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The estate of things to come

Another active year of merger and acquisition activity is expected in the life market.

Prudential’s review of its UK business has got several of the more acquisitive groups circling the firm.

Some analysts suggest that the review may see Pru sell off part or all of its UK business with Resolution consistently named as a front-runner in any potential deal.

Speculation is also likely to continue around Scottish Widows and Aviva, with Axa also being touted as on the acquisition trail.

Pearl and Swiss Re have also come out aggressively saying they are in the market for buying up closed books of funds and with Paternoster and others already in this space it could be a profitable year for corporate lawyers.

The A-Day effect is expected to continue, with a similar amount of churn going into next year but the frenzy of switching is expected to slow down towards the end of 2007 as the effect finally wears off.

With equities continuing to deliver, there is more confidence in the market and people are putting more money into pensions and consolidating them into one pot which is a trend that will continue.

It remains to be seen if some players have made the right provision for pension lapses and this is something that life offices will be continually reviewing next year.

Aviva’s timetable for paying out on its with-profits inherited estate means the policyholder advocate consultation period is due to end in February 2007.

In the spring, policyholder advocate Clare Spottiswoode will begin negotiations with Aviva to get a fair deal for policyholders and eligible policyholders will be told of any offer in the autumn.

This will put pressure on Pru to start the ball rolling on its inherited estate and rumours that Pru is looking to recruit a policyholder advocate would suggest that this could be on its agenda for next year.

The bulk annuities market is predicted to be a major growth area, with recent entrants such as Aegon, Goldman Sachs and Synesis Life set to increase competition.

This reflects the view that there are more efficient ways of managing pension scheme risks and the anticipation that there will be significant demand for these new solutions, according to Prudential UK policy development director Tom Boardman.

In terms of product development, it looks as if wraps, Sipps and retirement planning products such as flexsible annuities are the main areas where we can expect innovation from life offices in 2007.

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