Prudential plc Half Year 2018 Results

PRUDENTIAL DELIVERS HIGH-QUALITY PROFITABLE GROWTH

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

  • Group IFRS operating profit1 of £2,405 million, up 9 per cent2 (up 2 per cent3)
  • Asia new business profit4 of £1,122 million, up 11 per cent2 (up 3 per cent3), IFRS operating profit1 of £1,016 million, up 14 per cent2 (up 7 per cent3) and underlying free surplus generation5 of £590 million, up 14 per cent2 (up 7 per cent3)
  • US variable annuity separate account assets up 10 per cent2 (up 9 per cent3) from 30 June 2017 leading to a 13 per cent2 increase (3 per cent3 increase) in fee income
  • M&G asset management first half external net inflows of £3.5 billion (2017: £7.2 billion), PruFund net inflows of £4.4 billion (2017: £4.3 billion)
  • Planned demerger of M&G Prudential from the Group is progressing well
  • Group Solvency II surplus6,7 estimated at £14.4 billion; equivalent to a ratio of 209 per cent (31 December 2017: £13.3 billion, 202 per cent)
  • 2018 first interim dividend of 15.67 pence per share, up 8 per cent3

Mike Wells, Group Chief Executive, said: “We have made a good start to 2018, delivering high-quality, profitable growth. At the same time, we are taking the steps needed for the demerger of M&G Prudential from the Group, which we announced in March, alongside implementing M&G Prudential’s merger and transformation programme, which remains on track to meet its objectives.

“The Group’s performance has again been led by Asia, contributing to an overall increase in IFRS operating profit1 of 9 per cent2, growth in underlying free surplus generation5 of 6 per cent2, and an increase in new business profit4 of 13 per cent2 despite a lower level of APE sales.

“In Asia we have delivered double-digit growth across our key metrics of new business profit4, up 11 per cent2, IFRS operating profit1, up 14 per cent2, and underlying free surplus generation, also up 14 per cent2. Our growth continues to be high quality with protection new business profit4 growing by 19 per cent2, IFRS insurance margin8 up 17 per cent2 and renewal insurance premiums9 up 17 per cent2. Our Asia asset manager, Eastspring, has increased IFRS operating profit1 by 13 per cent2. Our broad-based portfolio of life insurance and asset management businesses, high-quality products and multi-channel strategy ensure that we continue to benefit from the growing customer demand in Asia for the wealth and health products and services that we provide.

“In our US life business, Jackson, variable annuity separate account assets were 10 per cent2 higher than at 30 June 2017, leading to a rise in fee income as we continued to meet the need of Americans for retirement income. In the UK and Europe, continued demand for M&G Prudential’s differentiated product propositions has resulted in third-party net inflows of £3.5 billion for our asset management business, M&G, and net inflows of £4.4 billion in PruFund-related business.

“Our planned demerger of M&G Prudential from the Group, which will result in two separately listed companies, each with its own distinct investment prospects, demonstrates our commitment to creating shareholder value. We have mobilised our internal teams for delivery, positively engaged with external stakeholders and we are making good progress.

“Each of our businesses is built around strong and growing customer needs, and we continue to target growth in high-quality, recurring-premium health and protection and fee business. I am confident that, as we create new and better products, build our distribution channels and improve all our capabilities, we are well placed to continue to generate profitable growth for our shareholders.”

 

Summary financials

2018 £m

Half year

2017 £m

Half year

Change on

AER basis

Change on

CER basis

 

 

 

 

 

IFRS operating profit based on longer-term investment returns

2,405

2,358

2%

9%

Underlying free surplus generated5,10

1,863

1,840

1%

6%

Life new business profit4

1,767

1,689

5%

13%

IFRS profit after tax*,11

1,356

1,505

(10)%

(5)%

Net cash remittances from business units

1,111

1,230

(10)%

-

 

 

 

 

 

 

2018 £bn

Half year

2017 £bn

Full year

Change on

AER basis

 

 

 

 

 

 

IFRS shareholders’ funds

15.9

16.1

(1)%

 

EEV shareholders’ funds

47.4

44.7

6%

 

Group Solvency II capital surplus6,7

14.4

13.3

8%

 

*    IFRS profit after tax includes a £513 million pre-tax loss on the reinsurance of £12 billion of UK annuity liabilities.

 

Notes
1 Based on longer-term investment returns.
2 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 2017 unless otherwise indicated.
3 Growth rate on an actual exchange rate basis.
4 New business profit on business sold in the period, calculated in accordance with EEV principles.
5 For insurance operations underlying free surplus generated represents amounts maturing from the in-force business during the period less investment in new business and excludes non-operating items. For asset management businesses it equates to post-tax IFRS operating profit for the period. Restructuring costs are presented separately from the underlying business unit amount. Further information is set out in note 10 of the EEV basis results.
6 The Group shareholder capital position excludes the contribution to Own Funds and the Solvency Capital Requirement from ring-fenced with-profits funds and staff pension schemes in surplus. The solvency position includes management’s calculation of UK transitional measures reflecting operating and market conditions at each valuation date.
7 Before allowing for first interim dividend (31 December 2017: second interim dividend).
8 Insurance margin primarily represents profits derived from the insurance risks of mortality and morbidity. See note I(a) of the additional IFRS financial information for further details.
9 Gross earned premiums for contracts in second and subsequent years, comprising Asia segment IFRS gross earned premium of £7.7 billion less gross earned premiums relating to new regular and single premiums of £2.2 billion, plus renewal premiums from joint ventures of £0.6 billion.
10 The half year 2017 comparative results have been re-presented from those published previously, following reassessment of the Group’s operating segments as described in note B1.3 of the IFRS financial statements. This change in presentation does not alter total comparative IFRS operating profit or IFRS profit after tax.
11 IFRS profit after tax reflects the combined effects of operating results determined on the basis of longer-term investment returns, together with negative short-term investments variances, results attaching to disposal of businesses and corporate transactions, amortisation of acquisition accounting adjustments and the total tax charge for the period. In half year 2018 it includes a £513 million pre-tax loss on the reinsurance of £12 billion (valued as at 31 December 2017) of UK annuity liabilities to Rothesay Life.

 

For Prudential plc’s Half Year 2018 Results press release, visit: 
https://www.prudential.co.uk/~/media/Files/P/Prudential-V2/news-releases/2018/newsrelease-busrev-2018-08-08.pdf

 

<< Back to Press Releases

Back to Top