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and good riddance I'd say!!

"Financial executives say, however, that if the FSA is seen to be too restrictive of financial firms in London, some may relocate to other financial centres."

This made me smile. Correct me if I'm wrong, but for regulatory purposes isn't buying a business in Asia and selling your European and US businesses the *same* as relocating out of FSAs domain? The FSA regulates insurance largely on behalf of policy holders, not shareholders, and a London HQ is not relevant for any UK policyholders.

Not that Pru sales people will bother to make this distinction to new asian customers, who will be more than happy to continue buying safe 英国保诚 (British Insurance)

Delayed for 'a day or two'? What, until after the election?!? Someone more cynical would suggest that the outcome of the election would have a direct impact on whether the FSA can be arsed to think it through properly or not...

Too big to fail having the stable door bolted earl then?

'Financial executives say, however, that if the FSA is seen to be too restrictive of financial firms in London, some may relocate to other financial centres.'
Change the record.
The fewer bankers there are in this country, the sweeter will be the air that the rest of us breathe.

> Last minute intervention by the Financial Services Authority has led to a
> delay in the announcement by the Prudential of its record-busting ?14bn
> sale of new shares.

They can see another Sir Greedie coming along, and they don't want it to
end up like RBS.

And anyway, we're breaking these things up, not making them bigger.
Those boneheads have to get with the programme.

If a lot of the financial services relocate from the UK to abroad, what about the promises of the last 20 years of them being the backbone of the country? Both sets of politicians have said this in various ways.
What then generates the country after they have gone?
And why should I pay financial services to support another country?
I do see a gap appearing for a UK based company to service the UK and keep the cash here, an old fashioned view but when the service supplied is the same why not support an UK supplier?

Post 3. Also the result of the election may well have a direct impact on the price that the Pru may be able to get for the rights issue.

I find this whole saga deeply troubling. The whole point of the Pru is that it is a British insurance/assurance company. If I invest in the Pru then it is because it is a British insurer. If I wanted to invest in an Asian insurer then I could have done so directly. The Pru is not a hedge fund whose managers can move the capital into whatever is the latest fashion that takes their fancy and the owners of the business should remind the present management of that fact. The management's job is to grow the Pru as a mainly-British insurer.

Does anyone seriously imagine that the Pru will be still be around in five years time --- let alone another 160 years --- if this insane plan goes ahead?

oh well thats another insurance policy to get from elsewhere.

In summary: the Pru is leaving the UK for good financial reasons.

The UK is presently in severe decline - with no sign of a way out - , but other markets (i.e. Asia) are on the up.

On might also interpret this chain of events as the FSA is scared that the UK plc is seeing the first of the rats leaving the sinking ship for good financial reasons!

"So some, like Geffen, will view the Pru as much less robust if it pulls out of the UK. "

This is not the FSAs concern - if the Pru pulls out of the UK insurance market, there is not much for the FSA to worry about.

In a transition period, however, the expanded group may be perceived to have overstretched solvency capital at the same time as huge asset price and currency volatility, and sovereign debt ratings dropping like flies.

The asian business is no more immune from this than the UK/US ones, and the FSA should rightly expect a healthy solvency margin from the whole group while it is still together.

The Pru has seven million UK customers and about ?300 billion under management. Far too high a price is being paid. Shareholders are not enthusiastic. Remember the last hubristic mega takeover? RBS bought ABN. The result was not happy for the 'executive team', shareholders or the taxpayer. Good on the FSA. If the executive management team want to do this kind of deal let them find another insurer in another jurisdiction with another set of taxpayers and policyholders to underwrite it.

Surely the key point of an Insurance business is that it has built a solid repository of funds large enough to withstand the roughest storm. Should the management, shareholders and customers not me more concerned with the concept that the core of this new business plans to continue to "consume cash"

It's nothing to do with profits for policy holders or shareholders. Clearly the Pru wants bonuses like the bank directors.
We worry about the political situation in this country, and Asia is seen as a growing economy so attractive by comparison. The political situation in the UK is stable by comparison.
Goodbye Pru - it'll all end in tears.

"The Pru believes that both it and AIA are among the best capitalised groups in the world." Well everything must be all right then - we dont need regulators to interfere and surely all policyholders can rest assured. What do you think, Robert, are they? If you do not know may be it is because it is well concealed. Well capitalised for the probable claims that will arise from climate change events?

I can see what is in the deal for , the chief executive of the Pru (the bit about this years pay packet of ?5.2 million if the deal goes through) but I can't see much benefit to the existing Pru shareholders and there will only be costs to the employees through offshoring (rationalisation) and the only UK presence for the customers will be via a callcentre and online.

The ?14 billion raised from the UK markets will be shipped out to Singapore, never to be seen (or invested) on these shores again.

#14 "Consuming cash" in this context is from a shareholder perspective - a growing life insurance business needs to build reserves and solvency capital precisely so it can withstand the roughest storm. This leaves very little left to pay out as shareholder dividends until policies start maturing faster than you sign up new ones, which can take, well.. a life time. It doesn't mean it's not profitable, just that dividends could be some time in the coming.

Can someone explain who exactly is supposed to benefit from this deal? It seems to me we, the UK, will be left with a severely weakened UK operation that in time will fail or be swallowed up at a fraction of current net worth. This deal smells a bit like the takeover of Man United, which was a borrowing free company now saddled with humungous debts and an egregious owner family (allegedly), who are sucking the financial life out of the club. I propose we rename the good ship UK as Titanic. I'll have the deckchair near the biggest lifeboat.

THIS WHOLE DEAL STINKS!

...and has been conveniently timed to coincide with the final days of the General Election to slip through under the radar.

When will our spineless politicians start growing backbones?

Yes, this will be an interesting story to follow, Robert.

Could you kindly do the analysis for us in due course please, in detail, looking at exactly who made what out of this and who lost etc?

My betting is as follows:

- Pru goes ahead with the new share issue and takes over AIA for a very expensive price. AIA shareholders make a packet and original Pru shareholders get massively diluted.
- Pru then puts up charges for UK policy holders to support the huge cash consumption of overall group and the growth in China etc.
- Pru then sells off original UK part for a much higher value than present share price, thereby becoming just AIA under a different name effectively.

Result:
- Existing Pru shareholders get massively diluted on the initial deal, only being partly made back by the much higher price gained from sale of Uk business.
- AIA original shareholders who sold out make a packet.
- New long term owners of Pru/AIA end up with paltry return, as the new share price suffers from a higher risk profile.
- Investment banks advising on the deal make fortunes charging excessive fees on both the in and out transaction, for taking very little risk.
- Pru executives make ridiculous bonuses, not for any intrinsic improvement in managing the businesses, but just for doing two mega deals and taking one easy short term decision to increase charges to policy holders that they can do nothing about.

The biggest losers of all in this will of course be the existing Pru policy holders, who have provided the foundation and the cash for this whole adventure, and who end up materially worse off as a result, with reduced pensions as a result of higher charges.

What do you think?!

The precedents for this type of deal are very bad. Other have mentioned RBS and ABN. I'm reminded of Simpson and Mayo at GEC selling their boring old British Marconi business and buying lots of exciting American telecoms companies. That turned out really well!

The bigger and better story is that ALL elected governments, across Europe, for the people, must call the bluff of any credit agency, run by banks for banks?

This whole so-called global financial collapse was created by fraudulent banking behaviour in the first place?

Therefore, why would any democratically elected government continue the fraud on it's electorate? Do you want your political representatives to allow more vacuous and unaccountable bankers to continue rule the world?

Fraudulent banking practices created this problem - don't allow them to hold another fake weapon at you, or your democracy? Your money was gambled by high octane idiots - it's our money - start a better bank and take control back?

#9,

I find your post deeply troubling!

Another bit of silverware gone
Any reaction from Mandy yet ?

John Wilkes "The fewer bankers there are in this country, the sweeter will be the air that the rest of us breathe."

Maybe so but our taxes will have to go up a lot to cover the tax they pay on their salary, bonuses, VAT PAYE etc.

I wonder if anyone can tell us how much tax would have to go up by if banking left the UK?

#18 A business that's absorbing cash for a lifetime isn't a business a sane person should invest in, or put their funds in. Life assurance businesses do not generate cash as policies mature. All successful Life assurance generates cash up front through premiums. The only reason to absorb money is when they are building or reshaping infrastructure, overpaying commission to buy market share or they just pay too damn much.

26. SirLoseaLot:


I know it can really feel like a really sad old day when the master threatens to leave after years of neglect and abuse. You begin to wonder where your next meal is coming from after years of fighting over the crumbs that used to fall off his table.

But in the long run, you're sometimes better of standing up on your own. And its not as if you really want to spend the rest of your life begging like a dog.

#27 I think you misunderstand what is meant by "generating cash". In this context it means generating profits that can be released and paid out to shareholders.

Premiums cannot be paid out to shareholders, apart from paying for expenses, they need to be kept in reserve for future policy claims - typically by investing them in low risk assets. On top of this, the shareholders need to put in solvency capital as a security buffer, in case your reserves turn out to be too low to pay out the claims you have promised.

Only when you know exactly what the claim on a policy is, and you know how much your investments have returned, do you know how much profit you have earned from that policy.

This still does not mean these profits can be paid out to shareholders. If you sign up two new policies every time one policy matures, as a growing business might, the requirement for solvency capital will increase - hence profits released from maturing policies needs to be retained. You might even have to call on shareholders for more capital. But they are still profits. If you want your cash back, simply sell your shares.