Preliminary Results 2006

Standard Life plc
22 March 2007


Standard Life plc

2006 Preliminary Results  22 March 2007

A year of strong progress



• EEV operating profit before tax up 55% to £614m (2005: £395m).

• New business contribution before tax up 521% to £205m (2005: £33m).

• IFRS underlying profit before tax up 272% to £540m (2005: £145m).

• EEV up 11% to £5,608m (2005: £5,048m including IPO proceeds),
  equivalent to 258p per share.

• EEV cash generation increased to £262m (2005: £17m outflow).

• Dividend of 5.4p in respect of period since IPO.

• Heritage With-Profits Fund Residual Estate increased to £1.3bn (2005: £0.5bn).

• Continuous improvement initiatives to deliver additional cost
  benefits of £100m per annum by 2009.

Group Chief Executive, Sandy Crombie, said:



'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.



'Notwithstanding this strong progress, there is more we can do to increase the
efficiency of our operations and to deliver further earnings growth and higher
returns.  Today we announce the next phase of our continuous improvement
strategy, which will deliver a leaner and fitter Standard Life.



'These initiatives are in addition to the targets announced at the time of the
IPO and will enhance our ability to grow profitably in the medium term.  We are
on track to achieve our return on embedded value target for 2007 of 9-10%, and
increasing thereafter.'




Financial Highlights
                                                                                  2006             2005           Change
New business PVNBP                                                            £14,263m          £9,675m              47%
New business APE                                                               £1,734m          £1,249m              39%
New business contribution                                                        £205m             £33m             521%
PVNBP margin                                                                      1.4%             0.4%     +1.0% points

EEV operating profit before tax                                                  £614m            £395m              55%
EEV profit before tax                                                          £1,022m            £770m              33%
Diluted EEV operating EPS                                                        20.7p            13.9p              49%
EEV                                                                            £5,608m          £5,048m              11%
ROEV                                                                              8.9%             7.4%     +1.5% points

IFRS underlying profit before tax                                                £540m            £145m             272%
Diluted IFRS underlying EPS                                                      21.8p             5.8p             276%
Dividend per share in respect of period since IPO                                 5.4p                -                -
IFRS profit attributable to shareholders in respect of period since IPO          £283m                -                -





EEV pro forma operating profit                                                       2006               2005
for the year ended 31 December                                                         £m                 £m


Life and Pensions by country
UK                                                                                    372                272
Canada                                                                                163                131
Europe                                                                                 45                 53
Other                                                                                 (8)                (2)
HWPF TVOG                                                                              44                  -


Life and Pensions operating profit                                                    616                454


Life and Pensions by source
New business contribution                                                             205                 33

In-force business
                    expected return                                                   392                328
                    experience variance                                               122                 60
                    assumption changes                                               (58)                 37
Other covered                                                                        (45)                (4)


Total Life and Pensions operating profit                                              616                454

Investment management                                                                  38                 24
Banking                                                                                38                 15
Healthcare and general insurance                                                       16                  7
Group corporate centre costs                                                         (89)               (58)
Other                                                                                 (5)               (47)

Operating profit before tax                                                           614                395

Tax on operating profit                                                             (185)              (125)

Operating profit after tax                                                            429                270






IFRS pro forma underlying profit                                                     2006               2005
for the year ended 31 December                                                         £m                 £m


Life and Pensions by country
UK                                                                                    230                 16
Canada                                                                                168                 86
Europe                                                                                108                 73
Other                                                                                 (9)                  -


Total Life and Pensions underlying profit                                             497                175


Investment Management                                                                  66                 44
Banking                                                                                38                 24
Healthcare and general insurance                                                       16                  7
Group corporate centre costs                                                         (89)               (58)
Other                                                                                  12               (47)
Total underlying profit before tax                                                    540                145

Tax on underlying profit                                                             (66)               (18)

Underlying profit after tax                                                           474                127











Basis of Preparation



These results have been calculated for the year ended 31 December 2006 using
assumptions to show the results which would have been attributable to
shareholders had the company been owned by shareholders under the terms of the
Scheme of demutualisation (the Scheme) throughout the year. The Scheme did not
take effect until 10 July 2006. For further information please refer to basis of
preparation sections 1.4.1 and 1.5.3.4 below for EEV and IFRS respectively. No
account has been taken of any prospective tax changes announced by the
Chancellor of the Exchequer on 21 March 2007.


Overview of results



In 2006 EEV operating profit before tax increased by 55% to £614m delivering a
return on embedded value of 8.9% (2005: 7.4%). Increased life and pensions new
business contribution, improved experience variances and greater profits from
our asset management, banking and healthcare businesses more than offset the
impact of increased lapse assumptions. On an IFRS basis, pro forma 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 including £189m in
reserve strengthening in the UK life and pensions business. Worldwide insurance
sales were up by 47% to £14,263m, on a PVNBP basis, reflecting strong new
business performance in UK life and pensions. This substantial improvement in
trading performance gives rise to diluted EEV operating earnings per share 49%
higher at 20.7p. Diluted underlying earnings per share on an IFRS basis
increased by 276% to 21.8p.



UK life and pensions benefited from a substantial increase in new business
contribution of 519% to £167m (2005: £27m). This reflects margin improvement in
every product group and the significant growth in PVNBP new business volumes of
69% to £11,400m (2005: £6,763m) driven by the success of SIPP, Capital
Investment Bonds and TIP, and the impact of A-day on customer activity. EEV
operating profit before tax increased by 37% to £372m despite changes in long
term assumptions and provisions for lapses of £207m. Although UK life and
pensions product lapses continued at levels in excess of long-term trends, net
fund flows remained strongly positive and amounted to £3.2bn during 2006. We
anticipate the continuation of strong underlying sales momentum in 2007,
underpinned by our market-leading service and innovative product offerings
coupled with our impressive track record in investment performance.



In our Canadian life and pensions business the focus on margin over volume and
the repricing of certain Universal Life products resulted in a turnaround in new
business contribution from a loss of £2m in 2005 to a profit of £28m in 2006,
which helped EEV operating profit before tax increase 24% to £163m. While we
expect market conditions to remain challenging this year, our continued efforts
on cost control and the product initiatives undertaken in the second half of
2006 will support steady profitable growth in 2007.



The EEV operating profit before tax from European businesses decreased 15% to
£45m reflecting the further investment in product development in Germany and
Ireland.  Following successful product launches in both countries, we expect to
build on the sales momentum we achieved in the second half of 2006.



The Asian life and pensions EEV operating loss increased to £8m (2005: £2m loss)
due to the continued expansion of the operations in India and China.  These
businesses are expected to achieve improved sales in 2007, driven by new product
launches, wider distribution and market growth.



Standard Life Investments' third party funds under management increased by 32%
to £38.5bn at the end of 2006, reflecting continued investment outperformance,
which has driven record levels of both institutional and retail third party
mandate wins. Standard Life Investments' operating profit before tax increased
50% to £66m on an IFRS basis as a result of the higher funds under management
leading to a significant improvement in the EBIT margin to 27.0% (2005: 22.3%).
The pipeline of new business remains strong and this, along with Standard Life
Investments' impressive performance track record and the successful introduction
of additional products in both the retail and institutional markets, provides a
powerful platform to deliver continued growth in 2007.



Standard Life Bank increased underlying profit before tax by 58% to £38m on an
IFRS basis as a result of improved interest margin and cost control in a year
when gross mortgage lending was similar to the prior year. In 2007 we expect
Standard Life Bank to benefit from continued reduction in its cost income ratio
and increasing SIPP and Wrap balances.  Credit quality remains extremely high;
the arrears rate of 0.17% at the year end continues to be well below the
industry average of 0.95%.



Through a disciplined approach to business Standard Life Healthcare more than
doubled 2005 IFRS underlying profit before tax. Standard Life Healthcare's new
policy administration system coupled with the launch of a new product
proposition is expected to increase sales and reduce operating costs in 2007.
The integration of FirstAssist continues to plan with the full benefits being
realised in 2008 and thereafter.



EEV increased to £5,608m, equivalent to 258p per share (diluted), driven by the
strong operating performance for the year and positive investment return
variances. EEV cash generation increased to a £262m inflow (2005: £17m outflow)
due to a reduction in new business strain, improved contribution from in-force
life business and greater non life profits.



We are recommending the payment of our first dividend of 5.4p a share on 31 May
2007, as indicated at flotation, based on a record date of 30 March 2007. This
dividend represents around half of the total dividend that we would have
expected to pay if Standard Life plc had been listed throughout the year. Our
intention is to pay a progressive dividend which will take account of the
long-term earnings and cash flow potential of the Group.




Delivering continuous improvement



We are announcing today further initiatives to increase the efficiency of our UK
businesses and enhance their growth prospects.  These initiatives focus on
driving synergy benefits from UK Life and Pensions, Standard Life Healthcare,
Standard Life Bank and shared services for Standard Life Investments.  In due
course we will look at achieving additional savings in our Canadian, German and
Irish businesses.



At the time of the flotation in July 2006 we announced a target to reduce UK
Life and Pensions' expenses by £30m by the end of 2007; £15m has been achieved
to date.  This commitment is being achieved at the same time as delivering
strong sales growth.  We also committed to reduce corporate costs in 2007 to
£58m per annum, the 2005 level, despite the incremental costs of being a listed
company.  This target is also expected to be achieved.  The initiatives
announced today are in addition to those targets.



We aim to reduce underlying costs by a further £100m per annum by 2009.  It is
expected that the phasing of savings will be achieved as follows:  in the second
half of 2007 £15m, in 2008 a further £70m, and in 2009 an additional £15m.
Through efficiency and productivity we can achieve a reduction in the underlying
headcount requirement to service our existing levels of business by around 1,000
by 2009. We expect growth and natural turnover to keep involuntary job losses to
a minimum.  The one-off costs of implementing these savings are expected to be
no greater than the annual savings achieved by 2009.



We are establishing a UK Retail Division, headed by Trevor Matthews, currently
Chief Executive of Standard Life Assurance Limited.  He will be responsible for
the continued development of UK Life and Pensions, Standard Life Bank and
Standard Life Healthcare and for driving synergies in both costs and revenues by
streamlining common functions and enhancing our capability to grow.  Duplication
of activities which are currently taking place across multiple business units,
divisions and product lines will be targeted.



Other key initiatives include the expansion of the use of shared service
activities, rationalisation of group central functions, re-engineering of key
processes and the implementation of smarter sourcing of services.



The cost savings are expected to be achieved roughly equally between covered and
non-covered businesses.  Within the covered business, we expect at least £20m
would be capitalised into the EEV in long term maintenance unit cost savings by
end 2009 after allowing for approximately 10% of the savings attributable to the
with-profits policyholders.



These additional actions will strengthen further our customer focus and improve
the efficiency of our operations. This will enhance our ability in the medium
term to increase new business margins, drive higher profitability and augment
future embedded value.



Outlook



We continue to drive our business forward and have exciting product and market
opportunities both in the UK and overseas. Customers' needs will remain at the
forefront of our thinking. Growth will continue to be driven by our strategy of
concentrating on higher margin and less capital intensive products delivered
with best in class customer service levels and through leading-edge platforms
and efficient systems.



The trading performance across the group for the first two months of 2007
remains strong with the positive sales momentum continuing in the UK.



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


Paste the following link into your web browser to download the PDF document 
related to this announcement: 

http://www.rns-pdf.londonstockexchange.com/rns/4833t_-2007-3-22.pdf




For further information please contact:



Media:



Scott White                                     0131 245 5422 / 0771 248 5738
Barry Cameron                                   0131 245 6165 / 07712 486 463
Neil Bennett (Maitland)                         0207 379 5151 / 07900 000 777

Equity Investors:

Gordon Aitken                                   0131 245 6799
Conor O'Neill                                   0131 245 6466
Gillian Bailey                                  0131 245 1110

Debt Investors:

John Cummins                                    0131 245 5195
Andy Townsend                                   0131 245 7260


Newswires

A conference call will take place for newswires and online publications from
8.00-9.00am.  Participants should dial 020 7162 0125 and quote Standard Life
Results.

Investors and Analysts

A presentation to investors and analysts will take place at 9.30am at Merrill
Lynch, 100 Newgate Street, London EC1A 1HQ. A live webcast of the presentation
and the presentation slides will be available on the Group's website,
www.standardlife.com.  In addition a replay will be available on this website
later today.

There will also be a live listen only teleconference to 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
Results.  The conference ID number is 1704831. A replay facility will be
available for two weeks on [phone]. The pass code is 1704831.



There will be a conference call for US and Canadian investors and analysts at 3:
00pm (UK) hosted by Sandy Crombie, Group Chief Executive and David Nish, Group
Finance Director. Dial in telephone number for international participants +1 866
779 1135 and UK participants 020 7162 0125. Callers should quote Standard Life
Results. A recording of this call will be available for replay for one week by
dialling [phone] (international) and 020 7031 4064 (UK), access code:
741172.


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