Standard Life Aberdeen is selling its U.K. and European insurance operation, Standard Life Assurance, to Phoenix Group in a cash and shares deal worth £3.24 billion ($4.53 billion), the asset manager confirmed on Friday.
The group, formed after the merger of Standard Life and Aberdeen Asset Management in August 2017, announced it will sell its insurance interests for £2.28 billion in cash and a 19.99 percent stake in Phoenix Group.
Phoenix Group is a FTSE 250-listed company that specializes in acquiring life assurance books from other insurers and combining them. The deal will take its assets under management to more than £240 billion, up from £76 billion.
It will also result in Standard Life Aberdeen managing £110 billion of the assets that are being transferred to Phoenix, under terms of a new three-year, rolling contract.
In a written statement, Martin Gilbert and Keith Skeoch, co-chief executive officers of Standard Life Aberdeen, said offloading the “capital-intensive” insurance business will transform the group into a “world-class investment company.”
“We have a diverse range of modern investment capabilities with global distribution and our leading U.K. retail platforms are growth engines, generating significant net inflows for our asset management business,” they said.
Standard Life Aberdeen will retain its retail platforms — Wrap, Elevate, and Armenian operations — which service the U.K. financial advisor community.
Last week, Lloyds Banking Group announced plans to terminate a contract with Standard Life Aberdeen to manage £109 billions of its assets due to concerns that much of Standard Life’s business was in direct competition with that of its Scottish Widows and wealth units.
[II Deep Dive: Lloyds Terminates £109 Billion Contract with Standard Life Aberdeen]
It is unclear whether Friday’s announcement will give Lloyds cause to reconsider that decision. Scottish Widows was unable to immediately comment when contacted by Institutional Investor.
In a call with reporters on Friday, Standard Life Aberdeen CEO Martin Gilbert said the business had not signed the deal with Phoenix to resolve the competition issue with Lloyds Banking Group.
“If it helps us win the mandate we would be delighted,” he said. “I expect, hopefully, we will get a chance to re-tender.”
Standard Life Aberdeen also said the company will part ways next year with chairman Gerry Grimstone, the banker who orchestrated the £11 billion merger of Standard Life and Aberdeen.
Grimstone said Friday’s deal with Phoenix Group completed SLA’s evolution into a “capital light” investment business, as it will be free from regulations that require insurers to hold more capital against riskier investments.
Clive Bannister, chief executive officer of Phoenix Group, described the acquisition of Standard Life’s insurance assets as a “compelling transaction” for the company, adding that the acquisition would establish Phoenix as the “pre-eminent closed life fund consolidator in Europe with more than 10 million policyholders.”
Standard Life Aberdeen also reported its full-year results in the announcement. Net outflows for 2017 were £31 billion, a slightly better performance than the £36.8 billions of outflows reported in 2016. Profit before tax was almost unchanged at £1 billion, according to its annual accounts.
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