Prudential to Bolster Egg, Move Beyond Life Insurance (Update2)

Oct. 26 (Bloomberg) -- Prudential Plc, Britain's second- largest insurer, may expand beyond its focus on life insurance while developing Internet bank Egg Plc under a new strategy laid out by Chief Executive Officer Mark Tucker.

`We see a need, looking to the future, to target a broader spectrum of opportunity than just life insurance -- important and profitable though we expect that sector to be for us,'' Tucker said today in a statement. Prudential has also decided to `retain and develop'' its 79 percent stake in Egg, the company said.

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New life and pensions business rose 16 percent to 481 million pounds ($858 million), from 413 million pounds a year earlier, Prudential said. U.K. sales were unchanged at 156 million pounds amid ``intensified'' competition for mortgage protection and individual annuity products in the quarter.

Tucker, 47, unveiling his plans for the first time since taking the helm in May from Jonathan Bloomer, plans to collaborate more closely with Egg under a `broader'' U.K. strategy. Prudential will try to sell more retirement, banking and asset management products and continue a review to identify cost cuts.

`The strategy all seems sensible and the focus on cost cuts is great,'' said Sanford C. Bernstein analyst Bruno Paulson in London, who has an ``outperform'' rating on the stock. ``It's a shame they can't sell Egg.''

Shares of Prudential fell 3.5 pence, or 0.7 percent, to 482 pence at 9:27 a.m. in London. The stock has gained 7.2 percent this year through yesterday's close, ranking it fifth on the eight- member FTSE All-Share life insurance index.

Asia Business

Prudential { loans } had been trying to sell the Egg stake last year under Bloomer, who was ousted as CEO by investors who protested a share sale to fund the U.K. business after the insurer previously focused on Asia for growth.

Prudential today said it will continue to focus on its Asian business by seeking ``organic growth,'' particularly in China, Taiwan, Korea and India. The Asia business will begin to generate cash in 2006 and doesn't need further investment from the parent company, said Tucker.

Egg, the U.K.'s biggest Internet bank, posted third-quarter net income of 11.2 million pounds today, compared with a 71.8 million loss in the period last year, as costs linked to the closure of its French business weren't repeated.

The bank has a `young and affluent'' client base with 3 million customers, Tucker said on a conference call. Its direct distribution business model will also help Prudential profit from the personal savings and loans market, he added.

`Right Decision'

`The potential advantages that we can get from owning Egg make it clear that retaining it is the right decision,'' the company said today. Loans

Prudential still hasn't decided whether to combine Egg with its main businesses and hasn't yet calculated how much money it could save by doing so, Tucker said. In August 2004, Prudential abandoned a seven-month search for a buyer for Egg, which had a net loss of 91.4 million pounds last year because of costs linked to the closure of its unprofitable French business.

`It would have been nice to get more clarity on Egg, which has been a long running niggle for investors,'' said Richard Peirson, who helps manage $8.2 billion including Prudential stock at London-based Framlington Invesment Management. `The numbers are pretty much as flagged and are fairly positive.'' Loans

Prudential's third-quarter sales in Asia rose 36 percent to 197 million pounds, helped by income from Korea, India and China. New business in the U.S. gained 17 percent to 125 million pounds.

Competition in the U.K., which restricted revenue growth, ``seems to be lessening,'' Tucker said.

Prudential's third-quarter sales figures beat the 478 million- pound median estimate of five analysts surveyed by Bloomberg by 3 million pounds.

Article taken from Bloomberg October 26

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