Prudential board fights calls to quit after failed bid for AIG's Asian arm

Published on Monday 7 June 2010 21:02

THE board of insurer Prudential yesterday faced down calls to resign over its aborted bid for AIG's Asian unit as it unveiled strong sales figures.

Although directors apologised at the AGM for the huge costs spent on preparing the deal, they defended having made the 24.5 billion agreed offer for American International Assurance (AIA).

Chairman Harvey McGrath said : "We remain convinced we were right to pursue this business opportunity. We feel it was a risk in proportion to the advantage we would have gained."

Prudential, the UK's largest insurer, was facing many of its investors for the first time since the Asian takeover bid was pulled last week after a tortuous process that cost it around 450 million.

McGrath said: "Please believe how sorry we are that we incurred costs, only to see the deal fall at the final hurdle. We do not believe that the failure to consummate the AIA deal should lead to a shake-up of strategy or leadership."

Chief executive Tidjane Thiam vowed during almost three hours of questioning from shareholders to restore "strained" ties. "I know that some of our, my, actions put a considerable strain on relations with shareholders. I very much regret that," he said. "I have two tasks now – to take advantage of the opportunities ahead of us and to start the process of restoring your confidence. I will to do this as long as you wish for me to be your chief executive."

Both small and large investors were divided on whether Thiam, who has been in the top job less than a year, should step down over the failed deal.

Thiam has faced demands for his head from top shareholders including asset manager Schroders.

But he found support for the Asian move among some small investors at the AGM and Euan Stirling, investment director at Standard Life Investments, said be believed Thiam should stay.

"We look to the future and would it serve our interest best if there were removals of senior executives from the top of the company? I don't think that is the case," he said.

Earlier, the insurer revealed a 28 per cent jump in sales during April and May, ahead of 26 per cent growth reported in the first quarter.

The company said that the figures demonstrated the business remained on track despite the Asian distraction.

The insurer said its strategy of pursuing capital-efficient growth with a focus on Asia was intact despite the failed bid.

A takeover of AIA would have given Prudential a commanding position in one of the world's fastest growing financial services markets but it was forced to ditch the bid after shareholders complained about the price.

Shares closed down 22p, or 3.96 per cent, at 534p.