Pru´s UK business sales hit by introduction of RDR

FTSE 100-listed financial services group Prudential has reported a positive start to 2013 driven by continued profitable growth in its businesses in Asia. Even so, the firms shares are now declining albeit after being one of this years best performers in the sector and after the introduction of the Retail Distribution Review (RDR) hit business sales here in the United Kingdom.

The UK's biggest insurer said first-quarter revenue rose 8%, coming in slightly ahead of analysts' estimates. Sales, as measured on an annual premium equivalent basis, climbed to 1.04 bn pounds.

Profit from new business increased 5% to 563m pounds, also beating market estimates.

In particular, new business profit increased by 18% in Asia to £308m in the first quarter, driven by higher sales of savings and protection products to the growing Asian middle class and a more favourable geographic mix, the group said.

Prudential's two largest business areas were Indonesia and Hong Kong, which had a a strong quarter with profitable volume growth driven primarily by increased levels of agent activation in both markets. Single insurance operations in Indonesia in the first quarter of 2013 year-to-date were £93m, up 21% from £77m in the corresponding time frame a year before. Single insurance operations in Hong Kong were £37m, up 95% from £19m one year before.

In the Philippines, APE sales were up 40% while in Vietnam APE sales growth of 43% was recorded. In China, CITIC-Prudential had a good start to the year with Prudential's 50% share of APE up 59% to £27m.RDR hits UK business salesTotal annual premium equivalent (APE) sales were 2.0% lower than in the first quarter of 2012, which Prudential attributed mainly to lower sales of with-profits bonds and individual pensions which it said had been partially offset by higher sales of individual annuities.

Sales of onshore bonds were also down 18% to APE of £45m and the group said that this reflected the anticipated reduction in sales of with-profits bonds as a consequence of the implementation of the Retail Distribution Review (RDR) regulations at the end of 2012.

The group forecasted that market dislocation would persist in the short-term as consumers and distributors adjusted to the new environment and the group predicted that this would dampen sales of investment bonds in 2013, compared to the level of sales achieved in 2012.

In the US, new business profits were £22m lower at £192m in the first quarter of 2013 reflecting the impact of lower interest rates and spread compression. On a like-for-like basis, adjusting for lower yields and narrower credit spreads since the first quarter of 2012, new business profit would have been flat year-on-year.

Prudential's share price was down 2.77% to 1,123p at 10:59 on Tuesday following a morning high of 1,179p.

MF