Prudential to make £15bn offer for troubled AIG's Asian assets

The Pru may sell off its UK life business to refocus on growth markets in Asia
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The Independent Online

The British insurer Prudential is planning a £15bn deal to buy the Asian arm of its bailed-out US rival AIG, and could sell its own UK life division, it was reported yesterday.

Prudential, whose chief executive, Tidjane Thiam, is said to be in New York talks with the US insurer's board this weekend, declined to comment but is likely to formally confirm the discussions today. AIG also declined to comment on the apparently well sourced stories.

Meanwhile, the Pru has itself been approached over a potential sale of its UK life business by Clive Cowdery's investment vehicle Resolution, which bought Friends Provident last year, according to reports at the weekend.

If the two deals were to succeed, it would mark a revolutionary change of focus for the Pru's business. The Prudential has long been rumoured to want to rival the likes of HSBC and Standard Chartered in the rapidly expanding east Asian market, and this would propel it into that league.

Prudential's previous attempts to acquire the Asian assets of AIG were vetoed by officials in the US, who were keen to ensure that they did not sell off assets owned by American taxpayers at fire-sale prices. The revival in the capital markets over the last year may lead the Obama administration to agree to a bid from the Pru.

An acquisition of AIG's Asian arm, AIA, would transform the Pru into an insurance powerhouse throughout the region. The UK insurer already has 11 million customers in Asia. In 2008, the region accounted for 57 per cent of its £1.31bn profit from new business.

A sale of AIA might help its parent company to pay back some of the cash it has been given by the US taxpayer since the financial crisis. AIG, best known in this country as the sponsor of Manchester United football club, had to be saved from collapse by the US government in September 2008.

The company was bailed out with about $200bn (£130bn) after racking up huge losses on toxic derivative deals. The Obama government had decided that the business was too important to the US economy to be allowed to fail.

AIG posted the biggest quarterly loss in US corporate history – $61.7bn – for the fourth quarter of 2008.

Its results for the final three months of 2009, which were published on Friday, showed a smaller net loss, of $8.9bn. At the same time, the company said it was "in productive discussions with third parties" about "a number" of possible deals.