Prudential operating profit up 16% to US$3.2b
ASIA-FOCUSED insurer Prudential posted a total adjusted operating profit before tax of US$3.2 billion on Wednesday (Mar 9), up 16 per cent from US$2.8 billion in the year-ago period.
The London- and Hong Kong-listed company saw a 13 per cent rise in new business profit to US$2.5 billion. Meanwhile, annual premium equivalent (APE) sales - a measure of new business activity - was up 8 per cent to US$4.2 billion.
The group's board has declared a second interim ordinary dividend of US$0.1186 per share. Combined with its first interim dividend of US$0.0537, the group's total 2021 cash dividend is US$0.1723 per share.
In an earnings call, group chief executive Mike Wells noted that Prudential's life insurance business in mainland China, Citic Prudential Life (CPL), posted record results and outperformed the market in FY2021.
APE sales for CPL, which is a 50-50 joint venture with Chinese state-owned conglomerate Citic, were up 25 per cent on year to US$776 million, and CPL was also the largest contributor to the group's total APE sales for the year.
Singapore APE sales came in at US$743 million, up 19 per cent on year, while Hong Kong APE sales were down 27 per cent on year to US$550 million amid border closures with mainland China.
Wells noted that the group saw high retential levels, particularly in Hong Kong and Greater China, adding that "nobody's backing off their health protection in this sort of climate".
"We've seen tremendous structural demand for products across Asia and I don't think that's surprising with Covid," Wells said.
He added, however, that uncertainty remains over Hong Kong's operating environment amid tightened Covid-19 measures.
As for claims related to Covid-19, the insurer saw a significant number of claims predominantly in India and Indonesia, but it also had a reduction in other normal claims, such as hospitalisation and medical claims, said Mark FitzPatrick, Prudential's chief financial officer and chief operating officer. FitzPatrick will become interim CEO of Prudential when Wells steps down at the end of March, after helming the role for 7 years.
The results are Prudential's first after 2 major demergers which allowed the life insurer to focus on the Asia and Africa markets. The group demerged from Jackson in September 2021 and spun off its British and European business M&G in 2019.
Following the demergers and the restructuring of Prudential's financing through an equity raise and debt redemption programme, the group's leverage ratio is now at the lower end of its medium-term target range. Coupled with its "strong levels of regulatory capital", Prudential said it is starting 2022 with materially enhanced financial flexibility.
Going forward, it noted that it will benefit from lower interest costs following the redemption and refinancing of debt to date, and by the start of 2023 from a further US$70 million reduction in annual central expenses.
Highlighting the Ukraine crisis and rising inflation, Wells said while the volatility could have wider implications on global economic and market conditions, he noted that a large portion of Prudential's earnings come from recurring relationships with clients on health and protection or fees, which see less impact from equity markets and interest rates.
"We believe our multi-channel approach and focus on quality business and operating efficiency is the right strategy for dealing with volatile operating conditions," he said.
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