12 Mar, 2008
Chris Marshall | 09:22:00 | 12 March 2008
Analysts have hailed Standard Life for
having turned around its business, upgrading it to a 'buy'
after it posted profits that were well ahead of consensus.
Standard Life announced a jump in operating profit before tax of
43% to £881 million over the year to the end of December,
prompting a 13.7% rise in its share price to 248p at 9.15am on
The Edinburgh-based insurer's new business contribution before tax
in 2007 was up 68% up on the previous year. Standard, which was
reporting its results for its first full year as a listed company,
announced it would pay a full year dividend of 11.5p.
Tim Young, an analyst at Collins Stewart described the results as
'barn-storming'. Young wrote in a note: 'True, Standard Life still
has issues with its over-reliance upon a future based on SIPPs and
wraps (the legacy of the much over-rated Trevor Matthews) but we
expect the company to establish a significant presence in the more
important corporate pensions market.'
In a conference call on the results, chief executive Sandy Crombie
added to speculation that he would stay on at the insurer beyond
his 60th birthday next February, saying 'I don't have any
expectations of retirement…we can see a lot to be done and I
look forward to playing my part in achieving it'.
In January the insurer had announced that its chief executive of
UK financial services, Trevor Matthews, was to leave the firm to
join Friends Provident.
Standard is on the look-out for a replacement for Matthews, but has
said that he may not be replaced directly, with a number of options
being considered. Crombie said: 'At the present time I have set no
Crombie also played down any possibility of Standard making a bid
for Friends Provident, a move which is expected to comfort the
market after Friends announced results below expectations
Many analysts and investors had been hoping that Standard would
use its results to give them some clarity on its strategy and
targets. Standard said that it had 'exceeded' each of the three
costs efficiency targets it had set itself, which included a
reduction in group corporate centre costs, a reduction of UK life
and pensions expenses by £31m, and a continuing reduction in
It has strengthened its mortality assumptions across UK and
Canadian operations by £100m. Standard said it had also
strengthened its persistency assumptions in the UK and Europe, and
that adverse lapse experience and strengthened operating
assumptions had reduced embedded value operating profit by
£249m, compared to a £266m in 2006.
Standard said that there had been an upturn in lapse activity in UK
onshore unit-linked bonds, which reflected concerns about the
outlook for commercial property, as well as general market
In January, Standard reported a fall in net inflows into its life
and pensions business, admitting that market volatility had taken
its toll on sales at the firm. Inflows for the full year were
£2.5 billion into life and pension products, compared to
£3.2 billion in 2006. As new pensions inflows were £2.7
billion this would indicate outflows of £300 million in the
The news in January that Matthews was leaving came at the end of a
turbulent period which included a failed bid for zombie fund
operator Resolution at the end of last year.
But Standard recently won plaudits from analysts for announcing a
deal to re-insure a £6.7 billion chunk of its UK annuity
liabilities. Crombie said this would reduce capital requirements