10 Aug 2012

Prudential plc 2012 Half Year Results

Links to supplementary information about this release: PDF
News release and business review
IFRS disclosure
EEV statements
Risk factors

ASIA CONTINUES TO DRIVE PROFITABLE GROWTH, WITH STRONG CASH REMITTANCES FROM ALL BUSINESSES

IFRS1:

  • Operating profit of £1,162 million, up 13 per cent
  • Asia life insurance business operating profit2 of £409 million, up 26 per cent
  • Total profit before tax3 of £1,259 million, up 13 per cent
  • Shareholders’ funds of £9.3 billion, up 8 per cent4

New Business:

  • EEV new business profit of £1,141 million, up 7 per cent
  • Asia EEV new business profit of £547 million, up 18 per cent

Embedded Value:

  • Operating profit of £2,109 million, down 2 per cent, reflecting low-interest rate environment
  • Asia life insurance business operating profit2 of £872 million, up 13 per cent
  • Shareholders’ funds of £20.6 billion, up 5 per cent4, equivalent to 806 pence per share

Capital & Dividend:

  • Strong underlying free surplus generation of £1.4 billion (before investment in new business), unchanged from last year
  • Net remittances from business operations up 5 per cent to £726 million
  • Asia net cash remittance of £126 million, up 20 per cent
  • Insurance Groups Directive (IGD) capital surplus estimated at £4.2 billion; solvency requirements covered 2.7 times
  • 2012 half year dividend increased by 5.7 per cent to 8.4 pence per share

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

“Prudential has produced a strong performance across our key financial metrics during the first six months of 2012 – IFRS, NBP and cash, despite the considerable global macroeconomic challenges. Our track record of profitable growth has continued as we have delivered our highest-ever first half new business profit and IFRS operating profit of £1.14 billion and £1.16 billion respectively. Net cash remittances from our business units to the Group have grown in line with our strategy and we retain one of the strongest capital positions in the sector.

“Asia delivered a 21 per cent rise in IFRS operating profit5 and a 18 per cent rise in new business profit. Importantly, Asia’s cash contribution to the Group was £126 million, an increase of 20 per cent, and evidence that our business in Asia continues to deliver both growth and cash for our shareholders.

“In the US we continue to perform well and Jackson delivered IFRS operating profit of £442 million, a 30 per cent increase from 2011 and a cash contribution to Group of £247 million, lower than 2011 which benefited from an exceptional release of surplus by Jackson. In May, we announced the acquisition of Reassure America Life Insurance Company which increases our scale, diversifies our earnings and enables us to increase by 30 per cent Jackson’s 2013 cash remittance objective from £200 million to £260 million.

“Our UK business has delivered a good performance, with IFRS operating profit remaining flat at £353 million and net cash remittances, slightly lower at £230 million. We continue to focus on the lines of business where we have a clear competitive advantage, namely annuities and with-profits, and are maintaining our selective approach to the bulk annuity market. In the first half of the year we completed a single large bulk annuity contract which contributed £23 million to our new business profit.

“In asset management M&G has delivered a particularly good performance in a difficult investment market, with net inflows of £4.9 billion. Once again, our high-margin retail business continues to be the driver of our strong inflows being the market leader in UK retail net flows for the 14th quarter in a row6.

“In the first half of 2012 we have delivered a good financial performance and continued to make progress towards the ‘Growth and Cash’ objectives we set ourselves for 2013. We remain on track to achieve these objectives despite the challenging macro-economic conditions in which we are operating. Clearly, as a large insurance company with a substantial balance sheet we are not immune to these conditions. However, we manage our business so that it is resilient in times of economic and financial market stress, and our track record through the crisis is evidence of this. Our balance sheet remains defensively positioned and we continue to capitalise on the long-term growth opportunities available to us.

“Those opportunities are most evident in South-east Asia, where the depth and breadth of Prudential’s franchise is a source of strength. Long-term savings and protection businesses such as ours are playing an integral role in the economic and social transformation that has only just started to take place, and will deliver growth for many years to come, long after the current worries that beset the global economy have passed. For this reason, we remain confident in our ability to grow earnings over the long-term while continuing to create value for our shareholders.”

Contact:

Media   Investors/Analysts  
Jonathan Oliver +44 (0)20 7548 3719 David Collins +44 (0)20 7548 2871
Robin Tozer +44 (0)20 7548 2776 Richard Gradidge +44 (0)20 7548 3860
Harshna Brahmbhatt +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 European Embedded Value principles issued by the CFO Forum of European Insurance Companies in May 2004. 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.

Operating profits are determined on the basis of including longer-term investment returns. EEV and IFRS operating profits are stated after excluding the effect of short-term fluctuations in investment returns against long-term assumptions and the shareholders' share of actuarial and other gains and losses on defined benefit pension schemes and, in 2012, gains on dilution of Group’s holdings. In addition, 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. As previously reported in our 2011 Annual Report, in 2012 the Group as an accounting policy improvement, adopted altered US GAAP requirements for deferred acquisition costs for certain businesses in our Group IFRS results. Accordingly, the 2011 comparative results have been adjusted from those previously published for the retrospective application of the improvement as if the new accounting policy had always applied. 

4.

Total number of Prudential plc shares in issue as at 30 June 2012 was 2,556,248,898.

5.

There will be a conference call today for media at 10.15 (UK) / 17.15 (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. UK dial-in telephone number: +44 (0)20 3140 0668 / 0800 368 1950 (Freephone UK), Hong Kong dial-in telephone number: 800 905 280. Passcode: 188085#.

6.

A presentation for analysts and investors will be held today at 12.00 (UK)/19.00 (Hong Kong) in the Conference Centre of UBS, 1 Finsbury Avenue, London EC2M 2PP. The presentation will be webcast live and as a replay on the corporate website via the link below:

www.prudential.co.uk/prudential-plc/investors/resultspresentations/resultsday/

A dial-in facility will be available to listen to the presentation and to allow analysts and investors to ask questions at the end of 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 11.30 (UK) 18.30 (Hong Kong)). Dial-in: +44 (0)20 3059 8125 / 0800 368 0649 (Freephone UK). Passcode: Prudential. Playback: +44 (0)121 260 4861, Passcode: 3078190#. This will be available from approximately 14.45 (UK) 21.45 (Hong Kong) on 10 August 2012 until 23.59 (UK) 06.59 (Hong Kong) on 17 August 2012.

A copy of this announcement can be found at www.prudential.co.uk/prudential-plc/media

7.

High-resolution photographs are available to the media free of charge at www.prudential.co.uk/prudential-plc/media/media_library

8.

2012 Interim Dividend  
Ex-dividend date 22 August 2012 (UK, Ireland and Singapore shareholders)
23 August 2012 (Hong Kong shareholders)
Record date 24 August 2012
Payment of dividend 27 September 2012 (UK, Ireland and Hong Kong shareholders)
On or about 4 October 2012 (Singapore shareholders)
On or about 5 October 2012 (ADR holders)

9.

About Prudential plc
Prudential plc is incorporated in England and Wales, 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 £363 billion in assets under management (as at 30 June 2012). 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.  

10.

Forward-Looking Statements
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, 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, fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, including, for example, new government initiatives related to the financial crisis and the effect of the European Union's ‘Solvency II’ requirements on Prudential's capital maintenance requirements; 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; the impact of changes in capital, solvency standards or accounting standards, 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.

Any forward-looking statements contained in this document speak only as of the date on which they are made. Prudential expressly disclaims any obligation to update the forward-looking statements contained in this document 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.

1 Comparatives adjusted for retrospective application of the accounting policy improvement for deferred acquisition costs as discussed in Note 3 of Notes to Editors.

2 Excluding Eastspring Investments, development costs and Asia regional head office expenses.

3 Attributable to shareholders.

4 Comparable to 31 December 2011.

5 Total Asia operating profit from long-term business and Eastspring Investments after development costs.

6 Source: Fundscape. (Q1 issue, May 2012). The Pridham Report, Fundscape LLP

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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).