Prudential Plc · LSE:PRU
Prudential — FY2013 Earnings Presentation
148 slides from Prudential's earnings presentation, Mar 12, 2014
Slide 1: 2013 Full Year Results: Delivering 'Growth and Cash'
Prudential plc 2013 Full Year Results Delivering ‘Growth and Cash’ 12 March 2014 1 2013 FULL YEAR RESULTS
Slide 2: Forward-Looking Statements
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, includin
Slide 3: Agenda
Prudential plc 2013 full year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 3 2013 FULL YEAR RESULTS
Slide 4: Agenda: Group Performance
Agenda Group Performance Asia Jackson UK Life M&G Cash 4 2013 FULL YEAR RESULTS
Slide 5: 2013 full year financial headlines
Group Asia Jackson UK Life M&G Cash 2013 full year financial headlines Performance Strong performance on key metrics Change Change £m 2013 2012 AER1 (%) CER1 (%) IFRS operating profit2 2,954 2,520 +17% +18% Growth New business profit 2,843 2,452 +16% +17% EEV operating profit 5,580 4,313 +29% +31% F
Slide 6: 2013 Growth and Cash objectives
Group Asia Jackson UK Life M&G Cash 2013 Growth and Cash objectives Performance ALL objectives achieved 2013 Growth and Cash objectives1, £m 2009 2013 2013 £m Objective1 Growth Asia new business profit 713 1,460 1,426 2013 1 Asia IFRS operating profit2 465 1,075 930 2012 2 Asia net remittance 40
Slide 7: 2013 highlights
Group Asia Jackson UK Life M&G Cash 2013 highlights Performance More of the same, just better • Acquired 1.9 million customers in Asia • Standard Chartered bancassurance partnership expanded and extended for 15 years • Successful integration and launch of Thanachart • Hong Kong with-profits domestic
Slide 8: High quality, growing earnings
Group Asia Jackson UK Life M&G Cash Group Performance High quality, growing earnings Sources of IFRS operating income1, £m 2008-2013 CAGR 4,334 +18% 216 3,681 298 205 3,192 311 1,073 +15% 2,862 200 242 331 1,061 2,212 342 1,899 248 1,049 1,391 1,534 213 310 998 1,423 1,077 425 63% 750 +31% 870 537 6
Slide 9: Diversified sources of cash
Group Asia Jackson UK Life M&G Cash Group Performance Diversified sources of cash Net cash remittances, £m 1,341 1,200 1,105 292 M&G 13.5x 297 935 280 355 UK 202 688 313 297 515 175 420 294 US 417 249 167 277 139 322 434 80 99 199 94 119 341 400 Asia 62 45 48 122 233 206 110 144 39 85 37 40 28 5 (96
Slide 10: 2017 objectives
Group Asia Jackson UK Life M&G Cash 2017 objectives Performance A new set of challenging objectives Asia underlying free surplus1, £m Asia IFRS operating profit2, £m Free surplus of £0.9bn to £1.1bn At least 15% CAGR from 2012-17 £1.1bn £0.9bn > 1,858 573 1,075 484 924 2012 2013 2017 2012 2013 2017
Slide 11: Macro environment: more supportive in the West
Group Asia Jackson UK Life M&G Cash Macro environment Performance More supportive in the West GDP growth forecasts Annual growth rates1, % US UK Eurozone 2.8 2.4 1.9 1.7 1.0 -0.4 2013 2014E 2013 2014E 2013 2014E 1 IMF World Economic Outlook – January 2014. 11 2013 FULL YEAR RESULTS
Slide 12: Agenda: Asia
Agenda Group Performance Asia Jackson UK Life M&G Cash 12 2013 FULL YEAR RESULTS
Slide 13: Growth resilient in developing Asia
Group Asia Jackson UK Life M&G Cash Macro environment Performance Growth resilient in developing Asia GDP growth estimates Annual growth rates1, % 6.7 6.8 6.5 2.2 2.3 1.3 2013 2014E 2015E 2013 2014E 2015E Advanced Economies Developing Asia 1 IMF World Economic Outlook – January 2014. 13 2013 FULL YE
Slide 14: Middle class contribution to GDP
Group Asia Jackson UK Life M&G Cash Asia Performance Middle class contribution to GDP Middle class in Asia (sweetspot)1, $bn 1,000 Lehman collapse Dotcom bubble SARS scare US Black Monday crash Mexico: Tequila crisis Russian Rouble crisis Asia currency crisis 0 1983 1980 1981 1982 1984 1985 1986 198
Slide 15: Growing demand for healthcare
Group Asia Jackson UK Life M&G Cash Asia Performance Growing demand for healthcare Household consumption by category1, % 100% = $1.3tn 6 Personal items 14 Recreation 3 Education 12 Transportation 3 Communications 5 Clothing 7 Healthcare 5 Household products 100% = $0.5tn 15 Housing 5 14 Discretionar
Slide 16: Growing demand for healthcare
Group Asia Jackson UK Life M&G Cash Asia Performance Growing demand for healthcare Household consumption of healthcare and medical services1, $bn 92 3.3x 28 1990 2010 1 Euromonitor, McKinsey, Prudential estimates. 16 2013 FULL YEAR RESULTS
Slide 17: Significant protection gap in sweetspot markets
Group Asia Jackson UK Life M&G Cash Asia Performance Significant protection gap in sweetspot markets Share of medical expenses paid out-of-pocket1, % 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
Slide 18: Competition
Group Asia Jackson UK Life M&G Cash Asia Performance Competition Prudential # of players Entrants since Rank 2005 Hong Kong 4 59 8 Indonesia 1 41 9 Malaysia – Conventional 2 14 4 Malaysia – Takaful 1 11 3 Philippines 1 34 1 Singapore 1 19 8 Thailand 9 24 1 Vietnam 1 14 11 *Ranking is based on new bu
Slide 19: Distribution – Agency
Group Asia Jackson UK Life M&G Cash Asia Performance Distribution – Agency Number of agents in sweetspot1 countries, 000’s 285 2.7x 107 2008 2013 1 Sweetspot countries include Indonesia, Malaysia, Hong Kong, Singapore, Thailand, Philippines and Vietnam. 19 2013 FULL YEAR RESULTS
Slide 20: Distribution – Bancassurance
Group Asia Jackson UK Life M&G Cash Asia Performance Distribution – Bancassurance SCB bancassurance relationship, APE 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 2013 FULL YEAR RESULTS
Slide 21: Affordable products underpin consumer demand
Group Asia Jackson UK Life M&G Cash Asia Performance Affordable products underpin consumer demand Prudential product premium1 Developed markets health insurance spend2 Healthcare spend as % of average annual income2 100% = average annual income 12% 11% 11% Linked 10% 46 premium Premiums paid = 9% of
Slide 22: Powerful momentum
Group Asia Jackson UK Life M&G Cash Asia Performance Powerful momentum Asia APE by quarter1, £m 1,174 1,209 1,501 1,660 1,897 2,125 602 569 515 513 513 495 456 443 435 429 404 403 376 367 359 354 353 325 296 282 279 276 274 248 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 23: Indonesia
Group Asia Jackson UK Life M&G Cash Asia Performance Indonesia IFRS operating profit, £m • 2013 underlying1 IFRS operating profit growth of 23% 2.9x 260 291 • Unrivalled distribution platform 212 102 157 – Over 197,000 agents – Access to > 700 branches 2009 2010 2011 2012 2013 • Rapid expansion outs
Slide 24: Hong Kong
Group Asia Jackson UK Life M&G Cash Asia Performance Hong Kong IFRS operating profit, £m • Professional and high calibre agency 101 sales force 2.1x 48 • MDRT > 1000 agents 2009 2013 • Innovative products to meet a spectrum of demands Strong customer proposition 97% • Strong continued customer loyal
Slide 25: Thailand
Group Asia Jackson UK Life M&G Cash Asia Performance Thailand IFRS operating profit, £m • Right strategy 53 – Bancassurance channel accounts for >50% of market’s new business 7.6x premiums1 • Successful integration and launch of 7 Thanachart in May 2013 2012 2013 – APE of £22m & IFRS contribution of
Slide 26: Growing scale
Group Asia Jackson UK Life M&G Cash Asia Performance Growing scale Asia IFRS operating profit1, £m 2,125 1,075 1,897 975 1,660 5.1x 1,501 774 1,174 1,209 1,044 591 482 814 562 278 209 213 186 2005 2006 2007 2008 2009 2010 2011 2012 2013 IFRS operating profit, £m APE2, £m 1 Adjusted for new and amend
Slide 27: Growing scale
Group Asia Jackson UK Life M&G Cash Asia Performance Growing scale Asia Life IFRS operating profit1, £m 2007 2013 Sweetspot > £200m Indonesia Singapore £50m – £200m India Vietnam Hong Kong Singapore Thailand Malaysia < £50m India China Vietnam Hong Kong Indonesia Korea China Philippines Taiwan Korea
Slide 28: Single premium sales are sentiment led and volatile
Group Asia Jackson UK Life M&G Cash Asia Performance Single premium sales are sentiment led and volatile Asia – Single Premium APE, £m MSCI Asia ex Japan1 214 157 155 146 122 110 91 79 77 68 63 56 46 45 27 23 11 6 9 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 29: Regular premium focus drives resilient growth
Group Asia Jackson UK Life M&G Cash Asia Performance Regular premium focus drives resilient growth for PCA Asia – Regular and Single Premium APE, £m 1,911 MSCI Asia ex Japan1 1,740 1,514 1,391 1,131 1,052 889 723 494 360 340 281 214 206 151 155 122 110 146 157 120 106 23 11 77 27 63 46 45 56 68 91 7
Slide 30: Track record of successful execution
Group Asia Jackson UK Life M&G Cash Asia Performance Track record of successful EXECUTION New business profit1, £m IFRS operating profit2, £m 2x 2.2x CAGR CAGR +19% 1,460 1,075 +22% 975 1,266 1,076 774 902 591 725 482 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Net cash remittances, £m 10x CAG
Slide 31: Growth potential intact
Group Asia Jackson UK Life M&G Cash Asia Performance Growth potential intact Year 15 Today Ambition Agents 1,100 150x – 200x Customers 6,000 300x – 400x Policies >15,600 150x – 200x APE £1m 400x – 500x 31 2013 FULL YEAR RESULTS
Slide 32: Asia
Group Asia Jackson UK Life M&G Cash Asia Performance APE, £m 500 Multiple Scale of 1998 in 2013 Agents 179x 197k Customers 367x 2.2m Policies 192x 3m APE 477x £477m 250 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 32 2013 FULL YEAR RESULTS
Slide 33: Significant headroom for growth
Group Asia Jackson UK Life M&G Cash Asia Performance Significant headroom for growth Indonesia $824bn $416bn $10.2bn $2.6bn 1.24% 0.62% Insurance GDP2, Life premiums3, Insurance GDP2, Life premiums3, Penetration1 $bn $bn Penetration1 $bn $bn 1998 2012 1 Life premiums as % of GDP. Source: Swiss Re. 2
Slide 34: Asia 2017 objectives
Group Asia Jackson UK Life M&G Cash Asia Performance 2017 objectives Asia Underlying Free Surplus Generation1 of £0.9bn – £1.1bn in 2017 (2012: £484m) Asia life and asset management pre-tax IFRS operating profit to grow at a compound annual rate of at least 15 per cent over the period 2012 – 2017 (2
Slide 35: Agenda: Jackson
Agenda Group Performance Asia Jackson UK Life M&G Cash 35 2013 FULL YEAR RESULTS
Slide 36: Healthy in-force portfolio
Group Asia Jackson UK Life M&G Cash Jackson Performance Healthy in-force portfolio Separate account value by S&P 500 level at policy issue 0% in the money 100% = $115bn as of at 31 Dec 2013 31 Dec 20131 4% 6% 18% 7% 14% 14% 21% 15% (≤1100) (1100-1200) (1200-1300) (1300-1400) (1400-1500) (1500-1600)
Slide 37: Proactive diversification
Group Asia Jackson UK Life M&G Cash Jackson Performance Proactive diversification VA sales, $bn VA new business margin, % 2013 81% 76% 72% 69% 65% 2009 9.0 2007 margin 14.5 1.0 6.4 69% 90% 10% 31% 42% With living Without benefits living benefits 2009 2010 2011 2012 2013 37 2013 FULL YEAR RESULTS
Slide 38: Disciplined growth
Group Asia Jackson UK Life M&G Cash Jackson Performance Disciplined growth Net cash remittances, £m 322 294 One-offs1 249 2013 Objective 144 80 39 2008 2009 2010 2011 2012 2013 438% 417% 483% 429% 423% 450% RBC ratio 1 Net remittances from Jackson include £122m in 2011 representing release of excess
Slide 39: Agenda: UK Life
Agenda Group Performance Asia Jackson UK Life M&G Cash 39 2013 FULL YEAR RESULTS
Slide 40: Capturing savings flows in asset management
Group Asia Jackson UK Life M&G Cash UK Performance Capturing savings flows in asset management UK life insurance sector net inflows1, £bn UK asset management industry net retail fund inflows2, £bn 15.2 9.7 29.8 29.9 0.8 18.3 18.6 14.3 11.2 11.2 -34.5 8.8 -41.5 6.2 4.8 -46.4 -49.4 -48.3 2005 2006 200
Slide 41: Strong product proposition
Group Asia Jackson UK Life M&G Cash UK Performance Strong product proposition With-profits fund 10-yr cumulative returns Cumulative with-profits bonus payments, £bn (2004 – 2013), % 49 22.2 119 20.2 18.2 16.1 70 13.9 11.9 9.1 6.4 3.9 ABI UK - Mixed Outperformance Pru With-profits 1.8 Investments 20-
Slide 42: Strong product proposition
Group Asia Jackson UK Life M&G Cash UK Performance Strong product proposition 2013 annuity APE, % (100% = £208m) Enhanced Conventional WP enhanced 4 13 5 WP other External 37% 12 24 Internal With- 63% profits 21 Guaranteed rates 14 7 Small pots Other (<£30k) 42 2013 FULL YEAR RESULTS
Slide 43: Delivering through significant regulatory change
Group Asia Jackson UK Life M&G Cash UK Performance Delivering through significant regulatory change Cash delivery to Group Net cash remittances, £m 434 420 355 One-offs1 150 120 2013 objective 313 297 199 2008 2009 2010 2011 2012 2013 1 The net remittances from the UK include the £150m in 2009 arisi
Slide 44: Agenda: M&G
Agenda Group Performance Asia Jackson UK Life M&G Cash 44 2013 FULL YEAR RESULTS
Slide 45: Diversified asset base
Group Asia Jackson UK Life M&G Cash M&G Performance Diversified asset base External retail FUM by region, £bn 2013 External FUM by asset class, % 2.6% 1.3% 67.2 1.5 PPMSA Retail £67.2bn 46.3% 49.8% 23.7 Europe Equities Fixed income Real estate 7.6x Cash / Other Infrastructure Private finance lending
Slide 46: Strong performance
Group Asia Jackson UK Life M&G Cash M&G Performance Strong performance M&G IFRS operating profit1, £m 1.7x 395 320 301 246 228 177 2008 2009 2010 2011 2012 2013 1 Excludes PruCap. 46 2013 FULL YEAR RESULTS
Slide 47: Agenda: Cash
Agenda Group Performance Asia Jackson UK Life M&G Cash 47 2013 FULL YEAR RESULTS
Slide 48: Free surplus generation
Group Asia Jackson UK Life M&G Cash Group Performance Free surplus generation Free surplus and dividend, £m 2.7x Net free surplus Reinvestment rate 21% Reinvestment Reinvestment rate 23% 637 Reinvestment rate 22% rate 28% Reinvestment 618 rate 31% 553 643 Reinvestment 660 Reinvestment rate 50% rate
Slide 49: Dividend
Group Asia Jackson UK Life M&G Cash Group Performance Dividend Dividend, pence per share 33.57 +15.0% 29.19 +15.9% 25.19 23.85 +5.6% +20.2% +5.0% 19.85 23.84 +5.0% 18.90 +5.0% 18.00 16.32 +5.0% 17.14 20.79 Total dividend 17.24 17.24 12.91 13.56 Final dividend 11.72 12.30 11.02 8.40 9.73 Interim divi
Slide 50: Agenda
Prudential plc 2013 full year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 50 2013 FULL YEAR RESULTS
Slide 51: Key financial highlights
Key financial highlights Overview IFRS operating Free surplus generation Other items 2013 continues strong performance profit 2013 vs 2012 £m 2013 20121 AER2 CER3 New business profit 2,843 2,452 16% 17% IFRS operating profit 2,954 2,520 17% 18% EEV operating profit 5,580 4,313 29% 31% Free surplus g
Slide 52: Key financial highlights
Key financial highlights Overview IFRS operating Free surplus generation Other items 2013 continues strong performance profit 2013 vs 20121, constant exchange rates Group Asia2 US UK M&G3 New business profit 17% 19% 23% (5)% n/a IFRS operating profit 18% 19% 28% - 19% EEV operating profit 31% 29% 37
Slide 53: Currency mix and translation sensitivities
Currency mix Overview IFRS operating Free surplus generation Other items Currency translation sensitivities profit IFRS operating profit IFRS operating profit, £m by currency, % FY13 Other Asia UK 2013 IFRS operating profit1 2,954 17 sterling 20 (2)% Asia - US Impact on Group result if currencies 19
Slide 54: IFRS – Asia
IFRS – Asia Overview IFRS operating Free surplus generation Other items Continued strong growth in Asia life profits profit Asia life, shareholder-backed policyholder liabilities2, £bn +5% Asia IFRS operating profit1, £m +12% 1.1 (1.7) 21.9 20.2 2.3 (8)% 1,075 975 74 Eastspring 69 51 Opening Net Inv
Slide 55: IFRS operating profit – source of earnings
IFRS operating profit – source of earnings Overview IFRS operating Free surplus generation Other items Life insurance - Asia profit 2013 2012 +/- Total operating profit1 £m except reserves £bn 1,001 855 17% = Total Life income Admin Expenses Acquisition Costs DAC adjustments - - +/- 2,615 2,344 12%
Slide 56: IFRS – US
IFRS – US Overview IFRS operating Free surplus generation Other items Total IFRS profits up 30% profit Jackson, shareholder-backed policyholder liabilities, £bn +9% 8.2 US IFRS operating profit, £m +10% (2.7) 107.4 92.3 9.6 (3)% 1,302 59 US asset 1,003 51% management 39 Opening Net Investments FX Cl
Slide 57: IFRS operating profit – source of earnings
IFRS operating profit – source of earnings Overview IFRS operating Free surplus generation Other items Life insurance - US profit Total operating profit 2013 2012 +/- £m except reserves £bn 1,243 964 29% = Total Life income Total Life expenses 2012 Expense deferrals - + 2,514 2,031 24% (1,584) (1,50
Slide 58: IFRS – UK
IFRS – UK Overview IFRS operating Free surplus generation Other items IFRS profits stable in challenging market profit UK Life, shareholder-backed policyholder liabilities, £bn +5% 50.8 8.2 UK IFRS operating profit, £m 49.5 2.3 (1.0) (2)% 736 735 GI commission 33 29 Bulks 31 25 Longevity 27 swap Ope
Slide 59: IFRS – M&G
IFRS – M&G Overview IFRS operating Free surplus generation Other items M&G IFRS profits up 23% profit M&G, external funds under management, £bn 13% M&G IFRS operating profit, £m +4% 126.0 +9% 4.6 111.9 9.5 441 46 Opening Net inflows Market Closing 371 2013 movements 2013 PruCap 51 M&G, underlying op
Slide 60: Increasing free surplus generation
Net free surplus generation Overview IFRS operating Free surplus Other items Increasing free surplus generation profit generation Net free surplus generation1, £m 2013 2012 Change 2013 2012 Change Unwind on in-force portfolio 2,017 1,924 5% Asia 573 484 18% Experience result 478 293 63% China Life -
Slide 61: Growing stock of free surplus and central cash
Net free surplus generation Overview IFRS operating Free surplus Other items Growing stock of free surplus and central cash profit generation Movement in free surplus, £m Movement in central cash, £m x% Free surplus cover (807) 5,344 195% 201% 2,462 (1,341) 4,003 3,689 2,230 (781) 1,341 605 1,380 (3
Slide 62: Future free surplus emergence
Net free surplus generation Overview IFRS operating Free surplus Other items Future free surplus emergence profit generation Expected undiscounted free surplus from life in-force, £bn 7.0 8.2 6.1 7.2 4.9 6.1 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Slide 63: Operating return on EEV of 19%
EEV operating profit Overview IFRS operating Free surplus generation Other items Operating return on EEV of 19% profit EEV Life operating profit1, £m 5,639 5,639 +27% 1,033 2012 2013 4,427 4,427 +19% Unwind 1,489 2,001 2,796 UK 866 +42% Variances 493 797 2,221 In-force 1,975 Dev costs (7) (2) +38% p
Slide 64: Robust in-force performance
EEV operating profit Overview IFRS operating Free surplus generation Other items Robust in-force performance profit Asia in-force1, £925m US in-force, £1,135m UK in-force, £736m 274 253 205 120 122 87 62 65 67 28 14 (16) Persistency & Mortality / Spread Other UK Other withdrawals Morbidity and items
Slide 65: Value creation through increasing NBP
EEV operating profit Overview IFRS operating Free surplus Other items Value creation through increasing NBP – up 16% profit generation New business profit, £m IRR Payback 2,843 period NBP, 2013 vs 2012 30 2,452 267 >20% 2 years UK wholesale 39 -3% Volume +5% UK retail 274 1,086 >20% 2 years Mix / pr
Slide 66: Equity shareholders' funds
Equity shareholders’ funds Overview IFRS operating Free surplus generation Other items Summary of movement profit Movement in shareholders’ funds1 IFRS Equity EEV Equity FY 2013 FY 2013 H1 2013 H2 2013 H1 2013 H2 2013 per share per share After-tax operating profit 1.1 1.2 91 1.8 2.4 165 Investment v
Slide 67: Defensive positioning maintained
Balance sheet Overview IFRS operating Free surplus generation Other items Defensive positioning maintained profit Maintained capital strength • IGD surplus £5.1bn equivalent to a cover of 2.8 times • With-profits estate of £8.0bn1 (31 December 2012: £7.0bn) • Jackson RBC at 450% (2012: 423%) Strong
Slide 68: Robust capital position
Economic capital Overview IFRS operating Free surplus generation Other items Robust capital position profit Economic capital position1 Strong capital position at FY13 before final dividend: at 31 December 2013, £bn Economic capital surplus of £11.3bn (257% cover) Estimated IGD surplus of £5.1bn
Slide 69: Balanced risk exposures
Economic capital Overview IFRS operating Free surplus generation Other items Balanced risk exposures profit Economic capital by risk type (before diversification)1,2 Operational/Expense Balanced risk exposures mainly arise from: Mortality/ 11% Credit • Credit (UK annuities and Jackson fixed annuitie
Slide 70: Economic capital movement over 2013
Economic capital Overview IFRS operating Free surplus generation Other items Movement over 2013 profit Movement in economic capital surplus1, £bn Economic solvency ratio 1 Jan 2013 8.8 215% Operating experience 2.1 +31 pts Non-operating experience 0.9 +12 pts FX (0.4) - Dividend (0.8) (11) pts M&A e
Slide 71: 2013 summary
2013 summary Overview IFRS operating Free surplus generation Other items profit Good progress across key financial metrics • Double digit growth in NBP, IFRS operating profit and free surplus generation • Broad based performance across geographies and sources of income • Cash generation supports div
Slide 72: Agenda
Prudential plc 2013 full year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 72 2013 FULL YEAR RESULTS
Slide 73: Summary
Summary • Strong performance, 2013 objectives delivered and dividend rebased upwards • Fast growing, higher quality earnings and diversified sources of cash • Leading Asian platform to deliver long-term profitable growth • Right products, right markets and right people • More of the same, just bette
Slide 74: Q&A
Q&A 74 2013 FULL YEAR RESULTS
Slide 75: Appendix
Appendix 75 2013 FULL YEAR RESULTS
Slide 76: Clear strategy underpinned by clear operating principles
Strategy We have a clear strategy underpinned by clear operating principles Strategy Operating Principles Balanced Metrics & Disclosures US Build on Strength ASIA Accelerate Focus on Customers and Distribution UK Proactive Disciplined ASSET Focus Risk Capital MANAGEMENT Management Allocation Optimis
Slide 77: Historic financial performance
Group Historic financial performance New business profit1, £m IFRS operating profit2, £m 1.8x 2x CAGR CAGR 2,843 2,954 +15% +20% 2,452 2,520 2,151 2,017 2,028 1,823 1,619 1,444 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Net cash remittances, £m 1.9x CAGR +18% 1,341 1,200 1,105 935 688 2009 20
Slide 78: Total dividend increased by 15%
Dividend Total dividend increased by 15% Dividend, pence per share 33.57 +15% Total dividend 29.19 • 2013 dividend increased by 15 per cent to 33.57 pence per share 23.84 • Ex-dividend date: 26 March 2014 Final dividend 20.79 • Record date: 28 March 2014 • Payment of dividend: 22 May 2014 Interim di
Slide 79: Asia long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 Hong Kong • Pan Asian leader: #1 by NBP2 Singapore 30,000 • Top 3 in 6 /11 Asian countries3 25,000 Taiwan Korea • Market leading platform 20,000 − Over 450,000 agents 15,000 − Access to over 15,700 bank
Slide 80: Asia markets
Asia Favourable dynamics Prudential customers as a GDP 2014 GDP % of total population2 ($bn)2 growth (%)2 Indonesia (1995)1 0.9% 867 5.5 Philippines (1996) 0.2% 272 6.0 Sweet Spot markets Thailand (1995) 0.7% 401 5.2 Vietnam (1999) 1.4% 170 5.4 Hong Kong (1964) 11.5% 280 4.4 Malaysia (1924) 6.1% 312
Slide 81: Disciplined capital allocation
Disciplined capital allocation New business profit growth New business strain1,2, £m New business profit2, £m 2,843 +76% 297 2,452 2,151 313 -3% 2,028 260 1,086 660 1,619 365 643 618 637 873 UK 103 65 553 45 29 UK 230 815 54 761 281 298 300 US 664 US 326 202 1,460 1,266 1,076 310 902 278 297 292 Asi
Slide 82: Delivering cash
Delivering cash Free surplus and cash remittances Underlying free surplus generated1, £m Business unit net remittances, £m +18% +12% 2,462 1,341 1,200 M&G 292 incl 2,080 1,105 PruCap 1,982 935 1,687 355 UK 1,453 688 515 294 US 779 400 Asia 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013
Slide 83: Central cash resources
Cash and capital Central cash resources Development of central cash resources, £m FY 2011 FY 2012 FY 2013 1,341 1,105 1,200 605 2,230 (315) (289) (296) 1,380 1,380 (781) 1,232 1,200 1,200 (642) (655) (76) (199) Operating holding co Operating holding co Operating holding co cashflow +£245m cashflow +
Slide 84: Net cash remittances UK and other
Net cash remittances UK and other Business unit net remittances, £m CAGR (UK Life + Other) +21% 986 887 One-offs1 120 808 150 515 316 313 355 284 254 300 297 199 2008 2009 2010 2011 2012 2013 UK Life Other 1 The net remittances from the UK include the £150m in 2009 arising from the pro-active financ
Slide 85: Group life APE
New business growth Group life APE Life APE1, £m (AER) +4% H1 11: £1,824m H2 11: £1,857m H1 12: £2,030m H2 12: £2,165m H1 13: £2,162m H2 13: £2,261m +7% 1,158 1,117 1,124 1,103 1,066 1,048 1,038 977 964 936 888 880 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 1 Excluding J
Slide 86: Group life new business profit
New business growth Group life new business profit Life new business profit1, £m (AER) +20% H1 11: £1,069m H2 11: £1,082m H1 12: £1,141m H2 12: £1,311m H1 13: £1,268m H2 13: £1,575m +11% 893 714 705 682 616 605 597 571 563 536 498 466 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13
Slide 87: Group life 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 3.3 2.9 2.8 2.2 1.7 1.1 2008 2009 2010 2011 2012 2013 1 Free surplus invested in new business; excludes Japan. 87 2013 FULL YEAR RESULTS
Slide 88: Wealth and financial assets ownership
Asia distribution Wealth and financial assets ownership Breakdown of personal financial assets Life 12% 24% Non-Life 9% 39% Asset Mgt 9% 18% 20% 24% Bank 70% Deposits 21% 38% 16% Per capita Up to $2000 to $15000+ income level $2000 $15000 Source: Oliver Wyman analysis; Prudential analysis. 88 2013 F
Slide 89: Products meet customer needs and create shareholder value
Asia Life Products meet customer needs and create shareholder value Health and Protection – Out of pocket Annual premium for a customer aged 50 medical expenses1 (indexed) 143 123 19 117 114 100 73 Saving 100 81 27 Spend Without Basic Prudential Prudential Co. A Co. B Co. C Co. D insurance Governmen
Slide 90: Asia Life APE by market
Asia Life APE by market Asia APE by market, £m +7% +23% 487 477 446 +20% 396 361 301 -5% 218 -25% 208 156 +19% +1% +48% 117 113 +84% 95 102103 +20% +18% 83 68 56 37 45 54 45 53 Indonesia Hong Kong Singapore1 Malaysia2 Taiwan Korea India 26%3 China 50%4 Thailand Vietnam Philippines5 1st 4th 1st 1st 1
Slide 91: Asia Life APE sales by product
Asia Life APE sales by product - percent Asia APE by product, % 3 3 3 4 2 2 4 3 4 5 3 3 3 3 3 5 4 5 5 5 5 7 7 6 8 7 9 8 14 18 19 17 19 21 20 23 26 26 27 29 30 30 28 25 33 33 33 34 34 33 18 33 35 31 34 35 17 38 18 20 20 19 22 30 24 27 27 24 30 27 25 31 29 32 24 34 33 30 29 32 30 34 30 29 62 65 60 57
Slide 92: Flows and persistency
Asia Life Flows and persistency Asia Life inflows1,2, £bn Asia Life inflows (ex-India)1,2, £bn 2.5 2.4 2.3 2.2 2.2 2.2 2.0 2.1 2.0 1.9 1.9 1.8 1.7 1.7 1.6 1.5 1.5 1.5 1.2 6.2% 6.4% 5.6% 6.0% 5.1% 5.2% 5.1% 5.2% 5.5% 4.8% 4.8% 4.6% 1.0 4.4% 4.5% 3.9% 3.5% 0.5 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13
Slide 93: US retail sales and deposits
US retail sales and deposits 2013 Retail sales and deposits, $m 2012 = $24,863m 2013 = $25,966m 2,457 921 2,733 868 27 4 1,733 1,419 1,345 4,045 2,055 16,325 14,537 2,360 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access Index Ann
Slide 94: US Life VA volumes
US Life VA volumes VA volumes by quarter, sales US$m 42% 43% 81% 72% 69% 65% 76% 5,656 5,715 5,473 5,258 412 5,189 •‘Features War’ 4,974 218 1,124 1,094 4,553 4,565 991 4,383 4,427 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
Slide 95: Variable annuity distribution
US Life Variable annuity distribution Variable annuity sales by distribution channel, US$bn 2013 includes $4.4bn of Elite Access sales 20.9 19.7 13.3 12.7 3.8 3.9 3.2 3.7 2012 2013 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 95 2013 FULL YEAR RESULTS
Slide 96: New business margin
US Life New business margin New business margin – % APE 76% 69% 65% 36% 29% 27% Variable Annuities US Other 2011 2012 2013 96 2013 FULL YEAR RESULTS
Slide 97: DAC impact on results
US IFRS profit DAC impact on results Impact on results of DAC amortisation, £m 2012 2013 Gross profits1 1,427 1,716 New business strain2 (174) (198) DAC Amortisation - Core (412) (485) - (acceleration) / deceleration 56 82 Operating result 897 1,115 Core as % of Gross profits 29% 28% 1 Gross profits
Slide 98: Policyholder behaviour
US Life Policyholder behaviour Optional benefits elected, % of initial benefits elected (New business) 86% 82% 80% 79% 65% 55% 42% 28% 14% 15% 11% 5% 6% 5% 5% 6% 2006 2007 2008 2009 2010 2011 2012 2013 No benefit GMWB (for life) 98 2013 FULL YEAR RESULTS
Slide 99: Asset growth
US Life Asset growth Growth in statutory admitted assets, US$bn 2013 v 2012 increase: $28.1bn 170.9 Net Inflows: $12.1bn Market Movements: $16.0bn 142.8 107.6 108.8 97.5 80.1 81.0 76.7 69.3 70.9 58.8 62.8 48.9 55.6 30.0 33.3 50.9 22.3 20.9 46.6 14.7 40.2 43.0 10.4 4.4 7.1 5.6 5.1 62.7 62.1 43.8 45.2
Slide 100: GMWB policyholder behaviour sensitivities
Resilient balance sheet GMWB policyholder behaviour sensitivities GMWB policyholder behaviour sensitivities, FY 2013 US$bn • Policyholder behaviour experience is continuously monitored and a comprehensive study is conducted on an annual basis 7 • For IFRS and Statutory accounting purposes, assumptio
Slide 101: IFRS impact 'below-the-line'
Hedging result IFRS impact ‘below-the-line’ 2013 VA hedge results, net of related DAC, £m 00 (200) (200) (400) (400) 595 (600) (600) 197 (696) (800) (800) (441) (1,100) (1,000) (1,047) (1,200) (1,200) Equity hedge VA reserve Interest Non-operating IFRS net instruments changes rate hedges fee income,
Slide 102: Moving IFRS hedge result to 'economic' result
Hedging result Moving IFRS hedge result to ‘economic’ result 2013 VA ‘economic’ hedge results, net of related DAC, £m 400 400 200 200 85 276 32 00 (131) 498 (200) (200) (400) (400) (600) (600) (696) (800) (800) IFRS net Adjustment Fair value Adjustments to Other ‘Economic’ hedge results to full fees
Slide 103: Moving reserves to 'fair value'
VA hedging Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 200 200 00 98 (200) -200 (271) (400) -400 (600) -600 (800) -800 (1,000) -1,000 21 (942) (1,115) (1,094) (1,200) -1,200 As recorded2 Change in Adjustment Revised liability, Volatility Hypot
Slide 104: Capital, hedging and policyholder behaviour
Jackson Capital, hedging and policyholder behaviour • Hedging programme continues to effectively Total adjusted Capital mitigate risks • Total adjusted capital excludes losses on interest rate US$bn swaps: $1.2m at Dec 2013 (Dec 2012: gain of $581m) 4.7 • Earned guarantee fees of 117 bps per annum (
Slide 105: 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 fees net of The net investment investment expenses Profits derived from Our share of bonus return we make primarily charged on our linked and the insurance risks of declared by the with
Slide 106: Life IFRS operating profit: source of earnings
Life IFRS operating profit Source of earnings INCOME Technical and other Spread income Fee income With-profits LIFE margin Expected return on shareholder assets - +/- EXPENSES LIFE Acquisition Administration DAC Other costs expenses adjustments adjustments = LIFE OPERATING PROFIT 106 2013 FULL YEAR
Slide 107: Source of earnings – Group (1/3)
Life IFRS operating profit Source of earnings – Group (1/3) Source INCOME Total Life income LIFE 2013 2012 +/- £m 6,083 5,387 13% - +/- EXPENSES Total Life expenses DAC adjustments LIFE (3,467) (3,232) (7)% 334 418 (20)% = Total Operating profit 2,950 2,573 15% Note: Comparatives adjusted for new an
Slide 108: Source of earnings – Group (2/3)
Life IFRS operating profit Source of earnings – Group (2/3) Total Operating profit Source 2013 2012 +/- 2,950 2,573 15% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments - +/- 6,083 5,387 13% (3,467) (3,232) (7)% 334 418 (20)% Technical and Spread income Fee income With-
Slide 109: Source of earnings – Group (3/3)
Life IFRS operating profit Source of earnings – Group (3/3) Source 2013 2012 +/- £m except reserves £bn Total Life expenses (3,467) (3,232) (7)% Acquisition costs1 Administration expenses (2,039) (1,997) (2)% (1,428) (1,235) (16)% Admin expense APE2 4,423 4,195 5% 84 87 (3) ratio (bps) Acquisition A
Slide 110: IFRS operating profit – source of earnings: UK
IFRS operating profit – source of earnings Life insurance - UK Source Total operating profit 2013 2012 +/- £m except reserves £bn 706 703 - = Total Life income Total Life expenses DAC adjustments - - 954 961 (1)% (234) (250) 6% (14) (8) (75)% Spread Technical and Expected returns Fee income income o
Slide 111: IFRS operating profit – asset management
IFRS operating profit – source of earnings Asset management Source Asset management 2013 2012 +/- operating profit1,2 £m except assets £bn 469 389 21% M&G operating Eastspring profit Investments 395 320 23% 74 69 7% Underlying income Other income3 Total expenses Total income3 Total expenses 863 734
Slide 112: Life IFRS operating income – Asia
Life IFRS operating income – Asia Sources of income Asia IFRS operating income1, £m Growth % 1,053 2013 vs. 2012 5% +35% 905 4% +24% 5% 11% +24% 4% 10% 15% +9% 16% 65% +15% 65% 2012 2013 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Excludes margin on
Slide 113: Life IFRS operating income – US
Life IFRS operating income – US Sources of income US IFRS operating income1, £m Growth % 2,514 2013 vs. 2012 1% (57)% 2,031 3% 29% +4% 34% 47% +34% 43% 23% +47% 20% 2012 2013 Insurance margin Fee income Spread income Expected return on shareholder assets 1 Excludes margin on revenues, acquisition an
Slide 114: Life IFRS operating income – UK
Life IFRS operating income – UK Sources of income UK IFRS operating income1, £m Growth % 2013 vs.2012 745 767 14% 17% 25% 37% 33% (8)% 30% (14)% 36% 8% 7% 8% 5% 12% +128% 2012 2013 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Excludes margin on reven
Slide 115: High quality earnings
Life IFRS operating income High quality earnings “Cash profit”1: Income2 – Expenses (before impact of DAC adjustment), £m 1.5x 3,467 3,232 2,805 6,083 2,536 2,616 5,336 4,589 2,104 4,047 1,784 1,650 US Life + 1,511 1,233 UK Life 1,111 990 Asia 871 966 521 1 673 1 1 Life Life Expenses “Cash Life Expe
Slide 116: Shareholder backed business – Group
Policyholder liabilities Shareholder backed business – Group Policyholder liabilities1 roll-forward, £bn 11.7 180.1 9.6 161.9 157.5 2.3 (1.0) (4.4) Net inflows2 £10.9bn 6.9% of CER opening reserves of which: unit linked & separate account £8.7bn; other reserves £2.2bn Liabilities Foreign CER Asia US
Slide 117: Shareholder backed business – Asia
Policyholder liabilities Shareholder backed business – Asia Policyholder liabilities roll-forward1, £m 4,728 1,109 21,931 20,187 (2,379) 18,473 (1,714) Net inflows2 £2,349m 12.7% of CER opening policyholder liabilities Liabilities Foreign CER Premiums Maturities, Investment Liabilities 1 Jan 2013 Ex
Slide 118: Shareholder backed business – US
Policyholder liabilities Shareholder backed business – US Policyholder liabilities roll-forward, £m 15,951 8,219 107,411 92,261 89,557 (6,316) (2,704) Net inflows1 £9,635m 10.8% of CER opening reserves Liabilities Foreign CER Premiums Maturities, Investment Liabilities 1 Jan 2013 Exchange opening de
Slide 119: Shareholder backed business – UK
Policyholder liabilities Shareholder backed business – UK Policyholder liabilities roll-forward1, £m 3,628 2,312 50,779 49,505 (4,666) Net inflows1 £(1,038)m -2.1% of opening reserves Liabilities Shareholders’ Shareholders’ Investment Liabilities 1 Jan 2013 Premiums maturities, deaths related and ot
Slide 120: Group 3rd party net-inflows
Asset management Group 3rd party net-inflows Asset Management movement in 3rd party FUM1, £m 3,353 143,916 9,490 1,575 140,563 129,498 Opening 3rd M&G Asia2 Sub-Total Investment Closing 3rd party FUM net flows markets/other party FUM (including fx) 1 Excludes Asia MMF. 120 2013 FULL YEAR RESULTS
Slide 121: M&G net retail sales
Asset Management M&G net retail sales Average monthly gross and net retail sales, £m 2,500 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Gross sales Net sales 121 2013 FULL YEAR RESULTS
Slide 122: IFRS shareholders' funds
IFRS shareholders’ funds 2013 movement Analysis of movement in IFRS shareholders’ funds, £m 2,954 (1,110) (72) (102) (35) (289) (1,034) (255) (48) 63 (781) 10,359 10,431 9,650 Shareholders’ Operating Short term Amortisation Sale of Japan HK Tax and Net movement FX impact Actuarial loss / Other1 Sub-
Slide 123: EEV shareholders' funds
EEV shareholders’ funds 2013 movement Analysis of movement in EEV shareholders’ funds, £m 5,580 821 152 (35) (35) (819) (1,306) 25,637 (1,077) (87) 24,856 (781) 22,443 Shareholders’ Operating Short term Economic Mark to Cost of Sale of Tax and FX impact Other Sub-total Dividend Shareholders’ funds P
Slide 124: Life operating variances – Group
EEV operating profit Life operating variances – Group Group Life operating variances, £m Experience variances and assumption changes % opening EEV1 1.4% 1.2% 3.0% 1.2% 2.2% 2.5% 2.5% 3.6% 2,001 1,484 1,441 1,489 1,415 1,170 1,210 1,033 797 464 493 414 343 151 140 181 2006 2007 2008 2009 2010 2011 20
Slide 125: Life operating variances – Asia
EEV operating profit Life operating variances – Asia Asia Life operating variances, £m Experience variances and assumption changes % opening EEV1 3.2% 1.9% 4.3% (1.8)% (0.1)% 1.2% 1.1% 0.9% 846 607 595 565 483 408 338 252 159 89 97 81 63 48 (6) (96) 2006 2007 2008 2009 2010 2011 2012 2013 Unwind Exp
Slide 126: IGD capital
IGD capital Movement during the period 1 IGD capital – movement in 2013, (£bn)1 Capital position at 31 December 2013, (£bn)1 Solvency 280% 280%280% cover IGD surplus 31 December 20122 5.1 Impact of amended contribution from Jackson (1.2) Net capital generation 2.2 Impact of Thanachart transaction (0
Slide 127: Invested assets: Group overview
Invested assets Group overview Breakdown of invested assets – 2013, £bn Total PAR Unit- Shareholders Group Funds Linked Asia Life US Life UK Life Other Total Debt securities 132.9 57.8 9.6 6.4 30.3 26.8 2.0 65.5 Equity 120.2 28.4 90.9 0.6 0.3 - - 0.9 Property Investments 11.4 9.3 0.6 - - 1.5 - 1.5 C
Slide 128: Group shareholder exposures – Sovereign debt
Invested assets Group shareholder exposures – Sovereign debt Breakdown of the shareholder debt securities portfolio, % SH sovereign exposures by regions & ratings1, £m US UK Europe Asia Other Total AAA - 3,516 413 461 3 4,393 AA-BBB 3,045 - 118 1,775 31 4,969 Below BBB - - - 814 - 814 Total 3,045 3,
Slide 129: Group shareholder exposures – hybrid bank debt
Invested assets Group shareholder exposures – hybrid bank debt Breakdown of the shareholder bank hybrid debt portfolio, % Banks Exposure to Tier 1 and Tier 2 hybrid bank debt, £m Other US UK France Germany “PIIGS” Other Total Eurozone Total 3% Tier 2 456 673 71 63 23 69 300 1,655 £65.5bn Tier 1 19 1
Slide 130: Total PIIGS sovereign and bank debt of only £281m
Resilient balance sheet Total PIIGS sovereign and bank debt of only £281m Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets – PIIGS countries as at 31 December 2013, £m PIIGS sovereign Sovereign Bank debt & bank debt Institution Covered Senior Tier II Tier I Total
Slide 131: UK asset quality – credit reserve
Invested assets UK asset quality – credit reserve UK shareholder debt securities portfolio by rating1 Strength of the £1.9bn credit reserve BB or below 2% • No defaults of shareholder-backed debt BBB AAA securities 14% 22% • Allowance for credit risk as at 31 December 2013 materially in line with pr
Slide 132: 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 £30.3bn <1 Corporate Bond Portfolio, % by rating Other 2 CMBS BB and AAA and 2 RMBS below AA 3 Govt 4% 4% HY 1 A 43% Total 39% A or £22.3bn above Corporate 53% Bonds IG 21 BBB
Slide 133: 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 £30.3bn <1 Investment Grade Corporate Bond Portfolio, % by sector Other 2 CMBS Automotive 2% 2 RMBS Banking 3 Utility Basic Govt Industry • Portfolio spread HY 1 13% 6% over 7
Slide 134: 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 £30.3bn <1 High Yield Corporate Bond Portfolio, % by sector Other 2 CMBS 2 Automotive 2% RMBS Basic Utility Industry 3 Govt Telecom • Portfolio spread HY 1 3% across 144 14% C
Slide 135: US asset quality – RMBS portfolio
Invested assets US asset quality – RMBS portfolio US Shareholder Debt Securities Portfolio Market value, £bn £30.3bn <1 Breakdown of the RMBS portfolio – £bn Other 2 CMBS Market Value £m FV Price 2 RMBS 2006/07 0 20 3 2005 2 72 Govt HY 1 Pre 2005 53 90 1.8 0.9 0.3 0.1 0.2 0.2 0.1 Corporate Bonds IG
Slide 136: US asset quality – CMBS portfolio
Invested assets US asset quality – CMBS portfolio US Shareholder Debt Securities Portfolio Market value, £bn £30.3bn <1 CMBS portfolio, % by rating Other 2 CMBS 2 RMBS BB and 3 lower = 2% Govt BBB • Average credit enhancement HY 1 of the non-agency portfolio is 9% 32% 42% AAA • 89% of the portfolio
Slide 137: 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 £6m Hotels – Spread across property type – Geographic diversification 9% Industrial 29% • Strong underwriting discipline Retail 19% – Portfolio p
Slide 138: Increasing free surplus stock
Cash and capital generation Increasing free surplus stock Evolution of free surplus, £m x% Free surplus cover +45% 3,099 M&G 346 UK 702 195% (637) 201% 365 5,344 US 1,168 (1,172) Asia 883 4,003 3,689 (1,341) M&G 449 M&G 392 Reinvestment Rate = 21% UK 797 UK 1,101 Underlying free surplus £2,462m US 1
Slide 139: Historic free surplus emergence
Cash and capital generation Historic free surplus emergence Use of free surplus generated, 2010 – 20131, £m 13,193 13,193 Return on net worth 475 Asset mgt 1,543 Experience / Cash 1,153 4,581 assumptions remitted to Group 4,581 Expected 2,158 Market / other return on movements M&G 1,071 7,491 existi
Slide 140: Historic free surplus emergence
Cash and capital generation Historic free surplus emergence Use of free surplus generated, 2010 – 20131, £m 56% average remittance ratio 2010 - 2013 Cumulative Objectives 8,211 Return on net worth 478 475 Expected net free surplus generated: £6.5bn Asset mgt 1,543 Net cash remittance objective: £3.8
Slide 141: Net remittances (1/2)
Cash and capital Net remittances (1/2) Group objectives 2010-13, £bn 2009 2010 2011 2012 2013 Target £m £m £m £m £m 2013 Remittance ratio: 56% UK with-profit 284 202 223 216 206 350 £8.2bn UK shareholder- 150 218 74 97 149 backed1 US4 39 80 322 249 294 260 £4.6bn Asia2 40 233 206 341 400 300 £6.5bn
Slide 142: Net remittances (2/2)
Cash and capital Net remittances (2/2) Group objectives 2010-13, £bn 2010- £m 2010 2011 2012 2013 2013 Total Remittance ratio: 56% Actual free surplus 1,692 1,858 1,924 2,017 £8.2bn Operating variances 190 192 293 478 Expected return on free assets 138 109 95 133 £4.6bn Asset management 310 376 386
Slide 143: Future free surplus emergence: Asia
Future free surplus emergence Asia Expected undiscounted free surplus from Life in-force, £bn 0.9 2.8 3.2 2.5 2.7 2.2 2.6 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2012 Life in-force 2013 life in-force including market effects Fr
Slide 144: Future free surplus emergence: US
Future free surplus emergence US Expected undiscounted free surplus from Life in-force, £bn 1.2 2.3 3.2 2.0 2.7 1.3 1.7 1.0 0.8 0.6 0.4 0.2 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2012 Life in-force 2013 life in-force including market effects From 2013 new bu
Slide 145: Future free surplus emergence: UK
Future free surplus emergence UK Expected undiscounted free surplus from Life in-force, £bn 0.8 1.8 1.9 1.6 1.9 1.4 1.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2012 Life in-force 2013 life in-force including market effects From 201
Slide 146: Currency mix 2013 full year
Currency mix 2013 full year IFRS operating profit, New business profit, EEV operating profit, Underlying free surplus % % % generation, % Other Asia Other Asia UK sterling Other Asia UK sterling Other Asia UK sterling Asia - US UK sterling dollar 11 linked1 9 17 20 18 15 22 14 42 19 38 26 29 41 44 3
Slide 147: Currency translation sensitivities
Currency mix Currency translation sensitivities New business profit New business profit, £m by currency, % FY13 UK Other Asia 11 2013 new business profit1 2,843 sterling 22 (2)% Impact on Group result if currencies marked to 2013 year-end spot rates (5)% 38 US dollar Asia - US 29 Impact on Group res
Slide 148: 2013 Full Year Results: Delivering 'Growth and Cash'
Prudential plc 2013 Full Year Results Delivering ‘Growth and Cash’ 12 March 2014 148 2013 FULL YEAR RESULTS