The insurance industry is recovering steadily, and the diversified market and multi-channel strategy will support the long-term steady growth.
In 2023, the insurance industry in Chinese mainland will achieve original premium income of 5,124.7 billion yuan, a year-on-year increase of 9.13%, and the scale will exceed 5 trillion yuan for the first time. Among them, life insurance revenue accounted for nearly 54%, with a year-on-year growth rate of nearly 13%. The life insurance business showed a trend of recovery development.
Thanks to this, Hong Kong-listed insurance companies have achieved optimistic performance growth, and there are also many high-quality targets among foreign insurance companies that have achieved outstanding performance. Among them, Prudential (2378.HK), an international insurance company, recently delivered an annual report card that exceeded expectations, demonstrating its resilience through the cycle and allowing the market to see its ample growth potential.
The profitability of new business has increased significantly
In Prudential's 2023 annual report, profitability improvement is the key word.
New business was a core highlight of Prudential's performance, with strong growth. In 2023, the company's new business profit (NBP) reached $3.125 billion, up 45% year-over-year, while annual premium equivalent sales (APE) also increased 37% year-on-year to $5.876 billion.
As the most critical indicator of insurers' growth and profitability, Prudential's steady growth in new business is further proof of its considerable growth potential.
The ability to hand over such a high-quality "report card" is mainly due to the full resumption of customs clearance between the mainland and Hong Kong and Macao.
According to the Hong Kong Insurance Authority, in 2023, the new premium of individual life insurance policies taken by mainland visitors to Hong Kong will be about HK$59 billion, an increase of more than 27 times from about HK$2.1 billion in 2022, not only surpassing the pre-pandemic level in 2019, but also second only to HK$72.7 billion in 2016.
Prudential was quick to capitalize on the tailwind. Prudential noted in its earnings report that after all COVID restrictions were lifted, the company recorded double-digit growth in new business profits in 12 of the 22 markets, particularly after the resumption of customs clearance between Chinese mainland and Hong Kong.
Among them, the annual premium equivalent sales and new business profit in the Hong Kong market surged by 276% and 267% to US$1.966 billion and US$1.411 billion respectively, while the annual premium equivalent sales of Chinese mainland tourists were about 1.1 times that of 2019 before the pandemic.
However, Prudential's strategic focus on the Asia-Pacific market, as well as its customer-centricity approach to providing a diversified product portfolio, can be one of the main options for the mainland to "apply for insurance in Hong Kong".
Considering that the penetration rate of life insurance in the Asia-Pacific region is still significantly low. According to Guotai Junan Research Report, in 2022, the penetration rate of life insurance in Chinese mainland, Indonesia, India, Malaysia, Vietnam, the Philippines and other markets will be 2.1%, 1.1%, 3.2%, 3.9%, 1.6% and 1.5% respectively.
In 2019 and 2021, Prudential completed the divestiture of its UK and US divisions, respectively, and the focus on Asia Pacific has become its future development direction, which also means that Prudential can enjoy the growth dividend of insurance demand in the Asia Pacific market. In 2023, Prudential ranked in the top three in eight of the nine ASEAN markets in which it already operates, which also accounted for 43% of Prudential's embedded value and 37% of new business profit.
In addition, Prudential has always adhered to a customer-centric product orientation, providing a variety of insurance products to meet the diversified needs of customers, and even tailoring insurance products based on the economic level and consumption preferences of customers in different regions. For example, it launched a critical illness plan for customers in the Greater Bay Area in Chinese mainland, and continued to enrich the Takaful product system in Indonesia and Malaysia and maintained its leading market position.
This has become the key for Prudential to achieve performance growth and open up a broader incremental space, and this is just the beginning.
The focus on the Asia-Pacific region is expected to usher in value restoration
In the wake of the pandemic, we are more concerned about the health of ourselves and our families, and with the gradual recovery of China's economic development in 2024, bringing development opportunities and momentum to the insurance industry, Prudential is well positioned to continue to maintain positive earnings growth.
From the perspective of the external environment, industry policies are developing in a more favorable direction. For example, at the end of 2022, the Hong Kong SAR Government issued the Strategic Blueprint for the Development of Hong Kong's Insurance Industry, which pointed out that Hong Kong is striving to set up insurance after-sales service centers in Nansha and Qianhai, and will further study feasible models to connect the insurance markets of the Mainland and Hong Kong, so as to consolidate Hong Kong's positioning as an international risk management centre and a mature insurance hub.
In addition, due to the demand for high-quality insurance products and the impact of RMB exchange rate fluctuations, mainland consumers want to purchase foreign currency insurance to manage risks, and it is foreseeable that in 2024, mainland residents will continue to maintain their popularity and show a steady growth trend.
Anil Wadhwani, chief executive officer of Prudential, also said at the results conference that the number of mainland tourists visiting Hong Kong last year was only 60% to 60% of the pre-pandemic level in 2019. He believes that the number of visitors will return to the level of 2019 or beyond, and that the Hong Kong government's talent attraction policy will further increase the demand for insurance in Hong Kong, and Prudential is expected to benefit and maintain growth.
Against the backdrop of a significant recovery in the insurance industry, Prudential continues to make efforts through a multi-channel strategy to further open up room for growth.
In order to improve its flexibility and resilience, Prudential has implemented a strategy of multi-channel development of agency, bancassurance and digital sales platforms in most of the life insurance markets covered by its insurance business, which is also the foundation for its future steady organic growth.
This is also reflected in Prudential's annual report data, for example, Prudential's multi-channel agents and large-scale bancassurance distribution platform have an average of about 68,000 monthly active agents, of which more than 9,000 agents are eligible for MDRT membership.
According to the data disclosed in the annual report, the average new business profit per active agent increased by 59%, driving the new business profit of the agency channel to increase by 75%, accounting for about two-thirds of the group's new business profit.
It can be seen that such an industry-leading high-capacity agency team can not only help Prudential continue to achieve performance growth in the next year, but also an important support for Prudential to achieve its 2022-2027 growth target and increase the profit of new agency business by 2.5 to 3 times.
summary
In 2023, Prudential Insurance, as a high-quality stock in the Hong Kong stock insurance sector, has delivered a high-quality "answer sheet", and looking forward to 2024, many market analysts believe that the scale of the entire insurance industry will continue to grow. As a company that has already optimized its business layout and built a solid risk barrier, Prudential is committed to implementing a multi-market and multi-channel strategy, and will break through the value ceiling in a more relaxed manner.