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European Embedded Value (EEV)
basis results

Post-tax operating profit based on longer-term investment returns

Results analysis by business area

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    2016 £m   2015 £m
  Note Half year
 
  Half year
note (iii)
Full year
note (iii)

Notes

  1. EEV basis other income and expenditure represents the post-tax IFRS basis result less the unwind of expected margins on the internal management of the assets of the covered business (as explained in note 13(a)(vii)) and an adjustment for the shareholders’ share of the pension costs attributable to the with-profits business.
  2. Solvency II and restructuring costs comprise the net of tax charge recognised on an IFRS basis and the additional amount recognised on the EEV basis for the shareholders’ share incurred by the PAC with-profits fund.
  3. The comparative results have been prepared using previously reported average exchange rates for the period.
  4. The EEV basis results have been prepared in accordance with the amended European Embedded Value Principles dated April 2016, prepared by the CFO Forum of major European insurers. The half year 2016 results for UK insurance operations have been prepared to reflect the Solvency II regime. The half year and full year 2015 results for UK insurance operations were prepared reflecting the Solvency I basis being the regime applicable for those periods. There is no change to the basis of preparation for Asia and US operations.
  5. Following Prudential’s withdrawal from the UK bulk annuity market, the 2015 comparative results for UK bulk annuities new business have been presented separately.
Asia operations          
New business 4 824   664 1,490
Business in force 5 391   408 831
Long-term business   1,215   1,072 2,321
Eastspring Investments   53   50 101
Total   1,268   1,122 2,422
US operations          
New business 4 311   371 809
Business in force 5 383   441 999
Long-term business   694   812 1,808
Broker-dealer and asset management   (8)   8 7
Total   686   820 1,815
UK operationsnote (iv)          
New business:note (v)          
Excluding UK bulk annuities   125   80 201
UK bulk annuities     75 117
  4 125   155 318
Business in force 5 259   256 545
Long-term business   384   411 863
General insurance commission   15   14 22
Total UK insurance operations   399   425 885
M&G   181   203 358
Prudential Capital   11   6 18
Total   591   634 1,261
Other income and expenditurenote (i)   (302)   (275) (566)
Solvency II and restructuring costsnote (ii)   (17)   (23) (51)
Interest received from tax settlement   37  
Operating profit based on longer-term investment returnsnote (iv)   2,263   2,278 4,881
           
Analysed as profit (loss) from:          
New business:note (v)          
Excluding UK bulk annuities   1,260   1,115 2,500
UK bulk annuities     75 117
  4 1,260   1,190 2,617
Business in force 5 1,033   1,105 2,375
Long-term business   2,293   2,295 4,992
Asset management and general insurance commission   252   281 506
Other results   (282)   (298) (617)
Total   2,263   2,278 4,881

Post-tax summarised consolidated income statement

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    2016 £m   2015 £m
  Note Half year   Half year Full year

* The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).

Asia operations   1,268   1,122 2,422
US operations   686   820 1,815
UK operations*   591   634 1,261
Other income and expenditure   (302)   (275) (566)
Solvency II and restructuring costs   (17)   (23) (51)
Interest received from tax settlement   37  
Operating profit based on longer-term investment returns   2,263   2,278 4,881
Short-term fluctuations in investment returns 6 489   (367) (1,208)
Effect of changes in economic assumptions 7 (1,345)   80 57
Mark to market value movements on core borrowings   (13)   124 221
Total non-operating loss   (869)   (163) (930)
Profit for the period attributable to equity holders of the Company   1,394   2,115 3,951

Basic earnings per share

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  2016   2015
  Half year   Half year Full year

* The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).

Based on post-tax operating profit including longer-term investment returns (in pence)* 88.5p   89.3p 191.2p
Based on post-tax profit attributable to equity holders of the Company
(in pence)*
54.5p   82.9p 154.8p
Average number of shares (millions) 2,558   2,552 2,553

Movement in shareholders’ equity

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    2016 £m   2015 £m
  Note Half year   Half year Full year
* The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).
Profit for the period attributable to equity shareholders   1,394   2,115 3,951
Items taken directly to equity:          
Exchange movements on foreign operations and net investment hedges   2,663   (554) 244
Dividends   (935)   (659) (974)
Mark to market value movements on Jackson assets backing surplus and required capital   138   (8) (76)
Other reserve movements   (165)   19 53
Net increase in shareholders’ equity* 9 3,095   913 3,198
Shareholders’ equity at beginning of period          
As previously reported 9 32,359   29,161 29,161
Effect of implementation of Solvency II on 1 January 2016* 2 (473)  
    31,886   29,161 29,161
Shareholders’ equity at end of period 9 34,981   30,074 32,359

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  30 Jun 2016 £m   30 Jun 2015 £m   31 Dec 2015 £m
Comprising: Long-term business operations note 9 Asset manage- ment and other operations Total   Long-term business operations Asset manage- ment and other operations Total   Long-term business operations Asset manage- ment and other operations Total
* The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).
Asia operations 16,578 352 16,930   12,838 284 13,122   13,876 306 14,182
US operations 10,150 201 10,351   8,457 165 8,622   9,487 182 9,669
UK insurance operations* 10,075 37 10,112   8,708 33 8,741   9,647 22 9,669
M&G 1,838 1,838   1,697 1,697   1,774 1,774
Prudential Capital 31 31   26 26   70 70
Other operations (4,281) (4,281)   (2,134) (2,134)   (3,005) (3,005)
Shareholders’ equity at end of period 36,803 (1,822) 34,981   30,003 71 30,074   33,010 (651) 32,359
                       
Representing:                      
Net assets excluding acquired goodwill and holding company net borrowings 36,545 270 36,815   29,772 1,635 31,407   32,777 866 33,643
Acquired goodwill 258 1,230 1,488   231 1,230 1,461   233 1,230 1,463
Holding company net borrowings at market valuenote 8 (3,322) (3,322)   (2,794) (2,794)   (2,747) (2,747)
  36,803 (1,822) 34,981   30,003 71 30,074   33,010 (651) 32,359

Summary statement of financial position

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    2016 £m   2015 £m
  Note 30 Jun   30 Jun 31 Dec

* Including liabilities in respect of insurance products classified as investment contracts under IFRS 4.

† The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).

Total assets less liabilities, before deduction for insurance funds   381,242   331,233 340,666
Less insurance funds:*          
Policyholder liabilities (net of reinsurers’ share) and unallocated surplus of with-profits funds   (366,637)   (319,129) (327,711)
Less shareholders’ accrued interest in the long-term business 9 20,376   17,970 19,404
    (346,261)   (301,159) (308,307)
Total net assets 9 34,981   30,074 32,359
           
Share capital   128   128 128
Share premium   1,921   1,910 1,915
IFRS basis shareholders’ reserves   12,556   10,066 10,912
Total IFRS basis shareholders’ equity 9 14,605   12,104 12,955
Additional EEV basis retained profit 9 20,376   17,970 19,404
Total EEV basis shareholders’ equity (excluding non-controlling interests) 9 34,981   30,074 32,359

Net asset value per share

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  2016   2015
  30 Jun   30 Jun 31 Dec

* Annualised return on embedded value is based on EEV post-tax operating profit, as a percentage of opening EEV basis shareholders’ equity. Half year profits are annualised by multiplying by two.

† The half year 2016 results for UK insurance operations have been prepared on a basis that reflects the Solvency II regime effective from 1 January 2016. The half year 2015 and full year 2015 comparative results for UK insurance operations reflect the Solvency I basis being the regime applicable for those periods (see note 2 for details).

Based on EEV basis shareholders’ equity of £34,981 million (half year 2015: £30,074 million, full year 2015: £32,359 million) (in pence) 1,356p   1,170p 1,258p
Number of issued shares at period end (millions) 2,579   2,571 2,572
         
Annualised return on embedded value* 14%   16% 17%

Section 4

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Notes on the EEV basis results

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