Prudential continues pivot to Hong Kong despite ‘difficult’ conditions
Prudential has warned that Hong Kong’s Covid-19 measures continue to make trading “difficult” in its core market, but the life insurer added that it planned to increase the share of head office staff there as it stressed its long-term commitment to the Asian financial hub.
The FTSE 100 group has undergone a break-up in recent years, leaving it solely focused on Asia and Africa — but with a UK domicile and primary listings in London and Hong Kong.
The group’s incoming chief executive is to be based in Asia for the first time, but might be forced to remain outside Hong Kong in the short term due to the challenges posed by pandemic-related travel restrictions, the Financial Times reported last month.
Prudential’s Hong Kong sales plunged 27 per cent last year, it disclosed on Wednesday, as it reported full-year results. This was mostly as a result of the closure of the border with mainland China shutting out its agents.
Sales volumes in the territory continue to be affected by the current coronavirus wave, with agents working from home and some bank branches closing, said Mark FitzPatrick, who takes over as interim chief executive at the end of the month.
“I think where we are at the moment is a difficult operating environment in the very short term in Hong Kong,” he said, adding: “We have great faith and belief that Hong Kong will bounce back from this.”
Eight other markets including mainland China grew sales by a double-digit amount during the period.
Together with a shift to higher-margin products in Hong Kong and Singapore, that pushed second-half new business profit, a measure of predicted earnings on newly sold products, beyond analyst expectations. Overall for 2021, this profit measure was up 13 per cent to $2.5bn.
Prudential’s shares were up 5 per cent in morning trading in London.
The group’s board was taking an “agnostic and fact-based” approach to the question of whether to move the domicile, FitzPatrick said, pointing out that such a move would have to be supported by three-quarters of shareholders — and more than 40 per cent of the ownership base is in the UK. That would make such a move “very unlikely” at this point, he added.
The company, which operates dual headquarters in London and Hong Kong, has been “pivoting” its head office resources towards the latter, and now has 65 per cent of such staff based in the territory. “I would expect that number to increase over time,” said FitzPatrick.
Prudential says it needs people in London to work on debt sales, serve reporting requirements and meet the needs of UK stakeholders. “We have no ambition to have all of our employees in a single office,” outgoing chief executive Mike Wells added.
Despite the constraints, Wells also gave a vote of confidence to Hong Kong’s status as an important financial centre, saying it was “one of the strongest gateways China has to the west”.
Prudential said the board was considering internal and external candidates for the next chief executive, but broker Jefferies said the lack of further information about a new chief was “disappointing”.
