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Prudential buffeted by challenging investment markets

Asia continues to drive earnings growth for the life insurer
March 13, 2019

Prudential (PRU) pressed on with the demerger of UK and European operation M&G Prudential last year, reinsuring £12bn of UK annuities with Rothesay Life, reorganising its Hong Kong subsidiaries and rebalancing debt across the two businesses. However, chief executive Mike Wells kept mum on the deadline for the split, save for saying the life insurer was making “good progress”.

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The Asia life business continued to be the growth engine for profits, reporting a 14 per cent rise in new business profit on a European embedded value basis at constant exchange rates, as the business continued to target the health and protection markets. Management is also seeking to expand across Africa – where the population is forecast to rise by 1bn by 2045 – from existing operations across Ghana, Nigeria, Kenya, Uganda and Zambia.

Meanwhile, the UK and European segment looked in good shape ahead of its spin-out, with life insurance profit rising by almost a third after a £441m longevity release thanks to a change in mortality assumptions. However, the regions’ asset management arm reported £9.9bn in net outflows, £6.5bn of which was the result of the loss of a single low-margin institutional mandate and outflows resulting from rocky investment markets. Equity market volatility also pushed down operating profits at US business Jackson by 11 per cent, following higher market-related amortisation of acquisition costs.

City analysts forecast a consensus EPS of 158.1p for 2019, up from 156.6p in 2018.