US activist Dan Loeb will doubtless crow that the Pru’s share price leap today proves his attack on the company’s strategy last night was right.
Well, not quite. The shares may have jumped a couple of per cent, but only after yesterday’s 5% coronavirus meltdown. Loeb’s impact has been muted at best.
It’s a fitting market reaction to a manifesto that, while being a bit right, is mostly misguided.
First, the bad stuff: Loeb says the Pru should scrap its London HQ and move it to Asia. While that might make sense on an egghead’s spreadsheet, it misses the Pru’s unique selling point in Asia — its Britishness. In countries where financial services are blighted by self-destructing Ponzi schemes and poor customer service, a long-established firm governed by British rule of law is a big draw.
Loeb also wants the Pru to be less generous in its dividends and invest more in growth. But while this seems sensible on the surface, it ignores the fact that Loeb’s fellow shareholders rather like their divi payments. Also, a hell-for-leather dash for cash into Asia may make the Pru’s creditors queasy.
Where Loeb is right is in the mismatch of the Pru’s mature US business, Jackson Life, with go-getting PruAsia. Split ’em up, says Loeb. The thing is, the Pru was probably going to do this anyway. It hasn’t yet because it first had to hammer M&G and Pru UK together, flog its £12 billion annuities book and split the remainder into two FTSE-100 businesses. No small task.
Now it’s through all that, hiving off Jackson Life is the next natural step. It should press on with it, then shoo Loeb off on his way.