Shareholders can be forgiven for being in two minds following Prudential’s 2006 results presentation on Thursday. On the one hand, headline numbers were stronger than the estimates of the most bullish analysts. On the other, hopes that the long-awaited strategic review would surprise with a radical solution were dashed. The UK’s second biggest insurer seems convinced it can continue to go it alone, and in one piece.

The management team’s conviction was best demonstrated by a 5 per cent dividend increase. This may be pretty irrelevant financially but after years of cash and capital constraints, it sends a strong signal to potential bidders that Prudential is not for sale. The announcement made in parallel, that it will be buying Equitable Life’s with-profits annuities business, is another show of Prudential’s resolve.

Certainly, a number of plans to improve the health of the UK business make sense. Low-margin products are to be rationalised, cost-cutting targets have been raised and Prudential is beginning to look into the possibility of distributing its inherited estate – money in its life fund in excess of what is needed to meet future liabilities. New health and home-equity offerings, coupled with a leading annuities business, should also help Prudential become a leading one-stop shop for retirees.

The trouble is that the positive trends underlying the global savings and retirement market are hardly a secret. Competition remains intense in Europe and the US, and capacity is flooding into the higher-growth markets of Asia, which now account for about a quarter of Prudential’s operating profits. Booming equity returns, which have spurred demand for savings products as well as lifting asset management profits, cannot be relied on forever.

But the biggest issue remains valuation. Not on earnings multiples, which even after these results look pretty full. Rather its break-up value – now certainly above £10 a share – will keep Prudential squarely at the front of many investors’ minds.

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