Prudential sells £12bn annuity book to Rothesay Life

Jenna Towler writes

Prudential has sold £12bn in annuity assets to reinsurance business Rothesay Life as part of its M&G demerger announced today.

The sale, which covers about 400,000 policies, comes as the provider announced it would be splitting operations from its asset management arm M&G.

It said the £12bn annuity sale was part of its transition towards a more “capital efficient, de-risked business model”. It said the transfer of the portfolio should be complete by the end of 2019.

The capital benefit from the transition, it said, would be retained within the group to support the demerger process.

Prudential said on an accounting basis its liabilities relating to its total annuity portfolio were £32.6bn at the end of 2017. The UK annuity business being sold contributed about £140m towards life insurance operating profit which totalled £597m before tax in 2017.

It added the transaction is likely to result in a pre-tax loss of about £500m in the first half of 2018 alongside the de-risking being achieved.

Rothesay Life said the deal was a “landmark” for both itself and the industry.

The transaction makes Rothesay Life the UK’s largest specialist annuity insurer with more than £37bn of assets under management and some 750,000 lives insured.