BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Tuesday, 25 July, 2000, 14:38 GMT 15:38 UK
Axa promises 525m windfall
Sun Life Centre in Bristol, part of Axa Group
Axa's Sun Life Centre in Bristol is gearing up for a big pay-out
Equity & Law life insurance policy holders can hope for a windfall of about 400 each after the Financial Services Authority (FSA) gave permission to release so-called "orphan" assets of 1.7bn.

If the plan goes ahead, UK life insurance companies could release up to 20bn to share and policy holders.

We are staggered that the FSA has allowed Axa to give so much of this money to shareholders ... we cannot imagine what circumstances persuaded the FSA to take millions away from policy holders

Sheila McKechnie, Consumers' Association
But the Consumers' Association complains that policy holders are getting a raw deal.

Equity & Law is part of Sun Life & Provincial, which in turn is owned by French insurance giant Axa, the world's largest.

Its orphan or "inherited" assets are reserves held in with-profits life funds. They hold money from unclaimed life policies and surplus profits from life and pensions policies that have lapsed.

Axa had asked the FSA to clarify whether the assets were owned by its shareholders or by current holders of insurance policies.

The FSA accepted Axa's proposal to divide the assets and pay 525m to policy holders.

But according to the Consumers' Associaton, this is splitting up the available funds as 45% going to shareholders and 55% to policy holders.

The organisation says that this is contrary to Treasury statements demanding that up to 90% of such funds should go to policy holders, and no more than 10% to share holders .
Axa UK chief executive Mark Wood
Axa's Mark Wood says the money will be split between share holders and policy holdes

The association's director, Sheila McKechnie, said: "We are staggered that the FSA has allowed Axa to give so much of this money to shareholders. We cannot imagine what circumstances persuaded the FSA to take millions away from policy holders."

Renouncing all claims

In return for the one-time pay-off, Equity & Law with-profits policy holders will have to renounce all claims to the orphan assets. The deal still needs the approval of policy holders and the High Court.

Of the money released, 300m will be spent for the pay-off, while another 250m will flow into reorganisation bonuses for policy holders.

The first payments could be made by the end of February 2001.

The rest will go to Axa and its shareholders. Notionally this amounts to about 1.4bn, of which between 400m to 500m could go to the company.

Axa's UK chief executive Mark Wood said the money would be used to generate new business "within the with-profits fund".

Search BBC News Online

Advanced search options
Launch console
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories