A City analyst claims that Standard Life is plagued by poor pension persistency, internal churn and a limited back-book value and is likely to underperform.
Analyst Fox-Pitt Kelton says Standard is its least favourite UK insurance stock after ranking life companies between 1996 to 2005, scoring firms on new premium growth, reserves, expenses, persistency and margin.
Its top four are Resolution, Prudential, Friends Provident and Old Mutual.
The report says Standard has historically had higher expenses and lower persistency than its rivals. It says the firm’s 2005 persistency figures have been understated due to demutualisation and predicts persistency will fall as more policyholders start surrendering pensions.
It believes Standard will have to put aside £100m for lapsed business and says its business model is threatened by new business growth coming through recycling of existing products.
Despite acknowledging that Standard has only just demutualised, has a market-leading Sipp and has made significant progress in cutting costs, the report predicts that the company will take several years to reach the profitability levels of its main UK peers.
But Standard has hit back, pointing to APE sales up by 35 per cent on last year, with a 56 per cent increase in the third quarter, and says its share price is 20 per cent up on July’s float price of 240p.
A Standard spokeswoman says: “Our reported margins in the first six months of 2006 demonstrate that the company is closing the gap on its UK competitors considerably following a number of repositioning initiatives. We have had net positive inflows over the reported period, unlike firms such as Aviva, Friends Provident and Pru.”