Prudential today announced plans to demerge M&G from Prudential plc in a move that will result in two separately-listed FTSE 100 companies, each with a ‘distinct’ investment prospects.

Pru says that after the demerger M&G Prudential will become “an independent, capital-efficient UK & Europe savings and investment provider, headquartered and listed in London.”

Prudential plc will then focus on being an international insurance group focused on growth opportunities in Asia, the US and Africa and headquartered and listed in London.
Pru also announced today that it would sell £12 billion of its UK annuity portfolio to Rothesay Life as part of a partial sell off of it annuity book.

As a standalone entity, M&G Prudential will be led by its current chief executive John Foley and will target demand for “comprehensive financial solutions.” M&G Prudential is currently undergoing a cost savings programme.

In line with a move towards a “more capital efficient, de-risked business”, M&G Prudential has sold £12bn of its shareholder annuity portfolio to Rothesay Life. Under the agreement, M&G Prudential has reinsured £12.0 billion of liabilities to Rothesay Life, which is expected to be followed by a transfer of the portfolio by the end of 2019.

M&G Pru says the undisclosed capital benefit of the transaction will be retained within the group to “support” the demerger process.

Prudential plc will be led by its current group chief executive Mike Wells. The company is growing particularly strongly in Asia and is represented in over 10 Asian countries. In the US, subsidiary Jackson is a major provider of retirement solutions and in Africa, Prudential has established operations in five countries since 2014.

Paul Manduca, chairman of Prudential plc, 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, said: “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 plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.”

John Foley, chief executive of M&G Prudential, said: “The demerger will allow M&G Prudential to play a broader leadership role in the fast-changing savings and investments market within the UK and Europe. M&G Prudential’s proven investment capabilities and balance sheet management provide an excellent platform from which to serve the demand for comprehensive financial solutions.”