genb914801 pia16 07 18 pia - prudentialinternational.com fileprudential has decided to consolidate...

Policyholder InformationThe proposed transfer of the businessof the Polish branch and certainother historic overseas business

of

The Prudential AssuranceCompany Limited

to

Prudential InternationalAssurance plc

pursuant to

Part VII of the UK FinancialServices and MarketsAct 2000

2 Policyholder Information Booklet

Please share this information with anyone who has an interest in your policy Other people might be involved with your policy, for instance:

> Joint holders of your policy> A transferee of the right of the insurance benefit under a policy> A beneficiary someone who might get a payment from the policy other than the policyholder> A beneficial owner someone who has a beneficial interest in the policy under a

nominee/trustee arrangement

> Someone who holds a power of attorney for a policyholder If you need another copy of the booklet so you can share it with someone, just ask us for one.

You have the right to raise any concerns or object to this transferIts your right to tell us or the High Court about any worries you have. Theres information abouthow to do this in the answer to question 15 in Section B of this booklet.

If you receive this booklet on or after 11 December 2018, the High Court hearing will have alreadytaken place and concerns can no longer be raised to the High Court. However, please feel free tocontact us if you wish to discuss any concerns.

You can get in touch to ask us any questions If you have any questions that we havent answered in this booklet, please get in touch so we cananswer them for you. It will help us if you can tell us the reference number at the top of your letterwhen you get in touch.

> Write to us at the address at the top of the accompanying letter> Call us on our Freephone helpline 0808 1686 204 (if calling from the UK) or if calling from

outside the UK please call us on +353 1 476 5893 (your usual call rates will apply). Our linesare open from 9 am-5.30 pm Monday to Friday, except on bank holidays.

> Email us on [email protected].

Prudential has reviewed its operations across Europe since the UK voted to leave the EuropeanUnion. These operations relate to the long-term insurance business sold by PAC Poland, PAC France,PAC Malta and by overseas branches of ELAS in Germany and Ireland which were transferred to PACin 2007 (all defined below). Currently Prudentials European operations are split across twocompanies, The Prudential Assurance Company Limited (PAC) and Prudential International Assuranceplc (PIA). Prudential has decided to consolidate all of its long term European business (excluding theUK) into one entity, PIA, which is based in Ireland.

If you have a policy with PAC through one of these PAC branches, your insurer will change to PIA.

Weve included this booklet as a guide about the transfer for your information. If youre worried aboutthe transfer, this booklet will tell you how to raise your concerns. If you have any questions that wehavent covered in this booklet, you can phone the helpline on 0808 1686 204 (if calling from the UK)or if calling from outside the UK please call us on +353 1 476 5893 (your usual call rates will apply).

Policyholder Information Booklet 3

Contents

Expected Timetable

Final Court Hearing to considerthe proposed transfer:

11 December 2018 (High Court of Justiceof England and Wales, Rolls Building,Fetter Lane, London EC4A 1NL)

Proposed date on which thetransfer becomes effective:

1 January 2019 at 00.01 hrs (GMT) (01:01 hrs(CET))

Expected Timetable 3

The terms we use in this booklet 4

A. Key Information about the Transfer 5

B. Questions and Answers 6

C. Summary of the Transfer 13

D. Summary of the Independent Experts Report 15

E. Legal notice of the Transfer 22


In this booklet, the following words andexpressions have the following meanings:

Chief Actuary the Chief Actuary of PAC is asenior actuary appointed to advise the PAC boardabout the risks which may affect its business

ELAS The Equitable Life Assurance Society

FCA the Financial Conduct Authority, theregulator responsible for the regulation offinancial markets and supervising the conductof financial services firms in the UK

FSMA the UK Financial Services and MarketsAct 2000

Head of Actuarial Function the Head ofActuarial Function of PIA is a senior actuaryappointed to advise the PIA board about therisks which may affect its business

High Court the High Court of Justice ofEngland and Wales, Rolls Building, Fetter Lane,London EC4A 1NL

Independent Expert Oliver Gillespie, aPrincipal of Milliman LLP and a Fellow of theInstitute and Faculty of Actuaries

Independent Experts Report the report onthe transfer made by the Independent Expert inaccordance with section 109 of FSMA, asummary of which is contained at Section D ofthis booklet

Notice of Transfer the notice of theapplication to the High Court to make thistransfer. The notice is in Section E of this booklet

PAC The Prudential AssuranceCompany Limited

PAC France PACs branch in France, whichwas set up in 2000 and ceased writing newbusiness in 2003

PAC Local European Business the books oflong-term insurance business sold by PACPoland, PAC France, PAC Malta and by overseasbranches of ELAS in Germany and Ireland whichwere transferred to PAC in 2007

PAC Malta PACs branch in Malta, whichwas set up in 1955 and ceased writing newbusiness in 1982

PAC Poland the Polish branch of PAC. Its fullname is The Prudential Assurance CompanyLimited Sp. z o.o. Oddzia w Polsce

PIA Prudential International Assurance plc, awholly owned subsidiary of PAC

PIA Poland the Polish branch of PIA. Its fullname will be Prudential International Assuranceplc Spka Akcyjna Oddzia w Polsce

PRA the Prudential Regulation Authority, theregulator responsible for regulating andsupervising insurers and other financialinstitutions in the UK

Prudential Prudential plc and the companiesit owns, including PIA and PAC

Scheme the legal document setting out theterms for the transfer of the PAC Local EuropeanBusiness of PAC to PIA. This is done under PartVII of FSMA

Transfer Date the date on which the businessis expected to transfer, i.e. 00.01 hrs (GMT)(01:01 hrs (CET)) on 1 January 2019

With-Profits Actuary the With-ProfitsActuary of PAC. Theyre a senior actuary whoadvises PACs board on how to treat its with-profits policyholders fairly

With-Profits Sub-Fund the With-Profits Sub-Fund within PAC's long term insurance fund

The terms we use in this booklet


Were transferring policies to keepthem running smoothlySince the UK voted to leave the European Union(EU), we at Prudential have reviewed how wework across the EU. To keep things runningsmoothly for our policyholders and for us were proposing to transfer some business out ofthe UK to Ireland. Specifically, were going totransfer the local European life insurancebusiness of The Prudential Assurance CompanyLimited (PAC) (the PAC Local European Business)to Prudential International Assurance plc (PIA).

Were transferring policies to PIA, awholly owned subsidiary of PACWere transferring these policies from PAC to PIA:

> PAC Poland policies

> PAC France policies

> PAC Malta policies

> Policies written in Germany and Ireland thatwere transferred from the Equitable LifeAssurance Society (ELAS) in 2007 as part ofa wider transfer of business

PIA is incorporated and established in Ireland.Its a public limited company thats whollyowned by PAC. Its authorised to carry on lifeassurance business by the Central Bank ofIreland, the Irish regulatory authorityresponsible for supervising Irish-authorisedinsurance undertakings.

The Independent Expert has concludedthat your benefits will stay secureWe appointed an Independent Expert to reviewwhat the proposed transfer would mean forpolicyholders of PAC and PIA, and how it mightaffect them. This Independent Expert is anindependent consulting actuary and not anemployee of Prudential. Oliver Gillespie, a

Principal of Milliman LLP, has been appointedfor this role. The PRA and the FCA haveapproved this appointment.

His report concluded that the transfer will not havea material adverse effect on the security of yourbenefits, your reasonable expectations for yourbenefits, or on the standards of administration,service, management or governance that apply toyour policy. You can see a summary of his report inSection D of this booklet.

We expect the transfer to take place on1 January 2019.

If you have a PAC Poland, PAC Franceor PAC Malta policy or an ELAS policywritten in Germany or Ireland, it willtransfer to PIAIf the High Court approves the transfer, the PACLocal European Business will transfer to PIA. PIAwill then be the provider of all those policies.Nothing else about these policies will change the terms and conditions will stay the same, andthe way the policies are run will be the same asbefore the transfer. Other PAC policies will remainin PAC as they arent part of the PAC LocalEuropean Business. The terms and conditions ofthese policies will stay the same, too.

If your policy is with PIA, it will staywith PIAPolicies that are already with PIA will stay withPIA. Nothing about these policies will change.

Theres more information inthis bookletYoull find Questions and Answers in Section B,the Summary of the Transfer in Section C, theSummary of the Independent Experts Report inSection D, and the Notice of Transfer in Section E.

A. Key Information about the Transfer


Weve created a list of questions and answersabout the transfer that we think policyholdersmight find useful. The answers are general, sowhile theyre correct for most policyholders,there may be a few exceptions for individualcircumstances. If you have any questions thatwe havent covered in this booklet, you canphone the helpline on 0808 1686 204 (if callingfrom the UK) or if calling from outside the UKplease call us on +353 1 476 5893 (your usualcall rates will apply).

1. Why have I been sent this booklet?Were sending this pack to everyone who mightbe affected by the transfer. Its for yourinformation only.

We havent sent these packs to everyone whomay have an interest in your policy. If you thinktheres anyone who should have this booklet,please share this information with them.Alternatively, you can direct them to thedocuments online at www.prudential-international.com/transfer.

2. Whats being proposed and why?Prudential has reviewed its operations acrossEurope since the UK voted to leave theEuropean Union (EU). Currently PrudentialsEuropean operations are split across twocompanies, The Prudential AssuranceCompany Limited (PAC) and PrudentialInternational Assurance plc (PIA). Prudentialhas decided to consolidate all of its long termEuropean business (excluding the UK) into oneentity, PIA, which is based in Ireland.

This change will allow us to operate moreefficiently and simplify how we manage thesepolicies. In addition, it will also ensure that these

policies can continue to run smoothly given thatpost-Brexit it might not be possible for PAC as aUK insurance company to operate in the sameway it has done previously within the EU.

Specifically, this is what PAC will be transferringto PIA:

> PAC Poland well transfer all policies of thePolish branch of PAC to a new Polish branchof PIA. This branch will be called PrudentialInternational Assurance plc Splka AkcyjnaOddzia w Polsce

> PAC France well transfer these policiesto PIA

> PAC Malta well transfer these policiesto PIA

> Policies written in Germany and Ireland thatwere transferred from the Equitable LifeAssurance Society (ELAS) to PAC in 2007 well transfer these policies to PIA

To make this transfer, we need to follow theprocess set out in the UKs Financial Servicesand Markets Act 2000. Part of this process is toask the High Court for its approval. If itapproves, the transfer is expected to take placeon 1 January 2019.

3. I have a policy with PIA. How ismy policy affected and what do I need to do now?Nothing about your policy is going to change.The terms and conditions of your policy, and theway its run, will all stay the same.

PIA is taking in policies from PAC written inGermany, Poland, Ireland, France and Malta.This means that PIA will become Prudentialsmain insurer in the EU. It will be a largerorganisation with more policyholders in more

B. Questions and Answers


countries, including a new branch in Poland.This wont affect PIAs relationship with itsparent company PAC. PIA will stay a part of thePrudential group.

For more information, please look at section 5of the Summary of the Independent ExpertsReport in Section D of this booklet.

If you have no questions or concerns aboutthe transfer were proposing, you dont needto do anything. If you do have any questionsor concerns, you can contact the helpline on0808 1686 204 (if calling from the UK) or ifcalling from outside the UK please call uson +353 1 476 5893 (your usual call rateswill apply). Alternatively, you can raiseconcerns or object to the transfer at theHigh Court there are details for how to dothis in question 15.

4. Can you give me moreinformation about PAC?PAC is The Prudential Assurance CompanyLimited. Its part of the global Prudential group,which is based in the UK.

The main thing PAC does is look after long-terminsurance policies. These are made up of life,pension and annuity policies. PAC also reinsureslong-term policies that other companies sell.The policies PAC issues are mostly with-profits,and include non-linked and linked non-profitpolicies. PACs business is done mostly in theUK, but it also operates in Poland through itsPolish branch. PAC has also sold policiesthrough other branches in the past, including inFrance and Malta.

PAC is authorised and regulated by thePrudential Regulation Authority, and is alsoregulated by the Financial Conduct Authority.

5. Can you give more informationabout PIA?PIA is Prudential International Assurance plc.Its a life assurance company thats fully ownedby PAC and based in Ireland.

PIA is authorised and regulated by the CentralBank of Ireland, the Irish regulatory authoritythats responsible for supervising Irish-authorised insurance undertakings.

6. How will the transfer work?Were following a process outlined in Part VIIof FSMA, called an insurance businesstransfer scheme:

> Were writing to you to tell you whats goingon, and giving you the opportunity to raiseany concerns you have. Were doing this forall policyholders who may be affected bythis transfer.

> Weve appointed an Independent Expert.His job is to review what the proposedtransfer will mean for policyholders, andhow it might affect them. Theres asummary of the Independent Expertsreport in Section D.

> Regulators in the UK, Poland, France,Malta, Germany and Ireland are beingconsulted. The regulators were talking to inthe UK are the Prudential RegulationAuthority and the Financial ConductAuthority. In France, this is the Autorit decontrle prudentiel et de rsolution. InGermany, this is the Bundesanstalt frFinanzdienstleistungsaufsicht. In Malta,these are the Malta Financial ServicesAuthority and the Financial ServicesTribunal. In Poland, this is the KomisjaNadzoru Finansowego, which is thePolish Financial Supervision Authority.In Ireland, the Central Bank of Ireland isbeing consulted.


> Were going to the High Court to ask for itsapproval. We need to do this by law itsstandard procedure for a transfer like this toensure that the transfer is appropriate. TheHigh Court hearing is expected to take placein the UK in London on 11 December 2018.If the date or time changes well post thenew details on our website the webaddress is www.prudential-international.com/transfer.

Youve got the right to be heard at the HighCourt hearing. If youre concerned about thetransfer, please see the answer to question 15.

7. How will we protect the interestsof PIA and PAC policyholders?Were following a process to make sure thatwere protecting your interests.

Were publishing notices in the press, and werewriting to you to tell you whats going on andgive you the opportunity to raise any concernsyou have. Were doing this for policyholders whoare involved in this transfer. The transfer will notgo ahead unless it is approved by the High Court,which will consider concerns or objections raisedby policyholders and will not approve the transferunless it is appropriate to do so.

Weve appointed an Independent Expert Oliver Gillespie, a Principal of Milliman LLP. Hisjob is to review what the proposed transfer willmean for policyholders, and how it might affectthem. In particular, the Independent Expert haslooked into:

> How the transfer might affect the security ofyour contractual rights

> How the transfer might affect your benefitsand what you expect them to be

The Independent Expert has concluded that thetransfer will not have a material adverse effect onthe security of your benefits, your reasonable

expectations for your benefits, or on thestandards of administration, service, managementor governance that apply to your policy.

You can see a summary of his report in SectionD of this booklet. Or you can find a full report on our website www.prudential-international.com/transfer. The IndependentExpert will also prepare a supplementary reportprior to the High Court hearing to update hisreport. Well put it on our website shortly beforethe High Court hearing on 11 December 2018.

Regulators in the UK, Poland, France, Malta,Germany and Ireland are being consulted aboutthe transfer. The regulators were talking to inthe UK are the Prudential Regulation Authorityand the Financial Conduct Authority. In France,this is the Autorit de contrle prudentiel et dersolution. In Germany, this is the Bundesanstaltfr Finanzdienstleistungsaufsicht. In Malta,these are the Malta Financial Services Authorityand the Financial Services Tribunal. In Poland,this is the Komisja Nadzoru Finansowego, whichis the Polish Financial Supervision Authority. InIreland, the Central Bank of Ireland is beingconsulted. Weve taken their views on thistransfer into account and well keep doing so upuntil the transfer.

8. How independent is theIndependent Expert?The Independent Expert has a duty to the HighCourt. The main purpose of his report is to helpthe High Court in deciding whether or not toapprove the transfer. The Independent Expertsobligation to the High Court overrides anyobligations he has to anyone else (including toPAC or PIA), even if someone else is instructinghim or paying him.

The PRA and the FCA have approved theappointment of Oliver Gillespie as theIndependent Expert.


9. What does the IndependentExpert mean by the transfer nothaving a material adverse effect?The Independent Expert is an actuary. His job inthis case is actuarial analysis to work out thepossible implications of a transfer like this byestimating how likely future events are. Thephrase material adverse effect (or equivalent)reflects the standard terms used in the analysisof transfers like this, including by theIndependent Expert in his analysis. It meansthat it is very unlikely that this transfer will haveany negative impact on you and your policyand, if it does, it will not have a significantimpact. While they cant be completely 100%certain, this is the judgement hes making afteranalysing the situation.

Although the situation for most policyholders isthat they wont be affected by the transfer, thismay not be the case for all policyholders. This isonly because outcomes for different groups ofpolicyholders may be slightly different, andthere are a range of possible outcomes for allpolicyholders. If a potential outcome is veryunlikely to happen and would not have asignificant impact, or is likely to happen but hasa very small impact, then it is not considered tomaterially adversely affect policyholders.

We can confirm that we havent identified anycircumstances in which policyholders are likely tobe materially adversely affected by this transfer.Whilst it is expected (although not certain) thataccess to the FSCS will be discontinued as aresult of this transfer and therefore your policywill no longer be covered by this scheme, theIndependent Expert has considered the effect ofthe transfer on the security of policyholders andhas concluded that no longer having access tothe FSCS would not have a material adverseeffect on the security of benefits of thepolicyholders of PAC, given the strength of PIA.For more information, please look at question 11of this booklet.

10. What do the PAC ChiefActuary, the PIA Head of ActuarialFunction and the PAC With-ProfitsActuary think of the transfer?The Chief Actuary of PAC and the Head ofActuarial Function of PIA have also consideredhow the transfer might affect policyholders.

The Head of Actuarial Function of PIA isconfident that:

> The security of PIA policyholders policieswill not be materially adversely affected bythe transfer

> The reasonable expectations of PIApolicyholders for their policies wont bematerially adversely affected by the transfer

The Chief Actuary of PAC is confident that:

> The security of PAC policyholders policieswont be materially adversely affected bythe transfer

> The reasonable expectations of PACpolicyholders for their policies wont bematerially adversely affected by the transfer

The PAC With-Profits Actuary has reviewed theimpact of the proposed transfer on the PACwith-profits policyholders. The actuary isconfident that the transfer wont have anymaterial adverse effect on either the security orthe reasonable benefit expectations of PACswith-profits policyholders. The PAC With-ProfitsActuary is also confident that the transfer isconsistent with the fair treatment of PACs with-profits policyholders.


11. Will transferring my policyfrom a UK-based company (PAC)to an Irish-based company (PIA)affect how secure my policy is inthe future?PAC and PIA are subject to harmonised EUinsurance regulations which govern the amountof capital PAC and PIA are required to hold tosupport their insurance businesses. Bothcompanies have strong solvency ratios, whichmeans they hold similarly high proportions ofcapital to support their insurance businesses.

As a UK-based insurer, PAC participates in a UKscheme called the Financial ServicesCompensation Scheme (FSCS). If an insurer hasinsufficient assets to meet claims or becomesinsolvent, the FSCS may pay compensation tothe policyholder. PAC policyholders who fulfillthe eligibility criteria of the applicable rulescurrently have access to the FSCS.

Your policy will be transferred to PIA, a whollyowned subsidiary of PAC, incorporated andestablished in Ireland. It is expected that accessto the FSCS will be discontinued as a result ofthis transfer and therefore your policy will nolonger be covered by this scheme.

Ireland, where PIA is incorporated, currentlydoes not have any statutory compensationscheme. Irish solvency rules (based onEuropean-wide principles established underthe Solvency II directive) are aimed atprotecting policyholders as creditors in theevent of insolvency of an Irish insurancecompany. Although these rules do not providethe same sort of protection as FSCS, they areintended to limit the need for policyholders toseek compensation from a scheme similar tothe FSCS.

Furthermore, PIA is well regulated inaccordance with Irish and EU law, and mustfollow rules set at an EU level about the amountof capital it is required to hold to support itsinsurance business. PIA is also well capitalisedwhich means that it is unlikely that it willbecome unable to meet its claims.

The Independent Expert has considered theeffect of the transfer on the security ofpolicyholders and has concluded that no longerhaving access to the FSCS would not lead to amaterial adverse effect on the security ofbenefits of the policyholders of PAC, given thestrength of PIA.

This is covered in section 4 of the Summary ofthe Independent Experts Report in Section Dof this booklet. You can see the full report onwww.prudential-international.com/transfer.

12. Will the proposed transferimpact my ability to access anombudsman service?Following the transfer, in circumstances wherePAC currently refers policyholders to the UKFinancial Ombudsman Service (FOS), PIA wouldrefer those policyholders to the Irish FinancialServices Ombudsman (FSO). Although youwould no longer have access to the FOS, youwould be able to pursue complaints through theFSO, where the complaints procedures arebroadly similar to those for the FOS.

The Independent Expert has concluded that thetransfer would have no material adverse effecton the rights of the transferring policyholders inrelation to their access to the services of afinancial ombudsman.


13. How much is the transfercosting, and whos paying for it? Were not publishing how much this transfer iscosting because its commercially sensitive. Butwe can tell you that you wont be payinganything extra and none of the costs of thetransfer will have an impact on the benefits orbonuses of existing policyholders.

14. Why have you only written tome now, when its close to the HighCourt hearing and when youvebeen planning this for so long?To make this transfer process fair and smooth,weve been following a process outlined inFSMA. This process also tells us when tocontact policyholders. The timing of our writingto you is also in keeping with similar insurancebusiness transfers.

Weve also followed guidance from ourregulators in the UK the PRA and the FCA about the time between writing to policyholdersand the hearing on 11 December 2018.

15. What if I have concerns aboutthe transfer or I think Ill beadversely affected?If youre concerned about the transfer or wish toobject to it, you can say so. You can call or writeto us to tell us about your concerns. If you tell usabout your concerns, well look at them andpass them on to the regulators, the IndependentExpert and the High Court. The High Court willconsider your concerns or objection when itsdeciding whether to approve the transfer.

You can write to the High Court at the RollsBuilding, Fetter Lane, London EC4A 1NL, or you can appear in person or via a legalrepresentative at the hearing on 11 December2018. If the date or time changes well post the

new details on our website at www.prudential-international.com/transfer. You can makerepresentations to the High Court via us. If youwant to do so, please let us know as soon aspossible in writing, and by 7 December 2018.This is so we can make sure we have time topass your representations to the High Court.

You can ring the helpline on 0808 1686 204(if calling from the UK) or if calling from outsidethe UK please call us on +353 1 476 5893(your usual call rates will apply) for moreinformation about how to make representationsto the High Court.

16. What happens next?The next thing to happen in this process is theHigh Court hearing on 11 December 2018. Thisis when the High Court will tell us whether ornot it approves the transfer. If the High Courtapproves it, we expect the transfer to take placeon 1 January 2019.

17. Who do I contact forinformation about my policy afterthe transfers happened?You should use the details youd use now theyre not changing either. For a reminder ofwhat these are, go to www.prudential-international.com/transfer.

18. Why have I been sent morethan one pack?If weve sent you more than one pack, it mightbe because youve got more than one policywith us. Weve tried to make sure that peoplewho have more than one policy with us only getone pack, but in some cases we might not havebeen able to. Were sorry if weve sent youmore than one.

19. How do I get more informationabout the transfer?Go to www.prudential-international.com/transfer to download:

> The full Scheme document

> The full Independent Experts Report

> Reports from the Chief Actuary of PAC, theHead of Actuarial Function of PIA and theWith-Profits Actuary of PAC

You can also ask for copies of these documentsby writing to us at the address at the top of theaccompanying letter or calling us on ourhelpline at 0808 1686 204 (if calling from theUK) or if calling from outside the UK please callus on +353 1 476 5893 (your usual call rates willapply) When youre getting in touch, it will helpus if you can quote the reference number at thetop of the letter we sent with this booklet.

20. What will happen to mypersonal data once youve madethe transfer, and who willadminister it? When your policy transfers to PIA, so will yourpersonal data. This means that your personaldata will be looked after by PIA. Its registeredoffice is at Montague House, Adelaide Road,Dublin 2, Ireland.

The way your personal data is looked after wontchange. Your data will be looked after with thesame standards of protection and security as arecurrently applied.

You have the right to access the personalinformation that PIA holds about you. Thisdoesnt cost you anything. By law you can alsoask to have your data deleted (if we dont needit for your active policy or corrected.

We understand how important it is to look afteryour personal information. Its one of ourfundamental responsibilities to make sure thatwe protect all the information you give us.



1. Transfer of the businessSubject to the approval of the Court, the wholebusiness of PAC Poland, PAC France, PAC Maltaand the ELAS German and Irish Business willtransfer from PAC to PIA. This is defined in theScheme as the "Transferred Business". Thismeans that PIA will be the insurer andresponsible for the Transferred Policies insteadof PAC. PIA will take over responsibility formaking payments under the Transferred Policiesand paying claims and other monies due to theholders of Transferred Policies.

The final Court hearing is scheduled for 11December 2018 and the Scheme is expected tobecome effective on 1 January 2019. Such timeand date is defined in the Scheme as the"Transfer Date". Unless the transfer occursbefore 1 March 2019 (or a later date, if allowedby the Court), the Scheme will lapse.

If the Scheme is approved by the Court, PIA willacquire all of the rights, benefits and powers ofPAC in relation to the Transferred Policies. Theholders of Transferred Policies will be entitled tothe same rights against PIA in respect of theirpolicies as they currently have against PAC.

Any contracts between PAC and a third partyrelating to the Transferred Business will alsotransfer so that they will become agreementsbetween PIA and the third party. Any judicial,quasi-judicial, administrative, regulatory,arbitration or other proceedings or applications(including any complaint or claim to anyombudsman) whether pending, current orfuture by, against or in relation to and/or inrespect of to which PAC is a party (or, in thecase of future proceedings, PIA would be a

party but for the Scheme) concerning or inconnection with the Transferred Business shallbe continued or commenced by, against or inrelation to PIA. Any judgment, settlement, orderor award obtained by or against PAC, to theextent that it relates to any part of theTransferred Business, and which is not fullysatisfied before the Transfer Date (or theapplicable Subsequent Transfer Date), shallbecome enforceable by or against PIA.

For so long as the relevant PAC ReinsuranceAgreement remains in force, PIA will determineannual, final and any other discretionarybonuses in respect of the Transferred Policiesand, in respect of the Transferred Policies ofPAC France, apply market value reductions inaccordance with the bonus rates andmethodology for calculating market valuereductions notified to it by PAC. PAC willdetermine the applicable bonus rates andmethodology for calculating market valuereductions referable to the reinsured with-profits business to be notified to PIA in a mannerthat is consistent with the terms and conditionsof the Transferred Policies and with theapproach it has taken before the Transfer Datein respect of such Transferred Policies and,where PAC makes any changes to themethodologies it uses for calculating bonusrates or market value reductions or takes anyother actions referable to the reinsured with-profits business, it shall do so in a manner whichis no less favourable (directly or indirectly) tothe beneficiaries of such Transferred Policiesthan would have been the case if theTransferred Policies had continued to be writtendirectly by PAC.

C. Summary of the Transfer

This summary sets out the key details of the Scheme and its effect on theTransferred Policies. In this summary, capitalised terms shall have the meaningsgiven to them in paragraph 1.1 of the Scheme document.

PAC shall, where applicable, continue to applythe principles of financial management set out inSchedule 2 to the ELAS Scheme to the ELASGerman and Irish Business pursuant to and insatisfaction of its obligations under the relevantPAC Reinsurance Agreement as if the policiescomprised in the ELAS German and IrishBusiness remained part of the TransferringAnnuities Bonus Series.

PIA will succeed to all rights, liabilities andobligations of PAC in respect of personal datarelating to the Transferred Business and willbecome the data controller of such information.PIA will also be under the same duty to respectthe confidentiality and privacy of that information.

2. Other mattersIf the Court approves or imposes anymodification of or addition to the Scheme (orany further condition or provision affecting theScheme) prior to its sanction of the Scheme,PAC and PIA may consent to it for and on behalfof the parties to the Scheme and all otherpersons concerned.

After the sanction of the Scheme, PIA may applyto Court for consent to amend its terms. If PIAmakes such an application: (i) the CBI, the PRAand the FCA shall be notified of and have theright to be heard at the Court hearing; and (ii)PIA must obtain a certificate from anindependent actuary confirming that in hisopinion the proposed amendment will notadversely affect the interests (including thesecurity or benefit expectations) of PIApolicyholders, including the former PACpolicyholders or PAC policyholders. Minorand/or technical amendments will not requirethe sanction of the Court; however, the CBI, thePRA and the FCA must be given notice of themand confirm they do not object.

3. Independent expert's reportIn order to help the Court to understand howthe transfer could affect Policyholders, a reporton the transfer by an Independent Expert isrequired under Section 109 of the FinancialServices and Markets Act 2000. The PrudentialRegulation Authority must approve theappointment of the Independent Expert (havingconsulted with the Financial Conduct Authority)and the form of his report.

Oliver Gillespie, a Fellow of the Institute andFaculty of Actuaries, has been appointed as theIndependent Expert. A summary of theIndependent Expert's report is included inthis document.

4. Costs and expensesPAC and PIA have shared the costs in relation tothe preparation and carrying into effect of thisScheme in accordance with the allocations setout in the Scheme.



Prepared by: Oliver Gillespie, FIA

1. IntroductionPrudential Assurance Company Limited (PAC)is a proprietary company, whose shares arewholly owned by Prudential plc (an internationalfinancial services group) and whose principalactivity is long-term insurance business.

As at 31 December 2017, PAC had over 229billion of assets under management and over6.5 million policyholders.

PAC currently has long-term business acrossEurope (in addition to its business in the UK):

> Poland: This business is written under afreedom of establishment passport in thePAC Poland Branch.

> France: This business was written under afreedom of establishment passport. ThePAC France Branch closed to new businessin 2003 but remains open.

> Malta: This business was written by PAC inthe PAC Malta Branch whilst operating withauthorisation as a third country insuranceundertaking in Malta and is currentlyserviced under a freedom of servicespassport. The PAC Malta Branch was closedto new business in 1982 but remains open.

> Germany and Ireland: This business waswritten by the German and Irish branches ofThe Equitable Life Assurance Society(ELAS) and was transferred in to PAC in2007 via a Part VII transfer. It is servicedunder a freedom of services passport.

Prudential International Assurance plc (PIA) is a proprietary company, domiciled andauthorised in Ireland whose shares are whollyowned by PAC, and whose principal activity islong-term insurance business.

As at 31 December 2017, PIA had over 6.5 billion of assets under management and47,692 policyholders.

PIA currently has two lines of business:

> Single premium off-shore bonds writtenthrough PIA and sold to UK nationals in theUK and Europe which include a with-profitsoption (if selected by the policyholder)where returns are provided through areinsurance arrangement with the PACwith-profits funds.

> Single premium on-shore bonds writtenthrough the PIA UK Branch to high networth UK nationals and non-UK nationalsseeking the tax and estate planningadvantages offered by an on-shore bond.

2. The proposed SchemeIn order to allow more efficient operation and tosimplify the management of its long-termbusiness across Europe, Prudential plc wishes toconsolidate all of its long-term business writtenin Europe (excluding the UK) into one entity:PIA. Although not a primary motivation, thetransfer has been structured so as to ensure thatthe PAC policies written through establishmentsin Europe (excluding the UK) can continuelawfully to be administered and serviced in theevent that the UK were to leave the EU.

D. Summary of the Independent Experts Report


If the proposed Scheme were to beimplemented, the existing PAC long-termbusiness in Poland, France, Malta, Ireland andGermany would be transferred to PIA. Thisbusiness is collectively known as the transferringpolicies or the transferring business.

The total policyholder liabilities proposed to betransferred, amounted to 74 million as at31 December 2017.

With the exception of the PAC Poland business,all of the transferring blocks of business are nowclosed to new business.

The transfer is expected to be presented to theCourt for its Directions Hearing on 9 July 2018and for a Final Hearing on 11 December 2018. If approved by the Court, the Scheme wouldbecome operative on 1 January 2019 (theEffective Date).

3. My considerations with respectto the proposed Scheme The key points to consider in respect of eachgroup of policyholders affected by the proposedScheme are the likely changes (if any) to thefollowing, as a result of the implementation ofthe proposed Scheme:

> The security of benefits under thepolicies. This is derived from the financialstrength available to provide security for thebenefits for each group of policies under theappropriate risk appetite statements andcapital policy applicable and includes thestrength provided by the reinsurancearrangements and by the support from theparent company, where relevant.

> The regulatory regime to which thepolicies will be subject.

> The profile of risks to which thepolicies are exposed.

> The reasonable expectations of thepolicyholders in respect of theirbenefits. This includes the likely effectsof the transfer on the standards ofadministration, service, management andgovernance applied to each group of policies.

In my main report I consider the effects of theproposed Scheme on the transferring PACpolicies in Section 8, on the existing PIA policiesin Section 9, and on the non-transferring PACpolicies in Section 10, and I summarise thesesections below.

4. The effects of the proposedScheme on the transferring policiesI analyse the effects of the implementation ofthe proposed Scheme on the transferringpolicies of PAC in Section 8 of my main report.

The effects of the Scheme on the security ofbenefits under the transferring policiesCurrently, the transferring policies derive theirsecurity of benefits from being part of PAC andthe associated financial strength under the PACrisk appetite statements, the strength of PACsreinsurance arrangements and support providedto PAC from the parent (Prudential plc).

In addition, the transferring policyholders arecurrently protected under the UKs statutoryfund of last resort the Financial ServicesCompensation Scheme (the FSCS). In theevent that PAC were to become insolvent andunable to meet its obligations to policyholders,100% of any benefits that would have beenclaimed from the insurer would be coveredunder the FSCS.


The implementation of the proposed Schemewould mean that PAC would cease to have adefined contractual obligation under thetransferring policies and that these obligationswould be transferred to PIA. As the analysis inSection 8 of my main report shows, if the Schemewere to be implemented I am satisfied that:

> There would be no material adverse effecton the security of benefits due to thereliance on the financial strength of PIA(rather than PAC) and the associated riskappetite statements;

> The reinsurance arrangements in placewould provide security of benefits byplacing contractual obligations on PAC andSwiss Re (the reinsurers of PIAs business ifthe Scheme were to be implemented) andthe termination conditions set out in thereinsurance arrangements mean thatpolicyholders security would be protectedin the event of a subsequent termination ofthe reinsurance agreement; and

> Considerable security is derived fromhaving PAC as its parent as in all but themost extreme scenarios PAC would providesupport to PIA if and when required.

If the Scheme were to be implemented, it islikely (although not certain) that thetransferring policies would no longer becovered under the FSCS.

Analysis has been carried out into the likelihoodof a scenario where PIA would be unable tomeet its obligations to policyholders and thisindicates that:

> The likelihood of such a scenario occurringis less than 0.03% over a one year timehorizon; and

> The main drivers of such a scenario relate toeither the default of PAC in respect of itsobligations under the reinsurancearrangements, or the failure of PAC toprovide support as the parent of PIA, andthe likelihood of these events remains loweven over a 10 year time horizon.

Taking all of this together, in summary, I amsatisfied that, if the Scheme were to beimplemented:

> There would not be a material adverseeffect on the security of the benefits of thetransferring policies as a result of their beingpart of PIA after the Scheme rather thanPAC as currently; and

> Although the implementation of the Schememay mean that the coverage provided bythe FSCS would cease, the loss of the FSCScoverage for the transferring policyholderswould not lead to a material adverse effecton the security of their benefits.

The effects of the Scheme on the profileof risks to which the transferring policiesare exposedIf the proposed Scheme were to beimplemented, the transferring PAC policieswould be directly exposed to the risk profile of a different company that has written differentbusiness, through different distributionchannels, to policyholders with differentdemographic profiles.

Although implementation of the proposedScheme would result in a change to the riskexposures of the transferring policies, the typesof risk exposures are likely to be similar and itshould be noted that:

> The Solvency II regime has beenimplemented consistently across the UKand Ireland;


> The SCR calculated in accordance with theSolvency II regime will reflect the riskexposures of the relevant company;

> The capital held in PIA comfortably exceedsthe required SCR; and

> The capital held in PIA exceeds the levelrequired under the PIA RA Statement.

I am satisfied that any change in risk profile wouldnot have a material adverse effect on the securityof the benefits of the transferring policies.

The effect of the Scheme on the benefitexpectations of the transferring policyholdersIf the proposed Scheme were to be implemented,there would be no change to the following:

> The terms and conditions of the transferringpolicies (except that the policies wouldbecome policies of PIA);

> The charges that apply to the transferringpolicies;

> The operation of the PAC with-profits funds;

> The PAC with-profits fund upon which anytransferring policy depends for its benefits;

> The derivation of the bonuses granted to,or any Market Value Reduction (MVR) tobe applied to, the transferring with-profitspolicies;

> The range of funds to which the transferringunit-linked policies would have access;

> The management of the unit-linked funds inrespect of investment objectives, chargestaken, the tax charged to the unit funds, andunit pricing; or

> The number of or type of units held by thetransferring policyholders as a result of theimplementation of the proposed Scheme.

If the proposed Scheme were to beimplemented, reinsurance arrangements wouldbe set up between PIA and PAC in respect ofthe transferring with-profits business and thesereinsurance arrangements would ensure thatthe transferring with-profits policies would notbe treated any differently to the other policies inthe appropriate with-profits fund and I amsatisfied that the implementation of the Schemewould not have a material adverse effect on thebenefit expectations of the transferring with-profits policies.

The transferring unit-linked and non-profitbusiness is currently subject to the managementand governance of PAC and would, if theScheme is implemented, be subject to themanagement and governance of PIA and I amsatisfied that the Scheme would not have amaterial adverse effect on the benefitexpectations of the transferring unit-linked andnon-profit policies.

Although the administration and servicing of thetransferring policies would be outsourced,under CBI rules, PIA will retain ultimateresponsibility for the administration andservicing of the transferring policies.

I am satisfied that the implementation of theScheme would not have a material adverseeffect on the benefit expectations of thetransferring policyholders or on the levels andstandards of administration and service thatwould apply to the transferring policies.


5. The effects of the proposedScheme on the existing policiesof PIAI analyse the effects of the implementation ofthe proposed Scheme on the existing policies ofPIA in Section 9 of my main report.

The effect of the Scheme on the security ofbenefits of the existing PIA policiesAs at 31 December 2017, the transferringbusiness consisted of approximately 47,000policies and 74 million of liabilities and PIA had47,692 policyholders and over 6.5 billion ofassets under management and therefore atunder 1.2% by liabilities as at 31 December 2017the business being transferred in to PIA is smallcompared to the existing business of PIA.

If the Scheme were to be implemented, theexisting PIA policies would continue to bepolicies of PIA and there would be no change tothe structure of PIA, the Solvency II regime, thecalculation of the technical provisions and SCRfor PIA, or to the PIA risk appetite.

I am satisfied that the implementation of theproposed Scheme would not lead to a materialadverse effect on the security of benefits for theexisting PIA policies.

The effect of the Scheme on the profileof risks to which the existing PIA policiesare exposedIf the Scheme were to be implemented, therange of risks to which the existing PIA businesswould be exposed would change. However itshould be noted that the business beingtransferred in to PIA is small compared to theexisting business of PIA, the SCR of PIA wouldreflect the risk exposures of PIA in accordancewith Solvency II, and the risk exposure of PIAwould be less concentrated than currently.

I am satisfied that the change in the profile ofrisks to which the existing PIA policies areexposed would not have a material adverseeffect on the security of the benefits of theexisting PIA policies.

The effect of the Scheme on the expectationsof the existing PIA policyholders in respect oftheir benefitsIf the Scheme were to be implemented, therewould be no change to the terms and conditions,the governance, the management, theadministration, the servicing, or the investmentmanagement of the existing PIA policies.

I am satisfied that the implementation of theScheme would not have a material adverseeffect on the reasonable benefit expectationsof the existing PIA policyholders or on thestandards of administration, service,management and governance that applyto the existing PIA business.

6. The effects of the proposedScheme on the non-transferringpolicies of PACI analyse the effects of the implementation ofthe proposed Scheme on the existing policies ofPIA in Section 9 of my main report.

The effect of the Scheme on the security ofbenefits of the non-transferring PAC policiesAs at 31 December 2017, the transferringbusiness consisted of approximately 47,000policies and 74 million of liabilities and PAChad over 6.5 million policyholders and over229 billion of assets under management andtherefore the business to be transferred out is,at less than 0.05% of the total liabilities,immaterial in the context of the PAC business.

I am satisfied that the transfer would have nomaterial effect on the security of the remainingbusiness of PAC.

The effect of the Scheme on the profile ofrisks to which the non-transferring PACbusiness is exposed I am satisfied that the transfer out of lessthan 0.05% of the liabilities of PAC would nothave a material adverse effect on the profileof risks to which the non-transferring PACpolicies are exposed.


The effect of the Scheme on the expectationsof the non-transferring PAC policyholders inrespect of their benefitsIf the Scheme were to be implemented, therewould be no change to the terms and conditions,the governance, the management, theadministration, the servicing, or the investmentmanagement of the non-transferring PAC policies.

I am satisfied that the implementation of theScheme would not have a material adverseeffect on the reasonable benefit expectations ofthe non-transferring PAC policyholders or onthe standards of administration, service,management and governance that apply to thenon-transferring PAC business.

7. The fair treatment of policyholdersI analyse the effects of the implementation ofthe proposed Scheme on the fair treatment ofcustomers in Section 11 of my main report.

PAC intends to seek waivers from the regulatoryrequirements to send a written notice to thepolicyholders of PAC that would not betransferred under the Scheme on the basis thatthe cost of such a mailing would bedisproportionate relative to the benefits to thenon-transferring policyholders of PAC.

I am satisfied that the proposed approach tocommunication with policyholders, includingthe application for the waiver, is fair andreasonable, and that the information containedin the notification to policyholders adequatelydescribes the proposals to policyholders.

The costs of the Scheme would be split betweenPAC and PIA, with the costs allocated to PACbeing divided between the shareholders and thewith-profits funds. As the primary motivation forthe Scheme is to simplify the management andincrease the operational efficiency in respect ofthe non-UK European operations of Prudential plcand any efficiencies and reductions in ongoingcosts would reduce the costs charged to the

with-profits funds, I am satisfied that it isreasonable to charge some of the Scheme costs to the PAC with-profits funds and I am satisfiedthat the approach of PIA and PAC to the allocationof the costs of the Scheme is reasonable.

8. My other considerations arisingfrom the schemeIn Section 12 of my main report I cover a rangeof other considerations in respect of theproposed Scheme and I summarise the mostsignificant of these below.

The exit of the UK from the EU BrexitThe exit of the UK from the EU could lead toconsiderable disruption in the market forfinancial services across Europe and thereremains considerable uncertainty as to exactlywhat form exit might ultimately take.

That said, if the Scheme were to be implemented,I am satisfied that in most scenarios in which theUK does exit from the EU, the transferringbusiness would be in a better position than thescenario where the UK exits the EU and theScheme had not been implemented.

The restructuring of Prudential plc and thesale of part of the UK annuity portfolioIn August 2017, Prudential plc announced that it was combining two businesses within thePrudential group, Prudential UK & Europe andits asset manager, M&G, to form a combinedbusiness called M&G Prudential.

In March 2018, Prudential plc announced arestructuring and a transaction with RothesayLife plc to transfer a portion of the PAC non-profit annuity business.

As set out in Section 12 of my main report,I am satisfied that neither the restructuring ofPrudential plc nor the reinsurance arrangementwith Rothesay will have any effect on theconclusions reached.


9. My conclusionsI confirm that I have considered the issuesaffecting the policyholders of PAC and PIAseparately, as set out in Sections 8, 9, 10, 11and 12 of my main report, and that I do notconsider further subdivisions (other than thosein my main report) to be necessary.

I am satisfied that the implementation of theScheme would not have a material adverseeffect on:

> The security of the benefits under thepolicies of PIA and PAC;

> The reasonable expectations of thepolicyholders of PIA and PAC with respectto their benefits; or

> The standards of administration, service,management and governance that apply tothe PIA and PAC policies.

I am satisfied that the Scheme is equitableto all classes and generations of PIA andPAC policyholders.

Oliver Gillespie June 2018 Fellow of the Institute and Faculty of Actuaries


E. Legal notice of the Transfer

IN THE HIGH COURT OF JUSTICE No: CR-2018-002674CHANCERY DIVISIONBUSINESS AND PROPERTY COURTSOF ENGLAND AND WALES

IN THE MATTER OF THE PRUDENTIAL ASSURANCE COMPANY LIMITED

-and-

IN THE MATTER OF PRUDENTIAL INTERNATIONAL ASSURANCE plc

-and-

IN THE MATTER OF THE FINANCIAL SERVICES AND MARKETS ACT 2000

NOTICE IS HEREBY GIVEN that on 2 July 2018 The Prudential Assurance Company Limited ("PAC")and Prudential International Assurance plc ("PIA") applied to the High Court of Justice of England andWales for an Order under section 111(1) of the Financial Services and Markets Act 2000 (the "Act")sanctioning a scheme (the "Scheme") providing for the transfer to PIA of the business of PACs Polishbranch (and certain other overseas legacy business, being policies written by PAC in Malta andFrance and policies written by the Equitable Life Assurance Company in Germany and Ireland whichwere transferred to PAC in 2007) (together the "Business") and for the making of ancillary provisionsin connection with the Scheme under sections 112 and 112A of the Act.

The proposed transfer will result in the Business which is currently being carried on by PAC beingcarried on by PIA. If the Scheme is sanctioned, it is expected to come into effect on 1 January 2019.

Copies of the report on the terms of the Scheme prepared by an Independent Expert in accordance withsection 109(1) of the Act, a statement setting out the terms of the Scheme and containing a summary ofthe Independent Experts report, and a copy of the full Scheme document, may be obtained free ofcharge by contacting Prudential using the telephone number or addresses set out below, from the dateof publication of this notice until the date on which the application is heard by the Court. These and otherdocuments relating to the Scheme (including sample copies of the communication to policyholders) arealso available on Prudential's website at www.prudential-international.com/transfer.


All questions or concerns relating to the proposed transfer should be referred to Prudential using thefollowing telephone number or address:

Freephone 0808 1686 204 (if calling from the UK) or if calling from outside the UK please call us on +353 1 476 5893 (your usual call rates will apply)

Post: Prudential, Montague House, Adelaide Road, Dublin 2, Ireland

Email: [email protected]

The application is expected to be heard at the Rolls Building, Fetter Lane, London EC4A 1NL on11 December 2018. Any person (including any employee of PAC or PIA) who thinks that he or shemay be adversely affected by the carrying out of the Scheme may attend the hearing and expresstheir views either in person or by Counsel. It would be helpful if anyone wishing to attend could givenotice of such intention to Prudential before 7 December 2018, setting out the grounds of theirobjection or why they consider they may be adversely affected, by calling the above number orwriting to the address above. Any person who does not intend to attend the Court hearing but wishesto make representations about the Scheme or considers that they may be adversely affected shouldcommunicate their views to Prudential by calling the above number or writing to the address above,preferably before 7 December 2018.

Slaughter and May

Solicitors to The Prudential Assurance Company Limited and Prudential International Assurance plc

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The registered office of Prudential International is in Ireland at Montague House, Adelaide Road, Dublin 2. Prudential International is a marketing name of Prudential International Assurance plc, a life assurance companyoperating from Ireland. Registration No. 209956. Telephone number + 353 1 476 5000. Prudential InternationalAssurance plc is authorised by the Central Bank of Ireland.

Prudential International Assurance plc, UK Branch is registered in the UK as a branch of Prudential InternationalAssurance plc which is authorised by the Central Bank of Ireland and subject to limited regulation by the FinancialConduct Authority and the Prudential Regulation Authority. Details about the extent of our regulation by the FinancialConduct Authority and the Prudential Regulation Authority are available from us on request. The registered addressof Prudential International Assurance plc, UK Branch is 3 Sheldon Square, Paddington, London W2 6PR. RegistrationNo. BR017106. Telephone number 0207 004 4998. If the company should become unable to meet its liabilities, theFinancial Services Compensation Scheme will protect eligible policyholders habitually resident in the UK when theircontract starts. This protection does not extend to externally-linked investments for further information please readthe Key Features Document which is available on the Prudential website.

genb914801 pia16 07 18 pia - prudentialinternational.com fileprudential has decided to consolidate...

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