Prudential struck a landmark deal today to take control of Equitable Life's £1.8 billion with-profits annuities fund as it committed its future to the UK, beat profits forecasts and rolled out a string of new initiatives — putting at risk 2,000 jobs in Britain.

Pru shares rose almost 4 per cent, up 25p at 668p, as shareholders welcomed operating profits of almost £2 billion that were 8 per cent ahead of consensus. An increase in the cost-cutting target to £195 million by 2010 also went down well among investors.

The bulk-annuities deal with Equitable Life, representing about 20 per cent of its outstanding book of business, marks the largest agreement of its kind in recent years and will entail 60,000 policyholders transferring to a Pru-run combined book.

The insurer, led by Mark Tucker, the group chief executive, said today that it should generate annual premium equivalent income of about £180 million and a one-off profit of about £50 million as a result of the agreement.

No payment is involved in arrangements such as this, which effectively involve the transfer of risk from one party to another.

It came as the Pru generated more than £1 billion of customer money for the first time last year, 20 per cent growth on the previous year.

New business profit margins improved to 42 per cent.

But the Equitable transfer, which is subject to policyholder approval, also came as the Pru completed a wholesale review of its UK business by concluding, as expected, that it would retain its UK business but concentrate on profitable policies.

Mr Tucker said: "We are confident that there are profitable opportunities for the group in the [UK] retirement and savings market. What you will see in the future is a leaner, more focused group that will generate superior returns."

The Pru said that it had already withdrawn from certain areas of the UK individual pensions and unit-linked bond markets.

The second-largest insurer said that it would set up a retail retirement business, designed to concentrate on individual annuities, equity release and what it called a "new approach" to retirement savings.

It also said that it would take "an opportunistic approach" to increasing the size of its bulk-annuities business, similar to today's Equitable book deal.

And it noted that it would nominate Peter Bloxham, formerly at the law firm Freshfield Bruckhaus Deringer, as a policyholder advocate, as it took the decision in principle to proceed with a reattribution of its inherited estate.

Nick Prettejohn, the head of the Pru in the UK, said that £80 million of extra cost savings had been targeted, to total £195 million a year by 2010.

A total of 3,000 jobs are at risk as a result of the target, which involves the possibility that more jobs will be "offshored" to Pru's Bombay centre, where 1,000 staff are working already.

Of the total jobs at risk, 2,000 are in Britain.

The insurer will also spend the next three to six months talking to three potential outsourcers, who might contract out the management of Pru's existing life and pensions book.

Some redundancies may be involved. Amicus, the pensions union, was told about the move before today's announcements.

David Fleming, a national officer for Amicus, said that the Pru's jobs decision "could have been a lot worse".

He said: "We are now looking for clarity and transparency from the Prudential. We expect the company to enter into a genuine dialogue with Amicus on the future of its UK business, with the aim of ending uncertainty and achieving the best possible outcome for the staff."

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