Prudential turns around with first-half adjusted profit of US$947 million on rising Chinese demand, strong growth in Indonesia, Africa

The UK insurer reported a first-half net profit of US$947 million versus a loss of US$1.5 billion a year earlier
The value of new business, a key measure of sales and future growth, surged 39 per cent to nearly US$1.5 billion

Banking & finance

Enoch Yiu

Published: 1:55pm, 30 Aug 2023

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British insurer Prudential reported strong first-half earnings as new policy sales to mainland Chinese visitors surged as they returned to Hong Kong to buy insurance products after the border reopened earlier this year.

Adjusted net profit for the first six months of the year came in at US$947 million, compared with a loss of US$1.5 billion a year earlier, according to a filing to the Hong Kong stock exchange on Wednesday. Operating profit rose 6 per cent to US$1.46 billion.

Prudential adopted the new IFRS17 accounting standard this year and adjusted the figures from a year earlier for comparison purposes.

The value of new business, a key measure of sales and future growth, surged 39 per cent to nearly US$1.5 billion.

The number of mainland Chinese tourists to Hong Kong stood at 10 million in the first half. Photo: Edmond So

“In the first half of 2023, in Hong Kong, both domestic and Chinese mainland visitor segments performed particularly well,” Anil Wadhwani, the new CEO of Prudential, who joined the insurer in February from rival Manulife, said in a post result briefing.

“Our agency channel has rebounded strongly in all segments as Covid restrictions ended, reporting 89 per cent growth in new business profit on an ex-economics basis.”

“Over the next five years to 2027 we will look to grow new business profits across all our markets more consistently, with an objective of 15 to 20 per cent compound annual growth from the level of new business profits achieved in 2022.”

Prudential moved Wadhwani to Hong Kong at the start of his tenure, breaking a tradition of basing its CEO in London. He said the move highlighted the important role of Hong Kong in the future growth of the company.

“Hong Kong is our home market. So winning in Hong Kong is absolutely crucial for us and we are delighted in terms of establishing a leadership position in the mainland Chinese visitors segment and domestic segment,” he said.

'Over the five years to 2027 we will look to grow new business profits across all our markets more consistently,’ said Anil Wadhwani, CEO of Prudential. Photo: Elson Li

He believes Hong Kong’s economy will grow about 4 to 5 per cent this year, boosted by the return of mainland visitors.

“We also believe that initiatives like the Greater Bay Area are going to be a source of ongoing growth in the medium to long term for Hong Kong,” he said.

The bay area, which connects Hong Kong, Macau and nine cities in Guangdong province, is envisioned by Beijing as an economic powerhouse.

Prudential and its rivals Manulife, HSBC Life, AIA and Cigna have all unveiled expansion plans in Hong Kong recently, after Chief Executive John Lee Ka-chiu said in December the government would introduce more policies to attract global insurers hoping to use Hong Kong as a hub to expand in Asia.

Prudential said 13 of the 22 markets it operates in Asia and Africa achieved strong growth in new sales, with Hong Kong seeing the highest growth at 68 per cent, as mainland visitors returned after the border reopened between Hong Kong and mainland China in January.

In the first half, 13 million travellers visited the city, including more than 10 million from mainland China, according to government data.

New sales in the first half rose 42 per cent in Indonesia, 31 per cent in Africa, 13 per cent in the Philippines and 12 per cent in Malaysia. However, they fell 3 per cent in Singapore and 18 per cent in Vietnam.

In June, Prudential made a foray into the Macau market, setting up its first branch there and completing its presence in all 11 cities in the Greater Bay Area. As the 13th life insurer to operate in Macau, Prudential competes with AIA, AXA and FWD among others.

Prudential’s asset-management arm, Eastspring, saw funds under management rise 3 per cent to US$227.7 billion at the end of June, from US$221.4 billion at the end of last year, as a result of higher insurance and retail fund sales.

Prudential’s shares rose 3.6 per cent to close at HK$100.8 on Wednesday after the results announcement at the lunch break, while the broader Hang Seng Index fell 0.01 per cent.

The insurer declared an interim dividend of 6.26 US cents per share, 9 per cent higher than its target.