Driving value from a
position of strength
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”, “intends”, “expects”,
“plans”, “seeks” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all
forward-looking statements involve risk and uncertainty because they relate to future events and
circumstances which are beyond Standard Life's control including among other things, UK domestic and
global economic and business conditions, market related risks such as fluctuations in interest rates and
exchange rates, and the performance of financial markets generally; the policies and actions of regulatory
authorities, the impact of competition, inflation, and deflation; experience in particular with regard to
mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other
uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes
in capital, solvency or accounting standards, and tax and other legislation and regulations in the
jurisdictions in which Standard Life and its affiliates operate. This may for example result in changes to
assumptions used for determining results of operations or re-estimations of reserves for future policy
benefits. As a result, Standard Life’s actual future financial condition, performance and results may differ
materially from the plans, goals, and expectations set forth in the forward-looking statements. Standard
Life undertakes no obligation to update the forward-looking statements contained in this presentation or
any other forward-looking statements it may make.
Driving value from a position of strength
Standard Life plc
2
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 Hunt
Driving value from a position of strength
David Nish
Driving value from a position of strength
Standard Life plc
3
Our strategy to drive
performance and profit
David Nish
Building on a track record of delivery
Growth through innovation
• 2004: SIPP launched - £13.0bn AUA
Sustainable cash generation1
EEV core capital and cash generation
£307m
£305m
• 2006: Wrap launched - £5.0bn AUA
£276m
• UK Corporate Pensions AUA doubled since
2004 - £18bn
• Third Party AUM at SLI more than doubled since
2005 - £63bn
£85m
2006
2008
2009
FGD Surplus (£bn)
Balance sheet strength
Key risks mitigated
FTSE100
3.6
• Longevity Risk: £6.7bn of annuity liabilities reinsured
• Persistency Risk: Move away from unfunded
commission
• Liquidity Risk: Sale of Standard Life Bank
• Expense Risk: Continued efficiency programmes
3.5
3.5
3.6
3.4
3.1
6,000
FTSE100 Index level
• Market Risk: Group structure, asset allocation,
hedging
(1)
2007
5,000
4,000
3,000
2,000
1,000
0
31 Dec
2007
30 Jun
2008
31 Dec
2008
31 Mar
2009
30 Jun
2009
31 Dec
2009
2006 results are shown on a pro forma basis. Results exclude discontinued operations.
A strong platform for profitable growth
Driving value from a position of strength
Standard Life plc
5
Delivering consistent growth for shareholders
since demutualisation
Final dividend (p)
11.50p
11.77p
12.24p
Interim dividend (p)
10.80p
8.09
7.70
7.70
3.60
3.80
4.07
4.15
4.35
2006
2007
2008
2009
2010
7.20
Driving value from a position of strength
Standard Life plc
6
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
A clear strategy to take the business forward
Our
goal
Driving shareholder value through being a leading,
customer-centric business focused on long-term
savings and investment propositions
in our chosen markets
Trusted brand
Delivered
through
Technology and innovation
Customer insight, access and service capability
Superior investment performance
Driving value from a position of strength
Standard Life plc
8
How we generate profit
Lowering
unit costs
Increasing
assets
Maximising
revenue
Driving cash
profit
• Fee business
• Spread-based business
• Capital management
A simple business model
Driving value from a position of strength
Standard Life plc
9
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
Continuing to invest in our business
for profit and growth
• Employee Wealth Benefits Plan
• Canadian Flexible Benefits and
ConsultAction
• Irish Corporate
• German Corporate
•
•
•
•
•
Building on our
strength in our pension
savings and corporate
benefits markets
Expanding the global
reach of our investment
management business
• Alliance with Chuo Mitsui
• Extension of GARS to Bonds
& Equity
• Specialist credit and high
yield sectors
• Private equity smaller fund
offerings
Focusing on the
savings and
investment needs of
customers in our
chosen segments
Goal-based investment propositions
Strengthening our adviser support
Diversified distribution in Canada
Direct-to-customer propositions
Flexible Investment Proposition
for Hong Kong and Germany
Maximising value from
our Joint Venture
relationships in Asia
• Negotiations with Bank of China
• Opportunity to increase stake
in HDFC SL
Capturing opportunities across our markets
Driving value from a position of strength
Standard Life plc
11
Accelerating the pace of delivery
Building valuable
customer
relationships
Developing our
talent
Making
performance
matter
Engaging our customers
through our brand, service
and product propositions
Recruiting, retaining and
developing the best talent to
support our business needs
Driving accountability,
responsibility and
performance from individuals,
teams, business units and
across the Group
Transforming how we operate
To deliver our strategic priorities
• Making us better positioned to meet customer needs
• Delivering increased operational effectiveness and efficiencies
A continuing transformation journey
Driving value from a position of strength
Standard Life plc
12
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 efficiency and reducing unit costs
• Upgrading operational capabilities through innovative use of new technology
Portfolio
• Sale of Standard Life Bank and Standard Life Healthcare
• Acquisition of threesixty and Aida Capital
Increasing the metabolic rate of our business
Driving value from a position of strength
Standard Life plc
13
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 our IFRS operating profit
Driving value from a position of strength
Standard Life plc
14
Standard Life Investments
David Nish
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% of AUM
• Distinctive culture
• Strong management team here today:
- Keith Skeoch (CEO)
- Colin Walklin (COO)
- Rod Paris (CIO)
- Colin Clark (Director, Global Client Group)
- David Cumming (Head of Equities)
Driving value from a position of strength
Standard Life plc
16
A valuable growth business
Keith Skeoch, Colin Walklin
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 profit
Driving value from a position of strength
Standard Life plc
18
Strong strategic positions
No. 4 in UK Institutional Pensions
2010
ranking
2009
ranking
Pension Fund
Manager
1
1
Legal & General
Inv Mg’mnt
221.0
19.9
2
5
BlackRock
189.0
n/a
3
3
Insight Inv
Mg’mnt (Global)
69.4
1.0
4
8
Standard Life
Investments
50.3
21.5
5
6
State Street
Global Advisers
30.9
(12.5)
6
13
M&G
Investments
24.0
33.3
Hermes Fund
Managers
23.9
7
4
Combined value of
pooled and seg
funds - 2009 (£bn)
Increasing Global Scale
%
change
Ranking
Sector
Source
6
UK
IMA - Survey 2010 (UK based asset
managers only)
32
European
Institutional
I&PE - Top 400 Asset Managers
June 2010
48
World
Cerulli Associates – Annual Survey of
Top 50 Global Asset Managers
17
Property
Towers Watson – Global Alternative
Survey 2010
7
Private Equity
(Fund of Funds)
Towers Watson – Global Alternative
Survey 2010
(10.3)
Source: FTfm
No. 1 in UK Wholesale
Comparison with FTSE 350 - Quoted Co’s
Ranking
Fund Manager
AUM
1
SLI & SLTM (combined)
2
Invesco Perpetual
34.0
3
S. Widows & SWIP (combined)
33.3
4
PRU & M&G (combined)
30.7
5
FIL Investment Management
26.3
6
Legal & General
24.9
7
Capita Financial Managers Ltd
20.8
AUM
(£bn)
Net Flows
2.5 year
CAGR
Revenue
Yield (bps)
EBIT
Margin
Mkt Cap
1. Aberdeen
164.7
(5.0)
38
33%
1,560
2. Schroders
150.0
15.0
67
37%
3,785
3. SLI (TPA)
63.0
28.9
34
34%
?
4. Henderson
56.4
(16.4)
62
29%
1,064
5. Gartmore
19.9
(23.4)
108
34%
373
6. Jupiter
19.8
18.0
113
53%
938
34.8
Source: IMA website 30 June 2010
Driving value from a position of strength
Fund Manager
Source: Company Reports, adjusted for comparability
Standard Life plc
19
Building a successful and sustainable asset
management business we will continue to be a...
Significant provider of high
margin global investment
management services to
institutional clients, in both
developed and new markets
+
Major provider of wholesale
investment management
services to the UK retail market
and other markets domestic to
Standard Life
...while always seeking to build a
balanced business with diversified
alpha and EBIT
Driving value from a position of strength
Standard Life plc
20
Financials and Profit
Drivers
Colin Walklin
Strong and profitable growth record
Third party net flows
8.0
Inflows have grown steadily…
6.0
£4.7bn
4.0
2.0
Revenue
10
20
09
300
H1
20
08
20
07
20
20
05
20
06
20
04
03
20
02
01
20
20
20
00
19
99
0
225
….producing substantial revenue growth,
offsetting the attrition of captive assets…
£154m
150
75
EBIT
10
20
09
H1
20
08
20
07
20
20
06
05
20
20
04
03
20
02
20
01
20
20
19
00
0
99
90
68
£49m
45
...and enabling strong profit growth despite
two major financial crises.
23
20
04
20
05
20
06
20
07
20
08
20
0
H1 9
20
10
20
02
20
03
20
01
20
00
19
99
0
Driving value from a position of strength
Standard Life plc
22
Revenue growth driven by third party assets
350
Revenue (£m)
300
Captive
250
100
200
110
103
160
158
Revenue growth has been driven
by third party business...
Third Party
106
117
150
94
100
50
0
87
2005
110
153
201
Third Party Net Inflows
(exc. volatile UK money market funds) (£bn)
5.0
4.5
4.0
2006
2007
2008
1
2009
3.5
2
H1 2010
3.0
2.5
2.0
1.5
1.0
0.5
Average revenue yield (bps)
21
17
18
18
13
21
14
22
H1
2005
14
H2
2005
H1
2006
H2
2006
H1
2007
H2
2007
H1
2008
H2
2008
H1
2009
H2
2009
H1
2010
Captive
11
Third Party
11
13
37
33
35
36
34
34
2006
2007
2008
2009
H1 2010
2005
0
...plus strong underlying margins
and a richer mix.
(1) Underlying revenue – after adjusting for one-off performance fee amendments re captive funds
(2) Annualised – H1 x2
Driving value from a position of strength
Standard Life plc
23
Strong product positioning and broadening reach
2005
India
4%
Asset class
Broadening range of third of party
assets and investment strategies
Cash
10%
Cash 19%
GARS 0%
Private Equity
6%
Equities
45%
Property
10%
Growing importance of wholesale
and third party institutional
Institutional
19%
India
7%
Equities
25%
GARS
10%
Private Equity
5%
Property
8%
Fixed Income
16%
Channel
2010
Fixed Income
35%
Institutional
33%
Wholesale 4%
Captive
56%
Captive
77%
Wholesale
11%
Driving value from a position of strength
Standard Life plc
24
Expanding global footprint
Increasing penetration of Standard Life Investments’ institutional global
products into international markets
2005
Europe India
1% 4% Other
Canada
1%
18%
US
1%
2010
Canada
17%
US
2%
Europe
5% India
7%
Other
4%
UK
75%
UK
75%
Driving value from a position of strength
Indicative
2015
UK
65%
UK
50%
International
50%
Standard Life plc
25
We have responded well to
changing client demand
Fixed Income AUM and Yield
AUM (£bn)
Yield (bps)
24
25.0
20
20.0
AUM
16
Yield
15.0
De-risking via Fixed Income
12
10.0
8
5.0
0
4
2005
2006
2007
2008
2009
0
H1 2010
GARS AUM and Yield
Yield (bps)
AUM (£bn)
7
80
AUM
6
5
Emerging demand for Absolute Return
(GARS)
60
Yield
4
40
3
2
20
1
0
Driving value from a position of strength
2005
2006
2007
2008
2009
H1 2010
0
Standard Life plc
26
Our philosophy is “a premium price for a
premium product”
120
Revenue yield bps ( Institutional only)
£6.6bn
£6.5bn
92 First quartile
90
88 First quartile
81 SLI
£3.8bn
70
69 SLI
First quartile
66 Median
60 SLI
60
£8.4bn
60 Median
45 First quartile
£14.5bn
30
69 Median
33 SLI
50 Last quartile
36
29 Median
23 First quartile
28 Last quartile
21 SLI
18 Median
11
Last quartile
17 Last quartile
Last quartile
0
Fixed Income
Equities
Property
Alternatives
(Inc. PE and GARS)
Mutual Funds
Note: Covers all third party AUM except Canada, India, our Money Market funds and the Standard Life Group Pension Fund.
Excludes early mandates - pre 2005.
Source: Benchmark data is taken from McKinsey European Asset Management Survey 2009. Standard Life Investment data is average institutional revenue yield 6 months to 30 June 2010.
Driving value from a position of strength
Standard Life plc
27
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
• Strong growth in fixed income - at premium prices
• Very high institutional client retention
Driving value from a position of strength
Standard Life plc
28
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%
28%
258
30%
266
32%
269
266
269
232
EBIT Margin
22%
Revenue
(Inc. HDFC AM)
181
258
314
181
Costs
141
167
167
184
184
184
184
189
189
2005
2006
2007
2008
2009
216
216
H1 20101
(1) Annualised – H1 x2
Driving value from a position of strength
Standard Life plc
29
People, our greatest asset - our main cost
£m
Cost Growth
250
Other
200
Out sourced costs
150
Staff costs maintained at around 65% of total
costs; comp ratio at around 45% (2009)
100
50
61%
65%
65%
63%
64%
2005
2006
2007
2008
2009 (2)
66% Staff costs
0
2
£m
1
H1 2010 (1)
Staff Costs
150
Variable staff costs
113
Staff costs have a substantial variable element
- provides a hedge if performance dips
75
Fixed staff costs
£m
38
FTE
400
900
0
300
825
200
750
100
0
Revenue (Inc. HDFC AM)
Headcount
675
2005
2006
2007
2008
2009
H120101
2005
2006
2007
2008
2009
H1 20101
Headcount growth has been controlled in
order to release the operational gearing of
the business
600
(1) Annualised – H1 x2
(2) Underlying – After eliminating a one-off settlement from an outsource partner
Driving value from a position of strength
Standard Life plc
30
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%
154
125
23%
(108)
(99)
8%
HDFC Asset Management (£m)
3
4
-
EBIT (£m)
49
30
63%
32%
24%
-
Revenue (£m)
Costs (£m)
EBIT Margin
(1) 2009 at December 31
Driving value from a position of strength
Standard Life plc
31
Growth
Opportunities
Keith Skeoch
Growth underpinned by strong
investment performance
Money Weighted Average Performance - Third Party AUM
% Ranking
0
25
34
31
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
A large, growing and increasingly global industry
New big emerging
asset pools
Clients demanding
alignment of
interests
Client demand for
global products
Key trends
Barriers to entry are
getting higher
Individual replacing
collective investment
Separation of
beta and alpha
Driving value from a position of strength
Standard Life plc
34
Profit pools within the investment
management industry
Estimated size, 2009 ($trillions)
Scale = $1 trillion
CAGR, 2009–2013 (%)
30
Traditional active
Passive products/ETFs
25
Passive
Alternative
ETFs
SLI pool
20
Passive fixed income
Alternative products
15
Real estate
(including REITs)
Passive equity
Infrastructure
10
Commodities
LDI
Fixed Structured
income
5
Absolute return
Hedge funds
Private equity
Quantitative
Active
equity
Money market
0
0
Traditional
active products
50
100
200
Net revenue margin (basis points)1
Source: Boston Consulting Group analysis
(1) Management fees net of distribution costs
Note: This analysis assumes a conservative scenario of 5 percent annual growth of equity markets.
Source: BCG Global Asset Management Market Sizing database 2010, BCG Global Asset Management Benchmarking database 2010, BCG analysis
Driving value from a position of strength
Standard Life plc
35
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
Institutional growth opportunities
Traditional/Core
•
•
•
•
Absolute Return
• Extension of GARS to Bonds & Equity
• Greater use as core solution by Pension Funds
Alternatives
Global
Driving value from a position of strength
Specialist Credit
High Yield
Global Bonds
Global Equity
• Private Equity new smaller fund offerings
• Property – European Property Growth Fund (EPGF)
• Aida Acquisition
• Japan – distribution through Chuo Mitsui
• India – JV + HDFC Asset Management
• Additional strategic alliances
Standard Life plc
37
Wholesale growth opportunities
Expanding
sales force
• Increase penetration with existing 3rd party platform
providers and add new 3rd party platforms to list
• Significantly increase market share from key segments:
Banks, National Discretionary Managers, Large
Intermediaries and Fund of Fund Managers
Investing in
Marketing
• Expand advertising and promotional campaign activity
• Increase the level of communications support
• Provide additional support to new and existing
platform partners
Working better
with
Standard Life
• Place SLI at the heart of the new “Investment
Proposition”
• SLI participation in the UK’s strategic alliances
• UK sales force active in promoting SLI funds via
intermediaries through 3rd party platforms
Aiming to boost market share
Driving value from a position of strength
Standard Life plc
38
Driving value from a position of strength
Standard Life plc
39
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 strength
Standard Life plc
40
Our UK long-term
savings business
David Nish
Driving value from a position of strength
Standard Life plc
The UK is an exciting place for Standard Life
to do business
Attractive asset pools
• £2.3 trillion assets in our target retail customer segments
• Total pensionable assets of £1.4 trillion
• Movement from DB to DC; unbundled to bundled
Changing customer
behaviours
• Increasingly self-directed
• Demanding simpler, more transparent products
• Greater use of technology
Government
intervention
• Retail Distribution Review (RDR) ban on provider commissions doubles size of
our accessible market
• Taxation changes and low interest rates are driving consumers to seek better
value for money
Distribution
restructuring
• Business models moving from commission to fee (adviser charging)
• Product sales to Advice
• DIY growing
Competition
• Asset consolidation on platforms to support ‘Advice’ proposition driving growth
• RDR and consumer demand will increase platform competition and consolidation
We are strongly placed to benefit from market changes
Driving value from a position of strength
Standard Life plc
42
Take to market focus
Paul Matthews
Driving value from a position of strength
Standard Life plc
43
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 growth
• Greater focus on our customers and intermediary partners
• Stronger position to leverage common infrastructure development and spend
• Sharper investment focus to gain usage and maximise value extraction
• Consistency across propositions in all ‘three channels’
Driving value from a position of strength
Standard Life plc
44
Investing in the Future
Strong in house
capability
Stable of high quality
providers to exploit
Strong
proposition
huge UK
opportunity
to extract
greater value
Standard Life
UK
Products
Platforms
Tools
and
planners
Standard Life
Investments
Banks
Standard Life
Wealth
Discretionary
Fund
Management
Retail
Stable of high quality
Accesstotoexploit
providers
huge
UK opportunity
customers
through
multi channel
approach
Standard Life
Int’nl (offshore)
Vebnet
Investment
Management
Consultancy
CBCs
Employers
Future
services
Direct
Corporate
IFAs
threesixty
Employees
Customers
Past = selling products using commission
Future = providing chargeable platforms and services
Driving value from a position of strength
Standard Life plc
45
Corporate market drivers
Movement of assets over the next 5 years
• De-risking business by moving pension provision
(DB to DC, Unbundled to Bundled)
UK Pension Assets - £bn AUA
£800bn
• Growing demand for employee benefit solutions
(no longer just pensions)
Defined Benefits
Trust DC
(Unbundled)
• Increased focus on higher quality schemes and
better value for money (pre and post RDR)
£250bn
Trust DC
(Semi Bundled)
Trust DC
(Bundled)
£150bn
Corporate ISA
Contract Based
DC
£200bn
Investment
Solutions
Corporate SIPP DC
Employee Wealth Plan (EWP)
• Desire for technology driven solutions
(employer, employee, IFA and CBC)
• Pensions Reform – auto enrolment opportunity
(c.280,000 employers)
• Removal of provider funded commission post RDR
£1.4 trillion total assets
Regulatory and market changes will drive c.£180bn of asset flows over next 5 years
Driving value from a position of strength
Standard Life plc
46
Corporate market opportunities
We are well positioned to grow both assets and revenue
• Leading pension and flexible benefits provider in
Corporate Market today (21% IFA market share1)
• Market leading service proposition
• Integrated Employee Wealth Benefits Proposition
(Vebnet) moves us from pension provider to the
No. 1 flexible benefit solutions provider
• Standard Life Investments
• Proven track record of administering at scale
• Already fit for RDR world
• Established and growing ‘Triple track’ capability
Investing to strengthen our proposition
Revenue drivers
• Employee Wealth Benefit Plan
• Enhanced scheme wins
• Trust Based Pension
• Greater employee engagement
• Suite of Investment Solutions and tools
(Model Portfolios, Blended Funds, DFMs,GARS)
• Improved employee retention
• Employee Engagement Team with links to Direct
• Substantial growth potential and increased margins
(1) Source: ABI Statistics H1 2010
Standard Life is uniquely positioned
Driving value from a position of strength
Standard Life plc
47
Retail market drivers
Movement of assets over the next 5 years
> £3 trillion ‘wrappable’ assets
£m
Bonds
SIPP
PEPs / ISAs
• Customers seeking integrated view of their assets
• Desire for simple, uncomplicated technology driven
solutions; accessed through one easy route (eg iPhone)
• Efficiency and compliance needs plus valued client
proposition driving advisers to platforms
Legacy
Stocks / Shares
• Consolidation: IFAs; Product, Platform and SIPP
providers; Investment Companies
• Customers more financially aware and demanding
access to advice in a way that suits them
(24/7, DIY, Multi channel, IFA)
Wrap platforms:
• support a better customer propositions;
• provide audit trail for advisers;
• reduce cost to serve;
• and create recurring income stream.
• “DP10/2” Banning of rebates, auto re-registration,
increased capital requirements
• Diminishing role of Employer funded pension provision
Regulatory and market changes will drive c.£400bn of
platform asset flows over next 5 years
Driving value from a position of strength
Standard Life plc
48
Retail market opportunities
Why we are well positioned to grow assets and revenue
• Focused on non commission, ‘new model advisers’
since 2004
• Ownership of threesixty - No 1 service provider/
adviser to intermediary marketplace
• IFA market share - 16.4% (growth at twice the rate
of IFA market (ABI - H1’10 v H1’09)
• Standard Life Investments & Standard Life Wealth
(SLW) captures more of the value chain
• Full service wrap (‘EEE’ 5th year running - FTRC)
• Reputation for strong customer service
• Fastest growing wrap in the UK
• Our AdviserZone - most used portal by IFAs
Investing to strengthen our proposition
Revenue drivers
• Wrap/ Intermediary platforms
• Greater customer and intermediary engagement
• Suite of Investment Solutions and tools
(Model Portfolios, Blended Funds, GARS, SLW)
• Improved sales capability and productivity
• Improved customer retention
• SLW - Discretionary Fund Management
• Distribution capability (Chartered status)
• Substantial platform asset growth and increased
margins
Building from a position of strength
Driving value from a position of strength
Standard Life plc
49
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 strengthen our proposition
Revenue drivers
• D2C platform - being introduced
• Greater customer access and engagement
• Suite of Investment Solutions and tools
(Model Portfolios, Blended Funds, DFMs,GARS)
• Improved customer retention
• Lower cost to acquire and serve customers
• Building Direct expertise
• Improving our customer communications
• Customer growth and increased margins
Our Direct channel is complementary to Retail and Corporate
Driving value from a position of strength
Standard Life plc
50
Investing in the Future
Strong in house
capability
Stable of high quality
providers to exploit
Strong
proposition
huge UK
opportunity
to extract
greater value
Standard Life
UK
Products
Platforms
Tools
and
planners
Standard Life
Investments
Banks
Standard Life
Wealth
Discretionary
Fund
Management
Retail
Stable of high quality
Accesstotoexploit
providers
huge
UK opportunity
customers
through
multi channel
approach
Standard Life
Int’nl (offshore)
Vebnet
Investment
Management
Consultancy
CBCs
Employers
Future
services
Direct
Corporate
IFAs
threesixty
Employees
Customers
Past = selling products using commission
Future = providing chargeable platforms and services
Driving value from a position of strength
Standard Life plc
51
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 anticipating and responding to market changes
• We are increasing investment from a position of strength to capture significant
growth and margin opportunities
The UK is an exciting place for Standard Life to do business
Driving value from a position of strength
Standard Life plc
52
Creating a scalable
business for growth
Christian Torkington
Driving value from a position of strength
Standard Life plc
Compelling drivers for transforming
our operations
Asset growth
• Deliver propositions to support asset growth
• Extend architecture to support multi-channel model
• Build customer value management capabilities and increase retention
Reduced cost
• Simplify and drive scale economies from structure
• Improve understanding and management of unit cost
• Move to single platform architecture
Scalability
• Take platform architecture to next level
• Automate processes to remove growth constraints
• Build greater automation into new propositions
Control
• Embed preventative controls
• Leverage the regulatory and legislative challenges
• Remove unrewarded operational risks
Driving value from a position of strength
Standard Life plc
54
We have a blueprint and plan
Right organisation
and capabilities
Platforms &
infrastructure to
deliver growth
•
•
•
•
Fit for purpose operating structures
Investing in capability gaps, remove duplication
Building on talents and change culture
Flexible sourcing models
• Delivering digital platforms and tools that drive
growth in assets to the next level
• Integrating platforms with operations
• Re-engineering processes and increase end to
end automation
• Redesign proposition development process and
delivery capabilities to improve speed to market
Asset growth
Reduced cost
Scalability
Customer value
management
Leveraging
regulatory change
Driving value from a position of strength
• Unlocking value from existing customer base
• Build direct to customer capability
• Embed CRM tools to support contact programme
• Solvency II
• RDR
• Pensions Reform
Control
Standard Life plc
55
Here is the plan…
H2 2010
H1 2011
H2 2011
Trust Based Pensions final launch
release
Customer Contact Programme
Asset Growth
Customer Contact & Value Management Tools
release
Reduced Cost
Platforms
Intermediary
Investment Proposition
release
release
release
launch
Employee Wealth Plan
D2C
Product Enhancements
Product Enhancements
Product Enhancements
release
release
release
release
release
release
Scalability
Integration with Operations – End to End Processes
Process Re-engineering
Process Re-engineering
Process Re-engineering
Process Re-engineering
Control
System Simplification
Project Delivery Improvement Programme
Organisational Design
RDR and Solvency II
Driving value from a position of strength
Standard Life plc
56
We are building capacity and capability to deliver
Right organisation and
capabilities
Change
priorities
Platforms and
infrastructure to drive
growth
Customer value
management
Leverage regulatory
change
Increased capacity and capability with new strategic development partners
Realigned IT Organisation around strategic change
Supported by
our capacity
for delivery
Reduction in duplicated effort through reorganised Change and IT functions
Increased capacity in our development and testing environments
Functional alignment and design through Enterprise Architecture
Driving value from a position of strength
Standard Life plc
57
Customer Service - An example of our
transformed operating model
Digital Self Service
Customer Services
• Market leading customer experience
• Multi-channel model to support lifetime
relationship with customers
Employer &
Intermediary
Services
Bespoke
aligned to
value
• Transactional
• Straight Through Processing (STP)
• Migrate to self service
Specialist Services
• Complex/niche
• Specialist knowledge
• Simplify
Support Services
• Deliver a step change in productivity
Driving value from a position of strength
• One stop mail
• Document production
• One stop automation
Standard Life plc
58
Customer Service - Delivering unit cost reductions
Organisational Design
• Resources grouped to process
Planned Customer Service Manpower Profile
• Flatter management structures; increase spans
(not to scale)
• Clearer lines of accountability and responsibility
• Remove duplication
Growth
Organisational
changes 2010
Organisation
design
Process Redesign & Automation
Process
redesign &
automation
• End to end process re-engineering - initial focus
on new business, provide information, fund
switches
Digital self
service
• Increased use of ICR (intelligent character
recognition) to automate mail processing
• Reuse of STP solutions across all media
2010
2012
Migration to Self Service
• User friendly and intuitive digital platforms
making routine administration easy and attractive
• Active promotion of existing and new services
• Changing behaviours e.g. target significant
uptake in electronic statements
Combination of asset growth and efficiency improvement
will deliver circa 40% productivity improvement by 2012
Driving value from a position of strength
Standard Life plc
59
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 from a position of strength
Standard Life plc
60
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 from a position of strength
Standard Life plc
61
Our UK long-term
savings business
David Nish
Driving value from a position of strength
Standard Life plc
The UK is an exciting place for Standard Life
to do business
Opportunity
• Attractive asset pools in our core market segments
• Regulatory driven market changes aligned to our business focus
Transforming
• Take to market focus increasing the speed of proposition delivery
• Using technology to deliver efficiency
Investing
• Developing our propositions to meet customer needs
• Creating capacity to drive scalability
Delivering
• Significant asset and revenue growth
• Productivity improvements to drive down unit costs
Well positioned to drive increased profits and cash flow from our UK business
Driving value from a position of strength
Standard Life plc
63
Capital and cash
generation and IFRS
profit drivers
Jackie Hunt
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 business
- invest in profitable growth opportunities
- deliver a progressive dividend
We are driving a material increase in cash profitability
Driving value from a position of strength
Standard Life plc
65
Capital and cash generation
Driving value from a position of strength
Standard Life plc
Group EEV capital and cash generation
H1 2010
£m
H1 2009
£m
300
246
(109)
(72)
Covered business capital and cash generation from new business and expected return
191
174
Covered business development expenses
(21)
(9)
Non-covered business core capital and cash generation
(10)
(14)
Core
160
151
Efficiency
(7)
(8)
Back book management
(4)
29
Operating profit capital and cash generation from continuing operations
149
172
Capital and cash generation from existing business 1
New business strain 1
(1) The Asia businesses were included on an EEV basis for the first time in the FY09 results. Asia accounted for £19m of capital and cash generation from existing business
and (£35m) of the new business strain for H1 2010. The IFRS underlying loss of £25m after tax for H1 2009 is included in the capital and cash generation from existing
business.
Core cash generation up with strong coverage of new business strain
Driving value from a position of strength
Standard Life plc
67
Group EEV capital and cash generation and
utilisation H1 2010
Non-covered
IRR of 19%
International
(£109m)
Canada
£52m
Investment criteria
(£12m)
Minimum IRR 15%
and 5 year payback
UK
(£98m)
£73m
*1
(£11m) 1
(£42m) 1
*1
£300m
£187m
£149m
£98m
Generation of
capital & cash covered
Generation of
capital & cash non-covered
Gross operating
profit capital and
cash generation
New
business
strain
Growth
investment
spend
Operating
profit capital
and cash
generation
Dividend
declared
(1) Growth investment spend of £42m represents £72m investment spend for H1 2010 on a post tax basis and excludes £11m of costs included within new business strain. See Appendix for
reconciliation of growth investment spend.
Generating cash to invest in growth, write new business and
support progressive dividend
Driving value from a position of strength
Standard Life plc
68
Group EEV capital and cash generation
and utilisation H1 2010
UK - £187m
Canada - £73m
International - £52m
IRR of 19%
Non-covered - (£12m)
IGD surplus as at 31 Dec 2009:
£3.6bn
NBS
(£109m)
Growth investment spend
(£42m)
Retained EEV capital and cash
£0.3bn
Gross operating EEV capital and
cash generation £300m1
Remove movement in subdebt
liability: (£0.4bn)4
Cash dividend
(£134m)3
Reverse change in IFRS Pension
Scheme Surplus: (£0.2bn) 4
Retained EEV capital and cash
£312m
Non-operating and non-trading
£297m 2
Other: £0.2bn 4
IGD surplus as at 30 June 2010:
£3.5bn
(1) Represents EEV operating capital and cash generation from continuing operations of £149m prior to the deduction of the NBS of (£109m) and growth investment spend of (£42m).
(2) Consists of EEV non-operating capital and cash generation of £165m, capital and cash generation from discontinued operations of (£17m), after tax actuarial gains on defined pension schemes of £82m, net worth foreign
exchange differences on consolidation of £74m and other non-trading of (£7m).
(3) Represents dividends paid in cash during the period and excludes new shares issued in lieu of cash dividends as part of the Scrip dividend scheme.
(4) Included within the EEV total retained capital and cash generation are movements in relation to the Group's sub debt liability on a market value basis and the Group's pension schemes on an IFRS basis. The adjustment for sub
debt removes the movement in the sub debt liability as this is included as capital for regulatory purposes. The adjustment for the pension scheme reverses the movement in the IFRS net liability/ surplus as these are excluded for
regulatory purposes. The sub debt adjustment and ‘Other’ predominantly relate to the disposal of the banking business.
Strong IGD surplus and returns on new business
Driving value from a position of strength
Standard Life plc
69
Group EEV capital and cash movements
FY 2009
£m
FY 2008
£m
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 continuing operations
371
396
Dividend declared
272
257
Coverage of Gross operating profit capital and cash to new business strain
3.28
3.08
Coverage of Operating profit capital and cash to Dividend declared
1.36
1.54
Gross operating profit capital and cash:
(1) See Appendix for reconciliation of growth investment spend
Consistently delivering strong cash coverage
Driving value from a position of strength
Standard Life plc
70
PVIF monetisation profile
Undiscounted
Total PVIF
In-force
Cash emerging in first 5 years
£m
£m
%
UK
4,031
1,414
35
Canada
3,075
454
15
958
344
36
8,064
2,212
27
- Retail
120
40
34
- Corporate
132
29
22
- Total
252
69
27
77
6
8
International
132
57
43
Total
461
132
29
International
Total
New business H1 2010
UK
Canada
Based on six months
new business
£2.2bn of cash emerges from backbook over the next five years
Driving value from a position of strength
Standard Life plc
71
Analysis of New Business
NBC (Pre tax)
IRR
Payback (undiscounted)
H1 2010
£m
H1 2009
£m
H1 2010
%
H1 2009
%
H1 2010
years
H1 2009
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 existing business
• NBS ratio to PVNBP is 1.1% (0.8% excluding Asia)
• NBS includes fixed overheads which are scalable to increasing new business volumes
(1) H1 2009 comparatives exclude Hong Kong and the joint venture businesses
High IRR and short payback reflects capital-lite approach
Driving value from a position of strength
Standard Life plc
72
Capital and cash conversion - H1 2010
EEV operating capital and cash generation
from continuing operations
£149m
Impact of different treatment of assets
and liabilities
(£17m)
DAC/DIR, intangibles, tax and other
£2m
IFRS operating profit after tax from
continuing operations
£134m
Close alignment of capital and cash generation and IFRS operating profit
Driving value from a position of strength
Standard Life plc
73
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 investment spend based on strict return criteria - substantially expensed
• Supports our progressive dividend policy
Sustainable cash generation provides financial flexibility
Driving value from a position of strength
Standard Life plc
74
IFRS profit drivers
Driving value from a position of strength
Standard Life plc
How we generate profit
Fee business revenue
(including guarantee margin)
Spread/ risk business 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 Life plc
76
Assets Under Administration by type of business
£14.2bn
(£8.9bn)
£3.7bn
£179.1bn
£170.1bn
£157.3bn
£147.9bn
Fee
£128.4bn
Fee
£139.7bn
Fee
£146.6bn
Fee
£118.5bn
Spread/risk
£20.4bn
Spread/risk
£20.2bn
Spread/risk
£22.3bn
Spread/risk
£23.6bn
Other
£8.5bn
Other
£9.2bn
Other
£8.1bn
Other
£8.9bn
31 Dec 2007
31 Dec 2008
31 Dec 2009
Gross inflows
Redemptions
Market/other
movements
30 Jun 2010
The majority of flows and AUA relate to fee based business
Driving value from a position of strength
Standard Life plc
77
Fee Business
Driving value from a position of strength
Standard Life plc
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 strength
Standard Life plc
79
Fee Business - UK
£6.8bn
(£4.8bn)
£0.1bn
£85.5bn
£87.6bn
Fee
Fee
Fee
£65.8bn
£66.6bn
£67.5bn
£57.4bn
BPS
75
BPS
75
TIP
£8.6bn
TIP
£12.0bn
CWP
£7.9bn
CWP
£6.9bn
31 Dec 2008
31 Dec 2009
£86.1bn
£73.9bn
Fee
TIP
£10.0bn
CWP
£10.3bn
31 Dec 2007
TIP
£13.4bn
Gross inflows
Redemptions
No shareholder
return for UK
CWP
£6.7bn
Market/other
movements
30 Jun 2010
• UK fee business bps stable at 75bps
• 66% retail and 34% corporate AUA at 30 June 2010
• Continuing to grow both retail and corporate business while driving down unit costs
Our retail and corporate propositions are highly scalable
Driving value from a position of strength
Standard Life plc
80
Fee Business - Canada
£1.1bn
(£0.8bn)
£0.5bn
£12.1bn
£11.3bn
£9.6bn
£9.0bn
BPS
118
BPS
116
31 Dec 2007
31 Dec 2008
31 Dec 2009
Gross inflows
Redemptions
Market/other
movements
30 Jun 2010
• Canadian fee based bps have remained broadly stable at 118 bps for H1 2010 (FY 2009: 116bps)
• 25% retail and 75% corporate AUA at 30 June 2010
• Basis points trend reflects changes in the product mix including an increase in retail funds
Strong flows in savings and investment products
Driving value from a position of strength
Standard Life plc
81
Fee Business - International
(excluding joint ventures)
£9.1bn
248bps
£0.9bn
(£0.3bn)
(£0.1bn)
£9.6bn
223bps
£8.3bn
£6.4bn
Ireland
Ireland
£5.1bn
£4.9bn
Ireland
90bps
74bps
£4.7bn
Ireland
£3.9bn
Germany
Germany
Germany
Germany
£2.5bn
£3.6bn
£4.4bn
£4.2bn
Hong Kong
£0.1bn
413bps
31 Dec 2007
31 Dec 2008
31 Dec 2009
Gross inflows
Redemptions
Market/other
movements
323bps
30 Jun 2010
• Fee based revenue in Ireland mainly consists of AMCs while the majority of revenue in Germany
arises from premium based charges
• Basis point trend in Germany reflects premium based nature of revenue and a gradual shift in the
mix towards AMC-based products. We expect this trend to continue
Exciting growth opportunities: transferability of propositions
Driving value from a position of strength
Standard Life plc
82
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
movements
30 Jun 2010
• Revenue generated from third party AUM (presented above) and the captive AUM
• Basis points trend driven by strong sales of GARS and Fixed Income institutional business
• Average basis points on third party AUM have remained flat at 34 bps over FY 2009 and H1 2010
(1) Basis points calculated on third party business excluding Indian associate
Strong growth in third party AUM while maintaining revenue margins
Driving value from a position of strength
Standard Life plc
83
Fee Business - Summary
H1 2010
Revenue
FY 2009
Revenue
Revenue
Average
AUA1
Revenue
£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)
(21.2)
Total fee based AUA
145.3
535
124.7
Average
AUA1
72
(19)
75
978
Guarantee margin
(24)
(6)
Revenue (inc g’tee margin)
511
972
• Strong growth in fee based propositions across all key markets
• Revenue basis points reflect the increasingly capital-lite nature of our business
• Future revenue basis points will be affected by product mix
(1) Average AUA based on average of closing quarterly AUA data
(2) bps figure excludes CWP, TIP business as well as surrender penalties received on special bond deals in 2009
(3) Average AUA and revenue relate to third party mandates, bps figure excludes impact of associate
Strong growth in AUA leading to increased revenue
Driving value from a position of strength
Standard Life plc
84
Spread and risk business
Driving value from a position of strength
Standard Life plc
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
Spread/ risk business - UK
£13.1bn
£13.0bn
Full
1.2
£1.2bn
£11.9bn
Full
1.5
£1.5bn
Partial
4.4
£4.4bn
£0.3bn
(£0.6bn)
£0.8bn
£13.6bn
Full
2.4
£2.4bn
Full
2.1
£2.1bn
Partial
5.0
£5.0bn
Partial
4.9
£5.0n
Shareholder
exposure
Partial
£11.8bn
11.8
0
31
Dec
31 Dec 2007
2007
None
6.0
£6.0bn
None
6.1
£6.0bn
31
31 Dec
Dec 2008
2008
31
31Dec
Dec2009
2009
None
6.3
£6.2bn
0
Gross
inflows
Gross inflows
0
Redemptions
Redemptions
0
Market/other
Market/other movements
movements
30
2010
30 June
Jun 2010
• Full shareholder exposure to annuities on only £2.4bn of AUA
• Remaining exposure has either been fully reinsured (£6.2bn of AUA) or subject to partial exposure
as per the scheme of demutualisation (longevity risk remains with shareholders, whilst investment
risk is limited to HWPF Burnthrough risk)
• Redemptions largely relate to regular payments to annuitants
Effective risk management of spread / risk business
Driving value from a position of strength
Standard Life plc
87
Spread/ risk business - UK
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£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 adequate reward for risk (leading to day one profits
on immediate annuities)
• Significant book of deferred annuities providing a flow of new immediate annuity business
• Back book management
Prudent pricing ensures adequate reward for risk
Driving value from a position of strength
Standard Life plc
88
Spread/ risk business - Canada
(£0.7bn)
£0.5bn
£1.0bn
£10.0bn
£9.2bn
£8.3bn
£7.4bn
Full
£9.3bn
Full
£8.6bn
Full
£7.7bn
Full
£6.8bn
Partial
£0.6bn
31 Dec 2007
Shareholder
exposure
Partial
£0.6bn
31 Dec 2008
31 Dec 2009
Partial
£0.7bn
Partial
£0.6bn
Gross inflows
Redemptions
Market/other
movements
30 June 2010
• Full shareholder exposure on majority of spread/ risk products
• Products include annuities, term funds, individual life insurance, group life and health insurance
• Adoption of IFRS operating profit has removed a significant proportion of volatility from reporting earnings
• However, the operating results remain sensitive to non-economic assumptions
(lapse, expense, mortality/longevity)
Appetite for growth conditional on adequate reward for risk
Driving value from a position of strength
Standard Life plc
89
Spread/ risk business - Canada
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£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/ risk business compared to fee business
• Return on existing business based on:
+ investment returns on AUA
- returns credited to policyholders
+ underwriting margin on risk business
•
One-off reserving changes affected by:
- continuing asset and liability management; and
- management of longevity risk
Growth conditional on adequate reward for risk
Driving value from a position of strength
Standard Life plc
90
Lowering unit costs
Driving value from a position of strength
Standard Life plc
Definition of acquisition and
maintenance expenses
Commission costs
Initial charges
+
Acquisition expenses
Allocation of internal costs
+/Creation of DAC/DIR
Renewal commission
Renewal charges
+
Allocation of internal costs
Maintenance expenses
+/Amortisation of DAC/DIR
Driving value from a position of strength
Standard Life plc
92
Acquisition expenses
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
132
129
240
274
57
64
116
203
- DAC
(80)
(85)
(162)
(258)
- DIR
30
26
49
79
Net commission/initial charges/DAC/DIR
7
5
3
24
9,631
7,452
14,546
15,679
137bps
173bps
165bps
175bps
Acquisition expenses
Of which:
- commission net of initial charges
PVNBP
Acquisition expenses / PVNBP
• Negligible impact of commission and initial charges on IFRS operating profit
• Expect acquisition expenses to continue to fall as a proportion of PVNBP as we increase sales
Scalability driving lower incremental cost of new business
Driving value from a position of strength
Standard Life plc
93
Maintenance expenses
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
307
307
607
601
- net renewal commission
34
30
76
79
- amortisation of DAC
59
78
147
94
(13)
(14)
(38)
(19)
Average AUA (£bn)1
155.5
123.2
132.3
130.8
Maintenance bps1
39bps
50bps
46bps
46bps
Maintenance expenses
Of which:
- release of DIR
•
•
Highly scalable business with potential for unlocking further scalability
Efficiencies will be achieved via organisational design, process re-engineering and
automation, ensuring alignment with our strategy
(1) Excludes impact of CWP and immediate annuity business reinsured to Canada Life
Highly scalable business with scope for further efficiencies
Driving value from a position of strength
Standard Life plc
94
Growth investment spend
Growth investment spend
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
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:
• our strong positions in both retail and corporate markets
• our leading position amongst IFAs
• opportunities brought about by regulatory change
• the scalability of our operations including our platform based propositions
• increasing numbers of customers favouring DIY and multi-channel offerings
through new D2C propositions
Significant opportunities for profitable growth
Driving value from a position of strength
Standard Life plc
95
Summary
Driving value from a position of strength
Standard Life plc
How we generate profit
Fee business revenue
(including guarantee margin)
£511m (H1 2009: £459m)
Spread/ risk business margin
£222m (H1 2009: £228m)
Acquisition expenses £132m (H1 2009: £129m)
Maintenance expenses £307m (H1 2009: £307m)
Group corporate centre £30m (H1 2009: £25m)
Growth investment spend £72m (H1 2009: £44m)
Capital management £10m (H1 2009: £1m)
Joint ventures (£20m) (H1 2009: (£17m))
IFRS operating profit £182m (H1 2009: £166m)
Driving value from a position of strength
Standard Life plc
97
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 growth opportunities
deliver a progressive dividend
We are driving a material increase in cash profitability
Driving value from a position of strength
Standard Life plc
98
Driving value from a
position of strength
David Nish
Driving value from a position of strength
Standard Life plc
We have a simple model for growing profit
Lowering
unit costs
Increasing
assets
Maximising
revenue
Driving cash
profit
Driving a material increase in cash profitability
Driving value from a position of strength
Standard Life plc
100
Driving value from a position of strength
Clear strategy with
exciting growth
opportunities
• Customer-centric strategy focused on long-term savings and investments
• Strategically positioned to benefit from positive trends in all core markets
• Asian joint ventures provide attractive growth opportunities
Standard Life
Investments
• Anticipating client needs and culture of innovation driving growth in third
party AUM
• Strong strategic positions, broad product range and geographical reach
underpin quality of profits
• Dynamic management of cost base to protect and enhance EBIT margin
Our UK long-term
savings business
• Unprecedented change and growth opportunities
• Investment in corporate, retail and direct propositions will drive significant
asset growth and increased margins
• Investing to build capacity and scalability - expected to deliver 40%
productivity improvement in customer service by 2012
Capital and cash
generation and IFRS
profit drivers
• Strong and predictable cash generation provides financial flexibility
• Increasing investment based on strict return criteria - 15% IRR and 5 year
payback period
• Inherently simple business model - IFRS closely linked to cash
• Delivering a progressive dividend
Investing to drive a material increase in cash profitability
Driving value from a position of strength
Standard Life plc
101
Driving value from a
position of strength
Driving value from a position of strength
Standard Life plc
Appendix
Driving value from a position of strength
Standard Life plc
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)
Growth investment spend
(£58m)
£3.5bn
Retained EEV capital and cash
(£0.1bn)
Gross operating EEV capital and
cash generation £617m1
Remove movement in subdebt
liability: £0.2bn4
Cash dividend
(£158m)3
Reverse change in IFRS Pension
Scheme Surplus: £0.1bn4
Retained EEV capital and cash
(£100m)
Other: (£0.1bn)
FGD surplus as at 31 Dec 2009:
£3.6bn
Non-operating and non-trading
(£313m)2
(1) Represents EEV operating capital and cash generation from continuing operations of £371m prior to the deduction of the NBS of (£188m) and growth investment spend of (£58m).
(2) Consists of EEV non-operating capital and cash generation of (£382m), capital and cash generation from discontinued operations of £49m, after tax actuarial losses on defined pension schemes of (£50m), net worth foreign
exchange differences on consolidation of £36m and other non-trading of £34m.
(3) Represents dividends paid in cash during the period and excludes new shares issued in lieu of cash dividends as part of the Scrip dividend scheme.
(4) Included within the EEV total retained capital and cash generation are movements in relation to the Group's sub debt liability on a market value basis and the Group's pension schemes on an IFRS basis. The adjustment for sub
debt removes the movement in the sub debt liability as this is included as capital for regulatory purposes. The adjustment for the pension scheme reverses the movement in the IFRS net liability/ surplus as these are excluded for
regulatory purposes.
Driving value from a position of strength
Standard Life plc
104
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:
£3.6bn
NBS
(£224m)
Growth investment spend
(£70m)
Retained EEV capital and cash
£0.3bn
Gross operating EEV capital and
cash generation £690m1
Remove movement in subdebt
liability: (£0.1bn)4
Cash dividend
(£256m)3
Reverse change in IFRS Pension
Scheme Surplus: (£0.2bn)4
Retained EEV capital and cash
£308m
Other: (£0.1bn)
FGD surplus as at 31 Dec 2008:
£3.5bn
Non-operating and non-trading
£168m2
(1) Represents EEV operating capital and cash generation from continuing operations of £396m prior to the deduction of the NBS of (£224m) and growth investment spend of (£70m).
(2) Consists of EEV non-operating capital and cash generation of (£16m), capital and cash generation from discontinued operations of (£44m), after tax actuarial gains on defined pension schemes of £108m, net worth foreign
exchange differences on consolidation of £159m and other non-trading of (£39m).
(3) Represents dividends paid in cash during the period and excludes new shares issued in lieu of cash dividends as part of the Scrip dividend scheme.
(4) Included within the EEV total retained capital and cash generation are movements in relation to the Group's sub debt liability on a market value basis and the Group's pension schemes on an IFRS basis. The adjustment for
sub debt removes the movement in the sub debt liability as this is included as capital for regulatory purposes. The adjustment for the pension scheme reverses the movement in the IFRS net liability/ surplus as these are excluded
for regulatory purposes.
Driving value from a position of strength
Standard Life plc
105
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:
£3.6bn
NBS
(£0.5bn)
Growth investment spend
(£0.2bn)
Retained EEV capital and cash
£0.5bn
Gross operating EEV capital and
cash generation £1.6bn1
Remove movement in subdebt
liability: (£0.3bn)4
Cash dividend
(£0.5bn)3
Reverse change in IFRS Pension
Scheme Surplus: (£0.3bn)4
Retained EEV capital and cash
£0.5bn
Other: £0.0bn
IGD surplus as at 30 June 2010:
£3.5bn
Non-operating and non-trading
£0.1bn2
(1) Represents EEV operating capital and cash generation from continuing operations prior to the deduction of the NBS and growth investment spend.
(2) Consists of EEV non-operating capital and cash generation, capital and cash generation from discontinued operations, after tax actuarial gains on defined pension schemes, net worth foreign exchange differences on
consolidation and other non-trading.
(3) Represents dividends paid in cash during the period and excludes new shares issued in lieu of cash dividends as part of the Scrip dividend scheme.
(4) Included within the EEV total retained capital and cash generation are movements in relation to the Group's sub debt liability on a market value basis and the Group's pension schemes on an IFRS basis. The adjustment for sub
debt removes the movement in the sub debt liability as this is included as capital for regulatory purposes. The adjustment for the pension scheme reverses the movement in the IFRS net liability/ surplus as these are excluded for
regulatory purposes.
Driving value from a position of strength
Standard Life plc
106
Run-off profile of legacy assets generating
shareholder cash flow
70
Assets not generating
shareholder cash flow
60
Assets generating
shareholder cash flow
50
£bn
40
30
20
10
0
Q22010
2010
2011
2012
2013
2014
2015
2016
2017
2018
Assets generating shareholder cash are long-term
Driving value from a position of strength
Standard Life plc
107
Reconciliation of growth investment spend
Growth investment spend before tax
Less tax
Growth investment spend included within NBS
Growth investment spend in cash analysis
Driving value from a position of strength
H1 2010
£m
H1 2009
£m
Change
£m
FY 2009
£m
FY 2008
£m
72
44
28
106
116
(19)
(12)
(32)
(32)
53
32
74
84
(11)
(7)
(16)
(14)
42
25
58
70
Standard Life plc
108
PVIF monetisation profile Reconciliation against published H1 2010 results
Undiscounted
Discounted
Reconciliation of discounted PVIF (£m) to H1 2010 Results
Total
PVIF
Emerging in
1st 5 years
Total
PVIF
Emerging in
1st 5 years
PVIF
TVOG
Published result H1 2010
(Note 4.2(c))
£m
%
£m
%
£m
£m
£m
UK
4,031
35
2,359
52
2,359
-
2,359
Canada
3,075
15
1,056
35
1,056
(31)
1,025
International
958
36
594
53
594
(17)
577
HWPF TVOG
-
-
-
-
-
(90)
(90)
8,064
27
4,009
48
4,009
(138)
3,871
In-force
Total
Undiscounted
Discounted
Reconciliation of discounted PVIF (£m) to H1 2010 Results
Total
PVIF
Emerging in
1st 5 years
Total
PVIF
Emerging in
1st 5 years
PVIF
£m
%
£m
%
£m
UK
252
27
135
43
Canada
77
8
27
18
International
132
43
81
Total
461
29
243
Cost of
capital
TVOG
Published result H1 2010
(Note 4.9)
£m
£m
New Business
H1 2010
Driving value from a position of strength
135
(4)
-
131
27
(3)
-
24
61
81
(2)
(3)
76
46
243
(9)
(3)
231
Standard Life plc
109
Group - IFRS operating profit
from continuing operations
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£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)
Maintenance expenses2
(307)
(307)
(607)
(601)
Investment spend
(72)
(44)
(106)
(116)
JV businesses
(20)
(17)
(27)
(25)
Group corporate centre costs
(30)
(25)
(50)
(50)
Capital management3
10
1
(4)
76
Group IFRS operating profit
182
166
399
482
(1) Includes impact of commission and charges on new business net of deferrals
(2) Includes amortisation of DAC and DIR on existing business as well as investment management expenses
(3) Return on shareholder assets, including working capital and assets backing subordinated liabilities less finance costs
Driving value from a position of strength
Standard Life plc
110
Group corporate centre (GCC)
and capital management
Group corporate centre costs
Capital management (cost)/income
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
(30)
10
(25)
1
(50)
(4)
(50)
76
GCC costs in H1 2010 reflect increased investment as part of the transformation of the
business, including:
• Creation of a Group marketing centre of excellence to generate increased customer and brand
awareness
• Creation of a risk hub to provide additional focus on risk management across the Group
Capital management largely reflects cost of carry of subordinated liabilities and lower return on
surplus assets as a result of a low interest rate environment
Increased investment in our business whilst maintaining
control over operating cost base
Driving value from a position of strength
Standard Life plc
111
Joint Ventures
IFRS operating profit/(loss)
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
(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
• Ranked 2nd in market share, 30 June 2010 (2nd in Retail, 3rd in Corporate)
• CAGR of 92% in AUM over last five years (AUM almost doubled in year to
31 March 2010 and stood at £3.0bn)
• 2009-10 premiums of £0.9bn (53% of which were renewals)
• 2009-10 loss before tax almost halved compared to 2008-09
Maximising shareholder value from our joint venture relationships in Asia
Driving value from a position of strength
Standard Life plc
112
Impact of DAC / DIR
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£m
New business – creation of DAC
(80)
(85)
(162)
(258)
New business – creation of DIR
30
26
49
79
(50)
(59)
(113)
(179)
59
78
147
94
(13)
(14)
(38)
(19)
Net impact of DAC/DIR on
maintenance expenses
46
64
109
75
Net impact of DAC/DIR on IFRS
operating profit
(4)
5
(4)
(104)
Net impact of DAC/DIR on
acquisition expenses
Existing business – amortisation of
DAC
Existing business – release of DIR
Driving value from a position of strength
Standard Life plc
113
Linkage of cost base to total expenses
£4,443m
£91m
(£3,383m)
(£4m)
£541m
GCC costs £30m
Growth investment
spend £72m
£454m
(£549m)
(£57m)
Maintenance
expenses
£307m
Acquisition
expenses
£132m
H1 2010
total expenses per
income statement
Claims, commissions
and changes in
provisions & liabilities
Driving value from a position of strength
IFRS adjustments
and amortisation
Finance costs
H1 2010
cost base
Commission
(net of initial and
renewal charges)
DAC/DIR
H1 2010
total expenses
Standard Life plc
114
New business commission net of initial charges
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£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
UK new business commission strain
H1 2010
£m
H1 2009
£m
FY 2009
£m
FY 2008
£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
11,267
Total UK commission/ PVNBP
55bps
82bps
74bps
159bps
• Commission in UK business is low and decreasing
• Increasing recovery of commission through initial charges
Driving value from a position of strength
Standard Life plc
116
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 was previously a partner with
Price Waterhouse, and subsequently Group Finance Director and then Executive
Director, Infrastructure Division at Scottish Power plc.
David Nish
Chief Executive
Appointed a Director and Chief Financial Officer in May 2010, having been Interim
Chief Financial Officer since November 2009. Jackie joined Standard Life in
January 2009 as Deputy Group Finance Director. Before this, she held various
senior management roles at Aviva, including Chief Financial Officer at Norwich
Union. After qualifying as a Chartered Accountant with Deloittes in South Africa,
Jackie then worked for Pricewaterhouse Coopers and Royal & Sun Alliance before
joining Aviva in 2003.
Jackie Hunt
Chief Financial Officer
Appointed Director in May 2006. He is Chief Executive of Standard Life
Investments. Keith joined Standard Life Investments in 1999 after nearly 20 years
investment experience at James Capel & Co in a number of roles, including Chief
Economist and Managing Director International Equities. He is also a director of
the Investment Management Association, a board member and Chairman of the
Investment Committee of the Association of British Insurers, and a member of the
Advisory Board of Reform Scotland.
Keith Skeoch
Chief Executive
Standard Life Investments
Driving value from a position of strength
Standard Life plc
117
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 Standard Life since 1989, his most recent being as Managing
Director of Distribution, which he was appointed to in 2007.
Paul Matthews
UK Take to Market Director
Paul is a member of a number of Industry Committees and Boards, including the Chartered
Insurance Institute Faculty, and is a frequent speaker at industry events and conferences.
Appointed in March 2010, Christian is responsible for UK Operations, IT and People
and Group Information Technology. Christian joined Standard Life from RSA Insurance
Group, where he was the UK Chief Operating Officer. Prior to this he was Managing
Director, Operations at Scottish Widows, and held various senior executive positions in
operations and technology at Barclays Bank.
Christian is a chartered accountant and spent the early part of his career in
management consultancy with Coopers & Lybrand and PA Consulting.
Christian Torkington
Group Information and
Operations Director
Colin began his career as an Auditor with Arthur Andersen in 1975 before joining UK
stockbroker Sheppards and Chase as Corporate Finance Manager in 1981. Colin then
moved to Switzerland in 1982 to take up the position of Business Planning Manager with
Philip Morris. In 1985 he joined Deloitte as a Management Consultant (Financial Services
sector) and during his time there, was seconded to the Bank of England for two years. Colin
joined Standard Chartered in 1992 and was appointed Group Head of Finance in 1999. In
2002, he moved to Barclays, initially as Group Financial Controller and, in 2005, was
appointed CFO of Barclaycard. He joined Standard Life Investments in 2007 as Finance
Director and was appointed Chief Operating Officer in 2010.
Colin Walklin
Chief Operating Officer
Standard Life Investments
Driving value from a position of strength
Colin has a BSc in Engineering, is a Fellow of the Institute of Chartered Accountants and is a
Panel Member on the Financial Reporting Review Panel (part of the FRC).
Standard Life plc
118