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Prudential Plc's Pivot To Asia Paying Off Already

Mar. 10, 2021 1:48 AM ETPrudential plc (PUK) Stock2 Comments
Stephen Simpson profile picture
Stephen Simpson


  • Prudential PLC shares have outperformed since management announced an accelerated demerger plan for Jackson National and a faster transition to an all-Asia life insurance model.
  • Profits in the Asian operations were boosted by product mix in the second half, as customers sought out more protection products.
  • Prudential PLC has strong share in multiple markets where insurance penetration is less than 5% and where rising household incomes are driving more interest in savings/insurance products.
  • Double-digit core earnings growth in the Asian insurance operations, and a modest book value multiple for Jackson National, can support a $45 fair value, with good long-term appreciation potential.

Give the market what it wants and good things can happen... at least in the short term. Prudential PLC’s (NYSE:PUK) (“Pru”) decision to accelerate its demerger from Jackson National, its U.S. life insurance operation, has lit a fire under the shares, sending them up more than 30% since the late January announcement. With Jackson National off the books, Pru management will be free to dedicate all their time, attention, and capital to the faster-growing, higher-margin Asian markets where the company already enjoys a solid business.

I like the move to accelerate the split, though I do find management’s decision to raise equity in order to pay down debt much more questionable. Long term, I like the growth opportunities in Prudential’s top markets across Southeast Asia, not to mention growth opportunities in China and India. The shares aren’t a huge bargain today, but I think 10% long-term core earnings growth is possible now, and I think that can still support decent total returns from today’s price.

Sometimes Good Things Come To Those Who Don’t Wait

When I last wrote about Pru, the company was already in the process of separating itself from Jackson National, but the company was still considering a more measured exit strategy centered around an IPO. Since then, and since a meaningful revision to hedging assumptions within Jackson National significantly impacted the RBC ratio, management has decided to accelerate the process.

Pru is now going to pursue a demerger, basically a spin-off, in which Pru shareholders will get a share of the new Pru and a share of Jackson National. Pru will retain a 19.9% stake in Jackson, but with the intention of selling half within a year and most likely disposing of the remainder not so long after.

Management will be raising debt within Jackson National, but it

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor.Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds).

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (2)

WeTheNorth profile picture
Thanks for the article. Do you know when they are targeting to complete the spin-off?
Retired Fernando profile picture
Interesting article, but a bit confusing that you use "PRU", ticker of "Prudential Financial, Inc" when you are referring to "PUK", ticker of "Prudential plc". Makes the article a difficult to read.
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