Shares in Prudential PLC (LSE:PRU) fell 3% on Wednesday, as investors took profits following a 25% year-to-date rally, despite the life and pensions giant reporting a stronger-than-expected rise in new business profit for the first quarter.
The Asia-focused group reported a 12% increase in new business profit to $608 million in the three months to March, ahead of Prudential’s full-year guidance of 10% growth.
Panmure Liberum had expected a more gradual build-up, describing the performance as “excellent to see this come through in the first quarter”.
Sales on an annual premium equivalent basis rose 4% to $1.68 billion at constant exchange rates.
The improvement in profitability was driven by a 2 percentage point expansion in margins to 36%, supported by re-pricing, lower claims and cost control. Prudential said these actions would continue through the year.
The company has adopted the Traditional Embedded Value methodology, bringing its reporting into line with peers in Asia.
It reaffirmed guidance for 10% growth in new business profit for the full year and said this would also apply to earnings, cash generation and dividends.
Pru is considering listing and partially divesting its Indian joint venture, ICICI Prudential Asset Management, as part of a broader capital allocation strategy.
It said the move would help crystallise value in markets where peers trade on significantly higher multiples.
The company’s $2 billion share buyback is on track to be completed by the end of 2025, a year ahead of schedule, following an acceleration in recent months.
It also disclosed an ongoing legal dispute in Malaysia, where a 49% shareholder in one of its joint ventures has made a fresh claim for unpaid dividends. The company is contesting the claim.
Despite the share price rally this year, Prudential continues to trade at 0.7 times embedded value and 9 times forecast earnings for 2025.
In a note, the company compared this valuation unfavourably with that of rival AIA, which trades at 1.1 times embedded value and 11 times earnings. Panmure Liberum maintained its 'buy rating and 1,610p target price.