problem with failed takeovers is you have to try and pretend they never happened. For several months, the men from the Pru were courting shareholders mercilessly, telling them a $35bn acquisition of Asian insurer AIA was an unmissable opportunity. Sure, management were careful not to talk down the group’s chances as a standalone life insurer, but the message was clear: we’re fighting tooth and nail for this deal because it’s the only way to go. Now investors are supposed to forget everything they were told before the deal fell through, and buy into the former strategy of organic-only growth in Asia.
There’s no denying that management put in a commendable performance in the first half, an impressive feat considering the bid distractions. Unsurprisingly, Asia is the star of the show. There, new business sales totalled some £713m, a 36 per cent hike on the same period a year ago. All regions excluding Korea (which has implemented a “value over volume” strategy) reported double digit growth rates, offering an average initial rate of return in excess of 20 per cent within three years. In the UK, it is a different story, with new business up just two per cent; in truth, the British ops are little more than a tired cash cow.
Investors should be rating these results more highly, but the truth is Tidjane Thiam is looking like a man who had one big idea: bold expansion in Asia by acquisition. With the former strategy in place, the Pru should find a team more suited to the softly-as-she goes organic approach. A new chairman would be best-placed to start the search.