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Prudential's full-year earnings up on stronger Asia growth; to spin off M&G Prudential

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BRITISH insurer Prudential on Wednesday reported a 6 per cent rise in IFRS operating profit for the full-year ended 2017 to £4.7 billion (S$8.6 billion) on a constant exchange rate basis, led by double-digit growth in its Asia business.

BRITISH insurer Prudential on Wednesday reported a 6 per cent rise in IFRS operating profit for the full-year ended 2017 to £4.7 billion (S$8.6 billion) on a constant exchange rate basis, led by double-digit growth in its Asia business.

Asia new business profit was up 12 per cent, mainly as a result of prioritisation of health and protection products and positive pricing actions.

IFRS operating profit from the Asia business grew 15 per cent to £2 billion, "reflecting continued business momentum", the company said.

Underlying free surplus generated increased by 19 per cent.

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In the US, IFRS operating profit increased by 3 per cent, due mainly to growth in fee income on higher asset balances, which outweighed the anticipated reduction in spread earnings.

In the UK, M&G Prudential's total IFRS operating profit was 10 per cent higher than the prior year. This reflected 6 per cent growth in the insurance business, with core life operating profit "stable" at £597 million, and record asset management profit of £500 million resulting from the positive impact on earnings of net fund inflows, supportive markets and higher performance fees.

In the UK, PruFund new business annual premium equivalent sales increased 36 per cent to £1.2 billion, while M&G recorded net inflows of £17.3 billion from external clients.

Overall, M&G Prudential assets under management reached £351 billion, up from £311 billion at Dec 31, 2016.

Profit attributable to equity holders came in at £16.1 billion, up 10 per cent compared to the year before.

Earnings per share for FY2017 stood at 93.1 pence, up from 75 pence a year ago.

Full-year ordinary dividend rose 8 per cent to 47 pence per share.

On Wednesday, the group also announced that it will demerge its UK & Europe business, M&G Prudential, from Prudential plc, which will cover Asia, Africa and the US, "resulting in two separately-listed companies with different investment characteristics and opportunities".

Following the demerger, Prudential plc will remain headquartered in the UK and retain its premium listing on the London Stock Exchange, its primary listing in Hong Kong, and other listings in Singapore and New York. M&G Prudential also will be headquartered in the UK and take a "premium" listing on the London Stock Exchange.

The merger of M&G and Prudential's UK life insurance business, Prudential UK and Europe, to create M&G Prudential was only established last August.

In line with the demerger, Prudential also announced on Wednesday that M&G Prudential has agreed to sell £12 billion of its UK annuity portfolio to Rothesay Life. Based on asset and liability values as at Dec 31, 2017, the transaction is estimated to give rise to a pre-tax IFRS loss of around £500 million in the first half of 2018, alongside the de-risking being achieved.

The capital benefit of this transaction will be retained within the group to support the demerger process, said Prudential.

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