Prudential’s (PRU) underlying first-half performance was much better than the headline figures suggest. Although negative returns on fixed income securities slashed reported IFRS profits, underlying profits rose by 22 per cent to £1.42bn. Moreover, profits on an embedded value basis grew by a third to £2.51bn. Finances remained in good shape, too, with free cash surplus generated rising from £1.03bn to £1.15bn. The regulatory capital surplus, after taking off the cost of the interim dividend, remained solid at £3.9bn.
The life assurer also made strong progress towards achieving the six growth and cash objectives set out in 2010 to be achieved by the end of this year. Two were achieved last year, and the group added two more by exceeding the full-year £260m cash objective from its US Jackson operation by £34m at the half-way stage, and surpassing its £3.8bn four-year group cumulative net cash remittance objective by generating £4.1bn of remittances. Management is confident that it will deliver the two remaining objectives, which are to double Asia’s 2009 new business profits and to generate over £350m of net remittances from the UK.
Once again, the Asian side of the business remained the key revenue driver, with new business profits up 20 per cent at £659m, while Asia’s cash contribution to the group rose by 51 per cent to £190m. New business profits in the Jackson operation grew by 8 per cent to £479m, thanks to a significant increase from £14m to £127m in sales of Elite Access, the group’s variable annuity without guarantees product. However, variable annuity sales without Elite fell by 10 per cent as the group reduced its risk exposure to annuities offering guaranteed benefits. In the more mature UK market, operating profits were flat at £341m, partly as a result of changes brought about by the Retail Distribution review.
On the asset management side, M&G attracted net retail inflows of £4.8bn, which together with a positive investment performance helped to boost assets under management from £203.7bn to £234.3bn. Accordingly, operating profits delivered a record half-year performance, rising 17 per cent to £204m.
Subject to revision, Investec is forecasting full-year IFRS operating profits of £2.76bn and embedded value per share of 929.6p (from £2.53bn and 878p in 2012).
| PRUDENTIAL (PRU) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,216p | MARKET VALUE: | £31.1bn | |
| TOUCH: | 1,215-1,218p | 12-MONTH HIGH: | 1,237p | LOW: 768p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 376p* | EMBEDDED VALUE: | 958p | |
| Half-year to 30 Jun | Net premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 13.7 | 1.17 | 35.0 | 8.40 |
| 2013 | 14.8 | 0.51 | 14.3 | 9.73 |
| % change | +8 | -57 | -59 | +16 |
Ex-div: 21 Aug Payment: 26 Sep *Includes intangible assets of £7.27bn, or 284p a share | ||||
