Prudential’s long-term growth potential is based on its substantial presence across Asia, the largest geographical contributor to group profits. The region benefits from overall economic growth but also the increasing insurance penetration that this brings. In mature markets, Prudential (PRU) has shown a disciplined approach to new business and has focused on realising value from the back-book, to provide a significant source of cash to the group. Overall, Prudential has a balanced portfolio of businesses that provide opportunities to invest in high-growth and high-profitability areas while also generating sufficient cash earnings to fund new business investment, pay progressive dividends and maintain capital strength. The group appears on track to meet its ‘growth and cash’ objectives, set in 2010, to double Asian IFRS operating and EEV new business profits by end 2013, while delivering substantial cash remittances to the group from each business unit.
Q3 IMS shows continued growth
The recent Q3 IMS shows further growth in new business profits (+13% ytd vs +7% at H1). Asian new business profits are +15% ytd or +23% if based on similar economic assumptions y-o-y. There is actually some slowdown in Asia during Q3 as Prudential says it traded volume for value in Korea, Taiwan and Malaysia. JNL had a very strong Q3 for sales of variable annuities, which will slow in Q4 as it limits sales of guaranteed products for the rest of the year to maintain the portfolio diversification by vintage that should protect returns across economic and market cycles. In the UK, new business profits were +56% (+17% ytd) and M&G saw net inflows of £6.4bn, making it the best nine months on record (+£11.3m). The (IGD) capital surplus has increased from £3.9bn to £4.1bn year-on-year.
New York investor conference: Focus on US business
Prudential will be holding its annual investor seminar in New York on 28-29 November 2012 and we expect a strong focus on the strategy and growth prospects for the US. The event provides an opportunity to explain how JNL manages and adequately prices for the risks contained in product guarantees, and why it believes it can avoid the problems faced by many other providers in the recent past. A number of competitors have seen periods of market weakness expose underpriced and poorly hedged risk.
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