Number one for new business is a daunting target in the highly competitive world of workplace pensions. Four years in to his tenure as Scottish Widows chief executive Antonio Lorenzo believes he will close in on that particular goal in a matter of weeks.
“We are looking to become number one in corporate pensions. We are some days off but we are nearly there,” says the quiet- spoken Spaniard, who has been a UK resident for 15 years now, with homes in London and Edinburgh.
“We set ourselves the target of being 15 per cent of the corporate pensions market for new business. Last time I looked we were at 14.5 per cent, but we are nearly there.”
His next target is to hit 20 per cent by 2025. While the Zurich corporate pensions acquisition clearly boosted Widows’ business and breadth of proposition, accounting for around half a million of the 1.3 million new customers that have been added, Lorenzo sees the huge Lloyds Banking Group client base as his biggest opportunity for building the pensions business.
The wall of cash heading into DC in the coming decades is an opportunity Widows identified some time ago.
“Clearly pensions is a significant market. We had much lower penetration before and and we have turned that around,” he says, adding that he is happy that the FNZ platform that came with the Zurich business will be the go-forward platform in future.
So does he predict any more acquisitions, given the number of master trusts that are expected to exit the market in the next year or so?
“Our strategy is to build, buy or partner. We have for example built a new platform in home insurance that is a market leading. Corporate pensions, with the Zurich acquisition, is the example of us buying, and then the other example is our strong partnership with Diligentia for a policy- administration service.
“We are open, so if we find something good for us we are prepared to take it, but it is not something that we have in the pipeline right now.
“The Zurich business has been a catalyst for us to be able to target new business across the entire spectrum. We now have more than 3 million customers in total in pensions. This means we are competing across the market. We are bringing in £6 billion in premiums per year,” he says.
There are two ways for Scottish Widows to continue their growth – winning schemes off competitors or growing assets through pulling in existing customers’ pensions onto the Scottish widows platform. Lorenzo would obviously be delighted with both, but sees more potential in the latter.
“In the last four years we have been reinventing Scottish Widows and we are building the insurer of the future,” he says.
For Lorenzo, this means developing the bancassurer model – creating the ability to touch consumers in multiple ways, forging strong levels of engagement and driving them to bring their assets to the provider.
“We have created a single customer view so the customer can see their pension opposite their bank details, if they bank with Lloyds Banking Group. The beauty with the banking app is that we have access to millions of customers, and these are active users, making on average 23 interactions per month with the apps.
“They’re not just bank customers, but customers with other product lines. We think around 40 per cent of workplace pension scheme members have a relationship with us,” he says.
“Lloyds Banking Group has 10 million customers engaging through mobile, out of a total of 16 million customers, and more than 3 million pension customers. This is a sizeable opportunity,” he adds.
It is through digital engagement that he sees the biggest opportunity.
“The government wants to build the pension dashboard, which is something we support and have bought into. But we have also created our own digital tools to increase transfers and engagement.
“We want customers to be able to create their own plan in the app. So the idea is that they create this spirit in people that they can use the app and understand where they are in their own journey. The increase in awareness is key. Customers’ existing pots is a bigger target for us than transferring other pension schemes to us.
“It is also important that when you do win a scheme from another provider that you can be sure that you can convince the customer to bring the assets from the existing provider to the new scheme,” he says.
Does Lorenzo anticipate the UK setting up a system like in Australia where employers can send their contributions to the employee’s chosen pension provider?
“Yes I think this will come, and we share the FCA’s belief that we should help to promote competition as much as possible. We have already seen this with bank accounts,” he says.
As an insurer and bank, Scottish Widows, and Lloyds Banking Group have their own real assets investment team to invest the company’s assets on behalf of shareholders.
So could this in-house investment expertise be made available to the default fund, as a way to efficiently access private markets?
“No I don’t think so. Asset management is a competitive industry. We believe in staying close to our clients. The assets that the company has are there to match the annuity liabilities, so they are long-term investments matching the cash flows coming out of the annuities.
“There is also complexity around illiquid assets that means they can become stressed and you can’t access them. While you may not need to access your pension until you are 55, what happens if you need a transfer and you can’t realise your illiquid assets? The illiquidity issue is a bit of a problem,” he says.
And where is Scottish Widows on ESG?
“We are currently working on this and the appointment of Maria Nazarova-Doyle to head up our investments is part of this. We are working with some asset managers and building our capabilities. So watch this space as in the near future hopefully we will have some news that you will like,” he says cryptically.
In this age of Big Data, few organisations know as much about us as our banks. At the same time, web marketing is now so hyper personalised that some of us even suspect our computers are listening to what we are saying. So for a pension provider that is also a bank, what does holding lots of such personal information mean for the choices members are offered?
Lorenzo is concerned never to cross the line into something that might look like a personal recommendation that would be seen as advice, so does not see any Big Data matrix or bespoking approach applied to default funds.
He says: “This sort of information may assist in the way that you construct the alerts that you send and the way you present guidance. You may use flexibility to give the opportunity, but you will have to leave it for the member to make the ultimate decision to take a different path.”
The provider is arguably most famous in the eyes of the UK public for the caped Scottish Widow model. Some people have questioned whether a young female model in a cloak is an outdated image for a modern company. Lorenzo thinks the cut-through the company gets from the widow is too powerful an asset to forgo.
“There is some debate around this but the brand is working beautifully. The impact in terms of marketing is really powerful.
“From my point of view the Scottish Widow is an icon like the Lloyds black horse. It has been in the lives of people for many
years and people recognise this icon.” Lorenzo sees heritage and continuity as important to the company, and reports a big responsibility in running a company with a history as long as Scottish Widows’. “It really struck me when we were in the Balmoral Hotel for the 200th anniversary of the foundation of Scottish Widows, and we were in the same room as where the 100th anniversary took place. The sense of responsibility I got from that moment was that there was something significant in the brand and heritage. But there is still more to do – we have become number one in home insurance in 2019, we have seen the growth in the corporate pensions business, but there is still much more to do”.
ALL ABOUT ANTONIO LORENZO
- Joined Lloyds Banking Group in March 2011 from Santander, where he had worked in a number of different leadership roles including CFO. Was part of the management team that completed the take-overs of Abbey National, Bradford & Bingley and Alliance & Leicester.
- Spent over nine years at Arthur Andersen. Taught auditing at the European University of Madrid.
- Member of the official Registry of Auditors of Spain and holds two bachelors degrees (economics and law).
- His first role at LBG was group director, wealth, international and group corporate development. He played a key role in the development and execution of the group’s first strategic review,leading the work to reshape LBG’s international footprint, including the reduction from more than 30 countries to six, and strengthening the balance sheet through significant non-core asset reduction, by £170bn.
- In 2013, he assumed the role of group director, consumer finance & group corporate development, leading the division’s growth strategy, leading to the acquisition of MBNA, and also completing the sale of TSB.
- In 2016, he was appointed chief executive of Scottish Widows & group director, insurance; the Wealth and Halifax Share Dealing businesses joined the division in September 2017.
- In 2018 LBG announced the creation of the Schroders Personal Wealth JV – which Lorenzo chairs. This business aims to become a top three UK financial planning business by the end of 2023.