Friday 24 February 2017 11:55 am

Standard Life shares muted despite beating expectations with nine per cent profit growth

Standard Life's share price was somewhat muted this morning despite beating expectations with a nine per cent increase in profits.

Shares in the firm initially jumped before falling by 3.5 per cent by midday.

The figures

Fee based revenue grew by five per cent to £1.7bn and assets under management swelled – up 16 per cent to £357bn.

The firm’s operating profit before tax jumped from £665m to £723m.

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Underlying cash generation increased by nine per cent to £502m, with the shareholders set to benefit from an increase of eight per cent in dividends to 19.82p per share.

Standard LIfe’s Solvency II ratio increased from 162 per cent to 176 per cent

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Why it’s interesting

Company supplied analyst forecasts expected operating profit to be in the order of £684m, so the Edinburgh-based firm has delivered with its £723m returns.

Historically seen as a pensions, life insurance and savings firm, Standard Life has morphed into an asset manager in recent years

"The whole tone of this statement reflects a company which seems to be fully focused on asset gathering and asset management," said Eamonn Flanagan, an analyst at Shore Capital Markets.

Standard Life investments generated £383m of profits during the year – up from £342m – compared with the UK pensions and savings returns of £281m, which fell by £10m on the prior year.

While the investments it manages have increased, this was a market-driven, as funds under management were hit by net outflows of £2.6bn during the year, compared with inflows of £6.3bn in 2015.

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The FTSE 100 firm isn’t just focusing on the asset management though. During the year it bought Elevate – an online platform for advisers – from Axa and is pushing forward with its Indian life insurance expansion.

Despite the group emphasising the opportunity presented by India, operations currently are comparatively small, generating £41m of profits over the year.

What the company said

Chief executive Keith Skeoch said:

"We have increased the pace of strategic delivery, against a backdrop of volatile investment markets, with growth in assets, profits, cash flows and returns to shareholders.

Despite industry headwinds, we are benefiting from our strengthening global brand and strong long-term relationships with a well diversified range of clients and customers.

The acquisition of Elevate has strengthened our leading position in the advised platform market while the increase in the stake in HDFC Life and the proposed combination with Max Life will increase our exposure to the attractive and fast growing Indian market.

"We are already seeing the benefits of targeted investments to further our diversification agenda, including the success of our newer investment solutions, and the sharpened focus on operational efficiency."

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