The insurance industry is recovering steadily, and a diversified market and multi-channel strategy will contribute to long-term steady growth.
In 2023, the insurance industry in mainland China achieved original premium income of 512.47 billion yuan, an increase of 9.13% over the previous year, and the scale surpassed 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 is showing a restorative development trend.
Thanks to this, Hong Kong stock listed insurers have achieved optimistic performance growth, and there is also no shortage of high-quality insurers that have achieved outstanding performance. Among them, the international insurer Prudential (2378.HK) recently handed over an annual report card that exceeded expectations, demonstrating its resilience through the cycle and allowing the market to see its full potential for growth.
Significant increase in profitability of new businesses
In Prudential's 2023 report, improving profitability is the key word.
As a core highlight of Prudential's performance, the new business showed strong growth. In 2023, the company's new business profit (NBP) reached US$3.125 billion, up 45% year on year, while annual premium equivalent sales (APE) also rose 37% year over year to reach US$5.876 billion.
The new business is the most critical indicator for measuring the growth and profit level of insurers. Prudential's steady growth in the new business further proves that it has considerable growth potential.
Being able to hand over such a high-quality “report card” is mainly due to the full resumption of customs clearance between the Mainland, Hong Kong and Macao.
According to data from the Hong Kong Insurance Authority, in 2023, the premiums for new personal life insurance policies insured by mainland visitors to Hong Kong were about HK$59 billion, an increase of more than 27 times over the approximately HK$2.1 billion in 2022. This not only surpassed pre-pandemic levels in 2019, but was second only to HK$72.7 billion in 2016.
Prudential was quick to seize this advantage. Prudential pointed out in its performance report that after all epidemic prevention restrictions were lifted, especially after the resumption of customs clearance between mainland China and Hong Kong, the company recorded double-digit growth in new business profits in 12 of the 22 markets.
Among them, the Hong Kong market's annual premium equivalent sales and new business profit were US$1,966 billion and US$1,411 million respectively, surging 276% and 267%, while the annual premium equivalent sales of mainland Chinese travelers were about 1.1 times that of 2019 before the pandemic.
However, it can become one of the main options for “going to Hong Kong to apply for insurance” in the Mainland, and is inseparablePrudential's strategy focuses on the Asia-Pacific market while maintaining a customer-centric approach to providing a diverse product portfolio.
Considering that life insurance penetration in the Asia-Pacific region is still clearly low. According to data from Cathay Pacific Junan Research Report, in 2022, the life insurance penetration rates in mainland China, Indonesia, India, Malaysia, Vietnam, and the Philippines were 2.1%, 1.1%, 3.2%, 3.9%, 1.6%, and 1.5%, respectively.
Prudential completed the divestment of its UK and US divisions in 2019 and 2021, respectively. Focusing on the Asia-Pacific region has become its future development direction, which also means that Prudential can enjoy the dividends of growing insurance demand in the Asia-Pacific market. In 2023, 8 of the 9 ASEAN markets where Prudential has already operated were ranked in the top three, and the ASEAN market also accounted for 43% of Prudential Group's intrinsic value and 37% of profits from new businesses.
Furthermore, Prudential has always adhered to a customer-centered product orientation, provided various types of insurance products to meet the diverse needs of customers, and even customized insurance products for customers in different regions based on their economic level and consumer preferences. Examples include launching a critical illness program for customers in the Greater Bay Area in mainland China, continuing to enrich the Islamic insurance product system in the Indonesian and Malaysian markets, etc., and maintaining a leading market position.
This has also become the key for Prudential to achieve performance growth and open up more room for incremental growth, and this is just the beginning.
Focus on the Asia-Pacific region, which is expected to usher in value restoration
After the epidemic, everyone paid more attention to the health of themselves and their families. In addition, in 2024, China's economic development gradually recovered, bringing development opportunities and momentum to the insurance industry. In order to continue to maintain a positive profit growth trend, Prudential is also ready.
Judging from the external environment, industry policies are moving in a more favorable direction.For example, at the end of 2022, the “Hong Kong Insurance Industry Development Strategy Blueprint” issued by the Hong Kong Special Administrative Region Government indicates that Hong Kong is seeking to establish insurance after-sales service centers in places such as Nansha and Qianhai, and will further study a viable model to connect the mainland and Hong Kong insurance markets to consolidate Hong Kong's position as an international risk management center and a mature and complete 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 manage risk by purchasing foreign currency insurance, which is foreseeableIn 2024, “going to Hong Kong to apply for insurance” for mainland residents will continue to be popular, showing a steady growth trend.
Prudential Group CEO Anil Wadhwani (Anil Wadhwani) also said at the results conference that the number of mainland visitors to Hong Kong last year was only 60% to 60% of what it was in 2019 before the epidemic. He believes that in the future, the number of visitors will return to 2019 or even higher. Coupled with the Hong Kong Government's talent attraction policy, Hong Kong's insurance demand will be further boosted, and Prudential is expected to benefit and continue to grow.
In a context where the insurance industry is recovering significantly, Prudential continues to make efforts through a multi-channel strategy to further open up room for growth.
Unlike insurers in the same industry that focus more on developing insurance business through a single channel, in order to improve flexibility and resilience to risks, Prudential has implemented a strategy of co-developing diversified channels of agents, banking insurance, and digital sales platforms in most of the life insurance markets covered by its insurance business. This is also the foundation for achieving steady endogenous growth in the future.
This is also reflected in Prudential's annual report data. Taking agency channels as an example, Prudential's multi-channel agents and large-scale banking and insurance distribution platforms have an average of about 68,000 active agents per month, of which more than 9,000 agents qualify for the “One Million Roundtable” membership.
According to data disclosed in the annual report, the average new business profit per active agent increased by 59%, driving a 75% increase in new business profit in the agency channel, 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 will not only help Prudential continue to achieve performance growth in the next year, but is also an important support for Prudential to achieve the 2021-2027 growth target and increase the profits of the new agency business by 2.5 to 3 times.
summed
In 2023, Prudential Insurance, as a high-quality stock in the Hong Kong insurance sector, has handed over a high-quality “questionnaire”. Looking ahead to 2024, many market analysts believe that the scale of the entire insurance industry will continue to grow. As a company that has optimized its business layout and established a strong risk barrier, Prudential is committed to implementing a diversified market and multi-channel strategy, and will break through the value ceiling with a more relaxed attitude.