Prudential initiates discussions on four-way sale of £10bn UK annuities book

Prudential has initiated discussions regarding the four-way sale of its £10bn UK annuities book, it has been revealed.

According to information obtained by Sky News, the Pru has begun contacting potential buyers for its UK annuities back-book business. An individual briefed on the Pru’s plans noted that interested parties have been informed that the £10bn portfolio is to be divided into four packages of £2bn and £3bn each.

Each part of the UK annuities book offers different assets to appeal to a number of buyers, sources told Sky News.

Firms including Rothesay Life, Legal & General and the Pension Insurance Corporation are among those expected to be interested in Pru’s annuities business. Those close to the situation added that Pru chief executive Mike Wells has said he would not permit the sale of the annuities portfolios unless attractive offers are secured, Sky News added.

It is currently unclear as to whether the Pru has appointed advisers to oversee the sale, Sky News noted, however, sources have explained that UBS and Perella Weinberg & Partners are possible contenders.

The Pru formerly withdrew from the UK retail annuities market and has been reviewing its back-book among newer regulations.

Former managing director of Prudential annuities and Primetime Retirement founder and CEO Kim Lerche – Thomsen commented: “Having founded Prudential’s UK annuities division and helped build it into one of the largest providers, the latest speculation that the insurer is poised to sell its £10bn UK annuity book as four separate parcels is very interesting. The current era of low interest rates together with improvements in mortality rates and increased solvency capital requirements has meant insurers such as Prudential face higher costs and lower profits when setting up new annuities.

“As such, it is not a surprise we are seeing companies such as these looking to offload their annuity books in order to seek higher returns elsewhere. In addition, with the Bank of England raising interest rates for the first time in 10 years, perhaps signaling further rate rises in the future and recent reports revealing that rising rates of life expectancy are beginning to stagnate, other insurers will be looking to buy up books such as Prudential’s ahead of these upcoming fiscal and demographic changes.”

The Pru is yet to comment on its plans.

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