Launch of US$2 billion share buyback programme
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HKEx Chinese version
LSE
Launch of US$2 billion share buyback programme1
- Return of capital of US$2 billion to be completed no later than mid 2026.
- Progress towards our 2027 financial objectives2 will increase the potential for further cash returns to shareholders.
- Strong capital base to fund organic growth and to continue to invest in enhancing our capabilities.
CEO Anil Wadhwani, said: “I am pleased with the progress we continue to make in executing our strategy, as we drive towards generating growth in both value and cash returns for shareholders over the long term. The significant growth opportunity ahead of us has not changed and we remain focused on realising that opportunity.
“With our strong capital base, strategic progress and the recent clarification of the rating agencies’ treatment of the IFRS17 CSM, we can now provide a capital management update.
“We will continue to prioritise investment in organic new business at attractive returns and in enhancing our capabilities as we execute our strategy. We will pursue selective partnership opportunities to accelerate growth in our key markets. Investment decisions will be judged against the alternative of returning surplus capital to shareholders.
“Consistent with our capital allocation framework, we are today announcing a US$2 billion share buyback programme to return capital to shareholders. The buyback will be completed by no later than mid 2026.
“Progress towards our financial objectives will increase the potential for further cash returns to shareholders. Our dividend policy remains unchanged, with the Board continuing to expect the 2024 annual dividend to grow in the range of 7-9 per cent.
“Our outperformance in H1 2023 when the border between Hong Kong and the Chinese Mainland reopened results in a strong comparator for H1 2024. Q2 2024 APE sales trends are similar to those in Q1 2024. Given our focus on quality growth in both value and cash and on account of the progress on execution of our strategy, we have confidence in our FY2024 new business growth and in achieving our 2027 financial and strategic objectives.”
Free surplus ratio3
At our 2023 Half Year Results, we set out our capital allocation framework. Certain elements of the shareholder GWS capital surplus only become available as cashflows for distribution to the holding company over time. The Group’s free surplus (excluding intangibles) metric, which excludes these future flows, is therefore our preferred measure of distributable shareholder capital.
We are now able to provide additional guidance as to how we assess the deployment of free surplus, in the context of the Group’s growth aspirations, leverage capacity and our liquidity and capital needs. Going forwards, we will express this guidance based on the free surplus ratio, defined as the Group’s capital resources, being Group free surplus (excluding intangibles) plus the EEV required capital of the life business, divided by the EEV required capital of the life business.
Free surplus ratio operating range
Our historic focus on “with profit” savings, unit-linked and health and protection business results in a relatively low volatility of free surplus to stress events. Based on our current risk profile and our business units’ applicable capital regimes, we seek to operate with a free surplus ratio of between 175%-200%. If the free surplus ratio is above the operating range over the medium term, and taking into account opportunities to reinvest at appropriate returns and allowing for market conditions, capital will be returned to shareholders.
At the end of 2023, our free surplus ratio was 242%. Accordingly, and after taking into account the 2023 second Interim dividend, we have determined that we will return US$2 billion to shareholders.
Terms of proposed share buyback programme
The terms of the proposed share buyback programme will be in accordance with the relevant shareholder approval obtained at the 2024 AGM, and subsequently with the terms of any similar approval to be obtained at the 2025 AGM.
The pace and timing of and the form of the proposed return of capital will be subject to market conditions and execution considerations, including discretion given to a third party for execution during close periods and the completion of regulatory processes. Repurchases of shares will be made on the London Stock Exchange and/or other venues but will be treated as being bought back by the company on the London Stock Exchange4. Shares repurchased under the proposed buyback programme are expected to be cancelled.
We intend to continue our existing practice of neutralising the dilutive effects of Share Scheme and other share issuance on the Hong Kong Stock Exchange (including the possible issuance of future scrip dividends) through repurchases on the London Stock Exchange and/or other venues4. Such repurchases would be in addition to the proposed share buyback programme of up to US$2 billion announced today.
The person responsible for arranging the release of this announcement on behalf of Prudential plc is Tom Clarkson, Company Secretary.
Prudential plc expects to publish its Half Year Results for 2024 on Wednesday 28 August 2024.