PRU Prudential Plc

By Philip Georgiadis and Ben Dummett 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 15, 2018).

British insurer Prudential PLC has split its European and international arms into two new companies, the latest example of wide-ranging restructuring of the European insurance sector.

The 170-year-old firm said Wednesday it will demerge M&G Prudential, its U.K. and European business, leaving investors with shares in two separately listed companies with entirely different business models.

Prudential -- which isn't related to Prudential Financial Inc., a U.S. financial-services provider -- will become a solely international firm, focused on the U.S., Asia and Africa, and will be led by current Chief Executive Mike Wells.

M&G Prudential will focus on its retirement and savings business in the U.K. and Europe, and will pursue a less-capital intensive structure, following new rules that require insurers to hold higher levels of capital.

Shares in Prudential were up about 6% in London afternoon trading.

Prudential's transformation comes as the European insurance sector is being reshaped.

While many European insurers have struggled to expand in their home markets, Asia and other emerging markets have proved far more attractive. That has led to an uptick in deal-making.

German insurer Allianz SE has this year expanded its presence in South Asia, announcing deals in Sri Lanka and Thailand. Zurich Insurance Group AG on Monday announced a deal expanding its presence in Latin America.

While Prudential's insurance and asset-management operations in the U.K. and Europe have increased profit 7% annually over the past 10 years, its Asian operation has seen a 24% annual rise over the same period.

Prudential expects the region's expanding middle class to continue to drive that growth by fueling demand for more savings and life and health insurance coverage. Mr. Wells said the region's population is "underprotected" and offers an attractive growth opportunity.

Prudential's Jackson operation in the U.S., which sells annuities in the world's largest market for retirement savings, is also growing at a faster clip than the U.K. and European business. The division's profit has gained 17% annually over the past 10 years.

As part of the demerger, Prudential announced GBP12 billion sale of M&G Prudential's U.K. annuity portfolio to insurer Rothesay Life.

Prudential's changes follow French company AXA SA's decision to sell its U.S. life-insurance business via a coming initial public offering, and focus on property and casualty insurance via the $15.3 billion acquisition of XL Group Ltd.

Analysts said a spinoff had looked a possibility since Prudential combined two if its U.K. businesses last August, but the move had come about quicker than some expected.

"In an organization as complex and diverse as Pru, a split makes sense," said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. "The two businesses that emerge will be distinctive -- a high-growth emerging market play and a capital-light dividend machine."

Prudential announced the moves alongside its annual results for 2017, recording a 10% rise in operating profit to GBP4.69 billion.

Write to Philip Georgiadis at philip.georgiadis@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

March 15, 2018 02:47 ET (06:47 GMT)

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