By Selena Li
HONG KONG (Reuters) -Asia-focused insurer Prudential’s said its exposure to collapsed Silicon Valley Bank (SVB) is minimal, and expects little impact on its “conservative” balance sheet.
The insurer has around $1 million exposure to SVB, against a total debt book of $23 billion, James Turner, company’s chief financial officer said at a news briefing on Wednesday.
“Our exposure to SVB is de minimis,” Turner said.
The failure of SVB and Signature Bank in the past week sparked fears of contagion in the banking and wider financial sector, triggering a selloff in global stock markets.
“We are very conservative in the positioning of our balance sheet”, Turner said, adding around 46% of Prudential’s debt exposure is to sovereign bonds and 89% of its corporate debts are investment grade.
The insurer’s stock price ended 1.18% lower in Hong Kong on Wednesday, while the broader market was up 1.52%. Its London-listed shares fell 4.7% by 9 a.m. GMT
Analysts say they expect a stronger pickup in sales from Chinese mainland visitors to Hong Kong, the insurer’s key revenue centre.
Prudential’s growth in new sales is lower than JP Morgan’s 2023 full-year forecasts, according to a research note from the bank.
“This is a mixed set of results versus forecast by JP Morgan and consensus, and we expect a neutral to negative share price reaction.”
The number of Chinese visitors to Hong Kong is still only 45% of peak levels before the COVID-19 pandemic, Anil Wadhwani, the company’s new chief executive, said at the news briefing.
He added the initial flow of visitors had a positive impact on the company’s sales.
Prudential’s annualised premium equivalent (APE) sales, a closely watched gauge of insurance sales, jumped 15% for the first two months of this year from the same period a year ago, said Wadhwani, who officially assumed the top job in February.
“The removal of the bulk of COVID-19-related restrictions across the region and the progressive opening up of the Chinese mainland economy has meant that 2023 has started well with encouraging progress in year-on-year sales,” Wadhwani said.
As China ended its Zero-COVID policy, border restrictions were removed last month allowing mainland visitors to go to Hong Kong and buy insurance again.
The insurer’s adjusted operating profit came in at $3.38 billion on a constant exchange rate basis, up by 8% from $3.23 billion in 2021, Prudential said in a statement.
The result beat a forecast of around $3.34 billion from 22 analysts’ forecasts provided by the company.
The insurer has now completed the move of its entire senior management team from London to Hong Kong – its new global headquarters – which is closer to its revenue sources.
The insurer has no immediate plan to change its UK domicile, its chief executive said.
(Reporting by Selena Li, additioanl reporting by Scott Murdoch in Sydney and Ian Withers in LondonEditing by Shri Navaratnam, Sonali Paul and Kim Coghill)