Prudential shares sank on Wednesday despite the group posting strong 2023 results boosted by reopening the border between Hong Kong and the Chinese mainland.
New business soared 45% to $3.1bn, and annual premium sales jumped 37%. There’s a lot to like in the group’s full-year results.
However, Prudential’s strong results did little to lift the mood among investors who are still clearly concerned about the risks to China’s economy and what they mean for the immediate outlook.
“The whole idea behind Prudential’s pivot east was to benefit from the growth opportunities in less mature insurance and savings markets in Asia and Africa,” said AJ Bell investment director Russ Mould.
“However, the recent sticky patch for the Chinese economy has undermined the business and, to an even greater degree, sentiment towards it.”
Prudential shares were down 6% at the time of writing and were trading at the lowest levels since the beginning of the pandemic. While 2023 results were robust, what happens next is less clear.
The company said they remain confident in meeting their 2027 targets of 15% – 20% new business compound annual growth from 2022 levels and double-digit compound annual growth in operating free surplus from insurance and asset management businesses.
However, the group’s outlook section of the results was brief and provided little insight into what happens next year. This may have put investors off, given the uncertainty around China.
“Despite analyst price forecasts being significantly higher than the current price, it would appear that The Pru still has some work to do in convincing investors that the prolonged downtrend is reversing,” said Mark Crouch, analyst at investment platform eToro.
“Prudential still has significant exposure to China and their share price dropped by a quarter in 2023, currently sitting at a key area of support that also marked the COVID lows.”
Prudential shares are attractive at these levels for those optimistic about China’s outlook, however difficult that may be. The forward earnings multiple is around 10x and offers value.
The company increased the full-year dividend by 9%. Prudential yields around 2%.
