According to the company, net income for 2009 was 676 million pounds (US$1 billion), a 34 percent increase over 2008. But the profit missed analysts’ median target of 1.0 billion pounds in profits from analysts surveyed by Bloomberg.
Revenues in the U.K. dropped by 11 percent in 2009, a reflection of the nation’s still-weak economy.
“This reflects our decision to focus on value over volume, leading to significantly lower wholesale annuity business, individual annuities and corporate pensions, partially offset by higher sales of with-profit bonds. Our strategy allows us to generate surplus capital for investment in more profitable opportunities for the Group,” commented Prudential CEO Tidjane Thiam in a statement.
The company has targeted Asia as the growth engine for the firm.
“Asia is the engine of the Group’s future growth, particularly the fast-growing economies in South East Asia,” Thiam said. “The fourth-quarter 2009 saw record sales in Asia, up 42 percent from the third-quarter 2009, as the recovery took hold.”
Asia has been a driver for the company’s growth in recent years as the area’s consumers became more savvy in purchasing financial instruments and insurance products.
“Many moons ago there was skepticism, particularly among Chinese, about taking life policies, given its association with death in a perverse sense,” Thiam noted in a television interview with BBC. “Life policies were not uppermost in many people’s list of investment requirements and protection requirements.”
Buys AIA
Prudential on Monday announced an agreement with troubled New York-based insurer AIG to purchase its Asian life insurance arm American International Assurance (AIA), for $35.5 billion.
The deal will be paid with $25 billion in cash and roughly $10.5 billion in stock and securities. To pay for the purchase, Prudential announced a $20 billion rights offering and a $5 billion bond sale.
For AIG, the AIA sale is its biggest since its historic bailout in 2008—the U.S. company has been seeking to sell parts of the company to raise money to repay the U.S. taxpayers.
Thiam called the acquisition a “unique opportunity” to create one of the largest insurance companies in Asia. “The combined business will be the largest life insurer in seven major Asian countries,” Thiam said in a statement, referring to the new company becoming the market leader in Hong Kong, Singapore, Thailand, Malaysia, Indonesia, Vietnam, and the Philippines.
At least two analysts cut Prudential’s stock rating in London on fears of the rights issue diluting Prudential’s stock.
“No one knows exactly what AIA contains or how profitable it is, or how it overlaps with Pru’s existing businesses,” Kevin Ryan, an analyst with ING, told the BBC.
AIG, which is now 80 percent government-owned following its $182.5 billion federal rescue in September 2008, said last Friday that it lost almost $9 billion in the fourth quarter of 2009.
