09 Mar 2016
Prudential plc 2015 Full Year Results
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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 cent1,2
- 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.”
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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:
||The results in this announcement are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The IFRS basis results form the basis of the Group's statutory financial statements. The supplementary EEV basis results have been prepared in accordance with the European Embedded Value principles (EEV Principles) issued by the CFO Forum of European Insurance Companies in May 2004 and expanded by the Additional Guidance on EEV disclosures published in October 2005. The impact of Solvency II is not reflected in EEV results in line with the guidance issued by the CFO Forum in October 2015. The Group’s EEV basis results are stated on a post-tax basis and, where appropriate, include the effects of IFRS. Year-on-year percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates results are calculated by translating prior year results using the current year foreign exchange rate ie current year average rates for the income statement and current year closing rates for the balance sheet.
||Annual Premium Equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales.
||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, the gain on sale of PruProtect and PruHealth and the costs arising from the domestication of our Hong Kong business. 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 and the cumulative foreign exchange loss on the disposal of the Japan Life business that has been recycled from Other Comprehensive Income on completion of the sale process.
||Total number of Prudential plc shares in issue as at 31 December 2015 was 2,572,454,958.
||A presentation for analysts and investors will be held today at 11:00am (UK)/ 7:00pm (Hong Kong) in the conference suite at Nomura International plc, 1 Angel Lane, London EC4R 3AB. The presentation will be webcast live and as a replay on the corporate website via the link below:
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 10.30am (UK) / 6.30pm (Hong Kong)). Dial-in: +44 (0) 20 3059 8125 / 0800 368 0649 (Freephone UK), Passcode: ‘Prudential’ (this must be quoted to the operator to gain access to the call). Playback: +44 (0) 121 260 4861, Passcode: 124923#. This will be available from approximately 3.00pm (UK) / 11.00pm (Hong Kong) on 9 March 2016 until 11.59pm (UK) on 23 March 2016 / 7.59am (Hong Kong) on 24 March 2016.
||High-resolution photographs are available to the media free of charge at
|2015 Dividend (Second interim ordinary and Special)
||24 March 2016 (UK, Ireland, Hong Kong and Singapore)
||29 March 2016
|Payment of dividend
||20 May 2016 (UK, Ireland and Hong Kong)
On or about 27 May 2016 (Singapore and ADR holders)
||About Prudential plc
Prudential plc and its affiliated companies constitute one of the world's leading financial services groups, serving around 24 million insurance customers and it has £509 billion of assets under management (as at 31 December 2015). 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.
This document 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, 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 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 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 actions 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' heading in this document.
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