Royal London’s Ireland Brexit move to cost £21m

UK insurance and investment group Royal London will incur more than £21m (€24m) in costs for transferring £1bn (€1.1bn) in assets to Ireland as it pre-empts the fallout from Brexit.

Royal London is the UK’s largest mutual life and pensions company. It has about 8.8 million policies and funds under management of £114bn (€130bn).

About 500,000 policies are being transferred to Ireland, as well as 1,300 bonds that were sold in Germany under the Scottish Life International brand.

Royal London, which received court approval in London this week to transfer the assets to a subsidiary in Ireland called Royal London Insurance, will split the cost of the move to Ireland between two main funds – the Royal Liver Sub-Fund and the Royal London Main Fund. Royal London acquired Royal Liver in 2011.

There had been some objections to the manner in which the costs would be split between the funds, but the judge hearing the matter said that while the costs are high, they were an “unavoidable consequence” of the need to provide service continuity for transferring policyholders post-Brexit.

Some policyholders had also questioned whether the costs would negatively on the future profits of the policies being transferred to Ireland.

But the judge said that new reinsurance agreements are designed to “essentially produce the same results” for the with-profit policyholders in the transferred business as if they not left Royal London.

Royal London, whose CEO is Phil Loney, has capitalised its new Irish subsidiary with a €40m cash injection. It will employ about 20 people at the Irish office.

Justice Richard Snowden said that Royal London has not decided to implement the scheme to transfer assets for its own commercial purposes.

“It has been forced to do so by the continued uncertainties over Brexit,” he said.

“In the absence of any agreement between the UK and the EU in relation to the ability of UK institutions to conduct financial services businesses in the EEA [European Economic Area] after Brexit, the board of Royal London have taken the entirely reasonable decision to propose the scheme to be certain that their EEA policyholders will be able to be serviced after the UK leaves the EU,” the judge added.

The effective date of the transfer of the Royal London assets to Ireland is expected to be today. For accounting and reporting purposes, it will be deemed to have taken effect on January 1.

EU New Car Registrations Fall For Third Month

New passenger car registrations in the European Union declined for a third straight month in November, the European Automobile Manufacturers Association, or ACEA, said Friday.

Demand for new cars fell 8 percent year-on-year following a 7.3 percent slump in October and a 23.5 percent plunge in September. Ahead of the introduction of the new WLTP emission test regime, car registrations jumped 31.2 percent in August.

Further, the market continued to contract in most EU countries in November, including the five biggest car markets, the ACEA said.

In the January to November period, car registrations grew 0.8 percent from a year ago.

Cost of insuring against UK debt default highest since Brexit vote

News of a vote of no confidence against Britain’s Prime Minister Theresa May yesterday pushed the cost of insuring UK government debt against default to its highest since the Brexit vote.

The vote lifted the price of ‘5-year UK Credit Default Swaps’. These products are used by traders to guard against the prospect of Britain defaulting on its debt.

The swaps are structured whereby the purchaser of the swap pays a fee for protection. The seller of the swap has to pay out if the UK defaults.

The greater the risk of a default, the higher the fee that has to be paid for the insurance. Swaps can also be used as a way to make money. They were famously used by a number of investors to bet against big US banks before the crash.

The investors bought swaps, paid the premiums, and then collected big payouts when the banks got into trouble.

The strategy was the subject of ‘The Big Short’ – a film based on the book of the same name by well-known US author Michael Lewis.

Ms May was yesterday trying to shore up the support of Conservative MPs as she seeks to salvage her proposed agreement for Britain’s withdrawal from the EU.