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Prudential’s chief executive said the life insurer was “starting to see the momentum coming back” in mainland China, after sales in its joint venture fell nearly 40 per cent amid concerns over the health of the world’s second-biggest economy.
In full-year results on Wednesday, the life insurance and asset management group reported a 45 per cent rise in new business profit — a measure of expected earnings from newly sold products — to $3.1bn, at constant currencies, ahead of analysts’ forecasts.
The result was driven by a recovery in sales in Hong Kong, which more than trebled from the previous year, lifted by the return of mainland Chinese visitors after the border reopened following the pandemic.
Prudential, which is domiciled in the UK and jointly listed in London and Hong Kong, shed its US and European operations to focus on Asia and Africa in a sweeping restructure that completed in late 2021. But it was then hit by zero-Covid policies in its core Hong Kong market, which cut off visitors from mainland China.
Sales at the group’s mainland China joint venture, Citic Prudential Life, dropped 36 per cent compared with 2022, as the country was hit by an economic slowdown. That reflected a decline in so-called bancassurance sales — selling through banks — which were impacted by a regulatory reform on fees, the company said.
Prudential put an extra $176mn in cash into the venture last year to support its regulatory capital and the growth of new business. It also has about $2.2bn in exposure to Chinese property and local government debt through Citic, at a time when concerns are rising over a property market slump. The company said this exposure was “well diversified”.
Shares in Prudential fell 6 per cent by late-morning trading in London, against a broadly flat FTSE 100 index.
Anil Wadhwani, who became Prudential chief last year, remained bullish about mainland China. “As we transition into 2024, we are already starting to see the momentum coming back,” he told reporters.
“We don’t believe the fundamental demand drivers in China have changed. The demand drivers for long-term savings, for retirement, for protection, are very much intact, and they are only going to increase in my view as we move forward,” he said.
The company’s strategy in long-term savings and protection is aligned with “the way the Chinese government is thinking about providing social security to the Chinese consumers”, he added.
Savings products contribute the majority of sales in Hong Kong, the company said on Wednesday. Wadhwani added that Prudential’s growth prospects in Hong Kong were “solid” this year, with mainland Chinese visitor numbers continuing to recover towards pre-pandemic levels.
Rival AIA Group last week also reported an 82 per cent jump in the value of new business in Hong Kong, supported by the return of mainland Chinese visitors.
“Mainland Chinese visitors’ demand for foreign currency-denominated long-term savings policies remains strong, given [the] interest rate differential between Hong Kong and mainland China,” said Billy Teh, associate director at S&P Global Ratings.
In the African market, which Prudential has highlighted as its next “growth engine”, sales grew 26 per cent last year, faster than more established markets such as Indonesia, Malaysia and Singapore.
Wadhwani on Wednesday said that while Africa contributed a “much smaller extent as compared to some of the Asia markets” in sales, Prudential saw strong growth potential.
Additional reporting by William Sandlund in Hong Kong
