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Prudential’s growth stalled in its key Hong Kong market in the first half of the year, marking a slowdown as pent-up demand was released in the wake of the pandemic.
Profit from new business, a measure of expected revenue from recently sold products, fell 3 percent year-on-year to $651 million in Hong Kong, the insurer’s biggest market, in the six months to the end of June. It had previously risen sharply in the same period last year as visitors from mainland China returned to the territory to buy insurance after pandemic restrictions were lifted.
Prudential’s joint venture in mainland China also reported a 33 percent decline in new business profit, although CEO Anil Wadhwani said in March that they were “slowly seeing a return to momentum” in China.
On Wednesday, Wadhwani told reporters that “China continues to offer great potential,” pointing to underlying factors such as an ageing population that could lead to “unmet demand” for long-term savings, retirement and healthcare products.
Prudential, which is based in the UK and jointly listed in London and Hong Kong, divested its US and European operations to focus on Asia and Africa as part of a major restructuring completed in 2021. However, the company was then hit by the zero-Covid policy in its core market of Hong Kong, which deterred visitors from mainland China.
On Wednesday, it was reported that the group’s profit from new business in the first half of the year fell to $1.47 billion from $1.49 billion a year earlier due to weakness in China and Hong Kong.
The insurer said it had “taken steps to reposition our business” in light of “macroeconomic headwinds” in China, while it continued to expect “sustained” growth in Hong Kong from visitors from mainland China.
The insurer added that overall weak growth in mainland China and concerns about its real estate sector continued to put pressure on Chinese interest rates, which could also “weigh on the entire Asian region and the vitality of the global economy.”
Prudential has now bought back around $200 million worth of shares as part of a $2 billion buyback plan announced in June. Adjusted operating profit in the first half of the year rose 6 percent (at current exchange rates) to $1.54 billion (from $1.46 billion) compared to the same period last year.
The company’s shares closed flat in Hong Kong on Wednesday, having fallen more than 20 percent since the start of the year. In London, the company’s shares rose 2 percent in morning trade as Prudential stuck to its guidance and reported an interim dividend of 6.84 cents per share due to its “strong capitalization.”
Its results come after Hong Kong-based insurer AIA last week reported a jump in half-year profits and a 21 percent rise in total new business, driven by strong Chinese demand.
In Hong Kong, AIA’s largest market, new deal value increased by 26 percent on an actual exchange rate basis, reflecting the increasing number of Chinese visitors to the city. In contrast, new deal value growth in mainland China was recorded at 30 percent.
