Best’s News & Research Service - November 10, 2010 11:22 AM (EST)
UK's Prudential Sees Strongest Nine-Month Profit Growth in Asia
HONG KONG //BestWire// - Strong Asian economic conditions, together with positive regional life insurance market performances, contributed to a 32% revenue gain for U.K.-based Prudential plc's Asian operations in the first three quarters of 2010.
Annual premium equivalent sales in Asia reached 1.07 billion pounds (US$1.72 billion), up from 806 million pounds in 2009.
The insurance group's new business profit in Asia rose 34% to 621 million pounds, representing 46% of the group's total new business profit. New business profit rose 14% in the United Kingdom and 10% in the United States.
Its APE margin in Asia was 58% at the end of the third quarter.
Prudential's traditional growth strategy is for "organic growth," said Barry Stowe, chief executive of Prudential Corporation Asia, in a conference call.
Whether the company will continue to seek merger and acquisition investments across Asia after its failure to acquire AIA Group in June depends on whether a transaction can provide "unique opportunity" to complement the company's organic growth, he said.
"Every deal is selective," noted Stowe. "We decide [to have] M&A if that makes sense; we don't need M&A as we can build business organically."
China is expected to be one of the largest insurance markets for Prudential, with significant growth prospects. Prudential's domestic 50-50 life insurance joint venture CITIC-Prudential with Chinese partner CITIC-Bank reported nine-month new business volume rose 24% to 42 million pounds, from 34 million pounds in 2009.
The joint venture has a multichannel distribution approach in China, with an approximate split of 50-50 between agency and bancassurance in the first three quarters of 2010.
"We are able to take balanced approach in the China market that has a strong growth number," said Stowe. "We will continue to grow agency and bancassurance distribution channels that can drive more value to the company."
Asia Businesses
In Hong Kong, nine-month APE sales rose 30% to 195 million pounds, mainly due to an increasing agency force and a 28% growth rate from bancassurance sales through Standard Chartered Bank, according to Prudential.
In Indonesia, Prudential said domestic new business volume rose 49% year-on-year to 188 million pounds. Agencies continue to be the predominant distribution channel, while takaful-linked products remain a "significant" contributor at 20% of the new business mix in the country, the group said.
In Malaysia, the company noted an "exceptionally" strong performance in the first three quarters, with new business APE reaching 129 million pounds, up 54%. The agency channel was again the main driver for growth.
Prudential said domestic new business volume in Singapore rose 48% to 118 million pounds, driven by increasing agency productivity and new business contribution amounting to 29% of the total from the bancassurance channel. A new partnership with United Overseas Bank produced 39% of the APE growth for the bank channel and 11% of the group's total APE sales during the period.
In the Philippines, Thailand and Vietnam, the group saw APE sales total 64 million pounds, up 49%. Among the total, Prudential Vietnam reported a strong APE result with a larger agency force, while both the Philippines and Thailand saw growth drivers mainly from the combination of bancassurance and a revitalized agency force.
In Taiwan, the group exited from the agency channel in 2009, and is now focusing on bancassurance distribution with domestic partners E.Sun and Standard Chartered Bank. New business volumes generated from this market totaled 95 million pounds, up 23% from 77 million pounds in the correspondent period of 2009.
Prudential's PCA Life Japan suspending writing new business sales from Feb. 15, 2010. The group's new business sales for Japan in 2010 amounted to 7 million pounds, compared with 40 million pounds in 2009.
The company said the South Korea market remains "very challenging." Prudential's unwillingness to compete in the low-margin, high-capital guaranteed product sector is the main factor behind a 28% decline in new business volume over the first nine months to 69 million pounds, noted Prudential. But the company said persistency experience in Korea continues to be "on an improving trend."
In India, the group's local joint venture ICICI-Prudential saw "resurgence" in new business volume during the first nine months of 2010 following on from a market-related decline in 2009. During the period, India's APE reached 167 million pounds, up 44%.
New domestic insurance regulations have made unit-linked policies subject to charging caps and lock-in periods effective from Sept. 1 (BestWire, Aug. 19, 2010), which negatively affected Prudential's Indian operation. New business for September was down 48% from August, and the company expects this trend "to continue or worsen for the rest of the year."
"Southeast Asia, with its high rates of gross domestic product growth, saving habits and low penetration of insurance products, remains the most attractive long-term opportunity in our industry and the primary focus for our growth and investment," said Tidjane Thiam, group chief executive of Prudential, in a statement.
He added the opportunity supported by the group's strong position in the United States, its focused business in the United Kingdom and market-leading asset management businesses means "we view our future with confidence and believe that we will continue to outperform our competitors in our chosen markets."
London and Hong Kong-listed Prudential said total APE sales for the first three quarters rose 24% to 2.46 billion pounds. New business profit rose 21% to 1.35 billion pounds. Total APE margin was 55%, down from 56% in 2009.
The group's investment net inflows fell 52% to 6.2 billion pounds.
(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)