French insurance group AXA is expected to unveil a deal with UK regulators today over ownership of about £2 billion sterling (€3.25 billion) of so-called orphan assets.
The outcome could be a test case for the UK life insurance industry and may lead to the release of almost £20 billion sterling (£25.6 million) in surplus assets as windfalls to shareholders and policyholders.
A decision to unlock those funds is unlikely to yield immediate windfalls for most Irish with-profits policyholders, however. Most of the with-profits funds operated by UK companies in the Irish market are managed separately and will not be affected by the UK ruling.
Mr Tony O'Riordan, of CGNU, the company which includes Norwich Union, Hibernian and CGU, said some 7,000 policyholders who hold with-profits policies from CGU Life, which is part of the UK fund, may stand to benefit immediately from any disruption of orphan assets, but other policyholders would not.
"It will depend on the extent to which CGU would redistribute funds," he added. None of Norwich Union's 60,000 Irish with-profits policyholders will be entitled to a payment even if surplus assets, estimated at £5 billion sterling, are handed back to policyholders in the UK, he said.
AXA, which owns UK insurer Sun Life & Provincial, has been in lengthy negotiations with the industry regulator, the Financial Services Authority, over ownership of the assets held by its subsidiary, Equity & Law.
The deal is believed to be based on a 60/40 per cent split of the cash between policyholders and shareholders. AXA has declined to comment.
Orphan or inherited assets are reserves held in with-profits life funds made up partly of unclaimed life policies and surplus profits relating to life and pensions policies that have lapsed.
Industry analysts said a decision in favour of distributing these surpluses would be positive for the UK life insurance sector, freeing up funds that have been effectively dormant.
"If it's a 60/40 per cent split, that will be good news for the sector," said Mr Eamonn Flanagan at Charterhouse Securities.
Life insurance company share prices moved up last week on speculation that a deal was imminent.
In the past, the UK authorities had only allowed distribution of orphan assets on a limited basis and under a 90/10 per cent split, with 90 per cent going to policyholders.
CGNU, the UK's biggest insurance group, is estimated to have about £5 billion sterling in orphan assets, Prudential, the second biggest, between £7 billion and £9 billion, and Britannic about £2 billion, according to analysts.
