Group Asia Jackson UK Life M&G Cash Macro environment Performance More supportive in the West GDP growth forecasts Annual growth rates 1 , % US UK Eurozone 2.8 2.4 1.9 1.7 1.0 -0.4 2013 2014E 2013 2014E 2013 2014E 1 IMF World Economic Outlook – January 2014. 11 2013 FULL YEAR RESULTS
Agenda Group Performance Asia Jackson UK Life M&G Cash 12 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Macro environment Performance Growth resilient in developing Asia GDP growth estimates Annual growth rates 1 , % 6.8 6.7 6.5 2.3 2.2 1.3 2013 2014E 2015E 2013 2014E 2015E Advanced Economies Developing Asia 1 IMF World Economic Outlook – January 2014. 13 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Middle class contribution to GDP Middle class in Asia (sweetspot) , $bn 1,000 Lehman collapse US Black Monday crash Mexico: Tequila crisis Asia currency crisis Russian Rouble crisis Dotcom bubble SARS scare 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1 Sweetspot countries include Indonesia, Malaysia, Singapore, Hong Kong, Thailand, Philippines and Vietnam. Household consumption as a component of GDP. Source: World Bank, IMF and Economic Research Division of Federal Reserve Bank of St. Louis. Prudential estimates. Middle Class household consumption arrived at adjusting total household consumption data for income share held by the top 10% and bottom 10% of households. 14 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Growing demand for healthcare Household consumption by category 1 , % 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 14 Discretionary 2 10 2 9 6 Semi-Necessities 6 13 31 Food Necessities 34 1990 2010 1 Euromonitor, McKinsey, Prudential estimates. 15 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Growing demand for healthcare Household consumption of healthcare and medical services 1 , $bn 92 3.3x 28 1990 2010 1 Euromonitor, McKinsey, Prudential estimates. 16 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Significant protection gap in sweetspot markets Share of medical expenses paid out-of-pocket 1 , % 60% 59% 56% 56% 50% 42% 35% 35% 33% 31% 16% 11% 9% USA UK Japan 1 World Health Organisation – Global Health Expenditure Database (2011). For Hong Kong – Food and Health Bureau, Government of Hong Kong (2010). For Taiwan data is for the year 2006. 17 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Competition Prudential # of players Entrants since Rank 2005 Hong Kong 4 59 8 Indonesia 1 41 9 Malaysia – Conventional 2 14 4 Malaysia – Takaful 1 11 3 Philippines 1 34 1 Singapore 1 19 8 Thailand 9 24 1 Vietnam 1 14 11 *Ranking is based on new business premium (APE or WFYP depending on availability of data). Information is based on market share data (formal or informal) comparison between 2005 and 2013. 18 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Distribution – Agency Number of agents in sweetspot 1 countries , 000’s 285 2.7x 107 2008 2013 1 Sweetspot countries include Indonesia, Malaysia, Hong Kong, Singapore, Thailand, Philippines and Vietnam. 19 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Distribution – Bancassurance SCB bancassurance relationship , APE 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Affordable products underpin consumer demand Prudential product premium 1 Developed markets health insurance spend 2 Healthcare spend as % of average annual income 2 100% = average annual income 12% 11% 11% Linked 10% 46 premium Premiums paid = 9% of average annual 5.0% income H&P 54 premium Premiums as a proportion of % of premium used Prudential US France Germany UK Example average annual income to purchase benefit 1 Average Prudential customer spend on insurance products. 2 Source: OECD, UN population stats, Prudential estimates. Premium spend includes healthcare expenditure by private and public sources except for the US. Healthcare spend data adjusted for working age population and unemployment rates. 21 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Powerful momentum Asia APE by quarter 1 , £m 1,174 1,209 1,501 1,660 1,897 2,125 602 569 515 513 513 495 456 443 435 429 403 404 376 367 359 354 353 325 296 282 279 276 274 248 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 1 Excludes Japan and Taiwan agency; prepared on an AER basis. 22 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Indonesia • 2013 underlying 1 IFRS operating profit IFRS operating profit, £m growth of 23% 2.9x • Unrivalled distribution platform 291 260 212 157 – Over 197,000 agents 102 – Access to > 700 branches 2009 2010 2011 2012 2013 • Rapid expansion outside Jakarta • Newly launched protection products driving growth 1 CER basis. 23 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Hong Kong • Professional and high calibre agency IFRS operating profit, £m sales force 101 2.1x • MDRT > 1000 agents 48 • Innovative products to meet a spectrum 2009 2013 of demands Strong customer proposition 97% • Strong continued customer loyalty Customer retention 24 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Thailand • Right strategy IFRS operating profit, £m 53 – Bancassurance channel accounts for >50% of market’s new business 7.6x premiums 1 • Successful integration and launch of 7 Thanachart in May 2013 – APE of £22m & IFRS contribution of 2012 2013 £30m in 8 months • UOB APE up 24% in 2013 • Fast growing scale 1 Source: TLAA. 25 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Growing scale Asia IFRS operating profit 1 , £m 2,125 1,075 1,897 975 1,660 5.1x 1,501 774 1,209 1,174 591 1,044 482 814 562 278 209 213 186 2005 2006 2007 2008 2009 2010 2011 2012 2013 IFRS operating profit, £m APE 2 , £m 1 Adjusted for new and amended accounting standards and excludes Japan Life. 2 Excludes Taiwan agency and Japan 26 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Growing scale Asia Life IFRS operating profit 1 , £m Sweetspot 2007 2013 > £200m Indonesia Singapore £50m – £200m India Vietnam Hong Kong Singapore Thailand Malaysia < £50m India China Vietnam Hong Kong Indonesia Korea China Philippines Taiwan Korea Taiwan Philippines Thailand Malaysia 1 Adjusted for new and amended accounting standards and excludes Japan Life. 27 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Single premium sales are sentiment led and volatile Asia – Single Premium APE, £m MSCI Asia ex Japan 1 214 157 155 146 122 110 91 79 77 68 63 56 46 45 27 23 11 6 9 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Single Premium APE 1 Source: Datastream. 28 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Regular premium focus drives resilient growth for PCA Asia – Regular and Single Premium APE, £m 1,911 MSCI Asia ex Japan 1 1,740 1,514 1,391 1,131 1,052 889 723 494 360 340 281 206 214 151 155 122 110 146 157 120 106 23 11 77 27 63 46 45 56 68 91 79 103 91 6 9 79 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Single Premium APE Regular Premium 1 Source: Datastream. 29 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Track record of successful EXECUTION New business profit 1 , £m IFRS operating profit 2 , £m 2x 2.2x CAGR CAGR 1,075 +19% 1,460 +22% 975 1,266 774 1,076 902 591 725 482 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Net cash remittances, £m 10x CAGR 400 +78% 341 233 206 40 2009 2010 2011 2012 2013 x.x 2013 multiple over 2009 1 Excludes Japan Life and Taiwan agency. 2 Adjusted for new and amended accounting standards and excludes Japan Life. 30 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Growth potential intact Year 15 Today Ambition Agents 1,100 150x – 200x Customers 6,000 300x – 400x Policies >15,600 150x – 200x APE £1m 400x – 500x 31 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance APE, £m 500 Multiple Scale of 1998 in 2013 Agents 179x 197k Customers 367x 2.2m Policies 192x 3m APE 477x £477m 250 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 32 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance Significant headroom for growth Indonesia $824bn $416bn $10.2bn $2.6bn 1.24% 0.62% Life premiums 3 , Insurance GDP 2 , Insurance GDP 2 , Life premiums 3 , Penetration 1 $bn $bn Penetration 1 $bn $bn 2012 1998 1 Life premiums as % of GDP. Source: Swiss Re. 2 Source: IMF October 2013. 3 Life premiums is product of Insurance penetration and GDP. 33 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Asia Performance 2017 objectives Asia Underlying Free Surplus Generation 1 of £0.9bn – £1.1bn in 2017 (2012: £484m) Asia life and asset management pre-tax IFRS operating profit to grow at a compound annual rate of at least 15 per cent over the period 2012 – 2017 (2012: £924m) 2 Cumulative Group Underlying Free Surplus Generation of at least £10bn over the four-year period from 2014 to end-2017 Note: The objectives assume exchange rates at December 2013 and economic assumptions made by Prudential in calculating the EEV basis supplementary information for the half year ended 30 June 2013, and are based on regulatory and solvency regimes applicable across the Group at the time the objectives were set. The objectives assume that the existing EEV, IFRS and Free Surplus methodology at December 2013 will be applicable over the period. 1 Underlying free surplus generated comprises underlying free surplus generated from long-term business (net of investment in new business) and that generated from asset management operations. The 2012 comparative is based on the retrospective application of new and amended accounting standards and excludes the one-off gain on sale of our stake in China Life of Taiwan of £51 million. 2 Asia 2012 IFRS operating profit of £924 million, as reported at HY 2013, is based on the retrospective application of new and amended accounting standards, and excludes the one-off gain on sale of our stake in China Life of Taiwan of £51 million. 34 2013 FULL YEAR RESULTS
Agenda Group Performance Asia Jackson UK Life M&G Cash 35 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Jackson Performance Healthy in-force portfolio Separate account value by S&P 500 level at policy issue 0% in the money 100% = $115bn as of at 31 Dec 2013 31 Dec 2013 1 4% 6% 18% 7% 14% 14% 15% 21% (≤1100) (1100-1200) (1200-1300) (1300-1400) (1400-1500) (1500-1600) (1600-1700) >1700 1 Includes VAs allocated to General Account. 36 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Jackson Performance Proactive diversification VA sales, $bn VA new business margin , % 2013 81% 76% 72% 69% 65% 2009 2007 margin 9.0 6.4 14.5 1.0 90% 31% 69% 10% 42% With living Without benefits living benefits 2009 2010 2011 2012 2013 37 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Jackson Performance Disciplined growth Net cash remittances , £m 322 294 249 One-offs 1 2013 Objective 144 80 39 2008 2009 2010 2011 2012 2013 438% 417% 483% 429% 423% 450% RBC ratio 1 Net remittances from Jackson include £122m in 2011 representing release of excess surplus to the Group. 38 2013 FULL YEAR RESULTS
Agenda Group Performance Asia Jackson UK Life M&G Cash 39 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash UK Performance Capturing savings flows in asset management UK life insurance sector net inflows 1 , £bn UK asset management industry net retail fund inflows 2 , £bn 15.2 9.7 29.9 29.8 0.8 18.6 18.3 14.3 11.2 11.2 8.8 -34.5 6.2 -41.5 4.8 -46.4 -48.3 -49.4 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1 Source: ABI. 2. Source: IMA. 40 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash UK Performance Strong product proposition With-profits fund 10-yr cumulative returns Cumulative with-profits bonus payments , £bn (2004 – 2013), % 49 22.2 119 20.2 18.2 16.1 70 13.9 11.9 9.1 6.4 3.9 ABI UK - Mixed Outperformance Pru With-profits 1.8 Investments 20-60% Shares Pension Fund 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 41 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash UK Performance Strong product proposition 2013 annuity APE , % (100% = £208m) Enhanced Conventional WP enhanced 4 13 5 WP other External 12 37% 24 Internal With- 63% profits 21 Guaranteed rates 14 7 Small pots Other (<£30k) 42 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash UK Performance Delivering through significant regulatory change Cash delivery to Group Net cash remittances, £m 434 420 355 One-offs 1 120 150 2013 objective 313 297 199 2008 2009 2010 2011 2012 2013 1 The net remittances from the UK include the £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. The 2010 net remittances include an amount of £120m representing the release of surplus and net financing repayments. 43 2013 FULL YEAR RESULTS
Agenda Group Performance Asia Jackson UK Life M&G Cash 44 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash M&G Performance Diversified asset base External retail FUM by region , £bn 2013 External FUM by asset class , % 1.3% 2.6% 67.2 1.5 PPMSA Retail £67.2bn 46.3% 49.8% 23.7 Europe Equities Fixed income Real estate Cash / Other Infrastructure Private finance lending 7.6x 19.1 10.8% 13.4% 42.0 UK 2.3 3.1 3.1x 16.0% Institutional £58.8bn 4.6% 13.8 46.0% 9.2% 2008 2013 Note from 2012 onwards PPMSA FUM reported on a proportional basis. 45 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash M&G Performance Strong performance M&G IFRS operating profit 1 , £m 1.7x 395 320 301 246 228 177 2008 2009 2010 2011 2012 2013 1 Excludes PruCap. 46 2013 FULL YEAR RESULTS
Agenda Group Performance Asia Jackson UK Life M&G Cash 47 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Group Performance Free surplus generation Free surplus and dividend, £m 2.7x Net free surplus Reinvestment rate 21% Reinvestment rate 23% Reinvestment 637 rate 22% Reinvestment rate 28% Reinvestment 618 rate 31% 553 643 Reinvestment 660 rate 50% Reinvestment rate 35% 3,099 2,698 2,535 2,462 794 2,330 483 2,113 2,080 1,982 413 1,687 374 376 1,573 1,453 1,384 281 381 901 237 305 779 781 655 642 449 344 286 243 2007 2008 2009 2010 2011 2012 2013 Surplus generation 1 Investment in new business 1 Central outgoings 2 Net free surplus Dividend net of scrip 1 Comparatives adjusted for new and amended accounting standard and excludes Japan Life. 2 Central outgoings includes RHO costs. 48 2013 FULL YEAR RESULTS
Group Asia Jackson UK Life M&G Cash Group Performance Dividend Dividend, pence per share 33.57 +15.0% 29.19 +15.9% 25.19 23.85 +5.6% +20.2% 19.85 23.84 +5.0% 18.90 +5.0% 18.00 +5.0% 17.14 +5.0% 20.79 Total dividend 16.32 17.24 17.24 13.56 12.91 12.30 11.72 Final dividend 11.02 9.73 8.40 7.95 Interim dividend 6.61 6.29 5.70 5.99 5.42 5.30 2005 2006 2007 2008 2009 2010 2011 2012 2013 49 2013 FULL YEAR RESULTS
Prudential plc 2013 full year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 50 2013 FULL YEAR RESULTS
Key financial highlights IFRS Free surplus Other Overview operating generation items 2013 continues strong performance profit 2013 vs 2012 2012 1 AER 2 CER 3 £m 2013 New business profit 2,843 2,452 16% 17% IFRS operating profit 2,954 2,520 17% 18% EEV operating profit 5,580 4,313 29% 31% Free surplus generation 2,462 2,080 18% 18% 1 IFRS and EEV results and underlying free surplus generation have been prepared under new joint venture accounting standards and also exclude Japan life operating profit following reclassification as held for sale. 2 Actual exchange rates. 3 Constant exchange rates. 51 2013 FULL YEAR RESULTS
Key financial highlights IFRS Free surplus Other Overview operating generation items 2013 continues strong performance profit 2013 vs 2012 1 , constant exchange rates Asia 2 M&G 3 Group US UK New business profit 17% 19% 23% (5)% n/a IFRS operating profit 18% 19% 28% - 19% EEV operating profit 31% 29% 37% 18% 19% Free surplus generation 18% 21% 11% 38% 21% 1 IFRS and EEV results and underlying free surplus generation have been prepared under new joint venture accounting standards and also exclude Japan life operating profit following reclassification as held for sale. 2 2012 excludes £51 million gain from sale of shares in China Life of Taiwan. Including this effect, IFRS profit increased 13%, EEV operating profit increased 26% and free surplus generation increased 9%, while new business profit is not impacted. 3 Includes PruCap. 52 2013 FULL YEAR RESULTS
Currency mix IFRS Free surplus Other Overview operating generation items Currency translation sensitivities profit IFRS operating profit IFRS operating profit , £m by currency , % FY13 Other Asia UK sterling 2013 IFRS operating profit 1 2,954 17 20 (2)% Asia - US Impact on Group result if currencies 19 dollar linked marked to 2013 year-end spot rates (4)% 44 US dollar Impact on Group result Impact on Group result from US contribution from Asia contribution Underlying free surplus generation Underlying free surplus generation , £m by currency , % FY13 Other Asia 9 2013 free surplus generation 1 2,462 Asia - US dollar linked 14 UK 42 sterling (2)% Impact on Group result if currencies marked to 2013 year-end spot rates (3)% 35 Impact on Group result Impact on Group result US dollar from US contribution from Asia contribution 1 IFRS results and underlying free surplus generation have been prepared under new joint venture accounting standards and also exclude Japan life operating profit following reclassification as held for sale. 53 2013 FULL YEAR RESULTS
IFRS – Asia IFRS Free surplus Other Overview operating generation items Continued strong growth in Asia life profits profit Asia life, shareholder-backed policyholder liabilities 2 , £bn +5% Asia IFRS operating profit 1 , £m +12% 1.1 21.9 (1.7) 20.2 2.3 (8)% 1,075 975 74 Eastspring 69 Opening Net Investments FX Closing 51 China Life of / Other 3 2013 inflows 2013 Taiwan Asia life, operational leverage , £m (CER 4 ) 17% 1,001 1,001 +14% 832 855 Asia life 2,615 2,292 Revenue Expenses 1,460 1,614 2012 2013 +11% 2012 2013 vs 2012 2013 Expenses / increase in expenses 5 Revenue / increase in revenue 1 IFRS results have been prepared under new joint venture accounting standards and also exclude Japan life operating profit following reclassification as held for sale. 2 Excludes Japan life following reclassification as held for sale. 3 Includes £487 million from the acquisition of Thanachart Life. 4 2012 restated on constant exchange rate basis, reducing revenue by £52 million and reducing expenses by £29 million; excludes Japan life operating profit following reclassification as held for sale; 2012 excludes £51 million gain from sale of shares in China Life of Taiwan. 5 Expenses stated net of deferred acquisition costs. 54 2013 FULL YEAR RESULTS
IFRS operating profit – source of earnings IFRS Free surplus Other Overview operating generation items Life insurance - Asia profit 2013 2012 +/- Total operating profit 1 £m except reserves £bn 1,001 855 17% = Total Life income Admin Expenses Acquisition Costs DAC adjustments - - +/- 2,615 2,344 12% (634) (570) (11)% (1,015) (903) (12)% 35 (16) n/a Spread Technical and With-profits Fee income income other margin 93 24% 115 47 39 21% 154 141 9% 2,241 2,028 11% Spread Margin on 154 155 (1) Expected returns AMF (bps) 112 111 1 1,562 1,439 9% (bps) revenues Average Average Insurance 6.0 23% 7.4 58 43 35% 13.7 12.6 9% 679 589 15% reserves reserves margin Increase in technical margin Increase in spread income due to growth in H&P book. reflects the growth in Asian Higher fee income driven by Insurance margin also benefits non-linked policyholder growth in unit-linked reserves from claims controls and liabilities pricing actions 1 IFRS results have been prepared under new joint venture accounting standards and also exclude Japan life operating profit following reclassification as held for sale. 2012 comparatives have been adjusted on a comparable basis. 2012 also excludes the one-off gain of £51 million from the sale of stake in China Life of Taiwan. 55 2013 FULL YEAR RESULTS
IFRS – US IFRS Free surplus Other Overview operating generation items Total IFRS profits up 30% profit Jackson, shareholder-backed policyholder liabilities , £bn +9% US IFRS operating profit , £m 8.2 +10% (2.7) 107.4 9.6 92.3 (3)% 1,302 59 51% 1,003 US asset management 39 Opening Net Investments FX Closing and broker 2013 inflows 2013 dealer Jackson, operational leverage , £m (CER 1 ) 1,243 29% 1,243 +22% 964 977 US life 2,514 2,057 Income 1,080 Expenses 1,271 +18% 2012 2013 2012 2013 vs 2012 2013 Expenses / increase in expenses 2 Revenue / increase in revenue 1 2012 restated on constant exchange rate basis, increasing revenue by £26 million and increasing expenses by £13 million. 2 Expenses stated net of deferred acquisition costs. 56 2013 FULL YEAR RESULTS
IFRS operating profit – source of earnings IFRS Free surplus Other Overview operating generation items Life insurance - US profit Total operating profit 2013 2012 +/- £m except reserves £bn 1,243 964 29% = Total Life income Total Life expenses 2012 Expense deferrals - + 2,514 2,031 24% (1,584) (1,509) (5)% 716 798 (10)% - Spread Fee income Expected returns income DAC amortisation 24 55 (56)% 730 702 4% 1,172 875 34% (403) (356) (13)% Spread Technical and 246 239 7 AMF (bps) 196 199 (3) (bps) other margin Average Average 588 399 47% 29.6 29.4 1% 59.7 44.0 36% reserves reserves Increase reflects impact of net Increase in technical and other Increase reflects effect of flows (including Elite Access) margin reflects the additional lower crediting rates and positive markets on contribution from REALIC separate account balances 57 2013 FULL YEAR RESULTS
IFRS – UK IFRS Free surplus Other Overview operating generation items IFRS profits stable in challenging market profit UK Life, shareholder-backed policyholder liabilities , £bn +5% 50.8 UK IFRS operating profit , £m 8.2 49.5 2.3 (1.0) (2)% 735 736 GI commission 29 33 25 31 Longevity Bulks 27 swap Opening Net Investments Closing 2013 outflows 2013 With-profits 272 251 -8% transfer UK Life, expenses management , £m UK Life, expenses management , £m 703 706 (1)% Shareholder- 400 403 +1% backed 961 954 Income Expenses 258 248 (4)% 2012 2013 2012 2013 vs 2012 2013 Expenses / decrease in expenses 1 Revenue / decrease in revenue 1 Expenses stated net of deferred acquisition costs. 58 2013 FULL YEAR RESULTS
IFRS – M&G IFRS Free surplus Other Overview operating generation items M&G IFRS profits up 23% profit M&G, external funds under management , £bn 13% M&G IFRS operating profit , £m +4% 126.0 +9% 4.6 111.9 9.5 441 46 Opening Net inflows Market Closing 371 2013 movements 2013 PruCap 51 M&G, underlying operational leverage , £m 358 395 +18% 23% 298 320 M&G 863 734 Revenue 436 Expenses 505 +16% 2012 2013 FY12 underlying 2013 FY13 underlying IFRS op. profit 1 IFRS op. profit 1 Revenue / increase in revenue Expenses / increase in expenses 1 Excluding revenue from performance related fees and earnings from associates. 59 2013 FULL YEAR RESULTS
Net free surplus generation IFRS Free Other Overview operating surplus items Increasing free surplus generation profit generation Net free surplus generation 1 , £m 2013 2012 Change 2013 2012 Change Unwind on in-force portfolio 2,017 1,924 5% Asia 573 484 18% Experience result 478 293 63% China Life - 51 n/a Investment return on free surplus 133 95 40% 573 535 7% Life in-force result 2,628 2,312 14% US 870 773 13% Asset management 471 386 22% UK 673 487 38% Gross free surplus generation 3,099 2,698 15% M&G 346 285 21% Less: new business strain 637 618 3% 2,080 18% Total 2,080 18% Net free surplus generation 2,462 2,462 1 Free surplus generation has been prepared under new joint venture accounting standards and also excludes Japan life operating profit following reclassification as held for sale. 2012 comparatives have been adjusted on a comparable basis. 60 2013 FULL YEAR RESULTS
Net free surplus generation IFRS Free Other Overview operating surplus items Growing stock of free surplus and central cash profit generation Movement in free surplus , £m Movement in central cash , £m Free surplus cover x% (807) 5,344 195% 201% 2,462 (1,341) 4,003 3,689 2,230 (781) 1,341 605 (315) 1,380 1 Jan Net free Market / Cash 31 Dec 1 Jan Cash Dividends Central Corporate 31 Dec 2013 surplus other remitted to 2013 2013 remitted paid costs actions 2013 generated 1 movements Group from BUs 1 Underlying free surplus has been prepared under new joint venture accounting standards and also excludes Japan life following reclassification as held for sale. 61 2013 FULL YEAR RESULTS
Net free surplus generation IFRS Free Other Overview operating surplus items Future free surplus emergence profit generation Expected undiscounted free surplus from life in-force, £bn 7.0 8.2 6.1 7.2 4.9 6.1 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual From 2012 Life in-force 2013 life in-force including market effects From 2013 new business Expected undiscounted cash flows from 2013 new business, £bn 0.8 0.7 0.4 0.0 (0.4) (0.8) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 62 2013 FULL YEAR RESULTS
EEV operating profit IFRS Free surplus Other Overview operating items generation Operating return on EEV of 19% profit EEV Life operating profit 1 , £m 5,639 5,639 +27% 1,033 2012 2013 4,427 4,427 Unwind 1,489 2,001 +19% 2,796 866 UK Variances 493 797 +42% In-force 2,221 1,975 Dev costs (7) (2) profit 1 +38% 1,610 US New 2,843 +16% 2,452 2,385 business +22% 1,951 Asia 1 profit 2012 2013 2012 2013 1 Net of Asia development expenses (2012: £(7)m, 2013: £(2)m). Excludes Japan life following reclassification as held for sale. 63 2013 FULL YEAR RESULTS
EEV operating profit IFRS Free surplus Other Overview operating items generation Robust in-force performance profit Asia in-force 1 , £925m US in-force, £1,135m UK in-force, £736m 274 253 205 120 122 87 67 65 62 28 14 (16) Persistency & Mortality / Spread Other UK Other withdrawals Morbidity and items Corporation items Other items 1 tax change 2012 2013 2012 2013 2012 2013 1 Net of Asia development expenses (2012: £(7)m, 2013: £(2)m). Excludes Japan life following reclassification as held for sale. 64 2013 FULL YEAR RESULTS
EEV operating profit IFRS Free surplus Other Overview operating items generation Value creation through increasing NBP – up 16% profit New business profit , £m IRR Payback 2,843 period NBP, 2013 vs 2012 30 2,452 267 >20% 2 years 39 -3% Volume +5% UK wholesale 274 UK retail >20% 2 years 1,086 Mix / pricing +4% +24% 873 US Economic +8% effect (excl FX) FX (1)% 1,460 >20% 3 years 1,266 +15% Asia 2012 2013 65 2013 FULL YEAR RESULTS
Equity shareholders’ funds IFRS Free surplus Other Overview operating items generation Summary of movement profit Movement in shareholders’ funds 1 IFRS Equity EEV Equity FY 2013 FY 2013 H1 2013 H2 2013 H1 2013 H2 2013 per share per share 1.1 1.2 91 1.8 2.4 165 After-tax operating profit (0.7) (0.3) (38) 0.1 0.1 6 Investment variance 0.4 0.9 53 1.9 2.5 171 Profit for the period Unrealised loss on AFS 2 (0.8) (0.2) (40) - (0.1) (4) Foreign exchange and other 0.1 (0.3) (10) 0.7 (1.7) (43) (0.5) (0.3) (31) (0.5) (0.3) (31) Dividend Retained earnings 3 (0.8) 0.1 (28) 2.1 0.4 93 10.4 9.6 405 22.4 24.5 878 Opening shareholders’ equity 9.6 9.7 377 24.5 24.9 971 Closing shareholders’ equity Movement in period (7)% - (7)% +9% +2% +11% 1 IFRS and EEV results have been prepared under new joint venture accounting standards. Excludes Japan life operating profit following reclassification as held for sale. 2012 comparatives have been adjusted on a comparable basis. 2 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. 3 Subject to rounding. 66 2013 FULL YEAR RESULTS
Balance sheet IFRS Free surplus Other Overview operating items generation Defensive positioning maintained profit Maintained capital strength • IGD surplus £5.1bn equivalent to a cover of 2.8 times • With-profits estate of £8.0bn 1 (31 December 2012: £7.0bn) • Jackson RBC at 450% (2012: 423%) Strong liquidity position • Issued subordinated bond for £700m in Dec 2013 • £2.2bn of central cash resources • £2.1bn of untapped liquidity facilities Credit position improved • UK: £1.9bn default provision • Unrealised gains on US debt securities of £0.8bn (31 December 2012: £2.8bn) • US impairments in 2013 of £4m (31 December 2012: £47m) Continued balance sheet conservatism • Variable annuity hedging remains robust • No change to conservative asset mix with 97% of credit portfolio rated investment grade 2 1 During 2013, Prudential completed the long-running project for approval to domesticate the Hong Kong branch business of the PAC With-Profits fund which has an effective date of 1 January 2014. The value of the estate of our UK With-Profits fund as at 31 December 2013 is estimated at £8.0 billion prior to the effect of this transfer. 2 Shareholder-backed business. 67 2013 FULL YEAR RESULTS
Economic capital IFRS Free surplus Other Overview operating items generation Robust capital position profit Economic capital position 1 Strong capital position at FY13 before final dividend: at 31 December 2013 , £bn Economic capital surplus of £11.3bn (257% cover) Estimated IGD surplus of £5.1bn (280% cover) Solvency Capital position resilient to a range of market sensitivities 257% cover Economic capital position is based on: • US equivalence (250% of RBC) with no diversification • No restrictions on economic value of overseas surplus • UK annuity ‘liquidity premium’ derived from Solvency I Surplus and other industry benchmarks, pending clarity on £11.3bn Solvency II Matching Adjustment 18.5 • No allowance for Solvency II transitionals • Credit risk adjustment of 10 basis points • Internal model calibrations which have not yet been 7.2 approved by the Prudential Regulation Authority (PRA) Economic capital Considerable uncertainties remain in this estimate, to be updated annually reflecting changes to Solvency II rules, on-going refinements to our internal model and feedback Available capital Required capital from the PRA 1 The economic capital result is based on outputs from the Group’s Solvency II internal model which will be subject to Prudential Regulation Authority (PRA) review and approval before its formal adoption in 2016. We do not expect to submit our Solvency II internal model to the PRA for approval until 2015 and therefore the economic capital disclosures should not be interpreted as outputs from a PRA-approved internal model. 68 2013 FULL YEAR RESULTS
Economic capital IFRS Free surplus Other Overview operating items generation Balanced risk exposures profit Economic capital by risk type (before diversification) 1,2 Operational/Expense Balanced risk exposures mainly arise from: Credit Mortality/ 11% • Credit (UK annuities and Jackson fixed annuities) 20% Morbidity 8% • Equity (with-profits shareholder transfers; unit linked fund charges) • Interest rates (impact on guarantee costs, offset by impact on 9% Longevity discount rate for insurance profits) 15% Equity • Insurance risks: lapse, longevity, mortality and morbidity (Asia 19% protection products, UK annuities, with-profits shareholder 13% Lapse transfers) 5% Interest rates • Operational and expense risks Other market Economic capital sensitivities , £bn 1 Impact Economic capital surplus Base position (as reported) 11.3 10.3 40% equity fall (1.0) 11.0 20% equity fall (0.3) 10.0 100bp interest rate fall (1.3) 12.1 100bp interest rate rise 0.8 10.0 100bp credit spread widening 3 (1.3) 1 There are material areas of uncertainty with regard to methodology and assumptions which remain subject to review and approval by the PRA. These estimates should not be interpreted as outputs from a PRA-approved Solvency II internal model. 2 The split by risk type includes Jackson’s risk exposures, based on 250% of the US RBC Company Action Level. 3 For the credit spread widening stress, 10 times expected defaults are assumed for Jackson since credit spread movements do not directly impact on the US RBC result. 69 2013 FULL YEAR RESULTS
Economic capital IFRS Free surplus Other Overview operating items generation Movement over 2013 profit Movement in economic capital surplus 1 , £bn Economic solvency ratio 1 Jan 2013 8.8 215% Operating experience 2.1 +31 pts Non-operating experience 0.9 +12 pts FX (0.4) - Dividend (11) pts (0.8) M&A effects (0.5) (8) pts +16 pts Sub-debt raised 1.1 +2 pts Model changes 0.1 257% 31 Dec 2013 11.3 1 There are material areas of uncertainty with regard to methodology and assumptions which remain subject to review and approval by the PRA. These estimates should not be interpreted as outputs from a PRA-approved Solvency II internal model. 70 2013 FULL YEAR RESULTS
2013 summary IFRS Free surplus Other Overview operating items generation profit Good progress across key financial metrics • Double digit growth in NBP, IFRS operating profit and free surplus generation • Broad based performance across geographies and sources of income • Cash generation supports dividend rebasing upwards • Positive start towards 2017 objectives Improving earnings quality • Increased contribution from insurance income and fee based business • Balanced and significant earnings and cash from all four businesses • Continued investment in new business with attractive returns and fast payback Strong balance sheet position • Continued balance sheet conservatism • Robust solvency position 71 2013 FULL YEAR RESULTS
Prudential plc 2013 full year results Agenda Business Review Tidjane Thiam Financial Review Nic Nicandrou Outlook Tidjane Thiam 72 2013 FULL YEAR RESULTS
Summary • Strong performance, 2013 objectives delivered and dividend rebased upwards • Fast growing, higher quality earnings and diversified sources of cash • Leading Asian platform to deliver long-term profitable growth • Right products, right markets and right people • More of the same, just better 73 2013 FULL YEAR RESULTS
Q&A 74 2013 FULL YEAR RESULTS
Appendix 75 2013 FULL YEAR RESULTS
Strategy We have a clear strategy underpinned by clear operating principles Strategy Operating Principles Balanced Metrics & Disclosures US Build on Strength ASIA Accelerate Focus on Customers and Distribution UK ASSET Proactive Disciplined Focus Risk Capital MANAGEMENT Management Allocation Optimise 76 2013 FULL YEAR RESULTS
Group Historic financial performance New business profit 1 , £m IFRS operating profit 2 , £m 2x 1.8x CAGR CAGR 2,954 2,843 +15% +20% 2,520 2,452 2,151 2,017 2,028 1,823 1,444 1,619 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Net cash remittances, £m 1.9x CAGR +18% 1,341 1,200 1,105 935 688 2009 2010 2011 2012 2013 x.x HY 2013 multiple over HY 2008 1 Excludes Japan Life and Taiwan agency. 2 Comparatives adjusted for new and amended accounting standards and excludes Japan Life. 77 2013 FULL YEAR RESULTS
Dividend Total dividend increased by 15% Dividend, pence per share 33.57 +15% Total dividend 29.19 • 2013 dividend increased by 15 per cent to 33.57 pence per share • Ex-dividend date: 26 March 2014 23.84 Final dividend 20.79 • Record date: 28 March 2014 • Payment of dividend: 22 May 2014 9.73 8.40 Interim dividend 2012 2013 78 2013 FULL YEAR RESULTS
Asia Long term opportunity GDP per capita in 2010, against the US GDP per capita,1990 US$ 1 35,000 • Pan Asian leader: #1 by NBP 2 Hong Kong Singapore 30,000 • Top 3 in 6 /11 Asian countries 3 25,000 Taiwan • Market leading platform Korea − Over 450,000 agents 20,000 − Access to over 15,700 bank 15,000 branches Malaysia − 12.5 million customers 10,000 Thailand China Indonesia Vietnam 5,000 India Philippines 0 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 US GDP per capita 1 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 1990. Prudential estimates. 2 NBP = New Business Profit; Prudential estimates based on information disclosed in company reports. Amongst pan Asian international (private) insurers. 3 Source: based on formal (Competitors’ results release, local regulators and insurance associations) and informal (industry exchange) market share data. Excludes Cambodia , Myanmar and Japan Market Share data as of latest; India and China ranking and market share among foreign / JV / Private only. Singapore includes onshore only. Thailand Market share is post acquisition of Thanachart Life. 79 2013 FULL YEAR RESULTS
Asia Favourable dynamics Prudential customers as a GDP 2014 GDP % of total population 2 ($bn) 2 growth (%) 2 Indonesia (1995) 1 0.9% 867 5.5 0.2% 272 6.0 Philippines (1996) Sweet Spot markets 0.7% 401 5.2 Thailand (1995) Vietnam (1999) 1.4% 170 5.4 Hong Kong (1964) 11.5% 280 4.4 6.1% 312 4.9 Malaysia (1924) Singapore (1931) 14.5% 287 3.4 India (2000) 0.3% 1,758 5.4 JV’s 0.05% 8,939 7.5 China (2000) Markets 1.0% 485 3.8 Taiwan (1999) Mature 0.6% 1,198 3.7 Korea (2002) Nascent Markets - 16 7.3 Cambodia (2013) - 59 7.8 Myanmar (2013) 1 Number in bracket denotes start of operation. 2 Source IMF. GDP in $bn for 2013 (estimated) 80 2013 FULL YEAR RESULTS
Disciplined capital allocation New business profit growth New business strain 1,2 , £m New business profit 2 , £m 2,843 +76% 297 2,452 2,151 313 -3% 2,028 260 1,086 365 660 1,619 643 637 618 873 29 553 UK 65 103 UK 230 45 815 54 761 298 281 300 664 US US 202 326 1,460 1,266 1,076 902 310 Asia 297 292 725 278 Asia 231 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 1 Free surplus invested in new business. 2 Excludes Japan and Taiwan agency. 81 2013 FULL YEAR RESULTS
Delivering cash Free surplus and cash remittances Underlying free surplus generated 1 , £m Business unit net remittances, £m +12% +18% 1,341 2,462 M&G 1,200 incl 292 2,080 1,105 PruCap 1,982 935 1,687 UK 355 1,453 688 515 294 US 779 400 Asia 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 1 Comparatives adjusted for new and amended accounting standard and excludes Japan Life. 82 2013 FULL YEAR RESULTS
Cash and capital Central cash resources Development of central cash resources, £m FY 2011 FY 2012 FY 2013 1,341 1,200 1,105 605 2,230 (315) (289) (296) 1,380 1,380 (781) 1,232 1,200 1,200 (655) (642) (76) (199) Operating holding co cashflow +£245m Operating holding co Operating holding co cashflow +£167m cashflow +£256m Dividend Opening balance of central cash resources Net remittances to Group Other items Corporate cash costs, interest and tax received Closing balance of central cash resources 83 2013 FULL YEAR RESULTS
Net cash remittances UK and other Business unit net remittances, £m CAGR (UK Life + Other) +21% 986 887 808 One-offs 1 120 150 515 355 316 313 300 297 284 254 199 2008 2009 2010 2011 2012 2013 UK Life Other 1 The net remittances from the UK include the £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. The 2010 net remittances include an amount of £120m representing the release of surplus and net financing payments. 84 2013 FULL YEAR RESULTS
New business growth Group life APE Life APE 1 , £m (AER) +4% H1 11: £1,824m H2 11: £1,857m H1 12: £2,030m H2 12: £2,165m H1 13: £2,162m H2 13: £2,261m +7% 1,158 1,124 1,117 1,103 1,066 1,048 1,038 977 964 936 888 880 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 1 Excluding Japan. 85 2013 FULL YEAR RESULTS
New business growth Group life new business profit Life new business profit 1 , £m (AER) +20% H1 11: £1,069m H2 11: £1,082m H1 12: £1,141m H2 12: £1,311m H1 13: £1,268m H2 13: £1,575m +11% 893 714 705 682 616 605 597 571 563 536 498 466 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 1 Excluding Japan. 86 2013 FULL YEAR RESULTS
New business growth Group life returns on new business investment Post-tax new business profit per £ of new business strain 1 3.3 2.9 2.8 2.2 1.7 1.1 2008 2009 2010 2011 2012 2013 1 Free surplus invested in new business; excludes Japan. 87 2013 FULL YEAR RESULTS
Asia distribution Wealth and financial assets ownership Breakdown of personal financial assets 12% Life 24% Non-Life 9% 39% 9% Asset Mgt 18% 24% 20% Bank 70% Deposits 21% 38% 16% Per capita Up to $2000 to $15000+ income level $2000 $15000 Source: Oliver Wyman analysis; Prudential analysis. 88 2013 FULL YEAR RESULTS
Asia Life Products meet customer needs and create shareholder value Health and Protection – Out of pocket Annual premium for a customer aged 50 medical expenses 1 (indexed) 143 123 19 117 114 100 73 Saving 100 81 27 Spend Without Basic Prudential Prudential Co. A Co. B Co. C Co. D insurance Government Protection insurance Product 1 Expenses for a male aged 50 for heart diseases and heart surgery treatment. 89 2013 FULL YEAR RESULTS
Asia Life APE by market Asia APE by market, £m +23% +7% 487 477 446 +20% 396 361 301 -5% 218 -25% 208 +19% 156 +1% +48% 117 +84% 113 103 +20% +18% 102 95 83 68 54 56 53 45 45 37 India 26% 3 China 50% 4 Hong Kong Singapore 1 Malaysia 2 Indonesia Taiwan Korea Thailand Vietnam Philippines 5 17 th 1 st 4 th 1 st 1 st 11 th 1 st 3 rd 9 th 1 st 1 st Ranking 2012 2013 1 Singapore includes onshore only, excluding Eldershield and DPS. 2 Includes Takaful sales @100%. 3 Ranking amongst private players. 4 Ranking amongst foreign JVs/players. 5 #1 ranking based on most recent industry sharing data. 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). 90 2013 FULL YEAR RESULTS
Asia Life APE sales by product - percent Asia APE by product, % 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 5 5 5 5 5 5 6 7 7 7 8 8 9 14 19 18 19 17 21 20 23 27 26 29 28 26 30 30 25 33 33 33 33 34 34 33 35 31 34 18 35 38 17 18 20 20 19 22 30 24 27 27 24 25 30 27 31 29 24 32 30 32 34 33 29 30 34 30 29 65 62 60 59 59 57 55 46 44 44 44 43 42 39 38 37 36 34 31 31 30 30 29 28 28 27 27 24 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 Linked Health Par Other 91 2013 FULL YEAR RESULTS
Asia Life Flows and persistency Asia Life inflows 1,2 , £bn Asia Life inflows (ex-India) 1,2 , £bn 2.4 2.5 2.3 2.2 2.2 2.2 2.1 2.0 1.9 1.9 2.0 1.8 1.7 1.7 1.6 1.5 1.5 1.2 1.5 6.4% 6.2% 6.0% 5.6% 5.2% 5.1% 5.1% 5.2% 5.5% 4.8% 4.8% 4.4% 4.6% 4.5% 1.0 3.9% 3.5% 0.5 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 H1 10 H2 10 H1 11 H2 11 H1 12 H2 12 H1 13 H2 13 Surrenders/withdrawals as % of opening liabilities 1 Defined as movements in shareholder-backed policyholder liabilities arising from premiums (after deducting insurance & other margins). 2 Japan is excluded from 2013 flows and surrender rates. If 2012 was stated on a comparable basis, the total Asia Life inflows would be £1.9bn in H1 12 and £2.2bn in H2 12, and the surrender rates would be 5.2% and 5.0% respectively; Asia Life inflows (ex-India) would be £1.7bn in H1 12 and £2.1bn in H2 12, and the surrender rates would be 4.8% and 4.2% respectively. 92 2013 FULL YEAR RESULTS
US retail sales and deposits 2013 Retail sales and deposits , $m 2012 = $24,863m 2013 = $25,966m 921 868 2,733 2,457 27 4 1,733 1,419 1,345 4,045 2,055 16,325 14,537 2,360 Fixed Annuities Variable Annuities – with living benefits Variable Annuities – w/o living benefits, non EA Elite Access Index Annuities Life insurance Curian 93 2013 FULL YEAR RESULTS
US Life VA volumes VA volumes by quarter , sales US$m 42% 43% 81% 72% 69% 65% 76% 5,715 5,656 5,473 5,258 412 5,189 • ‘Features War’ 4,974 218 1,124 1,094 4,553 4,565 991 4,427 4,383 4,212 4,176 836 715 3,756 3,686 3,658 3,335 3,134 2,909 2,368 2,370 2,324 2,250 2,052 1,780 1,769 1,505 1,412 1,508 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 1 12 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 2 nd 2 nd 1 st 1 st 1 st 1 st Ranking FY New business margin Elite Access 1 Estimated. 94 2013 FULL YEAR RESULTS
US Life Variable annuity distribution Variable annuity sales by distribution channel, US$bn 2013 includes $4.4bn of Elite Access sales 20.9 19.7 13.3 12.7 3.9 3.8 3.7 3.2 2012 2013 IBD RBD/Wirehouse Bank IBD: Independent Broker/Dealer, RBD: Regional Broker Dealer. 95 2013 FULL YEAR RESULTS
US Life New business margin New business margin – % APE 76% 69% 65% 36% 29% 27% Variable Annuities US Other 2011 2012 2013 96 2013 FULL YEAR RESULTS
US IFRS profit DAC impact on results Impact on results of DAC amortisation, £m 2012 2013 Gross profits 1 1,427 1,716 New business strain 2 (174) (198) DAC Amortisation - Core (412) (485) - (acceleration) / deceleration 56 82 Operating result 897 1,115 28% Core as % of Gross profits 29% 1 Gross profits equals IFRS operating profit pre acquisition costs and pre DAC, excluding REALIC. 2 Represents acquisition costs no longer deferrable following the adoption of altered US GAAP principles for deferred acquisition costs. 97 2013 FULL YEAR RESULTS
US Life Policyholder behaviour Optional benefits elected , % of initial benefits elected (New business) 86% 82% 80% 79% 65% 55% 42% 28% 15% 14% 11% 6% 6% 5% 5% 5% 2006 2007 2008 2009 2010 2011 2012 2013 No benefit GMWB (for life) 98 2013 FULL YEAR RESULTS
US Life Asset growth Growth in statutory admitted assets, US$bn 2013 v 2012 increase: $28.1bn 170.9 Net Inflows: $12.1bn Market Movements: $16.0bn 142.8 108.8 107.6 97.5 80.1 81.0 76.7 70.9 58.8 69.3 48.9 62.8 33.3 55.6 30.0 20.9 50.9 22.3 14.7 46.6 43.0 10.4 40.2 7.1 4.4 5.1 5.6 62.7 62.1 50.0 48.6 48.8 48.1 47.1 47.7 46.7 45.2 43.8 42.2 37.9 34.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 General account Separate account 99 2013 FULL YEAR RESULTS
Resilient balance sheet GMWB policyholder behaviour sensitivities GMWB policyholder behaviour sensitivities, FY 2013 US$bn • Policyholder behaviour experience is continuously monitored and a comprehensive study is conducted on an annual basis 7 • For IFRS and Statutory accounting purposes, assumptions are set at the conservative end of the plausible range (i.e., best estimate with 6 an explicit margin for conservatism). For example, – Surrender -- GMWB ultimate surrender assumptions at 5 significantly ITM levels are assumed to be 33% of the base surrender assumptions 4 – Utilisation -- For-Life GMWB utilisation assumptions at attained ages 65+ are 60-80% (with special provisions for benefits with 3 incentives to delay withdrawals) • To measure the sensitivity to these assumptions, IFRS Equity and 2 Statutory Capital were computed under severe shocks to these already conservative assumptions. The shocks were as follows: 1 – Surrender – surrender rates for ITM policies were reduced to half the assumed levels. For example, ultimate surrender rates on significantly ITM policies were reduced from 33% to 17% of the 0 base surrender level, resulting in ultimate surrender rates of less Total Adjusted Capital IFRS SH equity than 2% for most plan types – Utilisation -- utilisation rates beyond the bonus period, if Total Lapse sensitivity impact applicable, were increased by an absolute 10%. For example, Utilisation sensitivity impact utilisation rates of 60-80% on For-Life contracts at attained ages 60+ were increased to 70%-90% 100 2013 FULL YEAR RESULTS
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