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Prudential PLC reports Q3 earnings

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Prudential PLC reported strong growth in Asia and of variable annuities in the U.S., but sales in the U.K. were hampered by regulatory changes in that country.

According to its third-quarter financial statement released today, new business profit in Asia climbed 20 percent to £990 million during the first nine months of the year, buoyed in part by a growing and increasingly wealthy middle class.

In the U.S., Prudential PLC’s affiliate, Jackson National Life, registered an 11 percent boost in new business profit in the first nine months of this year compared to the same period a year earlier, reaching a total of £756 million. That increase came despite the company’s strategy of temporary halting sales of variable annuities with guarantees.

Total annuity flows between January and September hit £6.5 billion, of which £2.1 billion came in the third quarter. By product type, total variable annuity (VA) annual premium equivalent (APE) rose to £1,000 million (from £970 million) for the first nine months of 2013. Much of that growth was driven, according to the company, by Elite Access, Jackson’s VA without income guarantees. It contributed £191 million of APE in the nine-month period compared to £40 million a year earlier. Excluding Elite Access, VA sales of £809 million were 13 percent lower than the prior year. Year-to-date, sales of variable annuities that do not feature living benefit guarantees comprise 30 percent of sales versus 15 percent in the prior year. Jackson National is not alone in taking measures to address the balance sheet risk of lifetime income guarantees. Hartford and AXA have offered buyouts of lifetime income riders, and other carriers are raising fees and trimming benefits.

Meanwhile, fixed annuity sales of £44 million remained relatively flat compared to 2012, while fixed indexed annuity APE sales of £84 million increased 6 percent compared to the same period in 2012.

In the U.K., total new business profit of £204 million was 10 percent below the first nine months of 2012. That drop was due to lower sales of bulk annuities and the impact of regulatory changes in the country following the implementation of the Retail Distribution Review and the introduction of the ABI Code on Retirement Choices, an initiative the country’s financial review agency has undertaken to ensure consumers shop around before buying an annuity.

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