By Vladimir Guevarra
--Manduca to become chairman July 2
--Appointment comes as Prudential mulls change in domicile
--Outgoing chairman McGrath blamed by some investors over failed AIA acquisition
LONDON (MarketWatch) -- Prudential PLC (NYS:PUK) , the U.K.'s largest insurer by market value, has appointed Paul Manduca as chairman effective July 2, replacing Harvey McGrath who some investors blamed for the company's failed and costly attempt to buy Asian rival AIA Group Ltd. in 2010 for $35.5 billion.
Prudential said Manduca will step down as chairman of Aon U.K., the U.K. arm of the global insurance broker, "as soon as possible and reduce his other commitments in order to make Prudential his principal focus."
The appointment comes at a time when Prudential is weighing its options of staying in the U.K. or changing its domicile to Asia to circumvent provisions of a new insurance-solvency regime called Solvency II, set to sweep through Europe in 2014.
"Prudential is a renowned financial institution with a track record of strong delivery. The company has generated significant returns for shareholders under the leadership of (Chief Executive) Tidjane Thiam, in spite of significant macroeconomic headwinds," Manduca said.
"Our strong financial performance, exposure to fast-growing emerging markets and our proactive and prudent risk management clearly set us apart from our competitors," he said.
Manduca's annual fee as chairman will be GBP600,000. Last year, McGrath's total compensation was GBP582,000.
Manduca, a senior independent director of Prudential, was initially supposed to lead the search for Prudential's new chairman but was replaced by Andrew Turnbull after the board asked Manduca to be a candidate.
"I am very pleased that Paul is to succeed me as chairman of Prudential. I am confident that he will lead the board and support Tidjane very effectively, and I am pleased to be leaving the business in such good shape to face the challenges and opportunities that lie ahead," said McGrath, who was at the helm of Prudential for three and a half years.
In 2010, Prudential launched an audacious but doomed bid for AIA, hoping to leapfrog into a dominant Asian insurance player. Though some shareholders liked the strategy behind the deal, others were worried that the mechanics of the takeover were fraught with problems.
These included the threat that the deal would be blocked by the U.K.'s financial regulator, as well as a complicated GBP14.5 billion rights issue to fund the deal.
In the end, AIA's parent company rejected Prudential's bid to renegotiate terms. The failed bid cost Prudential GBP377 million and led some shareholders to call for the resignations of McGrath and Thiam.
Since then, AIA has listed on the Hong Kong stock market while Prudential has focused on organic growth in Asia, and has since reaped higher sales and profits from the region.
"I am delighted that Paul has accepted the position of chairman of Prudential and very much look forward to working with him," Thiam said. "I would like to thank Harvey for all he has done for this company."
A Prudential spokesman said Manduca wasn't immediately available for interviews.
Manduca founded Threadneedle Asset Management Ltd in 1994 and has acted as CEO of both Rothschild Asset Management and Deutsche Asset Management, Prudential said.
Prudential shares are around 40% higher compared with a low in 2010, but are some 6% lower from a year ago. At 0845 GMT, the shares were up 0.7% at 689 pence, giving the company a market capitalization of GBP17.6 billion.