Prudential's Asian life business beats expectations with $3.1b NBP

Jefferies expects Prudential to exceed medium-term growth targets.

Prudential's Asian life business surpassed expectations with new business profits (NBP) reaching $3.1b, 6.4% ahead of consensus, according to Jefferies Equity Research report.

Notably, fourth-quarter new business figures exceeded consensus by 23.8%, signalling a robust performance compared to previous quarters. Margins outperformed, contributing to the positive variance. Looking ahead, Jefferies anticipates margins in the first half of 2024 to dip slightly from fourth-quarter levels but remain ahead of previous periods.

Upcoming catalysts include a potential Sharia-compliant bancassurance deal in Indonesia and the 1Q 2024 trading statement, which is expected to reflect continued momentum. 

Additionally, Jefferies expects Prudential to exceed medium-term growth targets, potentially resulting in an uplift at the 1H 2024 results. Management's statement on aspirations beyond the 15% to 20% growth target suggests a positive outlook for future performance.

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Eastspring experienced a significant turnaround in 2023 after a challenging 2022, with market returns rebounding. 

Despite subdued net flows, improved performance is expected to drive higher flows in 2024. Although competitive pressures may impact fee margins, rising assets under management (AUM) and reduced cost-income ratios support our forecast of over 10% annual operating profit growth in the medium term.

Regarding IFRS 17 disclosures, whilst Prudential's consideration of adopting TEV is welcomed by the market, Jefferies advocates for enhanced disclosures focusing on Asian Life by geography to provide more insight into earnings and the CSM roll forward.