Prudential Posts Loss for 2008, CEO Steps Down

 

Friday, Mar 20,2009, 11:31:33 AM   Click:

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LONDON_Prudential PLC announced Thursday that its CEO was resigning because the company fell to a loss of 396 million pounds ($ 566 million) for 2008, primarily due to depreciation on the value of assets in the United States, USA.

Mark Tucker, who led the company for 4 1 / 2 years, will be replaced by Chief Financial Officer, Tidjane Thiam, Prudential said. He did not comment on the reason for the decision of Tucker.

"I think I realized what I decided to do and that it is time to hand over to his successor to continue the work," said Tucker, a veteran of 25 years in business.

The full-year deficit of insurance and financial services compared to a profit of 947 million pounds in 2007. The company said this was due mainly to short-term fluctuations in financial markets, particularly in the United States, where it has reserved 624 million in impairment charges and defaults to an American unit .

The total losses in the United States, rose to 1.06 billion pounds compared to 18 million pounds in 2007.

Excluding these write, Prudential boast an increase of 12 per cent of operating profit to 1.3 billion pounds, led by a jump of 70 percent operating profit in Asia.

The company's shares rose 6.9 percent to 269 pence in early trading on the London Stock Exchange.

"We delivered solid sales growth and operating profits, has maintained a strong capital position, and achieved the goal we set ourselves to generate a Group holding company cash flows in 2008," Thiam said.

Barrie Cornes, an analyst at Panmure Gordon & Co., Prudential part noted as a "purchase".


"The valuation is too low, in our view," Cornes said, adding: "The actions are given too much uncertainty on the balance sheet."

Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers, said Prudential had "sufficient in the short term with regard to its financial strength," but said that the change of management adds to the uncertainty and doubts about the capital adequacy levels are not likely to disappear soon. "

Prudential confirmed it had considered bids for the AIA, the Asian subsidiary of AIG, the giant U.S. insurance in difficulty, but decided against it.

It said its main area of credit risk shareholder was in its U.S. subsidiary, Jackson National Life Insurance Co.

"On 31 December 2008, Jackson's fixed income portfolio was approximately 24 billion pounds, of which 93 per cent of investments has been excellent and 7 percent for high-efficiency," said the company.

Total impairment charges and default values amounted to 624 million pounds in 2008, including 78 million books have been by default, and 419 million pounds of impairment charges, the company said. The remaining 127 million pounds were losses on the sale of assets.

"Given the evolution of spreads in the United States, unrealized losses for the year were 3.2 billion pounds. It should be noted that we enforce a policy of detention of the assets to maturity, which in economic terms, limits the impact of current price levels, "Prudential said.

On a European Embedded Value (EEV) basis, Prudential reported a loss of 1.34 billion pounds compared to a profit of 2.96 billion pounds in 2007.

EEV is a solution accounting for life insurance companies, reflecting the expected future cash flows from the sale during the year and updated assumptions based on experience.

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On the Net: http://www.prudential.co.uk/prudential-plc/



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