REG - Prudential PLC Prudential Fdg(Asia) - Prudential plc - Q3 Business Performance Update

PrudentialAnnouncement

06/11/2023 07:30

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RNS Number : 4744S  Prudential PLC  06 November 2023

6 November 2023

 

 

PRUDENTIAL PLC Q3 BUSINESS PERFORMANCE UPDATE

 

Year to date new business performance remains strong

 

Performance highlights on a constant(1) (and actual) exchange rate basis for
the nine months ended 30 September 2023

 

·      Year to date new business profit(2) was up 37 per cent (34 per
cent) to $2,143 million with Q3 business momentum continuing to reflect the
strength of our multi market, multi-channel strategy. Excluding economic
impacts(3) new business profit was up 48 per cent (45 per cent), with margins
improved due to positive developments in channel and geographic mix .

·      Year to date APE sales(4) were up 40 per cent (36 per cent) to
$4,417 million led by Hong Kong, with increased sales to both Chinese Mainland
visitors and Domestic customers compared with the same period last year.

 

APE new business sales(4) (APE sales) and EEV new business profit(2)(NBP)

 

                                                          Actual exchange rate                         Constant exchange rate
                                YTD 30.09.2023 $m         YTD 30.09.2022 $m     Change                 YTD 30.09.2022 $m     Change

                                                                                %                                            %
                                APE sales  NBP            APE sales  NBP        APE sales  NBP         APE sales  NBP        APE sales  NBP
 Total                          4,417      2,143          3,247      1,597      36%        34%         3,147      1,562      40%        37%
 Total new business margin (%)             49%                       49%                                          50%

 

 

CEO Anil Wadhwani, said: "The new business momentum we saw in the first half
of 2023 continued in the third quarter. The strength of our distribution
capabilities and the diversification of the business across markets, products
and channels drove our performance in the nine months to 30 September 2023,
with fifteen of our life markets across Asia and Africa delivering
double-digit growth in new business profit.

 

"Consumer demand in Asia remained resilient and we have seen ongoing demand
for both savings and health and protection products from both Domestic and
Chinese Mainland visitor customers in Hong Kong. At the same time, several of
our ASEAN(5) based businesses have seen double-digit growth in new business
profit for the first nine months of 2023. In the Chinese Mainland, the
industry-wide changes in both product and bancassurance distribution
regulations and our pro-active actions to diversify product mix are leading to
some disruption in sales. However, these changes are expected to be beneficial
to the development of the domestic industry by increasing the role for
insurance to meet customer needs and providing continuing demand for long-term
savings and health and protection products.

 

"We are focused on the execution of our recently announced five-year strategy
designed to enhance the Group's operational efficiency and increase the
productivity of our agency and bank distribution channels. We continue to
build our core capabilities across our strategic pillars of Customer,
Distribution and Health and supporting enablers including Technology. In this
regard we have recently appointed Ashley Veasey as our new Chief Information
Technology Officer, reflecting the importance of technology and innovation in
enhancing our customer and distribution experiences".

 

Going forward, Prudential plans to provide business performance updates for
the first three months and nine months of the year.

 

Outlook

 

Our diversified business model and strong capitalisation positions us well to
navigate ongoing challenges in the macro-economic and geopolitical
environment. Looking forward the environment continues to be challenging but
new business momentum has continued into the fourth quarter supported by our
multi-market growth engine.

 

Performance summary for the nine months ended 30 September 2023

 

APE sales grew significantly compared with the same period in 2022 and,
excluding economic impacts, new business margins improved(3) due to positive
developments in channel and geographic mix. Health and protection products
accounted for 37 per cent of our total new business profit. APE sales through
the agency channel increased by 81 per cent while new business profits were up
62 per cent(6) from the equivalent period in the prior year despite the
negative impact from interest rate movements. The increased agency APE sales
reflected the continued demand from Chinese Mainland visitors and Domestic
customers in Hong Kong and an improvement in agency production in the majority
of the other markets. APE sales through the bancassurance channel increased 3
per cent compared with the same period last year. This was mainly a result of
new products and bank partners in Taiwan, an improvement in Malaysia and the
continued success of our multi-currency savings product in Hong Kong,
partially offset by headwinds to sales through the Chinese Mainland
bancassurance channel and reduced consumer sentiment in Vietnam.

 

Market highlights for the nine months ended 30 September 2023

 

In Hong Kong, APE sales to both Domestic customers and Chinese Mainland
visitors grew strongly compared with the same period in the prior year. The
Hong Kong economy continued to recover year on year led by inbound tourism and
domestic demand, with over 8 million people from the Chinese Mainland visiting
Hong Kong in the third quarter of 2023. Visitor numbers in the discrete third
quarter were circa 90 per cent of that in the same period of 2019, while APE
sales to Chinese Mainland visitors in the same period were circa 1.3 times of
that in 2019. In addition to these sales we also saw double-digit growth in
the Domestic segment's new business profit in the discrete third quarter of
2023 compared with the same period in the prior year. While the appetite for
savings products remained elevated in Q3, the case sizes started to normalise
after the initial border reopening earlier this year. Health and protection
sales contributed to more than a third of the new business profit with growth
in both the agency and bancassurance channels. Consequently, the new business
margin increased sequentially for each quarter of 2023, if economic effects
were excluded(7).

 

In the Chinese Mainland, our pro-active actions to diversify product mix and
the implementation of the anticipated regulatory changes resulted, as
expected, in a decline in APE sales at CITIC Prudential Life (CPL) in the
first nine months of the year. CPL's APE sales declined further in the third
quarter when compared with the prior period due to the revisions to products
required by the regulatory changes for bancassurance announced in the quarter.
New business profit for the agency channel grew in the first nine months
offset by a decline in the bancassurance channel. New business margins
improved for both channels in the discrete third quarter supported by a shift
in product mix to health and protection, particularly within the agency
channel. Agency productivity measured by cases per active agent recorded
double-digit growth in the third quarter(8). We are confident that the
continued focus on quality establishes a good foundation for future growth.

 

Within our larger ASEAN(5) based businesses:

o   Indonesia and Malaysia saw continued momentum in APE sales and new
business profit for the year to date. In Indonesia, the positive effect on new
business profits from product repricing and upgrades seen in the first half of
2023 moderated in the third quarter, but the overall growth in new business
profit remained robust. In Malaysia we continue to take actions to improve
productivity by developing programs to support both new and established agents
which have seen productivity(9) increase consistently each quarter since the
start of 2023.

o   In Singapore, the strength of our franchise and the quality of our
distribution model saw APE sales increasing year on year in the discrete third
quarter. This was aided by a rebound of the bancassurance channel as the
benefit of new regular premium product launches came through. Given the impact
and challenges of higher interest rates on sales in the first half of the
year, total new business profits for the first nine months of the year were
lower than the same period in the prior year. Our continued focus on customer
experience resulted in recognition by The Straits Times as the top insurer for
customer service.

o   In Vietnam APE sales and new business profit when compared to the
corresponding period declined more in the third quarter than the first half of
2023 reflecting an industry-wide fall in consumer sentiment. However, the
business's focus on customers and the strength of its agency force has seen it
outperform the market, increase its market share and maintain its number one
position in the market(10).

 

Both ICICI Prudential Life and Africa delivered double-digit growth for APE
sales and new business profits in the nine months to 30 September compared
with the same period in the prior year. ICICI Prudential Life has seen recent
growth in its retail protection sales, improving persistency and is focused on
innovating product design to meet customer needs.

 

Eastspring's third party flows (excluding money market funds and funds managed
on behalf of M&G) increased in the third quarter to give a total year to
date net inflow of $2.1 billion, driven by retail clients with net inflows
into higher margin retail equity funds. Market movements and foreign exchange
rate effects in the third quarter together with the redemption of funds
managed on behalf of M&G plc led to a reduction in funds under management
to $216 billion at the end of September 2023 compared to $221 billion(11) at
the end of 2022. The overall asset mix has remained stable and continued to be
diversified across both clients and asset classes.

 

 

Notes

1     Comparisons are to the first nine 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.

2     New business profit, on a post-tax basis, on business sold in the
period, calculated in accordance with EEV Principles. Amounts for joint
ventures and associates are included on the basis of the Group's proportionate
share. See the EEV basis results in Prudential's Half Year 2023 Report for
further explanation.

3     This is a comparison with the first nine months of 2022 if new
business profit for the first nine months of 2023 had been calculated using
economics (including interest rates) as at 30 September 2022.

4     APE sales is 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, including
premiums for contracts designated as investment contracts under IFRS. Amounts
for joint ventures and associates are included on the basis of the Group's
proportionate share. It is not representative of revenue recorded in the IFRS
financial statements. See note II of the Additional financial information in
Prudential's Half Year 2023 Report for further explanation.

5     Markets within the Association of Southeast Asian Nations.

6     Excluding the effects of economics, the new business profit for
agency channel increased by 74 per cent.

7     Based on a consistent set of economics including interest rates (31
March 2023).

8     Double-digit growth in agent productivity measured over the nine
months to 30 September 2023 compared to the nine months to 30 September 2022,
and also measured over the discrete 3 months to 30 September 2023 compared to
the discrete 3 months to 30 September 2022.

9     Agency productivity by reference to APE sales per active agent.

10   Source: Q3 2023 Vietnam Actuarial Network data.

11   On an actual exchange rate basis.

 

Contact:

 

 Media                               Investors/Analysts
 Simon Kutner    +44 (0)7581 023260  Patrick Bowes       +852 9611 2981
 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/ (https://www.prudentialplc.com/)

 

Metrics presented

 

This business performance update provides relevant information on the trading
and sales development of the Group in the first nine months of 2023. 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 nine months 2023 NBP contained in this announcement is
based on interest rates as at 30 September 2023. When published, the full year
2023 results will contain NBP for the full year based on interest rates as at
31 December 2023. Consequently, the NBP values for the first nine months of
2023 that will be presented in the full year 2023 results may differ to the
amounts included in this announcement.

 

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 Standards. Further information about these metrics
including a reconciliation of EEV shareholders' equity for half year 2023 to
the most directly comparable IFRS measure can be found in the Group's Half
year 2023 Report.

 

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 ESG
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, the 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 ESG
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, in
particular, 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
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 Half
year 2023 Report and 2022 Annual Report. Such reports are available on
Prudential's website at www.prudentialplc.com.

 

Any forward-looking statements contained in this announcement speak only as of
the date on which they are made. Prudential expressly disclaims 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 Half year 2023 Report and 2022 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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