Prudential PLC
LSE:PRU
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
601.4
887.2
|
| Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Prudential PLC
You don't have any saved screeners yet
Hello, everyone, and welcome to the Prudential plc 2020 Half Year Results Call. My name is Seb, and I will be the operator for your call today. [Operator Instructions] I will now hand the floor over to Mark Fitzpatrick to begin. Please go ahead.
Thank you, and welcome, everyone, to our 2022 half year presentation from our offices here in Hong Kong. I'm Mark FitzPatrick, and I'm joined here in person by several members of our leadership team and by a number of our Hong Kong-based analysts. From the Prudential team, we have James Turner, our Group CFO; and Avnish Kalra, our Group Chief Risk Officer and Compliance Officer.
We also have the Managing Directors of our 3 strategic business groups. Here with us in the room is Lillian Ng, responsible for Chinese Mainland, Hong Kong and Taiwan as well as overall distribution capabilities. And then joining us remotely from Singapore is Dennis Tan, who heads up Singapore, Thailand and Vietnam; Solmaz Altin who's responsible for the remaining country markets, including Indonesia, Malaysia and the Philippines, and he also has responsibility for our digital and technology functions. And then also Seck Wai-Kwong, Chief Executive of Eastspring.
So I appreciate this is a very busy day for many of you, and we'll close the session just before top of the hour. But very briefly, before we go into Q&A, just a couple of key points I'd like to highlight from the half year. So firstly, it was a resilient set of results. APE sales were up 9% to $2.2 billion, reflecting diverse source of growth due to our geographic footprint, product mix and distribution channels. APE sales of -- in Southeast Asia and in Greater China are now both at about $1 billion.
New business profit was flat year-on-year when you exclude economic effect, and it was down 5% to $1.1 billion, following differences in country and channel mix and the impact of higher interest rates, and the draws could be attributed approximately 1/3 to each of those factors. IFRS group operating profit was up 8% to $1.7 billion. And our resilient operational performance is a testament to our multichannel digitally enhanced distribution platform and our strong franchise across Asia and Africa, where we are a top 3 player in 11 Asian life markets.
And the quality of our business is strong, as evidenced by the high customer retention rate that we published today. And we are looking to drive growth through a focus on operational delivery, writing quality, health and protection business and by investment in people. And therefore, our management priorities are around distribution, digital business quality people.
And in distribution, it means we're expanding our distribution channels and driving higher productivity across both our agency and banca channel. In digital, we are embedding digital into our sales and servicing process to deliver a superior customer experience and to enhance operational delivery. And we are focused on maintaining the quality of our business, and we continue to build leadership and strength and building capabilities of our people through ongoing training and development. And we're also very pleased to announce 2 new nonexecutive directors today as well.
And so we are confident of continued growth. Customer demand continues to be strong. Our index monthly sales were up 13% in July this year, and our latest Hong Kong border survey, which is included in the appendix to the slides, continue to show very high intention to purchase insurance. And importantly, we see that long-term structural growth drivers remain intact, driven by urbanization, growth in middle class and their corresponding wealth and rising demand for health and protection. And we remain confident that Prudential has a financial resilience, capital strength and capability to meet the growing health and saving needs of our customers in Asia and Africa.
So with that, Patrick, I thought let's start the Q&A session, and maybe we can start with questions here in the room in the first instance, please.
Thank you. Maybe we can start it out with Michael.
My name is Michael Chang. I'm from CGS-CIMB. I've got 2 questions. So firstly is on the China business. It's definitely better than expected. First half NBP was only down 4%, and that's up an extremely difficult base for last year. Could you shed some light on your view of the operating environment on that front? Maybe you can show some -- give some figures on trends, how the 1Q and 2Q during -- as China exits the outbreaks, how is July doing on that front? And what are you doing to continue to outgrow the industry?
And secondly, on the Hong Kong business, in terms of the fifth wave, obviously, a very tough 1Q. But since then, things have improved in terms of COVID cases. How is the business momentum of the domestic segment since then?
Okay. Michael, thank you for that question. Let me start off and then Lilian, I'll hand over to you for a little bit of extra color, please. So in terms of the -- our business in China, we're very pleased with how it performed this half. A key component -- a key differentiator in our performance was undoubtedly the multichannel distribution that we have. So we had strength in agency. We see strength in bancassurance but also the very broad footprint we have in Chinese Mainland in terms of 99 cities, in terms of 6,000 outlets. So that meant most of the business was able to continue performing even if some cities were at various stages of lockdown or restricted movements. So that undoubtedly was a very important component.
And I think we've also been very focused on the quality of our agents in terms of additional training, and we're seeing improved -- significant improvements in terms of the number of cases that each agent is working through and a significant increase in terms of health and protection policies that we're seeing coming through.
So we think these are important drivers, important competitive advantages because it takes time to build up bancassurance relationships, and we think we have those and we have those in abundance throughout China.
Lillian why don't you kind of -- any further comments on the Chinese Mainland and then maybe a little bit on Hong Kong?
Hong Kong. Okay. Thanks, Mark, and thanks for the question. So obviously, on the Chinese mainland, I think the reason why we can continue to outperform is a combination of our wide geographic footprint as well as the multi-distribution. So basically, we are where the customers are, and we can serve them the way that they want to be served, whether it's through our agency or our bancassurance channel. So just touch a little bit on our agency capacity and capabilities. I think as people were -- I think the regulator is focusing more about sales practices. And I think there's now a draft in place in terms of looking at how does an insurance company and the sales synergy drive consumer conduct.
I think you'll be very happy to hear for a CPL agency force, we are already embarking on that, the role that they play. So we're very selective in who we recruit as well as how we equip them to actually do the right thing for our customers. So as a result, we've been able to see an increase in what we call the productive and the leader agents month on month. Since the beginning of this year, as you appreciate, I think the COVID has so some impacting on our recruitment momentum, but we're seeing that quality coming up.
On the bancassurance side, the beauty we have actually, with our bancassurance platform other than our capabilities is, I believe, in terms of our digital technology platform that we can actually hook up with a bank partner quickly and also address the double recording, which is coming through in terms of financial advice. So you have to do a video and sound recordings. So these are capabilities that we can and, as a result, we can onboard a bank partner and the branches quickly. And on top of that, obviously continues to evolve our product part offering.
So overall, we do see a lot of opportunities in China, and we believe we have the capabilities and continue to refine in that area.
Now into Hong Kong, which I think on the domestic segment. Obviously, Hong Kong is a very resilient place. And I think there's 2 things that we need to recognize in Hong Kong. And actually, this is promoted by obviously the new administration of the Hong Kong government as well as from the Chinese Mainland government is that it continues to be seen as an international financial center. One thing that we call is Hong Kong is also seen as an international health care center. And these are the 2 reasons why we can actually continue to grow in the domestic market and in -- when the border opens, we continue to believe there will be a lot of appetite or pent-up demand from MCV customers coming through.
So just on the domestic front, the purpose we are doing is we're driving more health and protection for our agency force. And you can see in some of our data that we are now driving our product mix to an area where the product mix is just on its own is adding 11 points to the new business margins for the agency product mix. And on our banca piece, we continue to have a very good partnership with Standard Charter Bank. And I think we have -- I have to say, we probably -- the one-off, I think the only 1 [indiscernible] today actually continue to offer a whole range of products, including savings and protection, whereas we know a lot of our bank partnerships truly saving our spread. So that's an area that we continue to work on.
Maybe to Thomas?
Thomas Wang, Goldman Sachs. So a couple of questions, if I can follow on that China question. In terms of distribution, we're seeing struggles between -- among a lot of Chinese in the agency side, how and then proved a lot of new bancassurance relationship. I just want to think in terms of how you think about medium to long term, how that dynamic or balance between the 2 channels? How do you see that developing?
And then the second question, if I can ask on the capital side. Just could we have some update on the IFRS 17 implementation and how potentially that impacts our financials for next year?
Thomas, thank you. So in terms of distribution on Chinese Mainland, I think what we've seen is a real shift towards quality. So you've seen the number of agents in the market come down, a real focus in terms of quality, and you've seen the regulatory direction from CBIRC focusing on quality of agents as well. So that plays to our strength, and we think that, that support who we've been in the space of the market that we play in. We do think that banca is going to continue to be a very important part of distribution as well in Chinese Mainland. And -- we have developed it to such a way that the lodging is very respectable at about 40%, 41%, and therefore, it's a meaningful contributor.
And as Lilian says, we have the wherewithal to be able to link up with new banking relationships very significantly. So mainly in Chinese Mainland, we have 55 banca partners, and we have access to over 6,100 bank outlets. So it is a capability and a strength of scale and of size as well, which is important.
So both banca and agency will be important. I think it will be -- the whole industry will shift towards a more professional agency force, and that's very much in line with where we're at. And then on IFRS 17?
Thomas, thank you. So -- and thank you for my first question as CFO. In terms of IFRS 17, we've given you a slide in the deck, which sets out the time table and some of the key points. But in terms of impact, really, the key issue is that the methodology is still being defined in a number of areas. What we will do is we'll do a market update in Q2 2023, where we'll go through the impact of IFRS 17 and bridge between IFRS 4 and the new accounting basis.
But really, the important thing to remember is this is an accounting basis. So it doesn't change the economics of our business. It doesn't change our strategy, our dividend, our cash-generative basis or indeed our capital strength. So it is clearly important, and it's front of my mind in terms of ensuring we get an optimal outcome. The key underlying economics of this business are not impacted by IFRS 17.
Perhaps we're going to pass to Edwin, and then we'll come down.
Thank you. I'm Edwin from CLSA. If I can switch gears to non-China markets, so my first question is on Singapore. I noted that last year and actually -- well, for the first half of this year, Singapore business performed quite well, and the momentum seems to be much better than your peers. So I just wonder could you share some color behind the strong momentum for your Singapore business? And should we expect such momentum to continue in the second half?
And the other question is going back a little bit to the Hong Kong business. So I understand the economic assumption may have some impact on the new business profit for Hong Kong in the first half. Is there -- is it possible to share with us without such economic assumption change what would be the new business profit change for Hong Kong market in the first half?
Sure. Edwin, thank you. I'll start off in Singapore and then Dennis, I'll hand over to you for a little bit of extra color synergy on the ground in Singapore. And then maybe, James, you could cover the Hong Kong and NBP margin economics.
So in terms of Singapore, I think the team have continued to do fantastic well. The agency has performed well. We've got nearly 20% of our agency base as MDRT, so that's continuing to do well. And I think with the banca channel and the customer appetite over the course of the last 6 months, banca has come through very strongly. And we've seen a real appetite for -- from high net worth clients for long-term policies that really look at savings and legacy protection. But maybe, Dennis, I could hand over to you for a little bit of extra color, please.
Thank you, Mark. I think in the Singapore context, given the reopening and things being more endemic in nature now, that's in a lot more activities on the ground. So we see that a lot more in the second quarter of this year as compared to the first quarter. In that regard, a lot more customer engagement, a lot more face-to-face activities are being rolled out, both in the bank channel as well as through our large agency force that continues to support a lot more of our business generation here. And the other item is actually with the pandemic, there's been a huge adoption in terms of our digital tools.
So despite the reopening now, the agency force continues to really use the digital tools in terms of the video engagement and video tools to sell. I think that continues to help us increase productivity. So definitely, we'll continue to see this having true in terms of momentum into the second half of this year. Back to you, Mark.
Thank you very much, Dennis. James?
Edwin, listen, thank you. In terms of economic impacts in Hong Kong, in terms of margin, it had about a 25.1% hit in terms of the NBP margin, and that equated to about $57 million in terms of NBP.
This is Jenny from Morgan Stanley. First of all, thank you for organizing this on-site event. I think it's very -- so good to see management in person and also our peers. So maybe 2 questions from me. One is still on China. I want to ask about management's view on China's retirement market. On the asset management side, I think there's a lot of changes in regulation, removal of ownership cap. So is there any further thinking or strategy planning there in China? And also on the insurance side, we've seen some new business model in China. They're doing financial products plus retirement services like the senior care homes is getting quite popular, a lot of local peers, your key competitors, they're all trying to explore that business model. So I just want to hear your view on that.
And maybe a second question is on Indonesia. You should be a very, very important market for us. It has been struggling a little bit. We just want to hear management's -- maybe some comments how the market is doing. Do we think it has turned around? And we have done some changes there. We have a new sharia license. How is that going to sort of develop? And also in the venture side in Indonesia, is there anything further we can do to strengthen the distribution there?
Okay. Jenny, so there's a lot in there. Let's start with China. I'll make some opening comments and then Lilian maybe over to yourself. And then Solmaz may start on Indo and then hand over to yourself, if that's okay, please. Thank you.
So in terms of China, the retirement market, it is a huge opportunity. We think Pillar 3 is a huge opportunity for the market, and it's great that the consumers and regulators on Chinese Mainland are spending more time focusing on the need to save for retirement. It's a need, I think, that we're seeing throughout the world. So it's great to see it really being an area of focus in Chinese Mainland. I think the opportunities we have within the CPL are very real and CPL, our China business, has a 100% owned asset management company that effectively provides at all the support and some of the new regs effectively would link into that entity.
Lilian, why don't I ask give you to provide a little bit more color on this.
Okay. Thank you, Mark. I think, as you said, I think these pension opportunities in China is huge, right? So our joint venture, City Prudential Life, as Mark mentioned, we actually have a wholly-owned subsidiary, [indiscernible] insurance asset management company. I think they're probably around about 30-plus insurance asset management companies in China and about 1/3 of that are what we call JV or foreign on. So very proud to say that actually, we are 1 of the top 3 or 4 JV AMC in the market. So we have capabilities in that AMC business.
Now going back to the pension opportunities, I think where we definitely can play is actually in the periphery, which is the private and personal pensions. Actually, CPL is 1 of the first to actually engage in the pilot where CBIRC allow certain insurers to actually pilot the retirement products in the southern provinces. Obviously, as a learning regulator, CBIRC continued to work with those pilot insurers to improve the product offering.
The second thing where we are actually quite excited is actually, it's formalized in the revised regulation just came out this week is that we can also now with our AMC participate in the asset management of pension assets for other providers. So that's an area that we're very excited, and I think we can tap into that. So hopefully, that address our capabilities already underground to capture those opportunities.
I think the second one you mentioned is about the insurance products. I think the way we actually look at insurance product is we look at it from a customer proposition. So we offer the -- what we call the retirement savings insurance product. But at the same time, we have what we call value-added services. And back to your point, we actually, for example, offer, for example, engage with 1 of the popularity developer so that we can engage with them, say, to purchase a retirement home in advance in Hainan of all places. We've also engaged with 1 of our health management company called [indiscernible], and that's offering health care management services.
So this is how we provide those value-added services for our customers who are planning for retirement. So all that you see is something that we're actively engaged in.
And then on Indonesia. So Indonesia is a very exciting market for us, very, very exciting. And we've been very busy. The team have been very busy this year. We launched the new Sharia business, the first in the world to launch stand-alone Sharia business in April, and that's come along really, really well. And we're also very pleased in terms of the broadening out in the continued upskilling that we're doing in terms of our agency, but also the element of our product range. We spent a lot of time developing and expanding the product range. And therefore, that's actually resonating with a lot of customers and especially at the moment when COVID is still very real in some parts of Indonesia, making sure that the policies are available for those customers as well as getting into the SME market is 1 that we got into fairly recently, and we're seeing some very encouraging signs from there.
Solmaz, why don't I hand over to you and just allow you to provide a little bit of extra color, please.
Thank you very much, Mark, and thank you very much for the question. We will see Indonesia insurance market, which has been hit hard indeed by the pandemic. As the country opening up, the situation will become better. Let me also point out a few things on the questions that you mentioned on Sharia and bancassurance. On the Sharia side, indeed, we have successfully separated our Sharia business. We are currently the market leader in the Sharia segment with 30% market share, and we have 160,000 agents and able to be operating and selling Sharia-compliant products with that new entity.
So we have an amazingly strong position in the Sharia segment. Our distribution power in Indonesia conventional business is extremely strong. We have almost 50% of all agency population -- is with us. And as the country opens up, this will give us the opportunity to increase also sales again with banca being flat and the APE sales agency was a bit down. With bancassurance overall, we do see some progress with our existing bancassurance partnerships, albeit from a slow base. We will certainly look into other opportunities that might present themselves to us over the next year or so. And we certainly will also be cautionary in terms of the transaction values and the price we will be willing to pay for that.
Back to you, Mark.
Solmaz, thank you. Thanks for those questions, Jim. I think we'd like to go to the operator, and we'll have a question from the -- some of the international sell side, if that's okay.
Our first question comes from Andrew Baker of Citi.
So just 2 for me, please. Are you able to just provide an update on where you are on the Macau license registration process? And then when that does come into effect, what impact you're expecting on both AP and new business profit from Macau?
And then just secondly, on the group IT provision ratio, obviously, there's a lot of moving pieces, and it now includes the RBC and the CLO changes. Just wondering when you think you might be in a position to provide us with more information on what you might consider an appropriate target range for that ratio.
Andrew, thank you for those questions. I'm pleased to hear that James will have to deal with the target range question rather than me having to deal with it in the past. In terms of Macau license, we continue to engage with the regulators. So as soon as that is open, we'll expect to be able to begin business very shortly thereafter. A key component clearly of Macau is not need the element of Macau itself but also the visitors coming down from Chinese Mainland and the opportunity of that. And while the border with Hong Kong and Chinese Mainland remain shut, that provides a useful conduit to be able to tap into some of that demand that undoubtedly is there for multicurrency for critical illness protection and the like that can be effectively provided to what would be a branch of our Hong Kong business. So that's what we would expect to happen once the license gets approved.
James, in terms of GWS?
Andrew, thank you. So in terms of the GWS ratio, as we stated in our disclosures, we haven't set a maximum limit on the coverage ratio because the GWS solvency position, which is a key metric for assessing our regulatory capital but it does include elements of capital that cannot be converted into cash immediately. So a classic example would be contributions from the with-profits fund. And so where we've guided to is free surplus. I think that's a much better metric in terms of understanding the shareholder capital available for distribution. It's also the primary metric we're using to assess the group's sources and uses of capital. What we have done is we've given you a risk appetite level of 150%. And so that was the new piece that we've added in terms of those moving parts that you referenced.
Operator, should we have another call from the international callers, please.
Next question comes from Farooq Hanif from JPMorgan.
Just going back on Andrew's question on GWS ratio first. So what does that risk appetite mean? So if we take free surplus ahead of that, does that basically mean this is a capital that you feel like, I mean, how much of that do you think you'll need to retain for growth? And how much do you think could be part of some sort of huge distribution, obviously dividends or buybacks? If you could talk about that or at least tell us when you might consider talking about that?
And the second question is you've got this 13% growth momentum that you talked about in July in your slides. Can you give us a bit more of an idea of where this is coming from and where growth is accelerating? And quickly, third question is, what are your kind of latest thoughts on dividend growth generally and given the momentum that you've seen in free surplus?
James, do you want to...
Yes. Okay. So Farooq, thank you. In terms of GWS and risk appetite, and really the question is why do we pick 1 50. Clearly, we carry out a lot of internal stress testing to derive this buffer. We considered all the considerable risks to the GWS capital position and also the potential mitigating actions. Holding this level of buffer over the GPCR minimizes the probability of regulatory intervention even after a very large movement. And I'd kind of draw your attention to the fact that if you look at our -- we've given you the pro forma GPCR level at the beginning of the year of 320% and even after the significant disruption that we faced in the first 6 months and market volatility, we're reporting a 317% percentage at the half year.
I think your second question really is about how to think about kind of firepower, and it's probably better. I'm not going to give a number, but to tell you how I think about it. First, I'll refer you to our free surplus of $8.6 billion, and there's a slide in the CFO appendix that covers that. That's the best guide to a distributable surplus because this is the stock in excess of 100% of GPCR. And clearly, we are net capital generative, so all else being equal, that capital stock will increase over time.
But that stock does include $2.1 billion of Holdco cash. And clearly, we need to maintain prudent levels of liquidity. Also conscious of the scale of our organic opportunities, the attractive IRRs that we're able to achieve and we're able to invest in.
And so we'd also need to look at all the necessary stock at one time. We wouldn't necessarily want to play it up from the businesses. Classic example is when we invested in TTB in Thailand. You saw that, that was a [ $750 billion ] investment. About 500 came from the central resources, but we used the stock in the business units to pay the balance. So that's how we think about free surplus. Clearly, there's also the fact that we're capital generative and that we are -- we look at things like our debt equity ratio, where we're at the bottom end. Hopefully, that gives you a sense of the strength of our capital position and our financial flexibility through it.
And then Farooq, in terms of the growth in July, I think it was about 10 markets registered year-on-year growth. So it's some doing stronger than others across the path. So pleased it's quite a broad brush in terms of performance. And James, I wonder if you could pick up the DIF question.
Sorry, I didn't hear the second.
Trajectory for dividends, given the OFSG.
Just in terms of -- my question was in light of your strong free surplus in light of your growth in kind of generation of free surplus. What sort of trajectory here in dividend growth -- full-year dividend growth?
No. Listen, thanks. So we announced a new dividend policy last year, and we're linking that through to -- as you say, to that growth in free surplus, obviously, relevant of normalized central costs, et cetera. And so you would expect to see it grow at the same level as our growth in free surplus aligned with that dividend policy.
Operator, we'll go to another question from the phones.
Our next question is from Craig Paterson at KBW.
Can you hear me?
Yes.
Just 2 questions. I wonder if you could give us an update on your ambition to increase your stake in the Chinese JV. And the second thing, there seems to be a sort of a retail property crisis going on in China, and it seems to be escalating hiccup maybe from supply chain issues from the 1 big insolvency we had last year. I was wondering if that's having any detrimental or will have any detrimental impact on your volumes?
Thank you. So the stake in CPL, I think we've made it clear to yourselves, investors and -- specific or our appetite to be able to buy more if that opportunity arose. That being said, our time and effort and Lilian is here to elect all our time and efforts are being absolutely committed to try and help that business grow as quickly as possible, grow into the footprint further. You've seen the great job that the team have done over the course of this half, and we look forward to seeing them continue. Just to contextualize vis-a-vis the industry, CPL outperformed the industry 4 times in the first 6 months of the year, so very, very strong performance. And that's really what we're going to keep driving and keep focusing on. So nothing new on that side, Craig.
And in terms of the retail property piece, actually, I suppose that's going to be a broader economic and macroeconomic piece for the Chinese economy. That being said, the inflation print that was done for China this morning at 2.7% CPI isn't, I think, causing any concerns in the market. The core inflation is running at 0.8%. So Chinese consumer is not driving up demand significantly. So we do believe that there is an opportunity to continue really focusing on the health and protection space, which is what we've been doing for a number of years. And I think COVID and the unpredictability of COVID outbreaks around the world just continues to remind customers of the need to get some protection should they suffer from COVID or should, unfortunately, somebody die from COVID. So at this stage, not seeing that there's going to be a major direct impact and the impact from ourselves in terms of our balance sheet is fairly minimal.
To that end, I've got a question on the web, which I'll just read out. So part of it has already been answered. But Nasib at UBS is asking what opportunities do you see in the banca space and which markets?
And then a question for Lillian, which is how would you expect to run sales from the branch in Macau once that license is approved.
Okay. So thank you for that question. In terms of the banca space, 1 of the areas that we have said for a little while now that we continue to explore and consider opportunities to close the gap is in Indonesia, where the market is a bit more balanced than our business. Our business is predominantly agency and the market is a little bit more balanced between agency and banca, so we're very focused on various opportunities to try and pick up a bancassurance deal in Indonesia possible, as Solmaz said a short while ago. So that's probably the main component. Our big kind of regional bancassurance deals are pretty much kind of locked up for many years, and we're very pleased at how well the processes are progressing and we continue to keep an eye on individual opportunities that may arise, ensuring at all times that we're very disciplined. We don't want to overpay, and we want to make sure the terms and conditions are appropriate for what we do in the banca space, and Lilian then on Macau.
I think, as Mark mentioned, we are applying for a branch license of Prudential Hong Kong. So Macau will operate as a branch. A lot of the infrastructure and operations will be done through in Hong Kong. So in terms of the sales model, obviously, we'll continue to put in a multi distribution. We actually already have capability in Macau already in our rep office setting up, for example, recruiting corporate sales service people to service the agency channel. So that's 1 area. And actually, interesting enough, on the banca side, we are already starting to talk to some of our bank partners that is in the region that are -- who have or have a branch in Macau. So it will be in the same way that we actually run sales in most of our markets.
Operator, let's go back to 1 of the international calls, please?
Next question is from Andrew Crean from Autonomous.
Can I ask 3 questions, please? Firstly, could you give a sense of how you see the opportunity when the border opens in terms of sales and new business profits relative to the levels that you were doing in 2018? Secondly, coming back on the first question, could you give us the growth rate in the -- in China and Hong Kong new business profits or APE first quarter and second quarter, so we get a sense of momentum? And thirdly, coming back on this capital position, could you tell us in terms of the war chest for acquisitions, say, the China JV, how much you've got either in terms -- is it defined in terms of the amount of free surplus available for that or in terms of the Holdco cash? It is important, I think, that investors understand what your firepower is.
Okay. So Andrew, let me start off with the border opening piece, and then I'll hand over to James for the other components. In terms of the border opening vis-a-vis the previous period when we had significant volume coming through, and I think pretty close to about $100 million per month was effectively coming through of new business profit. Effectively, what that -- from the research that we've done and from the surveys that we've done and interesting, it's not just surveys that we've done a number of other houses to do these surveys of people in Chinese Mainland asking about their appetite and propensity to travel down to Hong Kong and then when they hear what they might do.
So we've seen an uptick actually an appetite for people to travel down to Hong Kong. And we've seen an uplift in terms of people's propensity to purchase, especially those who are in the 45-plus age group and those who have maybe about USD 100,000 or more to be able to invest. It's a significant uptick. So we think that, that demand has not gone away. It's pent-up in that, maybe the very high net worth individuals in Chinese Mainland have ways to be able to move some of their wealth around the globe. But our population, our audience rather, is very much the affluent, the mass affluent. And therefore, they really need the border to be open to be able to benefit from the multicurrency opportunities to be able to benefit from the critical illness cover and to be able to access the Hong Kong health care system that is so well known and so well respected.
And again, that's something that we explored in the survey, where people said, for minor illnesses very happy to deal with local hospitals. For anything significant, they'd like to come down to Hong Kong given the brand that Hong Kong has.
So I think the border opening so much will depend, Andrew, on how the border opens. I think it's unlikely the border is just going to be flung open. Our expectation is this more likely to be a gradual opening and likely to be GBA in the first instance that may be -- that may get a broader opening. And just to remind everybody, the GBA population size and scale, it's kind of a size of about 70 million people and a scale a bit like South Korea in terms of an economy. So it is a very sizable opportunity for us, for the market and also for Hong Kong because at its height, we had 1 million visitors a week coming down for mainland China. And while I'm in Hong Kong at the moment, you see it's got a lot more energy about it. People have been enthusiastic given quarantine rules are being restricted. It would be great, even better when the visitors come down. James?
Andrew, thank you. So I'll do the ABE one first in terms of Hong Kong and China. So in Hong Kong, it was split pretty much 50-50 in terms of Q1, Q2. In China, in terms of APE, it was weighted much more to the first quarter and kind of -- yes, in the first quarter. In terms of your second question in terms of where we are on...
Sorry, the growth rates there? The growth rates rather than the split quarter-to-quarter, I was after.
Okay. So in terms of Hong Kong, the growth rate in Q1 was down about 18%. And in Q2, it was up 19%. And in China, clearly, in the first quarter, you'll recall that we had the fire sale of the CI products. So that's reflected in Q1 where it was down 62, and Q2, it was up 41.
In terms of the second question, you asked about firepower. I mean I refer you back to what I said before. It's not appropriate to give a number, but it's best to look at examples. So I would say that in Thailand example, the investment into TTB, where we had 700 -- just over $750 million that we invested $530 million was from central resources, $240 million was from local resources. So that's about demonstrating that the capital, the free surplus that we hold in the LBUs is important to those investments and that we are able to call on it when we need to.
You're right that we have $2.1 billion of cash in the center. And we have been very successful in growing our business and then being able to convert that growth into cash, which ultimately comes up in terms of remittances. But we're not looking to remit more than we need. And we've got the financial flexibility aligned with how I described the free surplus earlier to the earlier question.
Is there another question from the room?
I'm Jenny from HuaTai Securities. My first question is about Mainland China. There is a discussion in the market that the overall demand of insurance in Mainland China is weakening because people see a huge number of agents are leaving the industry. So what's your observation? And what's your future competitive advantage in this market?
Second is about Malaysia, what's the opportunity in the Takaful business? And what are you going to do to maintain your leadership?
Perfect. Okay. Thank you for those questions. So Solmaz, I'm come to you for the Malaysia Takaful opportunity. And then in terms of Chinese Mainland, in terms of demand. So undoubtedly, the number of agents across the industry has fallen dramatically over the course of the last few years. I think a large part of that is when you look at what type of business, many of those agents who are selling, it tended to be very short-term endowment type products. And that's not really what the CBIRC is looking for the industry to sell. The industry is looking to make sure there's greater protection and there's more long-term cover rather than short-term investment component.
So we do think there is undoubtedly a big shift towards quality, and we're seeing that play through. And therefore, I think 1 of our big advantages in the market is that we've never played in that space where some of the other agents and some other people played with a lot of short-term endowment. It wasn't something that we felt was attractive business or business we wanted to do.
So we have, within our organization, within the management team, a culture and a mindset and within our agents, a culture and a mindset of actually selling more health and protection products. So we do think that, that opportunity will continue.
And we think, again, with our bancassurance footprint, given how wide it is, that gives us a tremendous opportunity. When we move into a new city, a Tier 2, Tier 3 city, it gives us an opportunity to establish a presence almost immediately and be selling through those bank branches while we then recruit up agents locally and while we then actually mature our business locally.
So we are, I think, very positive about the prospects and opportunities within Chinese Mainland for insurance. CBIRC has made it be clear they're looking for a greater level of penetration than they have at the moment. They spoke about a penetration level of close to 5%. We're well under that as an industry in Chinese Mainland. So there's a long way to go, I think, before we reach anywhere near saturation.
So Solmaz, could we go to Malaysia, please, in Takaful.
Yes, of course. Thank you, Mark. Thank you to HuaTai for the Takaful question in Malaysia. Takaful is a fast-growing segment in Malaysia and is an important component of our Malaysia APE and NBP overall. The size of the opportunity is actually very huge with Islam being the most widely practiced religion in Malaysia with around 60% of the entire population. And we, with our BSN -- PruBSN company, we are the Takaful market leader with 29% market share. That's as of the financial year '21. We are also launching new health and protection Takaful products. For example, the product called BSN Sakinah. We launched that in this half year and the past half year, and this helps us support the very high APE mix of 67% in our Takaful business. We have a strong Takaful agency force, as I mentioned, 160,000, and we have grown them just in the past half year by another 15% or 19,000.
Back to you, Mark.
Solmaz, thank you. I think just on that Takaful, it is a huge opportunity, 1 that we're very, very excited of. And just for clarity, I think the agent numbers at Takaful is about 16,000. So I think the number Solmaz gave was for the Indonesia. So the Takaful piece is about 16,000. Yes.
Andrew, it's James. I picked up the wrong numbers comparatives. The actuals that I gave you were correct in terms of quarter-on-quarter. But the year-on-year, I was picking up a different number. In Q1, in Hong Kong, it was a 17% drop. In Q2, it was flat. And in Q1 in China, it was a 7% drop. And in Q2, it was a 68% increase. Apologies for that. But just to correct that immediately.
Michael? And then I think we've got 2 more from the phone lines.
Yes, it's Michael Chang, CGS-CIMB again. Sorry, James, just on your comment about the second quarter for Mainland China that are 68% year-on-year. Could you may be shed some light on what the agency was for 2Q versus bancassurance? And I think that ties to what Lilian said earlier on that since the beginning of this year, productivities have increased month-on-month for every single month. So maybe shed some light on that.
And secondly, on the Macau business, obviously, as you said, a great opportunity to reclaim some of the MCV-related business. Could you shed some light on what proportion of the MCV historically maybe came from the Greater Bay area, the Guangdong region? Maybe that could be some easy wins that can be tough in the near term.
Absolutely. Why don't we start with the second question in terms of Macau and the Chinese Mainland visitors?
So obviously, I think, Macau, obviously, there's the opportunity. What we -- in the past, what we see pre-2019, the contribution from the Guangdong areas, about 1/4 of our MCV business will come from the GBA area. Actually, if you then added to that what we call the Eastern coastal provinces, right? So as you know, right, in China, anything south of that, it's -- they're prone to come to Hong Kong. If you add that part where you go in terms of Beijing, Shanghai, Jiangsu, that will be like 50% of our business. So we expect that's how the flow may come when the border opens up.
In terms of split, in terms of H1, what we saw in China is agency was down 11% and bancassurance was up 28%. That's completely aligned with what Lillian was saying earlier.
Should we go back to the international phones, please?
Our next question from the phone is from Dom O'Mahony at BNP Paribas Exane.
Three from me if that's all right. First, you highlighted 22 new bancassurance arrangements. Is that -- I wonder if you could just highlight which geographies or which big arrangements you would highlight within that, whether there are any particularly being full large arrangements that you could highlight?
The second question is on the free surface generation in the life business. This is very, very strong. I think it was 18% increase in the expected free surplus generation. And it's also well, well ahead of the outlook for '22 as presented at full year '21. I'm wondering whether there are mark-to-market effects within the operating free surplus generation? And if so, how big that is? And then third question, if I look at the insurance margin, very strong. I just was curious as to whether the sort of lockdowns and broader sort of COVID-related measures may have reduced claims activity. I think that, that was something you highlighted in previous periods. For instance, discretionary health claims may have reduced. I'm wondering whether that was relevant in this period? And if so, if you have any idea of how much?
Okay. All right. So Lillian, do you want to give an overview of the new banca arrangements, please, in terms of just the broad geographies that we have?
I think for 2022, actually, a majority of that is actually now China in the Chinese Mainland. As you know, in the Chinese Mainland, it's an open architecture arrangement. So we've been able to onboard 11 new bank partners in the first half of 2022. So a majority of that is new and the rest is actually operating on the existing arrangements that we have with our regional bank partnership. And I think we spoke about the Thailand on as well. That's what adding the value.
And James, in terms of the -- just conscious of time in terms of the 2 questions in terms of FS generation and insurance margin.
To answer, they're both linked and so the insurance margin, the 17% increase in the insurance margin is -- benefits from the impact of the adoption of Hong Kong RBC. It's about $200 million above the line, and that goes through the insurance margin. So that's why that's up at 17%. If you strip that out, it'd be it at the underlying of approximately 6%, 7%.
Okay. I think we've got 1 more call from the international lines, then we'll close.
Our next question then is from Fulin Liang at Morgan Stanley.
Two quick questions on IFRS. The first one is as a follow up as Indonesia. So if I look at the operating profit, actually, all of your regions still show like high single digit or low double-digit operating profit growth apart from Indonesia. And just wanted to see when are we going to expect to see the turnaround in Indonesia and from the IFRS side? And the second thing is on Hong Kong. If I back out your numbers, seems like a majority of the short-term fluctuation came from Hong Kong business, which was a bit surprise to me because in the past, we've been advertising that a majority of Hong Kong's business is with profit, which means that it's actually relatively stable under the IFRS metrics. So I wonder, actually, what -- is it because of your general account despite a small proportion in Hong Kong? Is still very large absolute amount? And I wonder just what's the reason of that? And also whether -- do you think that the IFRS 17 implementation will change that?
Okay. Thank you. Just in the interest of time, let me just deal with the first 1 quickly and then James, maybe if you could comment on the second 2. In terms of the IFRS from Indonesia, the op profit -- that is down, I suppose, not particularly surprising given that there's a bit of a lag effect in terms of with -- over the course of the last few years, sales have unfortunately been down in Indonesia as we've retooled that business. And therefore, effectively, what I think you'll see is a continuation of the softness in the Indonesian IFRS numbers until the time as we see the agency performing again at the levels that we are familiar with. And until so time as we see, I suppose, effectively a sustained period of the market being open and agents can interact with customers on a more normalized level.
And James, in terms of the Hong Kong?
You're right, a significant amount of the short-term fluxes from Hong Kong, and that's really reflecting the fact that, as you know, we focus on high-quality health and protection business. It's not particularly sensitive to market movements. But all of those profits, you're discounting at a higher level. So that's what you're seeing in driving that number.
In terms of IFRS 17, you'll see a spreading of profits. That's the nature of it. That has both advantages on the with-profits business where they're typically under IFRS 4 back ended. But clearly, under products where they recognize them more upfront, they're spread out more along the whole of the life cycle of that project -- the life cycle of that product.
Okay. Thank you, operator. I'll pass it back to Mark who's got some closing comments.
Thank you very much, everyone. So as you can see, we've demonstrated hopefully that our business is delivering quality and disciplined growth that we have diverse sources for this growth because of the regional footprint, but also our digitally enhanced multichannel distribution model and a predominant and very strong focus on health and protection and a very keen focus on execution and delivery.
So there's plenty more to go for, and we look forward to further progress as the effects, hopefully, of COVID diminish everywhere and with Asian growth generally higher than in the West. We're looking forward to a very exciting future here in Asia and Africa. So thank you very much, everybody, for your time this afternoon and this morning. And we look forward to chatting to you in due course.
Thank you, operator. You can close the call now.