Blueprint
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 May, 2017
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-
18 May
2017
Solvency and Financial Condition Report
and update on current trading
Prudential plc ("Prudential") is today holding its Annual General
Meeting. Prudential has also today published its 31 December 2016
Solvency and Financial Condition Reports on the Group's
website.
Performance highlights for the first quarter of 2017 on a constant
(and actual) exchange rate basis
● Group new
business profit1
of £856 million, up 25 per
cent2,3
(up 42 per cent4)
● Broad-based
growth in Asia, with new business profit1
up 26 per cent2,3
(up 45 per cent4)
to £561 million
● US separate
account assets up 5 per cent5
to $157 billion; UK PruFund assets up
11 per cent5
to £27.5
billion
● Asset management
external net inflows of £5.7 billion from M&G and
Eastspring
● Group
shareholders' Solvency II surplus6
estimated at £12.4 billion;
equivalent to a cover ratio of 198 per cent
Prudential has made a strong start to the year. The first three
months of 2017 have seen continued positive momentum across the
Group, building on the improving trends experienced in the second
half of 2016. On a constant exchange rate basis, Group new business
profit1
increased by 25 per
cent2,3
(42 per cent on actual exchange
rates), driven by Group APE sales growth of 18 per
cent2,3
(33 per cent on actual exchange rates)
and the overall positive effect of higher interest
rates.
In Asia, we have seen continued strong, diversified
growth. New business profit1
was up 26 per cent2,3
due to higher volumes and improvements
in mix, with health and protection new business
profit1
increasing by 31 per
cent2,3.
New business performance in the period benefited from further
increases in active manpower and productivity improvements in the
agency channel, together with a pick-up in volume growth from all
of our core bancassurance partners.
In China, continued momentum from agent recruitment, strong growth
in the bank channel and increased focus on health and protection
sales have seen new business profit more than double. In Hong Kong,
double-digit growth in new business profit reflects similar
underlying drivers, partially offset by our decision to
de-emphasise sales through the broker channel. In Indonesia, sales
levels are consistent with prior year and we continue to focus on
improving the quality of our agency business. In Singapore, we are
seeing broad growth across product and channel, while in Malaysia,
we continue to build on our market-leading positions in both the
conventional and takaful markets.
Eastspring's improving investment performance has continued to
support external net inflows, which totalled £2.0 billion in
the first three months of 2017. Combined with positive market
effects, this contributed to a 9 per cent5
increase (12 per cent on actual
exchange rates) in external assets under management to £42.7
billion as at 31 March 2017 (31 December 2016: £38.0 billion).
Total assets under management increased to £128.8
billion7
over the period (31 December 2016:
£117.9 billion).
The Group confirms it completed the sale of its life insurance
subsidiary in Korea, PCA Life Insurance Co. Ltd., to Mirae Asset
Life Insurance Co. Ltd. for consideration of KRW170 billion
(equivalent to £117 million8).
In the US, we believe current regulatory developments play
to Jackson's established strengths and represent a significant
opportunity to access new asset pools, both within the existing $2
trillion variable annuity market and the wider adviser distributed
market where assets worth an additional $14 trillion have to date
been unpenetrated by variable annuities.
In the first three months, Jackson has continued to attract
positive separate account net flows, totalling $1.3 billion.
Including the favourable impact of market movements, separate
account assets increased 5 per cent5
to $157 billion (31 December 2016:
$149 billion). Total APE sales were up 19 per
cent2,
reflecting a modest increase in variable annuity sales to $4.5
billion and a higher level of opportunistic institutional
business.
Jackson is well-prepared for the introduction of the Department of
Labor's fiduciary standards, the applicability of which has now
been delayed 60 days to 9 June 2017. We remain focused on working
with our key distributors, confident in the strength of our product
proposition in the evolving regulatory landscape.
In UK
Life, we are gaining share in
our chosen market segments, particularly in the emerging retirement
savings marketplace, where Prudential's distinctive product
offering is closely aligned to consumer needs post pension reforms
and complements our established expertise, market position and
distribution capabilities. Reflecting these competitive strengths,
APE sales of our PruFund-backed product range were up 33 per cent
in the first three months, with PruFund assets under management up
11 per cent since the start of the year to £27.5
billion.
In asset management, M&G has seen net inflows from both retail and
institutional investors, totalling £3.6 billion. This result
builds on the improvements in investment performance that emerged
towards the end of 2016. As a result and combined with positive
market effects, external assets under management increased 5 per
cent5
to £144 billion at 31 March 2017.
Including assets managed on behalf of Prudential's insurance
businesses, M&G's total assets under management are £275
billion as at 31 March 2017, an increase of 4 per
cent5.
M&G announced in March that it is to set up a new legal
structure and SICAV fund range in Luxembourg and a commitment to
launch a new family of Luxembourg SICAV funds by March 2019,
ensuring that non-UK consumers retain access to the full range of
existing retail investment strategies regardless of the outcome of
the trading relationship between the UK and the European
Union.
The estimated Group shareholders' Solvency II capital surplus at 31
March 2017 was £12.4 billion6,
equivalent to a shareholder solvency ratio of 198 per cent (31
December 2016: £12.5 billion, 201 per cent). Solvency II
surplus benefited from operational capital generation, net of
market effects, of £0.7 billion and is reported after the 2016
second interim ordinary dividend of £0.8
billion.
Solvency and Financial Condition Report
Prudential has also today published its 31 December 2016 Group
Solvency and Financial Condition Report and related Quantitative
Reporting Templates. In addition, The Prudential Assurance Company
Limited ("PAC") has published its corresponding 'solo' entity
regulatory report and templates.
The regulatory templates require the shareholder Solvency II
position to be consolidated with the Solvency II position of
ring-fenced funds without recognising the surplus in the
ring-fenced funds, and are presented before recalculation of
transitional measures. On this regulatory basis, as at 31 December
2016, the Group shareholder Solvency II surplus was £12.9
billion and the UK PAC shareholder Solvency II surplus was
£5.1 billion. This regulatory consolidation requirement
excludes Solvency II surplus of £3.9 billion in the Group's
ring-fenced funds.
Outlook
Prudential's strategy remains centred on the favourable structural
opportunities in its three key regions of Asia, the US and the UK.
We continue to focus on the build-out of our execution capabilities
from a strong base, meeting growing demand from customers for our
products and enhancing the growth prospects of the
Group.
We are making good operational progress across our businesses and
continue to benefit from the scale and diversity of our business
platform. Prudential is extremely well-capitalised and remains
highly capital-generative.
We are well positioned to continue to deliver value for both our
customers and our shareholders.
1 New business profit on business sold in the period,
calculated in accordance with EEV principles as defined in our
Annual Report.
2 Year-on-year percentage increases are stated on a
constant exchange rate basis unless otherwise stated.
3 Following its reclassification to held for sale
during 2016, new business results exclude the contribution of the
Korea life business.
4 Growth rate on an actual exchange rate
basis.
5 Percentage growth rate compared to 31 December
2016.
6 The Group Solvency II surplus represents the
shareholder capital position excluding the contribution to Own
Funds and the Solvency Capital Requirement from ring fenced
with-profits funds and staff pension schemes in surplus. The
estimated solvency position includes the impact of recalculated
transitionals at the valuation date, which has reduced the Group
shareholder surplus from £12.9 billion to £12.4 billion.
The formal Quantitative Reporting Templates (Solvency II regulatory
templates) include transitional measures without this
recalculation.
7 Eastspring total assets under management include
assets managed for internal life operations and money market
funds.
8 KRW/GBP exchange rate of 1,451 at 17 May 2017
closing rate. The consideration is denominated in KRW.
Enquiries:
Media
|
|
Investors/Analysts
|
|
Jonathan Oliver
|
+44 (0)20 7548 3537
|
Raghu Hariharan
|
+44 (0)20 7548 2871
|
Tom Willetts
|
+44 (0)20 7548 2776
|
Richard Gradidge
|
+44 (0)20 7548 3860
|
|
|
William Elderkin
|
+44 (0)20 3480 5590
|
Notes to Editors:
2017 financial calendar
2017 half-year results: 10 August 2017
2017 investor conference: 16 November 2017
New business performance Q1 2017 year to date
|
|
|
|
|
|
|
Actual Exchange Rate
|
|
Constant Exchange Rate
|
|
Q1 2017 £m
|
Q1 2016 £m
|
Change %
|
|
Q1 2016 £m
|
Change %
|
|
APE Sales
|
New Business Profit
|
APE Sales
|
New Business Profit
|
APE Sales
|
New Business Profit
|
|
APE Sales
|
New Business Profit
|
APE Sales
|
New Business Profit
|
Asia
|
1,070
|
561
|
801
|
386
|
34
|
45
|
|
920
|
444
|
16
|
26
|
US
|
497
|
224
|
362
|
154
|
37
|
45
|
|
418
|
178
|
19
|
26
|
UK retail
|
340
|
71
|
275
|
62
|
24
|
15
|
|
275
|
62
|
24
|
15
|
Total Group
|
1,907
|
856
|
1,438
|
602
|
33
|
42
|
|
1,613
|
684
|
18
|
25
|
Asset management external funds under management
|
|
2017 £m
|
|
2016 £m
|
|
Q1
|
|
Q1
|
|
Actual Exchange Rate
|
|
Actual Exchange Rate
|
|
At 1 January 2017
|
Net flows
|
Market and other movements
|
At 31 March 2017
|
|
At 1 January 2016
|
Net flows
|
Market and other
movements
|
At 31 March 2016
|
M&G Retail
|
64,209
|
3,098
|
1,463
|
68,770
|
|
60,801
|
(4,108)
|
2,232
|
58,925
|
M&G Institutional
|
72,554
|
544
|
2,200
|
75,298
|
|
65,604
|
751
|
2,363
|
68,718
|
Total M&G
|
136,763
|
3,642
|
3,663
|
144,068
|
|
126,405
|
(3,357)
|
4,595
|
127,643
|
Eastspring
|
38,042
|
2,021
|
2,595
|
42,658
|
|
30,281
|
(84)
|
606
|
30,803
|
Total asset management
|
174,805
|
5,663
|
6,258
|
186,726
|
|
156,686
|
(3,441)
|
5,201
|
158,446
|
Reconciliation of 31 December 2016 Group Solvency II capital
position published in the Annual Report to the Solvency and
Financial Condition Report
|
Own Funds
|
SCR
|
Surplus
|
Ratio
|
|
£m
|
£m
|
£m
|
%
|
Group shareholder Solvency II capital position as disclosed in the
Annual Report
|
24,810
|
12,327
|
12,483
|
201%
|
Remove impact of recalculating transitionals
|
376
|
(79)
|
455
|
|
Group shareholder Solvency II capital position
|
25,186
|
12,248
|
12,938
|
206%
|
Ring fenced funds consolidation of own funds limited to
SCR*
|
5,997
|
5,997
|
-
|
|
Group Solvency II capital position as disclosed in regulatory
templates
|
31,183
|
18,245
|
12,938
|
171%
|
* On consolidation, own funds of £9.9 billion in ring-fenced
funds are restricted by £3.9 billion, to the £6.0 billion
of solvency capital requirements that these own funds are
covering.
Reconciliation of 31 December 2016 UK PAC Solvency II capital
position published in the Annual Report to the Solvency and
Financial Condition Report
|
Own Funds
|
SCR
|
Surplus
|
Ratio
|
|
£m
|
£m
|
£m
|
%
|
UK PAC shareholder Solvency II capital position as disclosed in the
Annual Report
|
12,006
|
7,363
|
4,643
|
163%
|
Remove impact of recalculating transitionals
|
376
|
(79)
|
455
|
|
UK PAC shareholder Solvency II capital position
|
12,382
|
7,284
|
5,098
|
170%
|
Ring fenced funds consolidation of own funds limited to
SCR
|
5,924
|
5,924
|
-
|
|
UK PAC Solvency II capital position as disclosed in regulatory
templates
|
18,306
|
13,208
|
5,098
|
139%
|
Basis of Preparation
Period-on-period percentage increases are stated on a constant
exchange rate basis unless otherwise stated. All amounts are
comparable to the three months ended 31 March 2016 unless otherwise
indicated.
|
Average Rate *
|
|
Closing Rate
|
Local Currency: £
|
Q1 2017
|
Q1 2016
|
% Change**
|
|
Q1 2017
|
Q1 2016
|
% Change**
|
Hong Kong
|
9.62
|
11.12
|
16%
|
|
9.72
|
11.15
|
15%
|
Indonesia
|
16,541.10
|
19,346.26
|
17%
|
|
16,662.87
|
19,058.60
|
14%
|
Malaysia
|
5.51
|
6.00
|
9%
|
|
5.53
|
5.61
|
1%
|
Singapore
|
1.75
|
2.01
|
15%
|
|
1.75
|
1.94
|
11%
|
US
|
1.24
|
1.43
|
15%
|
|
1.25
|
1.44
|
15%
|
*
Average rate is for the 3 month period to 31 March.
**
Change represents the appreciation of local currency against
GBP.
The valuation of EEV new business profit for the first three months
of 2017 represents post-tax profit determined under the methodology
as set out in our 2016 Full Year Financial Report. The non-economic
assumptions applied are consistent with those at 31 December 2016
other than for the reduction in the UK corporation tax rate to 17
per cent effective from 1 April 2020, for which the impact on new
business profit is not material.
The key
economic assumptions are as follows:
|
|
|
Risk discount rate %
|
|
Government bond yield %
|
|
|
|
31 Mar 2017
|
31 Mar 2016
|
|
31 Mar 2017
|
31 Mar 2016
|
Asia operations:1
|
|
|
|
|
|
|
Hong Kong2
|
3.8
|
3.3
|
|
2.4
|
1.8
|
|
Indonesia
|
11.0
|
11.7
|
|
7.2
|
7.8
|
|
Malaysia
|
6.7
|
6.3
|
|
4.2
|
3.8
|
|
Singapore
|
4.1
|
3.5
|
|
2.3
|
1.8
|
US operations: Variable
Annuity1
|
6.8
|
6.3
|
|
2.4
|
1.8
|
UK operations:3,4
|
4.6
|
5.1
|
|
1.6
|
2.0
|
1
For Asia and US operations the risk-free rates shown are 10-year
government bond yields.
2
For Hong Kong the assumptions shown
are for US dollar-denominated business.
3
For UK business, following the implementation of Solvency II on 1
January 2016, the risk-free rate is based on a yield
curve.
4
Mostly relates to with-profits
business.
The Solvency II estimate at 31 March 2017 has been prepared on a
consistent basis with that set out in the 2016 Annual Report under
'Additional Unaudited Financial Information' Section II (c), which
should be read in conjunction with the 'Risk Factors' also set out
in the 2016 Annual Report.
About Prudential plc
Prudential
plc and its affiliated companies constitute one of the world's
leading financial services groups, serving around 24 million
insurance customers. It has £599 billion of assets under
management (as at 31 December 2016). Prudential plc is incorporated
in England and Wales and is listed on stock exchanges in London,
Hong Kong, Singapore and New York. Prudential plc is not affiliated
in any manner with Prudential Financial, Inc., a company whose
principal place of business is in the United States of
America.
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, 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; the political, legal and
economic effects of the UK's vote to leave the European Union; the
impact of continuing designation as a Global Systemically Important
Insurer or 'G-SII'; the impact of competition, economic
uncertainty, inflation and deflation; 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 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 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 the
Annual Report.
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.
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
May 2017
|
PRUDENTIAL
PUBLIC LIMITED COMPANY
|
|
|
|
By:
/s/ Nic
Nicandrou
|
|
|
|
Nic Nicandrou
|
|
Chief
Financial Officer
|