Oceanic Life Ltd and Anor Life Insurance Company of Australia Ltd and Anor

[1997] FCA 1124

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 751 of 1997

OCEANIC LIFE LIMITED
APPLICANT

AND:

TYNDALL LIFE INSURANCE COMPANY LIMITED
APPLICANT

NG 752 of 1997

THE LIFE INSURANCE COMPANY OF AUSTRALIA LIMITED
APPLICANT

AND:

TYNDALL LIFE INSURANCE COMPANY LIMITED
APPLICANT

JUDGE(S):	HILL J
DATE:	29 SEPTEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Before the Court are applications under s 191 of the Life Insurance Act 1995 (Cth) (“the Act”) for confirmation of two schemes, the first, matter NG 751 of 1997, is an application for approval of a scheme being a transfer of the life insurance business of Oceanic Life Limited to Tyndall Life Insurance Company Limited (“the Oceanic matter”).  The second (NG 752 of 1997) is a scheme being for the transfer of the life insurance business of the Life Insurance Company of Australia Limited to Tyndall Life Insurance Company Limited (“Tyndall”).

In each case, an affidavit has been filed by a Mr Stanbridge who is the Operations Director of Tyndall in support of an application under subs (5) of s 191 of the Act that the Court dispense with the need for compliance with par (2)(c) of that section so far as it relates to the forwarding of an approved summary of the scheme to the policy holders of Tyndall.

Mr Stanbridge in each case refers to an Actuarial Report lodged in connection with each scheme by actuaries Mr Goodsall and Mr Fox to the effect that policy holders of Tyndall will not be materially affected by the implementation of each of the respective schemes.  Mr Stanbridge points to the cost in each case of mailing summaries of the schemes to Tyndall policy holders.  He points also that the Insurance Superannuation Commission does not oppose the Court dispensing with the requirement that summaries be sent to Tyndall policy holders.  Mr Stanbridge's assertion is supported by the appearance this morning of a representative of the Commission who has indicated that the present application is not opposed.

In the Oceanic matter, the Actuaries Report makes it clear that the assets in the statutory fund which will be transferred as part of the scheme to Tyndall are in excess of the policy liabilities.  This, coupled with the advantages to the scheme to Tyndall policy holders of spreading costs over a larger number of policy holders, reinforces the actuaries conclusion that the benefit expectations of Tyndall policy holders will not be materially affected by the transfer.  As the actuary says, the only significant potential effect is the sharing of fixed corporate overheads among a larger number of policies which clearly will operate for the benefit of all parties.

The application involving the transfer of assets and liabilities to the Life Insurance Company of Australia Limited is not quite as clear.  The Actuaries Report indicates that the outlook for policy holders of the transferring company is somewhat uncertain if the present situation were to continue.  While the transferring company was solvent, as at 30 December 1996, a new capital adequacy regime is to commence to apply as and from 30 December 1997 which would have the consequence that additional capital up to in the order of $5 million would be necessary for the transferring company to continue to carry on business.  This means that there would be a need for a substantial capital injection if the transfer does not take place.  This no doubt illustrates the need for the transfer on the part of the proposed transferor.

Tyndall is in a much stronger capital position. It is said that it will benefit from the transaction because it will be able to spread its expenses over an increased number of policies although it is conceded that this effect is not likely to be significant. It appears that the statutory fund had excess assets as at 31 December 1996 and that the excess assets had increased as at 30 June 1997. The actuary concludes that although the additional capital requirements will mean a reduction in the amount of free capital in the Tyndall statutory fund, this is not in the opinion of the actuaries a disadvantage to the existing Tyndall policy holders as there is capital surplus to current needs. In consequence, each Tyndall statutory fund will continue to meet the capital requirements under the Act.

Thus the actuaries conclude that the benefit expectation of Tyndall policy holders will not be materially affected by the transfer.  The actuaries indicate also that it is their belief that there will be a small benefit to Tyndall policy holders through improved profitability.  As already noted, in both cases the Life Insurance Commission consents to the dispensing with the forwarding of the summary.

Having regard to the nature of the scheme as I have outlined it, the fact that there is no substantial detriment to Tyndall policy holders, that the forwarding of a summary would involve a substantial cost to those policy holders and indeed might operate according to the evidence to confuse Tyndall policy holders. I would dispense with the need for compliance in each case with the provisions of s 191(2)(c) so far as that paragraph of that subsection requires a summary of the scheme to be given to the policy holders of Tyndall.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill

Associate:

Dated:             24 October 1997

Counsel for the Applicant:	C Ecob
Solicitor for the Applicant:	Abbott Tout
Counsel for the Life Insurance Commissioner::	J Noonan
Solicitor for the Life Insurance Commissioner:	Australian Government Solicitor
Date of Hearing:	29 September 1997
Date of Judgment:	29 September 1997