13 Mar 2013

Prudential plc 2012 Full Year Results

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

PRUDENTIAL CONTINUES TO DELIVER GROWTH AND CASH AND REBASES DIVIDEND UPWARDS

IFRS1:

  • Operating profit of £2,533 million, up 25 per cent
  • Asia operating profit2 of £988 million, up 26 per cent
  • Total profit before tax3 of £2,810 million, up 54 per cent
  • Shareholders’ funds of £10.4 billion, up 21 per cent

New Business:

  • EEV new business profit of £2,452 million, up 14 per cent
  • Asia EEV new business profit of £1,266 million, up 18 per cent

Embedded Value:

  • Operating profit of £4,321 million, up 9 per cent
  • Asia life insurance business operating profit of £1,960 million, up 11 per cent
  • Shareholders’ funds of £22.4 billion, up 14 per cent, equivalent to 878 pence per share

Capital & Dividend:

  • Underlying free surplus generation of £2.7 billion (before investment in new business), up 6 per cent from 2011
  • Net remittances from business operations up 9 per cent to £1,200 million
  • Asia net cash remittance of £341 million4, up 66 per cent, and for the first time, the largest contributor of cash to the Group
  • Insurance Groups Directive (IGD) capital surplus estimated at £5.1 billion5; solvency requirements covered 3 times
  • 2012 full year dividend increased by 15.9 per cent to 29.19 pence per share

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

“Prudential has produced a strong performance in 2012. Globally, we have around 24 million insurance customers and have continued to provide each of them with products and services that they value highly, delivering on our promise to offer quality savings and protection products. In 2012, we added more than one million new customers in Asia, while in the US we sold more than 200,000 new policies. In the UK, where we have 7 million customers, we are one of the largest providers of annuities and in 2012 we paid £2.9 billion in income to our annuitants. We are widely recognised as the UK’s leading with-profits manager and, during the year, the with-profits fund increased the value of customer policies by more than £2 billion. In total in 2012, our customers around the world have entrusted us with an additional £26 billion6 of their assets to manage.

“The quality of our products, the strength of our multi-channel distribution platform, and our ability to innovate and develop creative solutions to meet our customers’ needs, translate over time into profitable and sustainable growth for the company. Our focus on capital and risk management has allowed us to deliver both growth and cash to shareholders, despite a challenging macroeconomic environment. Our business in Asia has continued to demonstrate the benefits of both its scale and its diversification, by growing strongly on each of our three key performance metrics: new business profit, IFRS operating profit and cash. This performance has been largely driven by our ‘sweet-spot’ markets including Indonesia, Singapore, Malaysia, the Philippines and Thailand. Asia’s net cash remittance of £341 million, an increase of 66 per cent on the prior year, made it, for the first time, the largest contributor of cash to the Group. To put this into context, in 2009 Asia’s net cash remittance was £40 million.

“In 2012, we have exceeded two of our 2013 ‘Growth and Cash’ objectives for Asia. In 2010, I said we would more than double Asia’s 2009 IFRS operating profit from £465 million to £930 million by full year 2013. In fact we have delivered £988 million in 2012. We have also exceeded Asia’s 2013 cash target of £300 million. This highlights the effectiveness of our strategy and the strength of our franchise in the region. We are on track to deliver our remaining four objectives notwithstanding the uncertain global economic environment.

“Across the Group, our key financial metrics have seen good growth – IFRS operating profit is up 25 per cent, new business profit is up 14 per cent and net cash remittances are 9 per cent higher. We have delivered this thanks to our discipline and focus on value over volume. During the year, we have continued to take proactive management action including to make sure that we concentrate our business on products and markets that offer the best returns with the shortest payback periods. For instance, during the third quarter we deliberately slowed down our growth in Korea and Taiwan, and in the US, in the fourth quarter, we took steps to limit sales of guaranteed variable annuities. To ensure we can manage the Group with a focus on value creation, we avoid committing to minimum sales or volume growth targets.

“The US continued to deliver profitable growth with total IFRS operating profit exceeding £1 billion for the first time in 2012. The UK business produced a strong performance in a difficult market helped by increased sales of annuities and with-profits products, ahead of the implementation of the conclusions of the Retail Distribution Review. In asset management, M&G has seen record net investment inflows, allowing it to reach record funds under management and to deliver a record level of IFRS operating profit.

“Although the outlook for global growth has seen some modest improvement in recent months, a high level of uncertainty remains. Like other insurance companies we face the challenge of persistently low long-term interest rates. Our emphasis in recent years on growing our income from activities and products that are less sensitive to interest rates has been beneficial for us. Our balance sheet is strong and remains defensively positioned. In Asia, we have high-quality franchises and market-leading distribution in some of the fastest growing and most profitable markets in the world. We also have market-leading positions in the US and the UK, with a strong asset management proposition. Together, these factors should allow us to continue to deliver relative outperformance.

“We have increased our dividend by 15.9 per cent to 29.19 pence per share. This is the second time in three years we have rebased it upwards. Our approach to growing the dividend demonstrates our confidence in our ability to continue to deliver long-term value for our shareholders.”

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 and expanded by the Additional Guidance on EEV disclosures published in October 2005. Where appropriate the EEV basis results include the effects of IFRS. Year-on-year 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, the shareholders' share of actuarial and other gains and losses on defined benefit pension schemes and gain on dilution of Group holdings. In addition, for EEV basis results, operating profit based on longer-term investment returns excludes the effect of changes in economic assumptions, the mark to market value movement on core borrowings and the gain arising on the acquisition of Reassure America Life Insurance Company (REALIC). Separately on the IFRS basis, operating profit also excludes amortisation of accounting adjustments on the acquisition of REALIC. In 2012 the Group as an accounting policy change 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 change as if the new accounting policy had always applied.
   
4. Total number of Prudential plc shares in issue as at 31 December 2012 was 2,557,242,352.
   
5. There will be a conference call today for media at 9.30am (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: 43171627#.
   
6. A presentation for analysts and investors will be held today at 11.00am (UK)/ 7.00pm (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:
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 10.30am (UK) 6.30pm (Hong Kong)). Dial-in: +44 (0)208 817 9301 / 0800 634 5205 (Freephone UK). Confirmation number (this must be quoted to the operator to gain access to the call): 10183847. Playback: +44 (0)20 7769 6425/+35 3143 64267, Pin: 10183847#. This will be available from approximately 2.45pm (UK) 10.45pm (Hong Kong) on 13 March 2013 until 11.59pm (UK) on 20 March 2013 and until 7.59am (Hong Kong) on 21 March 2013.
   
7. High-resolution photographs are available to the media free of charge at www.prudential.co.uk/prudential-plc/media/media_library
   
8.
2012 Full Year Dividend
Ex-dividend date 27 March 2013 (UK and Ireland shareholders)
28 March 2013 (Hong Kong and Singapore shareholders)
Record date 2 April 2013
Payment of dividend 23 May 2013 (UK, Ireland and Hong Kong shareholders)
On or about 30 May 2013 (Singapore shareholders)
On or about 3 June 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 £405 billion in assets under management (as at 31 December 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 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 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.

1 Comparatives adjusted for retrospective application of the accounting policy change for deferred acquisition costs as discussed in note 3 of ‘Notes to Editors’
2 Including Eastspring Investments, and after development costs
3 Attributable to shareholders
4 Remittances from Asia in 2012 include net remittance of £27 million, representing cash from sale of Group's holding in China Life Insurance Company in Taiwan offset by repayment of funding contingent on future profits of the Hong Kong life insurance operations
5 From March 2013 the basis of calculating Jackson’s contribution to the Group’s IGD surplus will change, further detail can be found in the ‘Capital position, financing and liquidity’ section of the Chief Financial Officer’s Overview
6 Calculated as net flows into policyholder liabilities plus net inflows received by our asset management business in 2012

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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).