Prudential’s Sales Rise as Asia Growth Offsets U.S. WeaknessKevin Crowley
Prudential Plc, the U.K.’s biggest insurer by market value, said first-quarter revenue rose 8 percent as growth in Asia offset lower sales in the U.K. and a decrease in profit from new business in the U.S.
Revenue climbed to 1.04 billion pounds ($1.6 billion) in the period, beating the 1.02 billion-pound average estimate of 15 analysts surveyed by the company. The shares dropped.
Prudential’s results were “strong but not stellar,” Matthew Preston, a London-based analyst at Berenberg Bank, wrote in a note to clients today. “Given the stock’s recent performance, in our view the benchmark for delivery remains relatively high.”
The insurer, led by Chief Executive Officer Tidjane Thiam, said it is curbing sales in the U.K. and U.S. to defend profits and protect its capital position from being squeezed by low interest rates and volatile markets. Instead, the firm is focused on fast-growing nations in southeast Asia such as Hong Kong, Indonesia and the Philippines.
“Against a background of historically low long-term interest rates and uncertain economic growth, we remain focused on executing our strategy and capturing the long-term profitable growth opportunities available to us, particularly in Asia,” Thiam, 50, said on a conference call with reporters.
The stock declined 0.9 percent to 1,145 pence in London trading. It rose 32 percent this year, giving the company a market value of about 29.3 billion pounds.
Thiam, who this year became the first serving FTSE 100 Index CEO to receive a public rebuke from the U.K. regulator, rebutted criticism from shareholder groups such as Pensions Investment Research Consultants Ltd. over the firm’s pay plans.
“This year’s compensation was basically the 2009 compensation,” he said. “If we’re paid in shares and the share price doubles, our pay will double.”
PIRC, which advises clients with more than $2 trillion of assets, recommended investors oppose the re-election of Thiam as a director after he and the company were penalized for failing to tell the U.K. regulator early enough of its $35.5 billion bid for AIA Group Ltd. in 2010. The firm was fined 30 million pounds and Thiam received a public reprimand.
“That failed deal in itself would raise serious concerns about the judgment of the CEO and the board,” PIRC said. “The regulatory breaches take those concerns to another level.”
PIRC also said Prudential’s compensation structure “remains one favoring very high pay.”
The company’s share price has almost doubled since Thiam took over in October 2009. The board is proposing to pay the CEO 7.8 million pounds for 2012 even after the regulatory penalties.
Sales in Asia rose 12 percent to 495 million pounds in the first quarter, compared with the same period a year earlier, it said. Profit from new business climbed 5 percent to 563 million pounds including an 18 percent rise in Asia.
Profit from new business in the U.S., where the firm sells variable annuities, declined 10 percent to 192 million pounds. Sales dropped 2 percent in the U.K. to 185 million pounds.
The firm’s net flows into its asset-management divisions increased 66 percent to 3.5 billion pounds, bringing assets under management to 301.2 billion pounds.