28th Aug 2024 14:28
(Alliance News) - There were mixed feelings for Prudential PLC on Wednesday, with its outlook and higher dividend shining some positivity on falling profit.
"Prudential's big pivot to Asia over the last decade, which culminated in the shedding of its US and European operations in 2021, isn't playing out as the company would have hoped," AJ Bell's Russ Mould said.
"The insurance giant went to less mature markets in the pursuit of growth, betting on an emergent middle class having increased appetite for financial products and services, but in key geographies like mainland China and Hong Kong, that growth is proving elusive. Zero-Covid policies didn't help and the subsequent uncertain recovery in the Chinese economy has only compounded things."
Prudential raised its half-year dividend by nearly 10%, despite a two-thirds fall in profit, as adjusted profit rose and the Asia-focused insurer and asset manager said it is on track to achieve its five-year growth plan.
London-based Prudential reported USD394 million in IFRS attributable pretax profit in the first half of 2024, down 66% from USD1.18 billion a year before. The sharp fall in profit was due to negative "short-term fluctuations" in investment returns of USD1.08 billion, compared to negative USD287 million a year before.
Adjusted operating profit was USD1.54 billion, up 5.6% from USD1.46 billion.
Insurance business profit was USD1.69 billion, up 3.3% from USD1.64 billion. It was up 6% at constant currency. Within the insurance business, profit was up 20% in mainland China, up 27% in Singapore, and up 21% in Indonesia, all at actual currency rates. However, it was down 9% in Hong Kong and 8% in Malaysia on the same basis.
"Our resilient performance in the first half of 2024 was achieved having taken steps to reposition our business in the Chinese mainland ahead of both regulatory and macro-economic changes," Prudential said. "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."
Asset management profit rose by 6.2% to USD155 million in the first half of 2024 from USD146 million a year before.
New business profit was down 1.4% to USD1.47 billion from USD1.49 billion, but up 1% at constant currency. Prudential said growth in new business profit was 8% at constant currency when excluding "the effect of interest rate and other economic impacts".
Prudential said it saw a pick-up in sales momentum in June, which has continued into the second half of the year. It expects new business profit to grow in all of 2024 in line with its objective for 2022-27 of a 15% to 20% compound annual growth rate.
"We entered this year with a clear strategy and a set of outcomes we are confident in achieving by 2027," commented Chief Executive Officer Anil Wadhwani.
AJ Bell's Mould added: "Wadhwani has only been in post for a little over 18 months so he is likely to be given time to turn things around, but he will need to demonstrate that the targets outlined for 2027 are credible before long."
interactive investor's Richard Hunter was also positive about Prudential's outlook.
"The group's stated aims by 2027 are punchy, including new business profit growth of between 15% and 20% annually, but even at this early stage Prudential is confident in achieving these goals. Indeed, the outlook comments mention that the momentum seen so far this year is carrying over to the second half and that new business profit is in line with its objectives," Hunter said.
Prudential declared a first interim dividend of 6.84 cents, up 9.3% from 6.26 cents a year before. The company also noted that it has bought back 22 million shares for USD192 million in total since the launch of the first tranche of its USD2 billion share buyback.
Prudential shares were down 0.5% to 658.94 pence early Wednesday in London, with the wider FTSE 100 index down just 0.2%. The stock closed down 2.2% to HKD68.15 in Hong Kong.
By Sophie Rose, Alliance News senior reporter
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