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Prudential Merges Its U.K. Asset Management, Insurance Units

The combined businesses will see technology upgrades under the merger.

  • Joe McGrath

British insurer Prudential is merging its asset management business with its U.K. insurance operations in a cost-savings move.

Combining asset manager M&G with Prudential U.K & Europe, a provider of long-term savings, investment and retirement income services, will help cut £145 million (about $189 million) in annual costs by 2022, according to a statement from Prudential Thursday. The combined units have more than six million customers globally and a total £332 billion of assets.

M&G Prudential will immediately begin a large-scale digital investment program to increase its competitiveness with technology and systems upgrades, Mike Wells, Prudential’s chief executive officer said during a media call about the merger. The scale and expertise in a newly combined business will allow the organization to develop more “customized” products for clients on both the retail and institutional side, according to Wells, who said the firm is not currently planning to cut staff in client-facing divisions.

“We are a little over 9,300 employees in the combined business. It is a good crew,” he said. “There will be no change in the fund managers or the research team.”

When asked whether there was a difference in culture between the businesses, he acknowledged subtle differences but said that conversations with fund managers highlighted an appreciation for the security that comes from being part of a business with sizable resources.

Analysts view the merger favorably. Shore Capital director Eamonn Flanagan, for example, said combining the U.K. insurance and M&G business “makes enormous sense” as it helps the firm cut costs while offering a “unified proposition” to the market.

“Pru has now 3 fully formed, unified, distinct and financially robust divisions across Asia, the U.S. and the U.K.,” Flanagan said.

Anne Richards, now CEO of M&G, will become deputy chief executive of M&G Prudential following the merger. In the firm’s statement, Richards said the deal will “enable our investment teams to offer their expertise to a wider range of customers and across a broader range of investment and savings formats, while continuing to provide our current clients with the same high level of service.”

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A spokeswoman for M&G said Richards was not taking calls. Further details on the newly integrated company are to be presented at Prudential’s investor conference in London on November 16, according to the statement.

Since the end of last year, media reports have suggested that the company was looking to sell its £45 billion pensions annuity book. The London Times reported in December that former Aegon chief financial officer Clare Bousfield had been appointed to assess market appetite for such a sale.

On the media call, Wells said that the profitable annuity book “would not be part of any such conversation,” but declined to say whether Prudential might consider selling a portion of it.

“We are not looking to get rid of the entire book that we have. It is a case of price discovery for us,” he said. “The with-profits is not part of that consideration at this point in time. I think it is in the interest of our shareholders to keep things a little tight.”