Sales plunge at Standard Life

Published on Wednesday 28 January 2009 15:05

LIFE and pensions giant Standard Life today revealed the impact of the financial crisis as it reported double-digit sales declines in the months after last autumn's market turmoil.

The group said UK life and pensions new business fell by a quarter to 2.38 billion in the final three months of 2008.

It suffered an 80% plunge in protection sales in the quarter, while pensions business dropped 28% and savings and investments was off by a fifth.

The fourth quarter falls left full-year UK life and pensions sales down 9% at 12.2 billion, said Standard Life.

The Edinburgh-based insurer said its capital strength was robust as it sought to reassure investors following a recent battering for its shares.

The group said its regulatory required capital "buffer" stood at 3.5 billion – more than the 3.4 billion reported at the end of September thanks to "extensive" hedging measures taken to protect against equity falls.

Chief executive Sir Sandy Crombie said the group's capital base would help position it well for what is expected to be a tough year ahead.

"Conditions across all our markets will remain challenging during 2009 with the combination of weakening economic conditions and an unprecedented level of dislocation in financial markets," he cautioned.

However, the group said growth across Asia continued in the final quarter of last year, with sales ahead by 30% after a near-doubling of business in China.

Read Bill Jamieson's view on Standard Life here

Hong Kong sales were 18% lower in the period, mirroring yesterday's update from rival Friends Provident, which also revealed a slowdown in the territory since the banking crisis escalated following the Lehman Brothers bankruptcy last October.

But the growth across the rest of Asia helped limit sales declines for its worldwide life and pensions business, down 6% at 15.6 billion in 2008.

Standard Life Investments also "held up well" in the face of unprecedented stock market turbulence, according to the group, with total funds under management decreasing by 14% to 123.8 billion in the year.

The firm's ongoing efforts to decrease its mortgage exposure in light of the credit crunch left gross mortgage lending 70% lower.

Protection products were the hardest hit as Britain's housing market slump deepens, knocking sales of insurance policies linked to property purchases.

Sales of protection products stood at just 1 million in the fourth quarter.

Standard Life shares rose more than 7% today, with the market also cheered by signals that profits may be better than expected.

The insurer said return on embedded value – defined as post tax operating profits – was forecast to be ahead of market expectations, broadly similar to the 11.5% seen in 2007 rather than the 10.1% pencilled in by analysts.

Panmure Gordon said this was welcome positive news from the sector and added that Standard Life's capital position was "arguably the strongest amongst the large UK life insurers".