Prudential PLC - CGS-CIMB Research 2022-09-30: Exposed To Faster Growth Channels & Regions

Prudential PLC - Exposed To Faster Growth Channels & Regions

  • We forecast Prudential (SGX:K6S)'s 2H22F new business profit (NBP) to return to growth at 6% y-o-y, from 1H22’s 7% fall, driven by strong growth momentum for annualised premium equivalent (APE), which we think continued in Aug, following a strong start to 3Q22F.
  • We see Prudential as well placed to benefit from continued strong bancassurance growth, with this channel comprising 53% of 1H22 APE and 42% of 1H22 NBP, and bancassurance APE and NBP up by 25% y-o-y and 31%, respectively, on a constant exchange rate (CER) basis in 1H22.
  • We think Singapore and mainland China could be the strongest regions for 2H22F NBP growth, with Indonesia, Malaysia and Hong Kong the weakest.
    • With Prudential onboarding 22 new bank partners in 1H22, half of which were from mainland China, we expect mainland China to continue its strong 2Q22 bancassurance APE growth momentum in 2H22F. Bancassurance NBP also benefits more notably from the higher US rate environment, given actuarial investment assumption changes under Pru’s European Embedded Value (EEV) methodology.
    • Singapore grew the fastest of Prudential’s major regions in 1H22 NBP, up 13% y-o-y. We expect Singapore’s fast growth to continue, again driven by bancassurance as Prudential targets the high net worth segment. Importantly,
  • Singapore was also Prudential’s largest region (22% of its 1H22 NBP), with mainland China its second largest market (20% of 1H22 NBP).
  • Importance of obtaining a licence to operate in Macau is rising. This is because we expect greater inflow of mainland Chinese visitors (MCV) buying insurance following an imminent resumption of the individual e-visa programme and group tours from Guangdong, Shanghai, Zhejiang, Jiangsu and Fujian. RMB weakness has historically been a powerful motivation for mainland Chinese visitors buying insurance offshore.
  • We cut our FY22F, FY23F and FY24F EPS forecast for Prudential by 52.7%, 8.4% and 10.3% respectively, mainly to reflect worse-then-expected equity markets, and adverse mark-to-market impact from bond market movements. Another reason for the cut is also lower renewal premium growth assumptions, primarily for HK.
  • Reiterate ADD rating for Prudential with SOP-based target price cut to HK$119.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

Michael CHANG CFA CGS-CIMB Research | Laura LI Zhiyi CGS-CIMB Research | 2022-09-30
SGX Stock Analyst Report ADD MAINTAIN ADD 15.16 DOWN 18.430

Previous report by CGS-CIMB:
2022-09-05 Prudential PLC - 1H22 NDR Takeaway ~ Diversification Matters

Relevant links:
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Prudential Plc Share Price History,
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