27 Jul 2005

Prudential plc 2005 Interim Results

  • New business APE of £1,129 million, up 34% on first half 2004
  • New business achieved profit of £413 million, up 37%, with Group margin of 37% (HY2004: 36%)
  • Total achieved profit from continuing operations of £834 million, up 31% on first half 2004
  • Total statutory profit from continuing operations of £469 million, up 25% on first half 2004
  • Achieved profit shareholders' funds of £9.3 billion (end 2004: £8.8 billion)
  • Interim dividend of 5.3 pence per share (HY2004: 5.19 pence per share)

Commenting, Mark Tucker, Group Chief Executive said:

"These results demonstrate the Group is performing well. We have delivered double-digit sales growth in all our markets, while maintaining margins at a Group level. We are taking advantage of our strong presence across the diverse markets in which we operate.

"My priority is to maintain our focus on delivery of superior performance, enhancement of earnings and capital efficiency in order to make the most of these opportunities.

"As you would expect, I am actively reviewing longer-term trends and opportunities in order to anticipate the changing needs of our customers. This attention to the longer-term will help ensure that the actions we take today lay the foundations for an even stronger position for Prudential in the future. I will talk more about our evolving thinking with our third quarter new business figures in October.

"We face a number of challenges, but we remain confident of achieving the growth and return targets we have set out across each of our businesses and we are optimistic about prospects in the longer term."

Operational highlights:
Prudential's UK and Europe insurance operations are making good progress with sales of £541 million on an APE basis, 50% ahead of last year, including the Phoenix Life & Pensions Limited transaction, which increased APE sales by £145 million in the period. Excluding this transaction, sales growth was 10% compared to an estimated market growth of 2-3%; and the primary drivers of growth were strong sales of unit-linked bonds (up 100%), individual annuities (up 12%) and bulk annuities (up 67%). The internal rate of return on new business written in the first half was 13%, moving towards our target of 14% by the end of 2007. New business margin was 30%, although some reduction from the 2004 year-end level is still expected for the full year 2005 due to changing product mix as Prudential UK builds its shareholder-backed business.

In the US, sales increased by 18% on an APE basis with margins improving to 37% (HY 2004:34%) as a result of improved profitability from both variable annuities and Guaranteed Investment Contracts (GICs). The acquisition of Life of Georgia was completed in May and the integration of that business remains on track to be completed by the end of 2005. Jackson is a low-cost high quality operator that has shown an ability to innovate in the US market and deliver cash back to the Group.

In Asia, sales growth in the first half of the year was 26% on an APE basis, with particularly strong growth in Korea, India, Indonesia, Malaysia and China. The new business margin was lower at 49% (full year 2004: 54%) primarily due to a combination of changes in country and product mix. In July we announced our 9th and 10th licences in China, further strengthening our presence in this exciting market. Trading conditions in Japan remain tough and we have taken the decision to impair goodwill in our life insurance business by £95 million in these results.

M&G enjoyed a strong start to the year with net investment in-flows of £1.7 billion and growth in underlying profit of 15% to £68 million. Total profit for the period was £83 million.

Egg's first half profit from the core UK business was £13 million after charging £10 million for restructuring costs. We remain focused on optimising the performance of the Egg business and the value of the Group's investment for Prudential's shareholders.

We continue to look to improve capital efficiency and earlier in July we took advantage of good market conditions in the US retail market to raise $300 million of perpetual subordinated capital securities, which will qualify as Group regulatory capital. The primary use of the proceeds will be to re-finance our outstanding non-qualifying £150 million bond maturing in 2007.

ENDS

Enquiries to:
Media Investors / analysts
Jon Bunn 020 7548 3559 James Matthews 020 7548 3561
William Baldwin-Charles 020 7548 3719 Marina Novis 020 7548 3511
Joanne Davidson 020 7548 3708

Notes to Editors

  1. The comparative International Financial Reporting Standards results are prepared on a "proforma" basis which reflects the estimated effect on the 2004 results as if IAS 32, IAS 39 and IFRS 4 had been applied from 1 January 2004 to the Group's insurance operations together with the discretionary change for the basis of determining longer-term investment returns, as disclosed on 2 June 2005.

    Achieved profits basis results have been restated for the consequential impact of the adoption of International Financial Reporting Standards at 1 January 2004 together with the discretionary change for the basis of determining longer-term investment returns, as disclosed on 2 June 2005.

    The 2004 interim dividend per share has been restated to reflect the bonus element of the October 2004 rights issue.

    Period on period percentage increases are stated on a constant exchange rate basis.

  2. There will be a conference call today for wire services at 7.45am (BST) hosted by Mark Tucker, Group Chief Executive and Philip Broadley, Group Finance Director. Dial in telephone number: 0800 358 2705. Passcode: 155439#.
  3. A presentation to analysts will take place at 9.30am (BST) at Governor's House, Laurence Pountney Hill, London, EC4R 0HH. An audio cast of the presentation and the presentation slides will be available on the Group's website, www.prudential.co.uk.
  4. There will be a conference call for investors and analysts at 2.30pm (BST) hosted by Mark Tucker, Group Chief Executive and Philip Broadley, Group Finance Director. Please call from the UK +44 (0)20 8609 0205 and from the US +1 866 793 4279. Pin number 487687#. A recording of this call will be available for replay for one week by dialling: +44 (0)20 8609 0289 from the UK or +1 866 676 5865 from the US. The conference reference number is 129574.
  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 Mark Tucker, Group Chief Executive, (in video/audio/text) will be available on www.cantos.com and www.prudential.co.uk from 7.05am on 27th July 2005.
  7. Annual premium equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales.
  8. New business achieved profits represent the present value of the future cash flows we expect to receive from new business written in the year, less the costs of acquiring that new business and the cost of holding the capital required to back it.
  9. Total number of Prudential plc shares in issue as at 30th June 2005 was 2,383,761,711.
  10. Financial Calendar 2005:
    Ex-dividend date Wednesday 17 August 2005
    Record date Friday 19 August 2005
    Q3 new business figures Wednesday 26 October 2005
    Payment of interim dividend Friday 28 October 2005
  11. In addition to the financial statements provided with this press release, additional financial schedules are available on the Group's website at www.prudential.co.uk

*Prudential plc, a company incorporated and with its principal place of business 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. It has been in existence for over 150 years and has £187 billion in assets under management, (as at 31December 2004). 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.

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.

Jackson National Life Insurance Company

Prudential

You are about to enter the website of our US affiliate Jackson National Life Insurance Company, an indirect subsidiary of Prudential plc of the United Kingdom.

Proceed to the site

Prudential

If you are looking for an affiliate of Prudential Financial, Inc, whose principal place of business is in the United States of America.

Proceed to the site

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).

PPM America

Prudential

You are about to enter the website of our US affiliate PPM America, an indirect subsidiary of Prudential plc of the United Kingdom.

Proceed to the site

Prudential

If you are looking for an affiliate of Prudential Financial, Inc, whose principal place of business is in the United States of America.

Proceed to the site

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).