Prudential expected to maintain strong market position, low financial leverage

Prudential's capital and earnings are deemed very strong, S&P Global Ratings said.

Prudential’s transition to International Financial Reporting Standard 17, the insurer disclosed a contractual service margin (CSM) net of reinsurance of about $20.0b, treated as equity-like reserves, assessed S&P Global Ratings.

The group's shareholders' equity stood at $16.7b as of end-2022. Prudential is expected to continue leveraging its strong market position whilst maintaining low financial leverage.

Although Prudential's focus on life insurance in Asia and Africa is seen as less diversified than global multiline peers, the group's distribution strength and presence in key markets support its new business profit growth. 

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Prudential's capital and earnings are deemed very strong, benefiting from an improved capital buffer under revised criteria. Despite potential increased capital demands due to expansion in Asia and Africa, the group is expected to maintain its competitive advantage and financial profile.

The stable outlook reflects expectations of sustained robust capital and earnings, with possible ratings downgrade if there's a prolonged deterioration in capital and earnings or significant decline in profitability. 

Conversely, sustained superior risk-adjusted returns could lead to an upgrade.