Delivering Shareholder Value

Transcription

1 Delivering Shareholder Value Adrian O Connor Chief Financial Officer Prudential Corporation Asia 10 December 2013

2 Delivering shareholder value Value - Profits - Cash Life Cycle New business contribution Required capital Conversion to IFRS profit Value creation Investment in new business Value of in-force Accounting differences IFRS profit Free surplus generation Retained in business Surplus cash Cash remitted to group 2

3 Large and growing book of business 4.6bn growth in in-force book in three and a half years Embedded value, m 20% CAGR 10,921 4,980m 5, ,395 7,445 1, ,610 8,510 1, ,583 9, ,518 1,359 1,049 8,513 9,562m HY2013 Value of in-force Required capital Free surplus 3

4 Growth in in-force portfolio New business contribution building in-force portfolio In-force portfolio growth analysis, m 2010 Opening VIF & required capital 4,980 New business contribution 4,000 Change in In-force 1 2,000 Actual transfer to free surplus (2,259) Exchange movement Others HY2013 Closing VIF & required capital 9, Change in in-force comprises + 1.5bn unwind and + 0.4bn from change in economic assumptions. 2. Others comprise repayment of funding contingent on future profits for Hong Kong and acquisition of in-force business from UOB and Thanachart Bank. 4

5 Contribution to new business All markets contributing to growth in shareholder value creation Cumulative new business contribution (2010 HY2013), m , ,066 PCA Indonesia Hong Kong Singapore Malaysia Taiwan India Korea China Vietnam Philippines Thailand 5

6 Rapid capital payback Quality new business enhances future profit and surplus generation Expected transfer to free surplus profile from different new business tranches, m Investment in new business: 1,034m ( HY2013) HY (400) (280) (297) (292) (200) (165) Investment in new business Undiscounted Cumulative 6

7 Portfolio effect underpins our surplus generative characteristics Capital consumption and return profiles vary by product Expected transfer to free surplus (cumulative) per 100 APE, Expected transfer to free surplus by product, m 160 HY2013 Linked protection 100 HY Health & Protection Non-par Linked savings Par Par Non-Par Health & Protection Linked protection Linked savings 7

8 Surplus generation to IFRS profit IFRS profits emerge more quickly than free surplus New business strain (2010 HY2013), m In-force profit (2010 HY2013), m Tax gross-up Investment in new business Tax gross-up In-force free surplus generation (1,174) (140) , (14) (488) 111 2,670 (1,034) 152 (190) 2,509 Investment in new business + Change in required capital + Deferred acquisition costs + Asset/liability valuation differences = IFRS new business strain 1 In-force free surplus generation + Change in required capital + Deferred acquisition costs + Asset/liability valuation differences = IFRS in-force operating profit 1 1. Both IFRS new business strain and in-force operating profit exclude non-recurrent items. 8

9 Strong growth in IFRS profits Increasing contribution from other markets Long-term business IFRS operating profit by markets 1, m China 59% India 61% % % CAGR ( ) 2 Others: 41% Hong Kong: 22% Malaysia: 22% Singapore: 23% Indonesia: 37% Korea 39% Philippines 96% Vietnam -6% Thailand ( 1m) + 7m Taiwan ( 7m) + 18m HY IFRS results for 2012 and HY13 have been prepared under new joint venture accounting standards and exclude Japan life operating profit and 2010 comparatives have not been adjusted for the change of DAC policy in Others also include non-recurrent items and development costs. 9

10 Resilient IFRS earnings Insurance margin contributes two third of profits Long-term business IFRS operating profit by source of earnings 1,2, m % 12% 17% 66% 635 5% 14% 19% 62% 760 5% 15% 17% 63% 4% 15% 16% 65% 489 4% 17% 16% 62% With profits Spread income/return on Shareholder assets Fee income Insurance margin HY IFRS results for 2012 and HY13 have been prepared under new joint venture accounting standards and exclude Japan life operating profit source of earnings also excludes 51m gain from disposal of China Life (Taiwan). 2. Excludes margin on revenue, acquisition and administration expenses and DAC amortisation. 10

11 Free surplus generation Actual transfers higher than expectation In-force free surplus generation - 2,718m Actual transfer to free surplus - 2,259m Opening free surplus stock m + Expected transfer to free surplus 2,005m + Op. variances & changes in assumptions 254m + Return on free surplus 250m +/- Marketrelated movements (100)m = Closing Free free surplus surplus stock stock available for use 3,580m + Eastspring Investments 209m 11

12 Utilisation of free surplus stock 1.6bn of surplus capital in excess of target at HY 2013 Free surplus utilisation 264% 1 250% 1 In-force free surplus Investment in new business generation Opening free surplus stock 2,718 m + = Closing Free surplus free surplus stock available stock for use (1,034)m - + = Closing free surplus stock m Marketrelated movements 3,580m Cash remitted to group HY2013 1,576m (100)m (970)m 1. Free surplus coverage ratio is defined as net worth divided by required capital. 12

13 Delivering shareholder value Value - Profits - Cash Life Cycle New business contribution Required capital Conversion to IFRS profit Value creation Investment in new business Value of in-force Accounting differences IFRS profit Free surplus generation Retained in business Surplus cash Cash remitted to group 13

14 Key messages In-force book has 10bn of future cash flow expectation Quality new business is key in adding to that expectation Managing persistency, claim and expenses has and continues to turn expectation into reality Resulting in delivery of resilient and growing IFRS and free surplus 14

15 Appendix 15

16 Operating experience Small operating experience variances and basis changes relative to opening EEV Operating Experience Variances and Basis Changes relative to Embedded Value, m Opening Embedded Value 7,445 8,510 9,462 Experience variances and basis changes (2008-HY2013: 241m) 5,264 5,781 Experience variances and basis changes as % of opening EEV 3, (24) (97) HY % (1.8)% (0.4)% 1.0% 1.1% 0.2% Average: 0.6% as % of opening EEV experience variances and basis changes exclude Taiwan agency business (sold in Q1 2009). 16

17 Non-operating experience Impact of short term fluctuations has been relatively small, even in volatile market conditions MSCI Asia Opening Embedded Value Short term fluctuations in investment returns and effect of changes in economic assumptions relative to embedded value, m Short term fluctuations in investment returns and effect of changes in economic assumptions (2008 H1 2013: 134m) Short term fluctuations in investment returns and effect of changes in economic assumptions as % of opening EEV 3,726 5,264 5,781 (746) ,445 (20.0)% 5.0% 3.7% 1.7% 2.7% 0.5% Average: 0.3% as % of opening EEV 8, , HY short term fluctuations in investment returns and effect of changes in economic assumptions exclude Taiwan agency business (sold in Q1 2009). 17

18 Renewal premiums Robust momentum in renewal premiums, reflecting policyholders continued belief in the preservation of their insurance contracts with Prudential Renewal premiums, m 3,803 4,359 4,955 4,955 2,283 2,805 2,331 2, HY 2012 HY Exclude Taiwan agency business (sold in Q1 2009) and Japan Life (ceased writing new business in Q1 2010). 18

19 Delivering growth and cash New business profit 1, m EEV operating profit 1,2, m ,076 1, ,105 1,450 1,764 1,960 1, m2012 9m HY2012 HY Results for 9m 2013, 9m 2012, HY13 and HY12 exclude Japan Life. 2. Long-term business operating profit before tax and development costs. 19

20 Delivering growth and cash IFRS operating profit 1, m Operating free surplus 1, m Long-term business Eastspring Investments HY2012 HY HY2012 HY HY13 IFRS result and operating free surplus generation have been prepared under new joint venture accounting standards and exclude Japan life operating profit following reclassification as held for sale. HY 2012 comparatives have been adjusted on a comparable basis. 20