Prudential announced this morning that it will demerge M&G Prudential from the group, along with the partial sale of its UK annuity portfolio for £12bn.
It has reinsured £12bn of liabilities to Rothesay Life.
The life insurer said it will demerge its UK and Europe business from Prudential, so there are two separately-listed companies with "different investment characteristics".
Shares rose more than four per cent in early trading.
On completion of the demerger, shareholders will hold interests in both Prudential and M&G Prudential.
Mike Wells, group chief executive, said: “Following separation, M&G Prudential will have more control over its business strategy and capital allocation. This will enable it to play a greater role in developing the savings and retirement markets in the UK and Europe through two of the financial sector’s most trusted brands, while Prudential plc will be able to focus on the attractive returns and growth potential of its market-leading businesses in Asia and the US.”
Addy Loudiadis, chief executive of Rothesay Life, said she predicted "a very active pension buy-out pipeline ahead".
I am delighted that Prudential, one of the UK’s most respected insurance companies, has chosen Rothesay Life to secure its policyholders’ pensions over the long term in a landmark transaction for us and for the industry.
This is a testament to the quality and strength of our business, our focus on customer service, our execution proficiency and the support we receive from our shareholders.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "In an organisation as complex and diverse as Pru, a split makes sense. It allows investors to get a firmer handle on what’s going on at each of the component businesses, and should help M&G focus on its own progress rather than having to compete with the rapidly growing Asian business for management attention.
"The sale of UK annuity assets suggests M&G Prudential is ultimately eyeing up something closer to the Standard Life Aberdeen model than Legal & General. However, it’s a shame the sale proceeds aren’t coming back to shareholders, especially given that it’s freeing up significant regulatory capital."
The news came alongside the firm's annual results, reporting a rise in profits, led by "double-digit growth" in its Asia business.