Investment view: Standard Life's a safe bet but room for improvement

Our view: Hold. Share price: 219.8p (3.1p)

Has Standard Life been more than a standard investment? The insurer was once the flag waver for mutual ownership only to be all but forced on to the stock market when regulators took fright at its lack of capital strength.

Since then it has been something of a bumpy ride but policyholders who held on to their shares haven't done too badly.

The Edinburgh life insurer is entering its sixth year as a quoted company, having joined the market on July 10, 2006 at 230p. In May 2007, less than a year after the float, the shares had hit 349.5p. They fell back, reaching a low point of 131.8p in March 2009, but have since recovered quite a bit.

Standard's customers were offered a 5 per cent discount if they bought shares at the flotation (those with savings in the with-profits funds also got free shares). Which makes the effective purchase price of 218.5p not far off today's price. Those who held on for a year, however, also qualified for free bonus shares, one for every 20 held.

According to Standard the average small shareholder held 641 shares at flotation. Assuming all the dividends paid out were re-invested into new shares and the shareholder held on long enough for the bonus shares, they will be sitting on a paper return of 37 per cent (the figures are based on a closing price of 218.7p, although the shares have fallen a touch since then). An outlay of £1,401 turned into £1,918.

Those who were issued free shares at 230p would, on the same assumptions, have enjoyed a return of 30 per cent. Not too shabby. Looking at the dividends, the shares have produced compound annual growth of 4.8 per cent (base rates today are at 0.5 per cent). So while Standard Life is on the stock market it has gone back to what it always was, a conservative Scottish life insurer which offers decent, but modest, returns. Which rather frustrates the City. Critics wonder exactly what chief executive David Nish's long-term strategy is. The company is in Asia, the hot growth market where Prudential is a big hitter and Aviva is trying to become one. But compared with them it is dabbling.

It has retained strength in the UK and Canada. Despite various talk of shifts to becoming a big direct seller, independent financial salesmen love Standard. They see it as a safe place to put their clients, and it is, although critics wonder how profitable the new business it is putting on will be.

Standard Life Investments has long been seen as the jewel in the crown, and makes good money from managing Standard's profitable back book of business. But it hasn't become quite the heavyweight some expected.

It is a cynical way of looking at things but Mr Nish is a former finance director. There's enough fat in Standard that he can hold the City at bay by cutting costs (and jobs). And he has a big advantage: Standard has grown organically. There aren't the problems with people, systems and cultures rivals such as Aviva and Pru face. This might make Standard a good takeover target, except foreign insurers tend to be sceptical about the UK life and long-term savings market. With some reason.

Standard trades on between 1.2 and 1.3 times the forecast net asset value of all its businesses, which is in line with the sector, although at 14 times forecast earnings it looks expensive. Fortunately, there is that dividend. With the forecast yield at 6.4 per cent, it has the capital to sustain that for a while.

For those looking across the sector Standard wouldn't be our first choice for people buying in and if this was a school report we'd be inclined to say "could do better". All the same, it should provide acceptable returns for those who hold.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific