Legal & General eyes £10bn Prudential annuity back-book as part of sector dominance push

Legal & General is ready to pounce on Prudential’s £10bn annuity business, as the FTSE 100 insurer splashes the cash on pension back-books.

On Thursday, Prudential announced plans to merge its UK fund management and life insurance arms, forming M&G Prudential. The announcement came as part of yet another quarter of double-digit growth in Prudential’s Asian operations.

The move prompted analysts to predict the UK merger was a precursor for group separation that would leave more mature operations behind.

L&G has made no secret that it is on the hunt for snapping up similar opportunities to its monster £3bn purchase of Aegon’s annuity business last year.

And according to reports by the Sunday Times, it has already internally earmarked the funds required when Prudential’s annuity business is officially put on the market.

Read more: Prudential pulls back from the UK open annuity market

Prudential said last year it was exiting the annuities market. It is widely expected to sell off its tail of policies.

But insiders highlighted the size of Prudential’s book could be too large for one buyer and would instead need to slice it into smaller pieces before being sold off.

L&G chief executive Nigel Wilson has made plans to be a “global leader in pension de-risking” as one of his main priorities. Within last Wednesday’s results announcement, the insurer said demand for “remains strong” and the firm is currently bidding for around £12bn of pension de-risking deals.

A spokesperson for L&G said: “We made it clear in our results announcement that we are interested in buying further annuity back-books like Aegon. However, there is no sale process at this time, so this is just an idea.”

Read more: Legal & General shares drop as UK insurance profits tumble