Martin Flanagan: Standard Life shows you could always bank on insurance

INSURANCE, the more staid financial cousin of the "I'll get my coat" banking sector, continues its recovery. Standard Life took up yesterday where rivals Aviva and Legal & General left off earlier this month with a decent set of interims, including a 10 per cent rise in profits. Prudential is expected to continue the trend when it reports today.

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Was it really that long ago that the Financial Services Authority and the City were worried about the insurance sector's capital pillows and heavy exposure to the fortunes of stock markets via their investment arms?

In reality, although there were genuine issues about the insurance industry's capital strength it was unfairly tarred with the same brush when banks were forming a disorderly queue to show off their greed, irresponsibility and balance sheet weakness.

Apart from both being involved with money, the links between the two financial sectors were always facile. Insurance was not affected by the wholesale market liquidity issues that torpedoed many banks. And insurance was not into subprime.

And now? The latest results in the sector show steady organic progress. Resolution may be trying to restructure the British insurance industry, and the Pru is nursing hurt pride from its bid embarrassment with AIG Asia, but underneath the surface ripples of takeover activity, underlying trading advances are clearly being made.

Edinburgh-based Standard Life saw a 71 per cent increase in net inflows in the period, a case of revenues from premiums and deposits healthily outweighing withdrawals and policy terminations.

Ageing populations and outsourcing of company pension schemes continue to play into its and rivals' hands. Standard's joint ventures in India and China continue to make headway, although it will probably be two or three years before they are contributing meaningfully to the bottom line.

Meanwhile, Standard Life Investments, the group's fund management arm, is thriving. Third party assets under management - that most tangible expression of outsider belief in a fund management operation - rose to 63 billion from 57bn.

Standard's shares fell 3.6 per cent yesterday, but this was largely profit-taking on a good run recently anticipating yesterday's strong results.

Chief executive David Nish knows his company's business model is not the raciest on the blocks, but no doubt derives considerable satisfaction from knowing it is far from the riskiest, either.The near-5 per cent divi increase will also quietly satisfy many shareholders with interest rates where they are.