How does LGII fit strategically with Canada Life’s offshore proposition?
The offshore bond market has seen a lot of change over recent years and is in a phase of consolidation in terms of the number of providers. We benefit from an extremely supportive parent, Great West Lifeco, that is firmly committed to growing its offshore business, and the opportunity to acquire LGII was seen as an ideal strategic fit with our existing businesses on the Isle of Man and in Dublin.
The deal brings with it a number of strong and established adviser firm relationships, notably in the discretionary fund management space. Increased scale also brings financial benefits to both our businesses in Dublin through consolidation.
On a more practical level, LGII outsources parts of its administration to a third-party administrator in Dublin, which is actually owned by Canada Life. This arrangement takes away a lot of the complexities associated with the integration phase of an acquisition and was another factor that made the purchase attractive.
It was also clear LGII shared the same customer-centric values as Canada Life International, operating a business model that is entirely committed to the adviser market.
What benefit does the increased scale bring to the operation?
We set up our Dublin-based proposition, Canada Life International Assurance (CLIA) in 2013, and while it has been reasonably successful during the past couple of years, we probably underestimated the length of time it would take to achieve panel positions with institutional firms.
The acquisition of LGII brings with it a significant number of the relationships we were targeting. Later in the year, CLIA will merge with the rebranded LGII business, and through this consolidation we will achieve several synergy savings, not least by having one Dublin-based management and board structure, rather than two.
Further scale synergies are expected as processes are aligned across all our businesses in the Isle of Man and Dublin, leading to increased profitability for the combined entity.
Where does this position Canada Life in terms of its market share of offshore bonds into the UK?
Our goal is to consistently be the leading provider of offshore bonds in the UK. To achieve this we believe a market share of at least 20% is required. Based on the 12 months ended Q1 2015, the combined market share of both Canada Life and LGII was 29%.
Will there be any staff cutbacks?
Our existing offshore business in Dublin was still in its infancy. In order to benefit from economies of scale its administration was outsourced back to our business in the Isle of Man with key control functions remaining in Ireland.
The acquisition provides us with a strong and experienced team in Dublin, allowing us to immediately increase our local presence and transfer back most of the outsourced administration, which was always a longer-term plan.
The integration of the two businesses is unusual. Rather than experiencing the typical challenges of consolidating two large businesses, it is a case of a relatively small business (CLIA) being consolidated into the newly-acquired established company (LGII). As a result we do not see large areas of staff overlap.