Prudential has sold its internet banking arm Egg to Citigroup for 575m in a surprise U-turn.
The move comes just over a year after chief executive Mark Tucker affirmed the insurer’s commitment to Egg after buying back the 21 per cent it did not own in a deal valuing it at 973m.
Pru will continue to offer life and pension products to Egg’s three million customers for five years.
Egg’s operating losses are estimated to be 145m in 2006 and Tucker admits the timing of the sale was influenced by the deteriorating consumer credit outlook in the UK. The cash realised by the sale will be used to help reduce debt and enhance earning per share.
The insurer is expected to come under further pressure from the City to sell its underperforming UK operation after its results for last year showed sales flat at 884m compared with 871m in 2005, on an annual premium equivalent basis.
Bulk annuity sales fell by 30 per cent from 203m in 2005 to 143m last year on an APE basis.
But one bright spot was individual annuity sales, which rose by 22 per cent to 271m in 2006 from 222m in 2005, which Pru attributes to increased activity in the second half of 2006 following the removal of uncertainty over A-Day changes.
Tucker says: “The sale of Egg to Citigroup realises greater value for our shareholders than retaining the business within the group.”