The reopening the border between mainland China and Hong Kong has led to a greater than expected increase in profits at Prudential.
The new business profit, which is a measure for the future profitability of policies sold, increased by 43 percent at actual exchange rates, to $3.13 Billion, beating the consensus forecast of just $2.94 Billion.
Hong Kong’s business was the main driver of growth in 2018. It recorded a threefold increase of new business profits, which grew from $384 millions in 2022 to $1,41 billion in 2017.
After the reopening of borders last month, sales were boosted both by domestic customers as well as visitors from mainland China. Sales for Hong Kong businesses were negatively affected by the pandemic, as Chinese tourists travelled to Hong Kong to buy products not available on mainland China.
Anil Wadhwani said that the company is increasingly confident about achieving the 2027 goal set in 2022.
The company aims to increase new business profits at a rate between 15 and 20% per year by 2027. This is an increase from 2022. It also aims to deliver double-digit annual compound growth in operating free surplus, which is the cash generated net of new business.
Wadhwani stated: “These results are very impressive, especially in the context of a challenging macro-environment. New business profits have increased by 45 percent due to a relentless focus in our markets in Asia & Africa.”
As the FTSE100 group increased its investment to win new business, the operating surplus generated by in-force insurance business and asset management was also flat compared to 2022 at $2,74 billion.
Prudential reported that the sales growth continued during the first two month of this year.
The company’s mainland China business, and its asset management division were weaker than expected.
The new business profit of the life insurance company in the region was 43% lower, at $222,000,000. This is a joint venture between Citic and a Chinese conglomerate. The Prudential attributed the decrease to a change in the profit mix prompted to by regulatory reforms to the way products are sold to its bank partners. Standard Chartered is one of them.
Prudential warned of the impact that “weak growth in the Chinese mainland property sector could have on the Chinese economy, and on China’s interest rates. It may also affect the wider Asian region as well as the future vitality of the global economy.”
Eastspring’s asset management division also reported operating profits that were lower than expected at $280 million. This was slightly below the consensus estimate of $286 millions.
The share price fell by 60 1/2p or 7.7 percent to 720p.
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