Join our community of smart investors

Prudential's new business profit up by a quarter

The insurers boosted sales through most of its locales despite wider business disruption
Prudential's new business profit up by a quarter

 

  • Jackson write-down impacts net earnings
  • $2.5-$3.0bn equity raise still in prospect

There was a marked contrast in outcomes for Prudential (PRU) at the half-year mark once the negative impact of its discontinued operations in the US is factored into the equation. The group was forced to book a multi-billion-dollar write-down in the value of its US life insurance business, Jackson, ahead of its planned demerger next month. The result was that a reported pre-tax profit of $1.5bn (£1.08bn) transformed to a net loss of $4.64bn.

The accounting write-down shouldn’t detract from a satisfactory sales performance across all the insurer’s locales other than Indonesia and Hong Kong. APE sales (the aggregate of annualised regular premiums) for Asia and Africa increased by 17 per cent, while new business profit was up by a quarter to $1.18bn.

The group confirmed that it is considering raising equity of around $2.5-$3.0bn through a global offering to institutions and Hong Kong retail investors, after the Jackson demerger. Certainly, a portion of any new funds raised will be utilised to accelerate the group’s digital transformation. The focus is on digitalising many of Prudential’s existing products and services to make them accessible through its Pulse digital platform. Since its launch in 2019, Pulse has been downloaded around 30m times and has rapidly increased its proportion of overall APE sales.

The demerger of the Jackson business should enable the group to increase focus on the higher growth Asian markets. Chief executive Mike Wells said profitability had been achieved against “a backdrop of continuing economic and social challenges due to Covid-19 and the resulting volatility in consumer activity”. With the Delta variant to the fore, those factors are still in play, but a forward consensus rating of 18 times forecast earnings isn’t overly expensive given long-term growth prospects. Buy.

Last IC view: Buy, 1,498p, 3 Mar 2021

PRUDENTIAL (PRU)   
ORD PRICE:1,487pMARKET VALUE:£ 39.0bn
TOUCH:1,486-1.487p12-MONTH HIGH:1,599pLOW: 926p
DIVIDEND YIELD:0.8%PE RATIO:18
NET ASSET VALUE:600pGWS capital coverage ratio:351%
Half-year to 30 JunGross premiums ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
202011.00.9323.15.37
202111.51.5040.95.37
% change+5+61+77-
Ex-div:19 Aug   
Payment:28 Sep