Prudential bolstered by reopening of China

Prudential bolstered by reopening of China as profits and dividend rise – but shares dive as investors take profits amid fallout of SVB collapse

  • Prudential saw its adjusted operating profit increase by 8% in the last year
  • Group buoyed by reopening of China and seeks to expand further in India 

Prudential shares fell sharply today despite the group posting a better than expected rise in profits.  

FTSE 100-listed Prudential’s shares were down 8.41 per cent or 99.50p to 1,083.50p this morning, having risen by around 8 per cent in the last 12 months. 

The insurer’s adjusted operating profit jumped by 8 per cent to $3.38billion in 2022, above forecasts of around $3.38billion. 

Prudential upped its dividend by 9 per cent to 18.78 cents per share for the full year, with a projected yield of about 1.5 per cent. 

Focus: Insurer Prudential focuses its operations on Asia and Africa 

And current trading has held pace, with annualised premium equivalent sales up 15 per cent for the first two months of the current year, when compared to the same period a year ago. 

Chief executive Anil Wadhwani, said: ‘The removal of the bulk of Covid-19-related restrictions across the region and the progressive opening up of the Chinese Mainland economy has meant that 2023 has started well with encouraging progress in year-on-year sales.’ 

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

He added: ‘But right now investors are treating financial stocks with the same suspicion as something they’ve found on their shoe.’ 

The company’s chief financial officer James Turner said the insurer had ‘minimal’ exposure of $1million to SVB against a total debt book of $23billion, according to Reuters. 

Prudential, which focuses its operations in Asia and Africa, said India represented a ‘very large opportunity’ for further growth, given it has a large population, ‘low insurance penetration and expectation of fast rising GDP per capita’. 

In the past year, the group saw APE sales rise 4 per cent, driven by strong growth in its protection and annuity business.

Since demerging from fund manager M&G in 2019, Prudential no longer has significant UK operations.

Richard Hunter, head of markets at Interactive Investor, said: ‘Now fully focused on Asia and Africa, Prudential has been boosted by the recent reopening in China, allowing business to resume its growth trajectory.

‘The Chinese reopening is a major boon for immediate prospects, as evidenced by the strength of new sales already being seen in the new financial year.

‘In turn, the share price has had an extremely strong run of late, with a rise of 26 per cent over the last six months contributing to a hike of 13 per cent over the last year, as compared to an increase of 6.4 per cent for the wider FTSE100. 

‘Some profit taking given this recent run has been exacerbated by a weaker wider market in early exchanges, with the shares seeing some weakness. 

‘However, it appears that longer term prospects remain very much intact, and the market consensus of the shares as a strong buy is seemingly leading most to believe that the strategy will continue to flourish.’