POLICYHOLDER CIRCULAR

Transcription

1 POLICYHOLDER CIRCULAR PROPOSED TRANSFER of the long-term insurance business of Protection Life Company Limited to Countrywide Assured plc 1

2 CONTENTS Part 1 Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 Part 8 Introduction Your Questions Answered Summary of the Independent Expert's Report The Legal Process and the Scheme Notice of Application to the Court Definitions Expected Key Dates Questions and Further Information Please Note: Defined terms have capital letters and are listed in Part 6. This document contains important information and you are advised to read it carefully. It tells you about our proposed Scheme to transfer the long-term insurance business of Protection Life Company Limited to Countrywide Assured plc. It also explains what the Transfer means for you, what will happen to your policy if the Transfer is completed and how you can object to the Transfer if you feel that you may be adversely affected. If you have any questions about the Transfer please contact us using the details given in Part 8 of this document. We will be happy to answer your general enquiries, although please note that we are unable to provide any financial advice. Other persons may be policyholders in respect of your policy or have an interest in your policy (for example joint policyholders, your lenders (as assignees), trustees, or trustees in bankruptcy). If that is the case, please draw their attention to this Policyholder Circular. Further copies can be obtained through the contact details set out in Part 8. 2

3 PART 1 - INTRODUCTION This Part gives you certain key information about the Transfer. You should read it alongside the rest of this document, which provides more details of the Transfer. Protection Life, formerly known as Direct Line Life Insurance Company Limited, was sold by Direct Line Insurance Group Plc to Chesnara plc in November Chesnara is now proposing to merge the Protection Life business with the business of its existing UK life assurance company, Countrywide Assured plc, by a process known as an Insurance Business Transfer Scheme to be carried out under Part VII of the UK Financial Services and Markets Act Separate transfer schemes will also be carried out in Guernsey and Jersey on substantially the same terms as the UK Scheme. The Guernsey Scheme and the Jersey Scheme will run in parallel to the UK Scheme to give effect to the transfer of policies issued by Protection Life to residents of Guernsey and Jersey. Each scheme can only be implemented if it is approved by the relevant court in the UK, Guernsey or Jersey. Chesnara believes that the Transfer will enable it to manage its UK insurance businesses more efficiently. If the Transfer of the Protection Life business to Countrywide Assured is approved, Chesnara is planning to de-authorise and wind up Protection Life. Any subsequent de-authorisation of Protection Life will not have an impact on you. After reading through the information in this Policyholder Circular, if you are happy with the Transfer, you need do nothing. However, if you have any questions or if you are in any way concerned about the Scheme you can contact us either by telephone or in writing. See Part 8 for more details. If you believe that you will be adversely affected by the carrying out of the Scheme, you have the right to be heard at the relevant court hearing. If you do not wish to attend court you can still send your written comments about the Transfer to us or telephone us and we will raise them with the court. Again, see Part 8 for more details. Information on the legal process and a summary of the Scheme are set out in Part 4 of this Policyholder Circular and a Notice relating to the UK Scheme is set out in Part 5. Within this document you will find: Answers to questions which you may have (Part 2); A summary of the Independent Expert's Report on the Transfer (Part 3); A summary of the legal process and the Scheme (Part 4); A copy of a legal Notice relating to the UK Scheme (Part 5); Definitions of some of the words and phrases used (Part 6); Expected key dates for the Transfer (Part 7); and Details of what to do if you have any questions or require further information (Part 8). The Court hearing to consider the UK Scheme is currently expected to take place on 4 December 2014 at the High Court of Justice, Companies Court, 7 Rolls Buildings, Fetter Lane, London, EC4A 1NL. The court hearing to consider the Guernsey Scheme is currently expected to take place on 12 December 2014 at the Royal Court of Guernsey, the Royal Court House, St Peter Port, Guernsey GY1 2PB. The court hearing to consider the Jersey Scheme is currently expected to take place on 10 December 2014 at the Royal Court of Jersey, Royal Court House, Royal Square, St Helier, Jersey JE1 1BA. 3

4 Subject to court approval, the Scheme is expected to become effective on 31 December The Scheme has been reviewed by an Independent Expert, John McKenzie (a Fellow of the Institute and Faculty of Actuaries) whose appointment was approved by the Prudential Regulation Authority ( PRA ) after consultation with the Financial Conduct Authority ( FCA ), to report to the Court and assist it in coming to its decision. Part 3 of this document contains a summary of the Independent Expert s report. In addition, the documents submitted to the Court will be reviewed by the FCA and the PRA, the UK regulatory authorities for insurance companies which regulate Protection Life and Countrywide Assured, as well as the Guernsey Financial Services Commission and the Jersey Financial Services Commission. Each regulator will have the right to be heard at the relevant court hearing. 4

5 PART 2 YOUR QUESTIONS ANSWERED This Part sets out some answers to questions which you may have regarding the Proposals. 1. Who are Countrywide Assured, Protection Life and Chesnara plc? Countrywide Assured plc was established in 1988 and has been substantially closed to new business since It manages a portfolio of approximately 269,000 policies and has funds under management of around 1.7bn. Countrywide Assured is a subsidiary of Chesnara. Protection Life was formerly known as Direct Line Life Insurance Company Limited, it was established in 1987 and is a provider of mortgage life cover, fixed term life cover (both with and without critical illness cover) and over 50s life cover with approximately 146,000 policies in force as at 31 December Protection Life became substantially closed to new business in July 2011 and has been focused since then on managing the existing portfolio. Protection Life distributed policies under its own name and also in recent years, but before the closure to new business, for other financial companies, including Tesco Personal Finance. Protection Life also underwrote the life cover element of creditor insurance policies which are administered by U K Insurance Limited, a member of the Direct Line Insurance Group plc group of companies, who were also responsible for underwriting the general insurance element of the product. Chesnara plc is listed on the London Stock Exchange and was formed in Chesnara s strategy is to acquire and manage life assurance companies in the UK and Western Europe. On 28 November 2013, Chesnara completed the acquisition of Protection Life Company Limited from Direct Line Insurance Group Plc. Further information about Chesnara, Countrywide Assured and Protection Life can be found at and Countrywide Assured is the vehicle used to consolidate Chesnara s UK acquisitions. Chesnara has previously purchased the City of Westminster Assurance Company Limited, Save and Prosper Insurance Limited and Save and Prosper Pensions Limited. All of these were UK closed life assurers. In 2009, it also purchased Movestic Livförsäkring AB, an open Swedish life assurance company. 2. What is an Insurance Business Transfer Scheme? An Insurance Business Transfer Scheme is a legal process before the Court under the Act through which insurance companies, such as Protection Life, can transfer all or part of their insurance business into another insurance company. Countrywide Assured adopted this process in 2011 to transfer all the insurance business of Save & Prosper Insurance Limited and Save & Prosper Pensions Limited into Countrywide Assured. Equivalent procedures exist in Guernsey and Jersey to permit the transfer of insurance business in these jurisdictions. 5

6 3. Why are you making the Scheme proposal? Chesnara believes that, if implemented, the Scheme will enable it to manage its insurance businesses more efficiently. In particular, the Scheme is expected to provide the following benefits: an improvement in administrative efficiency, particularly in relation to financial reporting functions, and a reduction in costs for the merged business; greater financial flexibility for the merged business, enhancing the financial security of policyholders; more efficient use of capital within the Chesnara group of companies; and possibly, some financial management benefits from continuing operations. 4. When will the Transfer take place? If approved by the relevant courts, the Transfer will take place when the Scheme becomes effective, which we currently expect will be on 31st December What effect will the Scheme have on me? If implemented, the Scheme will have the effect that a Protection Life policyholder will become a policyholder of Countrywide Assured. 6. Will my policy terms and conditions change? There will be no changes to the policy terms and conditions for Countrywide Assured policyholders. For Protection Life policyholders, apart from the change in the identity of your insurer, your policy terms and conditions will remain unchanged as a result of the Scheme. Countrywide Assured will be obliged, after the Transfer, to comply with those terms and conditions and to treat its customers (including Protection Life policyholders) fairly in exactly the same way as Protection Life was obliged to do prior to the Transfer. 7. Do I need to do anything? We encourage you to read this Policyholder Circular in full. If you have any questions or if you are in any way concerned about the proposal you can contact us. See Part 8 for more details. If you believe you may be adversely affected by the Transfer, you have the right to be heard at the relevant court hearing. Please see Part 8 for more details. 8. How are my interests being protected? If the Transfer takes place, Countrywide Assured will continue to be required by law to honour all of the contractual and other obligations to its policyholders (including, after the Scheme takes effect, all former Protection Life policyholders). In addition, an Independent Expert, whose appointment was approved by the PRA after consultation with the FCA, has been appointed to provide a report to the relevant 6

7 courts on the likely effects of the Scheme on the policyholders of Countrywide Assured and Protection Life. He has considered the fairness of the proposals between the various groups of policyholders, the security of benefits in each company both before and after the implementation of the Scheme, policyholders reasonable expectations, and whether the proposed Transfer treats policyholders fairly. A summary of his report is set out in Part 3 of this document. The full report is available as described in Part 8. The Court will only approve the Scheme if it considers it is appropriate taking account of the effect on policyholders. The documents submitted to the Court will also be reviewed by the FCA and PRA, the industry regulators, and they will submit their own reports on the Scheme to the Court. The documents submitted to the Royal Courts in Jersey and Guernsey will also be reviewed by the respective Financial Services Commissions in Jersey and Guernsey. In addition, as set out in the answer to Question 7 above, if you believe you may be adversely affected by the Transfer you have the right to be heard at the relevant court hearing in London, Jersey or Guernsey. Please refer to Part 8 of this Policyholder Circular for more information. 9. What changes will I notice? For Protection Life policyholders there will be no changes to your policy terms and conditions. If you make payments by direct debit or standing order, you will not need to complete a new instruction. The main changes will relate to the change in identity of your insurer. So, when we write to you after the Scheme is implemented, it will be from Countrywide Assured, rather than Protection Life. Payments to and from Protection Life will become payable to and from Countrywide Assured. If you are a policyholder of a Tesco insurance policy underwritten by Protection Life, you will see no changes to either your policy terms and conditions or the administration of your policy. If you are a Countrywide Assured policyholder you will see no changes to either your policy terms and conditions or the administration of your policy. 10. Will my policy benefits still be secure? After the Scheme takes effect Countrywide Assured will assume responsibility for the payment of benefits on a Protection Life policy. In the Independent Expert s Report, the Independent Expert confirms that, in his opinion, the implementation of the Scheme will not materially affect the security of the benefits or adversely affect the reasonable benefit expectation of the holders of the transferred policies or Countrywide Assured policies. 11. Will the Scheme have any tax implications for me? No. The Transfer will only take place on a basis that there will be no adverse tax implications for policyholders. 12. Will the quality of service I receive be affected? No. There will be no changes as a result of the Scheme to the identity of the service providers who are currently employed to provide services to Protection Life or to Countrywide Assured and its funds. 7

8 13. What will happen to my personal details? Your rights and obligations in relation to data held by Protection Life will be unchanged and will transfer to Countrywide Assured. Countrywide Assured will have the same obligations of confidentiality as Protection Life had prior to the Scheme becoming effective. 14. Will policyholders get the chance to vote on approving the Scheme? No. Policyholders are not entitled to vote on the terms of the Scheme under a Part VII transfer. If you think that the Scheme would adversely affect you, you have the right to be heard by the court in the relevant jurisdiction as outlined in Part Are policyholders bearing the costs of the Scheme? No. Policyholders will not pay for any of the costs of the Scheme. These will be borne by shareholders of Countrywide Assured. 16. Will I receive any windfall payments as a result of the Scheme? No. There will be no distribution of profit or other direct financial benefit as a result of the proposed Scheme. 17. What is the legal procedure? Please refer to paragraph (A) of Part 4 of this Policyholder Circular. 18. Who is the Independent Expert and what is his view? The Independent Expert has been appointed with the agreement of our regulators the PRA and the FCA to provide a report to Court assessing the impact of the Scheme on all policyholders. The Independent Expert has concluded that the implementation of the Scheme on the Transfer Date will not: materially affect the security of the benefits under the Protection Life transferred policies or Countrywide Assured s policies; or, adversely affect the reasonable benefit expectations of holders of the Protection Life transferred policies or of Countrywide Assured s policyholders. and that Countrywide Assured and Protection Life have given due regard to the need to treat all policyholders fairly in developing the Scheme. Please refer to Part 3 of this Policyholder Circular for further details of the Independent Expert s view. 19. How do I raise my concerns or objections with the Court? Please refer to Part 5 and Part 8 of this Policyholder Circular. 20. How will I find out if the Scheme has been approved? An announcement will be published and available from the following websites and following the Court hearing. Or you can contact us by telephone or in writing to find out. Please see Part 8 for our contact details. 8

9 21. What would happen if the UK Court decides not to approve the Scheme? Nothing would change; The Transfer would not proceed, the Scheme would not be effective and the business of each of Countrywide Assured and Protection Life would remain separate. 22. What would happen if the UK Court approves the Scheme but the Royal Courts of Jersey or Guernsey do not? If the Royal Court of Jersey does not approve the Jersey Scheme, or the Royal Court of Guernsey does not approve the Guernsey Scheme, then the policies subject to the Jersey Scheme or the Guernsey Scheme (as applicable) will not transfer from Protection Life to Countrywide Assured, but will become Excluded Policies as detailed in paragraph 2.6 of the Scheme. These policies will be reinsured to Countrywide Assured on a basis that replicates the economic effect of a transfer to Countrywide Assured. 23. How can I find out more? Please refer to Part 8 of this Policyholder Circular. 9

10 PART 3 - SUMMARY OF THE INDEPENDENT EXPERT S REPORT This Part contains a summary of a report prepared by an Independent Expert, Mr John McKenzie, a Fellow of the Institute and Faculty of Actuaries, and dated 16 September A copy of the Independent Expert s full report can be obtained by contacting us as described in Part I have been instructed by Countrywide Assured plc ( CA ) and Protection Life Company Limited ( PL ), to report in the capacity of Independent Expert on the terms of the scheme ( the Scheme ) for the proposed transfer ( the Transfer ) of PL s long-term insurance business to CA This is a summary of my report, as Independent Expert, on the Scheme ( the Scheme Report ). The terms used in this summary of the Scheme Report follow the terms used in the Scheme unless otherwise defined My appointment as the Independent Expert has been approved by the Prudential Regulation Authority ( PRA ). In approving my appointment the PRA has consulted with the Financial Conduct Authority ( FCA ). The PRA, having consulted with the FCA, has approved the form of my report. The Scheme Report will be presented to the High Court in England and Wales. To complete the transfer of business from PL to CA, separate schemes of transfer are required for sanction by the Royal Court of Guernsey and the Royal Court of Jersey covering Guernsey and Jersey policies respectively. The Guernsey and Jersey Schemes are identical in all material respects to the Scheme to be presented to the High Court in England and Wales. The Scheme Report does not, and does not need to, distinguish between UK, Guernsey or Jersey policyholders, as my considerations, assessment and conclusions apply equally to all of these groups of policyholders The Scheme Report has been prepared in line with the relevant rules and guidelines covering the transfer of long-term insurance business. The Scheme Report contains a description of the past operations of CA and PL. It also contains an outline of the terms and conditions of the Scheme and an assessment of the likely impact of the Scheme on CA and PL and in particular the impact it will have on existing CA policyholders and on PL policyholders. Under the terms of the Scheme the PL policyholders will be referred to as the holders of Transferred Policies and, to the extent there are any, holders of Excluded Policies My assessment has considered the terms of the Scheme and subsequent transfer of the long-term business of PL to CA but has focussed on policyholder interests under the headings of: The security of the policyholder benefits; and, Reasonable benefit expectations 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. In matters of interpretation, the Scheme Report takes precedence over this summary I have relied on information provided to me by the CA and PL. 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 CA or PL. Summary of Conclusions 3.8. In my opinion, implementation of the Scheme on the Transfer Date: will not materially affect the security of the benefits under the Transferred Policies, the Excluded Policies or CA s policies; and, 10

11 will not adversely affect the reasonable benefit expectations of holders of Transferred Policies or holders of Excluded Policies or of CA s policyholders In my opinion, the companies have given due regard to the need to treat all policyholders fairly in developing the Scheme. Motivation for the Scheme The business model of Chesnara plc ( Chesnara ), the parent of CA and PL, is focused around the management of closed UK long term business funds. However, Chesnara also operates a subsidiary in Sweden that continues to write new business. Chesnara consolidates its UK business into CA. Consolidation of Chesnara s UK business allows Chesnara to achieve better capital management and to obtain modest cost savings through reduced overheads. Background CA CA is a shareholder-owned insurance company authorised by the regulator to undertake long-term insurance business. CA operates principally in the UK. Structure and Operation CA maintains two funds; a Long-Term Insurance Fund ( LTIF ) and a Shareholder Fund ( SHF ). As a result of the consolidation of different blocks of business, CA includes with-profits, non-profit non-linked and non-profit linked business All profits arising in the LTIF may be retained in the LTIF or transferred to the SHF where they may be available to be paid as a dividend to CA s shareholder subject to any legal or regulatory constraints which may apply (e.g., there being sufficient distributable earnings under the Companies Act or to ensure that adequate solvency margin coverage is maintained) CA is managed by a relatively small management team (which it shares with PL) and this management team provides central control and oversight within CA. Particular emphasis is placed on management and oversight of the various outsourcing arrangements in place. Outsourcing arrangements exist covering policy administration, actuarial services and investment management services. Products As a consequence of acquiring different blocks of business, there is a wide range of different products within CA, which means a variety of different policy conditions and management requirements apply. Further details of the range of products is covered in section 2 of the Scheme Report. Financial Condition Under the UK regulatory regime, CA must maintain prudent reserves and hold sufficient capital to cover the prescribed solvency capital requirement and must also satisfy its risk based assessment. I considered CA s audited solvency position as at 31 December CA comfortably covered its regulatory capital requirements, with a coverage ratio of 218% of that required as at 31 December The cover level was also above CA s capital management target which is 162.5% of the Long Term Insurance Capital Requirement plus 100% of the Resilience Capital Requirement. The Long Term Insurance Capital Requirement and the Resilience Capital Requirement are components that make up the regulatory capital requirement I also considered details of CA s own risk based assessment to establish the main contributory factors to its risk capital requirement required under PRA rules. I concluded that the management of CA appropriately monitor the risks and that these risks are mitigated against by financial or governance methods and were, as a result, unlikely to be a concern. 11

12 3.18. A new regulatory regime will apply from 1 January 2016 called Solvency II. CA is on course to deliver Solvency II capabilities as required. I have concluded that there were no areas of concern with the solvency coverage projected to provide a significant level of capital in excess of its capital requirements under the new regime. PL PL is a shareholder-owned insurance company authorised by the regulator to undertake long-term insurance business. PL was acquired by Chesnara from Direct Line Insurance Group Plc at the end of Before the acquisition, PL was previously called Direct Line Life Insurance Company Limited ( DLL ) and all of its business was sold under the DLL brand PL has only written non-linked non-profit protection business in the UK, Isle of Man, the Channel Islands and Gibraltar. PL was substantially closed to new business in Structure and Operation PL maintains a Long Term Business Fund ( LTBF ) and SHF. All of the long term insurance business written by PL has been written in the LTBF. All profits arising in the LTBF may be retained in the LTBF or transferred to the SHF where they may be available to be paid as a dividend to PL s shareholder subject to any legal or regulatory constraints which may apply (e.g., there being sufficient distributable earnings under the Companies Act or to ensure that adequate solvency margin coverage is maintained). The individuals that make up the management team of PL are the same individuals that make up the management team of CA A number of administration functions are carried out by third parties and this will continue to apply under the terms of a transitional service agreement signed between Chesnara and PL s previous owner. The current administration functions will be migrated over to PL s preferred outsourcer over the coming years. However, for the Payment Protection Insurance ( PPI ) business the arrangements with the outsourcer will continue until there are no longer any PPI policies in-force or earlier if PL or the outsourcer agree to terminate the contract in line with the contract terms and conditions. Products PL has sold non-linked non-profit protection products including term assurance, mortgage protection and critical illness. PL has also underwritten the life cover of PPI business that was sold by banks within the same group as PL s previous owner. PL was not directly involved in selling PPI policies to customers, and, as such, PL has not been liable to pay compensation as a result of any PPI mis-selling claims that have arisen (as the liability to any PPI mis-selling claim has generally fallen to those directly selling the policies and providing advice, rather than to any third party provider of the insurance cover). Therefore the likelihood of future mis-selling claims falling on PL is likely to be remote. However, as part of the terms of the acquisition of PL by Chesnara, a limited indemnity was secured to reimburse Chesnara in respect of any PPI mis-selling compensation claims incurred, even though the chance of PPI mis-selling claims falling on PL is likely to be remote. Financial Condition The same solvency requirements and assessment described for CA apply to PL. As at 31 December 2013 PL comfortably covered its regulatory capital requirements. The capital requirements coverage level was 157%. The cover level was also above PL s capital management policy which targets a coverage ratio of 150% of its regulatory capital requirement As for CA, I considered the detail of PL s own risk based assessment to establish the main contributory factors to its risk capital requirement required under the PRA rules. I concluded that the management of PL appropriately monitor the risks and that these risk are mitigated against by financial or governance methods and were, as a result, unlikely to be concern. 12

13 3.26. The Solvency II capabilities being developed by Chesnara and CA also cover the PL business. The planned date of the Scheme means that it is not expected that PL will be required to apply Solvency II on a standalone basis. However, on a standalone basis PL is projected to provide a significant level of capital in excess of its capital requirements under the new regime. Outline of the Scheme I can confirm that the details set out in Part 4 of this Circular are consistent with my understanding of the Scheme. Assessment of the Scheme In carrying out my assessment I have considered separately the impact on the CA policyholders and on the PL policyholders whose policies are to be transferred from PL to CA upon implementation of the Scheme ( Transferred Policies ). It is possible that some policies may not be able to be transferred under the Scheme but these policies ( Excluded Policies ) are provided for under the Scheme. The expectation is that there will not be any Excluded Policies. Where necessary, I have explicitly considered, where necessary, the impact and position of CA s with-profits policyholders I have considered the security of benefits and the effect on policyholder reasonable expectations after implementation of the Scheme. In preparing the Scheme Report, I have actively considered whether it has been necessary for me to have obtained independent legal advice in relation to the Scheme. After due consideration I have not considered it necessary to obtain independent legal advice, In particular there are two indemnities that were part of the acquisition of PL by CA, and neither of these has required me to take independent legal advice as the scope of their operation is clear. Furthermore, in respect of the PPI mis-selling indemnity, I have not had to rely on it in my assessment (for the reason noted in section 3.23) as the indemnity is unlikely to be used given that PL did not have any active involvement in selling the life component of the PPI policies. Security of Benefits I have considered the effects of implementation of the Scheme on the security of benefits for policyholders of CA, and for the holders of the Transferred Policies (including, should it turn out there are any, holders of Excluded Policies). To do so I have considered the financial position and risk exposures upon implementation of the Scheme. Financial Position To provide a reasonable indication of the financial position of CA after implementation of the Scheme, I have considered the financial position of CA and PL had the Scheme been implemented on 31 December CA would have comfortably covered its regulatory capital requirements, with a coverage ratio of 195% of that required as at 31 December The level of cover would be above the regulatory minimum and above CA s capital management target No assets or liabilities from PL will be allocated to either of the separate with-profits funds within CA s LTIF. There is therefore no direct impact on the security of benefits to CA with-profits policyholders The combined Solvency II position is expected to be similar to a risk based assessment that UK companies are already required to complete under the current regulatory regime. I have reviewed the approach adopted by CA in producing this Solvency II assessment and consider this conclusion to be reasonable. Furthermore, CA is projected to comfortably cover its Solvency II capital requirements had the Scheme been implemented on 31 December Risk Exposures I have assessed whether after implementation of the Scheme the combined risk profile would expose CA and/or PL policyholders to new or materially increased risks which may impinge unreasonably on the security of benefits. During this process I considered the nature of the business and any specific mitigation features, for example in considering the PPI business, I have taken into 13

14 consideration the assessment that the chances of a PPI mis-selling claim falling on CA is likely to be remote and as such the indemnity secured is unlikely to be utilised. I consider that implementation of the Scheme will not result in CA policyholders or the holders of Transferred Policies (including holders of Excluded Policies) being subjected to materially different risks which would be likely to impair their security of benefits. Conclusion on the Security of Policyholder Benefits In my opinion, implementation of the Scheme on the Transfer Date will not materially affect the security of the benefits under the Transferred Policies, the Excluded Policies or CA s Policies. Effect on Fair Treatment of Policyholders Contract Terms and Benefit Expectations The Scheme will preserve the contractual rights, policy terms and benefit expectations of the holders of Transferred Policies, including the right to exercise options. CA non-profit Business There will be no change to the terms or conditions of existing CA non-profit policies. Specifically there will be no change to the range or access to linked funds for holders of non-profit linked policies. CA with-profits Business There will be no change to the terms or conditions, investment practices, governance or management of CA s with-profits business as a result of the Scheme being implemented. CA s With-Profits Actuary (whose responsibilities include advising on the fair management of the with-profits business) has concluded there is no reason to believe that the Scheme will affect the benefit expectations of CA with-profits policyholders. I concur with the With-Profits Actuary s view. Transferred Policies There will be no change to the terms or conditions of Transferred Policies including the ability for CA to carry out premium reviews on policies that are subject to reviewable premiums. Administration Standards & Governance The administration for holders of Transferred Policies and for CA policyholders will remain the same. A transitional services agreement is currently in place and the agreement will ensure the continuity of service standards in respect of the Transferred Business. The terms and conditions of the transitional services agreement are unaffected by the Scheme. As such CA policyholders and holders of Transferred Policies will not experience any changes to the service levels or in the administration of their policies as a result of the Scheme The individuals providing management oversight to CA are the same individuals providing management oversight within PL meaning there will be no discontinuity as a result of implementation of the Scheme. Conclusion on the Benefit Expectations and Treating Customers Fairly In my opinion, implementation of the Scheme on the Transfer Date will not adversely affect the reasonable benefit expectations of holders of Transferred Policies or holders of Excluded Policies or of CA s policyholders In my opinion, the companies have given due regard to the need to treat all policyholders fairly in developing the Scheme. 14

15 Miscellaneous Matters Circularisation of Policyholders PL policyholders will receive this Circular, except PPI policyholders, giving them detailed information on the Transfer. Information regarding the Transfer will be available on the PL and CA website, and notices will be published in a number of national newspapers I have considered the terms of the draft Circular and consider that it fairly presents the terms of the Scheme. Tax It is not expected that there will be any adverse tax consequences for holders of Transferred Policies as a result of implementing the Scheme. Consequences of the Scheme Not Being Implemented If the Scheme does not occur then CA and PL will continue to operate as they currently do. The capital efficiencies, cost savings and operational efficiencies envisaged will not be achieved. The costs will fall on the SHF of CA, but the impact will not materially affect the security of benefits for CA policyholders as CA would remain well capitalised. The PL policy administration migration (which affects certain PL policies) will still proceed. 15

16 PART 4 THE LEGAL PROCESS AND THE SCHEME This Part gives you some detail about the legal process that needs to take place to enable the Transfer to be implemented and about the Scheme by which it will be implemented. (A) The Legal Process The UK Scheme will be effected by means of a scheme under Part VII of the Act. The Guernsey Scheme will be effected by means of a scheme under Section 44 of the Insurance Business (Bailiwick of Guernsey) Law, The Jersey Scheme will be effected by means of a scheme under Article 27 of and Schedule 2 to the Insurance Business (Jersey) Law The UK Scheme will require the approval of the High Court of Justice in England and Wales, the Jersey Scheme will require the approval of the Royal Court of Jersey and the Guernsey Scheme will require approval of the Royal Court of Guernsey. The court hearings to consider the Transfer are expected to take place in London on 4 December 2014, in Jersey on10 December 2014 and in Guernsey on 12 December The law in the United Kingdom requires that a notice of the proposed Transfer be sent to the policyholders concerned and that the notice be advertised in certain publications. The notice of the proposed Transfer is set out in Part 5 of this document. That notice will also be published in the London, Edinburgh and Belfast Gazettes and in the Financial Times, Times, Daily Mail, Daily Mirror, Daily Express, Daily Telegraph, Guardian, Sun, Metro, Sunday Telegraph, Sunday Times, Sunday Mirror, Mail on Sunday and, in Scotland, in the Daily Record and The Scotsman. Similar notices will also be published once in the Jersey Gazette and twice in the Guernsey Gazette, the Alderney Gazette and the Sark Notice Box. If you are in any way concerned about the Transfer you can contact us with any questions, or, if you believe you would be adversely affected by the carrying out of the Scheme, you have the right to be heard at the relevant court hearing. You can do this either in person, by telephone or in writing as outlined in Part 8. (B) The Scheme The following is a summary only of the principal provisions of the UK Scheme. It should not be relied upon as containing a comprehensive description of the detailed provisions of the UK Scheme. The Guernsey Scheme and the Jersey Scheme have substantially the same terms as, and have substantially the same effect to, the UK Scheme; therefore this summary shall apply equally to them. Part 8 of this document gives details of how a copy of the full Scheme documents can be obtained. 1. Interpretation In this summary, the definitions set out in Part 6 of this document apply. 2. Transfer of business On the Transfer Date, subject to the approval of the Court, and subject to certain possible exclusions (see paragraph 7 below), the whole of Protection Life s business, including all of its in-force policies, will be transferred to Countrywide Assured. At that time Countrywide Assured will become the insurer of those policies. 16

17 3. Transfer of assets and liabilities On the Transfer Date, subject to the approval of the Court, and subject to certain possible exclusions (see paragraph 7 below), all of Protection Life s assets and liabilities, including its rights and obligations under any contracts to which it is a party, will also be transferred to Countrywide Assured, and from that time Countrywide Assured will be the beneficiary of those assets and rights and will be liable to discharge those liabilities and obligations. 4. Continuity of proceedings All Proceedings, including claims referred to the Financial Ombudsman Service, and any which are threatened, pending, in progress or capable of being issued or brought (including future claims) by or against Protection Life prior to the Transfer Date will be commenced or continued by or against Countrywide Assured after the Transfer Date and Countrywide Assured will be entitled to the same defences and rights as were previously available to Protection Life. 5. Rights and obligations under policies On the Transfer Date, Countrywide Assured will acquire all of Protection Life s rights, benefits and powers under the policies being transferred and policyholders will be entitled to the same rights against Countrywide Assured in relation to their policies as they had against Protection Life prior to the Transfer Date. 6. Restrictions The transfer of the policies, and of Protection Life s assets and liabilities, to Countrywide Assured will take effect, and be valid and binding, even if there is a restriction on their transfer. It will also take effect on the basis that their transfer will be deemed not to contravene any such restriction or give any third parties a right to terminate or modify a contract, acquire an asset or other similar right or interest to which they might otherwise be entitled. 7. Exclusions Any policies which cannot be transferred on the Transfer Date (for example, because they are subject to the laws of another country where the UK Court has no jurisdiction), will be excluded from the Transfer (and classed as Excluded Policies). Those policies will be reinsured to Countrywide Assured on a basis which replicates the economic effect of a transfer to Countrywide Assured. Any assets and liabilities which cannot be transferred on the Transfer Date (for example, because their transfer requires a third party consent which the Court is not willing to waive) will be excluded from the immediate transfer and temporarily held by Protection Life in trust for Countrywide Assured until the third party consent or other impediment to immediate transfer is obtained or removed. These Residual Assets and Residual Liabilities will then be transferred to Countrywide Assured at that time. It is not currently envisaged that there will be any policies, assets or liabilities to which the above provisions of this paragraph 7 would apply, but these provisions are included within the Scheme to ensure that if, contrary to expectation, such policies, assets or liabilities do arise, an appropriate mechanism is in place to deal with them. The policies issued in connection with business carried on by Protection Life in or from within Jersey, and for Guernsey, for policies issued to residents of Guernsey or 17

18 governed by the law of the Island of Guernsey, will only be transferred if and when the approvals of the applicable local courts are obtained. Certain assets will be retained within Protection Life to ensure that, for so long as Protection Life remains an authorised insurer, there is sufficient regulatory capital remaining in Protection Life. Those assets will then be transferred to Countrywide Assured when Protection Life is de-authorised after the Transfer Date. 8. Premiums, mandates, instructions and payments Premiums which, prior to the Transfer Date, were payable to Protection Life will automatically become payable to Countrywide Assured after the Transfer Date. Similarly, mandates and instructions to Protection Life (including those relating to payments by Protection Life to policyholders) which are in force at the Transfer Date will take effect after the Transfer Date in the same manner and to the same extent as if given directly to Countrywide Assured. 9. Data On the Transfer Date, Countrywide Assured will become the Data Controller, and will succeed to all of Protection Life s rights and obligations, in respect of any personal data relating to the business transferred. Countrywide Assured will be under the same obligations as to privacy and confidentiality as existed, and will be bound by the same notices or consents given and requests made, prior to the Transfer Date. 10. Indemnity On the Transfer Date, Countrywide Assured will indemnify Protection Life against any liabilities which Countrywide Assured incurs and which the Scheme provides are transferred, or are to be transferred, to Countrywide Assured. 11. Allocation On the Transfer Date, and on any subsequent date on which any assets or liabilities are transferred under the Scheme, all Protection Life policies and all policyholder-related assets and liabilities will be allocated to the Countrywide Assured Long Term Insurance Fund which does not contain its with-profits funds and all shareholder-related assets and liabilities will be allocated to Countrywide Assured s shareholder fund. 12. Future Operation of Long-Term Insurance Fund Countrywide Assured can establish and maintain other Long Term Insurance Funds or other sub-funds of Countrywide Assured s Long Term Insurance Fund and can write, acquire or reinsure any Long Term Business into its Long Term Insurance Fund or any such other Long Term Insurance Funds or sub-funds. 13. Transfer date The Scheme will become effective on 31 December 2014 or at such other date as may be agreed by Protection Life and Countrywide Assured and specified by the court. If the Scheme has not become effective by 30 th June 2015 or such later date as the court may allow, it may lapse. 18

19 14. Costs and expenses The costs and expenses incurred by each of Protection Life and Countrywide Assured in relation to the Scheme will be paid by Countrywide Assured and borne out of its shareholder fund. Accordingly, policyholders will not bear any of those costs and expenses. 15. Modifications or additions Countrywide Assured and Protection Life may consent on behalf of all interested parties to any modifications of, or, additions to, the Scheme prior to Court approval which the Court may approve. After the Transfer Date, Countrywide Assured may apply to the Court to amend the Scheme, subject to notifying the FCA and PRA in advance and subject also to obtaining a report from an independent actuary or other person (approved by the FCA and PRA) to the effect that the proposed amendment will not adversely affect the reasonable expectations of policyholders. Court approval is not required for minor and/or technical amendments to the Scheme so long as the FCA and PRA have indicated that they have no objection to the amendments. 16. Governing law The UK Scheme is governed by English law, the Jersey Scheme is governed by the laws of Jersey and the Guernsey Scheme is governed by the laws of the Island of Guernsey. 19

20 PART 5 NOTICE OF APPLICATION TO THE COURT This Part contains the text of a Notice which is to be advertised in accordance with the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations IN THE HIGH COURT OF JUSTICE (CHANCERY DIVISION) COMPANIES COURT No OF 2014 IN THE MATTER OF PROTECTION LIFE COMPANY LIMITED (FORMERLY DIRECT LINE LIFE INSURANCE COMPANY LIMITED) -and- IN THE MATTER OF COUNTRYWIDE ASSURED PLC -and- IN THE MATTER OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 Notice is hereby given that, on 25th September 2014, an Application was made to the High Court of Justice, Companies Court, in London by Protection Life Company Limited ( PL ), which was formerly known as Direct Line Life Insurance Company Limited, and by Countrywide Assured plc ( CA ) for an Order under Section 111 of the Financial Services and Markets Act 2000 (the Act ) sanctioning a scheme (the Scheme ) providing for the transfer of the long-term insurance business of PL to CA and making ancillary provision in connection with the Scheme under Sections 112 and 112A of the Act. Copies of the report on the terms of the Scheme prepared by an Independent Expert in accordance with section 109 of the Act and of a Circular containing a statement setting out the terms of the Scheme and a summary of the Independent Expert s report, and a copy of the full Scheme document, may be obtained free of charge from the date of publication of this notice until the date on which the Application is heard by the Court by contacting the Part VII Team either in writing at Part VII Team, Countrywide Assured, Harbour House, Portway, Preston, PR2 2PR or by telephone on (or, if you are calling from a mobile on or overseas on ). These documents can also be downloaded through the PL website at and the CA website at In addition, if you are a customer of any of The Royal Bank of Scotland plc, National Westminster Bank plc, The Royal Bank of Scotland International Limited, Coutts & Company, The One Account Limited, Ulster Bank Limited, Ulster Bank Ireland Limited, Isle of Man Bank Limited or Tesco Personal Finance Limited, and you hold a payment protection insurance policy in relation to a credit card, loan or overdraft with any of them, then you should check your latest annual statement. If the name of the insurer of that policy on the statement is Protection Life Company Limited or Direct Line Life Insurance Company Limited, then this legal notice applies to you and you can obtain further information by contacting the Part VII Team either in writing at Part VII Team, Countrywide Assured, Harbour House, Portway, Preston, PR2 2PR, or by telephone on (or, if you are calling from a mobile on or overseas on ). You can also obtain further information through the website of PL at If sanctioned, the Scheme will result in the property and contracts related to the transferred business being transferred to CA notwithstanding any restrictions on transfer or requirements 20