Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prudential PLC (PUK, Financial) reported an 8% growth in new business profit for the first half of 2024, reaching $1.5 billion.
- Operating profits grew by 9%, supported by a large and growing in-force portfolio.
- The company announced a $2 billion share buyback program and a 9% increase in the interim dividend to $188 million.
- Prudential PLC (PUK) successfully launched its enhanced customer digital platform, PruServices, and saw improved customer registrations and satisfaction.
- The company has made significant progress in its five-year strategy, showing early positive results from capability investments and disciplined financial and operational management.
Negative Points
- Prudential PLC (PUK) faced a disappointing Federal Court decision in Malaysia, overturning previous favorable judgments.
- The company experienced a decline in active agents in markets like Indonesia, Philippines, and Vietnam, indicating areas needing improvement.
- The solvency ratio in China has been impacted by lower rates, necessitating potential capital injections later in the year.
- The overall reported margins in China decreased from 43% to 35%, driven by lower rates and a higher mix of savings business.
- The company is still working on achieving positive operating variances, with ongoing efforts required in expense management and claims handling.
Q & A Highlights
Q: Could you provide more color on the level of growth of new business in Mainland China and which distribution channels and products contributed to this growth?
A: We saw a shift in product mix towards longer-term savings, greater power, and health and protection. This shift, along with pre-emptive actions taken last year, has led to significant margin improvements in both agency and bancassurance channels. We remain cautiously optimistic about the quality and productivity improvements in Mainland China.
Q: Can you provide more details on the movement in the MCV new business in Hong Kong?
A: The ticket size for MCV business has stabilized around USD 18,000. The traffic is stabilizing at about 2.6 million to 2.7 million, with around 10 products sold per 1,000 customers. The demand for Hong Kong's health infrastructure and products remains strong, giving us confidence in the MCV segment's growth for the rest of 2024.
Q: What is the outlook for new business profit growth for 2024? Is it excluding economic effects?
A: Yes, the outlook for new business profit growth for 2024 is on an ex-economics basis. We expect the growth rate to be consistent with the trajectory needed to meet our 2027 new business profit objective.
Q: Can you provide a split on health and protection versus savings in new business sales and new business profit?
A: Health and protection new business profit was $545 million, growing 7% year-on-year, with APE mix at around 22%. Demand for health and protection remains strong, with 14 markets recording growth in both APE and new business profit.
Q: How do you plan to deploy the remaining USD 1 billion investment in capabilities?
A: We have spent $230 million so far and plan to invest another $150 million to $200 million in the second half of the year. In 2025, we expect to invest around $250 million to $300 million. The focus is on accelerating execution in quality agency recruitment, bancassurance, health vertical, and customer digital platforms.
Q: Can you provide more details on the impact of the global minimum tax on your growth targets?
A: The implementation of the global minimum tax is not expected to impact our growth targets for new business profit. We are still assessing the impact, but we remain confident in achieving our 2027 objectives.
Q: What are the key drivers behind the impressive 15% year-on-year new business profit growth in Singapore?
A: The growth is driven by the strength of our agency and bancassurance channels, particularly targeting high net worth and offshore customers. The Prudential Financial Advisory has also contributed significantly, with over 800 financial advisers focusing on affluent and high net worth individuals.
Q: How do you plan to address the solvency issues in China?
A: We are actively considering management actions such as taking on more duration and reclassifying certain assets. While we may need to make a capital injection later this year, these actions are part of our broader capital management plans.
Q: What steps are you taking to improve the quality and productivity of your agency force?
A: We are focusing on quality recruitment, reskilling agents, and generating more activity. Programs like PruVenture have shown that new recruits under this program are six times more productive than regular agents. We are also leveraging digital platforms to enhance agent productivity.
Q: Can you provide more details on the pricing changes in China and how you are positioning yourself in the market?
A: We have already repriced our products in line with the new regulatory changes and will launch them as soon as the effective dates come into play. We continue to focus on driving a different product mix to improve margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
