STANDARD Life boss David Nish brings down the curtain on his six-year tenure at the helm of the Edinburgh life assurer this week, with the City expecting a swansong of rising profits and dividends.
Nish is also set to reveal that a fall in life and pensions earnings, triggered by the annuities changes ushered in by Chancellor George Osborne, has not stopped strong net inflows into the business during the six months to the end of June.
Nish, who steps down on Wednesday, the day after the results, is expected to unveil a double-digit rise in operating earnings at Standard Life following a period of major corporate activity. The broad City range of forecasts is for profits of between £290 million and £305m.
In January, the Edinburgh-based group sold its long-standing Canadian insurance business to Manulife for £2.2 billion, returning £1.75bn to shareholders in May.
Analysts expect that deal to mean a 600 per cent-plus leap in headline net profits at Standard Life to £1.43bn this week. Meanwhile, Standard Life Investments (SLI), the fund management arm run by Keith Skeoch, who succeeds Nish as chief executive, will have been boosted by the £390m acquisition of the Ignis asset management group from Phoenix last summer.
One analyst said: “There are obviously one-offs involved in this week’s numbers that flatter the picture. But even so, the positive underlying operating performance shows real resilience, and it means Nish signs off on a high note.
“Another helpful thing is that Skeoch is well known to the City so there is no acclimatisation period needed going forward. He is inheriting a strong organisation.”
JP Morgan Cazenove forecasts Standard Life’s operating earnings will have jumped 10 per cent to £302m, compared with a profit of £274m in the first six months of 2014. The investment bank expects shareholders to benefit with an interim dividend of 5.99p, up 7 per cent.
City analysts say the strong performance has largely been driven by SLI, with the division’s profits expected to have jumped about 50 per cent to £152m due to higher assets under management and the Ignis acquisition.
Robust second-quarter net inflows of about £3.5bn are expected in the SLI third party business, including £3bn from the Global Absolute Return Strategy Fund. Previous management guidance on inflows has been for about £1bn-£1.5bn a quarter. The strong SLI outturn will have been partly offset by lower UK life and pensions earnings following the annuities changes the Chancellor announced in the Budget of 2014.
These changes, which kicked in fully a few months back, allow retirees to decide what to do with their pension pots rather than automatically putting them into annuities.
JP Morgan Cazenove forecasts earnings at the group’s life and pensions arm will be 10 per cent lower at £148m against £165m last time.
However, it notes: “In Standard Life’s UK pensions business, we expect net inflows of £0.8bn and this would be the 30th quarter in a row to deliver positive net inflows, showcasing the stickiness of the business.” The pensions business, one of the biggest in the UK, is also seen as having benefited from auto-enrolment.
Skeoch is likely to be quizzed on what the group may do with what has been estimated by some as “excess capital” of about £800m.
However, it is thought the group may decide to forgo its use for further merger and acquisition activity until there is greater clarity on the final rules on Solvency II as it affects insurers’ balance sheets.