Insurer Standard Life today posted lower than expected first-half profits, with its performance hampered by an increase in provisions to cover cancelled pension policies.
The UK's fifth-largest insurer, which ended eight decades as a mutual insurer in July, said in a statement announcing its first results as a listed company that its pre-tax operating profit for the six months to June 30th was £206 million on a European embedded value (EEV) basis.
That compared with an operating profit of £395 million for the whole of 2005, but the figure fell short of analyst expectations, with forecasts for the Reuters news agency anticipating that the insurer would post a profit of anything up to £263 million.
Standard Life, which did not report details of its net income or provide comparable figures for the first-half of last year, said its performance had been undermined by a £100 million increase in so-called lapse provisions, which cover customers transferring out of their pension policies.
The insurer said that it had made the move in the wake of lapses related to the company's recent demutualisation and following action by customers to consolidate their pension arrangements in response to "A-Day" changes to the UK's pension regulations.
"We have been net winners from the heightened activity in the UK pensions market. However, we have seen in recent weeks an increase in lapses and have deemed it prudent to set aside a provision until lapse levels return to normal," said Standard Life chief executive Sandy Crombie.
However, Mr Crombie stressed that new business had contributed £91 million to Standard Life profits over the first half, almost three times that reported for the whole of 2005.
He also indicated that the insurer remained "on track" to meet its cost cutting target of £30 million for its life and pensions operations and to provide a nine to ten per cent return on embedded value in 2007.