Prudential bolstered by reopening of China

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  • Prudential increased its adjusted operating income by 8% over the past year.
  • The group is encouraged by the opening of China and aims for further expansion in India

Prudential shares fell sharply today despite the group reporting better-than-expected earnings growth.

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Shares of Prudential, listed on the FTSE 100, fell 8.41%, or 99.50 pence, to 1083.50 pence this morning, up about 8% over the past 12 months.

The insurer’s adjusted operating income jumped 8% to $3.38 billion in 2022, above forecasts of about $3.38 billion.

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Prudential increased its dividend by 9% to 18.78 cents a share for the full year, on a projected yield of around 1.5%.

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Focus: Prudential insurance company focuses on Asia and Africa

Current trading is not far behind, with year-on-year premium sales up 15% in the first two months of this year compared to the same period a year ago.

CEO Anil Wadhwani said: “The lifting of most of the Covid-19 related restrictions across the region and the gradual reopening of the mainland Chinese economy means 2023 is off to a good start with encouraging year-on-year sales growth. .’

Russ Mould, AJ Bell’s chief investment officer, said the group’s share price may have responded better to last week’s results before the collapse of Silicon Valley Bank.

He added: “But right now, investors are as suspicious of financial stocks as they are of something they found on their shoes.”

According to Reuters, the company’s CFO James Turner said the insurer has a “minimal” $1 million risk to SVB with a total debt of $23 billion.

Prudential, which focuses its operations in Asia and Africa, said India presents “a very large opportunity” for further growth given its large population, “low insurance penetration and the expectation of rapid GDP per capita growth.”

The group posted 4% growth in APE sales last year, driven by strong growth in its insurance and annuities business.

After splitting from management company M&G in 2019, Prudential no longer has significant operations in the UK.

Richard Hunter, Head of Markets at Interactive Investor, said: “Now fully focused on Asia and Africa, Prudential is supported by the recent reopening in China, allowing the business to resume its growth trajectory.

“The reopening of operations in China is a great boon for our immediate customers, as evidenced by the strength of the new sales we are already seeing in the new fiscal year.

“In turn, the share price has recently risen strongly: over the past six months, it has risen by 26%, which led to an increase of 13% compared to last year, compared to a growth of 6.4%. for the wider FTSE100.

“Some profit taking, given this recent gain, is exacerbated by a weaker broader market on early exchanges, with equities showing some weakness.

“However, it looks like the long-term outlook remains largely unchanged, and the market consensus for stocks as a bargain seems to have most believing this strategy will continue to flourish.”

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