Prudential, Britain’s biggest insurer, has announced plans to split its business into two FTSE 100 companies, with one focused on the UK and Europe and the other on its faster-growing US and Asian operations.
After years of speculation, the 170-year-old company will split off its UK business, M&G Prudential, leaving Prudential plc to focus on Asia, its main growth engine, along with the US and burgeoning African markets. In August, Prudential merged its UK life insurance division with its fund management arm, M&G, run by Anne Richards.
That move was welcomed by City analysts and investors, with the shares closing up 5% at £19.18. Prudential also reported operating profits of £4.7bn for 2017, up 6%.
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Both firms will be headquartered in London and listed on the London Stock Exchange. Prudential’s shareholders will hold shares in both companies once the demerger is completed, which analysts expect to happen in 2020. Both companies are expected to be listed in the FTSE 100 index.
John Foley, who will continue to run M&G Prudential with 7.2 million customers in the UK and Europe, said the introduction of pension freedom in Britain in 2015 offered big opportunities.
The firm will focus on improving its customer service by going digital and is investing £250m over five years. “At the moment, we are a largely paper-based organisation. Our communication with customers will be through our digital channels,” Foley said.
A spokesman explained that UK customers would eventually be able to invest online and via their smartphones, which is expected to lower costs.
Mike Wells, Prudential’s group chief executive, will lead the international business, Prudential plc. “Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe,” Wells said.
He said the split had “nothing to do with Brexit” and would not result in “material job cuts”. He described it as a strategic move that was not about cutting costs.
Barrie Cornes, an analyst at Panmure Gordon, described the breakup as a “bold move” that would be positive for shareholders.
“Ten years ago the UK business was the dominant part within the group – the cash cow that generated the funds to expand in Asia,” Cornes said.
“Ten years later the UK is having to fight for capital amongst the other businesses now that Asia is self-financing. We therefore see the move as a natural progression.”
This article was first published by Julia Kollewe and Angela Monaghan on The Guardian