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 August, 2019 

 

PRUDENTIAL PUBLIC LIMITED COMPANY 

 

(Translation of registrant's name into English) 

 

1 Angel Court, London,


England, EC2R 7AG

(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-
 

 

IFRS disclosure and additional financial information

Prudential plc Half Year 2019 results

International Financial Reporting Standards (IFRS) basis results

 

CONDENSED CONSOLIDATED INCOME STATEMENT

 

				2019 £m		2018* £m
			Note	Half year		Half year	Full year
Profit from continuing operations:
Gross premiums earned				16,293		14,786	34,163
Outward reinsurance premiums				(520)		(363)	(886)
Earned premiums, net of reinsurance				15,773		14,423	33,277
Investment return				24,633		1,381	(6,829)
Other income				199		215	398
Total revenue, net of reinsurance			B1.4	40,605		16,019	26,846
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance				(36,671)		(10,928)	(17,545)
Acquisition costs and other expenditure			B2	(2,711)		(3,285)	(6,386)
Finance costs: interest on core structural borrowings of shareholder-financed businesses				(226)		(189)	(410)
Gain (loss) on disposal of businesses and corporate transactions			D1	13		(57)	(80)
Total charges, net of reinsurance and gain (loss) on disposal of businesses				(39,595)		(14,459)	(24,421)
Share of profits from joint ventures and associates, net of related tax				106		82	239
Profit before tax (being tax attributable to shareholders' and policyholders' returns)note (i)				1,116		1,642	2,664
Less tax charge attributable to policyholders' returns				(220)		(43)	(80)
Profit before tax attributable to shareholders			B1.1	896		1,599	2,584
Total tax charge attributable to policyholders and shareholders			B4	(221)		(369)	(506)
Adjustment to remove tax charge attributable to policyholders' returns				220		43	80
Tax charge attributable to shareholders' returns			B4	(1)		(326)	(426)
Profit from continuing operations for the period				895		1,273	2,158
Profit from discontinued operations for the period, net of related taxnote (ii)			D2.1	645		83	855
Profit for the period				1,540		1,356	3,013
Attributable to:
	Equity holders of the Company:
		From continuing operations		890		1,272	2,155
		From discontinued operations		645		83	855
	Non-controlling interests from continuing operations			5		1	3
Profit for the period				1,540		1,356	3,013

 

Earnings per share (in pence)				2019		2018*
			Note	Half year		Half year	Full year
Based on profit attributable to the equity holders of the Company:
	Basic		B5
		Based on profit from continuing operations		34.4p		49.5p	83.7p
		Based on profit from discontinued operationsnote (ii)		25.0p		3.2p	33.2p
				59.4p		52.7p	116.9p
	Diluted		B5
		Based on profit from continuing operations		34.4p		49.4p	83.6p
		Based on profit from discontinued operationsnote (ii)		25.0p		3.2p	33.2p
				59.4p		52.6p	116.8p

* The 2018 comparative results have been re-presented from those previously published to reflect the Group's UK and Europe operations as discontinued operations at 30 June 2019 (as described in note A2).

 

Dividends per share (in pence)			2019		2018
		Note	Half year		Half year	Full year
Dividends relating to reporting period:		B6
	First interim ordinary dividend		16.45p		15.67p	15.67p
	Second interim ordinary dividend		-		-	33.68p
Total			16.45p		15.67p	49.35p
Dividends paid in reporting period:		B6
	Current year first interim ordinary dividend		-		-	15.67p
	Second interim ordinary dividend for prior year		33.68p		32.50p	32.50p
Total			33.68p		32.50p	48.17p

 

Notes

(i)     This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders. This is principally because the corporate taxes of the Group include those on the income of consolidated with-profits and unit-linked funds that, through adjustments to benefits, are borne by policyholders. These amounts are required to be included in the tax charge of the Company under IAS 12. Consequently, the profit before all taxes measure is not representative of pre-tax profits attributable to shareholders. Profit before all taxes is determined after deducting the cost of policyholder benefits and movements in the liability for unallocated surplus of with-profits funds after adjusting for taxes borne by policyholders.

(ii)    Profit from discontinued operations represents the post-tax profit contributed by the UK and Europe operations which are classified as held for distribution at 30 June 2019 (a line-by-line analysis of profit for the period for the discontinued UK and Europe operations is included in note D2.1).The 2018 comparative results have been re-presented from those previously published accordingly (as described in note A2).

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

				2019 £m		2018* £m
			Note	Half year		Half year	Full year
Profit for the period from continuing operations				895		1,273	2,158
Other comprehensive income (loss) from continuing operations:
Items that may be reclassified subsequently to profit or loss
Exchange movements on foreign operations and net investment hedges:
	Exchange movements arising during the period			95		70	344
	Related tax			1		2	5
				96		72	349
Net unrealised valuation movements on securities of US insurance operations classified as available-for-sale:
	Net unrealised holding gains (losses) arising in the period			2,636		(1,392)	(1,606)
	Deduct net gains included in the income statement on disposal and impairment			(19)		(29)	(11)
				2,617		(1,421)	(1,617)
	Related change in amortisation of deferred acquisition costs		C5.2	(432)		272	246
	Related tax			(459)		241	288
				1,726		(908)	(1,083)
Total items that may be reclassified subsequently to profit or loss				1,822		(836)	(734)
Items that will not be reclassified to profit or loss
Shareholders' share of actuarial gains and losses on defined benefit pension schemes:
	Net actuarial (losses) / gains on defined benefit pension schemes			(86)		3	20
	Related tax			14		(1)	(4)
Total items that will not be reclassified to profit or loss				(72)		2	16
Other comprehensive income (loss) from continuing operations for the period, net of related tax				1,750		(834)	(718)
Total comprehensive income for the period from continuing operations				2,645		439	1,440
Profit for the period from discontinued operations			D2.1	645		83	855
Other comprehensive income from discontinued operations			D2.1	4		62	57
Total comprehensive income for the period from discontinued operations				649		145	912
Total comprehensive income for the period				3,294		584	2,352
Attributable to:
	Equity holders of the Company
		From continuing operations		2,640		438	1,436
		From discontinued operations		649		145	912
	Non-controlling interests from continuing operations			5		1	4
Total comprehensive income for the period				3,294		584	2,352

* The 2018 comparative results have been re-presented from those previously published to reflect the Group's UK and Europe operations as discontinued operations at 30 June 2019 (as described in note A2).

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

			Period ended 30 June 2019 £m
			Share  capital	Share premium	Retained   earnings	Translation reserve	Available -for-sale  securities reserves	Shareholders' equity		Non-  controlling   interests		Total  equity
		Note	note C9	note C9
Reserves
Profit from continuing operations for the period			-	-	890	-	-	890		5		895
Other comprehensive income (loss) from continuing operations			-	-	(72)	96	1,726	1,750		-		1,750
Total comprehensive income from continuing operations for the period			-	-	818	96	1,726	2,640		5		2,645
Total comprehensive income from discontinued operations for the period			-	-	647	2	-	649		-		649
Total comprehensive income (loss) for the period			-	-	1,465	98	1,726	3,289		5		3,294
Dividends		B6	-	-	(870)	-	-	(870)		-		(870)
Reserve movements in respect of share-based payments			-	-	2	-	-	2		-		2
Share capital and share premium
New share capital subscribed		C9	-	10	-	-	-	10		-		10
Treasury shares
Movement in own shares in respect of share-based payment plans			-	-	(9)	-	-	(9)		-		(9)
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS			-	-	1	-	-	1		-		1
Net increase (decrease) in equity			-	10	589	98	1,726	2,423		5		2,428
At beginning of period			130	1,964	14,206	1,188	(239)	17,249		18		17,267
At end of period			130	1,974	14,795	1,286	1,487	19,672		23		19,695

 

			Period ended 30 June 2018* £m
			Share  capital	Share premium	Retained   earnings	Translation reserve	Available -for-sale  securities reserves	Shareholders' equity		Non-  controlling   interests		Total  equity
		Note	note C9	note C9
Reserves
Profit from continuing operations for the period			-	-	1,272	-	-	1,272		1		1,273
Other comprehensive income (loss) from continuing operations			-	-	2	72	(908)	(834)		-		(834)
Total comprehensive income (loss) from continuing operations for the period			-	-	1,274	72	(908)	438		1		439
Total comprehensive income (loss) from discontinued operations for the period			-	-	148	(3)	-	145		-		145
Total comprehensive income (loss) for the period			-	-	1,422	69	(908)	583		1		584
Dividends		B6	-	-	(840)	-	-	(840)		-		(840)
Reserve movements in respect of share-based payments			-	-	(9)	-	-	(9)		-		(9)
Share capital and share premium
New share capital subscribed		C9	-	6	-	-	-	6		-		6
Treasury shares
Movement in own shares in respect of share-based payment plans			-	-	28	-	-	28		-		28
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS			-	-	27	-	-	27		-		27
Net increase (decrease) in equity			-	6	628	69	(908)	(205)		1		(204)
At beginning of period			129	1,948	12,326	840	844	16,087		7		16,094
At end of period			129	1,954	12,954	909	(64)	15,882		8		15,890

* The half year 2018 comparative results have been re-presented from those previously published to reflect the Group's UK and Europe operations as discontinued operations at 30 June 2019 (as described in note A2).

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

 

				Year ended 31 December 2018* £m
			Share  capital	Share premium	Retained   earnings	Translation reserve	Available -for-sale  securities reserves	Shareholders' equity		Non-  controlling   interests		Total  equity
		Note	note C9	note C9
Reserves
Profit from continuing operations for the year			-	-	2,155	-	-	2,155		3		2,158
Other comprehensive income (loss) from continuing operations			-	-	16	348	(1,083)	(719)		1		(718)
Total comprehensive income (loss) from continuing operations for the year			-	-	2,171	348	(1,083)	1,436		4		1,440
Total comprehensive income from discontinued operations for the year			-	-	912	-	-	912		-		912
Total comprehensive income (loss) for the year			-	-	3,083	348	(1,083)	2,348		4		2,352
Dividends		B6	-	-	(1,244)	-	-	(1,244)		-		(1,244)
Reserve movements in respect of share-based payments			-	-	69	-	-	69		-		69
Change in non-controlling interests			-	-	-	-	-	-		7		7
Movements in respect of option to acquire non-controlling interests			-	-	(109)	-	-	(109)		-		(109)
Share capital and share premium
New share capital subscribed		C9	1	16	-	-	-	17		-		17
Treasury shares
Movement in own shares in respect of share-based payment plans			-	-	29	-	-	29		-		29
Movement in Prudential plc shares purchased by unit trusts consolidated under IFRS			-	-	52	-	-	52		-		52
Net increase (decrease) in equity			1	16	1,880	348	(1,083)	1,162		11		1,173
At beginning of year			129	1,948	12,326	840	844	16,087		7		16,094
At end of year			130	1,964	14,206	1,188	(239)	17,249		18		17,267

* The full year 2018 comparative results have been re-presented from those previously published to reflect the Group's UK and Europe operations as discontinued operations at 30 June 2019 (as described in note A2).

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

				2019 £m		2018 £m
			Note	30 Jun		30 Jun	31 Dec
Assets
Goodwill			C5.1	510		1,620	1,857
Deferred acquisition costs and other intangible assets			C5.2	12,659		11,359	11,923
Property, plant and equipmentnote (i)				785		951	1,409
Reinsurers' share of insurance contract liabilities				10,151		9,620	11,144
Deferred tax assets			C7	2,762		2,435	2,595
Current tax recoverable				371		626	618
Accrued investment income				1,332		2,574	2,749
Other debtors				2,011		3,519	4,088
Investment properties				11		17,605	17,925
Investment in joint ventures and associates accounted for using the equity method				1,030		1,554	1,733
Loans			C3.3	12,513		16,922	18,010
Equity securities and portfolio holdings in unit trustsnote (ii)				183,670		229,707	214,733
Debt securitiesnote (ii)			C3.2	99,675		160,305	175,356
Derivative assets				1,222		3,428	3,494
Other investmentsnote (ii)				958		6,059	6,512
Deposits				1,491		12,412	11,796
Assets held for distributionnote (iii)			C1	218,324		-	-
Assets held for sale				-		12,024	10,578
Cash and cash equivalents				5,208		8,450	12,125
Total assets			C1	554,683		501,170	508,645
Equity
Shareholders' equity				19,672		15,882	17,249
Non-controlling interests				23		8	18
Total equity				19,695		15,890	17,267
Liabilities
Contract liabilities (including amounts in respect of contracts classified as investment contracts under IFRS 4)			C4.1	285,168		405,482	409,301
Unallocated surplus of with-profits funds			C4.1	2,944		17,283	15,845
Core structural borrowings of shareholder-financed businesses			C6.1	7,441		6,367	7,664
Operational borrowings attributable to shareholder-financed businessesnote (i)			C6.2	1,664		1,618	998
Borrowings attributable to with-profits businessesnote (i)			C6.2	238		3,589	3,940
Obligations under funding, securities lending and sale and repurchase agreements				6,756		7,128	6,989
Net asset value attributable to unit holders of consolidated unit trusts and similar funds				3,482		9,358	11,651
Deferred tax liabilities			C7	3,701		4,443	4,022
Current tax liabilities				319		415	568
Accruals, deferred income and other liabilities				10,597		13,551	15,248
Provisions				254		920	1,078
Derivative liabilities				1,037		3,149	3,506
Liabilities held for distributionnote (iii)			C1	211,387		-	-
Liabilities held for sale				-		11,977	10,568
Total liabilities			C1	534,988		485,280	491,378
Total equity and liabilities				554,683		501,170	508,645

 

Notes

(i)     As at 1 January 2019, the Group applied IFRS 16, 'Leases', using the modified retrospective approach. Under this approach, comparative information is not restated. The application of the standard has resulted in the recognition of an additional lease liability and a corresponding 'right-of-use' asset of a similar amount as at 1 January 2019. See note A3 for further details. As at 30 June 2019, right-of-use assets recognised in property, plant and equipment for continuing operations amounted to £425 million.

(ii)    Included within equity securities and portfolio holdings in unit trusts, debt securities and other investments are £8 million of lent securities as at 30 June 2019 (30 June 2018: £8,993 million; 31 December 2018: £8,278 million).

(iii)   Assets and liabilities held for distribution relate to the Group's UK and Europe operations, which have been classified as discontinued operations at 30 June 2019 and are presented above after the elimination of intra-Group balances with the continuing operations (see note C1). A line-by-line analysis of assets and liabilities for the discontinued UK and Europe operations before elimination of such intra-Group balances, is included in note D2.2. The 2018 comparative results for the assets and liabilities at 30 June 2018 and 31 December 2018 are as published and not re-presented on a basis consistent with half year 2019 (as described in note A2).

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

				2019 £m		2018* £m
			Note	Half year		Half year	Full year
Cash flows from continuing operations:
Cash flows from operating activities
Profit before tax (being tax attributable to shareholders' and policyholders' returns)note (i)				1,116		1,642	2,664
	Adjustments to profit before tax for non-cash movements in operating assets and liabilities:
	Investments			(29,889)		(3,439)	1,675
	Other non-investment and non-cash assets			(2,075)		(58)	(1,495)
	Policyholder liabilities (including unallocated surplus)			26,820		2,186	(1,229)
	Other liabilities (including operational borrowings)			3,147		292	644
Other itemsnote (ii)				97		357	201
Net cash flows from operating activities				(784)		980	2,460
Cash flows from investing activities
Net cash flows from purchases and disposals of property, plant and equipment				(16)		(59)	(100)
Net cash flows from corporate transactionsnote (iii)				(72)		(132)	(331)
Net cash flows from investing activities				(88)		(191)	(431)
Cash flows from financing activities
Structural borrowings of the Group:
	Shareholder-financed operations:note (iv)		C6.1
		Issue of subordinated debt, net of costs		-		-	1,630
		Redemption of subordinated debt		(400)		-	(434)
		Fees paid to modify terms and conditions of debt issued by the Groupnote (v)		(141)		-	(33)
		Interest paid		(229)		(187)	(376)
Equity capital:
	Issues of ordinary share capital			10		6	17
	Dividends paid		B6	(870)		(840)	(1,244)
Net remittances from discontinued operations			D2.3	356		341	654
Net cash flows from financing activities				(1,274)		(680)	214
Net increase in cash and cash equivalents from continuing operations				(2,146)		109	2,243
Net cash flows from discontinued operationsnote (vi)			D2.3	(124)		(2,380)	(1,112)
Cash and cash equivalents at beginning of period				12,125		10,690	10,690
Effect of exchange rate changes on cash and cash equivalents				(23)		31	304
Cash and cash equivalents at end of period				9,832		8,450	12,125
Comprising:
	Cash and cash equivalents from continuing operations			5,208		5,030	7,376
	Cash and cash equivalents from discontinued operations			4,624		3,420	4,749

* The 2018 comparative results have been re-presented from those previously published to reflect the Group's UK and Europe operations as discontinued operations at 30 June 2019 (as described in note A2).

 

Notes

(i)      This measure is the formal profit before tax measure under IFRS but it is not the result attributable to shareholders, as explained in footnote (i) of the 'Condensed Consolidated Income Statement'.

(ii)     The adjusting items to profit before tax included within other items are adjustments in respect of non-cash items together with operational interest receipts and payments, dividend receipts and tax paid.

(iii)     Net cash flows from corporate transactions include amounts paid for distribution rights and cash flows arising from the acquisitions and disposals of businesses.

(iv)    Structural borrowings of shareholder-financed businesses exclude borrowings to support short-term fixed income securities programmes, non-recourse borrowings of investment subsidiaries of shareholder-financed businesses and other borrowings of shareholder-financed businesses. Cash flows in respect of these borrowings are included within cash flows from operating activities. The changes in the carrying value of the structural borrowings of shareholder-financed businesses are analysed as follows:

 

			Cash movements £m				Non-cash movements £m
		Balance at beginning  of period	Issue  of debt	Redemption of debt	Change to terms of debt		Foreign exchange movement	Change to terms of debt	Other movements	Balance at end of period
								note (v)
	Half year 2019	7,664	-	(400)	-		8	169	-	7,441
	Half year 2018	6,280	-	-	-		83	-	4	6,367
	Full year 2018	6,280	1,630	(434)	(33)		210	-	11	7,664

 

(v)     In the first half of 2019, the Group agreed with the holders of two subordinated debt instruments to alter the terms and conditions of these instruments in exchange for an upfront fee and an increase in the coupon of the instruments. The upfront fee and increase in coupon rates represent a significant change in the cash flows of each instrument and therefore, in accordance with IAS 39, has resulted in an extinguishment of the old debt and recognition of a new debt at fair value, the net effect of which is a non-cash movement in debt of £169 million. The upfront fee paid of £141 million has been expensed and is shown in the cash flow statement above (see note C6.1 for further details).

(vi)    Net cash flows from discontinued operations represents the movement in cash and cash equivalents from the UK and Europe operations, which are classified as held for distribution at 30 June 2019. A detailed analysis of cash flows for the period for the discontinued UK and Europe operations is included in note D2.3. The 2018 comparative results have been re-presented from those previously published accordingly (as described in note A2).

 

NOTES TO PRIMARY STATEMENTS

 

A    BACKGROUND

A1  Basis of preparation, audit status and exchange rates

 

These condensed consolidated interim financial statements for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board (IASB) and as endorsed by the European Union (EU). The Group's policy for preparing this interim financial information is to use the accounting policies adopted by the Group in its last consolidated financial statements, as updated by any changes in accounting policies it intends to make in its next consolidated financial statements as a result of new or amended IFRS and other policy improvements. EU-endorsed IFRS may differ from IFRSs issued by the IASB if, at any point in time, new or amended IFRS have not been endorsed by the EU. At 30 June 2019, there were no unendorsed standards effective for the period ended 30 June 2019 which impacted the condensed consolidated financial statements of the Group, and there were no differences between IFRS endorsed by the EU and IFRS issued by the IASB in terms of their application to the Group.

 

The IFRS basis results for half year 2019 and half year 2018 are unaudited. Except for re-presenting the results for UK and Europe operations as discontinued operations, the 2018 full year IFRS basis results have been derived from the 2018 statutory accounts. The auditors have reported on the 2018 statutory accounts which have been delivered to the Registrar of Companies. The auditors' report was: (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The exchange rates applied for balances and transactions in currencies other than the presentational currency of the Group, pounds sterling (GBP), were:

 

		Closing rate at  30 Jun 2019	Average for the 6 months to 30 Jun 2019		Closing rate at  30 Jun 2018	Average for the 6 months to 30 Jun 2018	Closing rate at  31 Dec 2018	Average  for the 12 months to 31 Dec 2018
Local currency: £
	Hong Kong	9.94	10.15		10.36	10.78	9.97	10.46
	Indonesia	17,980.07	18,364.05		18,919.18	18,938.64	18,314.37	18,987.65
	Malaysia	5.26	5.33		5.33	5.42	5.26	5.38
	Singapore	1.72	1.76		1.80	1.83	1.74	1.80
	China	8.74	8.78		8.75	8.76	8.74	8.82
	India	87.85	90.62		90.46	90.37	88.92	91.25
	Vietnam	29,660.27	30,087.11		30,310.96	31,329.01	29,541.15	30,732.53
	Thailand	39.06	40.91		43.74	43.66	41.47	43.13
	US	1.27	1.29		1.32	1.38	1.27	1.34

 

Certain notes to the financial statements present half year 2018 comparative information at constant exchange rates (CER), in addition to the reporting at actual exchange rates (AER) used throughout the condensed consolidated financial statements. AER are actual historical exchange rates for the specific accounting period, being the average rates over the period for the income statement and the closing rates at the balance sheet date for the statement of financial position. CER results are calculated by translating prior period results using the current period foreign exchange rate, ie current period average rates for the income statement and current period closing rates for the statement of financial position.

 

The accounting policies applied by the Group in determining the IFRS basis results in this report are the same as those previously applied in the Group's consolidated financial statements for the year ended 31 December 2018, as disclosed in the 2018 statutory accounts, aside from those discussed in note A3 below.

 

A2  Discontinued operations

 

The Group is planning to demerge its UK and Europe operations, M&GPrudential, from the Prudential plc group in the fourth quarter of 2019. Following an assessment at 30 June 2019, in accordance with IFRS 5, 'Non-current assets held for sale and discontinued operations', the results of M&GPrudential have been classified as held for distribution and as discontinued operations at 30 June 2019 in these condensed consolidated financial statements.

 

In order to present the results of the continuing operations on a comparable basis and consistent with IFRS 5 requirements, results attributable to the discontinued UK and Europe operations in half year 2019 have been shown in a single line in the income statement with 2018 comparatives being restated accordingly. Notes B1 to B5 have been prepared on a consistent basis.

 

IFRS 5 requires the assets and liabilities of the UK and Europe operations at 30 June 2019 to be presented as single line 'assets held for distribution' and 'liabilities held for distribution' on the statement of financial position but does not permit the comparative 30 June 2018 and 31 December 2018 assets and liabilities to be re-presented as the UK and Europe operations were not classified as held for distribution at these dates. In the related balance sheet notes, prior period balances have been presented to show the amounts from discontinued operations separately from continuing operations. Additionally, in the analysis of movements in Group assets and liabilities between the beginning and end of periods, the balances of the discontinued UK and Europe operations are removed from the opening balances to show the underlying movements from continuing operations.

 

The profit from the discontinued UK and Europe operations is presented in the condensed consolidated income statement before the elimination of intragroup transactions with continuing operations in order to provide a more meaningful presentation of the position of the Group immediately after the proposed demerger.

 

The condensed consolidated statement of financial position has been presented after the elimination of all intragroup balances. 

 

A detailed analysis of the earnings performance, financial position and cash flows in the periods from the discontinued UK and Europe operations is provided in note D2, with supplementary analysis on adjusted IFRS operating profit based on longer-term investment returns by driver provided in note I(vi) within the additional financial information.

 

A3  New accounting pronouncements in 2019

 

IFRS 16, 'Leases'

The Group has adopted IFRS 16, 'Leases' from 1 January 2019. The new standard brings most leases on-balance-sheet for lessees under a single model, eliminating the distinction between operating and finance leases.

 

IFRS 16 applies primarily to operating leases of major properties occupied by the Group's businesses where Prudential is a lessee. Under IFRS 16, these leases are brought onto the Group's statement of financial position with a 'right-of-use' asset being established and a corresponding liability representing the obligation to make lease payments. The rental accrual charge in the income statement under IAS 17 is replaced with a depreciation charge for the 'right-of-use' asset and an interest expense on the lease liability leading to a more front-loaded operating lease cost profile compared to IAS 17.

 

As permitted by IFRS 16, the Group has chosen to adopt the modified retrospective approach upon transition to the new standard. Under the approach adopted, there is no adjustment to the Group's retained earnings at 1 January 2019 and the Group's 2018 comparative information is not restated. The right-of-use asset and lease liability at 1 January 2019 is set at an amount equal to the discounted remaining lease payments adjusted by any prepaid or accrued lease payment balance immediately before the date of initial application of the standard.

 

When measuring lease liabilities on adoption, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 3.4 per cent. The aggregate effect of the adoption of the standard on the statement of financial position at 1 January 2019 is shown in the tables below:

 

Consolidated statement of financial position

 

Effect of adoption of IFRS 16 at 1 January 2019 £m	Continuing operations	Discontinued operations*	Total Group
Assets
Property, plant and equipment (Right-of-use assets)	414	289	703
Total assets	414	289	703
Liabilities
Operational borrowings attributable to shareholder-financed businesses (Lease liability)	206	304	510
Borrowings attributable to with-profits businesses (Lease liability)	219	21	240
Accruals, deferred income and other liabilities (Accrued lease payment balance under IAS 17)	(11)	(36)	(47)
Total liabilities	414	289	703

* Presented within assets and liabilities held for distribution at 30 June 2019.

 

The Group has applied the practical expedient to grandfather the definition of a lease on transition. This means that IFRS 16 has been applied to all contracts, which were identified as leases in accordance with IAS 17 and IFRIC 4, 'Determining whether an Arrangement contains a Lease', entered into before 1 January 2019. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.

 

The Group has used the following practical expedients, in addition to the aforementioned when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

 

-   Applied a single discount rate to a portfolio of leases with similar characteristics. Accordingly, for such portfolios, the incremental borrowing rates used to discount the future lease payments will be determined based on market specific risk-free rates adjusted with a margin/spread to reflect the Group's credit standing, lease term and the outstanding lease payments.

-   Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

 

Other new accounting pronouncements

In addition to the above, the IASB has also issued the following new accounting pronouncements to be effective from 1 January 2019:

 

-   IFRIC Interpretation 23, 'Uncertainty over income tax treatments';

-   Amendments to IAS 28, 'Long-term Interests in Associates and Joint Ventures';

-   Amendments to IFRS 9, 'Prepayment features with negative compensation';

-   Annual Improvements to IFRSs 2015-2017 cycle; and

-   Amendments to IAS 19, 'Plan Amendment, Curtailment or Settlement'.

 

The Group has applied the principles within the Amendments to IAS 19, 'Plan Amendment, Curtailment or Settlement', when accounting for the changes to the pension benefits of its UK defined benefit schemes during the period. The other pronouncements have had no significant impact on the Group financial statements.

 

B    EARNINGS PERFORMANCE

 

B1  Analysis of performance by segment

 

B1.1  Segment results

 

				2019 £m		2018* £m			Half year 2019 vs half year 2018* %			2018* £m
			Note	Half year		AER Half year	CER Half year		AER	CER		AER Full year
						notes (i),(v)	note (i)		note (i)	note (i)		note (i)
Asia:
Insurance operations				1,095		927	963		18%	14%		1,982
Asset management				103		89	92		16%	12%		182
Total Asia				1,198		1,016	1,055		18%	14%		2,164
US:
Jackson (US insurance operations)				1,203		1,001	1,064		20%	13%		1,911
Asset management				12		1	1		n/a	n/a		8
Total US				1,215		1,002	1,065		21%	14%		1,919
Total segment profit from continuing operations				2,413		2,018	2,120		20%	14%		4,083
Other income and expenditure:
	Investment return and other income			24		33	33		(27)%	(27)%		52
	Interest payable on core structural borrowingsnote (ii)			(226)		(189)	(189)		(20)%	(20)%		(410)
	Corporate expenditurenote (iii)			(164)		(173)	(175)		5%	6%		(367)
Total other income and expenditure				(366)		(329)	(331)		(11)%	(11)%		(725)
Restructuring costs				(23)		(20)	(20)		(15)%	(15)%		(56)
Adjusted IFRS operating profit based on longer-term investment returns from continuing operations			B1.3	2,024		1,669	1,769		21%	14%		3,302
Short-term fluctuations in investment returns on shareholder-backed business			B1.2	(1,124)		9	8		n/a	n/a		(592)
Amortisation of acquisition accounting adjustmentsnote (iv)				(17)		(22)	(23)		23%	26%		(46)
Gain (loss) on disposal of businesses and corporate transactions			D1	13		(57)	(60)		n/a	n/a		(80)
Profit from continuing operations before tax attributable to shareholders				896		1,599	1,694		(44)%	(47)%		2,584
Tax charge attributable to shareholders' returns			B4	(1)		(326)	(343)		100%	100%		(426)
Profit from continuing operations for the period				895		1,273	1,351		(30)%	(34)%		2,158
Profit from discontinued operations for the period, net of related taxnote (v)			D2.1	645		83	83		n/a	n/a		855
Profit for the period				1,540		1,356	1,434		14%	7%		3,013
Attributable to:
	Equity holders of the Company
		From continuing operations		890		1,272	1,350		(30)%	(34)%		2,155
		From discontinued operations		645		83	83		n/a	n/a		855
	Non-controlling interests from continuing operations			5		1	1		400%	400%		3
				1,540		1,356	1,434		14%	7%		3,013
				2019		2018*			Half year 2019 vs half year 2018* %			2018*
			Note	Half year		AER Half year	CER Half year		AER	CER		AER Full year
Basic earnings per share (in pence)			B5			notes (i),(v)	note (i)		note (i)	note (i)		note (i)
Based on adjusted IFRS operating profit based on longer-term investment returns, net of tax, from continuing operationsnote (vi)				65.3p		53.7p	57.0p		22%	15%		108.7p
Based on profit for the period from continuing operations				34.4p		49.5p	52.6p		(31)%	(35)%		83.7p
Based on profit for the period from discontinued operations				25.0p		3.2p	3.2p		681%	681%		33.2p