Proactive Investors - Prudential PLC's (LON:PRU) announcement of a new shareholder capital returns policy today was larger and earlier than some analysts had been expecting, though it was leaked to media over the weekend.
The FTSE 100-listed life insurer launched the new policy with a $2 billion share buyback, 8% of market cap, to be completed by mid-2026, with an initial $700m share buyback tranche beginning today.
Pru shares, which had recently sunk to levels last maintained over a decade ago, jumped 5% in early trading and were up almost 7% by afternoon trading on Monday.
The buyback was "greater than, and earlier than our expectations", said UBS, noting that the share buybacks will be bought from the London listing and funded from Prudential's surplus capital.
It was also much greater than City analysts had forecast on average, which based on predictions of Pru's share count reduction by 2026, UBS estimated had been for around a $600 million share buyback over the same period, with the Swiss bank having expected around three times that.
Liberum analysts said the new capital management policy will see around $1 billion, or around 4% of market cap each year, bought back.
Dividend guidance remained at 7-9% growth for this year.
"A guiding principle in determining the level of future share buybacks is a new free surplus ratio, which expresses the available capital over the required capital on an embedded value basis. This was 242% at FY23, the new target range is 175-200%," the Liberum team added.
Prudential also mentioned trading in the second quarter of this year being similar to the first.
This was "OK", said the Liberum analysts, in the face of a tough prior-year comparator and "ongoing regulatory flux" in mainland China.
"Overall we understand the pressure to start buying back shares, given the weak share price performance and the fact its rival, AIA, has been doing so for some time now. The long-term growth prospects across its Asian and African markets remain strong," said Liberum.