Search

11 August 2010
Strong operating performance supporting investment for growth



Significant increase in net inflows

Strong financial performance

Improved cash flow and increased dividend

Commenting on the key aspects of the results, Chief Executive David Nish said:
"This strong set of results demonstrates the progress we have made as a business and the potential for increased profits and dividends as we invest for growth.

"We operate in markets which have exciting growth opportunities for Standard Life. In particular, we are well positioned to help our customers meet the challenges of the savings gap in the UK. We continue to lead in providing innovative propositions for individuals, employers and intermediaries in the UK.

"Standard Life Investments has consistently delivered impressive net inflows over the last five years. Its contribution to the Group is considerable and it is a business which provides us with global reach. We have extended our reach into alternative investments, through the purchase of Aida Capital and the continuing innovation of our absolute return offerings, which will accelerate growth.

"Our Canadian operations and Asian businesses, including the joint ventures, have also performed well. In particular there is strong momentum building in India and we see great potential in this very exciting market.

"The Group is more focused following the sale of our banking and healthcare operations. Our transformation programme is driving efficiency and we are investing to grow our business to be more profitable and cash generative, which will deliver our progressive dividend policy to shareholders."

Unless otherwise stated, all comparisons are in Sterling and are with the 6 months ended 30 June 2009. We are reporting IFRS operating profit as our main IFRS performance measure for the first time in place of IFRS underlying profit, having restated prior period comparators in our 21 July 2010 press release.

IFRS operating profit

H1 2010
 £m

Restated
H1 2009
£m

UK

76

80

Canada

62

74

International

8

(8)

Global investment management

49

27

Other

(13)

(7)

Operating profit before tax from continuing operations

182

166

 

 

 

Tax on operating profit

(48)

(39)

Operating profit after tax from continuing operations

134

127

Profit/(loss) attributable to equity holders after tax

182

(20)

Diluted IFRS operating EPS from continuing operations

6.0p

5.8p

 

EEV operating profit

H1 2010
 £m

Restated
H1 2009
£m

Covered business by source

 

 

New business contribution

161

114

Contribution from in-force business

251

282

Other covered

(36)

(50)

Covered business operating profit

376

346

 

 

 

Non-covered business

 

 

Global investment management

21

10

Other non-covered and corporate costs

(33)

(28)

Non-covered business operating loss

(12)

(18)

Operating profit before tax from continuing operations

364

328

Tax on operating profit

(112)

(101)

Operating profit after tax from continuing operations

252

227

Profit/(loss) after tax

326

(48)

Diluted EEV operating EPS from continuing operations

11.3p

10.4p

For more information please refer to Section 1.6 - Basis of preparation and Section 3 - IFRS pro forma reconciliation of consolidated operating profit to IFRS profit for the period of the Half Year Results 2010.

Our focus in 2010
Standard Life has delivered another strong performance in the first half of 2010 with increased net flows across our businesses and higher markets6 continuing to drive asset growth, profitability and cash flow generation.

At our 2009 Preliminary Results in March we announced our intention to double our growth investment in our areas of key strategic focus where we see significant potential, namely corporate and retail markets, our global investment management business and the Asian joint venture operations. This programme of investment is already driving momentum across the Group, including the launch of new Corporate and Retail propositions in the UK market, the acquisition of the intermediary services business threesixty and alternative investment company Aida Capital, and our entry into a strategic alliance with Chuo Mitsui Asset Trust and Banking.

Continued strong growth in net flows
Net inflows of £5.3bn (2009: £3.1bn) across the Group, combined with positive investment markets, led to an increase in assets under administration of 5% to £179.1bn (31 December 2009: £170.1bn). The increase in net inflows has been driven by a strong performance in both long-term savings and third party investment management, with third party assets under management reaching a new record level of £63bn.

Long-term savings operations
Net inflows across our long-term savings operations1 have more than tripled to £2,452m (2009: £767m), with inflows across key product lines in the UK, Ireland and Asia strengthening. This reflects our continued success in attracting new retail customers and winning profitable corporate mandates. Total new business sales across our long-term savings operations increased by 29% to £9.6bn (2009: £7.5bn)7.

UK retail - strong growth in customers and assets
Our UK retail business has had a strong first six months of the year, with significant growth in net inflows and sales within our individual SIPP, mutual fund and Wrap platform propositions. Across our UK retail business net flows improved to a net outflow of £404m (2009: net outflow £1,107m).

We continue to see good growth in our individual SIPP customer base and assets under administration. The number of customer accounts increased by 11,900 or 14% during the six month period to 95,800 (31 December 2009: 83,900), with assets under administration increasing by 10% to £13.0bn (31 December 2009: £11.8bn)8.

Asset and customer growth on our Wrap platform9 continues at pace with assets under administration increasing by 36% to £4.9bn (31 December 2009: £3.6bn) at the end of June and recently passing the £5bn milestone. During the first six months of the year we have on average signed up one new adviser each day to the Wrap platform, with adviser numbers increasing by 25% to 727 (31 December 2009: 583).

We continue to see high demand for mutual funds sold through our UK long-term savings business with net inflows on our Wrap, Sigma and Fundzone platforms increasing by 67% to £561m (2009: £336m).

As expected traditional product lines such as endowment policies within legacy life, and individual pensions, continue to see net outflows. In individual pensions this has been in part due to the recent increase in the minimum retirement age. The vast majority of endowment policies where we have seen outflows are conventional with profits contracts, which generate minimal shareholder margin.

UK corporate - continued success in winning mandates
UK corporate net inflows increased by 64% to £2,039m (2009: £1,242m).

In corporate pensions, assets under administration increased by 1% to £18.1bn (31 December 2009: £17.9bn), the strength of net inflows being largely offset by adverse market movements. During the period we won 90 new schemes (2009: 83), including the 5,000 member Logica scheme which transitioned and generated £148m of sales in the second quarter. This scheme win is a good example of the success we have had in leveraging the expertise of Vebnet in the employee benefits market to develop tailored savings and benefits offerings. In addition to these successes with our co-developed solutions, Vebnet has had a strong half in its own right, implementing 16 new schemes with 24,000 employees (2009: 12 schemes with 12,000 employees) including Bovis Lend Lease and Telegraph Media Group.

Momentum continues within institutional pensions with net inflows more than doubling to £1,266m (2009: £560m). The increased volume of business in this product line, combined with its relatively low capital and servicing costs, have led to a strengthening of profitability in the period.

Canada - increased flows into higher margin investment products
Net inflows in Canada were lower at £92m (2009: £139m). Net inflows in higher margin investment products, which include group and individual segregated funds and mutual funds, have increased by 43% to £344m (2009: £241m), reflecting the strength of our savings and investment propositions.

Gross inflows and sales across our retail and group propositions have seen strong growth over the six month period, reflecting our continuing success in winning large and profitable group savings and retirement mandates, the continued strength of our disability management proposition, and the positive impact of recovering equity markets and improved customer sentiment.

These strong trends have been more than offset by higher claims and withdrawals. This has been particularly marked within mutual funds due to the expiry of early redemption penalties, with an increase in outflows from individual insurance, savings and retirement principally reflecting maturing term deposits sold when product demand was very high. Against this, we have seen encouraging signs during the second quarter, with gross inflows stabilising and outflows decreasing compared to the first quarter. Across our whole retail portfolio retention levels remain in line with the industry.

International - significant increase in net flows and sales
The International operations comprise our wholly owned long-term savings operations in Europe and Hong Kong along with the long-term savings joint ventures in India and China. Net inflows across these regions were 47% higher at £725m (2009: £493m)1.

Wholly owned
Net inflows into our wholly owned operations were 51% higher at £592m (2009: £392m)1. This principally reflects reduced claims levels from our domestic business in Ireland, coupled with strong growth in offshore new business.

In Ireland, net inflows were significantly higher at £264m (2009: £62m). Domestic flows improved significantly, driven by reduced claims and strong new business inflows resulting from the comprehensive choice and strength of our investment offering available through the Synergy platform. Higher inflows into offshore bonds reflected an increase in new business across all versions of our offshore bond, particularly via our Wrap platform. The inflows also benefited from an increase in case sizes and more stable economic conditions.

Net inflows in Germany were slightly lower at £317m (2009: £326m) with strong inflows of regular premiums from the in-force book and reduced lapse activity offsetting the impact of the market environment, which was challenging for the whole industry, especially the IFA segment.

In Hong Kong the success of our new unit-linked savings product has continued to drive strong growth in net flows and sales, as well as an increase in market share.

Joint ventures
Net inflows for the Asian joint ventures were 32% higher at £133m (2009: £101m)1.

Sales in India increased by 9%7,10, as we continue to refocus the business for greater profitability. The Indian joint venture, HDFC Standard Life, appointed Amitabh Chaudhry as CEO in January and has made a good start to 2010. It has captured market share over the last year with strong growth in its bancassurance channel, leveraging its distribution relationship with HDFC Bank. This trend has been particularly marked during the second quarter, with total sales in India increasing by 35%7,10 compared to the prior year.

In China, sales volumes decreased by 1%10. This reflects a greater focus on profitability through increasing the proportion of regular premium business. In line with this approach, regular premiums increased by 28%10 compared to the prior year whereas single premium business declined by 31%10.

Global investment management - continued growth in higher margin assets
Third party assets under management have reached a record level of £63.0bn (31 December 2009: £56.9bn) and now represent 44% of total assets under management (31 December 2009: 41%). Total assets under management increased by £4.3bn to £143.0bn (31 December 2009: £138.7bn).

Third party net inflows at Standard Life Investments continue to be very strong and have increased by 52% to £4.7bn
(2009: £3.1bn), representing 17% of opening third party assets under management on an annualised basis.

Sales of our core products such as fixed income, which increased by 37% to £2.4bn of net inflows, remain buoyant. Global Absolute Return Strategies (GARS) has attracted over £4bn since launch in 2006 and continues to be popular with both retail and institutional investors. The wholesaling of retail products has seen continued momentum with investors showing appetite for GARS, Global Index Linked Bonds, UK Smaller Companies, European Corporate Bonds, European Government Bonds and European Inflation Linked Bonds.

Overseas markets continued to add significant sales. This is especially so within our SICAV11 range, predominantly sold in mainland Europe, which increased by 61% to £0.3bn (2009: £0.2bn). Momentum is also strong within HDFC Asset Management, in which we have a 40% stake, with over 4 million customer accounts, 1 million customers on regular savings plans, and total assets under management of £11.6bn12. This equates to a 12.8% market share, the second highest ranking in the industry.

The strength of our investment process across a range of OEICS and unit trusts is demonstrated by the high proportion of eligible funds (21 out of 29 actively managed) rated 'A' or above by Standard & Poor's. The money weighted average performance for third party assets is above median over one, three, five and ten years.

IFRS profits benefiting from net inflow momentum and increased revenues
We are reporting IFRS operating profit as our main IFRS performance measure for the first time in place of IFRS underlying profit, having restated prior period comparators in our 21 July 2010 press release.

IFRS operating profit before tax from continuing operations increased by 10% to £182m (2009: £166m), principally reflecting a combination of higher revenues, offset by increased costs as we accelerate our investment in the business, and lower reserve movements.

Increased net inflows and higher average market levels have led to strong growth in assets under administration. This, combined with an increased weighting of higher margin products in our investment management business, have led to a £78m increase in income received through annual management charges. We have also seen improved profitability in our International long-term savings businesses mainly due to improved sales and fees combined with robust cost control in our Irish and Hong Kong businesses.

As announced at our 2009 Preliminary Results in March we are broadly doubling the growth investment in the business over the course of 2010. While this will lead to increased assets and profitability in the medium term there will inevitably be a short-term impact on the level of IFRS operating profit. This has been reflected in a £35m increase in operating costs in the period compared to the prior year, of which £28m relates to increased growth investment. Excluding this investment for growth, IFRS operating profit increased by 21% to £254m (2009: £210m). Profits in the second half of the year will also be affected as more of our investment projects come on stream.

The movement in IFRS operating profit has also been impacted by lower reserve movements arising from management actions. During the first half the IFRS operating result benefited from a £26m release of reserves in respect of our UK annuity and legacy life businesses, as well as a £20m release of reserves following a review of annuitant policy data and reinsurance arrangements in Canada. In 2009 our IFRS operating result similarly benefited from £79m of reserve releases relating to our UK deferred annuity business and Canada management actions.

EEV operating cash flow robust with strong coverage of new business strain
Core capital and cash generation after tax from continuing operations was 6% higher at £160m (2009: £151m)2,4,5. This was driven by increased capital and cash generation from existing business, partially offset by higher development expenses, and an increase in new business strain arising from the inclusion of the Asian businesses in the current period. Capital and cash generated from existing business of £300m (2009: £246m)4 comfortably covered new business strain of £109m (2009: £72m)4 by 2.8 times (2009: 3.4 times).

Overall, operating capital and cash generation amounted to £149m (2009: £172m)2,4. This includes a negative contribution of £4m from back book management that reflects adverse tax and pension scheme variances, partly offset by management actions to reduce reserves in UK and Canada. The 2009 comparative included a contribution from back book management which included the benefit of a £29m release of deferred annuity reserves in the UK.

EEV operating result driven by higher new business profits
EEV operating profit before tax from continuing operations increased by 11% to £364m (2009: £328m)2,4, delivering an RoEV of 8.0% (2009: 7.5%)2,4. As a long-term savings and investments business our core return will inevitably be influenced by the overall level of financial markets through their impact on long-term savings flows and asset levels within our Global investment management business. Core return has increased by 41% to £336m (2009: £239m)2,4,5. Within this, new business contribution was also 41% higher at £161m (2009: £114m)4, due to improved sales volumes and the inclusion of the Asian businesses in the current period. The expected return on existing business and profits generated by our Global investment management business have also strengthened.

We remain committed to driving increased value from the management of our back book. Back book management profits of £31m in 2010 were driven by management actions to reduce reserves in the UK and Canada. In 2009 the back book management result of £94m included an £89m benefit from changes to asset allocations and hedging arrangements, which reduced the time value of options and guarantees (TVOG) associated with the Heritage With Profits Fund (HWPF).

Increased 2010 interim dividend
The Board have proposed an interim dividend of 4.35p per share (2009: 4.15p), an increase of 4.8% (2009: 2.0%). The Group will continue to apply its existing progressive dividend policy taking account of market conditions and the Group's financial performance.

Stable balance sheet
Group embedded value of £6,799m (31 December 2009: £6,435m), represents an embedded value per share of 302p
(31 December 2009: 288p). IFRS equity excluding intangible assets and non-controlling interests was £3,531m
(31 December 2009: £3,351m), representing 157p per share (31 December 2009: 150p). The increase in Group embedded value and IFRS equity during the year primarily reflects the profit for the period offset by the payment of the final dividend declared in respect of 2009.

Delivering our strategy
Today's results underline our confidence in the exciting prospects we see for all our businesses. During the first half of 2010 we have driven business performance and made good progress against our strategic priorities.

The increased level of investment we are making in our business to help us capture market opportunities is already driving momentum:

We have focused our business portfolio. In January 2010 we concluded the sale of our banking operations to Barclays Bank PLC, with sales proceeds of £246m. In May we announced our intention to sell Standard Life Healthcare as we believe that manufacturing of private medical insurance is not core to our long-term savings and investment strategy in the UK. This transaction successfully concluded on 31 July with proceeds of £138m.

To increase cash profitability, we are driving transformation across the Group to create a fitter, more flexible business that can identify and capture new opportunities. In June we made changes to our leadership structure and to the way the Group operates, including bringing together marketing and distribution to create a Take to Market focus. We continue to invest in, and build on, the strong relationships we have with advisers and intermediaries, a trend that will be enhanced by our acquisition of threesixty.

We continue to upgrade our operational capabilities through innovative use of technology and improvements to our processes. These will further enhance the customer experience and drive greater efficiencies. As announced in March we are targeting further efficiency savings of £100m by 2012 to improve our new business margins, achieved through making our operations lower cost and more scalable. We remain on track to achieve this.

We have a strong pipeline of new developments:

Outlook
Whilst the economic background remains uncertain we believe that the underlying demographic and regulatory trends in our key markets continue to support our future growth potential.

There are very large individual and employer markets available to us in the UK and Canada and we believe we have the products and propositions to capitalise on this. In the UK we are particularly well placed for regulatory change, whether it be the impact of the Retail Distribution Review, or auto-enrolment in the corporate market.

Standard Life Investments is well placed to continue its growth, including in alternative asset classes such as absolute returns.
The joint venture businesses in Asia also offer us valuable opportunities. In India we continue to monitor the potential to increase our holding in the long-term savings joint venture with HDFC, whilst negotiations are ongoing with the Bank of China to change the nature of the joint venture relationship in China.

We see exciting opportunities in our core markets and are confident that the investments we are making will lead to continued strong growth in assets and cash profitability, supporting our progressive dividend policy.

For further information please contact:

Institutional Equity Investors

Retail Equity Investors

Duncan Heath

0131 245 4742

Capita Registrars

0845 113 0045

Paul De'Ath

0131 245 9893

 

 

Media

 

Debt Investors

 

Barry Cameron

0131 245 6165 / 07712 486 463

Scott Forrest

0131 245 6045

Nicola McGowan

0131 245 4016 / 07872 191 341

    

Paul Keeble

020 7872 4481 / 07712 486 387

    

Neil Bennett (Maitland)

020 7379 5151 / 07900 000 777

 

 

 

Newswires and online publications

A conference call will take place for newswires and online publications from 8.00-9.00am. Participants should dial +44 (0)1452 555566 and quote Standard Life Half Year Results 2010. The conference ID number is 92155227. A replay facility will be available for 7 days. Investors and analysts should dial +44 (0)1452 550000. The pass code is 92155227#.

Investors and Analysts

A presentation to investors and analysts will take place at 9:30am at UBS Ground Floor Conference Centre, 1 Finsbury Avenue, London. A live webcast of the presentation and the presentation slides will be available on the Group's website. In addition a replay will be available on this website later today.

There will also be a live listen only teleconference to the investor and analyst presentation at 9:30am. Investors and analysts should dial +44 (0)20 3059 5845. Callers should quote Standard Life Half Year Results. A replay facility will be available for 14 days. Investors and analysts should dial +44 (0)121 2604861. The pass code is 1182010#.

Notes to Editors:

1

Net flows and assets under administration across the Group include net flows in respect of the Asian joint ventures and our wholly owned Hong Kong subsidiary. Prior year figures have been restated accordingly.

2

Assets under administration (AUA), net flows, IFRS and EEV operating profit, EEV capital and cash generation and return on embedded value (RoEV) exclude our discontinued banking and healthcare operations. Prior period figures have been restated accordingly.

3

AUA are the adjusted gross assets of the Group and include assets administered on behalf of customers, including both those managed by the Group and those placed with third party managers.

4

The results for the Hong Kong and joint venture businesses were prepared on an EEV basis for the first time at full year 2009. H1 2009 results include these on an IFRS basis.

5

Core elements comprise new business contribution (NBC), expected return on in-force business, non-covered business profits and development costs for covered business other than those directly related to back book. Core EEV capital and cash generation reflects the after tax net worth impact of the core EEV result attributable to shareholders.

6

The daily average level of the FTSE All share index was 32% higher over the six months to 30 June 2010 when compared to the same period in 2009. On the same basis the UK IPD All Property Index was 13% higher and the Sterling 5-10 Yr Corporate Securities Index was up 29%.

7

Unless otherwise stated, all sales figures are on a present value of new business premiums (PVNBP) basis. PVNBP is calculated as 100% of single premiums plus the expected present value of new regular premiums. Prior period PVNBP for India has been restated by £1m to reflect the reclassification from regular premiums to single premiums

8

Analysis of Individual SIPP assets under administration.

 

 

30 Jun
2010

31 Dec
2009

 

£m

£m

Insured Standard Life funds

2,860

2,832

Insured external funds

1,836

1,723

Collectives - Standard Life Investments

2,481

1,894

Collectives - Funds Network

1,023

973

Cash

1,281

1,199

Non collectives

3,471

3,159

Total

12,952

11,780

 

 

 

Insured

4,696

4,555

Non-insured

8,256

7,225

Total

12,952

11,780

Of the £13.0bn assets under administration at 30 June 2010, £2.2bn relate to assets on the Wrap platform.

 

9

At the end of June 2010 we had 45,500 customers on our Wrap platform (31 December 2009: 31,600).

10

Percentage movements for PVNBP sales, regular premiums and single premiums in our overseas businesses are calculated on a constant currency basis.

11

A SICAV (société d'investissement à capital variable) is an open-ended collective investment scheme common in Western Europe. SICAVs can be cross-border marketed in the EU under the UCITS directive.

12

Based on 100% of HDFC Asset Management. Standard Life share of AUM £4.6bn.

Read the full press release PDF(1.5Mb)



Back to previous page

Important legal and regulator information

NOTE ELECTRONIC VERSIONS OF THE MATERIALS YOU ARE SEEKING TO ACCESS ARE BEING MADE AVAILABLE ON THIS WEBSITE BY STANDARD LIFE PLC IN GOOD FAITH AND FOR INFORMATION PURPOSES ONLY.

Please read this notice, and the other linked notices, carefully as they apply to all persons who view this site. Please note that the disclaimer set out below may be altered or updated. You should read it in full each time you visit the site.

Overseas Persons
Viewing this information may not be lawful in certain jurisdictions. In other jurisdictions only certain categories of person may be allowed to view this information. If you are not permitted to view materials on this website or are in any doubt as to whether you are permitted to view these materials, please exit this webpage.
Basis of access
Access to electronic versions of these materials is being made available on this website by Standard Life plc in good faith and for information purposes only. No representation is made as to completeness and accuracy. Any person seeking access to Standard Life plc's website represents and warrants to Standard Life plc that they are doing so for information purposes only. Standard Life reserves the right to add, modify or delete information on this site at any time. You may not create a link to this website from another website or document without Standard Life's prior written consent.
© 2012 Standard Life
Standard Life plc, registered in Scotland (SC286832), Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. Telephone +44 (0)131 225 2552. Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.