Standard Life plc Ordinary 10p (SL.)

Company overview

Headquartered in Edinburgh Scotland, Standard Life is a financial services group whose principal activities consist of the provision of life assurance, pensions and investment management. On 10 July 2006, after 80 years as a mutual company, Standard Life Assurance Company demutualised and Standard Life PLC was listed on the London Stock Exchange. Standard Life represents one of the largest life insurance groups in the UK and is a constituent of the FTSE 100 Index.

HL Comment (2 November 2011)

The group's third quarter update (02Nov2011), saw management describing trading as "robust". It also noted that the group remained on track to transform its operational and financial performance. Group assets under administration (AUA) came in at £191.1 billion, compared to £200 billion as of 30 June 2011, with the board highlighting a diversified mix. New business sales of long-term savings products rose by 10% to £15.5 billion (2010: £14.0bn), following broadly maintained sales during the latest quarter. Management noted that “the third quarter period had seen very challenging conditions in global financial markets, conditions which had impacted the value of assets held along with customer confidence, reducing the pace of fund flows".

Negative Points:

• Assets under administration (AUA) have fallen when compared to both June (2011) and December 2010.
• Group investments are, in the near term, increasing costs and reducing cash generation. The insurer has courted criticism from investors over the level of investment made into its wrap platform.
• Competition in the UK pensions and savings markets remains intense.
• As with any assurance company, there are risks arising from exposure to the equity markets, movements in interest rates and property valuations.
• Fee business AUA in Canada fell by 3% to £13.2 billion due to negative market movements.
• The UK pension industry is in the midst of significant reform.
• The government has a number of legislative and regulatory initiatives underway. The Retail Distribution Review holds significant implications for companies providing retail financial advice.

Positive Points:

• The board believes that the group remains on track to transform its operational and financial performance.
• Management continues to highlight a robust financial position.
• Investment into group operations remains ongoing.
• Fee business AUA across its wholly owned International operations increased by 7% to £11.9 billion driven by higher net inflows, although partly offset by negative market movements.
• For its UK business, total SIPP customers increased to 127,700, an increase of 26% year-on-year and 19% since the start of 2011.
• A progressive dividend policy continues to be pursued. At the half year results, the group raised its dividend by 5.7%.

Consensus:

On balance, market consensus indicates a hold.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: British pound.