Prudential reported that its Hong Kong division suffered a steep fall in new enterprise income within the first half of the yr due to China’s strict zero-Covid coverage, because the insurer warned of “challenging” and “complex” market circumstances for the remainder of the yr.
The FTSE 100 group stated in a outcomes announcement on Wednesday that Hong Kong new enterprise income, a essential measure of predicted earnings on newly offered merchandise, fell 31 per cent within the first six months of the yr.
Profits from new mainland Chinese clients that journey throughout the border to purchase insurance coverage insurance policies in Hong Kong have been $694mn earlier than the pandemic in 2019, however fell to virtually nothing this yr, the Asia-focused insurer stated.
Prudential warned that there was “prolonged uncertainty” about when the border between Hong Kong and China, which has been closed for greater than two years due to the pandemic, can be reopened. New enterprise income in Hong Kong have been $211mn for the six-month interval.
Prudential’s share value fell 1.3 per cent in Hong Kong. Its London-listed shares have misplaced 1 / 4 of their worth this yr.
Prudential has undergone a radical transformation in recent times, leaving it solely centered on insurance coverage merchandise in Asia and Africa — however with a UK domicile and first listings in London and Hong Kong. It break up from its UK enterprise, M&G, in 2019 and its US operation, Jackson, two years later.
The group’s incoming chief govt, Anil Wadhwani, would be the first to be based mostly in Asia in Prudential’s 174-year historical past. Wadhwani will be a part of Prudential in Hong Kong in February 2023. Prudential’s chief monetary officer and chief threat and compliance officer may also be based mostly in Hong Kong.
Prudential stated on Wednesday that 2022 “is the first year in which the group is focused entirely on the long-term opportunities we have identified in Asia and Africa across life insurance and asset management”.
Overall new enterprise income have been $1.1bn for the primary half of the yr, which was 7 per cent decrease than the identical interval final yr, however beat analyst expectations of $1.07bn. Its efficiency was hit by increased rates of interest and decrease gross sales in Hong Kong, which suffered from a big coronavirus outbreak and strict pandemic containment measures earlier this yr.
Of its 5 cornerstone markets — Hong Kong, mainland China, Indonesia, Malaysia and Singapore — new enterprise income solely elevated in Singapore in the course of the first half of the yr. Its development markets, which embody Taiwan, India, Vietnam and Africa, noticed a mixed improve in new enterprise income of 18 per cent to $304mn.
Mark FitzPatrick, who took over as interim chief govt in March, stated: “Although there are signs that Covid-19-related impacts in many of our markets are stabilising, over the remainder of the year we expect that operating conditions may continue to be challenging.”
Prudential additionally warned that a rise within the “complexity of the macroeconomic, geopolitical and regulatory environments” this yr would most likely improve and that it might be compelled to navigate “volatile financial markets” to stay robustly capitalised.
Prudential continues to rebalance staffing ranges between London and Hong Kong, with about 60 per cent of head workplace employees now based mostly within the Chinese territory and fewer than 200 workers within the UK capital.
The insurer has come below stress from activist shareholder Third Point to vary its UK domicile as a part of its demerger from the UK and US companies. Mike Wells, its earlier chief govt who retired in March, beforehand stated the group had no plans to ditch its London base.
Source: www.ft.com