ii view: Prudential profit growth exceeds target

First-quarter trading update to 31 March

• Currency adjusted Annual Premium Equivalent (APE) sales up 4% to $1.68 billion
• Currency adjusted new business profit up 12% to $608 billion

Chief executive Anil Wadhwani said: 

"Our ongoing focus on quality growth in new business profit continues to produce attractive returns and capital generation. Our strong 2025 first quarter new business performance reflects the benefits of our on-going efforts to build and modernise our capabilities to better serve our customers.

“We remain confident that, despite the wider macroeconomic uncertainty, our robust solvency position and multi-channel, multi-market franchise situates us well for long-term success in this highly profitable and attractive growth business."

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ii round-up:

Asia and Africa-focused life assurer Prudential (LSE:PRU) today detailed growth in quarterly new business profit ahead of its previously outlined full year target, as well as an update for an ongoing legal dispute in Malaysia.

Currency adjusted new business profit grew 12% during the first quarter to $608 million, exceeding management’s growth target for 2025 of 10%. Numbers were driven by double-digit growth across core regions including Hong Kong, mainland China and Singapore. Sales on a constant currency basis rose 4% from Q1 2024 to $1.68 billion. 

Shares in the FTSE 100 financial services company fell 3% in UK trading having come into this latest news up by around a quarter year-to-date. That’s ahead of gains of around 17% for UK listed rivals Aviva (LSE:AV.) and Phoenix Group Holdings (LSE:PHNX) and comfortably ahead of a near 3% gain for the FTSE 100 index in 2025.  

Prudential sells protection products including life assurance, health insurance and savings related products as well as providing asset management services to customers across Asia and Africa.

New business profit for Malaysia, Pru's third biggest country profit generator in 2024, declined, hindered by a repricing of health insurance policies and a tough year ago comparative, although bancassurance partnerships helped.

In Malaysia, a legal dispute between the Pru and 49% shareholder, Detik Ria, in the Pru branded business continues. Detik Ria is now claiming dividends to the equivalent of approximately $813 million plus interest, which it claims to be entitled to. 

Funds under management for the Prudential’s Eastspring asset manager business fell to $256.2 billion as of late March, down from $258 billion as of 31 December.

Prudential continues to evaluate a potential listing of its India asset management business, with the intention that net proceeds would be returned to shareholders. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on Prudential shares following the trading update. First-half results are likely to be announced late August. 

ii view:

Founded in 1848, Prudential today serves around 18 million customers via approximately 60,000 agents and over 200 banking partners. Headquartered in Hong Kong, the FTSE 100 constituent company operates across 24 markets with Hong Kong its biggest profit generator in 2024, followed by Singapore. The group’s shares are listed on stock exchanges in London, Hong Kong, Singapore, and New York.

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, a global trade war and possible recession might cause customers to reduce savings and insurance costs, impacting group performance. Litigation uncertainties regarding its Malaysian business persist. Currency headwinds can impact, while the Pru's forecast dividend yield of around 2.5% compares with over 6.5% for UK sellers Aviva, Legal & General Group (LSE:LGEN) and Phoenix Group.   

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To the upside, insurance penetration rates remain low across Asia, offering significant selling opportunity. Investment in technology, including AI to sift client data for potential new sales, is ongoing. A review of operations continues, with proceeds from any business sales being returned to shareholders, while a focus on shareholder returns includes an ongoing $2 billion share buyback programme and the targeting of at least 10% growth in the 2025 dividend payment.  

In all, and while risks remain, a diversity of product and focus on growth regions, plus a consensus analyst fair value estimate above £11 per share are likely to keep investors interested.  

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