Prudential Plc’s 2 Greatest Strengths

When I think of life insurer Prudential (LSE: PRU) (NYSE: PUK.US), two factors jump out at me as the firm’s greatest strengths and top the list of what makes the company  attractive as an investment proposition.

prudential1) Expansion in Asia

Prudential’s CEO reckons Asia is at the heart of the firm’s future prospects. So, it’s satisfying to see the full-year results report a 16% up tick in operating profits in the Asia region. Around 34% of operating profit now comes from Asia, which is enough to make growth there significant and exciting for Prudential’s investors.

The firm is tapping into a growing demand for protection products from the rapidly expanding middle class in the region. The directors think the Asian business is capable of delivering long-term value for shareholders and the perky profit-growth figures that the firm is throwing out seem to underpin that prediction.

2) Steady growth in revenue

When it comes to monitoring Prudential’s financial performance, one indicator that it’s hard to argue with is revenue growth:

Year   to December 2009 2010 2011 2012 2013
Revenue   (£m) 20,299 24,568 25,706 29,113 30,502

Consistent upwardly moving revenue is essential for any long-term growth proposition. Firms of any shape or size can only grow profits by a finite amount by sharpening up operations and cost cutting. In the end, new business is needed and one indicator of that is revenue-growth. However, such growth needs to be at a rate above price inflation for the measure to be meaningful.

The challenge going forward is to grow profits and cash flows along with revenue.

What now?

Prudential is performing well in Asia but it’s worth bearing in mind that the firm operates in a cyclical sector. It’s best to consider growth expectations within the frame of such cyclicality.

That's why I'm also looking at potential investments with consistent cash flows whatever the macro-economic cycle is doing, and I've found some in a Motley Fool report prepared by our top analysts. The report highlights five shares with dependable all-season stalwart-like characteristics that seem attractive.

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Kevin does not own shares in Prudential.