Prudential delivers 'outstanding results'

Published on Friday 14 March 2008 09:22

PRUDENTIAL said today that its profit last year rose by a quarter, helped by the absence of its loss-making internet bank Egg, its focus on more profitable domestic business and growth in Asia.

Britain's biggest insurer by market value said its profit, on a European embedded value basis – which measures the current value of future expected profits – was 2.54 billion, which was largely in line with City expectations.

That compares with 2.13bn for the year earlier, when restated to exclude the sale of Egg to Citigroup in early 2007.

The Pru's profit from new business was up 22 per cent overall at 1.21bn, with the profitability of new business in the fast-growing Asian market rising 34 per cent.

Chief executive Mark Tucker said the company had delivered a set of "outstanding results".

"Each of our businesses is performing strongly representing a powerful geographic spread to our growth platform," he said.

"Spectacular growth in Asia has been accompanied by a very strong performance by the US and clear profit growth in the UK.

"Combined with our excellent performance in asset management, these results demonstrate the benefits of Prudential's diversified, international strategy."

Prudential said that while the UK and US were likely to suffer as the economies in each country slowed, the growth drivers were still "powerful" in Asia, where it has a strong presence with life insurance operations in 12 markets.

Over the year, the group's margin remained stable at 42 per cent, as higher margins in the UK business, where the company focuses on the retirement income and savings market, offset a dip in Asia.

A cost-cutting drive to revive the UK arm will also see it outsource nearly 2000 UK jobs as it seeks to save 195m a year.

On prospects for the retirement sector, Mr Tucker said: "The market offers significant long-term sustainable growth opportunities as the biggest demographic wave in history transitions out of the work-force and into retirement."

In Asia, which accounts for almost half the group's business, analysts have been watching for signs of contagion from a US slowdown, but Prudential said operating profit from its Asian operations rose almost 28 per cent to 1.1bn.

And Mr Tucker expects Asia to deliver a doubling of the new business profit it was seeing in 2005 by 2009, a year earlier than its planned target.

Operating profit at its US insurance operations came in at 627m, down 11 per cent, hit by the weak dollar.

In its slimmed down UK business, where the Pru announced plans to restructure and pull out of lower margin business, last year, operating profit from its insurance operations rose 25 per cent to 859m.

And at its asset management arm, the group scored an operating profit of 334m, a rise of 28 per cent.