Standard Life 9-month sales miss forecasts

People are seen going up stairs during the Standard Life annual general meeting at the Edinburgh International Conference Centre in Scotland May 31, 2006.

LONDON (Reuters) - Life insurer Standard Life reported weaker than expected nine-month sales, sending its shares lower, but said its capital position was strong despite the stock market slump.

Standard Life said on Thursday its worldwide life and pensions sales for the nine months to Sept 30 were 12.4 billion pounds, little changed from 12.3 billion pounds in the same period last year.

That was below the 12.6 billion pounds expected by analysts, according to the average of nine forecasts collected by the company.

By 12:14 p.m., Standard Life shares were down 1.5 percent at 197 pence, having earlier fallen as low as 185 pence, while the FTSE 100 share index was 2.1 percent higher.

"There was a slight miss against the consensus sales number. Standard Life has been one of the better performing UK life stocks," said Peter Eliot, insurance analyst at MF Global.

Standard Life shares have fallen about 24 percent since the beginning of the month, less than leading rivals Aviva and Prudential, which are down 28 percent and 36 percent respectively.

CAPITAL CUSHION

The Edinburgh-based insurer on Thursday also reported a capital surplus of 3.4 billion pounds at September 30, compared with 3.5 billion pounds three months earlier, and said its capital buffer would drop to 1.9 billion pounds if stock markets fell 40 percent from their September 30 level.

"Our FGD surplus is still strong in the event of further market weakness," the company said in a statement.

The Financial Groups Directive is an industry measure of capital adequacy which stipulates that insurers must hold a layer of capital over and above the minimum needed to meet their obligations to customers, plus a further cushion to absorb unexpected shocks.

In a conference call with reporters, Standard Life finance director David Nish said the company's surplus currently stood at about 3.3 billion pounds, following a 20 percent drop in equity markets during October.

Analysts said Standard Life's update on its capital position was reassuring.

"If we see the market ease up further, I don't think there's anything we need to worry about," said Tim Young, insurance analyst at Investec.

Standard Life's Nish added the company was comfortable with its capital position, and was not considering raising fresh funds.

"We're very well capitalised," Nish said.

This month's decline in UK life insurance stocks has been driven largely by fears that falling equity and bond prices as the global economy slows could dent insurance companies' capital reserves.

Standard Life's FGD surplus at Sept 30 compares with Aviva's 1.9 billion pounds and Prudential's 1.2 billlion pounds.

Standard Life blamed its flat sales performance over the first nine months on a downturn in the UK and Europe, where sales fell 5 percent and 29 percent respectively, offset by strong progress in Canada, where they rose 32 percent.

The downturn in the UK was driven by a 6 percent fall in pension sales, while the decline in European sales reflected a 44 percent slump in Ireland, where a slump in property values and domestic share prices has weighed on consumer demand for insurance products.

(Editing by David Cowell)