Lloyds, Scottish Widows to move £109 billion from Standard Life Aberdeen

Standard Life Aberdeen is set to lose about £109 billion ($153.8 billion) in assets under management following discussions with a client related to its merger.

Lloyds Banking Group and its subsidiary Scottish Widows — a life insurance, retirement and investment business – is launching a review of its investment management arrangements and has given notice to terminate its investment arrangements with the firm. About £109 billion of wealth and retirement assets were run by legacy Aberdeen entities.

Lloyds Banking Group and Scottish Widows committed to discussions over the six months following the completion of the 2017 merger between Standard Life and Aberdeen Asset Management.

A regulatory filing by Standard Life Aberdeen said that, following the conclusion of the six-month period, Lloyds and Scottish Widows said they intend to review their long-term investment management arrangements, including those currently undertaken by legacy Aberdeen entities. The filing said the review also covers arrangements agreed to by Aberdeen with Lloyds Banking Group when the money management firm acquired Scottish Widows Investment Partnership from the banking group in 2014.

Standard Life Aberdeen said the revenue associated with these assets under management represents less than 5% of the merged firm's 2017 pro forma figures.

"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," said Keith Skeoch and Martin Gilbert, Standard Life Aberdeen's CEOs, in the filing. "We will be discussing the implications of this with LBG and Scottish Widows."

Lloyds and Scottish Widows have sent notices to the firm seeking to terminate the investment management arrangements relating to the assets, enabling a review to take place. Arrangements agreed at the time of the merger state that any termination is subject to a 12-month notice period before it takes effect.

As of Sept. 30, Standard Life Aberdeen managed, administered and advised on £646 billion of assets.

Standard Life Aberdeen's share price fell 7.53% on Thursday.

In a separate announcement, Scottish Widows and Lloyds Banking Group confirmed the review of their money management arrangements and that they have given notice to Standard Life Aberdeen over partnership agreements with the legacy Aberdeen Asset Management business.

Regarding the long-term contracts for the management of the about £109 billion in assets by Aberdeen, the announcement said: "These contracts enabled Scottish Widows and (Lloyds Banking Group's wealth business) to terminate the contracts in the event that Aberdeen was subject to a change of control with a material competitor. Aberdeen recently completed a merger with Standard Life PLC, which is a material competitor of Scottish Widows and also of (Lloyds' wealth business). At the time, Scottish Widows and Wealth agreed to delay a decision regarding the exercise of their termination rights for a period of six months following completion of the merger, during which period the parties agreed to discuss in good faith ways to build a successful relationship and address the competition issue."

The announcement said no agreement was reached, and that "Aberdeen has delivered good service and performance." Scottish Widows and Lloyds Banking Group added that they would welcome the participation of Standard Life Aberdeen in its investment management review "if (the firm) is able to resolve the competition issue."

Scottish Widows and Lloyds' wealth business expect to implement new investment management arrangements by the end of the first half of 2019.