Prudential to prioritise Asia after split

Prudential will prioritise investing in Asia following the demerger of its UK business as it seeks to step up expansion in the region that already accounts for more than half of its profits.

“This new group . . . will be Asia led,” Nic Nicandrou, the insurance company’s chief executive for Asia, told the Financial Times.

He said the region would be “the preferred destination of capital for the group, whether it’s to branch out into new segments, develop new products and services, build out new relationships and develop new routes to market . . . Asia will be the priority”.

In October Prudential split its UK M&G business from operations in Asia and the US in a demerger that had been under way since March 2018 and cost £355m.

The sharper focus on Asia will raise questions about what will happen to the group’s other businesses. Prudential has a relatively small operation in Africa and a much more substantial business — called Jackson National Life — in the US. 

Asian operations account for nearly two-thirds of the company’s revenues and more than half its profits, said Mr Nicandrou. “But we’re still scratching the surface.”

As of June, Hong Kong was Prudential’s most profitable Asian market, followed by Indonesia.

Mr Nicandrou argued that the unrest that has engulfed Hong Kong for the past six months would only have a “temporary” impact. He said existing customers — whose premiums are four times those generated by new clients — as well as sticky demand from mainland China for more sophisticated products would support the business there in the longer term.

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Premium income at Prudential’s mainland China business grew by 55 per cent in the first half of this year, versus a market average of 13-15 per cent, said Mr Nicandrou. 

Prudential wants to expand its asset management business to capture growing wealth in the country, he added. Its fully owned private fund manager, which manages Rmb125m in equity investments, will launch a bond fund in the first quarter of 2020 and aims to create a multi-asset offering next year. 

Meanwhile, Indonesia is among Asia’s “populous countries” where Mr Nicandrou forecasts most business growth. At 260m, Indonesia hosts the world’s fourth-largest population but only 18m private insurance policies have ever been sold to just 13m people, he said. 

Progress in Indonesia has not always been smooth. In 2016 Prudential’s sales there fell 25 per cent amid what it called challenging trading conditions. Operating profits there last year were no higher than they were two years previously. 

To grow in this market, the company is focusing on technology — in June it partnered with Ovo, one of Indonesia’s largest digital payments platforms — and on smaller clients: in July it launched group insurance targeting SMEs.

Some shareholders want Prudential to demerge or sell its Jackson division but bankers have said that stock market valuations for similar US businesses are low so the group would not secure a high price for it. 

For the moment, analysts expect the company to try to diversify Jackson, possibly with some bolt-on acquisitions.



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