Standard Life’s profits expand ahead of reform

INSURANCE giant Standard Life yesterday reported an unexpectedly large jump in profits and said it expects to grow even more thanks to forthcoming regulatory changes.

Chief executive David Nish told City A.M. that the imminent implementation of the retail distribution review – which will outlaw commission payments to financial advisers – will benefit Standard Life as the firm has operated on similar terms for the last six years.

“We’ve been excluded from half the market and are now coming back into a broader market with more propositions,” he said. “We’re counting down the days and minutes until we’re back.”

Half-year operating profits at the Edinburgh-based company were £302m, up 15 per cent on a like-for-like basis thanks to strong growth at the firm’s British business. Key to this was a 17 per cent fall in the cost of acquiring new business, largely thanks to efficiency savings.

“The company believe these lower costs are sustainable and may be capable of falling further,” said analyst Kevin Ryan at Investec. “Given the significant spend on IT-based projects in the last two years, we believe this represents a good result and a vindication of the investment.”

Standard Life said it grew the UK customer base of its self-invested personal pension business by 22 per cent to 147,000, assisted by Britain’s ageing population. The only negative was a 30 per cent decline in profits to £72m at the firm’s Canadian unit, which the company blamed on low interest rates.

Standard Life posted the biggest gain on the FTSE 100, closing yesterday up more than eight per cent at 277.4p.

THE £17BN SUPERFUND BUCKING TRENDS

STANDARD Life Investment’s flagship global absolute return strategies fund, known as the GARS fund, yesterday posted a 70 per cent annual increase in assets under management taking the size of the fund to more than £17bn.

GARS, an absolute return fund set up by Standard Life’s investment division in 2006, saw its asset base rise from £10bn at the end of June last year to £13bn in December.

Yesterday Standard Life said GARS saw an increase in asset values of £4bn in the last six months alone.

The fund is led by former Credit Suisse man Guy Stern, who helps mix around 30 different investment strategies, ranging from high yield credit to long-short currency strategies, at any one time to target a return of six-month Libor rate plus five per cent for investors.

Hargreaves Lansdown head of research Mark Dampier yesterday said the growth of the fund was a reflection of the low interest rate environment and investors’ growing appetite for low return, low risk investments.

“GARS is effectively a global macro hedge fund but without the gearing,” he said.

“Standard Life is also a good brand for IFAs, and that will help quite a lot. If you look at the background, most investors are scared stiff of losing money – these are very difficult markets and therefore people are not looking for the same level of volatility.”