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 Monday. 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 on Sunday ruled out making another attempt to acquire AIA.
"We want a couple of heads to roll," shareholder Paul Ferro said at the meeting. "There's been a huge amount of mismanagement. We could have had a year's extra dividend for all that's been wasted."
Investors voted 94 percent in favor of the insurer's pay report at the meeting.
The insurer's revenue in the first five months of the year grew 27 percent to £1.36 billion, compared with the same period in 2009, as policy sales in Asia rose 33 percent, Prudential said separately in a statement. The company's Asian unit had its highest rate of sales growth on record in April and May, up 38 percent from 2009.
Thiam said in a June 4 interview his main priority in Asia will be to hire more agents to sell policies in the region.
Prudential is in "extremely good shape," the chairman said Monday. The company has no doubt it will grow without AIA, he said. Thiam added at the meeting that Asia's potential is "extraordinary," and that growth at the company's business there will "accelerate."
Prudential dropped 13.5 pence, or 2.4 percent, to 542.5 pence at 2:40 p.m. in London trading, valuing the firm at about £13.8 billion. The FTSE 100 index of leading U.K. firms fell 1.1 percent to 5070.21 points.
Prudential's managers "have the support of the non- executive directors," spokesman Ed Brewster said June 4.
"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."
John Rider, a shareholder from Enfield, southeast England, said Monday at the meeting that the whole board has to take responsibility for the failed acquisition. "The management has performed abysmally," he said. "A lot of money has gone to waste. I'm very relieved the deal didn't go ahead."
The company will take a "hard look" at shareholders' communications, McGrath said today. Investors voted in favor of re-electing several executives at the meeting by more than 95 percent.
Former CEO Mark Tucker is a candidate to replace either Thiam or McGrath, the Financial Times reported today, 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.
"It was not just my brainchild, it was something that was embraced by the company before," Thiam said. "We worked on this for a long time, since September 2008. That predates my appointment as CEO."
He plans to continue with the insurer's strategy of using cash from maturing policies in the U.K. to fund investment in faster-growing Asian economies. The insurer also operates in the US through its Jackson National Life Insurance Co. unit.
"You would expect the management to come out pretty strongly saying that the strategy was to grow in Asia," said Jonathan Jackson, who helps manage £2 billion including Prudential shares at Killik & Co. in London. "They need to knuckle down with the existing strategy."
Prudential will still look for "bolt-on" acquisitions, the chairman said today, adding that "knee-jerk" asset sales aren't planned.