Prudential shares bask in optimistic Asia profits

Shares at Prudential plc (LON:PRU) have bounced 2.76% after the company released a “resilient” set of half year 2020 results, celebrating a 14% adjusted operating profit across its services in Asia.

The British multinational life insurance and financial services firm – based in London and boasting more than 20 million customers – announced that it intends to build on its encouraging Asian profits by focusing on “high growth Asia and Africa markets with a view to sustained double-digit growth in embedded value per share”.

Nevertheless, Prudential was not entirely able to escape the impact of the coronavirus pandemic, with underlying operating profit in the first half down 2% year-on-year to $2.5 billion. Net cash across its business units was also down a whopping 60%, falling from $1.09 billion to $432 million.

The company assured, however, that its regulatory capital surplus remains strong at $12.4 billion, and that it will be announcing a new dividend policy aimed at focusing on “value creation through growth”.

Amidst its H1 results, Prudential also announced that it intends to “fully separate” from its US life insurance provider Jackson, beginning in early 2021.

Mike Wells, Prudential’s chief executive, commented on the firm’s announcement:

“We have delivered a resilient performance in the first half, despite a challenging new business sales environment, which is likely to persist for the rest of the year, and further falls in interest rates.

“The Board of Prudential plc has decided to pursue the full separation and divestment of Jackson to enable the Group to focus exclusively on its high-growth Asia and Africa businesses.

He added that the company is well-placed to withstand the long-term economic impact of the coronavirus pandemic:

“We believe we are well positioned both to weather the disruption caused by the Covid-19 pandemic as we continue to support our customers and communities in the recovery to come, and emerge stronger and with a more focused strategy”.

Neil Shah, Director of Research at Edison Group, weighed in on Prudential’s optimistic report:

“Although Prudential has had to struggle with several unexpected set of events in Asia, from the start to the pandemic to Hong Kong riots and US/China or a hit to fees from falling markets, Pru has found a bright spot in the Far East with a 14% increase in profit”.

It is good news for investors, nonetheless, as Shah maintains “proceeds from the [Jackson] move will force the company to take a new dividend policy and will kick off with a first interim dividend for 2020 of 5.37 cents a share”.

Prudential’s share price rallied 2.76% to 1,226.00p at BST 12:41 11/08/20 in response to the company’s announcements.