Prudential to hold talks with Third Point over US, Asia demerger demand
British insurer Prudential said it would hold talks with activist hedge fund Third Point over its demands that it spin off its Asian and US businesses.
Third Point has built a stake worth $2bn in Prudential to become its second largest shareholder and wrote to the UK company on Monday outlining position.
“Prudential proactively engages with shareholders with regards to group strategy and structure, and looks forward to commencing a dialogue with Third Point with regard to the views outlined in its letter,” Prudential said on Tuesday.
It recently demerged its European insurance and asset management businesses into a new company called M&G. US-based Third Point, which holds just under 5% of Prudential, wants it to separate its Asian and US operations.
In its letter, Third Point said it believed “a more significant opportunity exists” to increase investment in both businesses, “optimize growth, and drive higher valuation” and claimed its analysis indicated that the interests represented by Prudential shares could “double within three years”.
It added that Prudential's Asian unit and the US operation which trades as Jackson National Life, had “distinct strengths but share no discernable benefit from being operated under the same corporate umbrella”.
“PruAsia is a leading Pan-Asian insurance franchise with decades of structural growth potential driven by rising middle-class wealth in Asia and low penetration levels in health and protection insurance,” Third Point chief Daniel Loeb wrote.
“Jackson is a leading US-focused annuity writer with best-in-class distribution, high diversification by vintage, and its own impressive track record; a conservative hedging policy protected Jackson in 2008 and allowed the business to take significant market share following the financial crisis.”
“If PruAsia and Jackson were separated, resulting in a greater focus on reinvesting capital in each unit and streamlining central costs at the group level, our analysis indicates that the interests represented by Prudential shares can double within three years,” Loeb claimed.