Scottish Friendly back on acquisition trail

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SCOTTISH Friendly Assurance has taken over a small London-based mutual society, signalling an end to a five-year 
hiatus in acquisitions by the Glasgow-based group.

The deal with Royal Standard Friendly Society comes as Scottish Friendly looks to pursue both organic growth and takeover opportunities.

Chief executive Fiona McBain said the group expected more deals to come to the fore as increasing regulation brought heavy cost pressures upon smaller providers of financial services.

“The third part of our strategy for growth is mergers and acquisitions,” McBain said. “With all the pressures going on in the market, we expect there to be more consolidation, and that is something we are looking at.”

Royal Standard dates back to 1828, but has “less than 1,000” members, McBain said. Scottish Friendly’s website has a welcome message for customers of Royal Standard, which has been closed to new members for two years.

“It is another example of how those rising costs are taking effect and pushing up overheads,” McBain added.

Scottish Friendly went on a merger spree in the first two years under McBain’s leadership, culminating in the completion of three deals in 2007.

The largest of these was the acquisition of Glasgow rival Scottish Legal Life, which increased the size of Scottish Friendly by one-third.

The deal with Royal Standard has been finalised amid another new initiative by Scottish Friendly, the launch of a savings product to open up the benefits of stock investment to those other than high earners.

Neil Lovatt, director of sales and marketing at Scottish Friendly, said the “My Choice Individual Savings Account (Isa)” could represent about half of the group’s new business. Such organic growth is an additional major plank in the mutual’s expansion plan.

Designed to bring the tax breaks of share investments to smaller savers, accounts can be opened from £10 a month.

“It is really very different from the rest of the industry,” Lovatt said. “We are taking developments designed for the top end of the market and applying it for our target market. It just makes these kinds of investments digestible.”

While cash Isas are relatively common, only about one in ten people have tapped into Isas invested in stocks and shares. This makes up half of an individual’s tax-free allowance, but few beyond the highest earners are aware it exists.

“The trouble is the investment Isa is pitched at the large, premium end of the market and is just not accessible for investors looking just to get started with a small or simple investment,” Lovatt added.

Fiona McBain Interview in The Scotsman tomorrow »