Prudential’s impending demerger has been described as a “distraction” in the face of looming headwinds despite the group’s half year results revealing it to be in rude health.
Group operating profit rose 9% to £2.4bn, as the firm stated its demerger of UK and Europe asset management and pensions business M&G Prudential was on track.
M&G inflows more than halved to £3.5bn compared to the same period last year when they totalled £7bn.
M&G Prudential investment headwinds
Shares nudged higher on the results, but Interactive Investor head of markets Richard Hunter raised concerns about the timing of the demerger, which aims to focus Prudential’s activities on high growth markets in the US and Asia.
“The major risks facing Prudential are not necessarily of its own making, namely investment performance where certain markets are starting to look stretched on a valuation basis, a political landscape which is lurching towards protectionism and the ongoing costs and overhang of regulation.
“In addition, currency headwinds are in focus, while the demerger will prove a complex undertaking and will inevitably become something of a distraction for the group as the time approaches.”
However, Tilney managing director Jason Hollands argued a tougher environment could add to the case for integrating M&G and Prudential as a standalone UK business.
Share price since Prudential demerger announcement
The M&G Prudential demerger was welcomed by markets when it was revealed in March, but Hunter said that has now “evaporated”.
Shares have fallen 2% over the last six months. Over the last year shares have fallen 6% whereas the FTSE 100 has grown 2.5%.
Hollands said businesses were starting to take a more cautionary tone regarding the investment environment.
“As major manager of fixed income securities, M&G and Prudential will be particularly conscious of the impact on bond prices from rising yields.”
Parent company Prudential’s share price held steady after news broke that M&G chief executive Anne Richards was jumping ship to become the top boss at Fidelity International.
M&G Prudential chief executive John Foley is taking on Richards’ responsibilities following her exit.