Prudential Plc Full Year 2021 Results

Prudential Delivers Continued Operational Progress and Completes Strategic Re-Positioning

HONG KONG SAR – Media OutReach – 9 March 2022 –

Performance highlights for the continuing business¹ on a constant (and actual) exchange rate basis²

• APE sales³ up 8 per cent (10 per cent) to $4,194 million
• New business profit⁴ up by 13 per cent (15 per cent) to $2,526 million
• Strategic re-positioning to Asia and Africa completed
• Adjusted operating profit⁵ from continuing operations up 16 per cent (17 per cent) to $3,233 million
• Second interim ordinary dividend of 11.86 cents per share, 17.23 cents per share for the full year

Mike Wells, Group Chief Executive of Prudential plc, said: “Prudential has delivered high-quality, resilient growth as we completed the strategic re-positioning of our business to focus solely on Asia and Africa. We have continued to deliver for our customers against the backdrop of the Covid-19 pandemic, and I would like to record my deep gratitude to our staff and agents for their outstanding efforts. We have announced that I will retire from my role at the end of March 2022. I am grateful to have had the opportunity to work with the staff and Board of Prudential, and look forward to watching the Group’s further success.

“Our digitally enabled, multi-channel and geographically diversified business enabled us to increase APE sales³ by 8 per cent⁶ and deliver growth⁶ in 10 of our 14 insurance markets⁷, despite the obvious challenges of Covid-19. New business levels in Hong Kong remained impacted by the continuing Mainland China border closure. Excluding Hong Kong, 2021 APE sales grew by 16 per cent⁶ driven by our businesses in Mainland China, India, Malaysia, the Philippines, Singapore and Thailand. We delivered 13 per cent⁶ growth in Group new business profit⁴ through an improvement in business mix, and therefore margin, and the growth in new sales.

“The Group’s high-quality business, based on regular-premium income, focus on health and protection, and high levels of customer retention, supports resilient, compounding growth. This enabled the Group’s life businesses to deliver adjusted operating profit⁵ growth of 8 per cent⁶ despite higher Covid-19-related claims, with seven of our 14 life markets generating double-digit⁶ adjusted operating profit⁵ growth. Eastspring’s adjusted operating profit was up 10 per cent⁶, with its funds under management reaching $258.5 billion, with continued inflows from the Group’s life businesses. Collectively our life and asset management businesses delivered 8 per cent⁶ growth in adjusted operating profit⁵ and 7 per cent⁶ growth in operating free surplus generation⁸. After delivery of the planned central cost savings, total Group adjusted operating profit for the continuing business was up 16 per cent⁶.

“We continue to invest for the long term in new products, additional distribution capabilities and enhanced digital capabilities, to build our presence as a leading agency and bancassurance player and to access new pools of customers. Our product and other initiatives helped attract over 2.5 million customers in 2021 who were not existing policyholders of Prudential, contributing to an increase in our total life customer base to 18.6 million (2020: 17.4 million excluding Jackson). New business policies sold to both new and existing customers rose 16 per cent to 3.9 million and included 109,000 policies which were sold direct to the consumer through digital systems, including Pulse. These new policies included 2.2 million health and protection cases, reflecting our customers’ increased focus on this area in light of the pandemic.

“We have completed the strategic re-positioning of our business into one focused entirely on Asia and Africa. In the fourth quarter, we carried out a successful $2.4 billion⁹ equity raise in Hong Kong. In December 2021 and January 2022 cash from this issuance was deployed in deleveraging our balance sheet in a $2.25 billion debt reduction programme. These actions, together with the associated reduction in interest costs, have enhanced our financial flexibility in light of the breadth of opportunities to invest for growth in Asia and Africa.

“We enter 2022 with a strong balance sheet and capital position. The timing of the opening of the Hong Kong border remains uncertain and Covid-19 will continue to have an impact. The current conflict in Ukraine could have wider implications for global economic and market conditions as well as geopolitical relations. However, we believe our multi-channel approach and focus on quality business and operating efficiency is the right strategy for dealing with volatile operating conditions. We are confident that our investment in new business, distribution and product enhancements will continue to meet the needs of our customers and build value for our shareholders over the long term.”

Summary financials	2021 $m	2020 $m	Change on AER basis3	Change on CER basis3
New business profit from continuing operations1,4	2,526	2,201	15%	13%
Operating free surplus generated from continuing operations1,8	2,071	1,888	10%	7%
Adjusted operating profit from continuing operations1,5	3,233	2,757	17%	16%
IFRS profit after tax from continuing operations1	2,214	2,468	(10)%	(12)%
IFRS (loss) profit for the period after write-down of Jackson to fair value	(2,813)	2,185	n/a	n/a
	31 Dec 2021		31 Dec 2020*
	Total	Per share	Total	Per share
EEV shareholders’ equity	$47.4bn	1,725�	$54.0bn	2,070¢
IFRS shareholders’ equity	$17.1bn	622¢	$20.9bn	800¢

* Includes Jackson. Excluding Jackson EEV of the continuing Group was $41.9bn (1,607¢ per share) and IFRS shareholders’ equity was $12.4bn at 31 December 2020.

Notes

1 Continuing operations represents the Asia, Africa and head office functions of the Group following the demerger of Jackson.

2 Further information on actual and constant exchange rate bases is set out in note A1 of the IFRS financial statements.

3 APE sales is a measure of new business activity that comprises the aggregate of annualised regular premiums and one-tenth of single premiums on new business written during the year for all insurance products, including premiums for contracts designated as investment contracts under IFRS 4. It is not representative of premium income recorded in the IFRS financial statements. See note II of the Additional unaudited financial information for further explanation.

4 New business profit, on a post-tax basis, on business sold in the period, calculated in accordance with EEV Principles.

5 In this press release ‘adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing operations. This alternative performance measure is reconciled to IFRS profit for the period in note B1.1 of the IFRS financial statements.

6 On a constant exchange rate basis.

7 13 Asia markets plus Africa.

8 Operating free surplus generated from insurance and asset management operations before restructuring costs. For insurance operations, operating free surplus generated represents amounts emerging from the in-force business during the year net of amounts reinvested in writing new business and excludes non-operating items. For asset management businesses, it equates to post-tax operating profit for the year. Restructuring costs are presented separately from the business unit amount. Further information is set out in ‘movement in Group free surplus’ of the EEV basis results.

9 After deduction of underwriting fees and other estimated expenses connected with the equity raise.

Notes to editors:

a. The results in this announcement are prepared on two bases: International Financial Reporting Standards (IFRS) and European Embedded Value (EEV). The results prepared under IFRS form the basis of the Group’s statutory financial statements. The supplementary EEV basis results have been prepared in accordance with the amended European Embedded Value Principles issued by the European Insurance CFO Forum in 2016. The Group’s EEV basis results are stated on a post-tax basis and include the post-tax IFRS basis results of the Group’s asset management and other operations. The IFRS and EEV results are presented in US dollars and the basis of translation is discussed in note A1 of the IFRS financial statements. Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates are calculated by translating prior period results using the current period foreign exchange rate ie current period average rates for the income statement and current period closing rates for the balance sheet.

b. EEV and adjusted IFRS operating profit for continuing operations is based on longer-term investment returns and is stated after excluding the effect of short-term fluctuations in investment returns against long-term assumptions, which for IFRS in 2021 were driven largely by the movements in interest rates and equity markets in Asia, and other corporate transactions. Furthermore, for EEV basis results, operating profit based on longer-term investment returns excludes the effect of changes in economic assumptions and the mark-to-market value movement on core borrowings. Separately on the IFRS basis, adjusted operating profit also excludes amortisation of acquisition accounting adjustments.

c. Total number of Prudential plc shares in issue as at 31 December 2021 was 2,746,412,265.

d. We expect to announce our Full Year 2021 Results to the Hong Kong Stock Exchange and to the UK Financial Media at 4.00am UKT– 12.00pm HKT on Wednesday, 9 March 2022 – 11.00pm ET on Tuesday, 8 March 2022. The full announcement and associated information will be loaded onto the Group’s website at or shortly following the confirmation of the publication on the Hong Kong Stock Exchange.

The announcement will appear on the RNS of the London Stock Exchange at 7.00am UKT – 3.00pm HKT – 2.00am ET on Wednesday, 9 March.

Media call – 7.00am UKT – 3.00pm HKT – 2.00am ET

If you would like to join the media call, please get in touch with either of the media contacts listed above for joining instructions.

Analysts & Investors Q&A call – 8.00am UKT – 4.00pm HKT – 3.00am ET

To register to listen into the conference call and submit questions online, please do so via the following link: https://www.investis-live.com/prudential/61f006825acd270d003c0edf/2021fyqa. The call will be available to replay afterwards using the same link.

Dial-in details

A dial-in facility will be available to listen to the call and ask questions: please allow 15 minutes ahead of the start time to join the call (lines open half an hour before the call is due to start, ie from 7.30am UKT – 3.30pm HKT – 2.30am ET.

Dial-in: +44 (0) 20 3936 2999 (UK and international) / 580 33 413 (HK) / 010 5387 5828 (China), Toll free: 0800 640 6441 (UK) / 800 908 350 (HK), Participant access code: 204128. Once participants have entered this code their name and company details will be taken.

Transcript

Following the call a transcript will be published on the results centre page of the Prudential plc’s website on Friday 11 March 2022.

Playback facility

Please use the following for a playback facility: +44 (0) 20 3936 3001 (UK and international), replay code 670696. This will be available from approximately 3.00pm UKT – 11.00pm HKT – 10.00am ET on 9 March until 11.59pm UKT – 6.59pm ET on 23 March – 7.59am HK time on 24 March 2022.

e. 2021 Second interim ordinary dividend

Ex-dividend date	24 March 2022 (UK, Hong Kong and Singapore)
Record date	25 March 2022
Payment of dividend	13 May 2022 (UK, Hong Kong and ADR holders) On or around 20 May 2022 (Singapore)

f. About Prudential plc

Prudential plc provides life and health insurance and asset management in Asia and Africa. The business helps people get the most out of life, by making healthcare affordable and accessible and by promoting financial inclusion. Prudential protects people’s wealth, helps them grow their assets, and empowers them to save for their goals. The business has more than 18 million life customers and is listed on stock exchanges in London (PRU), Hong Kong (2378), Singapore (K6S) and New York (PUK). Prudential is not affiliated in any manner with Prudential Financial, Inc. a company whose principal place of business is in the United States of America, nor with The Prudential Assurance Company Limited, a subsidiary of M&G plc, a company incorporated in the United Kingdom. https://www.prudentialplc.com/.

g. Discontinued operations

Throughout this results announcement ‘discontinued operations’ refers to the US operations (referred to as Jackson). All amounts presented refer to continuing operations unless otherwise stated, which reflect the Group following the completed demerger of Jackson.

h. Forward-Looking Statements

This document may contain ‘forward-looking statements’ with respect to certain of Prudential’s (and its wholly and jointly owned businesses’) 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 (and its wholly and jointly owned businesses’) beliefs and expectations and including, without limitation, statements containing the words ‘may’, ‘will’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of similar meaning, 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 of the entity referred to in any forward-looking statement to differ materially from those indicated in such forward-looking statement. Such factors include, but are not limited to, the impact of the ongoing Covid-19 pandemic, including adverse financial market and liquidity impacts, responses and actions taken by governments, regulators and supervisors, the impact on sales, claims and assumptions and increased product lapses, disruption to Prudential’s operations (and those of its suppliers and partners), risks associated with new sales processes and technological and information security risks; future market conditions (including fluctuations in interest rates and exchange rates, inflation (including interest rate rises as a response) and deflation, the potential for a return to a sustained low-interest rate environment, the performance of financial markets generally and the impact of economic uncertainty (including as a result of geopolitical tensions and conflicts), asset valuation impacts from the transition to a lower carbon economy and derivative instruments not effectively hedging exposures arising from product guarantees); global political uncertainties, including the potential for increased friction in cross-border trade and the exercise of executive powers to restrict trade, financial transactions, capital movements and/or investment; the policies and actions of regulatory authorities, including, in particular, the policies and actions of the Hong Kong Insurance Authority, as Prudential’s Group-wide supervisor, as well as the degree and pace of regulatory changes and new government initiatives generally; given its designation as an Internationally Active Insurance Group (“IAIG”), the impact on Prudential of systemic risk and other group supervision policy standards adopted by the International Association of Insurance Supervisors; the physical, social and financial impacts of climate change and global health crises on Prudential’s business and operations; the impact of not adequately responding to environmental, social and governance issues (including not properly considering the interests of Prudential’s stakeholders or failing to maintain high standards of corporate governance); the impact of competition and fast-paced technological change; the effect on Prudential’s business and results from, in particular, 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 internal transformation projects and other strategic actions failing to meet their objectives; the availability and effectiveness of reinsurance for Prudential’s businesses; the risk that Prudential’s operational resilience (or that of its suppliers and partners) may prove to be inadequate, including in relation to operational disruption due to external events; disruption to the availability, confidentiality or integrity of Prudential’s information technology, digital systems and data (or those of its suppliers and partners) including the Pulse platform; any ongoing impact on Prudential of the demerger of M&G plc and the demerger of Jackson Financial Inc.; the increased operational and financial risks and uncertainties associated with operating joint ventures with independent partners, particularly where joint ventures are not controlled by Prudential; the impact of changes in capital, solvency standards, accounting standards or relevant regulatory frameworks, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate; and the impact of legal and regulatory actions, investigations 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 actual future financial condition or performance to differ, possibly materially, from those anticipated in Prudential’s forward-looking statements can be found under the ‘Risk Factors’ heading of this document. These factors are not exhaustive as Prudential operates in a continually changing business environment with new risks emerging from time to time that it may be unable to predict or that it currently does not expect to have a material adverse effect on its business.

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 any of 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 Guidance and Transparency Rules, the Hong Kong Listing Rules, the SGX-ST Listing Rules or other applicable laws and regulations.

j. Cautionary Statements

This document does not constitute or form part of any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to purchase, acquire, subscribe for, sell or dispose of, any securities in any jurisdiction nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor.

Please click here to see all documents relating to Prudential’s Full Year Results:
https://www.prudentialplc.com/en/investors/results-centre

The issuer is solely responsible for the content of this announcement.