Prudential announces split of global businesses

Prudential announces split of global businesses

The decoupling of Pru from M&G Prudential will result in two separately-listed companies, which the life insurer expects will both be included in the FTSE 100 index.

"The move represents a welcome expansion of the United Kingdom listed asset management sector which in recent years has lost Henderson, which delisted on the London Stock Exchange following its merger with New York Stock Exchange-listed Janus, and F&C following its acquisition by Canada's BMO, a subsidiary of the Bank of Montreal".

In preparation for the United Kingdom demerger process, and to align the ownership of the company's businesses with their operating structures, Prudential plc intends to transfer the legal ownership of its Hong Kong insurance subsidiaries from The Prudential Assurance Company Limited to Prudential Corporation Asia Limited, which is expected to complete by the end of 2019.

"The decision to demerge M&G Prudential follows a rigorous review by the board which considered all options, including the status quo, and concluded that it is in the best interest of the group to operate as two separately-listed companies, able to focus on their distinct strategic priorities in their chosen geographies", Paul Manduca, Prudential's chairman, said.

UK-based Rothesay Life announced today that it has entered into an agreement to purchase £12bn of annuities from Prudential plc. "Rising interest rates in the United States would not necessarily work to Prudential's advantage, and the group's complex currency position is to an extent driven by the vagaries of sterling's performance".

Prudential group chief executive Mike Wells says: "Following separation, M&G Prudential will have more control over its business strategy and capital allocation".

Meanwhile, Prudential will be able to focus on the attractive returns and growth potential of its business in Asia and the US.

Ahead of the demerger, Prudential will transfer the legal ownership of its Hong Kong insurance subsidiaries from its United Kingdom regulated insurance entity, The Prudential Assurance Company Limited, to Prudential Corporation Asia Limited. Proceeds will be used to support the group's demerger.

Group IFRS operating profit of 4.70 billion pounds grew 6 percent.

In the US, IFRS operating profit increased by 3 per cent, due mainly to growth in fee income on higher asset balances, which outweighed the anticipated reduction in spread earnings.

On the FTSE 250, shares in Dignity (DTY) jumped 15.1% to 981.5p after reassuring investors with a 3% jump in profits, calming fears after January's profit warning.

Total revenue, net of reinsurance, was 86.56 billion pounds, up from 71.84 billion pounds a year ago. In Asia, the company reported double-digit broad-based growth in new business profit of 12 percent. "So while it is a clearly very significant deal we don't believe there will be any fundamental change to the way the bulk annuity market acts during 2018 - we think it remains on target for at least £30 billion, as we predicted in late 2017".

Prudential raised its full year dividend by 8% to 47p per share even as underlying free surplus capital generation fell by 1% to £3.6bn due to an increase in restructuring costs and a lower contribution from our USA business.

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