Last year saw the UK’s biggest insurer, Prudential Plc, spin-off M&G, its UK and European savings and investments business – and experts are predicting that the demerger trend may continue this year.
The last few years have seen significant instances of insurers offloading businesses to allow them to focus on core operations. Some of the more noteworthy examples include the UK’s Esure’s 2016 demerger from price comparison site GoCompare and Standard Life selling its insurance business to Phoenix Group in 2018.
Now, analysts have told Financial Times that stiffer capital requirements may cause more demergers to happen in 2020 – with insurance giants Aviva, Saga, RSA, and Admiral likely to have plans to downsize this year.
“The evidence for having a diverse [insurance] group is fairly scant,” Rob James, a fund manager at Merian Global Investors, told Financial Times.
Aviva, for instance, has already started to downsize the group, by selling its Hong Kong operations. According to analysts, other international operations may be sold off as the company’s share price continues to struggle.
“I’d like them to think about exiting Turkey, France, Italy, and Poland,” Abid Hussain, an insurance analyst at Credit Suisse, told Financial Times.
Meanwhile, the industry may still see further activity from Prudential – with James predicting a potential separation between the firm’s business in Asia and Jackson National Life, its US subsidiary.
“Prudential Asia should be a standalone company,” James told Financial Times. “I don’t think being tied to Jackson does it any favours — it very clearly damages the valuation. It would be to the benefit of shareholders to have Jackson out of the group, almost at any price.”