Sant Uk.10te% Regulatory News (SAN)

7 Jun 2006 07:45

Abbey National PLC07 June 2006 FOR IMMEDIATE RELEASE 7 June 2006 Abbey agrees to sell its life businesses to Resolution plc for £3.6 billion in cash - 97% of EV Abbey National plc ("Abbey") announces that it has entered into an agreementwith Resolution plc under which Abbey will sell its entire life insurancebusiness to Resolution plc ("Resolution") for a fixed cash consideration of £3.6billion1. This represents 97% of the Embedded Value2 of the businesses beingsold as reported by Abbey at 31 December 2005. The life businesses being sold are Scottish Mutual Assurance plc, ScottishProvident Limited and Abbey National Life plc, as well as the two offshore lifecompanies, Scottish Mutual International plc and Scottish ProvidentInternational Life Assurance Limited. Abbey will retain all of its branch-basedinvestment and asset management business, James Hay, its market-leadingself-invested personal pension company, and its Wrap business. Separately, in order to provide continuity of product supply and service to itscustomers, Abbey has entered into two distribution agreements with Resolutionunder which: • Abbey will distribute through its retail network Abbey-branded life and pensions products provided by Resolution; and • Abbey will continue to be the exclusive distributor of Scottish Provident protection products to intermediaries. In addition, Abbey has secured exclusive access to provide retail bankingproducts to Resolution's estimated five million policyholders. It is envisaged that some 2,000 Abbey employees will transfer to Resolution aspart of the transaction. Resolution will continue to operate the lifeoperations from the existing Abbey premises in Glasgow. Resolution will alsomaintain the operations in Dublin and the Isle of Man. Francisco Gomez-Roldan, Abbey's Chief Executive, said: "This is a great deal for Abbey, for our employees and for our customers. Wehave sold our life businesses for an excellent price and ensured continuity ofservice and product. We have also secured a competitive distribution agreementfor our retail bank and retained our fast-growing branch-based asset managementbusiness. In addition, this deal opens up an exciting opportunity for Abbey todistribute banking products to Resolution's customer base. We believe Resolution has the expertise, strength and focus to manage the lifebusinesses going forward and this deal provides a clean exit for Abbey allowingus to focus on building our banking business in the UK." Clive Cowdery, Resolution's Executive Chairman commented: "This is an excellent transaction for both groups. Abbey's retailing skills andquality products will accelerate Resolution's customer strategy." Completion of the transaction is expected during the third quarter of 2006 andis conditional upon, among other things, approval from the Financial ServicesAuthority and relevant overseas regulators and the approval of Resolution'sshareholders. Lehman Brothers is acting as exclusive financial adviser to Abbey in thistransaction. Further information: Abbey Matthew Young Tel: 020 7756 4232 Stephanie Thatcher Tel: 020 7756 4212 Maitland Consultancy Martin Leeburn Tel: 020 7395 0419 Lehman Brothers Stephen Fox Tel: 020 7102 1000 Matt Cannon Tel: 020 7102 1000 Notes to Editors: 1. The cash consideration is £3.6 billion for the shares of the lifebusinesses and their associated infrastructure and service companies and issubject to a formula adjustment if completion takes place earlier than or after1 September 2006. 2. The total value of long-term insurance business ("Embedded Value")reported by Abbey at 31 December 2005 relating to the companies that form partof this transaction was £3,693m, comprising £1,421m of DVFP, £1,487m of netassets held by long-term assurance funds and £785m of shareholder net assets.The £11m difference from the published total value of long term business of£3,682m at 31 December 2005 in Abbey's annual accounts is due to the exclusionof net assets of companies and other net liabilities which are outside the scopeof the transaction. The UK and Offshore Life Insurance operations had some 2.7m policies and fundsunder management of £24.2bn at 31 December 2005. The audited trading profitbefore tax for companies in scope included in Abbey's financial results for theyear ending 31 December 2005 was £278m. The £150m difference from the publishedtrading profit before tax of £128m is due to the exclusion of trading profit ofcompanies outside the scope of the transaction and the cost of capital chargedto the life insurance operations. DVFP represents the discounted value of future profits, which is determined bycalculating the discounted value of future cash flows arising from the insurancebusiness (excluding investment contracts). The new business premiums sold through the retail and intermediary channels forthe year ended 31 December 2005 were £45m and £119m respectively (expressed onan annual premium equivalent basis and excluding incremental premiums inScottish Provident Limited and Scottish Mutual International plc). 3. The retail bank distribution agreement is a ten year deal coveringprotection, life bonds and stakeholder pension products. It is subject to areview after five years. There are normal per policy commission arrangementsfor new business sales with no upfront consideration being paid. The intermediary distribution agreement is a ten year deal covering ScottishProvident Self Assurance protection products, Scottish Mutual Pegasus protectionproducts and offshore bonds issued by Scottish Provident International LifeAssurance Limited. Resolution will use Abbey's intermediary salesforce todistribute Scottish Provident products to intermediaries and will reimburseAbbey's costs, on a variable basis, in respect of this salesforce. The agreement to provide retail banking products to Resolution's customer baseis a five year deal and covers savings products, mortgages, loans, credit cardsand other retail banking products. Resolution Resolution is the largest specialist manager of closed UK life funds. It wasformed on 6 September 2005 when the merger of Britannic Group plc and ResolutionLife Group Limited ("RLG") completed. Resolution's Head Office is in London, with significant administrationoperations in Wythall (Birmingham) and Liverpool. Resolution's asset managementoperations are based in Glasgow. Britannic's heritage dates back to 1866, but it was only in 2003 that it closedfor new business to focus on acquiring closed life funds. Britannic acquired thelife operations of Allianz Cornhill in December 2004 for £115m and the CenturyGroup in March 2005 for £45m. RLG was formed for the purpose of buying and managing closed life funds. Itacquired the Royal & Sun Alliance life companies in September 2004 for £850m andSwiss Life UK for £205m in March 2005. Resolution had total policyholder assets of approximately £35 billion at 31December 2005, with total funds under management of £38 billion. Abbey and Santander Abbey is a wholly owned subsidiary of Banco Santander Central Hispano, S.A. ("Santander") (SAN.MC, STD.N). Santander is the largest bank in the euro zone and fourth largest in Europe by market capitalisation. Founded in 1857,Santander has 66 million customers, over 10,000 offices and a presence in over40 countries. It is the largest financial group in Spain and Latin America, andhas significant market positions elsewhere in Europe, including the UnitedKingdom (through Abbey) and Portugal, where it is the third largest bank.Through Santander Consumer Finance, it also operates a leading consumer financefranchise in Germany, Italy, Spain and nine other European countries. In 2005,Santander recorded EUR 6.22 billion in net profit, up 72.5% from the previousyear. For more information on Santander, visit www.gruposantander.com. Disclaimer Abbey and Santander both caution that this press release may containforward-looking statements. The US Private Securities Litigation Reform Act of1995 contains a safe harbour for forward-looking statements on which we rely inmaking such statements in documents filed with the US Securities and ExchangeCommission. Such forward looking statements are found in various placesthroughout this press release. Words such as "believes", "anticipates", "expects", "intends", "aims" and "plans" and similar expressions are intended toidentify forward looking statements, but they are not the exclusive means ofidentifying such statements. Forward looking statements include, withoutlimitation, statements concerning our future business development and economicperformance. These forward looking statements are based on management's currentexpectations, estimates and projections and both Abbey and Santander cautionthat these statements are not guarantees of future performance. We also cautionreaders that a number of important factors could cause actual results to differmaterially from the plans, objectives, expectations, estimates and intentionsexpressed in such forward-looking statements. These factors include, but arenot limited to, (1) inflation, interest rate, exchange rate, market and monetaryfluctuations; (2) the effect of, and changes to, regulation and governmentpolicy; (3) the effects of competition in the geographic and business areas inwhich we conduct operations; (4) technological changes; and (5) our success atmanaging the risks of the foregoing. The foregoing list of important factorsis not exhaustive. When relying on forward-looking statements to make decisionswith respect to Abbey or Santander, investors and others should carefullyconsider the foregoing factors and other uncertainties and events. Suchforward-looking statements speak only as of the date on which they are made, andwe do not undertake any obligation to update or revise any of them, whether as aresult of new information, future events or otherwise. This information is provided by RNS The company news service from the London Stock Exchange