Standard Life Aberdeen has struck a £3.2 billion deal to offload its insurance arm as it takes further steps to overhaul the business following an £11bn mega-merger last year.
The Edinburgh-based group has sold “capital intensive” Standard Life Assurance to rival Phoenix Group, with the asset management giant receiving £2.3bn in cash and a 19.9 per cent slice of the Phoenix business.
Phoenix will take on the UK mature retail and spread/risk books and the Europe, UK retail and workplace operation, while Standard Life Aberdeen will hold on to the UK retail platforms and financial advice business.
Standard Life Aberdeen said the insurance sale marked a “major step towards” becoming a world-class investment company and would help transform the firm into a fee-based capital-light business.
The update came alongside the group’s annual results, with assets under management lifting 1 per cent to £654.9bn as net outflows fell 15 per cent to £31bn.
Sir Gerry Grimstone, Standard Life Aberdeen chairman, 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.
“This transaction represents excellent value for our shareholders, including a comprehensive and mutually beneficial strategic relationship entered into with Phoenix Group, a longstanding partner of the firm.
“In addition, I am particularly pleased to note Phoenix Group’s commitment to maintain operational headquarters in Edinburgh.”
Grimstone also called time on his 11-year tenure as chairman, saying he would leave the firm by the end of 2019. The company has now started the hunt for his successor.
Europe’s second biggest fund manager saw shares suffer last week after Lloyds Banking Group said it was ending a £100bn asset management contract for its Scottish Widows business.
The enlarged group was created after Standard Life and Aberdeen Asset Management joined forces in June when shareholders overwhelmingly backed the deal.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The legacy insurance business was always a bit of an odd fit with the new-look Standard Life Aberdeen.
“Selling it off to Phoenix provides a cash injection and frees up capital, while the 20 per cent equity stake should keep the assets under SLA’s management, potentially adding more from elsewhere in the Phoenix portfolio.
“Mutual back-scratching is much in evidence, but it’s a sensible deal. Finding a new source of assets is critical, since the bits of SLA that will remain are not having the best of times.”