Goldman Sachs: Raise the target price of AIA (01299) to HK$94, while lowering that of PRU (02378) to HK$147.

Goldman Sachs released a research report stating that it believes with the recovery in new business sales and the continued increase in US bond yields, the distribution of profits will reach a turning point, and the expected capital return rates for AIA (01299) and PRU (02378) from 2025 to 2027 will expand. The speed of capital generation will also accelerate, providing greater potential for shareholder returns. Compared to European insurance companies, the short-term outlook for shareholder returns for both AIA and PRU is lower, partly reflecting the longer impact of the pandemic. The report states that AIA has implemented a $12 billion share buyback program (2022-2024) and is believed to be able to maintain an additional $2 billion buyback in the 2025/26 fiscal year. Looking ahead, the bank expects the capital return rate to increase from 14% in 2023 to 19% in 2027. Estimated profit growth is expected to recover to a compound annual growth rate of 8% from 2024 to 2027, similar to pre-pandemic levels. The target price has been adjusted slightly from HK$93 to HK$94. The "buy" rating is reiterated. Based on new business premiums, PRU holds a leading market share in key markets such as China, Hong Kong, Indonesia, Malaysia, Singapore, the Philippines, and Vietnam. PRU has asset management businesses in multiple Asian markets, with assets under management reaching $237 billion by the end of the 2023 fiscal year. As the impact of pandemic-related disruptions diminishes, strong growth in new business sales and the continued increase in US bond yields should benefit the company's profit growth. The bank estimates that PRU's capital return rate will increase from 17% in 2023 to 19% in 2027, and the compound annual growth rate of distributable profits is expected to recover to 7% from 2024 to 2027, returning to pre-pandemic levels. Goldman Sachs has lowered PRU's new business profit forecast for the 2024-2026 fiscal years by 8-10% to reflect the negative impact of rising US bond yields and a strong US dollar (against Asian currencies) and reiterated a "buy" rating. The target price has been reduced from HK$154 to HK$147.