Slide 1: Prudential plc 2015 Half Year Results
Prudential plc 2015 Half Year Results 11 August 2015 1 2015 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 2015 half year results Agenda Business Review Mike Wells Financial Review Nic Nicandrou Outlook Mike Wells 3 2015 HALF YEAR RESULTS
Slide 4: Profitable growth
Group Profitable growth IFRS operating profit1, £m New Business Profit1,2, £m Free surplus generation1, £m 1,881 +17% +12% 1,418 +12% 1,190 1,601 1,269 1,063 HY 2014 HY 2015 HY 2014 HY 2015 HY 2014 HY 2015 1 Comparatives have been stated on a constant exchange rate basis 2 HY14 results have been res
Slide 5: Delivering cash
Group Delivering cash Cash remittances1, £m Interim dividend, pence per share 1,068 +10% +10% 12.31 974 11.19 HY 2014 HY 2015 HY 2014 HY 2015 1 HY 2015 includes £42 million of proceeds from the sale of Japan 5 2015 HALF YEAR RESULTS
Slide 6: Consistent delivery
Asia Consistent delivery Sales1,2, £m Relative performance – sales3, £m +31% 706 691 675 601 573 530 529 512 489 469 467 451 424 405 401 400 371 350 343 330 326 313 PCA Co A Co B Co A Co B PCA Co D Co C Co D Co C Co E Co E Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 2015 Q2
Slide 7: Broad based performance
Asia Broad based performance Agency APE1, £m • IFRS operating profit up 23% Hong Kong1 • #1 agency sales force +32% 805 • H&P sales up 67% • Regular premium (95% of APE) up 88% 609 • APE up 44%; H&P sales up 90% • Agency activity up 34% China1 • Increasing CITIC Bank penetration HY 2014 HY 2015 • Op
Slide 8: Eastspring
Asia Eastspring Funds under management1, £bn Largest retail fund manager – FUM2, US$bn +28% 85.3 66.8 HY 2014 HY 2015 Eastspring Co A Co B Co C Co D Co E 38% 42% 3rd party % 1st 1 Comparatives have been stated on a constant exchange rate basis 2 Based on assets sourced from the region. Excluding Jap
Slide 9: Profitable growth
Asia Profitable growth IFRS operating profit1, £m Free surplus generation1, £m +17% 632 +16% 356 308 540 Eastspring Eastspring Life Life HY 2014 HY 2015 HY 2014 HY 2015 1 Comparatives have been stated on a constant exchange rate basis . 9 2015 HALF YEAR RESULTS
Slide 10: Disciplined execution
US Disciplined execution VA sales, $bn 10.0 9.0 8.0 7.0 6.0 5.0 VA ex Elite Access1 4.0 3.0 2.0 Elite Access 1.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2012 2013 2014 2015 $18.4bn $16.9bn $18.0bn VA ex Elite Access1 $1.3bn $4.0bn $5.1bn Elite Access 1 VA ex Elite Access sales includes VA
Slide 11: Delivering value
US Delivering value Separate account FUM, $bn Life IFRS operating profit1, £m 2.3x 1.8x +11% 135.2 +11% 834 122.2 751 Cumulative 33.0 appreciation 43.4 Cumulative in-flows 457 58.8 58.8 2011 HY 2014 HY 2015 HY 2012 HY 2014 HY 2015 Cumulative cash remittances $3.2bn 2008 – HY 2015 1 Comparatives have
Slide 12: Strong progress
UK Strong progress Retail sales APE1, £m UK Insurance +25% • Successfully transitioning into ‘Pensions freedoms’ 55 landscape (35) 58 393 315 +£113m • Maintaining selective approach to bulks HY14 Annuities Existing New products3 HY15 • Well positioned for the future products 2 M&G FUM, £m M&G +1% 25
Slide 13: Strong progress
UK Strong progress IFRS operating profit, £m UK Insurance • Successfully transitioning into ‘Pensions freedoms’ landscape +16% 704 • Maintaining selective approach to bulks 605 251 M&G • Well positioned for the future +11% 227 M&G +20% 453 UK Insurance1 378 • Exceptional financial performance histor
Slide 14: Capital
Group Capital In-force free surplus generation, % HY15 • Diversified sources of earnings and cash UK Life US UK Asset • Strongly capitalised and cash generative business 81% Management & GI Asia • Solvency II internal model submitted in June • PRA decision expected in December Contribution from inte
Slide 15: 2017 objectives
Group 2017 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 >£1,858m £1.1bn £0.9bn +17% 1,140 573 592 +19% 1,075 484 924 +17% 292 302 356 512 525 632 201 435 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015
Slide 16: Long term value creation
Group Long term value creation IFRS operating profit1,2, £m New business profit1,2,3, £m Free surplus generation1,2,4, £m 3.8x 3.7x 5.7x 1,190 1,418 1,881 CAGR CAGR CAGR +15% 1,009 1,219 +16% +21% 1,521 1,152 913 1,091 1,415 1,031 818 756 921 1,157 1,022 630 817 488 609 693 402 503 611 462 497 538 3
Slide 17: Agenda
Prudential plc 2015 half year results Agenda Business Review Mike Wells Financial Review Nic Nicandrou Outlook Mike Wells 17 2015 HALF YEAR RESULTS
Slide 18: HY15 continued strong performance
Key financial highlights Group Business units Balance sheet Summary HY15 continued strong performance / Capital HY15 vs HY14 £m HY15 HY14 CER2 AER2 IFRS operating profit 1,881 1,521 17% 24% Growth New business profit1 1,190 1,009 12% 18% EEV operating profit 2,278 1,943 11% 17% Free surplus generati
Slide 19: Growing profit and improving quality
IFRS operating profit Group Business units Balance sheet Summary Growing profit and improving quality / Capital IFRS operating profit by business unit, £m IFRS operating income by source, £m (CER2) HY15 HY14 CER2 AER 3,521 3,208 +10% 274 +1% Asia 632 525 +17% +20% 270 574 (3)% 594 US 846 681 +13% +2
Slide 20: Increasing scale of cash generation
Net free surplus generation Group Business units Balance sheet Summary Increasing scale of cash generation / Capital Free surplus generation, £m, (CER2) Life in-force result, £m (CER2) HY15 HY14 Change HY15 HY14 Change Expected return from in-force 1,366 1,184 15% Asia 519 447 16% Experience result
Slide 21: Positive evolution in free surplus and central cash
Balance sheet Group Business units Balance sheet Summary Positive evolution in free surplus and central cash / Capital Movement in free surplus, £m Movement in central cash, £m x% Free surplus cover 211%1 6,372 219% HY15 HY14 (105) 1,418 (1,068) 5,304 Asia2 258 216 5,059 US 403 352 UK 231 246 M&G3 1
Slide 22: Operating return on EEV of 16%
EEV operating profit (post-tax) Group Business units Balance sheet Summary Operating return on EEV of 16%1 / Capital EEV operating profit by business unit, £m (CER) New business profit2, £m (CER4) Asia 1,190 +12% • IRR: >20% for all 1,063 HY15 vs HY144 • Payback: • Asia: 3 years Asia Life 1,072 +24%
Slide 23: Strong growth momentum
Asia Group Business units Balance sheet Summary Strong growth momentum / Capital Financial performance, £m (CER) Life HY15 vs HY14 • New business growth APE growth >15% for 7 countries APE sales 1,366 +31% APE growth >30% for agency and regular premium H&P NBP +27% New business profit 664 +30%
Slide 24: Growth in earnings and cash
US Group Business units Balance sheet Summary Growth in earnings and cash / Capital Financial performance, £m (CER) Life HY15 vs HY14 • New business in line with strategy APE consistent with volume discipline APE sales 857 (10)% NBP reflects lower volume of VA with LB Economics remain strong w
Slide 25: Strong response to changes in environment
UK Group Business units Balance sheet Summary Strong response to changes in environment / Capital Financial performance, £m Life HY15 vs HY14 • Strong new business growth Retail NBP +14%, driven by PruFund sales APE sales1 510 +22% Selective approach to bulks; NBP of £75m (2014: £69m) • IFRS gro
Slide 26: Cash-rich earnings growth
M&G Group Business units Balance sheet Summary Cash-rich earnings growth / Capital Financial performance, £m IFRS growth HY15 vs HY14 • Profit up 11% on: Higher revenues Net flows (2,375) (156)% − Fee income +6% on average FUM growth of +7% − Fee margin stable at 38bp Total external FUM (£bn) 133.
Slide 27: Well capitalised and defensively positioned
Balance sheet Group Business units Balance sheet Summary Well capitalised and defensively positioned / Capital IFRS shareholders’ funds, £bn EEV shareholders’ funds, £bn 30.1 12.1 25.9 +16% 10.6 +14% HY14 HY15 HY14 HY15 Per share 414p 471p Per share 1,009p 1,170p • IGD surplus £5.2bn equivalent to c
Slide 28: Prudential well capitalised and highly cash generative
Solvency II Group Business units Balance sheet Summary Prudential well capitalised and highly cash generative / Capital • Internal model submitted in June Asia • PRA decision expected in December • Health and Protection business Solvency II ‘friendly’ • Strong 1H15 Solvency II capital generation • ‘
Slide 29: Delivering 'Growth and Cash'
2015 half-year summary Group Business units Balance sheet Summary Delivering ‘Growth and Cash’ / Capital New Business Profit, £m IFRS operating profit, £m Free surplus stock1, £bn IGD surplus, £bn HY142 1,009 HY14 1,521 HY14 4.2 HY14 4.1 Life in-force / Operating FX 54 FX 80 3.4 2.0 Asset mgt experi
Slide 30: Agenda
Prudential plc 2015 half year results Agenda Business Review Mike Wells Financial Review Nic Nicandrou Outlook Mike Wells 30 2015 HALF YEAR RESULTS
Slide 31: Clear, unchanged strategy
Group Clear, unchanged strategy Significant protection gap and investment needs of the Asian middle class Transition of US ‘baby-boomers’ into retirement UK ‘savings gap’ and ageing population in need of returns / income 31 2015 HALF YEAR RESULTS
Slide 32: Priorities
Group Priorities Asia US UK / M&G • Build agency scale and quality • Focus on profitable growth • Continue to evolve product propositions to align with market reforms • Leverage bancassurance • Bolt-ons to leverage platform relationships • Ongoing build-out of digital • Disciplined management of in-
Slide 33: Effective response to challenges
Group Effective response to challenges IFRS operating profit1,2, £m 2008 2009 2010 2011 2012 2013 2014 2015 • Liquidity crisis • Start of global • Greece and • Concern over China • US debt ceiling • Concern over • Asia FX • Solvency II finalisation • Sub-prime recession Ireland bailouts hard-landing
Slide 34: Market leading franchise
Asia Market leading franchise Top 3 Life market share Platform • In Asia since 1923 • Top 3 position in 9 out of 12 life markets Eastspring • Top decile brand awareness1 Distribution Protection Other4 Linked • Proven multi-channel model 26% 11% 23% • Over 560,000 agents • Selling through over 12,000
Slide 35: High quality platform
US High quality platform Fee income (£m) & separate Expenses1, Distribution account assets (£bn) % of assets 81.8 Indexed Number of wholesalers2,3 productivity2,4 65.7 JNL 200 61bps 49.3 Co A +44% 100 37.8 Co B 114 32bps 31.2 Co C 157 20.6 15.0 14.5 11.4 Product innovation JNL Industry Average 2006
Slide 36: Solid base
UK Solid base Life operating profit, PruFund FUM (£bn) & M&G FUM by client and asset FY14 £m performance class, HY15 % 776 105 Property Cash 57 +34% 13.7 Internal Retail Equity 255 Total 10.2 in-force profits Fixed Inc Multi- Asset 614 Fixed Inc £256bn Property 335 Equity 0.1 24 Equity 2006 HY 2014
Slide 37: Well positioned to deliver across cycles
Group Well positioned to deliver across cycles IFRS income by revenue IFRS earnings split by In-force IFRS earnings4, source, HY15 % currency1,2,3, HY15 % FY14 £bn 3.2 Other Asset 18% 0.6 Other management Insurance margin USD linked 16% Spread income 76% Life Fee USD 45% Asset Mgt income Life 2.6 Fe
Slide 38: Summary
Group Summary • Clear, unchanged strategy focused on three secular growth opportunities • Leading franchise, ‘best in class’ capabilities • Experienced, proven management team • Strongly capitalised and cash generative businesses • Well positioned to deliver long term profitable growth 38 2015 HALF
Slide 39: Long term value creation
Group Long term value creation IFRS operating profit1,2, £m New business profit1,2,3, £m Free surplus generation1,2,4, £m 3.8x 3.7x 5.7x 1,190 1,418 1,881 CAGR CAGR CAGR +15% 1,009 1,219 +16% +21% 1,521 1,152 913 1,091 1,415 1,031 818 756 921 1,157 1,022 630 817 488 609 693 402 503 611 462 497 538 3
Slide 40: Appendix
Appendix 40 2015 HALF YEAR RESULTS
Slide 41: A clear strategy underpinned by clear operating principles
Strategy A clear strategy underpinned by clear operating principles Strategy Operating Principles Balanced Metrics & Disclosures ASIA US Accelerate Build on Strength Focus on Customers and Distribution Proactive Disciplined Risk Capital ASSET UK Management Allocation Focus MANAGEMENT Optimise 41 201
Slide 42: New business profit growth
Disciplined capital allocation New business profit growth New business strain1,3, £m New business profit2,3, £m 1,190 155 1,009 +196% 913 139 818 100 371 756 116 630 108 376 311 +28% 97 488 288 434 298 396 376 402 86 364 57 235 339 319 337 20 297 22 36 UK 92 35 664 UK 93 45 33 164 190 180 211 173 US
Slide 43: Higher quality and growing earnings
Group Higher quality and growing earnings Sources of IFRS operating income1,2, £m 6,338 5,921 5,043 1,131 1,073 4,444 4,002 1,061 1,441 3,521 1,356 3,126 1,049 3,043 2,831 998 1,027 574 742 1,635 74% 557 750 592 1,587 857 537 672 1,362 321 446 1,252 865 76% 1,140 784 73% 932 58% 914 1,618 1,391 870
Slide 44: Higher quality earnings
Life IFRS operating income Higher quality earnings “Cash profit”1,2: Income3 – Expenses (before impact of DAC adjustment), £m 1.6x 1,924 1,701 1,703 3,576 1,652 1,520 1,388 2,925 3,067 1,366 1,222 2,448 2,222 928 1,156 US Life + 834 UK Life 757 923 1,652 563 1,366 509 1,215 834 928 Asia 365 465 443
Slide 45: Free surplus generation
Delivering cash Free surplus generation Free surplus and dividend, £m 2.8x Reinvestment rate 23% Reinvestment Reinvestment rate 24% rate 26% 434 Reinvestment Reinvestment rate 21% rate 26% Reinvestment 376 rate 27% 396 297 364 Reinvestment 337 Reinvestment rate 34% rate 40% 1,852 1,548 1,596 319 221
Slide 46: Cash remittances to Group
Delivering cash Cash remittances to Group Business unit net remittances, £m +10% 1,068 974 M&G 176 incl PruCap 844 160 726 134 231 UK 690 246 123 226 265 460 230 403 US 375 334 130 352 86 294 86 320 247 263 268 237 216 2581 Asia 190 105 126 67 11 21 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY
Slide 47: Delivering cash
Group Delivering cash Dividend, pence per share 36.93 +10.0% 33.57 +15.0% 29.19 +15.9% 25.19 23.85 +5.6% 25.74 +20.2% 19.85 23.84 18.90 18.00 +5.0% +5.0% 20.79 Total dividend 16.32 +5.0% 17.14 +5.0% 17.24 17.24 12.91 13.56 12.30 +10.0% Final dividend 11.02 11.72 11.19 12.31 8.40 9.73 Interim 5.30 5.
Slide 48: 2015 Interim dividend increased by 10%
Dividend 2015 Interim dividend increased by 10% Dividend, pence per share Total dividend 36.93 • Interim dividend increased by 10 per cent to 12.31 pence per share Final dividend 25.74 • Ex-dividend date: 20 August 2015 • Record date: 21 August 2015 • Payment of dividend: 24 September 2015 +10% Inte
Slide 49: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 Hong Kong 30,000 Singapore • Pan Asian leader: #1 by NBP2 25,000 Taiwan • Top 3 in 9 /12 Asian countries3 Korea 20,000 • Market leading platform 15,000 − Over 560,000 agents Malaysia − Access to over 12
Slide 50: Favourable dynamics
Asia Favourable dynamics Population Prudential customers as a GDP 2015 GDP Market (m) % of total population2 ($bn)2 growth (%)2 penetration3 (%) Indonesia (1995)1 255 1.0% 935 5.2 1.1% 101 0.2% 304 6.7 ASEAN and Hong Kong Philippines (1996) 1.6% Thailand (1995) 69 2.2% 388 3.7 3.6% Vietnam (1999) 92
Slide 51: Products meet customer needs and create shareholder value
Asia Life Products meet customer needs and create shareholder value Health and Protection – Out of pocket medical expenses1 Annual premium for a customer aged 50 (indexed) 143 123 19 117 114 100 73 Saving 100 81 27 Spend Without Basic Government Prudential Prudential Co. A Co. B Co. C Co. D insuranc
Slide 52: Affordable products underpin consumer demand
Asia Affordable products underpin consumer demand Prudential product premium1 Developed markets health insurance spend Healthcare spend as % of average annual income2 100% = average annual income 12% 11% 11% Linked 10% 46 premium Premiums paid = 9% of average annual 5.0% income H&P 54 premium Premiu
Slide 53: Growing demand for healthcare
Asia 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 Discretionary 14 2 10 2 9 6 Semi-Necessities 6 13 31 Food Neces
Slide 54: 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 income Up to $2,000 to $15,000+ level $2,000 $15,000 Source: Oliver Wyman analysis; Prudential analysis. 54 20
Slide 55: APE by market
Asia Life APE by market Asia APE by market, £m (Constant Exchange Rate) +84% 519 +0% 282 -13% +18% +44% 183 183 +48% 176 +45% 153 +7% +4% 105 +36% 89 89 +21% 74 68 62 57 61 50 47 46 48 25 34 24 29 Hong Kong Indonesia Singapore Malaysia China 50% Korea India 26% Taiwan Thailand Vietnam Philippines 1
Slide 56: APE sales by product - percent
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 9 7 8 9 9 6 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 35 38 17 38 40 38 45 18 20 20 42 19 22 30 24 27 27 24 30 27 25 31 29 32 24 34 33 30
Slide 57: Flows and persistency
Asia Life Flows and persistency Asia Life gross flows1,2, £bn Asia Life gross flows (ex-India)1,2, £bn 2.5 2.5 2.3 2.3 2.2 2.2 2.0 2.0 1.9 1.8 1.5 1.7 1.5 5.1% 5.6% 5.2% 5.0% 5.2% 5.0% 4.7% 4.8% 4.4% 1.0 4.8% 0.5 HY11 HY12 HY13 HY14 HY15 HY11 HY12 HY13 HY14 HY15 Surrenders/withdrawals as % of openin
Slide 58: US retail sales and deposits
US retail sales and deposits HY 2015 Retail sales and deposits, $m HY 2014 = $14,843m HY 2015 = $13,584m $1,365 $439 $1,145 $355 $304 $320 $8,711 $2,492 $2,523 $7,817 $1,532 $1,424 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access
Slide 59: VA volumes
US Life VA volumes VA volumes by quarter, sales US$bn 27% 28% 53% 46% 45% 42% 50% 47% 47% 6.6 6.4 6.4 •‘Features War’ 5.7 5.7 5.7 1.4 5.5 1.1 1.4 5.3 0.4 5.2 5.2 5.0 0.2 1.1 1.1 1.3 4.7 4.6 4.6 4.4 1.0 1.1 4.2 4.4 4.2 0.7 0.8 3.7 3.7 3.8 1.3 3.3 3.1 2.9 2.4 2.4 2.3 2.3 2.1 1.8 1.8 1.5 1.4 1.5 Q1 07
Slide 60: Successful diversification
US Group Balance sheet Successful diversification / Capital Jackson VA sales mix, $bn 23.1 20.9 2.8 19.7 17.5 34% 5.1 14.7 10.0 15.1 6.5 1 2008 2009 2010 2011 2012 2013 2014 VA With Living Benefit Elite Access VA Without Living Benefit 1 Values may not cast to total due to rounding. 60 2015 HALF YEA
Slide 61: Variable annuity distribution
US Life Variable annuity distribution Variable annuity sales by distribution channel, US$bn HY 2015 includes $2.5bn of Elite Access sales (HY 2014, $2.5bn) 12.7 11.8 8.3 7.7 2.3 2.0 2.1 2.1 HY 2014 HY 2015 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 61 2015 HA
Slide 62: New business margin
US Life New business margin New business margin (post tax), % APE 46% 47% 44% 21% 12% 12% Variable Annuities US Other HY 2013 HY 2014 HY 2015 62 2015 HALF YEAR RESULTS
Slide 63: Successful execution
US Successful execution Cumulative cash remittances, $m $3,158m 2 100 580 610 530 470 400 280 125 63 2008 2009 2010 20111 2012 2013 2014 HY 2015 RBC Ratio 438% 417% 483% 429% 423% 450% 456% 1 Net remittances from Jackson include $197m in 2011 representing release of excess surplus to the Group. 2 Ne
Slide 64: DAC impact on results
US IFRS profit DAC impact on results Impact on results of DAC amortisation, £m 2014 HY 2014 HY 2015 Gross profits1 1,944 948 1,113 New business strain2 (209) (103) (110) DAC Amortisation - Core (474) (249) (275) - (Acceleration) / deceleration (13) 10 20 Operating result 1,248 606 748 Core as % of G
Slide 65: Policyholder behaviour
US Life Policyholder behaviour Optional benefits elected, % of initial benefits elected (New business) 86% 82% 80% 79% 65% 63% 62% 55% 42% 24% 22% 21% 15% 11% 6% 7% 6% 8% 8% 5% 5% 5% 2007 2008 2009 2010 2011 2012 2013 2014 HY 2015 No benefit GMWB (for life) Elite Access 65 2015 HALF YEAR RESULTS
Slide 66: Asset growth
US Life Asset growth Growth in statutory admitted assets, $bn 197.7 HY 15 v 2014 increase: $8.3bn 189.4 Net Inflows: $5.9bn 170.9 Market and other movements: $2.4bn 142.8 135.2 127.5 107.6 108.8 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 43.0 46.6 14.7 40.2 7.1 10.4 5
Slide 67: GMWB policyholder behaviour sensitivities
Resilient balance sheet GMWB policyholder behaviour sensitivities GMWB policyholder behaviour sensitivities, HY 2015 $bn 7 • Policyholder behaviour experience is continuously monitored and a comprehensive study is conducted on an annual basis 6 • For IFRS and Statutory accounting purposes, assumptio
Slide 68: IFRS impact 'below-the-line'
Hedging result IFRS impact ‘below-the-line’ HY 2015 VA hedge results, net of related DAC, £m 200 146 160 100 394 0 (54) (100) (200) (300) (326) (400) Equity hedge VA reserve Interest rate Non-operating fee IFRS net hedge instruments changes hedges income, result net of claims 68 2015 HALF YEAR RESUL
Slide 69: Moving reserves to 'fair value'
VA hedging Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 800 226 600 Liabilities 404 400 200 0 (200) (400) Assets (600) (800) 40 (1,000) (951) (1,621) (991) (1,200) As recorded2 Change in rates3 Adjustment to full Revised liability, excluding Vo
Slide 70: Capital, hedging and policyholder behaviour
Jackson Capital, hedging and policyholder behaviour Total adjusted Capital • Hedging programme continues to effectively mitigate risks $bn • Total adjusted capital excludes gains on interest rate swaps: $289m at 31 Dec 2014 4.9 June 2015 (Dec 2014: gain of $555m) • Earned guarantee fees of 118 bps p
Slide 71: Life insurance - Asia
IFRS operating profit – source of earnings Life insurance - Asia Source Total operating profit HY14 HY15 (CER) +/- 574 497 15% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments - +/- 1,424 1,258 13% (928) (804) (15)% 78 43 81% Spread Technical and other income Fee income
Slide 72: Life insurance - US
IFRS operating profit – source of earnings Life insurance - US Source Total operating profit HY14 HY15 (CER) +/- 834 751 11% £m except reserves £bn = Total Life income Total Life expenses Expense deferrals - + 1,607 1,492 8% (887) (888) - 369 409 (10)% - Spread Expected returns Fee income income DAC
Slide 73: Life insurance - UK
IFRS operating profit – source of earnings Life insurance - UK Source Total operating profit HY15 HY14 +/- 436 366 19% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments - - 545 486 12% (109) (114) 4% 0 (6) n/a Spread Technical and other Expected returns Fee income income
Slide 74: Asset management
IFRS operating profit – source of earnings Asset management Source Asset Management Operating HY 2014 profit1 £mHY except 2015reserves £bn +/- (CER) 309 270 14% £m except average assets £bn M&G Operating profit Eastspring investments 251 227 11% 58 43 35% Underlying income Other income2 Total expens
Slide 75: Sources of income - Asia
Life IFRS operating income – Asia Sources of income Asia IFRS operating income1,2, £m Growth % HY 2015 vs. HY 2014 (CER) 592 6% +3% 512 4% +31% 6% 11% 0% 3% 13% 14% +13% 15% 65% +20% 63% HY 2014 CER HY 2015 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets
Slide 76: Sources of income - US
Life IFRS operating income – US Sources of income US IFRS operating income1, £m Growth % HY 2015 vs. HY 2014 (CER) 1,607 1,492 1% +54% 1% 23% -6% 27% 52% +15% 48% 24% 24% +6% HY 2014 CER HY 2015 Insurance margin Fee income Spread income Expected return on shareholder assets 1 Excludes acquisition an
Slide 77: Sources of income - UK
Life IFRS operating income – UK Sources of income UK IFRS operating income1,2, £m Growth % HY 2015 vs. HY 2014 457 402 15% -9% 18% 29% -1% 34% 30% +5% 33% 7% +3% 8% 19% +190% 7% HY 2014 HY 2015 Insurance margin3 Fee income Spread income With-profits Expected return on shareholder assets 1 Excludes m
Slide 78: M&G – retail FUM
Asset Management M&G – retail FUM Retail funds under management, £bn 16% 21% 19% 26% 35% 43% 42% 43.5 42.5 40.4 40.4 36.0 33.5 31.8 28.7 26.1 23.7 14.5 9.0 8.2 5.0 2009 2010 2011 2012 2013 2014 HY 2015 UK / Other Europe X% Europe FUM as % of Retail FUM 78 2015 HALF YEAR RESULTS
Slide 79: Life operating variances – Group
EEV operating profit Life operating variances – Group Group Life operating variances1, £m Experience variances and assumption changes % opening EEV2 0.0% 0.9% 0.3% (0.4)% 0.4% 0.9% 1.2% 1.0% 0.9% 0.7% 892 749 706 632 584 566 493 500 432 358 229 221 232 215 166 101 64 40 (3) (60) HY 2006 HY 2007 HY 2
Slide 80: In-force performance
EEV operating profit In-force performance Asia in-force1, £408m US in-force, £441m UK in-force, £256m +21% +10% +6% 135 108 101 70 14 26 12 11 (3) (27) Persistency & Mortality / Morbidity Spread Other items Total variances / withdrawals and Other items other HY14 HY15 X% In-force change from HY14 to
Slide 81: Life operating variances – Asia
EEV operating profit Life operating variances – Asia Asia Life operating variances, £m Experience variances and assumption changes % opening EEV1 (0.4)% 0.7% (0.4)% (1.9)% (0.8)% (0.3)% 0.1% 0.1% 0.1% 0.0% 411 328 315 286 254 250 197 151 113 91 19 10 12 11 (8) (1) (16) (22) (47) (98) HY 2006 HY 2007
Slide 82: Shareholder backed business - Group
Policyholder liabilities Shareholder backed business - Group Policyholder liabilities1 roll-forward, £bn 4.4 1.1 211.6 208.2 0.8 206.2 (0.9) (2.0) Net inflows2 £4.3bn 2.1% of CER opening reserves of which: unit linked & separate account £3.0bn; other reserves £1.3bn Liabilities Foreign CER opening A
Slide 83: Shareholder backed business - Asia
Policyholder liabilities Shareholder backed business - Asia Policyholder liabilities1 roll-forward, £m 2,456 860 27,301 26,410 (1,622) 25,607 (803) Net inflows1 £834m 3.3% of CER opening policyholder liabilities Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2015 e
Slide 84: Shareholder backed business - US
Policyholder liabilities Shareholder backed business - US Policyholder liabilities1 roll-forward, £m 8,493 129,667 126,746 (4,142) (221) 125,537 (1,209) Net inflows1 £4,351m 3.5% of CER opening reserves Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2015 exchange l
Slide 85: Shareholder backed business - UK
Policyholder liabilities Shareholder backed business - UK Policyholder liabilities1 roll-forward, £m 2,016 55,009 503 54,656 (2,872) Net outflows1 £(856)m (1.6)% of opening reserves Liabilities Shareholders’ Shareholders’ Investment Liabilities 1 Jan 2015 Premiums maturities, deaths related and 30 J
Slide 86: Summary of movement
Equity shareholders’ funds Summary of movement Movement in shareholders’ funds Movement in shareholders’ funds IFRS Equity EEV Equity HY15 % vs HY15 HY15 % vs HY15 £bn HY14 per share £bn HY14 per share After-tax operating profit 1.5 26% 57 2.3 17% 89 Investment variance and other (0.1) (1) (0.2) (6)
Slide 87: Movement during the period
IGD capital Movement during the period 1 IGD capital – movement in first half of 2015, (£bn) Capital position at 30 June 2015, (£bn) Solvency 280% 2.5x 280% cover IGD surplus 31 December 2014 4.7 Net capital generation 0.8 Surplus £5.2bn Sub Debt issuance 0.6 2014 year-end dividend payment (0.7) 8.6
Slide 88: Group overview
Invested assets Group overview Breakdown of invested assets – HY 2015, £bn Total PAR Unit- Shareholders Group Funds Linked Asia Life US Life UK Life Other Total Debt securities 142.3 59.0 9.8 8.3 32.1 31.1 2.0 73.5 Equity 155.3 39.8 114.2 0.8 0.3 0.0 0.2 1.3 Property Investments 13.3 10.8 0.7 0.0 0.
Slide 89: 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 - 3,735 347 171 4 4,257 AA-BBB 3,522 - 79 1,995 102 5,698 Below BBB - - 618 - 618 Total 3,522 3,73
Slide 90: Total PIIGS sovereign and bank debt of only £264m
Resilient balance sheet Total PIIGS sovereign and bank debt of only £264m Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets – PIIGS countries as at 30 June 2015, £m PIIGS sovereign & bank debt Sovereign Bank debt Institution Covered Senior Tier II Tier I Total Por
Slide 91: UK asset quality – credit reserve
Invested assets UK asset quality – credit reserve UK shareholder debt securities portfolio by rating1 Strength of the £2.2bn credit reserve BB or below 2% AAA • No defaults of shareholder-backed debt securities BBB 14% • Allowance for credit risk as at 30 June 2015 materially in line with 22% prior
Slide 92: 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 £32.1bn <1 Corporate Bond Portfolio, % by rating Other 2 CMBS 1 BB and below AAA and RMBS AA 4 Govt 4% 5% HY 1 A 46% Total A or £24.1bn 41% 50% above Corporate IG 23 BBB Bonds
Slide 93: 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 £32.1bn Investment Grade Corporate Bond Portfolio, % by sector Other <1 2 CMBS Automotive 2% 1 Utility RMBS Banking 4 Govt Basic Industry • Portfolio spread over 696 Telecom H
Slide 94: 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 £32.1bn High Yield Corporate Bond Portfolio, % by sector Other <1 CMBS 2 1 Automotive RMBS Utility 4 Basic Industry Govt • Portfolio spread across HY 1 Telecom 3% 4% 12% Capit
Slide 95: 2015 half year currency mix
Currency mix 2015 half 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 dollar 18 16 13 15 15 linked1 11 21 UK sterling 14 37 16 31 34 36 40 US
Slide 96: Prudential plc 2015 Half Year Results
Prudential plc 2015 Half Year Results Delivering ‘Growth and Cash’ 11 August 2015 96 2015 HALF YEAR RESULTS