Clerical Medical is set to become a serious player in group and stakeholder pensions following Halifax's deal with Equitable Life, which is worth up to £1bn.
Halifax says Clerical will remain an IFA-only office but it will take over the running of Equitable funds, almost doubling its £34bn in funds under management.
Clerical will also use Equitable's admin system, which is regarded as state of the art for the low-margin stakeholder environment and hopes to take a lot of group AVC business.
The Equitable salesforce will be rebranded Halifax Equitable and will sell “a carbon copy” of the Equitable range except for with-profits and Equitable's planned stakeholder pension.
It will sell a white-labelled version of Clerical's individual stakeholder instead and will also sell Halifax products. It will develop its own products in the future. Equitable will still remain a mutual life insurance society.
The deal, which analysts say is very good value, comes in three parts. Halifax will pay £500m up front for the admin system, salesforce and unit-linked and non-profit business.
It will pay Equitable a further £250m if policyholders reach an agreement on guarantees. Another £250m will be available if the Halifax Equitable salesforce reaches targets in 2003 and 2004.
GE Capital is still thought to be offering a higher bid but Equitable chief executive Chris Headdon says most of the headline figure of GE's £1.2bn offer comprises a loan to Equitable, making the Halifax deal more attractive.
Clerical chief executive Robert Walther will oversee the integration of Equitable into the Halifax group, with Clerical's sales and marketing director John Edwards promoted to managing director.
Ned Cazalet of Cazalet Financial Consulting says: “This is a very cunning deal. The unit-linked and non-profit business accounts for £300m of the £500m which would have gone to back in to the business anyway. The rest is for fund management which Halifax will also profit from.
“Clerical now has a strong position in group pensions and stakeholder. Equitable's systems were designed to work on low margins. It will get any potential group schemes switching from Equitable.”
Clerical Medical spokesman Tony Bloomer says: “This secures our position to compete in the long term and write business profitably. IFAs can feel safe about recommending Clerical because we are now a very big player. We now have a very attractive group AVC proposition.”