Prudential’s profits grow but Hong Kong sales dip amid zero-Covid policies

Prudential has seen its half-year profits grow, but warned that ongoing Covid-19 restrictions have stifled sales in Hong Kong and will affect its Asian operations.

The insurance giant – which has headquarters in London and Hong Kong and is focused on Asia and Africa – reported an 8% rise in its half-year adjusted operating profits to 1.7 billion dollars (£1.4 billion), compared with 1.6 billion dollars (£1.3 billion) a year earlier.

The rise was driven by an increase in life insurance and asset management sales as well as a 32% reduction in costs, having saved 180 million dollars (£149 million) by demerging the UK business and ahead of plans to cut head office costs by 70 million dollars (£58 million).

Its annual premium equivalent (APE) – a sales measure used by insurance companies – also jumped 9% to 2.2 billion dollars (£1.8 billion), with greater expansion into the Asian markets and selling a mix of products.

But the insurer noted that APE sales in Hong Kong, a key market for the firm, were down 10% with the state going through the fifth wave of the coronavirus pandemic in the first four months of the year and businesses and the economy struggling.

Hong Kong is among several regions that have imposed strict zero-Covid policies, with quarantine measures intended to prevent the spread of the virus at the border.

Bosses at Prudential acknowledged that ongoing Covid lockdowns and volatile financial markets will bring challenges for the businesses in the latter half of the year.

Group chief executive Mark FitzPatrick said: “Our resilient operational performance demonstrates the strength of our well-positioned and well-diversified franchise across the Asia region, driven by our multi-channel, digitally-enhanced distribution platform.

“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.

“We remain confident that Prudential has the financial resilience, capital strength and capability to meet the growing health and savings needs of our customers in Asia and Africa.”

Analysts said Prudential’s long-term growth objectives are likely to be dampened by its focus on regions suffering the “full force” of that latest Covid variants, especially in Hong Kong.

“Prudential is in a difficult place at present, trying to balance its short-term challenges against its longer term objectives”, said Richard Hunter, head of markets at interactive investor.

He added: “The company has pointed to an expected middle-class population of 1.5 billion across Asia by 2030, with an estimated health protection gap of 1.8 trillion dollars (£1.5 trillion).

“For the moment, however, it is those very regions which have tended to suffer the full force of the latest Covid-19 variants, with particularly acute financial pain being felt still in Hong Kong.

“Customer retention remains solid, but the ability to grow the business was severely impacted by the latest wave of the pandemic, which severely impacted agent activity in the region.”