A Fine Start For Standard Life by Finance News Bulletin

Published: 27/10/06

Shortly before criterion Life (LSE: SL) floated in July, I wrote that the company was "priced to go", and, sure enough, the share has enthused up nicely from the float cost of 230p to 268p today I think the shares are worth holdingAdmittedly, the share has slipped on today's temporary results The market is worried by information that a higher than expected figure 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 increased provision in force profits came in at £206m, inferior than a consensus forecast of £249m

Still, the trend is up; operating profit for the full year in 2005 was £395mAnd there was good information in nowadays's results statement Standard Life's "share of the UK life and pensions market rose in the first not whole and profits better"New business contributed a profit 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 following pensions A-Day mean there's decent possible for growth in the UK life business And even the more difficult Canadian operations seem to be picking up factual, overall market share in Canada has fallen but income are rising thanks to improved margins and a choice not to chase volume via low prices

Life insurance companies are often worthd on an "embedded worth" (EEV) basis -- a combination of attuned net asset value and the present value of prospect profitsTraditionally, if a life insurance company trades on a multiple of one era 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 nowadays's new EEV per share shape is 246p, so at 268p, Standard 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 wounding their full year forecasts today so the p/e ratio may rise a littleStandard Life's relatively near to the ground EEV multiple reflects the piece of information that the company has its problems: departing customers after the IPO, a anxious healthcare business, declining market share in Canada, and uncertainty about prospect top management But overall, I certainly don't think criterion 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% top-up by investment 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 criterion Life could be an attractive engage in recreation on an ageing population's need to invest more for longer retirements© Copyright 1998-2006, The assorted Fool Limited

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