change growth priorities Increased capacity and capability with new strategic development partners Realigned IT Organisati
Slide 58: Customer Service - An example of our transformed operating model
Customer Service - An example of our transformed operating model Digital Self Service Customer Services • Market leading customer experience • Transactional • Straight Through Processing (STP) • Migrate to self service Employer & Intermediary Services • Multi-channel model to support lifetime Specia
Slide 59: Customer Service - Delivering unit cost reductions
Customer Service - Delivering unit cost reductions Organisational Design • Resources grouped to process Planned Customer Service Manpower Profile (not to scale) • Flatter management structures; increase spans • Clearer lines of accountability and responsibility Growth • Remove duplication Organisati
Slide 60: Delivering efficiency savings of £100m
Delivering efficiency savings of £100m Planned Efficiencies Automation 20% Money Out Process 10% Servicing Process 20% Money In Process 15% Finance Process 5% Sourcing 10% Organisational Design 20% 2010 2011 2012 Our plans for delivery are well grounded, detailed, realistic and robust Driving value
Slide 61: In summary - A scalable business for growth
In summary - A scalable business for growth • We understand shifting market dynamics and customer needs across the short, medium and long term • We have a clear blueprint and roadmap of where we need to be at each stage • Good progress is being made and we are on schedule to deliver Driving value fr
Slide 62: Our UK long-term savings business
Our UK long-term savings business David Nish Driving value from a position of strength Standard Life plc
Slide 63: The UK is an exciting place for Standard Life to do business
The UK is an exciting place for Standard Life to do business • Attractive asset pools in our core market segments Opportunity • Regulatory driven market changes aligned to our business focus • Take to market focus increasing the speed of proposition delivery Transforming • Using technology to delive
Slide 64: Capital and cash generation and IFRS profit drivers
Capital and cash generation and IFRS profit drivers Jackie Hunt
Slide 65: Building on our strong financial performance
Building on our strong financial performance • Our business model is simple • IFRS closely linked to cash • Majority of our income is fee based • Driving unit cost efficiencies through building a scalable business • Our capital and cash generation is predictable • Financial flexibility to: - win new
Slide 66: Capital and cash generation
Capital and cash generation Driving value from a position of strength Standard Life plc
Slide 67: Group EEV capital and cash generation
Group EEV capital and cash generation H1 2010 H1 2009 £m £m Capital and cash generation from existing business 1 300 246 New business strain 1 (109) (72) Covered business capital and cash generation from new business and expected return 191 174 Covered business development expenses (21) (9) Non-cove
Slide 68: Group EEV capital and cash generation and utilisation H1 2010
Group EEV capital and cash generation and utilisation H1 2010 IRR of 19% Non-covered International (£109m) Canada £52m (£12m) Investment criteria Minimum IRR 15% UK and 5 year payback (£98m) £73m *1 (£11m) 1 *1 (£42m) 1 £300m £187m £149m £98m Generation of Generation of Gross operating New Growth Op
Slide 69: Group EEV capital and cash generation and utilisation H1 2010
Group EEV capital and cash generation and utilisation H1 2010 UK - £187m Canada - £73m IRR of 19% International - £52m Non-covered - (£12m) IGD surplus as at 31 Dec 2009: NBS £3.6bn (£109m) Retained EEV capital and cash Growth investment spend Gross operating EEV capital and £0.3bn (£42m) cash gener
Slide 70: Group EEV capital and cash movements
Group EEV capital and cash movements FY 2009 FY 2008 £m £m Gross operating profit capital and cash: UK 395 519 Canada 131 132 International 102 49 Non-covered (11) (10) Total 617 690 New business strain (188) (224) Growth investment spend 1 (58) (70) Operating profit capital and cash generation from
Slide 71: PVIF monetisation profile
PVIF monetisation profile Undiscounted Total PVIF Cash emerging in first 5 years In-force £m £m % UK 4,031 1,414 35 Canada 3,075 454 15 International 958 344 36 Total 8,064 2,212 27 New business H1 2010 UK - Retail 120 40 34 - Corporate 132 29 22 - Total 252 69 27 Based on six months new business Ca
Slide 72: Analysis of New Business
Analysis of New Business NBC (Pre tax) IRR Payback (undiscounted) H1 2010 H1 2009 H1 2010 H1 2009 H1 2010 H1 2009 £m £m % % years years UK 103 92 20 20 5 5 Canada 31 18 19 14 7 7 International 1 27 4 17 7 5 10 Total 161 114 19 16 5 6 • Total new business strain covered 2.75 times from cash from exis
Slide 73: Capital and cash conversion - H1 2010
Capital and cash conversion - H1 2010 EEV operating capital and cash generation £149m from continuing operations Impact of different treatment of assets (£17m) and liabilities DAC/DIR, intangibles, tax and other £2m IFRS operating profit after tax from £134m continuing operations Close alignment of
Slide 74: Capital and cash generation - Summary
Capital and cash generation - Summary • Existing business provides predictable underpin to cash flow and capacity for growth • New business strain covered around three times from existing business capital and cash generation • High IRR and short payback reflects capital-lite approach • Growth invest
Slide 75: IFRS profit drivers
IFRS profit drivers Driving value from a position of strength Standard Life plc
Slide 76: How we generate profit
How we generate profit Fee business revenue Spread/ risk business margin (including guarantee margin) Acquisition expenses Maintenance expenses Group corporate centre Growth investment spend Capital management Joint ventures IFRS operating profit Driving value from a position of strength Standard Li
Slide 77: Assets Under Administration by type of business
Assets Under Administration by type of business £14.2bn (£8.9bn) £3.7bn £179.1bn £170.1bn £157.3bn £147.9bn Fee £139.7bn Fee Fee £146.6bn £128.4bn Fee £118.5bn Spread/risk Spread/risk Spread/risk Spread/risk £20.4bn £20.2bn £22.3bn £23.6bn Other Other Other Other £8.5bn £9.2bn £8.1bn £8.9bn 31 Dec 2
Slide 78: Fee Business
Fee Business Driving value from a position of strength Standard Life plc
Slide 79: Definition of fee business revenue
Definition of fee business revenue Asset management charges 80%1 Premium based charges 15%1 Fee business revenue (including guarantee margin) Transactional charges and other 5%1 +/- Guarantee costs on fee business (primarily Canada) (1) Percentages based on H1 2010 Driving value from a position of s
Slide 80: Fee Business - UK
Fee Business - UK £6.8bn (£4.8bn) £0.1bn £85.5bn £87.6bn £86.1bn £73.9bn Fee Fee Fee £65.8bn £66.6bn £67.5bn Fee BPS BPS £57.4bn 75 75 TIP TIP £10.0bn TIP TIP £13.4bn £8.6bn £12.0bn CWP CWP No shareholder CWP CWP £10.3bn £7.9bn return for UK £6.7bn £6.9bn 31 Dec 2007 31 Dec 2008 31 Dec 2009 Gross in
Slide 81: Fee Business - Canada
Fee Business - Canada £1.1bn (£0.8bn) £0.5bn £12.1bn £11.3bn £9.6bn £9.0bn BPS BPS 116 118 31 Dec 2007 31 Dec 2008 31 Dec 2009 Gross inflows Redemptions Market/other 30 Jun 2010 movements • Canadian fee based bps have remained broadly stable at 118 bps for H1 2010 (FY 2009: 116bps) • 25% retail and
Slide 82: Fee Business - International (excluding joint ventures)
Fee Business - International (excluding joint ventures) £9.6bn £0.9bn (£0.3bn) £9.1bn (£0.1bn) 223bps 248bps £8.3bn £6.4bn Ireland Ireland £5.1bn £4.9bn 90bps Ireland 74bps Ireland £4.7bn £3.9bn Germany Germany £4.4bn Germany Germany £4.2bn £2.5bn £3.6bn Hong Kong £0.1bn 323bps 413bps 31 Dec 2007 31
Slide 83: Fee Business - Global Investment Management Third Party
Fee Business - Global Investment Management Third Party £7.3bn (£2.6bn) £1.4bn £63.0bn £56.9bn £47.7bn £45.5bn BPS BPS 34 34 31 Dec 2007 31 Dec 2008 31 Dec 2009 Gross inflows Redemptions Market/other 30 Jun 2010 movements • Revenue generated from third party AUM (presented above) and the captive AUM
Slide 84: Fee Business - Summary
Fee Business - Summary H1 2010 FY 2009 Average Revenue Revenue Average Revenue Revenue AUA1 AUA1 £bn bps £m £bn bps £m UK2 87.7 75 277 77.0 75 498 Canada 12.2 118 72 9.9 116 115 International 9.4 223 105 8.4 248 208 Investment management3 62.0 34 101 50.6 34 176 Eliminations/adjustments (26.0) (20)
Slide 85: Spread and risk business
Spread and risk business Driving value from a position of strength Standard Life plc
Slide 86: Definition of spread/ risk margin
Definition of spread/ risk margin Net earned premiums - Claims and benefits paid +/- Spread/ risk business margin Net investment return using long-term assumptions +/- Change in contract liabilities using long-term assumptions Driving value from a position of strength Standard Life plc 86
Slide 87: Spread/ risk business - UK
Spread/ risk business - UK £0.8bn £13.6bn £0.3bn (£0.6bn) £13.0bn £13.1bn Full Full 1.2 2.4 £2.4bn £11.9bn Full £1.2bn 2.1 £2.1bn Full 1.5 £1.5bn Partial Partial 5.0 £5.0bn Partial 4.9 £5.0n 4.4 £4.4bn Shareholder Partial exposure £11.8bn 11.8 None 6.0 None 6.1 None 6.3 £6.0bn £6.0bn £6.2bn 0 0 0 0
Slide 88: Spread/ risk business - UK
Spread/ risk business - UK H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m New business 36 40 70 75 Existing business 29 37 107 94 65 77 177 169 One-off reserving changes 18 29 63 203 Spread / risk margin 83 106 240 372 Operating profit is driven by: • Market conditions and pricing which ensures adequat
Slide 89: Spread/ risk business - Canada
Spread/ risk business - Canada (£0.7bn) £1.0bn £10.0bn £0.5bn £9.2bn £8.3bn £7.4bn Full £9.3bn Full £8.6bn Shareholder Full exposure £7.7bn Full £6.8bn Partial Partial Partial Partial £0.6bn £0.6bn £0.7bn £0.6bn 31 Dec 2007 31 Dec 2008 31 Dec 2009 Gross inflows Redemptions Market/other 30 June 2010
Slide 90: Spread/ risk business - Canada
Spread/ risk business - Canada H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m New business 12 9 15 16 Existing business 114 101 240 164 126 110 255 180 One-off reserving changes 13 12 (34) (108) Spread / risk margin 139 122 221 72 Operating profit is primarily driven by: • Our appetite for new spread/
Slide 91: Lowering unit costs
Lowering unit costs Driving value from a position of strength Standard Life plc
Slide 92: Definition of acquisition and maintenance expenses
Definition of acquisition and maintenance expenses Commission costs - Initial charges + Acquisition expenses Allocation of internal costs +/- Creation of DAC/DIR Renewal commission - Renewal charges + Maintenance expenses Allocation of internal costs +/- Amortisation of DAC/DIR Driving value from a
Slide 93: Acquisition expenses
Acquisition expenses H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Acquisition expenses 132 129 240 274 Of which: - commission net of initial charges 57 64 116 203 - DAC (80) (85) (162) (258) - DIR 30 26 49 79 Net commission/initial charges/DAC/DIR 7 5 3 24 PVNBP 9,631 7,452 14,546 15,679 Acquisition
Slide 94: Maintenance expenses
Maintenance expenses H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Maintenance expenses 307 307 607 601 Of which: - net renewal commission 34 30 76 79 - amortisation of DAC 59 78 147 94 - release of DIR (13) (14) (38) (19) Average AUA (£bn)1 155.5 123.2 132.3 130.8 Maintenance bps1 39bps 50bps 46bps 4
Slide 95: Growth investment spend
Growth investment spend H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Growth investment spend 72 44 106 116 • We are broadly doubling investment spend through 2010 and the first half of 2011 • Stringent investment return criteria (minimum 15% IRR and 5 year payback) • Will allow us to capitalise on: •
Slide 96: Summary
Summary Driving value from a position of strength Standard Life plc
Slide 97: How we generate profit
How we generate profit Fee business revenue Spread/ risk business margin (including guarantee margin) £222m (H1 2009: £228m) £511m (H1 2009: £459m) Acquisition expenses £132m (H1 2009: £129m) Maintenance expenses £307m (H1 2009: £307m) Group corporate centre £30m (H1 2009: £25m) Growth investment sp
Slide 98: Conclusion
Conclusion • Our business model is simple • IFRS closely linked to cash • Majority of our income is fee based • Driving unit cost efficiencies through building a scalable business • Our capital and cash generation is predictable • Financial flexibility to: - win new business - invest in profitable g
Slide 99: Driving value from a position of strength
Driving value from a position of strength David Nish Driving value from a position of strength Standard Life plc
Slide 100: We have a simple model for growing profit
We have a simple model for growing profit Lowering unit costs Increasing Maximising Driving cash assets revenue profit Driving a material increase in cash profitability Driving value from a position of strength Standard Life plc 100
Slide 101: Driving value from a position of strength
Driving value from a position of strength Clear strategy with • Customer-centric strategy focused on long-term savings and investments exciting growth • Strategically positioned to benefit from positive trends in all core markets opportunities • Asian joint ventures provide attractive growth opportu
Slide 102: Driving value from a position of strength
Driving value from a position of strength Driving value from a position of strength Standard Life plc
Slide 103: Appendix
Appendix Driving value from a position of strength Standard Life plc
Slide 104: Group EEV capital and cash movements - FY 2009
Group EEV capital and cash movements - FY 2009 UK - £395m Canada - £131m IRR of 14% International - £102m Non-covered - (£11m) FGD surplus as at 31 Dec 2008: NBS (£188m) £3.5bn Retained EEV capital and cash Growth investment spend Gross operating EEV capital and (£0.1bn) (£58m) cash generation £617m
Slide 105: Group EEV capital and cash movements - FY 2008
Group EEV capital and cash movements - FY 2008 UK - £519m Canada - £132m IRR of 16% International - £49m Non-covered - (£10m) FGD surplus as at 31 Dec 2007: NBS £3.6bn (£224m) Retained EEV capital and cash Growth investment spend Gross operating EEV capital and £0.3bn (£70m) cash generation £690m1 R
Slide 106: Group EEV capital and cash movements - cumulative
Group EEV capital and cash movements - cumulative Historic - cumulative from 31 December 2007 to 30 June 2010 Covered - £1.6bn Non-covered - £0.0bn FGD surplus as at 31 Dec 2007: NBS £3.6bn (£0.5bn) Retained EEV capital and cash Growth investment spend Gross operating EEV capital and £0.5bn (£0.2bn)
Slide 107: Run-off profile of legacy assets generating shareholder cash flow
Run-off profile of legacy assets generating shareholder cash flow 70 Assets not generating shareholder cash flow 60 Assets generating shareholder cash flow 50 40 £bn 30 20 10 0 Q2- 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 Assets generating shareholder cash are long-term Driving value from a
Slide 108: Reconciliation of growth investment spend
Reconciliation of growth investment spend H1 2010 H1 2009 Change FY 2009 FY 2008 £m £m £m £m £m Growth investment spend before tax 72 44 28 106 116 Less tax (19) (12) (32) (32) 53 32 74 84 Growth investment spend included within NBS (11) (7) (16) (14) Growth investment spend in cash analysis 42 25 5
Slide 109: PVIF monetisation profile - Reconciliation against published H1 2010 results
PVIF monetisation profile - Reconciliation against published H1 2010 results Undiscounted Discounted Reconciliation of discounted PVIF (£m) to H1 2010 Results Total Emerging in Total Emerging in Published result H1 2010 PVIF 1st 5 years PVIF 1st 5 years PVIF TVOG (Note 4.2(c)) £m % £m % £m £m £m In-
Slide 110: Group - IFRS operating profit from continuing operations
Group - IFRS operating profit from continuing operations H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Fee based revenue 535 456 978 1,010 Fee based guarantee margin (24) 3 (6) 18 Spread / risk margin 222 228 461 444 Total income 733 687 1,433 1,472 Acquisition expenses1 (132) (129) (240) (274) Mainte
Slide 111: Group corporate centre (GCC) and capital management
Group corporate centre (GCC) and capital management H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Group corporate centre costs (30) (25) (50) (50) Capital management (cost)/income 10 1 (4) 76 GCC costs in H1 2010 reflect increased investment as part of the transformation of the business, including: •
Slide 112: Joint Ventures
Joint Ventures H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m IFRS operating profit/(loss) (20) (17) (27) (25) • The results of our joint ventures in India and China reflect the start up nature of those businesses • HDFC Standard Life– strong market position, growth momentum and improving profitability
Slide 113: Impact of DAC / DIR
Impact of DAC / DIR H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m New business – creation of DAC (80) (85) (162) (258) New business – creation of DIR 30 26 49 79 Net impact of DAC/DIR on (50) (59) (113) (179) acquisition expenses Existing business – amortisation of 59 78 147 94 DAC Existing business –
Slide 114: Linkage of cost base to total expenses
Linkage of cost base to total expenses £4,443m £91m (£4m) £541m (£3,383m) GCC costs £30m Growth investment £454m spend £72m (£549m) (£57m) Maintenance expenses £307m Acquisition expenses £132m H1 2010 Claims, commissions IFRS adjustments Finance costs H1 2010 Commission DAC/DIR H1 2010 total expense
Slide 115: New business commission net of initial charges
New business commission net of initial charges H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m UK 14 21 33 104 Canada 19 13 30 24 International 24 30 53 75 Total 57 64 116 203 Driving value from a position of strength Standard Life plc 115
Slide 116: UK new business commission strain
UK new business commission strain H1 2010 H1 2009 FY 2009 FY 2008 £m £m £m £m Funded initial commission 9 9 18 26 Other commission 29 34 57 153 UK new business commission 38 43 75 179 Initial charges on new business 24 22 42 75 Coverage of total UK commission 63% 51% 56% 42% PVNBP 6,930 5,246 10,180
Slide 117: Biographies
Biographies David succeeded Sir Sandy Crombie as Chief Executive on 1 January 2010, having been Group Finance Director since November 2006 when he was appointed to the Board. He is also a non-executive director of Northern Foods plc and a board member of the Association of British Insurers. David wa
Slide 118: Biographies
Biographies Paul was appointed UK Take to Market Director in June 2010 and heads up the Take to Market areas of Marketing, Distribution and Product Development. Paul joined Standard Life as an Account Manager in 1989 from National Mutual Life. He has held a number of roles in Distribution at Standar