Prudential: Insurer’s shares up as it posts £3bn profit and hikes dividends eight per cent after Asian and African re-focus

Wednesday 15 March 2023 6:47 am

Prudential has declared a nine per cent rise in dividend payments 18.78 cents per share for the full year, up nine per cent

Prudential hiked its dividend after posting an uptick in its operating profits following its first full year as an Asia and Africa focused insurance business.

The insurer, which was first set up in London in 1848 but has now moved its entire management team to Hong Kong, benefited from the easing of COVID restrictions in China in posting operating profits of $3.75bn (£3.09bn).

The dual Hong Kong and London listed company in turn upped its dividend by nine per cent, to 18.78c for the full year 2022, as it posted an eight per cent uptick in operating profits. 

Prudential chief executive Anil Wadhwani said the insurer had “delivered a resilient performance against a backdrop of Covid-19 related disruption and broader macroeconomic volatility.” 

In pivoting to Asia and Africa, Prudential is hoping to fill a gap in the market and capitalise on a major boom that is set to see the middle class in those continents grow to 1.5bn people by 2030.

Prudential business experienced growth in all major markets apart from Indonesia, in which the insurer’s business suffered from an uptick in medical claims following the lifting of the country’s COVID restrictions. 

At the time of reporting, shares in Prudential are up 1.24 per cent on the London Stock Exchange.

Wadhwani added: “2022 was the first full year for the Group as an Asia and Africa focused business. We have delivered a resilient performance against a backdrop of Covid-19-related disruption and broader macroeconomic volatility. The results reflect the advantage of our diversified business model across the Asia region, highlighted by a balanced contribution to APE sales and new business profit from Hong Kong, the Chinese Mainland and Taiwan and from South-east Asia, including Singapore, Indonesia and Malaysia.

“The removal of the bulk of Covid-19-related restrictions across the region and the progressive opening up of the Chinese Mainland economy has meant that 2023 has started well with encouraging progress in year-on-year sales, with group-wide APE sales for the two months ended February 2023 up 15 per cent over the prior year.

“In Hong Kong we have seen a gradual increase in cross-border traffic from the Chinese Mainland as travel restrictions are eased. Demand for savings products across the Hong Kong business is driving the increase in APE sales in the first two months of 2023.

Richard Hunter, head of markets at interactive investor, commented “Now fully focused on Asia and Africa, Prudential has been boosted by the recent reopening in China, allowing business to resume its growth trajectory.

“Indeed, the longer term strategy is very much intact, and the group is one which is on an extremely stable financial footing, boosted by a fund raising of $2.4bn in the last financial year which went towards reducing debt.

“The insurance and health protection markets within Prudential’s target geographies provide a rich seam of opportunities alongside increasingly wealthy populations with evolving financial needs.

“The company has pointed to an expected middle class population of 1.5 billion across Asia by 2030, with an estimated health protection gap of $1.8 trillion. The potential spoils are enormous and Prudential has a strong reputation in these regions.

Why China has boosted Pru’s profits

“Prospects in China are also receiving a twin boost. On the one hand, regulatory proposals in the region are favourable for insurance markets, while at the same time demographics are also improving given an ageing population, an emerging middle class and rapid urbanisation, to which Prudential is attuned.

“The reopening of the economy following the lifting of Covid-19 restrictions also provides a fillip to the Hong Kong business.

“Significant numbers of mainland Chinese customers choose to buy their insurance products in Hong Kong, since this provides both asset class and currency diversification, as well as access to a broad range of products and high-quality medical care.

“With travel now possible, Prudential has seen annual premium equivalent (APE) sales rise by 15 per cent in the two months to February of this year as compared to the year previous, largely driven by Hong Kong sales, and providing a welcome early boost to the group’s immediate outlook.

“Alongside those regions, Prudential has also seen the benefits of geographical diversification, with balanced contributions from the likes of Taiwan and South East Asia. In addition, the group is targeting further growth through a combination of growing its range of products, consolidating its distribution channels and enhancing its digital capabilities.”