An ongoing fees dispute between Phoenix and Standard Life Aberdeen could end in legal proceedings if the “disagreement” is not resolved commercially, Phoenix has warned.
Phoenix Group’s half year results, published today (August 6), showed the insurance giant was engaged in “disagreements” with SLA over the operation of certain deals dating back to when it bought SLA’s insurance arm in 2018.
Under the agreement, SLA manages assets and certain services for Phoenix while Phoenix administers the products.
FTAdviser understands the dispute stems from the level of fees charged to Phoenix by SLA for managing and selling Phoenix products, as the two firms have a different perspective on the services and expenses originally decided in their agreement.
Phoenix said: “The group is currently engaged in ongoing discussions with members of the SLA group in respect of disagreements over the operation of certain aspects of the SLA Share Purchase Agreement.
“Whilst Phoenix and SLA are currently seeking a commercial resolution in respect of such disagreements, it is possible that all or some of these matters could be escalated to a dispute resolution process provided for in the relevant agreements, or result in legal or arbitration proceedings.”
It added there was “no certainty” as to how the current disagreements would be resolved and what cost may be required to “settle any obligation”.
Phoenix bought SLA’s insurance arm in August 2018 for £3.28bn after Standard Life Assurance was put up for sale following the merger of Standard Life and asset manager Aberdeen in 2017.
As part of the deal, SLA acquired a shareholding of just under 20 per cent in Phoenix, but this has decreased since Phoenix’s acquisition of ReAssure.
It was announced today Campbell Fleming from SLA had left the board due to its reduced shareholding following the completion of the ReAssure transaction.
Today’s results also showed Phoenix would pay an interim dividend of 23.4p per share — against a backdrop of companies culling their payouts due to Covid-19 — as its group operating profit increased from £325m in 2019 to £361m for the first six months of 2020.
Assets under administration remained steady at £248bn as at June 30, the same as recorded for the end of 2019.
Some £1.8bn of net outflows from the group’s heritage business were partly offset by inflows of £1.3bn into its open and European arms, helped by positive market movements in the half year.
Phoenix’s business is split into two segments, heritage and open.
The heritage segment comprises products that are no longer actively marketed to clients and has been built through the consolidation of more than 100 legacy insurance brands.
Meanwhile, the open business manufactures and underwrites new products and policies, which are actively marketed to new and existing customers primarily under the Standard Life brand.
Group chief executive officer Andy Briggs said the group’s three main avenues of growth looking forward included consolidation through mergers and acquisitions, open workplace and retail business and bulk purchase annuities.
He said insurers would likely increase their focus on “freeing up capital” by divesting their heritage books as Covid-19 meant interest rates would be lower for longer and equity markets could remain volatile.
Mr Briggs said: “Covid-19 has resulted in an unprecedented global crisis which has challenged each and every one of us.
“The resilience of Phoenix's business model has been evidenced through this period and ensured the continued delivery of cash and growth, which underpins our ability to continue to pay dividends in accordance with our stable and sustainable dividend policy.
“Although there remains much uncertainty as the pandemic continues to unfold, I am confident that Phoenix remains well positioned to continue to deliver cash, resilience and growth."
imogen.tew@ft.com
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