28th Jan 2021 09:22
(Alliance News) - Prudential PLC on Thursday said it is contemplating raising around USD2.5 billion to USD3 billion in Hong Kong or London, or both, with the hope or increasing its investor base in Asia.
Shares in Prudential were down 9.5% at 1,213.50 pence in London, making it the worst performer in the FTSE 100 in morning trading.
"Such a transaction, if executed, would maintain and enhance the group's financial flexibility in light of the breadth of the opportunities to invest in growth," the company said.
The firm confirmed its overall Asian quarterly sales trajectory has continued improving in the second half of 2020, with 2020 operating performance expected to align with current market expectations. Prudential expects to post its 2020 preliminary results on March 3.
The London-headquartered insurance firm has also opted to pursue separation of its Jackson Financial Inc US business in the second quarter of 2021 via a demerger.
The separation would take place via a demerger, with shares in Jackson to be distributed to Prudential shareholders, and would lead to a much earlier separation than a minority initial public offering and future sell-downs could have achieved.
The demerger would complete Prudential's transformation into company "focused exclusively on the high-growth opportunities of Asia and Africa".
At the point of demerger, Prudential would have a 19.9% non-controlling stake in Jackson and would monetise this over time to support Asian investment.
The company has appointed Steven Kandarian, former chief executive of US life insurer MetLife Inc, as non-executive chair of Jackson's board, effective February 1. Further independent director appointment will be announced in due course.
Once the separation is complete, Jackson expects to list on the New York Stock Exchange. At the time of separation, it will have total financial leverage in the 25% to 30% range, subject to market conditions. Jackson is not expecting to pay a pre-separation dividend to Prudential.
Prudential said, that: "Following completion of the separation of Jackson, Prudential will be wholly focused on its growing health & protection and savings markets in Asia and Africa. These regions offer attractive demographic characteristics and have generally low levels of penetration of insurance products. Prudential expects to maintain its existing strong credit ratings and growth trajectory, including a focus on achieving sustained double-digit growth in embedded value per share."
At at December 31, pro forma for the separation of Jackson and assuming no pre-separation dividend, Prudential's debt-leverage ratio is estimate to be in the low 30s in percentage terms, with Prudential to target a 20% to 25% debt-leverage ratio in the medium term.
Jackson's risk based capital ratio ratio expected to be 425% to 450% at the point of separation, but will look to revise its hedge modelling for US statutory standards for calculating reserves and capital.
Chief Executive Mike Wells said: "Our priorities as a group remain, first, to ensure our investors fully benefit from the opportunities of Asia and, second, to pursue, at pace, a fully independent Jackson. The demerger we are announcing today will significantly accelerate Prudential's transformation into a business purely focused on profitable growth in Asia and Africa.
"I am delighted that Steve has agreed to join as chair of Jackson. He brings an unrivalled track record in the US life insurance sector, and I am more confident than ever that Jackson will flourish as a separate business. Any future equity raising by Prudential will allow us to capture even more fully the rapid growth in the health, protection and savings needs of people in our chosen markets."
By Anna Farley; [email protected]
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