No deal over competition issue
Widows delivers £100bn blow to Standard Life Aberdeen
Scottish Widows: ‘SLA is now a competitor’ (photo by Terry Murden)
Standard Life Aberdeen has taken a heavy blow after Scottish Widows said it was withdrawing more than £100 billion of assets managed by the newly-merged group.
Scottish Widows and Lloyds Banking Group’s wealth businesses have given a year’s notice to Standard Life Aberdeen to terminate their partnership agreements with Aberdeen Asset Management, now regarded as a competitor.
Standard Life Aberdeen said it was “disappointed” with the decision which will result in a £40 million hit to its full year results. The companys shares fell 8%.
Scottish Widows and Lloyds’ wealth business entered into the partnership with Aberdeen following the sale of Scottish Widows Investment Partnership to Aberdeen in 2014.
This included long-term contracts for the management by Aberdeen of what is currently £109bn of assets on behalf of Widows and Wealth.
These contracts enabled Scottish Widows and Wealth to terminate the contracts in the event that Aberdeen was subject to a change of control with a material competitor.
The decision to withdraw the funds follows a breakdown in discussions to find a way to resolve the competition issue.
As no agreement has been reached, Scottish Widows and Wealth have decided to terminate their partnership agreements with Standard Life Aberdeen and to review their long-term asset management arrangements.
In a statement this morning, Scottish Widows said: “Aberdeen has delivered good service and performance and Scottish Widows and Wealth would welcome their participation in the review if Standard Life Aberdeen is able to resolve the competition issue.”
Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance & wealth, said: “Given the merger of Standard Life and Aberdeen has resulted in our assets being managed by a material competitor, it is now appropriate to review our long-term asset management arrangements to ensure they remain up-to-date and that customers continue to receive good service and investment performance.
“Therefore, we will begin an in-depth assessment of the market to identify a long-term strategic partner, or partners, to manage the current £109bn of assets.”
There are no immediate changes for customers. Following completion of the review, Scottish Widows and Wealth anticipate implementing the new arrangements by the end of the first half of 2019. Scottish Widows and Wealth will work with Standard Life Aberdeen to ensure no disruption to performance or service in the interim.
Standard Life Aberdeen said the revenue associated with the assets under management represents less than 5% of SLA’s full year 2017 pro forma revenue.
Keith Skeoch and Martin Gilbert, Standard Life Aberdeen’s co-chief executives said: “We are disappointed by this decision in the context of the strong performance and good service we have delivered for LBG, Scottish Widows and their customers. We will be discussing the implications of this with LBG and Scottish Widows.”
SLA will take an impairment charge of approximately £40m on the intangible asset relating to the LBG customer relationship recognised at the time of the merger in its full year 2017 results.
Aberdeen Standard Investments has more than 100 clients, and £176 billion of insurance assets under management. It said it has propositions “which position the company well for growth in this market segment.”