Prudential gains on Asian growth

published 13 March 2012

Prudential, the insurance and financial services giant, says growth in Asia has pushed 2011 profits well ahead of the previous year.

Operating profit reached £2.07bn, a 7% gain on 2010, driven by a 32% rise in earnings from the Asian life assurance business to £709m.

The figures have come in ahead of Credit Suisse's analyst forecasts which were for profits of £1.98bn, though Credit Suisse's forecast was below the market consensus of £2.02bn.

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The 2011 full year dividend has been increased by 5.6% over the previous year to 25.19p, pretty much in line with the forecast by broker Charles Stanley but ahead of the market consensus of 24.77p.

Asia now accounts for 45% of group sales, the UK 35%, with the smaller US business 20%.

Prudential also has a significant asset management business, with £351bn of funds under management by the end of 2011, boosted by £4.5bn of net inflows, most of which (£4.4bn) came from the M&G division.

Prudential has long sought a "balanced" funding structure, instead of having to rely on the UK life business. In today's update the firm's Chief Executive, Tidjane Thiam, noted all four of the group's business units had "remitted significant amounts of cash", citing this as evidence that the company had navigated well through the financial crisis.

One of the constant obsessions amongst Prudential watchers is whether it will up sticks and leave the UK, given how well its Asian operations are doing.

The issue has been made more acute by negotiations on new European insurance regulations called Solvency II. Thiam says Prudential is considering "optimising the group's domicile, including as a possible response to an adverse outcome on Solvency II".

This kind of threat has been heard before and may be taken with a pinch of salt by both investors and the UK government.

Nevertheless, the market appears impressed with the results, at 09:28 Prudential shares had risen 1.5%.