Standard Life 2009 profit beats forecasts

The one-off changes to the life insurer's back book -- including asset allocation changes, hedging arrangements and actions taken to reduce the risk to certain tax treatments -- added up to 349 million pounds.

Analysts said the changes, without which UK-focussed Standard Life's headline profit would have been broadly in line with forecasts, clouded the group's prospects and were weighing on its underperforming shares.

"With that one-off number, people aren't looking beyond that. Looking forward, they are indicating headwinds because of market levels and therefore this business looks fairly becalmed," analyst Kevin Ryan at ING said.

"It is doing well in difficult circumstances, but that is about the best you can say."

In its first full-year results under Chief Executive David Nish, the former finance director who took the helm at the start of the year, Standard Life said its operating profit on a European embedded value basis totalled 919 million pounds.

That compares to a year-ago profit of 933 million pounds and a forecast of 668 million, according to Thomson Reuters I/B/E/S.

On a statutory basis, Britain's fifth-largest insurer by market value said underlying profit before tax came in at 291 million pounds for the year, virtually double the figure of 154 million a year earlier and above market forecasts.

SAVINGS TARGETS

In the UK, its core domestic market, Standard Life posted an operating profit of 506 million pounds, down from 658 million and again above expectations thanks to the back book changes.

Its fast-growing Asian business turned to a profit of 6 million pounds from a loss of 35 million a year ago.

UK-focussed Standard Life, seeking to overcome the impact of poor market conditions and weak confidence on its core self-invested personal pension (SIPP) product, moved to set a further savings target of 100 million pounds by 2012.

Standard Life said a year ago it aimed to cut costs by 75 million pounds by the end of 2010 and the insurer said on Wednesday it had already achieved 47 million of that, as it restructures customer service operations.

Last month Standard Life posted a better-than-expected 7 percent drop in 2009 sales, as a market recovery during the second half helped soften the impact of crisis-hit UK consumers cutting back on savings.

The insurer will pay a dividend of 12.2p.

At 9:11 a.m. British time, the stock was up 0.1 percent at 204.4p, broadly in line with the FTSE 100 index. Standard Life shares have dropped more than 5 percent since the start of 2010, underperforming the European sector by almost 10 percent.

The shares trade at a 36 percent discount to embedded value, according to analysts at Keefe, Bruyette & Woods, well below peers in a UK sector already trading at an average discount of 15 percent.

The insurer declined to comment on whether it is considering a sale for its healthcare business, valued at around 200 million pounds.

(Editing by Hans Peters and David Holmes)