Negative Points

• Prudential PLC ( NYSE:PUK ) faces a high comparator base in the second half of 2026, particularly in Hong Kong and China, which could challenge achieving double-digit new business profit growth.

• The company's Mainland China business experienced margin deterioration due to a pronounced shift to PAR products (76% of mix in H1) and regulatory changes, with full-year margins expected to decline to about 40% from 43% in 2025.

• Prudential PLC ( NYSE:PUK ) reported a negative IFRS non-operating result of $626 million, driven by lower rates in China and higher rates in other markets, impacting bondholdings and discounting effects.

• The total number of active agents declined to 55,000, with continued declines in emerging ASEAN markets (except Malaysia), as the company pivots to quality over quantity, which may limit near-term growth.

• The company's Singapore business faced margin pressure due to new co-payment health regulations, requiring adjustments that could impact short-term profitability.

• Prudential PLC ( NYSE:PUK ) expects new business strain to remain at 11-12% of APE, which could constrain capital generation despite improvements in product mix.

• The company's investment in capabilities program will continue through 2026, with $300-350 million in investments, potentially weighing on earnings and free surplus generation.

• Prudential PLC ( NYSE:PUK ) faces uncertainty from tax enforcement noise on offshore insurance products, though no lapse behavior changes have been observed yet.

• The company's growth markets (excluding Hong Kong and China) are expected to grow at double-digit to mid-teens, but this may not be sufficient to offset the slowdown in larger markets, limiting overall growth acceleration.

• The cost/income ratio in Eastspring increased due to IPAMC sell-down mechanics, and revenue margins declined by 2 bps, indicating potential operational inefficiencies.

Q & A Highlights

Q: Can you unpack the drivers behind the double-digit new business profit (NBP) growth guidance for 2026, given the expectation of flat growth in China and the high comparables in Hong Kong? A: Anil Wadhwani (CEO) confirmed the group remains firmly focused on delivering double-digit growth. While Hong Kong is expected to deliver double-digit growth, the company anticipates a resumption of growth in China in the second half due to actions on product mix and expense regulations. Growth will also be complemented by strong performances from Malaysia, an outstanding first half in Thailand, and expectations to take Singapore from mid-single to high-single or early double-digit growth. The company also sees Vietnam starting to flatten out and turn marginally positive, providing a broad-based growth engine across its multi-market model.

Q: What is the base case for Hong Kong's new business profit in the second half of 2026? Should we expect domestic growth to continue at the 20-plus level and MCV to remain at first-half levels? How much will be driven by margin versus volume? A: Anil Wadhwani (CEO) stated that the Hong Kong business is now balanced, with 50% domestic and 50% Chinese Mainland visitor (MCV) business. The domestic business grew by 22%, driven by a focus on proprietary channels and a 7-percentage-point improvement in margins. The company sees no abatement in the structural demand drivers for MCV customers. With strong domestic margin improvement, strong bancassurance, and ongoing work to improve agency performance, the company has a positive outlook for achieving double-digit growth in Hong Kong for the full year, including an improved performance in the second half.

Q: What were the key drivers behind the 11% lower new business strain, and are they sustainable? Should we still use the 11% to 12% of APE guidance for modeling? A: Benjamin Bulmer (CFO) explained that the lower strain is due to a slight shift in product mix, with more participating (par) products being more capital efficient, as well as nuances in country mix. He advised that for forward modeling, investors should continue to use the 11% to 12% of APE guidance for new business strain.

Q: Regarding the India asset management business (AMC), is the intention to meet the free float criteria and then stop, or is there a different strategy? Also, should we expect all proceeds from the IPRU sell-down to be reinvested, or could some return to shareholders? A: Benjamin Bulmer (CFO) confirmed that the company is making steps towards meeting the initial 15% free float requirement, which will generate approximately $0.3 billion in proceeds to be added to the 2026 share buyback. On the IPRU sell-down, subject to the successful completion of the Bharti acquisition, the company will retain a portion of the proceeds to fund the acquisition and investment in the Prudential Bharti platform to accelerate growth. However, residual proceeds are expected to add to the already very healthy free surplus ratio, and given the company's behavior, this implies a return to shareholders.

Q: Can you clarify the contribution of the 2026 new business to the 2027 gross operating free surplus generation (OFSG) target? Also, where will the 2 to 3 percentage point improvement in return on embedded value (ROEV) come from? A: Benjamin Bulmer (CFO) clarified that the 42% increase in new business contribution reflects moving on one policy year and growth in the book. The 2026 new business cash generation signature is in line with the 2025 cohort, which added approximately $0.5 billion to the 2027 contribution. This base should be grown by the new business profit growth in 2026. For ROEV, the 2 to 3 percentage point improvement will come from the completion of the capability investment program and improving variances, with the company back to net positive underlying variances and positive claims experience. This will lead to greater operating leverage and scale benefits.

Q: Can you provide more color on the Mainland China business? Is the product mix change to PAR now complete, and should we expect a return to high growth next year without drastic margin deterioration? A: Angel Ng (Regional CEO, Greater China) stated that the PAR product mix has shifted significantly, from low single digits to 40% last year and 76% in the first half of 2026, causing margin compression. However, the company has pivoted to protection business in Q2, seeing quarter-on-quarter margin uplift. In the second half, the focus will be on protection products and optimizing margins for par savings. The company expects to normalize the par mix to about 60% for the full year. Anil Wadhwani (CEO) added that the full-year margin for China is expected to be around 40%, versus 43% in 2025.

Q: What is the long-term vision for India, and at what point will the new ventures (life and health) be greater than or equal to the previous partnership? A: Naveen Tahilyani (Regional CEO) explained that India is a strategic pivot, offering a unique position as a multinational insurer straddling both the stand-alone health and life insurance verticals, with partnerships with HCL and Bharti. The priority over the next 3-5 years is to build a high-quality, profitable business targeting the large unmet protection gap. The strategy includes building a quality agency focused on health and protection, scaling up Bharti's bancassurance partnerships, and leveraging the ecosystems of both corporate groups (e.g., Bharti's 450 million customers). The company will focus on 100-120 cities in the next five years, with the expectation that India will become a material franchise on multiple metrics in the next 5-10 years.

Q: Can you provide guidance on the IFRS profit items, specifically the investment margin and other components that impacted the results? A: Benjamin Bulmer (CFO) explained that the strong growth in the release from the CSM was curtailed by a lower net investment result, driven by asset derisking in China and lower surplus in Life businesses due to higher remittances. This effect is expected to normalize, with the net investment result expected to be a couple of points higher as the year progresses. Combined with the strong structural growth in the CSM (now about 30% higher than at IFRS 17 inception) and improving underlying variances, the company is confident in its double-digit EPS growth outlook on an IFRS basis.

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For the complete transcript of the earnings call, please refer to the full earnings call transcript .