When a stock halves in 18 months, usually there has been some sort of specific and easily identifiable mishap. Not so with Prudential. To understand how the shares could improve from here, we need to start by diagnosing what has gone wrong. The shares have been very weak. Why? We identify six reasons for Pru''s 18m underperformance, based on our discussions with investors. New business performance has been weak, underperforming expectations and peers. The Chinese macro deterioration has weighed on sentiment and capital. Capital generation targets appear stretching. Economic profitability has deteriorated, at least optically, in part due to new accounting. Higher bond yields have weighed on valuation and Embedded Value. And we have seen several years of adverse claims experience that raise questions about assumptions. This note examines each of these topics in detail and asks how developments might reverse. Some reasons to be optimistic from here There may be light at the end of the tunnel for new business, with management confident that growth will accelerate in 2H24. While we have been sceptical on the capital generation, FY24 will be the opportunity for the company to show that the quality of new business performance is higher, helping achieve capital generation targets. US bond yields have fallen significantly, which should help valuation. And the adverse claims trends might be turning around. Reiterate Outperform, but not due to a simple peer valuation comparison With a cash distribution yield approaching 6% on a sustainable basis, and some potential for good news (or the end of bad news) in 2H24, we think the shares offer good value, and reiterate our O/P rating. Short term earnings are impacted by slightly weaker operating profit, court judgement on Malaysia ownership, and buyback phasing. 2024 is specifically hit by non-operating items. Free surplus generation is less impacted, and WACC reduces, hence our slightly higher target price.