ii view: Prudential optimistic about growth and shareholder returns

Full-year results to 31 December

• Annual Premium Equivalent (APE) sales up 7% to $6.2 billion
• Currency adjusted new business profit up 11% to $3.08 billion
• Capital cushion or free surplus ratio of 234%, down from 242%
• Second interim dividend of 16.29 cents per share
• Total 2024 dividend up 13% to 23.13 cents per share

Guidance:

• Expects growth in 2025 new business profit of more than 10%
• Expects the 2025 dividend payment per share to increase by at least 10%

Chief executive Anil Wadhwani said: 

“The long-term growth trends inherent in our Asia and Africa markets are reasserting themselves, creating significant opportunities for us. 

"We are well positioned to capitalise on this growth opportunity. Our focus is on writing quality new business alongside managing our in-force business and improving variances by enhancing operational delivery and serving our customers' needs.”

• Invest with ii: What is a Managed ISA? | Open a Managed ISA | Transfer an ISA

ii round-up:

Prudential (LSE:PRU)sells protection products including life assurance, health insurance and saving related products, along with providing asset management services to its customers across both Asia and Africa.

Headquartered in Hong Kong, the FTSE 100 constituent company operates across 24 markets including China and India and is listed on stock exchanges in London, Hong Kong, Singapore, and New York.

For a round-up of these latest results announced on 20 March, please click here. 

ii view:

Started in London in 1848, Prudential separated from UK and US businesses M&G and Jackson Life in 2019, leaving it focused on Asia and Africa. Around 60,000 agents and over 200 banking partners help Prudential service around 18 million customers. Management focuses include powering the distribution of products via the use of technology, transforming the health-related insurance business and improving shareholder returns. 

For investors, the recent implementation of US tariffs could now see China making business more difficult for Western companies generally within its territories, including Hong Kong – Pru's single biggest country of profit generation in 2024 at just over a third. A global trade war and potential global recession might cause customers to reduce savings and insurance costs, impacting group performance. Currency headwinds can have an impact, while a forecast dividend yield of close to 3% compares with estimates of over 7% for UK insurers Aviva (LSE:AV.), Legal & General Group (LSE:LGEN) and Phoenix Group Holdings (LSE:PHNX).

• When markets fall, here’s what to avoid doing
• Can Africa replicate Asian economic miracle?
• Stockwatch: four defensive shares to consider amid market wreckage
• ii view: L&G plans return of billions more to shareholders

More favourably, insurance penetration rates remain low across Asia, offering significant selling opportunities. Diversity of both product and geographical region exist. Investment in technology, including AI to sift client data for potential new sales, is ongoing. A continued review of operations is underway, with proceeds from any business sales being returned to shareholders, while a focus on shareholder returns includes an ongoing $1.2 billion (£940 million) share buyback programme and the targeting of at least 10% growth in the 2025 dividend payment.  

On balance, and while risks in relation to China should not be ignored, there is still a huge opportunity for Prudential in Asia and Africa, while a consensus analyst fair value estimate above £11 per share implies continued optimism in the City. 

Positives: 

• Ongoing focus to improve operational performance
• Exposure to required health insurance across Asia and Africa

Negatives:

• China geopolitical tensions
• Potential currency headwinds 

The average rating of stock market analysts:

Buy