Lloyds bank has agreed terms with Zurich to acquire for an undisclosed amount its United Kingdom workplace pensions and savings business, a division that presently has up to £19bn assets under management (AUM).
This part of the business adds some diversification to the Lloyds stable without the risks inherent in the investment banking activities practiced by its peers. This is compounded by the increasing regulation faced by financial services firms.
Data published in Platforum's February Workplace Savings Guide show that based on third quarter 2016 assets under advice figures, Scottish Widows and Zurich would have a combined £47.7bn AUA compared to Legal & General at £56.9bn and Aviva at £55bn.
Scottish Widows presently has £124bn AUM, of which £35bn is workplace pensions business, so this represents growth of up to around a half in one stroke.
Thursday's announced acquisition will widen the retirement expertise within Lloyds Banking Group, with 200 Zurich employees transferring to the business in management, business development, and operations roles. In addition, the Zurich Corporate Savings offering will enable Scottish Widows to provide a flexible investment capability to create bespoke investment plans and access assets not previously available through Scottish Widows.
Hargreaves Lansdown analyst Laith Khalaf said: "This move underlines Lloyds' commitment to the pensions market, scotching rumours that have circulated for years that [it] is looking to sell off the Scottish Widows franchise".
The deal will see Zurich get exclusive distribution rights for group life protection to certain corporate clients of LBG's commercial banking business.
The bank did not disclose the price of the deal but said it expects it to "partially close" in the first quarter of 2018, followed by the transfer of assets, subject to regulatory approval.
Zurich UK chief executive Tulsi Naidu added: "We see today's announcement as a very positive step forward for our business. To support our other ambitious growth plans, we are also investing in a new multi-million pound retail protection platform and enhancing the range of products on our retail wealth platform".