The Edinburgh-based firm, which last week said investors were in line for a bumper £1.75bn windfall following the sale of its Canadian arm to Manulife, already has a 26 per cent stake in HDFC Life, one of India’s largest life insurers, and chief executive David Nish is keen to see that holding strengthened. After handing back the bulk of the Canadian sale proceeds to shareholders, the group will have about £450 million left over, which it said would be used for “general corporate purposes”.
This has raised speculation about whether it would embark on another acquisition, following the £390m purchase of Ignis Asset Management by Standard Life Investments (SLI) in March.
However, insiders have pointed out that Standard Life, which employs about 5,000 people in Scotland, has enough on its plate in terms of overseeing the sale of the Canadian operations and integrating Ignis. Nish last month said the work to bring Ignis within SLI was “going well” but he was unable to give any details on how the deal might affect the firm’s 230 workers in Glasgow.
However, it emerged last week that 15 fund manager roles had been cut at Ignis, with SLI handing the positions to its own managers.
Rather than seeking out a fresh takeover target, sources said that Standard Life was now more likely to focus on the organic growth of its UK business and lifting its stake in HDFC Life.
With Narendra Modi’s BJP sweeping to victory in May’s general election, the country’s government is planning to implement rules allowing foreign investors to own up to 49 per cent of local firms.
Nish has already said that he would “look positively” on any opportunity to increase the group’s holding in HDFC Life, which has more than 400 branches and almost 14,000 employees around the country.
Life insurance penetration in India is about 3.2 per cent of gross domestic product in terms of premiums a year, much lower than Japan’s level of more than 10 per cent and almost 6 per cent in Australia.
State-owned Life Insurance Corporation of India controls about 70 per cent of the life insurance market, but the Modi administration is “more open to inward investment and foreign ownership”, said Garry White, chief investment commentator at Charles Stanley.
The new regime could open up more opportunities for other companies with local joint ventures, such as the Dutch parent group of Edinburgh-based insurer Aegon UK.
Standard Life has had a presence in Canada for more than 180 years, and the sale of the business is targeted for completion early next year. As part of the deal, Manulife will market SLI’s funds to investors in Asia, Canada and the US.
SLI chief executive Keith Skeoch said the firm’s assets under management distributed by Manulife could more than treble from the current level of £3.3bn in three years.
Investors can choose to take their windfall as a capital gain via bonus shares, which Standard Life will buy back for cash, or as income through a special one-off dividend. The average payout for those who kept all their shares after the firm floated eight years ago will be about £491.