An eighth successive decline gave the FTSE 100 its longest losing streak since 2003 with Prudential among the fallers. Prudential slid 3.5 per cent to 555p as analysts questioned whether management’s targets were realistic in the market turmoil.
At a meeting last week in Kuala Lumpur, Prudential said it remained on track to double Asian new business and profits by 2013.
“We’re left still struggling to see how they would meet these,” said Exane BNP Paribas. “The main justification appeared to be extrapolation of first-half trends. The rather gloomy economic outlook was not mentioned.”
Prudential has boosted growth in markets such as Malaysia by cross selling to existing customers, a trend Exane argued would not be sustainable.
Feedback from agents also suggested to the broker that customers might be buying critical illness cover thinking it was income protection. (One lump sum is paid upon policyholder being diagnosed for 36 Critical illnesses.)
“The company risks long-term brand damage if policyholders expect payments for illness which are not paid by the group,” said Exane. It forecast Prudential to fall short of its Asian new business target by more than a third.
All Insurance Premium Rate are carefully calculated (by actuary)based on past mortality / morbidity rate plus other factors (investment yield, expenses etc). Scope of Coverage for Critical Illnesses may be specific (ie in Malaysia 36 illnesses)- and the end-premium rate reflects its limitation. Insurance Protection have evolved from mere death / disability to disability especially due to major illnesses.
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