Heir apparent to Davis quits the Prudential

Jim Sutcliffe, the man seen as heir apparent to Sir Peter Davis as chief executive of Prudential, is to leave the life insurance group at the end of the month after what appears to have been a power struggle at the top.

News of his resignation accompanied an announcement that his responsibilities for all Prudential's UK operations were to be split between four new market- based units. The changes are part of a radical shake-up of the business following the pounds 2.2bn acquisition of Scottish Amicable earlier this year.

Sir Peter, who will now take direct responsibility for the UK retail operations, said yesterday that Mr Sutcliffe had been offered an alternative job involving "a redistribution of responsibility at board level. He saw it as not of the same importance and decided a clean break was what he would prefer." Mr Sutcliffe, who earned pounds 315,000 a year and was on an 18 month contract, will receive a payoff, but Sir Peter implied that it would be heavily mitigated by how quickly it takes him to get another job.

The departure had been prompted by a difference of style, Sir Peter said, but he denied that it was particularly sudden.

"We have been discussing the reorganisation for three to four months and have been discussing the implications for him for a couple of months.... There is nothing sinister and nothing sudden," he said.

He also denied that the departure had any connection with the pensions mis-selling scandal. The Pru admitted for the first time yesterday that it was "unlikely" it would meet the deadline for priority cases laid down by the Securities and Investments Board, which has said 90 per cent must be dealt with by 30 September.

However, insiders suggest that Mr Sutcliffe, who was seen as a strong favourite for the chief executive's job before Mr Davis arrived in May 1995, had been attempting to distance the UK operations from the group's head office. He was also being seen as having borne some responsibility for the Pru's failure to keep up with developments in direct sales of financial services, with the non-financial companies like Virgin and Marks & Spencer having stolen a march on the insurance giant by carving out a growing and profitable market in this area.

Explaining the reorganisation, Sir Peter said they had been facing a changing market and "some compliance problems" in the UK, which still represented half the group. "I want to get closer to the UK market. There are some issues facing the market which I would like to see handled in smaller units with more responsibility for the UK managing directors."

The new divisions will be directed at the Pru's four main customer groups. One will focus on IFA's via the new Scottish Amicable operation, one will be based on the Pru's home sales force, another will deal with corporate pensions and the fourth is to encompass direct sales by telephone or computer. As well as Sir Peter, the new UK management team will be headed by John Elbourne, currently managing director of Prudential Assurance, Roy Nicolson, managing director of Scottish Amicable who will take over responsibility for IFA business, and Mike Harris, the former head of Midland Bank's First Direct banking operation who will add the new direct operation to his existing role as head of Prudential Banking.

The Prudential's shares fell 8.5p to 620.5p yesterday as the news of Mr Sutcliffe's departure was greeted with dismay by many analysts. Charles Landa at brokers Societe General Strauss Turnbull said Mr Sutcliffe had been reorganised out of a job.

"I think its a great shame. He was very much the rising star at the Pru. As far as I know, he was held in very high regard both inside and outside the Pru. He was behind many of the market leading moves at the Pru over the past five years."

Roman Cizdyn at Merrill Lynch, who described Mr Sutcliffe as "a leading actuary and a great manager", said his leaving was a great loss to the company. Both analysts said Mr Sutcliffe, who has been with the Pru for 21 years, would have no difficulty finding another job.