ii view: Prudential reaches inflection point for shareholder returns

First-half results to 30 June

• Annual Premium Equivalent (APE) sales up 6% to $3.29 billion
• Adjusted operating profit up 6% to $1.6 billion
• New business profit up 12% to $1.26 billion
• Capital cushion, or free surplus ratio of 221%, down from 234% as of late December
• First interim dividend up 13% to 7.71 US cents per share

Guidance:

• Expects more than 10% growth in the annual dividend payment per share for 2025, 2026 and 2027
• Expects share buybacks of $500 million in 2026 and $600 million in 2027
• Also intends to return initial net proceeds from the potential IPO of ICICI Prudential Asset Management Company Limited

Chief executive Anil Wadhwani said: 

"We are pleased with our strong performance in the first half of 2025, delivering double-digit growth across our key metrics in line with the guidance we gave earlier in the year. We have reached the inflection point in our capital generation, enabling us to update our capital management programme and increase shareholder returns, which validates our business model and its ability to generate sustainable cash returns. 

“Reflecting our strategic progress and investments in the growth drivers of the business, we are confident we will carry this momentum into the second half and beyond, keeping us firmly on track to achieve our 2027 financial objectives."

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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 Asia and Africa.

A constituent of both the FTSE 100 and Hang Seng Composite indexes, Prudential operates across 20 markets including Greater China and India.

For a round-up of these latest results announced on 27 August, please click here. 

ii view:

Celebrating its 175th anniversary in 2023 and including 100 years of business in Asia, Prudential today serves around 18 million customers via approximately 65,000 agents and over 200 banking partners. Geographically, Hong Kong generated most sales in 2024 at just over a third. That was followed by Singapore at a fifth, Malaysia and Indonesia at just over a tenth each, and others the balance. 

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 outgoings. Significant exposure to Hong Kong and Chinese rules and regulations should not be forgotten, with the West’s relationship with China arguably now more challenged plus uncertainty over Taiwan. Currency headwinds can impact, while a forecast dividend yield of around 2% at the Pru compares with estimates of over 5.5% for UK sellers Aviva (LSE:AV.), Legal & General Group (LSE:LGEN) and Phoenix Group Holdings (LSE:PHNX). 

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To the upside, shareholder returns including share buybacks are expected to total more than $5 billion between 2024 and 2027, a figure which excludes possible business sale proceeds. A multi-channel, multi-market franchise is being pursued, with economic and sales growth for targeted regions expected to outpace that of the West. Investment in technology, including AI, to sift client data for potential new sales continues, while demand for health insurance may prove relatively defensive given the product’s requirement no matter the state of the economy.  

In all, and despite ongoing risks, an increasing focus on shareholder returns and a consensus analyst estimate of fair value above £11.80 per share are likely to see further interest in this growth markets-focused insurer.  

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