Prudential PLC - FY18 Results - Business Review

PRUDENTIAL DELIVERS CONTINUED GROWTH IN PROFIT AND DIVIDEND

 

Performance highlights on a constant (and actual) exchange rate basis

·     Group operating profit1 of £4,827 million, up 6 per cent2 (up 3 per cent3)

·     Asia EEV new business profit4 of £2,604 million, up 14 per cent2, operating profit1 of £2,164 million, up 14 per cent2 and underlying free surplus generation5 of £1,171 million, up 14 per cent2

·     US fee income up 8 per cent2 following a 10 per cent2 increase in average separate account balances6

·     M&GPrudential operating profit1 up 19 per cent, including the effect of updated longevity assumptions

·     Full year 2018 ordinary dividend increased by 5 per cent to 49.35 pence per share

·     Group Solvency II surplus7,8 estimated at £17.2 billion, equivalent to a cover ratio of 232 per cent

·     Continued progress in preparations for the demerger of M&GPrudential from Prudential plc

Summary financials

2018 £m

2017 £m

Change on

AER basis

Change on

CER basis

 

 

 

 

 

Operating profit1

4,827

4,699

3%

6%

Underlying free surplus generated5

4,047

3,640

11%

14%

Life new business profit4

3,877

3,616

7%

11%

IFRS profit after tax9

3,013

2,390

26%

30%

Net cash remittances from business units10

1,732

1,788

(3)%

-

 

 

 

 

 

 

2018 £bn

2017 £bn

Change on

AER basis

 

 

 

 

 

 

IFRS shareholders' funds

17.2

16.1

7%

 

EEV shareholders' funds

49.8

44.7

11%

 

Group Solvency II capital surplus7,8

17.2

13.3

29%

 

Mike Wells, Group Chief Executive, said: 'In 2018, our financial performance, again led by our Asia operations, is testament to the scale of our opportunity set, the depth of our capabilities and our unrelenting focus on executing our strategy at pace. At the same time we have made good progress in our preparations for the demerger of M&GPrudential from Prudential plc.

'In Asia we have again delivered double-digit growth across our key metrics of new business profit4 (up 14 per cent2), operating profit1 (up 14 per cent2) and underlying free surplus generation5 (up 14 per cent2). This performance is both broad-based, with 10 markets achieving double-digit growth2 in new business profit4, and high-quality, with health and protection new business profit growing by 15 per cent2. Our Asia asset manager, Eastspring, has increased operating profit (up 6 per cent2) amidst a challenging external environment reflecting the structural benefit from life business net flows. Our broad-based portfolio of life insurance and asset management businesses, high-quality products with distinctive value-added services and multi-channel strategy ensure that we continue to benefit from the growing customer demand in Asia for the health, protection and savings solutions that we provide.

'In the US, our life business, Jackson, remains focused on providing financial security to increasing numbers of individuals approaching or in retirement, broadening its product range and extending its distribution network. US operating profit decreased by 11 per cent, with higher fee income being more than offset by higher market-related amortisation of acquisition costs and lower spread-based income. Jackson's risk-based capital ratio, which increased from 409 per cent to 458 per cent by year-end, highlights the effectiveness of its risk management and hedging performance in the equity market decline experienced during the fourth quarter.

'M&GPrudential continues to make progress implementing its merger and transformation programme while consolidating its position as one of the leading businesses in the UK & European savings and investment markets. M&GPrudential's total operating profit increased 19 per cent, principally reflecting the benefit from updated longevity assumptions and an 11 per cent increase in the shareholder transfer from the with-profits business, which includes a 30 per cent increase from PruFund.

'The intended demerger of M&GPrudential from Prudential plc will further enhance the strategic focus of both businesses. I am confident that, given the extent of our opportunities and our proven ability to execute and innovate, we are well positioned to continue to grow profitably.'

Dividend

The Board has decided to increase the full-year ordinary dividend by 5 per cent to 49.35 pence per share, reflecting our 2018 financial performance and our confidence in the future prospects of the Group. In line with this, the Directors have approved a second interim ordinary dividend of 33.68 pence per share (2017: 32.5 pence per share).

The Group's dividend policy remains unchanged. The Board will maintain 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 an assessment of opportunities to generate attractive returns by investing in specific areas of the business25.