13 March 2012
2011 Preliminary Results



Increased operating profits and cash flow delivered in challenging market conditions

Continuing growth in assets and strong net flows

Operating profit3 increased by 28%

Capital and cash generation increased by 53%, dividend up 6.2% and strong capital position

Delivering for our customers


David Nish, Chief Executive, commented:

"Today's results again demonstrate that we are well on track to transform the operational and financial performance of Standard Life.

"We have delivered increased operating profits and cash flow while investing to strengthen our market positions. We have developed innovative propositions to respond to the changing needs of our customers and their advisers, ensuring we are well positioned to benefit from market changes and the new regulatory environment.

"In the year ahead, we expect to see the work that we have done as part of the transformation programme reinforce our clear leading positions in our chosen markets.

"While the economic backdrop remains uncertain, we are confident that the strong capital position of the Group, the demand for our attractive customer propositions and the continued improvements in operational and capital efficiency mean that we are well on track to achieve an ongoing improvement in financial performance."


Unless otherwise stated, all comparisons are in Sterling and are for the 12 months ended 31 December 2010.

IFRS results 2011
£m
2010
£m
By source    
Fee based revenue 1,223 1,131
Spread/risk margin 356 370
Total income 1,579 1,501
Acquisition expenses (270) (267)
Maintenance expenses (723) (673)
Investment for transformation and growth (137) (149)
Group corporate centre costs (45) (50)
Capital management 74 27
India and China JV businesses 2 (23)
Change in UK pension scheme liabilities4 64 59
Operating profit before tax from continuing operations 544 425
By segment    
UK 220 234
Global investment management 125 103
Canada 187 110
International 40 15
Other (28) (37)
Operating profit before tax from continuing operations 544 425
Tax on operating profit (87) (89)
Operating profit after tax from continuing operations 457 336
Diluted operating EPS from continuing operations 19.8p 15.0p
IFRS profit attributable to equity holders after tax 298 432
Diluted EPS from continuing operations 12.9p 18.3p
EEV results 2011
£m
2010
£m
Covered business by source    
New business contribution 335 308
Contribution from in-force business 621 530
Other covered (67) (67)
Covered business EEV operating profit 889 771
Non-covered business    
Global investment management 69 33
Other non-covered and corporate costs 31 (17)
Non-covered business EEV operating profit 100 16
EEV operating profit before tax from continuing operations 989 787
Tax on EEV operating profit (265) (249)
EEV operating profit after tax from continuing operations 724 538
Diluted EEV operating EPS from continuing operations 31.4p 23.9p
EEV profit after tax 369 816

For more information please read Section 1.8 - Basis of preparation and the reconciliation of consolidated operating profit for the period in Section 2 of the Preliminary Results 2011

 

Delivering on our strategy

We are well on track to transform the operating and financial performance of Standard Life as we continue to focus on meeting the long-term savings and investment needs of our customers. We have launched a number of propositions to build on the leading market positions we have across the Group and are making progress in increasing the scalability and operational efficiency of our businesses through technology, process improvement and external sourcing arrangements.

We have a simple business model: increasing assets, maximising revenues, reducing unit costs and driving increased cash profitability. Assets under administration grew to £198.4bn and fee based revenue increased by 8%. We continued to invest to transform and grow our business while increasing operating profit. We have delivered a further £45m of cost efficiencies in the period and continue to drive operational efficiency in all our businesses. Operating profit before tax increased by 28% to £544m (2010: £425m) driven by significant profit improvements across the Group and in our newer UK fee based business. The result benefited from the remaining £64m gain (2010: £59m) resulting from the change in the basis of future pension increases in the UK staff pension scheme.

Standard Life continues to have a strong capital position, with an IGD surplus of £3.1bn (2010: £3.8bn) reflecting the successful tender for €687m of lower tier two subordinated liabilities. In the last few years we have significantly de-risked our business and this, combined with our capital-lite business model, means we believe we are well placed to operate in the currently proposed Solvency 2 environment, although there remains significant uncertainty about the final outcome of this regulatory change. We have removed the Scrip dividend option from the 2011 final dividend and we will continue to look for opportunities to drive our capital efficiency and improve return on equity.

In the year ahead, we expect to see the work that we have done as part of the transformation programme reinforce our clear leading positions in our chosen markets ensuring we are well on track to achieve an ongoing improvement in financial performance.

 

Increased assets under administration

Assets under administration 1 Jan 2011 Gross inflows Redemptions Net inflows Market and other movements7 31 Dec 2011
Fee business5(£bn) 163.4 23.9 (17.8) 6.1 (6.2) 163.3
Spread/risk business (£bn) 23.5 1.6 (2.6) (1.0) 2.2 24.7
Other6 (£bn) 9.9 0.4 (0.1) 0.3 0.2 10.4
Group AUA (£bn) 196.8 25.9 (20.5) 5.4 (3.8) 198.4

After allowing for the transfer of UK money market funds, following our decision to exit this sector, Group assets under administration increased from £192.9bn2 to £198.4bn. This increase was driven by strong, though lower, flows into our newer fee based propositions, which were offset by negative market movements in our fee business. Notably, Standard Life Investments had another strong year with third party net inflows of £4.3bn1 in what has been a difficult year for the investment management sector.

 

Operating profit increased by 28%

Operating profit before tax from continuing operations was 28% higher at £544m and 31% higher at £480m (2010: £366m) excluding the impact of the UK staff pension scheme release.

Revenues from fee business were 8% higher at £1,223m and now make up 77% of total income (2010: 75%). The remaining 23% (2010: 25%) of total income is a margin on spread/risk business. The increase in the spread/risk margin in our Canada business included the positive impact of specific management actions designed to enhance investment yields on assets, including a gain on sale of a significant property, as well as reserving changes from revisions to investment allocations offset by the impact of strengthened mortality assumptions. The increase in spread/risk margin in Canada was offset by a reduction in the UK spread/risk margin which fell as a result of annuity reserve strengthening in 2011 and the non-recurrence of a benefit from changes in investment strategy and reserve releases in 2010. In total these resulted in the spread/risk margin being 4% lower at £356m (2010: £370m).

Acquisition expenses, the costs we incur in writing new business, were up 1% to £270m largely driven by higher costs in our International business. However, as a proportion of sales, acquisition expenses fell from 149bps to 140bps for Group, and from 133bps to 120bps in the UK. Maintenance expenses, the ongoing costs we incur in servicing and administering customer policies, were 7% higher at £723m largely due to growth in our global investment management business and the acquisition of Focus Solutions. Maintenance expenses expressed as a proportion of average AUA were down to 41bps (2010: 42bps) at Group level and 33bps (2010: 34bps) in the UK. This continues the positive trend and demonstrates the scalability of our business.

IFRS profit after tax attributable to equity holders of £298m (2010: £432m) included a loss on short-term fluctuations in investment return and economic assumption changes of £139m (2010: profit £157m) largely driven by year end financial market levels.

 

EEV operating capital and cash generation increased by 53%

Gross EEV operating capital and cash generation increased by 26% to £749m (2010: £596m) driven by higher contributions from our covered businesses in Canada and International as well as increased profits from global investment management and the improved funding position of the UK pension scheme.

EEV operating capital and cash generation from continuing operations increased by 53% to £438m (2010: £287m), reflecting the increase in gross capital and cash generation which has been used to fund the largely fixed new business strain of £226m (2010: £220m) and lower investment for transformation and growth spend of £85m (2010: £89m).

 

EEV operating profit increased by 26%

Total EEV operating profit (EVOP) from continuing operations increased by 26% to £989m (2010: £787m). Within this, core EVOP was 16% higher at £731m (2010: £629m), due to higher new business contribution (NBC) of £335m (2010: £308m), increased expected return on existing business and higher profits from global investment management.

The new business contribution (NBC) of £335m generated an NBC margin of 1.7% (2010: 1.7%) and an IRR of 15% (2010: 17%), primarily reflecting higher margins on UK institutional pensions and Canada group insurance business which have been offset by lower margins in our joint venture businesses following the impact of industry-wide regulatory changes in India.

Efficiency operating profit of £88m (2010: £132m) reflects the impact of a management action within the UK business to reduce current and future investment expenses as well as positive assumption changes mainly in Canada. The positive expense assumptions reflect the reduction in the ongoing expenses of managing our covered business and the growth in business volumes.

Back book management operating profit of £170m (2010: £26m) includes the remaining £64m (2010: £59m) benefit following the change in the basis of future pension increases in the UK staff pension scheme as well as the impact of tax variances and management actions in Canada to enhance investment yields on assets.

 

Increased operating profit while investing for transformation and growth

We have previously said that we were targeting £100m of annual margin improvement by 2012 to be achieved through greater efficiency as well as improved asset mix and higher inflows to Standard Life Investments. As at 31 December 2011, we have delivered £79m of efficiency savings, including £45m of savings in 2011, with further savings delivered since the start of 2012. In addition we continue to see increased revenues from our fee based products through strong flows into higher margin propositions and Standard Life Investments.

During 2011 we expensed £137m (2010: £149m) in our transformation and growth programme, with a combination of new customer and adviser propositions launched, investment in our underlying technology to support our growth and the one-off costs related to our new brand and visual identity. Our total investment in transformation and growth, including capitalised development spend and capital injections into our India and China JV businesses, was £196m (2010: £201m). We invested £23m in our JV businesses (2010: £16m).

As we have previously stated, we expect our total investment in transformation and growth (including capitalised investment expenditure and capital injections into the joint venture businesses) to decline modestly in 2012.

 

Strong balance sheet

The strong capital position of the Group is evidenced by our balance sheet which continues to be robust on both an embedded value and IFRS basis despite the recent volatility in financial markets. Our IGD surplus stands at £3.1bn (2010: £3.8bn) reflecting our decision to successfully tender for €687m of the lower tier two subordinated liabilities. Direct shareholder exposure to debt issued by governments and banks in Greece, Ireland, Italy, Portugal and Spain equates to less than £50m. Our capital and cash generation continues to be strong.

Our embedded value increased to £7,428m (2010: £7,321m) representing an embedded value per share of 317p (2010: 322p). IFRS equity excluding intangible assets and non-controlling interests was £3,761m (31 December 2010: £3,768m), representing 160p per share (2010: 166p). The change in IFRS equity, excluding intangible assets and non-controlling interests, relates primarily to profit for the period attributable to equity holders of £298m offset by the cash impacts of the dividend, net actuarial losses on defined benefit pension schemes, capitalised investment expenditure and the purchase of Focus Solutions.

 

Increase in dividend and commitment to progressive policy

The Board have proposed a final dividend of 9.20p per share (2010: 8.65p). This makes a total of 13.80p (2010: 13.00p) for the year, an increase of 6.2%. Following the Board's decision to remove the Scrip option a Dividend Reinvestment Plan (DRIP) alternative will be offered in 2012, commencing with the final dividend for 2011. The Group will continue to apply its existing progressive dividend policy taking account of market conditions and the Group's financial performance.

 

Outlook

Our confidence in our ability to deliver sustainable growth is underpinned by the results we have delivered today. We also 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.

We continue to drive down unit costs having delivered £79m of efficiency savings towards our £100m margin improvement target which we are on track to achieve in the first half of 2012.

In the UK, we are entering a period of unprecedented change and potential for growth of our business. With the Retail Distribution Review (RDR) less than a year 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 offerings together with the opportunities created by the RDR and pensions reform for increased individual savings will provide us with an increased flow of new business over the medium to long term.

Our business in Canada is well positioned to benefit from the ongoing shift from defined benefit to defined contribution pension provision. Our International business will continue to benefit from the strength of our offshore bond proposition and ongoing progress in our joint ventures but may continue to be affected by the impact of economic uncertainty in Europe.

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 and third party assets.

The uncertain economic backdrop and its effect on consumer confidence have impacted new business volumes since the start of the year against a strong start to last year. However, we see significant opportunities in all of our chosen markets and are confident that the investments we are making will lead to continued strong growth in assets together with further improvements in efficiency. We expect to continue to drive an ongoing improvement in financial performance.

 

UK

Continuing to build on our advantage in our chosen markets

  1 Jan 2011 Gross inflows Redemptions Net inflows Market and other movements 31 Dec 2011
UK fee business (£bn) 76.5 10.5 (7.6) 2.9 (1.6) 77.8
Institutional pensions (£bn) 15.8 3.2 (1.8) 1.4 0.3 17.5
Conventional with profits (excl. annuities) (£bn) 6.6 0.2 (1.7) (1.5) 0.2 5.3
UK fee business total AUA 98.9 13.9 (11.1) 2.8 (1.1) 100.6
Spread/risk business AUA (£bn) 13.4 0.5 (1.2) (0.7) 1.7 14.4
Total AUA backing products (£bn) 112.3 14.4 (12.3) 2.1 0.6 115.0
Fee business revenue (bps) 77         73

UK fee business AUA grew by 2% to £100.6bn, reflecting a continuation of good flows which were partly offset by negative market movements in the second half of the year. Fee business net inflows, into our core retail and corporate pension propositions, increased by 37% to £2.9bn, while new business sales were up 8% to £14.0bn, driven by success of our core propositions. The average revenue yield across our UK fee business was 73bps reflecting the impact of changes in product mix.

Retail business with scale, momentum and market leading propositions

Our retail business continues to be very well positioned for growth by providing IFAs and direct customers with the propositions, tools and service they value. We are focused on meeting the needs of "new model" IFAs who are best placed to prosper in the new market environment we are entering. Developing solutions for both them and their clients has allowed us to grow our intermediary market share without incurring the cost of commission on new business while maintaining our leading position. Our acquisition of Focus Solutions, along with threesixty Services, provides Standard Life with a unique ability to support advisers in developing business models compliant with RDR, and beyond, in a very efficient way. Providing further evidence of our continued progress, Standard Life, once again, won 'Company of the Year' and 'Best SIPP Provider' at the Money Marketing Financial Services Awards.

Our award-winning platforms continue to attract customers, advisers and assets, as we further enhance the features and usability of our proposition. Collectively, our platforms account for 196,800 customers with total assets under administration of £11.4bn. At 31 December 2011 we had 999 (2010: 820) adviser firms on the Wrap platform signing up our 1,000th adviser firm shortly into the new year. We continue to embed the Wrap platform with existing adviser firms resulting in the average AUA per firm rising to £8.5m (2010: £7.4m) despite a 7% decrease in the FTSE All-Share Index during the year.

Total SIPP customers increased to 134,200, an increase of 25% over the year. Our SIPP proposition continues to perform well as we maintain our impressive market share, helping to increase AUA by 10% to £16.4bn (2010: £14.9bn).

Standard Life Wealth continues to build a strong presence in the IFA market with the launch of a Managed Portfolio Service, achieving over £1bn of AUA shortly into the new year.

UK spread/risk business AUA increased to £14.4bn, reflecting falling yields on debt securities which were partly offset by overall net outflows driven by scheduled annuity payments. Gross inflows into annuities were 7% lower at £459m (2010: £491m) reflecting much higher annuity inflows in the first quarter of 2010 ahead of the increase in the minimum retirement age, and the continued impact of actions we have taken to increase sales in the second half of 2011.

Corporate business positioned for growth from market and regulatory trends

Corporate pension gross inflows, excluding Trustee Investment Plan (TIP) business of Standard Life Investments, were up 30% to £3.9bn (2010: £3.0bn), while net inflows increased by 43% to £2.0bn (2010: £1.4bn).

We have continued to build on our momentum, winning 167 new schemes (2010: 182 schemes) while 66,000 new employees joined schemes implemented in 2011 (2010: 46,000 employees).

We have now streamlined our approach to implementation of Lifelens, our market-leading fully integrated pension and employee benefit solution. We expect the next wave of clients to transition throughout 2012 following the successful implementation of Lifelens for Standard Chartered Bank in the first quarter of this year.

We continue to build strong relationships with employers and corporate benefit consultants and are working with them to deliver the most comprehensive benefit solution to auto enrolment ahead of the launch in the third quarter of 2012. Combining the quality of our propositions with the high levels of customer service we offer, means we are well positioned 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 in the second half of this year.

Continuing profitable growth in our fee business

  2011
£m
2010
£m
Fee based revenue 625 593
Spread/risk margin 75 148
Total income 700 741
Acquisition expenses (169) (172)
Maintenance expenses (332) (312)
Investment for transformation and growth (53) (61)
Capital management 10 (21)
Other 64 59
UK operating profit before tax from continuing operations 220 234

Operating profit before tax in the UK business amounted to £220m (2010: £234m). The continued growth in our fee based business resulted in a 5% increase in fee revenue to £625m, although revenues were impacted by significantly lower equity market levels in the second half of the year. This was offset by a reduction in the spread/risk margin which fell by £73m as a result of annuity reserve strengthening in 2011 and a £30m benefit from changes in investment strategy and reserve releases in 2010.

Acquisition expenses fell by £3m to £169m. Maintenance expenses included revenue passed to Standard Life Investments in respect of TIP of £62m (2010: £48m) and maintenance expenses of newly acquired Focus Solutions of £15m with other maintenance expenses lower at £255m (2010: £264m).

Capital management improved due to investment of shareholder funds in higher yielding asset classes and the improved funding position of the UK staff pension scheme. Other comprises the remaining £64m (2010: £59m) benefit following the change in the basis of future pension increases in the UK staff pension scheme.

Lowering the unit costs of our operations

Technology continues to be a key enabler in our drive to lower unit costs. We have undertaken a number of initiatives to manage the acquisition and maintenance expenses of our business and these are beginning to show results. Acquisition expenses expressed as a proportion of PVNBP fell by 10% to 120bps (2010: 133bps) despite the difficult market conditions in the second half of the year. Maintenance expenses expressed as a proportion of average AUA fell to 33bps (2010: 34bps) reflecting the scalability of our operations.

We are lowering unit costs by improving existing propositions and processes, reusing core components across our retail and corporate channels. Offerings such as Lifelens have been designed to be scalable by making greater use of online technologies and direct links to employers, and their employees, increasing self-servicing. Our market-leading adviser portal, Adviserzone, has seen usage double, with the number of users, online quotations and individual adviser firm customisations increasing all the time. We have continued to grow our business while maintaining leading levels of customer service against an improving cost base. The number of full-time equivalent customer service employees fell by 15% since the start of 2010. We have implemented two significant sourcing agreements which will help to reduce both the risk of delivery and overall costs of future IT development.

While these improving trends and opportunities demonstrate the potential for greater operational leverage, we have more to deliver as we continue to transform our business.

Global investment management

Growth in net flows into higher margin products

Third party assets 1 Jan 2011 Gross inflows Redemptions Net inflows Markets and other movements 31 Dec 2011
Fee business (£bn) 71.6 12.9 (8.6) 4.3 (4.1) 71.8
Fee business excl. Global Liquidity Funds (£bn) 67.7 12.9 (8.6) 4.3 (0.2) 71.8
Fee business revenue (bps) 35         37

Assets under management (AUM) in our third party fee business reached a record year end level of £71.8bn (2010: £71.6bn) driven by strong net inflows which were partly offset by the transfer of £3.9bn of Global Liquidity Funds and the impact of negative market movements.

We have continued to see strong demand for Global Absolute Return Strategies (GARS) propositions, both in the UK and overseas, with AUM at 31 December 2011 in excess of £13bn. The MyFolio family of risk-based portfolios, which we have recently expanded to include two new suites of Multi Manager Income and Managed Income funds, has proved popular with UK retail clients and has now attracted over £1.0bn of assets since launch. UK wholesale net inflows and SICAV sales have remained robust at £2.1bn (2010: £2.8bn) despite a downturn in consumer confidence during the second half of the year.

Net inflows in North America have shown positive growth with Canadian sales up 33% to £553m.

We continued to make progress in increasing our global presence. Our award-winning GARS fund has been made available, for the first time, to retail as well as institutional investors in the US via John Hancock Mutual Funds. We have also entered into an agreement with Swedish banking group Länsförsäkringar to distribute our GARS fund to investors in Sweden.

The average revenue yield across our third party business has increased to 37bps (2010: 35bps), excluding the fee received from the transfer of UK money market funds, reflecting our success in attracting higher revenue margin business.

Increased EBIT margin and operating profit before tax

  2011
£m
2010
£m
Fee based revenue 383 331
Maintenance expenses (227) (194)
Investment for transformation and growth (31) (34)
Global investment management operating profit before tax 125 103
EBIT margin2 34% 33%

Operating profit before tax increased by 21% to £125m (2010: £103m). Revenue increased by 16% to £383m driven by strong flows into higher margin products, such as GARS and UK mutual funds, and included a fee received following the transfer of UK money market funds.

Operating costs were tightly controlled while allowing us to accelerate the expansion of our business in our chosen markets. Earnings before interest and tax (EBIT) margin2 increased by 1% to 34%.

Continuing to deliver robust investment performance

Although investment conditions have been difficult, longer term investment performance continues to be robust, with the money weighted average for third party assets well above median over three, five and ten years. Our fixed interest funds have performed well over the twelve months to 31 December 2011 with the Global Index Linked Fund top percentile and the AAA Income Fund top decile. The strength of our mutual fund and unit trust range is demonstrated by the proportion of actively managed funds (22 out of 29) rated 'A' or above by Standard & Poor's in the UK.

 

Canada

Continued growth in fee business and group insurance sales

  1 Jan 2011 Gross inflows Redemptions Net inflows Market and other movements 31 Dec 2011
Fee business AUA (£bn) 14.0 2.3 (1.7) 0.6 (0.3) 14.3
Spread/risk business AUA (£bn) 10.1 1.1 (1.4) (0.3) 0.5 10.3
Total AUA backing products (£bn) 24.1 3.4 (3.1) 0.3 0.2 24.6
Fee business revenue (bps) 118         117

Fee business AUA in Canada has increased by 3%8 to £14.3bn driven by net inflows which were partly offset by negative market movements. Strong sales and market share growth in our retail segregated funds were offset by an increase in mutual fund net outflows. Group savings fee business net inflows of £530m were 25%8 higher (2010: £420m) and included net inflows in to our core defined contribution proposition which increased by 18%8, benefiting from higher renewal flows.

The average revenue yield on fee business decreased slightly to 117bps (2010: 118bps).

Within Canada spread/risk business, the Group insurance and disability management business continues to perform well with PVNBP sales up 34%8 to £826m and strong growth in market share benefiting from large mandates. A large part of these sales consisted of future renewal premiums and as such had a marginal impact on inflows. AUA has increased to £10.3bn driven by market movements partly offset by scheduled outflows in our annuity back book.

We continue to enhance our propositions for both corporate and retail customers. The launch of a stock and options feature and the introduction of the Standard Life Investments GARS proposition to our Quality & Choice investment programme support our market positioning as a provider of comprehensive solutions in benefits and pension management. The addition of a trust capability to our SLX platform enabled us to secure key accounts. In the retail space we launched Ideal Income Segregated Funds which help our customers protect their assets against risks in their retirement. In addition we announced an alliance with Qtrade Financial Group, an online brokerage platform and investment dealer, which will enhance our distribution capabilities.

Increase in operating profit before tax

  2011
£m
2010
£m
Fee based revenue 166 150
Spread/risk margin 281 222
Total income 447 372
Acquisition expenses (61) (64)
Maintenance expenses (201) (193)
Investment for transformation and growth (36) (35)
Capital management 38 30
Canada operating profit before tax 187 110

Operating profit before tax in our Canada business increased by 70% to £187m.

The spread/risk margin included the positive impact of specific management actions designed to enhance investment yields on assets, including a gain on sale of a significant property, as well as one off reserving changes from revisions to investment allocations offset by the impact of strengthened mortality assumptions.

Fee based revenue increased by 11%. The decrease in acquisition costs was primarily due to lower commission charges while the increases in maintenance expenses and capital management were mainly due to the rise in AUA.

 

International

Continued growth in sales with improved performance from joint venture businesses

  1 Jan 2011 Gross inflows Redemptions Net inflows Market and other movements 31 Dec 2011
Wholly owned fee business AUA (£bn) 11.1 2.5 (1.1) 1.4 (0.2) 12.3
India and China JV businesses AUA (£bn) 1.2 0.4 (0.1) 0.3 (0.3) 1.2
Fee business revenue (bps) 212         186

Fee business AUA across our wholly owned International operations increased by 11% to £12.3bn, driven by record net inflows of £1.4bn. New business sales increased by 18% to £2.3bn, with sales growth across all of our wholly owned operations.

Net inflows in Ireland increased by 15% to £0.8bn despite the effects of increased competition and the impact of austerity measures such as the pension levy. We continued to enhance our offshore bond proposition, launching a recurring single premium bond. Our International Bond which exceeded £2bn in AUA, continues to grow. Net inflows in Hong Kong increased by 80% reflecting ongoing demand for our Harvest propositions. The average revenue yield across International wholly owned businesses was lower at 186bps (2010: 212bps), reflecting the charging structure of legacy business and the change in asset mix across International territories.

Net flows in the India and China joint venture businesses increased to £275m (2010: £254m), 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.

Increase in operating profit before tax

  2011
£m
2010
£m
Fee based revenue 221 212
Acquisition expenses (40) (31)
Maintenance expenses (132) (129)
Investment for transformation and growth (12) (15)
Capital management 1 1
Total wholly owned 38 38
India and China JV businesses 2 (23)
International operating profit before tax 40 15

International operating profit before tax more than doubled to £40m. Our joint venture in India, HDFC Life, has achieved profitability and is nearing capital self sufficiency. We continue to make progress in China. Profit from the wholly owned businesses remained strong at £38m.

Higher average AUA resulted in an increase in revenue while higher acquisition expenses reflected growth in sales. The increase in maintenance expenses was due to our growing back book.

 

Supplementary information - analysis of operating profit by segment

  UK Global investment management9 Canada International Other Elimination Total
Year ended 31 December 2011 £m £m £m £m £m £m £m
Fee based revenue 625 383 166 221 - (172) 1,223
Spread/risk margin 75 - 281 - - - 356
Total income 700 383 447 221 - (172) 1,579
Acquisition expenses (169) - (61) (40) - - (270)
Maintenance expenses (332) (227) (201) (132) (3) 172 (723)
Investment for transformation and growth (53) (31) (36) (12) (5) - (137)
Group corporate centre costs - - - - (45) - (45)
Capital management 10 - 38 1 25 - 74
India and China JV businesses - - - 2 - - 2
Other 64 - - - - - 64
Operating profit/(loss) before tax from continuing operations 220 125 187 40 (28) - 544
  UK Global investment management9 Canada International Other Elimination Total
Year ended 31 December 2010 £m £m £m £m £m £m £m
Fee based revenue 593 331 150 212 - (155) 1,131
Spread/risk margin 148 - 222 - - - 370
Total income 741 331 372 212 - (155) 1,501
Acquisition expenses (172) - (64) (31) - - (267)
Maintenance expenses (312) (194) (193) (129) - 155 (673)
Investment for transformation and growth (61) (34) (35) (15) (4) - (149)
Group corporate centre costs - - - - (50) - (50)
Capital management (21) - 30 1 17 - 27
India and China JV businesses - - - (23) - - (23)
Other 59 - - - - - 59
Operating profit/(loss) before tax from continuing operations 234 103 110 15 (37) - 425

 

For further information please contact:

Institutional Equity Investors
Jakub Rosochowski - 0131 245 8028
Craig Cameron - 0131 245 3848

Retail Equity Investors
Capita Registrars - 0845 113 0045

Media
Nicola McGowan - 0131 245 4016 / 07872 191 341
Barry Cameron - 0131 245 6165 / 07712 486 463
Susanna Voyle (Tulchan Communications) - 020 7353 4200 / 07980 894 557

Debt Investors
Scott Forrest - 0131 245 6045
Nick Mardon - 0131 245 6371

Newswires and online publications

We will hold a conference call for newswires and online publications from 07:30 (UK time) on 13 March 2012. Participants should dial +44 (0)1452 555566 and quote Standard Life Preliminary Results 2011. The conference ID number is 54886447. A replay facility will be available for seven days. To access the replay please dial +44 (0)1452 550000. The pass code is 54886447#.

Investors and Analysts

A presentation for investors and analysts will take place at 9:30am at J.P. Morgan Cazenove, 20 Moorgate, London EC2R 6DA. 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 the website later today.

There will also be a live listen-only teleconference of the investor and analyst presentation at 9:30am. Investors and analysts should dial +44 (0)20 3059 8125. Callers should quote Standard Life Preliminary Results 2011. A replay facility will be available for fourteen days. Investors and analysts should dial +44 (0)121 260 4861. The pass code is 1182010#.

Notes to Editors:

  1. In order to be consistent with the presentation of new business information, certain products are included in both long-term savings and investments AUA and net flows. Refer to Supplementary information 4.4 - Group assets under administration and net flows for further information.
  2. Adjusted to exclude the impact of the transfer of Standard Life Investments Global Liquidity Funds plc.
  3. Operating profit is IFRS profit before tax from continuing operations adjusted to remove the impact of market driven short-term fluctuations in investment return and economic assumptions, restructuring costs (including the Solvency 2 restructuring programme), impairments of intangible assets, amortisation of intangible assets acquired in business combinations, profit or loss on the disposal of a subsidiary, joint venture or associate and other significant one-off items outside the control of management.
  4. Change in pension scheme liabilities reflects a change in the basis of future pension increases in the UK staff pension scheme.
  5. Standard Life Wealth has been disclosed separately for the first time in 2011 and includes some assets previously reported as 'Other'.
  6. Other assets included within AUA of £10.4bn (2010: £9.9bn) comprise assets not backing products, joint ventures, non-life assets and consolidation / elimination adjustments.
  7. Comprises market and other movements including the transfer of our UK money market funds following our decision to exit this sector of the industry.
  8. On a constant currency basis.
  9. Global investment management fee based revenue includes share of profits from HDFC Asset Management Company Limited.


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