SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June,
2020
PRUDENTIAL PUBLIC LIMITED COMPANY
(Translation of registrant's name into English)
1 Angel Court, London,
England, EC2R 7AG
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F X
Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No X
If
"Yes" is marked, indicate below the file number assigned to the
registrant
in connection with Rule 12g3-2(b): 82-
18 June 2020
This announcement contains inside information
Prudential
plc announces $27.6 billion1 US
reinsurance agreement alongside $500 million equity investment by
Athene Holding Ltd into its US business
●
$27.6
billion1 of
Jackson's in-force fixed and fixed indexed annuity portfolio fully
reinsured by Athene, effective from 1 June 2020
●
Athene to make a $500 million anchor
equity investment in Prudential's US business
●
Athene to hold a 11.1 per cent
economic interest in the enlarged common equity
of Prudential's US business
●
Equity
investment and reinsurance transactions expected to increase
Jackson's RBC cover ratio by approximately 80 percentage
points2
●
Equity investment expected to close in
July 2020
●
Preparations for a
minority IPO of Jackson continue alongside an evaluation of other
options
The Board of Prudential plc ("Prudential") has today reached
agreement with Athene Holding Ltd ("Athene"), a leading retirement
services company, for its subsidiary Athene Life Re Ltd to invest
$500 million in Prudential's US business in return for an 11.1 per
cent economic interest for which the voting interest is 9.9 per
cent. Athene's investment will be deployed in Jackson,
strengthening its capital base.
Athene Life Re Ltd has also fully reinsured a $27.6
billion1 in-force
portfolio of Jackson's US fixed and fixed indexed annuity
liabilities under a long-term arrangement.
Athene's investment will take the form of a cash subscription for
the issuance of new common equity in Brooke (Holdco 1) Inc, the
holding company containing Prudential's US businesses. These
include Jackson National Life Insurance Company ("Jackson"), a
top-two annuity provider with best-in-class products, distribution
and operations headquartered in Lansing, Michigan, and PPM America
Inc, an asset manager headquartered in Chicago,
Illinois.
The combined effects of the investment and reinsurance transactions
are expected to increase Jackson's risk-based capital cover ratio
by approximately 80 percentage points2.
Prudential continues to prepare for a minority IPO of Jackson
alongside the active evaluation of other options to create an
independent US business. A further update will be provided at
Prudential's half-year results in August. After the transaction,
Prudential's US business will have an anchor investor of Athene's
standing bringing a long-term commitment to Jackson and its
development, while Prudential will retain full strategic
flexibility in relation to the business.
Mike Wells, Group Chief Executive of Prudential, said: "We are
delighted to be forging a new relationship with the team at Athene,
given their deep expertise in the US annuity sector and long-term
commitment to its development. This agreement is a key step forward
in meeting our strategic objectives for Jackson."
Michael Falcon, Chairman and Chief Executive Officer of Jackson,
said: "Today's transactions with Athene, a leading franchise in the
retirement services market, further strengthen our capital position
and enhance our ability to grow. We value Athene's investment in
Jackson, which is aligned to our common goal of serving the growing
population of American savers transitioning into and through
retirement."
Jim Belardi, CEO of Athene, said: "We are very pleased to announce
this mutually beneficial transaction in coordination with Jackson
and its parent, Prudential plc. As top annuity providers focused on
serving the US retirement marketplace, we are excited to bring
these two leading franchises together through a large-scale
reinsurance transaction that includes a new investment in Jackson
by Athene."
Marc Rowan, Co-Founder and Senior Managing Director of Apollo
Global Management Inc, Athene's strategic partner and largest
shareholder, said: "In support of our strategic partnership with
Athene, we are delighted to help tailor a solution for, and work
with, Jackson and Prudential plc on this significant transaction.
Jackson has complementary distribution capabilities relative to
Athene's business, and it is the largest and highest-quality
variable annuity platform in the marketplace. Through our
significant investment and support of Athene, we look forward to
working with leading insurance franchises like Jackson and
Prudential plc to enable them to achieve their strategic
objectives."
Contacts
Media
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Investors/Analysts
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Jonathan
Oliver
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+44
(0)20 3977 9500
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Patrick
Bowes
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+44
(0)20 3977 9702
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Tom
Willetts
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+44
(0)20 3977 9760
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William
Elderkin
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+44
(0)20 3977 9215
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Person responsible
The person responsible for arranging the release of this
announcement on behalf of Prudential plc is Tom Clarkson, Company
Secretary.
Transaction details
Reinsurance of $27.6
billion1 of
Jackson fixed and fixed indexed annuity
portfolio
Under the terms of the agreement, Jackson National Life Insurance
Company has fully reinsured $27.6 billion1 of
liabilities to Athene Life Re Ltd, as at 31 March 2020, in return
for $28.2 billion of assets (principally bonds)1.
The portfolio reinsured represents substantially all of Jackson's
fixed and fixed indexed annuity portfolio but excludes its legacy
life and institutional business as well as the REALIC portfolio and
group pay-out annuity business reinsured from John Hancock. The
annuity business being reinsured contributed around $0.1 billion
towards US adjusted operating profit3 before
tax of $3.1 billion in 2019.
Based on IFRS accounting principles and values as at 31 March 2020,
the reinsurance agreement is estimated to give rise to a pre-tax
IFRS profit of around $1.2 billion2 alongside
the improvement in Jackson's capital position achieved. After
allowing for tax and the reduction in unrealised gains recorded
directly in other comprehensive income, the estimated impact of the
reinsurance transaction, on a discrete basis, on IFRS shareholders'
equity is a reduction of $0.7 billion2.
The reinsurance agreement will be effective as at 1 June 2020 and
be recorded in the HY20 financial statements after allowing for
closing balance sheet pricing adjustments.
$500 million new equity investment by Athene into Prudential's US
business
The $500 million investment (payable in cash at completion) by
Athene into Brooke (Holdco 1) Inc, in return for an 11.1 per cent
economic interest for which the voting interest is 9.9 per cent, is
expected to additionally reduce IFRS shareholders'
funds2 by
approximately $0.7 billion, based on asset and liability values as
at 31 March 2020. The investment is expected to complete in July
2020 and the financial effects will correspondingly be updated
using asset and liability values at the completion
date.
The aggregate impact of the equity investment and reinsurance,
assuming both occurred at 31 March 2020, is a reduction to IFRS
shareholders' funds of $1.4 billion2.
Pro-forma impact on
Jackson RBC cover ratio and Group shareholder LCSM cover
ratio2
The estimated pro-forma impact on the Jackson RBC cover ratio,
assuming that these actions had both been completed as at 31 March
2020, is an estimated increase of 80 percentage points. On the same
basis, the Group shareholder LCSM cover ratio4 is
estimated to increase by 27 percentage points.
Summary of relevant contractual terms
The reinsurance agreement is effective as at 1 June 2020. The
common equity investment is subject to US Hart-Scott-Rodino
antitrust filings, and is expected to complete in July 2020. There
are no break fee arrangements and Athene is bound by formal drag
along and tag along rights in respect of any future strategic sales
to third parties. Prudential plc is not restricted in the conduct
of the other strategic options in respect of its US business.
Athene has no right to appoint Board members in respect of its
shareholding and its shareholding voting rights will be limited to
9.9% following completion of the investment.
Advisors
Goldman Sachs International, Moelis & Company LLC and N.M.
Rothschild & Sons Limited are serving as financial advisers to
Prudential in connection with this transaction.
1 Valued under IFRS as at 31 March
2020.
2 The pro-forma estimates assume that the
reinsurance of the Jackson fixed and fixed indexed annuity
portfolio and the capital investment by Athene had both been
completed as at 31 March 2020. Actual impacts could differ
materially depending on the value of assets (including those to be
transferred), liabilities and shareholders' equity at the date the
transactions are recorded in the financial statements and, in
respect of the reinsurance contract, on any closing balance sheet
pricing adjustments.
3 In this announcement 'adjusted operating
profit' refers to adjusted IFRS operating profit based on
longer-term investment returns from continuing operations as
defined in note B1 of the Group's 2019 Annual Report &
Accounts.
4 Based on coverage of available capital over
Group minimum capital requirement. Shareholder business excludes
the available capital and minimum capital requirement of
participating business in Hong Kong, Singapore and
Malaysia.
Notes to Editors
About Prudential's US business
Jackson is a leading provider of retirement products for industry
professionals and their clients. The company and its affiliates
offer variable, fixed and fixed indexed annuities designed for
tax-efficient growth and distribution of retirement income for
retail customers, as well as products for institutional investors.
Jackson is a proud founding member and co-chair of the Alliance for
Lifetime Income, a nonprofit 501(c)(6) organisation formed and
supported by 24 of the US's financial services organisations to
create awareness and educate Americans about the importance of
protected lifetime income. With $297.6 billion in IFRS assets*, the
company prides itself on sound corporate risk management practices
and strategic technology initiatives. Focused on thought leadership
and education, Jackson provides industry insights and financial
representative training on retirement planning and alternative
investment strategies. The company is also dedicated to corporate
philanthropy and supports non-profit organisations focused on
strengthening families and creating economic opportunities in the
communities where its employees live and work. For more
information, please visit www.jackson.com.
Founded in 1990, PPM America is a global institutional asset
manager with $130 billion in assets as of 31 March 2020. It offers
investment solutions in public fixed income, public equity, private
equity, and private debt. Its investment approach is guided by
team-based values and its firm size allows the company to remain
nimble and investment-led. For more information, please
visit www.ppmamerica.com.
*Prudential plc's US business has IFRS total assets of $299.2
billion (of which $297.6 billion relate to Jackson) and $269.5
billion of IFRS policyholder liabilities (as of 31 December
2019).
The US business generated IFRS loss before tax of $(725) million in
2019 ($(380) million net of tax) and a profit before tax of $2,322
million in 2018 (net of tax $1,982 million).
About Prudential plc
Prudential plc is an Asia-led portfolio of businesses focused on
structural growth markets. The business helps individuals to
de-risk their lives and deal with their biggest financial concerns
through life and health insurance, and retirement and asset
management solutions. Prudential plc has 20 million customers and
is listed on stock exchanges in London, Hong Kong, Singapore and
New York. Prudential plc is not affiliated in any manner with
Prudential Financial, Inc. a company whose principal place of
business is in the United States of America, nor with the
Prudential Assurance Company, a subsidiary of M&G plc, a
company incorporated in the United Kingdom.
About Athene Holding Ltd
Athene, through its subsidiaries, is a leading retirement services
company that issues, reinsures and acquires retirement savings
products designed for the increasing number of individuals and
institutions seeking to fund retirement needs. The products offered
by Athene include:
●
Retail fixed, fixed indexed and
index-linked annuity products;
●
Reinsurance arrangements with
third-party annuity providers; and
●
Institutional products, such as
funding agreements and the assumption of pension risk transfer
obligations.
Athene had total assets of $142.2 billion as of 31 March 2020.
Athene's principal subsidiaries include Athene Annuity & Life
Assurance Company, a Delaware-domiciled insurance company, Athene
Annuity and Life Company, an Iowa-domiciled insurance company,
Athene Annuity & Life Assurance Company of New York, a New
York-domiciled insurance company, and Athene Life Re Ltd., a
Bermuda-domiciled reinsurer.
Forward-Looking Statements
This document may contain 'forward-looking statements' with respect
to certain of Prudential's plans and its goals and expectations
relating to its future financial condition, performance, results,
strategy and objectives. Statements that are not historical facts,
including statements about Prudential's beliefs and expectations
and including, without limitation, statements containing the words
'may', 'will', 'should', 'continue', 'aims', 'estimates',
'projects', 'believes', 'intends', 'expects', 'plans', 'seeks' and
'anticipates', and words of similar meaning, are forward-looking
statements. These statements are based on plans, estimates and
projections as at the time they are made, and therefore undue
reliance should not be placed on them. By their nature, all
forward-looking statements involve risk and
uncertainty.
A number of important factors could cause Prudential's actual
future financial condition or performance or other indicated
results of the entity
referred to in any forward-looking
statement to differ
materially from those indicated in such forward-looking statement.
Such factors include, but are not limited to, the impact of the
current Covid-19 pandemic; future market conditions, including
fluctuations in interest rates and exchange rates, the potential
for a sustained low-interest rate environment, and the impact of
economic uncertainty, asset valuation impacts from the transition
to a lower carbon economy, inflation and deflation and the
performance of financial markets generally; global political
uncertainties; the policies and actions of regulatory authorities,
including, in particular, the policies and actions of the Hong Kong
Insurance Authority, as Prudential's new Group-wide supervisor, as
well as new government initiatives generally; the impact of
continuing application of Global Systemically Important Insurer or
'G-SII' policy measures on Prudential; the impact on Prudential of
systemic risk policy measures adopted by the International
Association of Insurance Supervisors; the impact of competition and
fast-paced technological change; the effect on Prudential's
business and results from, in particular, mortality and morbidity
trends, lapse rates and policy renewal rates; the physical impacts
of climate change and global health crises on Prudential's business
and operations; the timing, impact and other uncertainties of
future acquisitions or combinations within relevant industries; the
impact of internal transformation projects and other strategic
actions failing to meet their objectives; the ability to complete a
potential minority initial public offering of Jackson, or one of
its related companies, or other strategic options in relation to
Jackson, or one of its related
companies; the risk that
Prudential's operational resilience (or that of its suppliers and
partners) may prove to be inadequate, including in relation to
operational disruption due to external events; disruption to the
availability, confidentiality or integrity of Prudential's
information technology, digital systems and data (or those of its
suppliers and partners); any ongoing impact on Prudential of the
demerger of M&G plc; the impact of changes in capital, solvency
standards, accounting standards or relevant regulatory frameworks,
and tax and other legislation and regulations in the jurisdictions
in which Prudential and its affiliates operate; the impact of legal
and regulatory actions, investigations and disputes; and the impact
of not adequately responding to environmental, social and
governance issues. These and other important factors may, for
example, result in changes to assumptions used for determining
results of operations or re-estimations of reserves for future
policy benefits. Further discussion of these and other important
factors that could cause Prudential's actual future financial
condition or performance or other indicated
results of the entity
referred to in any forward-looking
statements to differ,
possibly materially, from those anticipated in Prudential's
forward-looking statements can be found under the 'Risk
Factors' in Prudential's Annual Report for the year ended 31
December 2019. Prudential's 2019 Annual Report is available on its
website at www.prudentialplc.com.
Any forward-looking statements contained in this document speak
only as of the date on which they are made. Prudential expressly
disclaims any obligation to update any of the forward-looking
statements contained in this document or any other forward-looking
statements it may make, whether as a result of future events, new
information or otherwise except as required pursuant to the UK
Prospectus Rules, the UK Listing Rules, the UK Disclosure and
Transparency Rules, the Hong Kong Listing Rules, the SGX-ST listing
rules or other applicable laws and regulations.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: 18 June 2020
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PRUDENTIAL
PUBLIC LIMITED COMPANY
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By: /s/ Mark FitzPatrick
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Mark
FitzPatrick
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Group
Chief Financial Officer and Chief Operating Officer
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