PENSIONS giant Standard Life has delivered a better-than-expected hike in annual earnings, providing its chief executive with a seven-figure pay boost.
The Edinburgh-based group said pre-tax profits for 2014 grew to £604 million, up from £506m a year earlier and well ahead of the £539m predicted by analysts at Panmure Gordon.
Yesterday’s results came as the insurer revealed the total pay package for chief executive David Nish had swelled to almost £5.5m, boosted by an increase in the value of his long-term incentives.
Nish’s remuneration in 2013 was £4.2m and he has now overtaken Standard Life Investments (SLI) boss Keith Skeoch to become the group’s highest-paid executive. Skeoch saw his total pay deal rise from £4.4m to £5.3m.
Standard Life’s assets under administration jumped 38 per cent to £296.6 billion, driven by net inflows, positive market movements and SLI’s £390m acquisition last year of Glasgow-based rival Ignis Asset Management last year. The group expected to squeeze out £50m of annual cost savings as it integrates the business, which it bought from Phoenix Group in July.
With more than 340,000 auto-enrolment customers added during the year, the firm has now secured more than 560,000 additional savers since employers were compelled to start providing workplace pension schemes for their workers.
Nish said: “Although investment markets are unsettled and may affect the near-term pace of asset and revenue growth, we are very well placed for the future.
“We have an excellent track record of succeeding in evolving markets and 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.”
However, Standard Life said that changes announced in last year’s Budget that will allow people to unlock their pensions savings had caused a “significant reduction” in demand for individual annuities and are expected to see a “step down in the profitability” at its spread/risk business.
The firm predicted that the contribution from annuities new business will fall by between £10m and £15m in the current year, with a further hit of up to £40m from asset liability management.
Panmure Gordon maintained its “buy” rating on the group’s shares after the results, and analyst Barrie Cornes said: “Standard Life has never been a big UK annuity writer but profitability has been impacted by the changes announced in the March 2014 Budget.
“We think that being the leader in the income drawdown market positions Standard Life very well for the proposed changes that take effect in April.”
Earlier this month, the firm said it would launch a UK-wide financial advice business after agreeing to buy the wealth management arm of Skipton Building Society, and pledged that more deals would follow amid “unprecedented” customer demand.
The group has also sold its Canadian operations to Manulife in a deal that will trigger a £1.75bn windfall for shareholders at the start of April, and Nomura analyst Ben Bathurst said: “As a result of these developments, we see the group as having superior short-term growth prospects.”
Standard Life proposed a final dividend of 11.43p a share. That would give a total payout for the year of 17.03p, an increase of 7.8 per cent on last time.
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