Insurance sector buoyed by Prudential and Aviva increases

Insurers are amongst the top performing stocks on the blue-chip index this morning with Prudential (LON:PRU) and Aviva (LON:AV) towing the sector up the FTSE 100 in early trading.

Rob Hull
shareprices.com - Thursday, May 27, 2010

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Prudential Chief Executive Tidjane Thiam

Prudential has been the outstanding stock of the day as rumours hit the market that the $35bn takeover of US giant AIG’s Asian unit may be off.

If the takeover bid of AIA was successful it would make Prudential the biggest foreign-owned insurer in Asia.

But in order for the deal to go through, Tidjane Thiam, the insurer’s Chief Executive, needs the backing of 75 per cent of investors to buy the Asian arm of AIG, which is 80 per cent owned by the US Government.

A report from financial statement analysts RiskMetrics recommending investors vote against the take-over bid on price and risk ground, which has come about at the same time as reports claiming that 15 per cent of shareholders will write to the Chairman opposing the deal, looks likely to scupper the deal.

Shareholders in the Pru are expected to double their investments to fund the deal – something analysts think is unlikely to sit well with the deal priced well beyond their expectations.

The US Government has already confirmed it is preparing to revive plans to float the AIA unit if the deal does fall though, and the reports that it will do has edged the group’s share price up over seven per cent as it gains 37p at 11:20BST.

The share price increase has sent the group to the top of the FTSE 100 risers this morning, closely followed by rival insurer Aviva.

Aviva, the world’s largest insurance provider, is currently boasting gains of 20p at 11:20BST, putting the share price up to 320.40p with an increase of 6.8 per cent.

The gain comes after Nomura changed its ranking in the group to ‘buy’, raising target to 619p from 603p.

Legal & General Group (LON:LGEN) is also following closely with a share price increase of over six per cent.

Standard Life (LON:SL) has also gained four per cent and Old Mutual (LON:OML) is up 3.9p, or 3.5 per cent.

 

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