Release date: 3 January 2007

Pearl Group today announces it has increased the equity backing ratio (EBR) in the Pearl and London Life with-profits funds in a move that can potentially increase investment returns for over one million Pearl Group policyholders with combined assets of over £11 billion.

Further information for customers can be found in our Questions and Answers section.

Around 45,000 London Life policyholders** will benefit from an EBR increase from about 10% to 35%. London Life policyholders have had little benefit from investment returns from equities and property since 2002/3 under the previous owners, when the EBR on all funds moved from 68% at its height in the late 90s to around 10% in 2002/3.

From 1st January 2007, Pearl further increased the EBR for the one million policyholders in the Pearl Assurance with-profits fund from 45% to 50% - Pearl was acquired 18 months ago and during this time the Pearl target EBR has gone from 25% to 50%. The improvements in the Pearl with-profits fund will also potentially increase investment returns for the 25,000 NPIL policies that are reassured into the Pearl with-profits fund. The EBR changes have been notified to the Financial Services Authority.

Hugh Osmond, Director of Pearl Group Limited, said: "Since we acquired the businesses in 2005, we have stressed that our overriding aim is to improve returns for policyholders – in part through driving the alignment of shareholder and policyholders’ interests across the Pearl Group. The increase in EBR’s is tangible proof of this commitment. We have been able to take such steps because we have significantly improved the risk management of the Pearl Group Funds which has helped to deliver renewed capital strength. He added ‘Turning round the performance of a closed fund is like turning round an oil tanker - these moves represent a real tangible change of direction for policyholders."

The equity backing ratio (EBR) is the amount of policyholder funds invested in equity and property. The Increases in EBR should therefore improve long term investment performance of the funds for policyholders as assets such as equities and property have historically generated higher returns than fixed income investment. The changes are likely to start impacting on the returns of Pearl and London Life policyholders by 2008/09. This will have an increasing impact over time.

Pearl Group continues to examine its funds’ asset mix and investment strategies. It also continues to drive changes that unlock and protect value to Pearl Group policyholders.

** The LL EBR change directly benefits those LL policies in particular existing sub-funds where reasonable investment performance has a realistic likelihood of increasing policy payouts.

If you are a member of the press or media, please visit www.pearlgrouplimited.co.uk for further information.