Anticipated acquisition by Royal London Mutual Insurance Society Limited of certain businesses and assets of Resolution plc

Affected market: Life insurance products and services

No. ME/3429/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 28 December 2007. Full text of decision published 18 January 2008.

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.

PARTIES

Royal London Mutual Insurance Society Limited (Royal London) is a mutual life insurance company, providing life protection, pensions and investment products in the UK.

Resolution plc (Resolution) is a specialist manager of life funds which operates closed and open funds, seeks to acquire closed funds and operates an asset management business. Resolution's UK turnover in 2006 was [greater than £70 million].

TRANSACTION

Royal London will be purchasing certain Resolution assets and businesses relating to Resolution's new business capability (including that of the off-shore life protection business) and in-force funds. This transaction will be carried out after Pearl Group Ltd (Pearl) has completed the acquisition of the whole of Resolution, [see note 1] partly using finance provided by Royal London (which will then be used as a part payment for the on-sale). In the interim period until the on-sale, Resolution and Royal London will have joint control over those assets to be sold. Although Pearl and Royal London envisage that the joint control will be limited in scope and time (up to three months), the OFT has taken a cautious approach and completed its assessment on the basis that Royal London will be acquiring control over the whole of Resolution.

Royal London notified the OFT on 23 November 2007. The extended statutory deadline is 9 January 2008.

JURISDICTION

As a result of this transaction Royal London and Resolution will cease to be distinct. The UK turnover of Resolution 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.

THIRD PARTY VIEWS

The OFT received very few third party comments, receiving responses from just two competitors and one customer. None raised any merger-specific competition concerns.

ASSESSMENT

Royal London and Resolution overlap in the provision of asset management and life insurance products and services in the UK.

For the purposes of this assessment, the OFT has considered the impact of the anticipated transaction on the life insurance market in the UK, as well as the market for the consolidation of closed funds in the UK, the provision of off-shore life insurance in the UK and asset management in the UK. Although Royal London will only be purchasing a part of the business and assets of Resolution, the OFT has considered the impact as if Royal London purchased the whole of Resolution in case of any material influence that may occur during the period of limited joint control between the time of the initial acquisition of the whole of Resolution by Pearl and the final on-sale.

On this basis, this merger raises no competition concerns given that shares of supply in any of the segments looked at under this competitive assessment are below [10 – 15] percent with increments below [0 – 5] percent, and that the market is fragmented with a number of larger competitors.

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.

DECISION

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

NOTE

1. The OFT has assessed this merger under a separate decision. See OFT decision of 28 December 2007 on the anticipated acquisition by Pearl Group Ltd of Resolution plc.

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