Berenberg raises target price on Standard Life

(Sharecast News) - Berenberg lifted its price target on insurer Standard Life to 1,072p from 975p, saying the upcoming Aegon UK acquisition would materially strengthen the group's scale and market position.

Berenberg said the �2bn deal would move Standard Life to first place in pensions and savings and second in workplace, while also shifting the mix of adjusted operating profits further toward capitallight, feebased revenues. It added that the enlarged scale should also give Standard Life greater capacity to tackle recurring retail outflows that have been benefiting rivals such as St James's Place.

Ahead of the group's first half results on 7 September, Berenberg expects debt to have fallen to �2.9bn following a �500m reduction in the first half, bringing Standard Life's Solvency II leverage ratio down to 29%, ahead of the yearend target of around 30%.

With that leverage goal effectively met, Berenberg said Standard Life can now redeploy the �500m previously earmarked annually for debt reduction into growth and capital returns, forecasting a �200m buyback starting after FY26 results.

Berenberg also pointed to potential further changes in Standard Life's business model, noting an Financial Times report that a consortium led by CVC and Prudential Financial was in talks to provide thirdparty capital to support bulk purchase annuity growth - a move could inject around �1bn into a new unit and accelerate the shift toward capitallight revenues.

The German bank, which has a 'buy' rating on the stock, said its higher target price reflects updated estimates incorporating the Aegon deal as well as a reduced cost of equity, lowered from 9.25% to 8.9%, arguing that Standard Life's position as the UK's largest longterm retirement savings and income business justifies the change.

Reporting by Iain Gilbert at Sharecast.com