Fitch downgrades Prudential on UK demerger

Fitch Ratings has downgraded the long-term ratings of UK-based life insurance group Prudential following the company's decision to separate its UK & European businesses (M&G Prudential) from the rest of the group.

Prudential plans to demerge its UK & Europe business from the US, Asia and Africa business, creating two separately-listed companies.

Rating actions include a downgrade of The Prudential Assurance Company Ltd's (PAC) and Prudential's US subsidiaries' (collectively Jackson) Insurer Financial Strength (IFS) Ratings to 'AA-' from 'AA'.

Fitch believes that the demerger announcement crystallises Prudential's strategic intent to separate M&G Prudential from the relatively higher-growth US and Asia-Pacific businesses. Fitch has concluded that the Prudential Assurance Company (PAC), the main insurance operating subsidiary of M&G Prudential, will no longer be treated as "Core" to the Prudential group under the agency's group rating methodology. Fitch now rates PAC and and the US life business Jackson separately.

The ratings agency noted that the demerger plan removes the company’s global diversification benefits. In addition, PAC's profitability has not grown as strongly as Jackson and Prudential Corporation Asia.

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