Prudential Shares Plunged 7.2% on Slow Hong Kong Travel Rebound

The Prudential plc (LON: PRU) share price plunged 7.16% after releasing its full-year results for 2022. The UK insurance company is now fully focused on the Asian and African markets that promise significant growth in the coming years, boosted by changing demographics.

The group grew its Annual Premium Equivalent (APE) sales by 9% to $4.39 billion in 2022 from $4.19 billion in 2021, beating analysts' estimates of $4.22 billion. The company’s adjusted operating profits rose to $3.38 billion from $3.23 billion, slightly ahead of consensus estimates.

Prudential hiked its annual dividend by 9% after announcing a second interim dividend of 13.04 US cents per ordinary share. However, its total dividend yield of 1.5% is much lower than other insurance companies, such as Aviva, are paying. 

The insurance and investment management firm’s pivot towards Asian and African markets was based on the changing demographics in these countries where insurance penetration is not as high as in developed countries such as the United Kingdom. 

For example, Asian countries such as China, Malaysia, Hong Kong and Indonesia are rapidly urbanising and have a growing middle-class population, expected to rise to 1.5 billion people by 2030. As the middle-class population expands, demand for insurance coverage in such countries is expected to skyrocket.

Asian countries led by China have adopted new regulations that are friendly to insurance companies as they try to stimulate the industry to increase the number of citizens with insurance coverage. 

Prudential is well-positioned to benefit from the surging middle-class population in Asia and Africa, which underpins its changing strategy to focus on the two continents. However, the pivot has faced several challenges, including China's Covid-zero lockdowns. 

Today’s decline in Prudential’s share price was triggered by the CEO’s comments that the number of Chinese mainland visitors to Hong Kong had recovered to only 45% of their pre-pandemic levels, indicating that there is still a long way to go. 

The number of Chinese visitors to Hong Kong is crucial to Prudential since most Chinese customers prefer to buy their insurance products in Hong Kong to get asset class and currency diversification. 

*This is not investment advice. 

The Prudential share price.

The Prudential share price plunged 7.16% to trade at 1098.3p, from Tuesday’s closing price of 1183.0p.