ibusinesslines.com September 20, 2018

Prudential To Demerge Fund Manager M&G

15 March 2018, 02:34 | Kelvin Horton

Prudential To Demerge Fund Manager M&G

Prudential To Demerge Fund Manager M&G

On March 14, London-based business Prudential, one of the biggest insurance and financial services companies in the world, announced it will split into two separately listed companies, demerging its United Kingdom and Europe division from its worldwide operations.

The group announced plans to combine its United Kingdom savings and investments businesses to create a single entity named M&G Prudential in August.

M&G Prudential will be led by its current chief executive John Foley and will continue its drive to become a more capital-efficient and customer-focused business, targeting growing demand for comprehensive financial solutions.

John Foley, Chief Executive of M&G Prudential, said: "The demerger will allow M&G Prudential to play a broader leadership role in the fast-changing savings and investments market within the United Kingdom and Europe".

The group said it will be seeking a separate listing on the London Stock Exchange for M&G Prudential.

But with £12bn of Prudential's existing annuity portfolio to transfer to Rothesay Life, combined with the recent news that Phoenix is taking on Standard Life's annuity portfolio, the total value of annuity liabilities taken on by the eight insurers now active in the market is expected to hit £40bn in 2018. The transfer is expected to be completed by the end of 2019. 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.

Following the demerger, shareholders will be left with shares in both companies.

Prudential group chief executive Mike Wells says: "Following separation, M&G Prudential will have more control over its business strategy and capital allocation". Prudential's primary listing will be in Hong Kong.

Meanwhile, Prudential will be able to focus on the attractive returns and growth potential of its business in Asia and the US. Proceeds will be used to support the group's demerger.

In the US, IFRS operating profit increased by 3 per cent, due mainly to growth in fee income on higher asset balances, which outweighed the anticipated reduction in spread earnings.

The UK and Europe region posted a 10% increase in operating profit and a 28% rise in net business profit.

For fiscal 2017, Prudential's profit before tax grew to 3.97 billion pounds from last year's 3.21 billion pounds.

Hikma was another big mid cap gainer, jumping 14 percent after the drugmaker's full-year profit and revenue met analyst expectations.

Total revenue, net of reinsurance, was 86.56 billion pounds, up from 71.84 billion pounds a year ago.

The company improved its capital strength with Solvency II surplus rising by 6% to £13.3bn and the ratio increasing by 1 percentage point to 202%.

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