The world of international life offices seems to be hitting a very sorry note indeed. It is actually...
The world of international life offices seems to be hitting a very sorry note indeed. It is actually inaccurate to say the industry is 'consolidating' ' for the simple reason that there seems to be no interest from anyone to buy them.
Abbey National is a prime case in point. In its annual shareholder meeting, the bank announced it planned to concentrate on the UK financial services market ' and made no secret of the fact that it wants to get rid of three offshore life companies: Scottish Provident Ireland and Scottish Mutual International in Dublin, and Scottish Provident International in the Isle of Man. That was in February.
Needless to say, the announcement didn't stir a blade of grass. It became enormously apparent that no one wanted to buy Scottish Provident Ireland or Scottish Mutual International. So two months later the company decided to just shut down the businesses. Bringing out a calculator, it probably worked out it would be cheaper to keep these companies ticking along solely to support existing policy holders, than it would have cost to hire consultants and advisers to find a likely suitor.
And sadly, it seems offshore life offices are going cheap. One source estimates that at best Scottish Provident International would fetch £10m. The same source estimates the amount the company generates in trail fees is about £5m a year. The one interesting thing about SPILA is that it has a licence to operate in Hong Kong, which would be handy for any company looking to expand there.
But where does all this leave advisers, who in the happy days of a bull market were being wined and dined by these very companies that are now disappearing into the ether?
Advisers have always been at the front-line of customer abuse when policies started to go pear-shaped. Now they will have to explain to these self-same irate clients that the company which managed their policy no longer exists ' they didn't even merge! Naturally this does not instill great confidence in one's soul.
Yet lest we all become depressed, there are happy moments too. At least for those offshore life companies which remain standing: namely Scottish Life International, Scottish Equitable International, Clerical Medical International, Friends Provident International (which acquired Royal & SunAlliance) just to name a few.
The market is less crowded for them, which is already beginning to have a positive impact on their profits and growth. Despite the reduced competition implicit in a smaller number of players, many investors may find financially strengthening product providers a welcome change from the recent trend.
£300bn of liabilities
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Transfer from occupational scheme
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