Investor bonanza as SLA to return £1.75bn of capital

● Shares windfall from sale of group’s insurance business to Phoenix

Standard Life Aberdeen (SLA) is to return up to £1.75 billion to shareholders in a major capital distribution following the sale of its European insurance business to Phoenix Group.

Yesterday’s announcement comes after the fund management giant revealed earlier this year that it would offload Standard Life Assurance to Phoenix in order to focus on asset management.

As part of that deal, SLA, formed last summer through the merger of Edinburghbased Standard Life and Aberdeen Asset Management, received £2.3bn in cash and a near-20 per cent holding in Phoenix.

SLA’S board said yesterday that it now expected there will be surplus capital within the group as a result of the deal and lower capital requirements.

The company said £1bn is to be returned by way of a B share scheme and the remaining amount of up to £750 million via a share buyback programme.

Sir Gerry Grimstone, chairman of Standard Life Aberdeen, said: “The last year has been a period of significant change for Standard Life Aberdeen, with the proposed sale of the UK and European insurance businesses completing our transformation to a capital-light investment company.

“The cash generated from the sale will enable us to continue to invest in the development of our business and also to return surplus capital to shareholders.”

The capital return represents about 15 per cent of the company’s stock market value at the close of business on 25 May.

The remainder of the proceeds of the sale to Phoenix will be used to pay down debt, support investment and for other general corporate purposes.

As part of the deal, Phoenix takes on the UK mature retail and spread/risk books and the Europe, UK retail and workplace operation, while SLA holds on to the UK retail platforms and financial advice business.

A general meeting of SLA shareholders to approve the sale of the insurance business and the proposed return of capital is expected to be held on 25 June.

Earlier this month a war of words broke out between Lloyds Banking Group and SLA when the fund manager disputed the bank’s right in February to terminate its mandate to run £109bn of assets for Lloyds and its Scottish Widows business.

SLA said it had “informed LBG that it does not agree that, following the merger of Aberdeen Asset Management and Standard Life, SLA was in material competition in the UK with LBG and that, therefore, SLA does not consider that LBG, Scottish Widows or their respective affiliates has the right to terminate the investment management arrangements”.

A Lloyds spokesman hit back that it was “not credible” to suggest SLA was not a material competitor.