28th Nov 2007 08:00
Prudential PLC28 November 2007 For immediate release: 8.30am on 28 November 2007 Prudential UK announces outsourcing partnership to support delivery of target cost savings • Prudential UK selects Capita to provide outsourced administration services • Agreement will deliver £60 million per annum of savings to Prudential UK by the end of 2010. Prudential UK on track to deliver total per-annum cost savings of £195 million by the end of 2010 • Proposal for approximately 1,750 UK employees and 1,250 Mumbai-based employees to transfer to Capita • Capita has a proven track record of customer and adviser service and IT delivery and support Prudential UK ("Prudential") has today entered into a major partnershipagreement with Capita Group Plc ("Capita") to outsource a large proportion ofits in-force and new business policy administration. Under the terms of theproposed agreement, Capita will provide customer servicing, policyadministration, new business processing, claims activity and related IT supportto Prudential UK. Nick Prettejohn, Chief Executive, Prudential UK, said: "The agreement withCapita is another significant milestone in our programme to deliver continuedsuperior performance and profitability in our UK business. We have set out veryclear priorities for the business and this agreement helps us to deliver ourstrategy by removing fixed costs from our operations and achieving significantoperating efficiencies. It will allow us to concentrate on using our competitivestrengths and proven capabilities to realise the attractive opportunities in themarket for retirement savings and income. "After detailed analysis of a number of potential options, it was clear thatCapita best enables us to deliver continued high levels of customer servicewhile providing ongoing certainty over costs. They are a partner with a provenrecord of high standards of service for customers and advisers, IT delivery andsupport while also offering the best overall employment solution for our staff." Cost savings target and partnership with Capita The proposed 15-year agreement with Capita will enable Prudential to: • Achieve its overall cost saving target of £195 million per annum by the end of 2010; • Reduce unit costs per-policy by 32 per cent by 2011; and • Provide a significant reduction in long-term expense risk by providing certainty on per-policy costs as the number of policies in the Mature Life and Pensions back-book decreases over the coming years (see Notes to Editors). The agreement provides for Capita to acquire business and assets fromPrudential, for a consideration of £25 million, including part of the businessof PPMS, Prudential's offshore operation based in Mumbai. At its 2007 Interim Results, Prudential confirmed that actions were in place todeliver £115 million of the £195 million savings by the end of 2007. Theagreement with Capita will lead to savings of £60 million per annum by the endof 2010. The remaining £20 million per annum of cost savings, of whichapproximately £11 million has already been delivered, will be generated fromacross the rest of the UK business by the end of 2010. The total one-off investment costs of achieving the £195 million of savings willbe £176 million, after deducting the proceeds from the sale of part of PPMS. Ofthese one-off costs, £57 million were incurred in 2006. This investment will deliver enhanced service for customers and advisers througha substantial simplification of policy administration processes and migration ofin-force and new business policies from 15 of Prudential's legacy systems to twoCapita platforms. The total value of the agreement with Capita, includinginvestment spend, is expected to be approximately £722 million over the lifetimeof the contract. The savings, net of investment costs, are expected to result in a £60 millionbenefit to embedded value over the period to 2011. Staff Under the terms of the proposed agreement, approximately 1,750 (1,000 inStirling and 750 in Reading) of Prudential's staff working in the UK in CustomerServices, Customer Operations, Information Technology and other related supportfunctions will transfer to Capita under Transfer of Undertakings (Protection ofEmployment) Regulations (TUPE) in April 2008. This will follow a collectiveconsultation process. In addition, approximately 1,250 out of PPMS's 1,800 staff in Mumbai will alsotransfer to Capita. Capita has committed that all employees affected will beoffered roles on their existing terms and conditions of employment. PPMS willremain a captive offshore service centre and will continue to deliver a numberof important activities for the UK business. Prudential intends to grow PPMS asa shared services operation for the Prudential Group as a whole. Paul Pindar, Chief Executive of Capita, added: "Capita is delighted to engage inthis strategic alliance with Prudential UK. Our aim is to build a mutuallybeneficial partnership to support the further growth of both Prudential andCapita in the life and pensions industry. We look forward to working withPrudential to deliver high quality outsourced support and welcoming alltransferring staff to the Capita Group's thriving life and pensions business. "We are committed to expansion in both the UK life and pensions market and ourIndian operations to meet increasing demand. The operations and employeestransferring to Capita under this agreement will allow us to take a significantstep forward with these ambitions. The Stirling operation will be developed intoa Centre of Excellence for life and pensions administration. The Readingoperation will initially continue to be delivered from its current site while weinvestigate the feasibility of combining it with our operations in Cheltenham orSwindon, or from an alternative site in Reading. And in Mumbai, which will alsobe developed into a Centre of Excellence, the combination of our increased scaleand capability will provide a market leading off-shoring base from which tosupport our plans across the broad range of our service offerings." Capita already delivers a range of life and pension sales and administrationservices for Prudential UK's business. Prudential and Capita signed anoutsourcing agreement in 2006 under which Capita delivers support forPrudential's UK life and pensions operations from Belfast. Capita has also beensuccessfully providing a full range of life and pensions administration servicesfor Prudential's international cross border life assurance portfolio of new andexisting business in Dublin since 2003. - ENDS - ENQUIRIES TO: MEDIA ANALYSTS / INVESTORS Prudential GroupJon Bunn 020 7548 3559 James Matthews 020 7548 3561William Baldwin-Charles 020 7548 3719 Prudential UKSteve Colton 020 7150 3136Darragh Leeson 020 7150 2600 CapitaShona Nichols 020 7799 1525 Shona Nichols 020 7799 1525Caroline Mooney 020 7654 2152 NOTES TO EDITORS: Wire Services Conference Call There will be a conference call today for wire services at 9.00am hosted by NickPrettejohn, Chief Executive, Prudential UK. Dial in number: +44 (0)208 609 0793.Passcode: 155439# Prudential UK Prudential is a leading life and pensions provider to approximately 7 millioncustomers in the United Kingdom. It employs approximately 4,100 staff in the UKand 1,800 in Mumbai Prudential UK has offices located in London, Reading, Dublin, Stirling andMumbai. Products: Bulk and Individual Annuities, Corporate Pensions, With-Profits andUnit-Linked Bonds, Savings and Investments, Lifetime Mortgages, Healthcare andProtection. Distribution Channels: Direct-to-customers/PruDirect (telephone, internet andmail), Financial Advisers, Business to Business (consulting actuaries andbenefit advisers), and Partnerships (affinities and banks). Mature Life and Pensions ("ML&P") is the term used to describe the collection ofproducts Prudential holds for its existing life and pensions customers. Thebusiness comprises the vast majority (approximately 7 million policies) ofPrudential UK's in-force policies. It consists of group pensions, individualpensions, investment bonds and life and endowment policies (annuities, lifetimemortgages, protection, healthcare and general insurance are not included withinthe book of business). Most of these products are still open to new business,for instance through top-ups, but the main role of the ML&P operation is to lookafter this existing business and deliver the best possible value from it forshareholders and policyholders. Prudential expects that this business willcontinue to be a significant source of new business, particularly throughinternal annuity vestings and in the corporate pensions arena. The Mature Life and Pensions back-book represents around two-thirds ofPrudential UK's total cost base. A key priority for Prudential is to continue todeliver embedded value through the ML&P business and as the back-book runs downover the course of the next few years (over 40 per cent of the in-force policiesmature in the next five years), this creates an inherent pressure on unit costs.As large proportions of the costs are currently fixed, this means that unitcosts would continue to rise beyond the levels allowed for when the policieswere originally sold. Prudential, therefore, highlighted an aggressive target toreduce per-policy unit processing costs in line with the reducing numbers ofin-force policies. Capita GroupThe Capita Group Plc is the UK's leading provider of integrated professionalsupport service solutions. The Group's service capabilities encompass businessprocess outsourcing, (BPO), customer services, administration and support, humanresources, ICT, property consultancy, finance & treasury and consultancydelivered to both public sector and private organisations. Capita provides core administrative support to a number of UK and overseas lifeand pensions companies, including MetLife, the Children's Mutual, LincolnFinancial Group, Resolution, Zurich and Co-operative Financial Services.Including this agreement, Capita Life & Pensions will be responsible foradministering approximately 23 million policies. With 28,500 employees at more than 250 offices across the UK, Channel Islands,Ireland and India, Capita is quoted on the London Stock Exchange (CPI.L), and isa constituent of the FTSE100 with revenues for 2006 of £1,739 million. Further information on The Capita Group Plc can be found at: www.capita.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PrudentialCapita