Measuring our performance

To create sustainable economic value for our shareholders we focus on delivering growth and cash while maintaining appropriate capital

Profit, cash and capital

Prudential takes a balanced approach to performance management across IFRS, EEV and cash. We aim to demonstrate how we generate profits under different accounting bases, reflecting the returns we generate on capital invested, and highlight the cash generation of our business.

Find out more about what we measure and why in the table below.

What we measure and why Performance1  

IFRS operating profit2 £m

IFRS operating profit is our primary measure of profitability. This measure of profitability provides an underlying operating result based on longer-term investment returns and excludes non-operating items.

CAGR
+20%
2011 2012 2013 2014 2015
2017 2520 2954 3186 4007
  • Group IFRS operating profit in 2015 increased by 22 per cent on a constant exchange rate basis (26 per cent on an actual exchange rate basis), compared to 2014, reflecting strong growth in our life businesses, with Asia up 16 per cent, the US up 10 per cent and the UK up 60 per cent, on a constant exchange rate basis.

EEV new business profit3 £m

Life insurance products are, by their nature, long term and generate profit over a significant number of years. Embedded value reporting provides investors with a measure of the future profits streams of the Group. EEV new business profit reflects the value of future profit streams which are not fully captured in the year of sale under IFRS reporting.

CAGR
+16%
2011 2012 2013 2014 2015
1433 1536 1791 2115 2617
  • EEV new business profit in 2015 increased by 20 per cent on a constant exchange rate basis (24 per cent on an actual exchange rate basis), compared to 2014, driven by higher volumes.

EEV operating profit3 £m

EEV operating profit is provided as an additional measure of profitability. This measure includes EEV new business profit, the change in the value of the Group’s long-term in-force business, and profit from our asset management and other businesses. As with IFRS, EEV operating profit reflects the underlying results based on longer-term investment returns.

CAGR
+14%
2011 2012 2013 2014 2015
2868 2937 3174 4096 4881
  • Group EEV operating profit in 2015 increased by 16 per cent on a constant exchange rate basis (19 per cent on an actual exchange rate basis), compared to 2014, reflecting higher new business profits and higher contributions from the in-force business.

Group free surplus generation4 £m

Free surplus generation is used to measure the internal cash generation of our business units. For insurance operations it represents amounts maturing from the in-force business during the period less investment in new business and excludes other non-operating items. For asset management it equates to post-tax IFRS operating profit for the period.

CAGR
+11%
2011 2012 2013 2014 2015
1982 2080 2462 2579 3050
  • Underlying free surplus in 2015 increased by 15 per cent, on a constant exchange rate basis (18 per cent on an actual exchange rate basis), compared to 2014, driven by growth of the in-force portfolio, and continued discipline in the investment made to support new business growth.

Business unit remittances £m

Remittances measure the cash transferred from business units to the Group. Cash flows across the Group reflect our aim of achieving a balance between ensuring sufficient net remittances from business units to cover the dividend (after corporate costs) and the use of cash for reinvestment in profitable opportunities available to the Group.

CAGR
+9%
2011 2012 2013 2014 2015
1105 1200 1341 1482 1625
  • Business unit remittances increased by 10 per cent in 2015, compared to 2014, with significant contributions from each of our four major business units.

IGD capital surplus5 £bn

During 2015, Prudential was subject to the capital adequacy requirements of the European Union Insurance Groups Directive (IGD) as implemented by the Prudential Regulation Authority in the UK. The IGD capital surplus represents the aggregated surplus capital (on a Prudential Regulation Authority consistent basis) of the Group’s regulated subsidiaries less the Group’s borrowings6. No diversification benefit is recognised.

2011 2012 2013 2014 2015
4.0 5.1 5.1 4.7 5.5
  • Our estimated IGD capital surplus at the end of 2015 before allowing for dividends5 covered the capital requirements 2.5 times.

Group Solvency II capital surplus5,7 £bn

Replacing the IGD capital regime, from 1 January 2016 Prudential will be subject to the risk-sensitive solvency framework required under European Solvency II Directives (Solvency II) as implemented by Prudential Regulation Authority in the UK. The Solvency II surplus represents the aggregated capital (own funds) held by the Group less solvency capital requirements.

  • The Group has a strong Solvency II capital position, with an estimated Group Solvency II capital surplus of £9.7 billion5 and a solvency coverage ratio of 193 per cent.

Read more: Chief Financial Officer's report on our 2015 financial performance

2017 objectives8

We are making good progress towards the objectives we announced in December 2013:

Download as excel file

  2012 £m11 2013 £m 2014 £m 2015 £m CAGR
(since 2012) %
2017
Objectives8
Asia objectives            
Asia life and asset management IFRS operating profit            
Reported actuals 924 1,075 1,140 1,324    
Constant exchange rate9 901 1,075 1,260 1,468   >£1,858m
Constant exchange rate change % (year-on-year)   19 17 17 18 >15% CAGR
Asia underlying free surplus generation4,10            
Reported actuals 484 573 592 673    
Constant exchange rate9 471 573 662 765   £0.9 – £1.1bn
Constant exchange rate change % (year-on-year)   22 16 16    

Download as excel file

Notes

  1. The comparative results shown above have been prepared using actual exchange rate (AER) basis except where otherwise stated. Comparative results on a constant exchange rate (CER) basis are also shown in financial tables in the Chief Financial Officers’ report on our 2015 financial performance. CAGR is Compound Annual Growth Rate.
  2. The basis of IFRS operating profit based on longer-term investment returns is discussed in note B1.3 of the IFRS financial statements. The IFRS profit before tax attributable to shareholders have been prepared in accordance with the accounting policies discussed in note A of the IFRS financial statements.
  3. The EEV basis results have been prepared in accordance with the EEV principles discussed in note 1 of EEV basis supplementary information.
  4. Free surplus generation comprises underlying free surplus released from long-term business (net of investment in new business) and that generated from asset management operations.
  5. Estimated before allowing for second interim ordinary and special dividends. IGD Capital Surplus for 2014 and comparative years estimated before allowing for final dividend.
  6. Excludes subordinated debt issues that qualify as capital.
  7. Excludes surplus in ring-fenced policyholder funds. The methodology and assumptions used in calculating the Group Solvency II capital results are set out in note II (c) of Additional unaudited financial information. The Group Solvency II capital ratio is based on outputs from the Group’s Solvency II internal model, approved by Prudential Regulation Authority in December 2015.
  8. The objectives assume exchange rates at December 2013 and economic assumptions made by Prudential in calculating the EEV basis supplementary information for the half year ended 30 June 2013, and are based on regulatory and solvency regimes applicable across the Group at the time the objectives were set. The objectives assume that the existing EEV, IFRS and Free Surplus methodology at December 2013 will be applicable over the period.
  9. Constant exchange rate results translated using exchange rates as at December 2013.
  10. The 2012 comparative is based on the retrospective application of new and amended accounting standards and excludes the one-off gain of £51 million from the sale of the Group’s holdings in China Life Insurance Company in Taiwan.
  11. Asia 2012 IFRS operating profit of £924 million is based on the retrospective application of new and amended accounting standards, and excludes the one-off gain of £51 million from the sale of the Group’s holdings in China Life Insurance Company in Taiwan.
  Actual Objective
  1 Jan 2014
to 31 Dec 2015
1 Jan 2014 to
31 Dec 2017
Group objective for cumulative period 1 January 2014 to 31 December 2017    
Cumulative Group underlying free surplus generation from 2014 onwards £5.6bn > £10bn

Next page:

Our businesses and their performance

2

Reporting tools

Save pages of the report
to download, print or email

View your pages

Feedback

Your comments and ideas
help us to shape future reports
to suit your needs

Tell us your views