Prudential, one of Britain’s oldest and biggest insurers, is to float a minority stake in Jackson, its US business, after pressure from an activist investor for a full split of the insurance group.
Prudential said the stock market flotation would give Jackson the funds to expand. Jackson, headquartered in Michigan, is one of the top annuity providers in the US, and analysts at Citi have put its value at about £6.5bn.
Third Point Management, a New York-based hedge fund, has been calling on Prudential to split its US and Asian businesses and separate into two companies, to capitalise on the value of the Asian arm.
Led by the US billionaire Daniel Loeb, Third Point became the insurer’s second largest shareholder last month, with a stake of almost 5%. The partial flotation falls short of the full split demanded by the activist investor.
Mike Wells, Prudential’s chief executive, said: “In order to diversify at pace, Jackson will need access to additional investment, which we believe would best be provided by third parties. Today we are announcing that preparations have commenced for a minority IPO [initial public offering] of Jackson.”
The move comes months after the 172-year-old insurance group spun off its UK and European fund management division. It was valued at £5.7bn when it began trading as M&G on the London Stock Exchange in October.
Prudential’s 2019 results showed operating profits rose by a fifth to $5.3bn (£4.1bn). More than half its profits came from Asia, prompting Wells to warn: “The [coronavirus] outbreak has slowed economic activity and dampened our sales momentum in Hong Kong and China.
“Given these conditions, lower levels of new sales activity in affected markets are to be expected, with a consequential effect on new business profit.”
Insurance claims for coronavirus had been minimal so far, Wells said, and sales were growing in double digits outside China and Hong Kong this year.
Like other financial firms, Prudential has restricted international travel and split its workforce in Asia into teams that rotate between working from home and in the office.
