It is believed that Prudential, the second biggest life insurer, is in advanced talks with Equitable Life to buy up to £7 billion of annuities, after Legal & General have dropped out. If the deal goes ahead, it would be the largest bulk purchase by Prudential, and would make it easier for Equitable Life to sell the rest of its remaining £7 billion with profits fund.
Both companies refuse to talk about the possible purchase. In December 2004, the insurer bought 60,000 annuity policies from Royal London and in June this year, they bought a further 50,000 plus policies from Resolution Life Group. In May, the chief executive of Equitable Life was quoted as saying that the company was in theoretical discussions with potential purchasers of its £10 billion with profits fund, and hinted that this could be within the next 18 months.
Our view
Let us see wait and see. Some serious number crunching will be going on, both on the profitability of the annuities and also on the potential of the client base being bought.