UK's Prudential confident in Asian outlook

LONDON (Reuters) - UK insurer Prudential (PRU.L) is well positioned to weather the impact of a global recession in Asia and could even see acquisition opportunities in the downturn, the head of its key Asian division said on Thursday.

Barry Stowe, chief executive of Prudential Corporation Asia, said Britain's second-largest insurer by market value could see some margin pressure in the region, but said its profit and sales numbers would prove resilient.

Stowe, who joined Pru two years ago from rival AIG (AIG.N), also brushed aside market concerns over Prudential's ability to hit a key target of doubling 2005 new business profit in 2008, after growth slowed in the first six months of 2008.

"The environment is different than it was a year ago -- anyone who thought the East is completely decoupled from the West has a little crow to eat right now. But the economies are still growing very quickly, the environment is still very positive," Stowe said in an interview on Thursday.

"There probably will be (margin pressure) but we are better equipped to deal with that because of our other capabilities."

He said a sales pattern biased to the second half -- when Asia makes roughly 60 percent of its new business profit -- showed the group was "almost there" with the target.

"I do not want to suggest it won't be challenging -- we thought it was challenging when we put it out there and it is especially challenging to do it a year early," he said.

"It's probably a little closer than people realize."

Asian sales soared 48 percent in the first half of 2007, but rose a more modest 14 percent in the first six months of this year. Similarly, growth in Asian new business profit -- more than half the group's total -- slowed from 31 percent to 15 percent, though margins have remained broadly stable.

The insurer, whose 13 Asian markets stretch from the United Arab Emirates to Japan, has warned growth in the region could slow from recent breakneck speed as it grows and reaches scale.

Investors have also worried over the impact of market turbulence on Pru's Asian persistency -- the length of time consumers hold on to policies -- but Stowe said the overwhelming majority of regular premium products meant Asian customers were less likely to cash in early as a result of turbulent markets.

"We have seen absolutely not a blip in persistency as a result of capital market movements," Stowe told Reuters.

"I would suggest that what would be more likely to drive a persistency problem in Asia would be if market turned white hot again. Single premium purchasers particularly would be more likely to realize that gain than to crystallize a loss."

"ON THE PROWL"

The slowdown could, however, provide the opportunity for attractive deals in a region that has long seen sky-high valuations. Pru has already said the cycle could help bolt-on deals for its U.S. business, Jackson National Life, and Stowe said the Asian division was also "on the prowl".

"It is not as if we are desperate to do a bolt-on in this or that market. We are interested in looking at anything that moves -- if it makes sense from a shareholder and a strategic perspective, we'll do it," Stowe said during a visit to London.

"There has not been as much activity over the last few months, the market capitalizations of publicly traded companies have come off. You'd have to assume deals would be more sensible today than they might have been a year or two ago."

Prudential's Asian business has yet to return significant cash to the group as it continues to invest, but Stowe said that could change "soon" for key markets including Korea and India, where Pru's geographical spread is almost complete.

Its sales force, however, will continue to grow. Prudential already employs some 500,000 people in Asia -- including more than 420,000 tied agents, up 37 percent from last year.

Stowe said that level of growth was unlikely to be sustained, though it would remain well into double digits.

Prudential has been more focused on Asia's developing markets than some of its competitors, but the insurer is also eyeing up Japan, one of the region's largest and most mature markets, which represents just 4 percent of its Asian sales.

Stowe, however, recognized it would be tough to push out the country's largest players, both local and international.

(Editing by Erica Billingham)