Prudential share price jumps on news of record operating profit driven by Asian growth
Prudential shares rose over two per cent in early trading after the FTSE 100 insurer posted record annual operating profits, driven by a seventh year of double-digit growth in Asia.
The figures
Operating profit on longer-term investments rose by seven per cent to £4.3bn with underlying free surplus generated increasing 18 per cent to £3.6bn.
In the life division, new business profit rose by 24 per cent – from £2.5bn to £3.1bn.
Profit after tax fell by 26 per cent to £1.9bn, while net cash remittances from business units increased by six per cent to £1.7bn.
Read more: Prudential aiming to grow dividend by five per cent per year
The Pru's asset management arm, M&G, increased external assets under management by eight per cent and has £265bn of investments to look after in total.
Dividends were increased by 12 per cent to 43.5p per share.
The Pru's Solvency II ratio stood at 201 per cent, giving the group an estimated surplus of £12.5bn.
Why it's interesting
Asia
While its roots stretch back to mid-nineteenth century London, Prudential has for a number of years been targeting Asia and other emerging markets as areas of growth.
And chief executive Mike Wells reckons there is more to come in the region, telling reporters this morning on a conference call Prudential had "barely scratched the surface".
Read more: Prudential boss thinks people are still confused about Asia
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Prudential has based this expectation on the expansion of Asia's middle classes and the variety of insurance products they can be persuaded to buy. As people get richer in the emerging markets, Prudential will hitch onto this and grow too. Wells said: "The number of Chinese people going abroad for holidays now has doubled in the last five years to 120m, just to give you some context, that figure is just short of the total number of passports Americans have at 130m."
Special dividend?
Growing the firm's dividend by 12 per cent broke with tradition. Previously Prudential aimed for a steady five per cent increase each year but today's results meant it had generated significant cash to reward investors.
Last year Prudential paid its first special dividend since 1970 but it said this would not be repeated this year.
The group said a number of one-off events had led to 2015's 10p per share payout – including changes made ahead of the introduction of Solvency II. As these were not repeated in 2016, Prudential said it made sense to reward shareholders solely through a normal dividend hike instead.
What the company said
Chief executive Mike Wells on…
…Discipline: "In a year that has seen continued low interest rates, market volatility and dramatic political change, our results continue to benefit from the scale and diversity of the group's global platform, the disciplined execution of our strategy and the strength of the opportunities in our target markets."
… Asia:
Our performance has been driven by Asia, which has delivered a seventh consecutive year of double-digit growth in new business profit, operating profit and capital generation.
… US and UK: "In the US and in the UK, our businesses remain well positioned to navigate a period of significant regulatory change. We remain on course to achieve our 2017 financial objectives."
… Dividends: "The dividend increase demonstrates our commitment to deliver long-term value for our shareholders and our confidence in the future prospects of our group."
…Future growth: "In Asia, growing numbers of middle-class consumers increasingly require our health and protection products, and ageing populations in the UK and the US are seeking ways to invest their savings to produce secure income for retirement."