Speculation that Prudential (PRU) could sell-off its UK operations altogether has been given further fuel. Alongside these results, the life assurance group announced plans to combine its UK asset management arm M&G with its UK and Europe life business to form M&G Prudential. Chief executive Mike Wells was keen to stress this was not a case of “combining two similar firms trying to end up with one”; each side brings something to the table. The merger seeks to create an “investment-led, capital-light” business with the scale to provide a range of services. Management expects to make around £145m in annual cost savings by 2022, partly through back office automation.
The life assurer’s skew towards the Asian markets continues to deliver. First-half new business sales for the Asian life business were up 7 per cent at constant currencies to £1.94bn, driven by continued demand for savings and protection products. The strong growth in sales in China and Hong Kong, particularly from its health and protection products via its agency channel meant the region accounted for 23 per cent of group operating profits, up from 17 per cent in 2016. Asset management business Eastspring also put in a solid performance, gaining £2.3bn in external net new business.
In the US – the world’s largest retirement market – life business Jackson benefited from higher account balances in its variable annuities business. This meant fee income increased, pushing operating profits up by 7 per cent to £1.08bn. The decline in new business profit last year was also reversed.
UK life profits were fairly flat at £480m, with the profits from new annuity business declining from £27m to £4m following its withdrawal from the market. M&G put in a much stronger performance than during the prior period. It reversed last year’s net outflows, gaining net new business of £7.18bn. Together with market gains this took assets under management to £149bn.
Analysts at Shore Capital expect adjusted net assets of 1,600p per share at the end of December 2017 (before dividends), up from 1,479p in 2016.
| PRUDENTIAL (PRU) | ||||
| ORD PRICE: | 1,829p | MARKET VALUE: | £ 47.3bn | |
| TOUCH: | 1,829-1,829.5p | 12-MONTH HIGH: | 1,890p | LOW: 1,290p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 597p* | SOLVENCY RATIO: | 202% | |
| Half-year to 30 Jun | Gross premiums (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 17.39 | 0.96 | 26.9 | 12.93 |
| 2017 | 21.16 | 2.21 | 58.7 | 14.50 |
| % change | +22 | +131 | +118 | +12 |
| Ex-div: | 24 Aug | |||
| Payment: | 28 Sep | |||
| *Includes intangible assets of £12.3bn, or 474p a share | ||||
