Shares in the recently-merged investment group Standard Life Aberdeen dropped sharply in early trading on news that it is to lose its biggest client.
Lloyds Banking Group (LBG) confirmed that it is terminating a contract for Standard Life Aberdeen to manage £109bn of assets for the bank’s Scottish Widows insurance business.
The decision follows a six-month review, triggered by last year’s merger of Standard Life and Aberdeen Asset Management.
The tie-up created a “material competitor”, according to Scottish Widows chief executive Antonio Lorenzo, who said: “It is now appropriate to review our long-term asset management arrangements to ensure they remain up-to-date and that customers continue to receive good service and investment performance.
The Financial Times reports that Aberdeen gained the right to manage the assets when it acquired Scottish Widows Investment Partnership from Lloyds in 2014, but the latter had the right to terminate the contract if Aberdeen merged with a competitor – as happened last March when it agreed to a union with insurer Standard Life.
The FT adds that the Scottish Widows contract represented almost 17% of Standard Life Aberdeen’s £646bn (€728bn) of total assets under management.
Keith Skeoch and Martin Gilbert, Standard Life Aberdeen’s chief executives, commented: “We are disappointed by this decision in the context of the strong performance and good service we have delivered for LBG, Scottish Widows and their customers. We will be discussing the implications of this with LBG and Scottish Widows.”
The group will take a £40m impairment charge following the end of the relationship. LBG has given 12 months’ notice of the termination
Standard Life Aberdeen’s shares traded 16 pence lower at 410.80p, a 3.75% decline, in mid-morning trade.