Insurance giant Prudential today said its strategy to focus on profitable business in the UK had paid off following "clear" full-year profit growth at its domestic arm.
But a 34% leap in new business profit in Pru's fast growing Asian operation overshadowed the UK progress and helped lift group-wide operating profits by a quarter to £2.54 billion.
Prudential said while the UK and US were set to suffer amid an economic slowdown, the growth drivers were still "powerful" in Asia, where it has a strong presence with life insurance operations in 12 markets.
Pru's move to offload its loss-making Egg credit card business to Citigroup last year also helped the group deliver its 25% rise in 2007 operating profits, calculated on a European embedded value (EEV) basis, which measures the current value of future expected profits.
In the UK, Prudential said retail new business profit rose 17%, with total profits from sales up 4% at £277 million. The group said it was continuing its strategy of competing in those areas of retirement and savings where it can generate attractive returns.
A cost-cutting drive to revive the UK arm will also see it outsource nearly UK 2,000 jobs as it seeks to save £195 million a year.
Pru said today the outsourcing deal with Capita would provide a £60 million boost by 2011. It has already cut annual costs by £115 million as at the end of 2007 and Pru added that "plans were in place" for the remaining £80 million.
Pru's Asian division, which now accounts for more than half of the group's new business profits, reported operating profit up nearly 28%, breaking the £1 billion barrier for the first time. The group said it was on track to at least double 2005 new business profit within its Asian business a year early.
Pru's Asian operation is being closely watched amid speculation that some of China's biggest insurers are looking for UK investment.
Ping An Insurance was reported in January to be interested in a stake in Pru, with suggestions that the group may be looking to use £11 billion of fund raising to invest in the firm.
Mark Tucker, chief executive of Prudential, said the group's prospects for the year ahead remained "positive". He said: "There is significant volatility and nervousness in markets and it seems clear that there will be a period of less attractive economic growth trends in the US and in the UK than we have seen in recent years. Notwithstanding this, we believe that our strategy and our business model are very robust and will continue to deliver sustainable value."
"Over the longer-term the demographic, economic and social factors driving our business will continue and we are ideally positioned to capture a greater share of that growth," he added.
Pru shares opened 2% higher today.
