UK’s Prudential taps strong US pension demand

UK’s Prudential taps strong US pension demand

London: British insurer Prudential Plc beat sales growth expectations in the first quarter of 2011 by tapping pension demand from an ageing US population to counteract a slump in India.

Prudential, Britain’s No. 1 insurer, said on Wednesday it had sales of £ 888 million in the first quarter, up 10% from a year earlier and ahead of the £ 854 million pencilled in by analysts, according to the company’s calculation of consensus expectations.

The increase came as revenue at the company’s pensions-focused US business grew by a quarter, helped by strong demand from ageing baby boomers.

That more than compensated for a 58% downturn in India, driven by regulatory changes introduced in 2010, which held back overall growth in the company’s key Asian markets to just 2%.

Prudential, which relies on fast-growing Asia to offset pedestrian growth at home, had warned in November 2010 that sales in India would suffer as it redesigned its products to conform with the new regulations.

Asian sales excluding India were up 17% at £ 367 million , the company said, driven by continued strong growth across the booming economies of south-east Asia.

Prudential shares were up 1% at 776.75 pence by 1045 GMT, recouping earlier losses, and outperforming a flat FTSE 100.

The stock is up about 14% so far this year, outpacing a 9% rise for the European insurance sector.

“Pru made it very clear that within Asia, India was always going to go backwards because of regulatory changes," said Shore Capital analyst Eamonn Flanagan

“The statement reads well, the prospects look good. We thought it was a very confident performance."

Prudential chief executive Tidjane Thiam said the group’s Indian sales should improve from 2012, but that the pace of progress would be hampered by the need to retrain its 185,000 local sales agents.

“We definitely don’t expect any improvement in 2011. But in the long term, from 2012 onwards, things will improve slowly," he told reporters on a conference call.

Prudential said it had a first-quarter new business profit of £ 498 million ($794 million) in the first three months, up 17% from a year earlier, and ahead of the £ 456 million expected by analysts.

The 163-year old insurer also said it was on course to hit its objective of doubling its 2009 Asian operating profit by 2013 and generating £ 300 million of cash annually in the region by that year.

The targets were unveiled in December in an effort to mollify irate investors after an ambitious $35.5 billion bid for Asian rival AIA fell through, leaving the company to shoulder £ 377 million in costs, and prompting calls for Thiam and chairman Harvey McGrath to quit.