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Pandemic hits Prudential Asia, sources say Jackson on block

LONDON/NEW YORK (Reuters) - Shares in Prudential PRU.L fell on Thursday as the coronavirus pandemic hit its Asia sales and it warned of challenging times ahead, while sources told Reuters the insurer's U.S. unit was for sale.

FILE PHOTO: The logo of British life insurer Prudential is seen on their building in London, Britain March 17, 2019. REUTERS/Simon Dawson/File Photo

Prudential’s main businesses are in Asia and the United States after it spun off its British unit last year.

Asian annual premium equivalent sales fell 24% in the first quarter to $986 million, with a 50% drop in Hong Kong and 19% in China, although Prudential said there were signs the sales environment was beginning to normalise in China.

Prudential traditionally relies on face-to-face contact between customers and agents to make sales in Asia.

Prudential's shares were down 5% to 10.36 pounds at 1523 GMT, compared with a 2.75% drop in the FTSE 100 .FTSE.

And the coronavirus crisis would continue to have an impact on its business in the second quarter, with sales in Asia inevitably “challenged”, Prudential Chief Executive Mike Wells told a media call ahead of its annual general meeting.

“In times like this, the quality of our existing customer relationships becomes clear,” Wells added.

The company said it was working with regulators to enable more products to be sold online, with more than 25% in Hong Kong already sold in this way.

JACKSON

Prudential reiterated that it was continuing to prepare to float a minority stake in Jackson, whose annual premium equivalent sales rose 25% to $631 million, alongside “active evaluation of other options”.

However, a process organised by an investment bank was launched in recent weeks to sell all of Jackson, according to two sources familiar with the matter, who spoke on condition of anonymity as the information isn’t public.

The economic dislocation caused by the virus has impacted Prudential’s plans for the minority initial public offering, the sources said.

Interest in Jackson, which mostly sells annuity products, is expected to come predominantly from private equity firms and their insurance affiliates.

While Prudential had hoped to value Jackson as highly as $10 billion before COVID-19 struck, the pandemic has reduced insurance company valuations, meaning that potential buyers will likely offer well below that mark, the sources added.

A spokesman for Prudential declined to comment. Jackson didn’t respond to a request for comment.

Rebel investor Third Point is pushing Prudential for a full separation of Jackson.

JP Morgan analysts said Jackson “remains a drag on the attractiveness of Prudential”, reiterating their “neutral” rating on the stock.

Although several insurers in Britain have suspended dividend payments, under pressure from regulators to preserve capital, Prudential, whose main regulator is in Hong Kong, is continuing with its 2019 payout.

Reporting by Carolyn Cohn in London and David French and Greg Roumeliotis in New York; Editing by Huw Jones, Alexander Smith and Barbara Lewis

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