Global life insurance and asset management services provider Prudential reported good first-half 2010 results, and raised its interim dividend 5%. On a European Embedded Value (EEV) basis, pretax operating profit totaled £954 million, up from a crisis-depressed but positive £67 million in the first half of 2009. But the first half of 2010 results also represented a solid improvement from a good performance in the first half of 2008. New business sales in life insurance rose 28% above the first half of 2009, and also posted a good increase on a sequential basis from the latter half of 2009, with positive contributions from all three (UK, US, Asia) main reporting regions. Funds under management rose 7% from year-end 2009 to £3.4 billion at mid-year 2010, and were up over 25% from financial crisis-depressed year-earlier levels. Net inflows remained positive in M&G's asset management operations, although they were actually down from a year ago, as M&G's bond funds attracted significant new capital during the 2009 financial crisis.
Prudential's costs to terminate its attempted purchase of American International Group's AIA life operations added £377 million of pretax expense to first half 2010 results; this was a lower amount than Prudential originally estimated, but still a meaningful drag. Yet Prudential still managed to report an annualised gain of 19% in shareholder funds per share in the first half of the year, just below a 23% pace in the latter half of 2009. Prudential's annualised return on embedded value came to 16% in the first half of 2010, well in excess of our estimate for its cost of equity capital. Overall, Prudential looks to have had a very productive start to 2010.
Bill Bergman is an equity analyst with Morningstar.
