Prudential hit a new all time high after an upbeat trading statement, with business boosted by selling annuities to company pension schemes.
The insurer said new business profit in the first nine months of the year was up 17% on last year to £1.5bn. There was 15% growth in new business profit in Asia and 16% in the US, but the UK came out on top with a 28% gain, lifted by six bulk annuity transactions.
Its shares rose 16p to £14.91and Shore Capital analyst Eamonn Flanagan said:
Prudential’s excellent performance in the first nine months of 2014, with both new business volumes and profits ahead of our expectations and towards the top end of market forecasts, was delivered in the face of significant foreign exchange headwinds and turmoil within Indonesia, one of its key ‘sweet spot’ territories in Asia. The underlying figures at constant forex, growth of 17% in new business profits and 14% in volume, bears testimony to the strength of Prudential’s strategic positioning in the key Asian, US and UK markets, the depth of its franchise across the globe and the continued focus on capital efficiency and profitability over volume. This, in turn, should translate into excellent delivery of IFRS [international financial reporting standards] profits and cash, with investors ultimately benefiting via dividend flows.
Bernstein Research said:
Prudential reported a solid set of numbers at the third quarter, beating consensus, and in line with our estimates. Shorter-term macroeconomic challenges, and Asian currency weakness remains, but underlying earnings progress remains solid. We retain our outperform rating on Prudential [with a price target of] 1650p.
But Andy Hughes at Exane BNP Paribas was more circumspect, saying:
Prudential reported strong growth in third quarter sales, driven by Hong Kong. We expect this business will have had a boost from new agents hired in the period and a new critical illness product launch. The key challenge is whether this is a permanent uplift or a short term benefit. We expect the business is selling more cross border with profit business as the mainland economy slows, but this will be with-profit business adding little to the IFRS earnings in the near term. Regulation in Hong Kong has not been mentioned but we expect to be a headwind.
In our opinion Prudential is an expensive play on US variable annuity earnings growth. The US business accounted for two thirds of earnings growth last year, Asia is one third of IFRS operating earnings.
Overall the FTSE 100 finished 37.16 points higher at 6709.13, helped by better than expected German confidence figures, a positive US housebuilders index and hopes of further measures to stimulate the Japanese economy after the government delayed a tax increase and called a snap election.
Miners were mixed, with Randgold Resources rising 109p to £44.28 and Fresnillo adding 11p to 747.5p after gold and silver edged higher. But worries about Chinese economic growth hit base metal prices including iron ore, pushing Rio Tinto 54p lower to £30.04.
Elsewhere AstraZeneca added 88.5p to £46.85 after an upbeat strategy day, against the backdrop of uncertainty over whether US rival Pfizer would renew its takeover attempt.
Tullow Oil ended 16.3p higher at 475p after its recent plan to cut back spending on exploration activities. Liberum said:
Reduced exploration spend will take some pressure off the balance sheet while maintaining activities in low cost East Africa. It shows Tullow’s portfolio is broad enough to offer choices. Other revisions have been unhelpful and our net asset value has come back 4% to 495p. More important for us, lower cash generation means less value could be added through reinvestment. Our target price has come back from 888p to 720p - we remain buyers, awaiting further success in Kenya.
But Salamander Energy slumped nearly 18% to 90p as Spain’s CEPSA said after the market closed on Monday that it had decided not to proceed with a takeover offer. Ophir Energy has yet to reveal whether it will make a formal offer.
Finally Nostra Terra Oil and Gas added nearly 4% to 0.285p after a positive report from the fourteenth well at its Chisholm Trail Prospect in the US. It said:
CT-14 is performing in excess of management’s initial expectations and with [our] 20% working interest the well will materially improve our free cash flow.
