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29.04.2010
Interim Management Statement - three months to 31 March 2010

Strong growth in net flows and assets

Substantial increase in net inflows

• Net inflows across the Group more than tripled to £2.1bn (2009: £0.6bn)¹
• Long-term savings net inflows significantly higher at £1.0bn (2009: £0.1bn)¹
• Standard Life Investments third party net inflows doubled to £1.8bn (2009: £0.9bn)

Continued growth in assets

• Group assets under administration (AUA) 7% higher at £181.5bn (31 December 2009: £170.1bn)¹
• SIPP AUA 9% higher at £12.8bn (31 December 2009: £11.8bn)²
• Wrap AUA 22% higher at £4.4bn (31 December 2009: £3.6bn)
• Corporate pensions AUA 7% higher at £19.1bn (31 December 2009: £17.9bn)
• Standard Life Investments third party assets under management 9% higher at £62.2bn (31 December 2009: £56.9bn)

Significant sales growth

• Long-term savings sales 30% higher at £4.6bn (2009: £3.6bn)³

Chief Executive David Nish said:
"Standard Life has made a strong start to 2010, with increased net inflows and a continued growth in assets. These results underline our belief that the UK market is a great place to do business.

"We are executing our strategy of investing for growth and have made good progress in developing our core propositions for retail, corporate and institutional markets.

"My executive team is established and we are progressing well in changing how we operate, making Standard Life more nimble and quicker to respond to our customer growth opportunities.

"This increased momentum positions us well for improved cash flow and profit generation as our programme of developments is delivered."

Unless otherwise stated, all comparisons are in Sterling and are for the three months ended 31 March 2009.

Continued strong growth in net flows and assets
Continued demand for our broad and innovative product set has led to strong growth in customer numbers and net inflows. Positive net inflows of £2.1bn (2009: £0.6bn)¹ across the Group included long-term savings net inflows of £1.0bn (2009: £0.1bn) and third party investment management net inflows of £1.8bn (2009: £0.9bn). Consolidation adjustments reduced net inflows by £0.7bn (2009: £0.3bn).

Coupled with a £9.3bn positive impact from market movements, this increase in net inflows has led to continued growth in the assets we manage and administer across the Group. At the end of March 2010 total assets under administration had increased 7% to £181.5bn (31 December 2009: £170.1bn)¹. Within this total, third party assets under management at Standard Life Investments have increased to a new record level of £62.2bn.

Long-term savings operations
Net inflows across our long-term savings operations¹ have increased significantly, reflecting our continued success in winning profitable corporate mandates and retail customers. Total new business sales across our long-term savings operations increased by 30% to £4.6bn (2009: £3.6bn)³.

UK retail
Net flows within our retail long-term savings business in the UK improved to a net outflow of £163m (2009: outflow £832m). Flows in 2009 were lower due to a £359m outflow caused by our decision not to renew lower-margin bulk investment bond deals which were written in 2008. Sales in our retail long-term savings business increased 23% to £1.8bn (2009: £1.4bn)³.

We continue to see good growth in our individual SIPP customer base and assets under administration. The number of customer accounts increased by 5,900 or 7% during the quarter to 89,800 (31 December 2009: 83,900). SIPP assets under administration were 9% higher at £12.8bn (31 December 2009: £11.8bn)². As expected, customers are increasingly using the flexible features within the product such as tax free cash and drawdown as our SIPP business grows and matures. In addition, we have seen a short-term increase in activity levels across our individual SIPP, individual pension and corporate pension product lines as some customers took benefits ahead of the minimum retirement age increasing from 50 to 55 in April 2010. These increases in outflows in individual SIPP have been more than offset by gross inflows of £1.0bn from higher sales volumes, with net inflows 28% higher at £566m (2009: £441m). In February 2010 we broadened the reach of our individual pension proposition with the launch of Active Money Personal Pension. We have seen encouraging customer interest with over 1,000 new customers now secured since its launch.

Assets under administration on our Wrap platform have increased by 22% to £4.4bn (31 December 2009: £3.6bn). It now serves 38,800 customers, an increase of 23% in the quarter (31 December 2009: 31,600). The number of adviser firms who are live on the platform also increased by 15% to 671 (31 December 2009: 583). On average we are adding a new advisory firm to Wrap every day. In the first quarter of 2010 we continued our rolling programme of Wrap platform development, ensuring that we offer industry leading capability and service to our customers and advisers. As part of this, we release an upgraded version of our Wrap platform every two months, with recent developments including bulk switching of mutual funds and back-office integration.

Demand for mutual funds sold through our UK long-term savings business on our Wrap, Sigma and Fundzone platforms remains high with net inflows increasing 93% to £316m (2009: £164m).

In individual pensions the recent increase in the minimum retirement age has had a short-term effect on outflows. This has led to a net outflow of £505m (2009: outflow £370m).

As has been seen in previous quarters, a number of endowment policies that were written during the 1980s reached maturity during the quarter. This led to a net outflow of £213m (2009: outflow £469m) in respect of pre-Demutualisation Legacy Life products. The vast majority of these products are conventional with profits contracts, which generate minimal shareholder margin.

UK corporate
UK corporate comprises long-term savings and investment solutions for UK businesses and pension funds. UK corporate net inflows increased 35% to £776m (2009: £574m). Sales in our corporate long-term savings business also increased 52% to £1.6bn <(2009: £1.0bn)³.

In corporate pensions, assets under administration increased by 7% to £19.1bn (31 December 2009: £17.9bn). The quality and flexibility of our proposition, combined with the financial strength of the Group, continue to act as key differentiators and enable us to win profitable new business. During the quarter we implemented 51 new schemes (2009: 50), the average size of which was considerably higher than the prior year. Recent notable wins include the Logica scheme with over 5,000 members, which we expect to transition in the second quarter. This scheme win is a good example of the success we have had in developing joint flexible benefits and pension propositions with Vebnet.

While lower average salary increases and recruitment across the UK have reduced increments to existing schemes, our continued success in winning new schemes has been reflected in a 21% increase in sales to £744m (2009: £616m)³. The increase in net inflows has been more modest, increasing by 3% to £302m (2009: £293m) with increased flows from new scheme wins being partly offset by the short-term increase in activity levels highlighted above. Within this total net inflows in our flexible corporate SIPP have continued to be very strong, increasing by 96% and accounting for 87% of total group pensions net inflows in the quarter (2009: 46%).

As highlighted at our Preliminary Results announcement on 10 March 2010, we continue to invest in developing our solutions for the corporate market. We have made strong progress in our programme of developments for 2010, and have recently launched a corporate ISA and a new trust based pension featuring the option of blended funds. Further developments are on track for the remainder of this year and beyond.

Institutional pensions net inflows increased by 69% to £474m (2009: £281m).  Performance during the quarter has been strong, continuing the momentum from the final quarter of 2009 and reflecting significant contributions from a number of schemes.

Sales in our healthcare business were level at £6m (2009: £6m) on an APE basis reflecting the continuation of our selective approach to the new business we write.

Canada
Canadian net inflows were lower at £30m (2009: £57m) reflecting higher claims and withdrawals, which have more than offset the strong growth in gross inflows and sales achieved across our retail and Group insurance product lines. Canadian net flows in higher margin investment products, which include group and individual segregated funds and mutual funds, have increased 53% to £155m (2009: £101m), reflecting the strength of our savings and investment propositions. Sales in Canada increased 5%⁴ to £733m (2009: £635m)³.

Higher assets values have increased the level of both gross inflows and outflows in Group savings and retirement however additional outflows, mainly in Group segregated funds, have reduced overall net inflows to £54m (2009: £80m). Retention rates across the portfolio have remained broadly stable.

The recovery in equity markets and resultant improvement in customer sentiment has been reflected in higher sales and gross inflows across our Individual insurance, savings and retirement and mutual fund product lines. However, higher asset values and an expected slight decline in mutual fund retention levels, driven by an increase in maturing contracts no longer subject to early redemption penalties, have increased the level of outflows. There was a slight deterioration in mutual fund flows from an inflow of £4m to an outflow of £1m. Net outflows in Individual insurance, savings and retirement product lines remained broadly level at £41m (2009: outflow £43m). Retention levels across our retail propositions remain in line with the industry.

Group insurance net inflows increased by 13% to £18m (2009: £16m), reflecting the continued strength of our disability management proposition.

Other overseas
Our other overseas operations comprise our long-term savings operations in Europe and Asia. Net inflows across these regions amounted to £370m (2009: £250m). Sales in these operations increased 26%⁴ to £561m (2009: £455m)³.

Europe
In Europe, net inflows were 60% higher at £276m (2009: £173m). Sales were 29%⁴ higher at £331m (2009: £263m)³.

In Ireland, net inflows were significantly higher at £110m (2009: £9m). Domestic flows improved significantly to an inflow of £37m (2009: outflow £14m), mainly due to strong new business inflows resulting from the comprehensive choice and strength of our investment offering available through the Synergy platform. In particular, the Global Absolute Return Strategies fund managed by Standard Life Investments is proving very popular with both retail and institutional investors. Offshore bond inflows were 217% higher at £73m (2009: £23m), reflecting an increase in new business across all versions of our offshore bond, with a particularly strong increase in business via our Wrap platform. The inflows also benefited from an increase in larger case sizes and the benefit of more stable economic conditions.

Net flows in Germany were stable at £166m (2009: £164m) 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.

Asia
Net inflows for our Asian operations were 22% higher at £94m (2009: £77m). Combined sales were 22%⁴ higher at £230m (2009: £192m)³.

Sales in India decreased by 3%⁴, as we continue to refocus the business for greater profitability. Standard Life's share of these sales was £140m (2009: £145m)³.

In China, sales volumes decreased by 14%⁴ reflecting management's greater focus on profitability through increasing the proportion of regular premium business. In line with this approach, regular premiums increased by over 50% compared to the prior year whereas single premium business declined by 52%. Standard Life's share of these sales was £26m (2009: £33m)³.

Hong Kong has continued to enjoy strong growth and has increased market share. This is due to the success of our new unit-linked savings product, with sales increasing by 397%⁴ to £64m (2009: £14m)³.

Global investment management
Impressive inflows into Standard Life Investments have continued and have driven an increase in third party assets under management to a record level of £62.2bn (31 December 2009: £56.9bn). Third party assets represent 43% of total assets under management (31 December 2009: 41%). Total assets under management increased by £7.1bn to £145.8bn (31 December 2009: £138.7bn). Non UK business continues to grow and now accounts for almost a third of third party assets under management.

Third party net inflows at Standard Life Investments have doubled to £1.8bn, representing 13% of opening third party assets under management on an annualised basis. £1.1bn of these inflows relate to investment products only. Net mutual fund sales, including SICAVs⁵, were up 120% to £0.4bn while net UK institutional sales accounted for over £1bn (2009: £65m).

We continue to see strong momentum in our Global Absolute Return Strategies (GARS) solutions which are proving to be particularly popular both in retail and institutional space. GARS now has in excess of £3bn in assets under management and has attracted over 168 institutional clients, spanning a range of blue chip corporate, charity and local authority pension funds. Corporate bond products have also attracted strong flows of new business. Retail offerings, through SICAVs in mainland Europe and mutual funds in the UK, have seen very positive sales with investors also showing appetite for Global Index Linked, UK Equity Income and UK Smaller Company funds.

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 30 actively managed), rated 'A' or above by Standard & Poor's. Performance over the twelve months to 31 March 2010 has been particularly strong in UK equities with over 55% of UK equity OEICs returning top decile performance. The UK Equity High Alpha Fund and the UK Equity Unconstrained Fund were both 1st percentile while the UK Equity recovery Fund was 2nd percentile.

The money weighted average for third party assets is above median over one, three, five and ten years.

Other Group developments
During the quarter we have undertaken several steps in supporting the delivery of our strategy to grow our long-term savings and investments business.

In October 2009 we announced that we would sell our banking operations to Barclays Bank PLC. This sale was successfully concluded on 1 January 2010, with expected sales proceeds of £245m.

In March 2010, we announced the purchase of the remaining 75% stake in the intermediary support services business, threesixty, having held a 25% stake since May 2007.  This acquisition adds further depth to our propositions in the intermediary market and supports our long-term distribution capability. Since announcing this acquisition we have continued to work alongside threesixty to develop the business for the benefit of their IFA client firms.

In March 2010 we also announced Standard Life Investments' intention to acquire a 75.1% stake in Aida Capital.  Aida Capital is a London based, FSA registered, fund of hedge funds manager which has a solid eight year track record of superior performance. This acquisition will enable Standard Life Investments to expand into alternative asset classes and presents further opportunity to strengthen its alternatives capacity. We have made good progress and expect to complete this deal in the near future.

In January 2010 we confirmed the new structure of the Executive Team, including:

• Christian Torkington joined us on 1 March 2010 as Group Information and Operations Director. He will focus on developing and implementing our technology strategy and processes that underpin our day-to-day operations.
• Sandy Begbie will join Standard Life on 1 May 2010 as Group Transformation Director. His role will be to assist in leading and delivering the Group's transformation plan.
• Nathan Parnaby, previously Chief Executive of Standard Life Europe, now also has Executive responsibility for the Group's Asian businesses.

On 27 April 2010 we also announced that Jackie Hunt, currently Interim Chief Financial Officer, had been appointed Chief Financial Officer and an executive director of the Company with effect from the conclusion of the Company's Annual General Meeting on 14 May 2010.

Standard Life Group outlook
We entered 2010 with good momentum, and have had a strong start to the year, aided by the rise in markets.

We continue to execute our strategy of investing for growth and good progress has been made in developing our core propositions for retail, corporate and institutional markets. 

In the UK retail market we continue to see strong prospects for SIPP and Wrap.  In the UK corporate market there is great potential to build on our market-leading positions, with the recent launch of our enhanced trustee based pension offering expected to benefit sales.

In Canada, we expect further success in our core segments of retail investment funds, disability insurance and defined contribution pensions, but remain cautious about the short-term prospects in the pension market. 

While market conditions in India and China remain tough, we are confident in the prospects for both markets and see significant potential in our joint venture operations.  We are encouraged by the strong trading performance we have seen in both Hong Kong and Ireland.

At Standard Life Investments the pipeline for institutional business is strong with growing demand for GARS and fixed interest products.  With renewed consumer confidence and interest, we expect to see increasing demand for retail products and are well placed in key asset classes such as absolute returns, fixed interest, equities and property. We continue to look at the introduction of new products with our recently announced intention to acquire a stake in Aida Capital providing an opportunity for us to widen the range of alternative assets available to clients.

This increased momentum positions us well for improved cash flow and profit generation as our programme of developments is delivered.

For further information please contact:

Newswires and online publications
There will be a conference call today for newswires and online publications at 8:00am hosted by Jackie Hunt, Chief Financial Officer Designate and Paul Matthews, Managing Director of Distribution for our UK business. Dial in telephone number +44 (0) 1452 555 566. Callers should quote Standard Life Media Call. The conference ID number is 71669347.

Investors and Analysts
There will be a conference call today for analysts and investors at 9.30am hosted by Jackie Hunt, Chief Financial Officer Designate and Paul Matthews, Managing Director of Distribution for our UK business. Dial in telephone number +44 (0) 1452 555 566. Callers should quote Standard Life Analysts & Investors Call. The conference ID number is 71669659. A recording of this call will be available for replay for one week by dialling +44 (0) 1452 550 000 (access code 71669659#).

Notes to Editors:

Continued...

Read our 2010 Q1 Interim Management Statement, including financial tables (161Kb).

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