Prudential’s return to NZ may be short-lived

Prudential may quit the New Zealand market quickly if its $35.5 billion purchase of American International Group's (AIG's) AIA goes ahead.

Tuesday, March 9th 2010, 9:51PM

by Jenha White

Sources directly involved in the deal told Reuters that Prudential may quit some countries in Asia including Australia, New Zealand, South Korea and Taiwan due to low market share.

AIA is a small to medium sized player in the Australasian market. It is the ninth largest life insurer in New Zealand and ranked around 14^th in Australia.

Both countries also focus on independent financial adviser business which is not the traditional agency based business that Prudential focuses on.

Prudential external company spokesman Tim Payne says, in an emailed statement, that the transaction has only just been announced and it is wrong to make assumptions on what the company may or may not do with claims of possible divestment being entirely speculative.

Fidelity Life chief executive Milton Jennings says he would not surprised if Prudential was looking to exit the New Zealand market as the sale of AIA is a huge acquisition anyway and it will be looking at markets for growth and if there's no growth, potentially bailing out.

He says it is similar to AXA which is concentrating on the Asia market with good growth and not so much developed markets like New Zealand.

"New Zealand is a small mature market going through regulatory change making it not as attractive as Asia."

He says New Zealand has too many insurance companies anyway and if Prudential was to exit New Zealand it would make a better situation.

Financial Partners practice manager Cameron Smith says it'd be a shame if Prudential flicked AIA New Zealand for having too small a market share.

"I'd be disappointed if someone who didn't have the understanding of life insurance bought it as David Pierce did a great job as the chief executive.

"It would also be a bit sad if one of the bank owned life insurers was to buy the business because more and more insurance companies are being dominated by banks."

Investment Savings and Insurance Association chief executive Vance Arkinstall believes Prudential is a reputable life insurance company and in whatever decision it makes it would act in a reputable way to ensure policyholders would not be disadvantaged.

He says if Prudential buys AIA to be a long term holder however, it would be a good outcome.

"Prudential is a globally recognised name and it would add to the competition in New Zealand bringing strength and discipline to the operation."

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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