【行业研究报告】保诚-15% APE growth in 2M23; Minimal exposure to US banking sector

16Mar202316Mar2023CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdatePrudentialPlc.(2378HK)15%APEgrowthin2M23;MinimalexposuretoUSbankingsectorPrudentialplcreportedinlineresultsforFY22,withNBPexcl.HKup5%YoYonconstantexchangerates(CER)basis.ThegroupNBPdeclined11%onCERbasisinFY22,mainlydraggedbyinterestrateassumptionchanges.Excludingtheimpactofnegativeeconomicassumptionchanges,theinsurer’sgroupNBPdecreased4%YoYinFY22.ThetotalDPSforFY22grew9%YoYto0.1878US$.In2M23,groupAPEgrowthofPruacceleratedto15%YoY,drivenby1)upbeatMCV(mainlandChinavisitors)businessmomentuminHK,2)robustnewbusinessgrowthinmainlandChinadrivenbymulti-channeldistributionofCPL,and3)continualpositivegrowthinIndonesiasince4Q22.Theinsurer’scapitalpositionremainedsoundwithGWSGPCRcoverratiostoodat302%atend-FY22.Lookingforward,weexpecttheinsurer’srallyinHKMCVbusiness,robustgrowthmomentuminChinaJV,andtherecoveryofIndonesiamomentumwillunderpinastrongVNBgrowththroughoutFY23.ReiterateBUY.MinimalexposuretoSVBandSignatureBank.Duringtheanalystbriefing,themanagementindicatedthatamongPru’sexposuretocorporatedebtofUSbankingsectoramountedtoUS$1.1bn,lessthan1%ofitstotalinvestmentassets.AndamongtheUS$1.1bnexposure,95%areallocatedtosystemicallyimportantbanks.TheexposuretoSVBandSignatureBankspecificallywasonlyaboutUS$1mn,lessthan0.01%ofPru’sdebtholdings.UpbeatAPEmomentumin2M23.In2M23,theAPEgrowthofPrureached15%YoYonCERbasis,upfrom+10%YoYin3Q22and+11%in4Q22.Weexpectthenewbusinessgrowthtofurtheraccelerateinthecomingmonths,giventhat1)theMCVtrafficisstillontheriseeversincethefullreopeningon6Feb,and2)PruHKhasretainedsufficientsalesforce,asaround10,000outofits19,000agentsarespecializedforMCVbusiness.LimitedimpactfromIFRS17&9.ThebookvaluewouldhaveincreasedUS$1.8-2.7bnunderIFRS9&17asofend-FY21,duetoreleaseofprudentmarginsandchangesintimingsofprofitrecognition,whiletheOPATFY22wouldhavedeclinedbyUS$0.65-0.85bn.Thecontractualservicemargin(CSM)amountedto~US$25bnasofend-FY21,whichwillunwindat9-10%p.a.TheIFRS17EquityAdjusted(bookvalue+CSM+Riskadjustment–Relatedtax)stoodaroundUS$43bnatend-FY21,about10%belowtheEEV.Valuation:Thestockisnowtradingat0.8xP/EVFY24Eand1.9xP/BVFY24E.WebelievetherallyinHKMCVbusinessandtheuptickinmainlandChinaandIndonesiabusinessarepoisedfor20%+NBPgrowthin2023.TargetPriceHK$143.00(PreviousTPHK$143.00)Up/Downside31.4%CurrentPriceHK$108.80ChinaInsuranceGigiCHEN,CFA(852)39163739gigichen@cmbi.com.hkNikaMA(852)39000805nikama@cmbi.com.hkStockDataMktCap(HK$mn)299,091.2Avg3mthst/o(HK$mn)119.152wHigh/Low(HK$)134.80/68.75TotalIssuedShares(mn)2749.0Source:FactSetShareholdingStructureBlackRock8.5%Vanguard5.6%Source:HKExSharePerformanceAbsoluteRelative1-mth-11.0%-5.2%3-mth2.6%1.7%6-mth27.4%23.4%Source:FactSet12-mthPricePerformanceSource:FactSetRecentReports:1.PrudentialPLC(2378HK)-Asia-focusleadingplayer;border-reopeningtailwindsin2023(link)2.PrudentialPLC(2378HK)-StrongnewbizmomentumfromChinaJV(link)Auditor:KPMGLLPEarningsSummary(YE31Dec)FY21AFY22AFY23EFY24EFY25ENetprofit(US$mn)(2,042)9983,0633,7984,408EPS(Reported)(US$)(0.78)0.361.111.381.60ConsensusEPS(US$)nana1.131.301.47Groupembeddedvalue/share(US$)17.2415.3416.3417.2818.40Premiumincome(US$mn)22,37321,40125,96530,26735,345Premiumincomegrowth(%)2.3(4.3)21.316.616.8P/B(x)2.22.22.11.91.7P/Embeddedvalue(x)0.80.90.80.80.8Dividendyield(%)1.31.44.15.16.0ROE(%)(10.8)5.917.319.620.6Source:Companydata,Bloomberg,CMBIGMestimates