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Failed AIA bid costs Pru £377m

Prudential has revealed that its failed bid for AIA has cost the company £377m as it boosted its dividend and posted profits across the group.

The figure for the cost of the AIA deal does not include expected tax relief of £93m on the aborted transaction.

In a teleconference this morning announcing Pru’s half year results, group chief executive Tidjane Thiam admitted that a break-up of the global company or a flotation of the Asian business are options that remain under consideration by the board.

He also ruled out a further bid for AIA and said the insurer would not be looking at further large-scale acquisitions.

Pru posted UK pre-tax operating profits of £449m for the first half of 2010 on an embedded value basis – an increase of 11 per cent year-on-year from £406m.

On an IFRS basis Pru’s UK operating profits were £330m, unchanged from the first half of 2009.

As a group, Pru posted IFRS operating profits of £968m, up 41 per cent year-on-year and embedded value profits of £1.67bn, up 35 per cent year-on-year.

Profits in the Asian business, which remains the key focus of the group, were up 59 per cent from £401m to £636m.

Thiam was also bullish about competition from AIA in the Asian market under the leadership of his predecessor, former Prudential chief Mark Tucker, saying “we are confident that we can continue to beat AIA just as we have done so before.”

When asked whether he would consider a break-up of the group Thiam said: “Our view is that the current strategy is working very well and delivering excellent results. We are not closed minded. We look regularly at those options – whether it is a break up or floating Asia.”

On possible future acquisitions Thiam added: “Large inorganic transactions are not on the agenda.”

Prudential boosted its dividend by 5 per cent to 6.61p per share and the group’s capital buffer remained stable at £3.4bn.

Within the UK business, profits on with-profits business were £7m higher than the same time last year at £154m.

M&G’s operating profit for 2010 was £143m, an increase of 40 per cent from £102m in 2009.

Pru says this record level of interim profits for M&G reflects higher equity market levels, strong net inflows, particularly in the retail business, and increased sales of more profitable equity products.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. What an appalling situation. This money could have been used to top up all those endowment policies that are going to provide their owners with a shortfall.

    I shall not be placing business with a company that fails in its duty to act responsibly to their clients.

  2. …or they could have used a tiny portion of it to update the IT systems to allow USP to continue to 77 for their policyholders(see “Systems Block age 75 change”). Prudential is not the company it was.

  3. “Prudential is not the company it was”

    Very true. They have lost the confidence of millions of investors who pinned their hopes and dreams on this once great giant of the insurance industry. Poor returns giving no hope for investors means loss if future investment.

    How sad!

  4. “poor returns”, “endowment shortfalls”?? looking at annual statments i wish more of my clients had been in Prudential endowments, i know alot of my colleagues are also not best amused by other endowment and pension providers who have paid a whopping 0% bonus rate in the last 5yrs.

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