Standard Life yesterday underlined the resilience of its new business model as it posted an 18% increase in underlying first-half profits, boosted to a 51% rise by its blockbuster £6.7bn annuity reinsurance deal with Canada Life earlier this year.
Standard Life yesterday underlined the resilience of its new business model as it posted an 18% increase in underlying first-half profits, boosted to a 51% rise by its blockbuster £6.7bn annuity reinsurance deal with Canada Life earlier this year.
That injected £119m into its embedded value operating profit, which rose from £353m to £534m, ahead of most forecasts, while its investment and sales performance largely counteracted the fall in markets.
The firm's life insurance and pensions sales climbed 5%, in line with rivals, but required 14% less capital to fund, while Standard Life Investments held its third-party funds steady at £47.5bn against the market headwind.
Sandy Crombie, chief executive, said SLI would be "one of the select few companies who have maintained or improved their asset base during the last six months".
Across the group, £3.3bn of inflows, up by 15%, were offset by £8.7bn of market fall, leaving assets down £5.4bn at £163.4bn. The dividend is increased 7% to 4.07p.
In contrast with its bear market savaging as a mutual, the new "capital-lite" listed company unveiled solvency levels little affected by the conditions, with surplus capital down 3% at £3.5bn, and return on capital up from 9.1% to 11%.
Crombie, who has ridden out the storm over his on/off retirement and faced no questions over it yesterday, commented: "In easy times, almost anyone can manufacture some sort of performance.
In difficult times, it does test the resilience of your model. Where we have done well in this period, relative to some others, is that we are not on the one hand reliant on big bulk deals, like L&G and the Pru, and we are not dependent on consumer discretionary spending."
Standard argues that its new business, notably in self-invested personal pensions (Sipps), is coming from transfers of assets already in circulation, not newly invested.
On criticism from some industry quarters that much of Standard's impressive growth in Sipps is actually its existing pension business being repackaged, Crombie said: "There is an element of business that is internally transferred from an individual pension into a Sipp but it is not a lot."
He added that significant group pension transfers were flagged up. Net inflows, which set new business against policies leaving the books, were down in UK life and pensions by 3% to £1.4bn.
Individual Sipp funds under administration increased by 12% to £8.6bn, and Sipp customer numbers increased by 23% to 57,500, though individual Sipp sales fell by 19% to £2.1bn, due largely to the effect of depressed transfer values.
Standard plans to add five new features to its Sipp in the autumn, including the inclusion of protected rights and the launch of a variable annuity option, and Crombie reiterated the group's belief that the market will double to £100bn by 2011.
Group pension funds under management held steady at £15bn, while funds held on the new wrap platform jumped by 36% to £1.5bn and investment bond sales, hit by tax changes, fell by only 1%.
The tighter mortgage market saw outflows of £700m to £10.6bn at Standard Life Bank, with deposits up £200m to £4.8bn. New business profits edged up by 4% to £157m, well below forecasts of a 9% rise.
Asked whether Standard would consider bidding for Friends Provident or other merger targets, Crombie said that organic growth was the priority but "if there was an opportunity to gain scale in a particular area of operations, a product line that we don't have, a new route to market, or a customer base, we would like to work with - these are all things that interest us".
