The block of policies, with assets of £2.7bn ($3.6bn, €3.1bn), has largely been closed to new business since 2003 and comprises life and pensions savings policies, along with some protection policies all written in the UK.
The Scottish mutual has agreed an arrangement under which Canada Life Investments will continue to manage a substantial portion of the transferring unit-linked assets. The terms of the deal were not disclosed.
The deal is subject to the satisfactory completion of certain conditions including court sanction.
The transfer is expected to occur in late 2019.
No international impact
A spokesperson for Canada Life confirmed to International Adviser that the deal has no impact on the international part of the business.
“Today’s announcement relates purely to the onshore business and that closed legacy book. There is no impact at all on the international business that operates from the Isle of Man and Dublin.”
The firm’s commitment to the international market was reiterated by the spokesperson, who said: “The business lines that we are trying to grow in the UK business increasingly rely on the adviser relationships that we’ve built up over 30 years now through the international business.”
One of the areas that the insurer is looking to develop is wealth management, of which the international business currently makes up the lion’s share, the spokesperson told IA.
The sale of the policies was prompted by the rising costs associated with administering the book, IA was told.
As life companies try to streamline costs and improve efficiencies, consolidators are becoming bigger players in the market.
On 15 June, it was confirmed that Equitable Life has been acquired by Life Company Consolidation Group (LCCG), the parent company of open-book provider Utmost Wealth Solutions.
In April, it was announced that a UK pensions specialist is to set up a fund to buy long-term life policies.
Phoenix Group’s acquisition of Standard Life Aberdeen’s insurance arm made big waves when it was announced in February 2018.
The spokesperson added that there are no other similar deals in the pipeline, “this is a one-off exercise for us”.
New retirement products
The Scottish Friendly deal is the second large-scale move by Canada Life in recent months following the acquisition of Retirement Advantage, which completed in January 2018.
The deal added over 30,000 pension and equity release customers and more than £2bn in assets under management, including a £1.5bn block of in-force annuities.
Canada Life said disposing of non-core business will help it build on the integration with Retirement Advantage and develop new retirement products, as well as further accelerate its push into core markets, including:
- Wealth management
- Group and individual protection
- Retirement solutions
Doug Brown, chief executive, Canada Life UK, said: “This is an excellent move for both organisations, for Scottish Friendly by increasing their scale and for Canada Life to concentrate its resources around its core business strategy.
“Our priority is ensuring customers receive the highest standards of care both during this transition period, and beyond. Scottish Friendly has a great reputation in this area which gives us confidence that customers are in good hands.
“This was a difficult decision – many of these customers have been with us for years, arriving through acquisition or organic growth. However, following close evaluation it was clear that the sale is the right thing to do.”
Jim Galbraith, chief executive of Scottish Friendly, added: “This activity is a key element of Scottish Friendly’s three-part growth strategy, so Canada Life and their policyholders can be confident that the process of change will be as smooth and seamless as possible and can look forward to the friendly and efficient service that Scottish Friendly specialise in.”