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Tuesday, January 16, 2007

Prudential's Inherited Estate

Those of you with shares in Prudential may find themselves a little better off in the future, thanks to the £9BN of inherited estate sitting in Prudential's books.

However, as with all things in the financial service industry, there is a catch; therefore don't crack open the champagne just yet.

The Prudential is now looking for a senior figure to represent the interests of policyholders, before making any move on the inherited estate. This is the first step required to free up the surplus funds.

The inherited estate is a dormant pot of money that has built up in the life fund over decades, that Prudential does not need to meet its obligations to policyholders.

However, in order to free it up, the Prudential would need the approval of the Financial Services Authority (FSA) which would need to be satisfied that policy holders have been fairly treated.

The next step would be for Prudential to count a proportion of it as capital, not move it out. This would give the Pru some more flexibility.

Analysts at Merrill Lynch claim that freeing up the inherited estate could be worth £2.5BN to shareholders, that's an extra £1 a share.

We shall see!

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