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Prudential's M&G, Rothesay to appeal blocking of large annuity transfer

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By Carolyn Cohn and Simon Jessop

LONDON (Reuters) – Prudential <PRU.L> and Rothesay Life will appeal a recent judgement blocking the transfer of 12 billion pounds ($15 billion) in annuities, the largest ever such deal, the firms said on Friday.

A UK High Court judge in August blocked the transfer of the annuities, which are closed to new customers, from Prudential’s UK business M&G to Rothesay, following complaints from policyholders.

The planned deal would have been the largest ever such transfer covering 400,000 policy holders. It was announced in March 2018 at the same time Prudential said it was to spin off its M&G business though the demerger has not been affected by the decision.

In response to tougher European Union rules introduced after the financial crisis, insurers have increasingly looked to free up capital by off-loading closed books of annuity business to specialist firms such as Rothesay and Phoenix <PHNX.L>.

Lawyers said they had not previously seen such deals blocked by the courts. The decision raises questions about whether other similar big deals can be struck.

“Our appeal is on the basis that the judgement in the High Court contains material errors of law and should therefore be reconsidered,” Rothesay said in a statement, adding that the appeal would be unlikely to be heard for several months.

M&G’s Chief Financial Officer Clare Bousfield also told an investor and analyst conference on Friday that the firm was appealing the decision.

Prudential and M&G aim to split by Oct 21, they said on Thursday.

Rothesay, whose investors include U.S. private equity giant Blackstone and Singapore sovereign wealth fund GIC, this week announced two bulk annuity deals totalling more than eight billion pounds. It said shareholders had chipped in 200 million pounds of new equity into the company, taking total new equity raised this year to 700 million pounds.

Rothesay’s main focus is on bulk annuities, which involve insuring company defined benefit, or final salary pension schemes.

(Reporting by Carolyn Cohn; editing by Simon Jessop and Elaine Hardcastle)

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