pru201411186k.htm
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington, D.C. 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER
 
 
Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934
 
 
For the month of November, 2014
 
 
PRUDENTIAL PUBLIC LIMITED COMPANY
 
 
(Translation of registrant's name into English)
 
 
LAURENCE POUNTNEY HILL,

LONDON, EC4R 0HH, ENGLAND
(Address of principal executive offices)





 
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.



Form 20-F X           Form 40-F





Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 
Yes              No X


 
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-



 



NEWS RELEASE        
PRUDENTIAL PLC
 
GROUP COMMUNICATIONS
 
12 ARTHUR STREET
 
LONDON EC4R 9AQ
 
TEL 020 7220 7588
 
FAX 020 7548 3725
 
www.prudential.co.uk
 
8.15 am (GMT) 18 November 2014
 
PRUDENTIAL PLC THIRD QUARTER 2014 INTERIM MANAGEMENT STATEMENT
 
·      Prudential sustaining strong profitable growth
·      Group new business profits of £1,514 million year-to-date, up 17 per cent1
·      Asia new business profit increased 15 per cent1, to £775 million
·      Eastspring third party net inflows of £3.7 billion2
·      US new business profit increased 16 per cent1, to £530 million
·      UK new business profit increased 28 per cent, to £209 million
·      M&G third party net inflows of £5.9 billion year-to-date, with external funds under management up 8 per cent
 
Tidjane Thiam, Group Chief Executive, said:
 
"Prudential has continued to make good progress in the third quarter, with new business profit3 for the first nine months of the year of £1,514 million, up 17 per cent on a constant exchange rate basis (up 6 per cent on an actual exchange rate basis). We have seen strong contributions across the Group, with year-to-date double-digit growth in both new business profit and new business APE sales in each of our three life insurance businesses in Asia, the US and the UK, and net inflows of £9.6 billion2 in our asset management businesses.
 
"In Asia, new business profit increased by 15 per cent to £775 million, driven by APE sales growth of 14 per cent, both at constant exchange rates, demonstrating the strength of our broad based regional platform. Our diversification by country, product and distribution channel is at the heart of our Asia strategy and has enabled continued growth despite short-term challenges in some of our key countries in the region. Our long-term growth potential in the region is strong, underpinned by favourable structural dynamics in our chosen markets.
 
"In the US, we continue to manage new business volumes within our annual risk appetite and to pro-actively diversify our product mix. Jackson's new business profit increased by 16 per cent at constant exchange rates to £530 million, reflecting attractive product economics in our traditional variable annuity business and increased contribution from Elite Access.
 
"New business profit in our UK life business increased by 28 per cent to £209 million, a strong performance. In our retail business, APE sales are nearly at the same levels as last year, despite the disruption in the individual annuity market, reflecting increased appetite among individual investors for our savings and investments products, particularly our with-profits bonds. Our selective approach to wholesale business has seen us write six bulk annuity transactions in the year-to-date, contributing new business profit of £88 million. 
 
"Our performance in 2014 across geographies is strong: our disciplined execution in pursuing clearly defined long-term opportunities in Asia, the US and the UK, has continued to drive profitable growth, in spite of a challenging environment. We remain confident about our prospects for the rest of the year and our ability to create lasting long-term value for our customers and shareholders."
 
 
1   The period since June 2013 has seen depreciation of currencies in some of the Group's key Asia markets and significant strengthening of sterling. In order to reflect underlying performance, and to be consistent with the     currency of transactions of our businesses in Asia and the US, period on period percentage increases referred to in this interim management statement are stated on a constant exchange rate basis. Increases on an actual     exchange rate basis, which incorporate the effect of the exchange rate movements, are shown in the financial highlights section
2   Net investment inflows excluding year-to-date Eastspring Money Market Funds net inflows of £0.1 billion (2013: net outflows of £0.1 billion)
3   As communicated in the full year 2013 results and as reported at Q1 2014 and at HY 2014 the presentation of EEV results has been altered to a post-tax basis from 2014. All references to new business profit in this release are on a    post-tax basis
 
BUSINESS UNIT REVIEW
 
As highlighted in our previous 2014 financial results announcements, there has been significant fluctuation in the value of a number of currencies in our key markets. In periods of currency volatility, the translation into UK sterling of our country results will be significantly impacted by currency effects, potentially masking the underlying performance of our businesses operating in foreign currencies. In that context, it is worth noting that the actual flows that we collect from our customers in Asia and the US are received in local currency, and that those flows are reinvested in local currency so that our businesses are fundamentally domestic businesses. As a result, we believe that the most appropriate way to assess the operational performance of our businesses is to look at what they have achieved on a local currency basis, in other words in terms of the actual flows they have collected which are expressed and measured in local currency, rather than the translation of those flows into sterling. Therefore, in this section, each time we comment on the performance of our businesses, we focus on performance measured in local currency (presented here by reference to percentage growth expressed at constant exchange rates) unless otherwise stated.
 
ASIA
The quality of our regional platform has ensured the continued delivery of profitable growth despite challenging conditions in some of our key markets. In the first nine months of 2014, new business profit grew 15 per cent to £775 million (1 per cent on an actual exchange rate (AER) basis), driven by APE sales growth of 14 per cent to £1,544 million (AER: 1 per cent).
 
In the discrete third quarter, APE sales increased by 17 per cent to £548 million, the highest quarterly sales volume in the year-to-date, with double-digit growth across both agency and bancassurance channels. In particular, the renewed and expanded agreement with Standard Chartered Bank (SCB), which commenced on 1 July, has had a good start with third quarter APE sales 40 per cent higher year-on-year and up 30 per cent compared to the second quarter of 2014.
 
Our focus on our health and protection offering through the agency channel in our chosen markets of South East Asia including Hong Kong continues to underpin the strength of our performance in this region. These 'sweet spot'1 markets saw new business profit increase by 17 per cent and APE sales increase by 14 per cent in the first nine months of the year. In the discrete third quarter, new business profit from these markets grew by 25 per cent year-on-year, reflecting strong contributions from both our agency and our bancassurance channels.
 
Hong Kong delivered excellent APE sales growth of 36 per cent to £424 million. This strong performance has been led by our agency channel, through a combination of growth in active agents and higher agent productivity, and the on-going popularity of our products with customers from mainland China. We are seeing strong momentum across our product range, with increased levels of health and protection sales and continued demand for our established participating products.
 
In Singapore, APE sales increased 9 per cent to £258 million. This performance is mainly a result of an increase in agency volumes, which grew 19 per cent led by regular premium business, reflecting growth in active manpower and improvements in agent productivity. In the bancassurance channel, our arrangement with Maybank ceased during the third quarter, negatively impacting sales. On a like for like basis, bancassurance sales grew by 12 per cent in the third quarter and we continue to benefit from the strength of our partnerships with United Overseas Bank (UOB), and with SCB where monthly sales reached record levels in September.
 
Indonesia has had a challenging year-to-date with natural disasters impacting the first quarter, and uncertainty about the outcome of the Presidential elections impacting overall industry performance in the second and third quarters. Against these short-term headwinds, APE sales of £264 million are 4 per cent lower than the prior year. However, we have outperformed the market as we have increased our market share in the year-to-date. We have seen positive month-on-month momentum in the quarter, confirming that once current headwinds subside, the long-term potential of the life insurance market in Indonesia remains compelling: we are well placed to meet the protection and savings needs of a rapidly growing middle class who are mostly uninsured.
 
In Malaysia, the economic climate has been challenging. The country has experienced lower levels of private consumption and higher public debt, uncertainty regarding reforms to fuel subsidies and the introduction of a new Goods and Services Tax (GST) effective from 2015. In this context, our APE sales have grown by 3 per cent in the first nine months. We continue to make good progress in the Bumi channel, where we have focused our efforts for a few years now, achieving a 20 per cent increase in our APE sales of Takaful products. Although that business has lower case sizes and therefore contributes less to the APE sales growth, we are laying the foundations of future profitable growth in a segment that constitutes the majority of the population of Malaysia.
 
 
1  Sweet spot markets include Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam
 
In our other sweet spot1 markets, we have continued to make good progress. The success of our distribution deal with Thanachart Bank is transforming the scale of our business in Thailand with APE sales growth of 46 per cent to £60 million. Vietnam APE sales were up 15 per cent, primarily reflecting increases in agency productivity. In the Philippines, overall APE sales for the nine months fell by 3 per cent as we continue to increase the focus of the business on regular premium sales. Discrete third quarter APE sales grew by 9 per cent. Sales of regular premium are at the heart of our performance in Asia and we are implementing this well tried approach with success in this nascent market where APE sales of regular premium products were up 25 per cent in the quarter.
 
Among our other markets, our joint venture with CITIC in China continues to see growing contributions in both the agency and bank channels, with APE sales increasing 27 per cent overall. In India, our joint venture with ICICI is performing well in a challenging market, with APE sales up 6 per cent year-to-date. Our third quarter sales increased strongly and were 29 per cent above prior year, benefitting from the recent improvement in sentiment in India. Our niche operations in Korea and Taiwan remain focused on selective participation, with combined year-to-date APE sales growth of 11 per cent.
 
Our asset management business, Eastspring Investments, saw record net third party inflows2of £3.7 billion in the first 9 months of the year, up 95 per cent. These net inflows were driven by several large new institutional mandates and inflows from retail funds in India, China, Japan and Taiwan. Overall funds under management3 at 30 September 2014 were £72.6 billion, up 24 per cent on prior year as a result of the positive net inflows and market movements.  
 
The scale, resilience and diversity of our business platform in Asia combined with the powerful, long-term structural trends of a rapidly growing and increasingly wealthy middle class population with significant savings and protection needs, continues to underpin our long-term profitable growth prospects in the region.
 
US
Jackson's new business profit was up 16 per cent (AER: 8 per cent) to £530 million in the first nine months of 2014. We continue to write business at overall new business margins close to post crisis highs, demonstrating the positive effect of pro-active product and pricing actions that have helped to mitigate the adverse impact of the low interest rate environment.
 
Jackson achieved total retail APE sales of £1,172 million in the year-to-date, representing an increase of 12 per cent. These sales were achieved while continuing to write new business at aggregate internal rates of return in excess of 20 per cent and with a payback period of two years. Including institutional sales, total APE sales increased 11 per cent to £1,235 million.
 
APE sales from variable annuities increased 19 per cent to £1,103 million, with continued improvement in the diversification of our product mix. The success of Elite Access, our variable annuity without living benefits, saw APE sales up 29 per cent at £229 million, contributing to an increase in the share of non-living benefit variable annuity sales to a new high of 33 per cent of total variable annuity APE sales (2013: 30 per cent).
 
Jackson remains focused on managing sales volumes of variable annuities with living benefits to maintain an appropriate balance of our revenue streams and to match our annual risk appetite. In the third quarter, sales of variable annuities with living benefits were 13 per cent lower than the second quarter in 2014.
 
At 30 September 2014, Jackson had statutory separate account assets of £75.9 billion, up 13 per cent (AER: 16 per cent) compared to the end of December 2013, as a result of both positive net flows and the significant growth in the underlying market value of the separate account assets over the period.
 
Fixed annuity APE sales of £41 million remained flat compared to 2013, while fixed index annuity APE sales of £28 million decreased 64 per cent, primarily as a result of product changes implemented in late 2013 to ensure appropriate returns on shareholder capital.
 
Curian Capital, the specialised asset management company of Jackson that provides innovative fee-based separately managed accounts, had assets under management of £7.4 billion at the end of September 2014 compared with £6.4 billion at the same point in 2013, as a result of positive net flows and market appreciation during the period. 
 
Jackson's strategy is unchanged, with a primary focus on delivering earnings and cash. We continue to price new business on a conservative basis, targeting value over volume. Jackson completed a review of policyholder behaviour during the third quarter, which showed that experience is generally in line with our assumptions. Our hedging remains focused on optimising the economics of our exposures over time while maintaining a strong balance sheet.
 
 
1  Sweet spot markets include Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam
2   Net investment inflows excluding year-to-date Eastspring Money Market Funds net inflows of £0.1 billion (2013: net outflows of £0.1 billion)
3   Total funds under management include all external and internal funds
 
UK, Europe and Africa
Our UK business continues to focus on its core strengths of with-profits and retirement solutions. Our strong brand, investment track record and experience in providing income in retirement have enabled us to deliver a 28 per cent increase in new business profit to £209 million and APE sales growth of 20 per cent to £648 million during the first nine months of 2014.
 
The significant reforms of the pensions industry announced by the UK Government, including removal of the requirement to purchase a pension annuity from April 2015, have resulted in an increasing proportion of customers deferring the decision to convert their pension savings into retirement income. The more recent announcement on changes to tax treatment of pensions after death is consistent with these wider pension reforms and is welcomed. The increased flexibility afforded by these reforms should ultimately help create an environment where more people are encouraged to save. The changes have also opened up opportunities for us to meet customer needs for alternative retirement solutions, including income drawdown.
 
Within our retail business, we saw strong sales across our range of retail investment products, in particular in onshore and offshore bonds, individual pensions and income drawdown, which collectively increased 37 per cent. These balanced a 47 per cent reduction in individual annuities, reflecting the slowdown in the market following the UK Budget announcement. Overall retail APE sales of £507 million were only 3 per cent lower than the first nine months of 2013, and increased by 5 per cent in the discrete third quarter on the strength of sales in investment products. Retail new business profit was 22 per cent lower year-to-date, largely due to the reduced sales of individual annuities.
 
Onshore bonds APE sales of £162 million increased by 29 per cent, reflecting the strength of our investment proposition. APE sales from onshore with-profits bonds of £149 million, were 30 per cent higher, with continuing demand for our non-guaranteed bond. We expect significant ongoing demand for our with-profits bond, with customers attracted by the benefit of a smoothed return to help manage market volatility.
                        
Other retail products including offshore bonds, income drawdown and individual pensions increased by 42 per cent to £142 million. Offshore bond APE sales were 56 per cent higher, reflecting the growing popularity of our with-profits fund. Income drawdown APE sales grew by 128 per cent and individual pensions APE sales increased by 30 per cent, both driven by the strength of our with-profits PruFund offering.
 
In total, PruFund assets under management have increased 20 per cent to £10.9 billion since the start of the year.
 
Corporate pensions APE sales of £117 million were 15 per cent lower, in line with the trend seen this year, mainly due to changes to government sector pension schemes. We remain the largest provider of Additional Voluntary Contribution plans within the public sector, where we provide schemes for 72 of the 99 public sector authorities in the UK (2013: 68 of the 99).
 
In the wholesale market, we wrote two additional new bulk annuity deals in the third quarter of 2014, making a total of six in the year-to-date (2013: one), generating cumulative APE sales of £141 million and new business profit of £88 million in the first nine months (2013: APE sales £15 million, new business profit £8 million). Our expertise and capabilities in this market including considerable longevity experience, operational scale and solid investment track record, are increasingly in demand. Our approach to bulk transactions in the UK will continue to be one of selective participation, focusing on those opportunities where we can bring both significant value to our customers and meet our shareholder return requirements.
 
While the UK retirement income market continues to undergo significant change, our business remains well placed to prosper in this new environment through its ongoing focus on its core strengths of with-profits and retirement solutions.
 
On 10 November 2014, Prudential Assurance Company Limited announced an agreement to sell its 25 per cent equity stake in the PruHealth and PruProtect joint venture to Discovery Group Europe Limited ("Discovery") for £155 million in cash. This transaction sees Prudential UK realise its investment at attractive terms and creates strategic flexibility to participate in the UK protection market.
 
We are pleased to have announced our entry into the Kenyan life insurance market during the third quarter, with the acquisition of Shield Assurance Company Limited. This represents our second operation in the nascent African life insurance industry, following the acquisition of Express Life in Ghana, which completed earlier this year.
 
M&G
M&G has had a good quarter. Year-to-date retail net fund inflows totalled £5.3 billion with £1.5 billion of this received during the third quarter. Continental Europe continues to drive the growth, with net inflows of £6.2 billion for the first nine months of the year (2013: £6.4 billion), more than offsetting net outflows of £1.1 billion in the UK. The strength of our performance in Continental Europe has increased funds under management from this region to a record high of £29.6 billion, up 34 per cent over the past 12 months. Total retail funds under management stand at £73.0 billion, up 13 per cent compared with 30 September 2013, with assets from Continental Europe now accounting for 41 per cent (2013: 34 per cent) of the total.
 
M&G's institutional business saw year-to-date net inflows of £0.6 billion (2013: £3.0 billion). Both the current year and prior year periods are impacted by flows from a single large but low-margin mandate. Excluding these, institutional net inflows were more consistent with prior year, at £1.4 billion (2013: £1.5 billion). Sales of alternative credit products remain strong, especially inflation-linked investment strategies, along with leveraged loan, infrastructure and real estate finance mandates. Overall, institutional funds under management increased to £61.6 billion, up 3 per cent year-on-year.
 
M&G attracted total net fund inflows of £1.7 billion during the third quarter, contributing to cumulative net inflows for the nine months to September 2014 of £5.9 billion (2013: £8.9 billion). Total external client assets of £134.6 billion at 30 September 2014 represent an increase of 8 per cent compared to one year ago. Total funds under management now stand at £257.3 billion (2013: £242.2 billion), with third-party external assets accounting for 52 per cent (2013: 51 per cent) of the total.
 
M&G continues to seek diversification by both asset class and geography, while remaining focused on delivering excellent investment performance and service to its clients.
 
BALANCE SHEET
Our balance sheet remains resilient and conservatively positioned. As at 30 September 2014, our IGD surplus was estimated at £4.1 billion, after deducting the 2014 interim dividend of £0.3 billion. The estimated IGD surplus is equivalent to a cover of 2.3 times.
 
OUTLOOK
The Group has delivered a strong performance in the third quarter. 
 
In recent weeks we have seen increased volatility in investment markets, reflecting rising uncertainty. This is driven by a number of factors including the potential impacts of the withdrawal of central bank support in the US, the persistent difficulties of the Eurozone, the significant movements observed in commodity prices and rising geo-political risks. Against this challenging backdrop, our results demonstrate the quality of our strategy and of our execution, focusing on the provision of products and services that address our customers' long-term needs in our chosen markets and on capturing the specific structural growth opportunities available to us in Asia, the US and the UK.
 
In Asia, the diversity of our platform, the quality of our strategy and the provision of products meeting the needs of our customers continue to drive our performance. This year, we have operated with significant macroeconomic and political uncertainty, in Indonesia, in Thailand and most recently in Hong Kong. Despite these challenges, we have continued to execute well, taking actions when and where necessary to continue to deliver a strong performance at the regional level, whatever challenges we meet at a country by country level. We continue to build on our regional distribution platform by expanding our agency distribution while also strengthening our bancassurance channel, most recently this year through the renewal of the pan regional Standard Chartered relationship for another fifteen years. The strength of our brand, the value our products bring to our thirteen million customers, our expanding distribution presence and the quality of our teams leave us well positioned to continue to deliver value to customers and sustained, profitable growth for our shareholders.
 
In the US and the UK we continue to operate with discipline within our chosen market segments, prioritising the generation of earnings and cash over volume. Our UK life business aims to build on its strong existing expertise in investment products, particularly in with-profits, and in the retirement market to deliver a strong performance in a more supportive context where new opportunities have appeared, following the recent reforms.
 
In these times of growing uncertainty, pro-active risk management and a resilient, conservatively-managed balance sheet are more important than ever. The Group's balance sheet, solvency capital and liquidity remain strong and defensively positioned, ensuring that we are well-placed to meet our long-term commitment to our customers through all stages of the economic cycle.
 
We remain confident about our prospects for the rest of the year and our ability to create lasting long-term value for our customers and shareholders.
 
Q3 2014 Business Unit financial highlights
 
 
New Business Profit (post tax)1
              
               
 
YTD 2014
  
YTD 2013
  
YTD 2014 v 2013
 
AER
  
AER
CER
  
AER
CER
Asia
£775m
  
£767m
£673m
  
1%
15%
US
£530m
  
£492m
£455m
  
8%
16%
UK
£209m
  
£163m
£163m
  
28%
28%
Total Group Insurance
£1,514m
  
£1,422m
£1,291m
  
6%
17%
               
               
 
Q3 2014
  
Q3 2013
  
Q3 2014 v 2013
 
AER
  
AER
CER
  
AER
CER
Asia
£281m
  
£265m
£243m
  
6%
16%
US
£154m
  
£181m
£167m
  
(15)%
(8)%
UK
£64m
  
£63m
£63m
  
2%
2%
Total Group Insurance
£499m
  
£509m
£473m
  
(2)%
5%
 
 
               
               
Sales - APE
              
               
 
YTD 2014
  
YTD 2013
  
YTD 2014 v 2013
 
AER
  
AER
CER
  
AER
CER
Asia
£1,544m
  
£1,523m
£1,354m
  
1%
14%
US
£1,235m
  
£1,202m
£1,113m
  
3%
11%
UK
£648m
  
£540m
£540m
  
20%
20%
Total Group Insurance
£3,427m
  
£3,265m
£3,007m
  
5%
14%
               
               
 
Q3 2014
  
Q3 2013
  
Q3 2014 v 2013
 
AER
  
AER
CER
  
AER
CER
Asia
£548m
  
£513m
£470m
  
7%
17%
US
£364m
  
£405m
£377m
  
(10)%
(3)%
UK
£215m
  
£185m
£185m
  
16%
16%
Total Group Insurance
£1,127m
  
£1,103m
£1,032m
  
2%
9%
 
 
Investment Flows
              
               
 
YTD 2014
  
YTD 2013
  
 YTD 2014 v 20132
 
AER
  
AER
CER
  
AER
CER
Gross inflows
              
Retail
£21.6bn
  
£21.3bn
£21.3bn
  
 1 %
 1 %
Institutional
£6.8bn
  
£10.6bn
£10.6bn
  
(36)%
(36)%
M&G - total
£28.4bn
  
£31.9bn
£31.9bn
  
(11)%
(11)%
Eastspring Investments3
£10.6bn
  
£9.6bn
£8.8bn
  
10%
20%
Total Group
£39.0bn
  
£41.5bn
£40.7bn
  
(6)%
(4)%
Net inflows
              
Retail
£5.3bn
  
£5.9bn
£5.9bn
  
(10)%
(10)%
Institutional
£0.6bn
  
£3.0bn
£3.0bn
  
(81)%
(81)%
M&G - total
£5.9bn
  
£8.9bn
£8.9bn
  
(34)%
(34)%
Eastspring Investments3
£3.7bn
  
£2.0bn
£1.9bn
  
82%
95%
Total Group
£9.6bn
  
£10.9bn
£10.8bn
  
(12)%
(11)%
               
 
 
1   New business profits have been calculated by applying the assumptions set out in schedule 5
2   Percentages based on unrounded numbers
3   Gross and net investment inflows excluding year-to-date Eastspring Money Market Funds. Investment flows exclude Eastspring Money Market Funds (MMF) gross inflows of £50.4 billion (2013: £45.5 billion) and net inflows of £0.1 billion (2013: net outflows of £0.1 billion)
 
 
               
               
               
 
Q3 2014
  
Q3 2013
  
Q3 2014 v Q3 20131
 
AER
  
AER
CER
  
AER
CER
Gross inflows
              
Retail
£6.8bn
  
£5.9bn
£5.9bn
  
15%
15%
Institutional
£2.3bn
  
£5.4bn
£5.4bn
  
(57)%
(57)%
M&G - total
£9.1bn
  
£11.3bn
£11.3bn
  
(19)%
(19)%
Eastspring Investments2
£3.7bn
  
£2.2bn
£2.1bn
  
67%
81%
Total Group
£12.8bn
  
£13.5bn
£13.4bn
  
(5)%
(4)%
Net inflows
              
Retail
£1.5bn
  
£1.1bn
£1.1bn
  
35%
35%
Institutional
£0.2bn
  
£4.0bn
£4.0bn
  
(96)%
(96)%
M&G - total
£1.7bn
  
£5.1bn
£5.1bn
  
(67)%
(67)%
Eastspring Investments2
£1.2bn
  
£0.0bn
£0.0bn
  
n/a
n/a
Total Group
£2.9bn
  
£5.1bn
£5.1bn
  
(43)%
(43)%
 
 
               
               
Funds Under Management3
              
               
 
 YTD 2014
  
YTD 2013
  
 YTD 2014 v YTD 20131
 
AER
  
AER
CER
  
AER
CER
M&G
£257.3bn
  
£242.2bn
£242.2bn
  
6%
6%
Eastspring Investments
£72.6bn
  
£59.7bn
£58.6bn
  
22%
24%
Total Group
£329.9bn
  
£301.9bn
£300.8bn
  
9%
10%
External Funds Under Management
              
M&G
£134.6bn
  
£124.3bn
£124.3bn
  
8%
8%
Eastspring Investments4
£22.9bn
  
£18.5bn
£18.0bn
  
24%
27%
Total Group
£157.5bn
  
£142.8bn
£142.3bn
  
10%
11%
 
 
ENDS
 
Enquiries:
 
 
Media
  
Investors/Analysts
  
Jonathan Oliver
+44 (0)20 7548 3719
Raghu Hariharan
+44 (0)20 7548 2871
Tom Willetts
+44 (0)20 7548 2776
Richard Gradidge
+44 (0)20 7548 3860
 
1   Percentages based on unrounded numbers
2   Gross and net investment inflows excluding discrete third quarter Eastspring Money Market Funds. Investment flows for the discrete third quarter exclude Eastspring Money Market Funds gross inflows of £18.3 billion (2013: £14.7    billion) and net inflows of £0.1 billion (2013: net outflows of £0.2 billion)
3   Total funds under management include all external and internal funds
4   External funds under management for Eastspring excluding Money Market Funds as set out in schedule 3
 
Notes:
 
1          Annual premium equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales and are subject to rounding.
 
2          Present Value of New Business Premiums (PVNBP) are calculated as equalling single premiums plus the present value of expected new business premiums of regular premium business, allowing for lapses and other assumptions            made in determining the EEV new business contribution.
 
3          NBP assumptions for the period are detailed in the accompanying schedule 5.
 
4          Period-on-period percentage increases are stated on a constant exchange rate basis unless otherwise stated. Constant exchange rates results are calculated by translating prior period results using the current period foreign             exchange rate i.e current period average rates for the income statement and current period closing rates for the balance sheet.
 
5          There will be a conference call today for the media at 09.15 (UK) / 17.15 (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. Dial in telephone number: (UK) +44 (0)20 3139 4830 (Hong Kong) +852 3068 9834 Pin:             72659606#.
 
6          There will be a conference call today for analysts and investors at 10.30 (UK) / 18.30 (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. Dial in telephone number: +44 (0)20 3139 4830 / 0808 237 0030 (Freephone UK)             Pin: 77765171# Playback (PIN: 651007#) +44(0)20 3426 2807 / 0808 237 0026 (Freephone UK - available from 12.30 (UK Time) on 18 November 2014 until 23.59 (UK Time) on 17 December 2014). Please follow the link for             international dial-in numbers -http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf
 
7          High resolution photographs are available to the media free of charge at www.prudential.co.uk/prudential-plc/media/media_library or by calling the media office on +44 (0) 207 548 2466.   
 
8          Sales for overseas operations have been reported using average exchange rates for the period as shown in the attached schedules. Reference to prior year figures in the commentary is on an actual exchange rate basis unless            stated. An alternative method of presentation is on a constant exchange rate basis shown in supplementary schedules 1B, 2B, 2C 4B and 4C.
 
9          Prudential plc is incorporated in England and Wales, and its affiliated companies constitute one of the world's leading financial services groups. It provides insurance and financial services through its subsidiaries and affiliates             throughout the world. It has been in existence for more than 166 years and has £457 billion in assets under management (as at 30 June 2014). Prudential plc is not affiliated with Prudential Financial, Inc., or its subsidiary, The             Prudential Insurance Company of America.
 
10        Forward-Looking Statements
This document may contain 'forward-looking statements' with respect to certain of Prudential's 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 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 to differ materially from those indicated in any forward-looking statement. Such factors include, but are not limited to, future market conditions, including fluctuations in interest rates and exchange rates and the potential for a sustained low-interest rate environment, and the performance of financial markets generally; the policies and actions of regulatory authorities, including, for example, new government initiatives related to the financial crisis and the effect of the European Union's 'Solvency II' requirements on Prudential's capital maintenance requirements; the impact of continuing designation as a global systemically important insurer; the impact of competition, economic growth, inflation, and deflation; experience in particular with regard to 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 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 actions 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 Prudential's actual future financial condition or performance or other indicated results to differ, possibly materially, from those anticipated in Prudential's forward-looking statements can be found under the 'Risk factors' heading in its most recent Annual Report and the 'Risk Factors' heading of Prudential's most recent annual report on Form 20-F filed with the U.S. Securities and Exchange Commission, as well as under the 'Risk Factors' heading of any subsequent Prudential Half Year Financial Report. Prudential's most recent Annual Report, Form 20-F and any subsequent Half Year Financial Report are/will be available on its website at www.prudential.co.uk.
 
 
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 and Transparency Rules, the Hong Kong Listing Rules, the SGX-ST listing rules or other applicable laws and regulations.
 
 
11        The financial information presented in this Interim Management Statement and accompanying schedules is unaudited.
 
Schedule 1A - New Business Insurance Operations (Actual Exchange Rates)
 
 
                                   
   
Single
  
Regular
  
Annual Equivalents(2)
  
PVNBP
  
   
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
   
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
   
£m
£m
    
£m
£m
    
£m
£m
    
£m
£m
    
Group Insurance Operations
                                  
Asia (1a)
  
 1,598
 1,562
2%
  
 1,384
 1,366
1%
  
 1,544
 1,523
1%
  
 8,408
 8,206
2%
  
US(1a)
  
 12,352
 12,006
3%
  
 -  
 1
(100)%
  
 1,235
 1,202
3%
  
 12,352
 12,006
3%
  
UK
  
 4,991
 3,744
33%
  
 149
 165
(10)%
  
 648
 540
20%
  
 5,598
 4,398
27%
  
Group Total
  
 18,941
 17,312
9%
  
 1,533
 1,532
0%
  
 3,427
 3,265
5%
  
 26,358
 24,610
7%
  
     
  
                            
Asia Insurance Operations(1a)
                                  
Cambodia
  
 -  
 -  
N/A
  
 2
 -  
N/A
  
 2
 -  
N/A
  
 9
 -  
N/A
  
Hong Kong
  
 286
214
34%
  
 395
314
26%
  
 424
 335
27%
  
 2,501
 1,922
30%
  
Indonesia
  
 193
 264
(27)%
  
 245
 321
(24)%
  
 264
 348
(24)%
  
 1,090
 1,453
(25)%
  
Malaysia
  
 70
 79
(11)%
  
 132
 143
(8)%
  
 139
 151
(8)%
  
 899
 1,001
(10)%
  
Philippines
  
 84
 163
(48)%
  
 27
 24
13%
  
 35
 41
(15)%
  
 167
 239
(30)%
  
Singapore
  
 475
 373
27%
  
 210
 220
(5)%
  
 258
 257
0%
  
 1,868
 1,831
2%
  
Thailand
  
 72
 44
64%
  
 53
 42
26%
  
 60
 47
28%
  
 278
 199
40%
  
Vietnam
  
 2
 1
100%
  
 39
 37
5%
  
 39
 37
5%
  
 161
 136
18%
  
SE Asia Operations inc. Hong Kong
  
 1,182
 1,138
4%
  
 1,103
 1,101
0%
  
 1,221
 1,216
0%
  
 6,973
 6,781
3%
  
China(6)
  
 172
 95
81%
  
 63
 59
7%
  
 80
 68
18%
  
 414
 342
21%
  
Korea
  
 156
 229
(32)%
  
 64
 62
3%
  
 80
 85
(6)%
  
 433
 465
(7)%
  
Taiwan
  
 66
 73
(10)%
  
 81
 66
23%
  
 88
 73
21%
  
 336
 321
5%
  
India(4)
  
 22
 27
(19)%
  
 73
 78
(6)%
  
 75
 81
(7)%
  
 252
 297
(15)%
  
Total Asia Operations
  
 1,598
 1,562
2%
  
 1,384
 1,366
1%
  
 1,544
 1,523
1%
  
 8,408
 8,206
2%
  
     
  
                            
US Insurance Operations(1a)
    
  
                            
Variable Annuities
  
 8,740
 8,096
8%
  
 -  
 -  
N/A
  
 874
 809
8%
  
 8,740
 8,096
8%
  
Elite Access (Variable Annuity)
  
 2,293
 1,909
20%
  
 -  
 -  
N/A
  
 229
 191
20%
  
 2,293
 1,909
20%
  
Fixed Annuities
  
 405
 439
(8)%
  
 -  
 -  
N/A
  
 41
 44
(7)%
  
 405
 439
(8)%
  
Fixed Index Annuities
  
 280
 835
(66)%
  
 -  
 -  
N/A
  
 28
 84
(67)%
  
 280
 835
(66)%
  
Life
  
 -  
 -  
N/A
  
 -  
 1
(100)%
  
 -  
 1
(100)%
  
 -  
 -  
N/A
  
Wholesale
  
 634
 727
(13)%
  
 -  
 -  
N/A
  
 63
 73
(14)%
  
 634
 727
(13)%
  
Total US Insurance Operations
  
 12,352
 12,006
3%
  
 -  
 1
(100)%
  
 1,235
 1,202
3%
  
 12,352
 12,006
3%
  
                                   
UK & Europe Insurance Operations
                                  
Direct and Partnership Annuities
  
 135
 223
(39)%
  
 -  
 -  
N/A
  
 14
 22
(36)%
  
 135
 223
(39)%
  
Intermediated Annuities
  
 123
 406
(70)%
  
 -  
 -  
N/A
  
 12
 41
(71)%
  
 123
 406
(70)%
  
Internal Vesting Annuities
  
 603
 981
(39)%
  
 -  
 -  
N/A
  
 60
 98
(39)%
  
 603
 981
(39)%
  
Total Individual Annuities
  
 861
 1,610
(47)%
  
 -  
 -  
N/A
  
 86
 161
(47)%
  
 861
 1,610
(47)%
  
Corporate Pensions
  
 76
 103
(26)%
  
 109
 127
(14)%
  
 117
 138
(15)%
  
 455
 553
(18)%
  
On-shore Bonds
  
 1,620
 1,263
28%
  
 -  
 -  
N/A
  
 162
 126
29%
  
 1,621
 1,264
28%
  
Other Products
  
 1,021
 622
64%
  
 40
 38
5%
  
 142
 100
42%
  
 1,248
 825
51%
  
Wholesale
  
 1,413
 146
868%
  
 -  
 -  
N/A
  
 141
 15
840%
  
 1,413
 146
868%
  
Total UK & Europe Insurance Operations
  
 4,991
 3,744
33%
  
 149
 165
(10)%
  
 648
 540
20%
  
 5,598
 4,398
27%
  
Group Total
  
 18,941
 17,312
9%
  
 1,533
 1,532
0%
  
 3,427
 3,265
5%
  
 26,358
 24,610
7%
  
 
Schedule 1B - New Business Insurance Operations (Constant Exchange Rates)
 
Note:    In schedule 1B constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013.
 
 
                                 
 
Single
  
Regular
  
Annual Equivalents(2)
  
PVNBP
  
 
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
Q3 2014
Q3 2013
    
 
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
YTD
YTD
+/- (%)
  
 
£m
£m
    
£m
£m
    
£m
£m
    
£m
£m
    
Group Insurance Operations
                                
Asia (1a) (1b)
 1,598
 1,408
13%
  
 1,384
 1,213
14%
  
 1,544
 1,354
14%
  
 8,408
 7,353
14%
  
US(1a) (1b)
 12,352
 11,120
11%
  
 -  
 1
(100)%
  
 1,235
 1,113
11%
  
 12,352
 11,120
11%
  
UK
 4,991
 3,744
33%
  
 149
 165
(10)%
  
 648
 540
20%
  
 5,598
 4,398
27%
  
Group Total
 18,941
 16,272
16%
  
 1,533
 1,379
11%
  
 3,427
 3,007
14%
  
 26,358
 22,871
15%
  
                                 
Asia Insurance Operations(1a) (1b)
                                
Cambodia
 -  
 -  
N/A
  
 2
 -  
N/A
  
 2
 -  
N/A
  
 9
 2
350%
  
Hong Kong
 286
 198
44%
  
 395
 291
36%
  
 424
 311
36%
  
 2,501
 1,781
40%
  
Indonesia
 193
 209
(8)%
  
 245
 254
(4)%
  
 264
 275
(4)%
  
 1,090
 1,151
(5)%
  
Malaysia
 70
 70
0%
  
 132
 128
3%
  
 139
 135
3%
  
 899
 896
0%
  
Philippines
 84
 143
(41)%
  
 27
 22
23%
  
 35
 36
(3)%
  
 167
 210
(20)%
  
Singapore
 475
 344
38%
  
 210
 203
3%
  
 258
 237
9%
  
 1,868
 1,688
11%
  
Thailand
 72
 38
89%
  
 53
 37
43%
  
 60
 41
46%
  
 278
 172
62%
  
Vietnam
 2
 1
100%
  
 39
 34
15%
  
 39
 34
15%
  
 161
 125
29%
  
SE Asia Operations inc. Hong Kong
 1,182
 1,003
18%
  
 1,103
 969
14%
  
 1,221
 1,069
14%
  
 6,973
 6,025
16%
  
China(6)
 172
 88
95%
  
 63
 54
17%
  
 80
 63
27%
  
 414
 317
31%
  
Korea
 156
 226
(31)%
  
 64
 61
5%
  
 80
 84
(5)%
  
 433
 457
(5)%
  
Taiwan
 66
 67
(1)%
  
 81
 60
35%
  
 88
 67
31%
  
 336
 293
15%
  
India(4)
 22
 24
(8)%
  
 73
 69
6%
  
 75
 71
6%
  
 252
 261
(3)%
  
Total Asia Operations
 1,598
 1,408
13%
  
 1,384
 1,213
14%
  
 1,544
 1,354
14%
  
 8,408
 7,353
14%
  
                                 
US Insurance Operations(1a) (1b)
                                
Variable Annuities
 8,740
 7,498
17%
  
 -  
 -  
N/A
  
 874
 750
17%
  
 8,740
 7,498
17%
  
Elite Access (Variable Annuity)
 2,293
 1,768
30%
  
 -  
 -  
N/A
  
 229
 177
29%
  
 2,293
 1,768
30%
  
Fixed Annuities
 405
 407
(0)%
  
 -  
 -  
N/A
  
 41
 41
0%
  
 405
 407
(0)%
  
Fixed Index Annuities
 280
 774
(64)%
  
 -  
 -  
N/A
  
 28
 77
(64)%
  
 280
 774
(64)%
  
Life
 -  
 -  
N/A
  
 -  
 1
(100)%
  
 -  
 1
(100)%
  
 -  
 -  
N/A
  
Wholesale
 634
 673
(6)%
  
 -  
 -  
N/A
  
 63
 67
(6)%
  
 634
 673
(6)%
  
Total US Insurance Operations
 12,352
 11,120
11%
  
 -  
 1
(100)%
  
 1,235
 1,113
11%
  
 12,352
 11,120
11%
  
                                 
UK & Europe Insurance Operations
                                
Direct and Partnership Annuities
 135
 223
(39)%
  
 -  
 -  
N/A
  
 14
 22
(36)%
  
 135
 223
(39)%
  
Intermediated Annuities
 123
 406
(70)%
  
 -  
 -  
N/A
  
 12
 41
(71)%
  
 123
 406
(70)%
  
Internal Vesting Annuities
 603
 981
(39)%
  
 -  
 -  
N/A
  
 60
 98
(39)%
  
 603
 981
(39)%
  
Total Individual Annuities
 861
 1,610
(47)%
  
 -  
 -  
N/A
  
 86
 161
(47)%
  
 861
 1,610
(47)%
  
Corporate Pensions
 76
 103
(26)%
  
 109
 127
(14)%
  
 117
 138
(15)%
  
 455
 553
(18)%
  
On-shore Bonds
 1,620
 1,263
28%
  
 -  
 -  
N/A
  
 162
 126
29%
  
 1,621
 1,264
28%
  
Other Products
 1,021
 622
64%
  
 40
 38
5%
  
 142
 100
42%
  
 1,248
 825
51%
  
Wholesale
 1,413
 146
868%
  
 -  
 -  
N/A
  
 141
 15
840%
  
 1,413
 146
868%
  
Total UK & Europe Insurance Operations
 4,991
 3,744
33%
  
 149
 165
(10)%
  
 648
 540
20%
  
 5,598
 4,398
27%
  
Group Total
 18,941
 16,272
16%
  
 1,533
 1,379
11%
  
 3,427
 3,007
14%
  
 26,358
 22,871
15%
  
 
 
Schedule 2A - Total Insurance New Business APE - By Quarter (Actual Exchange Rates)
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2
Q3
  
 
£m
£m
£m
£m
  
£m
£m
£m
  
Group Insurance Operations
                  
Asia (1a)
 495
 515
 513
 602
  
 507
 489
 548
  
US(1a)
 358
 439
 405
 371
  
 432
 439
 364
  
UK
 185
 170
 185
 185
  
 237
 196
 215
  
Group Total
 1,038
 1,124
 1,103
 1,158
  
 1,176
 1,124
 1,127
  
                   
Asia Insurance Operations(1a)
                  
Cambodia
 -  
 -  
 -  
 1
  
 -  
 1
 1
  
Hong Kong
 107
 107
 121
 152
  
 128
130
 166
  
Indonesia
 112
 128
 108
 129
  
 86
98
 80
  
Malaysia
 46
 53
 52
 57
  
 43
48
 48
  
Philippines
 14
 15
 12
 12
  
 11
11
 13
  
Singapore
 80
 90
 87
 104
  
 87
85
 86
  
Thailand
 11
 14
 22
 21
  
 25
17
 18
  
Vietnam
 10
 13
 14
 17
  
 11
12
 16
  
SE Asia Operations inc. Hong Kong
 380
 420
 416
 493
  
 391
 402
 428
  
China(6)
 27
 20
 21
 15
  
 38
19
23
  
Korea
 30
 32
 23
 28
  
 26
22
32
  
Taiwan
 19
 26
 28
 44
  
 24
30
34
  
India(4)
 39
 17
 25
 22
  
 28
 16
31
  
Total Asia Insurance Operations
 495
 515
 513
 602
  
 507
 489
 548
  
                   
US Insurance Operations(1a)
                  
Variable Annuities
 240
 298
 271
 270
  
 317
297
260
  
Elite Access (Variable Annuity)
 54
 73
 64
 68
  
 69
80
80
  
Fixed Annuities
 14
 16
 14
 11
  
 12
15
14
  
Fixed Index Annuities
 34
 28
 22
 7
  
 8
10
10
  
Life
 1
 -  
 -  
 1
  
 -  
 -  
 -  
  
Wholesale
 15
 24
 34
 14
  
 26
37
 -  
  
Total US Insurance Operations
 358
 439
 405
 371
  
 432
 439
 364
  
                   
UK & Europe Insurance Operations
                  
Direct and Partnership Annuities
 8
 7
 7
 6
  
 5
5
4
  
Intermediated Annuities
 15
 14
 12
 8
  
 7
3
2
  
Internal Vesting Annuities
 32
 35
 31
 33
  
 24
19
17
  
Total Individual Annuities
 55
 56
 50
 47
  
 36
 27
 23
  
Corporate Pensions
 53
 40
 45
 35
  
 40
39
38
  
On-shore Bonds
 45
 38
 43
 50
  
 49
53
60
  
Other Products
 32
 36
 32
 40
  
 39
46
57
  
Wholesale
 -  
 -  
 15
 13
  
 73
 31
37
  
Total UK & Europe Insurance Operations
 185
 170
 185
 185
  
 237
 196
 215
  
Group Total
 1,038
 1,124
 1,103
 1,158
  
 1,176
 1,124
 1,127
  
 
Schedule 2B - Total Insurance New Business APE - By Quarter (2013 at Constant Exchange Rates)
 
 
Note:   In schedule 2B constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013. Discrete quarters in 2014 are presented on actual exchange rates.
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2
Q3
  
 
£m
£m
£m
£m
  
£m
£m
£m
  
Group Insurance Operations
                  
Asia(1b)
 434
 450
 470
 577
  
 507
 489
 548
  
US(1b)
 333
 403
 377
 361
  
 432
 439
 364
  
UK
 185
 170
 185
 185
  
 237
 196
 215
  
Group Total
 952
 1,023
 1,032
 1,123
  
 1,176
 1,124
 1,127
  
                   
Asia Insurance Operations(1b)
                  
Cambodia
 -  
 -  
 -  
 1
  
 -  
 1
 1
  
Hong Kong
 99
 99
 113
 147
  
 128
 130
 166
  
Indonesia
 87
 98
 90
 123
  
 86
 98
 80
  
Malaysia
 40
 47
 48
 55
  
 43
 48
 48
  
Philippines
 12
 13
 11
 12
  
 11
 11
 13
  
Singapore
 73
 82
 82
 100
  
 87
 85
 86
  
Thailand
 9
 12
 20
 19
  
 25
 17
 18
  
Vietnam
 9
 12
 13
 17
  
 11
 12
 16
  
SE Asia Operations inc. Hong Kong
 329
 363
 377
 474
  
 391
 402
 428
  
China(6)
 25
 18
 20
 13
  
 38
 19
 23
  
Korea
 29
 32
 23
 27
  
 26
 22
 32
  
Taiwan
 18
 23
 26
 41
  
 24
 30
 34
  
India(4)
 33
 14
 24
 22
  
 28
 16
 31
  
Total Asia Insurance Operations
 434
 450
 470
 577
  
 507
 489
 548
  
                   
US Insurance Operations(1b)
                  
Variable Annuities
 223
 275
 252
 262
  
 317
 297
 260
  
Elite Access (Variable Annuity)
 50
 67
 60
 65
  
 69
 80
 80
  
Fixed Annuities
 13
 15
 13
 11
  
 12
 15
 14
  
Fixed Index Annuities
 32
 25
 20
 8
  
 8
 10
 10
  
Life
 1
 -  
 -  
 1
  
 -  
 -  
 -  
  
Wholesale
 14
 21
 32
 14
  
 26
 37
 -  
  
Total US Insurance Operations
 333
 403
 377
 361
  
 432
 439
 364
  
                   
UK & Europe Insurance Operations
                  
Direct and Partnership Annuities
 8
 7
 7
 6
  
 5
 5
 4
  
Intermediated Annuities
 15
 14
 12
 8
  
 7
 3
 2
  
Internal Vesting Annuities
 32
 35
 31
 33
  
 24
 19
 17
  
Total Individual Annuities
 55
 56
 50
 47
  
 36
 27
 23
  
Corporate Pensions
 53
 40
 45
 35
  
 40
 39
 38
  
On-shore Bonds
 45
 38
 43
 50
  
 49
 53
 60
  
Other Products
 32
 36
 32
 40
  
 39
 46
 57
  
Wholesale
 -  
 -  
 15
 13
  
 73
 31
 37
  
Total UK & Europe Insurance Operations
185
170
185
185
  
237
196
215
  
Group Total
952
1,023
1,032
1,123
  
1,176
1,124
1,127
  
 
Schedule 2C - Total Insurance New Business APE - By Quarter (2014 and 2013 at Constant Exchange Rates)
 
 
Note:   In schedule 2C constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013 and 2014 i.e the average exchange rates for the period ended 30 September 2014 are              applied to each discrete quarter for 2013 and 2014.
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2
Q3
  
 
£m
£m
£m
£m
  
£m
£m
£m
  
Group Insurance Operations
                  
Asia(1c)
 434
 450
 470
 577
  
 506
 492
 546
  
US(1c)
 333
 403
 377
 361
  
 429
 442
 364
  
UK
 185
 170
 185
 185
  
 237
 196
 215
  
Group Total
 952
 1,023
 1,032
 1,123
  
 1,172
 1,130
 1,125
  
                   
Asia Insurance Operations(1c)
                  
Cambodia
 -  
 -  
 -  
 1
  
 -  
 1
 1
  
Hong Kong
 99
 99
 113
 147
  
 128
 130
 166
  
Indonesia
 87
 98
 90
 123
  
 86
 98
 80
  
Malaysia
 40
 47
 48
 55
  
 44
 48
 47
  
Philippines
 12
 13
 11
 12
  
 11
 12
 12
  
Singapore
 73
 82
 82
 100
  
 87
 85
 86
  
Thailand
 9
 12
 20
 19
  
 25
 17
 18
  
Vietnam
 9
 12
 13
 17
  
 10
 13
 16
  
SE Asia Operations inc. Hong Kong
 329
 363
 377
 474
  
 391
 404
 426
  
China(6)
 25
 18
 20
 13
  
 37
 19
 24
  
Korea
 29
 32
 23
 27
  
 26
 22
 32
  
Taiwan
 18
 23
 26
 41
  
 24
 30
 34
  
India(4)
 33
 14
 24
 22
  
 28
 17
 30
  
Total Asia Insurance Operations
 434
 450
 470
 577
  
 506
 492
 546
  
                   
US Insurance Operations(1c)
                  
Variable Annuities
 223
 275
 252
 262
  
 315
 299
 260
  
Elite Access (Variable Annuity)
 50
 67
 60
 65
  
 68
 81
 80
  
Fixed Annuities
 13
 15
 13
 11
  
 12
 15
 14
  
Fixed Index Annuities
 32
 25
 20
 8
  
 8
 10
 10
  
Life
 1
 -  
 -  
 1
  
 -  
 -  
 -  
  
Wholesale
 14
 21
 32
 14
  
 26
 37
 -  
  
Total US Insurance Operations
 333
 403
 377
 361
  
 429
 442
 364
  
                   
UK & Europe Insurance Operations
                  
Direct and Partnership Annuities
 8
 7
 7
 6
  
 5
 5
 4
  
Intermediated Annuities
 15
 14
 12
 8
  
 7
 3
 2
  
Internal Vesting Annuities
 32
 35
 31
 33
  
 24
 19
 17
  
Total Individual Annuities
 55
 56
 50
 47
  
 36
 27
 23
  
Corporate Pensions
 53
 40
 45
 35
  
 40
 39
 38
  
On-shore Bonds
 45
 38
 43
 50
  
 49
 53
 60
  
Other Products
 32
 36
 32
 40
  
 39
 46
 57
  
Wholesale
 -  
 -  
 15
 13
  
 73
 31
 37
  
Total UK & Europe Insurance Operations
185
170
185
185
  
237
196
215
  
Group Total
952
1,023
1,032
1,123
  
1,172
1,130
1,125
  
 
Schedule 3 - Investment Operations - By Quarter (Actual Exchange Rates)
           
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4 
  
Q1
Q2
Q3
  
 
£m
£m
£m
£m 
  
£m
£m
£m
  
Group Investment Operations
                  
Opening FUM
129,498
138,926
137,407
142,820
  
143,916
147,914
153,849
  
Net Flows:(8)
3,502
2,344
5,093
126
  
2,571
4,123
2,893
  
 - Gross Inflows
13,409
14,561
13,528
11,006
  
12,146
14,045
12,847
  
 - Redemptions
(9,907)
(12,217)
(8,435)
(10,880)
  
(9,575)
(9,922)
(9,954)
  
Other Movements
5,926
(3,863)
320
970
  
1,427
1,812
791
  
Total Group Investment Operations(10)
138,926
137,407
142,820
143,916
  
147,914
153,849
157,533
  
                   
M&G
                  
                   
Retail
                  
Opening FUM
54,879
61,427
62,655
64,504
  
67,202
68,981
71,941
  
Net Flows:
2,446
2,308
1,132
1,456
  
1,291
2,493
1,531
  
 - Gross Inflows
7,213
8,138
5,919
6,789
  
7,305
7,468
6,801
  
 - Redemptions
(4,767)
(5,830)
(4,787)
(5,333)
  
(6,014)
(4,975)
(5,270)
  
Other Movements
4,102
(1,080)
717
1,242
  
488
467
(460)
  
Closing FUM
61,427
62,655
64,504
67,202
  
68,981
71,941
73,012
  
                   
Comprising amounts for:
                  
   UK
41,194
39,953
40,955
42,016
  
42,199
42,392
41,756
  
   Europe (excluding UK)
18,696
21,198
22,064
23,699
  
25,244
27,927
29,622
  
   South Africa
1,537
1,504
1,485
1,487
  
1,538
1,622
1,634
  
 
61,427
62,655
64,504
67,202
  
68,981
71,941
73,012
  
                   
Institutional(3)
                  
Opening FUM
56,989
57,745
55,484
59,810
  
58,787
59,736
60,830
  
Net Flows:
(15)
(899)
3,928
(866)
  
152
275
138
  
 - Gross Inflows
2,656
2,591
5,364
2,163
  
1,655
2,894
2,295
  
 - Redemptions
(2,671)
(3,490)
(1,436)
(3,029)
  
(1,503)
(2,619)
(2,157)
  
Other Movements
771
(1,362)
398
(157)
  
797
819
604
  
Closing FUM
57,745
55,484
59,810
58,787
  
59,736
60,830
61,572
  
                   
Total M&G Investment Operations
119,172
118,139
124,314
125,989
  
128,717
132,771
134,584
  
                   
PPM South Africa FUM included in Total M&G
4,701
4,509
4,633
4,513
  
4,720
4,815
4,905
  
                   
Eastspring - excluding MMF(8)
                  
                   
Equity/Bond/Other(7)
                  
Opening FUM
15,457
17,206
16,756
16,133
  
16,109
16,753
18,259
  
Net Flows:
795
838
65
118
  
540
1,063
1,127
  
 - Gross Inflows
3,122
3,596
2,214
1,982
  
2,546
3,285
3,583
  
 - Redemptions
(2,327)
(2,758)
(2,149)
(1,864)
  
(2,006)
(2,222)
(2,456)
  
Other Movements
954
(1,288)
(688)
(142)
  
104
443
507
  
Closing FUM(5)
17,206
16,756
16,133
16,109
  
16,753
18,259
19,893
  
                   
Third Party Institutional Mandates
                  
Opening FUM
2,173
2,548
2,512
2,373
  
1,818
2,444
2,819
  
Net Flows:
276
97
(32)
(582)
  
588
292
97
  
 - Gross Inflows
418
236
31
72
  
640
398
168
  
 - Redemptions
(142)
(139)
(63)
(654)
  
(52)
(106)
(71)
  
Other Movements
99
(133)
(107)
27
  
38
83
140
  
Closing FUM(5)
2,548
2,512
2,373
1,818
  
2,444
2,819
3,056
  
                   
Total Eastspring Investment Operations
19,754
19,268
18,506
17,927
  
19,197
21,078
22,949
  
                   
US
                  
Curian - FUM(5) (9)
6,315
6,466
6,371
6,601
  
6,781
6,948
7,421
  
 
Schedule 4A - Total Insurance New Business Profit (Actual Exchange Rates)
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2 
Q3
  
 
YTD
YTD
YTD
YTD
  
YTD
YTD 
YTD 
  
 
£m
£m
£m
£m
  
£m
£m 
£m 
  
Post-tax analysis
                  
                   
Post-tax new business profit(1a)
                  
Total Asia Insurance Operations
237
502
767
1,139
  
243
494
 775
  
Total US Insurance Operations
125
311
492
706
  
195
376
 530
  
Total UK & Europe Insurance Operations
48
100
163
237
  
91
145
 209
  
Group Total
410
913
1,422
2,082
  
529
1,015
1,514
  
                   
Annual Equivalent(1a) (2)
                  
Total Asia Insurance Operations
495
1,010
1,523
2,125
  
507
996
1,544
  
Total US Insurance Operations
358
797
1,202
1,573
  
432
871
1,235
  
Total UK & Europe Insurance Operations
185
355
540
725
  
237
433
648
  
Group Total
1,038
2,162
3,265
4,423
  
1,176
2,300
3,427
  
                   
Post-tax new business margin (NBP as % of APE)
                  
Total Asia Insurance Operations
48%
50%
50%
54%
  
48%
50%
50%
  
Total US Insurance Operations
35%
39%
41%
45%
  
45%
43%
43%
  
Total UK & Europe Insurance Operations
26%
28%
30%
33%
  
38%
33%
32%
  
Group Total
39%
42%
44%
47%
  
45%
44%
44%
  
                   
PVNBP(1a) (2)
                  
Total Asia Insurance Operations
2,734
5,524
8,206
11,375
  
2,690
5,378
8,408
  
Total US Insurance Operations
3,581
7,957
12,006
15,723
  
4,323
8,703
12,352
  
Total UK & Europe Insurance Operations
1,540
2,943
4,398
5,978
  
2,072
3,741
5,598
  
Group Total
7,855
16,424
24,610
33,076
  
9,085
17,822
26,358
  
                   
Post-tax new business margin (NBP as % of PVNBP)
                  
Total Asia Insurance Operations
8.7%
9.1%
9.3%
10.0%
  
9.0%
9.2%
9.2%
  
Total US Insurance Operations
3.5%
3.9%
4.1%
4.5%
  
4.5%
4.3%
4.3%
  
Total UK & Europe Insurance Operations
3.1%
3.4%
3.7%
4.0%
  
4.4%
3.9%
3.7%
  
Group Total
5.2%
5.6%
5.8%
6.3%
  
5.8%
5.7%
5.7%
  
 
Schedule 4B - Total Insurance New Business Profit (2013 at Constant Exchange Rates)
 
 
Note:   In schedule 4B constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013.  The year-to-date amounts for 2014 are presented on actual exchange rates.
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2 
Q3
  
 
YTD
YTD
YTD
YTD
  
YTD
YTD 
YTD 
  
 
£m
£m
£m
£m
  
£m
£m 
£m 
  
Post-tax analysis
                  
                   
Post-tax new business profit(1b)
                  
Total Asia Insurance Operations
 203
 430
 673
 1,025
  
243
494
 775
  
Total US Insurance Operations
 116
 288
 455
 661
  
195
376
 530
  
Total UK & Europe Insurance Operations
 48
 100
 163
 237
  
91
145
 209
  
Group Total
367
818
1,291
1,923
  
529
1,015
1,514
  
                   
Annual Equivalent(1b) (2)
                  
Total Asia Insurance Operations
434
884
1,354
1,931
  
507
996
1,544
  
Total US Insurance Operations
333
736
1,113
1,474
  
432
871
1,235
  
Total UK & Europe Insurance Operations
185
355
540
725
  
237
433
648
  
Group Total
952
1,975
3,007
4,130
  
1,176
2,300
3,427
  
                   
Post-tax new business margin (NBP as % of APE)
                  
Total Asia Insurance Operations
47%
49%
50%
53%
  
48%
50%
50%
  
Total US Insurance Operations
35%
39%
41%
45%
  
45%
43%
43%
  
Total UK & Europe Insurance Operations
26%
28%
30%
33%
  
38%
33%
32%
  
Group Total
39%
41%
43%
47%
  
45%
44%
44%
  
                   
PVNBP(1b) (2)
                  
Total Asia Insurance Operations
2,416
4,876
7,353
10,403
  
2,690
5,378
8,408
  
Total US Insurance Operations
3,329
7,362
11,120
14,735
  
4,323
8,703
12,352
  
Total UK & Europe Insurance Operations
1,540
2,943
4,398
5,978
  
2,072
3,741
5,598
  
Group Total
7,285
15,181
22,871
31,116
  
9,085
17,822
26,358
  
                   
Post-tax new business margin (NBP as % of PVNBP)
                  
Total Asia Insurance Operations
8.4%
8.8%
9.2%
9.9%
  
9.0%
9.2%
9.2%
  
Total US Insurance Operations
3.5%
3.9%
4.1%
4.5%
  
4.5%
4.3%
4.3%
  
Total UK & Europe Insurance Operations
3.1%
3.4%
3.7%
4.0%
  
4.4%
3.9%
3.7%
  
Group Total
5.0%
5.4%
5.6%
6.2%
  
5.8%
5.7%
5.7%
  
 
Schedule 4C - Total Insurance New Business Profit (2014 and 2013 at Constant Exchange Rates)
 
 
Note: In schedule 4C constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013 and 2014, i.e the average exchange rates for the period ended 30 September 2014 are           applied to each period for 2013 and 2014.
 
 
 
2013
  
2014
  
 
Q1
Q2
Q3
Q4
  
Q1
Q2 
Q3
  
 
YTD
YTD
YTD
YTD
  
YTD
YTD 
YTD 
  
 
£m
£m
£m
£m
  
£m
£m 
£m 
  
Post-tax analysis
                  
                   
New business profit(1c)
                  
Total Asia Insurance Operations
 203
 430
 673
 1,025
  
 243
 495
 775
  
Total US Insurance Operations
 116
 288
 455
 661
  
 193
 376
 530
  
Total UK & Europe Insurance Operations
 48
 100
 163
 237
  
 91
 145
 209
  
Group Total
367
818
1,291
1,923
  
527
1,016
1,514
  
                   
Annual Equivalent(1c) (2)
                  
Total Asia Insurance Operations
434
884
1,354
1,931
  
506
998
1,544
  
Total US Insurance Operations
333
736
1,113
1,474
  
429
871
1,235
  
Total UK & Europe Insurance Operations
185
355
540
725
  
237
433
648
  
Group Total
952
1,975
3,007
4,130
  
1,172
2,302
3,427
  
                   
New business margin (NBP as % of APE)
                  
Total Asia Insurance Operations
47%
49%
50%
53%
  
48%
50%
50%
  
Total US Insurance Operations
35%
39%
41%
45%
  
45%
43%
43%
  
Total UK & Europe Insurance Operations
26%
28%
30%
33%
  
38%
33%
32%
  
Group Total
39%
41%
43%
47%
  
45%
44%
44%
  
                   
PVNBP(1c) (2)
                  
Total Asia Insurance Operations
2,416
4,876
7,353
10,403
  
2,686
5,388
8,408
  
Total US Insurance Operations
3,329
7,362
11,120
14,735
  
4,286
8,702
12,352
  
Total UK & Europe Insurance Operations
1,540
2,943
4,398
5,978
  
2,072
3,741
5,598
  
Group Total
7,285
15,181
22,871
31,116
  
9,044
17,831
26,358
  
                   
New business margin (NBP as % of PVNBP)
                  
Total Asia Insurance Operations
8.4%
8.8%
9.2%
9.9%
  
9.0%
9.2%
9.2%
  
Total US Insurance Operations
3.5%
3.9%
4.1%
4.5%
  
4.5%
4.3%
4.3%
  
Total UK & Europe Insurance Operations
3.1%
3.4%
3.7%
4.0%
  
4.4%
3.9%
3.7%
  
Group Total
5.0%
5.4%
5.6%
6.2%
  
5.8%
5.7%
5.7%
  
 
Notes to Schedules 1A to 4C
 
 
(1)    Prudential plc reports its results at both actual exchange rates (AER) and constant year-to-date average exchange rates (CER) so as to eliminate the impact of exchange translation.
 
 
 Local currency: £
  
Q3 2014*
Q3 2013*
Q3 2014 vs Q3 2013 (depreciation) appreciation of local currency against GBP
 Hong Kong
 
 Average Rate
 12.95
 11.99
 (7)%
 Closing Rate
 12.59
 12.56
 (0)%
 Indonesia
 
 Average Rate
 19,589.29
 15,519.15
 (21)%
 Closing Rate
 19,753.71
 18,752.65
 (5)%
 Malaysia
 
 Average Rate
 5.41
 4.84
 (11)%
 Closing Rate
 5.32
 5.28
 (1)%
 Singapore
 
 Average Rate
 2.10
 1.94
 (8)%
 Closing Rate
 2.07
 2.03
 (2)%
 India
 
 Average Rate
 101.36
 88.80
 (12)%
 Closing Rate
 100.12
 101.38
1%
 Vietnam
 
 Average Rate
 35,321.44
 32,474.00
 (8)%
 Closing Rate
 34,412.97
 34,189.58
 (1)%
 Thailand
 
 Average Rate
 54.10
 46.99
 (13)%
 Closing Rate
 52.57
 50.65
 (4)%
 US
 
 Average Rate
 1.67
 1.55
 (7)%
 Closing Rate
 1.62
 1.62
0%
 
*Average rate is for the 9 months to 30 September
 
(1a)  Insurance new business for overseas operations are converted using the year-to-date average exchange rate applicable at the time (AER). The sterling results for individual quarters represent the difference between the year-to-        date reported sterling results at successive quarters and will include foreign exchange movements from earlier periods.
(1b)  Insurance new business for overseas operations for 2013 has been calculated using constant exchange rates (CER).
(1c)  Constant exchange rates have been used to calculate insurance new business for overseas operations for all periods in 2013 and 2014.
(2)    Annual Equivalents, calculated as regular new business contributions plus 10 per cent of single new business contributions, are subject to roundings. Present value of new business premiums (PVNBPs) are calculated as         equalling single premiums plus the present value of expected premiums of new regular premium business. In determining the present value, allowance is made for lapses and other assumptions applied in determining the EEV new         business profit.
(3)    Balance includes segregated and pooled pension funds, private finance assets and other institutional clients. Other movements reflect the net flows arising from the cash component of a tactical asset allocation fund managed by         PPM South Africa.
(4)    New business in India is included at Prudential's 26 per cent interest in the India life operation. 
(5)    Balance Sheet figures have been calculated at the closing exchange rate.
(6)    New business in China is included at Prudential's 50 per cent interest in the China life operation. 
(7)    Mandatory Provident Fund (MPF) product sales in Hong Kong are included at Prudential's 36 per cent interest in Hong Kong MPF operation.
(8)    Investment flows for the period exclude year-to-date Eastspring Money Market Funds (MMF) gross inflows of £50,396 million (2013: £45,464 million) and net inflows of £58 million (2013 net outflows: £82 million). For the discrete         third quarter excluded MMF gross inflows of £18,331 million (2013: £14,690 million) and net inflows of £110 million (2013: net outflows of £189 million).
(9)    Excludes Curian Variable Series Trust funds (internal funds under management).
(10)  Total M&G and Eastspring excluding MMF. Funds under management for MMF amounted to £4,613 million at 30 September 2014 (30 September 2013: £3,791 million).
 
Schedule 5
 
EEV New Business Methodology and Assumptions
 
Valuation of new business
As communicated with the full year 2013 results and as reported at Q1 2014 and at half year 2014, the basis of presentation of EEV results has been altered to a post-tax basis from 2014.
 
The valuation of new business for the third quarter of 2014 represents post-tax profits determined using non-economic assumptions which are consistent with those at 30 June 2014.
 
Tax payments and receipts included in the projected cashflows to determine the value of new business are calculated using assumed rates which have been substantively enacted by the end of the reporting period.
 
For UK immediate annuity business and single premium Universal Life products in Asia, primarily Singapore, the new business contribution is determined by applying economic assumptions reflecting point of sale market conditions. This is consistent with how the business is priced as crediting rates are linked to yields on specific assets and the yield locked-in when the assets are purchased at the point-of-sale of the policy. For other business within the Group, end of period economic assumptions are used.
 
Principal economic assumptions
Expected returns on equity and property asset classes and corporate bonds in respect of each territory are derived by adding a risk premium, based on the Group's long-term view, to the risk-free rate. In Asia, equity risk premiums range from 3.5 per cent to 8.7 per cent for all periods shown below. In the US and the UK, the equity risk premium is 4.0 per cent for all periods shown below.
 
Assumed investment returns reflect the expected future returns on the assets held and allocated to the covered business at the valuation date. The rates shown for assumed investment returns are pre-tax rates.
 
The tables below summarise the principal financial assumptions:
 
 
Asia operations notes (ii),(iv)
                      
                       
30 September 2014
                      
 
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
Taiwan 
Thailand 
Vietnam
   
notes
(ii),(iii)
      
note (iii)
  
note (iii)
      
 
%
%
%
%
%
%
%
%
%
%
%
New business risk discount rate
10.6
4.3
13.7
12.6
6.4
6.6
11.2
4.5
4.2
10.3
13.3
10-year Government bond yield
4.1
2.5
8.7
8.7
2.9
4.0
4.4
2.5
1.7
3.6
6.6
                       
30 June 2014
                      
 
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
Taiwan 
Thailand 
Vietnam
   
notes
(ii),(iii)
      
note (iii)
  
note (iii)
      
 
% 
% 
% 
% 
% 
% 
% 
% 
% 
% 
% 
New business risk discount rate
10.6
4.3
13.9
12.2
6.8
6.6
10.8
4.3
4.0
10.6
15.4
10-year Government bond yield
4.1
2.6
8.9
8.4
3.2
4.1
4.1
2.3
1.6
3.8
8.7
                       
30 September 2013
                      
 
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
Taiwan 
Thailand 
Vietnam
   
notes
(ii),(iii)
      
note (iii)
  
note (iii)
      
 
% 
% 
% 
% 
% 
% 
% 
% 
% 
% 
% 
New business risk discount rate
10.6
4.5
14.0
12.4
7.3
6.2
10.4
4.5
4.0
10.7
16.3
10-year Government bond yield
4.1
2.7
9.0
8.7
3.5
3.8
3.6
2.4
1.7
3.9
9.5
 
Schedule 5
 
EEV New Business Methodology and Assumptions (cont.)
 
 
       
 
Asia Total
 
30 Sep 2014
30 Jun 2014
30 Sep 2013
 
% 
% 
% 
New business weighted risk discount rate note (i)
7.3
7.4
7.9
 
Notes
(i)      The weighted risk discount rates for Asia operations shown above have been determined by weighting each country's risk discount rates by reference to the EEV basis new business result.
(ii)     For Hong Kong the assumptions shown are for US dollar denominated business. For other territories, the assumptions are for local currency denominated business.
(iii)     The mean equity return assumptions for the most significant equity holdings in the Asia operations were:
 
 
 
30 Sep 2014
30 Jun 2014
30 Sep 2013
 
% 
% 
% 
Hong Kong
6.5
6.6
6.7
Malaysia
10.0
10.1
9.8
Singapore
8.5
8.4
8.4
 
(iv)    The local tax rates applicable for the most significant operations for all periods shown, are as follows:
 
 
 
Assumed corporate tax rate %
Hong Kong
16.5 per cent on 5 per cent of premium income
Indonesia
25 per cent
Malaysia
2013 to 2015: 25 per cent
 
From 2016: 24 per cent
Singapore
17 per cent
 
 
US operations
      
       
30 Sep 2014
30 Jun 2014
30 Sep 2013
       
%
%
%
Weighted average assumed new business spread margins:
      
 
Fixed Annuity business:1,2
      
   
January to June issues
1.5
1.5
1.2
   
July to September issues
1.5
n/a
1.75
 
Fixed Index Annuity business:2
      
   
January to June issues
2.0
2.0
1.45
   
July to September issues
2.0
n/a
2.0
 
Institutional business
0.7
0.7
0.75
New business risk discount rate note (i)
      
 
Variable annuity
7.1
7.1
7.4
 
Non-variable annuity
4.3
4.3
4.9
 
Weighted average total
7.0
6.9
7.2
US 10-year treasury bond rate at end of period
2.5
2.6
2.7
Pre-tax expected long-term nominal rate of return for US equities
6.5
6.6
6.7
Assumed corporate tax rate
35.0
35.0
35.0
1   Including the proportion of variable annuity business invested in the general account
2   The weighted average rates at inception shown above grade up linearly by 25 basis points to a long-term assumption over five years
 
Note
(i)      The risk discount rates shown above include an additional credit risk allowance for general account business of 100 basis points (30 June 2014: 100 basis points; 30 September 2013: 150 basis points) and for variable annuity           business of 20 basis points (30 June 2014: 20 basis points; 30 September 2013: 30 basis points).
 
Schedule 5
 
EEV New Business Methodology and Assumptions (cont.)
 
 
UK operations
      
       
30 Sep 2014
30 Jun 2014
30 Sep 2013
       
% 
% 
% 
Shareholder-backed annuity business:note (i)
      
New business risk discount rate
6.8
6.9
7.1
             
Expected long-term nominal rate of return
4.4
4.5
4.0
             
Other business:
      
New business risk discount rate note (ii)
5.7
5.9
6.0
             
Expected long-term nominal rates of investment return:
      
 
UK equities
6.8
7.2
7.1
 
15-year gilt rate
2.8
3.2
3.1
 
Corporate bonds
4.4
4.8
4.7
Assumed corporate tax rate
20.0
20.0
23.0
 
Notes
(i)      For Prudential's UK shareholder-backed annuity business, Prudential has used a market consistent embedded value (MCEV) approach to derive an implied risk discount rate which is then applied to the projected best estimate          cash flows. In the annuity MCEV calculations, the future cash flows are discounted using the swap yield curve plus an allowance for liquidity premium based on Prudential's assessment of the expected return on the assets          backing the annuity liabilities after allowing for expected long-term defaults, a credit risk premium, an allowance for a 1 notch downgrade of the asset portfolio subject to credit risk and an allowance for short-term downgrades and          defaults. The credit assumptions used in the MCEV calculation and the residual liquidity premium element of the bond spread over swap rates for shareholder-backed individual annuity new business are as follows:
 
 
 
30 Sep 2014
30 Jun 2014
30 Sep 2013
 
(bps)
(bps)
(bps)
Bond spread over swap rates
122
121
114
Total credit risk allowance
34
34
37
Liquidity premium
88
87
77
 
(ii)     The risk discount rates for new business for UK insurance operations other than shareholder-backed annuities reflect weighted rates based on the type of business.
 
Schedule 6
 
Capital Management
 
We continue to operate with a strong solvency position, while maintaining high levels of liquidity and capital generation. At 30 September 2014 our IGD surplus is estimated at £4.1 billion after deducting the 2014 interim dividend of £0.3 billion. The IGD surplus is equivalent to strong coverage of 2.3 times the requirement. This compares to £4.1 billion at 30 June 2014 (before taking into account the 2014 interim dividend of 0.3 billion) and £3.9 billion at 30 September 2013.
 
As at 30 September 2014 stress testing of our IGD capital position to various events has the following results:
 
·     An instantaneous 20 per cent fall in equity markets from 30 September 2014 levels would reduce the IGD surplus  by £250 million;
 
·     A 40 per cent fall in equity markets (comprising an instantaneous 20 per cent fall followed by a further 20 per cent fall over a four week period) would reduce the IGD surplus by £500 million;
 
·     A 100 bps reduction (subject to a floor of zero) in interest rates would reduce the IGD surplus by £150 million; and
 
·     Credit defaults of ten times the expected level would reduce IGD surplus by £650 million.
 
 
All of our subsidiaries continue to hold strong capital positions on a local regulatory basis. At 30 September 2014, the value of the estate* of our UK with-profits funds is estimated at £6.8 billion. In addition, the Hong Kong with-profits fund had an estate* estimated at £1.5 billion. The estates of the with-profits funds in the UK and Hong Kong are excluded from the IGD calculation.
 
The values of the shareholders' interests in future transfers from the with-profits funds in the UK and Hong Kong are valued at £2.4 billion and £0.5 billion, respectively. No credit has been included in the IGD calculation for these values (30 September 2013: £0.2 billion).
 
In addition to our strong capital position, on a statutory basis the total credit reserve for the UK shareholder annuity funds also contributes to protecting our capital position in excess of the IGD surplus. This credit reserve as at 30 September 2014 was £2.1 billion, equivalent to 6.4 per cent of the assets backing annuity liabilities. This represents 47 per cent of the portfolio spread over swaps, compared to 47 per cent at 31 December 2013 and 46 per cent at 30 September 2013.
 
 
 
* For consistency of presentation, both estates have been calculated using the Prudential Regulation Authority's Pillar 1 peak 2 basis. The Hong Kong branch of the Prudential Assurance Company was domesticated into separate    Hong Kong subsidiaries on 1 January 2014.
 
 
Schedule 7
 
BASIS OF PREPARATION
 
The format of the schedules is consistent with the distinction between insurance and investment products as applied for previous financial reporting periods. With the exception of some US institutional business, products categorised as 'insurance' refer to those classified as contracts of long-term insurance business for regulatory reporting purposes, i.e falling within one of the classes of insurance specified in part II of Schedule 1 to the Regulated Activities Order under PRA regulations.
 
The details shown for insurance products include contributions for contracts that are classified under IFRS 4 'Insurance Contracts' as not containing significant insurance risk. These products are described as investment contracts or other financial instruments under IFRS. Contracts included in this category are primarily certain unit-linked and similar contracts written in UK Insurance Operations, and Guaranteed Investment Contracts and similar funding agreements written in US Operations.
 
New business premiums for regular premium products are shown on an annualised basis. Internal vesting business is classified as new business where the contracts include an open market option. New business premiums reflect those premiums attaching to covered business, including premiums for contracts designed as investment products for IFRS reporting.
 
Investment products referred to in the tables for funds under management are unit trusts, mutual funds and similar types of retail fund management arrangements. These are unrelated to insurance products that are classified as investment contracts under IFRS 4, as described in the preceding paragraph, although similar IFRS recognition and measurement principles apply to the acquisition costs and fees attaching to this type of business.
 
New Business Profit (post-tax) has been determined using the European Embedded Value (EEV) methodology set out in our 2014 Interim Report and assumptions set out in Schedule 5.
 
In determining the EEV basis value of new business written in the period policies incept, premiums are included in projected cash flows on the same basis of distinguishing annual and single premium business as set out for statutory basis reporting.
 
Annual premium equivalent (APE) sales are subject to rounding.
 
 
 
 

 
 
 
 
 
 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





 
 
Date: 18 November 2014
 
 
PRUDENTIAL PUBLIC LIMITED COMPANY
   
 
By: /s/Nic Nicandrou
   
 
Nic Nicandrou
  Chief Financial Officer