Daniel Loeb Comments on Prudential

Prudential plc Update

Prudential plc (LSE:PRU) stock performed well in the Second Quarter, gaining 18% as concerns over Prudential’s U.S. business, Jackson National, waned and management proved the efficacy of Jackson’s robust hedging program. However, the volatility in the shares over the past few months has confirmed our view that accurate price discovery by the market will prove elusive unless Jackson National is held in a separate corporate entity from Pru Asia.

We were pleased by the Board’s recent announcement of a combined equity investment and reinsurance transaction between Jackson and Athene, a leading annuities company affiliated with Apollo Global Management. Athene will reinsure Jackson’s $28 billion fixed and fixed indexed annuities portfolio, as well as make a $500 million anchor equity investment in

Jackson in exchange for an 11.1% economic stake. We believe that this transaction is an important step towards full separation of Jackson and Pru Asia. It increases capital levels at Jackson to be more in‐line with standalone publicly traded peers, a critical consideration for regulators and ratings agencies when evaluating an independent U.S. business. It also puts a floor valuation mark on Jackson equity from a respected market player ahead of a standalone listing.

We continue to advocate for expeditious action in our constructive dialogue with management and the Board. We are confident that an independent Jackson can unlock significant value by closing the still‐large complexity discount in the stock. When Prudential’s fast ‐growing Asia business becomes a pure‐play, investors will better appreciate this high‐quality business, leading to significant multiple expansion. We look forward to an update on the company’s restructuring plans on its August 11 earnings call.

From Daniel Loeb (Trades, Portfolio)'s Third Point second-quarter 2020 investor letter.

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