London: British life insurer Standard Life on Wednesday reported a 35% drop in its half-year profit, blaming weaker sales and falling asset values, and said market conditions remained “challenging”.
Standard Life said its sales fell 17% in the first half of 2009, reflecting a market-driven decline in the value of new customers’ pension pots, as well as its decision to withdraw from less profitable product lines.
But the UK’s fourth-biggest life insurer said it remained financially robust, with a regulatory capital buffer of £3.1 billion as of 30 June , little changed from £3.3 billion at the end of December.
“The recession has had an inevitable impact on our performance in the first half of 2009,” Standard Life chief executive Sandy Crombie said in a statement.
European insurance stocks fell sharply in March on concerns that rising corporate bond defaults could erode their capital, potentially triggering rights issues.
But Standard Life has escaped the worst of the sell-off thanks to its strategy of focusing on products that require little capital outlay.
The company also holds fewer corporate bonds, typically used to fund payments to annuity customers, than rivals with a greater presence in the annuity market.
Standard Life had a European Embedded Value pretax operating profit of £348 million ($589.5 million) for the six months to 30 June , down from £534 million in the same period last year.
Analysts had expected a profit of £338 million , according to the average of 11 estimates collected by the company.
The company had an underlying pretax profit of £47 million under International Financial Reporting Standards, down sharply from £345 million a year earlier, and far below the average analyst forecast of £122 million.
The insurer said it was paying an interim dividend of 4.15 pence per share, an increase of 2%, and in line with the average analyst forecast of 4.16 pence.
Standard Life shares closed at 195.8 pence on Tuesday, valuing the company at about £4.4 billion. The stock has fallen 12% in the past year against a 31% decline in the Dow Jones European insurance stocks index.