Pandemic disruption weighed on Prudential’s new business sales but historic policies helped the life insurer deliver higher profits as it presses ahead with a demerger and pivot to Asia.
Sales to mainland Chinese individuals in Hong Kong, a significant and high margin market for the Pru, were “severely curtailed” by the closure of the border last year, the company said. New business profits in Hong Kong declined 62 per cent year on year, and gross premiums earned across the group ticked down from $45bn to $42.5bn.
However, chief executive Mike Wells said the “high quality of [Prudential’s] in-force business” and loyalty of existing customers helped protect the group’s earnings. Pre-tax profits rose from $2.29bn to $2.42bn.
The annual results came as the UK-based insurer prepares to demerge Jackson, its US business, leaving it to focus on Asia and Africa. Prudential separated the UK unit M&G in 2019 and subsequently came under pressure from investor Third Point to spin off the US business as well.
The company said the demerger was expected to be completed in the second quarter of this year, adding that bank financing for the separation had been agreed.
Prudential announced plans in January to raise up to $3bn of equity to increase its “financial flexibility in light of the breadth of the opportunities to invest in growth” in Asia.
The Pru is going ahead with the separation at a time of disruption from the coronavirus crisis. Border restrictions between mainland China and Hong Kong were unlikely to be lifted before the third quarter, the company said, but it expected sales to pick up once they were removed.
Sales in Asia have improved since the second quarter of 2020, yet the insurer noted its fortunes were dependent in part on the course of the pandemic and the vaccine rollout.
The board declared a second interim ordinary dividend of 10.73 cents, giving a full-year pay out of 16.10 cents.
Diluted earnings per share improved from 75.1 cents to 81.6 cents, and shares in Prudential ticked 1.2 per cent higher in early London trading to £15.01.