Prudential plc Half Year 2019 Results

PRUDENTIAL CONTINUES TO DELIVER ASIA-LED GROWTH AND PREPARES FOR DEMERGER IN Q4 2019

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

  • Group operating profit[1] from continuing operations (excluding M&GPrudential) of £2,024 million, up 14 per cent[2](21 per cent)

  • Asia operating profit[1] up 14 per cent[2] (up 18 per cent); new business profit[3] up 10 per cent[2] (up 15 per cent); operating free surplus generation[4] up 13 per cent[2] (up 16 per cent)

  • US operating profit[1] up 14 per cent[2] (up 21 per cent); RBC capital ratio in excess of 400 per cent

  • 2019 first interim ordinary dividend increased by 5 per cent to 16.45 pence per share in line with our existing dividend policy

  • Group Solvency II surplus[5,6] estimated at £16.7 billion, equivalent to a cover ratio of 222 per cent

  • Demerger expected to be completed in fourth quarter of 2019, as a result of which M&GPrudential has been classified as discontinued operations.


London, 14 August 2019 - Mike Wells, Group Chief Executive, said: “We have delivered a positive performance in the first half of 2019. The Group’s operating profit[1] from continuing operations increased by 14 per cent[2]. Our focus on key areas of operational improvement and continued investment has enabled us to drive growth and position ourselves to continue to grow profitably. At the same time, we expect to complete the demerger of M&GPrudential in the fourth quarter of 2019, and preparations are complete for Prudential plc’s move to Group-wide supervision by the Hong Kong Insurance Authority. We believe that the demerger will enable both businesses to maximise their potential performance. Both will have experienced management teams better able to focus on their strategic priorities and distinct investment prospects, as well as improved allocation of resources and greater flexibility in execution.

“The Group’s performance has again been driven by our Asian business, where we have delivered double-digit growth across our key metrics of operating profit[1], up 14 per cent[2], new business profit[3] and APE sales[12], both up 10 per cent[2], and operating free surplus generation[4], up 13 per cent[2]. Total assets under management at our Asian asset manager, Eastspring, grew 12 per cent[7] to £169.5 billion, with positive external net flows of £3.1 billion[8] (2018: net outflows of £0.9 billion on an actual exchange rate basis). Our multi-channel strategy across life insurance and asset management ensures that we provide high-quality products delivering distinctive value-added services to our broad customer base. We are benefiting from growing demand for health, protection and savings across the region and we are constantly improving our access to this demand by innovating in new value-added services, distribution and digitalisation of the customer journey. We recently passed another key milestone through the first launch of our new holistic health management app, Pulse by Prudential, in Malaysia, which will be followed by a wider roll-out across the region.

“In the US, Jackson’s operating profit[1] increased by 14 per cent[2], largely due to lower amortisation of deferred acquisition costs resulting from the strong equity market performance in the period. With greater clarity in key consumer regulations emerging, we intend to accelerate our process of diversifying our business, while retaining our longstanding discipline in terms of risk management. We have a leading position in the retirement income industry, with strong long-term economics, and our operating platform has industry-leading cost advantages and is highly digital and scalable. We are in the process of driving a more diversified product mix and developing relationships with new distributors. We are actively exploring options to accelerate this diversification.

“M&GPrudential is approaching life as a fully independent business, and its Board and management are in place. The business is well positioned to capture the opportunities created by shifting demographics and the search for yield, through its differentiated, high-value savings and investment solutions. While operating profit[1] was lower at £687 million (2018: £736 million), PruFund net inflows of £3.5 billion contributed to 6 per cent growth in total assets under management[9] to £341.1 billion.

“Our focus on structural growth opportunities in terms of geographies, products and distribution platforms and our diligent approach to execution mean that we are well placed to continue to deliver important benefits for our customers and profitable growth for our shareholders.”

Summary financials

Half year
2019 £m

Half year
2018 £m

Change on
AER basis

Change on
CER basis

Operating profit from continuing operations[1]

2,024

1,669

21%

14%

Operating profit from discontinued operations[1]

687

736

(7)%

(7)%

Operating free surplus generated from continuing operations[4]

1,502

1,173

28%

22%

Life new business profit from continuing operations[3]

1,643

1,588

3%

(2)%

Life new business profit from discontinued operations[3]

152

179

(15)%

(15)%

IFRS profit after tax (total continuing and discontinued operations)[10]

1,540

1,356

14%

7%

Net cash remittances from business unit (both continuing and discontinued operations)[11]

1,212

1,111

9%

 

30 June
2019

31 Dec
2018

Change
on AER basis

 

IFRS shareholders' funds per share

757p

665p

14%

 

EEV shareholders' fund per share

2,055p

1,920p

7%

 

Group Solvency II cover ratio[5,6]

222%

232%

(10)pp

 

Notes

[1] In this press release ‘operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns. This alternative performance measure is reconciled to IFRS profit for the period in note B1.1 of the IFRS financial statements. Continuing operations relate to Asia, US and central operations (including Africa). It excludes M&GPrudential which met the criteria to be classified as held for distribution at 30 June 2019 and hence is shown as discontinued. M&GPrudential operating profit is stated after restructuring costs.

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

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

[4] For insurance operations, operating 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 operating profit for the period. Restructuring costs are presented separately from the underlying business unit amount. The amount is for continuing operations only (ie M&GPrudential is excluded). Further information is set out in note 9 of the EEV basis results.

[5] The Group shareholder capital position covers continuing and discontinued operations and excludes the contribution to own funds and the Solvency Capital Requirement from ring-fenced with-profits funds and staff pension schemes in surplus. The estimated solvency positions include management’s calculation of UK transitional measures reflecting operating and market conditions at each valuation date.

[6] Estimated before allowing for first interim ordinary dividend (31 December 2018: second interim ordinary dividend).

[7] Growth from 31 December 2018.

[8] Excluding money market funds.

[9] Represents M&GPrudential asset management external funds under management and internal funds included on the M&GPrudential long-term insurance business balance sheet.

[10] IFRS profit after tax reflects the combined effects of operating results determined on the basis of longer-term investment returns, together with short-term investment variances, which in half year 2019 were driven by those arising in the US, results attaching to disposal of businesses and corporate transactions, amortisation of acquisition accounting adjustments and the total tax charge for the period.

[11] 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 financial information. This comprises dividends and other transfers from business units that are reflective of emerging earnings and capital generation.

[12] 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 period for all insurance products, including premiums for contracts designated as investment contracts under IFRS 4. It is not representative of premium income recorded in the IFRS financial statements. See note II of the Additional financial information for further explanation

For Prudential's Half Year 2019 press release, visit:

https://www.prudential.co.uk/news/news-releases/2019/14-08-2019