Ahead of the group’s interim management statement released today, experts on the insurance sector concluded the financial services giant’s approach to the RDR, including switching off its trail commission payments and moving towards clean share classes will put the insurer and asset manager ahead of the competition.
Panmure Gordon & Co analyst Barrie Cornes said he felt the strength of Standard Life’s group pension book and its STP functionality would serve it well as the industry moves ahead with auto-enrolment.
Cornes added having the investment platforms sitting in-house would continue to improve efficiencies at Standard Life as he predicted more consolidation in the platform space.
While the analyst said he anticipated more M&A in the UK asset management sector, he felt Standard Life Investments, like Legal & General Investment Management, was too healthy a business unit to be sold off by the parent group.
Retaining a ‘buy’ position on the stock at a 420p target price, the broker said the recent share price had underperformed its peer group following the first half results, but a strong recovery was expected.
Standard Life shares had risen more than 2% the day before the IMS.
Panmure forecasted Standard Life’s AUM to be up 12.5%, to £245.4bn, reflecting improving investment markets.
SLI third party inflows would also benefit, with only limited fallout following the departure of the GARS managers to Invesco Perpetual in September.
Cornes said: “Generally we think that SLI will have performed very well reflecting a broader product range and we also anticipate that this will continue post April 2014 when ‘RDR 2’ comes into force and there is increased transparency on fund pricing.”
Oriel Securities also retained its ‘add’ recommendation, with a more modest price target of 400p which it said captured the short to medium upside in the shares.
It said the group’s “relatively modern” product set including its Wrap, Sipp, corporate pension and employee benefits propositions and third party asset growth at SLI – in spite of the high profile manager departures – would underpin its success.
Oriel said SLI’s third party net flows were forecasted to increase 222%, from £3.02bn to £9.72bn, taking AUM to £96.4bn.
