(Adds background, detail, co-CEO comments, analyst, shares)
By Carolyn Cohn
LONDON, Aug 7 (Reuters) - First-half pre-tax profit at insurer and asset manager Standard Life Aberdeen fell 12 percent, with the firm’s co-chief executives describing market conditions as challenging, but the early start of a buyback programme lifted its shares.
The business, formed from an 11 billion pound ($14.26 billion) merger last year of two rival Scottish firms, has shifted away from insurance towards less capital-intensive asset management but has suffered from net outflows.
The merger of the two active asset managers was necessary to compete against lower-cost index-tracking funds, co-chief executive Martin Gilbert told a media call.
“We are seeing fee compression,” he said.
“The customer is the winner, sadly the asset manager is the partial loser.”
SLA said earlier this year it would hand 1.75 billion pounds back to shareholders.
On Tuesday it said it would start that process with a 175 million pound tranche “in the next few days”, which Bernstein analysts described as “the main bright spot” in the results announcement, reiterating their “outperform” rating on the stock.
The buyback news lifted SLA’s shares 3 percent to 315.8 pence at 0740 GMT, taking it to the top of the FTSE 100.
Co-chief executive Keith Skeoch told the call that SLA, which is in the process of selling its insurance business to Phoenix, was “taking action to improve investment performance”, such as building up investment research.
Adjusted profit before tax from continuing operations fell to 311 million pounds ($403.06 million), below analyst expectations of 325 million pounds, according to a company-supplied poll.
Assets under management at fund arm Aberdeen Standard Investments were 557 billion pounds on June 30, down 3.2 percent from end-2017 but in line with a 556 billion pound forecast. Net outflows were larger than forecast at 19.2 billion pounds.
SLA said it would pay an interim dividend of 7.3 pence per share, up 4.3 percent and against a forecast 7.33 pence. ($1 = 0.7720 pounds) (Reporting by Carolyn Cohn; editing by Ben Martin and Kirsten Donovan)