Prudential H1 Results Surpass Expectations

Investing.com — Shares of Prudential (LON:PRU) rose on Wednesday after it reported its H1 results, which surpassed expectations in several key areas.

At 4:08 am (0808 GMT), Prudential was trading 2.2% higher at £676.80.

Analysts from Jefferies, JP Morgan, and Morgan Stanley have flagged the company’s strong performance and strategic shift to Traditional Embedded Value (TEV) reporting as major contributors to the positive market reaction.

Prudential reported an APE of $3,027 million, which was 1.5% lower than consensus. However, despite this slight miss, growth markets showed strong sales momentum, with an increase of 30% in constant currency terms.

Sales in Hong Kong were down by 7%, showing a deceleration from the previous quarter’s growth. Management noted a pick-up in sales momentum in June, which is expected to continue into the second half of the year, according to analysts at Jefferies.

The NBP exceeded consensus by 1% and JP Morgan’s estimates by 5%. The NBP margin of 47.2% surpassed the consensus margin of 46.1% and was 2.5 percentage points above JP Morgan’s estimate.

This improvement was driven by better pricing and product mix, though country and channel mix challenges remained, stated analysts at JP Morgan.

In constant currency terms, Prudential’s Gross OFSG dropped 4% year-over-year to $1.35 billion. Reports from Morgan Stanley and Jefferies indicate this result was consistent with consensus expectations, but lower new business sales during the COVID period continued to exert pressure on results.

The company reported an IFRS operating profit of $1.54 billion, which exceeded consensus estimates by 3%. This was driven by positive results across Life and Asset Management segments, with a Contractual Service Margin (CSM) growth of 9%, slightly ahead of guidance, according to analysts at Morgan Stanley.

Prudential will transition from the European Embedded Value (EEV) method to Traditional Embedded Value (TEV) reporting in the first quarter of FY25. This change is expected to enhance comparability with key peers and was well received by investors.

Under TEV reporting, Prudential will reset its new business profit starting value to $1.7 billion, with a revised 2027 target range of $3.4-4.2 billion, as reported by JP Morgan.