PRUDENTIAL PLC 2012 FULL YEAR RESULTS

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.”

  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
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