Transcript Document

ANNUAL RESULTS 2010
February 2011
Mike Wilson
CHAIRMAN
David Bellamy
CHIEF EXECUTIVE
Andrew Croft
FINANCE DIRECTOR
MIKE WILSON
Chairman
Agenda
Introduction
MIKE WILSON
Business Update
DAVID BELLAMY
Financials
ANDREW CROFT
Outlook
DAVID BELLAMY
Q&A
DAVID BELLAMY
Chief Executive
Record new business (APE)
+32%
£582m
+23%
+58%
-2%
£429m
£419m
2007
2008
+5%
£441m
£349m
2006
2009
2010
Record single investments
+37%
£4.75bn
+29%
+62%
£3.36bn
-7%
+11%
£3.46bn
£3.12bn
£2.61bn
2006
2007
2008
2009
2010
Growing net inflow of funds under management
+30%
+35%
+36%
+40%
£1.9bn
-1.0%
£3.0bn
£2.3bn
£1.7bn
£1.4bn
2006
2007
2008
2009
2010
Consistent performance
• Unique culture
• Unique distribution – the Partnership
• Distinct investment management approach
Five strong years of Partner recruitment (number of partners)
+5%
2006
+8%
2007
+7%
2008
+9%
2009
+6%
1,552
2010
Record levels of productivity (APE per Partner - £’000s)
+23%
+14%
+61%
£356.0
£311.8
2006
2007
-9%
-3%
£323.2
£314.1
2008
2009
£385.6
2010
Compound APE Growth – rolling five years
22.6%
23.0%
20.0%
20%
21.4%
15%
2002-2007
2003-2008
2004-2009
2005-2010
Funds under management
17%p.a. compound growth over the last
5 years and 10 years
+26%
+31% £27.0bn
+18%
+25%
-10%
+29%
+11%
+34%
+20%
-6%
£6.3bn
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
ANDREW CROFT
Finance Director
Analysis of EEV operating profit
£’m
New business contribution
Profits from existing business
– expected
– experience variance
– operating assumption changes
Investment income
Life & unit trust operating profit
Distribution
Other
Operating profit
2010
2009
217.8
155.4
93.5
26.4
(3.4)
4.2
338.5
5.8
(11.7)
332.6
78.3
11.6
(1.5)
5.6
249.4
(7.5)
(13.0)
228.9
+40%
+36%
+45%
New business margin
2010
On an APE basis
On a PVNBP basis
2009
37.4%
35.3%
4.4%
4.3%
Analysis of EEV pre-tax result
£’m
2010
2009
Operating profit
332.6
228.9
Investment variance
117.6
148.2
Economic assumption change
Pre-tax result
4.8
455.0
(13.9)
363.2
Taxation
£’m
Pre- tax result
Taxation
Change in corporation tax rate
Post-tax result
2010
2009
455.0
363.2
(120.1)
(98.1)
17.7
-
352.6
265.1
+33%
EEV net asset value per share
Pence
Net asset value per share
2010
2009
352.9
284.5
+24%
IFRS
£’m
2010
2009
Life
72.8
53.6
Unit trust
17.3
16.8
5.8
(7.5)
(11.7)
(13.0)
84.2
49.9
Distribution
Other
Profit before shareholder tax
+69%
IFRS net asset value per share
Pence
Net asset value per share
2010
2009
120.6
112.0
+8%
Analysis of post-tax cash result
£’m
2010
2009
Arising on in force business
109.7
88.8
+24%
Arising from new business
(61.4)
(65.3)
-6.0%
48.3
23.5
+106%
Post tax cash result
Return on in force
• Where product structure uses surrender penalties the
business is cash neutral in the first six years
• This relates to £8.8 billion of new business added in last
six years, which is not yet generating positive cash
earnings*
• Over £61.0 million of post tax cash earnings per annum
in future*
* Ignores stock net movements and out flows
Return on investment in new business
As % of gross inflow of FUM
As % of net inflow of FUM
Cash payback
IRR (net of tax)
2010
2009
1.3%
2.0%
5 yrs
19.6%
1.9%
2.8%
6 yrs
16.4%
Cash outlook
• Average funds under management growing
•
1
3 of
funds under management not yet generating income
• Proportion of re-investment to acquire new business
increasing at a lower rate than the return from in-force
• Cash result to continue to grow strongly in 2010
and future years
Dividend
• Rebasing the dividend over the next two years
• Thereafter dividend to progressively grow in line with the
underlying business performance
• Proposed final dividend to increase by 49% to 3.975 pence
per share
• Therefore full year dividend of 6.0 pence per share an
increase of 33%
Capital position
• Total group solvency assets at 31 December 2010 are
£295.6 million
• Solvency remains strong
• Investment policy for solvency assets continues to
be prudent
• Solvency II QIS5 outcome
Summary
• EEV new business profit up 40%
• EEV operating profit up 45%
• IFRS profit before shareholder tax up 69%
• Cash result up 106%
• Full year dividend up 33%
DAVID BELLAMY
Chief Executive
Record EEV new business profit
+40%
£217.8m
+26%
+31%
+71%
£150.9m
£155.4m
£123.5m
£115.2m
2006
-18%
2007
2008
2009
2010
Record EEV operating profit
+45%
£332.6m
+39%
+54%
£244.7m
-16%
+12%
£228.9m
£204.3m
£176.0m
2006
2007
2008
2009
2010
Growth in EEV Net Asset Value per share
+24%
+22%
+13%
+20%
252.5p
222.6p
2006
2007
-8%
352.9p
284.5p
232.4p
2008
2009
2010
Underlying post tax cash arising from inforce business
+24%
+24%
£84.7m
+8%
-3%
£91.4m
£88.8m
2008
2009
£109.7m
£68.2m
2006
2007
2010
Continual dividend growth
+33%
6.00p
+16%
+18%
+2%
4.30p
4.39p
2007
2008
+2.5%
4.50p
3.65p
2006*
* Plus special dividend of 6.35 pence
2009
2010
Retail Distribution Review
• Professional qualifications
• Adviser charging (customer agreed remuneration)
• Status disclosure (independent vs restricted)
Professional qualifications
• Making excellent progress
• 750+ qualified at Diploma level
• 300+ within 1 exam
• 350+ within 2 exams
Ahead of schedule
8
Adviser remuneration
• Now have clarity
• Product charges and remuneration structure
RDR compliant
• Additional disclosure required
9
Current disclosure
How much will the advise cost?
• For arranging this plan and providing ongoing servicing throughout its
term, we will provide your adviser’s practice with direct remuneration and
administrative services. These have been valued at £ in the first year,
followed by a variable amount depending on the value of your fund. For
example, if the value of your fund grows at the Mid Rate then the amounts
would be £ in the second year and £ in the tenth year
• The amounts are paid out of the deductions shown and are included in the
illustrations above. They depend on the size of the contribution, the term of
the plan the value of your fund
Industry consequences
• More transparency required
• Margin pressure
• Labels (e.g. “Independent” “Restricted”) still causing tensions
• Potential reduction in adviser population
• Competition for distribution
• Reduced access to advice
• Individuals who do get access will get a better service
• Familiar brands may attract market share
11
Our approach to investment management
Investment Committee
Input / advice from
Stamford Associates
‘Manage the Managers’
Appoint the
Fund Managers
Sets
Performance
objectives
Risk
Management
& Strategy
Decisions:
Change Firm?
Change Manager?
No Change?
Stamford Associates
Research Fund
Manager Market
Monitor Managers
and Portfolios
Advise Investment
Committee
Access to
Whole Market
Qualitative &
Quantitative
Focus on Future
Outperformance
• Analyse & identify
talented managers
• Gather intelligence
• Number crunching
• Monitor activity
• Behavioural psychology
• Workplace analysis
Recommend:
• Potential changes
• New managers
New Fund Managers 2010
Current Fund Houses
12
Growth Portfolios
16
Income Portfolios
17
18
19
In Summary
• Consistent performance
• Investing for the future
• Product structures are “RDR Compliant”
• Strengthened our Investment proposition
• Substantially increased dividend
• Strong reputation and well placed
Highlights
• New business growth up 32%
• EEV new business profit of £217.8 million up 40%
• EEV operating profit at £332.6 million up 45%
• IFRS profit before shareholder tax of £84.2 million up 69%
• Cash result of £48.3 million up 106%
• EEV net asset value per share of 352.9p
• IFRS net asset value per share of 120.6p
• Funds under management at £27.0bn up 26%
• Final dividend of 3.975p per share up 49% providing
for full year dividend of 6.0p per share up 33%