Prudential’s McGrath Remains Chairman as Investors Protest

Prudential Plc Chairman Harvey McGrath
Prudential Plc Chairman Harvey McGrath. Source: Prudential via Bloomberg

Prudential Plc Chairman Harvey McGrath said he has a mandate to continue in the role after more than a fifth of investors opposed his re-election following the British company’s failed bid for AIA Group Ltd last year.

About 78 percent of investors voted in favor of McGrath’s re-election, compared with more than 99 percent in 2009, according to figures released at Prudential’s annual general meeting in London today. Other directors up for re-election received more than 94 percent investor approval.

“Getting the support of 80 percent of the shareholders is a pretty good mandate and we will take it forward on that basis,” McGrath told reporters after the vote. “The chairman becomes the lightening rod for shareholders’ issues at large and I suppose that’s what’s reflected in the voting today.”

McGrath was under pressure to step down from investors including Schroders Plc and Jupiter Fund Management Plc following the firm’s failed $35.5 billion bid for AIA, American International Group Inc.’s Asian business last June. While Chief Executive Officer Tidjane Thiam also faced calls to step down, 99 percent of investors supported his re-election. The bid cost the insurer 377 million pounds ($610 million) before tax in fees to lawyers and advisers.

There is “more work to be done” to improve the insurer’s relationship with investors following the bid for AIA, McGrath told the meeting earlier.

“The transaction did place strain on the company’s relationship with institutional investors,” McGrath said. “We’re seeking to allay any remaining concerns over the stewardship of the company,” he said.

Quality of Advice

Prudential last month hired law firm Clifford Chance LLP at the request of the Financial Services Authority to investigate the quality of advice Prudential received during its attempt to buy AIA, according to two people briefed on the matter. Credit Suisse AG, JPMorgan Chase & Co. and HSBC Holdings Plc advised Prudential on its bid.

McGrath and Thiam apologized last year for the cost of the deal, which would have made Prudential the biggest international insurer in Asia. The bid foundered after Prudential’s investors forced the company to cut its offer, which AIG rejected.

The insurer has since appointed Howard Davies, former director of the London School of Economics, and Paul Manduca, founding CEO of Threadneedle Asset Management Ltd., as non-executive directors. Manduca replaces James Ross, who is retiring, as the firm’s senior independent director from today.

Prudential, Britain’s biggest insurer by market value, has climbed almost a third in London trading since the deal collapsed at the start of June. The insurer raised its dividend by 20 percent in March after 2010 profit beat expectations, helped by a 29 percent gain in earnings at its Asian operations.

The stock climbed 1.6 percent to 740 pence a share in London trading, valuing the firm at about 18.9 billion pounds.

Prudential Plc has no relation to Newark, New Jersey-based Prudential Financial Inc.

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