THE SALE OF Standard Life Aberdeen’s insurance business to zombie-fund consolidator Phoenix Group is not expected to result in any job losses north of the Border despite the acquirer being headquartered in the City of London.
Most of Standard Life Pensions and Savings, which at the end of 2017 had £188.1 billion of assets under administration, is being sold to Phoenix, which is paying £2.3bn in cash and giving Standard Life Aberdeen a 20 per cent shareholding.
It marks Phoenix’s first move into the pensions space, with the business until now focusing on buying up life insurance books that are no longer issuing new policies, hence the name zombie funds. The Standard Life Wrap, which sells funds to retail investors, is not part of the deal.
Standard Life Aberdeen co-chief executive Martin Gilbert said around 2,700 of the insurance arm’s 3,000 employees are based in Edinburgh and that he “thinks and hopes” all will be kept on by Phoenix following the deal.
“One of the things we asked for was a commitment to Edinburgh, which they have given,” Mr Gilbert said. “Nowadays you can’t say those things and not do it.
“They want to grow the business. If they do, Edinburgh could do well.”
Mr Gilbert said part of the attraction of the Phoenix deal had been that the group wants to expand across Europe and so is taking Standard Life Aberdeen’s German and Irish insurance arms as well as the Scottish-headquartered business.
He said that Scottish Widows, an arch rival of predecessor firm Standard Life that had also been in talks to buy Standard Life Aberdeen’s insurance arm, “would probably have balked at those two businesses”.
Last week Scottish Widows, which is owned by Lloyds Banking Group, announced that it was terminating a contract that sees Standard Life Aberdeen manage £109bn of assets invested across Scottish Widows’ pensions funds.
Standard Life Aberdeen inherited that contract from Aberdeen Asset Management, which bought out the funds’ previous manager, Scottish Widows Investment Partnership, in 2014.
Aberdeen merged with Standard Life last August, becoming what Scottish Widows termed a “material competitor” that it could no longer contract the work out to.
Mr Gilbert said that while the Phoenix deal does not mean the firm can keep the Scottish Widows contract it will allow Standard Life Aberdeen to “have a future discussion with Widows” about those assets.
“They’ve walked away I think, it’s whether they walk back,” he added.
Under the terms of the Phoenix deal, Standard Life Aberdeen will continue to manage the £150bn of assets invested in its funds via the insurance business, with Phoenix expected to channel further assets into the firm’s range.
News of the sale came as Standard Life Aberdeen unveiled its first set of results as a merged entity, with the investment arm, which suffered net outflows of £31bn during 2017, seeing pre-tax profits slide by six per cent to £677 million.
Standard Life Pensions and Savings, meanwhile, posted a five per cent rise in pre-tax profits to £381m, although the unit’s profit margin dipped from 42 per cent to 40 per cent.
Both Mr Gilbert and his co-chief executive Keith Skeoch saw their pay packets decrease in 2017, with Mr Gilbert’s maximum award going from a possible £5.8m to £4.3m across salary, pension contributions and performance pay. He was awarded £1.3m.
Mr Skeoch’s maximum potential award went from £4.9m to £4.3m and he received £3m.
Despite the falls the pairs’ earnings are still 60 times higher than that of the median earner at the firm.
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