ALEX BRUMMER: Losing the ‘man from the Pru’ would be a great pity


Ever since Prudential failed to take over Hong Kong based rival AIA in 2010 the perennial question on everyone’s lips has been about doing the splits.

Canadian chief executive Mike Wells has bitten the bullet and plans to split the Pru into two quoted FTSE 100 companies: a fast-growing international insurer and a more sedentary British fund manager.

The bigger of the new companies will be Prudential Plc, comprising Jackson Life in the US, Asia and a growing franchise in Africa with a valuation of around £47billion.

In many ways that represents a posthumous triumph for the late Mick Newmarch, the Pru boss who invested in the opportunity of China in the early 1990s.

Prudential has announced its UK unit M&G Prudential is being spun–off.

Prudential has announced its UK unit M&G Prudential is being spun–off.

Prudential has announced its UK unit M&G Prudential is being spun–off.

Latest results show Asia up 13 per cent, generating £1.98billion of earnings last year just behind the more mature North American market, where profit was 3 per cent better at £2.2billion.

The fund management arm, M&G Prudential, will be the minnow with a valuation in the order of £12billion after a 10 per cent boost in earnings to £1.4billion.

The good thing about M&G Pru is that it has a great brand, a well-liked fund manager in Anne Richards and, in 2017, had record net inflows with funds swelling 13 per cent to £351billion. 

Contrast this to Standard Life Aberdeen and Janus Henderson (both newly merged companies), which have suffered outflows in the face of competition from index funds.

Pru plans to cover the advisory costs of a complex reorganisation out of the proceeds of selling its annuities book to Rothesay Life. The radical reshaping will see Mike Wells in charge of the global enterprise and ought to be good for investors.

This year they will receive an 8 per cent increase in the dividend, then the two companies will each set their own payouts.

If the past is any guide the greater clarity will mean that the two new companies should be worth more than the old. 

The downside is, as smaller independent entities, both will be more vulnerable to takeover with the Chinese and maybe AIA casting an envious eye over Prudential Plc.

And M&G Pru is a sitting target for another fund merger. Losing the ‘man from the Pru’ would be a great pity.

Going Dutch

As a world-leading, fast-moving consumer goods firm, losing Unilever’s domicile to Rotterdam would look like a huge Brexit blow. 

But the decision by Paul Polman and the board has nothing to do with Brexit.

The trigger was the undertakings it made to investors about simplifying its Anglo-Dutch structure when the company came under siege from Kraft Heinz a year ago.

There are many ways of skinning the cat. Both Royal Dutch Shell and the media and publishing giant Relx have been through the same process.

Shell is technically domiciled in the Hague. But the Shell building on the banks of the Thames at Waterloo in London will remain a landmark, and it was from there that chief executive Ben van Beurden plotted the takeover of BG Group in 2015.

Shell’s stock market quote was left behind in London – many of the company’s shareholders are in the City as well as its investment bank advisers. Maybe Unilever will be more radical and move the whole caboodle to Holland.

But when I last discussed the issue with Polman he gave no indication that the company’s emblematic HQ at Blackfriars was to be closed.

Unilever’s commitment to the UK and to the North West remains intact. Earlier this month, without fanfare, the company opened an advanced manufacturing centre at Port Sunlight on the Wirral.

The new facility, the size of a football field, will be used by Unilever scientists and engineers to test new production techniques on an industrial scale.

Not the actions of a company about to pull up British roots.

Delayed reaction

One would like to be kind about the departing chairman of the Financial Conduct Authority (FCA), John Griffith-Jones. 

But he really should have left long ago after the mangled audits of HBOS and the Co-op Bank, which took place during the time he was still senior partner at auditors KPMG.

The record of the FCA in delivering justice to bad bankers has been appalling and lost Griffith-Jones the respect of much of the industry he regulates.

We wish him well with what comes next, as long as it is far away from the Square Mile.

 



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