SWEEPING changes to pension rules took their toll on Standard Life in the first half of the year as sales of annuities plunged.
The Edinburgh-based group saw a 66 per cent fall in new annuity sales after reforms were introduced in April which allowed pensioners to retire without having to buy one. Over the full-year Standard Life said it expects its new annuity business to fall by £10 million to £15m.
We have the products, experience and proven investment performanceDavid Nish
The update on annuity sales came in chief executive’s David Nish’s last results presentation to the City after six years at the helm. He will be replaced today by head of Standard Life Investments, Keith Skeoch, who joined the firm 16 years ago.
Despite the fall in annuity sales, the insurance giant said its half-year pre-tax operating profit rose by 6 per in line with forecasts to £290m, after fee income jumped by 17 per cent to £761m.
But shares fell by 3.3 per cent to 439.7p and Shore Capital analyst Eamonn Flanagan said that on top of the annuity update the results had contained a number of “disappointing” regulatory and restructuring charges such as a £46m hit from its Hong Kong business and £38m charge from the closure of its insurance unit in Singapore.
On a positive note Standard Life said that it added 120,000 new customers in the UK through the workplace pensions auto enrolment programme. It said workplace and retail new fee business inflows jumped 23 per cent to £2.9 billion. The firm’s assets under management rose 35 per cent to £302.1bn year-on-year, partly driven by its acquisition of Ignis Asset Management for £390m announced last March.
Shareholders will receive an interim dividend of 6.02p, up 7.5 per cent on the same period last year.
Nish said that the investment made in the UK business in recent years had left it “well positioned to benefit from evolving customer needs and regulatory changes.”
“We are very well placed for the future. We have the products, experience and proven investment performance to help our customers and clients in all of our markets to save and invest, so that they can look forward to their financial futures with confidence,” he said.
Andrew Sinclair of Bank of America Merrill Lynch said that although he sees investment attractions in what is a fast growing asset manager, he noted Standard Life shares currently traded at a similar valuation to the higher rated asset managers.
He said there were “more attractive options elsewhere in the sector”, and maintained his “neutral” rating on the shares.
Barrie Cornes at Panmure Gordon, who has a “hold” rating on the shares, said the profit figures were in line with his expectations but believes the shares are “fully valued at the current level”.
Nish said it had been “an absolute privilege” to lead Standard Life for the last six years.
“I wish Keith and the inspirational people across all of our group every success for the future,” he said.
When he announced plans to leave the role in June, Nish said it was “the right time for both the group and myself”.
Chairman Sir Gerry Grimstone had paid tribute to Nish’s “great leadership”.
“He has changed the shape of Standard Life allowing us to successfully grow globally through world class investment management and distribution businesses.”