JP Morgan anticipates Prudential PLC (LSE:PRU) will significantly increase its capital returns to shareholders from 2025.
Despite robust growth in new business value and promising free cash-flow prospects, the insurance giant continues to trade at discounted valuations — approximately 0.55 times its expected enterprise value and about 0.7 times its comprehensive equity for 2024.
Analysts point to the market’s ongoing scepticism, fuelled by Prudential’s modest dividend yields and previous balance sheet complications, as a key reason for the undervaluation. This, they suggest, could be mitigated by a commitment to enhanced capital returns.
Prudential is set to revise its capital management strategy in the first half of 2024, with plans to increase the payout of its net free surplus through dividends and regular stock buybacks.
"We maintain our 'overweight' rating on Prudential, expecting a substantial uplift in shareholder returns," JP Morgan stated in its briefing.