Prudential profits cheered as insurer rules out UK sale

Cowdery's plan for a super insurer will not include the prize of Prudential UK

Prudential yesterday all but ruled out being involved in a shake-up of the UK life insurance sector.

Tidjane Thiam, who will take over as chief executive from Mark Tucker in October, said he would not sell Prudential UK but indicated that if deals were to be done, he would look to faster-growing markets in the US and Asia.

Mr Thiam's decision will come as a blow to Clive Cowdery, who this week sealed a deal for his Resolution to take over Friends Provident as the first step in his plans to build a UK super-insurer.

He is likely to have to focus now on Scottish Widows, the life insurance arm of Lloyds Banking Group where Deutsche Bank is conducting a review of the business, which many expect will result in a sell-off to raise much-needed capital for the business, which is 43 per cent-owned by the taxpayer.

Banco Santander's insurance operations – which came to the group through its purchase of Abbey National – are also seen as possible targets for Mr Cowdery, who has said that he is sizing up nine prospects.

Analysts have for years speculated that Prudential might sell off its UK unit, which lacks the rapid growth rates and expansion potential of the company's other operations.

But Mr Thiam said it was important to the company's ratings, was profitable, and remained a key part of the business. That appears to have left Mr Cowdery with eight remaining targets.

Mr Thiam, a former Ivory Coast finance minster, also said he would continue to focus on writing profitable business and would not sacrifice this on the altar of "growth for the sake of growth". "I am comfortable with our strategy. It is an excellent strategy and I will continue to build on it," he said.

He was speaking as the company raised cheers in the City as it beat profit forecasts and said it planned to raise the dividend – in contrast to rival Aviva, which slashed its pay-out last week.

Pru will pay 6.29p a share, up 5 per cent on last year's first-half pay-out. Operating profits were up 6 per cent to £688m. New business premiums fell 8 per cent to £1.32bn, but both Mr Thiam and Mr Tucker have said they would not drive volumes if they were not able to make money.

Mr Tucker said: "These results demonstrate a continuing strong performance by the Prudential Group in what remain challenging market conditions. As a result of the decision we took last year to focus on capital conservation and cash generation by concentrating on expanding sales in our most profitable product lines, we have been able to manage our investment in new business and improve our margins across the Group."

Mr Tucker has yet to give any indication about what he will do next, although he would appear to have his pick of any number of jobs in the financial sector. However, banking is not thought to be a likely destination after a brief spell as finance director of HBOS.

While profits in Prudential Asia slipped by 4 per cent to £277m, that appears to be where the focus of Mr Thiam will be in future. His current role as finance director will be taken by Nic Nicandrou, who cut his teeth at Aviva.

Analysts gave the results good reviews. Panmure, the broker, said of them: "We believe that these strong results in tough trading conditions reinforce the benefit of the strength and diversity, coupled with appropriate management action."

James Pearce at Cazenove said: "Departing CEO Mark Tucker appears to be leaving the Pru in good shape. Interim figures were better than expected in almost all areas, and the company appears to have navigated extreme volatility in H1 better than smaller, less diversified peers. The US business in particular appears to be having a good economic crisis."

The shares responded to the figures by closing the day at 529.5, up 51.2p. That made the company the biggest riser on the FTSE 100.