Prudential Plc · LSE:PRU
Prudential — H1 2013 Earnings Presentation
116 slides from Prudential's earnings presentation, Aug 12, 2013
Slide 1: Prudential plc 2013 Half Year Results
Prudential plc 2013 Half Year Results Delivering „Growth and Cash‟ 12 August 2013 1 2013 HALF YEAR RESULTS
Slide 2: 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, strategy and objectives. Statements that are not historical facts, including statements about Prudenti
Slide 3: Agenda
Prudential plc 2013 half year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 3 2013 HALF YEAR RESULTS
Slide 4: 2013 half year financial headlines
2013 half year financial headlines Strong performance on all key metrics £m HY 2013 HY 2012 Change (%) New business profit 1,268 1,141 +11% Growth IFRS operating profit1 1,415 1,157 +22% EEV operating profit 2,479 2,109 +18% Free surplus generation 1,152 1,031 +12% Cash Net remittance 844 726 +16% I
Slide 5: Continuation of a strong track record
Continuation of a strong track record New business profit1, £m IFRS operating profit2, £m 2.3x 2.3x CAGR CAGR +18% 1,268 1,415 1,141 +18% 1,069 1,157 892 1,022 700 817 693 562 611 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 Net cash remittances, £m
Slide 6: Resilient income
Resilient income Well positioned for upside IFRS operating income1, £m 2,067 97 155 535 1,092 Expected return 154 667 With-profits 158 Spread income 360 62% Fee income 203 613 38% Insurance margin 217 HY 2009 HY 2013 1 Excludes margin on revenues, acquisition and administration expenses, DAC amortis
Slide 7: 2013 Growth and Cash objectives
2013 Growth and Cash objectives 4 out of 6 objectives achieved 2013 Growth and Cash objectives1, £m 2009 2012 2013 HY 2013 Status £m Objective1 Growth Asia new business profit 713 1,266 1,426 659 On-track 1 Asia IFRS operating profit2 465 988 930 512 2012 2 Asia Net Remittance 40 341 300 190 201
Slide 8: Delivery for shareholders: Share price
Delivery for shareholders Share price Share price performance (Jan 2009 to Jun 2013)1 Prudential 158% STOXX Europe 600 39% Insurance FTSE 100 40% 1 Source: Datastream. 8 2013 HALF YEAR RESULTS
Slide 9: Delivery for shareholders: Dividend
Delivery for shareholders Dividend Dividend, pence per share 29.19 +15.9% 25.19 +5.6% 23.85 +20.2% +5.0% 19.85 +5.0% 18.90 +5.0% 18.00 17.14 20.79 Total dividend 16.32 +5.0% 17.24 17.24 13.56 12.30 12.91 Final dividend 11.02 11.72 +15.8% 9.73 7.95 8.40 5.42 5.70 5.99 6.29 6.61 Interim dividend 5.30
Slide 10: Effective response to a broad range of challenges
Effective response to a broad range of challenges IFRS operating profit1, £m 2008 2009 2010 2011 2012 2013 • Liquidity crisis • Start of global • Greece and Ireland • Concern over • US debt ceiling • Concern over China recession bailouts China hard-landing & EM growth • Sub-prime market • Europe re-
Slide 11: Asia: Track record of successful execution
Asia Track record of successful execution New business profit1, £m IFRS operating profit2, £m 2.2x 4.9x CAGR CAGR +17% 659 +38% 547 512 465 435 396 359 296 286 291 233 104 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 Net cash remittances, £m 17.3x C
Slide 12: Asia: Long-term drivers intact
Asia Long-term drivers intact • Increasing share of world GDP growth to come from Asia • Strong demand for savings & protection products from growing middle class • Positioned in the right markets • Strong track-record of delivery 12 2013 HALF YEAR RESULTS
Slide 13: Long-term trends remain intact: GDP
Long-term trends remain intact GDP Asia‟s contribution to world GDP growth1, US$tn Asia‟s contribution xx% to absolute growth in world GDP c44% 21 30% 10% 6 1 1970-1990 1990-2010 2010-2030F Absolute growth in world GDP, $tn 15 21 47 1 Asia excluding Japan. Source: US Department of Agriculture – Econ
Slide 14: Long-term trends remain intact: Growing Asian middle class
Long-term trends remain intact Growing Asian middle class Middle Class population1, m Asia as a % of world middle class 28% 54% 66% 3,228 1.9x 1,740 3.3x Asia 525 Rest of 1,509 1,656 1,320 the World 2009 2020 2030 Asia as % of world population2 61% 61% 60% 1 Source: The emerging middle class in deve
Slide 15: Asia: Leading pan-Asian franchise
Asia Leading pan-Asian franchise Hong Kong Rank: 4 Singapore Malaysia Rank: 1 Rank: 1 Indonesia: Vietnam Rank: 1 Rank: 1 Philippines India Rank: 1 Rank: 1 Thailand China Rank: 11 Rank: 2 Cambodia Korea Sweet spot market Taiwan Rank: 17 Rank: 17 Source: Based on formal (Competitors‟ results release,
Slide 16: Asia: Sweet spot markets driving performance
Asia Sweet spot markets driving performance New business profit, £m IFRS life operating profit1, £m 2.6x 2.4x CAGR CAGR +27% +25% 613 401 487 345 403 273 327 220 232 166 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 Net cash remittances, £m 3.0x +32% 207 153 161 69
Slide 17: Asia: Significant protection gap in sweet spot markets
Asia Significant protection gap in sweet spot markets Share of medical expenses paid out-of-pocket (2011), % 60% 59% 56% 56% 50% 42% 35% 35% 33% 31% 16% 11% 9% USA UK Japan 1 World Health Organisation – Global Health Expenditure Database (2011). For Hong Kong – Food and Health Bureau, Government of
Slide 18: Asia: Creating customer and shareholder value
Asia Creating customer and shareholder value Health & Protection – Out-of-pocket Annual premium for a customer aged 50 medical expenses1 (indexed) 143 123 19 117 114 73 Saving 100 100 81 27 Spend Without Basic Government Prudential Prudential Co. A Co. B Co. C Co. D insurance insurance Protection pr
Slide 19: Asia: Two major routes to market
Asia Two major routes to market Number of agents in sweet spot Access to bank branches countries1, 000‟s 15,700 287 +1.2x +2.6x 110 > 13,000 HY 2009 HY 2013 2009 HY 2013 1 Sweet spot countries – Indonesia, Malaysia, Hong Kong, Singapore, Philippines, Vietnam and Thailand. 19 2013 HALF YEAR RESULTS
Slide 20: Asia: Indonesia
Asia Indonesia Building wider geographical reach 1995 2013 Agency offices: 3 Agency offices: > 320 • Clear market leader with wide Number of agents: 251 Number of agents: > 200,000 geographic reach Number of cities: 1 Number of cities: 137 • Growing agency scale and productivity • Expanding bancassu
Slide 21: Asia: Philippines
Asia Philippines Channel mix – APE sales, £m • Favourable macro trends 29 • Strong agency growth 27% Bancassurance • New leg – Bancassurance platform 8% DMTM • Unit-linked sales up 54% 5 65% Agency 27% 73% HY 2009 HY 2013 DMTM – Direct Marketing and Telemarketing. 21 2013 HALF YEAR RESULTS
Slide 22: Asia: Thailand
Asia Thailand Bank branches > 800 • Acquisition completed in May 2013 • Successful integration • Full product suite launched with H&P focus • First policy sold on 4th May 2013 183 • APE contribution of £5m • Agency opportunity with increasing Pre-Thanachart Life Current scale and visibility 22 2013
Slide 23: Asset Management: Eastspring
Asset Management Eastspring Funds under management, £bn 62 58 52 50 +48% 42 2009 2010 2011 2012 HY 2013 23 2013 HALF YEAR RESULTS
Slide 24: Asset Management: M&G
Asset Management M&G M&G IFRS operating profit1, £m M&G funds under management, £bn >50% External FUM as % of total FUM 234 31% 167 External FUM 118 204 51 172 175 116 116 Internal FUM 122 2007 HY 2013 108 113 75 M&G international retail FUM, £bn 5.6x 21.2 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY
Slide 25: UK: Delivering through regulatory change
UK Delivering through regulatory change Selective participation Robust capital Retail Life IFRS operating profit, £m 341 Inherited estate, £bn 7.8 318 271 6.8 7.0 314 6.4 6.1 303 307 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 2009 2010 2011 2012 HY 2013 Cash delivery to Group Net cash remittances, £m 2
Slide 26: Jackson: Proactive diversification
Jackson Proactive diversification Elite Access sales, $m VA sales, $bn 10.3 9.6 1,960 1.3 3.0 Without living benefits 8.3 7.3 With living benefits 218 HY 2012 HY 2013 HY 2012 HY 2013 26 2013 HALF YEAR RESULTS
Slide 27: Jackson: Disciplined growth
Jackson Disciplined growth Separate account value by S&P 500 level at policy issue “In the Money” from issue $97.7bn as of 30 June 20131 2% 7% 9% 11% 15% 16% 23% 17% (≤1000) (1000-1100) (1100-1200) (1200-1300) (1300-1400) (1400-1500) (1500-1600) >1600 1 Includes VAs allocated to General Account. 27
Slide 28: Jackson: Net remittances
Jackson Net remittances Net remittances, £m 2.4x 322 294 2013 1221 249 Objective £260m 144 122 80 39 2007 2008 2009 2010 2011 2012 HY 2013 1 Net remittances from Jackson include £122m in 2011 representing release of excess surplus to the Group. 28 2013 HALF YEAR RESULTS
Slide 29: Agenda
Prudential plc 2013 half year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 29 2013 HALF YEAR RESULTS
Slide 30: Delivering Growth and Cash
Delivering „Growth and Cash‟ Overview Growth & Profitability Cash & Capital HY 2013 builds on recent strong performance HY 2013 £m HY 2013 HY 2012 vs. HY 2012 New business profit 1,268 1,141 +11% IFRS operating profit1 1,415 1,157 +22% Growth IFRS operating EPS1 (pence) 42.2 34.6 +22% EEV per share
Slide 31: Growth in value and volume
Growth in value and volume Overview Growth & Profitability Cash & Capital Balancing value creation and capital consumption NBP, £m NBP margin, % 1,268 Group Life +11% 56% 59% IRR: >20% 1,141 659 547 +20% Payback: 4 years 61% 65% Asia Life IRR: >20% 442 +8% 479 Payback: 2 years 61% 60% US Life IRR: >
Slide 32: Growth in value and volume: drivers
Growth in value and volume Overview Growth & Profitability Cash & Capital Balancing value creation and capital consumption NBP, £m 1,268 Asia Group Life 1,141 +11% • Continued strong volume growth in high return markets of SE Asia 659 • Positive impact of rise in yields, particularly in 547 +20% Hon
Slide 33: New business profit: Strong underlying progress
New business profit Overview Growth & Profitability Cash & Capital Strong underlying progress New business profit, £m HY 2012 1,141 Volume 43 Mix/Pricing1 30 Economic Effect1 54 HY 2013 1,268 1 Economic and mix / pricing effects have been prepared excluding Elite Access which is included in volume e
Slide 34: Profitability – IFRS
Profitability – IFRS Overview Growth & Profitability Cash & Capital IFRS profits up 22% IFRS operating profit1, £m 1,397 1,181 +18% Life HY 2012 HY 2013 Group 1,415 1,157 +22% Asset 312 265 +18% Management and Other businesses HY 2012 HY 2013 HY 2012 HY 2013 HY 2012 HY 2013 Other income and expenses
Slide 35: Profitability – IFRS by region
Profitability – IFRS Overview Growth & Profitability Cash & Capital IFRS profits up 22% IFRS operating profit1, £m 1,397 HY 2012 HY 2013 1,181 +18% Asia 403 474 US 442 582 Life UK 336 341 HY 2012 HY 2013 Group 1,415 1,157 +22% Asset 312 265 +18% Management and Other businesses HY 2012 HY 2013 HY 201
Slide 36: Delivering growth: Strong growth in Life
Delivering growth Overview Growth & Profitability Cash & Capital Strong growth in Life Net inflows1, £m CAGR 12% 5,201 5,871 • First half net inflows equivalent to 4% of 5,014 4,231 opening reserves (HY 2012: 4%) • Total net inflows of £30.8bn over the last three years HY 2010 HY 2011 HY 2012 HY 201
Slide 37: Diversified Life earnings
Profitability – IFRS Overview Growth & Profitability Cash & Capital Diversified Life earnings Life operating profit1 by region, £m 1,397 US operating profit, £m +18% 1,181 582 341 56 REALIC 442 +1% 336 UK +16% 818 „Gross profits‟ 582 703 +32% 442 US Decelerated DAC 25 20 (204) (219) Core DAC +18% 47
Slide 38: Diversified and resilient Life earnings
Profitability – IFRS Overview Growth & Profitability Cash & Capital Diversified and resilient Life earnings IFRS operating income1,2, £m Growth % HY 2013 vs. HY 2012 2,067 +18% 5% 1,752 7% -25% -5% 7% 9% 26% +1% 31% 32% +31% 29% 30% +46% 24% HY 2012 HY 2013 Insurance margin Fee income Spread income
Slide 39: IFRS source of earnings: Asia
IFRS operating profit – source of earnings Overview Growth & Profitability Cash & Capital Life insurance - Asia Total operating profit1 HY 2013 HY 2012 +/- £m except reserves £bn 474 403 18% = Total Life income Total Life expenses DAC adjustments - - 1,267 1,036 22% (802) (671) (20)% 9 38 (76)% Spre
Slide 40: IFRS source of earnings: US
IFRS operating profit – source of earnings Overview Growth & Profitability Cash & Capital Life insurance - US Total operating profit1 HY 2013 HY 2012 +/- £m except reserves £bn 582 442 32% = Total Life income Total Life expenses 2012 Expense deferrals - + 1,197 945 27% (788) (722) (9)% 372 398 (7)%
Slide 41: IFRS source of earnings: UK
IFRS operating profit – source of earnings Overview Growth & Profitability Cash & Capital Life insurance - UK Total operating profit1 HY 2013 HY 2012 +/- £m except reserves £bn 341 336 1% = Total Life income Total Life expenses DAC adjustments - - 461 467 (1)% (113) (127) 11% (7) (4) (75)% Spread Te
Slide 42: IFRS profits up 22%
Profitability – IFRS Overview Growth & Profitability Cash & Capital IFRS profits up 22% IFRS operating profit1, £m 1,397 HY 2012 HY 2013 1,181 +18% Asia 403 474 US 442 582 Life UK 336 341 HY 2012 HY 2013 Group HY 2012 HY 2013 1,415 M&G 175 204 1,157 +22% Asset 312 PruCap 24 21 265 +18% Management Ea
Slide 43: IFRS source of earnings: Asset management
IFRS operating profit – source of earnings Overview Growth & Profitability Cash & Capital Asset management Asset management HY 2013 HY 2012 +/- £m except assets £bn operating profit1,2 242 207 17% M&G operating Eastspring profit Investments 204 175 17% 38 32 19% Underlying income Other income3 Total
Slide 44: Profitability – EEV
Profitability – EEV Overview Growth & Profitability Cash & Capital Return on Embedded Value of 16% In-force1, £m HY 2012 HY 2013 Experience 192 220 variance 1,229 Life operating profit, £m +20% Assumption 75 57 1,025 275 changes Variances 264 Dev costs (3) (2) +15% 2,497 /Other 2,166 404 954 -18% 76
Slide 45: Equity shareholders' funds
Equity shareholders‟ funds Overview Growth & Profitability Cash & Capital Summary of movement IFRS Equity1 EEV Equity % vs. % vs. £bn EPS (p) £bn EPS (p) HY 2012 HY 2012 After-tax operating profit 1.1 +23% 42 1.8 +18% 71 Investment variance2 (0.7) (28) 0.1 5 Profit for the period 0.4 -59% 14 1.9 +41
Slide 46: Balance sheet: Defensive positioning maintained
Balance sheet Overview Growth & Profitability Cash & Capital Defensive positioning maintained Maintained capital strength • IGD surplus £3.9bn equivalent to a cover of 2.3 times • With-profits estate £7.8bn (31 December 2012: £7.0bn) Strong liquidity position • Issued perpetual bond for $700m in Jan
Slide 47: Cash and capital generation: Increasing free surplus stock
Cash and capital generation Overview Growth & Profitability Cash & Capital Increasing free surplus stock Evolution of free surplus1, £m x% Free surplus cover +35% 1,548 195% M&G 175 309 4,988 197% UK 304 US 612 (396) (162) 4,144 3,689 Asia 457 (844) M&G 511 M&G 392 Reinvestment rate = 26% UK 1,039 U
Slide 48: Historic free surplus emergence
Cash and capital generation Overview Growth & Profitability Cash & Capital Historic free surplus emergence Use of free surplus generated1, 2010 – HY 2013, £bn 11.6 11.6 Return on 0.4 net worth Asset mgt 1.3 Experience / Cash 0.9 4.1 assumptions remitted to Group Market / other 1.2 Expected movements
Slide 49: Historic free surplus emergence and objectives
Cash and capital generation Overview Growth & Profitability Cash & Capital Historic free surplus emergence Use of free surplus generated1, 2010 – HY 2013, £bn Net surplus 59% average remittance ratio 2010 - 2013 Cumulative Objectives generated 6.9 Return on 0.4 Expected net free surplus generated: £
Slide 50: Delivering Growth and Cash
Delivering „Growth and Cash‟ HY 2013 builds on recent strong performance HY 2013 £m HY 2013 HY 2012 vs. HY 2012 New business profit 1,268 1,141 +11% IFRS operating profit1 1,415 1,157 +22% Growth IFRS operating EPS1 (pence) 42.2 34.6 +22% EEV per share (pence) 958 806 +19% Free surplus generation1 1
Slide 51: Agenda
Prudential plc 2013 half year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 51 2013 HALF YEAR RESULTS
Slide 52: Asia markets: Sweet spot and nascent
Asia Prudential customers as a GDP 2014 GDP % of total population2 ($bn)2 growth (%)2 Indonesia (1995)1 0.8% 878 6.4 Philippines (1996) 0.1% 250 5.5 Sweet Spot markets Thailand (1995) 0.5% 366 4.2 Vietnam (1999) 1.4% 138 5.2 Hong Kong (1964) 11.2% 263 4.4 Malaysia (1924) 6.3% 303 5.2 Singapore (1931
Slide 53: Summary
Summary • Double digit growth for NBP, IFRS and Cash • Profitable growth in Asia and cash generation from all businesses • More of the same • There remains significant untapped growth potential for Prudential 53 2013 HALF YEAR RESULTS
Slide 54: Prudential
b PRUDENTIAL
Slide 55: 2013 Investor Day
2013 Investor Day 3rd December 2013 London RSVP: [email protected] 55 2013 HALF YEAR RESULTS
Slide 56: Appendix
b PRUDENTIAL
Slide 57: Strategy and operating principles
Strategy We have a clear strategy underpinned by clear operating principles Strategy Operating Principles Balanced Metrics & Disclosures Focus on Customers and Distribution Proactive Disciplined risk capital management allocation 57 2013 HALF YEAR RESULTS
Slide 58: Asia: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 US GDP Hong Kong per capita 30,000 Singapore Pan Asian leader: #1 by NBP2 25,000 Taiwan Korea Top 3 in 5 /11 Asian Countries3 20,000 Market leading platform 15,000 • Over 400K agents Malaysia • Access t
Slide 59: Focusing on higher earnings quality
Focusing on higher earnings quality Sources of earnings Sources of IFRS operating income1, £m CAGR 2,067 +17% 5% 1,752 7% 1,594 7% 1,385 8% 9% 26% +10% 9% 11% 1,092 12% 31% Expected return 15% 33% 32% With-profits 14% 33% 29% 62% +32% Spread income 33% 26% 23% 53% 48% Fee income 19% 46% 30% 38% 22%
Slide 60: Disciplined capital allocation
Disciplined capital allocation New business profit growth New business strain1,2, £m New business profit2, £m +125% 1,268 1,141 130 1,069 152 892 146 479 135 +17% 700 442 458 562 122 361 396 UK 129 339 337 364 292 319 297 20 137 22 US 659 45 35 UK 93 33 211 547 180 465 168 179 135 396 US 157 Asia 29
Slide 61: Delivering cash: Free surplus generation
Delivering cash Free surplus generation Free surplus and dividend, £m 2.6x Reinvestment rate 26% Reinvestment Reinvestment rate 21% rate 26% Reinvestment rate 27% 396 297 364 337 Reinvestment Reinvestment rate 34% rate 40% Reinvestment rate 35% 318 1,548 339 1,388 1,395 1,258 197 251 1,152 1,091 189
Slide 62: Free surplus and cash remittances
Delivering cash Free surplus and cash remittances Underlying free surplus generated1, £m Business unit net remittances, £m +12% 844 1,152 +16% 1,091 M&G 1,031 726 134 incl PruCap 690 921 226 UK 460 609 503 375 334 294 US Asia 190 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2008 HY 2009 HY 201
Slide 63: Central cash resources
Cash and capital Central cash resources Development of central cash resources, £m FY 2011 FY 2012 HY 2013 1,105 1,200 844 (289) (132) (296) 1,490 1,380 1,380 (532) (655) (70) 1,232 (642) 1,200 1,200 (76) (199) Operating holding co Operating holding co Operating holding co cashflow +£167m cashflow +£
Slide 64: Growth – On track to Double Asia
2013 Growth and Cash objectives Growth – On track to „Double Asia‟ CAGR +19% 988 930 Doubling Asia Life and 784 Asset Management IFRS 604 553 operating profit1,2,3, £m 465 417 309 H2 237 435 +18% 512 295 367 H1 228 2009 2010 2011 2012 2013 2013 Objective CAGR +19% 1,426 Doubling Asia value of 1,266
Slide 65: Net cash remittances: UK and other
Net cash remittances UK and other Business unit net remittances, £m CAGR (UK Life + Other) +20% 618 496 425 268 263 265 237 230 226 192 197 91 97 107 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 UK Life Other 65 2013 HALF YEAR RESULTS
Slide 66: Dividend: Interim dividend increased by 15.8%
Dividend Interim dividend increased by 15.8% Dividend, pence per share Total dividend 29.19 • Interim dividend increased by 15.8 per cent to 9.73 pence per share Final dividend 20.79 • Ex-dividend date: 21 August 2013 • Record date: 23 August 2013 • Payment of dividend: 26 September 2013 +15.8% Inte
Slide 67: New business growth: Group life APE
New business growth Group life APE Life APE1, £m +7% H1 10: £1,655m H2 10: £1,830m H1 11: £1,824m H2 11: £1,857m H1 12: £2,030m H2 12: £2,165m H1 13: £2,162m 1,117 1,124 1,066 1,048 1,021 1,038 977 964 936 888 880 848 807 809 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1
Slide 68: New business growth: Group life new business profit
New business growth Group life new business profit Life new business profit1, £m +11% H1 10: £892m H2 10: £1,136m H1 11: £1,069m H2 11: £1,082m H1 12: £1,141m H2 12: £1,311m H1 13: £1,268m 714 705 683 616 605 597 571 563 536 498 465 453 466 427 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q
Slide 69: Returns on new business investment
New business growth Group life returns on new business investment Post-tax new business profit per £ of new business strain1 2.5 2.3 2.2 1.9 1.4 1.1 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 1 Free surplus invested in new business; excludes Japan. 69 2013 HALF YEAR RESULTS
Slide 70: Asia Life: APE by quarter
Asia Life APE by quarter Asia APE1 by quarter, £m 2008 2009 2010 2011 2012 HY 2013 1,174 1,209 1,501 1,660 1,897 1,010 27 28 17 39 18 21 35 22 52 26 16 31 73 46 48 89 37 542 47 35 56 40 498 20 485 456 414 408 438 407 378 351 336 360 286 308 305 236 259 227 244 220 228 242 Q1 08 Q2 08 Q3 08 Q4 08 Q1
Slide 71: Asia Life: APE by market
Asia Life APE by market Asia APE by market, £m +17% 240 +21% 214 206 +21% 177 170 141 +1% -49% 98 99 88 +38% +6% 62 +42% 53 56 45 47 45 +38% +32% +28% 33 29 25 21 19 18 23 Indonesia Hong Kong Singapore Malaysia1 Korea India 26%2 China 50%3 Taiwan Philippines4 Thailand Vietnam 1st 4th 1st 1st 17th 1s
Slide 72: Asia Life: APE sales by product
Asia Life APE sales by product - percent 3 3 3 4 2 2 4 3 4 5 3 3 3 3 3 5 4 5 6 5 5 5 7 7 8 7 14 18 19 21 17 19 20 23 26 26 27 29 30 30 28 25 33 33 33 33 33 35 34 31 34 34 18 17 18 20 20 19 22 30 24 27 27 24 25 30 27 31 29 32 24 30 32 34 30 33 34 29 62 65 60 57 59 59 55 44 46 43 44 44 42 38 39 37 36
Slide 73: US retail sales and deposits
US retail sales and deposits HY 2013 Retail sales and deposits, $m HY 2012 = $12,278m HY 2013 = $13,152m $1,333 $493 $1,456 $457 $17 $2 $794 $957 $218 $1,960 $8,320 $9,423 Fixed Annuities Elite Access Life insurance Variable Annuities Index Annuities Curian 73 2013 HALF YEAR RESULTS
Slide 74: US Life: VA volumes
US Life VA volumes VA volumes by quarter, sales US$m 42% 43% 81% 72% 69% 65% 68% 5,656 5,715 5,258 412 •„Features War‟ 4,974 218 1,124 4,553 4,427 4,565 4,383 4,176 4,212 715 836 3,686 3,658 3,756 3,335 3,134 2,909 2,368 2,370 2,324 2,250 2,052 1,780 1,769 1,505 1,412 1,508 Q1 07 Q2 07 Q3 07 Q4 07 Q
Slide 75: US Life: Variable annuity distribution
US Life Variable annuity distribution Variable annuity sales by distribution channel, US$bn HY 2013 includes $2.0bn of Elite Access sales +7.3% 10.3 9.6 6.5 6.1 1.9 1.9 1.6 1.9 HY 2012 HY 2013 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 75 2013 HALF YEAR RESUL
Slide 76: US Life: New business margin
US Life New business margin New business margin – % APE 73% 66% 68% 37% 31% 19% Variable Annuities US Other HY 2011 HY 2012 HY 2013 76 2013 HALF YEAR RESULTS
Slide 77: US IFRS profit: DAC impact on results
US IFRS profit DAC impact on results Impact on results of DAC amortisation, £m 2012 HY 2012 HY 2013 Gross profits1 1,427 703 818 New business strain2 (174) (82) (93) DAC Amortisation - Core (412) (204) (219) - (acceleration) / deceleration 56 25 20 Operating result 897 442 526 Core as % of Gross pro
Slide 78: US Life: Policyholder behaviour
US Life Policyholder behaviour Optional benefits elected, % of initial benefits elected (New business) 86% 82% 80% 79% 66% 55% 42% 28% 14% 15% 11% 5% 6% 5% 5% 5% 2006 2007 2008 2009 2010 2011 2012 HY 2013 No benefit GMWB (for life) 78 2013 HALF YEAR RESULTS
Slide 79: US Life: Asset growth
US Life Asset growth Growth in statutory admitted assets, US$bn 153.6 142.8 107.6 97.5 91.1 80.1 81.0 76.7 69.3 70.9 58.8 62.8 48.9 55.6 30.0 33.3 50.9 22.3 20.9 46.6 14.7 40.2 43.0 10.4 4.4 7.1 5.6 5.1 62.7 62.5 43.8 45.2 48.1 47.1 46.7 50.0 47.7 48.6 48.8 37.9 42.2 34.6 2000 2001 2002 2003 2004 20
Slide 80: IFRS impact below-the-line: Hedging result
Hedging result IFRS impact „below-the-line‟ 2013 Half Year VA hedge results, net of related DAC, £m 0 (100) (200) 175 (300) (400) (500) (475) 88 (546) (600) (334) (700) Equity hedge VA reserve Interest rate Non-operating IFRS net instruments changes hedges fee income, hedge result net of claims 80 2
Slide 81: Moving IFRS hedge result to economic result
Hedging result Moving IFRS hedge result to „economic‟ result 2013 half year VA „economic‟ hedge results, net of related DAC, £m 0 74 (100) (104) 62 (200) 121 (300) 185 (400) (500) (546) (600) (700) IFRS net hedge Adjustment Fair value Adjustments to Other „Economic‟ results to full fees adjustment o
Slide 82: Life IFRS operating profit: Source of earnings
Life IFRS operating profit Source of earnings Technical and other Spread income Fee income With-profits margin The net investment The fees net of Profits derived from Our share of bonus return we make investment expenses the insurance risks of declared by the with- primarily on annuity charged on ou
Slide 83: Life IFRS operating profit: Source of earnings
Life IFRS operating profit Source of earnings Technical and other INCOME Spread income Fee income With-profits margin LIFE Expected return on shareholder assets - +/- EXPENSES LIFE Acquisition Administration DAC Other costs expenses adjustments adjustments = LIFE OPERATING PROFIT 83 2013 HALF YEAR R
Slide 84: Source of earnings – Group (1/3)
Life IFRS operating profit Source of earnings – Group (1/3) Source HY 2013 HY 2012 +/- INCOME Total Life income £m LIFE 2,925 2,448 19% - +/- EXPENSES Total Life expenses DAC adjustments LIFE (1,703) (1,520) (12)% 175 253 (31)% = Total Life operating profit 1,397 1,181 18% Note: Comparatives adjuste
Slide 85: Source of earnings – Group (2/3)
Life IFRS operating profit Source of earnings – Group (2/3) Total Operating profit Source HY 2013 HY 2012 +/- 1,397 1,181 18% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments1 - +/- 2,925 2,448 19% (1,703) (1,520) (12)% 175 253 (31)% Technical and Spread income Fee inco
Slide 86: Source of earnings – Group (3/3)
Life IFRS operating profit Source of earnings – Group (3/3) Source HY 2013 HY 2012 +/- £m except reserves £bn Total Life expenses (1,703) (1,520) (12)% Administration Acquisition costs1 expenses (1,021) (972) (5)% (682) (548) (24)% Admin expense APE2 2,162 2,030 7% ratio (bps) (82) (81) (1) Acquisit
Slide 87: Life IFRS operating income – Asia
Life IFRS operating income – Asia Sources of income Asia IFRS operating income1, £m Growth % HY 2013 vs. HY 2012 489 6% +38% 408 4% +23% 12% +17% 5% 4% 12% 16% +22% 16% 62% +18% 63% HY 2012 HY 2013 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Exclude
Slide 88: Life IFRS operating income – US
Life IFRS operating income – US Sources of income US IFRS operating income1, £m Growth % 1,197 HY 2013 vs. HY 2012 0% (89)% 945 32% +8% 4% 37% 46% +36% 43% 22% +71% 16% HY 2012 HY 2013 Insurance margin Fee income Spread income Expected return on shareholder assets 1 Excludes margin on revenues, acqu
Slide 89: Life IFRS operating income – UK
Life IFRS operating income – UK Sources of income UK IFRS operating income1, £m Growth % HY 2013 vs. HY 2012 399 381 18% (13)% 17% 37% 35% (9)% 27% (23)% 33% 9% (6)% 9% 12% +336% 3% HY 2012 HY 2013 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Exclude
Slide 90: Higher quality earnings: Cash profit
Life IFRS operating income Higher quality earnings “Cash profit”1: Income2 - Expenses (before impact of DAC adjustment), £m 1.5x (1,703) (1,520) (1,388) 2,925 (1,255) 1,222 2,448 2,222 928 1,991 834 736 US Life + 757 UK Life 563 509 494 465 Asia Life 242 325 365 Life Expenses “Cash Life Expenses “Ca
Slide 91: Shareholder backed business – Group
Policyholder liabilities Shareholder backed business – Group Policyholder liabilities1 roll-forward, £bn 3.0 179.2 5.2 7.3 170.3 1.0 (0.3) 163.0 Net inflows2 £5.9bn 3.5% of CER opening reserves of which: unit linked & separate account £4.4bn; other reserves £1.5bn Liabilities Foreign CER Asia US UK
Slide 92: Shareholder backed business – Asia
Policyholder liabilities Shareholder backed business – Asia Policyholder liabilities roll-forward, £m 2,379 66 22,903 585 21,798 21,213 (1,340) Net inflows1 £1,039m 4.8% of CER opening policyholder liabilities Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2013 Exc
Slide 93: Shareholder backed business – US
Policyholder liabilities Shareholder backed business – US Policyholder liabilities roll-forward, £m 8,208 2,038 106,215 6,748 99,009 92,261 (3,040) Net inflows1 £5,168m 5.2% of CER opening reserves Liabilities Foreign CER Opening Premiums Maturities, Investment Liabilities 1 Jan 2013 Exchange liabil
Slide 94: Shareholder backed business – UK
Policyholder liabilities Shareholder backed business – UK Policyholder liabilities roll-forward1, £m 2,090 49,505 901 50,070 (2,426) Net inflows1 £(336)m -0.7% of opening reserves Liabilities Shareholders‟ Shareholders‟ Investment Liabilities 1 Jan 2013 Premiums maturities, deaths related and 30 Jun
Slide 95: Asset management: Group 3rd party net-inflows
Asset management Group 3rd party net-inflows Asset Management movement in 3rd party FUM1, £m 2,063 137,407 2,006 135,344 3,840 129,498 Opening 3rd M&G Asia2 Sub-Total Investment Closing 3rd party FUM net flows markets/other party FUM 1 Excludes Asia MMF. 95 2013 HALF YEAR RESULTS
Slide 96: Asset Management: M&G net retail sales
Asset Management M&G net retail sales Average monthly gross and net retail sales, £m 3,000 2,500 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 HY 2013 Gross sales Net sales 96 2013 HALF YEAR RESULTS
Slide 97: IFRS shareholders' funds: HY 2013 movement
IFRS shareholders‟ funds HY 2013 movement Analysis of movement in IFRS shareholders‟ funds, £m -2% 1,415 10,359 (755) (30) (124) 232 59 10,157 (141) 9,625 (21) (837) (532) Shareholders‟ Operating Short term Amortisation of Sale of Japan Tax and Net movement FX impact (net Actuarial loss / Other1 Sub
Slide 98: Life operating variances – Group
EEV operating profit Life operating variances – Group Group Life operating variances, £m Experience variances and assumption changes % opening EEV1 0.6% 0.1% 1.1% 0.5% (0.5)% 0.6% 1.4% 1.4% 1.2% 954 822 769 761 678 677 596 506 351 267 277 252 125 94 53 67 13 (77) HY 2005 HY 2006 HY 2007 HY 2008 HY 2
Slide 99: Life operating variances – Asia
EEV operating profit Life operating variances – Asia Asia Life operating variances, £m Experience variances and assumption changes % of opening EEV1 1.0% (0.4)% 1.0% (0.6)% (2.6)% (0.9)% (0.3)% 0.1% 0.2% 400 330 318 296 244 191 117 142 80 15 25 20 9 (8) (24) (20) (53) (137) HY 2005 HY 2006 HY 2007 H
Slide 100: EEV shareholders' funds: HY 2013 movement
EEV shareholders‟ funds HY 2013 movement Analysis of movement in EEV shareholders‟ funds, £m +12% 2,479 203 693 20 25,054 684 24,522 (26) (47) (532) (587) (808) 22,443 Shareholders‟ Operating Short term Economic Mark to Actuarial Sale of Tax and FX impact Other Sub-total Dividend Shareholders‟ funds
Slide 101: IGD capital: Base and sensitivities
IGD capital Base and sensitivities IGD sensitivity analysis 20% fall in equity markets £(250)m 40% fall in equity markets1 £(850)m 10x expected defaults £(700)m • Sensitivities shown are as at 30 June 2013, based on Jackson‟s contribution to IGD capital at that time 100bps fall in interest rate • Wi
Slide 102: IGD capital: Movement during the period
IGD capital Movement during the period IGD capital – movement in first half of 2013 (£bn) IGD surplus 31 December 2012 5.1 Impact of amended contribution from Jackson (as agreed with PRA) (1.2) Net capital generation 1.0 Impact of Thanachart transaction (0.3) Reduction in SHIFT asset allowance1 (0.2
Slide 103: Invested assets: Group overview
Invested assets Group overview Breakdown of invested assets – HY 2013, £bn Total PAR Unit- Shareholders Group Funds Linked Asia Life US Life UK Life Other Total Debt securities 138.3 60.4 9.6 6.4 33.4 26.6 1.9 68.3 Equity 112.3 25.9 85.4 0.6 0.3 0.0 0.1 1.0 Property Investments 10.6 8.4 0.6 0.0 0.0
Slide 104: Group shareholder exposures – Sovereign debt
Invested assets Group shareholder exposures – Sovereign debt Breakdown of the shareholder SH sovereign exposures by regions & ratings1, £m debt securities portfolio, % US UK Europe Asia Other Total AAA - 3,533 427 125 - 4,085 AA-BBB 3,434 - 117 1,695 32 5,278 Below BBB - - - 996 - 996 Total 3,434 3,
Slide 105: Group shareholder exposures – hybrid bank debt
Invested assets Group shareholder exposures – hybrid bank debt Breakdown of the shareholder debt securities portfolio, % Exposure to Tier 1 and Tier 2 hybrid bank debt, £m Banks Other US UK France Germany “PIIGS” Other Total Eurozone Total 3% Tier 2 462 656 71 18 34 80 338 1,659 £68.3bn Tier 1 18 11
Slide 106: Resilient balance sheet: PIIGS exposure
Resilient balance sheet Total PIIGS sovereign and bank debt of only £290m Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets – PIIGS countries as at 30 June 2013, £m PIIGS sovereign Sovereign Bank debt & bank debt Institution Covered Senior Tier II Tier I Total BCP
Slide 107: UK asset quality – credit reserve
Invested assets UK asset quality – credit reserve UK shareholder debt securities Strength of the £2.0bn credit reserve portfolio by rating1 BB or below 3% • No defaults of shareholder-backed debt securities BBB AAA 14% • Allowance for credit risk as at 30 June 2013 materially in line with prior year
Slide 108: US asset quality – corporate debt portfolio (1/3)
Invested assets US asset quality – corporate debt portfolio (1/3) US Shareholder Debt Securities Portfolio Market value, £bn £33.4bn <1 Corporate Bond Portfolio, % by rating Other 3 CMBS BB and AAA and 2 below RMBS AA 4 Govt 5% 4% 1 HY A 44% Total 40% A or £24.0bn above 51% Corporate IG BBB Bonds 23
Slide 109: US asset quality – corporate debt portfolio (2/3)
Invested assets US asset quality – corporate debt portfolio (2/3) US Shareholder Debt Securities Portfolio Market value, £bn £33.4bn <1 Investment Grade Corporate Bond Portfolio, % by sector Other 3 CMBS Automotive 1% 2 RMBS Banking Utility Basic Govt 4 Industry • Portfolio spread 1 6% over 713 issu
Slide 110: US asset quality – corporate debt portfolio (3/3)
Invested assets US asset quality – corporate debt portfolio (3/3) US Shareholder Debt Securities Portfolio Market value, £bn £33.4bn <1 High Yield Corporate Bond Portfolio, % by sector Other 3 CMBS 2 RMBS Basic Automotive Industry Govt 4 • Portfolio spread Utility 1 10% 12% Capital across 145 HY 4%
Slide 111: US asset quality – RMBS portfolio
Invested assets US asset quality – RMBS portfolio US Shareholder Debt Securities Portfolio Market value, £bn Breakdown of the RMBS portfolio – £bn £33.4bn <1 Other Market Value £m FV Price 3 CMBS 2006/07 1 15 2 RMBS 2005 3 72 2.2 1.2 4 Pre 2005 63 86 Govt 1 HY 0.3 0.1 0.2 0.3 0.1 Total Agency Sub Se
Slide 112: US asset quality – CMBS portfolio
Invested assets US asset quality – CMBS portfolio US Shareholder Debt Securities Portfolio Market value, £bn CMBS portfolio, % by rating £33.4bn <1 Other 3 CMBS BB and 2 RMBS lower = 2% BBB • Average credit enhancement Govt 4 of the non-agency portfolio is 1 9% 31% HY 39% AAA • 91% of the portfolio
Slide 113: US asset quality – commercial mortgage loan portfolio
Invested assets US asset quality – commercial mortgage loan portfolio Breakdown by property type, % • High level of diversification – Average loan size of £7m Hotels – Spread across property type – Geographic diversification 9% Industrial 28% • Strong underwriting discipline Retail 17% – Portfolio p
Slide 114: Cash and capital: Net remittances (1/2)
Cash and capital Net remittances (1/2) Group objectives 2010-13, £bn HY 2009 2010 2011 2012 Target 2013 2013 £m £m £m £m Remittance ratio >55% £m UK with-profit 284 202 223 216 206 UK shareholder- 350 £6.9bn 150 218 74 97 20 backed1 US4 39 80 322 249 294 260 £4.1bn Asia2 40 233 206 341 190 300 £6.5b
Slide 115: Cash and capital: Net remittances (2/2)
Cash and capital Net remittances (2/2) Group objectives 2010-13, £bn 2010- HY HY 2013 £m 2010 2011 2012 2013 Total Remittance ratio >55% Actual free surplus 1,690 1,862 1,923 1,065 £6.9bn Operating variances 220 188 295 203 Expected return on 139 110 96 41 free assets £4.1bn Asset management 310 376
Slide 116: Prudential plc 2013 Half Year Results
Prudential plc 2013 Half Year Results Delivering „Growth and Cash‟ 12 August 2013