09 Mar 2016

Prudential plc 2015 Full Year Results

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IFRS disclosure
EEV statements
Risk factors

PRUDENTIAL DELIVERS BROAD-BASED GROWTH AND INCREASED CASH GENERATION

Group Performance Highlights (on constant exchange rate basis):

• IFRS operating profit of £4,007 million, up 22 per cent¹
• EEV new business profit of £2,617 million, up 20 per cent^1,2
• Underlying free surplus generation³ (after investment in new business) of £3,050 million, up 15 per cent¹
• Net cash remittances from business units of £1,625 million, up 10 per cent

Business Units Performance Highlights (on constant exchange rate basis):

• Asia life and asset management IFRS operating profit of £1,324 million, up 17 per cent¹
• Jackson life IFRS operating profit of £1,691 million, up 10 per cent¹
• UK life IFRS operating profit of £1,167 million, up 60 per cent²
• M&G IFRS operating profit of £442 million, down 1 per cent

Capital & Dividend:

• IFRS shareholders’ funds of £13.0 billion, up 10 per cent⁴
• EEV shareholders’ funds of £32.4 billion, up 11 per cent⁴, equivalent to 1,258 pence per share
• Group Solvency II capital surplus⁵ estimated at £9.7 billion
• 2015 full year⁶ ordinary dividend increased by 5 per cent to 38.78 pence per share
• Special dividend of 10 pence per share

Commenting on the results, Mike Wells, Group Chief Executive, said:

“We have delivered a strong performance in 2015. We continue to grow across our key metrics despite the macroeconomic uncertainty and the challenges presented by low long-term interest rates. IFRS operating profit increased 22 per cent to £4,007 million and EEV new business profit grew 20 per cent to £2,617 million. The Group’s underlying free surplus generation increased by 15 per cent to £3,050 million and cash remittances from business units were up 10 per cent to £1,625 million. These results represent good progress towards the 2017 growth and cash objectives, which we set out at the December 2013 investor conference in London.

“In Asia, our portfolio of businesses remains focused on serving the protection and investment needs of the growing middle classes in the region through a high-quality agency force and well-established bank partnerships. Our life and asset management businesses delivered a combined IFRS operating profit of £1,324 million, up 17 per cent. Life APE sales were 26 per cent higher at £2,853 million and generated a 28 per cent increase in EEV new business profit to £1,490 million. Despite this strong sales performance, our focus on growth and cash in the region also saw underlying free surplus generation rise 16 per cent to £673 million. Eastspring, our Asian asset management business, achieved record third-party net inflows of £6.0 billion, driving it’s total funds under management to a new high of £89.1 billion.

“In the US, we continue to meet the needs of the ‘baby-boomer’ generation transitioning into retirement. Jackson’s disciplined execution delivered good returns to our shareholders, with life IFRS operating profit up 10 per cent to £1,691 million and cash remittances to Group 13 per cent higher to a record £470 million. Our success in capturing strong variable annuity inflows at attractive margins drove our separate account asset base up 5 per cent¹ to £91.0 billion.

“In the UK, our life business delivered a 60 per cent² increase in IFRS operating profit to £1,167 million, reflecting continued pro-active management of our in-force book. This result includes £339 million from specific management actions undertaken in the second half to position the balance sheet more efficiently under the new Solvency II regime, which are not expected to recur going forward. Against a backdrop of unprecedented change brought about by pension reforms, we delivered a 23 per cent increase in life APE sales to £1,025 million and drove new business profit up 23 per cent to £318 million.

“After a period of exceptional growth, M&G had a more challenging year with retail net outflows more than offsetting positive flows from institutional new business. As a result total funds under management declined by 7 per cent to £246.1 billion. Despite this, IFRS operating profit of £442 million was broadly in line with last year reflecting actions on costs and cash remittances were 6 per cent higher at £302 million.

“Prudential’s capital generative business operations and disciplined approach to risk management have improved the Group’s shareholders’ equity and solvency levels and have enhanced the Group’s financial flexibility. Our Solvency II outcome, following approval by the Prudential Regulation Authority of our internal model in December 2015, underscores the strength and resilience of the Group’s capital position. At 31 December 2015, Group Solvency II capital surplus was estimated at £9.7 billion⁵, which is equivalent to a Group Solvency II capital ratio of 193 per cent. Shareholders’ equity on an EEV basis at 31 December 2015 was 11 per cent higher at £32.4 billion, equivalent to £12.58 per share.

“The Board has decided to increase the full-year ordinary dividend by 5 per cent to 38.78 pence per share, reflecting the continued strong financial performance of the Group in 2015. The Board has also decided to award a special dividend of 10 pence per share reflecting the additional contribution to earnings from the specific management actions in the UK.

“I am pleased to be able to announce such a strong performance today despite the current macroeconomic and political uncertainty, which have created a more volatile and unpredictable short-term outlook for global growth. We have the flexibility and resilience to adapt to these developments due to our focus on those markets where the need for our products is greatest, our growing level of recurring income from our sizeable in-force portfolio and our robust balance sheet position.

“The fundamentals of the Group remain compelling, our opportunities are intact and we are in an enviable position to benefit from the attractive structural and demographic opportunities in Asia, the US and the UK. The disciplined execution of our strategy, underpinned by the cash generating nature of our business, positions us well to be able to continue to deliver high-quality products and services to our 24 million customers and long-term profitable growth to our shareholders.”

¹Year-on-year percentage increases are stated on a constant exchange rate basis unless otherwise stated. Increases on an actual exchange rate basis, which incorporate the effect of the exchange rate movements, are shown in the Financial Highlights section and in the Chief Financial Officer’s report. All amounts are comparable to 2014 unless otherwise indicated.
²Following the disposal of the Group’s 25 per cent interest in PruHealth and PruProtect in November 2014, the 2014 comparative results of UK insurance operations have been adjusted to exclude results of those businesses.
³Underlying free surplus generation comprises underlying free surplus released from long-term business (net of investment in new business) and that generated from asset management operations.
⁴Comparable to 31 December 2014 at actual exchange rates.
⁵Before allowing for second interim ordinary and special dividends.
⁶From 2016, Prudential will make twice-yearly interim ordinary dividend payments to replace final/interim dividend.

Notes to Editors: