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M&G and Prudential investment arms to merge

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M&G and Prudential investment arms to merge

(Update) Prudential is to merge its M&G Investments funds arm with its Prudential UK and Europe (UK&E) businesses to form a new investment division.

The division will be called M&G Prudential, which the firm described as a savings and investments business focused on meeting growing customer demand for comprehensive financial solutions.

The business will control some £332 billion in assets with over six million customers. 

Prudential UK&E chief executive officer (CEO) John Foley has been appointed CEO of M&G Prudential, while Anne Richards (pictured above) remains CEO of M&G.

Richards and Prudential UK&E insurance CEO Clare Bousfield will also serve as deputy CEOs of Prudential UK&E. 

'I look forward to working with the teams across both sides of the business to develop the products and capabilities that will help us to continue to lead the fast-changing savings and investments market,' Foley (pictured below) said in a stock exchange announcement. 

'Prudential UK&E and M&G both offer well designed solutions which help investors meet their most important financial goals.

'Combining their complementary strengths allows us to provide greater choice to a wider range of customers.' 

Logic behind merger 

Prudential highlighted a range of compelling reasons for combining the businesses. 

It noted that M&G Prudential will be able to leverage its scale, financial strength and complementary product and distribution capabilities to enhance the development of capital-light, customer-focused products.

Additionally the new entity will combine M&G's active investment expertise with Prudential UK&E's capabilities in volatility-adjusted savings and liability-driven investment, providing more choice for customers of both historical channels.

Prudential also pointed out the unified business will also be better positioned to develop and fund joint product propositions and to build new digital service and distribution to meet fast-changing customer needs. 

M&G chief Richards said: 'This is an exceptional opportunity to bring together M&G's extensive investment capabilities and Prudential UK&E's expertise in balance sheet management.

'It will enable our investment teams to offer their expertise to a wider range of customers and across a broader range of investment and savings formats, while continuing to provide our current clients with the same high level of service.' 

Foley added: 'Prudential UK&E and M&G both offer well designed solutions which help investors meet their most important financial goals. Combining their complementary strengths allows us to provide greater choice to a wider range of customers.' 

Cost savings

M&G Prudential intends to invest to achieve its goal of becoming an 'efficient, service-led digitally-enabled business'. The investment and associated cost savings will be shared between M&G, and Prudential UK&E's with-profits and shareholder businesses.

Shareholders are expected to contribute around £250 million towards the investment and to benefit from cost savings of circa £145 million by 2022, excluding revenue synergies.

 

Prudential chief executive Mike Wells (picture above) said: 'M&G and Prudential UK&E have a long history of collaboration and we are fortunate to have two highly respected brands. Combining these businesses will allow us to better leverage our considerable scale and capabilities.' 

Retail record flows

News of the merger was accompanied by a trading update, which showed profit at M&G increased by 10% to £248 million in the first half.

The business benefited from a strong recovery in net flows, with external inflows totalling £7.2 billion in the first half versus an outflow of £7 billion in the corresponding period of last year. 

Institutional inflows accounted for £1.7 billion of this, while retail sales came in at a net record £5.5 billion. 

The firm highlighted its Optimal Income and its Global Floating Rate High Yield funds, along with its multi-asset fund range as major drivers of first half inflows, while institutional investors were also drawn to its illiquid credit strategies. 

The inflows, along with supportive markets, helped M&G's assets under management run on behalf of external clients rise 9% since the turn of the year to £149 billion. 

Together with internal assets, M&G's total assets under management have increased by 6% to £281 billion since the end of 2016. 

At 11.25am shares in Prudential were broadly flat at £18.39. 

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