Stocks in Focus: Prudential Plc

stethoscope/ life insurance

This week Jason Butler of NW Brown Wealth Management looks at Prudential, the global life insurance and asset management firm, following a positive trading update last week covering the first six months of 2019.

Performance was again driven by robust growth in the Asian business. Operating profit climbed 14%, which was 13% ahead of last year. Total assets under management rose 6% for the period compared to 2018, which more than offset net outflows of client cash. The company increased dividends by 5% to 16.45p a share.

Prudential has a substantial business in mainland China and Hong Kong, and derives a large portion of group profit from the region. The share price was affected recently by the long-running US-China trade dispute and it is carefully monitoring the ongoing protests in Hong Kong. Management has reassured investors that business in the region had not been impacted as the Asian business logged a 14% rise in operating profit. This is due to the growing demand for health, protection and savings resulting from increasing middle class population.

Last year, the group announced that it planned to split into two companies. The demerger of the UK M&G-Prudential business from the rest of the group, which include the US and Asian units, is currently underway. The split will create two different businesses - a new lower growth but cash generative £7billion FTSE 100 company, M&G Plc, which will look after the UK and European operations, and a high-growth Asia and U.S. business that will continue to trade as Prudential Plc. The latter will be listed in the UK, but will be subject to the regulator in Hong Kong, where capital rules are considered less onerous. Shareholders will be given one share in M&G for every share they own in Prudential. The demerger is expected to complete by the end of this year.

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