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%