Prudential’s interim results fell short of market estimates after a valuation loss in the British insurer’s investment portfolio led to an unexpected drop in profit.
Net income fell 87 percent year-on-year to $120 million in the first six months of 2024, after excluding a short-term investment loss of $1.08 billion, in stark contrast to the $1.08 billion net income expected by analysts in Bloomberg’s consensus estimates.
Prudential’s investment losses quadrupled from the $287 million it wrote off last year. The company, whose roots go back to London in 1848, performed well in its core insurance business. Operating profit, or income excluding one-off items or changes in value, rose 9 percent to $1.54 billion, in line with estimates.
Profit from new business, a key indicator of insurance companies’ revenue and future growth, rose 8 percent to $1.47 billion, supported by improved sales in Southeast Asia.
The value of new sales rose 3 percent in Malaysia and 17 percent in Singapore, while it fell 18 percent in mainland China and 29 percent in Indonesia.
In Hong Kong, the largest of the 22 markets in Asia and Africa, new business revenue fell 7 percent to $955 million, while profit excluding economic factors rose 9 percent to $951 million.
“Our robust performance in the first half was achieved after we took steps to reposition our mainland China business ahead of regulatory and macroeconomic changes,” Prudential’s chief executive Anil Wadhwani said in a statement to the stock exchange. “We also took decisive pre-market actions to reprice the medical space in Indonesia and Malaysia. Other markets such as Singapore, India and Taiwan performed well due to our continuous product innovation and expansion of distribution capabilities.”
The insurer aimed to increase profits from new business by 2027 from 2022 levels at an average annual growth rate of 15 to 20 percent.
Hong Kong, which is a 15-minute high-speed train ride from Shenzhen in southern China, is the traditional shopping destination for mainland insurance buyers looking to cover their risks. Two-thirds of the 21 million visitors who came to Hong Kong in the first half of the year were from the mainland, according to data from the Hong Kong Tourism Board, and many of them stopped by an insurance company to purchase a policy.
According to data from the Hong Kong Insurance Authority, mainland visitors spent HK$15.63 billion (US$2 billion) on insurance policies in the first quarter, up 62 percent from the same period in 2023.
Prudential’s Hong Kong business will continue to benefit from the influx of mainland Chinese insurance buyers, Wadhwani said.
In the asset management sector, Prudential’s subsidiary Eastspring Investment increased funds under management by 4 percent to 247.4 billion US dollars in the first half of the year.
The insurer announced an interim dividend of 6.84 cents per share, up 9 percent from the previous year. Prudential announced a $2 billion share buyback in June, which is expected to be completed by mid-2026.
Wadhwani, who joined Prudential from Manulife early last year, is the first global chief of the insurer based in Hong Kong since its founding 175 years ago. The British insurer uses both London and Hong Kong as its headquarters.
Prudential shares fell 1.7 percent to HK$68.50 in Hong Kong ahead of the insurer’s earnings release. The stock has fallen 20 percent this year, underperforming the benchmark Hang Seng index, which has gained 5 percent.
As part of its latest efforts to further expand in the region, the insurer earlier this month hired former Citigroup Asia head Angel Ng Yin-yee as CEO of Greater China, customers and wealth.
“We saw a pick-up in sales momentum in June, which has continued into the second half of the year,” Wadhwani said. “Given our performance so far in 2024, we remain confident of achieving our 2027 targets and increasing the value we can deliver to our shareholders.”
