16 Sep 2013
Domestication of Hong Kong branch
In its half-year results announcement on 12 August 2013, Prudential plc noted that the long-running project to domesticate its Hong Kong insurance business was approaching its conclusion. The courts have now approved the timetable to complete the project, following directions hearings held respectively on 10 September 2013 in Hong Kong and in London on 13 September 2013. The aim is for the domestication to become effective on 1 January 2014.
Since 1964 The Prudential Assurance Company Limited (“PAC”) has been providing customers in Hong Kong with insurance products through a local Hong Kong branch. This is the last remaining Asian branch office of Prudential’s UK-based business and it has grown to become one of the leading insurers in Hong Kong.
To align the branch business in Hong Kong more closely with Prudential’s other Asian operations, the Board of PAC is proposing to transfer the branch business to two Hong Kong-incorporated companies – Prudential Hong Kong Limited and Prudential General Insurance Hong Kong Limited – with one providing life insurance and the other providing general insurance.
Similar reorganisations have been undertaken by PAC in the past – most recently in Singapore, Australia, New Zealand and Canada during the 1990s.
Transfer of policies
Life insurance policies that were originally taken out by customers of PAC’s Hong Kong branch will be transferred to the new life insurance company in Hong Kong. The assets supporting PAC’s life insurance policies, including those in Hong Kong, form part of the assets of the PAC long-term fund. The proposed transfer will mean that a certain amount of the fund’s assets and Hong Kong liabilities are transferred to the new life company. The vast majority of the life insurance business and long-term fund will remain in the UK and will continue to be regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The Hong Kong companies will be regulated by the Office of the Commissioner of Insurance (OCI).
Having taken the current opinions of its regulators and advisers into account, the Board of PAC has concluded that the proposed transfer is fair to both transferring and non-transferring policyholders and will not materially adversely affect either their security or their reasonable benefit expectations.
Only the life and general insurance policies of the approximately 800,000 customers of the Hong Kong branch, out of PAC’s total of around 9.5 million policyholders, will be transferred to the relevant company of the two new companies created in Hong Kong and there will be no changes to the terms and conditions of any customer’s policy or to the way it is managed as a result of the proposed transfer.
Prudential is committed to making the proposed transfer transparent for all policyholders. The plan to divide the long-term fund has been reviewed by the PAC With-Profits Committee, independent actuaries and regulators including the FCA, the PRA, and the OCI. The PAC Board has consulted extensively with all of these regulators about the proposals and will continue to take their views into account until the transfer is finalised.
Life insurance policyholders who are affected will be sent detailed information in the coming weeks about the proposed transfer of the Hong Kong life insurance business including information on the composition of the PAC long-term fund and how its assets and liabilities will be split. PAC is taking extra steps beyond the policyholder mailing to ensure that affected stakeholders are aware of its plans. Advertisements will be published over the coming days in a number of national, regional and trade newspapers in the UK, and where appropriate in their international editions. The advertisements will also appear in English and Chinese language publications in Hong Kong.
The proposed transfer of the life insurance business is subject to court approval in Hong Kong. However, because PAC is a UK-based company, the Board of PAC is also seeking approval from a UK court. Affected parties have the right to raise any concerns about the proposed transfer with the UK and Hong Kong courts, either in writing, via a representative or by appearing in person at either or both of the court hearings.
It is expected that the Hong Kong court Sanctions Hearing will take place on 26 November 2013 and if not concluded on that day the court will reconvene on 27 November 2013. The UK court Sanctions Hearing is expected to take place on 10 December 2013. Any changes to these dates will be announced on: www.pru.co.uk/hongkongtransfer and www.prudential.com.hk/announcement_en. A live video link from the court hearing in Hong Kong will be available to policyholders in the UK. This facility will also be available to Hong Kong policyholders during the UK court hearings.
The applications are due to be heard by the Hong Kong court and the UK court as follows:
- Hong Kong court: 26 and, if required, 27 November 2013 at 15.00 (Hong Kong time), at the High Court Building, 38 Queensway, Hong Kong
- UK court: 10 December 2013 at 09.30 (UK time), at the Rolls Building, Royal Courts of Justice, Fetter Lane, London, EC4A 1NL
Details for attending the court hearings via video link are as follows:
- The live video link of the Hong Kong hearing in London will commence at 07.00 (UK time), located at: IDRC, 70 Fleet Street, London, EC4Y 1EU (Tel: +44 (0) 20 7936 7000)
- The live video link of the UK hearing in Hong Kong will commence at 17.30 (Hong Kong time), located at: Executive Centre, Level 3 Three Pacific Place, 1 Queen's Road East, Hong Kong (Tel: +852 2855 6888)
The aim is for the transfer to become effective on 1 January 2014.
PAC is also proposing to transfer the general insurance business of its Hong Kong branch to a new Hong Kong-incorporated Prudential general insurance company. The proposed general insurance transfer follows a different process and does not require approval by either of the UK or Hong Kong courts; instead it is subject to the approval of the OCI. General insurance policyholders of the Hong Kong branch will also be sent a detailed pack of information including details of how they can raise any concerns.
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Notes to Editors:
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