Prudential PLC - UOB Kay Hian 2022-10-26: Remains Appealing With Discounted Valuation Despite Market Volatility

• Citic Prudential Life (CPL)’s expansive geographic footprint has become its key advantage despite the lockdown of multiple cities in China. We reckon Hong Kong’s 2H22 growth is still domestically driven and investors could focus on ASEAN while the reopening of the Hong Kong-China border remains uncertain.
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Prudential’s multiple branches in China − A key advantage for the company during COVID-19 lockdowns.

• Prudential Plc (SGX:K6S)’s JV with Citic (Citic Prudential Life, CPL) allows them to leverage Citic's multichannel distribution and broad geographic footprint (99 cities, >6,000 bank outlets), thereby penetrating nearly the entirety of the Chinese mainland. This allowed CPL’s sales to continue despite various lockdown phases, leading to a 15.91% CAGR increase in new business profit (NBP) from 2019 to 2021.
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• the weak economy's resultant shift to savings products, benefitting the CPL bancassurance distribution channel (more than 50% of policies were sold via the banca channel in 1H22 as agencies activities were disrupted by COVID-19 lockdown); and
• government policies, such as the Pillar 3 retirement opportunity.
• Note that CPL’s 1H22 Annual Premium Equivalent (APE) grew 13% y-o-y; we believe Prudential's unique partnership is well-positioned for the 2H22 growth in the region.

Prudential has implemented various approaches to tackle local demand in Hong Kong.

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Above is the excerpt from report by UOB Kay Hian Research.
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