Fund business M&G Prudential is to split from its parent company Prudential Plc with the new UK and European business to be headquartered and listed in London.
Alongside the de-merger, Prudential has also announced the sale of its £12 billion annuity book which has 40,000 policyholders to closed-book provider Rothesay Life.
Seven months after Prudential merged with asset manager M&G, to form M&G Prudential, the UK and European investment management company is now separating from its parent company.
The de-merger will result in ‘two separately-listed companies with different investment characteristics and opportunities’, the company said.
Following the transaction, M&G Prudential will continue to be led by chief executive John Foley and ‘will continue its transformation into a more capital-efficient and customer-focused business, targeting growing demand for comprehensive financial solutions. M&G Prudential remains on track to deliver its previously announced cost savings target’, the company said.
As part of this strategy shift to focus on asset management and away from insurance, M&G Prudential announced the sale of its annuity book to Rothesay Life which will see assets and liability of £12 billion transferred to the closed-book provider following regulatory and court approval.
Prudential said this deal is likely to lead to a pre-tax loss of about £500 million in the first half of 2018.
Paul Manduca, chairman of Prudential plc, 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. Both are expected to meet the criteria for inclusion in the FTSE 100 index.’
Mike Wells, group chief executive, said: ‘Our businesses share common heritage, values and purpose. 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.
Wells added the deal will give M&G Prudential more control over its strategic direction in the UK pension market.
‘Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector's most trusted brands, while Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.’