Prudential has announced plans to separate M&G Prudential from the international insurance business to create two separately-listed companies, leading shares to jump 5% in early trading.
The two businesses will have their own distinct investment prospects, the firm said today, with M&G Prudential lined up to be "an independent, capital-efficient UK & Europe savings and investment provider" and Prudential aiming to be a "a leading international insurance group focused on high-growth opportunities in Asia, the US and Africa".
Both companies will be headquartered and listed on the London Stock Exchange.
When the merger completes - which is currently on an unknown date and is subject to shareholder and regulatory approval - shareholders will have holdings in both Prudential and M&G Prudential. The Prudential dividend policy will remain unchanged through the separation period.
Prior to the demerger, the group's debt capital position will be re-balanced across Prudential and M&G Prudential, which may include the redemption or debt liability management of issued debt, and new debt issuance. Prudential has sold £12bn in annuity assets to reinsurance business Rothesay Life as part of the demerger.
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. The business remains on track to deliver its previously announced cost savings target, the firm said.
Prudential, which will continue to be led by current group chief executive Mike Wells, will combine growth opportunities in its Asia, US and Africa businesses.
Anne Richards will continue in her role as CEO of M&G Investments.
Following the news, shares in Prudential rose 4.9% to £19.15 in early morning trading.
FTSE 100 inclusion
The group announced plans to combine its UK savings and investments businesses to create a single entity named M&G Prudential in August.
Paul Manduca, chairman of Prudential, said: "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. Both are expected to meet the criteria for inclusion in the FTSE 100 index."
Mike Wells, group chief executive, added: "Our businesses share common heritage, values and purpose. 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 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 through two of the financial sector's most trusted brands, while Prudential will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US."
In a conference call following the announcement, Wells and Foley added the business split will allow the board of each company to focus on their own customers, rather than having one board looking at the different needs of customers across both groups.
Wells said the decision was not made with the intention of cutting expenses or headcount but said it evolves its staffing model every year.
"There is more and different work to do and people will take on different jobs as their roles evolve. We are not expecting any cuts but we are expecting the business to be more efficient globally."
The senior team also emphasises the move had nothing to do with the UK's impending exit from the European Union.
"To be crystal clear, this is nothing to do with Brexit. M&G has effective distribution in Europe with multiple SICAVS in Luxembourg. The firm has done a tonne of work to make sure we are ready for any shape of Brexit," Well said.
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