Prudential – Jackson Disruption To The Headline Numbers, But Signs Of A Thriving Business Beneath

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Prudential plc (LON:PRU) reported a loss after tax for the half of $4.6bn, impacted by a $7.5bn writedown in the value of US life insurance business Jackson ahead of its planned demerger. Excluding Jackson the group reported a profit after tax of $1.1bn, up by 64% year-on-year at constant exchange rates.

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Q2 2021 hedge fund letters, conferences and more

The improvement in underlying profits reflects insurance sales growth across all regions other than Indonesia and Hong Kong, as well as improvements in asset management operating profit.

The board announced an interim dividend of 5.37 cents per share, in-line with last year’s payout.

The Jackson demerger is expected to complete in September.

Prudential shares rose 1.2% in early trading.

Prudential's Q2 Numbers

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown:

“The writedown in Jackson’s valuation ahead of its demerger dominates reported numbers this half. However, it doesn’t affect any of the underlying fundamentals and we think these numbers show a thriving business underneath.

Insurance sales in Asia and Africa continue to grow well, unsurprising after a time of crisis when the importance of planning for an uncertain future have been driven home to consumers around the world. With wealth in these markets still growing steadily the group’s middle class customer base is growing. Meanwhile the premiums collected on these insurance contracts are being funnelled into Pru’s in house asset manager Eastspring – boosting profits there too. Since size is key to competitiveness in asset management, growth together with improved investment results should help Eastspring stem the flow of external investors leaving its funds making it a growth engine in its own right.

Clearly Pru’s business model is pedalling along nicely, and we think that bodes well for the long term. However, the immediate future is less certain, with lockdowns returning across many Asian economies in the face of spiking Delta variant cases and disrupting what is still a very analogue distribution system in many markets – reliant on banks and insurance brokers that simply can’t open.”

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