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Legal & General plans to bid for Prudential's UK annuity business

Legal & General is understood to have put money aside for a bid when Prudential’s annuity business is officially put up for sale
Prudential is exiting the annuities market

Legal & General Group PLC (LON:LGEN) is reportedly planning to bid for a £10bn tranche of Prudential PLC's (LON:PRU) UK annuity portfolio amid rumours of a possible break-up at the insurer.

Prudential last week fuelled speculation of a break-up after saying it was merging its UK asset management and life insurance arms to form M&G Prudential. The announcement came alongside the company’s first half results, which showed the Asian operations continued to drive growth.

READ: Prudential merges UK operations as Asia continues to drive profit growth in first half

L&G wants to bulk up its portfolio of closed books of annuities that pay a fixed income for life following its £3bn acquisition of Aegon’s annuity business last year.

A spokesman told The Telegraph that L&G will look at Prudential’s annuity division once a formal process kicks off.

“It’s well-known we’re looking to add back-books as part of our growth strategy, [but] as yet there is no formal process to the sale,” he said. “If there is, we’ll look at it as we do every other ­asset that comes to the market.”

The move would involve the transfer of thousands of policyholders to a new provider and help the company to fend off competition.

The Sunday Times reported that L&G has already put money aside for a bid when Prudential’s annuity business is officially put up for sale.

Prudential last year said it was exiting the annuities market as regulatory changes and low interest rates have deterred customers and insurance firms.  Under new laws since 2015, retirees no longer need to use their retirement savings to buy an annuity, while low interest rates have made annuity price unattractive for buyers. 

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