Pru boss hits back as critics say break-up is ‘a disaster’
INDUSTRY experts have slammed Prudential over its controversial break-up – triggering a fierce rebuttal from its chief executive.
Analysts and insurance insiders claimed the company had made a hash of its plan to slim down and focus on Asia, which began in earnest in 2019.
But Prudential’s interim boss Mark FitzPatrick hit back, arguing that the business had quietly been bolstering its balance sheet so it had the ‘firepower to take advantage’ of new opportunities.
Once a proud British life insurer, whose ‘Man from the Pru’ agents became commonplace across towns and cities in the last century, the Pru now barely has a presence in the UK.
The 174-year-old firm hived off its UK business into savings and wealth firm M&G in 2019, before separating from its US business Jackson last year.
What remains of Pru – which is still listed on the London Stock Exchange – is now entirely focused on Asia, where it hopes the ballooning middle-class will fuel its growth.
The premise behind the split was that the value of Pru’s constituent parts would be worth more than their sum. But so far those hopes have been dashed.
Prudential was worth about £50billion before the M&G separation in 2019. Now it is worth just £23billion. Jackson is trading at £2.8billion and M&G at £4.1billion.
‘It’s been a total disaster,’ said an analyst at one investment bank, who asked to remain anonymous.
‘I think it would have been – and can still be – a great plan. But [Prudential’s management] screwed up the execution.’
Farooq Hanif, an analyst at JPMorgan, said: ‘The vision was great. Some investors had been on at Pru for a while to be Asiafocused, because that’s where the growth was.’
But he agreed that the way the break-up had been handled left much to be desired.
Hanif noted that Prudential repeatedly said its capital position – how much money it has available to meet its requirements – was strong.
But the returns to investors are unimpressive, he said – especially compared with rival AIA Group.
‘They need to give a clearer steer on capital – how much surplus they think they have and what they intend to do with it,’ Hanif said.
FitzPatrick, who took the reins at Prudential after former boss Mike Wells stepped down in the spring, brushed off criticism that the company has not been transparent enough. ‘We’ve got huge long-term growth opportunities to pursue,’ he told The Mail on Sunday.
‘We’ve spent the last four years preparing ourselves for the situation where we are now – a pure Asia-Africa-focused group.’
He added that Prudential had been building its balance sheet ‘so that as those opportunities present themselves, we can go in and we have the firepower to be able to take advantage’.
But it has undoubtedly been a year of upheaval for the Pru. One City source suggested there had been tensions between Wells and chair Baroness Shriti Vadera.
Claims of bullying levelled at Vadera by an employee caused another headache, though an independent inquiry cleared her of any misconduct.
FitzPatrick, formerly the company’s finance boss, stepped in to fill the breach left by Wells in March, but he was keen to emphasise that he did not want the role permanently.
Anil Wadhwani, a top executive at Canadian insurer Manulife, is due to take over in February.
Hanif said: ‘The lack of CEO has been a problem for investors. You can see that in the share price.’ Prudential is down more than 40 per cent on a year ago.
FitzPatrick rebutted critics’ suggestions that he has merely been a caretaker boss.
‘That’s so not who I am,’ he said. ‘The business is too exciting, the opportunities in front of us are too real to tread water.
‘I’ve been driving the business forward. We’ve been able to bring in new blood. I’ve cleared the runway so Anil can move at pace.’
A spokesman for Prudential said: ‘We did an investor audit at the end of last year.
‘They all understand the great structural opportunity.’