Prudential is back in black as deal looms

PRUDENTIAL swung back into the black as it reported a £1.7bn pre-tax profit yesterday, marginally ahead of consensus estimates.

Bullish after performing solidly through changeable market conditions, the British insurer upped its total dividend by five per cent to 19.85p per share for 2009.

However, traders were unsettled by a 24 per cent fall in UK sales to £723m and a slight decline in operating profits to £606m. Analysts said the numbers contributed to the downward pressure on Prudential’s share price yesterday.

On a day when his firm’s results were a sideshow to the excitement of an industry-changing takeover deal, chief executive Tidjane Thiam said Prudential had now “earned” the right to buy American International Assurance.

“Our performance was delivered against a backdrop of unprecedented market turbulence,” Thiam said. “We entered 2009 with a deliberately defensive strategy.”

New business profit increased from 42 per cent to 56 per cent on a European embedded value basis.

Worldwide sales edged up one per cent to £2.9bn, but attention fell on Asia where turnover soared 42 per cent in the fourth quarter to contribute to year-long sales of £1.2bn. In the US, strong annuity sales helped boost sales 12 per cent to £912m.

M&G Investments, Prudential’s London-based asset management business, brought in record inflows of £13.4bn to bring funds under management to £174bn. But the firm blamed choppy market conditions for a 17 per cent drop in the unit’s operating profit to £238m.


CONFIRMATION of Prudential’s $35.5bn (£24bn) pounce on American International Group’s Asian assets was hurried out after media reports broke over the weekend.

As a result, the board has not yet had time to consider how the merged entity’s senior management line-up will look. It is likely one or two American International Assurance figures will join the board as non-executive directors, as AIG will retain an 11 per cent stake in the holding company.

There is even the chance the US government will have representation as it owns the majority of AIG after $182bn of taxpayers’ money was pumped in during the financial crisis.

Although Prudential boss Tidjane Thiam said yesterday the merged group’s chief executive was yet to be appointed, Barry Stowe will fancy his chances against AIA’s top man, Mark Wilson. Stowe knows AIA’s practices like the back of his hand, having spent 11 years working for AIG in Hong Kong before joining Prudential.

Tony Wilkey, chief executive of insurance for Prudential, also served as deputy president at AIA before joining the British giant.

The tie-up should be culturally straightforward. Thiam has pledged to make any tough decisions in a “fair and transparent” manner, and there is no shortage of respect for the larger company’s achievements at Prudential. Thiam hinted the AIA brand would be retained, adding: “We’re a multi-brand company.”