Although Prudential (PUK, Financial), a global life and health insurance provider, is headquartered in the U.K., we estimate that over 90% of its value is derived from Asia, where it possesses strong franchises in Hong Kong, Indonesia and China. We believe that two structural factors will continue to boost the Asian market for years to come. First, Asian consumers’ increased wealth has significantly driven demand for insurance and financial planning products. Secondly, a massive demographic transition has created an aging population increasingly in need of retirement-related products and services. Yet, the penetration of life and health insurance in Asia remains relatively low compared to other markets. In addition to the structural benefits of the Asian market, we believe Prudential enjoys strong brand recognition, significant scale and financial stability, giving it an attractive competitive position. While the quarantine has made it difficult for the company’s agents to sell new products, the outbreak has not materially affected insurance-related payouts. We also believe that any setbacks Prudential experiences will likely be temporary and that the pandemic will actually increase awareness about the importance of both health and life insurance products and, therefore, serve to increase penetration rates over time.
From David Herro (Trades, Portfolio)'s Oakmark International Fund first-quarter 2020 shareholder commentary.
