12 Aug 2013

Prudential plc 2013 Half Year Results

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

STRONG PERFORMANCE WITH FOUR OUT OF SIX 2013 ‘GROWTH AND CASH’ OBJECTIVES NOW ACHIEVED

Performance Highlights:

  • IFRS operating profit1 of £1,415 million, up 22 per cent
  • EEV new business profit of £1,268 million, up 11 per cent
  • Net remittances from business units up 16 per cent to £844 million
  • Jackson IFRS operating profit of £582 million, up 32 per cent
  • M&G delivers record IFRS operating profit of £204 million, up 17 per cent

‘Growth and Cash’ Objectives:

  • Asia IFRS operating profit1,2 of £512 million, up 18 per cent
  • Asia EEV new business profit of £659 million, up 20 per cent
  • Asia net cash remittance of £190 million, up 51 per cent
  • Jackson cash remittance of £294 million exceeds 2013 full-year cash objective of £260 million
  • Cumulative net remittances to Group of £4.1 billion exceed 2013 objective of £3.8 billion

Capital & Dividend:

  • Underlying free surplus generation1 of £1.5 billion (before investment in new business), up 11 per cent
  • EEV shareholders’ funds of £24.5 billion, up 9 per cent3, equivalent to 958 pence per share
  • IFRS shareholders’ funds of £9.6 billion, down 7 per cent3
  • Insurance Groups Directive (IGD) capital surplus4 estimated at £3.9 billion; solvency requirements covered 2.3 times
  • 2013 interim dividend increased by 15.8 per cent to 9.73 pence per share

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

“Prudential has produced a strong performance across our key financial metrics of IFRS operating profit, new business profit and cash during the first six months of 2013. Our focus on meeting the needs of our customers with well-designed products, on executing our strategy with discipline and on managing risk effectively has continued to allow us to deliver profitable growth and to generate increasing levels of cash.

“In 2010, we set ourselves six challenging ‘Growth and Cash’ objectives to be achieved by the end of 2013. At the end of 2012, we had already achieved two of the six 2013 objectives – Asia’s objectives of doubling its 2009 IFRS operating profit and of delivering more than £300 million of net remittances to the Group.

“At the half year stage of the last year in this four-year 2010-2013 programme, we have achieved two more of our objectives:

  • Jackson has exceeded its full year 2013 cash objective of £260 million, delivering £294 million, and
  • The Group has surpassed its four-year cumulative net cash remittance objective of £3.8 billion with £4.1 billion of remittances.

“These results provide further evidence of our ability to deliver both earnings growth and cash. We are on track to achieve the remaining objectives of doubling Asia’s 2009 new business profit by 2013 and delivering over £350 million of net remittances from the UK by the end of the year.

“In Asia, our focus on meeting the needs of the fast-growing middle class of South-east Asia, combined with our allocation of capital prioritised towards regular-premium health and protection business, continued to deliver strong returns and earnings growth. Asia IFRS operating profit1 increased by 18 per cent while new business profit was up 20 per cent. Asia’s cash contribution to the Group in the first six months was £190 million, an increase of 51 per cent, providing further evidence that our growth in the region is now cash-generative.

“In the US, where we are well positioned to benefit from the transition into retirement of the ‘baby-boomer’ generation, Jackson continues to manage sales volumes in line with our risk appetite and has maintained its pricing discipline. Our emphasis remains on driving IFRS operating earnings and cash generation. Elite Access, our variable annuity product without guarantees, has proven popular in the marketplace. Second-quarter APE sales were 35 per cent higher than the first quarter’s sales. Life IFRS operating profit increased by 32 per cent to £582 million, reflecting higher fee income and the benefit of our acquisition of REALIC in September 2012. The US remitted £294 million of cash to the Group, exceeding its 2013 cash remittance objective of £260 million, which was revised upwards at the time of the acquisition of REALIC.

“Our UK life business, which continues to cater to the needs of an ageing British population, delivered IFRS operating profit of £341 million, up 1 per cent. UK industry sales volumes have been affected by the implementation of the conclusions of the Retail Distribution Review. Prudential UK remains focused on its core business of individual annuities and with-profits products. We believe the strength of our products and brand will position us well once distributors have adjusted to the new environment.

“In asset management, all of our operations have continued to focus on delivering superior investment performance for our customers. M&G has delivered a good performance with net retail inflows of £4.8 billion driven by strong new business from Continental Europe. Reflecting these inflows as well as positive market movements, funds under management have increased to £234.3 billion from £203.7 billion at 30 June 2012. This contributed to a 17 per cent increase in IFRS operating profit to £204 million, a record half-year performance. Eastspring Investments, our Asia asset management business, has also performed strongly during the first half, increasing its funds under management to £62 billion, 15 per cent higher than at the same time last year.

“The global economic environment remains uncertain, with continued equity market and interest-rate volatility often driven by short-term news flows, as confidence is still fragile. Despite this, the long-term structural trends of a growing middle class, low insurance penetration and faster relative economic growth underpin our profitable growth in South-east Asia. Our multi-product portfolio, multi-channel distribution platform and our leading position in six out of our 13 Asian markets leave us well placed to capture profitably this unique opportunity. The transition of US ‘baby-boomers’ into retirement and the ageing of the UK population provide us with additional opportunities to generate significant value.

“Our disciplined approach to capital allocation, our diversification by product and geography and our conservative balance sheet management add resilience to the Group. This positions Prudential to perform well through challenging economic conditions, with significant upside as the economic conditions improve. We will continue to implement our long-term strategy in Asia to meet the savings and protection needs of the Asian middle class, the key driver of our sustainable and profitable growth, and to focus on our strengths in the US and UK.

“We look forward to the rest of the year with confidence and remain focused on achieving the 2013 ‘Growth and Cash’ objectives we set in 2010.”

Contact:

Media Investors/Analysts
Jonathan Oliver +44 (0)20 7548 3719 Raghu Hariharan +44 (0)20 7548 2871
Robin Tozer +44 (0)20 7548 2776 Richard Gradidge +44 (0)20 7548 3860

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, gain on dilution of Group holdings and (loss)profit attaching to held for sale Japan Life insurance business. 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. Separately on the IFRS basis, operating profit also excludes amortisation of accounting adjustments on the acquisition of REALIC. In 2013 the group has adopted new accounting standards on consolidated financial statements and joint arrangements, and amendments to the employee benefit accounting standard. The 2012 comparative results have been retrospectively adjusted from those previously published so as to be presented on a consistent basis to 2013.
4. Total number of Prudential plc shares in issue as at 30 June 2013 was 2,559,278,610.
5. There will be a conference call today for media at 10.30am (UK) / 5.30pm (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. UK dial-in telephone number: +44(0)203 139 4830, Hong Kong dial-in telephone number: +852 3068 9834/800 903 645 (Freephone). Passcode: 66746121#.
6. A presentation for analysts and investors will be held today at 11.30am (UK)/ 6.30pm (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:
  http://www.prudential.co.uk/prudential-plc/investors/resultspresentations/resultsday/
  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 11.00am (UK) / 6.00pm (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: 6829838#. This will be available from approximately 2.00pm (UK) / 9.00pm (Hong Kong) on 12 August 2013 until 11.59pm (UK) / 6.59am (Hong Kong) on 25 August 2013.
7. High-resolution photographs are available to the media free of charge at www.prudential.co.uk/prudential-plc/media/media_library
8.
2013 Interim Dividend  
Ex-dividend date 21 August 2013 (UK, Ireland and Singapore)
22 August 2013 (Hong Kong)
Record date 23 August 2013
Payment of dividend 26 September 2013 (UK, Ireland and Hong Kong)
On or about 3 October 2013 (Singapore)
On or about 4 October 2013 (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 165 years and has £427 billion in assets under management (as at 30 June 2013). 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 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 and 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 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 designation as a global systemically important insurer; the impact of competition, economic growth, 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, 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.
 

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 any of 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.

1The 2012 comparative results have been adjusted from those previously published for the retrospective application of the new and amended accounting standards as discussed in note 3 of ‘Notes to Editors’. In addition, following its reclassification to held for sale at 30 June 2013, operating results exclude the result of the Japan Life insurance business. 2012 comparatives have been retrospectively adjusted on a comparable basis.

2Including Eastspring Investments, and after development costs

3Comparable to 31 December 2012

4As disclosed in full year 2012 results, from March 2013 the basis of calculating Jackson’s contribution to the Group’s IGD surplus was changed, further detail can be found in the section ‘C.1 Regulatory capital (IGD)’ of Risk and capital management

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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).