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MGM members get bonus boost from private equity bid

MGM Advantage has sold the main part of its modern business to a private equity group, meaning a pay out of sorts for members of this small, Surrey-based mutual insurer.


by Michelle McGagh on Feb 28, 2013 at 14:51

Policyholders with MGM Advantage, a small mutual insurer based in Worthing, West Sussex, got a modest piece of good news today as the company struck a deal with a private equity bidder that will see it pay out £9 million to members.

However, this is not a windfall cash payment of the kind that Standard Life policyholders got when the Edinburgh-based insurer floated on the stock market in 2006.

Just of 15,000 holders of MGM's 'with profits' policies, who own the society, will receive an average of £592 in bonus top-ups following the sale of its retirement income and annuity business to TDR Capital.

The insurer will close to new business when the deal is complete and a new life company, financed by TDR Capital, will continue under the MGM Advantage brand and focus on new annuity business. The old mutual business will continue to be served by TDR Capital using the same MGM teams and with the same investment strategy.

Under the deal the new company will take on £800 million of annuity business risk leaving the closed business with old policies in a more financial stable position.

MGM Advantage chairman William Proby said the deal was ‘the best outcome for members and policyholders’.

‘We set out a strategy in 2008 to return the society to growth, reverse the decline in our membership and to manage our risks in uncertain markets,’ he said.

‘Since then our focus has been selling new business in the retirement income market, which has proven highly successful. We have been looking at how to unlock the value create by the new business strategy and have considered a whole range of options.’

The deal has been welcomed by pensions experts. Tom McPhail, head of pensions research at Hargreaves Lansdown, said: ‘Annuity business is extremely competitively priced and also requires substantial amounts of capital so it is good news that the MGM board has found a way to maintain its presence in the market place.

‘Annuity buyers in the UK can take advantage of this competition by shopping around for the best terms; hopefully through this deal MGM Advantage will continue to play an active role in this competitive market.’

The deal is subject to regulatory authorisation and the support of the mutual organisation’s members who will be able to attend an extraordinary general meeting (EGM) in May.

MGM used to be called the Marine and General Mutual Life Assurance Society. It was founded in 1852 to insure seamen who didn't drink alcohol.

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