Standard high as city insurer makes £881m

STANDARD Life today announced a forecast-busting 43 per cent rise in annual operating profit to £881 million in what was described as "a very strong set of results" by chief executive Sandy Crombie.

But the Edinburgh-based insurer, which demutualised and joined the London Stock Exchange in July 2006, could have claimed a £1 billion-plus profit had it not been for another round of provisions to cover customers cashing in policies early.

Analysts had been expecting Standard to weigh in with a consensus European Embedded Value (EEV) operating profit of £687m, with even the most optimistic observer in the City forecasting £752m.

Elsewhere in the update, Britain's sixth-largest life insurer said its return on embedded value (RoEV) – a closely-watched figure in the insurance industry – was up from 8.9 per cent last year to 11.5 per cent this time, "significantly exceeding" Standard's own target of between nine and ten per cent.

The company said that the performance had been helped by growth in new business profitability, cost efficiency savings and a strong showing from its investment management operation Standard Life Investments, which last month announced a 23 per cent to jump in sales to £7.9bn.

"Standard Life has delivered a very strong set of results in its first full year as a listed company," said Mr Crombie. "We have beaten all our profitability and efficiency targets for 2007 and achieved record sales, a platform which we will build upon for further growth."

Contribution from new business jumped 68 per cent to £345 million, helped by a 0.7 percentage point increase to its sales margin.

In January, the company said that over the latest calendar year it had seen group sales rise by 12 per cent to £16.31bn. Had it not been for a £249m charge for "adverse lapse provision and strengthened operating assumptions" Standard would have been looking at an EEV profit of £1.13bn.

Standard had warned earlier this year that it expected to make additional provision, after a £266m lapse charge in 2006.

ABN Amro analyst Youssef Ziai said the strong figures were a "big surprise".

He added: "They are impressive results. They are beginning to see delivery of their cost-reduction programmes, and they are getting quick payback on the low-capital products they are selling."

The group has endured a roller-coaster ride over the past year, including seeing its £4.9bn bid for rival Resolution scuppered by Pearl Assurance. Then in January, its UK chief executive Trevor Matthews quit to become chief executive of Friends Provident.

Standard said it would pay a full-year dividend of 11.5p per share, up 6.5 per cent and at the higher end of expectations.

Mr Crombie said the group had made a "good start" to 2008 despite the challenges of "an uncertain economic background".