Axa Wealth says it sold its life and pensions business to Resolution because the traditional life model was "broken" and the company needed to evolve its business proposition.
Speaking at a briefing in London today, CEO Mike Kellard said the main driver behind the £2.75m deal with Resolution was an effort to move away from the redundant traditional life model and develop a capital-light company focussed on investment.
"It didn't make any sense for us to stay in the old model," he says. "To use a phrase from UK television programme Dragon's Den, we said "We are out".
He revealed the proposed deal with Resolution was first mooted two or three years ago when Axa bought the global Winterthur group. Conceding the deal was "partly" driven by the £2.75m on offer, Kellard said the primary motive was establishing a steam-lined, modern company spearheaded by multi-manager offering Architas and the Elevate platform.
Kellard said a review of the industry concluded the life market was capital -intensive and overly-complicated with the company spending a lot of time managing products such as annuities and with profits which were closed to new business.
Furthermore, he said the life industry was not profitable and was either loss-making or just hitting break-even. The cash flow of the UK life industry was £50bn in the red in 2008, he pointed out.
No new business was really available in the market, he added, which simply "churned" out single premium business from one company to another resulting in a "vortex of cash floating around."
In addition, Kellard said traditional life products failed to target the whole IFA market - a market undergoing a "perfect storm" for advisers as business models changed from from one focused on sales to client management and fees.
"This was not an industry I was getting satisfaction from anymore," he adds. "We thought the traditional model was broken."
The idea behind the newly-restructured Axa Wealth model, said Kellard, was to build a streamlined business focusing on providing investment management and a flexible wrap proposition to IFAs.
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