Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

<ul>
<li>Pru is currently trading below its embedded value, with the valuation assigning a negative value for the group’s new business profits.</li>
<li>Given its quality franchise across all key markets in Asia and continued strong new business recovery (to pre-Covid levels), this doesn’t seem to make sense at all.</li>
<li>We would continue underwriting the investment case of Pru in the coming year, with the stock offering significant upside potential. </li>
</ul>


Pru is currently trading below its embedded value, with the valuation assigning a negative value for the group’s new business profits.
Given its quality franchise across all key markets in Asia and continued strong new business recovery (to pre-Covid levels), this doesn’t seem to make sense at all.
We would continue underwriting the investment case of Pru in the coming year, with the stock offering significant upside potential. 


2024 High Conviction: Underwriting Prudential’s Investment Case into 2024

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

FWD Group Holdings / Equity Capital Markets

<ul>
<li>Turning losses around in 2024 relied on capital market recovery and adjustment of accounting standards. If investment returns fluctuate or premium growth slows down, profits may again come under pressure.</li>
<li>The excessive goodwill of insurance companies is essentially "overdrawing the current valuation with future expectations".Whether goodwill can be transformed into actual synergy effects is the key to determining long-term value. </li>
<li>The market usually gives lower valuation to companies with high goodwill. FWD relies on debt to provide funding for working capital/acquisition financing. Valuation of FWD should be lower than peers.</li>
</ul>


Turning losses around in 2024 relied on capital market recovery and adjustment of accounting standards. If investment returns fluctuate or premium growth slows down, profits may again come under pressure.
The excessive goodwill of insurance companies is essentially "overdrawing the current valuation with future expectations".Whether goodwill can be transformed into actual synergy effects is the key to determining long-term value. 
The market usually gives lower valuation to companies with high goodwill. FWD relies on debt to provide funding for working capital/acquisition financing. Valuation of FWD should be lower than peers.


Pre-IPO FWD Group Holdings (PHIP Updates) - The Pain Points and the Outlook

China Life Insurance Company / Equity Bottom-Up

<ul>
<li>Share prices of China Life and Prudential plc have been up by 33% and 40% - 50% YTD, respectively.</li>
<li>China Life's agency restructuring is bearing fruit, as evidenced by increasing agency productivity, and is expected to continue driving new business growth and margin expansion.</li>
<li>Our previous thesis for Prudential plc remains largely intact. Albeit the strong share price performance YTD, valuation upside remains as its new business multiple continues to re-rate.</li>
</ul>


Share prices of China Life and Prudential plc have been up by 33% and 40% - 50% YTD, respectively.
China Life's agency restructuring is bearing fruit, as evidenced by increasing agency productivity, and is expected to continue driving new business growth and margin expansion.
Our previous thesis for Prudential plc remains largely intact. Albeit the strong share price performance YTD, valuation upside remains as its new business multiple continues to re-rate.


Two Asian Life Insurance Stocks (Both Up >30% YTD) Worth Closer Looks

<ul>
<li>Given Pru's demerger in 2021, it now offers investors a good alternative to AIA to tap into the development and the growth potential of the life insurance sector in Pan-Asia.</li>
<li>AIA has a more balanced business across so many markets in APAC, while Pru skews toward Southeast Asia.</li>
<li>Pru's P/BV is currently at a 30% discount to AIA's and is trading at the same level as the year-end when China just announced the re-opening of its borders.</li>
</ul>


Given Pru's demerger in 2021, it now offers investors a good alternative to AIA to tap into the development and the growth potential of the life insurance sector in Pan-Asia.
AIA has a more balanced business across so many markets in APAC, while Pru skews toward Southeast Asia.
Pru's P/BV is currently at a 30% discount to AIA's and is trading at the same level as the year-end when China just announced the re-opening of its borders.


APAC Insurers Series (#2): AIA or Prudential?

<ul>
<li>While FWD has achieved strong growth in certain key markets, its overall new business growth rate didn't differ significantly from the peers, AIA and Prudential.</li>
<li>Compared to the peers, it offers more exposure to Thailand/Cambodia, in terms of APE and VNB mix. But, the peers still have better scale in these markets.</li>
<li>We struggle to develop the thesis unless FWD's valuation is really attractive. It's also not expecting to pay any dividends in the near future while both peers do.</li>
</ul>


While FWD has achieved strong growth in certain key markets, its overall new business growth rate didn't differ significantly from the peers, AIA and Prudential.
Compared to the peers, it offers more exposure to Thailand/Cambodia, in terms of APE and VNB mix. But, the peers still have better scale in these markets.
We struggle to develop the thesis unless FWD's valuation is really attractive. It's also not expecting to pay any dividends in the near future while both peers do.


Hong Kong

Prudential Public Limited Company provides long term savings and protection products. The Company offers life and health insurance for long term business including asset management services. Prudential serves customers in Asia and Africa.

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Prudential (2378 HK)

2024 High Conviction: Underwriting Prudential’s Investment Case into 2024

Prudential plc's share prices have gone up by c. 40% in London and 50% in Hong Kong YTD. The thesis we highlighted in this note remains largely...

Alec Tseung

Pre-IPO FWD Group Holdings (PHIP Updates) - The Pain Points and the Outlook

FWD turned losses around with capital market recovery/accounting adjustments. High goodwill will lead to high asset-liability ratio/liquidity risk,...

Xinyao (Criss) Wang

Two Asian Life Insurance Stocks (Both Up >30% YTD) Worth Closer Looks

After years of underperformance, China Life and Prudential are finally recovering. China Life's agency restructuring is bearing fruit while...

Alec Tseung

APAC Insurers Series (#2): AIA or Prudential?

Pru’s recent correction offers investors an opportune window to buy into its premium franchise (vs. AIA), although both stocks provide investors...

Alec Tseung

FWD IPO: What Are We Buying?

As FWD's scale still lags behind both AIA and Prudential and its growth rate was also merely in line with them, we struggle to develop the...

Alec Tseung

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