Pru readies annuities book for sale

Pru readies annuities book for sale

Prudential is believed to be contacting possible buyers for parts of its pension annuities business.

The company said in August that it was looking at options for a chunk of its £45bn UK annuities back book.

At the time it said that these options could involve selling that part of the business outright but it could also include other ways to cut the amount of capital consumed by the book, such as reinsurance deals.

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Reports suggest that the company could sell four parcels valued between £2bn and £3bn, with annuities split into different asset profiles to appeal to buyers.

The firm has already stopped selling annuities and a possible sale of the business is seen by many as the precursor to a split, which would allow the company to take advantage of the higher-growth Asian market.

In August Prudential announced it was merging its UK and Europe asset management and insurance arms, which was seen by many as the beginning of a possible break up.

The company declined to comment on the reports that it was selling the annuities business.

But Kim Lerche-Thomsen, former managing director of Prudential Annuities and founder and CEO of Primetime Retirement, said he was not surprised by the news.

“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.”