M&G Prudential will continue to be led by its current chief executive, John Foley, with a focus on running a more capital efficient and reduced risk businesses.
The demerger plans have grabbed the headlines away from a solid set of 2017 results for Prudential Plc.
As part of the deal, the life insurer giant will also be offloading its United Kingdom annuity business to Rothesay Life for £12bn, using the proceeds to help fund the demerger.
Once the proposed split is complete, Prudential said it expects both companies to be big enough to feature on Britain's benchmark FTSE 100 stock index.
Prudential has sold £12bn in annuity assets to reinsurance business Rothesay Life as part of its M&G demerger announced today.
The transaction covers an annuity book containing roughly 400,000 policyholders, making this the largest transaction of its kind in the UK.
Meanwhile, Prudential, under the stewardship of group chief executive Mike Wells, will focus its efforts on the Asian, US and African markets.
Both firms will be headquartered in London and listed on the London Stock Exchange, the financial services group said.
The capital benefit of this transaction will be retained within the group to support the demerger process.
"We're not looking to get rid of all of our capital-intensive products, we're looking to grow the piece that's capital-light", Wells told Reuters, adding that the M&G Prudential business "is better off standalone, competing domestically for people, for capital". John Foley, who now heads up the M&G Prudential division, will steer that business through the demerger.
Back in August, the life insurer merged its asset management arm with its United Kingdom savings business, forming M&G Prudential with some £332bn in assets under management.
Under the agreement, the group's M&G Prudential arm has reinsured £12 billion of liabilities to Rothesay Life, which is expected to be followed by a Part VII transfer of the portfolio by the end of 2019. "However, it's a shame the sale proceeds aren't coming back to shareholders, especially given that it's freeing up significant regulatory capital". "M&G Prudential's proven investment capabilities and balance sheet management provide an excellent platform from which to serve the demand for comprehensive financial solutions".
Worldwide insurer Prudential has announced that its United Kingdom and European units will be split from the rest of its global insurance business.
The reinsurance arrangement with Rothesay Life will help Prudential to separate out legacy annuity business, so de-risking and preparing its two new separated operating entities for further growth.