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Prudential faces speculation of a break-up as it pulls out of UK annuity market

Investors have said Prudential has been more open to the idea of a break-up
Prudential reports its first half results on Thursday

Prudential plc (LON:PRU) is facing fresh speculation that it could split off its Asian division following reports it has put a £10bn block of UK annuities up for sale.

Investors have said the insurance giant has been more open to the idea of getting rid of its mature UK business to focus on its Asian unit, the Financial Times reported.

The company is said to have put £10bn of its £45bn UK annuities back book up for sale but a disposal is not definite.

Prudential is now confronted with questions on whether it is considering offloading the remainder of the UK business, including the rest of its annuities and the PruFund and M&G operations.

“Talk of getting rid of the weakest parts of the business makes sense,” said Guy de Blonay, fund manager at Jupiter Asset Management, which holds a stake in the insurer.

“We are in an environment where cash is abundant and buyers are lined up for anything that is for sale. It makes sense that a company would want to explore a break up.”

Should Prudential decide to carve off its UK business, its stronger performing Asia and US operations would lead to a faster growth rate, according to analysts.

Chris Kinder, UK equities portfolio manager at Columbia Threadneedle Investments, said: “Prudential Asia is one of the most impressive financial assets globally.”

Some parts of its domestic operation have grown, including the PruFund range of investment funds, and UK profits rose 14% last year. 

But the UK asset management business, M&G, has struggled in recent years and last year Prudential appointed Anne Richards, formerly at Aberdeen Asset Management, to overhaul the business.

In comparison, profits in Asia last year were two thirds higher than in 2012 and the business is expected to see further demand for insurance from the middle class in the region. 

“A split has always been something they have wanted to do, but market chatter has picked up recently,” said Ben Wallace, fund manager at Janus Henderson. “People who know Prudential will see it as a process of slicing bits of the UK portfolio off over many years, but it would be good for the company to specialise.”

Prudential, which reports its first half results on Thursday, declined to comment on the speculation.


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