Piece by piece, Mark Tucker and Nick Prettejohn are building a Prudential that gives a better account of itself domestically and draws more on its strengths abroad, particularly in Asia.

Yesterday’s outsourcing deal with Capita goes a long way towards justifying the Pru’s UK division, now pared back to dealing in core annuities, underwriting, sales and head-office functions. It also underscores the potential of low-cost but highly efficient operational offshoots, such as those in India.

It is true that some Pru-watchers had hoped that the insurer could have wrung out more costs from its outsourcing measures. The critics are speculating that Mr Tucker, the group chief executive, will come under renewed pressure to break up the group unless the underperforming UK division shows signs of a turnaround within the next six months.

But the management are being realistic – dare it be said adventurous – by embracing the potential of the operation in Bombay, which has shown itself capable of hosting group operations, including strategy and planning. The Pru’s oft-criticised management are also, albeit only just, keeping their promises on cost-cutting. The 15-year Capita deal is worth £60 million a year of the insurer’s hoped-for £195 million in annual savings by 2010.

Previous outsourcing, the merging of IT systems and other belt-tightening measures have already seen Prudential find £115 million. With a further £11 million delivered since then, this leaves the Pru only £9 million short of its annual target with plenty of time to spare.

Mr Prettejohn, tghe UK chief executive, was careful yesterday to give himself room to take out further costs as necessary, including refusing to rule out additional job cuts. At the same time, the insurer has secured guarantees on employment rights and conditions for the departing staff and signalled to the remainder that further rationalisation is not at the front of its mind.

While the more agitated among its investors might prefer a Pru break-up or a transforming merger deal such as the one missed with Aviva, the majority seem to have applauded yesterday’s cost-saving measures. The boost to the share price should put confidence in executive hearts.

Times Recommends

• Food prices rise 8.3% on soaring fish and meat
• Car sales crash as economy hits skids
• House prices fall but Bank leaves rates on hold