May 17 (Bloomberg) -- Prudential Plc shareholders, frustrated by Chief Executive Officer Mark Tucker's failure to lift U.K. earnings, are urging him to break up Britain's second-biggest insurer.

New Star Asset Management Group Plc, Jupiter Asset Management and Canada Life Ltd. of London, which together oversee about $91 billion, say Prudential's U.K. division is dragging down faster- growing units in Asia and the U.S. Earnings in the U.K. fell 7.9 percent in 2006, while profit in Asia jumped 20 percent.

The 159-year-old company, one of Britain's largest life insurers for more than a century, is under fire because sales growth in its home market has fallen behind Legal & General Group Plc and Aviva Plc. Prudential's value would rise as much as 40 percent if Tucker split up the London-based company and sold the pieces, said Trevor Moss, an analyst at Man Securities in London.

``The U.K. is not delivering,'' said Ed Collins, who helps manage about $41 billion, including Prudential shares, at London- based New Star. ``The gem is the Asian business, which is doing very well and throwing off cash. A restructuring to separate the businesses would be good for shareholders.''

Tucker, who rebuffed a 16.9 billion-pound ($33.4 billion) takeover bid last year from London-based Aviva, the biggest U.K. insurer, won't discuss communications with shareholders, said spokeswoman Carole Butcher. He'll face investors today at the annual meeting in London.

Shares Gain

Shareholders owning about 10 percent of the company, including Sevenoaks, England-based Principal Asset Management, say they would support a breakup. Prudential, which traces its roots to 1848, has 26,000 employees and more than 20 million customers stretching from Michigan to Hong Kong.

Prudential shares rose 11 percent this year to 773.5 pence, giving it a market value of 18.9 billion pounds as investors anticipated a shakeup. Splitting the company would value Prudential's assets at 950 pence a share, 23 percent more than the current price, according to the median estimate of five analysts surveyed by Bloomberg News.

``The school of thought that it would be worth more broken up is getting stronger,'' said Alan Beaney, who helps manage $1.8 billion, including about 1 million Prudential shares, at Principal Asset Management.

Investors have been disappointed by three CEOs over the past eight years. Peter Davis reduced the sales force in 1999 and failed to sign distribution agreements with banks, hobbling growth. Jonathan Bloomer cut the dividend in 2003 for the first time since World War I, and was ousted after he diluted investors' holdings with a 1 billion-pound share sale in November 2004.

Pushing for Change

Tucker, 49, replaced Bloomer in May 2005. The new CEO bought the 22 percent of the unprofitable Internet bank Egg that Prudential didn't already own for 211 million pounds. He then sold the unit to New York-based Citigroup Inc. this year.

Moody's Investors Service lowered its outlook on the U.K. division's financial strength rating to ``negative'' from ``stable'' yesterday, on concern its market position will deteriorate. Moody's rates the unit Aa1, the second-highest level.

``I don't think Mark Tucker has exactly covered himself in glory since he became CEO,'' said Martin Kinsler, a London-based investment analyst who helps manage about $125 billion at Henderson Group Plc, including about 30 million Prudential shares. ``Shareholders are putting the company under pressure.''

Figures on Prudential shareholdings are based on data compiled by Bloomberg or provided by the companies.

More Vocal

The stock rose 9.7 percent the week of April 30 after Hermes Pensions Management Ltd., which holds 1.6 percent, or 39.6 million shares, sent a letter asking the insurer to consider a breakup. The note was reported in The Sunday Times and confirmed by the London- based fund manager.

One Hermes fund pushed for changes in strategy, management or dividends at about three-quarters of the companies it invests in, and won more than half the time, according to a London Business School study last year. Hermes got Six Continents Plc, a London- based owner of hotels and restaurants, to split in 2003, forming Mitchells and Butlers Plc and InterContinental Hotels Group Plc.

Shareholders have grown more vocal at some of Europe's biggest companies. TCI Fund Management LLP, a London-based hedge fund, helped turn ABN Amro Holding NV into a takeover target after challenging CEO Rijkman Groenink to break up the company. A group of banks led by Edinburgh-based Royal Bank of Scotland Group Plc is vying with Barclays Plc of London to buy the 183-year-old Dutch company, and plans to split it apart.

`Catalysts'

TCI, run by Christopher Hohn, 40, held about 1 percent of Amsterdam-based ABN Amro when it attacked in February. By the time of the company's annual meeting on April 26, about 68 percent of shareholders backed a motion urging management to consider selling or splitting up the bank.

``It doesn't matter how big a shareholder you are,'' said Sandy Nairn, who helps manage about 2 billion pounds at Edinburgh Partners. ``They are acting as catalysts, and the current fad of the markets is takeovers.''

An ally of TCI's in agitating at ABN Amro was Toscafund Asset Management LLP. The London-based hedge fund said March 7 that ``ABN Amro has failed to deliver acceptable returns.''

Tosca is now pressing for a Prudential breakup, said Tim Young, an analyst at Collins Stewart in London. The fund controls about 1.1 percent of the insurer, according to a Regulatory News Service statement.

``Tosca is always focused on creating shareholder value,'' said non-executive director George Mathewson, when asked about breaking up Prudential. He declined to elaborate.

More Time

Robert Talbut, chief investment officer at Royal London Asset Management, which oversees about $61 billion, including Prudential shares, disagrees. While Tucker ``has to improve performance,'' Talbut's not convinced ``a breakup of Prudential is the right way to proceed.''

Tucker, who led Prudential's Asia unit from 1993 to 2003, said in March that he wants more time to turn around the British operation. The insurer may shed as many as 3,000 workers in the U.K. and focus on selling annuities rather than less-profitable pensions, income-protection products and health insurance, he said March 15, when the company published full-year results. The insurer decided against selling the U.K. unit after an eight-month review, he said at that time.

The U.K. division, which accounts for 41 percent of new insurance premiums, reported little change in revenue last year as sales of corporate annuities declined amid competition from Legal & General and Standard Life Plc. Both reported higher U.K. profits in 2006.

`Strongest Position'

Prudential's Asian unit, with operations in 13 countries including Korea, Singapore and China, accounted for 27 percent of new premium income last year.

``They have the strongest market position in Asia of any quoted life company in the U.K.,'' said Colin Morton, a fund manager at Leeds, England-based Rensburg Sheppards Plc, who helps manage about $1.8 billion.

The U.S. unit, Lansing, Michigan-based Jackson National Life Insurance Co., posted a 20 percent increase in sales last year. Prudential isn't affiliated with New Jersey-based Prudential Financial Inc., the second-largest U.S. life insurer.

``I am not writing letters, though in general I am sympathetic'' to the idea of separating the company, said Philip Gibbs, who helps oversee $37 billion, including about 1.2 million Prudential shares, at Jupiter Asset Management in London. ``There is more value in Prudential shares than perhaps the market is attributing.''

To contact the reporter on this story: Jon Menon in London jmenon1@bloomberg.netBen Livesey in London at blivesey@bloomberg.net;

Last Updated: May 17, 2007 02:38 EDT