David Nish’s focus on UK market pays high dividend for Standard Life

ROBUST trading on its home turf drove Standard Life’s halftime operating profits up 15 per cent, with the Edinburgh-based life assurer’s army of 1.5 million private shareholders benefiting from a solid hike in the dividend.

The group yesterday revealed its UK profits jumped 62 per cent from £87m to £141m as it shrugged off tough economic conditions, with many customers switching to high-margin products such as Sipps (self invested personal pensions).

David Nish, the group’s chief executive, said sales of Sipps rose 22 per cent to 147,000 as customers saw them as a good home for their money.

“The market environment is challenging and those conditions look set to continue. However, our business model, leading market positions and strong balance sheet will allow us to continue to deliver ongoing improvements in value for customers and shareholders,” he said.

The strong UK performance comes before auto-enrolment for corporate pensions is introduced by the government in two months time, expected to provide a further boost for the long-term savings industry. Standard secured 21 new corporate pension schemes in the period, and now provides corporate pensions to almost 1.2 million employees.

Last year, 17 per cent of the British population were aged 65 and over, and this is expected to increase to 23 per cent by 2033. Standard also benefited from an 18 per cent fall in set-up costs linked with writing new life insurance business. Group operating profits lifted to £302m from £262m, well ahead of the consensus £254m forecast by City insurance analysts, sending Standard’s shares spiralling to the top of the Footsie risers board. The stock closed the day up 20.7p or 8.1 per cent at 277.4p.

Standard’s shares have risen 24 per cent since the start of 2012, outperforming a 16 per cent rise in the European insurance sector. The interim dividend rises 6.5 per cent from 4.6p to 4.9p.

The overall performance would have been even better but for a 30 per cent fall in profits in the Canadian division to £72m, largely due to that country’s low interest rate environment.

Nish, who has made a number of successful bolt-on acquisitions in recent years, appeared to rule out any bigger strategic sector consolidation moves despite the opportunities he said significant insurance market changes would throw up.

These include the Retail Distribution Review that will ban the payment of commissions by insurers to independent financial advisors.

Nish said although Standard would “keep our eyes open” for acquisition opportunities “I’m very comfortable that Standard Life has a strong organic [growth] core to it”.

In the international division, its joint ventures in India and China made a profit for the first time – an aggregate £8m – after breaking even last year.

The group’s fund management arm, Standard Life Investments, edged up profits by £1m to £68m despite volatile stock market conditions against the backcloth of the eurozone financial crisis. SLI’s third-party assets under management increased to £74.3 billion from £71.8bn at end-December 2011.