Prudential plc Half Year 2015 Results

PRUDENTIAL DELIVERS BROAD-BASED PROFITABLE GROWTH AND INCREASED CASH GENERATION

 

Group Performance Highlights (on constant exchange rate basis)

  • IFRS operating profit of £1,881 million, up 17 per cent1
  • EEV new business profit of £1,190 million, up 12 per cent1,2
  • Underlying free surplus generation3 (after investment in new business) of £1,418 million, up 12 per cent1
  • Net cash remittances from business units of £1,068 million, up 10 per cent

Business Units Performance Highlights (on constant exchange rate basis)

  • Asia life and asset management IFRS operating profit of £632 million, up 17 per cent1
  • Jackson life IFRS operating profit of £834 million, up 11 per cent1
  • UK life IFRS operating profit of £436 million, up 19 per cent2
  • M&G IFRS operating profit of £251 million, up 11 per cent

Capital & Dividend

  • IFRS shareholders’ funds of £12.1 billion, up 14 per cent4
  • EEV shareholders’ funds of £30.1 billion, up 16 per cent4, equivalent to 1,170 pence per share
  • Insurance Groups Directive capital surplus5 estimated at £5.2 billion; solvency requirements covered 2.5 times
  • 2015 interim dividend increased by 10 per cent to 12.31 pence per share

 

Commenting on the results, Mike Wells, Group Chief Executive, said:

“We have delivered a strong, broad-based performance in the first half of 2015. Our consistent strategy, rigorous execution and tight focus on the needs of our customers have ensured that we continue to deliver profitable growth and increased cash generation.

“Group IFRS operating profit increased 17 per cent to £1,881 million and EEV new business profit grew by 12 per cent to £1,190 million, while underlying free surplus generation increased by 12 per cent to £1,418 million.

“We have seen strong performances from each of our principal business units. In Asia, where we are focused on meeting the protection and savings needs of the growing middle classes through our high-quality agency force and productive bank partnerships, our life and asset management businesses delivered a combined IFRS operating profit of £632 million, up by 17 per cent and free surplus generation of £356 million, up 16 per cent. Life new business profit in the region was up 30 per cent to £664 million, reflecting a 31 per cent increase in APE sales.

“At Eastspring, our Asia-based asset management business, external net inflows of £4.6 billion and positive market movements have driven total funds under management to a record level of £85.3 billion, 28 per cent higher than a year ago.

“In the US, Jackson continues to execute with discipline, delivering growth in both IFRS operating profit and cash, while maintaining a strong focus on value, risk management and capital. In the first half of 2015, we continued to manage proactively sales of variable annuities with living benefits while diversifying our sales mix. Our success in capturing strong variable annuity inflows at attractive margins drove our separate account asset base 11 per cent6 higher to £85.9 billion at 30 June 2015. Jackson’s life IFRS operating profit consequently increased by 11 per cent to £834 million, which represents a new high at the half year stage. Cash remittances also grew by 14 per cent (on an actual exchange rate basis) to £403 million.

“Our UK life business delivered a strong performance amid an unprecedented level of regulatory change affecting how customers access their savings in retirement. Prudential delivered a 25 per cent increase in retail APE sales to £393 million, despite lower sales of retail annuities. This volume growth, together with the completion of two attractively priced bulk deals in the first half of the year, resulted in a 12 per cent increase in total new business profit. Life IFRS operating profit of £436 million was up 19 per cent, reflecting ongoing active management to unlock value in our in-force business.

“In asset management, M&G delivered operating profit of £251 million, an increase of 11 per cent, reflecting higher average levels of funds under management. This was achieved despite the net outflows experienced in the second quarter of 2015, a consequence of softer consumer sentiment on fixed income assets.

“Our capital-generative business model and our disciplined approach to risk management have driven our shareholders’ equity and our estimated Insurance Groups Directive surplus to higher levels at 30 June 2015 than at 31 December 2014. In anticipation of the implementation of Solvency II at the start of 2016, we submitted our internal model to the Prudential Regulation Authority for approval in June. Alongside our UK peers, we expect to hear the outcome of the approval process in early December. Our strong half year performance and sound capital position have enabled us to increase our 2015 interim dividend by 10 per cent to 12.31 pence per share.

“In summary, the first half of the year has demonstrated the success of our disciplined execution of the Group’s strategy. We are capturing profitably the opportunities available to us in the growing markets of Asia, while in the US and the UK we are continuing to use our established market position, distribution strength and products that are valued by customers to deliver growth in IFRS operating profit and free surplus generation. In doing so, we are making progress towards our 2017 objectives.

“I am pleased to be able to announce such a strong performance today, the first time I have reported our results after taking over as Group Chief Executive at the beginning of June. Since then I have visited all of our major business operations, which has confirmed to me not only that our strategy is the right one, but that we have all of the capabilities required to execute it successfully.

“Looking ahead, despite ongoing macro-economic uncertainties, we are confident that our proven strategy, strong execution and the quality of our people will continue to deliver great products and service to our 25 million customers and relative outperformance to our shareholders.”

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1 Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. 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. All amounts are comparable to the six months ended 30 June 2014 unless otherwise indicated.
2 Following the disposal of the Group’s 25 per cent interest in PruHealth and PruProtect in November 2014, the 2014 comparative results of UK insurance operations have been adjusted to exclude results of those businesses.
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 30 June 2014 on an actual exchange rate basis.
5 Before allowing for interim dividend.
6 Comparable to 30 June 2014 on a constant exchange rate basis.
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