Prudential speculation that the insurer is working on a potential deal to buy part of US insurance giant AIG.

Prudential shares jumped by 22% yesterday on speculation that the insurer is working on a potential deal to buy part of US insurance giant AIG.
The Pru's shares had slumped by almost 30% in two sessions at the end of last week, amid worries that an economic downturn could put pressure on insurer solvency. The Financial Services Authority had helped to stoke the anxiety by admitting it was in discussion with insurers over the issue. An FSA briefing note had raised concerns over "weaknesses" in the calculation of capital ratios.Yesterday Standard Life shares rallied by 4.4% and Legal & General by 3.4% though Aviva shares were flat.
But investors cheered the hope that the Prudential was interested in raising money to fund a potential deal, rather than to bolster its balance sheet. They also hope that the insurer will reassure on its trading position when it publishes third-quarter new business figures today.Asia has been the growth engine for Prudential in recent years as the UK disappointed, and acquiring a major operation in the region would help to offset a slowing in the pace of organic growth.The plan is thought to involve Middle Eastern and Chinese investors taking a 20% stake worth over £1bn in the company to help it finance a bid for the Asian business of AIG, which had to be rescued by the US government in a £49bn bailout last month.Mark Tucker, chief executive, was reportedly holding talks with AIG over the potential acquisition last week. But analysts said he could face opposition to the deal from other potential buyers including French insurance giant Axa and Holland's ING.Meanwhile, ING yesterday became the latest European bank to seek government funding, after agreeing to a 10bn (£7.8bn) cash injection as well as scrapping executive bonuses and its year-end dividend.Following a weekend of intense negotiations, after seeing its share price crash by over 25% on Friday and the partial nationalisation of rival Fortis two weeks ago, ING sought help to shore up its core capital and restore investor confidence.It is now thought that insurer Aegon may be looking to strengthen its solvency, after becoming the only institution apart from ING to admit that it was "looking at" the Dutch government's announcement that it was ready to pump 20bn (£15.6bn) into its financial institutions. Aegon UK employs 3000 in Edinburgh.Most of the smaller listed Dutch financial companies have indicated that they did not plan to ask for capital support. ING, which has a major savings business in the UK, has this month taken over the savings accounts of Iceland' s Heritable Bank and Kaupthing Edge.ING's chief executive Michael Tilmant said: "The market environment has changed over the last two weeks and the expectations for capital levels have changed following massive capital injections in financial institutions worldwide."

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