Prudential plc today announces its intention to demerge its UK & Europe business ('M&G Prudential') from Prudential plc, resulting in two separately-listed companies with different investment characteristics and opportunities.
Prudential M&G, a United Kingdom and European savings, investment and retirement business, will be separated from the group and operate as a standalone entity.
Rating actions include a downgrade of The Prudential Assurance Company Ltd's (PAC) and Prudential's United States subsidiaries" (collectively Jackson) Insurer Financial Strength (IFS) Ratings to "AA-' from "AA".
John Foley, who now heads up the M&G Prudential division, will steer that business through the demerger.
When the merger completes - subject to shareholder and regulatory approval - shareholders will have holdings in both Prudential and M&G Prudential.
The transaction makes Rothesay Life the UK's largest specialist annuity insurer with more than £37bn of assets under management and some 750,000 lives insured.
Prudential shares leapt over five per cent this morning, adding more than £2.5bn to the market capitalisation of the London-listed insurance giant. The capital benefit of this transaction will be retained within the Group to support the demerger process.
Wells said the separation will give M&G Prudential "more control over its business strategy and capital allocation" and allow both businesses to focus on their "distinct investment prospects".
Following the demerger, Prudential plc will remain headquartered in the United Kingdom and retain its premium listing on the London Stock Exchange, its primary listing in Hong Kong, and other listings in Singapore and NY.
In response to the announcement, Aon partner John Baines said: "This market development is the culmination of a long process and during that period it's pleasing that appetite for pension scheme transactions remained undiminished and pricing remained very attractive, even in the context of a mega deal in the market".
Prudential will be able to focus on the "attractive returns and growth potential of its market-leading businesses in Asia and the US", he said. Prudential PLC is now served by its asset management arm Eastspring.
Investors were buoyed by the Pru's well-signposted plans to spin-off European operations, a £12bn sale of its annuities business and another year of bumper results - driven by further expansion in Asia. This may include the redemption or debt liability management of issued debt, and new debt issuance. Discussions have also commenced with our other key stakeholders, including rating agencies.
Following completion, Rothesay Life will be the largest specialist annuity insurer in the United Kingdom, covering 400,000 policyholders.
The demerger may not happen until late 2019 or early 2020 as Prudential first needs to undertake some legal paperwork.