Give the market what it wants and good things can happen... at least in the short term. Prudential PLC’s (PUK) (“Pru”) decision to accelerate its demerger from Jackson National, its U.S. life insurance operation, has lit a fire under the shares, sending them up more than 30% since the late January announcement. With Jackson National off the books, Pru management will be free to dedicate all their time, attention, and capital to the faster-growing, higher-margin Asian markets where the company already enjoys a solid business.
I like the move to accelerate the split, though I do find management’s decision to raise equity in order to pay down debt much more questionable. Long term, I like the growth opportunities in Prudential’s top markets across Southeast Asia, not to mention growth opportunities in China and India. The shares aren’t a huge bargain today, but I think 10% long-term core earnings growth is possible now, and I think that can still support decent total returns from today’s price.
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