Company claims insurers should have paid £100m top-up into struggling fund, and court agrees

Standard Life has won a court claim worth £100m involving a controversial fund.

The commercial court in London has ruled against a group of insurers who provided professional indemnity insurance to Standard Life’s Pension Sterling Fund. In February 2009, Standard Life was forced to pay £100m into the fund following losses made in the wake of the credit crunch, and it claimed the insurers should have covered the cost of this top-up. The court agreed, although the insurers were granted leave to appeal and Standard Life will not recognise the £100m in its accounts pending the outcome of any new hearing. The news has lifted Standard Life’s shares by 2.3p to 220.1p, and comes as some of its policyholders are warned of lower payouts and cuts in bonuses.

The Pension Sterling Fund proved controversial after Standard Life was accused of misleading customers about the safety of customers’ money. Its marketing material suggested it was a low risk investment when in fact some of it was invested in toxic mortgage debt which plummeted in value.

Standard Life was subsequently fined £2.45m by the Financial Services Authority.

Interdealer broker sees signs of optimism despite uncertainty due to eurozone crisis

Here’s something of a novelty – an update spelling out tough trading conditions which has seen the company’s shares soar.

Icap, the interdealer broker, said full year profits would be in the range of £336m to £358m after it recorded lower volumes in the third quarter, as customers reduced risk in the wake of the eurozone crisis. In November the company had said it expected annual profits to be between £358m and £390m. This was “based on the assumption that markets normalise in the last quarter.”

It said third quarter revenues to the end of December fell by 7% and in January volumes fell 19% compared to the same month in 2011. It has cut its cost base by £20m by reducing staff numbers in areas where profits are falling, while investing in its futures and commodities businesses.

But it saw signs for “cautious optimism”, especially in the improvement in the US economy. Chief executive Michael Spencer said:

Like everyone else we saw a significant reduction in risk appetite in November and December. In January we saw encouraging signs of activity starting to return, albeit cautiously in some markets.

This positive spin has helped lift the company’s shares 28.4p to 364.4p, making them the biggest riser in the FTSE 100. It has also helped smaller rival Tullett Prebon, which is leading the second tier risers with a 13.7p increase to 311.5p.

On Icap, Numis analysts said:

The £20m of cost savings means they should be at the top of the very much reduced £336m-£358m pre-tax profit range for the year. Icap had previously guided that they expected to see a recovery in volumes through to their March year end and this may form part of their profit and loss guidance for the full year. Further cost saving could help and are likely next year. The immediate net £20m benefit is a mixture of reduced staff numbers (the Brazilian redundancies was announced last year) and lower bonus payments opposed to just redundancies. Icap is being valued at 9.2 times this year’s earnings which is not expensive but with forecast risk remaining we retain our hold recommendation.

Overall the market has moved higher as better than expected Chinese manufacturing data encouraged investors, despite a rather more mixed bag from the eurozone’s purchasing managers indices for January. The FTSE 100 is currently 69.40 points higher 5751.01.

Banks are higher on continuing hopes – usually dashed, it has to be said – that the financial crisis could be easing. Royal Bank of Scotland has risen 1.09p to 27.71p, while Lloyds Banking Group has added 0.8p to 31.42p after an expected shake-up of its management structure.

Barclays is 7.7p better at 220.25p following an update from a South African subsidiary. This has done nothing to put Shore Capital off its sell recommendation on Barclays, however:

Absa is a South African bank that is 56% owned by Barclays. This morning, it has issued a trading statement ahead of its full year results announcement on 10 February 2012. Overall Absa expects full year headline earnings per share growth of 18% and diluted headline earnings growth of 22%. A quick check of Bloomberg indicates that this is broadly in line with consensus market expectations. We do not explicitly split out Absa in our forecasts for Barclays as its results are spread across a number of divisions, although we are not expecting to make any changes following this announcement. Overall, Africa is viewed by the company as a key area of opportunity and growth.

We have a sell recommendation on Barclays shares highlighting that (1) the majority of the company’s profits are derived from low quality investment banking earnings, (2) the company has significant ‘PIIGS’ exposure (notably Spain and Italy) and (3) it is the most exposed of the UK banks to regulatory headwinds, in our view.

Cigarette maker says volumes fell 7% in first quarter, but blamed one off factors

Cigarette maker Imperial Tobacco has been an uncertain market recently, and despite a disappointing update from the company ahead of its annual meeting later its shares are moving higher.

Imperial said first quarter volumes were down 7% but added that the figures were hit by one off factors, including international sanctions on Syria, declines in Spain where a price war recently ended, problems in the US after a price rise and destocking in the Ukraine.

But with underlying tobacco revenues up 3%, its shares have added 42p to £23.12. Martin Deboo at Investec kept his buy recommendation but said:

Reported first quarter volume declines look to be below market expectations at negative 7%.

Imperial are keen to stress that the quarter was impacted by one-offs on the volume line from a number of sources, which they quantify as accounting for 6 percentage points of the impact.

We’re not convinced that these impacts are really one-offs. Trade loading impacts [the US problems] are a fact of life in the tobacco industry that a well-diversified company should be able to accommodate. The decline in Spain is an unavoidable reality and Imperial entered the market by choice when they acquired Altadis in 2008.

With the shares down by 7% since the year open, expectations look to have been rebased at least directionally in line with the disappointing delivery. And Imperial’s defensive and yield attractions remain intact. But evidence of any top-line recovery is slow to materialise and we remain buyers of the stock primarily for its earnings visibility, total shareholder return profile and a putative take-out premium, not the organic growth story.

It’s been three months since MF Global became the eighth-largest bankruptcy in U.S. history. Did anyone see this coming? Well, a few people had some idea, and a Congressional subcommittee will hear from them on Capitol Hill Thursday.

Investors await the latest unemployment data and comments from Federal Reserve Chairman Ben Bernanke on Thursday, while continuing to watch developments on Greece’s debt talks.

If there’s a crown jewel in the world of initial public offerings, it’s Facebook.

Shares of Whirlpool spiked more than 17% Wednesday after the appliance maker issued a strong outlook for 2012, despite a soft fourth quarter.

The parent company of the New York Stock Exchange said Wednesday that it plans to end its proposed merger with the parent of the Frankfurt exchange, after European officials blocked the deal.

The Nasdaq shot up 8% in January. 8% in one month! Unless you are extremely greedy, that would be a good year.

After wreaking havoc in global financial markets last year, the debt crisis in Europe has entered a complicated new phase in 2012.