12th Mar 2014 09:22
LONDON (Alliance News) - Prudential PLC Wednesday reported a sharp fall in 2013 pretax profits due to short-term fluctuations on investment returns, but its closely-watched operating profit grew by 17%, driven by its US operations.
In a separate statement, Prudential said it has signed a new 15-year agreement with Standard Chartered PLC that will see a wide range of Prudential's life insurance products exclusively distributed through the emerging markets-focused bank's branches in a number of markets, including Hong Kong and Singapore.
The two FTSE 100 powerhouses also will look to collaborate in other parts of Asia and Africa.
Prudential said its pretax profit fell to GBP1.64 billion in 2013, down 40% from the GBP2.7 billion reported in 2012, as a result of short-term fluctuation in investment returns costing the life insurer GBP1.11 billion.
However, its closely watched operating profit, which is based on longer-term investment returns, grew to GBP2.95 billion from GBP2.52 billion in 2012, after stronger profitability in Asia, the US and the UK.
Analysts had been forecasting a GBP2.83 billion operating profit, according to consensus estimates provided by Prudential.
Prudential's growth has been largely driven by the US and Asia, with that trend continuing in 2013, as the life insurer's strategy of diversifying away from the UK continues to bear fruit.
"We remain focused on pursuing the three significant opportunities - the significant protection gap in the Asian middle class, the transition of US 'baby-boomers' into retirement and the need for savings and retirement income for an ageing population in the UK - that are core to our strategy," Chief Executive Tidjane Thiam said in a statement.
Thiam said picked Asia as the area that "remains more than ever central to the long-term, profitable growth opportunities" for Prudential
"The longer-term structural trends of a rapidly growing and wealthier middle class with significant unmet needs for savings and protection remain intact and underpin our prospects in the region," Thiam said.
Asia is also at the core of Prudential's three new objectives for 2017, which Thiam outlined at an investor conference in December.
Thiam said "an encouraging start" has been made towards achieving two of those objectives.
"We have grown Asia life and asset management pre-tax IFRS operating profit by 16% over 2012 and we have also delivered an 18% increase in underlying free surplus from Asia to GBP573 million in 2013. We will regularly update the market on our progress on all three objectives," Thiam said.
Those increases exclude the 2012 GBP51 million one-off gain from the sale of Prudential's stake in China Life Insurance Company of Taiwan.
Prudential has set 2017 targets for Asia underlying free surplus generation, life and asset management pretax operating profit, and group underlying free surplus generation.
Looking beyond 2017, Thiam said Prudential is considering investing in Saudi Arabia. This would be in addition to new investments in the past two years in Cambodia, Myanmar, Poland and, most recently, Ghana.
The emerging markets insurer has had a strong three years since announcing six 'cash and growth' objectives set out at its 2010 investor conference, announcing that the targets were met at the full-year, with new business profits in Asia more than doubling to GBP1.46 billion from GBP1.43 billion in 2009.
Thiam predicted "more of the same, just better".
Prudential increased its full-year dividend by 15% to 33.57 pence from 29.19 pence.
Prudential shares were Wednesday quoted up 4.1% at 1417.00 pence.
By Samuel Agini; [email protected]; @samuelagini
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