Standard Life reports 43% profit rise on cost cutting
Wednesday, 12 Mar 2008 09:02
Sandy Crombie, chief executive of Standard Life, said the company has "made a good start" to 2008
Insurer Standard Life has reported a 43 per cent rise in profit before tax to £881 million in its first year as a listed company.
The results compared favourably to rival Friends Provident, which reported a decline in profits to £16 million yesterday.
A 13 per cent increase in new business values to £16.4 billion and better-than-expected efficiency savings drove profit growth, Standard Life said.
The UK-based company added this delivered a return on embedded value (RoEV) of 11.5 per cent, significantly exceeding Standard Life's nine to ten per cent target set for the year.
Chief executive Sandy Crombie said: "Against an uncertain economic backdrop we have made a good start to 2008 and are working to improve our core profitability."
Savings through integration of units and reducing expenses across the group contributed £109 million towards operating profit in 2007.
A review of UK group deferred annuity data also resulted in a £191 million boost to profits, as more advanced modelling found the reserves to be overly-prudent.
There has been an upturn in lapse activity - people cashing in the value of their investments - recently in UK onshore unit-linked bonds, reflecting market volatility, according to Standard Life.
The insurer has set up a short-term provision to cover the current period of instability and also strengthened its mortality assumptions by £100 million to account for increased life expectancies.
As people live longer, companies paying out annuities are facing bigger bills, increasing the risk of making a loss. Standard Life reinsured £6.7 billion of its UK annuities in February to reduce this risk.
The move will deliver a one-off increase in operating profit of £100 million in 2008, the company confirmed.