Phoenix and SLA simplify Strategic Partnership

FOR IMMEDIATE RELEASE

SMALLER RELATED PARTY TRANSACTION

Phoenix Group and Standard Life Aberdeen simplify their Strategic Partnership to accelerate growth

Following the acquisition of Standard Life Assurance Limited ("SLAL") from Standard Life Aberdeen plc ("SLA") in 2018 (the "Acquisition"), Phoenix Group ("Phoenix") and SLA entered into a strategic partnership ("Strategic Partnership") to advance the interests of both businesses. At the same time SLA became a leading shareholder in Phoenix and today has a strategic shareholding of circa 14%.

Phoenix and SLA are pleased to announce that they have entered into a new binding agreement which significantly simplifies the arrangements of their Strategic Partnership, enabling Phoenix to control its own distribution, marketing and brands, and focusing the Strategic Partnership on using SLA's asset management services in support of Phoenix's growth strategy. 

Under the terms of the transaction, Phoenix will sell its SLAL UK investment and platform-related products, comprising Wrap Self Invested Personal Pension ("Wrap SIPP"), Onshore Bond and UK Trustee Investment Plan ("TIP") to SLA, and acquire ownership of the Standard Life brand. As a result, the Client Service and Proposition Agreement ("CSPA") entered into between the two groups in connection with the Acquisition will be dissolved.

At the same time, Phoenix is reinforcing its Strategic Partnership with SLA by re-committing to a 10-year strategic asset management partnership, with Phoenix harnessing Aberdeen Standard Investments' ("ASI") expertise across a breadth of portfolio management and investment strategy areas.

Ownership of the Standard Life brand is a key enabler for delivering Phoenix's Workplace and Customer Savings and Investments ("CS&I") growth strategies at pace. The relevant marketing, distribution and data team members will transfer from SLA to Phoenix ensuring that Phoenix has full discretion over marketing and communications. This will support the delivery of a more cohesive experience for customers, clients and their advisers. By investing in the Standard Life brand, Phoenix will accelerate the delivery of a broader set of product and service propositions and be better positioned to take advantage of opportunities arising through the shifting landscape of the long-term savings and retirement market. Phoenix will continue to partner with SLA to design and provide investment solutions for its customers.

Through this transaction, Phoenix will receive £115 million of cash consideration, ownership of the Standard Life brand, and Phoenix and SLA will resolve all legacy issues in relation to the Transitional Services Agreement entered into in connection with the Acquisition ("TSA") and the CSPA. The majority of the cash consideration is payable upon announcement of the transaction, while completion of the sale of the investment and platform-related products will be effected through a Part VII transfer targeted in late 2022.

The impact of the transaction on the Group's Solvency II surplus and Shareholder Capital Coverage Ratio as well as IFRS operating profit is expected to be broadly neutral, with a net circa £0.2 billion reduction in long-term free cash.

Andy Briggs, CEO of Phoenix Group, commented:

"This agreement is a natural progression of our strong Strategic Partnership with SLA and significantly simplifies our relationship.

I am delighted that Phoenix now owns all of the Life and Pensions business of Standard Life, including the brand and all distribution and marketing, and we are committed to investing in this business. This will enable Phoenix to accelerate the delivery of a broader set of product and service propositions to meet the financial needs of our customers as they journey to and through retirement. This is therefore a key enabler of our Open business growth strategy and will support the delivery of incremental new business long-term cash generation.

I look forward to continuing to work with Stephen and his team to execute against our respective growth ambitions and deliver Phoenix's purpose of helping people secure a life of possibilities."

Stephen Bird, CEO of Standard Life Aberdeen, commented:

"This agreement builds on the strong foundations of our long-standing relationship with Phoenix and the simplification of our Strategic Partnership enables both groups to focus the partnership on the provision of Standard Life Aberdeen's high-quality asset management services to Phoenix and its customers.

I am also delighted that Phoenix has agreed to extend our Strategic Asset Management Partnership until 2031 and believe this is testament to the expertise and excellent service ASI delivers as a leading asset manager.

Given the growth ambitions of the Strategic Partnership, SLA remains committed to its strategic investment in Phoenix and I look forward to continuing to work in partnership with Andy and his team in the years ahead." 

Details of the transaction

·      Sale of Wrap SIPP, Wrap Onshore Bond and TIP: Phoenix has agreed to sell its Wrap SIPP, Wrap Onshore Bond and TIP businesses to SLA. These propositions predominantly comprise products sold via SLA's Wrap platform. As at 30 September 2020, these businesses had assets under administration of £27 billion and year-to-date new business had contributed 29% (£1.8bn) of gross inflows and 4% (£18 million) of incremental long-term cash generation. The economic risk and reward in these businesses will transfer to SLA with effect from 1 January 2021 with the legal transfer to follow by a Part VII transfer scheme targeted for completion in late 2022.  

·      Client Service and Proposition Agreement: The CSPA between Phoenix and SLA will be dissolved under the terms of the transaction, resulting in significant operational simplification. As a result, SLA's rights of first refusal to provide advice or non-insured savings products where they are to be offered as part of any future long-term savings proposition will be removed and responsibility for distribution and marketing will transfer to Phoenix. The CSPA will continue to operate in the short term on a transitional basis predominantly for those elements supporting the Wrap SIPP and Wrap Onshore Bond products prior to completion of their sale.

·      Standard Life brand and marketing: As part of the transaction Phoenix will receive ownership of the Standard Life brand which it currently uses under licence. Phoenix expects transfer of the brand for most parts of the business and the standardlife.co.uk website by mid-2021. As a result, the end-to-end experience of our SLAL customers will be managed solely by Phoenix, resulting in a more streamlined, multi-channel customer experience. This will also involve circa 60 new colleagues joining Phoenix at its operational headquarters in Edinburgh as marketing, distribution and data team members supporting the Workplace and CS&I propositions move from SLA to Phoenix.

·      Transitional Services Agreement: The TSA between the two groups will come to a close and both parties have agreed a timeline for separation by 2022 to ensure a smooth transition. This also concludes all legacy issues relating to services and expenses in relation to the TSA, CSPA and certain other agreements between the two groups entered into at the time of the Acquisition.

·      Strategic Asset Management Partnership: The transaction reaffirms Phoenix's strategic asset management partnership with ASI by extending core components of the asset management partnership for a further 2.5 years from August 2028 to February 2031.

Smaller Related Party Transaction

SLA is a related party of Phoenix for the purposes of the Listing Rules. The transaction falls within Listing Rule 11.1.10R (smaller related party transactions) and this announcement is made in accordance with Listing Rule 11.1.10R(2)(c).

HSBC Bank plc has provided written confirmation to Phoenix pursuant to LR 11.1.10R(2)(b) in its capacity as Phoenix's sponsor that the terms of the transaction are fair and reasonable as far as the shareholders of Phoenix are concerned.

Enquiries

Investors/analysts:

Claire Hawkins, Director of Corporate Affairs and Investor Relations, Phoenix Group
+44 (0)20 3735 0575

Andrew Downey, Head of Investor Relations, Phoenix Group
+44 (0)20 3735 0160

Media:

Douglas Campbell, Teneo

+44 (0)775 313 6628

Haya Herbert Burns, Teneo

+44 (0)734 203 1051

Shellie Wells, Head of Corporate Communications, Phoenix Group

+44 (0)203 735 0922

Disclaimer

1.    HSBC Bank plc ("HSBC"), which is authorised by the Prudential Regulatory Authority ("PRA") and regulated in the United Kingdom by the PRA and the FCA, is acting for Phoenix and for no one else in connection with the transaction described in this announcement, and will not regard any other person as a client in relation to such transaction and will not be responsible to anyone other than Phoenix for providing the protections afforded to its clients, nor for providing advice in connection with such transaction, or any other matter, transaction or arrangement referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on HSBC by the Financial Services and Markets Act 2000 (as amended) or the regulatory regime established thereunder, neither HSBC nor any of its affiliates accepts any responsibility or liability whatsoever and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, fairness, sufficiency, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with Phoenix or the transaction described in this announcement and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. HSBC and its affiliates accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

2.    Statements containing the words: 'believes', 'intends', 'will', 'may', 'should', 'expects', 'plans', 'aims', 'seeks', 'targets', 'continues' and 'anticipates' or other words of similar meaning are forward-looking.  Such forward-looking statements and other financial and/or statistical data involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Phoenix and its group (the "Group"). For example, certain insurance risk disclosures are dependent on the Group's choices about assumptions and models, which by their nature are estimates. As such, actual future gains and losses could differ materially from those that the Group has estimated.

3.    Other factors which could cause actual results to differ materially from those estimated by forward-looking statements include but are not limited to: domestic and global economic and business conditions; asset prices; market related risks such as fluctuations in interest rates and exchange rates, the potential for a sustained low-interest rate environment, and the performance of financial markets generally; the policies and actions of governmental and/or regulatory authorities, including, for example, initiatives related to the financial crisis, the COVID-19 pandemic and the effect of the European Union's "Solvency II" requirements on the Group's capital maintenance requirements; the impact of inflation and deflation; the political, legal, social and economic effects of the COVID-19 pandemic and the UK's exit from the European Union; market competition; changes in assumptions in pricing and reserving for insurance business (particularly with regard to mortality and morbidity trends, gender pricing and lapse rates); the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; risks associated with arrangements with third parties; inability of reinsurers to meet obligations or unavailability of reinsurance coverage; the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which members of the Group operate.

4.    As a result, the Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in the forward-looking statements and other financial and/or statistical data within this announcement. The Group undertakes no obligation to update any of the forward-looking statements or data contained within this announcement or any other forward-looking statements or data it may make or publish. Nothing in this announcement should be construed as a profit forecast or estimate.