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Prudential seeks efficiency with merger of UK businesses

Prudential Plc's decision to combine its asset manager M&G Investment Management Ltd. with Prudential UK & Europe is largely about efficiency, according to CEO Mike Wells.

The merged business, which will be called M&G Prudential, will have £332 billion of assets under management as of June-end. The move will combine M&G's active investment capabilities with Prudential UK&E's specializations in volatility-adjusted savings and liability-driven investment.

"We need to take the investment we are putting in these firms — the back office, in technology, in digital, in service capability — and lever it more," he told analysts during a conference call for the company's first-half earnings. "So that when we are investing over a horizon of three, four years, we don't want to be investing twice at the intersection between insurance and asset management."

He said the move is about efficiency and also about meeting a structural demand.

"We are not solving a weakness," he said. "It should produce an at-scale leading savings and investments provider."

The company already has everything it needs in order to grow the new, combined business, and will not be looking at M&A in this space, he said.

Wells' comments came as the company reported a first-half profit attributable to shareholders of £1.51 billion, up from £687 million a year ago.

Strong performance in Asian markets "underpins growth" for Prudential, according to CFO Mark Fitzpatrick, who stepped into the role in July. The Asia business made a pretax operating profit of £953 million, up from £728 million a year previously.

Wells also spoke of his ambitions for continued growth in Asia during the call.

"We're looking to deliver growth at scale," he said. "One of the questions has been can we continue to grow? What you'll see is, yes, we very much can."

He said Prudential is at "the front end of the opportunity" in most of its Asia markets. GDP growth is not the main driver of sales in the region, but rather deepening relationships, he said.

Wells added that recent growth in Asia has come despite Prudential exiting several markets, including the Korean and Japanese life markets and the broker independent channel in Hong Kong, he said.

There has been some speculation from analysts this year that Prudential would consider carving out its U.K. business in order to focus on higher-growth Asian markets.