- Initial $700 million tranche starts immediately
- Capital return larger than expected
- Dividend policy unchanged
Shares in Asian focused insurer Prudential (PRU) jumped more than 6% to 749.6 on Monday, topping the FTSE leaderboard after the firm announced a $2 billion return of capital via a share buyback.
The buyback is expected to be completed no later than mid-2026 with the first $700 million tranche beginning today (24 June).
Reflecting confidence in the future, the company said progress towards its 2027 objectives will increase the potential for further returns to shareholders.
The shares are down around 12% year to date compared with an 7% gain in the blue-chip FTSE 100 index, reflecting poor sentiment towards China.
WHY DID THE SHARES JUMP?
Analysts at Jefferies said the share buyback is double what they were modelling but spread out over a longer timeframe than the six months they were anticipating.
The company said its dividend policy remains unchanged with the board expecting the 2024 payout to grow in the 7% to 9% range.
CEO Anil Wadhwani commented: ‘With our strong capital base, strategic progress and the recent clarification of the rating agencies' treatment of the IFRS17 CSM (contractual service margin), we can now provide a capital management update.
‘Our outperformance in H1 2023 when the border between Hong Kong and the Chinese Mainland reopened results in a strong comparator for H1 2024. Q2 2024 APE (annual premium equivalent) sales trends are similar to those in Q1 2024.
‘Given our focus on quality growth in both value and cash and on account of the progress on execution of our strategy, we have confidence in our FY2024 new business growth and in achieving our 2027 financial and strategic objectives.’
The capital return is based on an assessment of the group’s free surplus capital position measured against a target range of 175% to 200%.
‘At the end of 2023, our free surplus ratio was 242%. Accordingly, and after taking into account the 2023 second Interim dividend, we have determined that we will return US$2 billion to shareholders’, the company explained.
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