Pru customers miss out on windfall

By Myles Neligan

LONDON (Reuters) - Four and a half million Prudential (PRU.L) customers will not receive a hoped-for windfall after the insurer abandoned plans to reattribute an 8.7 billion pound surplus in its with-profits fund.

Under the plan, Prudential policyholders would have received a one-off payment in return for giving up the right to a share of any future distribution of the surplus, or inherited estate, with the full amount going instead to Prudential's shareholders.

The company has said previously that policyholders would have been entitled to "a small one-off benefit", with newspapers reporting estimates of several hundred pounds on average.

Prudential UK and Europe Chief Executive Nick Prettejohn said on Friday the group had concluded that shareholders and policyholders were unlikely to reach any mutually acceptable reattribution deal.

The estate, built up from decades of shareholder contributions and unclaimed policies, and used to protect policyholders from market fluctuations by smoothing out returns, would underpin the with-profits fund's performance in current choppy financial markets, he said.

"This isn't a decision based on current market conditions," he told reporters on a conference call. "But current volatile conditions are an excellent example of why it is necessary to have a strong inherited estate."

By 3:50 p.m., Prudential shares were down 2 percent at 540 pence, while the FTSE 100 share index was largely flat.

Prudential's decision was seen as unlikely to have had any impact on the stock, as few analysts had factored the reattribution process into their earnings forecasts.