Third Point, the US-based hedge fund led by billionaire Daniel Loeb as well as a shareholder holding $2 billion in Prudential, said the London-based insurer should separate into two companies.
|Third Point, the second-largest investor of Prudential believes the group should be separated into two companies |
In a letter sent to the Prudential's Board of Directors, Third Point stressed that it has become the second-biggest shareholder with nearly 5 per cent, according to The Guardian.
The US-based activist investor argued Prudential should split its Asian and US businesses, only months after Prudential announced completing the demerger of M&G Plc. from Prudential Plc. The UK and European operations began trading as M&G on the London stock exchange in last October.
Following the demerger, Prudential is an Asia-led group focused on capturing opportunities in structural growth markets. In Asia, the growing middle class needs to save more and protect themselves from ill-health. In the US, the growing ageing population needs more access to secure retirement income.
Third Point praises the 172-year-old insurance group for demerging M&G but calls on it to split Prudential Corporation Asia and Jackson National Life “to increase investment in both businesses, optimise growth, and drive higher valuation”, as cited in The Guardian.
The separately managed franchises Prudential Asia and Jackson “have distinct strengths but share no discernable benefit from being operated under the same corporate umbrella,” Loeb said.
Prudential confirmed to VIR that it has received a letter from Third Point LLC.
“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,” said Addy Frederick, Prudential Media Relations manager.
Prudential announced providing an update on the group’s performance and strategy at its full-year results on March 11.
Third Point, which manages more than $14 billion of assets, said Prudential Asia and Jackson could have been spun off at the same time as M&G.
The US-based investment fund lists several reasons to believe Prudential would benefit from separating the businesses, such as eliminating group head-office costs and recruiting local executives, and asserts this would “close the yawning gap between the current share price and intrinsic value”.
Prudential has yet to disclose its plan for 2020, however, the change in structure might impact the Vietnam market where the company is a giant in the insurance segment.
According to its financial report for 2018, Prudential Vietnam achieved a revenue of VND19 trillion ($826.1 million) from the insurance sector, up 18.7 per cent compared to 2017. Pre-tax profit reached VND1.4 trillion ($60.87 million) as well as maintaining a high level of liquidity with a solvency margin of more than 130 per cent.
Prudential Vietnam also manages a total asset value of VND90 trillion ($3.9 billion).