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ROUNDUP Prudential Q1 sales beat expectations, but UK falls again
AFX
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LONDON (Thomson Financial) - Life insurer Prudential PLC reported better-than-expected first quarter sales, with a strong performance from its international division offsetting another downturn at its troubled UK operation.
Prudential, the UK's second-biggest insurer, said total sales for the three months to March 31 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 to 653 mln stg.
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.
Prudential's strong performance overseas 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 it booked in the first quarter of 2006. The insurer also lost 15 mln stg in sales compared with the year-earlier period as a result of 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 two years because of 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 11.30 am, Prudential shares were up 0.6 pct at 738 pence, valuing the company at about 17.9 bln stg.
Bear Stearns analyst Lance Burbidge said Prudential's progress in the UK had been hampered by a dearth of lucrative bulk purchase annuity deals, in which the company manages annuity portfolios on behalf of pension funds in return for a fee.
'It was disappointing to see that Prudential did not sell any bulk purchase annuity schemes in the quarter. We believe this is due to intensified competition,' he wrote in a note to clients.
The bulk purchase annuity market, traditionally dominated by Prudential and rival Legal & General Group PLC, attracted a string of new entrants last year. They include Paternoster, a start-up led by Prudential's former UK chief executive, Mark Wood.
Analysts said Prudential's shares remain supported by persistent speculation that the company, which last year rebuffed a 17 bln stg merger approach from UK arch-rival Aviva PLC, will be taken over. Last week, market rumour centred on a possible bid from HSBC Holdings PLC, Europe's biggest bank.
Prudential's Tucker declined to comment today.
'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.
Separately, Prudential today announced plans to sell health insurance through the stores of health and beauty retailer Alliance Boots PLC. The company hopes the scheme will boost its health insurance customer numbers to 200,000 by the end of the year, up from 108,000 at the end of March.
myles.neligan@thomson.com
af/slm/mn/ro/mn/bsd/mn/cml
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