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ANNUAL RESULTS February 2010

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.

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ANNUAL RESULTS February 2010

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  1. ANNUAL RESULTS February 2010

  2. MIKE WILSON Chairman

  3. Mike WilsonCHAIRMAN David BellamyCHIEF EXECUTIVE Andrew CroftFINANCE DIRECTOR

  4. Agenda Introduction MIKE WILSON Business Update DAVID BELLAMY Financials ANDREW CROFT Outlook DAVID BELLAMY Q&A

  5. DAVID BELLAMY Chief Executive

  6. Review of 2009 New Business • Total single investments of £3.5bn up 13% • APE of £440.8m up 5% • Manufactured proportion 91%

  7. Investment new business Single premiums 2009 over 2008 -15% -12% +20% +64%

  8. Pensions new business Single premiums 2009 over 2008 +11% -0% -1% +30%

  9. Total single investments 2009 over 2008 -6% -8% +12% +50%

  10. Total new business (APE) APE (Annual premiums plus 10% of single premiums) 2009 over 2008 -5% -10% +3% +38%

  11. Manufactured new business (APE) APE (Annual premiums plus 10% of single premiums) 2009 over 2008 -1% -3% +12% +43%

  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. Net inflow of funds under management +35% +36% -10% +56% Percentage of opening FUM 9% 11% 12% 9% 14%

  14. Review of 2009 Partnership • Continued strong retention • 20 Academy graduates • Partnership numbers 1464 up 9%

  15. Number of Partners +9% +7% +8% +5% +2%

  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. ANDREW CROFT Finance Director

  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 EEVand cash result and not the IFRS result

  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. Analysis of Operating Profit

  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. Analysis of Operating Profit

  23. Analysis of Operating Profit

  24. Analysis of Operating Profit

  25. Analysis of Operating Profit

  26. Analysis of Operating Profit

  27. Analysis of Pre-Tax Result

  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. Analysis of Pre-Tax Result

  30. Analysis of Pre-Tax Result

  31. EEV Net Asset Value per Share Net asset value 284.5p

  32. Analysis of Post Tax Cash Result

  33. Dividend Final dividend Increased by 4% to 2.66 pence Full year dividend Up 2.5% to 4.5 pence

  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. IFRS Result

  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. 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. DAVID BELLAMY Chief Executive

  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. 2009 Productivity (APE per Partner)

  41. The Growth Model Target 15 – 20% pa New Business Capacity No of Partners Productivity New Business Per Partner

  42. 2009 Productivity (APE per Partner)

  43. 2009 Growth in APE Total APE Growth -5% -10% +3% +38%

  44. Productivity (APE per Partner £’000s) +14% -9% -3% +61% +23%

  45. Number of Partners +9% +7% +8% +5% +2%

  46. Retail Distribution Review • Further demonstration of our professionalism • Accredited SJP module • Realigned management structure • We will minimise fall out and disruption

  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. 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

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