AXA taken over by ResolutionWhat the acquisition of the insurer means for you
24 June 2010
The life and pensions arm of AXA UK has been sold to insurance consolidation giant Resolution in a £2.75bn deal, and will be merged with Friends Provident as the second insurer to fall under Resolution's ownership - creating one of the largest providers of corporate pensions and protection in the UK.
AXA has disposed of its life, income protection and critical illness business, its group pensions (which provides pension schemes to companies) and its retail life and pensions business. It is estimated that 2,200 AXA staff members will move over to Friends Provident within the next three months.
When the two companies combine, they will be rebranded as Friends Life, and the AXA name shall no longer exist. The deal will see 3.7 million AXA customers join the 2.9 million Friends Provident customers, giving them a market share of 6.6 million customers.
Why has AXA sold its business?
AXA has stated that it wants to focus on a new core part of its business, such as wealth management, its wrap platform proposition, Elevate, investment arm Architas Multi-manager and its financial advisory operation Bluefin Advisory Services.
But the UK life insurance market is going through a difficult period and many large companies in the sector feel that they have to sell parts of their business to meet tough new European regulations, which will require them to have much higher free capital than many do now.
Resolution's owner Clive Cowdery is well practiced in the consolidation arena. His former business, also named Resolution, bought up a large number of closed with profits funds and carried out the administration for them until he sold the book to the Pearl Group (now named the Phoenix Group) in 2008.
What's in it for AXA and Friends Provident policyholders?
In theory, consolidation should allow businesses to be streamlined, enabling companies to cut costs to make running the business more efficient. The projected impact on consumers is that costs for the services that the businesses provide could decrease.
However, if you have a policy with Friends Provident or AXA, you cannot expect to get any shares or a cash windfall from the deal.
Nathan Moss, interim managing director at Friends Provident, said that the merger will allow AXA and Friends Provident combine their expertise in the corporate pensions market and mix a complimentary suite of protection products to improve the quality of services on offer.
But this does reduce the competitiveness of the insurance market and restricts the choice of products available to consumers. It has the potential to increase unemployment in the UK. The merger of AXA and Friends Provident will cut costs by around £75m but Moss could not confirm if any job losses would be taking place.
What will change for AXA and Friends Provident customers
In truth, not much. Friends Provident says that it will be business as usual for the time being. The deal will not complete until the end of August and there are no plans to rebrand the two companies until early in 2011.
There are currently no plans to change existing products or policies. So if you have life cover, income protection or critical illness cover with either of the two companies, you shouldn't expect a hike in premiums or vast changes in your policy terms.
Which? protection expert Teresa Fritz said: 'This buy out is bad news for policyholders, bad news for consumers and bad news for AXA's employees.
'Friends Provident and AXA are still two big players in the UK life and pensions market and their merger will mean even less choice for consumers trying to find value for money products.
'Resolution seems intent on ruining competition in the UK's financial services and the FSA seems content to let it do it.'
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