Standard Life profits rise by 51 per cent with help of reinsurance deal

Standard Life's profits beat forecasts yesterday but the life insurer warned that the outlook for the sector was impossible to call in difficult markets.

First-half operating profits on an embedded value basis rose 51 per cent to £534m, boosted by pension sales and a one-off gain from a reinsurance deal to protect against longer life expectancy. The figure was at the top of analysts' forecasts and ahead of an average forecast of £525m.

David Nish, the finance director, said: "In terms of how the second half will go, we are positive about our capability but markets are difficult. We expect to do well in the segments we work in but there is no way of guessing where the market overall will go."

The former mutual insurer gained from a £119m boost to operating profit from a deal struck in October which saw Canada Life reinsure more than half Standard Life's UK annuity liabilities.

Life and pension sales rose 5 per cent to £9.1bn but profits from new business came in below forecasts at £157m, up 4 per cent. Margins at the Canadian and European businesses offset a stable 1.9 per cent UK margin.

Sandy Crombie, the chief executive, said Standard Life would perform strongly compared with the rest of the market because it was taking business from rivals rather than chasing new money.

"We have gone for a different part of the market from our competitors," he said. "We are less exposed to consumers' ability to direct discretionary amounts towards savings; we are more exposed to money in the market moving around the market."

UBS analysts said: "The environment remains challenging but comfort can be taken from the company's generally resilient performance in the period."

Analysts questioned the company's strategic direction after it lost out to Pearl Group in a bidding war for Resolution last year, but strong sales have seen it back in favour this year.

Mr Crombie said the company had many opportunities to grow in the UK by launching new products without looking for deals.

Standard Life shares closed down 0.4 per cent at 243.25p, outperforming the life insurance sector. Its shares have fallen 3.8 per cent this year compared with a 22 per cent fall by the wider sector. Standard Life increased its interim dividend 7 per cent to 4.07 pence. "If I talk about how we feel about the future, that is a sign of our confidence," Mr Crombie said.