Prudential PLC (LSE:PRU)’s results and strategic update were well received by the City but could the Asia-focused insurer be next to join the exit door for London’s faltering market?
‘The Man from the Pru’ became synonymous with the UK in the 1960s when six million homes in Britain were visited by Prudential agents selling insurance.
But over time the FTSE 100-listed insurer’s focus has switched to Asia and now, seemingly Africa.
In March, new CEO Anil Wadhwani said: “We are a UK-domiciled company. We don’t have any plans as of now to change our UK domicile. There is no plan to change that.”
But reading his vision for the future, it is clear the UK is not at the forefront of his mind as he mulls the next engine of growth.
The new strategy called 'For Every Life, For Every Future' aims to build a sustainable growth platform, through targeted investment across Asia and Africa.
It is clear why. As Richard Hunter, head of markets at Interactive Investor noted: “Now fully focused on Asia and Africa, the group is fully aware that such major continents bring significant opportunities.”
He pointed out that in Asia, for example, household wealth “was over $150 trillion in 2021, broadly similar to North America and well in excess of Europe, while it is expected that by 2030 Asia and Africa will house three-quarters of the global working age population.”
“The insurance and health protection markets within Prudential’s target geographies provide a rich seam of opportunities alongside increasingly wealthy populations with evolving financial needs,” he said.
“The company has pointed to an expected middle class population of 1.5 billion across Asia by 2030, with an estimated health protection gap of $1.8 trillion.”
“The potential spoils are enormous and Prudential has a strong reputation in these regions,” Hunter added.
As for the results, Bank of America’s Andrew Sinclair said Prudential delivered small beats across the board.
In a BofA research report, Sinclair noted IFRS17 operating profits of $1,462 million were 6% ahead of expectations, new business volumes were up 42% to $3.0 billion on an annual premium equivalent basis, 3% ahead of expectations and new business profits were up 39% to $1.5 billion, 2-4% ahead of expectations.
Within this Hong Kong beat expectations on volumes and margins but mainland China JV was weaker. Indonesia, Malaysia, and Singapore were “bang in-line,” he added.
Sinclair thinks the new targets provided for 2022-27 by Wadhwani “should provide confidence in growth of new business profits and free surplus generation (a proxy for cash) for years to come.”
“We think this can help reverse the malaise in Pru's share price,” he added.
Sinclair said Prudential's strategy update includes no obvious 'clean-up' or strategic overhaul, with a recommitment to its existing key markets and products, with perhaps an increased weight on health.
“Importantly, there does not appear to be any plan to increase JV stakes in China or India in the foreseeable future,” he said.
“This should all be well-received,” in Sinclair’s opinion.
Sinclair has a 'buy' recommendation and a 1,350p price objective on Prudential.