European Embedded Value (EEV) basis results

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

Results analysis by business area

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		2017 £m	2016 £m
	Note	Half year	Half year note (iii)(iv)	Full year note (iii)
Notes EEV basis other income and expenditure represents the post-tax IFRS basis result less the unwind of expected margins on the internal management of the assets of the covered business (as explained in note 12(a)(vii)). Solvency II and restructuring costs comprise the net-of-tax charge recognised on an IFRS basis and the additional amount recognised on an EEV basis for the shareholders’ share incurred by the PAC with-profits fund. The comparative results have been prepared using previously reported average exchange rates for the period. The Group completed the sale of its life business in Korea in May 2017. In order to show the results of the retained operations on a comparable basis, operating profit based on longer-term investment returns excludes the results attributable to the sold Korea life business for all periods shown, as described in note 15. For half year 2016 this has resulted in a reclassification of £6 million of operating profit attributable to the Korea life business to non-operating profit. This approach has been adopted consistently throughout this supplementary information.
Asia operations
New business	3	1,092	821	2,030
Business in force	4	549	388	1,044
Long-term business		1,641	1,209	3,074
Eastspring Investments		73	53	125
Total		1,714	1,262	3,199
US operations
New business	3	436	311	790
Business in force	4	452	383	1,181
Long-term business		888	694	1,971
Broker-dealer and asset management		(4)	(8)	(3)
Total		884	686	1,968
UK operations
New business	3	161	125	268
Business in force	4	304	259	375
Long-term business		465	384	643
General insurance commission		14	15	23
Total UK insurance operations		479	399	666
M&G		201	181	341
Prudential Capital		5	11	22
Total		685	591	1,029
Other income and expenditure^{note (i)}		(386)	(302)	(679)
Solvency II and restructuring costs^{note (ii)}		(27)	(17)	(57)
Interest received from tax settlement		–	37	37
Operating profit based on longer-term investment returns		2,870	2,257	5,497

Analysed as profit (loss) from:
New business	3	1,689	1,257	3,088
Business in force	4	1,305	1,030	2,600
Long-term business		2,994	2,287	5,688
Asset management and general insurance commission		289	252	508
Other results		(413)	(282)	(699)
		2,870	2,257	5,497

Post-tax summarised consolidated income statement

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		2017 £m	2016 £m
	Note	Half year	Half year*	Full year
Asia operations		1,714	1,262	3,199
US operations		884	686	1,968
UK operations		685	591	1,029
Other income and expenditure		(386)	(302)	(679)
Solvency II and restructuring costs		(27)	(17)	(57)
Interest received from tax settlement		–	37	37
Operating profit based on longer-term investment returns		2,870	2,257	5,497
Short-term fluctuations in investment returns	5	739	479	(507)
Effect of changes in economic assumptions	6	(50)	(1,318)	(60)
Mark to market value movements on core borrowings		(262)	(13)	(4)
Loss attaching to the sold Korea life business	15	–	(11)	(410)
Total non-operating profit (loss)		427	(863)	(981)
Profit for the period attributable to equity holders of the Company		3,297	1,394	4,516

Basic earnings per share

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	2017	2016
	Half year	Half year*	Full year
* The half year 2016 comparative operating result has been adjusted to exclude the result attributable to the sold Korea life business (see note 15).
Based on post-tax operating profit including longer-term investment returns (in pence)	111.9p	88.2p	214.7p
Based on post-tax profit attributable to equity holders of the Company (in pence)	128.5p	54.5p	176.4p
Average number of shares (millions)	2,565	2,558	2,560

Movement in shareholders’ equity

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		2017 £m	2016 £m
	Note	Half year	Half year	Full year
Profit for the period attributable to equity shareholders		3,297	1,394	4,516
Items taken directly to equity:
Exchange movements on foreign operations and net investment hedges		(1,045)	2,663	4,211
Dividends		(786)	(935)	(1,267)
Mark to market value movements on Jackson assets backing surplus and required capital		31	138	(11)
Other reserve movements		55	(165)	(367)
Net increase in shareholders’ equity	8	1,552	3,095	7,082
Shareholders’ equity at beginning of period		38,968	31,886	31,886
Shareholders’ equity at end of period	8	40,520	34,981	38,968

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	30 Jun 2017 £m			30 Jun 2016 £m			31 Dec 2016 £m
Comprising:	Long-term business operations note 8	Asset manage- ment and other operations	Total	Long-term business operations	Asset manage- ment and other operations	Total	Long-term business operations	Asset manage- ment and other operations	Total
Asia operations	19,851	382	20,233	16,578	352	16,930	18,717	383	19,100
US operations	11,370	202	11,572	10,150	201	10,351	11,805	204	12,009
UK insurance operations	10,865	14	10,879	10,075	37	10,112	10,307	25	10,332
M&G	–	1,868	1,868	–	1,838	1,838	–	1,820	1,820
Prudential Capital	–	61	61	–	31	31	–	22	22
Other operations	–	(4,093)	(4,093)	–	(4,281)	(4,281)	–	(4,315)	(4,315)
Shareholders’ equity at end of period	42,086	(1,566)	40,520	36,803	(1,822)	34,981	40,829	(1,861)	38,968

Representing:
Net assets excluding acquired goodwill and holding company net borrowings	41,841	1,305	43,146	36,545	270	36,815	40,584	961	41,545
Acquired goodwill	245	1,230	1,475	258	1,230	1,488	245	1,230	1,475
Holding company net borrowings at market value note 7	–	(4,101)	(4,101)	–	(3,322)	(3,322)	–	(4,052)	(4,052)
	42,086	(1,566)	40,520	36,803	(1,822)	34,981	40,829	(1,861)	38,968

Summary statement of financial position

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		2017 £m	2016 £m
	Note	30 Jun	30 Jun	31 Dec
* Including liabilities in respect of insurance products classified as investment contracts under IFRS 4.
Total assets less liabilities, before deduction for insurance funds		419,810	381,242	407,928
Less insurance funds:*
Policyholder liabilities (net of reinsurers’ share) and unallocated surplus of with-profits funds		(404,361)	(366,637)	(393,262)
Less shareholders’ accrued interest in the long-term business	8	25,071	20,376	24,302
		(379,290)	(346,261)	(368,960)
Total net assets	8	40,520	34,981	38,968

Share capital		129	128	129
Share premium		1,937	1,921	1,927
IFRS basis shareholders’ reserves		13,383	12,556	12,610
Total IFRS basis shareholders’ equity	8	15,449	14,605	14,666
Additional EEV basis retained profit	8	25,071	20,376	24,302
Total EEV basis shareholders’ equity (excluding non-controlling interests)	8	40,520	34,981	38,968

Net asset value per share

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	2017	2016
	30 Jun	30 Jun	31 Dec
* Annualised return on embedded value is based on EEV post-tax operating profit, as a percentage of opening EEV basis shareholders’ equity. Half year profits are annualised by multiplying by two.
Based on EEV basis shareholders’ equity of £40,520 million (half year 2016: £34,981 million, full year 2016: £38,968 million) (in pence)	1,567p	1,356p	1,510p
Number of issued shares at period end (millions)	2,586	2,579	2,581

Annualised return on embedded value*	15%	14%	17%

2017 Half Year Financial Report

European Embedded Value (EEV) basis results

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

Results analysis by business area

Post-tax summarised consolidated income statement

Basic earnings per share

Movement in shareholders’ equity

Summary statement of financial position

Net asset value per share

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