Prudential unveiled a surprise 20 per cent jump in its annual dividend and booming profits yesterday as it sought to draw a line under last year's botched bid for rival AIA. The news sent the insurer's shares up almost 5 per cent to a four-year high.
Prudential said it would increase the dividend steadily from the new base of 23.85p per share, which beat the 21p expected by analysts.
Nic Nicandrou, the group's finance director, said: "You have seen a group performing really well two years in a row. This has given us the headroom and confidence to increase our dividend as a tangible way to demonstrate we are serious about the creation of shareholder value."
Prudential enraged investors last year when it racked up £377m in costs with its bungled $36bn plan to buy AIA, the Asian business arm of US insurer AIG. At the time, investors called for the heads of chief executive Tidjane Thiam and chairman Harvey McGrath. Since then, Mr Thiam has renounced big acquisitions and focused on cash and profit generation.
Prudential's operating profit surged by 24 per cent to £1.94bn last year, driven by growth in Asia and the US. This was well ahead of analyst expectations of £1.73bn.
An institutional investor who was fiercely critical of Prudential bosses last year said they were in the clear. "The results are very good. They are doing what we wanted them to do by focusing on the business and not being distracted by large expensive acquisitions. Clearly, these results will do them no harm and I think the market has moved on from that issue [of management changes]."
But a row is brewing over board bonuses. Mr Thiam could be in line for a £4.3m payday based on the financial results. But shareholders will press for limits to payouts to reflect the cost of the failed AIA deal and the management mistakes that doomed the bid. Prudential bosses declined to comment on their bonuses yesterday.
Mr Nicandrou said Prudential's performance was reaping the benefits of decisions taken three or four years ago and the insurer was not responding to shareholder anger over AIA.
He said Prudential was reinvesting cash from its UK business in new policies for 1.9 billion middle-class consumers in its Asian markets and in annuities for the 10,000 US baby boomers due to retire each day over next 20 years.
Prudential made the biggest gains in the FTSE 100, rising 35p, or 4.9 per cent, to 749p.