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Standard Life plc - Annual Report and Accounts 2007
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Creating capital efficient, innovative solutions

Last year we made some important steps forward. We continued to direct our energy towards the markets, customers and products that offer us better financial opportunities. We supported this with a Group-wide drive to improve efficiency, while making sure that our customers didn't lose out.

We have achieved a 43% increase in Group EEV operating profit before tax to £881m from £614m. This is a reflection of our improvement in margins and product mix. The Group's sales margin rose to 2.1% of PVNBP from 1.4%, which was due to improvements across all of our key global business operations. We are also achieving these improvements faster than planned - our UK life and pensions business achieved a new business margin of 2.1% at the end of 2007 - ahead of our target to reach 2% in 2008.

Efficiency and profitability were a focus for our Canadian business. Our new business contribution in Canada increased 38% in constant currency to £37m (2006: £28m). EEV operating profit before tax increased from £163m to £178m in 2007. As we celebrate our 175th year in Canada this year we aim to rebuild the distribution network and launch several new client propositions to re-start growth.

The Group's financial health is demonstrated by the improvement in capital and cash generation in 2007 and the increase in our regulatory capital resources as at 31 December 2007. A central component of our strategy is to write capital efficient new business. We have reduced new business strain (NBS) by 26% to £225m (2006: £303m) while growing sales volumes by 13%. NBS as a proportion of PVNBP has improved to 1.4% (2006: 2.2%) and was comfortably covered by EEV capital and cash generation from our existing business, which increased by 26% to £549m (2006: £436m). These factors have contributed to the 129% increase in total EEV capital and cash generation after tax to £600m (2006: £262m). Our regulatory capital resources have increased from £7.9bn to £9.2bn, giving solvency cover of 166% of capital resources requirements. The residual estate of the Heritage With Profits Fund (HWPF) at 31 December 2007 was £1.5bn compared with £1.3bn in 2006.

Group Chief Executive's statement ... continued