Resolution plc / Abbey National Life business

OFT closed case: Anticipated acquisition by Resolution plc of the Abbey National Life business.

Affected market: Life insurance

No. ME/2496/06

The OFT’s decision on reference under section 33(1) given on 24 July 2006. Full text of decision published on 3 August 2006.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.


Resolution plc (Resolution) purchases and operates life insurance funds that have ceased writing life business to new customers (closed life funds). Resolution also operates an asset management business, which in addition to managing the assets of Resolution's closed life funds, provides asset management services to third party institutional customers and a range of retail asset management products.

Abbey National Life (Abbey Life) comprises the life insurance businesses of Abbey National plc (Abbey National). These businesses include both open and closed life funds, which offer a wide range of long-term products – investment and protection policies, pensions and annuities. Abbey Life's UK turnover for the financial year ended 31 December 2005 was [over £70 million].

Resolution has entered into a sale and purchase agreement with Abbey National, dated 7 July 2006, to acquire Abbey Life.


As a result of this transaction Resolution and Abbey Life will cease to be distinct. The UK turnover of Abbey Life exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.



A life fund is an investment fund that individuals can participate in through the purchase of a policy. The funds may be invested in a number of ways, including, equities, property, fixed interest securities and cash deposits.

When a customer opens a policy in a life fund, they purchase units in the fund. Policy holders in a life fund have the choice of a number of different policy contracts, which can broadly be categorised as protection policies, investment policies and annuities. However, most life insurance products satisfy similar consumer needs and are considered as substitutes; (see [Note 1])  hence we have not considered further segmentation for the purposes of assessing this transaction.

An open life fund is one which continues to write new business and accept new customers. The fund can grow through new customers buying policies, or existing customers topping-up their policies.

A closed life fund is one that no longer accepts new business. It will continue to be managed for the existing policyholders and they can continue to top-up their policies (which means the fund can continue to grow in value).

In addition to managing the assets of Resolution's closed life funds, Resolution also provides asset management services to third party institutional customers and a range of retail asset management products.

Product scope

Asset management

Asset management is the management or administration of life funds or other insurance funds owned by separate companies. Whilst Resolution is active in the provision of asset management services, Abbey Life is not. Therefore, the OFT does not consider that there is an overlap in the provision of asset management services. Given the parties do not compete in this segment and in the absence of any third party concerns this segment is not considered further.

Life funds

The parties overlap in the operation of closed life funds. However, given the nature of closed life funds, policyholders cannot switch between the two. Therefore, closed life funds do not compete with each other. In Britannic Group plc/Resolution Life Group Limited the OFT considered whether there was competition in relation to the acquisition of closed life funds. (see [Note 2]) However, in this case, while Resolution is a ‘consolidator’ in the acquisition of closed life funds Abbey Life is not an active consolidator and therefore this issue is not considered further.

The relationship between closed and open life funds was considered by the OFT in two recent decisions: Britannic Assurance plc/Allianz Cornhill Insurance plc (see [Note 3])  and Britannic Group plc/Resolution Life Group Limited. The OFT considered two possible approaches to the relevant product scope in this sector.

On the one hand, it might be relevant to treat open and closed life funds as forming part of the same product scope, on the basis that the availability of competitively priced policies offered by open life funds may constrain the conduct of operators of closed life funds. Alternatively, if switching or termination costs for policy holders in closed life funds are high, each closed life fund could be in a separate frame of reference.

Third party views on the level of competition between closed and open funds were mixed, with many considering that the level of switching depended on the type of policy. Most third parties commented there was an element of competition as closed fund providers wished to retain policyholders.

This possibility of switching between closed and open life funds may suggest that each closed fund could be considered in the same frame of reference as all open life funds. However, given that no competition concerns arise on any definition, it is not necessary to reach a firm conclusion on the product scope in this case.

Geographic scope

Insurers from abroad would need to gain regulatory clearance from the Financial Services Authority to operate in the UK. Previous cases involving the insurance sector considered the UK as the relevant geographic frame of reference, and the OFT has found no evidence in this case to suggest that a sufficient number of individuals look beyond the UK for life assurance suppliers. Therefore the relevant geographic scope is considered to be the UK.


The OFT found no evidence to suggest that closed life funds compete with each other. Therefore, the combination of the parties’ closed life funds raises no competition concerns.

However, if we were to consider that each closed life fund competes with all open life funds, then the parties' combined share of supply of long term insurance will be less than seven per cent whichever frame of reference is considered appropriate. Consequently, the OFT does not believe that any competition concerns arise.


There is no evidence that this transaction raises any vertical issues.


None of the third parties contacted raised concerns about this transaction.


The parties to this transaction overlap in the operation of closed life funds. However, given the nature of such funds and the fact that no new business is accepted into them, the parties are not considered to be actual or material potential competitors in this regard. Even if the relevant frame of reference is widened to include open life funds, the merged entity’s share of supply is so small as to raise no competition concerns.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.


This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.


  1. See, for example, anticipated acquisition by Old Mutual plc of Försäkringsaktiebolaget Skandia (30 November 2005).
  2. Anticipated acquisition by Britannic Group plc of Resolution Life Group ME/1815/05 10 August 2005.
  3. Completed acquisition by Britannic Group Plc of Allianz Cornhill Insurance Plc's life Operations ME/1583/05 6 May 2005.

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