Insurance and pensions heavyweight Prudential has announced a split of its business with the UK unit M&G Prudential being spun–off from the rest of the company.
The M&G Prudential unit was only created a year ago through the merging of Prudential’s UK and European life insurance business with its asset manager M&G Investments.
Prudential shares were buoyed by the news, seeing a 4.6 per cent rise to 1,910p.
Prudential has announced its UK unit M&G Prudential is being spun–off.
The move comes as a consequence of an ‘in depth review’ of the business and is a continuation of a pivot towards Asia, with the region now crucial to the company’s growth prospects.
The remaining Prudential business will include its Asian, US and African operations and remain headed by the group’s chief executive Mike Wells.
The spun-off UK and Europe unit M&G Prudential will be headquartered in the UK and led by its own chief executive, John Foley.
Both companies are expected to meet the criteria for inclusion in the FTSE 100.
Prudential said it the move will give the division ‘more control’ over its business strategy and capital allocation and allow it to focus more closely on its respective geography.
The news came alongside its annual results statement, with Asian operations being the biggest driver of a 6 per cent overall rise in profit for 2017.
The Asian division on its own saw a 20 per cent rise in operating profits to nearly £2 billion, which was double the growth rate of its UK and European division, which saw a 10 per cent rise to £1.4 billion. The US business saw 9 per cent growth to £2.2 billion.
Prudential chairman Paul Manduca 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.’
M&G sponsors the annual Chelsea Flower Show.
Group boss Mike Wells said Prudential had achieved its objectives for 2017, which included seeing its Asian business deliver a compound annual growth rate in operating profit of at least 15 per cent between 2013 and 2017.
‘I am confident that, given the extent of our opportunities and our proven ability to execute and innovate, we are well positioned to continue to grow profitably,’ he said.
Richard Hunter, head of markets at Interactive Investor, commented: ‘News of a demerger driven by geography is one which makes commercial and strategic sense. It has also propelled Prudential to being the day’s star performer as the announcement has clearly been well received by investors.’
‘Prudential’s exposure to Asia has for some time been a particular strength. Within these numbers, a further 12 per cent rise in new business in the region is testament to the success the company continues to enjoy, as a burgeoning middle class focuses on its savings and investment needs.’