REG - Prudential PLC Prudential Fdg(Asia) - Prudential Plc - 1Q24 Business Performance Update

PrudentialAnnouncement

30/04/2024 07:00

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RNS Number : 4811M  Prudential PLC  30 April 2024

NEWS RELEASE

30 April 2024

 

 

PRUDENTIAL PLC Q1 BUSINESS PERFORMANCE UPDATE

 

First quarter new business profit up 11 per cent (excluding economic impacts)

 

Performance highlights on a constant (and actual) exchange rate basis for the
three months ended 31 March 2024

 

·      First quarter 2024 new business profit up 11 per cent excluding
economic impacts to $810 million diversified across our geographical markets.
After allowing for economic impacts, new business profit was broadly unchanged
at $726 million.

·      First quarter APE sales were up 7 per cent (4 per cent) to $1,625
million. The business showed continued momentum despite strong comparators in
Hong Kong and CPL (described below) and headwinds in Vietnam.

 

APE new business sales (APE sales) and EEV new business profit (NBP)

 

 

CEO Anil Wadhwani, said: "Against a strong prior period comparator that
reflects our outperformance in Q1 2023 when the border between Hong Kong and
the Chinese Mainland reopened, I am pleased the Group has delivered new
business profit growth of 11 per cent, excluding economic impacts. Our
continued focus on the quality of business written is reflected in new
business profit (excluding economic impacts) growing more than APE sales. Our
total APE sales have grown sequentially each quarter since Q3 2023, reflecting
resilient consumer demand across Asia and demonstrating the strength of our
multi-market and multi-channel distribution model. Together, we believe this
provides a sound base for continued FY 2024 new business growth. Given the
relentless execution focus in implementing our strategy, we are increasingly
confident in achieving our 2027 financial and strategic objectives. We remain
focused on accelerating value creation for our shareholders and we expect to
provide an update on our capital management plans by HY 2024 results."

 

Market highlights for the three months ended 31 March 2024

 

In Hong Kong, we continued to focus on quality growth. Despite the significant
rebound in Q1 2023 where we outperformed the market as the border reopened,
our total APE sales still grew 1 per cent with both domestic and Chinese
Mainland visitor segments growing. The combined contribution of agency and
bancassurance APE sales in Q1 2024 remained broadly consistent with the second
half of 2023 as a proportion of Hong Kong's total APE sales. For the Chinese
Mainland visitor segment, average case sizes were broadly stable compared with
the levels seen in the second half of last year, smaller than that seen in the
first quarter of 2023. New business margins increased year-on-year, from 64
per cent to 69 per cent (73 per cent when prepared using economics as at full
year 2023), supported in part by a 16 per cent increase in health and
protection APE sales. The first quarter new business profit grew more strongly
than APE sales reflecting the increase in new business margin.

 

Despite falling 17 per cent year-on-year, APE sales for CITIC Prudential Life
(CPL), our Chinese Mainland joint venture, in the first three months of 2024
exceeded the total for the last six months of 2023, for both the agency and
bancassurance channels. We continue to optimise our product portfolio in this
market towards long-term savings, annuities and health and protection. Our
continued focus on quality and product optimisation efforts increased new
business margins by 4 percentage points from the first quarter in the prior
year, excluding the impact of updated economics. CPL's first quarter 2024
margin, when prepared using full year 2023 economics, was consistent with the
full year 2023 margin, at 42 per cent.

 

The rebound in sales momentum in Singapore seen in the second half of 2023
continued in the first quarter, with a third sequential quarter of growth in
APE sales. Compared with the first quarter of 2023, APE sales in Singapore
increased by 2 per cent and new business margins improved by 2 percentage
points (excluding economic impacts) leading to an increase in new business
profit.

 

Our Malaysian businesses delivered APE growth of 29 per cent compared with the
prior year, driven by a 50 per cent growth in bancassurance sales underpinned
by our strong bank partnerships particularly that with UOB supported by new
product launches. Health and protection APE sales as a proportion of total
sales increased when compared to the same period in 2023. Higher APE sales in
Malaysia increased new business profit, although margins declined given the
higher proportion of bancassurance sales.

 

In Indonesia, APE sales were down (10) per cent compared with the first
quarter in 2023, following base effects due to regulatory actions on
investment linked products that took effect in the second quarter of 2023.
Bancassurance sales grew significantly by 26 per cent compared with the prior
year, driven by growth through UOB on its expanded customer base following the
integration of Citi Bank. Lower APE sales and channel mix effects in Indonesia
contributed to lower new business profit. We are continuing with our program
of transformation to improve overall productivity and profitability.

 

Across the businesses in our "growth markets and other" segment a strong
increase in APE sales of 28 percent was generated in total, driven by
Thailand, Taiwan, India and Africa. This more than offset continued weakness
in Vietnam. New business margins declined given business mix effects, but
given the significant growth in APE sales, overall new business profit
increased.

 

Eastspring's funds under management or advice grew to $239 billion at the end
of March 2024 compared to $237 billion at the end of 2023. As well as strong
net inflows from the Group's insurance business following continued growth,
there were $0.1 billion of net inflows from third parties (excluding money
market funds and funds managed on behalf of M&G), with strong flows into
the retail business offset by flows out of the institutional business.

 

Notes

Comparisons are to the first three months of the prior year unless otherwise
stated and year-on-year percentage changes are provided on a constant exchange
rate basis unless otherwise stated. All results are presented in US dollars.

See "Definitions of Performance Metrics" below for explanation of performance
measures used in this announcement.

 

Contact:

 

 Media                               Investors/Analysts
 Simon Kutner    +44 (0)7581 023260  Patrick Bowes       +852 2918 5468
 Sonia Tsang     +852 5580 7525      William Elderkin    +44 (0)20 3977 9215
 Sophie Sophaon  +852 6286 0229      Darwin Lam          +852 2918 6348

 

About Prudential plc

 

Prudential plc provides life and health insurance and asset management in 24
markets across Asia and Africa. Prudential's mission is to be the most trusted
partner and protector for this generation and generations to come, by
providing simple and accessible financial and health solutions. The business
has dual primary listings on the Stock Exchange of Hong Kong (2378) and the
London Stock Exchange (PRU). It also has a secondary listing on the Singapore
Stock Exchange (K6S) and a listing on the New York Stock Exchange (PUK) in the
form of American Depositary Receipts. It is a constituent of the Hang Seng
Composite Index and is also included for trading in the Shenzhen-Hong Kong
Stock Connect programme and the Shanghai-Hong Kong Stock Connect programme.

 

Prudential is not affiliated in any manner with Prudential Financial, Inc. a
company whose principal place of business is in the United States of America,
nor with The Prudential Assurance Company Limited, a subsidiary of M&G
plc, a company incorporated in the United Kingdom.

 

https://www.prudentialplc.com/

 

Metrics presented

 

This business performance update provides information on the trading and sales
development of the Group in the first three months of 2024. This update
focusses on annual premium equivalent (APE) and new business profit (NBP),
which are key metrics used by the Group's management to assess and manage the
development and growth of the business. APE sales are provided as an
indicative volume measure of transactions undertaken in the reporting period
that have the potential to generate profits for shareholders. NBP is measured
in accordance with European Embedded Value (EEV) Principles and reflects the
value of future profit streams which are not fully captured in shareholders'
equity in the year of sale under IFRS. Under this methodology, discount rates
and other economic assumptions are updated at the end of each reporting period
to reflect current interest rates, introducing a degree of volatility into the
NBP measure. In addition, the entire NBP amounts within a given reporting
period are updated using end of period discount rates. In particular, the
first three months 2024 NBP contained in this announcement is based on
interest rates as at 31 March 2024. When published, the half year 2024 results
will contain NBP for the half year based on interest rates as at 30 June 2024.
Consequently, the NBP values for the first three months of 2024 that will be
included in the half year 2024 results may differ to the amounts presented in
this announcement. In addition to the NBP presented as described above, we
also present new business profit excluding economic impacts. This is NBP
calculated using interest rates and other economics at 31 March 2023 to show
underlying growth compared with the prior year. It is based on average
exchange rates for the three months ended 31 March 2024 which are also used to
determine the constant exchange rate Q1 2023 amount.

 

The presentation of these key metrics is not intended to be considered as a
substitute for, or superior to, financial information prepared and presented
in accordance with IFRS. Further information about these metrics including a
reconciliation of EEV shareholders' equity for full year 2023 to the most
directly comparable IFRS measure can be found in the Group's 2023 Annual
Report and Accounts.

 

Definitions of Performance Metrics

 

Annual premium equivalent (APE) sales

A measure of new business activity that comprises the aggregate of annualised
regular premiums and one-tenth of single premiums on new business written
during the year for all insurance products.

 

Eastspring total funds under management or advice

Total funds under management or advice including external funds under
management, money market funds, funds managed on behalf of M&G plc and
internal funds under management or advice.

 

New business profit

Presented on a post-tax basis, on business sold in the year, calculated in
accordance with EEV principles.

 

New business profit excluding economic impacts (and the movements therein)
represent the amount of NBP for the first three months of 2024 calculated
using economics (including interest rates) as at 31 March 2023 using average
exchange rates for the first three months of 2024. Comparisons are to the Q1
2023 new business profit on a constant exchange rate basis to indicate
underlying growth.

 

See the Prudential 2023 Annual Report for further information on the metrics
above, including reconciliations to IFRS where appropriate.

 

Forward-Looking Statements

 

This announcement contains 'forward-looking statements' with respect to
certain of Prudential's (and its wholly and jointly owned businesses') plans
and its goals and expectations relating to future financial condition,
performance, results, strategy and objectives. Statements that are not
historical facts, including statements about Prudential's (and its wholly and
jointly owned businesses') beliefs and expectations and including, without
limitation, commitments, ambitions and targets, including those related to
sustainability (including ESG and climate-related) matters, and statements
containing the words 'may', 'will', 'should', 'continue', 'aims', 'estimates',
'projects', 'believes', 'intends', 'expects', 'plans', 'seeks' and
'anticipates', and words of similar meaning, are forward-looking statements.
These statements are based on plans, estimates and projections as at the time
they are made, and therefore undue reliance should not be placed on them. By
their nature, all forward-looking statements involve risk and uncertainty.

 

A number of important factors could cause actual future financial condition or
performance or other indicated results to differ materially from those
indicated in any forward-looking statement. Such factors include, but are not
limited to:

 

·     current and future market conditions, including fluctuations in
interest rates and exchange rates, inflation (including resulting interest
rate rises), sustained high or low interest rate environments, the performance
of financial and credit markets generally and the impact of economic
uncertainty, slowdown or contraction (including as a result of the
Russia-Ukraine conflict, conflict in the Middle East, and related or other
geopolitical tensions and conflicts), which may also impact policyholder
behaviour and reduce product affordability;

·        asset valuation impacts from the transition to a lower carbon
economy;

·        derivative instruments not effectively mitigating any exposures;

·       global political uncertainties, including the potential for
increased friction in cross-border trade and the exercise of laws, regulations
and executive powers to restrict trade, financial transactions, capital
movements and/or investment;

·        the longer-term impacts of Covid-19, including macro-economic
impacts on financial market volatility and global economic activity and
impacts on sales, claims (including related to treatments deferred during the
pandemic), assumptions and increased product lapses;

·     the policies and actions of regulatory authorities, including, in
particular, the policies and actions of the Hong Kong Insurance Authority, as
Prudential's Group-wide supervisor, as well as the degree and pace of
regulatory changes and new government initiatives generally;

·     the impact on Prudential of systemic risk and other group
supervision policy standards adopted by the International Association of
Insurance Supervisors, given Prudential's designation as an Internationally
Active Insurance Group;

·        the physical, social, morbidity/health and financial impacts of
climate change and global health crises, which may impact Prudential's
business, investments, operations and its duties owed to customers;

·     legal, policy and regulatory developments in response to climate
change and broader sustainability-related issues, including the development of
regulations and standards and interpretations such as those relating to
sustainability (including ESG and climate-related) reporting, disclosures and
product labelling and their interpretations (which may conflict and create
misrepresentation risks);

·        the collective ability of governments, policymakers, the Group,
industry and other stakeholders to implement and adhere to commitments on
mitigation of climate change and broader sustainability-related issues
effectively (including not appropriately considering the interests of all
Prudential's stakeholders or failing to maintain high standards of corporate
governance and responsible business practices);

·        the impact of competition and fast-paced technological change;

·        the effect on Prudential's business and results from mortality
and morbidity trends, lapse rates and policy renewal rates;

·        the timing, impact and other uncertainties of future
acquisitions or combinations within relevant industries;

·     the impact of internal transformation projects and other strategic
actions failing to meet their objectives or adversely impacting the Group's
operations or employees;

·        the availability and effectiveness of reinsurance for
Prudential's businesses;

·       the risk that Prudential's operational resilience (or that of its
suppliers and partners) may prove to be inadequate, including in relation to
operational disruption due to external events;

·       disruption to the availability, confidentiality or integrity of
Prudential's information technology, digital systems and data (or those of its
suppliers and partners) including the Pulse platform;

·        the increased non-financial and financial risks and
uncertainties associated with operating joint ventures with independent
partners, particularly where joint ventures are not controlled by Prudential;

·       the impact of changes in capital, solvency standards, accounting
standards or relevant regulatory frameworks, and tax and other legislation and
regulations in the jurisdictions in which Prudential and its affiliates
operate; and

·        the impact of legal and regulatory actions, investigations and
disputes.

 

These factors are not exhaustive. Prudential operates in a continually
changing business environment with new risks emerging from time to time that
it may be unable to predict or that it currently does not expect to have a
material adverse effect on its business. In addition, these and other
important factors may, for example, result in changes to assumptions used for
determining results of operations or re-estimations of reserves for future
policy benefits. Further discussion of these and other important factors that
could cause actual future financial condition or performance to differ,
possibly materially, from those anticipated in Prudential's forward-looking
statements can be found under the 'Risk Factors' heading of Prudential's 2023
Annual Report, available on Prudential's website at www.prudentialplc.com
(http://www.prudentialplc.com) .

 

Any forward-looking statements contained in this announcement speak only as of
the date on which they are made. Prudential expressly disclaim any obligation
to update any of the forward-looking statements contained in this announcement
or any other forward-looking statements it may make, whether as a result of
future events, new information or otherwise except as required pursuant to the
UK Prospectus Rules, the UK Listing Rules, the UK Disclosure Guidance and
Transparency Rules, the Hong Kong Listing Rules, the SGX-ST Listing Rules or
other applicable laws and regulations.

 

Prudential may also make or disclose written and/or oral forward-looking
statements in reports filed with or furnished to the US Securities and
Exchange Commission, the UK Financial Conduct Authority, the Hong Kong Stock
Exchange and other regulatory authorities, as well as in its annual report and
accounts to shareholders, periodic financial reports to shareholders, proxy
statements, offering circulars, registration statements, prospectuses,
prospectus supplements, press releases and other written materials and in oral
statements made by directors, officers or employees of Prudential to third
parties, including financial analysts. All such forward-looking statements are
qualified in their entirety by reference to the factors discussed under the
'Risk Factors' heading of Prudential's 2023 Annual Report.

 

Cautionary Statements

 

This announcement does not constitute or form part of any offer or invitation
to purchase, acquire, subscribe for, sell, dispose of or issue, or any
solicitation of any offer to purchase, acquire, subscribe for, sell or dispose
of, any securities in any jurisdiction nor shall it (or any part of it) or the
fact of its distribution, form the basis of, or be relied on in connection
with, any contract therefor.

 

NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED
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