Prudential plc announces transfer of its legacy agency book and agency force in Taiwan to China Life Insurance of Taiwan

Prudential plc announces transfer of its legacy agency book and agency force in Taiwan to China Life Insurance of Taiwan

Prudential plc (”Prudential”) announces that it has entered into an agreement to transfer the assets and liabilities of its agency distribution business and its agency force in Taiwan to China Life Insurance Company, Ltd of Taiwan (”China Life”) for the nominal sum of NT$1.

The business being transferred represents 94 per cent of Prudential’s in-force liabilities in Taiwan and includes Prudential’s legacy interest rate guaranteed products.

In addition, Prudential will invest £45m to purchase a 9.95 per cent stake in China Life through a share placement. China Life is currently ranked fourth in the country and is one of Taiwan’s fastest growing insurers offering a range of products through agency, broker and bancassurance channels.

As an EU domiciled company, Prudential adheres to the European Union Insurance Group Directive (”IGD”), under which it is required to carry significant economic capital reserves against this back book. On completion of this transfer there will be a net increase in Prudential’s IGD surplus of approximately £800m, further strengthening its already robust IGD position. The Group’s embedded value as reported under the European Embedded Value (”EEV”) principles will increase by £90m after restructuring costs. The transfer will have a estimated one-off IFRS negative impact of £595m including restructuring costs to be reported on completion. There is no impact on Prudential’s dividend paying capacity.

The transferred business had IFRS gross assets at 31 December 2008 of £4.5bn, an IFRS operating profit pre-tax based on longer-term investment returns, of £55m and an EEV operating profit pre-tax of £90m. The loss before tax on the IFRS and EEV bases were £(10)m and £(240)m respectively.

This deal will enable Prudential to focus on creating greater value in its wholly-owned and fast-growing life insurance operation, PCA Life Assurance Company Ltd, specialising in bank distribution through partnerships with Standard Chartered Bank and E.Sun and its successful asset management operation (PCA Securities Investment Trust Company Ltd). The direct investment in China Life announced today will also be a source of incremental value.

The transfer is subject to regulatory approval.

Mark Tucker, Group Chief Executive of Prudential said:

“This agreement is enormously value-enhancing for Prudential Group on several levels. We release significant capital to further strengthen our already very robust capital position; we improve our embedded value; and the transfer enables us to focus on both our rapidly expanding bank distribution through our successful partnerships with Standard Chartered Bank and E-Sun Bank and our asset management business. We also retain a significant interest in agency distribution in Taiwan through our shareholding in one of the largest and most reputable life companies in Taiwan.

“We see this as clear-sighted and active management of the Group to optimise shareholder value. We continue to see Asia as the primary engine of growth for Prudential and our commitment to our unique agency distribution model and to the region is absolute.”

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