Prudential to Complete Split of Insurance, Asset Fund by Year’s End

Britain’s biggest insurer Prudential will complete a planned break-up of the company by the end of the year, with its UK-focused fund and insurance business set to list as M&G Plc.

The Asia and U.S.-focused rump of the company will continue to trade as Prudential and be listed in the UK, but will be subject to the regulator in Hong Kong – where Prudential said it was “carefully monitoring” current violent protests in the city.

“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,” Chief Executive Mike Wells said in a statement.

“We believe that the demerger will enable both businesses to maximize their potential performance.”

Prudential said last year it planned to split into two companies, a route followed by insurance and asset management peers including Old Mutual and Standard Life Aberdeen.

The process has been slow, though, due to the need for a court process to complete a transfer of 12 billion pounds ($14.5 billion) in annuities to insurer Rothesay Life. Prudential agreed the sale of the book of closed policies to Rothesay last year.

While splitting the two companies had been a complex task, Wells said it would allow both to perform better and had been done from a “position of strength.”

John Foley, the chief executive of M&GPrudential and post-demerger of M&G Plc, said the split would open “many doors” for the company and help it tap growing global demand to save for retirement.

“An independent M&GPrudential will be in a far stronger position to seize the many opportunities we see out there,” he said.

While it would keep the Prudential brand for savings and insurance customers in the UK and Europe, and for asset management in South Africa, M&G would be the asset management brand globally.

Total assets under management rose 6% in January-June from a year earlier to more than 341 billion pounds, Foley said, although like most of its major fund rivals, the bulk of that came from market moves more than offsetting net outflows of client cash.

At 1123 GMT, shares in Prudential were down 1.3%.

The split will enable the part of the group focused on Asia and the United States to be regulated in Hong Kong, where capital rules are considered less onerous.

Prudential, which has a substantial business in mainland China and Hong Kong, has seen its shares hit hard by the long-running trade tussle between China and the United States, but Wells said business had not been impacted.

Sales of insurance in mainland China jumped 45% in the first half from a year earlier, beating peers, Wells said, and the company now had a network of 231 sales offices in 89 cities.

Wells declined to comment on the political situation in Hong Kong but said the company was “obviously taking appropriate precautions for our employees,” without elaborating.

The former British colony has been rocked by around 10 weeks of increasingly violent clashes between police and pro-democracy protesters in the worst crisis since the territory reverted from British to Chinese rule in 1997.

Stripping out the performance of its M&GPrudential unit over the period, Prudential saw a 14% rise in half-year operating profit to 2.02 billion pounds, driven by robust growth in its Asian business.

“The group’s performance has again been driven by our Asian business, where we have delivered double-digit growth across our key metrics of operating profit,” Wells said in a statement.

“We are benefiting from growing demand for health, protection and savings across the region.”

New business profit in Asia rose 10% over the six months to the end of June, while assets under management at its Asia-focused fund unit Eastspring grew 12% to 169.5 billion pounds.

While there has been speculation Prudential may seek to sell off Jackson, its U.S. business, Wells said the company remained committed to the region and was actively targeting the growing number of ‘Baby Boomers’ set to retire in the coming years.

However, he said he wanted the unit to accelerate its diversification and cash-flow generation, after reporting a 14% rise in first-half operating profit.

($1 = 0.8290 pounds) (Editing by Kirstin Ridley and Susan Fenton)