U.S. insurer Prudential Plc plans to spin off its U.S. unit, Jackson National Life Insurance Co., and focus on Asia, accelerating a breakup of the company that began with the listing of its U.K. business last year.
An initial public offering of a stake in Jackson, one of the biggest annuities providers in the U.S., will be held in the first half of 2021, according to a company statement Tuesday. Prudential has been under pressure for months from activist shareholder Third Point to separate its Asian and U.S. businesses.
“We think there is a real demand for the shares, and they are ready at size and scale to be a stand-alone company,” Chief Executive Mike Wells said in a Bloomberg TV interview.
Prudential shares rose as much as 4.2% in London on Tuesday morning.
The insurer announced in March that it was readying a minority listing of Jackson, while continuing to look at other options for creating an independent company. In June, Prudential said that it was selling a stake in its U.S. operations to Apollo Global Management-backed Athene Holding Ltd., which will inject $500 million.
Third Point Chief Executive Dan Loeb wrote in a letter to investors last week that the deal with Apollo was an “important step” toward the full separation of Prudential’s Asian and U.S. units and provided a floor valuation on Jackson ahead of the standalone listing.
Wells said on a call with journalists that the Athene sale was intended to ensure that Jackson was well capitalized as a stand-alone company.
If an IPO of Jackson isn’t feasible, the stake could be offered to Prudential’s existing shareholders, according to the statement.
Splitting off Jackson makes “strategic sense” for Prudential, according to Bloomberg Intelligence analysts Kevin Ryan and Charles Graham.
“Investors will be offered a very clear focus on Asia and particularly Hong Kong and China,” they wrote in a note. “Executing it is taking time because of where the businesses are based, but also the location of shareholders.”
Prudential’s first-half earnings highlight the potential benefit from focusing on its Asian business. Adjusted operating profit for the region increased by 14%, with nine markets reporting double-digit growth, according to the statement. In the U.S., by contrast, this profit measure was down by 19%. For the company as a whole, adjusted operating profit fell slightly to $2.5 billion.
The insurer didn’t give an estimate of the impact COVID-19 has had on its business.
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