Pru springs profits surprise despite AIA turmoil

INSURER Prudential sought to quell investor anger over its collapsed takeover of Asia's AIA today with a 5% dividend hike and better than expected profits.

The failure of the 35.5 billion dollar (22.6 billion) deal for the Asian business of nationalised US insurance giant AIG led to calls on chief executive Tidjane Thiam to step down.

Prudential had slightly better news on the cost of the bungled venture today, which was lower than previously thought at 377 million.

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Alongside the dividend hike, the Pru also posted operating profits of 1.68 billion - up 35% on an embedded value basis and ahead of City hopes - as Mr Thiam insisted the group had not taken its eye off the ball despite the fiasco.

"While the proposed AIA transaction was high profile and attracted a great deal of interest, the group continued to perform strongly," he said.

"We very much regret that this transaction did not proceed and that costs were incurred," the company said.

Despite the failure, Prudential is sticking to its strategy of growth in Asia amid caution over mature and debt-laden western economies where unemployment is high and progress is expected to be more sluggish. Shares rose 2% following the results.

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"Asia appears to be more resilient and in the first six months of 2010 Prudential has benefited from the recovery in markets in the region," it added.

The firm posted a 36% jump in Asian new business sales to 713 million with growth across all countries except Korea. This represented the Pru's strongest half-year sales performance in its history, with sales in South-East Asia rising 46% to 452 million.

The company's US arm, Jackson, also saw sales jump 43% to 592 million, driven by annuity sales. The firm's 'value over volume' approach in the UK to focus on more profitable business led to sales growth of just 2%, although new business profits rose 11% to 135 million.

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