Activist Investor To Prudential: End Your 172-Year U.K. Presence

Activist Investor To Prudential: End Your 172-Year U.K. Presence
  • Activist investor Dan Loeb accumulated a $2 billion stake in Prudential.
  • The activist investor wants the insurance giant to split its America and Asia business.
  • The London office would be shut with operations shifting to Michigan and Hong Kong.

U.S.-based activist investor Dan Loeb and his Third Point hedge fund has a simple message to insurance giant Prudential: end your 172-year presence in the U.K.

The Letter

According to the Financial Times, Loeb’s Third Point accumulated a $2 billion position in Prudential. The activist hedge fund will use its clout and influence to push the insurance giant to separate its U.S. and Asian business.

Loeb’s demands were communicated to Prudential in a letter which emphasized a lack of any strategic logic to its current business, according to FT. As it stands today, the London-based head office oversees both the U.S. and Asian operations.

The American business is named Jackson National Life and the Asian business is named PruAsia.

Loeb is reportedly waiting for Prudential CEO Michael Wells to give him a call, a source told Financial Times.

Logic Behind The Demands

Prudential doesn’t offer its products and services to the U.K. market, despite a 37 billion pound listing on the London Exchange, according to FT. Prudential’s exposure to the market was removed through a 2019 demerger when it divested the U.K. business and fund manager M&G.

“Prudential PLC’s two seperately managed franchises… have distinct strengths but share no discernible benefit from being operated under the same corporate umbrella,” the letter stated.

Instead, the activist investor believes the separation of National Life and PruAsia into two separate companies would double Prudential’s size in three years. Prudential would still maintain a financial interest in each entity.

The strategy would also eliminate 200 million pounds per year in costs as PruAsia’s operations would shift to Hong Kong and the American business will be managed out of Michigan.

Some sort of strategic alternative is required to reverse Prudential’s underperformance versus rival AIA. Specifically, Prudential’s stock has underperformed AIA by 80% over the past five years.

Simply put, Prudential has been “operating in a suboptimal way for some time,” Loeb told Financial Times. He also said the time to take action is now and any further delay will add to the stock’s poor performance.

“Any time you wait around and do nothing you’re wasting the opportunity to go into a growing market and take advantage of the changes that are going on,” Loeb also said.

Prudential was shy on details with the media but did confirm with FT it received a letter from Third Point. The insurance company stated it “looks forward to commencing a dialogue with Third Point with regard to the views outlined in its letter.”

Prudential is scheduled to report its full-year results on March 11 and is expected to provide commentary related to its performance and strategy, according to Financial Times.

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.
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