UK insurance giant Prudential confirms interest in AIG’s Asian assets

UK insurance and investments group Prudential said Tuesday that it's considering buying Asian assets from beleaguered US insurance company American International Group (AIG) as it also reported a 15 per cent rise in sales. (See: Analysts see insurance rivals profiting from AIG's misfortune)

Such a possibility of asset sales by AIG was earlier explored a month ago when the Bush administration was forced to rescue the company with an $85 billion bailout using taxpayer money.(See: $85-billion bailout for AIG)

"We are of course monitoring closely AIG's disposal programme and considering what, if any, opportunities (in Asia) may arise that would create additional value for our shareholders," Prudential CEO Mark Tucker said in a trading update.

He added, "Asia is the only region in the world that is expected to record high single digit economic growth rates in both 2008 and 2009. This, combined with the strong growth of intra-regional trade, ongoing development of domestic consumer markets and the very low penetration of financial products, means we remain highly positive about the medium to long term prospects for Asia and our prime position in the region."

Press reports last week had indicated Prudential was in advanced talks with two strategic investors to take a 20 per cent stake in the group and help launch a $15 billion bid for the Asian operations of AIG. Now, that interest has been officially confirmed.

The company also declared encouraging results today. It said total insurance sales on an annual premium equivalent basis rose 18 per cent to £2.3 billion ($3.9 billion), driven by growth in the UK and Asia. Its M&G asset management business in the UK also benefited from net inflows of £4.1 billion, with Asian inflows totaling £1 billion, the group added. Prudential said its surplus capital declined to £1.2 billion from £1.4 billion, and it's able to withstand further deterioration in both market and economic conditions.

"Our capital position remains robust and our prudent and proactive risk management approaches to capital management will allow us to withstand significant shocks should the need arise," Tucker said.

The insurer said it's unlikely to achieve its goal of doubling new business profit in Asia in 2008 because of the financial turmoil and forecast it will meet the plan in 2009. ``We fully expect global financial market conditions to remain highly challenging for some time,'' the company said. The pace of growth may slow for Prudential and the industry, Tucker admitted.