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Prudential sees profit boost from Asia, demerger holds on track

FILE PHOTO: The logo of British life insurer Prudential is seen on their building, in London October 21, 2008. REUTERS/Stephen Hird/File Photo

By Simon Jessop and Chandini M

LONDON (Reuters) - Prudential (PRU.L), Britain's largest insurer, said new business profit from its life insurance operations rose 17 percent in the first nine months of the year, driven by another robust performance in Asia.

After a tough year for many asset managers, however, Prudential said its two fund management units, M&G Investments and Asia-focused Eastspring, had both posted net outflows of external client money.

"A key positive in Prudential's trading update is a move up in Asian volume growth," said KBW analyst Greig Paterson in a note to clients, flagging an 'outperform' rating and 2,100 pence price target, although he called the outflows "disappointing".

At 0909 GMT, shares in Prudential were down 0.5 percent, in a 1 percent weaker FTSE 100 (.FTSE).

The life insurer, which has a market value of around 42 billion pounds, is in the process of demerging that will see the UK and European insurance and asset management units of the 170-year-old company split off into a separate company.

Once the new company, M&G Prudential, lists in London, the remaining international operations will refocus on faster-growing markets in Asia - particularly China - as well as the less tightly regulated U.S. market.

The planned demerger is on track, Prudential said in the business performance update ahead of an investor day event in Singapore.

The company said new business profit in Asia, where a burgeoning middle class has boosted demand for insurance, rose 15 percent to 1.76 billion pounds.

"As we look ahead post-demerger, the profitable growth prospects of our Asia businesses remain substantial, given the increasing protection and savings needs of our customers and the extent of the footprint we have established," Group Chief Executive Mike Wells said.

The company's U.S. operation, Jackson, posted a 22 percent increase in new business profit to 716 million pounds, buoyed in large part by rising interest rates and tax reform.

Prudential's in-house asset management arms, which invest both the premium income it receives from writing insurance business and cash from third-party retail and institutional investors, both posted outflows.

Rising market volatility over recent months has spooked retail investors and led to slowing growth or net outflows at rivals including Jupiter Fund Management (JUP.L) and Standard Life Aberdeen.

External net outflows at its M&G Prudential unit over the nine months to the end of September were 5.6 billion pounds, a reversal from inflows of 9.9 billion in 2017. Eastspring, meanwhile, saw net outflows of 2 billion pounds.

(Reporting by Chandini Monnappa in Bengaluru; Editing by Sriraj Kalluvila and Jan Harvey)