Prudential PLC Plans Full Separation of U.S. Arm, Cuts Dividend -- Update

--Prudential plans minority IPO of its U.S. business during the first-half of 2021, with a full divestment over time.

--Prudential to invest money from IPO into Asia, African businesses.

--Lower dividend payout "reflects a rebalancing of capital allocation from cash dividends to reinvestment in Asia."

By Ian Walker

Prudential PLC said Tuesday that it plans a full separation of its U.S. arm and has slashed its dividend in order to focus on growth opportunities in Asia and Africa.

The insurance-and-investment business said it will start with a minority initial public offering of the U.S. unit--which includes Jackson National Life Insurance Co. and asset-management firm PPM America Inc.--during the first half of next year, then a full divestment over time subject to market conditions. Money raised from the IPO will be invested in the Asia and Africa businesses.

"Our Asia-focused strategy will support long-term delivery of future shareholder returns through value appreciation, with a focus on achieving sustained double-digit growth in embedded value per share," Prudential said.

If, however market conditions aren't supportive of any IPO, Prudential will separate the U.S business through a demerger of its stake to existing shareholders, subject to shareholder approval at the time.

Prudential said that the group will continue to have listings in both London and Hong Kong, with secondary listings in Singapore and the U.S., while Jackson will be solely listed in the U.S.

In June, Prudential agreed to sell an 11.1% minority stake in the U.S. business to Athene Holding Ltd. for $500 million.

Prudential said that its new dividend policy "reflects a rebalancing of capital allocation from cash dividends to reinvestment in Asia, which is expected to deliver profitable and sustainable compounding growth."

The board declared a first interim dividend of 5.37 cents a share for 2020--one third of its full-year expectation. Prudential said that under its previous dividend policy, the interim dividend would have been 12.28 cents a share. Future payouts will be determined by capital generation in Asia, after allowing for writing new business and central costs, the company said.

No dividend is expected to be paid this year or next for the Jackson business ahead of its IPO, Prudential said.

Prudential made an adjusted operating profit--a closely watched figure for the industry--of $2.54 billion compared with $2.62 billion. Asia profit was up 14%, with double-digit growth in nine markets.

Group regulatory capital surplus--a key measure of balance-sheet strength--was estimated at $12.4 billion, equivalent to a ratio of 334% compared with a ratio of 309% at Dec. 31, 2019.

Gross premiums earned were $19.84 billion, compared with $21.08 billion a year earlier.

IFRS net profit from continuing operations of $512 million for the half year ended June 30 compared with $1.15 billion for the comparable period last year, reflecting lower interest rates and lower equity market values on U.S. liabilities.

Shares in London at 1330 GMT were up 24 pence, or 2%, at 1256 pence.

Write to Ian Walker at [e-mail]

(END) Dow Jones Newswires

August 11, 2020 09:49 ET (13:49 GMT)

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