Prudential plc 2012 Half Year Results

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 row1.

"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."

  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.
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