Standard Life shares surged yesterday after the life insurer posted annual profits ahead of expectations and sounded an upbeat note on its prospects this year.
Pre-tax operating profit on an embedded value basis rose 43 per cent to £881m, way ahead of forecasts ranging from £579m to £752m. The increase was boosted by a 68 per cent jump in new business profits and a margin increase of 70 basis points to 2.1 per cent.
Headline profit benefited from one-off gains, including £191m from a release of overly conservative reserves for pension policies on its back book. But analysts gave the company credit for taking a hefty £349m combined charge for policy lapses and people living longer.
Standard Life's share price has been hit by a perception of strategic confusion after it entered the bidding war for Resolution, the closed life fund operator, only to back off when faced with the aggressive tactics of Pearl. Further uncertainty was created when Trevor Matthews, the highly rated head of retail, announced he was quitting to head Friends Provident, whose merger with Resolution was scuppered by Pearl.
The shares rose by 12.9 per cent to 247p yesterday. They had dropped more than 17 per cent this year, and the company has been one of the worst performers in the sector since it abandoned the Resolution bid in November.
David Nish, Standard Life's finance director, said: "What we are trying to demonstrate today is that we are consistently delivering on the strategy that we certainly thought we were talking about last year. Now here is the first full year's performance."
Last year was Standard Life's first year as a public company after capital strain forced the 183-year-old company to demutualise in July 2006.
Mr Nish said Standard Life could keep growing this year in spite of turbulent financial markets. He said that investors could "park" their cash in Standard Life's self-invested personal pensions (SIPPs) if they were wary about stock markets.
Mr Nish indicated that Standard Life would not relent on keeping Mr Matthews to his contract until July. "Trevor is a very senior executive of our company and was involved with a lot of our strategic plans and direction. Our shareholders would expect that he should be enjoying himself in the garden," he said.
The insurer declared a full-year dividend of 11.5p for 2007, implying growth of 6.5 per cent over the year before.
Bruno Paulson, an analyst at Bernstein, said: "While concerns remain about potential competition in SIPPs... the new business result has to go down as a distinct positive surprise."Reuse content