Prudential Group CEO said the insurer’s intention to fully separate its US arm will enable the firm to concentration on the high growth markets in Asia and Africa.

Mike Wells revealed today that Prudential will begin the process to divest Jackson Life via a minority IPO in the first six months of next year and full divestment “over time”.

Post-separation Prudential Group to focus on high growth Asia and Africa markets with a view to sustained double-digit growth in embedded value per share

“The Board of Prudential plc has decided to pursue the full separation and divestment of Jackson to enable the Group to focus exclusively on its high-growth Asia and Africa businesses,” explained Mr Wells. “This would result in two separately listed companies with distinct investment propositions, which we believe would lead to improved strategic outcomes for both businesses.” The Group would have primary listings in both London and Hong Kong and secondary listings in Singapore and the US. Jackson is expected to be solely listed in the US.

“The separation and divestment of Jackson would transform Prudential into a Group purely targeting the structural opportunities of Asia and Africa,” he added. “Our differentiated product and geographic portfolio is well positioned to meet the health, protection and savings needs in these regions, where insurance penetration is low and demand for savings solutions is rapidly developing. The post-separation Group would focus on growth, with a view to achieving sustained double-digit growth in embedded value per share. This would be supported by growth rates of new business profit, which are expected to substantially exceed GDP growth in the markets in which the Group operates.

“The Group expects to commence separation by way of a minority IPO, targeting the first half of 2021, followed by future sell-downs over time, subject to market conditions, with the proceeds used to increase financial flexibility for further investment in our Asia and Africa business. If market conditions are not supportive of an IPO, the Group’s current intention is that separation would be facilitated through a demerger of the Group’s stake in Jackson to our existing shareholders. Any required shareholder approval for the separation will be sought in advance of its execution.”

Mr Wells explained: “Jackson intends to seek a strong credit rating and capitalisation and is expected to target an RBC ratio in the circa 425-475 per cent range at the point of the proposed listing. This range would be subject to market conditions and will be kept under review. Proceeds from anticipated new Jackson debt issuance would enable repayment of a portion of the Group’s debt during 2021 and 2022, and support Prudential’s intention to maintain its strong credit rating following the separation. Proceeds from further sell-downs in Jackson following the IPO would provide further resources to the Group for investment in Asia and Africa.”

The firm added that it does not currently expect Jackson to remit any regular dividends in 2020 or 2021 prior to an IPO.

Prudential will adopt a new dividend policy that is aligned to the Asia and Africa growth strategy and to the intended separation of Jackson.

“This new policy reflects a rebalancing of capital allocation from cash dividends to reinvestment in Asia, which is expected to deliver profitable and sustainable compounding growth,” said Mr Wells.  “We believe we are well positioned both to weather the disruption caused by the Covid-19 pandemic as we continue to support our customers and communities in the recovery to come, and emerge stronger and with a more focused strategy.”