08 Aug 2018
Prudential plc Half Year 2018 Results
|Links to supplementary information about this release: || |
|Full news release and business review || |
|IFRS disclosure || |
|EEV statements || |
|Risk factors || |
|2018 half year financial supplement || |
PRUDENTIAL DELIVERS HIGH-QUALITY PROFITABLE GROWTH
Performance highlights on a constant (and actual) exchange rate basis
- Group IFRS operating profit1 of £2,405 million, up 9 per cent2 (up 2 per cent3)
- Asia new business profit4 of £1,122 million, up 11 per cent2 (up 3 per cent3), IFRS operating profit1 of £1,016 million, up 14 per cent2 (up 7 per cent3) and underlying free surplus generation5 of £590 million, up 14 per cent2 (up 7 per cent3)
- US variable annuity separate account assets up 10 per cent2 (up 9 per cent3) from 30 June 2017 leading to a 13 per cent2 increase (3 per cent3 increase) in fee income
- M&G asset management first half external net inflows of £3.5 billion (2017: £7.2 billion), PruFund net inflows of £4.4 billion (2017: £4.3 billion)
- Planned demerger of M&G Prudential from the Group is progressing well
- Group Solvency II surplus6,7 estimated at £14.4 billion; equivalent to a ratio of 209 per cent (31 December 2017: £13.3 billion, 202 per cent)
- 2018 first interim dividend of 15.67 pence per share, up 8 per cent3
Mike Wells, Group Chief Executive, said: “We have made a good start to 2018, delivering high-quality, profitable growth. At the same time, we are taking the steps needed for the demerger of M&G Prudential from the Group, which we announced in March, alongside implementing M&G Prudential’s merger and transformation programme, which remains on track to meet its objectives.
“The Group’s performance has again been led by Asia, contributing to an overall increase in IFRS operating profit1 of 9 per cent2, growth in underlying free surplus generation5 of 6 per cent2, and an increase in new business profit4 of 13 per cent2 despite a lower level of APE sales.
“In Asia we have delivered double-digit growth across our key metrics of new business profit4, up 11 per cent2, IFRS operating profit1, up 14 per cent2, and underlying free surplus generation, also up 14 per cent2. Our growth continues to be high quality with protection new business profit4 growing by 19 per cent2, IFRS insurance margin8 up 17 per cent2 and renewal insurance premiums9 up 17 per cent2. Our Asia asset manager, Eastspring, has increased IFRS operating profit1 by 13 per cent2. Our broad-based portfolio of life insurance and asset management businesses, high-quality products and multi-channel strategy ensure that we continue to benefit from the growing customer demand in Asia for the wealth and health products and services that we provide.
“In our US life business, Jackson, variable annuity separate account assets were 10 per cent2 higher than at 30 June 2017, leading to a rise in fee income as we continued to meet the need of Americans for retirement income. In the UK and Europe, continued demand for M&G Prudential’s differentiated product propositions has resulted in third-party net inflows of £3.5 billion for our asset management business, M&G, and net inflows of £4.4 billion in PruFund-related business.
“Our planned demerger of M&G Prudential from the Group, which will result in two separately listed companies, each with its own distinct investment prospects, demonstrates our commitment to creating shareholder value. We have mobilised our internal teams for delivery, positively engaged with external stakeholders and we are making good progress.
“Each of our businesses is built around strong and growing customer needs, and we continue to target growth in high-quality, recurring-premium health and protection and fee business. I am confident that, as we create new and better products, build our distribution channels and improve all our capabilities, we are well placed to continue to generate profitable growth for our shareholders.”
|2018 £m |
|2017 £m |
|Change on |
|Change on |
|IFRS operating profit based on longer-term investment returns ||2,405 ||2,358 ||2% ||9% |
|Underlying free surplus generated5,10 ||1,863 ||1,840 ||1% ||6% |
|Life new business profit4 ||1,767 ||1,689 ||5% ||13% |
|IFRS profit after tax*,11 ||1,356 ||1,505 ||(10)% ||(5)% |
|Net cash remittances from business units ||1,111 ||1,230 ||(10)% ||- |
| || || || || |
| ||2018 £bn |
|2017 £bn |
|Change on |
|IFRS shareholders’ funds ||15.9 ||16.1 ||(1)% || |
|EEV shareholders’ funds ||47.4 ||44.7 ||6% || |
|Group Solvency II capital surplus6,7 ||14.4 ||13.3 ||8% || |
* IFRS profit after tax includes a £513 million pre-tax loss on the reinsurance of £12 billion of UK annuity liabilities.
1 Based on longer-term investment returns.
2 Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. All amounts are comparable to the six months ended 30 June 2017 unless otherwise indicated.
3 Growth rate on an actual exchange rate basis.
4 New business profit on business sold in the period, calculated in accordance with EEV principles.
5 For insurance operations underlying free surplus generated represents amounts maturing from the in-force business during the period less investment in new business and excludes non-operating items. For asset management businesses it equates to post-tax IFRS operating profit for the period. Restructuring costs are presented separately from the underlying business unit amount. Further information is set out in note 10 of the EEV basis results.
6 The Group shareholder capital position excludes the contribution to Own Funds and the Solvency Capital Requirement from ring-fenced with-profits funds and staff pension schemes in surplus. The solvency position includes management’s calculation of UK transitional measures reflecting operating and market conditions at each valuation date.
7 Before allowing for first interim dividend (31 December 2017: second interim dividend).
8 Insurance margin primarily represents profits derived from the insurance risks of mortality and morbidity. See note I(a) of the additional IFRS financial information for further details.
9 Gross earned premiums for contracts in second and subsequent years, comprising Asia segment IFRS gross earned premium of £7.7 billion less gross earned premiums relating to new regular and single premiums of £2.2 billion, plus renewal premiums from joint ventures of £0.6 billion.
10 The half year 2017 comparative results have been re-presented from those published previously, following reassessment of the Group’s operating segments as described in note B1.3 of the IFRS financial statements. This change in presentation does not alter total comparative IFRS operating profit or IFRS profit after tax.
11 IFRS profit after tax reflects the combined effects of operating results determined on the basis of longer-term investment returns, together with negative short-term investments variances, results attaching to disposal of businesses and corporate transactions, amortisation of acquisition accounting adjustments and the total tax charge for the period. In half year 2018 it includes a £513 million pre-tax loss on the reinsurance of £12 billion (valued as at 31 December 2017) of UK annuity liabilities to Rothesay Life.
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Notes to Editors:
|1. || |
The results in this announcement are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The results prepared under IFRS form the basis of the Group's statutory financial statements. The supplementary EEV basis results have been prepared in accordance with the amended European Embedded Value Principles dated April 2016 prepared by the European Insurance CFO Forum. The Group’s EEV basis results are stated on a post-tax basis and include the post-tax IFRS basis results of the Group’s asset management and other operations. Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates results are calculated by translating prior period results using the current period foreign exchange rate ie current period average rates for the income statement and current period closing rates for the balance sheet.
|2. || |
Annual Premium Equivalent (APE) sales comprise the aggregate of regular premiums and one-tenth of single premiums from insurance sales.
|3. || |
Operating profit is determined on the basis of including longer-term investment returns. EEV and IFRS operating profit is stated after excluding the effect of short-term fluctuations in investment returns against long-term assumptions and gains/losses arising on the disposal of businesses and other corporate transactions including the reinsurance of UK annuity contracts to Rothesay Life in March 2018. Furthermore, for EEV basis results, operating profit based on longer-term investment returns excludes the effect of changes in economic assumptions and the mark to market value movement on core borrowings. Separately on the IFRS basis, operating profit also excludes amortisation of accounting adjustments arising principally on the acquisition of REALIC completed in 2012.
|4. || |
Total number of Prudential plc shares in issue as at 30 June 2018 was 2,591,872,867.
|5. || |
A presentation for analysts and investors will be held today at 11.30am (UK) / 6.30pm (Hong Kong) in the Conference Centre of Nomura, 1 Angel Lane, London EC4R 3AB. The presentation will be webcast live and available to replay afterwards using the following link:
To register attendance in person please send an email to email@example.com.
Alternatively, a dial-in facility will be available to listen to the presentation: please allow time ahead of the presentation to join the call (lines open half an hour before the presentation is due to start, ie from 11.00am (UK) / 6.00pm (Hong Kong)). Dial-in: +44 (0) 20 3936 2999 (UK and International) / 0800 640 6441 (Freephone UK), Participant access code: 721864. Once participants have entered this code their name and company details will be taken. Playback: +44 (0) 20 3936 3001 (UK and international excluding US) / + 1 845 709 8569 (US only) (Replay code: 675129). This will be available from approximately 3.00pm (UK) / 10.00pm (Hong Kong) on 8 August 2018 until 11.59pm (UK) on 22 August 2018 and 6.59am (Hong Kong) on 23 August 2018.
|6. || |
2018 First Interim Dividend
|Ex-dividend date ||21 August 2018 (Singapore) |
23 August 2018 (UK, Ireland and Hong Kong)
|Record date ||24 August 2018 |
|Payment of dividend |
|27 September 2018 (UK, Ireland and Hong Kong) |
On or about 4 October 2018 (Singapore)
On or about 4 October 2018 (ADR holders)
|7. || |
About Prudential plc
Prudential plc and its affiliated companies constitute one of the world’s leading financial services groups, serving over 26 million customers, with £664 billion of assets under management (as at 30 June 2018). Prudential plc is incorporated in England and Wales and is listed on the stock exchanges in London, Hong Kong, Singapore and New York. Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America.
|8. || |
This Prudential Half Year Financial Report may contain ‘forward-looking statements’ with respect to certain of Prudential's plans and its goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements that are not historical facts, including statements about Prudential’s beliefs and expectations and including, without limitation, statements containing the words ‘may’, ‘will’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of similar meaning, are forward-looking statements. These statements are based on plans, estimates and projections as at the time they are made, and therefore undue reliance should not be placed on them. By their nature, all forward-looking statements involve risk and uncertainty. A number of important factors could cause Prudential's actual future financial condition or performance or other indicated results to differ materially from those indicated in any forward-looking statement. Such factors include, but are not limited to, the timing, costs and successful implementation of the demerger of the M&G Prudential business; the future trading value of the shares of Prudential plc and the trading value and liquidity of the shares of the to-be-listed M&G Prudential business following such demerger; future market conditions, including fluctuations in interest rates and exchange rates, the potential for a sustained low-interest rate environment, and the performance of financial markets generally; the policies and actions of regulatory authorities, including, for example, new government initiatives; the political, legal and economic effects of the UK’s decision to leave the European Union; the impact of continuing designation as a Global Systemically Important Insurer or ‘G-SII’; the impact of competition, economic uncertainty, inflation and deflation; the effect on Prudential’s business and results from, in particular, mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; the impact of internal projects and other strategic actions failing to meet their objectives; disruption to the availability, confidentiality or integrity of Prudential’s IT systems (or those of its suppliers); the impact of changes in capital, solvency standards, accounting standards or relevant regulatory frameworks, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate; and the impact of legal and regulatory actions, investigations and disputes. These and other important factors may, for example, result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. Further discussion of these and other important factors that could cause Prudential's actual future financial condition or performance or other indicated results to differ, possibly materially, from those anticipated in Prudential's forward-looking statements can be found under the ‘Risk Factors’ section of this Half Year Financial Report.
Any forward-looking statements contained in this Half Year Financial Report speak only as of the date on which they are made. Prudential expressly disclaims any obligation to update any of the forward-looking statements contained in this report or any other forward-looking statements it may make, whether as a result of future events, new information or otherwise except as required pursuant to the UK Prospectus Rules, the UK Listing Rules, the UK Disclosure and Transparency Rules, the Hong Kong Listing Rules, the SGX-ST listing rules or other applicable laws and regulations.