Standard Life Plc (SL/), Scotland’s biggest insurer, rose the most in more than three years after first-half profit beat estimates because of increased sales of fee-based savings products and lower acquisition costs.
The stock rose 8.1 percent to 277.4 pence in London, the most since March 2009 and was the biggest climber in the FTSE 100 index. Operating profit climbed 15 percent to 302 million pounds ($474 million) beating the 263 million-pound median prediction of six analysts surveyed by Bloomberg, the Edinburgh- based firm said today in a statement.
Standard Life, which manages 204 billion pounds of assets, is midway through a three-year plan to turn the firm into a provider of long-term savings rather than a traditional life insurer. The company has invested about 500 million pounds since 2010 on technology, betting U.K. regulatory changes to pensions and investment advice this year will lead to greater inflows into fee-based savings products.
“We can now add assets and new customers without needing to reinvest into the operation,” Finance Director Jackie Hunt said on a call with reporters. “This is as much about growth in revenues and that’s because we’re adding assets.”
The insurer raised its first-half dividend 6.5 percent to 4.9 pence a share, beating estimates of 4.83 pence.
Net income climbed 28 percent to 254 million pounds. U.K. profit climbed 62 percent to 141 million pounds on sales of fee- based savings products and pensions. Earnings in Canada dropped 29 percent as the European debt crisis pushed down yields on Canadian corporate and sovereign bonds, seen as a safer alternative to European government bonds.
The cost of selling new products fell 18 percent to 144 million pounds because of savings in the U.K. business and its investment in technology, which allows it to increase assets without a corresponding increase in administration, Hunt said.
“The beat appears to be driven by a very strong U.K. performance where the benefits of the cost-reduction program are coming through to a much greater extent than we and the market had anticipated,” wrote Barrie Cornes, a London-based analyst at Panmure Gordon & Co., who raised his recommendation to buy from hold today in a note to clients.
The U.K. government starts its auto-enrollment program this year, which will require employees to opt out of their employers’ retirement plan should they not wish to join. Standard Life has said it expects to gain about 200,000 savers through its existing company pensions and win more mandates.
The firm has said it expects to gain from a retail distribution review, which bans independent financial advisers from taking commissions from life insurers and fund managers. Standard Life is better prepared than rivals because it stopped paying commissions to IFAs in 2006, according to Kevin Ryan, a London-based analyst at Investec Plc (INVP) with a buy rating on the stock. Instead the firm has invested in online portals for IFAs for which it charges savers a monthly fee.
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