Prudential reported full-year annual premium equivalent (APE) sales of $6.2bn, up 7% when ignoring currency moves. Underlying operating profit rose 10% to $3.1bn. Both the insurance and asset management divisions contributed to growth.
Funds under management at asset manager Eastspring rose 9% to $258.0bn, driven by positive market moves and net inflows.
The free surplus ratio, its preferred measure of balance sheet strength, was 234% at the end of the year (175-200% target range).
A second interim dividend of 16.29 cents per share was approved, taking the annual total to 23.13 cents, up 13%. Around half of the ongoing $2bn buyback has been actioned, with the remainder now expected to be completed by the end of the year (previously mid-2026).
For 2025, underlying operating profit and the dividend are expected to rise by at least 10%.
The share price rose 1.2% in early trading.
Our view
Prudential’s had a decent year and the outlook for 2025, with 10% growth expected across pretty much every key metric, is an appealing proposition.
The business offers life and health insurance, as well as asset management, across a range of Asian countries. Hong Kong operations boast a market-leading position for products aimed at visitors from mainland China. Strong performance in 2023, when borders reopened after the pandemic, acted as a tough comparator, so it was impressive to see double-digit growth continue.
The product mix has shifted, with higher rates meaning savings products are taking a bigger chunk of the pie. More recently we're starting to see that shift back toward the higher margin health and protection business, a trend that would be beneficial if it continues.
Medium-term initiatives are evolution rather than revolution and include investment across several core areas including technology, and creating a more joined-up customer approach across the product ranges.
Looking further ahead, the broader Asian and Indian regions should benefit from long-term economic development. Insurance uptake is also low in Areas like Asia, and in many cases state provisions for pensions and social security are limited. India offers lots of potential in the health insurance space, with a huge population and around half of all health expenses being covered by disposable cash. We see several longer-term opportunities in many of these underpenetrated markets.
China is a challenging market, where Prudential mainly operates through joint ventures. Interest rates and government bond yields impact performance, and while other regions have seen rising yields, China’s have been falling. That challenging environment is expected to continue into 2025.
Prudential also has a big asset management business, Eastspring, which manages around $260bn of assets. It offers a host of investment solutions as well as managing premiums generated from the life insurance business. Improving market dynamics mean retail investors are moving back to higher margin equity funds.
Capital levels are strong, and the group’s committed to increasing the dividend 10% over the next year, as well as accelerating the pace of its ongoing buyback. But this isn't a high yielder like some of its UK listed peers and nothing is guaranteed.
The refreshed strategy brings with it some bold goals, and progress looks good. We think Prudential's Asian focus and higher growth opportunities give a different option for a UK investor. The key challenge comes from China, where uncertain economic conditions continue to add risk.
Environmental, social and governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security is also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, Prudential’s management of material ESG issues is strong.
Prudential trains sales employees annually on responsible marketing and has strong policies for data privacy and security. The company invests in digital products to enhance customer experience but does not disclose customer complaint details. While it offers thorough training on ethics and corruption, and also provides whistleblower protections, Prudential lacks ethical risk assessments in investment and product development.
Prudential key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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