The pensions and investment giant announced today (14 March) it is splitting its UK and European arm from its Asia business, to create M&G Prudential, which will target retirement and fund management markets in the UK and Europe.
As part of the move, Prudential revealed that despite “excellent success” selling through intermediaries, it would be moving to a "digital transformation" that would allow to sell direct to investors - putting it at odds with its adviser customers.
For example the company pointed out it does not currently have an investment platform, seen as a key way of selling direct in a model used by online brokers such as Hargreaves Lansdown.
“One capability we can establish is business to consumer,” said John Foley, chief executive of M&G Prudential said on a call this morning.
“This is something we are developing going forward.”
Mr Foley said the company is investing £250m in M&G to ensure the company provides, not only the right products, but the right customer service as well.
“This is mostly about digital capabilities” he said, describing the organisation as currently “fairly paper-based”.
The company said its investment products, including multi-asset funds, were “performing really well and meeting customer needs”.
The split announced today will create two London listed businesses, and shareholders will hold shares in both.
M&G Prudential will be a savings and investment provider focused on the UK and Europe. Prudential will operate across Asia, the US and Africa.
The business also announced a £12bn sale of annuities to derisking expert Rothesay Life, covering 400,000 policies.
Mike Wells, group chief executive of Prudential, said: “Following separation, M&G Prudential will have more control over its business strategy and capital allocation.
"This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector’s most trusted brands, while Prudential will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.”
Mr Wells will continue to be the head of Prudential, and John Foley will remain CEO of M&G Prudential.
The demerger “will allow M&G Prudential to play a broader leadership role in the fast-changing savings and investments market within the UK and Europe”, Mr Foley said.
The timing of the demerger will depend on factors such as market conditions and the completion of the annuity sale, which should happen by the end of 2019.
The company also announced full year figures, showing ·group IFRS operating profit4 of £4.6bn, up 6 per cent and an 8 per cent increase in the dividend to 47p a share.
The company's pre-tax profit rose to £3.30bn, up from £2.28bn a year earlier. This was due to an increase in inflows into managed products as well as growth in Asia.
Assets under management at M&G Prudential rose 13 per cent to £351bn.
Mr Wells said the company’s strategy “is aligned to structural trends: the savings and protection needs of the fast-growing middle class in Asia, the retirement income needs of the baby boomers in the US and the increasing demand for managed savings solutions among the ageing populations of the UK and Europe.
“The Group's performance demonstrates that we are highly effective in accessing the opportunities arising from these trends, and that we are meeting the needs of our customers better than ever before.
"I am confident that, given the extent of our opportunities and our proven ability to execute and innovate, we are well positioned to continue to grow profitably.”
