Prudential in strong position as it focuses on Asia, Africa: Fitch
January 27 2022 by Maya Huf
Prudential’s annualised premium equivalent sales of the Asian and African businesses saw year-on-year growth of 17% in the first half of 2021 (H1 2021) amid lingering economic and social challenges due to Covid-19, according to a January 27 report from Fitch Ratings.
The improvement in profitability was driven by the group’s consistent focus on expanding, said the release.
The new business margin of the insurer for 2021 was 56% for H1 2021, having averaged 65% between 2018 and 2020. Annualised return on equity (ROE) was approximately 17% in H1 2021.
In September 2021 Prudential completed a demerger from Jackson Financial National Life Insurance Company and Jackson National Life Insurance Company of New York, in order to focus more on its Asian and African businesses. The demerger also helped the group reign in its financial market risk and reduce capitalisation volatility, according to the report from Fitch.
“Fitch assesses Prudential’s financial performance as very strong on a sustainable and robust Asian insurance margin and stable fee income from its asset management business, Eastspring Investments,” said Fitch in the announcement.
Fitch affirmed Prudential’s long-term issuer default rating at ‘A’ with a stable outlook.
However, the rating agency also suggested that a higher adjusted risky assets ratio in H1 2021 may expose Prudential to potential volatility in earnings and investment impairment. The ratio increased from the end of 2020 because of a lower capital base and more equity investments held by the participating business in Asia.
But the rating agency also believed that Prudential’s distribution capability would support its growth in markets such as China, India, Indonesia and Thailand as it builds up its business in Africa.
The company registered a US$4.637 billion loss in the first half of the 2021 financial year compared to a US$534 million profit in the first half of 2020. Over the same period, adjusted operating profit from continuing operations was up 19% to US$1.571 billion.
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