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INTERIM RESULTS July 2013. DAVID BELLAMY Chief Executive. Agenda. Business Update DAVID BELLAMY Financials ANDREW CROFT Outlook DAVID BELLAMY Q&A. APE (Annual premiums plus 10% of single premiums ). Total new business by quarter. APE (Annual premiums plus 10% of single premiums). - PowerPoint PPT Presentation
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INTERIM RESULTS
July 2013
DAVID BELLAMY
Chief Executive
Agenda
Business UpdateDAVID BELLAMY
FinancialsANDREW CROFT
Outlook DAVID BELLAMY
Q&A
Q1 Q2 Q3 Q4£60m
£100m
£140m
£180m
£220m
133.3
159.3
136.5152.7156.7
178.9
153.9 152.8152.6
201.3
165.6
223.8
199.2
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%
Q1 Q2 Q3 Q4£60m
£100m
£140m
£180m
£220m
133.3
159.3
136.5152.7156.7
178.9
153.9 152.8152.6
201.3
165.6
223.8
199.2
227.3
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%
Q1 Q2 Q3 Q4£0m
£400m
£800m
£1200m
£1600m
£2000m
11151276.2
1104.51253.11,288
1,4451,263 1,2061,256
1,5011,331
1,7871,601
1,927
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%
H1 2008
H1 2009
H1 2010
H1 2011
H1 2012
H1 2013
£0.8bn
£1.1bn
£1.5bn£1.7bn
£1.5bn
£2.0bn
Net inflows (£bn)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
£0bn
£5bn
£10bn
£15bn
£20bn
£25bn
£30bn
£35bn
£40bn
Funds under management
+34%+20%
+29%+25%
+18%-10%
+31%
+26% +6%
+15%
+22% £39.9
June
18% p.a compound growth over the last5 years and 20% p.a over 10 years (at June 2013)
Five strong years of Partner recruitment
2008 2009 2010 2011 2012 H1 2013
0200400600800
1,0001,2001,4001,6001,8002,000
13461467
15551649
17881,905
+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
– expected56.5
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 152.4 120.6Profits from existing business
– expected56.5
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 152.4 120.6Profits 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 152.4 120.6Profits 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 152.4 120.6Profits 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 152.4 120.6Profits 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 152.4 120.6Profits 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 152.4 120.6Profits 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 54.9Economic 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 54.9Economic 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 tax90.1 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 tax90.1 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 tax90.1 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 losses38.4 -
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 losses38.4 -
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 losses38.4 -
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
53
NEW BUSINESS
CAPACITYNumber of Partners
PRODUCTIVITYNew business per Partner
NEW BUSINESS
“Simple but not easy”
Partnership growth
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
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
69
NEW BUSINESSST JAMES’S PLACE
CRAIGFORTHLife & Pensions
BASILDONUnit Trust / ISA
70
NEW BUSINESS
Unified Administration
CRAIGFORTHLife & Pensions
BASILDONUnit Trust / ISA
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%