Prudential Drives Profit in Asia, Says Demerger is On Track -- Update

(Adds details and background throughout, CEO and analyst comments; updates share price)

By Adam Clark

Prudential PLC's (PRU.LN) first-half results helped bolster its planned demerger of its U.K. and European operations, with growth coming from a focus on its health and protection business in Asia.

The FTSE 100 insurer said Wednesday that it increased its insurance margins in Asia by 17% with its focus on increasing the quality of returns. The higher margin more than outweighed a fall in new business sales to drive a 14% increase in regional operating profit to 1.02 billion pounds ($1.31 billion) in constant currency.

Asian growth helped drive Prudential's overall 9% rise in interim operating profit to GBP2.41 billion, although currency headwinds held it back to a 2% rise at actual exchange rates.

The international financial-services group said in March that it would split its operations to create an independent savings-and-investment provider in the U.K. and Europe, which currently operates under the name M&G Prudential. Prudential PLC will continue to focus on high-growth opportunities in Asia, the U.S. and Africa.

Chief Executive Mike Wells told reporters on a conference call that the timeline for the demerger is yet to be determined, as Prudential restructures its debt among the regional operations. Both businesses are set to remain headquartered in the U.K. and listed on the London Stock Exchange, although Hong Kong's Insurance Authority will take over supervision of the ongoing Prudential PLC demerger

Analysts at UBS said operating profit was 7% ahead of consensus estimates, mainly due to the one-off release of provisions.

M&G Prudential increased its operating profit by 4% to GBP778 million, as healthy net inflows in its asset management business belied the recent gloom in the sector. M&G asset management received external net inflows of GBP3.5 billion and PruFund net inflows came to GBP4.4 billion.

In the U.S., operating profit rose 2% at constant exchange rates to GBP1.00 billion. Prudential's Jackson operation, which sells annuities, increased its fee income by 13% from higher account balances.

Post-tax profit fell 10% to GBP1.36 billion, including a GBP513 million loss on the reinsurance of U.K. annuity liabilities.

Prudential declared an interim dividend of 15.67 pence a share, up 8% from a year earlier. The company said its capital surplus stood at GBP14.4 billion at the end of the half, equivalent to a Solvency II cover ratio of 209%.

Shares at 1153 GMT were up 2.7%, at 1,804.50 pence.

Write to Adam Clark at [e-mail]

(END) Dow Jones Newswires

August 08, 2018 08:10 ET (12:10 GMT)

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