Prudential H1 profits rise as new CEO unveils pivot towards Asia

Insurer Prudential on Wednesday posted a better-than-expected 6% rise in first-half operating profits as Chinese investors bought its products in Hong Kong after Covid restrictions were lifted, and also outlined a new investment strategy pivot towards Asia.

Adjusted operating profit of the London and Hong Kong dual-listed company was came in at $1.46bn for the six months to June 30, compared with $1.41bn a year earlier and company-compiled estimates of $1.38bn.

Chief executive Anil Wadhwani, who joined the insurer in February, also unveiled a new strategy to target investment in structural growth markets across Asia and Africa.

Prudential said it expected the plan to generate 15-20% compound annual growth in new business profit by 2027, and achieve double-digit compound annual growth in operating free surplus in the same period.

Prudential's annualised premium equivalent (APE) sales, rose 37% to $3bn on a stronger pickup in sales from Chinese mainland visitors to Hong Kong. This figure also beat the consensus forecast of $2.93bn.

"Prospects in China are also receiving a twin boost, despite the current economic uncertainty. On the one hand, regulatory proposals in the region are favourable for insurance markets, while ... demographics are also improving given an ageing population, an emerging middle class and rapid urbanisation, to which Prudential is attuned," said Interactive Investor head of markets Richard Hunter.

"Asia generally has low levels of life insurance penetration compared to more developed markets, given that state provision of pensions and social security is limited."

"However, it has not all been plain sailing for Prudential over recent months, especially as the Chinese economy has failed to maintain any momentum gained after the reopening of the economy post-Covid .. and Prudential shares have dropped by 22% over the last six months."

"Despite this decline, the shares have managed a gain of 8% over the last year, as compared to a marginal rise of 1.4% for the wider FTSE100. An increase to the dividend (albeit at a projected yield of a pedestrian 1.6%) is a further sign of confidence, and Prudential has also indicated that the strong sales momentum is spilling over into the current quarter. "

Reporting by Frank Prenesti for Sharecast.com