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Prudential’s £12bn annuities transfer to Rothesay blocked by High Court

16th August 2019 - Author: Charlie Wood

A UK High Court judgement has blocked Prudential’s proposed £12 billion annuities transfer to longevity re/insurer Rothesay Life.

JudgeThe Part VII portfolio transfer was first announced by Prudential in March 2018 as part of plans to demerge its UK & Europe business.

The High Court judgement supposedly has no impact on the timetable for the demerger, which is still expected to complete in the fourth quarter of 2019.

Furthermore, despite this judgement, the current benefits, terms and conditions, and service for the policyholders covered by the proposed transfer are expected to remain unaffected.

“We are disappointed by the High Court’s decision,” Prudential has said.

“The Independent Expert, who was appointed to report to the High Court, concluded the transfer would have no material adverse effect on the security of benefits or the reasonable benefit expectations of our policyholders.

“PAC and Rothesay Life have been granted leave to appeal the judgment by the High Court.”

The transfer consisted of an annuity book containing roughly 400,000 policyholders, making it the largest transaction of its kind in the UK.

While the bulk annuity transfer has been blocked, the reinsurance purchased by Prudential from Rothesay for the £12 billion chunk still stands.

The reinsurance arrangement remains in place and the High Court’s judgement is expected to have  no effect on the current capital position of Prudential.

“The reinsurance transaction agreements contain provisions to address this outcome and whilst it is not the preferred or optimal outcome for either party, it will not have a material impact on Rothesay Life as a whole,” explained Rothesay Life in a statement.

“Rothesay Life and Prudential are committed to a long-term relationship irrespective of the outcome of the proposed insurance business transfer.”

Dominic Simpson, VP- Senior Credit Officer at Moody’s Investors Service, has since commented that this ruling is a set-back for the UK life insurance sector.

“This development brings some uncertainty around future sizable closed book deals between insurers and could reduce somewhat the number of transactions going forward,” He added.

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