LONDON: The second largest life insurer in Britain, Prudential Plc., is negotiating to buy 7-billion-pound worth of annuities from ailing mutual insurer Equitable Life, according to industry sources. Both the companies refused to comment on the news.
The deal may be complex and Prudential may not buy the assets in one go, according to the sources. If finalised, this will be the largest annuity purchase ever by Prudential, which along with Legal & General, is a major buyer of annuities, when companies offload their pension schemes.
It had bought 52,500 policies with assets of 1.5 billion pounds from Resolution Life Group in June this year. The cost of the transaction has not been disclosed. In last December, the company had bought around 60,000 annuity policies with assets worth 1 billion pounds from Royal London.
Increasing life expectancy has paved way for annuities to become less favourites among insurers. It is estimated that Equitable has some 200 million pounds to cover risks associated with its risks.
Prudential pays annuities to more than one million pensioners in Britain, the largest number by one company. The Equitable deal will be a welcome relief to some 50,000 with-profits annuity holders, who have taken a 40 per cent cut as the company had been in dire straits.
Equitable is mired in controversies over its former directors and advisers and last month it had dropped a 650-million-pound negligence claim against former managing director, Roy Ranson. It had also given up a 2-billion-pound claim against Ernst & Young, its former auditors, and a 1-billion-pound claim against 11 other former directors.
Once the Prudential deal goes through, Equitable will be left with 7 billion with-profits fund and 250,000 policies that are yet to mature, and the company can then easily find a buyer. Sources say the metal is already in talks with Resolution in this regard. The mutual's chairman Vanni Treves has been studying strategic options in this regard, which include sale to Resolution, unitisation, which would allow policyholders to withdraw their savings and move them elsewhere, or continuing to run the business off in its current form.
Posted
on : Mon, 14 Nov 2005 09:00 GMT | Insurance News
By : Pippa Fielding
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