Legal & General Group (LON:LGEN) is preparing to bid for a £10-billion tranche of Prudential’s (LON:PRU) annuity business, The Sunday Times has revealed. The move is expected to come within weeks.
Legal & General’s share price lost ground on Friday, shedding 1.18 percent to close at 269.00p. The decline was in line with the selloff in the broader London market, which saw the benchmark FTSE 100 index drop 1.08 percent to 7,309.96 points. Prudential’s share price meanwhile underperformed the Footsie, closing 2.38 percent lower at 1,782.50p.
Insiders told The Sunday Times that L&G had earmarked funds internally to bankroll a deal for a £10-billion slice of the Pru’s annuity business. The move comes with the blue-chip insurer looking to expand its annuity arm, picking up business from rivals who are scaling back. L&G’s chief executive Nigel Wilson’s strategy has been focused on buying bulk annuities, or pools of pension funds spun off from blue-chip companies struggling to clear retirement scheme deficits.
The company, however, could face competition to win Prudential’s annuity book, with pensions buyout firm Rothesay Life and annuity provider Pension Insurance Corporation also reportedly interested in a buyout.
The Pru meanwhile is expected to offload the pensions, having signalled that it would stop selling annuities, amid concerns by the City watchdog about sales practices across the industry. The group’s chief executive Mike Wells is thought to have been seeking advisers to handle the sale.
The disposal would also come amid a restructuring at Prudential, with the FTSE 100 group having unveiled plans last week to merge its two big UK businesses into a single entity. The news has fuelled speculation that the move could lead to the break-up of the company.