Standard Life has announced a brief third quarter trading update which reveals a further rise in Assets Under Administration (AUA), despite volatile investment markets. The shares rose by 1% in early morning trading.
AUA was up 2% to £301.9bn, driven by strong net inflows of £5.8bn, including net inflows of £2.4bn in Q3 2015. Standard Life Investments (SLI) generated 3rd party net inflows of £5.3bn, with two thirds coming from outside the UK as the group continues to expand its global reach. Record third party net inflows of £10bn across institutional and wholesale channels was also a highlight.
The UK and Europe business continues to build momentum with net inflows of £1.9bn. Workplace and retail new fee business net inflows rose by 20% to £4.4bn, including £1.5bn in Q3. 190,000 new customers have been added year to date and 70,000 in the quarter through auto enrolment, contributing to a 12% rise in regular contributions into workplace pensions. Wrap assets increased by 20% to £23.6bn with Wrap net inflows up 25% to £3.3bn, including a record £1.2bn in Q3.
Keith Skeoch, Chief Executive, commented:
"Standard Life has performed well against a backdrop of volatile investment markets...We remain well positioned with clients and customers to deliver growth as we continue to innovate and increase collaboration across our businesses."
Standard Life has transformed itself over the last fifteen years or so from a traditional life insurer to a fee-based asset manager. The sale of the Canadian operations (which had a large legacy insurance business) marks the near-completion of this strategy, resulting in a more-focused, capital-light and scalable business model.
Standard Life now has two main business lines - Standard Life Investments (SLI), which offers a range of active and passively managed funds, and its UK savings, pensions and investments business. These two businesses complement each other, with the UK savings and investment arm providing a strong distribution platform to channel inflows into the group's own suite of funds.
Standard Life is benefitting from some favourable trends, such as the on-going shift from defined benefit to defined contribution pension schemes, and auto-enrolment (by 2018 all UK employers will need to provide a qualifying workplace pension for eligible employees). Recent pension reforms could also benefit the group in the long run, by increasing demand for alternative pension arrangements such as income drawdown. This should allow the company to retain more assets on its platform when people come to retirement.
The shares trade on a prospective price to earnings ratio (P/E) of 15.8x, which is broadly in line with their long run average. For that investors get a business that has increased its dividend every year since its stock market flotation in 2006, offering a yield of 4.3% for the current year; although please remember yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.