Prudential says Asia helps it boost 2013 profits

12th Mar 2014 07:00

Insurer Prudential said a focus on Asia was helping it drive higher profits, but it warned of short-term volatility as the US economy recovers.Prudential said operating profits in Asia had risen 16% to £1.1bn, more than double the level it achieved in 2009, while new business profit lifted 15% to £1.5bn. The rise helped the Pru to drive a 17% rise in the group's full-year operating profit to £2.9bn.Chief Executive Tidjane Thiam said Asia was "at the heart" of the prospects of the group, which is targeting increasing demand for insurance from the rapidly growing middle class in the region. The company said its total US IFRS operating profit rose 30% to £1.3bn while its M&G investment arm achieved a record operating profit of £395m, up 23%.The group said it was increasing its annual dividend by 15% to 33.57p per share.Thiam said the Pru had succeeded in its aim of generating more of its profit and cash in areas other than the UK.He said Prudential had met all of its six 2013 "Growth and Cash" targets it set in 2010 and was focusing on insurance and savings needs of the growing Asian middle class, the retirement of American 'baby-boomers' and savings and income retirement needs of an ageing UK population."In the US, we remain focused on meeting the needs of the 'baby-boomer' generation as they move into retirement. Jackson has been capitalising on this large opportunity and has increased both its IFRS operating earnings and its cash generation," he said.Thiam said the Pru's UK business produced £355m of cash in 2013, above its objective of £350m, which he described as an "excellent performance from a mature business in an industry facing considerable regulatory change".The UK achieved IFRS operating profit of £735m, which Thiam said was a resilient performance as industry sales volumes were hit by new regulation."Looking ahead, we believe the global economic outlook is improving. However, investment markets are impacted by short-term volatility as the market adjusts to policy normalisation in the US," he said."The macro-economic adjustments we're seeing in emerging markets, partly driven by the return of robust US growth, are ultimately a net positive for these countries, the global economy and Prudential. "We remain confident our Asian business is well positioned and offers a compelling opportunity to achieve long-term value for our customers and shareholders. A rapidly growing, increasingly wealthy and well-educated middle class with significant savings and protection needs underpins demand for our products."In addition to these positive Asian prospects, we expect our leading businesses in the US and the UK to continue to generate significant levels of earnings and cash as we serve the savings and retirement income needs of their ageing populations."The group is targeting new markets where populations and economies are growing and insurance is needed to top up social security. It has invested in Cambodia, Myanmar, Poland and Ghana in the last two years and is considering Saudi Arabia.The group said it hoped to keep increasing its dividend subject to financial flexibility and investment needs."The board believes that in the medium term a dividend cover of around two times is appropriate," it said."We believe the group is well positioned to continue to deliver good value to customers and attractive returns to shareholders while continuing to manage capital prudently."PW