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Talking about achievements with your Group Chief Executive

Sandy Crombie

Standard Life is an international Group working to add long-term value for shareholders by meeting people’s lifetime financial needs in a flexible, innovative way.

Our aim is to work with our customers – institutional and individual – and to protect their assets through the breadth of our offer. We offer helpful choices about the important financial decisions – owning a home, planning for a rewarding retirement, protecting health, saving for the future and investments.

To do this, we talk to people to understand what they want, provide financial products that can adapt to life’s changes, help our customers to pick solutions that suit them, and make sure they get great personal service from the first moment they talk to us. Customers’ needs will continue to be at the very forefront of our thinking – and our 2006 results show that looking after our customers is good for our business and for our shareholders too.

Financial highlights

We have achieved a strong improvement in our financial performance in 2006. Our strategy of concentrating on higher margin and less capital intensive products has delivered strong growth in new business volumes and profitability.

I am confident that, by continuing to focus on such products and continuing to invest in producing award winning service and superior investment performance, we can capitalise on the market opportunities now open to us.

European Embedded Value

The Group pro forma¹ EEV operating profit before tax rose substantially from £395m in 2005 to £614m in 2006 and our return on embedded value (ROEV) has improved from 7.4% in 2005 to 8.9% in 2006.

This was driven by significantly higher sales volumes, increased life and pensions new business contribution and greater profits from our asset management, banking and healthcare businesses. These factors more than offset the impact of the strengthening of lapse assumptions.

On an IFRS basis, pro forma¹ underlying profit before tax increased by 272% to £540m. This increase was driven by higher fee and commission income resulting from increased funds under management, greater profitability in new business and the prior year figure including £189m in reserve strengthening in the UK life and pensions business.

For the period commencing 10 July 2006, i.e. following demutualisation, the Group is able to report an IFRS profit after tax attributable to equity holders of £283m. Sales for the Group also increased with worldwide new business sales on a present value of new business premiums (PVNBP) basis up 47% to £14,263m from £9,675m in 2005. Annual premium equivalent (APE) increased by 39% to £1,734m from £1,249m.

We are on track to achieve our return on embedded value target for 2007 of 9-10%, and increasing thereafter.

Group Chief Executive statement continued...


¹ See basis of preparation.