Asian Insurance Markets Drive Prudential Growth

Posted on Nov 11, 2010 by Sergio Ulloa (G+)

Prudential plc has reported a 17 percent increase in third quarter sales for 2010, driven by flourishing Asian insurance markets. The UK based insurer reported that Prudential Group's sales reached £809 million (US$1.3 billion) for the third-quarter of 2010 - a figure which beat analyst's predictions of £773 million (US$1.23 billion). Prudential's highly published failed bid for AIG's Asian arm, AIA, earlier this year, highlighted the Prudential Group's intention to gain a stronger foothold in the Asian insurance market in order to increase its presence in this expanding region of the world for insurance and protection products. Although Prudential abandoned its pursuit of AIA (Link), the British based insurance group's Asian operations continue to accelerate with sales up by 32 percent to £1.066 billion (US$1.7 billion) - up from £806 million (US$.1.28 billion) year-on-year. New business profit for Prudential was up by 34 percent to £621 million (US$993.6 million), with the Asian arm of the group's activities representing 46 percent of that amount. The Asian arm of the operations for Prudential is predominately focused on writing high quality regular premiums, with a substantial element of business coming from Prudential's health and protection products across this region. Prudential remains the market leader within the UK insurance industry. UK business activities amounted to £548 million (US$877 million) in total sales, an increase of 3 percent year-on-year for the third-quarter of 2010. The UK market generated a 14 percent increase in new business growth for the third-quarter 2010, which amounted to £192 million (US$307 million). Prudential's US operations returned an increase of 33 percent with sales totaling £850 million (US$1.36 billion) for the third-quarter of this year. In total, the group's new business profit was reported at £532 million (US$851 million) reflecting a 10 percent increase year-on-year. While the UK insurance market has remained fairly stagnant - partly due to the mature market presenting minimal opportunities for growth, combined with the more challenging economic conditions in Britain - global insurers, such as Prudential, have shifted their focus to the more robust Asian market, which has provided international insurance firms with scope to expand and develop. Prudential remains well positioned within the Asian region, which is part of the group's strategy for growth and its aim to maximize strong returns from its Asian insurance operations. Prudential's Asian arm has developed a strong network of distribution channels and created insurance products specifically designed for the communities in the region. Prudential is, therefore, well position to take full advantage of the improving prosperity in Asia and the increasing wealth among the population. In China - the world's second largest economy - Prudential's 50-50 joint venture CITIC-Prudential recorded a 24 percent increase in business and reported that sales in the country totaled £42 million (US$67.2 million) for the first nine months of 2010. CITIC-Prudential, has been rationalistic non-productive agents, as it seeks to improve returns from operations in a Chinese insurance market which has been increasingly competitive this year; these measures have placed the JV company in a position to challenge insurance rivals in China for higher premium business. The more mature Asian insurance markets of Hong Kong and Singapore remain profitable for Prudential. In Hong Kong, sales increased to £195 million (US$312 million) from £150 million (US$240 million) year-on-year for the third quarter of 2010 - an increase of 30 percent. In the Singaporean insurance industry, Prudential's new business volume was up by 48 percent, generating £118 million (US$189 million) over the third-quarter of 2010. The news follows Prudential UK-rivals - Aviva - reporting positive third-quarter figures from mature insurance markets in Asia. The more advanced Asian insurance industries such as those in Hong Kong and Singapore are currently indicting that financial stability and growth are returning to the Asian region, which supports the global insurer's strategy to focus on the Asian region insurance markets. Growth was also reported by Prudential in Indonesia and Malaysia recording sales at £188 million (US$ 300.8 million) and £129 million (US$206.4 million) - representing a 49 percent and 54 percent increase respectively. However, low premium returns from the Korean insurance market, saw Prudential report a decline of 28 percent with sales of £69 million (US$ 111 million) reported for the third quarter 2010 - down from £96 million (US$ 155 million) for the same period last year. The Philippines, Thailand and Vietnam all saw growth in business for Prudential, with sales up by 100 percent, 82 percent and 17 percent respectively. Sales in these three countries totaled £64 million (US$ 103 million) in the third-quarter 2010 an overall increase of 40 percent. Vietnam, Thailand and Philippines have emerged from the 2007-2008 global financial crisis as strong markets for international insurers to penetrate and develop the non-life and life insurance products. Chief Executive of Prudential, Tidjane Thiam said regarding the future of the Group: "We remain well positioned to deliver strong growth and generate strong returns for our shareholders, based on the Group's proven strategy, our brand and market position in the countries where we choose to operate, the power of our distribution and the quality of our teams. South East Asia, with its high rates of GDP 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" In India, the ICICI-Prudential JV reported a 44 percent increase in sales generating a total of £167 million (US$267.2 million) for the third-quarter 2010. However, Prudential has highlighted that, in the short term, the insurance business in India is likely to suffer adversely from the recent changes imposed by Indian insurance regulators in the country; these changes are expected to hamper growth. In the medium term, however, the changes in the regulations in India are expected to have a positive impact for major insurers like Prudential operating in this second most populous country in the world. Prudential will face increasing competition from rival international insurers, with the likes of Zurich, Allianz, AXA, AIA and UK rival Aviva all stepping up their presence in the Asian region and setting out corporate strategies to benefit from the prosperous Asian economy. Within the Asian region, China, India, Indonesia, Thailand, Vietnam and the Philippines have all emerged from the 2007-2008 global financial crisis as developing economies with fantastic opportunities for expanding insurance sales. Deals such as the Zurich joint venture in Indonesia - giving them access to one of Asia fastest expanding life markets - and the French insurer AXA's possible takeover of AXA Asia Pacific Holdings Ltd - will increase competitiveness in Asia. However, Prudential is also well positioned to take full advantage of the fast-growing Asian market, offering the group potential for an increase in premium business to offset stagnation in the UK market. Currently Prudential is one of the biggest foreign-owned insurers operating in the Asian region and is well positioned to challenge its insurance rivals and generate further expansion. Insurance Company Mentioned: Prudential Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide. Prudential's Asian operations include Hong Kong, India, Malaysia, Singapore, Indonesia and other Asian countries.