Court challenge to AXA 'could open £20bn chest'

Claims that consumers have been deprived of hundreds of millions of pounds by an insurance company will be heard in a High Court case that could unlock a £20bn treasure chest of surplus assets.

Claims that consumers have been deprived of hundreds of millions of pounds by an insurance company will be heard in a High Court case that could unlock a £20bn treasure chest of surplus assets.

The case centres on plans by the giant insurance group AXA to pay a substantial portion of £1.7bn of surplus funds to shareholders. Even though AXA is offering 660,000 policyholders windfalls of £400 each, the Consumers' Association (CA) says they should get much more.

The association is preparing to challenge AXA's proposals for distributing so-called "orphan assets", at the High Court on 20 November. The hearing is being seen as a test case for more than £20bn of orphan assets held by British life assurance companies, which could be paid out.

Orphan assets are reserves held in life funds, which are made up of unclaimed life policies and surplus profits on lapsed policies. They are often built up over decades. Policyholders and shareholders are arguing over who gets the lion's share of these "inherited estates".

The proposals have been prompted by the merger of AXA Equity & Law, chaired by Lord Taverne, and AXA Sun Life, chaired by Mark Wood,

The CA has commissioned an independent study of AXA's proposals, which says it would give 31 per cent of the £1.7bn to policyholders and 19 per cent to shareholders. The remaining 50 per cent, some £836m, would be locked away for tax and other long-term liabilities.

The consumer group says this breaks guidelines established by the Government in 1995, which say that in any distribution of orphan assets policyholders should receive 90 per cent of any payout and shareholders no more than 10 per cent. The association also says AXA's future tax bill could be cut by careful tax planning. Therefore, orphan assets earmarked to pay off tax under the present proposals could end up benefiting shareholders.

AXA has sent voting forms to policyholders, and the Financial Services Authority (FSA) has let the deal go forward to a vote by policyholders, of whom only 35 per cent have to approve the scheme. Postal votes have to be in by 16 October.

Ashley Holmes, the head of legal affairs at the association, said yesterday: "A choice between getting a cash windfall or receiving nothing at all is not a real choice to put before policyholders... in the light of this independent assessment, some may not be happy at the way AXA has carved up this money so that shareholders come out on top."

The consumer group is urging discontented policyholders to contact it. It has to be invited to represent the policyholders before it can put its views forward at the High Court.

A spokesman for AXA rejected the Consumers' Association claims yesterday, saying: "We're a little surprised by their timing, as we had a meeting about orphan assets scheduled with them for Monday [11 September].

"We believe this is a fair deal for with-profits policyholders. It was put together with the knowledge of the FSA and it has been approved by independent actuaries."

The AXA spokesman also said that even the CA acknowledged that, had AXA decided not to propose any deal, policyholders would have been unlikely to get any significant benefit from the assets.

AXA has sent out a 110-page circular and further explanatory leaflets to its policyholders. It also provides a helpline on 0345 341 341, which is open on weekdays from 8am to 6pm.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas