Prudential Plc, the UK insurer that failed to buy AIA Group earlier this year, said it won’t make another bid for the American International Group unit as it posted earnings that beat analysts’ estimates.
Operating profit climbed 41 per cent to £968 million ($1.5 billion) in the first half, the London-based company said today in a statement. That beat the £746-million median estimate of eight analysts surveyed by Bloomberg News. The shares rose as much as 2.1 per cent. “We tried it and it didn’t work out,” Chief Executive Officer Tidjane Thiam said of the $35.5 billion offer on a call with reporters. “Making another bid has been “ruled out. We are back to our organic growth strategy, which is producing excellent results,” he added.
Prudential revised down the costs of the failed bid to £284 million from a previous estimate of £450 million, as the firm forced its advisers to accept lower fees and benefitted from tax relief. Thiam, 48, and Chairman Harvey McGrath, 58, have so far survived calls to resign from investors including Schroders Plc after they rejected the deal.
The total cost of the failed transaction is “a large sum, but completely manageable,” Thiam said. “The dividend is not threatened.” The costs include £100 million in foreign-exchange hedging, £58 million of underwriting fees and £66 million in advisory fees. Thiam declined to disclose the amount by which the fees were reduced, saying it was “confidential.”
Dividend rises
The insurer raised its half-year dividend to 6.61 pence a share from 6.28 pence in 2009. That matched the analysts’ estimate.
Operating profit included a £ 123-million equity hedging gain related to the firm’s fixed-index annuities business in the US Profit at the Asian unit climbed 24 per cent to £262 million. Net income for the group was £442 million, compared with a £254-million loss a year earlier.
“These figures should allay any fears that Pru took its eye off the ball in its bid for AIA,” said Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Plc with a “buy” recommendation on the stock.
The insurer is in the process of hiring two new non-executive directors. One of them will replace Winfried Bischoff, who left to become chairman of Lloyds Banking Group Plc in September.
New directors
“We need to recruit more non-executive directors,” Thiam said. “The makeup of the board has to evolve over time to reflect” the growth in Asia, he said. He declined to comment on whether any current directors will step down from the board.
Thiam said in a separate interview on Bloomberg Television he had “no regrets” over the AIA deal and that he would continue to work for the insurer, while he has the support of shareholders.
Prudential has risen 17 per cent since July 1 as rival UK insurers Aviva Plc, Legal & General Group Plc and Standard Life posted higher profits and raised their dividends.
Prudential climbed 6 pence, or 1.1 per cent, to 568 pence at 12:36 pm in London trading, valuing the firm at about £14.4 billion. The stock is 5.7 per cent below the price before Prudential embarked on its bid for AIA.
