Goodbye Prudence. Hello Aviva?

Cards on the table – I’m an ex-employee and current shareholder of Prudential.

In that capacity I confess I was very excited to hear that Prudential the UK’s largest insurer, is in talks to buy an Asian life insurance unit from AIG in a deal that would be valued at about £23 billion.

Prudential’s sharp strategic focus on Asia is no secret – the company wants to raise the proportion of new business from Asia from 50 to 80 percent by 2015. Prudential is, of course, already a major player in 13 countries and as CEO Thiam Tidjane, puts it, this deal would create a “sector powerhouse, with a unique position in the fastest-growing markets in the world”.

The Prudential strategy is simple and given the likely cash call – possibly the UK’s largest ever – also courageous. But that’s fine, great strategy is about sharp focus and making bold (good) choices.

Inevitably there are implications for the UK division which I anticipate will play an increasingly ‘constrained’ role in the portfolio. UK growth prospects are obviously less exciting than Asia and scarce capital will need to be directed east.

Given a likely need for lots of cash, the sale of the UK business may have had some merit, but I am sure this was quickly and comfortably discounted. The truth is that the UK has already been sharply refocused on profitable business, retains a valuable brand asset, has outsourced most operational activity and enjoys the remarkably steady income stream that comes with a long-established customer base.

Moving the head office to Hong Kong at some point, must be tempting though.

Sold or retained, it means a constrained ‘cash cow’ role for the UK business. This in turn means limited ambition (and risk taking) when meeting the needs of UK consumers. Prudential UK will not have the appetite (or capital) for any major direct to consumer innovation and it is not a coincidence that they have stopped marketing their relatively new equity release product. With arguably less to offer those retiring in the UK, the brand tag line of “retirement has more potential with Prudential” will, no doubt, soon be dropped.

From an exclusively (and not entirely unemotional) consumer perspective this is a shame given the company’s famous ‘Man from the Pru’ heritage. But, I must repeat, good strategy involves trade-offs.

Retaining this perspective I wonder if Aviva can now fill the void in the UK?

I have made no secret of my passionate belief that there must be an opportunity for a direct to consumer offering that builds a (profitable) relationship with those approaching retirement, providing a comprehensive range of retirement income and protection solutions.

Aviva with a smaller presence in Asia and a major UK general insurance business has little choice but to be more UK centric. In fact, a record amount was spent on UK marketing with the rebrand from Norwich Union to Aviva in 2009. If you see advertising investment as a proxy for strategic focus then comparing the spends for Prudential and Aviva in the countries they operate should be illuminating.

Aviva will be seeking a return on the heavy investment made in establishing one engaging UK name and brand consideration will surely be at record levels. With Prudential’s focus happily elsewhere is now the time for Aviva to combine a consumer brand consideration advantage with product and direct marketing innovation?

I wonder.