What happened?
Op profit and DPS beat expectations by low single digits, while NBP was in-line, and the outlook is confident. Capital is also a lot stronger than we''d been expecting, which bodes well for the capital return update scheduled for HY25 results (more buyback?). Path to the 2027 free surplus gen target of $4.4bn has been spelled out, which we think is helpful. Especially given that AIA''s results a few days ago were a little short of expectations, we think there will be some relief for Pru, and expect the shares to outperform by a few ppts today.
BNPP Exane View:
. NEW BIZ: APE 1% below, EEV NBP 1% ahead of consensus as reported. 11% Y/Y growth in NBP ex. economics, which is an acceleration vs 9% at 9M24, which we think is encouraging. TEV NBP also grew 11% Y/Y. Reiterated objective for NBP growth through to 2027 implies 11-19% CAGR from 2024 (TEV basis now).
. IFRS: 3% overall IFRS op profit beat, driven by Life op profit and central items, partially offset by AM. CSM grew 9% (we think in-line).
. CAP GEN: Gross OFSG 2% ahead of our expectations. Shape of surplus emergence from new business in FY24 is a bit faster than the FY23 vintage, which makes it easier to hit the reiterated 2027 Gross OFSG target of $4.4bn, which looks to include a contribution from positive operating variances.
. BALANCE SHEET: Free Surplus ratio of 234% is well ahead of our expectation (211%), driven by non-operating items. Pro forma for the completion of the existing buyback programme, dividend and Indonesian bancassurance deal, the free surplus ratio is 204%, providing ample room we think for further deployment from organic generation. No expectation of capital injection into China JV in 2025.
. CAPITAL RETURN: DPS is 3% ahead of consensus. No change to quantum of current buyback programme, but it is now expected to complete by the end of 2025, rather than mid-2026. Update to capital management plans to come at HY25 results (N.B. the framework for capital...
