Third Point LLC Calls On Prudential Plc To Split Businesses Into Two

The US hedge fund Third Point LLC has asked the UK based Prudential Plc to separate into two entities as the former has taken around £1.5 billion ($2 billion) stake in the UK based insurer. Third Point LLC is well known for devising new strategies and acquiring stakes in large international companies.

Hedge funds are pooled investments which are managed by dedicated fund managers with an intention to generate returns for investors. These are riskier when compared to mutual funds or other pooled investments as they provide with more flexibility in terms of investment strategies. Also, most of the strategies deployed by hedge funds use leverage to increase investment exposure along with other speculative strategies which are not usually deployed by other pooled investments.

The New York-based asset management firm, Third Point LLC has written a letter to Prudential stating it to separate its US business and Asian businesses as the former have gained a stake of almost 5 per cent to become the insurer’s second-biggest shareholder. Third Point LLC appreciated Prudential Plc for demerging M&G. The US hedge fund has asked the 172-year-old insurance group to divide Prudential Corporation Asia and Jackson National Life. The idea behind implementing this split is to optimise growth and drive higher valuation along with increasing investments in both businesses. With $14 billion of assets under management (AUM), the hedge fund believes that along with M&G, PruAsia and Jackson could have been spun off as well.

The US based hedge fund believes that there would be several benefits arising from this split. The insurer would be able to recruit local executives and eliminate group head-office costs. In addition, as believed by Third Point, this will further help to reduce the gap between the intrinsic value and the current share price. The insurer, Prudential Plc will look forward to engaging with its shareholders and Third Point is hopeful of collaborating with the insurer on this split of businesses. Prudential Plc is expected to release its results in 11th March 2020, which will include the Group's performance and strategy.

Prudential Plc-Financial highlights 1H FY19

(Source: Company’s website)

The company’s operating profit from continuing operations rose to £2,024 million in the first half of the fiscal year 2019 as compared to £1,669 million in the first half of the fiscal year 2018. The company’s total profit after taxation (inclusive of continued & discontinued operations) increased to £1,540 million in the first half of the fiscal year 2019 as against £1,356 million in the first half of the fiscal year 2018. These results are based on IFRS adjustments.

About Prudential Plc

Prudential Plc (LON: PRU) is a London, the United Kingdom based financial services company, that mainly engages in the business of Life Insurance and related products. The company’s four core businesses are Prudential Corporation Asia, which look after the health protection and savings management in the Asian region. Jackson, which is the Retirement management group division of the company. The company also has an auxiliary division called the Environmental, Social and Governance (ESG) group which focuses on the company’s activities that contribute to the health and sustainability of the communities in which the company has a presence and influence. The company’s shares have their listings on the stock exchanges of New York, Hong Kong, Singapore and London. The shares of the company have a listing on the London Stock Exchange where they are traded with the ticker name PRU. The shares are also part of the FTSE 100 index.

Eastspring, which operates as an asset manager, handling various portfolios across the world and Prudential Africa, which not only looks to provide insurance and de-risking services in various African countries, but also provide people solutions to manage and grow wealth. The company consistently develops their product portfolio, designing it around its customers’ needs and providing them with comfort around the fact whether that be in relation to savings for retirement or insuring against any kind of uncertainty around illness, death or critical life events. The company believes that its customers are the most important aspect of the business and its business strategy revolves around this thought. The company is also into the provision of various other financial services such as asset management and other finance-related products and solutions alongside its core business activity of life insurance.

Prudential Plc-Stock price performance

Daily Chart as on 25-February-20, before the market closed (Source: Thomson Reuters)

On 25th February 2020, while writing at 12:17 PM GMT, Prudential Plc’s shares were clocking a current market price of GBX 1,445.50 per share. The company’s market capitalisation was at £37.07 billion at the time of writing.

On 5th July 2019, the shares of Prudential Plc have touched a new peak of GBX 1,532.78 and reached the lowest price level of GBX 1,109.67 on 28th August 2019 in the last 52 weeks. The company’s shares were trading at 5.69 per cent lower from the 52-week high price mark and 30.26 per cent higher than the 52-week low price mark at the current trading level, as can be seen in the price chart.

The stock’s traded volume was hovering around 3,139,787 at the time of writing before the market close. The company’s 5-day stock's daily average traded volume was 6,545,857.40; 30 days daily average traded volume- 5,225,015.27 - and 90-days daily average traded volume – 5,746,911.48. The volatility of the company’s stock was 21 per cent higher as compared with the index taken as the benchmark, as the beta of the company’s stock was recorded at 1.21 with a gross dividend yield of 3.53 per cent.

The shares of the company have delivered a positive return of 8.77 per cent in the last quarter. The company’s stock plunged by 1.97 per cent from the start of the year to till date. The company’s stock has given investors 8.37 per cent of a positive return in the last year.Â

About Third Point LLC

Incepted in 1995, New York based Third Point LLC is SEC-registered investment adviser. The Group has rich expertise in risk arbitrage, distressed debt and other special instruments in the financial markets. The Group looks for capitalising upon growth catalyst and unlocking value in investments. The Group deploys a value-oriented and event-driven strategy. The Group is led by the US billionaire Daniel Loeb.