Standard answers critics over investment programme

“I will leave investors to make their judgment,” said chief executive David Nish.

“What we will be trying to demonstrate today is that these returns are beginning to come through. We are beginning to see revenues come off the investments we have made.”

Standard Life has faced criticism for failing to spell out when a three-year programme of investment in new products and technology that cost it £201m last year, and is set to cost a similar amount in 2011, will start to pay off.

The company, Britain’s fifth-biggest insurer, said it invested £119m as part of the modernisation programme in the first half, and signalled that expenditure will be lower next year.

“Standard Life has reported a strong set of figures with the effect of the transformational programme finally starting to come through in the results,” said Panmure Gordon analyst Barrie Cornes in a note, raising his recommendation on the stock to ‘buy’ from ‘hold’.

Standard Life topped the list of FTSE 100 gainers, initially gaining as much as 12 per cent.

They eventually closed the day up 10p at 184.1p, a 5.7 per cent gain.

Its shares rebounded from a steep sell-off in financial stocks last week triggered by fears of a US recession and potential sovereign debt defaults in Europe.

The stock is still down 14 per cent in the year to date, underperforming a 9.3 per cent fall in the FTSE life insurance index.

Edinburgh-based Standard Life said it made pre-tax operating profits of £262m, up from £182m a year earlier.

Analysts had expected a profit of £198m.

The improvement was driven by a surprise 66 per cent jump in profit from Standard Life’s Canadian business, reflecting a switch into higher yielding investments, and by £30m in cost cuts.

The 186-year old former mutual raised its half-year dividend 5.7 per cent to 4.6p, and said it would withdraw the option for investors to claim the final payout of the year in shares rather than cash.

The disposal of Standard Life’s banking division last year has reduced the need for the so-called scrip dividend, introduced to preserve cash when the credit crisis was hindering banks’ access to wholesale funding, the insurer said.

The insurer said it has grown assets under management to £200bn and increased fee based revenues by 14 per cent.

“We are competitively positioned to benefit from market changes and the new regulatory environment,” added Mr Nish.