Delivering growth in a riskier world Sandy Crombie Group Chief Executive October 2007
Please turn off your mobile phone and BlackBerry
Disclaimer 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, 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 Standard Life's forward-looking statements. Standard Life undertakes no obligation to update the forward-looking statements contained in this presentation or any other forward-looking statements it may make. 3
Agenda Delivering value Meeting customer needs in a riskier world Meeting shareholder needs in a riskier world Balancing risk and reward Strong financial progress so far Your questions 4
Delivering value
Driving shareholder value is our objective Delivery Efficiency Driving shareholder value Opportunity On track to achieve our return on embedded value target for 2007 of 9-10% and increasing thereafter 6
How we deliver value Building valuable customer relationships with leading service and compelling propositions Creating capital efficient innovative products Opening new routes to markets Leveraging investment management expertise and performance Driving for operational excellence Delivering shareholder value 7
The changing business model From Volume Selling products Product provider Product focussed To Profit Nurturing and developing relationships Service provider Customer focussed 8
Meeting customer needs in a riskier world
Platforms benefit both customers and advisers Benefits to customers timely portfolio view richer involvement and experience opportunity to focus on longer term aims, structures and asset allocations investment flexibility efficiency Benefits to advisers deeper client adviser relationships alignment of interests with their clients increased efficiency ongoing revenue based on funds under advice increased enterprise value convenience 10
Moving from a transactional based relationship with IFAs.. Commission Valuations Statements Correspondence IFA Advice Appoints an Adviser Customer Contract Notes, Statements & Requests Unit Trust Provider Cash Account ISA Provider PEP Provider Unit Trust Provider Offshore Bond Provider ISA Provider Personal Pension Provider Onshore Bond Provider Unit Trust Provider Onshore Bond Provider Personal Pension Provider Stock Broker ISA Provider 11
to an on-going, service-based relationship IFA TRANSACTIONS VALUATIONS REPORTS Customer CONSOLIDATION OF ALL ASSETS IN ONE PLACE Full Range of planning Tools: Fact find- Risk Evaluation Target funding/income tool CGT/IHT Tax Calculator Portfolio Planning tool Asset Allocation Rebalancing Fund Selection Tax wrapper optimisation tools, Holistic planning reports, valuation reports Online application process ACCESS TO CLEAN TAX WRAPPERS ISA PEP Personal Portfolio Onshore Bond Offshore Bond SIPP Cash Legacy Business Discounted access to the whole Market 12
Transparency and control over adviser remuneration Capital Efficient Remuneration Design Initial commission Recouped by equal charge from customer funds Funded initial commission Each 1% of commission to IFA recouped by customer charge of 0.2% p.a. of fund for 6 years, with uncollected charges recouped if contract terminates Fees Ongoing fund based commission Per cent of assets per annum Recouped by equal charge from customer funds We do not pay unfunded commission 13
Investment flexibility Standard Life SIPP SIPP funds under management As at 30 June 2007 Inner ring Middle Ring Outer Ring Total FUM FUM 4.3bn 0.6bn 1.4bn 6.3bn 14
Leading customer service Best for Customer Service Standard Life Skandia Life Friends Provident Legal & General Norwich Union Abbey 0 100 200 300 400 500 600 Large IFAs >10 Registered Individuals Independents <10 Registered Individuals 109 companies nominated 1000 brokers voted in this category Networks <10 Registered Individuals Source: Money Marketing Provider Awards 2007 Weighted Result Top six 15
Leading product quality Best for product quality and innovation Best for product quality and innovation Standard Life Skandia Life Legal & General Scottish Equitable Norwich Union Friends Provident 0 100 200 300 400 500 Large IFAs >10 Registered Individuals Networks <10 Registered Individuals Independents <10 Registered Individuals 125 companies nominated 1000 brokers voted in this category Source: Money Marketing Provider Awards 2007 Weighted Result Top six 16
Consistent investment outperformance Active Investment Performance by Product Group % Rank 0 at 30 June 2007 25 50 75 100 Weighted Average Par Funds Non Par Funds Mutual Funds SLIF Net SLIF Gross Corporate SLPF Irish & German Ex Group Life Funds 1 year 3 years 5 years 10 years MWA Third Party Assets 17
Meeting shareholder needs in a riskier world
Scalable platforms UK Corporate pensions 1.1m UK DC scheme members a 38% increase since end of 2003 Strong sales growth driving a 115% increase in funds under management since end of 2003 10% growth in funds under management during H1 2007 UK Corporate Pensions Funds Under Management FUM per Customer Service Staff Member 16.0 14.0 12.0 10.0 Total FUM ( bn) 8.0 6.9 6.0 4.0 2.0 0.0 31 Dec 2003 8.8 31 Dec 2004 1 Compound annual growth rate 24% CAGR 1 11.4 31 Dec 2005 13.5 31 Dec 2006 14.8 30 June 2007 We believe we have the best DC proposition in the UK m 40 35 30 25 20 15 10 5 0 250% Increase 2003 2004 2005 2006 2007 19
Leveraging existing products into new markets Significant and sustained SIPP growth SIPP FUM in the UK market expected to triple by 2011 Leveraging SIPP across the group Post retirement market Corporate market International m 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 121 83 15 1.3bn 116 243 762 SIPP Funds Under Administration 70 Non-Insured Funds 25% Insured Funds 75% 2.4bn 268 191 226 435 1,215 Non-Insured Funds 31% Insured Funds 69% 4.3bn 598 223 234 361 921 1,923 Non-Insured Funds 33% Insured Funds 67% 6.3bn 921 334 463 632 1,445 2,533 Non-Insured Funds 37% Insured Funds 63% 31 Dec 05 30 June 06 31 Dec 06 30 June 07 Insured Standard Life Funds Insured External Funds Collectives - Standard Life Investment Collectives - Funds Network Cash Non Cash / Non-Collectives Our market-leading SIPP powers ahead 20
Innovative thinking Continuous enhancements to SIPP since launch Customer access online 6/05 Regular premium commission options 9/05 E-quotes, online new business tracking 1/06 Launch Alternatively Secured Pension 4/06 Further online improvements for advisers 4/07 The third way (variable annuities) SIPP Launch 12/04 SL call for voluntary code of self regulation 10/05 Launch Group SIPP 1/06 Self Investment launch in Ireland 5/06 Systems and processes changed for SIPP regulation 4/07 Protected rights into SIPP 21
Growth opportunities Projected growth in Wrap assets in the UK By 2008, assets held within wrap like services will grow to around 150bn 22
Balancing risk and reward
Reducing acquisition costs m 250 200 150 100 50 0 NBC Development H1 2006 - H1 2007 151 78 73 H1 2006 (excludes non-insured SIPP) 218 133 85 H1 2007 (includes non-insured SIPP) UK PVNBP has increased by 45% compared to H1 2006 Excluding non-insured SIPP acquisition costs increased from 73m in H1 2006 to 76m in H1 2007 71% increase in post acquisition cost new business contribution Pre acquisition cost new business contribution Post acquisition cost new business contribution Acquisition cost Margin growth benefiting from leveraging acquisition costs 24
Driving efficiency benefit profile m 180 160 140 120 100 131m 146m 80 60 61m 40 20 0 2007 2008 2009 All figures reported pre-tax Reduction in corporate costs Additional cost savings Reduction in UK L&P costs 25
Diversifying distribution April 2005 July 2005 January 2007 SIPP launched on 6 December 2004 March 2005 October 2006 Further deals in the pipeline 26
Strong balance sheet management Standard Life has direct exposure to CSOs 1 of 6m (0.005% of AUM) No direct exposure to US sub prime mortgages Indirect exposure of c. 120m (0.1% of AUM) to US mortgages (including both prime and sub prime) Indirect exposure is in the form of asset backed commercial paper (ABCP) or senior notes issued by structured investment vehicles (SIV) Exposure is via Aaa/P-1 rated notes only, with good levels of subordination Underlying assets within ABCPs / SIVs are highly rated financial institutions and structured products 1 Collateralised synthetic obligations 27
Strong financial progress so far
Improving financial performance H1 2007 financial highlights EEV operating profit 71% to 353m New business contribution 66% to 151m PVNBP margin 0.4% pts to 1.8% 1 Embedded value 5% to 5,911m EEV cash generation 68% to 207m IFRS normalised profit 11% to 219m Interim dividend 5.6% 2 to 3.8p Strong improvement in our financial performance 1 Compared to full year 2006 2 Applying our dividend policy to the dividend announced in the 2006 Preliminary Results 29
Your questions
Appendix
Strong new business volumes and margins 31% increase in PVNBP 1 Margin improvement at group level 7,000 6,000 5,000 4,802 6,954 UK Canada Europe Group H1 2007 1.9% 2.3% 0.8% 1.8% FY 2006 1.5% 1.6% 1.2% 1.4% H1 2006 1.8% 1.1% 0.6% 1.6% 4,000 m NBC increasing 66% 2 3,000 2,000 1,000 1,025 589 340 513 0 UK Canada Europe H1 2006 H1 2007 H1 2007 m FY 2006 m H1 2006 m UK Canada Europe Total 133 14 4 151 167 28 10 205 78 11 2 91 Sales and margin driving NBC improvement 1 UK PVNBP for H1 2006 restated to include non-insured SIPP. NBC and margin calculation excludes non-insured SIPP in H1 2006 2 H1 2007 versus H1 2006 32
A more capital efficient product mix Focus on products with lower new business strain (NBS) Strain reduced to 1.9% of PVNBP (H1 2006: 2.2%) Our practice within our UK platform range Commission, where paid, is recouped from customer funds Shift towards ongoing fund based commission bn 9 8 7 6 5 4 3 2 1 0 50% FY 2005 H1 2006 H2 2006 H1 2007 3.3% 3.1% 2.9% 2.7% 2.5% 2.3% 2.1% 1.9% 1.7% 1.5% PVNBP NBS as a % of PVNBP A focus on Capital lite products 33
Cash generation H1 2007 H1 2006 m m New business strain (153) (127) Cash generation from existing business 265 201 112 74 Cash generation from operating variances and assumption changes and development costs 24 29 Cash generation from non-operating variances and assumption changes 45 53 Life and pensions total cash generation 181 156 Investments, bank and healthcare 52 23 Group corporate centre costs (17) (29) Subordinated debt cost of carry - (8) Group income on capital and other resources 13 - Mutual funds, Wrap and other (22) (19) Total cash generation 207 123 All figures stated net of tax Existing business funding significant increase in new business growth 34
Standard Life Investments Third party funds under management 48 46 7.2bn (1.6)bn 2.0bn 46.1bn 44 42 bn 40 38 36 34 32 38.5bn 30 Third Party FUM at 31 Dec 06 Inflows Outflows Market & other movements Third Party FUM at 30 Jun 07 Sustained outperformance is driving asset growth 35
Canada a strong pensions franchise Turnaround continues Disciplined approach to pricing 86% growth in funds under management since December 2003 14.0 Canada Corporate Pensions Funds Under Management 12.0 19% CAGR 1 11.0 11.7 10.0 9.3 Total FUM Can$bn 8.0 6.0 6.3 7.8 4.0 2.0 0.0 31 December 2003 31 December 2004 31 December 2005 31 December 2006 30 June 2007 1 Compound annual growth rate 36
Asia-Pacific potential from growing markets Sales have more than doubled Further strong growth expected driven by new product launches, wider distribution and market expansion Agreement to increase our shareholding in our Indian insurance JV to 26% PVNBP m 250 200 150 100 Asia-Pacific new business growth 1 108% growth 50 0 H1 2006 H1 2007 India China 1 India new business based on agreed shareholding of 26% Hong Kong 37
Investment flexibility Standard Life SIPP The Inner Ring Top Funds % of Insured Annual Charge Standard Life Select Property 12% 1.5% Standard Life Sterling 10% 1.0% Standard Life Property 8% 1.5% Standard Life Managed 7% 1.0% Invesco Perpetual High Income 5% 1.7% Standard Life UK Equity 4% 1.0% Standard Life Cautious Managed 4% 1.0% Insured Funds Less than 50,000 50,000-250,000 250,000-500,000 More than 500,000 Annual Large Fund Discount Nil 0.3% 0.4% 0.5% Total Funds Under Management at 30 June 2007-4.3bn 1 Note 1: Includes cash in SIPP bank account of 0.3bn 38
Investment flexibility Standard Life SIPP The Middle Ring Top Funds Fidelity European Invesco Perpetual Monthly Income Plus Invesco Perpetual High Income Fund Standard Life Higher Income Fund We receive a share of the annual management charge, plus Charges Set up Administration Drawdown Transaction Nil 208 pa Nil 10 Total Funds Under Management at 30 June 2007-0.6bn 39
Investment flexibility Standard Life SIPP The Outer Ring Outer Ring Fidelity FundsNetwork Discretionary Investment Managers Trustee Investments Commercial Property Stockbroker Other Value 463m 376m 209m 94m 0.4m 195m Profit share agreements with business partners, plus Charges Set up Administration Drawdown Transaction 302 416 pa 125 pa 50 Total Funds Under Management at 30 June 2007-1.4bn 40
SIPP market outlook high growth potential At end 2006, 145,000 customers have a SIPP, with 35bn assets under management 1 Based on population segmentation, we estimate a potential target market of 3m to 7m customers For this population we expect 15% to 20% penetration over the next 5 years. This is based on current penetration rates: - Pensions Approx 40% 2 - Investments Approx 75% 2 Therefore we expect over 500,000 SIPPs in the UK market with in excess of 100bn assets under management by 2011 Future premium income from new premiums & transfers - 2.9m people have liquid assets above 100,000 3 - Funds of 460bn in personal pensions, and 880bn in employer managed funds 4 Notes: 1 Money Management Survey April 2007. Not all providers disclosed. 2 Standard Life & Experian 3 Citigroup 4 ABI 41