Standard Life plc -- Moody's assigns Baa2(hyb) rating to the dated subordinated notes to be issued by Standard Life Plc

London, 20 November 2012 -- Moody's Investors Service has assigned a Baa2(hyb) rating to the dated subordinated notes to be issued by Standard Life Plc (SL). The rating is based on the expectation that there will be no material difference between current and final documentation in relation to the notes. The outlook is stable in line with those of SL and the main operating company, Standard Life Assurance Limited (SLAL).

RATINGS RATIONALE

The unguaranteed subordinated notes are issued under the EMTN programme and rank subordinated to the senior creditors of SL. The Baa2(hyb) rating is driven by the A1 IFSR of SLAL, and the four notch gap between SLAL's IFSR and the holding company subordinated debt rating is consistent with Moody's typical notching practice for European insurance companies. This will be the first unguaranteed hybrid capital issue by Standard Life Plc.

The proceeds will be used for general corporate purposes, although we note that the subordinated Euro 750m instrument which was tendered in H2 2011 (with the stub called in July 2012) was not immediately refinanced. The new notes will qualify as regulatory capital under the existing Solvency I rules and are designed to qualify as Tier Two regulatory capital under the forthcoming Solvency II regime.

The notes will receive some equity credit from Moody's based on the 30 year maturity of the notes. The notes contain a mandatory interest deferral trigger based upon breach of regulatory capital requirements. Under the existing EU Solvency I rules, Moody's regards this trigger as weak. The terms of the bond allow the trigger to switch to the Solvency II capital requirements when the Solvency II regulations are activated. As Solvency II is designed to be a more rigorous solvency regime, Moody's view on the strength of the trigger may change. Moody's expects to publish guidance on how it will assess the new Solvency II triggers within the context of ratings, equity credit and the implementation timetable in due course. The coupons on the new instrument are fully deferrable on an optional basis.

Relative to YE 2011, financial leverage is expected to increase modestly from around 20% (albeit after the tendering of the subordinated instrument which was not immediately refinanced, to an estimated 26%, following the Q3 2012 CAD$400m issuance and this instrument).

Commenting on what could lead to potential positive rating pressure in the future at SLAL, Moody's noted these would include after tax new business EEV profit margins in excess of 2% of PVNBP and sustained return on capital above 8%, a MASC ratio (Moody's public measure of UK solvency) consistently above 2.5 times and adjusted financial leverage below 30% and sustained interest coverage of over 8 times. Conversely Moody's noted that negative rating pressure could occur, in the event of after tax new business EEV profit margins of below 1% of PVNBP and return on capital below 4%, a MASC ratio materially below 2 times, adjusted financial leverage in excess of 40% and interest coverage below 4 times in the medium term.

The following rating has been assigned with a stable outlook:

Standard Life Plc - EMTN dated subordinated notes: Baa2(hyb)

Standard Life, headquartered in London, United Kingdom, had consolidated total assets of GBP158bn and shareholders' equity excluding non-controlling interests of GBP 3,993m at 30 June 2012 under IFRS.

The methodologies used in this rating were Moody's Global Rating Methodology for Life Insurers published in May 2010 and Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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