Distribution Agreement

Prudential PLC
10 October 2002


Thursday 10 October 2002

Prudential and Abbey National in distribution agreement


Abbey National and Prudential have signed an agreement for Abbey National to
distribute Prudential's market-leading with-profits bond for an initial
four-year period from 2003. This anticipates the proposed changes to
polarisation rules1 that will allow banks to offer advice on other companies'
regulated products.


The companies have also signed a Heads of Agreement, under which Abbey National
will tailor its highly-regarded range of life protection products for
distribution by Prudential through its multi-channel distribution network.


The benefits of the agreements post-depolarisation will be:


  • Prudence Bond, Prudential's market-leading with-profits bond, will be
    distributed through Abbey National's extensive high street branch network.


  • Prudential will make a with-profits bond tranche of up to £750 million
    available to Abbey National each year.


  • Enhanced income opportunities and increased capital efficiency for both
    parties.


  • Both parties will receive commission at market-leading rates for selling
    each other's products.


Pre-depolarisation, both companies will enter a similar distribution arrangement
that will meet the current regulatory requirements2 and will provide similar
benefits.


The with-profits agreement is an exclusive four-year arrangement between Abbey
National and Prudential. Abbey National remains free to sell any of its own
investment and protection products but will not sell any other third party's
with-profits bond through its branches for at least the next four years.


Similarly, under the Heads of Agreement proposals, Prudential will not sell any
other protection products during this period. Both these arrangements are
subject to certain conditions and regulatory approval and are consistent with
both companies' focus on selectively manufacturing products where they have a
clear competitive advantage. Both parties are also free to seek further
distribution arrangements for these and other products.


The with-profits agreement, post-depolarisation, will allow Abbey National to
sell a jointly-branded version of the Prudence Bond through its 700 specialist
investment advisers based in its 756 branches and on the telephone.


Under the Heads of Agreement, it is intended that Prudential will replace its
current protection products with new products developed on its behalf by Abbey
National, such as life assurance, critical illness cover and income protection,
and sell these through its multi-channel distribution network. The products will
be underwritten and administered by a new dedicated business unit within
Scottish Provident, Abbey National's award-winning specialist protection arm,
but sold under the Prudential brand.


Mark Wood, Head of Prudential UK said: 'The with-profits agreement will give
Abbey National's 15 million customers the opportunity to purchase our
market-leading Prudence Bond. It reflects our strategy of building multi-channel
distribution and enables us to focus our capital on areas of the business that
give us a competitive advantage.'




Andrew Pople, Managing Director, Retail Banking, Abbey National, said: 'We are
pioneers in developing innovative ways of using partnerships in UK financial
services, and are moving swiftly to embrace the opportunities offered by
depolarisation proposals.

This will further Abbey National's ambition to be the best place on the high
street for a wide range of superior investment products.



'As with MBNA, where we use their expertise to manufacture credit cards for us,
we are taking advantage of Prudential's brand strength and recognised leading
position in with-profits, whilst expanding our in-house capabilities across the
broader range of investment and protection offerings.'

                                     -Ends-
Media Enquiries to:

Darragh Leeson                                        Christina Mills/Gug Kyriacou

Media Relations                                       Media Relations

Prudential UK                                         Abbey National Group

020 7334 5121                                         020 7756 4212/ 020 7756 4207


Clare Staley/Steve Colton

Group Media Relations

Prudential plc

020 7548 3719/ 020 7548 3721

Investor Relations Enquiries to:

Rebecca Burrows/Laura Presland                        Jon Burgess/Rob Askham

Group Investor Relations                              Investor Relations

Prudential plc                                        Abbey National Group

020 7548 3537/020 7548 3537                           020 7756 4182



NOTES TO EDITORS:

1. The agreement is dependent on the implementation of the proposals to
liberalise the polarisation regime envisaged in the FSA's Consultation Paper 121
(CP121). The FSA is due to publish proposed rule changes later this year.

2. Pre-depolarisation, Abbey National intends to distribute a new Abbey National
with-profits bond provided by Prudential.

3. This agreement builds on Prudential's current agreements with Bradford and
Bingley and Woolwich IFAs (WIFAS) who are major distributors of Prudence Bond in
the intermediated channel.

4. Abbey National customers investing in Prudence Bond will have their money
invested in Prudential's with-profits fund, a mixture of stock market equities,
property, gilts and other investments.

The Prudential life fund had a balanced asset mix as at 30 June 2002 (details of
asset mix as at 31 December 2001 are in brackets):

•     UK equities - 36 per cent (38.6 per cent)

•     International equities - 14.8 per cent (14.4 per cent)

•     Property - 15.6 per cent (14.9 per cent)

•     Bonds - 29.4 per cent (27.8 per cent)

•     Other asset classes - 2 per cent (1.6 per cent)

•     Cash - 2.2 per cent (2.7 per cent)

5. Scottish Provident is the award-winning protection brand of Abbey National
for Intermediaries, offering better protection to individuals and families
against the financial effects of serious illness, death, disability and
unemployment.





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