Prudential says exposure to SVB minimal, sales to China travellers pick up

© Reuters. FILE PHOTO: The logo of British life insurer Prudential is seen on their building in London, Britain March 17, 2019. REUTERS/Simon Dawson

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 (NASDAQ:SBNY) 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.