Executive Summary / Key Takeaways

• Prudential plc is undergoing a strategic transformation, leveraging its deep presence in Asia and Africa to capitalize on significant growth opportunities in life and health insurance and asset management. The company has reached an "inflection point" in operating free surplus generation, enabling enhanced shareholder returns.
• The company's multi-channel distribution model, underpinned by significant investments in digital tools like PRUForce and PRULeads, is driving productivity and customer engagement, contributing to robust new business profit growth and margin expansion.
• Prudential delivered strong financial performance in the first half of 2025, with double-digit growth across key metrics, including new business profit, adjusted operating profit per share, gross operating free surplus generation, and dividends per share.
• A clear capital management framework is in place, targeting over $5 billion in shareholder returns between 2024 and 2027, alongside a commitment to grow ordinary dividends per share by more than 10% annually from 2025 to 2027.
• While macro volatility and regulatory shifts present challenges, Prudential's proactive management, particularly in product repricing and strategic market positioning, combined with its technological advancements, positions it for sustained growth and improved profitability towards its 2027 objectives.

A Legacy Reimagined: Prudential's Strategic Evolution in High-Growth Markets

Prudential plc, a financial services stalwart founded in 1848, has forged a formidable presence in the dynamic life and health insurance and asset management sectors across Asia and Africa. With dual primary listings in Hong Kong and London, and a significant footprint in 10 Asian life insurance markets where it holds a top-three position, Prudential's enduring strength lies in its extensive and diverse geographic reach. This expansive network positions the company to tap into nearly $1 trillion of growth opportunity over the next decade, driven by the reassertion of long-term growth trends in these emerging markets.

The company embarked on a pivotal strategic transformation in August 2023, refocusing on three core pillars: customer, distribution, and health. This multi-year strategy is designed to drive high-quality, sustainable growth and accelerate cash returns to shareholders. Prudential's historical journey, marked by adapting to diverse market dynamics—from selling par business in China decades ago to building strong market positions across ASEAN, which now contributes 43% of its embedded value—provides a robust foundation for its current strategic responses.

Technological Edge: Fueling Growth and Efficiency

At the heart of Prudential's strategic transformation is a significant commitment to technological differentiation and innovation. The company is investing $1 billion in enhancing capabilities, with $400 million already deployed by the first half of 2025. These investments are modernizing its technology infrastructure, processes, and capabilities, underpinned by an increased focus on data, predictive analytics, and artificial intelligence.

Prudential's core differentiated technologies are evident in its distribution and customer engagement platforms:

• PRUVenture: This flagship quality recruitment program, particularly active in China and Hong Kong, is designed to attract agents who view insurance as a long-term career. While PRUVenture agents constitute only 10% of rookie recruits, they contribute an impressive 40% of the Annualized Premium Equivalent (APE) from new recruits. This highlights a four to five times higher productivity compared to agents not participating in the program, directly boosting new business profit and agent quality.
• PRUForce: An upgraded agency platform, PRUForce enhances agent effectiveness and is seeing strong adoption rates. It aims to drive technology-enabled productivity across the agency force.
• PRULeads: This agency performance management module, equipped with intelligent profiling and allocation, processed 2 million leads in the first half of 2024. It achieved an 8% conversion rate, contributing to a 49% increase in sales from leads managed through the module. This demonstrates a clear, quantifiable benefit in sales efficiency and agent productivity.
• PRUServices: An enhanced customer digital servicing platform, PRUServices has improved registration by 2x and increased the transactional Net Promoter Score (NPS) of new customers by 7 points in Malaysia. This platform is being rolled out across nine markets, enhancing customer retention and creating cross-selling opportunities.

Beyond these platforms, Prudential is scaling AI with a pipeline of around 100 use cases and has partnered with Google Cloud (GOOGL) to create an AI Lab in Asia and Africa. This initiative aims to use AI to solve business and customer challenges, increasing speed to market and driving progress in customer experience, technology-powered distribution, and access to quality healthcare. These technological advancements are critical to Prudential's competitive moat, contributing to higher sales, lower operational costs, improved margins, and a stronger market position.

Competitive Landscape: Strengths in Diversification and Niche Expertise

Prudential operates in a competitive landscape alongside major regional and global insurers such as AIA Group (AAGIY), Manulife Financial (MFC), Prudential Financial (PRU), and Sun Life Financial (SLF). Prudential's competitive positioning is significantly bolstered by its unique geographic diversification across Asia and Africa, which provides a broader base for growth compared to more Asia-centric peers like AIA. The company's dual strength in both agency and bancassurance channels, a scale not matched by all large Asia-focused insurers, offers a distinct advantage in market penetration and customer reach.

In terms of strategic agility, Prudential has demonstrated proactive management. For instance, in China, it was the first to reprice its 3.5% guaranteed product in April 2023, ahead of regulatory guidance, a move that contributed to an 8% increase in its bancassurance margin on an ex-economics basis by the end of 2023. This early action allowed Prudential to reposition its product mix towards participating products, reaching 40% in Q4 2024, while competitors adjusted later. In health, Prudential's investments in capabilities, including claims-based pricing and medical repricing in markets like Malaysia, have put it "ahead of competition" in managing rising medical inflation and regulatory changes.

While some competitors may exhibit faster digital innovation or greater scale in developed markets, Prudential's focus on organic growth of its productive agency base and disciplined approach to inorganic opportunities, coupled with its specialized health insurance offerings for specific regional needs, provides a strong competitive edge. The company's regulatory licenses in key regions also create barriers to entry, further solidifying its market position.

Financial Performance: An Inflection Point for Growth and Returns

Prudential's strategic initiatives are translating into compelling financial performance, marking an "inflection point" in its operating free surplus generation. In the first half of 2025, the company delivered double-digit growth across its key financial metrics:

• New Business Profit (NBP): Grew 12% to $1.3 billion. This growth was high-quality and diversified, reflecting disciplined product repricing and mix improvement, leading to a 2 percentage point expansion in the NBP margin to 38%.

• Adjusted Operating Profit per Share: Increased by 12%.
• Gross Operating Free Surplus Generation (OFSG): Rose 14% year-on-year, with net OFSG up 20%. This acceleration is expected to broadly double holding company free cash flow between 2024 and 2027.
• Dividends per Share: Increased by 13%.
• Return on Embedded Value (ROEV): Improved to 15%, driven by growth in in-force profit and ongoing capital returns.

The contribution to 2027 capital emergence from new business written in H1 2025 increased by a robust 27% year-on-year, outpacing APE growth and demonstrating a significantly improved cash signature from new business cohorts. Operating variances, reflecting the difference between actual and expected cash flows, have more than halved, a testament to effective repricing, enhanced claims management, and cost containment.

Geographically, Hong Kong's NBP grew 16% and Indonesia's NBP surged 34% in H1 2025. Bancassurance continues its strong performance, with 14 markets delivering double-digit NBP growth, and its margins benefiting from product and geography mix, as well as pricing actions. Eastspring Investments, Prudential's asset management arm, reported $274.9 billion in Assets Under Management (AUM) in H1 2025, an 11% year-on-year increase, with adjusted operating income of $158 million.

Outlook and Shareholder Returns: A Clear Path Forward

Prudential's management expresses strong confidence in achieving its 2027 financial objectives, including a gross OFSG target of over $4.4 billion. For 2025, the company expects to deliver growth in new business profit, operating earnings per share, gross operating free surplus generation, and dividends per share in excess of 10%. This outlook is supported by sustained sales momentum, particularly in the second half of 2024, and the continued operational transformation.

The company has unveiled an enhanced capital allocation framework with a "total return orientation" for holding company free cash flow. This includes a commitment to return over $5 billion to shareholders between 2024 and 2027. This plan encompasses the completion of the existing $2 billion share repurchase program by the end of 2025, and additional recurring buybacks of $500 million in 2026 and $600 million in 2027. Furthermore, any net proceeds from the potential IPO of the Indian asset management business would be incremental to this $5 billion commitment. The ordinary dividend policy remains unchanged, with guidance for greater than 10% dividend per share growth each year from 2025 to 2027, building on the 13% growth in 2024.

Management anticipates that core operating variances will return to historic positive levels by 2027, further bolstering capital generation. Required capital is expected to grow at a low double-digit rate, primarily driven by new business. Prudential also projects active agent growth of 7% to 10% year-on-year for 2026-2027, and aims to double its health business new business profit by 2027. Bancassurance targets are expected to be achieved well in advance of the 2027 guidance, creating additional headroom.

Risks and Mitigation

While the macro environment remains volatile, Prudential is well-positioned due to its multi-channel and multi-market franchise. Key risks include regulatory changes, particularly in China, where the focus on agent retention and income aligns with Prudential's quality-driven strategy. Hong Kong's upcoming referral fee caps and commission spreading for brokers are being monitored, though Prudential's business is largely focused on agency and bancassurance.

In China, despite a "couple of years duration gap" for new business, the group-level interest rate hedge has been effective, and the business has diversified liabilities and a significant portion of assets in fixed income, with over half of its in-force book having variable liability costs. Medical inflation and higher utilization rates of medical reimbursement products post-pandemic are challenges across major health markets, but Prudential has proactively implemented repricing actions, claims management, and set a $200 million provision to cap negative experience variances.

Conclusion

Prudential plc is executing a powerful strategic transformation, positioning itself as a compelling investment opportunity in the high-growth markets of Asia and Africa. The company's deep-rooted history, combined with its forward-looking investments in technology, distribution, and health, is driving a significant inflection point in its financial performance. The consistent double-digit growth across key metrics, coupled with a clear and substantial capital return program, underscores management's confidence in its ability to generate sustainable value.

Prudential's competitive advantages, particularly its diversified geographic footprint and unique scale in both agency and bancassurance, are being amplified by its technological leadership in agent productivity and customer experience. While macroeconomic volatility and regulatory shifts present ongoing challenges, Prudential's proactive strategic responses and disciplined capital allocation framework provide a robust foundation. Investors looking for a company poised for accelerated growth and enhanced shareholder returns, driven by strategic execution and technological prowess in dynamic emerging markets, will find Prudential's narrative highly compelling.