Insurance company Standard Life Group has reported today that its European Embedded Value (EEV) operating profit before tax increased by 43 per cent to £881 million. Standard Life said in its 2007 preliminary results, the increase is due to a: “continued shift towards improved new business cost efficiencies”.
New business cost efficiencies and a new range of products dubbed ‘capital lite’ have seen new business increase by a margin of 2.1 per cent. Standard Life has three cost efficiency targets: a reduction in Group Corporate Centre costs, a reduction of UK life and pension expenses and a Continuous Improvement Programme.
The Group Corporate Cost programme reduced costs to £57m in 2007 from £89m in 2006, and UK life and pension expenses are down by £31m, which exceeds a target of £30m. The Continues Improvement Programme produced savings of £27m in 2007 and had a target of £15m. This was achieved through the founding of an integrated UK life and pensions, banking and healthcare division.
Group Chief Executive, Sandy Crombie said of the results: “Standard Life has delivered a very strong set of results in its first full year as a listed company. Our distinctive ‘capital lite’ approach to designing and distribution products has allowed us to more than double the capital and cash generated in the business.”
A drive towards service-oriented architecture (SOA) and a strategy to develop a single IT platform has been at the heart of cost reductions at Standard Life. The company claims SOA has saved it £16m in the three years the framework has been in place. A single IT platform strategy aims to reduce costs by £100m by 2009. This will be achieved through shared services. Standard Life last autumn completed the migration of small and medium sized business policy administration to the single platform successfully. It has also moved the acquired FirstAssist organisation over to the single IT platform.
Total adoption of the single IT platform is expected to be completed by the third quarter of 2009.
Financial analysts were predicting that Standard Life results would be poor and were surprised by today’s figures. Last year the Edinburgh based insurance provider failed to acquire rival Resolution and lost the head of its UK retail arm to Friends Provident. Standard Life demutualised in a floatation in 2006.