August 12, 2014 / 9:32 AM / 3 years ago

UPDATE 2-UK insurer Prudential's profits lifted by Asia, U.S.

(Adds quotes, detail, share movement)

By Richa Naidu

LONDON, Aug 12 (Reuters) - UK insurer Prudential Plc posted a jump in first-half profit as a strong performance in Asia and the United States offset negative currency swings in some of its most important markets.

Shares in Britain’s biggest insurer by market capitalisation rose as much as 3 percent on Tuesday, making it the top gainer on the FTSE 100 Index, after the company boosted its interim dividend by 15 percent to 11.18 pence per share.

Prudential’s operating profit, based on IFRS international accounting standards, rose 17 percent to 1.52 billion pounds ($2.55 billion) on a constant-currency basis, boosted by fee income from its U.S. business and higher sales of health and protection products in Asia.

Operating profit rose by just 7 percent on an actual exchange rate basis, however. Prudential blamed the depreciation of key Asian currencies against the pound.

“The Asian performance came despite political uncertainties in Indonesia and Thailand, with Hong Kong up an eye-catching 32 percent,” UBS analyst James Shuck wrote in a note.

“Importantly, there are no changes to the outlook for Asia,” he said, maintaining his “buy” rating on the stock.

A growing, wealthy middle class in Asia has been a focus for the British life insurance and pensions heavyweight, particularly in countries whose citizens and businesses are largely uninsured such as Indonesia, Malaysia, Philippines, Vietnam and Thailand.

Chief Executive Tidjane Thiam said the business fundamentals in Asia remained “compelling”. New business profit grew 15 percent at its Asia life business.

Ahead of the results, 21 out of 24 analysts had either a “buy” or “strong buy” rating on the stock, according to Thomson Reuters data.

“It’s largely to do with the growth prospects in Asia being under-appreciated,” said UBS analyst Shuck. “No one has the same distribution network that Prudential does in Asia, apart from AIA, which is a Hong-Kong listed company.”


The company weathered changes to British pensions announced in March. The reforms scrapped a requirement for retirees to swap their pension pots for an annuity, which provides an income for life.

Prudential’s UK life business posted a 10 percent rise in IFRS operating profit to 374 million pounds as it made up for a hit to individual annuities by selling 104 million pounds of ‘bulk annuities’ in the six months ended June.

Rival pensions groups such as Legal & General and Aviva have been mitigating the impact of the reforms by striking such bulk deals with firms looking to outsource all or part of their pension scheme liabilities.

During a media call, Thiam brushed aside concerns about any impact on Prudential’s business as a result of Scotland’s vote for independence next month.

He said Prudential would continue operating in Scotland and fulfill its obligations to customers and staff “no matter what happens”.

Thiam’s comments come a week after Edinburgh-based rival Standard Life reiterated plans to potentially relocate some operations to England in the event of a ‘yes’ vote that could create risks for its business. ($1 = 0.5958 British Pounds) (Reporting by Richa Naidu; editing by Laura Noonan and Tom Pfeiffer)

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