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Standard Life seizes opportunities

RESULTS: RDR and pension auto-enrolment are proving big opportunities for Standard Life, and there's a tasty dividend yield for investors
February 28, 2014

Adjust for 2012's exceptional gains (including Canadian property disposals and an insurance claim) and Standard Life's (SL.) underlying profit rose 19 per cent in 2013 to £638m. Moreover, total assets under management jumped 12 per cent to £244bn, buoyed by net fund inflows of £9.6bn.

IC TIP: Buy at 374p

Healthier investment conditions are helping, but the life assurer is also benefiting from the Retail Distribution Review (RDR) and pension auto-enrolment. Standard axed commission-based product sales in 2004, so was already well prepared for the post-RDR world (in which commissions are banned). Meanwhile, auto-enrolment is shaping up to be a big opportunity: in 2013, a third of FTSE 350 companies established schemes with Standard Life. Neither is the possible implementation of a charge-capping regime for auto-enrolment worrying management. Standard's automated approach should keep costs sufficiently low to allow for decent margins.

Accordingly, 340,000 new UK customers were secured in 2013, and UK and European new business sales jumped 28 per cent. The small Asian operation is also growing fast; new business sales there rose 21 per cent. Canadian dollar weakness, however, impacted performance, sending Canadian new business sales down 19 per cent.

Prior to these figures, JP Morgan Cazenove was expecting 2014 EPS of 27.6p and embedded value of 374p.

STANDARD LIFE (SL.)

ORD PRICE:373.6pMARKET VALUE:£8.88bn
TOUCH:373.5-373.7p12-MONTH HIGH:422pLOW: 323p
DIVIDEND YIELD:4.2%PE RATIO:19
NET ASSET VALUE:178pEMBEDDED VALUE:353p

Year to 31 DecGross life premiums (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20093.304107.512.2
20103.2497118.413.0
20113.3459513.013.8
20124.3296328.314.7*
20134.1380119.715.8
% change-4-17-30+7

Ex-div: 9 Apr

Payment: 22 May

*Excludes 2012 special dividend of 12.8p a share