Prudential to merge M&G funds arm with its UK life insurance business

● Latest move in consolidation of sector ● £145m of cost savings targeted

Britain’s Prudential announced yesterday that it is to merge its M&G fund management arm with its UK and Europeaninsurancebusinesses to shake out cost savings and give an integrated product offering.

The Pru said the combined business will be called M&G Prudential and will manage £332 billion of assets for more than six million customers in the UK and overseas.

It said the move was likely to involveunspecifiedredundancies as the group looks to save £145 million a year by 2022. Prudential said it was premature to say how this will affect the combined UK workforce of nearly 7,300.

Mike Wells, group chief executive,said:“m&gandprudential UK & Europe 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.” The move was welcomed by City analysts.

Peter Gray, co-head of financial services at Cavendish, commented: “The deal reflects the continued trend of consolidation in the industry as firms seek to lower costs in the face of margin pressure precipitated by the increasing popularity of tracker funds.”

Edinburgh-based Standard Life and Aberdeen Asset Management are merging next week to form a £670bn active fund manager, shaking out costs of £200m amid rising competitive pressures in the asset management industry.

Eamonn Flanagan, an insurance analyst with Shore Capital, said the UK insurance/ M&G merger made “enormous sense”, allowing the new division to cut costs and deliver a unified service offering.

John Foley, chief executive of Prudential UK and Europe, will become chief executive of M&G Prudential. Anne Richards will remain CEO of M&G and will be a joint deputy chief executive of M&G Prudential, alongsideclarebousfield,ceo of the group’s insurance arm in the UK and Europe.

The plans were announced alongside Prudential’s latest financial results, which showed its fast-growing Asian business once again led earnings higher. Group operating profits rose 5 per cent to £2.4bn in the first six months of this year.

Operating profits in Asia lifted 16 per cent to £752m at constant currencies – but soared 30 per cent including the benefit of currency translation due to the chronic weakness of sterling since the Brexit vote.

M&G saw earnings lift 10 per cent to £248m, with net investment inflows of £7.2bn. UK profits edged 1 per cent higher to £480m.