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LONDON (Reuters) – British insurer Prudential (L:PRU) said on Tuesday it planned to spin off its U.S. business Jackson to focus on Asia and Africa, as its adjusted operating profit fell 3% in the first half.
A minority initial public offering of Jackson is planned for the first half of 2021, with “full divestment over time”, Prudential said in a statement.
Prudential’s shares jumped 4% as investors cheered news of the exit plan, after many had urged the company to follow in the footsteps of fellow insurers Standard Life (LON:SLA) and Old Mutual, which have both split up their operations in recent years.
Prudential spun off its European funds unit M&G last year.
Reuters reported earlier this year that Prudential was considering a divestment of Jackson.
Pressure had built on the insurer after U.S. hedge fund Third Point (NYSE:TPRE) took a more than $2 billion stake earlier this year and called on management to split the company in two.
The insurer sold a minority equity stake in Jackson to Apollo Global-backed Athene Holding (NYSE:ATH) for $500 million in June, in the first phase of its plan to create an independent U.S. business.
“The separation and divestment of Jackson would transform Prudential into a Group purely targeting the structural opportunities of Asia and Africa,” Prudential CEO Mike Wells, a former boss of Jackson, said.
Analysts at Jefferies (NYSE:JEF) said a disposal of Jackson would reduce the risk premium currently applied to Prudential, reitrating their hold rating.
Operating profit came in at $2.5 billion, above a forecast of $2.4 billion, according to a company-compiled consensus forecast.
Asia’s operating profit was up 14%, but Jackson’s profit fell 19%.
Prudential said it was introducing a new dividend policy, aligned to growth in the Asia and Africa businesses.
It said it would pay an interim dividend of 5.37 cents per share, one-third of its expected full-year 2020 dividend.
