01 Mar 2010

Prudential plc Full Year 2009 Unaudited Results

Note: On 8 March 2010, the Company's auditor, KPMG Audit Plc, delivered an unqualified report on the Company's financial statements for the year ended 31 December 2009. The results within these financial statements are unchanged from those published on 1 March 2010.

PRUDENTIAL'S STRATEGY DELIVERS RECORD PERFORMANCE

Embedded Value:

  • New business profit of £1,607 million up 34%*
  • Operating profit based on longer-term investment returns of £3,090 million up 8%*
  • Shareholders’ funds of £15.3 billion, equivalent to 603 pence per share

IFRS:

  • Operating profit based on longer-term investment returns of £1,405 million up 10%*
  • Operating profit after tax covers full year dividend 2.2 times
  • Shareholders’ funds of £6.3 billion (2008: £5.1 billion)

New Business:

  • Total APE sales of £2,896 million up 1%*
  • Retail APE sales of £2,890 million up 11%*
  • EEV new business profit margin (% APE) of 56% (2008: 42%)*
  • Free surplus – investment in new business - of £675 million down 16 per cent*

Capital & Dividend:

  • Management action strengthened Insurance Groups Directive (“IGD”) capital surplus, estimated at £3.4 billion, £1.9 billion higher than at the end of 2008 (£1.5 billion)
  • 2009 full year dividend increased by 5% to 19.85 pence per share

Prudential separately announced today that it has reached an agreement with American International Group Inc. (“AIG”), on terms for the combination of Prudential and AIA Group Limited ("AIA"), a wholly-owned subsidiary of AIG.

Commenting on the full year results, Tidjane Thiam, Group Chief Executive said:

“These results represent an outstanding performance against a backdrop of unprecedented economic uncertainty, demonstrating the success of our strategy to focus on value over volume and capitalise on the most profitable growth opportunities in our chosen markets around the world. In 2009, we achieved record total sales for the Group, with total APE sales of £2,896 million, up 1 per cent (2008: £2,879 million) and importantly, retail sales up 11 per cent to £2,890 million (2008: £2,615 million). The fourth quarter 2009 saw a significant increase in our sales, up 25 per cent on the third quarter 2009 driven by the performance of our business in Asia.

Compared with the same period in 2008, our Group EEV new business profit was up 34 per cent to £1,607 million and total EEV operating profit based on longer-term investment returns was up 8 per cent to £3,090 million. Our IFRS operating profit based on longer-term investment returns was up 10 per cent to £1,405 million. Average Group new business profit margin, as a percentage of APE, increased to 56 per cent (2008: 42 per cent). Free surplus investment in new business was 16 per cent lower at £675 million (2008: £806 million). Therefore, we achieved higher profits while consuming less capital, highlighting our ability to allocate capital to markets and products which produce the highest returns.

Our performance has been delivered while taking a disciplined approach to risk management and targeted Group-wide actions to grow and protect our capital, consolidating our position as one of the best capitalised insurers in the world. Our estimated IGD surplus was £3.4 billion at 31 December 2009, an increase of £1.9 billion versus 31 December 2008. This capital strength underpins our ability to exploit growth opportunities.

Asia is the engine of the Group’s future growth, particularly the fast growing economies in South East Asia. The fourth quarter 2009 saw record sales in Asia, up 42 per cent from the third quarter 2009, as the recovery took hold. In 2009, total APE sales were £1,261 million (2008: £1,216 million). New business profit in Asia was up 12 per cent to £713 million (2008: £634 million) meaning that despite the most challenging of environments, we have exceeded our target to double 2005 new business profits by the end of 2009. IFRS operating profit was up by 62 per cent to £416 million (2008: £257 million) reflecting the increasing maturity of this business and a one off credit of £63 million for our Malaysian operations.

In the US, Jackson APE sales were £912 million, up 27 per cent (2008: £716 million) as the business continued to benefit from a flight to quality in the US annuity market. Jackson has continued to implement the strategy of targeting increasing volumes of relatively less capital-intensive variable annuity sales, higher fixed index annuity sales and contained fixed annuity sales. As a result, Jackson was ranked 4th in total annuity sales in the first nine months of 2009, up from 11th at the end of 2008. Our focused approach to this market has seen our new business margins increase from 41 per cent to 73 per cent in 2009.

At Prudential UK, our strategy remained to rigorously focus on balancing new business, with cash and capital preservation while maintaining margins. APE sales were £723 million, down 24 per cent (2008: £947 million) but Retail APE sales were £717 million, down 11 per cent (2008: £803 million). New business margins increased 3 percentage points to 32 per cent in 2009 versus 2008. This reflects our decision to focus on value over volume, leading to significantly lower wholesale annuity business, individual annuities and corporate pensions, partially offset by higher sales of with-profit bonds. Our strategy allows us to generate surplus capital for investment in more profitable opportunities for the Group. The UK business remains key to the future delivery of the Group’s overall aim of generating sustainable, increased shareholder value.

Our asset management businesses saw strong inflows over the year as our record of generating superior investment performance attracted funds in a turbulent market environment. At M&G, net investment flows reached a record £13.5 billion, a 296 per cent increase versus 2008. The total funds under management at 31 December 2009 were £174 billion. M&G IFRS operating profit was £238 million, 17 per cent lower than 2008, primarily due to a lower FTSE All Share index in 2009. In Asia, asset management total funds under management were £42 billion, up 22 per cent and IFRS profit was 6 per cent higher at £55 million (2008: £52 million).

At the start of 2009 we were positioned defensively, but in 2010 we will accelerate and amplify our proven strategy to capitalise on the most profitable growth opportunities in our chosen markets supported by our strong capital position. Our remarkable results in Asia and the exceptional performances of Jackson and M&G, have allowed us to differentiate ourselves during 2009. The UK remains the bedrock of our expansion in our other business units. That strategy has served us well and will continue to serve us well in 2010 as Asia continues to grow faster than the rest of the world and as other economies progressively recover.”

Commenting specifically on the agreement with AIG, Tidjane Thiam said:

“With this agreement we have a unique opportunity to create the leading pan-Asian life insurer. The combination of Prudential and AIA will create a sector powerhouse in the fastest growing markets in the world. This agreement provides Prudential with a one-off opportunity to transform the growth profile of the Group and offers long-term material benefits to our shareholders. Both parties are committed to a smooth transition process including the commitment to the strong AIA brand and the unique strengths of the sales forces. The combined business will be the largest life insurer in seven major Asian countries, allowing us to continue to create shareholder value through our presence in the world’s most dynamic and attractive markets.”

ENDS

* 2008 comparatives are at actual exchange rates (AER). In order to facilitate comparisons for the Group’s current business amounts shown for 2009 and 2008, new business and profit related KPIs exclude those of the Taiwan agency business for which the sale process was completed in June 2009.

Enquiries:

Media

 

Investors/Analysts

 

Edward Brewster

+44 (0)20 7548 3719

Matt Lilley

+44 (0)20 7548 2007

Robin Tozer

+44 (0)20 7548 2776

Jessica Stalley

+44 (0)20 7548 3511

Sunita Patel

+44 (0)20 7548 2466

 

 

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 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 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. Where appropriate the EEV basis results include the effects of IFRS.
    Period on period percentage increases are stated on an actual exchange rate basis.

  2. Annual premium equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales.

  3. Present value of new business premiums (PVNBP) are calculated as equalling single premiums plus the present value of expected new business premiums of regular premium business, allowing for lapses and other assumptions made in determining the EEV new business contribution.

  4. Operating profits are 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 shareholders' share of actuarial and other gains and losses on defined benefit pension schemes, and the effect of disposal and results of the Taiwan agency business, for which the sale process was completed in June 2009. In addition for EEV basis results, operating profit excludes the effect of changes in economic assumptions and the time value of cost of options and guarantees, and the market value movement on core borrowings.

  5. There will be a conference call today for wire services at 10.00am (GMT) hosted by Tidjane Thiam, Group Chief Executive. Dial in telephone number: +44 (0)20 8817 9301 Passcode:  2519535.

  6. A presentation to analysts will take place at 12.00pm (GMT) at Governor’s House, Laurence Pountney Hill, London, EC4R 0HH. Dial in telephone number: +44 (0)208 817 9301 Passcode: 2486527.  An audio cast of the presentation and the presentation slides will be available on the Group’s website, www.prudential.co.uk/prudential-plc/

  7. High resolution photographs are available to the media free of charge at www.newscast.co.uk on +44 (0)207 8886 5895 or by calling Sunita Patel on +44 (0)20 7548 2466.

  8. Total number of Prudential plc shares in issue as at 31 December 2009 was 2,532,227,471.

  9. Financial Calendar 2010:

    First Quarter Interim Management Statement 14 May 2010
    AGM 19 May 2010
    2010 Half Year Results and Second Quarter 2010 New Business Figures 12 August 2010
    Third Quarter 2010 Interim Management Statement 10 November 2010
       
    2009 Full Year Dividend  
    Ex-dividend date 7 April 2010
    Record date 9 April 2010
    Payment of dividend 27 May 2010
  10. About Prudential plc
    Prudential plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute one of the world's leading financial services groups. It provides insurance and financial services through its subsidiaries and affiliates throughout the world. It has been in existence for over 160 years and has £290 billion in assets under management (as at 31 December 2009). 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, andexpectations 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.

Download the full news release (including Group Chief Executive Review, Business Review, IFRS and EEV Statements)

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).