UK's Prudential says business growth driven by Asia, U.S

LONDON Thu Nov 14, 2013 6:38am EST

LONDON (Reuters) - Demand for insurance from Asia's multiplying middle classes and for annuities from retiring American baby boomers has fuelled growth through 2013 for British life group Prudential (PRU.L).

The firm issued a trading statement on Thursday showing group-wide new business profit rose 12 percent in the first nine months of the year, at the high end of forecasts.

The lift was largely driven by a 20 percent increase in business profits from the Asian arm and 11 percent growth in its U.S. Jackson business, offsetting a 10 percent drop in Prudential's home market of Britain.

Analysts and investors cheered the results and Prudential shares gained more than 2 percent by mid-morning in London.

"Not too shabby," analysts at Bernstein said in a note to clients, highlighting the Asian performance.

Chief executive Tidjane Thiam said the group remains "on track" to achieve its objectives for the full year.

"In Asia, our focus on meeting the long term savings and protection needs of a rapidly growing and increasingly wealthy middle class remains a key driver of resilient and sustainable profit growth," Thiam said.

While Asia's economic rise and demographic conditions in the United States have driven these arms of Prudential's business to eclipse the original UK arm, Britain remains a focus, he said.

The company attributed the decline in its third quarter UK profits in part to a regulatory shakeup of how investments are sold to the public, which has led many firms to rethink how they distribute savings products.

FUND MANAGEMENT

But Thiam highlighted nearly 9 billion pounds of new money flowing into its fund management arm M&G and the fact that the funds run by the unit on behalf of external clients, rather than its own insurance customers, had grown by nearly one fifth.

"The UK is the second largest asset management market in the world… M&G makes a huge contribution to our earnings and it's a very attractive market," he said on a conference call with journalists.

He also sought to dampen speculation that Prudential may one day relocate to Asia, saying London was an ideal location from which to run a global business, especially because of its time zone that makes it easier to run a global conference call.

"Ask people in Asia who have U.S.-based headquarters, they generally have pockets under their eyes and a pretty miserable life," he said.

Thiam acknowledged that new European rules dictating how much capital insurers must hold to minimize risk to policy holders had, in an earlier form, caused him for a time to consider relocating the headquarters.

However, the so-called "Solvency II" rules which will be introduced in 2016 now looked far more palatable.

"Solvency 2... was at one point a real threat for the group... If the outcome had been unfavorable we would have had to reconsider our location. Things have moved in the right direction so that issue is not as present as before," he said.

European lawmakers reached agreement late on Wednesday on the rules, which allow greater flexibility than originally envisaged for insurers setting a shield against market swings when calculating capital levels.

(Reporting by Chris Vellacott; Editing by Gareth Jones)

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