Life getting better for man at top

DAVID Nish could barely suppress his smile as he watched the steady uptick of the numbers on the day Standard Life unveiled its half-year results.

Although a dramatic 13 per cent bounce in the firm's share price was moderated by a further round of panic sell-offs across world markets, the 5 per cent rise not only put the stock at the top of the FTSE-100 risers list for the day on Wednesday but it was also the first sign that the chief executive's direction was beginning to come good - and that it was being recognised by some of his harsher City critics.

When he took the top job last year, the accountant-by-trade Nish had a clear view of where the group needed to go. When he succeeded Sir Sandy Crombie, Nish, supported by former ScottishPower executive, the HR director Sandy Begbie, embarked upon a "transformation" programme. Part of this involved hundreds of job cuts. But the programme also required hundreds of millions in investment in the firm, which set investors' teeth on edge.

With a constantly depressed share price, investors have long been sceptical of the firm, raising complaints that it was failing to keep up with its peers on paying out dividends. The week before Nish unveiled the firm's 44 per cent increase in half-year profits, some analysts had raised the alarm at how much Nish was going to spend instead of paying out to investors. But Nish defiantly confirmed he would need 200m this year, to spend mainly on upgrading the firm's IT processes. It was necessary, he insisted. The world was changing rapidly, for life and pensions giants in particular, as regulations due to come into force in 2012, wipe away old ways of doing business.

Nish hailed the market response as "the first sign of things beginning to happen", but also made sure that his views on spending to create the insurance firm of his dreams were clear: "If I was sitting here in 12 months time looking back and we hadn't invested and all I had done was maintain the capital, squeeze the costs and run the business off a bit, what a waste of an opportunity and also the quality that is in Standard Life."

Earlier this year, the firm unveiled Nish's baby, a product called Lifelens which would give employees of firms who bought the service a new way of managing their pensions, buying savings, taking advantage of corporate goodies and could also still be used when the employee moved to a new employer. The plan had been long in the devising. Standard Life had acquired the employee benefits solutions portal, Vebnet, that provided the basis of many of the new product's bells and whistles in 2008.

But with new government rules insisting that all employers will have to offer some form of pension provision to their employees, Standard Life had to move fast.

Most client firms Standard Life deals with tend to offer their employees leather-lined Lexus-style pension schemes compared to the Lada econobox versions that most auto-enrolment propositions will entail starting from next year. But Paul Matthews, the new chief executive of Standard Life UK, recently told analysts he believes this will still provide a "big opportunity" for the group as hundreds of billions in pension mandates come into the market, or review their current supplier.

As Nish creates his new model business, the rival life and pensions group Aegon has been finding life a little tougher. It has been grappling with similar issues but approaching them in a different way and from a much more challenging position.

While Nish was struggling to stop smiling, Aegon chief Adrian Grace could only grimace as his second-quarter results showed the extent of the firm's challenges. The second quarter saw the firm book 15m in losses and underlying earnings slashed in half on the same period last year.

In addition to a 35m impairment charge on soured European bank holdings, Aegon UK also had to cough up 18m to sort out dodgy old Scottish Equitable customer records.

The firm predicted more costs to come by the end of the year as it addressed the glitches in the data. The firm also paid out 13m in its massive 80m cost-cutting programme, which is seeing the insurer also cut hundreds of jobs.

But another 7m was also spent in the quarter on Aegon's own platform which will allow it to soak up some of the tide of corporate pension schemes coming to the market. The wrap platform, currently being developed by a subsidiary of Bath-based Novia Financial, is due to begin offering services in October.

The tie up between the insurer and the platform provider was dubbed by industry insiders as the "wedding of the year" and was one of the first major moves made by Grace after he took over the top job at the UK business of the Dutch insurance firm in March.

But it was a move he had to make quickly. It is thought the decision to outsource the development of a wrap platform was taken for expediency in order to get the project up and running. Its launch in the autumn will be none too soon before the 2012 changes proposed under the retail distribution review (RDR) and auto-enrolment take effect. The firm has also recruited Paul McMahon, a former heavy-weight marketeer of wrap platforms at Axa, as its group marketing director. Grace will be hoping the new plan quickly brings about the benefits he's promised his Dutch masters.

Nish, on the other hand, is sitting pretty and enjoying the admiring glances from the City. Although many analysts still rate Standard Life as a "hold" or a "buy", others including Barrie Cornes, an analyst with Panmure Gordon, are converts. "David Nish has said he will get strong earnings but it will take two or three years to start coming through. The analysts, including myself, have sat there thinking there will be a time to buy Standard Life, but is it now? The answer was ‘probably not' until fairly recently.

"The fact that the shares bounced so strongly on Wednesday indicated the fact that it is starting to come through."

But will Nish make the case that Standard Life needs the investment and make shareholders pay for it?

"It is a difficult one because they are delivering on the dividend front, it is really the growth of the share price that has been lacking," said Cornes.