Prudential to complete demerger by end of 2019

Insurance giant Prudential confirmed it will spin off its UK and European arm by the end of the year as it posted a hike in half-year profits.

The group said it expects to complete its demerger of M&GPrudential in the fourth quarter of 2019.

The move will create a separate FTSE 100 listed company with a market capitalisation reportedly estimated at around £7 billion.

Details of the split came as the company reported operating profits of £2.02 billion for the six months to June 30, excluding M&GPrudential – up 14% with currency movements stripped out.

Profits were 21% higher on a reported basis.

The group said it was “carefully monitoring” developments in Hong Kong as the city continues to be thrown into chaos by anti-government protests.

Prudential chief executive Mike Wells said the firm was taking “appropriate measures” for its Hong Kong employees, but declined to comment further.

The company has a raft of offices in Hong Kong, including a regional head office, life assurance firm and agency force.

The group, which has been based in Hong Kong since 1964, declined to comment on whether the protests have had an impact on trading since the first half.

It said the US-China trade war had not held back progress in mainland China, where sales soared 45% in the first half as it expands its network in the country.

On the M&G demerger, Mr Wells said: “We believe that the demerger will enable both businesses to maximise their potential performance.”

He added: “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.”

M&GPrudential will change its name to M&G plc following the demerger, but will keep the Prudential brand for some of its businesses.

Prudential also confirmed plans for it to move to group-wide supervision by the Hong Kong Insurance Authority.

The results showed earnings were driven once again by a solid performance from its Asian division, where operating profits lifted 14% on a constant currency basis.

US operating profits also rose 14%.

But it flagged up risks of the unrest in Hong Kong, as well as the US-China trade war and Brexit in the UK.

Brexit uncertainty contributed to a tougher first half for M&G, with the division’s operating profits 8% lower at £716 million.

It saw investor cash outflows as it said Brexit uncertainty was hitting appetite for investment risk.

M&G’s institutional net outflows stood at £300 million, with wholesale and direct net outflows of £4.3 billion over the first half, it added.

Paul De’Ath, insurance analyst at Shore Capital, said: “Prudential’s upcoming demerger is what the market has wanted for years.

“Fundamentally the long-term investment case for the group remains as strong as ever.

“Asia still has huge amounts of growth potential; the US is an excellent generator of cash and profit, and M&GPrudential has an interesting mix of asset management and a unique with-profits offering.”