Prudential spins off US business to focus on Asia amid its fast-growing markets

12 Aug, 2020 21:21
source: Singularity Financial

Singularity Financial Hong Kong August 12, 2020 – Prudential is to spin off its American retirement business, completing a break-up of the sprawling insurer that was called for by Third Point, the US hedge fund.

According to a company statement on Tuesday, an initial public offering of a stake in Jackson National Life Insurance Co. will be held in the first half of 2021.

Prudential has been under pressure for months from activist shareholder Third Point to separate its Asian and U.S. businesses.  Prudential shares rose as much as 4.2% in London on Tuesday morning.

Prudential also would slash its dividends in order to plough capital into its fast-growing Asian and African markets, responding to another demand by Third Point, which took Prudential by surprise in February by revealing that it had built up a 5 per cent stake.

Mike Wells, Prudential’s chief executive, said, “We think there is a real demand for the shares, and they are ready at size and scale to be a standalone company.”

The insurer announced in March that it was readying a minority listing of Jackson, while continuing to look at other options for creating an independent company. Since announcing those plans, Prudential said in June that it was selling a stake in its U.S. operations to Apollo Global Management-backed Athene Holding Ltd., which will inject $500 million.

Third Point Chief Executive Officer Dan Loeb wrote in a letter to investors last week that the deal with Apollo was an “important step” toward the full separation of Prudential’s Asian and U.S. units and provided a floor valuation on Jackson ahead of the standalone listing.

If an IPO of Jackson isn’t feasible, the stake could be offered to Prudential’s existing shareholders, according to the statement.

Splitting off Jackson makes “strategic sense” for Prudential, according to Bloomberg Intelligence analysts Kevin Ryan and Charles Graham.

“Investors will be offered a very clear focus on Asia and particularly Hong Kong and China,” they wrote in a note. “Executing it is taking time because of where the businesses are based, but also the location of shareholders.”

Prudential’s first-half earnings highlight the potential benefit from focusing on its Asian business. Adjusted operating profit for the region increased by 14%, with nine markets reporting double-digit growth, according to the statement. In the U.S., by contrast, this profit measure was down by 19%. For the company as a whole, adjusted operating profit fell slightly to $2.5 billion.