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12th August 2020
Prudential plc highlights resilient Asia operating profit-to separate Jackson in US
Prudential plc intends to fully separate Jackson from the Group, commencing with a minority IPO planned for first half of 2021 and full divestment over time.
Post-separation, Prudential Group is to focus on high growth Asia and Africa markets with a view to sustained double-digit growth in embedded value per share.
A new dividend policy will be aligned with revised Group strategy to focus on value creation through growth
Asia half year adjusted operating profit was up 14% with double-digit adjusted operating profit1 growth in nine Asia markets
Jackson local statutory RBC ratio is expected to be above 425 per cent after Athene equity investment9
Group regulatory capital surplus8 strong at $12.4 billion, with an LCSM ratio of 334%(31st December 2019: 309 per cent)
Mike Wells, Prudential plc’s Group chief executive, comments “We have delivered a resilient performance in the first half, despite a challenging new business sales environment, which is likely to persist for the rest of the year, and further falls in interest rates. Our diverse, high-quality platform in Asia and our focus on writing profitable value-adding business led to a 14% increase in Asia adjusted operating profit. Our performance is again broad-based, with nine markets reporting double-digit adjusted operating profit1 growth2. In the US adjusted operating profit was (19)% lower due to market-related effects on the level of DAC amortisation but, while sales were lower, we have maintained our leadership position in the annuities market.
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. 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. 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.
Jackson intends to seek a strong credit rating and capitalisation and is expected to target an RBC ratio in the circa 425-475% 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.
To support the separation process, other than any pre-separation returns of capital including from Jackson’s debt issuance as indicated above, Prudential plc 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. The new policy will apply with immediate effect. 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. For the 2020 first interim dividend, the Board has approved a dividend of 5.37 cents per share, representing one third of the current expectation for the 2020 full-year dividend under the Group’s new dividend policy. Dividends are expected to grow broadly in line with the growth in Asia operating free surplus generation net of right-sized central costs, and will be set taking into account financial prospects, market conditions and investment opportunities.
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.”
Prudential Trends(814 articles)