Overseas growth boosts Prudential

As usual, Prudential’s growth is being generated far from the UK. In Asia, new business sales jumped 12 per cent and operating profit rose 16 per cent to £1.08bn. Prudential has now met the target set in 2010 of doubling its profits in Asia. But more is to come. "The Asian pie is growing faster than we can eat it," explains chief executive Tidjane Thiam. "Asia’s middle class is larger than the entire EU". Prudential has updated it targets for Asia and plans to generate over £1.86bn in operating profit in the region by 2017. That should be supported by an expanded bancassurance agreement with Asian-focused lender Standard Chartered (STAN), which was announced alongside these results.

Prudential’s mature US market is also bounding ahead, reflecting robust demand from retiring baby-boomers. Prudential’s Jackson operation in the country has boosted new business sales by 8 per cent, largely thanks to the popularity of the group’s variable annuity product, launched in early 2012. Overall, US operating profit jumped 30 per cent to £1.3bn.

The UK life business was rather weaker, although that was significantly down to regulatory change. Specifically, the implementation of gender-neutral pricing meant annuity sales were concentrated in 2012, while the introduction of the Retail Distribution Review (banning commissions) had a similar impact on onshore bond sales. UK new business sales fell 13 per cent, limiting the group-wide rise in new-business sales to just 5 per cent.

Prior to these figures, JP Morgan Cazenove was expecting EPS of 86.8p this year (2013: 52.7p), but given the robust performance upgrades look likely. The broker also expected embedded value to rise to 1,060p.