Interim Results

Standard Life plc
04 September 2007


Standard Life plc

2007 Interim Results - 4 September 2007




• EEV operating profit up 71% to £353m (2006: £206m)

• New business contribution up 66% to £151m (2006: £91m)

• PVNBP margin up to 1.8% in first half of 2007, from 1.4% in full year 2006

• EEV up 5% to £5,911m (31 December 2006: £5,608m), equivalent to 271p
  per share

• EEV cash generation up 68% to £207m (2006: £123m)

• IFRS underlying profit 10% lower at £219m (2006: £243m), up 11% on a
  normalised basis

• Interim dividend of 3.8p, representing 5.6% growth1

Commenting on the results, Group Chief Executive Sandy Crombie said:



'Our 2007 Interim Results show that Standard Life is growing strongly and
profitably.



'We have made significant progress in increasing margin in our UK business over
the first half of 2007, thanks to strong growth in higher margin products
supported by the continued improvement in underlying efficiency.  We are on
track to meet our target of a 9-10% return on embedded value in 2007 and
increasing thereafter.



'I am pleased to be able to announce the payment of our first interim dividend
to our 1.5 million shareholders of 3.8p per share on 30 November 2007,
representing a growth rate of 5.6%.



'Standard Life has enjoyed a successful first year as a listed company and I am
confident we can achieve much more.'




Financial highlights:
                                                                               H1 2007          H1 2006           Change


New business PVNBP                                                             £8,181m          £6,235m              31%
New business APE                                                               £1,009m            £795m              27%
New business contribution                                                        £151m             £91m              66%
PVNBP margin                                                                      1.8%            1.4%2     +0.4% points

EEV operating profit before tax                                                  £353m            £206m              71%
EEV profit before tax                                                            £461m            £266m              73%
Diluted EEV operating EPS                                                        11.2p             7.1p              58%
EEV                                                                            £5,911m         £5,608m3               5%
Return on embedded value                                                          9.1%             6.8%     +2.3% points

IFRS underlying profit before tax                                                £219m            £243m            (10)%
IFRS profit after tax4                                                           £115m             £82m              40%
Diluted IFRS underlying EPS                                                       9.7p             9.9p             (2)%
Interim dividend per share                                                        3.8p                -                -


1  Applying our dividend policy to the dividend announced in the 2006 Preliminary Results.

2  Full Year 2006.

3  As at 31 December 2006.

4  H1 2006 is shown on a mutual basis - refer to section 1.1.3.



EEV operating profit                                                                                          Pro forma
                                                                                                H1 2007         H1 2006
                                                                                                     £m              £m
Life and pensions by country
UK                                                                                                  252             148
Canada                                                                                               75              79
Europe                                                                                               14              25
Other                                                                                               (6)             (2)
HWPF TVOG                                                                                           (2)               -


Life and pensions operating profit                                                                  333             250


Life and pensions by source
New business contribution                                                                           151              91

In-force business
               expected return                                                                      201             189
               experience variances                                                                (15)              22
               operating assumption changes                                                           1            (38)
Development costs                                                                                   (7)            (11)
Expected return on free surplus                                                                       2             (3)


Life and pensions operating profit                                                                  333             250

Investment management                                                                                26              14
Banking                                                                                              14              17
Healthcare and general insurance                                                                      4               3
Group corporate centre costs                                                                       (26)            (42)
Other                                                                                                 2            (36)

Operating profit before tax                                                                         353             206

Tax on operating profit                                                                           (108)            (72)

Operating profit after tax                                                                          245             134






IFRS underlying profit                                                                                        Pro forma
                                                                                                H1 2007         H1 2006
                                                                                                     £m              £m
Life and pensions by country
UK                                                                                                   91             119
Canada                                                                                               64              68
Europe                                                                                               19              52
Other                                                                                               (6)             (2)


Life and pensions underlying profit                                                                 168             237


Investment management                                                                                40              28
Banking                                                                                              14              17
Healthcare and general insurance                                                                      4               3
Group corporate centre costs                                                                       (26)            (42)
Other                                                                                                19               -
Total underlying profit before tax                                                                  219             243

Tax on underlying profit                                                                            (8)            (27)

Underlying profit after tax                                                                         211             216



Basis of preparation

Unless otherwise stated, the comparative results have been calculated using
assumptions to show the results which would have been attributable to
shareholders had the company been owned by the shareholders under the terms of
the Scheme of Demutualisation (the Scheme) throughout the period.  The Scheme
did not take effect until 10 July 2006.  For further information please refer to
the basis of preparation section 1.3 below for both EEV and IFRS.





Standard Life Group



In the first half of 2007, EEV operating profit before tax increased by 71% to
£353m (2006: £206m) delivering an annualised return on embedded value of 9.1%
(2006: 6.8%).  IFRS underlying profit before tax decreased by 10% to £219m
(2006: £243m).  The prior year benefited from provision releases and profits
from exceptional sales in Germany in 2004 and the first quarter of 2005.
Adjusting for these items IFRS underlying profit would have increased by 11%.
Worldwide insurance sales were up by 31% to £8,181m (2006: £6,235m), with a
significant increase in margin from 1.4% in the full year of 2006 to 1.8% in the
first half of 2007.



Embedded value increased by 5% to £5,911m (31 December 2006: £5,608m),
equivalent to 271p per share on a diluted basis (31 December 2006: 258p),
reflecting the EEV retained profit during the first half of 2007.  EEV cash
generation increased by 68% to a £207m inflow (2006: £123m inflow) due to our
focus on capital efficient products.



We will pay an interim dividend of 3.8p per share on 30 November 2007, which
represents growth of 5.6%.  Our intention is to pay a progressive dividend
taking account of the long-term earnings and cash flow potential of the Group.



UK Financial Services



In the UK, life and pensions EEV operating profit before tax increased by 70% to
£252m (2006: £148m).  New business contribution was up 71% to £133m (2006: £78m)
due to 45% growth in sales to £6,954m (2006: £4,802m), and a further
strengthening in margins to 1.9% (H1 2006: 1.8%, FY 2006: 1.5%).  UK IRR
increased to 15% (2006: 14%) for the full product range.  The margin improvement
reflects the strong growth in higher margin product lines, coupled with an
improvement in underlying product margins driven by higher volume.



Net flows for life and pensions business were positive at £1.2bn in the first
half of 2007.  Within this total, net pensions inflows were £1.5bn compared with
£1.8bn in H2 2006.  Excluding institutional TIP, underlying net pensions inflows
strengthened from £0.6bn in H2 2006 to £1.1bn in H1 2007.  Net life outflows
amounted to £0.3bn in H1 2007 compared to £0.6bn in H2 2006.  The improving
trend in underlying net flows has been achieved against a backdrop of claims
activity across our life and pensions portfolios being above expected levels.
In line with normal industry practice, we will review our lapse assumptions as
part of our year end review of all operating assumptions.



We expect the UK life and pensions market to continue to experience good growth
over the medium term.  Over the coming months we expect to exceed market growth
as we continue to enhance our SIPP proposition and to leverage it into the group
pensions market.  Our award-winning platform propositions, underpinned by our
market-leading service and impressive track record in investment performance,
mean we are well placed to capitalise on the available opportunities.



We achieved a 29% increase in gross mortgage lending to £1.6bn (2006: £1.2bn)
despite a competitive banking market.  Credit quality remains extremely high;
the arrears rate of 0.18% at 30 June 2007 continues to be well below the
industry average of 1.15%.  We have cut costs while maintaining high levels of
customer service.  This has been offset by the impact of pressure on interest
margins and the accelerated write-off of acquisition costs as we have taken a
more prudent view of product duration reflecting changes in customer behaviour.
The underlying profit before tax on an IFRS basis decreased by 18% to £14m
(2006: £17m) while the cost income ratio improved to 65% (2006: 67%).  We
anticipate margin pressure will continue to impact on profitability but aim to
mitigate this by continued cost reduction.



In healthcare and general insurance IFRS underlying profit before tax increased
to £4m (2006: £3m).  We expect to generate future growth and improved financial
results through delivery of flexible customer propositions, retention of
profitable existing business and use of lower cost operating platforms.



Canada



In Canada, new business contribution increased by 35% in constant currency to
£14m (2006: £11m) on sales which fell by 37% in constant currency to £589m
(2006: £1,025m), highlighting our focus on margin over volume.  EEV operating
profit before tax increased by 3% in constant currency to £75m (2006: £79m).  A
promising pipeline of prospects in the group savings and retirement business and
our strengthened offering in the group insurance segment are expected to support
improved sales performance.




Europe



In Europe, sales increased 54% in constant currency to £513m (2006: £340m),
including 96% growth in constant currency in Ireland.  New business contribution
doubled to £4m (2006: £2m) while EEV operating profit before tax decreased 44%
to £14m (2006: £25m) reflecting the positive experience variance in Germany in
H1 2006.  We intend to further develop our product range and broaden
distribution and believe good growth potential exists for our markets.



Asia-Pacific



In Asia-Pacific, sales from our joint ventures in India and China and our Hong
Kong operations increased by 107%1 in constant currency.  Our continued
investment in the development and expansion of our operations contributed to the
underlying loss before tax on an IFRS basis of £6m.  We expect further strong
growth driven by new product launches, wider distribution and market expansion.



We have reached agreement with Housing Development Finance Corporation Limited
('HDFC'), our joint venture partner in India, to increase our shareholding in
HDFC Standard Life Insurance Company Limited, the insurance joint venture
company, from approximately 18.8% to 26%, subject only to the compliance with
applicable Indian regulatory requirements.  The cost of acquiring the additional
shares from HDFC will be satisfied in cash and, as it derives from a formula in
the joint venture agreements, will vary depending on the date upon which the
transaction takes place.  If the transaction takes place on 1st October 2007,
the cost will be approximately £22m-£23m.



Standard Life Investments



Standard Life Investments' underlying profit before tax increased by 43% to £40m
on an IFRS basis (2006: £28m) with an improvement in EBIT margin to 29.3% (2006:
24.5%).  Third party funds under management increased by 20% to £46.1bn over the
first six months of 2007 (31 December 2006: £38.5bn), reflecting continued
investment outperformance, which has driven substantial retail and institutional
third party mandate wins.  Worldwide investment net inflows increased 61% to
£5.0bn (2006: £3.1bn).  The pipeline of new business remains strong.  Across the
book of third party assets we have a strong track record that should serve as
the foundation for maintaining the sales momentum.



Delivering continuous improvement



In March we announced our aim to reduce underlying costs by a further £100m by
2009, in addition to existing initiatives announced at the time of the IPO to
reduce UK life and pensions and corporate costs by the end of 2007.  We have
established a UK Financial Services Division and are integrating UK life and
pensions, Standard Life Bank and Standard Life Healthcare.  This will drive both
cost and revenue synergies and enhance our capability to deliver higher
profitability.  We are also taking a groupwide approach to the sourcing for key
processes and to product development, including increased usage of shared
services.  At 30 June 2007, Group headcount was 10,472, a reduction of 269 from
31 December 2006, after creating 147 additional jobs from the investment in UK
SIPP and Wrap.



Outlook



Our focus on customer service, our excellent investment performance and our
innovative product range are expected to continue to drive strong sales.  Our
strategy of concentrating on more profitable, less capital intensive products
offering attractive rates of return, along with the cost efficiency initiatives
announced, will ensure that this growth is converted into improved
profitability.  We remain on track to meet our target for return on embedded
value of 9-10% in 2007 and increasing thereafter.

For a PDF of the full Interim Results including a PDF version of this press
release, please click here http://www.rns-pdf.londonstockexchange.com/rns/2309d_-2007-9-4.pdf.


1 The growth percentage quoted reflects the growth in sales in HDFC Standard
Life Insurance Limited rather than the growth in Standard Life's share of the
joint venture.


For further information please contact:



Equity investors:
Gordon Aitken                                    0131 245 6799
Duncan Heath                                     0131 245 4742



Debt investors:
Andy Townsend                                    0131 245 7260



Media:
Scott White                                      0131 245 5422 / 0771 248 5738
Barry Cameron                                    0131 245 6165 / 0771 248 6463
Neil Bennett (Maitland)                          0207 379 5151 / 0790 000 0777





Newswires and online publications

A conference call will take place for newswires and online publications at
8.00am.  Participants should dial 020 7162 0125 and quote Standard Life Interim 
Results.



Investors and analysts

A presentation to investors and analysts will take place at 9.30am at UBS,
Ground Floor Conference Centre, 1 Finsbury Avenue, London EC2M 2PP.  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 audio teleconference of the investor and analyst
presentation at 9.30am.  UK investors should dial 0845 245 5000, and overseas
investors should dial [phone].  Callers should quote Standard Life
Interim Results.  The conference ID number is 11395127.  A replay facility will
be available for two weeks on 0845 245 5205 for UK investors and 
[phone] for overseas investors. The pass code is 11395127#.




                      This information is provided by RNS
            The company news service from the London Stock Exchange