Phoenix buys Standard Life brand

Written by Adam Cadle

23/02/2021

Standard Life Aberdeen has announced a simplification and extension of its strategic partnership with Phoenix Group.

The agreements announced today are mutually beneficial and simplify the partnership focusing it on the provision of Standard Life Aberdeen's asset management services to Phoenix Group and its insurance and workplace pension customers. Standard Life Aberdeen's purchase of the Wrap Self-Invested Personal Pension, Wrap Onshore Bond and UK Trustee Investment Plan businesses from Phoenix Group will also support its growth agenda for these businesses.

The partnership with Phoenix Group was expanded when Standard Life Aberdeen sold its UK and European life insurance business to Phoenix Group in 2018 (the insurance sale). While the insurance sale allowed Standard Life Aberdeen to streamline its own operations, it also created a network of commercial and operational services between the groups, including in respect of certain pensions and savings products and the shared use of the "Standard Life" brand.

The two groups have now agreed to simplify these arrangements and strengthen their relationship in the following way:

· The strategic asset management partnership (under which Standard Life Aberdeen currently manages c. £147.4bn of Phoenix Group assets) will be extended and will now operate until at least 2031. The key changes relate to the price adjustment mechanism agreed at the time of the insurance sale which protects Standard Life Aberdeen in the event of certain types of asset withdrawals.

· Standard Life Aberdeen has a market-leading offering for its UK financial adviser clients in the form of its Wrap and Elevate platforms. To support its ambitious growth plans for these businesses and the continuous improvement of its service to its UK adviser clients, Standard Life Aberdeen will purchase the Wrap SIPP and Wrap Onshore Bond businesses from Phoenix Group. The economic risk and reward in these businesses will transfer to Standard Life Aberdeen with effect from 1 January 2021 with the legal transfer to follow by a Part VII transfer scheme targeted for completion in late 2022. Wrap SIPP and onshore bond customers should see no service impact arising from the transfer.

· Standard Life Aberdeen will continue to partner with Phoenix Group to design and provide investment solutions for Phoenix customers. In addition, it will acquire the TIP business from Phoenix Group to consolidate its investments offering for UK pension scheme clients. Standard Life Aberdeen already provides investment services for these clients.

· Standard Life Aberdeen will sell the "Standard Life" brand to Phoenix Group during the course of 2021. As a consequence, certain colleagues who support this brand and related marketing will also transfer to Phoenix Group. Standard Life Aberdeen will pay £32m to Phoenix Group in return for Phoenix Group bearing the cost of some transferring colleagues going forward. The sale of the "Standard Life" brand and the transfer of related marketing colleagues are not expected to impact materially on results. Standard Life Aberdeen has initiated a branding review, the outcome of which it will announce later this year.

· The upfront payment by Standard Life Aberdeen for the purchase of the Wrap SIPP, onshore bond and TIP businesses will be £62.5m, which will be offset in part by expected payments from Phoenix Group to Standard Life Aberdeen relating to the profits of the business prior to completion of the legal transfer. Standard Life Aberdeen expects its Adviser vector to benefit from its acquisition of these businesses (which represent existing AUMA of c.£36bn).

· All outstanding differences between the two groups in relation to legacy matters have been settled as part of the agreements being announced today. The resolution of these legacy matters will not materially impact on Standard Life Aberdeen's 2020 financial performance and will result in Standard Life Aberdeen receiving a net cash inflow of £34m in February 2021. This represents an inflow of £54m relating to specific indemnities and a £20m outflow relating to settlement of other legacy matters.

· Other existing services and platform arrangements between the groups will gradually be terminated to simplify the strategic partnership.

Standard Life Aberdeen's beneficial shareholding in Phoenix Group remains c.14% and it retains the right to appoint a director to the Phoenix Group board.

Commenting on the transaction, Stephen Bird, CEO of Standard Life Aberdeen, said:

"The most successful partnerships in business tend to be formed on clear and simple terms. What we are announcing today is an agreement that simplifies the relationships between Standard Life Aberdeen and our strategic partner Phoenix Group in a way that will allow us to work together constructively as partners for at least the next ten years. Both businesses will be able to play to their respective strengths in the partnership."

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