Tuesday, 25 September, 2018

Fitch downgrades Prudential on United Kingdom demerger

Prudential to spin off UK and European business Prudential shares jump on spin-off news: This is how the City is reacting
Laurie Berry | 15 March, 2018, 02:32

Insurer Prudential (PRU) led the index, up 5.7% at £19.30 on its plans to hive off its recently formed United Kingdom and European M&G Prudential group into a separate London-listed FTSE 100 business.

M&G Prudential will become an independent UK & Europe savings and investment provider, headquartered in London.

Rating actions include a downgrade of The Prudential Assurance Company Ltd's (PAC) and Prudential's U.S. subsidiaries" (collectively Jackson) Insurer Financial Strength (IFS) Ratings to "AA-' from "AA".

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 United Kingdom and Europe". Eastspring will continue to serve as the Asian asset manager for Prudential, while M&G Investments will serve that function for Prudential M&G.

The ratings agency noted that the demerger plan removes the company's global diversification benefits.

The transaction makes Rothesay Life the UK's largest specialist annuity insurer with more than £37bn of assets under management and some 750,000 lives insured.

Prudential says the demerger will result in two separately-listed companies, "each with its own distinct investment prospects".

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The group said it will be seeking a separate listing on the London Stock Exchange for M&G Prudential.

The two businesses will have their own distinct investment prospects, the firm said today, with M&G Prudential lined up to be "an independent, capital-efficient UK & Europe savings and investment provider" and Prudential aiming to be a "a leading global insurance group focused on high-growth opportunities in Asia, the U.S. and Africa".

John Foley, Chief Executive of M&G Prudential, also said, "The demerger will allow M&G Prudential to play a broader leadership role in the fast-changing savings and investments market within the United Kingdom and Europe". Prudential's shares are changing hands 5.97 percent higher at 1,934.55p. 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.

Prudential will be able to focus on the "attractive returns and growth potential of its market-leading businesses in Asia and the US", he said.

M&G Prudential also announced the sale of 12 billion pounds of United Kingdom annuity portfolio to Rothesay Life.

BRITISH insurer Prudential on Wednesday reported a 6 per cent rise in IFRS operating profit for the full-year ended 2017 to £4.7 billion (S$8.6 billion) on a constant exchange rate basis, led by double-digit growth in its Asia business. Proceeds will be used to support the group's demerger. In addition, prior to the demerger, the Group's debt capital position will be re-balanced across Prudential plc and M&G Prudential. Discussions have also commenced with our other key stakeholders, including rating agencies. It is also subject to regulatory and shareholder approval.

Following completion, Rothesay Life will be the largest specialist annuity insurer in the United Kingdom, covering 400,000 policyholders.

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