Prudential PLC (LON:PRU) bowed to activist pressure on Wednesday as it unveiled plans to spin out its US business, Jackson, in a minority initial public offering (IPO).
The life insurer said preparations for the IPO had commenced and that it would begin “detailed engagement” with key stakeholders to ensure Jackson had enough capital strength when it began life as a separate business, adding that it will provide an update in its half-year results on 11 August.
READ: Prudential prepared to discuss break-up proposal from US hedge fund
Pru has recently come under pressure from US hedge fund Third Point, which owns around 5% of the firm, to separate its US and Asian business and decamp from the UK with the fund’s boss, corporate activist Dan Loeb, saying the company could save around £200mln if the group closed its head office in London.
The company recently demerged its fund management arm M&G and shifting its two other divisions abroad would end the company’s 172-year presence in the UK, an outcome that seems more likely now its US business will also be split off.
Jackson provides retirees in the US will variable annuities, products that allow a guaranteed income with some exposure to stock market risk offset by hedging.
Full-year profits slide
In its results for 2019, Prudential reported a pre-tax profit from continuing operations of US$2.3bn. down from US$3.6bn in the prior year, despite a revenue jump to US$93.7bn from US$35.8bn.
The company also said it was closely monitoring the coronavirus outbreak, saying the pandemic had “dampened” sales momentum in its Hong Kong and Chinese markets.
“Given the impact of the coronavirus outbreak on travel and activity in the markets in which we operate, lower levels of new sales activity in those affected markets are to be expected. Our book of existing business is proving resilient and we are taking measures to manage the effect of lower activity while maintaining our investment in products, distribution and technology”, the company said.
Pru also said that a decline in interest rates alongside “volatile” equity markets at the start of 2020 will “create headwinds in of near-term new business profit”.
Despite the uncertain outlook, the news of the Jackson IPO sent Pru’s shares up 2.5% to 1,124.5p in early trading on Wednesday.