Interim Management Statement

Standard Life plc
30 April 2008


Standard Life plc

Interim Management Statement - three months to 31 March 2008

30 April 2008



Net flows

  • Worldwide life and pensions net inflows up 31% to £986m1.
  • UK life and pensions net inflows up 42% to £826m.
  • Worldwide investment net inflows up 1% to £2,295m.

New business sales

  • Worldwide life and pensions sales up 8% to £4,477m.
  • UK life and pensions sales up 6% to £3,516m.

Other developments

  • £6.7bn of UK immediate annuity liabilities reinsured.
  • Global Liquidity Funds* restructured, with an expected net cash cost of
    £17m after tax.

Group Chief Executive Sandy Crombie said:



'We have delivered a solid performance in the first quarter against a backdrop
of economic uncertainty and volatile markets.



'In the UK, we've seen robust performance against a strong comparative period.
Net flows and sales both increased and we successfully reinsured £6.7bn of
annuities to reduce the longevity risk borne by our shareholders.  The strength
of our balance sheet has also enabled us to approve the restructuring of one of
the Global Liquidity sub-funds, providing support to our customers and limiting
shareholders' exposure. Investment management net inflows have been resilient
largely reflecting our strengths in the institutional market.  We had a good
start to the year in Canada following the repositioning of the business in 2007
while our joint venture operations in India and China continue on a strong
growth path.



'While market conditions ahead appear challenging, particularly in the UK, we
remain confident in our ability to outperform in the profitable segments in
which we operate.'



Unless otherwise stated, all comparisons are in sterling, all sales figures are
on a PVNBP basis and all comparators are with the first three months of 2007.
* 'Global Liquidity Funds' refers to Standard Life Investments (Global Liquidity
Funds) plc.
Net flows



As Standard Life is an asset managing business, net flows are a key driver of
shareholder value. Consistent with this focus, we are introducing new disclosure
in respect of life and pensions net flows.  This enhanced disclosure increases
transparency and will assist investors in gaining a clearer understanding of the
performance of our business.  Total net flows across our UK, European and
Canadian life and pensions operations have strengthened by 31% to £986m.



UK life and pensions net flows have been resilient in the face of challenging
market conditions, increasing by 42% to £826m during the first quarter.  Within
this total, net pensions flows excluding volatile institutional TIP flows were
£603m (2007: £367m), the overall improvement being driven by reduced claims.
Net savings and investments inflows amounted to £198m (2007: net outflow of
£66m) reflecting higher gross inflows.  Claims levels across our pensions and
with profits portfolios continue to trend downwards and are now within our
strengthened long-term assumptions.  Claims levels of unit-linked bonds, driven
by market volatility and recent CGT changes, are consistent with the short-term
lapse provision set up at the year-end.



In Europe, net flows strengthened by 15% to £147m, due to higher net inflows
within our German operations.  Canadian net flows reflect the continuation of
scheduled payments made in respect of legacy annuity products, which have been
less actively marketed since the repositioning of the business in 2005, and
reduced to £13m from £43m.



Standard Life Investments' worldwide investment net inflows increased by 1% to a
record level of £2,295m during the quarter.  Net investment inflows for
Institutional business, which accounts for around 80% of our third party funds
under management, increased by 20%.  This reflects further mandate wins
including a significant mandate in the UK, the majority of whose assets
transitioned during the quarter.  As expected, and in line with the industry,
net flows in respect of third party retail Mutual Funds were significantly lower
than the prior year.



UK Financial Services



Sales within our UK financial services division increased in the first quarter
with total life and pensions sales up by 6% to £3,516m, driven by a 43% increase
in savings and investment sales.  Pension sales were 2% lower than a strong
prior year comparator.  Gross mortgage lending decreased by 46% to £407m (2007:
£748m) whilst healthcare sales, on an APE basis, increased by 60% to £8m (2007:
£5m).



Individual SIPP funds under administration increased by 6% to £8.1bn2 (31
December 2007: £7.7bn), the impact of net inflows of £845m (2007: £1,020m) being
partly offset by a market-driven reduction in underlying asset values.  During
the quarter SIPP customer numbers increased by 12% to 52,600 (31 December 2007:
46,900) with average case sizes across our SIPP portfolio reducing to £154,000
at the end of the quarter (31 December 2007: £164,000).



Individual SIPP sales of £1,059m were 14% lower than a very strong prior year
period that was significantly enhanced by heightened activity post A-day.  This
is largely due to the impact of market movements on average incoming transfer
values, which continue to represent the majority of total SIPP sales.  Recent
sales figures reflect the emergence of a more mature and seasonal market, with
sales levels achieved in the first quarter representing growth of 10% compared
to the fourth quarter of 2007.



Group Pensions sales increased by 48% to £896m, reflecting strong levels of new
and incremental business and a large scheme (£224m) won during the quarter.
Group SIPP volumes increased by 34% compared to the prior year and accounted for
24% of total Group Pensions sales (2007: 27%).  At 31 March 2008, UK Group
Pensions funds under management had reduced marginally to £14.9bn (31 December
2007: £15.0bn), the strong growth in new business volumes being offset by
negative market movements.



Savings and Investments sales increased by 43% to £918m.  This was largely
driven by sales of Investment Bonds, which increased by 22% to £652m, due to
capital-lite volumes secured through bulk deals with large institutional
distributors at lower margins.  The continued popularity of our retail portfolio
bond has been reflected in the strong performance of our Offshore Bonds, with
sales increasing to £118m, or five times the level of the prior year.



At 31 March 2008, funds under administration on Standard Life's Wrap platform
had increased by 16% to £1.3bn (31 December 2007: £1.1bn).  At the end of the
quarter there were 234 IFA firms using the platform (31 December 2007: 209
firms) and 10,400 customers (31 December 2007: 8,100 customers) with an average
fund size of £121,000 (31 December 2007: £133,000).



The sharp decrease in gross mortgage lending has been driven by a number of
strategic measures in line with those of many mortgage lenders.  These have been
implemented to drive profitability in response to difficult credit market
conditions.  At 31 March 2008 mortgages under management stood at £11.0bn (31
December 2007: £11.3bn), with an arrears rate across our mortgage portfolio of
0.22%, which compared favourably to the Council of Mortgage Lenders industry
average of 1.20%.



Savings balances in our banking operations continue to increase with total
savings balances at 31 March 2008 of £4.7bn (31 December 2007: £4.6bn).  This
total includes combined SIPP and Wrap balances of £852m (31 December 2007:
£629m).



Europe



Life and pensions sales in Europe were 24% lower than the prior year in constant
currency.  In Ireland, sales of £94m were 35% lower than the prior year in
constant currency, reflecting the difficult market conditions in the Irish
market.  Sales in Germany of £121m were 11% lower in constant currency and were
affected by recent changes in insurance contract regulations, which have
impacted the sales process across the German life and pensions industry.



Canada



Sales generated by our Canadian operations increased by 9% in constant currency
to £556m despite the impact of weak equity markets.  Sales of Group Savings and
Retirement products benefited from a number of mid-size mandates secured in the
quarter whilst growth in Group Insurance sales reflected our continued success
in the disability insurance segment.



Asia Pacific



Combined sales from our joint ventures in India and China and our Hong Kong
operations increased by 31% in constant currency on a PVNBP basis and by 84% on
an APE basis despite volatile market conditions3.  In India, sales increased by
23% in constant currency on a PVNBP basis and by 80% on an APE basis.  Standard
Life's share of these sales was £166m (2007: £78m).  The number of financial
consultants appointed by the joint venture has increased to approximately
145,000 (31 December 2007: 132,000).  In China, sales volumes increased by 131%
in constant currency on a PVNBP basis and by 147% on an APE basis, reflecting
strong growth in group products and in bank distribution, as well as continued
business expansion in major cities within existing provinces.  Standard Life's
share of these sales was £19m (2007: £8m).


Standard Life Investments



Third party funds under management increased by 1% during the quarter to £48.2bn
(31 December 2007: £47.7bn), the strong net inflows of £2,295m being largely
offset by a market-driven reduction in asset values.  Total funds under
management decreased by 6% during the quarter and predominantly reflects the
annuity reinsurance transaction entered into in February 2008 which reduced
funds under management by £6.7bn.  Excluding the impact of this reinsurance
transaction, total funds under management reduced by 2% during the quarter
compared to a fall of 11% in the FTSE All Share index.

Investment performance has been steady with 18 of the 23 pooled pension funds
outperforming their respective peer groups during the twelve months to 31 March
2008.  The strength of performance across a range of Mutual Funds is
demonstrated by the high proportion of eligible funds, (18 out of 23), rated 'A'
or above by Standard & Poor's.  Money weighted average investment performance
over 3 and 5 year periods continues to be top quartile and remains a key driver
of our strong institutional sales and pipeline.



Other developments



Reinsurance of UK Immediate Annuity Liabilities



As previously announced, in February 2008 Standard Life reinsured £6.7bn of UK
immediate annuity liabilities, more than half of its total £12bn, to Canada Life
International Re, a wholly owned subsidiary of Great-West Lifeco.



This transaction, which is believed to be the largest of its kind in the UK,
followed a full analysis of the strategic options for the annuity book.  It has
significantly reduced the longevity risk borne by shareholders and has generated
an expected one-off positive impact on embedded value operating profit before
tax of at least £100m, based on existing EEV methodology.  It has released cash
from reserves and reduced capital requirements.  The transaction has also
benefited policyholders as there has been an enhancement to the Heritage With
Profits Fund estate and a reduction in its exposure to risk.



In addition to the financial benefits, reducing the shareholders' longevity
exposure has provided greater capacity to broaden the Group's innovative product
range and take advantage of the profitable opportunities available.



Restructuring of the Global Liquidity Funds



As reported in the 2007 preliminary results, a provision of £10m had been
established for a guarantee provided by Standard Life to an associate.  This
guarantee was provided to Standard Life Investments (Global Liquidity Funds)
plc, to maintain the pricing structure for the investors in two of its
sub-funds.



Following the continued deterioration in liquidity conditions, the principal
sub-fund covered by the guarantee has been restructured, changing its pricing
structure to a mark-to-market basis and removing the guarantee.  As a result of
the restructuring, Standard Life has substituted an indirect exposure to the
underlying assets of the fund with a direct investment representing £565m4,5 of
highly rated asset backed securities with an average duration of 2.9 years.  In
addition, Standard Life has substituted £455m4,5 of investment in corporate
bonds, used to back subordinated debt, with an investment in a portfolio of more
highly rated and higher yielding asset backed securities acquired from the fund
with an average duration of 3.2 years.  These assets will be held to maturity,
with expected mark-to-market benefits.  Full details of these assets are
provided in Note 4 to Editors.  The restructuring provides continuing investment
opportunities and support to customers and limits shareholders' exposure.



The expected net of tax impact on the Group's first half 2008 profits on both an
EEV and IFRS basis as at 28 April 2008 is a reduction of £37m5.  The expected
net cash cost is £17m5 after tax.  There has been no material change in Standard
Life's total investment (including third party funds) in asset backed securities
since 31 December 2007.  A residual guarantee, for a maximum of £5m, has been
provided in relation to the other sub-fund covered by the original guarantee.



Standard Life group outlook



In the UK, the market outlook for sales of investment products is challenging
due to market volatility and the impact of the CGT changes on bonds.  Whilst
pensions business overall is less directly sensitive to investment conditions,
reduced market values depress incoming transfer values to SIPPs and Group
schemes.  Against this backdrop, we remain confident in our ability to
outperform the market in the profitable segments in which we operate.



We expect to deliver growth in Canada due to the rebuilding of our retail sales
and distribution capabilities.  In addition, we expect further strong growth in
our Asia Pacific joint ventures.  This will be driven by the development of
distribution, continued recruitment of agents and extension of reach through new
branches, penetration of existing markets and continued product development.  In
contrast, market conditions in Europe continue to be challenging and, until
confidence is restored in investment markets, we expect sales growth to be
significantly slower than 2007.



The outlook for Standard Life Investments remains positive with a significant
pipeline of new institutional business expected to underpin resilient third
party inflows and continued growth in third party assets under management.









For the full Press Release, including detailed financial tables, please click
here:


http://www.rns-pdf.londonstockexchange.com/rns/3981t_-2008-4-29.pdf














For further information please contact:



Institutional Equity Investors:



Gordon Aitken                          0131 245 6799

Duncan Heath                           0131 245 4742

Paul De'Ath                            0131 245 9893



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. Worldwide life and pensions net inflows do not include net inflows in respect
    of our Asia Pacific joint ventures.



 2. Analysis of Individual SIPP funds under administration.

                                                            31 Mar         31 Dec           Change
                                                              2008           2007
                                                                £m             £m           £m         %


Insured Standard Life Funds                                  2,787          2,752           35         1
Insured External Funds                                       1,619          1,671         (52)       (3)
Collectives - Standard Life Investments                        856            834           22         3
Collectives - Funds Network                                    621            603           18         3
Cash                                                           645            484          161        33
Non Cash and Non Collectives                                 1,575          1,332          243        18
Total                                                        8,103          7,676          427         6

Insured                                                      4,406          4,423         (17)       (0)
Non-insured                                                  3,697          3,253          444        14
Total                                                        8,103          7,676          427         6



Of the £8.1bn funds under administration at 31 March 2008, £0.5bn relate to
funds on the Wrap platform.



3.      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.  Sales quoted reflect Standard Life's share of the joint
venture.




4.      Assets transferred to a direct holding of the Group.
                                                          Aaa            Aa            A          < A        Total
                                                           £m            £m           £m           £m           £m
ABCP                                                        -             -            -            -            -
Auto ABS                                                    -             -            -            -            -
CMBS                                                      199             -            -            -          199
Credit Card ABS                                            53             -            -            -           53
RMBS                                                      677            13            -            -          690
US Sub-Prime RMBS                                           -             -            -            -            -
SIV                                                        30             -           20           11           61
WhCo                                                        -             -            -            -            -
CDO                                                         -             -            -            -            -
CSO                                                         -             -            -            -            -
CLO                                                         -             -            -            -            -
Other ABS                                                  17             -            -            -           17
Total                                                     976            13           20           11        1,020
% of total                                                96%            1%           2%           1%         100%



Based on market values as at 28 April 2008



5.      Numbers based on prices available as at 28 April 2008, the latest
practicable date prior to the publication of this statement.  Final numbers will
reflect prices as at 29 April 2008.



 6. There will be a conference call today for newswires and online publications
    at 8.00am hosted by David Nish, Group Finance Director and Keith Skeoch,
    Chief Executive of Standard Life Investments.  Dial in telephone number 
    [phone].  Callers should quote Standard Life Media Call.



 7. There will be a conference call today for investors and analysts at 9.30am
    hosted by David Nish, Group Finance Director and Keith Skeoch, Chief
    Executive of Standard Life Investments.  Dial in telephone number 
    [phone].  Callers should quote Standard Life Conference Call.  
    A recording of this call will be available for replay for one week by 
    dialing [phone] (access code 792684).









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