Standard Life toughs it out with profit rise

INSURER Standard Life today said it is performing well despite "more difficult" market conditions, after posting a big rise in operating profits.

The Edinburgh-based former mutual said first-half operating profits on an embedded value basis increased 51 per cent to £534 million, helped by one-off gains from a deal to reinsure annuity liabilities and reduce the financial risk posed by Britons living longer.

Worldwide life and pensions new business sales rose five per cent to £9.1 billion in the first six months of the year, with the figure in the UK "constant" at £7.2bn, helped by strong growth in Asia.

New business profits generated by the UK life and pensions operation increased by four per cent to £138m.

The firm expects the market for self-invested personal pensions (SIPP) to double in size in the UK to £100bn of assets by 2011, although first-half SIPP sales were down 19 per cent to £2.1bn.

Sandy Crombie, the Standard's chief executive, said: "I am pleased to report that Standard Life has had a successful first half in 2008, despite more difficult market conditions.

"In our life and pensions businesses, net flows were strong, sales showed good growth and profitability was maintained.

"In Standard Life Investments, net inflows offset the impact of market declines so that third party funds under management remained constant.

"Group operating profits were well ahead and our balance sheet remains robust with strong solvency ratios maintained."

Overall profits were helped by a move in February to reinsure £6.7bn of UK immediate annuity liabilities to Canada Life International, generating a one-off pre-tax profit of £119m.

Group pension sales of £1.8 billion increased by 17 per cent compared to a strong period a year earlier, reflecting a further sign of the shift towards group personal pension schemes and thanks also to a large scheme win.

Standard Life added that sales across its savings and investments portfolio increased by 19 per cent to £1.6bn, due to continued strong offshore bond sales, which have more than tripled compared to a year earlier.

In mortgages, it said its book stood at £10.6bn at the end of June, a fall of £700m on December, but with a low arrears rate of 0.24 per cent.

"Looking ahead, we will continue to drive further efficiency gains, whilst investing in our businesses where we identify opportunities for growth," said Mr Crombie. Our innovative product set, excellence in customer service and strong distribution relationships leave us well placed for the full year."

He added that, following the progress made in the first half of the year and in light of the board's "confidence about the future", it is increasing the interim dividend payment by seven per cent.