10 Aug 2017

Prudential plc 2017 Half Year Results

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

PRUDENTIAL DELIVERS BROAD-BASED PERFORMANCE LED BY DOUBLE-DIGIT GROWTH IN ASIA

Performance highlights on a constant (and actual) exchange rate basis

• Group IFRS operating profit¹ of £2,358 million, up 5 per cent^2,3 (up 15 per cent⁴)
• Asia new business profit⁵ of £1,092 million, up 18 per cent^2,3 (up 33 per cent⁴), IFRS operating profit¹ of £953 million, up 16 per cent^2,3 (up 31 per cent⁴) and free surplus generation⁶ of £553 million, up 15 per cent^2,3 (up 30 per cent⁴)
• US life insurance IFRS operating profit¹ of £1,079 million, up 7 per cent³ (up 22 per cent⁴)
• UK life retail APE sales of £721 million, up 22 per cent, with PruFund sales up 29 per cent to £564 million
• M&G first half external asset management net inflows of £7.2 billion
• M&G and Prudential UK & Europe to be combined to create a leading savings and investments provider
• 2017 first interim dividend of 14.50 pence per share, up 12 per cent
• Group Solvency II surplus⁷ estimated at £12.9 billion; equivalent to a ratio of 202 per cent⁸

Mike Wells, Group Chief Executive, said: “Our successful strategy, innovative products and strong execution have driven growth across all of our main performance measures led by double-digit growth in our Asian business. We have achieved our objective of generating over £10 billion of Group cumulative free surplus between 1 January 2014 and 31 December 2017 six months early and we remain on track to achieve the remaining Asia-focused objectives by the end of this year.

“In Asia, we continue to leverage our structural advantages, delivering a 16 per cent² increase in IFRS operating profit and 15 per cent² growth in free surplus generation. New business profit in our life business increased by 18 per cent², while Eastspring, our asset management business, delivered £2.3 billion of external net inflows⁹. The scale, breadth and diversification of our businesses leave us well placed to continue to grow as we access the opportunities created by the region’s dynamic economies, fast-growing middle class and underpenetrated markets.

“Our US life business, Jackson, has delivered a 7 per cent rise in IFRS operating profit and continues to outperform the market¹⁰ with positive net flows in variable annuities, where its product and distribution capabilities are a competitive strength. In the UK our life retail sales are up by 22 per cent due to the continued consumer appetite for PruFund-backed products, while M&G experienced record net inflows from external retail clients for the first half of the year, reflecting improved investment performance.

“Our strategy is focused on markets where the need for our products is strong and growing, and our capabilities and execution ensure that we are successfully meeting that demand across our different regions. In Asia we offer innovative products that meet the savings, health and protection needs of the fast-growing middle class, in the US our variable annuities are focused on meeting consumers’ needs as they move into retirement, and in the UK and Europe we are responding with agility to changing consumer preferences, meeting the rising demand for savings and retirement solutions.

“We are also announcing today our intention to combine M&G and Prudential UK & Europe to form M&G Prudential, a savings and investments business focused on meeting growing customer demand for comprehensive financial solutions. Combining these businesses will allow us to better leverage our considerable scale and capabilities. This will enable us to increase our growth prospects by providing better outcomes for our millions of customers.

“This performance demonstrates our strength in accessing the market opportunities available to us. Our proven ability to innovate in both our products and capabilities positions us well to continue generating profitable growth and cash.”

¹ Based on longer-term investment returns.
² Following its sale in May 2017, the operating results exclude the contribution of the Korea life business. All comparative results have been similarly adjusted.
³ Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. All amounts are comparable to the six months ended 30 June 2016 unless otherwise indicated.
⁴ Growth rate on an actual exchange rate basis.
⁵ New business profit on business sold in the period, calculated in accordance with EEV principles.
⁶ Underlying free surplus generated based on operating movements from long-term business (net of investment in new business) and that generated from asset management operations. Further information is set out in note 10 of the EEV basis results.
⁷ The Group shareholder capital position excludes the contribution to Own Funds and the Solvency Capital Requirement from ring fenced With-Profit Funds and staff pension schemes in surplus. The solvency positions include management’s estimate of transitional measures reflecting operating and market conditions at the valuation date. The estimated Group shareholder surplus would increase from £12.9 billion to £13.6 billion at 30 June 2017 if the approved regulatory transitional amount was applied instead.
⁸ Before allowing for first interim dividend (31 December 2016: Second interim dividend).
⁹ External net inflows exclude Asia Money Market Fund (MMF) net inflows of £499 million (2016: net inflows of £656 million on an actual exchange rate basis).
¹⁰ ©2017 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 1Q 2017 Morningstar VA Report with Commentary.
¹¹ IFRS profit after tax reflects the combined effects of operating results, negative short-term fluctuations in investments variances, result attaching to the sold Korea life business and the total tax charge for the year.

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