Insurance business transfer from Alico UK to MetLife

Transcription

1 Insurance business transfer from Alico UK to MetLife A guide for policyholders Contents 1. Your questions answered 2 2. Summary statement of the transfer A Summary of the Independent Expert s Report Legal Notice 32

2 1. Your questions answered 1.0 What is happening and why? 1.1 Why have you written to me? American Life Insurance Company (Alico) intends to transfer part of its insurance business to various other companies within the MetLife group including MetLife Limited, MetLife Assurance Limited and MetLife Europe Limited (individually, a MetLife Receiving Entity and together, the MetLife Receiving Entities ). As our records show that you have an interest in a policy/insurance cover with Alico which is affected by the proposed transfer, we are required by law to tell you about our proposals. This booklet provides further information about the proposed transfer and how to raise any queries or concerns you may have. 1.2 What is Alico proposing to do? Alico proposes to transfer certain policies within its UK business to the MetLife Receiving Entities. This includes the policy/insurance cover you have an interest in. The proposed transfer is part of a European-wide project to reorganise the Alico business, following the purchase of Alico by MetLife in November Alico also proposes separately to transfer its remaining UK business to ReAssure Limited ( ReAssure ). That transfer will only go ahead if the High Court approves it and a report on that transfer is also being prepared by the Independent Expert, John McKenzie of Milliman Limited. Mr McKenzie has considered the ReAssure transfer and concluded that it will not have a material effect on any category of policyholder. Further information is available on the Alico website at Alternatively, please contact us using the contact details in question 5.1 if you have any questions or wish to receive copies of this information by post. 1.3 If the proposals go ahead which MetLife Receiving Entity will my policy transfer to? Please refer to the letter accompanying this booklet which explains which MetLife Receiving Entity we are proposing to transfer your policy to. 1.4 When will these changes take place? Alico s and MetLife s proposals will only be carried out if the High Court of England and Wales approves them. A High Court hearing is scheduled to take place on 24 July If approved by the Court, the transfer to the MetLife Receiving Entities is expected to take place on 1 September A separate hearing will be held for the Alico business which is transferring to ReAssure. 2

3 This is expected to take place on 19 July We have written to you separately if you have a policy (or policies) that are being transferred to ReAssure. 2.0 Information about the MetLife group 2.1 What does the MetLife group do? The first MetLife company was established in the United States in Since then, the MetLife group has grown to be a global provider of insurance, retirement and savings products. MetLife Limited is a company registered in Scotland which offers life products in the UK. MetLife Assurance Limited is a company registered in England which provides annuity and pension risk management solutions for pension schemes. MetLife Europe Limited is registered in Ireland and has a UK branch which offers a range of retirement and investment products. It is an insurance firm authorised and regulated by the Central Bank of Ireland. 2.2 What are some of the key statistics about the MetLife group? MetLife has over 140 years experience providing an extensive suite of insurance, annuity and pension-related products and services. It is the largest life insurer based on life insurance in force and one of the largest insurance and financial services companies in the US. It is the market leader in the bulk annuity business in the US, providing benefit payments to over half a million annuitants every month. It has total assets of over $785 billion and total liabilities of over $724 billion (as at 30 September 2011). It manages group annuity assets of more than $68 billion (of which over $35 billion relates to transferred pension liabilities)(as at 31 December 2010). 2.3 Is the business of the MetLife group different to the business within Alico? No. MetLife already offers similar products to those which are being transferred from Alico. 3

4 3.0 How will the transfer affect me? 3.1 Will my insurance cover or my investment change after the transfer? The proposed transfer will not affect your insurance cover or the terms of your investment. Your policy number, terms and conditions, cover and premium will all remain the same. The only change to your policy or investment will be the replacement of your current insurer/provider, Alico, with the relevant MetLife Receiving Entity as identified in the letter accompanying this booklet. You will also not need any new policy and investment documents. Any standing order or direct debit will automatically be paid to the relevant MetLife Receiving Entity after the transfer takes place. You do not need to complete a new direct debit or standing order instruction. Your rights under the direct debit guarantee are also unaffected. Please see the Summary of the Scheme in part 2 of this booklet for further information. 3.2 How can I be sure that this transfer will not be detrimental to me? Alico and MetLife are only permitted to carry out the transfer if the High Court approves it. Before deciding whether to approve the transfer, the High Court will consider a report on the proposed transfer prepared by an Independent Expert, John McKenzie of Milliman Limited, whose appointment has been approved by the Financial Services Authority (FSA). A summary of the Independent Expert s report is included in this booklet and a copy of the full Independent Expert s report is available on the Alico website at or on request see question 4.4 below. The Independent Expert has considered our proposals and concluded that he believes that (i) the proposed transfer will not have a material effect on the security of the benefits of any category of policyholder and (ii) the benefit expectations of all categories of policyholder will not be adversely affected by the transfer. The FSA will also prepare a report on the proposed transfer and it also has a right to object to them in the High Court. See section 4 for more information about the Independent Expert. 3.3 I am invested in the Protected Recovery Fund (PRF). Will the transfer affect the PRF guarantee? No. The proposed transfer will not affect the PRF guarantee in any way. As previously advised, the PRF will close on 1 July 2012, when at least 1 for every PRF unit held will automatically be transferred into the Standard Fund. This is two months before the proposed date of the transfer. 3.4 I have received two (or more) different letters from you. How do I know which one applies to me? In parallel with the transfer to the MetLife Receiving Entities, Alico is also intending to transfer the rest of its UK business to ReAssure. Alico s UK branch will close following both transfers. You may have received more than one letter if: 4

5 you have an interest in more than one policy transferring from Alico to the MetLife Receiving Entities; you have an interest in one or more policies transferring from Alico to the MetLife Receiving Entities and one or more policies transferring to ReAssure; or you have an interest in one or more policies transferring from Alico to the MetLife Receiving Entities and you have a current policy with MetLife Europe Limited or MetLife Limited. Your letters explain which insurer will be responsible for each of your policies after the proposed transfers have taken place. Please note that the transfer of certain Alico UK business to ReAssure will only go ahead if the High Court approves it and a report on that transfer is also being prepared by Independent Expert, John McKenzie of Milliman Limited. Mr McKenzie has considered the ReAssure transfer and concluded that it will not have a material or adverse effect on any category of policyholder. Further information is available on the Alico website at Alternatively, please contact us using the contact details in question 5.1 if you have any questions or wish to receive copies of this information by post. 3.5 Will I receive any payment as a result of the transfer? No. No payment is usually made on a transfer of this kind and none is proposed in this case. 3.6 Will the proposals change the tax status of my policy? No. The tax status of Alico policies will not change because of these proposals. This means that there will be no direct changes to any tax which may be payable on the proceeds of your policy. 3.7 What should I do if I am bankrupt or about to be declared bankrupt? If you are bankrupt or about to become bankrupt, please show this booklet to your Trustee in Bankruptcy (the person appointed by the court to administer your affairs), receivers or administrative receivers. 3.8 What should I do if I am the trustee of the policy? As a trustee of the policy, we would encourage you to tell other trustees about the proposed transfer, as well as any beneficiaries unless it is inappropriate to do so. You can download additional copies of these and other documents from or if you prefer you can contact us to ask for additional paper copies. We will reimburse your reasonably incurred expenses in notifying other trustees or beneficiaries. If you 5

6 would like our help in notifying these people, please let us know by contacting the Alico Transfer Team using the contact details noted in question What should I do if I am a beneficiary to a policy? We would urge you to read this booklet. If you are happy with our proposals, you do not need to take any action. However, if you have any questions about the proposed transfer, question 5.1 provides details of where you can obtain more information Has my spouse/child/beneficiary received a letter? If your spouse has an interest in and/or is entitled to receive benefits under the policy, he or she should have received a letter. Certain beneficiaries such as children will not receive a letter from us. If you are aware of anyone who has an interest in and/or is entitled to benefits under your policy, then please pass this booklet onto that person I do not have a policy with Alico why have I been sent a letter? Some of Alico s policies were originally sold through other parties. You may not have been aware that Alico was providing this insurance cover as the policy was sold through another firm. The letter accompanying this booklet provides further details about your policy. However, if you have any questions please contact Alico Transfer Team using the contact details provided in question What should I do if the policy has been assigned? Where a policy has been assigned (i.e. transferred to another person) and we have details of the assignee on our systems, the assignee will have received a copy of this information booklet. If you have assigned the policy to someone else and not informed us or provided us with the assignee s contact details, please pass this booklet to that person Who will pay for the cost of the transfer? MetLife and Alico will pay the costs associated with the proposed transfer. No costs will be passed on to policyholders Is there an opportunity to vote on the proposed transfer? No. As Alico is not a mutual company, there will not be a vote on these proposals. However, you do have a right to object to the proposed transfer if you feel you would be adversely affected by it and for your objection to be heard by the Court. See question 5.3 on what to do if you object to the Scheme. 6

7 4.0 The Independent Expert 4.1 Who is the Independent Expert? The Independent Expert is Mr John Lyle McKenzie of Milliman Limited. Milliman is one of the world s largest actuarial and consulting firms, employing over 2,000 professionals. Mr McKenzie is a principal and consulting actuary at Milliman, with extensive experience in the issues concerned with the transfer of insurance businesses. 4.2 What is the role of the Independent Expert? He has been appointed to report his opinion on the likely effect of the proposals on policyholders. His appointment has been approved by the FSA. His report is impartial and prepared for submission to the High Court. His report is based on a thorough scrutiny of the proposals and the businesses of the MetLife Receiving Entities and Alico. Both companies have provided Mr McKenzie with access to key staff and any information he has requested, both private and public. 4.3 How do I know he is independent? Mr McKenzie s overriding duty of responsibility is to the High Court, and not to the companies involved in the proposed transfer. His report is required to be impartial. 4.4 Where can I see a copy of the Independent Expert s report? We have included a summary of his report as part of this booklet but you can obtain a copy of the full Independent Expert s report by visiting the Alico UK website ( or the MetLife UK website ( If you would like a paper copy posted to you, please contact the Alico Transfer Team using the details in question 5.1. Any supplemental Independent Expert s report that may be prepared prior to the High Court hearing will also be posted on these websites and will be available on request from the same address and telephone number. 5.0 Next Steps 5.1 What do I need to do now? Further details about our proposals are enclosed in this booklet and the covering letter. We recommend that you read them and unless you have any queries, you do not need to take any further action. If you have any questions, further information is available via the Alico website ( and the MetLife UK website ( or from the Alico Transfer Team who can be contacted by calling (or if you are calling from overseas) or writing to PO Box 2037, Croydon, CR90 9JR. 7

8 5.2 What can I do if I have concerns about your proposals? We encourage you to consider the enclosed summaries of the proposed Scheme and the Independent Expert s report. The full Independent Expert s report is available on the Alico UK website ( and the MetLife UK website ( or by contacting the Alico Transfer Team using the details in question 5.1. If, having read this information, you still have concerns about our proposals, please contact us using the details in question 5.1 above. If, following our response to your concerns, you wish to object to the proposed transfer please refer to question 5.3 which explains how you can raise objections. 5.3 What should I do if I have an objection to the proposed transfer? We hope this booklet and covering letter provide you with the information to allow you to understand what is proposed, and answer any questions that you may have. However, if you have concerns or require further information on the proposal, please contact us to discuss them. If you still wish to object to the proposals you may do so by writing directly to us at the address shown on your covering letter or by calling (or if you are calling from overseas). By informing us, we will be able to let you know about any changes that may be made in relation to the High Court hearing, for example a change of date. We may also be able to deal directly with any concerns you have. We will keep a careful record of any objections received and will provide these as evidence at the Court hearing. As detailed in question 5.6, you also have the right to attend the High Court hearing and to make your objection known to the High Court. 5.4 Can I choose not to have my policy transferred? You are not able to choose whether your policy is transferred. If the High Court approves the Scheme, your policy will transfer. However, if you have any objections to the proposals you are entitled to raise them as set out in question Where and when will the High Court hearing take place? The High Court hearing is scheduled to take place on 24 July 2012 at the Rolls Buildings, Royal Courts of Justice, 7 Rolls Buildings, Fetter Lane, London, EC4A 1NL. We will update the Alico and MetLife websites nearer the time with further details about the time and location of the hearing. 5.6 Who can attend the hearing? The High Court hearing will be attended by representatives of Alico and the MetLife Receiving Entities, and the Independent Expert. 8

9 The High Court hearing is also open for members of the public to attend. If you have an objection to the transfer because you believe you will be adversely affected as a result, you can attend (in person or by a legal representative with advocacy rights) and make your objection at the High Court hearing. If you do intend to appear or to be represented at the High Court hearing, you should notify the Alico Transfer Team of your intention and the reasons. You should contact them by writing to PO Box 2037, Croydon, CR90 9JR as soon as possible, and ideally before 20 July If you would rather make your objection in writing, as explained at question 5.3 above, this will also be included in the information supplied to the High Court. 5.7 What will happen at the High Court hearing? The Judge will consider whether all of the legal procedures for completing the transfer have been followed correctly. The Judge will also review the evidence presented by Alico and the MetLife Receiving Entities, and consider the reports of the Independent Expert and the FSA. Time will be allocated to hear any objections put forward (whether in writing or in person) by affected policyholders or any other person who alleges that they would be adversely affected by the proposals. The Judge must decide whether or not it is appropriate to approve the transfer, taking all of the evidence into account. If the Judge does approve the transfer, then a High Court Order is made which allows the transfer to come into effect at a time specified in the Order. 5.8 How will I know if the Scheme has been approved? We will announce the outcome of the High Court application via the Alico and MetLife UK websites following the High Court hearing, which is due to take place on 24 July If the transfer is approved, it is expected to take place on 1 September After the transfer has been approved, the relevant MetLife Receiving Entity will write to you to confirm the change to your insurer. 9

10 2. Summary statement of the transfer of certain product lines of American Life Insurance Company (Alico) UK branch to certain other companies within the MetLife group Part A - Overview 1.0 Background This Statement sets out information on the proposed transfers of the Transferring Businesses of Alico to MetLife Assurance Limited (MAL), MetLife Limited (ML) and the UK branch of MetLife Europe Limited (MEL) (together the Transferees). The transfers will be achieved through a scheme (the Scheme) which will be submitted to the Court for its approval under Part VII of the Financial Services and Markets Act The Court will consider a report on the Scheme s terms by the Independent Expert, Mr John McKenzie of Milliman Limited (whose appointment was approved by the Financial Services Authority, the statutory regulator of financial services in the UK). A summary of the Independent Expert s report is set out in part 3 of this booklet. The glossary in Part C of this Statement gives an explanation of the words and phrases put in italics that are used throughout this document. 2.0 Brief details of the Scheme The key terms of the Scheme are as follows: Alico will transfer the Transferring Businesses, including (so far as it is possible) the related Transferring Assets and Transferring Liabilities, to the Relevant Transferees upon the proposals taking effect. The Transferring Policies of Alico, upon the proposal taking effect, will become policies of the Relevant Transferees. This means that any policyholders or claimants in respect of the Transferring Policies will be policyholders or claimants of the Relevant Transferees following the transfer. It is currently expected that the Scheme will be implemented on 1 September 2012 (the Effective Date), in the case of the businesses transferring to MAL and ML, at 00:01 and, in the case of the business transferring to MEL, at 00:02 (in each case, the Relevant Effective Time). The Scheme will lapse if it has not been implemented on or before 31 December 2012, or such later date as the Court may allow upon the application of Alico and the Transferees. A summary of the terms of the Scheme is detailed below. 10

11 Part B - Scheme Summary 1.0 Transfers of the Transferring Business 1.1 At the Relevant Effective Time, Alico will transfer: the BPA Transferring Business to MAL; the Wealth Management Transferring Business to ML; and the Remaining Insurance Transferring Business to MEL. 1.2 The process for dealing with any Transferring Policies which cannot be transferred or which it is not appropriate to transfer at the Relevant Effective Time (Residual Policies) is set out in section 2 below. Any Transferring Assets or Transferring Liabilities which cannot be transferred or which it is not appropriate to transfer at the Relevant Effective Time (respectively, Residual Assets and Residual Liabilities) will be transferred (if appropriate) once the relevant restriction to the transfer has been removed. Alico will hold any Residual Assets on trust for the Relevant Transferee with effect from the Relevant Effective Time. 2.0 Residual Policies 2.1 It is possible that some of the policies that would otherwise be included as Transferring Policies will not transfer at the Relevant Effective Time, for example: due to legal steps that are required to be taken in other jurisdictions; if the Court determines not to transfer such policies at the Relevant Effective Time; or if Alico and the Transferees agree before the Relevant Effective Time that such policies should not transfer at that time. 2.2 If any Residual Policy is subsequently transferred to the Relevant Transferee, the assets and liabilities relating to such policy will, to the extent not previously transferred, be transferred to the Relevant Transferee on the date such policy is subsequently transferred and such policy will be dealt with as if it were a Transferring Policy. 2.3 Until such time as any Residual Policy is subsequently transferred to the Relevant Transferee, that Residual Policy will remain a liability of Alico but will be reinsured in its entirety by the Relevant Transferee. 3.0 Excluded Policies, Excluded Assets, Excluded Contracts and Excluded Liabilities Any policies of Alico at the Relevant Effective Time that are not Transferring Policies or Residual Policies (Excluded Policies) will not transfer and are excluded from the Scheme. Certain of the Excluded Policies may also be reinsured in their entirety by the Relevant Transferee. The Excluded Assets, the Excluded Contracts and the Excluded Liabilities will not be transferring and are also excluded from the Scheme. 11

12 4.0 Linked Funds 4.1 ML will establish new Linked Funds (New ML Linked Funds) which will correspond to the Linked Funds maintained by Alico prior to the Relevant Effective Time in respect of the Wealth Management Transferring Policies. ML must comply with the relevant regulatory requirements when establishing these new Linked Funds, in particular the requirement to ensure that customers are treated fairly. 4.2 Wealth Management Transferring Policies whose benefits are linked to one or more Linked Funds of Alico will be allocated the same number (and value) of units in the New ML Linked Funds as they held in the Linked Funds of Alico. 4.3 After the Relevant Effective Time, unless prevented by the terms of the relevant Wealth Management Transferring Policies and/or ML is prohibited by the relevant regulatory requirements from doing so (in particular the requirement to ensure that customers are treated fairly), ML will be entitled to (i) modify the investment objectives of any of the New ML Linked Funds to permit investment in assets which are sufficiently similar to those already held in the New ML Linked Funds, and (ii) combine or amalgamate any New ML Linked Fund with any other Linked Fund of ML, or to close, sub-divide or otherwise alter any Linked Fund of ML. 5.0 General Provisions The Scheme also includes other provisions which, in the case of sections 5.1 to 5.4 below, will have effect on and from the Relevant Effective Time: 5.1 Rights and obligations under Transferring Policies The Relevant Transferee will have all the rights, benefits, powers and obligations of Alico under or by virtue of the Transferring Policies and holders of the Transferring Policies will have rights against the Relevant Transferee instead of against Alico. 5.2 Payments and mandates Direct debits, standing orders or other instructions or authorities payable to or from Alico will be payable to or from the Relevant Transferee. 5.3 Continuity References in Transferring Policies or other contracts to Alico will be read as references to the Relevant Transferee. 5.4 Legal proceedings and complaints Any proceedings (whether current or future) by or against Alico in relation to the Transferring Businesses, the Transferring Policies, the Transferring Assets or the Transferring Liabilities will be continued or commenced by or against the Relevant Transferee. On and with effect from the Relevant Effective Time or, in the case of 12

13 any Residual Policy, the date it is subsequently transferred, any proceedings by or against Alico in connection with the Transferring Businesses will be continued or commenced against the Relevant Transferee. Any proceedings after the Relevant Effective Time or, in the case of any Residual Policy, the date it is subsequently transferred, commenced in error against Alico will be deemed to have been commenced and will be continued against the Relevant Transferee. 5.5 Costs and expenses No policyholder will bear any costs or expenses incurred in connection with the transfer of the Transferring Businesses pursuant to the Scheme. 5.6 Modifications, amendments or additions The terms of the Scheme may be modified or amended with the consent of Alico and the Relevant Transferee and any necessary approval or requirement of the Court. At any time after the sanction of the Scheme by the Court, any subsequent amendments would be subject to the Financial Services Authority being notified. 5.7 Governing law The Scheme is governed by English law. 6.0 ReAssure Scheme 6.1 On 29 July 2012, part of Alico s business will be transferred to ReAssure Limited (the ReAssure Scheme). 6.2 The ReAssure Scheme includes the transfer of the Excluded Policies and certain of the Excluded Assets and Excluded Liabilities. 6.3 The ReAssure Scheme is a separate transfer and will not affect any policies being transferred to the Transferees under this Scheme. We bring this transfer to your attention as it is possible you have seen reference to the ReAssure Scheme in the press and via the Alico website. 7.0 Further Information This Statement sets out a summary of the terms of the Scheme only. For further information on how the Scheme will impact you please contact the Alico Transfer Team on (or if you are calling from overseas) or by writing to us at PO Box 2037, Croydon, CR90 9JR or refer to the Alico and MetLife UK websites at, respectively, and 13

14 Part C - Glossary Alico This is American Life Insurance Company, a company incorporated in Delaware, United States of America (registered as an overseas company in the United Kingdom with number FC002696), acting through its United Kingdom branch with establishment number BR and registered address at Alico House, Addiscombe Road, Croydon, CR9 5AZ. BPA Transferring Business This is the business of Alico comprised in or attributable to the bulk purchase annuities product and business lines, as listed in the Scheme. BPA Transferring Policies These are the policies of Alico related to the BPA Transferring Business. Court This is the High Court of Justice in England and Wales. Effective Date This is the date on which the Scheme will become effective if it is sanctioned by the Court, currently expected to be 1 September Excluded Assets These are all the assets of Alico which are not Transferring Assets or Residual Assets, and which are not transferring under the Scheme. Excluded Contracts These are any contracts of Alico that are not Transferring Contracts. Excluded Liabilities These are all liabilities of Alico which are not Transferring Liabilities or Residual Liabilities, and which are not transferring under the Scheme. Excluded Policies These are any policies of Alico at the Relevant Effective Time that are: (i) ReAssure Scheme Policies; and (ii) policies that cannot be transferred under the Scheme by operation of law. 14

15 Independent Expert This is Mr John McKenzie, the Independent Expert approved by the Financial Services Authority to provide a report on the terms of this Scheme to the Court. Linked Funds These are internal linked funds maintained by either Alico or ML, for the purposes of calculating directly or indirectly benefits payable under linked polices. MAL This is MetLife Assurance Limited, a company incorporated in England under company number and whose registered office is at 2nd Floor, 15 Bedford Street, London, Greater London, WC2E 9HE. MEL This is the UK branch of MetLife Europe Limited (a company incorporated in Ireland under company number whose registered office is at 20 On Hatch, Lower Hatch Street, Dublin 2, Ireland), with establishment number BR and registered address One Canada Square, Canary Wharf, London, E14 5AA. ML This is MetLife Limited, a company incorporated in Scotland under company number SC whose registered office is at Princes Exchange, 1 Earl Grey Street, Edinburgh, EH3 9AQ. New ML Linked Funds These are the new Linked Funds that ML will establish. They will correspond to the Linked Funds maintained by Alico immediately prior to the Relevant Effective Time. ReAssure Scheme This is the separate insurance business transfer scheme pursuant to Part VII of FSMA under which Alico will transfer part of its business to ReAssure Limited and which will become effective and operative on 29 July ReAssure Scheme Policies These are the policies which are transferred under the ReAssure Scheme, including any residual policies which cannot be transferred at the effective date of the ReAssure Scheme and which will transfer to ReAssure Limited at a date following such effective date in accordance with the ReAssure Scheme. 15

16 ReAssure Scheme Transferring Business This is the business which is transferred under the ReAssure Scheme. Relevant Effective Time This is the time on the Effective Date at which the Scheme will be implemented, which in the case of the BPA Transferring Business and the Wealth Management Transferring Business transferring, respectively, to MAL and ML, will be at 00:01 and, in the case of the Remaining Insurance Transferring Business transferring to MEL, at 00:02. Relevant Transferees These are: a. in the case of the BPA Transferring Business, MAL; b. in the case of the Wealth Management Transferring Business, ML; and c. in the case of the Remaining Insurance Transferring Business, MEL, (each a Relevant Transferee ) Remaining Insurance Transferring Business This is the whole of the business of Alico, but excluding the BPA Transferring Business, the Wealth Management Transferring Business, the ReAssure Scheme Transferring Business, the Excluded Assets, the Excluded Liabilities and the Excluded Contracts. Remaining Insurance Transferring Policies These are the policies of Alico related to the Remaining Insurance Transferring Business. Residual Assets These are Transferring Assets which cannot be transferred to the Relevant Transferees at the Relevant Effective Time. Residual Liabilities These are Transferring Liabilities which cannot be transferred to the Relevant Transferees at the Relevant Effective Time. Residual Policies These are Transferring Policies which cannot be transferred to the Relevant Transferees at the Relevant Effective Time. 16

17 Scheme This is the legal method by which the transfer of the Transferring Businesses will be achieved. Transferees These are MAL, MEL and ML (each a Transferee ). Transferring Assets These are certain assets of Alico related to the BPA Transferring Business, the Wealth Management Transferring Business and the Remaining Insurance Transferring Business, which are to transfer to the Relevant Transferees under the Scheme. Transferring Businesses These are the BPA Transferring Business, the Wealth Management Transferring Business and the Remaining Insurance Transferring Business. Transferring Contracts These are the contracts listed in a schedule to the Scheme, as amended, supplemented, varied or substituted from time to time. Transferring Liabilities These are the liabilities of Alico as at the Relevant Effective Time under the Transferring Policies, the Transferring Assets and the Transferring Contracts, and certain other liabilities to tax, which are transferring to the Relevant Transferees under the Scheme, other than any Excluded Liabilities or Residual Liabilities. Transferring Policies These are the BPA Transferring Policies, the Wealth Management Transferring Policies and the Remaining Insurance Transferring Policies. Wealth Management Transferring Business This is the business of Alico comprised in or attributable to the wealth management product and business lines, as listed in the Scheme. Wealth Management Transferring Policies These are the policies of Alico related to the Wealth Management Transferring Business. 17

18 3. A Summary of the Independent Expert s Report The following is a Summary of the Scheme Report prepared by the Independent Expert, John McKenzie, FFA, and dated 19 April Terms used in this Summary and not specifically defined are set out in the Glossary in the Communications Pack accompanying this Summary. Introduction 1. I have been instructed by the UK branch of American Life Insurance Company ( Alico UK ), MetLife Europe Limited ( MEL ), MetLife Assurance Limited ( MAL ) and MetLife Limited ( ML ) to report in the capacity of Independent Expert on the terms of the scheme (the Scheme ) for the proposed transfer of parts of the insurance business of Alico s UK Branch to each of MEL, MAL and ML. MetLife, Inc., ( MetLife ), a major insurance group domiciled in the US, is the ultimate parent company of each of the parties to the Scheme. 2. My appointment as the Independent Expert has been approved by the Financial Services Authority ( FSA ) which has also approved the form of my report (the Scheme Report ). The Scheme Report will be presented to the High Court of Justice in England and Wales. 3. My Scheme Report has been prepared in compliance with the relevant rules and guidance. It contains a description of the past operations of Alico UK, MEL, MAL, ML, an outline of the terms and conditions of the Scheme and an assessment of the likely impact of the Scheme on the policyholders of Alico UK, MEL, MAL and ML. 4. My assessment has considered the terms of the Scheme but has focused on: The security of policyholder benefits; and The fair treatment of policyholders, including their reasonable benefit expectations. 5. My terms of reference are set out in the Scheme Report and my assessment has been undertaken in the context of those terms. The Scheme Report, and this Summary of it, should be read in the context of the Scheme and not used for any other purpose. The Scheme Report and its summary will be translated into other languages as part of the communications to be made available to policyholders. For the avoidance of doubt, the English language version of the Scheme Report will take precedence in matters of interpretation. 6. I have relied on information provided to me by Alico UK, MEL, MAL and ML. This Summary is subject to the same reliances and limitations as set out in the Scheme Report. Nothing in this Summary should be taken as investment advice or an endorsement of the products of Alico UK, MEL, MAL or ML. 18

19 Summary of Conclusions 7. In my opinion, in respect of the Remaining Insurance Transferring Business transferring from Alico UK to MEL: the security of the benefits of Transferring Policies, Residual Policies and existing MEL policies will not be materially affected by the implementation of the Scheme; and, the benefit expectations under Transferring Policies, Residual Policies and existing MEL policies will not be adversely affected as a result of implementing the Scheme. 8. In my opinion, in respect of the BPA Transferring Business transferring from Alico UK to MAL: the security of the benefits of Transferring Policies, Residual Policies and existing MAL policies will not be materially affected by the implementation of the Scheme; and, the benefit expectations under Transferring Policies, Residual Policies and existing MAL policies will not be adversely affected as a result of implementing the Scheme. 9. In my opinion, in respect of the Wealth Management Transferring Business transferring from Alico UK to ML: the security of the benefits of Transferring Policies, Residual Policies and existing ML policies will not be materially affected by the implementation of the Scheme; and, the benefit expectations under Transferring Policies, Residual Policies and existing ML policies will not be adversely affected as a result of implementing the Scheme. 10. In my opinion, in respect of the Remaining Insurance Transferring Business, BPA Transferring Business and Wealth Management Transferring Business: I do not anticipate that there will be any deterioration of the servicing arrangements as a result of the implementation of the Scheme; and, the companies have had due regard to the need to treat all policyholders fairly in developing the Scheme. 11. In my opinion, implementation of the Scheme will have no effect on the security of benefits for, or benefit expectations of, Alico policyholders whose policies are not part of Alico UK. Motivation for the Scheme 12. The Scheme meets a number of aims including being part of an overall review of MetLife s operations in Europe to reduce the complexity of the group structure and improve capital efficiency. The Scheme will also facilitate establishing MEL into an Irish hub for MetLife s European businesses. Furthermore, as Alico UK is effectively closed to new business the Scheme offers a more cost effective way to service the remaining business for the benefit of policyholders and shareholders. The Scheme will allow MetLife to meet the terms agreed with the US Internal Revenue Service which requires Alico to change substantially the structure of its overseas operations by the end of 2013 to avoid the potential imposition of a withholding tax on payments made to its policyholders. 19

20 13. The business of Alico UK that is not being transferred under the Scheme is the subject of a concurrent scheme to transfer that business to ReAssure Limited. The Scheme will not proceed in its current form if the other scheme is not implemented. Consequently, the business included in the other scheme is not described or considered in the Scheme Report or this summary of it. Background MetLife 14. MetLife is the holding company for a diverse financial services and insurance group and is the ultimate parent of the companies involved in this transfer. MetLife acquired Alico in Alico UK 15. Alico UK is authorised by the FSA to undertake long term insurance business and primarily operates in the UK. Alico UK is also authorised to undertake general insurance business. 16. Alico UK is a branch of Alico but, for all intents and purposes Alico UK operates as if it was a standalone UK insurance company and so must meet the FSA requirements on conduct of business and prudential reserving requirements. Structure and Operation 17. Alico UK maintains a separate long term business fund ( Alico UK LTF ), which represents the assets and liabilities of its long term insurance contracts and another fund that consists of the general insurance business and shareholder assets and liabilities called the Other than Long Term Business Fund ( Alico UK OLTBF ). 18. Profits arising in Alico UK LTF are attributable entirely to the shareholder, and subject to adequate capital cover being maintained in the fund may be available to be repatriated to Alico. 19. Alico UK has a number of different arrangements with both internal and external parties to carry out the administration for its different lines of business. As Alico UK effectively operates as a standalone company, it has its own governance and risk management framework specifically geared towards meeting its day-to-day operational aspects as well as its strategic objectives. Products 20. Alico UK s business includes a range of life and pension business and on both individual and group terms, Alico UK classifies its different lines of business as follows: a. Fixed term annuities ( Living Time ); b. Personal insurance for members and ex-members of HM Regular Armed Forces ( PAX ); 20

21 c. Group protection business ( Employee Benefits and General Business ); d. Non linked and linked savings business ( Wealth Management Business); and, e. Bulk purchase annuity business ( BPA Business ). 21. Alico UK has progressively ceased to sell new business since its acquisition by MetLife, and certain product lines have now been re-branded as MetLife products and sold by other MetLife entities. Enhanced Fund and Protected Recovery Fund 22. In 2008, market turmoil led to an unprecedented volume of withdrawals from Alico UK s Enhanced Fund. Alico UK closed the Enhanced Fund as a result but redirected 50% of policyholders funds into the Standard Fund and the other 50% into a newly created fund called the Protected Recovery Fund ( PRF ). The PRF provides a guarantee that the value on 1 July 2012 will be no less than the value of the holding in the Enhanced Fund prior to closure. Financial Condition 23. I have considered Alico UK s statutory financial position, based on internal financial statements, as at 31 May 2011 adjusted for the impact of the prior transaction with ReAssure. Alico UK would have comfortably covered its regulatory capital requirements by 532% as at 31 May The cover level was also above Alico UK s capital management policy, which targets 165% of its regulatory capital requirements. The estimated solvency cover of 532% is well above Alico UK s target. However, as this represented a materially higher level of capital than required US$239 million was repatriated to Alico in the US, in December I also considered the detail of Alico UK s internal risk-based assessment to establish the main contributory factors to its risk capital requirement required under FSA rules. Alico UK faces a wide range of different risks due to the diverse lines of business that it has written. Alico UK faces risks from the risk of default from its fixed interest assets and from the nature of the assets held. Alico UK faces a variety of insurance risks in line with the different underlying contracts that it has sold. Outline of the Scheme 25. The Scheme has been summarised in the Communications Pack and is not repeated in this Summary of the Scheme Report. I confirm that the summary of the Scheme is consistent with my understanding of the Scheme. Assessment of the Scheme - MEL, MAL and ML 26. As described in the outline of the Scheme, there are effectively three separate transfers of business from Alico UK to each of MEL, MAL and ML, which are also conditional on the successful implementation of the ReAssure Part VII Scheme. Consequently, my approach to the assessment has assumed that the ReAssure Part VII Scheme has taken place and the impact on each of MEL, MAL and ML considered separately. 21

22 Solvency II 27. A new European-wide regulatory system, Solvency II, is expected to come into effect in The final requirements of Solvency II have not been fully determined and it is therefore not possible to establish precisely what the financial impact on each of the companies will be either individually or in the context of the Scheme. I have considered the Scheme in the context of the current outline specification of Solvency II. MEL 28. MEL is authorised by the Central Bank of Ireland ( CBI ) to undertake long term insurance business and must also conform to the FSA s conduct of business rules in respect of its UK business. Furthermore, MEL sells directly from Ireland into Poland, Greece and Spain. 29. It is intended that MEL becomes the hub for MetLife s European business, selling a wide range of products across Europe. To achieve this there are further consolidations planned for after implementation of this Scheme, which will involve bringing other European branches and companies of Alico into MEL. The integration of these European branches is not considered in detail in my Scheme Report, but, in the context of the regulatory controls that will apply and the capital management policies that MEL applies, the financial condition of MEL is not expected to be materially affected by these further integration plans. Structure and Operation 30. MEL maintains a separate long term business fund ( LAF ), which represents the assets and liabilities of its long term insurance contracts and another fund that consists of the shareholder assets and liabilities called the Other (non-life Assurance) Fund ( OF ). 31. Profits arising in the LAF accrue wholly to the shareholder and may be retained in the LAF or transferred to the OF where they may be available to be paid as a dividend to MEL s shareholder, subject to legal or regulatory constraints that may apply. Products 32. MEL transacts both linked and non-linked business. The linked business represents the majority of MEL s in force business and includes the so called Variable Annuities which provide policyholders with exposure to good investment performance whilst having a degree of protection in the form of minimum guarantees. 33. MEL continues to develop its product range selling variations to the current variable annuity product range and diversifying into other lines of business such as fixed term annuities, individual protection and group employee benefits. 22

23 Management of Variable Annuities 34. The guaranteed nature of the variable annuity and similar products requires sophisticated techniques to manage the capital required and associated business risks. MEL reinsures this business to Exeter, another MetLife company, which has the experience and expertise required to manage the guarantees. Exeter deposits assets with MEL to reduce the risk to MEL if Exeter does not honour its commitments. 35. MEL plans to recapture the reinsurance arrangements and carry out the necessary processes to manage the business in-house in the near future when new regulatory requirements apply across Europe. Financial Condition 36. MEL has in place an established capital planning process to identify its future capital needs and size of the capital facility required from its parent, which is underpinned by a minimum capitalisation agreement between MEL and its parent. This facility and parental agreement allow MEL to operate to its target (165% of statutory capital requirement) and meet its minimum level of capital in line with its authorisation from the CBI (150% of the statutory capital requirement). 37. I have considered the regulatory financial position of MEL as at 30 June 2011, based on internal financial statements. My review took into account changes made by the CBI that applied to the capital requirements of companies writing variable annuity business. The cover provided for the statutory capital requirement was 249%. I have concluded that MEL was well capitalised. 38. The majority of MEL s risks arise from the nature of the guarantees on its variable annuity business, which is in turn reinsured to Exeter. The exposure to Exeter is however managed through regular monitoring of the exposure and collateral arrangements under which assets are held in trust for MEL. These assets include a letter of credit issued a major US bank which is callable by MEL on demand, although MEL is unlikely to make such a demand unless a predefined event (as agreed between MEL and Exeter) has occurred. The new lines of business that are being offered by MEL introduce new risks, but MEL s risk profile is expected to be driven by the variable annuity business for the foreseeable future. Assessment of the Scheme - MEL 39. Under the terms of the Scheme the Living Time business, personal insurance for members and ex-members of HM Regular Armed Forces, Group Employee and General Business will be transferred from Alico UK to MEL. In the Scheme, these comprise the Remaining Insurance Transferring Business. Security of Benefits 40. I have considered the security of benefits under MEL s policies and the Remaining Insurance Transferring Policies assuming that the transfer had been implemented at 30 June On 23

24 implementation of the Scheme, MEL would have covered its increased capital requirements by 201%. However, the cover provided for the capital requirement does not provide the full picture and I considered three other issues. 41. First, the Remaining Insurance Transferring Business has been subject to the much better level of capitalisation in Alico UK. However, I concluded that Alico UK would not have remained capitalised at the level that has applied in recent times and the company s management has confirmed that capital would be expected to be repatriated to its parent. 42. Secondly, I have considered the comparability of solvency coverage levels under the different regulatory regimes that Alico UK operates under and that MEL operates under. There are differences in the requirements under the UK and Irish regulatory regimes for both the statutory capital requirements and the internal risk-based assessment (which in the Republic of Ireland currently only applies to the variable annuity business written by companies). However, MEL has agreed with the CBI that, upon implementation of the Scheme, its authorisation will be amended to require MEL to carry out a risk-based assessment based on the Solvency II proposals for all its business wherever located, and not just for the variable annuities. As at present, MEL will be required to hold 150% of statutory capital requirement derived. I am satisfied that the approach MEL intends to follow in managing the existing and Transferring Business will mean that where differences do appear in the regulatory regime, these will not lead to a materially different level of protection and that an appropriate level of security will be provided to both MEL s existing business and the Remaining Insurance Transferring Business. 43. Thirdly, there are certain differences in the capital management policy of Alico UK and MEL such that MEL targets a lower internal risk-based capital target. I concluded whilst there is a potential reduction in cover, the difference is not material and that MEL s target capital level provides policyholders with a satisfactory level of protection. MEL s capital management policy is subject to final review by its Board and I intend to review the position in a supplementary report that I shall submit to the Court 44. I also considered whether the Scheme would expose the policyholders of each company to new or altered risk profiles after the Effective Date. The Remaining Insurance Transferring Business will be exposed to new risks from the variable annuity business. However, currently these risks are managed through a reinsurance arrangement with Exeter and when the reinsurance recapture completes MEL will manage the risks directly. Upon the recapture of this reinsurance, MEL will receive a significant capital injection to ensure that it continues to meet its target capital levels. A project is underway to manage the recapture and this includes ensuring that an appropriate capital facility is in place together with the necessary operational enhancements before the recapture happens. The recapture is intended to coincide with the implementation of Solvency II, (but may occur earlier if MEL gains approval for its internal model for its risk-based capital assessment under the new rules). These matters will need to be agreed and approved by the CBI. 45. It is possible that some policies will remain with Alico UK if their transfer cannot be achieved by the Scheme although this is not expected to be the case other than possibly for a very short period of time. These policies, Residual Policies, will be reinsured to MEL to secure fully the benefits under them and this arrangement will apply until such time as they can be transferred. 24