Prudential asks investors to forget AIA debacle after strong first-half results
Friday 13 August 2010
Prudential yesterday moved to draw a line under its disastrous attempt to buy its Asian rival AIA earlier this year as it revealed forecast-beating first-half profits.
Unveiling its first results since abandoning a $35.5bn (£22.8bn) takeover of AIG's Asian arm in May, the insurance giant beat expectations with a 19 per cent increase in operating profit, to £968m. The group added that the cost of giving up on the deal – forced by investors, who balked at the price – is lower than first estimated.
Nic Nicandrou, finance director, said that while a number of shareholders were still disgruntled over the failed deal, yesterday's results underlined the group's strength in Asia. "The takeover of AIA was never proposed from a position of weakness," he said. "It had been designed to complement our position in these high growth markets. Our commitment to Asian markets has been a cornerstone of our strategy, and [yesterday's] results show that."
Mr Nicandrou refused to comment on whether the figures would silence those that have called for the heads of the chief executive, Tidjane Thiam, and chairman, Harvey McGrath. Earlier, Mr Thiam said that the calls for his resignation had largely subsided.
Those have been vocal in calling for Mr Thiam's to step down were notably quiet yesterday. Robin Geffen, of Neptune Investment Management, who in May launched an action group to protest at the AIA deal, and who tried to garner support for a resolution to remove Mr Thiam and Mr McGrath, declined to comment. A spokeswoman said he was "very busy".
Two days ago, Mr Geffen said: "If the numbers from Asia are good, then it only goes to prove that they didn't need the acquisition. It doesn't help the management."
Analysts said that the results showed Prudential was ready to move on. "The company can now consign the AIA approach to history, whilst its core business continues on a sound footing," said Richard Hunter, head of UK equities at Hargreaves Lansdown. "Its geographical diversification, particularly in Asia, gives it a distinct advantage over certain rivals."
Mr Thiam also confirmed yesterday that the group will not be seeking any other takeover deals, stressing that Prudential was now "focused on an organic growth strategy".
That decision is likely to have been influenced by the cost of the aborted tilt at AIA. Even though the insurer said that the £377m fees associated with the deal are now lower than the previously estimated £451m, the bill will still fuel the argument of those that considered that the bid was foolhardy.
The amount includes £58m paid to the banks that underwrote the deal. Credit Suisse, HSBC and JP Morgan Cazenove were lead underwriters. Prudential also had to pay £153m to AIA in break fees.
Mr Nicandrou said that the reduced fees were as a result of lower than expected loss on unwinding foreign exchange hedges.
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