Standard Life worth buying

What's new:

■ Rise in assets under management

■ Customer numbers up

■ Strong capital surplus

Life assurer Standard Life has started the new financial year on a positive note by pushing assets under administration in the first quarter up from £198.4bn to £206.8bn. The rise is not just as a result of positive market movements, but also reflects a £1.1bn net inflow of funds, including a strong performance from the corporate pension business (net inflow of £700m), which signed up 26,000 new employees in the three-month period. Further gains are expected as a result of pension reforms, including auto-enrolment. The group already administers 35,000 schemes on behalf of its clients, and has put the potential total of additional savers at 400,000.

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.

Investec says...

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.

visible-status-Standard story-url-StandardLife_BrokersViews_270412.xml