Post on 14-Oct-2020
INTERIM RESULTS
July 2013
DAVID BELLAMY
Chief Executive
Agenda
Business Update DAVID BELLAMY
Financials ANDREW CROFT
Outlook DAVID BELLAMY
Q&A
133.3
159.3
136.5 152.7 156.7
178.9
153.9 152.8 152.6
201.3
165.6
223.8
199.2
£60m
£100m
£140m
£180m
£220m
Q1 Q2 Q3 Q4
2010 2011 2012 2013
Total new business by quarter
APE (Annual premiums plus 10% of single premiums)
2010 over 2009 +42% +46% +30% +15%
2011 over 2010 +18% +12% +13% +0%
2012 over 2011 -3% +13% +8% +46%
2013 over 2012 +31%
133.3
159.3
136.5 152.7 156.7
178.9
153.9 152.8 152.6
201.3
165.6
223.8
199.2
227.3
£60m
£100m
£140m
£180m
£220m
Q1 Q2 Q3 Q4
2010 2011 2012 2013
Total new business by quarter
APE (Annual premiums plus 10% of single premiums)
2010 over 2009 +42% +46% +30% +15%
2011 over 2010 +18% +12% +13% +0%
2012 over 2011 -3% +13% +8% +46%
2013 over 2012 +31% +13%
1115
1276.2
1104.5 1253.1 1,288
1,445
1,263 1,206 1,256
1,501
1,331
1,787
1,601
1,927
£0m
£400m
£800m
£1200m
£1600m
£2000m
Q1 Q2 Q3 Q4
2010 2011 2012 2013
Single investment by quarter
2010 over 2009 +57% +54% +32% +16%
2011 over 2010 +16% +13% +14% -4%
2012 over 2011 -3% +4% +5% +48%
2013 over 2012 +28% +28%
£0.8bn
£1.1bn
£1.5bn
£1.7bn
£1.5bn
£2.0bn
H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013
Net inflows (£bn)
£0bn
£5bn
£10bn
£15bn
£20bn
£25bn
£30bn
£35bn
£40bn
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Funds under management
+34% +20%
+29%
+25% +18%
-10%
+31%
+26% +6%
+15%
+22% £39.9
June
18% p.a compound growth over the last
5 years and 20% p.a over 10 years (at June 2013)
Five strong years of Partner recruitment
1346 1467
1555 1649
1788 1,905
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2008 2009 2010 2011 2012 H1 2013
+7%
+9% +6% +6%
+8.4% +6.5%
New business results
• New business up 21%
• New single investments of £3.5 billion (up 28%)
• Net inflows £2.0 billion (up 32%)
• FUM £39.9 billion (up 15% ytd)
• Partnership 1,905 (up 6.5% ytd)
• Interim dividend up 50%
ANDREW CROFT
Chief Financial Officer
First half profit drivers
• New business growth of 21% (28% excluding last year
large group pension scheme)
• Favourable business mix – manufactured up 24%
• Careful management of expenses
• Continued strong retention
• Very strong investment returns
Reinsurance treaty
• New treaty entered into by UK life company
• Removes remaining insurance and persistency risk of
closed Protection book
• Positive post-tax benefit of £18.3 million in the cash result
• Release of prudent solvency reserves and realisation of the
capitalised value of expected future margins
• Neutral in EEV
• Small IFRS pre-tax benefit of £8.9 million
Capital losses
• Value placed on capital losses within group now capable
of being utilised
• £38.4 million deferred tax asset in IFRS result
• £32.0 million positive experience variance in EEV result
• Benefit to be realised in cash result over medium term
Changes in respect of adviser charging
• New rules have changed nature of certain cash flows
• Loss of tax relief on the adviser charge which reduces the
new business margin
• Acceleration of cash earnings on certain pension business
reducing new business strain
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6 +26%
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8
Analysis of EEV operating profit
£‟m 2013 2012
New business contribution 152.4 120.6
Profits from existing business
– expected 56.5 48.9
– experience variance 39.3 3.7
– operating assumption changes - -
Investment income 1.7 1.4
Life & unit trust operating profit 249.9 174.6
Distribution (2.1) 2.0
Other (14.2) (8.8)
Operating profit 233.6 167.8 +39%
Analysis of EEV pre-tax result
£‟m 2013 2012
Operating profit 233.6 167.8
Investment variance 209.5 54.9
Economic assumption change 1.5 (2.2)
Pre-tax result 444.6 220.5
Analysis of EEV pre-tax result
£‟m 2013 2012
Operating profit 233.6 167.8
Investment variance 209.5 54.9
Economic assumption change 1.5 (2.2)
Pre-tax result 444.6 220.5 +102%
EEV post-tax result
£‟m 2013 2012
Pre- tax result 444.6 220.5
Tax on ordinary activities (88.0) (46.8)
Corporation tax change 18.9 18.7
Post-tax result 375.5 192.4
Tax rate on ordinary activities 20% 21%
£‟m 2013 2012
Pre- tax result 444.6 220.5
Tax on ordinary activities (88.0) (46.8)
Corporation tax change 18.9 18.7
Post-tax result 375.5 192.4
Tax rate on ordinary activities 20% 21%
EEV post-tax result
£‟m 2013 2012
Pre- tax result 444.6 220.5
Tax on ordinary activities (88.0) (46.8)
Corporation tax change 18.9 18.7
Post-tax result 375.5 192.4
Tax rate on ordinary activities 20% 21%
EEV post-tax result
£‟m 2013 2012
Pre- tax result 444.6 220.5
Tax on ordinary activities (88.0) (46.8)
Corporation tax change 18.9 18.7
Post-tax result 375.5 192.4
Tax rate on ordinary activities 20% 21%
EEV post-tax result
EEV net asset value per share
Pence 2013 2012
Net asset value per share 524.1 414.6 +26%
Pre-tax IFRS
£‟m 2013 2012
Life 81.1 52.6 +54%
Unit trust 25.3 13.1
Distribution (2.1) 2.0
Other (14.2) (8.8)
Profit before shareholder tax 90.1 58.9
Pre-tax IFRS
£‟m 2013 2012
Life 81.1 52.6
Unit trust 25.3 13.1 +93%
Distribution (2.1) 2.0
Other (14.2) (8.8)
Profit before shareholder tax 90.1 58.9
Pre-tax IFRS
£‟m 2013 2012
Life 81.1 52.6
Unit trust 25.3 13.1
Distribution (2.1) 2.0
Other (14.2) (8.8)
Profit before shareholder tax 90.1 58.9
Pre-tax IFRS
£‟m 2013 2012
Life 81.1 52.6
Unit trust 25.3 13.1
Distribution (2.1) 2.0
Other (14.2) (8.8)
Profit before shareholder tax 90.1 58.9 +53%
£‟m 2013 2012
Pre- tax result 90.1 58.9
Tax on ordinary activities (20.3) (12.8)
Recognition of capital losses 38.4 -
Post-tax result 108.2 46.1
Tax on ordinary activities 22.5% 21.7%
IFRS post-tax result
£‟m 2013 2012
Pre- tax result 90.1 58.9
Tax on ordinary activities (20.3) (12.8)
Recognition of capital losses 38.4 -
Post-tax result 108.2 46.1
Tax on ordinary activities 22.5% 21.7%
IFRS post-tax result
£‟m 2013 2012
Pre- tax result 90.1 58.9
Tax on ordinary activities (20.3) (12.8)
Recognition of capital losses 38.4 -
Post-tax result 108.2 46.1
Tax on ordinary activities 22.5% 21.7%
IFRS post-tax result
£‟m 2013 2012
Pre- tax result 90.1 58.9
Tax on ordinary activities (20.3) (12.8)
Recognition of capital losses 38.4 -
Post-tax result 108.2 46.1
Tax on ordinary activities 22.5% 21.7%
IFRS post-tax result
£‟m 2013 2012
Underlying cash result 66.9 41.9 +60%
Reinsurance transaction 18.3 -
Variance (2.6) 3.0
82.6 44.9
Analysis of post-tax cash result
£‟m 2013 2012
Underlying cash result 66.9 41.9
Reinsurance transaction 18.3 -
Variance (2.6) 3.0
82.6 44.9
Analysis of post-tax cash result
£‟m 2013 2012
Underlying cash result 66.9 41.9
Reinsurance transaction 18.3 -
Variance (2.6) 3.0
82.6 44.9
Analysis of post-tax cash result
£‟m 2013 2012
Underlying cash result 66.9 41.9
Reinsurance transaction 18.3 -
Variance (2.6) 3.0
82.6 44.9 +84%
Analysis of post-tax cash result
£‟m 2013 2012
Arising on opening in force 91.9 75.7 +21%
Margin arising on new business 18.5 3.1
Expenses (46.4) (40.5)
Other 2.9 3.6
66.9 41.9
Underlying cash
Return on in force
• c£12.2 billion of new business added in last six years,
which is not yet generating positive cash earnings*
• Over £91.0 million of post tax cash earnings per
annum in future*
* Ignores stock net movements and out flows
£‟m 2013 2012
Arising on opening in force 91.9 75.7
Margin arising on new business 18.5 3.1
Expenses (46.4) (40.5)
Other 2.9 3.6
66.9 41.9
Underlying cash
£‟m 2013 2012
Arising on opening in force 91.9 75.7
Margin arising on new business 18.5 3.1
Expenses (46.4) (40.5)
Other 2.9 3.6
66.9 41.9
Underlying cash
£‟m 2013 2012
Arising on opening in force 91.9 75.7
Margin arising on new business 18.5 3.1
Expenses (46.4) (40.5)
Other 2.9 3.6
66.9 41.9
Underlying cash
Dividend
Maturing FUM = Increasing emergence of cash
Increasing emergence of cash = Increasing dividend
Dividend
• Interim dividend to increase by 50%
• Expect a similar increase in the full year dividend
• Thereafter dividend to progressively grow in line with the
underlying performance of the business
Investment programme
• Need to invest to accommodate future growth and
achieve efficiency savings
• Major systems development costs will be borne by
outsourced provider
• We will have internal project costs over the next
couple of years
• Estimate of £5.0 million cost in 2013
• Internal expenditure covered by cash released from
reinsurance treaty
Summary
• 2013 has got off to a great start
• Strong financial performance on all measures
• Highlight is the post tax cash result
• 50% increase in the interim dividend
DAVID BELLAMY
Chief Executive
The Growth Model
52
NEW BUSINESS
CAPACITY
Number of Partners
CAPACITY
Number of Partners
PRODUCTIVITY
New business per Partner
PRODUCTIVITY
New business per Partner
NEW BUSINESS NEW BUSINESS
“Simple but not easy”
Partnership growth
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Adviser numbers down 20%
Academy
• 100 „students‟
– Average age 38
– Age range 23 to 50+
– 20% are female
– 50% from broader financial services
– 50% military, law, sport, retail, accountancy etc.
– Majority referred by Partners
• 100% Diploma qualified within 12 months
• Graduation to Partnership beginning in 2014
Other initiatives
• Regional Academies
• Third party relationships – military, sports bodies,
City out-placement agencies and universities
• Overseas adviser opportunities
Client engagement
• Wealth account survey – over 45,000 responses
• Over 300 centrally supported client forums – circa
40,000 clients
• Other Partner led client events
• CEO lunches
“Simple but not easy”
Bespoke iPad applications
E-Briefing service
E-Briefing service – tailored to client needs
New Intranet
68
NEW BUSINESS ST JAMES’S PLACE ST JAMES’S PLACE
CRAIGFORTH
Life & Pensions
CRAIGFORTH
Life & Pensions
BASILDON
Unit Trust / ISA
BASILDON
Unit Trust / ISA
69
NEW BUSINESS
Unified Administration Unified Administration
CRAIGFORTH
Life & Pensions
CRAIGFORTH
Life & Pensions
BASILDON
Unit Trust / ISA
BASILDON
Unit Trust / ISA
ST JAMES’S PLACE ST JAMES’S PLACE
Launch of the journey to the FCA
“The FCA has been set up to work with firms to ensure they put
consumers at the heart of their business”
Underlying this are three outcomes:
• Consumers get financial services and products that meet their
needs from firms they can trust
• Firms compete effectively with the interests of their
customers and the integrity of the market at the heart of how
they run their business
• Markets and financial systems are sound, stable and resilient
with transparent pricing information
Speech by Martin Wheetley - 16 October 2012
• “The best firms, the most successful firms, the most
trusted, are the ones that take customers seriously in this
environment of expectation. The ones that understand
the currency of trust in generating business.”
• “Customer focus has to become a bread and butter staple
of financial services”
Speech by Martin Wheatley at Chartered Institute for Securities & Investment 12.3.13
Summary
• New business £426.5m - up 21%
• Single investments £3.5 billion – up 28%
• Net inflow of funds £2 billion – up 32%
• Funds under management £39.9 billion – up 29%
• EEV operating profit £233.6m – up 39%
• IFRS profit before shareholder tax of £90.1m – up 53%
• Underlying post tax cash result of £66.9m up 60%
• Interim dividend of 6.38 pence per share – up 50%