Standard Life Plc · LSE:SDLF
Standard Life — H1 2009 Earnings Presentation
49 slides from Standard Life's earnings presentation, Aug 5, 2009
Slide 1: Standard Life Interim Results 2009
Standard Life Interim Results 2009 5 August 2009
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: What we will be covering
What we will be covering Group Overview Sir Sandy Crombie Financial Highlights David Nish Delivering value from an asset managing business Sir Sandy Crombie Questions Sir Sandy Crombie, David Nish and Keith Skeoch 3
Slide 4: Group Overview
Standard Life Interim Results 2009 Group Overview Sir Sandy Crombie
Slide 5: A distinctive approach to delivering value
A distinctive approach to delivering value An asset managing business 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 performanc
Slide 6: Standard Life – strategy delivering
Standard Life – strategy delivering • Solvency position remains robust • Strong capital and cash flow generation • New money flows resilient throughout the cycle • Selective approach to new business • Ongoing focus on efficiency • Well positioned for all market conditions A resilient business model
Slide 7: Financial Highlights
Standard Life Interim Results 2009 Financial Highlights David Nish
Slide 8: Financial summary
Financial summary H1 2009 H1 2008 Assets under administration1 £156.5bn £156.8bn Life and pensions net flows2 £0.7bn £1.8bn Investment management third party net flows £3.1bn £2.7bn New business IRR 16% 18% Embedded value operating profit before tax £348m £534m Return on embedded value (RoEV) 8.0% 1
Slide 9: Movement in assets under administration
Movement in assets under administration £3.1bn (£0.8bn) (£2.4bn) £0.9bn (£0.8bn) £0.4bn (£0.9bn) £0.2bn £156.8bn £156.5bn Opening UK net UK legacy Canada net Europe Bank Standard Life Group Market / other Closing AUA flows net flows flows net flows net flows Investments adjustments movements AUA (ex
Slide 10: Delivering a capital-lite strategy
Delivering a capital-lite strategy 10 5.0% New business strain % 4.5% Europe 8 4.0% Canada 3.5% UK PVNBP £bn 6 3.0% 2.5% 4 2.0% 1.5% 2 1.0% 0.5% 0 0.0% H1 H1 H1 H1 2006 2007 2008 2009 (1) New business strain is calculated on a post tax basis. (2) H1 2006 NBS is shown on a pro forma basis. (3) New bu
Slide 11: Growing returns – capital-lite products
Growing returns – capital-lite products H1 2009 H1 2008 IRR Discounted PVNBP NBC NBC Payback margin % years % £m £m Individual pensions 11% 10 0.7% 14 36 Group pensions 14% 11 1.9% 29 44 Institutional pensions >40% <3 0.8% 7 10 Annuities Infinite Immediate 17.8% 46 40 Savings and investments 4% N/A
Slide 12: Back book management
Back book management H1 2009 H1 2008 UK Canada Europe HWPF Total Total TVOG £m £m £m £m £m £m Lapses - - (8) - (8) 2 Mortality and morbidity 3 9 1 - 13 (1) Tax 11 2 8 - 21 24 Other (10) (2) (9) 89 68 - UK annuity reassurance - - - - - 119 Total 4 9 (8) 89 94 144 TVOG benefit reflects model improveme
Slide 13: IFRS underlying profit movement
Normalised H1 2008 underlying profit £247m Impact of market volatility on Canada surplus assets and reserves (£31m) Normalised H1 2008 underlying profit (excl. Canada volatility) £216m Decreased management charges (£71m) Reduction in holding company profit (£21m) New business development (£9m) IFRS
Slide 14: Capital and cash generation
Capital and cash generation H1 2009 H1 2008 £m £m New business strain (72) (131) Capital and cash generation from existing business 246 263 Covered business capital and cash generation 174 132 from new business and expected return Covered business development expenses (9) (10) Global investment mana
Slide 15: Embedded value
Embedded value Movement in embedded value per share Opening EEV per share 31 Dec 2008 286p Operating profit - post tax 11p Non operating profit - post tax (12p) Actuarial losses on pension schemes (4p) Foreign exchange movements (8p) Cash dividend to equity holders (5p) Other 1p Scrip issue (4p) Clo
Slide 16: Financial Groups Directive
Financial Groups Directive FGD Surplus 30 June 2008 31 December 20081 30 June 2009 £3.5bn £3.3bn £3.1bn Sensitivity to equity market falls2,3 Sensitivity to yields2,3 Fall in equities FGD Surplus Rise in yields FGD Surplus 20% (FTSE 3,399) £2.5bn 100bps rise in yields £1.4bn (e.g. 4.12% to 5.12%) 30
Slide 17: Balance sheet management
Balance sheet management Asset exposures Non- Policyholder Policyholder As at 30 June 2009 Shareholder controlling Total participating unit linked interests £m % £m £m £m £m 1 Investment property 713 3% 2,866 2,982 376 6,937 Equity securities1 433 2% 6,457 31,833 1,077 39,800 Debt securities 8,817 3
Slide 18: Standard Life Bank
Standard Life Bank • IFRS underlying profit before tax increased to £15m (H1 2008: £12m) • Asset quality remains good with an arrears rate of 0.68% at 30 June 2009 - CML average of 2.61% reported at Q1 2009 • Low average indexed loan to value of 48% • The liquidity and funding position of our bankin
Slide 19: Continuous Improvement Programme
Continuous Improvement Programme • Initial target of £100m annualised efficiency savings delivered one year early • On track to achieve second target of £75m savings by the end of 2010 - £26m achieved during H1 2009 • Second phase deliverables to date include: • Repositioning of our UK distribution
Slide 20: Financial summary
Financial summary • Strong net inflows across the Group • Capital-lite and cash generative with good IRRs • Balance sheet and capital position resilient • Low shareholder asset exposures with conservative default assumptions • IFRS profits impacted by significant market volatility • Dividend growth
Slide 21: Delivering value from an asset managing business
Standard Life Interim Results 2009 Delivering value from an asset managing business Sir Sandy Crombie
Slide 22: Our transition to a capital-lite business model
Our transition to a capital-lite business model Capital Heavy Capital-lite Capital-lite Capital-lite Cash Cash Cash Cash Consuming Consuming Funded Generating 22
Slide 23: Operational highlights
Operational highlights • Maintained investment in developing the business • Building on our leadership in the UK transparent fee market • Activation of BT scheme - largest DC scheme to go to tender in Europe • Canadian retail investment starting to deliver • 80% of investment management flows from o
Slide 24: UK SIPP leadership
UK SIPP leadership Individual SIPP customer numbers • Net flows of £1.0bn 8,800 74,700 dominated by pension 8,400 65,900 consolidation 10,600 • SIPP AUA up 12% to £9.7bn 46,900 despite reduced asset values • Increasing popularity of non- 25,200 insured investment options 9,100 31 Dec 31 Dec 31 Dec H
Slide 25: UK Wrap leadership
UK Wrap leadership Wrap assets under administration • Leveraging business from our 2.5 2.3 existing relationships 2.0 • The only platform rated ‘eee’ 1.7 by FTRC / Money Marketing for 1.5 1.5 four consecutive years £bn 1.1 • Re-pricing strategy providing a 1.0 simpler charging structure 0.6 0.5 • Bu
Slide 26: UK corporate pensions leadership
UK corporate pensions leadership AUA per customer facing staff member 45 40 • 216 schemes won in H1 2009 35 • Net inflows of £671m 30 • BT regular contributions 25 £m received 20 • Efficiency through scalability 15 - £14.7bn AUA at June 2009 10 - 264% efficiency improvement 5 since 2003 0 • One of t
Slide 27: Canada – broadening franchise strength
Canada – broadening franchise strength Canada corporate pensions assets under administration 14.0 • Market share up in all key 12.0 11.8 11.6 11.0 product lines1 - DC sales up 10.5 41%2,3 10.0 9.3 • Investment in retail 7.8 Can $bn 8.0 distribution starting to deliver 6.0 • Award winning ‘Plan for L
Slide 28: Asia-Pacific - potential from growing markets
Asia-Pacific - potential from growing markets India • Higher bancassurance sales as well as volumes now coming from expatriate Indians Asia life and pensions - PVNBP 350 • Strong flows into investment management company 300 Hong Kong • Recent political change viewed as positive for the China life in
Slide 29: Standard Life Investments - strong third party growth
Standard Life Investments - strong third party growth Third party AUM / Total AUM Third party revenues / Total revenues Retail % 45 Institutional % 40 70 35 60 % of Total Revenue % of Total AUM 30 50 25 40 20 30 15 20 10 5 10 0 0 2003 2004 2005 2006 2007 2008 H1 H1 H1 H1 H1 H1 H1 H1 2009 2003 2004 2
Slide 30: Standard Life Investments - a resilient investment management business
Standard Life Investments - a resilient investment management business Institutional business Split of total third party AUM • Well positioned due to breadth of offering and skills: • Fixed Income, UK Equity and Property expertise Retail business • Global Absolute Return Strategies (GARS) 23% • Incr
Slide 31: Driving efficiency
Driving efficiency The next phase of the Continuous Improvement Programme • Target to achieve £75m of annualised efficiency savings by the end of 2010 • Ongoing initiatives include: • Finance, marketing and HR transformation programmes • Adopting a global approach for our infrastructure • Improving
Slide 32: Investing for future growth
Investing for future growth Investing in customer solutions • Broadening corporate benefit propositions • Developing retail SIPP and Wrap offerings • Strengthening our international savings propositions • Extending our global product capability Leveraging our financial strength to develop the busine
Slide 33: Increasing shareholder value is our objective
Increasing shareholder value is our objective Delivery Increased Efficiency shareholder value Opportunity A business model for all market conditions 33
Slide 34: Questions
Standard Life Interim Results 2009 Questions Sir Sandy Crombie, David Nish and Keith Skeoch
Slide 35: Appendix
F | STANDARD LIFE L< Appendix
Slide 36: Components of Standard Life value
Components of Standard Life value Illustrative key components in excess of EEV (not to scale) Standard Life EEV New markets Global investment Cost efficiency New Business Value to Standard management Life Shareholders 265p per share India Value in Efficiency SIPP as at China excess of programmes Wra
Slide 37: Group EEV operating profit
Group EEV operating profit H1 2009 H1 2008 HWPF Non- UK Canada Europe Asia TVOG covered Total Total £m £m £m £m £m £m £m £m Contribution from new business 92 18 4 - - - 114 157 Expected return on existing business 105 67 17 - - - 189 218 Return on free surplus (13) 1 2 (25) - - (35) (1) Core develop
Slide 38: Maturity profile of PVIF
Maturity profile of PVIF Cumulative proportion of existing PVIF converting into cash 100 90 80 70 Percent (%) 60 50 40 30 20 10 0 1-5 6-10 10+ Years 47% of PVIF converts to cash within the next 5 years 38
Slide 39: Capital and cash generation
Capital and cash generation Free Required Net Group surplus capital worth PVIF EEV £m £m £m £m £m 31 December 2008 2,348 844 3,192 3,053 6,245 Operating capital and cash generation 172 16 188 - 188 Non operating capital and cash generation (140) 1 (139) - (139) PVIF income statement movement - - - (
Slide 40: UK SIPP leadership
UK SIPP leadership Individual SIPP: Assets under administration 10,000 £9.7bn Other investments 9,000 £8.7bn 2,071 Deposit accounts 8,000 £7.7bn 1,739 SIPP bank account 725 7,000 1,332 Non- Collectives – FNW Non - 703 Non- insured 1,092 funds Collectives – Standard Life 484 insured insured 6,000 fun
Slide 41: Asset exposures – shareholder exposure
Asset exposures – shareholder exposure Canada Standard Life Other Total As at 30 June 2009 Non-segregated funds Bank shareholder shareholder £m £m £m £m Investment property 713 - - 713 Equity securities 350 - 83 433 Debt securities 5,170 662 2,985 8,817 Loans and receivables 2,018 8,599 27 10,644 Ot
Slide 42: Credit risk allowance for corporate bonds
Credit risk allowance for corporate bonds UK and Europe annuities • £1.8bn of bonds, comprising £0.8bn of government and government backed bonds and corporate bonds of £1.0bn used to back £1.7bn of annuity liabilities • There were no defaults in respect of debt securities backing UK and European ann
Slide 43: Credit exposures
Credit exposures As at 30 June 2009 Shareholder Policyholder Policyholder Third Total unit linked participating party £m £m £m £m £m US sub-prime RMBS - - - - - US Alt-A - - - - - CDO/CSO/CLO1 - - 5 - 5 Wrapped credit 44 63 194 87 388 Direct monoline - - - - - SIVs - - - - - Total 44 63 199 87 393 %
Slide 44: Exposures to assets – debt securities
Exposures to assets – debt securities Exposure to debt securities Non- Policyholder Policyholder controlling 1 As at 31 June 2009 Shareholder participating unit linked interests Total £m £m £m £m £m Government 3,717 18,845 6,604 225 29,391 Corporate - financial institutions 2,735 7,253 3,881 114 13,
Slide 45: Heritage With Profits Fund (HWPF) - Estate
Heritage With Profits Fund (HWPF) - Estate • HWPF Estate of £0.4bn at June 2009 (31 March 2009: £0.3bn, 31 December 2008: £0.5bn) Sensitivities and current position • Estimated HWPF Estate broadly unchanged in current conditions • Estate increased since March 2009 and able to withstand further deter
Slide 46: HWPF Time Value of Options and Guarantees (TVOG)
HWPF Time Value of Options and Guarantees (TVOG) • The TVOG measures the risk to the transfers from the HWPF to shareholders fully reflecting the current size of the Estate and the risk of potential future shortfalls • TVOG of £101m at June 2009 (31 Dec 2008: £220m) fully reflects market conditions
Slide 47: FGD - Capital tier structure
FGD - Capital tier structure Jun-09 Dec-081 Jun-08 £bn £bn £bn Group core tier 1 4.7 5.3 5.7 Group innovative tier 1 0.6 0.7 0.6 Deductions from tier 1 (0.8) (0.8) (0.7) Total Group tier 1 capital 4.5 5.2 5.6 Group upper tier 2 0.8 0.8 0.8 Group lower tier 2 0.7 0.7 0.6 Total Group tier 2 capital 1.
Slide 48: Asset backed securities – total
Asset backed securities – total Exposure by type and credit rating As at 30 June 2009 ABS Type AAA AA A BBB BB B Not Rated Total £m £m £m £m £m £m £m £m Total ABCP - - - - - - - - Auto ABS 10 - - - 3 - - 13 CMBS 812 262 429 414 - - 106 2,023 Credit Card ABS 237 - - - - - - 237 Other ABS 69 - - 5 - -
Slide 49: Asset backed securities – shareholder
Asset backed securities – shareholder Exposure by type and credit rating As at 30 June 2009 ABS Type AAA AA A BBB BB B Not Rated Total £m £m £m £m £m £m £m £m Shareholder ABCP - - - - - - - - Auto ABS 7 - - - 2 - - 9 CMBS 250 46 10 20 - - - 326 Credit Card ABS 179 - - - - - - 179 Other ABS 37 - - 5