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Prudential PLC 'disappointed' as UK High Court blocks £12B annuity transfer

The High Court of England and Wales has at least temporarily prevented Prudential PLC's planned £12 billion bulk annuity transfer to Rothesay Holdco UK Ltd. from going forward.

Rothesay has previously described the deal, part of Prudential's exit from the bulk annuity market, as "the largest transaction of its type ever executed in the U.K."

In a stock exchange announcement, Prudential said it was "disappointed" by the decision and pointed out that an independent expert appointed to report to the High Court had concluded the transfer would have "no material adverse effect on the security of benefits or the reasonable benefit expectations" of the Prudential policyholders affected by the transfer.

Both companies have been granted leave to appeal the decision.

As part of the deal, Rothesay had reinsured the business to be transferred, effectively giving Prudential the deal's benefit even before the transfer took place. Prudential said in the statement that the reinsurance arrangement remains in place and that the High Court's decision has "no effect" on the capital position of Prudential Assurance Company Limited, or PAC — the subsidiary containing the business. Prudential said PAC had a Solvency II surplus of £3.7 billion as of June 30.

In an emailed statement, Rothesay also expressed disappointment with the decision, noting that neither of the U.K.'s financial regulators had objected to the transfer.

Rothesay added that the reinsurance agreement contained prevision to address the nonapproval of the transfer.

"Whilst it is not the preferred or optimal outcome for either party, it will not have a material impact on Rothesay Life as a whole," the company said.