Standard Life and Aviva differ in Indian market

Standard Life's David Nish said the insurer was in India for the long term. Picture: Contributed
Standard Life's David Nish said the insurer was in India for the long term. Picture: Contributed
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INSURANCE giants Standard Life and Aviva yesterday took differing stances on the emerging Indian market, with the Edinburgh-based group talking up its prospects, while Britain’s second-biggest insurer hinted that it could sell its joint venture on the sub-continent.

Standard Life chief executive David Nish said that he was committed to the company’s joint venture businesses in India “for the long term”.

Nish hailed the importance of the unit, saying: “The opportunity to grow material value [in India] is really quite significant”.

Standard Life has two joint ventures in India – a life assurance business and an asset management unit run in partnership with the state-backed Housing Development Finance Corporation.

Nish said HDFC Asset Management was now the largest mutual fund business in India and has returned 30 per cent growth in profit.

“We are very pleased with our investment there,” he added.

New Aviva boss Mark Wilson unveiled a rise in profits, but revealed that operational problems remained in a number of businesses and hinted the insurer might quit India.

Like Standard Life, Aviva has a 26 per cent stake in its joint venture – the limit to which foreign companies can currently own Indian businesses.

The majority 74 per cent stake in Aviva Life Insurance Company India – which was launched in 2000, the same year as HDFC Life – is held by family-owned Dabur Investment Corporation.

Both Aviva and Standard Life reported half-year results yesterday. Aviva investors were cheered by signs that the company was turning a corner following recent under-performance, with shares jumping by 7.6 per cent to 399p.

However, Standard Life’s stock fell by 2.6 per cent to 377.5p despite reporting growth in sales, flows and assets, which drove higher revenues and profits.

First-half profits at Standard Life grew by 6 per cent to £304 million, short of the 12 per cent increase expected by City analysts, who suggested its half-year results were a “mixed bag”.

Nish insisted the group has made “good progress” and that misses that were picked up by analysts were due to accounting changes, which led to a readjustment of figures, and actuarial changes in the Canadian business as well as costs of a debt refinancing.

He said the firm was well positioned for structural and regulatory changes introduced at the start of the year and that this was starting to show in the group’s performance.

Nish added that Standard Life Investments (SLI) had “an outstanding start to the year”, increasing operating profits by 37 per cent to £93m and third-party assets under management up 13 per cent to £93.4 billion. He added that an “excellent investment performance” drove net inflows of £7.1bn.

Keith Skeoch, chief executive of SLI, admitted the departure of Euan Munro, the founder and head of the company’s £30bn global absolute return strategies (Gars) fund, was “clearly a loss”.

However, he dismissed concerns that Munro, who has taken over as chief executive of Aviva’s asset management business, would see him take the Gars fund’s secrets to its rival.

Standard Life raised its interim dividend by 6.5 per cent to 5.2p. Aviva meanwhile cut in the group’s interim dividend from 10p to 5.6p, having warned earlier this year that it would be reduced in line with the major cut to its full-year payout.

Aviva reported underlying operating profits up 5 per cent to £1bn for the six months to 30 June, as new business lifted 17 per cent to £401m.

Costs at the group, which employs 2,500 staff at Bishopbriggs and Perth, fell 9 per cent, or £147m, to £1.5bn as part of its aim to save £400m.