Full-year results from Prudential PLC (LSE:PRU) were broadly what City analysts were hoping for, with new business profit, earnings and the dividend all nudging ahead of expectations – but a softer-than-expected free surplus ratio is likely to temper enthusiasm.
Shares in the FTSE 100 group fell almost 5% to 1045p by early afternoon.
UBS analysts said they expected "a small negative reaction", given the stock had been well bought ahead of results, up over a third during the past 12 months, and the fact that management did not provide any upgrades to estimates today.
The Swiss bank flagged the free surplus ratio of 221% as the main soft spot, coming in below the consensus expectation of around 230%, driven by higher-than-guided required capital growth within Hong Kong's regulatory framework. The free surplus ratio is a measure of how much capital is held above its regulatory minimum, with a lower number implying a smaller cushion for dividends, buybacks and future investment.
On the positive side, Deutsche Bank analysts flagged that new business profit of $2.78 billion was 3% above their estimate and 1% ahead of consensus, driven by stronger-than-expected performance in mainland China, with small beats in Hong Kong and Malaysia. Indonesia, Singapore and other markets missed his forecasts.
UBS said: "We expect this trend to continue given lower savings rates in China, making insurance products more attractive." However, Hong Kong profit was lower as the final few months of the year appeared to be weaker due to sales being brought forward in the preceding quarter.
Also encouraging was the bancassurance business, which new business profit jump 27%, though agency volumes remain a concern, with active agents falling to 57,000 from 65,000 a year ago.
For 2026, management reiterated double-digit growth targets across key metrics, with China expected to grow new business profit at a double-digit rate, albeit with some margin pressure from product mix.The CSM – the contractual service margin, a measure of future expected profits locked into existing policies – is expected to release at a slower rate than in 2025.
Both banks broadly agreed that the results keep Prudential on track for its 2027 targets, with both maintaining their 'buy' ratings. Deutsche's 1,355p target price is a 24% premium to Tuesday's closing price of 1,095p. The UBS target is 1,400p.