(An article published on Tuesday August 12 at 12:03 misstated the amount of funds M&G has under management. The correct version follows.)
LONDON (Alliance News) - Prudential PLC Tuesday upped its interim dividend by 15% to 11.19 pence per share, as it reported a 7% increase in operating profit based on longer-term investment returns before tax, though results were hurt by the strengthening of the pound.
In a statement, the financial services group, which operates in Asia, the US and the UK, said it made a GBP1.52 billion operating profit in the six months ended June 30, compared with GBP1.42 billion in the corresponding period last year.
This was driven by Prudential's long-term business, such as life insurance, which showed an 18% increase to GBP686.0 million in the US, where Prudential targets the baby boomer generation through Jackson National Life Insurance Co. Prudential said the increase in the US was primarily driven by increased fee income from higher separate account assets.
A 10% increase to GBP374.0 million was reported in the UK, where Prudential benefited from higher levels of bulk annuity transactions. In Asia, operating profit increased by 2% to GBP483.0 million, but the increase came to 19% at constant exchange rates.
Similarly, the increase in US operating profit was higher at constant exchange rates, at 28%.
M&G Investments, within Prudential's asset management business, saw its operating profit increase to GBP249.0 million from GBP225.0 million, helped by third-party net inflows combined with favourable market movements. M&G grew its external funds under management by GBP14.7 billion to GBP132.8 billion. Eastspring Investments, Prudential's Asia asset manager, reported an increase to GBP42.0 million from GBP38.0 million.
Pretax profit attributable to shareholders multiplied to GBP1.42 billion from GBP506.0 million, primarily due to short-term fluctuations in investment returns from Prudential's insurance operations, which took just GBP14.0 million away from operating profit in the recent half, compared to a GBP725.0 million negative fluctuation a year before.
Chief Executive Tidjane Thiam said Prudential's performance came despite challenging conditions including macroeconomic concerns in Southeast Asia and significant disruption to the UK life market, where the effective requirement for individuals to turn their pension pots into products guaranteeing income in retirement was put to an end by the Coalition government.
"Looking ahead, outside the Eurozone, which continues to grapple with significant, unresolved economic and political challenges, GDP growth is forecast to accelerate in the US and the UK. Growth in the emerging economies of Asia is expected to continue outpacing growth in the advanced economies," Thiam said.
"The fundamentals for our businesses in Asia remain compelling - strong economic growth and significant and rising demand for insurance from a rapidly growing and increasingly prosperous middle class, which is under-insured. This is what we call the Asian 'protection gap'," he added.
Shares were Tuesday mid-morning quoted up 1.6% at 1,360.00p, leading all FTSE 100 gainers.