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Prudential Singapore sues former top manager for up to S$2.5b
PRUDENTIAL Assurance Co Singapore is suing its former top agency manager Peter Tan Shou Yi for up to S$2.5 billion for allegedly plotting to recruit at least 250 top Prudential agents for Aviva Singapore.
On the first day of a trial that will be closely watched by the industry and regulator, the High Court heard on Tuesday that rival insurer Aviva Singapore had set aside a war chest of S$100 million to S$150 million to poach the agents, whose defection Prudential said left it with 70,000 policies without agents to service them.
Prudential alleges that Mr Tan, its former star group agency manager, had instigated 221 agents and 23 agency leaders at his agency Peter Tan Organisation (PTO) to defect en masse to Aviva Ltd's subsidiary Aviva Financial Advisers (AFA) in mid-2016.
It claims that the 54-year-old had breached his contractual and fiduciary duties when he carried out the poaching - which involved "secret" meetings and non-disclosure agreements - while he was still a Prudential agency manager and being paid handsomely - S$9.7 million in 2015.
PTO was the top producer at Prudential before the exodus took place. It pulled in S$141 million in new business profits and a total annual premium equivalent (APE) of S$192 million from 2011 to 2015.
Mr Tan would stand to receive an additional S$17 million on top of the standard remuneration if PTO could generate S$189.1 million in APE and S$154.6 million in new business profits in the first six years under his agreement inked with Prudential in 2015 .
In its opening statement, Prudential's lawyers from Rajah & Tann detailed how Mr Tan secretly orchestrated the exodus using a "carrot and stick" approach in his targeted and aggressive campaign to "dislodge" the agents from Prudential. He allegedly agreed to provide a base team of 250 agents under his 10-year deal with Aviva, which dangled incentives of S$100 million to S$150 million. Court documents did not reveal what these incentives were.
Mr Tan had at least 12 meetings with the agents - including one in Guangzhou where attendance was mandatory - gave extensive presentations, promised those who left with him loyalty bonuses while threatening the future of those who remained, the court heard.
"He compelled agents to sign non-disclosure agreements, go to Guangzhou from May 26-29, 2016, to discuss the defection, and warned them not to inform (Prudential) of the defection," said the Rajah & Tann team led by Murali Pillai.
To keep his solicitation a secret, Mr Tan was said to have warned agents not to make copies of the material distributed to them and also had them write their names on the material so that any photocopy could be traced, Prudential charged.
"Peter's surreptitious actions are consistent with his own belief that he was under a non-solicitation obligation."
Mr Tan was accused of engineering the mass defection on the one hand, and assuring Prudential that he would not leave the insurer on the other hand. He was said to have acted as if he had not decided whether he would resign or retire, after his agents had already crossed over in strength to AFA.
He tendered his termination notice on July 8, 2016, after 232 of his agents had quit.
Calling Mr Tan's plan to hollow out PTO and reproduce it for Aviva "ruthless", Paul Tan of Rajah & Tann told the court: "Defendants would like the court to believe that all this was coincidence, normal attrition, perhaps loyalty to Peter. One swallow may not make a summer, but 244 agents make it an unlawful, illegitimate en bloc solicitation of Prudential's agents."
Prudential saw an unprecedented 70,000 policies suddenly left with no agents, or known as orphan policies, as a result of the exodus. To minimise the adverse impact on holders of these orphan policies, the insurer gave incentives to have them serviced.
The insurer's productivity and profits have also suffered, resulting in "significant and long-lasting loss and injury", according to Prudential. In noting that Mr Tan, who joined Prudential as agent in February 1997, claimed his agency contracts were missing, the insurer made this comment in the opening statement "Tellingly, Peter... only after the event reported to the police that his contracts with Prudential were 'lost'."
The insurer is also suing PTO Management and Consultancy (PTOMC), which Prudential claims is the alter ego (directing mind and will) of the legally-trained Mr Tan.
Its claims for compensation from both Mr Tan and PTOMC include the profits that would have been made by the departed agents, with the quantum depending on the period of loss.
If the period of loss is calculated as 10 years - used for projections in the 2015 agreement Mr Tan entered into with Prudential - the quantum would be about S$300 million.
If the agents had stayed on indefinitely, Prudential argues that the lost profits would amount to S$2.5 billion.
Mr Tan in his defence said it was not him but PTOMC that contracted with Aviva Financial Advisers.
He is not only denying he has non-solicitation obligation to Prudential, but also rejecting claims that he persuaded his agents to jump ship. Also, he points out that his departure from Prudential would anyway have prompted some of his agency leaders and, in turn, agents to follow suit.
He points the finger at Prudential's refusal to adopt the financial advisory model (that would allow advisers to sell products from multiple insurers), extensive cost-cutting measures after Philip Seah became Prudential's chief executive and Mr Seah's "high-handed" attitude in running the insurer. Mr Tan said significant and widespread unhappiness was prevalent in PTO as a result, and his agents told him that they wanted to quit and asked him to help explore options for them.
Mr Seah was appointed chief executive of Prudential Singapore in late October 2015 and was replaced in October 2016 by Wilfred Blackburn.
Through Senior Counsel Thio Shen Yi from TSMP Law, Mr Tan is counter-suing Prudential. Among other things, he's accusing the insurer of invalidly terminating his service and inducing former PTO agency leader Wendy Ho to breach her non-disclosure agreement with PTO.
PTOMC, which is defended by Nicholas Poon from Breakpoint LLC, denied it had a role in poaching the agents and leaders.
Justice Chua Lee Ming is presiding over the trial which is scheduled to run for 65 days.