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Customers, and the judge, are not arguing about changes in risk, but about choice. As the lady said - why should the companies paternalistically decide what is best for them, without even consulting them, when it is they, the customer who paid for the whole thing, and who have to live with it for the rest of their lives.
Pru's costs are irrelevant. Your second point turns the case on it's head by implying it is the customer who wants to transfer, and Pru are somehow doing them a favour by bearing all the costs. Customers have already paid for their annuities, have not chosen to transfer, and also probably paid a lifetime of charges and fees on the funds which were used to purchase the annuities.
Pru have also just been caught out harming pensioners interests by mis-selling annuities, so I don't think anyone is going to feel any sympathy over costs resulting from Pru's executive decisions, which the customer has absolutely no influence over or responsibility for.
The transfers change the capital position of the two companies involved but there is no change in risk for the customers who are protected by FSCS and before it gets there the capital of the company writing the policy. The PRA takes a close interest in the solvency of both large insurers and has to approve the deal.
Perversely, the dissenting customers may remain in a less safe company. I am sure the two parties could opt out dissenting policyholders as they are relatively low in number.....but if that then morphed into an opt in then such deals are impossible to deliver in any scale.
If a customer wants to transfer do they also want to pay the price of the new provider, there would be costs of moving. Eg Pru booked a loss of 500m on this deal.....but it releases more capital and reduces the potential for future capital increases so improves the capital position of M&G.
Interesting views on the disputed Rothesay transfer: “The annuity providers have all the freedom to switch and we have none,” she said. “It is an asymmetry of power between provider and customer.”
https://www.standard.co.uk/business/business-focus-prudential-court-ruling-prompts-questions-for-burgeoning-sector-a4257666.html
The split effectively transfers the annuity book anyway, to the new M&G, a smaller company. That weakens the judges argument somewhat, but not completely. A relatively minor issue, and it looks like we have to sleep on it for a year or so. I guess they are keeping the courts free to deal with the outlaw BoJo? (@:
Rothesay has done 2 large deals this week.....it has also raised £700m new capital from its shareholders this year to support growth.
I suggest that if needed, Rothesay will find it easier to raise capital than MNG.....the judge seemed to side with a relatively small number of customers and while acknowledging the experts saying there was no detriment to customers in the transfer decided they should not be forced to transfer to a foreign owned entity with only a 20 year history.....if the appeal is lost i will be very surprised.
Both M&G and Rothesay are appealing against the High Court’s decision to block the £12bn transfer of Prudential’s annuity book. Rothesay said "The appeal is unlikely to be heard for several months":
https://uk.reuters.com/article/uk-prudential-rothesay-appeal/prudentials-mg-to-appeal-judgement-blocking-annuity-transfer-mg-cfo-idUKKBN1WC12X?rpc=401&
https://www.professionalpensions.com/news/4005366/rothesay-life-appeals-court-block-prudential-annuity-transfer
BBD.
Excellent fair post ,which highlight s that the Judge gave the matter solid thought.Possibly too many things are passed on the nod.
To be fair, the judge accepted the regulators technical assessment of capital, his concerns seemed more about the policyholders being shortchanged in terms of the comparative quality and security of the company they were being transferred to. In a way, it was a compliment?:
"The High Court judge blocked the Prudential-Rothesay transfer on the grounds that Rothesay did not have the characteristics that policyholders were drawn to in selecting Prudential as their annuity provider.
The judge said Rothesay was a “relatively new entrant without an established reputation in the business” and although it had solvency ratios at least equal to Prudential’s, “it does not have the same capital management policies or the backing of a large group with the resources and a reputational imperative to support a company that carries its business name if the need were to arise over the lifetime of the annuity policies”."
https://www.ipe.com/countries/uk/high-court-blocks-12bn-prudential-rothesay-annuities-transfer/10032863.article
It's good that someone is standing up for policyholders, but I suspect this judgement may eventually be overturned on appeal. If not, I guess all these annuities will have to be retained under the spun-off M&G business, or would the judge object to that too, on the same grounds? Retention would involve expense and bother, since Rothesay are already engaged, and a different shape to the company going forward. The split goes ahead anyway, let's hope there are no more unpleasant surprises.
Nobody complained when annuity company Tomorrow was taken over
Funny how a nothing changes vote can be so detrimental on the markets.
Time will sort it out as Jatw says.
Morning all.
Quite frankly an astounding intervention.....the only part VII transfer to be rejected.
FCA, PRA have agreed, Rothesay has as much capital relatively as M&G.
Judge obviously doesn’t believe in the experts.
I Expect the deal to be agreed on appeal....