Following a legacy of over 193 years, Standard Life has been sold to Phoenix Life. We assess the impact this change may have for existing clients of Standard Life and give our view on what they should do.
WHAT ARE THE FACTS?
Standard Life have sold their life assurance business, which includes the Standard Life Pensions and Assurance business in Ireland and the UK. The business has been sold to the Phoenix Group a specialist UK life assurance company. The total consideration paid was £3.24 billion, including £2.28 billion in cash and a 19.99% shareholding in the Phoenix Group. The deal is subject to shareholder and regulatory approval which is expected to be completed by the 3rd quarter of 2018.
WHY WAS IT SOLD?
This sale is the culmination of a strategic journey Standard Life have undertaken over recent years to transition from a Life Assurance company to the second largest asset manager in Europe. The merger of Standard Life and Aberdeen Asset Management (to create Standard Life Aberdeen PLC) in late 2017 led to the life assurance business becoming non-core part of the business.
By exiting the life and pensions business to focus on the ‘capital-light’ asset management business Standard Life Aberdeen PLC will also avoid the Solvency II capital requirement issues that were introduced in January 2016 for insurers across Europe. These capital requirements forced insurance companies to hold significant assets to ensure they do not default on their obligations. Standard Life Aberdeen PLC will no longer be required to hold these significant levels of capital in place. Standard Life are not unique in changing, a number of life assurance companies in the UK have also altered their model.
WHAT DOES IT MEAN?
Initially, there will be very little change until the deal is approved by shareholders and the regulators in the relevant countries. Standard Life’s leadership team have stated there will be no visible change for clients of Standard Life in Ireland. The company will continue to be branded as Standard Life, the same experienced customer support team will service clients and there will be no change to the product range. They will also continue to take on new business and reinvest in new technologies. Importantly for existing clients of the company they will continue to have access to the same range of funds at their existing terms. It is also likely that in the future clients will have access to a wider range of funds than they currently do, as former Aberdeen and other funds become available.
Following the acquisition, it will be important to monitor the situation to ensure the above commitments are maintained. The Phoenix Group previously took over other operations in Ireland (e.g. Scottish Provident) and did not have a good reputation for client service. However, this transaction does represent a significant change to the Phoenix Group business. The transaction has almost doubled their customer base to 10 million and increased their assets from £74 billion to £240 billion. There is no doubt the Standard Life operation will be a core business for the Group going forward. However, the strategic direction of the new company is still to be clarified and there is always the risk of unintended consequences leading to issues that were not foreseen.
WHAT IS THE CONCLUSION?
If Standard Life was selected because it was the most competitive and suitable option for you, our view is no change is required. Clients will continue to have access to the same competitive investment management offering at existing terms, supported by a strong experienced team. This position should be monitored over time to ensure standards do not drop.