07.08.2007
Standard Life plc - New Business Results - six months to 30 June 2007
- Worldwide life and pensions sales1 up 31% to £8,181m (2006: £6,235m)
- Interim results will report an increased overall margin from full year 2006
- UK life and pensions sales up 45% to £6,954m (2006: £4,802m)
- Individual SIPP* sales up 82% to £2,556m (2006: £1,406m)
- Group Pensions sales up 49% to £1,487m (2006: £995m)
- Standard Life Investments worldwide investment net inflows up 61% to £5,021m (2006: £3,120m)
- Third party funds under management up 20% to £46.1bn (31 December 2006: £38.5bn)
- Total funds under management up 6% to £140.6bn from £132.1bn (31 December 2006)
All comparisons are in sterling unless otherwise stated2. All sales figures are on a PVNBP basis unless otherwise stated. All comparators are with the first half of 2006 unless otherwise stated. *Individual SIPP includes Insured SIPP & Drawdown and Non-Insured SIPP.
Commenting on the results, Group Chief Executive Sandy Crombie said:
Standard Life group“Our strong new business performance is continuing. UK life and pensions sales have increased by 45%, building upon a strong comparative period in 2006, and our third party funds under management continue to reach new highs.
“We have enjoyed great success with a range of asset accumulation products, delivering higher sales at an increased overall margin.
“We are launching new products into our chosen markets, and this is being supported by excellent investment performance and first-class service. I am confident this will enable Standard Life to grow new business further in the future.”
Standard Life has delivered strong new business results during the first half of 2007. Worldwide life and pensions sales increased by 31% and Standard Life Investments net inflows grew by 61%.
Our Interim results released on 4 September 2007 will report a significant increase in PVNBP margin compared to the Pro forma Full Year 2006 figure of 1.4%, due to this strong sales growth and the continuing improvement in efficiency.
UK Financial Services
Our UK financial services division has seen growth across all major product categories in the first half of 2007. Life and pensions new business volumes increased by 45% to £6,954m, driven largely by continued growth in SIPP and other pensions products. Sales of pensions products increased by 49% and life products by 26%. Gross mortgage lending and healthcare sales increased by 29% and 10% respectively.
Individual SIPP sales increased strongly by 82% to £2,556m (2006: £1,406m), resulting in Individual SIPP funds under management growing to £6.3bn3 (31 December 2006: £4.3bn). Sales have benefited from the increase in contribution limits introduced at A-day and the implementation of new SIPP regulations. At 30 June 2007 we had 36,800 SIPP customers (31 December 2006: 25,200) with an average case size of £172,000.
Customers continue to take advantage of our SIPP functionality and investment flexibility with sales of Non-insured SIPP doubling year-on-year compared to a 71% growth in Insured SIPP. At 30 June 2007 37% of SIPP assets were invested in non-insured funds (31 December 2006: 33%).
Standard Life’s Wrap proposition continues to be rolled out and developed with IFAs. At the end of the second quarter there were 149 IFA firms using the platform (31 December 2006: 88 IFA firms) and 4,300 customers (31 December 2006: 900 customers) with an average fund size of £140,000. At 30 June 2007, funds under administration on the Wrap platform had increased to £0.6bn (31 December 2006: £0.2bn).
We have experienced accelerated growth in Group Pensions, with sales increasing by 49% to £1,487m (2006: £995m), largely due to increasing volumes of Group SIPP. Second quarter sales benefited from a large group stakeholder scheme re-written as a Group SIPP4. We expect this trend to continue and drive further sales of Group SIPP, which now accounts for 31% of total Group Pensions sales. We believe our excellent customer service and strong product proposition have been major factors in our ability to retain and grow our Group Pensions business.
Trustee Investment Plan (TIP) and Personal Pension Investment Plan (PPIP) sales increased by 35% to £1,038m5 (2006: £767m), driven by strong investment performance.
Life sales increased by 26% to £1,123m (2006: £889m), including a 19% increase in Investment Bond sales to £1,039m (2006: £874m). Sales of our Offshore Bond, launched in January 2006, increased by 460% to £84m (2006: £15m), with the bulk in the second quarter (£60m). This reflects the increasing popularity of the product as well as the introduction of wider investment options and bespoke charging, which have enabled us to attract larger case sizes.
Standard Life’s UK Annuity sales increased by 53% to £257m (2006: £168m). This rate of increase largely reflects lower sales levels in the first half of last year due to A-day and Standard Life pensions policyholders deferring the purchase of an annuity ahead of our demutualisation.
We continue to strengthen our distribution capability in the UK life and pensions market by diversifying across channels whilst maintaining strong growth in the traditional IFA sector. Sales generated through channels other than traditional IFAs now represent 40% (H1 2006: 26%) of new business. This increase principally reflects the growth in sales through Employee Benefit Consultants and multi-tie and single-tie distribution arrangements.
Net flows for life and pensions business were positive at £1.2bn in the first half of 20076. Within this total, net pensions inflows were £1.5bn compared with £1.8bn in H2 2006. Excluding institutional TIP, underlying net pensions inflows strengthened from £0.6bn in H2 2006 to £1.1bn in H1 2007. Net life outflows amounted to £0.3bn in H1 2007 compared to £0.6bn in H2 2006. The improving trend in underlying net flows has been achieved against a backdrop of claims activity across our life and pensions portfolios being above expected levels.
Gross mortgage lending increased by 29% to £1,571m (2006: £1,216m) resulting in mortgages under management standing at £10.5bn as at 30 June 2007 (31 December 2006: £10.4bn). We continue to maintain a balance between growth and margin, and our mortgage portfolio remains of the highest quality with an arrears rate of 0.18% at 30 June 2007, compared with an industry average of 0.94% at the end of Q1 2007.
Healthcare sales increased by 10% to £11m on an annual premium equivalent (APE) basis (2006: £10m). We expect sales of SME business to grow in the second half of the year following the launch in July of our new SME proposition.
Europe
Our European business experienced a strong first half with sales increasing to £513m (2006: £340m), a 54% increase in constant currency.
In Germany we are evolving our product offering to match the significant changes that have taken place in the market during recent years. One such example is our new unit-linked product, Maxxellence, which was launched in October 2006. Its success, coupled with initiatives to access new distribution channels and broaden existing broker arrangements, has helped us increase sales by 27% in constant currency to £260m (2006: £209m).
Sales in Ireland increased by 96% in constant currency to £253m (2006: £131m). This reflects the continued success of new products and the introduction of self-investment options for customers, inspired by the UK SIPP platform. The positive impact of these developments has been underpinned by strong investment performance.
Canada
Sales in our Canadian business were down 37% in constant currency to £589m (2006: £1,025m). This reflects a number of large transactions which boosted sales volumes in the prior year, the continuation of our focus on margin over volume in the first half, and a planned realignment of our distribution capability.
Group Savings and Retirement sales declined by 46% in constant currency to £339m (2006: £693m). The comparative period includes two large transactions which accounted for £319m. The second half of 2007 will be influenced by the results of current proposals to a number of large institutional clients.
Individual Insurance, Savings and Retirement sales declined by 28% in constant currency to £172m (2006: £264m). This fall reflects the transition of life focused distributors towards wealth management business, and the realignment of sales staff following the initiation of our repositioning strategy at the end of 2005. In addition, the comparative period included £17m of unprofitable Universal Life sales which the company no longer writes. We intend to re-launch our individual retail proposition.
Group Insurance sales increased by 26% in constant currency to £78m (2006: £68m) against the backdrop of a competitive market. This growth reflects our success in Life and Health insurance and the positive impact of our repositioning strategy.
Excluding the business no longer written and the unusually large transactions in the prior year period, underlying sales volumes declined by 7% on a constant currency basis.
Asia Pacific
Combined sales from our joint ventures in India and China and our Hong Kong operations have increased by 107% in constant currency. Standard Life’s share of these sales was £125m (2006: £68m)7.
Sales from our Indian joint venture HDFC Standard Life Insurance Limited increased by 104% in constant currency. The number of financial consultants appointed by the joint venture has increased to 84,500 (30 June 2006: 34,000).
Sales generated by our Chinese joint venture, Heng An Standard Life, increased by 83% in constant currency, due to expansion in major cities within existing provinces. This strong growth has resulted in Heng An Standard Life moving into a top 10 position among the foreign joint venture peer group in China. We expect to start writing business in Liaoning province later this year.
Standard Life Investments
Standard Life Investments continues to perform exceptionally well with worldwide investment net inflows increasing by 61% to a record level of £5,021m (2006: £3,120m).
Standard Life Investments UK net inflows increased by 54% to £4,302m (2006: £2,799m) thanks to strong institutional and retail business. Segregated fund inflows increased by 60% to £1,561m (2006: £977m) and retail mutual fund inflows increased by 63% to £1,113m (2006: £684m). Inflows into the Triple A money market fund increased by 53% to £1,399m (2006: £915m), reversing the decline reported at the end of the first quarter.
We experienced a strengthening of net inflows in respect of our Canadian and International operations to £392m (2006: £90m) and £372m (2006: £231m), the trend in Canada reflecting a number of liability driven investment mandates won during the period.
During the first half of 2007, total funds under management increased by £8.5bn to £140.6bn (31 December 2006: £132.1bn). The majority of this increase came from third party funds under management which increased by £7.6bn to £46.1bn (31 December 2006: £38.5bn).
Performance remained strong during the six month period, with 18 of our 23 pooled pension funds above median and 6 of these in the top decile. The strength of performance across our range of mutual funds was recognised when Standard life Investments was named ‘Global Group of the Year’ at the recent Investment Week Awards 2007.
Read the Full New Business Results – six months to 30 June 2007 (PDF format).
For further information please contact:
Media -
Scott White 0131 245 5422 / 07712 485 738
Barry Cameron 0131 245 6165 / 07712 486 463
Neil Bennett (Maitland) 020 7395 0452 / 07900 000777
Angus Maitland (Maitland) 020 7379 5151
Equity Investors -
Gordon Aitken 0131 245 6799
Duncan Heath 0131 245 4742
Debt Investors -
Andy Townsend 0131 245 7260
Notes to Editors
- Present Value of New Business Premiums (PVNBP) is calculated as 100% of single premiums plus the expected present value of new regular premiums.
- Insurance new business and gross sales for overseas operations are calculated using average exchange rates. The principal average exchange rates for the first half of 2007 were £1: C$2.23 (2006: £1: C$2.03) and £1: €1.48 (2006: £1: €1.45). Funds under management are calculated using the closing exchange rate as at 30 June 2007. The principal closing exchange rates used as at 30 June 2007 were £1: C$2.13 (31 December 2006: £1 : C$2.28) and £1: €1.49 (31 December 2006: £1 : €1.48).
- Analysis of Individual SIPP funds under management
30 June 2007
31 March 2007
31 December 2006
£m £m £m Insured Standard Life Funds
2,533 2,265 1,923 Insured External Funds
1,445 1,180 921 Collectives – Standard Life Investments
632 494 361 Collectives – Funds Network
463 355 234 Cash
334 262 223 Non Cash and Non Collectives
920 729 599 Total
6,327 5,285 4,261 Insured
3,978 3,445 2,844 Non-insured
2,349 1,840 1,417 Total
6,327 5,285 4,261
Of the £6.3bn of SIPP funds under management at 30 June 2007, some £0.2bn relate to funds on the Wrap platform.
- The rewrite of the large Group Pensions case as a Group SIPP generated £140m of PVNBP in the second quarter.
- Investments (TIP & PPIP) sales in the first half of 2007 comprised Institutional sales of £982m (2006: £700m) and Retail sales of £56m (2006: £67m).
- Net flows for UK life and pensions products
H1 2007
H2 2006
H1 2006 Pension Products
£bn £bn £bn Insured Pensions
Premiums / Deposits
4.8 5.3 3.5 Claims
(3.6) (3.5) (1.8) Annuity Payments
(0.4) (0.5) (0.3) Insured Pension Net Flows
0.8 1.3 1.4 Non - Insured Pensions
Premiums / Deposits
0.8 0.6 0.4 Claims
(0.1) (0.1) - Non-Insured Pension Net Flows
0.7 0.5 0.4 Total Pension Net Flows
1.5 1.8 1.8 Life Products
Premiums / Deposits
1.5 1.4 1.3 Claims
(1.8) (2.0) (1.1) Total Life Net Flows
(0.3) (0.6) 0.2 UK L&P Net Flows
Total UK L&P Insured-Product Flows
0.5 0.7 1.6 Total UK L&P Non-Insured Product Flows
0.7 0.5 0.4 Total UK L&P Net Flows
1.2 1.2 2.0 The figures reflected in the table above include the following amounts in respect of Institutional TIP:
H1 2007
H2 2006
H1 2006 £bn
£bn
£bn Premiums / Deposits
1.0 1.6 0.8 Claims
(0.6) (0.4) (0.3) Net Flows
0.4 1.2 0.5
- The growth percentages quoted for India, Asia Pacific life and pensions and Total worldwide life and pensions reflect the growth in sales in HDFC Standard Life Insurance Limited, rather than the growth in Standard Life’s share of the joint venture. The sales quoted reflect Standard Life’s share of the joint venture.
- H1 2006 sales figures relate to the period before the demutualisation of the Standard Life Assurance Company on 10 July 2006.
- Department of Work and Pensions rebate premiums in the first half of 2007 were £165m (2006: £65m), comprising Individual Pensions rebates of £93m (2006: £37m) and Group Pensions rebates of £72m (2006: £28m).
- There will be a conference call today for newswires and online publications at 8.00am hosted by David Nish, Group Finance Director, Trevor Matthews, Chief Executive of Standard Life UK Financial Services and Keith Skeoch, Chief Executive of Standard Life Investments. Dial in telephone number +44 (0)20 7162 0125. Callers should quote Standard Life H1 Sales.
- There will be a conference call today for investors and analysts at 9.30am hosted by David Nish, Group Finance Director, Trevor Matthews, Chief Executive of Standard Life UK Financial Services and Keith Skeoch, Chief Executive of Standard Life Investments. Dial in telephone number +44 (0)20 7162 0025. Callers should quote Standard Life H1 Sales. A recording of this call will be available for replay for one week by dialing +44 (0)20 7031 4064 (access code 759198).
Read the Full New Business Results – six months to 30 June 2007 (PDF format).