Insurer will have to prove investment will not erode the stock’s meaty yield

ALL eyes will be on Standard Life’s ability to generate significant amounts of cash when the insurer reports first quarter results this Thursday.

At the end of March, shares in the firm lost more than 18 per cent after operating capital and cash generation from continuing operations was 23 per cent lower at £287m.

Cash generation was hit by a triple whammy of higher reserve releases; increased investment (which many investors fear is running at levels that are too high); and a failure to repeat 2009’s stellar back book management results.

The problem is investors look to Standard Life for its meaty yield of over five per cent, which will be jeopardised unless the firm can run enough cash off of its operation. Last year, the 13p-a-share was only just covered. Shareholders will want reassurance that it is safe in the long run.