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Thursday 22 August 2019

Prudential reaps rewards of higher interest rates in US and Asia

The firm said “higher sales and more favourable economics” had lifted life insurance new business profit by 17%.

Prudential MandG merger
Prudential MandG merger

By Ben Woods, Press Association Chief City Correspondent

Insurance giant Prudential has seen new business profits jump by nearly a fifth as higher interest rates bolstered sales across the US and Asia.

The firm said “higher sales and more favourable economics” gave life insurance new business profit a 17% lift to £2.47 billion for the first nine months of the year.

Asia churned out the largest slice of the growth, with new business profit in the region rising 15% to £1.62 billion, as the firm saw double-digit growth in seven countries, including China, Hong Kong and Singapore.

Jackson, Prudential’s US insurance arm, also hiked new business profits by 17% to £619 million during the three quarters, but said regulatory reforms in America had cast an uncertain outlook over variable annuity sales.

Group chief executive Mike Wells said: “In Asia, we are meeting the health, protection and savings needs of a rapidly growing middle class.

“In the US, we are addressing the savings and retirement income requirements of the baby-boom generation, and in the UK and Europe we are focused on the opportunity presented by the converging life assurance and savings markets.”

Focusing on the UK, asset manager M&G Prudential saw total assets under management rise to £336.5 billion, up from £310.8 billion at the end of December last year.

The operation, which was forged following the merger of Prudential and M&G asset management, recorded external asset management net inflows of £9.9 billion for the period. UK insurance new business profits rose 31% to £234 million.

Under Solvency II – which requires insurance companies to prove they can withstand a major financial shock – Prudential’s surplus was £12.8 billion, an equivalent cover ratio of 201%.

Shares were up just shy of 1% in morning trading on the London Stock Exchange.

Shore Capital analyst Eamonn Flanagan said: “The strength of the group’s business model across the globe is unparalleled… with a powerful balance sheet to match.

“The operations in Asia and the US are ‘best in class’ in our view in their respective territories, with M&G Prudential in the UK clearly determined to deliver likewise on these shores.”

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