U.K. Insurer Prudential Splits Into Two -- Update

By Philip Georgiadis 

British insurer Prudential PLC has split its European and international arms into two new companies, the latest example of wide-ranging restructuring of the European insurance sector.

The 170-year-old firm said Wednesday it will demerge M&G Prudential, its U.K. and European business, leaving investors with shares in two separately listed companies with entirely different business models.

Prudential -- which isn't related to Prudential Financial Inc., a U.S. financial-services provider -- will become a solely international firm, focused on the U.S., Asia and Africa, and will be led by current Chief Executive Mike Wells.

M&G Prudential will focus on its retirement and savings business in the U.K. and Europe, and will pursue a less-capital intensive structure, following new rules that require insurers to hold higher levels of capital.

As part of this, the company also announced the GBP12 billion ($14.9 billion) sale of its U.K. annuity portfolio to insurer Rothesay Life.

"This is the right thing to do and the right time to do it," Mr. Wells told reporters on an earnings call.

Shares in Prudential rose nearly 5% in morning trading in London.

Analysts said a spinoff had looked a possibility since Prudential combined two if its U.K. businesses last August, but the move had come about quicker than some expected.

"In an organization as complex and diverse as Pru, a split makes sense," said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. "The two businesses that emerge will be distinctive -- a high-growth emerging market play and a capital-light dividend machine."

Mr. Wells and highlighted the opportunities available to Prudential when it is left free to focus entirely on non-European markets. While many European insurers have struggled to expand in their home markets, Asia has proved far more attractive.

Prudential's move comes as the European insurance industry undergoes intensive realignment.

French insurance giant AXA SA earlier this month announced a $15.3 billion agreement to buy XL Group Ltd., the latest step in its efforts to cut exposure to financial markets and focus more on insurance. In February, reinsurance giant Swiss Re AG confirmed a Wall Street Journal report that it was in talks to sell a minority stake to Japan's SoftBank Group Corp.

Prudential announced the moves alongside its annual results for 2017, recording a 10% rise in operating profit to GBP4.69 billion.

Write to Philip Georgiadis at [e-mail]

(END) Dow Jones Newswires

March 14, 2018 08:53 ET (12:53 GMT)

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