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Standard Life sells insurance arm to Phoenix for £3.2bn
Standard Life Aberdeen on Friday said it was selling its insurance arm to Phoenix for £3.2bn.
The deal will be cash and a 19.9% stake in Phoenix, SLA, adding that it would continue as Phoenix Group's long-term asset management partner for the insurance business.
Phoenix said it would raise £950m in a rights issue to finance the deal which would create an enlarged group with £240bn of legacy assets and 10.4m policyholders.
It added that the cash from the extra cash generated by the new business supported a proposed increase in the annualised cost of the dividend to £338m million from the date of the 2018 final dividend.
"Based on the Phoenix closing share price of 759.5 pence per share as at 22 February 2018, this would be approximately equivalent to a 3% increase in the dividend per share," Phoenix said.
SLA was hit hard last week when Lloyds Bank said it was pulling out £109bn of managed assets after the two companies failed to agree terms on a merger of their insurance businesses.
Lloyds said it was withdrawing the funds due to competition concerns over shared insurance businesses.
The company also reported its first full year results since the £11bn merger of Standard Life with Aberdeen Asset Management.
SLA said total assets under management and administration were up 1% to £654.9bn, while total adjusted operating income increased by 4% to £2.92bn with fee revenue up 3% to £2.76bn. Net outflows were £22.1bn compared with £26.1bn in 2016.
Adjusted profit before fell to £1.03bn from £1.05bn, while pro-forma adjusted pretax profit was down 0.5% to £1.04bn.
The full year dividend was lifted 7.5% to 21.30p a share.
The company also announced that chairman Sir Gerry Grimstone was standing down by the end of 2019 after 11 years.
Hargreaves Lansdown analyst Nicholas Hyett said SLA's insurance business was "always a bit of an odd fit" with the merged company.
"Selling it off to Phoenix provides a cash injection and frees up capital while the 20% equity stake should keep the assets under SLA's management, potentially adding more from elsewhere in the Phoenix portfolio. Mutual backscratching is much in evidence, but it's a sensible deal," he said.
"Finding a new source of assets is critical, since the bits of SLA that will remain are not having the best of times. Assets continue to walk out the door, with a net loss equivalent to 4.8% of starting assets this year, and Lloyds is looking at withdrawing the £109bn Scottish Widows portfolio within a year."
"Fortunately investment performance is holding up and the adviser platforms continue to deliver steady growth in assets. That should give the group the tools to get asset flows moving back in the right direction. It's now just a question of turning potential into reality."