Prudential Plc, the U.K.’s biggest insurer, is eyeing markets in Africa including Nigeria and Kenya for its next leg of growth after surging profits in Asia helped drive the stock to a record.
The insurer has extended its partnership in Asia with Standard Chartered Plc by 15 years and plans to expand the venture to more Asian and African nations, London-based Prudential said in a statement today. The company posted a 17 percent increase in 2013 operating profit and boosted its dividend 15 percent, beating analysts’ estimates.
Africa is “a country story, a city-by-city story,” Chief Executive Officer Tidjane Thiam, a 51-year-old Ivory Coast native, said in an interview with Bloomberg Television in London. It’s “like Asia in the 1990s. We rode Asia in a wave of urbanization, and the same forces are at play in Africa.”
Prudential is looking to Africa to capitalize on rapid economic growth and a rising middle class. It bought Ghana’s Express Life Co. for an undisclosed sum in December, marking its entry into the region’s life-insurance market. Even so, Thiam still sees Asia as at the “heart of future prospects” after the company reached its final 2010 target to double profit in the region by 2013.
The shares rallied as much as 5.8 percent to the highest level since at least 1988 as group operating profit rose to 2.95 billion pounds ($4.9 billion), beating the 2.83 billion-pound median estimate of 24 analysts surveyed by the company. The full-year dividend increased to 33.57 pence a share, above the 31.56 pence estimate.
Prudential, which gets about half its revenue from Asia, said new business profit in the region climbed to 1.46 billion pounds and operating profit rose to 1.08 billion pounds, more than double 2009 levels. In the Asian market, the “pie grows faster than our ability to eat it,” Thiam said.
Today’s deal with Standard Chartered ensures that the London-based lender, which makes most of its profit in Asia, is the exclusive seller of Prudential’s life insurance in nine countries, including India, Thailand, Malaysia and Vietnam.
“The Asian business is proving resilient in the face of emerging-market currency volatility and macro-economic growth concerns,” Edward Houghton and John Gately, analysts at Sanford C. Bernstein in London, said in an e-mailed note after the results, repeating their outperform rating.
The stock closed up 2.7 percent to 1,398 pence a share in London, valuing the firm at about 36 billion pounds. The shares have climbed 39 percent in the last 12 months, outpacing the 24 percent gain by the 19-member FTSE 350 Insurance Index.
Thiam said in 2012 that doubling profit in Asia by the end of 2013 would provide the unit with enough cash to fund itself, potentially leading to a spinoff.
The CEO said today in an interview that Prudential was “not there yet,” and that a potential spinoff was “just another option” for the future.
In the U.S, Prudential’s Jackson National Life business reported a 30 percent jump in full-year operating profit to 1.3 billion pounds as the unit gave back 294 million pounds of cash to the group.
M&G Investments, the insurer’s money-management arm, increased its 2013 profit 23 percent to a record 395 million pounds, boosted by net inflows from third-party investors. External funds under management increased 14 billion pounds to 126 billion pounds, the statement showed.
Prudential said in December that it plans to generate at least 10 billion pounds in cash in the next four years. It follows British insurance peers Legal & General Group Plc, Standard Life Plc and Aviva Plc in raising dividends.
Prudential Plc has no relation to Newark, New Jersey-based Prudential Financial Inc.