Prudential plc 2012 Half Year Results

Transcription

1 Prudential plc 2012 Half Year Results Delivering Growth and Cash 10 August 2012

2 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 Prudential s beliefs and expectations, are forward-looking statements. These statements are based on plans, estimates and projections as at the time they are made, and therefore undue reliance should not be placed on them. By their nature, all forward-looking statements involve risk and uncertainty. A number of important factors could cause Prudential's actual future financial condition or performance or other indicated results to differ materially from those indicated in any forward-looking statement. Such factors include, but are not limited to, future market conditions, fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, including, for example, new government initiatives related to the financial crisis and the effect of the European Union's Solvency II requirements on Prudential's capital maintenance requirements; the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; the impact of changes in capital, solvency standards or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate; and the impact of legal actions and disputes. These and other important factors may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. Further discussion of these and other important factors that could cause Prudential's actual future financial condition or performance or other indicated results to differ, possibly materially, from those anticipated in Prudential's forward-looking statements can be found under the Risk factors heading in this document. Any forward-looking statements contained in this document speak only as of the date on which they are made. Prudential expressly disclaims any obligation to update the forward-looking statements contained in this document or any other forward-looking statements it may make, whether as a result of future events, new information or otherwise except as required pursuant to the UK Prospectus Rules, the UK Listing Rules, the UK Disclosure and Transparency Rules, the Hong Kong Listing Rules, the SGX-ST listing rules or other applicable laws and regulations. 2

3 Prudential plc 2012 half year results Agenda Business Review Overview of results Business update Tidjane Thiam Financial Review Nic Nicandrou Outlook and Q&A Tidjane Thiam 3

4 2012 half year financial headlines A strong performance Overview Business update Growth Group new business profit 1,141m (H1 2011: 1,069m) Asset Management net inflows 5.4bn (H1 2011: 2.9bn) Profitability IFRS operating profit 1,162m (H1 2011: 1,028m) EEV operating profit 2,109m (H1 2011: 2,147m) Cash and Capital Net remittances from business units 726m (H1 2011: 690m) IGD surplus of 4.2bn, coverage of 2.7 times Interim dividend up 5.7% at 8.40 pence per share EEV shareholders funds of 20.6bn, 8.06 per share (FY 2011: 19.6bn) 4

5 Group KPIs A long-term track record of growth across our key metrics Overview Business update New business profit 1, m IFRS operating profit 2, m CAGR +19% 892 1,069 1, CAGR +17% ,028 1,162 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 Net cash remittances, m CAGR +21% HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY Excludes Japan and Taiwan agency. 2 Comparatives adjusted for accounting policy improvements for deferred acquisition costs. 5

6 Macroeconomic environment Managing through a challenging context Overview Business update Low interest rates & flat yield curve Maintaining high IRR and payback period hurdles Managing the risks within the in-force book Diversifying the earnings sources (insurance income) Weak economic growth Putting Asia at the heart of our strategy Benefitting from a strong Baby boomer demographic shift Strong inflows in Asset Management Regulatory challenge Proactive engagement on Solvency 2 with all stakeholders Maintaining a robust capital position in light of the uncertainty 6

7 Returns on capital invested Continuing disciplined capital allocation Overview Business update New business strain 1,2, m New business profit 2, m +103% 892 1, , UK US Asia +7% UK US Asia HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2008 HY 2009 HY 2010 HY 2011 HY Free surplus invested in new business. 2 Excludes Japan and Taiwan agency. 7

8 2013 Growth and Cash objectives Growth On track to Double Asia Overview Business update CAGR +19% Doubling Asia Life and Asset Management IFRS operating profit 1,2, m H2 H Objective +20% CAGR +19% Doubling Asia value of new business 1, m H2 H , , Objective +18% 1 The objectives assume current exchange rates and normalised economic environment consistent with the economic assumptions made by Prudential in calculating the EEV basis supplementary information for the half year ended 30 June 2010, is based on the current solvency regime and dose not pre judge the outcome of Solvency II, which remains uncertain. 2 Total Asia operating profit from long-term business and Eastspring Investments after development costs. The comparatives represents results as reported in respective periods and excludes adjustment for altered US GAAP requirements for deferred acquisition costs. 8

9 2013 Growth and Cash objectives Cash On track to deliver 2013 objectives Overview Business update 2013 Cash objectives, m m Objective 1 HY 2012 Asia Net Remittance Cash Jackson Net Remittance UK Net Remittance Group Net Remittance (cumulative) - 3,800 2, The 2013 objectives assume current exchange rates and normalised economic environment consistent with the economic assumptions made by Prudential in calculating the EEV basis supplementary information for the half year ended 30 June 2010, is based on the current solvency regime and dose not pre judge the outcome of Solvency II, which remains uncertain. 2 Jackson net remittance objective increased from 200m to 260m contingent on completion of REALIC acquisition. 3 The net remittances from UK include 150m in 2009 arising from the pro-active financing techniques used to bring forward cash emergence of the in-force book during the financial crisis. 9

10 Strategy Continuing to execute the Group strategy Overview Business update Asia Driving growth in agency and bancassurance Greenfield entry into Cambodia ASIA Accelerate US Build on Strength US Maintaining pricing, reserving and hedging conservatism Financially attractive bolt-on acquisition of REALIC ASSET MANAGEMENT Optimise UK Focus UK Focussing on areas of competitive advantage Completed financially attractive bulk annuity Asset Management M&G achieved #1 position in UK retail 1 Investing in Eastspring to build out offshore business 1 Measured by funds under management as at June Source: Investment Management Association. 10

11 Asia Growing across ALL our key metrics Overview Business update New business profit 1, m Life IFRS operating profit 2, m x x HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 Net remittances, m 7.9x HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY Excludes Taiwan agency excludes Taiwan. 2 Net of development costs 11

12 Asia Delivering our strategy Overview Business update Building out broad-based distribution Investing in our brand across the region Managing our product suite Maintaining financial and capital discipline Nurturing Government and regulatory relationships 12

13 Asia Key initiatives across our agency channel Overview Business update Indonesia Expansion outside Jakarta: non-jakarta now 50% Recruitment seminars: 30 cities, 30 times / month Expanded 10 e-learning facilities in cities ex- Jakarta Leading agency salesforce: over 40% market share Singapore Launched STAR programme to drive higher conversion and activation rates Targeting HNWs: Launch of PRUvantage portfolio Launched Yes You Can initiative to drive productivity of lower tier financial advisors APE productivity per agent best in the industry 1 Hong Kong PRUmyhealth campaign to drive critical illness sales Launched Elite recruitment campaign Reactivation focus: special workshops for nonactive managers and producers Agency H&P mix over 30% Malaysia Developing new locations across the country with a focus on Bumi Campus recruitment programs Faculty of Takaful Business to train and develop agency force 58% of new recruits are Bumi 42% of total agents are Bumi; Largest in the market Market leader in takaful sales 1 Source: Life Insurance Association of Singapore 13

14 Asia Continued progress in bancassurance Overview Business update Bancassurance partners Deep penetration through over 14,500 branches Multiple partners, accessing all socioeconomic classes (77 partners in total) Leveraging best practices across partnerships SCB: 42% growth. Philippines and Takaful launched. UOB: >100% growth. 14

15 Asia Delivering new business profit Overview Business update New business profit HY , m New business profit HY , m UK 122 UK 152 Asia 286 Asia 547 Indonesia 50 Indonesia Excludes Japan and Taiwan agency 15

16 Asia Delivering IFRS operating profit Overview Business update Life IFRS operating profit HY , m Life IFRS operating profit HY , m UK 303 UK 336 Asia 207 Asia 406 Indonesia 42 Indonesia Net of development costs 16

17 Asia Delivering cash Overview Business update Cash remittances HY 2009, m Cash remittances HY 2012, m UK 268 UK 230 Asia 21 Asia

18 Asia Long term opportunity Overview Business update Evolution of US GDP per capita, 1990 US$ 1 35,000 30,000 US GDP per capita 25,000 20,000 15,000 10,000 5, Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Prudential estimates 18

19 Asia Long term opportunity Overview Business update Evolution of China GDP per capita , against the US GDP per capita,1990 US$ 1 35,000 30,000 US GDP per capita 25,000 20,000 15,000 10,000 China ,000 China 1980 China 1990 China Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Prudential estimates 19

20 Asia Long term opportunity Overview Business update Evolution of Indonesia GDP per capita , against the US GDP per capita,1990 US$ 1 35,000 30,000 US GDP per capita 25,000 20,000 15,000 10,000 5,000 IDN 1980 IDN 1990 IDN 2000 IDN Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Prudential estimates 20

21 Asia Long term opportunity Overview Business update Evolution of Malaysia GDP per capita , against the US GDP per capita,1990 US$ 1 35,000 30,000 US GDP per capita 25,000 20,000 15,000 Malaysia ,000 5,000 Malaysia 1980 Malaysia 1990 Malaysia Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Prudential estimates 21

22 Asia Long term opportunity Overview Business update Evolution of Singapore GDP per capita , against the US GDP per capita,1990 US$ 1 35,000 30,000 Singapore 2010 US GDP per capita 25,000 Singapore ,000 15,000 10,000 Singapore 1980 Singapore , Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Prudential estimates 22

23 Asia Long term opportunity Overview Business update GDP per capita in 2010, against the US GDP per capita,1990 US$ 1 35,000 30,000 Hong Kong Singapore US GDP per capita 25,000 20,000 Taiwan Korea 15,000 Malaysia 10,000 5,000 Vietnam Philippines India Indonesia Thailand China Geary-Khamis dollar, based on purchasing power parities with 1990 as benchmark year - one 1990 dollar has the same purchasing power as the US dollar in Source: Maddison project, Prudential estimates. 23

24 Jackson Value over volume approach in managing VAs Overview Business update Variable Annuities NBP, m Variable Annuities sales, APE m HY 2009 HY 2010 HY 2011 HY 2012 HY 2009 HY 2010 HY 2011 HY

25 Jackson Delivering on our 2013 Cash objectives Overview Business update Net remittances, m HY

26 Jackson Bolt-on acquisition of REALIC Overview Business update Transaction IRR of over 20% and short payback period Financially attractive Immediate accretion to IFRS earnings per share Immediate uplift to EEV per share Scope for additional synergies as REALIC is transitioned to Jackson platform Strategically enhancing Addition of 1.5 million life policies and $10bn of assets Diversifies the earnings sources (Insurance income) Increases 2013 Cash objective Jackson s 2013 dividend objective increased from 200m to 260m 26

27 UK Delivering on our 2013 Cash objectives Overview Business update Selective participation 1 New business profit, m Robust balance sheet strength Inherited estate, bn HY 2009 (44) HY 2010 (35) 134 HY 2011 (25) 123 HY 2012 (20) HY 2012 New business strain New business profit 1 Retail business only 27

28 Asset Management M&G achieved #1 position in UK retail Overview Business update UK retail FUM 1, bn IFRS operating profit 2, m HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY % 58% 63% 60% 55% 53% xx% Cost / income ratio 1 As at end-of-june Source: Investment Management Association 2 Excludes Prudential Capital 28

29 Dividend Resilient and growing dividend Overview Business update Dividend, pence per share % Total dividend % % % Final dividend Interim dividend +5.7% HY

30 Prudential plc 2012 half year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook and Q&A Tidjane Thiam 30

31 Delivering Growth and Cash HY 2012 builds on recent strong performance Overview Growth & Profitability Cash & Capital m HY 12 HY 11 HY 12 vs. HY 11 New business profit 1,141 1,069 +7% Growth IFRS operating profit 1 1,162 1, % EEV operating profit 2,109 2,147-2% EEV per share (pence) % Net remittance % Cash Free surplus generation 1,039 1,093-5% Dividend per share (pence) % 1 HY 2011 adjusted for the retrospective application of the new DAC policy. 31

32 Growth in value and volume Balancing value creation and capital consumption Overview Growth & Profitability Cash & Capital NBP, m NBP margin, % Group Life +7% 1,069 1,141 59% 56% IRR: >20% Asia Life % % 61% Payback: 4 years IRR: >20% US Life % 68% 61% Payback: 2 years IRR: >20% Payback 1 : 3 years UK Life Wholesale Retail +4% % 37% IRR: >20% HY 11 HY 12 1 Shareholder-backed business Payback: Expected period over which future undiscounted free surplus generation recoups initial new business investment. 32

33 New business profit Strong underlying progress Overview Growth & Profitability Cash & Capital New business profit, m New business margin, % HY 11 1,069 HY 11 59% Economic Effect (116) Economic Effect (6%) Mix/Pricing 57 Mix/Pricing 3% Volume 131 HY 12 1,141 HY 12 56% 33

34 Profitability IFRS IFRS profits up 13% Overview Growth & Profitability Cash & Capital IFRS operating profit 1, m % 1,184 Life Group HY 2011 HY , % 1,162 HY 2011 HY HY 2011 adjusted for the retrospective application of the new DAC policy. 34

35 Profitability IFRS Diversified Life earnings Asia up 26% Overview Growth & Profitability Cash & Capital Life operating profit by region, m +19% 1,184 US operating profit, m Operating profits +1% UK % 703 Gross profits 442 US % Accelerated DAC (66) (175) 25 (204) Decelerated DAC Core DAC Asia % 406 (80) (82) NBS HY 2011 HY 2012 HY 2011 HY Net of Asia development expenses (HY 11: (2)m, HY 12: (3)m). 35

36 Profitability IFRS Diversified and resilient Life earnings Overview Growth & Profitability Cash & Capital IFRS operating income 1, m Growth % HY 12 vs. HY 11 1,603 8% 11% 33% 1,759 7% 9% 31% (1)% (4)% +1% 26% 29% +20% 22% 24% +22% HY 2011 HY 2012 Insurance margin With-profits Fee income Expected return on shareholder assets Spread income 1 Excludes margin on revenues, acquisition and administration expenses and DAC amortisation. 36

37 IFRS operating profit source of earnings Life insurance - Asia Overview Growth & Profitability Cash & Capital Total operating profit 1 HY 12 HY 11 +/- m except reserves bn % = Total Life income 1, % Admin Expenses - - (250) (242) (3%) Acquisition Costs (428) (349) (23%) +/- DAC adjustments 33 (13) nm Spread income Fee income Technical and other margin With-profits % (1%) % % Spread (bps) Average reserves (8) 25% AMF (bps) Average reserves (5%) Margin on revenues Insurance margin % 14% Expected returns % Increase reflects growth of Asian reserves Continued growth in inforce book and higher H&P sales 1 HY 2011 adjusted for the retrospective application of the new DAC policy. 37

38 IFRS operating profit source of earnings Life insurance - US Overview Growth & Profitability Cash & Capital Total operating profit 1 HY 12 HY 11 +/- m except reserves bn % = Spread (bps) Average reserves Total Life income % Spread income (4%) (24) 5% - Total Life expenses (722) (680) (6%) Fee income % AMF (bps) Average reserves % Technical and other margin % Expected returns (31)% Expense deferrals (2%) DAC amortisation (179) (241) 26% - Decline due to spread compression Increase reflects growth in separate account balances and repricing benefits 1 HY 2011 adjusted for the retrospective application of the new DAC policy. 38

39 IFRS operating profit source of earnings Life insurance - UK Overview Growth & Profitability Cash & Capital Total operating profit HY 12 HY 11 +/- m except reserves bn % = Total Life income % - Total Life expenses (127) (126) (1%) +/- DAC adjustments (4) (1) nm Spread income Fee income Technical and other margin Expected returns % % (7%) % Spread (bps) Average reserves (4) 12% AMF (bps) Average reserves (3%) Margin on revenues Insurance margin (13%) 57% With-profits (5%) Increase driven by growth in annuity book Decrease due to reduction in policyholder bonuses 39

40 Profitability IFRS IFRS profits up 13% Overview Growth & Profitability Cash & Capital IFRS operating profit 1, m % 1,184 Life Group HY 2011 HY 2012 HY 11 HY 12 1, % 1,162 Asset Management and Other businesses 280-5% 267 HY 2011 HY 2012 M&G PruCap Eastspring US AM UK GI HY 2011 HY HY 2011 adjusted for the retrospective application of the new DAC policy. 40

41 IFRS operating profit source of earnings Asset management Overview Growth & Profitability Cash & Capital Asset management operating profit 1 HY 12 HY 11 +/- m except reserves bn (3%) M&G operating profit Eastspring Investments % (21%) Underlying income Other income 2 Total expenses Total income 2 Total expenses % 7 25 (72%) (186) (183) (2%) (4%) (63) (58) (9%) Average fees (bps) Cost / income ratio 3 Average fees (bps) (1) Cost / income ratio 3 Average assets ( bn) % 53% 55% (2)ppt Average assets ( bn) % 59% 7ppt 1 Excludes PruCap and US asset management business. 2 Includes performance-related fees and M&G s share of operating profit from PPMSA. 3 Cost/income ratio excludes performance-related fees, carried interest and profit from associate. 41

42 Profitability IFRS IFRS profits up 13% Overview Growth & Profitability Cash & Capital IFRS operating profit 1, m % 1,184 Life Group HY 2011 HY 2012 HY 11 HY 12 1, % 1,162 Asset Management and Other businesses 280-5% 267 HY 2011 HY 2012 M&G PruCap Eastspring US AM UK GI HY 2011 HY 2012 Other income and expenses / restructuring HY 2011 HY 2012 (246) -17% (289) HY 11 HY 12 Net Interest (140) (140) Corporate/ (118) (120) RHO Solvency II (27) (27) costs Other/ (3) (2) Restructuring RPI/CPI change 42-1 HY 2011 adjusted for the retrospective application of the new DAC policy. 42

43 Profitability EEV Return on Embedded Value of 16% Overview Growth & Profitability Cash & Capital In-force 1, m HY 11 HY 12 Life business, m 2,140 +1% 2,164 Variances /Other 1,071-4% 1, Experience variance Assumption changes Dev costs (2) (3) UK 537-9% 490 Unwind US 831-3% 805 HY 2011 HY 2012 Asia 1,2 +13% HY 2011 HY 2012 New business profit 2, m 1,141 1,069 +7% HY 2011 HY Net of Asia development expenses (HY 11: (2)m, HY 12: (3)m). 2 Excluding Japan. 43

44 Equity shareholders funds Resilient and growing Overview Growth & Profitability Cash & Capital IFRS Equity 1 EEV Equity bn EPS (p) bn EPS (p) After-tax operating profit Investment variance (0.1) (4) Profit for the period Unrealised gain on AFS Foreign exchange and other (0.1) (1) (0.1) (5) Dividend (0.4) (17) (0.4) (17) Retained earnings Opening shareholders equity Closing shareholders equity Increase in shareholder equity 4 +13% +7% 1 HY 2011 adjusted for the retrospective application of the new DAC policy. 2 Includes non-operating profit. 3 For IFRS relates to JNL fixed income portfolio accounted as available for sale. For EEV, represents mark to market movements on JNL assets backing surplus and required capital. 4 Adjusted for 2011 final dividend paid in the period. 44

45 Equity shareholders funds Resilient and growing Overview Growth & Profitability Cash & Capital EEV (per share) 1, pence CAGR +16% CAGR +38% +8% % HY 12 Dividends Total 2 In-Force Required Capital Free Surplus Cumulative Dividends 2 1 Including goodwill attributable to shareholders. 2 Total dividends paid since 1 January 2009 of 63p, less deduction for scrip. 45

46 Cash and capital generation Free surplus stock Overview Growth & Profitability Cash & Capital Evolution of free surplus, m x% Free surplus cover 199% 4,175 (364) US 591 (129) 2 (156) 195% 3,421 3,449 M&G 229 UK % 1,403 M&G 150 UK 291 Asia 371 (726) Reinvestment Rate = 26% M&G 348 UK 515 US 1,333 Underlying free surplus 1,039m US 1,326 Asia 1,278 Asia 1,260 Free surplus Jan Underlying in-force surplus generated Investment in new business Other movements and timing differences Market related items Free surplus before Group actions Net cash remitted to Group Free surplus 30 Jun Asia and US include asset management and UK includes GI commission. 2 Includes gain of 42m as a result of the divestment of M&G s holding in PPMSA. 46

47 Cash and capital generation Net remittances: 73% of Group objectives achieved Overview Growth & Profitability Cash & Capital Group objectives , bn HY 09 m HY 10 m HY 11 m HY 12 m UK with-profit bn Remittance ratio >55% UK shareholderbacked (16) bn US Asia M&G bn 73% 2.8bn 73% Net remittances to group Cumulative underlying free surplus Cumulative net remittances 1 Includes Prudential Capital. 2 In 2011 M&G remitted its full year dividend in the second half of the year. 47

48 Balance sheet Defensive positioning maintained Overview Growth & Profitability Cash & Capital Maintained capital strength IGD surplus 4.2bn equivalent to a cover of c270% With-profits estate 6.1bn Credit position improved UK: 2.1bn default provision maintained Unrealised gains on US debt securities of 2.5bn (FY 2011: 2.1bn). US impairments of 25m in HY 2012 Strong liquidity position 1.2bn of central cash resources and 2.1bn of untapped liquidity facilities Next call date Dec 2014 for $750m T1 perpetual bond Continued balance sheet conservatism Variable annuity hedging remains robust Minimal direct shareholder exposure to PIIGS sovereign and bank debt 48

49 Jackson Capital, hedging and policyholder behaviour Overview Growth & Profitability Cash & Capital Impact of market movements offset by hedging program Total adjusted Capital US$bn 31 Dec Operating profit 0.5 Dividend (0.4) Reserves/Hedging - Other Jun Total adjusted capital excludes gains on interest rate swaps: $649m at Jun 2012 (Dec 2011: $474m) Earned guarantee fees of 120 bps per annum (c$400m in HY 2012). Guarantee fees continue to be sufficient to cover cost of hedging Annual policyholder behaviour experience review in Q2 confirmed prudence of our assumptions Equities allocations remain below our 82% pricing assumption: New business: 54% equities (versus 62% in HY 11) In-force book: 63% equities (at end HY 12) Only 17% of book in the money from issued levels at end H1 49

50 Balance sheet Total PIIGS sovereign and bank debt of only 344m Overview Growth & Profitability Cash & Capital Breakdown of the shareholder debt securities portfolio, % Shareholder invested assets PIIGS countries as at 30 June 2012, m PIIGS sovereign & bank debt Sovereign Bank debt <1% Institution Senior Tier I Tier II Covered Total Portugal - Banco Comercial Portugues Espirito Santo Financial Group Total 60.3bn Ireland - Bank of Ireland Italy 44 Intesa SanPaolo Unicredit Greece Spain 1 Banco Santander Total Total PIIGS sovereign & bank debt = 344m 50

51 Prudential plc 2012 half year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook and Q&A Tidjane Thiam 51

52 Outlook

53 Q&A

54

55 Appendix

56 Dividend Interim dividend increased by 5.7% Dividend, pence per share Total dividend Final dividend Interim dividend increased by 5.7 per cent to 8.40 pence per share Ex-dividend date: 22 August 2012 Interim dividend +5.7% Record date: 24 August 2012 Payment of dividend: 27 September

57 Net cash remittances Group Business unit net remittances, m % M&G (incl PruCap) US UK 126 Asia HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY

58 Net cash remittances UK and other Business unit net remittances, m Non UK-Life CAGR +40% HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY 2012 UK Life Other 58

59 New business growth Group life APE Life APE 1, m +11% H1 10: 1,655m H2 10: 1,830m H1 11: 1,824m H2 11: 1,857m H1 12: 2,030m , ,066 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q Excluding Japan. 59

60 New business growth Group life new business profit Life new business profit 1, m +7% H1 10: 892m H2 10: 1,136m H1 11: 1,069m H2 11: 1,082m H1 12: 1,141m Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q Excluding Japan. 60

61 New business growth Group life returns on new business investment Post-tax new business profit per of new business strain 1 1 Free surplus invested in new business; excludes Japan. 61

62 Asia Life APE by quarter Asia APE 1 trend by quarter, m HY ,174 1,209 1,501 1, Excludes Japan and Taiwan agency; prepared on an AER basis. 62

63 Asia Life APE by market +30% Asia APE by market, m +17% +37% +8% +49% +13% -18% -6% -5% +50% +73% Indonesia Hong Kong Singapore Malaysia 1 Taiwan India 26% 2 Korea China 50% 3 Vietnam Philippines Thailand 1 st 4 th 1 st 1 st 11 th 1 st 19 th 3 rd 1 st 1 st 11 th Ranking HY 2011 HY Includes Takaful 2 Ranking amongst foreign JVs; market share amongst all insurers. 3 Ranking amongst foreign JVs, market share amongst all foreign and JVs. Source: Based on formal (Competitors results release, local regulators and insurance associations) and informal (industry exchange) market share data. Ranking based on new business (APE or weighted FYP depending on the availability of data) 63

64 Asia Life APE sales by product - % Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Linked Health Par Other 64

65 Asia Life New business margins New business margin by country as % of APE Analysis of movement in Asia New business profit margin, % HY 2011 HY % China 40% 41% Hong Kong 72% 57% -2.4% +0.9% -0.2% 60.9% India 21% 19% Indonesia 76% 87% Korea 41% 43% Taiwan 26% 19% Others 73% 70% Total 63% 61% HY 2011 Economic Assumptions Product/ Channel/ Country Mix Other HY

66 Asia Life Net inflows and persistency Asia Life inflows 1, bn Asia Life inflows (ex-india) 1, bn % 6.2% 6.4% 5.1% 4.4% 5.2% 5.5% 6.0% 4.8% 4.5% 4.8% 2.2% H1 09 H2 09 H1 10 H2 10 H1 11 H2 11 H1 12 H1 10 H2 10 H1 11 H2 11 H1 12 Surrenders/withdrawals as % of opening liabilities 1 Defined as movements in shareholder-backed policyholder liabilities arising from premiums (after deducting insurance & other margins. 66

67 Asia Life APE and NBP margin APE HY 2012, m New business profit HY 2012, m APE growth, HY 2012 vs. HY 2011 NBP margin, % of APE +24% +17% -6% +13% 72% 27% 41% 19% SE Asia & HK Korea & Taiwan China India SE Asia & HK Korea & Taiwan China India 67

68 US retail sales and deposits HY 2012 Retail sales and deposits, $m HY 2011 = $11,988m HY 2012 = $12,278m $371 $493 $24 $1,396 $17 $1,333 $671 $218 $794 $9,526 $9,423 Fixed Annuities Variable Annuities Elite Access Index Annuities Life insurance Curian 68

69 US Life Variable annuities volumes VA volumes by quarter, sales US$m 42% 43% 81% 72% 69% YTD 66% 4,974 5,258 Features War 4,176 4,553 4,212 4,383 3,686 3,658 3,756 2,909 3,335 3,134 2,052 2,368 2,370 2,324 1,780 1,769 1,505 1,412 1,508 2,250 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q th 11 th 12 th 12 th 12 th 12 th 12 th 12 th 8 th 5 th 4 th 4 th 4 th 4 th 3 rd 3 rd 3 rd 3 rd 3 rd 3 rd 3 rd 3 rd 1 Ranking FY New business margin Elite Access $218m 1 Estimated. 69

70 US Life New business margin New business margin % APE 71% 73% 66% 45% 31% 25% 20% 37% 34% Variable Annuities Fixed Annuities Fixed-Index Annuities HY 2010 HY 2011 HY

71 US Life Variable annuity distribution Variable annuity sales by distribution channel, US$bn HY 2012 includes $0.2bn of Elite Access sales % 9.6 IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 71

72 US IFRS profit DAC impact on results Impact on results of DAC amortisation, m 2011 HY 2011 HY 2012 Gross profits 1 1, New business strain 2 (156) (80) (82) DAC Amortisation - Core (316) (175) (204) - (acceleration) / deceleration (190) (66) 25 Operating result Core as % of Gross profits 24% 26% 29% 1 Gross profits equals IFRS operating profit pre acquisition costs and pre DAC. 2 Represents acquisition costs no longer deferrable following the adoption of altered US GAAP principles for deferred acquisition costs. 72

73 US Life Policyholder behaviour Optional benefits elected, % of initial benefits elected (New business) No benefit GMWB (for life) 73

74 US Life Asset growth Growth in statutory admitted assets, US$bn HY 2012 General account Separate account 74

75 Life IFRS operating profit Source of earnings Spread income Fee income Technical and other margin With-profits The net investment return we make primarily on annuity and other spread based business The fees net of investment expenses charged on our linked and separate account business for managing the assets Profits derived from the insurance risks of mortality, morbidity and persistency Our share of bonus declared by the withprofits fund in the period Expected return on shareholder assets Acquisition costs Administration expense DAC and other adjustment The operating return we make on shareholder net assets Acquisition costs incurred on shareholder-backed new business including commission Expenses and renewal commissions incurred by the shareholder in managing the in-force book Costs deferred at inception net of costs amortised during life of contract and one off items 75

76 Life IFRS operating profit Source of earnings LIFE INCOME Spread income Fee income Expected return on shareholder assets Technical and other margin With-profits - +/- LIFE EXPENSES Acquisition costs Administration expenses DAC adjustments Other adjustments = LIFE OPERATING PROFIT 76

77 Life IFRS operating profit Source of earnings Group (1/3) LIFE INCOME Total Life income 2,463 2,241 10% Source HY 2012 HY /- m - +/- LIFE EXPENSES Total Life expenses (1,527) (1,397) (9)% DAC adjustments % = Total Life operating profit 1, % 1 HY 2011 restated for DAC accounting adjustments. 77

78 Life IFRS operating profit Source of earnings Group (2/3) Source HY 2012 HY /- m Total Life income 2,463 2,241 10% Total Life expenses - +/- (1,527) (1,397) (9)% DAC adjustments % Spread income Fee income Technical and other margin With-profits % % 1, % (4)% Spread (bps) (16) AMF (bps) Margin on revenues % Bonus (bps) (2) Average reserves ( bn) % Average reserves ( bn) % Insurance margin % Average reserves ( bn) % Expected returns (1)% 1 HY 2011 restated for DAC accounting adjustments. 78

79 Life IFRS operating profit Source of earnings Group (3/3) Source HY 2012 HY /- m Total Life expenses (1,527) (1,397) (9)% Acquisition costs 1 Administration expenses 1 (972) (900) (8)% (555) (497) (12)% APE 2 2,030 1,824 11% Admin expense ratio (bps) Acquisition cost ratio 48% 49% (1) ppt Average reserves ( bn) % 1 Relate to shareholder-backed business only. HY 2011 restated for DAC accounting adjustments. 79

80 Life IFRS operating income Asia Sources of income Asia IFRS operating income 1, m 366 3% 5% 13% 18% 415 5% 4% 13% 16% Growth % HY 2012 vs. HY % +6% +20% (1)% 61% 62% +14% HY 2011 HY 2012 Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Excludes margin on revenues, acquisition and administration expenses and DAC adjustments. 80

81 Life IFRS operating income US Sources of income US IFRS operating income 1, m 856 6% 945 4% Growth % HY 2012 vs. HY 2011 (31)% 43% 37% (4)% 38% 43% +25% 13% 16% +35% HY 2011 HY 2012 Insurance margin Fee income Expected return on shareholder assets Spread income 1 Excludes margin on revenues, acquisition and administration expenses and DAC amortisation. 81

82 Life IFRS operating income UK Sources of income UK IFRS operating income 1, m Growth % HY 2012 vs. HY % % +9% 40% 37% (5)% 32% 33% +8% 8% 2% 9% 3% HY 2011 HY % +57% Insurance margin Fee income Spread income With-profits Expected return on shareholder assets 1 Excludes margin on revenues, acquisition and administration expenses and DAC amortisation. 82

83 Policyholder liabilities Shareholder backed business Group Policyholder liabilities 1 roll-forward, bn (0.5) (0.8) Net inflows 2 5.2bn 4% of CER opening reserves of which: unit linked & separate account 3.8bn; other reserves 1.4bn Liabilities 1 Jan 2012 Foreign exchange CER opening liabilities Asia net inflows US net inflows UK net inflows Investment related and other Liabilities 30 Jun Shareholder-backed business. 2 Defined as movements in shareholder-backed policyholder liabilities arising from premiums, surrenders, maturities and deaths. 83

84 Policyholder liabilities Shareholder backed business Asia Policyholder liabilities roll-forward, m 1, ,424 18,269 (233) 18,036 (1,047) Net inflows 1 891m 5% of CER opening policyholder liabilities Liabilities 1 Jan 2012 Foreign Exchange CER opening liabilities Premiums Maturities, deaths and surrenders Investment related and other Liabilities 30 Jun Defined as movements in shareholder-backed policyholder liabilities arising from premiums, surrenders, maturities and deaths. 84

85 Policyholder liabilities Shareholder backed business US Policyholder liabilities roll-forward, m 7,303 1,906 75,264 69,189 (600) 68,589 (2,534) Net inflows 1 4,769m 7.0% of CER opening reserves Liabilities 1 Jan 2012 Foreign Exchange CER Opening liabilities Premiums Maturities, deaths and surrenders Investment related and other Liabilities 30 Jun Defined as movements in shareholder-backed policyholder liabilities arising from premiums, surrenders, maturities and deaths. 85

86 Policyholder liabilities Shareholder backed business UK Policyholder liabilities roll-forward 1, m 46,048 2,018 1,507 47,096 (2,477) Net inflows 1 (459)m -1% of opening reserves Liabilities 1 Jan 2012 Shareholders Premiums Shareholders maturities, deaths and surrenders Investment related and other Liabilities 30 Jun Defined as movements in shareholder-backed policyholder liabilities arising from premiums, surrenders, maturities and deaths. 86

87 Asset management Group 3 rd party net-inflows Asset Management movement in 3 rd party FUM 1, m 4, ,351 (2,147) 110, ,984 Opening 3rd party FUM M&G net flows Asia 1 Sub-Total Investment markets/other Closing 3rd party FUM 1 Excludes Asia MMF and PPMSA. 87

88 Asset Management M&G net retail sales Average monthly gross and net retail sales, m 2,000 1,800 1,600 1,400 1,200 1, HY 2012 Gross sales Net sales 88

89 IFRS shareholders funds HY 2012 movement Analysis of movement in IFRS shareholders funds, m +14% 8,564 1,162 (32) (307) 196 (54) 74 9,732 (440) 9,292 Shareholders funds 1 Jan Operating profit Short term fluctuations in Inv returns Actuarial loss / gain on DB pension schemes Gain on dilution of Group Holdings Tax and minority interests Net movement US unrealised value change FX impact (net of tax) Other Sub-total Dividend 336p +45p -1p +3p +2p -12p +8p =381p -17p Pence per share Note: No. of shares in issue 31 Dec 2011: 2,548m, 30 Jun 2012: 2,556m; movement in pence per share has been applied on a pro-rata basis. Shareholders funds 30 Jun -2p +2p = 364p 89

90 EEV operating profits Life operating variances Group Group Life operating variances, m % of experience variances and assumption changes over opening EEV 1 0.8% 0.1% 1.1% 0.5% (0.4)% 0.6% 1.4% 1.3% Unwind Experience variances and assumption changes 1 Opening EEV of Life operations, excluding goodwill. 90

91 EEV operating profit Life operating variances Asia Asia Life operating variances, m Experience variances and assumption changes as a % of opening EEV1 0.3% (0.6)% 1.9% (0.3)% (2.4)% (1.0)% (0.3)% 0.0% Unwind Experience variances and assumption changes 1 Opening EEV of Life operations, excluding goodwill. 91

92 EEV operating profit In-force performance Asia in-force 1, m (up 5% to 322m) US in-force, m (down 3% to 363m) UK in-force, m (down 14% to 338m) 19 (10) (18) (16) Persistency & withdrawals Mortality / Morbidity and Other items 1 Spread Other items UK Corporation tax change Other items HY 2011 HY Net of Asia development expenses (HY 11: (2)m, HY 12: (3)m). 92

93 EEV shareholders funds Geographic split Geographical split June 2012, bn EEV shareholders funds, bn Total Group EEV = 20.6 ROEV Asia 16% US 22% 10.9 UK 13% M&G % % 21% 24% Central % % 9.3 HY 2006 HY 2007 HY 2008 HY 2009 HY 2010 HY 2011 HY % Asia Rest of the Group 1 ROEV is based on opening shareholders' funds. 2 Including acquired goodwill. 93

94 EEV shareholders funds HY 2012 movement Analysis of movement in EEV shareholders funds, m +7% 19,637 2, (371) (113) (554) (125) 92 21,045 (440) 20,605 Shareholders funds 1 Jan Operating Profit Short term fluctuations in investment returns Economic assumption changes Mark to market own debt Actuarial gain on own DB pension scheme Gain on dilution of Group holdings Note: No. of shares in issue 30 Jun 2012: 2,556m, 31 Dec 2011: 2,548m; movement in pence per share has been applied on a pro-rata basis. Tax and minority interest FX impact (net of tax) Other Dividend Shareholders funds 30 Jun 771p +76p +8p -13p -4p +4p +2p -20p -5p +4p = 823p -17p = 806p Pence per share Sub-total 94

95 IGD capital Base and sensitivities IGD surplus, bn IGD sensitivity analysis 1 152% 283% 305% 275% 270% % fall in equity markets 40% fall in equity markets 10x expected defaults 100bps fall in interest rates (550)m (750)m (650)m With Permitted Practice 2 Without Permitted Practice YE 2009YE 2010YE 2011YE 2012HY Solvency Ratio HY 12 Interest rates 100bps HY 12 Interest rates 100bps 1 All sensitivities measured as at 30 June The 40% fall in equity markets assumes a 20% immediate fall followed by a 20% fall over the next 20-trading days. 2 The current regulatory permitted practice used by Jackson values all interest rate swaps at book value rather than fair value. 95

96 IGD capital Movement during the period IGD capital movement in 2012 ( bn) IGD surplus 31 December 2011 Net capital generation Market movement impact 2011 Dividend payment (final) External financing and other central costs (net of tax) IGD surplus 30 June (0.1) (0.4) (0.2)

97 Invested assets Group overview Breakdown of invested assets HY 2012, bn Total Group PAR Funds Unit- Linked Shareholders Asia Life US Life UK Life Other Total Debt securities Equity Property Investments Commercial mortgage loans Other loans Deposits Other Investments Total

98 Invested assets Group shareholder exposures Sovereign debt Breakdown of the shareholder debt securities portfolio, % SH sovereign exposures by regions & ratings 1, m US UK Europe Asia Other Total AAA - 3, ,930 AA-BBB 2, , ,434 Below BBB Total 60.3bn 15% Sovereign Total 2,365 3, , ,142 Europe by key countries, m Germany PIIGS Other Total Europe Portugal Italy Ireland Greece Spain Total PIIGS Includes Credit Default Swaps. 98

99 Invested assets Group shareholder exposures hybrid bank debt Breakdown of the shareholder debt securities portfolio, % Total 60.3bn 3% Banks Exposure to Tier 1 and Tier 2 hybrid bank debt, m US UK France Germany PIIGS Other Eurozone Other Total Tier Tier ,595 1 Includes Credit Default Swaps. 99

100 Invested assets UK asset quality credit reserve UK shareholder debt securities portfolio by rating 1 Strength of the 2.1bn credit reserve BB or below BBB 22% 2% 26% AAA No defaults of shareholder-backed debt securities Continued sale of financial subordinated debt holdings Total 25.3bn Allowance for credit risk as at 30 June 2012 materially in line with prior year 2 Pillar 1 (IGD) 66 bps (FY 2011: 66 bps) IFRS 43 bps (FY 2011: 42 bps) A 33% 17% AA Pillar 1 and EEV assumptions equivalent to 35% of current spread over swaps (FY 2011: 33%) 2 76% A or above 1 Ratings from different agencies aggregated for presentational purpose. Also includes internal ratings. 2 For Prudential Retirement Income Limited (PRIL). 100

101 Invested assets US asset quality corporate debt portfolio (1/3) US Shareholder Debt Securities Portfolio Market value, bn Other CMBS RMBS Govt HY 27.0bn Corporate Bond Portfolio, % by rating BB and below 5% 3% AAA and AA Corporate Bonds IG 19 BBB 52% Total 20.0bn 40% A 43% A or above 95% Investment Grade, 5% High Yield 101

102 Invested assets US asset quality corporate debt portfolio (2/3) US Shareholder Debt Securities Portfolio Market value, bn Other CMBS RMBS 27.0bn Investment Grade Corporate Bond Portfolio, % by sector Automotive 2% Govt Corporate Bonds HY IG Services Real Estate Telecom Technology & Electronics Media 4% 2% 5% 4% Utility 5% 7% 14% Total 19.0bn Banking Basic Industry 5% 7% Capital Goods 5% 8% 4% 9% Consumer Cyclical Consumer Non-Cyclical Portfolio spread over 572 issuers, with an average holding of 33m Insurance 3% 15% Healthcare GSAs 1% Financial Services Energy 102

103 Invested assets US asset quality corporate debt portfolio (3/3) US Shareholder Debt Securities Portfolio Market value, bn Other CMBS RMBS Govt Corporate Bonds HY IG 27.0bn Telecom Technology & Electronics Services 2% 9% 13% Healthcare Utility High Yield Corporate Bond Portfolio, % by sector 8% Automotive 9% 3% Total 1.0bn 8% 3% 20% 13% Basic Industry 6% 3% 2% Energy Capital Goods Consumer Cyclical Consumer Non-Cyclical Portfolio spread across 129 issuers, with an average holding of 8m Real Estate <1% Media Financial Services 103

104 Invested assets US asset quality RMBS portfolio US Shareholder Debt Securities Portfolio Market value, bn Other CMBS RMBS Govt HY 27.0bn Breakdown of the RMBS portfolio bn Market Value m FV Price 2006/ Pre Corporate Bonds IG 19 Average Fair Value (FV) Price Total Portfolio Agency Guaranteed Su -prime Senior Pre-2005 Senior 2005 Non-Agency RMBS Senior 2006/07 Non -Senior

105 Invested assets US asset quality CMBS portfolio US Shareholder Debt Securities Portfolio Market value, bn Other CMBS RMBS Govt Corporate Bonds HY IG 27.0bn A BBB 45% 8% Total 2.1bn BB and lower = 2% 9% CMBS portfolio, % by rating 36% AA AAA Average credit enhancement of the portfolio is 31% 77% of the portfolio is super senior tranches Virtually all of the vintages are in super-senior tranches 105

106 Invested assets US asset quality commercial mortgage loan portfolio Breakdown by property type, % Hotels High level of diversification Average loan size of 6.6m 11% 27% Industrial Spread across property type Geographic diversification Retail 19% Total 3.6bn Strong underwriting discipline Portfolio performing well in current environment Current average LTV of 66% Problem loan balances at 30 June % 24% Loans with restructured terms 84.1m No loans are 90+ days delinquent Office Multi-Family No write downs during H m reduction of specific reserves 106

107 Cash and capital Underlying free surplus Underlying free surplus generation, m HY 2010 HY 2011 HY ,286 (339) UK (35) M&G 100 US (179) Asia (125) UK 386 (118) x (318) 1,093 1,390 (297) UK (33) M&G 160 US (135) Asia (129) (141) UK x (439) 1,039 1,403 (364) UK (22) M&G 150 US (180) Asia (162) (148) UK x (440) US (261) US US Asia 306 Asia 350 Asia 371 Free surplus from in-force Investment in new business Net corporate cash costs Dividend net of scrip Underlying free surplus generation AIA cash costs x Free surplus cover 1 1 Ratio of Operating underlying free surplus generated by life and asset management businesses net of investment of new business and corporate cash costs to cash dividend paid in the period. 107

108 Cash and capital Free surplus generation Free surplus and dividend, m 2.4x Reinvestment rate 26% Reinvestment rate 21% 297 Reinvestment rate 26% 364 Reinvestment rate 58% Reinvestment rate 37% Reinvestment rate 42% Reinvestment rate 36% , ,390 1,403 1, , HY 06 HY 07 HY 08 HY 09 HY 10 HY 11 Surplus generation Investment in new business Net free surplus Dividend net of scrip HY 12 Central outgoings 108