tiptrot.com May 21, 2018

Prudential to spin off M&G

15 March 2018, 02:31 | Cedric Leonard

The firm announced the news with its full-year results

The firm announced the news with its full-year results

Jason Hollands of Tilney Investment said: "The news that Prudential is to split and spin-out its asset management dominated M&G Prudential business as a separately listed United Kingdom company is arguably a long overdue development".

'One may assume the United Kingdom interests (M&G Prudential) will be less appealing to investors as the non-UK interests have experienced faster growth, ' says Russ Mould, investment director at AJ Bell.

Jason Hollands said Pru's spin-out of M&G Prudential was "arguably a long overdue development" and follows the direction of travel in the sector, with players like Standard Life Aberdeen separating its insurance and asset management units. The business remains on track to deliver its previously announced cost savings target, the firm said.

Meanwhile, Prudential also announced the sale of a £12 billion (US$16.7 billion) of United Kingdom annuity portfolio to Rothesay Life, in line with its strategy to transition towards a more capital light business model.

Both transactions are expected to complete by the end of 2019.

The capital benefit of this transaction will be retained within the group to support the demerger process, said Prudential. Based on asset and liability values as at Dec 31, 2017, the transaction is estimated to give rise to a pre-tax IFRS loss of around £500 million in the first half of 2018, alongside the de-risking being achieved.

"Meanwhile in the USA, the company is well served through its Jackson brand, which is ideally placed to suit the needs of the baby boomers". Prudential's shares are changing hands 5.97 percent higher at 1,934.55p.

Both companies will be headquartered and listed on the London Stock Exchange.

On a day when it declared solid annual results, United Kingdom insurance giant Prudential Plc managed to steal its own thunder with a huge announcement - namely its plans to demerge M&G Prudential from Prudential Plc and partially sell off its United Kingdom annuity portfolio.

The blue chip FTSE 100 index was up 0.3 percent at 7,157.09 points by 1001 GMT, recovering some losses from the previous session.

Mike Wells, Group Chief Executive, said: "Our businesses share common heritage, values and objective".

"Looking forward, we believe we will be better able to focus on meeting our customers' rapidly evolving needs and to deliver long-term value to investors as two separate businesses", he said.

The two businesses will have their own distinct investment prospects, the firm said today, with M&G Prudential lined up to be "an independent, capital-efficient UK & Europe savings and investment provider" and Prudential aiming to be a "a leading worldwide insurance group focused on high-growth opportunities in Asia, the United States and Africa".

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

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