6th May 2015 09:03
LONDON (Alliance News) - Prudential PLC Wednesday said it has been hurt by low interest rates as it reported a fall in first-quarter new business profit, with growth in Asia more than offset by declines in the US and the UK.
In a statement, Prudential said new business profit fell to GBP496 million in the three months ended March 31, compared with GBP526 million in the corresponding period of the prior year.
Prudential said its Asian platform is an "engine of genuine profitable growth at a time when this is increasingly at a premium".
The group said it has taken action to improve the "quality and resilience" of its earnings, as well as to de-risk its balance sheet, helping to reduce the pain of falling yields amid historically low interest rates implemented by central banks.
However, the company warned that "persistently low long-term rates still represent a significant headwind going forward, as evidenced by the impact on first quarter new business profit".
"The world is facing the impact of divergent monetary policy between the US and the Eurozone/Japan. This has manifested itself in the form of a rising dollar and extremely low and in some cases, negative government bond yields in Europe. We have also observed during the last twelve months a significant fall in the oil price," Prudential said.
"More importantly, continued monetary easing in Europe has exacerbated an environment of extremely low long-term interest rates across the developed economies, a difficult backdrop for any insurance company," Prudential said.
New business profit in Asia increased to GBP309 million from GBP243 million, due to higher sales volumes, partially offset by lower interest rates, which the company said were mainly in Hong Kong.
Eastspring Investments, Prudential's Asian asset management company, reported net inflows of GBP2.3 billion, driven by Japan, China and India. Its third-party funds under management increased to GBP29.8 billion from GBP19.2 billion at the end of the corresponding quarter of 2014.
New business profit fell to GBP153 million from GBP195 million in the US, where Prudential's Jackson National Life Insurance Co serves the baby boomer generation. The group said the decline was due to a number of factors, including a "disciplined approach to sales, a historically strong first quarter in 2014 (our highest first quarter ever) and the impact of the year-on-year decline in interest rates of 80 basis points".
New business profit from UK retail was down to GBP34 million from GBP38 million, while no UK wholesale new business profit was recorded compared with GBP50 million in the first quarter of 2014.
M&G Investments, Prudential's UK investment manager, reported net inflows of about GBP700 million in the quarter. Its external funds under management increased to GBP139.5 billion from GBP128.7 billion at the end of the corresponding quarter of 2014.
Annual premium equivalent sales increased to GBP1.25 billion from GBP1.17 billion, driven by growth in Asia and UK retail, partly offset by lower US sales and UK wholesale.
Outgoing Chief Executive Tidjane Thiam said the group made a strong start to the year, particularly in Asia.
"This performance demonstrates our continued execution of a clear, consistent and successful strategy centred on Asia," Thiam said in a statement.
"In the mature US and UK markets, we have continued to prioritise value over volume and maintained our focus on delivering good value to our customers and shareholders," Thiam added.
Prudential is preparing for the departure of Thiam, who is leaving to lead Credit Suisse AG, and has appointed US head Mike Wells to become its chief executive in June.
Prudential shares were up 0.4% at 1,619.65 pence on Wednesday.
By Samuel Agini; [email protected]; @samuelagini
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