There is a lot of interest around Aegon’s UK business, following its recent strategic announcements.

It has brought me back to a longstanding industry discussion. Even when I was at Standard Life 20 years ago, there was regular debate about whether it would make strategic sense to combine the three Edinburgh based pensions businesses, Standard Life (now owned by Phoenix), Scottish Widows (owned by Lloyds Banking Group), and Scottish Equitable (now Aegon UK).

If Aegon UK does change hands, Phoenix feels like the most natural home, from a capability and execution perspective.

Phoenix has already demonstrated that it can do large, complex life transactions, notably Standard Life Assurance, announced in February 2018, and ReAssure, announced in December 2019, then integrate them effectively.

Deals like this are rarely about simply banging books together, which is often expensive and operationally messy. The real value tends to come from capital synergies, which are largely driven by diversification benefits.

Phoenix has a strong track record here. It has consistently under promised and over delivered on capital, and delivered sustainable cash generation.

A valid question is, would an acquisition of Aegon UK be good or bad for the Phoenix share price.

To frame that, I have set out the Phoenix share price against the FTSE 350 Life Insurance sector, indexed from the Standard Life acquisition announcement in February 2018, through to just before the pandemic hit share prices.

It is also worth remembering that the strong share price performance following the Standard Life acquisition was not just about execution. Standard Life sold its life and pensions business at a large discount to what I calculated the embedded value to be at the time, and the market eventually recognised that gap.

What happens next to Aegon UK, a trade sale, a PE deal, a public listing, or a longer term reshape and retain?

Not investment advice.

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