Prudential’s sales dented by Asia lockdowns

Asia-focused insurance giant Prudential has seen its sales take a hit amid global lockdowns in the last few months, and its shares are down over 7 per cent today.

The group’s sales across Asia fell by 24 per cent in the first quarter of this year, with Hong Kong seeing the biggest drop.

But, on the investment front, some analysts think the company still represents a ‘strong buy’ opportunity, even though the share price has dropped around 30 per cent in the last year.

While several insurers in Britain have suspended dividend payments, under pressure from regulators to preserve capital, Prudential, whose main regulator is in Hong Kong, is continuing with its 2019 payout. 

Prudential’s sales in Hong Kong halved over the period, while in China, sales fell by a fifth, an update published today revealed.

Mike Wells, Prudential’s chief executive, said: ‘We continue to see a challenging sales environment in the second quarter of 2020 as social distancing measures are stepped up in other Asian markets.’

In the last quarter, the company’s profits across Asia increased by 14 per cent, but the bulk of this cash was made before lockdowns were introduced. 

In Hong Kong, Prudential can currently only sell 25 per cent of its products virtually, with the area having rules in place which mean most of its products can only be sold via face-to-face meetings.

But, across China, Malaysia, Singapore, Vietnam and the Philippines most products across Prudential’s operations are now capable of being sold without the need for the customer and a member of staff to be in the same room.

Boss Mike Wells said his company was ‘working closely’ with regulators to boost the number of products it could sell to customers online.

The group also confirmed it was still considering other options for its US business, alongside a possible flotation.

Back in March, Prudential said that while it would continue to prepare the planned minority initial public offering of its Michigan-based Jackson business, it would also ‘actively evaluate’ alternatives.

Rebel investor Third Point is pushing Prudential for a full separation of Jackson. 

Prudential expects to see US sales ‘materially’ hit in the short-term due to lockdown restrictions and recent moves to increase prices across its product range. 

Around three-quarters of Prudential’s 19,500-strong workforce are currently working remotely, with the group claiming it had seen ‘no notable increase in costs.’

Mr Wells said: ‘While we cannot say with certainty how the Covid-19 impact will impact the global economy and hence how Prudential might be impacted, we believe we are well positioned over the long term both to weather the disruption caused by the pandemic, and to support our customers and communities in the recovery to come.’

The company’s share price has dropped sharply this afternoon and is currently down 7.29 per cent or 79.5 points to 1,011.5p, having fallen over 30 per cent in a year.

For some City analysts, Prudential still has the potential to prove fruitful for investors.

Richard Hunter, head of markets at Interactive Investor, said: ‘Prudential’s Asian exposure has been both a blessing and a curse over recent months, but for the long-term the proposition remains firmly intact.’ 

He added: ‘Despite the inevitable disappointment of recent trading, the longer term strategy of tapping into the health, protection and savings markets of a burgeoning region remains appealing. 

‘If the Chinese and Hong Kong economies are beginning to normalise, Prudential will be well placed to benefit. 

‘In the meantime, a share price decline of 35 per cent over the last year, as compared to a drop of 18 per cent for the wider FTSE 100 has not detracted from investors’ appetite for the company on future prospects, with the market consensus as a strong buy reflecting high hopes.’