11 Aug 2021

Prudential plc 2021 Half Year Results

Links to supplementary information about this release:  
Full news release and business review
IFRS disclosure
EEV statements
Risk factors
2021 half year financial supplement

PRUDENTIAL DELIVERS RESILIENT PERFORMANCE AND MOVES FORWARD WITH STRATEGIC TRANSFORMATION

Performance highlights on a constant (and actual) exchange rate basis

  • APE sales4 in Asia and Africa up 17 per cent (21 per cent) to $2,083 million, new business profit12 up by 25 per cent (29 per cent) to $1,176 million
  • Adjusted operating profit2 from continuing operations1 up 19 per cent (22 per cent) to $1,571 million
  • Completion of strategic transformation through proposed demerger of Jackson, planned to complete in September 2021
  • Prudential plc continues to consider raising equity of around $2.5-3.0 billion through global offering to institutions and Hong Kong retail investors, after the proposed Jackson demerger

Mike Wells, Prudential plc’s Group Chief Executive, said: “We have delivered a resilient performance in the first half of 2021, against a backdrop of continuing economic and social challenges due to Covid-19 and the resulting volatility in consumer activity. Despite the constraints of the environment, our hard-working and dedicated staff and agents have continued to serve our customers and build value for our shareholders, while moving forward with our strategic transformation.

“Our operational performance in Asia and Africa reflects the strength of our strategy and our execution. In the first half of 2021, APE sales4 from Asia and Africa increased by 17 per cent11, while new business profit12 was up by 25 per cent11. This was delivered through our platform of around 560,000 agents16 and our access to more than 28,000 bank branches15.

“Our agency and bank channels were supported by our digital transformation during the period. We are developing the capability to become a digitally enabled organisation with the capacity to serve 50 million customers by 2025. We are focused on digitalising many of our products, services and experiences so that they can be delivered by Pulse, our digital platform and ecosystem. Since its launch in 2019 to 5 August 20216 Pulse had been downloaded around 30 million times. APE sales4,10 involving Pulse were $158 million in the first half of 2021. Our aspiration is that Pulse facilitates customer acquisition at scale, provides an enhanced customer experience, and acts as a platform for the business with scope for delivering future operational efficiency.

“We are continuing to move toward the proposed demerger of Jackson, the Group’s US business, which we plan to complete in September 2021, subject to shareholder approval. The proposed demerger will complete our strategic transformation to focus exclusively on our higher-growth and higher risk-adjusted return businesses in Asia and Africa.

“In order to enhance financial flexibility and de-lever the balance sheet, we continue to consider raising new equity of around $2.5-3.0 billion following the completion of the proposed Jackson demerger. Our preferred route is a fully marketed global offering to institutional investors concurrent with a public offering in Hong Kong to retail investors. As an Asia-focused company, we believe there are clear benefits from increasing both our Asian shareholder base and the liquidity of our shares in Hong Kong. The allocation of any offering will take into account a number of criteria including the interests of existing shareholders and the strategic benefits of enhancing our shareholder base and liquidity in Hong Kong.

“We have been included as a designated insurance holding company under the Hong Kong Insurance Authority’s (IA) Insurance Ordinance, meaning that we are now subject to the Hong Kong IA’s Group-wide Supervision (GWS) Framework. The Hong Kong IA has confirmed the grandfathering of our $6.0 billion17 of subordinated debt and senior debt as capital. Our GWS capital position is strong, with shareholder surplus8,9 (excluding Jackson) at 30 June 2021 estimated at $10.1 billion, representing a coverage ratio of 383 per cent7. This compares with a corresponding surplus at 31 December 2020 of $9.4 billion5.

“We expect the vaccination programmes being rolled out during 2021 and 2022 to facilitate a gradual return to more normal economic patterns, although the pace of these programmes and their effect are likely to vary substantially, and give a degree of uncertainty over the economic outlook and therefore the performance of the business in the short term. Significant Covid-19 restrictions continue in many markets including Indonesia, Malaysia, Thailand and the Philippines, while more stringent limitations on movement have recently been introduced in India, Singapore and Vietnam, the impacts of which are likely to extend at least into the fourth quarter of 2021. There is also continuing uncertainty over the extent and the timing of the re-opening of the border between Hong Kong and China and we now expect that it will remain closed at least for the rest of this year. However, we are confident that the demand for our products will continue to grow in line with the structural growth in our chosen markets, and that our expanded offering and increasingly digitalised distribution platforms are well placed to meet this demand.”

Summary financials Half year 2021 $m Half year 2020 $m Change on
AER basis3
Change on
CER basis3
Life new business profit from continuing operations1,12 1,176 912 29% 25%
Operating free surplus generated from continuing operations1,13 1,112 983 13% 9%
Adjusted operating profit from continuing operations1,2 1,571 1,286 22% 19%
IFRS profit after tax from continuing operations1,14 1,070 622 72% 64%
IFRS (loss) profit for the period after write-down of Jackson to fair value* (4,637) 534 n/a n/a
  30 Jun 2021 31 Dec 2020
  Total Per share Total Per share
EEV shareholders’ equity (including Jackson)* $45.8bn 1,752¢ $54.0bn 2,070¢
IFRS shareholders’ equity (including Jackson)* $15.7bn 601¢ $20.9bn 800¢

* The IFRS loss for the period includes a loss after tax of $(7.5) billion for the required write-down of Jackson to estimated fair value following the Board’s decision to demerge Jackson announced in the first half of 2021. This revaluation, together with Jackson’s IFRS profit after tax for the period of $1.8 billion, after adjusting for amounts taken directly to other comprehensive income and non-controlling interests, reduces IFRS shareholders’ equity by $(5.8) billion at 30 June 2021. The equivalent reduction in EEV shareholders’ equity is $(9.4) billion at the same date.

Notes

1 Continuing operations represents the Asia, Africa and head office functions of the Group following the reclassification of Jackson as held for distribution in the first half of 2021.
2 In this press release ‘adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing operations. This alternative performance measure is reconciled to IFRS profit for the period in note B1.1 of the IFRS financial statements.
3 Further information on actual and constant exchange rate bases is set out in note A1 of the IFRS financial statements.
4 APE sales is a measure of new business activity that comprises the aggregate of annualised regular premiums and one-tenth of single premiums on new business written during the year for all insurance products, including premiums for contracts designated as investment contracts under IFRS 4. It is not representative of premium income recorded in the IFRS financial statements. See note II of the Additional financial information for further explanation.
5 Before allowing for the 2020 second interim ordinary dividend. The 2020 surplus has been restated so it is on a consistent basis as the position stated at 30 June 2021, which applies the GWS Framework. Under the GWS Framework, all debt instruments (senior and subordinated) issued by Prudential plc at the date of designation meet the transitional conditions set by the Hong Kong IA and are included as eligible Group capital resources. This has increased eligible capital resources by $1.6 billion compared to the LCSM basis. Other increases in the first half of 2021 largely reflect $0.8 billion of operating capital generation from the in-force business.
6 As at close on 5 August 2021.
7 GWS coverage ratio of capital resources over Group minimum capital requirement attributable to shareholder business. Shareholder business excludes the capital resources and minimum capital requirement of participating business in Hong Kong, Singapore and Malaysia. Under the GWS Framework, all central debt instruments (senior and subordinated) held at 14 May 2021, meet the transitional conditions set by the Hong Kong IA and are included as capital resources.
8 Estimated Group shareholder excluding Jackson GWS capital position at 30 June 2021 before allowing for the impact of the 2021 first interim dividend.
9 The Group shareholder excluding Jackson GWS capital position is presented before including the value of the proposed retained 19.7 per cent non-controlling economic interest in US operations. This retained interest is expected to be included in the Group GWS capital resources valued at 60 per cent of the market value.
10 APE sales involving Pulse are sales completed by agents on leads from digital campaigns captured within the Pulse customer management system or on leads from Pulse registrations, together with a small number of policies purchased via Pulse online.
11 On a constant exchange rate basis.
12 New business profit, on a post-tax basis, on business sold in the period, calculated in accordance with EEV Principles.
13 Operating free surplus generated from insurance and asset management operations before restructuring costs. For insurance operations, operating 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 operating profit for the period. Further information is set out in ‘movement in Group free surplus’ of the EEV basis results.
14 IFRS profit after tax from continuing operations reflects the combined effects of operating results determined on the basis of longer-term investment returns, together with short-term investment variances, which for the first half of 2021 were driven largely by the movements in interest rates and equity markets in Asia, and other corporate transactions.
15 Number of branches as at 30 June 2021.
16 Number of agents as at 30 June 2021 and includes India.
17 Debt not denominated in USD is translated using exchange rates as at 31 December 2020 for the purposes of grandfathering.

Contact:

Media   Investors/Analysts  
Tom Willetts +44 (0)20 3977 9760 Patrick Bowes +44 (0)20 3977 9702
Addy Frederick +44 (0)20 3977 9399 William Elderkin +44 (0)20 3977 9215
Tan Ping Ping +65 9654 8954    

Notes to Editors:

a.

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 issued by the European Insurance CFO Forum in 2016. 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. The IFRS and EEV results are presented in US dollars and the basis of translation is discussed in note A1 of the IFRS financial statements. Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates 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.

b.

EEV and adjusted IFRS operating profit for continuing operations is based on longer-term investment returns and is stated after excluding the effect of short-term fluctuations in investment returns against long-term assumptions, which for IFRS in half year 2021 were driven largely by the movements in interest rates and equity markets in Asia, and other corporate transactions. 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, adjusted operating profit also excludes amortisation of acquisition accounting adjustments.

c. Total number of Prudential plc shares in issue as at 30 June 2021 was 2,615,611,541.
d.

We expect to announce our 2021 Half Year Results to the London Stock Exchange at 9.30am UK time – 4.30pm HKT – 4.30am EST on Wednesday, 11 August 2021.

A pre-recorded presentation for analysts and investors will be available on-demand from 9.30am UK time – 4.30pm HKT – 4.30am EST using the following link: https://www.investis-live.com/prudential/60f55d0380fc9310005f3034/2021hy  A copy of the script used in the recorded video will also be available from 9.30am UK time – 4.30pm HKT – 4.30am EST on 11 August 2021 on the Prudential plc's website.

A Q&A call for analysts and investors will be held on the same day at 11.30am UK time – 6.30pm HKT – 6.30am EST.

Registration to a "listen in" only and online question facility
To register to listen into the conference call and submit questions online, please do so via the following link: https://www.investis-live.com/prudential/60f55d142527a9160063c654/21hyqa The call will be available to replay afterwards using the same link.

Dial-in details
A dial-in facility will be available to listen to the call and ask questions: please allow 15 minutes ahead of the start time to join the call (lines open half an hour before the call is due to start, ie from 11.00am UK time – 6.00pm HKT – 6.00am EST).

Dial-in: +44 (0) 20 3936 2999 (UK and international) / 580 33 413 (HK) / 010 5387 5828 (China), Toll free: 0800 640 6441 (UK) / 800 908 350 (HK), Participant access code: 143518. Once participants have entered this code their name and company details will be taken.

Transcript
Following the call a transcript will be published on the results centre page of Prudential plc's website on 13 August 2021.

Playback facility
Please use the following for a playback facility: +44 (0) 20 3936 3001 (UK and international), replay code 259667. This will be available from approximately 3.00pm UK time – 10.00pm HKT – 10.00am EST on 11 August until 11.59 pm UK time – 6.59pm EST on 25 August 2021 / 06.59am HKT on 26 August 2021.

e.

2021 First interim ordinary dividend

Ex-dividend date 19 August 2021 (UK, Hong Kong and Singapore)
Record date 20 August 2021

Payment of dividend

28 September 2021 (UK, Hong Kong and ADR holders)
On or around 5 October 2021 (Singapore)
f.

About Prudential plc
Prudential plc provides life and health insurance and asset management, with a focus on Asia and Africa. The business helps people get the most out of life, by making healthcare affordable and accessible and by promoting financial inclusion. Prudential protects people’s wealth, helps them grow their assets, and empowers them to save for their goals. The business has more than 17 million life customers in Asia and Africa and is listed on stock exchanges in London, Hong Kong, Singapore and New York. Prudential is not affiliated in any manner with Prudential Financial, Inc. a company whose principal place of business is in the United States of America, nor with The Prudential Assurance Company Limited, a subsidiary of M&G plc, a company incorporated in the United Kingdom.

g.

Discontinued operations
Throughout this results announcement ‘discontinued operations’ refers to the US operations (referred to as Jackson). All amounts presented refer to continuing operations unless otherwise stated, which reflect the Group following the proposed demerger of Jackson.

h.

Forward-Looking Statements
This announcement may contain 'forward-looking statements' with respect to certain of Prudential's plans and its goals and expectations relating to its and Jackson’s 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 and Jackson’s actual future financial condition or performance or other indicated results of the entity referred to in any forward-looking statement to differ materially from those indicated in such forward-looking statement. Such factors include, but are not limited to, the ability to complete the proposed demerger of Jackson Financial Inc. on the anticipated timeframe or at all; the realisation of anticipated benefits of the proposed demerger of Jackson; the ability of the management of Jackson Financial Inc. and its group to deliver on its business plan post-separation; the impact of the current Covid-19 pandemic, including adverse financial market and liquidity impacts, responses and actions taken by governments, regulators and supervisors, the impact to sales, claims and assumptions and increased product lapses, disruption to Prudential’s operations (and those of its suppliers and partners), risks associated with new sales processes and information security risks; future market conditions, including fluctuations in interest rates and exchange rates, the potential for a sustained low-interest rate environment, and the impact of economic uncertainty, asset valuation impacts from the transition to a lower carbon economy, derivative instruments not effectively hedging exposures arising from product guarantees, inflation, including interest rate rises as a response, and deflation and the performance of financial markets generally; global political uncertainties, including the potential for increased friction in cross-border trade and the exercise of executive powers to restrict trade, financial transactions, capital movements and/or investment; the policies and actions of regulatory authorities, including, in particular, the policies and actions of the Hong Kong Insurance Authority, as Prudential's Group-wide supervisor, as well as new government initiatives generally; given its designation as an Internationally Active Insurance Group (“IAIG”), the impact on Prudential of systemic risk and other group supervision policy standards adopted by the International Association of Insurance Supervisors; the impact of competition and fast-paced technological change; the effect on Prudential's business and results from, in particular, mortality and morbidity trends, lapse rates and policy renewal rates; the physical, social and financial impacts of climate change and global health crises on Prudential's business and operations; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; the impact of internal transformation projects and other strategic actions failing to meet their objectives; the effectiveness of reinsurance for Prudential’s businesses; the risk that Prudential's operational resilience (or that of its suppliers and partners) may prove to be inadequate, including in relation to operational disruption due to external events; disruption to the availability, confidentiality or integrity of Prudential's information technology, digital systems and data (or those of its suppliers and partners); any ongoing impact on Prudential of the demerger of M&G plc and, if and when completed, the demerger of Jackson Financial Inc.; 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; the impact of legal and regulatory actions, investigations and disputes; and the impact of not adequately responding to environmental, social and governance issues. 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 of the entity referred to in any forward-looking statements to differ, possibly materially, from those anticipated in Prudential's forward-looking statements can be found under the 'Risk Factors' heading of this document.

Any forward-looking statements contained in this announcement 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 announcement 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.

i. Cautionary Statements
This announcement does not constitute or form part of any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to purchase, acquire, subscribe for, sell or dispose of, any securities in any jurisdiction nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor.

Jackson National Life Insurance Company

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Prudential plc is an international company incorporated in the United Kingdom, and its affiliated companies constitute one of the world’s leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world, and it has been in existence for over 170 years. 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, or the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).

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Prudential plc is an international company incorporated in the United Kingdom, and its affiliated companies constitute one of the world’s leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world, and it has been in existence for over 170 years. 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, or the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).

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