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Prudential’s growth stalled in its key markets of Hong Kong and mainland China in the first half of the year, confounding a recently bullish outlook for the region from the life insurer.
New business profit, a measure of expected earnings from recently sold products, dropped 3 per cent year on year in Hong Kong, its biggest market, in the six months to the end of June, to $651mn. The fall comes after the company notched up strong growth of 218 per cent in the same period last year, as mainland Chinese visitors returned to Hong Kong after the pandemic.
Prudential’s mainland Chinese joint venture recorded a 33 per cent dip in new business profit, despite the insurer’s chief executive Anil Wadhwani stating in March that it was “starting to see the momentum coming back” in China.
Prudential, which is domiciled in the UK and jointly listed in London and Hong Kong, shed its US and European operations to focus on Asia and Africa in a sweeping restructure that completed in late 2021. However it was then hit by zero-Covid policies in its core Hong Kong market, which cut off visitors from mainland China.
On Wednesday it reported that group new business profit fell to $1.47bn in the first half, from $1.49bn a year earlier, pulled down by weakness in China and Hong Kong.
The insurer said it had “taken steps . . . to reposition our business” in anticipation of “macroeconomic headwinds” in China, while in Hong Kong it expected to continue to see “sustained growth” from mainland Chinese visitors.
The insurer added that overall weak growth in mainland China and concerns surrounding its property sector continued to put pressure on Chinese interest rates, which could also “weigh on the broader Asian region and the global economy’s vitality”.
Prudential has now bought back $200mn of shares as part of a $2bn buyback plan announced in June. Its adjusted operating profit for the first half increased 6 per cent year on year at actual exchange rates to $1.54bn, from $1.46bn.
The company’s shares fell 3 per cent in Hong Kong on Wednesday, having fallen by more than 22 per cent since the start of the year.
Its results come after Hong Kong-based insurer AIA last week recorded a jump in half-year profits and a 21 per cent increase in overall new business, driven by strong Chinese demand.
New business value in Hong Kong, AIA’s biggest market, grew 26 per cent on actual exchange rates buoyed by growing Chinese visitors to the city, while in mainland China it recorded a 30 per cent growth in new business value.
But a slowdown in China’s economy continues to add to pressure on the growth rate for AIA, according to Jefferies equity analysts last month, although elevated demand from mainland China is expected to remain in Hong Kong.