Standard Life lifted by reinsurance deal

Insurer Standard Life saw shares stride ahead today after announcing a deal that will boost its operating profits by £100m (€135m) this year.

The group said it had re-insured £6.7bn (€9bn) of its UK pension annuity liabilities with Canada Life International Re, a subsidiary of Great-West Lifeco.

Shares leapt 3% on the news, providing a much-needed lift to the stock, which has languished at all-time lows in recent weeks on declining sales and the departure of its UK boss Trevor Matthews.

The deal is thought to be the biggest of its kind in the UK, according to Standard Life.

It said the move will allow the group to offload risks associated with longer life expectancies of its annuity policyholders for more than half of its £12bn (€16bn) annuity liabilities.

Standard Life has assets, such as bonds and cash, matched to its liabilities, but said the deal sees it transfer more risk than assets to Canada Life International, which has provided the one-off cash boost.

The group added it hopes to use money to “take advantage of the profitable opportunities available to us”.

The life and pensions firm has been under pressure since losing out in the takeover battle to buy closed life insurer Resolution last year after Pearl Assurance clinched the deal.

Its woes were compounded by results last month revealing a 20% drop in fourth quarter UK sales as market volatility hit the group’s domestic business.

Shares have since slipped below the group’s 230p float price seen after its demutualisation in July 2006.

However,investors cheered today’s announcement, with Standard Life planning to put the money to use in broadening its “innovative product range”.

Standard Life reported a 15% increase in life and pensions new business last year, at £13.17bn (€17.7bn), despite the poor fourth quarter performance.