News Life and Health16 Mar 2018

Asia:UK's Prudential to demerge units to focus on region

16 Mar 2018

The UK's largest insurer Prudential is to separate its British and European business from its other international operations, a move which will result in two separately listed companies with distinct investment prospects.

The UK and Europe business, called M&G Prudential, is one of the leading retirement and savings businesses in the UK & Europe, offering compelling product propositions through its range of investment solutions, and will be an independent, capital-efficient business, headquartered and premium-listed in London.

Separately, Prudential will combine the exciting growth potential of its Asian, US and African markets, representing a leading international insurance and asset management group focused on the markets that offer the most attractive growth opportunities globally.

The Asia, US and Africa businesses and will be led by its current Group Chief Executive Mike Wells. 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.

The parent company will remain headquartered in London and retain its listings.

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.


 

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