A £3.24billion deal struck by Standard Life Aberdeen (SLA) to exit insurance could pave the way for a U-turn by Lloyds Banking Group (LBG) over its decision to pull the plug on £109billion-worth of business with the Scottish financial services giant.
LBG announced its pull-out just last week, citing competition issues arising from last year’s merger of Granite City-based Aberdeen Asset Management (AAM) and Edinburgh-headquartered Standard Life.
Yesterday, SLA co-chief executive Martin Gilbert said he was hopeful that LBG may now have a change of heart over its move to cut longstanding ties with AAM and, more recently, SLA as part of a review of asset management arrangements.
The end of SLA’s partnership deals with Scottish Widows – owned by LBG – and LBG Wealth is subject to a 12-month notice period. An exit by Scottish Widows and LBG Wealth would remove nearly 17% off SLA’s total assets under management as of September 30, 2017, when they were worth £646.2billion.
Asked if these assets may yet be saved, Mr Gilbert said: “I think there is a chance – they could change their minds.”
SLA is offloading its insurance arm as part of an overhaul of its business following the £11billion mega-merger between Standard Life and AAM.
“Capital intensive” Standard Life Assurance is being sold to rival Phoenix Group, with SLA receiving £2.3billion in cash and a 19.9% slice of the Phoenix business. The deal affects about 3,000 employees and is expected to complete in the third quarter of 2018 but is conditional on regulatory approvals, including from the Prudential Regulatory Authority and Financial Conduct Authority.
SLA said it marked a “major step towards” the group becoming a world-class investment company and would help transform it into a fee-based capital-light business.
The news emerged alongside SLA’s maiden annual results, with assets under management lifting 1% to £654.9billion as net outflows fell 15% to £31billion.
Adjusted pre-tax profits were flat at just over £1billion.
SLA also announced chairman Sir Gerry Grimstone will step down by the end of 2019, giving the group nearly two years to find a successor. “He was due to go last year but we insisted he stayed on,” Mr Gilbert said.