The Court of Appeal has reversed a controversial ruling from last year that stopped Prudential from selling a £12bn book of life insurance business to Rothesay Life.
The decision will clear the way for similar business transfers in the UK as insurers look to offload unwanted old contracts from their balance sheets. Insurers were taken aback by the original ruling, saying it put other deals into question.
Last year, the High Court blocked the proposed transfer of annuities from Prudential UK — which is now part of M&G — to Rothesay, a privately owned rival, despite the deal being approved by regulators and an independent expert.
Several policyholders had complained about the deal, arguing they wanted their policies to remain with Prudential. The judge ruled in their favour, saying that Rothesay did not have the same history or reputation as its UK rival.
On Wednesday, the Court of Appeal quashed that ruling, saying the judge in the original case was wrong to disregard the views of the regulators and the independent expert. The decision paves the way for the High Court to reconsider the deal, which was first announced in 2018.
Both M&G and Rothesay welcomed the Court of Appeal’s decision.
Rothesay said that it “provides important clarity for our whole sector”.
Michael Abramson, a partner at consultants Hymans Robertson, said: “It was interesting to see that the Court of Appeal rejected each and every one of the original judge’s objections to the transfer from Prudential to Rothesay.
“This will be very well received by the insurance industry, as the original and unprecedented ruling risked stymieing corporate activity,” he added.
Business transfers of this kind are increasingly popular in the UK and Europe. The insurance companies that originally sold the policies want to free up capital used to back contracts that were, in many cases, sold decades ago.
The buyers, many of which are backed by private equity or sovereign wealth funds, see opportunities to generate cost savings by merging several businesses together. They also hope to make money by investing the assets that back the policies differently.
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