Prudential reports better-than-expected rise in first half profits

12th Aug 2013 11:07

Insurance company Prudential posted a 22 per cent jump in first-half operating profits to 1.415bn pounds, driven by an increase in income in its US operation and growth in Asia. The British firm's shares surged to the highest level since at least 1988 as profits came 6.0% ahead of consensus and as the group raised its interim dividend 16% to 9.73p per share.In the US, Prudential said it gained from those in the baby boomer generation moving into retirement. Operating profit from US business Jackson National Life grew 32% to £58m, boosted by sales of Elite Access, a variable annuity product.In the fast-growing market of Asia, operating profit increased 18% to £512m. Prudential said it saw record sales in seven of its local business units, with China up 42% and Philippines and Korea up 38%.Funds under management at its M&G investment arm rose to £234.3bn from £203.7bn a year earlier, as a result of net retail inflows and rising asset prices."These results provide further evidence of our ability to deliver both earnings growth and cash," said Chief Executive Tidjane Thiam. "We are on track to achieve the remaining objectives of doubling Asia's 2009 new business profit by 2013 and delivering over £350m of net remittances from the UK by the end of the year."In the UK operating profit was up 1.0% at £341m. Prudential said the UK industry sales volumes were affected by the implementation of the conclusions of the Retail Distribution Review. Analysts at Nomura reiterated a 'buy' rating and a target price of 1392p."We believe Prudential has a superior growth profile compared with its large-cap peers on all metrics (be it IFRS, embedded value (EV) or cash), which, importantly, is not at the expense of dividend growth," the broker said."We concede there are likely structural issues that need to be addressed in Asian emerging economies, but we believe a growing middle class and increasing insurance penetration, coupled with Pru's strong market position, strong distribution and good product design, means the positive outlook for Pru's Asian business remains intact."Shares were up 2.36% to 1,212p at 11:37 on Monday.RD