Britain’s biggest insurer Prudential on Tuesday announced a small rise in annual net profits to £1.49 billion on strong Asian demand and posted a rosy outlook ahead of stricter European regulation.
Prudential, the country’s largest insurer by market value, said in a results statement that profit after tax climbed four per cent to £1.49 billion (1.77 billion euros, $2.33 billion) in 2011, compared with £1.43 billion in 2010.
“Prudential has delivered another strong performance in 2011 led by Asia,” chief executive Tidjane Thiam said in the earnings release.
“The heart of our strategy remains Asia, where our positive momentum has been maintained in 2011 …. Asia is generating both growth and cash and our focus on the fast-growing markets of South-East Asia continues to pay off.”
Thiam added that the company was on track to deliver its profit growth and cash generation objectives going forward.
“In this uncertain macroeconomic environment, our clear strategy and the strength of our products and distribution — combined with our balanced portfolio of businesses and market-leading positions in Asia — mean we are well positioned to deliver continued relative outperformance in the medium-term.”
Prudential said on Tuesday that group operating profit, or earnings before tax and interest payments, grew 7.0 per cent to £2.07 billion in 2011, beating analyst expectations.
Thiam added that for the first time, Prudential’s life insurance business in Asia was the single largest contributor to the group’s operating profit total.
“Since 2008, Asia’s contribution to this benchmark profit measure has almost trebled from £257 million to £709 million,” he added.
There has been long-running media speculation that Prudential could switch its headquarters from London to Asia, where the group makes about 45 per cent of its total sales. Ahead of its latest earnings update, Prudential last month said that it was looking at possibly moving its base to avoid new European capital requirement regulations for the insurance sector.
On Tuesday, the company repeated its opposition to aspects of the reforms. “Solvency II, which is currently anticipated to be implemented from 1 January 2014, represents a major overhaul of the capital adequacy regime for European insurers,” Prudential said in its statement.
“We are supportive in principle of the development of a more risk-based approach to capital but we have concerns about the potential consequences of some aspects of the Solvency II regime under consideration (…) Lack of certainty over the policy content and timetable continues to impede the industry’s ability to prepare fully for the new regime,” it said.
Prudential meanwhile added on Tuesday that it would pay a full-year dividend of 25.19 pence a share, up 5.6 per cent compared with 2010. The group’s shares rallied 1.99 per cent to 742.02 pence in afternoon deals on London’s FTSE 100 index, which was higher.
“The Asian business today became the largest contributor to earnings for the first time, and underlined that the company is well positioned in several of the region’s strongest markets,” noted Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
“The strategy to fund this expansion from the fruits of its profits elsewhere is vindication of having a strong geographical diversity, whilst the general cash position looks increasingly solid.”
London, March 13, 2012 (AFP)
