Standard Life hit by steep drop in UK sales

Standard Life, the Scottish insurer, revealed another sharp drop in sales across many of its lines of business yesterday, continuing its painful shift towards profitability before a proposed £5bn flotation this summer.

UK life and pension sales fell by about 12 per cent in the last quarter of 2005, as the group changed its pension commission structures to try to increase margins. Worldwide, insurance sales were down 26 per cent for the period.

Alison Reed, the finance director, admitted Standard had previously been writing a large amount of unprofitable business, but said it was now well advanced in its transformation. "Before [the transformation process], we were clearly writing business for volume, and not focusing on profitability."

Although UK insurance sales rose 2 per cent in 2005, this was driven by a huge inflow of funds into the company's self-invested personal pension (Sipp) plans.

In September, the group boasted it had taken £1bn into its Sipp in nine months, because of proposed legal changes which promised to allow residential property, fine wines and other assets to be held within pensions for the first time. However, the Treasury changed its mind on the rules regarding property in December, with many now predicting the popularity of Sipps will wane.

Ms Reed denied the surge in Sipp sales was driven by anticipated changes to the treatment of residential property in pensions, insisting the product would continue to be attractive.

The insurer is heading for a demutualisation in April or May, with a flotation likely to follow shortly after.