Kevin Carr, chief executive of the Protection Review, says forecasts of just five major players in the UK life space may prove accurate after all...

With the dust still settling on Prudential's AIA venture, news breaks that Clive Cowdery's Resolution is in talks with AXA about buying most its UK life business, including its UK IFA protection arm, for £2.8bn.

Should this deal go through, which, speaking to a few insiders, already seems more than likely, it is thought AXA's book will be merged with Friends Provident, the life office Resolution bought last year for £2bn.

The initial market reaction seems positive. The protection industry needs focused life offices delivering quality, competitive products backed by strength and service. Both companies are strong in the protection market, without yet seriously challenging those at the very top.

Traditionally, Friends Provident has been a strong player in the income protection market and has driven some of the industry's leading technology developments, while AXA is typically thought to be stronger in the life and critical illness space.

In a statement, Resolution said the transaction would create one of the UK's largest providers of protection: "Resolution intends to consolidate the AXA businesses with its Friends Provident operations, consistent with its view that value for shareholders can be created from consolidation in the UK life and pensions market, particularly in the areas of risk and group pensions."

The group were thought to be looking at a number of transactions and Prudential's UK business was seen as a likely target. One can only wonder to what extent the recent Prudential situation impacted on this deal. Was AXA always ‘plan B', or was it in the pipeline anyway?

From AXA's perspective, the deal appears to make sense as it could remove the legacy book while raising funds at the same time.

AXA said: "This potential transaction does not call into question, in any way, the AXA Group's continuing long-term commitment to the UK market going forward. The group remains fully committed to AXA's UK direct protection and wealth management operations."

In recent decades, many financial journals have predicted the UK life industry will end up with just five major players, however, to date, this has been proved false due to a fairly regular number of new market entrants, including the likes of Fortis, Bright Grey, PruProtect, Royal Liver and AXA themselves.

With Royal Liver and Liverpool Victoria thought to be in talks with the Royal London Group, who already have Scottish Provident and Bright Grey in the stable, maybe, just maybe, they were right after all.

© Article reproduced by kind permission of IFAonline