Prudential warns on outlook despite stellar growth

Prudential, Britain's second biggest insurer, warned yesterday that 2003 would be hugely uncertain because of economic and political risks, as it turned in another period of stellar growth in its key Asian market.

Jonathan Bloomer, the chief executive of Prudential, said: "2003 is the most challenging year I have looked forward into for a long, long time. There is so much uncertainty about where the stock market is going. There is economic risk from consumer confidence, and political risk."

Mr Bloomer struck a cautious note despite turning in an 18 per cent rise in Prudential's sales in Asia measured on an annual premium equivalent (APE) basis, which takes in new and ongoing business. The result pleased analysts because it came on top of already strong growth in the region.

Prudential, which now derives 75 per cent of its sales from outside the UK, said it thought there was plenty of growth still to come from its Asian business. Mr Bloomer said: "We are in 12 countries there and GDP growth rates look tremendous."

He attempted to scotch rumours that the rapid expansion in the region, which has made Prudential the number two behind AIG of the US, would not require it to raise capital.

"Our capital needs in Asia are manageable. We said at the half year that Hong Kong, Singapore and Malaysia were cash flow positive and we would expect others to follow," Mr Bloomer said.

The insurer also beat tough market conditions to increase sales by 23 per cent to £595m at its US business, Jackson Life, on an APE basis. Mr Bloomer confirmed that Prudential's long-term plans for the United States still contain a major acquisition – an ambition which was thwarted two years ago when its plan to buy American General fell through.

But he signalled that a fresh deal was not imminent, saying: "We will get opportunities to do a bolt-on acquisition but we are not talking at the moment – not in these market conditions."

Prudential saw it sales fall 5 per cent to £781m in the UK on an APE basis, reflecting an industry-wide malaise in life assurance products, thanks to disappointing investment returns and criticism of some of the sector's complex products.

Prudential has signed an agreement to sell its with-profit bond through Abbey National, a deal which was up and running in December.

Mr Bloomer said the project had got off to a "strong start", and indicated Prudential's enthusiasm for expanding the link so that more of the insurer's products could be sold through Abbey's branches.

Prudential's shares rose 12.5p to 380p.