Hot on the heels of Standard Life's acquisition of Aberdeen AM - and by extension the recently acquired Scottish Widows Investment Partnership - comes news of a proposed tie up between each firm's parent insurer.  What is driving this most recent example of consolidation in the UK life sector?  Could we see a reversing of trends, back towards a more wholesale based life co corporate structure?  This would reverse the recent pattern of polarisation, as Europe's life offices embrace either capital light or capital intensive business strategies?

On the face of it, there is some logic in a merger of the Scottish firms:  The terms of Aberdeen's acquisition of SWIP back in 2014 are said to provide a degree of reassurance concerning SWIP's long term relationship with Widows and its parent, Lloyds Banking Group.  But few investment mandates last forever, so what better way of unifying the asset strategies of each than by merging the parent firms? Although each manager sits in a relatively similar client sphere, there were nonetheless some interesting product synergies back in 2014 - so could a similar rationale be applied to the insurance companies? SL is very clearly wedded to the post-S2 'capital light' model, whilst Widows offers a more capital intense mix of business thanks to its growing annuities business.

...Or is that a reason NOT to merge?  Natalie Holt's article in last week's Money Marketing poses some interesting questions concerning both companies' need to drive down policyholder administration costs and consolidate their back books ahead of the shrinking revenues which will accompany an ageing population...