Prudential to see robust financial status in 12-18 months: Moody’s

The top five markets contributing to IFRS operating profit were Hong Kong, Singapore, Vietnam, Malaysia, and mainland China.

Prudential will see a stable outlook on the back of a strong financial position, including capitalisation and profitability, with a stable outlook over the next 12-18 months, according to Moody's Investors Service.

The affirmation of Prudential plc's issuer rating acknowledges the geographical diversity of the insurer's operations, capital sources, and earnings. While recognizing the correlation of Prudential plc's credit fundamentals with economic conditions in Hong Kong and China, 

This decision follows Moody's recent change of outlook on the A1 and Aa3 ratings for the Government of China and the Government of Hong Kong SAR, China, from stable to negative.

The insurer's financial performance in the first half of 2023 showed an IFRS profit after tax of $947m, a positive shift from a $1.5b loss in 2022. The top five markets contributing to IFRS operating profit were Hong Kong (31%), Singapore (15%), Vietnam (11%), Malaysia (9%), and mainland China (9%).

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Prudential plc's financial flexibility remains strong, supported by solid earnings coverage and access to capital markets. The group's financial and total leverage improved in H1 2023, below its medium-term target.

However, higher operational and investment risks arise from the significant life insurance operations in less-developed markets within Prudential plc's Asian business. 

Despite this, Moody's affirms the debt and program ratings, backed by Prudential plc's expected strong capacity to support Prudential Funding (Asia) plc (PFA) and Prudential International Treasury Limited (PITL).

Moody's outlines factors that could lead to an upgrade or downgrade of Prudential plc's ratings. Upgrades may result from improvements in operating environments and sovereign ratings, enhanced capitalization, or strengthened underlying profitability. 

Conversely, downgrades could be triggered by deteriorating capitalisation, weakening profitability, increased financial leverage, or reduced business diversification.