Shareholders vote on Phoenix deal
Grimstone ‘disappointed’ by market response post merger
Board appointments amid big changes at Standard Life house
Standard Life Aberdeen chairman Sir Gerry Grimstone today admitted he was disappointed with the company’s sluggish share price and the slow progress of Brexit talks as shareholders voted to offload its insurance business.
Sir Gerry, who led Standard Life’s merger with Aberdeen Asset Management last year, said he believed that investors would see value in the company once it had completed what he called a “major transformation”.
Since the £11 billion merger was completed in August the company has been embroiled in a dispute with Lloyds Banking Group which wants to cancel a £109bn mandate. Earlier this year Standard Life Aberdeen announced the sale of its life insurance business to Phoenix Group. Shares in Standard Life Aberdeen are down by about 12% over the past 12 months.
In a briefing ahead of the shareholder vote on the sale to Phoenix, Sir Gerry said: “I am very disappointed by the share price. It is certainly lower than we would have liked.
“Stock markets do not like it when deals are still to be completed, but there are now 16 analysts who have a positive recommendation on the business.”
He told the company’s shareholders that they had enjoyed a 209% return since demutualisation in 2006, double the return by the FTSE 100 over that period.
Shareholders overwhelming backed the sale to Phoenix and a £1.75bn return of funds to shareholders from the proceeds.
Commitment to staff
Earier, he told the media that 3,200 staff would transfer to Phoenix when the deal completes, probably in September, to be based at Standard Life House in Lothian Road, Edinburgh. All terms and conditions will be protected and “it will be the same people running the business and answering the phones”. Standard Life Aberdeen will be left with about 2,500 employees in Edinburgh. About 400 have left since the Aberdeen merger.
He added that all staff moving to Phoenix were expected to be retained: “I have spoken to the chairman and chief executive of Phoenix who say they need them to run this business. This is a Standard Lifing of Phoenix. The people going there are joining a business which is better suited to that sort of business,” he said.
Sir Gerry Grimstone: confident investors will see the company’s attractions
Standard Life Aberdeen will “no longer be an insurance company” but it will retain a 29.9% holding in Phoenix which, he said, will move into open as well as closed insurance business.”
He said it was a big strategic development for Phoenix which is changing its business model. “It is a new major company coming into Edinburgh,” he said.
He expects it to grow, partly by acquiring other businesses, and that this will create asset management opportunities.
Reflecting on the Brexit talks, he told the media that “progress had been slower than business would like it to be”, adding: “We were asking for certainty a year ago and nine months away [from the UK leaving the EU] we are no more certain than we were then.”
He said progress was being made on setting up an office in Dublin to handle the company’s European business post-Brexit.
“It is not a contingency plan,” he said, admitting that in other circumstances the company would not be doing it. He was confident the company would be Brexit ready “when it comes”.
He also admitted that Brexit was “one of the rationales” for the merger with Aberdeen. “We saw the Aberdeen acquisition as a hedge against Brexit. Globalisation is the best hedge against Brexit and I would encourage all companies to take a global path as preparation for Brexit.”
Sir Gerry will be standing down as chairman at the end of next year and a succession plan is in progress.
Earlier, it was announced that two Standard Life Aberdeen executives, Barry O’Dwyer and Campbell Fleming, will join the Phoenix board as non-executive directors.
These appointments will be effective when Phoenix’s acquisition of SLA’s UK and European insurance business is completed.
Mr O’Dwyer is the CEO of SLA’s Pensions & Savings business (Standard Life). He has held several senior roles at Standard Life since re-joining the company in 2013, and during his initial spell at Standard Life between 1988-2008.
A fellow of the Institute of Actuaries, he has 30 years of experience in the insurance industry, in a career which has also included senior roles at Prudential and HBOS.
Mr Fleming is the Global Head of Distribution at Aberdeen Standard Investments, the asset management business of SLA. He joined Aberdeen Asset Management in August 2016 from Columbia Threadneedle Investments where he was the Chief Executive – EMEA and Global COO. He is chairman of the Investment Association Trade Committee and previously held senior positions at JP Morgan Asset Management.
Standard Life Aberdeen has today announced that Cathleen Raffaeli, a US-born businesswoman, will be appointed a non-executive director with from 1 August on an annual fee of £73,500. She also becomes a member of the remuneration committee.
Sir Gerry said: “Her strong FinTech experience and background in the platforms sector, as well as her board experience, make her an ideal addition as we continue to build a world class investment company.”
The board will comprise four executive directors, nine non-executive directors and the chairman. There will be three women and 11 men and the company said the restructuring of the board after the merger in 2017 “will continue over the coming months”.
Phoenix, which specialises in closed books of business otherwise known as zombie funds, may switch a a £7bn mandate to Standard Life Aberdeen, with the “potential for additional mandates to follow”.