Swiss Life's deal to offload its UK employee benefits business to Unum Provident has been abandoned following the decision by the Office of Fair Trading to refer the deal to the Competition Commission.
Swiss Life says it is not going ahead with the deal, which was announced last August. However, it says it is still looking at ways it can work with Unum, taking into the account the OFT's concern. These discussions include Unum becoming a new UK partner in the Swiss Life Network for international pooling. Swiss Life may also put the business into run-off.
The OFT was concerned that the a merger could substantially reduce competition in the group income protection, group life and group critical-illness insurance markets and that there could be barriers to expansion for smaller firms.
The Competition Commission report on the deal was expected to be completed by April 16.
Existing customers due for policy rate reviews are to have their cover temporarily extended on their existing terms, with Swiss Life promising that they will be given sufficient notice once the final position is decided.
Unum Provident declines to comment on its future plans.
Swiss Life UK Richard Davies says: “It was disappointing that the deal was referred to the Competition Commission as it has created more uncertainty for our customers and staff. The reason for this decision is an attempt to reduce the amount of uncertainty by making it a matter of weeks rather than months before an answer is given.”
PIFC Consulting head of technical services Mike Dowding says: “If the answer is that there is a rundown and not a continuation of a competitive position then it is as bad news as if the merger had taken place as it reduces the capacity and therefore the competition in the market.”