Prudential announces SGD 10Y subordinated notes at IPG of 4.15%

Prudential PLC (“Prudential”) plans on issuing new SGD 10-year unsecured subordinated notes at the initial price guidance (“IPG”) of 4.15%. It is expected to be issued on 22 May 2025, with a maturity date of 22 May 2035. The proceeds will be used for general corporate purposes. We wish to highlight that the new issuance is made available only for accredited and institutional investors.

Prudential is a leading life and health insurer and asset manager, serving over 18 million customers across 24 markets in Asia and Africa. Headquartered in Hong Kong, Prudential is listed on both the Hong Kong and London Stock Exchanges. Prudential focuses on four strategic regions—Greater China, ASEAN, India, and Africa—and is supported by approximately 65,000 active agents and over 200 bank partners.

Through its asset management arm, Eastspring Investments, Prudential offers innovative investment solutions across Asia, North America, and Europe. The company's strategy focuses on enhancing customer experiences, leveraging technology in distribution, and transforming its health business model, all aimed at delivering accessible financial and health solutions to its customers.

For the quarter ended 31 March 2025 (“1Q25”), its new business profit rose 12% YoY to SGD 608 million on a Traditional Embedded Value (“TEV”) basis, driven by higher volumes and a 2-percentage point improvement in margins. Specifically, the company saw double-digit growth in both Singapore and Hong Kong.

Prudential also continued its $2 billion share buyback program, completing an additional $442 million (49 million shares) of repurchases between 1 January and 23 April 2025. The company is evaluating a potential listing of its India asset management business, with intentions to return net proceeds to shareholders.

For the year ended 31 December 2024 (“FY24”), its insurance revenue rose 13.0% YoY to SGD 3.0 billion, supporting a 10.1% YoY increase in profit before tax from SGD 844.7 million to SGD 929.8 million in FY24. That said, higher finance expenses for insurance contracts issued, stemming from elevated interest rates and a higher average level of borrowings, have weighed on profits. We also wish to highlight the maturity profile of the expected future cash flows disclosed in its FY24 annual report. These are adjusted on a discounted basis and relates to cash flows coming from insurance and reinsurance contract liabilities. Notably, these expected cash flows (Figure 1) have grown relative to FY23. If this sustains, it could further improve Prudential’s ability to repay its debt.

Figure 1: Expected cashflows

For Prudential’s credit profile, debt metrics remain robust. This is underscored by a Free Surplus Ratio of 234% and a Group-Wide Supervision (GWS) shareholder surplus over the Group Prescribed Capital Requirement (GPCR) of SGD 15.9 billion, equating to a 280% coverage over GPCR as of FY24. Taking into account the (i) share buyback programme completion, (ii) payment of the 2024 second interim dividend and the (iii) commencement of the new bancassurance arrangement in Indonesia, the adjusted surplus ratio would stand at 204%, surpassing the company's internal target of a 150% buffer - reflecting a strong capital foundation.

In terms of debt securities, more than 80% are investment grade rated (at “A-“ and above by S&P), which suggests lower credit risk across its portfolio. Moreover, Prudential holds SGD 483.7 million in central cash resources, providing liquidity to support operations and obligations.

Moving forward, the CEO Anil Wadhwani emphasised the company's focus on quality growth and operational efficiency, stating that the strong Q1 performance provides a sound base for continued growth in 2025, despite global economic uncertainties.

Our recommendations

Table 1: Comparable insurers SGD papers

Overall, we find Prudential’s credit profile healthy. We think Prudential’s IPG of 4.15% is slightly more attractive as compared to other SGD insurance issuers with similar tenors which are yielding around low 3%. However, we note that the comparable bonds have a stronger credit ratings - Prudential’s new issuance is expected to be BBB+ (by S&P credit rating).

Also, we do expect the final price guidance to adjust downwards from the IPG, but we think the FPG (“final price guidance”) of the new issue should remain higher than peers. Lastly, we think Prudential’s new issuance is suitable for investors who are looking for investment grade rated issuances and/or are looking for longer tenor options within the SGD bond space.

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in MFCCN 4.275% 19Jun2034 Corp (SGD). The analyst who produced this report holds an NIL position in the abovementioned securities.

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