About a year ago in a Blog entitled, Another Life Insurance Carrier is Sold…Why This Sale May Be Bad News For You and Your Clients, I wrote about the sale of Lincoln Benefit by Allstate Corporation to Resolution Life Holdings, a company I reported “whose mastermind is Clive Chowdry, a well know British entrepreneur”.
Two updates on the matter. First, Mr. Chowdry has moved on, at least from the board. In an article in a UK paper (Mail Online) it was disclosed that Mr. Chowdry, a Resolution founder, and John Tiner, another board member “would not stand as non-executive board directors at the annual general meeting”. This may be good news as the company is described as leaving its restructuring phase and is “transforming from a company which specialized in snapping up ‘zombie’ pensions and investments which have closed to new business into a more typical life insurance firm which sells pensions and insurance to new customers”.
In the earlier Blog, I mentioned possible issues with the sale, chief among them the fact that Resolution was a “run off” company, a firm that bought insurance and pension companies “to close off a block of business and turn it into an “investment” that can be bought and sold”. This article, seems to speculate that, at least in the UK and Europe, that model may be changing a bit.
But in another bit of news, A.M. Best last week (July 9, 2014) downgraded the financial strength rating of Lincoln Benefit from A+ (Superior) which is 2nd of 16 ratings to A- (Excellent) which is 4th highest of 16 ratings. And according to A.M. Best, at least in the States, the Resolution run off model will continue, citing in its press release…“The rating downgrades of LBL are reflective of a run-off company that is expected to maintain a strong capitalization profile….The company will manage the business based on a run-off business model utilizing a variable cost structure, which relies on outside third party administrators”. A.M. Best further stated, “Positive rating actions are unlikely in the near term, as LBL has not yet fully transitioned into the new business model. Negative rating actions could occur if there are negative changes in LBL's capitalization and/or operating performance”.
As I mentioned before, the three possible issues I saw were diminished carrier financial strength, lagging customer service and increased policy costs. I think the A.M. Best report has shown that the financial strength has not diminished markedly, we will have to see about service levels and pricing.
When the sale occurred there were some in the industry that advocated replacing all Lincoln Benefit products. I was not one of them. At any time, if you think there is a more suitable product for your client, you should act. But I would weigh the costs of replacement before moving forward. However, I would suggest tracking the internal costs of any non-guaranteed Lincoln Benefit insurance policies in your portfolio.