Prudential profits rise as ‘continued progress’ made with with M&G demerger

Mike Wells

The insurance and pension giant, which is in the process of spinning off its UK and Europe operations into a separate company called M&G, said operating profit before tax rose to £4.8bn, ahead of analysts’ expectations of £4.6bn.

The Asia businesses delivered a 14 per cent rise in profit to £2.2bn on the back of a 14 per cent rise in new business profit.

US fee income up 8 per cent following a 10 per cent increase in average separate account balances.

M&GPrudential operating profit was up 19 per cent, including the effect of updated longevity assumptions.

Full year 2018 ordinary dividend increased by 5 per cent to 49.35 pence per share.

Group Solvency II surplus estimated at £17.2 billion, equivalent to a cover ratio of 232 per cent.

Mike Wells, group chief executive, said: “In 2018, our financial performance, again led by our Asia operations, is testament to the scale of our opportunity set, the depth of our capabilities and our unrelenting focus on executing our strategy at pace. At the same time we have made good progress in our preparations for the demerger of M&GPrudential from Prudential plc.

“In Asia we have again delivered double-digit growth across our key metrics of new business profit (up 14 per cent), operating profit (up 14 per cent) and underlying free surplus generation (up 14 per cent). This performance is both broad-based, with 10 markets achieving double-digit growth in new business profit, and high-quality, with health and protection new business profit growing by 15 per cent. Our Asia asset manager, Eastspring, has increased operating profit (up 6 per cent) amidst a challenging external environment reflecting the structural benefit from life business net flows.

Our broad-based portfolio of life insurance and asset management businesses, high-quality products with distinctive value-added services and multi-channel strategy ensure that we continue to benefit from the growing customer demand in Asia for the health, protection and savings solutions that we provide.

“In the US, our life business, Jackson, remains focused on providing financial security to increasing numbers of individuals approaching or in retirement, broadening its product range and extending its distribution network. US operating profit decreased by 11 per cent, with higher fee income being more than offset by higher market-related amortisation of acquisition costs and lower spread-based income. Jackson’s risk-based capital ratio, which increased from 409 per cent to 458 per cent by year-end, highlights the effectiveness of its risk management and hedging performance in the equity market decline experienced during the fourth quarter.

Prudential also said it was making “continued progress” in the demerger of M&G through a stock market listing, having reorganised its UK and Hong Kong businesses, sold a £12bn chunk of its annuity book to Rothesay and started the process of splitting the group’s debt.

Mr Wells added: “M&GPrudential continues to make progress implementing its merger and transformation programme while consolidating its position as one of the leading businesses in the UK & European savings and investment markets. M&GPrudential’s total operating profit increased 19 per cent, principally reflecting the benefit from updated longevity assumptions and an 11 per cent increase in the shareholder transfer from the with-profits business, which includes a 30 per cent increase from PruFund.

“The intended demerger of M&GPrudential from Prudential plc will further enhance the strategic focus of both businesses. I am confident that, given the extent of our opportunities and our proven ability to execute and innovate, we are well positioned to continue to grow profitably.”