Prudential sues former agency leader for up to $2.5b for mass exodus of 244 agents

SINGAPORE - Life insurer Prudential Assurance Company Singapore is suing former agency leader Peter Tan Shou Yi after 244 of its agents jumped ship to rival firm Aviva, saying he offered loyalty bonuses to those who left with him and had agents sign non-disclosure agreements while he planned the move.

In a High Court trial that started on Tuesday (July 16), Prudential is claiming "significant and long-lasting loss" over alleged poaching by Mr Tan, which resulted in 70,000 policies left with no agents, in the first litigation fallout from such a dispute.

It estimates its losses in profits to be around $300 million if the agents had stayed on to 2025; and if they stayed in perpetuity, the losses would amount to $2.5 billion.

The timeframes were taken in view of a Pegasus Agreement Mr Tan signed with Prudential just a year before the mass defection. It contained projections of his and his agents' performance for at least 10 years, suggesting Prudential's losses were unlikely to be limited to a short period of time, the court heard.

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Prudential accused Mr Tan, 54, of "surreptitiously" orchestrating a mass defection to Aviva and its subsidiary financial advisory firm from May to July 2016, adding that Aviva "furnished a war chest of at least $100 million to $150 million" to recruit an expected base of 250 agents.

If Mr Tan could get another 100 agents on board, he would receive an annual bonus as well, said Prudential's lawyers from Rajah & Tann, led by Mr K. Muralidharan Pillai, in an opening statement.

"The defendants would like the court to believe that this mass migration... was the result of coincidence, normal attrition, and possibly even loyalty to (Mr Tan)," lawyer Paul Tan of Rajah & Tann told the court on Tuesday.

"One swallow may not make a summer, but 244 agents make it an unlawful, illegitimate en bloc solicitation of Prudential's agents."

Prudential's lawyers also said in their submissions to court that Mr Peter Tan compelled agents to sign non-disclosure agreements, travel to Guangzhou from May 26 to 29 to discuss the defection, and warned them not to inform (Prudential) of the defection.

They said that Mr Tan held at least 12 meetings with agents and made it "mandatory" for agents, including those who had yet to make up their minds, to attend the Guangzhou meeting where he gave a presentation with 95 slides.

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Mr Tan, represented by lawyers from TSMP Law Corporation led by Senior Counsel Thio Shen Yi, contends that the regulatory and commercial landscape made Aviva's model more attractive and was decisive in causing the defection. Prudential, however, argues that Mr Tan had to persuade the agents to move.

Mr Tan's case is also that regardless of his acts, his departure from Prudential would have caused several other senior agency leaders to leave with some agents - an argument that the insurer contests.

Mr Tan, while working at Prudential, had set up a company called Peter Tan Organisation (PTO), which had about 500 agents and agency leaders under his stewardship.

Court documents said PTO was the top producer at Prudential before the exodus, and generated $141 million in new business profits, as well as a total annual premium equivalent of $192 million from 2011 to 2015.

"As a result of (Mr Tan's) wrongdoing, Prudential Assurance Company Singapore has suffered significant and long-lasting loss and injury due to reduced productivity and lost profits from the mass defection," said Prudential's lawyers.

These losses stem from factors such as the profits the defecting agents would have generated until their departure from the company, as well as profits they were expected to make if they had not left Prudential.

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While Prudential argued that Mr Tan knew his acts had breached his contractual obligations of non-solicitation, as set out in a 2010 agency instruction circulated to agents, Mr Tan's case is that the 2010 terms did not apply to him.

This was because the 2010 terms referred to people who had signed an adviser or financial consultant agreement with Prudential, and the agreements he signed were not termed as such, said court documents.

Prudential said as well that Mr Tan breached his fiduciary duties - an implied duty of trust and confidence - which could arise from the fact that he had influence over Prudential's agents and could thus directly affect the company's economic interests.

Mr Tan, through his lawyers, is counterclaiming that Prudential terminated his service in an invalid manner, causing him loss and damage as well. 

This article was first published in The Straits Times. Permission required for reproduction.