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Prudential: Q1 sales
Prudential, the UK’s second largest listed life insurance company reported strong first quarter sales, ahead of expectations. Group APE sales rose 27% to £637m, with sales growth strongest in Asia. Last year the company reported a 15% increase in sales for the full year.
The company’s sales in Asia rose 47% to £226m on an APE basis with strong performance in Korea (+77%) and India (+65%). US sales on an APE basis reached £167m, up 22% while UK sales rose 17% to £244m helped by strong sales of offshore bonds, bulk annuities and with-profit bonds. US sales were driven by record volumes of retail sales (+31%) particularly of variable annuities. Asian sales recovered compared to a slow 1st quarter in 2005.
The company reported that the UK market remains competitive and that focus would be on margins and return on capital rather than APE volume growth, which we take to be a warning that UK sales are likely to be volatile. The company’s UK sales in Q4 of last year contracted by 33%.
The strong sales performance seems to vindicate the management of the company which rejected a £17bn takeover bid from Aviva last month claiming that the deal did not reflect Prudential’s growth prospects. The company is very bullish in its outlook and says the group has “excellent prospects for profitable growth” with “tremendous scope to deliver increasing value to shareholders”. Shareholders will expect nothing less.
The share trades at 676.01p, on a prospective PE (2007 earnings) of 12.2x with a yield of 2.6%.
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