STRONG PERFORMANCE WITH FOUR OUT OF SIX 2013 ‘GROWTH AND CASH’ OBJECTIVES NOW ACHIEVED
Performance Highlights:
‘Growth and Cash’ Objectives:
Capital & Dividend:
Commenting on the results, Tidjane Thiam, Group Chief Executive, said:
“Prudential has produced a strong performance across our key financial metrics of IFRS operating profit, new business profit and cash during the first six months of 2013. Our focus on meeting the needs of our customers with well-designed products, on executing our strategy with discipline and on managing risk effectively has continued to allow us to deliver profitable growth and to generate increasing levels of cash.
“In 2010, we set ourselves six challenging ‘Growth and Cash’ objectives to be achieved by the end of 2013. At the end of 2012, we had already achieved two of the six 2013 objectives – Asia’s objectives of doubling its 2009 IFRS operating profit and of delivering more than £300 million of net remittances to the Group.
“At the half year stage of the last year in this four-year 2010-2013 programme, we have achieved two more of our objectives:
“These results provide further evidence of our ability to deliver both earnings growth and cash. We are on track to achieve the remaining objectives of doubling Asia’s 2009 new business profit by 2013 and delivering over £350 million of net remittances from the UK by the end of the year.
“In Asia, our focus on meeting the needs of the fast-growing middle class of South-east Asia, combined with our allocation of capital prioritised towards regular-premium health and protection business, continued to deliver strong returns and earnings growth. Asia IFRS operating profit1 increased by 18 per cent while new business profit was up 20 per cent. Asia’s cash contribution to the Group in the first six months was £190 million, an increase of 51 per cent, providing further evidence that our growth in the region is now cash-generative.
“In the US, where we are well positioned to benefit from the transition into retirement of the ‘baby-boomer’ generation, Jackson continues to manage sales volumes in line with our risk appetite and has maintained its pricing discipline. Our emphasis remains on driving IFRS operating earnings and cash generation. Elite Access, our variable annuity product without guarantees, has proven popular in the marketplace. Second-quarter APE sales were 35 per cent higher than the first quarter’s sales. Life IFRS operating profit increased by 32 per cent to £582 million, reflecting higher fee income and the benefit of our acquisition of REALIC in September 2012. The US remitted £294 million of cash to the Group, exceeding its 2013 cash remittance objective of £260 million, which was revised upwards at the time of the acquisition of REALIC.
“Our UK life business, which continues to cater to the needs of an ageing British population, delivered IFRS operating profit of £341 million, up 1 per cent. UK industry sales volumes have been affected by the implementation of the conclusions of the Retail Distribution Review. Prudential UK remains focused on its core business of individual annuities and with-profits products. We believe the strength of our products and brand will position us well once distributors have adjusted to the new environment.
“In asset management, all of our operations have continued to focus on delivering superior investment performance for our customers. M&G has delivered a good performance with net retail inflows of £4.8 billion driven by strong new business from Continental Europe. Reflecting these inflows as well as positive market movements, funds under management have increased to £234.3 billion from £203.7 billion at 30 June 2012. This contributed to a 17 per cent increase in IFRS operating profit to £204 million, a record half-year performance. Eastspring Investments, our Asia asset management business, has also performed strongly during the first half, increasing its funds under management to £62 billion, 15 per cent higher than at the same time last year.
“The global economic environment remains uncertain, with continued equity market and interest-rate volatility often driven by short-term news flows, as confidence is still fragile. Despite this, the long-term structural trends of a growing middle class, low insurance penetration and faster relative economic growth underpin our profitable growth in South-east Asia. Our multi-product portfolio, multi-channel distribution platform and our leading position in six out of our 13 Asian markets leave us well placed to capture profitably this unique opportunity. The transition of US ‘baby-boomers’ into retirement and the ageing of the UK population provide us with additional opportunities to generate significant value.
“Our disciplined approach to capital allocation, our diversification by product and geography and our conservative balance sheet management add resilience to the Group. This positions Prudential to perform well through challenging economic conditions, with significant upside as the economic conditions improve. We will continue to implement our long-term strategy in Asia to meet the savings and protection needs of the Asian middle class, the key driver of our sustainable and profitable growth, and to focus on our strengths in the US and UK.
“We look forward to the rest of the year with confidence and remain focused on achieving the 2013 ‘Growth and Cash’ objectives we set in 2010.”