A Decent Start For Standard Life by Finance News Bulletin

Published: 28/10/06

Shortly before criterion Life (LSE: SL) floated in July, I wrote that the corporation was "priced to go", and, sure enough, the split has moved up nicely from the float cost of 230p to 268p today I think the shares are value holdingAdmittedly, the share has slipped on today's interim marks The market is worried by news that a higher than usual number of customers are cashing in their policies now they've received their split allocation in the float

Some other customers are ending pensions in command to exploit the new pension system following A-Day The company has increased "lapse" provisions by £100m in responseWhat's more, first-half profits missed forecaster forecasts, partly thanks to the greater than before provision Operating profits came in at £206m, lower than a agreement forecast of £249m

Still, the trend is up; operating profit for the full day in 2005 was £395mAnd there was good news in today's results statement Standard Life's "share of the UK existence and pensions market rose in the first not whole and profits improved"New business contributed a income of £93m, almost three times greater than the equivalent figure for the whole of 2005

That's thanks to a concentration on higher margin goods such as SIPPS and investment bondsSIPPS and the changes next pensions A-Day mean there's decent possible for growth in the UK life commerce And even the more problematic Canadian operations seem to be option up True, overall market share in Canada has fallen but profits are rising thanks to improved limits and a decision not to chase volume via near to the ground prices

Life insurance companies are often worthd on an "embedded worth" (EEV) foundation -- a combination of adjusted net asset value and the present value of future profitsTraditionally, if a life cover company trades on a manifold of one times EEV, it's seen as cheap Prudential (LSE: PRU), for instance, currently trades on a manifold of 14

At flotation, Standard Life's EEV multiple was just below 1 Today's new EEV per split figure is 246p, so at 268p, criterion Life trades on an EEV multiple of around 11Looking at the price/earnings relation, analysts were forecasting pay per share of 20

3p for the whole of 2006 That puts the company on a price/earnings ratio of 13, but I expect that analysts are almost certainly cutting their full year forecasts today so the exercise ratio may rise a littleStandard Life's comparatively low EEV multiple reflects the fact that the corporation has its problems: departing customers after the IPO, a troubled healthcare business, declining marketplace share in Canada, and uncertainty about prospect top management But overall, I surely don't think Standard Life is expensive, more like around pale value

So if you hold shares from the IPO, I suggest you suspend on That's especially true if you're in line to receive a 5% refill by holding until next summerI'm not sure that now is a high-quality time to pay money for fresh shares, but if the share price slipped back to 246p, then Standard Life could be an good-looking play on an ageing inhabitants's need to invest more for longer retirements© patent 1998-2006, The Motley Fool Limited

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