Slide 1: Prudential plc 2016 Half Year Results
Prudential plc 2016 Half Year Results 10 August 2016 1 2016 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: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 3 2016 HALF YEAR RESULTS
Slide 4: Group: Strong progress
Group Strong progress IFRS operating Solvency II profit1 surplus £ 2,059m (+6%) £9.1bn (175 ) % Free surplus Interim generation1,2 dividend £1,609m (+10%) 12.93p ( 5 ) + % 1 Growth rates based on CER 2 Underlying free surplus generation 4 2016 HALF YEAR RESULTS
Slide 5: Group: Clear positioning
Group Clear positioning Structural trends underpin Asian prospects Growth ‘Managing the cycle’ in US & UK Investing in growing scale and quality of franchise to underpin future growth Fee and insurance margin focus; limited appetite for spread products Ongoing actions to lower rate sensiti
Slide 6: Asia: High quality, defensive growth
Asia High quality, defensive growth Regular and Single Premium APE1, £m c90% MSCI Asia ex Japan2 +25% 2,641 2,010 1,911 1,740 1,551 1,514 1,391 1,242 1,131 1,052 889 723 124 206 105 120 494 106 151 103 360 91 340 281 155 122 110 146 157 214 227 212 79 23 11 77 27 63 46 45 56 68 91 79 6 9 1995 1996 1
Slide 7: Asia: Growing earnings base
Asia Growing earnings base Life weighted premium income1,2, £bn CER 10.0 8.5 HY16 7.3 growth4 MSCI Asia 6.2 7.2 5.9 +20% ex Japan3 5.6 4.9 6.3 4.9 4.2 5.4 3.8 3.3 4.6 4.3 +20% 4.1 3.6 3.6 2.6 3.0 2.1 2.8 1.9 2.2 +19% 1.1 1.2 1.1 1.3 1.4 1.6 1.4 1.7 2007 2008 2009 2010 2011 2012 2013 2014 2015 HY15 H
Slide 8: Asia: Delivering 'Growth and Cash'
Asia Delivering ‘Growth and Cash’ IFRS operating profit1, Geographic mix1,2 Free surplus generation1,3, £m £m £m AER AER +18% Indonesia +12% +18% +15% +15% Singapore +2% Hong Kong +32% £743m 419 +15%, Malaysia +22% 743 Eastspring +2% 644 Vietnam +26% 364 Thailand 0% India +5% HY 15 HY 16 China +67%
Slide 9: Asia: Consistent delivery
Asia Consistent delivery IFRS operating profit1, £m 2x3 2017 objective2 1,324 1,140 1,075 2x 975 774 2x 591 482 278 743 213 632 184 512 525 435 291 359 233 102 81 104 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H 2H 1. Comparatives have been stated on an actual exchange rate. 2012 i
Slide 10: US: Disciplined execution
US Disciplined execution Separate account assets, $bn Life IFRS operating profit1, HY16 £m Cumulative net flows $82bn 27.3 3.3 12.1 VA fee business 13.1 +9%, 72% (AER: +16%) 12.5 138.9 £888m 12.4 0%, (AER: +6%) 11.2 108.3 8.9 28% Spread & Other business 2.6 5.6 -18% (AER: -13%) 29.9 FY 07 2008 2009
Slide 11: UK: Navigating change
UK Navigating change Life Asset management IFRS operating profit, PruFund FUM, M&G FUM, HY16 £m £bn £bn HY 2016 +22% 2007 Retail ‘Core’ in-force1 HY15: £309m 59.2 £306m 22.3 £ 473m +8 % 28.9 125.7 255.4bn £ £ 167.3bn Annuities2 20.1 16.5 116.1 70.5 Mgt actions3 11.6 Internal Institutional FY14 FY15
Slide 12: Group: Well positioned to deliver across cycles
Group Well positioned to deliver across cycles IFRS income by revenue source1, HY16 % IFRS profit by business2 & currency3,4,5, HY16 % Other M&G Other 8% 10% Spread income Insurance margin 26% 16% 32% Asia UK 21% GBP 76% USD linked USD 22% Asset Mgt Fee income Life Fee income 28% 37% US In-force IFR
Slide 13: Group: Half year results summary
Group Half year results summary IFRS operating profit1 £ 2,059 m P Strong performance in a volatile environment (+6%) P Asia delivering double digit growth in earnings and cash Free surplus generation1 £ 1,609 m (+10%) P Disciplined execution to offset known headwinds Solvency II surplus £ 9.1 bn P
Slide 14: Nic Nicandrou, Chief Financial Officer
Nic Nicandrou Chief Financial Officer 14 2016 HALF YEAR RESULTS
Slide 15: Key financial highlights
Key financial highlights Continued delivery of “Growth and Cash” HY16 vs HY15 £m HY16 HY15 CER3 AER3 IFRS operating profit 2,059 1,881 +6% +9 % Growth New business profit1,2 1,260 1,115 +8% +13% EEV operating profit2 2,263 2,278 (4)% (1)% Free surplus generation2 1,609 1,418 +10% +13% Cash Remittanc
Slide 16: 2017 financial objectives
2017 financial objectives Delivery remains on track 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 > £1,858 £1.1bn +18% 1,468 765 £0.9bn 1,260 662 +15% 1,075 +15% 573 901 471 453 787 484 592 673 419 924 1,140 1,324 74
Slide 17: Group: High quality and resilient earnings
Group High quality and resilient earnings IFRS operating fee income and IFRS non-sterling IFRS operating income insurance income, £m operating profit1, £m and expenses1,4, £m £m £bn % total % total income2 62% 76% profit3 56% 69% 4,394 1.61x 2.1x 2,682 2.3x 1,631 Income 2,726 1,276 702 Expenses (1,4
Slide 18: Group: High quality and resilient capital
Group High quality and resilient capital Solvency II capital position1,2 Solvency II capital sensitivities1,2 Sources of capital excluded 30 June 2016, £bn 30 June 2016 from Solvency II £m £bn Shareholder share of estate Solvency II cover 175% With-profit capital HY16 surplus cover 175% Permit
Slide 19: Group: Conservative approach to balance sheet risk
Group Conservative approach to balance sheet risk UK shareholder credit portfolio Jackson shareholder portfolio1 Jackson VA portfolio 30 June 2016, £35bn 30 June 2016, $60bn Unhedged GMWB cash flows £bn 30 Jun vs PV of guarantee <BBB 2% fees less benefits 2016 YE15 AAA 12% Cash/Treasury/ Public IG B
Slide 20: Group: Earnings growth driven by Asia and US fee business
Group Earnings growth driven by Asia and US fee business IFRS operating profit by business unit, £m IFRS operating profit HY16 vs HY15, £m HY16 HY15 CER AER HY15 (CER)1 1,946 Asia 743 632 +15% +18% Asia 99 US 876 846 (3)% +4 % US fee business profit5 55 UK2 492 453 +9% +9 % Management actions 74 M&G
Slide 21: Asia: Strong and consistent growth momentum
Asia Strong and consistent growth momentum Financial performance, £m (CER) HY16 vs HY15 1,655 +18% Life APE sales • High quality, diversified sales and value New business profit 824 +20% Regular premium +21%, 94% of total Agency APE +22%, driven by manpower growth and productivity improvements I
Slide 22: Asia: Earnings prospects driven by regular premium business
Asia Earnings prospects driven by high quality, regular premium business Regular premium APE In-force premium Policyholder liabilities1 Insurance income 65% 68% +21% +20% +22% +24% 33.3 27.3 18.6 16.5 4,275 488 1,551 3,557 393 1,277 14.7 10.8 HY15 HY16 HY15 HY16 30 Jun 30 Jun HY15 HY16 (CER) (CER) 2
Slide 23: US: Disciplined execution
US Disciplined execution Financial performance, £m (CER) HY16 vs HY15 New business APE sales 782 (14)% • Lower APE reflects market volatility and disruption from Department of Labor New business profit 311 (21)% reforms • 10 point drag on NBP growth due to 78bp IFRS operating profit 876 (3)% fall in
Slide 24: US: Growing contribution from fee business
US Growing contribution from fee business Movement in separate account assets in HY16, US$bn Variable annuities • Net flows continue to be strongly positive despite lower sales in HY16 • In-force portfolio remains profitable across all years 1.4 138.9 (3.6) 6.9 134.2 3.3 % opening +10% (5)% +5% 2% F
Slide 25: UK Life: Positive response to new environment
UK Life Positive response to new environment Financial performance, £m FY15 HY16 vs HY15 New business • Increase in Retail new business driven by APE sales1 593 +51% continued growth in PruFund product sales, which were 80% higher at £438m New business profit1 125 +56% Life IFRS operating profit, £m
Slide 26: M&G: Taking action to address short-term challenges
M&G Taking action to address short-term challenges Financial performance, £m HY16 vs HY15 Net flows (6,966) (2,375) Net flows • Retail: £6.1bn net outflows, of which Total FUM (£bn) 255.4 - £4.1bn occurred in 1Q • Institutional: £0.8bn net outflows, healthy Revenues1 440 (10)% pipeline remains Cost
Slide 27: Group: Free surplus generation momentum maintained
Group Free surplus generation momentum maintained Life and asset management free surplus generation1, £m, (CER) Life in-force result1, £m (CER2) HY16 HY15 Change HY16 HY15 Change Expected return from in-force 1,437 1,411 2% Asia 603 529 14% US 701 746 (6)% Experience result 374 162 131% UK 555 352 5
Slide 28: Group: Free surplus generation momentum maintained
Group Free surplus generation momentum maintained Life and asset management free surplus generation1, £m, (AER) Business FX Interest Actions2 Solvency Growth/ Mix/ HY15 HY16 rates II3 Experience Expected return from in-force 1,366 45 (104) - 22 108 1,437 Experience result 153 9 - 138 - 74 374 Invest
Slide 29: Group: Resilient free surplus and strong central cash
Group Resilient free surplus and strong central cash Movement in life and asset management free surplus1,2, £m Movement in central cash, £m (1,268) 6,881 (477) (405) 384 791 (1,118) 5,763 (935) 1,609 5,293 (256) FY15 special dividend Asia2 1,118 (679) FY15 second 2,546 Based on interim dividend loca
Slide 30: Equity shareholders' funds
Equity shareholders’ funds Benefiting from natural offsets in our business IFRS Equity EEV Equity1 Per Per £bn share (p) £bn share (p) Operating profit after tax 1.6 61 2.3 88 Investment variance (0.9) (35) (0.9) (34) Unrealised gain on AFS 1.1 42 n/a n/a Foreign exchange 0.8 31 2.7 103 Dividend (0.
Slide 31: Solvency II: Strong Group capital position
Solvency II Strong Group capital position and lowered sensitivities HY16 movement in Solvency II capital1,3, £bn Solvency II surplus estimated sensitivities1,3 Impact on solvency 31 December 20152 9.7 ratio HY16 estimated surplus £9.1bn 175% Modelling changes (0.1) 2015 dividends paid (0.9) 20% equi
Slide 32: Solvency II: Resilient local solvency
Solvency II Resilient local solvency Local solvency capital positions, £bn (US$bn) Asia1,2 US3 5.5 Business unit 4.9 5.2 5.1 • Asia SII surplus of £5.1bn exceeds free surplus of £1.8bn 1.6 1.8 5.1 • Jackson TAC of $4.9bn before permitted practice 481% 3.9 363% • UK shareholder SII surplus of £2.9bn
Slide 33: Group: Operating performance remains a key source of capital
Group Operating performance remains a key source of capital IFRS operating profit post tax Group free surplus generation1 Group S2 capital generation £m £m £m +9% +18% +£0.4bn 1,580 1,455 1,199 1,338 1,133 798 HY15 HY16 HY15 HY16 HY15 HY16 1 1 January 2016 Group free surplus shown after effect of im
Slide 34: Group: Conservative balance sheet and resilient business model
Group Conservative balance sheet and resilient business model IFRS shareholders’ funds EEV shareholders’ funds1 Solvency II surplus £bn £bn £bn +13% +10% (0.6) 35.0 14.6 31.9 13.0 9.7 9.1 31 Dec 2015 30 Jun 2016 31 Dec 2015 30 Jun 2016 31 Dec 2015 30 Jun 2016 1 Change includes adjustment to opening
Slide 35: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 35 2016 HALF YEAR RESULTS
Slide 36: Group: Footprint aligned to long-term trends
Group Footprint aligned to long-term trends Asia growing working population1,2, m Increasing global wealth4, $tn Ageing population1,5, % + 178m 2030 Growth 2014 from 2015 2015 Footprint 2030 Footprint $34tn 32% +4ppt +4ppt Asia insurance penetration3, % ROW 40% 2.4% 2019 1 United Nations Department
Slide 37: Group: Investing for growth
Group Investing for growth Indonesia distribution expansion – Digitising 400 offices Operationalised UK and M&G new markets – Laos offerings Recruited over Launching fee based Added nearly 1 million 100,000 new agents Variable Annuity in 3Q new Asian customers in Asia Investing in best of Launched i
Slide 38: Group: Growing value at consistent returns
Group Growing value at consistent returns Shareholders equity (EEV), £bn 35.0 32.4 29.2 24.9 22.4 19.6 18.2 14.6 15.0 15.3 2007 2008 2009 2010 2011 2012 2013 2014 2015 HY 16 Return on Embedded Value1, 15% 14% 15% 18% 16% 16% 19% 16% 17% 14% % 1 Return on embedded value is based on EEV post-tax opera
Slide 39: Group: Growing earnings and dividends
Group Growing earnings and dividends Earnings Dividend EPS movement 2007-20151,2 , (%) DPS movement 2007-20151,2 , (%) 3.5x 2.2x 1.6x 0.9x 2007 2015 2007 2015 2007 2015 2007 2015 3 Peers Prudential Peers Prudential 1 Source: UBS. Data based on reported currency. Peers equates to a sector average pro
Slide 40: Group: Long-term track record
Group Long-term track record IFRS operating profit1,2,3, £m New business profit1,2, £m Free surplus generation1,2,3, £m 3.5x 3.8x 3.7x 2,059 1,609 1,260 1,881 1,190 CAGR CAGR 1,418 CAGR +15% +16% +16% 1,009 1,219 1,521 1,152 1,415 913 1,091 818 1,031 756 921 1,157 1,022 630 817 488 609 693 402 503 6
Slide 41: Group: Summary
Group Summary P Strong performance in a volatile and uncertain environment P Asia centricity and structural drivers underpin future prospects P Diversity, scale and discipline smooths the cycle P Strong, defensive balance sheet P Consistent delivery of long-term value 41 2016 HALF YEAR RESULTS
Slide 42: Prudential plc 2016 Half Year Results
Prudential plc 2016 Half Year Results 10 August 2016 42 2016 HALF YEAR RESULTS
Slide 43: Appendix
Appendix 2016 Half Year Results 43 2016 HALF YEAR RESULTS
Slide 44: Group: Premium franchises
Group Premium franchises Asia US UK Premier retirement income Well recognised brands with strong track Leading pan regional franchise player record In Asia since 1923 168 years of providing financial Founded in 1961 security 14m life customers 4m life customers 6m life customers Top 3 position in 8
Slide 45: Group: Disciplined capital allocation
Group Disciplined capital allocation New business strain1,3,4, £m New business profit2,3,4, £m 1,260 1,190 125 +213% 155 1,009 913 311 139 818 100 371 756 +48% 116 630 108 376 502 311 434 97 56 488 288 396 376 364 57 298 339 337 20 402 86 319 22 36 235 297 209 824 35 92 UK 93 45 33 164 UK 664 180 21
Slide 46: Group: High quality and growing earnings
Group High quality and growing earnings Sources of IFRS operating income1,2,3,4, £m 7,058 6,341 5,921 1,157 5,043 1,131 1,073 4,444 1,759 4,002 1,061 1,418 1,356 3,460 3,513 3,126 1,049 2,831 998 1,027 574 557 1,707 742 1,661 750 592 1,587 796 914 537 1,362 321 446 1,252 1,140 865 75% 775 76% 932 58
Slide 47: Group: Free surplus generation
Group Free surplus generation Free surplus3 and dividend, £m 3.2x Net free surplus Reinvestment rate 24% Reinvestment rate 23% 502 Reinvestment Reinvestment rate 24% 434 Reinvestment Reinvestment rate 26% Reinvestment rate 21% rate 26% 376 rate 27% 396 297 364 Reinvestment 337 Reinvestment 2,111 253
Slide 48: Group: Cash remittances to Group
Group Cash remittances to Group Business unit net remittances, £m 1,118 1,068 M&G & 974 175 PruCap 176 844 160 131 Other 30 726 134 201 690 215 UK 246 123 226 265 460 230 403 375 339 US 334 130 352 86 294 86 320 247 263 268 Asia 237 216 2581 258 190 105 126 21 67 11 HY 2008 HY 2009 HY 2010 HY 2011 H
Slide 49: Group: Interim Dividend
Group Interim Dividend Dividend, pence per share Total dividend 48.78 Special dividend 10.00 • First Interim dividend increased by 5 per cent to 12.93 pence per Ordinary dividend 38.78 share • Ex-dividend date: • 25 August 2016 (UK, Ireland and Hong Kong) Second Interim 26.47 • 24 August 2016 (Singa
Slide 50: Asia: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 Hong Kong 30,000 Singapore • Top 3 in 8 /13 Asian countries2 25,000 Taiwan • Market leading platform Korea − Over 500,000 agents 20,000 − Access to over 10,000 bank branches 15,000 − 14 million customer
Slide 51: Asia: Favorable dynamics
Asia Favorable dynamics Population2 (m) Prudential customers as a Market GDP 2015 GDP % of total population penetration3 (%) ($bn)2 growth (%)2 Indonesia (1995)1 255 1.0% 1.1% 930 4.7 ASEAN and Hong Kong Philippines (1996) 101 0.2% 1.6% 302 6.0 Thailand (1995) 69 2.2% 3.6% 415 2.5 Vietnam (1999) 92
Slide 52: Asia: Products meet customer needs and create shareholder value
Asia 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 19 123 117 114 73 Saving 100 100 81 27 Spend Without Basic Government Prudential Prudential Co. A Co. B Co. C Co. D insurance ins
Slide 53: Asia: Affordable products underpin consumer demand
Asia 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 average annual 5.0% income H&P 54 premium Premi
Slide 54: Asia: 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 Semi-Necessities 6 6 13 31 Food Neces
Slide 55: Asia: Wealth and financial assets ownership
Asia Wealth and financial assets ownership Breakdown of personal financial assets Life 12% 24% Non-Life 9% 39% Asset Mgt 9% 18% 20% 24% Bank Deposits 70% 21% 38% 16% Per capita income level Up to $2,000 to $15,000+ $2,000 $15,000 Source: Oliver Wyman analysis; Prudential analysis. 55 2016 HALF YEAR
Slide 56: Asia: Life APE by market
Asia Life APE by market Asia APE by market, £m (Constant Exchange Rate) 58% 868 550 (11)% (33)% 187 159 10% 21% 142 7% 125 (10)% 109 109 (32)% 99 90 26% (12)% 3% 68 73 73 62 56 50 44 49 43 35 29 30 Hong Kong Singapore Indonesia Malaysia China 50% India 26% Taiwan Korea Vietnam Thailand Philippines 1
Slide 57: Asia: Life APE sales by product
Asia Life APE sales by product - percent Asia APE by product, % 3% 4% 2% 3% 5% 4% 3% 3% 4% 5% 4% 6% 6% 7% 8% 8% 8% 7% 6% 18% 17% 19% 22% 26% 26% 29% 29% 33% 33% 35% 33% 33% 19% 37% 38% 38% 18% 43% 19% 50% 57% 26% 27% 27% 26% 29% 31% 30% 32% 32% 30% 30% 29% 27% 26% 61% 62% 24% 58% 24% 49% 42% 43% 42%
Slide 58: Asia: Life 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 2.3 2.3 2.3 2.2 2.2 2.1 2.0 1.9 1.7 1.8 1.5 5.6% 5.1% 5.2% 5.0% 4.7% 5.2% 5.0% 4.8% 4.8% 3.7% 4.4% 3.5% HY11 HY12 HY13 HY14 HY15 HY16 HY11 HY12 HY13 HY14 HY15 HY16 Surrenders/withdrawals as % o
Slide 59: Asia: Eastspring
Asia Eastspring Funds under management, £bn Largest retail fund manager – FUM1, £bn 105 1.8x 89 77 58 60 FY12 FY13 FY14 FY15 HY16 Eastspring Co A Co B Co C Co D Co E 1st 1 Based on assets sourced from the region. Excluding Japan, Australia and New Zealand as at Jun 2015. Source Asia Asset Management
Slide 60: US: HY 2016 retail sales and deposits
US HY 2016 retail sales and deposits Retail sales and deposits, $m HY 2015 = $13,584m HY 2016 = $9,389m $1,145 $355 $397 $8 $408 $320 $1,418 $2,523 $7,817 $958 $6,200 $1,424 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access Fixed
Slide 61: US: VA volumes
US VA volumes VA volumes by quarter, sales US$bn ‘Features War’ 2009 2010 2011 2012 2013 2014 2015 2016 6.6 2007 2008 6.4 6.4 6.0 5.7 5.7 5.7 1.4 5.5 1.1 1.4 5.3 0.4 5.2 5.2 5.3 5.0 1.3 0.2 1.1 1.3 4.7 1.1 4.6 4.4 4.4 4.6 1.0 1.1 1.0 4.3 4.3 4.2 4.2 3.7 3.7 3.8 0.7 0.8 1.3 0.7 0.7 3.3 3.1 2.9 2.4 2.
Slide 62: US: Successful diversification
US Successful diversification Jackson VA sales mix, $bn 23.1 23.1 20.9 2.8 19.7 17.5 33% 4.8 14.7 10.0 15.5 6.5 2008 2009 2010 2011 2012 2013 2014 2015 VA With Living Benefit Elite Access VA Without Living Benefit 62 2016 HALF YEAR RESULTS
Slide 63: US: Variable annuity distribution
US Variable annuity distribution Variable annuity sales by distribution channel, US$bn 11.8 8.6 7.7 5.7 2.0 1.5 2.1 1.4 HY 2015 HY 2016 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 63 2016 HALF YEAR RESULTS
Slide 64: US: Cash remittances
US Cash remittances Cash remittances, $m $3,708m 680 710 530 470 450 400 280 125 63 2008 2009 2010 20111 2012 2013 2014 2015 HY 2016 RBC Ratio 438% 417% 483% 429% 423% 450% 456% 481% 1 Net remittances from Jackson include $197m in 2011 representing release of excess surplus to the Group. 64 2016 HAL
Slide 65: US: DAC impact on IFRS profit
US DAC impact on IFRS profit Impact on results of DAC amortisation, £m 2015 HY2015 HY2016 Gross profits1 2,231 1,113 1,141 New business strain2 (205) (110) (92) DAC Amortisation - Core (514) (275) (266) - (Acceleration) / deceleration (2) 20 29 Operating result 1,510 748 812 Core as % of Gross profi
Slide 66: US: Asset growth
US Asset growth Growth in statutory admitted assets, US$bn 205.9 199.1 189.4 170.9 142.8 134.2 138.9 127.5 107.6 108.8 97.5 80.1 76.7 81.0 69.3 70.9 58.8 62.8 48.9 50.9 55.6 33.3 46.6 22.3 30.0 20.9 40.2 43.0 14.7 7.1 10.4 5.1 4.4 5.6 67.0 62.7 62.1 61.9 64.9 42.2 43.8 45.2 48.1 47.1 46.7 50.0 47.7
Slide 67: US: Reserves return assumptions
US Reserves Return Assumptions EEV IFRS Mean Return vs (percentages asS&P 500 Historical annualized return) 10 IFRS Mean Return vs S&P 500 Historical 9 8 Reserves are based on conservative return 7 assumptions Value of $1 Investment 6 5 4 All accounting bases assume 20-year equity 3 market retur
Slide 68: US: IFRS impact 'below-the-line'
US IFRS impact ‘below-the-line’ HY2016 VA hedge results, net of related DAC, £m 0 (200) (400) (600) (800) (711) (1,000) (1,200) (1,400) 170 (1,406) 286 (1,600) (1,800) (1,151) (2,000) Equity hedge VA reserve Interest rate Non-operating IFRS net instruments changes hedges fee income, hedge result net
Slide 69: US: Moving reserves to 'fair value'
US Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 3,500 719 3,000 2,500 2,365 2,000 1,500 63 1,026 1,000 (2,121) 500 0 As recorded2 Change in Adjustment to full Volatility Hypothetical fair rates3 fees4 adjustment5 value with full fees 1 A positi
Slide 70: US: Capital, hedging and policyholder behavior
US Capital, hedging and policyholder behavior Total adjusted • Hedging programme continues to effectively mitigate risks Capital • Earned guarantee fees of 131 bps per annum (c$0.9bn in HY 2016). US$bn Expected guarantee fees of $1.8bn for 2016 31 Dec 2015 5.1 • Equity allocations remain below our 8
Slide 71: US: GMWB unhedged cash flow
US GMWB unhedged cash flow Unhedged GMWB Cash Flow Exposure, 30 June 2016 $millions S&P @ 6/30 = 2,099 Includes guarantee fees only Base, 5% Gross Return 2,000 1,800 Guarantee Fees Uses prudent best estimate assumptions (AG43, C3P2) PV Future Guarantee Fees 10,249 1,600 Benefits PV Benefits (2,5
Slide 72: US: GMWB unhedged cash flow
US GMWB unhedged cash flow Unhedged GMWB Cash Flow Exposure, 31 December 2015 $millions S&P @ 12/31 = 2,044 Includes guarantee fees only 2,000 Base, 5% Gross Return 1,800 Guarantee Fees Uses prudent best estimate assumptions (AG43, C3P2) PV Future Guarantee Fees 9,842 1,600 Benefits PV Benefits
Slide 73: M&G: Retail FUM
Asset Management M&G – retail FUM Retail funds under management, £bn 16% 16% 21% 19% 26% 35% 43% 39% 39% 43.5 42.5 40.4 36.0 37.3 36.2 33.5 31.8 26.1 23.7 23.5 23.0 16.0 14.5 9.0 8.2 5.0 3.1 2008 2009 2010 2011 2012 2013 2014 2015 HY2016 UK / Other Europe X% Europe FUM as % of Retail FUM 73 2016 HAL
Slide 74: UK Life: Growth across wrappers and new propositions
UK Life Growth across wrappers and new propositions Bonds, (APE, £m) Individual Pensions, (APE, £m) Retail Growth, (APE, £m) 51% 396% 185% 130 156 196 134 = 285 481 62 169 27 H1 2014 H1 2015 H1 2016 H1 2014 H1 2015 H1 2016 H1 2014 H1 2015 H1 2016 Drawdown, (APE, £m) + PruFund ISA, (APE, £m) Legacy,
Slide 75: UK Life: PruFund Range
UK Life PruFund Range PruFund Investment Performance1 Growth in PruFund AuM (£bn) 100% PruFund Growth 80% +83% 60% ABI fund comparator 20.1 40% +37% 16.5 20% 11.6 9.1 7.5 0% 5.4 4.1 0.1 0.3 2.5 -20% 0.9 2007 2009 2011 2013 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 HY 2016 AuM 1 ABI Mixe
Slide 76: M&G: Diversified across principal asset classes
M&G Diversified across principal asset classes M&G Group assets under management by client type and asset class (%), 30 June 20161 1% 1% 4% 3% 6% 6% 9% 9% 21% 12% 2% 4% 6% 31% 1% 3% Internal AUM Retail AUM Wholesale AUM £125.7bn £59.2bn £70.5bn 72% 50% 59% Equities Fixed Income Real Estate Multi-ass
Slide 77: M&G: Operating profit
M&G Operating profit M&G IFRS operating profit1, £m 3x 251 227 225 204 172 175 122 75 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2014 HY 2015 HY 2016 1 Excludes PruCap. 77 2016 HALF YEAR RESULTS
Slide 78: IFRS operating profit sources of earnings: Asia
IFRS operating profit – sources of earnings Life insurance - Asia Source HY 2015 HY 2016 (CER) +/- £m except reserves £bn Total operating profit 682 584 17% = Total Life income Total Life expenses DAC adjustments - +/- 1,624 1,446 12% (1,001) (941) (6)% 59 79 (25)% Spread Technical and other income
Slide 79: IFRS operating profit sources of earnings: US
IFRS operating profit – sources of earnings Life insurance - US Source HY 2015 HY 2016 (CER) +/- Total operating profit £m except reserves £bn 888 887 0% = Total Life income Total Life expenses Expense deferrals - + 1,669 1,709 (2)% (864) (943) 8% 320 392 (18)% - Spread Technical and other Fee incom
Slide 80: IFRS operating profit sources of earnings: UK
IFRS operating profit - sources of earnings Life insurance - UK Source HY2016 HY2015 +/- Total operating profit £m except reserves £bn 473 436 8% = Total Life income Total Life expenses DAC adjustments - - 575 545 6% (100) (109) 7% (2) - - Spread Technical and other Fee income Expected returns With-
Slide 81: IFRS operating profit sources of earnings: Asset management
IFRS operating profit – sources of earnings Asset management Source Asset Management Operating HY2015 profit1 HY2016 (CER) +/- £m except average assets £bn 286 311 (8)% Eastspring M&G Investments 225 251 (10)% 61 60 2% Underlying income Other income2 Total expenses Total income2 Total expenses 440 4
Slide 82: IFRS operating profit sources of income: Asia
IFRS operating profit sources of income Life insurance - Asia Asia IFRS operating income1, £m Growth % 720 HY 2016 vs. HY 2015 (CER) 6% +18% 3% +14% 601 11% +24% 6% 4% (1)% 12% 11% 14% 68% +24% 65% HY2015 CER HY2016 Insurance margin Fee income Spread income With-profits Expected return on shareholde
Slide 83: IFRS operating profit sources of income: US
IFRS operating profit sources of income Life insurance - US US IFRS operating income1, £m 1,709 Growth % 1,669 HY 2016 vs. HY 2015 (CER) 1% 1% (35)% 23% 23% (5)% 23% 26% 52% 51% 52% (1)% 50% 24% 24% 25% 24% (2)% HY 2015 CER HY 2016 Insurance margin Fee income Spread income Expected return on shareho
Slide 84: IFRS operating profit sources of income: UK
IFRS operating profit sources of income Life insurance - UK UK IFRS operating income1,2, £m 396 Growth % 17% 349 HY 2016 vs. HY 2015 18% (9)% 30% 34% 32% 40% 4% 29% 35% 34% 7% 27% (30)% 8% 20% 8% (12)% 9% 7% 7% (2)% HY 2015 HY 2016 Insurance margin Fee income Spread income With-profits Expected retu
Slide 85: EEV operating profit
EEV operating profit Half Year operating return on EEV 14% EEV operating profit by business unit4, £m (CER) New business profit3,4, £m (CER2) Group +8% 1,260 HY16 vs HY152 1,162 Asia Life 1,215 +10% US Life 694 (20)% HY15 CER HY16 UK Life 384 (7)% In-force profit1,4, £m (CER2) Asset Management1 252
Slide 86: EEV operating profit: Life operating variances - Group
EEV operating profit Life operating variances - Group Group Life operating variances1,2, £m Experience variances and assumption changes % opening EEV 3 0.0% 0.9% 0.3% (0.4)% 0.4% 0.9% 1.2% 1.0% 0.9% 0.7% 0.7%4 892 798 749 706 632 584 566 493 500 432 358 229 221 231 213 235 166 101 40 64 (3) (60) HY
Slide 87: EEV operating profit: Long-term business
EEV operating profit Long-term business NBP2, £m In Force EEV1,2, £m Total2, £m HY HY HY HY HY HY FX Economics Other FX Economics Other FX Economics Other 2015 2016 2015 2016 2015 2016 Asia 664 24 (46) 182 824 408 10 (75) 48 391 1,072 34 (121) 230 1,215 US 371 23 (38) (45) 311 441 28 (53) (33) 383 8
Slide 88: EEV operating profit: In-force performance
EEV operating profit In-force performance Asia in-force1, £391m US in-force, £383m UK in-force, £259m 135 114 70 60 54 24 28 11 (27) (21) Total variances / Persistency & Mortality / Morbidity Spread Other items other withdrawals and Other items HY15 HY16 1 Asia In-force shown post development costs.
Slide 89: EEV operating profit: Life operating variances - Asia
EEV operating profit Life operating variances - Asia Asia Life operating variances1, £m Experience variances and assumption changes % opening EEV 2 (0.4)% 0.7% (0.4)% (1.9)% (0.8)% (0.3)% 0.1% 0.1% 0.1% 0.0% 0.1% 411 384 315 328 286 254 250 197 113 151 91 19 10 12 10 7 (8) (16) (3) (22) (47) (98) HY
Slide 90: Policyholder liabilities: Group
Policyholder liabilities Shareholder backed business - Group Policyholder liabilities1,2 roll-forward, £bn 7.9 247.9 2.9 18.3 237.9 1.0 (1.7) 219.6 Liabilities Foreign CER opening Asia US UK Investment Liabilities 1 Jan 2016 exchange liabilities net inflows net inflows net outflows related 30 June 2
Slide 91: Policyholder liabilities: Asia
Policyholder liabilities Shareholder backed business - Asia Policyholder liabilities roll-forward1, £m 2,327 860 33,348 3,643 31,487 (1,326) 27,844 Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2016 exchange liabilities deaths and related and 30 June 2016 surrende
Slide 92: Policyholder liabilities: US
Policyholder liabilities Shareholder backed business - US Policyholder liabilities roll-forward, £m 7,101 2,737 159,155 14,650 153,563 (4,246) 138,913 Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2016 exchange liabilities deaths and related and 30 June 2016 surre
Slide 93: Policyholder liabilities: UK
Policyholder liabilities Shareholder backed business - UK Policyholder liabilities roll-forward, £m 4,286 55,411 52,824 869 (2,568) Liabilities Shareholders’ Shareholders’ Investment Liabilities 1 Jan 2016 Premiums maturities, deaths related and 30 June 2016 and surrenders other 93 2016 HALF YEAR RE
Slide 94: Solvency II: A strong capital position
Solvency II A strong Solvency II capital position Internal model approval step Approval date Estimated Group Shareholder Solvency II capital position1,2 HY16, £bn Matching adjustment November 2015 Transitionals December 2015 Asia surplus treatment December 2015 Solvency cover 175% US Equivalence (De
Slide 95: Solvency II: Well-diversified risks
Solvency II Well-diversified risks Reconciliation of IFRS equity to Solvency II Own Funds1,2, HY16 £bn SCR by risk type3, HY16 IFRS equity 14.6 Less: goodwill, DAC, intangibles (3.9) Operational/Expense Equity Sub-debt 5.7 FX translation 12% 11% Value of shareholder transfer4 3.1 5% Longevity US res
Slide 96: Solvency II: High quality capital
Solvency II High quality capital Solvency II Own Funds by capital tier1,2 Share of Solvency II Own Funds by capital tier1,2 HY16, 100% = £21.1bn 21.1 0.0 Tier 3 – deferred tax Tier 3 4.8 Tier 2 – sub debt Tier 2 0.8 Tier 1 – hybrid capital 0% 23% Other Tier 1 Tier 1 = Tier 1 – core capital Tier 1 =
Slide 97: Solvency II: UK surplus
Solvency II UK Solvency II surplus Solvency II surplus, HY16, £bn Calibrations Solvency 138% 176% cover • Credit: 171bp p.a. credit allowance for annuities, roughly equivalent to 1.5x the cumulative default losses over the worst 10 years since 1920 Surplus • Longevity: The risk margin effectively do
Slide 98: Solvency II: Approach to capital management
Solvency II Approach to capital management • Capital defined by local capital regulations and local business needs • ‘Healthy’ buffer above capital requirements Business unit capital • Self-funded organic growth through reinvestment of operating capital generated • Capital generation supports cash r
Slide 99: Solvency II: Capital dynamics and dividend philosophy
Solvency II Capital dynamics and dividend philosophy Remittances Dividend dashboard2 Central costs 2.0x Asia US UK M&G 1.5x 2.5x Dividends to New business New business New business Retained as shareholders IFRS investment investment investment buffer operating profit cover1 Market Market Market Corp
Slide 100: SII treatment of hybrid capital classification
Solvency II SII treatment of hybrid capital classification Hybrid Capital outstanding, 30 June 2016 Issue Date Amount Coupon Maturity Date 1st Call Date SII Classification 19-Dec-01 GBP 435m 6.125% 19-Dec-31 None Tier 2* 23-Jun-03 USD 1,000m 6.50% Perp 23-Dec-08 Tier 2* 10-Jul-03 EUR 20m 20 yr CMS r
Slide 101: Asset portfolio is high quality and well diversified
Invested assets Asset portfolio is high quality and well diversified Breakdown of invested assets1, HY16, £bn Shareholder debt portfolio, HY16, £bn Shareholders Holding by issuer HY % Portfolio No. Av. Max debt Total PAR Unit Asia US UK £bn issuers £m £m portfolio Group funds linked Life Life Life O
Slide 102: 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 - - 546 215 8 769 AA-BBB 6,881 5,720 199 2,768 54 15,622 Below BBB - - - 1,036 - 1,036 Total 6,881
Slide 103: Total PIIGS sovereign and bank debt
Invested assets Total PIIGS sovereign and bank debt Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets – PIIGS countries as at 30 June 2016, £m Bank debt Sovereign Institution Covered Senior Tier II Tier I Total Portugal - Banco Espirito Santo - 20 - - 20 PIIGS sov
Slide 104: Group shareholder exposures – oil and gas sector
Invested assets Group shareholder exposures – oil and gas sector Breakdown of the shareholder debt securities portfolio Exploration Pipeline Integrated Refining & Oil & gas Total & / Mid- Oils Marketing Services (£m) Production stream Investment grade 3.0% Investment grade 626 919 227 366 551 2,689
Slide 105: US asset quality – Energy Exposure
Invested assets US asset quality – Energy Exposure Energy Portfolio by Sub-Sector – Total IFRS Book Value, in billions 30 June 2016 1 $3.8 $1.4 Higher Energy, Exploration & A- or Higher • Total energy exposure at 30 June, $3.8bn sensitivity to oil Production • Energy exposure is 8% of the fixed matu
Slide 106: UK asset quality – credit reserve
Invested assets UK asset quality – credit reserve UK shareholder debt securities portfolio by rating1 Strength of the £1.8bn credit reserve BB or below AAA BBB 2% • No defaults of shareholder-backed debt securities 12% 15% • Allowance for credit risk as at 30 June 2016 of 43 bps (IFRS) in line with
Slide 107: US asset quality – shareholder debt portfolio (1/3)
Invested assets US asset quality – shareholder debt portfolio (1/3) US Shareholder Debt Securities Portfolio Market value, £41.1bn Other <1 3% BB and below 5% AAA and AA CMBS 3 RMBS 1 Govt 7 Corporate Bond - 1 High Yield Corporate Bond 52% BBB Portfolio, % by rating 40% A £29.2bn Corporate Bond Inve
Slide 108: US asset quality – shareholder debt portfolio (2/3)
Invested assets US asset quality – shareholder debt portfolio (2/3) US Shareholder Debt Securities Portfolio Market value, £41.1bn Other <1 Auto 3% CMBS Utility 13% 3 Banking 8% RMBS 1 Govt 7 Telecoms 3% Basic Industry 7% High Yield Corporate Bonds 1 Technology 4% Services 2% Capital Goods 6% Invest
Slide 109: US asset quality – shareholder debt portfolio (3/3)
Invested assets US asset quality – shareholder debt portfolio (3/3) US Shareholder Debt Securities Portfolio Market value, £41.1bn Other <1 Auto 4% CMBS 3 RMBS 1 Utility 3% Basic Industry 16% Govt 7 Telecoms 9% High Yield Corporate Bonds 1 Technology 2% Capital Goods 4% Services 4% Consumer 2% High
Slide 110: Currency translation sensitivities
Currency mix Currency translation sensitivities IFRS operating profit, £m IFRS operating profit, % HY2016 as Other Asia 2,059 US UK sterling reported 17 21 Asia Impact of translating 63 +3% results at 30 June Asia – 2016 spot rate US 19 65 +3% dollar linked1 HY2016 at 30 June 43 2,187 2016 spot rate
Slide 111: Currency translation sensitivities
Currency mix Currency translation sensitivities New business profit, £m New business profit, % HY2016 as Other Asia UK sterling 1,260 US reported 11 10 Asia Impact of translating 22 +2% results at 30 June 25 US 2016 spot rate dollar 65 +5% Asia – US dollar 54 HY2016 at 30 June linked1 1,347 2016 spo