Prudential PLC chairman Harvey McGrath defended the British insurer’s failed US$35.5 billion takeover of AIA Group Ltd after investors called for him and chief executive officer Tidjane Thiam to quit.
Prudential is “convinced” that the attempted purchase of AIA was the right strategy and that it was “in the best interests of investors,” the chairman told shareholders at the company’s annual general meeting in London yesterday. The board doesn’t support management changes, said McGrath, who also apologized for the costs of the failed bid, while calling them “affordable.”
McGrath and Thiam are trying to show shareholders they have a plan to expand in Asia after the acquisition failed amid disagreements with large investors, the UK regulator and AIA’s parent, American International Group Inc. The 47-year-old CEO has already apologized to investors for spending £450 million (US$651 million) in fees on the deal, and Prudential yesterday ruled out making another attempt to acquire AIA.
“Somebody has to be held accountable for this monumental mess,” Robin Geffen, founder and chief investment officer of London-based Neptune Investment Management Ltd, said in a telephone interview.
Thiam and McGrath’s positions are “untenable,” he said. Neptune owns 0.2 percent of Prudential.
The insurer’s revenue in the first five months of the year grew 27 percent to £.36 billion, compared with the same period last year, as policy sales in Asia rose 33 percent, Prudential said separately in a statement on Monday. The company’s Asian unit had its highest rate of sales growth on record in April and last month, up 38 percent from last year.
Thiam said in an interview on Friday that his main priority in Asia would be to hire more agents to sell policies in the region.
Prudential is in “extremely good shape,” the chairman said today. The company has no doubt it will grow without AIA, he said.
Thiam said at the meeting that Asia’s potential is “extraordinary,” and that growth at the company’s business there will “accelerate.”
Prudential dropped 5 pence, or 0.9 percent, to 551 pence at 11:35am in London trading, valuing the firm at about £14 billion. The FTSE 100 index of leading UK firms fell 0.5 percent to 5102.65 points.
Prudential’s managers “have the support of the non-executive directors,” spokesman Ed Brewster said on Friday.
“I’m the servant of the shareholders and if the shareholders wanted me to resign, of course I would,” Thiam said in a Bloomberg Television interview. “They have not expressed that desire.”
Former CEO Mark Tucker is a candidate to replace either Thiam or McGrath, the Financial Times reported yesterday, citing two unidentified top 15 shareholders.
Thiam, who became CEO in October, has sought to justify the AIA acquisition by saying the deal would have accelerated his plan to expand in Asia. Prudential would have become the biggest life insurer in Hong Kong, Malaysia, Thailand, the Philippines and Vietnam had the deal been completed.
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