The British insurance giant Prudential Plc has today announced plans to demerge its US business in Q2 2021. The proposed demerger would accelerate its Jackson separation, completing the breakup of the 173-year old insurer and its transformation to focus exclusively on its high-growth Asia and Africa businesses. The demerger is the latest separation the insurer has faced since it completed the demerger of UK operation M&G in 2019.
The demerger is subject to shareholder and regulatory approval and, in a news release, Prudential noted that the action would lead to a significantly earlier separation of the business than would otherwise have been thought possible. Following the demerger, Prudential will retain a 19.9% non-controlling interest in Jackson, which the group will look to monetise over time to support its Asia investment.
Former MetLife CEO Steven A Kandarian will serve as non-executive chair of Jackson, effective February 01, 2021, and said he is honoured to lead the board at this pivotal time and looks forward to supporting Jackson’s growth and success as an independently listed company.
The life insurer is also considering an equity raise of approx. $2.5 – $3 billion (approx. £1.83 billion - £2.20 billion) to increase its financial flexibility and enable it to take advantage of Asia growth opportunities. Mike Wells, group CEO of Prudential, noted that the priorities of the group remain to ensure that its investors fully benefit from the opportunities of Asia and to pursue a fully independent Jackson.
“The demerger we are announcing today will significantly accelerate Prudential’s transformation into a business purely focused on profitable growth in Asia and Africa,” he said. “I am delighted that Steve has agreed to join as chair of Jackson. He brings an unrivalled track record in the US life insurance sector, and I am more confident than ever that Jackson will flourish as a separate business. Any future equity raising by Prudential will allow us to capture even more fully the rapid growth in the health, protection and savings needs of people in our chosen markets.”
Reporting on the demerger, the Financial Times (FT) noted that Prudential has been under pressure from activist investor Third Point to split itself up and that, following the US split, Prudential will be a UK-headquartered business with stock listings in London and Hong Kong and operations in Asia and Africa. The FT also highlighted that Prudential shares fell 9% on news of the demerger and equity raising.