In Phoenix’s full-year results, chairman Henry Staunton said: “Economic and regulatory pressures have resulted in the break-up of the traditional life insurance model.
“With certain players re-focusing their efforts on asset management and others concentrating on specific areas of new business, while divesting legacy portfolios.”
There is little doubt that the industry has undergone substantial change in recent years, which at times has been difficult for what has traditionally has been a slow moving industry.
But observers need only look at the history of Phoenix Group and the number of firms and books it has acquired over the years to appreciate that high levels of M&A are not that unusual.
The pace at which technology and regulation have advanced has made the evolution of life companies, at times, a painful one. Laden with legacy systems and business, full and bolt-on acquisitions have added scale and, often, revenue to insurers – but they have also created drag.
The merger of Standard Life and Aberdeen; the sale of Axa Wealth International to LCCG; Prudential spinning off its UK and European business; and Phoenix Group’s acquisition of Standard Life’s insurance business all point to an industry full of companies reassessing what it is they do best.
“Phoenix will become the largest closed life consolidator in Europe and Standard Life Aberdeen will focus on its world class investment management business and UK wealth platform,” Phoenix said in its financial results on Wednesday.
Money to be made
You only need look at the latest financial results from some big industry players to see that there is still demand and it is growing.
On Thursday, Old Mutual Wealth proclaimed itself ready to separate from its parent, embrace the name Quilter and list. The firm reported a 40% uplift in pre-tax profit.
Italy’s Generali which is selling its PanEurope operation to LCCG, reported a record operating result of €4.89bn (£4.3bn, $6.05bn) for 2017 on the back of a strong performance from its life segment and its investments, asset & wealth management business.
New business value was up 53.8% to €1.8bn compared with €1.19bn the previous year, driven by strong growth in Italy and across Generali’s international division.
Phoenix reported group operating profit of £368m for 2017, up from £351m the previous year.
The announcement that Standard Life was selling its insurance arm to Phoenix came as a shock to the industry. There had been little, if anything, to suggest that such a deal was in the works.
The deal has been trumpeted as a success for Standard Life, but especially for Phoenix Group.
It has, however, created uncertainty for the advice community, which has a tendency to shrink away from anything that could be considered disruptive change.
Click here to read about how Utmost Wealth Solution’s Mike Foy believes a clear strategy from Phoenix could go a long way to remedying adviser uncertainty and how Canada Life International’s Sean Christian feels there is room for established open-book operators and market consolidators in the industry.