Slide 1: Prudential plc 2016 Full Year Results
Prudential plc 2016 Full Year Results 14 March 2017 1 2016 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 2016 FULL YEAR RESULTS
Slide 4: Group 2016 headline results
Group 2016 headline results Record IFRS operating profits1 of £4.3 billion; cash generation2 up 10% to £3.6 billion Asia earnings up 15% to £1.6 billion and cash generation2 up 15% to £859 million Strong progress on 2017 objectives £12.5 billion Solvency II surplus3 at 201% cover 12% incre
Slide 5: Delivering profitable growth at scale
Group Delivering profitable growth at scale IFRS operating profit1,2, £m + £1bn 4,256 3,969 + £1bn 3,154 + £1bn 2,937 2,504 2,000 1,811 1,438 1,232 £1bn 1,181 1,077 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 Comparatives have been stated on an actual exchange rate basis 2 Comparatives
Slide 6: Translating into strong shareholder returns
Group Translating into strong shareholder returns Dividend, pence per share £ 6.8 bn Total dividends1 to shareholders 2006-16 CAGR 48.78 +10% Special 43.50 dividend 38.78 36.93 33.57 29.19 25.19 23.85 18.90 19.85 17.14 18.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 Amounts paid 2006-
Slide 7: Geographic footprint aligned to significant demand
Group Geographic footprint aligned to significant demand Insurance penetration1 Mutual fund penetration2 Leading pan Penetration regional life Penetration ASIA franchise #1 Retail Asian UK 7.5% Europe 75% asset manager3 2.4% 12% US retirement advisor assets4 Premier Other VA US National & RIA retire
Slide 8: Disciplined execution delivering strong returns
Group Disciplined execution delivering strong returns Strategic choices High quality earnings Strong returns IFRS income by revenue source, % Value over volume Other 26% 7% Insurance Spread margin income 16% 26% Leveraging strengths 77% 2016 IFRS ROE1 2014 2015 2016 Life Fee income 29% 22% Asset Mgt
Slide 9: Asia: Consistent new business growth
Asia Consistent new business growth New business sales1 APE, £m CER Consistent growth 30 Consecutive quarters of growth (year on year) High quality 93 % Regular premium2 1,083 904 850 848 819 733 707 707 701 At scale 622 588 545 541 533 505 484 472 457 2.6 431 415 410 400 371 347 338 330 323 312 APE
Slide 10: Asia: Compounding revenues
Asia Compounding revenues New & renewal premiums Prudential growth Life weighted premium income1,2, £bn CER 2007-2016 4x Prudential customers4 12.6 2x MSCI Asia 10.4 ex Japan3 7m 15m 8.8 Renewal 7.5 9.1 6.4 Prudential insurance 5.6 7.6 4.8 6.6 penetration5 4.0 5.5 3.6 4.7 3.1 4.1 3.5 2.5 2.9 New 2.1
Slide 11: Asia: Growing assets
Asia Growing assets Eastspring FUM1,2, £bn 118 4.1x 89 77 58 60 52 50 42 37 37 29 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 Comparatives have been stated on an actual exchange rate basis 2 Funds under management includes both internal and external FUM. 11 2016 FULL YEAR RESULTS
Slide 12: Asia: Delivering compounding growth
Asia Delivering compounding growth IFRS operating profit1, £m 2x3 2017 objective2 1,644 1,286 2x 1,108 1,058 959 1,826 757 2x 579 476 266 728 199 226 613 427 504 508 285 350 237 109 89 111 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H 2H 1. Comparatives have been stated on an actual
Slide 13: US: Disciplined execution
US Disciplined execution Delivering VA net inflows in an evolving environment VA net inflows $ 6.0 bn Increasing separate account assets underpin 8% earnings1 growth Separate account assets2 11 + % Strong capital position RBC ratio 485 % 1. Life IFRS operating profit 2 Growth rates have been stated
Slide 14: UK: Navigating change
UK Navigating change Capital light business model PruFund 10yr return1 + 75 % (ABI mixed investment 20%-60%: +39%) Strong demand for PruFund product range PruFund AUM 50 + % M&G Performance2 + 67 % (Funds above median – 1 year) Improving M&G fund performance and growing FUM M&G FUM 8 + % (External)
Slide 15: Strong progress on 2017 objectives
Group Strong progress on 2017 objectives Asia Group Underlying free surplus1,2, £m IFRS operating profit2, £m Underlying free surplus1,3, £bn At least £10bn £0.9bn to £1.1bn At least 15% CAGR 872 1,641 CAGR 17% 884 9.2 859 909 1,644 2016 2017 2012 2016 2017 2014 - 2017 Objective Comparatives stated
Slide 16: Key take-aways
Group Key take-aways Results reinforce structural growth drivers Asia continues to underpin growth Disciplined execution to offset known headwinds Strong balance sheet, defensive positioning Well positioned to deliver long-term value 16 2016 FULL YEAR RESULTS
Slide 17: Nic Nicandrou, Chief Financial Officer
Nic Nicandrou Chief Financial Officer 17 2016 FULL YEAR RESULTS
Slide 18: Key financial highlights
Key financial highlights Continued delivery of “Growth and Cash” New business profit1,2,3, £m IFRS operating profit1,2, £m Free surplus generation1,2, £m +24% +7% +18% +11% 3,088 -2% 4,256 +10% 3,588 2,492 3,969 3,043 CER CER CER 2015 2016 2015 2016 2015 2016 EEV per share4 (pence) Group Solvency II
Slide 19: Asia Life growing in scale and quality
Strong progression in key earnings drivers Asia Life growing in scale and quality New regular premium APE1 Life weighted premium Diverse mix of Insurance income1,3 £m income1,2 , £bn Indonesia +15% +20% +21% 283 Singapore +17% 164 FY16 £1,040m 12.6 153 Hong Kong +45% 10.4 107 +24% 85 Malaysia +7% Re
Slide 20: Asset management businesses building fee earning base
Strong progression in key earnings drivers Asset management businesses building fee earning base Movement in separate account assets, $bn Movement in life invested +8% assets, £bn 17.9 181.5 8.6 148.8 164.8 6.0 24.7 UK US 6.7 134.2 PruFund 16.5 (7.9) Other1 1 Jan 2016 Net inflows Markets / 31 Dec 20
Slide 21: High capital velocity
Capital allocation High capital velocity Capital velocity, £m Expected undiscounted free surplus from life in-force1, £bn 3,331 4.5 12.0 15.8 10.5 13.3 4.0 Years 6-10 3.5 3.0 2.5 3,088 Year 5 2.0 Year 4 1.5 322 Year 3 302 Year 2 1.0 903 Year 1 0.5 485 0.0 Free surplus New Free surplus 2016 2017 2018
Slide 22: High quality and resilient capital
Group solvency position High quality and resilient capital Solvency II capital position1,2 Solvency II capital sensitivities1,2 Sources of capital excluded 31 December 2016, £bn 31 December 2016 from Solvency II £m £bn Surplus £12.5bn Shareholder share of estate Operating capital generation3 £2.7b
Slide 23: Growth in Asia and US fee business underpin 2016 earnings
Group IFRS profit Growth in Asia and US fee business underpin 2016 earnings IFRS operating profit by business unit1, £m IFRS operating profit1 2016 vs 2015, £m 123 FY16 FY152 CER AER FY15 CER 3,810 400 4,333 Asia 1,644 1,286 +15% +28% Asia 213 US 2,048 1,702 +7% +20% US fee business profit4 266 UK 8
Slide 24: Asia Life: Strong and consistent growth
Asia Life Strong and consistent growth across key metrics New business profit1, £m IFRS operating profit1, £m New business APE growth of 19% to £3,599m +22% +15% 4Q APE > £1bn, with >20% growth in 8 countries2 Hong Kong +21% China +47% Philippines +27% Taiwan +23% Singapore +24% India +58% Vietn
Slide 25: US: Disciplined execution of fee-based strategy
US Disciplined execution of fee-based strategy New business profit, £m IFRS operating profit, £m New business -13% +7% Lower APE consistent with industry disruption following DOL reforms 913 790 1,921 2,048 NBP positively impacted by mix effects FY15 (CER) FY16 FY15 (CER) FY16 Free surplus gener
Slide 26: UK Life: Retail propositions driving growth
UK Life Retail propositions driving growth in new environment New business profit1, £m IFRS operating profit, £m Life IFRS operating profit, £m +33% -32% FY15 FY16 In-force annuities 375 332 With-profits transfer 269 269 268 1,167 201 799 Core in-force 644 601 FY15 FY16 FY15 FY16 Other activities Lo
Slide 27: Asset management: Improved performance in second half
Asset management Improved performance in second half Total FUM, £bn IFRS operating profit, £m FY16 external retail net outflows of £6.3bn +8% -4% 4Q16 retail net inflows of £0.9bn Revenue1 down 2% at £923m M&G • Retail (13)%, av. Retail AUM2 (13)% 246 265 442 425 • Institutional +17%, shift in
Slide 28: 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) FY16 FY15 Change FY16 FY15 Change Asia 1,210 1,064 14% Expected return from in-force 3,060 2,817 9% US3 1,866 1,608 16% Experience result3,4 824 609 35% UK4
Slide 29: Free surplus generation momentum maintained
Group Free surplus generation momentum maintained Life and asset management free surplus generation1, £m (CER) Free surplus generation1 2016 vs 2015, £m (CER) (25) FY16 FY15 Change FY15 CER 3,026 275 3,276 Expected return from in-force 3,060 2,817 9% Growth in in-force 243 Experience result2 824 609
Slide 30: Resilient free surplus and strong central cash
Group Resilient free surplus and strong central cash Movement in life and asset Movement in central cash, £m management free surplus1,2, £m FY16 FY15 Asia 516 467 (1,268) US 420 470 (477) UK 300 301 468 8,293 791 M&G3 335 357 (1,056) Other UK 147 30 3,588 (1,718) 6,575 Asia2 Based on 5,293 (1,267) l
Slide 31: Operating performance drives positive movement
Equity shareholders’ funds Operating performance drives positive movement IFRS Equity EEV Equity1 Per Per £bn share (p) £bn share (p) Operating profit after tax 3.4 131 5.5 215 Investment variance and other (1.2) (47) (0.6) (22) Unrealised gain on AFS 0.0 1 n/a n/a Foreign exchange and reserve movem
Slide 32: Strong capital position at Group and local level
Solvency II Strong capital position at Group and local level Group Shareholder Solvency II capital position1, £bn Local solvency capital position Surplus £9.7bn £12.5bn Solvency II 193% 201% 2015 2016 cover Asia4 229% 250% Local regulatory basis US5 481% 485% Risk Based Capital 24.8 20.1 UK 10.4 12.
Slide 33: Strong Group capital position and lowered sensitivities
Solvency II Strong Group capital position and lowered sensitivities FY16 movement in Solvency II capital1, £bn Solvency II surplus estimated sensitivities1,3 Impact on SII Impact on coverage ratio solvency 31 December 20152 9.7 ratio FY16 estimated surplus £12.5bn 201% Operating experience 2.3 ~25pt
Slide 34: Transitional amortisation not expected to impact capital generation
Solvency II Transitional amortisation not expected to impact capital generation Risk margin release vs transitional amortisation for UK annuity business1 (£m) Contribution of transitionals £2.5bn 200 margin release 150 Impact of risk Impact on Group Solvency II ratio ~20ppts 100 50 Represents
Slide 35: Dividend rebased
Group Dividend rebased Dividend per share (pence) 48.78 • Full year ordinary dividend +12% to 43.50p per share Special 43.50 10.00 • Progressive dividend policy, balancing security and retention for investment in growth dividend • Second interim ordinary dividend of 30.57p (2015 second interim ordin
Slide 36: Long-term value creation
Group Long-term value creation Life and AM assets1, IFRS operating profit2, Dividends3, pence EEV shareholders’ £bn £m funds1, £bn Life invested assets CAGR CAGR CAGR CAGR +11% 418 +14% +10% +15% 334 348 280 293 48.78 4,256 39.0 3,969 10.00 32.4 3,154 29.2 2012 2013 2014 2015 2016 2,937 24.9 2,504 2
Slide 37: Summary
Group Summary Growth and Cash metrics at new highs, led by Asia New business profit1,2 £ 3,088 m +24% On track for 2017 financial objectives Strong progression in performance drivers IFRS operating profit1 £ 4,256 m +7% Continued Asia new business momentum Resilient VA net inflows Free surplus g
Slide 38: Mike Wells, Group Chief Executive
Mike Wells Group Chief Executive 38 2016 FULL YEAR RESULTS
Slide 39: Priorities
Group Priorities Leverage scale Accelerate Expand health & protection Asia Penetrate wealth Adapt product offerings Grow US & Utilise competitive advantages Enhance UK Rational capital deployment Leverage Group strength Optimise Capital Adapt to changing regulation Significant optionality 39 2016 FU
Slide 40: Asia: Accelerate
Asia Accelerate Over 500k agents Leverage scale 10k branches Expand and evolve agency model Life Top 3 position in 9 of 12 countries4 Leverage bancassurance 2.4 % insurance penetration1 With Embed digital capability access to 3.3bn population 2015 2016 Expand health 1.6x Premier Health Insurance pro
Slide 41: US: Grow
US Grow £ 120 bn Premier retirement income player Largest retirement asset pool in the world2 US £ 2.0 bn $ 16 retirement tr advisor IFRS operating assets1 profit Leverage cost, performance & technology 2015 advantage to access new asset pools Separate Account assets Launched fee based VA and EA 1.
Slide 42: UK: Enhance
UK Enhance £ 311 bn Well known brands with strong investment bias UK&E £ 1.3 bn Second largest asset management market in the 3 +£ tr Growth in UK AUM1 IFRS operating world3 M&G profit Assets under management2 Accelerate transition to capital light business 1. Source: The Investment Association. PWC
Slide 43: Optimise capital
Group Optimise capital Strong capital position Strong capital position Disciplined capital allocation £ 12.5bn 2016 SII surplus1 Ratio 201% High capital velocity Strong returns Adapt to changing regulation 26% 2016 IFRS ROE2 Significant optionality 1 The Group and UK Shareholder positions
Slide 44: Long-term track record
Group Long-term track record IFRS operating profit1,2, £m New business profit1,2, £m Free surplus generation1,2,3, £m 4.0x 5.0x 5.5x 4,256 3,088 3,588 3,969 CAGR CAGR 2,609 3,043 CAGR +15% +17% 3,154 +19% 2,586 2,937 2,104 2,454 2,057 2,504 2,064 1,776 1,986 2,000 1,671 1,811 1,506 1,415 1,450 1,438
Slide 45: Summary
Group Summary Clear strategy focused on significant structural growth opportunities Leadership positions and capabilities underpin peer / market outperformance Resilient operating model with clear value discipline Significant headroom from leveraging scale, efficiencies and skills Well pos
Slide 46: Prudential plc 2016 Full Year Results
Prudential plc 2016 Full Year Results 14 March 2017 46 2016 FULL YEAR RESULTS
Slide 47: Appendix
Appendix 2016 Full Year Results 47 2016 FULL YEAR RESULTS
Slide 48: Clear strategy
Group Clear strategy 48 2016 FULL YEAR RESULTS
Slide 49: 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 15m life customers 4m life customers 6m life customers Top 3 position in 9
Slide 50: Disciplined capital allocation
Group Disciplined capital allocation New business strain1,3, £m New business profit2,3, £m 3,088 268 +282% 2,609 318 790 2,057 2,104 +18% 1,776 237 259 903 809 767 1,506 241 718 129 1,415 706 694 638 624 623 195 598 583 65 1,109 266 568 UK 293 103 65 539 29 298 45 65 166 530 54 267 808 2,030 495 281
Slide 51: 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 • Rising oil and • Sub-prime • Liquidity crisis • Start of global • Greece and • Concern over • US debt ceiling • Concern over • Asia FX • Solvency II • Brexit commodity prices
Slide 52: High quality and growing earnings
Group High quality and growing earnings Sources of IFRS operating income1,2,3,4, £m 7,504 6,932 6,278 1,171 5,883 1,153 5,011 1,129 1,071 1,991 4,418 3,979 1,671 1,061 1,393 1,329 3,108 1,049 2,801 998 1,000 1,629 77% 1,682 722 1,635 750 574 1,587 537 1,362 294 431 1,252 1,140 1,888 2,175 932 58% 91
Slide 53: Free surplus generation
Group Free surplus generation Free surplus and dividend, £m 3.9x Net free surplus Reinvestment rate 20% Reinvestment 903 rate 19% Reinvestment 718 Reinvestment rate 18% rate 20% Reinvestment 583 Reinvestment rate 22% 623 Reinvestment rate 21% Reinvestment rate 27% 598 rate 31% 539 4,491 624 Reinvest
Slide 54: Delivering cash
Group Delivering cash Dividend, pence per share 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 16.32 20.79 17.24 17.24 Final / second 12.91 13.56 11.02 11.72 12.30 interim dividend 11.19 12.31 12.93 7.95 8.40 9.73
Slide 55: 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 profit4,5, £bn FY16 % % 2010-2016 CAGR 15% 4.2 Other 17% Other USD linked 21% Spread Insurance margin 16% income Life 3.6 77% USD 48% Life Fee Asset Mgt income
Slide 56: Cash remittances to Group
Group Cash remittances to Group Business unit net remittances, £m 1,718 1,625 1,482 335 M&G & PruCap 1,341 357 1,200 342 147 Other UK 30 1,105 292 301 300 UK 935 297 280 325 355 202 688 313 470 420 US 297 515 175 415 420 294 167 249 322 434 80 199 4671 516 Asia 341 400 400 144 39 233 206 5 40 2008 2
Slide 57: Growing value at consistent returns
Group Growing value at consistent returns Shareholders’ equity (EEV), £bn 39.0 32.4 29.2 24.9 22.4 18.2 19.6 14.6 15.0 15.3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Return on Embedded Value1, 15% 14% 15% 18% 16% 16% 19% 16% 17% 17% % 1 Return on embedded value is based on EEV post-tax opera
Slide 58: Long term opportunity
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$1 35,000 Hong Kong Singapore 30,000 • Pan Asian leader: #1 by NBP2 25,000 Taiwan • Top 3 in 9 /12 Asian countries3 20,000 • Market leading platform − Over 500,000 agents 15,000 − Access to over 10,000 bank branc
Slide 59: Favourable dynamics
Asia Favourable dynamics Population2 (m) Market GDP 2016 GDP penetration3 (%) ($bn)2 growth2 Indonesia (1995)1 259 1.3% 901 4.9% 104 1.4% 311 6.4% ASEAN and Hong Kong Philippines (1996) Thailand (1995) 69 3.7% 408 3.2% Vietnam (1999) 93 0.8% 203 6.1% Hong Kong (1964) 7 13.3% 314 1.4% Malaysia (1924)
Slide 60: 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 61: 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 62: 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 63: 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. 63 2016 FULL YEAR
Slide 64: Life APE by market
Asia Life APE by market Asia APE by market, £m (Constant Exchange Rate) 40% 1,912 1,368 1% (25)% 8% 347 351 371 31% 21% 279 3% 225 244 26% (14)% 199 11% 75% 152 175 145 146 150 92 116 103 89 63 70 8 14 Hong Kong Singapore Indonesia Malaysia China 50% India 26% Taiwan Vietnam Thailand Philippines Cam
Slide 65: 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 1,829 1,654 1,420 1,302 1,013 841 648 206 120 515 494 151 106 103 360 91 340 281 137 114 103 139 148 183 206 194 240 79 23 11 77 27 63 46 45 56 68 81 75 6 9 1995 1996 19
Slide 66: 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% 6% 5% 6% 6% 4% 5% 7% 8% 8% 8% 7% 18% 17% 19% 22% 26% 26% 29% 29% 33% 33% 35% 33% 33% 19% 37% 38% 38% 18% 43% 50% 19% 57% 56% 26% 27% 27% 26% 29% 31% 30% 32% 32% 30% 30% 29% 27% 26% 61% 62% 24% 58% 24% 24% 49%
Slide 67: Life flows and persistency
Asia Life Flows and persistency Asia Life gross flows1,2,3, £bn Asia Life gross flows (ex-India)1,2,3, £bn 4.7 4.2 3.8 3.9 3.8 4.1 4.2 4.2 12.6% 3.4 3.7 13.8% 3.4 2.9 2.9 2.3 9.9% 8.6% 8.9% 8.5% 9.4% 7.6% 7.7% 8.5% 7.1% 7.2% 9.0% 9.2% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY10 FY11 FY12 FY13 FY14 FY15
Slide 68: Eastspring funds under management
Asia Eastspring Funds under management2, £bn 2012 – 2016 Growth 118 2.0x 14 2.8x 89 77 11 #1 Retail Fund Manager September 20161 8 58 1.9x 58 60 5 5 42 39 31 33 £ 118bn Funds under management 46 2.1x 30 36 22 22 2012 2013 2014 2015 2016 Third party Asia life UK Life/ JNL 1 Based on assets sourced fr
Slide 69: The Baby Boomer Retirement Wave is Picking up Steam
US The Baby Boomer Retirement Wave is Picking up Steam • 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
Slide 70: Opportunities Measured by Advisors
US Opportunities Measured by Advisors US Retail Financial Advisors: 308,937 Licensed to Sell Annuities: 260,765 Industry Market Sizing Jackson Producers With Annuities on the Books: 230,779 Jackson Selling Agreements: 237,883 Wrote an Annuity Last Year: 212,901 Jackson Appointed Advisors: 13
Slide 71: More than $16 trillion in assets across existing channels
US More than $16 trillion in assets across existing channels Advisor Distributed Assets (in $billions) Wirehouses 5.1% National and regional B/D 5.0% RIA 10.5% Independent B/D 6.6% Independent / RIA Hybrid 11.7% Retail bank B/D 8.5% Insurance B/D 4.3% $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Tot
Slide 72: FY 2016 retail sales and deposits
US FY 2016 retail sales and deposits Retail sales and deposits, $m FY 2015 = $26,008m FY 2016 = $18,664m 1,470 728 689 8 753 700 2,785 4,805 15,491 2,007 12,422 2,814 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access Fixed Index A
Slide 73: VA volumes
US VA volumes VA volumes by quarter, sales US$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 1.3 5.0 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 4.2 4.2 3.8 0.7 0.8 3.7 3.7 1.3 0.7 0.7 0.7 0.7 3.
Slide 74: Variable annuity distribution
US Variable annuity distribution Variable annuity sales by distribution channel, US$bn 23.1 17.2 15.1 11.5 4.0 3.0 4.0 2.7 2015 2016 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 74 2016 FULL YEAR RESULTS
Slide 75: Cash remittances
US Cash remittances Cash remittances, $m $3,808m 680 710 530 550 470 400 280 125 63 2008 2009 2010 20111 2012 2013 2014 2015 2016 RBC Ratio 438% 417% 483% 429% 423% 450% 456% 481% 485% 1 Net remittances from Jackson include $197m in 2011 representing release of excess surplus to the Group. 75 2016 F
Slide 76: DAC impact on IFRS profit
US DAC impact on IFRS profit Impact on results of DAC amortisation, £m 20153 2016 • Core amortisation will drive DAC charge in the absence of significant market movements Gross profits1 2,231 2,510 • Core amortisation includes modest impacts from New business strain2 (205) (195) assumption unlocking
Slide 77: Asset growth
US Asset growth Growth in statutory admitted assets, US$bn 215.2 199.1 189.4 170.9 142.8 148.8 134.2 127.5 107.6 108.8 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 42.2 43.8 45.2 48.1 47.1 46.7 50.0 47.7
Slide 78: Value of $1 Investment
US Reserves Return Assumptions IFRS Mean Return vs S&P Historical1 All accounting bases assume 20-year equity market returns 10 well below the mean returns posted by the S&P 500 9 8 IFRS return assumptions are especially punitive. There has 7 never been a 20-year period for the S&P with as weak
Slide 79: IFRS impact below-the-line
US IFRS impact ‘below-the-line’ FY2016 VA hedge results, net of related DAC, £m 0 (500) (1,000) (1,500) (1,709) (2,000) (1,923) (133) (122) 469 (2,500) Equity hedge VA reserve Interest rate Non-operating IFRS net instruments changes hedges fee income, hedge result net of claims 79 2016 FULL YEAR RES
Slide 80: Moving reserves to fair value
US Moving reserves to ‘fair value’ Guarantee Benefit Liability Supplemental Disclosure1, net of DAC, £m 2,500 688 2,000 1,500 1,412 Liabilities 1,000 500 0 82 Assets (195) (2,377) (500) As recorded2 Change in Adjustment to full Volatility Hypothetical fair rates3 fees4 adjustment5 value with full fe
Slide 81: GMWB policyholder behaviour sensitivities
US GMWB policyholder behaviour sensitivities GMWB policyholder behaviour sensitivities, FY 2016 US$bn 7 • Policyholder behaviour experience is continuously monitored and a comprehensive study 6 is conducted on an annual basis. • For IFRS and Statutory accounting purposes, assumptions are set at the
Slide 82: Capital, hedging and policyholder behavior
US Capital, hedging and policyholder behavior Total Adjusted Capital • Hedging programme continues to effectively mitigate US$bn risks 31 December 2015 5.1 • Earned guarantee fees of 130 bps per annum (c$1.8bn Operating profit 1.2 in FY 2016). Expected guarantee fees of $2.0bn for 2017 Dividend (0.6
Slide 83: 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 84: 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 Guarantee Fees Uses prudent best estimate assumptions (AG43, C3P2) 1,800 PV Future Guarantee Fees 9,842 1,600 Benefits PV Benefits
Slide 85: 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) +31% +139% +301% 294 333 384 289 = 658 962 150 401 72 2014 2015 2016 2014 2015 2016 2014 2015 2016 Drawdown, (APE, £m) + PruFund ISA, (APE, £m) Legacy, (APE, £m) +371% +70% -5
Slide 86: Improved asset gathering capability
UK Life Improved asset gathering capability UK life flows £bn YoY Change Premiums £118bn 9.0 With-profits +13% 6.1 3.7 31 December 2016 invested assets 2.3 2.2 2.7 2.0 1.5 1.2 1.2 1.0 0.5 (0.8) (0.9) (1.2) (1.9) (3.0) (3.1) £64bn (3.2) (3.3) Shareholder +5% Claims (6.1) (6.6) (6.5) backed (7.2) inve
Slide 87: PruFund Range
UK Life PruFund Range PruFund Investment Performance1 Growth in PruFund AuM (£bn) 100% PruFund Growth 80% +75% 60% 24.7 +39% 40% ABI Sector comparator 16.5 20% 11.6 0% 9.1 7.5 -20% 5.4 4.1 0.1 0.3 2.5 0.9 2006 2008 2010 2012 2014 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 AuM 1. ABI
Slide 88: Diversified across principal asset classes
M&G Diversified across principal asset classes M&G Group assets under management by client type and asset class (%), 31 December 20161 1% 1% 1% 1% 3% 5% 6% 9% 11% 21% 2% 4% 12% 5% 31% 1% 3% Internal AUM Retail AUM Wholesale AUM £128.1bn £64.2bn £72.6bn 73% 52% 58% Equities Fixed Income Real Estate M
Slide 89: M&G – retail FUM
Asset Management M&G – retail FUM Retail funds under management, £bn 16% 16% 21% 19% 26% 35% 43% 39% 42% 43.5 42.5 40.4 36.0 37.3 37.3 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 UK / Other Europe X% Europe FUM as % of Retail FUM 89 2016 FULL
Slide 90: Operating profit
M&G Operating profit M&G IFRS operating profit, £m 1.8x 488 441 442 425 357 371 284 238 2009 2010 2011 2012 2013 2014 2015 2016 90 2016 FULL YEAR RESULTS
Slide 91: Life insurance - Asia
IFRS operating profit – sources of earnings Life insurance - Asia Source FY 2015 FY 2016 (CER) +/- £m except reserves £bn Total operating profit1 1,503 1,303 15% = Total Life income Total Life expenses DAC adjustments - + 3,472 3,125 11% (2,117) (1,930) (10)% 148 108 37% Spread Technical and other i
Slide 92: Life insurance - US
IFRS operating profit – sources of earnings Life insurance - US Source FY 2015 FY 2016 (CER) +/- Total operating profit £m except reserves £bn 2,052 1,908 8% = Total Life income Total Life expenses DAC amortisation - + 3,644 3,655 - (1,836) (1,993) 8% 244 246 (1)% Spread Technical and other Fee inco
Slide 93: Life insurance - UK
IFRS operating profit - sources of earnings Life insurance - UK Source FY2016 FY2015 +/- Total operating profit £m except reserves £bn 799 1,167 (32)% = Total Life income Total Life expenses1 Management actions/ other2 - - 885 1,014 (13)% (243) (247) 2% 157 400 (61)% Spread Technical and other Fee i
Slide 94: Asset management
IFRS operating profit – sources of earnings Asset management Source Asset Management operating FY2015 profit1 FY2016 (CER) +/- £m except average assets £bn 566 570 (1)% Eastspring M&G Investments 425 442 (4)% 141 128 10% Underlying income Other income2 Total expenses Total income2 Total expenses 923
Slide 95: Life insurance - Asia sources of income
IFRS operating profit sources of income Life insurance - Asia Asia IFRS operating income1,2, £m Growth % FY 2016 vs. FY 2015 (CER) +25% 1,553 -4% 6% 1,304 3% +17% 6% 13% +2% 4% 11% 13% 13% +24% 64% 67% 2015 CER 2016 Insurance margin Fee income Spread income With-profits Expected return on shareholde
Slide 96: Life insurance - US sources of income
IFRS operating profit sources of income Life insurance - US US IFRS operating income1, £m Growth % FY 2016 vs. FY 2015 (CER) 3,655 3,644 -54% 1% 0% -5% 23% 22% +3% 52% 53% -1% 24% 25% 2015 CER 2016 Insurance margin Fee income Expected return on shareholder assets Spread income 1 Excludes acquisition
Slide 97: Life insurance - UK sources of income
IFRS operating profit sources of income Life insurance - UK UK IFRS operating income1,2, £m 835 Growth % FY 2016 vs. FY 2015 15% 678 -13% 16% 32% +0% 40% 31% -31% 26% 8% -5% 9% -47% 14% 9% 2015 2016 Insurance margin3 Fee income Spread income With-profits Expected return on shareholder assets 1 Exclu
Slide 98: 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 profit, £m (CER2,3) Group +11% 3,088 FY15 (CER) 2,774 FY16 vs FY152 2,774 Volume +226 Economics +17 Asia Life 3,074 +20% Other4 +71 FY16 3,088 US Life 1,971 (3)% FY15 CER FY16
Slide 99: Life operating variances - Group
EEV operating profit Life operating variances - Group Group Life operating variances1,2, £m Experience variances and assumption changes % opening EEV3 0.6% 1.2% 3.1% 1.0% 1.6% 1.9% 2.4% 3.4% 2.7% 2.3% 2.2% 1,894 1,685 1,469 1,416 1,086 1,037 1,074 1,016 791 847 740 744 706 655 657 410 461 342 242 13
Slide 100: In-force performance
EEV operating profit In-force performance Asia in-force1, £1,044m US in-force, £1,181m UK in-force, £375m 479 378 173 102 149 119 57 5 (29) Spread Other exp. variances/ Persistency & Mortality / Morbidity op. assumption (70) withdrawals and Other items changes Total variances / other FY15 FY16 1 The
Slide 101: Life operating variances - Asia
EEV operating profit Life operating variances - Asia Asia Life operating variances1,3, £m Experience variances and assumption changes % opening EEV2 2.0% 2.4% 4.8% (1.1)% 0.6% 1.2% 1.5% 1.8% 1.4% 0.6% 1.3% 866 725 637 624 443 445 433 367 206 282 163 152 161 178 123 137 84 73 32 50 30 (50) 2006 2007
Slide 102: Shareholder backed business - Group
Policyholder liabilities Shareholder backed business - Group Policyholder liabilities1 roll-forward, £bn 13.7 266.6 5.2 (3.6) 32.4 252.0 (2.8) 2.1 219.6 Liabilities Foreign CER opening Korean life Asia US UK Investment Liabilities 1 Jan 2016 exchange liabilities business net inflows2 net inflows2 ne
Slide 103: Shareholder backed business - Asia
Policyholder liabilities Shareholder backed business - Asia Policyholder liabilities roll-forward, £m 4,749 (2,663) 1,116 32,851 4,617 32,461 (2,812) 27,844 Liabilities Foreign CER opening Korean life Premiums Maturities, Investment Liabilities 1 Jan 2016 exchange liabilities business deaths and rel
Slide 104: Shareholder backed business - US
Policyholder liabilities Shareholder backed business - US Policyholder liabilities roll-forward, £m 14,766 (9,568) 5,690 177,626 27,825 166,738 138,913 Liabilities Foreign CER opening Premiums Maturities, Investment Liabilities 1 Jan 2016 exchange liabilities deaths and related and 31 Dec 2016 surre
Slide 105: Shareholder backed business - UK
Policyholder liabilities Shareholder backed business - UK Policyholder liabilities roll-forward, £m 6,980 56,158 1,842 (5,488) 52,824 Liabilities Shareholders’ Shareholders’ Investment Liabilities 1 Jan 2016 Premiums maturities, deaths related and 31 Dec 2016 and surrenders other 1 Defined as moveme
Slide 106: Solvency II: Well-diversified risks
Solvency II Well-diversified risks Reconciliation of IFRS equity to Solvency II Own Funds1,2, FY16 £bn SCR by risk type3, FY16 IFRS equity 14.7 Less: goodwill, DAC, intangibles (3.8) Operational/ Expense Equity Sub-debt 6.3 FX translation 11% 12% 3.1 6% Value of shareholder transfer 4.0 7% Longevity
Slide 107: 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 FY16, 100% = £24.8bn 24.8 0.5 Tier 3 – deferred tax Tier 2 – sub debt Tier 3 5.7 0.9 Tier 1 – hybrid capital 2% Tier 2 23% Tier 1 = Tier 1 = 75% of Tier 1 – core capital 152% o
Slide 108: Capital dynamics and dividend philosophy are unchanged
Solvency II Capital dynamics and dividend philosophy are unchanged 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 p
Slide 109: SII treatment of hybrid capital classification
Solvency II SII treatment of hybrid capital classification Hybrid Capital outstanding, 31 December 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 C
Slide 110: 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 111: Asset portfolio is high quality and well diversified
Invested assets Asset portfolio is high quality and well diversified Breakdown of invested assets1, FY16, £bn Shareholder debt portfolio, FY16, £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
Slide 112: 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 31 December 2016, £90bn 31 December 2016, $58bn 31 December 2016, £36bn £bn Cash/Treasury/ Agency 14% <BBB 2% Common/ preferred Public IG AAA
Slide 113: Group shareholder exposures – Sovereign debt
Invested assets Group shareholder exposures – Sovereign debt Group shareholder credit portfolio Breakdown of the shareholder 31 December 2016, £90bn credit portfolio, % SH sovereign exposures by regions & ratings1, £m US UK Europe Asia Other Total AAA - - 573 149 10 732 AA-BBB 6,861 5,510 194 2,434
Slide 114: Total PIIGS sovereign and bank debt
Invested assets Total PIIGS sovereign and bank debt PIIGS sovereign & bank debt Shareholder invested assets – PIIGS 31 December 2016, <1% countries as at 31 December 2016, £m Bank debt Sovereign Institution Covered Senior Tier II Tier I Total Portugal - Banco Espirito Santo - 19 - - 19 PIIGS soverei
Slide 115: Group shareholder exposures – oil and gas sector
Invested assets Group shareholder exposures – oil and gas sector Shareholder Oil and Gas credit portfolio 31 December 2016, 3.9% Exploration Refining Oil & Pipeline Integrated Total & & gas / Mid- Oils (£m) Production Marketing Services stream Investment grade 3.3% Investment grade 652 1,007 252 381
Slide 116: US asset quality – Energy Exposure
Invested assets US asset quality – Energy Exposure Energy Portfolio by Sub-Sector – Total IFRS Book Value, in US$bn 31 December 2016 $3.9 $1.3 Higher Energy, Exploration & A- or Higher sensitivity to oil Production prices 0.4 • Total energy exposure at 31 December, $3.9bn 1.0 • Energy exposure is 8%
Slide 117: US asset quality – corporate debt portfolio (1/3)
Invested assets US asset quality – corporate debt portfolio (1/3) US Shareholder Debt Securities Portfolio Corporate Bond Portfolio, % by rating Market value, £40.7bn £30.6bn Other CMBS 1.0 4% BB and below 5% AAA and AA RMBS 2.2 1.0 Govt 5.9 Corporate Bond - High Yield 1.1 51% BBB 40% A Corporate Bo
Slide 118: US asset quality – corporate debt portfolio (2/3)
Invested assets US asset quality – corporate debt portfolio (2/3) US Shareholder Debt Securities Portfolio Investment Grade Corporate Bond Portfolio, Market value, £40.7bn % by sector £29.5bn Other CMBS 1.0 RMBS 2.2 Auto 3% 1.0 Utility 13% Govt Banking 8% 5.9 Corporate Bond - High Yield 1.1 Telecoms
Slide 119: US asset quality – corporate debt portfolio (3/3)
Invested assets US asset quality – corporate debt portfolio (3/3) US Shareholder Debt Securities Portfolio High Yield Corporate Bond Portfolio, % by Market value, £40.7bn sector, £1.1bn Other CMBS 1.0 Auto 4% RMBS 2.2 Utility 4% 1.0 Basic Industry 15% Govt Telecoms 9% 5.9 Corporate Bond - High Yield
Slide 120: Currency translation sensitivities
Currency mix Currency translation sensitivities IFRS operating profit, £m IFRS operating profit, % FY2016 as Other Asia 4,256 US UK sterling reported 14 17 Asia Impact of translating 197 +10%1 results at 31 Dec 2016 Asia – spot rate US 21 110 +7%1 dollar linked1 FY2016 at 31 Dec 48 4,563 2016 spot r
Slide 121: Currency translation sensitivities
Currency mix Currency translation sensitivities New business profit, £m New business profit, % FY2016 as Other Asia UK sterling 3,088 US reported 10 9 Asia Impact of translating 76 +10%1 results at 31 Dec 2016 26 US spot rate dollar 171 +8%1 Asia – US dollar 55 FY2016 at 31 Dec linked1 3,335 2016 sp
Slide 122: 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 123: 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 124: 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 125: 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