Hong Kong company reporting season

British insurer Prudential posts 6pc underlying profit growth

PUBLISHED : Wednesday, 10 August, 2016, 8:31pm
UPDATED : Wednesday, 10 August, 2016, 11:01pm

Prudential, Britain’s largest insurer that was listed in Hong Kong in 2010, posted a 6 per cent year on year growth in interim underlying operating profit.

Excluding the impact of foreign exchange rate fluctuations, group operating profit – the firm’s primary measure of profitability based on longer-term investment returns – rose 6 per cent year on year to £2.06 billion.

Asia life insurance and asset management’s contribution increased 15 per cent to £743 million thanks to strong growth in life insurance sales, while that from Britain grew 9 per cent to £492 million and that from the US fell 3 per cent to £876 million.

In the UK, Brexit has not interrupted our retail sales growth, especially pooled funds that are attractive in times of uncertainty
Mike Wells, chief executive, Prudential

The London-based firm had a net profit of £687 million for the year’s first six months, down from £1.44 billion in the year-earlier period.

The drop was caused by “non-operating items” including short-term fluctuations in investment returns and the effect of changes in economic assumptions for long-term operations.

A poll of 22 analysts by Thomson Reuters projected the firm to book a net profit for the whole of this year of £3.05 billion, up 18.3 per cent from last year.

An interim dividend of 12.93 pence per share was declared, up 5 per cent from 12.31 pence in the year-earlier period.

Prudential chief executive Mike Wells said the firm’s underlying profit growth was led by Asia where the fast-growing middle-class population are increasingly seeking to save and invest for their retirement, adding it is “on track” to achieve its financial objectives for next year.

It has targeted to book operating profit of more than £1.86 billion next year in Asia, doubled from 2012, or an average compound annual growth of more than 15 per cent.

He said Britons’ vote in favour of leaving the European Union late June has not had any “material” impact on the firm, which derived 80 per cent of its sales and some 70 per cent of its profit from regions outside Britain and Europe.

“In the UK, Brexit has not interrupted our retail sales growth, especially pooled funds that are attractive in times of uncertainty,” he told reporters after the results were released.

Still, the company noted that global economic conditions will likely remain highly uncertain.

“The uncertainty in market conditions is expected to continue while the UK’s future relationship

with the European Union is uncertain and the key risks to the business should be understood in this context,” the firm said in a filing to Hong Kong’s bourse after the stock market closed on Wednesday.

“The ongoing uncertainty of when the UK will leave the EU and the possibility of a lengthy period before negotiations are concluded may increase volatility in the markets ... and create the potential for a general downturn in economic activity and for further or prolonged interest rate reductions in some jurisdictions due to monetary easing and investor sentiment.”

Total revenue dropped 3.6 per cent year on year to £18.48 billion, with that from insurance business falling 3 per cent to £17.55 billion and that from asset management sliding 16.2 per cent to £863 million.

Prudential’s shares in Hong Kong fell 1.3 per cent to HK$139.10 on Wednesday before the results, and is 9.7 per cent lower than the day before Britons voted on membership of the EU.

The shares have fallen 22.7 per cent since the start of the year, underperforming the Hang Seng Index’s 2.6 per cent gain.