Delivering sustainable global growth Strong flows and investment performance driving profit Colin Clark Executive Director, Standard Life Investments
This presentation may contain certain forward-looking statements with respect to certain of Standard Life's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words believes, intends, expects, plans, pursues, seeks and anticipates, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Standard Life's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Standard Life and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Standard Life s actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in the forward-looking statements. Standard Life undertakes no obligation to update the forwardlooking statements contained in this presentation or any other forward-looking statements it may make. Sanford C Bernstein European Strategic Decisions Conference September 2014 2
` About Standard Life Investments Our global operations Active asset manager Total assets under management (AUM) of 236bn 1 Third party AUM of 156bn 1 Headquartered in Edinburgh More than 1,000 talented professionals Offices in Edinburgh, London, Dublin, Boston, Mumbai, Beijing, Hong Kong, Seoul, Sydney and Tokyo Broad and diversified range of capabilities: Multi-asset Equity Fixed income Real estate Private equity Liability aware Our investors rank among some of the world s most sophisticated and high profile institutions A leading asset manager with expanding global reach 1. HY 2014 AUA adjusted to reflect acquisition of Ignis Asset Management and sale of Canadian businesses, as if they had happened on 30 June 2014. Sanford C Bernstein European Strategic Decisions Conference September 2014 3
Delivering strong growth in constantly evolving markets bn 11 10 9 8 7 6 5 4 3 2 1 0 m 600 500 400 300 200 100 0 Third party net inflows 1,2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 Revenue 1,2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 bn 120 100 80 60 40 20 0 m 200 180 160 140 120 100 80 60 40 20 0 Third party AUM 1,2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 EBITDA 1,2,3 1. As reported in the half year results 2014 presentation prior to completion of Ignis Asset Management acquisition and sale of Canadian businesses. 2. H1 2014 and FY 2013 reflects Standard Life Wealth s move to be reported as part of Standard Life Investments. Previous periods have not been restated. 3. For H1 2014 and FY 2013 EBITDA has replaced EBIT. Previous periods are reported as EBIT. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014 Sanford C Bernstein European Strategic Decisions Conference September 2014 4
` Strong market positions delivering growth in assets, revenue and returns Standard Life Group Group assets under administration of 254.1bn (FY 2013: 244.2bn) and Group net inflows of 4.6bn (H1 2013: 6.5bn) Fee based revenue increased by 9% or 12% in constant currency to 758m (H1 2013: 694m) Operating profit before tax of 339m (H1 2013: 304m) reflecting strong demand for fee based products Business unit underlying performance up 7% to 367m UK SLI Canada + 6m (+4%) + 9m (+9%) + 1m (+1%) or 159m 165m + 12m (+18%) in constant currency Europe + 2m (+10%) Asia and Emerging Markets + 7m 95m 104m 68m 69m 21m 23m ( 1m) 6m H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 Sanford C Bernstein European Strategic Decisions Conference September 2014 5
Our investment philosophy Focus on Change: the philosophy behind our investment decisions Helps analyse key factors driving market price of an investment and to identify the drivers that the wider market may have missed Five key questions: Sanford C Bernstein European Strategic Decisions Conference September 2014 6
Our investment process is delivering results Robust and repeatable performance Third party AUM above benchmark at 30 June 2014: 1 year: 87% 3 years: 89% 5 years: 91% Suite of multi-asset funds outperformed their cash benchmark over all key time periods since inception The strength of our mutual funds proposition is demonstrated by the fact that 32 out of 39 1 actively managed mutual funds outperformed their benchmark Strong and stable teams Our House View Risk management, controls and integrity Stewardship and ESG (environmental, social and governance issues) 1. Source: Financial Express. Sanford C Bernstein European Strategic Decisions Conference September 2014 7
Standard Life Investments capitalising on opportunities Diverse and growing product offering Expanding global reach Extensive distribution capability 13% 7% 19% 18% 6% 6% 1% 31% 4% 31% 3 rd party AUM 108bn 1 26% 10% 3 rd party AUM 108bn 1 66% 62% 3 rd party AUM 108bn 1 Equities Multi-asset Other UK North America Institutional Wealth Fixed income MyFolio Real estate Europe Asia Wholesale India cash 8.5bn 3 rd party net inflows 1 ( 1.0bn) 7.4bn H1 2013 3.0bn H2 2013 4.2bn H1 2014 8.0bn 3 rd party net inflows 1 0bn 7.4bn H1 2013 3.0bn H2 2013 4.2bn H1 2014 Our long-term savings businesses provide flow of quality assets Higher margin opportunities in the growing wholesale channel Working closely with strategic partners including HDFC, Manulife/John Hancock and Sumitomo Mitsui Trust Bank 1. As reported in the half year results 2014 presentation prior to completion of Ignis Asset Management acquisition on 1 July 2014 and proposed sale of Canadian businesses. Sanford C Bernstein European Strategic Decisions Conference September 2014 8
Acquisition of Ignis further strengthens strategic positioning Deepen capabilities Broaden third party asset base Strengthen liability aware offering Enhanced capabilities particularly in government bonds, active management of liability overlays / liability aware investing Strong investment performance in 2013 with 85% of Ignis AUM above benchmark Ignis AUM at 30 June 2014: 60.5bn 1 Expected to increase third party AUM to two thirds of total SLI AUM Ignis Absolute Return Government Bond Fund (ARGBF) continues to grow with AUM of 3.7bn at H1 2014 (FY 2013: 2.1bn) Fast growing market for outsourcing of management of insurance assets and DB pension scheme de-risking Leveraging distribution capability across UK, Europe, US and Asia Strategic relationship with Phoenix Group Standard Life Investments Combined with Ignis Asset Management 1 Third party AUM now 66% of total Third party AUM Third party life books AUM In-house AUM 46% H1 2014 Total AUM 176bn 2 54% 34% H1 2014 adjusted AUM 236bn 3 19% 47% 1. Excluding 4.8bn of securities lending collateral assets. 2. HY 2014 AUA adjusted to reflect sale of Canadian businesses, as if it had happened on 30 June 2014. 3. Including Ignis Asset Management AUM as at 1 July 2014 of 60.5bn (excluding 4.8bn of securities lending collateral assets). Sanford C Bernstein European Strategic Decisions Conference September 2014 9
Complements Standard Life Investments strong organic growth 2013 third party net flows (total and as % of opening third party AUM) 1 13bn 12.0bn 1.9bn 2 10.1bn 9.5bn 9.4bn 9.3bn 2013 net flows 5.7bn 2.5bn 1.3bn 4.90 1.2bn ( 1.3bn) ( 10bn) SLI + Ignis M&G Schroders LGIM Ashmore Henderson F&C Jupiter Aviva Investors ( 8.1bn) AAM Net flows as %age of opening AUM 12.2% 3 8.5% 4.8% 2.3% 13.0% 3.8% 3.5% 4.6% (2.5%) (4.2%) 1. Source: Company reports and Standard Life Investments research. 2. Including liquidity net inflows of 0.4bn. 3. For Standard Life Investments only. Sanford C Bernstein European Strategic Decisions Conference September 2014 10
Value creation for shareholders Acquisition on attractive terms: Consideration for Ignis Asset Management of 390m including regulatory capital Consideration reflects a multiple of 2013 EBITDA ( 52m) of 7.5x before synergies 50% 37% EBITDA margin 35% 40% 45% Material cost savings from integration: 2013 2013 SLI Ignis SLI Expected to exceed 50m by third full year of ownership Will help accelerate Standard Life Investments towards new target EBITDA margin of 45% One-off costs of implementation c1.5x of ongoing annual cost savings 25% Target (by 2017) Combined Price adjustment mechanism provides additional protection Sanford C Bernstein European Strategic Decisions Conference September 2014 11
Fee focused Group with strengthened distribution supporting asset growth Total AUA 284bn 1 UK and Europe 267bn North America 8bn 1 Asia 9bn Channels Investment management Institutional, Wholesale and Retail Standard Life Investments AUM 236bn Multi-asset, equity, fixed income, real estate, private equity, liability aware Distribution Standard Life UK Standard Life Investments Standard Life Ireland Standard Life Germany Standard Life Wealth Phoenix Group Standard Life Investments Manulife (Canada) John Hancock Standard Life Investments Standard Life Asia HDFC Life and HDFC AMC Heng An Standard Life HDFC and HDFC Bank Sumitomo Mitsui Manulife Customer solutions Leading workplace pensions, SIPP, drawdown, Wrap platform, mutual funds, ISAs, onshore and offshore bonds, with profits, wealth Mutual funds Mutual funds, protection, life-insurance, with profits, health, single and regular premium investments 1. HY 2014 AUA adjusted to reflect acquisition of Ignis Asset Management and sale of Canadian businesses, as if they had happened on 30 June 2014 Sanford C Bernstein European Strategic Decisions Conference September 2014 12
Summary A leading asset manager with expanding global reach Sustained record of strong and profitable growth in constantly evolving markets Focus on Change philosophy driving investment performance Diversified and expanding investment capability through innovation Increasing channel diversity Acquisition of Ignis Asset Management enhances strategic positioning Deepening access to global markets through new Global Collaboration Agreement with Manulife Investing in our people and technology to support growth Sanford C Bernstein European Strategic Decisions Conference September 2014 13
Appendix
Consistently strong performance by Standard Life Investments H1 2014 H1 2013 1 m m Fee based revenue 303 252 Expenses (210) (170) Share of JVs and associates operating profit before tax 11 13 Operating profit 104 95 Interest, depreciation, amortisation and exchange rate 3 2 movements EBITDA 2 107 97 Third party revenue up 26% to 239m (H1 2013: 190m) Strong third party net inflows of 4.2bn (annualised 8% of opening AUM) Increased third party revenue margin benefiting from product and channel mix Lower EBITDA margin reflects acquisition of private client division of Newton and a stronger Sterling Acquisition of Ignis enhances strategic positioning Targeting 45% EBITDA margin by 2017 Third party AUM above benchmark 87% 89% 91% 1 year 3 years 5 years Third party AUM 102.4bn 108.0bn FY 2013 1 H1 2014 Third party revenue bps 45bps 47bps FY 2013 1 H1 2014 EBITDA margin 38.5% 35.3% H1 2013 1 H1 2014 1. Restated to reflect Standard Life Wealth s move to be reported as part of Standard Life Investments. 2. Earnings before interest, tax, depreciation and amortisation. Sanford C Bernstein European Strategic Decisions Conference September 2014 15
Deepening investment capabilities Ignis Asset Management AUM of 59bn by asset class 1 2013 UK and Europe absolute return fund net inflows 21% 3% 14% 5% 3% Rates Combined SLI Absolute 30% Return Suite + ARGBF 6.7bn Credit 24% Liquidity Other fixed income Equity Real estate Advisors SLI Absolute Return Suite Ignis ARGBF 1.4bn 5.3bn Enhanced capabilities particularly in government bonds and active management of liability overlays Complements Standard Life Investments existing strengths in emerging market debt, credit and real estate Strong foundation for liability aware market offering Strong investment performance in 2013 with 85% of AUM above benchmark Ignis Absolute Return Government Bond Fund (ARGBF) complements Standard Life Investments leading suite of absolute return funds: Complementary investment process delivering above benchmark performance annualised since inception 6.75% Attracted 2.1bn of assets since launch in March 2011 to end of 2013 Leveraging Standard Life Investments global distribution capability 1. Source: Ignis management information as at 31 December 2013; excludes 6.8bn of securities lending collateral. Sanford C Bernstein European Strategic Decisions Conference September 2014 16
Broadening third party client base Standard Life Investments Combined with Ignis Asset Management 1 Third party AUM 2013 Change Third party AUM now 64% of total 47% 2013 Total AUM 184bn 53% 36% 2013 Total AUM 243bn 46% bn % bn Third party 112 46 +15 Third party Life books 44 18 +44 Third party AUM 18% Total third party 156 64 +59 In-house AUM Third party revenue now 81% of total 25% 2013 Total revenue 521m 16% 19% 2013 Total revenue 671m 65% Third party revenue 2013 Change m % m Third party 437 65 +45 Third party Life books 105 16 +105 75% Total third party 542 81 +150 1. Ignis Asset Management AUM excludes 6.8bn of securities lending collateral assets. Sanford C Bernstein European Strategic Decisions Conference September 2014 17
Strengthens strategic position for rapidly developing liability aware market Growing global market for outsourcing of insurance assets US$1 trillion expected to be outsourced in the near future 1 Over US$13 trillion of life insurance assets across Europe, US and Asia Growing trend for outsourcing to specialist investment management providers DB pension schemes locking in funding levels and de-risking UK and US schemes funding levels average 95% with further improvements expected (DB assets across UK and US >US$9 trillion) Percentage of pension funds using LDI expected to increase from 57% to 87% in the coming years 2 Significant de-risking expected in near future asset owners expect increased investments in fixed income and alternatives, mostly at the expense of benchmark-tracking domestic equities. Notably, in the aggregate, asset owners expect no substantial increase in their passive portfolio exposure. 3 Enhanced expertise and capability in liability aware investing Five companies under long-term contracts with AUM of 131bn Ten insurance company mandates across five countries with AUM over 7bn Around 90bn of assets managed against liability benchmarks Leveraging Standard Life Investments global distribution capability across UK, Europe, US and Asia 1. Source: Cerulli Associates; March 2014. 2. Source: SEI; December 2013. 3. Source: A Tailored Approach: Positioning to Outcome-Oriented Global Investors; February 2014; evestment and Casey Quirk. Sanford C Bernstein European Strategic Decisions Conference September 2014 18
Assets under administration and management (adjusted for Ignis acquisition and proposed sale of Canadian businesses) As at 30 June 2014 Group reported Acquisition of Ignis Sale of SLF Inc. 1 Sale of SLI Inc. 2 Eliminations Adjusted total bn bn bn bn bn bn Group assets under administration (AUA) 254.1 60.5 (28.3) (19.1) 17.3 284.5 SLI assets under management (AUM) 195.1 60.5 n/a (19.1) n/a 236.5 SLI AUM as a % of Group AUA 77% n/a n/a n/a n/a 83% SLI third party AUM 108.0 60.5 n/a (12.7) n/a 155.8 SLI third party AUM as a % of SLI AUM 55% n/a n/a n/a n/a 66% 1. Standard Life Financial Inc. (Canadian long-term savings and retirement, individual and group insurance business). 2. Standard Life Investments Inc. (Canadian investment management business) at 30 June 2014 managed AUA of 17.3bn for Standard Life Financial Inc. Sanford C Bernstein European Strategic Decisions Conference September 2014 19