Life Company Consolidation Group (LCCG) has signed an agreement with The Equitable Life Assurance Society to transfer the company and all of its business to Reliance Life Limited, a specialist UK run-off manager established by LCCG.
The proposed transaction will maximise the capital distribution to members by converting Equitable Life’s ‘with profits’ policies to ‘unit linked funds’, while managing the administrative costs of a life insurance business in run-off.
This conversion is expected to increase capital distribution from 35% to between 60% and 70%, and the transfer to Reliance Life will provide policyholders with access to a broad range of funds, ensuring Equitable Life will have well-managed run off.
The deal forms part of LCCG’s strategy to acquire open and closed book insurance assets in the UK and Europe, having already acquired ten businesses from company’s such as Aviva, AXA, and Generali.
Total policyholder assets of the LCCG group are currently worth around £24 billion, and are predominantly unit-linked.
Paul Thompson, Group Chief Executive Officer (CEO) of LCCG, said: “We are delighted to have been selected by Equitable Life to be its partner in providing on-going service, fund choice and security to its policyholders. As a group we have significant experience in delivering policyholder value through well-managed run-off processes and our expertise in unit linked assets. We continue to see significant opportunities to add to our run-off assets through additional closed book life insurance transactions.”
Chris Wiscarson, Equitable Life’s CEO, also commented: “When the Equitable closed to new business in 2000, it was inevitable that at some point the Society had to come to an end. The benefit of bringing Equitable to an end sooner rather than later is that we can capture for with-profits policyholders the near record high values of the investments backing their policies.”
Ian Brimecome, Chairman of Equitable Life, added: “While it will be sad to bring an end to the oldest mutual assurer in the world, the potential to enhance withprofits policy values to the extent made possible by a transfer to Reliance Life is fundamentally helpful in distributing capital to our policyholders as fairly and as soon as possible. I believe Reliance Life’s approach to customer service, investment choice and policyholder security make for a compelling way forward.”
The parties will now ask eligible policyholders to vote in favour of the conversion of the ‘with profits’ policies, as well as on the arrangements to transfer to Reliance Life.
Additionally, the transaction remains subject to regulatory and Court approvals, and is expected to be completed towards the end of 2019.
Aon also commented on the transfer of Equitable Life policies, suggesting that the deal should act as a prompt for defined contribution (DC) scheme trustees to revisit their strategy for legacy providers of additional voluntary contributions (AVCs).
John Foster, Principal Consultant at Aon, explained: “The announcement is very good news for Equitable policyholders who have waited a long time for this. Trustees of schemes holding Equitable Life with-profits arrangements – largely through historic AVCs – should take action to understand the impact of this on their members, the options members have under the scheme rules, and to communicate with members to let them know the implications.
“This should also be an opportunity for trustees to take a step back and revisit their overall strategy for legacy DC and AVC providers, including whether to consolidate them with more up-to-date facilities, or whether to move them out of the scheme altogether.”
He continued: “Recent changes to regulations on bulk DC to DC transfers give an additional degree of flexibility that trustees can now take advantage of when considering their options on legacy DC and AVC arrangements – such as those held with the likes of Equitable or in other traditional insurance products.”
