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Resilient Standard Life has to run hard to keep still
Standard Life (SL.L) survived the summer crash but an analyst says the insurer's shares will 'tread water' until it proves its transformation strategy is paying off.
Standard Life’s share price was battered in the summer turmoil but its business got off relatively lightly, an interim management statement from the insurer revealed today.
Sales of long-term savings grew 10% to £15.5 billion in the first nine months of the year, although this fell short of analysts’ consensus forecasts of £15.8 billion.
The main factor in this was a third quarter dip in institutional pension sales. An understandable mood of caution among corporate trustees meant Standard Life won fewer new mandates than it would have liked. As a result corporate pension sales of £6.17 billion over the nine months to 30 September missed expectations of £6.43 billion sales.
Analysts forgave the miss, however, accepting that institutional pension business is lumpy and can swing from quarter to quarter.
There was relief too that the amount of assets administered by the company – fees from which generate the bulk of its turnover – had not taken a bigger hit from the market turbulence.
Assets under administration fell to just over £191 billion at the end of September, down from £200 billion at the end of June and from £196.8 billion at the start of the year. Although the crash wiped off nearly £12 billion from the value of assets held by the insurer , this was partly offset by net inflows of new money of £5.1 billion in the first nine months of the year.
Standard made further progress in its retail business, which faces a big shakeup at the end of 2011 when Financial Services Authority reforms will abolish the payment of commission to independent financial advisers (IFAs), the main sales channel for insurers like Standard Life. The company has made a big effort to change its culture and proposition ahead of the change. It has seen 969 IFA firms adopt its wrap platform, which is key to its 'new model', up from 772 at the end of last year, with total platform assets of £10.6 billion.
Standard Life (SL.L) shares were flat at 205.9p, reflecting the uneasy calm in the wider market after yesterday’s sell off. The share price has risen from a 52-week low of 163p reached in early August but is down from a peak of 245.4p in March.
Shore Capital summed up the mood as it reiterated its ‘hold’ stance on the company led by chief executive David Nish (pictured). With the shares trading 38% below its estimate of Standard Life’s embedded value and on a forward yield of 6.7%, it said ‘the shares are not expensive’. However, it added the stock would probably ‘tread water’ until there was more proof that the new generation of platform products, such as its Sipp (self-invested personal pension), were more than compensating for the decline in the group’s traditional with profits business.
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