Clive Cowdery’s goal of a corporate pensions giant of three or four insurers, bundled up and ready to float by 2013 is well on course after last month’s confirmation of Resolution’s acquisition of the majority of Axa’s UK life assurance business (protection, corporate benefits and annuities) in a deal worth approximately £2.75bn, subject to regulatory approval.
Press reports that Aegon were about to be the next in line have proved to be unfounded. However, many will think that the streamlining of the life and pensions business that proved to be the substantial news behind these misplaced rumours could be seen as dressing Aegon up for future sale. But with analysts saying that Resolution is looking at virtually everyone except the very biggest insurers, we are in for a summer of speculation.
What is clear is that £8bn of funds under management and £200m APE of corporate pension a year are joining Resolution under a new brand name, Friends Life, to be rolled out from next January. The deal is set to go through at the end of August, at which point existing schemes will be rebranded Friends Provident in the interim period until the new brand is launched.
Adding Friends Provident’s 8.5 per cent market share to Axa’s 4.5 per cent will give a combined 13 per cent, already a substantial sized insurer. Further acquisitions will create a true giant.
But the big question from the corporate advisory community is how will Friends cope with maintaining its service standards while dealing with such a vast integration project. Life insurers have historically struggled to merge multiple platforms and operating systems before, and with at least one and possibly two more businesses to be brought into the fold, Friends needs to keep its eye on the ball.
Nathan Moss, UK managing director of Friends Provident says: “Yes we are committed to maintaining the service levels we have a reputation for. We are ring-fencing our service proposition to employers and EBCs as part of our commitment to maintaining service standards, which we are guaranteeing. Friends and Axa have been travelling in a similar direction, and Paul McMahon and his team, who are coming over from Axa, will be running the combined operation.”
Moss says detail on when migration of schemes onto the Friends platform will take place is yet to be worked out.
Life insurers have historically struggled to merge multiple platforms and operating systems
“Over time we will look at the migration path for the Axa business. We need to work through that with employers and advisers. For the near future there will be no change,” he says.
The deal will see 2,000 employees coming over from Axa, and Moss says these are likely to continue to operate out of Bristol and Basingstoke for some time yet. One source has suggested that no decisions about integration, staff cuts and office locations will be made until Resolution has acquired all it wants and knows what Friends has to work with.
Trevor Matthews will lead the new team as CEO, with Evelyn Bourke taking on the new role of executive director of strategy, capital and risk. David Hynam, currently group chief operating office of Axa UK, will join as executive director operations. McMahon and Graham Harvey will be joining from Axa UK as managing director of corporate and managing director of individual respectively.
As far as employers and employees in Axa corporate pension schemes are concerned, the first thing they will notice is, subject to regulatoryapproval in August, notification of the change of ownership in September, followed by the rebrand in January 2011. That will see the end of the Friends Provident brand that has been in existence since it was set up by a group of Yorkshire Quakers in 1832.
As for where this leaves the French insurance giant selling its corporate benefits arm, Paul Evans, chief executive of Axa Life accepts the deal marks a step back from its policy of being a dominant product manufacturer and distributor in all the markets in which it operates. However, he has not ruled out Axa returning to the corporate pensions space in the future with a corporate wrap proposition, and adds that it has not severed all links.
He says: “We were successful but too small. We will focus on our corporate trustee investment platform, where we have £2bn invested. I believe worksite does have a part to play and I do expect us to target it going forward. But we retain the option of moving back into the corporate space through corporate wrap. We have always said that our Elevate individual wrap capability affords us the opportunity to do corporate wrap in the future. Is corporate wrap build a priority for us? No. Will it be in a couple of years? Yes.”
Advisers may question how Axa will be able to make corporate pensions stack up in future from a standing start, if the substantial business it has just sold was deemed too small to prosper. But the more searching questions will be put to Friends, as it embraces a future of juggling major life office mergers with maintaining its high service standards