ii view: Prudential narrows down M&G demerger date

by Keith Bowman from interactive investor |

Savings and insurance company Prudential expects to complete planned demerger in the fourth quarter.

Half-year results

  • Demerger expected to complete in fourth quarter of 2019
  • Operating profit from Prudential up 14% to £2 billion
  • Operating profit from M&G Prudential down 7% to £687 million
  • Interim dividend up 5% to 16.45p per share

Chief executive Mike Wells said:

"Our focus on key areas of operational improvement and continued investment has enabled us to drive growth and position ourselves to continue to grow profitably. At the same time, we expect to complete the demerger of M&GPrudential in the fourth quarter of 2019, and preparations are complete for Prudential plc's move to Group-wide supervision by the Hong Kong Insurance Authority. 

"We believe that the demerger will enable both businesses to maximise their potential performance. Both will have experienced management teams better able to focus on their strategic priorities and distinct investment prospects, as well as improved allocation of resources and greater flexibility in execution."

ii round-up:

Founded in 1848, Prudential (LSE:PRU) provides long-term savings and protection products, and currently operates in Asia, the US and M&G Prudential in the UK and Europe.

A demerger of the M&G Prudential business has been in the pipeline for some time, but now we hear the separation will likely complete in the fourth quarter of 2019. M&G Prudential will change its name to M&G plc and likely be listed in the FTSE 100 index. 

For a round-up of these half-year results please click here

ii view:

Asian growth is at the heart of the Prudential story. A move to separate the international businesses, including Asia, from the UK and Europe appears sensible. Growing Asian wealth is fuelling demand for life and health insurance, while exposure to an ageing US population should not be overlooked. 

For M&GPrudential, or soon to be M&G plc, 5 million customers with insurance and savings products across the UK, Europe and South Africa make it a business to be reckoned with. The M&G name and history provides a strong foundation on which to continue marketing its asset management capabilities to wholesale and institutional clients. 

Positives: 

  • The split of businesses should improve management focus
  • Possible reallocation of group debt would increase financial freedom
  • Progressive dividend policy – 15 years of consecutive growth

Negatives:

  • Demerger carries execution risk and requires management attention
  • Splitting the company means less diversification
  • New Prudential business will be regulated in politically strained Hong Kong

The average rating of stock market analysts:

Strong buy

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