Prudential bolstered by China reopening as earnings and dividends rise – but stocks plunge as investors take profits amid fallout from SVB collapse
- Prudential has seen its adjusted operating profit increase by 8% over the past year
- The group is taking advantage of the reopening of China and is looking to expand further in India
Shares of Prudential fell sharply today as the group posted better-than-expected profit growth.
Shares of Prudential, listed on the FTSE 100, were down 8.41% or 99.50p at 1,083.50p this morning, after rising around 8% in the past 12 months.
The insurer’s adjusted operating profit jumped 8% to $3.38 billion in 2022, above forecasts of around $3.38 billion.
Prudential raised its dividend by 9% to 18.78 cents per share for the full year, with a projected yield of around 1.5%.
Focus: Insurer Prudential focuses its operations on Asia and Africa
And current trading has kept pace, with annualized premium equivalent sales up 15% for the first two months of the current year, compared to the same period a year ago.
Chief Executive Anil Wadhwani said: “The removal of the bulk of Covid-19 related restrictions in the region and the gradual opening up of mainland China’s economy means that 2023 is off to a good start with encouraging progress in sales year on year. .’
Russ Mould, chief investment officer at AJ Bell, said the group’s share price may have reacted better to earnings last week before the Silicon Valley Bank collapse.
He added: “But right now investors are treating financial stocks with the same suspicion as something they found on their shoe.”
The company’s chief financial officer, James Turner, said the insurer had a “minimal” exposure of $1 million to SVB against a total debt portfolio of $23 billion, according to Reuters.
Prudential, which focuses its operations in Asia and Africa, said India presented a “very big opportunity” for future growth, given that it has a large population, “low insurance penetration and expectations of a rapid increase in GDP per capita”.
Over the past year, the group has seen its APE sales increase by 4%, driven by strong growth in its pension and annuity businesses.
Since its separation from fund manager M&G in 2019, Prudential no longer has a significant business in the UK.
Richard Hunter, Head of Markets at Interactive Investor, said: “Now fully focused on Asia and Africa, Prudential has been boosted by the recent reopening in China, allowing businesses to resume their growth trajectory.
“The Chinese reopening is a major boon to the immediate outlook, as evidenced by the strength of new sales already seen in the new fiscal year.
“In turn, the stock price has had an extremely strong run of late, with a 26% rise in the past six months contributing to a 13% rise in the past year, versus an increase 6.4% for the broader FTSE100.
“Some profit taking given this recent run was exacerbated by a weaker broader market in early trade, with stocks seeing some weakness.
“However, it looks like the longer-term outlook remains intact, and the market consensus on the equities as a strong buy appears to suggest the strategy will continue to thrive.”
