Prudential to demerge fund management business

Prudential to demerge fund management business

Shares of Prudential plc (PRU.L) were gaining around 5 percent in London trading after the UK-based financial services group reported Wednesday higher profit in its fiscal 2017 with increased premiums and strong growth in Asia.

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 move is in line with the group's strategy to transition towards a "more capital efficient, de-risked business model".

The demerger plans have grabbed the headlines away from a solid set of 2017 results for Prudential Plc.

John Baines, a partner in Aon's Risk Settlement Group, also said, "This market development is the culmination of a long process and during that period it's pleasing that appetite for pension scheme transactions remained undiminished and pricing remained very attractive, even in the context of a mega deal in the market". John Foley, who now heads up the M&G Prudential division, will steer that business through the demerger.

United Kingdom life insurer Prudential has sold a £12 billion United Kingdom annuity portfolio to Rothesay Life.


"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", said Chairman of Prudential Paul Manduca in the statement. It's a step on the road to a full Part VII transfer of the portfolio, which is expected to be completed by the end of 2019.

The transaction covers an annuity book containing roughly 400,000 policyholders, making this the largest transaction of its kind in the UK. It will be subject to the usual shareholder and regulatory approval.

"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", said Wells.

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 U.S. and Africa. "M&G Prudential's proven investment capabilities and balance sheet management provide an excellent platform from which to serve the demand for comprehensive financial solutions".

Pic: ReutersLONDON: Prudential is to spin its British and European business off from its worldwide operations, breaking up the 170-year-old insurer in the latest shake-up in a fast-changing industry. We believe this shows the United Kingdom market has matured, remains very competitive and can cope with this kind of change.

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