Prudential hit by £3.3bn loss as it prepares to spin-off of US arm

Insurance giant Prudential is poised to complete the separation of its US business next month.

Jackson will be spun off following a shareholder vote this month, with investors getting one share in the company for every 40 Pru shares they hold.

The business is then expected to list on the New York Stock Exchange under the ticker ‘JXN’.

Prudential is to spin-off its US arm Jackson following a shareholder vote this month, with investors getting one share in the company for every 40 Pru shares they hold

This will leave the Pru focused on Asia and Africa, with headquarters in London. Yesterday, it said it planned to fortify its balance sheet – and its war chest for expansion –by raising up to £2.2billion.

Chief executive Mike Wells said offerings in London and Hong Kong would aim to increase the number of Asian shareholders.

He added: ‘We are continuing to move toward the proposed demerger of Jackson, subject to shareholder approval.

‘The demerger will complete our strategic transformation to focus exclusively on our higher-growth businesses in Asia and Africa.

‘To enhance financial flexibility and de-lever the balance sheet, we continue to consider raising new equity. 

‘We believe there are clear benefits from increasing our Asian shareholder base and the liquidity of our shares in Hong Kong.’

The Pru posted a paper loss of £3.3billion for the six months to June 30, compared to a £385million profit a year ago. 

This was down to complex accounting rules, which say Jackson must be valued differently because it is being spun off, with its ‘fair value’ cut by £5.4billion to £2.2billion.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said that shareholders had been left no poorer by the accounting change and that the Pru was otherwise ‘thriving’.

It provides life and health insurance, as well as savings products, to 17m people in Asia and Africa, and is listed on the London, New York, Hong Kong and Singapore exchanges.

When excluding the Jackson revaluation, it reported a £772million half-year profit, up from £449million the previous year.

That was after new business jumped 29 per cent to £848million.

The Pru’s chief exec  Mike Wells (pictured), said offerings in London and Hong Kong would aim to increase the number of Asian shareholders

Hyett said: ‘Clearly, Pru’s business model is pedalling along nicely, and we think that bodes well for the long term.

‘The immediate future is less certain, with lockdowns returning across many Asian economies in the face of spiking Delta variant cases, disrupting what is still a very analogue distribution system in many markets – reliant on banks and insurance brokers that can’t open.’

Abid Hussain, analyst at Shore Capital, added: ‘Overall, the equity story and pivot to Asia remains attractive. 

Asian insurance remains underpenetrated with growing populations of middle-class requiring products across the health and protection, savings and wealth spectrum.’

The Pru was founded in London, 173 years ago and listed in the London in 1978. Recently, it has undergone a radical overhaul.

Its former UK and European operations – now known as M&G – were successfully spun off and listed in 2019, with the Jackson separation revealed this year. 

Its head office staff are in Hong Kong, but Wells said the company had no intention of closing its London base. 

He said: ‘We’ve got a tremendously talented staff in London, and they face off with key stakeholders there . We’re not looking to get everybody in one building.’

Yesterday, the stock rose 2.6 per cent, or 38p, to 1489.5p.

This post first appeared on Dailymail.co.uk