15th Mar 2007 07:05
Prudential PLC15 March 2007 15 March 2007 PRUDENTIAL TO ACQUIRE EQUITABLE LIFE'S £1.8 BILLION WITH-PROFITS ANNUITY BOOK Prudential and Equitable Life ('Equitable') announced today that they havereached agreement in principle for Prudential to acquire Equitable's portfolioof in-force with-profits annuities. The transaction is subject to certainconditions precedent including a vote among Equitable's policyholders, as wellas regulatory and Court approval. Under the terms of the agreement, this portfolio of with-profits annuities wouldtransfer into Prudential's with-profits fund. Prudential UK would assume directresponsibility for the management of these policies and payment to theseannuitants after the transfer is completed under a Part VII scheme. Theintention is for the Equitable book to transfer to Prudential by the end of2007. This transaction is one of the first of its kind and demonstrates Prudential'sability to grow its with-profits fund to create value for its policyholders andshareholders while providing Equitable policyholders with improved prospects andgreater security by being part of one of the largest and financially strongestfunds in the UK which has delivered excellent investment returns over manyyears. Equitable's with-profits annuities book covers approximately 62,000 policies(weighted average age 74 with no deferred annuities) with assets as at 31December 2006 of around £1.8 billion. The transaction is expected to generatepremium income for Prudential of approximately £180 million on an APE basis andthis will be recognised once the transaction completes. The transferring policies will form part of the Defined Charge ParticipatingSub-Fund of Prudential's with-profits fund. Profits to shareholders will emergeon a 'charges less expenses' basis and policyholders will be entitled to 100 percent of the investment earnings. Equitable policyholders will not be eligible toparticipate in any re-attribution of Prudential's Inherited Estate. Nick Prettejohn, Chief Executive, Prudential UK, said: "This transactiondemonstrates Prudential's ability to grow its with-profits business to createvalue for its policyholders and shareholders while providing Equitable Lifepolicyholders with improved prospects and greater security by being part of oneof the largest and financially strongest funds in the UK. The fund has deliveredexcellent investment returns over many years and as a result of thistransaction, Equitable Life's with-profit annuitants will benefit fromPrudential's considerable experience in the annuities market where we are amarket leader." Vanni Treves, Equitable Life's Chairman, added: "The proposal, which willbenefit all policyholders, to transfer with-profits annuity policies toPrudential is a further major success arising from the Society's ongoing reviewof strategic options. The Board has been very conscious of the particulardifficulties faced by with-profits annuitants and we are pleased to havenegotiated this excellent proposition for them. Our agreement with Prudentialrepresents the next phase of our plan to improve prospects for all with-profitspolicyholders and to simplify further the Equitable Life book of business." Charles Thomson, Equitable Life's Chief Executive, said: "The proposal fromPrudential represents an excellent opportunity for with-profits annuitants totransfer to a fund where they will enjoy far greater investment flexibility andwhich has a much better recent bonus record. They will become part of anactively managed fund, which is one of the largest and strongest in the U.K. Itwill also help us in the search for the best strategic solution for theremaining 80 per cent of policyholders." - ENDS - Enquiries to: Prudential Media Analysts/InvestorsSteve Colton Tel: 020 7150 3136 James Matthews Tel: 020 7548 3561 EquitableAlistair Dunbar Tel: 07967 564 039James Leviton (Finsbury) Tel: 0207 251 3801 Notes to Editors: 1. As part of the legal process of completing the transfer, an IndependentExpert will consider the potential impact of the transaction on with-profitsannuitants, the remaining Equitable Life policyholders and Prudential'spolicyholders. The Independent Expert, whose findings will be published in full,will be asked to confirm whether any group of policyholders will be worse off asa result of the transaction. 2. Equitable Life has established a special number for policyholders withquestions about the proposed transfer on 0800 408 0097. 3. Prudential is a leading life and pensions provider to approximately 7million customers in the United Kingdom. The Prudential Assurance CompanyLimited's (PAC) long-term fund remains very strong and is rated AA+ by Standard& Poor's, Aa1 by Moody's and AA+ by Fitch Ratings. The Prudential with-profitssub-fund, which had total assets of £71.9 billion as at 31 December 2006,delivered a pre-tax return of 12.4 per cent in 2006, and over the last fiveyears the fund has achieved a total return of 63.8 per cent against 41.1 percent for the FTSE 100 total return and 50.2 per cent for the FTSE All-Share(Total Return) index (figures are to 31 December 2006, before tax and charges).Much of this excellent investment performance was achieved through the activeasset allocation of the fund. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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