U.K. Prudential Realignment to Affect Jackson

Prudential PLC — a London-based life insurance giant with no connection to Prudential Financial Inc. — announced Wednesday that it wants to spin off its U.K. and European operations and focus mainly on opportunities in Asia. Prudential says it also plans to keep Jackson National Life Insurance Company, a major U.S. annuity issuer. But Prudential says it expects to make changes at Jackson. (Related: Jackson National's U.K Parent Wants to Keep It) The company says it has conducted a strategic assessment of the Jackson business. Now, "the business is focused on increasing product diversification (as measured by policyholder liabilities), with the objective of delivering growth in statutory capital generation and enhanced cash remittances," Prudential says. Prudential may use reinsurance or third-party financing arrangements to get more cash out of Jackson and provide more value for shareholders, Prudential says. In a slidedeck used in a conference call with securities analysts, Prudential says it wants Jackson to maintain its risk appetite.

The Background

Prudential has been selling life insurance in 1848, and it paid death benefits to the beneficiaries of at least 292 crew members and passengers who died when the Titanic sank. The company has also been active outside of the United Kingdom for decades. It says it began its first overseas life operation in Kolkata, in India, in 1923. The Prudential operations in Asia now account for about 79% of the company's European embedded value, the company says. Prudential acquired M&G Investments, an asset manager that ran into problems as a result of the United Kingdom's decision to leave the European Union, in 2017. Prudential then combined the M&G operations with its U.K. and European operations.

The Prudential-M&G Demerger

Prudential managers say they intend to split the business by distributing one share of M&G business shares to its own shareholders for every share of Prudential stock that the shareholders own. The post-merger Prudential would continue to be one of the biggest life insurers and asset managers in the world, and it would continue to be led by the current group chief executive officer, Mike Wells, the company says. The M&G business would emerge with about 5.5 million life insurance and retirement savings customers in the United Kingdom and Europe, along with about 800 institutional clients, the company says. One reason for the "demerger" is that investors interested in Prudential's opportunities in Asia tend to have different ideas than the investors who like M&G's well-established financial services operations, Prudential says. Prudential shareholders will meet to vote on the demerger Oct. 15, in London. The transaction appears to be similar, in some ways, to the transaction that AXA S.A. used to separate the Paris-based parent company from AXA Equitable.

Resources

Links to the reports Prudential files with the U.S. Securities and Exchange Commission are available here. Links to copies of the companies' presentations are available here. — Read Michael Falcon to Succeed Barry Stowe at Jackson National, on ThinkAdvisor. — Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.