Standard Life Aberdeen said on Monday that Lloyds and its subsidiaries, including Scottish Widows, do not have the right to terminate the long-term asset management arrangement, as it does not pose a competitive threat to the bank’s UK operations.
Lloyds announced in February it would be cancelling a contract for the investment firm to manage £109bn of assets on behalf of its Scottish Widows insurance business. The two groups had failed to make headway in the six-month interim period before Standard Life’s merger with Aberdeen Asset Management was finalised.
The Scottish Widows contract accounted for 17% of Standard Life Aberdeen’s total £646bn of assets under management (AUM). It also accounted for 4.4% of Standard Life Aberdeen’s revenue for the full year 2017.
Aberdeen began managing the Lloyds assets when it bought Scottish Widows back in 2014. However, post-merger with Standard Life, the unified group became “a material competitor,” according to Scottish Widows chief executive Antonio Lorenzo.
Weeks later, Standard Life Aberdeen announced it was selling its insurance arm to Phoenix Group, one of the biggest consolidators in the space, leaving some to speculate that Lloyds had been a prospective candidate to inherit the investment firm’s insurance book.
Standard Life Aberdeen’s co-chief executive Martin Gilbert denied the Phoenix deal was responsible for Lloyds’ decision to back out of the contract, stating at the time “it was more out of sadness that we reached where we were”.
Lloyds has not yet released a statement on Standard Life Aberdeen’s challenge but the investment firm said in a statement both parties were in the midst of the dispute resolution process.
Fresh bidders
The deal would derail Lloyd’s current plans to offload its £109bn book of business, which has attracted interest from some of the largest asset managers.
Chief financial officer George Culmer revealed that Lloyds was accepting fresh offers from a small number of bidders during the FTSE 100’s bank first quarter web presentation but did not disclose the names of the interested parties.
However, the Financial Times reported that Blackrock, JPMorgan Asset Management and Schroders were chosen by the FTSE 100 bank to advance to the second round of bids, after speaking with people close to the situation.
Sources told the newspaper that SLA, which has been given a 12-month notice period before the contract is terminated, did not make it through to the next round of bidding.
Culmer reiterated that the bank had “not allowed in any bidder with whom we have material competition concerns”. He teased that there had been an “enormous amount of interest” and that the bank would be making a further announcement over the summer.
Schroders and Blackrock were unavailable for comment and JPMorgan AM declined to comment.
