We have been assessing and rating companies, from a financial strength perspective, in our Offshore Life Companies peer sector since 2001. We currently assess and rate 33 Offshore Life Companies in this peer sector. Financial advisers and other interested parties can access our financial strength ratings for each of the companies in this peer sector via the AKG Rating Portal (sign in or register at www.akg.co.uk).
The first half of 2015 has seen some interesting developments in terms of acquisitions.
- In February Great-West Lifeco’s subsidiary, Canada Life, announced its agreement to acquire Legal & General International (Ireland) Ltd from Legal & General PLC, subject to approvals. On completion of this transaction Canada Life’s proposition in the Isle of Man and Dublin will no doubt be reinforced by the integration of the acquired business.
- In April Charles Taylor Group completed its acquisition of Scottish Widows International Ltd from Lloyds Banking Group and renamed it as LCL Assurance Ltd. It is intended that the acquired company will be re-domiciled from Jersey to the Isle of Man and that its policies will be transferred into Charles Taylor’s existing Isle of Man life insurance subsidiary LCL International Life Assurance Company Ltd.
- On 7 May RL360 Group announced that, subject to approvals, it was to acquire the Isle of Man based CMI Insurance Company Ltd from Lloyds Banking Group, creating a business with £8bn of assets under management. RL360 (which is backed by private equity firm Vitruvian Partners) said it was buying the closed book life business to accelerate its growth strategy. RL360 came out of the Royal London Group in October 2013 in a management-led buyout. Its existing Isle of Man operation RL360 Insurance Company Ltd trades under the RL360° brand.
It remains to be seen whether this type of activity will be repeated in the second half of 2015, but this conforms to AKG’s long held view that the significant strategic decisions are required across the market, with little time or ‘wriggle room’ to delay action. As we embark on our body of 2015 Offshore Life Company assessment work we will be keen to appraise the strategic direction of travel of these companies and others in the peer sector.
It is too early to tell exactly what the impact of pension freedom might be on offshore life offices but there may be some nervousness around the outlook for offshore bond sales for all but the most committed market participant. This would continue a theme of uncertainty in the sector since the Retail Distribution Review challenged distribution approaches and adviser remuneration models. Reporting in the May 2015 edition of International Adviser stated that, according to ABI figures, new business sales of UK-distributed offshore bonds fell by 10.7% last year but were contracting at a slower pace than in recent years (12.4% fall in 2013 and 20.4% drop in 2014).
As is the case with many companies operating across AKG’s assessment and rating peer sectors Offshore Life Companies need to evolve and respond to the various market and regulatory challenges. However an intermediary distribution sector in the UK which increasingly has tax and inter-generational planning at its heart may well, over time, embrace offshore options more into its mainstream market.