Prudential to spin off US arm by summer and ponder equity raise

Insurance giant Prudential has said it will spin off its US business in the second quarter of 2021 and is considering raising up to 3 billion US dollars (£2.2 million) as it looks to expand across Asia and Africa.

The London-listed group will demerge the Jackson business directly to investors rather than through an initial public offering (IPO) to speed up the separation.

It comes as the group is refocusing purely on Asia and Africa, having already spun off and separately listed its UK and European arm M&G on the London Stock Exchange in 2019.

It also follows pressure from activist investor Third Point to split itself up.

Prudential chief executive Mike Wells said: “Our priorities as a group remain, first, to ensure our investors fully benefit from the opportunities of Asia and, second, to pursue, at pace, a fully independent Jackson.

“The demerger we are announcing today will significantly accelerate Prudential’s transformation into a business purely focused on profitable growth in Asia and Africa.”

The company will retain a 20% stake in Michigan-based Jackson after the split.

Shares fell 9% after news of the demerger and equity placing, which will seek to raise between 2.5 billion and 3 billion US dollars (£1.8 billion and £2.2 billion) to “increase financial flexibility and take advantage of Asia growth opportunities”.

It added that operating results for 2020 are set to be in line with market expectations, with sales across Asia continuing to improve over the final six months.

The insurer will announced full-year results on March 3.

The group has come under pressure from Third Point to spin off the Jackson operation, as well as to ditch its London headquarters.

In June last year, Prudential sold an 11% stake in Jackson to Athene Holdings in a deal that valued the division at 4.5 billion US dollars (£3.3 billion).

Mr Wells said, on confirming plans to spin off Jackson last August, that the company would keep its London HQ, but scale it back.

He said at the time that it would be a “cost-effective” base as it looks to save another 70 million US dollars (£51 million) a year by 2023.

The firm employs around 200 staff at the HQ.