Prudential APE sales grew significantly, up 35% to $1,559 million

Prudential plc (LON:PRU) has provided a business performance update for the first quarter ended 31 March 2023.

Performance highlights on a constant¹ (and actual) exchange rate basis

·      APE sales² were up 35 per cent (29 per cent) to $1,559 million driven by increasing cross border traffic from the Chinese Mainland and higher domestic demand in Hong Kong alongside growth in many of our other business units

·      New business profit³ was up 30 per cent (26 per cent) to $743 million. Excluding economic impacts⁴ new business profit rose 43 per cent (39 per cent)

Financial update

“The strength of our distribution capabilities and the diversification of the business across country, product and channel contributed to our performance in the first quarter. 10 out of the 13 life insurance markets in Asia, as well as Africa, achieved double-digit growth¹ in new business profit. A key theme of our growth has been the success of new products as we continue to focus on meeting the diverse needs of our customers.

“APE sales grew significantly when compared with the same period in 2022. Following the removal of the bulk of Covid-19-related restrictions, our agency channel has seen continued momentum with APE sales increasing every quarter since Q2 2022. APE sales through the bancassurance channel reduced (by 4 per cent¹) following double-digit growth in the prior year. Total new business profit for the Group grew by 30 per cent¹ with new business margin broadly stable at 48 per cent.

“Hong Kong APE sales to both domestic customers and Chinese Mainland visitors grew strongly, with sales to Chinese Mainland visitors restarting following the reopening of the border with Hong Kong. New business profit in Hong Kong increased by 106 per cent¹ to $293 million on APE sales of $455 million, up 299 per cent¹. As highlighted in our full year 2022 results announcement in March 2023, Hong Kong’s new business profit margin in the first quarter of 2023 of 64 per cent reflects a higher proportion of savings products in our sales mix than in the prior period. This effect was partially offset by the impact of lower interest rates at the end of the first quarter compared with the end of 2022.

“CITIC Prudential Life’s agency APE sales increased compared with the same period in the prior year¹. As expected, APE sales through the bancassurance channel were lower with management placing greater focus on product mix. Total new business profit grew despite an overall fall in APE sales.

“In our businesses based in South-east Asia⁵, APE sales growth drove increases in new business profit in Indonesia and our Growth markets segment, while both APE sales and new business profit moderated in Singapore and Malaysia reflecting changes in product and channel mix. Our South-east Asia businesses represented 32 per cent of the total new business profit generated in the quarter. Indonesia showed a continuation of the performance seen in the fourth quarter of last year with growth in both agency and bancassurance production¹. The Growth markets segment performed well especially in Thailand and in the Philippines. ICICI Prudential Life has continued to deliver growth in the first quarter, with double-digit broad-based growth in APE sales and new business profit. It also announced that it had met its objective of doubling its 2019 new business profit by 2023.

“Eastspring’s funds under management increased to $228.6 billion at the end of the first quarter of 2023 from $221.4 billion⁶ at the end of 2022, with positive inflows from both the internal life businesses and retail third parties, and a net positive contribution from market and other movements in the period. We have however seen further redemptions by M&G plc of $1.7 billion in the period and anticipate a significant proportion of their remaining funds will exit in 2023.

Outlook

“Business momentum, particularly in Hong Kong, has continued to date in the second quarter and we maintain our prudent approach to asset allocation and credit risk. We remain confident that we have the financial resilience, capital strength and capabilities to meet the growing health, protection and savings needs of our customers in Asia and Africa. By doing so, we believe we will deliver on our purpose to help people get the most out of life and also build value for all our stakeholders over the long term.”

Anil Wadhwani

Chief Executive Officer

Notes

1     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.

2     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 unaudited financial information in Prudential’s 2022 Annual Report for further explanation.

3     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 2022 Annual Report for further explanation.

4     Represents the growth compared with the first quarter of 2022 if new business profit for the first quarter of 2023 had been calculated using economics (including interest rates) as at 31 March 2022.

5     South-east Asia comprises of our businesses in Asia excluding the Chinese Mainland, Hong Kong, Taiwan and India.

6     On an actual exchange rate basis.