■ Rise in assets under management
■ Customer numbers up
■ Strong capital surplus
The picture was more mixed on the retail side, although positive market trends helped to push assets under administration up 3 per cent to £77.8bn. However, net inflows into individual self-invested personal pensions (Sipps), mutual and wealth funds were more than offset by net outflows from other individual pensions, investment bonds and annuities, resulting in a net £400m outflow of funds.
Buy. Standard Life reported a 13 per cent drop in the present value of new business premiums to £5bn, but this was better than consensus expectations of £4.8bn, although Canadian and other international operations were a little below consensus. Corporate pension sales were down 6 per cent, but this was an impressive performance when set against a very strong first quarter in 2011. Trading well below our forecast embedded value, the shares are too lowly rated. Expect 2012 operating EPS of 14.8p and a dividend of 14.5p.
Charles Stanley says...
Hold. Overall, this was a positive trading statement from Standard Life; assets are growing and, while sales fell, the decline was less than expected. The insurer is more than halfway through its restructuring programme, but there are question marks as to whether business costs will remain high in the medium term after the programme has finished. We also wonder what margins the group can earn on its core offerings, such as corporate pensions, in the face of very stiff competition. And although the shares remain at a discount to embedded value, we are maintaining our hold recommendation.
Standard Life is continuing to shift away from capital-intensive annuity business and into more fee-based products. There is still plenty to do, but at least the insurer is moving in the right direction. Finances are in good shape, too, with £3.1bn of surplus regulatory capital. So with an attractive 6.4 per cent prospective dividend yield and trading below year-end embedded value estimates, the shares are too lowly rated at 227p. Buy.