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Stock of the week: Prudential

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Written by:
14/03/2016
Helal Miah, investment research analyst at The Share Centre, picks life insurer Prudential as stock of the week.

Life insurer Prudential reported its full year 2015 results last week which were welcomed by the market as group operating profits climbed by 22% to £4bn. Key business units performed well with its Asia life business and asset management business continuing to see good new business and fund inflows. The Jacksons Life division in the US saw operating profits up 10% while the UK life businesses operating profits jumped 60% due to a more pro-active management style of its books.

Interested investors will be aware that there was disappointment in the M&G asset management business where market volatility caused net outflows and funds under management to drop. However, the final dividend was raised by 5% along with the announcement of a special 10p dividend.

At present, the company trades at a slight premium to many of its UK listed peers, but we believe this is a reflection of its robust earnings yield and the potential that is presented from its Asian growth proposition and the business continuing to target cash growth. The demographics of many Asian regions, and the rise of the middle class, should indeed provide a good growth story for Prudential for some time to come.

The FTSE 100 company believes it has adequate capital surplus to withstand further significant deterioration in the European market, which should provide some reassurance to investors. Furthermore, the Asian growth story continues to remain attractive over the long-term, along with its UK and US operations. As a result, we recommend Prudential as a ‘buy’ for lower risk investors with a balanced portfolio and looking for a positive investment idea that spans a number of regions.

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