Listing this year

Prudential confirms demerger, unveils 14% rise in half-year profit


M&G Prudential will get new branding after the split

Prudential has confirmed that it will demerge its UK business by the end of this year.

The split, which was announced in March last year, will create a new FTSE 100 company with a market capitalisation of about £7 billion at today’s prices, according to estimates.

M&GPrudential, the UK operation, will split off from the US and Asian businesses and will be known as M&G. It will retain the Prudential brand for its savings and insurance customers in the UK and Europe and for asset management in South Africa. Its other brand, M&G Investments, will be used for asset management clients globally.

The announcement came alongside group interim figures showing a 14% rise in operating profit, driven by growth in Asia.

Group operating profit from continuing operations, excluding the M&G Prudential unit, was £2.02bn. The company has declared a 5% rise in the first interim dividend to 16.45p per share.

Prudential chief executive Mike Wells said: “We expect to complete the demerger of M&GPrudential in the fourth quarter of 2019, and preparations are complete for Prudential plc’s move to group-wide supervision by the Hong Kong Insurance Authority.”

He added: “We believe that the demerger will enable both businesses to maximise their potential performance. Both will have experienced management teams better able to focus on their strategic priorities and distinct investment prospects, as well as improved allocation of resources and greater flexibility in execution.”

John Foley, chief executive of M&GPrudential, said: “We are in the fortunate position of having two strong brands, each with a rich heritage. But as an international business operating in 28 markets, we need a single corporate name we can use globally.  So to distinguish ourselves in the global market, we have decided to list our shares on the London Stock Exchange as M&G plc, which we expect to take place in the fourth quarter of this year.

“Prudential will remain our operating brand for the 5 million customers who have insurance and savings products with us in the UK, Europe and South Africa. We will continue to invest in its development as we seek to improve our digital offering.

“M&G Investments is already a global brand and we will continue to use this name to market our asset management capabilities to wholesale and institutional clients across Europe and in Asia, Australia and North America.”

Market reaction

Alasdair Ronald of Brewin Dolphin said: “Prudential’s 14% rise in operating profit was ahead of analysts’ expectations and the 5% increase in the dividend will be well received by the market.

“However, the main focus for the company is the de-merger of M&GPrudential. The proposal is largely seen as a positive move and will likely narrow the discount between Prudential’s share price and the sum-of-its-parts valuation.

“After this process, Prudential will be almost entirely focused on the US and Asia – in the former it is a leading variable annuity provider, while the latter is its key growth engine. That said, future growth in Asia will be dependent on the continued rise of the continent’s emerging middle class and the low level of welfare provision in a number of countries.” 

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