Rothesay Life confirms purchase of £12bn annuity portfolio from Prudential

Lloyd Doyle
March 14, 2018

M&G Prudential will become an independent UK & Europe savings and investment provider, headquartered in London. "Both are expected to meet the criteria for inclusion in the FTSE 100 index".

Prudential has been today's most prominent Footsie riser after announcing plans to demerge its M&G Prudential business and reporting a rise in operating profits.

The FTSE 100-listed firm's move follows Standard Life's merger with Aberdeen Asset Management in 2017 which led Standard Life Aberdeen PLC (LON:SLA) last month to unveil the sale of the bulk of its insurance business to Phoenix Group PLC (LON:PHNX).

"We're not looking to get rid of all of our capital-intensive products, we're looking to grow the piece that's capital-light", Wells told Reuters, adding that the M&G Prudential business "is better off standalone, competing domestically for people, for capital".

M&G Prudential will be a savings and investment provider in the United Kingdom and Europe, while Prudential plc will be an worldwide insurance group targeting growth opportunities in Asia, the USA and Africa.

The transaction which was announced this morning saw life, pensions and longevity re/insurer Rothesay Life providing the reinsurance capacity to back a £12 billion chunk of Prudential plc's annuity book, which was managed under the M&G Prudential brand, as part of a demerger process. But with £12bn of Prudential's existing annuity portfolio to transfer to Rothesay Life, combined with the recent news that Phoenix is taking on Standard Life's annuity portfolio, the total value of annuity liabilities taken on by the eight insurers now active in the market is expected to hit £40bn in 2018.

It will also help the United Kingdom part of the business "continue its transformation into a more capital-efficient and customer-focused business, targeting growing demand for comprehensive financial solutions".

The timing of the demerger will be subject to a number of factors, including the completion of the United Kingdom annuity sale, prevailing market conditions, the transfer of the legal ownership of the Hong Kong business and efforts to minimise costs associated with the demerger.

The transition to a Part VII transfer will see all of the underlying assets and policy liabilities transferred to Rothesay Life, subject to regulatory and court approval.

Worldwide insurer Prudential has announced that its United Kingdom and European units will be split from the rest of its global insurance business.

"In Africa, Prudential has established operations in five countries since 2014, with a substantial opportunity to serve the rapidly expanding customer demand for long term financial solutions", Prudential said.

M&G Prudential saw "record" flows of £17.3bn, taking its total funds under management to £350.7bn at the end of the period, up 13%.

Other reports by Iphone Fresh

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