Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Linda Koco
Allstate is bowing out of writing life insurance and annuities and selling the products through the independent agency distribution channel business.
Late yesterday, the big U.S. carrier issued a statement saying it plans to sell its Lincoln Benefit Life Co. to Resolution Life Holdings for $600 million.
Resolution Life is a Delaware corporation established by The Resolution Group, a London-based financial services investor in businesses in the United Kingdom that manages in-force life insurance policies.
The deal is part of Allstate’s plan to reduce its exposure to spread-based business, and part of Resolution Life’s plan to expand into the United States.
Resolution Life reportedly beat out two private equity firms that were also bidding to buy Lincoln Benefit.
Resolution Life plans to acquire a number of life insurance businesses in the U.S., according to the Allstate statement, noting the new owners will be focusing on “the needs of existing customers over the long run,” not on actively seeking new sales.
The statement also said that Resolution Life has “a long-term view of the market and is committed to retaining in-force customers.”
Those comments will find receptive ears in the U.S., where many insurance professionals and observers have been wondering whether new players in the industry “get,” and “get along with,” the long-term nature of the life and annuity business.
Producers who sold life and annuity policies issued by Lincoln Benefit especially will be interested in those comments, since the producers will want their customers not to be sold into the spin cycle of new ownership every few years.
Impact on the independent agency market
The deal, which is subject to regulatory approvals, will definitely impact the independent agency marketplace.
Lincoln Benefit has been a player in the independent agency channel for decades. For many years, it had a strong presence in the brokerage market and maintained high visibility at national brokerage meetings. The firm writes fixed life insurance and annuities, indexed annuities, a Treasury-linked annuity, and variable life insurance, according to its website.
Allstate has owned the 75-year-old year old carrier since 1984. But now, the insurer plans to exit the consumer segment served by independent life insurance and annuity agencies -- and not sell new life or retirement products through those agencies.
In addition, Allstate Financial will discontinue issuing fixed annuities at year-end 2013, the company said.
Going forward, Allstate agencies and exclusive financial specialists will sell annuities available through third party annuity companies.
Other arrangements detailed in the statement include:
· For a 12- to 18-month transition period, Allstate will continue to service in-force Lincoln Benefit business sold through independent life insurance and annuity agencies. After that, Resolution Life will do the administration.
· Allstate agencies and exclusive financial specialists will continue to sell Lincoln Benefit’s life policies until Allstate Financial transitions the products to another Allstate company.
· When the transaction closes, Lincoln Benefit’s in-force life business and all of its payout annuity business sold through the Allstate agency channel will continue to be reinsured and serviced through Allstate.
Allstate will now focus on its own agency channel, Thomas J. Wilson, chairman, president and chief executive officer of The Allstate Corp., said in the statement.
For the long term
The transaction is one of “many actions” the company has taken “to strategically focus Allstate Financial and deploy capital to earn attractive risk-adjusted returns,” he said. It will also reduce exposure to spread-based business and interest rates, which he described as a “key priority” for the company.
The company intends to focus on life insurance sold through Allstate agencies and on the worksite benefits market, Don Civgin, president and chief executive officer of Allstate Financial, said in the statement.
Not incidentally, Allstate also has a big book of property-casualty business to manage. It is the largest publicly traded auto and home insurer in the U.S., according to the company.
The transaction will reduce required capital in Allstate Financial by about $1 billion, Allstate said. The business being sold had $341 million of premiums and contract charges in 2012, representing 15 percent of Allstate Financial's total that year. Normal after-tax returns have averaged approximately 1 percent of transaction reserves, according to the company statement.
Resolution Life is separate from Resolution Limited, a company also founded by The Resolution Group but which is publicly traded on the London Stock Exchange.
The Resolution Group is led by Clive Cowdery, the former chairman of Resolution plc and founder of Resolution Life Group Limited.
The deal is expected to close by year end, Allstate said.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at email@example.com.
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