Published: Thu, March 15, 2018
Markets | By Rosalie Gross

Prudential FY17 Profit Up, Hikes Dividend; To Demerge M&G Prudential; Stock Up

Prudential FY17 Profit Up, Hikes Dividend; To Demerge M&G Prudential; Stock Up

Prudential plc today announces its intention to demerge its UK & Europe business ('M&G Prudential') from Prudential plc, resulting in two separately-listed companies with different investment characteristics and opportunities.

On a day when it declared solid annual results, United Kingdom insurance giant Prudential Plc managed to steal its own thunder with a huge announcement - namely its plans to demerge M&G Prudential from Prudential Plc and partially sell off its United Kingdom annuity portfolio.

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.

Prudential PLC (LON:PRU) said it plans to demerge its M&G Prudential business and sell £12bn of its United Kingdom annuity portfolio as it revealed Asia continued to drive profit growth in 2017.

It said it planned to demerge M&G Prudential into a separate company with a premium listing on the London Stock Exchange.

It came as Prudential announced the sale of a £12 billion United Kingdom annuities book to Rothesay Life and posted annual results for 2017, which showed a 6% rise in operating profits to £4.7 billion. It's a step on the road to a full Part VII transfer of the portfolio, which is expected to be completed by the end of 2019.

"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", said Wells.

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Life, annuities, pension and longevity re/insurer Rothesay Life has reinsured a £12 billion chunk of Prudential plc's annuity book managed under the M&G Prudential brand.

According to the company, the move will allow Prudential to focus on its Asian, US and African markets, whilst M&G Prudential will give its European operations "more control" over its strategy.

Meanwhile, Prudential will be able to focus on the attractive returns and growth potential of its business in Asia and the US.

Both companies will be headquartered and listed on the London Stock Exchange.

The Group will look to realise efficiencies to benefit the two businesses post demerger.

In the US, IFRS operating profit increased by 3 per cent, due mainly to growth in fee income on higher asset balances, which outweighed the anticipated reduction in spread earnings. Its remaining business will contain its faster growth U.S. and Asian operations. While its Asian arm returned new business profits of £2.37bn, up 17% from 2016, the United Kingdom and Europe generated just £342m of new business profits, although this was still 28% higher year-on-year. However, the company said the tax changes will be "positive in the long term" with the effective tax rate expected to fall to 18% from 28%. The Prudential dividend policy will remain unchanged through the separation period.

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