Prudential plc Full Year 2019 Results

PRUDENTIAL DELIVERS RESILIENT BROAD-BASED GROWTH IN ASIA

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

  • Group adjusted operating profit[1] from continuing operations of $5,310 million, up 20 per cent[2] (20 per cent[3])

  • Asia adjusted operating profit[1] up 14 per cent[2] (up 13 per cent[3]); Asia embedded value up 23 per cent[3] to $39.2 billion

  • Double-digit growth[2] in new business profit[4] in eight markets in Asia

  • Preparations commenced for a minority IPO of Jackson

  • LCSM shareholder surplus[5] estimated at $9.5 billion, equivalent to cover ratio of 309 per cent

  • Second interim ordinary dividend of 25.97 cents per share

     

Mike Wells, Prudential plc’s Group Chief Executive, said: “We have delivered another positive performance during 2019, despite significant macroeconomic and geopolitical volatility. Our clear strategy and strong execution have enabled us both to deliver profitable growth and to position ourselves for further growth into the future.

“In Asia, we are focused on growth opportunities. We are building the long-term value of our fast-growing franchise by deepening our strong relationships with existing customers and by acquiring new customer relationships. We are continuing to strengthen our agency and bank channels in Asia, and harnessing the opportunities of digital technology, including Pulse by Prudential, our new end-to-end digital health app. We see continuing opportunities for selective inorganic investment.

“Outside Hong Kong, we delivered a 17 per cent[2] increase in APE[6] sales and a 29 per cent[2] rise in new business profit[4]. This includes China where APE[6] sales were up by 53 per cent[2]. Fewer visitors from mainland China caused a fall in total Hong Kong APE[6]  sales by 11 per cent[2] and a fall in new business profit[4] of 12 per cent[2]. Adjusted operating profit from Asia insurance operations was $2,993 million, growing by 14 per cent[2] with Hong Kong up by 24 per cent[2] to $734 million demonstrating the resilience of our business. Our Asia asset manager, Eastspring, performed well, with net external inflows of $8.9 billion[7](2018: net outflows $(2.1) billion[7]) contributing to average assets under management up 15 per cent[3] and adjusted operating profit of $283 million, up 18 per cent[2].

“In the US, the world’s largest retirement savings market and the continuing transition of millions of Americans into retirement creates a substantial opportunity for Jackson’s products. US APE6 sales increased by 8 per cent driven by fixed income and fixed index annuities, in line with our diversification strategy. New business profit[4] declined by 28 per cent, reflecting lower interest rates and changes in product mix. US adjusted operating profit1 increased by 20 per cent to $3,070 million, reflecting the impact of lower market-related amortisation of deferred acquisition costs. Higher equity markets also led to US separate account assets increasing by 19 per cent[3] to $195.1 billion. Our US business continued its long term track record of delivering cash to the Group, remitting a dividend of $525 million[8] during the year.

“As previously stated, in order to diversify at pace, Jackson will need access to additional investment, which we believe would best be provided by third parties. We are today announcing that the Board has determined that the preferred route to achieve this is a minority Initial Public Offering (IPO) of Jackson. We have already taken a number of management actions to support this path. We will now begin detailed engagement with our key stakeholders, with a view to ensuring that Jackson will have the capital strength as a separately listed business to support its continued success as a broad provider of retirement solutions for America’s aging population.

“We continue to monitor closely the development of the coronavirus outbreak and are focused on the health and well-being of our customers and staff. The outbreak has slowed economic activity and dampened our sales momentum in Hong Kong and China. Given these conditions, lower levels of new sales activity in affected markets are to be expected with a consequential effect on new business profit. Our in-force business is proving robust. The broad geographic spread of our business across the region and the strength of our recurring premium business model lends considerable resilience to our earnings.

“I am confident that, with our clear focus on our structural growth markets and our continuing operational improvements, we will continue to deliver profitable growth for our investors and benefits for our stakeholders over the medium and long term.”

Summary financials

2018 $m

2018 $m

Change on AER basis

Change on CER basis

Adjusted operating profit from continuing operations[1]

5,310

4,409

20%

20%

Operating free surplus generated from continuing operations before US EEV modelling enhancements[9,10]

3,764

3,410

10%

10%

Life new business profit from continuing operations[4]

4,405

4,707

(6)%

(6)%

IFRS profit after tax from continuing operations[11]

1,953

2,881

(32)%

(33)%

Net cash remittances from business units from continuing operations[8,12]

1,465

1,417

3%

-

LCSM shareholder surplus over Group minimum capital requirement[5]

$9.5bn

$9.7bn

(2)%

-

31 December 2019

Total

Per share

 

IFRS shareholders’ funds[13]

$19.5bn

749¢

 

EEV shareholders’ funds[13]

$54.7bn

2,103¢

 

Notes

[1] In this press release ‘adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing This alternative performance measure is reconciled to IFRS profit for the year in note B1.1 of the IFRS financial statements.

[2] Year-on-year percentage increases are stated on a constant exchange rate basis unless otherwise stated.

[3] Growth rate on an actual exchange rate basis.

[4] New business profit, on a post-tax basis, on business sold in the year, calculated in accordance with EEV Principles.

[5] Surplus over Group minimum capital requirement and estimated before allowing for second interim ordinary Shareholder business excludes the available capital and minimum requirement of participating business in Hong Kong, Singapore and Malaysia. 2018 surplus excludes M&G plc and includes $3.7 billion of subordinated debt issued by Prudential plc that was transferred to M&G plc on 18 October 2019. Further information on the basis of calculation of the LCSM measure is contained in note I(i) of the Additional unaudited financial information.

[6] APE sales is a measure of new business activity that comprises the aggregate of annualised regular premiums and one-tenth of single premiums on new business written during the year for all insurance products, including premiums for contracts designated as investment contracts under IFRS . It is not representative of premium income recorded in the IFRS financial See note II of the Additional unaudited financial information for further explanation.

[7] Excludes Money Market Funds.

[8] During 2019, the Group’s holding company cash flow was managed in sterling and significant remittances were hedged and recorded on that Amounts received were therefore distorted by the onwards translation into US dollars. The dividend paid by Jackson in the US in US dollars in 2019 was $525 million (2018: $450 million). The amount recorded as received in the holding company cash flow was $509 million (2018: $452 million).

[9] For insurance operations, operating free surplus generated represents amounts maturing from the in-force business during the year less investment in new business and excludes non-operating For asset management businesses, it equates to post-tax operating profit for the year. Further information is set out in note 11 of the EEV basis results.

[10] During 2019, as part of the implementation of the NAIC’s changes to the US statutory reserve and capital framework enhancements were made to the model used to allow for hedging within US statutory reporting which have been incorporated into the EEV This resulted in a fall in operating free surplus of $(903) million from a lower expected transfer to net worth. After allowing for this, operating free surplus generated is $2,861 million, down 16 per cent on both a constant and actual exchange rate basis.

[11] IFRS profit after tax from continuing operations reflects the combined effects of operating results determined on the basis of longer-term investment returns, together with short-term investment variances which for 2019 were driven by non-operating losses in Jackson, corporate transactions, amortisation of acquisition accounting adjustments and the total tax charge for the year.

[12] Net cash remitted by business units are included in the holding company cash flow, which is disclosed in detail in note I(iii) of the Additional unaudited financial This comprises dividends and other transfers from business units that are reflective of emerging earnings and capital generation.

[13] IFRS and EEV Shareholders’ funds at 31 December 2019 are not directly comparable to group shareholders’ funds reported at 31 December 2018, as the prior year balance included shareholders’ funds of M&G plc which, following demerger, are not part of the Group at 31 December The reported 31 December 2018 IFRS shareholders’ funds per share were 847¢ and EEV shareholders’ funds per share were $2,445¢.

 

For Prudential plc’s Full Year 2019 Results press release, visit: 

https://www.prudentialplc.com/~/media/Files/P/Prudential-V3/news-releases/2020/newsrelease-busrev-2020-03-11.pdf