Prudential posts net profit of US$947 million in H1 2023, helped by Chinese demand

PRUDENTIAL posted a net profit of US$947 million for the half year ended June 2023 on Wednesday (Aug 30), as the Asia-focused insurer benefited from a rebound in Chinese investors buying insurance products in Hong Kong, its key revenue centre.

This was a reversal from its loss of US$1.5 billion a year earlier, based on actual exchange rates. (*see amendment note)

New business profits, a measure of profitability for insurance businesses, rose 36 per cent to US$1.5 billion, from US$1.1 billion a year ago, based on an actual exchange rate basis.

Earnings per share stood at 34.5 US cents, reversing from a loss of 55.4 cents in H1 last year.

The board has approved a first interim dividend of 6.26 US cents per share, up from 5.74 cents per share in the same period last year.

Adjusted operating profit of the London and Hong Kong dual-listed company was US$1.5 billion for January to June, up from US$1.4 billion in the same period a year earlier, it said.

Prudential’s annualised premium equivalent (APE) sales, a closely watched gauge of insurance sales, rose 37 per cent to US$3 billion on a stronger pick-up in sales from Chinese mainland visitors to Hong Kong.

Chief executive officer Anil Wadhwani said that he “continued to feel good” about the company’s growth prospects from China, adding that mainland Chinese visitor traffic had rebounded back to as much as 70 per cent of pre-pandemic levels.

He noted the possibility of traffic exceeding even pre-pandemic levels, given that there were no “structural impediments” that inhibited Chinese visitor traffic from going back to its 2019 figures. “Structurally, I believe China will still provide us the next level of growth,” said the CEO, who was appointed last May.

By geography, profit contribution from Singapore fell significantly, by 16 per cent to US$270 million from US$320 million, based on a constant exchange rate. New business profit also slipped 20 per cent to US$198 million, while APE sales dropped 3 per cent to US$386 million.

Wadhwani attributed this to a slump in the Singapore industry in the first quarter of the year, as well as a slowdown in the country in the first half of 2023. There was also a higher base effect in 2022, when single-premium products performed “very well” due to the interest rates at the time, he added. “As interest rates have risen, obviously that opportunity has lessened.”

But the CEO remained confident about the group’s Singapore franchise, noting that it was already seeing an uptick in its Singapore volumes in July.

The insurance-focused group earlier announced that it would be investing US$1 billion in its business – half of which would go towards its distribution networks, a third to its customer segment, and the remainder to the health segment.

It aims to grow the value added to the business, measured by new business profits from agency, by two-and-a-half to threefold.

Ben Bulmer, chief financial officer of Prudential, said that this will be done through growing the number of active agents, as well as improving productivity.

*Amendment note: The story earlier reported net profit before tax figures, instead of net profit. The story has been amended to correct this.