pru201211146k.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 2012

 
 
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-



 
 
 
 
 
Enclosures:
Prudential plc - 3rd Quarter 2012 IMS 
 
NEWS RELEASE                                                                                                                        
 
                                                                                                                                                                                                                                                                                                                PRUDENTIAL PLC
                                                                                                                                                                                                                                                                                                                                   GROUP COMMUNICATIONS
                                                                                                                                                                                                                                                                                                                         12 ARTHUR STREET
                                                                                                                                                                                                                                                                                                                         LONDON EC4R 9AQ
                                                                                                                                                                                                                                                                                                                   TEL 020 7220 7588
                                                                                                                                                                                                                                                                                                                     FAX 020 7548 3725
                                                                                                                                                                                                                                                                                                                         www.prudential.co.uk
14 November 2012
 
PRUDENTIAL PLC THIRD QUARTER 2012 INTERIM MANAGEMENT STATEMENT
 
 
·      PRUDENTIAL DELIVERS STRONG PERFORMANCE WITH YEAR-TO-DATE NEW BUSINESS PROFIT UP 13 PER CENT TO £1.7 BILLION AND SALES UP 14 PER CENT TO £3.1 BILLION IN A CHALLENGING
        ENVIRONMENT
 
 
·      ASIA YEAR-TO-DATE NEW BUSINESS PROFIT UP 15 PER CENT TO £828 MILLION DRIVEN BY SOUTH EAST ASIA
 
 
·      US YEAR-TO-DATE NEW BUSINESS PROFIT UP 10 PER CENT TO £683 MILLION WITH CONTINUED FOCUS ON PRICING DISCIPLINE
 
 
·      UK YEAR-TO-DATE NEW BUSINESS PROFIT UP 17 PER CENT TO £227 MILLION REFLECTING PRODUCT MIX
 
 
·      ASSET MANAGEMENT YEAR-TO-DATE NET INFLOWS AT £12.3 BILLION LED BY A RECORD PERFORMANCE FROM M&G
 
 
·      RESILIENT BALANCE SHEET; IGD SURPLUS ESTIMATED AT £4.1 BILLION
 
 
 
YTD 2012
YTD 2011
% change
 
         
Group New Business Profit 1,2
£1,738m
£1,535m
13 %
 
Group APE sales  
£3,078m
£2,704m
14 %
 
Margin - APE %
56 %
57 %
-1pt
 
         
Investment Net Flows
£12.3bn
£3.4bn
263 %
 
 
 
IGD Surplus
£4.1bn
£3.9bn
5 %
   
 
 
 
Q3 2012 
Q3 2011
% change
 
         
Group New Business Profit  
£597m
£466m
28 %
 
Group APE sales  
£1,048m
£880m
19 %
 
         
Investment Net Flows
£7.0bn
£0.5bn
 
 
Tidjane Thiam, Group Chief Executive, said:
 
"Prudential has continued to perform strongly in the third quarter of 2012 in a global macroeconomic environment that remains turbulent. 
 
"We are in the right markets, with the right business models and continue to make good progress across our businesses and chosen markets.  We have increased new business profit, our preferred growth metric, for 13 consecutive quarters year-on-year since the third quarter of 2009.  In the third quarter, Group new business profit grew by 28 per cent year-on-year with group APE sales increasing by 19 per cent with all businesses contributing to this performance.
 
"In Asia, year-to-date new business profit increased by 15 per cent and 23 per cent on a 'like-for-like'5 basis and APE sales grew by 16 per cent.  In the discrete third quarter, new business profit grew by 11 per cent (16 per cent on a 'like-for-like basis'5) while APE grew by 6 per cent.  We took a number of initiatives in the third quarter to manage our business mix pro-actively giving up volume for value.  In North Asia (Korea, Taiwan) we have taken decisive action not to provide capital-intensive guaranteed products driving down APE by 26 per cent.  In Malaysia, we have refocused the business on higher value, lower volume protection business, driving a 20 per cent fall in APE.  Outside these three markets, APE growth in the discrete third quarter was strong at 19 per cent.
 
"We have seen these trends continue in October with 16 per cent APE growth for Asia.  Overall, our powerful multi-channel distribution platform, our continued focus on health and protection products and our geographic diversification position us well to continue to grow profitably and with discipline in the most attractive Asian markets.
 
"In the US we continue to balance cash and capital generation, sales volumes, risk and earnings to deliver value and maintain internal rates of return in excess of our hurdle rates.  In the first nine months, Jackson has achieved a 10 per cent increase in new business profit to £683 million with APE up 15 per cent to £1,133 million. 
 
"In the third quarter, we have seen very strong variable annuity sales levels as a result of high consumer demand, moving us close to our annual risk appetite earlier than expected.  Therefore, we have taken proactive steps to limit sales of guaranteed variable annuities and we expect total sales of these products to be between $18 billion and $18.5 billion for 2012.  This will ensure we achieve adequate diversification by vintage which enables us to perform well across economic and market cycles.  We continue to see robust sales growth in our non-guaranteed Elite Access product for which we have a strong appetite, given its characteristics.
 
"In the UK we delivered new business profit of £227 million in the first nine months of 2012, up 17 per cent.  We have delivered year-to-date growth in retail sales with new business profits up 11 per cent.  In our chosen markets in the UK, we generate internal rates of return that are commensurate with those that we are achieving in the other parts of the Group.   
 
"Asset management has recorded net inflows of £12.3 billion led by M&G.  This is our best ever performance at the nine month stage surpassing the historically high level of net inflows achieved in 2009.  M&G has benefited from its strong investment performance and broad range of attractive funds across asset classes as retail investors, particularly those in continental Europe, are starting to invest again after a period of extreme risk aversion observed in 2011. 
 
"Our balance sheet and capital position continue to be strong with our estimated IGD surplus at the end of the third quarter at £4.1 billion.
 
"The global macroeconomic environment remains challenging with persistently low government bond yields and recently we have also seen the IMF downgrade global growth forecasts6.  Although we remain defensively positioned, we are focused on the long-term profitable growth opportunities available to us, particularly in South-east Asia. 
 
"The recently announced acquisition of Thanachart Life and 15-year exclusive bancassurance agreement with Thanachart Bank in Thailand builds scale in a key target market for us with access to 865 branches across all our partnerships making this the fourth largest branch network in a country of 65 million people. This highlights our confidence in the longer-term profitable growth prospects in Asia.
 
"We are making progress towards the "Growth and Cash" objectives we set ourselves for 2013 and remain on track to achieve these objectives, despite the considerable macroeconomic headwinds we face.  We are well positioned to grow profitably over the long-term and to create value for our shareholders."
 
 
 
1   Unless otherwise stated all growth rates are on a sterling basis. Growth rates on constant currency are presented on schedule 1B of the Interim Management Statement 
 
2   The assumptions used to calculate new business profit are presented in schedule 5 to the Interim Management Statement
 
3   Investment net flows excluding Eastspring Money Market Funds and percentage change is based on unrounded numbers.
 
4   Represents estimated IGD surplus after deducting the 2012 interim dividend of £0.2 billion
 
5   The 'like-for-like' basis growth figures shown above have been determined by applying economic assumptions based on government bond yields as of 30 September 2011.
 
6   IMF Global Growth Outlook, October, 2012
 
 
1. Q3 2012 Business Unit financial highlights
 
 
             
New Business Profit
YTD 2012
YTD 2011 
% change on YTD 2011 
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
             
Asia  
£828m
£719m
15 %
£281m
£254m
11 %
US
£683m
£622m
10 %
£241m
£164m
47 %
UK
£227m
£194m
17 %
£75m
£48m
56 %
Total Group Insurance
£1,738m
£1,535m
13 %
£597m
£466m
28 %
 
 
Sales - APE
YTD 2012
YTD 2011
% change on YTD 2011
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
             
Asia  
£1,328m
£1,147m
16 %
£429m
£404m
6 %
US
£1,133m
£988m
15 %
£414m
£316m
31 %
UK
£617m
£569m
8 %
£205m
£160m
28 %
Total Group Insurance
£3,078m
£2,704m
14 %
£1,048m
£880m
19 %
 
 
Margin - APE %
YTD 2012
YTD 2011
+/- pts change on YTD 2011
     
             
Asia  
62 %
63 %
-1pt
     
US
60 %
63 %
-3pts
     
UK
37 %
34 %
+3pts
     
Total Group Insurance
56 %
57 %
-1pt
     
 
 
Investment Flows
YTD 2012
YTD 2011
% change on YTD 2011
 Q3 2012   
Q3 2011 
% change on
 Q3 2011
             
Gross inflows
           
M&G
£25.2bn
£19.8bn
27  %
£10.5 bn
£6.4bn
64  %
Eastspring Investments
£6.5bn
£6.5bn
-   
£2.7 bn
£2.2bn
23  %
Total Group
£31.7bn
£26.3bn
21  %
£13.2 bn
£8.6bn
54  %
             
Net inflows / (outflows)
           
M&G
£11.3bn
£2.6bn
329  %
£6.4 bn
£(0.3)bn
-   
Eastspring Investments
£1.0bn
£0.8bn
35  %
£0.6 bn
£0.8bn
(22) %
Total Group
£12.3bn
£3.4bn
263  %
£7.0 bn
£0.5bn
-   
             
Funds Under Management (FUM)10 
           
M&G
£216.9bn
£194.4bn
12  %
     
Eastspring Investments
£56.0bn
£49.5bn
13  %
     
 
 
7   New business profit is calculated using end-of-period economic assumptions. These are presented in schedules 5 of the Interim Management Statement. The fall in long-term interest yields between September 2011 and September 2012, have reduced the year-to-date September 2012 new business profit by £134 million.
 
8   Gross and net investment inflows excluding Eastspring Money Market Funds
 
9   Percentages based on unrounded numbers
 
10 Funds under management includes all external and internal funds                   
 
1.1 Asia Insurance operations
 
 
Asia
           
 
YTD 2012
YTD 2011
% change on YTD 2011
 Q3 2012 
Q3 2011 
% change on Q3 2011
Sales - APE
£1,328m
£1,147m
16 %
£429m
£404m
6 %
             
New Business Profit   
£828m
£719m
15 %
£281m
£254m
11 %
Total Margin - APE %
62 %
63 %
-1pt
     
 
Profitable growth prospects for Asia's life insurance markets remain compelling given the sustained expansion of the middle classes in the region and the low penetration rates for long-term savings and protection products.  However, we anticipate that industry growth rates may fluctuate in the short-term as theoutlook for global economic growth softened during the third quarter driven by contracting economic activity in Europe and more modest growth than expected in the United States.  This impacts some of Asia's economies to a degree in terms of trade opportunities and can undermine household confidence particularly in savings and investments that are directly linked to volatile markets.  These negative trends are mitigated by the emphasis put by a number of governments on growing their domestic demand, reducing the dependency of their economies on external markets and making them more resilient across the global economic cycle. 
 
Our strategy of expanding quality, multichannel distribution with an emphasis on regular premium policies and a focus on covering the health and protection needs of the emerging middle class across the region positions us to continue to grow profitably, well into the future.
 
Despite the challenge of low interest rates, new business profits for the nine months of 2012 (calculated using active assumptions) grew to £828 million which equates to a margin of 62 per cent, 1 percentage point lower year-on-year. The net impact of active assumptions, which reflect lower government bond yields as at 30 September 2012, was to reduce new business profits by £53 million compared to the end of September 2011, with this fall being mostly offset by a focus on higher margin products and a favourable geographic mix. The reported new business profit growth of 15 per cent in the nine month period equates to 23 per cent on a 'like for like'1 basis.
 
Our geographic diversification remains a key strength, enabling us to deliver continued profitable growth from the region as a whole. Year-to-date APE of £1,328 million has increased by 16 per cent relative to last year mainly led by strong growth in the South Asian markets of Indonesia, Singapore and Hong Kong.  Prudential's third quarter APE of £429 million was 6 per cent higher than the third quarter last year as continuing strong growth in Indonesia (up 20 per cent), Singapore (up 27 per cent) and Hong Kong (up 23 per cent) was partially offset by our decision not to provide low margin guaranteed products in Taiwan (down 33 per cent) and Korea (down 15 per cent) and to refocus Malaysia (down 20 per cent) on protection business which is lower premium but higher value.  Excluding those three markets where we deliberately and proactively gave up volume for value, our APE growth for the discrete third quarter was 19 per cent.  We have seen continued momentum in October with APE up 16 per cent for Asia.
 
The APE growth for South-east Asian markets in the first nine months of 2012 has been achieved profitably.  In Indonesia, Hong Kong and Singapore, new business profit grew by 19 per cent in aggregate year-to-date and by 37 per cent in our nascent markets of Thailand, Vietnam and the Philippines. In the discrete third quarter new business profits for these six South-east Asian markets grew by 21 per cent.
 
Prudential is a leading regional life insurer with both material agency and bank distribution. During this year we have seen a strong increase in new business volumes from our bank partners as we continue to deepen our long-term relationships with partners that include United Overseas Bank (UOB) and Standard Chartered Bank (SCB). The proportion of APE from this channel has increased to 35 per cent year-to-date in 2012 compared to 30 per cent for the prior period. In our agency channel, we continue to focus on enhancing activity levels and agent productivity. The number of average active agents, excluding India, has increased by 13 per cent year-on-year with 59 per cent of APE being derived from this channel. India's agency force continues to be restructured following the regulatory changes that came into effect on 1 September 2010.
 
Regular premium policies generated 92 per cent of APE during the first nine months of 2012 compared to 90 per cent during the same period last year. APE from health and protection products grew by 19 per cent to £410 million in the year-to-date as we focussed on these higher value products. The product mix for the nine month period was protection at 31 per cent, participating business at 34 per cent and unit-linked at 29 per cent (2011: 30 per cent, 33 per cent and 32 per cent respectively).
 
 
 The 'like-for-like' basis growth figures shown above have been determined by applying economic assumptions based on government bond yields as of 30 September 2011.
 
Net insurance flows for Asia (excluding India) remain strongly positive for both the third quarter and the year-to-date driven by new business flows and the continued growth of the in-force book. Third quarter outflows arising from surrenders and partial withdrawals relating to shareholder-backed business are at a similar run-rate to both the first half of 2012 and the equivalent quarter last year, when expressed as a percentage of opening liabilities.
 
 
Indonesia
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011 
% change on
 Q3 2011
APE
£303m
£239m
27 %
£97m
£81m
20 %
 
Indonesia is becoming one of Asia's largest and fastest growing economies and Prudential continues to be a leader in the Indonesian life insurance market.  We are continuing to deliver record levels of new business with year-to-date growth of 27 per cent primarily driven by the expansion and productivity improvements in our agency force. Our recruiting, training and licensing process continues to be effective and has driven a 26 per cent increase in average active manpower over the year.  We are also seeing excellent results from our rapidly developing bank channel where APE is up 74 per cent over the prior year.
 
 
Hong Kong
           
 
YTD 2012
YTD 2011
% change
on YTD 
 Q3 2012 
Q3 2011
% change on
 Q3 2011
APE
£273m
£229m
19 %
£96m
£78m
23 %
 
Hong Kong has delivered a strong performance year-to-date with APE up 19 per cent.  Prudential remains the only leading player in Hong Kong to have material agency and bank distribution channels and both have made positive contributions. The insurance specialists working with SCB have delivered increased referrals and higher case sizes and we have also grown the size of our tied agency and increased average case sizes.
 
 
Singapore
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011
% change on
 Q3 2011
APE
£217m
£163m
33 %
£76m
£60m
27 %
 
Singapore continues to perform well.  The bancassurance channel is growing at a faster rate than agency as each of our major and exclusive partners (SCB, UOB, Singpost and Maybank) delivered growth rates in excess of 40 per cent. Our agency channel continues to grow with sales up 9 per cent principally driven by improvements in agent productivity.
 
 
Malaysia
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011
% change on
Q3 2011
APE
£145m
£150m
(3)%
£47m
£59m
(20)%
 
In Malaysia we have taken the decision to de-emphasise high premium, but lower value, top-ups to linked polices and endowment products and to increase focus on protection. The proportion of year-to-date sales of protection business has increased by 13 percentage points over 2011. This focus on higher margin products is already bearing fruit with new business profits up 10 per cent year-to-date offsetting the impact of falling volumes. Although currently small relative to agency, our bank distribution in Malaysia is growing strongly, up 68 per cent compared to last year.
 
 
Other South-east Asia - Philippines, Thailand and Vietnam
         
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011
% change on
 Q3 2011
APE
£90m
£71m
27 %
£32m
£27m
19 %
 
Prudential's other operations comprise the Philippines, Thailand and Vietnam with new business APE sales increasing by 27 per cent in the first nine months of 2012.  The Philippines and Thailand have grown strongly, while Vietnam's performance has been broadly flat as the economy faces challenges. The recently announced acquisition and a fifteen year exclusive bancassurance agreement with Thanachart in Thailand enables us to double our market share and significantly enhances our growth opportunities in the country. The transaction is expected to complete in the first quarter of 2013.
 
 
China
           
 
YTD 2012
YTD 2011
% change
on YTD 
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
APE
£46m
£46m
- %
£13m
£11m
18 %
 
The life insurance market in China remains challenging due to macroeconomic pressures and regulatory changes implemented earlier this year that impacted the bank channel. However, we have seen some signs of stabilisation and the APE for the third quarter of £13 million is 18 per cent higher than the third quarter last year.
 
 
India
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
APE
£75m
£73m
3 %
£22m
£26m
(15)%
 
InIndia, the economic environment has become more challenging and the volatile equity markets have not been conducive to higher agency activity levels. The marked depreciation of the Indian rupee relative to the pound has also depressed the reported results; on a local currency basis year-to-date APE growth is 17 per cent, while APE in the discrete third quarter is in line with the prior period.  Sales of regular premium products remain robust with year-to-date APE on a constant currency basis up 32 per cent on 2011. Regular premium APE increased to 93 per cent of APE in 2012 (2011: 84 per cent).
 
 
Korea
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011
% change on
 Q3 2011
APE
£67m
£81m
(17)%
£22m
£26m
(15)%
 
Our business in Korea continues to concentrate on high-quality proprietary distribution and regular premium unit-linked business.  We have chosen not to compete in the market for capital-intensive guaranteed return products, particularly in the bank channel.  Agency production has remained in line with the prior period with the effect of increased manpower being offset by the average case sizes which have declined due to the current economic climate.
 
 
Taiwan
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012
Q3 2011
% change on
 Q3 2011
APE
£112m
£95m
18%
£24m
£36m
(33)%
 
Taiwan is now successfully focused on bank distribution principally with partners E.Sun and Standard Chartered Bank. New business APE in the third quarter declined sharply relative to prior year (down 33 per cent) given our decision not to compete in the market for low margin interest rate sensitive products.
 
1.2 US operations
 
Insurance operations
 
 
 US
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
Sales - APE 
£1,133m
£988m
15 %
£414m
£316m
31 %
New Business Profit 
£683m
£622m
10 %
£241m
£164m
47 %
Margin - APE %
60 %
63 %
-3pts
     
 
Jackson continues to focus on managing the balance between earnings, sales, capital efficiency, balance sheet strength through strict pricing discipline for both variable and fixed annuities. Thanks to its financial stability and innovative products, Jackson continues to enhance its reputation as a high-quality and reliable business partner, with more advisers recognising the benefits of working with Jackson.
 
Jackson delivered APE retail sales of £1,105 million in the first nine months of 2012, representing a 14 per cent increase over the same period in 2011.  In addition, with modest institutional sales in 2012, total APE sales were £1,133 million.  Jackson has achieved these sales levels while maintaining its pricing discipline, as it continued to write new business at aggregate internal rates of return in excess of its hurdle rates. 
 
New business profit, our preferred growth metric, was £683 million in the first nine months of 2012, 10 per cent higher than the same period in 2011 driven by higher sales volumes.  The overall margin was 60 per cent for the first nine months of 2012, compared to 63 per cent for the same period in 2011.  The combination of a reduction in the 10 year Treasury yields and spread compression has caused a 6 point drag on the margin relative to the same period in 2011.  Pricing actions and proactive management of the business mix have partially mitigated this reduction.  Notwithstanding the negative impact of lower interest rates, the overall profitability remains robust.  Variable annuity margins, although lower, remain high relative to historical levels at 65 per cent for 2012 (2011: 67 per cent). 
 
Total retail annuity net flows were £7.0 billion for the first nine months of 2012, reflecting a £1.3 billion increase over the same period in 2011.  Annuity net flows in 2012 benefited from net flows of £400 million from Elite Access, a variable annuity product launched in March 2012, which has no guaranteed benefits and provides tax efficient access to alternative investments. At the end of the period Jackson's separate account assets totalled £47.2 billion and general account assets totalled £38.7 billion; these amounts exclude separate and general account assets relating to the acquisition of Reassure America Life Insurance Company (REALIC).
 
In the third quarter, we have seen very strong variable annuity sales levels as a result of high consumer demand, moving us close to our annual risk appetite earlier than expected.  Therefore, we have taken proactive steps to limit sales of guaranteed variable annuities and we expect total sales of these products to be between $18 billion and $18.5 billion for 2012.  This will ensure we achieve adequate diversification by vintage which enables us to perform well across economic and market cycles.  We continue to see strong sales growth in our non-guaranteed Elite Access product for which we have a strong appetite, given its characteristics.
 
Jackson's hedging programme continues to perform well, mitigating the impact of the significant macroeconomic challenges and supporting our capital position on both an economic and a regulatory basis.  Policyholder behaviour in the first nine months of 2012 continued to trend in line with our expectations.  We continue to have strong regulatory capital levels.
 
On 4 September 2012, Jackson completed the acquisition of SRLC America Holding Corp (SRLC) from Swiss Re. SRLC was the U.S. holding company of REALIC. The acquisition helps diversify Jackson's sources of earnings by increasing the amount of income generated from underwriting activities. REALIC was closed to new business and, therefore this transaction has no impact on APE or new business profit. Jackson has begun integrating REALIC's book of business and  the transaction will be immediately accretive to its pre-tax earnings.
 
 
Variable annuity
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
APE  sales
£970m
£851m
14 %
£359m
£262m
37 %
 
Variable annuity APE sales of £970 million in the first nine months of 2012 were higher than the same period in 2011, with £40 million of the increase in APE relating to sales of Elite Access, our no guaranteed benefit variable annuity. Excluding sales of Elite Access, variable annuity sales increased 7 per cent compared to the same period in 2011 on a constant currency basis.  Jackson implemented various product and pricing initiatives in the second half of 2012 to further optimise the balance of value and risk and to ensure that sales of variable annuity with discretionary guarantees do not exceed the upper end of our risk appetite limits for the calendar year. 
 
 
             
Fixed index annuity
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
APE sales
£79m
£68m
16 %
£29m
£26m
12 %
 
Fixed index annuity APE sales of £79 million in the first nine months of 2012 increased 16 per cent from the same period of 2011.  Jackson ranked 8th in sales of fixed index annuities through the first half of 2012, with a market share of 4.7 per cent, and was also 8th for the full year 2011 with a market share of 4.6 per cent1
 
 
Fixed annuity
           
 
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011
% change on
 Q3 2011
APE 
£45m
£33m
36 %
£14m
£10m
40 %
 
Fixed annuity APE sales of £45 million in the first nine months of 2012 were 4 per cent of total APE sales and 36 per cent higher than the historically low level of fixed annuity sales in the same period in 2011.  Jackson ranked 8th in sales of traditional deferred fixed annuities through the first half of 2012, with a market share of 3.6 per cent, compared to 13th and a market share of 2.1 per cent for the full year 20112.
 
Asset management operations
 
Curian Capital, a specialised asset management company that provides innovative fee-based separately managed accounts, continued to generate positive net flows during the nine-month period, which increased total assets under management to £6.4 billion at the end of September 2012 compared with £4.7 billion at the end of 2011.
 
 
1 Source: AnnuitySpecs/The Advantage Compendium 
2 Source: LIMRA
 
1.3 UK insurance operations
 
 
UK
           
 
YTD 2012
 YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
             
Sales - APE 
           
Retail
£576m 
£541m 
6 % 
£191m 
£160m 
19 % 
Wholesale
£41m 
£28m 
46 % 
£14m 
£0m 
Total
£617m 
£569m 
8 % 
£205m 
£160m 
28 % 
             
New Business Profit 
£227m 
£194m 
17 % 
£75m 
£48m 
56 % 
Margin - APE %
37 % 
34 % 
+3pts 
     
 
 
Prudential competes selectively in the UK's retirement savings and income market, with a focus on writing profitable new business combined with sustainable cash generation and capital preservation, rather than pursuing top-line sales growth.
 
Total APE sales of £617 million were 8 per cent higher than during the first nine months of 2011, principally due to higher sales of individual annuities, with-profits bonds and bulk annuities which were partly offset by lower sales of corporate pensions. APE sales for the standalone quarter of £205 million were up 28 per cent, mainly due to higher sales of individual annuities, with-profits bonds and a bulk annuity sale. We have improved our new business profitability in the first nine months of 2012, despite the challenging economic environment and current competitive conditions in the UK marketplace.
 
New business profit was £227 million for the first nine months of 2012, an increase of 17 per cent over 2011 driven by higher sales and a more favourable product mix. Retail new business profit increased by 11 per cent over 2011. The new business margin, including bulk annuities, of 37 per cent achieved in the first nine months of 2012 was up 3 percentage points on the same period last year. The retail new business margin of 33 per cent was up 1 percentage point compared to 2011. The negative impact on product margins of lower interest rates was more than offset by a more favourable business mix, with lower sales of corporate pensions and higher sales of individual annuities, with-profits bonds and bulk annuities (which have a higher margin).
 
APE sales of individual annuities of £166 million were 25 per cent higher than for the first nine months of 2011. Sales from internal vestings of £104 million, were 18 per cent higher, due to a combination of two factors - a higher number of customers retiring and higher average fund values. Sales of external annuities of APE £62 million were 41 per cent higher, reflecting continued demand for our with-profits Income Choice Annuity which offers customers security with a potential for income growth.
 
Onshore bonds sales of APE £161 million in the first nine months of the year were up 27 per cent on the same period in 2011, including with-profits bond sales of APE £152 million, which increased by 36 per cent.  Our PruFund range made up 76 per cent of with-profits bond sales. Against the first nine months of 2011, PruFund sales were 41 per cent higher. The continued popularity of PruFund is a result of consumer appetite for its range of optional guarantees, which offer a degree of security against potential market falls but may also be Retail Distribution Review (RDR) related. Although the demand for guarantees remains high, the growth in PruFund sales has been mainly in the form of non-guaranteed business so is more capital efficient.
 
The RDR, one of a number of current reforms to the UK regulatory framework, is due to be implemented on 1 January 2013. From that point onwards, independent financial advisers will no longer be able to accept commissions from product providers on advised sales of investment and savings products.  Distributors are therefore adjusting their business models ahead of the implementation of the new regulatory framework. This is likely to lead to some short-term dislocation in the market. While our business is on track to be ready for the onset of RDR, we expect investment bond sales, in particular, to be impacted in the latter part of 2012 and into 2013 as distributors adapt to the new regulatory environment.
 
Corporate pensionssales of APE £148 million in the first nine months of the year were 22 per cent lower than the same period last year. Sales in 2011 were particularly high due to new defined contribution members joining our schemes following closure of a number of defined benefit schemes operated by existing clients. We continue to focus on securing new members and incremental business rather than new Corporate Pensions schemes. Prudential UK remains the largest provider of Additional Voluntary Contribution plans within the public sector where we now provide schemes for 68 of the 99 public sector authorities in the UK.
 
Sales of other products, principally individual pensions, PruProtect, PruHealth and offshore bonds of £101 million were 11 per cent higher than the first nine months of 2011. Individual pensions sales (including income drawdown) of APE £59 million were 9 per cent higher, reflecting the continued popularity of PruFund.
 
In the Wholesale market, Prudential UK's aim is to continue to participate selectively in bulk and back-book buyouts using our financial strength, superior investment track record, annuitant mortality risk assessment and servicing capabilities. In line with this opportunistic approach, we signed a further bulk annuity buy-in insurance agreement in the third quarter of 2012 of APE
£14 million, in addition to the agreement signed in the first half of 2012, bringing the total for the nine months to APE £41 million (2011: single deal APE £28 million). We will continue to maintain our focus on value and only participate in capital-efficient transactions that meet our return on capital and payback requirements.
 
1.4 M&G
 
 
Investment Flows
YTD 2012
YTD 2011
% change on
 YTD 2011
 Q3 2012
Q3 2011 
% change on
Q3 2011
Net inflows
           
Retail business  
£6.1bn
£2.6bn
134  %
£1.9bn
£(0.2)bn
-   
Institutional business
£5.2bn
£0.0bn
-   
£4.5bn
£(0.1)bn
-   
Total  
£11.3bn
£2.6bn
329  %
£6.4bn
£(0.3)bn
-   
             
Gross inflows total
£25.2bn
£19.8bn
27  %
£10.5bn
£6.4bn
64  %
             
Funds under management total
£216.9bn
£194.4bn
12  %
     
External funds under management
£104.2bn
£87.3bn
19  %
     
 
Persistent volatility of the world's markets has continued to dampen investors' appetite for risk. The third quarter saw a slight improvement in sentiment but equity markets remain subdued and there are no clear trends in investor behaviour beyond a general pursuit of safety and yield.
 
Despite this unsupportive backdrop, M&G has delivered a record level of net inflows in the third quarter of £6.4 billion as retail investors, particularly in mainland Europe, returned to the market after a period of extreme risk aversion last year (third quarter of 2011: net outflows of £0.3 billion). Total net inflows year-to-date have been £11.3 billion, more than four times higher than the £2.6 billion of asset flows in the previous year.
 
M&G's success can be attributed to continued strong long-term investment performance and a consistent programme of business diversification - by product, by distribution channel and by country. The benefits of diversification are most evident in the European retail funds market where M&G now ranks second for net sales among cross-border providers3.
 
Retail net fund sales remain robust; £1.9 billion of new inflows during the third quarter took the total for the year-to-date to £6.1 billion, more than double their level this time last year. As expected, net fund sales in the UK slowed in the three months to the end of September to £0.5 billion, mainly as a result of our deliberate decision in July to slow the inflow of new money into two market-leading UK corporate bond funds. Quarterly net inflows for the first half of 2012 averaged £1.4 billion.
 
In the UK, M&G has ranked first for gross fund sales for 16 consecutive quarters based on data at 30 September4. Over the first nine months of the year, M&G had a 10.8 per cent market share according to a measure of gross sales as defined by the Investment Management Association (IMA). It is also the UK's largest retail fund manager with funds under management of £41.4 billion as at 30 September 20125.
 
In mainland Europe, M&G continues to attract strong flows from investors, with net retail fund sales for the quarter of £1.4 billion. European distribution has accounted for more than half of net retail inflows since the start of the year at a total of £3.5 billion, reflecting consistently strong fund returns and considerable investment in the M&G brand in these newer markets.  Funds under management with European clients now exceed £12.2 billion, a 56 per cent increase on funds under management of £7.8 billion this time last year.
 
Underpinning the retail business is strong long-term investment performance. Twenty-three retail funds accounting for 72 per cent of funds under management have delivered top or upper quartile returns over the three years to 30 September 2012. A high proportion of investor contributions continue to flow into conservatively positioned funds, most notably the M&G Optimal Income Fund, a flexible bond fund which ranked fourth among European funds for net sales in the 12 months to the end of August 20126.  No fewer than 11 M&G funds, representing all of the main asset classes, have each attracted net sales of £20 million or more during the three quarters.
 
 
1  From 1 January 2012, Prudential Portfolio Managers South Africa (Pty) Limited was no longer a subsidiary of M&G following the restructuring transaction whereby M&G's ownership has been diluted following the equitisation of the staff incentive scheme and reduced further by the sale of an additional 10 per cent equity stake to an empowerment company as encouraged under Broad Based Black Economic Empowerment legislation. Consequently, 47.2 per cent of funds under management and flows from the South African associate company has been included in M&G's 2012 results in this announcement whereas 100 per cent had been included up to the end of 2011.
 
2   Percentages based on unrounded numbers.
  3 Source: Lipper FMI. (October 2012, data as at August 2012). SalesWatch. Thomson Reuters
  4 Source: Fundscape (Q3 issue, November 2012). The Pridham Report. Fundscape LLP
  5 Source: Investment Management Association
  6 Source: Lipper FMI. (October 2012, data as at August 2012). SalesWatch. Thomson Reuters
 
The £6.8 billion of net retail inflows in the UK and Europe have been partially offset by £0.7 billion net outflow from funds managed by M&G's associate entity in South Africa. These redemptions were entirely from the PPM South Africa Dividend Income Fund, which was closed on 31 March 2012 ahead of the implementation of new tax legislation on 1 April 2012 which would have had a materially adverse impact on the treatment of the distributions made by the Fund to the Fund's investors. Fund flows into other retail funds of the South African business, while outweighed by the Dividend Income Fund outflows, are in fact at record positive levels.
 
The consistency and quality of retail fund performance has resulted in M&G being awarded the prestigious 2012 Morningstar OBSR7 Outstanding Investment House Award. Shared this year with First State Investments, M&G has won this award for three consecutive years. Total external retail funds under management at the end of September were £52.0 billion (30 September 2011: £41.4 billion).
 
In the nine months to 30 September 2012, net inflows in the Institutional Business were £5.2 billion across M&G's range of diverse fixed income, property and alternative investment strategies. This represents a record level of year-to-date net sales, with a single fixed income mandate amounting to £4.4 billion accounting for a significant proportion of this total. However, redemptions from this short-dated mandate are expected during the course of 2013 and 2014.
 
In addition to record quarterly inflows, the Institutional Business has a strong pipeline of new business which has been won but which has not yet been funded. Investment performance remains extremely strong with 100 per cent of actively managed fixed income funds delivering returns ahead of their benchmarks in the three years to 30 September 2012. Total external institutional funds under management at the end of September 2012 were £52.2 billion (30 September 2011: £45.9 billion).
 
M&G's Institutional Business has also been recognised for its investment performance with multiple awards, including the UK Pensions Awards 2012 Fixed Income Manager of the Year award. Indeed, M&G's flagship institutional UK corporate bond fund, with assets of over £4.2 billion at 30 September 2012, has outperformed its benchmark8 by 1.69 percentage points a year over the five year period to 30 September 2012.
 
Total funds under management across M&G were £216.9 billion at the end of the third quarter, a 12 per cent increase on 30 September 2011. External funds now represent 48 per cent of the total, standing at a record level of £104.2 billion, a 19 per cent improvement year-on-year.
 
Looking to the future, we expect growth in retail fund sales to be strongest in mainland Europe following a substantial investment in distribution there. In the UK, however, net retail fund sales are likely to slow further as a result of our decision to limit new inflows into our two market-leading UK corporate bond funds.
 
7 Morningstar Old Broad Street Research Limited 2012 Outstanding Investment House Award.
8 The benchmark for the Fund is the iBoxx Sterling Non Gilts Index
9 Returns are gross estimates on an offer to offer basis
 
1.5 Eastspring Investments
 
 
Investment Flows
YTD 2012
YTD 2011
% change
on YTD
 Q3 2012 
Q3 2011 
% change on
 Q3 2011
Net inflows retail and institutional business
£1.0bn
£0.8bn
35  %
£0.6bn
£0.8bn
(22) %
             
Gross inflows retail and institutional business
£6.5bn
£6.5bn
-   
£2.7bn
£2.2bn
23  %
             
Funds under management total
£56.0bn
£49.5bn
13  %
     
External funds under management total
£16.5bn
£15.1bn
9  %
     
 
Net third party year-to-date inflows of £1,033 million were driven by inflows to new funds in India and Taiwan, as well as net inflows in Japan and China which benefitted from higher equity flows. Specifically, strong fund raising was seen in India for its fixed maturity plan range, while the Taiwanese business saw a successful launch of the Emerging Asian Local Fixed Income Fund. In addition Taiwan's existing range of onshore and offshore fixed income funds have attracted significant net inflows year-to-date.  The positive net flows were partially offset by redemptions from institutional business in Korea.  Third quarter net inflows in 2012 were 22 per cent  lower than the same period in 2011 mainly due to redemptions in September 2012 from an institutional mandate.  At 30 September 2012, 67 per cent of funds were outperforming their benchmarks over a rolling three year period.
 
September marked the opening of Eastspring Investments' first office in the US, as it aims to capture the increasing interest in Asia for investment opportunities within the US institutional market.
 
Total funds under management of £56.0 billion were 13 per cent higher than a year ago, driven by the net inflows and positive market movements. In September a survey conducted by Asia Asset Management3 ranked Eastspring Investments as the leading retail asset manager in Asia (based on assets sourced from Asia ex-Japan) as at 30 June 2012.
 
 
1   Investment flows exclude Eastspring Money Market Funds gross and net inflows. Year-to-date net outflows were £217 million (year-to-date net outflows 2011: £267 million). External funds under management exclude Money Market Funds of £4.1 billion (third quarter 2011: £4.5 billion).
 
2  Percentages based on unrounded numbers.
 
3   Source: September 2012, Asia Asset Management magazine
 
2. Financial Management
 
The Group remains focused on managing proactively its balance sheet and risk profile.  We continue to impose stringent stress testing on our key capital measures, ensuring we could withstand significant market shocks both in the short and medium term.
 
2.1 Capital Management
 
A strong balance sheet is at the heart of our strategy and is a key consideration for our customers when they choose our products. That strength gives confidence to our customers that we will be there to serve them in the long term. Strict and proactive management and allocation of capital remain a core focus for our Group.
 
Our capital position remains resilient. We have continued to focus on maintaining the Group's financial strength through optimising the balance between writing profitable new business, conserving capital and generating cash. We estimate that our Insurance Groups Directive (IGD) capital surplus was £4.1 billion at 30 September 2012 (after taking into account the 2012 interim dividend of £0.2 billion). This compares to £4.2 billion at 30 June 2012 (before taking into account the 2012 interim dividend) and £4.0 billion at 31 December 2011 (before taking into account the 2011 final dividend of £0.4 billion).
 
As at 30 September 2012 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 2012 levels would reduce the IGD surplus by £400 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 £900 million;
 
 
·      A 100 bps reduction (subject to a floor of zero) in interest rates would reduce the IGD surplus by £800 million;
 
 
·      Credit defaults of ten times the expected level would reduce IGD surplus by £650 million.
 
 
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 2012 was £2.1 billion, equivalent to 7.9 per cent of the assets backing annuity liabilities. This represents 40 per cent of the portfolio spread over swaps, compared to 33 per cent at 31 December 2011 and 35 per cent at 30 September 2011.
 
The surplus of the UK with-profits fund, which represents a substantial source of capital from both a solvency and economic perspective, is excluded from the IGD calculation. At 30 September 2012, the UK with-profits fund inherited estate was estimated at £6.7 billion. The value of shareholders' interest in future transfers from the UK with-profits fund is valued at £2.2 billion.
 
2.2 Credit
 
The Group's estimated total debt securities portfolio on an IFRS basis (excluding holdings attributable to external unit holders of consolidated unit trusts) comprised the following as at 30 September 2012:
 
 
 
With-profit
Unit-linked
 and variable
 annuity*
Other
 shareholder
 backed
 business
Total
 
£bn
£bn
£bn
£bn
UK insurance operations
 48.8 
 6.3 
 26.6 
 81.7 
US insurance operations**
 - 
 - 
 33.4 
 33.4 
Asia long-term business 
 1.3 
 2.1 
 5.0 
 8.4 
Other operations
 - 
 - 
 1.9 
 1.9 
Total
50.1 
8.4 
66.9 
125.4 
 
 
*    Jackson's variable annuity separate account assets comprise equity securities and portfolio holdings in unit trusts (including mutual funds), the majority of which are equity based.
 
**  Including the debt securities of REALIC acquired on 4 September 2012.
 
Shareholders are not directly exposed to value movements on assets backing with-profits or unit-linked operations, with sensitivity mainly related to shareholder-backed business. In the UK, of the £26.6 million of debt securities backing shareholder business and other non-linked business, 74 per cent is rated AAA to A, 21 per cent BBB and 5 per cent non-investment grade. No defaults were reported in the third quarter of 2012 for UK and Asia shareholder-backed businesses.
 
The most significant area of exposure to credit risk for the shareholder is in the US. The US insurance operation's fixed income portfolio at 30 September is estimated at £33.4 billion. Net unrealised gains on available-for-sale securities were £2.9 billion at 30 September 2012 (30 June 2012: £2.5 billion).
 
Gross unrealised losses on securities priced below 80 per cent of book value were £0.1 billion at 30 September 2012 (30 June 2012: £0.1 billion). 
 
For US insurance operations, total amounts charged to profits relating to debt securities as a result of impairments and sales of impaired and deteriorating bonds in the third quarter of 2012 were £39 million (third quarter 2011: £16 million), nine months ended 30 September 2012: £72 million (nine months of 2011: £29 million). In the third quarter of 2012, Jackson's total defaults were £nil (third quarter 2011: £nil).
 
Group shareholder sovereign debt exposure

Sovereign debt of shareholder-backed business represented 16 per cent or £10.6 billion of the Group's debt portfolio backing shareholder business at 30 September 2012. 38 per cent of this was rated AAA and 93 per cent investment grade.
 
Of the Group's holdings in Continental Europe of £582 million, 80 per cent was AAA rated. Prudential's direct exposure to the eurozone countries continues to be small in the context of our overall balance sheet. Shareholder exposure to the eurozone sovereigns of Italy and Spain is £49 million.The Group does not have any direct sovereign debt exposure to Greece, Portugal or Ireland. 
 
The exposure of the Group's shareholder funds to sovereign debt (including credit default swaps that are referenced to sovereign debt) at 30 September 2012 is as follows.
 
 
     
Shareholder
sovereign
debt 
     
£m
Continental Europe
 
   
Italy
48 
   
Spain
     
49 
 
Germany
467 
 
Other Europe (principally Isle of Man, France and Belgium)
66 
     
582 
       
United Kingdom
3,411 
United States
3,519 
Other (predominantly Asia)
3,051 
Total
10,563 
 
 Exposure to bank debt securities
 
Prudential expects that any second order sovereign credit exposures would most likely be concentrated in the banking sector. The Group's bank exposure is a function of its core investment business, as well as of the hedging and other activity undertaken to manage its various financial risks. Prudential relies on publicly available information to identify banks with large concentrations of indirect exposure.
 
Prudential has a range of controls and processes to manage credit exposure. In addition to the control frameworks that cover shareholder and policyholder credit risk within each Business Unit, the Group Credit Risk Committee oversees shareholder credit risk across the Group. The Committee receives comprehensive management information, including details of counterparty and invested credit exposure (including structured credit and loans), secured and unsecured cash balances, top 30 credit exposures, and an analysis of shareholder exposure by industry/country and rating. The Group Risk function also continually monitors the portfolio for emerging credit risks through various tools and processes. 
 
Prudential actively mitigates the level of Group-wide credit risk (invested credit and counterparty) through a comprehensive system of hard limits, collateralisation agreements and centrally managed 'watch lists'.
 
In terms of shareholder exposure to the bank debts of Portugal, Ireland, Italy and Spain, the Group held £270 million at 30 September 2012. There was no direct exposure to Greek banks.
 
The exposure of the Group's shareholder funds to bank debt securities at 30 September 2012 comprises the following:
 
 
 
Bank debt securities - shareholder-backed business
         
Total senior 
 debt 
Total 
 subordinated 
 debt 
Total
         
£m
£m
£m
Continental Europe
         
   
Portugal
   
 31 
 - 
 31 
   
Ireland
   
 16 
 - 
 16 
   
Italy
   
 12 
 25 
 37 
   
Spain
   
 160 
 26 
 186 
         
 219 
 51 
 270 
               
 
Germany
   
 34 
 1 
 35 
 
Other Europe
   
 86 
 283 
 369 
         
 339 
 335 
 674 
               
United Kingdom
 652 
 780 
 1,432 
United States
   
 1,778 
 484 
 2,262 
Other (predominantly Asia)
 372 
 570 
 942 
Total
       
 3,141 
 2,169 
 5,310 
 
 
ENDS
 
Enquiries:
 
 
Media
 
Investors/Analysts
 
Jonathan Oliver
+44 (0)20 7548 3719
Raghu Hariharan
+44 (0)20 7548 2871
Robin Tozer
+44 (0)20 7548 2776
Richard Gradidge
+44 (0)20 7548 3860
 
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. All references to NBP margins on pages 1 to 16 of this statement refer to margins on an APE basis, calculated as the ratio of new business profit to APE sales.
 
 
4           There will be a conference call today for the media at 09.30 (UK) / 17.30 (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. Dial in telephone number: (UK) +44 (0)203 140 0668; (Hong Kong) +852 3060 9173; Pin: 288152#.
 
 
5           There will be a conference call today for analysts and investors at 10.15 (UK) / 18.15 (Hong Kong) hosted by Tidjane Thiam, Group Chief Executive. Dial in telephone number: +44 (0)203 140 0668 / 0800 368 1950 (Freephone UK) Pin: 765743#. Playback (PIN: 388040#) +44 (0) 203 140 0698 / 0800 368 1890 (Freephone UK) (available from 12.30 (UK Time) on 14 November 2012 until 23.59 (UK Time) on 27 November 2012).
 
 
6           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)20 7548 2466.   
 
 
7           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 schedule 1B.
 
 
8           Prudential plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute a large global financial services group. It provides insurance and financial services through its subsidiaries and affiliates throughout the world. It has been in existence for over 160 years and has £363 billion in assets under management (as at 30 June 2012). 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.
 
 
9           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, 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, fluctuations in interest rates and exchange rates, 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 competition, 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 or accounting standards, 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 this document and the 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 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.
 
 
10      The financial information presented in this Interim Management Statement and accompanying schedules is unaudited.
 
 
Supplementary schedules
 
 
Contents
 
 
Page
 
Schedule 1A
 
New Business Insurance Operations (Reported Exchange Rates)
 
19
 
Schedule 1B
 
New Business Insurance Operations (Constant Exchange Rates)
 
20
 
Schedule 2A
 
Total Insurance New Business APE - By Quarter (Reported Exchange Rates)
 
21
 
Schedule 2B
 
Total Insurance New Business APE - By Quarter (Constant Exchange Rates)
 
22
 
Schedule 3
 
Investment Operations - By Quarter (Reported Exchange Rates)
 
23
 
Schedule 4
 
New Business Profit and Margin ( % APE and % PVNBP) (Reported Exchange Rates)
 
24
 
Schedule 5
 
EEV New Business Methodology and Assumptions
 
25
 
Schedule 6
 
Group Debt Securities at 30 September 2012
 
28
 
Schedule 7
 
Basis of preparation
 
33
 
 
 
Schedule 1A - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
INSURANCE OPERATIONS
 
 
 
Single
Regular
Annual Equivalents(3)
PVNBP
 
Q3
 2012
Q3
 2011
 
Q3
 2012
Q3
 2011
 
Q3
2012
Q3
 2011
 
Q3
 2012
Q3
 2011
 
 
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
 
£m
£m
 
£m
£m
 
£m
£m
 
£m
£m
 
Group Insurance Operations
                       
Asia (1a) (7)
 1,071 
1,096 
(2%)
 1,221 
1,037 
18%
 1,328 
1,147 
16%
 7,074 
6,221 
14%
US(1a) (7)
 11,221 
9,735 
15%
 11 
15 
(27%)
 1,133 
988 
15%
 11,308 
9,858 
15%
UK
 4,514 
3,615 
25%
 166 
207 
(20%)
 617 
569 
8%
 5,264 
4,603 
14%
Group Total  
 16,806 
14,446 
16%
 1,398 
1,259 
11%
 3,078 
2,704 
14%
 23,646 
20,682 
14%
                         
Asia Insurance Operations(1a) (7)
                       
Hong Kong
 101 
121 
(17%)
 263 
217 
21%
 273 
229 
19%
 1,574 
1,421 
11%
Indonesia
 247 
177 
40%
 279 
221 
26%
 303 
239 
27%
 1,242 
921 
35%
Malaysia
 69 
60 
15%
 138 
144 
(4%)
 145 
150 
(3%)
 892 
864 
3%
Philippines
 131 
76 
72%
 20 
14 
43%
 33 
22 
50%
 188 
115 
63%
Singapore
 277 
246 
13%
 189 
138 
37%
 217 
163 
33%
 1,564 
1,264 
24%
Thailand
 9 
13%
 27 
19 
42%
 28 
20 
40%
 106 
75 
41%
Vietnam
 1 
0%
 29 
29 
0%
 29 
29 
0%
 102 
101 
1%
SE Asia Operations inc. Hong Kong
 835 
689 
21%
 945 
782 
21%
 1,028 
852 
21%
 5,668 
4,761 
19%
China(8)
 27 
41 
(34%)
 43 
42 
2%
 46 
46 
0%
 218 
227 
(4%)
Korea
 26 
62 
(58%)
 64 
75 
(15%)
 67 
81 
(17%)
 353 
430 
(18%)
Taiwan
 131 
180 
(27%)
 99 
77 
29%
 112 
95 
18%
 514 
447 
15%
India(5)
 52 
124 
(58%)
 70 
61 
15%
 75 
73 
3%
 321 
356 
(10%)
Total Asia Operations  
 1,071 
1,096 
(2%)
 1,221 
1,037 
18%
 1,328 
1,147 
16%
 7,074 
6,221 
14%
                         
US Insurance Operations(1a) (7)
                       
Fixed Annuities
 452 
329 
37%
 - 
 - 
N/A
 45 
33 
36%
 452 
329 
37%
Fixed Index Annuities
 790 
680 
16%
 - 
 - 
N/A
 79 
68 
16%
 790 
680 
16%
Life
 5 
(38%)
 11 
15 
(27%)
 11 
16 
(31%)
 92 
131 
(30%)
Variable Annuities
 9,695 
8,511 
14%
 - 
 - 
N/A
 970 
851 
14%
 9,695 
8,511 
14%
Wholesale
 279 
207 
35%
 - 
 - 
N/A
 28 
20 
40%
 279 
207 
35%
Total US Insurance Operations
 11,221 
9,735 
15%
 11 
15 
(27%)
 1,133 
988 
15%
 11,308 
9,858 
15%
                         
UK & Europe Insurance Operations
                       
Direct and Partnership Annuities
 214 
 264 
(19%)
 - 
 - 
N/A
 21 
26 
(19%)
 214 
264 
(19%)
Intermediated Annuities
 411 
 180 
128%
 - 
 - 
N/A
 41 
18 
128%
 411 
180 
128%
Internal Vesting Annuities
 1,036 
 883 
17%
 - 
 - 
N/A
 104 
88 
18%
 1,036 
883 
17%
Total Individual Annuities
 1,661 
 1,327 
25%
 - 
 - 
N/A
 166 
133 
25%
 1,661 
1,327 
25%
Corporate Pensions
 179 
 161 
11%
 130 
174 
(25%)
 148 
190 
(22%)
 757 
979 
(23%)
On-shore Bonds
 1,613 
 1,265 
28%
 - 
 - 
N/A
 161 
127 
27%
 1,613 
1,266 
27%
Other Products
 648 
 579 
12%
 36 
33 
9%
 101 
91 
11%
 820 
748 
10%
Wholesale
 413 
 283 
46%
 - 
 - 
N/A
 41 
28 
46%
 413 
283 
46%
Total UK & Europe Insurance Ops
 4,514 
3,615 
25%
 166 
207 
(20%)
 617 
569 
8%
 5,264 
4,603 
14%
Group Total  
 16,806 
14,446 
16%
 1,398 
1,259 
11%
 3,078 
2,704 
14%
 23,646 
20,682 
14%
 
 
Schedule1B - Constant Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
INSURANCE OPERATIONS
 
 
 
Single
Regular
Annual Equivalents(3)
PVNBP
 
Q3
 2012
Q3
 2011
 
Q3
 2012
Q3
 2011
 
Q3
 2012
Q3
 2011
 
Q3
 2012
Q3
 2011
 
 
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
YTD
YTD
+/- (%)
 
£m
£m
 
£m
£m
 
£m
£m
 
£m
£m
 
Group Insurance Operations
                       
Asia  (1b) (7)
 1,071 
 1,084 
(1%)
 1,221 
 1,030 
19%
 1,328 
 1,139 
17%
 7,074 
 6,202 
14%
US(1b) (7)
 11,221 
 9,959 
13%
 11 
 15 
(27%)
 1,133 
 1,011 
12%
 11,308 
 10,086 
12%
UK
 4,514 
 3,615 
25%
 166 
 207 
(20%)
 617 
 569 
8%
 5,264 
 4,603 
14%
Group Total  
 16,806 
 14,658 
15%
 1,398 
 1,252 
12%
 3,078 
 2,719 
13%
 23,646 
 20,891 
13%
                         
Asia Insurance Operations(1b) (7)
                       
Hong Kong
 101 
 124 
(19%)
 263 
 223 
18%
 273 
 235 
16%
 1,574 
 1,458 
8%
Indonesia
 247 
 169 
46%
 279 
 212 
32%
 303 
 229 
32%
 1,242 
 883 
41%
Malaysia
 69 
 60 
15%
 138 
 144 
(4%)
 145 
 150 
(3%)
 892 
 864 
3%
Philippines
 131 
 79 
66%
 20 
 15 
33%
 33 
 23 
43%
 188 
 120 
57%
Singapore
 277 
 250 
11%
 189 
 140 
35%
 217 
 165 
32%
 1,564 
 1,281 
22%
Thailand
 9 
 8 
13%
 27 
 19 
42%
 28 
 20 
40%
 106 
 74 
43%
Vietnam
 1 
 1 
0%
 29 
 29 
0%
 29 
 29 
0%
 102 
 102 
0%
SE Asia Operations inc. Hong Kong
 835 
 691 
21%
 945 
 782 
21%
 1,028 
 851 
21%
 5,668 
 4,782 
19%
China(8)
 27 
 43 
(37%)
 43 
 44 
(2%)
 46 
 49 
(6%)
 218 
 239 
(9%)
Korea
 26 
 61 
(57%)
 64 
 74 
(14%)
 67 
 80 
(16%)
 353 
 423 
(17%)
Taiwan
 131 
 181 
(28%)
 99 
 77 
29%
 112 
 95 
18%
 514 
 448 
15%
India(5)
 52 
 108 
(52%)
 70 
 53 
32%
 75 
 64 
17%
 321 
 310 
4%
Total Asia operations
 1,071 
 1,084 
(1%)
 1,221 
 1,030 
19%
 1,328 
 1,139 
17%
 7,074 
 6,202 
14%
                         
US Insurance Operations(1b) (7)
                       
Fixed Annuities
 452 
 336 
35%
 - 
 - 
N/A
 45 
 34 
32%
 452 
 336 
35%
Fixed Index Annuities
 790 
 696 
14%
 - 
 - 
N/A
 79 
 69 
14%
 790 
 696 
14%
Life
 5 
 8 
(38%)
 11 
 15 
(27%)
 11 
 16 
(31%)
 92 
 135 
(32%)
Variable Annuities
 9,695 
 8,707 
11%
 - 
 - 
N/A
 970 
 871 
11%
 9,695 
 8,707 
11%
Wholesale
 279 
 212 
32%
 - 
 - 
N/A
 28 
 21 
33%
 279 
 212 
32%
Total US Insurance Operations
 11,221 
 9,959 
13%
 11 
 15 
(27%)
 1,133 
 1,011 
12%
 11,308 
 10,086 
12%
                         
UK & Europe Insurance Operations
                       
Direct and Partnership Annuities
 214 
 264 
(19%)
 - 
 - 
N/A
 21 
 26 
(19%)
 214 
 264 
(19%)
Intermediated Annuities
 411 
 180 
128%
 - 
 - 
N/A
 41 
 18 
128%
 411 
 180 
128%
Internal Vesting Annuities
 1,036 
 883 
17%
 - 
 - 
N/A
 104 
 88 
18%
 1,036 
 883 
17%
Total Individual Annuities
 1,661 
 1,327 
25%
 - 
 - 
N/A
 166 
 133 
25%
 1,661 
 1,327 
25%
Corporate Pensions
 179 
 161 
11%
 130 
 174 
(25%)
 148 
 190 
(22%)
 757 
 979 
(23%)
On-shore Bonds
 1,613 
 1,265 
28%
 - 
 - 
N/A
 161 
 127 
27%
 1,613 
 1,266 
27%
Other Products
 648 
 579 
12%
 36 
 33 
9%
 101 
 91 
11%
 820 
 748 
10%
Wholesale
 413 
 283 
46%
 - 
 - 
N/A
 41 
 28 
46%
 413 
 283 
46%
Total UK & Europe Insurance Ops
 4,514 
 3,615 
25%
 166 
 207 
(20%)
 617 
 569 
8%
 5,264 
 4,603 
14%
Group Total  
 16,806 
 14,658 
15%
 1,398 
 1,252 
12%
 3,078 
 2,719 
13%
 23,646 
 20,891 
13%
 
 
Schedule 2A - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
TOTAL INSURANCE NEW BUSINESS APE - BY QUARTER
 
 
 
2011 
2012 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
 
£m
£m
£m
£m
£m
£m
£m
Group Insurance Operations
             
Asia (1a)(7)
367 
376 
404 
513 
443 
456 
429 
US(1a)(7)
322 
350 
316 
287 
332 
387 
414 
UK  
199 
210 
160 
177 
189 
223 
205 
Group Total  
888 
936 
880 
977 
964 
1,066 
1,048 
               
Asia Insurance Operations(1a)(7)
             
Hong Kong
77 
74 
78 
102 
85 
92 
96 
Indonesia
74 
84 
81 
124 
97 
109 
97 
Malaysia
44 
47 
59 
73 
45 
53 
47 
Philippines
10 
11 
12 
Singapore
47 
56 
60 
72 
72 
69 
76 
Thailand
11 
Vietnam
11 
10 
13 
11 
11 
SE Asia Operations inc. Hong Kong
261 
286 
305 
399 
327 
353 
348 
China(8)
18 
17 
11 
13 
17 
16 
13 
Korea
28 
27 
26 
20 
21 
24 
22 
Taiwan
29 
30 
36 
53 
43 
45 
24 
India(5)
31 
16 
26 
28 
35 
18 
22 
Total Asia Insurance Operations
367 
376 
404 
513 
443 
456 
429 
               
US Insurance Operations(1a)(7)
             
Fixed Annuities
13 
10 
10 
14 
16 
15 
14 
Fixed Index Annuities
20 
22 
26 
25 
25 
25 
29 
Life
Variable Annuities
284 
305 
262 
240 
279 
332 
359 
Wholesale
13 
11 
Total US Insurance Operations
322 
350 
316 
287 
332 
387 
414 
               
UK & Europe Insurance Operations
             
Direct and Partnership Annuities
10 
Intermediated Annuities
10 
15 
16 
Internal Vesting annuities
27 
29 
32 
34 
31 
35 
38 
Total Individual Annuities
42 
44 
47 
46 
48 
57 
61 
Corporate Pensions
78 
69 
43 
43 
49 
55 
44 
On-shore Bonds
43 
41 
43 
51 
55 
51 
55 
Other Products
36 
28 
27 
31 
37 
33 
31 
Wholesale
28 
27 
14 
Total UK & Europe Insurance Operations
199 
210 
160 
177 
189 
223 
205 
Group Total
888 
936 
880 
977 
964 
1,066 
1,048 
               
 
 
Schedule 2B - Constant Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
TOTAL INSURANCE NEW BUSINESS APE - BY QUARTER
 
 
 
2011 
2012 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
 
£m
£m
£m
£m
£m
£m
£m
Group Insurance Operations
             
Asia(1b) (7)
366 
375 
398 
509 
443 
456 
429 
US(1b) (7)
327 
361 
323 
285 
332 
387 
414 
UK  
199 
210 
159 
177 
189 
223 
205 
Group Total
892 
946 
880 
971 
964 
1,066 
1,048 
               
Asia Insurance Operations(1b)(7)
             
Hong Kong
79 
76 
80 
102 
85 
92 
96 
Indonesia
72 
81 
76 
119 
97 
109 
97 
Malaysia
44 
47 
59 
74 
45 
53 
47 
Philippines
10 
11 
12 
Singapore
48 
58 
59 
73 
72 
69 
76 
Thailand
11 
Vietnam
10 
11 
13 
11 
11 
SE Asia Operations inc. Hong Kong
263 
286 
302 
395 
327 
353 
348 
China(8)
19 
18 
12 
13 
17 
16 
13 
Korea
28 
28 
24 
20 
21 
24 
22 
Taiwan
29 
29 
37 
54 
43 
45 
24 
India(5)
27 
14 
23 
27 
35 
18 
22 
Total Asia Insurance Operations  
366 
375 
398 
509 
443 
456 
429 
               
US Insurance Operations(1b) (7)
             
Fixed Annuities
13 
11 
10 
14 
16 
15 
14 
Fixed Index Annuities
21 
22 
26 
25 
25 
25 
29 
Life
Variable Annuities
288 
316 
267 
238 
279 
332 
359 
Wholesale
14 
11 
Total US Insurance Operations
327 
361 
323 
285 
332 
387 
414 
               
UK & Europe Insurance Operations
             
Direct and Partnership Annuities
10 
Intermediated Annuities
10 
15 
16 
Internal Vesting annuities
27 
29 
32 
34 
31 
35 
38 
Total Individual Annuities
42 
44 
46 
46 
48 
57 
61 
Corporate Pensions
78 
69 
43 
43 
49 
55 
44 
On-shore Bonds
43 
41 
43 
51 
55 
51 
55 
Other Products
36 
28 
27 
31 
37 
33 
31 
Wholesale
28 
27 
14 
Total UK & Europe Insurance Operations
199 
210 
159 
177 
189 
223 
205 
Group Total
892 
946 
880 
971 
964 
1,066 
1,048 
 
 
Schedule 3 - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
INVESTMENT OPERATIONS - BY QUARTER
 
 
 
2011 
2012 
 
Q1
Q2
Q3
Q4 
Q1
Q2
Q3
 
£m
£m
£m
£m 
£m
£m
£m
Group Investment Operations
             
Opening FUM
107,491 
108,234 
109,901 
102,535 
106,984 
109,507 
110,204 
Net Flows(10)
1,891 
1,019 
487 
1,621 
2,116 
3,251 
6,975 
 - Gross Inflows
9,186 
8,482 
8,599 
7,538 
9,183 
9,305 
13,228 
 - Redemptions
(7,295)
(7,463)
(8,112)
(5,917)
(7,067)
(6,054)
(6,253)
Other Movements*
(1,148)
648 
(7,853)
2,828 
407 
(2,554)
3,530 
Total Group Investment Operations
108,234 
109,901 
102,535 
106,984 
109,507 
110,204 
120,709 
               
M&G
             
               
Retail
             
Opening FUM
42,506 
44,018 
45,603 
41,427 
44,228 
47,972 
48,352 
Net Flows
1,310 
1,486 
(172)
1,271 
2,398 
1,876 
1,863 
 - Gross Inflows
5,474 
4,900 
4,322 
4,353 
6,055 
4,995 
4,903 
 - Redemptions
(4,164)
(3,414)
(4,494)
(3,082)
(3,657)
(3,119)
(3,040)
Other Movements*
202 
99 
(4,004)
1,530 
1,346 
(1,496)
1,736 
Closing FUM
44,018 
45,603 
41,427 
44,228 
47,972 
48,352 
51,951 
               
Institutional(4)
             
Opening FUM
46,820 
47,364 
47,747 
45,921 
47,720 
45,371 
46,291 
Net Flows
367 
(241)
(116)
480 
(631)
1,298 
4,505 
 - Gross Inflows
1,445 
1,571 
2,105 
1,811 
954 
2,697 
5,643 
 - Redemptions
(1,078)
(1,812)
(2,221)
(1,331)
(1,585)
(1,399)
(1,138)
Other Movements*
177 
624 
(1,710)
1,319 
(1,718)
(378)
1,419 
Closing FUM
47,364 
47,747 
45,921 
47,720 
45,371 
46,291 
52,215 
Total M&G Investment Operations
91,382 
93,350 
87,348 
91,948 
93,343 
94,643 
104,166 
               
PPM South Africa FUM included in Total M&G(11)
8,772 
8,695 
7,396 
7,872 
3,757 
3,584 
3,848 
               
Eastspring - excluding MMF(10)
             
               
Equity/Bond/Other(9)
             
Opening FUM
16,358 
14,943 
14,565 
13,404 
13,007 
13,970 
13,423 
Net Flows
64 
(272)
713 
(252)
333 
50 
838 
 - Gross Inflows
2,031 
1,911 
2,088 
1,147 
2,120 
1,552 
2,407 
 - Redemptions
(1,967)
(2,183)
(1,375)
(1,399)
(1,787)
(1,502)
(1,569)
Other Movements
(1,479)
(106)
(1,874)
(145)
630 
(597)
247 
Closing FUM(6)
14,943 
14,565 
13,404 
13,007 
13,970 
13,423 
14,508 
               
Third Party Institutional Mandates
             
Opening FUM
1,807 
1,909 
1,986 
1,783 
2,029 
2,194 
2,138 
Net Flows
150 
46 
62 
122 
16 
27 
(231)
 - Gross Inflows
236 
100 
84 
227 
54 
61 
275 
 - Redemptions
(86)
(54)
(22)
(105)
(38)
(34)
(506)
Other Movements
(48)
31 
(265)
124 
149 
(83)
128 
Closing FUM(6)
1,909 
1,986 
1,783 
2,029 
2,194 
2,138 
2,035 
               
               
               
Total Eastspring Investment Operations
16,852 
16,551 
15,187 
15,036 
16,164 
15,561 
16,543 
               
US
             
Curian Capital - FUM(6)
3,873 
4,268 
4,291 
4,705 
5,118 
5,212 
6,421 
 
 
* Other movements in Q1 2012 include £3.8 billion (with £1.0 billion retail, £2.8 billion institutional) relating to the impact of dilution in M&G's investment in PPM South Africa recognised in Q1 2012.
 
 
Schedule 4 - Reported Exchange Rates
PRUDENTIAL PLC - NEW BUSINESS - Q3 2012
TOTAL INSURANCE NEW BUSINESS PROFIT AND MARGIN (% APE AND % PVNBP)
 
 
 
2011 
2012 
 
Q1
Q2
Q3
Q4
Q1
Q2
Q3
 
YTD
YTD
YTD
YTD
YTD
YTD
YTD
 
£m
£m
£m
£m
£m
£m
£m
Annual Equivalent(3)
             
Total Asia Insurance Operations  
367 
743 
1,147 
1,660 
443 
899 
1,328 
Total US Insurance Operations
322 
672 
988 
1,275 
332 
719 
1,133 
Total UK & Europe Insurance Operations
199 
409 
569 
746 
189 
412 
617 
Group Total
888 
1,824 
2,704 
3,681 
964 
2,030 
3,078 
               
New business profit(2)
             
Total Asia Insurance Operations  
213 
465 
719 
1,076 
260 
547 
828 
Total US Insurance Operations
220 
458 
622 
815 
214 
442 
683 
Total UK & Europe Insurance Operations
65 
146 
194 
260 
62 
152 
227 
Group Total
498 
1,069 
1,535 
2,151 
536 
1,141 
1,738 
 
New business margin (% of APE)
             
Total Asia Insurance Operations  
58%
63%
63%
65%
59%
61%
62%
Total US Insurance Operations
68%
68%
63%
64%
64%
61%
60%
Total UK & Europe Insurance Operations
33%
36%
34%
35%
33%
37%
37%
Group Total
56%
59%
57%
58%
56%
56%
56%
               
PVNBP(3)
             
Total Asia Insurance Operations
1,935 
3,939 
6,221 
8,910 
2,303 
4,725 
7,074 
Total US Insurance Operations
3,206 
6,689 
9,858 
12,720 
3,307 
7,180 
11,308 
Total UK & Europe Insurance Operations
1,551 
3,264 
4,603 
6,111 
1,580 
3,495 
5,264 
Group Total
6,692 
13,892 
20,682 
27,741 
7,190 
15,400 
23,646 
               
New business profit(2)
             
Total Asia Insurance Operations  
213 
465 
719 
1,076 
260 
547 
828 
Total US Insurance Operations
220 
458 
622 
815 
214 
442 
683 
Total UK & Europe Insurance Operations
65 
146 
194 
260 
62 
152 
227 
Group Total
498 
1,069 
1,535 
2,151 
536 
1,141 
1,738 
               
New business margin (% of PVNBP)
             
Total Asia Insurance Operations
11.0%
11.8%
11.6%
12.1%
11.3%
11.6%
11.7%
Total US Insurance Operations
6.9%
6.8%
6.3%
6.4%
6.5%
6.2%
6.0%
Total UK & Europe Insurance Operations
4.2%
4.5%
4.2%
4.3%
3.9%
4.3%
4.3%
Group Total
7.4%
7.7%
7.4%
7.8%
7.5%
7.4%
7.4%
 
 
Schedule 5
 
EEV New Business Methodology and Assumptions
 
Valuation of new business
The valuation of the new business for the third quarter 2012 has been prepared using the same methodology as for previous reporting and the same non-economic assumptions as for half year 2012. The economic assumptions applied have been updated as shown below.
 
Principal economic assumptions
Expected returns on equity and property asset classes in respect of each territory are derived by adding a risk premium, based on the long-term view of Prudential's economists, 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 tables below summarise the principal financial assumptions:
 
 
Asia operationsnote (ii)
                     
                       
30 September 2012
                     
 
China
Hong Kong
India 
Indonesia
Korea 
Malaysia 
Philippines 
Singapore
Taiwan 
Thailand 
Vietnam
   
notes (ii), (iv)
     
notes (iii), (iv)
 
note (iv) 
     
 
%
%
%
%
%
%
%
%
%
%
%
New business risk discount rate
10.0 
3.7 
13.3 
11.0 
6.4 
6.4 
11.65 
3.75 
4.8 
10.3 
17.5 
Government bond yield
3.5 
1.7 
8.3 
6.05 
3.0 
3.55 
4.9 
1.5 
1.2 
3.5 
10.8 
                       
30 June 2012
                     
 
China
Hong Kong
India 
Indonesia
Korea 
Malaysia 
Philippines 
Singapore
Taiwan 
Thailand 
Vietnam
   
notes (ii), (iv)
     
notes (iii), (iv)
 
note (iv)
     
 
%
%
%
%
%
%
%
%
%
%
%
New business risk discount rate
9.9 
3.7 
13.35 
11.15 
7.05 
6.3 
12.4 
3.9 
4.9 
10.3 
17.0 
Government bond yield
3.4 
1.7 
8.35 
6.25 
3.65 
3.5 
5.6 
1.6 
1.2 
3.5 
10.3 
                       
30 September 2011
                     
 
China
Hong Kong
India 
Indonesia
Korea 
Malaysia 
Philippines 
Singapore
Taiwan 
Thailand 
Vietnam
   
notes (ii, (iv)
     
notes (iii), (iv)
 
note (iv)
     
 
%
%
%
%
%
%
%
%
%
%
%
New business risk discount rate
10.5 
3.65 
13.6 
12.2 
7.5 
6.8 
13.2 
4.1 
4.9 
10.5 
19.8 
Government bond yield
4.0 
1.9 
8.6 
7.0 
4.0 
3.7 
6.45 
1.6 
1.3 
3.7 
13.1 
 
 
 
 
       
 
Asia Total
 
30 Sep 2012
30 Jun 2012
30 Sep 2011
 
%
%
%
New business weighted risk discount rate  note (i)
7.3 
7.5 
7.7 
 
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. The risk discount rates for
             individual Asia territories reflect the movement in government bond yields, together with the effects of movements in the allowance for market risk and changes in product mix.
 
(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 risk discount rate for Malaysia reflects both the Malaysia life and Takaful operations.
 
(iv)       The mean equity return assumptions for the most significant equity holdings in the Asia operations were:
 
 
 
30 Sep 2012
30 Jun 2012
30 Sep 2011
 
%
%
%
Hong Kong
5.7 
5.7 
5.9 
Malaysia
9.55 
9.5 
9.7 
Singapore
7.5 
7.7 
7.7 
       
 
 
US operations  
     
     
   
30 Sep 2012
30 Jun 2012
30 Sep 2011
     
   
%
%
%
Assumed new business and spread margins: note (ii)
     
 
Fixed Annuity business:*note (i)
     
   
January to June issues  
1.4 **
1.4 **
1.9 
   
July to September issues  
1.25 **
n/a
1.9 
 
Fixed Index Annuity business: note (i)
     
   
January to June issues  
1.75 **
1.75 **
2.5 
   
July to September issues  
1.5 **
n/a
2.5 
 
Institutional business   
1.25 
1.25 
0.7 
New business risk discount rate:  
     
 
Variable annuity  
6.5 
6.5 
6.5 
 
Non-variable annuity  
4.4 
4.4 
4.2 
 
Weighted average total  
6.3 
6.3 
6.3 
US 10-year treasury bond rate at end of period  
1.7 
1.7 
1.9 
Pre-tax expected long-term nominal rate of return for US equities  
5.7 
5.7 
5.9 
     
   
     
*
 
Including the proportion of variable annuity business invested in the general account
**
 
Grading up 25 basis points to the long-term assumption over five years
 
 
 
Notes
 
(i)       For new business issuances in 2012, the assumed spread margin for fixed index annuity and fixed annuity business (including the proportion of variable annuity business invested in the general account) is assumed to grade to
          the long-term assumption over five years. For new business issuances for the nine months ended 30 September 2011 the assumed spread margin for these businesses applies from inception.
 
(ii)      Credit risk treatment
 
          The projected cash flows incorporate the expected long-term spread between the earned rate and the rate credited to policyholders. The projected earned rates reflect book value yields which are adjusted over time to reflect
          projected reinvestment rates. Positive net cash flows are assumed to be reinvested in a mix of corporate bonds, commercial mortgages and limited partnerships. The yield on those assets is assumed to grade from the current
          level to a yield that allows for a long-term assumed credit spread on the reinvested assets of 1.25 per cent over 10 years. The yield also reflects an allowance for a Risk Margin Reserve (RMR) allowance of 25 basis points for
          longer-term defaults for all periods shown above.
 
 
            In the event that longer-term default levels are higher then, unlike for UK annuity business where policyholder benefits are not changeable, Jackson has some discretion to adjust crediting rates, subject to contract guarantee
            levels and general market competition considerations. 
 
The results for Jackson reflect the application of the discount rates shown above, which include an additional allowance for a combination of credit risk premium and short-term downgrade and default allowance for general account business of 200 basis points (30 June 2012: 200 basis points; 30 September 2011: 150 basis points) and for variable annuity business of 40 basis points (30 June 2012: 40 basis points; 30 September 2011: 30 basis points) to reflect the fact that a proportion of the variable annuity business is allocated to the general account.
 
 
UK operations
     
       
30 Sep 2012
30 Jun 2012
30 Sep 2011
       
%
%
%
Shareholder-backed annuity business:note (i)
     
New business risk discount rate
7.3 
7.3 
7.05 
             
Pre-tax expected long-term nominal rate of return:  
     
 
Fixed annuities
4.3 
4.6 
5.0 
 
Inflation-linked annuities
3.3 
4.2 
5.0 
             
Other business:  
     
New business risk discount rate note (ii)
5.2 
5.2 
5.9 
             
Pre-tax expected long-term nominal rates of investment return:
     
 
UK equities
6.2 
6.3 
6.9 
 
Gilts
2.2 
2.3 
2.9 
 
Corporate bonds
3.75 
3.9 
4.5 
Post-tax expected long-term nominal rate of return for the PAC with-profits fund:
     
 
Pension business (where no tax applies)
4.9 
5.0 
5.5 
 
Life business
4.2 
4.3 
4.8 
 
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 portfolio subject to credit risk and an allowance for short-term defaults. The credit
          assumptions used in the MCEV calculations and the residual liquidity premium element of the bond spread over swap rates for shareholder-backed annuity new business are as follows:
 
 
   
30 Sep 2012
30 Jun 2012
30 Sep 2011
   
(bps)
(bps)
(bps)
 
Bond spread over swap rates
155 
163 
132 
 
Total credit risk allowance
35 
33 
34 
 
Liquidity premium
120 
130 
98 
 
            For the purposes of presentation in the EEV results, the results on this basis are reconfigured.  Under this approach the projected earned rate of return on the debt securities held is determined after allowing for expected long-
            term defaults and, where necessary, an additional allowance for an element of short-term defaults to bring the allowance in the earned rate up to best estimate levels. The allowances for credit risk premium, the 1 notch
           downgrade of the portfolio subject to credit risk and the remaining element of the short-term defaults are incorporated into the risk margin included in the discount rate.
 
 
 
(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
 
Group Debt Securities at 30 September 2012
 
1    IFRS balance sheet fair value                                                                                                                                                                    
The Group's investments in debt securities at 30 September 2012 excluding holdings attributable to external unit holders are as follows:
 
 
   
With-profit
Unit-linked and variable annuity
Other shareholder-backed business
Total
   
note (1a)
note (1a)
   
   
£bn
£bn
£bn
£bn
 
UK insurance operations notes (1b) and (1c)
48.8 
6.3 
26.6 
81.7 
 
US insurance operations notes (1d) and 3
   
33.4 
33.4 
 
Asia long-term business 
1.3 
2.1 
5.0 
8.4 
 
Other operations
   
1.9 
1.9 
 
Total
50.1 
8.4 
66.9 
125.4 
 
 
Notes
 
1(a)   Shareholders are not directly exposed to value movements on assets backing with-profit, unit-linked and variable annuity business.
 
 
1(b)   Of the £26.6 billion of debt securities for UK annuity and other non-linked shareholder-backed business 25 per cent was rated AAA, 16 per cent AA, 33 per cent A, 21 per cent BBB and 5 per cent Other.
 
 
 
1(c)   For UK annuity business provision is made for possible future credit related losses. At 30 September 2012, on a statutory basis, a provision of £2.1 billion was held.
 
 
1(d)  Debt securities of US Operations comprise those of Jackson National Life and those of SRLC America Holding Corp (SLRC) which was acquired from Swiss Re on 4 September 2012. The amounts included for SLRC are
         subject to the finalisation of the fair value balance sheet at the date of acquisition.  This will be finalised on agreement of the completion balance sheet with the vendor.  Full details will be included in Prudential plc's audited
         annual report for the year ended 31 December 2012.  The debt securities of SLRC and Jackson as at 30 September 2012 are as follows:
 
 
 
SRLC
Jackson
30 Sept
2012
30 Jun
2012
 
£m
£m
£m
£m
Government securities
1,502 
1,918 
3,420 
2,107 
Corporate securities (95% investment grade)
4,168 
19,800 
23,968 
19,987 
Residential mortgage backed securities (63% government agency; 21% for pre 2006/2007 vintages; £420 million for 2006/2007 vintages of which £419 million is for the senior part of the capital structure)
728 
2,095 
2,823 
2,282 
Commercial mortgage backed securities
482 
2,068 
2,550 
2,129 
Other debt securities
50 
544 
594 
556 
Total
6,930 
26,425 
33,355 
27,061 
 
 
 
2    Defaults, losses from sales of impaired and deteriorating bonds and write-downs for non-linked shareholder-backed business
 
2.1  US insurance operations                                                                                                                                                                       
 
The disclosures for US Operations as at 30 September 2012 in notes 2) and 3) below include those for Jackson and SLRC which, as described above, was acquired on 4 September 2012.
 
In general, the debt securities of the US insurance operations are purchased with the intention and the ability to hold them for the longer term.
 
The majority of the US insurance operation's debt securities are classified as available-for-sale under IAS 39. Under this classification realised losses from defaults, sales of impaired and deteriorating bonds and write-downs are recorded in the income statement. Changes in unrealised appreciation and depreciation are recorded as a movement directly in other comprehensive income.
 
Jackson continues to review its investments on a case-by-case basis to determine whether any decline in fair value represents an impairment and therefore requiring an accounting write-down in the income statement. IFRS requires available-for-sale debt securities which are impaired to be written down to fair value through the income statement.
 
The defaults, write-downs and losses on sales of impaired and deteriorating bonds (net of recoveries) for the three months to 30 September 2012 were as follows:
 
 
 
         
Defaults
Bond write
downs
Losses on sale of
 impaired and
 deteriorating
bonds (net of
recoveries)
         
£m
£m
£m
 
Corporate debt securities
-
-
(15)
 
Residential mortgage-backed  securities
-
-
-
     
Prime
-
(2)
(1)
     
Alt-A
-
-
     
Sub-prime
-
(3)
-
   
Other asset backed securities
-
(20)
   
Total
-
(25)
(14)
 
Impairments on the US insurance operations' commercial mortgage book were £2 million (third quarter 2011: £10 million).
 
2.2    Other operations
 
For the Group's operations, other than the US insurance operations, debt securities are accounted for on a fair value through the income statement basis with all value movements recorded in the income statement.  There were no defaults in the third quarter of 2012 for other shareholder-backed business.
 
 
3    US insurance operations - securities in an unrealised loss position                                                                                                
 
For US insurance operations' securities classified as available-for-sale under IAS 39, at 30 September 2012 there was a net unrealised gain position of £2,909 million. This amount comprised £3,069 million of gross unrealised gains and £160 million of gross unrealised losses on individual securities. Under IFRS unrealised losses are only applicable for securities which have not been impaired during the period. Securities impaired during the period are written down to fair value through the income statement in full. Note 2.1 shows the element of write downs in the third quarter of 2012.
 
IFRS requires securities to be carried at fair value, being the amount for which the security would be exchanged between knowledgeable, willing parties in an arm's length transaction. The best evidence of fair value is quoted prices in an active market, but if the market is not active then a valuation technique is used to establish fair value.
 
 
a)   Movements in the values for the 3 months to 30 September 2012:
 
Movements in the values of available-for-sale securities for the three months to 30 September 2012 are included in the table shown below:
 
 
     
Change reflected directly in shareholders' equity
 
   
30 September
2012
Movement in Quarter 3
Acquisition of
SLRC America
Holding Corp
on 4
September
2012
Foreign exchange translation
Total movement in Quarter 3 including Foreign exchange
30 June
2012
   
£m
£m
£m
£m
£m
£m
Assets fair valued at below book value
           
 
Book value
4,193 
2,551 
 - 
(28)
2,523 
1,670 
 
Unrealised loss
(160)
(6)
 - 
(3)
(157)
Fair value (as included in the balance sheet)
4,033 
2,545 
 - 
(25)
2,520 
1,513 
Assets fair valued at or above book value
           
 
Book value
26,253 
(2,897)
6,953 
(666)
3,390 
22,863 
 
Unrealised gain
3,069 
479 
 - 
(89)
390 
2,679 
Fair value (as included in the balance sheet)
29,322 
(2,418)
6,953 
(755)
3,780 
25,542 
Total
           
 
Book value
30,446 
(346)
6,953 
(694)
5,913 
24,533 
 
Net unrealised gain
2,909 
473 
 - 
(86)
387 
2,522 
Fair value (as included in the balance sheet)
33,355 
127 
6,953 
(780)
6,300 
27,055 
 
 
b)   Fair value of securities in an unrealised loss position as a percentage of book value                                                                                    
 
(i)  Fair value of securities as a percentage of book value                                                                                                                 
 
The unrealised losses for the US insurance operations' balance sheet on unimpaired securities are £160 million (30 June 2012: £157 million) relating to assets with fair market value and book value of £4,033 million (30 June 2012: £1,513 million) and £4,193 million (30 June 2012: £1,670 million) respectively.
 
The following table shows the fair value of the securities in a gross unrealised loss position for various percentages of book value:
 
 
 
 
Fair value
Unrealised loss
Fair value
Unrealised loss
 
30 September
2012
30 September
2012
30 June
2012
30 June
2012
 
£m
£m
£m
£m
Between 90% and 100%
3,846 
(78)
1,160 
(27)
Between 80% and 90%
98 
(16)
190 
(31)
Below 80%
89 
(66)
163 
(99)
 
4,033 
(160)
1,513 
(157)
 
 
Schedule 6
Group Debt Securities at 30 September 2012 (cont.)
 
(ii) Fair value of sub-prime and Alt-A securities as a percentage of book value                                                                                                                                                                                                                                                                                             
Included within the table above are amounts relating to sub-prime and Alt-A securities in a gross unrealised loss position for various percentages of book value of:
 
 
 
Fair value
30 September
2012
Unrealised loss
30 September
2012
Fair value
30 June
2012
Unrealised loss
30 June
2012
 
£m
£m
£m
£m
Between 90% and 100%
102 
(5)
127 
(5)
Between 80% and 90%
35 
(6)
50 
(9)
Below 80%
30 
(14)
62 
(25)
 
167 
(25)
239 
(39)
 
c) Securities whose fair value were below 80 per cent of the book value
                                                                                                                                                                                        
£66 million (30 June 2012: £99 million) of the £160 million (30 June 2012: £157 million) of gross unrealised losses at 30 September 2012 related to securities whose fair value were below 80 per cent of the book value. The age analysis for this £66 million (30 June 2012: £99 million), indicating the length of time for which their fair value was below 80 per cent of the book value, is as follows:
 
 
 
Fair value
30 September
2012
Unrealised loss
30 September
2012
Fair value
30 June
2012
Unrealised loss
30 June
2012
 
£m
£m
£m
£m
Less than 3 months
-    
-    
32 
(10)
3 months to 6 months
(1)
 -  
 -  
More than 6 months
88 
(65)
131 
(89)
 
89 
(66)
163 
(99)
 
For securities valued at less than 80 per cent of book value, 62 per cent are investment grade. The analysis by category of debt securities whose fair value were below 80 per cent of the book value is as follows:
 
 
           
   
Fair value
30 September
2012
Unrealised loss
30 September
2012
Fair value
30 June
2012
Unrealised loss
30 June
2012
   
£m
£m
£m
£m
RMBS
       
 
Prime
(3)
27 
(10)
 
Alt-A
-
-
11 
(3)
 
Sub-prime
30 
(14)
51 
(22)
   
38 
(17)
89 
(35)
Commercial mortgage backed securities
(27)
(29)
Other asset backed securities
42 
(22)
53 
(31)
           
Total structured securities
89 
(66)
150 
(95)
Corporates
 - 
 - 
13 
(4)
   
89 
(66)
163 
(99)
 
Balance sheet items for US insurance operations have been translated at the closing rate for the period, being $1.6148 at 30 September 2012 (30 June 2012: $1.5685). US insurance operations' income statement movements have been translated at the average exchange rate for the period, being $1.5778 for 9 months to 30 September 2012 (30 June 2012: $1.5768).
 
 
4       Shareholder Sovereign exposures
 
The exposure of the Group's shareholders funds to sovereign exposures as at 30 September 2012 (including credit default swaps that are referenced to sovereign debt):
 
 
     
Shareholder
sovereign
debt 
     
£m
Continental Europe
 
   
Italy
48 
   
Spain
     
49 
 
Germany
467 
 
Other Europe (principally Isle of Man, France and Belgium)
66 
     
582 
       
United Kingdom
3,411 
United States
3,519 
Other (predominantly Asia)
3,051 
Total
   
10,563 
 
 
5       Shareholder exposure to bank debt securities
 
The exposure of the Group's shareholders funds to bank's debt securities as at 30 September 2012:
 
 
 
Debt securities
 
Senior debt
Subordinated debt
 
 
Covered
Senior
Total senior debt
Tier 2
Tier 1
Total subordinated debt
Total
 
£m
£m
£m
£m
£m
£m
£m
Portugal
 -  
 31 
 31 
 - 
 - 
 - 
 31 
Ireland
 -  
 16 
 16 
 - 
 - 
 - 
 16 
Italy
 -  
 12 
 12 
 25 
 - 
 25 
 37 
Spain
 150 
 10 
 160 
 23 
 3 
 26 
 186 
 
 150 
 69 
 219 
 48 
 3 
 51 
 270 
               
Austria
 -  
 -  
 - 
 11 
 - 
 11 
 11 
France
 18 
 53 
 71 
 68 
 37 
 105 
 176 
Germany
 -  
 34 
 34 
 1 
 - 
 1 
 35 
Netherlands
 -  
 15 
 15 
 100 
 67 
 167 
 182 
United Kingdom
 450 
 202 
 652 
 674 
 106 
 780 
 1,432 
Total Europe
 618 
 373 
 991 
 902 
 213 
 1,115 
 2,106 
United States
 - 
 1,778 
 1,778 
 459 
 25 
 484 
 2,262 
Other predominantly Asia
 30 
 342 
 372 
 336 
 234 
 570 
 942 
Total Group
 648 
 2,493 
 3,141 
 1,697 
 472 
 2,169 
 5,310 
               
               
 
 
Schedule 7                                    
 
BASIS OF PREPARATION
The new business schedules are provided as an indicative volume measure of transactions undertaken in the reporting period that have the potential to generate profits for shareholders. The amounts shown are not, and not intended to be, reflective of premium income recorded in the IFRS income statement. Annual premium equivalent (APE) sales are subject to rounding.
 
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, ie falling within one of the classes of insurance specified in Part II of Schedule 1 to the Regulated Activities Order under FSA 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 classified 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 has been determined using the European Embedded Value (EEV) methodology set out in our 2012 Half Year Financial Report. 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.
 
All data included in this Interim Management Statement (and supplementary statements) is unaudited.
 
 
Notes to Schedules 1 - 6
 
(1a)    Insurance and investment new business for overseas operations has been calculated using average exchange rates. The applicable rate for Jackson for the period to 30 September 2012 is $1.58.
 
(1b)    Insurance and investment new business for overseas operations for 2011 have been calculated using constant exchange rates. The applicable rate for Jackson is $1.58.
 
(2)      New business values are all presented pre-tax.
 
(3)      Annual Equivalents, calculated as regular new business contributions plus ten per cent of single new business contributions, are subject to roundings. 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.
 
(4)      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.
 
(5)      New business in India is included at Prudential's 26 per cent interest in the India life operation. 
 
(6)      Balance Sheet figures have been calculated at the closing exchange rate.
 
(7)      Sales are converted using the year-to-date average exchange rate applicable at the time. 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.
 
(8)      New business in China is included at Prudential's 50 per cent interest in the China life operation. 
 
(9)      Mandatory Provident Fund (MPF) product sales in Hong Kong are included at Prudential's 36 per cent interest in Hong Kong MPF operation.
 
(10)    Investment flows exclude Eastspring Money Market Funds (MMF) year-to-date net outflows of £217 million (year-to-date 2011: net outflows £267 million).
 
(11)    From I January 2012, Prudential Portfolio Managers South Africa (Pty) Limited was no longer a subsidiary of M&G following the restructuring transaction whereby M&G's ownership has been diluted following the equitisation
          of the staff incentive scheme and reduced further by the sale of an additional 10 per cent equity stake to an empowerment company as encouraged under Broad Based Black Economic Empowerment legislation. Consequently,
          47.2 per cent of funds under management and flows from the South African associate company are included in M&G's results from 2012 onwards whereas 100 per cent had been included up to the end of 2011.
 
 


 
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 14 November 2012
 
 
PRUDENTIAL PUBLIC LIMITED COMPANY
   
 
By: /s/ Clive Burns
   
 
Clive Burns
 
Head of Group Secretariat