Slide 1: Prudential plc 2017 Half Year Results
Prudential plc 2017 Half Year Results 10 August 2017 2017 HALF YEAR RESULTS 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, 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 2017 HALF YEAR RESULTS 3
Slide 4: Group headline results
Group Headline results Earnings IFRS operating profit1 £ 2.4 bn P Broad based performance with double digit growth in Asia Cash 1.8 Free surplus generation1 £ bn P 2017 Asia objectives on track, Group objective achieved Growth 1.7 New business profit1,2 £ bn P Strong capital position 9.5 External Ne
Slide 5: Geographic footprint aligned to significant demand
Group Geographic footprint aligned to significant demand Leading pan Insurance penetration1 Mutual fund penetration2 Penetration Penetration regional life ASIA ✓ franchise UK 7.5% Europe 75% Growing earnings and scale #1 Retail Asian asset manager3 2.4% 12% US retirement advisor assets4 Premier ✓ Ot
Slide 6: 2017 Asia objectives on track, Group objective achieved
Group 2017 Asia objectives on track, Group objective achieved Asia Group Underlying free surplus1,2,3, £m IFRS operating profit2,3, £m Underlying free surplus1,3, £bn ✓ 11.1 At least 15% CAGR At least £10bn £1.1bn 872 to 1,641 £0.9bn CAGR 17% 884 553 953 859 909 1,644 2016 2017 2012 2016 2017 2014 -
Slide 7: Asia: Double digit growth in key metrics
Asia Double digit growth in key metrics Life weighted premium income1,2, £bn New business profit2, +17% £m Scale and diversification of portfolio driving £ 1,092 m value across the cycle 7.5 + 18% 6.4 IFRS operating profit2, Leveraging mix to drive quality growth £m 953 HY16 HY17 £ m Eastspring FUM3
Slide 8: Asia: High quality growth
Asia High quality growth Premium Mix NBP Growth Regular premium Distribution 18 % APE New business profit1 + % Agency1 + 24 % Banca1 + 54% 94% Momentum Country Quality 16 8 Countries with at least IFRS double digit growth1 operating profit1 + % Health & Protection % NBP Hong Kong1 + 15 % Agency +31%
Slide 9: Asia: Long-term performance track record
Asia Long-term performance track record IFRS operating profit1, £m 2x3 2017 objective2 1,644 1,286 2x 1,108 1,058 959 2x 757 579 476 953 266 728 199 226 613 427 504 508 2H 285 350 237 1H 109 89 111 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 NBP 2013 2017 objective3 objective3 o
Slide 10: US: Relative outperformance
US Relative outperformance Separate account assets, $bn Industry VA net flows1, $bn: (15) (20) (18) Rapidly adapting to changing environment 1H16 2H16 1Q17 19.2 Net inflows: $8.6bn 162.0 2.6 2.7 Fee business driving earnings growth 3.3 134.2 FY15 1H16 2H16 1H17 Markets & HY17 Launched fee based VA p
Slide 11: UK: Market context
UK Market context Market trends Strategic imperatives Scale, brand, product/distribution capability and financial strength Self-reliance for savings, investment and retirement Demonstrated breadth & depth of investment Convergent insurance and asset expertise management business models Customer dema
Slide 12: Intention to combine best of breed businesses
UK Intention to combine best of breed businesses Strategically Leading savings and investment provider attractive Complementary expertise: scale, brands, product, distribution and financial strength Combination leverages strengths to align to market opportunities compelling Financially Revenue upsid
Slide 13: Attractive market dynamics
UK Attractive market dynamics Opportunity1,2,3 ISA market value6 Other4 Private Equity4 Retail £ 1.2tn Commercial UK AUM1 Cash property4 0.9tn by 2023 Stocks & 518bn +£ shares £ £ 7tn 2015-16 Institutional £4.6tn +£ 1.6tn by 2023 Addressable Cash ISA transfers6,7 (£bn) 46.8 40.6 Europe AUM2 ex UK 33
Slide 14: M&G Prudential: Strong operating platform
M&G Prudential Strong operating platform Operating performance Investment performance FUM1, £bn External FUM2, £bn 332 PruFund CAGR ‘08-17 PruFund 3yr return3 + 23% (+16%) 4x Retail 180 + 17% (+7ppt vs ABI mixed investment 20%-60%: return of +16%) External 162 30 + 51% 56 Institutional 25 Retail abo
Slide 15: Well positioned to unlock opportunity
M&G Prudential Well positioned to unlock opportunity Capability spectrum1 Product range Customer needs Segregated ISA PruFund Inflation mandates Vol managed Income / Yield linked & cash- Growth & SIPP DC pension UCITS flow matching Diversified* Annuities Unit linked funds Closed-end vehicles Multi-a
Slide 16: Leading savings and investment provider
M&G Prudential Leading savings and investment provider P Savings and investment powerhouse with strong brands, scale and investment expertise P Leverage strengths to create comprehensive financial solutions for customers Strong performance track record provides a platform to lead the industry in cre
Slide 17: Mark FitzPatrick, Chief Financial Officer
Mark FitzPatrick Chief Financial Officer 2017 HALF YEAR RESULTS 17
Slide 18: Key financial highlights
Group HY17 results Key financial highlights HY17 vs HY16 £m HY17 HY16 AER1 CER1 IFRS operating profit 2,358 2,044 +15% +5% Growth New business profit 1,689 1,257 +34% +20% EEV operating profit 2,870 2,257 +27% +15% Free surplus generation 1,845 1,615 +14% +6% Cash Remittances 1,230 1,118 +10% n/a Or
Slide 19: Group IFRS operating profit
Group IFRS operating profit Growth driven by Asia and US fee business IFRS operating profit, HY17 vs HY16 (CER), £m HY16 (CER) 2,249 Growth led by Asia Asia life IFRS +16% Asia 132 Eastspring +20% US fee business1 122 Continued strong contribution from US M&G / UK 28 High quality sources of income I
Slide 20: Business unit IFRS operating profit
Business unit IFRS operating profit Positive momentum in underlying drivers of earnings Asia IFRS operating profit, £m US IFRS operating profit, £m UK IFRS operating profit, £m +16% 1,073 +8% 953 997 717 745 +4% 821 83 +20% Eastspring 69 M&G 225 248 +10% 1,079 +7% Life 1,010 870 +16% Life 752 Life a
Slide 21: Group new business profit
Group new business profit Strong new business growth in both life and asset management New business profit by business unit, £m Group • Life NBP up 20%1 and asset management inflows of £9.5bn 1,689 +20% • Overall 9% beneficial impact from interest rates on NBP 1,407 161 +29% UK 125 436 +23% Asia US
Slide 22: Group free surplus generation
Group free surplus generation Growing contribution from life in-force and asset management Life and asset management free surplus generation, £m Expected return from in-force1, £m +10% +13% +2% HY17 HY16 Change CER Expected return from in-force 1,719 1,568 10% 614 673 631 715 323 331 Experience resu
Slide 23: Group cash
Group cash Growing cash flows to Group Movement in life and asset management free surplus, £m Movement in central cash, £m Opening (1 Jan 2017) 2,626 106 Cash remitted to Group 1,230 +10% (317) (1,230) 1,845 6,979 6,575 Asia 350 US 475 M&G / UK1 390 Other 15 2016 second interim dividend paid (786) C
Slide 24: Equity shareholders' funds
Equity shareholders’ funds Operating profit remains key driver of growth IFRS Equity EEV Equity Per Per £bn share (p) £bn share (p) Operating profit after tax 1.8 70 2.9 112 Investment variance and other (0.3) (11) 0.4 17 Unrealised gain on AFS 0.3 12 n/a n/a Foreign exchange and reserve movements (
Slide 25: Solvency II: Strong solvency capital position
Solvency II Strong solvency capital position Group Shareholder Solvency II capital position1, £bn HY17 movement in Solvency II capital1, £bn Impact on SII coverage ratio Surplus £12.5bn £12.9bn 31 December 20162,3 12.5 Solvency II 201% 202% cover Operating experience 1.5 ~12pts Management actions 0.
Slide 26: Balance sheet: Well capitalised and defensively positioned
Balance sheet Well capitalised and defensively positioned Credit portfolio • Well capitalised at Group and local levels US and UK combined credit portfolio, £73bn Capital strength • Strong operating capital generation in the period <BBB AAA • Continued active management to optimise position BBB AA 9
Slide 27: HY17 results summary
HY17 results Summary P Continued delivery of growth and cash; enhancing earnings mix P Financial progress led by Asia, with recovery in asset management P Organic capital generation driving solvency strength and resilience P Sustained momentum in earnings drivers underpins positive outlook 2017 HALF
Slide 28: Financial profile: Scale, growth and resilience
Financial profile Scale, growth and resilience Scale Growth Resilience Assets under £635billion management IFRS Balance sheet strength 2.1x in 5 years solvency liquidity EEV shareholders’ funds NBP £40.5billion asset mix funding 2.1x in 5 years Asia recurring FSG Earnings quality >£9billion premium
Slide 29: M&G Prudential financial profile
M&G Prudential Financial profile M&G Prudential UK&E AUM Growth 149 +15% +49% 130 30 (£bn) 20 M&G Prudential HY16 HY17 HY16 HY17 External AUM PruFund AUM Transformation to efficient, services-led, digitally-enabled 492 497 business profit (£m) IFRS op. 186 209 Other1 225 248 306 288 Core • Sharehold
Slide 30: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 2017 HALF YEAR RESULTS 30
Slide 31: Group long-term track record
Group Long-term track record IFRS operating profit1,2,5, £m New business profit1,2,3,4, £m Free surplus generation1,2,3,4, £m 3.9x 4.3x 5.4x 2,358 1,845 1,689 CAGR CAGR 2,044 CAGR 1,615 +15% +16% 1,862 +18% 1,406 1,257 1,186 1,220 1,504 1,150 1,407 1,001 1,101 1,024 899 1,149 806 917 1,013 740 616 8
Slide 32: Key take-aways
Group Key take-aways P High quality, broad based performance P Asia continues to underpin growth P M&G Prudential leverages complementary strengths to unlock further value P Strong balance sheet, defensive positioning P Well positioned to deliver long-term, profitable growth 2017 HALF YEAR RESULTS 3
Slide 33: Investor Conference, London 16th November 2017
Investor Conference, London 16th November 2017 2017 HALF YEAR RESULTS
Slide 34: Appendix
Appendix 2017 Half Year Results 2017 HALF YEAR RESULTS 34
Slide 35: Group: Clear strategy
Group Clear strategy 2017 HALF YEAR RESULTS 35
Slide 36: Premium franchises
Group Premium franchises Well recognised brands with strong Leading pan regional franchise Premier retirement income player track record In Asia since 1923 Founded in 1961 169 years of providing financial security 15m life customers with Top 3 position 4m life customers 6m life customers in 9 out of
Slide 37: Disciplined capital allocation
Group Disciplined capital allocation New business strain1,3,4,5, £m New business profit2,3,4,5, £m 1,689 161 1,257 +350% 1,186 436 125 571 1,001 155 +77% 899 42 311 493 139 806 421 740 100 371 56 386 370 116 355 57 246 616 108 376 323 331 20 311 302 290 22 36 35 209 474 97 288 1,092 UK 93 45 33 164
Slide 38: Effective response to challenges
Group Effective response to challenges IFRS operating profit1,2, £m 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1H17 Rising oil and Sub-prime Liquidity crisis Start of global Greece and Concern over US debt ceiling Concern over Asia FX Solvency II Brexit Brexit commodity mortgage credit r
Slide 39: Growth in high quality earnings
Group Growth in high quality earnings Sources of IFRS operating income1,2,3,4, £m 7,504 6,932 6,278 5,883 1,171 1,153 5,011 1,129 4,418 1,071 1,991 1,671 4,169 3,979 1,061 1,393 3,481 1,329 583 3,108 1,049 2,801 1,629 998 1,000 556 1,682 1,152 722 1,635 750 574 1,587 898 537 1,362 431 880 79% 294 1,
Slide 40: Free surplus generation
Group Free surplus generation Free surplus3 and dividend, £m 3.6x Net free surplus 24% 571 2,416 23% 493 2,108 23% 1,845 23% 421 1,827 25% 21% 26% 1,615 370 1,590 386 1,536 27% 1,406 290 1,391 355 1,379 331 1,248 679 256 253 1,220 33% 1,150 320 1,101 39% 1,024 659 221 917 916 302 610 208 833 323 532
Slide 41: Delivering cash
Group Delivering cash Dividend, pence per share £ 7.6 bn Total dividends1 to shareholders 2006-HY17 48.78 Special dividend 10.00 43.50 38.78 36.93 33.57 29.19 25.19 30.57 23.85 26.47 25.74 18.90 19.85 23.84 17.14 18.00 Total dividend 20.79 17.24 17.24 12.91 13.56 Second interim dividend 11.72 12.30
Slide 42: Interim dividend
Group Interim dividend Dividend, pence per share First interim dividend increased by 12 per cent to 14.50 pence per share 43.50 Ex-dividend date: 24 August 2017 (UK, Ireland and Hong Kong) 30.57 23 August 2017 (Singapore) 14.50 Record date: 25 August 2017 +12% 12.93 14.50 Payment of dividend: 28 Sep
Slide 43: Well positioned to deliver across cycles
Group Well positioned to deliver across cycles IFRS income by revenue source, IFRS earnings split by currency1,2,3,6, In-force IFRS operating profit4,5, £bn HY17 % % HY16-HY17 Growth 2.3 16% Other 18% Other USD linked 22% Spread Insurance income margin 17% Life 2.0 79% USD 46% Life Fee Asset Mgt inc
Slide 44: Cash remittances to Group
Group Cash remittances to Group Business unit net remittances2, £m 1,718 1,625 1,482 335 1,341 357 1,200 342 147 1,230 30 1,105 292 1,118 190 297 301 300 935 175 280 325 215 355 131 202 688 313 470 420 215 297 515 175 415 475 420 294 167 249 339 322 434 80 199 4671 516 341 400 400 350 144 39 233 206
Slide 45: Growing value at consistent returns
Group Growing value at consistent returns Shareholders’ equity (EEV), £bn 40.5 39.0 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 2016 HY 2017 Full Year Return on 15% 14% 15% 18% 16% 16% 19% 16% 17% 17% Embedded Value1, % 1 Return on embedded value is base
Slide 46: Asia: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 Top 3 in 9 /12 Asian countries2 35,000 Hong Kong Singapore Cambodia (2013) 1st Malaysia (1924) 1st 30,000 China (2000)3 4th Philippines (1996) 3rd 25,000 Taiwan Hong Kong (1964) 2nd Singapore (1931) 3rd 20,000
Slide 47: Asia: Favorable dynamics
Asia Favorable dynamics 2017F Market 2017F GDP 2017F GDP Population1 (m) penetration2 (%) ($bn)1 growth1 Cambodia (2013) 16 - 21 6.9% China (2000) 1,391 2.0% 11,795 6.6% Hong Kong (1964) 7 13.3% 332 2.4% India (2000) 1,327 2.7% 2,454 7.2% Indonesia (1995) 262 1.3% 1,021 5.1% Laos (2015) 7 - 15 6.8%
Slide 48: Products meet customer needs
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 49: 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 50: 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 51: 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 2017 HALF YEAR RESU
Slide 52: Asia life growing in scale and quality
Asia Asia life growing in scale and quality Life weighted premium Diverse mix of Insurance income1,3 income1,2 , £bn +17% Indonesia +15% 153 Hong Kong +44% 113 Quality Scale Singapore +5% HY17 98 £658m 7.5 58 6.4 Malaysia +14% 53 44 China +185% +24% 35 Vietnam +32% vs HY16 (CER) Thailand +17% Other5
Slide 53: Life APE by market
Asia Life APE by market Asia APE by market, £m (Constant Exchange Rate) Asia NBP (CER) Asia APE (CER) +12% Ex-broker +18% +7% -7% 1,092 1,943 1,814 987 928 386 827 1,029 914 316 612 706 987 914 +23% +58% 1H 2016 1H 2017 1H 2016 1H 2017 Asia ex-HK HK +1% +10% 195 187 +45% +54% 159 +24% 143 144 -18% 1
Slide 54: High quality, defensive growth
Asia High quality, defensive growth Regular and Single Premium APE1, £m c90% Regular premium 3,359 MSCI Asia ex Japan2 2,518 1,918 1,830 1,829 1,654 1,505 1,420 1,302 1,013 841 648 206 120 515 106 151 494 103 360 281 340 137 114 103 139 148 183 206 194 240 100 113 91 79 23 11 77 27 63 46 45 56 68 81
Slide 55: Life APE sales by product
Asia Life APE sales by product - percent Asia APE by product,1 % 2% 3% 2% 1% 3% 2% 2% 3% 4% 5% 5% 3% 6% 7% 9% 8% 8% 8% 6% 5% 5% 20% 18% 20% 26% 31% 29% 32% 31% 36% 35% 37% 35% 7% 10% 36% 39% 40% 40% 46% 52% 59% 53% 22% 56% 29% 28% 29% 27% 30% 32% 31% 33% 33% 31% 31% 30% 28% 71% 69% 27% 56% 26% 24% 2
Slide 56: Life flows and persistency
Asia Life flows and persistency Asia Life gross flows1,2, £bn Asia Life gross flows (ex-India)1,2, £bn 4.7 4.1 4.2 4.2 4.2 13.8% 3.9 3.7 3.8 3.8 12.6% 3.4 3.4 2.9 2.8 2.9 9.9% 9.4% 7.6% 7.7% 9.0% 9.2% 7.1% 7.2% 2.4 2.3 8.6% 8.9% 8.5% 8.5% 4.1%3 3.8% FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 FY10 FY11
Slide 57: Eastspring
Asia Eastspring Funds under management2, £bn 2012 – H1 2017 Growth 131 2.3x 118 3.4x 17 14 89 #1 Retail Fund Manager September 20161 77 11 61 2.0x 8 58 60 131bn 58 5 5 42 39 £ 33 Funds under management 31 53 2.4x 46 30 36 22 22 2012 2013 2014 2015 2016 HY2017 Third party Asia life UK life/ Jackson 1
Slide 58: Baby boomer retirement wave
US Baby boomer retirement wave Over 40 million people will reach retirement age in the next decade Private defined benefit plans are disappearing and government plans are underfunded Social security was never intended to be the primary retirement plan and its long-term status is in question Life exp
Slide 59: Advisor distributed assets
US Advisor distributed assets More than $16 trillion in assets across existing channels (in $billions) 5.1% Wirehouses 5.0% National and regional B/D 10.5% RIA 6.6% Independent B/D Independent / RIA Hybrid 11.7% 8.5% Retail bank B/D 4.3% Insurance B/D $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Tot
Slide 60: Jackson retail sales and deposits
US Jackson retail sales and deposits Retail sales and deposits, $m HY 2016 = $9,389m HY 2017 = $9,507 $397 $8 $408 $199 $310 $1,387 $1,418 $1,156 $958 $6,200 $6,455 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access Fixed Index Ann
Slide 61: Jackson variable annuity volumes
US Jackson variable annuity volumes VA volumes by quarter, sales US$bn ‘Features War’ 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 6.6 6.4 6.4 6.0 5.7 5.7 5.7 1.4 5.5 1.1 1.4 5.3 5.3 0.4 5.2 5.2 5.0 1.3 0.2 1.1 1.3 1.1 4.7 4.6 4.4 4.4 4.6 1.0 1.1 1.0 4.3 4.3 4.3 4.3 4.5 4.5 4.2 4.2 3.8 0.7
Slide 62: Jackson variable annuity distribution
US Jackson variable annuity distribution Variable annuity sales by distribution channel, US$bn 9.0 8.6 5.7 6.2 1.5 1.5 1.4 1.3 HY 2016 HY 2017 IBD RBD/Wirehouse Bank IBD: Independent Broker Dealer, RBD: Regional Broker Dealer 2017 HALF YEAR RESULTS 62
Slide 63: Cash remittances
US Cash remittances Cash remittances, $m $4,408m 680 710 600 530 550 470 400 280 125 63 2008 2009 2010 20111 2012 2013 2014 2015 2016 HY17 Year End RBC Ratio 438% 417% 483% 429% 423% 450% 456% 481% 485% 1 Net remittances from Jackson include $197m in 2011 representing release of excess surplus to th
Slide 64: DAC impact on IFRS profit
US DAC impact on IFRS profit Impact on results of DAC amortisation,3 £m HY 2016 HY 2017 Gross profits1 1,141 1,357 New business strain2 (92) (108) DAC amortisation - Core (266) (272) - Deceleration 29 36 Operating result 812 1,013 Core as % of Gross profits 23% 20% 1 Gross profits equals IFRS operat
Slide 65: Jackson asset growth
US Jackson Asset growth Growth in statutory admitted assets, US$bn 227.6 215.2 199.1 189.4 170.9 142.8 162.0 148.8 134.2 127.5 107.6 108.8 97.5 80.1 76.7 81.0 69.3 70.9 58.8 62.8 48.9 55.6 33.3 46.6 50.9 22.3 30.0 20.9 43.0 14.7 40.2 7.1 10.4 5.1 4.4 5.6 66.4 62.7 62.1 61.9 64.9 65.6 42.2 43.8 45.2
Slide 66: Reserves return assumptions
US Reserves return assumptions IFRS Mean Return vs S&P Historical1 All accounting bases assume 20-year equity market returns well below the mean returns posted by the S&P 500 IFRS return assumptions are especially punitive. There has never been a 20-year Chart Title period for the S&P with as weak a
Slide 67: Moving reserves to fair value
US Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 2,400 1,900 716 1,400 1,129 900 400 Liabilities (Assets) -100 50 -600 (2,292) (447) (397) As recorded2 Change in Adjustment to full Revised liability, Volatility Hypothetical fair rates3 fees4 exc
Slide 68: GMWB policyholder behavior sensitivities
US GMWB policyholder behavior sensitivities GMWB policyholder behaviour sensitivities 30 June 2017 US$bn Policyholder behaviour experience is continuously monitored and a comprehensive study is 8 conducted on an annual basis. 7 For IFRS and statutory accounting purposes, assumptions are set at the c
Slide 69: Capital, hedging and policyholder behavior
US Capital, hedging and policyholder behavior Total adjusted capital US$bn Hedging programme continues to effectively mitigate risks 31 December 2016 5.3 Earned guarantee fees of 127 bps per annum (c$1.0bn in HY 2017). Expected guarantee fees of $2.0bn for 2017 Operating profit 0.4 Equity allocation
Slide 70: GMWB unhedged cash flow
US GMWB unhedged cash flow Unhedged GMWB cash flow exposure, 30 June 2017 $millions S&P @ 6/30 = 2,423 ▪ Includes guarantee fees only Base, 5% Gross Return 2,000 Guarantee Fees ▪ Uses prudent best estimate assumptions (AG43, C3P2) 1,800 PV Future Guarantee Fees 10,290 1,600 Benefits PV Benefits (1,7
Slide 71: GMWB unhedged cash flow
US GMWB unhedged cash flow Unhedged GMWB cash flow exposure, 31 December 2016 $millions S&P @ 12/31 = 2,239 ▪ Includes guarantee fees only Base, 5% Gross Return 2,000 Guarantee Fees ▪ Uses prudent best estimate assumptions (AG43, C3P2) 1,800 PV Future Guarantee Fees 10,286 1,600 Benefits PV Benefits
Slide 72: UK Life: Retail growth
UK Life Retail growth Bonds, (APE, £m) Individual Pensions, (APE, £m) Retail Growth, (APE, £m) 34% 933% 272% 130 156 196 174 279 = 481 628 134 285 62 169 27 H1 2014 H1 2015 H1 2016 H1 2017 H1 2014 H1 2015 H1 2016 H1 2017 + H1 2014 H1 2015 H1 2016 H1 2017 Drawdown, (APE, £m) PruFund ISA, (APE, £m) Le
Slide 73: UK Life asset flows
UK Life Life asset flows UK life flows, £bn YoY Change Premiums 9.0 6.1 6.0 With-profits £126bn +11% 3.7 2.7 30 June 2017 invested assets 2.3 2.2 2.0 1.5 1.2 1.2 1.0 0.5 0.1 0.4 (0.8) (0.9) (1.2) (1.4) (1.9) (1.6) (3.0) £64bn (3.1) (3.2) (3.3) (3.2) Shareholder +2% Claims (6.1) (6.6) (6.5) backed (7
Slide 74: PruFund
UK Life PruFund PruFund investment performance1 Growth in PruFund AuM (£bn) 70% PruFund 60% Growth 50% +62% 40% ABI fund 30% comparator +42% 20% 30.0 10% 24.7 0% 16.5 -10% 11.6 9.1 -20% 7.5 4.1 5.4 0.1 0.3 2.5 -30% 0.9 2007 2009 2011 2013 2015 2016 HY17 2006 2007 2008 2009 2010 2011 2012 2013 2014 2
Slide 75: M&G principal asset classes
M&G Principal asset classes M&G Group assets under management by client type and asset class (%), 30 June 20171 2% 1% 3% 5% 6% 4% 9% 22% 13% 1% 4% 12% 28% 2% 3% Internal AUM Retail AUM Institutional AUM £132.4bn £72.5bn £76.6bn 73% 57% 55% Equities Fixed income Real estate Multi-asset Infrastructure
Slide 76: M&G retail and FUM
M&G Retail & FUM Retail funds under management, £bn 16% 16% 21% 19% 26% 35% 43% 39% 42% 49% 43.5 42.5 40.4 36.0 37.3 37.3 37.3 35.2 33.5 31.8 26.1 26.9 23.7 23.5 16.0 14.5 9.0 8.2 5.0 3.1 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 1 UK / Other Europe X% Europe FUM as % of Retail FUM 1 Othe
Slide 77: M&G operating profit
M&G Operating profit M&G IFRS operating profit1, £m 3.3x 251 248 227 225 204 172 175 122 75 HY 2009 HY 2010 HY 2011 HY 2012 HY 2013 HY 2014 HY 2015 HY 2016 HY 2017 1 Excludes PruCap 2017 HALF YEAR RESULTS 77
Slide 78: IFRS operating profit
IFRS IFRS operating profit % Movement % Movement 2017 H1 2016 H1 (AER) 2016 H1 (CER) (AER) (CER) Asia operations Asia insurance operations 870 667 752 30% 16% Eastspring Investments 83 61 69 36% 20% Total Asia operations 953 728 821 31% 16% US operations Jackson (US insurance operations) 1,079 888 1
Slide 79: IFRS operating profit – sources of earnings
IFRS operating profit – sources of earnings Group long-term business Source HY 20161 HY 2017 (CER) +/- Total operating profit £m except reserves £bn 2,429 2,235 9% = Total Life income Total Life expenses DAC adjustments - +/- 4,615 4,224 9% (2,372) (2,138) (11)% 186 149 25% Spread Technical and othe
Slide 80: Sources of earnings: Life insurance - Asia
IFRS operating profit – sources of earnings Life insurance - Asia Source HY 20161 HY 2017 (CER) +/- Total operating profit £m except reserves £bn 870 752 16% = Total Life income Total Life expenses DAC adjustments - +/- 2,011 1,752 15% (1,207) (1,056) (14)% 66 56 18% Spread Technical and other incom
Slide 81: Sources of earnings: Life insurance - US
IFRS operating profit – sources of earnings Life insurance - US Source HY 2016 HY 2017 (CER) +/- Total operating profit £m except reserves £bn 1,079 1,010 7% = Total Life income Total Life expenses DAC amortisation - +/- 2,018 1,897 6% (1,056) (982) (8)% 117 95 23% Spread Technical and other Fee inc
Slide 82: Sources of earnings: Life insurance - UK
IFRS operating profit - sources of earnings Life insurance - UK Source HY 2017 HY 2016 +/- Total operating profit £m except reserves £bn 480 473 1% = Total Life income Total Life expenses DAC adjustments - +/- 586 575 2% (109) (100) (9)% 3 (2) - Spread Technical and other Fee income Expected returns
Slide 83: Sources of earnings: Asset management
IFRS operating profit – sources of earnings Asset management Source HY2016 Asset Management Operating HY2017 (CER) +/- profit1 £m except average assets £bn 331 294 13% Eastspring M&G Investments 248 225 10% 83 69 20% Underlying income Other income2 Total expenses Total income2 Total expenses 495 440
Slide 84: Sources of income: Life insurance - Asia
IFRS operating profit sources of income Life insurance - Asia Asia IFRS operating income1,2, £m Growth % HY 2017 vs. HY 2016 (CER) 955 +24% +11% 6% 787 3% +19% 11% 6% +12% 3% 11% 11% 12% +24% 68% 69% HY 2016 CER HY 2017 Insurance margin Fee income With-profits Expected return on shareholder assets S
Slide 85: Sources of income: Life insurance - US
IFRS operating profit sources of income Life insurance - US US IFRS operating income1, £m Growth % HY 2017 vs. HY 2016 (CER) 2,018 (100)% 1,897 0% (6)% 1% 20% 22% +15% 53% 57% +4% 24% 23% HY 2016 CER HY 2017 Insurance margin Fee income Expected return on shareholder assets Spread income 1 Excludes a
Slide 86: Sources of income: Life insurance - UK
IFRS operating profit sources of income Life insurance - UK UK IFRS operating income1,2, £m Growth % HY 2017 vs. HY 2016 349 17% 316 (23)% 15% 40% +3% 45% (23)% 28% 23% 7% 8% 10% (12)% 7% 7% HY 2016 HY 2017 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets
Slide 87: EEV: Life operating variances - Group
EEV operating profit Life operating variances - Group Group Life operating variances1,2,5, £m Experience variances and assumption changes % opening EEV3 0.0% 1.0% 0.4% (0.2)% 0.7% 1.0% 1.3% 1.2% 1.0% 0.8% 0.7%4 0.7% 1,043 880 787 736 692 617 567 552 481 489 425 356 237 245 243 243 262 216 167 100 96
Slide 88: EEV: In-force performance
EEV operating profit In-force performance Asia in-force1,2, £549m US in-force2, £452m UK in-force, £304m 114 98 60 42 72 36 54 14 29 (14) Total variances / Persistency & Mortality / morbidity Spread Other items other withdrawals and Other items HY16 HY17 1 Asia In-force shown post development costs
Slide 89: EEV: Life operating variances - Asia
EEV operating profit Life operating variances - Asia Asia Life operating variances1,3, £m Experience variances and assumption changes % opening EEV2 (0.4)% 0.8% (0.2)% (1.6)% (0.3)% (0.3)% 0.2% 0.4% 0.2% 0.0% 0.1% 0.3% 499 399 373 301 315 271 237 236 186 106 139 89 36 50 18 18 22 15 (7) (5) (15) (0)
Slide 90: Policyholder liabilities - Group
Policyholder liabilities Shareholder-backed business - Group Policyholder liabilities1,2 roll-forward, £bn 10.6 269.3 266.6 (9.7) 2.0 (1.2) 256.9 1.0 Liabilities Foreign CER opening Asia US UK Investment Liabilities 1 Jan 2017 exchange liabilities net inflows net inflows net outflows related 30 June
Slide 91: Policyholder liabilities - Asia
Policyholder liabilities Shareholder-backed business - Asia Policyholder liabilities roll-forward1, £m 2,801 (1,785) 1,912 35,040 32,851 (739) 32,112 Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2017 exchange liabilities deaths and related and 30 June 2017 surren
Slide 92: Policyholder liabilities - US
Policyholder liabilities Shareholder-backed business - US Policyholder liabilities roll-forward, £m 177,626 (8,929) 8,148 (6,190) 7,124 177,779 168,697 Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2017 exchange liabilities deaths and related and 30 June 2017 surr
Slide 93: Policyholder liabilities - UK
Policyholder liabilities Shareholder-backed business - UK Policyholder liabilities roll-forward, £m 1,658 (2,825) 56,158 1,500 56,491 Liabilities Premiums Maturities, deaths Investment Liabilities 1 Jan 2017 and surrenders related and 30 June 2017 other 2017 HALF YEAR RESULTS 93
Slide 94: Group capital position and sensitivities
Solvency II Group capital position and sensitivities HY17 movement in Solvency II capital1,2,3, £bn Solvency II surplus estimated sensitivities1,2,3, £bn Impact on Impact on coverage ratio coverage ratio 31 December 20162,3 12.5 30 June 20172,3 12.9 Operating experience 1.5 40% equity fall4 11.7 (3)
Slide 95: Well-diversified risks
Solvency II Well-diversified risks Reconciliation of IFRS equity to Solvency II Own Funds1,2,3, HY17 £bn SCR by risk type4, HY17 IFRS equity 15.4 Less: goodwill, DAC, intangibles (3.9) Operational/Expense Equity Sub-debt 6.1 FX translation 10% 13% 7% Value of shareholder transfer 4.6 Longevity 6% US
Slide 96: 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 HY17, 100% = £25.6bn 25.6 0.4 Tier 3 – deferred tax Tier 3 5.5 Tier 2 – sub debt Tier 2 0.9 Tier 1 – hybrid capital 2% 21% Other Tier 1 Tier 1 = Tier 1 – core capital Tier 1 =
Slide 97: Capital dynamics and dividend philosophy
Solvency II Capital dynamics and dividend philosophy Remittances Central costs Asia US UK M&G Capital-light Reliable capital Capital efficient Minimal capital Dividends to growth in unit- generation from growth through requirement shareholders linked and high-return fast with-profits protection payb
Slide 98: SII treatment of hybrid capital classification
Solvency II SII treatment of hybrid capital classification Hybrid capital outstanding, 30 June 2017 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 99: Dividend policy
Group Dividend policy The Board will maintain its focus on delivering a growing ordinary dividend. In line with this policy, Prudential aims to grow the ordinary dividend by 5 per cent per annum. The potential for additional distributions will continue to be determined after taking into account the
Slide 100: Asset portfolio is high quality and well diversified
Invested assets Asset portfolio is high quality and well diversified Breakdown of invested assets1, HY17, £bn Shareholder debt portfolio, HY17, £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 101: Conservative approach to balance sheet risk
Invested assets Conservative approach to balance sheet risk Group shareholder credit portfolio Jackson shareholder portfolio1 UK shareholder credit portfolio2 30 June 2017, £88bn 30 June 2017, $58bn 30 June 2017, £35bn Cash/treasury/ agency 13% <BBB 2% Common/ preferred Public IG AAA 13% stock 1% co
Slide 102: Group shareholder exposures – sovereign debt
Invested assets Group shareholder exposures – sovereign debt Breakdown of the shareholder credit portfolio, £m SH sovereign exposures by region & rating1, £m US UK Europe Asia Other Total AAA - - 649 148 8 805 AA-BBB 4,959 4,904 195 2,500 70 12,628 Below BBB - - - 1,448 - 1,448 Total 4,959 4,904 844
Slide 103: Total PIIGS sovereign and bank debt
Invested assets Total PIIGS sovereign and bank debt Shareholder invested assets – PIIGS countries as at 30 June 2017, £m Bank debt Sovereign Institution Covered Senior Tier II Tier I Total Banco Espirito Portugal - - 22 - - 22 Santo Ireland - - - - - - - PIIGS sovereign & bank PIIGS sovereign & debt
Slide 104: Group shareholder exposures – oil and gas sector
Invested assets Group shareholder exposures – oil and gas sector Shareholder Oil and Gas credit portfolio £m, 30 June 2017, 3.9% Exploration Refining Oil & Pipeline Integrated Total & & gas / Mid- Oils (£m) Production Marketing Services stream Investment grade 3.4% Investment grade 563 921 278 434 8
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 2017 $3.9 $1.3 Higher Energy, Exploration & A- or Higher sensitivity to oil Production 0.4 prices Total energy exposure at 30 June, $3.9bn 0.9 BBB+ Energy exposure is 8% of
Slide 106: US shareholder debt portfolio (1/3)
Invested assets US asset quality – shareholder debt portfolio (1/3) US Shareholder Debt Securities Portfolio Corporate Bond Portfolio, % by rating Market value, £38.0bn £29.5bn Other 1.1 CMBS 1.8 RMBS 0.8 4% BB and below 5% AAA and AA Govt 4.8 Corporate Bond - High Yield 1.1 51% BBB 40% A Corporate
Slide 107: US shareholder debt portfolio (2/3)
Invested assets US asset quality – shareholder debt portfolio (2/3) US Shareholder Debt Securities Portfolio Investment Grade Corporate Bond Portfolio, Market value, £38.0bn % by sector £28.4bn Other 1.1 CMBS 1.8 RMBS 0.8 Auto Govt 4.8 Utility 3% 13% Banking Corporate Bond - High Yield 9% 1.1 Teleco
Slide 108: US shareholder debt portfolio (3/3)
Invested assets US asset quality – shareholder debt portfolio (3/3) US Shareholder Debt Securities Portfolio High Yield Corporate Bond Portfolio, % by Market value, £38.0bn sector, £1.1bn Other 1.1 CMBS 1.8 RMBS 0.8 Govt 4.8 Banking Auto 5% Basic industry Corporate Bond - High Yield 1.1 Utility 3% 1
Slide 109: Currency translation sensitivities
Currency mix Currency translation sensitivities IFRS operating profit, £m IFRS operating profit, % HY2017 as Other Asia UK sterling2,3 2,358 US reported 14 18 Asia Impact of translating (32) results at 30 June Asia – 2017 spot rate US (19) dollar 22 linked1 46 HY2017 at 30 June 2,307 2017 spot rates
Slide 110: Currency translation sensitivities
Currency mix Currency translation sensitivities New business profit, £m New business profit, % Other Asia UK sterling HY2017 as 1,689 US 12 10 reported Asia Impact of translating (13) US 26 results at 30 June dollar 2017 spot rate Asia – (32) US dollar 52 HY2017 at 30 June linked1 2017 spot rates 1,
Slide 111: Future free surplus emergence - Group
Future free surplus emergence Group Expected undiscounted free surplus from life in-force1, £bn 4.5 12.0 15.8 10.5 13.3 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Actual From 2015 life in-force From 2015 life in-force including market effects From 2016
Slide 112: Future free surplus emergence - Asia
Future free surplus emergence Asia Expected undiscounted free surplus from life in-force1, £bn 4.6 6.1 4.2 5.5 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Actual From 2015 Life in-force 2015 life in-force including market effects From 2016 new business Expe
Slide 113: Future free surplus emergence - US
Future free surplus emergence US Expected undiscounted free surplus from life in-force1, £bn 4.9 6.6 3.9 5.1 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Actual From 2015 life in-force 2015 life in-force including market effects From 2016 new bus
Slide 114: Future free surplus emergence - UK
Future free surplus emergence UK Expected undiscounted free surplus from life in-force1, £bn 2.5 3.2 2.4 2.8 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Actual From 2015 life in-force 2015 life in-force including market effects From 2016 new bus
Slide 115: Our History
Prudential Our History 1848 1997 Prudential Mutual Assurance Investment and Loan Association Prudential acquires Scottish Amicable Life, founded in 1826. is established in London, offering loans and life assurance. Successive generations 1923 1997 have looked to Prudential’s first overseas life bran
Slide 116: Our strategy at a glance
Prudential Our strategy at a glance We meet the long-term savings and protection needs of an increasingly self-reliant population. We focus on three markets – Asia, the US and the UK – where the need for our products is strong and growing and we use our capabilities, footprint and scale to meet that
Slide 117: Strategy by business
Prudential Strategy Prudential Corporation Asia Jackson Prudential Corporation Asia has leading insurance and asset management Jackson provides retirement savings and income strategies aimed at the large operations across 14 Asian markets and serves the families of the region’s number of people appr
Slide 118: Corporate responsibility
Group Corporate responsibility Our approach We create social value through our day-to-day operations, by providing savings, income, £20 million1 total community investment investment and protection products and services, to help customers manage uncertainty and build a more secure future. Furthermor
Slide 119: Share information and contact details
Prudential Share information and contact details Share information Contact information London Stock Exchange: PRU.L Shareholder enquiries Institutional Analyst and Investor enquiries For enquiries about shareholdings, Tel +44 (0)20 7548 3300 Hong Kong Stock Exchange: 2378 E-mail investor.relations@p
Slide 120: Glossary A to I
Glossary A to I Term Description Actual Exchange Rate (AER) Actual Exchange Rates are actual historical exchange rates for the specific accounting period. Period average rate is used for the income statement and the closing rates for the balance sheet. Annual Premium Equivalent (APE) A common measur
Slide 121: Glossary J to Z
Glossary J to Z Term Description New business margin The value of new business on an EEV basis expressed as a percentage of the present value of new business premiums expected to be received from the new business. New business profit (NBP) The profits, calculated in accordance with European Embedded