LONDON: Insurer Standard Life Plc. posted a first-half operating profit of 206 million pounds, below market expectations, as the firm witnessed an increasing number of customers cashing in policies. The insurer said there has been an increase of around 100 million pounds in provisions for encashing policies.
The insurer, which became a listed company in July ending eight decades of existence as a mutual insurer and raising 1.1 billion pounds, and joined the FTSE 100 last week, said new business contribution before tax came in at 91 million pounds, almost three times the figure for the full year last year. It did not report net income nor did it provide comparable figures for the first half of 2005.
Chief executive officer Sandy Crombie, who had initiated a series of cost cutting measures, said the company had been net winners from the heightened activity in the U.K. pensions market. But, there has been an increase in lapses in the recent weeks and the company felt it prudent to set aside a provision until the lapse levels returned to the normal.
Analysts said customers, who stayed with the company to get a share in the IPOs rewards, are now leaving at a faster rate. Most of them held back as they were required to retain their policies in order to receive the bonuses. Once this is accomplished, they are leaving, said the analysts.
The company said sales of new pension policies, including single premium pensions and SIPPS pension plans that offer buyers more investment choices, are strong even as existing policy holders are canceling their policies.
Profit on new life insurance sales in the first half was 91 million pounds, up from 33 million pounds in all of 2005, the company said. In the U.K., new business profit was 78 million pounds in the first half, up from 27 million for all of 2005. It had reported a profit of 30 million pounds in 2005 and a loss of 456 million pounds in 2004.
The company also faces a dearth of leadership. Its finance director Alison Reed, 49, is leaving in October, after 16 months in the company. Crombie himself has not committed he will stay beyond the age 60. Chairman Brian Stewart, 61, will also leave after the company.
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