Capita Selected by Prudential UK as Strategic Outsourcing Partner

28 November 2007

• £722 million, 15 year contract to deliver annual savings of £60 million to Prudential by 2010
• Capita’s offshore operations more than doubled through acquisition in Mumbai

The Capita Group Plc ("Capita") announces that it has today signed a contract to become a strategic outsourcing partner of Prudential UK (“Prudential”), to administer 7 million mature life and pensions policies including group and individual pensions, investment bonds and life and endowment policies. The contract is worth approximately £722 million over 15 years.

Capita will provide customer servicing, policy administration, new business processing, claims activity and related IT support to Prudential UK. Under the terms of the agreement, the detail of which is subject to a collective consultation process, approximately 1,750 Prudential staff working in the UK, 1000 in Craigforth and 750 in Reading, will transfer to Capita under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) in April 2008.

As a key element of the deal, Capita will acquire business and assets from Prudential, for a consideration of £25 million, including part of the business of PPMS, Prudential’s offshore operation based in Mumbai, involving the transfer of 1,250 staff. Although TUPE does not apply in India, all affected employees will transfer in the spirit of the legislation, ensuring protection of their existing terms and conditions.

£100 million of the deal is an investment by Prudential UK, over six years, to fund a transformation programme. The programme will deliver enhanced customer service through a substantial simplification of policy administration processes and migration of in-force and new business policies from Prudential’s legacy IT systems to two Capita platforms.

Paul Pindar, Chief Executive of The Capita Group commented: “Capita is delighted to engage in this strategic alliance with Prudential UK. Our aim is to build a mutually beneficial partnership to support the further growth of both Prudential and Capita in the life and pensions industry. We look forward to working with Prudential to deliver high quality outsourced support and welcoming all transferring staff to the Capita Group’s thriving life and pensions business.

We are committed to expansion in both the UK life and pensions market and our Indian operations to meet increasing demand. The operations and employees that will transfer to Capita under this agreement will allow us to take a significant step forward with these ambitions. The Craigforth operation will be developed into a centre of excellence for life and pensions administration. The Reading operation will initially continue to be delivered from its current site while we investigate the feasibility of combining it with our operations in Cheltenham, Swindon or from an alternative site in Reading. And in Mumbai the combination of our increased scale and capability will provide a market leading offshoring base from which to support our plans across the broad range of our service offerings.”

Nick Prettejohn, Chief Executive, Prudential UK & Europe said: “The agreement with Capita is another significant milestone in our programme to deliver continued superior performance and profitability in our UK business. We have set out very clear priorities for the business and this agreement helps us to deliver our strategy by removing fixed costs from our operations and achieving significant operating efficiencies. It will allow us to concentrate on using our competitive strengths and proven capabilities to realise the attractive opportunities in the market for retirement savings and income.

After detailed analysis of a number of potential options, it was clear that Capita best enables us to deliver continued high levels of customer service while providing ongoing certainty over costs. They are a partner with a proven record of high standards of service for customers and advisers, IT delivery and support while also offering the best overall employment solution for our staff.”

Capita provides core administrative support to a number of UK and overseas life and pensions companies, including the Children’s Mutual, Lincoln Financial Group, Resolution, Zurich and Co-operative Financial Services. Including this agreement Capita Life & Pensions will be responsible for administering approximately 23 million policies.

Capita already delivers a range of life and pension sales and administration services for Prudential UK’s business. Prudential and Capita signed an outsourcing agreement in 2006 under which Capita delivers end-to-end support for Prudential’s UK life and pensions operations from Prudential’s Belfast operation. Capita has also been successfully providing a full range of life and pensions administration services for Prudential’s international cross border life assurance portfolio of new and existing business since 2003.