Prudential announces split of global businesses


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

Once the proposed split is complete, Prudential said it expects both companies to be big enough to feature on Britain's benchmark FTSE 100 stock index.

Prudential PLC (LON:PRU) investors today welcomed the financial giant's plans to demerge its M&G Prudential business, which accompanied solid full-year results, a move that continues the seismic changes happening in the previously rather staid sector.

Mike Wells, group chief executive, commented: "Our businesses share common heritage, values and objective".

"Following separation, M&G Prudential will have more control over its business strategy and capital allocation".

But, he concluded: "Nonetheless, the potential benefits arising from the demerger are intriguing and, should Prudential capitalise on the opportunities, the move could be extremely rewarding".

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Regarding its demerger plans, the company said that M&G Prudential will become a capital-efficient UK & Europe savings and investment provider, while Prudential plc will be an insurance group focused on high-growth opportunities in Asia, the USA and Africa. Following completion, Rothesay Life will be the largest specialist annuity insurer in the UK.

It will also help the United Kingdom part of the business "continue its transformation into a more capital-efficient and customer-focused business, targeting growing demand for comprehensive financial solutions".

The annuity sale is the largest of its kind in the United Kingdom and covers 400,000 policyholders.

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. "However, it's a shame the sale proceeds aren't coming back to shareholders, especially given that it's freeing up significant regulatory capital".

He added: "The separation of the United Kingdom and European unit will enable each business to hone in on specific strategic objectives. We look forward to building on this success as we predict a very active pension buy-out pipeline ahead".

"Meanwhile, from an investment perspective, the robust solvency surplus underpins Prudential's financial strength, whilst the healthy increase in the dividend is a statement of management confidence in the outlook, even if the projected yield of 2.8% is noticeably shy of some of its competitors".