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Prudential's profits rise on back of expanding middle class in China Prudential's profits rise on back of expanding middle class in China
(about 3 hours later)
China’s growing middle class has helped profits increase for British insurer Prudential, but the company’s strong results were overshadowed by large withdrawals at its UK fund management arm.China’s growing middle class has helped profits increase for British insurer Prudential, but the company’s strong results were overshadowed by large withdrawals at its UK fund management arm.
Prudential has for years focused on selling insurance and savings products to Asia, where sales rose 20% in the third quarter. The insurer recorded its best-ever performance in Hong Kong, where more than half of sales are made to customers from mainland China, with sales up 73%. Prudential has for years focused on selling insurance and savings products to Asia, where sales rose by 20% in the third quarter. The insurer said Hong Kong’s strong performance continued between July and September, and sales were up 73% in the first nine months of the year. More than half of sales in the territory are made to customers from mainland China.
The company says its regular premium savings product remains popular with young customers in their 20s and 30s who want to save for the future in times of stock market turmoil. Luxury goods companies such as Burberry, on the other hand, have been hit by a slowdown in Chinese spending. The company says its regular premium savings product remains popular with young customers in their 20s and 30s in Hong Kong, who want to save for the future in times of stock market turmoil. On the other hand, luxury goods companies such as Burberry and LVMH have been hit by a slowdown in Chinese spending.
Prudential’s chief executive, Mike Wells, who took over from Tidjane Thiam in June, said: “You could be excused for assuming that we might have been hit by the rollercoaster ride we’ve seen in the Chinese equity markets.” But he added that the long-term prospects in China remained good. Prudential’s chief executive, Mike Wells, who took over from Tidjane Thiam in June, has stuck to his predecessor’s Asian strategy. “You could be excused for assuming that we might have been hit by the rollercoaster ride we’ve seen in the Chinese equity markets,” he said. But he added that the long-term prospects in China remained good.
“In Asia, we continue to target the huge opportunity offered by the growth of the middle class … Many people have – wrongly, in my view – been looking at the Shanghai Composite Index as the barometer of the health of the Chinese economy,” Wells said. “In Asia, we continue to target the huge opportunity offered by the growth of the middle class … Many people have – wrongly, in my view – been looking at the Shanghai Composite Index as the barometer of the health of the Chinese economy. There are better metrics to measure the Chinese economy,” Wells said.
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China’s middle class has expanded to 109 million adults this year, outnumbering for the first time the US, with 92 million, according to Credit Suisse’s annual wealth report last month. He pointed to the expansion of China’s middle class. It has reached 109 million adults this year, outnumbering for the first time the US, with 92 million, according to Credit Suisse’s annual wealth report last month.
Despite wild swings in China’s stock markets over the summer, Prudential’s profit from new business in Asia jumped 24% to £976m in the first nine months of the year, with sales up 27% to just over £2bn. The company’s overall new business profit rose 13% to £1.76bn. Despite wild swings in China’s stock markets over the summer, Asia remained Prudential’s main growth engine. Profit from new business rose by 24% to £976m in the first nine months of the year, with sales up 27% to just over £2bn. The company’s overall new business profit increased by 13% to £1.76bn.
There was a slowdown in some areas for Prudential in mainland China, mainly owing to falling demand for single-premium products. Regular premium sales, however, were up 23% in the third quarter. Mainland China posted a 4% fall in sales in the third quarter, owing to lower demand for single-premium products amid the stock market turmoil. Regular premium sales, however, were up 23%. Over the first nine months, sales in China rose by 32%. South Korea, the Philippines and Thailand were also strong, offsetting declining sales in Indonesia and Singapore.
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Not all Asian markets are strong: analysts at JP Morgan Cazenove highlighted falling sales in Singapore, Malaysia and Indonesia. Prudential’s shares fell 3% on Tuesday to £15. Investors pulled nearly £4bn of funds from its UK asset management arm M&G amid worries about fixed income markets. This was offset partly by new investments, resulting in net fund outflows of £2.7bn.
Prudential’s shares fell 2.7% in early trading on Tuesday to £15. Investors pulled nearly £4bn of funds from its UK asset management arm M&G amid worries about fixed income markets. This was offset partly by new investments, resulting in net fund outflows of £2.7bn. Its US business, Jackson, posted a 4% decline in new business profit to £557m in the first nine months of the year. In the UK, profit rose by 16% to £231m, despite a 50% fall in individual annuity sales following pension changes, which also led to more interest in savings products.
Its US business, Jackson, posted a 4% decline in new business profit. In the UK, profit rose 16% to £231m in the first nine months of the year, aided by pension changes that have led to more interest in savings products.