Prudential reported full-year annual premium equivalent (APE) sales of $6.7bn, up 6% ignoring currency moves, and underlying operating profit was up 5% to $3.3bn ($3.3bn expected). New business profit rose 12% to $2.8bn, driven by higher volumes and improving margins.

The asset management business, Eastspring, saw funds under management rise 8% since the start of the year to $278bn.

The free surplus ratio, its preferred measure of balance sheet strength, was 221% at the end of the year (175-200% target range).

An interim dividend of 18.89 cents per share was announced, taking the full year total to 26.60, up 15%. The group also intends to return $1.2bn through buybacks in 2026 and a further $1.3bn in 2027, which includes $700mn a year from the IPO of its Indian joint venture.

The shares fell 2.0% in early trading.

Our view

Prudential delivered a decent set of full-year results, with management sounding a confident tone about achieving mid-term targets. New business profit will need to accelerate from here, but that was always part of the plan after laying the groundwork; the next step is to deliver.

The business offers life and health insurance, as well as asset management, across a range of Asian countries. Hong Kong operations boast a market-leading position for products aimed at visitors from mainland China. We’re pleased to see last year’s strong growth continue. Price increases seem to have landed without too much disruption, volumes are moving up, and the combination has been positive for margins.

Medium-term initiatives are evolution rather than revolution and include investment across several core areas, including technology, and creating a more joined-up customer approach across the product ranges. Benefits are already being felt, with sales agents becoming more profitable and AI driving higher sales by improving customer journeys.

Looking further ahead, the broader Asian and Indian regions should benefit from long-term economic development. Insurance uptake is also low in areas like Asia, and in many cases, state provisions for pensions and social security are limited. In India, health insurance is moving from a longer-term opportunity to execution: Prudential has announced plans for a standalone health insurer, and we see several longer-term opportunities in many of these underpenetrated markets.

China has been a challenging market, where Prudential mainly operates through joint ventures, but the winds are shifting. It’s only around 10% of the business, but now the fastest-growing segment after strong performance in the second half. Profits are still lagging, so this remains an area to watch.

Prudential also has a big asset management business, Eastspring, which manages over $275bn of assets. It offers a host of investment solutions as well as managing premiums generated from the life insurance business. New business has been good, driven by a mix of demand for Asian exposure and performance from its fixed-income products.

Capital levels are strong, and the group’s committed to increasing the dividend by more than 10% through to 2027, as well as accelerating the pace of its ongoing buyback. But this isn’t a high-yielder like some of its UK-listed peers, and nothing is guaranteed.

The refreshed strategy brings with it some bold goals, and progress looks good. We think Prudential’s Asian focus and higher growth opportunities give a different option for a UK investor. Keeping up the momentum is now key; early signs are good, but any slips could push targets out of reach.

Environmental, social and governance (ESG) risk

The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security is also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.

According to Sustainalytics, Prudential’s management of material ESG issues is strong.

Prudential trains sales employees annually on responsible marketing and has strong policies for data privacy and security. The company invests in digital products to enhance customer experience but does not disclose customer complaint details. While it offers thorough training on ethics and corruption, and also provides whistleblower protections, Prudential lacks ethical risk assessments in investment and product development.

Prudential key facts

Forward price/earnings ratio (next 12 months): 12.2

Ten year average forward price/earnings ratio: 10.1

Prospective dividend yield (next 12 months): 2.1%

Ten year average prospective dividend yield: 2.6%

All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.