Pru shelves plans to share excess capital

Grovelawn Financial News 30/07/2008

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Policy holders denied payout

Prudential, Britain’s second largest insurer, has informed its policyholders and shareholders that it will not pay out some of the £8.7 billion of excess capital from it’s with profits fund to them as had been previously assumed.

The cash comes from the surplus that builds up in a fund over time. The Pru’s UK chief executive, Nick Prettejohn, said that the average pay out for each recipient would be in the region of £25 and that “after comprehensive and extremely complex analysis” it’s model of operation for the with profits funds would remain the same, arguing that insurers need the excess capital to maintain healthy and secure funds.

Executives at the Prudential went through rigorous questioning by the Commons Treasury Select Committee. The Financial Services Authority has also begun a review that may prevent insurers from using inherited estates to pay miss selling claims, something the Pru has done with £1.6 billion so far.

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