Pru fires starting gun on break-up of £10bn UK annuities book

6 November 2017, 12:20

Prudential has fired the starting gun on a four-way break-up of a £10bn UK annuities book that could herald a broader exit by Britain’s largest insurer from its home market.

Sky News has learnt that the Pru has begun contacting potential buyers of chunks of the pension annuities business in the last few weeks.

The company has informed them that a £10bn portfolio will be divided into four parcels of between £2bn and £3bn each, according to someone briefed on the company's plans.

The packages being earmarked for sale by the Pru comprise different profiles of assets to appeal to a range of buyers, they added.

Specialist buyers of pension assets such as Rothesay Life, Legal & General and Pension Insurance Corporation are expected to be among those interested in bidding for the annuities business.

The sale process will be closely watched by investors, both to discern the Pru chief executive Mike Wells' intended use of the capital generated by it, and for clues about the company's longer-term ambitions about its presence in Britain.

The FTSE-100 insurer was founded in 1848, and now has a major presence in the US and Asia, where it is the region's second-largest life insurer.

It would have become by far the biggest player in the Far East if a $35bn takeover bid for AIA in 2010 had been successful, but the deal ultimately blocked by investors.

The Pru has since withdrawn from the UK retail annuities market and has been reviewing its back-book amid new, more capital-intensive, regulations.

Speaking to Bloomberg in August, Mr Wells confirmed that the company was examining the sale of part of its UK annuities back-book.

"I think that the key is long-term shareholder return, not short-term cash, so we're not in any hurry to do any transactions in that space.

"We have exited that space on a retail basis but we wouldn't do anything that would affect the consumers that own those products adversely or do anything that would diminish total shareholder return."

Insiders said that Mr Wells would not sanction the sale of the £10bn of UK annuities portfolios unless he could secure attractive offers for the assets.

It is unclear whether the Pru has formally appointed advisers to handle the sale, although sources said that UBS and Perella Weinberg & Partners were likely to be in contention to advise on the disposals.

The Pru declined to comment on Monday.