Standard Life Boosts Dividend As Profits Soar Print E-mail

7 August 2008 

Standard Life gave a boost to its 1.5 million-strong army of small shareholders yesterday when the life and pensions group lifted its interim dividend by 7 per cent after strong sales growth and soaring operating profits.

European embedded-value operating profits - the industry's preferred performance measure - grew by 51 per cent to £534 million in the six months to June 30. The performance was helped by a string of mandate wins at its investment management unit and a landmark deal with Swiss Re to reinsure £12 billion of funds in the insurer's with-profits book.

The Swiss Re deal protects Standard Life from the risk that its customers will live longer than they had expected and freed up £120 million of capital.

Sandy Crombie, the chief executive, described the group's performance as robust in the face of particularly difficult market conditions. “We are proud that we are picking up [sales] volumes, committing less capital and getting better paid for it,” he said

Sliding equity markets offset mandate wins at Standard Life Investments, leaving third-party funds under management constant. Life and pensions net inflows at the insurance group rose 15 per cent to £2 billion. The dividend increase to 4.07p means that Standard Life's shareholders will receive £24, on average. The company demutualised in 2006 and policyholders received an average of 600 shares.

Worldwide life and pensions sales rose 5 per cent to £9.1 billion, with new business up 4 per cent to £157 million. Particularly strong performances in Canada and Asia and a resilient showing in the UK helped to offset disappointing sales in Germany and Ireland.

Mr Crombie has been in charge of day-to-day management of Standard Life in Britain since Trevor Matthews left at the beginning of the year to become chief executive of Friends Provident. He defended Standard Life's failure to find a replacement for Mr Matthews, despite a six-month search, saying that a worldwide search had begun and he would be happy to hand over the reins, but only once the right person had been found.

“We are looking. It is an extensive search. They key thing with senior hires is to get the right person,” he said.

Standard Life Investments, a division that Mr Crombie used to run, has scored some big successes bulking up the third-party funds that it manages. In March, it was reappointed to run a £350 million property portfolio for the Lothian pension fund.

This year it was given a £1 billion-plus fixed-income mandate, thought to be one of the largest of its kind in the UK.

Shares in Standard Life closed down 1p at 243¼p as traders took profits after a strong run by the stock.

Barrie Cornes, a Panmure Gordon analyst, said that Standard Life had reported a good set of interim figures in difficult trading conditions.  

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