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Prudential Q1 sales beat expectations, but UK down 23 pct UPDATE
AFX
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(Adds CEO comment, analyst reaction, further detail)
LONDON (Thomson Financial) - Life insurer Prudential PLC reported better-than-expected first quarter sales, with a strong performance in Asia offsetting a downturn at its UK division.
Prudential, the UK's second-biggest insurer, said total sales for the three months to March 31 2007 came in at 640 mln stg on an annual premium equivalent basis, up 8 pct compared with the same period last year at constant exchange rates.
Analysts had expected sales of 613 mln stg, according to a consensus forecast supplied by the company, with individual analysts' forecasts ranging from 580 mln stg to 653 mln.
The improvement was driven by Prudential's Asian business, where sales jumped 34 pct to 277 mln stg. The group also benefited from robust growth in the US, with sales up 21 pct at 180 mln stg.
This growth outweighed a sharp downturn in the UK, where sales fell 23 pct on the year to 183 mln stg, missing the consensus analyst forecast of 208 mln stg.
Prudential said the decline largely reflected a one-off 66 mln stg bulk annuity deal with Royal London in the first quarter of 2006. The insurer also lost 15 mln stg in sales compared with the year-earlier period following the expiry of a distribution agreement with high street bank Lloyds TSB.
Prudential's UK sales growth has lagged that of rivals for the last 2 years due to stiff competition and a weaker distribution network, according to analysts. Last month, the group announced plans to turn around the UK business by taking out 195 mln stg in costs and pulling out of less profitable segments of the market, wrong-footing expectations that the unit might be sold outright.
In a conference call with reporters, Prudential chief executive Mark Tucker said the turnaround plan was already yielding results.
'Many initiatives are in place that are already providing benefits. We're competing on terms that are economically sustainable,' he said.
By 9.15 am, Prudential shares were up 0.48 pct at 736 pence, valuing the company at about 17.9 bln stg.
Analysts said the shares remain supported by recurrent speculation that Prudential, which last year rebuffed a 17 bln stg merger approach from UK arch-rival Aviva PLC, will be taken over. Last week, market speculation centred on a possible bid from HSBC Holdings PLC, Europe's biggest bank.
Prudential's Tucker declined to comment.
'It is right for investors to be holding the stock on the basis of the bid speculation. It's only that speculation that is keeping the share price where it is as opposed to where it should be, which is somewhere below 6 stg,' said Collins Stewart analyst Tim Young.
Prudential also revealed that net fund inflows at asset management arm M&G fell 22 pct on the year to 1.4 bln stg, down 22 pct on the same period last year. It blamed the decline on a short-lived downturn that hit global equity markets in February this year, prompting greater caution among private investors.
myles.neligan@thomson.com
af/slm/mn/ro/mn/bsd
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