LONDON British insurer Prudential (PRU.L) reported a 22 percent jump in its first-half profits on Monday, underscoring the appeal of its Asian business and bolstering chief executive Tidjane Thiam's decision to bet on the fast-growing region.
The results, which were slightly ahead of analyst forecasts, helped push Prudential's shares to an all-time high. The 165-year old company also cheered investors with a 16 percent hike in its interim dividend.
The results will do much to restore the reputation of Thiam, which took a serious knock after an ill-fated Asian takeover attempt in 2010.
While insurers from across Europe have enjoyed a strong start to 2013 - buoyed by rising investment returns and longer-term trends of an ageing population demanding more retirement income - Prudential has been among the sector's best performers because of its diversification beyond European shores.
More than four-fifths of Prudential's sales now come from outside of the UK.
"The growth of the middle class in Asia...the US baby-boomer gliding into retirement and the UK population becoming more aware of its long-term savings needs, are all positive for current trading as well as longer term prospects," Hargreaves Lansdown Stockbrokers' Head of Equities Richard Hunter said.
In 2010 Prudential set out to make its units in Asia and the United States financially independent within three years, saying this would give it the option of breaking itself up if its share price did not reflect the full value of its businesses by then.
However, the recent strong performance across the group has quelled talk of an imminent structural revamp, and Prudential has played down the possibility of disposals any time soon.
Thiam said after Monday's results that Prudential was in the process of setting up a new Asian holding company which would bring all its Asian operations under a single legal entity.
The move would theoretically make it easier to sell its Asian business in future, but the CEO told reporters that the purpose was to streamline its Asian operations and domesticate its Hong Kong unit, which is still a branch of the UK business, a legacy of the days of the British Empire.
SCRATCHING THE SURFACE
Prudential's operating profit came in at 1.415 billion pounds($2.2 billion) for the six months to end-June, against a forecast of 1.337 billion pounds. Prudential will raise its interim dividend by 15.8 percent to 9.73 pence a share.
In the United States, Prudential gained from the move into retirement of the baby-boomers. Profit rose by almost a third after a rise in U.S. Treasury rates in the second quarter boosted its variable annuity business, and it also benefited from its acquisition of REA LIC in 2012.
Thiam said he remained committed to its U.S. Jackson National Life unit - which had beaten its full-year cash objective already - although he was open minded about selling a stake in future if the price was right. Analysts have said Prudential could sell a stake in the business as a first step towards a bigger break-up.
Meanwhile in Asia, where Prudential focuses on selling products to a growing middle class in South East Asia, operating profit jumped 18 percent. Prudential saw record sales in seven of its local business units, with China up 42 percent and Philippines and Korea up 38 percent.
Thiam said the firm, which opened a representative office in Myanmar this year, counts on between 0.5 and 1 percent of Asia's population among its customer base. This contrasted with 11 percent of the UK population, and underlined the size of future opportunities for growth.
"We have not even scratched the surface," he told reporters.
Thiam said the firm was on target to double Asia's 2009 new business profit by 2013.
Shares in Prudential, which have gained 47 percent over the past 12 months, were up 2.6 percent at 1215 pence by 0740 ET, ahead of a 0.25 percent drop in the FTSE 100 index .FTSE.
(Editing by Sinead Cruise and Greg Mahlich)