Legal & General keen to pounce on Prudential annuity business
LEGAL & General is preparing to go after a slice of Prudential’s £45bn annuity business amid speculation over a potential break-up of the insurance giant.
Prudential, which last week said it was merging its UK asset management arm, M&G, with its European insurance unit, is also considering selling around £10bn of its annuities backbook in a move that has caught the eye of rivals looking to bulk up.
L&G, which last year acquired Aegon’s annuity portfolio for £3bn and recently hired Goldman Sachs banker Paul Miller to head up M&A, will look at the unit once a formal process kicks off, a spokesman said.
“It’s well-known we’re looking to add back-books as part of our growth strategy, [but] as yet there is no formal process to the sale,” he said. “If there is, we’ll look at it as we do every other asset that comes to the market.”
However sources told The Sunday Times that the insurance giant had already put money aside to fund the potential deal, suggesting that the company is getting ready to pounce if and when formal talks can commence. L&G’S chief executive, Nigel Wilson, has made no secret of wanting the insurer to be a beneficiary of consolidation in Britain’s bulk annuity market, joking last week that rivals eager to offload annuities should give him a call.
The insurer’s new annuity business more than doubled in the first half compared to a year ago, while the head of its retirement unit, Kerrigan Procter, noted last year that there was around £100bn of individual annuities in backbooks in the UK with more consolidation to come.
British insurance giant Aviva, which is also looking to expand its annuities business, is not preparing a bid, a person close to the company said.
Prudential has been scaling back its exposure to annuities for years, announcing last June that it was no longer selling any new annuities due to changes in the market and the introduction of new capital requirements.
The announcement last week that it would merge its funds arm and European insurance unit has reignited speculation that it is looking to break itself up and focus on its growing Asia and US businesses.