Standard Life performance stuns analysts

Only one year after being the target of an abortive take-over attempt by London insurer Revolution, Standard Life has stunned market analysts by announcing a 64% rise in its profits.

In addition to the announced annual results it was the best performing UK insurance stock during the month of February. Full year income for 2007 totalled £465million representing a 21.3 pence rise per share, comparing favourably to last year’s figures of £283million, or 13 pence a share.

Eight analysts surveyed by Bloomberg prior to the release of the results forecast a much lower income than was subsequently announced, so the results definitely took them by surprise. To improve its profitability over the period Standard Life promoted sales of low-cost pensions and also cut down staff numbers. As a result it managed to increase its operating profit by 41 per cent to £881million, comfortably beating three cost savings targets in the process.

Analysts at ABN Amro Holding NV held up their arms to not being able to predict the unexpected and ‘impressive’ results. Giving credit where it’s due a spokesman said that cost-reduction programmes and the rapid payback on low-capital products had paid dividends and they were now recommending clients to ‘buy’.

Over the year Standard Life managed to reduce its operating costs by £1million more than its ambitious target of £57milion and also managed to lower pension and life costs by £31million less than 2005 figures, again beating its pre-set target by over £1million. But, most impressively it slashed ‘underlying’ costs by £27million, nearly double its target of £15million. As a result the company declared that it is on track to reduce its total costs by £100million by the end of 2009.

From being a company that spent lots of cash, Standard Life has become one that is generating cash, according to chief executive Sandy Crombie. Their products are selling well through life assurance comparison websites in addition to their own website and via traditional broker business, leaving Crombie confident that the company will continue to grow ‘very rapidly’ this year.

Standard Life was one of the first companies off the mark to respond to changes in consolidated company and private pensions legislation in 2006 and is now paying dividends. It has invested heavily in the low-cost self-invested personal pensions market and expects it to grow to £100billion in the next three years, contrary to many analysts who believe that the pensions market will slow down during 2008.

However, none of those experts forecast the leap in Standard Life profits either - leaving them with a significant amount of egg on their face!

About the Author

Andrew Regan is an online, freelance author from Scotland. He is a keen rugby player and enjoys travelling.