UK's Pru hikes payout to dispel AIA fallout

By @ibtimes on

Prudential said it would pay a bigger-than-expected dividend from forecast-beating 2010 profits, hoping to finally dispel lingering investor resentment over its bungled and costly bid for Asian rival AIA last year.

Shareholders will get a payout of 23.85 pence per share, surpassing the 21 pence expected by analysts, Britain's No. 1 insurer said on Wednesday, adding that it aimed to keep dividends rising, helped by its fast-growing Asian operation.

All signs are that the business has performed pretty well, it's good for them to rebase the dividend, said Paul Mumford of Cavendish Asset Management, a Prudential shareholder.

Could they have done this if they had done the AIA deal? I'm not sure, but I do think it is now a very well-rounded business.

Prudential shares were up 4.7 percent at 747.5 pence by 1152 GMT, making the company the biggest riser in the FTSE 100 share index, which was 0.4 percent lower.

Prudential was forced to pull its $35.5 billion bid for AIA <1299.HK> in June last year after investors baulked at the price, leaving it to shoulder 377 million pounds in costs, and prompting calls for Chief Executive Tidjane Thiam and Chairman Harvey McGrath to quit.

CHARM OFFENSIVE

The insurer has since sworn off big acquisitions and set itself ambitious cash generation and profit targets in an effort to mend relations with its owners, bolstering its shares and reducing pressure for management change.

We believe that the majority of the shareholders are focused, rightly, on the performance of the company, Thiam told reporters on a conference call, declining to comment directly on whether investors still want him replaced.

Prudential made a 2010 operating profit of 1.94 billion pounds ($3.13 billion), up 24 percent on the year, and ahead of the 1.73 billion pounds penciled in by analysts, according to a consensus forecast calculated by the company.

The improvement was driven by strong growth at its flagship Asian division, which operates in the fast-expanding economies of south-east Asia, and from its Jackson National Life unit in the U.S.

Prudential said in December that it aimed to generate 3.8 billion pounds in cash in the four years to 2013, and analysts had expected the company to set out plans for allowing shareholders to benefit.

Prudential shares fell steeply on news of the AIA deal in March last year, but had recovered to pre-AIA levels by September, and have since risen a further 24 percent, outperforming a 15.5 percent increase in the Stoxx 600 European insurance share index <.SXIP>.

(Editing by Mike Nesbit)

($1=.6194 pounds)

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