Aberdeen Group Plc · LSE:ABDN
Aberdeen — Standard Life — H1 2006 Earnings Presentation
43 slides from Aberdeen's earnings presentation, Sep 27, 2006
Slide 1: Standard Life Half Year Results 2006
Standard Life Half Year Results 2006 27 September 2006
Slide 2: Agenda
Agenda Introduction Sir Brian Stewart Chairman Highlights Sandy Crombie Group Chief Executive Financial Performance Alison Reed Group Finance Director Life & Pensions Business Update Trevor Matthews Chief Executive Standard Life Assurance Ltd Business Update Sandy Crombie Group Chief Executive Quest
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: Highlights
Half Year Results 2006 Highlights Sandy Crombie Group Chief Executive
Slide 5: Highlights
Highlights • Strong sales growth with sharply improved new business profitability and margins(1) • Successful transition towards more profitable products with lower acquisition costs • New business margin of 1.6% is 4x higher than the 0.4% recorded in FY 2005 due to margin improvements in all key pr
Slide 6: Financial Performance
Half Year Results 2006 Financial Performance Alison Reed Group Finance Director
Slide 7: Key Performance Indicators
Key Performance Indicators 6 months to 12 months to 30 June 2006 December 2005 New business APE 745 1,218 New New business PVNBP 5,763 9,367 Business (£ millions) New business contribution 91 33 PVNBP margin 1.6% 0.4% EEV operating profit before tax 206 395 Excluding IPO proceeds EEV profit before t
Slide 8: Product Refocus Drives Significant New Business Contribution
Product Refocus Drives Significant New Business Contribution 19% increase in APE(1) NBC of £91m 6 months to 12 months to 31 30 June 2006 December 2005 5 % 700 +2 UK 78 27 600 Canada 11 (2) 500 Europe 2 8 400 Total 91 33 £m 300 New business margin(2) of 1.6% 200 % +18 (25% ) 100 6 months to 12 months
Slide 9: UK Life and Pensions: Product Growth and Margin Improvement
UK Life and Pensions: Product Growth and Margin Improvement UK L&P product growth…. …with margin improvement(4) 14.0% 13.1% H1 2006 APE vs. H1 2005 APE 140% 125% 12.0% 120% 10.0% 100% 8.0% 7.5% 75% 80% 6.0% 60% 4.0% 40% 2.0% 1.8% 20% 2.0% 1.4% 9% 0.8% 0.2% 0.4% 0% 0.0% (4% ) Pensions Life Annuities
Slide 10: Canada Life and Pensions
Canada Life and Pensions Canadian product split (APE%) Margin improvement 1.2% NBC Margin(1) 13% 1.1% 1.0% 39% FY 2005 0.8% 48% 0.6% 0.4% 9% 29% 0.2% 0.0% H1 2006 (0.1% ) 62% (0.2% ) FY 2005 H1 2006 Group Insurance Group Savings & Retirement Individual Insurance S&R (1)NBC margin is NBC / PVNBP (%)
Slide 11: EEV Operating Profit
EEV Operating Profit 6 months to 12 months to 31 30 June 2006 December 2005 UK Europe Canada Other Total Total £m £m £m £m £m £m New business 78 2 11 - 91 33 In-force - expected return 127 16 46 - 189 328 - experience variances 25 8 (11) - 22 60 - assumption changes (73) 1 34 - (38) 37 Other (9) (2)
Slide 12: EEV Operating Assumption Changes
EEV Operating Assumption Changes 6 months to 30 June 2006 UK Europe Canada Total £m £m £m £m Lapses A-Day (79) - - (79) Demutualisation (21) - - (21) Total Lapses (100) - - (100) Maintenance expenses - - 28 28 Mortality and morbidity - - 2 2 Other 27 1 4 32 Total before tax (73) 1 34 (38) 12
Slide 13: EEV Profit After Tax
EEV Profit After Tax 6 months ended 12 months to 31 30 June 2006 December 2005 £m £m Operating profit before tax 206 395 Investment return and tax var iances 58 231 Economic assumptions (111) 232 Movement in TVOG 6 (44) Movement in sub -ord debt 110 (63) Other (3) 19 Profit before tax 266 770 Tax (5
Slide 14: IFRS Underlying Profits
IFRS Underlying Profits 6 months to 12 months to 31 30 June 2006 December 2005 £m £m Life and pensions UK 155 16 Europe 52 73 Canada 68 86 Other (2) - Total Life & Pensions 273 175 Investment management 28 44 Banking 17 24 Healthcare & GI 3 7 Other (78) (105) Total underlying profit before tax 243 1
Slide 15: Standard Life Investments Strong Funds and Earnings Growth
Standard Life Investments Strong Funds and Earnings Growth 118.8 123.4 125 30.0% 95.7 25.0% 100 86.5 20.0% 75 15.0% 50 28.1 31.5 10.0% 25 15.3 18.3 5.0% 0 0.0% 2003 2004 2005 1H 2006 3rd Party Funds under Management (£bn) Total FUM (£bn) EBIT Margin (1) The EBIT margin is calculated by dividing EBIT
Slide 16: Group Cash Generation
Group Cash Generation 6 12 months months to to 30 31 June December 2006 2005 New business strain (127) (306) Group APE and New Business Strain Transfer to net worth 194 318 Expected return 7 33 1500 40% 30% Experience variances 7 36 1000 20% Development costs (8) (12) 500 10% Operating cash flows 73
Slide 17: Capital Strength and Ratings
Capital Strength and Ratings Capital Strength Current Ratings Mutual as at 30 June 2006 Moody’s Standard & Poor’s Excess of capital resources over CRR* +£2bn SLAL A1 (stable) A (stable) Standard Life plc - BBB+ SL Bank (FS) C- (stable) - SL Bank (deposits) A3 (stable) A- 17
Slide 18: Movement in RoEV
Movement in RoEV 2.0% (0.6%) (1.1%) (0.5%) (0.2%) (0.2%) 6.8% 7.4% 31/12/2005 NBC Expected Return Lapse Other Inforce Group Corp Other 30/06/2006 Provision Mvts Centre 18
Slide 19: Business Update UK Life & Pensions
Half Year Results 2006 Business Update UK Life & Pensions Trevor Matthews Chief Executive Standard Life Assurance Ltd
Slide 20: Strong Growth in Single Premium Pensions New Business
We Have Seen Strong Growth in Single Premium Pensions New Business Single Premium Growth on comparable period H1 Q2 800 500 700 450 400 600 350 500 300 £m 400 790 £m 250 449 300 200 514 150 323 200 400 417 100 184 100 191 211 119 147 50 82 0 0 Group Pensions Individual Pensions SIPP / Drawdown Group
Slide 21: Life Lapse Activity Post D-Day
Life Lapse Activity Post D-Day Total Life Surrender Requests • WP Life surrender requests rose after D-Day and peaked at end July and have started to decline SGM Vote D-Day (IPO) • Pattern of life surrenders represents a response to No. of Cases demutualisation • We increased the total D-Day lapse p
Slide 22: Pension Lapse Activity Post D-Day
Pension Lapse Activity Post D-Day • Volumes of surrenders requests Individual Pension Surrender Requests rose post D-Day (Unit-Linked and With Profits) • Unlike Life business, pensions SGM vote D-Day (IPO) lapse requests have not yet started to decline No. of Cases • We believe that A-Day is a more
Slide 23: Special Lapse Provision For A-Day Effect
Special Lapse Provision For A-Day Effect on Unit Linked and WP • We have made a £55m net provision (£79m pre-tax) in relation to A-Day driven lapses (across all unit linked and with profits) over the period to the start of the new tax year • We had utilised 16% of this provision at the end of August
Slide 24: New Single Premium Pensions Outstrips Surrender Volume
New Single Premium Pensions Outstrips Surrender Volume • Monthly new Single Premium pensions business excludes annuities and Monthly run-rate of net inflows (£m) TIPPs / PPIPs • Single Premium data does not include 100m non-insured SIPP (£438m impact in H1 2006) • We expect to retain a significant a
Slide 25: Shift to Less Capital Intensive, Higher Margin Products
We Continue the Shift to Less Capital Intensive, Higher Margin Products £m 1,200 60% 55% 62% 2004 APE(2) 38% 1,000 50% 800 45% 600 40% 35% 400 30% 200 25% 47% 2006 H1 APE(2) 53% 0 20% 2003 2004 2005 2006 Calendar UK APE H1 UK APE H2 New Business Strain(1) as % of APE Regular Premium Single Premium N
Slide 26: UK Life & Pensions Continuing To Focus on Cost Base
UK Life & Pensions Continuing To Focus on Cost Base Expenses Key drivers • Reduced headcount across divisions £m 500 465 418 • Sales branch rationalisation 400 350 • Automation and efficiencies in Customer 300 168 Services 200 100 • Reduced Marketing spend 0 2003 2004 2005 H1 2006 Headcount(1) Focus
Slide 27: SIPP has Significant Non Insured Element
SIPP has Significant Non Insured Element • SIPP Funds Under Management Breakdown of SIPP FUM (£'M) of £2.4bn at the end of H1 2006, up from £1.3bn at the end of 268 Non-Insured 191 2005. 70 Funds 226 31% £'M 435 121 • 31% of this total was non- 83 Non-Insured Funds 15 116 25% insured, up from 25% at
Slide 28: Improved New Business Profitability
Improved New Business Profitability New Business Contribution (NBC) (£'M) Pre-Tax NBC by Product H1 2006 FY2005 50 Pensions 44 11 40 Life 18 9 30 Annuities 22 22 Protection (6) (15) NBC 20 (£'M) Total 78 27 10 - (10) New Business Contribution (NBC) (£'M) (20) Pensions Life Annuities Protection FY200
Slide 29: Business Update
Half Year Results 2006 Business Update Sandy Crombie Group Chief Executive
Slide 30: Standard Life Canada
Standard Life Canada Canadian Cost Management Strong Market in Target Products Underpins Profit Growth 2,400 Employees - Full Time Market Share 2,308 Equivalents H106 FY05 2,300 2,215 Group S&R 23.9% 23.2% 2,200 2,145 Group Insurance 2.2% 4.0% 2,100 Individual Insurance S&R 4.8% 7.4% 1,989 2,000 Tot
Slide 31: Standard Life Investments: Investment Performance
Standard Life Investments: Investment Performance Active Investment Performance - by Product Group at 30 June 2006 % Rank 0 25 50 75 100 Weighted With Profits Non Par Mutual Unit Linked Unit Linked Corporate Segregated Irish & M.W.A Third Average Active Funds Funds Life Pensions Pooled Pension Germa
Slide 32: Standard Life Bank and Healthcare
Standard Life Bank and Healthcare Healthcare Banking • Gross earned premiums increased by 18% due to • Underlying profit from banking increased by 42% on a acquiring FirstAssist. pro-forma basis to £17m. • Underlying profit was £3m (2005: £7m) • A decrease in lending related income was offset by inc
Slide 33: Confident in Meeting 2007 RoEV Target of 9-10%
Confident in Meeting 2007 RoEV Target of 9-10% Group ROEV – Improvement from H1 2006 to FY 2007 UK L&P UK L&P Non-life Subs Corp. Centre UK L&P Canada 9-10% 6.8% H1 2006 No Lapse Provision in NBC Costs Non-life Profit 2007 Target 2007 Uplift 33
Slide 34: Conclusions and Outlook
Standard Life – Conclusions and Outlook • Strong first half with growth in margins and new business contribution • Robust platform to deliver future growth • On course to achieve £30m cost savings in Life & Pensions – and maintain group centre costs at 2005 levels On track to deliver 9-10% post tax
Slide 35: Standard Life plc, registered in Scotland (SC286832), Standard Life House, 30 Lothian Road, Edinburgh
Standard Life plc, registered in Scotland (SC286832), Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. 0131 225 2552 Calls may be recorded/monitored Standard Life Group includes Standard Life plc and its subsidiaries. www.standardlife.com 35
Slide 36: Questions and Answers
Half Year Results 2006 Questions and Answers
Slide 37: Appendix
Half Year Results 2006 Appendix
Slide 38: Key Performance Indicators - UK L&P
Key Performance Indicators - UK L&P 6 months to 12 months to 30 June 2006 December 2005 New business APE 594 908 New business PVNBP 4,330 6,455 Key New business contribution 78 27 Financials (£ millions) EEV operating profit before tax 148 272 EEV consolidated balance sheet 2,439 2,419 IFRS underlyi
Slide 39: Standard Life Investments: Third Party Sales
Standard Life Investments: Third Party Sales Major Driver for Asset Growth Gross Sales (£m) 2005 CAGR Annualised 1H 2006 CAGR 1H From From 1998 2005 2006 '98 5yrs 3yrs '98 5yrs 3yrs Mutual Funds 192 605 883 18% 19% 18% 32% 45% 73% UK Institutional 199 3,312 1,885 49% 45% 39% 44% 37% 36% Canada 341 8
Slide 40: Group Costs
Group Costs Expenses Headcount(1) £m FTEs 1,250 1,234 14,000 1,224 13,500 13,229 1,200 13,000 12,500 1,150 1,108 12,000 1,100 11,500 11,320 11,066 11,000 1,050 10,500 1,000 10,000 2004 2005 H1 2006 2004 2005 H1 2006 annualised (1) Headcount is average FTEs inc temps but excluding overtime 40
Slide 41: EEV Balance Sheet Reconciliation
EEV Balance Sheet Reconciliation Movement in Embedded Value Half 1 2006 £m 4,400 4,200 4,000 3,800 3,600 3,400 3,875 3,744 3,200 3,000 EEV NBC Expected Inforce Non Market & Sub Debt Tax & Capital EEV @ 31/12/05 Return Movements Covered Economic Market Other Non- and @ 30/06/06 incl, GCC Changes Move
Slide 42: UK Life & Pensions Distribution Profile is Diversifying
UK Life & Pensions Distribution Profile is Diversifying In H1 2006 almost 30% of new business came from outside the traditional IFA sector 2003 Distribution mix by APE 2006 H1 Distribution mix by APE Banks/New Banks/New Channels Channels Direct 5% 7% Consult. 6% Direct Actuaries 8% IFA IFA Network 4
Slide 43: UK Life & Pensions Distribution Profile is Diversifying
UK Life & Pensions Distribution Profile is Diversifying In H1 2006 almost 30% of new business came from outside the traditional IFA sector 2003 Distribution mix by 2005 Distribution mix 2006 H1 Distribution mix APE by APE by APE Banks/New Banks/New Banks/New Channels Channels Channels Direct 3% 7% D