Standard Life's Shares and Investors Jump Up Amid Result

Standard Life declared healthy profits in its first report as a public company, even as its banking division was causing heartburn due to the ongoing credit crisis. This news is certainly good for its small investors who own almost two thirds of the company's shares.

Standard Life's chief executive, Sandy Crombie has said that the company could consider selling of its floundering banking arm. The Company's stock, however, jumped to 247 3/4p, which was an increase of 12% but still way below its highest rate of 349 1/2p, which it had touched during May 2007. The Bank, with around 4.6 billion pounds locked in savings and deposits and around 11.3 billion pounds in mortgage loans had bettered its lending in the previous year but its pre-tax profits had decreased to 32 million pounds.

Mr. Crombie, who will turn 60 in 2009, is due for retirement but Standard Life unfortunately does not seem to have anyone ready to replace him. Standard Life's health care division too was not performing up to its expectations. Mr. Crombie said that the Banks profits had been restrained due to difficulty in funding and their health care division was in the midst of major IT investment and development. He was confident about the profits over the long term in the health care division but was not as optimistic about its banking arm, saying that if he could not explore ideas in increasing profits then he would be open to think about alternatives for the business.

Standard Life has posted a 43% rise in profits and that adds up to 881 million pounds for the year 2007 and has declared its first full year dividend of 11.5p. Its Health care division had increased its profits only by 1 million pounds to 13 million pounds. But, its main insurance arm did exceedingly well by posting a 606 million pound profit figure due to an increase in sales of its life and pension policies and adoption of the European Embedded Value Accounting measure, which is used by most of the insurance companies. Its margins on new business also rose to 2.1% even as Standard Life surpassed all its internal targets.

Just like the rest of the industry, Standard Life, too saw a lot of withdrawals by nervous and desperate customers who were caught up in the inflation cycle or were simple to nervous to let their money out of their sight. The company thus lost 249 million pounds due to customers who had en-cashed their policies before the due date. But despite this setback, these impressive figures are a shot in the arm for Mr. Crombie, whose reputation and style of working had taken a beating after a failed 5 million pound takeover bid to pick up a closed life operator, 'Resolution'. Mr. Crombie felt that he was restricted from explaining their side of the matter to their nervous investors at that time and felt that the problem would have been less had they been allowed to explain the takeover bid from their perspective.

This unsuccessful bid seems to have slowed down Mr. Crombie's zest for future takeover bids as he himself said "The strategy remains unchanged. Organic growth will be the primary focus, but you can expect us to take a look at opportunities that come along. They will be few and far between."

So, even as Mr. Crombie did not offer any specific data on how and when he planned to sort out the problem afflicting its banking division, it has however at present, pleased its many investors by giving them some cheerful news in the inflation ridden and economically depressed UK market. In fact the company's report seems to be more impressive than Mr. Darling's lackluster budget. The company's shares were one of the fastest rising in the FTSE 100 and Standard Life seems to be one insurance company, which has insured that its investors get some good news and dividend in these trying times.