Investors plan to force out Prudential boss

Major investors in Prudential are planning talks with one of the Uk-based insurer’s key directors in a bid to force its boss to stand down, according to reports.

Fund managers from heavyweight shareholders including Fidelity, Schroders and Legal & General are due to meet the Pru’s senior independent non-executive director, Robert Rowley, this week.

They are trying to garner support among board members and other institutional shareholders for their bid to force out the Pru’s chief executive, Jonathan Bloomer.

The three institutions, who between them control 10% of the £8.1bn (€11.6bn) company, are reportedly unhappy about the group’s recent surprise revelation of a £1bn (€1.4bn) rights issue.

They say the Pru should have warned them of the announcement in advance and claim it is the latest in a series of errors made by Mr Bloomer since he took charge, Sunday newspapers reported.

They plan to use the talks with Mr Rowley to put pressure on the Pru’s chairman, David Clementi, and the group’s board to back their position.

A spokesman for Legal & General declined to comment and no-one from Fidelity was available.

A spokeswoman for the Pru said the group had had some “very good meetings” with its institutional investors about the rights issue during the last fortnight and many had agreed with it, although some had not.

“The rights issue was a decision that was backed by our board and Jonathan Bloomer is backed by the board,” she said. “We have told all shareholders that we’re delighted to meet them and explain our case.”

Prudential shares have fallen as investors reacted to the impact that the new stock will have on the existing investor base, wiping £1.6bn (€2.3bn) off the value of the company. They dropped 1% on Friday to stand 6p off at 400.5p.

According to one report last week, investors are still angry at a 40% cut in the group’s annual dividend last year despite a commitment to a progressive dividend policy.

Mr Bloomer also saw his standing weakened by a failed bid for American General in 2002, while a buyer could not be found for the Pru’s remaining 79% stake in its Egg internet banking business this year.

The proposed issue of 337.2 million new shares represents around 16.7% of the entire issued share capital of the company.

Dealings in the new stock are due to start on November 11 as no special shareholder meeting is needed to approve the issue.

Mr Bloomer has said the rights issue is about raising capital to grow the UK business, which has bounced back in recent months to show a 19% improvement in sales to £521m (€748.4m) between January and September.

The fundraising exercise should ensure the Pru meets rules on capital requirements, which are more onerous than previously.