27 Jul 2004

Prudential plc 2004 Interim Results

Strong start to the year across the Group

  • Sales up 13 per cent, achieved basis operating profit up 55 per cent and statutory profit up 83 per cent
  • Strong performances from all businesses:
    • UK’s strengthened distribution and product mix produces 15 per cent sales growth
    • M&G’s underlying profits up 55 per cent
    • Jackson National Life delivers profitable growth while focusing on returning cash to the Group
    • New business achieved profits in Asia up 23 per cent on the first half of 2003
  • Interim dividend of 5.4 pence

Comparisons throughout this release are quoted at constant exchange rates (CER)

Results Summary 2004 H1 2003 H1
£m £m %
Total Group annual premium equivalent sales 853 757 13
New business achieved profits 305 279 9
Achieved basis operating profit 563 364 55
Modified statutory basis operating profit 304 166 83
Total Group funds under management 170bn 157bn 8
Interim dividend per share 5.4p 5.3p 1.9
Shareholders’ funds – achieved profit basis 7.2bn 6.7bn 8

Commenting on the results, Jonathan Bloomer, Prudential’s Group Chief Executive said:

“Our businesses across the group are firing on all cylinders and our markets in the UK, US and Asia present great opportunities for us.

“In the first half, we worked hard to build distribution and drive sales and profits. This led to pleasing performances from all our businesses.

“We enter the second half of 2004 with a strong mix of complementary businesses, which are well placed to meet the growing needs of our 16 million customers across the world, and in doing so, deliver improving returns to our shareholders.

UK insurance operations

“The UK business has delivered a strong performance, with sales up by 15 per cent. Margins were lower as we shifted the balance towards writing more unit-linked rather than with-profits business. This led to an overall increase in new business achieved profits of two per cent.

“The work done to strengthen our distribution channels is paying off, with increased sales through intermediaries, business to business and partnerships. In April we were appointed to the Sesame multi-tie panel, which will give us access to around a quarter of all Independent Financial Advisers in the UK. We expect to announce further panel appointments later in the year. We already have partnership agreements with Zurich, Lloyds TSB and Alliance & Leicester, and earlier this month announced a new partnership with Pearl to sell Prudential annuities to their personal pension customers.

“We also continue to introduce new products. We are currently launching an investment bond (PruFund) to IFAs, with the customer launch planned for September. PruFund, backed by the strength of our £57 billion life fund, is rated low to medium risk and is designed to deliver higher returns than deposit accounts. This will be followed by a health insurance product from a joint venture with Discovery, which will aggressively challenge the existing players in the market.

“Uncertainty over the regulatory and economic environment, combined with low consumer confidence led us to be cautious about prospects for the UK in the first half of the year. However, we believe we are now moving into a more positive phase, where the government has provided greater clarity on price caps and distribution, and there are some signs of returning consumer confidence. We are well placed to build on this.

“In particular, the improvements in our distribution and products will ensure that we benefit as the UK moves to a multi-tie model, where distributors will rely increasingly on a few strong providers such as Prudential to meet all their customers’ needs.

M&G

“M&G had a tremendous first half, with underlying profit growing by 55 per cent. This reflects our ability to capture the benefits of higher equity markets, as well as tightly controlled costs and continued development of new business initiatives.

“In our retail businesses, we have increased sales by 31 per cent as a result of M&G’s strong brand, broad distribution and choice of funds across fixed income, equities and, most recently, property.

“The fixed interest business has grown its profits by accessing new markets, such as private finance, and distributing innovative products with high quality earnings streams.

“We believe that M&G will remain a significant contributor of profits and capital to the group.

Egg

“Egg continued to make good progress in the UK, delivering a £35 million profit in the first half, and winning 292,000 new customers, bringing its total number of customers to almost 3.5 million. While the Egg Group made a profit of £1 million in the second quarter, it made a £4 million loss for the period. Earlier this month, Egg announced that it had begun to take the necessary steps to withdraw from the French market and will now focus on its successful UK business. We have been in discussions with various parties about our 79 per cent shareholding in Egg which may or may not lead to a transaction and these discussions continue.

Jackson National Life

“Jackson National Life (JNL) had an excellent first half, with sales up by nine per cent and statutory operating profit up by 50 per cent, reflecting the emphasis it places on profitability as well as volumes.

“The company’s strong product mix, distribution model and IT capability allow us to respond quickly to changing customer needs across the economic cycle. During the first half of 2004, this meant that lower demand for fixed annuity products (as a result of low US interest rates) was offset by a 25 per cent increase in sales of variable annuities and strong growth in institutional products.

“During the first half, JNL also continued to actively and successfully manage its capital position and this, combined with the strong growth in earnings, means that, in addition to financing its own expansion, we expect it to be able to return $120 million cash to the group this year and in future years.

“JNL is in a strong position to maintain its current level of retail sales throughout the second half of the year.

Prudential Corporation Asia

“Prudential Corporation Asia is a major force across the region. It is the largest European insurer in Asia, with 23 businesses in 12 countries. Our long-term commitment to the region has helped us to achieve the very strong presence we have today. We have a portfolio of licences, which are difficult for others to replicate and a strong multi-channel distribution network.

“In the first half of the year we continued to focus on profitable growth, with new business achieved profit up by 23 per cent on the first half of 2003.

“Insurance sales were up 12 per cent in the first half, driven up by a 21 per cent increase in the second quarter compared with the same period last year. We expect to see this momentum continue through the rest of the year.

“Asia’s results reflect the diversity of our operations across the region. In our newer operations in Korea and India sales were up by around 200 per cent, while in China, where sales in Beijing started this year, sales grew by over 50 per cent. In established markets we have seen a very good performance from Hong Kong, steady progress in Singapore and a good rebound in Malaysia in the second quarter. Meanwhile sales in Taiwan were flat and lower in Japan, as we move our focus towards more profitable products and channels.

“We have now reached a size and maturity in our Asian operations to start reaping the benefits of scale - taking the best of our IT, product and distribution developments and building on them. We are strongly placed to take advantage of Asia’s growing market for savings and investment products. The business remains on track to return cash to the group in 2006.

Dividend

“The board is recommending an interim dividend of 5.4 pence per share, an increase of 1.9 per cent on the previous half year. As we said previously, we expect to grow the dividend. The level of growth for the full year will be determined after considering opportunities to invest in those areas of our business offering attractive growth prospects, our financial flexibility and the development of statutory profits over the medium to long-term.

Outlook

“We have outstanding businesses in each of our regions: the UK; Asia and the US; all of which have considerable opportunities to grow.

“In the UK, we stand to be a clear beneficiary as the market concentrates towards those financially strong companies with a broad product range and diversified distribution. In the US, we have a business that is generating high returns, and is able to fund its own expansion, as well as return cash to the group; while in Asia, we are now an established force in one of the fastest growing regions of the world, with the ability to deliver continued strong growth.

“I am confident that we can take advantage of and build on these opportunities around the world.”

- ENDS -

Enquiries to:

Media Investors/Analysts
Geraldine Davies 020 7548 3911 Rebecca Burrows 020 7548 3537
Clare Staley 020 7548 3719 Marina Lee-Steere 020 7548 3511

Notes to Editors:

  1. There will be a conference call today for wire services at 07:45 hosted by Jonathan Bloomer, Group Chief Executive and Philip Broadley, Group Finance Director. Dial in telephone number: +44 (0) 20 8288 4530. Participants to quote “Prudential” to access the call.
  2. A presentation to analysts will take place this morning at 09:30 at Prudential plc, Governor’s House, Laurence Pountney Hill, London, EC4R 0HH. An audiocast of the presentation and the presentation slides will be available on the Group's website, www.prudential.co.uk
  3. A press conference will take place this morning at 11:45 at Prudential plc, Governor’s House, Laurence Pountney Hill, London, EC4R 0HH. If journalists wish to attend, please call the Group Press Office in advance, on 020 7548 3712.
  4. There will be a conference call today for investors at 14:30 hosted by Jonathan Bloomer, Group Chief Executive and Philip Broadley, Group Finance Director. Dial in telephone number: +44 (0) 20 7162 0192, US dial-in: +1 334 323 6203. Participants to quote "Prudential" to access the call.
    A recording of this call will be available for replay for one week.
    Dial in: +44 (0) 20 8288 4459, US dial in: +1 334 323 6222, Passcode: 299252.
  5. High resolution photographs are available to the media free of charge at www.newscast.co.uk (+44 (0) 207 608 1000).
  6. An interview with Jonathan Bloomer (in video/audio/text) will be available on www.cantos.com and www.prudential.co.uk from 07:00 on 27 July 2004.
  7. Annual premium equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales.
  8. The Free Asset Ratio is a common measure of financial strength in the UK for long-term insurance business. It is the ratio of assets less liabilities (before deduction of the required regulatory minimum solvency margin) to liabilities, and is expressed as a percentage of liabilities.
  9. Total number of Prudential plc shares in issue as at 30 June 2004 was 2,022,815,445.
  10. Financial Calendar:
    2004
    Ex-dividend date Wednesday 18 August
    Record date Friday 20 August
    Third quarter New Business Figures Tuesday 19 October
    Payment of 2004 interim dividend Friday 29 October
    2005
    Full Year New Business Figures Wednesday 26 January
    2004 Preliminary Results Wednesday 2 March
    First quarter New Business Figures Wednesday 20 April
  11. In addition to the interim financial statements provided with this press release, additional financial schedules are available on the website at www.prudential.co.uk
Forward-Looking Statements

This statement may contain certain “forward-looking statements” with respect to certain of Prudential's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “seeks” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Prudential's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Prudential's actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in Prudential's forward-looking statements. Prudential undertakes no obligation to update the forward-looking statements contained in this statement or any other forward-looking statements it may make.

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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).