Afternoon:
10°c
Prudential powers on with surge in profits
Simon Johnson, Evening Standard14 Mar 2008
Insurers started to look like a source of strength in a world blighted by instability today, when Prudential lived up to its name with a bumper set of results.
With major banks desperately seeking fresh injections of funds to stay afloat and regulators on Wall Street and in the City increasingly concerned, UK insurers look reassuringly solid.
Unveiling a 25% leap in profits for 2007 of £2.5 billion, chief executive Mark Tucker said: "Insurance companies are by and large in robust health.
"We have a resilient business model and feel very confident that we can out-perform in any economic scenario."
Last year Aviva made a takeover bid, which the Pru was criticised for rejecting out of hand.
Today it seems more likely that a deal would occur in the other direction. Aviva's market value has slumped to £15.5 billion, while Pru is now valued at £16.1 billion.
Tucker is passing investors a 5% increase in the dividend to 18p a share. He came under fire last year for a sudden U-turn which saw him offload online bank Egg to Citigroup for a cut-price £255 milllion.
That looks like an increasingly good deal given the strife in banking since.
He said of the turmoil: "We still view this as cyclical rather than structural, but there is no doubt there will be a slowdown."
Pru's Asian arm is increasingly important, accounting for more than half of new business profits.
Jackson, its US subsidiary, saw profits up 19% at £285 million, though the company admits sales are slowing. Meanwhile, the fund management division made £334 million, a 28% increase.
The UK arm, which many analysts wish the Pru would just dump, saw a 17% rise to £277 million.
Tucker insists the UK business is important and believes that a focus on high-margin products will continue to pay-off.
A shake-up of the UK arm, which is led by Nick Prettejohn, is still in progress.
Prudential shares have been on an upward curve since Tucker took over three years ago, and surged 3% yesterday as takeover talk re-entered the market.
Prudential is working on plans to distribute the near £9 billion of surplus in its with-profits funds. It has hired City solicitor Peter Bloxham to represent policy holders, though critics say that because he is paid by the insurer he can't be considered impartial.
