British multinational life insurance and financial services firm Prudential has agreed to divest £12bn of UK annuity portfolio, covering 400,000 policyholders, to Rothesay Life.

As per the terms of the deal, The Prudential Assurance Company has reinsured £12bn of liabilities to Rothesay Life.

Initially, the transaction has been structured as a reinsurance contract and is expected to lead to a Part VII transfer of the underlying assets and policy liabilities to Rothesay Life subject to regulatory and court approval.

Shareholders of Rothesay Life have invested additional equity to finance the deal.

The transaction makes Rothesay Life the UK’s largest specialist annuity insurer with more than £37bn of assets under management and over 750,000 lives insured.

Rothesay Life CEO Addy Loudiadis said: "I am delighted that Prudential, one of the UK’s most respected insurance companies, has chosen Rothesay Life to secure its policyholders’ pensions over the long term in a landmark transaction for us and for the industry.

“This is a testament to the quality and strength of our business, our focus on customer service, our execution proficiency and the support we receive from our shareholders. We look forward to building on this success as we predict a very active pension buy-out pipeline ahead."

Prudential is also planning to demerge its UK & Europe business (M&G Prudential), esulting in two separately-listed companies, each with its own distinct investment prospects.

Upon completion of the demerger, shareholders will hold interests in both Prudential plc and M&G Prudential.

M&G Prudential is a retirement and savings businesses in the UK and Europe, delivering product propositions via its range of investment solutions offered by M&G and PruFund. 

M&G Prudential's existing chief executive John Foley will lead the company as a standalone entity.

Prudential chairman Paul Manduca said: “The decision to demerge M&G Prudential follows a rigorous review by the Board which considered all options, including the status quo, and concluded that it is in the best interest of the Group to operate as two separately-listed companies, able to focus on their distinct strategic priorities in their chosen geographies. Both are expected to meet the criteria for inclusion in the FTSE 100 index.”

Prudential said it will combine the growth potential of its Asia, US and Africa businesses. The company's current group chief executive Mike Wells will lead it.

Image: The River Kennet frontage of the Prudential offices at 121 King's Road in Reading. Photo: Courtesy of Andrew Smith/