30th Apr 2024 12:26
(Alliance News) - Shares in Prudential PLC fell on Tuesday after a "mixed" trading update disappointed analysts on a number of fronts.
Shares in Prudential were down 4.3% to 709.40 pence each in London midday Tuesday.
The Asia-focused insurer said first-quarter new business profit, excluding economic impacts, rose 11% at constant exchange rates to USD810 million from USD727 million a year prior. But, after allowing for economic impacts, new business profit was broadly unchanged at USD726 million.
At actual exchange rates, and factoring in the "economic impacts", new business profit fell 2.3%.
First-quarter annual premium equivalent sales increased 4.2% to USD1.63 billion from USD1.56 billion a year prior, despite strong comparatives in Hong Kong and headwinds in Vietnam. At constant currency, it grew 7.3%.
Chief Executive Anil Wadhwani said he was "pleased" with the results.
"Our continued focus on the quality of business written is reflected in new business profit (excluding economic impacts) growing more than APE sales. Our total APE sales have grown sequentially each quarter since [the third quarter of 2023], reflecting resilient consumer demand across Asia and demonstrating the strength of our multi-market and multi-channel distribution model," the CEO said.
Wadhwani said this provided the insurer with a "sound base" for continued new business growth in 2024.
"We are increasingly confident in achieving our 2027 financial and strategic objectives," he said.
There was no share buyback, but Wadhwani said Prudential will provide an update on its capital management plans by its half-year results.
In Hong Kong, total APE sales grew 1%, Prudential said, despite the significant rebound in the first quarter of 2023. Both domestic and Chinese Mainland visitor segments grew.
APE sales rose 2% In Singapore and by 29% in Malaysia, but fell 10% in Indonesia.
Across the businesses in its "growth markets and other" segment, a strong increase in APE sales of 28% was generated in total, driven by Thailand, Taiwan, India and Africa. This more than offset continued weakness in Vietnam. New business margins declined given business mix effects, but given the significant growth in APE sales, overall new business profit increased.
Analysts at UBS said the update was "mixed" with sales in line with forecast, but new business profit 12% below the bank's expectation.
UBS noted the new business margin was 45%, significantly lower than 53% in 2023. The bank said this appears to be driven by Hong Kong, with a margin of 69%, which was below Visible Alpha consensus of 72%.
The margins in Indonesia, Malaysia and Growth Markets also appear to be lower due to channel and mix effects, UBS noted.
Jefferies felt that the market was hoping for a share buyback, especially after AIA Group Ltd's announcement on Monday.
However, the investment bank pointed out Prudential management expects to provide an update on its capital management plans with half-year results.
AIA pledged an additional USD2 billion in share buybacks, alongside a 27% rise in new business. The statement lifted Prudential's stock price on Monday in a positive read-across.
Jefferies pointed out Prudential's growth of 11% was considerably slower than AIA's 27%, although this reflected stronger comparative periods for
Prudential in Hong Kong and China while Vietnam also remains a headwind.
For KBW, the main driver of the miss seems Hong Kong. But it noted Prudential has said it should get back to the greater than 70% margin here by the full year, which "is reassuring if it occurs."
"All-in, we think consensus is likely to be more disappointed," the bank said, although it noted the "top-down guidance is that full-year trends are on track."
KBW pointed out Prudential's trailer of capital management updates "needs to be seen in the context of ongoing interest in bancassurance deals, especially in Indonesia and Malaysia."
By Jeremy Cutler, Alliance News reporter
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