15th Mar 2007 07:05
Prudential PLC15 March 2007 Embargo: 7.01am Thursday 15 March 2007 PRUDENTIAL CONSIDERING REATTRIBUTION OF INHERITED ESTATE, POLICYHOLDER ADVOCATENOMINATED TO REPRESENT POLICYHOLDERS Prudential is considering a reattribution of the inherited estate held in thewith-profits sub-fund (WPSF) of The Prudential Assurance Company Limited (PAC).Prudential has believed for many years that it would be beneficial if there wasgreater clarity as to the status of the PAC inherited estate. It will howeveronly proceed with a reattribution if this is in the interests of bothpolicyholders and shareholders. No decision has as yet been made to proceed with a reattribution andpolicyholders need take no action at this stage. Under rules introduced by the Financial Services Authority (FSA) in 2005, aPolicyholder Advocate (PHA) must be appointed to represent the interests ofwith-profits policyholders. These FSA rules also require a policyholder advocateto be free from any conflict of interest that might be, or might appear to be,detrimental to the interests of policyholders. Prudential supports the FSA's introduction of the PHA as it providespolicyholders with an independent negotiator on a reattribution of the inheritedestate. As such, Prudential is pleased to announce that PAC has nominated Peter Bloxhamas the proposed PHA and that the FSA has approved the nomination. Mr Bloxham hasmany years experience representing clients involved in complex cases where thereare competing claims on assets. He also has significant experience of theinsurance industry. He recently retired as a partner at Freshfields BruckhausDeringer, a leading international law firm. As the nominated PHA, Mr Bloxham's initial period of work will include: • Establishing an independent office • Setting up an independent technical team including actuarial and legal support • Reviewing and analysing PAC's with-profits business • Preparing plans for consultation with policyholders on the proposed reattribution • Finalising his terms of reference The appointment of the PHA will only be made if Prudential is fully satisfiedthat a reattribution is in the interests of both policyholders andshareholders. Formal appointment of the PHA could take place later this year. If Prudential decides to proceed with a reattribution, then as the appointedPHA, Mr Bloxham would undertake a period of consultation with policyholdersbefore negotiating the terms of the reattribution with Prudential on behalf ofwith-profits policyholders. Nick Prettejohn, Chief Executive of Prudential's UK Insurance Operations said:"I am delighted the FSA and the Board of Prudential Assurance Company haveapproved Peter Bloxham's nomination. "If we decide to proceed with a reattribution, Peter will bring extensivepractical experience of resolving competing claims to the role of independentpolicyholder advocate. He is very aware of the customer issues raised by areattribution and I am sure he will do an excellent job in representing theinterests of our with-profits policyholders." Peter Bloxham said: "This is a complex project with a considerable amount ofinformation to be analysed and reviewed. My principal task over the comingmonths will be to familiarise myself with Prudential's with-profits business. "I would hope to be in a position, subject to being formally appointed, to begina dialogue with policyholders in the autumn. Should a reattribution proceed Ilook forward to negotiating on behalf of Prudential's with-profits policyholdersto obtain the best possible outcome for them." Policyholders need take no action at this stage. However, in order to protectthe interests of existing policyholders of PAC's WPSF, the following will apply: • To be eligible for a payment in relation to the proposed reattribution, policyholders must have held an eligible policy in the WPSF on the Eligibility Date. The Eligibility Date is 14 March 2007, the day before the date of this announcement. If you are taking out a new with-profits policy after this date, it will not carry any interest in any possible future distribution of the inherited estate in the WPSF and therefore will not qualify for any payment from the proposed reattribution of that inherited estate. Existing policyholders who increase their with-profits investment after this date (through, for instance, irregular premium payments or by switching investments into the WPSF) should be aware that this is unlikely to increase the size of any cash payment or further bonus additions to which they may be entitled through any reattribution process. • Existing policyholders who reduce their with-profits investments (through, for instance, surrendering their policy, transferring all or part of their investment out of with-profits, taking their pension benefits early, or stopping making payments to their policy) are likely to lose any entitlement they may have to receive a payment in connection with the reattribution, or reduce the amount of the payment that may otherwise be due to them. • Policyholders should be aware that the eligibility rules described here are subject to agreement with the PHA, taking account also of the views of the Financial Services Authority. In the event that this reattribution does not proceed, new policies taken out and increases to with-profits investments made after the Eligibility Date will count towards a policyholder's participation in any possible subsequent reattribution or distribution of the inherited estate in the same way as any other with-profits policy or investments. ENDS Enquiries: Media Investors/AnalystsJon Bunn +44 20 7548 3559 James Matthews +44 20 7548 3561William Baldwin-Charles +44 20 7548 3719 Valerie Pariente +44 20 7548 3511 Notes to Editor: 1. Policyholders with questions on the reattribution proposals can call Prudential's dedicated Reattribution Service Centre on 0845 300 2641, 8am - 8pm Monday to Friday. Alternatively policyholders can write to Prudential, Stirling, FK9 4UE. 2. More information on the proposed reattribution process can be found at www.pru.co.uk/reattribution 3. The Policyholder Advocate has established a website at www.prupolicyholdersadvocate.com 4. About the Inherited Estate and reattribution The inherited estate - or 'estate' as it is often called - is money that hasbuilt up in the With-Profits Sub-Fund over many years from a number of sources,including contributions from shareholders. It is essentially an amount of moneyin excess of the amount we expect to pay out to existing policyholders. It isavailable to support current and future business by providing the benefitsassociated with smoothing and guarantees, permitting investment flexibility forthe fund's assets and maintaining the solvency of the fund. Reattribution of theinherited estate benefits policyholders in the With-Profits Sub-Fund in theshort term, by way of cash payments or the addition of a further bonus to theirpolicies, in return for giving up the possibility of sharing in any potentialfuture distribution from the estate. Reattribution will occur only if it is inthe interests of policyholders and shareholders. 5. Peter Bloxham Peter Bloxham is 55, and was until recently a partner in the international lawfirm, Freshfields Bruckhaus Deringer. Peter founded the Restructuring &Insolvency practice at the firm in the mid-1990s, and headed it until 2005. Hiswork involved complex investigations and negotiations with very largeorganisations. He qualified as a solicitor in 1977, joined Freshfields in the same year andbecame a partner in 1983. Peter worked on many high profile cases, including BCCI, Barings, BritishEnergy, Boo.com, Enron and Eurotunnel. He was a regular adviser to Lloyd's ofLondon, including major involvement in the formulation and implementation of theReconstruction and Renewal proposals. Peter's clients included the Bank of England, the Royal Bank of Scotland and UBSand he has advised the Financial Services Compensation Scheme. 6. Reattribution Expert Prudential has also announced today the nomination of Nick Dumbreck asReattribution Expert. As Reattribution Expert, Mr Dumbreck will assessobjectively the reattribution proposals, and will prepare a report for the Courton the implications of the proposals for policyholder security and benefitexpectations. Mr Dumbreck is a consultant with Watson Wyatt and currentlyPresident of the Institute of Actuaries. 7. About Prudential Prudential plc is a company incorporated and with its principal place ofbusiness in England, and it and its affiliated companies constitute one of theworld's leading financial services groups. It provides insurance and financialservices directly and through its subsidiaries and affiliates throughout theworld. It has been in existence for over 150 years and has £250.7 billion inassets under management as at 31st December 2006. Prudential plc is notaffiliated in any manner with Prudential Financial, Inc, a company whoseprincipal place of business is in the United States of America. The Prudential Assurance Company Limited is a wholly-owned subsidiary ofPrudential plc and is authorised by the FSA to carry on long-term insurancebusiness. Forward-Looking Statements This statement may contain certain "forward-looking statements" with respect tocertain of Prudential's plans and its current goals and expectations relating toits future financial condition, performance, results, strategy and objectives.Statements containing the words "believes", "intends", "expects", "plans", "seeks" and "anticipates", and words of similar meaning, are forward-looking. Bytheir nature, all forward-looking statements involve risk and uncertaintybecause they relate to future events and circumstances which are beyondPrudential's control including among other things, UK domestic and globaleconomic and business conditions, market related risks such as fluctuations ininterest rates and exchange rates, and the performance of financial marketsgenerally; the policies and actions of regulatory authorities, the impact ofcompetition, inflation, and deflation; experience in particular with regard tomortality and morbidity trends, lapse rates and policy renewal rates; thetiming, impact and other uncertainties of future acquisitions or combinationswithin relevant industries; and the impact of changes in capital, solvency oraccounting standards, and tax and other legislation and regulations in thejurisdictions in which Prudential and its affiliates operate. This may forexample result in changes to assumptions used for determining results ofoperations or re-estimations of reserves for future policy benefits. As aresult, Prudential's actual future financial condition, performance and resultsmay differ materially from the plans, goals, and expectations set forth inPrudential's forward-looking statements. Prudential undertakes no obligation toupdate the forward-looking statements contained in this statement or any otherforward-looking statements it may make. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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