New Business Results
Standard Life plc
30 January 2008
Standard Life plc
New Business Results - twelve months to 31 December 2007
30 January 2008
• Worldwide life and pensions sales1 up 12% to £16,312m (2006: £14,599m2).
• UK life and pensions sales up 15% to a record level of £13,174m (2006:
£11,436m2).
- Individual SIPP* sales up 24% to £4,538m (2006: £3,651m).
- Group Pensions sales up 29% to £2,574m (2006: £1,989m).
- Wrap funds under administration exceed £1bn (2006: £0.2bn).
• Standard Life Investments worldwide investment net inflows up 39% to
£6,361m (2006: £4,578m).
- Third party funds under management up 24% to £47.7bn (31 December 2006:
£38.5bn), driven by third party net inflows of £7.9bn (2006: £6.4bn).
- Total funds under management up 9% to £143.4bn (31 December 2006:
£132.1bn).
• We expect to achieve all our financial and efficiency targets for 2007.
Unless otherwise stated, all comparisons are in sterling3, all sales figures are
on a PVNBP basis and all comparators are with the twelve months of 2006. *
Individual SIPP includes Insured SIPP & Drawdown and Non-Insured SIPP.
Group Chief Executive Sandy Crombie said:
'The group's performance in 2007 was good, consolidating the strong progress
made in previous years. We grew worldwide life and pensions sales by 12%, and
Standard Life Investments continues to deliver strong growth, despite
challenging market conditions in the second half of the year. At our
Preliminary results on 12 March 2008, we expect to report the achievement of all
our financial and efficiency targets for 2007.
'The early indications are that some of the markets in which we operate will
remain difficult in 2008. We have however made a good start to 2008 and expect
to improve our overall performance in the coming year. Our confidence is based
on our excellence in managing assets, industry-leading customer service, strong
distribution relationships and the ongoing initiatives to improve efficiency.'
Standard Life group
The group's new business performance during 2007 has been good, despite
difficult market conditions in the second half of the year, with growth of 12%
in worldwide life and pensions and a 39% increase in investment net inflows.
The moderation in the growth rate from that seen in the first half of 2007 was
due to lower levels of UK new business, reflecting the impact of seasonality,
uncertainties in the tax regime affecting bond products and volatility in
financial markets. In addition, we secured an unusually large bulk TIP mandate
in the final quarter of 2006. Excluding the bulk TIP mandate, worldwide life
and pensions sales increased by 19% to £16,312m (2006: £13,759m2) for the full
year.
Net flows were healthy during 2007 with net investment inflows of £6.4bn (2006:
£4.6bn) and net inflows in our UK life and pensions operations of £2.5bn (2006:
£3.2bn).
UK Financial Services
The new business performance of our UK financial services division reflects
strong growth in the first half of the year, followed by resilient performance,
in the face of difficult market conditions, in the second half.
Life and pensions new business volumes increased by 15% to a record level of
£13,174m (2006: £11,436m2), driven by 11% growth in pensions and a 38% increase
in savings and investment sales. Gross mortgage lending and healthcare sales
increased by 22% and 10% respectively.
SIPP funds under administration have increased to £7.7bn4 at the year-end (31
December 2006: £4.3bn). At 31 December 2007 we had 46,900 SIPP customers (31
December 2006: 25,200) with an average case size of £164,000.
Individual SIPP sales increased by 24% to £4,538m (2006: £3,651m). Second half
SIPP sales were lower than the first half, largely reflecting expected seasonal
trends as well as the difficult market conditions highlighted in our Q3 sales
release. Whilst market conditions remain challenging, we are encouraged by SIPP
sales achieved in 2008 to date, which are higher than the strong prior year
comparative.
We remain confident in the prospects for the UK SIPP market. We expect the
fundamental attractions of SIPP, namely customer control, choice and
flexibility, to underpin growth. We continue to innovate our SIPP proposition,
with developments such as a high-yielding cash account and the introduction of
on-line servicing during the first quarter. Further enhancements to our SIPP
offering scheduled for 2008 include the launch of a GARS (Global Absolute Return
Strategy) fund link, accepting protected rights and the launch of a variable
annuity offering for the post-retirement market. We believe our competitive
advantages of our people, processes and platform, coupled with our ongoing
programme of proposition enhancements, leave us well positioned to capitalise on
the expected growth in this market.
At 31 December 2007, funds under administration on Standard Life's Wrap platform
had increased to £1.1bn4 (31 December 2006: £0.2bn). At the end of the year
there were 209 IFA firms using the platform (31 December 2006: 88 firms) and
8,100 customers (31 December 2006: 900 customers) with an average fund size of
£133,000. In 2008 we plan to continue this strong growth in our IFA user base.
Individual Pension sales decreased by 18% to £782m (2006: £951m). This reflects
heightened activity in 2006 post A-day and our decision not to pay commission on
new business, which leads to sales being generated mainly from increments to
existing policies.
Group Pensions sales increased by 29% to £2,574m (2006: £1,989m), reflecting the
strong levels of new and incremental business during the fourth quarter and the
large group stakeholder scheme rewritten as a Group SIPP in the second quarter
(£140m). Group SIPP accounted for 27% of total Group Pensions sales during the
year (2006: 14%). At 31 December 2007 UK Group Pension funds under management
had increased to £15.0bn (31 December 2006: £13.5bn). At the end of 2007 we had
a strong pipeline of new business, with a large scheme expected to transition
during the first quarter.
Trustee Investment Plan (TIP) and Personal Pension Investment Plan (PPIP) new
business decreased by 14% to £2,089m5 (2006: £2,428m). However, this movement
reflects the £840m bulk TIP mandate from Citigroup which was secured in the
fourth quarter of 2006, and which accounted for 23% of total UK life and
pensions sales in that quarter. Excluding this transaction TIP and PPIP new
business increased by 32% for the full year.
Savings and investments sales increased by 38% to £2,672m (2006: £1,937m).
Sales of Offshore Bonds, at £284m, were over seven times the level of the prior
year (2006: £39m), and benefited from the launch of our retail portfolio bond
and our distribution agreement with Fidelity. Investment Bond sales fell
marginally to £1,824m (2006: £1,862m). This was despite the slowdown in the
onshore market in the second half of the year, which was driven by weakness in
global financial markets and uncertainty regarding proposed capital gains tax
changes. We await clarity on the capital gains tax proposal - any sales impact
will be monitored and appropriate action taken where necessary.
Sales of Mutual Funds via our Wrap and FundZone platforms increased
significantly during the year to £564m (2006: £36m) with strong growth rates in
the first three quarters partially offset by market-driven lower sales levels in
the final quarter.
Annuity sales increased by 13% to £494m (2006: £438m). 94% of annuity sales
came from customers with maturing Standard Life pensions (2006: 93%).
We continue to strengthen our distribution capability in the UK life and
pensions market by diversifying across channels whilst maintaining strong growth
in the traditional IFA sector. Sales generated through non-traditional IFA
channels (consulting actuaries, employee benefit consultants and banks) and
other new channels (including multi-tie and single-tie arrangements) represented
41% of new business (2006: 34%).
Net flows for life and pensions business were £2.5bn during 2007 (2006: £3.2bn)
6. Within this total, net pensions flows were £2.7bn (2006: £3.6bn). Excluding
volatile institutional TIP flows, underlying net pensions flows were £1.7bn
(2006: £1.9bn). Net outflows for our savings and investments portfolio were
£0.2bn during the period (2006: net outflow of £0.4bn). Claims activity across
our life and pensions portfolios remains above long-term assumed levels, despite
an improvement in recent weeks. In line with normal industry practice, we will
review our operating assumptions as part of the year end process.
Gross mortgage lending increased by 22% to £3,652m (2006: £2,995m) with sales
volumes resilient to difficult market conditions throughout the year. At the
end of the year mortgages under management stood at £11.3bn (31 December 2006:
£10.4bn). Our mortgage portfolio remains of the highest quality with an arrears
rate of 0.18% at 31 December 2007, compared with an industry average of 1.15% at
the end of the third quarter.
Healthcare sales rose by 10% to £22m (2006: £20m) on an annual premium
equivalent (APE) basis. Following the launch of our SME product we expect
further progress in this market over the coming months.
Europe
Life and pensions sales in Europe increased by 35% in constant currency to
£1,179m (2006: £866m).
Sales in Ireland increased by 38% in constant currency to £457m (2006: £330m)
reflecting the continued popularity of our new products, self investment options
inspired by the UK SIPP platform, and our improved standing amongst financial
advisers. We have increased the proportion of single premium sales, which have
greater profitability and lower capital strain.
In Germany sales were up by 34% on a constant currency basis to £722m (2006:
£536m) due to the success of our new unit-linked product, Maxxellence and
initiatives to strengthen distribution.
Canada
New business in our Canadian operations fell by 19% in constant currency to
£1,657m (2006: £2,091m2). Excluding exceptionally large transactions,
underlying sales volumes fell by 8%. This underlying trend reflects our focus
on margin over volume as well as the planned realignment of our distribution
capability, which reduced sales levels earlier this year. Sales in Canada
increased during the fourth quarter relative to the third quarter, principally
reflecting a large Group Savings and Retirement mandate, which transitioned
during the period.
Group Savings and Retirement sales decreased by 27% in constant currency to
£841m (2006: £1,188m). Fourth quarter sales volumes benefited from a £196m
mandate from Bombardier Recreational Products (BRP). Competition within the
market remains aggressive and quote activity across all segments has reduced.
Individual Insurance, Savings & Retirement sales were down 20% in constant
currency to £357m (2006: £460m) reflecting the continuing realignment of our
sales operations and the inclusion in the prior year of unprofitable Universal
Life sales, which the company no longer writes.
Group Insurance sales were up 26% in constant currency to £175m (2006: £143m).
Sales volumes for 2007 increased in the fourth quarter, reflecting our success
in the disability insurance segment following our strategic repositioning in
that market.
Asia Pacific
Combined sales from our joint ventures in India and China and our Hong Kong
operations have increased in constant currency by 67%7 on a PVNBP basis and by
91% on an APE basis. Standard Life's share of these sales was £302m (2006:
£206m) on a PVNBP basis.
Sales from our Indian joint venture HDFC Standard Life Insurance Limited
increased in constant currency by 43% on a PVNBP basis and by 75% on an APE
basis. The number of financial consultants appointed by the joint venture has
increased to approximately 132,000, an increase of 33,000 during the fourth
quarter. At year end, we increased our stake in the joint venture to 26%,
which is the maximum permitted by the Indian Regulator. The joint venture has
also announced its intention to IPO part of the business by the end of 2009.
Sales generated by our Chinese joint venture, Heng An Standard Life increased in
constant currency by 121% on a PVNBP basis and by 118% on an APE basis,
reflecting our continued expansion in major cities. During the fourth quarter
Heng An Standard Life moved into a top 10 position by market share amongst the
Sino-foreign JV group in China. Our joint venture was also the first life
insurance company in China to launch a group pension plan product that attracts
tax relief.
Standard Life Investments
Standard Life Investments has continued to attract strong levels of new business
throughout the year, despite the challenging market faced in the second half.
Worldwide investment net inflows for the year increased by 39% to £6,361m (2006:
£4,578m).
Strong sales of institutional and retail business led to UK net inflows
increasing by 34% to £5,439m (2006: £4,050m). Retail mutual fund inflows
increased by 13% to £1,460m (2006: £1,287m) despite a slowdown in gross inflows
during the second half, which can be directly linked to the recent volatility in
global financial markets. Inflows into Private Equity funds increased by 31% to
£464m (2006: £354m), due to the large mandate of €400m (£279m) from CalPers8
which transitioned during the third quarter. Segregated fund inflows increased
by 64% to £2,322m (2006: £1,417m) partly due to two large bond mandates in the
third quarter.
Over the year we experienced a strengthening of net inflows in respect of our
Canadian and International operations to £400m (2006: £104m) and £522m (2006:
£424m) respectively.
Third party assets under management have increased by 24% to £47.7bn (31
December 2006: £38.5bn) driven by strong third party net inflows of £7.9bn
(2006: £6.4bn), which accounted for 87% of this increase. Total assets under
management increased by 9% to £143.4bn at 31 December 2007 (31 December 2006:
£132.1bn).
Investment performance has been steady with 13 of the 23 pooled pension funds
outperforming their respective peer groups during the twelve months to 31
December 2007. The majority of our 24 OEICs and Unit Trusts continued to
outperform their peer group with seven funds achieving top quartile performance
with the European Equity Growth Fund returning top decile performance.
Management of the range was also recognised with 18 of the 24 actively managed
funds rated 'A' or above by Standard & Poor's.
Standard Life group outlook
At our 2007 Preliminary results we expect to report the achievement of all our
financial and efficiency targets for the year, along with increased cash flow,
driven by growth in sales and the continued delivery of operational
improvements.
Volatile investment markets, the downturn in the commercial property sector, and
uncertainties in the tax regime affecting bond products are expected to continue
to have an impact on the UK market during the first quarter.
However we expect to maintain our market leading position, due to our ongoing
development of propositions that are attractive in the current market
environment and the resilience of our distribution channels. Early indications
from January 2008 support this expectation, with UK life and pensions sales
achieved to date higher than the strong prior year comparative.
In recent weeks, we launched Standard Life Wealth, a new discretionary
investment management business which further broadens our offering in the UK
financial services market. Standard Life Wealth will target individuals,
charities and small or executive pension schemes with at least £2m of investable
assets.
Internationally, the prospects for 2008 are encouraging. In Europe market
conditions continue to be difficult but while we expect the rate of growth will
slow compared to that seen in 2007, we anticipate 2008 will be ahead of last
year. In Canada the ongoing rebuilding of our retail sales force and already
secured sales will provide a more positive start to 2008 than the prior year.
In Asia Pacific we expect further strong growth in our operations driven by new
product launches, wider distribution and market expansion. We expect to see
continued strong growth in the Indian market due to an increase in household
incomes, favourable demographics and increased penetration of rural markets. In
China we expect continued product innovation as our joint venture utilises its
geographical advantage of being based in the Tianjin Binhai New Area Insurance
Pilot Zone.
The outlook for Standard Life Investments remains positive, despite volatile
markets and the industry wide slow down in mutual fund sales experienced during
the fourth quarter of 2007. Strong third party inflows, driven by institutional
funds, are expected to sustain continued growth in third party assets under
management.
We look forward to 2008 with confidence.
For further information please contact:
Institutional Equity Investors:
Gordon Aitken 0131 245 6799
Duncan Heath 0131 245 4742
Retail Equity Investors:
Computershare 0845 113 0045
Media:
Barry Cameron 0131 245 6165 / 07712 486 463
Neil Bennett (Maitland) 020 7379 5151 / 07900 000 777
Debt Investors:
Andy Townsend 0131 245 7260
Notes to Editors
1. Present Value of New Business Premiums (PVNBP) is calculated as 100% of
single premiums plus the expected present value of new regular premiums.
The 2007 PVNBP figures are shown prior to any year end changes to
non-economic assumptions. The impact on PVNBP of any such assumption changes
will be reported in the 2007 preliminary results on 12 March 2008. For our
Asia Pacific operations we have quoted growth rates on both PVNBP and APE
bases, due to the young and rapidly growing nature of these businesses.
2. We are reporting sales of Mutual Funds within our UK and Canadian life and
pensions operations for the first time and have restated 2006 figures
accordingly. Mutual Funds sales in the UK are defined as those sold to
customers on the Wrap and FundZone platforms and do not include Mutual Funds
sold by Standard Life Investments.
3. Insurance new business and gross sales for overseas operations are calculated
using average exchange rates. The principal average exchange rates for the
twelve months to 31 December 2007 were £1: C$2.15 (2006: £1: C$2.09) and £1:
€1.46 (2006: £1: €1.47). Funds under management are calculated using the
closing exchange rate as at 31 December 2007. The principal closing
exchange rates used as at 31 December 2007 were £1: C$1.96 (31 December
2006: £1: C$2.28) and £1: €1.36 (31 December 2006: £1: €1.48).
4. Analysis of Individual SIPP funds under administration.
31 Dec 31 Dec
2007 2006
£m £m
Insured Standard Life Funds 2,752 1,923
Insured External Funds 1,671 921
Collectives - Standard Life Investments 834 361
Collectives - Funds Network 603 234
Cash 484 223
Non Cash and Non Collectives 1,332 599
Total 7,676 4,261
Insured 4,423 2,844
Non-insured 3,253 1,417
Total 7,676 4,261
Of the £7.7bn of SIPP funds under administration at 31 December 2007, £0.4bn
relate to funds on the Wrap platform.
5. Investments (TIP & PPIP) sales comprised Institutional sales of £2,015m
(2006: £2,310m) and Retail sales of £74m (2006: £118m).
6. Net flows for UK life and pensions products
12 months 12 months Q4 2007 Q4
2007 2006 2006
Pensions £bn £bn £bn £bn
Insured Pensions
Premiums / Deposits 9.0 8.8 2.0 2.9
Claims (6.8) (5.3) (1.5) (1.9)
Annuity Payments (0.9) (0.8) (0.2) (0.2)
Insured Pension Net Flows 1.3 2.7 0.3 0.8
Non - Insured Pensions
Premiums / Deposits 1.6 1.0 0.4 0.3
Claims (0.2) (0.1) (0.1) (0.0)
Non-Insured Pension Net Flows 1.4 0.9 0.3 0.3
Total Pension Net Flows 2.7 3.6 0.6 1.1
Savings and Investments
Life Products
Premiums / Deposits 2.6 2.7 0.5 0.7
Claims (3.6) (3.1) (0.9) (0.9)
Life Net Flows (1.0) (0.4) (0.4) (0.2)
Offshore Bonds
Premiums / Deposits 0.3 0.0 0.1 0.0
Claims (0.0) (0.0) (0.0) (0.0)
Offshore Bonds Net Flows 0.3 0.0 0.1 0.0
Mutual Funds
Premiums / Deposits 0.5 0.0 0.1 0.0
Claims (0.0) (0.0) (0.0) (0.0)
Mutual Fund Net Flows 0.5 0.0 0.1 0.0
Total Savings and Investments Net Flows (0.2) (0.4) (0.2) (0.2)
UK L&P Net Flows
Total UK L&P Insured-Product Flows 1.1 2.3 0.1 0.6
Total UK L&P Non-Insured Product Flows 1.4 0.9 0.3 0.3
Total UK L&P Net Flows 2.5 3.2 0.4 0.9
The figures reflected in the table above include the following amounts in respect of Institutional TIP:
12 months 12 months Q4 2007 Q4
2007 2006 2006
£bn £bn £bn £bn
Premiums / Deposits 2.1 2.4 0.6 1.2
Claims (1.1) (0.7) (0.3) (0.2)
Net Flows 1.0 1.7 0.3 1.0
7. The growth percentages quoted for India, Asia Pacific life and pensions
and Total worldwide life and pensions reflect the growth in sales in HDFC
Standard Life Insurance Limited, rather than the growth in Standard Life's
share of the joint venture. The sales quoted reflect Standard Life's share
of the joint venture.
8. California Public Employees Retirement System (CalPers).
9. 2006 sales figures span the demutualisation of The Standard Life Assurance
Company on 10 July 2006.
10. Department of Work and Pensions rebate premiums were £252m (2006: £289m),
comprising Individual Pensions rebates of £145m (2006: £172m) and Group
Pensions rebates of £107m (2006: £117m).
11. There will be a conference call today for newswires and online publications
at 8.00am hosted by Sandy Crombie, Group Chief Executive, David Nish, Group
Finance Director, and Keith Skeoch, Chief Executive of Standard Life
Investments. Dial in telephone number +44 (0)20 7162 0025. Callers should
quote Standard Life Media Call.
12. There will be a conference call today for investors and analysts at 9.30am
hosted by Sandy Crombie, Group Chief Executive, David Nish, Group Finance
Director, and Keith Skeoch, Chief Executive of Standard Life Investments.
Dial in telephone number +44 (0)20 7162 0125. Callers should quote Standard
Life Sales. A recording of this call will be available for replay for one
week by dialing +44 (0)20 7031 4064 (access code 780224).
Standard Life New Business Summary
12 month period ended 31 December 2007
Insurance Operations PVNBP APE
12 months to 12 months to % Change 12 months to 12 months to % Change
31 December 31 December (g) 31 December 31 December (g)
2007 2006 2007 2006
UK £m £m £m £m
Pensions (a) 9,983 9,019 11% 1,335 1,201 11%
Savings and Investments
(including 'Life') (b) 2,672 1,937 38% 275 195 41%
Annuities 494 438 13% 49 44 13%
Protection 25 42 (40%) 4 6 (33%)
UK life and pensions 13,174 11,436 15% 1,663 1,446 15%
Europe
Ireland 457 330 38% 56 46 22%
Germany 722 536 35% 69 51 35%
Europe life and pensions 1,179 866 36% 125 97 29%
Canada
Group Savings and
Retirement 841 1,188 (29%) 70 98 (29%)
Individual Insurance,
Savings and Retirement 357 460 (22%) 36 49 (27%)
Group Insurance 175 143 22% 23 19 21%
Mutual Funds 284 300 (5%) 28 30 (7%)
Canada life and pensions 1,657 2,091 (21%) 157 196 (20%)
Asia Pacific
India (d) 223 180 45% (c) 38 25 76% (c)
China (d) 55 26 112% 8 4 100%
Hong Kong 24 - - 3 - -
Asia Pacific life and
pensions 302 206 67% (c) 49 29 96% (c)
Total worldwide life
and pensions 16,312 14,599 12% (c) 1,994 1,768 13% (c)
Investment Operations Gross Inflows Net Inflows
12 months to 12 months to 12 months to 12 months to
31 December 31 December 31 December 31 December
2007 2006 2007 2006
£m £m £m £m
UK (e) 7,025 4,773 5,439 4,050
Canada 720 369 400 104
International (f) 647 615 522 424
Total worldwide investment 8,392 5,757 6,361 4,578
Banking Operations 12 months to 12 months to % Change
31 December 31 December (g)
2007 2006
£m £m
Gross mortgage lending 3,652 2,995 22%
SL Healthcare 12 months to 12 months to % Change
31 December 31 December (g)
2007 2006
£m £m
APE 22 20 10%
(a) UK Pensions figures include non-insurance element of SIPP product (12 months
ended 31 December 2007 PVNBP £1,823m, APE £194m and 12 months ended 31 December
2006 PVNBP £1,218m, APE £129m).
(b) UK Savings and Investments figure includes certain Mutual Funds as described
in Note 2 (12 months ended 31 December 2007 PVNBP £564m, APE £64m and 12 months
ended 31 December 2006 PVNBP £36m, APE £4m).
(c) The percentage change figures for India are computed based on the percentage
movement in the new business of HDFC Standard Life Insurance Limited as a whole
to avoid distortion due to changes in the Group's shareholding in the joint
venture during 2006 and 2007.
(d) Amounts shown reflect Standard Life's share of the Joint Venture Company's
New Business except as noted in (c) above.
(e) The Triple A fund within UK Investment sales is calculated using average net
client balances.
(f) International gross inflows include India where, due to the nature of the
Indian investment sales market, the new business is shown as the net of sales
less redemptions.
(g) % change is calculated on the figures rounded to millions
For the full Press Release including detailed financial tables, please click
here:
http://www.rns-pdf.londonstockexchange.com/rns/8254m_-2008-1-29.pdf
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