Prudential’s interim results missed market estimates after a valuation loss in its investment portfolio drove the UK insurer to an unexpected plunge on its bottom line.
Net profit fell 87 per cent from last year to US$120 million in the first six months of 2024 after deducting a short-term investment loss of US$1.08 billion, in stark contrast to the US$1.08 billion net profit expected by analysts in Bloomberg’s consensus estimates.
Prudential’s investment losses quadrupled from the US$287 million it wrote down last year. The company, which traces its root to 1848 in London, performed well in its core insurance business. Operating profit, or income excluding one-off items or valuation change, rose 9 per cent to US$1.54 billion, in line with estimates.
Profit from new business, a key measure of sales and the future growth of insurance companies, increased 8 per cent to US$1.47 billion, bolstered by improving sales in Southeast Asia.
The value of new sales rose 3 per cent in Malaysia and jumped 17 per cent in Singapore, while mainland China decreased 18 per cent and Indonesia fell 29 per cent.
New business sales fell 7 per cent to US$955 million in Hong Kong, Prudential’s biggest revenue centre out of the 22 markets in Asia and Africa, while profit excluding economic factors rose 9 per cent to US$951 million.
“Our resilient performance in the first-half was achieved [after] having taken steps to reposition our business in the Chinese mainland ahead of both regulatory and macroeconomic changes,” Prudential’s chief executive Anil Wadhwani said in a statement to the exchange. “We also took decisive action on medical repricing in Indonesia and Malaysia in advance of the market. Other markets such as Singapore, India and Taiwan have performed well given our continued product innovation and expansion of distribution capabilities.”
The insurer targeted to grow new business profit to 2027 at a compound annual growth rate of 15 to 20 per cent from the level of 2022.
Hong Kong, which is a 15-minute ride by high-speed rail from Shenzhen in southern China, is the traditional shopping point for mainland insurance buyers seeking to hedge their risks. Two-thirds of the 21 million visitors who arrived in Hong Kong in the first half hailed from the mainland, according to the Hong Kong Tourism Board’s data, and many of them would stop by an insurer to pick up a coverage plan.
Mainland visitors spent HK$15.63 billion (US$2 billion) on insurance policies in the first quarter, a 62-per cent increase from the same period in 2023, according to data compiled by Hong Kong’s Insurance Authority.
Prudential’s Hong Kong business will continue to benefit from the influx of mainland insurance buyers, Wadhwani said.
In asset management, Prudential’s unit Eastspring Investment boosted its funds under management by 4 per cent to US$247.4 billion in the first half.
The insurer declared an interim dividend of 6.84 US cents per share, 9 per cent more than last year. Prudential announced in June a US$2 billion share buy-back to be completed by mid 2026.
Wadhwani, who joined Prudential from Manulife early last year, is the insurer’s first global head to be based in Hong Kong since its establishment 175 years ago. The UK insurer uses both London and Hong Kong as its headquarters.
Prudential’s shares fell 1.7 per cent to HK$68.50 in Hong Kong before the insurer announced its results. The stock has fallen 20 per cent this year, faring worse than the 5 per cent gain in the benchmark Hang Seng Index.
The insurer earlier this month hired former Citigroup Asia head Angel Ng Yin-yee as its chief executive for Greater China, customer and wealth, in its latest effort to further expand in the region.
“We have seen a pick up in sales momentum in June, which continues into the second half of the year,” Wadhwani said. “Given our performance so far in 2024, we continue to be confident in achieving our 2027 objectives and in accelerating the value we can bring to our shareholders.”
