Half-year operating profit at life assurer Standard Life (SL.) jumped 12 per cent year on year to £339m, which moderately beat most analysts' estimates. That reflected solid progress across the group's operating units and was achieved despite an £11m hit at the Canadian business due to the strong pound.
Mainly as a result of lower sales of institutional pensions, Standard Life's value of new business premiums (essentially, new business sales) fell 11 per cent year on year. Moreover, and reflecting this year's Budget decision to scrap the compulsory purchase of annuities, the group's margin from UK annuity new business slumped by 59 per cent.
But Standard Life also experienced strong demand for drawdown, self-invested personal pension (Sipp) and autoenrolment products. In fact, from the 180,000 new customers added in total to its corporate pension schemes in the period, 173,000 were autoenrolment customers. Meanwhile, the group's Sipp assets under management (AUM) rose 14 per cent to £24.5bn, while drawdown AUM exceeds £10bn. It is precisely such products that should benefit as demand for annuities declines and analyst Barrie Cornes of Panmure Gordon reckons Standard Life will be a "net beneficiary" of recent pension-related reforms.
Outside of the UK, a 7 per cent hike in AUM to £28.3bn helped the Canadian business to grow operating profit (in constant currency) by 18 per cent to £69m. However, management warned that the strength of sterling is likely to deliver a £25m hit by the year-end. The group's modest Asian operation, meanwhile, turned last year's £1m loss into a £6m profit after a strong contribution from the group's joint-venture operations in China and India.
Total assets under management grew 4 per cent to £254bn, driven by a £4.6bn net fund inflow. The group's £390m acquisition of fund manager Ignis from Phoenix (PHNX) - which completed just after the period ended - will add around £60bn of assets, too, and help accelerate the group's shift towards managing funds for external clients.
Broker JPMorgan Cazenove expects full-year EPS of 26p (from 19.7p in 2013), with embedded value of 369p a share and a 16.83p dividend.
STANDARD LIFE (SL.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 370p | MARKET VALUE: | £8.8bn | |
| TOUCH: | 369.9-370.1p | 12-MONTH HIGH: | 406p | LOW: 331p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 178p | EMBEDDED VALUE: | 349p | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 2.02 | 284 | 5.5 | 5.22 |
| 2014 | 2.00 | 452 | 11.6 | 5.6 |
| % change | -1 | +59 | +111 | +7 |
Ex-div: 10 Sep Payment: 21 Oct | ||||
