The activist demand that the Prudential sell its American arm Jackson Life was a bit of a shock. But the idea will be familiar to the Pru board, chaired by City grandee Paul Manduca.
As part of a continuing strategic review, the future of America’s top annuity insurer Jackson Life has been under discussion for months. The low valuation placed on US insurance assets by American investors is a drag on the Pru’s share price.
If the Pru could find a sensible way of enhancing the value of Jackson Life by releasing some capital and investing in new products, that might be a good way to go.
Dragged down: If the Pru could find a sensible way of enhancing the value of Jackson Life by releasing some capital and investing in new products, that might be a good way to go
There are shareholders, other than carpetbagging hedge fund Third Point, who like the current structure because it provides exposure to the world’s largest insurance market in the US and to fast-growing Asia in a neat package.
Manduca and his team, advised by brokers Goldman Sachs and Citibank, have several options.
The Pru could leave things as they are, or it could do the splits again, as it did last year when heritage Pru and M&G were spun off.
It could look for a private equity or trade sale. Or it could aim for a part-initial public offering, allowing Jackson Life to establish a value in the market while giving existing long-term investors a stake in the upside.
Selling, for instance, a 25 per cent stake might provide a chunk of capital which could be directly invested in the US or used to bolster Asian and African operations.
What the Pru doesn’t need is a viper in the nest forcing decisions for short-term gains when everything big insurers do – in terms of protection of lives and savers – is about the long view.
Much of this could be clarified when the Prudential releases its results on March 11 – Budget Day.
What is plain is that shifting the main quote out of London is not a battle that can be won by activist Dan Loeb and Third Point for much the same reasons as Unilever and Smith & Nephew are still here. The mandates of many long holders demand a full UK equity listing.
Moreover, even a slimmed-down HQ in Britain is preferable to dealing with the slings and arrows of Hong Kong-China relations.
That is precisely why the London Stock Exchange gave its Hong Kong counterpart the heave-ho.
A decade after the financial crisis, the detritus is still with us. Greedy bankers are as reviled now as when they crashed their own balance sheets and our prosperity.
Indeed, the judge in the trial of three former Barclays bankers Roger Jenkins, Tom Kalaris and Richard Boath, who are charged with devising bogus side deals to secure a bailout from Qatar, felt it necessary to warn jurors to put aside personal views about bankers, their bonuses and the financial crash.
All three defendants deny the charges.
Whatever the verdict of the jurors, the stain of the crisis is still with us. Former HBOS chief executive Andy Hornby is active in the same role at The Restaurant Group, where the dividend has been cut and 90 sites are to be closed.
But the Financial Conduct Authority’s report on alleged management failings which brought HBOS to the precipice is still under wraps.
Elsewhere, the Bank of England is having enormous trouble weaning banks off libor in spite of the fact that the whole system of setting rates was abused and landed several traders in jail.
The Bank’s executive director for markets, Andrew Hauser, warns market participants that unless they switch out of libor legacy contracts to the successor Sonia index they could be penalised.
Given that libor sets the interest rate for $400trillion of contracts, this is serious stuff.
If players don’t adopt Sonia, the Bank will require banks to post more collateral when they borrow to meet temporary requirements.
It is a mark of the severity of the crisis, the subsequent euro meltdown and libor scandal that there is so much unfinished business.
It would be nice to think that the City could put the past behind it. Don’t hold your breath.
Much ado about Chancellor Rishi Sunak’s backing for his local Yorkshire Tea.
Will he come to the defence of elegant Harrogate Spring Water, which is being gulped down by French yogurt maker Danone? I think we should be told.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.