Media Release
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.
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 sales12, 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[1] 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 profit1 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 management9 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 units (both continuing and discontinued operations)[11] | 1,212 | 1,111 | 9% | - |
| 30 June 2019 | 31 December 2018 | Change on AER basis | ||
| IFRS shareholders’ funds per share | 757p | 665p | 14% | |
| EEV shareholders’ funds 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 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 business sold in the year, 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 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] Average US separate account balances for the year to 31 December 2018, compared to average balances for the year to 31 December 2017 on a constant exchange rate basis.
[7] The Group shareholder capital position excludes the contribution to Own Funds and the Solvency Capital Requirement from ring fenced with-profit 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, which for both 2018 and 2017 reflects the approved regulatory position.
[8] Estimated before allowing for second interim ordinary dividend.
[9] 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, results attaching to disposal of businesses and corporate transactions, amortisation of acquisition accounting adjustments and the total tax charge for the year.
[10] Net cash remitted by business units are included in the Holding company cash flow, which is disclosed in detail in note II(a) of the Additional unaudited IFRS financial information. This comprises dividends and other transfers from business units that are reflective of emerging earnings and capital generation.
Contact:
| Media | Investors/Analysts | ||
| Jonathan Oliver | +44 (0)20 3977 3500 | Addy Frederick | +44 (0)20 3977 9399 |
| Tom Willetts | +44 (0)20 3977 9760 | Richard Gradidge | +44 (0)20 3977 4014 |
| Patrick Bowes | +44 (0)20 3977 9702 | William Elderkin | +44 (0)20 3977 9215 |
Notes to Editors:
- The results in this announcement are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The results prepared under IFRS form the basis of the Group’s statutory financial statements. The supplementary EEV basis results have been prepared in accordance with the amended European Embedded Value Principles issued by the European Insurance CFO Forum in 2016. The Group’s EEV basis results are stated on a post-tax basis and include the post-tax IFRS basis results of the Group’s asset management and other operations. Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates are calculated by translating prior period results using the current period foreign exchange rate ie current period average rates for the income statement and current period closing rates for the balance sheet.
- EEV and adjusted IFRS operating profit based on longer-term investment returns are stated after excluding the effect of short-term fluctuations in investment returns against long-term assumptions, which for IFRS in half year 2019 were driven by those arising in the US, and gains/losses arising on the disposal of businesses and other corporate transactions including costs associated with the demerger of M&GPrudential. Furthermore, for EEV basis results, operating profit based on longer-term investment returns excludes the effect of changes in economic assumptions and the mark to market value movement on core borrowings. Separately on the IFRS basis, operating profit also excludes amortisation of accounting adjustments arising principally on the acquisition of REALIC completed in 2012. The amounts shown are for continuing operations only (being Asia, US and central operations including Africa but excluding M&GPrudential) unless otherwise stated.
- Total number of Prudential plc shares in issue as at 30 June 2019 was 2,599,796,199.
- A presentation for analysts and investors will be held today at 11.30am (UK time) / 6.30pm (Hong Kong time) in the conference suite at Nomura, 1 Angel Lane, London EC4R 3AB. The presentation will be webcast live and available to replay afterwards using the following link https://www.investis-live.com/prudential/5d2f0850379ece0b00d7f019/lwin
To register attendance in person please send an email to investor.relations@prudential.co.uk
Alternatively, a dial-in facility will be available to listen to the presentation: please allow time ahead of the presentation to join the call (lines open half an hour before the presentation is due to start, ie from 11.00am (UK time) / 6.00pm (Hong Kong time).
Dial-in: 020 3936 2999 (UK Local Call) / +44 20 3936 2999 (International) / 0800 640 6441 (Freephone UK), Participant access code: 301853. Once participants have entered this code their name and company details will be taken.
Playback: +44 (0) 20 3936 3001 (UK and international excluding US) / + 1 845 709 8569 (US only) (Replay code: 830013). This will be available from approximately 3.00pm (UK time) / 10.00pm (Hong Kong time) on 14 August 2019 until 11.59pm (UK time) on 28 August 2019 / 6.59am (Hong Kong time) on 29 August 2019.
2019 First Interim Dividend
Ex-dividend date 22 August 2019 (UK, Hong Kong and Singapore)
Record date 23 August 2019
Payment of dividend 26 September 2019 (UK and Hong Kong)
On or about 03 October 2019 (Singapore and ADR holders)
- About Prudential plc
Prudential plc and its affiliated companies constitute one of the world’s leading financial services groups, serving 26 million customers, with £717 billion of assets under management (as at 30 June 2019). Prudential plc is incorporated in England and Wales and is listed on the stock exchanges in London, Hong Kong, Singapore and New York. Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America.
- UK and Europe
Throughout this results announcement we use M&GPrudential to refer to the Group’s discontinued UK and Europe operations. M&GPrudential has announced that it will change its name in preparation for listing to M&G plc, providing a single corporate identity while retaining its two customer-facing brands of Prudential and M&G Investments.
- Forward-Looking Statements
This document may contain ‘forward-looking statements’ with respect to certain of Prudential's plans and its goals and expectations relating to its future financial condition, performance, results, operating environment, strategy and objectives. Statements that are not historical facts, including statements about Prudential’s beliefs and expectations and including, without limitation, statements containing the words ‘may’, ‘will’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of similar meaning, are forward-looking statements. These statements are based on plans, estimates and projections as at the time they are made, and therefore undue reliance should not be placed on them. By their nature, all forward-looking statements, including without limitation those referring to the demerger and the expected timing of the demerger, involve risk and uncertainty. A number of important factors could cause Prudential's actual future financial condition or performance or other indicated results to differ materially from those indicated in any forward-looking statement. Such factors include, but are not limited to, the timing, costs and successful implementation of the demerger of the M&GPrudential business; the future trading value of the shares of Prudential plc and the trading value and liquidity of the shares of the to-be-listed M&GPrudential business following such demerger; future market conditions, including fluctuations in interest rates and exchange rates, the continuance of a sustained low-interest rate environment, and the performance of financial markets generally; the policies and actions of regulatory authorities, including, for example, new government initiatives; the actual or anticipated political, legal and economic ramifications of the UK’s withdrawal from the European Union; the impact of continuing application of Global Systemically Important Insurer (or ‘G-SII’) policy measures on Prudential; the impact of competition, economic uncertainty, inflation and deflation; the effect on Prudential’s business and results from, in particular, mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; the impact of internal projects and other strategic actions failing to meet their objectives; disruption to the availability, confidentiality or integrity of Prudential’s IT systems (or those of its suppliers); the impact of changes in capital, solvency standards, accounting standards or relevant regulatory frameworks, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate; and the impact of legal and regulatory actions, investigations and disputes. These and other important factors may, for example, result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. Further discussion of these and other important factors that could cause Prudential's actual future financial condition or performance or other indicated results to differ, possibly materially, from those anticipated in Prudential's forward-looking statements can be found under the ‘Risk Factors’ section in the Prudential 2019 Half Year Financial Report.
Any forward-looking statements contained in this document speak only as of the date on which they are made. Prudential expressly disclaims any obligation to update any of the forward-looking statements contained in this document or any other forward-looking statements it may make, whether as a result of future events, new information or otherwise except as required pursuant to the UK Prospectus Rules, the UK Listing Rules, the UK Disclosure and Transparency Rules, the Hong Kong Listing Rules, the SGX-ST listing rules or other applicable laws and regulations.
