Slide 1: Prudential plc 2019 Half Year Results
Prudential plc 2019 Half Year Results 14 August 2019 1
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, operating environment, strategy and objectives. Statements that are not historical facts, including st
Slide 3: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 2019 HALF YEAR RESULTS 3
Slide 4: Agenda
Group Agenda Group Group strategy and demerger update Mike Wells Group CEO Asia Asia highlights Nic Nicandrou Asia CEO US Jackson highlights Michael Falcon Jackson CEO Group Group financial highlights Mark FitzPatrick Group CFO & COO Group Closing remarks Mike Wells Group CEO Q&A session 2019 HALF Y
Slide 5: Key messages
Group Key messages Strong financial performance in supportive, but volatile markets Significant opportunities for each business to grow Demerger of M&GPrudential expected during 4Q2019 Management focused on strategic & operational delivery 2019 HALF YEAR RESULTS 5
Slide 6: Financial highlights
Group Financial highlights Continuing operations Group Asia growth Earnings Dividend + 10% HY2019 APE vs HY2018 CER1 + 14% Growth on prior year IFRS segmental + 5% Growth on prior year to operating profit1 to £2.4bn 16.45 pence per share Asia value Cash Embedded value + 10% HY2019 NBP vs HY2018 CER1
Slide 7: Strategic and operational delivery continues
Group Strategic and operational delivery continues Key HY2019 developments P Operational delivery unaffected by demerger Shaanxi >8,000 q u alifiers P Expansion of footprint Building on multi- Access to non-traditional Drive for digitalisation and future fit organisation in China channel capabilitie
Slide 8: Proven track record of disciplined capital allocation
Group Proven track record of disciplined capital allocation Asia ` Focus on health and protection business Capital allocation to Asia De-emphasis of Universal Life in Singapore Investment in new business (cumulative HY09-HY19)1 Products Jackson Launch fee based VAs Diversification of product mix £3.
Slide 9: Expected demerger timetable
Group Expected demerger timetable Prudential plc Circular & EGM Listing of M&GP M&GP Prospectus c.2 week window c.1 week window 4Q 2019 2019 HALF YEAR RESULTS 9
Slide 10: Nic Nicandrou, CEO Prudential Corporation Asia
Nic Nicandrou Chief Executive Officer: Prudential Corporation Asia 2019 HALF YEAR RESULTS 10
Slide 11: Delivering on strategic priorities
Asia Delivering on strategic priorities Strategic priorities Enhance the core Create best-in-class health capability Accelerate Eastspring Expand presence in China 2019 HALF YEAR RESULTS 11
Slide 12: Delivering on strategic priorities: enhance the core
Asia Delivering on strategic priorities New Market Segments Products Distribution Automation Ecosystem Brand Enhance the core ~50% NBP No.1 10 new 725m Employee Benefit growth from MDRT ecosystem TV & APE2: +15% new initiatives1 members in partnerships >8,000 Hong Kong5 81% (new business) online Pro
Slide 13: Asia: All-round delivery
Asia All-round delivery APE IFRS Op Profit AUM + 10% to £1,978m1; + 14% £ 169bn to £1,198m1; 30 June 2019 AUM (+14% at AER2) (+18% at AER2) (+23% vs HY2018 AER2,3) NBP Operating FSG Embedded value + 10% to £1,295m1; + 13% to £685m1; £ 28bn Annualised RoEV: +18% (+15% at AER2) (+16% at AER2) (+23% vs
Slide 14: Delivering high quality, diversified and consistent growth
Asia Delivering high quality, diversified and consistent growth Diversity Quality Momentum Double digit growth Renewal premium income 1, £bn (no. of markets) Regular premium mix 93 % +15% Q1 8 Q2 6 APE Retention rate 95 % 10 year +12% +13% CAGR ex-Hong Kong1 Hong Kong1 +5% H&P NBP mix 68 % MSCI Asia
Slide 15: Delivering high quality and profitable growth - Life
Asia Delivering high quality and profitable growth - Life Total policyholder liabilities3, £bn Life IFRS operating profit1 By territory Hong Kong +29% +23% 260 Indonesia (6)% Net flows £5.1bn 200 (+31% YoY) HY19 £ 1,095 m 176 Singapore +18% By sources of IFRS 14 Profitability Growth + % 109 operatin
Slide 16: Asia market highlights
Asia Market highlights Hong Kong China (JV) Indonesia Singapore Product upgrades & innovation Well-established branches provide Broadening product range Strong distribution platform solid base to increase penetration ✓ PRURetirement deferred annuity plan & 2018 1Q19 2Q19 3Q19 4Q19 ✓ >20% market shar
Slide 17: Delivering high quality and profitable growth - Eastspring
Asia Delivering high quality and profitable growth - Eastspring Third-party net flows1, £bn IFRS operating profit1, £m 3.1 Existing products New 32% products +12% 45% Top-ups 103 23% Profitability Growth 92 +16% 1H17 2H17 1H18 2H18 1H19 (AER3) FUM movement since HY18, £bn HY19 +23% AER3 HY18 HY19 2H
Slide 18: Asia summary
Asia Summary IFRS operating profit 1,2, £m • Strong performance on all metrics with positive new business +17% and net flow momentum 10 year CAGR • Executing on a clear set of strategic priorities and building out 1,198 digital capabilities 253 HY09 HY19 • Unlocking new customer segments through bro
Slide 19: Michael Falcon, CEO Jackson
Michael Falcon Chief Executive Officer: Jackson 2019 HALF YEAR RESULTS 19
Slide 20: Jackson introduction
Jackson Introduction Strategic assessment • Strength of the business • Market outlook • Future direction HY19 financial performance • Sales • Income measures Roadmap 2019 HALF YEAR RESULTS 20
Slide 21: Strategic assessment: strength of business
Jackson Strategic assessment Industry annuity sales & Jackson VA market share (LIMRA)1, $bn 1 Strength of business • Proven commercial capability • Formidable record of gathering assets in a disrupted segment • Broad capabilities across all annuity segments • Market leading customer outcomes & servi
Slide 22: Strategic assessment: market outlook
Jackson Strategic assessment Jackson fee based annuity sales, $m 1.2 Market outlook 400 • Improving: 300 ✓ Regulatory trajectory 200 ✓ Media coverage ✓ Distribution expansion 100 - Technology driven capabilities 0 1H 2017 2H 2017 1H2018 2H2018 1H2019 - Advice driven model evolution - Pension market
Slide 23: Strategic assessment: develop a more diversified book
Jackson Strategic assessment RBC ratio and statutory admitted assets, $bn 3 Develop a more diversified book • Deploy capital to grow non VA book • Diversification reduces statutory capital volatility • Allows for more efficient hedging • Release additional shareholder value & enhance cash generation
Slide 24: HY19 financial performance: sales shift in 1H 2019
Jackson HY19 financial performance: sales shift in 1H 2019 Sales and deposits, $bn 90% VA 68% VA 87% VA 83% VA 68% VA 66% VA • FA/FIA sales up to $1.4bn in 1H 2019 ($0.4bn 6.3 in 1H 2018) 5.7 4.9 5.1 1.8 4.7 4.7 0.9 • Overall sales of $10.8bn in 1H 2019 ($11.2bn 0.3 0.2 0.2 0.4 0.2 0.6 0.2 1.2 1.0 0
Slide 25: HY19 financial performance: income measures
Jackson HY19 financial performance: income measures IFRS pre-tax operating profit Statutory operating income and EEV post-tax net profit and and after-tax net profit1, £bn remittances1, £bn shareholder funds1, £bn £4.9bn £5.6bn £6.7bn £3.5bn £4.3bn £3.9bn £14.1bn £15.3bn 0.6 4 0.9 0.9 1.2 0.5 1.1 1.
Slide 26: Roadmap - Conclusion
Jackson Roadmap - Conclusion • Good commercial performance in 1H 2019 - Increased sales of FIA/FA - Broadened product range and distribution - Maintained operating efficiency • Well positioned with improving growth prospects over time • Appropriately capitalised with effective financial and risk man
Slide 27: Mark FitzPatrick, CFO and COO
Mark FitzPatrick Chief Financial Officer and Chief Operating Officer 2019 HALF YEAR RESULTS 27
Slide 28: HY19 financial highlights
Group HY19 financial highlights Asia & US £m +12%1 £m £m New business profit +14% +14% +15% +17% Cash remittances +10% IFRS Op. Profit -15%1 -30% 1,198 1,215 451 400 1,178 1,295 1,055 1,065 391 342 495 348 Asia US Asia US Asia US HY18 (CER) HY19 HY18 (CER) HY19 HY18 (AER) HY19 Group (Continuing & di
Slide 29: Group IFRS result
Group IFRS result Segment IFRS operating profit up 14%, M&GPrudential to discontinued operations Group IFRS result £m HY18 HY19 Change (CER) % Asia 1,055 1,198 14 US 1,065 1,215 14 Asia and US segment profit up 14% Total segment profit continuing operations 2,120 2,413 14 Other income & expenditure,
Slide 30: Robust Group solvency position & strong capital generation
Capital development Robust Group solvency position & strong capital generation Group shareholder Solvency II capital position1, HY19 movement in Group shareholder Solvency II surplus1, (includes M&GPrudential) (includes M&GPrudential) £bn £bn Impact on SII Surplus: £17.2bn £16.7bn coverage ratio Sol
Slide 31: Hong Kong regulatory framework
Hong Kong regulatory framework Replaces Solvency II post demerger • HKIA will assume the role of the Group-wide supervisor, post demerger • Regulatory Pillar 1 basis will be the ‘Local Capital Summation Method’ (LCSM), as agreed with HKIA – Asia minimum required capital is sum of local Minimum Capit
Slide 32: LCSM overview
LCSM overview Strong group and local capital positions Estimated Group shareholder LCSM pro-forma capital position, 30 June 20191, £bn • Group LCSM result reflects strong local capital positions: Surplus: £7.7bn – Asia shareholder cover ratio ~260% Cover: 340% 169% – Jackson RBC ratio >400% • Aligns
Slide 33: M&GPrudential Solvency II update
M&GPrudential Solvency II update Strong capital position Estimated M&GPrudential Group shareholder Solvency II Estimated M&GPrudential Group shareholder Solvency II position capital position, 30 June 20191, £bn movement from 30 June 2019 to pro-forma position1,2 , £bn Surplus: £3.9bn Cover: 169% Sur
Slide 34: Good progress towards demerger
Group Good progress towards demerger Completed to date: • Hong Kong legal transfer • £3.2bn debt with substitution clauses established through consent and issuance process • M&GPrudential Board fully in place • M&GPrudential head office functions are on-track to standalone • HKIA agreement for all s
Slide 35: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 2019 HALF YEAR RESULTS 35
Slide 36: Opportunity set is substantial
Group Opportunity set is substantial – strong operating franchises well positioned ` Asia • Growth drivers enduring and resilient • Demographics compelling • Protection & savings gap substantial • Multi-distribution strategy is a strength ` US • Operating in world’s largest retirement market • Broad
Slide 37: Key takeaways
Group Key takeaways Strong financial performance in supportive, but volatile markets Significant opportunities for each business to grow Demerger of M&GPrudential expected during 4Q2019 Management focused on strategic & operational delivery 2019 HALF YEAR RESULTS 37
Slide 38: Asia-led in structural growth markets
Group Asia-led in structural growth markets A leading Asian franchise operating in markets forecast to continue growing at >10%1 Jackson enhancing cash generation through accelerated diversification Active portfolio management approach with a record of effective capital allocation Discipline in deli
Slide 39: Appendix contents
Contents: Group 40 Asia 42 US 48 Appendix Africa 57 M&GPrudential 58 2019 Half Year Results Cash & capital 59 Invested asset exposures 62 2019 HALF YEAR RESULTS 39
Slide 40: Group embedded value: consistent growth, led by Asia in-force
Group embedded value Consistent growth, led by Asia in-force Growth in Group embedded value Growth in Group value of in-force 2012 - HY19, £bn CAGR 2012 - HY19, £bn 14% CAGR 53.4 15% 5.4 (1.5) CAGR 17% 9.2 17.8 7.4 (1.8) 17.9 53.3 22.4 14.6 Net worth 7.0 35.6 35.6 Value of 15.4 15.4 in-force 31 Dec
Slide 41: Group embedded value: driven by new business contribution
Group embedded value Consistent growth, led by Asia in-force, driven by new business contribution Growth in Group value of in-force Asia value of in-force 2012 - HY19, £bn £bn +£14.6bn 7.4 0.7 1.2 (1.8) 14.6 35.6 15.4 (6.4) 5.2 31 Dec 12 Asia US Discontinued 30 Jun 19 operations1 13.9 22.1 7.5 New b
Slide 42: Asia key features
Asia Key features Accelerating the trajectory in Asia’s structural growth markets ✓ Leading pan-regional franchise Asia financial performance, £m ✓ Top 3 position in 8 of 12 life markets1 HY19 HY18 CER % FY18 CER Best in ✓ #1 Retail Asian asset manager 2 APE 1,978 1,806 10% 3,836 class franchises ✓
Slide 43: Leading pan-regional franchise
Asia Leading pan-regional franchise Life Pru Asia footprint1 >600k Japan Eastspring Agents 127m P China >300 1,416m P P Korea Life & asset m anagem ent Taiwan distribution partnerships 51m P India4 24m P P 1.4m 1,354m Top 3 Top 10 New Pru life custom ers9 Hong Kong Top 3 Laos 7m Top 3 Top 10 Positio
Slide 44: Asia high quality portfolio
Asia High quality portfolio High quality Compounding Growing earnings +14% +11% 2.4x 852 9.0 750 8.1 1,198 103 6.3 7.1 Renewal 92 New 1.8 1.9 81 HY181 HY19 HY181 HY19 68 Insurance margin, Weighted premium income 3, £bn 1,095 67 contribution to IFRS operating profit, £m 963 496 50 842 731 41 616 93%
Slide 45: Asia value creation
Asia Value creation Hong Kong – APE and NBP trend1, £m Total Asia – APE and NBP trend1, £m 2015 2016 2017 2018 2019 CAGR • Asia / China • China SAFE • Indonesia • China-US trade • Indonesia, India & +8% slowdown controls election tensions Thai elections fears • Brexit • US removed • Fear of US rate
Slide 46: Business highlights - other countries
Asia Business highlights - other countries Malaysia India Vietnam Philippines Health ecosystem Improving business mix Enhancing distribution Enhancing agency capabilities ✓ Launched ✓ 13% H&P mix (APE), +3ppts ✓ Optimising partnerships ✓ Strong agent recruitment with ✓ Value added services – symptom
Slide 47: Asia product mix
Asia Product mix Asia Life APE sales by product1,2, %, £m 483 511 497 458 457 630 668 737 688 871 854 948 948 1,064 948 1,176 1,292 1,420 1,605 1,994 1,943 1,862 1,736 2,008 1,978 2 3 2 1 3 2 2 3 4 5 3 4 2 4 5 6 7 9 8 8 8 6 5 5 6 20 18 20 26 29 32 31 31 36 35 37 35 7 10 36 39 40 40 48 50 50 46 52 53
Slide 48: US key features
US Key features ➢ Opportunity for diversification ➢ Record of cash generation ✓ Leading position in the annuity industry1 US financial performance, £m HY19 HY18 % FY18 ✓ Best in class cost base & industry leading platform CER CER Best in class ✓ Successful track record of risk management APE 831 868
Slide 49: HY19 financial performance: statutory capital
Jackson HY19 financial performance: Statutory capital 6 months ended 1H 2019 Proforma 9 months ended 1H 2019 Jackson total Jackson total adjusted adjusted capital capital US$bn US$bn 31 Dec 2018 5.5 30 Sep 2018 (ex-Permitted Practice1) 4.6 Operating profit 0.8* Operating profit 1.2* Reserves net of
Slide 50: Unhedged economic profile of GMWB guarantees
US Unhedged economic profile of GMWB guarantees Jackson unhedged GMWB cash flow exposure, 30 June 2019 $m • Includes guarantee fees only S&P @ 6/30 = 2,942 Base, 5% Gross Return • Uses prudent best estimate assumptions (AG43, C3P2) Guarantee Fees PV Future Guarantee Fees 12,625 Benefits PV Benefits
Slide 51: Economic value of VA book has improved over time
US Economic value of VA book has improved over time Time Period PV of Fees PV of Benefits Net PV 2011 $3.0bn ($0.5bn) $2.5bn 2012 $4.3bn ($0.4bn) $3.9bn 2013 $5.8bn ($0.4bn) $5.4bn 2014 $7.3bn ($0.7bn) $6.6bn 2015 $9.8bn ($2.3bn) $7.5bn 2016 $10.3bn ($2.4bn) $7.9bn Guarantee Fees Benefits 2017 $11.5
Slide 52: IFRS - variable annuity DAC mean reversion
US IFRS - variable annuity DAC mean reversion Drivers of VA DAC acceleration/deceleration Market growth < MR Market growth > MR leads to ↓ in current period AGP and future EGP leads to ↑ in current period AGP and future EGP Current period market return buffered by an ↑ in MR, subject to 15% cap buff
Slide 53: IFRS - HY19 hedge results
US IFRS - HY19 hedge results IFRS impact ‘below-the-line’ (£bn, pre-tax, post-DAC)1 0.5 1.5 • 1H 2019 IFRS hedge results (net of DAC) of £(1.5)bn 0.4 (1.5) • Risk management effectiveness maintained in period & continues in H2 (1.4) (2.6) • Equity markets up 17% & interest rates down meaningfully (6
Slide 54: Statutory reserves
US Statutory reserves Statutory reserves by product type, % 2007 ($71bn) 1H 2018 ($233bn) 1H 2019 ($245bn) 10% 5% 5% 5% 1% 5% 5% 3% 12% 5% 40% 7% 6% 2% 3% 54% 3% 7% 53% 8% 8% 12% 25% 4% 12% VA Separate Account – With For-Life GMWB VA Separate Account – Other non-Elite Access VA Separate Account – El
Slide 55: Key features of VA product (GMWB)
US Key features of VA product (GMWB) Key features Simplified illustration of benefit mechanics (Assumes immediate utilisation and 0% market return) ➢ Customer benefits • Customers remain owners of underlying Grey shading represents account value – until account investments value is exhausted the inc
Slide 56: Conservative return assumptions in VA reserves
US Conservative return assumptions in VA reserves IFRS mean return vs S&P historical 10 10 10 Chart Title 999 Chart Title Chart Title • All accounting bases assume 20-year equity market returns 4.5 Chart Title well below the mean returns posted by the S&P 500 4.5 84.5 88 44.5 • IFRS return assumptio
Slide 57: Africa regional footprint
Africa Regional footprint Population of Africa1 Ghana 2014 Acquisition of Express Life 1.3 bn 2.3 bn 2015: Distribution partnership with Société Générale 2019 2015: Distribution partnership with Fidelity Bank 2045 2016: Distribution partnership with CAL Bank 2018: Distribution partnership with Stand
Slide 58: M&GPrudential key performance highlights
M&GPrudential Key performance highlights • M&GP FUM up 6% from YE 2018 to £341bn IFRS Operating Profit £m HY19 HY18 % • PruFund net flows remain positive despite lower DB Core profit from long-term business 345 255 35% transfer activity across the market o/w With-profits transfer 161 157 3% • Merger
Slide 59: Holding company cash
Holding company cash Movement in the period Holding company cash flow £m HY19 HY18 1 January 3,236 2,264 Net remittances to Group (continuing operations) 856 770 Asia 451 391 • Higher net remittances from Asia and the US, after funding new business investment US 400 342 • Other movements includes co
Slide 60: Capital quality
Group shareholder Solvency II position Capital quality Solvency II Own Funds by capital tier, £bn1,2,3 Share of Solvency II Own Funds by capital tier1,2,3 30.4 HY19, 100% = £30.4bn 0.1 Tier 3 – deferred tax Tier 3 6.6 Tier 2 – sub debt 0.4 Tier 2 Tier 1 – hybrid capital 0% 22% Tier 1 = Tier 1 – core
Slide 61: Solvency II estimated sensitivities
Group shareholder Solvency II position Solvency II estimated sensitivities Group shareholder Solvency II capital position1, £bn Solvency II shareholder surplus estimated sensitivities 1, £bn Impact on Surplus £17.2bn £16.7bn solvency ratio Solvency II 222% 232% 222% HY19 estimated surplus3 £16.7bn c
Slide 62: Group invested assets: total debt securities
Group invested assets, continuing operations Shareholder-backed total debt securities By asset type1,2, 30 June 2019 US Asia Supranational, 0% Corporate debt portfolio ABS, 2% CMBS, 6% Sovereign¹, 10% Investment grade Quasi Sovereign • Significant weighting towards investment grade Corporate RMBS, 2
Slide 63: Group invested assets: corporate debt exposures
Group invested assets, continuing operations Shareholder-backed corporate debt exposures By sector1, 30 June 2019 US Asia Technology, 3% Materials, 1% Materials, 5% Diversified, 1% Government, 2% Consumer, Cyclical, 5% Technology, 2% Communications, Other, 1% 6% Financial, 24% Industrial, 6% Consume
Slide 64: Group invested assets: by credit rating
Group invested assets, continuing operations Shareholder-backed total debt securities By credit rating1,2,3, 30 June 2019 US Asia 4% 6% 6% 15% 18% 25% 39% 27% 33% 27% Rating: AAA AA Total £45bn A Total £17bn BBB <BBB 1 Pie charts exclude other operations totalling £2bn, of which 27% AAA, 62% AA, 7%
Slide 65: M&GPrudential invested assets
M&GPrudential invested assets Shareholder-backed total debt securities By credit rating1,2,3, 30 June 2019 By asset type1,3,4, 30 June 2019 CMBS, 3% ABS, 1% Supranational, 6% 3% 13% Sovereign¹, 12% 12% Quasi Sovereign Bonds, 1% Other Public Sector Bonds, 9% 37% 35% Rating: Corporate Bonds, 68% AAA A
Slide 66: M&GPrudential corporate debt exposures
M&GPrudential invested assets Shareholder-backed corporate debt exposures By sector1, 30 June 2019 UK Consumer, Non-Cyclical, 10% Real Estate, 11% Consumer, Cyclical, 1% Technology, 1% Financial, 46% Government, 2% Diversified, 1% Energy, 1% Communications, 4% Industrial, 4% Utilities, 17% Other, 2%
Slide 67: Subordinated debt split
Subordinated debt split Pro forma rebalancing Subordinated debt with no option to substitute to M&GPrudential Issue Date Amount Coupon Maturity Date 1st Call Date SII Classification 10-Jul-03 EUR 20m 20 yr CMS rate 10-Jul-23 None Tier 2 19-Dec-01 GBP 435m 6.125% 19-Dec-31 None Tier 2 30-Jul-04 USD 2