Profits at Prudential Soar in Spite of Scuttled AIA Deal

Published: Thu 12 Aug 2010

Larry Roth

British insurance titan Prudential announced today that profits increased 41 percent in the first half of 2010, helped by skyrocketing sales in Asia, in spite of its unsuccessful attempt to purchase AIG's Asian insurance division AIA.

Operating profit soared to 968 million pounds ($1.5 billion) in the six-month period ending in June, the insurer said in its results statement.

That figure compares with a profit of 688 million pounds in the same period of 2009 and handily topped market predictions of 724 million, according to a Dow Jones Newswires poll of analysts.

Prudential noted that the unsuccessful $35.5-billion bid for AIA, which derailed in June, would cost 377 million pounds and refused to consider another takeover attempt of AIG's Asian unit.

That number is significantly less than the original estimated cost of 450 million pounds.

The insurer also moved into a net profit of 442 million pounds in the first six months of this year, compared to a loss of 254 million last year, and boosted its interim shareholder dividend to 6.61 pence per share, an increase of five percent.

Executives Respond

Prudential CEO Tidjane Thiam, who caught flak from certain shareholders over the ill-fated AIA bid, said that Asia holds the largest growth potential and conveyed "disappointment" over the unsuccessful AIA takeover.

"Prudential has delivered strong results during the first half of 2010 as we continued to allocate capital to the geographies and products with the best profitable growth prospects, in line with our strategy," said Thiam.

"Asia remains the region with the best potential for high and profitable growth, and despite our disappointment at not being able to further accelerate our strategy through the transaction with AIA, the prospects for future profitable organic growth remain excellent.

"We are cautious about the outlook for the western economies. However, our Asian business gives us a material and powerful presence in the most attractive markets in our industry, and one that will continue to underpin our growth."

When asked by reporters if Prudential had ruled out another try at an AIA takeover, Thiam said:

"Yes, it's ruled out. It's not on the agenda. We tried, it didn't work out."

"So we're back on the organic growth strategy, which is producing excellent results," Thiam noted in a conference call.

Investors welcomed the good financial news, thrusting Prudential's share price to 564 pence, 0.36 percent higher, on the London stock market, which in late morning trading was down 0.08 percent.