Nic Nicandrou. Group

Transcription

1 Nic Nicandrou Group

2 Drivers of high quality earnings, resilient capital and robust balance sheet Growing and resilient earnings drivers Capital is strong and highly accretive Defensive and robust balance sheet Growing Asia premium base Solvency II surplus 11.5bn Conservative asset portfolio 31 October September 2016 In-force % New Growing asset base in UK and US Capital velocity FY15 2,938 Years 6-10 ~98% Sovereign or Investment Grade US separate account assets ($bn) UK life invested assets ( bn) M&G external FUM ( bn) 745 Free surplus invested in new business 2,617 New business profit Free surplus emergence (undiscounted) Year 5 Year 4 Year 3 Year 2 Year 1 Holding company cash 30 June 2016 Credit facilities (undrawn) 30 June bn 2.6bn

3 New business profit driven by higher volume and improved mix New business profit (post-tax) m 3Q16 vs 3Q15 3Q16 3Q15 AER 1 CER 1 Movement in new business profit (post-tax) 3Q16 vs 3Q15 Asia 1, % +23% Volume + 149m +8% Jackson (13)% (21)% Economics (68)m (4)% UK Retail % +41% Mix / pricing / other + 88m +5% Total 2 1,970 1, % +9% CER 1 change + 169m +9% 1. AER: actual exchange rates. CER: constant exchange rates 2. Growth rates based on 2015 comparatives excluding UK bulks which contributed new business profit of 104 million in the first nine months of 2015

4 Asia Structural drivers of demand and new business performance intact New business profit m Regular premium APE sales, m Agency APE sales, m Health and protection new business profit, m +23% AER +34% AER +28% AER +31% +18% +21% +27% AER +38% 1,061 1,306 2,005 2,367 1,298 1, Q 2015 (CER) 3Q Q 2015 (CER) 3Q Q 2015 (CER) 3Q Q 2015 (CER) 3Q 2016

5 US Continued separate account asset growth despite sales disruption Separate account assets US$bn (5.8) +8% Variable annuity sales in line with HY16 and sector trends Net flows remain positive despite lower sales Continue to benefit from positive market effects 1 Jan 2016 New premiums Outflows Net inflows Markets / Other 30 Sep 2016

6 UK life Improved asset gathering capability UK life flows bn Claims Premiums 2.3 (0.8) 1.6 (7.2) 2.2 (3.0) 3.7 (0.9) 1.2 (6.1) 2.7 (3.1) 6.1 (1.2) 1.2 (6.6) 2.0 (3.2) 6.7 (1.2) (5.1) (2.4) With-profits 30 September 2016 Shareholder backed 30 September bn invested assets 64bn invested assets Change +11% +6% Q 2016 Retail Growth products 1 Legacy products 2 Annuities 3 1. Includes investment bonds, individual pensions, drawdown and PruFund ISA 2. Includes corporate pensions and other 3. Includes retail and bulk annuities

7 Asset management Improved third quarter flows and growing asset base M&G External assets under management, bn Eastspring Assets under management, bn +8% Total External % +23% Retail 60.8 (4.1) (2.0) (1.1) % Life / Internal 52.8 Institutional 65.6 (1.6) (0.1) % External MMF Dec Q 2Q 3Q 2016 net flows Markets / Other 30 Sep Dec 2015 External Life Markets / Other net flows 30 Sep Includes movement in money market funds of 1.6 billion, comprising net inflows of 0.5 billion, currency movements of 0.9 billion and market movements of 0.2 billion

8 Robust capital position Solvency II capital position 1 31 October 2016, bn Movement in Solvency II capital 1 30 June to 31 October 2016, bn Solvency cover 175% 189% 31 December Surplus 9.1bn 11.5bn 30 June Dividends paid (0.3) Operating experience Market effects Currency movements June Own Funds 31 October 2016 (estimated) SCR Sub-debt issuance 31 October 2016 (estimated) The Group Shareholder position excludes the contribution to the Group SCR and Own Funds of ring fenced With-Profit Funds and staff pension schemes in surplus 2 Before allowing for 2016 first interim ordinary dividend 3 Before allowing for 2015 second interim ordinary and special dividends 4 Includes 0.2 billion from specific asset and liability management actions taken in the third quarter of 2016 to improve the solvency position of our UK life businesses and further mitigate market risks

9 Disciplined capital allocation, directed to highest return opportunities Free surplus invested in new business m Undiscounted free surplus generation from new business Years 1-30, m CAGR 5, CAGR +8% UK 3, % 4, , ,011 UK US 1, US 202 Asia Asia 2,218 2,751 3,

10 with fast capital payback Free surplus invested in new business m Undiscounted free surplus generation from new business Years 1-30, m 5, UK Year of emergence , , ,078 US ,084 1,382 Asia ,194 1,357 1,

11 Life free capital generation prospects improve with new business 2.7 Group expected life free surplus generation, , bn (undiscounted, before investment in new business) From 2010 yearend in-force New business contribution

12 Growing life in-force underpins Group cash generation prospects Group expected life free surplus generation, , bn (undiscounted, before investment in new business) Assumption changes and experience Free surplus 3.4bn 6.8bn 1 Jan Dec 2015 Central cash 1.2bn 2.2bn Asset management 1.9 Retained Expected life free surplus generation New business investment 9.0 (2.6) 5.6 Remittances to Group (1.3) Group centre 1 Retained 3.3 Dividends (paid in year) Markets / other (1.2) From 2010 yearend in-force New business contribution Net free surplus generated after markets / other Remittances to Group 5.6bn 3.2bn Dividends (paid in year) 3.3bn 1.7bn 1 Group movements include interest and central costs (net of tax), corporate transactions, issue and repayment of subordinated debt, currency movements and other non-operating movements

13 Capital dynamics and dividend philosophy are unchanged Asia US UK M&G Remittances Central costs Capital-light growth in unitlinked and protection Reliable capital generation from high-return fast payback business Capital efficient growth through with-profits Minimal capital requirement Dividends to shareholders Capital generation Fast payback of invested capital from attractive earnings profile Economic risks hedged well into tail Stable generation from seasoned annuity and withprofits portfolios Cash-like earnings Corporate actions Capital hurdle Buffer over local required capital after 1/25 stress Minimum RBC ratio and target AA credit rating SII target range Minimum CRD III cover Remittances to Group Opening central cash Closing central cash > 1bn

14 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 Group s financial flexibility across a broad range of financial metrics and our assessment of opportunities to generate attractive returns by investing in specific areas of the business Assessment of dividend affordability unchanged grow the ordinary dividend by 5 per cent per annum potential for additional distributions Range of financial metrics IFRS earnings Free surplus generation Holding company cash Free surplus stock Solvency II surplus Local solvency surplus Financial strength ratings Stress tested 1/25 year stress on financial KPIs 1 Country level cash Group liquidity Buffer for regulatory change and shocks Competing use of capital Investment in growth Funding corporate activity 1 1/25 year stress is equivalent to a Group-wide scenario with movements in all risks including a 30% to 50% fall in equity levels, a 0.5% to 3.0% fall in long-term interest rates and spreads widening by 140p in A-rated credit and 210p in BBB-rated credit.

15 Balance sheet remains defensively positioned UK shareholder credit portfolio 1 30 Sep 2016 Jackson shareholder portfolio 2 30 Sep 2016 Asia shareholder portfolio 1 30 Sep 2016 Investment grade 98% BBB 16% <BBB 2% 98% Investment Grade AAA 12% AA 35% Average corporate holding 1 $49m Cash / Treasury / Agency 31 Dec % 30 Sep % <BBB 3% 97% Sovereign or Investment Grade Sovereign debt 41% A 35% Investment grade corporate 50% 59% Investment grade corporate debt 56% High yield / RMBS 3 14% <4% 1 Based on IFRS accounting market value 2 Based on Statutory accounting book value 3 Excludes Agency RMBS, which represented 1% of the portfolio at 30 September 2016 and 7% of the portfolio at 31 December 2008

16 Summary Q3 life performance extends first half progress Led by double-digit growth in Asia Asia new business profit US separate account AUM +23% growth to 1.3bn +8% growth to $145.6bn Continued net inflows in US VA Improved asset gathering capability in UK UK PruFund AUM +38% growth to 22.8bn More positive quarter for asset management Balance sheet and solvency robust M&G external AUM Eastspring total AUM +8% growth to 136.2bn +29% growth to 115.3bn 1 Estimated as at 31 October 2016 Dividend philosophy unchanged Solvency II capital 1 2.1bn operating capital generation 11.5bn surplus 189% surplus cover