James Moore: The City should celebrate if the Pru really has seen the light on quality
Outlook Prudential has given the City something to smile about with a pledge to double cash generation at its rapidly growing Asian business to roughly £1bn by 2017.
"Aggressive" is how its cheerleaders described the promise, as chief executive Tidjane Thiam gushed about the "sweet spots" that Pru is sitting on in the world's most economically dynamic region.
With the ranks of the middle class still growing very quickly in a part of the world where the state doesn't offer much in the way of service provision it's no wonder investors were salivating.
All the same, it might be wise not to get over excited.
There tends to be a lot of smoke and mirrors in the figures put out by insurance companies at the best of times. Sometimes apparently aggressive targets aren't quite as challenging as they appear to be at first glance. The canny modern executive always leaves plenty of scope for the targets they present to be exceeded. It pays to leave a little slack in your forecasts so that members of your remuneration committee can say that expectations were exceeded when they put the cream on the cake during the bonus round. That's particularly important for a business like Prudential, where the packages handed to those at the top are strikingly high.
That said, even with the help of smoke and mirrors targets can still be dangerous things for life insurers. The consequences can be devastating if they lead to salesmen on the ground being pressured into behaving badly. Which is what happened in Britain during the years when the sober and respectable man from the Pru morphed into a shiny-suited pension thief leading up to the turn of the century.
However, what was notably absent from Pru's promises yesterday was anything pertaining to sales. It's still true that pushing product will play an important role in their delivery. But so will keeping a lid on expenses, effective claims management and, crucially, making sure the policies that are sold are appropriate so they remain in force for longer than a few months.
The fact that Prudential is stressing the latter – and one of the sector's sharper analysts told me that management made a point of it in yesterday's investor presentation – is significant. It suggests the company is as much focused on the quality of sales as the quantity.
This makes all sorts of sense – if you can keep a policy on your books it'll see you right for years and there's not so much need to spend lots of money up front on selling new ones to replace it.
This is a lesson it took the UK-based insurance industry a very long time to learn. Has Prudential at last seen the light? If it has, after an awful lot of foul ups, it really would be something for the City to celebrate. It would also be good news for customers, who have little choice but to rely on the Pru and its representatives for a host of rather important services.
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