Pru’s buyback falls way short of a comeback
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.
By Katrina Hamlin
HONG KONG, June 25 (Reuters Breakingviews) -Prudential PRU.L, 2378.HK boss Anil Wadhwani has a long slog ahead of him to close the valuation gap with closest rival AIA 1299.HK. The $2 billion share buyback unveiled on Sunday represents a modest start to the process, sending the insurer's Hong Kong- and London-listed stock up 6% and more than 7% respectively on Monday. What's really needed, though, is for Wadhwani to deliver on the promise of both his predecessor's restructuring and his own revamp.
The stock repurchase plan was a pleasant surprise. Investors had been hoping for some time that the $26 billion firm might return some cash, and especially so after AIA boosted its own buyback in April. Pru also teased that it could return more to shareholders in the future.
However, while the buyback reduces excess capital and flatters metrics like earnings per share, it won’t reinvigorate the business. By most measures,that continues to lag behind AIA, its nearest peer since Pru transformed into an Asia-focused outfit by lopping off its UK and U.S. units in 2019 and 2021, respectively.
The two companies may log a similar return on equity in 2024 at around 10% for Pru and 11% for AIA, according to Morningstar. But results for the first three months of the year show the $80 billion AIA is growing faster. Prudential’s new business profit rose 11% to $810 million that quarter, while AIA’s comparable metric grew by nearly a third to $1.3 billion. Even after Monday's boost, Prudential's stock trades below its book value at the end of 2023, while AIA’s clocks in at more than 2 times, per Visible Alpha.
Wadhwani set a strategy to grease operations after taking the top job last year, but it is slow work. In 2023, he spent about 10% of a planned $1 billion investment to improve technology, distribution and more; he’ll still have over half of that sum left to spend by the end of this year. He’s also negotiating partnerships for sales via banks, but on Monday cautioned they're relatively small.
Meanwhile, the pivot to Asia has left Pru exposed to the region’s risks, as well as rewards. The company is digesting changes to regulations and its product mix in mainland China, where its joint venture’s annual premium equivalent sales shrank 17% in the first quarter, as well as a slowdown in Vietnam and demanding new rules in Indonesia.
Investors may be pleased to see the man from the Pru this week, but his to-do list is a long one.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Insurer Prudential on June 23 unveiled a programme to buy back $2 billion-worth of stock by no later than mid-2026. The first $700 million tranche of the buyback commenced on June 24. The company also said there was “potential” to return more cash to shareholders in the future.
The company's Hong Kong-listed shares closed up 6% on June 24, while its London-listed stock ended the day 7.35% higher.
Prudential's valuation lags AIA's by several measures https://www.reuters.com/graphics/BRV-BRV/xmvjnrzrgvr/chart.png
Editing by Antony Currie and Aditya Srivastav
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
