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Talk of Breakup of Jackson National Parent Company Intensifies

August 9, 2017

Prudential plc., the parent company of Jackson National, is becoming more open to spinning off its U.K. operations, according to investors, the Financial Times writes. It remains unclear how a breakup would affect Prudential’s North American business, including Jackson National Life, if it were ever to occur.

Talk of a breakup has been going on for a decade, the FT writes. But speculation picked up following recent reports that Prudential was talking to investment bankers about unloading £10 billion of its annuities business. The company decided to stop pursuing new business in the U.K. annuity market, its hometown market, in February. But it’s been moving out of the business since 2016, first ditching its bulk annuities business and later exiting from the market for insurers peddling annuities to pension savers.

However, despite the ongoing withdrawal from the U.K. annuities arena, there have been no plans in regard to Jackson National, which isn’t mentioned in the FT article. Prudential declined comment to the publication.

Getting rid of its U.K. business and instead focusing on the more promising units in Asia and the U.S. would allow Prudential to grow faster, analysts and investors tell the FT.

Profits in its Asia business have grown by two-thirds since 2012, while Prudential’s U.K. insurance operations only grew 14% during the same time period, the paper writes.

A breakup could boost valuation by about a third above the firm’s current value, although it will be affected by the amount of capital the firm will need, Abid Hussain, an analyst at Credit Suisse, tells the FT.

It’s also a sensible time for Prudential to consider a breakup, given the wide availability of cash for deals and hungry buyers, Guy de Blonay, fund manager at Jupiter Asset Management, tells the publication. Nonetheless, a sale would likely take many years as few buyers could handle the entire operation, bankers tell the FT.

Prudential would be far from the first company to spinoff a portion of its annuities product line. This summer MetLife formalized the spinoff of Brighthouse, allowing it to exit the retail life and annuities business and emphasize more growth-oriented business lines. Manulife Financial, meanwhile, is reportedly investigating a spinoff or IPO of its U.S. unit, John Hancock, according to an article in The Wall Street Journal.

Last month, in a Best's Review article, Prudential plc. Group CEO Mike Wells expressed confidence in Jackson National’s opportunity to take advantage of industry shifts brought on by the Department of Labor’s fiduciary rule, as a result of its prep work on technology and compliance, Best’s Review writes.

Wells told the publication that “product innovation” aimed at compliance with the rule, in addition to Jackson’s existing IT capabilities, will allow the U.S. firm to tap into retirement assets it couldn’t access before. Further, Jackson stands to benefit from the demographic changes in the U.S., namely, an aging population searching for ways to ensure retirement income, Wells tells Best’s Review.

In 2016, Jackson was the industry leader in U.S. individual annuity sales, according to LIMRA. Prudential Plc has no business affiliation with Prudential Financial of Newark, N.J.

By Alex Padalka
  • To read the Financial Times article cited in this story, click here if you have a paid subscription.
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