Insurance giant Prudential has appointed a new CEO as the firm doubles down on its change in strategy. Though defensive stocks have been in the spotlight this year, Prudential has sustained heavy losses, but it could see lasting change with new direction.
In these uncertain times it often pays to look at defensive options, and insurer Prudential’s [PRU.L] share price has re-emerged as a stock that could offer investors another haven.
The insurer’s share price has taken a beating this year, but it has more recently seen a slight rebound. Analysts are broadly positive on the firm and with a new CEO at a helm, shares in the Pru could be primed to perform in this period of uncertainty.
What’s happening with Prudential’s share price?
Prudential’s share price has fallen 20.1% to close Wednesday 1 June at 1,018p. However, since 9 May the stock has climbed 10.6%, providing shareholders with some optimism.
Shares in Prudential are still some way off the 52-week high of 1,566p — a recovery to this point would see a 53.8% upside on Wednesday’s close — but the firm will be hoping that a new chief could steer it in the right direction.
Why should investors care?
Subject to regulatory approval, Anil Wadhwani will join Prudential as chief executive in early 2023 from Manulife Asia, where he is currently president and CEO.
Prudential has two headquarters, one in London and one in Hong Kong, and the former Citi banker will be based in the insurer’s Hong Kong office. The move to base the new chief in its Asian office seems like a strategic fit with Prudential’s deepening focus on the region. Prudential has sold off a number of its US businesses and downsized in the UK over the past few years, indicating that significant change could be on the company’s horizon.
Wadhwani replaces Mike Wells, who is stepping down as chief executive, and his interim replacement, finance boss Mark FitzPatrick.
Why is Prudential focusing on Asia?
Prudential posted solid results for the full year 2021. Adjusted operating profit from continuing operations was up 16% to $3.2bn, while new business profit was up 13% to $2.5bn. Key markets, including mainland China, saw double-digit growth, validating the decision to focus on Asia and divest operations in the US. A focus on regular, premium insurance products in these growing markets should provide a reliable — not to mention lucrative — source of income.
“Prudential has delivered high-quality, resilient growth as we completed the strategic re-positioning of our business to focus solely on Asia and Africa. We have continued to deliver for our customers against the backdrop of the Covid-19 pandemic, and I would like to record my deep gratitude to our staff and agents for their outstanding efforts,” commented Mike Wells.
In the short term, the coronavirus outbreak in the region and the closing of the border between Hong Kong and the mainland may disrupt business. However, in the long term Prudential seems set for growth, which could make the current share price an attractive proposition given this year’s drop in value.
For 2021 Prudential paid a second interim ordinary dividend of $0.1186 per share and $0.1723 per share for the full year. A forward yield of 1.4% isn’t exactly over generous, so those looking for a short-term source of income might be tempted to look elsewhere.
However, with an incoming change in management and greater focus on profitable markets, Prudential could represent a long-term opportunity, even if the rest of the year consists of treading water before Wadhwani takes up post.
The 21 analysts offering 12-month price targets for Prudential have a median target of 1,601.48p according to the FT, with a high estimate of 1,868.93p and a low estimate of 1,224.33p. The median estimate represents a potential upside of 57.3% from last week’s close at 1,018p. Prudential has four ‘buy’, 12 ‘outperform’, one ‘hold’ and one ‘underperform’ rating from the analysts offering recommendations.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.