The Prudential chief executive Tidjane Thiam defended its Asia-focused strategy yesterday in the wake of a period of economic and political uncertainty across the region.
The insurer beat City forecasts in the first half of the year despite “challenging conditions” in its core growth market as well as regulatory upheaval at home following changes to the UK pensions industry in March’s Budget.
The Pru’s operating profits rose 17 per cent to £1.5bn in the six months to 30 June, although the increase was just 7 per cent on an “actual currency” basis, with the company citing the depreciation of currencies in its “sweet spot” Asian markets and the recent strengthening of the pound.
Mr Thiam said: “In the first half of this year, some of our markets experienced headwinds as a result of political and economic events such as the uncertainty over the outcome of presidential elections in Indonesia or the military takeover in Thailand.
“These shorter-term, cyclical pressures do not detract from the long-term structural trend of growing demand for our products and services from the rapidly growing and under-insured middle classes [in Asia].”
Since being forced to scrap its botched $35.5bn (£21bn) bid for rival AIA in June 2010, the Pru’s share price has climbed from less than 600p to 1,368.5p, where it closed yesterday having risen 129.5p on the back of the results. Once again, Mr Thiam reiterated his disappointment over the failed takeover, describing it as a “great opportunity” before adding: “I’m still animated about it.”
The company’s UK life operation accounted for £374m of profits, compared with £686m in the US, £525m in Asia and £227m at the fund manager M&G. However, the impact of the Coalition’s reforms in the UK retirement market were still noticeable as sales of individual annuities were down by 43 per cent to £63m. From next year, savers will be given more freedom with their pension pots and will not have to buy an annuity when they retire.
“The UK market continues to be heavily influenced by an unprecedented level of regulatory and legislative change,” Mr Thiam added. “Our experience in retirement income products and investment expertise means that we believe we are well positioned to help customers through this period of change.”
The Pru raised its interim dividend by 15 per cent to 11.19p as analysts approved the results. Last year, the company entered the African market with the acquisition of Express Life in Ghana. The business has now been rebranded Prudential Ghana though the Pru said it is “not likely to be material for many years”.
Barrie Cornes, an analyst at the broker Panmure Gordon, said: “The outlook for the US and UK economies is improving whilst the growth in Asia is still good despite the economic ‘head breezes’ there. The baby boomers in the US and UK are heading into retirement whilst in Asia the middle class is expanding rapidly. We believe that the valuation remains highly attractive.”