Citigroup to Buy Prudential's Internet Bank for $1.13 Billion
Citigroup has agreed to buy British insurer Prudential's loss-making Internet bank Egg for 575 million pounds ($1.13 billion) in cash, the two sides said on Monday.
Britain's second largest insurer has since last summer been reviewing its underperforming U.K. operations including Egg, hit by tough conditions in the personal loans market.
In full-year new business figures, due on Tuesday but released early on Monday, Prudential said trading conditions at Egg had deteriorated further since it updated the market in October.
Egg accounts for only a fraction of Prudential's group business, but the bank is facing a full-year loss, a potential embarrassment for Prudential Chief Executive Mark Tucker, who took the decision to buy out minority shareholders in 2005.
News of the Egg sale initially lifted Prudential shares by more than 2%, but the stock was standing up 1.1% at 710-1/2 pence by 1133 GMT.
"I think the market will view this deal as good news," analyst Kevin Ryan at ING said. "It's a sensible thing for them to have done. They seem to have got two times book value for it, which is a great price. So I think they've done well."
Last month, after a British newspaper reported Citigroup was considering a bid for Egg, Prudential confirmed it had received an approach, but declined to comment on the identity of the bidder, saying only the approach had been rejected.
Prudential separately announced its full year sales numbers, with insurance new business up 16% year-on-year in 2006 at 2.47 billion pounds, boosted by growth in the U.S. and Asian business.
The company said its U.K. retail insurance sales were up 14% to 689 million pounds, primarily driven by growth in individual annuities and corporate pensions.
Jackson, Pru's U.S. insurance business, achieved record new business of 613 million pounds, a 21% jump on the previous year, thanks to strong growth in sales of variable annuities.
The insurer's Asian life operations had sales of 956 million pounds, up 30% on 2005.
The figures are compiled on an annual premium equivalent basis, which includes regular premium sales plus one-tenth of single premium sales during the period.