Standard Life loses £3.7 billion from funds

● But operating profits up 6% at £362m and farewell dividend jumps by 8%

Financial giant Standard Life revealed investors pulled £3.7 billion from its funds in the first half of the year as it nears completion of its £11 billion merger with Aberdeen Asset Management.

In spite of this, the Edinburgh insurers saw a 6 per cent rise in overall pre-tax operating profits to £362 million for the six months to June 30 as it prepares to seal the tie-up.

Rising profits and dividends in Standard Life’s last results as an independent company before its £11 billion merger with Aberdeen Asset Management were overshadowed by investors pulling £3.7 billion from its funds.

The group suffered after its flagship Global Absolute Returns Strategies (Gars) fund had outflows of £5.6bn in the first six months of 2017, with some believing the trend was exacerbated by investor concerns about the uncertainties following any fund management merger.

Standard Life chief executive Keith Skeoch, who will share that role with Aberdeen’s Martin Gilbert in the new enlarged entity Standard Life Aberdeen, said: “Gross flows were lower on the institutional side because people were circumspect about the benefits of the merger. I wouldn’t be surprised if that remained in place for a few more months.”

However, he added: “The evidence I have seen to date says that Gars flows are starting to stabilise as performance has improved.”

Edinburgh-based Standard’s shares initially dropped 1.4 per cent after the results, but later closed down just 1.2p at 442.1p. Standard saw investor withdrawals of £24.4bn outweigh inflows of £20.7bn in the halfyear.

Neil Wilson, senior market analyst at ETX Capital, said: “Standard Life’s struggle to stem flows reflects a problem facing the whole active sector.

“Its betrothed, Aberdeen Asset Management, has been suffering net outflows for years.” Standard notched up a 6 per cent rise in overall operating profits to £362 million for the six months to endjune, while assets under management edged up 1 per cent to £362bn.

The group also lifted the interim dividend 8 per cent to 7p, ahead of consensus expectations, which Skeoch hailed as “the eleventh year of a progressive dividend policy” since Standard’s demutualisation in 2006. He said the company had delivered total shareholder returns of 11.5 per cent in that period compared to 6 per cent returns from the wider blue-chip FTSE 100 index.

Skeoch said the latest performance showed Standard was bowing out as an independent company “on a high point. We are looking forward to opening a new chapter in a few days time.

The merger with Aberdeen, which will have its headquarters in Edinburgh, is targeting cost savings of £200m a year, with about 800 jobs expected to be lost over a three-year period.

It will have £670bn of assets under management.

Skeoch said that the management team hoped to “hit the ground running” when the deal is expected to be sealed on 14 August. However, City analysts continue to have misgivings about the sharing of the top job.

Eamonn Flanagan, an analyst with broker Shore Capital said: “the machinations of the joint CEO roles will be closely scrutinised in the months to come – we still doubt the wisdom of this move.”