Prudential plc is to demerge its UK & Europe business ('M&G Prudential') from Prudential plc, resulting in two separately-listed companies with different investment characteristics and opportunities. On completion of the demerger, shareholders will hold interests in both Prudential plc and M&G Prudential.
British insurers have been changing tack to cut their exposure to capital-intensive products following the introduction of rigorous European solvency rules.
As a standalone entity, M&G Prudential will be led by its current Chief Executive John Foley and will continue its transformation into a more capital-efficient and customer-focused business, targeting growing demand for comprehensive financial solutions.
Prudential plc will combine the exciting growth potential of its Asia, US and Africa businesses and will be led by its current Group Chief Executive Mike Wells.
Prudential said it is splitting off savings and investment-focused M&G Prudential, which will be based in London, leaving Prudential plc focused on life insurance and asset management in the rapidly expanding markets of Asia and Africa as well as the United States, which is less tightly regulated than Europe.
The Asia pan-regional life and asset management business is well-positioned to meet the savings and protection needs of a growing and increasingly wealthy population, through top three positions in nine out of 12 life markets, and through Eastspring’s established presence in 10 Asian countries. Jackson is one of the largest providers of retirement solutions in the US, delivering income security to increasing numbers of baby boomer retirees. In Africa, Prudential has established operations in five countries since 2014, with a substantial opportunity to serve the rapidly expanding customer demand for long term financial solutions.
Moody's view
Commenting on Prudential's move, Mr Dominic Simpson, VP-Senior Credit Officer at Moody’s, said: “Following Prudential’s announcement on the demerger plan, our view is that Prudential will maintain its strong brand name recognition, excellent product profile and strong profitability despite reduced geographical diversity post the de-merger of the UK operation, which has been a stable earnings and capital provider over the past few years.
“In this regard, we view the increasing contribution from Asia as a key strength. We also expect relatively low adjusted financial leverage and strong earnings coverage for Prudential, aided by re-balancing the debt capital positions across Prudential and M&G Prudential.”
Additionally, Prudential has disclosed its 2017 results, which showed operating profit increased by 6% year on year to GBP4.7 billion (US$6.6 billion), on a constant exchange rate basis, above market expectations. Its Asia business jumped 15% in earnings to GBP1.6 billion, or a third of total operating profit.