U.K. insurer Standard Life PLC (SL.LN) Wednesday posted a 10%
rise in first-half operating profit and a 4.8% increase in its
interim dividend, helped by a strong recovery in sales amid signs
of improving financial markets.
The Edinburgh-based company gave an upbeat outlook on its
business, expecting growth in assets and profits and a continued
rise in dividends, and said it may look at small acquisitions to
help speed up its mainly organic growth.
Statutory operating profit for the six months ended June 30 was
GBP182 million, up from GBP166 million in the same period a year
earlier.
The result was in line with a GBP181 million average forecast
from eight analysts.
"This strong set of results demonstrates the progress we have
made as a business and the potential for increased profits and
dividends as we invest for growth," Chief Executive Officer David
Nish said.
"Our Canadian operations and Asian businesses, including the
joint ventures, have also performed well. In particular, there is
strong momentum building in India and we see great potential in
this very exciting market," Nish said.
On its outlook, the company said it sees "exciting opportunities
in our core markets and are confident that the investments we are
making will lead to continued strong growth in assets and cash
profitability, supporting our progressive dividend policy."
Total long-term savings new business sales on a present value of
new business premiums basis, or PVNBP, rose 29% to GBP9.6 billion,
significantly higher than the GBP8.93 billion average forecast from
analysts.
This contrasts from a year earlier when sales fell 18% to GBP7.5
billion.
PVNBP is a measure of life and pension sales, and is calculated
as 100% of single premiums plus the expected present value of new
regular premiums.
The company announced an interim dividend of 4.35 pence a share,
up from 4.15 pence a year earlier.
Standard Life shares opened higher, but at 0922 GMT were down
2.7% at 211 pence while the FTSE 100 was off 1.3%.
Oriel Securities analyst Marcus Barnard said: "Overall, this
seems to be a solid set of numbers, with growth in new business
combined with a strong back-book performance coming through in an
increased embedded value."
Embedded value, which is the value of an insurer's assets plus
the present value of future profits, grew to GBP6.8 billion, or 302
pence a share, from GBP6.4 billion at end-December.
Panmure Gordon analyst Barrie Cornes said the company's outlook
statement is "cautiously upbeat." Cornes said its sovereign debt
exposure is minimal and the development costs "should reap
dividends in the years to come as net flows improve in 12 to 18
months' time."
He downgraded the stock to a hold from a buy rating, noting that
the share price has already rallied 23% in the past month and is
now close to his target of 225 pence.
The best contributor to operating profit was the investment
management business, which grew earnings by 81% to GBP49 million,
offsetting declines seen in the U.K. and Canada.
Profits from the U.K. business were lower due in part to higher
spending on investments.
But in terms of new business sales, all key areas showed
double-digit growth, with the U.K. growing 32% to GBP6.93 billion
or 72% of total sales.
Canadian sales grew 17% while the international business grew
31% led by the Hong Kong and Irish operations.
In a briefing, Nish said the company will continue looking at
small acquisitions to speed up organic growth.
"I think, as you've seen in the last 18 months, we do acquire
businesses to accelerate organic growth," Nish said.
"For example, we bought Vebnet some 18 months ago. Then in the
last six months was threesixty and Aida Capital. They tend to be
smaller acquisitions and it's much more about accelerating organic
growth where, maybe, we have a gap in a scale, or a gap in the
proposition or a gap in distribution capability. So it's much more
in that sort of area," Nish said.
Vebnet is a technology and managed services company, threesixty
is an intermediary support services firm and Aida Capital is a
manager of funds of hedge funds.
Standard Life invests in many U.K. companies through its
Standard Life Investments unit. Recently, SLI has opposed the sale
of engineering and manufacturing company Tomkins PLC (TOMK.LN), in
which it has a more than 3% stake, to Canadian investors.
SLI head of U.K. equities David Cumming said recently the deal,
worth about GBP2.89 billion or 325 pence a share, was "without a
shadow of a doubt" too low, and that he expected a majority of
shareholders would oppose it.
The company on Tuesday declined to comment further on the
deal.
-By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 2078429486,
vladimir.guevarra@dowjones.com
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