Double-digit growth in Asia helps offset slump in UK profits at Prudential
Insurance giant Prudential has thanked its seventh year in a row of double-digit growth in Asia for helping it overcome a slump in UK profits.
The group revealed UK life operating profits tumbled by 32% to £799 million in 2016 after it was hit by a decision to stop offering annuity deals to company pension schemes, as well as a £175 million charge amid a review into past sales practices for individual annuities.
Pru's UK result was also knocked by a tough year for its M&G fund management business, which saw profits fall 4% to £425 million.
But boss Mike Wells cheered its seventh year running of double-digit profit growth in its fast-growing Asian business, which helped offset the domestic disappointment.
Operating profits in Asia leapt 28% higher to £1.5 billion in 2016, while the US also saw double-digit growth with earnings up 21% to £2.1 billion.
The results were flattered by the weak pound, but even with this stripped out earnings rose 15% across Asia and 8% in the US.
Mr Wells said Prudential delivered a "strong financial performance" despite a year of "continued low interest rates, market volatility and dramatic political change".
"Our performance has been driven by Asia, which has delivered a seventh consecutive year of double-digit growth," he added.
Pru said quarterly new business sales in Asia surged past £1 billion for the first time in the final three months of 2016.
Group-wide total operating profits rose 7% to £4.3 billion last year, although with the currency boost stripped out, earnings were 2% lower.
But the results showed a challenging UK market, with earnings falling despite a 33% rise in life new business profits.
It saw profits from new annuity business plunge from £123 million to £41 million in 2016 after it deliberately scaled back its bulk annuity sales.
The group added that it is "continuing to work to ensure we put things right" after the UK's Financial Conduct Authority last month ordered a number of providers to review their past non-advised individual annuity sales dating back to July 2008.
The watchdog raised concerns that some providers did not properly explain to customers t hat they may have been eligible for an enhanced annuity, where they could be paid a higher income because of health conditions.
Pru insisted despite the recent woes in its UK arm, there are "significant opportunities for our UK businesses", given the country's " ageing population that does not have enough saved for the future".
Shares lifted 3%, with Shore Capital analysts praising an "outstanding set of results".
"The quality and scale of Prudential's business model was demonstrated again," they added.