Standard Life CEO Says Firm in `Good Shape' After Market Selloff

  • Flagship GARS fund performance down year-to-date, CEO says
  • Scottish Insurer Reports Solvency II capital ratio 162%

Standard Life Plc Chief Executive Officer Keith Skeoch said the insurer turned asset manager is in “reasonably good shape” after the worst start to the year for equity markets since the financial crisis.

The Edinburgh-based firm reported 6.3 billion pounds ($9 billion) of net inflows in 2015 and 4 percent increase in assets under administration to 307.4 billion pounds, in a statement Friday. Fund managers started the year with reduced levels of risk in their investments, the CEO said on a conference call.

“This wasn’t in our view a financial crisis,” Skeoch told journalists. “Volatility is out of kilter with underlying fundamentals and it is much more sentiment driven. We are setting low levels of risk in our portfolios, but we are not doing anything especially different.”

Global equities are on the brink of a bear market, having lost more than $7 trillion in value in 2016 amid tumbling commodity prices and global growth concerns. The performance at the firm’s flagship 26.7 billion-pound Global Absolute Return Strategies fund has “slipped” in the year to date, the CEO said. Global equities are down 10 to 15 percent and GARS volatility is about 6 percent, he added.

Strategy Shift

The company, which has been shifting its strategy away from insurance toward less capital intensive asset management, reported a 10 percent increase in fee-based revenue to 1.6 billion pounds, representing 94 percent of Standard Life’s underlying income, the statement showed.

The shares were up 1.4 percent to 343.1 pence by 9:35 a.m. in London after full-year pretax operating profit of 665 million pounds, beating the average analyst estimate provided by Standard Life. It will pay a final dividend of 12.34 pence a share, increasing the total for the year by 7.8 percent.

Standard life, which is also Scotland’s biggest insurer, reported a Solvency II ratio of 162 percent, the first time it has disclosed its capital strength since new European Union regulations came into force in January. That’s based on a capital surplus of 2.1 billion pounds.

The company was among 19 insurers to get its solvency II capital model approved by the Bank of England in December under new EU laws that are designed to ensure insurers can withstand a 1-in-200 year event. Prudential Plc in January said its capital ratio was 190 percent.

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