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Prudential Spins Out Savings and Investment Provider M&G

As a part of the spinout, M&G will sell a £12 billion annuity portfolio to Rothesay Life, one of U.K.’s largest life insurers.

British financial services giant Prudential is spinning off its savings and investment unit in order to focus on high-growth opportunities globally.

The deal will result in M&G Prudential becoming an independent U.K. and Europe-based savings and investment provider, according to a Prudential statement Wednesday. As part of the spinout, M&G will sell a £12 billion ($16.74 billion) annuity portfolio to Rothesay Life, one of U.K.’s largest life insurers.

Prudential, led by CEO Mike Wells, will combine the high-growth potential of its Asia, U.S. and Africa businesses while remaining based in London, according to the statement. M&G, meanwhile, will focus on the savings and retirement markets in the U.K. and Europe.

“Following separation, M&G Prudential will have more control over its business strategy and capital allocation," Wells said in the statement. “Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the U.S.”

M&G Prudential manages £351 billion in total assets, according to Prudential’s website. The sale of the £12 billion annuity portfolio is expected to close in 2019, the firm said in the announcement.

“The demerger will allow M&G Prudential to play a broader leadership role in the fast-changing savings and investments market within the U.K. and Europe,” John Foley, chief executive officer of M&G Prudential, said in the statement. Foley will continue to lead the business after the spinoff.

“We call it a sale, but it’s actually a transfer of assets,” Jonathan Oliver, a spokesman for Prudential said by phone. “We’re transferring £12 billion in assets that support 400 thousand annuity policies to Rothesay. No one is paying a specific fee for it.”

According to Oliver, the deal will amount to a £1.1 billion benefit to Prudential and M&G. Following the deal, Rothesay will manage £37 billion in assets, according to an announcement from the life insurer. 

"I am delighted that Prudential, one of the UK’s most respected insurance companies, has chosen Rothesay Life to secure its policyholders’ pensions over the long term in a landmark transaction for us and for the industry,” Addy Loudiadis, chief executive at Rothesay, said in the firm’s deal announcement. 

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Both M&G and Prudential are expected to meet the criteria for inclusion in the FTSE 100 index, according to Prudential’s announcement. Prudential will also keep its primary listing in Hong Kong, as well as listings in Singapore and New York.

The sale of the U.K. annuities to Rothesay must happen before the spinout is completed.

“As far as the timing is concerned, we’ve absolutely avoided setting a hard deadline for this demerger because there’s a lot to do before we can do it,” Oliver said. 

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