Slide 1: Prudential plc 2015 Full Year Results
Prudential plc 2015 Full Year Results 9 March 2016 1 2015 FULL 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 2015 FULL YEAR RESULTS
Slide 4: Group CEO messages
Group CEO messages Broad based 2015 performance delivering profitable growth Double digit growth in key performance metrics led by Asia Well capitalised with defensive balance sheet Strong operating performance underpins shareholder dividends Disciplined execution of clear strategy Super
Slide 5: Nic Nicandrou, Chief Financial Officer
Nic Nicandrou Chief Financial Officer 5 2015 FULL YEAR RESULTS
Slide 6: FY15 continued strong performance
Key financial highlights FY15 continued strong performance FY15 vs FY14 £m FY15 FY14 CER2 AER2 IFRS operating profit 4,007 3,186 +22% +26% Growth New business profit1 2,617 2,115 +20% +24% EEV operating profit 4,881 4,096 +16% +19% Free surplus generation 3,050 2,579 +15% +18% Remittances3 1,625 1,4
Slide 7: Growing profit and improving quality
Group Growing profit and improving quality IFRS operating profit by business unit, £m IFRS operating income by source, £m (CER4) FY15 FY14 CER2 AER FY14 (CER2) 3,290 Asia 1,324 1,140 +17% +16% Insurance income 295 76% of total US 1,702 1,443 +9% +18% Fee income 195 IFRS UK1 1,195 753 +59% +59% Sprea
Slide 8: Asia: Strong and consistent growth momentum
Asia Strong and consistent growth momentum Financial performance, £m (CER) FY15 vs FY14 2,853 +26% Life APE sales • High quality, diversified sales and value New business profit 1,490 +28% Regular premium +30%, 93% of total Agency APE +29% APE growth >15% for 7 countries IFRS operating profit
Slide 9: Asia: Recurring income
Asia Recurring income Asia life weighted premium income1,2, £bn CER 10.0 FY15 growth 8.5 7.3 6.2 7.2 +14% In-force 5.6 4.9 6.3 4.2 5.4 3.8 3.3 4.6 4.1 2.6 3.6 2.0 2.6 3.0 2.1 1.8 1.4 2.8 +29% New business 1.6 1.9 2.2 1.1 1.2 1.1 1.3 1.4 0.6 0.8 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 10: Asia: In-force income
Asia In-force income Life in-force weighted CAGR premium income1 +18% £bn, CER Life in-force IFRS operating profit2,3 £m, CER 1,155 1,015 876 2.8x 746 642 413 493 375 2008 2009 2010 2011 2012 2013 2014 2015 7.2 2.6 CAGR 2008 2015 Life in-force +22% insurance income £m, CER 710 562 628 405 450 242 32
Slide 11: Asia: High quality, resilient earnings
Asia High quality, resilient earnings Driven by in-force Focus on insurance income Diverse country mix Life in-force IFRS operating profit1 Life insurance income Growth in IFRS operating profit FY15, CER £m, CER £m, CER £m vs FY14 +14% +17% Indonesia 356 +21% Singapore 204 (4)% 1,155 783 Hong Kong 1
Slide 12: US: Disciplined growth
US Disciplined growth Financial performance, £m (CER) FY15 vs FY14 APE sales 1,729 +3% Jackson • APE consistent with disciplined approach New business profit 809 +8% to value and risk • Elite Access mix moving to non-qualified IFRS operating profit 1,702 +9% • Fee income +11% in line with average se
Slide 13: US: Asset-based fee income
US Asset-based fee income Fee income Separate account assets Life fee income Movement in separate account assets US$m FY15, US$bn +11% (7.7) 19.7 (5.3) 134.2 2,555 127.5 12.0 2,309 % opening +15% (6)% +9% (4)% FY14 New Outflows Net Markets FY15 premiums1 inflows and other FY14 FY15 Capital light
Slide 14: UK: Positive response to changes in environment
UK Positive response to changes in environment Financial performance, £m FY15 vs FY14 New business • Retail APE +32% and NBP +31% driven by APE sales1 1,025 +23% extension of PruFund to additional product wrappers New business profit1 318 +23% Life IFRS operating profit, £m 1H15 2H15 FY15 IFRS opera
Slide 15: M&G: Cash-rich earnings
M&G Cash-rich earnings Financial performance, £m FY15 vs FY14 Net flows Net flows (7,008) 7,0871 • Retail: £10.9bn net outflows Principally from Optimal Income fund Total FUM (£bn) 246.1 (7)% Building scale in Multi-asset and Property • Institutional: £3.9bn net inflows, healthy Revenues2 939 (2
Slide 16: Increasing scale of free surplus generation
Group Increasing scale of free surplus generation Free surplus generation, £m, (CER2) Life in-force result, £m (CER3) FY15 FY14 Change FY15 FY14 Change Expected return from in-force 2,611 2,328 12% Asia 985 851 16% Experience result 559 336 66% US 1,426 1,284 11% UK1 878 637 38% Investment return on
Slide 17: Positive evolution in free surplus and central cash
Group Positive evolution in free surplus and central cash Movement in free surplus, £m Movement in central cash, £m FY15 FY14 8,391 Asia1 467 400 282 US 470 415 (1,625) 6,766 UK 331 325 3,050 M&G2 357 342 5,059 (974) 2,173 1,625 396 (354) 1,480 1 Jan Net free Market / Cash 31 Dec 1 Jan Cash Dividend
Slide 18: Strong future generation profile
Group Strong future generation profile Expected undiscounted free surplus from life in-force1, £bn 3.5 11.0 12.2 9.4 11.0 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2014 life in-force From 2014 life in-force including market effects From 2015 new b
Slide 19: UK profile not altered by Solvency II
Group UK profile not altered by Solvency II Expected life in-force free surplus generation1, £m Based on Solvency I Based on Solvency II £2.5bn £2.4bn £2.7bn £2.6bn 600 600 0 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Impact of Solvency II o
Slide 20: Group free surplus generation unchanged by Solvency II
Group Group free surplus generation unchanged by Solvency II Expected undiscounted free surplus from life in-force1, £bn 11.0 12.2 12.4 9.4 11.0 11.2 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2014 life in-force From 2014 life in-force includin
Slide 21: 2017 financial objectives
Group 2017 financial 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 > £1,858 £1.1bn +18% 765 1,468 £0.9bn 1,260 662 1,075 573 901 471 484 592 673 924 1,140 1,324 2012 CER 3 2013 2014 CER 2015 CER 2016 2017
Slide 22: Dividend growth
Group Dividend growth Dividend per share (pence) 2015 dividend • Full year ordinary dividend +5% to 38.78p per share 48.78 • Special dividend of 10p per share Special Reflects benefit of management actions in 2015 10.00 dividend • Payment of 2015 second interim ordinary and special dividends on 20
Slide 23: Well capitalised and defensively positioned
Balance sheet Well capitalised and defensively positioned IFRS shareholders’ funds, £bn EEV shareholders’ funds, £bn ~14.0 32.4 ~34.2 13.0 29.2 +11% 11.8 +10% FY14 FY15 29 Feb 2016 FY14 FY15 29 Feb 2016 (estimate) (estimate) Per share 460p 504p ~550p Per share 1,136p 1,258p ~1,325p • Strong operatin
Slide 24: Strong Solvency II capital position
Solvency II Strong Solvency II capital position Group Shareholder Solvency II capital position1, £bn FY15 movement in Solvency II capital1, £bn Solvency II FY14 disclosure 190% 193% 9.7 cover (Prudential ECap) Operating experience 2.0 2H management actions 0.4 Surplus Market effects (0.6) Surplus £9
Slide 25: Strong Solvency II capital position
Solvency II Strong Solvency II capital position Group Shareholder Solvency II capital position1, £bn Year-end position • Tier 1: 82% of Own Funds, equivalent to 159% of SCR Solvency II cover 190% 193% • Risks remain well-diversified • Market sensitivities are materially unchanged 2016 update (based
Slide 26: Strong local solvency capital
Solvency II Strong local solvency capital Local solvency capital positions, £bn Asia1,2 US3 Business unit 5.2 456% 481% 4.8 • Asia SII surplus of £5.2bn exceeds free surplus of £1.5bn • Jackson RBC ratio of 481% 1.4 1.5 • UK shareholder SII surplus of £3.3bn (HY15 £3.4bn)4 • UK with-profits SII surp
Slide 27: Strong capital formation
Group Strong capital formation Life and Asset Management IFRS, £bn free surplus, £bn Solvency II, £bn Operating capital generation Operating capital generation Operating capital generation IFRS operating Free surplus Operating capital 3.2 3.0 2.4 earnings generation generation Dividend1 (1.0) Remitt
Slide 28: Asset portfolio is high quality and well diversified
Invested assets Asset portfolio is high quality and well diversified Breakdown of invested assets1, FY15, £bn Shareholder debt portfolio, FY15, £bn Shareholders Holding by security2 HY % Portfolio No. Av. Max debt Total PAR Unit Asia US UK £bn issuers £m £m portfolio Group funds linked Life Life Lif
Slide 29: FY15 continued strong performance
Summary FY15 continued strong performance IFRS operating profit1, £m Free surplus generation1, £m New business profit1,2, £m +22% +15% +20% 4,007 2,617 3,290 3,050 2,175 2,645 2014 2015 2014 2015 2014 2015 EEV per share (pence) Group Solvency II surplus3, £bn Dividend per share (pence) +11% +£0.5bn
Slide 30: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 30 2015 FULL YEAR RESULTS
Slide 31: Group Strategy
Group Strategy 31 2015 FULL YEAR RESULTS
Slide 32: 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 167 years of providing financial Founded in 1961 security 14m life customers 4m life customers 6m life customers Top 3 position in 9
Slide 33: Asia regional footprint
Asia Regional footprint Hong Kong Singapore Malaysia Indonesia # 2 Rank #2 Rank # 1 Rank 3 # 1 Rank 4 18% Market share 32% Agency market 25% Market share share2 # 1 Largest agency in 22% Market share # 1 Agency player 23% Regular premium the industry market share Philippines, Thailand, India & China
Slide 34: Product portfolio aligns with customer needs
Asia Product portfolio aligns with customer needs Health & protection Savings Clear benefit Affordable price Strong returns 100% = average annual income Actual +19% Linked 19 46 premium Saving Premiums paid = 9% \ 73 of average annual Illustrative 100 income H&P 54 81 premium Spend 27 % of premium u
Slide 35: Consumers remain resilient
Asia Consumers remain resilient Personal disposable income1 China Malaysia Indonesia 25 12 25 10 30,352 8 20,396 22,297 19,244 20,348 27,290 18,439 30 20 16,755 10 20 15,116 16,587 17,866 8 22,434 24,898 7 14,655 15 12,549 8 15 13,883 6 20 18,090 20,084 6 6 5 10 10 4 4 10 4 5 2 5 2 3 0 0 0 0 0 2 201
Slide 36: Asia 2015 operations
Asia 2015 operations >500k Market Leading Agency Management Agents >90% Retention ratio2 Seamless and Efficient Customer Experience 350 >5m New products Unparalleled Delivery in launched1 Customer Bancassurance service interactions >25% Supporting distribution ~3.3x through technology APE and NBP Fr
Slide 37: Outperforming peers. Disciplined delivery
Asia Outperforming peers. Disciplined delivery APE sales1,2, FY15 £m Leveraging economies of scale and scope Q4 25 consecutive quarters of 17% average growth3 Q3 High regular premium content, protection bias Q2 Stable margins Q1 Discipline drives long-term shareholder value 7 PCA Pru AIAA1
Slide 38: High quality, defensive growth
Asia High quality, defensive growth Regular and Single Premium APE1, £m c90% Regular premium MSCI Asia ex Japan2 2,641 2,010 1,911 1,740 1,514 1,391 1,131 1,052 889 723 206 120 494 151 106 103 360 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 1997 1998
Slide 39: High quality, defensive growth
Asia High quality, defensive growth FY15 +15% +17% 1,266 Inforce recurring income underpins delivery 1,086 In-force IFRS 2015operating Profit1,5, In-force 2015 Free surplus Generation2,5, New business earns over time £m £m 10.0 Earnings predominantly uncorrelated to markets In-force 7.2 +14% 6
Slide 40: Significant growth headroom
Asia Significant growth headroom Multiple growth engines Intact opportunity Insurance Country IFRS operating profit1, £m Population3 Growth penetration4 mix 1,324 2.9x Philippines Thailand Nascent Vietnam 4.4x JVs 2,668m 2.1% China Eastspring India Other2 SG Nascent 278m 1.7% MY 454 2.3x Other 74m 9
Slide 41: US: Outperforming peers. Delivering results
US Outperforming peers. Delivering results Operating ROE1, FY15 $ 13.0 VA Net inflows bn 2 30% +16ppt #1 Leading cost efficient player 3 (33bps) 50% Larger wholesale distribution than nearest competitor 4 14% 32% Greater wholesaler productivity 5 1.7 Profitable inforce book £ bn 6 2015 481% RBC rati
Slide 42: US: Proven execution skills
US Proven execution skills Strategic imperatives Jackson position 1 1 High quality product 9x more funds than peers delivering +10% return1 2 2 Transparency of guarantee Modular product / no cross subsidy 3 3 Operational flexibility Leading cost efficient player2 4 4 Commercialisation speed & qualit
Slide 43: UK: Navigating change. Investment focus
UK Navigating change. Investment focus Retail APE sales1, £m Life Jan 2013 Apr 2014 Pension reforms 70% Growth in APE from new products (2015) 19% Income drawdown market share RDR 874 2 795 (Up 12pts from 7% 2013) Other 82% Growth in PruFund APE (inc PruFund ISA) 697 663 Bonds (2015) Income drawdown
Slide 44: Effective response to challenges
Group Effective response to challenges IFRS operating profit1,2, £m 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 • Natural disasters • Continued rise in • Sub-prime • Liquidity crisis • Start of global • Greece and • Concern over • US debt ceiling • Concern over • Asia FX • Solvency II fin
Slide 45: 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, In-force IFRS operating profit4, £bn FY15 % % 2010-2015 CAGR 14% 3.6 Other 17% Asset 8% management 0.6 Other USD linked 16% Spread Insurance income margin 76% 16% USD 42% Life 3.0 Asse
Slide 46: Disciplined execution
Group Disciplined execution IFRS operating profit1,2, £m New business profit1,2, £m Free surplus generation1,2,3, £m 3.8x 3.9x 4.8x 2,617 4,007 3,050 CAGR CAGR CAGR +16% 2,115 2,579 +16% 3,186 +19% 2,462 2,082 2,954 1,791 2,080 1,982 2,520 1,536 1,687 2,017 1,433 1,453 1,823 1,444 1,143 1,1681,244 9
Slide 47: Delivering cash
Group Delivering cash Dividend, pence per share 48.78 Special 10.00 dividend +10.0% 38.78 36.93 +5.0% +15.0% 33.57 +15.9% 29.19 +5.6% 25.19 +20.2% 23.85 26.47 +5.0% +5.0% 25.74 +5.0% +5.0% 18.90 19.85 23.84 Total dividend 17.14 18.00 16.32 20.79 17.24 17.24 12.91 13.56 Final / second 11.02 11.72 12.
Slide 48: Delivering profitable growth
Group Delivering profitable growth Revenue Value Returns APE1,2, £m + EEV shareholders’ equity3, £bn + IFRS ROE3,4, £m 1.5x CAGR1,2 Growth rate1,2 +10bn 11% 2014-2015 Q4 +30% Q3 +17% 5,456 26% 27% 32.4 Q2 +19% 29.2 23% 23% 4,025 24.9 22.4 Q1 +7% 2012 2015 2015 2012 2013 2014 2015 2012 2013 2014 2015
Slide 49: Summary
Group Summary 2015 performance highlights distinct competitive advantages and execution quality Premium franchises, ‘best in class capabilities’ Asia structural growth underpinned by compelling demographics and franchise quality High quality, recurring income & defensive balance sheet underp
Slide 50: Appendix
Appendix 2015 Full Year Results 50 2015 FULL YEAR RESULTS
Slide 51: Disciplined capital allocation
Group Disciplined capital allocation New business strain1,3, £m New business profit2,3, £m 2,617 318 +206% 2,082 2,115 237 259 1,791 809 -6% 1,536 241 1,433 706 694 195 794 745 1,143 266 568 660 643 637 618 598 65 166 530 UK 293 103 65 553 29 855 495 45 65 54 267 298 UK 197 432 1,490 300 281 187 326
Slide 52: High quality and growing earnings
Group High quality and growing earnings Sources of IFRS operating income1,2,3,4, £m 7,033 6,315 5,921 1,157 5,043 1,131 1,073 4,444 1,759 4,002 1,061 1,418 1,356 3,126 1,049 2,831 1,027 998 1,682 76% 742 1,635 750 592 1,587 537 1,362 321 446 1,252 1,140 932 914 1,618 1,896 58% 1,391 870 1,077 458 68
Slide 53: Free surplus generation
Group Free surplus generation Free surplus and dividend, £m 2.7x Reinvestment rate 20% Reinvestment Reinvestment rate 19% 745 rate 21% Reinvestment Reinvestment rate 23% 598 rate 22% 637 Reinvestment Reinvestment rate 28% 618 rate 31% 553 643 Reinvestment 3,795 660 Reinvestment rate 50% 3,099 3,177
Slide 54: Cash remittances to Group
Group Cash remittances to Group Business unit net remittances, £m +10% 1,625 1,482 M&G 357 incl 1,341 PruCap 342 1,200 1,105 292 331 UK 297 935 325 280 355 202 688 313 470 US 297 515 175 415 420 294 249 167 322 434 80 199 4671 Asia 341 400 400 144 39 233 206 5 40 2008 2009 2010 2011 2012 2013 2014 2
Slide 55: Dividend
Group Dividend Dividend, pence per share 48.78 Special • 2015 ordinary dividend increased by 5 per cent to 38.78 pence per 10.00 Dividend share. 38.78 Total dividend 36.93 +5% • 2015 special dividend of 10 pence per share • Ex-dividend date - 24 March 2016 (UK, Ireland, Hong Kong and Singapore) 26.4
Slide 56: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 Hong Kong 30,000 Singapore • Pan Asian leader: #1 by NBP2 25,000 Taiwan • Top 3 in 9 /12 Asian countries3 Korea 20,000 • Market leading platform − Over 500,000 agents 15,000 Malaysia − Access to over 10
Slide 57: Nascent Markets
Asia Favourable dynamics Population2 Prudential customers as a Market GDP 2015 GDP (m) % of total population penetration3 (%) ($bn)2 growth (%)2 Indonesia (1995)1 255 1.0% 1.1% 930 4.7 101 0.2% 1.6% 302 6.0 ASEAN and Hong Kong Philippines (1996) Thailand (1995) 69 2.2% 3.6% 415 2.5 Vietnam (1999) 92
Slide 58: 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 59: 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 60: 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 61: 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. 61 2015 FULL YEAR
Slide 62: Life APE by market
Asia Life APE by market Asia APE by market, £m (Constant Exchange Rate) +74% 1,213 -11% 696 -13% +17% +28% +25% 367 +21% 354 +2% 326 309 +12% +32% 211 +9% 181 142 141 111 113 112 135 128 131 85 95 63 83 54 59 Hong Kong Indonesia Singapore Malaysia China 50% Korea India 26% Taiwan Thailand Vietnam Ph
Slide 63: Life 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 6 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 47 18 20 20 42 51 19 22 30 24 27 27 24 30 27 25 31 29 32 24
Slide 64: Life flows and persistency
Asia Life Flows and persistency Asia Life gross flows1,2, £bn Asia Life gross flows (ex-India)1,2, £bn 4.8 4.8 4.4 4.5 4.4 4.7 13.8% 3.8 4.1 12.6% 3.8 3.4 3.3 2.7 10.6% 8.7% 8.4% 9.8% 10.0% 10.1% 9.6% 9.7% 9.6% 9.2% FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15 Surrenders/withdrawals a
Slide 65: FY 2015 retail sales and deposits
US FY 2015 retail sales and deposits Retail sales and deposits, $m FY 2014 = $27,179m FY 2015 = $26,008m $2,625 $868 $1,470 $728 $700 $609 $15,142 $4,805 $5,122 $15,491 $2,814 $2,813 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Acce
Slide 66: VA volumes
US VA volumes VA volumes by quarter, sales US$bn 6.6 6.4 6.4 6.0 •‘Features War’ 5.7 5.7 5.7 1.4 5.5 1.1 1.4 5.3 5.2 5.2 5.3 0.4 1.3 5.0 0.2 1.1 1.1 1.3 4.7 4.6 4.4 4.6 1.0 1.0 1.1 4.2 4.4 4.2 0.7 0.8 1.3 3.7 3.7 3.8 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 Q107 Q207 Q307 Q407 Q108 Q208 Q
Slide 67: Successful diversification
US Successful diversification Jackson VA sales mix, $bn 23.1 23.1 20.9 2.8 19.7 33% 17.5 4.8 14.7 10.0 15.5 6.5 2008 2009 2010 2011 2012 2013 2014 2015 VA With Living Benefit Elite Access VA Without Living Benefit 67 2015 FULL YEAR RESULTS
Slide 68: Variable annuity distribution
US Variable annuity distribution Variable annuity sales by distribution channel, US$bn 23.1 23.1 15.3 15.1 4.1 4.0 3.7 4.0 2014 2015 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 68 2015 FULL YEAR RESULTS
Slide 69: Cash remittances
US Cash remittances Cash remittances, $m $3,258m 680 710 530 470 400 280 125 63 2008 2009 2010 20111 2012 2013 2014 2015 RBC Ratio 438% 417% 483% 429% 423% 450% 456% 481% 1 Net remittances from Jackson include $197m in 2011 representing release of excess surplus to the Group. 69 2015 FULL YEAR RESUL
Slide 70: DAC impact on IFRS profit
US DAC impact on IFRS profit Impact on results of DAC amortisation, £m 2014 2015 Gross profits1 1,944 2,231 New business strain2 (209) (205) DAC Amortisation - Core (474) (514) - (Acceleration) / deceleration (13) (2) Operating result 1,248 1,510 Core as % of Gross profits 24% 23% 1 Gross profits eq
Slide 71: Asset growth
US Asset growth Growth in statutory admitted assets, US$bn 199.1 189.4 170.9 142.8 134.2 127.5 107.6 108.8 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 5.1 4.4 5.6 62.7 62.1 61.9 64.9 42.2 43.8 45.2 48.1 47.1 46.7 50.0 47.7 48.6 48.8 34.6 37
Slide 72: IFRS impact ‘below-the-line’
US IFRS impact ‘below-the-line’ 2015 VA hedge results, net of related DAC, £m 0 (100) (200) (300) (400) 299 (500) (475) (600) (589) (700) 29 (800) (214) (900) Equity hedge VA reserve Interest rate Non-operating fee IFRS net hedge instruments changes hedges income, result net of claims 72 2015 FULL Y
Slide 73: Moving IFRS hedge result to ‘economic result’
US Moving IFRS hedge result to ‘economic result’ 2015 ‘economic’ hedge results, net of related DAC, £m 100 16 61 518 70 0 (68) (100) (200) (300) (400) (475) (500) (600) IFRS net hedge Adjustment to full Fair value Adjustments to other Other ‘Economic’ results fees adjustment to assets carried at cos
Slide 74: Moving reserves to ‘fair value’
US Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 2,000 1,500 383 1,073 Liabilities 1,000 500 0 53 Assets (500) (368) (1,877) (1,000) As recorded2 Change in rates3 Adjustment to full Volatility Hypothetical fair fees4 adjustment5 value with full
Slide 75: Capital, hedging and policyholder behavior
US Capital, hedging and policyholder behavior Total adjusted Capital US$bn • Hedging programme continues to effectively mitigate risks 31 Dec 2014 4.9 • Total adjusted capital excludes gains on interest rate swaps: $356m at December 2015 (Dec 2014: gain of $555m) Operating profit 1.2 • Earned guaran
Slide 76: Life insurance - Asia
IFRS operating profit – sources of earnings Life insurance - Asia Source Total operating profit FY 2014 FY 2015 (CER) +/- 1,209 1,040 16% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments - +/- 2,947 2,588 14% (1,862) (1,640) (14)% 124 92 35% Spread Technical and other i
Slide 77: Life insurance - US
IFRS operating profit – sources of earnings Life insurance - US Source Total operating profit FY 2014 FY 2015 (CER) +/- 1,691 1,543 10% £m except reserves £bn = Total Life income Total Life expenses Expense deferrals - + 3,240 3,040 7% (1,767) (1,703) (4)% 734 731 0% - Spread Expected returns Fee in
Slide 78: Life insurance - UK
IFRS operating profit - sources of earnings Life insurance - UK Total operating profit Source FY2015 FY2014 +/- 1,167 729 60% £m except reserves £bn = Total Life income Total Life expenses DAC adjustments - - 1,414 974 45% (245) (239) (3)% (2) (6) 67% Spread Technical and other income Fee income Exp
Slide 79: Asset management
IFRS operating profit – sources of earnings Asset management Source Asset Management Operating FY 2014 profit1 £mFY except 2015reserves £bn +/- (CER) 557 537 4% £m except average assets £bn Eastspring M&G Investments 442 446 (1)% 115 91 26% Underlying income Other income2 Total expenses Total income
Slide 80: Life insurance - Asia
IFRS operating profit sources of income Life insurance - Asia Asia IFRS operating income1,2, £m Growth % FY 2015 vs. FY 2014 (CER) 1,215 1,056 6% +14% 3% +2% 6% 13% 4% +21% 12% 13% +5% 15% 65% +17% 63% 2014 CER 2015 Insurance margin Fee income Spread income With-profits Expected return on shareholde
Slide 81: Life insurance - US
IFRS operating profit sources of income Life insurance - US US IFRS operating income1, £m Growth % FY 2015 vs. FY 2014 (CER) 3,040 3,240 0% 1% +63% 23% -6% 26% 51% +11% 50% 24% 25% +10% 2014 CER 2015 Insurance margin Fee income Spread income Expected return on shareholder assets 1 Excludes acquisiti
Slide 82: Life insurance - UK
IFRS operating profit sources of income Life insurance - UK UK IFRS operating income1,2,3, £m Growth % FY 2015 vs. FY 2014 896 798 14% -7% 17% 30% +5% 32% 29% -5% 34% 7% +2% 8% 20% +147% 9% 2014 2015 Insurance margin3 Fee income Spread income With-profits Expected return on shareholder assets 1 Excl
Slide 83: M&G – retail FUM
Asset Management M&G – retail FUM Retail funds under management, £bn 16% 16% 21% 19% 26% 35% 43% 39% 43.5 42.5 40.4 36.0 37.3 33.5 31.8 26.1 23.7 23.5 16.0 14.5 9.0 8.2 5.0 3.1 2008 2009 2010 2011 2012 2013 2014 2015 UK / Other Europe X% Europe FUM as % of Retail FUM 83 2015 FULL YEAR RESULTS
Slide 84: Operating return on EEV
EEV operating profit (post-tax) Operating return on EEV of 17% EEV operating profit by business unit, £m (CER) New business profit1, £m (CER3) Group +20% 2,617 • IRR: >20% for all FY15 vs FY143 2,175 • Payback: • Asia: 3 years Asia Life 2,321 +22% • US: 1 year • UK: 3 years US Life 1,808 +10% FY14 C
Slide 85: Life operating variances - Group
EEV operating profit Life operating variances - Group Group Life operating variances1,2, £m Experience variances and assumption changes % opening EEV3 0.4% 1.1% 2.4% 0.7% 1.2% 1.9% 2.2% 3.0% 2.5% 2.3% 1,709 1,500 1,440 1,133 1,106 1,055 1,068 811 881 754 668 666 608 427 347 339 132 180 110 40 2006 2
Slide 86: In-force performance
EEV operating profit In-force performance Asia in-force1, £831m US in-force, £999m UK in-force, £545m +13% +20% +14% 378 260 192 108 149 63 66 57 27 (26) Spread Other items Total variances / Persistency & Mortality / Morbidity other withdrawals and Other items FY14 FY15 X% In-force change from FY14
Slide 87: Life operating variances - Asia
EEV operating profit Life operating variances - Asia Asia Life operating variances1, £m Experience variances and assumption changes % opening EEV2 0.8% 2.0% 2.4% (1.5)% (0.5)% 1.1% 1.0% 0.9% 0.9% 0.7% 749 668 648 490 476 465 406 316 226 177 89 81 89 85 90 82 51 16 (32) (80) 2006 2007 2008 2009 2010
Slide 88: Shareholder backed business - Group
Policyholder liabilities Shareholder backed business - Group Policyholder liabilities1 roll-forward, £bn 8.5 219.6 1.9 7.2 215.4 (2.7) (3.4) 208.2 Net inflows2 £7.6bn 3.5% of CER opening reserves driven by strong inflows of £8.5 billion in the US and £1.9 billion in Asia Liabilities Foreign CER open
Slide 89: Shareholder backed business - Asia
Policyholder liabilities Shareholder backed business - Asia Policyholder liabilities roll-forward, £m 4,793 27,844 (2,926) (121) 26,410 26,098 (312) Net inflows1 £1,867m 7.2% of CER opening policyholder liabilities Liabilities Foreign CER opening Premiums Liabilities 1 Jan 2015 exchange liabilities
Slide 90: Shareholder backed business - US
Policyholder liabilities Shareholder backed business - US Policyholder liabilities roll-forward, £m 16,699 138,913 (8,223) 7,515 134,261 (3,824) 126,746 Net inflows1 £8,476m 6.3% of CER opening reserves Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2015 exchange l
Slide 91: Shareholder backed business - UK
Policyholder liabilities Shareholder backed business - UK Policyholder liabilities roll-forward, £m 3,146 55,009 509 52,824 (5,840) Net outflows1 £(2,694)m (4.9)% of opening reserves Liabilities Shareholders’ Shareholders’ Investment Liabilities 1 Jan 2015 Premiums maturities, deaths related and 31
Slide 92: Movement in 2015
Equity shareholders’ funds Movement in 2015 Movement in shareholders’ funds IFRS Equity EEV Equity FY15 % vs FY15 FY15 % vs FY15 £bn FY14 per share £bn FY14 per share After-tax operating profit 3.2 30% 126 4.9 19% 191 Investment variance and other (0.6) (25) (0.9) (36) Profit for the period 2.6 16%
Slide 93: Movement in 2015: IGD capital
IGD capital Movement in 2015 1 IGD capital – movement in 2015, (£bn) Capital position at 31 December 2015, (£bn) Solvency 280% 2.5x 280% cover IGD surplus 31 December 2014 4.7 Net capital generation 1.8 External financing and other central costs (net of tax) (0.5) Surplus Market movement (0.1) £5.5b
Slide 94: A strong Solvency II capital position
Solvency II A strong Solvency II capital position Internal model approval step Approval date Estimated Group Shareholder Solvency II Matching adjustment November 2015 capital position1,2 FY15, £bn Transitionals December 2015 Asia surplus treatment December 2015 Solvency cover 193% US Equivalence (De
Slide 95: Solvency II framed to demonstrate ability to withstand severe stress
Solvency II Solvency II framed to demonstrate ability to withstand severe stress Probability distribution of Own Funds (illustrative) Own Funds are calculated following 1/200 year stress events over 1 year Example 1/200 year stress events UK Asia1 SCR (stand alone) Equity markets -47% -58% to -72% 9
Slide 96: Well-diversified risks
Solvency II Well-diversified risks Reconciliation of IFRS equity to Solvency II Own Funds1,2, FY15 £bn SCR by risk type3, FY15 IFRS equity 13.0 Less: goodwill, DAC, intangibles (3.7) Operational/ Expense Equity Sub-debt 4.4 FX translation 11% 11% Value of shareholder transfer4 3.1 7% US restated to
Slide 97: 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 FY15, 100% = £20.1bn 20.1 0.0 Tier 3 – deferred tax 3.6 Tier 2 – sub debt Tier 3 0.8 Tier 1 – hybrid capital Tier 2 0% 18% Other Tier 1 4% Tier 1 = Tier 1 – core capital Tier 1
Slide 98: Resilient capital position
Solvency II Resilient capital position Estimated Group Shareholder Solvency II surplus1,2 Impact on solvency ratio FY15 estimated surplus £9.7bn 193% 20% equity fall £8.7bn 186% (7)% 40% equity fall £7.9bn 179% (14)% 50bp interest rate fall3 £8.6bn 179% (14)% 100bp interest rate rise3 £10.8bn 210% +
Slide 99: Asia excluded surplus not a constraint
Solvency II Asia excluded surplus not a constraint Asia Solvency II surplus1, FY15, £bn Asia Group Solvency II basis • Internal model approach Asia SII surplus excluded SCR from Group result Calibrations • Inclusion of stressed VIF in addition to local regulatory Own (1.4) basis surplus Funds • No c
Slide 100: Contribution from Jackson in line with current free surplus basis
Solvency II Contribution from Jackson in line with current free surplus basis US solvency surplus1, FY15, US$bn US Group Solvency II basis • US equivalence (Deduction and Aggregation approach) Free surplus US$2.5bn RBC = Calibrations • Continue to recognise surplus in TAC / CAL Surplus excess of 250
Slide 101: Drivers of capital generation / consumption and remittances unchanged
Solvency II Drivers of capital generation / consumption and remittances unchanged Asia US M&G US equivalence Group Solvency II basis Internal model approach Capital Requirements Directive (CRD IV) (Deduction and Aggregation) Calibrations • Inclusion of stressed VIF in addition • Continue to recognis
Slide 102: UK Solvency II surplus in line with prior basis
Solvency II UK Solvency II surplus in line with prior basis Solvency II surplus, FY15, £bn Calibrations • Credit: 172bp p.a. credit allowance for annuities, roughly equivalent to 1.5x the cumulative default losses over the worst 10 years since 1920 Solvency • Longevity: The risk margin effectively d
Slide 103: 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 104: Capital dynamics unchanged for majority of our businesses
Solvency II Capital dynamics unchanged for majority of our businesses Regulatory capital basis Pre 1 Jan 2016 From 1 Jan 2016 Asia Local No change US RBC No change (equivalent) M&G Capital Requirements Directive (CRD) No change UK Life1 Solvency I (Pillar 1 / Pillar 2) Solvency II with transitional
Slide 105: Capital dynamics and dividend philosophy are unchanged
Solvency II Capital dynamics and dividend philosophy are unchanged Remittances Dividend Central costs dashboard2 Asia US UK M&G 2.0x 1.5x 2.5x New business New business New business Retained as investment investment investment buffer Dividends to shareholders IFRS operating Market Market Market prof
Slide 106: 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 - 4,997 409 152 7 5,565 AA-BBB 3,911 - 137 2,322 20 6,390 Below BBB - - - 837 30 867 Total 3,911 4
Slide 107: Total PIIGS sovereign and bank debt of £259m
Invested assets Total PIIGS sovereign and bank debt of £259m Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets – PIIGS countries as at 31 December 2015, £m PIIGS sovereign & bank debt Sovereign Bank debt Institution Covered Senior Tier II Tier I Total Portugal - B
Slide 108: 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 809 812 221 382 651 2,875 3.7% Total 0.3% High y
Slide 109: US asset quality – Oil and Gas sector
Invested assets US asset quality – Oil and Gas sector Energy Portfolio by Sub-Sector – Total IFRS Book Value, in billions 31 December 2015 $4.5 $1.9 • Total energy exposure is $4.5bn Higher sensitivity 1.3 • Total energy exposure is 9% of the fixed maturity to oil prices A- or higher, 0.7 portfolio
Slide 110: US asset quality – Mining sector
Invested assets US asset quality – Mining sector Metals and Mining Portfolio – Total IFRS Book Value, in billions 31 December 2015 $0.9 • Total Metals/Mining exposure including Steel is $0.9bn 0.1 $0.8 • Average market price was 83.4 • Unrealized loss was $134m A- of Higher, • The Metals/Mining excl
Slide 111: UK asset quality – credit reserve
Invested assets UK asset quality – credit reserve UK shareholder debt securities portfolio by rating1 Strength of the £2.1bn credit reserve BB or below 2% AAA • No defaults of shareholder-backed debt securities BBB 15% 18% • Allowance for credit risk as at 31 December 2015 materially in line with pr
Slide 112: 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 £34.1bn <1 Corporate Bond Portfolio, % by rating Other 2 CMBS 1 BB and below AAA and RMBS 4 AA Govt HY 1 4% 6% A Total £25.5bn 39% BBB 51% Corporate IG 25 Bonds 96% Investment
Slide 113: 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 £34.1bn Investment Grade Corporate Bond Portfolio, % by sector Other <1 2 CMBS 1 Automotive Utility RMBS 4 Banking Govt • Portfolio spread over 688 HY 1 Telecom Basic Industry
Slide 114: 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 £34.1bn High Yield Corporate Bond Portfolio, % by sector Other <1 CMBS 2 1 Automotive RMBS Utility Basic Industry 4 Govt • Portfolio spread across HY Telecom 3% 4% 1 14% 136 i
Slide 115: Currency mix 2015 full year
Currency mix 2015 full year Underlying free surplus IFRS operating profit, % New business profit, % EEV operating profit, % generation, % Other Asia Other Asia UK sterling Other Asia UK sterling Other Asia UK sterling Asia - US dollar 17 13 12 12 13 linked1 11 UK sterling 25 11 Asia - US 40 dollar 1
Slide 116: Asia: Future free surplus emergence
Future free surplus emergence Asia Expected undiscounted free surplus from Life in-force, £bn 4.3 4.7 3.9 4.3 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2014 Life in-force 2014 life in-force including market effects From 2015 new business Expected
Slide 117: US: Future free surplus emergence
Future free surplus emergence US Expected undiscounted free surplus from Life in-force, £bn 1.6 4.2 5.0 3.2 4.2 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2014 Life in-force 2014 life in-force including market effects From 2015 new business Exp
Slide 118: UK: Future free surplus emergence
Future free surplus emergence UK Expected undiscounted free surplus from Life in-force, £bn 2.5 2.5 2.3 2.4 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2014 Life in-force 2014 life in-force including market effects From 2015 new busi