Prudential buys AIG Asian insurance arm for £24bn

The 162-year-old insurer is buying the Asian assets of collapsed US giant American International Group via the biggest rights issue in British corporate history.

The deal — $25 billion in cash and the rest in new Prudential shares — doubles the size of the British insurer and takes its focus away from the UK.

The Pru insists it will remain headquartered in Britain though analysts speculate that it now has increased leverage to cut deals with the Inland Revenue given that 60% of its profits will come from overseas.

The deal makes it comparable in size and scope to outfits such as HSBC and Standard Chartered.

Chief executive Tidjane Thiam, a former minister in the Ivory Coast government before he was ousted in a coup, has been in charge of the Pru for less than a year.

He will head the new company, which will be overseen by the Pru's board.

Today he said: "Transformational is an overused word, but that's what this is.

"It creates a sector powerhouse. It is a one-off opportunity that will be a long-term, material benefit to shareholders."

Thiam denied reports that he would be offloading the insurer's UK arm in the near future: "The UK generates cash and capital for us. It is a very important part of the group."

AIG was at the centre of the global financial crisis and had to be rescued by the US taxpayer.

Prudential claims that the Asian arm — known as AIA — is the jewel in the crown of AIG's operations, although its true value is hard to ascertain.

One analyst said: "No one knows how profitable AIA was in 2008 never mind about 2009. Without that it is hard to know if this is a good deal or a bad deal.

"But people love the Asian story. If the financials stack up then strategically it is a great win."

Prudential's shares were suspended this morning, but fell 71 ½p to 528p after the announcement as existing shareholders realised their holding will be diluted by the massive rights issue.

The company will seek an additional listing on the Hong Kong Stock Exchange as its looks to increase its Asian shareholder base.

Prudential also announced its 2009 results today, which showed that profit jumped by 34% to £1.6 billion.

Integration costs will be high, at about $340 million, but cost synergies by year three will be $340 million, the Pru said.