Pru weighs €10bn Equitable deal

POLICYHOLDERS at Equitable Life could be in line for some good news following reports that insurance giant Prudential is interested in buying up to €10.4 billion (£7bn) of annuities from the group.

Britain’s second-biggest insurer Prudential is said to be in advanced talks with Equitable about taking on a large chunk of its annuity business, according to the Mail on Sunday.

The group is said to be interested in acquiring up to £5bn of beleaguered Equitable’s conventional annuities book and £2bn of its with-profits annuities and it has already carried out due diligence.

But it is reported to be unlikely to buy the annuities, which provide people with an income during retirement, in one go, instead agreeing an exclusivity deal with Equitable and buying them in tranches.

Prudential, which yesterday declined to comment on the speculation, is one of the biggest players in the annuities market and earlier this year it paid £1.5bn (€2.2bn) for the annuity book of financial services firm Resolution Life.

A Equitable spokesman said yesterday: “As a matter of policy we do not comment on market speculation and rumour.”

But at the society’s annual general meeting, chairman Vanni Treves said the board was carrying out a review looking at the long-term options for the society, including the sale of all or part of the business.

A big cash injection into the with-profits fund would not only further boost the stability of the society, but may also make it more attractive to a potential buyer.

If the deal was to go ahead it would provide a welcome boost to the society’s with-profits fund.

The fund has struggled in recent years as the mutual has fought to recover from a £1.5bn liability it was left with after losing a legal battle in the House of Lords.

Any equities sale would be particularly good news for the company following the disappointment of the collapse of Equitable’s lawsuit against its former auditors Ernst & Young and several of its former directors.

The society had been suing Ernst & Young for £2bn and its former directors for £1.7bn.

But in September it withdrew its claim against Ernst & Young with both sides paying their own costs, leaving it with a £30 million (€44.6m) legal bill.

The society has also since settled with six of its former directors on the same basis, although legal action is on-going against a further nine of them.

The decision to withdraw the claim against Ernst & Young led to calls from angry policyholder action groups for Mr Treves and chief executive Charles Thomson to stand down.