10 Mar 2015

Prudential plc 2014 Full Year Results

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Full News release and business review
IFRS disclosure
EEV statements
Risk factors

PRUDENTIAL CONTINUES TO DELIVER STRONG GROWTH IN A CHALLENGING ENVIRONMENT AND REBASES DIVIDEND UPWARDS

Group Performance Highlights (on constant exchange rate basis):

• IFRS operating profit of £3,186 million, up 14 per cent¹
• EEV new business profit² of £2,126 million, up 10 per cent¹
• Underlying free surplus generation³ (after investment in new business) of £2,579 million, up 9 per cent¹
• Net cash remittances from business units up 11 per cent to £1,482 million

Business Units Performance Highlights (on constant exchange rate basis):

• Asia life and asset management IFRS operating profit of £1,140 million, up 17 per cent¹
• Jackson life IFRS operating profit of £1,431 million, up 21 per cent¹
• UK life IFRS operating profit of £752 million, up 7 per cent
• M&G IFRS operating profit of £446 million, up 13 per cent

Capital & Dividend:

• IFRS shareholders’ funds of £11.8 billion, up 22 per cent⁴
• EEV shareholders’ funds of £29.2 billion, up 17 per cent⁴, equivalent to 1,136 pence per share
• Insurance Groups Directive (IGD) capital surplus⁵ estimated at £4.7 billion; solvency requirements covered 2.4 times
• 2014 full year dividend increased by 10 per cent to 36.93 pence per share

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

“The Group delivered a strong performance in 2014. We continued to grow across our key metrics despite the challenges presented by historically low long-term interest rates in the US and the UK, major currency discontinuities in some of our key Asian markets and unprecedented regulatory changes in the UK life market. IFRS operating profit increased 14 per cent to £3,186 million and EEV new business profit grew 10 per cent to £2,126 million. The Group’s underlying free surplus generation increased by 9 per cent to £2,579 million and cash remitted by our business units increased by 11 per cent to £1,482 million. These results represent solid progress towards our 2017 growth and cash objectives, which we set out at the December 2013 investor day in London.

“In Asia, our business remains focused on meeting the protection and savings needs of the region’s growing middle classes through a high-quality agency force and strong bank partnerships. Our portfolio of life businesses in the region delivered a combined IFRS operating profit of £1,050 million, up by 16 per cent. New business profit in the region was up 13 per cent to £1,162 million. We announced in March 2014 the renewal for 15 years of our pan-Asian distribution partnership with Standard Chartered Bank. This new agreement got off to a great start in its first year as sales through Standard Chartered Bank grew by 33 per cent in the second half of the year compared to the same period in 2013.

“In the US, Jackson has continued to proactively manage sales of variable annuities with living benefits to match our annual risk appetite. We continued to diversify our product mix, with APE sales of Elite Access, our innovative variable annuity without guarantees, increasing by 26 per cent to £311 million. This contributed to an increase in the proportion of variable annuities sold without living benefit guarantees to a record 34 per cent of total variable annuity sales. Jackson’s strategy delivered strong returns to our shareholders. In 2014, IFRS operating profit from our US life business increased by 21 per cent to £1,431 million and cash remittances grew by 41 per cent to a record £415 million.

“In the UK, our life business delivered a strong performance, with IFRS operating profit rising 7 per cent to £752 million despite an unprecedented level of regulatory change affecting annuities, a core product for us. In this context, the UK achieved a material increase in both APE sales of accumulation products (with-profits bonds sales increased by 34 percent year-on-year) and in APE sales of bulk annuities (bulk transactions increased from £28 million in 2013 to £171 million in 2014).

“In asset management:

• M&G produced a strong set of results. IFRS operating profit rose 13 per cent to £446 million and cash remitted increased by a record 21 per cent to £285 million. M&G continued its successful strategy of geographic diversification, with net flows from continental Europe growing by 7 per cent to £8.1 billion.
• Eastspring Investments delivered an excellent performance attracting a record level of asset inflows of £5.4 billion. Thanks to these inflows and the flows from our life businesses together with market movements, funds under management increased by 28 per cent to a new high of £77.3 billion. IFRS operating profit increased 32 per cent to £90 million.

“During the year, the Group faced the depreciation of currencies in some of our Asian ‘sweet spot’ markets⁶, a global investment environment where interest rates are expected to continue to remain low and geopolitical challenges which increased uncertainty, particularly in the Eurozone.

“Looking ahead, the economic environment in the US and the UK appears to show signs of improvement. Furthermore, we are optimistic about the outlook for the emerging economies of Asia, where the long-term fundamentals of our life insurance business remain compelling. We continue to see strong economic growth and increasing demand for insurance from a rapidly growing and prosperous middle class which is under-insured.

“We remain confident in our ability to produce profitable growth over the long-term and continue to create value for our customers and shareholders.”

¹ The period since June 2013 has seen depreciation of currencies in some of the Group’s key Asia markets and significant strengthening of sterling. In order to reflect underlying performance, and to be consistent with the currency of transactions of our businesses in Asia and US, year-on-year percentage increases referred to in this press release are stated on a constant exchange rate basis. Increases on an actual exchange rate basis, which incorporate the effect of the exchange rate movements, are shown in the Financial Highlights section and in the Chief Financial Officer’s report.
² The 2014 EEV results of the Group are presented on a post-tax basis and, accordingly 2013 results are shown on a comparable basis.
³ Underlying free surplus generated comprises free surplus generated based on operating movements from long-term business (net of investment in new business) and that generated from asset management operations.
⁴ Comparable to 31 December 2013.
⁵ Before allowing for final dividend.
⁶ ‘Sweet spot’ markets are Indonesia, Singapore, Hong Kong, Malaysia, Philippines, Vietnam and Thailand.

Notes to Editors: