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Prudential Targets Asia to Double Profits

Posted on Dec 02, 2010 by Sergio Ulloa ()

Prudential the UK based major insurance company has highlighted Asia as its cornerstone market for business growth over the next 2 years. Pru's chief executive, Tidjane Thiam stated - at the Prudential Investor Conference in December 2010 - that the global insurer plans to drive the group's profits from business operations in Asia. Despite the UK-based insurer's highly publicized failed acquisition bid of £22.2 billion (US$35.5 billion) for AIG's Asian arm AIA - leaving Prudential with a pre-tax bill of £377 million (US$ 599 million) - earlier in 2010, the insurers desire to rapidly expand its presence in Asia has not been dampened. Although the UK's largest insurer failed in its bid to takeover AIA, Prudential is still setting its sights on the Asian region to stimulate future growth for the group. In 2009, Prudential recorded new business profits of £713 million (US$1.13 billion) from Asian operations and now has set itself a target to double profits in the region by 2013. Like many global insurers, Prudential has been finding trading conditions in established markets challenging in recent years, but now is setting a clear strategy to target the Asian region for profitable new business. Asia has emerged from the worldwide financial crisis in 2007-2008 as the catalyst for global prosperity, with many organizations shifting business focus from western hemisphere countries to the growth markets in Asia in order to capitalize on the increasing affluence in the region. China and India are leading the charge in economic expansion, with both Asian powerhouses reporting bumper growth in demand for insurance products; countries such as Thailand, Vietnam and Indonesia are also developing in concert with their regional powerhouse neighbors. Speaking on the aspirations for Prudential's goals in Asia, Tidjane Thiam said: "The objectives for Asia reflect our belief that Asia will continue to offer the highest growth and higher return opportunities for a generation or more. Market conditions in Asia continue to be positive, with Asian economies performing strongly in spite of a challenging global environment." The Pru has enjoyed positive trading conditions so far this year, with the insurer reporting a 17 percent increase in the third-quarter 2010 - resultant sales totaling £809 million (US$1.3 billion), with operations in Asia driving new sales for the group. Tidjane Thiam also said: "These new objectives demonstrate that Prudential is uniquely positioned, delivering both rapid, profitable growth in emerging markets and generating strong cashflows." The Prudential has set out its strategic priorities in its drive to increase its share of the Asian insurance market. These include enhancing the quantity and quality of its agency network in order to increase its reach on a regional level and to develop new distribution partnerships. This will be coupled with the introduction of innovative new products with which Prudential intends to capture a larger proportion of Asian insurance markets' expanding volumes and premium business. However, the Pru is not alone in its ambition to strengthen its position in the Asian insurance industry, with the likes of UK-based counterparts Aviva linking with Asuransi Winterthur Life of Indonesia to gain access to one of Asia fastest expanding life insurance markets. Also, companies such as Zurich and Generali have augmented their presence in Asia, where they have enjoyed positive trading conditions and robust profits. Indonesia has a population of 240 million people, a developing economy, an expanding middle class and more affluent population and a growing insurance industry. These factors provide global insurers with tremendous scope to establish and expand operations in this South Eastern Asian country. PT Prudential Life Assurance (Prudential Indonesia) is the Pru group's Indonesian insurance subsidiary. This company was established in 1995, but will face increasing competition from other western based insurers gaining access to the market - this includes Zurich which has entered into a partnership with Indonesia insurer PT Mayapada Life. Prudential has established a presence across the Asian region, which includes a network of distribution channels in mature markets in Hong Kong, Singapore, Korea and Malaysia. In addition to its presence in the developed Asian insurance market, Prudential also has a presence in nascent insurance markets in India, Indonesia, Vietnam, the Philippines and Thailand. Within this broad Asian network, Prudential is forecasting a significant increase in written premiums in Thailand and India; in the mature market in Singapore it recorded total insurance premiums of £561 billion (US$878 million) for the first 9 months of 2010. Although the Prudential has highlighted Asia as a pivotal market for the group's drive to increase profits, it will face strong competition from other international insurers targeting the Asian region for growth. The failed bid for AIA by Prudential lead to calls for the resignation of chief executive Tidjane Thiam. However, with the ambitious approach the insurer is now taking, many feel the British insurance giant group has now repositioned itself and is heading in the right direction - which has been reflected in its share price valuation. Insurance Companies Mentioned: Prudential Prudential - PruPrudential 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. Aviva Aviva InsuranceEurope's fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions. AIG The American International Group - AIGThe American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally. Zurich Zurich Financial Services GroupHeadquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
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