Prudential is in talks with at least two sovereign wealth funds over the sale of a 20 per cent stake in the insurer, a deal that would provide it with sufficient cash to mount a bid for the Asian insurance operations of AIG.
AIG is currently in the process of auctioning off several of its international businesses following its dramatic rescue last month by the US Federal Reserve. Mark Tucker, Pru’s chief executive, is understood to have identified the Asian part of the US giant’s global empire as a major bid target.
However, raising the $15bn (£8.6bn) that analysts believe the AIG unit could sell for would be very difficult for Pru in current market conditions. Mr Tucker is therefore understood to have asked investment bank Credit Suisse to begin sounding out sovereign wealth funds about providing the capital necessary to finance a deal, in return for a large stake in the UK insurer.
Raising new capital from a Middle Eastern or Far Eastern sovereign wealth fund would also go some way to allaying fears about the funding of Pru. There has been increasing nervousness about the capital positions of all the major British insurers in recent days, with the dramatic falls on global stock markets reducing the surpluses on which the sector operates.
Legal & General, Pru’s biggest UK rival, said last week that its capital surplus had fallen by around a fifth since markets began dropping, though it stressed its funding remained robust. Pru’s share price fell 28 per cent last week on the anxieties, with other insurers hit by similar sell-offs.
Mr Tucker is due to unveil new business figures for Prudential on Tuesday and is expected to take the opportunity to reassure investors. A spokesman for the company yesterday refused to comment on Pru’s plans for AIG, saying only that “our capital position is strong and robust”.
If Pru does mount a bid for the Asian business of AIG it is likely to face significant competition. The French insurer AXA is also thought to be considering making an offer while the Dutch banking group ING has also been linked with a bid.Reuse content