Executive Summary / Key Takeaways

• Prudential plc has reached an "inflection point" in its capital generation, driven by a strategic transformation focused on high-growth markets in Asia and Africa, signaling a new phase of enhanced shareholder returns.
• The company is leveraging significant investments in technology, including AI, advanced analytics, and digital platforms like PRUVenture and PRULeads, to boost agent productivity, enhance customer experience, and drive operational efficiency, creating a distinct competitive edge.
• Strong financial performance in H1 2025, with double-digit growth in new business profit, operating profit per share, and free surplus generation, underscores the effectiveness of its strategy and disciplined capital allocation.
• Prudential plans to return over $5 billion to shareholders between 2024 and 2027 through a combination of growing ordinary dividends and recurring share buybacks, with potential additional proceeds from the Indian asset management IPO.
• While facing macro volatility and regional challenges, Prudential's diversified multi-channel and multi-market franchise, coupled with proactive repricing and a focus on higher-margin health and protection products, positions it for sustainable long-term growth.

A Legacy Reimagined: Prudential's Asia-Africa Growth Story

Prudential plc (PUKPF) stands as a venerable institution in the global financial services landscape, boasting a 176-year legacy as a life and health insurer and asset manager. Its strategic focus on the high-growth markets of Greater China, ASEAN, India, and Africa positions it uniquely within the industry. The company's mission is clear: to be the most trusted partner and protector for generations to come, delivering simple and accessible financial and health solutions. This ambition is underpinned by a multi-market growth model, where Prudential holds top three positions in 10 Asian life insurance markets and distinguishes itself with significant scale in both agency and bancassurance channels, complemented by its in-house asset management arm, Eastspring Investments.

The broader industry landscape in Asia and Africa is characterized by robust demand for long-term savings, protection, wealth management, and retirement planning. This structural growth opportunity, estimated at nearly $1 trillion over the next decade, provides a fertile ground for Prudential's expansion. The company's strategic transformation, launched in August 2023, is a direct response to these market dynamics, emphasizing three core pillars: enhancing customer experiences, powering distribution with technology, and transforming its health business model. This strategic pivot, following a "year of big reset" in 2023 post-COVID, has seen Prudential proactively address challenges and invest in capabilities to unlock its full potential.

Technological Edge: Fueling Growth and Efficiency

A cornerstone of Prudential's strategic transformation is its aggressive investment in technological differentiation and innovation. The company is modernizing its technology infrastructure across all markets, leveraging data, advanced analytics, and global platforms to drive operational effectiveness and enhance customer and agent engagement. This commitment to technology is not merely about modernization; it's about creating a quantifiable competitive moat.

Prudential's core differentiated technology manifests in several key initiatives. The PRUForce platform, an upgraded agency tool, is designed to enhance agent effectiveness. Complementing this is PRUVenture, a flagship quality recruitment program, particularly impactful in markets like China, where new recruits were up 45% in H1 2025. Agents enrolled in PRUVenture demonstrate significantly higher productivity, generating 4 to 5 times more new business profit per agent compared to their non-PRUVenture counterparts. This program contributed 40% of APE from new recruits in 2024, despite representing only 10% of rookie recruits. Furthermore, PRULeads, an agency performance management module, utilizes intelligent profiling and allocation to prompt sales activities. In the first half of 2024, PRULeads issued 2 million leads, achieving an 8% conversion rate and contributing to a 49% increase in sales from leads managed through the module.

On the customer front, PRUServices 2.0 is an enhanced digital servicing platform that has already delivered tangible benefits. In Malaysia, it improved customer registration by 2x and boosted the transactional Net Promoter Score (NPS) of new customers by 7 points. This platform is slated for deployment in nine markets over the next 12 months, replacing 15 disparate applications, thereby streamlining customer interactions and driving efficiency. A new customer engagement platform is also live in Singapore and Thailand, automating and personalizing marketing efforts, with plans to roll out across seven businesses.

Crucially, Prudential is at the forefront of leveraging Artificial Intelligence (AI). The company has identified a pipeline of approximately 100 AI use cases and has established an AI Lab in partnership with Google Cloud (GOOGL), a first-of-its-kind initiative for the insurance industry in Asia and Africa. This lab is focused on using AI to solve business and customer challenges, accelerating speed to market for new solutions. These technological advancements collectively contribute to Prudential's competitive moat by driving superior agent productivity, enhancing customer retention, improving operational efficiency, and accelerating new business growth, all of which translate into better margins and long-term value creation for investors.

Financial Momentum and Strategic Execution

Prudential's strategic transformation is yielding tangible financial results, demonstrating a clear acceleration in performance. In the first half of 2025, the company achieved double-digit growth across its key financial metrics. New business profit (NBP) surged by 12% to $1.3 billion, while adjusted operating profit per share also grew by 12%. Gross operating free surplus generation (OFSG) increased by 14%, with net OFSG showing an even stronger rise of 20%. This robust performance contributed to a significant 15% return on embedded value. The NBP margin expanded by 2 percentage points to 38% compared to the first half of 2024, reflecting a disciplined focus on quality new business. Notably, the contribution of new business added in H1 2025 to the expected 2027 capital emergence increased by 27% year-on-year, outpacing APE growth and highlighting improved cash generation profiles. Renewal premiums also saw an encouraging 11% increase.

This momentum builds on a strong 2024, where NBP grew 11% to $3.1 billion and adjusted operating profit after tax per share was up 8%. Gross OFSG reached $2.6 billion, and NBP margins improved by 4 percentage points on an ex-economics basis. The health new business mix improved by 1 percentage point on both sales and NBP, aligning with the company's strategic pillar. The company's in-force book management continues to improve, with variances between actual and expected cash flows meaningfully reducing due to repricing, enhanced claims management, and cost containment. Management anticipates core operating variances will return to historic positive levels by 2027.

Geographically, performance has been broad-based. Hong Kong's NBP grew 16% in H1 2025, driven by an 11% increase in active agents and a 4% rise in NBP per active agent. Mainland China saw new recruits jump 45% and active agents grow 6%. Indonesia delivered exceptional NBP growth of 34%. Bancassurance, a key distribution channel, delivered double-digit NBP growth in 14 markets in H1 2025, with its margins improving by 6 percentage points due to favorable product and geographic mix and effective pricing actions.

Capital Discipline and Shareholder Returns

Prudential has reached an "inflection point" in its operating free surplus generation, enabling an updated capital management program focused on enhanced shareholder returns. The company plans to return over $5 billion to shareholders between 2024 and 2027. This includes recurring share buybacks of $500 million in 2026 and $600 million in 2027. Any initial net proceeds from the potential IPO of the Indian asset management business will be in addition to this. The existing $2 billion share repurchase program, launched in June 2023, is on track for completion by the end of 2025, ahead of its original mid-2026 schedule.

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 seen in 2024. This dividend path is considered prudent and sustainable, looking through the anticipated upswing in capital generation as operating variances turn positive. Prudential maintains a robust capital position, with a target free surplus ratio operating range of 175% to 200%. Capital exceeding the upper end of this range will be regularly assessed and returned to shareholders if deemed excess. The company's leverage remains comfortably within the AA range, providing ample financial flexibility. Management noted that every dollar of investment in organic growth generates three to four dollars in return, underscoring the efficiency of its capital deployment.

Competitive Landscape and Strategic Positioning

Prudential operates in a competitive global insurance and asset management arena, primarily contending with multinational insurers like AIA Group (AAGIY), AXA (AXAHY), Manulife Financial (MFC), and Aviva (AVVIY). Prudential's competitive standing is bolstered by its strong brand presence in Asia and Africa, its unique multi-channel distribution model, and its extensive regulatory licenses across these high-growth regions.

Compared to AIA Group, which is dominant in Asia, Prudential's broader geographic diversification, including a significant presence in Africa, offers a qualitative edge in accessing diverse growth opportunities. While AIA has been aggressive in digital innovation, Prudential's operational efficiency in emerging markets and its established networks could lead to stronger customer loyalty and recurring revenue streams. Prudential's Africa-focused strategy serves as a key differentiator, enhancing its competitive positioning in markets where AIA has less penetration.

Against global players like AXA, Prudential leverages its specialized focus on Asia and Africa. While AXA has a heavier European emphasis, Prudential's deep regional expertise potentially provides a qualitative advantage in emerging market penetration and lower operating costs due to its focused approach. Prudential's offerings are tailored to local needs, fostering higher customer acquisition in underserved areas.

In comparison to Manulife Financial, which shares a strong Asian presence, Prudential's additional emphasis on Africa provides a broader market access. Prudential's agency-based distribution model, enhanced by technological tools, could lead to materially lower customer acquisition costs. Similarly, against Aviva, Prudential's stronger presence in Asia and Africa positions it for faster market share growth in these dynamic regions.

Prudential's competitive advantages are further reinforced by high barriers to entry in the insurance sector, including stringent regulatory approvals and substantial capital requirements. These factors help Prudential defend its market position and support its strategy in established markets. While facing potential vulnerabilities such as over-reliance on emerging markets and a need to accelerate digital innovation to match some rivals, Prudential's strategic adaptability, disciplined repricing actions, and focus on higher-margin health and protection products are key responses to these competitive forces. The company's proactive stance on medical book management, including claims-based pricing and renegotiations with healthcare providers, as seen in Singapore, Malaysia, and Indonesia, also demonstrates its ability to maintain profitability in challenging segments.

Outlook and Risks

Prudential's management expresses strong confidence in achieving its 2025 guidance and its 2027 financial objectives. The company anticipates carrying its strong H1 2025 momentum into the second half of the year and beyond. Key guidance includes greater than 10% dividend per share growth annually from 2025 to 2027, building on the 13% growth in 2024. Recurring capital returns, including $500 million in buybacks in 2026 and $600 million in 2027, are set to commence. The company expects its core operating variances to return to historic positive levels by 2027, driven by ongoing operational improvements. Agency active agent growth is targeted at 7% to 10% year-on-year for 2026 and 2027, with bancassurance targets likely to be achieved well in advance of 2027. China's new business profit is expected to grow at a high single-digit rate in 2025, and the health business is targeted to double by 2027. The remaining $600 million of the $1 billion capability investment is scheduled for deployment, with the majority booked by 2026.

Despite this optimistic outlook, several risks warrant investor attention. The macro environment remains volatile, potentially impacting consumer demand and investment returns. Industry-related challenges in certain agency markets, such as Malaysia and Vietnam, continue to affect the entire sector. Regulatory changes, including those impacting the broker channel in Hong Kong (referral fee caps and commission spreading) and ongoing adjustments in China's agency landscape, require continuous adaptation. Furthermore, higher medical inflation and increased utilization rates of medical reimbursement products across key markets pose ongoing challenges, though Prudential has proactively addressed this with repricing and a $200 million provision to cap negative experience variances. The prolonged low interest rate environment in China, while mitigated by product mix shifts and de-risking of assets, remains a factor to monitor.

Conclusion

Prudential plc is in the midst of a profound transformation, strategically positioning itself to capitalize on the immense growth opportunities in Asia and Africa. The company's deliberate focus on enhancing customer experience, empowering its distribution channels through technology, and optimizing its health business model is clearly translating into robust financial performance. The H1 2025 results, marked by double-digit growth across key metrics and an inflection point in capital generation, underscore the effectiveness of its disciplined execution and capital allocation strategy.

With a clear commitment to returning over $5 billion to shareholders by 2027, alongside a growing ordinary dividend, Prudential is demonstrating its confidence in future cash flow generation. Its technological advancements, from AI-powered platforms to enhanced digital services, are not merely incremental improvements but foundational shifts that reinforce its competitive moat and drive operational efficiency. While macroeconomic volatility and regional competitive pressures persist, Prudential's diversified franchise, proactive risk management, and strategic investments in high-potential areas position it for sustainable, high-quality growth. Investors should watch for continued execution on its strategic initiatives, particularly the expansion of its agency and bancassurance networks, the growth trajectory of its health business, and the successful integration of its technological innovations, all of which are critical to realizing its full long-term value.