The UK’s biggest insurance firm Prudential, which currently manages £669bn in assets, has announced a demerger of M&G Prudential and Prudential plc, resulting in the creation of two separate listed companies.
M&G Prudential will become a standalone entity covering the UK and European market, it will continue to be led by its chief executive John Foley. Prudential plc will cover the group’s Asia, US and Africa businesses and will be led by its current group chief executive Mike Wells. With the demerger, the group aims to enhance the capital efficiency and customer focus of both firms.
The decision to split both businesses has not come entirely unexpected, just last year, Prudential announced that it intends to merge its UK life insurance business with its fund group M&G. A move, which stoked speculation of a possible spin-off.
Moreover, Prudential’s Asia, US and Africa business has been growing at a faster pace compared to it’s UK and Europe business, with the Asia business booking double-digit growth at the end of 2017.
In a bid to improve its capital efficiency, the demerger will also involve M&G Prudential selling £12.0 bn of its shareholder annuity portfolio to UK insurance firm Rothesay Life.
Paul Manduca, chairman of Prudential plc, comments: “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. Both are expected to meet the criteria for inclusion in the FTSE 100 index”.
Mike Wells, group CEO adds: “Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector’s most trusted brands, while Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.”
The group confirmed that Prudential plc will remain headquartered in the UK and retain its premium listing on the London Stock Exchange, its primary listing in Hong Kong, and other listings in Singapore and New York. M&G Prudential will also remain headquartered in the UK and hold a premium listing on the London Stock Exchange.
Once the demerger has been completed, existing shareholders will hold shares in both groups.