Standard Life chief executive Keith Skeoch told Reuters in an interview that the Edinburgh financial giant would be willing to sell its £16.1 billion annuity portfolio after it merges with Aberdeen Asset Management — but it has no plans to exit the insurance business altogether.
Skeoch said the annuity business, which provides an income for life to retirees, was delivering “reasonable” profits but it was no longer growing after the company stopped writing new business last year.
“It is the most capital-heavy part of our business, so I would be quite happy to dispose of that book of business if I can get benefit for shareholders,” said Skeoch.
“However, at this level of interest rates, the capital would tend to go with the book (and) pricing is quite tight because there are quite a lot of books for sale.”
Standard Life will seek shareholder approval next week for its £11 billion merger with Aberdeen — and plans to ditch its index classification as an insurer to become an asset manager.
Some analysts have speculated Standard Life could sell off its insurance business altogether.
But Skeoch told Reuters that Standard Life’s asset management business relied on money held by clients in savings products, some of which had a life insurance element attached.
Skeoch said that under the insurance industry’s move to new European Solvency II rules on capital adequacy, Standard Life had several years to sell and did not need to do a deal quickly.
“I’m price-sensitive and could be patient,” he said.
According to Reuters, Standard Life also has an £88.8 billion “back-book” of other insurance assets.
These assets comprise £34 billion of UK so-called “with profits” — which can carry a guarantee — and unit-linked pensions, as well as £10 billion of German with-profits business and £44 billion of back-book business acquired through its purchase of Ignis Asset Management.
Skeoch told Reuters some of the other books of mature business were valuable because they could continue to generate flows of money into Standard Life’s retail asset management products.
“There may well be bits of our back book where there isn’t a future retail component … and if we can think of a better way of doing that, either through outsourcing or maybe in strategic partnership getting to do other things, then we would.
“(But), it’s not as simple as some people think, that you simply flog off life and pensions; these are actually very, very attractive books of business,” Skeoch added.