David Nish, Chief Executive, commented:
"Standard Life has performed well during the first nine months of this year and we remain on track to transform the operational and financial performance of the Group. We are strengthening our market positions and improving our efficiency to ensure we are competitively positioned for the important market and regulatory changes ahead of us.
"The third quarter saw very challenging conditions in global financial markets which have impacted values of assets and customer confidence, reducing the pace of fund flows. Our institutional and corporate business continued to grow, although at a slower rate, while inflows into retail propositions have held up well as we continued to add new customers and advisors to our platforms. Standard Life Investments has delivered positive net flows with particular success in the UK and Europe. Assets under administration and revenues have remained resilient due to our diverse asset mix.
"Although the economic backdrop continues to be uncertain, the outlook for our business is positive and we are confident in the future growth opportunities in our chosen markets."
Unless otherwise stated all comparisons are in Sterling and are for the nine months ended 30 September 2010.
| Assets under administration | 1 Jan 2011 | Gross inflows | Redemptions | Net inflows | Market and other movements4 | 30 Sep 2011 |
|---|---|---|---|---|---|---|
| Fee business (£bn) | 163.1 | 19.1 | (14.0) | 5.1 | (11.9) | 156.3 |
| Spread/risk business (£bn) | 23.5 | 1.1 | (1.9) | (0.8) | 0.7 | 23.4 |
| Other (£bn)3 | 10.2 | 0.3 | (0.1) | 0.2 | 1.0 | 11.4 |
| Group AUA (£bn) | 196.8 | 20.5 | (16.0) | 4.5 | (10.2) | 191.1 |
| Net flows | 9 months 2011 | 9 months 2010 |
|---|---|---|
| Fee business1 (£bn) | 5.1 | 6.5 |
| Spread/risk business (£bn) | (0.8) | (0.9) |
Group assets under administration decreased by 2.9% and now stand at £191.1bn. Net inflows into our newer fee based propositions of £5.1bn1 were strong, though lower. Long-term savings net inflows, excluding conventional with profits, increased by 5% to £4.4bn2 while Standard Life Investments third party net inflows of £3.5bn1 represented an annualised 7%1 of opening AUM. The impact of negative market movements in the period was partly mitigated by our relatively resilient asset mix. Market and other movements include the transfer, in the first half of this year, of approximately £4bn of UK money market funds following our decision to exit this sector of the industry.
Standard Life has a robust capital position, which, assisted by the de-risking of the business carried out over the last few years, has been largely insensitive to market movements even in the volatile financial market conditions seen in the last quarter. Direct shareholder exposure to debt issued by governments and banks in Greece, Ireland, Italy, Portugal and Spain is less than £50m. Our estimated IGD surplus of £3.3bn (31 December 2010: £3.9bn) reflects our decision to successfully tender for €687m of the lower tier two subordinated liabilities. We will continue to look for opportunities to drive our capital efficiency and improve return on equity.
In the short-term, economic uncertainty and volatile conditions in global capital markets will inevitably mean that the operating conditions which we face will be challenging. However, in spite of these headwinds, we expect to continue to make progress both at an operating level and in fulfilling our strategic objective of transforming the Group.
We remain confident that the underlying demographic and regulatory trends in our key markets, and our customers' demand for our propositions, will drive our future growth.
In the UK, we are entering a period of unprecedented change and potential for growth. With the Retail Distribution Review (RDR) less than 15 months away, our retail business has scale and momentum and is ideally positioned to continue to drive asset growth through our leading platform propositions. The quality of our corporate pension offering together with the opportunities created by the RDR and pensions reform will provide us with an increased flow of new business over the medium to long term.
The prospects for Standard Life Investments remain strong. The business is well positioned across a diversified range of asset classes and provides the investment solutions expertise which continues to allow the Group to capture a greater proportion of the platform value chain.
We see significant opportunities in all our core markets and are confident that the investments we are making will lead to continued strong growth in assets and ongoing improvements in efficiency. By delivering on our strategy we have the potential to grow our profits significantly and increase the return for our shareholders.
| 1 Jan 2011 | Gross inflows | Redemptions | Net inflows | Market and other movements | 30 Sep 2011 | |
|---|---|---|---|---|---|---|
| UK fee business (£bn) | 76.2 | 8.2 | (5.9) | 2.3 | (4.9) | 73.6 |
| Institutional pensions (£bn) | 15.8 | 2.5 | (1.4) | 1.1 | (0.4) | 16.5 |
| Conventional with profits (excl. annuities) (£bn) | 6.6 | 0.1 | (1.2) | (1.1) | - | 5.5 |
| UK fee business total | 98.6 | 10.8 | (8.5) | 2.3 | (5.3) | 95.6 |
| Spread/risk business AUA (£bn) | 13.4 | 0.4 | (0.9) | (0.5) | 0.9 | 13.8 |
| Total AUA backing products (£bn) | 112.0 | 11.2 | (9.4) | 1.8 | (4.4) | 109.4 |
| Fee business revenue (bps) | 77 | 75 |
UK fee business AUA of £95.6bn reflects continued net inflows and the relative resilience of the AUA mix to equity market movements. Fee business net inflows, in the first nine months of the year, into our core retail and corporate pension propositions5 increased by 48% to £2.3bn. Net inflows in the quarter amounted to £0.5bn (2010: £0.5bn) reflecting the impact of volatility in financial markets. The average revenue yield across our UK fee business was 75bps (2010: 77bps).
With RDR approaching quickly, our retail fee business continues to perform well with gross inflows up 6% to £5.2bn in the first nine months of the year (2010: £5.0bn). Despite the significant levels of volatility in financial markets gross inflows in the quarter were up 1% to £1.5bn (2010: £1.5bn). Net inflows in the first nine months of the year, excluding conventional with profits, increased by 51% to £689m.
Our award winning platforms continue to attract customers, advisors and assets, as we enhance further the features and usability of our technology. Collectively, our platforms now account for 194,200 customers with total platform assets under administration of £10.6bn. The number of adviser firms on the Wrap has increased to 969 (2010: 772), with an average AUA of £7.9m per firm (2010: £6.7m).
Total SIPP customers increased to 127,700, an increase of 26% year-on-year and 19% since the start of 2011. Our SIPP proposition continues to perform well as we maintain our impressive market share, helping to increase AUA to £15.9bn in spite of significant volatility in financial markets.
Standard Life Wealth continues to build a strong presence in the IFA market with the launch of the Managed Portfolio Service, and now has over £800m of AUA.
Gross inflows into annuities in the quarter increased by 16% to £123m (2010: £106m) reflecting the impact of the actions we have taken to increase sales. New business slowed in September as customers chose to defer their retirement rather than crystallise market losses due to current markets. Spread/risk business AUA increased to £13.8bn, reflecting falling yields on debt securities which were offset by overall net outflows driven by scheduled annuity payments.
Corporate pension gross inflows in the first nine months of the year, excluding Trustee Investment Plan business of Standard Life Investments, were up 33% to £3.1bn (2010: £2.4bn), while net inflows increased by 46% to £1.6bn (2010: £1.1bn). Net inflows in the quarter of £356m (2010: £336m) reflected steady contributions into existing schemes and fewer scheme implementations compared to the first six months of the year as we continue to attract premium quality new business.
We have continued to build on our momentum by winning 123 new schemes in the year to date (2010: 125 schemes) while 59,000 new employees joined schemes implemented in the first nine months of this year (2010: 40,000 employees).
Earlier in the year we announced the launch of Lifelens, our market-leading fully integrated employee-centric offering providing employee pension and non-pension benefit solutions via the workplace. As previously mentioned, we continue to streamline our approach to implementation of Lifelens schemes and expect the next wave of clients to transition in 2012.
We continue to build strong relationships with employers and corporate benefit consultants and are working with them to ensure that we have the most comprehensive and attractive solution to address the challenges of auto-enrolment ahead of the launch in the second half of 2012. This, combined with the quality of our propositions and the high levels of customer service we offer, positions us well for both pensions reform and RDR. We are working on our existing pipeline of schemes and are seeing strong levels of enquiries which will drive further growth in our business.
| 1 Jan 2011 | Gross inflows | Redemptions | Net inflows | Market and other movements | 30 Sep 2011 | |
|---|---|---|---|---|---|---|
| Fee business (£bn) | 71.6 | 10.2 | (6.7) | 3.5 | (6.0) | 69.1 |
| Fee business excl. Global Liquidity Funds (£bn) | 67.7 | 10.2 | (6.7) | 3.5 | (2.1) | 69.1 |
| Fee business revenue (bps) | 35 | 37 |
Standard Life Investments has delivered positive net inflows despite highly volatile markets and very challenging market conditions faced by the investment management sector during the first nine months of the year. Third party fee business AUM, excluding the Global Liquidity Funds transferred earlier in the year to Deutsche Asset Management, increased from £67.7bn to £69.1bn. The increase was driven by net inflows of £3.5bn1 (2010: £4.9bn1), which represented an annualised 7%1 of opening third party AUM, which were partly offset by negative market movements.
GARS has now achieved AUM of over £11.5bn and we continue to see demand in UK and Europe as investors increasingly seek investment solutions that help reduce volatility within their portfolios. We have also seen continued success in UK wholesale with net inflows of £1.6bn during the first nine months of the year (2010: £1.5bn). SICAV sales, predominately in mainland Europe, have remained extremely buoyant at £0.4bn matching the record sales achieved in 2010. The suite of MyFolio managed funds continues to prove popular having attracted £0.7bn of assets since the funds were launched in the last quarter of 2010, including net flows in the quarter of £150m.
The average revenue yield across our third party business has increased to 37bps (2010: 35bps), excluding the fee received from the transfer of the money market business, reflecting our success in attracting higher revenue margin business.
Although investment conditions have been difficult, longer term investment performance continues to be robust with the money-weighted average for third party assets above median over three, five and ten years. The strength of our mutual fund and unit trust range is demonstrated by the proportion of eligible and actively managed funds (23 out of 29) rated 'A' or above by Standard & Poor's in the UK.
| 1 Jan 2011 | Gross inflows | Redemptions | Net inflows | Market and other movements | 30 Sep 2011 | |
|---|---|---|---|---|---|---|
| Fee business AUA (£bn) | 14.0 | 1.8 | (1.4) | 0.4 | (1.2) | 13.2 |
| Spread/risk business AUA (£bn) | 10.1 | 0.7 | (1.0) | (0.3) | (0.2) | 9.6 |
| Total AUA backing products (£bn) | 24.1 | 2.5 | (2.4) | 0.1 | (1.4) | 22.8 |
| Fee business revenue (bps) | 118 | 118 |
Fee business AUA in Canada has decreased by 3%6 to £13.2bn due to negative market movements, partly offset by net inflows. Strong sales and market share growth in our retail segregated funds were offset by an increase in mutual fund net outflows. While retention is improving since the first quarter of the year, withdrawals in funds in the first nine months were higher than last year. Group savings fee business net inflows of £336m were 12%6 lower than the comparative period of 2010 which included two large scheme wins. Net inflows in our core Defined Contribution proposition increased by 8%6, from increased renewal flows.
The average revenue yield on fee business has remained stable at 118bps (2010: 118bps).
Within Canada spread/risk business, the group insurance and disability management business continues to perform well with PVNBP sales up 55%6 to £681m and strong growth in market share. A large part of these sales consisted of future renewal premiums and as such had a marginal impact on inflows. AUA has decreased to £9.6bn driven by market movements and scheduled outflows in our annuity back book.
| 1 Jan 2011 | Gross inflows | Redemptions | Net inflows | Market and other movements | 30 Sep 2011 | |
|---|---|---|---|---|---|---|
| Wholly owned fee business AUA (£bn) | 11.1 | 1.8 | (0.6) | 1.2 | (0.4) | 11.9 |
| India and China JV businesses AUA (£bn) | 1.2 | 0.3 | (0.1) | 0.2 | (0.2) | 1.2 |
| Fee business revenue (bps) | 212 | 188 |
Fee business AUA across our wholly owned International operations increased by 7% to £11.9bn driven by higher net inflows partly offset by negative market movements.
Ireland net flows increased by 39% to £650m reflecting continued success of our domestic and offshore bonds businesses, although net flows in the domestic business slowed in the quarter driven by increased competition in the market and the impact of austerity measures such as the pension levy. International Bond AUA exceeded £2bn helped by growth in the discretionary fund management and wealth management sectors. Flows in Hong Kong almost tripled, assisted by our popular Harvest propositions. The average revenue yield across International wholly owned businesses was lower at 188bps (2010: 212bps), reflecting the continuing shift in both sales and back book mix across International.
Net flows in the India and China joint venture businesses increased to £207m (2010: £193m), a strong result given the regulatory changes introduced in India in the second half of 2010. HDFC Life performed strongly, increasing market share and securing second place in the private sector overall.
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There will be a conference call today for newswires and online publications at 7:30am (UK time) hosted by Jackie Hunt, Chief Financial Officer, and Paul Matthews, UK Chief Executive. Dial in telephone number +44 (0)1452 555 566. Callers should quote Standard Life Media call. The conference ID number is 20607993.
A presentation for investors and analysts will take place at 9:30am at Deutsche Bank, Winchester House, 1 Great Winchester Street, London EC2N. 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 be a conference call today for analysts and investors at 9:30am (UK time) hosted by Jackie Hunt, Chief Financial Officer, and Paul Matthews, UK Chief Executive. Dial in telephone number +44 (0)1452 555 566. Callers should quote Standard Life Analysts & Investors call. The conference ID number is 20466532. A recording of this call will be available for replay for one week by dialling +44 (0)1452 550 000 (access code 20466532#).