Prudential sets a course to double Asian profits
Thursday 02 December 2010
Prudential unveiled plans to boost growth and profits in its Asian markets yesterday, underscoring its belief in the region's potential following its abortive attempt to acquire AIA, the local arm of the American International Group (AIG), earlier this year.
Tidjane Thiam, the Pru's chief executive, said the insurer was looking to double by 2013 the £713m of new business profits it made in Asia last year. Over the same period, Prudential also wants to double its pre-tax operating profits from Asian life and asset management, which stood at £413m last year.
The push comes just months after shareholders balked at the cost of Prudential's $35.5bn bid for AIA, a failure that prompted some investors to call for the departure of Mr Thiam and the Pru's chairman, Harvey McGrath.
The ambitions were outlined ahead of an investor conference in London yesterday. "The objectives for Asia reflect our belief that Asia will continue to offer the highest growth and higher return opportunities for a generation or more," Mr Thiam said. "Market conditions in Asia continue to be positive, with Asian economies performing strongly in spite of a challenging global environment."
The insurer also laid out new objectives for improving cash generation across the group. The statement was well received by the market, with Prudential's shares rising 5.5 per cent to close at 599p last night.
"This is a very positive statement and I think Prudential can deliver," said Eamonn Flanagan, an analyst at Shore Capital. "They were convincing and I think this should put an end to talk about the chief executive officer or chairman quitting."
Analysts at Merrill Lynch were also upbeat, characterising the targets as "good news".
Barrie Cornes, at Panmure Gordon, said that while the new objectives were ambitious, the company had a "habit of delivering on its previous targets".
"We view these targets as stretching but achievable and we feel confident that they would not have been released unless management were fairly confident that they are are achievable," Mr Cornes said. He highlighted the fact that the previous objective of doubling Asian new business profits between 2005 and 2005 "was successfully delivered".
Walking away from the AIA deal left Prudential with a pre-tax bill of £377m, which was made up of a termination break fee of £153m, underwriting fees of £58m, adviser fees of £66m and foreign exchange hedging costs of £100m. The overall post-tax hit was £284m.
The failure prompted criticism from investors, with one shareholder, Anthony Watts, describing the whole affair "as a shambles from start to finish" and "a disgrace". "You failed to do your job properly, all of you. All of you are responsible for this failed deal," he told directors at the insurer's annual meeting back in June.
AIA went on to list independently at the end of October, with its shares attracting strong support and surging by 17 per cent on their debut on the Hong Kong stock exchange.
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