Prudential completes a week of results from the big insurers, and broker Jefferies think US variable annuity (VA) hedge costs will be the focus of the interim results.
"VA hedge costs have doubled over the last 12 months mainly due to lower interest rates. As recently as November, Jackson's [Jackson National Life, a Pru associate] management was indicating that hedge costs remained within budget but these will have risen since then. It's difficult to know exactly how this will filter through into IFRS earnings but the relatively short duration of Jackson's interest rate hedges clearly presents some rollover risk and we expect this issue to be firmly in focus at H1 [first half]. In addition, reclassifiying $1bn of hedge costs as operational would lower group EPS [earnings per share] by around 5%," the broker asserts.
Jefferies is forecasting a 6% increase in interim profit driven by positive net inflows and higher US equity markets.
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"Geographically, we anticipate a 20% increase in the US as higher VA balances more than offset a lower investment margin. In Asia we expect 16% growth y-o-y [year-on-year] driven mainly by reserve growth. In terms of new business, we forecast Q2 APE [second quarter annualised premium equivalent] sales up 8% y-o-y (vs +9% Q1 12) driven almost entirely by Asia (+20%) where secular growth remains impressive but margins will probably narrow slightly in the low bond yield environment," the broker added.
Panmure Gordon is forecasting headline European Embedded Value operating profit of £2,160m, up 1% on the first half of 2011. Operating profit on an international finance reporting standards (IFRS) basis is tipped to be £1,095m (+3%) by Panmure Gordon. Shareholders can look forward to an interim dividend of 8.35p if Panmure Gordon's forecast is on the money.
The timing of the release of the results is a a bit of a mystery, and it could be before the market opens in London because of the Pru's stock exchange listings in Hong Kong and Singapore.
Collectibles dealer Stanley Gibbons is expected by Peel Hunt to post a small increase in interim pre-tax profits; the broker is forecasting £1.8m versus £1.7m the year before.
"The company is increasingly focusing on the online channel (12% of sales last
year), which we see as potentially a company changing opportunity given the
strength of the brand name globally," Peel Hunt said.
INTERIMS
Prudential, Stanley Gibbons
INTERIM DIVIDEND PAYMENT DATE
Pressure Technologies
QUARTERLY PAYMENT DATE
British Land Co
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Consumer Price Index(GER) (07:00)
Import and Export Price Indexes (US) (13:30)
Treasury Budget Statement (US) (19:00)
GMS
Gold Oil
UK ECONOMIC ANNOUNCEMENTS
Producer Price Index (09:30)
FINAL DIVIDEND PAYMENT DATE
Cable & Wireless Communications, Cropper (James), Ensor Holdings, GB Group, Hansa Trust, Hansa Trust 'A' Non Voting Shares, Hyder Consulting, Montanaro UK Smaller Companies Inv Trust, Sepura, VP, Walker Greenbank
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