Pru's 35% profits leap helps patch up damage from AIA bid

Published on Wednesday 11 August 2010 22:06

Prudential's efforts to rebuild bridges with investors over its botched Asian deal-making were given a boost yesterday when first-half profits topped City forecasts.

The insurer, which shelled out 377 million in the abortive bid to land the Asian arm of US giant AIG, upped its dividend 5 per cent and posted a 35 per cent hike in operating profits to 1.68 billion.

Chief executive Tidjane Thiam - the company's former finance director who faced calls to quit following the debacle - insisted he had the backing of most shareholders.

"Overall I believe that we have the support of the body of our shareholders and you can only operate on that basis really," he said. "I hope that these results will give confidence to our shareholders in the fact that we are running this company in the way it should be run."

Thiam - who added that a second attempt to land AIA was "not on the agenda" - insisted the decision to bid for the assets of the firm had not been a mistake. The company was particularly criticised for "woeful" communications on the strategy and the perceived top-dollar price of the bid.

"While the proposed AIA transaction was high profile and attracted a great deal of interest, the group continued to perform strongly," stressed Thiam.

The company added: "We very much regret that this transaction did not proceed and that costs were incurred."

The performance drew favourable comment from the City as shares rose 1.5 per cent, closing at 553p.

Charles Stanley analyst Nic Clarke said: "We were concerned that the significant costs associated with the AIA bid would hit the dividend.

"Not only has the Pru been quick to point out that those costs have been reduced but that the strength of the Pru's performance has actually allowed it to increase the dividend by 5 per cent."

Despite the failure of the bid - which came after major investors baulked at the $35.5bn (22.6bn) price and AIG refused to budge - Prudential is sticking to its strategy of organic growth in Asia.

The firm is cautious over mature and debt-laden western economies where unemployment is high and progress is expected to be more sluggish.

"Asia appears to be more resilient and in the first six months of 2010 Prudential has benefited from the recovery in markets in the region," it added.

The firm posted a 36 per cent jump in Asian new business sales to 713m with growth across all countries except Korea. This represented the Pru's strongest half-year sales performance in its history, with sales in South-east Asia rising 46 per cent to 452m.

The company's US arm, Jackson, also saw sales rise, up 43 per cent to 592m, driven by annuity business. The firm's "value over volume" approach in the UK to focus on more profitable business led to sales growth of just 2 per ent, and new business profits rose 11 per cent to 135m.