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Standard Life Aberdeen sells insurer to Phoenix

Standard Life Aberdeen has sold its insurance arm to Phoenix Group in a £3.2 billion deal.

 
Standard Life Aberdeen sells insurer to Phoenix
 

Standard Life Aberdeen (SLA) has sold its insurance arm to Phoenix Group (PHNX) in a £3.2 billion deal.

Phoenix will pay £2.2 billion in cash. Standard Life Aberdeen will also take a 20% stake in Phoenix as part of the deal. 

Shares in Standard Life Aberdeen rose 3% to 397.2p on the news, while Phoenix jumped 5.4% to 800.5p.

‘The sale involves the disposal of Standard Life Assurance Limited, with Standard Life Aberdeen retaining its UK retail platforms and financial advice business. The businesses transferring to Phoenix group as part of the sale include the UK mature retail and spread/risk books and the Europe, UK retail and workplace businesses,’ the company said in a statement this morning.

Standard Life Aberdeen will continue to be the asset manager for the insurance business acquired by Phoenix as well as the assets it already manages for Phoenix. In total these now amount of £158 billion.

'In addition, subject to normal commercial and governance constraints, Phoenix Group has committed to review further investment management mandates not currently managed by Aberdeen Standard Investments, who will be its preferred asset management partner for insurance investment solutions, as well as future consolidation opportunities,’ a company statement said.

Following the deal Phoenix said half of the newly enlarged group would be based in Edinburgh, where it will be moving its headquarters.

Standard Life Aberdeen said the sale was motivated by its aim to focus on its financial adviser platform business and asset manager arm Aberdeen Standard Investments.

‘In partnering with Phoenix Group, whose expertise is in administering and servicing long-term savings, Standard Life Aberdeen is able to realise attractive value for the disposed businesses, while continuing to benefit from access to related assets and flows,’ the company said.

'This transaction completes our transformation to a capital light investment business, a process started in 2010 with the sale of Standard Life Bank, continuing with the sale of our Canadian business and the merger last year between Standard Life and Aberdeen Asset Management,' Standard Life Aberdeen chair Gerry Grimstone said.

Widows deal revival?

News of the sale follows last week's decision by Lloyds (LLOY) to sack Standard Life Aberdeen as manager of £109 billion of Scottish Widows clients' pension investments.

A decision on that deal had long been expected after Aberdeen Asset Management, which had run the funds since 2013, combined with Scottish Widows' competitor Standard Life last year.

Lloyds, which owns Scottish Widows, has now begun a contest for these £109 billion funds and is chief executive said earlier this week it is getting a ‘lot of interest’ in it.

Scottish Widows chief executive Antonio Lorenzo said Standard Life Aberdeen could participate in this contest if it fixed its competitor issue which is the presence of the Standard Life insurance arm. 

‘Many people want to participate [in the contest]. We welcome Standard Life Aberdeen to participate if they fix their problem with competition. We are not thinking to address this internally,’ he said.

Standard Life Aberdeen co-chief executive Martin Gilbert said he was hopeful the sale of the insurance arm to Phoenix could help it win back the £109 billion mandate from Lloyds. 

‘Let me make it absolutely clear we have not done this transaction to solve the competition issues, we have a good relationship with Lloyds,’ he said.

‘I think it was more out of sadness than anything that we reached where we were. But we felt this was the right transaction for Standard Life. 

‘If it helps us win the mandate we would be delighted but we did a good job for their policy holders and clients to I expect hopefully we will get a chance to retender.’

Gars outflows hit £10.7 billion

In final results for 2017, Standard Life Aberdeen revealed its flagship fund, Global Absolute Return Strategies , continued to suffer heavy outflows, with a net £10.7 billion withdrawn over the year.

'Investment performance sentiment resulted in a slowdown in gross flows and increased rate of redemptions,' the group said in its update. 

Performance of the fund has been poor, with returns below its benchmark over one, three and five years.

'While flows in this area remained negative in 2017, we have seen the start of a turnaround as investors start to question how much longer the rally in equity markets can last,' it said.

Chairman Gerry Grimstone meanwhile announced he would step down from his position in 2019.

Grimstone has been with Standard Life for 11 years and was widely regarded as being instrumental to last year’s merger with Aberdeen.

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