Prudential FY17 Profit Up, Hikes Dividend; To Demerge M&G Prudential; Stock Up

Mike Wells

Mike Wells

Insurer Prudential was the top gainer, its shares rising 5.1 percent after it said it would demerge its United Kingdom and Europe retirement and asset management business from its global insurance business.

M&G Prudential, the United Kingdom and European business, will be listed on the London Stock Exchange and headed by its current chief executive John Foley.

Fitch believes that the demerger announcement crystallises Prudential's strategic intent to separate M&G Prudential from the relatively higher-growth United States and Asia-Pacific businesses.

The group said it will be seeking a separate listing on the London Stock Exchange for M&G Prudential.

Prudential has sold £12bn in annuity assets to reinsurance business Rothesay Life as part of the demerger. It's a step on the road to a full Part VII transfer of the portfolio, which is expected to be completed by the end of 2019.

"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", he said.

'One may assume the United Kingdom interests (M&G Prudential) will be less appealing to investors as the non-UK interests have experienced faster growth, ' says Russ Mould, investment director at AJ Bell.

The group will give more control to M&G Prudential over its business strategy and capital allocation, enabling it to play a greater role in developing the savings and retirement markets in the United Kingdom and Europe, said Wells.

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Prudential shares leapt over five per cent this morning, adding more than £2.5bn to the market capitalisation of the London-listed insurance giant.

Prudential will be able to focus on the "attractive returns and growth potential of its market-leading businesses in Asia and the US", he said.

The Group will look to realise efficiencies to benefit the two businesses post demerger.

For fiscal 2017, Prudential's profit before tax grew to 3.97 billion pounds from last year's 3.21 billion pounds.

Outside of the blue chips, shares in funeral services provider Dignity surged more than 15 percent, putting the stock on track for its biggest one-day gain since listing in 2004 after reporting full-year results.

M&G Prudential achieved record levels of external asset management net inflows of £17.3bn, contributing to total assets under management of £351bn, up from £311bn the previous year.

In response to the announcement, Aon partner John Baines said: "This market development is the culmination of a long process and during that period it's pleasing that appetite for pension scheme transactions remained undiminished and pricing remained very attractive, even in the context of a mega deal in the market".

The company improved its capital strength with Solvency II surplus rising by 6% to £13.3bn and the ratio increasing by 1 percentage point to 202%.

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