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Prudential’s growth stalled in its key market of Hong Kong in the first half of the year, marking a slowdown following the release of pent-up demand in the wake of the pandemic.
New business profit, a measure of expected earnings from recently sold products, dropped 3 per cent year on year in Hong Kong, the insurer’s biggest market, in the six months to the end of June, to $651mn. That followed a surge in the same period last year as mainland Chinese visitors returned to the territory to buy insurance after pandemic restrictions lifted.
Prudential’s mainland Chinese joint venture also recorded a 33 per cent fall in new business profit, despite chief executive Anil Wadhwani stating in March that it was “starting to see the momentum coming back” in China.
On Wednesday, Wadhwani told reporters that “China will continue to provide great potential”, pointing to underlying drivers including an ageing population that could fuel an “unmet demand” for long-term savings, retirement and health products.
Prudential, which is 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 2021. However, it was then hit by zero-Covid policies in its core Hong Kong market, which cut off visitors from mainland China.
On Wednesday it reported that group new business profit fell to $1.47bn in the first half, from $1.49bn a year earlier, pulled down by weakness in China and Hong Kong.
The insurer said it had “taken steps . . . to reposition our business” in anticipation of “macroeconomic headwinds” in China, while in Hong Kong it expected to continue to see “sustained” growth from mainland Chinese visitors.
The insurer added that overall weak growth in mainland China and concerns surrounding its property sector continued to put pressure on Chinese interest rates, which could also “weigh on the broader Asian region and the global economy’s vitality”.
Prudential has now bought back about $200mn of shares as part of a $2bn buyback plan announced in June. On an adjusted basis, operating profits for the first half increased 6 per cent year on year at actual exchange rates to $1.54bn, from $1.46bn.
The company’s shares closed flat in Hong Kong on Wednesday, having fallen by more than 20 per cent since the start of the year. In London, the company’s stock rose by 2 per cent in morning trading, as Prudential maintained its forward guidance and reported an interim dividend of 6.84 cents per share, based on its “strong capital position”.
Its results come after Hong Kong-based insurer AIA last week recorded a jump in half-year profits and a 21 per cent increase in overall new business, driven by strong Chinese demand.
The value of new business in Hong Kong, one of AIA’s biggest markets, grew 26 per cent on actual exchange rates buoyed by growing Chinese visitors to the city, while in mainland China it recorded a 30 per cent growth in new business value.
