WSJ : U.S.-European Friction Over Wiring Is Latest Complication for 737 MAX Retu

U.S.-European Friction Over Wiring Is Latest Complication for 737 MAX Return
FAA chief Steve Dickson expected to decide whether to require fixes

Potentially hazardous wiring inside Boeing Co. BA -1.56% ’s 737 MAX jets is the latest flashpoint between U.S. and European regulators and a further complication in the grounded fleet’s return to service, according to people familiar with the details.

Technical experts at the European Union Aviation Safety Agency want certain electrical wires relocated to reduce what they say are dangers from potential short circuits, which in a worst-case scenario could disrupt flight-control systems, according to these people.

In addition to the Federal Aviation Administration’s ongoing safety review of proposed fixes to the MAX, the European agency is independently vetting such changes.

But engineers at the Chicago plane maker and high-ranking FAA managers, including the agency’s top safety official, contend moving the wiring isn’t necessary, one of these people said. Boeing hasn’t yet submitted its formal recommendation, though the issue is headed for a decision in the next few weeks by FAA head Steve Dickson.

The disagreement over whether to take action on the wiring, which hasn’t been reported before, has prompted the FAA to hold off scheduling a key certification flight for the MAX. It also highlights the emergence of a series of new technical challenges and delays confronting the Chicago plane maker as it strives to get the MAX back in the air world-wide. The planes have been grounded since last March, following two fatal crashes that killed 346 people.

The planes are expected to gradually start resuming commercial flights sometime in the summer, with major U.S. carriers having removed them from schedules until June.

On Saturday, the FAA released a statement saying Boeing recently informed the agency “about concerns associated with the location of wiring in certain areas of the MAX.” Since then, according to the statement, “the FAA has closely monitored the company’s analysis and how the issue might affect the ongoing certification efforts.” The wiring concerns were reported earlier by the New York Times.

Reiterating earlier statements, the FAA said the MAX will be approved to carry passengers again “only after our safety experts are fully satisfied that all safety-related issues are addressed.”

A Boeing spokesman said the company is cooperating with international regulators on a thorough certification process, “and we are working to perform the appropriate analysis.” He said, “It would be premature to speculate as to whether this analysis will lead to any design changes.”

A spokeswoman for EASA, which also hasn’t submitted its final position to the FAA, declined to comment. The issues still could be resolved with a compromise, but Boeing’s priority at this point, according to some of the people familiar with the details, is avoiding any wire modifications.

The wires, which help control movable panels on the tail and power other systems, may be too close to each other in a dozen locations from the rear of the aircraft to the main electronics compartment beneath the cabin and behind the cockpit, according to the people familiar with the issue.

A short circuit, or “arcing” of electrical current between wires, could cause control problems for pilots that the FAA characterizes as hazardous or in some cases even catastrophic, according one of the people briefed on the details.

EASA and FAA technical experts, along with some other FAA officials responsible for certifying aircraft designs, have taken the position that safety rules require wiring modifications in such instances, this person said.

The relevant international rules relate to safety enhancements put in place more than a decade ago after an in-flight fire caused a Swissair jet to plunge into the water near Nova Scotia in 1998, killing all on board.

The current concerns about potential wiring problems stem from Boeing’s analysis of how short circuits could cause problems with some flight-control systems, and how quickly pilots could react to those emergencies.

Since the two fatal crashes, safety regulators have been reassessing certain MAX flight-control systems, changing software, adjusting related computers and modifying pilot training.

Last month, industry and government officials revealed the latest software glitch, a problem that prevents the jet’s flight-control computers from powering up and verifying they are ready for flight, and said Boeing was working to resolve it.

Addressing the wiring issues would pose tough logistical and financial hurdles. How the agency mandates fixes may depend on who owns the aircraft, according to another person familiar with the details. The FAA may require Boeing to fix wiring on approximately 400 undelivered aircraft now in storage at airfields dotting the Puget Sound area, this person said.

For planes previously delivered to carriers, the agency would likely perform a risk analysis to determine whether the wiring should be repaired either before the planes fly again or during routinely scheduled maintenance, this person added.

Relocating the wiring bundles would take roughly two weeks per plane, according to industry and government experts. Such fixes could be performed at the same time as software and training updates, depending on available manpower, to try to minimize additional delays.

FT : China unveils emergency market support in response to deadly coronavirus

China unveils emergency market support in response to deadly coronavirus
Liquidity boost planned as markets reopen on Monday

Beijing has readied an emergency package to support the Chinese financial system, including a Rmb1.2tn ($173bn) boost of liquidity, as markets brace for a sharp sell-off on Monday in response to the deadly coronavirus outbreak.

China’s central bank said on Sunday that it would provide the lending facilities to money markets as the country’s bourses were set to reopen following an extended closure.

Over 14,000 people have been infected with the coronavirus in China and more than 300 people have died, according to China’s health authorities. The number of infections is already greater than the total during the outbreak of severe acute respiratory syndrome, or Sars, in 2002-2003, which caused several months of market turbulence in China.

The Philippines reported the first death outside China on Sunday, as a number of countries imposed restrictions or outright bans on people traveling from China.

The crisis has led to the quarantine of about 40m people in China’s Hubei province, where the disease first appeared in December, and forced some of the country’s largest cities and manufacturing centres to extend the Lunar New Year holiday.

Some economists in China have predicted that the outbreak could shave more than a percentage point off economic growth in the first quarter, pushing gross domestic product growth below 5 per cent.

The new liquidity injection will be China’s largest single-day open market operation since 2004, according to Bloomberg, although the net addition of liquidity will be lower because more than Rmb1tn of short-term funds will mature on Monday.

The People’s Bank of China also plans to lower lending rates to support companies.

China’s markets shut for the Lunar New Year on January 24. The holiday period was extended three days until February 3 as a result of the coronavirus outbreak.

Hong Kong’s Hang Seng index closed down 2.8 per cent when the market resumed trading on Wednesday, after the Lunar New Year break, with travel and tourism-related companies hit by fears that the outbreak would disrupt travel.

Analysts said the virus — and efforts to contain it — were likely to hurt company performance and hit stock prices when they resume trading on Monday.

“In contrast to 2003 with Sars, we’re now a decade into a bull market and valuations of some financial assets are stretched,” said Simon MacAdam, global economist at Capital Economics, in a note to investors. “The new virus is a plausible catalyst for a market correction.”

The PBoC is partnering with several other Chinese financial regulators, such as the foreign exchange and banking watchdogs, to manage the impact of the virus on an economy that was already growing at its slowest pace in 29 years.

China’s banking and insurance regulator said on Saturday that it would extend a deadline beyond the end of 2020 for companies to meet new asset management rules. The regulations were part of a multiyear crackdown on shadow banking that led to a tightening on liquidity — and the announcement gives leeway on this.

The regulator also said that some insurers would be allowed to surpass the 30 per cent cap on investments in equity markets, in a move intended to support stock prices. 

While Chinese officials have said coronavirus infections could peak within a week, other experts outside China say that point could come as late as April or May.

During Sars, China experienced a two-month sell-off that caused the market to drop about 10 per cent, according to research from Maybank. Singapore and Hong Kong markets suffered similarly. 

“Markets, in particular Hong Kong and China equity markets, could be very volatile in the near term as markets anticipate a broader community outbreak to occur in coming months,” said BNP Paribas Wealth Management’s Asia chief investment officer Prashant Bhayani in a note. “Beijing is very likely to step up in policy easing when there are signs that the outbreak becomes a headwind to economic growth.”

FT : Global dealmaking gets off to sluggish start in 2020

Global dealmaking gets off to sluggish start in 2020
January marks the quietest month for M&A activity in almost 7 years

Global dealmaking has got off to its slowest start in seven years in 2020, more than halving from a year earlier as companies failed to sew up transactions on the scale of those that dominated headlines one year ago.

Companies across the globe clinched $164bn worth of mergers and acquisitions in January, after declines in dealmaking in the US and across the Asia-Pacific, according to data provider Refinitiv. January marked the quietest month for takeovers since April 2013. 

The year has lacked one of the gargantuan acquisitions that came to define M&A in 2019. The two biggest takeovers clinched this year clocked in just below $8bn, a fraction of the $93.4bn acquisition of Celgene by drugmaker Bristol-Myers Squibb that was agreed in the first few days of 2019.

Even excluding that blockbuster healthcare deal, global dealmaking is still down more than 30 per cent from 2019 levels, the Refinitiv data showed. The biggest deals of the year include the $7.6bn takeover of Boeing supplier Hexcel by rival aircraft parts manufacturer Woodward, as well as the $8bn consolidation of Singapore-based property groups CapitaLand Mall Trust and CapitaLand Commercial Trust.

Geopolitical uncertainty, including US president Donald Trump’s impeachment trial, fears of far left-leaning Democratic presidential candidates, the US-China trade war and more recent fears of a global health crisis, has shaken confidence among board members and executives in blue-chip companies. Global stock markets have slid over the past week, wiping out their gains for the year amid fears over the coronavirus epidemic.

“The cumulative impact of the lack of confidence [around] high valuations, of regulatory scrutiny, of macroeconomic uncertainty and of the coronavirus . . . is people are slightly more conservative,” said Melissa Sawyer, a partner at law firm Sullivan & Cromwell. “And when you layer ‘slightly more conservative’ on a $100bn bet, it might make the answer no instead of yes.”

David Klein, a partner at law firm Kirkland & Ellis, added that deals that faced demanding reviews by competition watchdogs were “taking a lot longer to get done in this environment, which will deter some buyers”.

Bankers and lawyers across Wall Street say that companies are still evaluating scores of acquisitions, particularly given that persistent slow economic growth has pushed them for years to consider dealmaking as one tool to bolster revenues and profitability. 

But the coronavirus outbreak could damp enthusiasm for dealmaking if its spread accelerates. Dusty Philip, the global co-head of mergers and acquisitions at Goldman Sachs, said that the bank’s pipeline of deals was strong and that dialogue with clients remained “very active” but he characterised the spread of the virus as a “wild card”. 

“We haven't seen the groundbreaking, industry-changing transactions and that may be impacted by this uncertainty related to the election, impeachment and the virus.”

Mr Philip and others cautioned that it was too soon to draw a conclusion on the year’s activity based on a single month of announced deals. Deal announcements, after all, are not spread equally across the year. But the $164bn of takeovers agreed in January was roughly 50 per cent below the average monthly pace in both 2018 and 2019.

FT : How Britain fell out of love with traditional cup of tea

How Britain fell out of love with traditional cup of tea
Unilever’s review of brew unit reflects falling sales across developed countries

Alan Jope is sipping a cup of herbal tea. “A few years ago [this] would have been inconceivable,” said the 55-year-old Scottish chief executive of Unilever. “I hope my mates don’t see me.”

The conversion of Mr Jope, who calls himself a “long-term black tea drinker”, is a sign of a broader trend: across several wealthier countries, the traditional brew is falling out of favour. In the UK, US and Russia, retail sales volumes of black tea dropped by at least 10 per cent in the five years to 2019, according to Euromonitor.

As head of the world’s largest tea seller, Mr Jope is more concerned than most about the cooling market. 

This week he announced a strategic review of Unilever’s tea division, which generated €2.9bn of sales last year. The move could result in a partial or total sale of the unit as the consumer goods company fights to accelerate growth.

As the maker of the Lipton and PG Tips brands, Unilever has suffered from declining appetite in developed countries for a standard black brew, whether it be the UK’s “builders’ tea” or US iced tea.

“Two-thirds of our [tea] business is in black tea, and most of that is in the developed world . . . Despite strong brands and putting great people to run our tea business for many years, it has been for decades a drag on Unilever’s growth,” Mr Jope said.

The UK, where the tea trend arrived in the 1600s, pushed large-scale production of the plant in India during the colonial period. British drinkers are among the top three countries in the world by consumption per head. But that centuries-old enthusiasm is waning.

“Across the consumer goods companies we are seeing some of the historic categories like tea changing more in the past five years than they had changed in a couple of decades beforehand,” said Richard Webster, partner at Bain & Company. 

Market researchers said the traditional brew was losing popularity as younger consumers turned to the growing coffee market or to fruit and herbal tea, where Euromonitor said sales grew over the past five years in every region.

Younger buyers want “hydrating beverages”, according to Ilaria Abagnale, research analyst at Euromonitor. “At the same time, the health trend is pushing sales of organic products, especially in France, Sweden and Portugal, and superfoods, such as ginger and turmeric,” she added.

Edward Eisler, who founded high-end UK-based brand Jing Tea, based on the culture of loose tea in China, said he believed the western market would move in a similar direction, with consumers regarding different teas as they do varieties of coffee or wine.

“Mass-marketed standardised black is not answering the needs of the consumer around taste and quality and origin and sustainability . . . it’s as if we are still drinking Blue Nun,” he said, referring to the sweet German wine popular in the 1980s.

With 10.4 per cent of the highly fragmented global retail market in black tea, according to Euromonitor, Unilever has been hit hard by the change in tastes — its Lipton brand alone has about 7 per cent. No other company comes close. Tata Global Beverages, the Indian group that owns Tetley, commands 2.3 per cent globally, as does Associated British Foods, owner of the Twinings brand.

Unilever has been particularly hurt by a shift to more upmarket brands. While retail sales volumes of black tea dropped in the five years to 2019 — by 15.3 per cent to 71,400 tonnes in the UK — the value sold rose over the same period, as many buyers traded up to premium versions. That left established mid-market brands struggling.

ABF’s Twinings brand last year overtook Unilever’s PG Tips as the most popular brand in the UK, according to Nielsen. Innovations such as “cold infusions” offered by the likes of Twinings can fetch six times the price per bag of standard black tea, Tom Newman, senior analyst at Nielsen, said.

Unilever has chased new trends by buying the herbal tea brand Pukka and the speciality tea brand Tazo in 2017, but both are dwarfed by the size of Lipton.

Barclays analysts estimate the value of the company’s whole tea arm at €4bn-€5bn, though they said: “We see few willing buyers for a declining black tea business.”

The Anglo-Dutch group said it would not necessarily sell the entire division, but could sell parts or enter new partnerships. Unilever already has a joint venture with Pepsi for ready-made Lipton drinks such as iced tea.

Analysts at Jefferies suggested the company could sell its developed market tea holdings while retaining those in emerging markets such as India, where black tea sales are growing in both volume and value.

Despite noting a “demographic problem” with the ageing buyers of black tea in developed markets, Mr Jope said: “We have very strong brands that other people might find very attractive as part of their business.”

The traditional product retains some loyal customers. Sem’s Cafe, a budget south London restaurant serving burgers and English breakfasts, stocks nine herbal and fruit teas but says 9 out of 10 tea orders are still for the classic brew. Who opts for the alternatives? Nej Batir, son of the proprietor, said: “Not the builders, that’s for sure.” 

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Cover story says investors looking for yield should consider international dividend stocks; Tech Trader reports on the new era of competition in the chip industry
* Cover story: “While bond yields in many parts of the world are even lower than they are in the US, there’s plenty of yield available in a sometimes-overlooked corner of the market: international dividend stocks”; A list of the top 10 non-US companies in terms of total dividends paid out last year, as measured in US dollars, includes Royal Dutch Shell, BHP, RIO, China Construction Bank, HSBC, TSM, BP, TOT, CHL, Commonwealth Bank of Australia.

* Tech Trader: Cautious on AMD: The latest round of tech earnings shows there a new era of competition in the chip industry, with INTC facing a credible rival in AMD, which has gained market share for the past three years; The latter will have to deal with a more aggressive Intel, which still controls 82% of the desktop processor market—and investors may want to take a breather from AMD’s stock for now.

* Trader: Some good may come out of the chaos surrounding the coronavirus, which the market has finally had to admit it can’t ignore: For one, the stock market is no longer overbought, and in the past it has risen in the months after spikes in volatility that followed long periods of calm; Cautious on PTON: Bearish bets on the exercise cycle company could pay off if results disappoint, especially with so many bullish analysts, but “whether you think Peloton is an exercise fad, or the future of at-home training, the tug of war could be an opportunity.”

* Profile: Matt Brill, manager of the $4.5B Invesco Core Plus Bond fund, seeks high-quality bonds across asset classes, working with Invesco’s fixed income teams to identify opportunities and risks, and uses a three-dimensional approach to picking bonds, considering credit, capital structure, and duration (top 10 industries: diversified banks, airlines, thrifts and mortgage finance, wireless telecom, oil and gas storage and transportation, integrated telecom, automobile manufacturers, electronic components, semiconductors, biotech).

* Interviews: 1) Charles Royce, who manages eight funds, including Royce Premier and Royce Pennsylvania Mutual, says neither value investing nor active management are dead—and that small caps are headed for a revival; 2) Drew Zager, who runs Los Angeles–based Zager Fixed Income Management, a $11.2B in assets-under-management bond shop for Morgan Stanley Private Wealth Management clients, says he has achieved success for clients without taking undue risk by investing exclusively in investment-grade US dollar bonds, including Treasuries, corporates, municipals, and mortgage-backed securities.

* Features: 1) Positive on TMUS: A merger with S would give the telecom greater scale, new wireless spectrum, and cost synergies to help it thrive in the 5G era, but if the deal fails, T-Mobile will continue outgrowing the industry in terms of subscribers, earnings, and free cash flow—and might resume share buybacks; 2) Though the coronavirus appears to be less deadly than SARS, it’s also more contagious and with a longer incubation period—and because it’s unclear how quickly the virus can be contained, bargain hunters may want to be patient for a month or two until the scope of the crisis clarifies; 3) + PE, CXO: Some analysts think that high-quality oil producers now look more attractive in the wake of the coronavirus outbreak, which has hit airlines, travel booking companies, and retailers, and the exchange traded fund XOP, which is down on what some analysts say is indiscriminate selling; 4) “It is rare that individual investors have access to better financial products than large institutions, but in this era of low interest rates, there is an anomaly that favors the little guy: CD rates in many cases are higher than bonds of equal maturity”; 5) US investors can find higher dividend yields in many overseas companies, but they come with tax ramifications that are different from domestic issues—foreign companies withhold some of the cash owed to American investors to pay taxes on those dividends, and the withholding rates vary, or are not imposed at all, as in the UK; 6) Positive on JNJ, NVAX, INO, MRNA: Though no real business model exists to justify developing vaccines for emerging viral threats, despite the broad impact they can have, these companies are developing coronavirus vaccines, and their success could be a model for how drug developers can find incentives to work on emerging viral threats; 7) Employers have become the go-to resource for most Americans to save for retirement, yet for small businesses or companies that employ part-time or seasonal workers, traditional 401(k) plans can be too costly and complex, prompting the growth of state-sponsored programs to help private-sector workers save for retirement.

* Financial Planning: 1) After a 38-year bull market, many bond investors don’t know what a bond bear market looks like, and investors with big stakes in long-duration bonds, in particular, could get crushed if interest rates rise; 2) For many years, the bond market’s quirks have made it difficult for indexers to gain as much of an edge over active managers as has been the case for stock funds, where passive funds now dominate—but that is starting to change; 3) Analysts forecasting inflation have been crying wolf for a decade, leaving bond investors inured to warnings of rising interest rates or an inflation scare, but that complacency could harm income-hungry retirees if they’re not well positioned.

* European Trader: Cautious on Standard Life Aberdeen: The British fund manager is struggling with performance, and isn’t an easy stock to love in an industry facing immense challenges, where firms face pressure to cut fees in response to the shift to low-cost index funds and amid greater regulatory scrutiny.

* Emerging Markets: Well-meaning investors heeding the rising call to buy “sustainable” stocks might initially consider emerging markets, but the “smokestack” image of emerging markets companies is outdated—names such as BABA, TSM, and Ping An Insurance Group are surging.

* Commodities: “Oil prices recently fell to a three-month low, and U.S. benchmark crude is on track to suffer a loss of more than 12% in January as coronavirus intensifies the impact of seasonal weakness in the market, raising prospects for lower fuel prices.”

* Streetwise: Early forecasts for full-year 2020 have earnings growing by an ambitious 9%, but investors shouldn’t count on that, says columnist Jack Hough, though a first-quarter prediction of 4% growth looks reasonable.

Barrons : Think Bonds Are Safe? That Could Cost You.

What does a bond bear market look like? After a 38-year bull market, many bond investors haven’t a clue.

A bear market in bonds could see the 10-year Treasury, now at 1.6%, soar to 3% or 5% or beyond. Can you fathom 15.84%? That was the 10-year’s rate at the peak of the last bear market in September 1981.

Investors with big stakes in long-duration bonds, in particular, could get crushed if interest rates rise. For every 1% increase in rates, a bond’s price declines by a percentage equal to its duration. So a three-year duration bond would see a 3% decline in price. The value of a 10-year duration bond could tank 10%.

For bond-fund investors, however, predicting the precise impact of rising rates is impossible because the yields of underlying holdings will change by different percentages depending on where they are on the yield curve, says Morningstar director of manager research Maciej Kowara. For an exchange-traded fund tracking the Bloomberg Barclays U.S. Aggregate Bond Index with a duration of 6.2 years, for example, a one-percentage-point rise in the 10-year Treasury would probably result in a 4% to 6.5% decline in value, Kowara says. For a $100,000 portfolio and a 3% rise, that could mean a $12,000 to $19,500 loss.

Theoretically, higher yields on bonds should compensate for price declines, but inflation is a major drag on total return, says Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. Carlson studied the period from 1950 to 1959, the early stage of the last multidecade bond bear market. The yield on the 10-year Treasury started the period at 2.3% and ended at 4.7%, while inflation was about 2% per year. While average annual returns on 30-year corporate bonds, 10-year Treasuries, and cash equivalents were positive—1%, 0.78%, and 1.94%, respectively—after factoring in inflation, all three had a negative return.


But even within the context of a broader bear market, investors who continued to hold bonds for downside protection were rewarded when stocks plunged in 1957, Carlson says. While stocks were down more than 10% that year, the long-term corporates were up 8.7%, 10-year Treasuries gained 6.8%, and cash equivalents rose 3.2%.

Bonds did their job, as they probably would in the next bear market, says Gretchen Hollstein, a senior advisor at Litman Gregory Asset Management, adding that there’s some comfort to the fact that a bond bear market is typically a symptom of a robust economy.

Barrons: A U.K. Fund Manager Tries to Lure Investors With a Huge Dividend

A U.K. Fund Manager Tries to Lure Investors With a Huge Dividend

British fund manager Standard Life Aberdeen isn’t an easy stock to love in an industry facing immense challenges.

There’s pressure to cut fees with the shift to low-cost index funds along with more regulatory scrutiny.

At the end of June 2019, the company (ticker: SLA.UK) earned 43.9 basis points for every pound of assets managed in its institutional funds, down from 51.1 basis points in 2017.

On top of that, the company has struggled with performance. The Standard Life Global Absolute Return Strategy fund, once the biggest fund in the United Kingdom, has halved in size as substandard performance led to outflows. Over three years, just 27% of its equity funds were outperforming their respective benchmarks, according to the company. Performance on the bond side has been stronger, and about two-thirds of all its funds are outperforming the benchmark.

The 2017 merger between Standard Life and emerging markets–focused Aberdeen Asset Management led Lloyds Banking Group to withdraw its assets from Aberdeen, since Standard Life is a competitor on the insurance side to the Scottish Widows arm of Lloyds. Terms of settlement have seen 74 billion pounds sterling ($96 billion) in assets already out the door and another £35 billion set to go, though Lloyds paid a £140 million fee. Martin Gilbert, who led Aberdeen since he co-founded the firm in 1983, and then ran the combined firm, has stepped down.

Sell-side analysts are, at best, lukewarm. Out of 16 ratings, half were Hold and two were Sell or Underweight, according to FactSet.

The company’s £7.3 billion market cap includes stakes in three companies—India’s HDFC Asset Management and HDFC Life Insurance, as well as a 27% stake in U.K. insurance and pension consolidator Phoenix. Standard Life Aberdeen had £577.5 billion in assets under management as of June 30.

Fahad Hassan, a fund manager at Atlantic House Fund Management, said that the core Standard Life Aberdeen’s market cap when those stakes are backed out, even applying a 25% discount, is just £3.5 billion.

He estimates that if assets managed for its key partners are excluded, the company runs about £250 billion, on which it earns £1.2 billion to £1.3 billion in fees. On those numbers, the asset management business is trading at just 6.75 times earnings, whereas the group as a whole trades at 21 times, he says. Analysts at JPMorgan Cazenove have similar numbers, saying the core asset-management business trades at eight times projected 2020 earnings.

There’s reason to think Standard Life Aberdeen’s assets can grow again once the overhang of the Lloyds settlement is removed. Hassan says its distribution in the U.K. pension market is second to none. A 2008 law requiring employers to auto-enroll some of their staff members in pensions will keep that market growing.

Its stake in Phoenix also is a help. Phoenix buys the annuities of companies that are no longer offering new policies, and it uses Standard Life Aberdeen as its fund manager for these policies.

“They won’t be able to replace the whole of the Lloyds’ outflow, but there is room for them to replace some of that through Phoenix-based acquisitions and various tie-ups that they have around the world,” Hassan said.

The company’s stock price has already moved up some 17% over the past 12 months, well ahead of the 9% gain for the FTSE 100 over the same period. Even with the stock price appreciation, its dividend yield is still north of 7%.

Standard Life Aberdeen carries more than its share of risks. But a dividend that high is an encouragement for investors willing to take the chance.