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ANNUAL RESULTS
February 2010
MIKE WILSON
Chairman
Mike Wilson
CHAIRMAN

David Bellamy
CHIEF EXECUTIVE

Andrew Croft
FINANCE DIRECTOR
Agenda

Introduction

MIKE WILSON

Business Update

DAVID BELLAMY

Financials

ANDREW CROFT

Outlook

DAVID BELLAMY

Q&A
DAVID BELLAMY
Chief Executive
Review of 2009

New Business
• Total single investments of £3.5bn up 13%
• APE of £440.8m up 5%
• Manufactured proportion ...
Investment new business
Single premiums

£738.0m
£557.9m

£554.7m

Q2

Q3

£431.0m

Q1

Q4

2009 over 2008
-15%

-12%

+20...
Pensions new business
Single premiums

£346.7m
£280.1m

£269.7m

£280.1m

Q1

Q2

Q3

Q4

2009 over 2008
+11%

-0%

-1%

+...
Total single investments
Investments

Pensions

£269.7m

£346.7m
£280.1m

£280.1m
£738.0m
£557.9m
£431.0m

Q1

Q2

£554.7m...
Total new business (APE)
APE (Annual premiums plus 10% of single premiums)

£133.2m
£109.2m

£104.6m

Q2

Q3

£93.8m

Q1

...
Manufactured new business (APE)
APE (Annual premiums plus 10% of single premiums)

£122.7m
£98.4m

£95.7m

Q2

Q3

£83.3m
...
Review of 2009

Funds under Management
• Continued 95% retention
• Net inflows of funds of £2.3bn up 35%
• Funds under man...
Net inflow of funds under management

+35%
+36%
+56%

£1.9bn

-10%

£2.3bn

£1.7bn

£1.4bn
£0.9bn

2005

2006

2007

2008
...
Review of 2009

Partnership
• Continued strong retention
• 20 Academy graduates
• Partnership numbers 1464 up 9%
Number of Partners

+9%
1,464

+7%
+8%
+2%

+5%

2005

2006

2007

2008

2009
Review of 2009
New Business
• Total single investments of £3.5bn up 13%
• APE of £440.8m up 5% (H1 -8%; H2 +20%)
• Manufac...
ANDREW CROFT
Finance Director
Profit measures
EEV
• Result reflects the net present value of future shareholder
cash flows
Cash result
• Is a measure of...
Highlights

• EEV new business profit of £155.4 million
up 26%
• EEV operating of £228.9 million up 12%
• EEV pretax profi...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Margin

• Higher new business
• Manufactured business 91% compared
with 86%
• Total direct expenses and establishment
cost...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Analysis of Operating Profit
£’m

New business contribution
Profits from existing business
–expected
–experience variance
...
Analysis of Pre-Tax Result
£’m

2009

2008

Operating profit

228.9

204.3

Investment variance
Economic assumption change...
Investment Variance

• Sensitivity provided is for a 10% change in
the value of equities
• Some 70/80% of our funds under
...
Analysis of Pre-Tax Result
£’m

2009

2008

Operating profit

228.9

204.3

Investment variance

148.2

(320.6)

Economic ...
Analysis of Pre-Tax Result
£’m

2009

2008

Operating profit

228.9

204.3

Investment variance

148.2

(320.6)

Economic ...
EEV Net Asset Value per Share

Net asset value
284.5p
Analysis of Post Tax Cash Result
£’m

2009

2008

Arising on in force business

88.8

91.4

Arising from new business
Cash...
Dividend

Final dividend
Increased by 4% to 2.66 pence
Full year dividend
Up 2.5% to 4.5 pence
Capital Position

• Total group solvency assets of £263.3
• Solvency remains strong
• Investment policy for solvency asset...
IFRS Result
£’m

2009

2008

One–off items
Share options
Interest income
Other
Profit before policyholder tax

(8.6)
6.1
5...
IFRS example
• £100,000 unit trust investment
• 5% bid offer spread and 3% directly
attributable expenses
• Cash profit of...
Summary

• Record new business
• Establishment expenses 4% below last year
• Record new business contribution
• Highest ev...
DAVID BELLAMY
Chief Executive
Review of 2009

• A record year
•
•
•
•

in new business
in funds under management
in new business profit
in recruitment a...
2009 Productivity (APE per Partner)

+27%

-4%

-11%
-17%

Q1

Q2

Q3

Q4
The Growth Model
Target
15 – 20% pa
New Business

Capacity
No of Partners

Productivity
New Business
Per Partner
2009 Productivity (APE per Partner)

+27%

-4%

-11%
-17%

Q1

Q2

Q3

Q4
2009 Growth in APE
Average APE

New Partners

+11%

+27%
+6%
-11%

+7%

Q1

Q2

+7%
-4%

-17%

Q3

Q4

Total APE Growth
-5...
Productivity (APE per Partner £’000s)
+14%
+61%

388.0

-3%

323.2

311.8

-9%

314.1

2008

2009

+23%
193.4

2005

2006
...
Number of Partners

+9%
1,464

+7%
+8%
+2%

+5%

2005

2006

2007

2008

2009
Retail Distribution Review

• Further demonstration of our professionalism
• Accredited SJP module
• Realigned management ...
Retail Distribution Review

Provider/Product Bias
• No provider bias
• Minor product differences – already addressed
Restr...
Retail Distribution Review

Adviser Charging
• Still not clear
• Vertically Integrated Firms are different (to IFA’s)
• Ou...
Retail Distribution Review

• Having a positive impact on recruitment
• We’re embracing the ‘Diploma’
• We’ve addressed an...
Evolving Fund Range
2008
• Alternative Asset Fund - Blackrock
• High Octane Fund
• Cash Unit Trust

- Oldfield
- State Str...
Investment Management Approach

• Emerging Market Fund
• Global Bond Fund
• Absolute Return Fund
Strengthen the Team

• Senior team together for 18 years
• Development from within
• Charles Gregson – new Non-Executive
•...
The SJP Opportunity

• In excess of 8m people in the UK with liquid
assets over £50k
• In excess of 500,000 people in the ...
The SJP Opportunity
• ISA’s
• £170bn - Cash (BSA)
• £116bn - Stocks & shares (HMRC)
• £220bn
Building Society deposits (BS...
The Opportunities

• Increasing tax burden
• Sustained low interest rates
• People not confident they have enough for
reti...
Summary

• Proven track record of growth
• Resilient in tough markets
• Well positioned for future growth
operating assumption change
operating assumption change
operating assumption change
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  • Transcript of "operating assumption change "

    1. 1. ANNUAL RESULTS February 2010
    2. 2. MIKE WILSON Chairman
    3. 3. Mike Wilson CHAIRMAN David Bellamy CHIEF EXECUTIVE Andrew Croft FINANCE DIRECTOR
    4. 4. Agenda Introduction MIKE WILSON Business Update DAVID BELLAMY Financials ANDREW CROFT Outlook DAVID BELLAMY Q&A
    5. 5. DAVID BELLAMY Chief Executive
    6. 6. Review of 2009 New Business • Total single investments of £3.5bn up 13% • APE of £440.8m up 5% • Manufactured proportion 91%
    7. 7. Investment new business Single premiums £738.0m £557.9m £554.7m Q2 Q3 £431.0m Q1 Q4 2009 over 2008 -15% -12% +20% +64%
    8. 8. Pensions new business Single premiums £346.7m £280.1m £269.7m £280.1m Q1 Q2 Q3 Q4 2009 over 2008 +11% -0% -1% +30%
    9. 9. Total single investments Investments Pensions £269.7m £346.7m £280.1m £280.1m £738.0m £557.9m £431.0m Q1 Q2 £554.7m Q3 Q4 2009 over 2008 -6% -8% +12% +50%
    10. 10. Total new business (APE) APE (Annual premiums plus 10% of single premiums) £133.2m £109.2m £104.6m Q2 Q3 £93.8m Q1 Q4 2009 over 2008 -5% -10% +3% +38%
    11. 11. Manufactured new business (APE) APE (Annual premiums plus 10% of single premiums) £122.7m £98.4m £95.7m Q2 Q3 £83.3m Q1 Q4 2009 over 2008 -1% -3% +12% +43%
    12. 12. Review of 2009 Funds under Management • Continued 95% retention • Net inflows of funds of £2.3bn up 35% • Funds under management £21.4bn up 31%
    13. 13. Net inflow of funds under management +35% +36% +56% £1.9bn -10% £2.3bn £1.7bn £1.4bn £0.9bn 2005 2006 2007 2008 2009 Percentage of opening FUM 9% 11% 12% 9% 14%
    14. 14. Review of 2009 Partnership • Continued strong retention • 20 Academy graduates • Partnership numbers 1464 up 9%
    15. 15. Number of Partners +9% 1,464 +7% +8% +2% +5% 2005 2006 2007 2008 2009
    16. 16. Review of 2009 New Business • Total single investments of £3.5bn up 13% • APE of £440.8m up 5% (H1 -8%; H2 +20%) • Manufactured proportion 91% Funds under Management • Continued 95% retention • Net inflows of funds of £2.3bn up 35% • Funds under management £21.4bn up 31% Partnership • Continued strong retention • 20 Academy graduates • Partnership numbers 1464 up 9%
    17. 17. ANDREW CROFT Finance Director
    18. 18. Profit measures EEV • Result reflects the net present value of future shareholder cash flows Cash result • Is a measure of the underlying cash generated by the business • Reflects the positive cash flow from in force business less the negative cash flow from acquiring new business IFRS result • Aims to smooth the emergence of profit over the life of the contract We manage shareholder value based on the EEV and cash result and not the IFRS result
    19. 19. Highlights • EEV new business profit of £155.4 million up 26% • EEV operating of £228.9 million up 12% • EEV pretax profits of £363.2 million compared with a loss of £115.9 million in 2008 • EEV net asset value per share of 284.5p up 22% • Final dividend of 2.66p up 4%
    20. 20. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption changes Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    21. 21. Margin • Higher new business • Manufactured business 91% compared with 86% • Total direct expenses and establishment costs down 4% • Margin as percentage of APE increased to 35.3% (2008: 29.5%)
    22. 22. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption changes Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    23. 23. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption changes Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    24. 24. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption change Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    25. 25. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption change Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    26. 26. Analysis of Operating Profit £’m New business contribution Profits from existing business –expected –experience variance –operating assumption change Investment income Life & unit trust operating profit Other Operating profit 2009 2008 155.4 123.5 78.3 11.6 (1.5) 5.6 249.4 (20.5) 228.9 80.5 16.9 (0.9) 4.9 224.9 (20.6) 204.3
    27. 27. Analysis of Pre-Tax Result £’m 2009 2008 Operating profit 228.9 204.3 Investment variance Economic assumption change Pre-tax result 148.2 (13.9) 363.2 (320.6) 0.4 (115.9)
    28. 28. Investment Variance • Sensitivity provided is for a 10% change in the value of equities • Some 70/80% of our funds under management are invested in equities • Our funds are global and the £ MSCI is the best index to use in your modelling
    29. 29. Analysis of Pre-Tax Result £’m 2009 2008 Operating profit 228.9 204.3 Investment variance 148.2 (320.6) Economic assumption change (13.9) Pre-tax result 363.2 0.4 (115.9)
    30. 30. Analysis of Pre-Tax Result £’m 2009 2008 Operating profit 228.9 204.3 Investment variance 148.2 (320.6) Economic assumption change Pre-tax result (13.9) 363.2 0.4 (115.9)
    31. 31. EEV Net Asset Value per Share Net asset value 284.5p
    32. 32. Analysis of Post Tax Cash Result £’m 2009 2008 Arising on in force business 88.8 91.4 Arising from new business Cash Result (65.3) 23.5 (67.3) 24.1
    33. 33. Dividend Final dividend Increased by 4% to 2.66 pence Full year dividend Up 2.5% to 4.5 pence
    34. 34. Capital Position • Total group solvency assets of £263.3 • Solvency remains strong • Investment policy for solvency assets continues to be prudent • Solvency II
    35. 35. IFRS Result £’m 2009 2008 One–off items Share options Interest income Other Profit before policyholder tax (8.6) 6.1 52.4 49.9 16.2 (14.9) 22.6 56.8 80.7
    36. 36. IFRS example • £100,000 unit trust investment • 5% bid offer spread and 3% directly attributable expenses • Cash profit of £2,000 (£5,000-3,000) • IFRS result spreads profit over the expected life of contract • If expected life of the contract is 5 years then year 1 profit is £400 • However if expected life of contract is 10 years then year 1 profit is £200 • A tension between managing the IFRS result and shareholder value
    37. 37. Summary • Record new business • Establishment expenses 4% below last year • Record new business contribution • Highest ever margin • Positive experience variance • Increased operating profit • Strong solvency position • Increased dividend
    38. 38. DAVID BELLAMY Chief Executive
    39. 39. Review of 2009 • A record year • • • • in new business in funds under management in new business profit in recruitment and size of the Partnership • A year of two halves
    40. 40. 2009 Productivity (APE per Partner) +27% -4% -11% -17% Q1 Q2 Q3 Q4
    41. 41. The Growth Model Target 15 – 20% pa New Business Capacity No of Partners Productivity New Business Per Partner
    42. 42. 2009 Productivity (APE per Partner) +27% -4% -11% -17% Q1 Q2 Q3 Q4
    43. 43. 2009 Growth in APE Average APE New Partners +11% +27% +6% -11% +7% Q1 Q2 +7% -4% -17% Q3 Q4 Total APE Growth -5% -10% +3% +38%
    44. 44. Productivity (APE per Partner £’000s) +14% +61% 388.0 -3% 323.2 311.8 -9% 314.1 2008 2009 +23% 193.4 2005 2006 2007
    45. 45. Number of Partners +9% 1,464 +7% +8% +2% +5% 2005 2006 2007 2008 2009
    46. 46. Retail Distribution Review • Further demonstration of our professionalism • Accredited SJP module • Realigned management structure • We will minimise fall out and disruption
    47. 47. Retail Distribution Review Provider/Product Bias • No provider bias • Minor product differences – already addressed Restricted Advice • Variation on a theme • Investment Management Approach is key • Professional and trusted advice is what matters
    48. 48. Retail Distribution Review Adviser Charging • Still not clear • Vertically Integrated Firms are different (to IFA’s) • Our approach is integrated • we are responsible for the advice (we guarantee it!) • we have a distinct investment approach • we build long term relationships • The market will decide if ‘margins’ are to change • but supply and demand principles will prevail
    49. 49. Retail Distribution Review • Having a positive impact on recruitment • We’re embracing the ‘Diploma’ • We’ve addressed any question of ‘bias’ • We believe we are better placed than most
    50. 50. Evolving Fund Range 2008 • Alternative Asset Fund - Blackrock • High Octane Fund • Cash Unit Trust - Oldfield - State Street 2009 • Corporate Bond Fund - Invesco Perpetual • Gilt Unit Trust - Wellington • Income Unit Trust • New managers - Axa Framlington - Burgundy/Liberty Square/JO Hambro
    51. 51. Investment Management Approach • Emerging Market Fund • Global Bond Fund • Absolute Return Fund
    52. 52. Strengthen the Team • Senior team together for 18 years • Development from within • Charles Gregson – new Non-Executive • Chris Ralph, Vivian Bazalgette & Peter Dunscombe
    53. 53. The SJP Opportunity • In excess of 8m people in the UK with liquid assets over £50k • In excess of 500,000 people in the UK with liquid assets over £500k • Total liquid assets estimated to be over of £1.5 trillion over 50% of which is held in cash
    54. 54. The SJP Opportunity • ISA’s • £170bn - Cash (BSA) • £116bn - Stocks & shares (HMRC) • £220bn Building Society deposits (BSA) • £750bn Bank deposits (LBG) • £480bn Mutual Funds (IMA)
    55. 55. The Opportunities • Increasing tax burden • Sustained low interest rates • People not confident they have enough for retirement • Migration from DB pensions to DC continues • Fewer advisers (200,000 – 1990; 50,000 – 2010)
    56. 56. Summary • Proven track record of growth • Resilient in tough markets • Well positioned for future growth
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