Insurance giant Prudential (PRU) is one of the FTSE 100’s highest risers despite announcing a 52% drop in half-year pre-tax profits to £720 million. The group is up 3.5% to £12.26 because of a strong performance in Asia. Operating profits rise 22% to £1.4 billion, giving the insurer confidence to lift the dividend by 15.8% to 9.7p per share.
Asia accounts for almost half of the group’s half-year sales, offsetting a 14% fall in UK income. Also producing solid first-half numbers is the US operations, generating £294 million cash during the six months to end of June, beating its £260 million annual target. The growth in its Asian and US businesses was explored by Shares in April.
Earned premiums, net of reinsurance, are higher at £14.8 billion versus £13.7 billion a year earlier. Yet the reason why reported pre-tax profit is down so much is because investment returns are lower and expenditure higher than the comparable period. The market is focusing on operating profits, hence today's share price rise.
Drilling deeper into the numbers, profits at its core life and pensions business increase 1% to £341 million and those generated by its fund management business, M&G, are up 17% to £204 million.
The group’s net cash inflows comes in at £1.3 billion for the period, beating the £705 million achieved in the whole of 2012. It had £6.8 billion cash at the half year, up from £6.3 billion a year earlier.
Prudential’s management is working to a plan to re-assure its shareholders following the disastrous $35 billion failed bid for Asian insurer AIA (1299: HK) in 2010. Growth in its Asian business and cash generation are two of its targets.