More on Prudential
Prudential: 1Q New Businesses
Prudential recorded total APE sales of £478m for the first quarter, the improvement being lead by sales in Asia (up 13% to £142m), UK & Europe (up 12% to £208m) and the US (up 9% to £128m).
The company’s partnership channel, redistribution arrangements with other firms (including St James’s Place, Barclays and National Australia Bank) has been particularly successful, growing by 42% and contributing £27m in APE.
In terms of product sales in the UK, annuities continue to be very popular with sales of bulk annuities (ie those sold to institutional clients) growing 71% to reach and APE of £24m while individual annuity sales grew 18% to reach £53m APE. Annuity sales now make up about 44% of total APE earned in the UK. Other products recording good growth include Life Bond sales (up 64% to reach £24m APE), life -other (ie excluding with profit schemes) (up 24% to reach £21m APE).
Annuities feature prominently in US sales as well, more traditional life insurance sales seem confined to Prudential’s Asian operations.
The sales figures for the quarter are positive and met the consensus estimates, although the market seems to have expected an even better performance. Prudential will do better this year and a possible sale of Egg could result in funds being returned to shareholders.
Prudential made an abrupt change in strategy, focusing on the UK market rather than overseas (announced as the justification for the £1bn rights issue last year). The surprise rights issue lead to the departure of the CEO Mr Bloomer, his replacement, Mr Tucker was responsible for Prudential’s Asian operations and this raises the possibility of further changes to strategy. Overall, the outlook for the life assurance industry seems to be stabilising, which augers well for Prudential’s future performance but there are still concerns with the solvency of this company.
The stock trades at 485p, on a prospective PE of 13.3x (on 2005 earnings). The yield is 3.4%.
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