First-half annual premium equivalent (APE) sales came in at $3.4bn ($3.5bn expected), up 3% ignoring currency moves.
Underlying operating profit was up 9% to $1.8bn (as expected), while new business profit rose 8% to $1.4bn as margins improved 2 percentage points to 40.4%.
The asset management business, Eastspring, saw funds under management rise 5% since the start of the year to $291bn.
The free surplus ratio, its preferred measure of balance sheet strength, was 209% at the end of the period (175-200% target range).
A first interim dividend of 8.88 cents per share was announced, up 15%. The group also added around $0.3bn to its $1.2bn buyback programme for 2026, with a further $1.3bn indicated for 2027.
Full-year guidance was maintained, looking for double-digit growth in new business profit.
The shares fell 1.1% in early trading.
Our view
The Prudential investment case rests on turning an expanding Asian middle class into cash for shareholders. That was the encouraging part of these results. Capital generation, which is key to fund dividends and buybacks, is building faster than expected. That’s why there was room to top up the buyback guide, aided by the planned sale of another slice of its Indian asset management arm.
New business profit is where the pressure sits. First-half growth of 8% leaves ground to make up against full-year guidance for double-digit growth, and it's well short of the 15-20% medium-term ambition. We said in March that things needed to accelerate, and that still holds.
Hong Kong is still the engine room, where Prudential's life and health cover for mainland Chinese visitors holds a market-leading position. The shift towards protection products means smaller policies but better margins, and repricing has landed without much disruption. Worries about a regulatory clampdown on those cross-border sales look overdone to us.
Elsewhere, the mix is working against margins. In China, sales have skewed towards with-profits savings products, which earn roughly half the margin of the rest of the range, though some of that shift looks seasonal. Singapore's growing too, but new rules on medical top-up cover are nudging the balance towards lower-margin savings business.
The wider growth markets are a mixed bag. India and Thailand are both expanding quickly, while Taiwan, around half of that division, has slowed after a very strong run. India is the one to watch, where Prudential is buying a controlling stake in Bharti Life and building out health insurance in a market where cover is still thin on the ground.
Eastspring, the asset management arm, is quietly useful. Funds under management have grown to $291bn, helped by demand for Asian exposure and decent fixed income performance, and it earns fees managing premiums from the insurance business.
The balance sheet is in good shape, with the free surplus ratio above the group's target range. Alongside the modest dividend, there's a rolling programme of buybacks plus extra returns of surplus capital pencilled in for this year and next. It's not a big yielder, though, and nothing's guaranteed.
The refreshed strategy brings with it some bold goals, and progress looks good. We think Prudential's Asian focus and higher growth opportunities give a different option for a UK investor. Momentum needs to step on from here, which could unlock a higher earnings multiple. Early signs are encouraging, but we are slightly concerned that it won’t take much to push targets out of reach.
Environmental, social and governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security is also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, Prudential’s management of material ESG issues is strong.
Prudential trains sales employees annually on responsible marketing and has strong policies for data privacy and security. The company invests in digital products to enhance customer experience but does not disclose customer complaint details. While it offers thorough training on ethics and corruption, and also provides whistleblower protections, Prudential lacks ethical risk assessments in investment and product development.
Prudential key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.