Market conditions in India were described as a "notable exception" to elsewhere in the region, following major regulatory changes that took effect there in September, which Prudential said are expected to have a "very negative" effect" in the short term even though their long-term impact is foreseen as being poisitive.
Year-to-date new business profit has grown by 34% since the beginning of the year on sales that are up 32%, Prudential said in its earnings statement, while “sustained sales momentum in the US” helped to boost revenue there by 33%.
Asia momentum ‘continues’
The Pru’s strong Asian showing comes months after chief executive Tidjane Thiam failed to convince shareholders to support his plan to acquire American International Group’s Asian operations. In a statement accompanying today’s results, Thaim, who became CEO in October 2009, noted that Prudential’s momentum in Asia “has continued”, and said that the region now represents 46% of total new business profit.
“We have continued to focus on writing higher quality regular premium business, with 94% of total APE [annual premium equivalent] being regular premium, with a significant proportion of health and protection products,” he added.
Since Prudential’s failed attempt to buy AIG’s AIA operation, it has been floated in Hong Kong, where it is headed up by Thiam’s predecessor at the Pru, Mark Tucker.
The continued strong overseas performance unveiled today by Prudential also comes a month after Prudential’s Dublin-based International division was revealed to be expanding into Spain, in what is being seen by market observers as a likely first step into overseas markets by the heretofore mainly UK-focused operation.
As reported, Prudential International told International Adviser that it plans to introduce a Spanish-compliant single-premium investment bond to UK expatriates in Spain before the end of the year.
Third quarter revenue up 17%
Company-wide, revenue grew by £120m to £809m in the three months to the end of September, according to the Pru, 17% ahead of the same quarter a year earlier, generating a new business profit margin of 55%, described by Thiam as “comparable” with last year’s 56%.
Asset management net inflows totalled £6.2bn in the YTD and £1.536m in the quarter, driven by what Prudential said were “very healthy” M&G retail net inflows. However, the YTD figure was down 44% and the quarterly by 39% from the same period in 2009, which Prudential attributed to 2009 having been “an outstanding year for M&G”, boosted by heavy purchases of its best-performing bond funds “from investors seeking to exploit an exceptional opportunity in fixed income markets”.
Moreover, Prudential said, “the retail business continues to be highly successful, with year- to-date net inflows of £5.1bn, only £600m behind the record level achieved last year, which was assisted by exceptional market conditions".
India regulations
With respect to India, where it has a 26% share of a joint venture with ICICI, the Indian bank, Prudential said new business volumes "saw resurgence" during the first eight months, following on from a "market-related decline" in 2009.
"However, from 1 Sept, the industry [has begun] operating under new regulations that will significantly change the market; in summary unit linked policies are now subject to charging caps and lock-in periods," Prudential said.
"Over the medium to long term, we believe these changes will have a positive impact on the market, as the emphasis will shift from investment products to savings and protection, but in the shorter term we anticipate that new business volumes and margins will decrease sharply as the industry goes through a period of adjustment."
It said it had prepared for the new regulations by downsizing its agency force there, by 28% from the same period a year earlier to 176,000, and taking measures to boost efficiency.
Noting that its share of new business in September in India was down 48% compared with August levels, it added: "we expect this trend to continue or worsen for the rest of the year".
