STANDARD Life Aberdeen bosses have defended the merger that created the business in the face
of investor unrest but conceded the company’s investment performance needs to improve in some areas.
Directors faced criticism regarding the £11 billion tie-up between pensions giant Standard Life and Aberdeen Asset Management at the first annual general meeting of the enlarged group yesterday.
With shareholders noting the company’s share price had fallen since the deal at least some seemed unconvinced of its benefits.
Claiming great harm had been done to Standard Life, one investor said: “You decided to merge with this company by hook or crook.”
The comments were directed at Sir Gerry Grimstone, who became chairman of the enlarged group after holding that position at Standard Life.
Sir Gerry noted in response: “More than 99 per cent of the shareholders voted for the merger and I’m very confident that over time the strengths of the merger will come through, the advantages of this being a global company will come through.”
Read more: Standard Life completes £11bn merger with Aberdeen Asset Management
He noted the deal marked an important step in a long term strategy to turn Standard Life from a capital heavy and old fashioned insurance company into a capital light growth business.
Edinburgh-based Standard Life Aberdeen subsequently agreed
a £3.2 billion deal to sell its
European insurance business to Phoenix Group.
Read more: Zombie firm Phoenix commits to maintaining Standard Life workforce
The company said yesterday it planned to return up to £1.75 bn to shareholders following completion of the deal.
Joint chief executives Keith Skeoch and Martin Gilbert reiterated their belief in the rationale for combining Standard Life and AAM to create a business with the scale and reach needed to compete in fast changing global markets.
Mr Skeoch, who used to run Standard Life, said: “I do believe that there’s an awful lot of disruption and dislocation in the world and that what we are doing is creating something very special and unique that will be able to take advantage of the way in which the world is changing.”
Mr Gilbert, former head of Aberdeen Asset, said: “I think we’re all disappointed in the share price, clearly we’d like it to be higher but in the long term I think our strategy is absolutely correct.”
Shareholders voiced concern about the level of funds outflows and the recent record of the flagship GARS fund.
“Clearly the flows situation is disappointing,” said Mr Gilbert. He added: “Gross sales flows are exceptionally good. It’s just the outflows. To a certain extent they’re performance related and industry related.”
While Standard Life Aberdeen follows an active management approach, Mr Gilbert noted the market shift into passive funds and alternatives.
“I’d like to reassure you we are working very, very hard on these issues especially the performance issue,” he said.
Mr Skeoch said of the recent record of the £18.7bn GARS fund: “Performance is disappointing and we need to do better.”
He added: “We have suffered poor short-term performance in the past because as an active manager that occasionally happens and actually performance has subsequently recovered.”
Shareholders expressed concern Standard Life Aberdeen stands to lose £109bn funds it manages for Scottish Widows on behalf of Lloyds Banking Group. In February Lloyds said it planned to end the contract arguing the change of control at Aberdeen Asset Management meant Scottish Widows’ funds were being run by a rival.
Read more: Standard Life to fight Widows for right to retain £109bn contract
Sir Gerry told the meeting Standard Life Aberdeen does not believe the agreement should be terminated as it is not in material competition with Lloyds group.
He defended the joint chief executive model noting the incumbents have clearly defined responsibilities. There has
been no sign of disagreement between them.
The company’s directors’ remuneration policy won the support of 97.9% of votes cast at the AGM.
Shares in Standard Life Aberdeen closed down 9.1p at 350.8p.
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