Pru walks fine line in Hong Kong wealth crackdown
BREAKINGVIEWS-Pru walks fine line in Hong Kong wealth crackdown The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Aug 27 (Reuters Breakingviews) - Prudential PRU.L, 2378.HK has some buffers against Beijing's wealth crackdown. The $35 billion insurer's new business from visiting Chinese customers in Hong Kong fell in the first half, stoking fears that mainland authorities want to curb cross-border capital flows, which have helped feed its cash cow business in the financial hub. Yet Pru looks well positioned to weather the uncertainty ahead.
First-half results show new business profit from mainland customers visiting Hong Kong dipped 2% from a year earlier, to roughly $290 million, a dramatic reversal from the 15% surge a year earlier. Policies bought in the financial centre have long been a popular channel to diversify assets offshore, a business Pru described as "the biggest structural engine of growth" in March.
The decline will spook investors already fretting over Beijing's campaign to tighten its grip over Chinese wealth abroad, in particular in Hong Kong. That kicked off in May, when officials fined online brokers for illegally facilitating offshore share trading. It was followed by tighter controls on Chinese customers opening bank accounts in the city, plus authorities starting to levy taxes on returns from Hong Kong insurance products. Pru's London-listed shares are down 9% in the past three months.
CEO Anil Wadhwani admitted it’s “too early” to assess the impact. The good news is that its products may draw less regulatory scrutiny. Its offshore policies, for instance, tend to be longer in duration, meaning they will appeal more to customers looking to bolster retirement funds than those chasing quick returns. About 90% of Pru’s new sales have a premium term in excess of five years, versus 31% for the broader Hong Kong industry. The policies are also typically small, ranging between $17,000 and $18,000 per ticket, well within China’s $50,000 per person foreign exchange quota.
Moreover, new business profit in Hong Kong from locals grew by 22% in the January to June period from a year ago and accounts for half of the city's total. Wadhwani can thank an influx of new arrivals, mostly from the mainland, to the territory. He says he will stick to his double-digit full-year growth target for Hong Kong.
Meanwhile, Prudential's mainland China business, accounting for just 12% of the group's total after-tax operating profit, is turning a corner after a shake-up in strategy and regulatory changes. Sales rose by more than a fifth in the interim, putting Pru on track to tap an ageing and increasingly prosperous population.
Pru's path through the storm looks clearer.
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CONTEXT NEWS
Insurer Prudential’s new business profit grew 8% year-on-year to $1.4 billion in the first six months of 2026, while its adjusted operating profit after tax grew 17% to $1.5 billion, according to results released on August 27.
New business profit from mainland Chinese visitors in Hong Kong fell 2% from a year earlier, the company said, citing a high base.
(Editing by Robyn Mak; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))