Celebrating
life
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Prudential plc
Annual Report 2022
We help people
get the most
out of life
Why we exist
Our markets in Asia and Africa typically
have substantial savings and protection
gaps, fuelling demand for our products.
The difference we make
Customers are at the heart of everything
we do. We help our customers by making
healthcare affordable and accessible
and by promoting financial inclusion.
We protect our customers’ wealth, help
them grow their assets, and empower
them to save for their goals.
Adding value over the long term
We are confident that our clear and
focused strategy, coupled with our
proven execution ability, leaves us
well placed to continue to deliver
value for our shareholders and all
our stakeholders over the long term.
Contents
Our operations
02 Group overview
02 Our history
04 Chair’s statement
06 Our investment case
Strategic and operating review
08 Strategic report
10 Our business at a glance
12 Our strategy
14 Our business model
16
32 Measuring our performance
34
48 Risk review
66
ESG report
169 Non-financial information statement
170 UK Companies Act, Section 172
Financial review
READ
MORE 16
Our financial
performance
READ
MORE 34
Our risk profile
READ
MORE 48
Statement
176 Governance
178 Chair’s governance statement
180 Our leadership
190 Corporate governance
192 How we operate
202 Risk management and internal control
204 Committee reports
223 Statutory and regulatory disclosures
225 Index to principal Directors’ report
disclosures
226 Directors’ remuneration report
228 Annual statement from the Chair
of the Remuneration Committee
233 Our Executive Directors’ remuneration
at a glance
234 Summary of proposed changes to the
Directors’ remuneration policy
236 Annual report on remuneration
261 New Directors’ remuneration policy
276 Additional remuneration disclosures
280 Financial statements
376 European Embedded Value (EEV)
basis results
402 Additional information
404 Index to the additional unaudited
financial information
430 Risk factors
443 Glossary
447 Shareholder information
450 How to contact us
The Directors’ Report of Prudential plc for the year ended
31 December 2022 is set out on pages 4 to 5, 178 to 225 and
404 to 450, and includes the sections of the Annual Report
referred to in these pages.
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Strategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Group overview
Our history
Celebrating life
This year, we are proud to celebrate Prudential’s 175th anniversary,
including 100 years in Asia. During this time, Prudential has helped
generations of families get the most out of life, from industrial
workers in 19th century Britain to people in Asia and Africa
confronting the health and economic challenges of the
Covid-19 pandemic.
While Prudential has changed significantly since 1848, notably with
the demergers of M&G plc and Jackson to focus solely on Asia and
Africa, our founding principles of integrity, security and prudence
still guide us in providing long-term security for our customers and
building social and economic value in our communities.
Prudential Portfolio
Managers (PPM) is set up
to manage investments
for the Prudential Group
and external customers
1982
1994
Prudential Corporation
Asia is formed in Hong
Kong as a regional
head office to expand
operations in Asia
Prudential plays a major role in the
British government’s new National
Insurance programme, running four
Approved Societies and providing
supplementary policies to members
1912
1923
Prudential enters Asia,
opening its first overseas
life branch in India
Prudential opens its
Industrial Department,
selling insurance to the
working classes for
premiums of a penny
1854
1871
Prudential becomes one
of the first companies
in the City of London
to employ women
1848
The Prudential Mutual
Assurance, Investment
and Loan Association
is founded in London
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Prudential plc Annual Report 2022 Prudential acquires
businesses in Ghana
and Kenya, marking
its entry into the
fast-growing African
life insurance industry
2014
Prudential becomes
the first UK life insurer
to enter the Chinese
Mainland market
through its joint venture
with CITIC Group
2000
2018
Eastspring signs the
United Nations-supported
Principles for Responsible
Investment (PRI), the
world’s leading proponent
of responsible investment
2011
Non-profit entity the
Prudence Foundation is
incorporated in Hong Kong,
to run regional community
investment programmes
Prudential plc shares are
included for the Shenzhen-Hong
Kong Stock Connect Programme
and are included in the Hang
Seng Composite Index (HSCI).
From March 2023 Prudential plc
shares are included in the
Shanghai-Hong Kong Stock
Connect programme.
2022
Pulse by Prudential, an
AI-powered mobile health
app, is launched in Asia
2019
2021
Prudential plc becomes fully
dedicated to Asia and Africa
following the completion of
restructuring. Prudential
shares are issued on the
Hong Kong Stock Exchange
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Strategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Group overview
Chair’s statement
Our focus is on executing
well to take advantage of
the opportunities ahead
to create long term,
sustainable value.
2023 marks 100 years since we began our first operations in Asia, and
175 years since Prudential was founded. No company survives that
long without constantly adapting to suit the times and the needs of its
customers. The last three years in particular have seen the most
substantial period of structural change in the company’s history. We
have undertaken this transformation because we believe it enables
Prudential to be a better partner to our customers, our people, our
communities and wider stakeholders, and to create better value for our
shareholders. Change is not easy, and I remain hugely impressed by,
and grateful for, the professionalism, resilience, and innovation of our
people in undertaking this change while delivering day by day for our
customers and creating long term value for our shareholders.
In 2022, Prudential delivered a resilient financial performance while the
pace of our transformation continued. We faced a challenging external
environment, with continued macroeconomic and geopolitical
headwinds, some, such as higher food and energy prices exacerbated
by the war in Ukraine, others by longer-term dynamics and emerging
trends. There are important differentiating factors between our
markets in Asia and Africa, but generally inflation continues to put
pressure on the cost-of-living for individuals and families. While in many
parts of the world, Covid-19 moved from a pandemic to an endemic,
the long-term effects on public finances, social safety nets, and
individual and family physical, mental and financial well-being will
be felt long after the pandemic abates.
We took a number of steps to respond to these challenges. We
continued to design and tailor new products to better serve our
customers, working with our agents and bancassurance partners.
We invested in and further harnessed digital technology to improve
customer experiences and the effectiveness of our distribution and to
promote wider financial inclusion. We have continued to work to equip
our people with the appropriate skills and to support their well-being to
ensure our culture celebrates diversity and assures inclusion.
As the strategic and operating review sets out in detail, the advantage
of our business model – with its geographic, channel and product
diversification – is reflected in the resilience of our performance
in 2022. We were pleased to see the removal of the bulk of Covid
restrictions and the progressive opening up of the economy of the
Chinese Mainland. We believe this will have a positive impact on
growth in China, the wider Asian region and globally.
During 2022, the disruption of Covid-19 alongside economic and
market challenges did, nonetheless, affect reported new business
profit1 and also led to volatility in shareholder returns. Sharp increases
in interest rates in many markets and lower bond and equity market
values negatively impacted IFRS profit after tax and embedded
value. However, our adjusted operating profit2 grew by 8 per cent3
in the period, demonstrating the creditable underlying development
of our business.
The Board has approved a 2022 second interim cash dividend of
13.04 cents per share (2021: 11.86 cents per share). Combined with the
first interim cash dividend of 5.74 cents per share (2021: 5.37 cents per
share), the Group’s total 2022 cash dividend is 18.78 cents per share
(2021: 17.23 cents per share), an increase of nine per cent.
Despite the volatility in 2022, the events of the last few years have
reinforced the long-term rationale behind our recent strategic
transformation and the purpose that sits at the heart of Prudential,
to help our customers to get the most out of life. This purpose is well
aligned with the long-term public policy priorities in our chosen markets
in Asia and Africa: providing products and services to help to close
health, protection and savings gaps where social safety nets vary
considerably; helping to respond to long-term demographic changes;
and supporting a just and inclusive transition in emerging markets in
the face of climate change.
Chief Executive Officer succession
It was with this purpose, strategy and long-term growth opportunities
in mind that the Board undertook an extensive search for Prudential’s
new Chief Executive Officer, with clarity about the attributes we were
looking for in the leader of Prudential’s next stage as an exclusively Asia
and Africa-focussed company. In particular, the Board sought an
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Prudential plc Annual Report 2022
individual with a deep understanding of, and operating experience
in insurance across our key Asian markets and the skills to lead and
develop a customer-centric, performance-driven culture. Given the
significance of the decision to the future success of the Group, the
Board conducted a rigorous selection process involving all Non-
executive Board members. Further details on the process are set
out in the Governance report on pages 176 to 225.
We were delighted to announce in May 2022 the appointment of Anil
Wadhwani as Chief Executive Officer. Anil is a global financial services
leader with over 30 years’ experience, almost all of it in Asia. He has a
strong track record of creating and driving a culture of performance
and success, and digital experience, most recently driving the
modernisation of technology platforms across Asia. He joined the
company as Chief Executive Officer on 25 February 2023.
The Board is immensely grateful for the way in which Mark FitzPatrick
led Prudential as interim Chief Executive Officer. Mark has made a vital
contribution to Prudential in the execution of two demergers as Chief
Financial Officer and Chief Operating Officer and, in his time as interim
Chief Executive Officer, in successfully completing Prudential’s
restructuring, moving senior management to Asia, implementing a
new structure for the Group Executive Committee, and focusing with
our wider leadership teams on our operational delivery. He has helped
ensure that Anil arrived against a backdrop of resilient performance
and momentum, with a franchise and platform that can grow to
achieve its full potential.
The Board
We have worked in my time as Chair to ensure Prudential’s Board
reflects the transformation of the Group, the markets in which we
operate and the expertise in areas that will help shape the future
success of the company. This year saw further progress in our transition
from being the board of a financial holding company of businesses
around the world, to the board of an operating company working
exclusively in Asia and Africa. We have taken a considered approach to
this transition and its accompanying requirement to change our
mindset, culture and expertise.
I have been very pleased to welcome two new members to the Board,
Arijit Basu who joined in September 2022, and Dr. Claudia Suessmuth
Dyckerhoff, who joined in January 2023. They bring extensive
knowledge and experience of insurance, health and technology, as well
as market experience in China and India. In the course of 2022, we
announced that Philip Remnant, who joined the Board in 2013, and
Tom Watjen, who joined in 2017, will step down at the end of the 2023
AGM in May. I am very grateful to both Philip and Tom for their
invaluable service to Prudential during a historic period of change, and
to Philip in his role as the Senior Independent Director. I am grateful for
shareholders’ approval for the exceptional extension of Philip in the role
last year, providing essential support to me as Chair and continuity at a
time of further Board changes. I am very pleased Jeremy Anderson has
agreed to succeed Philip as Senior Independent Director. Alongside
these changes, we updated the Board’s Committee memberships, with
Chua Sock Koong becoming Chair of the Remuneration Committee
and George Sartorel the Chair of the Responsibility and Sustainability
Working Group (RSWG). More details are set out in the Governance
section of this report.
The Board’s agenda, ways of working and culture have also needed to
reflect the changed focus and footprint of the company. We benefitted
over the course of the year from the gradual easing of travel restrictions
and could engage far more in-person within the Board, and with our
leadership teams, employees and key stakeholders across our markets.
We have become closer to our key markets through in depth sessions,
and focused on the core enabling drivers of our strategy, from
distribution channels to technology and, critically, our people.
Climate, people and communities
Prudential’s ability to generate shareholder returns is inextricably
linked to our creation of social value and our alignment with national
priorities for the protection of people in our markets. Underpinning our
purpose, our commitments on sustainability, customers, people and
community are an integral part of our culture, our strategy and our
business performance, and not just a part of a separate ESG strategy.
Reflecting the importance of these areas to us as a business, during
the year we changed the Terms of Reference of the RSWG to focus on
customers and digital in addition to its existing remit on people, culture
and communities.
Alongside our specific climate change policies and commitments, we
have made progress across these closely connected areas and continue
to embed our policies and processes, including the ESG strategy we set
out in 2021, across the company. Our approach and the actions we
have taken on ESG are detailed in our 2022 ESG Report on pages 66 to
168. This includes the important initiatives the Prudence Foundation
has delivered providing financial literacy education and helping to build
resilience around climate, health and safety.
We have drawn attention to the steps needed to support a just and
inclusive transition necessary across our markets. This approach
recognises and respects the fact that the markets in which we operate
have contributed less overall to the stock of carbon emissions
historically, are often more dependent on fossil fuels to continue to
develop their economies, have fewer resources in general to manage
the effects of climate change, and are more likely to be affected by its
impact. In October 2022, we set out in a white paper the case for a just
and inclusive transition, its place in meeting the Paris Agreement, and
areas where further actions are required, both from ourselves and the
wider market. We look forward to working with stakeholders across our
markets on the urgent progress needed.
Looking ahead
Prudential’s transformation has created exciting opportunities.
Notwithstanding the complex external environment, our chosen
markets in Asia and Africa are fundamentally attractive and we expect
strong, growing demand for our products and services given their
long-term trends and requirements. With diversification across high
growth and high potential markets, we are investing to have better
insight into our customers and meet their needs, enhancing our
multi-channel distribution capabilities, and embedding technology
to enhance the experience and delivery of our products and services.
With our leadership and operating geographies now fully aligned, we
believe we have created a company with high growth potential and our
focus is on executing well to take advantage of the opportunities
ahead to create long term, sustainable value.
Thank you all for your support.
Shriti Vadera
Chair
Notes
1
2
3
New business profit, on a post-tax basis, on business sold in the period, calculated in
accordance with EEV Principles.
‘Adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term
investment returns from continuing operations and is stated after excluding the effect
of short-term fluctuations in investment returns against long-term assumptions and
other corporate transactions. This alternative performance measure is reconciled to
IFRS profit for the period of $1,007 million (2021: $2,214 million) in note B1.1 of the
IFRS financial results.
On a constant exchange rate basis.
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Strategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Group overview
Our investment case
What we offer investors
Prudential has a high-quality, diversified portfolio in Asia and Africa, supported
by a leading multi-channel distribution platform and is well placed to continue to
deliver value for our shareholders and all our stakeholders.
Applying our strengths
Our long-term opportunities
Expect to deliver
long-term growth
outperformance
Sustainable growth
in operating capital
generation
Focus on high
return savings and
protection products
Business model aligned to
structural growth drivers
READ MORE PAGES 16 TO 31
Our businesses are
diversified across Asia and
Africa, with circa 50 per cent
of our APE sales and new
business profit generated
from South-east Asia
READ MORE PAGES 16 TO 31
Our modern multi-channel
and integrated distribution
network comprise agency
and bancassurance
partnerships with a
digital platform
READ MORE PAGES 16 TO 31
We offer adaptable,
innovative and consumer-
centric products addressing
the diverse needs of
our customers
READ MORE PAGES 16 TO 31
Our leading Asia-based
asset manager, Eastspring,
has $221.4 billion assets
under management
or advice
READ MORE PAGES 29 TO 30
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Prudential plc Annual Report 2022
There are substantial and unmet consumer
needs in our markets that are set to continue
in the long term, and provide significant
opportunity for growth and value creation.
2.8%
Low penetration1
Asia’s health and protection
gap is estimated at
$1.8 trillion2
40%
Asia’s contribution to
global GDP growth3
+1.5 billion
Growing middle class4
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Delivering a distinctive
shareholder proposition
We believe that our strategy and execution
ability will help support our ambition to achieve
the following:
Ambition for growth rates of new
business profit to substantially exceed
GDP growth in the markets in which
Prudential operates
Ambition for long-term double-digit
growth in embedded value per share
Ambition to fund further profitable
compounding growth and high
risk-adjusted returns for shareholders
Notes
1
2
3
4
Source: Swiss Re. Penetration defined as life insurance premiums
as a percentage of GDP.
Source: Swiss Re. The health protection gap in Asia: A modelled exposure
of USD 1.8 trillion. October 2018. Health protection gap defined as the
shortfall to adequately finance current and expected health expenditures.
Source: IMF. Between 2022 and 2027. Prudential’s Asia footprint.
Increase in the middle-class population in Asia Pacific between 2020
and 2030.
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Prudential plc Annual Report 2022Group overview
Strategic
report
Strategic and operating review
10 Our business at a glance
12 Our strategy
14 Our business model
16
32 Measuring our performance
34
48 Risk review
66
ESG report
169 Non-financial information statement
170 UK Companies Act, Section 172 Statement
Financial review
08
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Prudential plc Annual Report 2022Prudential plc Annual Report 2022 S
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Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Prudential plc Annual Report 2022
Our business at a glance
Our operations
In Asia, we provide savings and protection products in many markets
challenged by low insurance penetration and a pension funding gap1.
In Africa, we are building businesses in some of the world’s most
under-penetrated markets.
Our largest businesses are
based in the Chinese Mainland,
Singapore, Hong Kong,
Malaysia and Indonesia.
Our markets
Life insurance
Asset management
CHINESE
MAINLAND
KOREA
INDIA
MYANMAR
LAOS
MACAU
TAIWAN
HONG
KONG
THAILAND
VIETNAM
CAMBODIA
PHILIPPINES
GHANA
NIGERIA
UGANDA
TOGO
CÔTE
D’IVOIRE
CAMEROON
KENYA
ZAMBIA
MALAYSIA
SINGAPORE
INDONESIA
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Prudential plc Annual Report 2022 Our markets
Population2
Life
insurance
penetration3
Prudential
market
ranking4
Eastspring
funds under
management or
advice5
Health and
protection gap6
GDP growth
forecast7
Chinese Mainland
Hong Kong
Indonesia
Malaysia
Singapore
India
Taiwan
Vietnam
Laos
Philippines
Cambodia
Thailand
Myanmar
Japan
Korea
Macau
Africa
1.4bn
7m
274m
34m
6m
1.4bn
24m
97m
7m
114m
17m
72m
54m
2.1%
17.3%
1.1%
3.9%
7.5%
3.2%
11.6%
1.6%
n/a
1.5%
n/a
3.4%
n/a
3rd
2nd
1st
1st
3rd
3rd
1st
2nd
2nd
1st
1st
6th
2nd
$9.0bn
$805bn
$4.9bn
$4.1bn
$12.8bn
$125.9bn
$23bn
$82bn
$47bn
$23bn
$30.1bn
$369bn
$4.2bn
$6.2bn
n/a
n/a
n/a
$10.4bn
n/a
$2.7bn
$10.1bn
$41bn
$36bn
n/a
$32bn
n/a
$6bn
n/a
n/a
n/a
4.5%
3.1%
5.2%
4.4%
2.5%
6.5%
2.2%
6.6%
n/a
5.8%
n/a
3.4%
n/a
n/a
n/a
Macau licence granted in January 2023
Population of Prudential markets
Number of Prudential markets
428m
8
FIND OUT MORE IN THE STRATEGIC AND OPERATING REVIEW ON PAGE 16
Developing more inclusive products and services
for more customers
Providing an accessible multi-channel platform for
customers to choose their preferred ways of interaction
JAPAN
46%
of our APE sales are
generated by repeat
purchases
Access to
4.0
billion population
#1
in the Syariah market in
Malaysia and Indonesia
TOP 3
position in 12 Asian
life insurance markets
TOP 10
position in 6 Asian
asset management
markets
>100,000
active agents8
>7,000
agents qualifying
for Million Dollar
Round Table status
>190
bancassurance
partners
of which
10
are strategic partners
Pulse is available in
19
markets
Notes
1
2
3
4
5
6
7
8
Bridging Asia’s pension gap, Eastspring Investments July 2019.
United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects 2022.
Source: Swiss Re Institute; Sigma No 4/2022: World insurance – life insurance penetration (premiums as a percentage of GDP).
Sources: Chinese Mainland (Based on new business standard premiums for 2022 of the foreign joint ventures only, data from industry sharing of information),
Hong Kong (Based on PHKL total in-force premium for 2022 from Hong Kong Insurance Authority), Indonesia (Based on weighted new premiums for 2022,
preliminary results from Indonesian Life Insurance Association), Malaysia (On combined basis where Takaful is on 100%. Based on new business APE for 2022,
data from Life Insurance Association of Malaysia for Conventional Business and Insurance Service Malaysia for Takaful business), Singapore (Based on
weighted new business premiums reported within Singapore Life Insurance Association returns for 2022), India (Based on retail weighted premium for the
calendar year 2022 of private insurers operating in India, from the Life Insurance Council), Taiwan (Based on full year 2022 APE of foreign insurers, data from
Taiwan Insurance Institute), Vietnam (Based on full year 2022 APE data collected from data sharing by Vietnam Actuarial Network), Laos (Based on gross
written premiums for 2021, from Axco Insurance Market Report), the Philippines (Based on weighted first year premiums for the first nine months in 2022, data
from Insurance Commission), Cambodia (Based on full year 2022 adjusted APE, from Insurance Association of Cambodia), Thailand (Based on weighted new
business premium for 2022, from The Thai Life Assurance Association), Myanmar (Based on APE for the first nine months in 2022 for the foreign insurers
operating in Myanmar, from Myanmar Insurance Association).
Full year 2022 total funds under management or advice based on the country where the funds are managed.
Source: Swiss Re Institute. The health protection gap in Asia, October 2018. Estimated total national health protection gap.
Represents a CAGR of real GDP between 2022 and 2027 and is based on IMF World Economic Outlook Database, October 2022.
Active agents are agents who have been selling in 2022; excludes India associates and African businesses.
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Our strategy
How we drive value for all stakeholders
Q What is driving
our business today?
A Our purpose is to
help people get the
most out of life:
We want to make healthcare
affordable and accessible, and
promote financial inclusion.
We seek to protect people’s wealth,
and help them to grow their assets
and save for their goals.
We deliver our purpose by
following these key Principles:
> We put customers first
> We act with integrity
> We embrace a growth
mindset
> We invest in all our
communities
> We take the long view
Q What is our strategy?
A Our strategy is enacted
under three key areas:
Delivering
> Growing our savings and
protection business by
protecting our customers’
health and wellbeing.
> Focusing on the growth
opportunities in the Chinese
Mainland, India, and South-
east Asia.
> Positioning Eastspring to be
a leading responsible investor
in Asia.
> Supporting sustainable
growth through our inclusive
approach to climate transition.
Digitalising
> Accelerating our digitally-
enabled model of distribution.
> Improving customer servicing.
> Strengthening our direct
digital insurance product suite.
> Entering strategic digital
partnerships.
Humanising
> Upskilling our people, agents
and partner advisers.
> Providing inclusive offerings
for all segments.
> Ensuring our working
environment is inclusive
and promotes belonging.
Delivering
profitable
growth
and social
impact
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SEE OUR STRATEGIC AND OPERATING REVIEW PAGE 16
SEE OUR ESG STRATEGY PAGE 66
Prudential plc Annual Report 2022 Digitalising
products,
services and
experiences
Humanising
our company
and advice
channels
Q What outcomes do we
want to see as a result?
Q How do we approach
executive reward?
A Our long-term
performance
aspirations are:
Grow the value of our
business for shareholders
A We explicitly link
Executive Directors’
Remuneration to
strategic delivery:
Performance conditions of
Executive Directors include:
Operating free surplus generated1
New business profit
2022
2018
2,193
1,564
$m
0
500
1,000
1,500
2,000
2,500
EEV shareholders’ equity1
2022
2018
42.2
27.4
$bn
0
10
20
30
40
50
Assets we hold on behalf of our
insurance companies will become
net zero
by 20502
Carbon emissions (WACI)
2022
2019
219
386
0
100
200
300
400
500
Note
1
2
Including proceeds of $2,382 million from the issue
of share capital in October 2021.
‘Net zero’, with regards to greenhouse gas emissions,
refers to a state by which the greenhouse gases going
into the atmosphere are reduced as close to zero as
possible and any residual emissions are balanced by
removals from the atmosphere. When translating
these emissions to the activities in the value chain
of an organisation, net zero is a state in which the
activities of the value chain for an organisation
result in net zero greenhouse gas emissions, in a
time frame consistent with the Paris Agreement.
55%
of the financial
performance measures in
the 2023 Executive
Directors’ Annual Incentive
Plan (AIP)
Return on embedded value
40%
of the total 2023 Executive
Director’s Prudential
Long-Term Incentive Plan
(PLTIP) award
ESG metrics constitute
10%
of the total 2023 Executive
Director’s PLTIP award,
including 5 per cent linked
to carbon reduction
SEE OUR KEY PERFORMANCE
INDICATORS PAGE 32
SEE OUR REMUNERATION
REPORT PAGE 226
13
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Our business model
How we
create
value
We offer insurance and asset management products, focusing
on the markets where we believe there is rising demand for
savings and protection offerings. By tailoring our products to
the needs of customers in these markets, we believe we have
a significant opportunity for growth and value creation.
Our purpose
and function
The stages in our
business model
Key resources
and relationships
we employ …
We help people get the most out of life ...
Meet customer needs
in our selected markets
Engage with
customers
Markets
We operate in many markets
with low insurance penetration
with a growing need for savings
and protection products.
In these markets we seek to address
the social requirements for insurance
and asset management solutions.
This is achieved through discussions
with governments, regulators,
partners and customers.
Products
We focus on providing savings
products including participating,
linked, traditional products alongside
fee earning asset management
services and protection products.
Distribution and
digitalisation
Our savings and protection products are
distributed through our extensive agent
network, banks and digital partnerships.
We develop our products considering
the requirements of local markets
and the needs of individual customers.
Our asset management products are
distributed to third-party institutions and
retail clients alongside services provided
to internal insurance customers.
We are working to accelerate the
digital enablement of our distribution
network and a seamless digital
customer experience.
... and what
differentiates us
We have top three positions in 12 out
of 13 life markets in Asia, and Eastspring
is a top-10 asset manager in six of
11 markets. We operate in eight
countries in Africa, where we have
built a rapidly-growing multi-product
business since our entry in 2014.
Our focus on regular premium
savings and protection products
helps us grow our revenues over time
as we add new customers and increase
the savings of our existing customers.
READ MORE PAGES 16 TO 31
We are the market leaders of
Syariah business in Indonesia
and Malaysia.
READ MORE PAGES 16 TO 31
Our extensive multi-channel
and integrated distribution
enables us to better understand and
service customers’ financial needs.
Pulse by Prudential is a digital
platform supporting and enabling our
customers, agents, and distribution
partners across Asia and Africa.
READ MORE PAGES 16 TO 31
Underpinned by
our core behaviours
Operating with discipline
Risk management and disciplined allocation of capital
underpin our activities, while our governance, processes
and controls enable us to deal effectively with uncertainty.
Building sustainable business
We build sustainable businesses and invest responsibly, seeking
to integrate environmental, social and governance considerations
into our investment processes and stewardship activities.
READ MORE PAGES 48 TO 65
READ MORE PAGES 66 TO 168
14
prudentialplc.com
Prudential plc Annual Report 2022 … by making healthcare affordable and accessible, helping our
customers protect their wealth and save for their goals.
Meet or exceed
customer expectations
Generate benefits
for our stakeholders
Customer service
and loyalty
We have high customer loyalty,
with a retention ratio consistently
in excess of 89 per cent2.
We provide financial safety to
customers in the difficult times.
The satisfaction and trust our
customers have in our services
translates into a high proportion
of repeat sales.
Integrated asset
management
We leverage Eastspring’s expertise
in equity, bonds and multi-asset
management to underpin our
insurance products, as well as
offering products direct to
third-party institutions and
retail clients.
We seek to protect the value
of our business over the longer
term through meeting customer
expectations and disciplined risk
management and increase value
by adding new customers.
READ MORE PAGES 16 TO 31
Eastspring is one of the
largest pan-Asian asset
managers and benefits
from the operational leverage
from the substantial assets
and predictable inflows from
the Group’s life business.
READ MORE PAGES 29 TO 30
The value we create
for our stakeholders
Customers
We aim to provide accessible
healthcare solutions as well as
empowering our customers to
save for their goals.
Investors
Our Asia and Africa-focused strategy
will support long-term delivery of
future shareholder returns through
value appreciation and dividends.
During the year we paid out3 over
EEV
$9.3bn
to our customers in respect of
the long-term insurance products
they hold with us
Workforce
We provide an inclusive working
environment where we develop talent,
reward performance, protect our
people and value our differences.
14,681
employees1
New business profit
$42.2bn
$2.2bn
Government and
wider society
We regard governments and
legislatures in the markets in which
we operate as important stakeholders.
We support our wider communities
through investment in business and
infrastructure, paying tax and
community support activity.
Regulators
We work with regulators to understand
their objectives, priorities and
concerns, and how they affect the
shape of our business.
$12.2m
Total community investment
cash contributions
$15.6bn
GWS shareholder surplus
over GPCR
Suppliers
We treat our suppliers fairly so we both
mutually benefit from our relationship.
Engaging our stakeholders
We engage with our stakeholder groups closely and
take account of their concerns in our decision-making.
READ MORE PAGES 170 TO 175
Notes
1
2
3
Whole Group Full Time Equivalent including Chair, all Directors, GEC members,
and Senior Managers, excluding joint ventures.
Excluding India, Africa, Myanmar and Laos.
Claims paid gross of reinsurance, see note C3.2(i) to the IFRS financial results
for more details.
15
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Strategic and operating review
A resilient performance
in 2022, well positioned
for future opportunities
16
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Prudential plc Annual Report 2022 Recent achievements
Prudential plc shares are included for
Shenzhen and Shanghai-Hong
Kong Stock Connect Programmes
and are included in the
Hang Seng Composite
Index (HSCI)
Prudential received regulatory approval to establish a
branch in Macau
Eastspring Investments was named the
Best Emerging Markets
Equity Manager
by the Citywire Asia Asset
Management Awards
Made for Every Family
inclusive family cover
provided in our markets
Just and Inclusive
Transition
paper published
35%
women in
senior leadership
First Climate
Transition Plan
published
On track to meet
25%
WACI reduction by 2025
CO2
Prudential launched a
dedicated Syariah
life insurance entity
in Indonesia
Prudential sponsored the
2022 Africa Cup
of Nations
the largest football tournament
in Africa viewed by over
one billion people
Prudential announced a
strategic partnership
with Google Cloud
to enhance health and financial
inclusion for communities across
Asia and Africa
17
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Strategic and operating review / continued
Following the completion of the Group’s restructuring in 2021, our
operations are fully dedicated to the life insurance and asset
management opportunities in Asia and Africa. Our headquarters and
management of the Group are now based in Hong Kong.
Our strategy is aligned with the long-term structural opportunities
in Asia and Africa. Across Asia, the middle class is growing and is
forecast to increase by 1.5 billion1 by 2030. Prosperity is also rising
across the region2. This combined with a low level of insurance
penetration3 and a high level of out-of-pocket health and protection
spending4 is driving an estimated $1.8 trillion health protection gap5.
In Africa, the population is expected to double to more than
two billion6 people by 2050. These long-term trends underpin
increasing demand for savings and protection and create significant
opportunities for growth and value creation.
We have set out that our purpose is to help people get the most out
of life and we put our customers at the heart of everything we do.
We strive to meet the needs of our customers and continue to
support the development of the capital markets in which we operate.
We believe that it is important to the long-term success of our Group
that we play a wider role in the societies in which we operate. In Asia
and Africa, we seek to promote financial inclusion and a just and
inclusive transition to a low-carbon economy. We will use our
investments in both corporate and government sectors to promote
long-term sustainable development that is equitable for our markets
in the context of their historic carbon emissions. We also aim to fulfil
our purpose for our employees, one of our greatest assets. As an
employer, we have promised to make Prudential a place where our
people can connect, grow and succeed.
To further our purpose, we continue to focus on developing our range
of products and investing in our distribution channels as well as
enhancing and embedding our digital capabilities. In this way, we
expand our capacity to help protect our customers from threats to
their health and wellbeing, as well as support them to achieve their
savings goals. We also remain focused on investing in our people and
systems to ensure we have the resources to deliver on our long-term
growth strategy and to enhance our operating model to keep pace
with our opportunities.
We have strong franchises and operational expertise in both the
more developed markets and developing markets in Asia and Africa.
We continue to build on our success in the Chinese Mainland where
we see substantial opportunity to deepen our presence across a
nationwide footprint. With the newly set up Macau branch of the
Hong Kong business, we are strengthening our operations to capture
the opportunities in the Greater Bay Area and to fully prepare
ourselves for the increase in opportunities following the reopening of
the border between Hong Kong and the Chinese Mainland. We also
see large growth opportunities in South-east Asia, particularly in
Indonesia and Thailand, and also in India. Our focus on selected
markets in East and West Africa has provided us with exposure to
a growing and fast-changing continent since we re-entered Africa
in 2014.
We will allocate capital to those markets that we consider to have
attractive size and demographic characteristics, and where we
believe we have the ability to build and retain competitive advantage.
Through leveraging our scale and expertise in those markets we
believe we can achieve attractive returns. We have significant
investment appetite and capacity to support organic growth through
funding the writing of new business and through adding to our
existing capabilities, including distribution. We also remain ready
to consider strategic inorganic opportunities.
We seek geographic diversification of our Asia operations among
Greater China7, our businesses in South-east Asia8 and India.
The first part of 2022 saw Covid-19-related disruption in many of
our markets as the Omicron variant increased infection levels and
associated social restrictions. Subsequently, most markets have
returned to more stable operating conditions, albeit the border
between the Chinese Mainland and Hong Kong remained closed
throughout 2022. Against this backdrop, APE sales9 increased
9 per cent10 to $4,393 million on a constant exchange rate basis
reflecting growth in the second half of 2022 from both agency
and bancassurance channels. New business profit11 was down
(11) per cent10 with the impact of higher APE sales offset by increased
interest rates, most significantly in Hong Kong, and business mix
effects. Outside of Hong Kong, new business profit grew by
5 per cent10 to $1.8 billion. Additional commentary on the
performance by segment is included in the Operational performance
by market section below.
At a Group level, overall adjusted IFRS operating profit based on
longer-term investment returns (adjusted operating profit12) for
2022 was $3,375 million, 8 per cent10 higher than 2021, reflecting a
6 per cent10 increase from insurance and asset management business
and a decline in central expenses13 of 26 per cent10, reflecting lower
interest costs. IFRS profit after tax was $1,007 million in 2022
(2021: $2,143 million on a CER basis, $2,214 million on an AER basis),
reflecting short-term volatility from the impact of higher interest
rates and lower equity markets on the valuation of investments and
insurance liabilities, offset in part by the benefit from refinements to
the reserving basis following adoption of the Hong Kong Risk-Based
Capital regime (HK RBC). The Group’s financial performance for
the year is further discussed in the Financial Review later in this
strategic report.
Customers
Customers are at the heart of everything we do. Our customer-centric
strategy has three key pillars:
> ‘WE Listen to Understand’ the needs of our customers across
different segments and build lifelong relationships when we
onboard them. For example, our customer segmentation has
identified a clear opportunity in further expanding our offering in
the family segment leading to the launch of the innovative ‘WE DO
Family’ proposition in 2022. Through the application of a
data-driven approach, this proposition helps us identify the needs
of our customers based on their life events and individual
circumstances, helping us to tailor our offerings and build lifelong
relationships. More than 30 per cent of our new customers are from
the affluent and advanced affluent segments and over 50 per cent
of policies issued are health and protection plans to cover for
critical illness, to provide medical reimbursement to cover hospital
bills and to give protection against loss of income from acute illness
or permanent disability. 43 per cent of our new business profit was
contributed by health and protection products. These products
and solutions are offered through our multi-channel and integrated
distribution and are key to driving long-term business growth.
18
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Prudential plc Annual Report 2022 Agency
Agency continues to be an integral part of Prudential’s brand
and customer service platform. Across our markets, we have
launched and connected a series of agency growth programmes
to build capabilities and expand capacity for our agency platform.
Prudential’s Futuready Agency programmes aim to give our
agency force a defensible competitive advantage by leveraging
technology, behavioural science, and analytics to improve their skill
sets, capabilities, and external positioning for long-term sustainable
growth.
Our Futuready Agency programmes have four areas of emphasis:
> Attracting talent from target segments. PruVenture is Prudential’s
signature recruitment programme to attract talent and build a
purpose-driven agency force. This has been deployed in seven
core agency markets18 and onboarded over 9,800 associates
over three years with productivity19 four times higher than
standard new recruits. Our profiling assessment, PruDNA,
selects individuals with high propensity to succeed. Thirty
thousand successful agents went through PruDNA assessment
in 2022, prior to joining Prudential.
> Leading and coaching leaders. PruVerge is Prudential’s signature
learning programme for the next generation of leaders to help
them attract, recruit, coach and build high-performing teams.
This has enrolled over 6,000 Verge leaders over two years, where
they learn the science of coaching and development utilising a
data-driven decision model. We saw an increase in agent
recruitment per leader of 50 per cent for the Verge leaders while
overall recruitment was up 9 per cent and agent productivity
measured by cases per agent increased 6 per cent in the year.
> Building a premium career path for purpose-driven agents and
offering robust professional development. We had over 7,000
agents with production levels that qualified for the Million Dollar
Round Table (MDRT) contributing to 42 per cent20 of APE sales in
the relevant markets in 2022.
> Nurturing prospects by reimagining every aspect of prospecting,
engaging, and advising to fit the digital business environment.
Agents using PRULeads, our activity and leads management
engine, were 30 per cent more productive19 with 32 per cent of
agency sales generated using PRULeads21 (2021: circa 30 per cent)
from 7.3 million leads22 (2021: 10.2 million) channelled via
PRULeads.
Agency generated $1.2 billion of new business profit (2021:
$1.6 billion10) at a margin of 70 per cent (2021: 89 per cent) with
sales adversely affected by Covid-19-related restrictions in the
first half of 2022. Sales through our agency business represent
61 per cent of our total health and protection APE sales. As the
impact of Covid-19 subsides and agency activity resumes, we expect
the agency contribution to new business profit to increase while
maintaining the diversified distribution mix in line with our strategy.
> ‘WE Care’ for our customers to deliver value across all the
engagements they have with us. At Prudential, we have well-
established core expertise in utilising data and insights to improve
customer interactions and make operational improvements to
provide a differentiated and personalised experience to our
customers. At the point of purchasing, smart underwriting using
reflexive methods (an approach to inquiries that generates follow
up questions based on the initial answer) enables instant
underwriting decisions with confirmation of terms.
In 2022, 79 per cent of new policies were auto-underwritten and
41 per cent of policies were issued with no human intervention.
At the point of claims, 64 per cent of claims are submitted
electronically and 31 per cent of all claims are auto-adjudicated
for instantaneous approval. These actions supported 46 per cent14
of our APE sales being generated by our customers making a
repeat purchase in 2022.
> ‘WE Build’ customer advocacy by listening to the voice of
customers to understand and address their feedback. We have
adopted a systematic approach to understanding customer
feedback and then applying the insights gained to continually
improve our offerings with the aim of delivering best-in-class
customer experiences through each touchpoint and interaction.
Customer retention remains high at over 89 per cent14.
We seek to expand and innovate the coverage of our health and
financial security products in an inclusive manner. This entails
delivering solutions that recognise the evolution and needs of
non-nuclear families, women, religious minorities, small and
medium-sized enterprises, and lower-income groups. During 2022,
we launched strategic propositions that celebrate ‘families of every
shape and size’. Across 11 markets, we rolled out a range of new and
extended products that are ‘Made For Every Family’ with progressive
term definitions (such as ‘Beneficiary’) to offer more tailored
protection for extended family members.
Our total life customer base increased to 18.3 million15 (2021:
17.7 million15). New policies16 included 2.4 million17 health and
protection cases, an increase of 9 per cent when compared with
2021, reflecting our customers’ increased focus on this area in light of
the pandemic. While these policies were generally smaller in size than
in previous years17, we believe that the conversion of these customer
interactions into sales by our diverse distribution channels is evidence
of the power and quality of the Group’s franchise and brand.
Our strategy is to be a customer-centric organisation, driven by
customer needs. Customers are active in conducting their own
research, for example through search engines and social media;
however, when it comes to purchasing decisions on life insurance,
given the complexity and emotions, their preferred route is to seek
advice. Our multi-channel and integrated distribution strategy
enables us to adapt flexibly to changing local market conditions in
order to deliver products and services to targeted consumer segments
and support our growth ambitions. This distribution network
encompasses agency and bancassurance partnerships with a digital
platform. Historically, agency contributed around 80 per cent of our
overall new business profit in 2019. Asian and African insurance
market distribution dynamics have been significantly affected by
Covid-19-related restrictions. Over the last three years, our
bancassurance sales have been relatively resilient and agency sales
have been limited by mobility. As a result, the proportion of new
business profit through agency reduced to 55 per cent with the
majority of the reduction due to the restriction of the border between
the Chinese Mainland and Hong Kong.
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Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Strategic and operating review / continued
Bancassurance
Bancassurance plays a key role in our diversified multi-channel
platform. We operate the largest independent bancassurance
franchise in Asia with access to over 190 bancassurance partners of
which 10 are strategic partners. We continue to invest and integrate
our insurance solutions into the bank partners’ platforms and
ecosystems to enable a seamless customer journey, supporting
online to offline, virtual face-to-face and self-directed sales.
We also leverage our expertise in selling through bank partners
to deepen our customer relationships with an emphasis on health
and protection solutions.
Bancassurance was our largest channel in 2022, generating
$2,225 million in APE sales. Our strategic partnerships, both
regionally and locally, contribute 74 per cent of our overall
bancassurance APE sales in 2022.
Our continual focus on segment specific propositions and solutions
to address comprehensive customer needs resulted in new business
profit through the bancassurance channel of $879 million in 2022,
representing an increase of 15 per cent10 from 2021, with seven
Asian markets and Africa showing double-digit growth10. New health
and protection policies sold through the bancassurance channel
increased 39 per cent in the year.
Digital
Prudential’s digital platform, Pulse, continues to support and enable
our agents, customers and distribution partners across Asia and
Africa in 19 of our majority owned markets of operation. We are
constantly evolving the Pulse proposition as market conditions and
the distribution landscape changes. The agility and flexibility of the
platform allows us to provide products and services that meet the
changing needs of multiple customer segments locally, while also
providing up-to-date customer insights and leads to our distribution
network. Pulse also supports a wide variety of modules to assist our
agency force such as an integrated training and recruitment solution,
‘real-time’ management information tools and AI-powered analytics.
From a technology standpoint, the Pulse platform utilises a one
platform approach, allowing Prudential to consolidate and reduce IT
investment over the long term as well as accelerate application
development and deployment across our many markets. We remain
committed to the strategic pillars which have driven our digital
transformation and underpin our digital strategy. These are outlined
below:
> Accelerating our digitally-enabled model of distribution
via PRUForce;
> Improving servicing of existing and new customers
via PRUServices;
> Strengthening our direct digital insurance suite of products
and services; and
> Nurturing new business verticals and partnerships to drive
future customer acquisition opportunities.
PRUForce, our agency tool on the Pulse platform, has allowed
our agents to be more efficient, reaching and managing multiple
customers at a time, whilst still maintaining a personalised approach.
We continue to improve and refine this approach, with PRUForce
central to the evolution of our agency network. PRUForce is live in six
markets and offers our agents the competitive advantage by allowing
them to stay connected with customers, building trust and providing
personalised advice.
Accelerating the digital enablement of our distribution network
remains critical for Prudential. We provide a full set of digital
capabilities enabling agents to interact with customers via a
multi-channel approach. The use of data and analytics helps
accelerate our aspiration to support and increase sales productivity
from those within our organisation, to those of our distribution
partners. From a data security perspective, we have developed a
common bancassurance gateway which can manage all transactions
securely between any bank and Prudential’s businesses, ensuring
data security and privacy is always top of mind.
PRUServices is our digital customer servicing platform, allowing
customers and agents to access their policy claims, payments, and
benefits. Customers and agents can manage policies, from tracking
the status of a policy proposal to reinstating a lapsed policy, via
self-service features on the platform. PRUServices is live in nine
markets. We aim to deliver a seamless digital experience for
customers through an effective end-to-end journey. We believe this
will strengthen customer affinity toward Prudential, reduce attrition
of the in-force policy values and support the value represented by
our installed customer base.
Furthermore, the ability to embed insurance products in our
ecosystem and in core offerings from our partners is critical.
To offer these products dynamically and seamlessly to the broadest
possible market is only achievable via a digital platform. We have
strengthened our direct product suite, including the launch of
endowment products in several markets both via Pulse and through
partners’ mobile apps. This has enabled us to capture a larger pool
of insurance customers from a wider range of socio-economic
segments. Our life insurance joint venture in the Chinese Mainland
and our associate in India maintain their own high-quality offerings
via digital platforms with further details provided in the relevant
sections that follow.
Finally, we have expanded our collaboration with new partners.
For example, in October 2022, we entered a strategic partnership
with Google Cloud to make healthcare and financial security more
accessible across Asia and Africa. This strategic partnership supports
our broader digital strategy to leverage AI and advanced analytics
to transform the customer and agent experience and lower barriers
to accessing financial services.
Asset and wealth management
Eastspring Investments (‘Eastspring’) is the pan-Asia asset
management arm of Prudential with a presence in 11 Asian markets23
as well as distribution offices in North America and Europe. Eastspring
is a top-10 asset manager in six of these markets24 managing or
advising on $221.4 billion in assets25. Eastspring is well placed to
address the saving and investment needs of customers across the
region through a team of 300 investment professionals with local
market expertise. Eastspring also benefits from reliable and stable
fund inflows from the Group’s insurance businesses which, together
with its broad regional footprint, it can leverage to meet the
long-term opportunity to grow mutual fund penetration from the
market’s current low base. Eastspring is also playing an important role
as an active asset manager and is engaging with investee companies
and governments in supporting our commitment to carbon reduction
in our insurance company asset portfolio26, allowing us to deliver
profitable growth alongside a positive social impact.
During the year, Eastspring’s average funds under management or
advice decreased by (5) per cent10 to $229.4 billion (2021:
$240.9 billion10), reflecting adverse market movements during the
year, partially offset by net inflows, including from the Group’s
insurance business.
20
prudentialplc.com
Prudential plc Annual Report 2022 As a Group, we see opportunities to deepen our share of the wealth
market by providing holistic wealth solutions to our high-net-worth
and affluent customers. Our large and diverse customer base,
well-positioned agency networks, strong intermediary relationships
and leading brand name position us well to better serve this segment
and deepen our relationship with our existing customers. Fund
solutions occupy a central role in the product proposition, and we are
focused on offering customer choice and access to top fund
managers and innovative portfolio options. Our aim is to distinguish
ourselves in this market through our service to customers and
additional value-added services, such as consultation with
independent panels providing legal and estate planning advice.
People
The Group employs over 14,000 members of staff27. As an employer,
we have made a promise to make Prudential a place where our
people can Connect, Grow and Succeed. A significant part of that
pledge to employees is preparing them for the future of work, so that
they can participate in and contribute confidently to our business
transformation. We believe in creating a workforce and a workplace
that is innovative, inclusive and customer-centric. During 2022, we
focused on equipping our employees with these future-ready skills
through a series of webinars and developing our innovation and
design thinking capabilities within the organisation.
Our goal is to empower our people and deepen belonging at
Prudential by respecting and appreciating differences. We maintain a
culture where diversity is celebrated, and inclusion assured for our
people, customers and partners. Building on the launch of
PRUCommunities in 2021, our employee-led networks continued to
enhance connections and are key to deepening belonging at
Prudential. In 2022, we saw the global launch of various communities
including PRU Women Empowered, PRU Young Professionals,
Women in Tech, Mental Health First Aiders and the intersectional We
DO Wellness, joining the well-established PRUPride. We have been
included in the Bloomberg Gender Equality Index 2023, being listed
on the index for the third successive year.
Leadership developments
2022 saw a number of leadership changes to support the ongoing
evolution of the Group. The internal promotions during the year of
James Turner to Group Chief Financial Officer and Avnish Kalra to
Group Chief Risk and Compliance Officer, demonstrate Prudential’s
bench-strength and ability to focus on operational delivery by
leveraging continuity in executive leadership. In addition, the Group
continues to benefit from broad based and experienced local
leadership teams who are deeply rooted in their markets.
During 2022 Seck Wai-Kwong, CEO, Eastspring; Dennis Tan, CEO,
Prudential Singapore; Lilian Ng, CEO, Insurance; and Solmaz Altin,
Group Chief Strategy and Transformation Officer, were all promoted
to the Group Executive Committee (GEC). Mr Tan, Ms Ng and Mr Altin
were promoted to Managing Directors of the Strategic Business
Groups, which consist of selected markets. Mr Seck remains
responsible for the growth of Eastspring’s business and the delivery of
its investment performance. Prudential’s leadership team was further
enhanced with the appointment of Lawrence Lam as the new CEO
of the Hong Kong insurance business and Bundit Jiamanukoonkit
(Kenny) as the new CEO of the Thailand insurance business.
Outlook
We continue to believe that the Group’s multi-channel, digitally
enabled distribution model positions us well to capture the
opportunities open to us, and this competitive advantage, alongside
our distinctive geographical footprint and customer-centric product
range enables us to deliver a resilient performance.
There are signs that Covid-19-related impacts in many of our markets
have stabilised, albeit operating conditions may continue to be
challenging given the volatile macroeconomic environment and
increasing risks of inflation. We enter 2023 with a resilient balance
sheet and strong capital position, which we believe will enable us to
manage these uncertainties and capture the resulting opportunities
that arise.
We are encouraged by the year-on-year sales growth we have seen
in the first two months of 2023. Our actions to maintain and build
agent capacity and our continued innovation to broaden our product
proposition mean we stand ready to serve our customers across all
our markets. In particular, we are well positioned in Hong Kong and
the Chinese Mainland to take advantage of the opportunities that we
expect to arise as Covid-19-related restrictions are eased. We have
seen a gradual increase in cross-border traffic with sales in the first
two months of 2023 driven predominately by savings products.
We remain confident that we have the financial resilience, capital
strength and capability to meet the growing protection and savings
needs of our customers in Asia and Africa. By doing so, we believe
we will deliver on our purpose to help people get the most out of life
and also build value for our shareholders over the long term.
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Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Strategic and operating review / continued
Operational performance by market
The following commentary provides an update on the operational capabilities and performance
for each of the Group’s segments. Discussion of the financial performance of the Group and its
segments, including adjusted operating profit, is contained separately in the Financial review section
of this Strategic report.
Chinese Mainland – CITIC Prudential Life (CPL)
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
Actual exchange rate
Constant exchange rate
2022
884
387
44
368
(144)
2021
776
352
45
343
278
Change
14%
10%
(1)ppt
7%
(152)%
2021
743
337
45
329
266
Change
19%
15%
(1)ppt
12%
(154)%
Amounts included in the table above represent the Group’s 50 per cent share.
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
The Chinese Mainland continues to present significant growth
opportunities for the Group, with a population of circa 1.4 billion28,
with low levels of insurance penetration and an estimated health and
protection gap of $805 billion5. Furthermore, a number of factors also
support further growth both in health and protection as well as
retirement planning products and services. These include regulatory
proposals which are conducive to the long-term development of
insurance markets as well as favourable demographics such as an
ageing population, emerging middle class and rapid urbanisation.
The recent announcement made by the China Banking and
Insurance Regulatory Commission (CBIRC) to reform private
pension schemes offers a significant opportunity for foreign insurers
with strong financial capability and deep expertise in retirement
planning products.
Prudential’s life business in the Chinese Mainland, CPL, is a 50/50 joint
venture with CITIC, a leading Chinese state-owned conglomerate. CPL
benefits from the strong brands of both shareholders and a balanced
distribution network with strength in agency and bancassurance and
a well-diversified product range. CPL is a powerful franchise with an
extensive footprint across 23 branches. CPL is focused on the affluent
and upper affluent segments of the market where there is more
stability of income and employment. CPL’s diverse footprint supported
its resilient performance with its Greater Bay Area cluster and Beijing
new business profit growing at 72 per cent and 18 per cent respectively,
offsetting some softness in Shanghai and surrounding cities which
were most affected by Covid-19 surges during the first half of the year.
Overall, CPL has more than doubled new business profit between 2017
and 2022, and it continues to outperform the market; the total Chinese
Mainland industry-wide measure of gross written premium increased
by 3 per cent in the year, while CPL, on the same basis, saw an increase
of 16 per cent29 in 2022. We believe that these operational outcomes
are due to CPL seeking to put customers first and to enrich their health
and wealth journeys. As Covid-19-related controls are progressively
removed, CPL will continue to use its multi-distribution platform to
serve the insurance needs of customers in terms of health, protection,
long-term savings and retirement planning and expects to see a more
balanced mix of sales from agency and bancassurance going forward.
New business performance during 2022
CPL is the largest single market contributor to the Group’s total APE
sales in 2022. Despite isolated lockdowns, CPL achieved APE sales
growth of 19 per cent10 to $884 million. This resilient growth has
been underpinned by a diversified distribution strategy with a
high-quality agency force and strong partnerships with banks
delivering customer-centric protection and savings solutions.
The 19 per cent10 growth in APE sales was driven by stronger growth
in the bancassurance channel (an increase of 32 per cent10), with the
agency business being consolidated with the aim of driving quality
throughout 2022 resulting in an overall decrease of (7) per cent10 in
the year. In the first half of 2021 agency sales benefited from the
effect of regulatory changes in the definition of critical illness
coverage, which did not recur in the current year, lowering APE sales
by (11) per cent10 in the first half of 2022. Agency APE sales in the
second half of 2022 were 6 per cent10 higher than the equivalent
period in the prior year.
APE sales growth led to a 15 per cent10 increase in overall new
business profit for 2022 compared with the same period in 2021
and is now 44 per cent10 higher than that of the pre-pandemic year,
2019. Overall new business margins were marginally lower at
44 per cent (2021: 45 per cent). Agency margin was 65 per cent
(2021: 71 per cent) and bancassurance margin was 43 per cent
(2021: 39 per cent).
Delivering customer-led solutions
CPL seeks to address customers’ financial security and wellbeing at
different life stages, with built-in related services enriching the overall
customer propositions. Solutions and services are combined in an
ecosystem that provides an integrated experience, which seeks to
identify and meet the customers’ needs and so strengthens
relationships with them for the long term.
During 2022 CPL continued to develop customised protection
solutions. One specialised critical illness product that was specifically
developed to meet the needs of customers in the Greater Bay Area
of the Chinese Mainland contributed 21 per cent of CPL’s relevant
APE sales in that area. Beyond protection, CPL expanded its
concierge service network to not only cover healthcare needs,
including specialist consultation on treatment options, priority
hospital access and mental health rehabilitation services, but also
through development of our retirement and planning concierge
service. This expansion includes extension of CPL’s retirement village
network to cover 17 institutions in seven cities.
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CPL is enhancing the digital experience to its customers and
distributors, including through its mobile first Xin Yi Tong app. CPL’s
‘Virtual Lounge’ leverages technology to humanise the connection
between the agent and the customer. The technology’s ease of use
by customers has been recognised by digital media. In fact, CPL’s
business continues to report one of the highest virtual sales30 rates
among the Group’s businesses, at over 80 per cent.
Multi-channel distribution
CPL continues to focus on building a professional, high-quality
agency force, with a strong understanding of our health protection
and retirement planning products. CPL has over 15,200 agents that
serve customers across the country. While CPL’s agency channel
continues to go through a period of rationalisation along with the
overall industry, CPL’s agency force shows signs of stabilising in
numbers as well as improvements in quality, with APE sales per active
agent rising 9 per cent. CPL had over 1,000 agents with production
levels that qualified for the Million Dollar Round Table (MDRT) in
2022. CPL is providing agents with advanced tools and techniques
that help them engage with customers in order to provide solutions
tailored to their needs and manage the conversion of leads to
completed sales. Over time, as CPL’s agency force continues to
mature and build experience, we expect this to result in further
enhancement in productivity, providing additional support to the
growth trajectory in CPL.
Meanwhile, CPL also continues to build out its bancassurance
distribution network, adding 11 partners. China Merchant Bank has
become a significant partner in the Greater Bay Area and beyond.
CPL has a network of 59 bancassurance partners with access to
over 6,600 branches across the Chinese Mainland. Importantly,
these relationships are strengthened and enhanced by 3,200 local
insurance specialists catering to customers of the banks. This has
resulted in higher levels of new business from the bank channel and
supported an improvement in product mix. We believe that this highly
effective service model supported the 45 per cent10 growth in new
business profit in the bancassurance channel. Consistent with the
ongoing regulatory developments in terms of capital management
and customer conduct in the industry, we expect that refinements in
the product features may, in the short-term, impact volumes but CPL
continues to evolve its product set so that focus remains on meeting
customer demands.
Hong Kong
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
Actual exchange rate
Constant exchange rate
2022
522
384
74
1,036
(211)
2021
550
736
134
975
1,068
Change
(5)%
(48)%
(60)ppts
6%
(120)%
2021
546
731
134
969
1,060
Change
(4)%
(47)%
(60)ppts
7%
(120)%
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
Prudential has a strong and reputable brand in Hong Kong and serves
over 1.3 million customers. The fifth wave of the Covid-19 epidemic
significantly decreased the amount of economic activity in Hong
Kong, especially during the first half of the year with the impact
compounded by restrictions on cross-border travel.
Demand for insurance products and solutions centres around
retirement, legacy planning and health protection. Retirement savings
needs are driven by a de minimis social security net, very limited
employer contribution schemes and increasing longevity and rising
dependency ratios. As a result, the average member of the Hong Kong
population has no option but to voluntarily purchase savings and
insurance products. In addition, an awareness of the need for health
and protection products is generally high: an ageing population,
relatively low benefit growth schemes offered by employers, the
government’s desire to manage down medical expenditure from
the public purse and the rising cost of medical attention shape the
market for these sorts of products. These needs and concerns from
Hong Kong consumers are also relevant to Chinese Mainland visitors.
86 per cent of those surveyed said they are likely to purchase insurance
in Hong Kong for legacy planning and health protection
Chinese Mainland customers remain an important customer segment
for the Hong Kong business and represented around 50 per cent of
Hong Kong’s policies sold in 2019, prior to the Covid-19 pandemic.
We believe that Chinese Mainland customers continue to provide
a significant long-term opportunity for the Hong Kong insurance
industry, an opportunity Prudential Hong Kong remains focused upon,
despite the fact that sales momentum has been severely impacted
by the restriction on cross-border travel since late January 2020.
The fundamental reasons for Chinese Mainland customers buying
insurance products in Hong Kong remain the same, including
diversification in terms of currency and asset class, access to
professional financial advice with a broad product spectrum and
access to high-quality medical care available in Hong Kong, amongst
other factors. As a result, we expect to see the gradual return of this
important source of new business as cross-border travel normalises for
family and business visits with the resumption of quarantine free
travelling. We are well prepared in all aspects, including distribution
channels and customer servicing, platforms and systems, to serve
Chinese Mainland customers.
We obtained a licence to open our Macau branch in January 2023,
strengthening our operations to capture the opportunities in the
Greater Bay Area. We are building distribution capabilities having
established a strong and experienced leadership team in Macau. We
expect that the Macau branch will take some time to establish itself
before contributing meaningfully to the Hong Kong business.
New business performance during 2022
Overall APE sales declined by (4) per cent10 in the year to $522 million,
with sales through our agency channel adversely affected by the fifth
wave of the Covid-19 pandemic in the first half of the year. However
we saw a recovery in the second half with APE sales growing by
30 per cent10 compared with the first half, with growth across all
channels, demonstrating our capacity to grow once the economy is
fully reopened. In fact, based on the latest statistics available from the
regulator for the full year, our sales outperformed the market, aided by
the timely launch of our signature multi-currency product. Our market
share29 of APE sales increased by 2.0 percentage points to 7.4 per cent
for 2022 compared with 2021. In the discrete fourth quarter of 2022,
we outperformed the market and increased our market share to
12.5 per cent48, an increase of more than 5 percentage points compared
with the discrete fourth quarter of 2021. This expanded market share
was underpinned by the strong performance and maintenance of sales
quality in both agency and bancassurance channels.
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New business profit was $384 million, down (47) per cent10, driven by
lower sales volumes and a 60 percentage point fall in the new profit
margin. The impact of the large rise in US interest rates on the risk
discount rate applied under our EEV methodology had a significant
impact on new business profitability. Excluding economic impacts,
our new business profit was $572 million (2021: $731 million10).
Channel and product mix also lowered margins with a lower
proportion of agency sales and individual health and protection
business in the period.
Delivering customer-led solutions
Our continued pivot to domestic customers has resulted in an
overall increase of market share to 7.4 per cent31, based on the
latest statistics available from the regulator for 2022, despite fierce
competition in the domestic market. Our customer base is stable
with a retention rate of over 97 per cent.
The business continues to refresh and upgrade its customer
offerings with comprehensive protection and wealth accumulation
propositions for affluent customers, for example through the launch
of our new multi-currency saving product with a special feature for
wealth distribution across generations.
We continue to enhance our health and protection product suite for our
customers and potential customers as well as being a leading player and
offering a full range of VHIS products to serve our domestic customers.
We have fully embraced the government’s ‘Qualified Deferred Annuity
Plan’ (QDAP) for retirement and continue to offer a competitive product,
making us one of the leading players in the market.
Our investment proposition provides access to international equities
and bonds. Our with-profits product offering pools the investments
of policyholders and allocates returns based on long-term investment
performance. This is a distinct, capital-efficient structure benefiting
from significant scale, enabling Prudential to provide differentiated
products while generating attractive margins.
Multi-channel distribution
We operate a digitally-enabled multi-distribution platform and
provide customers with a choice on how they prefer to be served.
Our agency force accounted for more than 58 per cent of our APE
sales in the year. Despite a challenging operating backdrop in the first
half of the year, agent activity rebounded in the second half, assisted
by our drive to increase activity through customer-centric solutions,
enhancing digital capabilities and training and development
programmes. The second half of 2022 saw positive momentum with
an increase in APE sales for agency channel by 57 per cent, compared
with the first half of the year. The average agent case size was up
17 per cent year-on-year on the back of a broadened savings product
suite. Agent recruitment has also rebounded 45 per cent in the
second half of the year compared with the first half of the year.
On the bancassurance side, we have a long-standing strategic alliance
with Standard Chartered Bank which has gone from strength to
strength for more than 20 years. We were the leading major non-bank
owned insurer in the bancassurance channel and increased our market
share, measured by share of APE sales in the latest available public data
for 202231, driven by timely launch of new products and robust training
and sales motivation.
Indonesia
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
Actual exchange rate
Constant exchange rate
2022
247
125
51
343
243
2021
252
125
50
446
362
Change
(2)%
–
1ppt
(23)%
(33)%
2021
243
120
49
429
348
Change
2%
4%
2ppts
(20)%
(30)%
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
Indonesia remains a critical market for Prudential. It is expected to
contribute more than a third of ASEAN’s economic growth32 between
now and 2026, hence long-term growth prospects remain extremely
favourable. We see strong growth prospects specifically in the Syariah
segment given low insurance penetration rates, a substantial
protection gap and a sizeable Muslim population33.
We regained our leadership position in the Indonesian life market
with 11 per cent market share29 by weighted new business premium
in 2022. We are also the market leader in the agency segment with
28 per cent of market share29, and a market leader in the fast-growing
Syariah segment, with 32 per cent market share29.
In 2022, we became the first multi-national insurer to set up a
dedicated Syariah life insurance entity in Indonesia as part of our
strategy to meet the growing demands for Syariah solutions and
support the growth of the Syariah community and economy.
Our innovative product capabilities, coupled with a multi-channel
distribution network, puts us in a strong position to grow our business
and expand our customer reach.
Having completed a comprehensive refresh of our product offering,
we recently initiated a transformation programme for the operations
of the Indonesian business, looking to refresh the existing agency
model, rejuvenate the sales capability, improve productivity per
agent, and drive higher performance through operational efficiency.
This aims to consolidate our position in what is a large and vastly
under-insured market, recovering from a challenging economic
backdrop and operating environment.
New business performance during 2022
Overall APE sales increased by 2 per cent10 in the year to $247 million,
despite Covid-19-related restrictions hampering sales activity in the
first half of the year, limiting face-to-face interactions, and resulting
in reduced footfall within bank branches. Mitigation efforts included
leveraging our digital infrastructure to drive sales which, combined
with restrictions easing in the second half of 2022, contributed to
a 30 per cent10 increase in APE sales for the second half of 2022
compared with the first half of the year, and an overall increase in
APE sales of 7 per cent in the second half of the year compared with
the second half of 2021. Overall new business profit increased by
4 per cent10 compared with 2021 reflecting higher sales volumes
and a small increase in profit margin to 51 per cent.
Delivering customer-led solutions
We continue to focus on maintaining our market leadership by
broadening our propositions, delivering sound advice and solutions,
providing a superior customer experience, enhancing operational
effectiveness, and exploring new avenues for customer acquisition.
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In terms of product propositions, we leveraged our dedicated Syariah
life insurance entity in Indonesia by launching several new products in
2022. This included a first-in-market with yearly renewable term
standalone Syariah critical illness product (PRUSolusi Kondisi Kritis
Syariah) to meet consumer demand for simple, affordable cover. We
also launched an enhanced version of the first-in-market Syariah
education savings product, first launched in 2021 (PRUCerah Plus),
which supports customers with their children’s university education
costs. These innovative products further strengthened our
competitive position of being the only insurer to offer Syariah
traditional insurance solutions across multiple channels.
The business also launched new medical products (PRUSolusi Sehat
Plus Pro and PRUSolusi Sehat Plus Pro Syariah) to address the health
protection needs of a family, midlife, and younger segments. We also
continued to serve the insurance needs of the mass market segments
by launching eight bite-sized digital protection offerings in Pulse and
on the platforms of three digital partners, enabling us to acquire
more than 91,000 new customers.
Malaysia
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
Multi-channel distribution
Driving the quality and productivity of our agency channel has
remained one of our most important priorities. With 980 agents
qualifying for the MDRT award in 2022, we are the leader in the
agency channel. The shift to full time agents led to a reduction in the
overall agency force by (7) per cent to 183,000. This contributed to
an improvement in agency productivity19 of 8 per cent compared
with 2021. Management actions include a drive to create a long-term
career path for agents and a focus on urban areas where there is
more scope for operational leverage. Resumption of full face-to-face
agency activities followed a relaxation of Covid-19-related
restrictions, enabling us to further penetrate the advice-based
affluent segment. This contributed to a 26 per cent10 growth
in average APE per new policy compared with 2021.
In the bancassurance channel, our long-standing strategic
partnerships with SCB and UOB continued in 2022. These strategic
partnerships have enabled us to provide solutions to a wide spectrum
of customer segments, with SCB focusing on the premier face-to-face
segment and UOB serving its customers through multiple distribution
models. In addition to SCB and UOB, we have partnerships with
other banks on distribution and direct marketing. We are seeking
to enhance our bank partnerships particularly in the Syariah space.
Actual exchange rate
Constant exchange rate
2022
359
159
44
364
252
2021
461
232
50
350
265
Change
(22)%
(31)%
(6)ppts
4%
(5)%
2021
434
219
50
330
250
Change
(17)%
(27)%
(6)ppts
10%
1%
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
Significant growth prospects remain in the Malaysian insurance
market, given the large protection gap and low level of retirement
and healthcare provision in both the public and private sectors.
Insurance penetration is still low, especially in the mass market which
is a largely Muslim population33. The population of the country is
34 million28, of which over 60 per cent is Muslim33. The Central Bank of
Malaysia is actively supporting an increase in access to insurance
products for this group through the sponsoring of Takaful market
growth34. It has a public target of doubling the number of Malaysians
insured under Takaful policy certificates by 2026 through providing
financial incentives for the purchasing of private insurance policies34.
In Malaysia, we are the leading life insurer with 18.9 per cent market
share29, and we have one of the largest agency forces in the industry.
We are the largest Takaful operator in the market with 22.3 per cent
market share29 and our Takaful new business sales are 1.4 times
greater versus our nearest competitor in this market35.
New business performance during 2022
APE sales declined (17) per cent10 due to both the combined impact
of Covid-19-related restrictions in the first half of 2022 and the effect
of product repricing in 2021. Excluding the effect of repricing in 2021,
APE sales were marginally lower by 2 per cent10. However, as
restrictions started to ease, sales improved with the second half of
2022 delivering APE sales that were 15 per cent10 higher than the first
half of the year.
New business profit was down (27) per cent10 as compared with 2021,
reflecting both lower sales volumes and profit margins, which were
adversely impacted by the lower level of agency sales and higher
interest rates. This overall decline in new business margins lessened
in the second half of the year, as the launch of protection riders to
strengthen our medical and critical illness offerings had a favourable
impact on business mix in the second half of the year. Our business
profile remains resilient with over 97 per cent of our products being
regular premium in nature.
Delivering customer-led solutions
Our number of customers was 3.0 million in 2022 with 1.5 million from
the conventional business and 1.5 million from the Takaful business,
stable year-on-year. We continue to develop new and innovative
propositions to address the evolving needs of our customers.
For example, we strengthened our health and protection offering
by enhancing our core medical investment-linked proposition,
which caters for both new and existing customers. We believe that
its benefits offering is unique and supports customers’ needs by
providing medical protection that automatically increases in value
every year, unlimited room and board and ICU stay, and longer pre
and post-hospitalisation care. It also rewards customers for staying
healthy. The benefits are designed to reinforce the importance of
early intervention and consistent annual preventive care. We also
provided a one-time offer to all our existing customers to opt-in for
pandemic coverage if their existing policy excluded this benefit.
We continued to expand our customer base and drive financial
inclusion in the market. Through our partnership with BSN, we have
issued over 396,000 BSN Takaful Sakinah health and protection
certificates. We have also entered a digital partnership with EPF
i-Lindung to offer under-insured Malaysians further protection
coverage that can be funded from their Provident Fund accounts.
The i-Lindung initiative is aimed at promoting the importance of
financial protection amongst the lower income community without
the burden of upfront cash outlay.
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Multi-channel distribution
Against a challenging operating backdrop, our agency force
continued to grow with the workforce increasing 8 per cent over
the period to over 24,300. We continued to attract high-quality
agents, with a retention ratio that is above market levels. In 2022,
we recruited over 7,400 new agents. We upgraded our channel
capabilities with digital tools and leads for effective customer
prospecting. We will continue to utilise digitalisation as a key
enabler for customer and business excellence.
In the bancassurance segment, our product innovation drove APE
sales growth of 17 per cent10. Growth prospects remain strong as we
continue to build on our strength in the affluent segment and capture
opportunities to penetrate the mass market segment across existing
bank partners, including SCB, UOB and BSN. The merger of UOB and
Citibank’s operations in Malaysia will provide potential access to an
incremental 500,000 customers.
Singapore
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
Actual exchange rate
Constant exchange rate
2022
770
499
65
678
406
2021
743
523
70
663
394
Change
4%
(5)%
(5)ppts
2%
3%
2021
724
510
70
646
384
Change
6%
(2)%
(5)ppts
5%
6%
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
As Singaporeans live longer, demand for healthcare will continue
to increase – in fact, the overall health protection gap is estimated
at $23 billion5, being the measure of the shortfall in finances to
fund health expenditure. With increasing prosperity, Singapore is
set to have Asia’s highest number of millionaires by 203036, demand
for wealth management services is high, with life insurance a key
part of the suite of products being used for legacy planning and
asset diversification.
In Singapore, we are one of the market leaders in protection, savings
and investment-linked plans29. We have been serving the financial
needs of Singapore residents for more than 90 years, delivering
a suite of product offerings and professional advice through our
network of more than 5,000 financial consultants and our
bank partners.
In 2022, we continued to drive our segment-led customer strategy
by further penetrating the high-net-worth segment. In the affluent
segment, we intend to strengthen our leadership position with
comprehensive health and retirement solutions. We leverage
our Pulse app and market-leading Shield offerings to expand our
presence in the mass segment. For the younger generation,
we are reinvigorating our investment-linked propositions for both the
affluent and mass market segments. Finally, we further penetrate the
SME segment through our Business@Pulse platform for the employee
benefit business.
New business performance during 2022
Overall APE sales increased by 6 per cent10 to $770 million, despite the
negative impact of Covid-19-related social movement restrictions on
agency sales in the first half of the year. Reflecting these restrictions,
agency APE sales declined by (11) per cent10 in the first half of the
year compared with the first half of 2021. The easing of these
restrictions in the second half contributed to agency APE sales growth
of 15 per cent in the second half of the year, compared with the
equivalent prior year period, resulting in an overall increase in agency
APE sales of 3 per cent10 in the year. Demonstrating the benefit of
our balanced channel and diversified product mix, APE sales in our
bancassurance channel grew by 11 per cent10 in 2022.
New business profit declined by (2) per cent10, with the impact from
higher sales volumes more than offset by lower profit margins, mainly
as a result of adverse economics and also impacted by change in
product mix.
Delivering customer-led solutions
We saw diversified growth across our wide product offerings in 2022
to meet the health and wealth needs of our customers in Singapore.
APE sales to the high-net-worth segment grew 30 per cent10 driven by
new channels and services, as well as our effort to deliver superior
customer experience. Our enterprise benefit business also delivered
good growth with APE sales increasing by 17 per cent10, covering over
3,000 small-to-medium enterprises and over 200,000 employees.
To meet the specific retirement and investment needs of our
customers, we have launched PruVantage Wealth, an investment-
linked product offering low fees, simplified charges and a wide range
of professionally managed fund choices including dividend paying
funds and hassle-free model portfolio funds. We are offering
innovative plans that integrate both protection and wealth
accumulation for younger customers with affordable premiums
of 90 SGD per month for 200,000 SGD life and critical illness cover.
Our claims-based pricing model for the PruShield medical
reimbursement product enables us to manage our health book
sustainably and continue to offer best value for our customers
without compromising their medical outcomes.
We continue to improve our customer experience, leveraging digital
and technology in our day-to-day operations. Three out of four
policies went through instant underwriting engines, which improve
productivity and turnaround time. An AI TalkBot with localised
dialect was rolled out in 2022 to address customer queries instantly.
In addition, the PRUaccess platform is interfaced with SGFindex
which enables customers to have a single consolidated view of
financial investments within Singapore so that our customers
can better plan their financial future. The quality of our customer
service is reflected in the form of a high customer retention ratio
of 96 per cent.
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Multi-channel distribution
The quality and productivity of our agency force continues to
improve significantly. The total agency force stood at over 5,000,
stable when compared with 2021. Top-tier agents grew at pace as
demonstrated by the more than 23 per cent increase in the number
of MDRT qualifiers to over 1,200 in 2022. We are the first and
only agency force in Singapore, where all agents are subject to
the Institute of Banking and Finance (IBF) level 1 qualification.
Regular premium APE sales in our agency channel remained strong,
and productivity, as measured by APE sales per active agent, rose
2 per cent10, despite the industry headwinds.
Growth markets and other
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)*
IFRS profit after tax ($m)
In the bancassurance space, with two strategic partners, UOB and
SCB, we are gaining access to more than 1.6 million37 active mobile
banking customers and 130,000 small and medium enterprises and
commercial banking customers37. We continue to work with the banks
in serving their customers and focusing on distinct segments such as
the affluent and high-net-worth. We have also offered digital wealth
solutions on UOB mobile and SCB internet banking platforms. This
enabled us to connect directly with customers online or get a lead for
customers who prefer face-to-face engagements.
Actual exchange rate
Constant exchange rate
2022
1,611
630
39
1,057
881
2021
1,412
558
40
932
434
Change
14%
13%
(1)ppt
13%
103%
2021
1,323
526
40
880
406
Change
22%
20%
(1)ppt
20%
117%
*
Adjusted operating profit and Group IFRS profit after tax are discussed separately in the Financial review section of this Strategic report.
The Group’s growth markets and other segment incorporates its
businesses in India, Thailand, Vietnam, the Philippines, Taiwan,
Cambodia, Laos, Myanmar, and its businesses in Africa. The Group
sees the opportunity for rapid growth through the rollout of its
efficient and scalable business model, and multi-channel distribution
networks, including its digital Pulse platform.
India represents a very large opportunity for the Group’s further
growth, having a population of 1.4 billion28, low insurance penetration
and expectation of fast rising GDP per capita. We are a Promoter under
Indian Listing rules of ICICI Prudential Life Insurance Company, being
one of the founding shareholders. We currently have one board seat
and own 22 per cent of its voting rights. ICICI Prudential Life Insurance
Company is amongst the top-three private life insurance companies29
in India and is listed on the National Stock Exchange (NSE) and Bombay
Stock Exchange (BSE) in India. It intends to grow its business by
deepening penetration of under-served customer segments, enhancing
its distribution footprint and tailoring solutions to the different customer
needs across savings, protection, and retirement, including developing
new propositions for the mass market. ICICI Prudential Life maintains
its aspiration to double its 2019 new business profit by 2023 through
its ‘4P’ framework for Premium growth, Protection focus, Persistency
improvement and Productivity enhancement.
Thailand is the second-largest economy in ASEAN with a population
of over 70 million28 and a well-developed financial services industry.
Our strategy in Thailand is to focus on bancassurance and supported
by alternative distributions including digital, agency, direct marketing
and brokerage, together with retail asset management offering. We
have completed the integration of our bancassurance capabilities
with the expanded TMB Thanachart Bank (TTB), including the
training of their staff in our products and propositions. We continue to
focus on delivering the benefits from our bank partnerships with both
TTB and UOB. As a result, we delivered higher-than-industry-average
APE sales growth, both in the bancassurance channel and for the
industry as a whole in 2022. We have double-digit APE sales growth
for three consecutive years from 2020 to 2022, and now have an
overall market share of 7 per cent29, being sixth in the market29. We
are also offering relevant digital propositions served via the digital
apps of our bank partners to bring new health and protection
solutions to the underserved mass segment. In addition, we have
been working closely with our bank partners to unlock SME
opportunities through our Business@Pulse platform for the employee
benefit business. Finally, as part of our integrated model for
customers, we have been working in collaboration with our Thai retail
fund management business to design propositions in the health,
wealth, and retirement space, particularly for the high-net-worth and
affluent segment.
Vietnam has the third-largest population in ASEAN with a population
size of just under 100 million28, a median age of 32 years and a
significant health and protection gap estimated at $36 billion5.
The market has undergone rapid urbanisation with less than
20 per cent38 of the population living in urban areas in 1986,
increasing to 37 per cent38 at the end of 2021 and forecast to
increase to 45 per cent by 202539. We are expanding our geographical
footprint in the urban areas through digitally-enabled agency and
bancassurance channels. We are second in the market with
15 per cent29 market share, up 2 percentage points from 2021.
The Philippines provides us with an opportunity to serve customers,
given the large protection gap and low level of insurance penetration
across the country. We are the market leader with 17 per cent29
market share, based on the latest available market data to
30 September 2022, by weighted new business premium. Our core
strengths in the affluent and mass market segments together with
our digital capability helped drive a 17 per cent growth in our
customer base to 0.9 million customers.
Taiwan is the fifth-largest life insurance market in the world40, with a
population of 24 million28. Our business has an overall APE market
share of 4.4 per cent29, 1.5 percentage points higher than in 2021.
Prudential is a leading insurance brand in the market amongst the
foreign players29.
Africa presents a significant opportunity, with its population expected
to double6 by 2050. Since we entered Ghana in 2014, the business
has delivered double-digit APE sales growth in every year of
operation. We are in top-five positions in five of our eight countries
in Africa, including the number one position in Uganda and Zambia29.
Our business provided health, wealth and protection solutions to
990,000 customers across eight countries. Prudential was a sponsor
of the 2022 Africa Cup of Nations, the largest football tournament in
Africa. The matches were viewed by over one billion individuals,
improving Prudential’s brand awareness throughout the continent.
27
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Strategic and operating review / continued
New business performance during 2022
In India, APE sales grew 4 per cent10 driven by strong growth in the
protection and annuity business. ICICI Prudential’s focus areas of
annuity and protection, which represent underserved needs of the
country, performed well. Over the 9 month period to December
202247 annuity APE sales grew 56 per cent10 and protection APE sales
growing 23 per cent10, compared with the equivalent period in 2021.
This sales performance enabled ICICI Prudential to maintain its
top-three position in the private market with a market share of
6.3 per cent29. Over the period, new business profit grew 20 per cent10
reflecting APE sales growth and a favourable product mix.
In Thailand, APE sales rose 18 per cent10 through the expansion of
bancassurance sales in 2022 and the progressive easing of Covid-19-
related restrictions. During the year, there was strong appetite for
bundled protection products through the bancassurance channel,
improving new business profit which was further boosted by the
impact of higher interest rates.
In the Philippines, while the effects of Covid-19-related disruptions
hampered sales in the first half of 2022, momentum in the second
half was strong, as economic activity began to normalise. Overall APE
sales were up 14 per cent10 to $182 million. New business profit was
restrained by the change in interest rates during the year, despite the
strong growth in sales volumes.
Vietnam’s economy showed its resilience during the Covid-19
pandemic, being one of the few countries in the world to record two
consecutive years of growth. Our Vietnam business continued to
outperform the market in 2022, delivering a strong APE growth of
26 per cent10 compared with 2021, stronger than the industry APE
growth of 8 per cent29, underpinned by double-digit growth rates
in both bank and agency channels.
In Taiwan, APE sales grew 35 per cent10 during 2022 driven by strong
growth in both bancassurance and brokerage channels, outperforming
the market which reported a contraction of (11) per cent during 2022
compared with 2021. New business profit rose strongly driven by the
increase in sales and favourable product mix changes.
In Africa, despite headwinds from inflation and Covid-19, APE sales
grew by 19 per cent10 year-on-year, with a broad-based performance
across all channels, new business profit margin comparable with the
prior year.
Delivering customer-led solutions
In India, ICICI Prudential continues to offer products designed to
match customers’ need and life stage. A shift in customer preferences
and continued investment in product development have culminated
in award-winning product propositions across the protection,
long-term savings and annuity segments. This has given ICICI
Prudential a well-balanced product mix thereby insulating it from
volatility. ICICI Prudential introduced a number of significant new
products in the year, such as a regular premium annuity plan to
provide flexibility to customers in building retirement savings pools
over the long term. ICICI Prudential also launched a new long-term
participating savings product that enables customers to receive
tax-free guaranteed income or a lump sum maturity. This includes
a savings wallet option to accumulate the income and withdraw
the accumulated fund value at any point during the policy term.
ICICI Prudential continues to innovate by leveraging new-age digital
technologies to better address customer requirements during the policy
life cycle – from onboarding, to servicing, to claims processing. With an
exponential rise in digital adoption, its technology initiatives have
ensured that it is well positioned. ICICI Prudential will continue to deploy
best-in-class technology solutions to increase efficiencies and empower
customers. An example of the benefits of its updated technology
infrastructure and capability is that over 91 per cent of service
transactions are now done through self-help or the digital mode.
In Thailand, we continued to refresh our product suite to address
the evolving needs of the Thai population’s health and wealth
aspirations. From a low base, we tripled our health reimbursement
sales and our whole-of-life sales through extensive training for the
bank staff, as well as widening health and protection products to
both individual and group customers. We also promoted protection
through plans like Easy Care Plus, which offers simplified underwriting
to our customers. As a result, our health and protection APE sales
mix increased from 16 per cent in 2019 to 24 per cent in 2022.
In addition, we relaunched our flagship 888 savings product, which
is a long-term saving product that also offers protection, and other
Legacy Builder products and introduced innovative Index Link
Participating solutions. Our product initiatives have resulted in
17 per cent10 growth in total bancassurance APE sales including
19 per cent10 growth in protection sales through TTB. Our focus
on customer needs was also reflected in our market-leading net
promoter score position in the market29 and our 11 per cent increase
in the number of new customers41 acquired, bringing total customer
numbers to 1.7 million.
In Vietnam, we continued to provide customer segment-led
propositions by offering affordable protection solutions to the mass
market segment alongside providing savings, education and health
and protection plans to the middle-income segment, and serving
the investment needs of affluent customers. To address the market’s
need for affordable protection solutions, we have launched System
and Organ Function Insurance (SOFI), which provides simple to
understand health coverage based on the severity of symptoms and
organ function of customers. We also have launched PRU-Easy365
offering comprehensive protection benefits against accidental risk
and three common critical illnesses for customers. More than 2,100
and 31,100 SOFI and PRU-Easy365 policies respectively have been
sold since launch, increasing our penetration into the younger
segment of the population.
In the Philippines, we continue to drive product innovation and
financial inclusion with the launch of PRUHealth FamLove. This is
a first-of-its-kind critical illness protection plan for different types
of Filipino families and can cover up to four family members in one
policy. The product’s innovative design provides medical cover based
on severity of illness, rather than specific diseases.
In Taiwan, we provide solutions for long-term savings and protection
to our target market segments. We are focusing on addressing the
diverse needs of the sandwich generation with unique end-to-end
propositions. Through our H.E.A.R. campaign, we are innovating and
expanding our solution offerings for health and protection products.
We recognised the growing demand for eye-related treatments as
people spend more time using electronic devices, particularly as
working from home became more prevalent during the Covid-19
pandemic. In 2022, we launch the first-in-the-market eye care
insurance to strengthen the coverage for a broad range of eye-related
treatments from simple eye care to complicated eye surgery. The
product was well received and the continued emphasis on health
and protection led to a 94 per cent increase in sales of such products
in 2022.
In Africa, we continue to pursue customer-led insurance initiatives,
with the launch of 12 new products across the region in 2022. We
have also introduced end-to-end digital products in three countries.
Multi-channel distribution
In India, ICICI Prudential Life has continued to drive its growth
ambitions by enhancing its multi-channel distribution capability
supported by a diversified product mix. In the agency channel,
we recruited over 34,700 new agents during the year, bringing the
total number of agents to over 204,000. Outside agency, we have
over 850 partnerships including 34 banks. Distribution partners
are enabled with digital tools to onboard and serve customers with
ease. The onboarding journey is simplified by using collaboration
28
prudentialplc.com
Prudential plc Annual Report 2022 platforms, pre-approved sum assured offers, pre-population of
application forms from uploaded Know-Your-Customer documents,
customised offers to customers, and tele and video verification
triggers. We have built a state-of-the-art platform enabling ease
of integration with ecosystems and partners’ systems. Additionally,
we support our partners to build customer onboarding journeys on
their platform powered by micro services.
In Thailand, the relaxation of Covid-19-related restrictions during the
second quarter of the year resulted in the reopening of many of the
bank outlets of our main distribution partners, TTB and UOB. TTB is
one of the largest banks in Thailand with around 600 branches, and
UOB has around 150 branches. We continue to engage actively with
our partners at TTB to improve productivity and customer experience,
as well as to extend our reach to the wealth and enterprise benefit
segments. The acquisition of Citibank’s Thailand operations by UOB
provides an opportunity to further grow our bancassurance presence
and expand our customer base. Operational integration of the Citi
outlets started in late 2022 and will continue over the next year.
For Group EB, rapid realisation of strategy had made this business
grow 49 per cent compared with 2021. Our digital channel also
achieved a robust result where we attained second position42 in the
digital market share with APE sales tripling10 during 2022 compared
with 2021.
In Vietnam, we continued to focus on quality recruitment
and training in the agency channel and supporting our agents
with access to comprehensive product propositions and digital tools
such as PRUForce and PRULeads. As a result, we have grown our
number of MDRT qualifiers by 60 per cent in 2022 to almost 2,000.
The bancassurance channel continued to record strong growth
of 26 per cent10, underpinned by our partnerships with seven
banks with strong operations in urban areas, which combined have
over 600 branches in Vietnam.
In the Philippines, our agency channel continued its strong growth
with a 89 per cent growth in recruits. In addition to agency, we
continued to grow our customer base and promote financial inclusion
by offering bite-sized products on Pulse and by partnering with banks
and other digital outlets. Our partners include CIMB, a digital bank
with more than 6.5 million43 customers, GCash, the top mobile wallet
provider in the Philippines, and Shopee, the leading online shopping
platform.
In Taiwan, our 35 per cent10 APE sales growth in 2022 was supported
by strong bancassurance performance. Through strategic and
non-strategic bancassurance partners and brokers, we continue to
broaden and diversify our distribution network. Today, we reach
customers through partnerships with more than 20 banks and top
brokers in Taiwan, and we continue to digitalise our processes to
provide seamless services to customers and distributors.
In Africa, Prudential has a 16,000-strong agency force and is the first
African company to achieve the over 200 MDRT members milestone
in 2022. In addition, Prudential Africa has access to over 1,000 bank
branches, digital, telecommunication and intermediary partnerships.
Our ongoing investment in digital innovation and robust systems to
digitise processes will allow us to grow at scale and provide seamless
experience to better service our customer needs.
Eastspring
Total funds under management or advice ($bn)
Adjusted operating profit ($m)
Fee margin based on operating income (bps)
Cost/income ratio (%)
IFRS profit after tax ($m)*
Actual exchange rate
Constant exchange rate
2022
221.4
260
29
55
234
2021
258.5
314
30
54
284
Change
(14)%
(17)%
(1)bp
1ppt
(18)%
2021
251.6
299
30
54
271
Change
(12)%
(13)%
(1)bp
1ppt
(14)%
*
Group IFRS profit after tax is discussed separately in the Financial review section of this Strategic report.
Eastspring is the asset management arm of the Group. Its funds
under management or advice (referred collectively as funds under
management below) of $221.4 billion includes $30.1 billion that
represents our 49 per cent share in funds managed by ICICI
Prudential Asset Management Company (IPAMC) in India and
$9.0 billion that represents our 49 per cent share in funds managed
by CITIC-Prudential Fund Management Company Limited (CPFMC)
in China. Eastspring has $130.2 billion of funds under management
on behalf of the Prudential Group.
2022 was a challenging year for the asset management industry.
Global bond and equity markets declined sharply, weighed down
by concerns around the outlook for growth and fears of recession
as inflation spiked and central banks ratcheted up interest rates.
This was further compounded by the continuing conflict in eastern
Europe and, in 2022, an uncertain economic outlook in the
Chinese Mainland.
Eastspring’s ambition is to be a leading provider of investment
solutions to protect and grow clients’ wealth. Its purpose ‘Experts
in Asia. Invested in Your Future’ guides the business and reflects
its commitment to help its stakeholders build a better and more
sustainable future.
Eastspring sees three key enablers in driving its future success:
> Driving improved investment performance by leveraging an
integrated investment platform regionally, and through a rigorous
investment framework;
> Expanding its investment capabilities and product range to offer
competitive solutions for institutional and retail clients globally;
and
> Achieving greater operating efficiency through best-in-class
infrastructure and systems.
Financial performance
Eastspring saw a (14) per cent44 decline in its funds under
management to $221.4 billion in 2022, predominantly due to
market depreciation and foreign exchange translation losses, which
collectively totalled $42.1 billion. During 2022, there was a small shift
in overall asset mix from bond to equity funds with an asset mix as at
31 December 2022 being 47 per cent in bonds, 46 per cent equity,
1 per cent in alternatives and 6 per cent in money market funds.
The firm’s overall assets remain well diversified across both clients
and asset classes.
29
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Strategic and operating review / continued
The decline in funds under management was cushioned by stable
and reliable inflows of $7.8 billion from Prudential’s life insurance
businesses but offset by net outflows of $(3.2) billion from third-party
business45. These net outflows were driven primarily by bond funds
following interest rate hikes throughout the year, as well as
redemption of equity funds managed on behalf of M&G plc.
Fee margins reduced by 1 basis point44 as a result of mark-to-market
losses of $7.8 million on seed investments made to fund new products.
This reflects the volatile and adverse market conditions of 2022. The
firm’s cost/income ratio declined by 1 percentage point44. Excluding
these realised and mark-to-market investment losses, Eastspring’s cost/
income ratio improved by 2 percentage points against 2021.
Investment performance
Despite the challenging market environment, Eastspring recorded
solid performance results with 59 per cent of assets under
management outperforming their benchmarks46 over the past year
(2021: 61 per cent) and 39 per cent of assets under management
outperforming their benchmarks46 over the past three years
(2021: 42 per cent). The Singapore-based Value Equity teams posted
substantial outperformance over the past year on a funds under
management weighted basis and the Active Quantitative strategies
also firmly supported aggregate returns. Although Fixed Income and
Growth Equity strategies were under pressure over the year, broadly
underperforming benchmarks, sentiment started to turn in the final
quarter of 2022 following the unexpected easing of Covid-19-related
restrictions in the Chinese Mainland, the Chinese government’s
support for China’s stressed property market and signs that global
inflation pressures were beginning to ease.
To compete in an increasingly dynamic environment and to bring its
deep expertise of Asian markets to clients, Eastspring integrated the
investment capabilities of its wholly-owned businesses onto a single
platform. This enabled the firm to capitalise on its global execution
capabilities and resources more efficiently, providing more cohesive
and robust data and investment analysis.
Eastspring is proud to be recognised for its achievements, winning
numerous industry awards in 2022. Notably, Eastspring Investments
was named the Best Emerging Markets Equity Manager by the
Citywire Asia Asset Management Awards. At a country level,
Eastspring Singapore was named Top Investment House by The
Asset Benchmark Research Awards, while Eastspring Vietnam was
named Best Fund House in Vietnam by Asia Asset Management.
Client excellence
During a year when market headwinds resulted in challenging
outcomes for both the asset management industry and its clients,
Eastspring maintained its client-centric approach and frequently
engaged internal and external clients to better understand their
challenges and investment needs. In doing so, it could best meet
client expectations and provide tailored solutions.
Eastspring continued to strengthen its relationship with the
Prudential Group’s life insurance and corporate asset owners,
including launching customised strategies for local markets.
Across its institutional business, Eastspring continued winning
mandates, and top-ups, from some of the largest pension and
sovereign wealth funds. Notably, the firm has seen good success
in its international markets of the Americas, Europe, and Taiwan
and Malaysia’s Islamic business.
Enhancing distribution capabilities
While deepening and broadening its relationships with distributors,
Eastspring has also increased its efforts to improve its distribution
capabilities by developing new digital investment and servicing
platforms, particularly in Malaysia and Thailand. In Japan, Eastspring
launched online-exclusive funds to capture flows from the younger
generation. Eastspring also expanded its partnerships with online
mutual funds and wealth management platforms, for example with
a co-branded fund on iFast’s Fundsupermart.
In July 2022, Eastspring further strengthened its franchise and
footprint through the successful incorporation of Eastspring
Thailand, merging TMBAM Eastspring and Thanachart Fund
Eastspring. With this merger, Eastspring is now the sixth-largest
fund management company in Thailand and is well positioned
to offer compelling investment solutions to local investors and
to grow its business in South-east Asia’s second-largest economy.
Accelerating responsible investing
Eastspring’s commitment to responsible investing is embedded
across its business.
The firm is focused on driving sustainable solutions on three fronts.
First, Eastspring strengthened its engagement on climate change
and decarbonisation with investee companies, including with the
top emitters contributing to 65 per cent of absolute carbon emissions
in Prudential’s asset book. Second, the firm enhanced its ESG data
capabilities to support investment and engagement activities.
Third, the firm harmonised all Responsible Investment-related
policies across its markets into a single Eastspring Investments
Group Responsible Investment Policy.
Eastspring provided strong support to the wider Group’s successful
efforts in meeting its sustainability milestones. At the same time,
Eastspring expanded its range of sustainability-focused funds, for
instance, launching a Japan Sustainable Value Fund. In Indonesia,
the business launched the award-winning Reksa Dana Indeks ESG
IDX Leaders Plus, the first mutual fund that utilises the Indonesian
Stock Exchange’s ESG Leaders Index.
Joint venture growth initiatives
IPAMC continued to enhance its digital strengths and broadened its
product suite across equity and fixed income strategies. As a result,
over 50 per cent of new customers were onboarded directly and
through partnerships with fintech companies and neobanks, resulting
in an existing customer base of circa eight million.
CPFMC has deep cooperative relationships with over 40 local
research institutes and provides Qualified Foreign Institutional
Investors (QFII) with professional investment advisory services.
Since 2021, it has been building out its pension target funds,
which attracted steady net subscriptions from retail investors.
30
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Prudential plc Annual Report 2022 Notes
1
2
3
4
5
6
7
8
9
Source: The Unprecedented Expansion of the Global Middle Class, Global Economy and
Development program at the Brookings Institution, February 2017. Forecast growth of
Asia Pacific middle class 2020 to 2030.
Source: IMF World Economic Outlook Database, April 2022, compound annual growth
rates of GDP per capita, 2022-2026.
Source: Swiss Re Institute; Sigma No 3/2021: World insurance – life insurance
penetration (premiums as a percentage of GDP in 2020).
Source: World Health Organisation: Global Health Observatory data (2019). South-east
Asia, Out-of-pocket expenditure as percentage of current health expenditure (CHE).
Source: Swiss Re Institute: The health protection gap in Asia, October 2018.
Source: The Economist, Special report, 28 March 2020 edition.
Greater China comprises of our businesses in the Chinese Mainland, Hong Kong and
Taiwan.
South-east Asia comprises of our businesses in Asia excluding the Chinese Mainland,
Hong Kong, Taiwan and India.
APE sales is a measure of new business activity that comprises the aggregate of
annualised regular premiums and one-tenth of single premiums on new business written
during the year for all insurance products, including premiums for contracts designated
as investment contracts under IFRS 4. It is not representative of premium income
recorded in the IFRS financial results. See note II of the Additional unaudited financial
information for further explanation.
On a constant exchange rate basis.
10
11 New business profit, on a post-tax basis, on business sold in the period, calculated in
12
13
14
15
accordance with EEV Principles.
‘Adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term
investment returns from continuing operations. This alternative performance measure is
reconciled to IFRS profit for the period in note B1.1 of the IFRS financial results.
Excluding restructuring and IFRS 17 implementation costs.
Excluding India, Laos, Myanmar and Africa.
A life customer is defined as an individual or entity who holds one or more policies with a
Prudential life insurance entity, including 100 per cent of customers of the Group’s joint
ventures and associate. Group business is considered to be a single customer for the
purpose of this definition. The customer numbers for 2021 have been restated to ensure
consistent and comparable application of this definition across all Group entities.
16 New policies are presented on a 100 per cent basis.
17
18
19
20
21
22
23
24
25
Excluding Africa.
Core markets consist of the Chinese Mainland, Hong Kong, Indonesia, Singapore,
Malaysia, Vietnam and the Philippines.
Productivity measured by APE sales per average active agent.
Percentage of APE sales in Asia markets, including CPL, India and Malaysia Takaful on a
100 per cent basis.
APE sales completed by agents on leads recorded and managed on our PruLeads System
as a percentage of total APE new business sales through the agency channel.
Leads from all sources recorded and managed on our PruLeads System.
The Chinese Mainland, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South
Korea, Taiwan, Thailand and Vietnam.
Sources: Chinese Mainland: based on new business single premiums from the CBIRC for
foreign joint ventures only; Hong Kong: based on total in-force premiums; Indonesia:
based on weighted new business premiums from the PLAI; Malaysia combined: based
on APE sales from the Life Insurance Association of Malaysia; Singapore: based
on weighted new business premium for regular premium from the Life Insurance
Association of Singapore; India: based on retail weighted premium income among
foreign players from the Insurance Regulatory and Development Authority of India;
Vietnam: based on APE sales from the Vietnam Actuarial Network data sharing; Taiwan:
based on APE sales from the Taiwan Life Insurance Association for foreign insurers;
Thailand: based on weighted new business premiums from the Thailand Life Assurance
Association for the first 11 months of 2022; Philippines: based on weighted full-year
premiums from the Insurance Commission for the first 9 months of 2022; Cambodia:
based on APE sales.
Full year 2022 total funds under management or advice, including external funds under
management, money market funds, funds managed on behalf of M&G plc and internal
funds under management or advice, reported based on the country where the funds are
managed, including joint ventures.
26
Our investment portfolio includes both listed equities and corporate bonds, while
excluding assets held by joint venture businesses and assets in unit-linked funds as
we do not have full authority to change the investment strategies of these.
27 Whole Group Full Time Equivalent including Chair, all Directors, GEC members, and
Senior Managers, excluding joint ventures.
28 United Nations, Department of Economic and Social Affairs, Population Division, World
29
30
31
32
33
34
35
36
37
38
39
40
Population Prospects 2022.
Sources: Mainland China (Based on new business standard premiums for 2022 of the
foreign joint ventures only, data from industry sharing of information), Hong Kong
(Based on PHKL APE for 2022, from Hong Kong Insurance Authority), Indonesia (Based
on weighted new premiums for 2022, preliminary results from Indonesian Life Insurance
Association), Malaysia (On combined basis where Takaful is on 100%. Based on new
business APE for 2022, data from Life Insurance Association of Malaysia for
Conventional Business and Insurance Service Malaysia for Takaful business), Singapore
(Based on weighted new business premiums reported within Singapore Life Insurance
Association returns for 2022), India (Based on retail weighted premium for the calendar
year 2022 of private insurers operating in India, from the Life Insurance Council), Taiwan
(Based on full year 2022 APE of foreign insurers, data from Taiwan Insurance Institute),
Vietnam (Based on full year 2022 APE data collected from data sharing by Vietnam
Actuarial Network), Laos (Based on gross written premiums for 2021, from Axco
Insurance Market Report), the Philippines (Based on weighted first year premiums for the
first nine months in 2022, data from Insurance Commission), Cambodia (Based on full
year 2022 adjusted APE, from Insurance Association of Cambodia), Thailand (Based on
weighted new business premium for 2022, from The Thai Life Assurance Association),
Myanmar (Based on APE for the first nine months in 2022 for the foreign insurers
operating in Myanmar, from Myanmar Insurance Association).
Virtual sales are sales that are closed via Digital, Cloud and Electronic Signature.
Source: based on APE sales from Hong Kong Insurance Authority for 2022.
Source: based on GDP data sourced from the World Bank and www.bayarea.gov.hk
websites.
Source: World Population Review – Country Rankings – Muslim population by country.
Source: Bank Negara Malaysia, Financial Sector Blueprint 2022-2026.
Source: Based on APE sales from the Insurance services Malaysia (ISM) for the Takaful
business at 100 per cent.
Source: UNU-WIDER, World Income Inequality Database (WIID), World Bank, IMF,
United Nations Population Division, HSBC forecasts.
The number of customers is based on Prudential Singapore’s internal estimates.
Source: Based on data from the World Bank organisation: Urban population (% of total
population).
Source: Central Committee Vietnamese Communist Party, Resolution Number 06-NQ/
TW on planning, construction, management, and sustainable development of urban
areas in Vietnam until 2030, with a vision toward 2045, 24 January 2022.
Source: Global data report, Taiwan (Province of China) Life Insurance Market Size, Trends
by Line of Business (General Annuity and Personal, Accident and Health), Distribution
Channel, Competitive Landscape and Forecast, 2021-2026, November 2022.
41 New customers defined as the sum newly joined customers and newly joined who were
42
43
44
45
46
47
48
lost but reinstated.
Source: The Thai Life Assurance Association’s Life Insurance Business Report, data as
of November 2022 year-to-date.
CIMB Philippines number of customers as at 31 December 2022 based on the full year
2022 results.
On an actual exchange rate basis.
Including money market funds and funds managed on behalf of M&G plc.
The value of assets under management at 31 December 2022 in funds which
outperform their performance benchmark as a percentage of total assets under
management at 31 December 2022, excluding assets in funds with no performance
benchmark.
ICICI Prudential financial year runs from 1 April to 31 March each year.
Based on Prudential Hong Kong Limited’s APE for the discrete fourth quarter of 2022
from Hong Kong Insurance Authority.
31
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Key performance indicators
Measuring our performance
To create sustainable economic value for our shareholders we focus
on delivering sustainable compounding growth while generating capital
to reinvest in our businesses and meet our financing needs. We focus
on the following metrics when looking at our performance1.
EEV new business profit2 $m
Life insurance products are, by their nature, long
term and generate profit over a number of years.
Embedded value reporting provides investors with
a measure of the future profit streams of the Group.
EEV new business profit reflects the value of future
profit streams which are not fully captured in the year
of sale under IFRS reporting.
EEV new business profit decreased by (11) per cent
on a constant exchange rate basis to $2,184 million
((14) per cent on an actual exchange rate basis)
with the impact of higher APE sales offset by higher
interest rates and business mix effects.
2,526
(14)%
2,184
All amounts are from continuing operations only
Carbon emissions
As a significant asset manager and asset owner,
Prudential has a distinctive role to play in the
transition to a low-carbon economy. Reflecting the
stage of their development, the economies in which
we operate tend to start their transition from a higher
carbon intensity level. Prudential therefore seeks a
transition to a lower-carbon economy that is inclusive
for all of society and one that supports sustainable
growth within our markets. Our immediate actions
to help deliver on this objective include a target to
reduce the carbon emissions of our portfolio3 of
shareholder and policyholder assets by 25 per cent
by 2025.
EEV shareholders’ equity5 $bn
EEV represents the present value of the shareholders’
interest in the post-tax future profits (on a local
statutory basis) expected to arise from the current
book of long-term business, after sufficient
allowance has been made for the aggregate risks
in the business. Asset management and other
non-insurance business are included in EEV at
the Group’s proportionate share of IFRS basis
shareholders’ equity, with central Group debt shown
on a market value basis.
2021 $m
2022 $m
2019 WACI
386
2022 WACI
219
2025 Target
WACI
290
The weighted average capital intensity (WACI) of our
investment portfolio has declined by 43 per cent4
compared with our 2019 baseline. The WACI of our
portfolio changes due to movements in the carbon
intensity of the invested companies, movements in
market prices and our own actions to change their
weight in our investment portfolio (through strategic
asset allocation, portfolio construction and
investment selection). The decline to date has been
driven largely by the implementation of our coal
policy and the implementation of WACI budgets to a
number of our equity strategies. However, we believe
more real-world impact can be achieved through
financing the transition and engagement, rather
than simply changing the portfolio to optimise our
carbon footprint. Therefore, we do not anticipate
that the trend will continue at the same pace going
forward.
1,725 equity
per share
EEV shareholders’ equity for continuing
operations decreased (11) per cent to $42.2 billion,
largely reflecting the adverse impacts from higher
interest rates.
47.4
1,534 equity
per share
(11)%
42.2
(11)%
decline
per share
32
prudentialplc.com
2021 $bn
2022 $bn
Prudential plc Annual Report 2022 Free surplus generation from insurance and asset
management businesses6 $m
Free surplus generation from insurance and asset
management businesses is used to measure the
internal cash generation of our businesses.
For insurance operations, it represents amounts
emerging from the in-force business during the year,
net of amounts reinvested in writing new business
and excludes other non-operating items. For asset
management, it equates to post-tax adjusted
operating profit for the year.
Free surplus generation from continuing insurance
and asset management operations before
restructuring costs was up 9 per cent on a constant
exchange rate basis to $2,193 million (6 per cent on
an actual exchange rate basis). Net Group operating
free surplus generation, after restructuring and
central costs, was $1,374 million (2021: $1,135 million
on a constant exchange rate basis, $1,179 million on
an actual exchange rate basis).
Adjusted IFRS operating profit based on longer-term
investment returns (adjusted operating profit7) $m
The Group’s business involves entering into
long-term contracts with customers, and hence
the Group manages its associated assets and
liabilities over a longer-term time horizon. This
enables the Group to manage a degree of short-term
market volatility. Therefore, adjusted operating
profit based on longer-term investment returns is
management’s preferred measure when evaluating
the performance of the business. Other distorting
items are excluded from adjusted operating profit
to allow more relevant period-on-period comparisons
of the trading operations of the Group, (eg the effects
of corporate transactions are excluded).
Adjusted operating profit increased by 8 per cent
on a constant exchange rate basis to $3,375 million
(4 per cent on an actual exchange rate basis),
reflecting a 6 per cent increase in adjusted operating
profit on a constant exchange rate basis (2 per cent
on an actual exchange rate basis) from insurance
and asset management business, and a 26 per cent
improvement in central other income and
expenditure on a constant exchange rate basis
(28 per cent on an actual exchange rate basis), offset
by an increase in restructuring and IFRS 17 costs.
All amounts are from continuing operations only
6%
2,193
2,071
2021 $m
2022 $m
3,233
4%
3,375
2021 $m
2022 $m
Notes
1
2
3
4
5
6
7
The comparative results shown above have been prepared using an actual exchange rate (AER) basis except where otherwise stated. Comparative results on a constant exchange rate (CER) basis
are also shown in financial tables in the Financial Review on our 2022 financial performance. Growth rates for 2021 to 2022 are on an AER basis.
New business profit, on a post-tax basis, on business sold in the year, calculated in accordance with EEV principles.
Our investment portfolio includes both listed equities and corporate bonds, while excluding assets held by joint venture and associate businesses, and assets in unit-linked funds as we do not have
full authority to change the investment strategies of these.
Within the scope of EY assurance, see page 102.
The EEV financial results have been prepared in accordance with EEV principles discussed in ‘basis of preparation’ of the EEV financial results. See note II of Additional unaudited financial
information for definition and reconciliation to IFRS balances.
Operating free surplus generated from insurance and asset management operations before restructuring costs. For insurance operations, operating free surplus generated represents amounts
emerging from the in-force business during the period net of amounts reinvested in writing new business and excludes non-operating items. For asset management businesses, it equates
to post-tax operating profit for the period. Restructuring costs are presented separately from the business amount. Further information is set out in ‘Movement in Group free surplus’ in the
EEV basis results.
‘Adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing operations. This alternative performance measure is reconciled
to IFRS profit for the period in note B1.1 of the IFRS financial results.
33
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Financial review
Delivering growth across many
key performance measures
34
prudentialplc.com
Prudential plc Annual Report 2022 The Group delivered a resilient financial performance for the year
against a backdrop of Covid-19-related disruption during the first half
of 2022 in many of our markets and the broader macroeconomic
and geopolitical volatility, discussed further below. The diversity of
our business in terms of its geography, its multi-channel distribution
and its customer-centric product suite positions us well to take
advantage of the long-term opportunities as our markets recover
from the effects of Covid-19.
The Group’s 2022 financial performance saw us deliver growth across
many of our key performance measures, with APE sales1, operating
free surplus generated2, EEV operating profit and IFRS adjusted
operating profit3 all higher than the prior year4. Although our new
business profit generation5 of $2.2 billion was lower, this largely
reflected the impact of economic effects under our EEV framework,
notably in Hong Kong. Our markets outside of Hong Kong delivered
combined new business profit growth of 5 per cent4. IFRS profit
for the year was also negatively impacted by the increases in
interest rates and decreases in equity market values in the year,
as further discussed below and in the section headed IFRS basis
non-operating items.
2022 saw considerable macroeconomic volatility, characterised
in many markets by lower equity index levels, material increases
in government bond yields and widening corporate bond spreads.
The MSCI Asia excluding Japan equity index fell (24) per cent,
the Hang Seng index fell by (15) per cent and the CSI 300 index
fell by (22) per cent while the S&P 500 index fell by (19) per cent.
Government bond yields in many of our markets ended the year
higher with the US 10-year yield increasing by 236 basis points
to 3.9 per cent. As well as their impact on IFRS profit for the year,
lower associated asset values and consequent impact on fee
generating account balances, together with the impact of higher
discount rates under our active EEV methodology, contributed to a
fall in our embedded value in the year.
The year also saw the US dollar increase in value relative to many
currencies globally, resulting in a translation headwind. As in
previous years, we comment on our performance in local currency
terms (expressed on a constant exchange rate basis) to show
the underlying business trends in periods of currency movement,
unless otherwise noted.
In 2022, the Group reported a 9 per cent4 increase in APE sales
to $4,393 million while new business profit was (11) per cent4 lower
at $2,184 million. This encouraging APE sales performance, despite
Covid-19-related disruption during the first half of the year, reflects
the benefit of our diversification across geography, channel and
products. APE sales were broadly balanced between Greater China6
and South-east7 Asia across our four main product groups, with an
emphasis on health and protection, and across distribution channels
with our bancassurance channel providing notable resilience in
periods of disruption for our agency salesforce. Given the active basis
of our EEV methodology, rising interest rates led to both higher risk
discount rates and higher assumed fund earned rates being applied.
As a consequence, there was an overall negative impact on EEV new
business margins in many markets, particularly in Hong Kong which
led to a reduction in new business profit in the year to $2.2 billion
(2021: $2.4 billion4). Agency distribution and health and protection
products remain our most important value drivers.
Group EEV operating profit increased by 15 per cent4 to $3,952 million
largely due to 13 per cent4 growth in operating returns from the
long-term business. This reflects the higher expected return from
underlying business growth and higher interest rates, partially offset
by lower new business profit and a lower benefit from assumption
changes than was seen in the prior year. Operating return on
embedded value8 was 9 per cent compared with 8 per cent in 2021.
After allowing for economic effects, such as changes in interest rates,
currency movements and the payment of the external dividend,
the Group’s embedded value at 31 December 2022 was $42.2 billion
(31 December 2021: $47.4 billion9), equivalent to 1,534 cents per
share (31 December 2021: 1,725 cents per share9). The operating free
surplus generated from insurance and asset management business
(after investment in new business) during the year was $2,193 million,
up 9 per cent4, reflecting the underlying in-force business growth and
the positive effect of interest rate rises.
Group adjusted operating profit was up 8 per cent4 to $3,375 million,
reflecting a 6 per cent4 increase in operating profit from the insurance
and asset management business and an improvement in central
costs of 26 per cent4 reflecting lower interest costs. Adjusted
operating profit from our long-term business was up 7 per cent4 to
$3,846 million despite the Covid-19-related headwinds seen over the
last few years. The Group has completed its programme to deliver a
targeted reduction in central operating expenses of $70 million10
a year from the start of 2023 which, combined with previously
completed savings, represents delivery of central cost reduction
programmes since 2018 that in total have saved $250 million11 a year.
The Group’s total IFRS profit after tax from continuing operations was
$1,007 million (2021: profit of $2,143 million on a constant exchange
rate basis and $2,214 million on an actual exchange rate basis),
reflecting negative short-term fluctuations from higher interest rates
and lower equity markets during the year. These negative effects
were offset in part by the benefit from refinements to the reserving
basis following the adoption of the Hong Kong Risk-Based Capital
regime (HK RBC) for which we received approval from the regulator in
April 2022, effective from 1 January 2022. The IFRS reserving basis
for Hong Kong was refined to reflect the measurement techniques
applied within HK RBC, leading to a reduction in policyholder liabilities
(net of reinsurance) and an increase in profit before tax of
$945 million9. This was allocated between operating and non-
operating profit in line with the Group’s usual principles.
Our Group’s regulatory capital position, free surplus and central
liquidity positions remain robust. The Group’s leverage remains near
the bottom of our target range at 20 per cent, estimated on
a Moody’s basis, after allowing for the redemption of a £300 million
senior bond in January 2023. As a result, supported by a clear and
disciplined capital allocation policy, the Group is well positioned,
with considerable financial flexibility including leverage capacity,
to take advantage of the growth opportunities ahead.
35
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Financial review / continued
The Group aligns its capital adequacy requirements with the
established EEV and free surplus framework by comparing the total
eligible Group capital resources with the Group’s Prescribed Capital
Requirement (GPCR) and this is explained further in the capital
management section below. At 31 December 2022, the estimated
shareholder surplus above the GPCR was $15.6 billion12 (31 December
2021: $17.5 billion9) and cover ratio 307 per cent13 (31 December
2021: 320 per cent9). The surplus reduced due to adverse market
movements in the year, reducing available capital more than the
reduction in capital requirements.
During the year, the Group adopted both HK RBC for the Hong Kong
business and the China Risk Oriented Solvency System Phase II
(C-ROSS II) requirements in the Chinese Mainland with an
improvement to the shareholder GWS capital surplus of total
eligible group capital resources over the Group Minimum Capital
Requirement (GMCR) at 1 January 2022 by $9.3 billion14, increasing
the coverage ratio15 from 408 per cent to 545 per cent (after allowing
for the debt redemption in January 2022). The GWS coverage ratio at
1 January 2022 measured on GPCR basis after the regulatory
changes was 320 per cent. The Group’s free surplus increased by
$1.4 billion as a result of the change on 1 January 2022. This is less
than the increase in GWS surplus as free surplus excludes regulatory
surplus and the HK RBC technical provisions for GWS are lower than
policyholder asset shares or cash surrender floors, to reflect more
realistically the surplus which can be remitted. The effect of the HK
RBC implementation increased EEV by $0.2 billion.
With effect from 1 January 2023, IFRS 17, the new accounting
standard for insurance contracts that replaces IFRS 4, becomes
effective and the Group’s IFRS reporting will be prepared on this basis
from half year 2023. While this is an important step for the Group and
the wider insurance industry, this new accounting framework has no
impact on the Group’s capital generation or management, operating
free surplus generation, business strategy, EEV basis results or
dividend policy. Similarly, the new IFRS 17 framework has no impact
on the total level of profit generated over the life of the policy, but it
does change the timing of profit recognition. Upon transition from
our IFRS 4 grandfathered local GAAP measures to IFRS 17, we expect
an increase in opening shareholders’ equity of between $1.8 billion
and $2.7 billion from the $17.1 billion dollars recorded under IFRS 4 at
31 December 2021. This reflects the release of prudent margins from
our legacy accounting basis, particularly in Hong Kong, recognition of
the shareholders’ share of the inherited estate within the with-profit
funds and the net impact of timing differences in the pattern of profit
recognition. We have yet to complete the production of our half-year
and full-year 2022 comparatives using the IFRS 17 accounting
standard but we estimate that the net impact of timing differences
between the two accounting bases will decrease the adjusted IFRS 17
operating profit for 2022 by between $650 million and $850 million
compared with IFRS 4. The remaining uncertainty in the estimated
impact will be addressed once full-year IFRS 17 results have been
completed on the end state systems. Further disclosure of the impact
on 2022 results will be provided in June 2023.
IFRS profit
Adjusted operating profit based on longer-term investment returns
before tax from continuing operations
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Long-term business adjusted operating profit
Asset management
Total segment profit from continuing operations
Net investment income and other items
Interest payable on core structural borrowings
Corporate expenditure
Other income and expenditure
Total adjusted operating profit before tax and restructuring and IFRS 17
implementation costs
Restructuring and IFRS 17 implementation costs
Total adjusted operating profit before tax
Non-operating items:
Short-term fluctuations in investment returns on shareholder-backed business
Amortisation of acquisition accounting adjustments
Profit (loss) attaching to corporate transactions
Profit from continuing operations before tax attributable to shareholders
Tax charge attributable to shareholders’ returns
Profit from continuing operations for the year
Loss from discontinued operations for the year, net of related tax
Profit (loss) for the year
Actual exchange rate
Constant exchange rate
2022 $m
2021 $m
Change %
2021 $m
Change %
368
1,036
343
364
678
1,057
3,846
260
4,106
39
(200)
(276)
(437)
3,669
(294)
3,375
(1,915)
(10)
11
1,461
(454)
1,007
–
1,007
343
975
446
350
663
932
3,709
314
4,023
21
(328)
(298)
(605)
3,418
(185)
3,233
(458)
(5)
(94)
2,676
(462)
2,214
(5,027)
(2,813)
7
6
(23)
4
2
13
4
(17)
2
86
39
7
28
7
(59)
4
(318)
(100)
n/a
(45)
2
(55)
n/a
n/a
329
969
429
330
646
880
3,583
299
3,882
21
(328)
(280)
(587)
3,295
(178)
3,117
(435)
(5)
(91)
2,586
(443)
2,143
(5,027)
(2,884)
12
7
(20)
10
5
20
7
(13)
6
86
39
1
26
11
(65)
8
(340)
(100)
n/a
(44)
(2)
(53)
n/a
n/a
36
prudentialplc.com
Prudential plc Annual Report 2022 IFRS earnings per share
Basic earnings per share based on adjusted operating profit after tax
from continuing operations
100.5
101.5
(1)
97.7
3
Basic earnings per share based on:
Total profit after tax from continuing operations
Total loss after tax from discontinued operations
36.5
–
83.4
(161.1)
(56)
n/a
80.6
(161.2)
(55)
n/a
Actual exchange rate
Constant exchange rate
2022 cents
2021 cents
Change %
2021 cents
Change %
In Malaysia, adjusted operating profit registered growth of
10 per cent4 to $364 million supported by the growth of our in-force
business with shareholder-backed renewal premiums increasing
by 8 per cent4.
In Singapore, adjusted operating profit increased by 5 per cent4 to
$678 million, reflecting the continued growth of our in-force business
with shareholder-backed renewal premiums rising 9 per cent4
alongside higher profits from our with-profits business, offset in part
by the impact on revenue from adverse market movements.
The businesses comprising our Growth markets and other segment
generated adjusted operating profit of $1,057 million, up 20 per cent4.
This includes other items of $211 million (2021: $217 million on an
actual exchange rate basis and $208 million on a constant exchange
rate basis) which in 2022 comprised largely the impact of the
adoption of the HK RBC (as discussed further in note C3.2 of the
IFRS financial results). The adjusted operating profit for the Growth
markets (excluding other items) increased by 26 per cent4 to
$846 million, driven by Thailand and India. Thailand achieved
24 per cent4 growth in adjusted operating profit following growth in
new business over recent years as we upscaled the business through
our bank partnerships with TMB Thanachart Bank (TTB) and United
Overseas Bank (UOB), while India saw improved claims experience
in the period, following the spike in Covid-19 cases seen in 202116.
Segment profit from continuing insurance and asset management
business increased by 6 per cent4 to $4,106 million despite a
challenging environment over recent periods. All our major long-term
business segments, other than Indonesia, delivered growth,
demonstrating the resilient and diversified nature of our business.
The 7 per cent4 growth in the adjusted operating profit of our
long-term business was partially offset by a decline in Eastspring’s
adjusted operating profit following adverse market movements and
seed capital losses over the year. After allowing for a 26 per cent4
reduction in central expenditure and higher restructuring and IFRS 17
implementation costs, total adjusted operating profit before tax
increased to $3,375 million, an 8 per cent4 increase compared with
2021.
CPL, our joint venture business in the Chinese Mainland, delivered
a 12 per cent4 increase in adjusted operating profit to $368 million
reflecting growth in the underlying in-force portfolio from higher sales
volumes in recent years and improved operating experience during
the year.
In Hong Kong, our adjusted operating profit increased by 7 per cent4
to $1,036 million benefiting from the accumulating nature of the
asset shares underpinning our flagship critical illness product, higher
levels of profits from our with-profits business given the ageing of
certain cohorts, and the impact from changes to underlying product
profit profiles as a result of the adoption of the risk-based capital
regime previously discussed.
In Indonesia, adjusted operating profit reduced by (20) per cent4
to $343 million reflecting lower new business sales in recent years,
lower fee income from unit-linked business due to adverse market
movements and higher medical claims levels, specifically in the
second half of the year, as the country emerged from the restrictions
of the pandemic and policyholders felt more comfortable in
undertaking usual medical activity.
37
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Financial review / continued
Long-term insurance business adjusted operating profit drivers
Profit margin analysis of long-term insurance continuing operations17
Spread income
Fee income
With-profits
Insurance margin
Other income
Total life insurance income
Expenses:
Acquisition costs
Administration expenses
DAC adjustments
Share of related tax charges from joint ventures and associates
Long-term business pre-tax adjusted operating profit
Long-term business adjusted operating profit grew 7 per cent4
to $3,846 million (2021: $3,583 million4), driven principally by
15 per cent4 growth in insurance margin-related revenues. This
increase arises both from the growth of our business in the current
and recent years, supported by our focus on recurring premium
health and protection products, and from the adoption of HK RBC
in the year. While medical claims have begun to normalise (and
increase) as people return to usual claim patterns post the pandemic,
this has been balanced by a fall in mortality claims in the year.
Fee income increased by 1 per cent4, reflecting premium
contributions largely offset by unfavourable market movements,
while spread income increased by 3 per cent4, reflecting in-force
business growth with the improvement in margin primarily driven by
the impact of rising interest rates.
Actual exchange rate
Constant exchange rate
2022
2021
2021
Margin
bps
72
102
20
(53)%
(230)
$m
307
331
160
3,219
3,429
7,446
(2,346)
(1,732)
554
(76)
3,846
Margin
bps
66
103
16
(50)%
(205)
$m
312
345
135
2,897
3,239
6,928
(2,085)
(1,656)
566
(44)
3,709
Margin
bps
65
103
16
(50)%
(201)
$m
299
329
133
2,795
3,105
6,661
(2,000)
(1,581)
545
(42)
3,583
With-profits earnings relate to the shareholders’ share in bonuses
declared to policyholders. As these bonuses are typically weighted
towards the end of a contract, under IFRS, with-profit earnings
consequently emerge only gradually over time. The 20 per cent4
growth in with-profits earnings reflects the ongoing growth and
aging of certain cohorts within these portfolios.
Other income primarily represents amounts deducted from
premiums to cover acquisition costs and administration expenses.
As such, the growth of 10 per cent4 from 2021 largely reflects
premium growth in the year for our shareholder-backed business.
Acquisition costs increased in the year, driven by higher APE sales
as compared with the prior year. Administration expenses, including
renewal commissions, increased by 10 per cent4, reflecting in-force
business growth and sales and premium tax-related provisions.
Both acquisition costs and administration expenses reflect our
continued investment in the business to enhance and maintain
our capabilities for future growth.
38
prudentialplc.com
Prudential plc Annual Report 2022
Asset management
Actual exchange rate
Constant exchange rate
2022 $m
2021 $m
Change %
2021 $m
Change %
External funds under management* ($bn)
Funds managed on behalf of M&G plc ($bn)
External funds under management ($bn)
Internal funds under management ($bn)
Internal funds under advice ($bn)
Total internal funds under management or advice ($bn)
81.9
9.3
91.2
104.1
26.1
130.2
94.0
11.5
105.5
124.2
28.8
153.0
Total funds under management or advice ($bn)
221.4
258.5
(13)
(19)
(14)
(16)
(9)
(15)
(14)
87.5
11.6
99.1
123.6
28.9
152.5
251.6
(6)
(20)
(8)
(16)
(10)
(15)
(12)
Total external net flows*,18
(1,586)
613
n/a
765
n/a
Analysis of adjusted operating profit
Retail operating income
Institutional operating income
Operating income before performance-related fees
Performance-related fees
Operating income (net of commission)
Operating expense
Group’s share of tax on joint ventures’ adjusted operating profit
Adjusted operating profit
Adjusted operating profit after tax
392
268
660
1
661
(360)
(41)
260
234
449
298
747
15
762
(403)
(45)
314
284
(13)
(10)
(12)
(93)
(13)
11
9
(17)
(18)
424
289
713
15
728
(387)
(42)
299
271
(8)
(7)
(7)
(93)
(9)
7
2
(13)
(14)
Average funds under management or advice by Eastspring
Fee margin based on operating income
Cost/income ratio19
$229.4bn
29bps
55%
$251.7bn
30bps
54%
(9)%
(1)bp
+1ppt
$240.9bn
30bps
54%
(5)%
(1)bp
+1ppt
*
Excluding funds managed on behalf of M&G plc.
Eastspring, the Group’s asset management business, had total funds
under management or advice20 of $221.4 billion at 31 December
2022 (31 December 2021: $251.6 billion on a constant exchange rate
basis). Compared with 2021, Eastspring’s average funds under
management or advice decreased by (5) per cent4 to $229.4 billion
(2021: $240.9 billion4), reflecting adverse market movements during
the year, partially offset by net inflows.
We saw total net inflows of $4.5 billion over 2022 (2021: $5.8 billion4)
which included internal net inflows from our insurance businesses
totalling $7.8 billion (2021: $10.4 billion4). These flows were partially
offset by third-party outflows (excluding money market funds and
funds managed on behalf of M&G plc) of $(1.6) billion (2021: net
inflows of $0.8 billion4), primarily from our bond funds in the retail
business following increases in interest rates throughout the year, and
$(0.8) billion (2021: $(3.9) billion4) of net outflows from funds
managed on behalf of M&G plc.
Eastspring’s adjusted operating profit of $260 million was down
(13) per cent4 compared with the prior year, reflecting a decline in
the average funds under management or advice and losses on
shareholder investments including seed capital in its retail funds,
compared with gains in 2021. Operating income before gains and
losses on shareholder investments and performance related fees was
(4) per cent4 lower, reflecting a (5) per cent4 decline in average funds
under management or advice. Despite a 7 per cent4 reduction in
operating costs, the cost/income ratio increased marginally to
55 per cent (2021: 54 per cent4) due to the effect of mark-to-market
movements on shareholders’ investments.
Other income and expenditure
Central costs (before restructuring and IFRS 17 implementation
costs) were 26 per cent4 lower than the prior period reflecting the
benefit of the debt reduction programme completed in January
2022. Interest payable on core structural borrowings reduced
by $128 million compared with 2021. Total head office expenditure
was $(276) million (2021: $(280) million4) and the Group has
completed its programme to deliver a targeted reduction in central
operating expenses of around $70 million10 of cost savings from
2023. Net investment income and other items for the year was
$39 million (2021: $21 million4).
Restructuring costs of $(294) million (2021: $(178) million4) reflect
the Group’s substantial and ongoing IFRS 17 project, and one-off
costs associated with cost saving, regulatory and other initiatives
in our business. IFRS 17 costs are expected to remain elevated until
the standard is fully implemented in 2023.
IFRS basis non-operating items
Non-operating items from continuing operations in the year
consist mainly of negative short-term fluctuations in investment
returns on shareholder-backed business of $(1,915) million
(2021: $(435) million4) and a gain of $11 million from corporate
transactions (2021: loss of $(91) million4).
39
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Financial review / continued
The increase in the level of short-term fluctuations reflects the
significant increase in interest rates during the year compared
with 2021 and the fall in equity markets during the year, compared
with equity market gains in 2021. Decreases in bond values from
rising interest rates are not fully offset by reductions in policyholder
liabilities as assets held will exceed liabilities, given the need to
hold capital in line with local regulations, while some regimes have
policyholder liabilities that do not directly reflect changes in interest
rates or reprice more slowly than assets. This loss was offset in part
from the benefit arising from the early adoption of the HK RBC.
The adverse movements in investment returns largely occurred in
Hong Kong and the Chinese Mainland and resulted in the losses after
tax for those segments.
Corporate transactions include a $62 million realised gain from
the sale of 8.7 million shares in Jackson Financial Inc. during
2022. At 31 December 2022, we held 9.2 per cent of the shares21
in Jackson Financial Inc. which had a fair value of $266 million.
Further information on corporate transactions is presented in
note D1.1 to the IFRS financial results.
IFRS effective tax rates for continuing operations
In 2022, the effective tax rate on adjusted operating profit was
18 per cent, broadly aligned with the prior year rate of 17 per cent.
The effective tax rate on total IFRS profit in 2022 was 31 per cent
(2021: 17 per cent), reflecting the adverse impact of investment
losses on which no tax credit is recognised.
From 2024 onwards, the effective tax rate on adjusted operating profit is
likely to be impacted by a combination of the Organisation for Economic
Co-operation and Development (OECD) proposals to implement a
global minimum tax rate of 15 per cent and some jurisdictions where
Prudential operates implementing a domestic minimum tax based
on the OECD proposals. Through 2021, 2022 and early 2023, the OECD
has issued model rules, guidance and a number of supplementary
documents. Further OECD documents are expected during the course
of 2023. A number of jurisdictions where Prudential has operations
either have already issued or intend to issue draft legislation to
implement the OECD rules into domestic tax law. Detailed analysis
and consideration of all of these documents is ongoing.
Shareholders’ equity
Group IFRS shareholders’ equity
Total tax contributions from continuing operations
The Group continues to make significant tax contributions in the
jurisdictions in which it operates, with $1,009 million remitted to tax
authorities in 2022. This was similar to the equivalent amount of
$1,071 million9 remitted in 2021 after allowing for movements in
exchange rates.
Change of tax residence of Prudential plc
In 2022 the Prudential Board decided, in the context of having
demerged M&G plc in 2019 and Jackson Financial Inc. in 2021 and
its now exclusive focus on the growth markets of Asia and Africa,
that the roles of the Chief Executive Officer and Group Chief Financial
Officer would be based in Asia, where Prudential’s largest businesses,
the Group’s regulator and the rest of the senior management team are
located. As a result of these actions the tax residence of Prudential plc
has changed to Hong Kong with effect from 3 March 2023. This is an
immediate consequence of a Board meeting of that date in Hong
Kong, where the Board now regularly meets, and also the
commencement of the new Chief Executive Officer’s employment in
Hong Kong on 25 February 2023. The change of tax residence to Hong
Kong is not expected to impact materially the Group’s total corporate
income tax payment amounts or the location of those payments. Of
the $1,009 million total taxes remitted in 2022, over $950 million
related to our Asian and African insurance and asset management
businesses who pay and collect taxes where they do business and
where they make investments. None of these tax remittances will be
affected by Prudential plc changing tax residence. This change does
not impact Prudential plc’s legal structure or place of incorporation
which remains in the UK. Further detail, including tax guidance for
relevant shareholders, can be found at www.prudentialplc.com.
Tax strategy
The Group publishes its tax strategy annually which, in addition to
complying with the mandatory UK (Finance Act 2016) requirements,
also includes a number of additional disclosures, including a country-
by-country disclosure of revenues, profits, average employee numbers
and taxes for all jurisdictions where more than $5 million tax was
paid. This disclosure is included as a way of demonstrating that our
tax footprint (ie where we pay taxes) is consistent with our business
footprint. An updated version of the tax strategy, including 2022
data, will be available on the Group’s website before 31 May 2023.
Adjusted operating profit after tax attributable to shareholders from continuing operations
Profit from continuing operations for the year
Less non-controlling interest from continuing operations
Profit after tax for the year attributable to shareholders from continuing operations
Net decrease in shareholders’ equity from discontinued operations (see note D1.2 in the IFRS financial results)
Demerger dividend in-specie of Jackson
Exchange movements, net of related tax
Other external dividends
Issue of equity shares
Other (including revaluation of Jackson residual interest since demerger)
Decrease in shareholders’ equity
Shareholders’ equity at beginning of the year
Shareholders’ equity at end of the year
Shareholders’ value per share19
2022 $m
2021 $m
2,750
2,668
1,007
(9)
998
–
–
(531)
(474)
(4)
(117)
(128)
17,088
16,960
617¢
2,214
(22)
2,192
(6,283)
(1,735)
(165)
(421)
2,382
240
(3,790)
20,878
17,088
622¢
Group IFRS shareholders’ equity decreased marginally to $17.0 billion at 31 December 2022, reflecting profit generated during the year, offset
by dividend payments of $(0.5) billion, adverse exchange movements of $(0.5) billion and movements including the revaluation of the residual
interest in Jackson Financial Inc.
40
prudentialplc.com
Prudential plc Annual Report 2022 Greater China presence
Prudential has a significant footprint in the Greater China region, with businesses in the Chinese Mainland (through its holding in CPL), Hong Kong
and Taiwan.
The table below demonstrates the significant proportion of the Group’s financial measures that were contributed by the Greater China region:
Total Greater China**
Total Group**
Percentage of total
Gross premiums earned*
New business profit
2022 $m
2021 $m
2022 $m
2021 $m
13,103
27,783
14,335
28,796
912
2,184
1,181
2,526
47%
50%
42%
47%
*
**
The gross earned premium amount shown above differs from that shown in the income statement as the above number includes the Group’s share of amounts earned by associates and JVs.
The gross earned premium amount reflects the Group’s IFRS accounting policies. A reconciliation to the amount included in the income statements is included in note II of the Additional
unaudited financial information.
Total Greater China represents the amount contributed by the long-term business in Hong Kong, Taiwan and the Group’s share of the amounts earned by CPL. The Group total includes
the Group’s share of the amounts earned by all long-term business joint ventures and associates.
EEV basis results
EEV basis results from continuing operations
New business profit
Profit from in-force business
Operating profit from long-term business
Asset management
Other income and expenditure22
Operating profit for the year from continuing operations
Non-operating loss
(Loss) profit for the year from continuing operations
Dividends paid
Share capital issued
Foreign exchange movements
Other movements
Net (decrease) increase in EEV shareholders’ equity
from continuing operations
EEV shareholders’ equity from continuing operations at 1 Jan
Effect of HK RBC
EEV shareholders’ equity from continuing operations at 31 Dec
% New business profit/average EEV shareholders’ equity for continuing
long-term business operations*
% Operating profit/average EEV shareholders’ equity for continuing operations
*
Excluding goodwill attributable to equity holders.
EEV shareholders’ equity
Represented by:
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Embedded value from long-term business excluding goodwill
Asset management and other excluding goodwill
Goodwill attributable to equity holders
Group EEV shareholders’ equity
EEV shareholders’ equity per share
Actual exchange rate
Constant exchange rate
2022 $m
2021 $m
Change %
2021 $m
Change %
(14)
45
9
(18)
8
12
(2,358)
(210)
2,443
1,588
4,032
271
(874)
3,429
(261)
3,168
(11)
48
13
(14)
6
15
(2,782)
(213)
2,184
2,358
4,542
234
(824)
3,952
(7,523)
(3,571)
(474)
(4)
(1,195)
(156)
(5,400)
47,355
229
42,184
5%
9%
2,526
1,630
4,156
284
(897)
3,543
(306)
3,237
(421)
2,382
(460)
691
5,429
41,926
–
47,355
6%
8%
Actual exchange rate
31 Dec 2022
$m
31 Dec 2021
$m
3,259
16,576
1,833
3,695
6,806
6,688
38,857
2,565
762
42,184
1,534¢
3,114
21,460
2,237
3,841
7,732
6,262
44,646
1,931
778
47,355
1,725¢
41
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Financial review / continued
EEV new business profit and APE new business sales (APE sales)
2022 $m
2021 $m
Change %
2021 $m
Change %
Actual exchange rate
Constant exchange rate
APE sales
884
522
247
359
770
1,611
4,393
New
business
profit
APE sales
New
business
profit
APE sales
New
business
profit
New
business
profit
APE sales
New
business
profit
APE sales
387
384
125
159
499
630
2,184
50%
776
550
252
461
743
1,412
4,194
352
736
125
232
523
558
2,526
60%
14
(5)
(2)
(22)
4
14
5
10
(48)
–
(31)
(5)
13
(14)
743
546
243
434
724
1,323
4,013
337
731
120
219
510
526
2,443
61%
19
(4)
2
(17)
6
22
9
15
(47)
4
(27)
(2)
20
(11)
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total
Total new business margin
EEV operating profit from continuing operations increased by
15 per cent4 to $3,952 million, reflecting increased operating profit
from the in-force business and an improvement in central costs;
partially offset by a decline in the contribution from new business
profit and lower profit from the asset management business.
The operating return on embedded value was 9 per cent (2021:
8 per cent9).
The profit from long-term business is driven by the expected return
and effects of operating assumption changes and operating
experience variances. The expected return increased 50 per cent4 to
$2,559 million, reflecting the combined effects of underlying business
growth and, more significantly, the impact of higher interest rates.
Operating assumption changes and experience variances were
negative $(201) million on a net basis compared with $(116) million4
in 2021, reflecting a lower level of favourable assumption changes
in the current year.
APE sales increased by 9 per cent4 to $4,393 million and related new
business profit decreased by (11) per cent4, reflecting the impact of
higher interest rates and business mix effects. Excluding economic
effects new business profit was $2,357 million, a fall of (4) per cent4
from the prior year. Detailed discussion of new business performance
by segment is presented in the Strategic and operating review.
The non-operating loss of $(7,523) million (2021: loss of
$(261) million4) is driven largely by rising interest rates and falling
equity markets over the year leading to reduced asset values with
a consequential impact on future profits. Higher interest rates also
increased risk discount rates, which have a negative effect on health
and protection profits. This negative effect more than outweighed
the benefit on our savings products of increases to the assumed level
of future investment returns.
Overall, EEV shareholders’ equity from continuing operations
decreased at 31 December 2022 to $42.2 billion (31 December 2021:
$47.4 billion9). Of this, $38.9 billion (31 December 2021: $44.6 billion9)
relates to the long-term business. This amount includes our share of
our India associate valued using embedded value principles. The
market capitalisation of this associate at 31 December 2022 was
circa $7.8 billion, which compares with a publicly reported embedded
value of circa $4.0 billion at 30 September 2022.
EEV shareholders’ equity on a per share basis at 31 December 2022
was 1,534 cents (31 December 2021: 1,725 cents9).
Group free surplus generation from continuing operations
Free surplus is the metric we use to measure the internal cash
generation of our business operations and broadly reflects the
amount of money available to our operational businesses for
investing in new business, strengthening our capacity and capabilities
to grow the business, and potentially paying returns to the Group.
For our insurance businesses it largely represents the Group’s available
regulatory capital resources after allowing for the prescribed required
regulatory capital held to support the policies in issue, with a number
of adjustments so that the free surplus better reflects resources
potentially available for distribution to the Group. For our asset
management businesses, Group holding companies and other
non-insurance companies, the measure is based on IFRS net assets
with certain adjustments, including to exclude accounting goodwill
and to align the treatment of capital with our regulatory basis.
Operating free surplus generation represents amounts emerging
from the in-force business during the year, net of amounts reinvested
in writing new business. For asset management businesses, it equates
to post-tax adjusted operating profit for the year. Further information
is contained in note 8.1(e) of the EEV basis results.
42
prudentialplc.com
Prudential plc Annual Report 2022
Analysis of movement in Group free surplus
Actual exchange rate
Constant exchange rate
2022 $m
2021 $m
Change %
2021 $m
Change %
10
(31)
9
(6)
(18)
6
39
5
36
(64)
17
2,408
(158)
2,249
(516)
271
2,004
(328)
(261)
(118)
(162)
1,135
14
(44)
12
(10)
(14)
9
39
(6)
44
(71)
21
Expected transfer from in-force business and return on existing free surplus
Changes in operating assumptions and experience variances
Operating free surplus generated from long-term business
before restructuring costs
Investment in new business
Asset management
Operating free surplus generated from life business and asset
management before restructuring costs
Central costs and eliminations (net of tax):
Net interest paid on core structural borrowings
Corporate expenditure
Other items and eliminations
Restructuring and IFRS 17 implementation costs (net of tax)
Net Group operating free surplus generated for continuing operations
Non-operating and other movements, including foreign exchange
Recognition of residual interest in Jackson at demerger
External cash dividends
Share capital issued
Treatment of grandfathered debt instruments under the GWS Framework23
(Decrease) increase in Group free surplus from continuing operations before
net subordinated debt redemption
Net subordinated debt redemption
(Decrease) increase in Group free surplus from continuing operations
before amounts attributable to non-controlling interests
Change in amounts attributable to non-controlling interests
Free surplus at 1 Jan from continuing operations
Effect of HK RBC
Free surplus at 31 Dec from continuing operations
Free surplus at 31 Dec excluding distribution rights and other intangibles
2,753
(227)
2,526
(567)
234
2,497
(173)
2,324
(537)
284
2,193
2,071
(200)
(276)
(66)
(277)
1,374
(2,367)
–
(474)
(4)
–
(1,471)
(1,699)
(3,170)
(10)
14,049
1,360
12,229
8,390
(328)
(292)
(103)
(169)
1,179
330
493
(421)
2,382
1,995
5,958
(232)
5,726
(21)
8,344
–
14,049
10,083
Our Group generated an operating free surplus from insurance and
asset management operations before restructuring costs of
$2,193 million, up 9 per cent4, largely reflecting the underlying
business growth from our in-force insurance book and positive effects
of interest rates. The cost of investment in new business increased
by 10 per cent4 broadly in line with the increase in APE sales of
9 per cent4, with the benefit from regulatory changes in Hong Kong
and higher interest rates offset by changes in business mix. After
allowing for lower interest payments on the Group’s central debt
and higher restructuring and IFRS 17 costs, total Group free surplus
generation was up 21 per cent4 to $1,374 million.
Operating free surplus generated was offset by the negative impact
of market and currency movements in the period. After allowing for
these losses, the redemption of debt (which is treated as capital for
free surplus purposes), the external dividend payment and the
$1.4 billion benefit from adopting HK RBC at 1 January 2022, free
surplus at 31 December 2022 was $12.2 billion. Excluding distribution
rights and other intangibles it was $8.4 billion. In January 2023 Group
free surplus was reduced by $0.4 billion following the redemption of
a £300 million senior bond.
Dividend
Reflecting the Group’s capital allocation priorities, a portion of
capital generation will be retained for reinvestment in the business,
and dividends will be determined primarily based on the Group’s
operating capital generation after allowing for the capital strain
of writing new business and recurring central costs. Dividends are
expected to grow broadly in line with the growth in the Group’s
operating free surplus generation net of right-sized central costs,
and will be set taking into account financial prospects, investment
opportunities and market conditions.
The Board has approved a 2022 second interim cash dividend of
13.04 cents per share (2021: 11.86 cents per share9). Combined with
the first interim cash dividend of 5.74 cents per share (2021: 5.37
cents per share9), the Group’s total 2022 cash dividend is 18.78 cents
per share (2021: 17.23 cents per share9), an increase of 9 per cent9.
43
Group overviewGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Strategic report
Financial review / continued
Group capital position
Prudential applies the Insurance (Group Capital) Rules set out in the
GWS Framework issued by the Hong Kong Insurance Authority to
determine Group regulatory capital requirements (both minimum and
prescribed levels). The GWS Group capital adequacy requirements
require that total eligible Group capital resources are not less than
the GPCR and that GWS Tier 1 group capital resources are not less
than the GMCR. In line with the changes at half year 2022 and
the updated GWS disclosure guidelines issued by the Hong Kong
Insurance Authority in December 2022, the GWS capital disclosures
present the Group capital position by comparing the total eligible
group capital resources to the GPCR, aligned with the basis of our EEV
capital requirements. In addition, the total regulatory Tier 1 capital
resources relative to the GMCR is also disclosed. More information is
set out in note I(i) of the Additional unaudited financial information.
The Group holds material participating business in Hong Kong,
Singapore and Malaysia. Alongside the regulatory GWS capital basis,
a shareholder GWS capital basis is also presented which excludes
the contribution to the Group GWS eligible group capital resources,
the GMCR and the GPCR from these participating funds.
During the year, Group adopted C-ROSS Phase II requirements in
the Chinese Mainland and the HK RBC for the Hong Kong business
following the receipt of approval from the Hong Kong Insurance
Authority to early-adopt the new Risk-Based Capital regime effective
from 1 January 2022. These changes are estimated to have
increased the GWS shareholder surplus over the GMCR by
$9.3 billion14 and to have increased the corresponding coverage ratio
from 408 per cent to 545 per cent15 as at 31 December 2021, after
allowing for the $1.7 billion debt redemption in January 2022.
As at 31 December 2021 the corresponding GWS shareholder capital
surplus over the GPCR is estimated to have been $17.5 billion12 with a
corresponding GWS coverage ratio of 320 per cent13. When including
the contribution from ring-fenced policyholder funds, the total
surplus over the GPCR is estimated to have been $21.4 billion12,
with a corresponding GWS coverage ratio of 204 per cent13.
As at 31 December 2022, the estimated shareholder GWS capital
surplus over the GPCR is $15.6 billion12 (31 December 2021:
$17.5 billion9), representing a coverage ratio of 307 per cent13
(31 December 2021: 320 per cent9) and the estimated total
GWS capital surplus over the GPCR is $18.1 billion12 (31 December
2021: $21.4 billion9) representing a coverage ratio of 202 per cent13
(31 December 2021: 204 per cent9). The estimated Group Tier 1
capital resources are $17.4 billion25 with estimated GWS Tier 1
surplus over the GMCR of $12.1 billion14 (31 December 2021:
$14.9 billion9), representing a coverage ratio of 328 per cent15
(31 December 2021: 328 per cent9).
The Group shareholder GWS capital surplus over the GPCR reduced
by $(1.9) billion9 to $15.6 billion at 31 December 2022. Operating
capital generation in the period was $1.4 billion after allowing
for central costs and investment in new business. The impact of
non-operating and other items, including market movements, were
negative overall and reduced surplus by $(2.8) billion. Dividends of
$0.5 billion were paid to shareholders in respect of the 2022 first
interim dividend.
The Group’s GWS position is resilient to external macroeconomic
movements as demonstrated by the sensitivity disclosure contained
in note I(i) of the Additional unaudited financial information,
alongside further information on the GWS measure.
Group capital resources ($bn)
of which: Tier 1 capital resources25 ($bn)
Group Minimum Capital Requirement ($bn)
Group Prescribed Capital Requirement ($bn)
GWS capital surplus over GPCR ($bn)
GWS coverage ratio over GPCR (%)
GWS coverage ratio (over GMCR) (%)
GWS Tier 1 coverage ratio over GMCR (%)
31 Dec 2022
(post regulatory updates)
31 Dec 202124
(post regulatory updates)
Shareholder
Policyholder*
Total†
Shareholder
Policyholder*
23.2
15.9
4.4
7.6
15.6
307%
12.6
1.5
0.9
10.1
2.5
35.8
17.4
5.3
17.7
18.1
202%
12.1
328%
25.5
17.9
4.7
8.0
17.5
320%
16.5
3.5
1.8
12.6
3.9
Total†
42.0
21.4
6.5
20.6
21.4
204%
14.9
328%
*
†
This allows for any associated diversification impacts between the shareholder and policyholder positions reflected in the total company results where relevant.
The total company GWS coverage ratio over GPCR presented above represents the eligible group capital resources coverage ratio as set out in the GWS framework while the total company
GWS tier 1 coverage ratio over GMCR represents the tier 1 group capital coverage ratio.
44
prudentialplc.com
Prudential plc Annual Report 2022 The 31 December 2022 GWS capital results do not reflect the impact
of the redemption of $0.4 billion of senior debt in January 2023.
Allowing for this redemption reduces the shareholder GWS capital
surplus over GPCR to $15.2 billion with a coverage ratio of
302 per cent and reduces the total GWS capital surplus over GPCR
to $17.7 billion with a coverage ratio of 200 per cent. The total GWS
Tier 1 over GMCR capital position is unaffected by this redemption.
GWS risk appetite and capital management
The Group’s capital management framework focuses on achieving
sustainable, profitable growth and retaining a resilient balance sheet.
The Group monitors regulatory capital, economic capital and rating
agency capital metrics and manages the business within its risk
appetite by remaining within its economic and regulatory capital
limits. In respect of regulatory capital limits, a capital buffer above
the GPCR is held to ensure the Group can withstand volatility in
markets and operational experience, with capital resources remaining
sufficient to cover the GPCR even after significant stresses.
The calibration of the capital buffer reflects the Group’s risk profile
and the external economic environment, and is set and reviewed
regularly by the Board.
Typically, this requires a Group shareholder coverage ratio of above
150 per cent of the shareholder GPCR to be maintained and
de-risking management actions will be taken as necessary to
maintain this buffer. No maximum limit on the GWS coverage ratio
has been set. While the GWS shareholder capital position is a key
metric for assessing regulatory solvency, and for risk management,
there are some elements of the shareholder GWS capital surplus
which will only become available as cash flow for distribution over
time. The Group’s Free Surplus metric is a better measure of the
shareholder capital available for distribution, and is used as the
primary metric for assessing the Group’s sources and uses of capital
in the Group’s capital management framework, and underpinning
the Group’s dividend policy.
At 31 December 2022, the Group’s Free Surplus stock (excluding
distribution rights and other intangibles) was $8.4 billion, compared
with the GWS shareholder surplus of $15.6 billion and a reconciliation
is shown in note I(i) of the Additional unaudited financial information.
The uses of capital, for both organic and inorganic opportunities, are
assessed by reference to expected shareholder returns and payback
periods, relative to risk-adjusted hurdle rates which are set centrally.
Reflecting the Group’s capital allocation priorities, a portion of the
free surplus generated in each period will be retained for reinvestment
in the business, and dividends will be determined primarily based
on the Group’s operating free surplus generation after allowing for
the capital strain of writing new business and recurring central costs
(on a right-sized basis). To the extent that free surplus arises which is
not required to support organic and inorganic growth opportunities,
consideration will be given to returning capital to shareholders.
Separate from the capital management framework applied for
shareholder-owned capital, the capital held in ring-fenced with-profits
funds supports policyholder investment freedom, which increases
expected returns for our with-profits funds’ customers. GWS
policyholder capital surplus is not available for distribution out of the
ring-fenced funds other than as a defined proportion distributable to
shareholders when policyholder bonuses are declared. Policyholder
fund capital surplus is deployed over time to increase investment risk
in the with-profits funds in order to target higher customer returns,
or distributed as higher customer bonuses, in line with the specific
with-profits bonus policies which apply to each ring-fenced fund.
The result of applying these policies is that the aggregate
policyholder fund GPCR coverage ratio is typically lower than
the GPCR shareholder coverage ratio.
The total GWS coverage ratio, which is an aggregate of the
policyholder and shareholder capital positions, is therefore usually
lower than the shareholder coverage ratio, but also less sensitive in
stress scenarios, as is shown in the GWS sensitivity analysis section
above as at 31 December 2022. The total GWS coverage ratio is
the Group’s regulatory solvency metric to which Group supervision
applies, and this total regulatory coverage ratio is managed to ensure
it remains above the GPCR by applying separate shareholder and
policyholder risk appetite limits, as described above.
Financing and liquidity
At 31 December 2022, the Group’s net gearing ratio as defined in
the table below was 7 per cent, after reflecting the refined definition
of holding company cash and short-term investments as discussed
below, but excluding the impact of the redemption on 20 January
2023 of the £300 million senior bond, with a carrying value of
$361 million at 31 December 2022. The Group manages its leverage
on a Moody’s total leverage basis, which differs from the above by
taking into account gross debt, including commercial paper, and also
allows for a proportion of the surplus within the Group’s with-profits
funds. We estimate the Moody’s total leverage at 31 December 2022
to be 21 per cent (31 December 2021: 26 per cent9). After allowing for
the redemption in January 2023 of the £300 million senior bond we
estimate that Moody’s total leverage would be 20 per cent.
Prudential is targeting a Moody’s total leverage ratio of around 20 to
25 per cent over the medium term. Prudential may operate outside
this range temporarily to take advantage of growth opportunities
with attractive risk-adjusted returns as they arise, while still preserving
its strong credit ratings.
Prudential seeks to maintain its financial strength rating with
applicable credit rating agencies, which derives, in part, from its
high level of financial flexibility to issue debt and equity instruments,
which is intended to be maintained in the future.
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Net core structural borrowings of shareholder-financed businesses
Borrowings of shareholder-financed businesses
Less: holding company cash and short-term investments26
Net core structural borrowings of shareholder-financed businesses
Net gearing ratio*
31 Dec 2022 $m
IFRS
basis
Mark-to-
market value
4,261
(3,057)
1,204
7%
(427)
–
(427)
EEV
basis
3,834
(3,057)
777
31 Dec 2021 $m
IFRS
basis
Mark-to-
market value
6,127
(3,572)
2,555
13%
438
–
438
EEV
basis
6,565
(3,572)
2,993
*
Net core structural borrowings from continuing operations as proportion of IFRS shareholders’ equity from continuing operations plus net core structural borrowings from continuing operations,
as set out in note II of the Additional unaudited financial information.
The total borrowings of the shareholder-financed businesses from
continuing operations were $4.3 billion at 31 December 2022 and the
Group had central cash resources of $3.1 billion26 at the same date
resulting in net core structural borrowings of the shareholder-financed
businesses of $1.2 billion. We have complied with all of the covenants
and undertakings of our core structural borrowings and have not
modified any of their terms during 2022.
The Group has two securities that reach maturity in 2023; the
£300 million senior bonds that were redeemed on 20 January 2023
and a €20 million medium-term note that falls due in July 2023.
In addition, the Group has a $750 million perpetual note that
reached its first call date in January 2023 at which time the Group’s
management elected not to call it. We retain the right to call this
security at par on a quarterly basis hereafter. The Group’s remaining
securities have contractual maturities that fall between 2029 and
2033. Further analysis of the maturity profile of borrowings is
presented in note C2.3 to the IFRS financial results.
In addition to its net core structural borrowings of shareholder-
financed businesses set out above, the Group is able to access
funding via the medium-term note programme, the US shelf
programme (the platform for issuance of SEC registered bonds in
the US market), a commercial paper programme and committed
revolving credit facilities. All of these are available for general
corporate purposes. Proceeds from the Group’s commercial paper
programme are not included in the holding company cash and
short-term investment balance.
Prudential plc has maintained a consistent presence as an issuer
in the commercial paper market for the past decade and had
$501 million in issue at 31 December 2022 (31 December 2021:
$500 million9).
As at 31 December 2022, the Group had a total of $2.6 billion
of undrawn committed facilities, expiring in 2026. Apart from
small drawdowns to test the process, these facilities have
never been drawn, and there were no amounts outstanding
at 31 December 2022.
Cash remittances
Holding company cash flow
Net cash remitted by business units27
Net interest paid
Corporate expenditure28
Centrally funded recurring bancassurance fees
Total central outflows
Holding company cash flow before dividends and other movements
Dividends paid
Operating holding company cash flow after dividends but before other movements
Issuance and redemption of debt
Hong Kong public offer and international placing
Other corporate activities
US demerger costs
Total other movements
Total holding company cash flow
Cash and short-term investments at the beginning of the year
Foreign exchange and other movements
Inclusion of amounts at 31 Dec from additional centrally managed entities
Cash and short-term investments at the end of the year
Actual exchange rate
2022 $m
2021 $m
Change %
(10)
35
28
(25)
19
1,304
(204)
(232)
(220)
(656)
648
(474)
174
(1,729)
–
248
–
(1,481)
(1,307)
3,572
(113)
905
3,057
1,451
(314)
(322)
(176)
(812)
639
(421)
218
(255)
2,374
(199)
(30)
1,890
2,108
1,463
1
–
3,572
46
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Prudential plc Annual Report 2022
Remittances from our businesses were $1,304 million (2021:
$1,451 million9). Remittances were used to meet central outflows
of $(656) million (2021: $(812) million9) and to pay dividends of
$(474) million. Central outflows include net interest paid of
$(204) million (2021: $(314) million9), corporate expenditure of
$(232) million (2021: $(322) million9) and centrally funded recurring
bancassurance fees of $(220) million (2021: $(176) million9).
Other cash flow movements included net receipts from other
corporate activities of $248 million (2021: $(199) million9 net
payments) comprising proceeds of $315 million received from the
sales of shares in Jackson Financial Inc. together with dividends
from Jackson Financial Inc., partially offset by cash provided for
investment by the businesses mainly in digital infrastructure.
Our debt redemption and refinancing programme was completed
in January 2022 at a cost of $1,725 million. We also settled a bank
loan in the year funded by the issue of new senior debt at a net
outflow of $4 million.
The definition of holding company cash and short-term investments
has been updated, with effect from 31 December 2022, following
the combination of the Group’s London office and Asia regional office
into a single Group Head Office in 2022. This updated definition
includes all cash and short-term investments held by central holding
and service companies, including amounts previously managed on
a regional basis. These balances are now being centrally managed
by the Group’s Treasury function. This refinement increased holding
company cash and short-term investment balances by $0.9 billion
at 31 December 2022. After reflecting this refinement, cash and
short-term investments totalled $3.1 billion at 31 December 2022
(31 December 2021: $3.6 billion9). The redemption of debt in January
2023 reduced this balance by $371 million.
The Group will continue to seek to manage its financial condition such
that it has sufficient resources available to provide a buffer to support
the retained businesses in stress scenarios and to provide liquidity to
service central outflows.
Notes
1
2
3
4
5
6
7
8
9
10
11
12
APE sales is a measure of new business activity that comprises the aggregate of
annualised regular premiums and one-tenth of single premiums on new business written
during the year for all insurance products, including premiums for contracts designated
as investment contracts under IFRS 4. It is not representative of premium income
recorded in the IFRS financial results. See note II of the Additional unaudited financial
information for further explanation.
For insurance operations, operating free surplus generated represents amounts
emerging from the in-force business during the year net of amounts reinvested in writing
new business and excludes non-operating items. For asset management businesses,
it equates to post-tax operating profit for the year. Restructuring costs are presented
separately from the business unit amount. Further information is set out in ‘movement
in Group free surplus’ of the EEV basis results.
‘Adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term
investment returns from continuing operations. This alternative performance measure
is reconciled to IFRS profit for the period in note B1.1 of the IFRS financial results.
On a constant exchange rate basis.
New business profit, on a post-tax basis, on business sold in the period, calculated
in accordance with EEV Principles.
Greater China comprises of our businesses in the Chinese Mainland, Hong Kong
and Taiwan.
South-east Asia comprises of our businesses in Asia excluding the Chinese Mainland,
Hong Kong, Taiwan and India.
Operating return calculated as operating profit divided by the average EEV shareholders’
equity for continuing operations. See note II(x) of the Additional unaudited financial
information for definition and calculation.
On an actual exchange rate basis.
As compared with full year 2021 actual expenditure of $298 million and assuming
no significant change in current exchange rates.
Represents previously referred to $70 million costs savings from the start of 2023,
compared with full year 2021 actual expenditure, together with $180 million of cost
savings delivered from the start of 2021 compared with full year 2018 actual
expenditure.
Estimated GWS capital resources in excess of the GPCR attributable to the shareholder
business, before allowing for the 2022 second cash interim dividend. Prescribed capital
requirements are set at the level at which the local regulator of a given entity can
impose penalties, sanctions or intervention measures. The estimated GWS group capital
adequacy requirements require that total eligible Group capital resources are not less
than the GPCR.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Estimated GWS coverage ratio of capital resources over GPCR attributable to the
shareholder business, before allowing for the 2022 second cash interim dividend.
Estimated GWS capital resources in excess of the GMCR attributable to the shareholder
business, before allowing for the 2022 second cash interim dividend. Under the GWS
Framework, all debt instruments (senior and subordinated) issued by Prudential plc
at 30 June 2022 are included as GWS eligible group capital resources.
Estimated GWS coverage ratio of capital resources over GMCR attributable to
shareholder business, before allowing for the 2022 second cash interim dividend.
Our World in Data, India confirmed Covid-19 cases.
For discussion on the basis of preparation of the sources of earnings in the table
see note I(ii) of the Additional unaudited financial information.
Excludes Money Market Funds.
See note II of the Additional unaudited financial information for definition and
reconciliation to IFRS balances.
Full year 2022 total funds under management or advice including external funds under
management, money market funds, funds managed on behalf of M&G plc and internal
funds under management or advice.
Jackson Financial Inc. shares held by Prudential as a percentage of Jackson Financial Inc.
Shares disclosed as outstanding as at 31 December 2022.
Other income and expenditure includes restructuring and IFRS 17 implementation costs.
Debt not denominated in USD is translated using exchange rates as at 31 December
2020 for the purposes of grandfathering.
31 December 2021 comparative amounts include the effect of the adoption of HK RBC,
C-ROSS Phase II and the redemption of $1,725 million of sub-ordinated debt completed
in January 2022.
The classification of tiering of capital under the GWS framework reflects the different
local regulatory regimes along with guidance issued by the Hong Kong IA.
The definition of holding company cash and short-term investments has been updated,
with effect from 31 December 2022, following the combination of the Group’s London
office and Asia regional office into a single Group Head Office in 2022. This updated
definition includes all cash and short-term investments held by central holding
and service companies, including amounts previously managed on a regional basis.
These balances are now being centrally managed by the Group’s Treasury function.
27 Net cash amounts remitted by businesses are included in the holding company cash
flow, which is disclosed in detail in note I(v) of the Additional unaudited financial
information. This comprises dividends and other transfers from businesses
Including IFRS 17 implementation and restructuring costs paid in the year.
28
47
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Risk review
Enabling
effective
risk-based
decision-making
in a complex world
48
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Prudential plc Annual Report 2022 In the face of significant market volatility and uncertainty,
Prudential’s Group Risk Framework, risk appetite, and robust
governance have allowed the business to manage and control
its risk exposure dynamically and effectively throughout 2022,
in order to achieve the Group’s strategy of delivering value for
our shareholders and all our stakeholders. This section explains the
main risks inherent in the business and how Prudential manages
those risks, with the aim of ensuring an appropriate risk profile is
maintained.
1 Introduction
The Group
Following key actions taken in 2021 to reshape Prudential into an
Asia and Africa-focused business, the Group has transformed its
leadership structure and its strategic and operating models as it
continues to enhance its focus on its customers, as well as adapting
a multi-channel distribution model to reflect evolving markets and
external operating conditions. The Group Risk, Compliance and
Security (RCS) function continues to provide risk opinions, guidance,
assurance and engagement with Prudential’s Group-wide supervisor,
the Hong Kong Insurance Authority (IA), on these critical activities,
while overseeing the risks and implications to the ongoing business
in order to ensure the Group remains within approved risk appetite,
at all times, in the backdrop of increased complexity of the
macroeconomic, geopolitical and regulatory environments. During
2022, the Group achieved notable milestones with the completion
of all agreed transitional arrangements to fully implement the Hong
Kong IA GWS Framework, the implementation of the C-ROSS II
at CPL, its Chinese Mainland joint venture, and early adoption of RBC
at its Hong Kong businesses.
2022 was characterised by high inflation, high interest rates and
economic uncertainties, set against reconfigured national alliances
and competition for energy and natural resources. The impacts to
the Group are multifaceted and may be pronounced. These include
increased strategic and business risks, as well as increasing insurance,
product and customer conduct risks. For the Group’s customers, these
wider geopolitical and macroeconomic circumstances may increase
uncertainty over livelihoods, elevate costs of living, and cause
challenges in affordability for essential needs and services, including
insurance products and perhaps at times when they may be most
needed. The complexity of meeting regulatory expectations on
these issues, as governments increasingly focus on them, is expected
to increase. Prudential will need to meet these challenges for its
business and those of its customers in a fair and equitable way.
At the same time, the Group will be expected to navigate the volatile
financial environment in its markets to ensure it remains robustly
capitalised to sustainably deliver for the additional needs of its
customers and the societies in which it operates. These are the key
themes underpinning this report, with details included below.
Against this backdrop, the Group continues to effectively leverage
its risk management, compliance and security experience in more
mature markets, applying it to its growth markets as appropriate
to their respective risks and the extent of their challenges in this
changed world, and reflective of opportunities, customer issues and
needs and local customs. Prudential will continue to apply the holistic
and coordinated approach in managing the increasingly dynamic,
multifaceted and often interconnected risks facing its businesses.
Macroeconomic and market environment
The Russia-Ukraine conflict may continue to lead to economic and
market stresses being particularly intense in Europe given its
dependence on Russian energy and commodities. The uncertainty on
the longer-term evolution of these tensions has contributed to
keeping energy and commodity prices high and volatile leading to
high inflationary pressures. In early 2023, for certain markets which
the Group operates, inflation appears to have peaked after having
reached decades-high levels in 2022. However, there are structural
risks to inflation persistence, constraining real incomes and growth to
an extent capable of triggering a global recession.
Central banks, including many in Asia, in large part but at varying
pace and levels, have responded to inflationary pressures with
monetary policy tightening and base interest rate increases, while
factoring in the impact of US Federal Reserve monetary policy on the
strength of the US dollar and implications in emerging markets. This
challenging inflationary environment led to wide-spread weakness
across asset classes in 2022, in both fixed income and equities which
posted significant losses. Sentiment was also impacted by weak
demand in the property sector, and volatility in the economic outlook
in the Chinese Mainland as Covid-19 restrictions continued through
most of the year. The Chinese Mainland and Japan were the regional
exceptions in retaining a relatively accommodative monetary policy.
Global activity data was generally weaker in 2022, but showed some
resilience given the record pace of tightening of financial conditions.
Consumer confidence in both developed and emerging markets in
Asia fell sharply and into depressed territory for much of the year,
although actual spending remained at fairly stable levels, given high
levels of excess savings, reopening flows and higher-than-expected
fiscal stimulus.
With the rapid reopening of the Chinese Mainland market, the
headwinds appear to have reached a turning point at the end of the
year with policymakers announcing a relaxation of pandemic-related
restrictions and the reopening of borders as well as a more convincing
package of measures to stabilise the property market. However, the
growth path with recovery in consumer spending, especially services,
is likely to be volatile based on the experience in other countries, when
restrictions were quickly released, the temporary escalation in
Covid-19 cases led to an economic pause before a more sustained
rebound. Furthermore, supply chains have also taken time to recover
to previous levels of efficiency and capacity.
The continued strength in the US dollar against the majority of
other currencies further contributed to tighter financial conditions
and weaker exchange rates of a number of emerging markets
in which the Group operates, adversely impacting Prudential’s
consolidated financial statements upon the translation of results
into US dollar, the Group’s reporting currency. With interest rates
rising, sub-Saharan Africa has seen an increase in external debt
servicing costs. The rising debt servicing burden could lead to a
trade-off for governments in the region between paying down
debt obligations or funding longer-term social projects.
The macroeconomic landscape and financial markets are expected
to remain challenging and highly uncertain. The capital position of
the Group and its local businesses has been monitored with high
cadence and has remained robust throughout 2022. The full impact
of the economic turbulence in 2022 is yet to fully materialise and will
continue to be closely monitored by the Group.
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Geopolitical landscape
The Russia-Ukraine conflict has led to a range of geopolitical
implications, which remain uncertain and complex. The direct
implications were regularly monitored throughout 2022 and were
considered in the Group’s broader scenario analysis and planning.
The diplomatic consequences of the conflict have driven an
adjustment (and some reinforcement) in regional security and
trading blocs, with an increasing conflation of economic issues with
considerations of national interest and security, and with implications
for international strategic competition. The Russia-Ukraine conflict
may have implications for, or result in a short-term slowing of,
progress in meeting global and corporate decarbonisation targets,
as markets prioritise access to sufficient primary energy sources,
increasing the use of coal. In the medium term, a reduction in the
reliance on external gas and oil supplies may drive an acceleration in
the adoption of zero-carbon energy sources. However, challenges to
supply chains, technologies and access to raw materials and energy
will remain where national security concerns are heightened. Over the
longer term, the conflict, and the diplomatic and economic reactions
to it, could contribute to an acceleration towards ‘decoupling’ or the
divergence of markets into more distinct trading blocs, limiting the
scope for flows of people, capital and data between blocs, increasing
the potential operational and reputational risks for companies
continuing to trade and operate between these blocs.
The US-China relationship has been a key focus of geopolitical tension
in 2022, impacted in part by the Russia-Ukraine conflict. In turn,
this has exerted pressure on policymakers in other geographies,
including the Asian markets in which the Group operates. Following
the US mid-term Congressional elections and 20th Party Congress
of the Communist Party of China in the second half of 2022, political
pressures continued to indicate an increasingly divergent set of
positions and strained rhetoric on matters of mutual interest,
including Taiwan. The relationship remains inherently dynamic and
continues to be monitored, against a backdrop of increasing strategic
competition as illustrated by the US CHIPS Act and sustained
bilateral criticism. While the pace of domestic regulatory reform in
the Chinese Mainland abated in 2022 relative to 2021, the effects of
reforms and their implementation, including those relating to
technology, data usage and capital market operations, may create
geopolitical implications which will require assessment, as will US
legislation, which may in turn be mirrored or affect other markets’
regulations related to China. Legislative or regulatory changes that
adversely impact Hong Kong’s economy or its international trading
and economic relationships, as a key market which hosts Group head
office functions, could have an adverse impact on sales and
distribution and the operations of the Group.
Societal developments
Global economic uncertainties and the rise in inflation are
increasingly putting pressure on household affordability and may
exacerbate existing structural inequalities within societies.
Government and supervisory attention is being increasingly focused
on the cost of living crisis taking shape across many of the Group’s
markets and the contribution of the corporate sector to government
tax revenues. These developments have implications for Prudential in
terms of how it engages with its customers, who will, in some markets,
experience real challenges in affording or maintaining insurance
products at their current level of coverage. This may happen at times
when that protection is needed most, and when such customers
increasingly represent the vulnerable in society. In Asia, there is an
increasing expectation from governments for private companies to
help with affordability issues, for example, by introducing moratoria
on price increases, and to extend the regulatory definitions of
‘vulnerable’ customers to explicitly include those in need due to the
current economic pressures. Prudential will continue to carefully
balance affordability and the impact on its customers with the need,
and ability, to reprice products where necessary.
A high inflation environment, combined with recessionary concerns,
and societal and regulatory expectations of support, may also
heighten existing challenges in persistency for insurers. As has always
been the case, Prudential will continue to engage with governments,
regulators and supervisors on these issues. As a matter of course,
the Group regularly assesses the suitability and affordability of its
products, and aims to reduce their perceived complexity whilst
increasing the transparency of their costs and benefits. These aims,
as well as the Group’s increasing focus on the sustainable digital
distribution of its health and protection products via its digital
platform, help to expand the financial inclusion of Prudential’s
products and improve customer outcomes.
Most markets have moved, at different paces, to an endemic
approach in managing Covid-19. The Group looks to retain the
positive changes that the pandemic accelerated, including those
related to changes in traditional working practices and the use of
digital services, technologies and distribution methods to customers,
while monitoring and mitigating the potential increase in technology,
data security or misuse and regulatory risks that these may bring.
Prudential is exploring new ways of working and, as a responsible
employer, is reflecting thematic trends through a coordinated suite
of activities related to the upskilling of its workforce, and increasing
flexibility, inclusivity and psychological safety in the workplace.
The Group continues to monitor emerging social trends, including
those linked to environmental change and the impacts to developing
market societies associated with the transition to a lower-carbon
global economy. A just and inclusive transition is central to the
Group’s strategy and Prudential recognises the interests from a wide
range of stakeholders in the way it manages ESG and climate-related
risks. The Group continues to recognise the importance of financial
inclusion and the ways in which the Group’s products and services
meet the changing needs of affected societies. Its risk management
framework continues to evolve to manage the changing nature of
these wide-ranging risks, including activities to promote a transparent
culture, and active encouragement of open discussion and learnings
from mistakes.
Regulations
Prudential operates in highly regulated markets, and as the nature
and focus of regulations and laws evolve, the complexity of
regulatory compliance (including with respect to economic sanctions,
anti-money laundering and anti-corruption) continues to increase
and represents a challenge for international businesses. Geopolitical
tensions including the Russia-Ukraine conflict have increased
uncertainties and the long-term complexity of legal and regulatory
compliance for Prudential’s businesses operating across multiple
jurisdictions. Whilst the complexity of sanctions driven by the
geopolitical conflicts is elevated, the Group is experienced in
managing this and has in place risk tolerance frameworks to deal with
complex and conflicting risk trade-offs to guide executive decisions.
The rapid pace and high volume of regulatory changes and
interventions, and swiftness of their application including those
driven by the financial services industry, have the potential to increase
strategic and regulatory risks for the Group’s businesses. There has
been an increased regulatory focus by Prudential’s Group-wide
supervisor, the Hong Kong IA, in particular on customer experience,
investment management, governance and sustainability and
climate-related topics. In the Chinese Mainland, various policy
and regulatory developments relevant to the provision of financial
services are in progress, as is the implementation of the market’s data
governance pillars. Regulatory focus on the financial services industry
remains broad and often concurrent, and includes areas such as
customer conduct and protection, information security and data
privacy and residency, third-party management, systemic risk
regulation, corporate governance and senior management
accountability. Climate and sustainability-related regulatory
developments continue to develop at pace, both globally and in Asia.
50
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Prudential plc Annual Report 2022 Developments in domestic and international capital standards
continue to move forward, for example, the International Insurance
Capital Standard (ICS) is being developed by the International
Association of Insurance Supervisors (IAIS) due for adoption post
2024; C-ROSS II and Hong Kong RBC which were implemented in the
Group’s Chinese Mainland joint venture and Hong Kong businesses
respectively. Changes in regulations related to capital have the
potential to change the extent of capital sensitivity to risk factors. The
new accounting standards IFRS 17 also became effective from
1 January 2023 which is mandatory for the Group given its UK
domicile and its dual primary listings. Other examples of material
regulatory changes include the sale and management of investment-
linked products in Indonesia. Prudential’s portfolio of transformation
and regulatory change programmes have the potential to introduce
new, or increase existing, regulatory risks and supervisory interest
while increasing the complexity of ensuring concurrent regulatory
compliance across markets driven by potential for increased
intra-Group connectivity and dependencies.
The Hong Kong IA’s GWS Framework became effective for Prudential
following designation by the Hong Kong IA on 14 May 2021.
Prudential will continue to engage constructively with the Hong Kong
IA as its Group-wide supervisor as it ensures ongoing sustainable
compliance. In jurisdictions where Prudential operates with ongoing
policy initiatives and regulatory developments which impact the
way Prudential is supervised, these developments continue to be
monitored by the Group at a market and global level and these
considerations form part of the Group Risk Framework and ongoing
engagement with government policymakers, industry groups
and regulators.
2 Risk governance
a System of governance
Prudential has in place a system of governance that embeds a
clear ownership of risk, together with risk policies and standards
to enable risks to be identified, measured and assessed, managed
and controlled, monitored and reported. The Group Risk Framework,
owned by the Board, details Prudential’s risk governance, risk
management processes and risk appetite. The Group’s risk
governance arrangements are based on the ‘three lines’ model.
The ‘first line’ is responsible for taking and managing risk, while the
‘second line’ provides additional challenge, expertise, oversight and
scrutiny. The role of the ‘third line’, assumed by the independent
Group-wide Internal Audit function, is to provide objective assurance
on the design, effectiveness and implementation of the overall
system of internal control. The Group-wide RCS function reviews,
assesses, oversees and reports on the Group’s aggregate risk
exposure and solvency position from an economic, regulatory and
credit ratings perspective.
In 2022, a review of committees across the Group’s head office
was undertaken to ensure continued appropriateness of the level
of Group governance that promotes individual accountability in
decision-making and supports the overall corporate governance
framework to provide sound and prudent management and oversight of
the Group’s business. The Group constituted a new Group Investment
Committee, chaired by the Group Chief Financial Officer, which was
accompanied by the approval of a revised Group Investment Policy, for
the oversight of all investment activities and in line with GWS Framework
requirements. During 2022, oversight responsibilities for the Group’s
reporting against the recommendations of the Task Force on Climate-
Related Financial Disclosures (TCFD) and the ongoing implementation
of the Group’s climate-focused commitments, as part of the Group’s ESG
strategic framework, were transferred from the Board-established
Responsibility & Sustainability Working Group (RSWG) to the Group Risk
Committee with the RSWG retaining its focus on overseeing the culture,
customer and digital aspects of the framework.
Building on enhancements implemented in 2021, Prudential has
continued to embed ESG and climate change considerations within
the Group Risk Framework, such as explicitly defining time horizons
for the purposes of climate risk and requiring the consideration of
risks in the context of the time horizon of expected benefits/paybacks
of decisions within core strategic processes where ‘risk-based
decision-making’ must be incorporated, and the embedding of its
Group-wide customer conduct risk (including the implementation of
enhanced monitoring metrics), third-party and outsourcing and data
management frameworks and policies.
b Group Risk Framework
i. Risk governance and culture
Prudential’s risk governance comprises the Board organisational
structures, reporting relationships, delegation of authority, roles and
responsibilities, and risk policies that have been established to make
decisions and control activities on risk-related matters. The risk
governance structure is led by the Group Risk Committee, supported
by independent Non-executive Directors on the risk committees of
the Group’s major businesses. The Group Risk Committee approves
changes to the Group Risk Framework and the core risk policies
that support it. The Committee has direct lines of communication,
reporting and oversight of the risk committees of the Group’s major
businesses. In the second half of 2022, the chief risk and compliance
officers of the Group’s major businesses and the managing directors
of the Group’s Strategic Business Groups have formally become
members of the Group Executive Risk Committee, the advisory
committee to the Group Chief Risk and Compliance Officer. The
chief risk and compliance officers of the Group’s major businesses
also attend Group Risk Committee meetings on a rotational
participating basis.
Risk culture is a strategic priority of the Board, which recognises its
importance in the way that the Group conducts business. A Group-
wide culture framework is in place, unifying the Group towards its
overarching purpose of helping our customers get the most out of life.
The RSWG supports its responsibilities in relation to implementation
of the culture framework, as well as embedding the culture aspects
of the Group’s ESG strategic framework and overseeing progress
on diversity and inclusion initiatives. The culture framework provides
principles and values that are embedded in the ways of working
across the Group’s functions and locations and defines how
Prudential expects business to be conducted to achieve its strategic
objectives, informs expectations of leadership and supports the
resilience and sustainability of the Group. The components of the
culture framework support sound risk management practices by
requiring a focus on customers, longer-term goals and sustainability,
the avoidance of excessive risk-taking, and highlighting acceptable
and unacceptable behaviours. This is supported through the inclusion
of risk and sustainability considerations in performance management
for key executives; the building of appropriate skills and capabilities
in risk management; and by ensuring that employees understand
and care about their role in managing risk through open discussions,
collaboration and engagement. The Group Risk Committee has a
key role in providing advice to the Remuneration Committee on
risk management considerations to be applied in respect of
executive remuneration.
Prudential’s Group Code of Business Conduct and Group Governance
Manual, supported by the Group’s risk-related policies, include
guiding principles on the day-to-day conduct of all its people and any
organisations acting on its behalf. Supporting policies include those
related to financial crime, covering anti-money laundering, sanctions,
anti-bribery and corruption and conduct. The Group’s third-party and
outsourcing policy requires that human rights and modern slavery
considerations are embedded across all of its supplier and supply
chain arrangements. Procedures to allow individuals to speak out
safely and anonymously against unethical behaviour and conduct
are also in place.
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Risk review / continued
Further details on the Group’s ESG governance arrangements
and strategic framework are included in the Group’s ESG Report.
ii. The risk management cycle
Risk identification
In accordance with provision 28 of the UK Corporate Governance
Code and the GWS guidelines issued by the Hong Kong IA, a
top-down and bottom-up process is in place to support Group-wide
identification of principal risks. An emerging risk identification
framework exists to support the Group’s preparations in managing
financial and non-financial risks expected to crystallise beyond the
short-term horizon. The Board performs a robust assessment and
analysis of these principal and emerging risk themes through the risk
identification process, the Group Own Risk and Solvency Assessment
(ORSA) report and the risk assessments undertaken as part of the
business planning review, including how they are managed and
mitigated, which supports decision-making.
The Group’s emerging risk identification process recognises the
dynamic materiality of emerging risk themes. This has been shown by
recent events such as the Covid-19 pandemic and the Russia-Ukraine
conflict, and this concept is also considered relevant in the context
of the Group’s monitoring of emerging themes relevant to ESG and
climate-related risks, including reputation risk.
The ORSA is the ongoing process of identifying, measuring and
assessing, managing and controlling, monitoring and reporting the
risks to which the business is exposed. It includes an assessment of
capital adequacy to ensure that the Group’s solvency needs are met
at all times, as well as stress and scenario testing, which includes
climate scenarios and reverse stress testing. The latter requires the
Group to ascertain the point of business model failure and is another
tool that helps to identify the key risks and scenarios that may have
a material impact on the Group. The risk profile assessment is a key
output from the risk identification and risk measurement processes
and is used as a basis for setting Group-wide limits, management
information, assessment of solvency needs, and determining
appropriate stress and scenario testing. The Group’s principal risks,
which are reported and managed by the Group with enhanced focus,
are reviewed and updated on a regular basis.
Risk measurement and assessment
All identified risks are assessed based on an appropriate
methodology for that risk. Quantifiable risks, which are material and
mitigated by holding capital, are modelled in the Group’s internal
model, which is used to determine the Group Internal Economic
Capital Assessment (GIECA) and is subject to independent validation
and processes and controls around model changes and limitations.
Risk management and control
The Group’s control procedures and systems focus on aligning
the levels of risk-taking with the Group’s strategy and can only
provide reasonable, and not absolute, assurance against material
misstatement or loss. The Group’s risk policies define the Group’s
appetite to material risks and set out the risk management and
control requirements to limit exposure to these risks. These policies
also set out the processes to enable the measurement and
management of these risks in a consistent and coherent way,
including the flows of management information required. The
methods and risk management tools employed to mitigate each
of the Group’s principal risks are detailed in section 3 below.
Risk monitoring and reporting
The Group’s principal risks are highlighted in the management
information received by the Group Risk Committee and the
Board, which also includes key exposures against appetite
and developments in the Group’s principal and emerging risks.
iii. Risk appetite, limits and triggers
The Group is cognisant of the interests of the broad spectrum
of its stakeholders (including customers, investors, employees,
communities and key business partners) and that a managed
acceptance of risk lies at the heart of its business. The Group seeks
to generate stakeholder value by selectively taking exposure to risks,
mitigated to the extent it is cost-effective to do so, and where these
are an outcome of its chosen business activities and strategy. Those
risks for which the Group has no tolerance are actively avoided. The
Group’s systems, procedures and controls are designed to manage
risk appropriately, and its approach to resilience and recovery aims
to maintain the Group’s ability and flexibility to respond in times
of stress.
Qualitative and quantitative expressions of risk appetite are defined
and operationalised through risk limits, triggers and indicators. The
RCS function reviews the appropriateness of these measures at least
annually. The Board approves changes to the Group’s aggregate risk
appetite and the Group Risk Committee has delegated authority to
approve changes to the system of limits, triggers and indicators.
Group risk appetite is defined and monitored in aggregate by the
setting of objectives for its capital requirements, liquidity, and
non-financial risk exposure, covering risks to stakeholders, including
those from participating and third-party businesses. Group limits
operate within these expressions of risk appetite to constrain material
risks, while triggers and indicators provide additional defined points
for escalation. The Group Risk Committee, supported by the RCS
function, is responsible for reviewing the risks inherent in the Group’s
business plan and for providing the Board with a view on the risk/
reward trade-offs and the resulting impact to the Group’s aggregated
position relative to Group risk appetite and limits, including non-
financial risk considerations.
a.
Capital requirements. Limits on capital requirements aim
to ensure that in both business as usual and stressed conditions,
the Group maintains adequate capital in excess of internal
economic capital requirements, achieves its desired target
credit rating to meet its business objectives, and supervisory
intervention is avoided. The two measures in use at the Group
level are the GWS group capital requirements and internal
economic capital requirements, determined by the Group
Internal Economic Capital Assessment (GIECA).
b.
Liquidity. The objective of the Group’s liquidity risk appetite is
to ensure that appropriate cash resources are available to meet
financial obligations as they fall due in both business as usual
and stressed scenarios. This is measured using a liquidity
coverage ratio which considers the sources of liquidity against
liquidity requirements under stress scenarios.
Non-financial risks. In 2022, the Group implemented the revised
Non-Financial Risk Appetite Framework, aiming to adopt an
approach framed around the perspectives of its varied stakeholders
and taking into account current and expected changes in the external
environment, and rolled out a simplification of the limit and trigger
appetite thresholds for non-financial risk categories across the
Group’s locations. The Group accepts a degree of non-financial risk
exposure as an outcome of its chosen business activities and strategy.
It aims to manage these risks effectively to maintain its operational
resilience and its commitments to customers and all stakeholders
and avoid material adverse financial loss or impact to its reputation.
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Prudential plc Annual Report 2022 Risk identification
Risk identification covers Group-wide:
1 Top-down risk identification
2 Bottom-up risk identification
3 Emerging risk identification
Risk management
Risk measurement and assessment
Risks are assessed in terms of materiality.
Material risks which are modelled are included
in appropriately validated capital models.
Risk identifi catio n
Risk governance
and culture
Risk governance comprises the Board,
organisational structures, reporting
relationships, delegation of authority,
roles and responsibilities, and risk
policies. The Group-wide culture
framework includes principles and values
that define how business is to achieve its
strategic objectives, inform expectations
of leadership and guide ESG activities.
Capital
management
Capital adequacy is monitored to
ensure that internal and regulatory
capital requirements are met,
and that solvency buffers are
appropriate, over the business
planning horizon and under stress.
M
o
n
it
o
r a
n
d re
p
ort
Risk m
e
asure
m
e
Business
strategy
Business strategy and the business plan
provide direction on future growth and
inform the level of limits on solvency,
liquidity and for our key risks. The RCS
function provides input and opinion
on key aspects of business strategy.
n
t
a
n
d
a
s
s
e
s
s
m
e
n
t
Stress and
scenario testing
Stress and scenario testing is
performed to assess the robustness
of capital adequacy and liquidity,
and the appropriateness of
risk limits. Recovery planning
assesses the effectiveness of
the Group’s recovery measures
and the appropriateness
of activation points.
a n a ge and control
M
Monitor and report
Escalation requirements in the event of a breach are
clearly defined. Risk reporting provides regular updates
to the Group’s Board and Risk committees on exposures
against Board-approved appetite statements and limits.
Reporting also covers the Group’s principal risks.
Manage and control
Risk appetite and limits allow for the controlled growth
of the Group’s business, in line with business strategy
and plan. Processes that support the oversight and
control of risks include:
1 The Risk and Control Self-Assessment process
2 The Own Risk and Solvency Assessment (ORSA)
3 Group-approved limits and early warning triggers
4 Large risk approval process
5 Global counterparty limit framework
6 Critical incidents procedures
7 Stress and scenario testing, including
reverse stress testing
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Risk review / continued
3 The Group’s principal risks
The delivery of the Group’s strategy in building long-term value for
its shareholders and other stakeholders, focusing on high-growth
business in Asia and Africa, exposes Prudential to risks. The
materialisation of these risks within the Group or in its joint ventures,
associates or key third-party partners may have a financial impact and
may affect the performance of products or services or the fulfilment
of commitments to customers and other stakeholders, with an
adverse impact on Prudential’s brand and reputation. This report is
focused mainly on risks to the shareholder but includes those which
arise indirectly through policyholder exposures and third-party
business. The Group’s principal risks, which are not exhaustive,
are detailed below. The Group’s risk management cycle (detailed
above) includes within its scope the processes for prioritising and
determining the relative significance of ESG and climate-related risks,
as well as those associated with implementing the Group’s externally
communicated commitments. The Group’s 2022 ESG Report includes
further detail on the ESG and climate-related risks which contribute to
the materiality of the Group’s principal risks detailed below, including
those related to the Group’s operational and financial resilience, data
privacy requirements and expectations, the regulatory landscape
and the implementation of the Group’s strategy. The Group’s Risk
Factor disclosures can be found at the end of this document.
Risks to the Group’s financial situation
(including those from the external macroeconomic and geopolitical environment)
The global economic and geopolitical environment may impact on the Group directly by affecting trends in financial markets and asset
values, as well as driving short-term volatility.
Risks in this category include the market risks to our investments and the credit quality of our investment portfolio as well as liquidity risk.
Global economic and geopolitical conditions
With geopolitical tensions high as national alliances and blocs
evolve, the jostling of the current world order and the increasing
prioritisation of national security widely defined has become
a key determinant of macroeconomic policy, with geopolitical
and macroeconomic uncertainties being intertwined. Geopolitical
developments and tensions, macroeconomic conditions, and
broad policy-driven regulatory developments (see below), at times
interconnected in the speed and manner in which they evolve,
Market risks to our investments
(Audited)
The value of Prudential’s investments is impacted by fluctuations
in equity prices, interest rates, credit spreads, foreign exchange
rates and property prices. Although inflation remains at decades-
level highs, the Group’s direct exposure to inflation remains modest.
Exposure mainly arises through an increase in medical claims
obligations, driven by rising medical import prices. This exposure
can be effectively managed by the business’ well-established
practice and ability to reprice products. Challenges for insurers
linked to affordability and existing challenges in persistency are
detailed in the Insurance Risks section below.
The Group has appetite for market risk where it arises from
profit-generating insurance activities to the extent that it remains
part of a balanced portfolio of sources of income for shareholders
and is compatible with a robust solvency position. The Group’s
market risks are managed and mitigated by the following:
> The Group market risk policy;
> Risk appetite statements, limits and triggers;
> The Group’s capital and asset liability management committees;
> Asset and liability management activities, which include
management actions such as changes in asset allocation, bonus
revisions, repricing and the use of reinsurance where appropriate;
> The Group Investment Committee and Group Investment Policy;
> Hedging using derivatives, including currency forwards, interest
rate futures and swaps, and equity futures;
drive the operating environment and risk landscape for the Group
and the level of its exposure to the principal risks outlined below.
Macroeconomic and geopolitical developments are considered
material to the Group and can potentially increase operational and
business disruption, regulatory and financial market risks, and have
the potential to directly impact Prudential’s sales and distribution
networks, as well as its reputation. The potential impacts to the
Group are included in the disclosures on Risk Factors.
> The monitoring and oversight of market risks through
the regular reporting of management information;
> Regular deep dive assessments; and
> The Group Critical Incident Procedure (GCIP), which defines
specific governance to be invoked in the event of a critical
incident, such as a significant market, liquidity or credit-related
event. This includes, where necessary, the convening of a
Critical Incident Group (CIG) to oversee, coordinate, and
where appropriate, direct activities during a critical incident.
Interest rate risk, including asset liability management (ALM).
Interest rate risk is driven by the impact of the valuation of
Prudential’s assets (particularly government and corporate bonds)
and liabilities, which are dependent on market interest rates.
Prudential’s appetite for interest rate risk requires that assets and
liabilities should be tightly matched for exposures where assets or
derivatives exist that can cover these exposures. Interest rate risk
is accepted where this cannot be hedged, provided that this arises
from profitable products and to the extent that such interest rate
risk exposure remains part of a balanced exposure to risks and is
compatible with a robust solvency position.
Sustained inflationary pressures have driven interest rates higher,
these have the potential to increase further in the near-to-medium
term, and may impact the valuation of fixed income investments
and reduce fee income.
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Prudential plc Annual Report 2022 Risks to the Group’s financial situation (including those from the external macroeconomic and geopolitical environment)
continued
Market risks to our investments
(continued)
The Group’s risk exposure to rising interest rates also arises from the
potential impact to the present value of future fees for unit-linked
based businesses, such as in Indonesia and Malaysia, as well as the
impact to the present value of the future profits for accident and
health products, such as in Hong Kong. Exposure to higher interest
rates also arises from the potential impact to the value of fixed
income assets in the shareholder funds.
The Group’s risk exposure to lower/decreased interest rates arises
from the guarantees of some non-unit-linked products with a
savings component, including the Hong Kong and Singapore
with-profits and non-profit businesses. This exposure results from
the potential for an asset and liability mismatch, where long-dated
liabilities and guarantees are backed by short-dated assets.
When this duration mismatch is not eliminated, it is monitored
and managed through local risk and asset liability management
committees and Group risk limits consistent with the Group’s
appetite for interest rate risk.
The Group-level Capital and ALM Committee is a management
committee supporting the identification, assessment and
management of key financial risks to the achievement of the
Group’s business objectives. The Committee also oversees ALM,
solvency and liquidity risks of the local businesses as well as the
declaration and management of non-guaranteed benefits for
participating and universal life lines of business. Local business
units are responsible for the management of their own asset
and liability positions, with appropriate governance in place.
The objective of the local business unit ALM process is to meet
policyholder liabilities with the returns generated from the
investment assets held, while maintaining the financial strength
of capital and solvency positions. The ALM strategy adopted
by the local business units considers the liability profile and
related assumptions of in-force business and new products to
appropriately manage investment risk within ALM risk appetite,
under different scenarios in accordance with policyholders’
reasonable expectations, and economic and local regulatory
requirements. Factors such as the availability of matching
assets, diversification, currency and duration are considered as
appropriate. The assumptions and methodology used in the
measurement of assets and liabilities for ALM purposes conform
with local solvency regulations. Assessments are carried out on an
economic basis which conforms to the Group’s internal economic
capital methodology.
Liquidity risk
(Audited)
Prudential’s liquidity risk arises from the need to have sufficient
liquid assets to meet policyholder and third-party payments as
they fall due, considered under both business-as-usual and stressed
conditions. It includes the risk arising from funds composed of
illiquid assets and results from a mismatch between the liquidity
profile of assets and liabilities. Liquidity risk may impact on market
conditions and valuation of assets in a more uncertain way than for
other risks like interest rate or credit risk. It may arise, for example,
where external capital is unavailable at sustainable cost, where
Equity and property investment risk. The shareholder exposure
to equity price movements arises from various sources, including
from unit-linked products where fee income is linked to the market
value of funds under management. Exposure also arises from
with-profits businesses through potential fluctuations in the value
of future shareholders’ profits and where bonuses declared are
based broadly on historical and current rates of return from the
business’s investment portfolios, which include equities. The Group
has limited acceptance for exposures to equity risk, but accepts the
equity exposure that arises on future fees (including shareholder
transfers from the with-profits business).
The material exposures to equity risk in the Group’s businesses
include CPL’s exposure to equity risk through investments in equity
assets for most of its products, including participating and non-
participating savings products and protection and investment-linked
products. The Hong Kong business and, to a lesser extent, the
Singapore business contribute to the Group’s equity risk exposure due
to the equity assets backing participating products. The Indonesia
and Malaysia businesses are exposed to equity risk through their
unit-linked products, and in the case of Malaysia exposure also
arises from participating and investment-linked business.
Foreign exchange risk. The geographical diversity of Prudential’s
businesses means that it has some exposure to the risk of foreign
exchange rate fluctuations. Some entities within the Group write
policies, invest in assets or enter into other transactions in local
currencies or currencies not linked to the Group’s reporting/
functional currency, the US dollar. Although this limits the effect of
exchange rate movements on local operating results, it can lead to
fluctuations in the Group’s US dollar-reported financial statements.
This risk is accepted within the Group’s appetite for foreign
exchange risk. In cases where a non-US dollar denominated surplus
arises in an operation which is to be used to support Group capital
or shareholders’ interest (i.e. remittances), this currency exposure
may be hedged where considered economically favourable.
Further, the Group generally does not have appetite for significant
direct shareholder exposure to foreign exchange risks in currencies
outside the markets in which it operates, but it does have some
appetite for this on fee income and on equity investments within
the with-profits funds. Where foreign exchange risk arises outside
appetite, currency swaps and other derivatives are used to manage
the exposure.
derivatives transactions require a sudden significant need of liquid
assets or cash to post as collateral to meet derivatives margin
requirements, or where redemption requests are made against
funds managed for external clients (both retail and institutional).
Liquidity risk is considered material at the level of the Group.
Prudential has no appetite for any business to have insufficient
resources to cover its outgoing cash flows, or for the Group as a
whole to not meet cash flow requirements from its debt obligations
under any plausible scenario.
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Risk review / continued
Risks to the Group’s financial situation (including those from the external macroeconomic and geopolitical environment)
continued
Liquidity risk
(continued)
The Group has significant internal sources of liquidity sufficient to
meet its expected cash requirements for at least 12 months from
the date the financial statements are approved, without having
to resort to external sources of funding. The Group has a total of
$2.6 billion of undrawn committed facilities that can be made use
of, expiring in 2026. Access to further liquidity is available through
the debt capital markets and the Group’s extensive commercial
paper programme. Prudential has maintained a consistent
presence as an issuer in the market for the past decade.
A number of risk management tools are used to manage
and mitigate liquidity risk, including the following:
> The Group’s liquidity risk policy;
> Risk appetite statements, limits and triggers;
Credit risk
(Audited)
Credit risk is the potential for loss resulting from a borrower’s
failure to meet its contractual debt obligation(s). Counterparty risk,
a type of credit risk, is the probability that a counterparty to a
transaction defaults on its contractual obligation(s) causing the
other counterparty to suffer a loss. These risks arise from the
Group’s investments in bonds, reinsurance arrangements,
derivative contracts with third parties, and its cash deposits with
banks. Credit spread risk, another type of credit risk, arises when
the interest rate/return on a loan or bond is disproportionately low
compared with another investment with a lower risk of default.
Invested credit and counterparty risks are considered a material
risk for the Group’s business units.
The Group’s holdings across its life portfolios are mostly in local
currency and with a largely domestic investor base, which provides
support to these positions. These portfolios are generally
positioned towards high-quality names, including those with either
government or considerable parent company balance sheet
support. Areas which the Group is actively monitoring include the
developments in the Chinese Mainland property development
sector and the impacts of rising inflation and the tightening of
monetary policy in the Group’s key markets, as well as high
indebtedness in sub-Saharan African countries. The impacts of
these trends, which are being closely monitored, include potential
for deterioration in the credit quality of the Group’s invested credit
exposures, particularly due to rising funding costs and overall credit
risks, and the extent of downward pressure on the fair value of the
Group’s portfolios. The Group’s portfolio is generally well diversified
in relation to individual counterparties, although counterparty
concentration is monitored in particular in local markets where
depth (and therefore the liquidity of such investments) may be low.
Prudential actively reviews its investment portfolio to improve the
robustness and resilience of the solvency position. The Group has
appetite to take credit risk to the extent that it remains part of a
balanced portfolio of sources of income for shareholders and is
compatible with a robust solvency position. Further detail on the
Group’s debt portfolio is provided below.
> Regular assessment and reporting by the Group and business
units of Liquidity Coverage Ratios which are calculated under
both base case and stressed scenarios;
> The Group’s Liquidity Risk Management Plan, which includes
details of the Group Liquidity Risk Framework as well as analysis
of Group and business units liquidity risks and the adequacy
of available liquidity resources under business-as-usual and
stressed conditions;
> The Group’s Collateral Management Framework, which sets out
the approach to ensuring business units using derivatives have
sufficient liquid assets or ability to raise liquidity to meet
derivatives margins;
> The Group’s contingency plans and identified sources of liquidity;
> The Group’s ability to access the money and debt capital
markets; and
> The Group’s access to external committed credit facilities.
A number of risk management tools are used to manage and
mitigate credit and counterparty credit risk, including the following:
> A credit risk policy and dealing and controls policy;
> Risk appetite statements and portfolio-level limits that have
been defined on issuers, and counterparties;
> Collateral arrangements for derivative, secured lending reverse
repurchase and reinsurance transactions which aim to provide
a high level of credit protection;
> The Group Executive Risk Committee and Group Investment
Committee’s oversight of credit and counterparty credit risk
and sector and/or name-specific reviews;
> Regular assessments, including of individual and sector
exposures subject to elevated credit risks; and
> Close monitoring or restrictions on investments that may
be of concern.
The total debt securities at 31 December 2022 for the Group’s
continuing operations were $77.0 billion (31 December 2021:
$99.1 billion). The majority (70 per cent) of the portfolio is in
unit-linked and with-profits funds. The remaining 30 per cent
of the debt portfolio is held to back the shareholder business.
Group sovereign debt. Prudential invests in bonds issued by
national governments. This sovereign debt holding of the Group’s
operations represented 46 per cent or $10.5 billion1 of the
shareholder debt portfolio of the Group’s operations as at
31 December 2022 (31 December 2021: 47 per cent or $14.2 billion
of the shareholder debt portfolio for the Group’s continuing
operations). The particular risks associated with holding sovereign
debt are detailed further in the disclosures on Risk Factors.
The exposures held by the shareholder-backed business and
with-profits funds in sovereign debt securities at 31 December 2022
are given in note C1 of the Group’s IFRS financial statements.
Corporate debt portfolio. In the shareholder-backed business,
corporate debt exposures totalled $11.5 billion of which
$10.2 billion or 89 per cent were investment grade rated.
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Prudential plc Annual Report 2022 Risks to the Group’s financial situation (including those from the external macroeconomic and geopolitical environment)
continued
Credit risk
(continued)
Bank debt exposure and counterparty credit risk. The banking
sector represents a material concentration in the Group’s corporate
debt portfolio which largely reflects the composition of the fixed
income markets across the regions in which Prudential is invested.
As such, exposure to banks is a key part of its core investments,
as well as being important for the hedging and other activities
undertaken to manage its various financial risks. Exposure to the
sector is considered a material risk for the Group. Derivative and
reinsurance counterparty credit risk exposure is managed using an
array of risk management tools, including a comprehensive system
of limits. Prudential manages the level of its counterparty credit
risk by reducing its exposure, buying credit protection or using
additional collateral arrangements where appropriate.
The Group’s sustainability and ESG-related risks
At 31 December 2022:
> 89 per cent of the Group’s shareholder portfolio (excluding all
government and government-related debt) is investment grade
rated2. In particular, 55 per cent of the portfolio is rated2 A- and
above (or equivalent); and
> The Group’s shareholder portfolio is well diversified: no individual
sector3 makes up more than 13 per cent of the total portfolio
(excluding the financial and sovereign sectors).
These include sustainability risks associated with environmental considerations such as climate change (including physical and transition risks),
social risks arising from diverse stakeholder commitments and expectations and governance-related risks.
Material risks associated with key ESG themes may undermine the
sustainability of a business by adversely impacting its reputation
and brand, ability to attract and retain customers, employees and
distribution and other business partners, and increasing litigation
risks, and therefore the results of its operations and delivery of its
strategy and long-term financial success. Prudential seeks to
manage sustainability risks and their potential impact on its
business and stakeholders through a focus on the Group’s purpose
to ‘help people get the most out of life’, and transparent and
consistent implementation of its strategy in its markets and across
operational, underwriting and investment activities. The Group’s
strategy includes a focus on supporting a just and inclusive
transition to a lower-carbon global economy that places the
societies of developing markets at the forefront of considerations,
as well as providing greater and more inclusive access to good
health and financial security that meets the changing needs of
societies, promotes responsible stewardship in managing the
human impact of climate change and building human and social
capital with its broad range of stakeholders. It is enabled by strong
internal governance, sound business practices and a responsible
investment approach, with ESG considerations integrated into
investment processes and decisions and the performance of
fiduciary and stewardship duties, including voting and active
engagement decisions with respect to investee companies, as both
an asset owner and an asset manager. With the update to the
Board committee oversight responsibilities noted in section 1
above, climate risk, the Group’s reporting against the
recommendations of the TCFD and progress on the Group’s
external climate-related commitments will be a priority focus for
the Group Risk Committee for 2023.
Regulatory interest and developments continue to increase
globally and in Asia, and ESG and sustainability-related risks are
high on the agenda of both local regulators and international
supervisory bodies such as the International Association of
Insurance Supervisors (IAIS) and the International Sustainability
Standards Board (ISSB), which is progressing on ESG and
sustainability-related disclosure requirements. The Group continues
to actively engage with, and respond to, discussions, consultations
and supervisory information-gathering exercises. Details of the
Group’s sustainability and ESG-related risks are included in the
disclosure on Risk Factors.
As local regulatory requirements on climate risk management
and disclosures develop, the Group continues to leverage and share
its Group-wide experience and knowledge with its local businesses
on their ESG policies and approaches, both to provide support and
to help drive consistency in their continuing embedment across
Prudential’s businesses. The Group Risk Framework continues to be
critically evaluated and updated where required to ensure both ESG
and sustainability-related considerations and risks to the Group,
and the external impact from the Group’s activities, are
appropriately captured.
Risk management and mitigation of ESG sustainability risks
at Prudential include the following:
> A focus on enhancing access to good health and financial
security, and in connection with our stakeholders, ensuring
responsible stewardship of climate and ESG related issues;
clear governance arrangements, both in the definition of
the roles and responsibilities of the Board and management
committees for aspects of ESG and sustainability risks and
through the Group Governance Manual, which include ESG
and responsible business practice-linked policies, and the
Group Code of Business Conduct;
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The Group’s sustainability and ESG-related risks
continued
> The continued embedding of ESG and sustainability risk
within the Group Risk Framework and risk processes, including:
– Consideration of the potential for dynamically-changing
materiality in emerging environmental, social and governance
themes and risks through emerging risk identification and
evaluation processes;
– Definition of appropriate (and longer) time horizons with respect
to climate risk management and the requirement to consider
time horizons where required in risk-based decision-making;
– Reflection in the risk taxonomy that the Group can be both
impacted by ESG/sustainability issues as well as having an
impact on these in the external world (‘double materiality’);
– The applicability of the Group’s Model Risk and UDA Risk Policy
to the tools used for the aggregation of the Group’s carbon
intensity metrics across its investment portfolios; and
– Deep dives into ESG themes, including climate-related risks,
and Board-level training sessions.
> Integrating ESG considerations into investment processes
and responsible supply chain management; and
> Participation in networks and industry forums and working
groups such as the Net Zero Asset Owner Alliance (NZAOA),
Principles for Responsible Investment (PRI) and CRO Forum to
further develop understanding and support collaborative action
in relation to ESG sustainability risks such as climate change
and promoting a just and inclusive transition.
Further information on the Group’s ESG governance and ESG
strategic framework, as well as the management of material
ESG themes, are included in the Group’s ESG Report.
Risks from the nature of our business and our industry
These include the Group’s non-financial risks (including operational and transformation risks from significant change activity), the customer
conduct risks and insurance risks assumed by the Group in providing its products, and risks related to regulatory compliance.
Non-financial risks
The complexity of Prudential, its activities and the extent of
transformation in progress creates a challenging operating
environment and exposure to a variety of non-financial risks.
These risks are considered to be material at a Group level.
Operational risk. This is the risk of loss (or unintended gain or
profit) arising from inadequate or failed internal processes,
personnel or systems and external events, and may arise from
employee error, model error, system failures, fraud or other events
which disrupt business processes or which have a detrimental
impact to customers. Prudential accepts a degree of non-financial
risk exposure as an outcome of its chosen business activities and
strategy. It aims to manage these risks effectively to maintain its
operational resilience and its commitments to customers and all
stakeholders and avoid material adverse financial loss or impact
on its reputation.
Transformation risk. Transformation risk remains a material risk
for Prudential, with a number of significant change programmes
under way which, if not delivered and executed effectively to
defined timelines, scope and cost, may negatively impact its
operational capability, control environment, reputation, and ability
to deliver its strategy and maintain market competitiveness.
Prudential’s current portfolio of transformation and significant
change programmes include (i) the implementation of large scale
regulatory changes; (ii) the expansion of the Group’s digital
capabilities and use of technology, platforms and analytics; and
(iii) improvement of business efficiencies through operating model
changes, including those relating to the Group’s central, asset
management and investment oversight functions. Programmes
related to regulatory/industry change, such as those required to
effect the discontinuation of inter-bank offered rates (IBORs) in
their current form and the implementation of IFRS 17, are also
ongoing. Further detail on the risks to the Group associated with
large-scale transformation and complex strategic initiatives is
included in the disclosures on Risk Factors.
The Group therefore aims to ensure that, for both transformation
and strategic initiatives, strong programme governance is in place
with embedded risk expertise to achieve ongoing and nimble risk
oversight, with regular risk monitoring and reporting to risk
committees. Transformation risk oversight operates alongside the
Group’s existing risk policies and frameworks to ensure appropriate
governance and controls are in place to mitigate these risks.
Outsourcing and third-party risks. The Group’s outsourcing
and third-party relationships require distinct oversight and risk
management processes. The Group has a number of important
third-party relationships, both with market counterparties and
outsourcing partners, including distribution, technology and
ecosystem providers. In Asia, the Group maintains material
strategic partnerships and bancassurance arrangements. These
arrangements support the delivery of high level and cost-effective
services to customers, but also create a reliance on the operational
resilience and performance of outsourcing and business partners.
The Group’s requirements for the management of material
outsourcing arrangements have been incorporated in its Group
third-party supply and outsourcing policy, aligned to the
requirements of the Hong Kong IA’s GWS Framework, and which
outlines the governance in place in respect of material outsourcing
and third-party arrangements and the Group’s monitoring and risk
assessment framework. This ensures that appropriate contract
performance and risk mitigation measures are in place over these
arrangements. Third-party management is also included and
embedded in the Group-wide operational risk framework
(see below).
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Risks from the nature of our business and our industry
continued
Non-financial risks
(continued)
Information security and data privacy risk. Risks related
to malicious attacks on Prudential systems, service disruption,
exfiltration of data, loss of data integrity and the impact on the
privacy of our customer data continue to be prevalent, particularly
as the accessibility of attacking tools available to potential
adversaries increases. The frequency and sophistication of attacks,
particularly in relation to ransomware, continues to grow globally.
With a rapidly transforming technological landscape, continued
expansion of Cloud services, including the adoption of a hybrid
multi-cloud strategy partnering with third-party service providers,
and the increased scrutiny from regulators against a backdrop
of tightening data privacy regulations across Asia, security and
privacy risks are material at the Group level. To mitigate the risk, the
Group has adopted a holistic risk management approach, not only
to prevent and disrupt potential attacks against Prudential systems
but to also manage the recovery process should an attack take
place successfully. It is also well understood that some attacks
will still be successful despite the layered security control defence-
in-depth methodology that Prudential and other mature
organisations assume, and so it is essential that the Group’s security
strategy encompasses a cyber resilience theme focusing on its
ability to respond and recover from an attack in order to maintain
its reputation and customer trust.
Globally, ransomware and distributed denial of services (DDoS)
attacks have increased markedly in 2022, in part driven by the
Russia-Ukraine conflict. The Group has responded swiftly by
leveraging threat intelligence information to configure security
systems to mitigate any potential attacks, whether targeted or
collateral, from these events. Prudential also has a number of
defences in place to protect its systems from these types of
attacks, including but not limited to: (i) DDoS protection for the
Group’s websites via web application firewall services; (ii) AI-based
endpoint security software; (iii) continuous security monitoring;
(iv) network-based intrusion detection; and (v) employee training
and awareness campaigns to raise understanding of attacks
utilising email phishing techniques. Cyber insurance coverage is
in place to provide some protection against potential financial
losses and the Group conducts simulation exercises for ransomware
attacks to assess and develop the effectiveness of incident
responses across its businesses. Cyber-attack simulation exercises
have been carried out during the year to enhance preparedness.
The Group has not, to date, experienced or been affected by any
cyber or data breaches which have had a material impact on
its operations. However, as the Group continues to develop and
expand digital services and emerging products, its reliance on
third-party service providers and business partners who specialise
in niche capabilities is also increasing. A number of supply chain
attacks took place in 2022 with notable breaches of service
disruption and infringements to data security, integrity or privacy
on Prudential’s service providers, which as a result directly impacted
the Group’s ability to service customers, maintain its reputation
and comply with regulation and privacy requirements. As part
of the remedial actions, the Group has continued to enhance
its third-party management process including the enhanced
security due diligence process when onboarding new business
partners and the ongoing monitoring of key business partners.
The key material risks can be summarised into three threat areas:
(i) ransomware attacks, (ii) supply chain compromise and
(iii) service disruption caused by cyber threats. In order for the
Group to manage these risks effectively, the security strategy
encompasses the ongoing maturity and development of protective
and detective controls, while further expanding and uplifting its
ability to react to and recover from successful attacks on both the
Group’s system as well as third-party partner systems.
The Group’s Information Security and Privacy strategy is structured
with three key pillars:
> Defending the nation – To expand coverage and maturity of
protective and detective security controls in response to both
the changing technology landscape, such as the adoption of
new Cloud services, as well as the heightened threat actor risks.
Within this pillar, continued focus on Africa business units
remains in order to ensure the same maturity level as Asia-based
business units is achieved.
> Cyber resilience – To build on a number of existing security
processes and formalise the development of an integrated
cross-functional incident management framework that is
regularly tried and tested. This includes further aligning Group
incident management plans, business unit incident
management plans and cyber security incident management
plans along with executing a number of drills and tabletop
exercises. The drills and exercises will be conducted at all levels
including executive committee members and within the business
units while bringing in critical key business partners such as cyber
insurance providers and forensic investigation partners.
> Enabling the digital journey – To focus on introducing and
building out key security controls within the digital ecosystem
to ensure continued enablement of the organisation’s digital
strategy while improving customer experience and data security
within the digital ecosystem.
The centralised Technology Risk Management team leverages skills,
tools and resources across different technology domains to provide
advisory, assurance and operations support for holistic technology
risk management including information security and privacy. The
Group Technology Risk Committee provides Group-wide oversight
of technology risks, including information security and privacy.
Technology risk management is also performed locally within
business units, with inputs from business information security
officers and with oversight from local risk committees. The Board
is briefed at least twice annually on cyber security and privacy by
the Group Chief Information Security Officer (CISO) and is being
engaged more closely on cyber resilience with executive-level cyber
tabletop exercises and risk workshops conducted in 2022 and
continuing in 2023 to ensure that members have the means to
enable appropriate oversight and understand the latest threats
and regulatory expectations. The Group Information Security,
Privacy and Data policies were developed to ensure compliance
with all applicable laws and regulations, and the ethical use of
customer data. In addition, these policies consider the
requirements of a range of supervisory guidelines including the
international standards on information security (ISO
27001/27002) and the US National Institute of Standards and
Technology’s Cyber Security Framework. Localised regulations or
legal requirements are addressed by local policies or standards.
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Risk review / continued
Risks from the nature of our business and our industry
continued
Non-financial risks
(continued)
Model and user developed application (UDA) risk.
Erroneous or misinterpreted tools used in core business activities,
decision-making and reporting may have adverse consequences
for Prudential. The Group utilises various tools to perform a range
of operational functions including the calculation of regulatory or
internal capital requirements, the valuation of assets and liabilities,
determining hedging requirements, and acquiring new business
via digital platforms. Many of these tools are an integral part of the
information and decision-making frameworks used at Prudential
and errors or limitations in these tools, or inappropriate usage,
may lead to regulatory breaches, inappropriate decision-making,
financial loss, customer detriment, inaccurate external reporting
or reputational damage.
The Group has no appetite for model and UDA risk arising from
failures to develop, implement and monitor appropriate risk
mitigation measures. Prudential’s model and UDA risk framework
and policy applies a risk-based approach from the point of view of
a broad range of stakeholders, including policyholders, in order to
ensure appropriate and proportionate risk management is applied
to all models and UDAs used across the business (including those
under development).
Prudential’s model and UDA risk is managed and mitigated using
the following:
> The Group’s Model and UDA Risk Policy and relevant guidelines;
> Annual risk assessment (including model limitations, known
errors and approximations) of all tools used for core business
activities, decision-making and reporting;
> Maintenance of appropriate documentation for tools used;
> Implementation of controls to ensure tools are accurate and
appropriately used;
> Tools are subject to rigorous and independent model validation;
and
> Regular reporting to the RCS function and relevant risk and Board
committees to support the measurement and management of
the risk.
Technological developments, in particular in the field of artificial
intelligence (AI), pose new questions on risk oversight provided
under the Group Risk Framework. An oversight forum for the use
of AI and key ethical principles apply to the use of AI by the Group.
Business disruption and operational resilience risk.
The Group continually seeks to increase business resilience through
adaptation, planning, preparation and testing of contingency
plans and its ability to respond effectively to and operate through
disruptive incidents. Business resilience is at the core of the Group’s
embedded Business Continuity Management (BCM) programme
and framework that help to protect the Group’s systems and its
key stakeholders. The BCM programme and framework covers
business impact analyses, risk assessments, and the maintenance
and exercising of business continuity, incident management and
disaster recovery plans. Business disruption risks are monitored
by the Group Security function, with key operational effectiveness
metrics and updates on specific activities reported to the Group
Risk Committee.
Financial crime risk. As with all financial services firms, Prudential
is exposed to risks relating to money laundering (the risk that
the products or services of the Group are used by customers or
other third parties to transfer or conceal the proceeds of crime);
fraud (the risk that fraudulent insurance claims, transactions,
or procurement of services, are made against or through the
business); sanctions compliance breaches (the risk that the Group
undertakes business with individuals and entities on the lists of the
main sanctions regimes); and bribery and corruption (the risk that
employees or associated persons seek to influence the behaviour
of others to obtain an unfair advantage or receive benefits from
others for the same purpose).
Prudential operates in some high-risk markets where, for example,
the acceptance of cash premiums from customers may be common
practice, large-scale agency networks may be in operation where
sales are incentivised by commission and fees and concentration of
exposure to politically-exposed persons may give rise to higher
geopolitical risk exposure.
The Group-wide policies in place on anti-money laundering, fraud,
sanctions and anti-bribery and corruption risks reflect the values,
behaviours and standards that are expected across the business.
Screening and transaction monitoring systems are in place with
ongoing improvements and upgrades being implemented where
required, and a programme of compliance control monitoring
reviews is in place across the Group. The Group has continued
to strengthen and enhance its financial crime risk management
capability through investment in advanced analytics and AI tools.
Proactive detective capabilities are being implemented across the
Group and delivered through a centralised monitoring hub, to
further strengthen oversight of financial crime risks in the areas of
procurement and third-party management. Risk assessments are
performed annually at higher-risk locations. Due diligence reviews
and assessments against Prudential’s financial crime policies are
performed as part of the Group’s business acquisition process.
The Group continues to undertake strategic activity to monitor
and evaluate the evolving fraud risk landscape, mitigate the
likelihood of fraud occurring and increase the rate of detection.
The Group has in place a mature confidential reporting system
through which employees and other stakeholders can report
concerns relating to potential misconduct. The process and results
of this system are overseen by the Group Audit Committee.
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Group-wide framework and risk management for non-financial risks
The risks outlined above form key elements of the Group’s
non-financial risk profile. A Group-wide operational risk framework
is in place to identify, measure and assess, manage and control,
monitor and report effectively on all material operational risks
across the business. Outputs from these processes and activities
performed by individual business units are monitored by the RCS
function, which provides an aggregated view of the risk profile
across the business to the Group Risk Committee and the Board.
The key components of the framework are listed below:
outsourcing and third-party supply, business continuity, financial
crime, technology and data, operations processes and extent
of transformation. These policies and standards include subject
matter expert-led processes that are designed to identify, assess,
manage and control operational risks, detailed below. These
activities are fundamental in maintaining an effective system
of internal control, and ensure that operational risk considerations
are embedded in key business decision-making, including material
business approvals and in setting and challenging the Group’s
strategy. These activities include:
> Application of a risk and control self-assessment (RCSA) process,
where risk exposures are identified and assessed as part of a
periodical cycle;
> An internal incident management process, which identifies,
quantifies and monitors remediation conducted through root
cause analysis and application of action plans for risk events;
> An annual scenario analysis process for the quantification of
extreme, yet plausible manifestations of key operational risks
across the business on a forward-looking basis; and
> A risk appetite framework for non-financial risks that articulates
the level of risk exposure the business is willing to tolerate and
defines escalation processes for breaches of appetite.
These core framework components are embedded across
Prudential via the Group Operational Risk Policy and accompanying
standards, which set out the key principles and minimum standards
for the management of operational risk within the Group’s risk
appetite. These sit alongside other risk policies and standards that
individually engage with specific operational risks, including
> Reviews of key operational risks and challenges within Group
and business unit business plans during the annual planning
cycle, to support business decisions;
> Corporate insurance programmes to limit the financial impact
of operational risks;
> Oversight of risk management during the transformation life
cycle, project prioritisation and the risks, interdependencies
and possible conflicts arising from a large portfolio of
transformation activities;
> Screening and transaction monitoring systems for financial
crime and a programme of compliance control monitoring
reviews and regular risk assessments;
> Internal and external review of cyber security capability and
defences; and
> Regular updating and risk-based testing of disaster recovery
plans and the Critical Incident Procedure process.
Risks associated with the Group’s joint ventures and associates
Prudential operates, and in certain markets is required by local
regulation to operate, through joint ventures and other joint
ownership or third-party arrangements (including associates).
A material proportion of the Group’s business comes from its
joint venture and associate in the Chinese Mainland and India
respectively. For such operations, the level of control exercisable by
the Group depends on the terms of the contractual agreements
between participants. As such, the level of oversight, control and
access to management information the Group is able to exercise
over the extent of the exposure to material risks at these operations
may be lower compared with the Group’s wholly owned businesses.
Further information on the risks to the Group associated with its
joint ventures and other shareholders and third parties are included
in the disclosures on Risk Factors.
Insurance risks
(Audited)
Insurance risks make up a significant proportion of Prudential’s
overall risk exposure. The profitability of the Group’s businesses
depends on a mix of factors, including levels of, and trends in,
mortality (policyholders dying), morbidity (policyholders becoming
ill or suffering an accident) and policyholder behaviour (variability
in how customers interact with their policies, including utilisation
of withdrawals, take-up of options and guarantees and persistency,
ie lapsing/surrendering of policies), and increases in the costs of
claims over time (claim inflation). The risks associated with adverse
experience relative to assumptions associated with product
performance and customer behaviour are detailed in the
disclosures on Risk Factors. The Group has appetite for retaining
insurance risks in the areas where it believes it has expertise and
operational controls to manage the risk and where it judges it to
be more value creating to do so rather than transferring the risk,
and only to the extent that these risks remain part of a balanced
portfolio of sources of income for shareholders and are compatible
with a robust solvency position.
Whilst most markets have moved, at difference paces, to an
endemic approach in managing Covid-19, the impact of
policyholders having deferred medical treatment during the
pandemic (latent morbidity impacts) continues to be experienced
in a number of markets. The implications from other factors such
as long-term post-Covid-19 symptoms (although there is currently
no consensus on the longer-term impact on morbidity) is being
monitored. Inflationary pressures driving higher interest rates may
lead to increased lapses for some guaranteed savings products
where higher levels of guarantees are offered by products of the
Group’s competitors, reflecting consumer demand for returns at the
level of, or exceeding, inflation. A high inflation environment, and
the broader economic effects of recessionary concerns, may also
increase lapses, surrenders and fraud, as well as heighten premium
affordability challenges.
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Risk review / continued
Risks from the nature of our business and our industry
continued
Insurance risks
(continued)
The principal drivers of the Group’s insurance risk vary across its
business units. In Hong Kong, Singapore, Indonesia and Malaysia,
a significant volume of health and protection business is written
and the most significant insurance risks are persistency risk,
morbidity risk, and medical claims inflation risk.
Medical claims inflation risk: A key assumption in these markets
is the rate of medical claims inflation, which is often in excess of
general price inflation. Where the cost of medical treatment
increases more than expected, resulting in higher than anticipated
medical claims cost passed on to Prudential, is a key risk. This risk
is best mitigated by retaining the right to reprice products and
appropriate overall claims limits within policies, either per type of
medical treatment or in total across a policy, annually and/or over
the policy lifetime. Medical reimbursement downgrade experience
(where the policyholder reduces the level of the coverage/
protection in order to reduce premium payments) following any
repricing is also a factor to be monitored by the Group’s businesses.
The risks to the Group’s ability to reprice are included in the
disclosures on Risk Factors.
Morbidity risk: Prudential’s morbidity risk is managed through
prudent product design, underwriting and claims management,
and for certain products, the right to reprice where appropriate.
Prudential’s morbidity assumptions reflect its recent experience
and expectation of future trends for each relevant line of business.
Persistency risk: The Group’s persistency assumptions reflect
recent experience and expert judgement, especially where a lack
of experience data exists, as well as any expected change in future
persistency. Persistency risk is managed by appropriate controls
across the product life cycle. This includes review and revisions to
product design and incentive structures where required, ensuring
appropriate training and sales processes, including those ensuring
active customer engagement and high service quality, appropriate
customer disclosures and product collaterals, use of customer
retention initiatives and post-sale management through regular
experience monitoring. Strong risk management and mitigation
of conduct risk and the identification of common characteristics
of business with high lapse rates is also crucial. Where appropriate,
allowance is made for the relationship (either assumed or observed
historically) between persistency and investment returns.
Modelling this dynamic policyholder behaviour is particularly
important when assessing the likely take-up rate of options
embedded within certain products.
Customer conduct risks
Prudential’s conduct of business, especially in the design and
distribution of its products and the servicing of customers, is crucial
in ensuring that the Group’s commitment to meeting its customers’
needs and expectations are met. The Group’s customer conduct
risk framework, owned by the Chief Executive Officer, reflects
management’s focus on customer outcomes.
Factors that may increase conduct risks can be found throughout
the product life cycle, from the complexity of the Group’s products
and services to its diverse distribution channels, which include its
Prudential’s insurance risks are managed and mitigated using
the following:
> The Group’s insurance policy, which sets out the Group’s
insurance risk appetite and required standards for effective
insurance risk management by head office and local businesses,
including processes to enable the measurement of the Group’s
insurance risk profile, management information flows and
escalation mechanisms;
> The Group’s product and underwriting risk policy, which sets out
the required standards for effective product and underwriting
risk management and approvals for new, or changes to existing,
products (including the role of the Group), and the processes
to enable the measurement of underwriting risk. The policy
also describes how the Group’s Customer Conduct Risk Policy
is met in relation to new product approvals and current and
legacy products;
> The Group’s counter fraud policy, which sets out the required
standards to enhance fraud detection, prevention and
investigation activities. The policy also sets out the framework
to tackle fraud that safeguards customers, protects local
businesses and the Group’s reputation and provides assurance
that fraud risk is managed within appetite, and to protect
resources to support sustainable business growth;
> In product design and appropriate processes related to the
management of policyholders’ reasonable expectations;
> The risk appetite statements, limits and triggers;
> Using persistency, morbidity and longevity assumptions that
reflect recent experience and expectation of future trends, and the
use of industry data and expert judgement where appropriate;
> Using reinsurance to mitigate mortality and morbidity risks;
> Ensuring appropriate medical underwriting when policies are
issued and appropriate claims management practices when
claims are received in order to mitigate morbidity risk;
> Maintaining the quality of sales processes, training and using
initiatives to increase customer retention in order to mitigate
persistency risk;
> The use of mystery shopping to identify opportunities
for improvement in sales processes and training;
> Using product repricing and other claims management
initiatives in order to mitigate morbidity and medical
expense inflation risk; and
> Regular deep dive assessments.
agency workforce, virtual face-to-face sales and sales via online
digital platforms. Prudential has developed a Group Customer
Conduct Risk Policy which sets out five customer conduct standards
that the business is expected to meet, being:
1 Treat customers fairly, honestly and with integrity;
2 Provide and promote products and services that meet customer
needs, are clearly explained and that deliver real value;
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continued
Customer conduct risks
(continued)
3 Manage customer information appropriately, and maintain
the confidentiality of customer information;
4 Provide and promote high standards of customer service; and
> The Group’s code of business conduct and conduct standards,
product underwriting and other related risk policies, and
supporting controls including the Group’s fraud risk control
programme;
5 Act fairly and timely to address customer complaints and any
> A culture that supports the fair treatment of the customer,
errors found.
Prudential manages conduct risk via a range of controls that are
assessed through the Group’s conduct risk assessment framework,
reviewed within its monitoring programmes, and overseen within
reporting to its boards and committees.
As the pandemic-related initiatives and campaigns rolled out
across markets to support customers expire (including customer
cash benefits, goodwill payments, and extended grace periods
for premium payments), the Group is monitoring the impact to
customers to ensure they are treated fairly and with due care
aligned with the Group’s customer conduct risk framework. The
virtual face-to-face sales processes and digital product offerings,
rolled out in most markets during the pandemic, continue to be
monitored for customer conduct, operational, regulatory
compliance and commercial risks.
Management of Prudential’s conduct risk is key to the Group’s
strategy. Prudential’s conduct risks are managed and mitigated
using the following:
incentivises the right behaviour through proper remuneration
structures, and provides a safe environment to report conduct
risk-related issues via the Group’s internal processes and the
Speak Out programme;
> Distribution controls, including monitoring programmes relevant
to the type of business (insurance or asset management),
distribution channel (agency, bancassurance, or digital) and
ecosystem, to ensure sales are conducted in a manner that
considers the fair treatment of customers within digital
environments;
> Quality of sales processes and training, and using other
initiatives such as special requirements for vulnerable customers,
to improve customer outcomes;
> Appropriate claims management and complaint handling
practices; and
> Regular deep dive assessments on, and monitoring of,
conduct risks and periodic conduct risk assessments.
Risks related to regulatory and legal compliance
Prudential operates in highly regulated markets and under the
ever-evolving requirements and expectations of diverse and
dynamic regulatory, legal and tax regimes which may impact its
business or the way it is conducted. The complexity of legal and
regulatory (including sanctions) compliance continues to evolve
and increase, representing a challenge for international businesses.
Compliance with the Group’s legal or regulatory obligations
(including in respect of international sanctions) in one jurisdiction
may conflict with the law or policy objectives of another
jurisdiction, or may be seen as supporting the law or policy
objectives of one jurisdiction over another, creating additional
legal, regulatory compliance and reputational risks. These risks
may be increased where the scope of regulatory requirements
and obligations are uncertain, and where specific cases applicable
to the Group are complex. Regulatory risks cover a broad range of
risks including changes in government policy and legislation, capital
control measures, and new regulations at either a national or
international level. The breadth of local and Group-wide regulatory
arrangements presents the risk that requirements are not fully met,
resulting in specific regulator interventions or actions including
retrospective interpretation of standards by regulators. As the
industry’s use of emerging technological tools and digital services
increases, this is likely to lead to new and unforeseen regulatory
issues and the Group is monitoring emerging regulatory
developments and standards on the governance and ethical use
of technology and data. In certain jurisdictions in which Prudential
operates there are a number of ongoing policy initiatives and
regulatory developments which will impact the way Prudential is
supervised. These developments continue to be monitored by the
Group at a national and global level and these considerations form
part of the Group’s ongoing engagement with government policy
teams, industry groups and regulators. Further information on
specific areas of regulatory and supervisory focus and changes are
included in the disclosures on Risk Factors.
Risk management and mitigation of regulatory risk at Prudential
includes:
> Proactively adapting and complying with the latest regulatory
developments;
> Group and business unit-level compliance oversight and
risk-based testing in respect of adherence with regulations;
> Close monitoring and assessment of our business and regulatory
environment and strategic risks;
> The explicit consideration of risk themes in strategic decisions;
> Ongoing engagement with national regulators, government
policy teams and international standard setters; and
> Compliance oversight to ensure adherence with in-force
regulations and management of new regulatory developments.
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Viability statement prepared in accordance with
Provision 31 of the UK Corporate Governance Code
The Group’s longer-term prospects
Prudential aims to make healthcare affordable and accessible,
protect people’s wealth and empower customers to save for their
goals, which can often be over a time frame of many years. As such,
Prudential considers that its purpose aligns closely with important
societal needs, including making health and financial security
more accessible, improving financial inclusion and education
and transitioning to a low-carbon economy. Prudential is focused
on addressing these increasing needs, reflecting population
demographics in our chosen markets.
The drivers for this structural growth, such as the low penetration
rates across the Asian region, are discussed on pages 8 to 31,
alongside the activities we have taken to deliver our objectives and
enhance our capabilities. In undertaking these activities, we aim both
to meet the evolving needs of our customers and provide sustainable
growth for our shareholders, which will support the viability of our
business over the longer term.
2022 has seen an easing of Covid-19 related restrictions, although
the timing and extent of easing varied across the markets in which
Prudential operates. During the year, we have seen a gradual return to
a more normalised sales environment. We expect this normalisation
to continue, albeit with some uncertainty over the short term.
Over the longer term we believe that the demand for our products
will continue to grow in line with the structural growth in our
chosen markets.
All of the Group’s activities are underpinned by ongoing risk
management, implemented via the Group Risk Framework and risk
appetite limits described in the Group risk report on pages 51 to 53.
The Group as a whole and each of its life assurance operations are
subject to extensive regulation and supervision, which are designed
primarily to reinforce the Group’s management of its long-term
solvency, liquidity and viability to ensure that it can continue to meet
obligations to policyholders. Further details on the current capital
strength of the Group are provided on pages 44 to 47.
The Group’s management of wider environmental, social and
governance issues that could pose a risk to the Group in the future,
including the impact of climate change, is set out in the
Environmental, Social and Governance report on pages 66 to 168.
This risk and regulatory focus supports the sustainability of our
business over the longer term.
Period of viability assessment
The Directors have assessed the viability of the Group for a period
longer than the 12 months required by the going concern statement.
The Directors performed the assessment by reference to the
three-year plan period to 31 December 2025. Three years is
considered an appropriate period as this is the period over which the
Group undertakes stress testing for the key economic and insurance
risk factors which most directly affect the viability of the Group.
A period of three years is selected as these forecasts are inherently
volatile over a longer estimation period. This period also represents
the period covered by the detailed business plan that is prepared
annually on a rolling three-year basis. In approving the business plan,
the Directors reviewed the Group’s projected performance with
regards to profitability, cash generation and capital position, together
with the parent company’s liquidity over this three-year period.
Assumptions applied in the plan include foreign exchange rates,
interest rates, credit spreads, equity growth rates, economic growth
rates, the impact on the business environment arising from the
impact of Covid-19 and anticipated regulatory changes. The Directors
are satisfied that this period is sufficient to enable a reasonable
assessment of viability to be made.
Assessment of principal risks over the period
The Group’s business plan implements the Group’s strategic
objectives through the business model and activities discussed on
pages 14 to 15. Assessment of the risks to achieving the projected
performance remains an integral part of the planning process.
The Group’s approach to risk management and a summary of the
key risks facing the Group are set out on pages 48 to 63.
For the purposes of assessing the Group’s viability, the Directors
considered those risks where the impact of possible adverse external
developments could be of such speed and severity to present a shock
to the Group’s financial position. While all the risks set out in the risk
report have the potential to impact the Group’s performance, the
key risks impacting the Group’s viability are: market risk, credit risk,
liquidity risk and regulatory risk. The Directors also considered the
macroeconomic environment and geopolitical risks in the markets
in which the Group operates. Mitigation in place for these key risks
to viability is set out on pages 48 to 63.
Stress and scenario testing
As noted above, underpinning the projections in the business plan
are a number of economic and other assumptions. To evaluate the
Group’s resilience to significant deteriorations in market and credit
conditions and other shock events, these risks are grouped together
into scenarios which are then applied to the assumptions underlying
the business plans. Stresses have been applied to the economic and
non-economic assumptions underlying the base case business plan,
reflecting the Group’s management of its position within its risk
appetite. The stresses applied to our economic plan and other
assumptions in two adverse economic scenarios were as below:
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Prudential plc Annual Report 2022 Global deflation
Global inflation
Interest
rate
stress
(75)bps
+25bps to
+200bps5
Equity
stress
(20)% to
(25)%
(25)% to
(30)%5
Equity
Volatility/Risk
Premium
Corporate credit
spread increase
Credit long-term
loss/long-term
spread4
n/a
+50bps
n/a
+75bps/
(50)bps
+75bps5
+100bps/
+250bps
Credit default/
downgrade
3 times base
assumption
3 times base
assumption
Adverse
currency
movement
Other
stress
n/a Adverse policyholder
behaviour
5% Adverse policyholder
behaviour
The impact on the business of known areas of regulatory change
whose financial implications can be reasonably quantified is also
considered as part of the plan. As well as known areas of regulatory
change, the Group is exposed to the risk of sudden and unexpected
changes in regulatory requirements at the Group and local levels.
While unexpected changes cannot be fully anticipated and hence
modelled, the risk of regulatory change is mitigated by capital held
by the Group and its subsidiaries in excess of Group and local
regulatory requirements, the Group and its subsidiaries’ ability to
generate significant capital annually through operational delivery
and the availability of compensating actions designed to restore
key capital metrics.
Conclusion on viability
Based on this assessment, the Directors have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year plan
period to December 2025.
The sensitivity of the Group’s regulatory solvency at 31 December
2022 to changes in key assumptions is set out on page 406 of this
annual report. In addition, the adequacy of liquid resources of the
Group’s parent company across the plan period has been assessed by
considering a stress scenario assuming the closure of short-term debt
markets, as well as additional calls on central liquidity by the local
businesses. In this liquidity stress scenario, the Group would have
access to sufficient resources to meet the funding requirements of the
business, after taking into account the Group’s undrawn committed
liquidity facilities of $2.6 billion, on top of central cash and short-term
investment balances, which as at 31 December 2022 were
$3.1 billion. The redemption of debt in January 2023 reduced this
balance by $0.4 billion.
The scenarios tested showed that the Group would be able to
maintain viability over the three-year period under assessment, after
taking account of the actions available to management to mitigate
the impacts on capital and liquidity in such scenarios. These actions
include, but are not limited to, rebalancing investment portfolios,
increased use of reinsurance, repricing of in-force benefits and
changes to the mix of new business being sold. In addition, the Group
conducts an annual reverse stress test which gives the Directors an
understanding of the maximum resilience of the Group to extremely
severe adverse scenarios. The analysis assists in identifying
management actions that could be implemented to restore the
Group’s capital and liquidity resources from extreme positions.
This analysis also informs the Group’s recovery plan and liquidity
risk management plan.
Notes
1
2
3
4
5
Excluding assets held to cover linked liabilities and those of the consolidated investment funds.
Based on middle rating from Standard & Poor’s, Moody’s and Fitch. If unavailable, NAIC and other external ratings and then internal ratings have been used.
Source of segmentation: Bloomberg Sector, Bloomberg Group and Merrill Lynch. Anything that cannot be identified from the three sources noted is classified as other.
Long-term parameter stresses are only applicable to GIECA.
Position in range depends on local market.
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ESG report
Creating a better future,
together with you
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Prudential plc Annual Report 2022 Our 2022 highlights
Demonstrating our continuing commitment to making a difference
in the markets in which we operate across our strategic priorities.
Making health and financial security accessible
FIND OUT MORE PAGE 78
Prudential launched our
dedicated Syariah
life insurance entity
in Indonesia
Made for Every
Family inclusive
family cover
provided in our markets
89%
customer retention
Supporting climate transition and responsible investment across our markets
FIND OUT MORE PAGE 90
On track to meet
25%
WACI reduction by 2025
Investee engagement
programme across
climate, palm oil
and human rights
Just and Inclusive
Transition
paper published
Leading Emerging
Markets Transition
Investment project
within NZAOA
Included as a partner in the
Just Energy
Transition Partnership
for Vietnam
First Climate
Transition Plan
published
Engaging and empowering our people and communities
FIND OUT MORE PAGES 109 AND 133
35%
women in senior leadership
350
Mental Health First Aiders
$12.2m
community investment
cash contribution
US$6.5m
Covid-19 relief fund since 2020
18,000
employee volunteering hours
in local communities
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Our approach
Introduction
Prudential is proud to celebrate its 175th anniversary and 100 years
of operations in Asia in 2023. While 2022 was the first full year for
the Group as an Asia and Africa business, Prudential has sought
to provide social good through financial protection since 1848.
Our company was one of the first to support Great Britain’s working
classes through innovative and affordable ‘penny policies’. While our
offering and focus have evolved, our philosophy of being there for
our customers and their communities in times of need has
remained steadfast.
Most of the markets in which we now operate are characterised by
relatively low levels of insurance cover and limited social safety nets.
Changing demographics, notably ageing populations alongside the
rising middle-class, have created a significant and growing health and
protection gap. Prudential seeks to close this gap and our ESG efforts
are firmly embedded within our strategy.
We are committed to inclusivity in all that we do for our customers,
our people and our communities. Our ‘Made for Every Family’
initiative aspires to make our coverage inclusive of how families
live their lives across different parts of the world.
Our people have a distinct opportunity to serve billions of people
across Asia and Africa. As an organisation, we are pushing boundaries
to remove barriers to inclusion, investing in talent and creating a
culture that binds us together to make that real-life impact.
As a major asset owner and manager, our most significant
contribution to combatting climate change is through the
decarbonisation of our investment portfolio. Prudential has the
goal of a 25 per cent reduction in emissions intensity from our
portfolio by 2025. We have already made significant progress
towards this commitment, with sustained reduction in our weighted
average carbon intensity (WACI) and substantive completion of
our coal divestment.
As Asia and Africa are being challenged by the impacts of climate
change, Prudential has a distinctive role to play in the transition to
a low-carbon economy. Our decarbonisation strategy acknowledges
the nature of the markets in which we operate and seeks to ensure
the financial and social burden of the transition is just and inclusive,
as set out in our 2022 white paper. More broadly, through our
investments, we seek to play a role in the growth of robust capital
markets across Asia and Africa. This is critical to sustainable
economic development.
As we look forward to our next 175 years, nothing could be
more important than continuing our work to deliver social good –
today and for the future.
Our purpose and strategy
The key features of our ESG framework remain its three strategic
pillars, which have clear alignment with our business strategy.
Within each of these, specific focus areas have been identified where
we believe that there is an opportunity for Prudential to make a
meaningful impact, and as such we place greater focus on these.
We have used this framework to structure the narrative sections of
our 2022 ESG Report, where we seek to provide a qualitative and
quantitative update on our progress in the year across each area.
Our targets, challenges and goals are set in the context of this
framework to allow us to measure our progress and set future
ambitions.
T H E P I L L A R S A N D FOCUS AREAS ARE:
Making health and
financial security accessible
> Digital health innovation
> Inclusive offerings
> Meeting the changing
needs of our customers
READ MORE PAGE 78
Building
social capital
> Our people
responsibility
> Our digital
responsibility
READ MORE PAGE 109
P O R ATE PURP
O
S
E
R
C O
Helping people
get the most
out of life
Stewarding the human
impacts of climate change
> Decarbonising our
investment portfolio
> Supporting a just and
inclusive transition
READ MORE PAGE 90
THE FOLLOWING STRATEGIC
ENABLERS SUPPORT THESE PILLARS:
Good governance
and responsible
business practices
READ MORE PAGE 140
Responsible
investment
READ MORE PAGE 122
Community
engagement
and investment
READ MORE PAGE 133
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ESG report / continuedPrudential plc Annual Report 2022 Targets
We recognise the importance of targets in evidencing our commitment to progress on ESG topics. Our long term target is to become a net-zero
asset owner by 2050, in alignment with the Paris Agreement. We publicly committed to this in May 2021, and made a number of related,
shorter-term targets.
During 2022, the business has made good progress on each of these as set out in the table below and in the relevant sections of this report.
Target
Board’s evaluation of progress
Deliver a 25 per cent reduction in the carbon
emissions‡ intensity of our investment
portfolio† by 2025 against our 2019 baseline
Divest from all direct investments in
businesses that derive more than 30 per cent
of their income from coal, with equities to be
fully divested from by the end of 2021 and
fixed-income assets fully divested from by the
end of 2022
Engage with the companies responsible for
65 per cent of the absolute emissions in our
investment portfolio
Deliver a 25 per cent reduction in our
operational emissions intensity from a 2016
baseline, abating the remaining emissions via
carbon offsetting initiatives, to become
carbon neutral across our Scope 1 and 2
(market-based) emissions by the end of 2030
On track: by the end of 2022, we had reduced the weighted average
carbon intensity (WACI) of our investment portfolio by 43 per cent
Substantively completed:
> In 2021, we fully achieved our divestment from coal equities
> By the end of 2022, we had substantively completed our divestment
from coal bonds with one holding remaining as a result of market
conditions. We continue to seek opportunities to divest from the
remaining holding and intend to do so as soon as practicable*
Detail in report
Page 91
Page 92
Fully met: This is a continuing annual target, which we have fully met
in 2022 for the identified cohort of companies
Page 128
On track: We achieved an intensity ratio of 1.21 tCO2e/FTE for 2022,
keeping us ahead of the emissions reduction trajectory required to
meet our 2030 target of 1.65 tCO2e/FTE
Page 102
Employ 35 per cent women in senior
management by the end of 2023
On track: at 31 December 2022, the representation was 35 per cent,
in line with our 2023 target
Page 110
‡
†
*
Carbon emissions refers to carbon dioxide equivalent emissions (CO2e) per the Greenhouse Gas (GHG) Protocol, including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).
Our investment portfolio (‘investment portfolio’) includes both listed equities and corporate bonds in all shareholder and policyholder assets, while excluding assets held by joint venture
businesses and assets in unit-linked funds as we do not have full authority to change the investment strategies of these. Further information is provided in the Basis of Reporting here:
www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf.
In 2021, we fully divested from equities meeting the policy criteria, which we continue to monitor so as to maintain this divestment position. By the end of 2022, we had substantively completed
our commitment to divest from coal bonds meeting the policy criteria: we had divested from 97 per cent of the coal bonds held at 31 March 2021, the date used for our May 2021 commitment.
Due to illiquidity in the market, we were unable to fully divest from one remaining holding of $12.1m, which illustrates the degree of challenge in implementing a divestment strategy in our
markets. We continue to seek opportunities to divest from the remaining holding and intend to do so as soon as practicable. We also continue to engage with the issuer on other options for us
to divest from this holding as we believe we have set our coal policy in a just and inclusive manner. Since 31 December 2022, we have further divested from this coal bond.
The above targets are as at 31 December 2022. The Board will continue to review and evolve these as the Group progresses on its ESG journey
to take into account evolving scientific data and stakeholder expectations.
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Challenges and future goals
There is significant effort required to become a net-zero asset owner by 2050. The journey towards a net-zero economy requires large scale
transformation, including for those companies held within our investment portfolio. Although we are making progress on our decarbonisation
targets, we are aware that we still have much more to do in both our decarbonisation planning and implementation.
We are aware of specific gaps in our knowledge and processes, and also acknowledge there are unknowns which may arise in the future. We are
committed to filling these gaps over time, and updating our approach and reporting on progress.
Specific goals and areas of focus for us in the coming three to five years include:
Targets
Achievement of our first interim target of 25 per cent reduction in emissions by 2025, for which we are on
track
Review of our investment portfolio ambition, including setting a 2030 decarbonisation target by the end of
2024, in line with the NZAOA Protocol
Investigate feasibility of setting net zero Scope 1 and 2 operational targets, acknowledging the lack of
renewable energy available within certain of our markets
Data
Increasing the coverage and quality of our Scope 3 investment book data
Developing specific decarbonisation pathways for asset classes
Increasing the coverage of our Scope 3 emissions for the rest of our value chain (eg supply chain)
Financing the transition
Exploring innovative opportunities to finance the transition in a just and inclusive manner, in partnership
with the private and public sector
Customers
Continuing to offer inclusive and affordable health and protection products, recognising that protection is
itself a climate mitigation measure
Continue to explore the intersection of climate change and adverse health impacts, including through
research, thought leadership and product development
Opportunities
Continue to explore the intersection of climate change and adverse health impacts, including through
research, thought leadership and product development
Continuing to offer inclusive and affordable health and protection products, recognising that financial
protection is itself a climate mitigation measure
People
Elevate our people for the future of work, by cultivating a continuous learning culture and build skills for now
and the future
Development of a bespoke approach for distinct workforce segments to actively manage the career
pathways and build a sustainable succession pool for our most critical roles
Continue to drive sustained performance through D&I, wellbeing, performance and reward
Emerging topics
Development of policies around nature and biodiversity
As we address these challenges, we seek to balance the need for
decarbonisation with sustainable development through a just and
inclusive transition. Action will be required from all players across both
the private and public sectors. Prudential is committed to working
alongside the governments in the markets in which it operates,
multi-lateral development banks and others.
We are particularly mindful of the challenges in some of our major
markets of India, China, Malaysia and Thailand, which remain highly
reliant on coal and other fossil fuels. As such, balancing the interests
of all our stakeholders across both developing and developed
markets, acknowledging their varying capacity and perspectives,
remains an ongoing challenge.
During 2022, as part of our ongoing review of our climate targets, we
undertook an internal review of the Science Based Targets initiative
(SBTi) and engaged with the SBTi to understand their view of the
methodology’s application in emerging markets. The SBTi uses global
decarbonisation targets and pathways for their verification which do
not distinguish between the differing needs for emerging markets
and developed markets. Aligned with our approach to a just and
inclusive transition, we believe it is critical that we engage with
countries and companies to work with them to overcome their
transition challenges. A part of this approach is reflecting the nuances
of the challenges faced by specific countries, for example in balancing
economic growth and decarbonisation. This leads to differences in
pace of decarbonisation as accepted in the Paris Agreement through
the ‘common but differentiated responsibilities’ principle, which we
try to integrate in our Responsible Investment approach and
articulated in our Just and Inclusive Transition paper. We continue to
engage with the SBTi and monitor its publications to explore how the
methodology can be appropriately applied in our markets, in a
manner that is consistent with the needs of emerging markets and
our broader philosophy.
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ESG report / continuedPrudential plc Annual Report 2022 Aligning with the United Nations Sustainable Development Goals
The United Nations (UN) Sustainable Development Goals (SDGs), which is at the core of the 2030 Agenda for Sustainable Development, are
universally recognised and provide a shared blueprint to provide a more sustainable future for all. In aligning with the SDGs, the Group is focused
on those goals where we can make a meaningful contribution given their alignment with our purpose and business strategy.
SDG
SDG target
Intended outcome
How Prudential can support this outcome
Link to our material topics
1. No poverty
1.4, 1.5
3. Good health
and wellbeing
3.8, 3.d
5. Gender equality 5.5
8. Decent work
and economic
growth
8.3
12. Responsible
consumption
and production
12.6
13. Climate action 13.1, 13.2,
13.3
*
Considered as priority material topics.
Increase access to quality healthcare
services, and financial services for
the poor and the underserved,
including microfinance.
Improve resilience of the poor and
reduction in their exposure and
vulnerability to climate-related
extreme events and other economic,
social and environmental shocks and
disasters, where there are no,
or limited, social safety nets.
Achieve universal health coverage,
including financial risk protection,
access to quality essential healthcare
services and access to safe, effective,
quality and affordable essential
medicines and vaccines for all.
Strengthen the capacity of all
countries, in particular developing
countries, for early warning, risk
reduction and management of
national and global health risks.
Ensure women’s full and effective
participation and equal
opportunities for leadership at all
levels of decision-making in political,
economic and public life.
Promote development-oriented
policies that support productive
activities, decent job creation,
entrepreneurship, creativity and
innovation, including through access
to financial services.
Encourage companies, especially
large and transnational companies,
to adopt sustainable practices and to
integrate sustainability information
into their reporting cycle.
Provide affordable bite-sized products for
underserved segments.
Enable financial literacy to promote
understanding of the need for health and
protection products.
Inclusive offerings*
Financial literacy
Leverage technology to provide people
with better access to healthcare services.
Digital health
innovation*
Collaborate with community organisations
to support health promotion, safety and
resilience activities.
Community
engagement
and investment
Set and implement targets for female
participation rate senior leadership.
Diversity, inclusion
and belonging*
Investments in business and industry
underpinning growth and supporting the
development of capital markets.
Responsible investment*
Employment,
recruitment and rewards
Continue to publish disclosures regarding
our operational emissions and our
initiatives to reduce them.
Strengthen resilience and adaptive
capacity to climate-related hazards
and natural disasters in all countries.
Integrate climate change measures
into national policies, strategies and
planning.
Improve education, awareness-
raising and human and institutional
capacity on climate change
mitigation, adaptation, impact
reduction and early warning.
Measure, manage and publicly disclose the
carbon footprint of our investment
portfolio. Be an active steward of the
investments in our portfolio companies,
engaging with management and
exercising shareholder voting rights.
Incorporate climate change risks into our
strategy and business planning.
Advocate for a just and inclusive transition.
Collaborate with community organisations
to support resilience and disaster recovery
activities.
Responsible
environmental practices
Responsible
procurement practices
Responsible investment*
Climate change*
Community
engagement
and investment
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What shapes our approach
Approach to materiality and stakeholder engagement
We recognise that our activities and how they are carried out have
impacts on markets, customers and people. To remain successful and
sustainable in the long term, we need to engage in societal discourse
and find ways to align both our broader business performance and
our societal impact with the expectations of our shareholders,
stakeholders and the broader society. Our materiality assessment
helps us gain a deeper understanding of the issues that matter most
to these groups, and how our environmental, economic and social
impacts are perceived and translated today and in the longer term
into associated risks and opportunities for our business.
This section serves to provide disclosure of the processes and results
of our materiality assessment, including the criteria adopted to
identify material ESG issues, and the process and results of our
stakeholder engagement.
Materiality assessment process
As mentioned in our last report, in 2021, we drove our ESG framework
through existing interaction with external stakeholders, including
frequent meetings with investors and NGOs. This allowed
management to evaluate the appropriateness and relevance of our
ESG framework to stakeholders. Following our 2021 review, we
adopted a more robust materiality assessment through deeper and
more structured stakeholder engagement on ESG issues in 2022.
For the purpose of materiality, we continued to identify our
stakeholders as governments, regulators, investors, rating agencies,
customers, employees, and distributors. Our stakeholders impact our
strategy and are also directly affected by it. Our materiality
assessment helps us examine various issues, risks and opportunities
as they relate to our stakeholders while focusing on areas where we
can create positive impact.
Step 1
Step 2
Step 3
Step 4
Identify and define
material topics
Our list of material topics
in 2022 is drawn from prior
material topics, HKEX and
SASB requirements as well
as having conducted peer
reviews. Biodiversity and
broader nature-based
considerations, being
emerging topics among
certain stakeholder groups
in 2021, were also
incorporated as one of our
topics. This resulted in a
list of 21 topics.
Prioritise topics
based on
stakeholder views
We gathered views from
stakeholders to prioritise
the list of topics. These
were carried out through
normal-course interaction
and through ESG surveys
that were done for the first
time with our customers,
employees and agency
distributors. The ESG
surveys were carried out
regionally with nearly
1,000 customers, more
than 1,000 employees,
and over 7,000 agency
distributors.
Analyse and
evaluate
We analysed and
evaluated the information
and mapped each topic
against a materiality
matrix. As part of this
process, we held a
workshop and carried out
interviews with nearly 20
senior internal
stakeholders across key
functions and businesses
who provided inputs from
a business impact
perspective.
Validation and
approval by senior
management
The final step of our
materiality assessment
involved getting validation
and approval from senior
management through the
governance of our Group
ESG Committee and
Responsibility and
Sustainability Working
Group (RSWG).
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ESG report / continuedPrudential plc Annual Report 2022 Materiality matrix
Our assessment resulted in 21 topics which are deemed to be either high, medium or of emerging priority. The topics are mapped according to
their relative degree of importance to stakeholders, their relevance to Prudential’s business and impact on the economy, environment and society.
Based on the work to date, the top material topics are: responsible investment, fair treatment of customers, customer satisfaction, inclusive
products and services, digital health innovation, climate change, privacy and data protection, ethics and responsible business practices, corporate
governance and diversity, inclusion and belonging. We deem these 10 topics to be of high priority, and they are also in line with our expectations
and aligned with our ESG strategy and areas of focus.
For more details on our material topics and where they are covered in our report, please refer to the visual below.
Materiality matrix
High
Workplace
health and
safety
Responsible
environmental
practices
Inclusive
products
and services
Customer
satisfaction
Responsible
investment
Fair treatment
of customers
Training and
development
Financial
literacy
Climate
change
Digital health
innovation
Employment,
recruitment
and rewards
Diversity,
inclusion and
belonging
Influence on
stakeholder
assessments
and decisions
Community
engagement
and investment
Responsible
procurement
practices
Volunteerism
Labour rights
Privacy and
data protection
Ethics and
responsible
business practices
Corporate
governance
Anti-bribery
and corruption
Biodiversity
and nature-based
considerations
Emerging
Emerging
Significance of Prudential’s economic,
environmental and social impact
High
Environmental
Social
Governance
Inclusive products
and services
Customer satisfaction
Digital health innovation
Fair treatment
of customers
MAKING HEALTH AND FINANCIAL
SECURITY ACCESSIBLE SECTION
ON PAGE 78
Climate change
Responsible investment
CLIMATE CHANGE SECTION
ON PAGE 90
RESPONSIBLE INVESTMENT
SECTION ON PAGE 122
Diversity, inclusion
and belonging
Ethics and responsible
business practices
Privacy and data protection
Corporate governance
BUILDING SOCIAL CAPITAL
SECTION ON PAGE 109
GOOD GOVERNANCE AND
RESPONSIBLE BUSINESS PRACTICES
SECTION ON PAGE 140
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Understanding our impact
Stakeholder engagement
In order for us to help people thrive, build a greener future and lead by
example, we need to maintain proactive dialogue with each of our
stakeholders. Understanding their views on the social, economic,
environmental and governance topics affecting us as a business will
enable us to better address their concerns, exchange constructively
and ultimately better manage our business.
Ongoing dialogue and collaboration with our stakeholders are
important for creating and maintaining meaningful and mutually
beneficial relationships. This keeps us plugged in on changes and
focused on staying relevant to our stakeholders. Continual
stakeholder engagement also helps us create long-term value where
we operate.
Listening to our stakeholders’ views
As part of our materiality review in 2022, and in light of activities
carried out in the past on stakeholder engagement, we took the
following actions to better understand our stakeholders’ key areas of
interest and concern:
> maintained current engagement with governments, regulators
and investors; and
> started engaging with selected key stakeholder groups including
customers, employees and agency distributors across major
markets in a more structured manner.
The table below provides an overview of the different stakeholder
groups we continue to engage with, how we have engaged with
them, what their key areas of interest or concerns are and our
response to these.
Stakeholder groups
Mode of engagement
Topics of interest or concern in order of priority
where indicated by the stakeholder group
Investors
Regular meetings
Investor conferences
Investor Perception Study
Rating agencies
Annual meetings
Customers
Employees
Contact centres
Focus groups
Customer survey
Employee survey
Collaboration Jam Workshop
Townhalls
Agency distributors
Agency distributor survey
Governments and regulators
Roundtables
Consultations
Regulatory colleges
Regular meetings
Climate change
Inclusive products and services
Responsible investment
Digital health innovation
Diversity and inclusion
Climate change
Inclusive products and services
Responsible investment
Digital health innovation
Diversity, inclusion and belonging
Customer fair dealing
Data privacy and protection
Responsible investment
Customer satisfaction
Financial literacy
Responsible environmental practices
Workplace health and safety
Responsible investment
Climate change
Employment, recruitment and rewards
Customer satisfaction
Inclusive products and services
Training and development
Digital innovation
Customer fair dealing
Healthcare access and insurance
Ethics and responsible business practices
Data privacy
Financial inclusion
Climate change
Responsible tax
Further information on our engagement with our stakeholders can be found in our Section 172 Statement.
74
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ESG report / continuedPrudential plc Annual Report 2022 Managing the process
ESG governance overview
The Board considers ESG to be integrated and aligned with our core
business strategy of protecting people’s wealth, helping them grow
their assets, and empowering them to save for their goals. It
recognises the major role that Prudential can continue to play across
Asia and Africa, as well as in the long-term success, resilience and
health of the communities in which we operate. As such, ESG matters,
including climate change, are overseen by the Board, which is
responsible for determining overall strategy and prioritisation of key
focus areas, and monitoring risks.
In recent years, the Board has included ESG in the strategic priorities
for the Group’s Executive Directors by way of a specific objective to
drive the climate and responsible investment focus across the
organisation, both as an asset owner and an asset manager, through
embedding the external ESG commitments made in May 2021.
In late 2021, the Remuneration Committee decided that a measure
aligned with our published commitment to reduce the carbon
emissions of all shareholder and policyholder assets by 25 per cent
by 2025 should be attached to Executive Directors’ 2022 Prudential
Long Term Incentive Plan (PLTIP) awards. Carbon reduction targets
will also be attached to Executive Directors’ 2023 PLTIP awards.
Further information can be found in the Directors’ remuneration
report.
The Board Responsibility and Sustainability Working Group (RSWG),
established in early 2021, continued during 2022. George Sartorel
replaced Alice Schroeder as Chair following the AGM in May 2022,
and both Arijit Basu and Claudia Suessmuth Dyckerhoff were
appointed to the RSWG on joining the Board. In light of his
appointment as Senior Independent Director, Jeremy Anderson will
step down from the RSWG on 31 March 2023.
In July 2022, the responsibilities of the RSWG were re-positioned to
focus on customer, culture, and digital, in addition to people and
community matters, having focused a large part of its agenda in
2021 on climate change. Oversight responsibilities for environmental
and climate-related issues, including the ongoing implementation of
the Group’s external commitments to the decarbonisation of its
operations and investment portfolio and other climate-focused
external responsible investment commitments were transferred to
the Group Risk Committee (GRC). Their terms of reference were
amended to ensure a holistic approach to these topics. The GRC’s
additional responsibilities extend to external reporting, via the ESG
Report, where it relates to those areas within its remit, including
monitoring the progress on the Group’s reporting against the
recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD).
It is anticipated that the GRC will have a standing item on its agenda
in relation to its oversight of climate change, including progress
against our climate targets. In setting future targets or commitments,
the GRC will consider and make appropriate recommendations to the
Board. The revised remit of the GRC is also anticipated to include the
consideration of climate-related issues when reviewing and guiding
overall strategy, major plans of action, risk management policies,
annual budgets and business plans. To support the GRC in executing
its duties, the Group’s policies and processes supporting significant
decisions and transactions have been updated to systematically
include consideration of how the matter requiring approval supports
and/or impacts the Group’s ESG strategy, including setting and
overseeing major capital expenditures, acquisitions, and divestitures.
Following this transition of responsibilities, an exercise was completed
to map out the material climate and climate-commitment-related
activities which support the GRC’s new responsibilities, and the
supporting governance arrangements including the demarcation in
roles of the Board and management committees involved in these
activities. The supporting management information and frequency
has also been reviewed, including how the management information
informs the GRC about climate related matters. The ‘ESG, including
climate change, governance during 2022’ diagram in this section sets
out the frequency that the Board, GRC and management
committees met during 2022.
In addition to regular course discussion, to further enhance strategic
Board-level discussions on climate, a dedicated climate deep dive
session was held with the Board in September 2022. Following
discussions at the Board on our approach to climate change, the
progress towards the Group’s externally communicated climate-
related commitments, climate-related opportunities, and the
evolving expectations of stakeholders, the Board agreed on the need
for clear communication around Prudential’s role in emerging
markets. The latter point has been supported by the publication of
Prudential’s ‘Just and Inclusive Transition’ white paper, which sets out
the Group’s approach to ensuring the transition to a low-carbon
economy considers all countries, economies and worker populations
by raising awareness on the country-specific challenges for emerging
markets in the energy transition.
In respect of the review of the FY22 ESG Report:
> The GRC reviewed the disclosures made in the sections of the ESG
Report that relate to areas within its remit (including non-climate
ESG-relevant areas within its remit such as financial crime and
conduct) in detail and confirmed their inclusion in the report to
the RSWG.
> The RSWG retained responsibility for reviewing the Group ESG
Report in totality and making recommendations to the Group
Audit Committee (GAC) and the Board.
> The GAC considered the Group ESG report within its broader review
and recommendation of the full Annual Report and Accounts to
the Board.
> The Board approved the Annual Report and Accounts, of which
the ESG Report is an integral part.
Management oversight
ESG activity, including the impacts from climate change, is overseen
at a management level by the Group ESG Committee, which was
chaired by the Group CEO in his role as ESG sponsor. Other members
of the Committee are the Group Chief Financial Officer, the Group
Chief Risk and Compliance Officer, the Group HR Director, both the
Chief Executive and CIO of Eastspring, and the Chief Executive of
PACS (Prudential’s Singapore business). During 2022, the Group ESG
Committee was strengthened by the inclusion of the recently-
appointed Group CIO and Group Corporate Affairs Director. From
26 February 2023, the Group ESG Committee is chaired by the Group
Chief Financial Officer.
One of the Group ESG Committee’s responsibilities is to oversee the
Group’s progress towards fulfilling our commitment to report against
the recommendations of the Financial Stability Board’s Task Force on
Climate-related Financial Disclosures (TCFD). In 2022, the Group ESG
Committee reported to the Board through the RSWG. Further
information on the governance and oversight of our responsible
investment activity is provided in the ‘Group responsible investment
governance’ section.
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Governance of ESG, including climate change, during 2022
Prudential plc
Board
> Oversees all aspects of ESG, including people, culture and
communities, with ultimate responsibility for determining
strategy and prioritisation of key focus areas
> Provides rigorous challenge to management on progress
against goals and targets
> Ensures the Group maintains an effective
risk management framework, including
over climate-related risks and opportunities
The Board
delegates specific
ESG, including
climate change,
oversight matters
to its committees
REPORTING
INFORMING
Group Risk Committee
> Meeting frequency in 2022: six times
> Oversight responsibilities for environmental and
climate-related issues
> Oversees implementation of external climate-focused
commitments
> Reviews climate-related information presented within
the ESG report
> Oversees the Group’s ongoing commitment relating
to TCFD
> Supports the ESG strategy by ensuring the risks, including
climate-related risks and opportunities, people and culture
are effectively managed
Board Responsibility and Sustainability
Working Group
> Meeting frequency in 2022: five times
> Oversees the embedding of the Group’s ESG strategy,
focusing on customer, culture, digital, people and
community matters
Group Audit Committee
> Meeting frequency in 2022: eight times
> Oversees the Group’s Annual Report and Accounts,
of which the ESG report is an integral part
> Oversees whistleblowing programme
Remuneration Committee
> Meeting frequency in 2022: six times
> Supports the ESG strategy through alignment of
the Group’s incentive plan to external ESG targets
Chief Executive and
Management Team
The Chief Executive has responsibility for implementation of the Group’s ESG strategy, including people, culture and climate
change risks and opportunities, with support from the executive management team
REPORTING
INFORMING
REPORTING
INFORMING
Group ESG
Committee
> Focused on the holistic assessment of
ESG matters, including climate change,
that are material to the Group
> Chaired in 2022 by Group CEO, and from
February 2023 by Group CFO
> Members include asset owner and asset manager CEOs,
Group CRCO, and Group CHRO
Group Responsible
Investment Advisory
Committee (GRIAC)
Prudential
Sustainability
Advisory
Group (PSAG)
REPORTING
INFORMING
> Operational responsibility for oversight of Responsible
Investment activity
> Co-chaired by Group CIO and Eastspring CIO
> Members include local business CIOs
REPORTING
INFORMING
> Share Group processes and practices on communications
and reporting of ESG-related matters
> Focus on knowledge sharing to support developing and
embedding of local business ESG strategies consistent
with the Group strategy
> Chaired by Director of Group ESG
> Members include local business ESG leads
and other specialists
PSAG is focused on execution and
is not part of formal governance
Local businesses
The local businesses support the implementation of the Group’s ESG strategy,
including climate change risks and opportunities
REPORTING
INFORMING
76
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ESG report / continuedPrudential plc Annual Report 2022 Approach to ESG reporting
As a company dual primary-listed in Hong Kong and London,
Prudential’s ESG reporting follows the Hong Kong Stock Exchange
(HKEX) requirements, as well as the UK Listing Rules.
HKEX sets out various reporting principles and they are addressed
through the report as follows:
Materiality
Quantitative
Consistency
Reporting boundary
Discussion of 2022 approach outlined in
‘Approach to materiality’ section above.
Consistent with 2021, metrics have been
provided in compliance with the HKEX
requirements and the voluntary adoption
of the SASB Insurance Standard. An index
is included at the end of this report for
both HKEX and SASB Insurance
reporting requirements.
The FY22 report has been prepared on
a consistent basis to FY21 to support
compatibility.
Consistent with prior years, the scope of
the report, and data therein is as set out in
the Basis of Reporting, and excludes joint
venture partnerships, notably our joint
ventures in India and China, and the
Takaful business in Malaysia, unless
otherwise stated.
Prudential is a supporter of the recommendations of the Financial
Stability Board’s (FSB'S) Task Force on Climate-related Financial
Disclosures (TCFD). Prudential has included material climate-related
financial disclosures in this report consistent with the TCFD's four
recommendations and eleven recommended disclosures, noting a
small number of items are included in our Climate Transition Plan,
given their forward looking nature, or our Basis of Reporting, given
their technical nature. In October 2021, the TCFD released additional
guidance implementing the “Recommendations of the Task Force on
Climate-related Financial Disclosures” (2021 TCFD Annex). We
reviewed all the relevant guidance in Section C of the TCFD Annex
(Guidance for All Sectors) and relevant sector-specific supplemental
guidance during 2022 and have provided disclosures in line with this,
including the publication of our first Climate Transition Plan. A TCFD
index is included at the end of this report (see the ‘TCFD index’
section) to demonstrate how Prudential is meeting the TCFD
recommendations.
As well as the work to enhance internal management and reporting
of climate-related information, we participate in external
benchmarks to provide additional visibility to stakeholders on our
climate-related activity. We aim continually to improve the
transparency and utility of our reporting. In 2022, we continued
to participate in CDP and we were pleased to improve our score to
A- (2021:B).
While assurance of ESG data is not required by the HKEX, it is
encouraged as part of the HKEX’s 2020 update to the ESG Listing
Rules. The Group has sought limited assurance on selected indicators
within the Group’s ESG report, covering Scope 1, Scope 2 and Scope 3
financed emissions, community investment cash contributions and
employee diversity. We appointed EY LLP (EY) to provide limited
independent assurance over these selected ESG KPIs within the 2022
ESG Report for the year ended 31 December 2022. EY will be the
Group’s external auditors from FY2023. Where assurance has been
provided, this is clearly indicated throughout the report. The
assurance engagement was planned and performed in accordance
with the International Standard for Assurance Engagement (ISAE)
(UK) 3000 (July 2020), Assurance Engagements Other than Audits or
Reviews of Historical Financial Information. A limited assurance
report was issued and is available on the Prudential plc website at
www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/
assurance-statement-2022.pdf. This report includes details of the
scope, respective responsibilities, work performed, limitations
and conclusion.
As the maturity of Prudential’s ESG reporting continues to develop
and in recognition of the increasing demand for and use of
Prudential’s ESG data, we will keep the scope of ESG data assurance
under review.
Climate Transition Plan
Prudential has developed the first iteration of our Climate
Transition Plan, which is published alongside this report. Our
Climate Transition Plan sets out our long-term net-zero pledge
and interim targets, and the progress we have made against
them. It describes the actions we plan to take to implement our
decarbonisation strategy across our investment portfolio* and
operations, as well as highlighting the areas in which we need to
strengthen our understanding and approach.
We expect our climate and decarbonisation strategy to continue
to evolve as we gain more accurate and in-depth data, deeper
insights into the specific challenges and evolutions of our local
markets, and knowledge from our engagement and advocacy
efforts across our value chain. We also expect our Climate
Transition Plan to adapt to reflect market, regulatory,
technological and other climate-related developments affecting
the context and pace of the global transition towards net zero†.
We are seeking to utilise this first iteration of our externally
disclosed Climate Transition Plan as an engagement mechanism
with our investors and stakeholders, to seek feedback as we
continue in the current target cycle and begin to think about the
next iteration of climate-related targets. We will therefore
consider providing our shareholders with an advisory vote on our
climate action and updated transition planning in the future.
For more information, see our Climate Transition Plan at
www.prudentialplc.com/~/media/Files/P/Prudential-V13/
esg-report/climate-transition-plan-2022.pdf
*
†
Our investment portfolio is defined in our Basis of Reporting at www.prudentialplc.com
/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf.
In the context of Prudential, net zero and carbon neutral have the following meanings:
1. ‘Net zero’, with regards to greenhouse gas emissions, refers to a state by which the
greenhouse gases going into the atmosphere are reduced as close to zero as possible
and any residual emissions are balanced by removals from the atmosphere. When
translating these emissions to the activities in the value chain of an organisation, net
zero is a state in which the activities of the value chain for an organisation result in net
zero greenhouse gas emissions, in a time frame consistent with the Paris Agreement.
2. ‘Carbon neutral’ for an organisation refers to relying on carbon offsets to balance its
value chain’s greenhouse gas emissions, whereas net zero refers to prioritising reductions
in an organisation’s value chain’s greenhouse gas emissions as close to zero as possible
and only then are any residual emissions balanced by removals from the atmosphere.
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Strategic Pillar: Making health
and financial security accessible
Access to social health protection is essential, not just for decent work
and sustained economic recovery, but also for enhancing long-term
social cohesion. While our emerging markets continue expanding
their social health protection programmes, increased demand,
compounded by the pandemic, has exacerbated gaps in coverage.
The low level of insurance penetration in Asia1 and high level of
out-of-pocket health and protection spending2 drives an estimated
$1.8 trillion health protection gap.3
The social role of our agents
As well as the digital innovation we are pioneering, we are proud
to have a leading agency force across Asia and Africa, with half
a million men and women who harness the power of digital to
serve 10 million customers. Agents become effective
ambassadors for us through developing and nurturing personal
relationships, often over generations.
For today’s digital savvy customers that move effortlessly
between multiple digital and in-person channels, these
ambassadors combine our values of honesty, integrity and
trustworthiness across multiple touchpoints to interact with
customers, where and when they demand.
We believe that the overriding quality that makes a good agent
is that they care about the role insurance plays in society, as a
contribution to financial sustainability. Our agents seek to do
the right thing for their customers, so that they can have better
financial futures.
The role of the agent has pivoted from financial advisor to
financial influencer, and Prudential continues to support them
on that journey.
Digital health innovation
Across the health and protection value chain, stakeholders are
looking for innovative, cost-effective ways to deliver consumer-
centric, technology-enabled ‘smart’ healthcare solutions. Insurers are
a key participant in the healthcare industry value chain, both
providing health and protection cover, and meaningfully using the
information they collect to develop relevant offerings.
We view technology as an enabler that allows people to do more and
to connect more. At the front end this enables agents, giving them
tools to increase productivity so that they can focus on engaging the
customer, and data-driven insights to start authentic conversations
on health risks for customers. It also enhances back-end processes,
such as supporting claims assessors in risk monitoring, and helping
underwriters to come to a decision much more quickly by providing
artificial intelligence (AI)-backed recommendations.
As the insurance industry integrates technology in its operations and
solutions, Prudential strives to harness the power of data to further
personalise the experience for our customers. At the same time, we
remain acutely aware of the importance of the human touch and the
role of our highly skilled agents. We are strong advocates of
humanising technologies – using tech not to replace, but to enhance,
decision-making and empower authentic human connections.
Pulse is a mobile app designed to bring holistic health and wealth
solutions to Prudential customers. It enables Prudential’s multi-
channel distribution strategy to make healthcare more accessible and
increase financial inclusion. Pulse can give users access to services
such as health risk assessments and online doctor consultations to
help them better manage their health needs, as well as digital wealth
tools to make financial decisions simpler. Pulse also seeks to leverage
its digital platform to streamline existing Prudential services, such as
allowing users to renew their insurance policies. For example,
customers in Cambodia will be informed in advance so that they can
renew their plans before the cover expiry date, to ensure
uninterrupted insurance coverage on their existing policies.
Pulse is active in many of our emerging markets, with offerings
tailored to each market in which it is offered. For example, in Malaysia
Pulse offers free services such as health assessments, symptom
checkers, incentivised health challenges and relevant news articles
related to health. In addition, we offer free telemedicine services to all
Malaysian Pulse users through our partner, DocOnCall. In 2022, we
launched the Medical Booster function, which rewards customers
with a non-claim benefit up to $220/RM1,000 for taking action to
stay healthy. This reinforces awareness around preventive care, by
allowing customers to claim for services such as health screenings,
vaccinations, diagnostic tests, and health subscription programmes
on Pulse.
Notes
1
2
3
78
Swiss Re Institute; Sigma No 3/2021: World insurance – life insurance penetration (premiums as a percentage of GDP in 2020).
World Health Organisation: Global Health Observatory data (2019). South-East Asia, Out-of-pocket expenditure as percentage of current health expenditure (CHE).
Swiss Re Institute: The health protection gap in Asia, October 2018.
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ESG report / continuedPrudential plc Annual Report 2022
Prudential and Femtech
In South-east Asia, female health and wellness remain underserved
by mainstream healthcare, and reliable information on relevant
science and services remain limited. Femtech – which refers to a
range of health software and tech-enabled products and services
addressing female medical and health needs – is a growing
industry. Prudential Thailand is focused on ensuring we stay
relevant to our female customer base, while being inclusive in
working to resolve broader global health issues.
In July 2022, Prudential Thailand launched a menstruation and
fertility tracker (‘FemHealth Cycle Tracker’) on Pulse. The tracker
allows users to generate a reproductive health self-assessment,
through answering questions on areas such as diet, alcohol
consumption, exercise frequency, and family history. These data
points enable the content engine within Pulse to create a
personalised dashboard for each user, to help them to understand
their reproductive health status. Users can also tele-consult with a
certified obstetrics and gynaecology expert through the app.
The ultimate aim is for these services to provide data and tools to
women, enabling them to make more informed decisions on
pregnancy, family planning and fertility treatment.
Digital partnerships
Across our markets, people are living longer, but not necessarily
healthier or better. By harnessing technology, we want to empower
people to live well for longer by making it easier for them to take care
of their health and plan for their financial futures.
In 2022, Prudential continued to expand the relationships it has built
in recent years with digital partners, to provide numerous offerings
that combine health, wealth, retirement and lifestyle knowledge and
solutions.
In October, Prudential and Google Cloud announced a strategic
partnership to enhance health and financial inclusion for
communities across Asia and Africa, strengthening Prudential’s
existing relationship with Google, which began in 2019. Prudential will
leverage Google Cloud’s data analytics capabilities, secure and
sustainable infrastructure, and the broader Google ecosystem to
accelerate its digital transformation. This will enhance user
engagement on preventative health via Pulse. In the longer term, we
will look to adopt Google’s AI across a broader digital strategy to
make accessing insurance simpler, to drive greater efficiency, and to
increase agent productivity.
Our markets in Africa made notable progress in providing affordable
insurance to underserved populations, through their partnerships
with local telecommunications service providers:
Country
Ghana
Cameroon
Description
Continuing its collaboration with AirtelTigo, which
distributes products by microinsurance specialist
BIMA, our Ghana business developed and sold
microinsurance to more than 315,000 customers in
2022. Covering hospitalisation, death and accidental
permanent disability, the product accepts premium
payments via airtime money transfer, to increase
affordability, reliability, and inclusivity for underserved
and unbanked populations.
Prudential partnered with MTN to offer insurance
through a low-cost package called Degree Insurance,
which provides protection to students from primary to
tertiary level. Premiums are paid through MTN Mobile
Money, facilitating insurance policy purchasing for
those without bank accounts.
Côte d’Ivoire Prudential partners with Orange to offer health
coverage for workers in the informal sector,
guaranteeing payment of hospital expenses for a
monthly premium of $0.99. In 2022, nearly 15,000
new policies were sold.
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telemedicine service offerings include remote lab sample collection,
sharing results digitally and providing explanatory calls, and following
up with relevant medication delivery. In 2022, more than 3,600
health insurance customers in Uganda used these telemedicine
services.
Mental health
Mental illness is the largest single cause of disability worldwide, and
the range of mental health conditions can make addressing this
challenge more difficult. The mortality rate of those with mental
disorders is significantly higher than the general population, with a
median life expectancy loss of 10.1 years.1
As the pandemic continued to disrupt day-to-day life globally, it
became clear that access to mental healthcare is critical for a healthy
and productive workforce. According to Mercer Marsh2, one in two
employees in Asia say they highly value insurance coverage for
mental health, yet only 1 per cent of Asian insurers regard mental
health provision as a key priority.
Lack of awareness, associated stigma and misconceptions about
mental illness are a primary challenge in accessing treatment.
Supporting the mental wellbeing of our customers is a strategic
priority, and we have dedicated products and digital services
addressing this critical area in our markets.
In Taiwan, Prudential has partnered with FarHugs to provide
discounted remote consultation services for customers.
Collaborating with nearly 300 psychologists and counselling
specialists, this partnership allows users to manage numerous types
of distress through customised coaching sessions. This initiative is a
form of early intervention for potential mental health challenges
affecting customers, and is especially valuable in the wake of the
pandemic that has increased isolation.
In Malaysia, Prudential’s critical illness offering ‘PRUAll Care’ provides
additional benefits beyond treatment. These include mental health
cover for seven conditions, including severe bipolar disorder, severe
major depressive disorder and schizophrenia (for adults), and autism,
Tourette Syndrome, and attention-deficit hyperactivity disorder
(for children).
We also prioritise the mental wellbeing of our employees, and strive
to create a work environment where we demonstrate care for each
other, strengthen inclusion and deepen belonging. Further details on
our support to employees can be found in the Prudential’s wellbeing
pillars section on page 114.
Upgrading personal digital healthcare
In Thailand, Prudential partnered with Garmin, a global designer
of fitness trackers, and Qumata, a provider of data-driven
algorithms. The partnership enables us to help people manage
risk factors associated with the pandemic using the Covid-19
Resistance Score Model. The model estimates a user’s likelihood
of developing serious health consequences should they be
infected, based on their activity and profile data (including a
voluntary vaccination input).
For example, in illustrating to users their resistance to Covid-19,
the app can recommend action for prevention.
Telemedicine
Telemedicine is the use of digital communication and information
technologies to provide clinical healthcare at a distance. Prudential
offers numerous ways for customers to conduct medical
examinations remotely with ease and convenience. Patients who
previously had limited access to healthcare services can now see a
physician without leaving their home. Such services also offer
customers privacy, more control of their personal time, and the
comfort of conducting the examination from a familiar and safe
location.
Through Pulse, users in Singapore, Vietnam, and Thailand can access
telemedicine services, through partnerships with MyDoc and
DocOnCall. In Hong Kong, Prudential launched the Tele-Medical
Examination Service and a new Point-to-Point Sample Collection
Service. Through its partnership with online platform MedNet, our
Taiwan business enables customers to seek doctor consultations,
second opinion services and information on cancer examinations and
treatment. It also provides home care and health articles to help
users better care for themselves and family members.
In Indonesia, Prudential launched a new medical protection product,
PRUSolusi Sehat Plus Pro. Among the many benefits provided, such
as coverage for pre-hospitalisation, customers can access telehealth
services (both locally, and in Malaysia or Singapore) up to three times
per outpatient surgery or cancer treatment, before or after discharge
from a hospital or clinic.
In Uganda, we continued our partnership with telemedicine partner
Rocket Health, to enhance the convenient and cost-effective
healthcare we provide to our customers and agents. The partnership’s
Notes
1
2
80
Walker ER, McGee RE, Druss BG. Mortality in mental disorders and global disease burden implications: a systematic review and meta-analysis. JAMA Psychiatry. 2015 Apr; 72(4): 334-41.
Mercer: Mercer Marsh Benefits report highlights gap in mental health coverage and outpaced healthcare costs vs inflation in Asia, March 2022.
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ESG report / continuedPrudential plc Annual Report 2022 Pulse and mental health
Being healthy is about more than physical fitness and muscular
strength. Positive mental health contributes to enhanced
decision-making, emotional and social wellbeing, and reducing
vulnerability to certain physical ailments like heart disease,
stroke and diabetes. Recognising this crucial wellness topic
and our customers’ active general mobile device use, Prudential
has invested in a curated mental wellness offering with our
partner Amaha, which is among the top Pulse functions within
launched markets.
The app features straddle three health stages: prevention,
postponement, and protection. Prevention includes a
Healthcheck function, where users answer a digital questionnaire
about their lifestyle, diet, mental health and medical history. This
generates a health report and provides practical insights into
long-term disease risks, which are supplemented by our chatbot
that analyses user health conditions. In addition, Pulse provides
customers with tools and information, such as mood trackers,
quizzes, and curated content, to better manage their mental
health.
In 2022, more than 30,000 unique users from ASEAN used the
mental health functions in Pulse. Our mental wellness features
resonated particularly well with women and customers between
the age of 18 and 45, specifically mood tracker features and
overparenting, anxiety and sleep hygiene quizzes.
In September, Prudential Singapore launched a mobile app,
Business@Pulse, to help SME employees manage their group
insurance. Business@Pulse complements other Prudential
wellness initiatives including WorkPLAYce, our corporate wellness
programme that offers a variety of activities aimed at promoting
physical and mental wellbeing, such as fitness and meditation
classes and health screenings.
Inclusive offerings
Socioeconomic factors often determine whether an individual is able
to access benefits, insurance and health coverage. This means that
disadvantaged groups often miss out, despite being the groups that
need the most help.
We therefore view the expansion of coverage of our health and
financial security products in Asia and Africa as critically important,
and strive to develop and re-design our products and services –
across our multi-distribution channels – in an inclusive manner. Our
objective is to offer underserved communities, including vulnerable
populations, protection and savings products that meet their
needs. Our multi-channel distribution model, through agency,
bancassurance and digital, gives us different ways to serve the
diverse needs of our customers in the way that best suits them.
Infantile policy (1856)
Prudential’s long history of adopting
financial inclusion
In 1854, we opened our Industrial Branch, providing affordable
‘penny policies’ to working people. This transformed the
insurance industry, as Prudential became one of the first UK firms
to provide insurance to the working classes. Two years later, the
company introduced another innovation, ‘Infantile Insurance’,
which allowed parents to insure the lives of children younger than
10, in contrast to peer offerings that only insured children older
than 10 due to the high infant mortality rate.
Prudential has also historically offered innovative products
targeted at women. In 1922, the company introduced the
Everywoman Policy, which encouraged independent saving for
women. The introduction of this policy and the advertising
campaign that accompanied it signalled an important moment
in Prudential’s history, as the company began to address women
as the target, rather than the subject, of insurance advertising.
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Inclusive family coverage in our
ASEAN markets
Today, over half of the Malaysian population does not own a life
insurance policy or family Takaful certificate. In addition, the Life
Insurance Association of Malaysia (LIAM) further revealed that
of those protected, over 90 per cent do not have sufficient
coverage to protect themselves and their families. Closing this
protection gap requires equalising access to insurance and
Takaful coverage. By making its solutions more inclusive,
Prudential Malaysia hopes to reduce the protection gap and to
serve more people and more families. Our Malaysia business
launched Extended Family Coverage, the first of its kind in the
local industry. This initiative extends coverage beyond the nuclear
family to include extended family members (eg cousins or
grandparents) who fully or partially support the maintenance or
education of others.
In the Philippines, Prudential launched PRUHealth FamLove, a life
protection plan that includes critical illness cover for up to four
family members in one policy, a first-of-its-kind product in the
market. This is available for all Filipino families, including
same-sex or common-law partners, parents, and adoptive
children.
Costs including long-term medication and care can be covered by
the plan’s critical illness benefits through the System and Organ
Function Insurance (SOFI) concept. This feature makes the
product unique in the market, as it provides coverage should any
major organs require surgery, without the need to consult a long
list of critical illnesses for which cover is provided.
In Thailand, Prudential designs insurance products to serve the
unique needs of all families, including traditional nuclear families,
those in the LGBTQIA+ community, single-parent homes and
extended families with adopted children.
For example, Prudential Thailand allows LGBTQIA+ policyholders
to designate non-relatives as their beneficiaries, if the
policyholder can identify and provide a ‘Life Partner’ document.
They can name their partners as beneficiaries for life and other
insurance plans, or add their adopted children.
Diabetes coverage in Thailand
More than four million people have diabetes in Thailand –
projected to rise to 5.3 million by 2040 – but only 2.6 million
are provided with access to medical treatment, making
diabetes sufferers an underserved population.
In November, we launched the PRUNo Worries Diabetes
insurance plan, which offers coverage specifically for pre-
diabetics and people diagnosed with Type 2 diabetes, up to
the age of 70. Applicants do not need to undergo a health
examination, but simply answer health-related questions.
On World Diabetes Day in November, Prudential Thailand
participated in numerous events in cooperation with the
Thailand Health Partnership Network (which includes the
Bangkok Health Bureau and the Department of Disease
Control). Prudential provided knowledge on preventative care
(eg nutrition and exercise), as well as offering free screenings
for diabetic retinopathy, a major complication that can cause
vision loss.
Prudential Thailand is also partnering with Thailand’s leading
hospitals to provide exclusive offers to all Prudential customers,
such as special vaccinations deals, discounts on cancer
screenings, and health check-ups.
Made For Every Family
Prudential continues to expand its beneficiary list for insurance
products, broadening its customer base to better support evolving
family structures and societal expectations. During 2022, we
launched numerous strategic propositions that celebrate families of
every shape and size. These underscore our commitment to making
healthcare and financial security accessible and affordable to more
people and families, and helping them get the most out of life. Our
range of inclusive products recognises that although each family is
different, they should receive equivalent protection and coverage.
Over the past year, our businesses across Asia have worked together,
collaborating and workshopping ideas that fulfil our customers’
needs. Across 11 markets, we rolled out a range of new and extended
products that are Made For Every Family. Within each product, we
expanded term definitions (such as ‘Beneficiary’) to offer more
tailored protection for extended family members. For example, in
2021, Prudential Hong Kong’s life customers could nominate a more
diverse range of family members as their beneficiaries, including
grandparents, cousins, and step-children. In 2022, we built further on
the extended family definition, by accepting same-sex married
couples as the life assured for designated insurance products.
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ESG report / continuedPrudential plc Annual Report 2022 Products for Women
Women are vulnerable to a range of gender-specific health conditions
and associated medical expenses, and the rising cost of healthcare,
pregnancy and motherhood increasingly compound affordability
and access. Prudential is focused on staying relevant to our female
customers, while also being more inclusive in working to resolve
broader health issues. A number of our markets offer exclusive plans
that cover a wide range of female specific illnesses and conditions.
These include:
Country
Products for Women
Philippines
Thailand
Cambodia
Prudential launched the first breast cancer-specific life
insurance product in the country. Designed to
promote women’s health protection and aid early
interventions, this product can be purchased digitally
on Pulse, and comes in two versions with premiums
starting at $2.86/PhP 150.
Prudential offers various products specifically covering
women’s health. These include PruLady Cancer Care
and PruMum, which are available through Pulse and
other digital channels, such as Prudential’s
partnership with Thailand’s largest loyalty
programme The 1. Respectively, these products
provide protection against numerous cancers
(including but not limited to cervical, ovarian, and
breast), and against the risk of pregnancy
complications and miscarriage from accidents.
Prudential Cambodia launched PRUMyHealth, the
first individual medical reimbursement solution in the
market from a local life insurer. In addition to
providing customer access to cancer and in- and
out-patient treatments, this product also provides
coverage against actual medical expenses for 10
types of pregnancy complications, including still
births, ectopic pregnancies and post-partum
haemorrhages that require a hysterectomy.
PRUMyHealth accepts cashless payments at more
than 200 hospitals domestically and within South-
east Asia and has a medical reimbursement coverage
amount up to $50,000.
Islamic finance
Islamic finance is seen as a risk-sharing service that works with the
community to provide Shariah-compliant products and services
across various finance-related areas.
Prudential is committed to playing a leading role in driving the
development of Islamic finance in Indonesia. In April, Prudential
Indonesia launched PT Prudential Sharia Life Assurance (Prudential
Syariah). Prudential is the first international life insurer in Indonesia to
establish a dedicated entity focused on serving the growing local
Sharia market. The business is dedicated to meeting the Sharia-
based health and welfare needs of the Indonesian Islamic
population, with a wide range of solutions that are based on ‘Sharia
for All’ principles.
We use our digital technology to provide personalised and accessible
Sharia-based solutions, in order to meet the growing need for risk
protection. In partnership with leading local digital payment services
provider OVO, and our bancassurance partner UOB, we launched
PRUTect Care, a Sharia-compliant life insurance product. This was
sold on the TMRW app, where customers could sign up for cover for
various causes of death, including Covid-19, as well as accidents,
hospital care and infectious diseases. Users can choose, register and
validate their policies, as well as make claims via Pulse.
We also serve the significant Islamic population in Malaysia. In 2022,
Bank Negara Malaysia stated that only 42 per cent of adult
Malaysians had at least one life insurance policy or family Takaful
certificate, though noting that the majority still remain uninsured
against death, disability, or sickness1. Prudential’s i-Lindung initiative,
aimed at promoting the importance of financial protection within the
B40 (bottom 40 per cent in terms of income) community, encourages
more Malaysians to be financially protected through our inclusive and
budget-friendly plans.
Under the i-Lindung initiative, which is delivered in partnership with
the Employee Provident Fund (EPF), we have launched four plans:
PRUGuard Life, PruBSN Lindung (term protection), PRUCare Life and
PruBSN Cegah (critical illness protection). EPF members can sign up
for the protection plans by completing a few simple health-related
questions and make premium payments directly from the EPF online
portal i-Akaun.
Bite-sized offerings
While insurance can provide financial support to policyholders during
periods of illness, access to financial services can still remain scarce
and unaffordable to those in low- and middle-income countries. The
process of positive change must start with addressing affordability, by
creating and offering relevant, valuable, and essential insurance
products at accessible rates.
Prudential’s growing portfolio of bite-sized insurance products proves
that by designing plans with the right features and price, and
distributing them digitally, we can address the needs of underserved
and first-time customers.
These products appeal to customers who are unable or unwilling to
pay for a comprehensive long-term insurance cover, preferring
instead to choose a plan that serves a specific need for a short period,
and at an affordable price point. As convenience is an important
factor, our bite-sized products are offered on Pulse and our own
websites, with some also being sold through our partners’ digital
networks.
Note
1
Bank Negara Malaysia: Financial Stability Review – First Half 2022, October 2022, p. 23.
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These are already offered in numerous markets:
Country
Cambodia
Bite-sized offerings
Completed an initial launch of insurance selling machines at 50 locations, to make insurance purchases more flexible and
convenient for customers. In a country with less than one per cent life insurance penetration, Prudential created these
machines – which have their own internet connection and power supply – to streamline customer purchases of bite-sized
insurance products (ie those costing less than $10 annually). Customers can obtain receipts of their transactions from the
machines, and upon policy issuance, can manage and submit claims through Pulse. Each machine has embedded design
elements for a more inclusive user experience, such as larger text display for elderly users.
In December, our Cambodia business also launched a new digital savings plan, allowing customers to start saving from
$5 per month or $30 per year, and guaranteeing a return of at least 100 per cent of premiums paid as a maturity benefit
when set conditions are met. Prudential has also embarked on various partnerships with TrueMoney, uPay, and iCare to
further broaden insurance access to its customers.
Malaysia
Flagship programme PRUKasih continues to protect over 33,000 underserved families in Malaysia, and has been helping
low-income families and the disabled community with temporary financial relief since 2011 on a not-for-profit basis.
We also launched PRUKasih Aman, a microinsurance product on Pulse aimed at safeguarding more individuals and
families. PRUKasih Aman is designed to generate modest revenue while meeting a societal need. This new product offers
enhanced coverage (up to $3,960/RM18,000) that includes daily hospitalisation allowance, funeral expenses, and both
death benefits and extra accidental death pay.
Our PRUSimple Care suite of affordable insurance plans, available to all Malaysians aged from 19 to 55 on Pulse from
$0.9/RM4 annually, was extended to other digital partners in 2022, broadening our reach to more underserved
customers.
On Pulse, we launched two new affordable bite-sized microinsurance products: PRUSafe Guard 22, which offers six-month
term coverage against Covid-19 and infectious diseases ($19/SGD26); and PRUSafe Sports, which offers 12-month term
coverage against bone fractures ($42/SGD58). Separate from Pulse, we also launched PRUFirst Gift II in November,
which offers protection for expectant mothers and babies during pregnancy, combined with an investments-linked plan
to provide long-term wealth growth for newborns.
Rolled out individual pension plan products to the market with no minimum contribution levels.
Signed up six new bancassurance partnerships in 2022 selling credit life and sponsored accounts. These partnerships
focus on microfinance, and provide insurance protection to low-income earners who do not have bank accounts.
Singapore
Kenya
Cameroon
Affordable products that address infectious disease
There is strong evidence for the impacts of climate change on the
transmission and future spread of malaria and dengue, two of the
most globally significant vector-borne diseases. Data that
illustrates the effect of global warming on the spread of dengue
shows the risk is strongest for South-east Asia. This disease is a
common cause of hospitalisation in endemic areas of tropical
countries, along with increased medical costs associated with
treatment facilities and household purchases of over-the-counter
medication. These all highlight the increasing need for protection
and insurance.
Prudential offers affordable products that protect against infectious diseases in numerous markets, including:
Cambodia
Philippines
Singapore
Vietnam
Bite-sized insurance product Moos Som Chanh is available for purchase on Pulse. This plan covers dengue and/or
malaria for individuals up to the age of 60, and starts at an annual rate of $4/KHR16,440 or $4.75/KHR19,515
respectively.
Prudential offers two packages that provide coverage for dengue. Filipino families can purchase these products
via Shopee e-vouchers, which are redeemable in Pulse, to provide coverage for the cost of getting the infectious
disease, and an additional amount in case of death. The PRUDengue MedCare offerings cost between $3.16 and
$13.54/PhP175 and PhP750.
Prudential offers a microinsurance plan ($3.66/SGD5 with a three-month term) that covers customers against
dengue fever.
Prudential offers one product that protects against three common tropical diseases: dengue, malaria, and
measles. PRU-Tropical covers customers for overnight hospitalisation from any of the three diseases.
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ESG report / continuedPrudential plc Annual Report 2022 Meeting the changing needs of our customers
At Prudential, we strive to always be customer-led. This means
anticipating customers’ challenges and questions, and proactively
providing solutions and answers. It means looking at every aspect of
our customers’ journey, to enable them to get the most out of their
relationships with us. In 2022, we further increased our focus on
customer centricity, both in our efforts to better understand our
customers, and in our endeavours to convert insight into action.
Our customers are core to what we do, and we aim to tailor our
products to meet their fast-changing needs, as well as the developing
requirements of local markets. Our increasing customer focus has
contributed to our customer retention rate remaining high at over
89 per cent1 in 2022.
Customer success
We have built a framework across the customer life cycle to help us
understand our customers, deliver value across all touchpoints, and
grow loyalty whilst encouraging advocacy. This framework aligns with
the three key pillars of our customer centric strategy: understanding
the needs of our customers across different segments; providing
high-quality care for our customers’ needs in order to deliver value via
engagement; and building customer advocacy by understanding and
responding to their feedback.
Customer success
Segmentation
Building lifelong relationship and
maximising lifetime value
Care
Building emotional connection and
delivering value across all touchpoints
Advocacy
Building and nurturing loyalty
and growing through advocacy
Helping customers get the most out
of their relationship with Prudential
Proactive: from lens
of customers
Achieving
customers’ goals
Optimising value
from products
Accessible and
relevant connection
Address customer
pain points
Intended outcomes
Personalised customer experience by proactively offering relevant solutions to serve their current
and future needs. Equipping our agents with skills to stay connected with customers for lifelong
relationships, by providing trusted advice and great customer experience.
By listening to customer voices, we implement systems to improve satisfaction, loyalty
and market perception of our brand and products. We transcend transactional relationships
and align Prudential towards our customers, who advocate us within their markets.
Note
1
Excluding India, Africa, Myanmar and Laos.
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Customer conduct standards
Prudential’s Group Code of Business Conduct (see the ‘Good
governance and responsible business practices’ section on page 140
for further details) sets out how we do business. In conjunction with
the Code, the Group Customer Conduct Risk Policy establishes five
Customer Conduct Standards, each with its own key control processes
and activities. To support good customer outcomes and fair
treatment of customers, these standards inform every aspect of the
customer journey, and cover products and services across all lines of
business, distribution channels and ecosystems. All of Prudential’s
businesses are expected to meet these customer standards, which
inform every aspect of our Customer Success approach.
Segmentation
1. Treat customers fairly, honestly and with integrity
Within our markets, local customer committees continually review
strategic customer initiatives, with the purpose of enhancing
customer experience and mitigating risks. Local markets report
feedback to Group-level with performance data on numerous
statistics, from turnaround time to e-registration to straight
processing and customer feedback on key interaction touchpoints.
The data and insights are shared and discussed from regional, new
business and policy servicing perspectives in various forums with
strategic-level guidance to local markets on implementing changes to
mitigate risk, improve customer satisfaction, and facilitate best
practice sharing across all markets.
2. Provide and promote products and services that meet
customer needs, are clearly explained, and deliver real value
Insurance products can be complex from a customer perspective,
making it difficult for a customer to understand the costs and value of
the product, and how best to utilise products to avoid poor outcomes.
We put robust controls in place to mitigate such conduct risks, via
regular review and monitoring programmes.
Customer proposition
The Customer Proposition Council is the forum for our business and
Group-level executives to innovate and institutionalise customer
solutions that can be implemented across our markets. During 2022,
the Council focused on evolving the young generation and family
propositions by developing and refreshing solutions with self-direct
purchase, future-proof protection, and an expanded definition of
insurable interests in order to promote inclusive offerings across
diverse market segments. The Group Product Approval Committee
provides oversight to ensure that product-related conduct risks, at
both product and portfolio level, are appropriately managed in
accordance with Prudential’s Customer Conduct Risk Policy. This
framework applies to the approvals of new insurance products,
alterations of existing products (including the launch of new funds on
investment-linked products), and permanent changes in underwriting
requirements. The Committee also ensures delegation of approval
authority and escalation where appropriate, and reviews and
assesses the financial and insurance risks associated with product
design, along with risk mitigations and proposed controls.
Prudential’s Customer Conduct Standards
1.
2.
3.
4.
5.
Treat customers fairly, honestly, and with integrity
Provide and promote products and services that meet
customer needs, are clearly explained, and deliver real value
Maintain the confidentiality of our customer information
Provide and promote high standards of customer service
Act fairly and timely to address customer complaints and
any errors we find
Responsible product development
1. Product feasibility assessment
Customer research is first conducted to truly understand
customer needs, concerns and pain points on financial security
and resilience for different life-stages of various customer
segments. Insights from market intelligence and findings from
customer needs analysis are included in the feasibility in order to
form a holistic review of the concept, proposition and overall
viability, together with business strategy, competitive positioning
and value to customers. This is an iterative approach from initial
ideation to completion of solutions as further input is fed into the
development of solutions via focus groups.
2. Product design, pricing and approval
After obtaining approval for the concept taken from the customer
perspective, local businesses will further refine the product
concept through detailed assessment of financial metrics and
operational risk assessments, stress, and scenario tests to
understand sensitivity to key risks, and the preparation of
disclosure materials to ensure regulatory compliance.
3. Post-launch monitoring
After product launch, local businesses proactively obtain
feedback and suggestions from customers and financial advisors
on key episodes of the customer’s journey. This is to ensure that
we deliver the intended services and value, while constantly
evolving our solutions and propositions to stay relevant for
customers. In addition, a control cycle is in place to regularly
monitor product approval conditions and financial viability of
currently marketed products, prepare risk reports for currently
marketed and legacy products, and provide updates to the
relevant governance bodies.
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ESG report / continuedPrudential plc Annual Report 2022 Protecting vulnerable customers
A vulnerable customer is someone who, due to their personal
circumstances, is especially susceptible to harm. Each of
Prudential’s local businesses must define vulnerable customers in
the context of their business, and are required to consider local
regulatory and industry requirements, as well as the customers’
age and education/literacy level. Our businesses customise their
definition to meet the local market environment by adding
criteria as necessary (eg financial status, physical or mental
disability, or other factors as appropriate).
To protect vulnerable customers, appropriate training is
incorporated into the sales process on suitability requirements.
Mandatory induction training is conducted for all sales staff and
external contracted distribution parties, and their understanding
is validated after the training. Definitions of vulnerable customers
and extra care sales requirements for dealing with them are
included into these training programmes.
Acting on customer feedback
Prudential Hong Kong collected feedback on customer
satisfaction levels at key interaction touchpoints. The results
indicated that customers expected more timely follow-ups and
progress updates on their insurance applications, yet were
experiencing longer processing times for policy approval.
Prudential improved channel support and communication
resources, with further enhancements that included the launch of
a 25-minute onboarding, and improved stability of the policy
application system.
The result was an upward trend in Net Promoter Score (NPS) over
the last five months of 2022.
Responding to customer survey feedback on opaque email
correspondence with customer care, Prudential Indonesia
implemented training and knowledge sharing for relevant
employees. Engagement with external trainers (including
communication professionals with psychological subject
expertise) created bespoke programmes to improve soft skills.
The impact on customers has been positive, decreasing the
majority of response times to less than two hours, and making
emails much easier for customers to understand.
Suitability
All Prudential businesses consider product design, the quality of their
communications with customers and the value that products are
likely to bring to customers. Any new products which our businesses
develop must reflect our key principles, including, but not limited to,
meeting customer needs, having a suitable basis for pricing risk and
having a consistent process for determining whether the insured
event has occurred.
Product design, testing and monitoring controls are implemented to
ensure adherence to these principles, and to review product
suitability, sustainability, and fairness. In 2022, this process was
strengthened with the implementation of a product conduct risk tool,
which each business must use to evaluate products. For each
insurance product type, the tool asks customised questions, including
whether a product has been subject to heightened customer
complaints in the past, whether the target customer segment has
sufficient familiarity with the product type, and if intended
distributors are sufficiently knowledgeable and experienced to
understand and distribute the product. The resulting assessment
assigns each product an overall conduct risk rating, and justifications
and escalations are needed for products with a suboptimal score.
Additional marketing controls are enacted to ensure that any
disclosures and communications to customers or other external
parties (eg regulators or investors) are fair, clear and not misleading.
We strive to ensure responsible marketing practices, including
sufficient controls to ensure distributors conduct sales in a manner
that considers fair treatment of customers. We also apply these
controls to our digital platforms and ecosystems, to ensure the safety
and fair treatment of customers within these online environments.
This includes ensuring that information on products and services is
clear and updated, and that customers using digital platforms
understand what they are paying for, including fees that will be
charged for using the platform.
3. Maintain the confidentiality of our customer information
Customers trust Prudential and its representatives with their personal
information. We have a duty to ensure we properly collect and
safeguard such data, both where we hold it on our systems and where
it is handled by our representatives and business partners. All our local
businesses must implement controls to support the responsible
handling of data, and the use of AI. See the ‘Digital responsibility’
section on page 117 for details on how we take all reasonable steps to
ensure that customer data is processed fairly, and in accordance with
applicable data protection laws.
Care
4. Provide and promote high standards of customer service
Consistent, ongoing, high-quality service and communication with
customers helps ensure products meet their needs and expectations.
Our businesses must have in place an appropriate set of customer
service metrics, which cover the relevant product life cycle and
customer journey. Our central teams work with local markets to
examine customer and distributor feedback, and to identify the root
causes of pain points and servicing issues. Regular reviews are
conducted on existing service delivery mechanisms, enabling us to
proactively correct any shortcomings.
We have developed a consistent methodology to standardise
customer feedback across each of our businesses, through a
customer satisfaction survey conducted by an independent
third-party vendor. Through analysing variables such as Net Promoter
Score (NPS), we aim to craft more in-depth insights to improve
customer service across each touchpoint.
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Claims
In line with our Group claims promise, all our local businesses must handle claims in a timely, fair, and transparent manner, and promptly disclose
product, contractual and other relevant updates. We only ask for relevant information, and strive to explain our decisions simply and clearly,
providing updates on claims progress when customers need them.
In 2022, we upgraded and digitised our learning and development programmes for our agents. This will enhance how our agents and partners
provide relevant advice and timely service to our customers, and build lasting relationships based on trust.
Claims promise
Timeliness
We handle each
claim as soon as we
receive it, and will
keep you informed
of its progress.
Communication
with care
We let you know
when we receive
your claim, require
additional documents,
and the outcome
of your claim. Our
staff and agents are
professionally trained
to guide you whenever
you need help.
Fairness
We understand your
claim is important
to you. We treat
every customer fairly.
We ensure our
claims process is
clear, transparent
and without
customer bias.
Customer
experience
Your feedback is
important to help us
serve you better. If
you have a complaint,
we will deal with it
seriously.
Privacy
We take your privacy
seriously and will
protect it at all times.
Improving customer claims
Prudential Malaysia made progress in 2022 on enhancing the
customer claims journey. Continuous improvement in upskilling
the team, such as training on using simpler language to ensure
message clarity, helped drive up service quality and timeliness via
more prompt and proactive engagement and communications
with customers. This resulted in positive feedback from
customers, who cited improvements such as more timely hospital
admission and discharge, SMS notification updates, staff
helpfulness, courtesy when attending to queries and processing
efficiency.
Agents
Agency continues to be an integral part of Prudential’s brand and
customer service platform. Across our markets, we have launched and
connected a series of agency growth programmes to build
capabilities and expand capacity for our agency platform. To stay
true to customer success, we are equipping our agency force to stay
connected with customers, to build trust and provide personalised
advice enabled by digital tools and informed by data analytics.
Prudential’s Futuready Agency programmes aim to give our agency
force a defensible competitive advantage by leveraging technology,
behavioural science, and analytics to improve their skill-sets,
capabilities, and external positioning for long-term sustainable
growth.
Partnership distribution
For customers who choose to access insurance products and solutions
via their banking relationships, we are collaborating with our bank
partners to enable customers to access affordable healthcare, protect
their wealth and empower them to save for goals. To do so, joint
working groups are formed to oversee the deployment of strategic
enablers, including product solutions, seamless experience, and sales
force effectiveness in insurance advice that drive customer success. At
regular steering committees, we oversee conduct risk and customer
outcomes with our partners, discussing strategy and how to act on
persistency, complaints, and other customer outcomes.
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Attracting
Tapping talent from target segments and equipping them
with capabilities and resources to succeed
Leading
Training future leaders for the digital world
via coaching and development
Futuready
Agent
Enabled by PRUForce:
Agency e-briefcase, a
seamless digital platform
Building
Defining a premium career path for purpose-driven agents
and offering robust professional development
Nurturing
Replicating every customer engagement discipline to fit the
digital world to drive behaviour-led habits
Advocacy
5. Act fairly and timely to address customer complaints
and any errors we find
Prudential takes customer feedback very seriously, particularly
complaints. All business units are required to ensure that complaints
received from customers are handled in a fair, timely and transparent
manner, and that processes for analysing complaints include
understanding their underlying cause and mitigating their recurrence.
Our local businesses have independent and dedicated teams tasked
with responsibility for managing complaints and maintaining
databases of complaints received. Across the Group as a whole, our
level of complaints has remained broadly flat at two per 1,000
policies in force (2021: two per 1,000 policies in force).
Our Voice of Customer (VOC) programme has continued into 2022
with rigour and cadence which is aligned with our focus in delivering
customer success, by anticipating customer challenges. The two
aspects of the programme are:
> Transactional Touchpoint Programme (TPP): In addition to
identifying both pain and delight points in our customers’ journey
and experience, we maintain a disciplined and consistent feedback
collection system. Key customer episodes are monitored and
studied in a timely and ongoing manner. The programme is
managed by an independent internal stakeholder, and largely
supported by an automated solutions platform that processes key
customer episodes at crucial touchpoints.
> Competitive Benchmarking: This explores how customers in
specific markets view Prudential, based on our strategic initiatives.
We commissioned periodic studies, conducted by an independent
third-party research agency, to confirm the rigour of our results.
Both these initiatives collect timely feedback to identify improvement
actions, and illustrate where we stand relative to competitors. The
purpose is to prioritise resources in alignment with insights from
research, and more fully understand, anticipate, and respond to
evolving customer needs.
Voice of the Customer (VOC) deployment
in one emerging market business unit
The main overall focus was to improve reimbursement claims
NPS. Through VOC, the business was able to properly identify
critical areas, challenges and focus points to then act to improve
them. One of the key factors impacting the customer experience
included challenges related to system intermittency, which
resulted in occasional disruptions and slowness. Focusing on vital
areas such as benefit payouts and ease in making claims, the
local business took step changes to improve customer experience.
These actions included revising the claims settlement letter to be
more customer friendly, specifically with details on non-coverable
items. Additional action included simplifying the claims
submission process, such as accepting soft copies of original
receipts for processing.
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Strategic Pillar: Stewarding the human
impacts of climate change
The continued fight to limit climate change, by globally transitioning
towards to low-carbon economies, remains one of the greatest
challenges of our time. The economic, societal and individual
consequences of climate change are expected to only increase,
particularly across the Asia and Africa regions in which Prudential
operates.
Decarbonising the global economy requires global solutions. Global
decarbonisation needs to be managed in a just and inclusive way,
which requires considering the specific needs of emerging markets.
The needs of these markets typically include higher dependence on
fossil fuels, insufficient means to finance the transition through clean
energy and other climate solutions, and unfinanced basic
development needs. These markets have also typically contributed
less historically to the levels of carbon emissions in the atmosphere,
whilst not always being included within mainstream climate
discussions and initiatives.
Prudential firmly believes in the need for a just and inclusive
transition, in a way that actively places the considerations of
emerging markets at the forefront of discussions. As a significant
investor and asset owner with long-term investment horizons and
liabilities, we believe that we are well placed to support this just and
inclusive transition in emerging markets. We are also able to bring an
emerging markets perspective to stakeholder discussions to help
ensure the need for a just and inclusive transition in those markets is
considered in policy and regulation. We support initiatives for
sustainable development and energy transition in all our markets
through collaborative and collective engagement. We are actively
working with our investee companies to transition to net-zero
business models, and we continue to decarbonise our investment
portfolio and our own operations.
An index is included in the Reference section to demonstrate how we
are meeting the recommendations of the TCFD. Our first Climate
Transition Plan is published alongside this report (www.prudentialplc.
com/~/media/Files/P/Prudential-V13/esg-report/climate-transition-
plan-2022.pdf), setting out further detail on our net-zero
commitments, including our targets and actions supporting our
transition toward a low-carbon economy.
Our climate journey to date
2018
2019
2020
2021
2022
> Endorsed
the TCFD
recommendations
> Established
ESG Executive
Committee
> Eastspring
becomes
PRI signatory
> Published our first
TCFD-aligned
disclosure
(investments
not included)
> Set operational
climate targets
for 2030
> Undertook
scenario analysis
and stress testing
across three
climate scenarios
> Disclosed material
climate risks and
responses
> New Group
ESG Committee
established
> Eastspring join
Climate Action
100+
> Developed our
new Group
ESG Strategic
Framework
> Established Board
Responsibility
& Sustainability
Working Group
> Committed to net
zero by 2050
> Set short-term climate
investment targets
> Joined the Net Zero
Asset Owners Alliance
> Disclosed weighted
average carbon
intensity (WACI)
& impact of climate
scenarios across
geographies
> Integrated climate
risk into enterprise
risk management
> Updated our
Group Responsible
Investment Policy
> Initiated subtrack within
NZAOA: Emerging Markets
Transition Investment
(EMTI) project
– EMTI published paper
on recommendations of
accelerating transition
investment in EM
> Launched the ‘Just and Inclusive
Transition’ paper articulating our
view on the climate transition
for our markets
> Formulated sectoral climate
views
> Further enhanced disclosure
on metrics, including absolute
financed emissions
> Joined the Vietnam Just
Energy Transition Partnership
working group
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Targets and progress made
We have set ourselves targets for both our investment portfolio and
our operations. These targets, and our ambition to achieve them,
remain unchanged during this period of global energy crisis as the
need continues to accelerate the transition to low-carbon energy in a
just and inclusive way.
In 2021, we announced pledges through which Prudential will play its
part in the transition to a global low-carbon economy and the
collective efforts to limit the rise in global warming. Our long-term
pledge is to become net zero by 2050, with the short-term investment
pledges discussed in the ‘Our short-term targets and progress made’
table. These pledges support the achievement of the Paris
Agreement goals to limit the increase in the global average
temperature by 2100 to well below 2°C above pre-industrial levels,
Our short-term targets and progress made
and to pursue efforts to limit the temperature increase to 1.5°C above
pre-industrial levels, recognising that this would significantly reduce
the risks and impacts from climate change. Our short-term targets for
our investment portfolio include both listed equities and corporate
bonds, while excluding assets held by joint venture businesses and
assets in unit-linked funds, as we do not have full authority to change
the investment strategies of these assets.
In 2020, we set climate targets for our operations to become carbon
neutral and deliver operational emissions intensity improvements.
We seek to actively reduce our direct impact on the environment in
line with our purpose of improving the lives of our customers and their
communities. Our progress against this target is summarised in the
table below, with more detail provided in the Managing our direct
operational environmental impacts section.
Target
Board’s evaluation of progress
Deliver a 25 per cent reduction in the carbon emissions intensity of our
investment portfolio by 2025 against our 2019 baseline
On track: by the end of 2022, we had reduced the weighted average
carbon intensity (WACI) of our investment portfolio by 43 per cent
Divest from all direct investments in businesses that derive more than
30 per cent of their income from coal, with equities to be fully divested
from by the end of 2021 and fixed-income assets fully divested from by
the end of 2022
Substantively completed:
> In 2021, we fully achieved our divestment from coal equities
> By the end of 2022, we had substantively completed our
divestment from coal bonds with one holding remaining as a result
of market conditions. We continue to seek opportunities to divest
from the remaining holding and intend to do so as soon as
practicable
Engage with the companies responsible for 65 per cent of the absolute
emissions in our investment portfolio
Fully met: This is a continuing annual target, which we have fully met
in 2022 for the identified cohort of companies
Deliver a 25 per cent reduction in our operational emissions intensity from
a 2016 baseline, abating the remaining emissions via carbon offsetting
initiatives, to become carbon neutral across our Scope 1 and 2 (market-
based) emissions by the end of 2030
On track: We achieved an intensity ratio of 1.21 tCO2e/FTE for 2022,
keeping us ahead of the emissions reduction trajectory required to
meet our 2030 target of 1.65 tCO2e/FTE
We provide additional commentary in this section on the carbon
emissions intensity reduction and divestment from coal holdings. We
provide a description of our engagement approach and examples of
the impact of our engagement in the Active ownership section in the
‘Responsible Investment enabler’ chapter. We also provide further
detail on how we are decarbonising our operations in the ‘Managing
our direct operational impacts’ section.
Reduction in WACI
We operate in both developed and emerging markets in Asia and
Africa, and the carbon footprint of investments in these markets,
which underlies our WACI, remains higher than in areas such as
Europe. Our public target remains to achieve a 25 per cent reduction
in the WACI in our investment portfolio by 2025, while continuing to
support a just and inclusive transition in the markets in which we
operate. We continue to keep all our climate targets under regular
review to ensure they take into account evolving scientific data, and
remain appropriate for our markets and aligned to our strategy
around the pursuit of a just and inclusive transition. Our Climate
Transition Plan, published alongside this report, sets out further detail
on our net-zero commitments, including scheduled future updates to
our targets such as revising our WACI target during 2024.
The WACI of our investment portfolio has declined by 43 per cent
compared with our 2019 baseline. The WACI of our portfolio changes
due to movements in the carbon intensity of the invested companies,
movements in market prices and our own actions to change their
weight in our investment portfolio (through strategic asset allocation,
portfolio construction and investment selection). The decline to date
has been driven largely by the implementation of our coal policy and
the implementation of WACI budgets to a number of our equity
strategies. However, we believe more real-world impact can be
achieved through financing the transition and engagement, rather
than simply changing the portfolio to optimise our carbon footprint.
Therefore, we do not anticipate that the trend will continue at the
same pace going forward. Were the scope of our investment portfolio
to change, we would have the opportunity to re-evaluate the progress
achieved and the target, in line with the target setting protocol from
the NZAOA.
Our focus on financing the transition, for example through green
bonds and mechanisms such as the energy transition mechanism
and the Just Energy Transition Partnership, may mean that the
WACI could increase in the short term as we support companies as
they transition. We also believe engagement can be effective, as
reflected by our engagement target, but this requires more patience
and the decarbonisation achieved by our investee companies will
take time to be reflected in our carbon footprint due to the time lag
in reported data.
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Divestment from coal holdings
In 2021, we fully divested from equities meeting the policy criteria,
which we continue to monitor so as to maintain this divestment
position. By the end of 2022, we had substantively completed our
commitment to divest from coal bonds meeting the policy criteria: we
had divested from 97 per cent of the coal bonds held at 31 March
2021, the date used for our May 2021 commitment. Due to illiquidity
in the market, we were unable to fully divest from one remaining
holding of $12.1m, which illustrates the degree of challenge in
implementing a divestment strategy in our markets. We continue to
seek opportunities to divest from the remaining holding and intend to
do so as soon as practicable. We also continue to engage with the
issuer on other options for us to divest from this holding as we believe
we have set our coal policy in a just and inclusive manner. Since
31 December 2022, we have further divested from this coal bond.
Data availability
As a data user, we are at the end of the data value chain, using data
disclosed by investees through reporting frameworks such as the
TCFD recommendations and CDP. As discussed in the Financial
Stability Board’s 2022 TCFD status report, which describes the global
state of alignment of companies’ reporting with the TCFD
recommendations, the TCFD-aligned reporting by region is notably
lower across Asia and Africa, ie the regions where we operate. Data
availability therefore remains an ongoing challenge, as is reflected in
the coverage level of the WACI and financed emissions for our
investment portfolio shown in this section. We continue to work with
data providers and our asset managers to improve the availability of
data. An increase in data coverage may have the impact of either
raising or lowering the WACI of our investment portfolio if the profile
of the new companies’ data is different to those already included in
the current coverage. We expect such limitations to be overcome as
more climate disclosures occur in these regions, potentially using
established frameworks such as the TCFD or the anticipated
standards from the International Sustainability Standards Board
(ISSB).
Average percentage of TCFD-aligned disclosure by region
Region
Europe
Asia Pacific
North America
Latin America
Middle East and Africa
Per cent (%)
60
36
29
28
25
Source: https://assets.bbhub.io/company/sites/60/2022/10/2022-TCFD-Status-Report.pdf
Choice of metrics
We continue to review climate metrics used by the financial sector for
their appropriateness to our markets and practicality of use, such as
data availability (ie coverage). We use a combination of absolute and
intensity emissions metrics to measure our exposure to climate-
related risks, with the combination recognising the strengths of
certain metrics while also addressing their shortcomings. Absolute
emissions measure the total carbon footprint associated with the
investments held in our investment portfolio, whereas WACI
compares that carbon footprint to the revenue also associated with
the investments in the investment portfolio.
We use WACI to compare progress in intensity improvements in
different portfolios, noting that data availability remains an ongoing
challenge as described in the ‘Targets and progress made’ section.
A key benefit of WACI is that it allows comparisons between different
investment portfolios, which is very important in our roles of asset
owner and asset manager. By reducing the WACI of our portfolios, we
aim to also support the transition to a low-carbon economy. We use
the WACI as a proxy for the transition risk in our investment portfolio:
a higher WACI normally indicates that an investment portfolio has to
transition more extensively to align with the Paris Agreement.
We use absolute emissions to identify the investee companies for our
engagement targets, to help reduce absolute levels of carbon
emissions. Our belief is that engagement is preferable to divestment
in supporting a just and inclusive transition, with divestment
considered only in appropriate circumstances as the ultimate course
of action. Engagement continues to be a core part of providing
effective stewardship and we monitor the progress in meeting this
annual target of reviewing and engaging with investees responsible
for 65 per cent of the absolute emissions in our investment portfolio.
We seek to encourage sustainable business and management
practices through constructive engagement, based on our in-depth
knowledge of the companies and their business environment.
We have set our coal policy in a way we believe supports a just and
inclusive transition in the markets where we operate, as discussed in
the ‘Supporting a just and inclusive transition’ section. The threshold
for our coal policy was set to balance the risk and return, while also
allowing companies in our markets to phase out coal in an inclusive
manner.
For operations, we use intensity to measure our reduction in per full
time employee, to support our target in becoming carbon neutral
across Scope 1 and 2 (market-based) emissions by the end of 2030.
Further information on our operations is provided in the ‘Managing
our direct operational environmental impacts’ section.
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Target-related metrics
WACI (weighted average of tCO2e/$mn revenue)
Coverage for the WACI of the investment portfolio
2022
219*
67%
2021
296
69%
Holdings in companies with more than 30 per cent of revenue from coal
Substantially divested from bonds
Fully divested from equities
Engagement with the companies responsible for 65 per cent
of the absolute emissions in our investment portfolio
Operational emissions intensity (tCO2e/FTE)
Our own operations
Scope 1 (tCO2e)
Scope 2 – market-based (tCO2e)
Scope 2 – location based (tCO2e)
Scope 3 (upstream activities)† (tCO2e)
Our financed emissions
Reviewed 100%
Engaged 100%
1.21*
1,645*
16,938*
19,880*
9,487*
Reviewed 44%
Engaged 31%
1.47
1,481
19,986
21,547
8,798
Scope 3: Downstream activities (financed emissions) (tCO2e)‡
3,100,000*
4,700,000
*
†
‡
Within the scope of EY assurance – for further information, see the ‘Scope 3 emissions review’ section of this report and the Basis of Reporting
(www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf) which notes those Scope 3 categories that were within the scope of EY assurance.
Includes Scope 3 categories: 3 (fuel- and energy-related activities, 5 (waste generated in operations) and 6 (business travel).
Reflecting the absolute emissions of the assets in the WACI calculation where the underlying data is available as detailed in the Basis of Reporting
(www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf).
Forward-looking metrics
In collaboration with our asset management and asset owner
businesses, we continue to develop further metrics that are
appropriate for our business, support enhanced management of and
reporting on climate-related risks, and integrate into investment
processes to support our responsible investment framework.
During the year, we reviewed peer practices and industry
recommendations regarding forward-looking metrics, such as
Climate Value at Risk (C-VAR) and implied temperature risk (ITR).
We have identified that these metrics are appropriate for internal use
at this stage, despite having limitations surrounding data availability
and the level of assumptions underlying the methodologies. As of
late 2022, our internal reporting has been enhanced to include the
ITR as an indicator of the level of temperature alignment of our
investment portfolio, and C-VAR as an indicator of the forward-
looking exposure on the investment portfolio’s exposure to physical
and transition climate change risks. We continue to develop our
internal understanding of these metrics, while giving consideration
to disclosing them externally when these shortcomings are
appropriately overcome or can be mitigated.
The Net Zero Insurance Alliance (NZIA) and the Science Based
Targets initiative (SBTi)
We continue to monitor industry initiatives, such as the Net Zero
Insurance Alliance (NZIA) and the Science Based Targets initiative
(SBTi).
The NZIA’s members commit to ‘transition their insurance and
reinsurance underwriting portfolios to net-zero carbon emissions
by 2050, consistent with a maximum temperature rise of 1.5°C
above pre-industrial levels by 2100, in order to contribute to the
implementation of the Paris Agreement on Climate Change’.
The current scope of this alliance is property and casualty insurance.
This scope excludes Prudential, as a life and health business, which
does not underwrite carbon intense activities. Therefore joining the
NZIA at this time is not a current priority for us, and we will continue
to evaluate its appropriateness moving forward.
During 2022, as part of our ongoing review of our climate targets, we
undertook an internal review of the Science Based Targets initiative
(SBTi) and engaged with the SBTi to understand their view of the
methodology’s application in emerging markets . The SBTi uses
global decarbonisation targets and pathways for their verification
which do not distinguish between the differing needs for emerging
markets and developed markets. Aligned with our approach to a just
and inclusive transition, we believe it is critical that we engage with
countries and companies to work with them to overcome their
transition challenges. A part of this approach is reflecting the nuances
of the challenges faced by specific countries, for example in balancing
economic growth and decarbonisation. This leads to differences in
pace of decarbonisation as accepted in the Paris Agreement through
the ‘common but differentiated responsibilities’ principle, which we
try to integrate in our Responsible Investment approach and
articulated in our Just and Inclusive Transition paper. We continue to
engage with the SBTi and monitor its publications to explore how the
methodology can be appropriately applied in our markets, in a
manner that is consistent with the needs of emerging markets and
our broader philosophy.
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We focus on life, health and wealth products and therefore do not
have carbon emissions intensive activities in our underwriting
portfolio. Climate change is creating opportunities for new savings
and insurance products:
> New savings products could incorporate the financing mechanisms
described above, including increasing the green bonds investments
in our investment portfolio and our investment-linked products
(ILPs), as described in the ‘Capital allocation’ section.
> New health and protection products need to reflect the impact of
climate change on human health via changes in the frequency,
severity and emergence of certain diseases, such as the dengue
cover we currently provide.
> Recognising that financial security at all levels is a climate
adaptation measure, we are actively developing inclusive insurance
products as described in the ‘Making health and financial security
accessible’ section, which also explains how we are developing
more products for underserved sections of the market.
We continue to explore using technology and innovation to support
sustainability and climate education. For example, our Philippines
business released a three-part webisode series in December 2022 via
YouTube. The web series proposes financial security to be recognised
as a climate adaptation measure with insurance coverage being one
way to achieve this. The webisodes, entitled ‘Pru Life UK Healthscape
Webisodes: The Big Change’, brought together thought leaders from
healthcare, insurance and the government. The webisodes were
designed to further raise awareness and educate the public about
climate health risks and their impact on financial security. The topics
covered in each webisode are:
> Webisode 1: Climate impacts on health and financial security
(https://youtu.be/_ciLKgN5cZM)
> Webisode 2: Financial Security as a Climate Adaptation Measure
(https://youtu.be/ZESnkuAiang)
> Webisode 3: The Role of Insurance in Climate Mitigation and
Adaptation (https://youtu.be/bAnq-6h7DWA)
We have initiated new research partnerships during 2022, as
described in the call out box. The findings from this research are not
only expected to help inform solution design, innovation and
development opportunities, but also help us engage, educate and
support our customers and employees.
Identifying climate-related opportunities
Our purpose
We help people get the most out of life, by making healthcare
affordable and accessible and by promoting financial inclusion.
We protect people’s wealth, help them grow their assets,
and empower them to save for their goals.
We recognise that our business purpose and strategy allows us to
generate climate-related opportunities for the Group through the
implementation of our strategic ESG framework, including our goal to
decarbonise our investment portfolio, while supporting a just and
inclusive transition. During 2022 we internally identified the following
categories of climate opportunities relevant to our business, which we
continue to explore and develop further:
> Financing mechanisms: investment in green bonds, transition
financing and adaptation financing;
> Savings and insurance products: increase ESG/impact investment
and climate-related health product offerings;
> Technology and innovation: use technology to support
sustainability and climate education; and
> Customers and employees: engage, educate and support our
customers and employees on sustainability and climate change.
Both as a significant investor and an asset owner with long-term
investment horizons and liabilities, the Group continues to be in a
position to invest in financing mechanisms linked to climate
mitigation and resilience. Our strategic asset allocation process allows
us to pursue such investment opportunities. The ‘Supporting a just
and inclusive transition’ section and the ‘Our paper on the just and
inclusive transition’ box provides further detail on how we are
supporting the development of such financing mechanisms, such as
blended finance. We have developed, and continue to implement, our
responsible investment framework, with more information available
in the ‘Responsible investment’ section.
A key input to our strategic asset allocation process is our capital
market assumptions (CMAs). The CMAs are our economic
assumptions which we use across our financial metrics and asset
classes, and they span financial markets around the world with a
focus on countries in which Prudential operates and invests. The
CMAs are set using a highly controlled process, including the use of
comprehensive research studies, economic models and projections of
the key drivers underlying the economic variables. This year we have
included explicit climate information into our CMAs, covering the
impact from both climate-related transition and physical risks. This
inclusion required the development and adoption of a Group view of
how and when climate policies could plausibly be implemented, and
understanding the significance to the CMAs from these potential
policies. As the underlying climate financial data and tools are in the
initial stage of development, we will continue to review climate-
related drivers and their impact on our CMAs on an annual basis.
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In 2022, we embarked on a two-year research partnership with
the Earth Observatory of Singapore (EOS) at Nanyang
Technological University (NTU) in Singapore to examine the
intersection of climate change and health. The Prudential EOS
Climate Impacts Initiative will focus on 10 key markets across
Asia and Africa including Singapore, Hong Kong, CÔte d’Ivoire,
Nigeria, Kenya, Indonesia, Malaysia, the Philippines, Thailand
and Vietnam. It will be carried out over two phases from 2022 to
2023. The first phase of the research involves reviewing historical
records of air quality and health impacts in the countries/cities in
the recent two decades. The second phase will entail projecting
future air quality and its health impact on individuals that
consider several emission scenarios including SSP370 and
SSP585. We are hopeful that the outcome and findings of the
research will help generate ideas and evaluate market
opportunities in terms of investments and products linked to
climate resilience.
Additionally, Prudential, via Prudence Foundation (which is
described in the ‘Community engagement and investment’
section), is funding research by the International Federation of
the Red Cross’s Climate Centre to examine the compound health
risks of heat, humidity, and air pollution, and what effective early
actions can be taken to reduce this risk. For more information,
visit https://www.prudentialplc.com/en/news-and-insights/
all-news/news-releases/2023/06-02-2023
Impact on financial and strategic planning
As part of our annual strategy and financial planning exercise, we
apply internally developed stresses to the projected strategy to test
its robustness. The level of these stresses are more stringent than the
impact from the climate scenarios, described in the ‘Climate-related
scenario testing’ section, over the planning period. Given that the
strategy withstands these more stringent tests, we have confidence
that the strategy and financial plan remain viable over the period
under assessment. We also request local businesses to identify how
our ESG strategy and responsible investment initiatives, including
climate change, are being taken into account in product development
and current products.
Impact on access to capital
We raise capital through the bond or equity markets to pursue
strategic opportunities, such as mergers and acquisitions or entering
new markets. We raise capital principally from institutional investors,
who, in our view, are not expected to have diminished sources of
capital for us to access due to climate change. Prudential issued debt
in March 2022 and during this and in our historic capital raises, we
have not been impacted by the risks from climate change to our
business.
Our ongoing access to capital is supported by the continued
maintenance of our high credit ratings. In deciding on credit ratings,
the credit rating agencies make an assessment of our business profile
and financial flexibility, including our ability to access capital markets.
ESG factors have not, to date, had a material impact on the
creditworthiness of our business or its assessment by the credit rating
agencies; however, they have become a topic of regular discussion
and interest which features in our annual meetings with the rating
agencies.
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Identifying, assessing, managing and responding
to climate-related risks
Identifying and assessing climate-related risks
To enable us to continue to be a long-term and resilient business
serving our customers, we actively identify and assess how climate
change can impact our business. The risk identification processes in
our Group Risk Framework (described in the ‘Risk review’ section)
recognise thematic emerging and principal risks. ESG risks, which
include climate-related risk, are identified as a Group principal risk.
The ‘Risk review’ section identifies the principal risks which are also
material from a climate perspective. The GRC and the Board receive
updates on the principal risks identified, the Group’s exposure to these
risks and subsequent management activities. Further detail on the
governance of climate-related risk is provided in the ‘ESG governance
overview’ section.
Climate-related risks are considered within our existing risk
management processes to determine the relative significance of
climate-related risks in relation to other risks. Prudential treats climate
risk as a cross-cutting amplifier of the existing standalone risk types.
By treating climate-related risk as a cross-cutting risk, we recognise
that there could be significant interdependencies with, and impacts
on, other established standalone risks, such as credit, market,
insurance and operational risk.
Time horizons for climate
Work to further embed ESG considerations into the Group Risk
Framework (GRF) has continued through the year to incorporate
characteristics associated with climate and ESG risks. The GRF has
been updated to include the need to consider the time horizons over
which the benefits and/or paybacks of risk-based decisions are
expected to be achieved within core strategic processes. Time
horizons relating to climate, chosen to reflect the timing over which
transition and physical climate-related risks and opportunities could
reasonably arise, are defined as:
> short term: zero to three years,
> medium term: three to five years, and
> long term: five to 30 years.
Our holistic process enabled us to identify the following areas of
potential exposure to climate-related risks over the short, medium,
and long term:
Areas of potential exposure to climate-related risks
Strategy implementation – As the Group implements its ESG strategy and climate-related commitments, there is a
continuing need to balance potentially different interests, expectations and objectives, both within and across
stakeholder groups.
Financial resilience – Our assets under management are at risk of physical climate risk in the long term. Some of our
assets under management are in high emission, carbon-intensive and carbon-reliant sectors. These assets are exposed
to transition risk in the short and medium term, potentially resulting in increased levels of price volatility, reduced levels
of liquidity, taxation, regulation and/or reduced demand, which could lead to impairments, downgrades and/or
stranding if they fail to adapt, innovate or transition to a lower-carbon business model.
Insurance and product risks – Our strategy focuses on life, health and wealth products, which excludes us from
underwriting carbon emissions-intensive activities. Climate change could impact our customers’ health and livelihoods,
which could result in changes in mortality, morbidity and/or persistency for our life and health underwriting portfolio.
Operational resilience – Climate change could have physical impacts on our operations. The impact from such
climate events on operational resilience, including the impact on third-party providers and the servicing of our
customers, is explored in our operational risk scenarios.
Data and model limitations – Current limitations in financial climate data quality and availability, and asset and
liability modelling tools, make it challenging to accurately assess the financial impact on the Group, particularly for
longer-term time horizons.
Regulatory, legislative and disclosure expectations – The pace and volume of new climate-related regulation
across the Group’s markets could pose compliance and operational challenges that may necessitate multi-jurisdictional
coordination. The increasing disclosure expectations of stakeholders heightens the potential for litigation risk
associated with external reporting conveying a materially false impression or misleading information.
Main affected time horizon
Short and
medium term
Short, medium
and long term
Long term
Long term
Short and
medium term
Short and
medium term
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ESG report / continuedPrudential plc Annual Report 2022 Building on the updates made in the previous year to the Group Risk Framework, a number of additional risk characteristics associated with
climate and ESG themes, which are not explicitly recognised in more traditional risk management practices and frameworks, have been added to
our risk management framework.
Sustainability risk characteristics
Considerations
Cross-cutting risk
Longer time horizons
Double materiality
Risk has significant interdependencies with, and influence on, other established/traditional risks, including
the potential to amplify their impact.
Some aspects of ESG/sustainability risks may emerge in the near term, while others may develop over a
much longer time period than traditional risks.
Recognises that the company can be both ‘impacted by’ ESG/sustainability issues, and can have an ‘impact
on’ those issues in the external world.
Dynamic materiality
A topic can rapidly change from being immaterial to material.
Multiple stakeholders
The company’s actions can impact a wide range of stakeholders including employees, customers,
communities and the environment (ie people and planet).
Other updates to incorporate consideration of the climate and ESG
risk characteristics into appropriate areas of the Group Risk
Framework include:
> As part of the risk taxonomy refresh, a double materiality lens has
been introduced with the inclusion of ‘social and environmental
responsibility’ as a strategic risk;
> The non-financial risk appetite framework reflects a stakeholder-
focused approach which supports the Group ESG Strategic
Framework and recognises a broader set of stakeholders as one of
the key characteristics defining sustainability and climate risks;
> The risk and control self-assessment libraries were reviewed to
identify key risks and controls which support the pillars and
enablers of the ESG Strategic Framework;
> The tools developed to assist with managing against the Group’s
external Responsible Investment commitments, including the
Weighted Average Carbon Intensity (WACI) calculation and
reporting tools, have been included in the Model Risk inventory;
and
> Noting increasing stakeholder and disclosure expectations around
quantification of climate risk exposure, climate scenario stress
testing results were included in the Group Own Risk and Solvency
Assessment (ORSA) report.
Managing and responding to climate-related risks
While many climate-related risks are common at Group and business
level, the nature, focus and impact of these risks can differ across the
Group’s markets. Our emerging risk process, at both the Group and
the business level, helps ensure that we continue to quickly identify
and adapt nimbly to new and evolving climate change and ESG
topics. During 2022, we continued to focus on developing our
understanding of our exposure to actual and potential climate-
related risks and their associated impacts on the Group, focusing on
key local markets in Asia. Ongoing engagement with the local
businesses is focused on six core areas, four of which reflect the TCFD
pillars (internal governance arrangements, local strategy
developments, embedding risk management considerations, and
appropriate metrics and targets), with the others being training and
local regulatory change and engagement.
We recognise the fast pace of climate-related regulatory change.
Engagement with the local businesses has included a focus on
understanding the current ESG regulatory landscape and internal
governance arrangements to help coordinate local responses. As
previously noted, while the application of TCFD-aligned reporting in
Asia has been lower than in Europe (36 per cent of companies, vs
60 per cent in Europe), some regulators and supervisors in the region
are starting to plan for local adoption of reporting against the TCFD
framework. We have been providing, and continue to provide, support
for these businesses in their adoption plans which to ensure
appropriate alignment between Group and any local disclosures.
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Summary of the scenarios used
for stress testing
> Orderly transition scenario: This below 2°C scenario includes
transition impacts as well as physical impacts in line with a
1.6°C increase in temperature by 2100, compared with the
average temperature between 1850 and 1900, in line with the
IPCC Representative Concentration Pathway1 (RCP) 2.6,
through the orderly introduction of climate policies. Ambitious
climate policies are introduced immediately. However, even as
emissions are lowered, acute and chronic extreme weather
continues to increase compared with today, resulting in
increased physical loss and damages. There is a marked
reduction in fossil fuel demand, higher carbon taxes and
investments in low-carbon electricity generation and
manufacturing.
> Disorderly transition scenario: This below 2°C scenario
ultimately includes similar levels of transition policy
assumptions and physical impacts to the orderly transition
scenario, but the policies are introduced in a delayed and
disorderly manner resulting in increased market volatility in the
medium term. There is particularly increased volatility in the
fossil-fuel intensive sectors and regions, but there is also
increased volatility in all sectors due to the disorderly nature in
which the climate policies are implemented.
> Hot house world scenario: This scenario includes physical
impacts in line with a greater than 4°C increase in temperature
by 2100. The physical impacts include irreversible damage to
the climate, resulting in extreme increases in acute and chronic
extreme weather in line with RCP 8.5. For example, many
countries suffer extreme droughts and water shortages. Some
regions will experience greater levels of warming than 4°C,
resulting in certain parts of the world becoming unfit for
agricultural production and human habitation. No further
climate policies are introduced in this scenario beyond those
already announced, resulting in few transition impacts being
assessed.
Climate-related scenario testing
Scenario testing is a key tool to improve understanding and support
decision-making. Scenario testing is particularly useful for raising
awareness of climate change risks due to the wide scope and
unknown timing of potential mitigation and adaptation actions. We
monitored and evaluated developments in climate scenario testing,
including publications by our regulators, and global bodies including
the International Association of Insurance Supervisors (IAIS) and the
Network for Greening the Financial System (NGFS), as well as
publications by the Principles for Responsible Investment (PRI), the
Transition Pathway Initiative (TPI), United Nations
Intergovernmental Panel on Climate Change (IPCC) and the
International Energy Agency (IEA).
Climate scenarios used
Investigating different methodologies appropriate to our nature,
scale and complexity supports our ability to engage with our Group
and local business regulators on this topic. During the year we have
further developed the sophistication of our use of scenario testing,
using different scenarios for different purposes based on the business
need:
> The orderly transition, disorderly transition and hot house world
scenarios from the NGFS provide plausible routes that can be used
for testing the continued robustness of strategy, finances and
operations, known as ‘stress testing’;
> The scenarios from the PRI, such as the forecast policy scenario,
are designed to assess the economic impact of likely policy
developments, which can be used for informing our central market
assumptions; and
> The IPCC, IEA and TPI provide science-based pathways for how
global and sectoral decarbonisation can be achieved to meet the
Paris Agreement goals, which can be used for investee
engagement to support achieving real world change, as described
in the ‘Sectoral decarbonisation pathways box in the Responsible
Investment’ section.
For our stress testing work, we use the orderly transition, disorderly
transition and hot house world scenarios aligned to those provided
by the NGFS, to identify risks over the short, medium and long term.
These scenarios are very rich in detail, providing high levels of insight
into the financial implications that could emerge from such
pathways. The three scenarios provide plausible future outcomes and
are constructed to simulate the complex and non-linear interactions
between energy, economy and climate systems. They also account
for various policy and technology developments, supporting a
sophisticated exploration of the different plausible futures and the
impacts from trade-offs between the policy and technology options.
A key difference between the calibration we use for these scenarios,
versus the NGFS’s calibration which uses general equilibrium
economic models, is the use of non-equilibrium economic models:
we believe the non-equilibrium economic models better allow for
real-world inefficiencies and decision making that could be expected
to be part of the transition to low-carbon economies. The box in this
section provides a summary of the scenarios, including the range of
climate-related events considered in the scenario testing work.
Further detail on the climate-related events from the RCP2.6 can be found in the UN IPCC’s reports at https://www.ipcc.ch/.
Note
1
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ESG report / continuedPrudential plc Annual Report 2022 Carbon prices used in scenario testing
Carbon prices are used in our climate scenario testing work as a proxy for the climate policies that could be enacted by governments. The table
below shows the carbon prices from the NGFS transition scenarios for the regions Prudential operates in. These prices show:
> The carbon prices continue to rise as government policies are expected to increase;
> The prices in the disorderly transition are consistently higher than in the orderly transition which results in bigger market impacts; and
> Carbon prices can be set in a way which reflects the different regional needs, for example the Asia and Sub-Saharan Africa carbon prices are
lower than the World prices.
Carbon prices in NGFS transition scenarios
Orderly transition scenario (US$/tCO2)
Region
World
Asia
Sub-Saharan Africa
Disorderly transition scenario (US$/tCO2)
Region
World
Asia
Sub-Saharan Africa
2025
85.0
61.5
25.2
2025
192.6
139.7
64.7
2030
114.6
87.4
42.2
2030
261.0
197.8
105.0
2035
180.7
122.7
74.3
2035
336.1
276.1
180.0
2040
255.2
171.4
127.9
2040
428.0
377.0
306.3
2045
345.1
237.6
209.4
2045
545.9
512.6
479.7
2050
451.2
325.4
325.4
2050
700.8
698.9
716.3
2055
493.9
366.0
366.0
2055
790.6
797.8
793.6
Source: NGFS Scenario Explorer at https://data.ece.iiasa.ac.at/ngfs, using the REMIND-MAgPIE 3.0-4.4 model, the Orderly Net Zero 2050 and Disorderly Divergent Net Zero NGFS calibrations.
The implementation of carbon taxes or ‘cap and trade’ emission
trading schemes are expected to increase as they are seen as key
tools in preventing climate change. The carbon emissions that
Prudential is operationally responsible for, in our up- and down-
stream supply chains and in investments, could be a risk to our
investments and operational costs were the costs associated with
carbon emissions to substantially increase. A consistently applied
internal carbon price (ICP) could be used to de-risk the business from
such anticipated carbon price increases by lowering emissions from
operations as well as to influence investment decisions. During 2022
we reviewed the potential uses of an ICP for Prudential, including how
carbon prices can be used internally to bring consistency across
operational and investment purposes. Any future ICP for Prudential
should focus on values that are relevant to Asia and Africa, for
example, different carbon prices for developed markets and
emerging markets that increase in a consistent manner over time,
to support an orderly just and inclusive transition.
Sectoral and regional impact on our current assets
and insurance liabilities
Each scenario is translated into sensitivities to economic factors,
which are then applied to the Group’s assets and liabilities to quantify
the potential financial impacts of climate change relative to our base
assumption. The insights from the scenario testing work were
reported in the Group’s Own Risk and Solvency Assessment report,
which continues to be provided to the Board.
The complexity and long-term nature of these climate scenario tests
result in the need for some simplifications in the exercises, in line with
industry practices, such as using a static balance sheet, and
simplifications in estimating the sectoral and regional impacts. These
may result in understating the exposures and vulnerabilities, as
identified by the FSB and NGFS1, which we remain aware of when
using the output. Our analysis did not take account of the potential
actions available to the Group to mitigate the impact, in line with
emerging industry practice, and is an area where we expect to
consider further the opportunities available. Given the level of
development of these models to date, we view them as not
appropriate for setting capital requirements at this stage.
Insights into impacts on assets
As a major asset owner and manager, we rely on investment returns
to meet the longer-term obligations of our liabilities and remain
exposed to risks that could interrupt or impair those returns, which is
what we explore through the climate scenarios. Though the Group
remains exposed to financial impact from climate change, the results
for each scenario were not outside observed market volatility, and
therefore do not indicate the need for an explicit allowance for
climate change in the assumptions used for the liability valuations or
observed market values. The scenario with the largest overall impact
on the Group balance sheet remains the hot house world scenario,
where physical climate change impacts in the longer term could result
in financial market impacts in the medium to longer term. The
disorderly transition scenario has the biggest impact in the short to
medium term as markets assimilate policy changes. As expected, the
orderly transition scenario has the lowest overall impact on the Group
balance sheet, which reinforces the case for our strategic objective to
decarbonise the investment portfolio.
A key insight from the scenario testing is the different sectoral
impacts of the different scenarios, as shown in the heatmap diagram
below. In the orderly transition scenario, which assumes governments
implement climate policies in an orderly manner, the impact is limited
to three specific sectors (fossil based utilities, coal and manufactured
fuels, and oil and gas). In the disorderly transition scenario,
government policies are assumed to be implemented in a manner
which results in enhanced market volatility, resulting in impact
beyond the three specific sectors. These sectoral impacts are
particularly important for Prudential given our operational footprint
across Asia and Africa where many countries are involved in
manufacturing rather than services. In both scenarios there are also
investment opportunities in clean energy and water supply.
Prudential is developing its engagement capability, as described in
the Sectoral decarbonisation pathways box in the ‘Responsible
Investment’ section, to support the orderly transition in a just and
inclusive manner.
Note
1
Current climate scenario analysis exercises may understate climate exposures and vulnerabilities, warn FSB and NGFS – Financial Stability Board
(https://www.fsb.org/2022/11/current-climate-scenario-analysis-exercises-may-understate-climate-exposures-and-vulnerabilities-warn-fsb-and-ngfs/)
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Heatmap of climate scenario impacts on sectors over time
Orderly transition
Disorderly transition
2025
2030
2050
2025
2030
2050
Sectors
Financials
Information technology
Consumer staples
Consumer discretionary
Industrials
Communication services
Materials
Real estate
Healthcare
Oil and gas
Fossil-based utilities
Coal and manufactured fuels
Public administration and defence
Education
Other low-carbon and biobased electricity
Water supply
Wind and solar
Nuclear
Forestry
Source: Prudential internal scenario analysis work
Insights into impacts on insurance liabilities
While climate change can impact morbidity, mortality and
persistency differently in different global regions, given the nature of
the business, the expected impact of climate change does not
directly alter the Group’s assumptions for its insurance business based
on the annual review of experience, which would capture the ongoing
impact on our products and any ongoing developments of climate-
related products. If experience or exposure were to change, for
example due to a step change in long-term morbidity, mortality and/
or persistency expectations in a particular region due to climate
events, the financial impacts from climate-related risks on our
insurance liabilities would be allowed for as part of the regular review
and be reflected in the valuation of our insurance liabilities.
The longer-term impact on the Group should be managed by our
ability to develop new products and reflect experience in our pricing
structures. As further proposed improvements in our understanding
of our exposure to climate-related risks, work continues on plotting
significant clusters of customer locations to assess the potential risk
from physical climate events to our known customer base. Our Group
Risk Framework, which is our enterprise risk management framework
through which our management is informed on climate related
matters, is described in the ‘Risk management cycle’ section.
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ESG report / continuedPrudential plc Annual Report 2022 We continue supplementing our business continuity management
activities with scenario analysis to identify additional areas of
vulnerability that may arise due to climate change, including
potential impacts on our operations, third-party supply chains and
customers. Utilising our third-party provider’s platform, the
operational risk scenarios were used to investigate how a severe
typhoon and/or flood would cause property damages and business
interruption, including operational impacts from additional market
volatility following such a climate event.
Regional impact on our operations
Our people and operations are exposed to climate-related physical
risk, which may threaten our corporate facilities and infrastructure.
We remain focused on maintaining and enhancing our
organisational resilience, so as to be able to provide our continued
support to address the potential humanitarian, customer and
employee impacts from climate change.
Our business continuity management programme assesses the risk
to our operating locations and staff from natural disasters, including
those caused by potential climate-related impacts, by using our
third-party provider’s platform. The results of this assessment can be
seen in the diagram below. The assessment uses the highest IPCC
emissions pathway, known as RCP 8.5, which is predicted to result in
significant physical climate-related impacts. The diagram shows the
extent to which our operations could be exposed to these physical
impacts of climate change from the hot-house scenario, ie if there
is no transition to lower-carbon economies or adaptation to the
increased physical impacts.
Impact of RCP 8.5 scenario on Prudential’s locations of operation
427 Overall Risk Rating
0–25
26–50
51–75
76–100
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Managing our direct operational environmental impacts
To help improve the lives of our customers and communities, we
actively seek to reduce our operational impact. We measure our
environmental performance so that we can understand our impact
and take appropriate actions.
Our approach to, and management of, our property footprint aligns
with our Group Environment Policy which forms part of the Group
Governance Manual, covering the following areas: environmental
laws and regulations with respect to emissions, energy consumption,
water use, waste disposal, environmental supply chain management
and the adoption of risk management principles for all property-
related matters.
We have consolidated our property portfolio in 2022 by 7 per cent.
We expect to see a further reduction in total floor space in 2023 due
to enhanced office fit-outs and space utilisation. It is important to
note that this reduction will not be linear, as our premises portfolio is
expected to change with our business operations.
As the fall in our 2022 emissions continues to be ahead of the
reduction trajectory required to meet our 2030 target for Scope 1 and
2 emissions, we have not purchased any carbon offsets for Scope 1
and 2 emissions in 2022. We have procured renewable energy in
Malaysia through green procurement strategies, utilising the Green
Energy Tariff (GET) and International Renewable Energy Certificates
(I-RECs) programmes. The impact of these actions is reflected in a
reduction for Scope 2 market-based emissions when compared with
location-based emissions.
Scope 3 emissions review
During 2021, we carried out a review of our Scope 3 emissions.
The assessment was carried out in accordance with both the
Greenhouse Gas (GHG) Protocol and Partnership for Carbon
Accounting Financials (PCAF). It considered all 15 Scope 3 categories
and provided us a better understanding of which areas of our value
chain contribute most significantly to our overall emissions footprint.
The detail is provided on page 32 of our 2021 ESG report
(www.prudentialplc.com/~/media/Files/P/Prudential-V13/
reports/2021/esg-report-2021.pdf).
During 2022 we have focused on improving Scope 1 and 2 data
collection from Africa and Scope 3 business travel data from Asia and
Africa. For 2022, we are reporting the same operational categories as
2021 while we focus on improving data quality for those categories.
We continue to keep expansion of the reported categories under
review.
Data gaps across some of our Scope 3 categories remain and as
Scope 3 data accuracy and methodologies continue to evolve, we will
seek to align with best practice, and broaden the scope of reported
Scope 3 categories.
Progress towards operational carbon targets
Our target is carbon neutrality by 2030 across our Scope 1 and 2
(market-based) emissions. We also target an operational
intensity ratio of 1.65 tCO2e per full time employee (FTE) by 2030
from our 2016 baseline of 2.20, representing a 25 per cent
reduction. We are currently tracking ahead of plan with our
intensity ratio at 1.21 tCO2e/FTE for 2022. However, we are aware
that office closures and operational restrictions imposed to
manage the spread of Covid-19 persisted into 2022 and have
played a part in the achievement of this reduction. We have seen
a partial rebound in emissions for our office functions that have
reinstated business-as-usual operations.
We keep our performance under review, and are continuing to
develop and implement reduction measures across our
operations to enable us to meet our targets.
Movement in our operational emissions
Our 2022 reporting covers the period 1 October 2021 to
30 September 2022, and includes our global property portfolio, which
spans Asia, Africa and the United Kingdom.
We have included full reporting for Scope 1 and 2 and selected Scope
3 reporting. Scope 1 emissions are our direct emissions from the
combustion of fuel, fugitive emissions and company-owned vehicles.
Scope 2 emissions cover our indirect emissions from the purchase of
electricity, heating and cooling. We have stated our Scope 2
emissions using both the location and market-based methods in line
with the GHG Protocol Scope 2 Guidance.
Our Scope 1 emissions remain a small percentage of our overall
operational emissions. In Asia, these emissions are primarily related
to vehicle usage. We are looking at purchasing electric or hybrid
vehicles in markets where the supporting infrastructure is available,
though transitioning to electric cars remains challenging in many of
our markets as the necessary supporting infrastructure is currently
not in place. In Africa, Scope 1 emissions represent a larger proportion
of emissions because our offices continue to have a greater reliance
on generator power. We would anticipate these emissions to revert to
Scope 2 over time, as utility grid stability improves in the markets in
which we operate.
A summary of our Scope 1, 2 and 3 emissions for 2022 and 2021 are
provided below. Our global absolute Scope 1 and 2 (market-based)
GHG emissions were 18,583 tCO2e, down 13 per cent from 2021,
primarily driven through the benefit of green power and renewable
energy procurement. Electricity use in our buildings is the largest
contributor to our operational footprint at 16,938 tCO2e (market-
based), making up 91 per cent of our total Scope 1 and 2 emissions.
Scope 3 emissions have increased compared with those reported in
2021 due to the inclusion of Africa business travel and resumption of
air travel in the second half of 2022 across Asia and UK operations.
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ESG report / continuedPrudential plc Annual Report 2022 Emissions source (tCO2e)
2022
2021 Change (%)
Scope 1
Scope 2 – market-based
Scope 2 – location-based
Scope 3 (upstream activities)†
Total: Scope 1 and 2 using
market-based approach
Total: Scope 1, 2 and 3
(upstream activities) using
market-based approach
1,645*
1,481
16,938*
19,986
19,880*
21,547
9,487*
8,793
11
(15)
(8)
8
18,583
21,467
(13)
28,069
30,260
(7)
Tonnes per employee – Scope 1 and 2
1.21
1.47
kg per m2 – Scope 1 and 2
54.01*
58.22
kg per m2 – Scope 1, 2 and 3
(upstream activities)
81.59*
82.09
(18)
(7)
(1)
*
†
Within the scope of EY assurance – for further information, see the ‘Scope 3 emissions
review’ section of this report and the Basis of Reporting (www.prudentialplc.com/~/
media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf) which notes
those Scope 3 categories that were within the scope of EY assurance.
Includes Scope 3 categories: 3 (fuel- and energy-related activities, 5 (waste, including
water, generated in operations) and 6 (business travel).
Driving reductions in our operational energy consumption
Our core focus remains on implementing projects that drive
reductions in our operational energy consumption, thereby reducing
associated Scope 2 emissions. With the Covid-19 pandemic
restrictions being relaxed across most of Asia and Africa, we have seen
our office functions starting to resume business-as-usual operations.
In implementing new working environments, we are taking the
opportunity to implement best practice environmental performance,
including adopting features such as LED lighting, increased lighting
controls, lighting zones and climate controls. In 2022, we have
undertaken several energy reduction projects across a range of
diverse markets, including offices in Taiwan, Malaysia, the Philippines,
Indonesia and Ghana. The focus of these projects has been on
lighting and control upgrades. It is estimated that these completed
projects combined will save 317 tCO2e every year.
In 2022, all our businesses have been issued with tailored
environmental roadmaps, detailing their existing Scope 1 and 2
emissions, their 2030 target and the actions required to meet those
targets. The roadmaps were developed through the learnings of site
surveys undertaken in previous years. The roadmaps will be updated
on an annual basis and supporting site surveys will continue to
monitor progress.
In addition to actions that reduce the amount of electricity our office
operations consume, we also actively look at how we can purchase
renewable energy for our office operations, to support our transition
to a low-carbon economy. We are faced by two challenges in this:
> Most of the markets in which we operate do not currently offer
direct renewable energy procurement; and
> As we are primarily a short-term leasehold tenant in the buildings
from which we operate, installing onsite generation capabilities
remains challenging.
Ghana LED lighting upgrade
In Ghana, an LED lighting upgrade project has been completed in
a significant number of Prudential’s offices. It is estimated that
the rollout will save 20 tCO2e every year. Prudential Ghana has
linked this project to its launch of energy efficient guidelines and
an Energy Efficient League, which gives recognition for
operational reduction efforts.
Malaysia renewable energy programmes
In 2022, we subscribed to the GET programme for our Malaysia
Peninsular operations. The programme is having a direct impact
on supporting a clean energy transition, through greening the
utility grid and supplying consumers with renewable energy. The
programme is currently fully subscribed.
The GET programme was introduced by Tenaga Nasional Berhad
and is evidenced by a Malaysia Renewable Energy Credit (mREC),
which is recognised by the I-REC Standard. The I-REC registry is
recognised by all major standards and campaigns, including CDP
and the Greenhouse Gas (GHG) Protocol, to give assurance that
consumers will receive renewable electricity and be provided with
the renewable energy generation source. The programme’s funds
go towards the Malaysian Electricity Supply Industry Trust
Account (MESITA) to support the implementation of Malaysia’s
renewable energy agenda and initiatives.
In addition to the GET programme, our landlord at Menara
Prudential, one of our offices in Kuala Lumpur, is purchasing
renewable energy supported by I-RECs and has enrolled in the
Sarawak Energy Initiative. We have put in place an agreement
with our landlord to ensure transparency and to support the claim
that the green energy purchased by the landlord is fully
attributed to our facility. This avoids double counting, which
enables us to use the emission factors related to this scheme
when calculating our emissions relating to the building.
Despite these challenges, we continue exploring viable renewable
energy procurement opportunities. In 2022, we procured renewable
energy for the first time, focusing on our Malaysia operations as it has
our largest operational footprint. 31 per cent of our total electricity
consumption, equivalent to 2,160 tCO2e, for Malaysia in 2022 was
covered through green procurement strategies, utilising the GET and
I-RECs programmes, as described in the box. We are aware of the
concern that these schemes do not fully guarantee additional
renewable energy supply reaching the market and have only selected
programmes where the impact is transparent to us.
While online communication and conferencing platforms remain very
important to our operations, the opening of international borders is
enabling us to hold face-to-face meetings, to better drive
engagement across the business after extended periods without
face-to-face contact. We are starting to see air travel increase, and we
anticipate emissions from air travel will increase further in 2023,
towards pre-pandemic levels. In 2022, Scope 3 business travel
emissions have risen by 173 per cent compared with 2021 but
remains 26 per cent lower than for 2020. We intend to review our
business travel policy during 2023.
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Hybrid working has been adopted in many of our operations in Asia.
The energy consumption associated with our employees working
from home has not been captured in our reporting in 2022. We
recognise that with the broader adoption of hybrid working, a
proportion of our staff will continue to spend part of their week
working away from the office, and we therefore need to better
understand the emissions associated with this. We have started
developing an emissions calculator designed to model Scope 3
emissions associated with staff working from home and we are
piloting this in our Singapore life business. The assumptions used in
this model are aligned with the framework used by the Department
for Environment, Food & Rural Affairs (DEFRA) and aligned with the
GHG Protocol.
Monitoring our progress
We have made considerable effort to engage with our businesses on
the importance of reporting throughout 2022. There has been a
continued focus on improving our data collection programme, and
we have seen data quality improve, with greater completeness and
fewer accruals. Due to the pandemic restrictions, we placed site-
based energy assessments on hold from 2021, limiting our access to
relevant data. However, this initiative has now resumed, with reports
available in 2023. These will help inform our updated environmental
roadmaps.
During 2022, we upgraded the environmental data platform for our
property portfolio. This platform allows users to interrogate the
emissions performance of our property portfolio down to a single
building. This level of granularity enables users to gain a better insight
into where potential emission reduction can be found, both at a
portfolio and asset level, and can provide local businesses with a tool
to measure the impact of their sustainability measures. Our local
environment representatives were trained on functionality updates,
and on the capabilities and role the platform plays in monitoring our
environmental operational progress.
Raising employee awareness and training
Raising employee awareness of the importance of the environment
and what we can do to minimise our emissions remains a core aim of
our management team. In support of this we have run several
initiatives throughout the year including the Group-wide Green Week
and training sessions.
Training was delivered to the Africa ESG senior leadership team to
help improve capabilities and awareness of the environmental
agenda. The focus of the presentation was on clarifying Group
targets, mandatory reporting requirements, the actions available to
reduce Scope 1 and 2 emissions and furthering our understanding of
the challenges our African businesses face, and how these differ from
those in Asia.
Enforcement actions and other regulatory events
No fines or regulatory actions occurred during the year for
environmental incidents (2021: zero).
Prudential Green Week
Prudential’s Green Week took place in April 2022 and was an
opportunity to engage internally on our alignment, commitment
and momentum towards sustainability within investment and
operational spheres. Features of the week included the launch
of a video around ‘Building a greener future’, which highlighted
our operational targets for carbon neutrality and the actions that
the business and individuals can take to help us reduce our
emissions. Green Week also included a series of interviews with
Group leaders covering subjects such as ‘Going green as a Group’,
our commitment to decarbonising our investment portfolio, and
what a just and inclusive transition entails.
Supporting a just and inclusive transition
In this section we set out how we have supported the just and
inclusive transition in 2022 through our engagement and advocacy
globally, regionally and through industry bodies. A highlight of 2022
was the publication of our paper on a just and inclusive transition,
described in the box in this section. A specific example of our active
outreach was our integral role in establishing the Emerging Markets
Transition Investment (EMTI) project.
The paper highlights the importance that Prudential places on
ensuring the transition to a low-carbon economy is a just and
inclusive one, and explores case studies and further actions required,
both from Prudential and the wider market.
Global advocacy
Alongside our work on the role of investors in a just and inclusive
transition across Asia and Africa, our advocacy for emerging market
ESG issues in the global context has formed the basis of our outreach
with policy and regulatory stakeholders throughout 2022. This has
taken shape across specific themes, including regulatory reform,
blended finance, harmonisation of standards and taxonomies, and
an increasing focus on nature. This section provides more information
on our advocacy activities.
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ESG report / continuedPrudential plc Annual Report 2022 Making sure emerging markets do not fall behind in the energy
transition requires both public and private investments, and the
mainstreaming of investing in the energy transition. The paper
identifies additional work required for this:
> A review of metrics for portfolio reporting so that climate-
oriented metrics do not create a disincentive for companies
providing transition financing due to short term carbon portfolio
targets;
> The need for emerging market-appropriate harmonised
taxonomies and protocols for investing in responsible retirement
facilities for fossil fuel utilities or investing in carbon-intensive
companies’ transition toward carbon neutral practices; and
> Jurisdictional involvement in international standard setting to
enable more disclosure, such as that which is encouraged within
the latest draft sustainability and climate standards proposed by
the International Sustainability Standards Board (ISSB).
The paper received overwhelming positive feedback, including:
> It correctly identifies the need for emerging markets to have a
‘seat at the table’ during discussions on how the world will reach
net zero; and
> It raises the need for global understanding to improve as to why
the transition needs to be just and inclusive for emerging markets.
Prudential will continue to work with other like-minded
organisations to raise awareness about the unique challenges
faced by emerging and developing economies in meeting their
needs for climate transition and other sustainable investments. We
expect both our position and execution approach to evolve whilst
maintaining our objective to influence real-world impact in a just
and inclusive way.
Our paper on the just and inclusive transition
Prudential’s 2022 white paper (www.prudentialplc.com/~/media/
Files/P/Prudential-V13/content-pdf/prudential-plc-just-and-
inclusive-transition-white-paper.pdf) sets out how we support a just
and inclusive transition.
The paper:
> Defines the case for a just and inclusive transition, and its place in
meeting the Paris Agreement;
> Highlights the importance that Prudential places on ensuring the
transition to a low-carbon economy is a just and inclusive one;
and
> Explores case studies and further actions required, both from
Prudential and the wider market.
Financing the transition
We believe that work on blended finance will be of increasing interest
to Asian and African policymakers in 2023, and we will seek to build
out our work in this area. The Just Energy Transition Partnerships
(JETPs) are an example of blended finance. The JETPs public-private
partnership models were launched in 2021 at COP26. They are an
example of a project grounded in local knowledge and participation,
which is important for ensuring the structures designed are applicable
for the market, designed to support a country’s energy transition
in a holistic manner, bringing together actors across the energy,
regulatory, finance, policy and renewables space, with financial
and capacity support from the G7 and the private sector.
Vietnam announced its JETP in December 2022 with the
International Partners Group. The JETP will support Vietnam in
working towards its new targets, including bringing forward the
projected peaking date for its GHG emissions, limiting its peak coal
capacity and accelerating the adoption of renewable energy.
Prudential was the only insurer invited to be one of the members
of the private sector working group. We will work with public and
private members of the group to ensure that the vehicles established
underneath the JETP model are suitable for an insurer/asset
manager such as Prudential.
Within the multilateral development bank (MDB) community, reform
of their structures is a priority to enable more effective partnerships
with the institutional investor community in emerging markets, for
blended finance and other vehicles, noting the models and incentives
for blended finance still needs development. Prudential will work
through its existing memberships in this area to support these
conversations where possible. Our other international membership
body of note, which is working to connect the insurance sector with
the multi-lateral community, is the Insurance Development Forum
(IDF), a partnership with MDBs. Prudential colleagues are on its
inclusive insurance workstream, and we have also supported their
COP27 activity on the ground.
Through our membership of the World Economic Forum (WEF),
Prudential was invited to take part in workshops as part of their
‘Fostering Effective Energy Transition’ initiative and the Regional
Action Group for ASEAN.
Having been involved at its inception, we continue to support the
Energy Transition Mechanism (ETM) as a concept, with the priority
being to retire coal plants early in a responsible way. Progress on the
ETM has continued throughout 2022, in particular in Indonesia
where the government and stakeholders are motivated and engaged.
Following positive discussion in Q3, where Prudential participated
as an observer, the Asian Development Bank announced a
memorandum of understanding for its first financing deal to
accelerate the phase-out of coal in Indonesia under the ETM. We
welcome this development. If, in future, entities established by the
ETM issue investible assets, as a long-term investor in those markets
we remain interested in them, provided they met our risk and return
criteria. Such investment would, under current rules, potentially have
an adverse impact on our WACI. This creates a disincentive for
companies providing transition financing, which is an issue we
highlight in our Just and Inclusive Transition paper.
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Net Zero Asset Owner Alliance
In 2021, Prudential joined the United Nations-convened Net Zero
Asset Owner Alliance (NZAOA) – a network of institutional investors
committed to the decarbonisation of their asset portfolios – to
facilitate greater collaboration with global peers. As an active
member, and one of the only members with an emerging market
footprint, we support their wider policy and outreach work
(including the EMTI project, see ‘Emerging Markets Transition
Investment (EMTI) project’ box). Through the NZAOA we have
contributed to consultations and papers on coal and on oil and gas,
and regularly engage in their target setting, methodology and
reporting workstreams. This has also been one of our main avenues
of communication with the UN and their Race to Zero campaign.
In 2022, Prudential’s continued focus has helped to ensure that
emerging markets feature more prominently in NZAOA
communications and discussions. This includes continued efforts to
raise awareness on the challenges for emerging markets in the
energy transition, to generate thinking on relevant solutions that
more actively consider the impact of climate change on developing
markets. We believe this represents a key and critical step in
acknowledging developing economies in the just and inclusive
transition. In 2022, we supported specific NZAOA sub-tracks,
advancing progress on:
> Financing the transition: Prudential initiated and leads this
sub-track, and started the Emerging Markets Transition
Investment (EMTI) project, with the objective of accelerating
investment towards the net-zero transition of emerging markets.
See the Emerging Markets Transition Investment (EMTI) project
box in this section for more detail.
> Monitoring, Reporting, and Verification (MRV): Submitting
commentary through the public consultation, Prudential
advocated for integrating a guiding design philosophy on
sovereign bonds into the NZAOA’s new protocol. The additions
emphasise support of a just and inclusive transition to low-
carbon economies, while acknowledging that emerging markets
will be more impacted by climate change despite having
contributed less to cumulative carbon emissions already emitted.
> Policy: Prudential provided input for the NZAOA’s oil and gas
position paper, which presents expectations for companies (ie
users and producers), governments and investors. The paper
adopted our recommendations that more in-depth
consideration be given to the unique transition challenges of
emerging markets, and how investor engagement can be both
impactful and consistent with principles of differentiated
responsibilities and a just transition.
Looking ahead to 2023 we will be taking more of a leadership role
in NZAOA’s emerging market thematic workstreams.
Industry bodies
In her capacity as a board member for the Institute of International
Finance (IIF), Prudential’s Chair attended the World Bank and IMF
Annual Meetings in October 2022, undertaking bilateral meetings
with a number of policymakers and regulators from Prudential’s
markets in Asia and Africa. Discussions focused on financial inclusion,
and the role of the financial sector in addressing climate change.
Prudential’s Chair of Growth Markets was invited to speak at the IIF’s
Emerging Markets Sustainable Finance Summit in September on the
role of finance in a just transition across Asia.
Prudential colleagues sit on a number of IIF working groups, including
the sustainable finance working group and the Insurance Regulatory
Committee Asia Pacific subgroup, which has focused on themes
related to climate change and sustainability, digital transformation
and the implications for financial inclusion.
In July 2022, Prudential submitted a response letter to the
International Sustainability Standards Board (ISSB) consultation
on its exposure draft on climate-related disclosures. Prudential
is supportive of the efforts of the ISSB to secure broad cross-
jurisdictional support for the proposals as work is undertaken to
finalise the standards. Prudential’s view is that the ISSB’s proposed
approach should clearly reflect developed and established
approaches such as those undertaken through the GHG Protocol
and the Partnership for Carbon Accounting Financials (PCAF).
We expressed that we have a particular concern about GHG emission
disclosure: it would be challenging for financial institutions to report
emissions for entities and investments that are not under their direct
control. This is not currently required by PCAF (which uses the
operational control or financial control approach), and therefore
represents an expansion to these requirements. To mitigate these
issues, it would be important to have some latitude in determining
organisational boundaries, as long as the approach is clearly
disclosed, and consistently applied.
During 2022, we continued our engagement with the IAIS on
climate-related risks, including bilateral meetings with the Chair of its
Climate Task Force. The climate-related work forms part of the IAIS’s
Holistic Framework (HF) and the Global Monitoring Exercise (GME),
which assesses and monitors systemic risk in the insurance sector.
The IAIS has been incorporating climate-related data in its annual
Individual Monitoring Exercise in a qualitative nature. The IAIS
continues working closely with other industry bodies, including the
NGFS and ISSB. In November 2022, we had the opportunity to speak
to members of the IAIS about our paper on the just and inclusive
transition (see box in the ‘Supporting a just and inclusive transition’
section).
We actively participate in industry forums and networks, such as
the CRO Forum Sustainability Working Group, to further develop
understanding and support collaborative action in relation to climate
and ESG risks, and to remain aware of industry best practice as it
develops. The two primary industry developments tracked by the
CRO Forum Sustainability Working Group have been:
> The collaboration between the Partnership for Carbon Accounting
Financials (PCAF) and the UN-convened Net Zero Insurance
Alliance (NZIA) to develop a global standard to measure and
disclose the carbon emissions associated with the risk being
insured; and
> The initial drafting of the Taskforce on Nature-related Financial
Disclosures (TNFD) framework, which has a targeted publication
date in 2023. Building upon the work of the TCFD, the TNFD
framework is being designed for future alignment with the global
baseline for sustainability standards under development by
the ISSB.
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ESG report / continuedPrudential plc Annual Report 2022 Emerging Markets Transition Investment project
Prudential initiated and leads a sub-track within the Net Zero Asset Owner Alliance (NZAOA) on
‘Financing the Transition in Emerging Markets’, which includes the Emerging Markets Transition
Investment (EMTI) project as a key component. The EMTI project was organised to identify
practical, near-term solutions to accelerate investment towards the net-zero transition of emerging
markets. The project is supported by the NZAOA, the World Economic Forum and the EU-ASEAN
Business Council. As part of the project, Prudential organised two webinars and two round tables in
2022. The first EMTI public webinar, with opening remarks provided by Prudential, focused on the
ASEAN markets. This was followed by a second webinar, with opening remarks from Prudential’s
Group Chief Executive, which focused on the role Africa has to play in global decarbonisation.
During the first roundtable, participants across the financial industry discussed the main barriers
for investing in the energy transition in emerging markets. The outcomes resulted in the publication
of a discussion paper (‘Code Red: Call for Urgent Action on Emerging Markets Transition
Investment’). The second roundtable focused on effective engagement in emerging markets.
The high profile of the supporting bodies within the EMTI project, together with the release of
Prudential’s ‘Just and Inclusive Transition’ white paper, combine to raise the external profile of
the Group’s future actions with regards to ‘stewarding the human impacts of climate change’.
Regional advocacy
Asia
Given our footprint, we monitor and engage with ASEAN-wide
financial services policy. Our markets in South-east Asia have
increased their focus on green finance and ESG throughout 2022,
both at the policy and regulatory level. Prudential’s local teams
have therefore supported consultations, workshops and events
even more regularly than in prior years.
We collaborated on an EMTI ASEAN webinar in spring 2022 in
partnership with the NZAOA and EU ASEAN Business Council, at
which the Cambodian government joined in their capacity as 2022
Chair of ASEAN and spoke on behalf of both Cambodia and the
region. We attended the ASEAN Leaders’ Summit in November at
which we spoke at a UK-ASEAN Business Council convened session
on a just and inclusive transition.
Our Singapore business provided inputs to the development of a best
practices disclosure document, which sets out pathways for financial
institutions (specifically banks, asset managers and insurers) to adopt
and put in place TCFD recommendations based on the different
stages they are at in their sustainability reporting journey. Our Group
CEO spoke on climate financing at the Singapore Fintech Festival.
We submitted a response to Indonesia’s regulatory requirements
on a Sustainable Finance Action Plan (SFAP).
Our team participated in the Mayor of Shanghai’s annual
International Business Leaders’ Advisory Council meeting, with a
paper on the role of corporate ESG practices in facilitating green
and low-carbon transformation.
Africa
Prudential is a founding member of the Nairobi International
Financial Centre, an initiative brokered by the UK High Commission
in Kenya, through which sustainability issues are raised.
In Kenya, Prudential Africa sponsored the yearly Kusi ideas festival
where the theme was “Climate Changes: Exploring Africa’s Response
and Solution”. As a panellist, Prudential Africa’s Chief Operating
Officer spoke about our position regarding a Just and Inclusive
Transition.
Another important global policy voice for Prudential, especially across
our African markets this year, has been the Commonwealth. In 2022,
Prudential attended the Commonwealth Heads of Government
Meeting (CHOGM) in Rwanda which had a strong focus on post-
pandemic recovery and sustainability, spoke at the financial services
roundtable on the role of the sector in building resilience and
sustainability. In Q4 2022, Prudential spoke on the role of sustainable
finance in development at the financial services roundtable at the
Commonwealth Trade and Investment Forum.
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United Kingdom
Prudential has had ongoing engagement with the United Kingdom
(UK) government, both in the UK and overseas, on ESG issues
throughout 2022. During the final months of the UK’s COP Presidency
this included engagement on key themes such as transition finance
and the role of the private sector in supporting an inclusive transition.
Throughout the year we have engaged with the Foreign
Commonwealth & Development Office, the Department for
International Trade, HM Treasury, the COP unit and British embassies.
This included the British Embassy in Cairo in the run-up to COP27 to
support UK-Egypt work in green finance.
We have retained our membership of the CBI’s Sustainable Finance
Working Group, through which we have discussed issues such as the
government’s transition plans, green taxonomies and the role of the
UK as a centre for green finance.
Prudential was represented at an event in the UK Parliament to
launch the Climate Policy Initiative (CPI)’s ‘Landscape of Climate
Finance in Africa’ report.
Prudential at COP27
Throughout 2022, we engaged with the UK government in its role
as COP26 chair on key themes of importance for them, contributing
to preparatory work on the Vietnam Just Energy Transition
Partnership (JETP) and their work putting finance at the heart of
solutions. As we drew closer to COP27, we also engaged with the
UN infrastructure, especially the Climate Champions Team, the
Glasgow Financial Alliance for Net Zero (GFANZ), and non-
governmental partners such as FSD Africa, ODI, Business Fights
Poverty and CPI as they planned their COP programmes (Financial
Sector Deepening Africa, Overseas Development Institute, Climate
Policy Initiative). Ahead of COP27, Prudential signed the 2022
Global Investor Statement to Governments on the Climate Crisis
(https://theinvestoragenda.org/wp-content/
uploads/2022/08/2022-Global-Investor-Statement-.pdf), which
calls on governments to implement the policy actions needed to
address the climate crisis and accelerate the transition to a net zero
emissions economy.
Prudential was represented in Sharm el-Sheikh for COP27 by the
Chief Operating Officer of Prudential Africa, who also has held
senior roles in our Asia businesses, and is thus well-positioned to join
discussions on the role of global finance in promoting a just and
inclusive transition.
Prudential’s main positioning at COP27 aligned with the Egyptian
host priorities in many ways, putting emerging markets at the heart
of the conference and how the finance sector plays a valuable role
in supporting the net-zero transition. Prudential spoke at an event
on the possible partnerships for institutional investors in mobilising
domestic capital in emerging markets to support a just transition.
We also joined a GFANZ coordinated meeting with the Vietnamese
government and partners to discuss next steps on their own JETP.
Through our membership of the IIF, we joined events on the role of
private finance in closing the climate gap, and through our
membership of the IDF (Insurance Development Forum) we
attended insurance-specific events, including a meeting with the
UN High Level Champions. Through our relationships with some
key non-profit organisations such as FSD Africa we joined the
launch of pan-African initiatives of interest.
Prudential also attended events hosted by our governments,
regulators and partners, especially the NGFS, MAS and multi-lateral
development banks, to discuss the ways in which the finance
community can support emerging markets on their transition.
We are particularly interested in the next steps on multilateral
development bank (MDB) reform and possible new blended finance
opportunities for institutional investors in Asia and Africa.
For COP27, Prudential has built a relationship with the UN’s High
Level Champions and their team who hope to expand the role of
private finance in closing the climate finance gap. This is an area of
ongoing engagement. As COP27 this year demonstrated,
governments around the world are increasingly focused on this
area, both in developed and emerging economies. We look forward
to supporting this policy work bilaterally, regionally and through our
memberships and associations. In 2023, we will be supporting
existing partnerships such as the NZAOA, IDF and High Level
Champions team on themes of importance as we look ahead
to COP28.
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ESG report / continuedPrudential plc Annual Report 2022 Strategic Pillar: Building social capital
We build social capital by building trusted relationships with our
employees, on whom our success depends, and we seek to safeguard
our customers’ trust in us through our rigorous approach to digital
responsibility.
Our people responsibility
In fulfilling our people responsibility, we continued to lean on our
Group Culture Framework which outlines who we are, why we exist,
and how we conduct our business and ourselves. The four
components that make up our culture framework are purpose,
principles, values and future-ready skills. Prudential’s purpose is to
help people get the most out of life and we aim to do this for our
employees, one of our greatest assets.
As an employer, we have promised to make Prudential a place where
our people can connect, grow and succeed. Our people strategy and
roadmap guide our work to fulfil this promise, and include areas such
as culture, diversity, inclusion and belonging, learning, leadership,
performance management, reward and recognition.
Connect
Culture and people experience
We are guided by our five values, ambitious, curious, empathetic,
courageous and nimble, in terms of how we carry ourselves in the
workplace. They are an essential part of our culture framework,
and this is reflected in the way we interact with one another.
Values
How we live our values
Ambitious
Our business is competitive. We push ourselves
and each other to greatness, but not at all costs.
Being a team player and doing the right thing
comes first.
Curious
The world is changing faster than ever. No one
has all the answers. We are humble and always
listen and seek to learn and understand.
Empathetic
There’s an age-old wisdom in walking a mile in
another’s shoes. We do that every day, whether it
is with our customers or colleagues.
Courageous
Prudential’s success and culture belongs to all of
us – it’s our shared legacy. We do the right thing
and bring our full selves to work to build it
together.
Culture
Nimble
Being agile and adaptive is the norm. We
approach our work iteratively, with carefully
designed experiments that help us fail fast and
fail forward.
Connect
Providing a diverse, inclusive and
flexible work environment where ideas
are welcomed, contributions valued,
and everyone is encouraged to bring
their true self to work
Grow
Giving our people the time to grow and
develop, with support and feedback
when it’s needed and a culture that
encourages them to challenge
themselves and learn new skills
Succeed
Recognising our people for their
skill sets and contributions and looking
after their health and wellbeing
Diversity,
inclusion and
belonging
People
experience
Learning
Leadership
Talent and
succession
Performance
management
Reward and
recognition
Future-ready
workforce
Since 2020, we have been conducting people surveys to evaluate
progress on our three-year culture journey and assess how our values
show up at work. Our fourth global people survey took place in
January 2023 with the participation and input of 95 per cent of
our workforce. Overall engagement stood at 79 per cent, an
improvement of 4 per cent from the previous survey conducted
in December 2021, as well as 5 per cent against industry benchmarks.
Company confidence has the highest favourable score of 89 per cent,
demonstrating the strong belief from our staff about the future of
Prudential. Our core values received an 86 per cent favourability score,
a testament to our strong and cohesive culture, while the score for
inclusion and belonging, social connection, and support from
management was at 85 per cent, indicating a deep sense of
belonging.
While work and life blend with a 70 per cent favourability score,
improved by 6 per cent in this survey, we continue to enhance our
efforts in this area to support our people through flexible or hybrid
work arrangements. Overall, the improvements seen in 2022 follow
the introduction of a number of initiatives aimed at enhancing
wellness, building capabilities, strengthening inclusion, and
deepening connections with our leaders, which we will continue
to build upon in 2023.
In 2021, our first Collaboration Jam – a three-day inclusive online
conversation – yielded inputs from colleagues across our businesses
on the different skills needed to be future-ready. Since then, we have
invested significantly in equipping our people with the appropriate
skills to embrace the future of work.
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In 2022, we held our third Collaboration Jam where more than 8,000
colleagues shared their views about belonging at Prudential. Over
130,000 comments were contributed during the 72-hour period,
exceeding our expectations and external benchmarks and
demonstrating enthusiasm, engagement and interaction across the
Group. The conversations centred on belonging at a local level, and
how feeling valued was a driver of feeling a sense of belonging; the
requirement for opportunities to broaden and strengthen internal
networks including with leaders; and the need to further embed our
commitment to connect, grow, and succeed across the business.
In response to the Collaboration Jam, and to enable our people to
build social connections, we launched Mystery Coffee, an initiative
that enables our people to grow their network, learn from each other
and reach their professional goals through peer connections and
support. Participants registered for a Mystery Coffee are matched
with a mystery partner from a different location to share skills,
expertise and develop personal connections over a virtual coffee
conversation. To date, we have had over 1,800 employees registering
for Mystery Coffee. This initiative will, over time, enable all our people
to expand their network and create a sense of belonging within the
larger Prudential Group.
We continued to drive a human-centred, digitally-enabled people
experience to help people connect with colleagues and our culture,
take ownership of their career and performance, and make work
more engaging. Our employees can also access the latest company
information on 1-hub, our company intranet, including information
on company performance, heritage, and our leaders’ profiles. On
myHR, employees can manage leave requests, development plans,
performance reviews, and more.
The Board uses a range of formal and informal methods to engage,
communicate and understand the views of the workforce. In May
2021, the Responsibility & Sustainability Working Group assumed
responsibility for leading the programme of workforce engagement
and, along with other Non-executive Directors, the Working Group
continued to participate in workforce engagement activities during
2022. In addition to its direct engagement with the workforce, the
Board and Working Group reviews the output from the annual
employment engagement survey and the Collaboration Jam and
discusses follow-up actions with management, and also receives
regular updates on employee matters from the Group Chief Executive
and Group HR Director. Key workforce engagement activities during
2022 include the Board visit to Singapore in April, the Collaboration
Jam, as well as attendance at Transformative Journey Graduation
sessions and Diversity & Inclusion Council meetings. Further
information can be found in the Section 172 Statement.
Diversity, inclusion and belonging
Our goal is to empower our people and deepen belonging at
Prudential by respecting and appreciating differences. We maintain
a culture where diversity is celebrated, and inclusion assured for our
people, customers and partners.
Our Global Diversity & Inclusion (D&I) Council continues to define our
global D&I strategy and action plan, while driving D&I initiatives
across our businesses. The Council provides updates to the Board
twice a year and the Responsibility & Sustainability Working Group
(RSWG) receives quarterly D&I updates. In 2022, we onboarded
new members to the Council to focus on inclusion of neurodiversity,
disability, culture and religion. The Council continues to be guided
by its Charter and adhere to the principles of empowering our
employees, fostering transparency and creating communities.
Building on the local endorsement of the United Nations Women’s
Empowerment Principles in a number of our markets in 2021, our
Group Chief Executive signed a Group-wide support statement for
them in 2022.
In 2022, we continued our focus on increasing inclusion awareness,
complementing the work with our leadership outlined in the section
on ‘Leadership’. One of the key initiatives was the implementation of
our Global Inclusion e-learning courses, which aim to build awareness,
nurture inclusion and promote inclusive leadership mindsets and
behaviours. The Global Inclusion e-learning was completed by
approximately 86 per cent of the workforce in 2022, which sets the
stage for our work to further deepen belonging in 2023.
To bring change throughout our organisation and processes, our
approach to D&I also extends to the way we positively impact our
customers through accessible solutions and services. We address
diverse needs and profiles with inclusive, rewarding and innovative
propositions such as our We DO Family campaign, as set out in
‘Making health and financial security accessible’ section. The
campaign extended to our employees, with a storytelling campaign
where over 100 employee stories were shared internally,
demonstrating the diversity of their families. We also embed D&I
principles in our Third Party Supply and Outsourcing Policy, with the
requirement to review our suppliers’ approach to diversity.
Following the launch of PRUCommunities in 2021, our employee-led
networks continued to enhance connections and are key to
deepening belonging at Prudential. In 2022, we saw the global
launch of various communities including PRU Women Empowered,
PRU Young Professionals, Women in Tech, Mental Health First Aiders
and the intersectional We DO Wellness, joining the well-established
PRUPride. Local businesses have also established their own
PRUCommunities to further strengthen connection and collaboration
around interests, identities and ideas. In 2022, PRUCommunities
articles were viewed by more than 10,000 employees, including
nearly 2,800 views on the Community Connections page, and nearly
3,500 views of our We DO Wellness page.
In 2022, Prudential signed the Neurodiversity in Business
Membership Charter as part of our commitment to further
strengthen inclusion and deepen belonging in the workplace. This
includes challenging and removing both physical and perceived
barriers to inclusion, while celebrating neurodiversity and the value of
neurodiverse individuals, and providing accommodations where
necessary to enable these individuals to perform their roles at
Prudential.
A summary of our D&I performance is included below. While our
diversity figures have mostly improved year-on-year, we recognise
that we have more to do in this area.
> At 31 December 2022, the representation of women on our Board
was 31 per cent; following Board changes on 1 January 2023,
representation was 38 per cent.
> We have exceeded the recommendation of the Parker Review for
the FTSE 250 to have at least one non-white director on the Board
by 2024, with six of our 13 directors meeting these criteria. We are
one of only five FTSE 100 companies with a non-white Chair.
Non-white representation on our Group Executive Committee
(GEC) has also improved in 2022, with 63 per cent of members
meeting these criteria compared with 20 per cent in previous years,
following our restructuring of this body to better reflect the
communities we serve.
> As a signatory to the HM Treasury Women in Finance Charter since
2016, we set a target of 35 per cent women in senior management
by the end of 2023, building on our earlier target of 30 per cent set
in 2021. At 31 December 2022, the representation was 35 per cent,
in line with our 2023 target.
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ESG report / continuedPrudential plc Annual Report 2022 Gender diversity – total workforce
2022*
8,363
2021^
7,946
Gender diversity – senior management
+5%
6,299
+7%
18 +64%
14,681
Total
5,912
11
13,869
Senior managers
2022*
39
–11%
71
–13%
2021
44
82
Group Executive Committee (GEC)
2022*
2
+100%
6
2021
1
4
Executive Directors
2022*
2
2021
3
+50%
–33%
Chair and Independent Non-executive Directors
2022*
4
2021
6
–33%
7
+17%
6
Female
Male
Unspecified†
*
^
†
Within the scope of EY assurance – see ‘Basis of reporting’ here: www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf.
The 2021 balances have been restated to reflect the consistent treatment of local sales agents in our Africa markets who are not permanent employees.
No specification or information is captured on gender for an immaterial number of our employees. These employees are regarded as ‘unspecified’.
As part of our ongoing commitment to transparency, we continued
to submit responses to the ShareAction Workforce Disclosure
Initiative in 2022, where we achieved a score of 87 per cent
(2021: 88 per cent). We have also been included in the Bloomberg
Gender Equality Index 2023, being listed on the index for the third
successive year.
In 2022, we saw a total turnover of 22.6 per cent for employees,
including our call centre staff, representing an improvement
compared with the 2021 rate of 24.4 per cent. This improvement
relative to 2021 was driven by our continuous focus on initiatives
for improving people engagement, wellbeing and culture across
our businesses. The total voluntary employee turnover, excluding
call centre staff, remained broadly stable at 16.7 per cent (2021:
16.2 per cent). The employee turnover reflects the number of
employees who leave employment voluntarily or due to dismissal
or retirement during the reporting period. Employees include
permanent and contract (fixed term) employees but exclude
contingency workers and interns. A breakdown of our employee
turnover rate by gender, age group and region is reflected in the
‘Reference tables’ section.
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Employee relations
Prudential is committed to fostering an inclusive, diverse and open
environment for our employees. Our Group governance human
resources policies, guided by the principles of the Universal
Declaration of Human Rights and the International Labour
Organization’s core labour standards, provide an overarching
framework and principles for everyone in the organisation. Our
Group Third Party Supply and Outsourcing Policy sets out how we
work with suppliers and our expectations of them. Our
Discrimination and Harassment Policy prohibits any form of
discrimination, harassment, bullying and other types of
misconduct where the behaviour is contrary to Prudential’s values
and standards.
Our people have always been our most important asset, and our
Employee Relations Policy governs the way we engage with them.
This, we believe, is fundamental to our ability to attract the people
we want, retain our current employees and motivate them to
achieve success for themselves and the Group.
Each local business is required to have an effective approach in
place to promote positive relationships with our employees and
their representative organisations. We encourage a positive and
constructive relationship with collective employee representative
bodies in order to ensure our colleagues’ rights to freedom of
association and collective bargaining.
Given the diverse marketplace we operate in, trade union
representation and collective bargaining practices vary by market.
Our businesses have trade union representation in Malaysia,
Singapore, Vietnam, Zambia, Côte d’Ivoire, Togo, and Cameroon.
We are an organisation that strives to promote inclusive
employment, and provide opportunities for growth and career
progression. We give fair consideration to applications, regardless
of gender, nationality, age, race, ethnicity, religion, physical or
mental disability, or sexual orientation. We make appropriate
arrangements for continuing the employment of employees who
become disabled, and we seek to promote training, career
development and progression for people with disabilities, making
appropriate adaptations where required.
To build a diverse, equal and inclusive workplace, where employees
can speak openly, we take grievances seriously and have strong
grievance policies and procedures in place to ensure timely and fair
investigation of any grievances raised.
Further information on activities to support employee wellbeing
are included in the ‘Responsible working practices and health and
safety procedures’ section.
Grow
Learning
A significant part of our connect, grow and succeed pledge to
employees is preparing them for the future of work, so that they can
participate in and contribute confidently to our business
transformation and are well equipped for wherever their careers may
take them.
In February 2022, we launched our Future of Work six-part webinar
series. The webinars are designed around our values, with each
looking in-depth at the future-ready skills that were explored in our
‘New Ways of Working’ webinar in 2021. For more detail, see the
‘Future-ready workforce’ section. These ways of working are based
on well-established practices developed by places including the UK
Design Council, LUMA Institute, the Stanford d.school, and IDEO,
a renowned consultancy. Each one has been defined by a set of
enabling values and micro skills, which form the basis of our peer-to-
peer feedback and our curated learning paths on Udemy.
Our partnership with the LUMA Institute, to help develop our
innovation and design thinking capability, continued through 2022.
Over 300 people from across the Group are now LUMA Practitioner
certified. Design thinking skills from LUMA Institute have been
applied to solve a broad range of business challenges, from hybrid
working to helping propel agency growth. A new partnership with
Udemy, a company that provides online learning and teaching,
enables us to host curated learning paths on future-ready and digital
skills.
Our local businesses also developed learning programmes to support
the future-ready skills initiative. Prudential Thailand hosted a
Learning Festival to support employees in upskilling and preparing for
new ways of working. The festival covered the benefits of Prudential’s
future-ready skills and how to apply each skill, with the sharing of real
experiences from our Thai colleagues. They delivered four events to
some 400 people, both virtual and on-site, in 2022.
Our learning also included annual mandatory compliance training on
key topics such as anti-bribery and corruption, anti-money
laundering, privacy and competition law, with employees completing
an average of 16 hours’ training during 2022.
Average training hours completed
per employee by gender
Male
Female
Unspecified
2022
16.04
15.58
8.43
2021
11.22
12.44
5.65
The total training hours per employee is likely to far exceed this as the
number of hours that employees take to complete their non-
mandatory training courses are not wholly captured in our system.
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ESG report / continuedPrudential plc Annual Report 2022 Leadership
Across Prudential, as our business evolves, we are continuing to
maximise our collective expertise and skills while becoming even
more focused on our customers and adapting our multi-channel
distribution model to changes in our markets. We recognise that it is
more important than ever that we live our values and remain nimble
and innovative in how and where we choose to develop our products
and services.
In line with this objective, we are drawing on strengths and best
practices across our Group’s leadership to continue to deliver the best
outcomes for our customers, colleagues, communities and broader
stakeholder groups. In May 2022, we announced changes to the
structure and composition of our Group Executive Committee (GEC),
whose responsibilities are now specifically designed to allow for much
closer and more continuous engagement with our market CEOs.
Continuing the effort to raise awareness and embed our values and
inclusiveness, our GEC and leadership teams across our businesses
also hosted numerous sessions to showcase the expected mindsets,
behaviours and capabilities of authentic and empathetic leaders.
To drive a more courageous and entrepreneurial mindset throughout
the organisation, we continued to deliver Transformative Journey,
a contemplative four-month part-time deep experiential programme
aimed at developing more human-centric and self-aware leaders and
change agents for the Group. The programme taps into curiosity,
humility and courage, encouraging participants to take ownership of
their personal development and actualise their desire to drive
sustainable change.
Talent and succession
In a continued effort to provide our diverse talent with accelerated
growth opportunities, we expanded the scope of our Talent
Sponsorship Programme to 60 employees in 2022, focusing on
underrepresented groups in our talent pool based on gender, cultural
background and experience. The programme matches our diverse
talent with senior executives who act as sponsors and build a critical
pipeline for our future. This programme aims to provide employees
with greater visibility in the organisation, increasing their impact in
their existing roles, and accelerating their career progression. The
programme continues to be a learning experience for both sponsors
and talents, who build trusted relationships across the organisation,
gain a greater understanding of other functions, develop their
personal leadership and deepen belonging.
Creating transparency of internal growth opportunities to all
employees continued in 2022 by embedding the democratised
mentoring and gig marketplace platforms that were piloted in 2021.
myMentor provides an opportunity for employees to seek and
connect with mentors through independently established mentoring
relationships. There are over 200 mentoring relationships across
the organisation, and 85 per cent of these are cross-functional.
The prevalent focus of mentoring has been on career growth;
however, recognising the importance of mental health in the
organisation, myMentor is also leveraged to enable employees to
connect with our Mental Health First Aiders so that they can reach
out directly for any mental health support and guidance.
Our employee-centric Opportunity Marketplace was fully
implemented across all businesses in 2022. The marketplace provides
our people with transparency and tailored recommendations of
full-time and gig (project-based) opportunities across the Group.
Over 20 businesses have posted gig opportunities in the marketplace,
resulting in over 150 of our people contributing to projects that are
of their choosing.
If you’re thinking of getting mentoring but unsure of the
time commitment, mentoring doesn’t have to be an onerous
formal activity. I believe it can be as simple as sharing and
constructively challenging each other’s views. I benefited
from that process and am thankful for that learning.
Donna Buckland,
Senior Director, Controllership; Group Head Office, Hong Kong
The recent gig I hosted was completed but the outcomes
and relationships we formed with those who participated
are experiences we will surely bring with us in time to come.
Veronica Tan,
Gig Host and Head, Operations Strategic Initiatives; Philippines
My mentorship journey has been an amazing one so far.
My mentor has challenged me beyond my comfort zone and
helped me navigate through challenges I never dreamt I could.
She has helped me recognise how showing up as my authentic
self can help build my confidence, influence leaders, and manage
engagement with senior stakeholders more assertively. I am
more confident and positive over my work, now more than ever.
For a new employee like me and with the strong support from
my line manager, joining this gig was a great opportunity to
meet people and showcase my expertise. Virtual reality was
one of the key learnings I had from this gig, a skill which I never
thought I would be exposed to. I also learned the value of
teamwork and how having a shared goal to make this gig
a success is important.
Astridah Hampongo Musonda,
Head, HR & Administration; Zambia
Emily Tsai,
Gig participant and Specialist, Policy Services; Taiwan
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Succeed
Performance management
The connection between our values and remuneration outcomes continues to be reinforced through the company’s performance management
framework, with reward decisions strongly linked to performance outcomes. We support our people in achieving peak performance so that they
can fulfil their professional aspirations while delivering on the company’s business strategy.
This can only succeed if performance is managed in a balanced and holistic manner. Therefore, our performance management model focuses
both on results, and how they are delivered. People managers are expected to support the performance and career development of their teams in
a purpose-led, collaborative culture where Prudential’s values are consistently demonstrated.
At Prudential, we are committed to helping our employees achieve optimal performance so that they can continue to connect, grow, and succeed
in their career. Our people strategy and performance are strongly linked, and we enable performance by leveraging our Group-wide COACH
framework, as set out below.
Driving optimal performance through our COACH framework
Connect
Grow
Succeed
A redefined
purpose-led culture
> Focus on what and
how
> Continuous feedback
> Support meritocracy
> Empower values-
driven behaviour
Enable
performance
C
O
A
C
H
Continuous
Frequent exchange
of constructive feedback
Ownership
Take responsibility of your
own development
Authentic
No fear, no judgement,
100% honesty
Clear
Clarity of goals and alignment
with business strategy
How and What
Assessment against clear criteria
– How and What
Reward and recognition
In 2022, we continued to instil wellbeing at work by promoting a culture of inclusion and health achieved through shared goals, company-wide
initiatives, and employee communities. Our initiatives are built upon four wellbeing pillars of health & wellness, mental health, financial and
work-life blend.
Prudential’s wellbeing pillars
Health & wellness
> We create a workplace
that fosters a healthy
lifestyle
> We provide competitive
protection benefits for
employees and their
family
Mental health
> We promote mental
Financial
> We support our
health through access to
services and support
when and where our
people need them,
within an environment
of psychological safety
at work
employees to achieve
financial security
through innovative
financial tools, financial
literacy and planning
Work-life blend
> We recognise different
ways of working and
provide an inclusive,
family-friendly work
environment
> We promote community
work opportunities
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ESG report / continuedPrudential plc Annual Report 2022 Our 2022 initiatives included:
> Health & wellness: Company- and employee-initiated promotion
of wellness practices and events were held by the We DO Wellness
PRUCommunity. Initiatives included monthly wellness webinars,
weekly workout posts and Friday wellness feeds.
> Mental health: We have approximately 350 certified Mental
Health First Aiders (MHFAs) across all our markets in 2022. Through
the MHFAs, the programme is intended to help employees with
mental health issues by reducing stigma, recognising support
needed and promoting a culture of psychological safety and
wellbeing at work. The MHFAs are trained by professional bodies to
look out for, assess and assist with mental health crises; listen and
communicate non-judgmentally; keep interactions confidential;
and help get appropriate professional help. We have developed a
guide to help our MHFAs connect colleagues to professional health
support, including referral to our Employee Assistance Programme.
Our MHFAs are identified on our intranet and the myMentor
platform, and use email signatures stating ‘I am a Certified Mental
Health First Aider’.
> Financial: We continued to actively encourage employees’ share
ownership and engagement through several share plans, such as
PruSharePlus, where employees receive a free matching share for
every two shares purchased at the end of a two-year holding
period. Participation rate remains steady with one in three
employees participating in the plan. In October 2021, to mark the
demerger of Jackson, we gave a Celebration Award of US$1,000
of restricted shares to our permanent employees. This award was
released equivalent to 50 shares in October 2022.
> Work-life blend: We continued to promote work-life blend by
introducing wellness leave into local policies in 2022. The policy
calls for employees to take at least five consecutive days of leave
without access to work so that they can fully disconnect and rest.
Following positive feedback from employees, we held our second
Group Wellness Day, a synchronous day off for colleagues to rest,
recharge and spend time with loved ones, on 26 August.
Additionally, we continued to offer hybrid working, sabbatical
leave and volunteer leave across all our businesses.
Below is a summary of our wellbeing proposition with mental health being a notable area of progress in 2022 as highlighted.
Prudential’s wellbeing proposition
1
2
3
Life protection
Mental health
Employee
Assistance
Programme (EAP)
4
PruCare fund
5
6
Hybrid work/
wellness days/
leave
Group-wide
wellbeing
framework
> Choice of 48 times
> Psychiatrist and
> 24/7 counselling
monthly base salary
(MBS) life insurance
and six times
monthly guaranteed
cash to aid with
living expenses
clinical psychologist
included in local
medical plans
> Mental health first
aider (MHFA)
certification
programme (+300
certified MHFAs in
2022)
services for
employees and their
dependants
> Work and people
management
coaching services
(one in four
employees used
EAP services
in 2022)
> Provision of financial
assistance in the
event of hardship
with a total of
~US$250,000
dispensed to the
families of 42
agents and
employees
> Introduction of 23
wellbeing enablers
under each pillar
including mental
healthcare, wellness
leave and
sabbatical. with the
aim of providing a
consistent benefit
and employment
experience for
employees
> New ways of
working such as
hybrid work and
time for employees
to re-energise, eg
Group Wellness Day,
wellness leave,
volunteering leave
and sabbatical leave
> Parental/partner
leave piloted in
some markets to
create an inclusive
and supportive
workplace
> Early finish on the
eves of special
holidays
2022 programmes
We DO wellness – This is Me campaign
To coincide with World Mental Health Day in October 2022, our
employees participated in a two-week-long This is Me campaign,
a global initiative that started in 2014 to normalise conversations
about those with different abilities and mental health.
Our then Group Chief Executive, Mark FitzPatrick, launched the
campaign, sharing his personal story on the intranet. This was then
followed by the sharing of personal stories by leaders and employees
on their own experiences with mental health. The campaign was also
about living our values by being courageous and empathetic, and
enabled our employees to learn from one another across all levels of
the organisation. The campaign closed with a message from Lilian Ng,
Managing Director, Strategic Business Group, that brought all the
stories together to create an accessible resource for the organisation
going forward.
This initiative sent an important signal to our people and other
stakeholders that we care about their mental and overall wellbeing, and
aim to create a more open, supportive and inclusive work environment,
including a robust support system and platform to raise awareness and
normalise discussions on mental health issues.
Having different abilities and managing mental health issues need not
create barriers to people’s professional or personal development. We
also took the opportunity to emphasise that support is available at
Prudential through our Employee Assistance and Mental Health First
Aider programmes, medical benefits and PRUCommunities, among
other initiatives designed to help.
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Prudential recognises the dedication and contribution of our
employees, and we are committed to a fair and transparent system
of reward. Our Remuneration Policy ensures that we pay our
employees a fair and competitive wage in all markets which is
benchmarked annually with our peers. Given the cost of living
pressures across many of our markets, cost of living payments have
been made to more junior people in the UK and benefit
improvements have been made for people in some locations to
ensure that we continue to provide our staff with competitive
packages which protect them and their families. Prudential has been
paying the London Living Wage since 2010.
The Group’s executive remuneration arrangements continue to
reward the achievement of Group, business, functional and individual
targets, provided that performance is aligned to the Group’s risk
management framework and appetite and that our conduct
expectations, as well as those of our regulators and other
stakeholders, are met. Information on executive remuneration and
its alignment with the pay of other employees is provided in the
Directors’ remuneration report.
As reported in the 2021 Directors’ remuneration report, the UK
headcount of Prudential Services Ltd is below the 250-person
threshold which triggers mandatory publication of the gender pay
gap and the CEO pay ratio. Both the 2021 gender pay gap and the
CEO pay ratio data were disclosed on a voluntary basis. After due
consideration, we have decided that the UK gender pay gap and CEO
pay ratio are not meaningful, given our small employee populations
in the UK.
Future-ready workforce
To embrace the future of work, we believe it is vital to develop a
workforce and a workplace where we practice being more innovative,
inclusive, risk-savvy and customer-centric daily. To do this, we
developed our future-ready skills in 2021 – a set of six skills that are
well-established, international practices, tailored to our colleagues
who live our values.
In 2022, we held a series of Future of Work webinars with 68 per cent
of our workforce either attending live or watching the recorded
sessions. The webinars were themed around these six topics,
featuring external experts, internal leaders and employees who
shared candidly what it means to innovate, practice inclusiveness,
Our future-ready skills
manage risks and maintain customers at the core of all that we do.
Among the experts were Mariano Suarez-Battan, CEO of Mural, who
shared tools for effective collaboration; Anita Schjøll Brede, co-
founder of Iris.ai and Forbes World’s Top 50 Women in Tech, who
spoke on using technology to get to know our customers better; and
Dr Ayesha Khanna, co-founder and CEO of ADDO AI, who shared on
innovative problem solving. The sessions, hosted by members of our
GEC, are made available in seven languages on our learning system.
Looking ahead
Moving forward, sustained performance and deepened belonging
through wellbeing will be a focus for us in 2023. We will continue to
develop our leaders, drive high-performance teams, and provide
wellness support through the provision of tools and programmes that
help our workforce connect, grow, and succeed in a safe, inclusive and
healthy workplace.
> Work: Elevate our people for the future of work. We will cultivate a
continuous learning culture, and build skills for now and the future,
through a new Prudential Skills Framework that will underpin our
skill-building initiatives in 2023. As part of the implementation,
functional leaders and subject matter experts will work together to
co-create Learning Academies for functional skills development.
We also aim to launch a Leadership Skills Booster to prepare our
managers to lead change in the new era of work.
> Workforce: Bespoke development approach for distinct workforce
segments. We will actively manage career pathways and build a
sustainable succession pool for our most critical roles.
Understanding the individual and collective capabilities of our
leaders will allow us to improve our succession planning efforts. For
the rest of our employees, self-directed, flexible career paths will be
made available.
> Workplace: Sustained performance through D&I, wellbeing,
performance and reward. We will continue to take a proactive
approach to wellbeing by focusing on collective and individual
resilience. We will refresh our performance principles, enabling
employees to achieve optimal performance through the Group-
wide COACH framework, and we will continue to review our existing
reward plans to ensure they attract, retain and motivate our people
to succeed as our work practices evolve.
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ESG report / continuedPrudential plc Annual Report 2022 Our digital responsibility
Digital innovation is key to our aim of helping our customers to
become healthier and wealthier, so that they can get the most out of
life. We are ambitious and we act with integrity when it comes to
digital responsibility. Our approach to the design, governance and
operation of our digital ecosystem is managed with the utmost care
and attention to safety, fairness, and transparency.
Group-wide Information Security Framework
Given the increasing dependence on technology in delivering our
business objectives, it is vital that we manage the associated
information security and privacy risks effectively in Prudential. We
remain committed to protecting our customer data and preserving
the privacy of our customers through our rigorous information
security management framework.
Global security operating model
The Group information security team operates globally, leveraging
skill sets, knowledge, experience and resources across our
geographical footprint to optimise our security defences and
responses across Asia, Africa and the UK. In 2022, the operating
model was further enhanced to consolidate cyber security operations
into a single Integrated Cybersecurity Operations group responsible
for security threat detection and incident response, threat
intelligence, vulnerability management and ethical hacking. As part
of the optimised model, all security engineering activities have also
been aligned under a single Security Architecture & Engineering
discipline. We continued to work collaboratively across the Group to
consolidate and optimise information security technologies and
processes, enabling security services to become more effective and
efficient.
Oversight and governance of information security
Governed by Group Policies, Standards and Risk Management Framework
Group Risk Committee
Group Executive Risk Committee
Group Technology Risk Committee
Oversees all aspects of technology risk covering infrastructure, platform, projects, third party,
data, AI, information security and privacy
The Group Technology Risk Committee (GTRC), established in
September 2021, continued to operate effectively in 2022 to provide
strong risk governance over cyber security and privacy issues across
the Group.
In 2022, with the increased regulatory interest in digital
transformation and technology risk management, we conducted
dedicated sessions with our Group regulator and the Regulatory
College to share best practices and lessons learnt.
The GTRC, chaired by the Group Chief Technology and Information
Security Officer (CTISO), is a sub-committee of the Group Executive
Risk Committee (GERC). It provides regular updates to GERC and the
Board-level Group Risk Committee (GRC) on cyber threats facing the
organisation and progress of our security programme. The Group
CTISO also holds dedicated sessions with the GRC and Group Audit
Committee (GAC) on cyber risks facing Prudential where required.
Furthermore, the Group Technology Risk Management (GTRM) team
and Group-wide Internal Audit (GwIA) provide second-line and
third-line assurance over the robustness of information security and
privacy controls across the Group.
According to a Trend Micro report the global financial industry
experienced a 1,318 per cent increase in ransomware attacks in 2021.
With ransomware continuing to be the most widespread worldwide
threat for financial institutions, we have also identified security
incident simulation in October 2022 with the Group Executive
Committee (GEC) to test our ability to respond to plausible cyber
risk scenarios.
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Group Information Security Policy
The Group Information Security Policy (IS Policy) is central to how
Prudential governs and manages information security. All relevant
businesses in Prudential are covered by the IS Policy, which is
developed with reference to numerous international and local
standards including:
> ISO 27002;
> NIST Cyber Security Framework;
> The Hong Kong Insurance Authority Guideline on Cybersecurity;
> The Monetary Authority of Singapore’s Guidelines on Technology
Risk Management; and
> The Bank Negara Malaysia’s Policy Document on Risk
Management in Technology; and
> The Bank Negara Malaysia’s Policy Document on Management
of Customer Information and Permitted Disclosures.
The policy is also supported by a set of technical standards to enable
consistent implementation. Our global security function retains its
comprehensive commitment to protect the business, comply with all
applicable laws and regulations, and support the growth of the
Group.
As the organisation transitions to a hybrid multi-cloud environment,
we are also investing in the adoption of Google Cloud Platform (GCP)
security services to complement our existing Microsoft Azure service
services. We are also developing further technical standards as well as
conducting an extensive architectural review as part of our
integration of GCP based security services.
Group data governance
In order to fulfil our long-term digital aspirations, we are creating
ecosystems that are getting us closer to our customers. Part of this
entails collecting and using large volumes of data from various
customer touchpoints so that we can continue to bring value to our
customers and our ecosystem partners. This process requires strict
oversight, and we have established strong data governance processes
so that our customers continue to entrust us with their personal
information.
At Prudential, data governance covers data stewardship and data
quality, both of which enable us to gain better control over data
assets, including methods, technologies, behaviours and training
around the proper management of data. It also addresses security
and privacy, integrity, usability, compliance, and the overall
management of the internal and external data flows within our
organisation, among other matters.
To support our Data Governance Strategy, we have a Group Data
Policy that is centred on the key principle that data must be well
governed and effectively managed throughout its life cycle. The data
life cycle includes acquiring the right data, sharing and using it,
storing it, and transforming it so that it can be used by applications to
support AI, business intelligence and operational use cases. The final
step is ensuring that we retain the data in accordance with regulatory
requirements.
Our aim is to democratise access to data, turning data into an
organisational asset which can be leveraged to help make our
customers healthier and wealthier. The policy also provides a
governance framework that enables us to build a data culture where
ownership and accountability are clearly defined.
We have taken a number of steps since 2020 to implement our data
strategy and policy, and enhanced our processes with the latest tools
and platforms.
Summary of our data governance journey
Jan 2020
Jun 2020
Dec 2020
Data policy and strategy
Group Data Policy and Strategy
defined and approved.
Regional governance
and roles
Group and Regional Data Governance
Councils established, with appointed Chief
Data Officers.
Core local governance
Core data defined. Core Local Data
Governance Councils established,
with Data Owners appointed.
Jun 2022
Dec 2021
Jun 2021
Group data policy
implemented
Policy is ‘live’ and all businesses have Data
Governance Councils, Data Owners and
Data Stewards.
Next generation master
data management
(MDM) capabilities
Core data dictionaries, lineage and quality
capabilities and core data models and
Unified Data Platform (UDP) start to go
‘live’ in core businesses.
Regional data centre
of excellence (CoE)
and data governance
tool implementation
Data CoE established to implement the
MDM platform strategy. Data governance
training deployed. Collibra integration in
progress.
Dec 2022
Dec 2023
Value add data use cases
Local businesses use cases establish data
governance value. All UDP complete for
core businesses. Data governance tool
rollout completed.
Complete platform
and drive value
Deliver next generation standardised
platform, roll out global data management
tools and enhance employees’ data driven
capability and mindset.
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ESG report / continuedPrudential plc Annual Report 2022 In 2022, our key highlights included:
Data privacy breach metrics
> Implementation of a Unified Data Platform (UDP) in eight of our
core businesses; and
> The Data Centre of Excellence, established in January 2021,
has been accelerating the development of the Master Data
Management Platform and data governance tools by
consolidating engineering and data skills from across Prudential
into a single delivery-focused team.
Cyber strategy and risk management
We have developed our global information security programme to
deliver our cyber security strategy and to drive continuous
improvement across people, process and technology. In 2022, the
programme continued to focus on the four strategic pillars to protect
our customer data against heightened cyber threats, while enabling
digital transformation of the business. The four pillars are: enabling
secured digital platform and ecosystems; uplifting the cyber defence
capabilities; automation and continuous improvement; and
transformation of the security organisation.
Overall, the 2022 security and privacy programme continued to
improve our cyber hygiene, enhance the responsiveness and
preparedness of cyber incidents and heighten the awareness of our
staff to minimise the surface of attack. Additionally, the Group is
covered by cyber insurance to cater for a catastrophic cyber event as
a risk management mechanism.
Security metrics
Cyber Security Awareness Month 2022
More than 2,000 employees participated in our Cyber Security
Awareness Month in October, with over 1,700 earning themselves
GISP Cyber Security Champion badges. Participants had to read and
watch the weekly cyber security content covering topics such as the
importance of multi-factor authentication approvals, phishing
prevention, software updates and best practices for remote working.
The participation rate for this second annual event rose by
71 per cent over 2021.
Employee participation
2022
2,450
2021
Change (%)
1,428
71
Cyber security incident metrics
Total number of
incidents
escalated* to
the Security
Incident
Response
Team (SIRT)
Total number
of incidents
confirmed**
by the SIRT
Total number
of incidents
that are related
to ransomware
2022
2021
39
69
12
30
2
0
*
**
Total incidents reported by employees to the Security Operations Centre.
Total incidents confirmed by the Security Operations Centre.
The total number of cyber security incidents escalated in 2022
represents a 43 per cent reduction, due to enhanced cyber hygiene,
more proactive threat hunting, and reduced surface of attacks eg
geolocation blocking implementation. Nonetheless, it should be
recognised that the volume of cyber attacks has increased globally,
along with increased sophistication of cyber threats and related
impacts. On this note, the number of security events such as attacks
that have been automatically blocked and not escalated as an
incident in Prudential have also increased. We will continue to focus
on managing malware attacks, particularly those that are
ransomware, despite the reduction of cyber incidents.
Total number of (privacy) data
breaches
Total number of (privacy) data
breaches involving sensitive
health information
Total number of customers and
employees affected by
company’s data breaches
Total number of customers and
employees affected by
company’s data breaches
involving sensitive health
information
2022
2021
Change (%)
20
1
18
11
6
(83)
24,250
47,266
(49)
1
113
(99)
The top three types of data breaches were related to:
(i) Data disclosed to incorrect recipient by email, post or other means;
(ii) Unauthorized data disclosure by financial consultants; and
(iii) Data breach originated from bank partner or internal data update
or access issue.
Out of the total data breaches reported, one of the data breach
incidents involved sensitive health information that affected one
individual.
Compared with 2021, the total number of data breaches has
increased by 11 per cent in 2022. However, the total number of
customers and employees affected by company’s data breaches has
decreased significantly by 49 per cent, while the total number of
(privacy) data breaches involving sensitive health information has
been reduced by 83 per cent. This can be attributed to the continued
development and optimisation of the organisation’s cyber security
defensive controls, increased maturity in the software development
life cycle across our businesses, early eradication of vulnerabilities,
and improvements made to remediate gaps across our businesses.
While the incidents do not represent any systemic issue, mitigation
actions have been taken promptly to prevent recurrence.
Regular external security audits are carried out as and when needed,
and we work closely with regulators to ensure this is effectively done.
We also conduct monthly scanning of our external environment for
vulnerabilities. All public-facing applications undergo penetration
testing, which includes vulnerability assessments as part of the
application launch. They are also regularly reviewed as part of our
governance process.
Privacy
As we increasingly adopt digital technology in our operations, the
data we generate creates an opportunity for us to enhance customer
engagement while maintaining a responsibility to keep our
customers’ personal data safe. It is therefore critical that we continue
to ensure the robustness of our privacy governance, and that our
personal data processing activities are conducted within lawful bases
such as consent, contract, legal obligation or legitimate interests. We
also adhere to data minimisation and ‘privacy-by-design’ principles,
ensuring that we only collect and use data for its intended purpose
and do not retain it longer than necessary, and that privacy elements
are present both at the onset and throughout our entire data
processes. Privacy impact assessments are conducted by relevant
businesses on their processing activities, including the deployment of
any new or enhanced technologies and practices affecting personal
data.
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As an international company, Prudential must navigate multiple
privacy laws. In 2022, several of our significant markets either issued
new laws or enhanced existing regulations. For example, in Thailand,
the Personal Data Protection Act (PDPA) came into effect in June
2022 while Vietnam’s Decree 53/2022/ND-CP (VN Decree 53) called
for data localisation for domestic companies.
Meanwhile, both Singapore and the Philippines increased the
financial penalties for data breaches, signalling more severe
consequences for companies. We have ensured that our privacy
systems and controls and our personal data processing activities
respect these regulatory requirements. For example, we revised our
privacy impact assessment to include transfer impact assessment
and legitimate interest assessment, where applicable under local
regulations. A specific application of this was in Vietnam where,
following the introduction of VN Decree 53, we took immediate steps
to successfully transfer our customers’ and employees’ personal data
to local storage in Vietnam.
A key focus in 2022 was to further embed privacy across the Group,
and ensure that the protection and compliant use of personal data is
considered a key component during new projects and initiatives. In
addition to global training focusing on the requirements of the Group
Privacy Policy (GPP), localised training to raise employees’ awareness
of their local privacy laws was rolled out across our businesses,
alongside the appointment of privacy champions. We also reviewed
data retention practices across the Group. Following the privacy
maturity reviews that were conducted in 2021, the Group Privacy
Office has since followed up on remediation and revisited the
maturity assessment across Asia, Africa and the UK to further
strengthen our Group-wide privacy controls. While Asia and the UK
continue to demonstrate high privacy maturity, Africa has
demonstrated clear improvements since the reviews.
The Group Privacy Office continues to have oversight of privacy
compliance through implementation of the Group-wide Operational
Standard, which sits within the Group Privacy Policy, and regularly
reports to the Group Executive Risk Committee on privacy
compliance. The Group Privacy Office works closely with privacy
officers across Asia and Africa to offer guidance on ongoing privacy
compliance, as well as to provide a point of escalation for resolving
data privacy issues. In 2022, the office enhanced its supervision of our
businesses with monthly privacy roundtables, and will explore similar
collaborative activities in the future.
Data subjects are notified about their rights via the Privacy Policy, and
they can contact the relevant entities to exercise data subject rights
such as access and correction. Clear and accessible mechanisms for
data subjects to raise their concerns about data privacy have been
implemented across our businesses.
Protecting privacy on Pulse
We approach data within our digital ecosystem in the same manner
as all data in our organisation. When it comes to our Pulse app,
Prudential continues to prioritise security protection and customer
data by ensuring tight security controls are effectively implemented.
These include having multi-factor authentication, setting minimum
standards for mobile device operating systems, preventing jailbroken
and rooted devices from using Pulse, and securing transmission and
storage of data. The Pulse team also continued to adopt a robust
secure development life cycle, and carry out independent penetration
testing by an external party where appropriate.
Business partners, who make up a key aspect of our Pulse ecosystem,
undergo strict due diligence to ensure that they meet our high
standards of data protection and security. At the same time, we use
our in-house security monitoring tool to detect any vulnerabilities and
keep Prudential and our ecosystem partners safe.
We continued to rely on the OnePulse Privacy Framework (OPF) to
standardise the implementation of privacy controls. This framework
also helps us to address the different regulatory requirements and
expectations across our businesses in regard to customer privacy.
Referencing the General Data Protection Regulation (GDPR)
requirements, the OPF outlines the mandatory and configurable
controls to be built into our Pulse app, covering data subject rights,
customer consent and privacy notices. Additional controls are being
considered as regulatory requirements evolve, for example China’s
Personal Information Protection Law, Thailand’s PDPA, Indonesia’s
Data Protection Act and VN Decree 53.
Data within our digital ecosystem is governed by the Group-wide
Information Security Policy and Group-wide Privacy Policy. To provide
suitable services to users, Pulse collects information about them, and
this is done transparently through the Privacy Notice provided prior to
registration. Overall, Pulse is subjected to robust governance
processes and risk oversight to ascertain all controls mentioned above
are operating effectively.
Building AI and digital capabilities
across the organisation
AI Certifications – Prudential provides regular AI training to all
employees, and they have the option to certify the skills attained
during the training. To gauge our organisation’s interest in AI,
we opened the certification to all employees and more than
2,700 completed the certification in 2022. Of these, 600 scored
higher than the pass mark and 150 achieved the top score.
This provides a solid base of AI literacy across the company
that we want to build on.
Code; Without Barriers – In 2022, Prudential signed a
memorandum of understanding with Microsoft to provide
women with greater access to opportunities in technology
through digital skilling and connected communities. Through
this partnership, our female employees can participate in a
programme called Code; Without Barriers where they will be
trained and certified in cloud, data and AI technologies. The
programme also provides a platform for female employees to
upskill themselves and connect with business leaders and a
network of mentors. With this partnership, our aim is to support
our women in tech to connect, grow and succeed.
AI community – In 2022, we created a company-wide AI
community of more than 200 professionals who are involved
in AI-related activities both in our central teams and our local
businesses. All functions are represented, from digital technology
to marketing, operations, finance, actuarial and beyond. The
community meets every month to share knowledge which aids
adoption and implementation, while enabling our community
members to remain at the leading edge of the fast-paced AI field.
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ESG report / continuedPrudential plc Annual Report 2022 Bringing value to customers through responsible AI
We continued to lean on our eight artificial intelligence (AI) Ethics Principles developed in 2020 to guide our use of AI in Pulse, and across our
insurance business processes. The principles are:
Value
Design Al with a clearly defined
purpose, and aligned with
customer values
Transparency
and explainability
Be transparent that Al is used as
part of our products and services,
explain this simply and be
prepared to justify decisions made
Fairness
Treat people fairly, avoiding bias
and unfair discrimination
Accountability
and responsibility
Accept accountability and
responsibility transparently
for the outcome of the
use of Al
Compliance
Comply and respect relevant
regulations, including human
rights laws
Reliability
Design Al that is highly reliable
and robust
Privacy and security
Respect user privacy and security
Assurance
Continuously review and monitor
our Al deployment and outcomes
to continually meet all principles
The Ethics Working Group, which was governed by the Global AI
Council until the end of 2022, continues to play a significant role in
upholding our AI Ethics Principles. Its main responsibilities include
reviewing all AI initiatives and prototypes and maintaining a record of
all assessments and certifications.
Among the newly approved AI systems were predictive underwriting
for new policy applications; a system to identify healthcare claims
that are potentially subject to fraud, waste and abuse; and a portfolio
optimisation tool based on genetic machine learning algorithms in
our wealth business.
Since it was established in 2021, the Ethics Working Group has
approved 47 per cent of AI systems, conditionally approved
18 per cent, rejected 23 per cent and conditionally rejected
12 per cent. We expect the rejection rate to decrease as our AI
engineers and business owners take our AI Ethics Principles on board
increasingly early in the development process.
Our AI ethics governance has enabled us to build and implement AI
systems thoughtfully, by considering all aspects that promote the
responsible and ethical use of AI.
From 2023, the Global AI Council has been replaced by the AI
Governance Working Group (AIWG), which is one of the working
groups that report into the Data and AI Governance Council (DAGC).
In 2022, the Ethics Working Group continued to review AI systems
that were in production for compliance with our principles, based on
real-world system performance. Overall, the Ethics Working Group
takes one of four decisions for every AI system it reviews. They are:
> Approved – The system is in alignment with our AI ethics principles
and is permitted to remain operational.
> Conditional approval – The system is in alignment with our AI
ethics principles and is permitted to remain operational, but there
are some follow-up actions to be conducted while the system
remains in use.
> Rejected – The system violates our AI ethics principles and must be
removed from use.
> Conditional rejection – The system is conditionally rejected, but in
certain conditions ongoing use may be permitted, eg use in specific
countries or demographics. For example, our symptom checker is
not to be applied to paediatric use cases.
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The Group ESG Committee oversees responsible investment activity,
with operational responsibilities being delegated to the Group
Responsible Investment Advisory Committee (GRIAC).
Co-chaired by Prudential’s Chief Investment Officer (CIO) and the
CIO of Eastspring, the GRIAC provides a regular forum for the main
asset owner and asset management businesses to consider
responsible investment approaches. The GRIAC meets monthly to
monitor the implementation of current responsible investment
activities, in addition to assessing new initiatives. During 2022, the
GRIAC met 10 times and discussed a range of responsible investment
topics, including:
> Progress updates on coal divestment;
> Eastspring’s progress on engaging with companies on climate
change;
> New classification frameworks for fund products with ESG
characteristics;
> Expanding third-party toolkits for Eastspring investment teams,
such as templates to assess sectoral decarbonisation pathways;
> Developing and integrating forward-looking metrics for climate risk
into Eastspring’s investment process;
> Prudential’s active involvement in the Net Zero Asset Owner
Alliance; and
> Developing internal carbon pricing for consistent use between our
investments and our operations.
With our responsible investment practices now developed, it is
anticipated that the remit of the GRIAC will be brought into the
Group Investment Committee during 2023.
Strategic Enabler: Responsible investment
As a life insurer, asset owner and asset manager, Prudential is a
long-term steward of its clients’ assets. We have a responsibility to our
clients, the communities and environment in which we operate, to
apply ESG considerations into our investment decisions and our
fiduciary and stewardship duties.
Our asset manager, Eastspring Investments, incorporates relevant
ESG issues into its responsible investment process. It seeks to identify
and account for such issues into both its investment decision-making
processes and the way it conducts stewardship activities.
Group responsible investment governance
Our responsibility to steward our client’s assets is reflected both in our
governance and in our Group Responsible Investment Policy, which
outlines our expectations of all our businesses.
At the Board level, the Group Risk Committee (GRC) has assumed
additional oversight responsibilities for environmental and climate-
related risk, and the Group’s ongoing external commitments to the
decarbonisation of its operations and investment portfolio, and other
climate-focused external responsible investment commitments.
The Board-level Responsibility & Sustainability Working Group
(RSWG) oversees overall embedding of our Group ESG strategy.
ESG is embedded in our governance
Group Risk Committee (GRC)
Board Committee, which reviews the Group’s material
risk exposures, including climate-related exposures,
and monitoring progress of the Group’s reporting
against the recommendations of the TCFD.
In 2022, the GRC started overseeing ongoing external
Group commitments to decarbonise its operations and
investment portfolio, and other climate-focused external
responsible investment commitments.
Responsibility & Sustainability Working Group
(RSWG)
Board-level working group, which oversees overall
embedding of the Group’s ESG strategy.
In 2022, the RSWG repositioned to focus more on customer,
culture and digital matters, transferring its climate,
decarbonisation and responsible investment oversight
to the Group Risk Committee (GRC).
Group ESG Committee
Focused on the holistic assessment of ESG matters material to the Group.
Group Responsible Investment Advisory Committee (GRIAC)
Operational responsibility for oversight of Responsible Investment activity.
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ESG report / continuedPrudential plc Annual Report 2022 During 2022, we made updates to our Group Responsible Investment
Policy, requiring our asset managers to screen the portfolio on
additional themes. These include assessing exposure to
unsustainable palm oil, as well as companies violating the United
Nations Global Compact (UNGC). More detail on these processes can
be found in the ‘Screening the Portfolio’ section below.
The objective is to enhance overall Group-level expectations related
to responsible investment, and better guide our local businesses and
asset managers on how to consider ESG factors in investment
activities. Our recent updates build on the six implementation
strategies introduced in 2021 (see diagram below, and for more
information, the policy can be found on our website here: www.
prudentialplc.com/~/media/Files/P/Prudential-V3/policies-and-
statements/group-responsible-investment-policy-07102021.pdf).
Responsible investment approach
Prudential is uniquely positioned as both a global and a local asset
owner, which affects our approach towards ESG and engagement, as
well as how we work with our asset managers. Our position of being a
local asset owner within many emerging markets in Asia and Africa
means that we invest the large majority of our assets within the
countries that we operate in. Whilst this has benefits from a capital
growth perspective, this also means that we must take local
circumstances into account.
We believe it is critical to respond to the challenge of transitioning
towards a low-carbon economy in a way that reflects both
geographical and sectoral challenges, as well as considering the
social implications of our plans in a just and inclusive manner.
Above all, Prudential is focused on real world impact that is
meaningful for our stakeholders. To view Prudential’s long-term
ambitions on tackling climate change, see our first Climate Transition
Plan, published alongside this report here: www.prudentialplc.com/~/
media/Files/P/Prudential-V13/esg-report/climate-transition-
plan-2022.pdf.
Our six implementation strategies
Screening the
portfolio
Maintaining an
awareness of the
potential risks to the
Group’s reputation
arising from
investment activities
Exclusion
Excluding a
company from
the investment
portfolio if its
products or conduct
is considered to be
unacceptable
ESG integration
Incorporation of
ESG information
into our parts of the
investment process:
> Asset allocation
> Manager selection
> Portfolio
management
> Risk management
Active
ownership
Maintaining a
dialogue with the
companies in which
we invest about
ESG risks and
opportunities
Voting policy that
supports long -term
performance by
taking account of
relevant ESG issues
Capital
allocation
Shifting capital
from harmful
activities towards
environmental or
social needs
> Portfolio
decarbonisation
> ESG investments
Market influence
Influencing the
market with regard
to responsible
investment by
contributing to
sustainable
initiatives
This section describes our activities across each of the
implementation strategies, with the exception of market influence
which is addressed in the ‘Supporting a just and inclusive transition’
section on page 104.
Screening the portfolio
Screening is the first stage for any new responsible investment at
Prudential, as our local businesses are required to maintain an
awareness of ESG risks within their investment portfolio. Screening
informs follow-up actions such as engagement, reallocating invested
capital to other companies, or complete divestment as a last resort.
Eastspring uses screening as a foundation for investment, its
approach to active ownership, and driving long-term strategic
change.
Prudential has exclusion policies for tobacco, controversial weapons,
and companies with coal revenue exceeding a certain threshold.
These are covered below, and are also found in our Group Responsible
Investment Policy, available here: www.prudentialplc.com/~/media/
Files/P/Prudential-V13/policies-and-statements/group-responsible-
investment-policy-for-external-publication.pdf.
Portfolio’s exposure to palm oil
Our asset managers screen for exposure to palm oil, specifically for
the degree of Roundtable on Sustainable Palm Oil (RSPO)
certification. This gives us insight into companies producing
unsustainable palm oil in the portfolio, so that we can engage with
them to encourage more sustainable manufacturing. The
engagement requirements cover the entire palm oil supply chain,
including buyers and other relevant stakeholders, as all actors in the
supply chain have a responsibility to encourage sustainable palm oil
production.
As the RSPO certification focuses primarily on palm oil producers and
not the wider supply chain, additional tools are used to close this gap,
such as SPOTT, a public online platform that scores palm oil, tropical
forestry and natural rubber companies. These insights highlight areas
requiring deeper assessment including traceability, certification and
commitment to non-deforestation and labour rights. We also use
information from sources such as the companies’ palm oil policy and
ESG ratings from our data suppliers to supplement our assessment of
individual companies.
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Companies are assessed based on their exposure, and defined as
‘worst performers’, ‘improvement needed’, and ‘best in class’. In line
with the Group’s Responsible Investment policy, those in the ‘worst
performers’ and ‘improvement needed’ categories are selected for
engagement, both bilaterally and through collaborative
engagement. Eastspring also engages with buyers of palm oil and
industry bodies, recognising that the unsustainable practices linked
to palm oil are a supply chain issue.
On an annual basis, both Prudential and Eastspring evaluate the
engagement of each holding. Should engaged companies fail to
indicate progress on meaningful sustainability commitments, further
actions are taken. These can include divestment as a last resort, if
identified material risks are deemed to sufficiently impact investment
conviction, and if any future engagement is likely to fail.
In 2022, Eastspring identified 22 different players within the palm oil
industry (17 plantations and supply-chain companies, four fast-
moving consumer goods companies, and RSPO itself) for
engagement on sustainable palm agriculture practices. The purpose
is to assess and engage, in order to elevate the standards of growing
or sourcing, to meet all material aspects of the RSPO and SPOTT
index. To conduct its initial assessment, Eastspring developed a set of
criteria required to assess all the different players in the palm oil
industry. Thus far, Eastspring has reviewed 100 per cent of the
companies, and commenced engagement with 95 per cent of the
same group. Eastspring will continue these engagements into 2023
and beyond.
Portfolio’s exposure to companies violating the UNGC
The UNGC is a voluntary United Nations pact to encourage
businesses to adopt sustainable and socially responsible policies, and
to report on their implementation. The 10 principles of the UNGC are
derived from international agreements on four topics: human rights,
labour, environment and anti-corruption. Screening for violators of
the UNGC is needed to encourage companies to change their
conduct and comply with international agreements brought together
in the UNGC.
Using third-party vendor data, Eastspring classifies companies into
three categories: violating the UNGC (and thus deemed as failing the
screening); close to violating the UNGC (and placed on a watch list);
or not violating the 10 UNGC principles (and passing the screening).
In line with the Group’s policy, Eastspring engages with UNGC
violators, both bilaterally and through collaborative engagement.
This policy was introduced during 2022. Eastspring have identified 14
companies that have failed the UNGC screening (ie, flagged as failure
by our third-party data vendor) and will engage them as a result. The
majority of these 14 companies are from the mining sector. Given the
timing of the policy introduction, Eastspring have reviewed
21 per cent of the companies during 2022, will continue its review and
commence engagement with the balance of the identified
companies in 2023. Eastspring will escalate if they do not receive a
satisfactory response.
Exclusions
Prudential has an exclusion policy for certain industries, including
controversial weapons, tobacco, and companies that derive more
than 30 per cent of their revenue from coal. When considering a
Group-wide exclusion, an assessment is made on the expected risk
versus return impact of the investment portfolio.
Prudential does consider exceptions, such as for certified green bonds
for coal, which can be granted on a case-by-case basis. These bonds
must contribute to a transition consistent with (or better than) the
Paris Agreement. The portfolio manager must also seek reasonable
assurance that funding provided by the green bond is not freeing up
additional financial capacity for that issuer, or related companies in
the market, that will be used to fund non-sustainable alternatives.
Our robust and continuous control processes help to mitigate the
implementation complexities which exceptions introduce.
Proposals for exceptions, or for additional exclusions (eg, companies
outside these three industries), need to be approved and follow our
responsible investment governance process.
Coal
In May 2021, Prudential pledged to divest from all direct investments
in businesses which derive more than 30 per cent of their revenue
from coal mining and/or electricity generated from coal. In setting
our threshold for divestment, we take great care in balancing our
stewardship duties in developing markets with our dedication to the
low-carbon transition. We firmly believe that the foundation for a
truly just and inclusive transition lies in the dedication to work with
companies to phase coal out more quickly and effectively, as
opposed to strict divestment that diverts necessary financing for the
transition. As such, we believe that the 30 per cent revenue threshold
appropriately balances this perspective, and are continually
monitoring this decision.
In 2021, we fully divested from equities meeting the policy criteria,
which we continue to monitor so as to maintain this divestment
position. By the end of 2022, we had substantively completed our
commitment to divest from coal bonds meeting the policy criteria: we
had divested from 97 per cent of the coal bonds held at 31 March
2021, the date used for our May 2021 commitment. Due to illiquidity
in the market, we were unable to fully divest from one remaining
holding of $12.1m, which illustrates the degree of challenge in
implementing a divestment strategy in our markets. We continue to
seek opportunities to divest from the remaining holding and intend to
do so as soon as practicable. We also continue to engage with the
issuer on other options for us to divest from this holding as we believe
we have set our coal policy in a just and inclusive manner. Since
31 December 2022, we have further divested from this coal bond.
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ESG report / continuedPrudential plc Annual Report 2022 Manager selection
Eastspring has integrated ESG considerations into its sub-fund
manager screening, due diligence, selection and ongoing monitoring
processes, in order to give confidence that those managers are
sufficiently aligned to Prudential’s ESG requirements.
During the due diligence stage, sub-fund managers are assessed
regarding the ESG aspects of their investment process. This ensures
that the ESG policy of each manager sufficiently aligns with the
sustainability objectives of the Prudential Group. This phase involves:
> A qualitative evaluation with the sub-fund manager to gain a
thorough understanding of how ESG is integrated with the team’s
philosophy and process; and
> A quantitative evaluation of ESG, which is conducted as part of a
broader assessment of various aspects of the manager’s team and
process.
Portfolio management
Eastspring is responsible for ensuring that Prudential’s Responsible
Investment policy is correctly implemented for assets under its
mandate. Each of our investment teams has its own approach to
integrating ESG matters, which is dependent on the characteristics of
each asset class and investment strategy. Accordingly, investment
teams have developed, or are in the process of developing,
environmental, social, and corporate governance policies that
formalise their specific approach to ESG issues and are explicitly
integrated into investment processes.
Eastspring has incorporated ESG into its formal research programme.
Using available historical data, investment teams identify and
validate ESG alpha factors that may improve the returns of its
strategies, and ESG factors that may mitigate risk. Over time, the aim
is to enhance data-driven approaches to strengthen environmental
and broader ESG capabilities, to generate alpha or reduce proven
risks for clients.
Tobacco
We exclude companies classified as ‘Tobacco’ under the Global
Industry Classification Standard (GICS) level 3, which is a global
classification standard used by market participants. Prudential
completed its divestment from this category by the end of 2021, and
in 2022 continued to exclude such holdings from its investment
portfolio.
Controversial weapons
Based on verification from our data provider, we exclude companies
involved in cluster munitions, anti-personnel mines, biological
weapons, chemical weapons and nuclear weapons outside of the UN
Treaty on the Non-Proliferation of Nuclear Weapons.
Prudential completed divestment from this category by the end of
2021, and in 2022 continued to exclude such holdings from its
investment portfolio.
ESG integration
We aim to integrate ESG factors into all our investment decisions. This
complements the traditional financial analysis we conduct, in order to
better manage risk and generate sustainable long-term returns for
our customers. ESG integration applies to the entire investment
process. All relevant Group investment teams are expected to
demonstrate how ESG considerations are embedded into investment
decisions. This includes our asset manager Eastspring, which recently
updated its Responsible Investment Policy to align more closely with
that of Prudential, while also allowing flexibility for the investment
strategies of third-party clients (ie non-Prudential clients).
Prudential is supportive of further regulation around ESG integration
in investments. The European Union’s Sustainable Finance Disclosure
Regulation (SFDR) is a prime example of such development. In 2022,
87 per cent of Eastspring’s international funds (SICAV) received
Article 8 status. These funds ‘promote, among other characteristics,
environmental or social characteristics, or a combination of those
characteristics, provided that the companies in which the
investments are made follow good governance practices.’ For more
information, see the ‘Global advocacy’ section on page 104.
Asset allocation
Prudential aims to integrate ESG into its asset allocation process,
reflecting our belief in the added value of ESG and ensuring asset
owners’ decisions on ESG are reflected accurately in the investment
process.
During 2022, we created climate-informed capital market
assumptions, which are an important input for the strategic asset
allocation (SAA) process, and we have changed some SAA
benchmarks to ESG benchmarks. This enables us to incorporate a
view on climate change into our asset allocation, including the
impact of relevant transition and physical risks, and government
policies responding to these factors.
Our SAAs are based on different decarbonisation targets that vary
depending on region. For example, Prudential Hong Kong and
Singapore have changed some of their SAA benchmarks to ESG
benchmarks, which align closely to Prudential’s responsible
investment efforts. As we prefer to take a gradual approach to gain
experience over time, the two businesses noted above have started
with the more ESG-mature markets of Europe and the United States.
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Sectoral decarbonisation pathways
During 2022, we established an internal sectoral decarbonisation
working group, with members from both Prudential and Eastspring.
The aim is to formulate sectoral approaches to inform investment
decisions and engagement on climate change.
In many decarbonisation models, a company in an emerging
market (eg Indonesia) is expected to decarbonise at the same rate
as a company operating in a developed market (eg Germany). This
does not do justice to the local circumstances, such as availability of
clean energy in an electric grid. In addition, Prudential faces the
challenge of data coverage, which is generally poorer in emerging
markets than in developed markets.
The working group explored a range of sectoral decarbonisation
pathways and toolkits, and chose the Transition Pathway Initiative
(TPI) tool. This tool allows the assessment of companies based on
an IEA-aligned 1.5°C scenario, a below 2°C scenario, and a national
pledges scenario (which combines all global pledges on net zero).
To address the data coverage challenge, we are developing an
internal tool to complement the TPI tool, which will be made
available across the organisation to investment teams within our
local businesses.
Additionally, the working group assessed sectoral engagement
questions from leading industry sources. Based on this analysis, the
working group focused on developing a list of sector-specific
engagement questions for the utilities sector, designed to elicit a
higher quality engagement response, and ultimately greater
decarbonisation progress. Moving forward, the working group aims
to formulate further sector-specific engagement approaches for
the five most carbon-intensive sectors in the investment portfolio,
which are utilities, oil and gas, cement, steel and metals and mining.
Risk management
Prudential actively identifies how ESG risks can impact its business,
including operational and investment activities. Our management of
climate-related risks is a key example of this ESG integration, as
highlighted in our ‘Stewarding the human impacts of climate change’
section on page 90. Such risks are managed through an overarching
risk framework, which identifies interdependencies and amplifiers,
time horizons, materiality and multiple stakeholders. We develop
bespoke climate scenarios to test the resilience of different business
functions and model carbon pricing where relevant as a proxy for
enacted government climate policies. These insights help determine
potential disruptions to the investment returns needed to meet the
long-term obligations of our liabilities.
Eastspring approaches climate risk at the company level, which is
covered in greater detail in the next section on active ownership. As a
response to the Monetary Authority of Singapore (MAS) guidelines
on Environmental Risk Management, which came into effect in June
2022, Eastspring Singapore took key internal preparation steps. This
included creating an internal working group to assess progress
against guideline requirements, and reporting through the Risk
Workstream and into the Sustainability Committee, to ensure clear
visibility of project updates. As part of initial scoping, the working
group conducted a gap analysis across all four segments of the
framework and had set up regular check-ins on progress for
addressing the identified gaps. The completion of this project was
marked by producing a public response to MAS and the creation of an
internal Environmental Risk Management framework.
Active ownership
Prudential recognises the importance of acting in ways consistent
with our stewardship responsibilities. This ensures that underlying
beneficiaries, including shareholders and policyholders, see their
capital protected and enhanced over time.
Our asset manager Eastspring adopts an active and impactful
approach to asset ownership, focusing on reducing investment risk
and enhancing returns, in addition to driving positive impact. This
approach emphasises direct and constructive dialogue with
companies on sustainability and governance issues that have a
material impact on long-term performance.
Eastspring aligns its stewardship approach with the International
Corporate Governance Network (ICGN) Global Stewardship Principles
and ICGN Global Governance Principles.
Prudential also considers voting as a crucial element of being an
active shareholder. This important part of the investment process is
covered below in the ‘Voting’ section.
Engagement process
As mentioned in the ‘Screening the Portfolio’ section, engaging
investee companies is a critical component of responsible
investment. Engagement with companies in the real economy is key
to encouraging responsible business practices, ultimately leading to
changes in company behaviour that contribute to sustainability
goals. Prudential defines active ownership as actively engaging with
the companies in which we invest, and using our voting rights. Such
activities represent a core part of effective stewardship, which can
support robust financial performance and generate positive changes
for society and the environment.
Prudential’s corporate engagement is carried out by Eastspring,
which engages portfolio companies through three channels:
> Central engagement: A central sustainability team conducts
specific engagement on discrete themes (including
decarbonisation and climate change, palm oil and UNGC
violations);
> Collaborative engagement: Where investment teams actively
participate in industry working groups on sustainability topics; and
> Investment teams for equity and fixed income drive investment-led
engagements (eg on earnings, corporate governance etc).
Across all three channels, Eastspring has conducted a total of 744
engagements with companies in 2022.
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ESG report / continuedPrudential plc Annual Report 2022 Geographic distribution of engagement
The charts below show the location of companies Eastspring has engaged, based on where they are incorporated. While our engagement
activities span the globe, our strongest focus was on companies in China, Taiwan and India. This reflects the Asia-centric nature of
Eastspring’s stewardship strategy, which we believe is a differentiating factor as a local asset manager.
Eastspring global engagement count 2022
Eastspring global
engagement count
Eastspring Asia engagement count 2022
Eastspring Asia
engagement count
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Eastspring central engagement process
1
2
3
4
5
Identify topic
for engagement
Identify
companies
that are in
scope for the
engagement
topic
Cross-check
company
disclosures
against selected
standards,
initiatives,
targets, and
strategy
Assess quality
of management
targets, and
strategy to
shortlist target
companies
Compose
engagement
letter and
email to target
companies
6
Monitor
progress
Central engagement programme
Eastspring’s sustainability team engages investee companies to both
enhance positive material ESG traits, and mitigate material ESG risks.
This complements the fundamental research process of Eastspring’s
investment team, in both active equity and fixed income.
Eastspring’s central engagement capability helps attract and retain
clients by meeting rising stakeholder expectations. The process also
ensures alignment with strengthening regulatory expectations, such
as those of MAS, who notably urged asset managers to directly
address environmental and climate-related risks in its May 2022
policy update.
These efforts focus primarily on ESG themes, initially targeting
companies who are not disclosing in line with global initiatives.
Currently, the central sustainability team at Eastspring primarily
engages on the theme of climate change and decarbonisation, and
how portfolio companies can take relevant action. Other thematic
engagements include palm oil, and violations of the UNGC.
In planning for engagement, Eastspring seeks to directly
communicate with target companies using the process summarised
in the diagram above. The written letter and email follow-up process
introduces Eastspring and its overall stewardship approach –
including its alignment with ICGN principles – before delivering
targeted questions.
A process is in place to monitor and report progress to the asset owner
(Prudential) and other stakeholders. Continuous engagement allows
for incremental improvements and achievement of milestones at
portfolio companies to be recognised, as well as escalation and
intervention for relevant businesses. The ‘Eastspring’s engagement
on climate change and decarbonisation’ box below provides further
detail on the milestones used.
Eastspring monitors and reports on the engagement progress with
each target company, based on five levels, as set out in the
‘Eastspring’s engagement on climate change and decarbonisation’
box below.
Eastspring strives to engage each company until it has satisfactorily
resolved the relevant outstanding sustainability issue. This is likely to
be a multi-year process, where Eastspring continues to engage until
satisfied the issue is resolved. Judgment is applied to all
engagements, and the strategy for escalation will be determined
on a case-by-case basis. Escalatory actions can vary, including
divestment as a last resort. More information can be found in
Eastspring’s Responsible Investment Policy, available here:
www.eastspring.com/docs/librariesprovider2/responsible-
investments/ri-policy-brochure-4-jan-2023.pdf
Throughout this process, the sustainability team integrates research
insights – from both Eastspring investment professionals and
third-party platforms– to inform its ongoing engagements.
Climate change and decarbonisation
Prudential fully supports the urgent need to reduce global carbon
emissions to limit climate change, in line with the Paris Agreement.
We therefore believe in using our influence to limit the impact of
climate change, benefitting our policyholders through reduced
impact on their daily lives, and limiting the financial impact on the
portfolios we manage for them.
Eastspring currently engages with companies responsible for
65 per cent of our Absolute Carbon Footprint, defined as the absolute
GHG emissions associated with an investment portfolio (expressed in
tonnes of CO2e). Eastspring utilises third-party data to calculate this
footprint of portfolios and securities in scope, and identify the top
carbon-emitting companies that correspond to this 65 per cent.
Throughout their monitoring process, Eastspring will use its judgment
to determine whether a company is progressing adequately on
decarbonisation. If further engagement is deemed as likely to fail,
Eastspring will exit the investment as a last resort.
In 2022, Eastspring engaged holdings representing 65 per cent of
absolute emissions in Prudential's portfolio. This translates to 72
companies. Eastspring's key assessment metrics include disclosure,
on CDP and TCFD, availability of short-, medium-, and long-term
targets, and details on strategy to achieve these goals. This involves
cross-checks on disclosures of information relevant to the
engagement topic, and utilises third-party resources, including public
databases, subscription-based ESG ratings, company sustainability
reports and prior engagements from Eastspring portfolio managers
and analysts.
The questions posed in the letters to investee companies differed
depending on observed information gaps, and focused on data
disclosure, short-, medium- and long-term targets for carbon
emissions reduction (from Climate Action 100+, an investor initiative
that engages large corporate GHG emitters to improve their climate
performance), and overall strategy to achieve these goals.
In cases where, after our rigorous assessment of their climate change
and decarbonisation strategy, companies fulfil or even exceed our
criteria, we nevertheless write to advise the company that they are
part of our ongoing monitoring under thematic climate engagement.
We encourage the company to strive for further progress and, where
applicable, make suggestions in relation to pursuing industry-leading
best practices.
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ESG report / continuedPrudential plc Annual Report 2022 Eastspring’s engagement on climate change and decarbonisation
> Assessed 86 holdings that are responsible for 65 per cent
of absolute emissions in Prudential’s investment portfolio.
This related to 72 companies at June 2022.
> 19 companies fulfilled all our criteria. Eastspring has written
letters to these companies, and will continue to monitor them.
Engagement milestones for 53 companies
Raised awareness of issue(s) with the company
4
Dialogue in progress
Company has agreed to address the issue(s)
Company has developed/planning to implement
a plan to address the issue(s)
Company has satisfactorily resolved the issue(s)
e
n
o
t
s
e
l
i
m
t
n
e
m
e
g
a
g
n
E
> For 53 holdings, there were identified climate-related data
items that were not in their public disclosures. To address this,
Eastspring engaged at least once with these companies,
writing emails individually tailored to each holding.
6
11
14
18
0
2
4
6
8
10
12
14
16
18
20
Number of companies
Engagement milestone levels
1
2
3
4
5
Raised awareness
of issue(s) with
the company
Dialogue in
progress
Company has
agreed to address
the issue(s)
Company has
developed/planning
to implement a
plan to address
the issue(s)
Company has
satisfactorily
resolved the
issue(s)
Eastspring engagement case studies
a) Chinese cement company (Milestone Level 2)
The company was initially assessed on its climate change strategy
in 2021. It did not meet any of our climate criteria, including not
disclosing to CDP, having targets to reduce carbon emissions, nor
explaining its decarbonisation journey. We arranged a virtual
meeting and conducted the engagement in Mandarin. During the
engagement, we explained that investors mainly want to see the
company disclose for the first time and do not mind if the score is
poor. We encouraged the company to submit its first-ever
disclosure, which was completed in 2022.
After engaging the company, we contacted CDP, who were pleased
to see successful contact made, given that they and other investors
had tried to engage with the cement company since 2010.
We rate the engagement with the company as Level 2 Milestone
because, while progress has been made, the company has yet to
set targets for carbon emissions reduction and there is no concrete
plan for decarbonisation in place yet.
b) Asia Pacific steel company (Milestone Level 4)
Upon assessment, the company had fulfilled most of our criteria on
climate change as it has set medium-term and long-term targets
and shared extensive details of its decarbonisation journey. It has
also conducted scenario analysis and explained the key drivers and
assumptions for each scenario. In addition, its senior management,
including its Chief Executive Officer and Chief Sustainability Officer,
have a part of their variable incentives linked directly to
emissions reduction.
The company’s only information gap is its disclosure to CDP.
Initially, the company was reluctant to disclose to CDP, as the
sustainability team had focused on enhancing its TCFD reporting.
During our engagement, we explained the benefits of disclosing
to CDP, which include improving its reputation as a transparent
company, improving access to capital, moving ahead of regulatory
changes on environmental reporting, identifying previously
overlooked risks and benchmarking against industry peers.
Five months later, the company informed Eastspring that it
acknowledged our expectations and would participate in CDP’s
disclosure cycle for 2022.
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As Prudential has carried out its divestment from companies who
obtain more than 30 per cent of their revenue from coal, these
companies are no longer included in the list for our climate
engagement target. However, as we believe it is important for these
companies to reduce their coal revenue, Eastspring continues to
engage with them, given that they have a particularly long-standing
relationship.
Over time, as these companies transition and their coal revenue
declines, Prudential hopes to be able to invest in them again to
support their transition to a low-carbon economy.
Eastspring was selected to participate in CDP’s Climate Transition
Champions Pilot, an engagement project that worked with target
companies to define transition plans and improve disclosures.
Eastspring worked with the procurement teams of numerous
multinational corporations to assess the resilience plans of their key
Tier 1 suppliers (if listed and disclosed to CDP). Several other global
asset managers conducted similar engagements with other
companies. As the only asset manager from the Asia region,
Eastspring shared and collected insights on how climate transition
strategies of emerging market companies compared with their
developed economy counterparts.
In addition, Eastspring has participated in CDP’s Non-Disclosure
Campaign, an initiative that encourages companies to respond to
CDP environmental data disclosure requests. As part of this
programme, Eastspring wrote to approximately 2,000 portfolio
companies that currently do not disclose basic GHG data.
Collaborative engagement
On certain issues, Eastspring may express concerns to companies’
management collectively with other investors. Such collaborative
engagement seeks to maximise investor influence and ensure
consistent messaging is delivered to businesses on enhancing their
sustainability practices.
Eastspring has aligned its stewardship approach with the ICGN
Global Stewardship Principles and believes that investors should be
prepared to collaborate with other investors to communicate areas
of concern. This is intended to more effectively engage with investee
companies to preserve or enhance value on behalf of beneficiaries
or clients.
Eastspring’s Japan Equity Team is part of the Japan Working Group
at the Asian Corporate Governance Association (ACGA). The
organisation is an independent non-profit dedicated to working with
investors, companies and regulators in the implementation of
effective corporate governance practices throughout Asia. Together
with other global asset managers, Eastspring engaged a large
multi-national bank through one of the Japan Working Group’s five
Collaborative engagement leads to
fast-tracking of sustainable energy
Eastspring continues to participate actively in industry working
groups on sustainability. Through The Asia Investor Group on
Climate Change (AIGCC) Asian Utilities Engagement Programme,
Eastspring collaboratively engaged a major Malaysian utility
company. After Eastspring participated in two further
engagements via the AIGCC in 2022, the utility company issued
a public statement on its approach of fast-tracking the pursuit
of its sustainability aspirations. This included a commitment to
integrate sustainability key performance indicators (KPIs) into
management level remuneration packages. This emerged from
numerous engagements since 2021, where Eastspring’s local
equity investment team requested the company publicly state
specific ways of meeting its net-zero ambitions.
sub-groups, each of which focused on a separate Japanese blue-chip
stock. The objective was to establish a long-term working relationship
focused on improving corporate governance, capital management
(ie reduction of cross-share holdings to increase return on equity), and
sustainability disclosures. Eastspring engaged with the bank twice in
2022 as a sub-group member of ACGA’s Japan Working Group. The
bank has committed to significantly increase the amount of
cross-shareholding to be unwound during the course of its three-year
mid-term plan. It also intends to expand the scope of sectors for
which it sets 2030 interim GHG reduction targets in its financed
portfolio (ie beyond power and upstream oil and gas) and strengthen
its corporate disclosures as part of its membership of the Net-Zero
Banking Alliance.
Investment-led engagement
Eastspring’s investment teams evaluate material risks to holdings,
which may differ across companies, sectors and asset classes. The
level of engagement with portfolio companies will vary based on
materiality, investment size and the nature of the risks themselves.
These ongoing dialogues focus principally on long-term factors that
determine companies’ earnings. Eastspring’s process incorporates a
range of milestones reflecting time-bound expectations, including
strategy development, reporting and disclosures, and
implementation.
Voting
Prudential considers voting as a crucial element of being an active
shareholder. This important part of the investment process
represents an opportunity to influence the company. Eastspring’s
voting and engagement activities are closely aligned, and seek to
change a company’s behaviour on areas of concern. Only in
appropriate circumstances will Eastspring consider divestment as the
ultimate course of action.
Eastspring engages Institutional Shareholder Services (ISS), a fellow
signatory to the United Nations-supported Principles for Responsible
Investment (PRI), to provide administrative assistance in connection
with voting proxies. These services include votes processing and
recommendation. Eastspring reviews these and decides whether to
follow or apply its judgment to vote differently. Given the paramount
importance of its shareholders’ long-term interests, Eastspring do not
always support the management of companies and may vote
against management from time to time.
In 2022, Eastspring voted on 97.7 per cent of the total number of
proxy votes in which it was eligible to vote. Eastspring voted with
management recommendations 89.3 per cent of the time and voted
against management recommendations 10.7 per cent of the time.
Capital allocation
Capital allocation refers to the strategic distribution, re-distribution,
and investment of our financial resources to environmental or social
needs appropriate to the markets in which we operate. Such activities
work in tandem with securing the required returns from such
opportunities that meet the long-term needs of our customers
and investors.
We aim to channel capital to companies that align more closely
with our values, as we believe this incentivises companies to operate
more sustainably, especially when combined with engagement.
As described below, we do this for both our investment portfolio
and our investment-linked products (ILPs), where the investment
risk associated with the product is usually borne by the policyholder.
Eastspring will invest in labelled bonds issued by companies when
suitable investment opportunities are available. Labelled bonds
include green bonds, and are considered by Eastspring only where
the companies produce documentation that attests the funding
provided solely funds sustainable alternatives. These exist where
investee companies issue a debt instrument that finances
decarbonisation targets, and is certified by a globally-recognised
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ESG report / continuedPrudential plc Annual Report 2022 Additional Eastspring engagement examples
a) Utilities company – on climate strategy and transition
financing
Given the increased impact of transition risk to high emission
industries such as the energy sector, the Singapore Equity team
contacted the company to clarify its capital expenditure plans for
decarbonisation between 2022 to 2026, to provide confidence on
the near-term risks and opportunities that the company can
mitigate and capitalise on, respectively.
We asked for clarity on how the company is positioning itself to
specific opportunities, such as new transition technologies. The
company demonstrated that it is building capacity to assess and
invest in future energy diversification projects, including the
creation of a fund and a dedicated research centre featuring a
combined portfolio of projects focusing on biofuels hydrogen and
offshore wind.
Through the engagement we attained a better grasp of the
company’s governance of its climate strategy, which features board
oversight as well as executive implementation under a committee
overseeing firmwide ESG initiatives. We also provided feedback to
the company on emerging topics, such as biodiversity, to which the
company noted they will factor in when scaling their future
programmes.
With a clearer understanding and comfort of the company’s level of
preparation for its climate commitments, we will continue to
monitor the implementation of its transition strategy.
standard. As of December 2022, Eastspring’s portfolio contained
$1.5 billion in green bonds, a 25 per cent year-on-year increase.
We also see interesting developments in our frontier markets, such
as Cambodia. Together with other global insurers, Prudential invested
in a bond issued by a local railway infrastructure conglomerate in
Q4 2022. Proceeds will support strategic transport infrastructure
development, which will increase capacity, lower costs, and ensure
safer and quicker deliveries. This ultimately seeks to improve
Cambodia’s growing logistics needs, facilitating trade, and reliably
connecting local communities. While not a labelled bond, this
investment illustrates how we allocate capital towards sustainable
business activities. In January 2023, we were able to invest in a
separate Cambodian green bond, verified by an internationally
recognised second party. The green bond was issued by the largest
local banks to finance eligible green projects and/or loans.
Cambodian green bonds only started to be issued in 2022, marking
a positive sustainable finance development in the region.
ESG investment classification framework
During 2022, Prudential and Eastspring established a new framework
to classify ESG investments.
Having agreed this classification, Prudential and Eastspring intend to
collaborate to increasingly allocate Prudential assets to ESG and UN
SDG promoted funds over time, subject to appropriate investment
governance.
This investment framework classifies investments into the following
three categories of ESG funds:
> ESG screened, which incorporate ESG considerations into the
decision-making process and include a minimum threshold on ESG,
aligned to our existing investment processes;
> ESG promoted, which include ESG in its KPIs; and
> SDG promoted, which consider real-world impact consideration,
along with strategies that aim for sustainability.
b) Port operating company – on environment (climate change
and adaptation) and social (occupational health and safety
(OHS))
Going into the engagement, the Singapore equity team observed
that a third-party ESG rating agency has awarded the company a
bottom-quartile rating. We utilised this opportunity to advise the
company on enhancing disclosures and remediating identified
issues. The company was receptive to our feedback, revealing that
they had already been conducting an environmental impact
assessment before modifying natural areas.
When we questioned the company about its readiness for adapting
to physical climate risks, the company demonstrated awareness,
such as conducting an expert review and increasing the height of
several flood gates. The company also disclosed that it is currently
working on modelling climate physical risk scenarios.
We continued encouraging the company to set relevant,
quantitative OHS targets, and to have group-level oversight on
OHS measures. We also advised on key metrics by benchmarking
with leading industry peers. The company was receptive to our
feedback, setting up an ESG committee to oversee all sustainability
aspects. We will continue to monitor their progress in addressing
targeted issues, and work with the company to improve
communication with the third-party ESG rating agency.
ESG and UN SDG promoted funds are Eastspring strategies that have
ESG or SDG targets alongside risk and return targets, that have been
introduced within the Prudential portfolio. These targets were
carefully selected and tailored to each market after consideration.
For example, in the case of portfolio carbon intensity, risk factors,
expected volatilities, the size of the market, and the carbon intensity
of the market overall have been considered.
In the future, Prudential may consider setting targets around the
proportion of its assets to be classified as ESG- or SDG-promoted.
Targets would be set with full consideration of investment objectives,
risk tolerance, and overall strategy.
Investing amid data uncertainty
Globally, asset managers are heavily dependent on publicly-
available sources of ESG data, which is often historic in nature
and only disclosed once or twice a year.
In our emerging markets, the availability of reliable business-level
sustainability metric data, whether from portfolio companies or
third-party vendors, continues to pose challenges. When
encountering such information uncertainty, our local investment
teams are required to establish ESG risk assessment frameworks,
and overcome data gaps. Using a framework established in 2021,
Eastspring Vietnam continues to leverage industry standards and
consolidate company-level assessments obtained through
engaging management.
In addition, an independent market data provider assists in
identifying companies that are considered to have failed to meet
UNGC standards. This data can be difficult to validate,
particularly any remediation of historical cases, and as such it is
considered in conjunction with Eastspring’s own research.
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ESG investment classification framework
ESG
screened
ESG
promoted
SDG
promoted
Objective:
Risk/return and minimum
threshold on ESG
Objective:
Specific ESG objective
alongside risk/return
Prudential has continued
to integrate a minimum
threshold on ESG into its
investment management
agreements for mandates.
Eastspring classifies a range of strategies, developed in 2022, as
ESG promoted. These are funds managed against one or more
ESG KPIs, such as lower carbon footprint, a lower exposure to
fossil fuel reserves, and gender diversity indicators.
In 2022, Prudential introduced WACI budgets into certain
current funds or mandates, which allows these funds to be
considered as ESG promoted. A phased approach for WACI
budgets into current funds and mandates was approved by the
Group ESG Committee during mid-2022, subject to appropriate
investment governance.
Objective:
SDG alignment
alongside risk/return
Eastspring is currently
developing funds with the
objective of targeting
alignment with the UN
SDGs. These funds will look
at investing in listed
companies that have
evidence of addressing one
or more UN SDGs through
their products and services.
Investing in healthcare impact
Prudential Singapore launched a new US$1 billion global private
equity fund in October 2022. Managed by Eastspring, this fund
makes commitments to private equity funds and co-investments,
with part of its strategic allocation being directed towards impact
investments.
In February 2023, Eastspring completed a commitment to an
impact-focused fund, ARCHIMED MED Platform II, which makes
mid-market investments in healthcare companies in Europe and
North America. ARCHIMED has fully integrated impact and ESG
into its investment process and strategy, with regular reviews of
progress achieved against impact objectives at each of its
underlying companies. ARCHIMED’s fund is classified as SFDR
Article 9 and the manager has set up a charitable foundation
that receives 5 per cent of its performance fees.
Prudential expects to make further impact-focused investments
going forward as part of its fund’s strategy.
ILP funds
Investment-linked products (ILPs) are insurance products coupled
with an investment fund managed by a professional fund manager.
At Prudential, our ILPs provide both protection and wealth
accumulation for policyholders. As the investment fund selection is
set by the policyholder (ie Prudential does not set the investment
mandate), these funds are not included in our WACI calculations.
Following their 2021 launch, Prudential Singapore continues to
operate its two sustainable ILP funds. Local clients can invest more
sustainably while also growing capital in the long term. Both funds
use the MSCI All Country World Index as a benchmark.
Managed by GMO Investment Management Company (Ireland
Limited), the PRULink Global Climate Change Equity Fund has assets
under management of $13.2 million as of 31 December 2022. This
fund’s investments aim to address environmental challenges
presented by global climate change, or improve the efficiency of
resource consumption.
Managed by Wellington Management Company LLP, the PRULink
Global Impact ESG Equity Fund has assets under management of
$4.3 million as of 31 December 2022. Through this fund’s investments,
we seek to improve the quality of and access to basic life essentials,
reduce inequality, and mitigate the effects of climate change.
Further information is provided in each fund factsheet:
> PRULink Global Climate Change Equity Fund:
www.prudential.com.sg/-/media/project/prudential/pdf/
ebrochures/prulink-funds-updated/factsheets/prulink-global-
climate-change-equity-fund.pdf
> PRULink Global Impact ESG Equity Fund: www.prudential.com.
sg/-/media/project/prudential/pdf/ebrochures/prulink-funds-
updated/factsheets/prulink-global-impact-esg-equity-fund.pdf
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ESG report / continuedPrudential plc Annual Report 2022 Strategic Enabler: Community
engagement and investment
Our mission and vision for community investment is to create a better
future for our communities by making them safer and more resilient
to life’s risks, and to provide families with essential life skills that help
them have a better, more secure future and get the most out of life.
By leveraging our key strengths as a business, including our long-term
approach and geographical scale, we are creating a better future for
our communities.
Prudence Foundation
Prudence Foundation, a subsidiary of Prudential plc and a Hong
Kong-registered charitable entity, was founded in 2011 to develop
and deliver integrated regional community investment programmes,
and to help our local businesses align and improve their individual
community investment strategies. The Foundation’s goal is to
maximise positive outcomes in the regions where we operate, and
help underserved communities to get the most out of life.
Our approach to community investment
Prudence Foundation’s activities centre on the significant needs of
vulnerable communities across our markets in Asia and Africa. We
worked with strategic partners and leveraged the knowledge and
local expertise of colleagues in our local businesses to initiate our key
programmes.
In setting our community investment strategy, Prudence Foundation
focuses on the following guiding principles:
> Addressing major societal needs relevant to both Asia and Africa
that are priorities for our communities and stakeholders in our
markets;
> Leveraging Prudential’s core strengths of providing health and
financial security with a long-term lens; and
> Leveraging partnerships to drive impact and scale.
Prudence Foundation ESG objective: Creating a better future, together with you
Three pillars Making health and
financial security accessible
Stewarding the human
impacts of climate change
Building
social capital
Community
investment
programmes
supporting
our strategy
Financial
Education
World-class award-winning
children’s financial
education programme
SDG link: 4 17
Children’s health
Wellbeing
Partnerships with UNICEF
and CDRF focused on the
first 1,000 days of a child’s
life. Improving holistic
parenting and care-giving
SDG link: 1 2 3 4 17
Community health
Wellbeing
Prudential’s Covid-19 relief
and recovery fund
Climate, health and safety
Resilience
Climate adaptation and school
resilience programme looking
at risks, frameworks and solutions
for global school and child safety
SDG link: 1 3 4 11 13 17
Climate research focused on
upcoming health impacts,
and identifying solutions and
implementing with Red Cross
SDG link: 3 13 17
Mass scale awareness and
education campaigns focused
on disasters, road safety, Covid-19,
first aid and mental health, with
global partnership ambassadors
SDG link: 1 3 11 13 17
Disaster Tech Awards, developing
networks and partnerships to
develop and drive solutions
SDG link (See https://sdgs.un.org/goals for more information about the SDGs.)
Leveraging staff regional and local volunteering
Parents
NGOs
Communities
Children
Schools
Governments
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Following these principles, we develop and deliver programmes that
fill gaps not being sufficiently addressed, reaching millions of people
at scale with the aim of improving lives and making vulnerable
communities more resilient. Our programmes are aligned to the
Sustainable Development Goals (SDGs) and our three ESG strategic
pillars: making health and wealth more accessible, stewarding the
human impact of climate change and building social capital.
We focus on health issues that are relevant to our communities,
financial education, and building community resilience against
natural disasters and climate-related risks. We continue to build on
the long-term relationships we have with our community partners,
offering both financial and skills-based support.
We are also actively involved in major disaster and crisis recovery
programmes and in 2022, Save the Children’s Emergency Fund, which
is supported by Prudential plc and helps prevent and respond to crises
across the world, provided essential support to children and families
in Ukraine and its neighbouring countries with food, clothes and
medicine as well as child protection services and education kits.
The emergency fund also responded to other natural disasters in our
markets, including an earthquake in Cianjur, Indonesia and famine
in East Africa. Our employees have also contributed around 18,000
hours of volunteer service in the local communities we operate in.
Monitoring and measuring community investment
In 2022, in our continuous effort to improve our data disclosures, we
made some changes to our reporting process. In 2021, we reported
only on cash donations made to charitable organisations. From 2022,
to reflect fully our actual community investment commitment,
we are reporting broader spend related to our community initiatives,
including spend with non-profit organisations, NGOs, social
enterprises and other third-party suppliers, and the 2021 spend has
been restated on the same basis. In 2022, the Group spent
$12.2 million on our community investment programmes (2021
(restated): $9.9 million).
Our community investment spend has been defined, calculated and
categorised using the internationally-recognised Business for Societal
Impact (B4SI) Framework.
Cash donations to
charities
Cash donations to other
community investment
partners
2022*
2021
(restated)†
2021
$7.9 million
$4.7 million
$5.9 million
$4.3 million
$5.2 million Not reported
Total cash contribution
$12.2 million
$9.9 million
$5.9 million
*
†
Within the scope of EY assurance – see the Basis of Reporting (www.prudentialplc.com/~/
media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf) for details.
The 2021 figures have been restated to reflect a change in the broader disclosure of
charitable spend as outlined above. See the Basis of Reporting (www.prudentialplc.
com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf) for details.
Our governance structure
The Responsibility and Sustainability Working Group (RSWG)
oversees Prudential plc’s community engagement and investment
activities on behalf of the Board. Prudence Foundation, our charitable
subsidiary, is governed by a statutory board of directors that meets
regularly to review community investment strategies, initiatives and
budgets. Prudence Foundation is also guided by the Group’s ESG
strategy framework.
Prudential’s Group-wide Community Investment Policy guides our
approach to community investment and engagement and sets out
minimum standards, including not permitting any investment or
contribution that is prohibited by law or regulation, that falls under
the Political Donations Policy, or that is made to any religious
organisation whose principal aim is to propagate a particular faith.
It is the Group’s policy neither to make donations to political parties
nor to incur political expenditure, within the meaning of those
expressions as defined in the United Kingdom Political Parties,
Elections and Referendums Act 2000. The Group did not make any
such donations or incur any such expenditure in 2022.
Our corporate social responsibility and sponsorship anti-bribery and
corruption guidelines state that Prudence Foundation or local
business community investment programmes or activities should not
be leveraged for sales opportunities.
Financial education
Cha-Ching
Cha-Ching is Prudence Foundation’s flagship and award-winning
global financial literacy education and responsibility programme,
which provides a tailored curriculum for children aged between seven
and 12. The programme aims to address financial literacy gaps across
our markets, by providing a blended learning approach, leveraging
digital tools and platforms and implementing a classroom-based
programme which can be taught by trained teachers in schools. Our
focus is to cultivate strong financial literacy foundations, and make
the programme freely available and easily accessible to millions of
children, parents and teachers.
Prudence Foundation entered into a partnership agreement with
Junior Achievement (JA) Asia Pacific in 2016 to develop the Cha-
Ching Curriculum. Through government collaboration and strong
NGO collaboration, the curriculum has been implemented in schools
across Asia and Africa.
The teacher-led Cha-Ching curriculum is now taught in eight markets
across Asia: the Philippines, Indonesia, Malaysia, Vietnam, Taiwan,
Cambodia, Thailand and Laos. In Singapore, through a volunteer-led
approach, we have reached over 16,000 children to date. Our teacher-
led Cha-Ching Curriculum programme continued in Africa, where we
worked with Junior Achievement Africa to bring this to primary school
students in six countries: Kenya, Ghana, Nigeria, Uganda, Côte
d’Ivoire and Zambia.
In addition to our partnership with Junior Achievement, to ensure
continued mass outreach to our targeted audience, we entered into
partnership with Cartoon Network in 2011 to broadcast Cha-Ching
cartoons, reaching over 36 million households daily. Cha-Ching
content continues to be available online via the website and through
digital channels including social media, receiving over 98 million
views to date in Asia and Africa.
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ESG report / continuedPrudential plc Annual Report 2022 Cha-Ching curriculum cumulative reach
from 2020-2022
2020
617,000
15,000
2021
888,000
24,000
2022
1,270,000
37,000
Students reached
Teachers reached
Cumulatively in Asia and Africa, more than 37,000 teachers have
been trained to deliver the Cha-Ching Curriculum in schools, and over
1.2 million primary school students have learnt the lessons of earn,
save, spend and donate.
Key awards received in recognition of our continued efforts in the
communities we serve:
> Cha-Ching won Best Non-Profit in a Developing Economy award at
the 2022 Money Awareness and Inclusion Awards (MAIA) which
recognises exemplary work raising awareness on problems caused
by poor financial literacy. It was the ‘highest scoring entry in the
whole of the MAIAs this year’.
> Cha-Ching was awarded ESG Initiative of the Year – Hong Kong at
the Insurance Asia Awards 2022, for its commitment to increase
financial literacy among young people globally.
> Cha-Ching in the Philippines won silver at the 2022 Annual
International Business Awards® in the Best Communications or PR
Campaign of the Year category, together with Pru Life UK and
Junior Achievement.
The Cha-Ching curriculum has been one of the best avenues
in providing life-long lessons to our learners regarding an
important life skill – financial literacy. The Cha-Ching network
in the Bicol Region has continuously worked to innovate and
improve the 360-degree implementation approach of the
programme, in coordination with the schools and educators of
the programme. This is why it is one of our proudest moments
and achievements to receive the news that the percentage of
educators with loans in the Bicol Region has decreased from
90 per cent to 70 per cent since Cha-Ching’s implementation.
This prestigious and international recognition has only fuelled
our hopes and drive to decrease this number even further in
the coming years, as well as to reach more beneficiaries of
the programme.
Gilbert Sadsad,
Regional Director, Department of Education, Philippines
I volunteered myself to teach Cha-Ching. Today I don’t regret
taking that step. Just the training alone when the Prudential
team were taking us through the Cha-Ching curriculum, by the
end of the day there was such a paradigm shift. I took two
classes, Grades 5 and 6, about 100 out of the 400 learners of
the school. When we started the first session, the children were
so excited. It has been received so well. I went an extra mile to
make sure their parents are aware of what we are doing and
they support their children. I will use the opportunity and the
training that I have received to invest in the incoming generation
so that I can make a change, because it doesn’t cost much to
share knowledge and to help young people come to a place
of financial literacy.
Madam Benter Okuku,
Teacher in Mombasa, Kenya
Cha-Ching Money Adventures
In 2021, a web-based interactive learning game ‘Cha-Ching Money
Adventures’ was developed by Prudence Foundation to complement
the Cha-Ching curriculum, foster greater financial literacy for children
and encourage family dialogue about financial decisions. It was
created in partnership with Two Moos (an Australian-based
educational media design studio) and Education Development
Center (a US-based not-for-profit organisation).
In January 2022, Education Development Center (EDC) researchers
conducted an evaluation study in the Philippines on the game to
determine its appeal and effectiveness. Key findings from the study
suggest that ‘Cha-Ching Money Adventures is fun and engaging for
eight- to nine-year-olds; is effective in improving their financial literacy
and helps catalyse parent-child conversations about money’.
In October 2022, Cha-Ching Money Adventures was launched
globally, following the success of a soft launch in the Philippines in
conjunction with Cartoon Network in July and August. Work is
currently under way to ensure the game is available in multiple
languages.
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Digital initiatives
In 2022, we continued to actively drive digital initiatives as part of our
efforts to increase the reach and impact of Cha-Ching.
> The Cha-Ching Financial Literacy Global Conference 2022 was
hosted virtually in February 2022. The purpose of the two-day
conference was to highlight the importance of financial literacy
and explore key global questions around the topic. Educators,
policy makers, academics and industry experts came together to
provide insights on the role financial education plays in enhancing
individual and collective development and the opportunities this
presents. Over 1,000 people attended via Zoom, with over 5,000
more people viewing through other social media platforms.
> The virtual 2022 Global Money Week campaign led by the
Organisation for Economic Co-operation and Development
(OECD) celebrated its tenth anniversary. Ten of our markets
participated, including Indonesia, the Philippines, Vietnam, and
Uganda, holding Cha-Ching webinars, competitions and digital
campaigns to raise awareness of the importance of financial
literacy for young people.
> Roll-out of the online Cha-Ching Financial Accreditation (CCFA)
programme continued in 2022. This online assessment is endorsed
by education authorities and was developed in alignment with the
Our local communities update
OECD Core Competencies Framework on Financial Literacy for
Youth and the ASEAN Teachers Competency Framework. The
Cha-Ching teacher network was strengthened through the CCFA
programme, and online CCFA webinars were held in the Philippines
and Indonesia. To date, over 14,000 teachers have registered and
8,700 have completed the CCFA online assessment since its
inception in 2020. 8,000 teachers have passed the CCFA and have
received accreditation.
> Cha-Ching videos and parent resources have been made available
for free on the Pulse app across markets including Singapore,
Vietnam, Cambodia and the Philippines.
PRU e-FinLit
We continued to provide our support for financial literacy
programmes via our Online Professional Certification Training
Program (PRU e-FinLit) for Philippines and Indonesia in 2022.
In Philippines, we expanded the certification programme to cover
government workers from the Metro Manila Development Authority
(MMDA). In Indonesia, in collaboration with Sharia Economic
Community (MES), Prudential Indonesia held a series of financial
literacy webinars with the objectives of increasing women’s
knowledge of basic financial management and increasing
awareness of sharia-based financial services.
Markets
Development
Impact in 2022
Vietnam
> Continued curriculum implementation, including a series of edutainment
and online/offline communication activities launched.
> Accessible to students and mass public.
> 4,600 students participated in the competition.
> A Smart Kids Smart Money Competition and Cha-Ching Day were held.
Thailand
Malaysia
Kenya
Nigeria
and
Ghana
> Collaborated with Human Capital Excellence Center under the Ministry
of Education.
> 4,000 teachers and master teachers trained.
> Over 76,000 students taught.
> Cha-Ching programme approved by Minister of Education.
> Partnership with Junior Achievement.
> Digital materials and video distribution to teachers and students.
> In September 2022, we partnered with Akili Kids free-to-air TV Network
to air Cha-Ching’s 18 episodes. (#1 TV channel in Kenya in households
with children and youths under 18 years of age).
> Cha-Ching Money Show, a Cha-Ching TV programme discussing
financial education, was developed, filmed and launched in 2022 in
conjunction with Junior Achievement Africa and Ultima Studio in Nigeria.
The programme features two teenage hosts, a live audience, the
Cha-Ching videos, games and interviews with special guests including
the Chief Commercial Officer, Prudential Zenith Insurance.
> Increased outreach to public school students.
> Over 16,000 students completed all six modules in the
programme and over 400 teachers were taught the
curriculum.
> Audience of 6.7 million children and 4.9 million adults
with children weekly.
Safety
SAFE STEPS
To promote the resilience of communities we run SAFE STEPS,
a global programme that provides education, awareness and
life-saving tips, including information on climate and disaster risk
preparedness, road safety, first aid and Covid-19. Developed in
partnership with the International Federation of Red Cross and Red
Crescent Societies (IFRC) and National Geographic, the programme
continues to reach millions of people in Asia and Africa through our
many media partnerships and government collaborations.
The programme’s reach continues to be significant:
> SAFE STEPS programmes reach over 136 million people
in Asia and Africa via various media partnerships in 2022;
> SAFE STEPS Kids has a TV reach of 36 million households
every day via Cartoon Network; and
> On social media, SAFE STEPS Kids has reached over 33 million
people, and its videos have been viewed over 12 million times
across all digital platforms since its launch in 2019.
SAFE STEPS Kids
Following our new SAFE STEPS Kids Health educational series ‘Be
Cool Be Clean’ video campaign, launched in 2021 to teach children
the importance of good hygiene, Prudence Foundation continued to
work with Cartoon Network and IFRC to introduce a 60-second public
service video in 2022, titled ‘Stress Busters’. The new video focused on
addressing children’s mental health and wellbeing by providing
easy-to-understand and relatable tips for children to overcome stress
and anxiety.
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ESG report / continuedPrudential plc Annual Report 2022 Covid-19 Risk Communication and Community Engagement
(RCCE) programme
During the pandemic, Prudence Foundation worked with IFRC Africa
to implement a Covid-19 Risk Communication and Community
Engagement (RCCE) programme. This was designed to help reduce
the spread of infection in Africa by supporting the development of
information materials and messages to address misinformation and
fears about Covid-19 and vaccines. The RCCE activities were informed
by local community insights, and accurate information was
disseminated through accessible and trusted mass media channels.
The Red Cross National Societies of Cameroon, Côte d’Ivoire, Ghana,
Kenya and Togo worked closely with Prudential businesses to develop
critical risk communication activities, each informed by local context.
The programme used a multi-pronged approach to engage
communities through perception surveys, webinars, mass media
broadcasts, home visits, community meetings and focus groups, and
reached over four million people across five countries in 2022.
International Road Assessment Programme (iRAP)
In 2022, Prudence Foundation entered a new partnership with the
International Road Assessment Programme (iRAP), a global
charitable organisation with the objective of international promotion
of road safety improvement and road quality. Prudence Foundation
provided funding support to its global Star Rating 4 Schools (SR4S)
programme, with an evidence-based tool for measuring, managing
and communicating children’s exposure to risk on a journey to school.
It supports quick interventions that help save lives and prevent
serious injuries. Road crashes are the biggest killer of young people
aged from five to 24, and the SR4S programme leverages the iRAP
Pedestrian Star Rating to create safer journeys to school.
The National Traffic Safety Committee highly appreciates the
long-term commitment from the donor – Prudence Foundation
and Prudential Vietnam. The SAFE STEPS Kids Road Safety
project delivered meaningful messages, established a safe
environment in and surrounding the school, and at the same
time provided traffic safety education for students.
Ms. Trinh Thu Ha,
Deputy Chief of the National Traffic Committee Office, Vietnam
Our local communities update
Markets
Development
Impact
Vietnam > Prudence Foundation renewed its partnership with AIP Foundation for a
second term, running from August 2021 to March 2022. The programme aims
to improve road safety for the benefit of communities in Hoa Binh and Quang
Ngai provinces in Vietnam. Our work included stakeholder engagement,
workshops and training for teachers, distribution of good-quality cycle
helmets to students, school-based education, infrastructure improvement,
communication campaigns, monitoring and evaluation.
> Average helmet-wearing rate of students across the
project schools increased from 22 per cent to
76 per cent in Hoa Binh and 40 per cent to 97 per cent
in Quang Ngai.
> Students’ road safety knowledge improved from
36 per cent to 80 per cent in Hoa Binh and from
61 per cent to 89 per cent in Quang Ngai.
> Improvement in safety levels from two stars in Hoa
Binh and one star in Quang Ngai to four stars in both
provinces.
Cambodia > Prudence Foundation expanded its partnership with AIP Foundation in 2022
to implement a SAFE STEPS Kids Road Safety programme in Cambodia.
Uganda
Zambia
Kenya
> In partnership with Uganda Red Cross and Boda Boda Association of
> Aims to train 10,000 boda boda drivers by the end of
Kampala region, we rolled out a SAFE STEPS Road Safety campaign focusing
on motorbike boda boda drivers. The programme provides monthly training in
road safety and first aid, and those who complete the training receive new
international standard helmets.
the first quarter of 2023.
> Partnerships with Road Traffic Safety Authorities, Zambia Red Cross, Cycling
> Reaches eight million Zambians.
Association of Zambia, Zambia Road Safety Trust and Zambia Motorsports to
roll-out SAFE STEPS Road Safety programme, leveraging radio and digital
media.
> A cycling event was also hosted, to promote road safety and health and
wellness.
> In late 2021, Prudence Foundation, with support from Prudential Kenya,
signed a partnership with Nation Media Group, one of the largest media
groups in East Africa, to distribute SAFE STEPS Road Safety in Kenya. The
campaign ran for 12 months.
> In 2022, Prudence Foundation has engaged Social Impact, a US-based
research organisation, to carry out an impact evaluation of the campaign,
which will help inform future media strategies for the programme. The report
is expected to be completed in Q2 2023.
> The media campaign reached 6.7 million viewers
through TV, radio, print and social media platforms.
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Safe Schools
Since 2013, Prudence Foundation, in partnership with Save the
Children and Plan International, has been supporting the
implementation of Safe Schools in our communities. The programme
aims to address the objectives of the Comprehensive School Safety
Framework (CSSF) which is supported by the Global Alliance for
Disaster Risk Reduction and Resilience in the Education Sector
(GADRRRES). CSSF is a global disaster risk management framework
that focuses on the importance of safe learning facilities, school
disaster management and risk reduction and resilience education.
This partnership also supports the objectives of the Sendai
Framework for Disaster Risk Reduction.
In 2021, Prudence Foundation supported a global initiative led by
GADRRRES and Save The Children, to revise and strengthen the CSSF.
The revised Global Comprehensive Safe School Framework 2022-
2030 is an all-hazards, all-risks approach in educating and protecting
children, offering governments a practical framework to make
significant progress across a multitude of children’s rights and the
sustainable development agenda. The CSSF 2022-2030 was
Our local communities update
launched globally on 12 September 2022 via an online webinar
attended by over 400 participants, including representatives from
governments, NGOs, United Nations agencies and the private sector,
galvanizing more action and investment to ensure education is
resilient against all hazards and risks.
In recognition of our efforts and partnership with the Philippines’
Department of Education, our partner, Save the Children Philippines,
was recognised as one of the United Nations Sasakawa Award
winners for Disaster Risk Reduction (UNDRR) in 2022.
At COP27 in Egypt, the Executive Director of Prudence Foundation,
presented the new CSSF 2022-2030 plan, where he shared insights on
our support of CSSF and how the framework is an effective climate
adaptation solution to protecting education systems. Our
Comprehensive Safe Schools Ecosystem project was highlighted as
an example of CSSF large-scale implementation in the Philippines,
with the aim of garnering more support from global actors in its
implementation.
Markets
Development
Impact
Looking forward
Philippines > Prudence Foundation partnered with Save the Children and the Philippines’
Department of Education to implement the Comprehensive Safe Schools
Ecosystem project. This includes the development of the Disaster Risk
Reduction Management Information System (DRRMIS) designed as a digital
platform to gather data for analysis and effective planning to reduce disaster
risk, along with training and capacity-building for teachers and local
government officials.
> The system consists of three key components. The Rapid Assessment of
Damages Report (RADaR), launched in 2021, is a tool that provides timely
and accurate reports to the Department of Education to enable efficient
recovery response and ensure minimal disruption to education. The core CSS
system, the second component, was launched nationwide in June 2022. And
the last component, a Students Watch App was rolled out in two regions,
allowing students to participate in the Disaster Risk Reduction planning.
> Rapid Assessment of
Damages Report
(RADaR) was used in 17
hazard events by more
than 28,000 schools
since its launch.
> The programme will be
rolled out to over 47,000
schools nationwide.
> An external independent
impact evaluation of the
programme is currently under
way with the intent to share
evidence-based impacts and
build a case study for other
governments to reduce disaster
risk and potentially replicate
this approach in other
countries.
Thailand
> In partnership with PLAN International, Prudence Foundation had
> The programme
> Target to roll out Safe Schools
successfully developed and implemented a Safe Schools Model with a
minimum standards checklist and certification scheme aligned with
CSSF in Chiang Rai Province since 2013.
benefited 50 schools
directly.
to 3,600 schools in 12 provinces
in northern Thailand from 2022
to 2025.
> Aim to develop and pilot a CSSF
platform to facilitate e-learning
and CSSF certifications, build
CSSF capacity for these 3,600
schools and enhance education
policies and actions to address
children and young people’s
needs on school safety.
> Goal is to have CSSF platform
ready for national scale-up
within the programme time
frame.
> Continue to support the roll-out
of the Safe Schools Programme
to new schools in Siem Reap
and Ratanak Kiri provinces in
the new phase from 2022 to
2025.
> We plan to launch the
programme in 2023 and aim to
reach over 170 schools in both
provinces.
Cambodia > Extended our support and partnership with PLAN International to
Cambodia, with the overall goal that children in the most at-risk
communities would increase their resilience to react to disasters and
have a safe and secure learning environment.
> The project has benefited
60 schools in Stung Treng
province.
> Provided training and
technical support to
sub-national educational
duty bearers to take on
roles and responsibilities
to ensure that schools are
safe for students.
Indonesia
> In 2022, Prudence Foundation expanded its partnership with PLAN
International to implement the Safe Schools programme. In collaboration
with Ministry of Education and National Disaster Management Office, the
three-year partnership will aim to equip two provinces, Yogyakarta and
Bali, with minimum standards aligned with CSSF.
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ESG report / continuedPrudential plc Annual Report 2022 Early childhood development
Prudence Foundation believes that early childhood care and
development runs from birth through to eight years of age, and is
critical for a child’s cognitive, social, emotional and physical
development. To set the child on the right path for future years, it is
imperative that quality education, adequate nutrition, healthcare
and protection are provided at a young age.
We work with our strategic partner, UNICEF, to implement a regional
early childhood development (ECD) programme that advances ECD
as part of the Nurturing Care Framework. With funding support from
Prudence Foundation in 2021, UNICEF completed country rapid
assessments on Nurturing Care ECD services in four countries;
Cambodia, Indonesia, Thailand and the Philippines.
The findings from the assessments resulted in the following actions:
> Informed and supported the development of the regional ECD
strategy, ‘Growing Steady and Strong’, which set up the vision for
ECD in the region. This will ensure it is relevant and appropriate to
the needs of the countries, and will ultimately result in better
outcomes for children and their families;
> We decided to continue our partnership in Indonesia to rebuild
ECD centres which were shut during the pandemic, and to support
the integration of the Nurturing Care Framework into these
centres; and
> A new ECD partnership was signed in late 2022 in Thailand to
improve ECD outreach to children and caregivers by integrating
and championing nurturing care as well as affordable and quality
childcare services, and strengthen the quality of Early Childhood
Education.
Prudence Foundation also renewed its support and partnership ECD
programmes with China Development Research Foundation (CDRF),
which will be implemented for three years from 2021 to 2024 in
Guizhou, China; a region with a population of 10 million. Bi Jie in
Guizhou is the first state-level experimental reform zone, aiming to
explore new development paths to accomplish poverty alleviation
and green development.
The two early childhood development programmes are:
> China Rural Education and Child Health (China REACH)
programme: the country’s first integrated ECD programme
targeting children in low-income rural areas. Elements of the
programme include nutrition and parenting interventions,
randomised controlled trials and follow-up assessments.
> Schools Nutrition Improvement programme: aims to improve
nutritional outcomes for students in rural and poverty-stricken
areas.
Covid-19 relief fund
In October 2022, Prudential plc donated an additional $2 million to
Prudence Foundation’s managed Covid-19 relief fund, to continue
supporting our communities through the pandemic. In total,
$6.5 million has been invested in the fund since its launch in 2020.
Our local businesses have used the funds to support vulnerable
communities, with activities including communications on the
importance of hygiene and sanitation, providing nutrition, and
educational programmes.
Key initiatives are:
> Indonesia: A holistic Covid-19 relief programme which includes
funding to provide vaccinations for children, personal protection
equipment and sanitation for schools, Covid test kits for high-risk
groups and skills training in vulnerable, hard-hit areas.
> Malaysia: Prudential Malaysia and Eastspring Investments
partnered with local NGOs in four projects to provide food aid and
relief to vulnerable communities in Malaysia. A total funding of
$181,000 was distributed to overcome challenges caused by the
pandemic.
> Uganda: Prudential Uganda is addressing mental health and food
insecurity through a partnership with local NGO StrongMinds, to
raise awareness around mental health issues brought on by the
pandemic and provide support through free teletherapy for 1,500
vulnerable working adults suffering from depression.
Other community investment activity: Taiwan
In 2020, the ‘Protecting Children and Making Their Future’
programme was launched with the aim of engaging the public,
the government and NGOs to work together to establish a safe
and healthy environment in which children can grow and develop.
In partnership with academics and field experts from local
Taiwan universities, three white papers and a child health index
with continuous tracking, which focused on children’s health,
mental health and education, were developed and published.
The white papers aim to promote a healthy environment for
children and instil a healthy lifestyle when they are young, to help
build the framework for an entire lifetime of healthy habits, both
physically and mentally.
In 2022, we leveraged influencers and key opinion leaders to
increase awareness, generating close to 92,000 views and
reaching more than 253,000 people on social media (Facebook
and YouTube). To foster and encourage innovation in the younger
population, Prudential partnered with Impact Hub Taipei, a social
NGO startup, to kick off a unique cultivation and incubation
programme ‘Innovation for Wellbeing’ in December 2021. This
programme, themed around health, wealth and community
investment, has not only created a platform for young college
students to transform their innovative ideas into reality, but also
provided them with the resources for implementation. In 2022,
twenty teams were selected to join the hack days, doubling the
number of 2021 participating teams.
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Strategic Enabler: Good governance
and responsible business practices
At Prudential, the way we do business is informed by our purpose.
This purpose applies to our entire company – from our work with
customers and business partners to how we manage environmental,
social and governance risk. Prudential operates in a highly regulated
financial marketplace where it is imperative to have strong
governance processes to provide the foundation for our business
operations and to maintain trust with our stakeholders.
Our business is overseen by strong governance structures, from our
Board of Directors at the highest level and throughout our Group and
local business management structures. At all levels of the company,
we recognise that managing our business responsibly is paramount,
and we ensure that our people are clear about the standards of
behaviour we expect and how these inform their work.
We have clear policies and systems in place to ensure high standards
across fundamental issues such as anti-bribery and corruption,
fighting financial crime, responsible tax practices, our expectations of
our suppliers, the upholding of human rights, and supporting
employee rights and wellbeing.
Our Governance Framework
Our Group Governance Manual (GGM) sets out our framework for
ethical business practices, governance, risk management and internal
control. Our Commitment to ethics and integrity is deeply embedded
in our values. Central to this is our Group Code of Business Conduct,
which provides a consolidated view of how we conduct our business
and the expectations that the Board sets for itself, our employees,
agents, suppliers and others working on behalf of the Prudential
Group, in order to ensure that we adhere to the highest professional
and ethical standards of conduct. This code is further supported by a
set of Group-wide principles and values that define how the Group
expects business to be conducted ethically in order to achieve its
strategic objectives and purpose. The GGM contains our full suite of
policies and is designed to ensure that we comply with all applicable
laws and regulations. Given its importance, the GGM is subject to
regular review to ensure that we continue to meet the expectations of
our stakeholders, and each business must certify annual compliance
with the requirements set out in the Manual, including the Code of
Conduct, Delegated Authorities and Group-wide policies.
In 2022, we invested in a refreshed Group mandatory training
programme that is consistent across our Asia and Africa businesses
and is reflective of our current structure and focus. It is mandatory for
all employees to complete the 2022 Group Code of Business Conduct
– All Employee Declaration attestation to confirm that they have
completed all relevant e-learning and have read, understood and
adhered to the individual obligations presented in the Group Code of
Business Conduct.
Prudential’s Annual Report and Accounts includes a comprehensive
Governance section, which provides further information on how the
Governance Framework operates, the Board of Directors, the Board
committee reports, and an overview of the risk management and
internal control system.
Supply chain management policy
Prudential uses third-party suppliers and outsourcing providers to
allow us to focus on our core business strengths and reduce costs. We
believe that the conduct of our suppliers reflects on us, and has the
potential to impact our standing, branding and reputation within the
communities in which we operate.
Our Group Third Party Supply and Outsourcing Policy forms part of
the GGM and is considered a core part of our system of governance.
The Policy specifies our position on supply chain management,
setting out our approach to due diligence, selection criteria,
contractual requirements, and ongoing monitoring of our supplier
relationships. Effective implementation of this Policy will help us meet
the expectations of our stakeholders and our legal and regulatory
requirements.
Following an extensive review, our new Group Third Party Supply and
Outsourcing Policy came into effect on 1 January 2022. This Policy
has further strengthened our guiding principles for onboarding
suppliers responsibly, as well as requiring ongoing risk assessment and
service monitoring to enable the sustainable supply of services
throughout the duration of a supplier’s relationship with Prudential.
Our new Policy also introduced responsible supplier guidelines which
include additional considerations for a supplier’s environmental,
social and governance practices in addition to existing supplier
qualification requirements tied to their capabilities, competitiveness
and assessment of third-party risks. These additional considerations
are applied to suppliers that are material to the Group, or those
suppliers that operate in industries where base-skilled labour is often
employed, including cleaning services, catering, security services and
low-cost manufacturing, or in geographies affected by conflicts,
countries with a weak rule of law and countries with a high number of
migrant workers.
In 2022 we materially completed the Group-wide deployment of our
third-party risk assessment platform, Coupa Risk Assess, to provide a
single system for the performance of supplier risk assessment and
due diligence activities. This system continues to strengthen our
visibility of third-party risks such as information and technology
security concerns, data privacy, anti-bribery and corruption and
business continuity and resiliency risks. Through this system we also
issue due diligence questionnaires aligned to the principles of the
responsible supplier guidelines, which are covered further below. To
date, Coupa Risk Assess has facilitated the assessment of 1,900
suppliers across the Group which represents close to 20 per cent of all
our suppliers across the Group. As the deployment of this tool was
materially completed within 2022, we expect to see coverage
increase in the coming years as the platform continues to be
embedded and operationalised across our businesses, and as we
refresh our due diligence with suppliers on a periodic basis in line with
our policies and procedures.
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ESG report / continuedPrudential plc Annual Report 2022
Supply chain onboarding due diligence process
Our businesses conduct due diligence before engaging with and ultimately selecting a new supplier. We perform regular due diligence, review
meetings and audits where required, and our policies and procedures are supported by regular employee training exercises. All our employees are
required to complete annual mandatory training reflecting the regulatory and legal obligations of the Group. We also require our employees to
confirm compliance with the Code of Business Conduct.
Supply chain onboarding
Selection
Due
diligence
Contracting
Monitoring
Seek supplier
for a new
requirement
or contract
renewal
Review
marketplace
options for
reputable
suppliers
Issue RFP
and consider
environmental
impacts
Issue ESG
questions to
supplier via
Coupa Risk
Assess
Due diligence
on stability,
tax, privacy,
IT security
and business
resilience
as needed
Supplier
contractually
obliged to
meet ESG
standards
Adverse
answers or
concerns
escalated to
ESG team for
review and ‘go’
or ‘stop’
decision
> Incidents
reported
> Whistleblowing
to our Speak
Out line
> Adverse
publicity
> Negative
news
(via Fiserv
system)
Our stringent supplier onboarding measures start from the vendor
selection process. Rigorous due diligence checks, third-party contract
evaluation and post-onboarding monitoring activities ensure that
controls are in place at Group and business levels. Our selection
processes take into consideration a supplier’s track record in delivering
goods and services to a high standard and stable financial
performance. We also assess suppliers’ data security control
procedures to ensure they have proper data privacy and personal
data security protection controls in place.
To ensure alignment of our suppliers with our ESG strategy, we use the
Coupa Risk Assess system to specifically target ESG-related questions
on suppliers that provide services in high-risk labour categories as well
as on suppliers that are material to our business. To assess
compliance across all our markets and as a form of control, we require
all our suppliers to undergo due diligence activities, which include
human trafficking, anti-money laundering and anti-bribery and
corruption checks. Lastly, we encourage our employees, contractors
and third-party suppliers to raise any concerns they may have in
relation to our vendor relationship via our Speak Out whistleblowing
platform.
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Our responsible supplier guidelines provide further detail of our expectations:
Theme
Summary of responsible supplier guidelines
Environmental
Given the planet’s finite resources, Prudential encourages our suppliers to build sustainable businesses by having sound
environmental management principles in place, and working towards reducing negative external impacts on the
environment within which they operate.
In our assessment check, we review suppliers for:
> Written environmental and/or sustainability policies and governance systems in place, appropriate to the size and
nature of their operations; and
> Compliance with relevant laws and legislation.
Social
In line with Prudential’s values and standards, we expect suppliers to respect the human rights of their employees and to
comply with all relevant legislation, regulations and directives in the countries and communities in which they operate.
In the United Kingdom, we require our suppliers to pay their employees the London or United Kingdom Living Wage, as
set by the Greater London Authority and the Centre for Research in Social Policy respectively.
Key requirements include:
> Prohibition of forced and child labour practices;
> Paying legally mandated minimum wages and/or industry standards;
> Prohibition of any form of discrimination, harassment, bullying and other types of misconduct;
> Providing safe working environments and abiding by local laws and regulations;
> Support fair trade and ethical sourcing practices; and
> Promote diversity and inclusion within their operations.
Governance
We expect suppliers that we have regular and recurring dealings with to have good ethical and management governance
processes in place, to ensure compliance with the responsible supplier guidelines. Suppliers must make reasonable efforts
to monitor their supply chain, ensuring that their own suppliers are aware of, and compliant with, the aims of our
guidelines.
Combatting modern slavery
Prudential is committed to ensuring that slavery, human trafficking,
child labour and any other form of human rights abuse have no place
in our Group or in our supply chain of close to 10,000 suppliers
globally.
Our most recent Modern Slavery Transparency Statement, issued in
May 2022, elaborated the steps we are taking to identify, monitor,
report and proactively mitigate any modern slavery risks in our supply
chain. Under the UK Modern Slavery Act 2015 we are not required
under UK law to detail our activities in Asia or Africa, but we have
decided to provide this detail on a voluntary basis.
In October 2022, we engaged The Remedy Project to review our
supplier onboarding and modern slavery due diligence risk
assessment procedures and practices in our Vietnam market as part
of gathering any additional lessons we could deploy in order to
enhance the effectiveness of our onboarding procedures in
identifying and mitigating modern slavery risks universally across all
our markets in Asia and Africa. Vietnam was identified as an ideal
market for this review as this represented a sizable and mature
business operating in a region where modern slavery related risks are
relatively more prevalent. The engagement with Remedy Project
included a review of our policies and procedures, comparing
Prudential’s best practices to those of other pan-Asian insurers and
identifying documentation and training improvements.
As a result of this engagement and over the course of 2023, we are
making improvements to our policies, procedures, and increasing the
comprehensiveness of our risk assessment criteria for assessing
suppliers so they continue to be closely aligned with our Responsible
Supplier Guidelines. Furthermore, we will be focusing on increasing
awareness and training for modern slavery and broader human rights
issues within our supply chain across our procurement and risk teams
in the Group. We will also be making corresponding enhancements to
our Coupa Risk Assess system to ensure consistency in application
across all our markets.
No incidents of modern slavery were reported or detected in 2022.
While our global supply chain is predominantly related to IT systems
and professional services and we have a limited exposure in low-cost
labour areas, we are not complacent and maintain extra scrutiny in
selecting suppliers.
For more information around how we are identifying and managing
our risks in relation to modern slavery, human trafficking, child and
forced labour, please read our most recent Modern Slavery Statement
on the Prudential plc website (https://www.prudentialplc.com/~/
media/Files/P/Prudential-V13/policies-and-statements/modern-
slavery-statement-2021.pdf).
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ESG report / continuedPrudential plc Annual Report 2022 Responsible tax strategy practices
Prudential believes that maintaining a fair and transparent approach
to tax management is critical to conducting a responsible business in
the communities where we operate.
Our tax strategy considers a range of different stakeholders, and is
supported by the Group Tax Risk Policy, which sets out the standards
for managing and reporting a broad range of tax risks across the
Group. Our Group Tax Risk Policy is reviewed annually to ensure it
reflects evolving risk management practices and the expectations of
relevant stakeholders.
We strive to be a responsible and compliant taxpayer through
consistent implementation of our tax strategy amid rapidly changing
domestic tax laws and international tax standards. We understand
the importance of paying the right amount of tax on time in all the
markets in which we operate. We manage our tax affairs in a
transparent, responsible and sustainable manner and seek to build
constructive relationships with tax authorities in all our jurisdictions.
In 2022, we made a total tax contribution of $1,009 million (2021:
$1,071 million), demonstrating our commitment to paying the right
amount of tax and thus helping to contribute to the health and
development of the communities in which we operate.
Our Tax Strategy Report is published annually and provides further
information on how we meet this commitment, through disclosures
demonstrating the clear link between our business footprint and our
tax footprint. The Tax Strategy Report published in May 2022 marked
the tenth year in which Prudential provided information on its tax
payments, and showed that over $8 billion of total tax payments
were made in the communities where we continue to operate
between 2012 and 2021.
In delivering our tax strategy through our day-to-day operations, we
follow a set of guiding principles:
> We act responsibly and with integrity in all of our tax matters;
> We seek to comply fully with all our tax obligations, including
paying the right amount of tax in each jurisdiction;
> We apply rigorous management over tax uncertainties and risk
through our Group Code of Business Conduct, Group Governance
Manual and Group Tax Risk Policy;
> Where the tax treatment of a particular transaction or activity is
unclear, we will follow the generally understood interpretation of
tax law, which means the common view across the informed tax
community of how the tax laws and regulations are interpreted
and applied;
> We deal with tax authorities in an open and constructive manner;
and
> We provide transparent disclosure of our tax affairs to better inform
our stakeholders on the amount and type of taxes we pay and our
tax governance processes.
We actively monitor developments in the tax transparency agenda.
The Tax Strategy Report published in May 2022 was expanded to
include an overview of our key Asian markets. In each of the key
jurisdictions in which we operate, additional disclosures were made
on the amount of tax remitted, the type of tax, the relevant effective
tax rate and an explanation of the rate.
Our updated Tax Strategy Report, which will include information on
the tax we paid in 2022, how we manage our tax affairs and the
governance and management of tax risk, will be published by 31 May
2023. Information on our tax charge and effective tax rate can be
found on pages 306 to 308 (note B3).
Fighting financial crime – bribery, money laundering and fraud
As a financial services provider with a significant international
presence, Prudential is, like its peers, exposed to financial crime risks.
These risks include sanctions, money laundering, terrorist financing,
fraud, bribery, and corruption. Prudential’s global financial crime risk
management approach has been developed to prevent, detect and
respond to these risks. We conduct periodic risk assessments with all
our businesses to identify and evaluate these risks and subsequently
develop proportionate measures to mitigate them. The effectiveness
of these measures is overseen through ongoing monitoring and
enhancement of the control environment at a local level. Our progress
in tackling these risks and our overall performance in effectively
managing financial crime risk is overseen by the Group Risk
Committee.
Prudential recognises that any involvement in any financial crime will
undermine our financial integrity and reliability, and will reflect
adversely on our image and reputation. Throughout 2022 we
continued to enhance our anti-bribery and corruption control
framework. In collaboration with our businesses, we reviewed and
re-communicated our policy and standards. We have also
strengthened our anti-bribery and corruption risk assessment
methodology, allowing us to identify and track risks in a more
consistent and informed fashion across the jurisdictions in which we
operate.
Our Anti-Bribery and Corruption standards include a commitment to
fostering a culture in which bribery is never acceptable. This
commitment applies to all our staff, business partners and vendors,
wherever they are based. We encourage our employees to be vigilant,
and to ensure sensitive information is treated appropriately and
professionally. We encourage employees to report any suspicion of
bribery by providing them with suitable channels of communication,
and we conduct training for employees so that they can recognise
and prevent bribery.
Under our Corporate Political Engagement and Political Donations
Policy, political contributions and facilitation payments are not
allowed.
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Our Anti-Money Laundering (AML) and Sanctions Policy outlines the
framework and requirements for our businesses to deter the use of
the Group’s products and services by money launderers, terrorist
organisations, sanctioned individuals and organisations, and other
criminals. This policy includes detailed standards which were
holistically refreshed in 2022, and contain governance and control
requirements designed to ensure our full compliance with national
and international directives concerning the fight against money
laundering and terrorism financing. These requirements include
having appropriate processes, systems and controls for risk
identification and assessment; conducting due diligence; screening of
customers, third parties and investments against applicable
sanctions and watchlists; ongoing monitoring; and suspicious activity
reporting. The policy requirements form part of the Group
Governance Framework and businesses are required to attest their
compliance every year.
During 2022, we enhanced our name screening and transaction
monitoring system effectiveness through initiatives to improve the
quality of data processed and system-generated alerts. In October
2022, Myanmar was added to the Financial Action Task Force (FATF)
list of High-Risk Jurisdictions subject to enhanced due diligence
measures, and in response, we have further strengthened our
risk-based enhanced due diligence framework. Our financial crime
team remains committed to professional development and regularly
participates in industry conferences and seminars across Asia.
In addition to training all new joiners on AML and sanctions, annual
refresher training is mandatory for all staff, to ensure their awareness
of the applicable regulatory and Group policy requirements and their
roles, responsibilities and obligations. Heightened geopolitical
tensions continued in 2022, and the conflict in Ukraine triggered
financial sanctions on Russia and various Russian entities and
individuals. While Prudential does not operate in either Russia or
Ukraine, we continue to comply with international sanctions
requirements by monitoring sanctions developments and
geopolitical changes closely. To mitigate the risk of undertaking
business with individuals and entities on the lists of international
sanctions regimes, we conduct risk assessments on all our businesses
to identify, understand and assess the risks; prohibit or restrict
business activity in high sanctions risk countries and regions; and
conduct regular screening of our customers, business partners and
vendors.
Whistleblowing
We want our people to feel safe and confident to speak out openly,
and to raise concerns about actions and behaviours that go against
Prudential’s values and principles, or breach regulations or policies.
Our Group Speak Out Policy sets out our framework and controls
relating to whistleblowing. Our employees are encouraged to raise
any concerns through their managers, human resources or our
Group-wide whistleblowing programme, Speak Out.
Speak Out, is a third-party managed, dedicated channel designed to
receive all manner of concerns, including those relating to any
violation of human or labour rights, or unethical behaviour within the
Group. This platform can be accessed both internally and externally
by all our stakeholders in multiple languages. Speak Out provides a
range of reporting channels including web, a telephone hotline and a
mobile app, as well as post, email and in-person. Reporters are able to
log concerns – anonymously, if they prefer – on a range of issues such
as anti-bribery and corruption, compliance breaches, discrimination,
harassment, health and safety or any concerns about behaviour and
conduct that is not in keeping with our values and business ethics.
Concerns are received by an independent third party and then
managed by an internal team, independent of the business. These
concerns are then investigated by appropriately trained and skilled
investigators. On an annual basis, all employees are required to
complete a computer-based training module on Speak Out. The
programme is also supported by regular communications containing
useful resources.
The Speak Out programme is overseen by the Group Audit
Committee, and local business audit committees through quarterly
and annual reporting. Operational oversight is exercised by the Group
Chief Security Officer through the Investigations Advisory Committee
which reports to the Group Chief Risk & Compliance Officer who
chairs the Investigations Risk Committee. These committees have
access to analysis of case trends, root cause, and an annual
assessment of the effectiveness of the Speak Out programme which
is benchmarked externally. Any material issues are reported to the
Board.
The annual external benchmark is independently conducted by an
external third party and an overall score is applied based on an
aggregate of the three scored elements: Governance (which
considers the structure and oversight of the programme),
Engagement (how well staff are trained and engaged), and
Operations (practical effectiveness of the programme). The 2022
overall score for Speak Out is 86 per cent, an improvement of five
percentage points from 2021, and higher than industry benchmark of
70 per cent. Scores for the three elements are: Governance:
95 per cent; Engagement: 69 per cent; Operations: 92 per cent.
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ESG report / continuedPrudential plc Annual Report 2022 The greatest volume of reported issues remains those related to
conduct matters, and breaches in Group policies. Reported concerns
to Speak Out have risen in 2022 by 1 per cent compared with 2021.
All reports were investigated with one in three being substantiated.
In June and July 2022, a Group-wide, multi-language Speak Out
communications campaign reinforced key messages around
confidentiality, zero tolerance to retaliation, and reassurance that
action would be taken in response to reported concerns. The
campaign, which was jointly led by the Group Chief Risk and
Compliance Officer and the Chair of the Group Audit Committee,
included high-profile external speakers, and coincided with World
Whistleblower Day.
Responsible working practices and health and safety procedures
We recognise the importance of health, safety and wellbeing in
fulfilling our Purpose of helping people get the most out of life. We
believe in creating a safe workplace by protecting our employees
from physical and mental health risks as well as promoting a healthy
work-life balance.
The Group Resilience Policy and its health and safety standards
provide a framework for our local businesses to establish, implement
and maintain comprehensive health and safety measures that
prevent work-related physical injury and mental illness. The Group
Chief Security Officer has overall responsibility for the Group health
and safety programme, which is coordinated by the Group Security
and Resilience team. Health and safety representatives in our local
businesses are responsible for implementing and managing the
programme and measures on a daily basis, and for reporting progress
in quarterly management information reports and annual
attestations. The Group Security and Resilience team consolidates
the data from local businesses and reports findings to the Group
Chief Security Officer, cross-functional working groups, and ultimately
the Group Risk Committee.
Our policy and standards are aligned with the international standard
ISO 45001:2018 occupational health and safety. This alignment
ensures:
> A risk-based approach to health and safety management;
> Compliance with current legislation worldwide;
> That risks are identified, assessed and controlled; and
> That our programmes adapt, improve, and tackle changing
workplace risks and contexts.
These measures improve our reputation as a safe place to work, raise
employee morale and help us meet our strategic and business
objectives.
In 2022, following the easing of Covid-19 pandemic restrictions,
Prudential’s health and safety priority shifted to hybrid working and
improving mental, physical and neurodiversity health. To further help
our colleagues connect, grow and succeed, we designed and aligned
our programmes with the Diversity & Inclusion strategy in
collaboration with local businesses and corporate property teams, to
ensure that appropriate controls are implemented, and reasonable
accommodations are made. Our colleagues can access information
concerning health and safety best practice, news, support and advice
on our intranet, and through our 24-hour Employee Assistance
Programme offered by an external provider.
More information on our approach to employee wellbeing is available
in the ‘Building social capital’ section.
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Reference tables
Hong Kong Stock Exchange requirements
HKEX KPI Requirement
Indicator
Disclosure
Environmental
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to air and greenhouse gas
emissions, discharges into water
and land, and generation of
hazardous and non-hazardous
waste.
A1
Our Group Environment Policy applies to our operational properties worldwide, guiding our
approach to the management of the direct impacts of our businesses.
In 2022, there were no confirmed instances of non-compliance in relation to such laws and
regulations that would have a significant impact on the Group.
The types of emissions and
respective emissions data.
A1.1,
A1.2
Prudential provides full reporting for Scope 1 and 2 emissions and selected Scope 3 reporting.
More information is provided in the ‘Group emissions data’ section on page 103.
Direct (Scope 1) and energy
indirect (Scope 2) greenhouse gas
emissions (in tonnes) and, where
appropriate, intensity.
Total hazardous waste produced
(in tonnes) and, where
appropriate, intensity.
Direct Scope 1 emissions (tCO2e)
Direct Scope 1 Emissions (tCO2e /FTE)
Direct Scope 1 Emissions (kgCO2e /m2)
Direct Scope 2 (market based) Emissions (tCO2e)
Direct Scope 2 (market based) Emissions (tCO2e /FTE)
Direct Scope 2 (market based) Emissions (kgCO2e /m2)
2022
1,645
0.11
4.78
16,938
1.11
49.23
2021
1,481
0.10
4.02
19,986
1.37
54.21
A1.3
As a life insurer, the production of hazardous waste is not applicable to our operations.
Total non-hazardous waste
produced (in tonnes) and, where
appropriate, intensity.
A1.4
Total non-hazardous waste produced (tonnes)
Total non-hazardous waste produced (tonnes/FTE)
2022
357
0.02
2021
222
0.02
Description of emissions target(s)
set and steps taken to achieve
them.
A1.5
Waste associated with our operations includes office waste and limited food waste from
canteens. As we occupy leased assets and smaller offices, waste is commonly controlled by the
landlord or the municipal government via direct roadside collection. It therefore it is not always
possible to obtain waste data. We continue to work with our landlords in all the areas in which we
operate to enhance the coverage of our reporting. During 2022, we increased the scope of
reporting of waste data to cover 82 per cent of our occupied floor area.
We have set a target to become carbon neutral across our Scope 1 and 2 (market-based)
emissions by the end of 2030. We aim to deliver a 25 per cent reduction per full time employee
(FTE) in our operational emissions from a 2016 baseline, then abating the remaining emissions
via carbon offsetting initiatives. To date the steps we have taken are:
> Carrying out site assessments for the highest consuming assets in our portfolio to identify
measures to reduce our carbon intensity.
> Issuing our local businesses with tailored environmental roadmaps, which are updated on an
annual basis and detail existing Scope 1 and 2 emissions, 2030 targets, and actions required
to meet these goals.
> Actively examining how we can procure renewable power for our office operations for certain
markets.
To date, we are ahead of the emissions reduction trajectory required to meet our target. More
information is available on page 91.
We have also set a target to reduce the carbon emissions of our portfolio of shareholder and
policyholder assets by 25 per cent by 2025. Our ambition is that the assets we hold on behalf of
our insurance companies will be ‘net zero’ by 2050. During 2022 we reduced the WACI of our
portfolio by 43 per cent against the 2019 baseline. More information is available on page 91.
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Indicator
Disclosure
Description of how hazardous
and non-hazardous wastes are
handled, and a description of
reduction target(s) set and steps
taken to achieve them.
A1.6
Non-hazardous waste is sorted in our offices and where possible recycled. The waste generated
by our operations is managed by the landlord of the premises we occupy and therefore we are
restricted in materials we can recycle by their operations.
The waste we produce is not material to the overall environmental impact of our operations and
as such, we do not currently have any targets in place to reduce the waste associated with our
operations. We continue to encourage waste reduction across our operations and we have
implemented initiatives such as providing staff with reusable cups and lunchboxes to reduce
consumption of single use plastic.
As a life insurer the production of hazardous waste is not applicable to our operations.
Our Group Environment Policy applies to our operational properties worldwide, guiding our
approach to the management of the direct impacts of our businesses.
Policies on the efficient use
of resources, including energy,
water and other raw materials.
Direct and/or indirect energy
consumption by type in total
(kWh in ’000s) and intensity.
A2
A2.1
Total Consumption (kWh)
kWh/FTE
More information is available in the SECR report on page 168.
2022
2021
41,200,175
2,688.60
42,131,700
2,891.48
2022
2021
163,720.17
0.48
123,025.82
0.33
Water consumption in total
and intensity.
A2.2
Total water withdrawal (m3)
Total water withdrawal (m3/m2)
We are not currently able to report the water consumption of all our assets as some sites do not
have water submetering or water is charged as part of the service charge.
During 2022, we increased the scope of reporting of water data to cover 79 per cent of our
occupied floor area.
Description of energy use
efficiency target(s) set and
steps taken to achieve them.
A2.3
We do not have explicit energy efficiency targets in place. However, 91 per cent of our Scope 1
and 2 carbon emissions are from the use of electricity. Thus, to achieve our carbon reduction
targets the implementation of energy efficiency measures are key.
We have carried out site assessments across our asset portfolio and identified measures to
reduce our impact. We have in turn developed roadmaps for our businesses with measures to
implement to generate energy savings. We will continue to carry out these assessments and
identify savings opportunities to reduce our energy consumption.
A2.4
As a life insurer with office-based operations, water consumption and water efficiency are not
material to our business.
Currently, we do not have any targets in place to reduce the water used in our operations.
A2.5
As a life insurer, the use of packaging material is not applicable to our business.
A3
A3.1
Our Group Environment Policy applies to our operational properties worldwide, guiding our
approach to the management of the direct impacts of our businesses.
The most significant impact of our activities on the environment is through our investment
portfolio. More information about how we are reducing the weighted average carbon intensity
footprint of our investment portfolio is available on page 91. More information is available in the
Responsible investment section on page 122.
Description of whether there is
any issue in sourcing water that
is fit for purpose, water efficiency
target(s) set and steps taken to
achieve them.
Total packaging material used for
finished products (in tonnes) and,
if applicable, with reference to per
unit produced.
Policies on minimising the issuer’s
significant impact on the
environment and natural
resources.
Description of the significant
impacts of activities on the
environment and natural
resources and the actions taken
to manage them.
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HKEX KPI Requirement
Indicator
Disclosure
Policies on identification and
mitigation of significant climate-
related issues which have
impacted, and those which may
impact, the issuer.
A4
More information is available in the Identifying and assessing climate-related risks section
on page 96.
Description of the significant
climate-related issues which have
impacted, and those which may
impact, the issuer, and the actions
taken to manage them.
A4.1
Different scenarios, including below 2°C scenarios, have different potential impacts on our
businesses, strategy, and financial planning, as described in the Climate-related scenario testing
section starting on page 98.
We have identified short-, medium- and long-term climate-related issues as described in the
Time horizons for climate section starting on page 96. We have taken actions, including
integrating our processes for identifying, assessing, and managing climate-related risks into our
overall risk management, as described in the Identifying, assessing, managing and responding
to climate-related risks section on page 96.
We also identified climate-related opportunities, as described in the Identifying climate-related
opportunities section on page 94.
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Indicator
Disclosure
Social
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to compensation and
dismissal, recruitment and
promotion, working hours, rest
periods, equal opportunity,
diversity, anti-discrimination, and
other benefits and welfare.
Total workforce by gender,
employment type, age group
and geographical region.
Note: The 2021 balances have been restated to
reflect the consistent treatment of local sales
agents in our Africa markets who are not
permanent employees.
B1
Prudential’s policies protect our employees by formalising its responsibilities and those of
everyone in the organisation. More information on the following policies is available on page
164:
> Discrimination and Harassment Policy
> Diversity and Inclusion Policy
> Employee Relations Policy
> Recruitment Policy
> Remuneration Policy
> Talent Policy
In 2022, there were no confirmed instances of non-compliance in relation to such laws and
regulations that would have a significant impact on the Group.
B1.1
Total workforce by gender
Total workforce by employment type
14,671.6
13,854.8
13,399.7
12,574.5
Male
Female
6,299.3
5,911.6
8,363.4
7,946.1
Unspecified
18.0
11.0
Full time
Part time
9.1
13.9
Total workforce by age group
Total workforce by region
10,535.4
10,030.2
Asia
Africa
Europe & USA
1,126.0
1,075.0
155.0
219.2
Below 30
30–50
Above 50
Unspecified
2,880.9
2,715.4
1,230.4
1,092.1
34.0
31.0
2022
2021
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HKEX KPI Requirement
Indicator
Disclosure
Employee turnover rate by gender,
age group and geographical region.
B1.2
Note: These numbers are representative of the
total turnover including our call centre staff. We
also have a second category for total turnover
excluding call centre staff and this can be found in
the section on ‘Building social capital’.
Employee turnover rate by gender
Employee turnover rate by age group
Male
Female
24%
26%
21%
23%
Below 30
30–50
Above 50
38%
38%
19%
19%
20%
16%
Employee turnover rate by region
56%
22%
24%
22%
23%
24%
Asia
Europe and USA
Overall (ex. Africa)
2022
2021
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to providing a safe
working environment and
protecting employees from
occupational hazards.
Number and rate of work-related
fatalities occurred in each of the
past three years including the
reporting year.
Lost days due to work injury.
Description of occupational health
and safety measures adopted,
and how they are implemented
and monitored.
B2
The Group Resilience Policy and its Health and Safety Standards set the governance framework
for our local businesses to establish, implement and maintain comprehensive health and safety
measures that are focused on the physical and mental health and wellbeing of our employees,
contractors, visitors, and others who may be affected by our operations.
Our policy and operational standards are aligned with the global ISO 45001:2018 standards
and include prescriptive minimum requirements for health and safety governance, legal
requirements and programme framework.
B2.1
There were no work-related fatalities in the reporting year (2021: nil; 2020: nil).
B2.2
B2.3
30 incidents resulting in 43 days lost to work-related injury.
Occupational health and safety measures employ a framework and methodology based on
ISO 45001 using predictive and reactive management tools that are centrally coordinated and
locally executed. The measures are implemented and monitored using:
> Defined policies, roles, responsibilities, and governance frameworks;
> Legal registers to ensure compliance with relevant laws, regulations, rules, guidelines and
codes issued by relevant regulators; and standards and codes issued by industry bodies where
appropriate;
> A comprehensive and sound risk management and internal control systems to identify,
quantify, prevent and reduce risk faced by our people and the business;
> Incident reporting and investigation protocols;
> Programmes for managing third party risks in the procurement of equipment and provision
of services;
> Provision of appropriate information, instruction, and training;
> Employee communication and consultation mechanisms;
> Workplace welfare and wellbeing facilities and programmes; and
> Mechanisms for monitoring, reviewing, reporting and improving performance.
Policies on improving employees’
knowledge and skills for
discharging duties at work.
Description of training activities.
B3
Our Performance and Learning Policy sets out the importance of our people and frames how we
invest in their development to deliver against our strategy and the future success of the
organisation. This includes our Performance Management Framework.
More information is available in the Learning section on page 112.
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ESG report / continuedPrudential plc Annual Report 2022 HKEX KPI Requirement
Indicator
Disclosure
The percentage of employees
trained by gender and employee
category
B3.1
Percentage of employees trained
by gender
Percentage of employees trained by
employee category
The average training hours
completed per employee by
gender and employee category.
B3.2
Note: The total training hours per employee is
likely to far exceed this as the number of hours
that employees take to complete their
non-mandatory training courses are not wholly
captured in our system.
96%
97%
96%
97%
Rank and file
Middle level
Top level
65%
45%
Male
Female
Unspecified
2022
2021
96%
96%
93%
99%
95%
99%
Average training hours completed per
employee by gender
Average training hours completed per
employee by employee category
11.22
16.04
15.58
12.44
Rank and file
Middle level
8.43
5.65
Top level
6.09
16.06
12.63
9.91
9.19
11.54
Male
Female
Unspecified
2022
2021
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to preventing child and
forced labour.
Description of measures to review
employment practices to avoid
child and forced labour.
B4.1,
B4.2
Description of steps taken to
eliminate such practices when
discovered.
B4
We are committed to ensuring that slavery, human trafficking, child labour or any other abuse of
human rights has no place in our organisation or supply chain.
The nature of our business means that main risk would be in our supply chain. More information
is available in the Modern slavery section on page 142.
In 2022, there were no confirmed instances of non-compliance in relation to such laws and
regulations that would have a significant impact on the Group.
We believe in supporting human rights and acting responsibly and with integrity in everything
we do. Our Group Governance Human Resources Policies are guided by the principles of the
Universal Declaration of Human Rights and of the International Labour Organization’s core
labour standards. These are also reflected within our Group Code of Business Conduct, which
sets out the Group’s values and expected standards of behaviour for all employees, and in our
Group Third Party Supply and Outsourcing Policy which describes how we work with suppliers.
The nature of our business means that main risk would be in our supply chain. More information
is available in the Modern slavery section on page 142.
Policies on managing
environmental and social risks of
the supply chain.
B5
Our Group Code of Business Conduct outlines the values and standards that are required by
each of our suppliers. Our Group Third Party Supply and Outsourcing Policy is core to our supply
chain governance and our responsible supplier guidelines cover a range of ESG topics. More
information is available in the Supply chain section on page 140.
Number of suppliers by
geographical region.
B5.1
Asia
Africa
Europe
Total
7,362
2,103
485
9,950
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HKEX KPI Requirement
Indicator
Disclosure
Description of practices relating to
engaging suppliers, number of
suppliers where the practices are
being implemented, and how they
are implemented and monitored.
B5.2
In 2022 we materially completed the Group-wide deployment of our third-party risk assessment
platform, Coupa Risk Assess, to provide a single system for the performance of supplier risk
assessment and due diligence activities. This system continues to strengthen our visibility of
third-party risks such as information and technology security concerns, data privacy, anti-
bribery and corruption and business continuity and resiliency risks. Through this system we also
issue due diligence questionnaires aligned to the principles of the responsible supplier
guidelines.
More information is available in the Supply chain due diligence section on page 141.
Description of practices used to
identify environmental and social
risks along the supply chain, and
how they are implemented and
monitored.
Description of practices used to
promote environmentally
preferable products and services
when selecting suppliers, and how
they are implemented and
monitored.
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to health and safety,
advertising, labelling and privacy
matters relating to products and
services provided and methods of
redress.
Percentage of total products sold
or shipped subject to recalls for
safety and health reasons.
Number of products and service
related complaints received and
how they are dealt with.
Description of practices relating to
observing and protecting
intellectual property rights.
B6.3
B5.3
More information is available in the Supply chain due diligence section on page 141 and the
Modern slavery section on page 142.
B5.4
B6
In line with the Group-wide Third Party Supply and Outsourcing Policy, we have introduced
responsible supplier guidelines. Our responsible supplier guidelines cover a range of ESG topics.
More information is available in the Supply chain section on page 140.
Our Customer Conduct Risk Policy includes our Customer Conduct Standards and sets out the
core values and standards that the Group expects all employees and persons acting on behalf
of it to observe. More information is available in the Customers section on page 85.
Our Group Data Policy defines how we should manage data throughout its life cycle and employ
the technology best suited for the business use cases. More information is available on page
118.
Our Privacy Policy governs the protection of data and complies with the General Data Protection
Regulation. More information is available on page 119.
B6.1
As a life insurer, this is not applicable to our business.
B6.2
37,589 (2021: 42,038).
In 2022, complaints per 1,000 policies have remained broadly flat at 2 (2021: 2 complaints
per 1,000 policies in force).
More information on how we deal with customer complaints is available on page 89.
Prudential’s brands, being the Prudential and Eastspring names and the Face of Prudence,
are considered as our intellectual property. These are protected by a comprehensive process
to maintain registered trademarks in the brand across all of the markets in which we operate.
This is supported by a brand Co-existence Agreement with Prudential Financial and M&G plc.
Where we see infringements of our brand, we take active steps to enforce our rights against
third parties.
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Indicator
Disclosure
Description of quality assurance
process and recall procedures.
B6.4
A description of our quality assurance procedures is available in the Customers section
on page 86.
As a life insurer, product recall procedures are not relevant to our business.
B6.5
Our Group Data Policy defines how we should manage data throughout its lifecycle and
employ the technology best suited for the business use cases. More information is available
on page 118.
Our Privacy Policy governs the protection of data and complies with the General Data Protection
Regulation. More information is available on page 119.
Our Information Security Policy supports our resilient information security programme across
the organisation and our commitment to protecting the data entrusted to us by customers.
B7
More information on the following policies is available on page 166:
> Anti-Bribery and Corruption Policy
> Anti-Money Laundering and Sanctions Policy
> Group Escalation Policy
> Group Counter Fraud Policy
In 2022, there were no confirmed instances of non-compliance in relation to such laws and
regulations that would have a significant impact on the Group.
B7.1
Nil (2021: Nil).
B7.2
More information is available in the Whistleblowing section on page 144.
Description of consumer data
protection and privacy policies,
and how they are implemented
and monitored.
Information on: (a) the policies;
and (b) compliance with relevant
laws and regulations that have a
significant impact on the issuer
relating to bribery, extortion, fraud
and money laundering.
Number of concluded legal cases
regarding corrupt practices brought
against the issuer or its employees
during the reporting period and the
outcomes of the cases.
Description of preventive
measures and whistle-blowing
procedures, and how they are
implemented and monitored.
B7.3
B8
Description of anti-corruption
training provided to directors and
staff.
Policies on community
engagement to understand the
needs of the communities where
the issuer operates and to ensure
its activities take into consideration
the communities’ interests.
We provide training to our staff to ensure that they are familiar with international standards and
best practice, as well as being well equipped to implement our policies in their respective
markets. Training completion levels are monitored throughout the year.
Our Community Investment Policy covers how we are committed to working with the
communities in which we operate as active and supportive members. It also outlines our
strategy for investing in the community and how we make investments and report against
them.
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HKEX KPI Requirement
Indicator
Disclosure
Focus areas of contribution.
B8.1
Total cash contribution by area of focus %
52%
51%
39%
31%
Education
Social and welfare
Environment
Cultural
Other
0%†
2%
0%†
0%
1%
1%
Emergency relief
Health
4%
7%
3%
7%
Economic development
Payroll giving
0%
1%
0%†
0%
0%
20%
40%
60%
80%
100%
†
While each rounds to 0% on an individual line basis, the sum of environment, cultural, and payroll giving contributes
to 1% in total.
Total cash contribution by region %
Asia
United Kingdom
Africa
3%
5%
2%
4%
95%
91%
0%
20%
40%
60%
80%
100%
2022
2021 (restated)
In 2022, in our continuous effort to improve our data disclosures, we made some changes
to our reporting process. In 2021, we reported only on cash donations made to charitable
organisations. From 2022, to reflect fully our actual community investment commitment, we are
reporting broader spend related to our community initiatives, including spend with non-profit
organisations, NGOs, social enterprises and other third-party suppliers. In 2022, the Group spent
$12.2 million on our community investment programmes (2021 (restated): $9.9 million).
More information is available in the Community Investment section on page 134.
Resources contributed to the
focus area.
B8.2
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SASB Topic
Accounting metric
Code
Disclosure
Transparent Information
and Fair Advice for Customers.
Total amount of monetary
losses as a result of legal
proceedings associated
with marketing and
communication of
insurance product-related
information to new and
returning customer.
FN-IN-270a.1
$0.2m (2021: nil).
Complaints-to-claims ratio.
FN-IN-270a.2
Total number of complaints received/total claims raised x
1,000 = 17 (2021: 25).
Prudential believes that this metric is less applicable to the
life insurance sector, and that a more appropriate metric is
the number of complaints per 1,000 policies in force, which
has remained broadly flat at 2 (2021: 2 complaints per
1,000 policies in force).
Customer retention rate.
FN-IN-270a.3
89 per cent (2021: 89 per cent) (Excluding India, Africa,
Myanmar and Laos).
Description of approach
to informing customers
about products.
Total invested assets, by
industry and asset class.
Incorporation of Environmental,
Social, and Governance Factors
in Investment Management.
FN-IN-270a.4 More information on the way we communicate with
customers and our approach to responsible marketing is
available in the Customers section on page 87.
FN-IN-410a.1
Total invested assets by asset class
($ million)
Debt
Loan
Equity securities and portfolio
holdings in unit
Other financial instruments
Derivatives
Deposits including items
classified as cash
equivalents
Cash (as defined under IFRS)
Property
2022
63,359
2,481
46,308
0
(462)
8,977
1,275
67
2021
81,540
2,367
48,448
0
212
5,351
1,112
56
Total
122,006
139,086
Total invested assets by industry
($ million)
Basic materials
Communications
Consumer, cyclical
Consumer, non-cyclical
Energy
Financial
Funds
Government
Industrial
Other
Technology
Utilities
2022
1,311
3,621
2,585
4,807
3,081
18,433
6,024
34,473
2,515
40,912
1,673
2,571
2021
1,435
3,879
2,452
4,913
3,302
20,016
9,261
46,102
2,578
40,205
1,807
3,136
Total
122,006
139,086
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SASB Topic
Accounting metric
Code
Disclosure
Policies Designed to Incentivize
Responsible Behaviour.
Description of approach
to incorporation of
environmental, social, and
governance (ESG) factors
in investment management
processes and strategies.
Environmental Risk Exposure.
Net premiums written
related to energy efficiency
and low-carbon technology.
Discussion of products
and/or product features that
incentivize health, safety,
and/or environmentally
responsible actions
and/or behaviors.
Probable Maximum Loss
(PML) of insured products
from weather-related
natural catastrophes.
Total amount of monetary
losses attributable to
insurance payouts from
(1) modeled natural
catastrophes and (2)
non-modeled natural
catastrophes, by type
of event and geographic
segment (net and gross
of reinsurance).
Description of approach
to incorporation of
environmental risks into
(1) the underwriting process
for individual contracts and
(2) the management of
firm-level risks and capital
adequacy.
FN-IN-410a.2 We integrate ESG factors into all our investment decisions.
This complements the traditional financial analysis we
conduct, in order to better manage risk and generate
sustainable long-term returns for our customers. ESG
integration applies to the entire investment process, and
all relevant Group investment teams are expected to
demonstrate how ESG considerations are embedded into
investment decisions.
This includes our asset manager Eastspring, which
recently updated its Responsible Investment Policy
(www.eastspring.com/docs/librariesprovider2/responsible-
investments/ri-policy-brochure-4-jan-2023.pdf) to align
more closely with that of the Prudential Group, while also
allowing flexibility for the investment strategies of
third-party clients (ie non-Prudential clients).
FN-IN-410b.1
As a life insurer, this metric is not applicable to our business.
FN-IN-410b.2
As a life insurer, this metric is not applicable to our business.
FN-IN-450a.1
As a life insurer, this metric is not applicable to our business.
FN-IN-450a.2
As a life insurer, this metric is not applicable to our business.
FN-IN-450a.3
As a life insurer, this metric is not applicable to our business.
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Accounting metric
Code
Disclosure
Systemic Risk Management.
Activity Metric.
Exposure to derivative
instruments by category:
(1) total potential exposure
to noncentrally cleared
derivatives, (2) total fair
value of acceptable
collateral posted with the
Central Clearinghouse, and
(3) total potential exposure
to centrally cleared
derivatives.
Total fair value of securities
lending collateral assets.
Description of approach to
managing capital and
liquidity-related risks
associated with systemic
non-insurance activities.
Number of policies in force,
by segment: (1) property
and casualty, (2) life, (3)
assumed reinsurance.
FN-IN-550a.1
(1) Total potential exposure to noncentrally cleared
derivatives
$28,375m
(2) Total fair value of acceptable collateral posted with the
Central Clearinghouse
$1,459m
(3) Total potential exposure to centrally cleared derivatives
$17,306m
FN-IN-550a.2
$0.12m
FN-IN-550a.3
A description of our approach is covered in the Risk Report,
under the discussion of the Group’s principal risks.
FN-IN-000.A
Total policies in force, all in life segment:
17,058,744
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TCFD index
TCFD recommendation
Prudential Group response
Location
Governance
a. Describe the Board’s oversight of climate-related risks and opportunities
Guidance for All Sectors
The processes and frequency by
which the Board and committees
are informed about climate-
related issues.
How the Board and committees
incorporate climate-related issues
into decision-making.
The Board and committees oversee all aspects of ESG, including
climate-related risks and opportunities, and provide rigorous
challenge to management on progress against goals and targets.
The ‘ESG governance overview’ section sets out the climate-related
responsibilities which have been assigned to Board and
committees, including the processes and frequency by which they
are informed about climate-related issues. Our governance for
responsible investment is disclosed in the ‘Group responsible
investment governance’ section.
Prudential treats climate risk as a cross-cutting amplifier of the
existing standalone risk types in our enterprise risk management
framework, as described in the ‘Identifying, assessing, managing
and responding to climate-related risks’ section. Our enterprise risk
management processes, which is how the Board and committees
are informed on climate related matters, is described in the ‘The risk
governance’ section.
The Board and committees oversee all aspects of ESG, including
climate-related risks and opportunities, with the Board having
ultimate responsibility for determining strategy and prioritisation of
key focus areas, as discussed in the ‘ESG governance overview’
section.
ESG governance overview section
on page 75.
Group responsible investment
governance on page 122.
Identifying, assessing, managing
and responding to climate-related
risks on page 96.
The Risk governance on page 51.
ESG governance overview section
on page 75.
How the Board monitors and
oversees progress against
climate-related goals and targets.
The Board and committees ensure the Group maintains an effective
risk management framework, which enables them to monitor and
oversee progress against the Group’s climate-related goals and
targets as described in the ‘ESG governance overview’ section.
ESG governance overview section
on page 75.
b. Describe management’s role in assessing and managing climate-related risks and opportunities
Guidance for All Sectors
Climate-related responsibilities
and accountability.
Management play an active role in assessing and managing
climate-related risks and opportunities. Climate-related
responsibilities have been assigned to management-level positions
and committees, as described in the ‘Managing the process’
section. These committees report to the Board and Board
committees, as described in the same section. Our governance for
responsible investment is disclosed in the ‘Group responsible
investment governance’ section.
Managing the process on page 75
Group responsible investment
governance on page 122.
Organisational structure.
The climate-related organisational structure is included in the
‘Management oversight’ section.
Management oversight
on page 75.
How management is informed
about climate-related issues.
We have implemented appropriate processes by which
management are informed about climate-related issues, as
discussed in the ‘Management oversight’ section.
Prudential treats climate risk as a cross-cutting amplifier of the
existing standalone risk types in our enterprise risk management
framework, as described in the ‘Identifying, assessing, managing
and responding to climate-related risks’ section. Our enterprise risk
management processes, which is how management is informed on
climate related matters, is described in the ‘The risk governance’
section.
Management oversight
on page 75.
Identifying, assessing, managing
and responding to climate-related
risks section on page 96.
The Risk governance on page 51.
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Prudential Group response
Location
How management monitors
climate-related issues.
Our management committees actively monitor climate-related
issues, as described in the ‘Management oversight’ section.
Prudential treats climate risk as a cross-cutting amplifier of the
existing standalone risk types in our enterprise risk management
framework, as described in the ‘Identifying, assessing, managing
and responding to climate-related risks’ section. Our enterprise risk
management processes, which is how the management monitors
climate related matters, is described in the ‘Risk governance’
section.
Management oversight on page 75.
Identifying, assessing, managing
and responding to climate-related
risks section on page 96.
The Risk governance on page 51.
Strategy
a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term
Guidance for All Sectors
Definition of short-, medium-,
and long-term time horizons.
We have defined the relevant short-, medium-, and long-term time
horizons, as described in the ‘Time horizons for climate’ section.
Time horizons for climate
on page 96.
Climate-related issues potentially
arising in each time horizon.
We have identified the specific climate-related issues potentially
arising in short-, medium- and long-term time horizons, as described
in the ‘Time horizons for climate’ section.
Time horizons for climate
on page 96.
Processes used to determine which
risks and opportunities could have
a material financial impact on the
organization.
Our risk and strategy processes have identified climate-related risks
and opportunities which could have a material financial impact on
our organization, as described in the ‘Identifying and assessing
climate-related risks’ section and the ‘Identifying climate-related
opportunities’ section.
Identifying and assessing climate-
related risks on page 96.
Identifying climate-related
opportunities on page 94.
Description of risks and
opportunities by sector
and/or geography.
We have identified specific risks and opportunities by sector and
geography, as described in the ‘Sectoral and regional impact on our
current assets and insurance liabilities’ section, the ‘Regional impact
on our operations’ section and the ‘Identifying climate-related
opportunities’ section.
Sectoral and regional impact on our
current assets and insurance
liabilities on page 99.
Regional impact on our operations
on page 101.
Identifying climate-related
opportunities on page 94.
b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning
Guidance for All Sectors
How identified climate-related
issues have affected our business,
strategy, and financial planning.
We have considered the impact on the following:
> products and services as described in the ‘Identifying climate-
related opportunities’ section
> supply chain and/or value chain, including carbon prices, in the
‘Managing our direct operational environmental impacts’
section, and the ‘Carbon prices used in scenario testing’ section
> adaptation and mitigation activities in the ‘Targets and progress
made’ section
> investment in research and development in the ‘Research
partnerships’ box
> operations (including type of operations and location of facilities)
in the ‘Managing our direct operational environmental impacts’
section
> access to capital in the ‘Impact on access to capital’ section
We did not have major strategic acquisitions or divestments during
the year.
How climate-related issues serve
as an input to our financial
planning process.
Climate-related issues serve as an input to our financial and
strategic planning, as described in the ‘Impact on financial and
strategic planning’ section. These risks are prioritised using the
processes described in the ‘The Group’s principal risks’ and ‘The risk
governance’ sections.
Identifying climate-related
opportunities on page 94.
Managing our direct operational
environmental impacts
on page 102.
Carbon prices used in scenario
testing on page 99.
Targets and progress made
on page 91.
Research partnerships on page 95.
Managing our direct operational
environmental impacts
on page 102.
Impact on access to capital
on page 95.
Impact on financial and strategic
planning on page 95.
The Group’s principal risks
on page 54.
The Risk governance on page 51.
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TCFD recommendation
Prudential Group response
Location
The impact of climate-related
issues on financial performance.
We assess the potential impact of climate-related issues on our
financial performance, as described in the ‘Climate-related scenario
testing’ section. We use scenarios to assess the robustness of our
financial and strategic planning, as described in the ‘Impact on
financial and strategic planning’ section.
Climate-related scenario testing
on page 98.
Impact on financial and strategic
planning on page 95.
Our plans for transitioning
to a low-carbon economy.
We have made GHG emissions reduction commitments, as
described in the ‘Targets and progress made’ section. We have
identified specific activities for transitioning to a low-carbon
economy, as set out throughout our Climate Transition Plan, given
the forward looking nature of the activities.
Targets and progress made
on page 91.
Climate Transition Plan:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
climate-transition-plan-2022.pdf
Supplemental Guidance for Asset Owners
How climate-related risks and
opportunities are factored into
relevant investment strategies.
We use our strategic asset allocation process to factor in climate-
related risks and opportunities, as described in the ‘Identifying
climate-related opportunities’ section. We pursue these
opportunities through our responsible investment approach,
as described in the ‘Responsible investment approach’ section.
Identifying climate-related
opportunities on page 94.
Responsible investment approach
on page 123.
c. Describe the resilience of the organization’s strategy, taking into consideration different climate related scenarios, including a 2°C
or lower scenario
Guidance for All Sectors
How our strategy is resilient
to climate-related risks
and opportunities.
We assessed the resilience of our strategy and financial plan against
three different climate scenarios and have confidence that they
remain viable, as described in the ‘Impact on financial and strategic
planning’ section. The assessment considered scenarios both 2°C or
lower and with increased physical climate-related risks, as described
in the ‘Climate-related scenario testing’ section.
Impact on financial and strategic
planning on page 95.
Climate-related scenario testing
on page 98.
How our strategy will be affected
by climate-related risks and
opportunities.
We recognise that our business purpose and strategy allows us to
generate climate-related opportunities for the Group through the
implementation of our strategic ESG framework, as described in the
‘Identifying climate-related opportunities’ section.
We identify climate-related risks that affect our strategy, as
described in the ‘Identifying and assessing climate-related risks’
section, and assess and manage these risks, as described in the
‘Managing and responding to climate-related risks’ section.
How our strategy might change
to address potential risks and
opportunities.
We recognise that our business purpose and strategy might be
impacted by climate-related opportunities through the
implementation of our strategic ESG framework, as described in the
‘Identifying climate-related opportunities’ section.
A description of the climate-
related scenarios used.
A description of how climate-
related scenarios are used,
such as to inform investments
in specific assets.
Our strategy may also be impacted by climate-related risks, as
described in the Identifying and assessing climate-related risks’
section, and assess and manage these risks, as described in the
‘Managing and responding to climate-related risks’ section.
We use climate-related scenarios, including below 2°C scenarios, as
described in the ‘Climate-related scenario testing’ section. We
identified the related time horizons, as set out in the ‘Time horizons
for climate’ section.
We use our strategic asset allocation process to inform investments
in specific assets, as described in the ‘Identifying climate-related
opportunities’ section. The climate-related scenarios we use in the
strategic asset allocation process are described in the ‘Climate-
related scenario testing’ section. We pursue these opportunities
through our responsible investment approach, as described in the
‘Responsible investment approach’ section.
Identifying climate-related
opportunities on page 94.
Identifying and assessing
climate-related risks on page 96.
Managing and responding to
climate-related risks on page 97.
Identifying climate-related
opportunities on page 94.
Identifying and assessing
climate-related risks on page 96.
Managing and responding to
climate-related risks on page 97.
Climate-related scenario testing
on page 98.
Time horizons for climate
on page 96.
Identifying climate-related
opportunities on page 94.
Climate-related scenario testing
on page 98.
Responsible investment approach
on page 123.
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Prudential Group response
Location
Risk management
a. Describe the organization’s processes for identifying and assessing climate related risks
Guidance for All Sectors
Risk management processes
for identifying and assessing
climate-related risks.
We assess climate-related risks, as described in the ‘Identifying,
assessing, managing and responding to climate-related risks’
section. We have appropriate enterprise risk management
processes in place, including for determining the relative
significance of climate-related risks in relation to other risks,
as described in the ‘The Group’s principal risks’ and ‘The risk
governance’ sections.
Identifying, assessing, managing
and responding to climate-related
risks on page 96.
The Group’s principal risks
on page 54.
The Risk governance on page 51.
Existing and emerging regulatory
requirements related to climate
change.
We consider existing and emerging regulatory requirements related
to climate change, as described in the ‘Identifying, assessing,
managing and responding to climate-related risks’ section.
Identifying, assessing, managing
and responding to climate-related
risks on page 96.
Processes for assessing the
potential size and scope of
identified climate-related risks.
We have processes for assessing the size and scope of climate-
related risks, as described in the ‘The risk governance’ section.
The Risk governance on page 51.
Definitions of risk terminology
used or references to existing risk
classification frameworks used.
Our risk classification framework, with our definitions of risk
terminology used, forms part of our Group Risk Framework,
as described in the ‘The Risk governance’ section.
The Risk governance on page 51.
Supplemental Guidance for Asset Owners
Engagement activity with
investee companies.
We have adopted an active and impactful approach to asset
ownership, which emphasises direct and constructive dialogue
with investee companies on sustainability and governance issues,
as described in the ‘Active ownership’ section.
b. Describe the organization’s processes for managing climate-related risks
Active ownership on page 126.
Guidance for All Sectors
Managing climate-related risks.
We have processes for managing and prioritising climate-related
risks, as described in the ‘Managing and responding to climate-
related risks’, ‘The Group’s principal risks’ and ‘The risk governance’
sections.
Positioning of our total portfolio
with respect to the transition
to a low-carbon energy supply,
production, and use.
We have implemented decarbonisation and coal divestment
targets to prepare the portfolio for the transition to a low-carbon
economy, as described in the ‘Targets and progress made’ section.
We have developed our responsible investment policy, including our
six implementation strategies to actively manage our portfolio’s
positioning, as described in the ‘Responsible investment approach’
section.
Managing and responding to
climate-related risks on page 97.
The Group’s principal risks
on page 54.
The Risk governance on page 51.
Targets and progress made on page
91.
Responsible investment approach
on page 123.
c. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s
overall risk management
Guidance for All Sectors
Integrating climate-related risks
into our overall risk management.
We identify, assess and manage climate related risks, as described
in the ‘Identifying, assessing, managing and responding to
climate-related risks’ section. These risks are integrated into our risk
management framework, as described in the ‘System of
governance’ and ‘The risk governance’ sections.
Identifying, assessing, managing
and responding to climate-related
risks on page 96.
System of governance on page 51.
The risk management cycle
on page 52.
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TCFD recommendation
Prudential Group response
Location
Metrics and targets
a. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk
management process
Guidance for All Sectors
Key metrics used to measure
and manage climate-related
risks and opportunities.
We use a suite of key metrics to measure and manage climate-
related risks and opportunities, as described in the ‘Choice of
metrics’ section, including absolute and intensity metrics.
The following metrics are provided:
> Absolute Scope 1, Scope 2, Scope 3 in the ‘Choice of metrics’
section;
> Internal carbon prices in the ‘Carbon prices used in scenario
testing’ section; and
> Proportion of executive management remuneration linked to
climate considerations in the ‘Directors’ remuneration report’.
We describe the following qualitatively:
> Amount and extent of assets or business activities vulnerable to
transition and physical risks in the ‘Sectoral and regional impact
on our current assets and insurance liabilities’ section, and the
‘Regional impact on our operations’ section;
> Proportion of revenue, assets, or other business activities aligned
with climate-related opportunities in the ‘Identifying climate-
related opportunities’ section; and
> Amount of capital expenditure, financing, or investment
deployed toward climate-related risks and opportunities in the
‘Responsible investment approach’ section, and the ‘ESG
integration’ section.
Choice of metrics on page 93.
Carbon prices used in scenario
testing on page 99.
Directors’ remuneration report
on page 226.
Sectoral and regional impact on
our current assets and insurance
liabilities on page 99.
Regional impact on our operations
on page 101.
Identifying climate-related
opportunities on page 94.
Responsible investment approach
on page 123.
ESG integration on page 125.
Metrics on climate-related risks
associated with water, energy,
and waste management.
We provide, where relevant and applicable, metrics on climate-
related risks associated with water, energy, and waste management
in the ‘Hong Kong Stock Exchange requirements’ section.
Hong Kong Stock Exchange
requirements on page 146.
How performance metrics are
incorporated into remuneration
policies.
The internal carbon prices we
use as well as climate-related
opportunity metrics.
Metrics used to assess climate-
related risks and opportunities.
We incorporate climate-related performance metrics, as described
in the ‘Directors’ remuneration report’ section.
Directors’ remuneration report
on page 226.
We use carbon prices in our scenario testing, as described in the
‘Carbon prices used in scenario testing’ section.
Carbon prices used in scenario
testing on page 99.
We provide the metrics used to assess climate-related risks in the
‘Choice of metrics’ section. We discuss qualitatively the
opportunities from products and services designed for a lower-
carbon economy in the ‘Identifying climate-related opportunities’
section.
Choice of metrics on page 92.
Identifying climate-related
opportunities on page 94.
Metrics for historical periods.
We provide historical metrics in the ‘Choice of metrics’ section, so as
to allow for trend analysis.
Choice of metrics on page 92.
Forward-looking metrics.
We qualitatively discuss forward-looking metrics in the ‘Forward-
looking metrics’ section.
Forward-looking metrics
on page 93.
Methodologies used to calculate
or estimate climate-related
metrics.
We describe the methodologies used to calculate our climate-
related metrics in our Basis of Reporting, so as to provide a single
consistent description of the methodologies.
Basis of Reporting:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
basis-of-reporting-2022.pdf
Our Scope 1 and Scope 2 GHG
emissions and appropriate Scope
3 GHG emissions.
We provide our Scope 1, Scope 2 and relevant Scope 3 GHG
emissions in the ‘Movement in our operational emissions’ section.
Movement in our operational
emissions on page 102.
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Prudential Group response
Location
Supplemental Guidance for Asset Owners
Metrics considered in investment
decisions and monitoring.
Description of the extent to
which assets we own and our
funds and investment strategies,
where relevant, are aligned with
a well below 2°C scenario.
Indication of which asset classes
are included.
We use a suite of key metrics to assess climate-related risks and
opportunities as well as for investment decisions and monitoring,
as described in the ‘Choice of metrics’ section, where we provide
also how these metrics have changed over time.
We qualitatively describe implied temperature rise, which can be
used to describe the extent to which assets, funds and investment
strategies are aligned with a well below 2°C scenario, in the
‘Forward-looking metrics’ section.
The asset classes included are detailed in our Basis of Reporting.
Choice of metrics on page 92.
Forward-looking metrics
on page 93.
Basis of Reporting:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
basis-of-reporting-2022.pdf
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
Guidance for All Sectors
How we calculate our Scope 1,
Scope 2 and Scope 3 GHG
emissions.
Our historical GHG emissions and
associated metrics, a description
of the methodologies.
We calculate our GHG emissions in line with the GHG Protocol
methodology, as described in our Basis of Reporting, so as to
provide a single consistent description of the methodologies. We
provide our full breakdown of Scope 1, Scope 2 and relevant Scope 3
GHG emissions, including industry-specific efficiency ratios, in the
‘Movement in our operational emissions’ section.
We provide metrics for historical periods to allow for trend analysis
in the ‘Movement in our operational emissions’ section. We describe
the methodologies used to calculate the metrics in our Basis of
Reporting, so as to provide a single consistent referable description
of the methodologies.
Movement in our operational
emissions on page 102.
Movement in our operational
emissions on page 102.
Basis of Reporting:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
basis-of-reporting-2022.pdf
Supplemental Guidance for Asset Owners
Disclosure of GHG emissions for
assets we own and the weighted
average carbon intensity (WACI).
We disclose the GHG emissions and WACI for our investment
portfolio, as defined in our Basis of Reporting, in the ‘Choice of
metrics’ section. The emissions are calculated in line with the PCAF
Standard, as described in our Basis of Reporting, so as to provide
a single consistent referable description of the methodologies.
Choice of metrics on page 92.
Basis of Reporting:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
basis-of-reporting-2022.pdf
Other carbon footprinting
metrics we believe are useful
for decision-making.
We qualitatively discuss other carbon footprinting metrics which we
believe can be useful for decision-making, including forward-looking
metrics, in the ‘Forward-looking metrics‘ section.
Forward-looking metrics
on page 93.
c. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets
Guidance for All Sectors
Key climate-related targets.
We have set key climate-related targets, as described in the ‘Targets
and progress made’ section, including the time frames for the
targets, the base years from which progress is measured, and the
key performance indicators used to assess progress made. We use
both intensity metrics and absolute metrics.
Targets and progress made
on page 91.
Interim targets.
We disclose our interim targets in aggregate in the ‘Targets and
progress made’ section, which also includes the medium-term and
long-term targets associated.
Targets and progress made
on page 91.
Description of the methodologies
used to calculate targets and
measures.
We describe the methodologies used to calculate targets and
measures in our Basis of Reporting, so as to provide a single
consistent referable description of the methodologies.
Basis of Reporting:
www.prudentialplc.com/~/media/
Files/P/Prudential-V13/esg-report/
basis-of-reporting-2022.pdf
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Our Group-wide policies relating to our ESG Strategic Framework
ESG strategic pillar/enabler
Our Group-wide policies
Making health and financial
security accessible
Stewarding the human impacts
of climate change
Building social capital
To ensure we treat our customers fairly, management of conduct
risks is key. Prudential mitigates conduct risk with robust controls,
which are identified and assessed through the Group’s conduct risk
assessment framework, and regularly tested within its monitoring
programmes. The Group Customer Conduct Risk Policy provides this
framework and includes our Customer Conduct Standards, which
set out the core values and standards that the Group expects all
employees and persons acting on behalf of it to observe, and which
further supports our ESG strategy.
These values and standards include specific requirements regarding
customers. In particular, the Group has committed to:
> Treat customers fairly;
> Provide and promote products and services that meet customer
needs, are clearly explained and that deliver real value;
> Maintain the confidentiality of our customer information;
> Provide and promote high standards of customer service; and
> Act fairly and in a timely way to address customer complaints
and any errors we find.
The Group Responsible Investment Policy articulates how ESG
considerations are integrated into investment activities and
processes in a consistent and coherent way. It describes our
approach to ensure external commitments and internal targets
on responsible investment are met and to ensure the different
objectives of responsible investment are taken into consideration
when making investment decisions.
The Environment Policy outlines our approach to understand and
manage the direct environmental impact of the Group. This covers
our measurement, monitoring, review and reporting of issues
associated with our environmental performance.
The Discrimination and Harassment Policy reflects our commitment
to creating and maintaining a welcoming, supportive culture
in which all can work in a friendly and professional working
environment. This policy prohibits discrimination, harassment,
bullying and other types of misconduct where the behaviour is
contrary to Prudential’s values and standards. Where our people
experience or witness inappropriate behaviours, they are
encouraged to report this via a range of available channels
including their line manager, Human Resources, grievance
procedures or Speak Out. Finally, the policy reinforces Prudential’s
zero-tolerance stance over retaliation against reporters of any
concerns or for cooperating or participating in the investigation
of a complaint.
The Diversity and Inclusion Policy sets out how we foster an
inclusive workforce and ensure all our employees are treated fairly
and feel valued, and together have the diversity in skill sets and
backgrounds that enriches the organisation. Our policy considers
a range of diversity aspects of our employees, including gender,
age, ethnicity, disability, sexual orientation and background.
The Employee Relations Policy outlines the way we engage our
employees and motivate them to achieve success for the Group,
promoting positive relationships with employees, representative
organisations and trade unions, and maintaining a positive
reputation for the treatment of employees.
Owner and date of last review
Group Chief Executive Officer
July 2022
Group Chief Executive Officer
July 2022
Group Chief Financial Officer
July 2022
Group HR Director
July 2022
Group HR Director
July 2022
Group HR Director
July 2022
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Our Group-wide policies
Building social capital (continued)
The Performance and Learning Policy sets out the importance
of our people and frames how we invest in their development
to deliver against our strategy and the future success of the
organisation. This includes our Performance Management
Framework.
The Recruitment Policy covers the Group’s recruitment processes,
reflecting fairness, equality of opportunities for all, and for all
recruitment decisions to be made without bias and with due
consideration. The Recruitment Policy aims to provide a set of
principles to guide hiring for all involved across the organisation,
introducing consistency in the process and decision-making across
the Group while setting standards to enable oversight and improve
quantitative and qualitative reporting of the recruitment process.
The Remuneration Policy outlines our effective approach to
appropriately rewarding our employees in a way that aligns
incentives to business objectives and performance, and enables
the recruitment, retention and incentivisation of high-calibre
employees in line with our risk appetite and Group Reward
Principles.
Owner and date of last review
Group HR Director
July 2022
Group HR Director
July 2022
Group HR Director
July 2022
The Talent Policy demonstrates how we attract, select and develop
the best people for roles that will ensure high performance in the
short term and improve the longer-term succession and talent
pipelines. It sets out our fair and effective approach to pursuing this.
Group HR Director
July 2022
The Consensual Relationships Policy applies to consensual romantic
and sexual relationships in the workplace. As a general principle,
the Group does not seek to prevent relationships between the
people in the organisation. The exception to this is that neither
the CEO nor the CFO of Prudential or of any of its subsidiary
entities or businesses, nor any of the Prudential country managers,
is permitted to have a relationship with any other person at
Prudential. Relationships with students or interns are also
prohibited, whilst such persons are undertaking work for Prudential.
Group HR Director
July 2022
The Group Data Policy is centred on the principle that data must be
well governed and effectively managed through its lifecycle. The
Policy provides a data, business, people and technology framework,
which defines how we should manage data throughout its lifecycle
and employ the technology best suited for the business use cases.
Managing Director,
Strategic Business Group
July 2022
The Privacy Policy governs the protection of data and complies with
the General Data Protection Regulation. The Information Security
Policy supports our resilient information security programme across
the organisation and our commitment to protecting the data
entrusted to us by customers.
Managing Director,
Strategic Business Group
July 2022
The Group Responsible Investment Policy articulates how ESG
considerations are integrated into investment activities and
processes in a consistent and coherent way. It describes our
approach to ensure external commitments and internal targets
on responsible investment are met and to ensure the different
objectives of responsible investment are taken into consideration
when making investment decisions.
Group Chief Executive Officer
July 2022
Responsible investment
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ESG strategic pillar/enabler
Our Group-wide policies
Good governance and
responsible business practices
The Group Code of Business Conduct sits at the heart of our Group
Governance Manual and highlights the ethical standards that the
Board expects of itself, our employees, our agents and others
working on behalf of the Group. The Code sets out our values
around ownership, partnership and stewardship, and the personal
standards we adhere to in the areas of protection from financial
crime, avoiding conflicts of interest, managing information,
communicating as a Group and providing equality for our people.
The Code is supported by a set of Group-wide principles and values
that define how the Group expects business to be conducted in
order to achieve its strategic objectives.
The Group Risk Framework describes the Group’s approach to risk
management, and the key arrangements and standards for risk
management and internal control that support the Group’s
compliance with Group-wide statutory and regulatory
requirements.
The Anti-Bribery and Corruption Policy covers our values for
reputation, ethical behaviour and reliability. As an organisation
we are focused on financial practices that align to those values
and we prohibit corruption or bribery within our working practices.
The Anti-Money Laundering and Sanctions Policy outlines how
we prohibit money laundering or terrorist financing in our working
practices, setting out how we establish parameters to prevent
this taking place across the organisation and the commitment
to comply with sanctions, laws and regulations by screening,
prohibiting or restricting business activity, and following up through
investigation.
The Security Policy has been replaced with several new policies.
The Group Resilience Policy covers physical security, health and
safety and business continuity management. The Group Escalation
Policy sets the framework by which the Group can conduct
investigations relating to a range of security issues. The Group
Counter Fraud Policy supports our local businesses in the
development of proportionate fraud systems to enhance fraud
detection, protection and investigation. The Group Speak Out Policy
sets out the framework and controls relating to whistleblowing.
Owner and date of last review
Group Chief Executive Officer
November 2022
Group Chief Risk and
Compliance Officer
July 2022
Group Chief Risk and
Compliance Officer
July 2022
Group Chief Risk and
Compliance Officer
July 2022
Group Chief Risk and
Compliance Officer
July 2022
The Tax Risk Policy includes our processes to manage tax-related
risk, by identifying, measuring, controlling and reporting on issues
considered an operational, reputational or regulatory risk.
Group Chief Financial Officer
July 2022
The Government Relations Policy outlines our position that as an
organisation, we do not donate to political parties. This is defined as
covering any political party or candidate or any other organisation
that attempts to affect support for any political party. It is defined
as covering any payment or gift or contribution, direct or indirect, as
defined by the UK’s Political Parties, Elections and Referendums Act
2000. The policy covers expenditure on engagement activity on
public policy discussions and applies across the Group.
Group Chief Executive Officer
July 2022
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ESG report / continuedPrudential plc Annual Report 2022 ESG strategic pillar/enabler
Our Group-wide policies
Good governance and
responsible business practices
(continued)
Community engagement and
investment
The Third Party Supply and Outsourcing Policy covers how we
manage and oversee our third-party arrangements, through due
diligence/selection criteria, contractual requirements, the ongoing
monitoring of such relationships, and reporting and escalation.
The new policy also introduced “responsible supplier guidelines”
which includes additional considerations for a supplier’s
environmental, social and governance practices in addition to
existing supplier qualification requirements tied to their capabilities,
competitiveness, and assessment of third-party risks. Additionally,
the policy considers the requirements of the UK Modern Slavery Act
and the principles of the UN’s Universal Declaration of
Human Rights.
The Community Investment Policy covers how we are committed
to working with the communities in which we operate as active
and supportive members. It also outlines our strategy for investing
in the community and how we make investments and report
against them.
Owner and date of last review
Group Chief Financial Officer
July 2022
Group Chief Executive Officer
July 2022
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SECR Report
Our 2022 energy consumption and GHG emissions are disclosed below in accordance with the Streamlined Energy and Carbon Reporting (SECR)
framework of the Companies Act 2006 (Strategic and Directors’ Reports). No energy reduction projects were undertaken in the UK portfolio
during 2022. Information on energy reduction initiatives across our Asian and African portfolio are included in the section on Managing our
direct operational environmental impacts. More information on the methodologies used is available in the Basis of Reporting (available here:
www.prudentialplc.com/~/media/Files/P/Prudential-V13/esg-report/basis-of-reporting-2022.pdf).
Emissions from activities for which the company own and control, including combustion
of fuel and operation facilities (Scope 1) tCO2e
Emissions from purchase of electricity, heat, steam and cooling purchased for own use
(Scope 2, location based) tCO2e
Emissions from purchase of electricity, heat, steam and cooling purchased for own use
(Scope 2, market based) tCO2e
Total gross Scope 1 and Scope 2 emissions (location-based) tCO2e
Intensity ratio: tCO2e /m2
Intensity ratio tCO2e /fte
2022
2021
UK and
offshore
Global
(excluding UK
and offshore)
UK and
offshore
Global
(excluding UK
and offshore)
123
131
219
254
0.0222
1.5875
1,522
19,749
16,719
21,272
0.0640
1.4028
122
122
177
244
0.0119
1.1675
3,954
36,516
34,900
40,470
0.0850
2.3354
Energy consumption used to calculate above emissions: kWh (Scope 1)
671,652
7,039,834
663,621
19,252,400
Energy consumption used to calculate above emissions: kWh (Scope 2)
638,894
32,849,795
559,790
69,984,995
Note:
2021 Global (excluding UK and offshore) emissions data includes the US portfolio, Jackson operations, up to the demerger on 13 September 2021.
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ESG report / continuedPrudential plc Annual Report 2022 Non-financial information statement
We recognise that to help our customers get the most out of life, we need to take a long-term view on a wide range of issues that affect our
business and the communities in which we operate. To do this, we maintain a proactive dialogue with our stakeholders to ensure that we are
managing these issues sustainably and delivering long-term value. Further information on our engagement with our stakeholders can be
found in our Section 172 Statement below.
The Group’s Strategic Report, including the ESG report and the Section 172 Statement, includes information required by the non-financial
reporting provisions contained in sections 414CA and 414CB of the Companies Act 2006. These reporting requirements are met in a number
of sections of our annual report. The diagram below illustrates where the relevant material is presented.
ESG Strategic enabler:
Building
social capital
PAGE 109
ESG Strategic enabler:
Good governance
and responsible
business practices
PAGE 140
Business
model
PAGES 14 TO 15
Principal
risks
PAGES 54 TO 63
Governance,
Group-wide policies
and due diligence
PAGES 164 TO 167
Environmental
matters
Human
rights
Social
matters
Employees
Anti-bribery and
anti-corruption
matters
KPI:
Carbon emissions
PAGE 32
ESG Strategic pillar:
Stewarding the human impacts
of climate change
PAGE 90
Streamlined Energy and Carbon
Reporting (SECR) framework
PAGE 168
ESG Strategic enabler:
Good governance
and responsible
business practices
PAGE 140
ESG Strategic pillar:
Making health
and financial
security accessible
PAGE 78
ESG Strategic pillar:
Building
social capital
PAGE 109
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UK Companies Act, Section 172 Statement
The Board recognises the importance of considering all stakeholders
in its decision-making.
Section 172 of the UK Companies Act 2006 (the Act) requires each
Director to act in a way that he or she considers, in good faith, would
be most likely to promote the success of the Company for the benefit
of its members. This requires a Director to have regard to the interests
of the Company’s employees, its relationship with suppliers and
customers and the impact of the Company’s operations on the
community and the environment, among other matters.
This statement details how the Board builds and maintains strong
relationships with its stakeholders, how it understands their interests,
needs and concerns and how the strength of these relationships is
contributing to the Company’s success. These stakeholder factors
are also relevant in shaping Prudential’s corporate culture.
Prudential’s key stakeholders are its customers, investors, workforce,
regulators, governments and wider society, and suppliers.
This section sets out how the Directors have considered the matters
set out in Section 172 and forms the statement required under the Act.
Upon joining the Board, each Director is provided with an induction
which includes a detailed briefing on Director duties, including those
arising under Section 172 and an overview of the Group’s stakeholders.
A briefing note reminding Directors of their Section 172 duties is made
available to the Board at each of its meetings. Management who
submit proposals to the Board for approval are required to address
the Section 172 criteria in their papers, pointing out the potential
impact on the Group’s stakeholders, or how stakeholder views have
been considered. This ensures that the Board is sufficiently briefed,
and that materials support a robust discussion, with due regard to
the impact a proposal may have on the Group’s stakeholders.
Section 172 duties are considered in our Board succession planning
and training materials. We ensure that we take account of any
conflicts between different stakeholder concerns and resolve such
conflicts as smoothly as possible at the highest level necessary.
A summary of the Board’s stakeholder engagement activities in 2022
is set out below.
The Board receives regular reports from business heads on issues
affecting their customers, including the ongoing impacts of the
macroeconomic environment and how the business is responding
to customer needs in individual markets.
As part of the Board’s visit to Singapore in April, the Board heard
more about the ‘We DO Family’ campaign and met with customers
and agents to hear directly about customer needs and how the
Group’s propositions, products and services are evolving to meet
them. Board members also experienced how Pulse was being
developed to enhance end-to-end customer journeys.
In May, the Board asked the Responsibility & Sustainability Working
Group (RSWG) to give extra focus to looking at how the Group is
demonstrating and embedding its customer-centric focus for new
and existing customers.
The impact that engagement with customers
has on Board decision-making
The outcome of our operational teams’ engagement with
customers is transmitted through the business and used to shape
the design of our products and how and where we distribute those
products, and ultimately to inform strategic decisions made at
Board level. Decisions about which markets to access, what kind
of products to offer and how to develop our agency force, our bank
partnerships and our digital capabilities, are all driven by an
understanding of what customers want, based on engagement
with those customers.
Mindful of the impact of macroeconomic trends on the cost of
living for our customers, the Board monitors persistency trends and
discusses with management how products and services are being
adapted to respond to changing customer needs.
The Board has actively discussed and supported the evolution
of the digital strategy, and the customer and distribution strategies
of individual businesses. The Group intends to build capacity to
serve a greater number of customers and monitors progress
towards this goal.
Customers
Why customers matter to Prudential
The Group’s purpose is to help customers get the most out of life.
We make healthcare affordable and accessible, delivering products
and services which meet the diversity of people’s needs. We protect
people’s wealth and grow their assets and we empower our
customers to save for their goals. Our customers are at the heart
of what we do.
How the Board engages and communicates with customers
and understands their interests, needs and concerns
Our extensive distribution channels enable us to better understand
and service customers’ financial needs. Prudential engages directly
with its customers through contact centres, dedicated account
managers, face-to-face advice (where possible), mobile phone
apps and telephone technical support teams. The development of
Prudential’s digital proposition, specifically the digital health app
Pulse, has enabled Prudential to give its customers a greater range
of services, including through partnerships with others.
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Prudential plc Annual Report 2022 Investors
Why investors matter to Prudential
The Board is committed to the long-term delivery of shareholder
returns through a combination of value appreciation and dividends,
and to the delivery to credit investors of their contractual rights to
servicing and principal. Securing our investors’ trust through regular
engagement promotes their ongoing investment and support.
How the Board engages and communicates with investors
and understands their interests, needs and concerns
The Group seeks to maintain an open and active dialogue with
investors. This ensures that the Group’s strategy is well understood
by the market and that investors’ perspectives and concerns are
communicated to the Board.
The Board is kept aware of major shareholder matters and concerns
through a variety of sources including regular reporting by the Chief
Executive Officer, the Group Chief Financial Officer and the Chief of
Investor Relations.
The Chair holds an annual programme of engagement with
major shareholders in respect of governance and strategic matters,
with the Chair attending over 20 investor meetings in 2022.
The Chair updates the Board on key themes emerging from her
meetings which, during 2022, included CEO succession, changes
within the Board and leadership positions, various ESG topics and,
following the strategic transformation of the Group, the Group’s
ability to execute its strategy and operate effectively in its key
markets given the challenging macro and geopolitical environment.
The Remuneration Committee Chair conducts an annual
engagement exercise with key shareholders and proxy agencies
on the Directors’ Remuneration Policy and its implementation and
reports to the Committee in detail on the feedback provided and
to the Board on key themes. The Committee’s advisors also provide
updates on major investor and proxy agency views which the
Committee takes into account when making decisions.
The Senior Independent Director and the Committee Chairs
also held meetings with investors during 2022 and all Directors
attended the Annual General Meeting (AGM).
The Group’s 2022 AGM adopted a hybrid approach, which allowed
shareholders to attend either in person or virtually. Prudential will
continue to offer this hybrid approach, which allows the greatest
flexibility for all shareholders, including the growing number
of Hong Kong-based shareholders who can now participate
directly in shareholder decision-making.
During 2022, 371 meetings were held with 319 individual
institutional investors in Asia, the US, UK and Europe. Of these
371 meetings, 141 were attended by either the Group Chief
Executive or the Group Chief Financial Officer. These meetings took
a variety of forms including one-on-one and group sessions,
participation in panels, and walking tours organised in some cases
by brokers. In Hong Kong, the Group carried out extensive face-to-
face, online and radio interactions with stock commentators and
retail brokers. In Europe, the Group uses a specialist firm to access
under-serviced institutions, retail stockbrokers and private wealth
management offices.
We also held 14 group and individual investor meetings as part
of our roadshows following half-year 2022, including in-person
meetings in Hong Kong with investors and stock commentators.
During the third and fourth quarter, we attended Emerging Market
investor conferences in Asia and had interactions with hedge funds,
family private wealth offices and sovereign wealth funds as well as
more traditional institutional investors.
Investor relations activity in 2023 is expected to include the
introduction of Anil Wadhwani, the new Chief Executive Officer,
and supporting analysts and investors with the new IFRS 17
accounting framework.
We will continue to host a number of tailored and thematic investor
relations events during 2023 for investors and research analysts,
including face-to-face meetings and live webcasts with business
unit leaders.
We continue to support an increase in liquidity on the Hong Kong
line of stock (ticker 2378 HK) including the facilitation of transfers of
shareholdings from the London line and are engaging with both the
Hong Kong Stock Exchange and market participants to achieve this.
Nearly half of our coverage analysts are now located in the Asia
region. We will continue working with Asian-based research
franchises to further increase the number of commentators located
close to our operating markets and those who actively cover our
Asian regional peers. At the same time we continue to provide
support to the European research teams.
The impact that engagement with investors
has on Board decision-making
The Board regularly discusses investor views as part of its decision-
making and seeks to deliver long-term sustainable value for
investors, whilst also taking into account the interests of other
stakeholders. Regular engagement with investors by the Chair
and management, with time allocated in each scheduled Board
meeting for the reporting of feedback, ensured that their views
were heard in the boardroom and that the Board’s strategy and
approach to key decisions was understood by investors.
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UK Companies Act, Section 172 Statement / continued
customers. The Board heard from the HR team and colleagues on
how they were embedding the Group’s purpose and culture in
building a vibrant community that fosters innovation,
collaboration, and diversity and inclusion.
The Board also heard directly from, and interacted with, members
of the talent pools from Prudential Singapore and Eastspring and
learnt more about how the organisation is helping them
individually to Connect, Grow and Succeed.
In addition, holding Board meetings in person in London, Hong
Kong and Singapore provided opportunities for Directors to engage
with senior management and other colleagues and obtain direct
insights into business operations, strengths and challenges, and
how the Group’s purpose and values are embedded in the business.
Collaboration Jam III
The Jam III was a 72-hour crowd-sourced conversation online,
supported by external advisers HSM, with over 8,000 colleagues
participating to explore themes around building a collective sense
of identity and belonging.
A summary of insights emerging from the Jam was presented to
the RSWG, including HSM’s conclusions and recommendations.
HSM provided insight into how the Group’s values, brand and
supportive culture were contributing towards a strong sense of
belonging, particularly at a local level, and how further focus on
networking, social connections and recognition was needed to
progress this further at a Group-wide level. Participants had
identified the critical role of senior leaders in helping to foster
belonging as part of a wider Prudential and shared their views on
the leadership behaviours required in order to build that greater
sense of belonging.
The RSWG discussed with management effective ways of bringing
people together across multinational organisations and how the
desired leadership values and behaviours were being embedded
through leadership development programmes.
Transformative journey graduation sessions
Various Board members participated in graduation sessions for
groups of colleagues completing a leadership development
programme designed to deepen participants’ self-awareness and
empower them to lead with authenticity and purpose.
Participating in these sessions gave Directors an opportunity to
hear how leaders were being impacted by the programme and how
it was supporting them in their leadership journeys. It also enabled
them to assess the effectiveness of this key programme in
developing future leaders who are strongly aligned with the Group’s
purpose and values. In light of the success of the programme and
Board members’ positive feedback, it will continue to be run in 2023.
Diversity & Inclusion Council meetings
The D&I Council is co-chaired by the Chief Executive Officer and the
Group HR Director and comprises 17 leaders from across the Group.
It is responsible for defining a global D&I strategy, promoting and
championing D&I initiatives in respective businesses, and
challenging the organisation.
The RSWG has been regularly updated on the Council’s meetings
and the Group’s D&I initiatives. Through attendance at D&I
Council meetings, Non-executive Directors have been able to
see directly how the Council is fulfilling its role and gained a better
understanding of the progress being made on initiatives in support
of the Group’s goal to empower employees and create a sense
of belonging through respect and appreciation of differences.
Workforce
Why the workforce matters to Prudential
Our people have always been our most important asset and their
engagement is fundamental to our ability to attract the people we
want, retain our current employees and motivate them to achieve
success for themselves and the Group. To support its strategic
goals, the Board’s focus is on creating a culture of inclusivity and
diversity which supports the workforce and fosters an environment
in which employees can connect, grow and succeed.
How the Board engages and communicates with the workforce
and understands their interests, needs and concerns
The Board and Group Executive Committee (GEC) use a range of
formal and informal methods to engage, communicate and
understand the views of the workforce. In May 2021, the RSWG
assumed responsibility for leading the programme of workforce
engagement and, along with other Non-executive Directors, the
RSWG participated in workforce engagement activities.
Prior to May 2021, the Board had appointed two ‘Designated NEDs’
as its main method for employee engagement. However, having
reflected at that time on the experience of the Designated NEDs,
the Board preferred to adopt a more collective approach. This
enables more Directors to interact directly with the workforce,
hear employees’ views and questions, and help embed the
organisational culture. The Board is satisfied that the current
arrangements are effective and will continue to monitor them
on a periodic basis.
A summary of key workforce engagement activities during the
year is set out below. In addition to its direct engagement with
the workforce, the Board receives regular updates on employee
matters from the Chief Executive Officer, Group HR Director and
local business leaders. The RSWG reviews in detail the output from
the annual employment engagement survey and the Collaboration
Jam and discusses follow-up actions with management, and this
is also discussed at Board meetings.
Board visits
As part of the Board’s visit to Singapore in April, Board members
were able to spend time with management teams from Singapore,
Indonesia and Malaysia, as well as from Head Office in Hong Kong
and London and the India Joint Venture. The visit involved an
extensive programme of interactive sessions which included a focus
on ‘colleagues, talent and capabilities’. Colleagues from Prudential
Singapore hosted sessions that showcased how the company was
bringing to life the Group’s employee value proposition – Connect,
Grow, Succeed – in order to prepare colleagues to better serve
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Prudential plc Annual Report 2022 Workforce continued
Focus on areas of staff attrition
The Board and RSWG have been regularly updated on any areas
of heightened staff attrition levels and seek to understand the
key drivers (external and internal) and the actions being taken
by management to address them.
Given their significance to the Group, the RSWG focused in
particular on the Hong Kong life business (PHKL) and Eastspring.
Following presentations from management to the RSWG in July,
Jeremy Anderson visited PHKL and Jeanette Wong and Chua Sock
Koong visited Eastspring and met with small groups of employees
in order to better understand workforce concerns and how these
were being addressed. They provided feedback to local
management teams and agreed follow-up actions where
appropriate.
Regulators
Why regulators matter to Prudential
Regulators regulate and supervise the insurance and asset
management industries, promote its general stability and protect
policyholders.
Prudential operates in highly regulated markets and is committed
to maintaining a constructive and open relationship with all of its
regulators to ensure mutual trust, respect and understanding.
How the Board engages and communicates with regulators
and understands their interests, needs and concerns
Prudential is a designated insurance holding company under
the Hong Kong Insurance Authority’s (IA) Insurance Ordinance
and is subject to the Hong Kong IA’s Group-wide Supervision
(GWS) Framework.
The impact that engagement with the workforce
has on Board decision-making
The Board and RSWG discussed with management the output
of the annual Group-wide employee engagement survey and
the Collaboration Jam and how feedback was being addressed
in people initiatives. They also received regular updates on people
issues and discussed with management the various ongoing
initiatives to support the workforce, including to support staff
wellbeing, to embed the Group’s values and desired behaviours
throughout the organisation, and to develop talent and a diverse
and inclusive workplace. Employee areas of focus are set out in
more detail in the ESG Report on pages 109 to 116.
Through these engagements, the Board has gained deeper insight
into the Group’s operations across different markets, the strengths
of the local businesses and the challenges they face; how well the
Group’s purpose and values are embedded within the leadership
and across the business; as well as issues that are affecting
employees. Conversely, employees have had an opportunity
to gain a better understanding of the Board’s perspective and
areas of interest, and to provide direct feedback on matters of
importance to them or their area of the business.
In November 2022, members of the Board and the GEC engaged
in discussions with the Regulatory College of Supervisors, which
includes regulators from the key markets in which we operate, on
the Group’s strategy and key business initiatives. Feedback from the
Regulatory College of Supervisors will be presented to the Board by
the Hong Kong IA in early 2023, allowing the Board to engage
directly with the Hong Kong IA on the concerns and focus areas
identified by the Regulatory College of Supervisors. In addition to
the main Regulatory College meeting, at the Hong Kong IA’s
request, information sharing sessions were held during the course
of the year in which management presented to College members
on IFRS 17, conduct risk, Group top risks, and Pulse/Digitalisation.
In addition, Directors, GEC members (in particular the Group Chief
Risk & Compliance Officer) and other key persons in control
functions meet with the Hong Kong IA on a periodic basis and an
agreed range of Board management information is shared with the
Hong Kong IA. Discussions cover areas such as capital, risk
management, updates on key projects, leadership changes, and
governance issues impacting Prudential and the industry.
The Board receives regular updates on our key engagements
with the Hong Kong IA and on their views and areas of focus.
The impact that engagement with regulators
has on Board decision-making
During 2022, the Board discussed and approved various matters
and documents required under the GWS Framework, including
the Group’s Own Risk and Solvency Assessment. The direct
engagement that the Board has with the Hong Kong IA and
other regulators, along with the reporting to the Board on matters
relating to the Hong Kong IA and other regulators, allows the
Board to take the regulator’s concerns into account in their
decision-making and oversight of the Group.
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UK Companies Act, Section 172 Statement / continued
Prudential continued to engage through the UK government’s
COP26 Presidency in 2022, through to the Egyptian-hosted COP27
Summit with a particular focus on transition finance and the role of
the private sector in supporting a just and inclusive transition in
emerging markets. Working towards COP27, we engaged with the
UN, especially the High-Level Climate Champions, and through
organisations such as the Glasgow Financial Alliance for Net Zero
and non-governmental partners. Further details in respect of the
Group’s engagement with industry bodies and regional advocacy
work in support of a just transition is set out in the ESG Report,
pages 104 to 108.
In 2023, we will be supporting existing partnerships such as the UN-
convened Net Zero Asset Owner Alliance, Insurance Development
Forum and High Level Champions ahead of COP28.
Wider society
Alongside the work we do to engage with governments, we engage
directly with the communities in which we operate.
Our approach to community investment and engagement is
guided by our Group-wide Community Investment Policy and the
Group’s ESG strategy. Within this framework, our businesses have the
autonomy to manage their own community investment
programmes. The Prudence Foundation regularly reviews our strategy
and funding for community investment programmes with the aim of
maximising positive outcomes in the regions where we operate. The
RSWG oversees our community engagement and investment
activities on behalf of the Board. In 2022, the RSWG received detailed
updates on the activities of the Prudence Foundation and its
aspirations for 2023 and beyond, and discussed the alignment of the
Foundations’ objectives to the Group ESG strategy and how to assess
the impact of its activities. In addition, the Board met with leaders
from the Prudence Foundation and local partners to hear about the
impact the Foundation is having in improving financial literacy
through its flagship Cha-Ching programme.
As Covid-19 moved from a pandemic to endemic disease in many
of our markets through 2022, we worked to understand the specific
impacts and concerns in our communities and contribute in a
meaningful way, including further contributions through our
Covid-19 Relief Fund, alongside the Prudence Foundation’s
community initiatives focused on safety, disaster response, and
financial literacy.
The impact that engagement with the government and wider
society has on Board decision-making
Engagement with governments contributes to better
understanding and analysis at the Board of the role we can play in
our chosen markets and the impact of public policy and regulation
on our strategy, the design and delivery of our products and
services, and our investments. It helps to inform the Board’s
opportunity and risk analysis and to better understand where we
can contribute to public policy goals.
In the critical area of climate change, engagement with
governments and wider society has informed our approach to our
ESG strategy and specifically the pathways for each of our markets,
the challenges and opportunities, and the realities of securing a
just energy transition alongside wider development goals. As part
of its deep-dive discussion on the Group’s approach to climate
change, whilst recognising that some investors may want to see the
Group go further in terms of divestment, the Board agreed the
Group’s positioning as a supporter of a just and inclusive transition.
This is in line with the Group’s purpose and considered to be in the
best interests of the Group’s stakeholders taken as a whole.
Governments and
the wider society
Why governments and wider society matter to Prudential
Governments and policymakers in the markets in which we operate
are key stakeholders, setting and shaping the business and policy
environment for the products and services we deliver, the
investments we make, and the value we can contribute to
individuals, families, communities and the wider economy.
As part of our commitment to help people get the most out of life,
we support communities where we operate, by making healthcare
affordable and accessible, offering savings and protection
products, paying tax revenues and delivering community support
activity, including through the work of the Prudence Foundation.
How the Board engages and communicates with governments
and wider society and understands their interests, needs
and concerns
Governments
We engage with governments in a range of ways, directly and
through industry and membership organisations. This engagement
helps us to better understand and inform approaches to
international and local-level policy and regulations, and to support
and contribute to sector and economic developments across the
markets in which we operate. The Board regularly receives and
discusses reporting on government, political and regulatory
developments from the Director of Group Government Relations.
Through 2022, as it became easier to travel and meet again in
person, we benefited from opportunities to meet with governments
and policymakers from across Asia and Africa, to discuss their
priorities, including for insurance and asset management, financial
inclusion, sustainable finance, pandemic recovery, healthcare, and
technology. We participated in a number of government and
regulatory dialogues and consultations, including responding to the
strong focus on the role of the financial sector in a just and inclusive
transition, particularly advocating and engaging on the range of
issues set out in our Just and Inclusive Transition White Paper.
Prudential’s Chair met with a range of government stakeholders
during the World Bank and IMF Annual Meetings, as well as
contributing to wider financial sector government engagement
as a member of the Board of the IIF.
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Why suppliers matter to Prudential
Prudential uses third-party suppliers and outsourcing providers to
allow us to focus on our core business strengths and reduce costs.
We believe that the conduct of our suppliers reflects on us, and has
the potential to impact our standing, branding and reputation
within the communities in which we operate.
How the Board engages and communicates with suppliers
and understands their interests, needs and concerns
Modern slavery
Prudential is committed to ensuring that slavery, human trafficking,
child labour or any other abuse of human rights has no place in our
organisation or supply chain. Management continue to carry out
a range of activities to enhance the Group’s approach to modern
slavery, not least through the implementation of responsible
supplier risk assessments and due diligence requirements within
the Group Third Party Supplier and Outsourcing Policy (GTPSO).
Our systems include due diligence checks in order to assess the risk
of dealing with a supplier that may be engaged in malpractice. We
pay particular attention to low-skilled labour areas which are known
’hot spots’ for Modern Slavery such as cleaning, catering and
clothing manufacture.
Payment terms
In order to demonstrate Prudential’s ongoing commitment
to supporting its supply chain, through the difficult trading
circumstances triggered by the global pandemic, Prudential
continued to provide payment assistance in 2022 to our
small suppliers.
Prudential’s standard contractual payment terms in the UK provide
for payment to suppliers within 30 days after the invoice date.
In the most recent reporting period ending 31 December 2022,
the average time taken to pay invoices was consistent at 29 days.
For smaller suppliers with under 100 employees, our Small Supplier
Accelerated Payment Scheme aims to pay suppliers in as little as
10 days after the invoice date. The Scheme has now benefited over
190 small suppliers since launch with payments of over £7 million in
2022 to bring the total since launch to £20 million.
The impact that engagement with suppliers has on Board
decision-making
The GTPSO Policy, which was approved by the Risk Committee,
introduced Responsible Supplier Guidelines, which further promote
the development of a sustainable and ethical supply chain, with
a particular emphasis on conducting due diligence on a service
provider’s position and compliance with human rights, ethical and
safe labour practices and local labour laws and wage standards
for spend in categories considered to be of higher risk.
Following discussion by the RSWG, the Board decided to provide
within the Company’s Modern Slavery Transparency Statement, on
a voluntary basis, additional detail in respect of the steps we are
taking to detect and prevent Modern Slavery occurring within the
Group’s supply chain in Asia and Africa, not just in the UK. For more
information, please refer to our most recent Modern Slavery
Statement on our website.
Strategic report approval by the Board of Directors
The strategic report set out on pages 8 to 175 is approved
by the Board of Directors.
Signed on behalf of the Board of Directors
Anil Wadhwani
Chief Executive Officer
15 March 2023
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Governance
178 Chair’s governance statement
180 Our leadership
190 Corporate governance
192 How we operate
202 Risk management and internal control
204 Committee reports
204 Nomination & Governance
Committee report
211 Audit Committee report
218
Risk Committee report
223 Statutory and regulatory disclosures
225 Index to principal Directors’ report
disclosures
176
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Chair’s governance statement
We want to ensure that our governance
is an enabler of, and support to, Anil and
the senior management team’s success
in leading the company to deliver on the
promise of our growth strategy to create
long-term value for our shareholders and
to serve all our stakeholders.
2022 was a year when we completed a period of significant corporate
transactions and restructuring that has transformed Prudential.
I would like to thank my fellow Board members, retired and current,
for their commitment, hard work and support throughout the year
and, indeed, since this phase of radical change began.
The appointment of our new Chief Executive Officer, Anil Wadhwani,
completed the shift of Prudential’s management to Asia, reflecting
our transformation to focus on the growth markets there and in
Africa. Given the importance of the decision to the future success of
the company, all Non-executive Directors were involved in the
decision-making process that resulted in Anil’s appointment. Building
on previous work by the Nomination & Governance Committee, the
Board conducted a thorough and robust search process, considering
the best internal and external talent with the support of the external
search firm, Egon Zehnder. Candidates were interviewed by all
Non-executive Directors and subject to full independent assessments
and extensive referencing. Our key criteria were deep understanding
of, and operating experience in, insurance across our key Asian
markets and the skills to lead and develop a customer-centric,
performance-driven culture. Following an extensive and rigorous
search, the Non-executive Board members unanimously identified
Anil as the best candidate. He has more than 30 years’ experience,
predominantly in Asia, including in insurance and as a customer-
centric people leader with a strong track record of creating and
driving a culture of success, significant and proven digital experience,
and the leadership skills required to take the company through the
next phase of its journey, building on the strong platform that we
have created.
Alongside this key management change, we recognised some time
ago that the changes to our organisational focus and footprint
meant changing the composition, focus and culture of the Board and
its committees. These continuing changes are set out in the
Nomination & Governance Committee report. As the Board
composition has changed to reflect the Group’s transformation, we
have worked to ensure we do not lose the experience and insights
gained from our long-standing commitment to strong governance as
a core pillar of our resilience.
In transforming the business and the Board, we benefited hugely
from the greater ability to travel through the course of the year, with
the return of in-person engagement and interaction, building and
re-building personal connections as a Board and with our
management teams across the Group. This enabled us to better
understand the different perspectives and expectations of a range of
stakeholders who are important to our success as a business.
As well as its composition, the Board’s agenda and ways of working
have also changed to reflect the transformed company’s needs.
Through 2022, we continued to conduct deep dives into each market
presented by local leadership on a rotating basis to enable a clearer
understanding of the performance, strategy, opportunities and risks
facing each of the businesses, as well as increasing dialogue between
Group and subsidiary boards to share understanding and experience.
We received regular updates on cross-cutting issues so the Board
could support management as they enhanced the operational focus,
synergies and risk management across the Group to realise the
promise of our re-focused strategy, which was energetically led by
Mark FitzPatrick through the year.
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Focus in 2023
With Anil’s arrival, we want to ensure that our governance is an
enabler of, and support to, his and the senior management team’s
success in leading the company to deliver for our customers, invest in
our capabilities, technology and people, and realise the promise of
our growth strategy to create long-term value for our shareholders
and to serve all our stakeholders.
We will continue to work on developing a performance-driven culture,
aligned to our values and necessary to support our transformation.
This underpins the ways we work, ensuring we have the diversity of
experience and perspectives, with our people truly included and
supported in their ambitions, able to contribute fully to the company
and, critically, to serve our customers.
Given the external challenges I described in my opening statement,
we are focused on the careful management of key risks which are set
out further in the Risk Committee report, as well as adapting to
changes in regulatory and reporting requirements such as IFRS 17,
which is discussed further in the Audit Committee report.
I look forward to welcoming you at our Annual General Meeting
at 10.30 UK /17.30 HK on 25 May.
Shriti Vadera
Chair
These subjects have included agency productivity, bank distribution,
our technology strategy, digital adoption opportunities and
challenges, trends in persistency and its implications, and people
issues such as how we are managing stress, well-being and attrition,
and the impact of the pandemic and cost of living crisis on our
customers. We ensured appropriate time and consideration was
given to understanding the impact of regulatory changes affecting
the Group, particularly IFRS 17, and risks such as those relating to
cyber security.
As I reported last year, we created the Board Responsibility &
Sustainability Working Group (RSWG) in 2021 with particular
focus in its first phase on how we created, embedded and reported
on Prudential’s role in, and targets for, a just and inclusive transition
on climate change, and on people issues.
In 2022, our attention to climate change continued unabated. With
our climate change policies more mature, we were able to move
the oversight of environmental and climate-related issues, including
the Group’s external commitments and their embedding into the
business, into the regular agenda of the Risk Committee, with its
terms of reference updated to ensure a holistic approach to this area.
Following detailed discussions at the Board of our approach to
climate change, and the progress towards the Group’s externally
communicated climate-related commitments set out in our 2022
ESG Report, recognising the evolving expectations of stakeholders,
the Board agreed the need for clear communication around
Prudential’s role in emerging markets. As a significant investor and
asset owner with long-term investment horizons and liabilities, we
believe we are in a position to support a just and inclusive transition
for and within emerging markets. We articulated this in 2022 through
the development of a white paper which defined the case for a just
and inclusive transition, and its place in meeting the Paris Agreement.
The paper explored case studies and further actions required, both
from ourselves, the wider market and a range of stakeholders.
With climate now under the terms of reference of the Risk Committee,
we have changed the RSWG to include focus on Customers and
Digital, in addition to its existing role with respect to People, Culture
and Communities. These are deeply inter-linked issues at the heart
of our future success: for example, how we ensure truly embedded
customer-centricity as the critical underpinning of our business and
conduct; how we use technology to support our people and agents
to deliver for our customers better; and how our culture, talent and
capabilities need to develop in order to deliver these objectives and
be nurtured through the pressures and stretch of change.
With Alice Schroeder’s departure, George Sartorel now chairs the
RSWG. Arijit Basu and Claudia Suessmuth Dyckerhoff were appointed
to the RSWG on joining the Board, with Jeremy Anderson stepping
down from it on 31 March 2023 after the publication of the ESG
Report, in light of his appointment as Senior Independent Director
from the AGM in May 2023.
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Our leadership
Board of Directors
Changes to the Board
Chief Executive Officer and Chief Financial Officer
Mike Wells retired from his role as Group Chief Executive
and stepped down from the Board on 31 March 2022.
Mark FitzPatrick, previously Group Chief Financial Officer
and Chief Operating Officer, took up the role of Group
Chief Executive on an interim basis until 24 February
2023 when he stepped down from the Board. On
25 February 2023, Anil Wadhwani joined the Board and
assumed the role of Chief Executive Officer.
James Turner, who performed the role of Group Chief
Risk and Compliance Officer since 2018, became Group
Chief Financial Officer on 1 April 2022 when Mark took
up the role of Group Chief Executive on an interim basis.
On 16 November 2022, Prudential announced a change
to the structure of the Board composition and the role of
Group Chief Financial Officer is no longer a Board role,
effective from 1 January 2023. James continues as a
member of the Group Executive Committee.
Non-executive Directors
As part of the regular refresh of Board membership,
a number of Non-executive Directors reached the end
of their tenure and were succeeded by new Directors
with skills required to execute the Group strategy going
forward. Each Director’s relevant skills and experience
is set out in their biography and more information on
succession planning can be found on pages 205 to 207.
> Alice Schroeder and Anthony Nightingale retired from
the Board at the conclusion of the last Annual General
Meeting (AGM) on 26 May 2022.
> Philip Remnant and Tom Watjen will retire from the
Board following the conclusion of the next AGM on
25 May 2023. Jeremy Anderson will succeed Philip as
Senior Independent Director at the conclusion of the
2023 AGM.
> On 14 January 2022, George Sartorel joined
the Board.
> On 1 September 2022, Arijit Basu joined the Board.
> On 1 January 2023, Claudia Suessmuth Dyckerhoff
joined the Board.
The composition of the Prudential Corporation
Asia Limited board of directors mirrors the
Prudential plc Board.
Changes to Board Committee and
Working Group membership:
Audit Committee
> On 1 May 2022, Chua Sock Koong stepped down
from the Audit Committee.
> On 1 September 2022, Arijit Basu joined the
Audit Committee.
Nomination & Governance Committee
> On 1 May 2022, George Sartorel and Chua Sock
Koong joined the Nomination & Governance
Committee and Tom Watjen stepped down from
the Committee.
> On 16 November 2022, Jeremy Anderson joined
the Nomination & Governance Committee.
Remuneration Committee
> On 1 May 2022, Ming Lu joined the Remuneration
Committee.
> On 26 May 2022, Chua Sock Koong succeeded
Anthony Nightingale as Chair of the Remuneration
Committee. Sock Koong served on the Remuneration
Committee as a member since May 2021.
Risk Committee
> On 1 May 2022, George Sartorel joined the Risk
Committee and Ming Lu stepped down from
the Committee.
> On 1 January 2023, Claudia Suessmuth Dyckerhoff
joined the Risk Committee.
Responsibility & Sustainability Working Group
> On 1 May 2022, George Sartorel joined the RSWG and
succeeded Alice Schroeder as Chair of the RSWG on
26 May 2022, following her retirement at the
conclusion of the AGM.
> On 1 September 2022, Arijit Basu joined the RSWG.
> On 1 January 2023, Claudia Suessmuth Dyckerhoff
joined the RSWG.
> On 31 March 2023, Jeremy Anderson will step down
from the RSWG.
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Prudential plc Annual Report 2022 Chair and Chief Executive Officer
Shriti Vadera
Chair
Age: 60
N
Anil Wadhwani
Chief Executive Officer
Age: 54
Committee and Working Group membership
A Audit Committee
Ri Risk Committee
N Nomination & Governance Committee
Rs Responsibility & Sustainability Working Group
Re Remuneration Committee
Committee Chair
Appointments
> Board: May 2020
> Chair of the Board: January 2021
> Chair of the Nomination & Governance Committee: January 2021 (member since May 2020)
Shriti is a standing attendee at meetings of the Audit, Remuneration and Risk Committees and
the RSWG.
Relevant skills and experience
Shriti brings senior boardroom experience and leadership skills at complex organisations, including
extensive experience in the financial services sector, with international operations and at the
highest level of international negotiations between governments and in multilateral organisations.
She contributes her wide-ranging and global experience in economics, public policy and strategy,
as well as her deep understanding and insight into global and emerging markets and the
macro-political and economic environment.
Shriti was chair of Santander UK Group Holdings, Senior Independent Director at BHP and a
Non-executive Director of Astra Zeneca. Between 2009 and 2014, she undertook a wide range of
assignments, such as advising the South Korean Chair of the G20, two European countries on the
Eurozone and banking crisis, the African Development Bank on infrastructure financing and a
number of global investors and sovereign wealth funds on strategy and economic and market
developments.
From 2007 to 2009, Shriti was a Minister in the UK government, serving in the Cabinet Office,
Business Department and International Development Department. She led on the UK
government’s response to the global financial crisis and its Presidency of the G20. From 1999
to 2007 she was a member of HM Treasury’s Council of Economic Advisers.
Shriti’s career began with 15 years in investment banking with SG Warburg/UBS, where she had
a strong focus on emerging markets. Shriti holds a Bachelor’s Degree in Philosophy, Politics and
Economics from Oxford University.
Current key external appointments
> Chair, The Royal Shakespeare Company
> Institute of International Finance, Board Member
Appointments
> Board: February 2023
> Chief Executive Officer: February 2023
Anil is a standing attendee at meetings of the Audit, Nomination & Governance, Remuneration
and Risk Committees and the RSWG.
Relevant skills and experience
Anil is a global financial services leader with more than 30 years’ experience, predominantly in Asia,
combining strategic vision and execution in some of the world’s biggest companies. Most recently,
as CEO of Manulife’s Asia region, he successfully grew and transformed its diversified and
multi-channel business with significant market share gains in many key markets and made it the
company’s largest source of core earnings. Anil also has significant and proven digital experience,
having driven the modernisation of technology platforms across 13 markets in Asia in his
previous role.
Prior to this he spent 25 years with Citi in Asia Pacific, EMEA and the US, in a number of consumer
financial services roles. Anil holds a Master’s Degree in Management Studies from the Somaiya
Institute of Management Studies and a Bachelor’s Degree in Commerce from the Narsee Monjee
College of Commerce and Economics.
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Our leadership / continued
Non-executive Directors
Lord Remnant (Philip) CBE
FCA
Senior Independent Director
Age: 68
A N Re
Jeremy Anderson CBE
Independent Non-executive
Director
Age: 64
Ri A N Rs
Appointments
> Board: January 2013
> Senior Independent Director: January 2013
> Audit Committee (since January 2013)
> Nomination & Governance Committee (since January 2013)
> Remuneration Committee (since January 2013)
Philip is due to retire from the Board at the conclusion of the AGM on 25 May 2023.
Relevant skills and experience
Philip is a chartered accountant and brings substantial advisory, regulatory and listed company
experience to the Board, having worked in senior roles across the financial services sector, including
asset management, in the UK and Europe.
Philip was formerly a senior adviser at Credit Suisse and a Vice Chairman of Credit Suisse First
Boston Europe and Head of its UK Investment Banking Department. He was twice seconded to the
role of Director General of the Takeover Panel and in May 2022 he retired from the Takeover Panel
after serving as Deputy Chair for ten years.
Philip also held the office of Chair of The City of London Investment Trust plc and of M&G Group
Limited and served on the board of Severn Trent plc.
In 2008, Philip was Chair of the Shareholder Executive of the UK government. He served on the
board of Northern Rock plc as one of two government appointed directors and on the board of UK
Financial Investments Limited.
Philip was awarded a CBE in 2011 for services to the financial services industry and to the public
sector. He is a fellow of the Institute of Chartered Accountants in England and Wales and holds a
Master’s Degree in Law from Oxford University.
Current key external appointments
> Chair, Coutts & Co
> Member of the House of Lords
Appointments
> Board: January 2020
> Chair of the Risk Committee: May 2020 (member since January 2020)
> Audit Committee (since January 2020)
> Nomination & Governance Committee (since November 2022)
> Responsibility & Sustainability Working Group (until 31 March 2023)
Jeremy will succeed Philip Remnant as Senior Independent Director with effect from the
conclusion of the AGM on 25 May 2023, subject to re-election by shareholders.
Relevant skills and experience
Jeremy brings to the Board substantial leadership experience in the financial services sector across
Asia. He has extensive technical audit and risk management skills and experience, particularly
with regard to multinational companies.
Jeremy was formerly the Chairman of Global Financial Services at KPMG International having
previously been in charge of its UK Financial Services Practice and held roles including Head of
Financial Services KPMG Europe, Head of Clients and Markets KPMG Europe and CEO of KPMG’s
UK consulting business. Jeremy served as a member of the Group Management Board of Atos
Origin and as Head of its UK operations. Jeremy also served on the board of the UK Commission
for Employment and Skills.
Jeremy was awarded a CBE in 2005 for his services to employment. He holds a Bachelor’s Degree
in Science (Economics) from University College London.
External listed company directorships
> Senior Independent Director, UBS Group AG (including its subsidiary, UBS AG)
Other current key external appointments
> The Kingham Hill Trust (trustee)
> The Productivity Group (non-executive director)
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Committee members
A Audit Committee
Ri Risk Committee
N Nomination & Governance Committee
Rs Responsibility & Sustainability Working Group
Re Remuneration Committee
Committee Chair
Appointments
> Board: September 2022
> Audit Committee (since September 2022)
> Responsibility & Sustainability Working Group (since September 2022)
Relevant skills and experience
Arijit has extensive experience in the banking and insurance industries in India following a career
at State Bank of India (SBI) spanning nearly 40 years.
Arijit retired as the managing director of SBI in September 2020 having joined in 1983. During his
career, he held a number of senior positions at the bank, across retail, corporate and international
banking, business process re-engineering, IT and risk management. He was managing director and
chief executive officer of SBI Life Insurance Company (a subsidiary of SBI), one of India’s leading
life insurers, from 2014 until 2018 and took it public in 2017.
Since his retirement from SBI, Arijit has acted as a consultant, including advising the Life Insurance
Corporation of India on its 2022 IPO.
Arijit is a Certified Associate of the Indian Institute of Bankers. He holds a Master’s Degree
in History and a Bachelor’s Degree in Economics from the University of Delhi.
Current key external appointments
> Chair, HDB Financial Services Ltd
> Academic Advisory Council of the Reserve Bank of India (member)
> Peerless Hospitex Hospital and Research Center Ltd (non-executive director)
Appointments
> Board: May 2021
> Chair of the Remuneration Committee: May 2022 (member since May 2021)
> Nomination & Governance Committee (since May 2022)
Sock Koong served as a member of the Audit Committee from May 2021 until May 2022.
Relevant skills and experience
Sock Koong has more than 30 years’ experience in business leadership, operations, information
technology and digitalisation throughout Asia.
From 2007 to 2020, Sock Koong was Chief Executive Officer of Singapore Telecommunications
Limited (Singtel), Asia’s leading communications technology group, having previously held a
number of senior roles at the firm, including Treasurer, Chief Executive Officer International and
Group Chief Financial Officer, where she was responsible for Singtel’s financial functions, including
treasury, tax, insurance, risk management and capital management.
Sock Koong is a Fellow Member of the Institute of Singapore Chartered Accountants and a
Chartered Financial Analyst. She holds a Bachelor’s Degree in Accountancy from the University
of Singapore.
External listed company directorships
> Bharti Airtel Limited (including its parent Bharti Telecom Limited)
> Royal Philips NV
> Ayala Corporation
Other current key external appointments
> Cap Vista Pte Ltd (non-executive director)
> Defence Science and Technology Agency (non-executive director)
> Deputy Chair, The Singapore Public Service Commission
> The Singapore Council of Presidential Advisers (member)
183
Arijit Basu
Independent Non-executive
Director
Age: 62
A Rs
Chua Sock Koong
Independent Non-executive
Director
Age: 65
Re N
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Our leadership / continued
Non-executive Directors / continued
Appointments
> Board: September 2015
> Chair of the Audit Committee: May 2017 (member since September 2015)
> Risk Committee (since May 2017)
> Remuneration Committee (since February 2021)
David served on the Nomination & Governance Committee from May 2017 until February 2021.
Relevant skills and experience
David has extensive technical knowledge and skills in audit, accounting and financial reporting
matters and experience across the Group’s key markets, and across a number of industry sectors,
particularly insurance.
David is a chartered accountant and spent almost 33 years working with Price Waterhouse and
PricewaterhouseCoopers (PwC). During that time he was, amongst other things, the global leader
of PwC’s insurance practice, a partner in the UK firm, and worked as the lead audit partner for
multinational insurance companies. He also led PwC’s insurance and investment management
assurance practice in London and the firm’s Scottish assurance division. After his retirement from
PwC, David became a director and Chief Executive Officer of L&F Holdings Limited and its
subsidiaries, which is a professional indemnity captive insurance group which serves the PwC
network and its member firms. David retired from this role in June 2019.
David is an Associate of the Institute of Chartered Accountants in England and Wales and holds
a Master’s Degree in Economics from the University of Edinburgh.
Appointments
> Board: May 2021
> Nomination & Governance Committee (since May 2021)
> Remuneration Committee (since May 2022)
Ming Lu served on the Risk Committee from May 2021 until May 2022.
Relevant skills and experience
Ming has over 30 years’ experience of investing and developing businesses throughout the
Asia Pacific region. He is the Head of Asia Pacific at KKR Asia Limited and is a Partner of Kohlberg
Kravis Roberts & Co. L.P. He also serves as a member of the KKR Asian Private Equity Investment
Committee, KKR Asian Portfolio Management Committee and KKR Operating Committee.
Since 2018 he has played an important role in KKR’s Asia growth and expansion and has
served as a member of the Asia Infrastructure Investment Committee and Asia Real Estate
Investment Committee.
Ming previously worked for CITIC, the largest direct investment firm in China, before moving to
Kraft Foods International Inc. He was president of Asia Pacific at Lucas Varity, and a partner at
CCMP Capital Asia (formerly J.P. Morgan Partners Asia), where he was responsible for investment
in the automotive, consumer and industrial sectors across a number of countries throughout Asia.
Ming has also held directorships at Ma San Consumer Corporation, Mandala Energy Management
Pte Ltd, Weststar Aviation Service Sdn Bhd and MMI Technologies Pte Ltd. He was a non-executive
director of Jones Lang LaSalle Inc from 2009-2021.
Ming holds a Master’s Degree in Business Administration from the University of Leuven and a
Bachelor’s Degree in Arts (Economics) from the Wuhan University of Hydroelectrical Engineering.
Current key external appointments
> KKR Asia Ltd (executive director)
> Goodpack Pte Ltd (KKR portfolio company)
David Law ACA
Independent Non-executive
Director
Age: 62
A Ri Re
Ming Lu
Independent Non-executive
Director
Age: 64
N Re
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George Sartorel
Independent Non-executive
Director
Age: 65
Rs N Ri
Claudia Suessmuth Dyckerhoff
Independent Non-executive
Director
Age: 56
Ri Rs
Committee members
A Audit Committee
Ri Risk Committee
N Nomination & Governance Committee
Rs Responsibility & Sustainability Working Group
Re Remuneration Committee
Committee Chair
Appointments
> Board: January 2022
> Chair of the Responsibility & Sustainability Working Group: May 2022
> Nomination & Governance Committee (since May 2022)
> Risk Committee (since May 2022)
Relevant skills and experience
George has considerable operational expertise in insurance, following a career spanning 40 years
in the sector, mainly across the Asia Pacific region.
From 2014 to 2019 he was the regional Chief Executive Officer of Allianz’s Asia Pacific business,
having previously held a range of senior roles for Allianz, including chief executive of Allianz Italy,
chief executive of Allianz Turkey, Global head of change programmes for the Allianz Group, general
manager of Allianz Malaysia, Allianz Australia and New Zealand. He also previously sat on the
Financial Advisory Panel of the Monetary Authority of Singapore from 2015 to 2019.
George began his career at Manufacturers Mutual Insurance in Australia. He holds a Master’s
Degree in International Business Studies from the Heriot-Watt University.
External listed company directorships
> Insurance Australia Group Limited
Appointments
> Board: January 2023
> Risk Committee (since January 2023)
> Responsibility & Sustainability Working Group (since January 2023)
Relevant skills and experience
Claudia has considerable experience in the healthcare services and technology sectors across
China and the broader Asia-Pacific region.
Claudia joined the global consultancy firm McKinsey & Partners in 1995 and worked in a number
of senior roles. She was responsible for helping to build the firm’s healthcare Services and Systems
sector in Asia Pacific, including working with the Chinese Ministry of Health to help develop their
views on China’s national healthcare systems. Much of the client work during this period involved
transformation through technology, digital and data and her board experience in recent years
has helped her develop valuable insights around the implementation of this in healthcare services.
She has experience across various Asian markets, in particular in China, having been based in
Shanghai for nearly 15 years and in Hong Kong for a further two years.
Claudia holds a PhD in Business Administration from the University of St. Gallen and a Master’s
Degree in Business Administration from CEMS/ESADE.
External listed company directorships
> Ramsay Health Care Ltd
> Clariant AG
> Roche Holding AG
Other current key external appointments
> Huma Therapeutics Ltd (non-executive director)
> QuEST Global Services Private Ltd (non-executive director)
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Our leadership / continued
Non-executive Directors / continued
Appointments
> Board: July 2017
> Remuneration Committee (since July 2017)
> Risk Committee (since November 2018)
Tom is due to retire from the Board at the conclusion of the AGM on 25 May 2023.
Relevant skills and experience
Tom has experience across the insurance, asset management and financial services industries,
as well as experience with listed companies.
Tom was formerly a director of Sun Trust Bank, an executive vice president and the chief financial
officer of Provident Companies Inc., a director of LocatorX Inc. and, following Provident’s merger
with Unum, president and chief executive officer of the renamed Unum Group. Tom started his
career at Aetna Life and Casualty before joining Conning & Company, an investment and asset
management provider, where he became a partner in the consulting and private capital areas. He
joined Morgan Stanley in 1987, and became a managing director in its insurance practice. Tom
holds a Master’s Degree in Business Administration from the University of Virginia and a Bachelor’s
Degree in Economics from the Virginia Military Institute.
External listed company directorships
> Arch Capital Group Limited
Other current key external appointments
> Vice-Chair, Virginia Military Institute Board of Visitors
Appointments
> Board: May 2021
> Audit Committee (since May 2021)
> Risk Committee (since May 2021)
> Responsibility & Sustainability Working Group (since November 2021)
Relevant skills and experience
Jeanette brings to the Board operational skills and experience in the financial services sector,
following a career spanning more than 35 years across the South-East Asia Pacific region.
From 2008 to 2019, she led DBS Group’s institutional banking business, where she was responsible
for corporate banking, global transaction services, strategic advisory, and mergers and
acquisitions. Prior to this, Jeanette was the DBS Group’s chief financial officer from 2003 to 2008,
having previously been chief administrative officer. As part of her role at DBS Group, Jeanette held
non-executive director positions with ASEAN Finance Corporation, TMB Bank and the Bank of the
Philippine Islands. Jeanette began her career in Singapore at Banque Paribas before moving to
Citibank and then J.P. Morgan in Singapore, where she held senior pan-Asian roles. She has
previously served as a non-executive director of Fullerton Fund Management Ltd and Neptune
Orient Lines Limited.
Jeanette holds a Master’s Degree in Business Administration from the University of Chicago
and a Bachelor’s Degree in Business Administration from the National University of Singapore.
External listed company directorships
> UBS Group AG (including its subsidiary, UBS AG)
> Singapore Airlines Limited
Other current key external appointments
> Council of CareShield Life (Chair)
> GIC Pte Ltd (member of risk committee)
> PSA International Pte Ltd (non-executive director)
> Singapore Securities Industry Council (member)
Thomas Watjen
Independent Non-executive
Director
Age: 68
Re Ri
Jeanette Wong
Independent Non-executive
Director
Age: 63
A Ri Rs
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Committee members
A Audit Committee
Ri Risk Committee
N Nomination & Governance Committee
Rs Responsibility & Sustainability Working Group
Re Remuneration Committee
Committee Chair
Appointments
> Board: September 2019
> Audit Committee (since March 2021)
Amy served on the Remuneration Committee from September 2019 until March 2021.
Relevant skills and experience
Amy has extensive skills and experience in asset management, banking, insurance, and regulation
following a career spanning more than 40 years in China and South-east Asia. Amy was formerly a
non-executive director of Deutsche Börse AG, Temenos Group AG, Fidelity Funds, Vita Green, Hong
Kong and an Executive Director of Reserves Management at the Hong Kong Monetary Authority.
From 2006 to 2010, Amy was chief executive officer of DBS Bank (Hong Kong) Limited, where
she was concurrently head of its wealth management group and previously chair of DBS asset
management. Amy began her career at the Morgan Guaranty Trust Company of New York, going
on to hold senior appointments at Rothschild Asset Management and Citibank Private Bank.
From 1996 to 2006, Amy held various senior positions at the Hong Kong Monetary Authority.
Amy holds a Master’s Degree in Business Administration from Harvard Business School and a
Bachelor’s Degree in Arts (History) from Brown University.
External listed company directorships
> EFG International AG (including its subsidiary, EFG Bank AG)
Other current key external appointments
> AIG Insurance Hong Kong Limited (non-executive director)
Amy Yip
Independent Non-executive
Director
Age: 71
A
Company Secretary
Tom Clarkson
Company Secretary
Age: 47
Appointments
> Company Secretary: August 2019
Relevant skills and experience
As the Company Secretary, Tom is a trusted adviser to the Board and plays a pivotal role in the
governance and administration of Prudential. Prior to his appointment as Company Secretary,
Tom held a number of senior roles at Prudential, including Head of Compliance, Business Partners
and prior to that, Group Litigation & Regulatory Counsel.
Tom is a qualified solicitor, admitted to practice in England and Wales. Prior to joining Prudential,
he practised law at Herbert Smith LLP, London from 2002 to 2012, which included secondments to
Lloyds Banking Group and Royal Bank of Scotland.
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Our leadership / continued
Group Executive Committee
The Group Executive Committee is a management committee constituted to support the Chief Executive
Officer, who chairs the Committee. Members comprise the Chief Executive Officer, the Group Chief Financial
Officer, the Group Human Resources Director, the Group Chief Risk and Compliance Officer, the Managing
Directors of the Strategic Business Groups and the Chief Executive Officer of Eastspring Investments Group.
For the purposes of the Hong Kong Listing Rules, Senior Management is defined as the members of the
Group Executive Committee.
Solmaz Altin
Managing Director, Strategic Business Group
Age: 49
Relevant skills and experience
Solmaz is Managing Director of the Strategic Business Group covering India, Indonesia, Malaysia,
the Philippines, Laos, Myanmar, Cambodia and Africa.
Appointments
> Group Executive Committee: July 2022
He is also accountable for our Digital and Technology functions and is driving the business
transformation, accelerating our customer delivery through multi-channel models and
strengthening our customer engagement platforms, including Pulse.
Solmaz joined Prudential as Group Strategic Transformation Officer in May 2022, bringing with
him 25 years’ experience of leading business change and growth in the financial services industry.
His most recent role before joining Prudential was as regional CEO, Asia-Pacific at Allianz.
Solmaz holds a Diplom-Ökonom, Banking and Economics from the University of Duisburg-Essen
and a Bachelor’s Degree in Business Administration and Management from the University of
Technology Sydney.
Jolene Chen
Group Human Resources Director
Age: 63
Relevant skills and experience
Jolene is the Group Human Resources Director for Prudential. She is also a Councillor of Prudence
Foundation, the community investment arm of Prudential in Asia.
Appointments
> Group Executive Committee: June 2019
Jolene is also a standing attendee at meetings
of the Remuneration and Nomination &
Governance Committees.
Jolene is due to retire from her role on the
Group Executive Committee at the end of
March and will be succeeded by Catherine Chia.
Avnish Kalra CA
Group Chief Risk and Compliance Officer
Age: 55
Appointments
> Group Executive Committee: April 2022
Avnish is a standing attendee at meetings of the
Board and of the Audit and Risk Committees.
Lilian Ng
Managing Director, Strategic Business Group
Age: 57
Appointments
> Group Executive Committee: July 2022
Jolene has more than 30 years’ experience, including eight as Chief Human Resources Officer for
Prudential Corporation Asia. Prior to joining Prudential she spent over 21 years with multinational
companies in a variety of resourcing, organisational design, talent management, learning and
development and human resources roles.
Jolene is a graduate of the INSEAD International Directors Program and holds a Bachelor’s Degree
in Pharmacy from the National University of Singapore.
Relevant skills and experience
Avnish was appointed Group Chief Risk and Compliance Officer in April 2022. He previously
held the position of Chief Risk Officer of Prudential Corporation Asia since July 2018 and was
responsible for regulatory compliance, risk management and corporate governance across all
of the Group’s insurance and asset management businesses in Asia and Africa. He joined
Prudential in August 2014.
Prior to joining Prudential, Avnish was the Asia Chief Risk Officer for Aviva for six years and has also
worked at Bank of America for 14 years in various capital markets trading and risk roles across Asia.
Avnish is a Chartered Accountant by training, having worked with PwC in India and Ernst & Young
in Dubai.
Relevant skills and experience
Lilian is Managing Director of the Strategic Business Group, responsible for the insurance
operations covering the Chinese Mainland, Hong Kong and Taiwan; and the Group-wide customer,
distribution and marketing strategy across the network of insurance businesses. Lilian spearheads
the Group-wide customer strategy and the corresponding strategic framework for customer
segmentation and proposition, distribution, marketing and customer care to deliver customer
success and drive customer advocacy.
Lilian is the Chair of the Board of Prudential Hong Kong Limited. She is also a Director of CITIC
Prudential Life Insurance Company Limited, Prudential BSN Takaful Berhad and Pulse Ecosystems
Pte. Ltd.
Lilian has been part of the Prudential family for over 20 years and has held a range of leadership
roles, including Chief Financial Officer of Prudential Hong Kong, Chief Operating Officer, Insurance
and Chief Executive, Insurance of Prudential Corporation Asia.
She is a Fellow of the Institute of Actuaries of Australia and holds a Bachelor’s Degree in Economics
from Macquarie University.
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Prudential plc Annual Report 2022 Seck Wai-Kwong
Chief Executive Officer, Eastspring
Age: 67
Appointments
> Group Executive Committee: July 2022
Relevant skills and experience
Wai-Kwong is Chief Executive Officer of Eastspring Investments Group, responsible for growing
the business, deepening investment capabilities and expanding Eastspring’s client base. Prior to
joining Eastspring in April 2019, Wai-Kwong was CEO AsiaPacific for State Street Bank & Trust since
2011. He joined State Street from the Singapore Exchange, where he was chief financial officer for
eight years. He held senior-level positions in the Monetary Authority of Singapore, the Government
of Singapore Investment Corporation (GIC), Lehman Brothers and DBS Bank.
Wai-Kwong is a board member of GIC and serves on the Board Risk and Audit Committees. He is
also chair of the Investment Committee and a trustee of the Singapore Police Force’s pension fund.
He chairs the Future Leaders Council at the Wealth Management Institute and is a member of the
Hong Kong University of Science and Technology’s Business School Advisory Council.
Wai-Kwong holds a Master’s Degree in Business Administration from the Wharton School of the
University of Pennsylvania and a Bachelor’s Degree in Economics, Econometrics and Operations
Research from Monash University.
Dennis Tan
Managing Director, Strategic Business Group,
and CEO, Prudential Assurance Company,
Singapore
Age: 54
Relevant skills and experience
Dennis is Managing Director of the Strategic Business Group covering Singapore, Thailand
and Vietnam.
A veteran banker, Dennis has 26 years of experience in consumer banking spanning product
development, segment management, marketing and sales and distribution.
Appointments
> Group Executive Committee: July 2022
James Turner FSA FCSI FRM
Group Chief Financial Officer
Age: 53
Appointments
> Group Executive Committee: March 2018
> Group Chief Financial Officer: April 2022
James is a standing attendee at meetings
of the Board and of the Audit and Risk
Committees. He also attends Remuneration
Committee meetings for specific matters.
Prior to joining Prudential, he was with OCBC Bank for 10 years, of which seven were spent as head,
consumer financial services. Dennis also spearheaded the growth of OCBC’s Premier Banking
business in Singapore, Malaysia, Indonesia and China as head of branch and group premier
banking. He was also a member of OCBC Bank’s management committee.
Dennis has been CEO of Prudential Singapore since March 2020. He is also Deputy President in
the Life Insurance Association’s Management Committee, Council Member at IBF Singapore,
Multilateral Healthcare Insurance Committee Member at Ministry of Health Singapore, Board
Director at the Council for Third Age, and Board Member at the European Chamber of Commerce
in Singapore.
Dennis has completed the Asian Financial Leaders Programme from Temasek Management
Services & Singapore Management University, the Investing in Alternative Investments Program
at Yale School of Management and the Stanford Executive Program at the Stanford University
Graduate School of Business. He holds a Bachelor’s Degree in Finance from Indiana University.
Relevant skills and experience
James was appointed Group Chief Financial Officer in April 2022, having previously been the Group
Chief Risk and Compliance Officer since March 2018. For the period March 2018 to January 2023,
James served as a Director on the Prudential plc Board. Having held senior positions at Prudential
for over a decade, James has a wide-ranging understanding of the business and draws on previous
experience across internal audit, finance, risk and compliance, as well as technical knowledge and
skills relevant to his role.
James joined Prudential as the Director of Group-wide Internal Audit and was appointed Director
of Group Finance in September 2015. He is a Director of Pulse Ecosystems Pte. Ltd. and Eastspring
Investments Group Pte. Ltd, which are wholly-owned Prudential subsidiaries.
James is a Fellow of the Institute of Chartered Accountants in England and Wales, and a Financial
Risk Manager (Global Association of Risk Professionals). He holds a Diploma from the Chartered
Institute for Securities & Investment and a Bachelor’s Degree in Accounting and Finance from the
Manchester Metropolitan University.
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Corporate governance
Corporate governance codes – statement of compliance
The Company has dual primary listings in Hong Kong (main board
listing) and London (premium listing) and has therefore adopted a
governance structure based on the Hong Kong and UK Corporate
Governance Codes (the HK and UK Codes). This report explains how
the principles set out in the HK and UK Codes have been applied.
The Board confirms that, for the year under review, the Company
has applied the principles and complied with the provisions of the
UK Code. The Company has also complied with the provisions of the
HK Code, other than provision E.1.2(d) of the HK Code, which requires
companies, on a comply or explain basis, to have a remuneration
committee which makes recommendations to a main board on
the remuneration of non-executive directors. This provision is not
compatible with provision 34 of the UK Code, which recommends
that the remuneration of non-executive directors be determined in
accordance with the Articles of Association or, alternatively, by the
Board. Prudential has chosen to adopt a practice in line with the
recommendations of the UK Code.
The HK Code is available from www.hkex.com.hk
The UK Code is available from www.frc.org.uk
The table on the right contains references to disclosures in this Annual
Report and Accounts which will enable shareholders to evaluate how
Prudential has applied the principles of the UK Code and complied
with the more detailed provisions.
Corporate governance principles
1. Board leadership
and company purpose
A. Board promotes long-term value
and sustainability
The application of principle A and a
description of how opportunities and risks to
the future success of the business have been
considered and addressed (provision 1).
B. Purpose, Values and Strategy aligned
with Culture
The Board is satisfied Prudential’s purpose,
values and strategy are aligned with its
culture.
Read more
Strategic report
Pages 10 to 175
ESG Report
Pages 66 to 175
Directors’
Remuneration Report
Pages 228 to 279
Section 172 Statement
Pages 169 to 175
C. Performance measures and controls
The responsibility for ensuring that the
necessary resources are in place for
Prudential to meet its objectives is delegated
to management.
Governance Report
Pages 193 to 195
Risk management
and internal control
Pages 202 to 203
D. Engagement with stakeholders
Prudential and its Board actively engage
with shareholders and stakeholders
throughout the year and consider their
interests. Prudential’s key stakeholders are its
customers, investors, workforce, regulators,
governments and the wider society, and
suppliers.
E. Workforce policies and practices
Prudential has applied principle E and
ensures that standards of business conduct
and workforce policies are maintained which
support the long-term sustainable success of
Prudential. Employees are able to raise any
matters of concern under the Company’s
Speak Out process.
Section 172 Statement
Pages 169 to 175
ESG Report
Pages 66 to 175
Section 172 Statement
(for provision 5)
Pages 169 to 175
ESG Report
Pages 109 to 121
Whistleblowing
(Speak Out)
(for provision 6)
Page 216
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Prudential plc Annual Report 2022
2. Division of
responsibilities
F. Role of the Chair
Shriti Vadera was independent on
appointment when assessed against the
criteria in UK Code provision 10 (she was also
independent under HK Code criteria). There
is no requirement for independence to be
determined post appointment.
G. Division of responsibilities
The Board comprises a majority of
independent Non-executive Directors. There
is a clear division of responsibility between
the Board and the executive management
team.
H. Non-executive Directors
As part of reviewing the performance of
Non-executive Directors and recommending
them for election by shareholders at the
AGM, the Board was satisfied that each
Non-executive Director has sufficient time to
meet their board responsibilities.
I. Effective and efficient processes
The 2022 Board evaluation tested and
confirmed that the Board has the necessary
support and information to function
effectively and efficiently.
Read more
Governance Report
Page 194
Governance Report
Page 193
Nomination
& Governance
Committee Report
Pages 206 to 207 and 209
Nomination
& Governance
Committee Report
Page 210
Governance Report
Pages 200 to 201
3. Composition,
succession and evaluation
Read more
J. Appointments and succession planning
The Board applied Principle J and provisions
20 and 23 to appointment and succession
planning.
Nomination
& Governance
Committee Report
Pages 205 to 210
K. Skills, experience and knowledge
The Board and its Committees have a
diverse combination of skills, experience and
knowledge.
Directors’ biographies
Pages 181 to 187
L. Board evaluation, composition and
diversity
The annual Board evaluation confirmed
the effectiveness of the Board and its
individual members. The Nomination &
Governance Committee considers Board
(and committee) composition and diversity
throughout the year.
Governance Report
Pages 200 to 201
Nomination
& Governance
Committee Report
(including provision 23)
Pages 205 to 208
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4. Audit, risk
and internal control
M. Integrity of financial statements
Prudential has formal and transparent
policies and procedures to ensure the
independence and effectiveness of both
internal and external audit functions. In
accordance with DTR 7.1.3(5) the Board is
satisfied with the integrity of Prudential’s
financial and narrative statements.
N. Fair, balanced and understandable
The Board has presented a fair, balanced
and understandable assessment of
Prudential’s position and prospects in this
Annual Report and Accounts.
Read more
Audit Committee Report
Pages 214 to 217
Governance Report
(including provision
27, 30 and 31)
Page 223
Audit Committee Report
(including provision 26)
Pages 211 to 217
O. Internal controls and risk management
The Board has established an effective
internal controls framework and risk
management framework, which are kept
under regular review.
Risk management
and internal control
Pages 202 to 203
Risk review
Pages 49 to 63
5. Remuneration
Read more
P. Remuneration policies and practices
Prudential’s remuneration policies and
practices support the achievement of the
Group’s strategy, promote long-term
sustainable success and are aligned to its
purpose and values.
Q. Procedure for developing policy
A formal and transparent procedure for the
development of the remuneration policy is in
place and no director is involved in deciding
their own remuneration outcome.
R. Independent judgement and discretion
Directors exercise independent judgement
and discretion when authorising
remuneration outcomes.
Directors’
Remuneration Report
Pages 228 to 279
Directors’
Remuneration Report
Pages 228 to 237
The shareholder-approved
Directors’ Remuneration
Policy sets out the limited
circumstances in which the
Remuneration Committee
may exercise discretion.
The policy can be accessed
on the Company’s website
at www.prudentialplc.
com/investors/
governance-and-policies/
policies-and-statements
Shareholders will vote on
an updated Directors’
Remuneration Policy at
the Annual General
Meeting on 25 May 2023.
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Prudential plc Annual Report 2022Governance
How we operate
Board and Committee structure
Shareholders
Board of Directors
The Board is collectively responsible for establishing the purpose, values and strategy of the Group and for promoting
the long-term success of Prudential for the benefit of our members
and other stakeholders
Audit
Committee
Assists the Board in meeting
its responsibilities for the
integrity of the Group’s
financial reporting, including
the effectiveness of the
internal control and risk
management system and for
monitoring the effectiveness
and objectivity of internal
and external auditors.
READ MORE ON PAGES
211 TO 217
Risk
Committee
Assists with the oversight of
the Group’s risk appetite,
tolerance and strategy.
Monitors current and
potential risk exposures, the
effectiveness of the risk
management framework and
the Group’s adherence to the
various risk policies.
READ MORE ON PAGES
218 TO 222
Remuneration
Committee
Assists with the
implementation and
operation of the
Remuneration Policy,
including the remuneration of
the Chair and the Chief
Executive Officer, as well as
overseeing the remuneration
arrangements of other staff
within its purview.
READ MORE ON PAGES
228 TO 279
Nomination &
Governance Committee
Assists with the recruitment of
candidates for the Board and
the maintenance of an
effective framework for
succession planning. Provides
support and advice on
corporate governance
arrangements.
READ MORE ON PAGES
204 TO 210
Responsibility &
Sustainability
Working Group
Enables the Board to bring
additional focus to the
embedding of the Group’s
ESG strategic framework
and oversight of people
initiatives, customers and
digital.
READ MORE ON PAGES
179 TO 210
AND 75 TO 134
Chief Executive Officer
Responsible for the day-to-day management of the business
Group Executive Committee
The Group Executive Committee is our leadership team responsible for executing the strategy and
supporting the Chief Executive Officer in the discharge of his responsibilities
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Prudential plc Annual Report 2022 Led by the Chair, the Board is collectively responsible for the overall
leadership of the Group, its long-term sustainable success and for
fostering and overseeing the embedding of culture. It does this by
setting the strategy and strategic objectives, approving capital
allocations, annual budgets and business plans for the Group,
overseeing the operations and monitoring financial performance and
reporting. The Board establishes the Group’s purpose, values and
Environmental, Social and Governance (ESG) policies, satisfying itself
that these and the Group’s culture are aligned with strategy. Further,
the Board is responsible for ensuring that an effective system of
internal control and risk management is in place, approving the
Group’s overall risk appetite and tolerance and endorsing the
Directors’ Remuneration Policy for approval by shareholders.
To assist the Board in carrying out its functions, a substantial part
of the Board’s responsibilities is delegated to the Board’s principal
Committees, which comprise Non-executive Directors only. The
Board’s principal Committees are the Audit Committee, Risk
Committee, Remuneration Committee and the Nomination &
Governance Committee. In addition, the Responsibility &
Sustainability Working Group (RSWG) assists the Board with matters
concerning the Group’s overall ESG Strategic Framework, including
engagement with the workforce. The Board receives regular updates
on Committee and RSWG activities. In 2022, responsibility for
oversight of matters relating to the impact of climate change and
responsible investment was transferred from the RSWG to the Risk
Committee. The Board requested that the RSWG increase its focus on
customer, culture and digital strategy. The terms of reference for the
Board and each of the Board’s Committees are available to view on
our website www.prudentialplc.com
In addition to the principal Committees and the RSWG, the Board
has established a Standing Committee which can meet as required
to assist with any business of the Board. It is typically used for ad hoc
urgent matters, which cannot be delayed until the next scheduled
Board meeting. All Directors are members of the Standing
Committee and have the right to attend meetings and receive
papers. Before taking decisions on any matter, the Standing
Committee must first determine that the business it intends to
consider is appropriate for a Committee of the Board and does not
need to be considered by the whole Board. The Standing Committee
allows for nimble decision-making where necessary, while ensuring
that the full Board has oversight of and receives feedback on all
matters under the Committee’s consideration and all Directors can
contribute. During 2022, the Standing Committee met three times.
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Delegation to management
Responsibility for the day-to-day management of the business and
implementation of strategy has been delegated to the Chief
Executive Officer, within certain limits, for execution or further
delegation by him in respect of matters which are necessary for the
effective day-to-day running and management of the business.
The Chief Executive Officer delegates authority to certain senior
executives through management reporting lines (principally to other
members of the Group Executive Committee).
To support the ongoing evolution of the Group, Prudential appointed
Solmaz Altin, Lilian Ng and Dennis Tan, the Managing Directors of
the Strategic Business Groups, and Seck Wai-Kwong, the CEO of
Eastspring to the membership of the Group Executive Committee.
They joined existing members: the Chief Executive Officer; the Group
Chief Financial Officer; the Group Chief Risk and Compliance Officer;
and the Group Human Resources Director. The Group Executive
Committee meets on a weekly basis, supporting the Chief Executive
Officer in the day-to-day management of the business and the
implementation of strategy.
Strategic Business Groups bring together our mature and growth
market businesses to drive and enable business performance,
operational excellence and the sharing of best practices. The
Managing Directors of the Strategic Business Groups are each
accountable for the business and operational results of the markets in
their Strategic Business Group and also for the Group-wide delivery of
enabling functions. The CEO, Eastspring is responsible for the growth
of Eastspring’s business and the delivery of its investment
performance.
Board size and roles
The Board’s size allows for decision-making to reflect a
broad range of views and perspectives while allowing all
Directors to participate effectively in meetings. At the date of
publication, the Board comprised 12 Non-executive Directors,
which will reduce to 10 after the AGM, and one Executive Director,
the Chief Executive Officer.
On 16 November, Prudential announced a change to the structure
of the Board composition and the role of Group Chief Financial
Officer is no longer a Board role, effective from 1 January 2023. The
role of Group Chief Financial Officer, along with that of Group Chief
Risk and Compliance Officer, continues to be part of the Group
Executive Committee. The Board satisfied itself that in making this
change, which is in line with many boards of Asia listed companies,
the role and status of the Group Chief Financial Officer within the
Prudential boardroom is well safeguarded and the Company’s
governance processes and protections for shareholders remain
robust. In particular, both the Group Chief Financial Officer and the
Group Chief Risk and Compliance Officer have a standing invitation
to Board meetings (except for private meetings of the Non-executive
Directors) as well as to Audit and Risk Committee meetings.
Appointments to both roles continue to be a matter for the Board to
determine and both are ‘key persons in control functions’ under the
Hong Kong Insurance Authority’s Group-wide Supervision framework.
Performance reviews for those roles include input from the Chairs of
the Audit and Risk Committees respectively, and their remuneration
as members of the Group Executive Committee is reviewed and
approved by the Remuneration Committee. The Group Chief
Financial Officer’s responsibility within the Group’s financial reporting
processes is unchanged.
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Board roles
Chair
The Chair has overall responsibility for the leadership of the Board and is
responsible for its effectiveness in directing the company and for succession
planning. She sets the Board’s agenda, including on strategy, performance
and value creation, and ensures effective communication with shareholders
and, together with the Chief Executive Officer, represents the Group
externally.
Read more
Chair’s Statement
Pages 4 to 5
Governance Report
Pages 178 to 179
Chief Executive Officer
The Chief Executive Officer is accountable to, and reports to the Board. He is
responsible for the day-to-day management of the Group, recommending
an overall strategic plan to the Board and executing the approved strategy.
Strategic Report
Pages 10 to 175
Senior Independent
Director
The Senior Independent Director acts as a sounding board for the Chair,
and provides support in the delivery of her objectives. The Senior
Independent Director also acts as an intermediary for other Directors and
shareholders when necessary and leads the annual performance evaluation
of the Chair.
Nomination & Governance
Committee report
Page 207
Committee
Chairs
Committee Chairs are responsible for the leadership and governance of
their respective Committees. They set the agenda for Committee meetings
and report to the Board on Committee activities.
Nomination & Governance
Committee report
Pages 204 to 210
Audit Committee report
Pages 211 to 217
Risk Committee Report
Pages 218 – 222
Non-executive Directors
Non-executive Directors offer constructive challenge to management,
holding them to account against agreed performance objectives for
individual and business performance. They also provide strategic guidance,
offer specialist advice and serve on at least one of the Board’s principal
Committees.
Company Secretary
The Company Secretary is responsible for advising the Board and
management on governance related matters, and supports the Chair in
ensuring the effective functioning of the Board and its committees. The
Secretary is available to all Directors to provide advice and support and
facilitates Directors’ induction and ongoing professional development.
Group Chief
Financial Officer
Group Chief Risk and
Compliance Officer
The Group Chief Financial Officer is responsible for managing the finance
function, including all aspects of financial reporting and planning, and
investor engagement.
The Group Chief Financial Officer is a standing attendee at, and receives all
papers for, meetings of the Board and the Audit and Risk Committees
(except private meetings of Non-executive Directors). Their appointment
and removal are matters reserved for the Board. Their remuneration is
determined by the Remuneration Committee.
Financial Review
Pages 35 to 47
Directors’ Remuneration Report
Pages 228 to 279
The Group Chief Risk and Compliance Officer is responsible for risk
management and compliance activities of the Group.
Risk Review
Pages 49 to 63
The Group Chief Risk and Compliance Officer is a standing attendee at, and
receives all papers for, meetings of the Board and the Risk and Audit
Committees (except private meetings of Non-executive Directors). Their
appointment and removal are matters reserved for the Board. Their
remuneration is determined by the Remuneration Committee.
Directors’ Remuneration Report
Pages 228 to 279
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At each scheduled meeting of the Board, the Non-executive Directors
have a session without the Executive Director present.
The roles of Chair and Chief Executive Officer are clearly
segregated. The Chair leads the Board and is responsible for its
overall effectiveness in directing the company, whilst the Chief
Executive Officer is responsible for the day-to-day management of
the company. The Senior Independent Director acts as a sounding
board for the Chair, and provides support in the delivery of her
objectives. The Chair, Chief Executive Officer and Senior Independent
Director all have written terms of reference which are approved by the
Board and kept under regular review. A summary is available to view
on our website.
Our governance framework
The Group Governance Manual (GGM) defines Prudential’s Group-
wide approach to Governance, Risk Management and Internal
Control. The principles by which Prudential conducts its business
activities are set out in the Group Code of Business Conduct (Code),
which sits at the heart of the GGM, incorporating standards of
business conduct which set expectations over employee behaviour
by presenting all individual obligations referenced throughout the
GGM policies in a single code.
The Code is reviewed annually by the RSWG to ensure that it remains
appropriate for the global business and is approved by the Board.
Each individual employee confirms their compliance with the Code on
an annual basis. The GGM itself sets out the Group’s Governance
Framework, Group-wide policies and standards, including the Group
Risk Framework, delegated authorities and lines of responsibility, and
is supported by a programme of regular learning for all Prudential
colleagues.
The Nomination & Governance Committee conducts regular reviews
of the Group’s Governance Framework, monitoring the Group’s
significant governance policies, including governance arrangements
of the Group’s main subsidiaries, and makes recommendations to the
Board as appropriate. The Risk Committee approves the Group Risk
Framework, an integral part of the GGM, and the Audit Committee
monitors Group-wide compliance with the GGM throughout the year.
Businesses manage and report compliance with the Group-wide
mandatory requirements set out in the GGM through annual
attestations. This includes compliance with our Risk Management
Framework, a summary of which is set out on pages 202 to 203 of
this report.
The content of the GGM is reviewed regularly, reflecting the
developing nature of both the Group and the markets in which it
operates, with significant changes on key policies reported to the
relevant Board Committee or the RSWG. The GGM helps the Board
embed the Group’s system of risk management and internal control
into the day-to-day operations of the business.
Subsidiary governance
Prudential’s material subsidiaries, comprising the insurance
subsidiaries in Hong Kong, Indonesia, Malaysia and Singapore and
the Eastspring holding company (the Material Subsidiaries) and a
number of its other subsidiaries have appointed independent
non-executive directors to their boards and have established an audit
and a risk committee with standard terms of reference. All audit and
risk committees of the Material Subsidiaries, as well as a number of
other subsidiaries’ committees, are chaired by an independent board
member. To ensure an effective information flow, the Chairs of the
Group Audit and Risk Committees maintain regular dialogue with
their counterparts in each of the Material Subsidiaries. Material
Subsidiaries and other life insurance businesses that operate local
audit and risk committees report to the Group-level Committees
through written updates and the chairs of the local committees
can escalate matters to the Group Committee Chairs or
management as required.
In 2022, the Chairs of the Audit and Risk Committees hosted a
subsidiary governance forum in Singapore, where they met with
non-executive directors from each of the Material Subsidiaries to
discuss matters of mutual importance, including the Group’s digital
strategy, conduct framework, ESG and areas of focus in audit and risk.
The Nomination & Governance Committee is responsible for
oversight of governance arrangements for the Material Subsidiaries.
Directors’ inductions, training and development
The induction programme for new Non-executive Directors features a
series of core topics, including an overview of the Group, its key
businesses and the control environment, as well as content tailored to
reflect the new Board member’s role and any particular needs identified
during the recruitment process. The induction includes written
materials, presentations and meetings with the Chair, the Chief
Executive Officer, the Group Chief Financial Officer, the Group Chief Risk
and Compliance Officer and the Chairs of the Board’s principal
Committees and the RSWG (as appropriate). Further meetings with
members of senior management at Group and local level are also
scheduled as required to develop the Directors’ knowledge of the
business. Each new Board member is also assigned a longer-tenured
Non-executive Director to support them in their new role and provide
advice and feedback.
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The induction provided by the team was very
thorough and well planned. I was made to
feel very welcome from the start and it was
particularly useful to meet so many of the
Prudential team in person.
The induction gave me an excellent
introduction to the main areas of the
business and the key issues for different
stakeholder groups. This helped me to build
up my understanding quickly and enabled
me to contribute to boardroom discussions
from my first meeting.
Induction of Arijit Basu
In September 2022, Arijit Basu joined the Board as an Independent
Non-executive Director and member of the Audit Committee and
the Responsibility & Sustainability Working Group (RSWG).
As part of his induction, Arijit had the benefit of attending Board
meetings in April and July 2022 as an observer. He also attended a
site visit in Singapore and the head offices in London and Hong Kong.
During these meetings Arijit met with various members of the Board
and Group as well as local business unit management teams and
gained insight into the Group’s business, strategy, operations, risk
profile, and culture framework. He also received briefings on his duties
as a Director under relevant UK and Hong Kong corporate
governance frameworks and the Group’s regulatory environment.
Arijit also participated in Board deep dive sessions and one-to-one
meetings with senior management which helped him gain an
understanding of the various Strategic Business Groups, the
Eastspring asset management business, the Pulse platform and the
digital ecosystem.
Specifically for his role, Arijit met with the Chairs of the Audit
Committee and RSWG. In respect of his role as member of the Audit
Committee, Arijit met with, among others, the Chief of Internal Audit
who provided an overview of Group-wide Internal Audit and recent
activities. Arijit also met with the external auditor KPMG, to hear their
views on Prudential’s financial reporting and business issues, with the
Director of Group Financial Accounting & Reporting who provided a
briefing on the Group’s key performance indicators and balance
sheet and with the Group Chief Risk and Compliance Officer, who
provided an overview of the Group’s risk profile, risk framework and
key risks in each market.
For RSWG matters, Arijit met with the Director of ESG and received a
briefing on the Group’s ESG Strategic Framework. The Group HR
Director briefed Arijit on the Group’s culture framework and workforce
strategies and initiatives, including diversity & inclusion and
employee wellbeing priorities.
These meetings were tailored to Arijit’s role at Prudential
and provided him with a detailed view of current issues and emerging
themes, as well as an understanding of the interests of the Group’s
key stakeholders.
Tom Watjen was chosen as the long-standing Non-executive
Director to support Arijit during his first year on the Board. Following
the conclusion of his formal induction programme, Arijit provided the
Company Secretary with feedback on the induction programme.
Training
Throughout the year the Board and its Committees received regular
business updates and participated in deep dive sessions, developing
the Board’s more granular knowledge of individual businesses,
current and emerging issues relevant to the Group and its operations
and on particular products and business opportunities. In 2022, these
sessions included deep dives into the Group’s operations in a number
of its markets and into its principal distribution channels.
In addition, the Board received training on the new Group Internal
Economic Capital Assessment (GIECA) model including key areas of
methodology and assumptions underpinning the model and how it is
being used across the Group.
It had a deep dive session on climate, which included an overview of the
evolving expectations of stakeholders and of climate-related
opportunities for the Group. Ahead of the Group’s adoption of the new
financial reporting standard, IFRS 17, the Group Audit Committee
received training on the new standard and how it may impact the
Group’s financial reporting, and other Board members were provided
with the core elements of this training.
All Directors have the opportunity to discuss their individual
development needs as part of their Director evaluations and are
encouraged to request specific updates during the year. At the start
of the year, suggested topics are shared with the Board for feedback.
Directors are asked to provide information on any external training or
development on an annual basis. All Directors have the right to obtain
professional advice at Prudential’s expense.
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Stakeholder engagement
Information on the Board’s engagement with, and discussion of,
stakeholder views as part of the Board decision-making process can
be found on pages 170 to 175.
Regulatory environment
Prudential is a designated insurance holding company under the
Hong Kong IA Insurance Ordinance, and is subject to the Hong Kong
IA’s GWS Framework. The GWS Framework includes requirements for
Hong Kong insurance groups to have in place appropriate corporate
governance arrangements and to maintain appropriate internal
controls for the oversight of their business.
Individual regulated entities within the Group continue to be subject
to entity-level regulatory requirements in the relevant jurisdictions in
which they carry out business.
Interactions with regulators form a key part of the Group’s governance
framework and the Chair, Chief Executive Officer and the Group Chief
Risk and Compliance Officer play a leading role in representing the
Group to regulators and ensuring our dialogue with them is
constructive.
Employee voice
Prudential’s programme for workforce engagement is led by the
RSWG, and all Board members participate in engagement activities.
An overview of the workforce engagement activities undertaken
during 2022 is set out in the Section 172 Statement on pages 170
to 175.
Shareholder communication policy and engagement
Prudential has dual primary listings on the Hong Kong Stock Exchange
and the London Stock Exchange, as well as a secondary listing on the
Singapore Stock Exchange and a listing on the New York Stock
Exchange in the form of American Depositary Receipts. These listings
are subject to rules that form the basis of Prudential’s shareholder
communications policy which, in summary, seeks to ensure that
shareholders and the investment community at large are provided with
timely access to balanced and understandable information about the
Company, its financial performance, strategic goals, plans and material
developments. This enables all shareholders, including prospective
shareholders, to exercise their rights in an informed manner.
Information released by the Company to the stock exchanges
where it is listed is also posted on the Company’s website
(www.prudentialplc.com). Prudential’s corporate communications
are available in English and Chinese where required.
To better understand the views of shareholders, the Chair holds an
annual programme of engagement with major shareholders in
respect of governance and strategic matters. The Remuneration
Committee Chair engages with major shareholders annually to hear
their feedback on remuneration decisions and policy proposals. Other
Non-executive Directors, in particular the Senior Independent
Director, who acts as an intermediary for shareholders, and
Committee Chairs, are available to meet with major shareholders on
request. In addition, shareholders can communicate their views on
matters affecting the Company through various channels including
investor events held throughout the year. Retail shareholders have
dedicated services in place at the Company’s Registrar, EQ. Key
information is available in the Shareholder Information section of
the Annual Report and on the Company’s website, including contact
details for Group Secretariat.
The Board conducts an annual review of its shareholder
communications policy. For the year ended 31 December 2022, the
Board concluded that the shareholder communications policy
continues to be effective.
During 2022, 371 meetings were held with 319 individual institutional
investors in Asia, the US, UK and Europe. Of these 371 meetings,
141 were attended by either the Group Chief Executive Officer or
the Group Chief Financial Officer. These meetings took the form of
one-on-one, group sessions and participation in panels and walking
tours organised in some cases by brokers. A summary of the Board’s
engagement with other stakeholders is set out on pages 170 to 175.
The perspectives gained from investor meetings and broader
shareholder engagement exercises are considered by the Board
when making key strategic decisions.
In keeping with the intent to communicate with shareholders on
an open basis and to use technology to facilitate this, the Group
continued its programme of visual and online interaction with
shareholders and the research community in 2022. During 2022, it
hosted four one-hour detailed briefings on individual business units
– Vietnam, Indonesia, the Philippines and Singapore. The briefings
were recorded in video format and published on the Group website
along with the transcripts. The Group hosted presentations for its
Half Year Results for 2022 in Hong Kong for the first time and used
this recorded session to introduce the Managing Directors of the
Group’s Strategic Business Groups.
The Group’s AGM in 2022 was a hybrid meeting with shareholders
able to attend in person or online. The Group intends to continue to
use both in-person and online communication techniques in the
coming year to communicate with investors.
Key areas of focus – how the Board spent its time in 2022
In 2022, the Board held six scheduled meetings and an additional three ad hoc meetings. Board meetings focussed on the key areas set out below.
Strategy, business plan and capital
Business and strategy deep dives
> Reviewed and scrutinised the strategic and operational performance
of the business in key markets and across distribution channels. This
included deep dives into the following areas:
– the Group’s life businesses in Africa, Hong Kong, Indonesia,
Malaysia, the Philippines and Vietnam as well as in the Eastspring
asset management business
– the Group’s agency and bancassurance distribution channels, as
well as its digital strategy, including Pulse
> Received updates on business performance in the Group’s China and
India joint venture businesses
Business plan and budget
> Approved the 2023-2025 business plan and budget
> Approved the 2023 Strategic Priorities
> Considered and approved any spend over $30 million and oversaw
other management approvals
Capital
> Oversaw an increase in the allocation of capital invested in organic
new business and investments in capabilities/distribution, following
the restructuring of the Group into a pure-play Asia and Africa
growth business
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Performance, business and operations
Reports from CEO, CFO, CRCO
> Received reports at every meeting from the Group Chief Executive
Officer, Group Chief Financial Officer and the Group Chief Risk and
Compliance Officer
> Received reports from regional business heads
Financial results
> Reviewed and approved the half year and full year results and the
Form 20F
> Considered fair, balanced and understandable requirements in the
half and full year financial reports, following a review by the Audit
Committee
> Reviewed and approved the Going Concern and the Viability
Statements that appeared in the 2022 Annual Report
> Approved the 2021 second interim dividend and first interim
dividend for 2022
Stakeholders
Investors
> Received regular reports from the Chief of Investor Relations on
shareholder-related matters, feedback from the Chair’s annual
shareholder engagement exercise and additional meetings offered
in connection with the Chief Executive Officer succession process,
and regular feedback from management on their ongoing
shareholder engagement activities
> Received an investor perception survey report from Rothschild & Co,
discussed the findings with the review team and management’s
response
> Kept appraised of investor and Hong Kong and UK governance
themes
Workforce
> Regularly discussed people issues as part of the Chief Executive
Officer report, including particular areas of higher attrition and steps
being taken by management to address them
> As part of business reviews, discussed with local management teams
particular challenges faced in their markets and how they are
developing a diverse pipeline of talent
> Received updates from the RSWG and directly from the Group
Human Resources Director on various people, culture and talent
initiatives and feedback from employee engagement activities
Governance, approvals and Board succession
> Held a discussion of the macroeconomic and geopolitical trends
affecting the Group’s key markets, supported by an external
economist
Customers
> Customers are considered as a core part of the Board’s discussions
on business performance and operations
> Discussed customer proposition, products, and customer service as
part of deep dives and business updates
> Discussed the evolution of Prudential’s digital strategy, including
how Pulse is supporting distribution and customer experience
> Considered the impact of the pandemic and global macroeconomic
trends on customers and initiatives to mitigate the impact on them
Regulators
> Received regular reports on the Group’s engagement with its key
regulators
> Received feedback from the regulatory Supervisory College and
discussed the Hong Kong IA’s annual management letter and the
Group’s response to it
> Received reports from the Head of Group Government Relations on
key government and political developments and regulatory policy
updates
Government and wider society
> Considered the impact of the pandemic on the communities in
which we operate and efforts by the business to support affected
communities
> Received detailed briefing on the work of the Prudence Foundation
> Received training materials on climate-related issues, including
Chapter Zero background materials
> Deep dive on the Group’s approach to climate change, including an
update on progress towards the Group’s externally communicated
climate-related commitments, understanding the evolving
expectations of stakeholders, identifying climate-related
opportunities, and considering next steps on the Group’s climate
journey
> Received regular reports on ESG policy developments
Approvals
> Considered various routine and administrative proposals put to the
Shareholder meetings
> Approved key items for, and attended, the AGM (either in person,
Board for approval not covered above
or online)
> Reviewed the Delegation of Authority and noted key matters
approved by management
Board Committees
> Received reports from the Chairs of the Audit, Risk, Remuneration
and Nomination & Governance Committees, and the RSWG
> Considered updates to the Group risk appetite
> Approved the Own Risk and Solvency Assessment for submission to
the Hong Kong IA
Board evaluation and succession planning
> Process to appoint a new Chief Executive Officer, as well as appoint
an interim Chief Executive Officer, a new Group Chief Financial
Officer and a new Group Chief Risk and Compliance Officer (the
Executive Directors did not attend meetings where appropriate)
> Approved other Board appointments and committee changes on
recommendation from the Nomination & Governance Committee
> Received the findings of the internal Board evaluation exercise,
discussed and agreed the action plan and monitored progress
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Prudential plc Annual Report 2022 > Employees – how Prudential Singapore is bringing to life the
Group’s employee value proposition – Connect, Grow, Succeed –
in order to prepare colleagues to better serve its customers, and
how the Group is helping talent in Prudential Singapore and
Eastspring to develop.
> Product innovation and development – seeing how products and
processes are being designed to meet evolving customer
preferences, and how inclusive products are being developed to
cater to customers who have been underserved by traditional
financial services.
> Digitisation – seeing how Prudential Singapore is digitising sales
and services to make insurance simpler and more accessible for
its customers and distributors, and getting hands-on experience
of how Pulse is supporting agents and enhancing customer
journeys.
> Communities – meeting with leaders from the Prudence
Foundation and local partners from Taiwan, the Philippines and
Zambia to hear about the impact the Foundation is having in
improving financial literacy through its flagship Cha-Ching
programme.
The Board also hosted a dinner with agency leaders, as well as a
dinner that was the culmination of a Group-wide Future of Work
innovation challenge at which the successful employee teams from
across the Group pitched their projects to the Board and senior
management.
Board visit to Singapore
In April, the Board visited Prudential Singapore and spent time with
management teams from the Singapore, Indonesia and Malaysia
life businesses and from Eastspring.
In addition to presentations on those businesses, the visit involved an
extensive programme of interactive sessions with employees, agents
and customers. Topics included:
Board meeting attendance throughout 2022
Individual Directors’ attendance at Board meetings throughout the year is set out in the table below. Board and Committee papers are usually
provided one week in advance of a meeting. Where a director is unable to attend a meeting, their views are canvassed in advance by the Chair of
that meeting where possible.
Scheduled Board meetings
attended/requiring attendance
Ad hoc Board meetings
attended/requiring attendance
General Meetings
attended/requiring attendance
Chair
Executive Directors
Shriti Vadera
Mike Wells1
Mark FitzPatrick2
James Turner2
Non-executive Directors
Philip Remnant
Jeremy Anderson
Arijit Basu3
Chua Sock Koong
David Law
Ming Lu
Anthony Nightingale4
George Sartorel
Alice Schroeder4
Tom Watjen
Jeanette Wong
Amy Yip
6/6
1/1
6/6
6/6
6/6
6/6
2/2
6/6
6/6
6/6
3/3
6/6
3/3
6/6
6/6
6/6
3/3
1/1
1/1
1/1
3/3
3/3
–
3/3
3/3
2/3
3/3
2/3
3/3
3/3
3/3
2/3
Notes
1
2
3
4
Mike Wells stepped down from the Board on 31 March 2022.
Mark FitzPatrick and James Turner did not attend two meetings of the Board in 2022 that were held to consider CEO succession.
Arijit Basu joined the Board on 1 September 2022. Prior to joining, he attended two meetings as an observer.
Anthony Nightingale and Alice Schroeder stepped down from the Board on 26 May 2022.
1/1
–
1/1
1/1
1/1
1/1
0/0
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
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Board effectiveness
Actions during 2022 arising from the 2021 review
The last Annual Report set out the key actions we planned to take in 2022 to enhance the performance of the Board in light of the findings of the
Board and Committee effectiveness evaluation conducted internally at the end of 2021. Set out below is an update on progress to address the
2022 actions:
Theme
Summary of Actions
Progress in 2022
Board composition,
succession planning
and meeting process
Board oversight,
stakeholders and
decision making
> Continue to develop the skills
map to support the work on
Board succession planning and
review processes for oversight
of the development of the
pipeline for executive positions
with the critical skills and
diversity required for the
Group’s future strategy.
> Create more opportunities for
Board interaction within the
Board, with management and
with employees, where
possible in person.
> The skills matrix has been updated and discussed by the Board,
refining key areas of focus for Non-executive Director succession
planning.
> In addition to regular updates to the Responsibility &
Sustainability Working Group (RSWG) on talent development
programmes, the Nomination & Governance Committee and
RSWG held a joint session in October to discuss the refreshed
talent development framework being created and implemented
by management which focuses on a core group of roles identified
as critical for the Group’s growth strategy. This will be discussed
further in 2023.
> Whilst certain restrictions remained in place for much of the year,
Board meetings held in person in London, Hong Kong and
Singapore were attended by most Board members and enabled
greater interaction amongst the Board, with the Group Executive
Committee and other senior leaders.
> The Board visit to Singapore, and individual visits by Directors to
local businesses, enabled the Board to engage with wider groups
of employees.
> Focus more Board meeting
> In May, the Board amended the terms of reference of the RSWG
agenda time on customers and
employees and review and
update KPIs for consistent
reporting and analysis.
> Consider new ways to ensure
learnings from past decisions
are highlighted to the Board
where appropriate, to fully
support decision-making.
to create a focus on customers and digital, in addition to its
existing remit on people, culture and communities, while oversight
of climate (on a holistic basis) transitioned to the Risk Committee.
The RSWG has looked at the ways in which customer experience is
being measured and how data-insights are being used to enhance
processes. It will oversee the development of refreshed KPIs for
Board reporting.
> The April Board visit to Singapore included sessions with
customers and agents to provide Board members with direct
insight into their perspectives.
> The RSWG recommended further development of People KPIs
which will be included in the regular management dashboard.
> People, culture and customers have been regular topics at Board
and Committee meetings throughout the year and further work
to develop the framework for these areas is ongoing.
> The Board agreed a revised approach for conducting Post
Transaction Reviews and enhancements to make the process
more dynamic and forward-looking. This will be further embedded
in 2023.
Risk management and
internal control
> Enhance risk reporting to the
Board to further support the
prioritisation of key risks.
> The Chief Risk Officer report and Risk MI Dashboard presented to
the Risk Committee and Board was updated to support the
prioritisation on key risks.
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Prudential plc Annual Report 2022 2022 review and actions for 2023
The performance evaluation of the Board and its principal Committees for 2022 was conducted internally at the end of 2022, led by the
Company Secretary, through a questionnaire which covered: Board composition; dynamics; meeting management and support; the Board’s
oversight of different areas; risk management and internal control; succession planning; and the work of the Committees.
The findings were presented to the Nomination & Governance Committee and the Board in March 2023 and collective Committee and
Board discussions to exchange ideas and agree priorities arising from the evaluation took place. The review confirmed that the Board and
its principal Committees continued to operate effectively during the year and no major improvements were required, however a number of
suggested areas for improvement were discussed. Given that the new Chief Executive Officer started shortly before the March meetings, it was
agreed that the Chair, Chief Executive Officer and Company Secretary would further discuss the priorities and prepare an action plan for later
approval by the Board.
Theme
Board dynamics
Meeting management
and support
Succession planning and
talent development
Areas of focus
> Continue to build Board and senior management relationships and ways of working, recognising the
relative newness of the senior management team and many Board members and the ability to have
in-person meetings.
> Drive greater consistency across all management papers/presentations in order to focus the Board on
key matters and support good discussion.
> Continue to create opportunities for a wider group of management to present at Board meetings and
for Board members to interact with future leaders within the organisation.
> Review suite of Non-financial KPIs.
> Following senior leadership changes in 2022, the Nomination & Governance Committee will oversee
the refresh of CEO succession and development, and the GEC succession development plans by the
Chief Executive Officer.
> Continuing to oversee, through the RSWG, the development of a systematic approach to talent
development across the Group.
Director evaluation
Individual performance evaluation of Non-executive Directors was
undertaken by the Chair, who gathered feedback from each Board
member and Group Executive Committee member. The Nomination
& Governance Committee discussed the performance of Directors at
its meeting in March 2023 as part of the overall Board evaluation.
The Chair relayed feedback.
Feedback on the performance of the Chair was separately gathered
by the Senior Independent Director, who held a meeting of the
Non-executive Directors, without the Chair present. The Senior
Independent Director then discussed the feedback with the Chair.
The Chair assesses the performance of Executive Directors in respect
of their role as Board Directors.
The outcome of these evaluation processes informs the Nomination
& Governance Committee’s recommendation for Directors to be put
forward for re-election by shareholders.
The performance of Executive Directors, in their capacity as
Executives, is subject to regular review, as part of our overall employee
performance evaluation. The outcome of this assessment is reported
to the Remuneration Committee, with input from Audit and Risk
Committee Chairs in respect of the Group Chief Financial Officer and
the Group Chief Risk and Compliance Officer respectively.
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Risk management and internal control
The Board is responsible for ensuring that an appropriate and
effective system of risk management and internal control is in place
across the Group.
The framework of risk management and internal control centres on
clear delegated authorities to ensure Board oversight and control of
important decisions. The framework is underpinned by the Group
Code of Business Conduct, which sets out the ethical standards the
Board requires of itself, employees, agents and others working on
behalf of the Group, and is supported by a set of Group-wide
principles and values that define how the Group expects business to
be conducted in order to achieve its strategic objectives. The
framework is designed to monitor and manage, rather than
eliminate, the risk of failure to achieve its strategic objectives, taking
into account the interests of the Group’s stakeholders.
As a provider of financial services, including insurance, the Group
recognises that interests of our broad spectrum of stakeholders and
that managed acceptance of risk lie at the heart of the business. As a
result, effective risk management capabilities represent a key source
of competitive advantage for the Group. By managed acceptance of
risk, the Group seeks to generate customer and shareholder value by
selectively taking exposure to risks, where these are an outcome of its
chosen business activities and strategy. These risks will be reduced to
the extent it is cost-effective to do so. The Group’s systems,
procedures and controls are designed to manage risk appropriately,
and our resilience and recovery approaches aim to maintain the
Group’s ability and flexibility to respond in times of stress. There are
some financial and non-financial risks for which the Group has no
tolerance, and these are actively avoided.
Internal control
The GGM sets out the general principles by which we conduct our
business and ourselves and defines our Group-wide approach to
Governance, Risk Management and Internal Control. Further
information on the GGM can be found on page 195. Group-wide
policies, internal controls and processes, based on the provisions
established in the GGM, are in place across the Group. These include
controls covering the preparation of financial reporting. The
operation of these controls and processes facilitates the preparation
of reliable financial reporting and the preparation of local and
consolidated financial statements in accordance with the applicable
accounting standards, and requirements of the Sarbanes-Oxley Act.
These controls include certifications by the Chief Executive Officer
and Group Chief Financial Officer of each business with respect to the
accuracy of information provided for use in preparation of the
Group’s consolidated financial reporting, and the assurance work
carried out in respect of US reporting requirements.
The Board has delegated authority to the Audit Committee to review
the framework and effectiveness of the Group’s system of internal
control. The Audit Committee is supported in this responsibility by
the assurance work carried out by Group-wide Internal Audit (GwIA)
and the work of the audit committees of the Group’s Material
Subsidiaries, which oversee the effectiveness of controls in each
respective business. Details of how the Audit Committee oversees
the framework of controls and their effectiveness on an ongoing
basis, is set out more fully in the report on pages 211 to 217.
Risk management
A key component of the GGM is the Group Risk Framework, which
requires all businesses to establish processes for (1) identifying;
(2) measuring and assessing; (3) managing and controlling;
and (4) monitoring and reporting the risks facing the business.
The Board determines the nature and extent of the principal risks it
is willing to take in achieving its strategic objectives while taking into
account the interests of the Group’s stakeholders. The Board has
delegated authority to the Risk Committee to assist it in providing
leadership, direction and oversight of the Group’s overall risk appetite,
risk tolerance and strategy; overseeing and advising on the current
and potential future risk exposures of the Group; reviewing and
approving the Group’s risk management framework, including
changes to risk limits within the overall Board approved risk appetite;
and monitoring the effectiveness of the risk management framework
and adherence to the various risk policies. Regular activities are
detailed in the report on pages 218 to 222.
The Group’s risk governance arrangements, which support the Board,
the Risk Committee and the Audit Committee, are based on the
principles of the ‘three lines model’: risk taking and management,
risk control and oversight, and independent assurance.
Formal review of controls
A formal evaluation of the risk management and internal control
system is carried out at least annually. Prior to the Board reaching
a conclusion on the effectiveness of the system in place, the report
is considered by the Disclosure Committee and Audit Committee,
with risk specific disclosures within the report also reviewed by the
Risk Committee. This evaluation takes place prior to the publication
of the Annual Report.
As part of the evaluation, the Chief Executive and Chief Financial
Officer of each business, including Head Office, certify compliance
with the Group’s governance policies and associated risk
management and internal control requirements. The Governance
function, under the responsibility of the Group Chief Risk and
Compliance Officer, facilitates a review of the matters raised in this
certification process. This includes the assessment of any risk and
control issues reported during the year, risk and control matters
identified and reported by the other Group oversight functions and
the findings from the reviews undertaken by GwIA, which carries out
risk-based audit plans across the Group. Issues arising from any
external regulatory engagement are also taken into account.
For the purposes of the effectiveness review, the Group has followed
the FRC Guidance on Risk Management, Internal Control and
Related Financial and Business Reporting. In line with this guidance,
the certification provided does not apply to material joint ventures
and associates where the Group does not exercise full management
control. In these cases, the Group satisfies itself that suitable
governance and risk management arrangements are in place
to protect the Group’s interests. Additionally, the relevant Group
company which is party to the joint venture or associate must,
in respect of any services it provides in support of the joint venture
or associate, comply with the requirements of the Group’s internal
governance framework.
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Prudential plc Annual Report 2022 Effectiveness of controls
In accordance with provision 29 of the UK Code and provisions
D.2.1, D.2.2 and D.2.3 of the HK Code, the Board reviewed the
effectiveness and performance of the system of risk management
and internal control during 2022. This review covered all material
controls, including financial, operational and compliance controls, risk
management systems, budgets and the adequacy of the resources,
qualifications, experience of staff of the Group’s accounting, internal
audit and financial reporting functions. The review identified a
number of areas for improvement, and the necessary actions have
been or are being taken. The Audit Committees at Group and
Material Subsidiary levels collectively monitor outstanding actions
regularly and ensure sufficient resource and focus is in place to resolve
them within a reasonable timeframe.
The Board confirms that there is an ongoing process for identifying,
measuring and assessing, managing and controlling, and monitoring
and reporting the significant risks faced by the Group and confirms
that the system remains effective.
Three lines model
First line (risk taking and management)
> Takes and manages risk exposures in accordance with the risk
appetite, mandate and limits set by the Board;
> Identifies and reports the risks that the Group is exposed to,
and those that are emerging;
> Promptly escalates any limit breaches or any violations of risk
management policies, mandates or instructions;
> Identifies and promptly escalates significant emerging risk
issues; and
> Manages the business to ensure full compliance with the
Group risk management framework as set out in the GGM,
which among other requirements, includes the Group Risk
Framework and associated policies as well as approval
requirements.
Second line (risk control and oversight)
> Assists the Board to formulate the risk appetite and limit
framework, risk management plans, risk policies, risk reporting
and risk identification processes; and
> Reviews and assesses the risk-taking activities of the first line,
and where appropriate challenging the actions being taken to
manage and control risks.
Third line (independent assurance)
> Provides independent assurance on the design, effectiveness
and implementation of the overall system of internal control,
including governance structures and processes, risk
management and compliance.
Each business is required to implement a governance structure
based on the three lines model, proportionate to its size, nature
and complexity, and to the risks that it manages.
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Nomination
& Governance
Committee report
We have continued to develop the Board’s
composition to reflect the Group’s
transformation. Following a year of change in
the senior management team, key priorities in
2023 will be working with Anil to refresh
management succession and development
plans and to ensure we create a strong and
diverse pipeline of talent.
Shriti Vadera
Chair of the Board
Committee reports
Committee’s purpose
The purpose of the Committee is to assist the Board in retaining
an appropriate balance of skills to support the strategic
objectives of the Group, to develop a formal, rigorous and
transparent approach to the appointment of Directors and
maintain an effective framework for succession planning. Further,
the Committee provides support and advice to the Board on
governance arrangements.
More information on the role and responsibilities of
the Nomination & Governance Committee can be
found in its terms of reference, which are available
at www.prudentialplc.com
Membership and 2022 meeting attendance
Committee members
Shriti Vadera, Chair
Jeremy Anderson2
Chua Sock Koong3
Ming Lu
Anthony Nightingale4
Philip Remnant
George Sartorel3
Tom Watjen5
2022 meetings1
4/4
–
3/3
4/4
1/1
4/4
3/3
1/1
Regular attendees
> Chief Executive Officer
> Group Human Resources Director
> Company Secretary
Notes
1 The Committee held one meeting jointly with the Responsibility and Sustainability
Working Group (RSWG). Attendance included the members of the RSWG, who at that
time comprised Mr Anderson (Chair), Mr Basu, Mr Sartorel and Ms Wong.
2 Jeremy Anderson joined the Committee on 16 November 2022. Prior to joining, he
attended one meeting as an observer, in addition to the meeting he attended as a
member of the RSWG.
3 Chua Sock Koong and George Sartorel joined the Committee on 1 May 2022. Prior to
his joining, Mr Sartorel attended one meeting as an observer.
4 Anthony Nightingale stepped down from the Committee on 26 May 2022.
5 Tom Watjen stepped down from the Committee on 1 May 2022. He attended one
additional meeting after stepping down.
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Prudential plc Annual Report 2022
As announced in November, the role of Group Chief Financial Officer
is no longer an Executive Director role. The Committee and the Board
satisfied itself that in making this change, which is in line with many
boards of Asia listed companies, the role and status of the Group
Chief Financial Officer as well as the Group Chief Risk and Compliance
Officer within the Prudential boardroom is well safeguarded and the
Company’s governance processes and protections for shareholders
remain robust. In particular, with further details set out in the
Governance Report, the Group Chief Financial Officer and the Group
Chief Risk and Compliance Officer are standing attendees at the
Board, their appointment is a matter reserved to the Board, and the
Chairs of the Audit and Risk Committee have a key role in their
performance assessment.
Looking ahead, the Committee has identified specific focus
areas for succession planning, including insurance-specific
financial assurance skills in anticipation of David Law reaching
the end of his tenure in 2024.
The rest of this report sets out in more detail the activities of the
Committee in 2022. I would like to thank the Committee members
for their diligence and contribution throughout the year.
Shriti Vadera
Chair of the Nomination & Governance Committee
Dear shareholder,
I am pleased to provide you with my report as Chair of the
Nomination & Governance Committee.
Succession planning for both the Board and the executive
management team was a key focus in 2022. I have set out in my
introduction to the Governance Report (page 178) the process that
led to the appointment of Anil Wadhwani as our new Chief Executive
Officer which, given the importance of the decision, involved all
Non-executive Directors.
Building on the extensive succession planning activities of the
Committee in 2021, the Board was able to appoint Mark FitzPatrick
as interim Group Chief Executive whilst the process for appointing a
permanent successor was ongoing, and to promote James Turner to
the role of Group Chief Financial Officer and Avnish Kalra to the role of
Group Chief Risk and Compliance Officer. This provided leadership
continuity and ensured that the Group could complete its
restructuring and continue to deliver on its strategy. The Committee
supported Mark in his capacity as interim Group Chief Executive in
restructuring the Group Executive Committee.
A key area of focus for the Committee over the next 18 months will be
to oversee the development of updated succession plans for the new
Chief Executive Officer and other Group Executive Committee roles.
The Committee will also work closely with the RSWG to oversee the
development of the framework which ensures that there is a strong
and diverse pipeline of talent for the Group’s future leadership needs.
Alongside management changes, we also continued to develop the
Board’s composition. In our recruitment, we have set requirements
for deep Asian experience and strong digital understanding,
alongside ensuring a balance of specific market and sectoral
experience, focusing in 2022 on insurance and healthcare. We have
paid careful regard to ensuring the diversity of both experience and
perspectives, and the ability to contribute views within the Board, to
ensure strong governance, support and challenge for the Group’s
transformation and operational delivery.
As Chair of the Committee, I have been pleased with the calibre of
candidates we have been able to consider, reflecting the strong
proposition that Prudential offers to potential Board members, and
I am delighted with those who have joined through the last year. In
August 2022, we announced the appointment of Arijit Basu and Dr.
Claudia Suessmuth Dyckerhoff to the Board. Arijit, who joined the
Board in September 2022, brings extensive operating and insurance
industry experience following a nearly 40 year career at State Bank of
India (SBI), including four years as CEO of SBI Life Insurance
Company Ltd. Claudia, who joined the Board in January 2023, brings
a deep and broad knowledge of the healthcare services sector and
health technology across China and the Asia-Pacific region. She spent
much of her career based in Shanghai and, more recently, in Hong
Kong and has worked with healthcare providers, governments,
insurers, pharmaceuticals and medical device companies. As with all
new Non-executive Directors, the Committee oversees their induction
to the business to quickly ensure that they are able to contribute and
the Board is able to benefit from their experience and expertise.
The Committee continues to review the composition of the Board
and the skills and experience needed in order for it to lead and
oversee the Group.
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Board composition, skills and succession
The Committee keeps under review the leadership needs of the
Group, both for Executive and Non-executive Directors. Board
succession plans are supported and informed by the results of the
annual Board evaluation, individual Director evaluations and any
skills gaps identified. Ongoing succession planning helps to ensure
that the Board maintains a balance in the mix of skills and experience
of its members.
The Committee regularly reviews the size, structure and composition
of the Board, its principal committees and the RSWG, including an
appropriate combination of Non-executive to Executive Directors
on the Board, the overall number of Directors and their respective
skills and experience. The Chair also seeks views on the needs of
the Board and its principal committees as part of the annual Board
evaluation and the Committee discusses desired skills as part of
succession planning.
To support its assessment of skills and support succession planning,
the Committee maintains a skills matrix for Non-executive Directors
to help it map existing and desired skills on the Board and identify any
gaps. The skills matrix includes the key skills and experience gained
from positions external to Prudential that the Committee considers
as particularly valuable for the Board to enable it to effectively
oversee the Group and the execution of our strategy.
Looking ahead, in light of Non-executive Directors who are due to
step down at the 2023 AGM and who will reach the end of their
tenure at the 2024 AGM, the Committee has identified the need for a
Board member with insurance-specific financial assurance expertise
as David Law reaches the end of his tenure in 2024.
Non-executive Directors skills matrix
9
8
Pan-Asia
China
India
Africa
Insurance
1
Other Financial Services
Health
2
Tech/Digital
Operational
Financial assurance
Regulatory/public policy
5
5
7
6
6
3
3
0
1
2
3
4
5
6
7
8
9
10
Geographical experience
Number of Non-executive Directors with experience
Technical skills and experience
Non-executive Directors
The existing Non-executive Board members contribute a range of
industry operating experience, sector expertise and personal
strengths to the Board. In 2022, the Committee focused on the
Board’s need to increase its expertise and experience in the areas of
insurance and healthcare, which led to the appointments of Arijit
Basu and Dr Claudia Suessmuth Dyckerhoff. Mr Basu has an in-depth
understanding of the banking and insurance industries in India whilst
Dr Suessmuth Dyckerhoff has broad experience in the healthcare
sector in Asia, including specifically in China. These appointments are
part of an ongoing process to refresh the Board to ensure that it has
the right skills and experience to support the Group’s strategic
objectives in Asia and Africa, both now and in the future.
The regular and ongoing review of candidates by the Committee
ensures a controlled approach to the onboarding of new Non-
executive Directors and allows a sufficient transition period with those
Directors who are reaching the end of their tenure.
The Committee also makes recommendations to the Board in
relation to skills to ensure the Audit Committee has the skills required
by the Codes and US legislation. The Audit Committee financial
expert, as defined in the Sarbanes-Oxley Act, is David Law.
Executive roles
Given the importance of Chief Executive Officer succession and the
Board’s collective responsibility, the succession process that led to the
appointment of Mr Wadhwani involved all of the Non-executive
members of the Board and is described on page 178.
Based on the extensive work by the Committee in 2021 on succession
planning for Group Executive roles, including considering full
assessments and development plans for internal candidates and
external benchmarking, the Committee had identified Mr Turner as
the preferred successor for the role of Group Chief Financial Officer,
and Avnish Kalra as the preferred successor for the role of Group
Chief Risk and Compliance Officer. The Board approved these
appointments in February 2022. The Board was also able to approve
the appointment of Mark FitzPatrick as interim Group Chief Executive
whilst the process for appointing a new Chief Executive Officer was
completed. These appointments ensured continuous and effective
leadership of the Group.
The Committee also has oversight of a diverse pipeline of leadership
talent extending below the level of the Group Executive Committee in
order to attract, retain and develop the next generation of emerging
leaders. Responsibility for overseeing talent development across the
Group more broadly, including diversity, inclusion, and employee
wellbeing sits with the RSWG. The Committee and RSWG hold joint
meetings where appropriate.
The Committee is supported by the Group HR Director and during the
year engaged Egon Zehnder and Spencer Stuart to support the
searches for certain Non-executive and Executive hires. Spencer
Stuart is also engaged by the Group for senior management
recruitment and Egon Zehnder for senior management recruitment
and leadership assessment and development.
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Prudential plc Annual Report 2022 Process for appointing new Directors
The Committee assists the Board in ensuring that there is a formal,
rigorous and transparent approach to the appointment of
new Directors.
The Committee is involved from the start in identifying a vacancy
or a gap in the Board’s skills. A role description is prepared, listing
the desired skills and experience and reflecting feedback from the
Committee and the objectives of the Board’s Diversity Policy. Once
agreed, specialist talent agencies are typically engaged to create a
long-list of candidates, which is reviewed by the Committee and other
Board members to create a short-list. Interviews with short-listed
individuals then take place with the Committee and additional
selected Board members and feedback is provided to the Committee.
In this manner, a preferred candidate is selected and the Committee
then recommends the individual to the Board for appointment. The
Senior Independent Director leads the Committee in the process
of appointing a new Chair and the Chair leads the process for
the appointment of a new Chief Executive Officer, involving all
Non-executive Directors in the process.
Contemporaneous with this process, due diligence checks are
undertaken on the candidate and Prudential liaises with the relevant
regulatory authorities. The Committee is kept updated on this
process as appropriate. Following appointment, the Committee
oversees the induction of new Non-executive Directors.
Director evaluation
The Committee has concluded that each of the Directors in office
for the year under review continued to perform effectively and each
was able to devote appropriate time to fulfil their duties, and that the
Board and its Committees had an appropriate combination of skills,
experience and knowledge.
In reaching this conclusion, the Committee determined that the
Non-executive Directors continued to demonstrate the desired
attributes, contributing effectively to decision-making and exercising
sound independent judgement in holding management to account.
Accordingly, the Committee recommended to the Board those
Directors standing for election at the 2023 Annual General Meeting.
During 2022, the Committee also reviewed the membership of the
Board’s principal Committees and the RSWG, recommending
changes to the Board. When making recommendations, the
Committee takes account of the current composition of each of the
principal Committees and the RSWG, the skills and experience of the
members and the strategic objectives of the Group. Assigning new
Directors to the Audit or Risk Committees has also helped them to
build up their knowledge of the business. More information on
Committee and RSWG membership changes can be found
on page 180.
Senior Independent
Director succession
The role of Senior Independent Director derives from
the UK Corporate Governance Code. The Senior
Independent Director acts as a sounding board for the
Chair and supports her in the delivery of her objectives.
He also acts as an intermediary for other Directors and
shareholders when necessary. The Senior Independent
Director also leads the annual performance evaluation
of the Chair as well as leading on the search of any
new Chair.
During 2022, the Chair consulted with members of the
Committee and other Board members on the best
candidate to succeed Philip Remnant, who has held
the role of Senior Independent Director since joining
the Board in January 2013. Mr Anderson was
considered the ideal candidate. He is familiar with the
UK investor and governance landscape, has long
experience of engaging with stakeholders, including
through successfully carrying out a similar role at UBS,
and possesses the personal skills necessary to fulfil the
different functions of the role.
In anticipation of his appointment, Mr Anderson
became a member of the Committee on 16 November
2022 and will step down from the RSWG on 31 March
2023, following the publication of the 2022 ESG
Report.
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Board diversity policy
Given the location of the Group’s operations, its business strategy and
long-term focus in Asia and Africa, the Committee seeks candidates
with backgrounds, experience and skills that broaden the Board’s
capability, and who possess a balance of sector-specific knowledge,
operational experience and commercial acumen, ensuring it has
representation from individuals with insights into the markets in
which the Group operates. Talent search agencies are briefed on the
Group’s requirements and candidate selection is based on merit,
against objective criteria and with due regard for the benefits of
diversity, including diversity of thought and perspective, gender,
ethnicity, age, geographical provenance and social, educational and
professional backgrounds.
The Board’s target for female representation on the Board is
40 per cent by the end of 2025, as recommended by the FTSE
Women Leaders Review. At 31 December 2022, the role of Chair was
held by a woman and the overall representation of women on our
Board was 31 per cent. On 1 January 2023 female representation
increased to 38 per cent. As previously announced, Philip Remnant
and Tom Watjen will not stand for re-election at the forthcoming
AGM, which will further increase the proportion of women on our
Board to 45 per cent.
The Parker Review recommends that we appoint at least one director
from what is regarded in the UK as an ethnic minority background.
We have exceeded this recommendation, with six of our 13 Directors
meeting those criteria as at 31 December 2022 (seven out of 11
following the 2023 AGM or 63%) reflecting our Asian and African
focus and operations. We are one of only three FTSE 100 companies
with a non-white Chair.
The Group’s Diversity and Inclusion Policy applies at all levels of the
business, including to the Board and its Committees. The Committee
is responsible for overseeing a diverse pipeline of talent for the Board
and other senior executive roles, driving a Group-wide culture where
our people feel valued, and are treated fairly and respected: enabling
them to fully contribute their thoughts and perspectives and to be
their authentic selves.
The Committee considers that the pipeline for diverse talent to serve
on the Group Executive Committee remains reasonable with
continued effort needed. Female representation of those who are
regarded as senior management and part of the leadership teams is
35%. The RSWG has overseen the development of a people
dashboard, which includes measures for tracking local representation,
gender, age, tenure and experience. Inclusive leadership practices are
implemented starting with the Board and Committee and
throughout the organisation. A full description of the Group’s
activities on diversity and inclusion throughout the workforce,
including at senior management level, can be found in the ESG
report, on pages 67 to 175.
The following tables set out the information Prudential is required to
disclose under UK LR 9.8.6R(10) and is expressed as at 31 December
2022.
Gender identity or sex1
Men
Women
Not specified/prefer not to say
Ethnic background1
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management2
Percentage of
executive
management
9
4
–
69%
31%
–
3
1
–
6
2
–
75%
25%
–
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management2
Percentage of
executive
management
7
–
6
–
–
–
54%
–
46%
–
–
–
3
–
1
–
–
–
3
–
5
–
–
–
37%
–
63%
–
–
–
1
2
The information in this table was collected directly from each individual.
For the purposes on this disclosure ‘executive management’ means the Group Executive Committee.
A full description of the Group’s activities on diversity and inclusion can be found in the ESG report, on pages 109 to 116.
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Prudential plc Annual Report 2022 Terms of appointment
Non-executive Directors are appointed for an initial term of three
years, and subject to review by the Committee and re-election by
shareholders, it is expected that Non-executive Directors serve a
second term of three years. After six years, Non-executive Directors
may be appointed for a further year, up to a maximum of three years,
or more in certain limited circumstances. Reappointment is subject to
rigorous review as well as re-election by shareholders.
In line with provisions of the UK Code, the notice of AGM includes
details on the skills and experience of each director seeking re-
election and specific reasons why their contribution is, and continues
to be, important to the Company’s long-term sustainable success.
Non-executive Director tenure1
David Law
Amy Yip
Jeremy Anderson
Shriti Vadera
Chua Sock Koong
Ming Lu
Jeanette Wong
George Sartorel
Arijit Basu
Claudia Suessmuth
Dyckerhoff
0
2
4
6
8
Length of tenure (years)
1
At the date of publication
The Directors’ Remuneration Report sets out the terms of Non-
executive Directors’ letters of appointment, in addition to the terms
applicable to Executive Directors’ service contracts.
Independence
All Directors have a statutory duty to exercise independent
judgement. For Non-executive Directors, the application of
independent judgement is critical to their role in providing
constructive challenge and holding management to account,
while providing strategic guidance and offering specialist advice.
The independence of Non-executive Directors is assessed as part
of the appointment process, and annually thereafter, in line with
requirements. To support that assessment, each Non-executive
Director (except the Chair) provides an annual independence
confirmation as required under the Hong Kong Listing Rules.
Members of the Audit Committee are also assessed against
independence criteria in the Sarbanes-Oxley Act.
During 2022 all Non-executive Directors were considered to be
independent by the Committee. The Chair, who was independent
on appointment, is no longer counted as independent in accordance
with the UK Corporate Governance Code.
Philip Remnant, the Senior Independent Director, joined the Board in
January 2013 and was re-elected at the AGM in May 2022 to serve
for a further one year term, with 96.65% of votes cast in favour. While
the UK Code provides that the independence of a director who has
served for more than nine years is likely to have been impaired, or
could appear to have been impaired, the Committee and the Board
were satisfied, having assessed his independence throughout 2022,
that Lord Remnant remained independent in judgement and
character. As previously announced, Lord Remnant will not stand
for re-election at the forthcoming AGM in May 2023. He will be
succeeded as Senior Independent Director by Jeremy Anderson.
When considering the independence of Jeremy Anderson and
Jeanette Wong, the Committee and the Board took into account that
both Mr Anderson and Ms Wong serve as Non-executive Directors of
UBS Group AG. The Committee and the Board have determined that
this cross-directorship does not affect their independence. Based on
their contributions to Board discussions to date, the Board is confident
that both can be expected to continue to demonstrate objectivity
and independence of judgement.
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Conflicts of interest
Directors have a statutory duty to avoid conflicts of interest.
In addition, the Company has in place procedures to identify and,
where necessary, mitigate potential conflicts of interest. These
processes help to ensure decisions are made in the best interests
of the Company. The Board has delegated authority to the
Committee to identify and, where necessary, authorise any actual or
potential conflicts of interest.
When recommending a candidate for appointment or re-election to
the Board, the Committee considers the external appointments of
the proposed candidate and recommends authorisation of any
conflicts to the Board as appropriate, attaching conditions to the
authorisation where necessary. If a Director makes a request to take
on a new external position during the year, the Chair (or the Senior
Independent Director in respect of the Chair) considers the proposed
external appointment and escalates to the Committee for
authorisation where a conflict or potential conflict could arise.
The Board considers that the procedures for dealing with conflicts
of interest operate effectively.
Board effectiveness
The Committee oversees the process by which the Board, its
Committees and individual Directors’ effectiveness is assessed. The
2022 Board evaluation was conducted internally using a
questionnaire. The findings were presented to the Committee and
the Board in March 2023 and suggested actions to address areas of
focus identified by the evaluation were discussed. The themes,
summary of actions and progress are set out on page 201.
Governance
The Committee reviews the Group’s governance framework regularly,
monitoring the Group’s significant governance policies, (including
governance arrangements of the Group’s main subsidiaries),
recommending changes to the Board as appropriate.
Time commitment
Non-executive Directors are expected to devote such time as is
necessary for the proper performance of their duties. The expected
time commitment for directors to effectively discharge their duties is
agreed and set out in writing in the Letter of Appointment, at which
point the existing external demands on an individual’s time are
assessed to confirm their capacity to take on the role. The assessment
takes into account the time required to prepare for and attend Board
and Committee meetings, the AGM, general projects, Board training,
dinners and other activities. Further external appointments which
could impair the ability of Directors to meet these time commitments
must first be discussed with the Chair (or, for the Chair, with the Senior
Independent Director) and, where appropriate, approved by the
Committee or the Board. Should the Executive Director wish to take
on any external appointments, this would also be subject to Board
consent. In line with UK Code recommendations, the Executive
Director is not permitted to hold more than one non-executive
directorship with a FTSE 100 company or other significant
appointments.
During 2022, the Committee considered the time commitment
required of the Non-executive Directors. Taking into account the
varying demands of the business, it was concluded that the time
commitment required of Directors needed to be refreshed. The
current time expectations for Board and Committee membership
are set out in the following table. The time expectations of Directors
performing Chair roles is considerably more.
Number of regular scheduled meetings
Board
6 meetings
Audit Committee
5 meetings
Risk Committee
5 meetings
Approximate time
commitment
33 days
15 days
8.5 days
Remuneration Committee
4 meetings
6 days
Nomination & Governance Committee
3 meetings
5 days
Responsibility & Sustainability Working Group
4 meetings
5.5 days
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report
In 2022, the Committee has continued to
support the Group through the transition to
being a purely Asia and Africa focused
business, gaining a greater understanding of
the issues facing our subsidiary businesses
while overseeing the challenges of the new
IFRS 17 standard and auditor transition
activities.
David Law
Chair of the Audit Committee
Dear shareholders
2022 has been another busy year for the Audit Committee as the
Group became a purely Asia and Africa focused business.
At the start of the year, the Committee considered that the following
should be the key areas of focus in addition to its regular ongoing
responsibilities.
1. Monitoring the Group’s preparedness for reporting under IFRS 17
and understanding the implications of the transition;
2. Deepening the Committee’s understanding of the accounting
judgements and issues in the Group’s major subsidiary businesses;
3. Overseeing transitional activities relating to the change of external
auditor in 2023; and
4. Ensuring the Group’s financial controls remain robust during a
period of transition for the business.
I am pleased that at the end of the year the review of the
Committee’s effectiveness concluded that we had delivered against
these objectives.
IFRS 17 became effective on 1 January 2023, alongside the adoption
of IFRS 9. This is a significant undertaking for the Group’s finance
teams and the Committee has been kept informed of progress on a
regular basis. During the year, systems implementation was
completed and the transition balance sheet on 1 January 2022
produced. In addition to time spent in meetings overseeing
implementation and discussing areas of judgment, the Committee
has spent time getting to understand the new regime and how it is
expected to impact the Group. I suspect there will be significant
challenges ahead in bedding down this complex project and also
helping stakeholders understand its impact across the industry. More
information on the project and expected impact on our transition is
contained in note A3.2 of the IFRS financial statements. Completion
of the audited comparatives will be a significant focus for the
Committee in the first half of 2023.
211
Committee’s purpose
The Committee’s purpose is to assist the Board in meeting its
responsibilities for the integrity of the Group’s financial reporting,
including the effectiveness of the internal control and risk
management system and for monitoring the effectiveness
and objectivity of internal and external auditors.
More information about the Audit Committee can be found
in its terms of reference, which are available at
www.prudentialplc.com
Membership and 2022 meeting attendance
Committee members
David Law, Chair
Jeremy Anderson
Arijit Basu2
Chua Sock Koong3
Philip Remnant
Alice Schroeder4
Jeanette Wong
Amy Yip
2022 meetings1
8/8
8/8
2/2
3/3
7/8
4/4
8/8
8/8
Regular attendees
> Chair of the Board
> Chief Executive Officer
> Group Chief Financial Officer
> Group Chief Risk and Compliance Officer
> Senior members of the Finance function
> Company Secretary
> Group Chief Internal Auditor
> External Audit Partner
> Chief Security Officer
Notes
1 The Committee held four joint meetings with the Risk Committee, in addition to the
eight Audit Committee meetings. All members attended the joint meetings.
2 Arijit Basu joined the Audit Committee on 1 September 2022. Prior to joining, he
attended one Audit Committee meeting and one joint Audit and Risk Committee
meeting as an observer.
3 Chua Sock Koong stepped down from the Audit Committee on 1 May 2022. After
stepping down, Chua Sock Koong attended one additional joint Audit and Risk
Committee meeting.
4 Alice Schroeder stepped down from the Audit Committee on 26 May 2022.
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In order to increase its focus on the Group’s Asia entities, the
Committee set out to strengthen its relationships in 2022 with the
finance teams and audit committees in our most material
subsidiaries. To that end, in addition to the usual written updates on
the activities of the local audit committees, I meet regularly with the
chairs of our Material Subsidiary audit committee chairs and provide
an update to the Committee on important points raised at local level.
In addition to its ongoing consideration of matters regarding the
Material Subsidiaries, the Committee has also received presentations
from local audit committee chairs and finance teams from the
Material Subsidiaries. This helped to deepen the Committee’s
understanding and facilitate discussion of key accounting
assumptions and judgements, control matters, key products and the
drivers of profitability in those businesses. In order to continue to
foster closer working relationships with the audit and risk committees,
in September Jeremy Anderson and I chaired a conference attended
by the non-executive directors of the Group’s Material Subsidiaries.
We have continued to pay particular attention to our whistleblowing
procedures and monitored these for any indicators of issues. I have
met privately with the Group Chief Risk and Compliance Officer and/
or Chief Security Officer to discuss significant cases and how they are
investigated and resolved. These are also discussed in private sessions
with the Committee, the Board or the relevant local audit committee
as appropriate.
Committee membership and compliance with
regulatory and governance requirements
In September, Arijit Basu joined the Committee. Arijit has extensive
executive experience in the banking and insurance industries in India.
His full biography and experiences are set out on page 183. In May,
the Committee said goodbye to Alice Schroeder who stepped down
from the Committee and from the Board, while Chua Sock Koong also
stepped down from the Committee as part of a refresh in the
membership of several of the Board Committees as announced on
26 April. I thank them both for their contributions.
At the conclusion of the 2023 AGM, the Committee will also bid
farewell to Philip Remnant who will step down from the Committee
and the Board. He has served on both since January 2013. Philip has
seen through many significant events in these years and we will miss
his wise counsel. I am extremely grateful for his support and
contribution throughout my period as Chair.
Further, for the purposes of the UK and Hong Kong Corporate
Governance Codes, each member of the Committee has recent and
relevant financial experience. Detailed information on the experience,
qualifications and skillsets of all Committee members can be found
on pages 181 to 187.
The effectiveness of the Committee was reviewed as part of the
annual Board evaluation, which confirmed that the Committee
continued to operate effectively during the year, with actions agreed
where appropriate. Further details on the Board evaluation are set
out on pages 200 to 201.
External auditor
An important part of the Committee’s work consists of overseeing
the relationship with the Group’s external auditor, including
safeguarding independence and approving non-audit fees. The
Committee continued its practice of meeting privately with KPMG
and I have held a number of meetings with the lead partner
throughout the year.
The audit of the 2022 year-end results will be the final one by the
Group’s current auditor, KPMG LLP (KPMG), and I would like to thank
them for their support and hard work over their years of service.
As reported in the 2020 Annual Report, following a rigorous tendering
process the Board resolved that it intends to recommend EY for
appointment as the Group’s auditor for the financial year ending
31 December 2023 onwards, subject to shareholder approval at the
AGM in 2023. The Committee is therefore also overseeing the Group’s
relationship with EY, their independence from Prudential and the
transition plan. EY have been undertaking assurance work on the
Group’s IFRS 17 comparatives in advance of the publication of its first
IFRS 17 results at Half Year 2023. We have also met regularly with
them to discuss progress. Their work has assisted with the transition
and I also met with their lead partners regularly.
Internal audit
The Committee receives regular updates from the Group Chief
Internal Auditor and key members of his team and I meet regularly
with him and the Group-wide Quality Assurance Director to discuss
internal audit work and matters arising. Having a strong function with
appropriate resource focused on our key risks has been a priority of
the Committee throughout the year.
Finally, I would like to thank our management colleagues for their
huge efforts this past year in difficult circumstances, their
responsiveness to challenge and the quality of papers; and my fellow
Committee members for their diligence and contribution throughout
the year.
David Law
Chair of the Audit Committee
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Accounting judgements and
estimates supporting the
Group’s results
One of the Committee’s key responsibilities is to monitor the integrity of the financial statements and any other
periodic financial reporting. This includes, the half-year financial statements, the Annual Report (including
compliance with the GWS public reporting requirements), associated results announcements and Form 20-F
disclosures, as well as the annual update of the Group’s published Tax Strategy.
In reviewing these and other items, the Committee received reports from management and, as appropriate,
reports from internal and external assurance providers.
When considering financial reporting matters, the Committee assesses compliance with relevant accounting
standards, regulations and governance codes focusing on key areas of judgement and complexity. No material
changes to accounting policies were made during 2022. The Committee continued to receive updates on the
Group’s implementation of IFRS 9 ‘Financial Instruments’ and IFRS 17 ‘Insurance Contracts’, which became
effective on 1 January 2023. The approach to and the impact of adopting these standards is further discussed
in note A3.2 of the IFRS financial statements.
The Committee reviewed the key assumptions and judgements supporting the Group’s IFRS results, including
those made in valuing the Group’s investments, insurance liabilities and intangible assets under IFRS, together
with reports on the operation of internal controls to derive these amounts. The Committee also reviewed the
assumptions underpinning the Group’s European Embedded Value (EEV) metrics.
Assumptions setting
The measurement of insurance liabilities is based on estimates of future cash flows, including those to and from
policyholders, over a long period of time. These estimates can, depending on the type of business, be highly
judgemental. The Committee considered changes to assumptions and other estimates used to derive IFRS
insurance liabilities and for EEV reporting. The key assumptions reviewed were:
> Within the insurance businesses, persistency, mortality, morbidity (including expectations of future medical
costs inflation and related premium rises) and expense assumptions (including consideration of future
expense levels anticipated in the business plan). When assessing assumptions the Committee considered
recent experience, including the impact of any short-term Covid-related disruption.
> Economic assumptions, including investment return and associated risk discount rates, which generally
increased as interest rates rose in the year, leading to adverse impacts on the Group’s EEV.
The Committee was satisfied that the assumptions adopted by management were appropriate.
In addition to the above the Committee received and considered information on the impact on the Group’s
metrics of the adoption of the Risk-Based Capital regime in Hong Kong. This included in particular the
refinements needed to the methodology used to calculate Hong Kong’s IFRS policyholder liabilities and the
impact of that change as further described in note C3.2 in the IFRS financial statements. The impact on the
Group’s EEV is set out in the basis of preparation and note 8 of the EEV financial statements.
Valuation of investments
The Committee received information on the carrying value of investments in the Group’s balance sheet
acknowledging that the vast majority of the Group’s investments are based on quoted prices in an active
market (circa 80 per cent being included in level 1 as at 31 December 2022). Further information on the
valuation of assets is contained in note C2 of the IFRS financial statements. The Committee satisfied itself that
overall investments were valued appropriately.
Intangible assets
The Committee received information to enable it to review the more material intangible asset balances, for
example, whether there had been any indication of impairment of the Group’s distribution rights asset or
goodwill in light of the current macroeconomic environment. The Committee was satisfied that there was no
impairment of these intangible assets at 31 December 2022. Further information is contained in note C4 of the
IFRS financial statements.
Going concern and viability statements
The Committee considered various analyses from management regarding the capital and liquidity positions at
Group and parent company level, taking into account the Group’s principal risks. This included an assessment of
the impact that different stress scenarios may have on the Group’s plan and its resilience to those threats.
Following this review, the Committee recommended to the Board that it could conclude that the financial
statements should continue to be prepared on a going concern basis and that the disclosures in the 2022
Annual Report on the Group’s longer-term viability were both reasonable and appropriate.
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Other financial
reporting matters
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Committee reports / Audit Committee report / continued
Principal activities and significant issues considered by the Audit Committee during 2022
Other financial reporting
matters continued
Fair, balanced and understandable requirement
The Committee carried out a formal review of whether the 2022 Annual Report were ‘fair, balanced and
understandable’ as required by the UK Corporate Governance Code. In particular, it considered whether the
report gave a full picture of the Group’s business model, strategy, financial position and performance in the year,
with important messages appropriately highlighted. It also considered the level of consistency between
financial statements and narrative sections, whether performance measures were clearly explained and the
prominence of alternative performance measures.
After completion of its detailed review, the Committee was satisfied that, taken as a whole, the Group’s Annual
Report is fair, balanced and understandable.
Taxation
The Committee regularly received updates on the Group’s tax matters and provisions for certain open tax items,
including tax matters in litigation. The Committee was satisfied that the level of provisioning adopted by
management was appropriate. See notes B3 and C7 of the IFRS financial statements. In 2022, the Committee
was also updated on the OECD proposals to reform international tax including the introduction of a global
minimum tax rate of 15 per cent likely to be effective from 2024.
The Committee received updates in November 2022 and February 2023 about the anticipated change in tax
residency of Prudential plc from the UK to Hong Kong, which became effective from 3 March 2023, as a
consequence of the strategic shift to being an Asia and Africa focused business.
Parent company financial statements
The Committee reviewed the parent company profit and loss account and balance sheet, which included the
recoverability of the parent company’s investment in subsidiaries by assessing and confirming that the net
assets of the relevant subsidiaries (being an approximation of their minimum recoverable amount) were in
excess of their carrying value at the balance sheet date.
FRC’s thematic reviews on TCFD and climate disclosures
The FRC’s Corporate Reporting Review (CRR) team carried out a limited scope review of the Group’s TCFD
disclosures and disclosures of climate in the 2021 Annual Report. The review is based solely on the Annual
Report and does not benefit from detailed knowledge of Prudential’s business or an understanding of the
underlying transactions entered into. Following completion of the review, the Committee was provided with a
letter from the FRC’s CRR team and was pleased to note that no questions or queries were raised by the FRC. In
preparing its 2022 Annual Report, the Group has taken account of a number of improvements applicable to all
companies following the thematic review alongside suggestions made to the Group by the FRC following its
review.
External audit
External audit effectiveness
The Group’s current external auditor is KPMG and oversight of the relationship with KPMG is one of the
Committee’s key responsibilities. Matters considered by the Committee in the year included:
> The detailed audit strategy for the year, approach to risk assessment and coverage of the audit response to
highlighted significant risks;
> Their approach to Group materiality setting and their proposal on how that is applied to the individual
business units;
> Insight around the key accounting judgements and the way KPMG applied constructive challenge and
professional scepticism in dealing with management; and
> The outcome of management’s internal evaluation of the auditor, which was based on a questionnaire
survey circulated to the Committee members, independent members of the audit committees of Material
Subsidiaries, the Group Chief Financial Officer and the Group’s senior financial leadership for completion.
The survey covered audit quality and execution, team performance, process and communication in relation
to the 2021 audit. In addition, the Committee discussed the results of the latest FRC review with KPMG,
including any implications for the Prudential audit and any actions being taken by KPMG to address these.
The Committee maintains an open dialogue on emerging risks and issues with the Group Lead Partner via a
regular schedule of meetings aligned to key reporting milestones. In 2022 the Committee formally met with the
Group Lead Partner without management present on two separate occasions.
The 2022 audit is expected to be the last one completed by KPMG. Following a tender process undertaken in
2020, the Board will recommend to shareholders that it appoints EY as the Group’s new auditors in 2023. This is
discussed further below.
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External Audit continued
Auditor independence and objectivity
The Committee has responsibility for monitoring auditor independence and objectivity and is supported in
doing so by the Group’s Auditor Independence Policy (the Policy). The Policy is approved annually by the
Committee. It sets out the circumstances in which the external auditor may be permitted to undertake
non-audit services and is based on four key principles which specify that the auditor should not:
> Have a mutual or conflicting interest with the Group;
> Audit its own firm’s work;
> Act as management or employees for the Group; or
> Be put in a position of being an advocate for the Group.
The Policy has two permissible service types: those that require specific approval by the Committee on an
engagement basis and those that are pre-approved by the Committee with an annual monetary limit capped
at no more than five per cent of the Group audit fee in the proposed year and capped at $65,000 individually.
The Policy also provides that the total fees payable to KPMG for non-audit services, other than those required by
law or regulation, shall be limited to no more than 70 per cent of the average audit fees paid in the past three
consecutive financial years. In accordance with the Policy, the Committee approved these permissible services,
classified as either audit or non-audit services, and monitored the usage of the annual limits on a quarterly
basis. Non-audit services undertaken by KPMG were agreed prior to the commencement of work, except as
noted below, and were confirmed as permissible for the external auditor to undertake in accordance with the
Policy which complies with the rules and regulations of the FRC’s Revised Ethical Standard (2019), the US
Securities and Exchange Commission (SEC) and the standards of the Public Company Accounting Oversight
Board (PCAOB).
The Committee monitored the nature and extent of non-audit services on a regular basis to ensure the provision
of non-audit services complied with the Group’s Policy and did not impair the auditor’s objectivity or
independence. The Committee noted that KPMG typically only performed non-audit services where they
complemented its role as external auditor, for example the review of half year and EEV financial statements or
additional assurance to support capital market requirements.
In keeping with professional ethical standards, KPMG confirmed its independence to the Committee and set out
the supporting evidence for its conclusion in a report that was considered by the Committee prior to publication
of the financial results. Included in this review, KPMG advised the Committee that, as covered in their audit
report, two KPMG member firms have provided services in connection with the preparation of local statutory
accounts and their translation into a different language. These services were provided to three of the Group’s
subsidiaries for either no or a nominal additional fee. The entities concerned were not individually significant to
the Group’s audit, the services did not involve management decisions and were provided after the Group audit
opinion was signed in the years concerned. The Committee agreed with KPMG’s assessment that this has not
impaired their integrity or objectivity. The Committee asked management to ensure suitable reminders were
shared with local teams and that they engaged with the incoming auditor to ensure procedures were sufficiently
robust to identify such services before they took place.
In line with the FRC’s Ethical Standard, the rules and regulations of the SEC and the standards of the PCAOB, a
new KPMG Group Lead Partner, Stuart Crisp, was appointed for the 2022 audit following completion of a five
year term by the prior lead partner at the end of the 2021 reporting cycle.
The Committee will continue to monitor developments to ensure the Group’s policies and processes around
audit effectiveness and independence evolve in line with market practice. During 2022 it also approved fees
payable to EY under the same policy, where applicable, to ensure the firm is independent prior to being
recommended for appointment as the Group’s auditor at the 2023 AGM.
Fees paid to the external auditor
The fees paid to KPMG for the year ended 31 December 2022 amounted to $10.9 million (2021: $15.5 million)
of which $3.3 million (2021: $6.5 million) was total amounts payable in respect of non-audit services, except
those required by law and regulation, as defined by the FRC’s Revised Ethical Standard (2019). A breakdown of
the fees payable to KPMG can be found in note B2.4 of the IFRS financial statements. The ratio of non audit
fees for the Group in 2022 over the average of audit fees for the past three years is 31 per cent (2021:
51 per cent) for the Group, 39 per cent (2021: 19 per cent) below the 70 per cent cap set by the FRC.
Total non-audit service fees that are subject to non-audit fee cap in 2022 were $3.3 million (2021: $4.4 million
excluding one-off amounts related to the demerger of Jackson and the public offering of equity shares in Hong
Kong). The 2022 services associated with this amount included the review of the Group’s half year financial
statements and EEV disclosures and assurance work performed by KPMG in connection with Prudential’s debt
programme and other internal assurance work.
In all these cases, the audit firm was considered the most appropriate to carry out the work, given its knowledge
of the Group and the synergies that arise from running these engagements alongside its main audit.
All non-audit services were pre-approved by the Committee and were in line with the Policy discussed above.
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Committee reports / Audit Committee report / continued
Principal activities and significant issues considered by the Audit Committee during 2022
External Audit continued
Whistleblowing
Internal audit
Appointment of the external auditor
KPMG was appointed in 1999 and since 2005, the Committee has annually considered the need to retender the
external audit service. Following the competitive tender process in 2020, the Board resolved that it intends to
recommend EY for appointment for the year ending 31 December 2023 onwards, subject to shareholders’
approval at the 2023 AGM. Full details of the tender process were included in the 2020 Annual Report, including
the two firms recommended by the Committee and how the firms were evaluated.
Transition to the new auditor has commenced. EY has been providing assurance work in connection with
the Group’s IFRS 17 project and through this work regularly attends Committee meetings and meets with
senior members of the financial leadership. EY has confirmed its independence to the Committee and the
Committee has reaffirmed its view that the Board should recommend EY be appointed as the Group Auditor
at the 2023 AGM.
Throughout the 2022 financial year, the Company has complied with the provisions of the Statutory Audit
Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 issued by the UK Competition and Markets Authority.
Speak Out
The Group continues to operate a Group-wide whistleblowing programme (‘Speak Out’), hosted by an
independent third party (Navex). The Speak Out programme received ad hoc reports from a wide variety of
channels, including a web portal, hotline, email and letters. Reports are captured, confidentially recorded by
Navex, and triaged by Group Security Investigations prior to investigation by the appropriate teams.
The Committee is responsible for oversight of the effectiveness of the Group’s whistleblowing arrangements.
The Committee received regular reports on the most serious cases and other significant matters raised through
the programme and the actions taken to address them. The Committee was also briefed on emerging Speak
Out trends and themes, causal factors and post-investigation remediation. The Committee may, and has,
requested further reviews of particular areas of interest.
Through an Annual Speak Out Report and quarterly updates, the Committee reviews the Group’s Speak Out
programme, satisfying itself that it continues to comply with legal, regulatory and governance requirements.
The Committee also considered the consistency of approach adopted across subsidiary audit committees,
where locally recorded Speak Out events, themes and trends are also briefed and considered. The Speak Out
programme has been further strengthened during the year by the management level committees. Where
relevant, the Committee requested information on the sharing of lessons learned.
The Committee Chair and Committee spend time privately, with the Group Chief Risk and Compliance Officer
and Group Chief Security Officer, to ensure that investigations were adequately resourced and appropriately
managed, that there had been no retaliation against anyone making a report and that investigations were not
improperly influenced and to understand outcomes of investigations.
An annual assessment of Speak Out arrangements is undertaken by an independent UK based Whistleblowing
Charity (‘Protect’) and benchmarked against peers. The assessment confirmed that the Group’s programme
continued to perform well and in accordance with best practice.
Regular reporting
The Committee received regular updates from Group-wide Internal Audit (GwIA) on audits conducted and
management’s progress in addressing audit findings within agreed timelines. Any delays in implementing
remediation actions were escalated to the Committee and given particular scrutiny.
The independent assurance provided by GwIA formed a key part of the Committee’s deliberations on the
Group’s overall control environment. During 2022, the areas reviewed included: transformation and change
management; financial controls; outsourcing and third-party supply; customer outcomes; cyber security and IT
risk; compliance and regulatory; and the second line.
The Group Chief Internal Auditor reports functionally to the Committee Chair and has direct access to the Chair
of the Board and to the Chief Executive Officer. For administrative purposes (excluding strictly all audit related
matters), the Group Chief Internal Auditor has a reporting line to the Group Chief Risk and Compliance Officer.
In addition to formal Committee meetings, the Committee meets with the Group Chief Internal Auditor in
private to discuss matters relating to, for example, the effectiveness of the internal audit function, significant
audit findings and the risk and control culture of the organisation.
The Committee Chair also meets with GwIA’s Quality Assurance Director to discuss the outcome of the quality
reviews of GwIA’s work and actions arising.
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Internal audit continued
Annual internal audit plan and focus for 2023
GwIA operates a rolling six-month approach to audit planning. The Committee approved the plan for the
second half (H2) of 2022. It also considered and approved the Internal Audit Plan, resource and budget for the
first half (H1) of 2023.
The H1 2023 Internal Audit Plan was formulated based on a bottom-up risk assessment of audit needs mapped
against various metrics combined with top-down challenge. The plan was then mapped against a series of risk
and control parameters, including the top risks identified by the Risk Committee, to verify that it is appropriately
balanced between financial, business change, regulatory and operational risk drivers and provides appropriate
coverage of key risk areas and audit themes within a risk-based cycle of coverage. Key areas of focus for H1 2023
include: strategic change initiatives; customer outcomes; cyber security; financial risk and financial controls;
culture; outsourcing and regulatory compliance.
Effectiveness of internal audit
The Committee is responsible for approval of the GwIA charter, audit plan, resources, and for monitoring the
effectiveness of the function.
The Committee also assesses the effectiveness of GwIA through a combination of External Quality Assessment
(EQA) reviews, required every five years, and an annual internal effectiveness review.
In Q4 2021, Deloitte performed an EQA of GwIA, which assessed GwIA as a mature function that ‘Generally
Conforms’ (the highest rating under the framework) with the Institute of Internal Audit International
Professional Practices Framework and Internal Audit Financial Services Code of Practice (the Standards), and
with the approach to meeting the requirements and expectations of the Hong Kong IA including the GWS
framework. The assessment also considered GwIA’s purpose, position, processes and reporting in the context of
the Group’s wider systems of governance.
Having considered the findings of the EQA, which was reported to the Committee in February 2022, and the
2022 Internal Effectiveness review, performed by the GwIA Quality Assurance Director, the Committee
concluded that GwIA had continued to operate independently of management and in compliance with the
requirements of GwIA delegated authorities, procedures and practice standards in all material respects and had
remained aligned to mandated objectives during 2022.
Internal control and
risk management
Internal control and risk management systems
The Committee is responsible for reporting and making recommendations to the Board on the effectiveness of
the Group’s system of risk management and internal control.
The Committee considered the outcome of the annual review of the system of risk management and internal
control. The review identified specific areas for improvement and the necessary actions that have been, or are
being, taken.
Group Governance Manual
The Group Governance Manual (the Manual) sets out the general principles by which we conduct our business
and ourselves and defines our Group-wide approach to Governance, Risk Management and Internal Control.
Incorporating our Group Code of Business Conduct, the Manual sets out the general principles by which we
conduct our business and ourselves. Each business attests annually to compliance with:
> Mandatory requirements set out in Group-wide policies, including the Group Code of Business Conduct; and
> Matters requiring prior approval from those parties with delegated authority.
The Committee reviewed the results of the annual content review of the Manual and the results of the year-end
compliance attestation for the year ended 31 December 2022.
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Committee’s purpose
The Committee’s purpose is to assist the Board in providing
leadership, direction and oversight of the Group’s overall risk
appetite, tolerance and strategy. It oversees and advises the
Board on the current and potential risks to the Group, reviews and
approves the Group’s risk management framework, and monitors
its effectiveness and adherence to the various risk policies.
More information on the Risk Committee can be
found in its terms of reference, which are available
at www.prudentialplc.com
Membership and 2022 meeting attendance
Committee members
2022 meetings1,5
Jeremy Anderson, Chair
David Law
Ming Lu2
George Sartorel3
Alice Schroeder4
Tom Watjen
Jeanette Wong
7/7
7/7
7/7
5/5
3/3
7/7
6/7
Regular attendees
> Chair of the Board
> Chief Executive Officer
> Group Chief Risk and Compliance Officer
> Group Chief Financial Officer
> Company Secretary
> Group Chief Internal Auditor
Members of the Group Risk Leadership Team are invited to attend
each meeting as appropriate.
Notes
1 The Committee held four joint meetings with the Risk Committee, in addition to the
seven Risk Committee meetings. All members attended the joint meetings.
2 Ming Lu stepped down from the Risk Committee on 1 May 2022.
3 George Sartorel joined the Risk Committee on 1 May 2022.
4 Alice Schroeder stepped down from the Board following the conclusion of the AGM held
on 26 May 2022.
5 Arijit Basu attended one of the meetings as an observer, as part of his induction
programme.
Risk Committee
report
The Committee has continued to provide the
Board with strategic leadership, direction and
oversight of the multi-faceted and often
inter-connected risks for the Group in a year
of uncertainty and volatility.
Jeremy Anderson
Chair of the Risk Committee
Dear shareholders
As Chair of the Risk Committee, I am pleased to report on the
Committee’s activities and focus during 2022. The Committee
considered the challenges presented by the confluence of
macroeconomic volatility, geopolitical tensions and Covid-19, with
specific focus on the management of non-financial risks that may
impact operational resilience and lead to reputational risk, such
as those associated with third parties and outsourcing, customer
conduct and technology risk. Moreover, the Committee has made
people a first-order focus, in recognition of the many demands on
resources across the Group.
The key risks and matters considered by the Committee are
summarised in this letter, with further information included in the
table below. In areas where risks are strategic or have broader impact,
the Risk Committee escalates to the Board for a wider discussion.
Committee operation and governance
As part of its duties detailed above, the Committee reviews the Group
Risk Framework (GRF) to ensure that it remains effective in identifying
and managing the risks faced by the Group and recommends
changes for approval by the Board. We considered and approved the
Risk, Compliance and Security (RCS) function’s planned activities for
2022 and received regular reports from the Group Chief Risk and
Compliance Officer (CRCO), who is advised by the Group Executive
Risk Committee (GERC). We also received regular reports from the
GwIA function and updates from other areas of the business as
needed.
The Committee works closely with the Audit Committee to ensure
both committees are updated and aligned on matters of common
interest, and I report to the Board on the main matters discussed.
Commencing in the second half of 2022, the CRCOs of the Group’s
Material Subsidiaries have been invited to present to the Committee
on a rotational basis, to help deepen the Committee’s understanding
of risks relevant to the local businesses. Regular direct communication
and close cooperation with each of the Material Subsidiary risk
committee chairs remains a key component of our governance
framework, and at each meeting I update the Committee on
important points raised at local level. In order to continue to foster a
close working relationship with the local audit and risk committees
and deepen understanding of Group-wide risk topics, David Law and
I chaired a conference attended by the non-executive directors of the
Group’s Material Subsidiaries.
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The effectiveness of the Committee was reviewed as part of the
annual Board evaluation, which confirmed that the Committee
continued to operate effectively during the year, with actions agreed
where necessary to improve its effectiveness.
Risk appetite and principal risks
a. Risk governance, capital and liquidity
The Committee performed its regular review of the Group’s risk
policies and proposed changes to the Group risk appetite statements
and associated limits. We regularly reviewed the strength of our
capital and liquidity positions, including the results of stress and
scenario analyses.
b. The Group’s principal risks
The Committee considered the principal risks to the Group’s financial
viability, operational resilience and sustainability. These included the
long-term macroeconomic impacts of Covid-19, geopolitical tensions,
inflationary pressure, rising interest rates and slowing economic
growth. Risks associated with the Group’s digital transformation and
sustainability agenda were also considered. The Committee reviewed
the Group’s annual Own Risk and Solvency Assessment (ORSA) report
in May 2022 and in-depth reviews were performed on existing and
emerging high-risk areas. A fuller explanation of the principal risks
facing the Group and the way in which these are managed is set out
in the Risk Review on pages 49 to 63.
Sustainability, including climate change risk
In July 2022, oversight responsibilities for environmental and
climate-related issues, including the ongoing implementation of the
Group’s external commitments to the decarbonisation of its
operations and investment portfolio and other climate-focused
external responsible investment commitments were transferred to
the Committee. The Committee’s terms of reference were changed to
reflect its holistic role in overseeing these areas. Building on changes
implemented in 2021, the embedding of ESG considerations into the
GRF continued during the year, such as explicitly including
consideration of risks in the context of the time horizon of expected
benefits/paybacks of decisions within core strategic processes where
‘risk-based decision-making’ must be incorporated. Time horizons for
the purposes of climate disclosures have been defined and included
in the GRF.
Digital and technology risks
The Committee received regular updates on the key risks associated
with technology across the Group, including notable incidents,
regulatory developments, governance and strategy, as well as
developments in the global cybersecurity threat landscape such as
the rise in prominence of ransomware, and the progress of cyber-
attack simulation exercises with senior executives and readiness
training across the Group.
Joint sessions of the Risk Committee and Audit Committee were held
in May and July 2022 covering updates on the Group Data Policy and
data governance process, as well as the cybersecurity and privacy
posture across businesses, respectively.
In the backdrop of heightened risks involving IT service areas
managed by third parties, a deep dive was performed and the
Committee received regular updates on the improvement plans.
Customer conduct risk
Treating customers fairly, honestly and with integrity remains a key
focus area of the Group and the Committee. In addition to receiving
regular updates, a joint session of the Risk and Audit Committees in
September 2022 was dedicated to customer conduct risk, where the
Committee considered the implementation and actions relevant to
the continuous developments in the Group’s conduct risk framework.
Going forward, the Committee will work with the Audit Committee
and the Responsibility & Sustainability Working Group (RSWG) on
matters relating to customer conduct risk.
Model risk
Following the review that I led in 2021 on the oversight and
governance arrangements of the Group’s critical models, a number of
enhancement actions have been taken throughout the year at Group
and business unit level. In February 2022, the Committee updated its
terms of reference to expand the model risk oversight expectations
and responsibilities and similar changes were implemented in the
Group’s Material Subsidiaries. Relevant model risk training has
been presented to the Committee and executive members of these
subsidiaries to facilitate effective oversight. The Committee also
received updates on model risk developments across the Group,
including areas of risk, controls in place and validation activity.
The Committee received regular updates on the Group internal
economic capital assessment (GIECA) model results in 2022, prior to
submission to the Hong Kong Insurance Authority (HKIA). The
updates considered key assumptions, the governance framework and
validation activity for the GIECA model. The Committee focused on
the use of the GIECA model which provides a consistent risk and
return lens for capital allocation and decision making across various
business processes including business planning, product pricing,
strategic business decision and remuneration management. We also
considered the approach and the application of the Risk-Based
Capital (RBC) regime for our Hong Kong business and received
regulatory approval for early adoption in April 2022.
I would like to take this opportunity to thank my fellow Committee
members and Prudential’s RCS function, both at Group and business
unit level, in supporting the crucial work of the Committee in the
midst of a complex macroeconomic, geopolitical and regulatory
environment.
Jeremy Anderson
Chair of the Risk Committee
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Principal activities and significant issues considered by the Risk Committee during 2022
Risk management
Group principal risks, including Group Chief Risk and Compliance Officer (CRCO) reporting
The Committee evaluated the Group’s principal risks, considering recommendations for promoting additional
risks and changes in the scope of existing risks. The Committee also received regular reporting on the Group’s
exposure to, and management of, its principal risks, emerging risk themes and external developments within the
Group CRCO’s regular report to the Committee. Further information on how the Group identifies emerging and
principal risks can be found in the Risk Review.
The Group CRCO’s reports also provided the Committee with regulatory updates, including the implications of
the developing global capital standards, systemic risk regulation, engagement with the regulators (including the
Supervisory College) and the Group’s ongoing compliance with the Group-wide Supervision Framework (GWS
Framework).
Covid-19 related risks
While most markets have moved to an endemic approach in managing Covid-19, the developments and risks
have been continuously monitored by the Committee including the ongoing resilience, and the level of mortality
claims and policy lapses or surrenders in certain markets.
Deep dives
As part of its risk oversight responsibilities, the Committee considered the results of ‘deep dive’ risk reviews
performed over the year.
In 2022, these focused on the risks related to the Group’s Artificial Intelligence (AI) ethics and governance
framework; agency sales practices and risk management in Indonesia; the Group’s data privacy governance
framework; IT service management areas managed by third parties; the Group’s debt investment portfolio
covering exposures to China property development sector and sub-investment grade debt; and the Group’s
interest rate risk exposures and asset liability management. The Committee also considered the progress made
in managing and addressing money laundering, fraud, bribery and corruption risks.
Transformation oversight and people risk
The Committee monitored the progress of the Group’s key strategic projects during the year which, in addition
to those outlined in the letter above, included activities focused on IFRS 17 implementation and IBOR cessation.
The Committee received regular updates on elevated people risk and mitigating actions. The Group is
undergoing significant transformation and we noted the importance of management balancing the need
to look after people whilst maintaining focus on desired outcomes. The Committee was updated on several
people initiatives, including fostering better flexibility, inclusivity and psychological safety in the workplace to
deepen belonging.
Outsourcing management and third-party oversight
The Committee received regular updates on the Group’s supplier and third party oversight and Joint Ventures
(JVs). In May 2022, the Committee considered third parties, JVs and outsourcing management as part of
the ORSA report, and approved the list of the Group’s material outsourcing arrangements prior to submission
to the HKIA.
Technology risk
During 2022, updates were provided to the Committee on key external developments relevant to information
security and data privacy, including changes in regulations and the external threat landscape. The Committee
received regular progress updates on the operationalisation of the Group-wide governance model and strategy
for the management of information security and data privacy risks, as well as material incidents and
improvement plans.
Two joint sessions of the Risk Committee and Audit Committee in May and July 2022 were dedicated to
cybersecurity and data/privacy, where the Committees considered the matters detailed in the letter above.
Sustainability, including climate change, risk
Updates to the oversight responsibilities of the Committee and the continued embedding of climate risk
considerations into the GRF have been detailed in the letter above.
The Committee received regular updates on key climate-related regulatory and legislative developments,
including those in respect of disclosure requirements, progress against the Group’s responsible investment
commitments, its ESG ratings by external assessors and agencies, as well as the Group’s participation in industry
fora, such as the Net Zero Asset Owner Alliance, and consultations, including that of the International
Sustainability Standards Board on its proposed standards for general sustainability and climate-related
disclosure requirements. In November 2022, a joint update by RCS and the ESG team to the Committee covered
development plans for the Group’s reporting against TCFD recommendations and the results of an exercise to
map out the material climate and climate-commitment-related activities to support the Committee’s plan with
respect to its updated responsibilities within the broader ESG Strategic Framework and the ongoing
implementation of the Group’s external climate-focused commitments.
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Prudential plc Annual Report 2022 Principal activities and significant issues considered by the Risk Committee during 2022
Risk management continued
Regulatory and
compliance matters
Remuneration
The Committee has a formal role in the provision of advice to the Remuneration Committee on risk
management considerations in respect of executive remuneration. It considered risk management
assessments of proposed executive remuneration structures and outcomes during the year, making related
recommendations to the Remuneration Committee for its consideration. In September 2022, the Committee
recommended to the Remuneration Committee to approve the use of GIECA in setting remuneration targets.
Stress and scenario testing
The Committee is responsible for reviewing the outcome and results of stress and scenario testing, which is a key
risk identification and measurement tool for the Group.
Stress and scenario testing is a key component of the Group’s ORSA process and the Risk Assessment of the
Business Plan, as described below, as well as its Recovery Planning and Reverse Stress Testing (RST).
The Group’s Recovery Plan, considered by the Committee in July 2022, included an assessment of the viability
and operational resilience of the Group under severe financial and non-financial shock scenarios, and actions
available to the Group to restore its financial strength in such circumstances. The Plan concluded that the Group
is expected to remain in a resilient financial and operational condition when under severe stress, with only a very
extreme scenario breaching the Group’s recovery activation measures, and that established governance
frameworks and procedures are in place for senior management to respond to actual and potential threats.
Risk assessment of the Business Plan
As part of its role in overseeing and advising the Board on future risk exposures and strategic risks, the
Committee reviewed the Risk Assessment of the Business Plan, which highlighted key financial and non-financial
risks. The analysis reviewed included sensitivity assessments of the impact of various plausible scenarios.
Model risk management
The Committee received regular updates on the enhancement of the oversight and governance arrangements
which operate for the Group’s critical models, see details in the letter above. Recommendations were made in
2021 relating to 1) the central role of management in overseeing models; 2) the oversight expectations and
responsibilities for the Audit and Risk Committees at Group and business unit level; and 3) the development of
guidance and training to support committees in their roles in an appropriately consistent manner. These
recommendations were acted on in 2022 and changes and improvements have been made in all three areas.
GWS Framework
In May 2022, the Committee received confirmation of the completion of all agreed GWS transitional
arrangements. The Committee received regular updates on the ongoing assurance processes in compliance
with the GWS Framework with its wider responsibilities for compliance oversight.
Compliance and regulatory change
The Committee received regular reporting on key regulatory compliance risks and mitigation activities across
the Group’s businesses throughout the year, covering regulatory changes, reviews and interventions, including
those relating to money laundering, sanctions and geopolitical risks.
In addition to those outlined in the letter above, we also received regular updates on the Group’s customer
conduct risk metrics.
Group-wide Internal Audit
The Committee received updates from GwIA throughout the year relating to matters which fall within the scope
of its responsibilities.
Risk and compliance
framework
Annual review of risk policies, risk framework compliance and Committee effectiveness
The GRF and risk policies were subject to their annual review, with amendments made to ensure the policies
remained fit for purpose and reflect developments within the Group. The Board approved the changes
recommended by the Committee.
The Committee reviewed the results of the annual Group Governance Manual year-end compliance attestation
performed by the business units against the GRF and associated policies.
In February 2022, the Committee considered the findings of the annual evaluation of Committee effectiveness,
agreeing actions where necessary to improve Committee effectiveness. In November 2022, the Committee
reviewed the actions taken in respect of how the Committee focuses its time and considered that the key areas
of focus for 2022 had been adequately covered. In March 2023, it also considered the effectiveness of the RCS
function in overseeing the key risks to the Group.
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Principal activities and significant issues considered by the Risk Committee during 2022
Risk and compliance
framework continued
Group Risk Appetite and Limits
The Committee is responsible for recommending changes in the Group’s overall risk appetite and tolerance to
the Board for approval.
In July 2022, the Committee recommended for approval by the Board proposed recalibration of the Group Risk
Appetite capital targets to ensure their continued appropriateness. In November 2022, as part of the annual
review of Group Risk Limits, we approved a recalibration of Limits and Triggers on duration mismatches to reflect
more recent market conditions. We also approved a decrease in the Group’s capital counter-cyclical buffer
reflective of the assessed cycle position back to a more neutral position compared to the mid-to-late economic
cycle assessed in Q4 2021.
The Committee received regular reporting throughout the year on any appetite breach of the Group’s non-
financial risk appetite.
External and regulatory
reporting
ORSA
The ORSA is a key ongoing process for identifying, assessing, controlling, monitoring and reporting the risks to
which the Group is exposed and assessing capital adequacy over the business planning horizon.
In May 2022, the Committee considered the Group’s ORSA report, based on the Business Plan, prior to its
approval by the Board and submission to the HKIA.
Systemic Risk Management
In July 2022, the Committee considered the Group’s Recovery Plan and Liquidity Risk Management Plan and
recommended them for approval by the Board.
Group Internal Economic Capital Assessment (GIECA)
The Committee received the regular bi-annual updates on the GIECA results in May and November 2022, prior
to submission to the HKIA. The updates also covered the governance framework and validation activity for the
GIECA model. In November 2022, we approved the proposed changes to the GIECA risk modelling assumptions
for FY 2022 reporting.
The Committee received updates on the use of the GIECA model for business decision making in May and July
2022.
Hong Kong Risk-Based Capital regime (HK RBC)
In February 2022, the Committee considered the planned application for early adoption of the Hong Kong RBC
framework by the Group’s Hong Kong business which received HKIA approval in April 2022.
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Financial reporting
The Directors have a duty to report to shareholders on the
performance and financial position of the Group and are responsible
for preparing the financial statements on pages 282 to 358 and the
supplementary information on pages 378 to 398.
It is the responsibility of the auditor to form independent opinions,
based on its audit of the financial statements and its audit of the EEV
basis supplementary information, and to report its opinions to the
Company’s shareholders and to the Company. Its opinions are given
on pages 359 to 375 and pages 399 to 401.
Company law requires the Directors to prepare financial statements
for each financial year that give a true and fair view of the financial
affairs of the Company and of the Group. The criteria applied in the
preparation of the financial statements are set out in the Statement
of Directors’ responsibilities on page 358. Company law also requires
the Board to approve the Strategic report.
In addition, the UK Code requires the Directors’ statement to state
that they consider the Annual Report and financial statements, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
The Directors are further required to confirm that the Strategic report
includes a fair review of the development and performance of the
business, with a description of the principal risks and uncertainties.
Such confirmation is included in the Statement of Directors’
responsibilities on page 358.
The Strategic report provides, on pages 10 to 175 , a description of
the Group’s capital position, financing and liquidity. The risks facing
the Group’s business are discussed in the Risk review section on pages
49 to 65.
The Directors who held office at the date of approval of this Directors’
Report confirm that, so far as they are each aware, there is no relevant
audit information of which the Company’s auditor is unaware; each
Director has taken all the steps that he or she ought to have taken as
a Director to make himself or herself aware of any relevant audit
information and to establish that the Company’s auditor is aware of
that information. This confirmation is given and should be interpreted
in accordance with the provisions of Section 418 of the Companies
Act 2006.
Going concern
In accordance with the guidance issued by the Financial Reporting
Council in September 2014, ‘Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting’ after making
sufficient enquiries, the Directors have a reasonable expectation that
the Company and the Group have adequate resources to continue
their operations for a period of at least 12 months from the date that
the financial statements are approved. Further information is
provided in note A1 on page 288.
Powers of the Board
The Board may exercise all powers conferred on it by the Company’s
Articles of Association and the Companies Act 2006. This includes
the powers of the Company to borrow money and to mortgage or
charge any of its assets (subject to the limitations set out in the
Companies Act 2006 and the Company’s Articles of Association) and
to give a guarantee, security or indemnity in respect of a debt or other
obligation of the Company.
Rules governing the appointment of Directors
The appointment and removal of Directors is governed by the
provisions in the Articles of Association, the UK Code, the HK Code (as
appended to the Hong Kong Listing Rules) and the Companies Act
2006.
Director indemnities
Subject to the provisions of the Companies Act 2006, the Company’s
Articles of Association permit the Directors and officers of the
Company to be indemnified in respect of liabilities incurred as a result
of their office. Suitable insurance cover is in place in respect of legal
action against directors and senior managers of companies within
the Group.
Qualifying third-party indemnity provisions are also available for the
benefit of the Directors of the Company and such other persons,
including certain directors of other companies within the Group.
These indemnities were in force for 2022 and remain so.
Contract of significance
At no time during the year did any Director hold a material interest in
any contract of significance with the Company or any subsidiary
undertaking.
Securities dealing and inside information
Prudential has adopted securities dealing rules relating to
transactions by Directors on terms no less exacting than required by
Appendix 10 to the HK Listing Rules and by relevant UK regulations.
Having made specific enquiry of all Directors, the Directors have
complied with these rules throughout the period. The Group has
adopted an Information Sharing and Securities Dealing Policy, which
includes guidance and procedures for the identification,
dissemination and escalation of inside information as well as
appropriate controls on the disclosure of such information in line with
regulatory requirements.
All staff are made aware of the policy and receive communications
reminding them of their obligations when they work on any
confidential matters in the business or are notified when the
Company enters or exits a closed period.
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Requirements of Listing Rule 9.8.4
Information to be included in the Annual Report and Accounts under
UK Listing Rule 9.8.4 may be found as follows:
Listing Rule
Description
9.8.4 (4)
9.8.4 (7)
Details of long-term incentive
schemes required by Listing Rule 9.4.3
Details of allotments of equity
securities for cash
9.8.4 (10)
Contracts of Significance involving
a Director
9.8.4 (12)
Details of shareholder waiver
of dividends
9.8.4 (13)
Details of shareholder waiver of
future dividends
Page
247
335
223
448
448
US regulation and legislation
As a result of its listing on the New York Stock Exchange, the Company
is required to comply with the relevant provisions of the Sarbanes-
Oxley Act 2002 as they apply to foreign private issuers and have
adopted procedures to ensure such compliance. In particular, in
relation to Section 302 of the Sarbanes-Oxley Act 2002 which
covers disclosure controls and procedures, a Disclosure Committee
has been established, reporting to the Chief Executive Officer, chaired
by the Group Chief Financial Officer and comprising members of
head office management. The work of the Disclosure Committee
supports the Chief Executive Officer and Group Chief Financial Officer
in providing the certifications regarding the effectiveness of the
Group’s disclosure procedures.
Hong Kong IA GWS public disclosures
Under the GWS Framework, the Group is required to provide publicly
certain risk, capital and other disclosures. These GWS public disclosure
requirements, as set out in the Guideline on Group Supervision (GL32)
and Insurance (Group Capital) Rules issued by the Hong Kong IA, are
met by certain disclosures within this Annual Report and Accounts.
Change of control
Under the agreements governing Prudential Corporation Holdings
Limited’s life insurance and fund management joint ventures with
China International Trust & Investment Corporation (CITIC), if there
is a change of control of the Company, CITIC may terminate the
agreements and either, (i) purchase the Company’s entire interest in
the joint venture or require the Company to sell its interest to a third
party designated by CITIC, or (ii) require the Company to purchase all
of CITIC’s interest in the joint venture. The price of such purchase or
sale is to be the fair value of the shares to be transferred, as
determined by the auditor of the joint venture.
Customers
The five largest customers of the Group constituted in aggregate
less than 30 per cent of its total revenue from sales for each of 2021
and 2022.
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Prudential plc Annual Report 2022 Index to principal Directors’ report disclosures
Information required to be disclosed in the Directors’ report may be found in the following sections:
Information
Section in Annual Report
Page number(s)
Disclosure of information to auditor
Statutory and regulatory disclosures
Directors in office during the year
Board diversity
ESG report
Employment practices
Greenhouse gas emissions
Charitable donations
Political donations and expenditure
Remuneration Committee report
Directors’ interests in shares
Agreements for compensation for loss of office
or employment on takeover
Board of Directors
Governance report
ESG report
ESG report
ESG report
ESG report
ESG report
Directors’ Remuneration Report
Directors’ Remuneration Report
Directors’ Remuneration Report
Details of qualifying third-party indemnity provisions
Governance report
Internal control and risk management
Governance report and Strategic report
Powers of Directors
Rules governing appointment of Directors
Significant agreements impacted by a change of
control
Governance report
Governance report
Governance report
Future developments of the business of the Company
Strategic and operating review
Post-balance sheet events
Note D3 of the notes on the Group financial statements
Rules governing changes to the Articles of Association
Shareholder information
Structure of share capital, including changes during
the year and restrictions on the transfer of securities,
voting rights, power to purchase own shares and
significant shareholders
Shareholder information, Governance report and note C8 of the
notes on the Group financial statements
Business review
Changes in borrowings
Dividend details
Financial instruments
Group overview and Strategic report
Financial review and note C5 of the notes on the Group financial
statements
Group overview and Strategic report
Strategic report and Additional information
Corporate governance statement including
compliance with the Code
Fostering the Company’s business relationships
Monitoring culture
Governance report
ESG report
ESG report
Details of how directors have regard to stakeholders
Strategic report
Details of the Company’s approach to investing in
and rewarding its workforce
ESG report
181 to 187
208
67 to 175
67 to 175
67 to 175
67 to 175
67 to 175
228 to 279
228 to 279
228 to 279
223
202 to 203
and 49 to 65
223
223
224
17 to 33
341
447
335
4 to 175
330 to 331
4 to 175
10 to 175 and
319 to 322
190 to 191
67 to 175
67 to 175
10 to 175
67 to 175
In addition, the risk factors set out on pages 430 to 442 and the additional unaudited financial information set out on pages 404 to 429,
are incorporated by reference into the Directors’ report.
The Directors’ report is signed on behalf of the Board of Directors by
Tom Clarkson
Company Secretary
15 March 2023
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Directors’
remuneration
report
228 Annual statement from the Chair
of the Remuneration Committee
233 Our Executive Directors’ remuneration
234 Summary of proposed changes
at a glance
to the Directors’ remuneration policy
236 Annual report on remuneration
261 New Directors’ remuneration policy
276 Additional remuneration disclosures
226
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Prudential plc Annual Report 2022Prudential plc Annual Report 2022 Directors’
remuneration
report
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Group overviewStrategic reportGovernanceFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Prudential plc Annual Report 2022
Annual statement
from the Chair of
the Remuneration
Committee
Dear shareholder,
I am pleased to present our Directors’ remuneration report
for the year to 31 December 2022 on behalf of the members
of the Remuneration Committee.
This is the first time that I have presented this report having been
appointed as Chair of the Remuneration Committee at the 2022
Annual General Meeting (AGM). I would like to thank Anthony
Nightingale for his tremendous support as I took up this role. I also
wish to welcome Ming Lu, who joined the Committee in May 2022.
By way of preface, I would like to share the context for the key
decisions the Committee took during 2022 and to outline those
taken in respect of remuneration arrangements for 2023.
Remuneration decisions made in respect of 2022
Reflecting 2022 financial performance
Prudential’s executive remuneration arrangements reward the
achievement of Group, business, functional and personal targets,
provided that this performance is delivered within the Company’s
risk framework and appetites, and that the conduct expectations
of Prudential, our regulators and other stakeholders are met.
As described in the Strategic report section earlier in this Annual
Report, 2022 was the first full year for the Group as an Asia and
Africa orientated business. The Group delivered another resilient
performance against a backdrop of continued Covid-19-related
disruption and broader macroeconomic volatility. The results
reflect the advantage of our diversified business model across
the Asia region. The table opposite illustrates achievement of
our key financial objectives:
This report has been prepared to comply with Schedule 8 of the Large and Medium-Sized
Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), as well
as the Companies Act 2006, the Listing Rules and other related regulations.
The following sections were subject to audit:
Table of 2022 and 2021 Executive Director total remuneration (the ‘single figure’) and
related notes (including details of all fixed and variable remuneration elements shown
in the single figure table), Pension entitlements, Long-term incentives awarded in 2022,
Chair of the Board and Non-executive Director remuneration in 2022 and 2021, Statement
of Directors’ shareholdings and Payments to past Directors and payments for loss of office.
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Directors’ remuneration reportPrudential plc Annual Report 2022 Performance measures
Life new business profit from continuing operations
A measure of the future profitability of the new business sold during the year and an indicator
of the profitable growth of the Group.
New business profit accounted for 45 per cent of Group financial bonus targets.
Group performance ($m)1
2,443
2,184
Operating free surplus generated from continuing operations2
A measure of the internal cash generation of our businesses.
Operating free surplus generated accounted for 20 per cent of Group financial bonus targets.
Adjusted operating profit from continuing operations3
Prudential’s primary measure of profitability and a key driver of shareholder value.
Adjusted operating profit accounted for 25 per cent of Group financial bonus targets.
Net cash remitted by the business4
Cash flows across the Group5 reflect our aim of achieving a balance between ensuring sufficient
net remittances from business units to cover the dividend and responsibly managing corporate
costs to allow for reinvestment in profitable opportunities.
A cash flow measure accounted for 10 per cent of the Group financial bonus targets
2021
2022
1,374
1,135
2021
2022
3,117
3,375
2021
2022
1,451
1,304
2021
2022
Notes
1
2
3
4
5
Group performance and growth rates shown on a constant exchange rate basis.
For insurance operations, operating free surplus generated represents amounts maturing from the in-force business during the period less
investment in new business and excludes non-operating items. For asset management businesses, it equates to post-tax operating profit for the year.
In this report ’adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns from continuing operations.
2021 business unit remittances exclude remittances from discontinued remittances.
Group cash flow includes business unit remittances net of dividends and corporate costs.
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Annual statement from the Chair of the Remuneration Committee / continued
Life new business profit was 11 per cent lower than prior year on a constant exchange rate basis driven principally by economic headwinds and
Covid-19-related imposed restrictions.
Operating free surplus generation was 21 per cent higher than 2021 on a constant exchange rate basis.
2022 adjusted operating profit was 8 per cent higher than prior year on a constant exchange rate basis reflecting the performance outlined in the
Strategic report.
Business unit remittance levels were 10 per cent lower than 2021. Holding company cash was $3.1bn at the year end, after dividends, corporate
costs and strategic investment.
For all metrics, the 2022 performance has exceeded the adjusted stretch target as set out in the ‘Annual bonus outcomes for 2022’ section of the
Annual Report on remuneration.
The Group achieved these results while maintaining appropriate levels of capital and while operating within the Group’s risk framework and
appetites.
Reflecting stakeholders’ 2022 experiences
In reaching its decisions for 2022, the Committee considered the experience of the Group’s stakeholders, as set out below. More details about how
we’ve listened to our stakeholders and what the Group delivered in 2022 can be found in the ESG section of the Strategic report.
Our people
> As well as holding our second Group Wellness Day in August 2022,
we introduced the following wellness initiatives:
– We now have 350 Mental Health First Aiders across the Group.
These are certified employees who provide ongoing support to
colleagues in need.
– This is Me was launched on World Mental Health Day. Mark
FitzPatrick, other leaders, and colleagues shared their personal
stories to normalise conversations around mental health by
building an environment where people feel safe to talk, share
and heal.
> The Celebration Award announced in 2021 of $1,000 of
restricted shares made to our people around the world was
released in October 2022. This Award was to recognise the hard
work and commitment demonstrated by our people and to give
them a stake in the new chapter of the Company’s development.
> Given the inflationary pressures, cost of living payments have
been made to more lower-paid staff in the UK.
> During 2022, we continued to engage with our people including:
– Over 8,000 colleagues participated in the Company’s third
Collaboration Jam in September 2022 which explored themes
around building a collective sense of identity and belonging.
– Our fourth groupwide employee engagement survey was
conducted in January 2023. The 2023 People Survey has
achieved more than 95 per cent participation with a
4-percentage point improvement in overall engagement on our
last survey in December 2021. Prudential recorded an overall
engagement score of 79 per cent.
Suppliers
> Prudential is committed to ensuring that slavery, human trafficking,
child labour or any other abuse of human rights has no place in our
organisation or supply chain. Management continues to carry out
a range of activities to enhance the Group’s approach to modern
slavery, not least through the implementation of the responsible
supplier risk assessments and due diligence requirements within
the Group Third Party Supplier and Outsourcing Policy (GTPSO).
Investors
> Prudential plc was included as a constituent stock of the Hang
Seng Composite Index with effect from 5 September 2022. This
is a milestone for our primary listing in Hong Kong and means that
qualified investors in the Chinese Mainland now have direct access
to Prudential’s shares through the Shenzhen Stock Exchange.
> Engagement with investors: During 2022, 371 meetings were
held with 319 individual institutional investors in Asia, the US, UK
and Europe. Of these 371 meetings, 141 were attended by either
the Group Chief Executive or the Group Chief Financial Officer.
These meetings took a variety of forms including one-on-one and
group sessions, participation in panels, and walking tours
organised in some cases by brokers.
> Prudential’s TSR performance remains below the peer group
median; performance over the period 1 January 2020 to
31 December 2022 was -22.4 per cent while the median
performance of the peer group was 7.4 per cent.
Governments and regulators
> In August 2022, Prudential and AIA submitted a joint response to
the International Association of Insurance Supervisors’ (IAIS)
consultation on the draft criteria that will be used to calculate
group capital requirements, calling for the IAIS to consider the
Group Wide Supervision (GWS) approach, being developed by the
Hong Kong Insurance Authority.
> Throughout 2022, the Board engaged with the UK government’s
COP26 chair on key themes including their preparatory work
behind the scenes on the Vietnam Just Energy Transition
Partnership (JETP) and their work putting finance at the heart of
solutions. As we drew closer to COP27, we also engaged with the
UN infrastructure, especially the Climate Champions Team, the
Glasgow Financial Alliance for Net Zero and non-governmental
partners such as FSD Africa, ODI, Business Fights Poverty and CPI
as they planned their COP programmes. Prudential was
represented in Sharm el Sheik for COP27 by the Chief Operating
Officer of Prudential Africa.
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Prudential plc Annual Report 2022 Customers
> In April 2022, the Company was the first global insurer to set up a
standalone Syariah life insurance entity in Indonesia. The move
underscores our deep commitment to develop products and
services that are respectful of cultures and traditions in the markets
we serve.
> In October 2022, Prudential and Google Cloud announced a
strategic partnership to enhance health and financial inclusion for
communities across Asia and Africa. Under this alliance, Prudential
will leverage Google Cloud’s data analytics capabilities, secure and
sustainable infrastructure, and the broader Google ecosystem, to
accelerate its digital transformation and to enhance user
engagement of Pulse, our health and wealth platform.
> Our Made for Every Family initiative ensures that our coverage is
fully inclusive of how families live in 2022 in our different markets.
To support the needs of more diverse family types, customers can
now nominate a wider range of family members who are
financially dependent on them as a beneficiary in a life insurance
policy. Additionally, customers can buy insurance for family
members beyond those who are directly related. There is also more
flexibility to choose which family member can pay for the policy.
Society
> Diversity and inclusion: During 2022, we signed the UN Women’s
Empowerment Principles, Neurodiversity in Business membership
charter, HK Racial Diversity & Inclusion Charter, and are again listed
on the Bloomberg Gender Equality Index.
> Prudence Foundation continued to invest in our communities
during 2022. Highlights included:
– The Cha-Ching programme, which aims to raise financial literacy
in children aged seven to 12 years old in an entertaining and
engaging way, won both the 2022 Money Awareness & Inclusion
Award for Best Non-Profit in a Developing Economy and ‘ESG
Initiative of the Year – Hong Kong’ at the Insurance Asia Awards.
– Our global SAFE STEPS programme, which aims to provide
education, awareness and life-saving tips on climate and
disaster risk preparedness, and road safety reached over
100 million people in Asia and Africa via various media
partnerships in 2022.
– Finally, as the world recovers from the pandemic, further
investments were made in Prudential’s Covid-19 relief & recovery
Fund, bringing the total investment to US$6.5m since the Fund’s
launch in 2020.
> Climate change initiatives
Highlights included:
– In October 2022, we published our white paper setting out how
we support a Just and Inclusive Transition in our markets.
– The Emerging Markets Transition Investment (EMTI) project was
organised to identify solutions and provide recommendations to
accelerate investment towards the net-zero transition of emerging
and developing economies. We’re proud to have contributed to
this paper which is supported by the Net Zero Asset Owner
Alliance, the Sustainable Development Investment Partnership
(SDIP), and the EU-ASEAN Business Council.
– In September 2022, we announced that we had signed the 2022
Global Investor Statement to Governments on the Climate Crisis.
We joined other investors in urging governments to limit global
temperature rise to 1.5°C.
Rewarding 2022 performance
The Committee determined remuneration outcomes having considered the financial performance of the Group, its delivery to stakeholders and
the personal contribution of the executives.
As set out above, 2022 saw the Group perform strongly against its key operating profit and operating free surplus generation targets in the face of
continued difficult external conditions. The first part of 2022 saw continued Covid-19-related disruption in many of our markets as the Omicron
variant increased infection levels and associated social restrictions. Since this date, most markets have returned to more stable operating
conditions, albeit the border between the Chinese Mainland and Hong Kong remained closed throughout 2022. Moreover, the Group achieved
several significant strategic milestones as it continued to focus exclusively on Asia and Africa. This performance, combined with effective personal
leadership, resulted in overall bonus outcomes of between 96 per cent and 98 per cent for the Executive Directors. The Committee believes that
the bonuses it awarded for 2022 appropriately reflect underlying Group performance, individual and/or functional performance.
With respect to the 2020 Prudential Long Term Incentive Plan (‘PLTIP’), the Group has shown strong performance against the sustainability
scorecard targets and against its ROE targets. However, the portion of the awards related to Prudential’s total shareholder return (TSR) lapsed as
TSR performance was ranked below the median of the peer group. On this basis, the Committee determined that 45.5 per cent of the PLTIP
awards made to Executive Directors in 2020 would vest. These awards are subject to a two-year holding period.
The 2020 PLTIP awards were made to Executive Directors in May 2020 as the global consequences of the pandemic were unfolding. At that time,
the Company’s share price (£10.85) was around 30 per cent lower than the price used to make 2019 PLTIP awards (£15.40) but, given the
demerger of the M&G business in October 2019, these grant prices did not provide a like-for-like comparison. The Committee decided not to adjust
2020 award levels at grant but to review whether windfall gains had arisen at the end of the performance period. By the end of the performance
period, the Company’s share price was £11.28 and it rose during the first weeks of 2023. Having considered the position now, the Committee is
content that share price movements during this period are broadly consistent with the underlying financial performance of the Group and the
movements in the indices of which it is part and reflect the share price implications of the demerger of the Jackson business in September 2021.
On this basis, the Committee concluded that there was no windfall gain and so no adjustment was necessary.
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Annual statement from the Chair of the Remuneration Committee / continued
Remuneration decisions and priorities for 2023
The Committee intends to operate within the new Directors’ remuneration policy during 2023 (as set out in the ‘New Directors’ remuneration
Policy’ section), pending approval of the Policy at the 2023 AGM.
Reflecting senior leadership changes
2022 and the early part of 2023 saw the further development of the Group executive leadership team. Mike Wells retired from the Board on
31 March 2022. Mark FitzPatrick served as interim Group Chief Executive from 1 April 2022 until 24 February 2023 when Anil Wadhwani took up
the role as Chief Executive Officer. Given the Company’s strategic shift to focus exclusively on Asian and African markets and reflecting practice
among Asian-listed organisations not to have Chief Financial Officers as Executive Directors, James Turner, Group Chief Financial Officer, stepped
down from the Board with effect from 1 January 2023. He remains Group Chief Financial Officer and a member of the Group Executive
Committee, and will be a standing attendee at future Board meetings.
The Committee made remuneration decisions in connection with these changes in line with the Directors’ remuneration policy adopted by
shareholders in 2020. Information about these decisions has previously been disclosed in our public announcements and further details can be
found in the ‘Statement of implementation of remuneration policy in 2023’, ‘Recruitment arrangements’ and ‘Payments to past Directors’
sections of this report.
Aligning remuneration arrangements with the Group’s strategic focus
I had the opportunity during late 2022 and early 2023 to engage with many of our major shareholders, as well as the organisations that represent
and advise them. I was pleased to meet and hear directly from so many of the Group’s investors and that the majority of shareholders and
advisory bodies who provided input were supportive of the remuneration decisions taken in respect of 2022 and of the arrangements that we
proposed for 2023. On behalf of the Committee, I would like to thank the shareholders and advisory bodies for their engagement.
The Group’s Directors’ remuneration policy is due to expire at the 2023 AGM. Given the Group’s exclusive focus on Asia and Africa, it is essential
that the new policy continues to equip the Group to recruit and retain critical executive talent in our key markets. The Committee is conscious of
the challenges of balancing the strategic shift to Asia and Africa with the expectations which result from a primary UK listing and this has been a
key consideration for the review of the Policy which has been undertaken during 2022.
During the consultation with shareholders and advisory bodies, there was positive feedback on the limited salary increases for the Executive
Directors effective for 2023. For the eleventh consecutive year, the increase for our Executive Directors will be below or close to the bottom of the
range of salary increases budgeted for the wider workforce. There was also a great deal of support for the proposed changes to the Directors’
remuneration policy (‘the Policy’) which will be proposed at the May 2023 AGM, together with valuable discussions on future areas for
consideration as part of the wider dialogue with shareholders following the strategic re-positioning of the business to focus on the long-term
growth opportunities in Asia and Africa.
Minimal changes are being proposed to the Policy at this time. Shareholders supported the introduction of deferral in cash (rather than shares) for
Executive Directors’ bonuses for 2023 and subsequent performance years (subject to the achievement of the share ownership guideline) in the
context of creating greater alignment with many of our Asian peers and the need to attract talent in our key markets. Several investors said that
they recognised this as a modest move towards Asian practice, acknowledging that the broader package remains focused on long-term
performance, and is largely delivered in shares.
Most stakeholders were comfortable with the proposed changes to the balance of measures in the PLTIP, with significant support for the increase
in the weighting of the Return on Embedded Value (‘RoEV’) measure. Shareholders were also supportive of the suggested changes to the TSR peer
group for 2023, which will focus more tightly on financial services companies operating in Asia. The Policy, which will be presented to shareholders
at the 2023 AGM, can be found out in the ‘New Directors remuneration Policy’ section.
During the consultation, I outlined the Committee’s aspiration to take further steps towards Asian remuneration practices, specifically, the
potential use of hybrid long-term incentive arrangements, in the future. While a number of shareholders indicated that they would be supportive
of this evolution of the remuneration model, others highlighted the potential complexity of hybrid long-term incentive plans, preferring
Prudential’s remuneration arrangements to remain substantially aligned to typical UK-listed practice, notwithstanding the Group’s strategic and
operational shift to Asia. The Committee will keep this topic under close review, taking account of changes in Asian market practice and
monitoring the organisation’s ability to attract and retain talent in its key markets.
Share plans renewal
As a result of new requirements under the Hong Kong Listing Rules which came into force on 1 January 2023, four share plans including the PLTIP
and some presented at recent AGMs will require shareholder approval at the 2023 AGM as they use newly issued shares to satisfy awards and the
new Hong Kong Listing Rules require all plans using newly-issued shares to be presented for shareholder reapproval. The dilution resulting from the
share awards we make to our people and agents is a fraction of the level set out in the guidelines issued by the Investment Association. Full details
of these plans can be found in the Notice of Meeting for the AGM.
I trust that you will find this report a clear account of the way in which the Committee has implemented the Directors’ remuneration policy during
2022 and of the proposed Directors’ remuneration policy and arrangements for 2023.
Chua Sock Koong
Chair of the Remuneration Committee
15 March 2023
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Prudential plc Annual Report 2022 Our Executive Directors’ remuneration at a glance
What performance means for Executive Directors’ pay in 2022
At Prudential, remuneration packages are designed to ensure strong alignment between pay and performance. In 2022 the Group’s performance
was appropriately reflected in the incentive outcomes, as set out in the Annual report on remuneration.
The value of the performance-related elements of remuneration is added to the fixed packages provided to Executive Directors to calculate the
2022 ‘single figure’ of total remuneration. For 2022, the ‘single figure’ outcomes for Executive Directors’ were higher than in the previous year. This
chiefly reflects the higher proportion of long-term incentive awards vesting this year. The values for the Executive Directors who served during
2022 are outlined in the summary table below:
Executive Director
Role
Mark FitzPatrick
James Turner
Group Chief Financial Officer and
Chief Operating Officer/Interim
Group Chief Executive
Group Chief Risk and Compliance
Officer/Group Chief Financial
Officer
Mike Wells
Group Chief Executive
Fixed pay
Variable pay
2022
salary
($000)
2022
pension
and
benefits
($000)
2022
bonus
($000)
2022
PLTIP
vesting
($000)
2022
single
figure
($000)
2021
single
figure
($000)
1,352
490
2,591
1,026
5,459
3,796
1,051
366
1,053
297
1,767
693
1,041
1,723
4,911
3,079
3,900
6,358
Aligning pay with the Group’s forward-looking strategy
During 2022, the Committee reviewed the Policy, taking into account the Group’s strategy, which is now entirely focused on the long-term
opportunities identified across the Asian and African growth markets, as well as the views of our shareholders and other stakeholders and the
broader regulatory and competitive environment. In this context, the Committee has made several changes to the remuneration framework.
These include:
> Making any deferred payments under the AIP in respect of 2023 and subsequent performance years in the form of cash, rather than shares,
where an Executive Director has already achieved their share ownership guideline;
> Adjusting the weightings of the financial AIP measures for 2023, by further increasing the focus on new business profit;
> Reweighting of the PLTIP measures for 2023 and introducing GIECA into the business integrity scorecard;
> Revising our TSR peer group ahead of 2023 awards being made under the PLTIP in order to better reflect the Asia footprint of the Group; and
> Updating pay benchmarking peer groups to increase focus on the 2023 TSR peer group.
Remuneration arrangements for 2023
Remuneration packages for 2023, effective 1 January 2023, are set out in detail in the Annual report on remuneration and are summarised below:
Executive Director
Role
Annual Incentive Plan (AIP)
2023 salary
(local currency)
2023 salary
(USD)1
Maximum
bonus
(% of salary)
Bonus
deferred
(% of bonus)
PLTIP
award
(% of salary)2
Mark FitzPatrick
Anil Wadhwani
Interim Group Chief Executive
Chief Executive Officer
£1,209,000
HK$12,281,000
$1,495,000
$1,568,000
200%
200%
40%
40%
N/A
400%
Notes
1
2
Mr Wadhwani’s salary was set on his appointment on 25 February 2023. Mark FitzPatrick received a salary increase of 3 per cent per cent with effect from 1 January 2023. In addition to base
salary, the interim Group Chief Executive received a monthly pensionable cash supplement of £30,167; he stepped down from his role as Interim Group Chief Executive on 24 February 2023.
For further details see section ‘Statement of implementation of remuneration policy in 2023’.
The exchange rate used to convert pay to USD is the reporting rate during 2022 of 0.8088 for GBP and 7.8305 for HKD. All salaries are rounded to the nearest $1,000/£1,000 or HKD 10,000.
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Summary of proposed changes to the Directors’ remuneration policy
Current key elements
of remuneration
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
Key features of operation
of the current policy1
Outline of proposed changes for 2023
Fixed pay
Salary and
benefits
Pension
Cash bonus
Deferred bonus
Prudential
Long Term
Incentive Plan
(PLTIP)
d
o
i
r
e
p
e
c
n
a
m
r
o
f
r
e
P
Short-term
variable pay
One-year performance
assessed on financial,
functional and personal
objectives, set with reference
to business plans approved
by the Board. Awards are
subject to the achievement
of a Pillar I capital underpin
aligned with the Hong Kong
Insurance Authority capital
framework.
Long-term
variable pay
Three-year performance
assessed on a combination
of:
Financial measures;
> Total Shareholder
Return (TSR) relative
to international
insurance peers; and
> Business integrity
scorecard of capital,
conduct, diversity
and environmental
measures.
Share ownership
guidelines
Share
ownership
guidelines
d
o
i
r
e
p
g
n
d
o
H
i
l
Salaries reviewed annually with
increases generally aligned with those
of the workforce unless there is a
change in role or responsibility. Benefits
reflect individual circumstances and are
competitive in the local market.
Pension contributions and/or a cash
supplement up to 13% of salary.
Executive Directors based in Hong Kong
receive this in addition to contributions
into the Hong Kong Mandatory
Provident Fund.
No change to salary or benefits policy.
No change in implementation of
pension policy.
The maximum opportunity is up to
200% of salary.
40% of bonus is deferred into shares for
three years.
Award is subject to malus and clawback
provisions, including in circumstances
where there are non-financial issues and
personal conduct which falls short of
the Company’s expectations.
No change in opportunity levels.
For bonus awards made in respect of 2023
performance year onwards, 40% of awards
will continue to be deferred for three years.
Deferral will either be in cash where share
ownership guidelines have been met, or
shares where not.
Bonuses are based on financial and
personal objectives.
No change to opportunity levels.
Weightings of 2023 PLTIP measures will
change as follows: the weighting of the
TSR performance measure will be reduced
from 50% to 35%, the weighting of the
Return on Embedded Value (RoEV)
measure will be increased to 40% (from
30%) and the scorecard (to be renamed
the ‘business integrity scorecard’) will be
increased to 25% (from 20%).
No change.
Maximum award under the Plan is
550% of salary although regular awards
are below this level.
Awards are subject to a three-year
vesting period from date of grant and a
further two-year holding period from
the end of the vesting period.
Awards are subject to malus and
clawback provisions, including in
circumstances where there are
non-financial issues and personal
conduct which falls short of the
Company’s expectations.
The proportion of awards which will vest
for threshold performance is 20%.
Significant in-employment share
ownership guidelines which for the
Group Chief Executive are 400% of
salary.
Executives have five years from the later
of the date of their appointment, or the
date of an increase in these guidelines,
to build this level of ownership.
Executive Directors leaving the Board
are required to hold the lower of their
actual shareholding at the date they
leave the Board and their in-
employment share ownership guideline
for a period of two years, subject to
Remuneration Committee discretion.
Notes
1
234
‘Policy’ refers to the 2020 Directors’ remuneration policy which can be found at www.prudentialplc.com/~/media/Files/P/Prudential-V13/policies-and-statements/directors-remuneration-
policy-2020-1.pdf
prudentialplc.com
Prudential plc Annual Report 2022
Principles underlying the policy
When reviewing the 2023 Directors’ remuneration policy, the Committee had regard to a number of key principles as illustrated below:
Key elements of
remuneration
Simplicity
How we reviewed the policy in 2022
The Committee is comfortable that the current remuneration structure is simple as it consists of fixed remuneration,
annual and long-term incentives only.
This structure is largely unchanged from our previous policy. Stakeholders are familiar with the operation of reward
arrangements and there is a demonstrable link between performance and reward outcome.
Risk
The Group Risk Committee formally provides advice to the Committee on risk management considerations to inform
decisions over bonus payments and long-term incentive vesting levels.
The policy provides the Committee with substantial flexibility to adjust incentive outcomes, to reduce or cancel
unvested awards and to reclaim both bonus and long-term incentive payments.
The time horizon for our long-term incentives extends for five years, including the holding period on awards.
There are currently significant in-employment share ownership guidelines for all Executive Directors providing a
material connection to the sustained success of the Company. Executive Directors have five years from the later of
the date of their appointment, or the date of an increase in these guidelines, to build this level of ownership.
A post-employment shareholding requirement for Executive Directors provides continued alignment with the success
of the Company and stakeholder interests even after leaving the Board. This obligation will be implemented by
requiring Executive Directors leaving the Board to obtain clearance to deal in the Company’s shares during the two
years following their retirement.
Alignment to culture
Executive Directors are offered pension benefits of 13 per cent of salary, aligned with the employer pension
contribution available to the wider workforce.
The conduct measure in the PLTIP rewards for appropriate management action and ensures that there are no
significant conduct/culture/governance issues that result in significant capital add-ons or material fines.
The vesting period attached to the long-term incentive reflects the time horizon of the business plan. The additional
post-vesting holding period and share ownership guidelines strengthen the community of interests between
Executive Directors and other stakeholders.
Clarity
The Committee has consulted with the Company’s largest shareholders and their advisers on the 2023 Directors’
remuneration policy and executive pay decisions before they are implemented.
Details on Executive Director pay are clearly set out in the Annual report on remuneration.
Proportionality
There are no incentive awards for below threshold performance. Financial targets are set against the
Board-approved plan.
Under the PLTIP, 20 per cent of each portion of the award will vest for achieving threshold performance.
The Committee approves the termination arrangements of Executive Directors to ensure that there is no reward for
failure.
The PLTIP leaver rules are another safeguard to ensure that there is no reward for failure under this plan.
Predictability
The levels of awards under incentive arrangements to Executive Directors at threshold, on-target and maximum
performance points are clearly defined and presented in relevant sections of this report.
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Group overviewStrategic reportGovernanceFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Directors’ remuneration report
Annual report on remuneration
Membership and 2022 meeting attendance
Committee members
Scheduled
meetings
Ad hoc meetings
Anthony Nightingale CMG SBS JP1
(Chair)
Chua Sock Koong2 (Chair)
David Law ACA
Ming Lu3
Philip Remnant CBE FCA
Thomas Watjen
4/4
6/6
6/6
4/4
5/6
6/6
8/8
8/9
9/9
2/3
8/9
8/9
Regular attendees
> Chair
> Chief Executive Officer
> Company Secretary
> Group Human Resources Director
> Director, Group Reward and
Employee Relations and CHRO, UK
> Remuneration Committee Adviser
Notes
1 Anthony Nightingale stepped down as Chair of the Remuneration Committee at the
2022 AGM.
2 Chua Sock Koong became Chair of the Remuneration Committee at the 2022 AGM.
3 Ming Lu joined the Remuneration Committee in May 2022.
Individual Directors’ attendance at meetings throughout 2022 is also set out in the ‘Governance’ section.
Role and responsibilities
The role and responsibilities of the Committee are set out in its terms of reference, which are reviewed by the Committee and approved by the
Board on a periodic basis, and which can be found on the Company’s website at www.prudentialplc.com/~/media/Files/P/Prudential-V13/
content-pdf/gremco-tor-at-30-11-2022.pdf The Committee’s role is to assist the Board in meeting its responsibilities regarding the determination,
implementation and operation of the overall remuneration policy for the Group, including the remuneration of the Chair of the Board, Executive
Directors, Group Executive Committee members and the Company Secretary, as well as overseeing the remuneration arrangements of other staff
within its purview. In 2022, the Committee met 15 times and also dealt with a number of matters by email circulation.
The principal responsibilities of the Committee set out in their terms of reference and discharged during 2022 were:
> Approving the operation of performance-related pay schemes operated for the Executive Directors, other members of the Group Executive
Committee and the Company Secretary, and determining the targets and individual payouts under such schemes;
> Reviewing the operation and awards made under all share plans requiring approval by the Board and/or the Company’s shareholders;
> Monitoring compliance of the Chair and Executive Directors and other members of the Group Executive Committee with share ownership
guidelines;
> Reviewing and approving individual packages for the Executive Directors and other members of the Group Executive Committee including for
any new hires and departures, and the fees of the Chair. Similarly, reviewing and approving fees for the Non-executive Directors of the Group’s
material subsidiaries;
> Reviewing workforce remuneration practices and related policies across the Group when setting the remuneration policy for Executive Directors,
as well as the alignment of incentives and awards with culture;
> Monitoring the remuneration and risk management implications of remuneration of senior executives across the Group and other selected
roles; and
> Overseeing the implementation of the Group remuneration policy for those roles within scope of the specific arrangements referred to in the
Hong Kong IA GWS Framework.
The Chair and the Chief Executive Officer attend meetings by invitation. The Committee also had the benefit of advice from:
> Group Chief Risk and Compliance Officer;
> Group Chief Financial Officer;
> Group Human Resources Director; and
> Director, Group Reward and Employee Relations and CHRO, UK.
Individuals are not present when their own remuneration is discussed and the Committee is always careful to manage potential conflicts of
interest when receiving views from Executive Directors or senior management about executive remuneration proposals.
In addition, during 2022, the Committee spent time reviewing the Directors’ remuneration policy and its implementation ahead of its renewal at
the 2023 AGM. As part of this, the Remuneration Committee Chair engaged extensively with shareholders. As part of our broader programme of
shareholder engagement, the Chair of the Committee held meetings with shareholders and the principle advisory bodies to discuss decisions
taken in respect of the Executive Directors’ remuneration arrangements for 2023 and the Directors’ remuneration policy. We have had the benefit
of substantive feedback from 44 per cent of our shareholder register and are pleased that the majority of shareholders and advisory bodies who
provided input were supportive of our proposals and commended the manner in which we conducted the consultation process.
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Prudential plc Annual Report 2022 During 2022, Deloitte LLP was the independent remuneration adviser to the Committee. Deloitte was re-appointed by the Committee following a
competitive tender process during 2021. Deloitte is a member of the Remuneration Consultants’ Group and voluntarily operates under their code
of conduct when providing advice on executive remuneration in the UK. Deloitte regularly meets with the Chair of the Committee without
management present. The Committee is comfortable that the Deloitte engagement partner and team providing remuneration advice to the
Committee do not have connections with Prudential that may impair their independence and objectivity. The total fees paid to Deloitte for the
provision of independent advice to the Committee in 2022 were £137,700 charged on a fixed fee as well as time and materials basis. During 2022,
Deloitte provided Prudential management advice on remuneration, digital and technology, taxation, internal audit, global mobility, risk and
regulatory matters. Remuneration advice is provided by an entirely separate team within Deloitte. Management also received external advice and
data from a number of other providers. This included market data and legal counsel. This advice, and these services, are not material.
In 2022, the Board conducted an evaluation of its effectiveness, which included an assessment of the Remuneration Committee. The evaluation
confirmed that the Committee continued to operate effectively during the year.
Table of 2022 Executive Director total remuneration (the ‘single figure’)
$000s
Mark FitzPatrick1
James Turner2
Mike Wells3
Total
2022
salary
1,352
1,051
366
2,769
2022
taxable
benefits*
314
914
249
1,477
2022
total
bonus†
2,591
1,767
693
5,051
2022
PLTIP
releases‡
2022
pension
benefits§
Total 2022
fixed
remuneration~
Total 2022
variable
remuneration~
Total 2022
remuneration
the ‘single
figure’^
Total 2022
remuneration
the ‘single
figure’ in
GBP (£000)#
1,026
1,040
1,723
3,789
176
139
48
363
1,842
2,104
663
4,609
3,617
2,807
2,416
8,840
5,459
4,911
3,079
4,415
3,972
2,490
13,449
10,877
*
†
‡
§
~
^
#
Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements, relocation/expatriate benefits. Benefits of significant value include
home leave/personal flights for Mr Wells, and housing and associated costs for Mr Turner.
The total value of the bonus, comprising both the 60 per cent delivered in cash and 40 per cent bonus deferred into Prudential plc shares for three years. The deferred part of the bonus is subject
to malus and clawback in accordance with the malus and clawback policies, but no further performance conditions.
The estimated value of the 2022 PLTIP awards vesting for all Executive Directors has been calculated based on the average share price over the last three months of 2022 (£9.62/US$11.89) and
includes the accumulated dividends delivered in the form of shares. The Committee’s approach to determining the level of vesting for this award is set out in the ‘Remuneration in respect of
performance periods ending in 2022’ section. The number of Prudential plc shares under award has been adjusted to take account of the Jackson demerger in line with the approach set out in
the section on ‘Remuneration decisions taken in relation to the demerger’ in last year’s remuneration report. The actual value of vesting PLTIP awards, based on the share price on the date awards
vest, will be shown in the 2023 report. Due to share price depreciation over the vesting period, the estimated value per share of the 2020 LTIP awards is 11.3 per cent lower than the value per
share at grant.
2022 pension benefits include cash supplements for pension purposes and contributions into defined contribution schemes as outlined in the ‘pension benefit entitlement’ section.
Total fixed remuneration includes salary, taxable benefits and pension benefits. Total variable remuneration includes total bonus and PLTIP awards vesting.
Each remuneration element is rounded to the nearest $1,000 and totals are the sum of these rounded figures. Total 2022 remuneration has been converted to US dollars using the exchange rate
of 0.8088 for GBP and 7.8305 for HKD. Exchange rate fluctuations will therefore impact the reported value.
Total 2022 remuneration has been converted to GBP using the exchange rate of 0.8088 USD to 1 GBP.
Notes
1
2
3
Mr FitzPatrick received a monthly pensionable cash supplement of £30,167, which is included in the annualised salary number from 1 April 2022.
Mr Turner is paid in HK dollars, while Messrs Wells and FitzPatrick are paid in sterling.
Mr Wells stepped down from his role as Group Chief Executive on 1 April 2022 and subsequently retired from the business on 14 July 2022.
Table of 2021 Executive Director total remuneration (the ‘single figure’)
$000s
Mark FitzPatrick
James Turner1
Mike Wells
Total
2021
salary
1,085
943
1,581
3,609
2021
taxable
benefits*
275
838
463
1,576
2021
total
bonus†
1,860
1,629
3,057
6,546
2021
PLTIP
releases‡
2021
pension
benefits§
Total 2021
fixed
remuneration~
Total 2021
variable
remuneration~
Total 2021
remuneration
the ‘single
figure’^
Total 2021
remuneration
the ‘single
figure’ in
GBP (£000)#
435
365
1,052
1,852
141
125
205
471
1,501
1,906
2,249
5,656
2,295
1,994
4,109
8,398
3,796
3,900
6,358
2,759
2,835
4,622
14,054
10,216
*
†
‡
§
~
^
#
Note
1
Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements, relocation/expatriate benefits. Benefits of significant value include
housing and associated costs for Mr Turner and taxes paid by the Company on behalf of Mr Wells. The benefit total also includes a tax payment of USD 191,296 paid by the Company in respect
of Mr Turner’s attendance at the London office which triggered a UK tax liability due to the Company’s corporate structure. This was omitted in error in the 2021 single figure.
The total value of the bonus, comprising both the 60 per cent delivered in cash and 40 per cent bonus deferred into Prudential plc shares for three years. The deferred part of the bonus is subject
to malus and clawback in accordance with the malus and clawback policies, but no further performance conditions.
In line with the regulations, the value of the 2021 PLTIP releases for all Executive Directors has been calculated using the share price at vesting of £11.2741 and includes the accumulated
dividends delivered. The number of Prudential plc shares under award has been adjusted to take account of the Jackson demerger in line with the approach set out in the section on
‘Remuneration decisions taken in relation to the demerger’ in last year’s remuneration report. As set out in the 2019 Annual Report, these awards have previously been adjusted on the demerger
of M&G. Due to the share price depreciation over the vesting period, the value per share of the 2019 PLTIP awards is 37 per cent lower than the value per share at grant. As a result, no value is
attributable to share price appreciation. No adjustment to vesting levels has been proposed as a result of the share price depreciation.
2021 pension benefits include cash supplements for pension purposes and contributions into defined contribution schemes as outlined in the ‘pension benefit entitlement’ section.
Total fixed remuneration includes salary, taxable benefits and pension benefits. Total variable remuneration includes total bonus and PLTIP releases.
Each remuneration element is rounded to the nearest $1,000 and totals are the sum of these rounded figures. Total 2021 remuneration has been converted to US dollars using the exchange rate
of 0.7269 for GBP and 7.7728 for HKD. Exchange rate fluctuations will therefore impact the reported value.
Total 2021 remuneration has been converted to GBP using the exchange rate of 0.7269 USD to 1 GBP.
Mr Turner is paid in HK dollars, while Messrs Wells and FitzPatrick are paid in sterling.
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Remuneration in respect of performance in 2022
Base salary
Salary increases of 3 per cent were awarded to Executive Directors with effect from January 2022. The 2022 salary increase budgets for other
employees across the Group’s businesses were between 4.5 per cent and 5 per cent.
On 1 April 2022, Mike Wells stepped down from his role as Group Chief Executive and Mark FitzPatrick was appointed as interim Group Chief
Executive. To reflect the additional responsibilities, Mark FitzPatrick received a monthly pensionable cash supplement of £30,167 in addition to his
base salary. This is included in his annualised salary from 1 April 2022. On the same date, James Turner was appointed as Group Chief Financial
Officer and his salary was increased to reflect this.
As a result, Executive Directors received the following salaries in 2022:
Executive Director
2022 salary
(local currency)
from
1 January 2022
2022 salary
(USD)1 from
1 January 2022
2022 salary
(local currency)
from 1 April 2022
2022 salary
(USD)1 from
1 April 2022
Mark FitzPatrick, Group Chief Financial Officer and Chief Operating Officer/Interim
Group Chief Executive
James Turner, Group Chief Risk and Compliance Officer/Group Chief Financial Officer
Mike Wells, Group Chief Executive
£822,000
HK$7, 550,000
£1,184,000
$1,016,000
$964,000
$1,464,000
£1,184,000
HK$8,460,000
$1,464,000
$1,080,000
Note
1
2022 salaries were converted to US dollars using an exchange rate of 0.8088 for GBP and 7.8305 for HKD. All salaries are rounded to the nearest $1,000/£1,000 or HKD 10,000.
Pension benefit entitlements
Pension benefit arrangements for 2022 are set out in the table below. The employer pension contribution available to the wider workforce
is 13 per cent of salary.
Executive Director
James Turner
2022 pension benefit
Pension supplement in lieu of pension of 13 per cent
of salary and a HKD18,000 employer payment to the
Hong Kong Mandatory Provident Fund.
Life assurance provision
Eight times salary.
Mark FitzPatrick and Mike Wells
Pension supplement in lieu of pension of 13 per cent
of salary.
Four times salary plus an additional four times
salary dependants’ pension.
Annual bonus outcomes for 2022
Target setting
For 2022, financial AIP metrics comprised 80 per cent of the bonus opportunity for the Group Chief Executive role, 40 per cent for the Group Chief
Risk and Compliance Officer role, and 50 per cent for the Group Chief Financial Officer role. The financial element of Executive Directors’ 2022
bonuses was determined by the achievement of four Group measures, namely adjusted operating profit, operating free surplus generation, EEV
new business profit and cash flow, which are aligned to the Group’s growth and cash generation focus. The performance ranges were based on the
annual business plans approved by the Board and reflected the ambitions of the Group, in the context of anticipated market conditions.
Personal objectives comprised 20 per cent of the bonus opportunity for all Executive Directors. These objectives were established at the start of
the year and reflect the Group’s Strategic Priorities as set by the Board. For 2022, Executive Directors had the shared strategic objectives which are
detailed below.
Functional objectives accounted for the remaining 40 per cent of the Group Chief Risk and Compliance Officer role’s bonus opportunity. These
were based on the Group Risk Plan and were developed with input from the Chair of the Group Risk Committee. Functional objectives accounted
for 30 per cent of the Group Chief Financial Officer role’s bonus. These were developed with input from the Chair of the Group Audit Committee.
AIP payments are subject to meeting minimum capital thresholds which are aligned to the Group risk framework and appetites (as adjusted for
any Group Risk Committee approved counter-cyclical buffers), as described in the Group Chief Risk and Compliance Officer’s report section of this
report.
The Committee seeks advice from the Group Risk Committee on risk management considerations to inform decisions about remuneration
architecture and performance measures to ensure that risk management, culture and conduct are appropriately reflected in the design and
operation of Executive Directors’ remuneration.
Performance assessment
The Committee determines the overall value of the bonus, taking account of the inputs described above and any other factors which it considers
relevant.
The Committee considered a report from the Group Chief Risk and Compliance Officer which was approved by the Group Risk Committee. This
report confirmed that the 2022 results were achieved within the Group’s and businesses’ risk framework and appetite. The Group Chief Risk and
Compliance Officer also considered the effectiveness of risk management and internal controls, and specific actions taken to mitigate risks,
particularly where these may be at the expense of profits or sales. The report also confirmed that the Group met minimum capital thresholds
which were aligned to the Group risk framework and appetites. The Committee took into account this advice when determining AIP outcomes for
Executive Directors.
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Annual report on remuneration / continuedPrudential plc Annual Report 2022 The table below illustrates the weighting of performance measures for 2022 and the level of achievement under the AIP:
Executive Director
Mark FitzPatrick
Group Chief Financial Officer and Chief
Operating Officer (up to 31 March 2022)
Interim Group Chief Executive (for the
remainder of 2022)
James Turner
Group Chief Risk and Compliance Officer
(up to 31 March 2022)
Group Chief Financial Officer (for the
remainder of 2022)
Mike Wells
Group Chief Executive (up to
31 March 2022)
Weighting of measures
(% of total bonus opportunity)
Achievement against performance measures
(% of maximum for each component)
Group
financial
measures
Functional
objectives
Personal
objectives
Group
financial
measures
Functional
objectives
Personal
objectives
2022 AIP
outcome1
(% of total
bonus
opportunity)
50%
80%
40%
50%
80%
30%
–
40%
30%
20%
20%
20%
20%
100%
100%
100%
100%
96.7%
–
95%
90%
93.8%
92.5%
90%
95%
98%
98%
96%
96%
–
20%
100%
–
80%
96%
Note
1
All bonus awards are subject to 40 per cent deferral for three years and the deferred bonus will be paid in Prudential plc shares.
Financial performance
The Committee reviewed performance at its meeting in March 2023. For all the financial metrics, namely Group EEV new business profit, Group
adjusted operating profit, Group free surplus generation and Group cash flow, the adjusted stretch targets established by the Board were met or
exceeded.
The level of performance required for threshold, plan and maximum payment against the Group’s 2022 AIP financial measures and the results
achieved are set out below:
2022 AIP measure
Group adjusted operating profit
Group operating free surplus generated
Group cash flow
Group EEV new business profit
Weighting
Threshold
($m)
25%
20%
10%
45%
2,902
1,244
91
1,947
Target
($m)
3,055
1,309
191
2,105
Stretch target
($m)
Achievement
($m)
3,208
1,375
291
2,157
3,375
1,374
394
2,184
In line with our long established practice, the targets have been adjusted to reflect prevailing interest rate and foreign exchange rate assumptions
applicable for the full year reporting of new business profit and other metrics. Adjustments to targets in any given year may be upwards or
downwards and are designed to ensure that outcomes reflect management’s performance in the year by neutralizing the effect of interest rates
and foreign exchange movements during that year.
Personal performance
A proportion of the annual bonus for each Executive Director is based on the achievement of personal objectives including:
> The executive meeting their individual conduct and customer measures;
> The executive’s contribution to Group strategy as a member of the Board; and
> Specific goals related to the function for which they are responsible and progress on major projects.
At the end of the year, the Committee considered the performance of all executives against objectives established at the start of the year. At its
meeting in March 2023, it concluded that 2022 had seen the execution of significant strategic objectives, as described in the ‘Strategic and
Operating Review’ section of the Annual Report. These achievements reflect Executive Directors’ high level of performance against their 2022
personal objectives. All executives met their individual conduct measures and each Executive Director made a significant contribution to the
achievement of Group strategy during 2022.
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Group overviewStrategic reportGovernanceFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Directors’ remuneration report
The below summarises performance against the personal objectives and strategic priorities for the Executive Directors. Assessments were
undertaken by each Executive Director’s manager. Additionally, the Chair of the Group Risk Committee reviewed the performance of the Group
Chief Risk and Compliance Officer while the Chair of the Group Audit Committee considered the contribution of the Group Chief Financial Officer.
Shared strategic objectives
2022 key strategic objectives
Achievement
Performance relative to target
ESG – climate & diversity
Drive the climate and
responsible investment focus
across the organisation, both
as an asset owner and an
asset manager, through
embedding the external ESG
commitments made in May
2021
SOCIETY, PEOPLE
The Executive Directors made significant progress towards all of our external
targets. By the end of 2022, Prudential had:
Between target and above
stretch target level
> reduced the WACI of our investment portfolio by 43 per cent ahead of our
25 per cent target;
> substantively completed our divestment from coal bonds with one holding
remaining as a result of market conditions;
> completed first year of Climate Change & Decarbonisation engagement
under the Central Engagement programme;
> achieved an intensity ratio of 1.21 tCO2e/FTE for 2022, keeping us ahead of
the emissions reduction trajectory required to meet our 2030 target of 1.65
tCO2e/FTE; and
> 35 per cent representation of women in senior management, in line with our
2023 target.
Prudential signed the 2022 Global Investor Statement to Governments on the
Climate Crisis and in October 2022 we published a white paper to outline the
case for the financial and social burden of the transition to be just and inclusive,
and its place in meeting the Paris Agreement.
Launch of Eastspring’s Group Responsible Investment Policy, harmonising the
approach to responsible investment across the Eastspring Group and launched
a number of products to support our ESG strategy.
Strengthening of senior management team with a number of significant hires
in Asia to support our ESG strategy including Director of Group ESG to deliver
our ESG strategy and commitments and a new Group Chief Investment Officer.
The Director of Group ESG aims to maintain constructive dialogue with key
stakeholders, and further embed our ESG strategy for sustainable long-term
value. The Group Chief Investment Officer will establish the new GCIO function
to drive investment strategy for Prudential as an asset owner and to support
the local businesses drive better investment performance for policyholders.
In 2022, we embarked on a two-year research partnership with the Nanyang
Technological University (NTU) in Singapore to examine the intersection of
climate change and health. The Prudential EOS (Earth Observatory of
Singapore) Climate Impacts Initiative will focus on 10 key markets across Asia
and Africa. Via the Prudence Foundation we are also funding research by the
International Federation of the Red Cross’s Climate Centre to examine the
compound health risks of heat, humidity, and air pollution, and what effective
early actions can be taken to reduce this risk.
Increase the Asia
shareholder base and Hong
Kong retail shareholder
awareness of Prudential,
with a view to increasing
Hong Kong liquidity to drive
valuation re-rating
INVESTORS
Material increase in the number of Asia-based sell side analyst coverage to 11
(plus one joint EU/Asia coverage) by the end of 2022 (from 2 at the end of
2021).
In September 2022, we achieved inclusion of Prudential shares in the Hang
Seng Composite Index (HSCI) and the Shenzhen-Hong Kong Stock Connect
mechanism, a significant milestone to further expand our investor base (not
only to qualified investors in the Chinese Mainland but also to institutional
investors) and increase the trading liquidity. The volume of trading on the Hong
Kong Stock Exchange has become more active since these inclusions.
Throughout 2022 we hosted a number of ‘meet the business’ events which
gave investors and sell side analysts the chance to engage with Strategic
Business Group Managing Directors and country CEOs across Asia, including
Singapore, Indonesia, Vietnam and the Philippines.
Above stretch target level
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Annual report on remuneration / continuedPrudential plc Annual Report 2022 Mark FitzPatrick in the role of Group Chief Financial Officer and Chief Operating Officer from 1 January to 31 March 2022
Personal and strategic objectives
2022 key strategic objectives
Achievement
Mark championed our diversity and inclusion efforts across the organisation
through his role as Co-Chair of the Prudential Diversity & Inclusion Council.
During 2022, Prudential adopted the United Nations Women’s Empowerment
Principles and was included in the Bloomberg Gender Equality Index for the
third successive year. At 31 December 2022, the representation of women in
senior management was 35 per cent, in line with our 2023 target under the HM
Treasury Women in Finance Charter.
Gender diversity – total workforce:
> Male: 57 per cent
> Female: 42.9 per cent
> Unspecified: 0.1 per cent
The score in the employee engagement survey for inclusion and belonging,
social connection, and support from management was at 85 per cent,
indicating a deep sense of belonging. We onboarded new members to the
Group’s D&I Council to focus on inclusion of neurodiversity, disability, culture
and religion.
Our Sponsorship Programme expanded deeper into our talent pool, providing
colleagues with the opportunity to work closely with a senior sponsor for
12 months on specific development objectives.
We continued to deepen belonging with the roll out of Inclusive Leadership
Profile and a Global Inclusion e-learning in August 2022. By the end of
November 2022 this had been completed by over 11,000 colleagues.
In 2022 we saw the global launch of various communities including PRU
Women Empowered, PRU Young Professionals, Women in Tech, Mental Health
First Aiders and the intersectional We DO Wellness, joining the well-established
PRUPride. We launched the #IamRemarkable initiative empowering our
colleagues to promote and celebrate their achievements in the workplace
and beyond.
Following the Group’s equity raise in Hong Kong in 2021, Mark established a
programme of capital management. This responsibility was transitioned to
James Turner in March 2022 as part of the CFO leadership. At 31 December
2022, the pro-forma Moody’s total leverage (i.e. after allowing for the debt
redemption in January 2023) was 20 per cent, at the lower end of the
medium-term range.
Performance relative to target
Above stretch target level
Above stretch target level
Increased focus on improving
diversity, inclusion and
belonging in the organisation,
as measured by inclusion
questions in the employee
engagement survey, with a
view to developing
appropriate targets for Group
and local businesses
PEOPLE, SOCIETY
Ensure the balance sheet is
positioned to support growth
opportunities within Asia,
through targeting the
Moody’s total leverage of 20
to 25 per cent over the
medium term and having
strong relationships with the
rating agencies for any future
issuances
INVESTORS
Deliver on appropriate
run-rate cost savings within
central costs and complete
the development of an
effective head office
operating model by 2023
INVESTORS
Mark first announced the $70 million annual central cost savings target in 2020
and undertook significant planning and execution over the coming period. This
responsibility was transitioned to James Turner in March 2022 as part of the
CFO leadership. The annual cost saving has been achieved and will result in a
compounding reduction in 2023 central costs.
Approaching stretch target
level
Recognising Mr FitzPatrick’s very strong performance against both his individual and shared personal objectives during the first quarter of
2022 as Group Chief Financial Officer and Chief Operating Officer, the Committee judged that 19 per cent of a maximum of 20 per cent
attributable to personal objectives was appropriate.
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Functional objectives
Summary of 2022 functional objectives Achievement
Develop and implement new
Group Finance function
taking the best of practices in
London and Asia around
financial controls, accuracy of
financial reporting and
appropriateness of key
financial assumptions and
judgements
PEOPLE
Support the transition of
auditor to Ernst & Young to
ensure an effective external
audit for their first year of
external reporting in 2023
REGULATORS
Performance relative to target
Above stretch target level
Set up the foundations of One Finance team with cross-location of the Finance
Leadership Team, supported by the appointment of an Asia-based Chief of
Staff.
Detailed planning was undertaken to transition certain roles and
responsibilities from London to Hong Kong, and build-up certain capabilities in
Hong Kong. This included cross-locating the financial accounting and reporting
teams in Hong Kong and London to enable sharing of best practice.
This resulted in the Group delivering the HY 2022 results from Hong Kong for the
first time with resilient performance and no material breach of financial controls.
Established the principles and process for the orderly transition of auditor from
KPMG to Ernst & Young, including:
Above stretch target level
> providing oversight of the process and operational handover from KPMG to
Ernst & Young;
> implementation of shadowing protocols to minimise disruption to the
internal team;
> facilitating the building of relationships across the Group Finance team; and
> appointing EY team to discrete projects such as conducting an assurance
review for the Group ESG report and attendance at the Group ESG Committee.
In recognition of Mr FitzPatrick’s very strong performance against his functional objectives during the first quarter of 2022, the Committee
judged that 29 per cent of a maximum of 30 per cent attributable to functional objectives as Group Chief Financial Officer and Chief
Operating Officer was appropriate.
Mark FitzPatrick in the role of Interim Group Chief Executive from 1 April to 31 December 2022
Personal and strategic objectives
2022 key strategic objectives
Achievement
Supporting the transition to the
new Chief Executive Officer
INVESTORS, PEOPLE
Ensured the readiness of the organisation and its stakeholders for the transition
to the new Chief Executive Officer, restructuring the management team and
creating the conditions for a smooth and successful transfer of responsibilities
to the new Chief Executive Officer.
Build leadership positions
with competitive advantages
and economies of scale within
each of our four largest
markets of China, India,
Thailand and Indonesia.
CUSTOMERS, INVESTORS
China was the largest single market contributor to the Group’s total APE sales in
2022, achieving APE sales growth of 19 per cent to $884 million underpinned by
a diversified distribution strategy with a high-quality agency force and strong
partnerships with banks. CPL has more than doubled new business profit
between 2017 and 2022, with new business profit for 2022 now 44 per cent
higher than that of the pre-pandemic year 2019. We continue to outperform the
market on the Chinese Mainland industry-wide measure of gross written
premium basis by 5 times in 2022.
Performance relative to target
Approaching stretch target
level
Approaching stretch target
level
India: In ICICI Prudential, APE sales grew 4 per cent driven by strong growth in
the protection and annuity business. This sales performance enabled ICICI
Prudential to maintain its top three position in the private market with a market
share of 6.3 per cent. Over the period, new business profit grew 20 per cent
reflecting APE sales growth and a favourable product mix.
Thailand: We delivered higher-than-industry-average APE sales growth, both in
the bancassurance channel and for the overall industry as a whole in 2022. We
have double-digit APE sales growth for 3 consecutive years from 2020 to 2022,
and now have an overall market share of 7 per cent, being 6th in the market. We
have completed a smooth and planned CEO succession with the appointment of
a local Thai CEO.
Indonesia: We regained our leadership position in the Indonesian life market with
11 per cent market share by weighted new business premium in 2022. Overall APE
sales increased by 2 per cent in the year to $247 million, despite Covid-19-related
restrictions in the first half of the year, and new business profit increased by
4 per cent compared with the prior year.
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Above stretch target level
2022 key strategic objectives
Achievement
Broaden health and wealth
capabilities, expanding our
product range to maintain
competitive advantage, to
access new customer
segments and to create
inclusive product offerings
CUSTOMERS
In 2022, we continued to deepen our current and future health and wealth
capabilities. In October we announced a strategic partnership with Google
Cloud to make health and financial security more accessible across Asia and
Africa.
New policies in 2022 included 2.4 million health and protection cases, an
increase of 9 per cent when compared with 2021, reflecting our customers’
increased focus on this area in light of the pandemic. While these policies were
generally smaller in size than in previous years, we believe that the conversion
of these customer interactions into sales by our diverse distribution channels is
evidence of the power and quality of the Group’s franchise and brand.
In 2022, we became the first multi-national insurer to set up a dedicated
Syariah life insurance entity in Indonesia, PT Prudential Sharia Life Assurance
(Prudential Syariah), as part of our strategy to meet the growing demands for
Syariah solutions and support the growth of the Syariah community and
economy.
Recognising Mr FitzPatrick’s very strong performance against both his individual and shared personal objectives during the second, third and
fourth quarters of 2022, the Committee judged that 18 per cent of a maximum of 20 per cent attributable to personal objectives as Interim
Group Chief Executive Officer was appropriate.
Performance relative to target
Approaching stretch target
level
James Turner in the role of Group Chief Risk and Compliance Officer from 1 January 2022 to 31 March 2022
Personal and strategic objectives
2022 key strategic objectives
Achievement
Led the application for an early adoption of the Hong Kong Risk-Based Capital
regime (HK RBC) framework by the Group’s Hong Kong business with work
undertaken to validate key model components which received HKIA approval in
April 2022.
External stakeholders
> Lead strategic
communications between
Prudential and key
regulators, ensuring a
constructive and open
relationship to foster
mutual trust, respect and
understanding, as well as
supporting the continued
enhancement of the
relationship, with the HKIA
> Work closely and lead
discussions with peers in
the insurance community
to support the industry and
its regulators to further
develop the strength of the
environment for provision
of health and protection to
the benefit of its customers
(linked to the Group’s
purpose)
REGULATORS
Recognising Mr Turner’s very strong performance against both his individual and shared personal objectives during the first quarter of 2022,
the Committee judged that 18.5 per cent of a maximum of 20 per cent attributable to personal objectives as Group Chief Risk and Compliance
Officer was appropriate.
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Functional objectives
Summary of 2022 functional objectives Achievement
Delivered GWS requirements with no breach for GWS attestation which was
completed on time with all governance steps achieved.
Completed GIECA development programme successfully in 2022 and have
embedded GIECA processes and results into risk management, capital
deployment, business planning and remuneration.
Led the completion of activities to close GWS transitional arrangements in H1
2022 on time and ensured continuous ongoing compliance for other GWS
requirements.
Performance relative to target
Above stretch target level
Approaching stretch target
level
Supported the identification and management of the Group’s principal risks,
including a series of associated deep dives. Delivered timely insights and
analysis to the Group Risk Committee focusing on the impacts of emerged and
emerging risks such as the pandemic impacts, enhanced controls and
monitoring linked to the Russia-Ukraine conflict with key areas of focus
including cyber and sanctions risks, and the management of credit risk in the
balance sheet.
Initiated design of an enterprise-wide and standardised Governance, Risk and
Control platform to support efficient and consistent risk, control and
compliance management (including operational risk management, regulatory
requirements of the GWS regime and SOX financial reporting controls testing)
across the Group, which is expected to provide greater visibility of risks and
controls across functions and businesses delivering key information to support
internal business decisions and external reporting requirements.
Rolled out a revised stakeholder-focused Non-Financial Risk Appetite
Framework across the Group in January 2022.
Deliver GWS requirements for
the financial control and
investment management
oversight roles as well as
reporting requirements across
both private (HKIA) and
public (market) returns
Develop GIECA into the
thinking and decisions
making around financial
planning and financial
management of the Group
Ensure timely delivering of
GWS transitional
arrangements and ongoing
compliance
REGULATORS
Risk and compliance
oversight and
developments
> Ensure the business is
sufficiently informed on
external risk and regulatory
perspectives and
challenges, where
appropriate to take
effective actions and
decisions
> Provide Non-executive and
Executive management
information, insight and
risk opinions (including via
the ACR process) to fully
support Board members in
strategic decision making
> Support the identification
and management of
emerging and top risks by
the business, including
deep dives into areas
identified in the Top Risk
process
REGULATORS
In recognition of James Turner’s very strong performance against his functional objectives during the first quarter of 2022, the Committee
judged that 37.5 per cent of a maximum of 40 per cent attributable to functional objectives as Group Chief Risk and Compliance Officer was
appropriate.
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Annual report on remuneration / continuedPrudential plc Annual Report 2022 Ensure the balance sheet is
positioned to support growth
opportunities within Asia,
through targeting the
Moody’s total leverage of 20
to 25 per cent over the
medium term and having
strong relationships with the
rating agencies for any future
issuances
INVESTORS
Deliver the committed
run-rate cost savings within
central costs of $70m from
2023.
INVESTORS
James Turner in the role of Group Chief Financial Officer from 1 April to 31 December 2022
Personal and strategic objectives
2022 key strategic objectives
Achievement
Balance sheet is well positioned to support growth opportunities, with a
Moody’s pro-forma total leverage (i.e. after allowing for the debt redemption in
January 2023) of 20 per cent at FY22. We enter 2023 with a resilient balance
sheet and a strong capital position to manage uncertainties and capture
opportunities that arise.
Performance relative to target
Above stretch target level
Achieved $70m annual cost savings from start of 2023 in line with external
commitments. Kept our FY2022 head office expenditure broadly flat on a
constant exchange rate basis with 2021.
Continued to cultivate cost optimisation to manage delivery of efficiency and
expense savings by making changes in our procurement operations. Delivered
cost reductions to embed improved governance and oversight on spendings
and investments.
Above stretch target level
Recognising Mr Turner’s very strong performance against both his individual and shared personal objectives during the second, third and
fourth quarters of 2022, the Committee judged that 19 per cent of a maximum of 20 per cent attributable to personal objectives as Group
Chief Financial Officer was appropriate.
Functional objectives
Summary of 2022 functional objectives Achievement
Met key IFRS 17 milestones to ensure system in place to deliver comparative
reporting and put in place a new operating model focus on business-led
prioritization and to mitigate delivery risks in H2 2022.
Materially progressed completion of Ernst & Young audit of IFRS 17 opening
balance sheet for the readiness of market communication in H1 2023.
Appointed a leadership team in multiple locations and built one highly
functioning cross-location finance team that enabled sharing of best practices
with minimised friction in delivering the HY22 and FY22 reported accounts with
a clean audit opinion and financial controls with no material breaches.
Successfully appointed Group Chief Investment Officer and Director of ESG and
dedicated Finance Business Partners to support the Strategic Business Group
structure.
Deliver IFRS reporting
changes to ensure systems in
place to deliver comparative
reporting from 2022
INVESTORS
Develop and implement a
culture of one Finance
function, taking the best of
practices in London and Asia
around financial controls,
accuracy of financial
reporting and
appropriateness of key
financial assumptions and
judgements.
PEOPLE
Performance relative to target
Approaching stretch target
level
Approaching stretch target
level
In recognition of James Turner’s very strong performance against his functional objectives during the second, third and fourth quarters of
2022, the Committee judged that 27 per cent of a maximum of 30 per cent attributable to functional objectives as Group Chief Financial
Officer was appropriate.
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Mike Wells in the role of Group Chief Executive from 1 January to 31 March 2022
2022 key strategic objectives
Achievement
Diversify from physical
cross-border flows into Hong
Kong by strengthening our
domestic market position and
increasing access to Greater
Bay Area (GBA)
CUSTOMERS, INVESTORS
In 2022 we set the groundwork which enabled the Group to complete our
footprint in all 11 cities in China’s Greater Bay Area (GBA) and which also
supported the subsequent regulatory approval for a branch of our Hong Kong
business to be established in Macau, strengthening our operations to capture
the opportunities in the GBA.
We focused on critical illness (CI) product innovation. For example, CPL
developed a specialised critical illness product specifically developed to meet
the needs of customers in the Greater Bay Area of the Chinese Mainland. This
contributed 21 per cent of CPL’s relevant APE sales in that area.
Build leadership positions
with competitive advantages
and economies of scale within
each of our four largest
markets of China, India,
Thailand and Indonesia.
CUSTOMERS, INVESTORS
China: This is the largest single market contributor to the Group’s total APE sales
in 2022, achieving APE sales growth of 19 per cent to $884 million underpinned
by a diversified distribution strategy with a high-quality agency force and
strong partnerships with banks. CPL has more than doubled new business profit
between 2017 and 2022, with new business profit for 2022 now 44 per cent
higher than that of the pre-pandemic year 2019. We continue to outperform
the market on the Chinese Mainland industry-wide measure of gross written
premium basis by 5 times in 2022.
Performance relative to target
Above stretch target level
At the target level
India: In ICICI Prudential, APE sales grew 4 per cent driven by strong growth in
the protection and annuity business. This sales performance enabled ICICI
Prudential to maintain its top three position in the private market with a market
share of 6.3 per cent. Over the period, new business profit grew 20 per cent
reflecting APE sales growth and a favourable product mix.
Thailand: We delivered higher-than-industry average APE sales growth, both in
the bancassurance channel and for the overall industry as a whole in 2022. We
have double-digit APE sales growth for 3 consecutive years from 2020 to 2022,
and now have an overall market share of 7 per cent, being 6th in the market.
We have completed a smooth and planned CEO succession with the
appointment of a local Thai CEO.
Indonesia: We regained our leadership position in the Indonesian life market
with 11 per cent market share by weighted new business premium in 2022.
Overall APE sales increased by 2 per cent in the year to $247 million, despite
Covid-19-related restrictions in the first half of the year, and new business profit
increased by 4 per cent compared with the prior year.
We have developed a consistent methodology to standardise customer
feedback across each of our businesses, through a customer satisfaction survey
conducted by an independent third-party vendor. Through analysing variables
such as Net Promoter Score (NPS), we aim to craft more in-depth insights to
improve customer service across each touchpoint.
At the target level
Increased focus on improving
customer experience, with a
view to developing a
consistent methodology
across business units on
customer measures, such as
Net Promoter Score (NPS)
CUSTOMERS
Recognising Mr Wells’s very strong performance against both his individual and shared personal objectives during the first quarter of 2022, the
Committee judged that 16 per cent of a maximum of 20 per cent attributable to personal objectives was appropriate.
2022 bonus awards
The Committee determined the 2022 AIP awards below on the basis of the performance of the Group and of the individual executives. In making
these decisions, it reflected on factors including:
> The overall contribution of the executive;
> Behavioural, conduct and risk management considerations; and
> Wider experience of stakeholders and overall corporate performance.
The AIP outcome was considered appropriate in the context of the above and, as such, no discretion was exercised.
40 per cent of the 2022 bonus awards will be deferred into shares for three years.
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Role
2022 salary1
Maximum
2022 AIP
(% of salary)
Actual 2022
AIP award
(% of maximum
opportunity)
2022 bonus award
(including cash and
deferred elements)
Mark FitzPatrick2 Group Chief Financial Officer and Chief Operating
1,353,539
175%/ 200%3
Officer/Interim Group Chief Executive
James Turner
Group Chief Risk and Compliance Officer/Group
1,051,736
Chief Financial Officer
Mike Wells4
Group Chief Executive
360,961
175%
200%
98%
96%
96%
2,591,207
1,766,768
692,948
Notes
1
2
3
4
Salaries are converted to US dollars using an exchange rate of 0.8088 for GBP and 7.8305 for HKD.
In addition to base salary, the Interim Group Chief Executive received a monthly pensionable cash supplement of £30,167 from 1 April 2022, which is included in the annualised salary number.
Upon promotion to Interim Group Chief Executive on 1 April 2022, maximum AIP potential changed to 200 per cent for Mr FitzPatrick.
Mike Wells stepped down as Group Chief Executive on 31 March 2022 and was eligible for a 2022 AIP on a pro-rata basis.
Long-term incentives vesting in respect of performance to 31 December 2022
Prudential Long Term Incentive Plan (PLTIP)
Target setting
Our long-term incentive plans have stretching performance conditions that are aligned to the strategic priorities of the Group. In 2020, all
Executive Directors were granted awards under the PLTIP. In determining the financial targets, the Committee had regard to the stretching nature
of the three-year Business Plan for return on equity and capital positions as set by the Board. Further, in setting the conduct and diversity targets
under the sustainability scorecard, the Committee considered input presented by the Group Chief Risk and Compliance Officer on behalf of the
Group Risk Committee on conduct risk for the conduct measure and had regard to the Company’s commitment under the Women in Finance
Charter for the diversity measure.
As described in the 2021 Directors’ remuneration report, the Committee also adjusted the performance conditions attached to the 2020 PLTIP
awards in light of the demerger with Jackson to exclude the Jackson components of the Plan on which the targets were based, with effect from the
date of the demerger, and appropriately account for the period that Jackson was not part of the Group. The Committee took care to ensure that
the revised performance conditions were no more or less stretching than those originally attached to the awards. The performance assessment
provided below is based on these adjusted targets.
Performance assessment
In deciding the proportion of the awards to be released, the Committee considered actual results against performance targets. The Committee
also reviewed underlying Company performance to ensure vesting levels were appropriate, including an assessment of whether results were
achieved within the Group’s risk framework and appetite. Finally, overall vesting levels were reviewed to ensure that levels of reward provided
remain reflective of the Company’s performance.
Weighting
Threshold (20 per cent of award
vests)
Stretch (100 per cent
of award vests)
Performance achieved
TSR1
Return on Equity
(RoE)
50%
30%
Median
Upper quartile
Below median
Group 3-year average
return on shareholders’
funds is 15.8%
Group 3-year average
return on shareholders’
funds is 21.8%
Above target (Group 3-year
average return on shareholders’
funds is 20.3%)
Vesting outcome
0 per cent
85 per cent
Local Capital
operating capital
generation2
5%
Cumulative Group LCSM
Operating Capital
Generation $4,442 million
Cumulative Group LCSM
Operating Capital
Generation $5,430 million
ECap operating
capital generation3
5%
Cumulative Group ECap
Operating Capital
Generation $3,787 million
Cumulative Group ECap
Operating Capital
Generation $4,629 million
Conduct4
5%
Partial achievement
Stretch achievement
Above stretch target
100 per cent
Above stretch target
100 per cent
No conduct, culture or governance
issues that resulted in significant
capital add-ons or material fines
100 per cent
Diversity5
5%
27 per cent of Leadership
Team being female
33 per cent of Leadership
Team being female
35 per cent of our Leadership
Team was female
Total
100%
–
–
–
100 per cent
45.5 per cent
Notes
1
2
3
4
5
Group TSR is measured on a ranked basis over three years relative to peers. The peer group for the 2020 awards consists of AIA, Aegon, AXA Equitable, China Taiping Insurance, Great Eastern,
Lincoln National, Manulife, MetLife, Ping An Insurance, Principal Financial, Prudential Financial and Sun Life Financial. No adjustments were made to the peer group in respect of the demerger.
The proposed Group Local Capital Summation Method (LCSM) operating capital generation targets are based on the cumulative 2020 to 2022 Board approved business plan.
This is cumulative three-year ECap Group operating capital generation, less cost of capital (based on the capital position at the start of the performance period).
Conduct is assessed through appropriate management action, ensuring there are no significant conduct/culture/governance issues that could result in significant capital add-ons or material fines.
Diversity is measured as the percentage of the Leadership Team that is female at the end of 2022. The target for this metric has been based on progress towards the goal that the Company set
when it signed the Women in Finance Charter, where 30 per cent of our Leadership Team should be female by the end of 2022. In 2020 the Leadership Team was subdivided into the Leadership
Team and the Executive Council. Both of these leadership groups are considered for the purposes of this assessment.
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Details of cumulative achievement under the capital measures have not been disclosed as the Committee considers that these are commercially
sensitive and would put the Company at a disadvantage compared to its competitors. The Committee will keep this disclosure policy under review
based on whether, in its view, disclosure would compromise the Company’s competitive position.
PLTIP vesting
The Committee considered a report from the Group Chief Risk and Compliance Officer which was approved by the Group Risk Committee. This
report confirmed that the financial results were achieved within the Group’s risk framework and appetite. On the basis of this report and the
performance of the Group described above, the Committee decided that it was not appropriate to apply any adjustment to the formulaic vesting
outcome under the 2020 PLTIP awards. It also decided that no windfall gains had arisen, as outlined in the ‘Annual statement from the Chair of
the Remuneration Committee’ section. The Committee determined the vesting of each Executive Director’s PLTIP awards as set out below:
Executive Director
Mark FitzPatrick
James Turner
Mike Wells
Percentage
of the PLTIP
award vesting
45.5 %
45.5 %
45.5 %
Number of
shares vesting2
Value of
shares vesting1
86,252
87,458
144,892
$1,025,895
$1,040,240
$1,723,369
Notes
1
2
The share price used to calculate the value of the PLTIP awards with performance periods which ended on 31 December 2022 and will vest in May 2023 for all Executive Directors, was the
average share price for the three months up to 31 December 2022, being £9.62 converted at the exchange rate of 0.8088 USD.
The number of shares vesting includes accrued dividends. Shares vesting will be subject to a two-year holding period.
Long-term incentives awarded in 2022
2022 share-based long-term incentive awards
The table below shows the conditional awards of shares made to Executive Directors under the PLTIP in 2022 and the performance conditions
attached to these awards.
Executive Director
Role
Face value of award
Number of
shares
subject
to award
% of
salary
(USD)†
Percentage
of awards
released for
achieving
threshold
targets‡
End of
performance
period
Mark FitzPatrick#
Interim Group Chief Executive
452,257
400% 6,072,775
20% 31 December 2024
James Turner
Group Chief Financial Officer
182,217
250% 2,700,968
20% 31 December 2024
50%
Weighting of performance conditions
Group
TSR
50%
Sustainability
scorecard§
20%
20%
RoEV
30%
30%
†
§
#
Awards for Executive Directors are calculated based on the average share price over the three dealing days prior to the grant date in April, being HKD 116.07/$14.82.
Each of the four measures within the sustainability scorecard has equal weighting. They are carbon reduction, GWS capital generation, diversity and conduct.
Mr FitzPatrick received an award as Group Chief Financial Officer and Chief Operating Officer in April 2022 of 182,131 shares. Given the length of Mr FitzPatrick’s tenure as Interim Group Chief
Executive, the Committee subsequently agreed that his 2022 PLTIP opportunity should be increased to align with that of the previous Group Chief Executive (i.e. 400 per cent of his Interim
Group Chief Executive salary, inclusive of the monthly supplement). He therefore received an additional PLTIP award in May 2022 of 270,126 shares. The May 2022 grant was calculated based
on the average share price over the three dealing days prior to the grant date, being HKD 97.78/$12.49.
The Committee will review awards on vesting to ensure that participants do not benefit from windfall gains. The Committee will consider
Prudential’s stretching performance targets, the share performance of Prudential and its peers, the prices of the indices on which Prudential is
listed and any other factors deemed relevant when determining vesting.
Relative TSR
Under the Group TSR measure, 20 per cent of the award will vest for TSR at the median of the peer group, increasing to full vesting for
performance within the upper quartile. The peer group for 2022 PLTIP awards remains unchanged from 2021 and is set out below:
AIA Group
Allianz
AXA
China Life
China Pacific Insurance (CPIC)
China Taiping Insurance
Great Eastern
Manulife Financial
New China Life Insurance (NCl)
Ping An Insurance
Sun Life Financial
Zurich Insurance Group
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Return on Embedded Value Equity (RoEV)
Performance will be assessed on the average three-year Group RoEV relative to the 2022 to 2024 Board approved Plan. 20 per cent of the award
will vest for achieving the threshold level of 8 per cent, increasing to full vesting for reaching the stretch level of at least 10.8 per cent.
Sustainability scorecard
For 2022, the sustainability scorecard was revised to ensure that reward remained aligned with the strategic priorities and capital allocation
framework of the Group following the Jackson demerger. In particular:
> A new carbon reduction measure replaced ECap to reflect the Group’s evolving ESG strategy and external commitments to reduce the carbon
emissions of all shareholder and policyholder assets by 25 per cent by 2025; and
> GWS operating capital generation replaced the LCSM following the Hong Kong Group-wide Supervision framework becoming effective in
May 2021.
Under the 2022 sustainability scorecard, performance will be assessed for each of the four measures at the end of the three-year performance
period. Performance will be assessed on a sliding scale. Each of the measures has equal weighting and the 2022 measures are set out below:
Carbon reduction measure:
Vesting basis:
A reduction in weighted average carbon intensity (WACI) at the end of the performance period
(31 December 2024) compared with the baseline as at 31 December 2019. Our carbon reduction objectives
for the PLTIP are aligned with our published targets. Please see our ESG report for details of our carbon
reduction target, our progress to date and the future actions that we plan in order to achieve our ambitions
in this area, noting that future progress may not be linear.
Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold of at least
22.5 per cent reduction in WACI (ie 299), increasing to full vesting for performance above stretch level of at
least 27.5 per cent reduction in WACI (ie 280). The 2019 baseline has been the subject of limited scope
assurance by EY. Please see our ESG report for details.
Capital measure:
Cumulative three-year GWS operating capital generation relative to threshold.
Vesting basis:
Conduct measure:
Vesting basis:
Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold, increasing to
full vesting for performance above stretch level. The threshold figure for this metric will be published in the
Annual Report for the final year of the performance period.
Through strong risk management action, ensure there are no significant conduct/culture/governance issues
that result in significant capital add-ons or material fines.
Performance below threshold results in nil vesting, 20 per cent vesting for partial achievement of the Group’s
expectations, increasing to full vesting for achieving the Group’s expectations.
Diversity measure:
Percentage of the Executive Council and Leadership Team that are female at the end of 2024.
Vesting basis:
Performance below threshold results in nil vesting, 20 per cent vests for meeting the threshold of at least
34 per cent of our Executive Council and Leadership Team being female at the end of 2024, increasing to full
vesting for reaching the stretch level of at least 38 per cent being female at that date.
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Pay comparisons
Performance graph and table
The chart below illustrates the TSR performance of Prudential, the FTSE 100 (as the Company has a premium listing on the London Stock
Exchange and is a constituent of the FTSE 100 index), and the peer group of international insurers used to benchmark the Company’s
performance for the purposes of the 2022 PLTIP awards. The chart illustrates the performance of a hypothetical investment of $100 in ordinary
shares of Prudential plc over the 10-year period 1 January 2013 to 31 December 2022 compared to a similar investment in the FTSE 100 or an
index of the Company’s peers. Total shareholder return is based on Returns Index data calculated on a daily share price growth plus re-invested
dividends (as measured at the ex-dividend dates).
Ten-year chart – Prudential TSR vs. FTSE 100 and peer group average – total return over 10-year period to December 2022
Ten-year TSR chart – Prudential TSR vs. FTSE 100 and peer group average
300
250
200
150
100
50
0
$181
$173
$172
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Prudential
FTSE 100
Peer group
The information in the table below shows the total remuneration for the Group Chief Executive over the same period:
$0001
2013
2014
2015
2015
2016
2017
2018
2019
2020
2021
2022
2022
Group Chief Executive
Salary, pension and
benefits
Annual bonus payment
(As % of maximum)
LTIP vesting
(As % of maximum)
Other payments
Group Chief Executive
‘single figure’ of total
remuneration4
T Thiam T Thiam T Thiam2 M Wells2 M Wells M Wells M Wells M Wells M Wells M Wells M Wells3 M FitzPatrick3
2,201
3,207
(99.8%)
8,167
(100%)
–
2,406
3,501
(100%)
16,233
(100%)
–
938
1,077
(77.3%)
5,174
(100%)
–
3,048
1,903
(99.7%)
6,564
(100%)
–
3,029
2,904
(99.5%)
4,016
(70.8%)
–
2,415
2,673
(94%)
5,955
(95.8%)
–
2,423
2,848
(95%)
4,837
(62.5%)
–
2,122
2,804
(96%)
2,746
(62.5%)
–
2,126
1,355
(46.0%)
4,286
(68.8%)
–
2,249
3,057
(96.7%)
1,052
(17.8%)
–
663
693
(96%)
1,723
(45.5%)
–
1,476
2,161
(98%)
1,026
(45.5%)
–
13,575
22,140
7,189
11,515
9,950
11,042
10,109
7,671
7,768
6,358
3,079
4,663
Notes
1
2
3
4
250
All remuneration has been converted to USD using the average exchange rate for each respective financial year.
Tidjane Thiam left the Company on 31 May 2015. Mike Wells became Group Chief Executive on 1 June 2015. The figures shown for Mike Wells’s remuneration in 2015 relate only to his service as
Group Chief Executive.
Mike Wells left the Board on 31 March 2022. Mark FitzPatrick became Interim Group Chief Executive on 1 April 2022. The figures shown for Mark FitzPatrick’s remuneration in 2022 relate only to
his service as Interim Group Chief Executive.
Further detail on the ‘single figure’ is provided in the ‘single figure’ table for the relevant year. The figures provided reflect the value of vesting LTIP awards on the date of their release other than
for 2022 (for which an estimate is used). For Mark FitzPatrick, the LTIP vesting for 2022 also includes performance periods in which he occupied the role of Group Chief Financial Officer and
Chief Operating Officer.
prudentialplc.com
Annual report on remuneration / continuedPrudential plc Annual Report 2022
Relative importance of spend on pay
The table below sets out the amounts payable in respect of 2021 and 2022 on all employee pay and dividends:
All employee pay ($m)1,2
Dividends including demerger dividend ($m)3
Dividends excluding demerger dividend ($m)3
Notes
1
2
3
All employee pay as taken from note B2.1 to the financial statements.
FY 2021 excludes Jackson costs.
Dividends taken from note B5 to the financial statements.
2021
1,057
2,201
466
2022
1,099
154
154
Percentage
change
4%
-93%
-67%
Percentage change in remuneration
The table below sets out how the change in remuneration for each Director between 2021 and 2022, between 2020 and 2021 and between 2019
and 2020 compared to a wider employee comparator group:
Executive Directors1
Mark FitzPatrick1,2
James Turner1,2
Mike Wells2
Chair and Non-executive Directors
Shriti Vadera3
Jeremy Anderson4
Arijit Basu5
David Law4
Ming Lu9
Anthony Nightingale6
Philip Remnant
George Sartorel7
Alice Schroeder8
Chua Sock Koong9
Thomas Watjen4
Jeanette Wong9
Amy Yip
Average pay for all UK-based
employees
Salary (% change)
Benefits (% change)
Bonus10 (% change)
2021-22
2020-21
2019-20
2021-22
2020-21
2019-20
2021-22
2020-21
2019-20
39%
12%
(74)%
2%
3%
–
2%
58%
(59)%
0.7%
–
(58)%
70%
(9)%
74%
1%
3%
(0.5)%
(0.5)%
907%
13%
–
6%
–
0%
0%
–
24%
–
(4)%
–
0%
1%
10%
1%
–
–
–
1%
–
4%
1%
–
1%
–
10%
–
0%
31%
9%
(46)%
15%
30%
20%
26%
49%
35%
39%
8.5%
(77)%
46%
23%
110%
(27)%
(2)%
(52)%
35%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
n/a
–
n/a
n/a
n/a
n/a
–
n/a
n/a
n/a
–
n/a
–
n/a
–
n/a
–
n/a
n/a
–
n/a
–
n/a
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
n/a
n/a
n/a
n/a
–
n/a
n/a
n/a
–
n/a
–
n/a
–
n/a
–
n/a
n/a
–
n/a
–
n/a
–
n/a
6.65%
3.05%
3.76%
(7.3)%
0.67%
(3.95)%
7.94%
5.76%
(7.27)%
Notes
1
2
3
4
5
6
7
8
9
10
The change in salaries for Executive Directors is calculated on a local currency basis. The change in benefits for Executive Directors is calculated in USD, as benefits values are denominated in a
number of currencies. The change in bonus is calculated in USD. As 2021 benefits for James Turner have been restated, the 2020-21 change has been updated for his benefits.
Mike Wells left the Board on 31 March 2022. On 1 April 2022, Mark FitzPatrick was appointed Interim Group Chief Executive and James Turner was appointed Group Chief Financial Officer.
Shriti Vadera joined the Board and the Nominations Committee on 1 May 2020 and became Chair on 1 January 2021. The change in pay in 2020–21 reflects her pro-rated pay for 2020 as well
as her change in role.
Fluctuations in pay are due to change in Committee memberships in 2022.
Arijit Basu joined the Board on 1 September 2022.
Anthony Nightingale retired from the Board on 26 May 2022.
George Sartorel joined the Board on 14 January 2022.
Alice Schroeder retired from the Board on 26 May 2022.
Chua Sock Koong, Ming Lu and Jeanette Wong joined the Board in 2021.
The change in bonus shows change in the value of the annual bonus and does not include the value of long-term incentive awards, in line with the reporting regulations.
The regulations prescribe that this comparison should include all employees of the parent company. The number of individuals employed by the
parent company is insufficient to be the basis of a representative comparison. Therefore, the Committee decided to use all UK-based employees
as the basis for this calculation. The average pay for all employees has been calculated on a full-time equivalent basis by reference to the total pay
awarded to UK employees in 2022, 2021, 2020 and 2019. The salary increase includes uplifts made through the annual salary review, as well as
any additional changes in the year; for example to reflect promotions or role changes. There has been no material change to the level of taxable
benefit coverage received by employees.
Group Chief Executive pay compared with employee pay and Gender pay gap
As reported in the 2021 Directors’ remuneration report, the UK headcount of Prudential Services Limited is below the 250-person threshold which
triggers mandatory publication of the gender pay gap and the CEO pay ratio. Both the 2021 gender pay gap and the CEO pay ratio data were
disclosed on a voluntary basis. After due consideration, we have decided that the UK gender pay gap and CEO pay ratio are not meaningful, given
our relatively small employee headcount in the UK.
251
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Consideration of workforce pay and approach to engagement
The Committee believes that the approach to executive remuneration is consistent with the pay, reward and progression policies for other
employees within the Group. The base salary and total remuneration levels for the Executive Directors and other employees are competitively
positioned within the relevant markets and reflect the operation of our remuneration structures which are effective in appropriately incentivising
staff, having regard to our risk framework, risk appetites and to rewarding the ‘how’ as well as the ‘what’ of performance. During 2022, the
Committee considered workforce remuneration and related policies in the businesses across the Group. Information presented to the Committee,
by way of a dashboard, included how the Company’s incentive arrangements are aligned with the culture and informed the Committee’s
decision-making on executive pay and policy. By way of example, employee salary increase budgets are considered as part of the year-end review
of Executive Director compensation and salary increases.
As part of the Board’s wider approach to employee engagement, which also included a Group-wide engagement survey, the Committee
continues to take additional measures to explain how the remuneration of Executive Directors aligns with the wider Company pay policy. The
Company operates a microsite on its intranet that outlines executive pay arrangements during the previous financial year and key areas of
change for the year ahead. It explains to employees that total remuneration for Executive Directors is made up of a number of elements and is
governed by both the Directors’ remuneration policy and the Group’s remuneration policy (which is also published on the Company’s website) with
the relevant links to these documents. Directors remuneration is considered appropriate compared to the wider workforce. In 2022, salary increase
budgets for other employees across the Group’s businesses were between 4.5 per cent and 5 per cent while Executive Directors received 3 per cent
salary increases in January 2022. Employee engagement is led by the Responsibility & Sustainability Working Group. The Strategic Report section
of this report describes how they discharged this responsibility during 2022.
The Celebration Award announced in 2021 of $1,000 of restricted shares made to our people around the world was released in October 2022. This
one-off Award was to recognise the hard work and commitment demonstrated by our people and to give them a stake in the new chapter of the
Company’s development. The Group also operates a number of all-employee share plans, allowing our people to invest in the Company’s shares.
During 2022, these plans were available across the Group’s footprint for the first time. Similar Syariah-complaint plans are available in our Syariah
business. Through these plans, many of our employees are shareholders and can therefore vote on remuneration-related resolutions at AGMs.
As part of our continuing efforts to safeguard our employees’ wellbeing, we held our second Group Wellness Day on 26 August 2022. All
employees Group-wide were encouraged to take that extra day off to rest and recharge, spend time with family and friends as referred to in
‘Reflecting stakeholders’ 2022 experiences’ section.
Chair and Non-executive Director remuneration in 2022
Chair fees
Shriti Vadera became the Chair of the Board on 1 January 2021. Her fee was revised on 1 July 2022 by 3 per cent, to £788,000 ($974,000), in line
with the increase awarded to Executive Directors in January 2022.
Non-executive Directors’ fees
The Non-executive Directors’ fees are denominated in sterling. Fee levels were reviewed by the Board during 2022, and the basic fee was increased
by 3 per cent effective from 1 July 2022. Increases in US dollar amounts reflect this increase, as well as changes in the exchange rate.
Annual fees
Basic fee
Additional fees:
Audit Committee Chair
Audit Committee member
Remuneration Committee Chair
Remuneration Committee member
Risk Committee Chair
Risk Committee member
Nomination & Governance Committee Chair1
Nomination & Governance Committee member
Responsibility & Sustainability Working Group Chair
Responsibility & Sustainability Working Group member
Senior Independent Director
From
1 July 2021
($)2
From
1 July 2021
(£)2
From
1 July 2022
($)2
From
1 July 2022
(£)2
136,000
99,000
126,000
102,000
103,000
41,000
89,000
41,000
103,000
41,000
–
21,000
62,000
30,000
69,000
75,000
30,000
65,000
30,000
75,000
30,000
–
15,000
45,000
22,000
50,000
93,000
37,000
80,000
37,000
93,000
37,000
19,000
56,000
27,000
62,000
75,000
30,000
65,000
30,000
75,000
30,000
–
15,000
45,000
22,000
50,000
There is no fee paid for the role of Nomination & Governance Committee Chair.
Fees were denominated in sterling and were converted to USD using an exchange rate of 0.7269 for 2021 and 0.8088 for 2022.
Notes
1
2
252
prudentialplc.com
Annual report on remuneration / continuedPrudential plc Annual Report 2022 If, in a particular year, the number of meetings is materially greater than usual, the Company may determine that the provision of additional fees
is fair and reasonable.
The resulting fees paid to the Chair and Non-executive Directors are:
Chair
Shriti Vadera
Non-executive Directors
Jeremy Anderson
Arijit Basu4
David Law
Ming Lu1,6
Anthony Nightingale2
Philip Remnant
George Sartorel5
Alice Schroeder3
Chua Sock Koong1
Thomas Watjen
Jeanette Wong1
Amy Yip
Total
2022 fees
($000)
2021 fees
($000)
2022
taxable
benefits*
($000)
2021
taxable
benefits*
($000)
Total 2022
remuneration:
the ‘single
figure’
($000)†
Total 2022
remuneration:
the ‘single
figure’ in GBP
(£000)‡
Total 2021
remuneration:
the ‘single
figure’
($000)†
Total 2021
remuneration:
the ‘single
figure’
in GBP
(£000)‡
960
284
63
291
180
90
279
192
103
212
205
226
161
1,052
124
102
1,084
306
–
318
126
246
308
–
270
139
250
144
177
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
284
63
291
180
90
279
192
103
212
205
226
161
877
229
51
236
146
73
226
155
83
172
166
183
131
1,154
306
–
318
126
246
308
–
270
139
250
144
177
839
222
–
231
92
179
224
–
197
101
182
105
129
3,245
3,336
124
102
3,369
2,725
3,438
2,501
*
†
‡
Benefits include the cost of providing the use of a car and driver and medical insurance.
Each remuneration element is rounded to the nearest $1,000/£1,000 and totals are the sum of these rounded figures. The Chair and Non-executive Directors are not entitled to participate in
annual bonus plans or long-term incentive plans.
Total remuneration has been converted to US dollars using the exchange rate of 0.7269 for the 2021 single figure calculations and 0.8088 for the 2022 single figure calculations. As
Non-executive Directors and the Chair don’t receive variable remuneration components, the table above doesn’t include a sum of total fixed and total variable remuneration.
Notes
1
2
3
4
5
6
Jeanette Wong, Chua Sock Koong and Ming Lu joined the Board on 12 May 2021.
Anthony Nightingale retired from the Board on 26 May 2022.
Alice Schroeder retired from the Board on 26 May 2022.
Arijit Basu joined the Board on 1 September 2022.
George Sartorel joined the Board on 14 January 2022.
Ming Lu donates his fee to Asia Art Archive, an independent non-profit organisation based in Hong Kong.
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Statement of Directors’ shareholdings
The interests of Directors in ordinary shares of the Company are set out below. ‘Beneficial interest’ includes shares owned outright, shares acquired
under the Share Incentive Plan (SIP) and deferred annual incentive awards, detailed in the ‘Supplementary information’ section. It is only these
shares that count towards the share ownership guidelines.
1 January
2022
(or on date of
appointment)
Total
beneficial
interest
(number of
shares)
67,500
228,600
204,735
1,264,572
9,157
–
11,054
7,000
50,000
7,916
20,000
7,500
10,340
–
2,500
During 2022
31 December 2022
(or on 31 March 2022 for Mike Wells)
Share ownership
guidelines
Number of
shares
acquired up
to 31 March
2022
Number
of shares
held at 31
March 2022
by Mike
Wells
Number
of shares
acquired
between 1
April 2022
and 31
December
2022
Number
of shares
disposed of
up to 31
December
2022 (or up
to 31 March
2022 for
Mike Wells)
Number
of shares
subject to
performance
conditions†
Total
beneficial
interest*
(number of
shares)
Total
interest
in shares
Share
ownership
guidelines‡
(% of salary/
fee)
Beneficial
interest as a
percentage
of basic
salary/
basic fees§
–
–
67,500
–
67,500
100%
84%
48
10,000
49
1,264,621
79,918
69,550
–
13,822
308,566
270,463
1,264,621
763,861 1,072,427
751,282
480,819
753,758 2,018,379
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,157
–
11,054
7,000
50,000
7,916
–
20,000
7,500
10,340
9,600
9,791
–
–
–
–
–
–
–
–
–
–
–
–
9,157
–
11,054
7,000
50,000
7,916
20,000
7,500
10,340
9,600
9,791
9,600
7,291
250%
250%
400%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
361%
306%
1,910%
86%
–
104%
66%
472%
75%
–
189%
71%
98%
91%
92%
Chair
Shriti Vadera
Executive Directors
Mark FitzPatrick
James Turner
Mike Wells1
Non-executive
Directors
Jeremy Anderson
Arijit Basu2
David Law
Ming Lu
Anthony Nightingale3
Philip Remnant
George Sartorel
Alice Schroeder3,4
Chua Sock Koong
Thomas Watjen5
Jeanette Wong
Amy Yip
*
†
‡
§
Beneficial interests include shares held directly or indirectly by connected persons. There were no changes of Directors’ interests in ordinary shares between 31 December 2022 and 7 March 2023
with the exception of any UK-based Executive Directors, due to their participation in the monthly Share Incentive Plan (SIP). Mark FitzPatrick acquired a further 29 shares in the SIP during this
period.
Further information on share awards subject to performance conditions are detailed in the ‘share-based long-term incentive awards’ part of the ‘Supplementary information’ section.
Holding requirement of the Articles of Association (2,500 ordinary shares) must be obtained within one year of appointment to the Board. Executive Directors have five years to reach their
guideline. Non-executive Directors have three years from their date of joining to reach the guideline.
Based on the average closing price for the six months to 31 December 2022 (£9.63).
The Company and its Directors, Chief Executives and shareholders have been granted a partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance (SFO).
As a result of this exemption, Directors, Chief Executives and shareholders do not have an obligation under the SFO to notify the Company of shareholding interests, and the Company is not required to
maintain a register of Directors’ and Chief Executives’ interests under section 352 of the SFO, nor a register of interests of substantial shareholders under section 336 of the SFO. The Company is,
however, required to file with the Stock Exchange of Hong Kong Limited any disclosure of interests notified to it in the United Kingdom.
Notes
1
2
3
4
5
6
254
Mike Wells stepped down from the Board on 31 March 2022 and retired from the Company on 14 July 2022. For the 1 January 2022 figure, Mike Wells’ beneficial interest in shares is made up of
297,320 ADRs (representing 594,640 ordinary shares) and 669,932 ordinary shares. For the 31 March 2022 figure, his beneficial interest in shares is made up of 297,320 ADRs (representing
594,640 ordinary shares) and 669,981 ordinary shares.
Arijit Basu was appointed to the Board on 1 September 2022.
Anthony Nightingale stepped down from the Board on 26 May 2022. Total interest in shares is shown at this date.
George Sartorel was appointed to the Board on 14 January 2022.
Alice Schroeder stepped down from the Board on 26 May 2022. Total interest in shares is shown at this date. For the 1 January 2022 figure, Alice Schroeder’s beneficial interest in shares is made
up of 10,000 ADRs (representing 20,000 ordinary shares). For the 26 May 2022 figure, the beneficial interest in shares is made up of 10,000 ADRs (representing 20,000 ordinary shares).
For the 1 January 2022 figure, Thomas Watjen’s beneficial interest in shares is made up of 5,170 ADRs (representing 10,340 ordinary shares). For the 31 December 2022 figure, the beneficial
interest in shares is made up of 5,170 ADRs (representing 10,340 ordinary shares).
prudentialplc.com
Annual report on remuneration / continuedPrudential plc Annual Report 2022
The bar chart below illustrates the Executive Directors’ shareholding as a percentage of base salary relative to the applicable
share ownership guideline.
1,910%
2,000%
1,750%
1,500%
1,250%
1,000%
750%
500%
250%
250%
361%
250%
306%
400%
Mark FitzPatrick
James Turner
Mike Wells
Share ownership guidelines as % of salary
Beneficial interest as at 31 December 2022 (31 March for Mike Wells) as % of salary
Outstanding share options
The following table sets out the share options held by the Executive Directors in the UK Savings-Related Share Option Scheme (SAYE) as at the
end of the period. No other directors participated in any other option scheme.
Date of
grant
Exercise
price
(pence)
Market
price at
31 Dec
2022
(pence)
Exercise period
Number of options
Beginning
End
Beginning
of period
Granted Exercised Cancelled
Forfeited
Lapsed
Mark FitzPatrick
Mike Wells1
21 Sep 17
22 Sep 20
1455 1127.50
964 1127.50
01 Dec 22 31 May 23
13 Jan 23
14 Jul 22
2,061
1,867
Notes
1
2
3
4
5
Mike Wells retired from the Company on 14 July 2022, and the beginning and end dates of the exercise period are based on his retirement date in line with the plan rules.
No gain was made by Directors in 2022 on the exercise of SAYE options.
No price was paid for the award of any option.
The highest and lowest closing share prices during 2022 were £13.37 and £7.98 respectively.
All exercise prices are shown to the nearest pence.
End of
period
2,061
1,867
Directors’ terms of employment
Details of the service contracts of each Executive Director are outlined in the table below. The Directors’ remuneration policy contains further
details of the terms included in Executive Director service contracts. As required by the Hong Kong Listing Rules, all service contracts in respect of
the Executive Directors can be terminated by the Company by giving no more than 12 months’ notice (or payment in lieu of such notice) and
without compensation payments other than any termination payments required by law.
Executive Directors
Mark FitzPatrick
Anil Wadhwani
Date of contract
Notice period
to the
Company
Notice period
from the
Company
17 May 2017
25 February 2023
12 months
12 months
12 months
12 months
255
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Letters of appointment of the Chair and Non-executive Directors
Details of Non-executive Directors’ individual appointments are outlined below. The Directors’ remuneration policy contains further details on
their letters of appointment. The Chair and Non-executive Directors are not entitled to receive any payments for loss of office. As required by the
Hong Kong Listing Rules, the appointment of the Chair and the Non-Executive Directors can be terminated by the Company by giving no more
than six months’ notice (12 months’ notice for the Chair), or payment in lieu of such notice and without compensation payments other than any
termination payments required by law.
Chair/Non-executive Director
Appointment by the Board
Notice period
Time on the Board at 2023 AGM
Chair
Shriti Vadera (Chair from 1 January 2021)
Non-executive Directors
Philip Remnant
Anthony Nightingale1
Alice Schroeder2
David Law
Thomas Watjen
Amy Yip
Jeremy Anderson
Ming Lu
Chua Sock Koong
Jeanette Wong
George Sartorel
Arijit Basu3
Claudia Suessmuth Dyckerhoff
1 May 2020
12 months
3 years
1 January 2013
1 June 2013
10 June 2013
15 September 2015
11 July 2017
2 September 2019
1 January 2020
12 May 2021
12 May 2021
12 May 2021
14 January 2022
1 September 2022
1 January 2023
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
10 years 4 months
n/a
n/a
7 years 8 months
5 years 10 months
3 years 8 months
3 years 4 months
2 years
2 years
2 years
1 year 3 months
8 months
4 months
Notes
1
2
Anthony Nightingale retired from the Board on 26 May 2022.
Alice Schroeder retired from the Board on 26 May 2022.
Recruitment arrangements
In making decisions about the remuneration arrangements for those joining the Board, the Committee worked within the Directors’ remuneration
policy approved by shareholders and was mindful of:
> The skills, knowledge and experience that each new Executive Director brought to the Board;
> The need to support the relocation of executives to enable them to assume their roles; and
> Its commitment to honour legacy arrangements.
Appointing high-calibre executives to the Board is necessary to ensure the Company is well positioned to develop and implement its strategy and
deliver long-term value.
Anil Wadhwani
Anil Wadhwani took up the role of Chief Executive Officer on 25 February 2023. As set out in the ‘Statement of implementation of remuneration
policy in 2023’ below, Mr Wadhwani was appointed on a salary of HK$12,281,000. He will receive pension benefits at 13 per cent of salary, in line
with the employer pension contribution available to the wider workforce, plus contributions into the Hong Kong Mandatory Provident Fund. For
2023, he will have a maximum bonus opportunity of 200 per cent of salary under the AIP. Forty per cent of any bonus will be deferred for three
years in line with the Directors’ remuneration policy. Long-term incentive awards, granted under the PLTIP, will have a face value on grant of
400 per cent of base salary. He will be subject to the shareholding guidelines of 400 per cent of salary and will have five years from the date of his
appointment to build this level of ownership. Incentive opportunities are unchanged compared to that of the previous Chief Executive Officer.
Any awards and payments from his previous employer, Manulife, that Mr Wadhwani has forfeited as a consequence of joining Prudential will be
replaced on a like-for-like basis, with replacement awards and payments released in accordance with the original vesting time frame attached to
the forfeited awards and payments. The performance shares and restricted shares together with share options will be bought out using share
options over nominal-cost Prudential shares. The buy-out will make use of Listing Rule 9.4.2. In addition, performance shares will remain subject to
the original Manulife performance conditions and only the “in the money” element of the options will be bought out. Full details of the
replacement awards will be disclosed at the time the awards are made and in the 2023 Directors’ remuneration report. Mr Wadhwani also received
compensation equal to salary, pension and housing benefits forfeited during the period between the end of his employment with Manulife and
commencement of his employment with the Group and reimbursement of the cost to him of buying out his notice period with his current
employer in order to facilitate his move to Prudential.
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There were no payments to Directors for loss of office in 2022.
Mike Wells’s leaving arrangements
Following the announcement of his retirement on 10 February 2022, Mr Wells stepped down from the Board on 31 March 2022. Mr Wells
remained employed by the Group until 14 July 2022, receiving his salary and certain benefits (including pension benefits) until that date. The value
of the salary and benefits for the period between 1 April 2022 and the end of his employment is USD 767,000 (rounded to the nearest thousand
dollars). His 2022 bonus opportunity was pro-rated for the period worked in 2022. 60 per cent of this award will be paid in cash in the usual way,
and 40 per cent will be deferred for three years (to be released in the Spring of 2026). The award will be subject to malus and clawback provisions.
Mr Wells’s outstanding deferred bonus awards will be released on the original timetable, subject to malus and clawback provisions. Outstanding
long-term incentive awards will be pro-rated to the end of his employment and will vest in line with the original vesting dates, subject to
satisfaction of the performance conditions as well as malus and clawback provisions. Awards will continue to accumulate dividend equivalents,
and will be subject to a two-year holding period. No long-term incentive award was made in 2022.
Mr Wells’s outstanding options under the Prudential Savings Related Share Option Scheme and outstanding shares held under the Prudential
Share Incentive Plan will be treated as a ‘good leaver’ in accordance with the applicable HMRC-approved rules.
Mr Wells will be subject to the share ownership guideline (400 per cent of his salary on the date he left the Board) for a period of two years after
stepping down from the Board. During this period, he will be required to obtain clearance to deal in the Company’s shares. A capped contribution
was made towards legal fees incurred in respect of his retirement agreement, and Mr Wells will receive a capped contribution of up to £1,600 per
year towards the costs of filing UK tax returns for periods for which he has Prudential employment income taxable in the UK. Mr Wells is not eligible
for any payments for loss of office.
Arrangements for James Turner
Given the Company’s exclusive focus on Asia and Africa and reflecting practice among Asian listed organisations not to have Chief Financial
Officers as Board members or Executive Directors, James Turner, Group Chief Financial Officer, stepped down from the Board with effect from
1 January 2023. He remains Group Chief Financial Officer and a member of the Group Executive Committee, and will be a standing attendee at
future Board meetings.
Mr Turner’s remuneration arrangements in respect of his departure from the Board were determined by the Committee in line with the Policy.
Salary, pension and benefits will continue to be paid to Mr Turner as he remains a member of the Group Executive Committee. Mr Turner was
eligible for a 2022 bonus as he remained an Executive Director for the full 2022 performance year. This award has been determined on
performance achieved, as detailed earlier in the report. 60 per cent of this award will be paid in cash in the usual way, and 40 per cent will be
deferred for three years (to be released in the Spring of 2026). The award will be subject to malus and clawback provisions.
Outstanding deferred bonus awards will be released on the original timetable. They remain subject to malus and clawback provisions and will
continue to accumulate dividends until they are released.
Outstanding long-term incentive awards will vest in line with the original vesting dates, subject to the satisfaction of the original performance
conditions. These awards will also continue to accumulate dividend equivalents until they are released and will remain subject to the original
malus and clawback provisions and a two-year holding period following the end of the three-year performance period.
Mr Turner is required to hold the lower of his actual shareholding following his stepping down from the Board on 31 December 2022 and his
current share ownership guideline of 250 per cent of salary for a period of two years. Thereafter, the Company’s shareholding guidelines that
apply to members of the Group Executive Committee will apply to him. Mr Turner will continue to be required to obtain clearance to deal in the
Company’s shares.
Arrangements for Mark FitzPatrick
Mark FitzPatrick stepped down as Interim Group Chief Executive and as a Board member on 24 February 2023 but will continue to assist with
specific projects until 30 June 2023. Mr FitzPatrick is entitled to 12 months’ notice commencing on the date he stepped down from the Board.
Remuneration arrangements in respect of Mr FitzPatrick’s departure from the Board have been determined by the Group Remuneration
Committee in line with the Directors’ remuneration policy approved by shareholders at the 2020 AGM. Mr FitzPatrick will not receive any loss of
office payments in respect of his service as Executive Director.
Salary, pension and benefits
Salary, pension and certain benefits will continue to be paid until the end of his notice period on 24 February 2024 (subject to adjustment in the
event that Mr FitzPatrick commences alternative employment before 24 February 2024). The monthly pensionable cash supplement relating to
the role of Interim Group Chief Executive ceased when Mr FitzPatrick stepped down from the Board.
Incentives
Mr FitzPatrick is eligible for an annual bonus under the Directors’ Remuneration Policy, which will be pro-rated for the period served as Interim
Group Chief Executive (1 January to 24 February 2023). Payment will be subject to achievement against the performance metrics as set out in
the ‘Statement of implementation of remuneration policy in 2023’ section, with any pay-out determined in the normal manner and at the normal
time based on performance achieved in 2023. 40 per cent of any annual bonus earned will be deferred for three years (released in spring 2027),
in line with normal practice. This award will be subject to malus and clawback provisions.
Outstanding deferred bonus awards will be released on the original timetable. They remain subject to malus and clawback provisions and will
continue to accumulate dividends until they are released.
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Outstanding long-term incentive awards will vest in line with the original vesting dates, subject to the satisfaction of the performance conditions.
The 2021 and 2022 PLTIP awards will be pro-rated to the end of Mr FitzPatrick’s employment. These awards remain subject to malus and
clawback provisions, and will continue to accumulate dividend equivalents until they are released. The awards will remain subject to a two-year
holding period following the end of their respective performance periods. No long-term incentive award will be made in 2023 or any subsequent
year.
Legal fees of up to £10,000 may be paid on Mr FitzPatrick’s behalf.
Any outstanding options under the Prudential Savings Related Share Option Scheme and any outstanding shares held under the Prudential Share
Incentive Plan will be treated in accordance with the applicable plan rules.
In line with the Directors’ remuneration policy approved by shareholders at the 2020 AGM, Mr FitzPatrick is required to hold the lower of his current
share ownership guideline of 250 per cent of salary and his actual shareholding when he steps down from the Board on 24 February 2023 for a
period of two years from the date on which he stepped down from the Board. Mr FitzPatrick will continue to be required to obtain clearance to deal
in the Company’s shares during this period.
Other Directors
A de minimis threshold of £10,000 has been set by the Committee; any payments or benefits provided to a past Director above this amount will be
reported.
Statement of voting at general meeting
The Directors’ remuneration policy was approved by shareholders at the 2020 Annual General Meeting. At the 2022 Annual General Meeting,
shareholders were asked to vote on the 2021 Directors’ remuneration report. Each of these resolutions received a significant vote in favour by
shareholders and the Committee is grateful for this support and endorsement by our shareholders. The votes received were:
Resolution
Votes for
% of votes
cast
To approve the Directors’ remuneration policy (2020 AGM)
To approve the Directors’ remuneration report (2022 AGM)
1,930,172,979
2,015,901,709
95.84
93.09
Votes against
83,796,656
149,605,401
% of votes
cast
Total votes cast
Votes
withheld
4.16
6.91
2,013,969,635
2,165,507,110
1,043,445
55,524,844
Statement of implementation of remuneration policy in 2023
Base salary
Executive Directors’ remuneration packages were reviewed in 2022, with changes effective from 1 January 2023. When the Committee made
these decisions, it considered the salary increases awarded to other employees in 2022 and the expected increases in 2023. The external market
reference points used to provide context to the Committee were based on data for 2023 TSR Peer group, Asia-focused Insurers and Asia Financial
Services Firms.
After due deliberation, the Committee considered there should be a 3 per cent salary increase to Mr FitzPatrick for 2023 which is less than the
average 6 per cent salary increase received by the wider Prudential workforce. On this basis, 2023 will be the eleventh consecutive year in which
the increases generally offered to executives have been below or close to the bottom of the range of salary increases budgeted for the broader
workforce.
The annual salaries effective for 2023 are set out below:
> Mark FitzPatrick: £847,000 effective 1 January 2023, plus a monthly pensionable cash supplement of £30,167 in the period he served as Interim
Group Chief Executive; and
> Anil Wadhwani: HK$12,281,000 effective 25 February 2023.
2023 pension entitlements
The Executive Directors’ pension benefits will remain aligned to the workforce rate currently considered to be 13 per cent of salary. In addition,
statutory contributions will continue to be made into mandatory pension arrangements in the country in which the Executive Directors are based,
in line with the local requirements.
Annual bonus
Award levels
As Interim Group Chief Executive, Mark FitzPatrick will continue to be eligible for a maximum bonus opportunity of 200 per cent of salary (plus the
cash supplement for the period it was payable), pro-rated for the period served as an Executive Director from 1 January to 24 February 2023. Anil
Wadhwani will be eligible for a maximum bonus opportunity of 200 per cent of salary as Chief Executive Officer. This will be pro-rated for the
period worked since 25 February 2023.
Performance conditions
For 2023, the AIP for the Chief Executive Officer role will be based 80 per cent on financial measures and 20 per cent on personal objectives. The
financial AIP measures and weightings will change to align with those adopted for the Asia business, increasing the focus on new business profit.
The resulting 2023 financial AIP measures and weightings are as follows:
> Group EEV new business profit – 55 per cent;
> Group adjusted operating profit – 20 per cent;
> Group operating free surplus generated – 15 per cent; and
> Group Holding Company cash flow – 10 per cent.
The Committee reserves the right to vary 2023 AIP targets to ensure that they remain fair and stretching as the consequences of the re-opening
of the border between the Chinese Mainland and Hong Kong become apparent.
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Award levels
Anil Wadhwani will be eligible to receive 2023 PLTIP awards of 400 per cent.
Performance conditions
Performance conditions for 2023 PLTIP awards have been revised to ensure that they remain aligned with the strategic priorities and in particular
the Group’s exclusive focus on Asia and Africa. The weighting of the Return on Embedded Value (RoEV) measure, which reflects the efficiency with
which the Group deploys shareholder equity to generate operating returns, will increase to 40 per cent (from 30 per cent) and the weighting of the
scorecard (to be renamed the ‘business integrity scorecard’), which comprises metrics whose purpose is to ensure that reward remains aligned with
the strategic priorities and capital allocation framework of the Group, will increase to 25 per cent (from 20 per cent). In line with the Group-wide
Supervision Framework and regulatory expectations, Group Internal Economic Capital Assessment (‘GIECA’), an additional capital measure, will
be introduced into the business integrity scorecard for 2023 with a weighting of 5 per cent. No other changes are proposed to the business
integrity scorecard. Relative TSR will determine the vesting of the remaining 35 per cent of 2023 PLTIP awards (50 per cent for 2022 awards),
providing alignment with the emphasis placed on this metric by many Asian and UK companies.
The weighting of measures for the 2023 PLTIP awards for all Executive Directors will therefore be as follows:
> Relative TSR (35 per cent of award);
> A return on embedded value measure (40 per cent of award); and
> Business integrity scorecard of strategic measures (25 per cent of award).
Relative TSR
Under the Group TSR measure, 20 per cent of the award will vest for TSR at the median of the peer group, increasing to full vesting for
performance within the upper quartile. TSR is measured on a local currency basis since this has the benefit of simplicity and directness of
comparison.
The TSR peer group has been revised from 2022 to further reflect the Group’s strategic focus and is set out below:
AIA Group
DBS Group
MetLife
China Life Insurance
China Pacific Insurance Company China Taiping Insurance
Great Eastern
New China Life
Hang Seng Bank
Manulife Financial
Ping An Insurance
Standard Chartered
Return on Embedded Value
20 per cent of the award will vest for achieving the threshold level of performance of 9.2 per cent, increasing to full vesting for reaching the stretch
level of at least 12.5 per cent. RoEV will be calculated as the total EEV operating profit as a percentage of the average EEV basis shareholders’
equity. RoEV will be assessed at the Group level.
Business integrity scorecard
Under the 2023 business integrity scorecard, performance will be assessed for each of the five measures at the end of the three-year performance
period. Performance will be assessed on a sliding scale. Each of the measures has equal weighting and the 2023 measures are set out below:
Carbon reduction measure:
Vesting basis:
Weighted average carbon intensity (WACI) indicator at the end of the performance period (31 December
2025) compared with the baseline number as at 31 December 2019. Our carbon reduction objectives for the
PLTIP are aligned with our published targets. Please see our ESG report for details of our carbon reduction
target, our progress to date and the future actions that we plan in order to achieve our ambitions in this area,
noting that future progress may not be linear.
Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold of at least
25 per cent reduction in WACI (ie WACI of 290), increasing to full vesting for performance above stretch level
of at least 35 per cent reduction in WACI (ie WACI of 251). The baseline and target WACI have been
externally validated.
GWS capital measure:
Cumulative three-year GWS operating capital generation relative to threshold.
Vesting basis:
GIECA measure:
Vesting basis:
Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold, increasing to
full vesting for performance above stretch level. The threshold figure for this metric will be published in the
Annual Report for the final year of the performance period.
The incorporation of a Group Internal Economic Capital Assessment (‘GIECA’) metric into the remuneration
process will ensure adherence to the GWS guidelines on GIECA use and an alignment with management’s
desire to fully embed the use of GIECA across the Group.
Performance below threshold results in nil vesting, 20 per cent vesting for achieving threshold, increasing to
full vesting for performance above stretch level. The threshold figure for this metric will be published in the
Annual Report for the final year of the performance period.
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Conduct measure:
Vesting basis:
Diversity measure:
Vesting basis:
Through strong risk management action, ensure there are no significant conduct/culture/governance issues
that result in significant capital add-ons or material fines.
Performance below threshold results in nil vesting, 20 per cent vesting for partial achievement of the Group’s
expectations, increasing to full vesting for achieving the Group’s expectations.
Percentage of the Core Group of leaders that are female at the end of 2025. The Core Group of leaders,
replacing the Executive Council and Leadership team, is defined as individuals who occupy a value-creator
role across the organisation and/or individuals who have demonstrated future potential and succession to a
value-creator role.
Performance below threshold results in nil vesting, 20 per cent vests for meeting the threshold of at least
35 per cent of our Core Group of leaders being female at the end of 2025, increasing to full vesting for
reaching the stretch level of at least 40 per cent being female at that date.
Chair and Non-executive Directors
Fees for the Chair and Non-executive Directors were reviewed in 2022 with changes effective from 1 July 2022, as set out under the ‘Chairman
and Non-executive Director remuneration in 2022’ section. The next regular fee level review will be conducted in 2023.
Chua Sock Koong
Chair of the Remuneration Committee
15 March 2023
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This section sets out the revised Directors’ remuneration policy (‘Policy’) which will be put forward to shareholders for a binding vote at the 2023
AGM on 25 May 2023. If approved, this Policy will apply immediately for three years following the AGM. This Policy has evolved from the current
Policy which was approved at the AGM held on 14 May 2020 and has applied from that date.
As discussed in the Annual statement from the Chair of the Remuneration Committee (the ‘Committee’), the current Policy has operated as
intended. Full details of the existing Policy can be found on pages 174 to 191 of the 2019 Annual Report or on our website at
www.prudentialplc.com/~/media/Files/P/Prudential-V13/policies-and-statements/directors-remuneration-policy-2020-1.pdf
During 2022, the Committee reviewed the Policy, taking into account the Group’s strategic shift to focus exclusively on Asia and Africa, the views
of our shareholders, the UK Corporate Governance Code, market practice and the broader regulatory and competitive environment. It also
considered workforce remuneration and related policies in the businesses across the Group, including how the Company’s incentive arrangements
are aligned with our footprint in Asia . Input was sought from the management team, while ensuring that conflicts of interest were suitably
mitigated. The Committee is entirely made up of independent Non-executive Directors and no-one is present when their own remuneration is
being discussed by the Committee. Advice is sought from the Group Risk Committee on risk management considerations to be applied in respect
of executive remuneration, in line with the broader Group Risk Framework.
In reviewing the Policy, alternative remuneration structures were considered. Following careful consideration and discussion with our major
investors, the Committee has decided to retain a typical UK-listed incentive structure but introduce some changes to the Policy to equip the Group
to recruit and retain critical executive talent in our key markets.
Changes from 2020 Policy
The proposed Policy generally reflects that approved by shareholders in May 2020. However, the Committee felt that it was important to make
certain changes to specific components in order to align reward with the strategic priorities of the Group and, in particular, its exclusive focus on
Asia and Africa. The principal differences are set out below.
> Deferral of the Annual Incentive Plan (‘AIP’) in cash rather than shares once the Executive Director’s Share Ownership Guideline is achieved;
> In respect of the Prudential Long Term Incentive Plan (‘PLTIP’) performance measures, reduce the relative weighting of the Total Shareholder
Return (‘TSR’) performance measure from 50 per cent to 35 per cent and increase the weighting of Return on Embedded Value (‘RoEV’) to
40 per cent (from 30 per cent) and business integrity scorecard to 25 per cent (from 20 per cent ). Full details of the relative TSR, RoEV and
business integrity scorecard target ranges to be attached to 2023 PLTIP awards are disclosed prospectively in the 2022 Directors’ remuneration
report.
> The sections dealing with malus and clawback and the treatment of Executive Directors leaving Prudential have been updated to reflect the
terms of the 2023 Prudential Long Term Incentive Plan, which is being submitted to shareholders at the 2023 AGM for approval.
Fixed pay Policy for Executive Directors
Component and purpose
Operation
Base salary
Paying salaries at a
competitive level enables
the Company to recruit
and retain key Executive
Directors.
Prudential’s Policy is to offer Executive Directors base salaries that are
competitive within their local market.
The Committee usually reviews salaries annually with changes normally
effective from 1 January. In determining base salary for each Executive
Director, the Committee considers factors such as:
Opportunity
Annual salary increases for
Executive Directors will normally be
in line with the increases for other
employees unless there is a change
in role or responsibility.
> Salary increases for other employees across the Group;
> The performance and experience of the Executive Directors;
> The size and scope of the role;
> Group financial performance;
> Internal relativities; and
> External factors such as economic conditions and market data, taking into
account the geographies and markets in which the Company operates.
Prudential’s Policy is for the Committee to have the discretion to offer
Executive Directors benefits which reflect their individual circumstances and
are competitive within their local market, including but not limited to :
> Health and wellness benefits;
> Protection and security benefits;
> Transport benefits;
> Family and education benefits;
> All employee share plans and savings plans;
> Relocation and location-specific benefits; and
> Reimbursed business expenses (including any tax liability) incurred when
travelling overseas in performance of duties.
Benefits
Provided to Executive
Directors to assist them
in carrying out their
duties efficiently.
Relocation and
location-specific benefits
allow Prudential to
attract high calibre
Executive Directors in the
international talent
market and to deploy
them appropriately
within the Group.
The maximum paid will be the cost
to the Company of providing these
benefits. The cost of these benefits
may vary from year to year but the
Committee is mindful of achieving
the best value from providers.
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New Directors’ remuneration policy / continued
Component and purpose
Operation
Provision for an income
in retirement
Pension benefits provide
Executive Directors with
opportunities to save for
an income in retirement.
Prudential’s Policy is to offer Executive Directors a pension provision that is
competitive and appropriate in the context of pension benefits for the wider
workforce.
Executive Directors have the option to:
> Receive payments into a defined contribution scheme; and/or
> Take a cash supplement in lieu of contributions.
In addition, Executive Directors may receive statutory contributions to
mandatory pension arrangements in the country in which they are based in
line with local requirements.
Opportunity
Executive Directors, either externally
recruited or promoted from within
the Company, will be entitled to
receive pension contributions or a
cash supplement (or a combination
of the two) in line with the workforce
rate, currently considered to be
13 per cent of base salary.
In addition, statutory contributions
will be made to mandatory pension
arrangements in the country in
which the Executive Directors are
based, in line with the local
requirements.
Annual bonus Policy for Executive Directors
Annual bonus
Payments under the Annual Incentive Plan (AIP) incentivise the delivery of stretching financial, functional and/or personal objectives which are
drawn from the annual business plan measured over a period not exceeding one financial year.
Operation
Currently Executive Directors participate in the AIP.
Form and timing of
payment
The AIP payments for Executive Directors are subject to the achievement of financial, functional and/or personal
objectives except in the case of buy-out awards on recruitment – see the ‘Approach to recruitment remuneration’
section.
Executive Directors are currently required to defer 40 per cent of their bonus for three years into Prudential shares,
with the remaining proportion of their bonus paid in cash following the end of the performance year. For bonus
awards made in respect of the 2023 performance year onwards, 40 per cent of their bonus will be deferred in cash
for three years provided that the Executive Director’s share ownership guideline is met. Deferred awards will be
made in shares if the Executive Director’s share ownership guideline has not yet been achieved. The Committee
retains discretion to vary the proportion of the bonus to be deferred and the length of the deferral period.
The release of deferred bonus awards is not subject to any further performance conditions. Deferred bonus
awards in shares carry the right to accumulate an amount to reflect the dividends payable in respect of the shares
that vest during the deferral period. These dividend equivalents will normally be settled in shares, but there is the
flexibility to deliver them in cash. The amount of the dividend equivalent payment may assume the re-investment
of the relevant dividends in shares.
The Committee has the authority to apply clawback and/or a malus adjustment to all, or a portion of, the cash
and deferred award elements of the bonus. More details about clawback and malus are set out below. See the
Policy on corporate transactions section for details of the Committee’s powers in the case of corporate
transactions.
Determining annual
bonus awards
In assessing financial performance, the Committee determines the AIP award for each Executive Director with
reference to the performance achieved against approved performance ranges.
In assessing performance, the Committee will take into account the personal performance of the Executive
Director and the Group’s risk framework and appetite, as well as other relevant factors. To assist them in their
assessment the Committee considers advice from the Group Risk Committee on adherence to the Group’s risk
framework and appetite and to all relevant conduct standards.
The Committee may adjust the formulaic outcome based on the performance targets to reflect the underlying
performance of the Company by applying discretion within the limits of the Policy. The Committee will disclose in
the relevant Directors’ Remuneration Report where discretion is used.
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The maximum AIP opportunity is up to 200 per cent of salary for Executive Directors. Annual awards are disclosed
in the relevant Annual report on remuneration.
Performance measures
The Committee has the discretion, for each Executive Director, to determine the specific performance conditions
attached to each AIP cycle and to set annual targets for these measures with reference to the business plans
approved by the Board. The financial measures used for the AIP will typically include profit and cash flow targets
and payments depend on the achievement of minimum capital thresholds and operation within the Board
approved risk framework and appetite. For the measures to be used in 2023, please refer to the Annual report on
remuneration.
No bonus is payable under the AIP for performance at or below the threshold level, increasing to 100 per cent for
achieving or exceeding the maximum level.
The weightings of the performance measures for 2023 for the Group Chief Executive are 80 per cent Group
financial measures and 20 per cent personal measures.
The Committee retains the discretion to adjust and/or set different performance measures and/or targets if
events occur (such as a change in strategy, a material acquisition and/or divestment of a Group business, a
change in share capital of the Company, a change in the capital framework, or the requirements of the Company’s
regulators or a change in prevailing market conditions) which cause the Committee to determine that the
measures and/or targets are no longer appropriate and that amendment is required so that they achieve their
original purpose (or comply with such regulatory requirements).
Amendments
The Committee may make amendments to the rules of the deferred bonus plan which it considers appropriate
(such as amendments which benefit the administration of the plan) but it will not make any amendments which
are incompatible with the approved Directors’ remuneration Policy.
Committee discretions
In determining awards under the AIP, the Committee retains the discretion to adjust the formulaic outcome
against any or all measures if it considers that the outcome does not reflect the underlying financial or non-
financial performance of the participant or any member of the Group over the performance period and/or there
exists any other reason why an adjustment is appropriate, taking into account such factors as the Committee
considers relevant.
Long-term incentive Policy for Executive Directors
Prudential Long Term Incentive Plan (PLTIP)
The Prudential Long Term Incentive Plan is designed to incentivise the delivery of:
> Longer-term business plans;
> Sustainable long-term returns for shareholders; and
> Group strategic priorities, such as disciplined risk and capital management.
Opportunity
The value of shares awarded under the PLTIP (in respect of any given financial year) may not exceed 550 per cent
of the Executive Director’s annual basic salary.
Awards made in a particular year are usually significantly below this limit.
On recruitment, any buy out awards will not count towards this limit provided that they replace forgone awards on
a like for like basis – see further details in the ‘Approach to recruitment remuneration’ section.
It is proposed that the Group Chief Executive receives a PLTIP award of 400 per cent of salary in 2023.
The Committee would consult with major shareholders before making any increase to current award levels. Award
levels are disclosed in the relevant Annual report on remuneration.
Operation
Currently Executive Directors participate in the PLTIP.
Prudential’s Policy is that Executive Directors may receive long-term incentive awards with full vesting only
achieved if the Company meets stretching performance targets except in the case of buyout awards on
recruitment – see the ‘Approach to recruitment remuneration’ section.
Granting awards
Under the PLTIP the shares which are awarded will ordinarily vest to the extent that performance conditions have
been met. If performance conditions are not achieved at the end of the three-year performance period, the
unvested portion of any award lapses and performance cannot be retested.
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New Directors’ remuneration policy / continued
Holding period
Awards made under this Policy are normally subject to a holding period which ends on the fifth anniversary of the
award (unless the Committee so determines, in exceptional circumstances, such as an Executive Director passing
away).
If the Committee so determines, the Company may sell such number of shares as is required to satisfy any tax
liability that arises on vesting and the balance of shares will be subject to the holding period.
Determining the
release of the award
The Committee has the authority to apply clawback and/or a malus adjustment to all, or a portion of, a PLTIP
award. More details about clawback and malus are set out below.
Awards will normally carry the right to accumulate an amount to reflect the dividends payable on the shares that
vest during the period between the awards being granted and the award vesting (or, if a holding period applies,
the period between the awards being granted and the award being released). Dividend equivalents will normally
be settled in shares, but there is the flexibility to deliver them in cash. The amount of the dividend equivalent
payment may assume the re-investment of the relevant dividends in shares.
Performance measures
The performance conditions attached to 2023 PLTIP awards for Executive Directors are:
> Relative TSR (35 per cent of award);
> A Return on Embedded Value measure (40 per cent of award); and
> Business integrity scorecard (previously known as the ‘sustainability scorecard’) measures (25 per cent of
award).
Using a Return on Embedded Value metric alongside TSR and a business integrity scorecard will ensure that the
full value of long-term incentive awards is attained only where capital is effectively created and deployed in a way
which creates shareholder returns superior to those delivered by peers while business integrity expectations are
met.
The Committee may decide to attach different performance conditions and/or change the conditions’ weighting
for future PLTIP awards. The performance conditions attached to each award will be disclosed in the relevant
Annual report on remuneration.
Relative TSR is measured over three years. 20 per cent of this portion of each award will vest for achieving the
threshold level of median, increasing to full vesting for meeting the stretch level of upper quartile. For awards
made in 2023, TSR is measured against a peer group of international insurers similar to Prudential in size,
geographic footprint and products. The peer group for each award is disclosed in the relevant Annual report on
remuneration.
Average over a three-year period of Return on Embedded Value, defined as Operating return on average EEV
shareholders’ equity, calculated as EEV operating profit net of non-controlling interests divided by average EEV
shareholders’ equity, is assessed at Group level. Threshold and maximum achievement levels will be set at the
beginning of the performance periods in line with the three-year business plan. 20 per cent of this portion of the
award will vest for achieving threshold performance increasing to full vesting for meeting stretch targets.
Performance against the measures in the business integrity scorecard is assessed at the end of the three-year
performance period. For the 2023 awards these measures will be equally weighted. 20 per cent of this portion of
the award will vest for achieving threshold performance increasing to full vesting for meeting stretch targets. The
scorecard measures for each award are disclosed in the relevant Annual report on remuneration for the year of
grant.
The Committee also considers advice from the Group Risk Committee on whether results were achieved within the
Group’s and businesses’ risk framework and appetite and to all relevant conduct standards.
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For any awards made under the PLTIP to vest, the Committee must be satisfied that the quality of the Company’s
underlying financial performance justifies the level of reward delivered at the end of the performance period. The
Committee receives data about factors such as risk management and the cost of capital to support their decision.
The Committee has the discretion to alter or disapply the holding period if it believes that it is appropriate. See the
Policy on corporate transactions section for details of the Committee’s powers in the case of corporate transactions.
The Committee retains the ability to amend the performance conditions and/or targets attached to an award
and/or set different performance measures (or to revise the weighting of measures) which apply to new or
outstanding long-term incentive awards if anything happens which causes the Committee to consider it
appropriate, provided the Committee considers that the amended condition will not be materially more or less
challenging to satisfy than the original condition in the circumstances.
The Committee may consider exercising its discretion in circumstances such as a change in strategy, a material
acquisition and/or divestment of a Group business or a change in the share capital of the Company, a change in
the requirements of the Company’s regulators or a change in prevailing market conditions. The Committee would
seek to consult with major shareholders before revising performance conditions on outstanding awards under the
PLTIP.
It is the intention of the Committee that PLTIP awards should normally reflect the outcomes of performance
measures set. However, the Committee may, in its discretion, adjust (including by reducing to nil) the formulaic
outcome under the PLTIP if it considers that:
(i)
(ii)
the extent to which any performance condition has been met does not reflect the underlying financial or
non-financial performance of the participant or any member of the Group over the performance period; or
there exists any other reason why an adjustment is appropriate, taking into account such factors as the
Committee considers relevant, including the context of circumstances that were unexpected or unforeseen
at the date of grant.
Amendments
The Committee may make amendments to the rules of the Plan which are minor and benefit the administration
of the Plan, which take account of any changes in legislation, and/or which obtain or maintain favourable tax,
exchange control or regulatory treatment. Otherwise, no amendments may be made to certain key provisions of
the PLTIP to the advantage of participants without prior shareholder approval.
Share ownership guidelines for Executive Directors
It is imperative that the Company’s remuneration arrangements align the interests of Executive Directors and other shareholders. Share
ownership guidelines reinforce this alignment.
In-employment
guidelines
Under the Articles of Association, Executive Directors are required to hold at least 2,500 shares and have one year,
from their date of appointment to the Board, to acquire these.
The share ownership guidelines for the Group Chief Executive during their employment is 400 per cent of salary.
Executive Directors normally have five years from the later of the date of their appointment or promotion, or the
date of an increase in these guidelines, to build this level of ownership. Shares earned and deferred under the AIP
are included in calculating the Executive Director’s shareholding for these purposes (on a net of tax basis), as are
shares held by members of an Executive Director’s household. Unvested share awards under long-term incentive
plans are not included but vested share awards under long-term incentive plans which are subject to a post-
vesting holding period are included (on a net of tax basis, where the shares have not yet been delivered to the
Executive Director).
Progress against the share ownership guidelines is detailed in the Statement of Directors’ shareholdings section of
the Annual report on remuneration.
Should an Executive Director not meet the share ownership guidelines, the Committee retains the discretion to
determine how this should be addressed, taking account of all the prevailing circumstances. In the absence of
mitigating circumstances, if an Executive Director fails to comply with the share ownership guideline in the required
timeframe and has not (in the opinion of the Committee) taken reasonable steps to achieve compliance, despite
encouragement to do so, then the Committee may take steps including preventing the individual from selling shares
or mandating the use of any cash bonuses to buy Prudential plc shares.
Post Directorship
guidelines
When an Executive Director leaves the Board, they will be required to hold the lower of their actual shareholding
on the date of them stepping down from the Board and their in-employment share ownership guideline for a
period of two years.
The Committee has the discretion to disapply or reduce this requirement in extenuating circumstances, for
example if the Executive Director takes up a role with a Regulator or for compassionate reasons (such as genuine
financial hardship or on death).
This obligation will be implemented by requiring Executive Directors leaving the Board to obtain clearance to deal
in the Company’s shares during the two years during which this post Directorship share ownership guideline
applies in the same way as they must during the time on the Board.
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New Directors’ remuneration policy / continued
Malus and clawback Policy
As detailed in the Policy table, the Committee may apply clawback and/or a malus adjustment to variable pay in certain circumstances as set out
below. The Committee can delay the release of awards pending the completion of an investigation which could lead to the application of malus or
clawback. The Committee may also introduce additional malus and/or clawback provisions where required to do so by regulatory requirements
applicable to it.
Circumstances when the Committee may exercise its discretion to apply malus or clawback to an award
Malus may be applied where there are exceptional circumstances, such as:
> a material misstatement in the published results of any member of the Group, for any period during or after the
performance period (or if no performance periods are applicable, the vesting period);
> an error in the assessment of any applicable performance conditions, the determination of the relevant bonus
or the number of shares subject to an award (or where such assessment was based on inaccurate or misleading
information);
> gross misconduct;
> a breach by the Executive Director of any restrictive covenants or other similar undertakings;
> where the Executive Director has caused a material financial loss for the Group as a result of (i) reckless,
negligent or wilful actions or omissions; or (ii) inappropriate values or behaviour;
> where a member of the Group is censured by a regulatory body or suffers significant reputational damage; and
> insolvency or corporate failure.
Clawback may be applied where there are exceptional circumstances, such as the circumstances listed above:
> For the PLTIP, at any time before the fifth anniversary of the award date, and
> For the AIP, at any time before the fifth anniversary of the end of the bonus performance period.
Malus (applies in respect
of any annual bonus or
long-term incentive
award)
Allows deferred cash
awards and unvested
shares awarded under
deferred bonus and LTIP
plans to be forfeited or
reduced in certain
circumstances.
Clawback
Allows cash and share
awards, including shares
subject to the holding
period, to be recovered
before or after release in
certain circumstances.
Notes to the remuneration Policy table for Executive Directors
Committee’s judgement
The Committee is required to make judgements when assessing Company and individual performance under the Directors’ remuneration Policy.
In addition, the Committee has discretions under the Company’s share plans, for example, determining if a leaver should retain their unvested
awards (and if so, the basis on which they are retained) and whether to apply malus or clawback to an award. Exercise of such discretion during the
year will be reported and explained in the next Annual report on remuneration.
The Committee may approve payments or awards in excess of, in a different form to, or calculated or delivered other than as described above,
where the Committee considers such changes necessary or appropriate in light of regulatory requirements. If these changes are considered by the
Committee to be material, the Company will seek to consult with its major shareholders.
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Determining the performance measures
The Committee selected the performance measures that currently apply to variable pay plans on the following basis:
AIP
The performance measures are selected to incentivise the delivery of the Group’s business plan, specifically to ensure that financial objectives are
delivered while maintaining adequate levels of capital. Executive Directors are also rewarded for the achievement of functional and/or personal
objectives. These objectives include the Executive Director’s contribution to Group strategy as a member of the Board and achievement of the
Group’s strategic priorities.
PLTIP
Awards made under the PLTIP in 2023 are subject to the achievement of Return on Embedded Value, relative TSR and a business integrity
scorecard:
> Return on Embedded Value was selected as a performance measure for the PLTIP because it is a familiar measure for investors, is comparable
across the market and also aligns performance incentives to the generation of long-term shareholder value.
> Relative TSR was selected as a performance measure because it focuses on the value delivered to shareholders – aligning the long-term
interests of shareholders with those of Executive Directors .
> A business integrity scorecard was selected to ensure an alignment with the Group’s strategic objectives, which are approved by the Board each
year, and to reflect Prudential’s cultural values.
The Committee may decide to attach different performance conditions and/or change the conditions’ weighting for future PLTIP awards.
Setting the performance ranges for financial targets
Where variable pay has performance conditions based on business plan measures (for example the financial metrics of the AIP and the Return on
Embedded Value element of the PLTIP) the performance ranges are set by the Committee prior to, or at the beginning of, the performance period.
Performance is based on the annual and longer-term plans approved by the Board. These reflect the long-term ambitions of the Group and its
businesses, in the context of anticipated market conditions.
For market-based performance conditions (eg relative TSR) the Committee requires that performance is in the upper quartile, relative to
Prudential’s peer group, for awards to vest in full.
Targets used to determine annual bonus outcomes will be disclosed in the Directors’ remuneration report for the year for which the bonus is paid.
Wherever possible, the targets attached to long-term incentive awards will be disclosed prospectively at the time of the award. Where long-term
incentive targets are commercially sensitive, they will be published in the Annual Report for the final year of the performance period.
Key differences between Directors’ remuneration and the remuneration of the wider workforce
Across the Group, remuneration is reviewed regularly with the intention that all employees are paid appropriately in the context of their local
market and given their individual skills, experience and performance. The Committee regularly receives information on workforce remuneration
and related policies and takes this into account when determining Executive Director remuneration; for example it considers salary increase
budgets for the workforce when determining the salaries of Executive Directors.
The remuneration principles that apply to Executive Directors are cascaded to employees as appropriate. Employees are regularly provided with
an explanation of how decisions on executive pay are made and how they reflect the wider Company remuneration Policy.
Legacy payments
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the
payment were agreed (i) before 15 May 2014 (the date the Company’s first shareholder-approved Directors’ remuneration Policy came into
effect); (ii) before this Policy came into effect, provided that the terms of the payment were consistent with the shareholder-approved Directors’
remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a Director of the Company and, in
the opinion of the Committee, the payment was not in consideration for the individual becoming or having been a Director of the Company. For
these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms
of the payment are ’agreed’ at the time the award is granted.
Currency and references to ‘shares’
In this Policy, references to shares may include share awards settled in shares listed on any of the stock exchanges where the Company has a
listing. Remuneration may be denominated and paid in any currency the Committee determines.
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New Directors’ remuneration policy / continued
Scenarios of total remuneration
The chart below provides an illustration of the future total remuneration for the Executive Director in respect of his remuneration opportunity for
2023. Four scenarios of potential outcome are provided based on underlying assumptions shown in the notes to the chart.
The Committee is satisfied that the maximum potential remuneration of the Executive Director is appropriate. Prudential’s Policy is to offer
Executive Directors remuneration which reflects the performance and experience of the Executive Director, internal relativities and Group financial
and non-financial performance. In order for the maximum total remuneration to be payable:
> Financial performance must exceed the Group’s stretching business plan;
> Relative TSR must be at or above the upper quartile relative to the peer group;
> The business integrity scorecard, aligned to the Group’s strategic priorities, must be fully satisfied;
> Functional and personal performance objectives must be fully met; and
> Performance must be achieved within the Group’s risk framework and appetite.
The fourth scenario below illustrates the maximum potential remuneration (shown in the third scenario) on the assumption that the Company’s
share price grows by 50 per cent over three years.
Scenario Chart – Anil Wadhwani
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
7,580
48%
20%
32%
2,518
100%
11,928
53%
26%
21%
15,065
62%
21%
17%
Minimum
In line with expectations
Maximum
Share price growth
Fixed
Short-term incentives
Long-term incentives
Notes
The scenarios in the chart above have been calculated on the following assumptions:
Fixed pay
Minimum
In line with expectations
Maximum
Share price growth
> Base salary at 1 January 2023.
> Pension allowance for the year has been calculated at 13% of salary in line with this Policy.
> Estimated value of benefits based on average amounts paid in 2022.
Annual bonus
No bonus paid.
> 50% of maximum AIP.
> 100% of maximum AIP.
Long-term incentives (excludes
dividends)
No PLTIP vesting.
> Vesting of 60% of award
under PLTIP (midway
between threshold and
maximum).
> Vesting of 100% of
award under PLTIP.
> Vesting of 100% of
award under PLTIP; plus
> Share price growth of
50 per cent over three
years.
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Approach to recruitment remuneration
The table below outlines the approach that Prudential will take when recruiting a new Executive Director. This approach would also apply to
internal promotions.
The approach to recruiting a Non-executive Director or a Chair is outlined in the ‘Recruitment of a new Chair or Non-executive Director’ section .
Element
Base pay
Principles
Potential variations
The salary for a new Executive Director will be set using
the approach set out in the fixed pay Policy table.
Benefits and pension
The benefits for a new Executive Director will be
consistent with those outlined in the fixed pay Policy
table.
Variable remuneration
opportunity
The variable remuneration opportunities for a new
Executive Director would be consistent with the limits
and structures outlined in the variable pay Policy table.
The Committee may consider compensating a
newly-appointed Executive Director for other relevant
contractual rights forfeited when leaving their previous
employer and/or remuneration foregone as a result of
leaving their previous employer.
The use of Listing Rule 9.4.2 may be used to facilitate
the recruitment of an Executive Director. The
Committee does not anticipate using this rule on a
routine basis but reserves the right to do so in an
exceptional circumstance. For example, this rule may
be required if, for any reason, like-for-like replacement
awards on recruitment could not be made under
existing plans.
This provision would only be used to compensate for
remuneration forfeited or foregone on leaving a
previous employer.
Awards and
contractual rights
forfeited when leaving
previous employer
On joining the Board from within the Group, the
Committee may allow an Executive Director to retain
any outstanding deferred bonus and/or long-term
incentive awards and/or other contractual
arrangements that they held on their appointment.
These awards (which may have been made under
plans not listed in this Policy) would usually remain
subject to the original rules, performance conditions
and vesting schedule applied to them when they were
awarded.
If an externally-appointed Executive Director forfeits
one or more bonuses (including outstanding deferred
bonuses) on leaving a previous employer, these
payments or awards may be replaced in either cash,
Prudential shares or options over Prudential shares
with an award of an equivalent value. Replacement
awards will normally be released on the same schedule
as the foregone bonuses.
If an externally-appointed Executive Director forfeits
one or more long-term incentive awards on leaving a
previous employer, these may be replaced with
Prudential awards with an equivalent value.
Replacement awards will generally be made under the
terms of a long-term incentive plan approved by
shareholders, and vest on the same schedule as the
foregone awards. Where foregone awards were
subject to performance conditions, performance
conditions will normally be applied to awards replacing
foregone long-term incentive awards; these will usually
be the same as those applied to the long-term
incentive awards made to Prudential Executive
Directors in the year in which the forfeited award was
made. Where foregone awards were not subject to
performance conditions, performance conditions will
not normally be applied to awards replacing them.
If an externally-appointed Executive Director incurs
costs in connection with joining Prudential (such as
buying out their notice period with a previous
employer at the Company’s request), the Executive
Director may be reimbursed for these costs .
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New Directors’ remuneration policy / continued
Policy on payment on loss of office
Element
Principles
Potential variations
Notice periods
Outstanding deferred
bonus awards
The Company’s Policy is that Executive Directors’
service contracts will not require the Company to give
an Executive Director more than 12 months’ notice
without prior shareholder approval. A shorter notice
period may be offered where this is in line with market
practice in an executive’s location. Contracts for new
Executive Directors may be offered with a six-month
notice period.
The Company is required to give to, and to receive
from, each of the current Executive Directors 12
months’ notice of termination. An Executive Director
whose contract is terminated would be entitled to
salary and benefits in respect of their notice period.
The payment of the salary and benefits would either
be phased over the notice period or, alternatively, a
payment in lieu of notice may be made.
In agreeing the terms of departure for any Executive
Director, other than on death or disablement, the
Company will have regard to the need to mitigate the
costs for the Company, which would normally be
reduced or cease if departing Executive Directors
secure alternative paid employment during the notice
period.
The treatment of outstanding deferred bonuses will be
decided by the Committee taking into account the
circumstances of the departure including the
performance of the Executive Director.
Deferred bonus awards are normally retained by
participants leaving the Company. Awards will usually
vest on the original timetable and will not normally be
released early on termination.
Prior to release, awards remain subject to the malus
terms originally applied to them. The clawback
provisions will continue to apply.
If an Executive Director is dismissed for cause their
contract would be terminated with immediate effect
and they would not receive any payments in relation to
their notice period.
Should an Executive Director die, their estate would
not be entitled to receive payments and benefits in
respect of their notice period – provisions are made
under the Company’s life assurance scheme to provide
for this circumstance.
Should an Executive Director step down from the
Board but remain employed by the Group, they would
not receive any payment in lieu of notice in respect of
their service as a Director.
Any Executive Director dismissed for cause would
forfeit all outstanding deferred bonus awards.
Should an Executive Director die, outstanding deferred
bonus awards will be released as soon as possible after
the date of death. On ill-health and in other
exceptional circumstances, the Committee has
discretion to accelerate the vesting of any outstanding
deferred bonus awards.
Should an Executive Director step down from the
Board but remain employed by the Group, they would
retain any outstanding deferred bonus awards. These
awards would remain subject to the original rules and
vesting schedule applied to them when they were
awarded.
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Prudential plc Annual Report 2022 Element
Principles
Potential variations
Unvested long-term
incentive awards
Vested long-term
incentive awards,
subject to the holding
period
The treatment of unvested long-term incentives will be
decided by the Committee taking into account the
circumstances of the departure including the
performance of the Executive Directors.
Where an Executive Director is determined to be a
good leaver, unvested long-term incentive awards will
normally subsist. These awards will ordinarily be
pro-rated, unless the Committee determines otherwise
to reflect the proportion of the performance period
that has elapsed, and will vest on the original
timescale. Awards will remain subject to the original
performance conditions assessed over the entire
performance period, unless the Committee decides to
assess the performance conditions over a shorter
period.
Good leavers are defined as injury or disability,
retirement with the approval of the employing
company, the employing company ceasing to be a
member of the Group, the business in which the
individual is employed being transferred to a
transferee that is not a member of the Group, or any
other circumstances at the discretion of the
Committee. Individuals who die in service will also be
treated as good leavers.
Where an individual is not determined to be a good
leaver, unvested long-term incentive awards will lapse
on cessation of employment.
Prior to release, awards remain subject to the malus
and clawback terms and holding periods originally
applied to them.
The treatment of vested long-term incentives will be
decided by the Committee taking into account the
circumstances of the departure.
Executive Directors will normally retain their vested
long-term incentive awards that remain subject to the
holding period. Normally these awards will be released
in accordance with the original timescale and will
remain subject to the holding period.
Prior to release, awards remain subject to the malus
and clawback terms originally applied to them.
Any Executive Director dismissed for cause would
forfeit all unvested long-term incentive awards.
If the Committee has judged that the departing
Executive Director should retain their unvested
long-term incentive awards with the expectation that:
(i)
(ii)
the Executive Director is retiring from their
professional executive career; and/or
the Executive Director will not be seeking to
secure alternative employment with another
organisation of comparable size as the Company
or that is within the financial services sector
the Committee retains the power to lapse all unvested
long-term incentive awards should the Committee
deem that the Executive Director has secured similar
paid executive employment elsewhere.
On death, disablement and in other exceptional
circumstances, the Committee has discretion to
release unvested long-term incentive awards earlier
than the end of the vesting period. The malus and
clawback provisions will continue to apply.
Should an Executive Director step down from the
Board but remain employed by the Group, an
Executive Director would retain any outstanding
long-term incentive awards which they held on their
change of role. These awards would remain subject to
the original rules, performance conditions and vesting
schedule.
On death, disablement and in other exceptional
circumstances, the Committee has discretion to
release vested long-term incentive awards earlier than
the end of the holding period. The malus and clawback
provisions will continue to apply.
Should an Executive Director step down from the
Board but remain employed by the Group, they would
retain any vested long-term incentive awards that
remain subject to the holding period. These awards
would remain subject to the original rules and release
schedule applied to them when they were awarded (ie
the holding period will continue to apply).
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New Directors’ remuneration policy / continued
Policy on payment on loss of office continued
Element
Principles
Potential variations
Bonus for final year of
service
Other payments
Post Directorship
guidelines
The payment of a bonus for the final year of service
will be decided by the Committee giving full
consideration to the circumstances of the departure
including the performance of the Executive Director.
The Committee may award a departing Executive
Director a bonus which will usually be pro-rated to
reflect the portion of the final financial year in which
they served which had elapsed on the last day that
they worked. Any such bonus would normally be
calculated with reference to financial, functional and/
or personal performance measures in the usual way.
The normal portion of any such bonus awarded would
usually be deferred.
Any Executive Director dismissed for cause would not
be eligible for any bonus that has not been paid.
Should an Executive Director die whilst serving as an
employee a time pro-rated bonus may be awarded. In
such circumstances, deferral will not be applied and
the payment will be made solely in cash.
The Committee may decide to award an Executive
Director stepping down from the Board but remaining
with the Group a bonus pro-rated to reflect the portion
of the financial year which had elapsed on the date of
their change of role. This would be calculated with
reference to financial, functional and/or personal
performance measures in the usual way. The
Committee may determine that a portion of such a
bonus must be deferred.
Consistent with other employees, Executive Directors
may receive payments to compensate them for the
loss of employment rights on termination. Payments
may include:
> A nominal amount for agreeing to non-solicitation
and confidentiality clauses;
> Directors and Officers insurance cover for a specified
period following the Executive Director’s
termination date;
> Payment for outplacement services;
> Statutory redundancy payments (where applicable);
> Reimbursement of legal fees;
> Support with preparation of tax returns; and
> Repatriation assistance.
The Committee reserves the right to make additional
exit payments where such payments are made in good
faith:
> In discharge of an existing legal obligation (or by
way of damages for breach of such an obligation);
or
> By way of settlement or compromise of any claim
arising in connection with the termination of a
Director’s office or employment.
> When an Executive Director leaves the Board they
will be subject to post-Director Share ownership
guidelines.
> Further details are included in the section on ‘Share
ownership guidelines for Executive Directors’.
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Prudential plc Annual Report 2022 Policy on corporate transactions
Treatment
Deferred Annual
Incentive Plan Awards
In the event of a corporate transaction (eg takeover, material merger, or demerger, winding up etc), the Committee
will determine whether awards will:
> Vest; and/or
> Continue in accordance with the rules of the plan; and/or
> Lapse and, in exchange, the participant will be granted an award under any other share or cash incentive plan
which the Committee considers to be broadly equivalent to the award.
Prudential Long Term
Incentive Plan
In the case of a corporate transaction (eg takeover, material merger, or demerger, winding up etc), the Committee
will determine whether awards will:
> Be exchanged for replacement awards (either in cash or shares) of equal value unless the Committee and
successor company agree that the original award will continue; or
> Vest (to the extent determined by the Committee).
Where awards vest, the Committee will have regard to (i) the performance of the Company, (ii) unless the
Committee determines otherwise, the proportion of the performance period that has elapsed and (iii) any other
matter that the Committee considers relevant or appropriate.
Vested awards will normally be released from any relevant holding period.
Service contracts
Executive Directors’ service contracts provide details of the broad types of remuneration to which they are entitled, and about the kinds of plans in
which they may be invited to participate. The service contracts offer no certainty as to the value of performance-related reward and confirm that
any variable payment will be at the discretion of the Company.
Copies of the service contract between the Prudential Group and the Executive Directors are available for inspection at Prudential’s registered
office during normal hours of business and will also be available at any General Meeting of the Company. Details of the duration of the Executive
Directors’ service contracts are set out in the ‘Directors’ terms of employment and external appointments’ section of the Annual report on
remuneration.
Statement of consideration of conditions elsewhere in the Company
Across the Group, remuneration is reviewed regularly with the intention that all employees are paid appropriately in the context of their local
market and given their individual skills, experience and performance. Each businesses salary increase budget is set with reference to local market
conditions. The Committee considers salary increase budgets across the workforce when determining the salaries of Executive Directors.
Prudential does not specifically consult with employees when setting the Directors’ remuneration Policy: Prudential is a global organisation with
employees and agents in multiple businesses and geographies. The Board has mechanisms for engagement by Non-executive Directors to gather
employees’ views on a range of topics and for these views to be represented to the Board. As many employees are also shareholders, they are able
to participate in binding votes on the Directors’ remuneration Policy and annual advisory votes on the Annual report on remuneration.
Statement of consideration of shareholder views
The Committee and the Company undertake regular consultation with key institutional investors on the Directors’ remuneration Policy and its
implementation. This engagement is led by the Committee Chair and is an integral part of the Company’s investor relations programme. The
Committee is grateful to shareholders for the feedback that is provided and takes this into account when determining executive remuneration.
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New Directors’ remuneration policy / continued
Remuneration Policy for Non-executive Directors and the Chair
Fees
Benefits
Share Ownership Guidelines
Non-executive
Directors
Under the Articles of
Association, Non-executive
Directors are required to hold at
least 2,500 shares and have
one year, from their date of
appointment to the Board, to
acquire these.
It is further expected that
Non-executive Directors will
hold shares with a value
equivalent to one times the
annual basic fee (excluding
additional fees for Chairship
and membership of any
committees).
Non-executive Directors will
normally be expected to attain
this level of share ownership
within three years of their date
of appointment.
Non-executive Directors do not
currently receive benefits or a
pension allowance or participate
in the Group’s employee pension
schemes.
Travel and business expenses for
Non-executive Directors are
incurred in the normal course of
business, for example, in relation
to attendance at Board and
Committee meetings. The costs
associated with these are all met
by the Company, including any
tax liabilities arising on these
business expenses.
If as a consequence of the
Company’s corporate structure,
Non-executive Directors are
required to prepare personal tax
returns in Hong Kong and/or the
UK, in addition to preparing their
personal tax returns for the
jurisdiction which is their place of
residence, the Company will
reimburse the costs of personal
tax return preparation for
whichever locations are not their
place of residence (including
payment of any tax cost
associated with the provision of
the benefit).
All Non-executive Directors receive a basic fee
for their duties as a Board member. Additional
fees are paid for added responsibilities such as
Chairship and membership of committees,
acting as the Senior Independent Director or
carrying out any other role determined by the
Board from time to time. Fees are paid to
Non-executive Directors, subject to the
appropriate deductions. Fees may be
denominated and paid in any currency as the
Committee determines.
The basic and additional fees are usually
reviewed annually by the Board with any
changes normally effective from 1 July. In
determining the level of fees, the Board
considers:
> The time commitment and other
requirements of the role;
> Group financial performance;
> Salary increases for all employees; and
> Market data.
If, in a particular year, the number of meetings
and/or time commitment is materially greater
than usual, the Company may determine that
the provision of additional fees in respect of
that year is fair and reasonable.
Should a new committee or working group be
formed, or the remit of an existing committee
be materially expanded, or a new Non-
executive Director role established, the new or
additional fees paid for acting as the chair or a
member of the committee will be
commensurate with the new or additional
responsibilities and time commitment involved.
Non-executive Directors are not eligible to
participate in annual bonus plans or long-term
incentive plans.
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Prudential plc Annual Report 2022 Fees
Benefits
Share Ownership Guidelines
Chair
The Chair receives an annual fee for the
performance of their role. This fee is agreed by
the Committee and is paid to the Chair in cash,
subject to the appropriate deductions. On
appointment, the fee may be fixed for a
specified period of time. Following the fixed
period (if applicable) this fee will normally be
reviewed annually. Changes in the fee are
usually effective from 1 July. The fee may be
denominated and paid in any currency the
Committee determines.
In determining the level of the fee for the Chair
the Committee considers:
> The time commitment and other
requirements of the role;
> The performance and experience of the
Chair;
> Internal relativities;
> Company financial performance; and
> Market data.
The Chair is not eligible to participate in annual
bonus plans or long-term incentive plans.
Under the Articles of
Association, the Chair is
required to hold at least 2,500
shares and has one year, from
their date of appointment to
the Board, to acquire these.
The Chair has a share
ownership guideline. This is
currently one times the annual
fee and it is normally expected
that this level of share
ownership would be attained
within five years of the date of
appointment.
The Chair may be offered benefits
including:
> Health and wellness benefits;
> Protection and security
benefits;
> Transport benefits;
> Reimbursement of business
expenses (and any associated
tax liabilities) incurred when
travelling overseas in
performance of duties; and
> Relocation and location-specific
benefits (where appropriate).
If as a consequence of the
Company’s corporate structure,
the Chair is required to prepare
personal tax returns in Hong Kong
and/or the UK, in addition to
preparing their personal tax return
for the jurisdiction which is their
place of residence, the Company
will reimburse the costs of
personal tax return preparation
for whichever locations are not
their place of residence (including
payment of any tax cost
associated with the provision of
the benefit).
The maximum paid will be the
cost to the Company of providing
these benefits.
The Chair is not eligible to receive
a pension allowance or to
participate in the Group’s
employee pension schemes.
Recruitment of a new Chair or Non-executive Director
The fees for a new Non-executive Director will be consistent with the current basic fee paid to other Non-executive Directors (as set out in the
Annual report on remuneration for that year) and will be reflective of their additional responsibilities as chair and/or members of Board
committees and any additional roles.
The fee for a new Chair will be set with reference to the time commitment and other requirements of the role, the experience of the candidate, as
well as internal relativities among the other Executive and Non-executive Directors. To provide context for this decision, data would be sought for
suitable market reference point(s).
Notice periods – Non-executive Directors and Chair
Non-executive Directors are appointed pursuant to letters of appointment with notice periods of six months without liability for compensation. A
contractual notice period of 12 months by either party applies for the current Non-executive Chair. The notice period for a new Chair may be set at
six months. The Chair and Non-executive Directors would not be entitled to any payments for loss of office. Details of the individual appointments
of the Chair and Non-executive Directors are set out in the ‘Letters of appointment of the Chair and Non-executive Directors’ section of the
Annual report on remuneration.
For information on the terms of appointment for the Chair and Non-executive Directors please see the Governance report.
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Additional remuneration disclosures
Directors’ outstanding long-term incentive awards and other share awards
The table below sets out Executive Directors’ PLTIP awards. The Company operates a number of share schemes and plans which are described in
more detail in note I(vii) of the ‘Additional Financial Information’ section.
Share-based long-term incentive awards
Conditional
share
awards
outstanding
at 1 Jan
2022 and at
31 March
20222
Conditional
awards in
2022
Market
price at
date of
award
(Number of
shares)
(Number of
shares)
(pence)
147,235
180,972
130,467
1605.5
1049.5
1495.5
1133.5
1030.0
182,131
270,126
Dividend
equivalents
on vested
shares1
(Number of
shares
released)
Rights
exercised
in 2022
Rights
lapsed in
2022
Conditional
share
awards
outstanding
on date of
retirement2
(Number of
shares)
1,680
26,134
121,101
458,674
452,257
1,680
26,134 121,101
123,600
183,500
114,934
1605.5
1049.5
1495.5
1133.5
182,217
1,410
21,939
101,661
422,034
182,217
1,410
21,939 101,661
2019
2020
2021
2022
2022
2019
2020
2021
2022
Plan name
Year of
award
Mark FitzPatrick
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
PLTIP
James Turner
Mike Wells2
Rights
lapsed in
2022
following
retirement
Conditional
share awards
outstanding
at 31
December
2022
Date of
end of
performance
period
(Number of
shares)
180,972
130,467
182,131
270,126
763,696
183,500
114,934
182,217
480,651
31 Dec 21
31 Dec 22
31 Dec 23
31 Dec 24
31 Dec 24
31 Dec 21
31 Dec 22
31 Dec 23
31 Dec 24
31 Dec 21
31 Dec 22
31 Dec 23
2019
2020
2021
356,155
437,762
315,596
1,109,513
4,066
63,218
292,937
1605.5
1049.5
1495.5
437,762
315,596
133,955
201,666
303,807
113,930
4,066
63,218 292,937
753,358 335,621
417,737
Notes
1.
2.
A dividend equivalent was accumulated on these awards.
Mike Wells stepped down from his role as Group Chief Executive on 1 April 2022 and retired from the Company on 14 July 2022.
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Prudential plc Annual Report 2022 Other share awards
The table below sets out Executive Directors’ deferred bonus share awards.
Conditional
share
awards
outstanding
at 1 Jan
2022
(Number of
shares)
Year of
grant
Conditionally
awarded in
20223
(Number of
shares)
Dividends
accumulated
in 20221
(Number of
shares)
Shares
released
in 2022
(Number of
shares)
Conditional
share
awards
outstanding
on date of
retirement2
(Number of
shares)
Dividends
accumulated
in 2022 post
31 March
20221
(Number of
shares)
Conditional
share awards
outstanding
at 31
December
2022
(Number of
shares)
Date of
end of
restricted
period
Market
price at
date of
award
Date of
release
Market
price at
date of
vesting
or
release
(pence)
(pence)
Mark FitzPatrick
Deferred 2018
annual
incentive award 2019
Deferred 2019
annual
incentive award 2020
Deferred 2020
annual
incentive award 2021
Deferred 2021
annual
incentive award 2022
James Turner
Deferred 2018
annual
incentive award 2019
Deferred 2019
annual
incentive award 2020
Deferred 2020
annual
incentive award 2021
Deferred 2021
annual
incentive award 2022
Mike Wells2
Deferred 2018
annual
incentive award 2019
Deferred 2019
annual
incentive award 2020
Deferred 2020
annual
incentive award 2021
Deferred 2021
annual
incentive award 2022
40,926
51,973
25,459
118,358
47,926
47,926
26,166
44,883
25,789
96,838
43,622
43,622
70,354
89,269
29,089
40,926
31 Dec 21
1605.5 1129.5
830
406
765
52,803 31 Dec 22
1047
25,865 31 Dec 23
1495.5
48,691 31 Dec 24
1133.5
2,001
40,926
127,359
26,166
31 Dec 21
1605.5 1129.5
717
411
696
45,600 31 Dec 22
1047
26,200 31 Dec 23
1495.5
44,318 31 Dec 24
1133.5
1,824
26,166
116,118
70,354
70,354
31 Dec 21
1605.5
89,269
1,426
90,695 31 Dec 22
1047
29,089
464
29,553 31 Dec 23
1495.5
188,712
78,771
78,771
70,354
188,712
1,259
3,149
80,030 31 Dec 24
1133.5
200,278
Note
1.
2.
3.
A dividend equivalent was accumulated on these awards.
Mike Wells stepped down from his role as Group Chief Executive on 1 April 2022 and subsequently retired from the business on 14 July 2022.
For Mike Wells, the 2022 award was granted after he stepped down from his role as Group Chief Executive on 1 April 2022 in respect of the deferred portion of his 2021 AIP.
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Additional remuneration disclosures / continued
All-employee share plans
It is important that all employees are offered the opportunity to own shares in Prudential, connecting them both to the success of the Company
and to the interests of other shareholders. Executive Directors are invited to participate in these plans on the same basis as other staff in their
location.
Save As You Earn (SAYE) schemes
UK-based Executive Directors are normally eligible to participate in the HM Revenue and Customs (HMRC) approved Prudential Savings-Related
Share Option Scheme. This scheme allows all eligible employees to save towards the exercise of options over Prudential plc shares with the option
price set at the beginning of the savings period at a discount of up to 20 per cent of the market price.
Since 2014, participants have been able to elect to enter into savings contracts of up to £500 per month for a period of three or five years. At the
end of this term, participants may exercise their options within six months and purchase shares. If an option is not exercised within six months,
participants are entitled to a refund of their cash savings plus interest if applicable under the rules. Shares are issued to satisfy those options which
are exercised. No options may be granted under the schemes if the grant would cause the number of shares which have been issued, or which
remain issuable pursuant to options granted in the preceding 10 years under the scheme and any other option schemes operated by the
Company, or which have been issued under any other share incentive scheme of the Company, to exceed 10 per cent of the Company’s ordinary
share capital at the proposed date of grant.
Details of Executive Directors’ rights under the SAYE scheme are set out in the ‘Outstanding share options’ table.
Share Incentive Plan (SIP)
UK-based Executive Directors are also eligible to participate in the Company’s Share Incentive Plan (SIP). Since April 2014, all UK-based employees
have been able to purchase Prudential plc shares up to a value of £150 per month from their gross salary (partnership shares) through the SIP. For
every four partnership shares bought, an additional matching share is awarded which is purchased by Prudential plc on the open market. Dividend
shares accumulate while the employee participates in the plan. If the employee withdraws from the plan, or leaves the Group, matching shares
may be forfeited.
The table below provides information about shares purchased under the SIP together with matching shares and dividend shares.
Mark FitzPatrick
James Turner
Year of initial
participation
Share Incentive
Plan awards
held in Trust
at 1 Jan 2022
(Number of
shares)
Partnership
shares
accumulated
in 2022
(Number of
shares)
Matching
shares
accumulated
in 2022
(Number of
shares)
Dividend shares
accumulated
in 2022
(Number of
shares)
Share Incentive
Plan awards
held in Trust
at 31 December
2022
(Number of
shares)
2017
2011
731
856
176
–
44
–
11
12
962
868
Share Incentive
Plan awards
held in Trust
at 1 Jan 2022
(Number of
shares)
Partnership
shares
accumulated
up to 31 March
2022
(Number of
shares)
Partnership
shares
accumulated
between 1 April
2022 and date
of retirement
(Number of
shares)
Matching
shares
accumulated up
to 31 March
2022
(Number of
shares)
Matching
shares
accumulated
between 1 April
2022 and date
of retirement
(Number of
shares)
Dividend shares
accumulated
between 1 April
2022 and or
date of
retirement
(Number of
shares)
Share Incentive
Plan awards
held in Trust
at date of
retirement
(Number of
shares)
Year of initial
participation
Mike Wells1
2015
1,088
39
59
10
14
10
1,220
Note
1.
Outstanding awards for Mike Wells are as stated at 31 March 2022 and as at date of retirement.
This information has been prepared in line with the reporting requirements of the Hong Kong Stock Exchange and sets out Executive Directors’
outstanding share awards and all employee share plan options.
Dilution
Dilution Releases from the Prudential Long Term Incentive Plan and the Prudential Agency Long Term Incentive Plan are satisfied using new issue
shares rather than by purchasing shares in the open market. Shares relating to options granted under all-employee share plans are also satisfied
by new issue shares. The combined dilution from all outstanding shares and options at 31 December 2022 was 0.32 per cent of the total share
capital at the time. Deferred bonus awards will continue to be satisfied by the purchase of shares in the open market.
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Prudential plc Annual Report 2022 Remuneration of the five highest-paid individuals and the remuneration of senior management
In line with the requirements of the Stock Exchange of Hong Kong Limited, the following table sets out, on an aggregate basis, the annual
remuneration of i) the five highest-paid employees, and ii) senior management for the year ended 31 December 2022.
Of the five individuals with the highest emoluments in 2022, two were Executive Directors for the full year whose emoluments are disclosed in this
report. The aggregate of the emoluments of the other three individuals for 2022 are set out in the table below. Senior management comprised
the Executive Directors and members of the Group Executive Committee. The table sets out the aggregate of the emoluments paid to the senior
management team:
Components of remuneration
Base salaries, allowances and benefits in kind
Pension contributions
Performance-related pay
Payments made on appointment
Payments made on separation1
Total
Their emoluments for 2022 were within the following bands:
Five highest paid
Senior management
HKD000
36,029
3,199
96,836
–
7,800
143,864
$000
4,601
408
12,367
–
996
18,372
HKD000
75,808
6,584
142,180
–
7,800
232,372
$000
9,681
841
18,157
–
996
29,675
Remuneration band USD equivalent
Number of employees
Five highest
paid
Senior
management
Remuneration band HKD
7,000,001 – 7,500,000
8,500,001 – 9,000,000
15,000,001 – 15,500,001
15,500,001 – 16,000,000
18,500,001 – 19,000,000
20,500,001 – 21,000,000
22,000,001 – 22,500,000
36,000,001 – 36,500,000
38,000,001 – 38,500,000
42,000,001 – 42,500,000
42,500,001 – 43,000,000
52,000,001 – 52,500,000
55,000,001 – 55,500,000
893,900 – 957,800
1,085,500 – 1,149,400
1,915,600 – 1,979,400
1,979,400 – 2,043,300
2,362,600 – 2,426,400
2,618,000 – 2,681,800
2,809,500 – 2,873,400
4,597,400 – 4,661,300
4,852,800 – 4,916,700
5,363,600 – 5,427,500
5,427,500 – 5,491,300
6,640,700 – 6,704,600
7,023,800 – 7,087,700
Note
1
Further detail on the payments made to Senior Managers can be found in note B2.3 to the IFRS financial statements.
0
0
0
0
0
0
0
1
0
0
0
1
1
1
1
1
1
1
1
1
0
1
1
1
0
0
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Group overviewStrategic reportGovernanceFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional informationPrudential plc Annual Report 2022Directors’ remuneration report
Financial
statements
282 Index to Group IFRS financial statements
352 Parent company financial statements
354
Notes on the parent company financial
statements
Statement of Directors’ responsibilities
358
359 Independent auditor’s report to
Prudential plc
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Prudential plc Annual Report 2022 i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
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Index to Group IFRS financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Consolidated statement of cash flows
Page
283
284
285
286
287
Section
Page
Section
Notes to the financial statements
A
A1
A2
A3
Basis of preparation and accounting policies
Basis of preparation and exchange rates
New accounting pronouncements in 2022
Accounting policies
A3.1 Critical accounting policies, estimates
and judgements
A3.2 New accounting pronouncements not yet
effective
B
B1
B2
B3
B4
B5
C
C1
C2
Earnings performance
Analysis of performance by segment
Segment results
B1.1
B1.2 Determining operating segments and
performance measure of operating segments
Revenue
B1.3
B1.4 Additional segmental analysis of profit after tax
Acquisition costs and other expenditure
Staff and employment costs
B2.1
B2.2 Share-based payment
B2.3 Key management remuneration
B2.4 Fees payable to the auditor
Tax charge
Total tax charge by nature
B3.1
B3.2 Reconciliation of shareholder effective tax rate
Earnings per share
Dividends
Financial position
Group assets and liabilities by business type
Fair value measurement
C2.1 Determination of fair value
C2.2 Fair value measurement hierarchy of Group
assets and liabilities
C2.3 Additional information on financial instruments
C3
Policyholder liabilities and unallocated surplus
C3.1 Policyholder liabilities and unallocated surplus by
business type
C3.2 Reconciliation of gross and reinsurers’ share of
policyholder liabilities and unallocated surplus
C3.3 Reinsurers’ share of insurance contract liabilities
C3.4 Products and determining contract liabilities
C4
C5
C6
C7
C8
C9
C10
C11
D
D1
D2
D3
D4
D5
D6
Intangible assets
C4.1 Goodwill
C4.2 Deferred acquisition costs and other intangible
assets
Borrowings
C5.1 Core structural borrowings of shareholder-
financed businesses
C5.2 Operational borrowings
Risk and sensitivity analysis
C6.1 Insurance operations
C6.2 Eastspring and central operations
Tax assets and liabilities
C7.1 Current tax
C7.2 Deferred tax
Share capital, share premium and own shares
Provisions
Capital
C10.1 Group objectives, policies and processes for
managing capital
C10.2 Local capital regulations
C10.3 Transferability of capital resources
Property, plant and equipment
Other information
Corporate transactions
D1.1 Gain (loss) attaching to corporate transactions
D1.2 Discontinued US operations
Contingencies and related obligations
Post balance sheet events
Related party transactions
Commitments
Investments in subsidiary undertakings, joint
ventures and associates
D6.1 Basis of consolidation
D6.2 Dividend restrictions and minimum capital
requirements
D6.3 Investments in joint ventures and associates
D6.4 Related undertakings
288
288
289
289
289
293
297
297
297
298
300
302
302
303
303
305
305
306
306
307
309
310
311
311
315
315
316
319
323
323
324
325
326
Page
328
328
329
330
330
331
331
332
333
334
334
334
335
336
336
336
337
338
338
340
340
340
340
341
341
342
342
342
342
344
344
346
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Prudential plc Annual Report 2022 Consolidated income statement
Continuing operations:
Gross premiums earned
Outward reinsurance premiums
Earned premiums, net of reinsurance
Investment return
Other income
Total revenue, net of reinsurance
Benefits and claims
Reinsurers’ share of benefits and claims
Movement in unallocated surplus of with-profits funds
Benefits and claims and movement in unallocated surplus of with-profits funds, net of reinsurance
Acquisition costs and other expenditure
Finance costs: interest on core structural borrowings of shareholder-financed businesses
Gain (loss) attaching to corporate transactions
Total charges net of reinsurance
Share of profit from joint ventures and associates, net of related tax
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns) note (i)
Tax charge attributable to policyholders’ returns
Profit before tax attributable to shareholders’ returns
Total tax charge attributable to shareholders’ and policyholders’ returns
Remove tax charge attributable to policyholders’ returns
Tax charge attributable to shareholders’ returns
Profit after tax from continuing operations
Loss after tax from discontinued US operations note (ii)
Profit (loss) for the year
Attributable to:
Equity holders of the Company:
From continuing operations
From discontinued US operations
Non-controlling interests:
From continuing operations
From discontinued US operations
Profit (loss) for the year
Earnings per share (in cents)
Based on profit attributable to equity holders of the Company:
Basic
Based on profit from continuing operations
Based on loss from discontinued US operations note (ii)
Total basic earnings per share
Diluted
Based on profit from continuing operations
Based on loss from discontinued US operations note (ii)
Total diluted earnings per share
Note
2022 $m
2021 $m
B1.3
B1.3
B1.3
B1.3
C3.2
C3.2
C3.2
B2
D1.1
D6.3
B3.1
B3.1
B1.4
D1.2
23,344
(1,943)
21,401
(30,159)
539
(8,219)
17,997
(6,168)
1,868
13,697
(3,880)
(200)
55
9,672
29
1,482
(21)
1,461
(475)
21
(454)
1,007
–
1,007
998
–
998
9
–
9
24,217
(1,844)
22,373
3,486
641
26,500
(17,738)
(971)
(202)
(18,911)
(4,560)
(328)
(35)
(23,834)
352
3,018
(342)
2,676
(804)
342
(462)
2,214
(5,027)
(2,813)
2,192
(4,234)
(2,042)
22
(793)
(771)
1,007
(2,813)
Note
2022
2021
B4
36.5¢
–¢
36.5¢
36.5¢
–¢
36.5¢
83.4¢
(161.1)¢
(77.7)¢
83.4¢
(161.1)¢
(77.7)¢
Notes
(i)
(ii)
This measure is the formal profit before tax measure under IFRS. It is not the result attributable to shareholders principally because total corporate tax of the Group includes those taxes 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 under
IAS 12. Consequently, the IFRS profit before tax measure is not representative of pre-tax profit attributable to shareholders as it is determined after deducting the cost of policyholder benefits
and movements in the liability for unallocated surplus of with-profits funds after adjusting for tax borne by policyholders.
Discontinued operations for 2021 related to the US operations (Jackson) that were demerged from the Group in September 2021.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Consolidated statement of comprehensive income
Continuing operations:
Profit for the year
Other comprehensive (loss) income:
Exchange movements arising during the year
Valuation movements on retained interest in Jackson classified as available-for-sale securities:
Unrealised (loss) gain arising during the year
Deduct net gains included in the income statement on disposal
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income from continuing operations
Total comprehensive loss from discontinued US operations
Total comprehensive income (loss) for the year
D1.2
Attributable to:
Equity holders of the Company:
From continuing operations
From discontinued US operations
Non-controlling interests:
From continuing operations
From discontinued US operations
Note
2022 $m
2021 $m
1,007
2,214
(541)
(125)
(62)
(187)
(728)
279
–
279
280
–
280
(1)
–
(1)
(180)
273
(23)
250
70
2,284
(7,068)
(4,784)
2,277
(6,283)
(4,006)
7
(785)
(778)
Total comprehensive income (loss) for the year
279
(4,784)
284
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Prudential plc Annual Report 2022 Consolidated statement of changes in equity
Year ended 31 Dec 2022 $m
Note
Share
capital
Share
premium
Retained
earnings
Translation
reserve
Available-
for-sale
securities
reserves
Shareholders’
equity
Non-
controlling
interests
Reserves
Profit for the year
Other comprehensive loss
Total comprehensive income (loss) for the year
Transactions with owners of the Company
Dividends
Reserve movements in respect of share-based
payments
Effect of transactions relating to non-controlling
interests
New share capital subscribed
Movement in own shares in respect of share-based
B5
C8
payment plans
Net increase (decrease) in equity
Balance at 1 Jan
Balance at 31 Dec
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4)
–
998
–
998
(474)
24
49
–
(3)
–
(531)
(531)
–
(187)
(187)
–
–
–
–
–
–
–
–
–
–
998
(718)
280
(474)
24
49
(4)
(3)
9
(10)
(1)
(8)
–
–
–
–
–
182
182
(4)
5,010
594
10,216
5,006
10,810
(531)
1,430
899
(187)
250
(128)
17,088
(9)
176
(137)
17,264
63
16,960
167
17,127
Total
equity
1,007
(728)
279
(482)
24
49
(4)
(3)
Year ended 31 Dec 2021 $m
Note
Share
capital
Share
premium
Retained
earnings
Translation
reserve
Available-
for-sale
securities
reserves
Shareholders’
equity
Non-
controlling
interests
Total
equity
Reserves
Profit for the year
Other comprehensive (loss) income
Total comprehensive income (loss) from continuing
operations
Total comprehensive (loss) income from
discontinued US operations
Total comprehensive (loss) income for the year
Transactions with owners of the Company
Demerger dividend in specie of Jackson
Other dividends
Reserve movements in respect of share-based
payments
Effect of transactions relating to non-controlling
interests*
New share capital subscribed
Movement in own shares in respect of share-based
payment plans
Net increase (decrease) in equity
Balance at 1 Jan
Balance at 31 Dec
D1.2
B5
B5
C8
–
–
–
–
–
–
–
–
–
9
–
9
173
182
–
–
–
–
–
–
–
–
–
2,373
–
2,373
2,637
5,010
2,192
–
–
(165)
–
250
2,192
85
22
(15)
2,214
70
2,192
(165)
250
2,277
7
2,284
(4,234)
(2,042)
(1,735)
(421)
46
(32)
–
(24)
463
298
(2,512)
(2,262)
–
–
–
–
–
–
–
–
–
–
–
–
(6,283)
(4,006)
(1,735)
(421)
46
(785)
(7,068)
(778)
(4,784)
–
(9)
–
(1,735)
(430)
46
(32)
2,382
(278)
–
(310)
2,382
(24)
–
(24)
(4,208)
14,424
10,216
298
1,132
1,430
(2,262)
2,512
250
(3,790)
20,878
17,088
(1,065)
1,241
(4,855)
22,119
176
17,264
*
The $(278) million in 2021 related to the derecognition of Athene’s non-controlling interest upon the demerger of Jackson.
285
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Consolidated statement of financial position
Assets
Goodwill
Deferred acquisition costs and other intangible assets
Property, plant and equipment
Reinsurers’ share of insurance contract liabilities
Deferred tax assets
Current tax recoverable
Accrued investment income
Other debtors
Investment properties
Investments in joint ventures and associates accounted for using the equity method
Loans
Equity securities and holdings in collective investment schemes note
Debt securities note
Derivative assets
Deposits
Cash and cash equivalents
Total assets
Equity
Shareholders’ equity
Non-controlling interests
Total equity
Liabilities
Insurance contract liabilities
Investment contract liabilities with discretionary participation features
Investment contract liabilities without discretionary participation features
Unallocated surplus of with-profits funds
Core structural borrowings of shareholder-financed businesses
Operational borrowings
Obligations under funding, securities lending and sale and repurchase agreements
Net asset value attributable to unit holders of consolidated investment funds
Deferred tax liabilities
Current tax liabilities
Accruals, deferred income and other creditors
Provisions
Derivative liabilities
Total liabilities
Total equity and liabilities
Note 31 Dec 2022 $m 31 Dec 2021 $m
C4.1
C4.2
C11
C3.3
C7.2
C7.1
C1(vii)
C1(vii)
C1
C1
C1
C2.2
C1(vi)
C1
C1
C3.2
C3.2
C3.2
C3.2
C5.1
C5.2
C7.2
C7.1
C1(viii)
C9
C2.2
C1
C1
890
7,155
419
2,807
310
18
1,135
1,694
37
1,915
2,536
57,679
76,989
569
6,275
5,514
907
6,858
478
9,753
266
20
1,171
1,779
38
2,183
2,562
61,601
99,094
481
4,741
7,170
165,942
199,102
16,960
167
17,127
121,213
309
741
3,495
4,261
815
582
4,193
2,872
208
8,777
348
1,001
148,815
165,942
17,088
176
17,264
150,755
346
814
5,384
6,127
861
223
5,664
2,862
185
7,983
372
262
181,838
199,102
Note
Included within equity securities and holdings in collective investment schemes and debt securities as at 31 December 2022 are $1,571 million of lent securities and assets subject to repurchase
agreements (31 December 2021: $854 million).
The parent company statement of financial position is presented on page 352.
The consolidated financial statements on pages 284 to 351 were approved by the Board of Directors on 15 March 2023 and signed on its behalf by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
286
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Prudential plc Annual Report 2022
Consolidated statement of cash flows
Continuing operations:
Cash flows from operating activities
Profit before tax (being tax attributable to shareholders’ and policyholders’ returns)
Adjustments to profit before tax for non-cash movements in operating assets and liabilities:
Investments
Other non-investment and non-cash assets
Policyholder liabilities (including unallocated surplus of with-profits funds)
Other liabilities (including operational borrowings)
Investment income and interest payments included in profit before tax
Operating cash items:
Interest receipts
Interest payments
Dividend receipts
Tax paid
Other non-cash items
Net cash flows from operating activities note (i)
Cash flows from investing activities
Purchases of property, plant and equipment
Acquisition of business and intangibles note (ii)
Disposal of Jackson shares note (ii)
Net cash flows from investing activities
Cash flows from financing activities
Structural borrowings of shareholder-financed operations: note (iii)
Issuance of debt, net of costs
Redemption of debt
Interest paid
Payment of principal portion of lease liabilities
Equity capital:
Issues of ordinary share capital
External dividends:
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash flows from financing activities
Net (decrease) increase in cash and cash equivalents from continuing operations
Net decrease in cash and cash equivalents from discontinued US operations
Cash and cash equivalents at 1 Jan
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 31 Dec
Note
2022 $m
2021 $m
1,482
3,018
22,374
6,429
(29,208)
15
(4,037)
(14,553)
2,658
9,095
16
(3,738)
2,689
(16)
1,523
(449)
276
1,078
(34)
(298)
293
(39)
346
(2,075)
(204)
(101)
(4)
(474)
(8)
(2,520)
(1,481)
–
7,170
(175)
5,514
2,328
(11)
1,480
(453)
438
278
(36)
(773)
83
(726)
995
(1,250)
(314)
(118)
2,382
(421)
(9)
1,265
817
(1,621)
8,018
(44)
7,170
C3.2
C11
C5.1
C8
B5
D1.2
C1(vi)
Notes
(i)
(ii)
(iii)
Included in net cash flows from operating activities are dividends from joint ventures and associates of $112 million (2021: $175 million).
Net cash flows from other investing activities include amounts paid for distribution rights and cash flows arising from the sale of subsidiaries, joint ventures and associates and investments that
do not form part of the Group’s operating activities.
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 for the Group are analysed below:
2022
2021
Cash movements $m
Non-cash movements $m
Balance at
1 Jan
$m
6,127
6,633
Issuance
of debt
Redemption
of debt
346
995
(2,075)
(1,250)
Foreign
exchange
movement
(147)
(13)
Demerger
of Jackson
Other
movements
–
(250)
10
12
Balance at
31 Dec
$m
4,261
6,127
287
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
A Basis of preparation and accounting policies
A1 Basis of preparation and exchange rates
Prudential plc (‘the Company’) together with its subsidiaries (collectively, ‘the Group’ or ‘Prudential’) provides life and health insurance and asset
management products in Asia and Africa. The Group is headquartered in Hong Kong.
Basis of preparation
These consolidated financial statements have been prepared in accordance with IFRS Standards as issued by the IASB and in accordance with UK-
adopted international accounting standards. At 31 December 2022, there were no unadopted standards effective for the year ended
31 December 2022 which had an impact on the consolidated financial statements of the Group, and there were no differences between UK-
adopted international accounting standards and IFRS Standards as issued by the IASB in terms of their application to the Group.
The Group accounting policies are the same as those applied for the year ended 31 December 2021 with the exception of the adoption of the
new and amended IFRS Standards as described in note A2.
The parent company statement of financial position prepared in accordance with the UK Generally Accepted Accounting Practice (including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’) is presented on page 352.
Going concern basis of accounting
The Directors have made an assessment of going concern covering a period of at least 12 months from the date these consolidated financial
statements and the parent company financial statements are approved. In making this assessment, the Directors have considered both the
Group’s current performance, solvency and liquidity and the Group’s business plan taking into account the Group’s principal risks and the
mitigations available to address them, as well as the results of the Group’s stress and scenario testing.
Based on the above, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue their
operations for a period of at least 12 months from the date these consolidated financial statements are approved. No material uncertainties that
may cast significant doubt on the ability of the Company and the Group to continue as a going concern have been identified. The Directors
therefore consider it appropriate to continue to adopt the going concern basis of accounting in preparing these consolidated financial statements
and the parent company financial statements for the year ended 31 December 2022.
Exchange rates
The exchange rates applied for balances and transactions in currencies other than the presentation currency of the Group, US dollars (USD) were:
USD : local currency
Chinese yuan (CNY)
Hong Kong dollar (HKD)
Indian rupee (INR)
Indonesian rupiah (IDR)
Malaysian ringgit (MYR)
Singapore dollar (SGD)
Taiwan dollar (TWD)
Thai baht (THB)
UK pound sterling (GBP)
Vietnamese dong (VND)
Closing rate at year end
Average rate for the year-to-date
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
6.95
7.81
82.73
15,567.50
4.41
1.34
30.74
34.56
0.83
23,575.00
6.37
7.80
74.34
14,252.50
4.17
1.35
27.67
33.19
0.74
22,790.00
6.73
7.83
78.63
14,852.24
4.40
1.38
29.81
35.06
0.81
23,409.87
6.45
7.77
73.94
14,294.88
4.15
1.34
27.93
32.01
0.73
22,934.86
288
prudentialplc.com
Prudential plc Annual Report 2022 Foreign exchange translation
In order to present the consolidated financial statements in USD, the results and financial position of entities not using USD as functional currency
(ie the currency of the primary economic environment in which the entity operates) must be translated into USD.
All assets and liabilities of entities not operating in USD are converted at closing exchange rates while all income and expenses are converted at
average exchange rates where this is a reasonable approximation of the rates prevailing on transaction dates. The impact of these foreign
exchange translations into the Group’s USD presentation currency is recorded as a separate component in the Statement of comprehensive
income. Upon the disposal of the entity, the related cumulative foreign exchange translation differences are recycled from other comprehensive
income to the income statement as part of the gain or loss on disposal.
The general principle for converting foreign currency transactions to the functional currency of an entity is to translate at the functional currency
spot rate prevailing at the date of the transactions. Foreign currency monetary assets and liabilities are translated at the spot exchange rate for the
functional currency at the reporting date. Changes resulting from the foreign exchange translations into the functional currency of the entity are
recognised in the income statement.
Certain notes to the consolidated financial statements present comparative information at constant exchange rates (CER), in addition to the
reporting at actual exchange rates (AER) used throughout the consolidated financial statements. AER are actual historical exchange rates for the
specific accounting year, being the average rates over the year 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 year results using the current year foreign exchange rate, ie current
year average rates for the income statement and current year closing rates for the statement of financial position.
A2 New accounting pronouncements in 2022
The IASB has issued the following new accounting pronouncements to be effective from 1 January 2022:
> Amendments to IAS 37 ‘Onerous contracts – Cost of Fulfilling a Contract’ issued in May 2020;
> Annual Improvements to IFRS Standards 2018–2020 issued in May 2020;
> Amendments to IAS 16 ‘Property, Plant and Equipment – Proceeds before Intended Use’ issued in May 2020; and
> Reference to the Conceptual Framework – Amendments to IFRS 3 ‘Business combination’ issued in May 2020.
The adoption of these pronouncements has had no significant impact on the Group consolidated financial statements.
A3 Accounting policies
A3.1 Critical accounting policies, estimates and judgements
Note A3.1 presents the critical accounting policies, estimates and judgements applied in preparing the Group’s consolidated financial statements.
Other accounting policies, where significant, are presented in the relevant individual notes. All accounting policies are applied consistently for the
years presented and normally are not subject to changes unless new accounting standards, interpretations or amendments are introduced by the
IASB.
The preparation of these consolidated financial statements requires Prudential to make accounting estimates and judgements about the
amounts of assets, liabilities, revenues and expenses, which are both recognised and unrecognised (eg contingent liabilities) in the consolidated
financial statements. Prudential evaluates its critical accounting estimates, including those related to long-term business provisioning and the fair
value of assets as required. The notes below set out those critical accounting policies, the application of which requires the Group to make critical
estimates and judgements. Also set out are further critical accounting policies affecting the presentation of the Group’s results and other items
that require the application of critical estimates and judgements.
289
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
A3 Accounting policies continued
A3.1 Critical accounting policies, estimates and judgements continued
(a) Critical accounting policies with associated critical estimates and judgements
Measurement of policyholder liabilities and unallocated surplus of with-profits
The measurement basis of policyholder
liabilities is dependent upon the classification
of the contracts under IFRS 4.
IFRS 4 permits the continued usage of previously applied Generally Accepted Accounting
Practices (GAAP) for insurance contracts and investment contracts with discretionary
participating features.
Impacts $146.7 billion of policyholder liabilities
and unallocated surplus of with-profits funds
including those held by joint venture and
associates.
Policyholder liabilities are estimated based on
a number of actuarial assumptions (eg
mortality, morbidity, policyholder behaviour
and expenses).
The Group applies judgement in determining
the actuarial assumptions to be applied to
estimate the future amounts due to or from
the policyholder in the measurement of the
policyholder liabilities.
A modified statutory basis of reporting was adopted by the Group on first time adoption of IFRS
Standards in 2005. This was set out in the Statement of Recommended Practice issued by the
Association of British Insurers (ABI SORP). The ABI SORP was withdrawn for the accounting
periods beginning in or after 2015. As used in these consolidated financial statements, the term
‘grandfathered’ ABI SORP refers to the requirements of the pronouncements prior to its
withdrawal.
For investment contracts that do not contain discretionary participating features, IAS 39 is
applied and, where the contract includes an investment management element, IFRS 15
‘Revenue from Contracts with Customers’ applies.
The current policies applied for the Group’s insurance businesses are noted below.
Measurement of insurance contract liabilities and investment contract
liabilities with discretionary participation features
The policyholder liabilities for businesses of the insurance operations are generally determined
in accordance with methods prescribed by local GAAP, adjusted to comply with the
‘grandfathered’ ABI SORP where necessary. Refinements to the local reserving methodology are
generally treated as changes in estimates, dependent on their nature. The UK-style with-profits
funds’ liabilities in Hong Kong are valued under the realistic basis in accordance with the
requirements of ‘grandfathered’ FRS 27 ‘Life Assurance’ (issued by the UK Accounting Standards
Board in 2004 and withdrawn in 2015). The realistic basis requires the value of liabilities to be
calculated as the sum of a with-profits benefits reserve, future policy-related liabilities and the
realistic current liabilities of the fund. In Taiwan and India, US GAAP principles are applied.
Further details on how liabilities are determined for material product types are set out in note
C3.4. This includes the approach to assumption setting including a margin for prudence. The
sensitivity of the insurance operations to variations in key economic assumptions, as well as the
insurance risks of mortality and morbidity, is discussed in note C6.1.
In April 2022 Prudential Hong Kong Limited received approval from the Hong Kong IA to early
adopt the new risk-based capital regime effective from 1 January 2022. The implication for IFRS
reporting of the Group is as explained further in note C3.2.
Measurement of unallocated surplus of with-profits funds
Unallocated surplus of with-profits funds represents the excess of assets over policyholder
liabilities, determined in accordance with the Group’s accounting policies, that have yet to be
appropriated between policyholders and shareholders for the Group’s with-profits funds in Hong
Kong and Malaysia. The unallocated surplus is recorded wholly as a liability with no allocation to
equity. The annual excess or shortfall of income over expenditure of the with-profits funds, after
declaration and attribution of the cost of bonuses to policyholders and shareholders, is
transferred to or from the unallocated surplus each period through a charge or credit to the
income statement. In Hong Kong, the unallocated surplus includes the shareholders’ share of
expected future bonuses, with the expected policyholder share being included in policyholder
liabilities. Any excess of assets over liabilities and amounts expected to be paid out by the fund
on future bonuses is also included in the unallocated surplus.
The balance of the unallocated surplus is determined after full provision for deferred tax on
unrealised appreciation or depreciation on investments.
Liability adequacy test
The Group performs adequacy testing on its insurance liabilities to ensure that the carrying
amounts (net of related deferred acquisition costs and, where relevant, present value of
acquired in-force business) is sufficient to cover current estimates of future cash outflows of the
in-force policies over the expected lives. Any deficiency is immediately charged to the income
statement. The liability adequacy test is performed at the level of a portfolio of contracts that
are subject to broadly similar risks and managed together as a single portfolio which may be at
an entity or business unit level, depending on how the business is managed.
290
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A Basis of preparation and accounting policies / continuedPrudential plc Annual Report 2022
(b) Further critical accounting policies affecting the presentation of the Group’s results
Presentation of results before tax attributable to shareholders
Profit before tax is a significant IFRS income
statement item. The Group has chosen to
present a measure of profit before tax
attributable to shareholders which
distinguishes between tax borne by
shareholders and tax attributable to
policyholders to support understanding of the
performance of the Group.
Profit before tax attributable to shareholders is
$1,461 million and compares to profit before
tax of $1,482 million.
The total tax charge for the Group reflects tax that, in addition to that relating to shareholders’
profit, is also attributable to policyholders through the interest in with-profits or unit-linked
funds. Further detail is provided in note B3. Reported IFRS profit before the tax measure is
therefore not representative of pre-tax profit attributable to shareholders. Accordingly, in order
to provide a measure of pre-tax profit attributable to shareholders, the Group has chosen to
adopt an income statement presentation of the tax charge and pre-tax results that
distinguishes between policyholders’ and shareholders’ returns.
Segmental analysis of results and earnings attributable to shareholders
The Group uses adjusted operating profit as
the segmental measure of its results.
Total segmental adjusted operating profit is
$4,106 million and is shown in note B1.1.
The basis of calculation of adjusted operating profit is provided in note B1.2.
For shareholder-backed business, with the exception of securities which are treated as
available-for-sale (AFS), and assets classified as loans and receivables at amortised cost, all
financial investments and investment properties are designated as assets at fair value through
profit or loss. Short-term fluctuations in fair value affect the result for the year and the Group
provides additional analysis of results before and after the effects of short-term fluctuations
in investment returns, together with other items that are of a short-term, volatile or one-off
in nature.
Short-term fluctuations in investment returns on assets held by with-profits funds in Hong Kong,
Malaysia and Singapore do not affect directly reported shareholder results. This is because (i)
the unallocated surplus of with-profits funds is accounted for as a liability and (ii) excess or deficit
of income and expenditure of the funds over the required surplus for distribution are transferred
to or from policyholder liabilities (including the unallocated surplus).
(c) Other items requiring application of critical estimates or judgements
Carrying value of distribution rights intangible assets
The Group applies judgement to assess
whether factors such as the financial
performance of the distribution arrangements,
changes in relevant legislation and regulatory
requirements indicate an impairment of
intangible assets representing distribution
rights.
To determine the impaired value, the Group
estimates the discounted future expected cash
flows arising from the cash generating unit
containing the distribution rights.
Affects $3.6 billion of assets as shown in note
C4.2.
Distribution rights relate to bancassurance partnership arrangements for the distribution of
products for the term of the contractual agreement with the bank partner, for which an asset is
recognised based on fees paid and fees payable not subject to performance conditions.
Distribution rights impairment testing is conducted when there is an indication of an
impairment.
To assess indicators of an impairment, the Group monitors a number of internal and external
factors, including indications that the financial performance of the arrangement is likely to be
worse than expected and changes in relevant legislation and regulatory requirements that
could impact the Group’s ability to continue to sell new business through the bancassurance
channel, and then applies judgement to assess whether these factors indicate that an
impairment has occurred.
If an impairment has occurred, a charge is recognised in the income statement for the
difference between the carrying value and recoverable amount of the asset. The recoverable
amount is the greater of fair value less costs to sell and value in use. Value in use is calculated as
the present value of future expected cash flows from the asset or the cash generating unit to
which it is allocated.
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A3 Accounting policies continued
A3.1 Critical accounting policies, estimates and judgements continued
Deferred acquisition costs (DAC) for insurance contracts
The Group estimates projected future profits/
margins to assess whether adjustments to the
carrying value or amortisation profile of DAC
asset are necessary.
Impacts $3.3 billion of DAC as shown in
note C4.2.
Financial investments – valuation
Financial investments held at fair value
represent $135.7 billion of the Group’s total
assets.
Financial investments held at amortised cost
represent $8.4 billion of the Group’s total
assets.
The Group estimates the fair value of financial
investments that are not actively traded using
quotations from independent third parties or
internally developed pricing models.
Except for acquisition costs of the UK-style with-profits funds’ contracts in Hong Kong, which are
accounted for under the ‘grandfathered’ FRS 27, costs of acquiring new insurance business are
accounted for in a way that is consistent with the principles of the ‘grandfathered’ ABI SORP.
The Group determines qualifying costs that should be capitalised (ie those costs of acquiring
new insurance contracts that meet the criteria under the Group’s accounting policy for DAC)
shown by an explicit carrying value in the balance sheet. However, in some insurance operations,
the deferral is implicit through the reserving basis. DAC is amortised against the profit margins
within future revenues on the related insurance policies. For some business units this is
approximated by amortising DAC on a straight-line basis over the expected duration of the
policies.
The recoverability of the DAC is measured and the DAC asset is deemed impaired if the
projected margins (which are estimated based on a number of assumptions similar to those
underlying policyholder liabilities) are less than the carrying value. To the extent that the future
margins differ from those anticipated, an adjustment to the carrying value will be necessary
either through a charge to the income statement (if the projected margins are lower than
carrying value) or through a change in the amortisation profile.
For those business units applying US GAAP to insurance assets and liabilities, as permitted by
the ‘grandfathered’ ABI SORP, acquisition costs are deferred and amortised as per the US GAAP
requirements under ASC 944 Financial Services – Insurance.
The Group holds the majority of its financial investments at fair value (primarily through profit or
loss). Financial investments held at amortised cost primarily comprise loans and deposits.
Determination of fair value
The fair values of the financial instruments for which fair valuation is required under IFRS
Standards are determined by the use of quoted market prices for exchange-quoted investments
or by using quotations from independent third parties such as brokers and pricing services or by
using appropriate valuation techniques. Further details are included in note C2.1.
The estimated fair value of derivative financial instruments reflects the estimated amount the
Group would receive or pay in an arm’s-length transaction. This amount is determined using
quoted prices if exchange listed, quotations from independent third parties or valued internally
using standard market practices.
Quoted market prices are used to value investments having quoted prices. Actively traded
investments without quoted prices are valued using prices provided by third parties such as
brokers or pricing services. Financial investments measured at fair value are classified into a
three-level hierarchy as described in note C2.1.
If the market for a financial investment of the Group is not active, the Group establishes fair
value by using quotations from independent third parties, such as brokers or pricing services, or
by using internally developed pricing models. Priority is given to publicly available prices from
independent sources when available, but overall the source of pricing and/or the valuation
technique is chosen with the objective of arriving at a fair value measurement which reflects the
price at which an orderly transaction would take place between market participants on the
measurement date. Changes in assumptions relating to these variables could positively or
negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as ‘level 3’ to which valuation techniques are applied and the sensitivity of
profit before tax to a change in the valuation of these items, are presented in note C2.2.
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A Basis of preparation and accounting policies / continuedPrudential plc Annual Report 2022 A3.2 New accounting pronouncements not yet effective
The following standards, interpretations and amendments have been issued by the IASB but are not yet effective for the Group in 2022. The
Group prepares consolidated financial statements in accordance with IFRS Standards as issued by the IASB and UK-adopted international
accounting standards. This is not intended to be a complete list as only those standards, interpretations and amendments that could have a
material impact on the Group’s consolidated financial statements are discussed.
IFRS 9 ‘Financial instruments: Classification and measurement’
IFRS 9 became mandatorily effective for the annual periods beginning on or after 1 January 2018, with early application permitted and
transitional rules apply. The Group met the eligibility criteria for temporary exemption under the Amendments to IFRS 4 from applying IFRS 9 and
has accordingly deferred the adoption of IFRS 9 until 1 January 2023.
The Group is eligible as its activities are predominantly to issue insurance contracts based on the criteria as set out in the amendments to IFRS
4. The required disclosure of the fair value of the Group’s financial assets, showing the amounts for instruments that meet the ‘Solely for Payment
of Principal and Interest’ (SPPI) criteria but do not meet the definition of held for trading and are not managed and evaluated on a fair value basis
separately from all other financial assets, is provided below.
The Group is implementing this standard in conjunction with IFRS 17 as permitted. IFRS 9 replaces the existing IAS 39 ‘Financial Instruments –
Recognition and Measurement’ and will affect the following three areas:
The classification and the measurement of financial assets and liabilities
IFRS 9 redefines the classification of financial assets. Based on the way in which the assets are managed in order to generate cash flows and their
contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’), financial assets are classified
into one of the following categories: amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss
(FVTPL). An option is also available at initial recognition to irrevocably designate a financial asset as at FVTPL if doing so eliminates or significantly
reduces accounting mismatches.
Under IAS 39, 97 per cent of the Group’s financial investments are valued at FVTPL and the vast majority of its investments will continue to be
classified as such under IFRS 9. The Company expects to make an election under IFRS 9 to measure its retained interest in Jackson’s equity
securities at FVOCI. Under this designation, only dividend income from this retained interest is recognised in the profit or loss of the Company.
Unrealised gains and losses are recognised in other comprehensive income and there is no recycling to the profit or loss on derecognition.
The existing IAS 39 amortised cost measurement for financial liabilities is largely maintained under IFRS 9. For financial liabilities designated at
FVTPL IFRS 9 requires changes in fair value due to changes in the entity’s own credit risk to be recognised in other comprehensive income.
The calculation of the impairment charge relevant for financial assets held at amortised cost or FVOCI
A new impairment model based on an expected credit loss approach replaces the existing IAS 39 incurred loss impairment model, resulting in
earlier recognition of credit losses compared to IAS 39. This aspect is the most complex area of IFRS 9 to implement and will involve significant
judgements and estimation processes.
The Group has assessed the scope of assets to which these requirements will apply and expects that the vast majority of the financial
investments of the Group to be held at FVTPL to which these requirements will not apply. Accordingly, no significant amount of additional
impairment is expected to be recognised by the Group under the expected credit loss approach as a result of the adoption of IFRS 9.
The hedge accounting requirements which are more closely aligned with the risk management activities
The Group has not applied hedge accounting treatment under IAS 39 and therefore, there is no impact in this area for the Group upon the
adoption of IFRS 9.
The parent company and a number of intermediate holding companies and non-insurance subsidiaries adopted IFRS 9 in 2018 in their
individual or separate financial statements where these statements are prepared in accordance with IFRS, including the UK Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’. The public availability of the financial statements for these entities varies according to the local
laws and regulations of each jurisdiction. The results for these entities continue to be accounted for on an IAS 39 basis in these consolidated
financial statements.
The fair value of the Group’s directly held financial assets at 31 December 2022 and 2021 are shown below. Financial assets with contractual
terms that give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) as defined by IFRS 9 are shown
separately. This excludes financial assets that meet the definition of held for trading or are managed and evaluated on a fair value basis.
293
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A3 Accounting policies continued
A3.2 New accounting pronouncements not yet effective continued
Financial assets, net of derivative liabilities
Accrued investment income
Other debtors
Loans note
Equity securities and holdings in collective investment schemes
Debt securities
Derivative assets, net of derivative liabilities
Deposits
Cash and cash equivalents
Total financial assets, net of derivative liabilities
Financial assets, net of derivative liabilities
Accrued investment income
Other debtors
Loans note
Equity securities and holdings in collective investment schemes
Debt securities
Derivative assets, net of derivative liabilities
Deposits
Cash and cash equivalents
Total financial assets, net of derivative liabilities
Financial assets that
pass the SPPI test
All other financial assets,
net of derivative liabilities
Fair value at
31 Dec 2022
$m
Movement in
the fair value
during 2022
$m
Fair value at
31 Dec 2022
$m
Movement in
the fair value
during 2022
$m
1,135
1,694
2,189
–
–
–
6,275
5,514
16,807
–
–
15
–
–
–
–
–
15
–
–
468
57,679
76,989
(432)
–
–
134,704
–
–
(37)
(8,420)
(21,803)
(4,487)
–
–
(34,747)
Financial assets that
pass the SPPI test
All other financial assets,
net of derivative liabilities
Fair value at
31 Dec 2021
$m
Movement in
the fair value
during 2021
$m
Fair value at
31 Dec 2021
$m
Movement in
the fair value
during 2021
$m
1,171
1,779
2,126
–
226
–
4,741
7,170
17,213
–
–
41
–
–
–
–
–
41
–
–
647
61,601
98,868
219
–
–
161,335
–
–
(1)
4,061
(3,164)
(943)
–
–
(47)
Note
The loans that pass the SPPI test in the tables above are primarily carried at amortised cost under IAS 39. Further information on these loans is as provided in note C2.2.
The underlying financial assets of the Group’s joint ventures and associates accounted for using the equity method are analysed below into those
which meet the SPPI condition of IFRS 9, excluding any financial assets that meet the definition of held for trading or are managed and evaluated
on a fair value basis, and all other financial assets.
Fair value information of the financial assets held by CITIC-Prudential Life Insurance Company (CPL), the Group’s individually material joint
venture, is shown in the table below. The amounts disclosed represent 100 per cent of the entity’s financial assets and not the Group’s share of
those amounts and have been prepared on the same basis as the Group’s consolidated financial statements.
Financial assets that pass the
SPPI test*
All other financial assets
CPL (100% of the financial assets of the entity)
Fair value at 31 Dec
Fair value at 31 Dec
Movement in the fair value during
Financial assets
2022 $m
2021 $m
2022 $m
2021 $m
2022 $m
2021 $m
Accrued investment income
Other debtors
Loans
Equity securities and holdings in collective investment
schemes
Debt securities
Deposits
Cash and cash equivalents
Total financial assets
176
667
674
–
–
1,174
561
3,252
170
620
656
–
–
1,210
422
3,078
–
–
–
15,698
11,478
–
–
27,176
–
–
–
12,882
11,976
–
–
24,858
–
–
–
(1,314)
37
–
–
(1,277)
–
–
–
254
184
–
–
438
*
The carrying value approximates fair value for the financial assets in this category with no movement in the fair value during the year.
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A Basis of preparation and accounting policies / continuedPrudential plc Annual Report 2022 Fair value information for the Group’s share of financial assets of other joint ventures and associates in aggregate is set out in the table below:
Financial assets that pass the
SPPI test*
All other financial assets
Other JVs and associates (Prudential’s share)
Fair value at 31 Dec
Fair value at 31 Dec
Movement in the fair value during
Financial assets
2022 $m
2021 $m
2022 $m
2021 $m
2022 $m
2021 $m
Accrued investment income
Other debtors
Loans
Equity securities and holdings in collective investment
schemes
Debt securities
Deposits
Cash and cash equivalents
Total financial assets
83
143
–
–
–
335
380
941
85
187
26
–
–
203
510
1,011
–
–
–
3,657
3,476
–
–
7,133
–
–
–
3,859
3,674
–
–
7,533
–
–
–
133
(131)
–
–
2
–
–
–
680
(121)
–
–
559
*
The carrying value approximates fair value for the financial assets in this category with no movement in the fair value during the year.
IFRS 17 ‘Insurance Contracts’
IFRS 17 ‘Insurance Contracts’ became effective on 1 January 2023 and replaces IFRS 4 ‘Insurance Contracts’. IFRS 4 permitted insurers to
continue to use the statutory basis of accounting for insurance assets and liabilities that existed in their jurisdictions prior to January 2005. IFRS 17
replaced this with a new measurement model that significantly changes the way insurance and reinsurance contracts are accounted for, albeit the
scope of IFRS 17 and IFRS 4 is very similar. Therefore, nearly all of the Group’s insurance and investment contracts with discretionary participation
features accounted under IFRS 4 will be accounted for under IFRS 17. The transition date of the Group for IFRS 17 was 1 January 2022. The Group
is adopting IFRS 17 on its mandatory effective date on 1 January 2023, alongside the adoption of IFRS 9.
IFRS 17 implementation programme
The requirements of the new standard are complex and require a fundamental change to accounting, presentation and disclosures for insurance
contracts as well as the application of significant judgement and new estimation techniques. The implementation of this standard has involved
significant enhancements to IT, actuarial and finance systems of the Group. The Group has been implementing IFRS 17 and IFRS 9 through a
Group-wide implementation programme.
A Group-wide Steering Committee, chaired by the Group Chief Financial Officer, provides oversight and strategic direction to the
implementation programme. Regular updates on progress are provided to the Group Audit Committee and during 2022 members of the
Committee, as well as the Board, received training on the new requirements. Since the last Annual Report, the systems implementation has been
completed and the transition impacts at 1 January 2022 have been calculated. The production of half year and full year 2022 comparatives using
the IFRS 17 accounting standard is scheduled to be completed in the first half of 2023.
Overview of IFRS 17
IFRS 17 requires liabilities for insurance contracts to be measured as the total of:
> fulfilment cash flows, comprising the best estimate of the present value of future cash flows within the contract boundary that are expected to
arise and an explicit risk adjustment for non-financial risk; and
> a contractual service margin (CSM) that is representing the deferral of any day-one gains arising on initial recognition.
Losses are recognised directly into the income statement. For measurement purposes, contracts are grouped together into contracts of similar
risk, profitability profile and issue year, with further divisions for contracts that are managed separately.
The establishment of CSM on the Group’s in-force business and transition approach
Transition refers to the determination of the opening balance sheet for the first year of comparative information presented under IFRS 17 (ie at
1 January 2022). The future cash flows and risk adjustment are measured on a current basis in the same manner as they would be calculated for
subsequent measurement. The key component of transition is therefore the determination of the CSM.
The standard requires IFRS 17 to be applied retrospectively (the ‘fully retrospective approach’) unless impracticable. If a fully retrospective
approach is impracticable there is an option to choose either a modified retrospective approach or a fair value approach. If reasonable and
supportable information necessary to apply the modified retrospective approach is not available, the fair value approach must be applied. The
Group applied all three approaches on transition, after taking into account the information that is available to be used for the different groups of
contracts of the Group. The fair value approach is applied, in particular, where suitable historical information required to apply the retrospective
transition approaches is no longer practicably available.
295
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A3 Accounting policies continued
A3.2 New accounting pronouncements not yet effective continued
Profit for insurance contracts under IFRS 17
IFRS 17 introduces a new measure of insurance revenue, based on the delivery of services to policyholders and excluding any premiums related to
the investment elements of policies, which will be significantly different from existing premium revenue measures, currently reported in the income
statement.
Profit for insurance contracts under IFRS 17 is represented by the recognition of the services provided to policyholders in the period (release of
the CSM), release from non-economic risk (release of risk adjustment) and the excess of the actual investment return in the period over the effect
of the unwind of the rate used to discount the General Measurement Model liabilities, together with operating variances as appropriate. CSM is
released in line with coverage units that are a measure of the quantity of benefits provided under a contract and the period over which coverage is
provided.
The CSM is released as profit over the coverage period of the insurance contract, reflecting the delivery of services to the policyholder. Under
IFRS 17 insurance contracts are measured under either the General Measurement Model (GMM), the Variable Fee Approach (VFA) for contracts
with direct participating features or the simplified Premium Allocation Approach (PAA). The Group predominantly uses the VFA and GMM,
depending on the specific characteristics of the insurance contracts. The Group makes very limited use of the PAA for some small portfolios of
short duration contracts. Reinsurance contracts held are measured under the GMM.
We estimate that over two-thirds of the CSM at transition is calculated using the VFA and relates to the Group’s with-profits products, the
Group’s flagship critical illness products in Hong Kong and unit-linked products with a low proportion of protection riders. The contracts calculated
using the GMM, include the Group’s non-profit protection business and unit-linked business with a high proportion of protection riders.
The fulfilment cash flows comprise the best estimate of the present value of future cash flows within the contract boundary that are expected
to arise and an explicit risk adjustment for non-financial risk. The discount rate applied to derive the present value of future cash flows is
determined on a bottom-up basis, starting with a liquid risk-free yield curve and adding an illiquidity premium to reflect the characteristics of the
insurance contracts. The risk adjustment reflects the compensation the Group requires for bearing the uncertainty about the amount and timing
of the cash flows from non-financial risk as the Group fulfils insurance contracts, determined by the Group using a confidence level approach.
The fulfilment cash flows are updated each reporting date to reflect current conditions. For contracts with direct participating features which
are accounted for under the VFA, the CSM represents the variable fee to shareholders and it is adjusted to reflect the effect of changes in
economics as well as experience variances and/or assumptions changes that relate to future services. For contracts accounted for under GMM, the
CSM is accreted using the locked-in discount rates and only adjusted to reflect the effect of non-economic experience variances and/or
assumptions changes that relate to future services. The adjustments to the CSM are determined using the locked-in discount rates.
Expected impact on transition (1 January 2022)
The Group is adopting IFRS 17 retrospectively to its 2022 comparatives as required by the standard. As permitted by IFRS 9, the Group is not
planning to restate the 2022 comparatives on initial application of IFRS 9 but the Group is taking advantage of the classification overlay for
selected assets, principally to change the classification of certain debt securities, so that they are valued at amortised cost rather than at fair value
under IAS 39, and certain loans, so that they are valued at fair value instead of the prior amortised cost valuation. Changes from IFRS 9 have an
immaterial impact on the Group’s financial statements.
The adoption of IFRS 17 and the IFRS 9 classification overlay are estimated to increase the Group shareholders’ equity at 1 January 2022 to
between $18.9 – $19.8 billion. This reflects the release of prudent margins from our legacy accounting basis, particularly in Hong Kong, recognition
of the shareholders’ share of the inherited estate within the with-profit funds and the net impact of timing differences in the pattern of profit
recognition. The overall net impact of the IFRS 9 classification overlay at 1 January 2022 is insignificant given the vast majority of the Group’s
financial investments will continue to be carried at fair value through profit or loss under IFRS 9, as currently applied under IAS 39.
The Group is yet to complete production of its 2022 comparatives under the IFRS 17 accounting standard. In addition we continue to review our
IFRS 17 accounting policies and approach to ensure they remain in line with market practice. Therefore the impacts discussed above are subject to
change prior to finalisation of the Group’s financial statements for the year ending 31 December 2023.
Other new accounting pronouncements
In addition to the above, the following new accounting pronouncements have also been issued and are not yet effective but the Group is not
expecting them to have a significant impact on the Group’s consolidated financial statements:
> Amendments to IAS 1 ‘Classification of liabilities as current or non-current’ issued in January 2020 and effective from 1 January 2023. An
exposure draft was issued in November 2021 proposing for this effective date to be delayed to periods starting no earlier than 1 January 2024;
> Amendments to IAS 1 and IFRS Practice Statement 2 ‘Disclosure of accounting policies’ issued in February 2021 and effective from 1 January
2023;
> Amendments to IAS 8 ‘Definition of accounting estimates’ issued in February 2021 and effective from 1 January 2023;
> Amendments to IAS 12 ‘Deferred tax related to assets and liabilities arising from a single transaction’ issued in May 2021 and effective from
1 January 2023;
> Amendments to IFRS 16 ‘Lease liability in a sale and leaseback’ issued in September 2022 and effective from 1 January 2024; and
> Amendments to IAS 1 ‘Non-current liabilities with covenants’ issued in October 2022 and effective from 1 January 2024.
296
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A Basis of preparation and accounting policies / continuedPrudential plc Annual Report 2022 B Earnings performance
B1 Analysis of performance by segment
B1.1 Segment results
2022 $m
2021 $m
2022 vs 2021 %
Note
note (i)
AER
note (i)
CER
note (i)
Continuing operations:
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other note (ii)
Eastspring
Total segment profit
Other income and expenditure unallocated to a segment:
Net investment return and other items
Interest payable on core structural borrowings
Corporate expenditure note (iii)
Total other income (expenditure)
Restructuring and IFRS 17 implementation costs note (iv)
Adjusted operating profit
Short-term fluctuations in investment returns on shareholder-
backed business note (v)
Amortisation of acquisition accounting adjustments
Gain (loss) attaching to corporate transactions
Profit before tax attributable to shareholders
Tax charge attributable to shareholders’ returns
Profit from continuing operations
Loss from discontinued US operations
Profit (loss) for the year
B1.4
B1.4
B1.2
D1.1
B3
D1.2
Attributable to:
Equity holders of the Company
From continuing operations
From discontinued US operations
Non-controlling interests
From continuing operations
From discontinued US operations
368
1,036
343
364
678
1,057
260
4,106
39
(200)
(276)
(437)
(294)
3,375
(1,915)
(10)
11
1,461
(454)
1,007
–
1,007
998
–
998
9
–
9
343
975
446
350
663
932
314
329
969
429
330
646
880
299
4,023
3,882
21
(328)
(298)
(605)
(185)
21
(328)
(280)
(587)
(178)
3,233
3,117
(458)
(5)
(94)
2,676
(462)
2,214
(5,027)
(2,813)
2,192
(4,234)
(2,042)
22
(793)
(771)
(435)
(5)
(91)
2,586
(443)
2,143
(5,027)
(2,884)
2,121
(4,234)
(2,113)
22
(793)
(771)
Profit (loss) for the year
1,007
(2,813)
(2,884)
AER
note (i)
7%
6%
(23)%
4%
2%
13%
(17)%
2%
86%
39%
7%
28%
(59)%
4%
(318)%
(100)%
n/a
(45)%
2%
(55)%
n/a
–
CER
note (i)
12%
7%
(20)%
10%
5%
20%
(13)%
6%
86%
39%
1%
26%
(65)%
8%
(340)%
(100)%
n/a
(44)%
(2)%
(53)%
n/a
–
(54)%
n/a
(53)%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
297
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B1 Analysis of performance by segment continued
B1.1 Segment results continued
2022
2021
2022 vs 2021 %
Basic earnings per share (in cents)
Note
note (i)
Based on adjusted operating profit, net of tax and
non-controlling interest, from continuing operations
Based on profit from continuing operations, net of
non-controlling interest
Based on loss from discontinued US operations, net of
non-controlling interest
B4
B4
B4
100.5¢
36.5¢
AER
note (i)
101.5¢
83.4¢
CER
note (i)
97.7¢
80.6¢
AER
note (i)
CER
note (i)
(1)%
3%
(56)%
(55)%
–¢
(161.1)¢
(161.2)¢
n/a
n/a
Notes
(i)
(ii)
Segment results are attributed to the shareholders of the Group before deducting the amount attributable to the non-controlling interests. This presentation is applied consistently throughout
the document. For definitions of AER and CER refer to note A1.
Adjusted operating profit for growth markets and other includes other items of $211 million (2021: $217 million on an AER basis; $208 million on a CER basis) which in 2022 primarily included
the impact of the adoption of the Risk-Based Capital regime in Hong Kong (as discussed further in note C3.2) partially offset by corporate taxes for life joint ventures and associates.
(iii) Corporate expenditure as shown above is for head office functions.
(iv)
(v)
Restructuring and IFRS 17 implementation costs include those incurred in insurance and asset management operations of $(137) million (2021: $(101) million on an AER basis), largely
comprising the costs of Group-wide projects including the implementation of IFRS 17, reorganisation programmes and initial costs of establishing new business initiatives and operations.
In general, the short-term fluctuations reflect the value movements on shareholders’ assets and policyholder liabilities (net of reinsurance) arising from market movements in the year. In 2022,
rising interest rates and widening credit spreads across a number of the Group’s life insurance markets led to unrealised bond losses which more than offset the impact of higher discount rates on
policyholder liabilities. The interest rates rises in 2022 were more substantial than that seen in 2021. Short-term fluctuations also reflect losses on equities backing shareholder-backed business
following market movements in 2022 (2021: equity gains) and the impact of refinements to the reserving basis in Hong Kong following the adoption of the Risk-Based Capital regime (as
discussed further in note C3.2).
B1.2 Determining operating segments and performance measure of operating segments
Operating segments
The Group’s operating and reported segments for financial reporting purposes are defined and presented in accordance with IFRS 8 ‘Operating
Segments’ on the basis of the management reporting structure and its financial management information. Under the Group’s management and
reporting structure, its chief operating decision maker is the Group Executive Committee (GEC), chaired by the Chief Executive Officer.
Performance measures for insurance operations are analysed by geographical areas for the larger business units of CPL, Hong Kong, Indonesia,
Malaysia and Singapore, with Eastspring, the asset management business, also analysed separately. CPL is managed jointly with CITIC, a Chinese
state-owned conglomerate. All other Asia and Africa insurance operations are included in the ‘Growth markets and other’ segment alongside
other amounts that are not included in the segment profit of an individual business unit, including tax on life joint ventures and associates and
other items that are not representative of the underlying segment trading for the period.
Operations and transactions which do not form part of any business unit are reported as ‘Unallocated to a segment’ and generally comprise
head office functions, as presented in the additional segmental analysis in note B1.4.
Performance measure
The performance measure of operating segments utilised by the Group is IFRS operating profit based on longer-term investment returns
(adjusted operating profit) as described below. This measurement basis distinguishes adjusted operating profit from other constituents of total
profit or loss for the year as follows:
> Short-term fluctuations in investment returns on shareholder-backed business;
> Amortisation of acquisition accounting adjustments arising on the purchase of business; and
> Gain or loss on corporate transactions.
Determination of adjusted operating profit for investment and liability movements
With-profits business
For with-profits business in Hong Kong, Singapore and Malaysia, the adjusted operating profit reflects the shareholders’ share in the bonuses
declared to policyholders. Value movements in the underlying assets of the with-profits funds only affect the shareholder results through indirect
effects of investment performance on declared policyholder bonuses and therefore, do not affect directly the determination of adjusted
operating profit.
Assets and liabilities held within unit-linked funds
The policyholder unit liabilities are directly reflective of the underlying asset value movements. Accordingly, the adjusted operating profit reflects
the current year value movements in both the unit liabilities and the backing assets, which offset one another.
Other shareholder-backed long-term insurance business
In the case of other shareholder-financed business, the measurement of adjusted operating profit reflects that, for the long-term insurance
business, assets and liabilities are held for the longer term. For this business the Group believes trends in underlying performance are better
understood if the effects of short-term fluctuations in market conditions, such as changes in interest rates or equity markets, are excluded. In
determining the profit on this basis, the following key elements are applied to the results of the Group’s shareholder-financed businesses.
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B Earnings performance / continuedPrudential plc Annual Report 2022 (a) Policyholder liabilities that are sensitive to market conditions
Under IFRS, the degree to which the carrying values of liabilities to policyholders are sensitive to current market conditions varies between
business units depending upon the nature of the ‘grandfathered’ measurement basis. Taiwan and India apply US GAAP, whose policyholder
liabilities are not sensitive to market movements as they are locked in at policy inception.
Movements in liabilities for some types of business do require bifurcation between the elements that relate to longer-term market condition
and short-term effects to ensure that at the net level (ie after allocated investment return and charge for policyholder benefits) the adjusted
operating profit reflects longer-term market returns.
For certain non-participating business, for example in Hong Kong, the economic features are more akin to asset management products with
policyholder liabilities reflecting asset shares over the contract term. Consequently, for these products, the charge for policyholder benefits in the
adjusted operating profit reflects the asset share feature that is calculated assuming a longer-term return assumption rather than volatile
movements that would otherwise be reflected if the IFRS balance sheet reserving basis was applied.
For other types of non-participating business, expected longer-term investment returns and interest rates are used to determine the movement
in policyholder liabilities for determining adjusted operating profit. This ensures assets and liabilities are reflected on a consistent basis.
(b) Assets backing other shareholder-backed long-term insurance business
Except in the case of assets backing liabilities which are directly matched (such as unit-linked business) adjusted operating profit for assets backing
shareholder-financed business is determined on the basis of expected longer-term investment returns. Longer-term investment returns comprise
actual income receivable for the year (interest/dividend income) and longer-term capital returns, determined for debt and equity-type securities
on the basis described below. The difference between the actual investment returns in the reporting period and the longer-term investment
returns is recognised within short-term fluctuations in investment returns.
Debt securities and loans
As a general principle, for debt securities and loans, the longer-term investment returns comprise the interest receivable for the year and the
amortisation of interest-related realised gains and losses to the date when sold securities would have otherwise matured (or a suitable proxy for
this period). All unrealised gains and losses are treated as a component of short-term investment fluctuations. Consideration is given to the need
to recognise an expected longer-term level of defaults for the securities within the longer-term investment returns, based on past performance
and having regard to the credit quality of the portfolio, with any difference with actual credit-related realised losses arising in the year being
included in short-term fluctuations. If, under this analysis, realised gains and losses are principally considered to be interest related with no
significant credit-related losses based on past performance, then all realised gains and losses to date for these operations are treated as interest
related and amortised to adjusted operating profit over the period to the date those securities would otherwise have matured and no separate
charge to longer-term investment returns for credit defaults is made.
For Group debt securities at 31 December 2022, the level of interest-related realised gains and losses on previously sold bonds that had yet to be
amortised to adjusted operating profit from short-term investment fluctuations was a net loss of $(98) million (2021: net gain of $515 million).
Equity-type securities
For equity-type securities that comprise both the Group’s investments in direct equities and all of its collective investment scheme holdings, the
longer-term rates of return are estimates of the long-term trend investment returns for income and capital having regard to past performance,
current trends and future expectations. Different rates apply to different categories of the securities within this category.
For insurance operations, investments in equity-type securities held for non-linked shareholder-backed business amounted to $7,089 million as
at 31 December 2022 (31 December 2021: $6,073 million). For Group’s investments in direct equities, the longer-term rates of return applied in
2022 ranged from 8.7per cent to 16.9 per cent (2021: 7.3 per cent to 16.9 per cent). For Group’s collective investment scheme holdings, the
longer-term rates of return applied ranged from 3.5 per cent to 10.7 per cent (2021: 3.6 per cent to 11.0 per cent) representing the range across
business units of the weighted average expected longer-term return rates determined by reference to the underlying asset mix of the funds for
each business unit. These rates are broadly stable from year to year but may be different between regions, reflecting, for example, differing
expectations of inflation in each business unit.
The assumptions are for the returns expected to apply in equilibrium conditions. The assumed rates of return do not reflect any cyclical
variability in economic performance and are not set by reference to prevailing asset valuations. The longer-term investment returns for the
insurance joint ventures and associates accounted for using the equity method are determined on a similar basis as the other insurance
operations described above.
Derivative value movements
Generally, derivative value movements are excluded from adjusted operating profit. The exception is where the derivative value movements
broadly offset changes in the accounting value of other assets and liabilities included in adjusted operating profit.
Other non-insurance businesses
For these businesses, the determination of adjusted operating profit reflects the underlying economic substance of the arrangements. Generally,
realised gains and losses are included in adjusted operating profit with temporary unrealised gains and losses being included in short-term
fluctuations. In some instances, realised gains and losses on derivatives and other financial instruments are amortised to adjusted operating profit
over a time period that reflects the underlying economic substance of the arrangements.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B1 Analysis of performance by segment continued
B1.3 Revenue
Premiums and annuity considerations for conventional and other protection type insurance policies are recognised as revenue when due.
Premiums and annuity considerations for linked policies and other investment type policies are recognised as revenue when received or, in the case
of unitised or unit-linked policies, when units are issued. These amounts exclude premium taxes and similar duties where Prudential collects and
settles taxes borne by the policyholder.
Policy fees charged on linked policies for mortality, morbidity, asset management and policy administration are recognised when related
services are provided.
(a) Analysis of total revenue by segment
Insurance operations note (i)
2022 $m
Hong Kong
Indonesia
Malaysia
Singapore
Growth
markets
and other
Inter-
segment
elimination
Eastspring
Gross premiums earned
Outward reinsurance premiums
8,792
(1,494)
1,590
(34)
1,843
(58)
6,540
(299)
4,579
(58)
Earned premiums, net of
reinsurance
Other income note (ii)
Total external revenue note (iii)
Intra-group revenue
Interest income note B1.3(b)
Dividend and other investment
income
Investment appreciation
(depreciation)
7,298
65
7,363
–
996
1,556
12
1,568
–
83
1,785
–
1,785
–
217
6,241
15
6,256
–
744
4,521
116
4,637
1
628
689
77
183
576
107
(23,704)
(70)
(365)
(7,498)
(2,876)
Total revenue, net of reinsurance
(14,656)
1,658
1,820
78
2,497
–
–
–
330
330
199
4
1
(21)
513
Total
segment
23,344
(1,943)
21,401
538
21,939
–
2,672
1,633
Unallocated
to a
segment
–
–
–
1
1
–
50
25
Total
23,344
(1,943)
21,401
539
21,940
–
2,722
1,658
(34,534)
(5)
(34,539)
–
–
–
–
–
(200)
–
–
–
(200)
(8,290)
71
(8,219)
Insurance operations note (i)
2021 $m
Hong Kong
Indonesia
Malaysia
Singapore
Growth
markets
and other
Inter-
segment
elimination
Eastspring
Gross premiums earned
Outward reinsurance premiums
10,032
(1,557)
1,724
(43)
1,900
(47)
6,246
(137)
4,315
(60)
Earned premiums, net of
reinsurance
Other income note (ii)
Total external revenue note (iii)
Intra-group revenue
Interest income note B1.3(b)
Dividend and other investment
income
Investment appreciation
(depreciation)
8,475
52
8,527
–
934
679
57
1,681
12
1,693
–
87
74
34
1,853
–
1,853
–
220
6,109
22
6,131
–
707
4,255
117
4,372
1
618
160
506
86
(300)
(29)
(361)
–
–
–
437
437
217
3
–
8
–
–
–
–
–
(218)
–
–
–
Total
segment
24,217
(1,844)
22,373
640
23,013
–
2,569
Unallocated
to a
segment
–
–
–
1
1
–
1
Total
24,217
(1,844)
22,373
641
23,014
–
2,570
1,505
19
1,524
(591)
(17)
(608)
Total revenue, net of reinsurance
10,197
1,888
1,933
7,315
4,716
665
(218)
26,496
4
26,500
Notes
(i)
(ii)
CPL, Prudential’s life business in the Chinese Mainland, is a joint venture with CITIC and is accounted for using the equity method under IFRS. The Group’s share of its results is presented in a
single line within the Group’s profit before tax on a net of related tax basis, and therefore not shown in the analysis of revenue line items above. Revenue from external customers of CPL
(Prudential’s share) in 2022 is $2,948 million (2021: $3,052 million). Further financial information on CPL is provided in note D6.3.
Other income comprises income from external customers and consists primarily of revenue from the Group’s asset management business of $330 million (2021: $437 million). The remaining
other income consists primarily of policy fee revenue from external customers and asset management rebate revenue from external fund managers. Also included in other income is fee income
on financial instruments that are not held at FVTPL of $2 million (2021: $1 million).
(iii) Due to the nature of the business of the Group, there is no reliance on any major customers. Of the Group’s markets, only Hong Kong and Singapore have external revenue that exceeds
10 per cent of the Group total for the years presented.
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B Earnings performance / continuedPrudential plc Annual Report 2022
(b) Additional analysis of investment return
Investment return included in the income statement principally comprises interest income, dividends, investment appreciation and depreciation
(realised and unrealised gains and losses) on investments designated as fair value through profit or loss, and realised gains and losses (including
impairment losses) on items held at amortised cost and/or designated as AFS. Movements in unrealised appreciation or depreciation of securities
designated as AFS are recorded in other comprehensive income. Interest income is recognised as it accrues. Dividends on equity securities are
recognised on the ex-dividend date and rental income is recognised on an accrual basis.
Net realised and unrealised gains (losses) on securities at fair value through profit or loss note (i)
Net realised and unrealised gains (losses) on derivatives at fair value through profit or loss note (i)
Net realised (losses) on loans note (i)
Interest income note (ii)
Dividend income
Other investment returns (including foreign exchange gains and losses)
Investment return
2022 $m
2021 $m
(30,097)
(4,487)
(14)
2,722
1,531
186
(30,159)
624
(943)
(2)
2,570
1,496
(259)
3,486
Notes
(i)
(ii)
Net realised gains and losses on the Group’s investments for 2022 recognised in the income statement amounted to a net loss of $(9.3) billion (2021: a net gain of $6.0 billion). The movement in
the net amount of realised and unrealised gains and losses on the Group’s investments from 2021 to 2022 primarily reflects the effects of significant increases in interest rates during the year
compared with 2021 as well as equity market falls during the year.
Interest income includes $362 million (2021: $280 million) in respect of financial assets not at fair value through profit and loss.
The overall financial strength of Prudential and the results, both current and future, of the insurance business are in part dependent upon the
quality and performance of the various investment portfolios. Prudential’s insurance investments support a range of businesses operating in
many geographic areas. Each of the operations formulates a strategy based on the nature of its underlying liabilities, its level of capital and its
local regulatory requirements. Prudential’s insurance business’s investments, excluding assets to cover linked liabilities and those attributable to
external unit holders of consolidated investment funds, are largely held by Prudential’s Singapore and Hong Kong operations.
All investments are carried at fair value in the statement of financial position with fair value movements, which are volatile from period to
period, recorded in the income statement, except for loans and receivables, which are generally carried at amortised cost (unless designated at fair
value through profit or loss), the Group’s retained interest in Jackson and certain centrally held debt securities, which are designated as available-
for-sale and therefore the changes in unrealised fair value are booked in other comprehensive income. Subject to the effect of the exceptions, the
year-on-year changes in investment returns primarily reflect the generality of overall market movements for equities and debt securities. In
addition, foreign exchange rates affect the USD value of the translated income. Consistent with the treatment applied for other items of income
and expenditure, investment return for operations not using USD as functional currency is translated at average exchange rates. The year-on-year
movements in investment return of the Group mainly reflect the cumulative impact from the changes in interest rates on bond asset values and in
the performance of the equity markets.
Allocation of investment return between policyholders and shareholders
Investment return is attributable to policyholders and shareholders. A key feature of the accounting policies under IFRS is that the investment
return included in the income statement relates to all investment assets of the Group, irrespective of whether the return is attributable to
shareholders, policyholders or the unallocated surplus of with-profits funds, the latter two of which have no direct impact on shareholders’ profit.
The table below provides a breakdown of the investment return attributable to each type of business.
Policyholder returns
Assets backing unit-linked liabilities
With-profits business
Shareholder returns
Total investment return
2022 $m
2021 $m
(2,574)
(21,287)
(23,861)
(6,298)
(30,159)
516
2,700
3,216
270
3,486
Policyholder returns
Investment returns allocated to policyholders are those from investments in which shareholders have no direct economic interest, namely
unit-linked business for which the investment returns are wholly attributable to policyholders and with-profits business in which the shareholders’
economic interest (and the basis of recognising IFRS basis profits) is restricted to a share of the actuarially determined surplus for distribution.
Except for this surplus, the investment returns of the with-profits funds are attributable to policyholders (through the asset-share liabilities) or the
unallocated surplus, which is accounted for as a liability under IFRS 4 as shown in note C3.
Shareholder returns
For shareholder-backed non-with-profits business, the investment returns are generally not directly attributable to policyholders and, therefore,
impact shareholders’ profit directly.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B1 Analysis of performance by segment continued
B1.4 Additional segmental analysis of profit after tax
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other note (i)
Eastspring
Total segment
Unallocated to a segment (central operations) note (ii)
Total profit after tax
2022 $m
2021 $m
(144)
(211)
243
252
406
881
234
1,661
(654)
1,007
278
1,068
362
265
394
434
284
3,085
(871)
2,214
Notes
(i)
(ii)
The Growth markets and other segment comprises all other Asia and Africa insurance businesses alongside other amounts that are not included in the segment profit of an individual business
unit, including tax on life joint ventures and associates and other items that are not representative of the underlying segment trading for the year, in line with the presentation used by
management when assessing the performance of the underlying segments internally.
Comprising other income and expenditure of $(437) million (2021: $(605) million) attributable to the head office functions, $(294) million (2021: $(185) million) of restructuring and IFRS 17
implementation costs, $19 million (2021: $(25) million) of short-term fluctuations on investment returns in central operations, $62 million (2021: $(35) million) of corporate transactions and
related tax of $(4) million (2021: $(21) million).
B2 Acquisition costs and other expenditure
Acquisition costs incurred for insurance policies
Acquisition costs deferred
Amortisation of acquisition costs
Administration costs and other expenditure (net of other reinsurance commission)
Movements in amounts attributable to external unit holders of consolidated investment funds
Total acquisition costs and other expenditure
2022 $m
2021 $m
(2,325)
1,002
(475)
(3,100)
1,018
(3,880)
(2,089)
848
(343)
(3,128)
152
(4,560)
Notes
(i)
(ii)
Administration costs and other expenditure include fee expenses relating to financial liabilities held at amortised cost and are part of the determination of the effective interest rate.
Total depreciation and amortisation expenses are included in ‘Acquisition costs incurred for insurance policies’, ‘Administration costs and other expenditure (net of other reinsurance commission)’
and ‘Amortisation of acquisition costs’ and relate primarily to amortisation of DAC of insurance contracts and distribution rights intangibles. The segmental analysis of depreciation and
amortisation is shown below.
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Eastspring
Total segment
Unallocated to a segment (central operations)
Total depreciation and amortisation
2022 $m
2021 $m
(147)
(61)
(70)
(202)
(461)
(13)
(954)
(26)
(980)
(123)
(51)
(56)
(162)
(390)
(17)
(799)
(31)
(830)
(iii)
Interest expense is included in ‘Administration costs and other expenditure (net of other reinsurance commission)’ other than interest on core structural borrowings that is presented separately
on the income statement as ‘Finance costs: interest on core structural borrowings of shareholder-financed businesses’. Interest expense of the central operations amounted to $(209) million
(2021: $(331) million) comprising $(200) million (2021: $(328) million) of interest on core structural borrowings, $(2) million of interest on lease liabilities (2021: $(3) million) and $(7) million
(2021: nil) of interest on other operational borrowings. Core structural borrowings and operational borrowings (other than lease liabilities) represent financial liabilities that are not classified at
fair value through profit and loss.
The ‘Total segment’ interest expense is $(16) million (2021: $(10) million) of which $(11) million arises in the Hong Kong segment (2021: $(3) million) with the remainder spread broadly evenly
across the other markets. Included within interest expense is $(7) million (2021: $(10) million) of interest on lease liabilities and is distributed evenly across segments.
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B Earnings performance / continuedPrudential plc Annual Report 2022
B2.1 Staff and employment costs
The average number of staff employed by the Group during the years shown was:
Asia and Africa operations note (i)
Head office function
Total continuing operations
Discontinued US operations note (ii)
Total Group
2022
13,685
511
14,196
–
14,196
2021
13,237
600
13,837
3,306
17,143
Notes
(i)
(ii)
The Asia and Africa operations staff numbers above exclude 744 (2021: 440) commission-based sales staff who have an employment contract with the Group.
Average staff numbers of the discontinued US operations were for the period up to the demerger in September 2021.
The costs of employment were:
Wages and salaries
Social security costs
Defined contribution schemes
Total Group
2022 $m
Group total
Continuing
1,018
41
40
1,099
973
42
42
1,057
2021 $m
Discontinued
US operations
511
22
29
562
Group total
1,484
64
71
1,619
B2.2 Share-based payment
The Company offers discretionary share awards to certain key employees and all-employee share plans in the UK and a number of Asia locations.
The compensation expense charged to the income statement is primarily based upon the fair value of the awards granted, the vesting period and
the vesting conditions. The Company has established trusts to facilitate the delivery of Prudential plc shares under some of these plans. The cost
to the Company of acquiring these newly issued shares held in trusts is shown as a deduction from shareholders’ equity.
(a) Description of the plans
The Group operates a number of share award plans that provides Prudential plc shares, or ADRs, to participants upon vesting. The plans in
operation include the Prudential Long Term Incentive Plan, the Prudential Annual Incentive Plan, savings-related share option schemes, share
purchase plans and deferred bonus plans. Where Executive Directors participate in these plans, details about those schemes are provided in the
Directors’ remuneration report. The following information is provided about plans in which the Executive Directors do not participate:
Share scheme note
Description
Prudential Asia and Africa (PAA)
Long-Term Incentive Plan (PAA LTIP)
The PAA LTIP provides eligible employees with conditional awards. Awards are discretionary and
vest after one, two or three years subject to the employee being in employment. Vesting of
awards may also be subject to performance conditions. All awards are generally made in
Prudential shares. In countries where share awards are not feasible for reasons including
securities and/or tax considerations, awards will be replaced by the cash value of the shares that
would otherwise have vested.
Prudential Agency Long-Term Incentive
Plan (LTIP)
Certain agents are eligible to be granted awards in Prudential shares under the Prudential
Agency LTIP. These awards are structured in a similar way to the PAA LTIP described above with
most awards granted with a three-year vesting period.
Restricted Share Plan (RSP)
Deferred bonus plans
Savings-related share option schemes
Share purchase plans
The Company operates the RSP for certain employees. Awards under this plan are discretionary,
and the vesting of awards may be subject to performance conditions. All awards are made in
Prudential shares.
The Company operates a number of deferred bonus plans including the Group Deferred Bonus
Plan (GDBP) and the Prudential Deferred Bonus Plan. There are no performance conditions
attached to deferred share awards made under these arrangements.
Eligible agents in certain business units are able to participate in the International Savings-
Related Share Option Scheme for Non-Employees, which is similar to the HMRC-approved Save
As You Earn (SAYE) share option scheme in the UK.
Eligible employees outside the UK are invited to participate in arrangements similar to the
Company’s HMRC-approved UK Share Incentive Plan, which allows the purchase of
Prudential plc shares. Staff based in Asia and Africa are eligible to participate in the Prudential
All Employee Share Purchase Plan.
Note
The total numbers of securities available for issue under these schemes are disclosed in note I(vii) within additional unaudited financial information.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B2 Acquisition costs and other expenditure continued
(b) Outstanding options and awards
The following table shows the movement in outstanding options and awards under the Group’s share-based compensation plans:
Options outstanding under SAYE schemes
Awards outstanding under
incentive plans
2022
2021
2022
2021
Number
of options
millions
Weighted
average
exercise
price
£
Number
of options
millions
Weighted
average
exercise
price
£
Number of awards
millions
2.0
0.5
–
(0.3)
–
(0.3)
–
–
1.9
0.3
11.61
7.37
–
11.17
10.84
12.67
13.00
–
10.43
12.48
2.3
0.4
0.1
(0.7)
–
(0.1)
–
–
2.0
0.2
11.86
11.90
11.77
12.58
11.11
11.51
12.88
–
11.61
12.26
24.6
6.5
–
(7.2)
(1.1)
(0.1)
(1.7)
–
21.0
40.6
5.2
0.7
(8.6)
(3.1)
(0.1)
(0.6)
(9.5)
24.6
Balance at beginning of year:
Granted
Modification
Exercised
Forfeited
Cancelled
Lapsed/Expired
Jackson awards derecognised on demerger note
Balance at end of year
Options immediately exercisable at end of year
Note
On demerger of Jackson from the Prudential Group, outstanding share awards for Prudential plc participants were adjusted to receive the demerger dividend in the form of additional Prudential plc
shares, to be released on the same timetable and to the same extent as their original share awards. In the case of the International Savings-Related Share Option Scheme for Non Employees the
adjustments to outstanding options were confirmed as being fair and reasonable by an independent financial adviser in accordance with the rules of that plan and the Hong Kong Stock Exchange
Listing Rules. Employees of Jackson were granted replacement awards over Jackson shares, in exchange for existing Group awards outstanding under incentive plans. As designated replacement awards
were granted, no cancellation was recognised in respect of the original awards. As the replacement awards are an obligation of Jackson these awards were derecognised by the Group on demerger.
The weighted average share price of Prudential plc for 2022 was £10.33 (2021: £14.31).
The following table provides a summary of the range of exercise prices for Prudential plc options outstanding at 31 December:
Number outstanding
millions
Outstanding
Weighted average
remaining
contractual life
years
2022
2021
2022
2021
0.5
0.4
0.8
0.1
0.1
1.9
–
0.4
1.2
0.2
0.2
2.0
4.1
2.2
2.4
1.4
0.4
2.6
–
3.2
2.7
1.6
1.4
2.6
Exercisable
Weighted average
exercise prices
£
2022
7.37
9.64
11.48
13.94
14.55
10.43
2021
–
9.64
11.38
13.94
14.55
11.61
Number exercisable
millions
2022
2021
–
–
0.2
–
0.1
0.3
–
–
0.1
0.1
–
0.2
Weighted average
exercise prices
£
2022
–
–
11.12
–
14.55
12.48
2021
–
–
11.04
13.94
–
12.26
Between £7 and £8
Between £9 and £10
Between £11 and £12
Between £13 and £14
Between £14 and £15
Total
The years shown above for weighted average remaining contractual life include the time period from end of vesting period to expiration of
contract.
(c) Fair value of options and awards
The fair value amounts estimated on the date of grant relating to all options and awards were determined by using the following assumptions:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected option life (years)
Weighted average exercise price (£)
Weighted average share price at grant date (£)
Weighted average fair value at grant date (£)
Prudential
LTIP (TSR)
–
33.64
2.79
–
–
11.15
2.09
2022
2021
SAYE
options
1.11
25.68
3.97
4.52
7.37
9.54
3.45
Other
awards
–
–
–
–
–
–
11.11
Prudential
LTIP (TSR)
SAYE
options
–
26.69
0.36
–
–
15.11
7.70
0.81
22.31
1.18
4.50
11.90
14.76
4.13
Other
awards
–
–
–
–
–
–
14.79
304
prudentialplc.com
B Earnings performance / continuedPrudential plc Annual Report 2022
The compensation costs for all awards and options are recognised in net income over the plans’ respective vesting periods. The Group uses the
Black-Scholes model to value all options, and financial equivalence to value all awards other than those which have TSR performance conditions
attached (some Prudential LTIP and RSP awards) for which the Group uses a Monte Carlo model in order to allow for the impact of these
conditions. These models are used to calculate fair values for share options and awards at the grant date based on the quoted market price of the
stock at the measurement date, the amount, if any, that the employees are required to pay, the dividend yield, expected volatility, risk-free interest
rates and exercise prices.
For all options and awards, the expected volatility is based on the market implied volatilities as quoted on Bloomberg. The Prudential specific
at-the-money implied volatilities are adjusted to allow for the different terms and discounted exercise price on SAYE options by using information
on the volatility surface of the FTSE 100.
Risk-free interest rates are taken from swap spot rates with projection terms matching the corresponding vesting periods. For awards with a TSR
condition, volatilities and correlations between Prudential and a basket of 12 competitor companies is required. For grants in 2022, the average
volatility for the basket of competitors was 26.46 per cent (2021: 23.62 per cent). Correlations for the basket are calculated for each pairing from
the log of daily TSR returns for the three years prior to the valuation date. Market implied volatilities are used for both Prudential and the basket of
competitors. Changes to the subjective input assumptions could materially affect the fair value estimate.
Other awards, without market performance conditions or exercise price, are valued based on grant date share price.
(d) Share-based payment expense charged to the income statement
The total expense recognised in 2022 in the consolidated financial statements relating to share-based compensation is $104 million (2021:
$100 million), of which $97 million (2021: $94 million) is accounted for as equity-settled.
The Group had $27 million of liabilities at 31 December 2022 (31 December 2021: $32 million) relating to share-based payment awards
accounted for as cash-settled.
B2.3 Key management remuneration
Key management constitutes the Directors of Prudential plc and other non-Director members of the GEC, as they have authority and
responsibility for planning, directing and controlling the activities of the Group.
Total key management remuneration is analysed in the following table:
Salaries and short-term benefits
Post-employment benefits
Share-based payments
Payments on separation
2022 $m
2021 $m
22.5
1.0
15.4
1.0
39.9
29.3
1.4
14.0
23.5
68.2
The share-based payments charge comprises $6.7 million (2021: $7.5 million), which is determined in accordance with IFRS 2 ‘Share-based
Payment’ (see note B2.2) and $8.7 million (2021: $6.5 million) of deferred share awards.
Additional details on the Directors’ emoluments, retirement benefits and other payments are given in the Directors’ remuneration report. In
addition to the total amounts disclosed of remuneration paid to the Directors in 2021, are amounts paid to those directors who stepped down
from the Board in 2021 being $102,000 to Kai Nargolwala and $203,000 to Fields Wicker-Miurin. This is as disclosed in the 2021 Annual Report.
B2.4 Fees payable to the auditor
Audit of the Company’s annual accounts
Audit of subsidiaries pursuant to legislation
Audit fees payable to the auditor
Audit-related assurance services note (i)
Other assurance services
Services relating to corporate finance transactions
Non-audit fees payable to the auditor
Total fees payable to the auditor
Analysed into:
Fees payable to the auditor attributable to continuing operations:
One-off non-audit services associated with demerger and public offering note (ii)
Other audit and non-audit services
Fees payable to the auditor attributable to discontinued US operations
2022 $m
2021 $m
2.3
4.4
6.7
3.5
0.7
–
4.2
2.4
5.9
8.3
4.5
1.1
1.6
7.2
10.9
15.5
–
10.9
10.9
–
10.9
1.9
11.3
13.2
2.3
15.5
Notes
(i)
(ii)
Of the audit-related assurance service fees of $3.5 million in 2022 (2021: $4.5 million), $0.9 million (2021: $0.6 million) relates to services that are required by law and regulation.
Of the $1.9 million one-off non-audit services fees associated with the demerger of the US operations and the public offering in Hong Kong in 2021, $0.1 million was for audit-related assurance
and $0.1 million for other assurance services required by law and regulation.
305
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B3 Tax charge
Prudential is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of estimation and
judgement. Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable amounts
for the current year and adjustments made in relation to prior years. The positions taken in tax returns where applicable tax regulation is subject to
interpretation are recognised in full in the determination of the tax charge in the consolidated financial statements if the Group considers that it is
probable that the taxation authority will accept those positions. Otherwise, provisions are established based on the likely amount of the liability, or
recovery, by providing for the single best estimate of the most likely outcome or the weighted average expected value where there are multiple
outcomes.
The total tax charge includes tax expense attributable to both policyholders and shareholders. The tax expense attributable to policyholders
comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain jurisdictions, life insurance companies are taxed
on both their shareholders’ profits and on their policyholders’ insurance and investment returns on certain insurance and investment products.
Although both types of tax are included in the total tax charge in the Group’s Consolidated income statement, they are presented separately in the
Consolidated income statement to provide the most relevant information about tax that the Group pays on its profits.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 ‘Income Taxes’ does not require all
temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of subsidiaries where
the Group is able to control the timing of the distribution and the temporary difference created is not expected to reverse in the foreseeable future.
Deferred tax assets are only recognised when it is more likely than not that future taxable profits will be available against which these losses can be
utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled, based on tax
rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period.
B3.1 Total tax charge by nature
The total tax charge in the income statement is as follows:
Attributable to shareholders:
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Eastspring
Total segment
Unallocated to a segment (central operations)
Tax charge attributable to shareholders
Attributable to policyholders:
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Tax charge attributable to policyholders
Total tax charge
2022 $m
2021 $m
(52)
(60)
(90)
(78)
(144)
(26)
(450)
(4)
(454)
(56)
(5)
–
44
(4)
(21)
(475)
(40)
(74)
(71)
(67)
(159)
(30)
(441)
(21)
(462)
(79)
4
(2)
(261)
(4)
(342)
(804)
Profit before tax includes Prudential’s share of profit after tax from the joint ventures and associates that are equity-accounted for. Therefore, the
actual tax charge in the income statement does not include tax arising from the results of joint ventures and associates including CPL.
The reconciliation of the expected to actual tax charge attributable to shareholders is provided in B3.2 below. The tax charge attributable to
policyholders of $(21) million (2021: $(342) million) above is equal to the profit before tax attributable to policyholders as a result of accounting
for policyholder income after the deduction of expenses and movement in unallocated surpluses on a post-tax basis. The reduction in the tax
charge attributable to policyholders results from the deferred tax impact of policyholder liability movements caused by adverse market
movements in 2022, primarily in Singapore.
306
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B Earnings performance / continuedPrudential plc Annual Report 2022 The total tax charge comprises:
Current tax expense:
Corporation tax
Adjustments in respect of prior years
Total current tax charge
Deferred tax arising from:
Origination and reversal of temporary differences
Adjustment in respect of a tax loss, tax credit or temporary difference from a prior year
Total deferred tax credit (charge)
Total tax charge
2022 $m
2021 $m
(474)
(7)
(481)
4
2
6
(475)
(405)
6
(399)
(388)
(17)
(405)
(804)
B3.2 Reconciliation of shareholder effective tax rate
In the reconciliation below, the expected tax rate reflects the corporation tax rates that are expected to apply to the taxable profit or loss for the
period. It reflects the corporation tax rates of each jurisdiction weighted by reference to the amount of profit or loss contributing to the aggregate
result.
2022
2021
Tax
attributable to
shareholders
$m
Percentage
impact
on ETR
%
Tax
attributable to
shareholders
$m
Percentage
impact
on ETR
%
Adjusted operating profit
Non-operating result note (i)
Profit before tax
Tax charge at the expected rate
Effects of recurring tax reconciliation items:
Income not taxable or taxable at concessionary rates note (ii)
Deductions and losses not allowable for tax purposes note (iii)
Items related to taxation of life insurance businesses note (iv)
Deferred tax adjustments including unrecognised tax losses note (v)
Effect of results of joint ventures and associates note (vi)
Irrecoverable withholding taxes note (vii)
Other
Total (charge) credit on recurring items
Effects of non-recurring tax reconciliation items:
Adjustments to tax charge in relation to prior years
Movements in provisions for open tax matters note (viii)
Impact of changes in local statutory tax rates
Adjustments in relation to business disposals and corporate transactions
Total (charge) credit on non-recurring items
Total actual tax charge
Analysed into:
Tax charge on adjusted operating profit
Tax credit on non-operating result note (i)
Actual tax rate on:
Adjusted operating profit:
Including non-recurring tax reconciling items note (ix)
Excluding non-recurring tax reconciling items
Total profit note (ix)
20%
(4)%
13%
(7)%
3%
0%
4%
0%
9%
0%
3%
0%
(1)%
2%
31%
3,375
(1,914)
1,461
(287)
61
(196)
108
(45)
3
(55)
(15)
(139)
1
(40)
–
11
(28)
(454)
(614)
160
18%
17%
31%
3,233
(557)
2,676
(539)
63
(92)
177
(111)
80
(60)
(8)
49
(11)
47
6
(14)
28
(462)
(548)
86
17%
18%
17%
20%
(2)%
3%
(7)%
4%
(3)%
2%
1%
(2)%
0%
(2)%
0%
1%
(1)%
17%
307
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B3 Tax charge continued
B3.2 Reconciliation of shareholder effective tax rate continued
Notes
(i)
‘Non-operating result’ is used to refer to items excluded from adjusted operating profit and includes short-term investment fluctuations in investment returns on shareholder-backed business,
corporate transactions and amortisation of acquisition accounting adjustments. The tax charge on non-operating result is calculated using the tax rates applicable to investment profit or loss
recorded in the non-operating result for each entity, and then adjusting for any discrete items included in the total tax charge that relate specifically to the amounts (other than investment
related profit or loss) included in the non-operating result. The difference between this tax on non-operating result and the tax charge calculated on profit before tax is the tax charge on adjusted
operating profit.
Income not taxable or taxable at concessionary rates primarily relates to non-taxable investment income in Malaysia and Singapore.
(ii)
(iii) Deductions and losses not allowable for tax purposes primarily relates to non-deductible investment losses in Growth markets.
(iv)
(v)
(vi)
Items related to taxation of life insurance businesses primarily relates to Hong Kong where the taxable profit is computed as 5 per cent of net insurance premiums.
The unrecognised tax losses reconciling amount reflects losses arising where it is unlikely that relief for the losses will be available in future years.
Profit before tax includes Prudential’s share of profit after tax from the joint ventures and associates. Therefore, the actual tax charge does not include tax arising from profit or loss of joint
ventures and associates and is reflected as a reconciling item.
(vii) The Group incurs withholding tax on remittances received from certain jurisdictions and on certain investment income. Where these withholding taxes cannot be offset against corporate income
tax or otherwise recovered, they represent a cost to the Group. Irrecoverable withholding tax on remittances is included in Other operations and is not allocated to any segment. Irrecoverable
withholding tax on investment income is included in the relevant segment where the investment income is reflected.
(viii) The statement of financial position contains the following provisions in relation to open tax matters:
Balance at 1 Jan
Movements in the current year included in tax charge attributable to shareholders
Other movements (including interest arising on open tax matters and amounts included in the Group’s share of profits from joint
ventures and associates, net of related tax)
Balance at 31 Dec
2022 $m
(42)
(40)
3
(79)
(ix)
The actual tax rates of the relevant business operations are shown below:
2022 %
Tax rate on adjusted operating profit
Tax rate on profit before tax
Tax rate on adjusted operating profit
Tax rate on profit before tax
Hong
Kong
6%
(33)%
Hong
Kong
5%
4%
Indonesia
Malaysia
Singapore
20%
20%
26%
26%
16%
16%
2021 %
Indonesia
Malaysia
Singapore
17%
17%
21%
21%
15%
15%
Growth
markets
and other
24%
14%
Growth
markets
and other
22%
27%
Eastspring
Other
operations
Total
attributable
to
shareholders
10%
10%
(1)%
(1)%
18%
31%
Eastspring
Other
operations
Total
attributable
to
shareholders
10%
10%
(3)%
(2)%
17%
17%
308
prudentialplc.com
B Earnings performance / continuedPrudential plc Annual Report 2022
B4 Earnings per share
Based on adjusted operating profit
Short-term fluctuations in investment returns on shareholder-
backed business
Amortisation of acquisition accounting adjustments
Gain attaching to corporate transactions
Based on profit for the year
Based on adjusted operating profit
Short-term fluctuations in investment returns on shareholder-
backed business
Amortisation of acquisition accounting adjustments
Loss attaching to corporate transactions
Based on profit for the year
Based on loss from discontinued US operations
Based on loss for the year
Before
tax
$m
3,375
(1,915)
(10)
11
1,461
Before
tax
$m
3,233
(458)
(5)
(94)
2,676
2022
Non-controlling
interests
$m
Tax
$m
Net of tax
and non-
controlling
interests
$m
Basic
earnings
per share
cents
(614)
(11)
2,750
100.5¢
155
–
5
(454)
(1,758)
(10)
16
998
(64.3)¢
(0.4)¢
0.7¢
36.5¢
2
–
–
(9)
2021
Non-controlling
interests
$m
Tax
$m
Net of tax
and non-
controlling
interests
$m
Basic
earnings
per share
cents
(548)
(17)
2,668
101.5¢
81
–
5
(5)
–
–
(462)
(22)
(382)
(5)
(89)
2,192
(4,234)
(2,042)
(14.5)¢
(0.2)¢
(3.4)¢
83.4¢
(161.1)¢
(161.1)¢
(77.7)¢
(77.7)¢
Diluted
earnings
per share
cents
100.5¢
(64.3)¢
(0.4)¢
0.7¢
36.5¢
Diluted
earnings
per share
cents
101.5¢
(14.5)¢
(0.2)¢
(3.4)¢
83.4¢
Basic earnings per share are calculated based on earnings attributable to ordinary shareholders, after related tax and non-controlling interests,
divided by the weighted average number of ordinary shares outstanding during the year, excluding those held in employee share trusts, which are
treated as cancelled. For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Group’s only class of potentially dilutive ordinary shares are those share options granted to employees where the
exercise price is less than the average market price of the ordinary shares during the year. No adjustment is made if the impact is anti-dilutive
overall.
The weighted average number of shares for calculating basic and diluted earnings per share, which excludes those held in employee share
trusts, is set out as below:
Number of shares (in millions)
Weighted average number of shares for calculation of basic earnings per share
Shares under option at end of year
Shares that would have been issued at fair value on assumed option price at end of year
Weighted average number of shares for calculation of diluted earnings per share
2022
2,736
1
(1)
2,736
2021
2,628
2
(2)
2,628
309
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
B5 Dividends
Dividends relating to reporting year:
First interim dividend
Second interim dividend
Total relating to reporting year
Dividends paid in reporting year:
Current year first interim dividend
Second interim dividend for prior year
Total paid in reporting year
2022
2021
Cents per share
$m
Cents per share
5.74¢
13.04¢
18.78¢
5.74¢
11.86¢
17.60¢
154
359
513
154
320
474
5.37¢
11.86¢
17.23¢
5.37¢
10.73¢
16.10¢
$m
140
326
466
138
283
421
First and second interim dividends are recorded in the period in which they are paid. In addition to the dividends shown in the table above, on
13 September 2021, following approval by the Group’s shareholders, Prudential plc demerged its US operations (Jackson) via a dividend in specie
of $1,735 million.
Dividend per share
The 2022 first interim dividend of 5.74 cents per ordinary share was paid to eligible shareholders on 27 September 2022.
On 15 May 2023, Prudential will pay a second interim dividend of 13.04 cents per ordinary share for the year ended 31 December 2022. The
second interim dividend will be paid to shareholders included on the UK register at 5.00pm (Greenwich Mean Time) and to shareholders on the HK
branch register at 4.30pm (Hong Kong Time) on 24 March 2023 (Record Date), and also to the Holders of US American Depositary Receipts
(ADRs) as at 24 March 2023. The second interim dividend will be paid on or about 22 May 2023 to shareholders with shares standing to the credit
of their securities accounts with The Central Depository (Pte) Limited (CDP) at 5.00pm (Singapore Time) on the Record Date.
Shareholders holding shares on the UK or HK share registers will continue to receive their dividend payments in either GBP or HKD respectively,
unless they elect otherwise. Shareholders holding shares on the UK or HK registers may elect to receive dividend payments in USD. Elections must
be made through the relevant UK or HK share registrar on or before 19 April 2023. The corresponding amounts per share in GBP and HKD are
expected to be announced on or about 27 April 2023. The USD to GBP and HKD conversion rates will be determined by the actual rates achieved
by Prudential buying those currencies prior to the subsequent announcement.
Holders of ADRs will continue to receive their dividend payments in USD. Shareholders holding an interest in Prudential shares through CDP in
Singapore will continue to receive their dividend payments in SGD at an exchange rate determined by CDP.
Shareholders on the UK register are eligible to participate in a Dividend Reinvestment Plan.
310
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B Earnings performance / continuedPrudential plc Annual Report 2022
C Financial position
C1 Group assets and liabilities by business type
The analysis below is structured to show the investments and other assets and liabilities of the Group by reference to the differing degrees of
policyholder and shareholder economic interest of the different types of business.
Debt securities are analysed below according to the issuing government for sovereign debt and to credit ratings for the rest of the securities. The
Group uses the middle of the Standard & Poor’s, Moody’s and Fitch ratings, where available. Where ratings are not available from these rating
agencies, local external rating agencies’ ratings and lastly internal ratings have been used. Securities with none of the ratings listed above are
classified as unrated and included under the ‘below BBB- and unrated’ category. The total securities (excluding sovereign debt) that were unrated
at 31 December 2022 were $1,152 million (31 December 2021: $1,130 million). Additionally, government debt is shown separately from the rating
breakdowns in order to provide a more focused view of the credit portfolio.
In the table below, AAA is the highest possible rating. Investment grade financial assets are classified within the range of AAA to BBB- ratings.
Financial assets which fall outside this range are classified as below BBB-.
311
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C1 Group assets and liabilities by business type continued
31 Dec 2022 $m
Asia and Africa
Insurance
With-
profits
note (i)
Unit-
linked
note (i)
Other
note (i)
Eastspring
Elimina-
tions
Unallocated
to a
segment
Total
Elimination
of
intra-group
debtors and
creditors
Debt securities notes (ii)(iv)
Sovereign debt
Indonesia
Singapore
Thailand
United Kingdom
United States
Vietnam
Other (predominantly Asia)
Subtotal
Other government bonds
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Corporate bonds
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Asset-backed securities
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Total debt securities
Loans
Mortgage loans
Policy loans
Other loans
Total loans
Equity securities and holdings in collective investment
schemes
Direct equities
Collective investment schemes
Total equity securities and holdings in collective investment
schemes
Other financial investments note (iii)
Total financial investments note (v)
Investment properties
Investments in joint ventures and associates accounted for
using the equity method
Cash and cash equivalents note (vi)
Reinsurers’ share of insurance contract liabilities note C3.3
Other assets note (vii)
Total assets
Shareholders’ equity
Non-controlling interests
Total equity
Contract liabilities and unallocated surplus of with-profits
funds
Core structural borrowings
Operational borrowings
Other liabilities note (viii)
Total liabilities
Total equity and liabilities
312
482
3,240
–
–
19,983
1
2,041
25,747
1,480
105
746
292
227
2,850
996
1,951
7,230
7,885
2,090
20,152
168
6
20
14
2
210
589
507
–
4
54
12
646
483
917
1,456
–
1,854
2,397
3,288
1,812
10,395
85
21
139
77
22
344
181
385
524
1,325
444
2,859
5
1
–
–
1
7
108
27
248
134
323
840
362
1,556
4,348
3,974
1,282
11,522
126
3
14
9
1
153
3
67
–
–
–
–
27
97
–
–
–
–
–
–
–
–
–
1
–
1
–
–
–
–
–
–
48,959
5,022
22,910
98
–
1,498
472
1,970
–
–
–
–
13,063
19,057
11,379
6,760
32,120
18,139
1,793
379
140
422
4
566
2,139
4,950
7,089
2,816
84,842
23,540
33,381
–
–
1,038
145
1,156
–
–
749
–
154
37
1,601
1,791
2,662
9,665
87,181
24,443
49,137
–
–
–
–
–
–
77,687
–
118
9,376
87,181
87,181
22,842
–
–
1,601
24,443
24,443
14,407
43
14,450
25,229
–
86
9,372
34,687
49,137
–
–
–
–
61
2
63
107
268
–
314
127
–
713
1,422
1,058
124
1,182
–
–
15
225
240
1,422
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(67)
(67)
–
–
–
–
–
–
(67)
(67)
(67)
1,557
4,731
1,456
4
21,891
2,410
6,002
38,051
1,673
153
1,133
503
572
4,034
1,539
3,892
12,102
13,185
3,816
34,534
299
10
34
23
4
370
76,989
140
1,920
476
2,536
26,642
30,769
57,411
5,095
142,031
37
1,915
3,705
2,807
11,621
162,116
15,465
167
15,632
125,758
–
219
20,507
146,484
162,116
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
266
2
268
1,749
2,017
–
–
1,809
–
3,409
7,235
1,495
–
1,495
–
4,261
596
883
5,740
7,235
Group
total
1,557
4,731
1,456
4
21,891
2,410
6,002
38,051
1,673
153
1,133
503
572
4,034
1,539
3,892
12,102
13,185
3,816
34,534
299
10
34
23
4
370
76,989
140
1,920
476
2,536
26,908
30,771
57,679
6,844
144,048
37
1,915
5,514
2,807
11,621
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,409)
(3,409)
165,942
–
–
–
16,960
167
17,127
–
–
–
(3,409)
125,758
4,261
815
17,981
(3,409)
148,815
(3,409)
165,942
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022
31 Dec 2021 $m
Asia and Africa
Insurance
With-
profits
note (i)
Unit-
linked
note (i)
Other
note (i)
Eastspring
Elimina-
tions
Unallocated
to a
segment
Total
Elimination
of
intra-group
debtors and
creditors
Debt securities notes (ii)(iv)
Sovereign debt
Indonesia
Singapore
Thailand
United Kingdom
United States
Vietnam
Other (predominantly Asia)
Subtotal
Other government bonds
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Corporate bonds
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Asset-backed securities
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
Below BBB- and unrated
Subtotal
Total debt securities
Loans
Mortgage loans
Policy loans
Other loans
Total loans
Equity securities and holdings in collective investment
schemes
Direct equities
Collective investment schemes
Total equity securities and holdings in collective investment
schemes
Other financial investments note (iii)
Total financial investments note (v)
414
3,684
–
–
28,552
–
2,030
34,680
1,472
45
667
121
204
2,509
1,222
2,203
9,046
9,523
4,009
26,003
88
6
26
15
2
137
598
550
–
7
47
20
720
609
1,068
1,577
–
3,525
3,022
4,001
1,942
13,802
86
2
119
16
15
238
236
359
675
1,711
678
3,659
6
1
–
–
2
9
246
12
304
116
450
1,128
411
1,858
5,294
5,105
1,827
14,495
74
4
17
9
1
105
11
126
3
–
–
–
21
161
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63,329
5,848
29,530
161
–
1,365
668
2,033
–
–
–
–
10,290
23,950
12,812
7,704
34,240
20,516
1,561
149
150
368
11
529
2,286
3,787
6,073
2,318
101,163
26,513
38,450
Investment properties
Investments in joint ventures and associates accounted for
using the equity method
Cash and cash equivalents note (vi)
Reinsurers’ share of insurance contract liabilities note C3.3
Other assets note (vii)
–
–
905
225
1,184
–
–
911
–
166
38
1,878
1,444
9,528
9,191
Total assets
Shareholders’ equity
Non-controlling interests
Total equity
Contract liabilities and unallocated surplus of with-profits
funds
Core structural borrowings
Operational borrowings
Other liabilities note (viii)
Total liabilities
Total equity and liabilities
103,477
27,590
60,529
1,599
(51) 193,144
–
–
–
94,002
–
142
9,333
103,477
103,477
–
–
–
25,651
–
–
1,939
27,590
27,590
14,289
45
14,334
37,646
–
106
8,443
46,195
60,529
1,120
131
1,251
–
–
18
330
348
–
–
–
15,409
176
15,585
–
–
–
(51)
157,299
–
266
19,994
(51) 177,559
1,599
(51) 193,144
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,632
5,428
1,580
7
32,124
3,042
6,772
50,585
–
1,804
59
1,090
253
669
3,875
–
1,869
4,420
15,015
16,339
6,514
44,157
–
168
11
43
24
5
251
–
–
–
226
–
–
–
226
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98,868
226
–
–
–
–
683
2
685
1,088
1,999
–
–
3,729
–
3,608
9,336
1,679
–
1,679
–
6,127
595
935
7,657
9,336
–
–
–
–
84
3
87
106
354
–
305
181
–
759
–
150
1,733
679
2,562
25,472
35,444
60,916
4,134
166,480
38
–
–
–
(51)
2,183
3,441
9,753
11,249
Group
total
1,632
5,428
1,580
233
32,124
3,042
6,772
50,811
1,804
59
1,090
253
669
3,875
1,869
4,420
15,015
16,339
6,514
44,157
168
11
43
24
5
251
99,094
150
1,733
679
2,562
26,155
35,446
61,601
5,222
168,479
38
2,183
7,170
9,753
11,479
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,378)
(3,378)
199,102
–
–
–
17,088
176
17,264
–
–
–
(3,378)
157,299
6,127
861
17,551
(3,378)
181,838
(3,378)
199,102
313
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C1 Group assets and liabilities by business type continued
Notes
(i)
(ii)
‘With-profits’ comprises the with-profits assets and liabilities of the Hong Kong, Malaysia and Singapore operations. ‘Unit-linked’ comprises the assets and liabilities held in the unit-linked funds.
‘Other’ includes assets and liabilities of other participating business and other non-linked shareholder-backed business.
Of the Group’s debt securities, the following amounts were held by the consolidated investment funds.
Debt securities held by consolidated investment funds
31 Dec 2022
$m
31 Dec 2021
$m
11,899
15,076
(iii) Other financial investments comprise derivative assets and deposits.
(iv)
The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor’s, Moody’s and Fitch Solutions and their respective affiliates and
suppliers (‘Content Providers’) is referred to here as the ‘Content’. Reproduction of any Content in any form is prohibited except with the prior written permission of the relevant party. The Content
Providers do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless
of the cause, or for the results obtained from the use of such Content. The Content Providers expressly disclaim liability for any damages, costs, expenses, legal fees, or losses (including lost
income or lost profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or security, a rating or any observation concerning an investment
that is part of the Content is not a recommendation to buy, sell or hold any such investment or security, nor does it address the suitability of an investment or security and should not be relied on
as investment advice.
Of the total financial investments of $144,048 million as at 31 December 2022 (31 December 2021: $168,479 million), $68,955 million (31 December 2021: $71,524 million) are expected to
be recovered within one year, including equity securities and holdings in collective investment schemes.
(v)
(vi) Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, treasury bills and other short-term highly liquid investments with less than 90 days maturity from
the date of acquisition and are analysed as follows:
Cash
Cash equivalents
Total cash and cash equivalents
Analysed as:
Held by the Group’s holding and non-regulated entities and available for general use
Other funds not available for general use by the Group, including funds held for the benefit of policyholders
Total cash and cash equivalents
31 Dec 2022
$m
31 Dec 2021
$m
1,878
3,636
5,514
1,809
3,705
5,514
1,902
5,268
7,170
3,729
3,441
7,170
*
The Group’s cash and cash equivalents are held in the following currencies as at 31 December 2022: USD 45 per cent, GBP 11 per cent, HKD 5 per cent, SGD 5 per cent, MYR 14 per cent and
other currencies 20 per cent (31 December 2021: USD 59 per cent, GBP 7 per cent, HKD 3 per cent, SGD 3 per cent, MYR 9 per cent and other currencies 19 per cent).
(vii)
‘Other assets’ at 31 December 2022, comprise goodwill, intangibles (including deferred acquisition costs), property, plant and equipment (see note C11), tax balances and accrued investment
income and other debtors, which are analysed as follows:
Interest receivable
Other accrued income
Total accrued investment income
Amounts receivable due from:
Policyholders
Intermediaries
Reinsurers
Other sundry debtors
Total other debtors
Total accrued investment income and other debtors
Analysed as:
Expected to be settled within one year
Expected to be settled beyond one year
31 Dec 2022
$m
31 Dec 2021
$m
885
250
1,135
644
–
192
858
1,694
2,829
2,700
129
2,829
872
299
1,171
686
4
226
863
1,779
2,950
2,761
189
2,950
(viii) Within ‘Other liabilities’ at 31 December 2022 are accruals, deferred income and other liabilities of $8,777 million (31 December 2021: $7,983 million), which are analysed as follows (detailed
maturity analysis is provided in note C2.3):
Accruals and deferred income
Creditors arising from direct insurance and reinsurance operations
Interest payable
Funds withheld under reinsurance agreements
Other creditors
Total accruals, deferred income and other creditors
31 Dec 2022
$m
31 Dec 2021
$m
539
3,000
59
2,040
3,139
8,777
565
1,120
77
1,545
4,676
7,983
314
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022
C2 Fair value measurement
The Group uses the trade date method to account for regular purchases and sales of financial assets. The Group holds financial assets in
accordance with IAS 39, whereby subject to specific criteria, financial instruments are required to be accounted for under one of the following
categories:
> Financial assets and liabilities at fair value through profit or loss (FVTPL): this comprises assets and liabilities designated by management as
FVTPL on inception and derivatives. This includes instruments that are managed and the performance evaluated on a fair value basis, including
liabilities related to net assets attributable to unit holders of consolidated investment funds and policyholder liabilities for investment contracts
without discretionary participation features. All investments within this category are measured at fair value with all changes thereon being
recognised in investment return in the income statement.
> Financial investments on an available-for-sale (AFS) basis: this comprises assets that are designated by management as AFS and/or do not fall
into any of the other categories. These assets are initially recognised at fair value plus attributable transaction costs and are subsequently
measured at fair value. Interest and/or dividend income is recognised in the income statement. Unrealised gains and losses are recognised in
other comprehensive income. Upon disposal or impairment, accumulated unrealised gains and losses are transferred from other comprehensive
income to the income statement as realised gains or losses. Subsequent to the demerger of Jackson in September 2021, the Group has
designated its retained interest in Jackson (as described in note D1.2) as AFS equity securities.
> Loans and receivables: except for those designated as FVTPL or AFS, these instruments comprise non-quoted investments that have fixed or
determinable payments, including loans collateralised by mortgages, deposits, loans to policyholders and other unsecured loans and
receivables. These investments are initially recognised at fair value plus transaction costs. Subsequently, these instruments are carried at
amortised cost using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset.
When assets held at amortised cost are subject to impairment testing, estimated future cash flows are compared to the carrying value of the
asset. The estimated future cash flows are discounted using the financial asset’s original or variable effective interest rate and exclude credit
losses that have not yet been incurred. If, in subsequent periods, an impaired loan or receivable recovers in value (in part or in full) and this
recovery can be objectively related to an event occurring after the impairment, then any amount determined to have been recovered is reversed
through the income statement.
C2.1 Determination of fair value
The fair values of the financial instruments for which fair valuation is required under IFRS Standards are determined by the use of quoted market
prices for exchange-quoted investments, or by using quotations from independent third parties, such as brokers and pricing services or by using
appropriate valuation techniques.
The estimated fair value of derivative financial instruments reflects the estimated amount the Group would receive or pay in an arm’s-length
transaction. This amount is determined using quoted prices if exchange listed, quotations from independent third parties or valued internally
using standard market practices.
Other than the loans which have been designated at fair value through profit or loss, the carrying value of loans and receivables is presented net
of provisions for impairment. The fair value of loans is estimated from discounted cash flows expected to be received.
The fair value of the subordinated and senior debt issued by the parent company is determined using quoted prices from independent third
parties.
The fair value of financial liabilities (other than subordinated debt, senior debt and derivative financial instruments) is determined using
discounted cash flows of the amounts expected to be paid.
Valuation approach for level 2 fair valued assets and liabilities
A significant proportion of the Group’s level 2 assets are corporate bonds, structured securities and other non-national government debt securities.
These assets, in line with market practice, are generally valued using a designated independent pricing service or quote from third-party brokers.
These valuations are subject to a number of monitoring controls, such as comparison to multiple pricing sources where available, monthly price
variances, stale price reviews and variance analysis on prices achieved on subsequent trades.
When prices are not available from pricing services, quotes are sourced directly from brokers. Prudential seeks to obtain a number of quotes
from different brokers so as to obtain the most comprehensive information available on their executability. The selected quote is the one which
best represents an executable quote for the security at the measurement date.
Generally, no adjustment is made to the prices obtained from independent third parties. Adjustments are made in only limited circumstances,
where it is determined that the third-party valuations obtained do not reflect fair value (eg either because the value is stale and/or the values are
extremely diverse in range). Securities valued in such manner are classified as level 3 where these significant inputs are not based on observable
market data.
Valuation approach for level 3 fair valued assets and liabilities
Investments valued using valuation techniques include financial investments which by their nature do not have an externally quoted price based
on regular trades, and financial investments for which markets are no longer active as a result of market conditions, eg market illiquidity.
The Group’s valuation policies, procedures and analyses for instruments categorised as level 3 are overseen by Business Unit committees as
part of the Group’s wider financial reporting governance processes. The procedures undertaken include approval of valuation methodologies,
verification processes, and resolution of significant or complex valuation issues. In addition, the Group has minimum standards for independent
price verification to ensure valuation accuracy is regularly independently verified. Adherence to this policy is monitored across the business units.
315
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C2 Fair value measurement continued
C2.2 Fair value measurement hierarchy of Group assets and liabilities
(a) Assets and liabilities carried at fair value on the statement of financial position
The table below shows the assets and liabilities carried at fair value analysed by level of the IFRS 13 ‘Fair Value Measurement’ defined fair value
hierarchy. This hierarchy is based on the inputs to the fair value measurement and reflects the lowest level input that is significant to that
measurement.
All assets and liabilities held at fair value are classified as fair value through profit or loss, except for $266 million of financial assets classified as
available-for-sale at 31 December 2022 (31 December 2021: $909 million), all of which (31 December 2021: $683 million) related to the Group’s
retained interest in Jackson’s equity securities. All assets and liabilities held at fair value are measured on a recurring basis. As of 31 December
2022, the Group did not have any financial instruments that are measured at fair value on a non-recurring basis.
Financial instruments at fair value
Loans
Equity securities and holdings in collective investment schemes
Debt securities
Derivative assets
Derivative liabilities
Total financial investments, net of derivative liabilities
Investment contract liabilities without discretionary participation features
Net asset value attributable to unit holders of consolidated investment funds
Total financial instruments at fair value
Percentage of total (%)
Analysed by business type:
Financial investments net of derivative liabilities, at fair value
With-profits
Unit-linked
Non-linked shareholder-backed business
Total financial investments net of derivative liabilities, at fair value
Percentage of total (%)
Total financial investments net of derivative liabilities, at fair value
Other financial liabilities at fair value
Total financial instruments at fair value
31 Dec 2022 $m
Level 1
Level 2
Level 3
Quoted prices
(unadjusted)
in active
markets
Valuation based
on significant
observable
market inputs
note (i)
Valuation based
on significant
unobservable
market inputs
note (ii)
–
49,725
57,215
82
(778)
106,244
–
(4,193)
102,051
78%
65,880
21,319
19,045
106,244
78%
106,244
(4,193)
102,051
447
7,130
19,736
487
(223)
27,577
(741)
–
26,836
21%
14,605
1,851
11,121
27,577
21%
27,577
(741)
26,836
3
824
38
–
–
865
–
–
865
1%
748
4
113
865
1%
865
–
865
Total
450
57,679
76,989
569
(1,001)
134,686
(741)
(4,193)
129,752
100%
81,233
23,174
30,279
134,686
100%
134,686
(4,934)
129,752
316
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 Loans
Equity securities and holdings in collective investment schemes
Debt securities
Derivative assets
Derivative liabilities
Total financial investments, net of derivative liabilities
Investment contract liabilities without discretionary participation features
Net asset value attributable to unit holders of consolidated investment funds
Total financial instruments at fair value
Percentage of total (%)
Analysed by business type:
Financial investments net of derivative liabilities, at fair value
With-profits
Unit-linked
Non-linked shareholder-backed business
Total financial investments net of derivative liabilities, at fair value
Percentage of total (%)
Total financial investments net of derivative liabilities, at fair value
Other financial liabilities at fair value
Total financial instruments at fair value
31 Dec 2021 $m
Level 1
Level 2
Level 3
Quoted prices
(unadjusted)
in active
markets
Valuation based
on significant
observable
market inputs
note (i)
Valuation based
on significant
unobservable
market inputs
note (ii)
–
54,107
76,049
359
(146)
130,369
–
(5,618)
124,751
81%
82,489
24,024
23,856
130,369
81%
130,369
(5,618)
124,751
616
6,917
22,987
122
(116)
30,526
(814)
(46)
29,666
19%
15,438
2,343
12,745
30,526
19%
30,526
(860)
29,666
5
577
58
–
–
640
–
–
640
0%
506
5
129
640
0%
640
–
640
Total
621
61,601
99,094
481
(262)
161,535
(814)
(5,664)
155,057
100%
98,433
26,372
36,730
161,535
100%
161,535
(6,478)
155,057
Notes
(i)
(ii)
Of the total level 2 debt securities of $19,736 million at 31 December 2022 (31 December 2021: $22,987 million), $37 million (31 December 2021: $24 million) are valued internally.
At 31 December 2022, the Group held $865 million (31 December 2021: $640 million) of net financial instruments at fair value within level 3. This represents less than 1 per cent of the total
fair-valued financial assets, net of financial liabilities, for both years and comprises the following items:
–
Equity securities and holdings in collective investment schemes of $824 million (31 December 2021: $557 million) consisting primarily of property and infrastructure funds held by the
participating funds, which are externally valued using the net asset value of the invested entities. Equity securities of $1 million (31 December 2021: $1 million) are internally valued,
representing less than 0.1 per cent for all periods of the total fair-valued financial assets net of financial liabilities. Internal valuations are inherently more subjective than external valuations;
and
– Other sundry individual financial instruments of a net asset of $41 million (31 December 2021: net asset of $63 million).
Of the net financial instruments of $865 million at 31 December 2022 (31 December 2021: $640 million) referred to above:
–
–
A net asset of $752 million (31 December 2021: $511 million) is held by the Group’s with-profits and unit-linked funds and therefore shareholders’ profit and equity are not impacted by
movements in the valuation of these financial instruments; and
A net asset of $113 million (31 December 2021: $129 million) is held to support non-linked shareholder-backed business, of which $111 million (31 December 2021: $112 million) are
primarily private equity investments and corporate bonds externally valued using the net asset value of the invested entities and external prices adjusted to reflect the specific known
conditions relating to these bonds (eg distressed securities) and are therefore inherently less subjective than internal valuations. If the value of all these level 3 financial instruments
decreased by 10 per cent, the change in valuation would be $(11) million (31 December 2021: $(13) million), which would reduce shareholders’ equity by this amount before tax.
All of this amount would pass through the income statement substantially as part of short-term fluctuations in investment returns outside of adjusted operating profit.
(b) Transfers into and transfers out of levels
The Group’s policy is to recognise transfers into and out of levels as of the end of each reporting period except for material transfers which are
recognised as of the date of the event or change in circumstances that caused the transfer. Transfers are deemed to have occurred when there is a
material change in the observed valuation inputs or a change in the level of trading activities of the securities.
During 2022, the transfers between levels within the portfolios were primarily transfers from level 1 to level 2 of $2,640 million (31 December
2021: $3,789 million) and transfers from level 2 to level 1 of $1,982 million (31 December 2021: $1,742 million). These transfers primarily reflect
the change in the observed valuation inputs of equity securities and debt securities and, in certain cases, the change in the level of trading
activities of the securities. There were transfers from level 3 to level 2 of $15 million in the year (31 December 2021: $12 million) and no transfers
into level 3 (31 December 2021: $30 million).
317
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C2 Fair value measurement continued
C2.2 Fair value measurement hierarchy of Group assets and liabilities continued
Reconciliation of movements in level 3 assets and liabilities measured at fair value
The following table reconciles the value of level 3 fair valued assets and liabilities at the beginning and end of the years shown.
Total investment return recorded in the income statement represents interest and dividend income, realised gains and losses, unrealised gains
and losses on the assets classified at fair value through profit and loss and foreign exchange movements on an individual entity’s overseas
investments. Total gains and losses recorded in other comprehensive income comprises the translation of investments into the Group’s
presentational currency of USD.
Balance at 1 Jan
Total losses in income statement note
Total losses recorded in other comprehensive income
Purchases and other additions
Sales
Transfers out of level 3
Balance at 31 Dec
Balance at 1 Jan
Total (losses) gains in income statement note
Total losses recorded in other comprehensive income
Purchases and other additions
Transfers (out of) into level 3
Balance at 31 Dec
2022 $m
Equity securities
and holdings in
collective
investment
schemes
Loans
5
(2)
–
–
–
–
3
577
(31)
(6)
305
(21)
–
824
2021 $m
Equity securities
and holdings in
collective
investment
schemes
Loans
6
(1)
–
–
–
5
445
6
(5)
143
(12)
577
Debt
securities
Group
total
58
(2)
(3)
–
–
(15)
38
640
(35)
(9)
305
(21)
(15)
865
Debt
securities
Group
total
33
(3)
(2)
–
30
58
484
2
(7)
143
18
640
Note
Of the total net losses in the income statement of $(35) million in 2022 (2021: net gains of $2 million), $(12) million (2021: $2 million) relates to net unrealised gains and losses of financial instruments
still held at the end of the year, which can be analysed as follows:
Loans
Equity securities and holdings in collective investment schemes
Debt securities
Total net (losses) gains
2022
$m
(2)
(8)
(2)
(12)
2021
$m
(1)
6
(3)
2
(c) Assets and liabilities at amortised cost and their fair value
The table below shows the financial assets and liabilities carried at amortised cost on the statement of financial position and their fair value. Cash
deposits, accrued income, other debtors, accruals, deferred income and other liabilities are excluded from the analysis below, as these are carried
at amortised cost which approximates fair value. The carrying value of investment contracts with discretionary participation features is on an
IFRS 4 basis, which is also excluded from the analysis below, as it is impractical to determine the fair value of these contracts due to the lack of
a reliable basis to measure participation features.
Assets
Loans
Liabilities
Core structural borrowings of shareholder-financed businesses
Operational borrowings (excluding lease liabilities)
Obligations under funding, securities lending and sale and repurchase agreements
Total net financial liabilities at amortised cost
31 Dec 2022 $m
31 Dec 2021 $m
Carrying
value
Fair
value
Carrying
value
Fair
value
2,086
2,207
1,941
2,152
(4,261)
(516)
(582)
(3,273)
(3,834)
(516)
(582)
(2,725)
(6,127)
(514)
(223)
(4,923)
(6,565)
(514)
(223)
(5,150)
318
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 The fair value of the assets and liabilities in the table above, with the exception of the subordinated and senior debt issued by the parent company,
has been estimated from the discounted cash flows expected to be received or paid. All the assets and liabilities in the table above have been
classified within level 2 at 31 December 2022 and 2021, reflecting the observability of the inputs used to derive their fair value. The fair value of
the subordinated and senior debt issued by the parent company is determined using quoted prices from independent third parties.
C2.3 Additional information on financial instruments
(a) Financial risk
Liquidity analysis
Contractual maturities of financial liabilities on an undiscounted cash flow basis
The following table sets out the contractual maturities for applicable classes of financial liabilities, excluding derivative liabilities and investment
contracts that are separately presented. The financial liabilities are included in the column relating to the contractual maturities of the
undiscounted cash flows (including contractual interest payments) based on the earliest period in which the Group can be required to pay
assuming conditions are consistent with those of year end.
31 Dec 2022 $m
Contractual maturity profile for financial liabilities
1 year
or less
1-2
years
2-5
years
5-10
years
10-15
years
15-20
years
Over
20 years
No stated
maturity
Total
undiscounted
cash flows
Total
carrying
value
4,261
299
516
Core structural borrowings of
shareholder-financed
businesses note C5.1
Lease liabilities under IFRS 16 note C5.2
Other operational borrowings note C5.2
Obligations under funding,
securities lending and sale and
repurchase agreements
Accruals, deferred income and
509
101
516
124
76
–
370
127
–
2,598
28
–
1,024
9
–
582
582
other liabilities
8,777
6,258
Net asset value attributable to unit
holders of consolidated unit
trusts and similar funds
4,193
4,193
–
–
–
–
–
–
–
–
–
–
–
–
Total financial liabilities
18,628
12,159
200
497
2,626
1,033
–
–
–
–
–
–
–
–
–
–
–
–
–
–
750
–
–
5,375
341
516
–
582
2,519
8,777
–
3,269
4,193
19,784
31 Dec 2021 $m
Contractual maturity profile for financial liabilities
Total
carrying
value
1 year
or less
1-2
years
2-5
years
5-10
years
10-15
years
15-20
years
Over
20 years
No stated
maturity
Total
undiscounted
cash flows
Core structural borrowings of
shareholder-financed
businesses note C5.1
Lease liabilities under IFRS 16 note C5.2
Other operational borrowings note C5.2
Obligations under funding,
securities lending and sale and
repurchase agreements
Accruals, deferred income and
6,127
347
514
1,872
110
514
551
81
–
702
135
–
1,817
45
–
1,642
11
–
223
223
other liabilities
7,983
5,972
Net asset value attributable to unit
holders of consolidated unit
trusts and similar funds
5,664
5,664
–
–
–
–
–
–
–
–
–
–
–
–
Total financial liabilities
20,858
14,355
632
837
1,862
1,653
–
–
–
–
–
–
–
–
–
–
–
–
–
–
750
–
–
–
2,011
–
2,761
7,334
382
514
223
7,983
5,664
22,100
319
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C2 Fair value measurement continued
C2.3 Additional information on financial instruments continued
Maturity analysis of derivatives
The following table shows the carrying value of the gross and net derivative positions.
31 Dec 2022
31 Dec 2021
Carrying value of net derivatives $m
Derivative
assets
Derivative
liabilities
569
481
(1,001)
(262)
Net
derivative
position
(432)
219
All net derivatives have been included at fair value due within one year or less, representing the basis on which they are managed (ie to manage
principally asset or liability value exposures). The Group has no cash flow hedges and, in general, contractual maturities are not considered
essential for an understanding of the timing of the cash flows for these instruments.
Maturity analysis of investment contracts
The table below shows the maturity profile for investment contracts based on undiscounted cash flow projections of expected benefit payments.
31 Dec 2022
31 Dec 2021
Maturity profile for investment contracts $m
Total
carrying
value
420
459
1 year
or less
11
14
1-5
years
369
442
5-10
years
98
63
10-15
years
22
16
15-20
years
Over
20 years
Total
undiscounted
cash flows
8
6
4
2
512
543
The undiscounted cash flows in the maturity profile shown above excludes contracts which have no stated maturity but which are repayable on
demand.
Most investment contracts have options to surrender early, often subject to surrender or other penalties. Therefore, most contracts can be said
to have a contractual maturity of less than one year, but the additional charges and term of the contracts mean these are unlikely to be exercised
in practice and the more useful information is to present information on expected payment.
The vast majority of the Group’s financial assets are held to back the Group’s policyholder liabilities. Although asset/liability matching is an
important component of managing policyholder liabilities (both those classified as insurance and those classified as investments), this profile is
mainly relevant for managing market risk rather than liquidity risk. Within each business unit, this asset/liability matching is performed on a
portfolio-by-portfolio basis.
In terms of liquidity risk, a large proportion of the policyholder liabilities contain discretionary surrender values or surrender charges, meaning
that many of the Group’s liabilities are expected to be held for the long term. Much of the Group’s investment portfolios are in marketable
securities, which can therefore be converted quickly to liquid assets.
For the reasons provided above, an analysis of the Group’s assets by contractual maturity is not considered meaningful to evaluate the nature
and extent of the Group’s liquidity risk.
Credit risk
The Group’s maximum exposure to credit risk of financial instruments before any allowance for collateral or allocation of losses to policyholders is
represented by the carrying value of financial instruments on the balance sheet that have exposures to credit risk comprising cash and cash
equivalents, deposits, debt securities, loans and derivative assets, accrued investment income and other debtors. Further details of collateral in
place in relation to derivatives, securities lending, repurchase and reverse repurchase agreements and other transactions are provided in note (c)
below. The Group’s exposure to credit risk is further discussed in the Risk review report.
Of the total loans and receivables held at 31 December 2022, $6 million (31 December 2021: $7 million) are past their due date but are not
impaired, of which $1 million are less than one year past their due date (31 December 2021: $2 million). The Group expects full recovery of these
loans and receivables.
There are no financial assets that would have been past due or impaired had the terms not been renegotiated in both years.
In addition, the Group did not take possession of any other collateral held as security in both years.
320
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 Foreign exchange risk
As at 31 December 2022, the Group held 27 per cent (31 December 2021: 26 per cent) of its financial assets and 64 per cent (31 December 2021:
63 per cent) of its financial liabilities in currencies mainly USD, other than the functional currency of the relevant business units or the currency to
which the functional currency is pegged (eg financial assets and liabilities of USD denominated business in Hong Kong). The exchange risks
inherent in these exposures are mitigated through the use of derivatives, mainly forward currency contracts and currency swaps as described in
note (b) below.
The amount of exchange gain recognised in the income statement in 2022, except for those arising on financial instruments measured at fair
value through profit or loss, is $234 million (2021: loss of $(132) million).
(b) Derivatives and hedging
Derivative financial instruments are used to reduce or manage investment, interest rate and currency exposures, to facilitate efficient portfolio
management and for investment purposes.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IAS 39. The Group has no net investment, fair value
or cash flow hedges under IAS 39 at 31 December 2022 and 2021. All derivatives that are not designated as hedging instruments are carried at fair
value, with movements in fair value being recorded in the income statement.
Embedded derivatives are embedded within other non-derivative host financial instruments and insurance contracts to create hybrid
instruments. Embedded derivatives meeting the definition of an insurance contract are accounted for under IFRS 4. Where economic
characteristics and risks of the embedded derivatives are not closely related to the economic characteristics and risks of the host instrument, and
where the hybrid instrument is not measured at fair value with the changes in fair value recognised in the income statement, the embedded
derivative is required to be bifurcated and carried at fair value as a derivative measured in accordance with IAS 39.
In addition, the Group applies the option under IFRS 4 to not separate and fair value surrender options embedded in host contracts and
with-profits investment contracts whose strike price is either a fixed amount or a fixed amount plus interest.
Derivatives held and their purpose
The Group enters into a variety of exchange traded and over-the-counter derivative financial instruments, including futures, options, forward
contracts, swaps and swaptions.
All over-the-counter derivative transactions are conducted under standardised ISDA (International Swaps and Derivatives Association Inc)
master agreements and collateral agreements are in place between the individual entities and relevant counterparties under each of these
market master agreements.
Derivatives are used for efficient portfolio management to obtain cost effective and management of exposure to various markets in
accordance with the Group’s investment strategies and to manage exposure to interest rate, currency, credit and other business risks. The Group
also uses interest rate derivatives to reduce exposure to interest rate volatility.
(c) Derecognition, collateral and offsetting
Derecognition of financial assets and liabilities
The Group’s policy is to derecognise financial assets when it is deemed that substantially all the risks and rewards of ownership have been
transferred.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged, cancelled or has expired.
Reverse repurchase agreements
The Group is party to various reverse repurchase agreements under which securities are purchased from third parties with an obligation to resell
the securities. The securities are not recognised as investments in the statement of financial position but the right to receive the cash paid is
recognised as deposits.
The Group has entered into reverse repurchase transactions under which it purchased securities and had taken on the obligation to resell the
securities. At 31 December 2022, the fair value of the collateral held in respect of these transactions, which is represented by the purchased
securities, was $3,244 million (31 December 2021: $2,149 million).
Securities lending and repurchase agreements
The Group is also party to various securities lending agreements (including repurchase agreements) under which securities are loaned to third
parties on a short-term basis. The loaned securities are not derecognised; rather, they continue to be recognised within the appropriate investment
classification. To the extent cash collateral is received it is recognised on the statement of financial position with the obligation to repay the cash
paid recognised as a liability. Other collateral is not recognised.
At 31 December 2022, the Group had $1,571 million (31 December 2021: $854 million) of lent securities and assets subject to repurchase
agreements. The cash and securities collateral held or pledged under such agreements were $1,679 million (31 December 2021: $913 million).
321
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C2 Fair value measurement continued
C2.3 Additional information on financial instruments continued
Collateral and pledges under derivative transactions
At 31 December 2022, the Group had pledged $62 million (31 December 2021: $99 million) for liabilities and held collateral of $234 million
(31 December 2021: $50 million) in respect of over-the-counter derivative transactions. These transactions are conducted under terms that are
usual and customary to collateralised transactions including, where relevant, standard securities lending and repurchase agreements.
The Group has entered into collateral arrangements in relation to over-the-counter derivative transactions, which permit sale or re-pledging of
underlying collateral. The Group has not sold any collateral held or re-pledged any collateral.
All over-the-counter derivative transactions are conducted under standardised International Swaps and Derivatives Association (ISDA) master
agreements. The collateral management for these transactions is conducted under the usual and customary terms and conditions set out in the
Credit Support Annex to the ISDA master agreement.
Offsetting assets and liabilities
The Group’s derivative instruments, repurchase agreements and securities lending agreements are subject to master netting arrangements and
collateral arrangements. A master netting arrangement with a counterparty creates a right of offset for amounts due to and due from that same
counterparty that is enforceable in the event of a default or bankruptcy. The Group recognises amounts subject to master netting arrangements
on a gross basis within the consolidated balance sheets.
The following tables present the gross and net information about the Group’s financial instruments subject to master netting arrangements:
Financial assets:
Derivative assets
Reverse repurchase agreements
Total financial assets
Financial liabilities:
Derivative liabilities
Securities lending and repurchase agreements
Total financial liabilities
Financial assets:
Derivative assets
Reverse repurchase agreements
Total financial assets
Financial liabilities:
Derivative liabilities
Securities lending and repurchase agreements
Total financial liabilities
31 Dec 2022 $m
Related amounts not offset in the balance sheet
Financial
instruments
note (ii)
Cash
collateral
Securities
collateral
note (iii)
Net
amount
note (iv)
Gross amount
included in the
balance sheet
note (i)
457
3,174
3,631
(284)
(582)
(866)
(179)
–
(179)
179
–
179
(217)
–
(217)
27
13
40
–
(3,174)
(3,174)
6
566
572
61
–
61
(72)
(3)
(75)
31 Dec 2021 $m
Related amounts not offset in the balance sheet
Financial
instruments
note (ii)
Cash
collateral
Securities
collateral
note (iii)
Net
amount
note (iv)
(94)
–
(94)
94
–
94
(31)
–
(31)
63
153
216
(1)
(2,134)
(2,135)
–
69
69
44
1
45
(8)
–
(8)
Gross amount
included in the
balance sheet
note (i)
170
2,135
2,305
(165)
(222)
(387)
Notes
(i)
(ii)
(iii)
(iv)
322
The Group has not offset any of the amounts included in the balance sheet.
Represents the amount that could be offset under master netting or similar arrangements where the Group does not satisfy the full criteria to offset in the balance sheet.
Excludes initial margin amounts for exchange-traded derivatives.
In the tables above, the amounts of assets or liabilities included in the balance sheet would be offset first by financial instruments that have the right of offset under master netting or similar
arrangements with any remaining amount reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than amounts presented in the tables.
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 C3 Policyholder liabilities and unallocated surplus
C3.1 Policyholder liabilities and unallocated surplus by business type
(a) Movement in policyholder liabilities and unallocated surplus of with-profits funds
The items below represent the amount attributable to changes in policyholder liabilities and unallocated surplus of with-profits funds as a result of
each of the components listed for the insurance operations of the Group. The policyholder liabilities shown include investment contracts without
discretionary participation features (as defined in IFRS 4) and their full movement in the year. The items are shown gross of external reinsurance.
At 1 Jan 2021
Comprising:
– Policyholder liabilities on the balance sheet
(excludes $296,513 million from discontinued US operations)
– Unallocated surplus of with-profits funds on the balance sheet note (i)
– Group’s share of policyholder liabilities relating to joint ventures and associates note (ii)
Premiums: note (iii)
New business
In-force
Surrenders notes (iii)(iv)
Maturities/deaths/other claim events
Net flows
Shareholders’ transfers post-tax
Investment-related items and other movements note (v)
Foreign exchange translation differences note (vi)
At 31 Dec 2021/1 Jan 2022
Comprising:
– Policyholder liabilities on the balance sheet
– Unallocated surplus of with-profits funds on the balance sheet note (i)
– Group’s share of policyholder liabilities relating to joint ventures and associates note (ii)
Premiums: note (iii)
New business
In-force
Surrenders notes (iii)(iv)
Maturities/deaths/other claim events
Net flows
Shareholders’ transfers post-tax
Investment-related items and other movements note (v)
Foreign exchange translation differences note (vi)
At 31 Dec 2022
Comprising:
– Policyholder liabilities on the balance sheet
– Unallocated surplus of with-profits funds on the balance sheet note (i)
– Group’s share of policyholder liabilities relating to joint ventures and associates note (ii)
Average policyholder liability balances note (vii)
2022
2021
Shareholder-backed business
With-
profits business
$m
Unit-linked
liabilities
$m
86,410
32,506
Other
business
$m
46,639
81,193
5,217
–
1,990
7,096
9,086
(844)
(2,116)
6,126
(134)
2,499
(899)
25,433
–
7,073
3,038
2,406
5,444
(3,326)
(215)
1,903
–
897
(550)
38,107
–
8,532
2,172
5,286
7,458
(734)
(1,123)
5,601
–
(3,505)
(239)
Total
$m
165,555
144,733
5,217
15,605
7,200
14,788
21,988
(4,904)
(3,454)
13,630
(134)
(109)
(1,688)
94,002
34,756
48,496
177,254
88,618
5,384
–
2,244
5,809
8,053
(1,233)
(2,103)
4,717
(158)
(20,677)
(197)
77,687
74,192
3,495
–
81,405
84,905
25,651
–
9,105
1,838
2,404
4,242
(2,763)
(200)
1,279
–
(2,802)
(1,836)
31,397
22,842
–
8,555
33,076
33,631
37,646
–
10,850
2,697
5,623
8,320
(677)
(1,712)
5,931
–
(14,623)
(2,181)
37,623
25,229
–
12,394
151,915
5,384
19,955
6,779
13,836
20,615
(4,673)
(4,015)
11,927
(158)
(38,102)
(4,214)
146,707
122,263
3,495
20,949
43,060
47,568
157,541
166,104
Notes
(i)
(ii)
(iii)
(iv)
(v)
Unallocated surplus of with-profits funds represents the excess of assets over policyholder liabilities, determined in accordance with the Group’s accounting policies, that have yet to be
appropriated between policyholders and shareholders for the Group’s with-profits funds in Hong Kong and Malaysia. In Hong Kong, the unallocated surplus includes the shareholders’ share of
expected future bonuses, with the expected policyholder share being included in policyholder liabilities. Any excess of assets over liabilities and amounts expected to be paid out by the fund on
future bonuses is also included in the unallocated surplus.
The Group’s investments in joint ventures and associates are accounted for on an equity method and the Group’s share of the policyholder liabilities as shown above relate to the life business of
CPL, India and the Takaful business in Malaysia.
The analysis includes the impact of premiums, claims and investment movements on policyholders’ liabilities. The impact does not represent premiums, claims and investment movements as reported
in the income statement. For example, premiums shown above are after any deductions for fees/charges; claims (surrenders, maturities, deaths and other claim events) shown above represent the
policyholder liabilities provision released rather than the claims amount paid to the policyholder. The analysis also includes net flows of the Group’s insurance joint ventures and associate.
The rate of surrenders for shareholder-backed business (expressed as a percentage of opening policyholder liabilities) is 4.1 per cent in 2022 (2021: 5.1 per cent).
Investment-related items and other movements in 2022 primarily represents the effects of higher interest rates on the discount rates applied in the measurement of the policyholder
liabilities, together with bond losses due to rising interest rates and lower level of investment returns from equities following the falls in equity markets, primarily in Hong Kong and Singapore
with profits-fund. Other business also includes the effect of the early adoption of the Risk-Based Capital Regime in Hong Kong as discussed in note C3.2 below.
(vi) Movements in the year have been translated at the average exchange rates for the year. The closing balance has been translated at the closing spot rates as at 31 December. Differences upon
retranslation are included in foreign exchange translation differences.
(vii) Average policyholder liabilities have been based on opening and closing balances, adjusted for any acquisitions, disposals and other relevant corporate transactions arising in the year, and
exclude unallocated surplus of with-profits funds.
323
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C3 Policyholder liabilities and unallocated surplus continued
C3.1 Policyholder liabilities and unallocated surplus by business type continued
(b) Duration of policyholder liabilities
The table below shows the carrying value of policyholder liabilities and the maturity profile of the cash flows on a discounted basis, taking account
of expected future premiums and investment returns:
Policyholder liabilities
Expected maturity:
0 to 5 years
5 to 10 years
10 to 15 years
15 to 20 years
20 to 25 years
Over 25 years
31 Dec 2022
$m
31 Dec 2021
$m
122,263
151,915
31 Dec 2022
%
31 Dec 2021
%
22
18
14
11
10
25
20
18
15
12
10
25
(c) Policyholder liabilities and unallocated surplus by operating segment
The table below shows the policyholder liabilities and unallocated surplus, excluding joint ventures and associates and net of external reinsurance,
by segment:
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total segment
31 Dec 2022
$m
31 Dec 2021
$m
60,880
3,648
8,231
31,197
18,995
79,363
4,257
8,660
34,361
20,905
122,951
147,546
C3.2 Reconciliation of gross and reinsurers’ share of policyholder liabilities and unallocated surplus
Claims paid include maturities, annuities, surrenders, deaths and other claim events. Maturity claims are recorded as charges on the policy
maturity date. Annuity claims are recorded when each annuity instalment becomes due for payment. Surrenders are charged to the income
statement when paid. Death and other claims are generally recorded when notified with additional contract liabilities held, where appropriate, for
‘incurred but not reported’ (IBNR) claims.
Further analysis of the movement in the year of the Group’s gross contract liabilities, reinsurers’ share of insurance contract liabilities and
unallocated surplus of with-profits funds (excluding those held by joint ventures and associates) is provided below:
At 1 Jan 2021
Removal of discontinued US operations note (i)
Income (expense) included in the income statement notes (i)(iii)
Other movements note (ii)
Foreign exchange translation differences
Balance at 31 Dec 2021/1 Jan 2022
Income (expense) included in the income statement notes (i)(iii)
Other movements note (ii)
Foreign exchange translation differences
At 31 Dec 2022
Gross
insurance
contract
liabilities
$m
(436,787)
293,325
(9,082)
–
1,789
(150,755)
27,252
–
2,290
(121,213)
Reinsurers’
share of
insurance
contract
liabilities
$m
46,595
(35,232)
(1,552)
–
(58)
9,753
(6,908)
–
(38)
2,807
Investment
contract
liabilities
$m
Unallocated
surplus of
with-profits
funds
$m
(4,459)
3,188
189
(75)
(3)
(1,160)
88
(26)
48
(1,050)
(5,217)
–
(202)
–
35
(5,384)
1,868
–
21
(3,495)
Notes
(i)
(ii)
(iii)
324
The total charge for benefits and claims shown in the income statement comprises the amounts shown as ‘Income (expense) included in the income statement’ in the table above together with
claims paid of $(9,343) million in the year (2021: $(8,845) million) and claim amounts attributable to reinsurers of $740 million (2021: $581 million). Claims incurred, net of reinsurance, shown
in the segment analysis of benefits and claims items below include claims paid and movement in claims outstanding payables, net of reinsurance, in the year.
Other movements include premiums received and claims paid on investment contracts without discretionary participating features, which are taken directly to the statement of financial position
in accordance with IAS 39.
The 2021 movement in the gross contract liabilities included $160 million for the impact of a change to allow for illiquidity premium in the calculation of the valuation interest rate (VIR) used to
value long-term insurance liabilities in Thailand. The 2022 movement in the gross contract liabilities and reinsurers’ share of insurance contract liabilities included the impact from the early
adoption of the Hong Kong Risk-Based Capital Regime as discussed below.
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022
The segmental analysis of the total charge for benefit and claims and movement in unallocated surplus, net of reinsurance in the income
statement is shown below. The CPL segment is a joint venture accounted for using the equity method under IFRS, with the Group’s share of its
results net of related tax presented in a single line within the Group’s profit before tax, and therefore not shown in the analysis of benefit and
claims items below.
Claims incurred, net of reinsurance
Decrease in policyholder liabilities, net of reinsurance
Movement in unallocated surplus of with-profits funds
Benefits and claims and movement in unallocated surplus,
net of reinsurance
Claims incurred, net of reinsurance
(Increase)/decrease in policyholder liabilities, net of
reinsurance
Movement in unallocated surplus of with-profits funds
Benefits and claims and movement in unallocated surplus,
2022 $m
Hong
Kong
(2,033)
15,643
1,815
Indonesia
Malaysia
Singapore
Growth markets
and other
(1,228)
270
–
(1,070)
(135)
53
(2,718)
3,189
–
(1,768)
1,679
–
Total
segment
(8,817)
20,646
1,868
15,425
(958)
(1,152)
471
(89)
13,697
2021 $m
Hong
Kong
Indonesia
Malaysia
Singapore
Growth markets
and other
Total
segment
(1,687)
(1,184)
(1,015)
(3,037)
(1,590)
(8,513)
(6,088)
(250)
167
–
(260)
48
(2,856)
–
(1,159)
–
(10,196)
(202)
net of reinsurance
(8,025)
(1,017)
(1,227)
(5,893)
(2,749)
(18,911)
Hong Kong Risk-Based Capital Regime
In April 2022, the Group’s Hong Kong life business (PHKL) received approval from the Hong Kong Insurance Authority to early adopt the Hong
Kong Risk-Based Capital (HK RBC) regime with effect from 1 January 2022. In light of this development and, given that the measurement
technique set out within the local regulatory basis has been applied by PHKL to calculate IFRS liabilities, the Group has refined the reserving
methodology of PHKL by reference to the method applied under the new HK RBC regime.
Under the basis previously applied, liabilities of non-participating business were generally determined on a net premium valuation basis to
determine the future policyholder benefit provisions, subject to minimum floors. Using the principles underpinning the HK RBC regime, the IFRS
reserving basis has been refined to one that is based on a gross premium valuation basis (including an allowance for the uncertainty of non-
hedgeable risks), subject to minimum floors. Depending on the product, the minimum floor is set at the policyholder’s asset share or guaranteed
cash surrender value or at a constraint that on day one no negative reserve exists at a product level. This new measurement technique better
estimates the liability and brings the estimation basis for PHKL more in line with that used by the Group’s other insurance operations. This change
of estimate has reduced policyholder liabilities (net of reinsurance) and increased profit before tax for 2022 by $945 million.
There has been no change to the reserving basis for with-profits liabilities, which under the Group’s accounting policy are valued under the
realistic basis in accordance with the requirements of the ‘grandfathered’ UK standard FRS 27 ‘Life Assurance’.
C3.3 Reinsurers’ share of insurance contract liabilities
The measurement of reinsurance assets is consistent with the measurement of the underlying direct insurance contracts. The treatment of any
gains or losses arising on the purchase of reinsurance contracts is dependent on the underlying accounting basis of the entity concerned.
Insurance contract liabilities
Claims outstanding
Total operations
31 Dec 2022
$m
31 Dec 2021
$m
2,592
215
2,807
9,550
203
9,753
The Group cedes certain business to other insurance companies. Although the ceding of insurance does not relieve the Group from its liability to its
policyholders, the Group participates in such agreements largely for the purpose of managing its loss exposure. The Group evaluates the financial
condition of its reinsurers and monitors concentration of credit risk from similar geographic regions, activities or economic characteristics of the
reinsurers to minimise its exposure from reinsurer insolvencies.
Of the reinsurers’ share of insurance contract liabilities balance of $2,807 million at 31 December 2022 (31 December 2021: $9,753 million),
98 per cent (31 December 2021: 99 per cent) was from reinsurers with rating A- and above by Standard & Poor’s or other external rating agencies.
The reinsurers’ share of insurance contract liabilities primarily relates to protection business written in Hong Kong. The year-on-year movement
in the reinsurers’ share of insurance contract liabilities included the impact from the early adoption of the Hong Kong Risk-Based Capital Regime
as discussed above in note C3.2. The Group’s Hong Kong business cedes insurance risk to limit exposure to underwriting losses under various
agreements that cover individual risks, group risks or defined blocks of business, on a co-insurance, surplus, quota share, or catastrophe excess of
loss basis. The amount of each risk retained depends on the evaluation of the specific risk, subject to certain circumstances, to maximum limits
based on characteristics of coverage.
Net commissions received during 2022 on ceded business totalled $216 million (2021: $285 million) and claims incurred ceded to external
reinsurers totalled $766 million (2021: $604 million). There was $1 million (2021: $3 million) of deferred gains in the year.
325
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C3 Policyholder liabilities and unallocated surplus continued
C3.4 Products and determining contract liabilities
IFRS 4 requires contracts written by insurers to be classified as either ‘insurance’ contracts or ‘investment’ contracts. The classification of the
contract determines its accounting.
Contracts that transfer significant insurance risk to the Group are classified as insurance contracts. This judgement is applied in considering
whether the material features of a contract gives rise to the transfer of significant insurance risk, which is made at the point of contract inception
and not revisited. For the majority of the Group’s contracts, classification is based on a readily identifiable scenario that demonstrates a significant
difference in cash flows if the covered event occurs (as opposed to does not occur) reducing the level of judgement involved.
Contracts that transfer financial risk to the Group but not significant insurance risk are classified as investment contracts. Insurance contracts
and investment contracts with discretionary participation features are accounted for under IFRS 4. Investment contracts without such
discretionary participation features are accounted for as financial instruments under IAS 39.
Investment contracts without discretionary participation features are measured in accordance with IAS 39 to reflect the deposit nature of the
arrangement, with premiums and claims reflected as deposits and withdrawals, and taken directly to the statement of financial position as
movements in the financial liability balance.
Investment contracts without fixed and guaranteed terms are classified as financial instruments and designated as FVTPL because the
resulting liabilities are managed and their performance is evaluated on a fair value basis. Where the contract includes a surrender option, its
carrying value is subject to a minimum carrying value equal to its surrender value.
Other investment contracts are measured at amortised cost.
The table below provides description of material feature of each of the products listed above, together with how their contract liabilities are
determined.
Contract type
Description and material features
Determination of liabilities
With-profits and
participating
contracts
Provides savings and/or protection where the
basic sum assured can be enhanced by a profit
share (or bonus) from the underlying fund as
determined at the discretion of the business
unit.
As explained in note A3.1, with-profits contracts are predominantly sold
in Hong Kong, Malaysia and Singapore. The total value of the
with-profits funds is driven by the underlying asset valuation with
movements reflected principally in the accounting value of
policyholder liabilities and unallocated surplus.
Participating products often offer a
guaranteed maturity or surrender value.
Declared regular bonuses are guaranteed once
vested. Future bonus rates and cash dividends
are not guaranteed. Market value adjustments
and surrender penalties are used for certain
products where the law permits such
adjustments. Guarantees are predominantly
supported by the segregated funds and their
estates.
Combines savings with protection, the cash
value of the policy primarily depends on the
value of the underlying unitised funds.
Unit-linked
In Hong Kong, the unallocated surplus includes the shareholders’ share
of expected future bonuses, with the expected policyholder share
being included in policyholder liabilities. Any excess of assets over
liabilities and amounts expected to be paid out by the fund on future
bonuses is also included in the unallocated surplus.
The attaching liabilities largely reflect the unit value obligation driven
by the value of the investments of the unit fund. Additional contract
liabilities are held for guaranteed benefits beyond the unit fund value,
generally using a gross premium valuation method, as discussed below
for health and protection business. These additional provisions are
recognised as a component of other business liabilities.
326
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 Contract type
Description and material features
Determination of liabilities
Health and
protection
Health and protection features are offered as
supplements to the products listed above or
sold as standalone products. Protection covers
mortality and/or morbidity benefits including
health, disability, critical illness and accident
coverage.
The approach to determine the contract liabilities is generally driven by
the local solvency basis. The discount rates used to determine the
contract liabilities are derived in line with the measurement basis
applied in each business unit and are generally based on the risk-free
rates applicable to the underlying contracts, including appropriate
margins.
A gross premium valuation (GPV) method is typically used in those
local businesses where a risk-based capital framework is adopted for
local solvency. Under the GPV method, all cash flows are valued
explicitly using best estimate assumptions with a suitable margin for
prudence.
This is achieved either through adding an explicit allowance above best
estimate to the assumptions, or by applying an overlay constraint such
that on day one no negative reserves (ie where future premium inflows
are expected to exceed future claims and outflows) are derived at an
individual policyholder level, or at a product/fund level, or a
combination of both. The margin for prudence is released to profit over
the life of the contract. Best estimate assumptions are reviewed
annually with reference to experience and expectations around the
short-term nature of any change (for example increases or decreases in
claims levels as a result of Covid-19). Any changes made to best
estimate impact the prudence mechanisms described above and, as a
consequence, IFRS profit tends to be relatively insensitive to
assumption changes made in any given year.
Prior to the adoption of the new HK RBC regime in 2022, the Hong
Kong business unit applied a net premium valuation method (NPV) to
determine the future policyholder benefit provisions, subject to
minimum floors at the policyholder’s asset share or guaranteed cash
surrender value as appropriate. Upon the adoption of the HK RBC
regime, the gross premium valuation method (including an allowance
for the uncertainty of non-hedgeable risks), subject to minimum floors
is applied.
For India and Taiwan, US GAAP is applied for measuring insurance
liabilities. For these businesses, the future policyholder benefit
provisions for non-linked business are determined using the net level
premium method, with an allowance for surrenders, maintenance and
claims expenses.
In Vietnam, an estimation basis to determine the contract liabilities is
aligned substantially to that used by the business units applying the
GPV method.
The approach to determining the contract liabilities is generally driven
by the local solvency basis, as discussed for health and protection
business above.
327
Non-participating
term contracts,
whole life and
endowment
assurance
Non-participating savings and/or protection
where the benefits are guaranteed, determined
by a set of defined market-related parameters,
or determined at the discretion of the business
unit. These products often offer a guaranteed
maturity and/or surrender value. It is common
for regulations or market-driven demand and
competition to provide some form of capital
value protection and minimum crediting
interest rate guarantees. This is reflected within
the guaranteed maturity and surrender values.
Guarantees are supported by shareholders.
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C4 Intangible assets
C4.1 Goodwill
Business combination
Business acquisitions are accounted for by applying the purchase method of accounting, which adjusts the net assets of the acquired company to
fair value at the date of purchase. The excess of the acquisition consideration over the fair value of the assets and liabilities of the acquired
business is recorded as goodwill. The Group chooses the full goodwill method or the partial goodwill method to calculate goodwill on an acquisition
by acquisition basis. Expenses related to acquiring new subsidiaries are charged to the income statement in the period in which they are incurred
and not included in goodwill. Income and expenses of acquired businesses are included in the income statement from the date of acquisition.
Where the Group writes a put option, which if exercised triggers the purchase of non-controlling interests as part of its business acquisition, the
put option is recognised as a financial liability at the acquisition date. Where risks and rewards remain with the non-controlling interests, a
corresponding amount is deducted from equity. Any subsequent changes to the carrying amount of the put option liability are also recognised
within equity.
Goodwill
Goodwill is capitalised and carried on the Group consolidated statement of financial position as an intangible asset at initial value less any
accumulated impairment losses. Goodwill impairment testing is conducted annually and when there is an indication of impairment.
Goodwill shown on the consolidated statement of financial position at 31 December 2022 represents amounts allocated to business units in
respect of both acquired asset management and life businesses. There has been no impairment as at 31 December 2022 and 2021.
Carrying value at 1 Jan
Exchange differences
Carrying value at 31 Dec
2022 $m
2021 $m
907
(17)
890
961
(54)
907
Impairment testing
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to cash-generating units for the purposes of
impairment testing. These cash-generating units (CGUs) are based upon how management monitors the business and represent the lowest level
to which goodwill can be allocated on a reasonable basis. Of the carrying value at 31 December 2022, $445 million (31 December 2021:
$465 million) relates to asset management business in Thailand and $234 million (31 December 2021: $233 million) relates to the acquisition of
UOB Life in Singapore. Other goodwill amounts are allocated across CGUs, which are not individually material.
Goodwill is tested for impairment by comparing the CGU’s carrying amount, including any goodwill, with its recoverable amount. The Group’s
methodology of assessing whether goodwill may be impaired for acquired life and asset management operations is discussed below.
For acquired life businesses, the Group routinely compares the aggregate of net asset value and acquired goodwill on an IFRS basis of the
acquired life business with the value of the current in-force business as determined using the EEV methodology. Any excess of IFRS value over EEV
carrying value is then compared with EEV basis value of current and projected future new business to determine whether there is any indication
that the goodwill in the IFRS statement of financial position may be impaired. The methodology and assumptions underpinning the Group’s EEV
basis of reporting are included in the EEV basis supplementary information in this Annual Report.
The goodwill in respect of asset management businesses comprises mainly the goodwill arising from the acquisition of Thanachart Fund
Management Co., Ltd in 2019 and TMB Asset Management Co., Ltd in Thailand in 2018. The goodwill impairment testing for these businesses is
prepared as a single CGU reflecting that these businesses are managed together. The recoverable amount of these businesses has been
determined by calculating the value in use of combined business calculated using a discounted cash flow valuation.
For the combined Thailand asset management business, the valuation is based on a number of key assumptions as follows:
> Cash flow projections based on the latest five-year business plan/forecast;
> A constant growth rate of 3.5 per cent (2021: 2.3 per cent) on forecast cash flows beyond the terminal year of the cash flow projection period;
> The risk discount rate applied in accordance with the nature of the businesses. The pre-tax discount rate applied is 9.0 per cent (2021:
9.0 per cent); and
> The continuation of asset management contracts on similar terms.
The key assumptions used in the impairment testing, including the cash flow projections, are subject to fluctuations in the external market and
economic conditions. The recent adverse conditions had contributed to reduced cash flow projections leading to a fall in the headroom in
comparison to the prior year. While management believes that any reasonable change in each of the key assumptions would not cause the
recoverable amount of the asset management businesses acquired to fall below its carrying amount, a more significant adverse change in the key
assumptions applied concurrently could lead to impairment charges.
328
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 C4.2 Deferred acquisition costs and other intangible assets
Intangible assets acquired on the purchase of a subsidiary or portfolio of contracts are measured at fair value on acquisition. DAC are accounted
for as described in note A3.1(c). Other intangible assets, such as distribution rights and software, are valued initially at the price paid to acquire or
cost to develop them and are subsequently carried at cost less amortisation and any accumulated impairment losses. For intangibles other than
DAC, amortisation follows the pattern in which the future economic benefits are expected to be consumed. If the pattern cannot be determined
reliably, a straight-line method is applied. For software, the amortisation generally represents the licence period of the software acquired.
Amortisation of intangible assets is charged to the ‘acquisition costs and other expenditure’ line in the Consolidated income statement.
Impairment testing is conducted when there is an indication of impairment.
Shareholder-backed business:
DAC related to insurance contracts as classified under IFRS 4
DAC related to investment management contracts, including life assurance contracts classified as financial instruments
and investment management contracts under IFRS 4
DAC related to insurance and investment contracts
Distribution rights
Present value of acquired in-force policies for insurance contracts as classified under IFRS 4
Other intangibles
Present value of acquired in-force and other intangibles
Total of DAC and other intangible assets attributable to shareholders
Other intangible assets, including computer software, attributable to with-profits funds
Total of deferred acquisition costs and other intangible assets
(a) Movement in DAC and other intangible assets attributable to shareholders
31 Dec 2022
$m
31 Dec 2021
$m
3,215
39
3,254
3,630
17
209
3,856
7,110
45
7,155
2,776
39
2,815
3,782
28
184
3,994
6,809
49
6,858
Balance at 1 Jan
Removal of discontinued US operations
Additions
Amortisation to the income statement
Disposals and transfers
Exchange differences and other movements
Balance at 31 Dec
2022 $m
2021 $m
Distribution
rights
note (i)
PVIF and other
intangibles
notes (ii)(iii)
Total
Total
3,782
–
206
(301)
–
(57)
3,630
212
–
76
(50)
(5)
(7)
226
6,809
–
1,284
(826)
(5)
(152)
7,110
20,275
(13,881)
1,185
(651)
(7)
(112)
6,809
DAC
2,815
–
1,002
(475)
–
(88)
3,254
Notes
(i)
Distribution rights relate to amounts that have been paid or have become unconditionally due for payment as a result of past events in respect of the bancassurance partnership arrangements
for the bank distribution of Prudential’s insurance products for a fixed period of time. The distribution rights amounts are amortised on a basis to reflect the pattern in which the future economic
benefits are expected to be consumed by reference to new business production levels.
All of the net PVIF balances relate to insurance contracts. The PVIF attaching to investment contracts have been fully amortised.
(ii)
(iii) Other intangibles comprise other intangible assets such as software rights. Software rights include additions of $58 million, amortisation of $(24) million, disposals of $(3) million, foreign
exchange of $(7) million and closing balance at 31 December 2022 of $138 million (31 December 2021: $114 million).
(b) Movement in DAC related to insurance and investment contracts
Balance at 1 Jan
Removal of discontinued US operations
Additions
Amortisation
Exchange differences and other movements
Balance at 31 Dec
2022 $m
2021 $m
Insurance
contracts
Investment
contracts
note
Insurance
contracts
Investment
contracts
note
2,776
–
993
(470)
(84)
3,215
39
–
9
(5)
(4)
39
16,182
(13,863)
841
(339)
(45)
2,776
34
–
7
(4)
2
39
Note
The carrying amount of the DAC balance relating to investment contracts comprises the following gross and accumulated amortisation amounts:
Gross amount
Accumulated amortisation
Carrying amount
31 Dec 2022
$m
31 Dec 2021
$m
59
(20)
39
55
(16)
39
329
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C4 Intangible assets continued
C4.2 Deferred acquisition costs and other intangible assets continued
(c) Movement in PVIF and other intangibles attributable to shareholders
2022 $m
2021 $m
PVIF
Distribution
rights
Other
intangibles
(including
software)
Total
PVIF
Distribution
rights
Other
intangibles
(including
software)
140
(112)
28
–
–
(10)
–
(1)
17
134
(117)
17
5,037
(1,255)
3,782
–
206
(301)
–
(57)
3,630
5,176
(1,546)
3,630
313
(129)
184
–
76
(40)
(5)
(6)
209
373
(164)
209
5,490
(1,496)
3,994
–
282
(351)
(5)
(64)
3,856
5,683
(1,827)
3,856
177
(143)
34
–
–
(5)
–
(1)
28
140
(112)
28
4,845
(994)
3,851
–
260
(268)
–
(61)
3,782
5,037
(1,255)
3,782
424
(250)
174
(18)
77
(35)
(7)
(7)
184
313
(129)
184
Total
5,446
(1,387)
4,059
(18)
337
(308)
(7)
(69)
3,994
5,490
(1,496)
3,994
Balance at 1 Jan
Cost
Accumulated amortisation
Removal of discontinued US operations
Additions
Amortisation charge
Disposals and transfers
Exchange differences and other
movements
Balance at 31 Dec
Comprising:
Cost
Accumulated amortisation
C5 Borrowings
Although initially recognised at fair value (net of transaction costs), borrowings are subsequently accounted for on an amortised cost basis using
the effective interest method. Under the effective interest method, the difference between the redemption value of the borrowing and the initial
proceeds (net of related issue costs) is amortised through the income statement to the date of maturity or, for hybrid debt, over the expected life of
the instrument.
C5.1 Core structural borrowings of shareholder-financed businesses
Subordinated debt:
US$1,000m 5.25% Notes note (i)
US$725m 4.375% Notes note (ii)
US$750m 4.875% Notes
€20m Medium Term Notes 2023
£435m 6.125% Notes 2031
US$1,000m 2.95% Notes 2033
Senior debt: note (iii)
£300m 6.875% Notes 2023 note (iv)
£250m 5.875% Notes 2029
US$1,000m 3.125% Notes 2030
US$350m 3.625% Notes 2032 note (v)
Bank loans:
US$350m Loan 2024 note (v)
31 Dec 2022
$m
31 Dec 2021
$m
–
–
750
21
520
995
361
281
987
346
–
1,000
725
748
23
584
995
404
313
985
–
350
Total core structural borrowings of shareholder-financed businesses
4,261
6,127
Notes
(i)
(ii)
(iii)
(iv)
(v)
330
The US$1,000 million notes were redeemed on 20 January 2022 using the proceeds from the issuance of ordinary shares during 2021 as discussed in note C8.
The US$725 million notes were redeemed on 20 January 2022 using the proceeds from the US$1,000 million subordinated debt issued in November 2021.
The senior debt ranks above subordinated debt in the event of liquidation.
The £300 million notes were redeemed on 20 January 2023.
In March 2022, the Company issued US$350 million 3.625 per cent senior debt maturing on 24 March 2032 with proceeds, net of costs, of US$346 million, which was used to redeem the
US$350 million bank loan in May 2022.
prudentialplc.com
C Financial position / continuedPrudential plc Annual Report 2022 C5.2 Operational borrowings
Shareholder-financed business:
Borrowings in respect of short-term fixed income securities programmes – commercial paper
Lease liabilities under IFRS 16
Other borrowings
Operational borrowings attributable to shareholder-financed businesses
With-profits business:
Lease liabilities under IFRS 16
Other borrowings
Operational borrowings attributable to with-profits businesses
Total operational borrowings
C6 Risk and sensitivity analysis
31 Dec 2022
$m
31 Dec 2021
$m
501
185
11
697
114
4
118
815
500
209
10
719
138
4
142
861
Group overview
The Group’s risk framework and the management of risks attaching to the Group’s consolidated financial statements including financial assets,
financial liabilities and insurance liabilities, together with the inter-relationship with the management of capital, have been included in the audited
sections of the Risk review report.
The financial and insurance assets and liabilities on the Group’s statement of financial position are, to varying degrees, subject to market and
insurance risk and other changes of experience assumptions that may have a material effect on IFRS basis profit or loss and shareholders’ equity.
The market and insurance risks and also ESG-related risks, including how they affect Group’s operations and how these are managed are discussed
in the Risk review report referred to above. The ESG-related risks discussed in the Risk review report include in particular the potential long-term
impact of environmental risks associated with climate change (including physical and transition risks) on the Group’s investments and liabilities.
The ESG Report included in this Annual Report sets out three commonly used scenarios of plausible global responses to climate change. Each
scenario is translated into potential sensitivities to economic factors, using third party calibrated inputs, which have then been applied during the
year to the Group’s starting assets and liabilities to quantify possible future impacts thereon. Though the Group remains exposed to financial
impact from plausible global responses addressing climate change, the results for each scenario are not outside observed market volatility
experienced and therefore do not indicate the need for explicit allowance for climate change within the current valuations. In addition, given the
nature of the business, the impact of climate change does not directly alter the Group’s assumptions for claims and lapses for its insurance
business based on the annual review of experience. If experience or exposure changes, for example due to a step change in long-term morbidity
and/or mortality expectations in a particular region due to climate events, the financial impacts from climate-related risks on our insurance
liabilities could be more significant and would be allowed for as part of the regular review.
The most significant market and credit risks that the IFRS shareholders’ profit or loss and shareholders’ equity for the Group’s life assurance
business are sensitive to, are shown in the following tables. The distinction between direct and indirect exposure is not intended to indicate the
relative size of the sensitivity. In addition, insurance businesses are sensitive to mortality and/or morbidity risk as well as persistency risk depending
on the products sold.
Type of business
With-profits business
Unit-linked business
Market and credit risk
Net neutral direct exposure (indirect exposure to investment performance, which is subject to smoothing
through declared bonuses)
Net neutral direct exposure (indirect exposure to investment performance, through asset management
fees)
Non-participating business
Asset/liability mismatch risk which results in sensitivity to interest rates and credit spreads, particularly for
operations where the insurance liability basis is sensitive to current market movements
Profit and shareholders’ equity are also sensitive to the impact of current market movements on assets
held in excess of non-participating policyholder liabilities
Indirect exposure to investment performance through policyholder charges and guarantees in some
cases
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C6 Risk and sensitivity analysis continued
Sensitivity analyses of IFRS shareholders’ equity to key market and other risks for the insurance operations are provided in section C6.1 below. The
sensitivity analyses provided show the effect on shareholders’ equity to changes in the relevant risk variables, all of which are considered to be
reasonably possible at the relevant balance sheet date.
The sensitivity of the Group’s Eastspring and central operations to market risks is discussed in section C6.2.
The Group benefits from diversification benefits achieved through the geographical spread of the Group’s operations and, within those
operations, through a broad mix of product types. These benefits are not reflected in the simplified sensitivities below.
Relevant correlation factors include:
> Correlation across geographic regions for both financial and non-financial risk factors; and
> Correlation across risk factors for mortality and morbidity, expenses, persistency and other risks.
The geographical diversity of the Group’s business means that it has some exposure to the risk of foreign exchange rate fluctuations. The Group
has no exposure to currency fluctuation from business units that operate in USD, or currencies pegged to the USD (such as HKD), and reduced
exposure to currencies partially managed to the USD within a basket of currencies (such as SGD). Sensitivities to exchange rate movements in the
Group’s key markets are therefore expected to be limited.
C6.1 Insurance operations
(a) Sensitivity to key market risks
The table below shows the sensitivity of shareholders’ equity as at 31 December 2022 and 2021 for insurance operations to the following market risks:
> 1 per cent increase and 0.5 per cent decrease in interest rates (based on local government bond yields at the valuation date) in isolation and
subject to a floor of zero; and
> Instantaneous 10 per cent rise and 20 per cent fall in the market value of equity and property assets. The equity risk sensitivity analysis assumes
that all equity indices fall by the same percentage.
The sensitivities below only allow for limited management actions such as changes to policyholder bonuses, where applicable. If the economic
conditions set out in the sensitivities persisted, the financial impacts may differ to the instantaneous impacts shown below. Given the continuous
risk management processes in place, management could take additional actions to help mitigate the impact of these stresses, including (but not
limited to) rebalancing investment portfolios, increased use of reinsurance, repricing of in-force benefits, changes to new business pricing and the
mix of new business being sold.
Where liabilities are valued using historic average rates for a short period (ie up to three years), the valuation interest rates are adjusted to
assume a parallel increase or decrease in the interest rates used in the averaging approach to reflect the impact that could be seen in the near
term. Credit risk sensitivities, such as the impact on the value of debt securities and policyholder liabilities from movements in credit spreads are not
presented below. A one-letter credit downgrade in isolation (ie ignoring any consequential change in valuation) would not have a material impact
on IFRS profit or shareholders’ equity.
Net effect on shareholders’ equity from insurance operations
Shareholders’ equity of insurance operations
Sensitivity to key market risks: note
Interest rates and consequential effects – 1% increase
Interest rates and consequential effects – 0.5% decrease
Equity/property market values – 10% rise
Equity/property market values – 20% fall
31 Dec 2022
$m
31 Dec 2021
$m
14,407
14,289
(386)
(122)
190
(729)
(796)
137
372
(787)
Note
The effect from the changes in interest rates or equity and property prices above, if they arose, would impact profit after tax for the insurance operations and would mostly be recorded within short-term
fluctuations in investment returns. The impact on profit after tax would be the same as the net effect on shareholders’ equity. Changes to the results of the Africa insurance operations from interest rate
or equity rate changes would not materially impact the Group.
The degree of sensitivity of the results of the non-linked shareholder-backed business of the insurance operations to movements in interest rates
depends upon the degree to which the liabilities under the ‘grandfathered’ IFRS 4 measurement basis reflects market interest rates from period to
period. This varies by business unit.
For example:
> Taiwan and India businesses apply US GAAP, for which the results can be more sensitive as the effect of interest rate movements on the backing
investments may not be offset by liability movements; and
> The level of options and guarantees in the products written in a particular business unit will affect the degree of sensitivity to interest rate
movements.
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C Financial position / continuedPrudential plc Annual Report 2022 The sensitivity of the insurance operations presented as a whole at a given point in time will also be affected by a change in the relative size of the
individual businesses.
The ‘increase of 1%’ sensitivities reflect that, for many operations the impact of interest rate movements on the value of government and
corporate bond investments dominates, namely bonds are expected to decrease in value as interest rates increase to a greater extent than the
offsetting decrease in liabilities from a corresponding change in discount rates. This arises because the discount rate in some operations does not
fluctuate in line with interest rate movements. Under a 0.5% decrease interest rate scenario although in the majority of operations asset gains
exceed the increase in liabilities, there are a number of operations where the increase in liabilities dominates, driven by an increase in the value of
policyholder guarantees, hence this results in an overall small negative impact of an instantaneous decrease of rates at 31 December 2022.
Movements in equities backing with-profits and unit-linked business have been excluded from the equity and property sensitivities as they are
generally matched by an equal movement in insurance liabilities (including unallocated surplus of with-profits funds). The impact on changes to
future profitability as a result of changes to the asset values within unit-linked or with-profits funds have not been included in the instantaneous
sensitivity above. The estimated sensitivities shown above include equity and property investments held by the Group’s joint venture and
associate businesses. Generally, changes in equity and property investment values held outside unit-linked and with-profits funds are not directly
offset by movements in non-linked policyholder liabilities. For Hong Kong’s non-participating business, liabilities largely reflect asset shares post
the adoption of HK RBC and therefore the consequential movements in equities are offset by movements in policyholder liabilities.
(b) Sensitivity to insurance risk
For insurance operations, adverse persistency experience can impact the IFRS profitability of certain types of business written. This risk is
managed at a business unit level through regular monitoring of experience and the implementation of management actions as necessary.
These actions could include product enhancements, increased management focus on premium collection, as well as other customer retention
efforts. The potential financial impact of lapses is often mitigated through the specific features of the products, eg surrender charges, or through
the availability of premium holiday or partial withdrawal policy features. The reserving basis, as discussed in note A3.1(a) and C3.4, is generally
such that a change in lapse assumptions has an immaterial effect on immediate profitability.
Many of the business units are exposed to mortality and morbidity risk and a provision is made within policyholder liabilities to cover the
potential exposure. If all these assumptions were strengthened by 5 per cent then it is estimated that profit after tax and shareholders’ equity
would decrease by approximately $(101) million (2021: $(108) million), before consideration of other reserving adjustments eg a corresponding
release of margin for prudence. Weakening these assumptions by 5 per cent would have a similar opposite impact.
C6.2 Eastspring and central operations
The profit for the year of Eastspring is sensitive to the level of assets under management, as this significantly affects the value of management
fees earned by the business in the current and future periods. Assets under management will rise and fall as market conditions change, with a
consequential impact on profitability.
Eastspring holds a small amount of investments direct on its balance sheet, including investments in respect of seeding capital into retail funds
it sells to third parties (see note C1). Eastspring’s profit will therefore have some exposure to the market movements of these investments.
At 31 December 2022, the Group’s central operations held a 9.2 per cent (31 December 2021: 18.4 per cent) economic interest in the equity
securities of Jackson. These equity securities are listed on the New York Stock Exchange and classified as available-for-sale with a fair value of
$266 million at 31 December 2022 (31 December 2021: $683 million). If the value of these securities decreased by 20 per cent, the change in
valuation would be $(53) million (31 December 2021: $(137) million), which would reduce shareholders’ equity by this amount before tax, all of
which would pass through other comprehensive income outside of the profit or loss.
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C7 Tax assets and liabilities
Accounting policies on deferred tax are included in note B3.
C7.1 Current tax
At 31 December 2022, of the $18 million (31 December 2021: $20 million) current tax recoverable, the majority is expected to be recovered within
12 months after the reporting period.
At 31 December 2022, the current tax liability from operations of $208 million (31 December 2021: $185 million) includes $79 million
(31 December 2021: $42 million) of provisions for uncertain tax matters. Further detail is provided in note B3.2.
C7.2 Deferred tax
The statement of financial position contains the following deferred tax assets and liabilities in relation to:
Deferred tax assets
Unrealised losses or gains on investments
Balances relating to investment and insurance contracts
Short-term temporary differences
Unused tax losses
Total deferred tax assets
Deferred tax liabilities
Unrealised losses or gains on investments
Balances relating to investment and insurance contracts
Short-term temporary differences
Total deferred tax liabilities
Deferred tax assets
Unrealised losses or gains on investments
Balances relating to investment and insurance contracts
Short-term temporary differences
Unused tax losses
Total deferred tax assets
Deferred tax liabilities
Unrealised losses or gains on investments
Balances relating to investment and insurance contracts
Short-term temporary differences
Total deferred tax liabilities
2022 $m
Balance
at 1 Jan
Movement in
income
statement
Other
movements
including
foreign
exchange
movements
3
34
162
67
266
(242)
(2,125)
(495)
(2,862)
317
1
(15)
(32)
271
44
(228)
(81)
(265)
2021 $m
Balance
at 1 Jan
Removal of
discontinued
US operations
Movement in
income
statement
–
87
4,662
109
4,858
(1,063)
(1,765)
(3,247)
(6,075)
–
–
(4,513)
(29)
(4,542)
691
–
2,832
3,523
3
(16)
15
(14)
(12)
127
(433)
(87)
(393)
(178)
(33)
(12)
(4)
(227)
185
47
23
255
Other
movements
including
foreign
exchange
movements
–
(37)
(2)
1
(38)
3
73
7
83
Balance
at 31 Dec
142
2
135
31
310
(13)
(2,306)
(553)
(2,872)
Balance
at 31 Dec
3
34
162
67
266
(242)
(2,125)
(495)
(2,862)
At 31 December 2022, no deferred tax asset has been recognised in respect of unused tax losses and temporary deductible differences of
$2,235 million (31 December 2021: $1,382 million). $837 million of the unused tax losses expired at the point of Prudential plc’s tax residency
change from the UK to Hong Kong on 3 March 2023. A further $103 million (31 December 2021: $108 million) relates to unused tax losses that will
expire within the next ten years (potential tax benefit: $22 million), and the remainder of $1,295 million (31 December 2021: $1,274 million) has
no expiry date (potential tax benefit: $277 million).
Some of the Group’s businesses are located in jurisdictions in which a withholding tax charge is incurred upon the distribution of earnings. At
31 December 2022, deferred tax liabilities of $216 million (31 December 2021: $330 million) have not been recognised in respect of such
withholding taxes as the Group is able to control the timing of the distributions and it is probable that the timing differences will not reverse in the
foreseeable future.
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C Financial position / continuedPrudential plc Annual Report 2022 C8 Share capital, share premium and own shares
Shares are classified as equity when their terms do not create an obligation to transfer assets. Amounts recorded in share capital represent the
nominal value of the shares issued. The difference between the proceeds received on issue of the shares, net of share issue costs, and the nominal
value of the shares issued, is credited to share premium. Where the Company purchases shares for the purposes of employee incentive plans, the
consideration paid, net of issue costs, is deducted from retained earnings. Upon issue or sale any consideration received is credited to retained
earnings net of related costs.
Issued shares of 5p each fully paid
Balance at 1 Jan
Shares issued under share-based schemes
Shares issued under Hong Kong public offer and
international placing in 2021 note
Balance at 31 Dec
2022
2021
Number of
ordinary
shares
2,746,412,265
3,257,115
–
2,749,669,380
Share
capital
$m
182
–
–
182
Share
premium
$m
5,010
2
Number of
ordinary
shares
2,609,489,702
6,142,213
(6)
130,780,350
5,006
2,746,412,265
Share
capital
$m
Share
premium
$m
173
–
9
182
2,637
8
2,365
5,010
Note
In October 2021, Prudential completed the issuance of new ordinary shares on the Hong Kong Stock Exchange, resulting in net proceeds and an increase in shareholders’ equity of $2.4 billion. The
proceeds from this issuance were used to redeem high coupon debt instruments of US$1.3 billion in total in December 2021 and US$1.0 billion in January 2022, with the remainder used to increase
Prudential’s central stock of liquidity, as originally intended and disclosed in Prudential’s prospectus for the issuance.
Options outstanding under save as you earn schemes to subscribe for shares at each year end shown below are as follows:
31 Dec 2022
31 Dec 2021
Number of
shares to
subscribe for
1,858,292
2,022,535
Share price range
from
737p
964p
to
Exercisable by
year
1,455p
1,455p
2028
2027
Transactions by Prudential plc and its subsidiaries in Prudential plc shares
The Group buys and sells Prudential plc shares (‘own shares’) in relation to its employee share schemes. The cost of own shares of $270 million at
31 December 2022 (31 December 2021: $267 million) is deducted from retained earnings. The Company has established trusts to facilitate the
delivery of shares under employee incentive plans. At 31 December 2022, 12.6 million (31 December 2021: 11.7 million) Prudential plc shares with
a market value of $174 million (31 December 2021: $201 million) were held in such trusts, all of which are for employee incentive plans. The
maximum number of shares held during the year was 13.0 million which was in September 2022.
Within the trusts, shares are notionally allocated by business unit reflecting the employees to which the awards were made.
The trusts purchased the following number of shares in respect of employee incentive plans:
2022
Share price
Low
£
12.93
12.43
10.37
10.64
8.95
10.13
10.06
9.81
9.24
9.06
8.99
10.63
High
£
13.14
12.49
10.96
11.29
9.05
11.70
10.15
9.95
9.73
9.30
9.04
10.74
Cost
$
1,120,889
1,098,500
1,055,044
58,880,934
5,288,807
2,402,464
1,052,807
1,029,843
1,000,619
1,675,634
837,944
1,240,296
76,683,781
Number
of shares
74,817
69,865
55,545
2,438,884
52,989
121,472
60,473
57,004
312,226
436,771
53,867
76,926
3,810,839
2021
Share price
Low
£
14.12
12.42
14.91
15.45
15.82
14.62
13.62
14.20
14.89
14.48
14.77
13.20
High
£
14.48
12.96
15.49
15.55
15.96
14.89
13.78
14.37
15.24
14.99
14.83
13.24
Cost
$
1,443,158
1,251,067
1,189,784
52,512,098
1,183,836
2,508,974
1,145,078
1,128,450
7,961,098
8,410,274
1,072,374
1,355,942
81,162,133
Number
of shares
63,019
65,223
73,193
4,024,410
460,897
196,180
87,338
86,540
90,843
175,837
79,326
95,680
5,498,486
January
February
March
April
May
June
July
August
September
October
November
December
Total
The cost in USD shown has been calculated from the share prices in pounds sterling using the monthly average exchange rate for the month in
which those shares were purchased.
A portion of the share purchases in respect of employee incentive plans as shown in the table above were made on the Hong Kong Stock
Exchange with the remainder being made on the London Stock Exchange.
Other than set out above, the Group did not purchase, sell or redeem any Prudential plc listed securities during 2022.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C9 Provisions
Staff benefits provisions note (i)
Other provisions
Total provisions note (ii)
Notes
(i)
(ii)
Provisions for staff benefits are generally expected to be paid out within the next three years.
Analysis of movement in total provisions is shown below:
Balance at 1 Jan
Removal of discontinued US operations
Charged (credited) to income statement:
Additional provisions
Unused amounts released
Utilisation during the year
Exchange differences
Balance at 31 Dec
C10 Capital
31 Dec 2022
$m
31 Dec 2021
$m
341
7
348
355
17
372
2022 $m
2021 $m
372
–
231
(20)
(221)
(14)
348
350
(14)
263
(15)
(204)
(8)
372
C10.1 Group objectives, policies and processes for managing capital
(a) Capital measure
The Group manages its Group GWS capital resources as its measure of capital. At 31 December 2022, estimated Group shareholder GWS capital
resources is $23.2 billion (31 December 2021: $25.5 billion). The impacts of regulatory updates, estimated as at 31 December 2021, and
$1.7 billion debt redemption in January 2022, are included within the 31 December 2021 capital resources.
(b) External capital requirements
Prudential plc is subject to the Group-wide Supervision (GWS) Framework issued by the Hong Kong Insurance Authority (IA).
Prudential applies the Insurance (Group Capital) Rules set out in the GWS Framework to determine group regulatory capital requirements (both
minimum and prescribed levels). The summation of local statutory capital requirements across the Group is used to determine group regulatory
capital requirements, with no allowance for diversification between business operations. The GWS eligible group capital resources are determined
by the summation of capital resources across local solvency regimes for regulated entities and IFRS shareholders’ equity, with adjustments where
applicable, for non-regulated entities.
The recent trend to more risk-based capital regimes being adopted in many of the Group’s markets is continuing and this impacts on the Group’s
GWS capital measure, which is underpinned by the local regulatory regimes of the Group’s subsidiaries, joint ventures and associates. C-ROSS
Phase II became effective in the Chinese Mainland in the first quarter of 2022 and, in April 2022, Prudential Hong Kong Limited received approval
from the Hong Kong IA to early adopt the new risk-based capital regime (HK RBC) effective from 1 January 2022.
More details on Group capital are given in section I(i) in the Additional unaudited financial information section.
(c) Meeting of capital management objectives
The GWS group capital adequacy requirements have been met since the GWS Framework became effective for Prudential upon designation. This
includes maintaining total eligible group capital resources in excess of the Group Prescribed Capital Requirement (GPCR) of the supervised group
and maintaining Tier 1 group capital resources in excess of the Group Minimum Capital Requirement (GMCR) of the supervised group.
The Group’s capital management framework focuses on achieving sustainable, profitable growth and maintaining a resilient balance sheet,
with a disciplined approach to active capital allocation. As well as holding sufficient capital to meet GWS requirements at Group level, the Group
also closely manages the cash it holds within its central holding companies so that it can:
> Fund new opportunities;
> Maintain flexibility and absorb shock events;
> Cover central costs; and
> Fund dividends.
More details on holding company cash flows and balances are given in section I(v) in the Additional unaudited financial information section.
The Group monitors regulatory capital, economic capital and rating agency capital metrics and manages the business within its risk appetite by
remaining within its economic and regulatory capital limits. Reserve adequacy testing under a range of scenarios and dynamic solvency testing is
carried out, including under certain scenarios mandated by the local regulators.
The sensitivity of liabilities and other components of total capital vary depending upon the type of business concerned and this conditions the
approach to asset/liability management.
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C Financial position / continuedPrudential plc Annual Report 2022 C10.2 Local capital regulations
(a) Insurance operations
For regulated insurance entities, the capital resources and required capital included in the GWS capital measure for Hong Kong IA Group
regulatory purposes are based on the local solvency regime applicable in each jurisdiction. The local valuation basis for the assets, liabilities and
capital requirements of significant insurance operations are:
CPL
A risk-based capital, risk management and governance framework, known as the China Risk Oriented Solvency System (C-ROSS), applies in the
Chinese Mainland. Under C-ROSS, insurers are required to maintain a core solvency ratio (core capital over minimum capital) and a comprehensive
solvency ratio (capital resources over minimum capital) of not lower than 50 per cent and 100 per cent, respectively.
The actual capital is the difference between the admitted assets and admitted liabilities with trading and AFS assets marked-to-market and
other assets at book value. Policyholder liabilities are based on a gross premium valuation method using best estimate assumptions with a
separate risk margin.
The final regulations of C-ROSS Phase II became effective in the first quarter of 2022. The main updates to the local regulation were to
introduce explicit tiering and admissibility rules on negative reserves in the capital resources and further updates to the risk calibrations used in
calculating capital requirements.
Hong Kong
In April 2022, Prudential Hong Kong Limited received approval from the Hong Kong IA to early adopt the new risk-based capital regime (HK RBC)
effective from 1 January 2022. The HK RBC framework requires liabilities to be based on a gross premium valuation method using best estimate
assumptions and capital requirements to be risk-based, resulting in the release of prudent regulatory margins previously included in liabilities and
an increase in required capital.
Indonesia
Solvency capital is determined using a risk-based capital approach. The capital resources are based on assets that are marked-to-market, with
policyholder liabilities based on a gross premium valuation method using best estimate assumptions with a suitable margin for prudence.
Liabilities are zeroised at policy level (ie negative liabilities are not permitted at a policy level). For unit-linked policies, an unearned premium
reserve is established.
Malaysia
A risk-based capital framework applies in Malaysia. The local regulator, Bank Negara Malaysia (BNM), has set a Supervisory Target Capital Level of
130 per cent, below which supervisory actions of increasing intensity will be taken. Each insurer is also required to set its own Individual Target
Capital Level to reflect its own risk profile and this is expected to be higher than the Supervisory Target Capital Level.
The capital resources are based on assets that are marked-to-market, with policyholder liabilities based on a gross premium valuation method
using best estimate assumptions with a suitable margin for prudence. Liabilities are zeroised at a fund level (ie negative liabilities are not
permitted at a fund level). The BNM has initiated a review of its RBC framework and a discussion paper on the design of the updated RBC
framework was issued on 30 June 2021 with industry feedback provided by 30 September 2021. The BNM have yet to issue their final technical
specifications and the exact timing of implementation of potential revisions remains uncertain as these would need to be subject to quantitative
impact studies and parallel run prior to introduction.
Market liberalisation measures were introduced by BNM in April 2009, which increases the limit from 49 per cent to 70 per cent on foreign
equity ownership for insurance companies and Takaful operators in Malaysia. A higher foreign equity limit beyond 70 per cent for insurance
companies will be considered by BNM on a case by case basis, for example, for companies who support expansion of providing insurance coverage
to the most vulnerable in Malaysian society.
Singapore
A risk-based capital framework applies in Singapore. The local regulator, Monetary Authority of Singapore (MAS), has the authority to direct
insurance companies to satisfy additional capital adequacy requirements in addition to those set forth under the Singapore Insurance Act, if
considered appropriate. The capital resources are based on assets that are marked-to-market, with policyholder liabilities based on a gross
premium valuation method using best estimate assumptions with a suitable margin for prudence. The updated risk-based capital framework
(RBC2) permits the recognition of a prudent allowance for negative reserves in the capital resources.
(b) Asset management operations – regulatory and other surplus
Certain asset management subsidiaries of the Group are subject to local regulatory requirements. The movement in the year of the estimated
surplus regulatory capital position (over the GPCR) of those subsidiaries, combined with the movement in the IFRS basis shareholders’ equity for
unregulated asset management operations, is as follows:
Balance at 1 Jan
Gains during the year
Movement in capital requirement
Capital injection
Distributions made to the parent company
Exchange and other movements
Balance at 31 Dec
2022 $m
2021 $m
522
187
15
3
(214)
(47)
466
453
266
3
6
(201)
(5)
522
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
C10 Capital continued
C10.3 Transferability of capital resources
The amounts retained within the insurance companies are at levels that provide an appropriate level of capital strength in excess of the local
regulatory minimum capital requirements. The businesses may, in general, remit dividends to parent entities, provided the statutory insurance
fund meets the local regulatory solvency requirements and there are sufficient statutory accounting profits. For with-profits funds, the excess of
assets over liabilities is retained within the funds, with distribution to shareholders tied to the shareholders’ share of declared bonuses.
Capital resources of the non-insurance business units are transferable after taking account of an appropriate level of operating capital, based
on local regulatory solvency requirements, where relevant.
C11 Property, plant and equipment
Property, plant and equipment comprise Group occupied properties and tangible assets. Property, plant and equipment also includes right-of-use
assets for operating leases of properties occupied by the Group and leases of equipment and other tangible assets. All property, plant and
equipment, including the right-of-use assets under operating leases, are held at cost less cumulative depreciation, calculated using the straight-line
method, and impairment charge.
A reconciliation of the carrying amount of the Group’s property, plant and equipment from the beginning to the end of the years shown is as
follows:
Balance at 1 Jan
Cost
Accumulated depreciation
Opening net book amount
Removal of discontinued US operations
Additions
Depreciation and impairment charge
Disposals, transfers and lease modifications
Effect of movements in exchange rates
Balance at 31 Dec
Representing:
Cost
Accumulated depreciation
Closing net book amount
2022 $m
2021 $m
Group
occupied
property
Tangible
assets
Right-of-
use assets
33
(10)
23
–
–
–
–
(1)
22
32
(10)
22
489
(349)
140
–
34
(39)
(2)
(7)
126
486
(360)
126
678
(363)
315
–
49
(106)
26
(13)
271
676
(405)
271
Group
occupied
property
Tangible
assets
Right-of-
use assets
355
(88)
267
(242)
–
(1)
–
(1)
23
33
(10)
23
707
(523)
184
(32)
36
(45)
–
(3)
140
489
(349)
140
710
(268)
442
(35)
59
(123)
(22)
(6)
315
678
(363)
315
Total
1,200
(722)
478
–
83
(145)
24
(21)
419
1,194
(775)
419
Total
1,772
(879)
893
(309)
95
(169)
(22)
(10)
478
1,200
(722)
478
Right-of-use assets
The Group does not have any right-of-use assets that would meet the definition of investment property. As at 31 December 2022, total right-of-
use assets comprised $267 million (31 December 2021: $311 million) of property and $4 million (31 December 2021: $4 million) of non-property
assets. Of the $271 million (31 December 2021: $315 million) total right-of-use assets, $105 million (31 December 2021: $128 million) were held by
the Group’s with-profits businesses.
Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are
exercisable only by the Group and not by the respective lessor. The Group assesses at lease commencement whether it is reasonably certain to
exercise the option. This assertion is revisited if there is a material change in circumstances. As at 31 December 2022, the undiscounted value of
lease payments beyond the break period not recognised in the lease liabilities is $189 million (31 December 2021: $201 million).
The Group has non-cancellable property subleases which have been classified as operating leases under IFRS 16. The sublease rental income
received in 2022 for the leases is $6 million (2021: $6 million).
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C Financial position / continuedPrudential plc Annual Report 2022 Tangible assets
At 31 December 2022, of the $126 million (31 December 2021: $140 million) tangible assets, $53 million (31 December 2021: $63 million) were
held by the Group’s with-profits businesses.
Capital expenditure: property, plant and equipment by segment
The capital expenditure on property, plant and equipment in 2022 of $34 million (2021: $36 million) arose as follows:
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Eastspring
Total segment
Unallocated to a segment (central operations)
Total capital expenditure on property, plant and equipment
2022 $m
2021 $m
11
1
1
3
16
2
34
–
34
9
1
2
1
19
3
35
1
36
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D Other information
D1 Corporate transactions
D1.1 Gain (loss) attaching to corporate transactions
Corporate transactions include those associated with the disposal of the Group’s entities amongst other items. Where there is a disposal, income
and expenses of entities sold during the year are included in the income statement up to the date of disposal. The gain or loss on disposal is
calculated as the difference between sale proceeds net of selling costs, less the net assets of the entity at the date of disposal, adjusted for foreign
exchange movements attaching to the sold entity that are required to be recycled to the income statement under IAS 21.
Gain (loss) attaching to corporate transactions as shown separately on the Consolidated income statement note
Loss arising on reinsurance transaction undertaken by the Hong Kong business
Total gain (loss) attaching to corporate transactions note B1.1
2022 $m
2021 $m
55
(44)
11
(35)
(59)
(94)
Note
The gain (loss) attaching to corporate transactions largely comprises a gain of $62 million (2021: $23 million) from the sale of shares relating to the Group’s retained interest in Jackson post the
demerger. Other corporate transactions in 2021 largely represent costs associated with the demerger of Jackson.
D1.2 Discontinued US operations
On 13 September 2021, the Group completed the separation of its US operations (Jackson) through a demerger. In accordance with IFRS 5
‘Non-current Assets Held for Sale and Discontinued Operations’, the US operations were classified as discontinued. The 2021 income statement
included the results of Jackson up to 13 September 2021, the date of demerger.
The retained interest in Jackson is reported within the Consolidated statement of financial position as a financial investment at fair value and is
included in ‘Unallocated to a segment (central operations)’ for segmental analysis. This investment has been classified as available-for-sale under
IAS 39. During 2022, transactions reduced the Group’s holding to 9.2 per cent (both voting and economic interest) at 31 December 2022
(31 December 2021: 18.4 per cent economic interest with 18.5 per cent voting interest). The fair value of the Group’s holding at 31 December 2022
was $266 million (31 December 2021: $683 million).
The results for the discontinued US operations presented in the consolidated financial statements up to the demerger in September 2021 are
analysed below.
(a) Income statement
Total revenue, net of reinsurance
Total charge, net of reinsurance
Profit before tax
Tax charge
Profit after tax
Remeasurement to fair value note (i)
Cumulative valuation movements on available-for-sale debt securities, net of related tax and change in DAC, and net investment hedges
recycled from other comprehensive income note (ii)
Loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Loss for the year
2021 $m
45,972
(43,655)
2,317
(363)
1,954
(8,259)
1,278
(5,027)
(4,234)
(793)
(5,027)
Notes
(i)
(ii)
340
The loss on remeasurement to fair value on demerger was recognised in accordance with IFRIC 17 ‘Distributions of non-cash assets to owners’ with the fair value determined with reference to the
opening quoted price of Jackson shares on the New York Stock Exchange as at the date of demerger on 13 September 2021.
In accordance with IFRS, as a result of the demerger of Jackson, accumulated balances previously recognised through other comprehensive income relating to financial instruments held by
Jackson classified as available-for-sale and historical net investment hedges were recycled from other comprehensive income to the results of discontinued operations in the Consolidated income
statement. Total shareholders’ equity is unchanged as a result of this recycling.
prudentialplc.com
Prudential plc Annual Report 2022 (b) Total comprehensive income
Loss for the year
Other comprehensive loss:
Valuation movements on available-for-sale debt securities, net of related tax and change in DAC
Cumulative valuation movements on available-for-sale debt securities, net of related tax and change in DAC, and net investment hedges
recycled through profit or loss at the point of demerger
Other comprehensive loss for the year
Total comprehensive loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive loss for the year
(c) Cash flows
Net cash flows from operating activities
Net cash flows from financing activities note
Cash divested upon demerger
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 Jan
Cash and cash equivalents at 31 Dec
2021 $m
(5,027)
(763)
(1,278)
(2,041)
(7,068)
(6,283)
(785)
(7,068)
2021 $m
(423)
2,329
(3,527)
(1,621)
1,621
–
Note
Financing activities in 2021 largely reflected the issuance of debt of $2,350 million. No dividends were paid by Jackson during 2021 prior to demerger.
D2 Contingencies and related obligations
Litigation and regulatory matters
The Group is involved in various litigation and regulatory proceedings. While the outcome of such litigation and regulatory issues cannot be
predicted with certainty, the Group believes that their ultimate outcome will not have a material adverse effect on the Group’s financial condition,
results of operations, or cash flows.
Guarantees
The Group has provided guarantees and commitments to third parties entered into in the normal course of business and the Company has
guaranteed public debt securities issued by one of its wholly-owned subsidiaries, Prudential Funding (Asia) PLC from early 2023. The Group
considers the likelihood of outflows arising under such guarantees and commitments as remote.
Intra-group capital support arrangements
Prudential has put in place intra-group arrangements to formalise undertakings by Prudential to the regulators of the Hong Kong subsidiaries
regarding their solvency levels. Other intra-group transactions are discussed in note D4 below.
D3 Post balance sheet events
Dividends
The 2022 second interim dividend approved by the Board of Directors after 31 December 2022 is as described in note B5.
Debt redemption
On 20 January 2023 the Company redeemed senior debt instruments of £300 million, as described in note C5.1.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D4 Related party transactions
Transactions between the Company and its subsidiaries or intra-group transactions are eliminated on consolidation. Intra-group transactions of
the Group mainly related to a limited number of loans, guarantees or services provided by the Company to or from others business units, or
between business units, including investment management services provided by the Group’s asset managers to the insurance operations
businesses as shown in note B1.3. All intra-group transactions are subject to the same internal approval framework as external transactions. As the
Group’s business units operate independently, overall there is limited interconnectedness across the Group. The Group reviews its recovery plan
(that also covers intra-group transactions and the level of the Group’s interconnectivity risk) on an annual basis and details the remedial actions
that could be used to restore financial strength and viability if the Group were to come under severe stress.
The Company has transactions and outstanding balances with collective investment schemes and similar entities that are not consolidated
and where a Group company acts as manager, which are regarded as related parties for the purposes of IAS 24. The balances are included in the
Group’s statement of financial position at fair value or amortised cost in accordance with IAS 39 classifications with the corresponding amounts
included in the income statement. The transactions include amounts paid on issue of shares or units, amounts received on cancellation of shares
or units and amounts paid in respect of the periodic charge and administration fee.
In addition, there are no material transactions between the Group’s joint ventures and associates, which are accounted for on an equity method
basis, and other Group companies.
Key management personnel of the Company, as described in note B2.3, may from time to time purchase insurance, asset management or
annuity products marketed by Group companies in the ordinary course of business on substantially the same terms as those prevailing at the time
for comparable transactions with other persons.
In 2022, transactions with key management personnel were not deemed to be significant both by virtue of their size and in the context of the
individuals’ financial positions. All of these transactions were on terms broadly equivalent to those that prevailed in arm’s-length transactions.
On 5 April 2021, pursuant to a separation agreement, Jackson National Life agreed to pay circa $23.5 million to Michael Falcon, the former
chief executive officer of Jackson, as a series of cash lump sum payments for termination of loss of office, and agreed that Mr Falcon would retain
98,311 Prudential ADRs that had been previously deferred under the Deferred Annual Incentive Plan. Prudential agreed to reimburse Jackson
National Life for such payments and settled this obligation prior to the demerger on 13 September 2021. On completion of the demerger, the
Prudential ADRs were translated into Jackson Shares with an equivalent value. They will be released on the original timeline, ie in 2022 and 2023,
and remain subject to the original malus and clawback provisions. Other transactions with those individuals meeting the definition of key
management personnel in 2021 were not deemed to be significant using the criteria described above.
Additional details on the Directors’ interests in shares, transactions or arrangements are given in the Directors’ remuneration report. Key
management remuneration is disclosed in note B2.3.
D5 Commitments
The Group has provided, from time to time, certain commitments to third parties.
At 31 December 2022, the Group had $2,626 million unfunded commitments (31 December 2021: $2,878 million) primarily related to
investments in infrastructure funds and alternative investment funds in Asia.
D6 Investments in subsidiary undertakings, joint ventures and associates
D6.1 Basis of consolidation
The Group consolidates those investees it is deemed to control. The Group has control over an investee if all three of the followings are met: (1) it
has power over an investee; (2) it is exposed to, or has rights to, variable returns from its involvement with the investee; and (3) it has the ability to
use its power over the investee to affect its own returns.
(a) Subsidiaries
Subsidiaries are those investees that the Group controls. The majority of the Group’s subsidiaries are corporate entities.
The Group performs a re-assessment of consolidation whenever there is a change in the substance of the relationship between the Group and
an investee. Where the Group is deemed to control an entity, it is treated as a subsidiary and its results, assets and liabilities are consolidated.
Where the Group holds a minority share in an entity with no control over the entity, the investments are carried at fair value within financial
investments in the Consolidated statement of financial position.
Entities consolidated by the Group include Qualifying Partnerships as defined under the UK Partnerships (Accounts) Regulations 2008 (the
‘Partnerships Act’). The Group’s limited partnership has taken advantage of the exemption under regulation 7 of the Partnerships Act from the
financial statement requirements. This is under regulations 4 to 6, on the basis that the limited partnership is dealt with on a consolidated basis in
these financial statements.
342
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D Other information / continuedPrudential plc Annual Report 2022 (b) Joint ventures and associates
Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint control of the net
assets of the arrangement. In a number of these arrangements, the Group’s share of the underlying net assets may be less than 50 per cent but
the terms of the relevant agreement make it clear that control is jointly exercised between the Group and the third party. Associates are entities
over which the Group has significant influence but does not control. Generally, it is presumed that the Group has significant influence if it holds
between 20 per cent and 50 per cent voting rights of an entity.
With the exception of those referred to below, the Group accounts for its investments in joint ventures and associates using the equity method
of accounting. The Group’s share of profit or loss of its joint ventures and associates is recognised in the income statement and its share of
movements in other comprehensive income is recognised in other comprehensive income. The equity method of accounting does not apply to
investments in joint ventures and associates held by the Group’s insurance or investment funds, including collective investment schemes which, as
allowed by IAS 28 ‘Investments in Associates and Joint Ventures’, are carried at fair value through profit or loss.
(c) Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the
entity. Voting rights relate to administrative tasks. Relevant activities are directed by means of contractual arrangements. The Group invests in
both consolidated and unconsolidated structured entities including investment vehicles such as collective investment schemes, collateralised debt
obligations, mortgage-backed securities and similar asset-backed securities.
Collective investment schemes
The Group invests in collective investment schemes that invest mainly in equities, bonds, cash and cash equivalents and properties. In assessing
control under IFRS 10 ‘Consolidated Financial Statements’, the Group determines whether it is acting as principal or agent and the variable returns
from its involvement with these entities. The Group’s percentage ownership in these entities can fluctuate on a daily basis according to the
participation of the Group and other investors.
Where the entity is managed by a Group asset manager:
> Where the Group’s ownership holding in the entity exceeds 50 per cent, the Group is judged to have control over the entity;
> Where the Group’s ownership holding in the entity is between 20 per cent and 50 per cent, the facts and circumstances of the Group’s
involvement in the entity are considered, including the rights to any fees earned by the asset manager, in forming a judgement as to whether
the Group has control over the entity;
> Where the Group’s ownership holding in the entity is less than 20 per cent, the Group is judged to not have control over the entity.
Where the entity is managed by an asset manager outside the Group, an assessment is made of whether the Group has existing rights that gives
it the ability to direct the current activities of the entity and therefore control the entity. In assessing the Group’s ability to direct an entity, the
Group considers its ability relative to other investors.
Where the Group is deemed to control an entity, it is treated as a subsidiary and is consolidated, with the interests of investors other than the
Group being classified as liabilities, and presented within ‘Net asset value attributable to unit holders of consolidated investment funds’.
Where the Group does not control these entities (where the Group is deemed to be acting as an agent under IFRS 10) and they do not meet the
definition of associates, they are carried at FVTPL within financial investments in the Consolidated statement of financial position.
Where the Group’s asset manager sets up investment funds as part of its asset management operations, unless the Group also participates in
the ownership holding of the entities, the Group’s interest is limited to the fees charged to manage the assets of such entities. With no
participation in ownership holding of these entities, the Group does not retain risks associated with investment funds. For these investment funds,
the Group is not deemed to control the entities but deemed to be acting as an agent.
The Group generates returns and retains the ownership risks in these investment vehicles commensurate to its participation and does not have
any further exposure to the residual risks of these investment vehicles.
Other structured entities
The Group holds investments in mortgage-backed securities, collateralised debt obligations and similar asset-backed securities, the majority of
which are actively traded in a liquid market.
The Group consolidates the vehicles that hold the investments where the Group is deemed to control the vehicles. When assessing control over
the vehicles, the factors considered include the purpose and design of the vehicle, the Group’s exposure to the variability of returns and the scope
of the Group’s ability to direct the relevant activities of the vehicle including any kick-out or removal rights that are held by third parties. The
outcome of the control assessment is dependent on the terms and conditions of the respective individual arrangements.
The majority of such vehicles are not consolidated. In these cases, the Group is not the sponsor of the vehicles in which it holds investments and
has no administrative rights over the vehicles’ activities. The Group generates returns and retains the ownership risks commensurate to its holding
and its exposure to the investments and does not have any further exposure to the residual risks or losses of the investments or the vehicles in
which it holds investments. Accordingly, the Group does not have power over the relevant activities of such vehicles and all are carried at FVTPL
within financial investments in the Consolidated statement of financial position.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D6 Investments in subsidiary undertakings, joint ventures and associates continued
D6.1 Basis of consolidation continued
The table below provides aggregate carrying amounts of the investments in unconsolidated structured entities reported in the Group’s
Consolidated statement of financial position:
Consolidated statement of financial position line items
Equity securities and holdings in collective investment schemes
Debt securities
Total investments in unconsolidated structured entities
31 Dec 2022 $m
31 Dec 2021 $m
Investment
funds
30,771
–
30,771
Other
structured
entities
–
370
370
Investment
35,446
–
35,446
Other
structured
entities
–
251
251
The Group’s maximum exposure to loss related to the interest in unconsolidated structured entities is limited to the carrying value in the
Consolidated statement of financial position and the unfunded investment commitments provided by the Group (see note D5).
During the year, the Group receives dividend and interest income from its investments in these unconsolidated structured entities. Where the
Group’s asset manager manages these entities, such as the collective investment schemes, the Group also receives asset management fees from
these entities.
As at 31 December 2022 and 2021, the Group does not have an agreement, contractual or otherwise, or intention to provide financial support
to structured entities (both consolidated and unconsolidated) that could expose the Group to a loss.
D6.2 Dividend restrictions and minimum capital requirements
Certain Group entities are subject to restrictions on the amounts of funds they may transfer in the form of cash dividends or otherwise to the
parent company.
Under UK company law, UK companies can only declare dividends if they have sufficient distributable reserves.
The Group’s subsidiaries, joint ventures and associates may remit dividends to the Group, in general, provided the statutory insurance fund
meets the capital adequacy standard required under local statutory regulations and has sufficient distributable reserves. Further details on local
capital regulations in certain Asia operations are provided in note C10.2.
D6.3 Investments in joint ventures and associates
Joint ventures represent arrangements where the controlling parties through contractual or other agreement have the rights to the net assets of
the arrangements. The Group has insurance and asset management joint ventures in Chinese Mainland with CITIC Group and an asset
management joint venture in India with ICICI Bank. In addition, there is an asset management joint venture in Hong Kong with Bank of China
International Holdings Limited (BOCI) and Takaful insurance joint venture in Malaysia. For the Group’s joint ventures that are accounted for using
the equity method, the net-of-tax results of these operations are included in the Group’s profit before tax.
The Group’s associates, which are also accounted for using the equity method, include the Indian insurance entity (with the majority
shareholder being ICICI Bank).
In addition, the Group has investments in collective investment schemes, funds holding collateralised debt obligations and property funds
where the Group has significant influence. As allowed under IAS 28, these investments are accounted for on a FVTPL basis. The aggregate fair
value of associates accounted for at fair value through profit or loss, where there are published price quotations, is approximately $0.3 billion at
31 December 2022 (31 December 2021: $0.6 billion).
For joint ventures and associates accounted for using the equity method, the 12 months financial information of these investments for the
years ended 31 December 2022 and 2021 (covering the same period as that of the Group) has been used in these consolidated financial
statements.
The Group’s share of the profit for shareholder-backed business (including short-term fluctuations in investment returns), net of related tax, in
joint ventures and associates equity accounted for as shown in the Consolidated income statement, is allocated across segments as follows:
CPL
Hong Kong
Malaysia
Growth markets and other note
Insurance operations
Eastspring
Total segment and Group total
2022 $m
2021 $m
(144)
–
24
5
(115)
144
29
278
9
28
(110)
205
147
352
Note
For growth markets and other, as well as the segment results for associates and joint ventures within the segment, the amount shown includes other items of $15 million (2021: $(38) million) which
primarily comprise of taxes for all life joint ventures and associates together with other non-recurring items.
344
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D Other information / continuedPrudential plc Annual Report 2022 There is no other comprehensive income in the joint ventures and associates other than the foreign exchange differences that arise from
translating the associates and joint ventures into the Group’s presentational currency. There has been no unrecognised share of losses of a joint
venture or associate that the Group has stopped recognising in total comprehensive income.
The Group’s interest in joint ventures and associates gives rise to no contingent liabilities or capital commitments that are material to the Group.
CITIC-Prudential Life Insurance Company (CPL)
CPL is the Group’s joint venture with the CITIC Group in which the Group owns a 50 per cent interest. The joint venture is incorporated in China and
is principally engaged in underwriting insurance and investment contracts. The summarised financial information for CPL, which is considered to
be a material joint venture to the Group, is set out below. The financial information represents the entity’s financial statements prepared in
accordance with Group’s IFRS accounting policies, on a 100 per cent basis, for the years shown:
Statement of financial position:
Total assets
Total liabilities (including non-controlling interest)
Shareholders’ equity
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
Financial liabilities (excluding trade and other payables and provisions)
Income statement:
Revenue
Profit for the year after tax
The above profit for the year includes the following:
Depreciation and amortisation
Interest income
Interest expense
Income tax credit (charge)
31 Dec 2022
$m
31 Dec 2021
$m
31,608
29,330
2,278
561
985
29,237
26,523
2,714
422
938
2022 $m
2021 $m
5,778
(248)
(106)
599
(3)
40
7,374
453
(86)
465
(2)
(84)
The summarised financial information above is reconciled to the carrying amount of the Group’s interest in the joint venture recognised in the
consolidated financial statements as follows:
Net assets of CITIC-Prudential Life as shown above
Proportion owned by the joint venture partner (50%)
Carrying amount of the Group’s interest in the joint venture (50%)
The Group has received no dividends from CPL in 2022 (2021: $57 million).
31 Dec 2022
$m
31 Dec 2021
$m
2,278
1,139
1,139
2,714
1,357
1,357
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D6 Investments in subsidiary undertakings, joint ventures and associates continued
D6.4 Related undertakings
In accordance with Section 409 of the Companies Act 2006, a list of Prudential Group’s subsidiaries, joint ventures, associates and significant
holdings (being holdings of more than 20 per cent) is disclosed below, along with the classes of shares held, the registered office address and the
effective percentage of equity owned at 31 December 2022. The Group also operates through branches, none of which are significant.
The definitions of a subsidiary undertaking, joint venture and associate in accordance with the Companies Act 2006 are different from the
definition under IFRS Standards. As a result, the related undertakings included within the list below may not be the same as the undertakings
consolidated in the Group consolidated financial statements. The Group’s consolidation policy is described in note D6.1.
Prudential plc
Prudential Corporation Asia Limited
Prudential Group Holdings Limited
and subsidiaries
CITIC-
Prudential
Life Insurance
Company
Limited† (CPL)*
Prudential
Hong Kong
Limited
Prudential
General
Insurance Hong
Kong Limited
PT. Prudential
Life Assurance
(Indonesia)†
Prudential
Assurance
Malaysia
Berhad†
Prudential
Assurance
Company
Singapore (Pte)
Limited†
Eastspring
Investments
Group Pte. Ltd.†
and subsidiaries
Growth markets
and other
entities†
(including Africa,
Cambodia, India,
Laos, Myanmar,
Philippines,
Taiwan, Thailand,
Vietnam)
Prudential
International
Treasury
Limited
* CPL is a joint venture with CITIC, a leading state owned conglomerate.
† Indirectly held by Prudential Corporation Asia Limited.
Direct subsidiary undertakings of the parent company, Prudential plc (shares held directly or via nominees)
Name of entity
Prudential Corporation Asia Limited
Prudential Group Holdings Limited
Classes of
shares held
Proportion
held
Registered office address
OS
OS
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Other subsidiaries, joint ventures, associates and significant holdings of the Group – no shares held directly by the parent company (Prudential plc)
or its nominees
Name of entity
Aberdeen Cash Creation Fund
Aberdeen Standard Global Opportunities Fund
Aberdeen Standard Singapore Equity Fund
AC Financial Partners Limited Partnership
Alternatives North America, Ltd.
BOCHK Aggressive Growth Fund
BOCHK Balanced Growth Fund
BOCHK China Equity Fund
BOCHK Conservative Growth Fund
BOCHK US Dollar Money Market Fund
BOCI-Prudential Asset Management Limited
BOCI-Prudential Trustee Limited
Cathay High Yield Ex China Cash Pay 1-5 Year 2% Issuer
Capped ETF
CITIC-CP Asset Management Co., Ltd.
CITIC-Prudential Fund Management Company Limited
CITIC-Prudential Life Insurance Company Limited
Eastspring Al-Wara' Investments Berhad
Classes of
shares held
Proportion
held
Registered office address
U
U
U
PI
U
U
U
U
U
U
OS
OS
U
30.62% 28th Floor Bangkok City Tower, 179 South Sathorn Road, Thungmahamek, Sathorn,
Bangkok 10120, Thailand
34.61% 21 Church Street, #01-01, Capital Square Two, Singapore 049480
62.18%
100.00% 65 Haymarket Terrace, Edinburgh, EH12 5HD
100.00% PO Box 1093, Queensgate House, Grand Cayman, KY1-1102, Cayman Islands
47.75% 27th Floor, Bank of China Tower, 1 Garden Road, Hong Kong
41.47%
73.71%
42.71%
21.91%
36.00%
36.00% Suites 1501-1507 & 1513-1516, 15th Floor, 1111 King's Road, Taikoo Shing, Hong Kong
42.71% 6th Floor, No.39, Sec.2, Dunhua South. Road, Taipei, Taiwan
MI - JV
MI - JV
MI - JV
26.95% Room 101-2, No.128 North Zhangjiabang Road, Pudong District, Shanghai, China
49.00% Level 9, HSBC Building, Shanghai IFC, 8 Century Avenue, Pudong, Shanghai, China
50.00% Room 1101-A, 1201, 1301, 1401, 1501, 1601, 1701, 1801, Unit 01, Building 1, No. B2, North
Road of East Third Ring Road, Chaoyang District, Beijing, PRC,100027, China
100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala
OS
Lumpur, Malaysia
Eastspring Asia Pacific High Yield Equity Fund
U
37.57% 4th Floor, No.1, Songzhi Road, Xinyi Dist., Taipei, Taiwan
346
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D Other information / continuedPrudential plc Annual Report 2022 Key to share classes:
LBG
MI
MI - WFOE
MI – JV
OS
PI
PS
U
Limited by Guarantee
Membership Interest
Membership Interest of a Wholly Foreign Owned Enterprise in the Chinese Mainland
Membership Interest of a Sino-Foreign Equity Joint Venture in the Chinese Mainland
Ordinary Shares
Partnership Interest
Preference Shares
Units
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Eastspring Asset Management (Thailand) Co., Ltd.
OS
59.50% 944 Mitrtown Office Tower, 9th Floor, Rama 4 Road, Wangmai, Pathumwan, Bangkok
10330, Thailand
Eastspring Asset Management Korea Co. Ltd.
OS
100.00% 22nd Floor (Seoul International Finance Center, Yeouido dong), 10 Gukjegeumyung-ro,
Eastspring Investment K-Short Term Bond Alpha Securities
Investment Trust(Bond Balanced)
Eastspring Investment Management (Shanghai) Company
Limited
Eastspring Investments - Asia Opportunities Equity Fund
Eastspring Investments - Global Growth Equity Fund
Eastspring Investments - Global Low Volatility Equity Fund
Eastspring Investments - Global Technology Fund
Eastspring Investments - Pan European Fund
Eastspring Investments - US High Yield Bond Fund
Eastspring Investments - US Investment Grade Bond Fund
Eastspring Investments - World Value Equity Fund
Eastspring Investments (Hong Kong) Limited
Eastspring Investments (Luxembourg) S.A.
Eastspring Investments (Singapore) Limited
Eastspring Investments Asia Pacific Equity Fund
Eastspring Investments Asia Pacific ex-Japan Target Return
Fund
Eastspring Investments Asia Real Estate Multi Asset Income
Fund
Eastspring Investments Asia Sustainable Bond Fund
Eastspring Investments Asian Bond Fund
Eastspring Investments Asian Dynamic Fund
Eastspring Investments Asian Equity Fund
Eastspring Investments Asian Equity Income Fund
Eastspring Investments Asian High Yield Bond Fund
Eastspring Investments Asian Investment Grade Bond Fund
Eastspring Investments Asian Low Volatility Equity Fund
Eastspring Investments Asian Multi Factor Equity Fund
Eastspring Investments Berhad
Eastspring Investments China A Shares Growth Fund
Eastspring Investments Dragon Peacock Fund
Eastspring Investments Emerging Markets Star Players
Eastspring Investments Equity Income Fund
Eastspring Investments European Investment Grade Bond
Fund
Eastspring Investments Fund Management Limited
Liability Company
Eastspring Investments Global Emerging Markets Bond
Fund
Eastspring Investments Global Emerging Markets Dynamic
Fund
Eastspring Investments Global Emerging Markets ex-China
Dynamic Fund
Eastspring Investments Global Equity Navigator Fund
Eastspring Investments Global Growth Fund
Eastspring Investments Global Market Navigator Fund
Eastspring Investments Global Multi Asset Income Plus
Growth Fund
Eastspring Investments Greater China Equity Fund
Eastspring Investments Group Pte. Ltd.
Eastspring Investments Incorporated
Eastspring Investments India Consumer Equity Open
Limited
Eastspring Investments India Equity Fund
Eastspring Investments India Equity Open Limited
Eastspring Investments India Infrastructure Equity Open
Limited
Yeongdeungpo-gu, Seoul, Republic of Korea 07326
U
27.54% 22nd Floor One IFC, 10 Gukjegeumyung-ro, Youngdungpo-gu, Seoul 07326, Korea
MI - WFOE
100.00% Unit 306-308, 3rd Floor, Azia Center, 1233 Lujiazui Ring Road, China (Shanghai) Pilot Free
Trade Zone, China
99.97% 26, Boulevard Royal, L-2449, Luxembourg
59.04%
96.36%
82.06%
61.34%
46.85%
68.91%
95.64%
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% 26, Boulevard Royal, L-2449 Luxembourg, Grand Duchy of Luxembourg
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
93.92% 26, Boulevard Royal, L-2449, Luxembourg
75.84% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX Barat, 55188
U
U
U
U
U
U
U
U
OS
OS
OS
U
U
Tun Razak Exchange, Kuala Lumpur, Malaysia
U
73.95% 26, Boulevard Royal, L-2449, Luxembourg
U
U
U
U
U
U
U
U
U
OS
U
U
U
U
U
93.97%
42.30%
91.58%
98.97%
87.52%
44.35%
90.06%
89.01%
90.94%
100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit Damansara, 50490 Kuala
Lumpur, Wilayah Persekutuan, Malaysia
63.69% 26, Boulevard Royal, L-2449, Luxembourg
95.82%
40.88% Eastspring Investments Limited, Marunouchi Park Bldg., 2-6-1 Marunochi, Chiyoda-ku,
Tokyo, Japan 100-6905
40.95% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX Barat, 55188
Tun Razak Exchange, Kuala Lumpur, Malaysia
99.91% 26, Boulevard Royal, L-2449, Luxembourg
MI
100.00% 23rd Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1, Ho Chi Minh City,
Vietnam
99.38% 26, Boulevard Royal, L-2449, Luxembourg
62.79%
99.96%
97.19%
40.22% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX Barat, 55188
Tun Razak Exchange, Kuala Lumpur, Malaysia
99.75% 26, Boulevard Royal, L-2449, Luxembourg
100.00%
90.60%
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
100.00% 874 Walker Road, Suite C, City of Dover, County of Kent, State of Delaware, 19904, USA
100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene 72201, Mauritius
79.97% 26, Boulevard Royal, L-2449, Luxembourg
100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene 72201, Mauritius
100.00%
U
U
U
U
U
U
U
U
OS
OS
OS
U
OS
OS
347
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D6 Investments in subsidiary undertakings, joint ventures and associates continued
D6.4 Related undertakings continued
Direct subsidiary undertakings of the parent company, Prudential plc (shares held directly or via nominees) continued
Name of entity
Eastspring Investments Limited
Eastspring Investments MY Focus Fund
Eastspring Investments Private Fixed Income Fund Number 1
Eastspring Investments Services Pte. Ltd.
Eastspring Investments SICAV-FIS – Alternative
Investments Fund
Eastspring Investments SICAV-FIS – Asia Pacific Loan Fund
Eastspring Investments Syariah Equity Islamic Asia Pacific
USD Kelas B
Eastspring Investments Unit Trusts - Dragon Peacock Fund
Eastspring Investments Unit Trusts Singapore ASEAN
Equity Fund
Eastspring Investments Unit Trusts Singapore Select Bond
Fund
Eastspring Investments US Corporate Bond Fund
Eastspring Investments US High Investment Grade Bond
Fund
Eastspring Investments Vietnam Navigator Fund
Eastspring Investments-Global Emerging Markets
Fundamental Value Fund
Eastspring Investments-Japan Sustainable Value Fund
Eastspring Overseas Investment Fund Management
(Shanghai) Company Limited
Eastspring Private Equity Fund 2
Eastspring Securities Investment Trust Co., Ltd.
Eastspring Singapore Alternatives VCC
Eastspring Syariah Fixed Income USD Kelas A
FCP Ecobank Actions Uemoa
First Sentier Global Property Securities Fund
FSSA China Focus Fund
Fubon 1-5 Years US High Yield Bond Ex China
Fubon China Bond Umbrella Fund - Fubon China Quality
Rmb Bond Fund
Fubon China Currency Fund
Fuh Hwa 1-5 Yr High Yield ETF
Fuh Hwa Emerging Market RMB Fixed Income Fund
Fuh Hwa Rmb Money Market Fund
Furnival Insurance Company PCC Limited
GIS Total Return Bond Fund
GS Twenty Two Limited
HSBC Asia Pacific Ex Japan Sustainable Equity UCITS ETF
HSBC Senior Global Infrastructure Debt Fund
ICICI Prudential Asset Management Company Limited
ICICI Prudential Life Insurance Company Limited
ICICI Prudential Pension Funds Management Company
Limited
ICICI Prudential Trust Limited
India Innovation High Growth EQ QII
Invesco Fixed Maturity Selective Emerging Market Bonds
2024
Invesco Select 6 Year Maturity Global Bond Fund
iShares Core MSCI Asia
iShares Global High Yield Corp Bond UCITS ETF
iShares MSCI Europe ESG Enhanced UCITS ETF
iShares MSCI Korea UCITS ETF USD (Acc)
Classes of
shares held
Proportion
held
Registered office address
OS
U
U
OS
U
U
U
U
U
U
U
U
U
U
100.00% Marunouchi Park Building, 6-1 Marunouchi 2-chome, Chiyoda-Ku, Tokyo, Japan
28.33% Eastspring Investments Berhad, Level 22, Menara Prudential, Persiaran TRX Barat, 55188
Tun Razak Exchange, Kuala Lumpur, Malaysia
87.11% Units 306-308, 3rd Floor, Azia Center 1233 Lujiazui Ring Road, Shanghai, China
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
100.00% 26, Boulevard Royal, L-2449, Luxembourg
100.00%
88.02% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta 12910, Indonesia
97.69% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
98.74%
66.05%
60.04% 26, Boulevard Royal, L-2449, Luxembourg
87.42%
76.79% 23rd Floor, Saigon Trade Center Building, 37 Ton Duc Thang Street, Ben Nghe Ward,
District 1, Ho Chi Minh City, Vietnam
99.96% 26, Boulevard Royal, L-2449, Luxembourg
U
MI - WFOE
100.00%
100.00% Unit 306-308, 3rd Floor, 1233 Lujiazui Ring Road, China (Shanghai) Pilot Free Trade Zone,
China
U
OS
U
U
U
U
U
U
U
U
U
U
U
OS
U
OS
U
U
OS
OS
OS
OS
U
U
U
U
U
U
U
99.99% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2, Singapore 018983
99.54% 4th Floor, No.1 Songzhi Road, Taipei 110, Taiwan
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre, Singapore 018983
69.23% Prudential Tower Lantai 23, JI. Jend. Sudirman Kav. 79, Jakarta 12910, Indonesia
43.63% Immeuble Ecobank, 2Er Etage -Avenue Houdaille Plateau, 01 B.P 4107 Abidjan O1 Cote
D’Ivoire
67.50% 79 Robinson Road, #17-01, Singapore 068897
67.76% 70 Sir John Rogerson’s Quay, Dublin 2, D02 R296, Ireland
61.05% 8th Floor, No.108, Sec.1, Dunhua South. Road, Taipei, Taiwan
23.37%
35.49%
44.22% 8th & 9th Floor, No.308, Sec. 2, Bade Road, Da-an District
46.42%
37.52%
100.00% PO Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET, Guernsey
27.53% 78 Sir John Rogerson's Quay, Dublin, D02 HD32, Ireland
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
63.65% 25/28 North Wall Quay, IFSC, Dublin 1, Ireland
100.00% 8 Canada Square, London, E14 5HQ, United Kingdom
49.00% 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi 110001, India
22.07% ICICI PruLife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi,
22.07%
Mumbai 400025, India
49.00% 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi 110001, India
100.00% Eastspring Investments Limited, Marunouchi Park Bldg., 2-6-1 Marunochi, Chiyoda-ku,
Tokyo, Japan 100-6905
100.00% 8th Floor, No 122, Tung Hua N. Rd. Taipei, Taiwan
100.00%
61.46% 15th, 16th, 17th Floor, Champion Tower & 17th Floor ICBC Tower, Three Garden Road,
Central, Hong Kong
65.61% 200 Capital Dock, 79 Sir John Rogerson’s Quay, Dublin 2, Ireland
51.34% 12 Throgmorton Avenue, London, EC2N 2DL
53.66% 200 Capital Dock, 79 Sir John Rogerson’s Quay, Dublin 2, Ireland
348
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D Other information / continuedPrudential plc Annual Report 2022 Key to share classes:
LBG
MI
MI - WFOE
MI – JV
OS
PI
PS
U
Limited by Guarantee
Membership Interest
Membership Interest of a Wholly Foreign Owned Enterprise in the Chinese Mainland
Membership Interest of a Sino-Foreign Equity Joint Venture in the Chinese Mainland
Ordinary Shares
Partnership Interest
Preference Shares
Units
Classes of
shares held
Proportion
held
Registered office address
U
U
U
U
U
OS
U
U
U
U
U
U
U
U
41.86% 12 Throgmorton Avenue, London, EC2N 2DL
35.38% 19th Floor Muang Thai-Phatra Complex, Building Tower, A, 252/25 Ratchadapisek Road,
Huaykwang, Bangkok 10310, Thailand
31.10% 12th, 18th Zone B Floor, Ploenchit Tower 898 Ploenchit Road, Lumpini Pathumwan,
Bangkok 10330, Thailand
99.97% 11-13 Bouldevard de la Foire, L-1528 Luxembourg
100.00% 138 Market Street, CapitaGreen #35-01, Singapore 048946
33.00% 138 Market Street, #35-01 CapitaGreen, Singapore 048946
57.81% 9th Floor, No 89 Son Ren Road, Taipei, Taiwan
22.54%
85.22%
20.53%
29.47%
100.00% 101 Tower, 30th Floor, No. 7 Sec. 5, Xinyi Rd., Xinyi Dist., Taipei, Taiwan
41.88%
97.86%
OS
100.00% No. 63, Athenee Tower, 34th Floor, Wireless Road, Lumpini Subdistrict Pathumwan District,
Bangkok Metropolis, Thailand
OS
OS
OS
U
U
OS
OS
LBG
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
99.79% 8th Floor, No.1 Songzhi Road, Taipei City, 11047, Taiwan
100.00% Unit Level 13(A), Main Office Tower, Financial Park Labuan, Jalan Merdeka, 87000 Federal
Territory of Labuan, Malaysia
37.37% 10th Floor, No. 144, Sec. 2, Minquan East Rd, Taipei
22.89% 44, 16th Floor, CIMB Thai Bank, Lungsuan Road, Lumpini, Bangkok 10330, Thailand
Metro Manila, Philippines
100.00% 9th Floor, Uptown Place Tower 1, 1 East 11th Drive, Uptown Bonifacio, 1634 Taguig City,
100.00%
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% Phnom Penh Tower, 20th Floor, #445, Monivong Blvd., Boeung Prolit, 7 Makara, Phnom
Penh, Cambodia
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
100.00%
100.00% 3rd Floor, One Africa Place, LR. No. 1870/X/45, P.O. Box 25093-00100, Westlands, Nairobi,
Kenya
100.00% 30 Cecil Street, #30-01 Prudential Tower, Singapore 049712
51.00% Level 26, Menara Prudential, Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala
Lumpur, Malaysia
100.00% 9th Floor Zebra Plaza, Plot 23 Kampala Road, P.O. Box 2660, Kampala, Uganda
Abidjan 01, Côte d'Ivoire
51.00% Abidjan Plateau, Avenue Noguès, Immeuble Woodin Center, 1er étage, 01 P.O. BOX 5173,
51.00%
50.71% 1944, Boulevard de la République Douala-Akwa, P.O. BOX 2328, Douala, Cameroon
51.00%
50.99% 2963 Rue de la Chance Agbalepedogan, P.O. Box 1115, Lome, Togo
49.00% Level 13, Menara Prudential, Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala
Lumpur, Malaysia
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
100.00% 30 Cecil Street, #30-01 Prudential Tower, Singapore 049712
100.00% 1 Angel Court, London, EC2R 7AG, England, United Kingdom
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% 59th Floor, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
100.00% 4th Floor, Saltire Court, 20, Castle Terrace, Edinburgh, EH1 2EN, United Kingdom
100.00% 59th Floor, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
100.00% 5th Floor, Lao international Business and Tourist Center Project (Vientiane Center),
Khouvieng Road, Nongchan Village, Sisattanak District, Vientiane Capital, Lao PDR
99.93% 944 Mitrtown Office Tower, 10th, 29th-31st Floor, Rama 4 Road, Wangmai, Pathumwan,
Bangkok, 10330, Thailand
OS
100.00% Vienna Court, Ground Floor, State House Crescent, Off State House Avenue, P.O. Box
25093-00603, Nairobi, Kenya
Name of entity
iShares MSCI USA ESG Enhanced UCITS ETF
KKP Active Equity Fund
Krungsri Greater China Equity Hedged Dividend Fund
Lasalle Property Securities SICAV-FIS
M&G Asia Property Trust
M&G Real Estate Asia Holding Company Pte. Ltd.
Manulife Asia Pacific Bond Fund
Manulife China Dim Sum High Yield Bond Fund
Manulife China Offshore Bond Fund
Manulife Taiwan Dynamic Fund
Manulife USD High Yield Bond Fund
Nomura Six Years Fixed Maturity Asia Pacific Emerging
Market Bond Fund
Nomura Six Years Fixed Maturity Emerging Market Bond
Fund
Nomura Six Years Ladder Maturity Asia Pacific Emerging
Market Bond Fund
North Sathorn Holdings Company Limited
PCA IP Services Limited
PCA Life Assurance Co., Ltd.
PCA Reinsurance Co. Ltd.
PineBridge US Dual Core Income Fund
Principal Global Silver Age Fund
Pru Life Insurance Corporation of U.K.
Pru Life UK Asset Management and Trust Corporation
Prudence Foundation
Prudential (Cambodia) Life Assurance Plc
Prudential (US Holdco 1) Limited
Prudential Africa Holdings Limited
Prudential Africa Services Limited
Prudential Assurance Company Singapore (Pte) Limited
Prudential Assurance Malaysia Berhad*
Prudential Assurance Uganda Limited
Prudential BeGeneral Insurance Côte d'Ivoire S.A.
Prudential Belife Insurance Côte d'Ivoire S.A.
Prudential Beneficial General Insurance Cameroon S.A.
Prudential Beneficial Life Insurance Cameroon S.A.
Prudential Beneficial Life Insurance Togo S.A.
Prudential BSN Takaful Berhad†
Prudential Corporation Holdings Limited
Prudential Financial Advisers Singapore Pte. Ltd.
Prudential Financial Partners (Asia) Limited
Prudential Financial Partners HK Limited
Prudential General Insurance Hong Kong Limited
Prudential Group Secretarial Services HK Limited
Prudential Group Secretarial Services Limited
Prudential Holdings Limited
Prudential Hong Kong Limited
Prudential International Treasury Limited
Prudential IP Services Limited
Prudential Life Assurance (Lao) Company Limited
Prudential Life Assurance (Thailand) Public Company
Limited
Prudential Life Assurance Kenya Limited
Prudential Life Assurance Zambia Limited
OS
100.00% Prudential House, Plot No. 32256, Thabo Mbeki Road, P.O. Box 31357, Lusaka, Zambia
349
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
D6 Investments in subsidiary undertakings, joint ventures and associates continued
D6.4 Related undertakings continued
Direct subsidiary undertakings of the parent company, Prudential plc (shares held directly or via nominees) continued
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Prudential Life Insurance Ghana Limited
OS
100.00% H/NO. 35, Opp. Hobats Clinic, North Street, Tesano, Accra, Accra Metropolitan, Greater
Prudential Life Vault Limited
Prudential Mauritius Holdings Limited
Prudential Myanmar Life Insurance Limited
Prudential Pensions Management Zambia Limited
Prudential Services Asia Sdn. Bhd.
Prudential Services Limited
Prudential Services Philippines Corporation
Prudential Services Singapore Pte. Ltd.
Prudential Singapore Holdings Pte. Limited
Prudential Technology and Services India Private Limited
Accra, P.O. Box AN 10476, Ghana
OS
OS
OS
OS
OS
PS
OS
OS
OS
OS
PS
OS
100.00% 48 Awolowo Road, South-West Ikoyi, Lagos, Nigeria
100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene, 72201, Mauritius
100.00% #15-01, 15th Floor, Sule Square, 221 Sule Pagoda Road, Kyauktada Township, Yangon,
Myanmar
49.00% Prudential House, Plot No. 32256, Thabo Mbeki Road, P.O. Box 31357, Lusaka, Zambia
100.00% Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh Ampang, 50100 Kuala
100.00%
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
100.00% 19th Floor Uptown Place Tower I East, 11th Drive Uptown Bonifacio Fort Bonifacio
Lumpur, Malaysia
Bonifacio Global City, Taguig City, Fourth District, National Capital Region (NCR), 1630,
Philippines
100.00% 7 Straits View, #06-01 Marina One East Tower, Singapore 018936
100.00% 30 Cecil Street, #30-01 Prudential Tower, Singapore 049712
100.00%
100.00% CoWrks NXT, EPIP Industrial Area, Whitefield Road, K.R Puram, Near SAP Labs, Hubli,
Bangalore, Karnataka, 560066, India
Prudential Vietnam Assurance Private Limited
OS
100.00% 25th Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1, Ho Chi Minh City,
Prudential Wealth Holdings Company Pte. Ltd.
Prudential Wealth Management Singapore Pte. Ltd.
Prudential Zenith Life Insurance Limited
PRUInvest PHP Liquid Fund
PRUInvest PH Equity Index Tracker Fund
PT Prudential Sharia Life Assurance
PT. Eastspring Investments Indonesia
PT. Prudential Life Assurance‡
Pulse Ecosystems Pte. Ltd.
Pulse Wealth Limited
Reksa Dana Eastspring IDR Fixed Income Fund
Reksa Dana Eastspring Investments Cash Reserve
Reksa Dana Syariah Eastspring Syariah Fixed Income
Amanah
Reksa Dana Syariah Eastspring Syariah Money Market
Khazanah
Reksa Dana Syariah Penyertaan Terbatas Bahana Syariah
Bumn Fund IV
Rhodium Investment Funds - Singapore Bond Fund
Rhodium Passive Long Dated Bond Fund
Robeco QI European Active Index Equities
Schroder Asian Investment Grade Credit
Schroder Emerging Markets Fund
Schroder Multi-Asset Revolution
Schroder US Dollar Money Fund
Scotts Spazio Pte. Ltd.
Shenzhen Prudential Technology Limited
Vietnam
100.00% 7 Straits View #07-01, Marina One East Tower, Singapore 018936, Singapore
100.00% 8 Marina View #15-06A, Asia Square Tower 1, Singapore 018960, Singapore
51.00% 13th Floor, Civic Towers, Ozumba Mbadiwe Avenue, Victoria Island, Lagos State, Lagos,
Nigeria
99.84% 9th Floor, Uptown Place Tower 1, 1 East 11th Drive, Uptown Bonifacio, 1634 Taguig City,
100.00%
Metro Manila, Philippines
94.62% Prudential Tower, 2nd Floor, Jl. Jend. Sudirman Kav. 79, Jakarta 12910, Indonesia
99.95% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta 12910, Indonesia
94.62% Prudential Tower, Jl. Jend. Sudirman Kav. 79, Jakarta 12910, Indonesia
100.00% 7 Straits View, #06-01 Marina One East Tower, Singapore 018936
100.00% Suite 3703-04, 37/F, Tower 6, The Gateway, Harbour City, 9 Canton Road, Tsim Sha Tsui,
Kowloon, Hong Kong
98.81% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta 12910, Indonesia
88.93%
66.32%
99.30%
99.01% Graha CIMB Niaga 21st Floor. Jl Jend Sudirman Kav 58, Jakarta - 12190, Indonesia
OS
OS
OS
U
U
OS
OS
OS
OS
OS
U
U
U
U
U
U
U
U
U
U
U
U
OS
MI - WFOE
99.75% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2, Singapore 018983
99.87%
94.55% 6, route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg
37.95% 138 Market Street, #23-01 CapitaGreen, Singapore 048946
67.30%
48.29%
34.92% 9th floor, no. 108, section 5, xinyi road, taipei
45.00% 316 Tanglin Road, #01-01,Singapore, 247978
100.00% Unit 5, 8th Floor, China Resources Tower, No.2666 Keyuan South Road, Yuehai Street,
Nanshan District, Shenzhen 518054, China
Sinopac RMB Money Market Fund
Sri Han Suria Sdn. Bhd.
U
OS
27.12% 14th Floor, No.17,Po Ai Rd., Taipei, Taiwan
51.00% Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh Ampang, 50100 Kuala
Lumpur, Malaysia
Staple Limited
OS
100.00% No. 63, Athenee Tower, 34th Floor, Wireless Road, Lumpini Subdistrict Pathumwan District,
Templeton Asian Growth Fund
Threadneedle (Lux) – Global Emerging Market Equities
U
U
31.40% 8A, rue Albert Borschette, L-1246 Luxembourg
69.10% 44 Rue de la vallée, 2661 Luxembourg
Bangkok Metropolis, Thailand
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D Other information / continuedPrudential plc Annual Report 2022 Key to share classes:
LBG
MI
MI - WFOE
MI – JV
OS
PI
PS
U
Limited by Guarantee
Membership Interest
Membership Interest of a Wholly Foreign Owned Enterprise in the Chinese Mainland
Membership Interest of a Sino-Foreign Equity Joint Venture in the Chinese Mainland
Ordinary Shares
Partnership Interest
Preference Shares
Units
Name of entity
United Global Innovation Fund
UOB Smart Global Healthcare Fund
UOB Smart Japan Small and Mid Cap Fund
UOB Smart Millennium Growth Fund
USD Investment Grade Infrastructure Debt Fund SCSp
Classes of
shares held
Proportion
held
Registered office address
U
U
U
U
U
Thungmahamek, Sathon, Bangkok 10120, Thailand
21.33% 23A, 25th Floor, Asia Centre Building, 173/27-30, 32-33 South Sathon Road,
42.04%
29.79%
38.65%
21.53% 35a, Avenue J.F. Kennedy, L-1855, Luxembourg, Grand Duchy of Luxembourg
*
†
‡
Prudential Assurance Malaysia Berhad is consolidated at 100 per cent in the Group’s consolidated financial statements reflecting the economic interest to the Group.
Prudential BSN Takaful Berhad is a joint venture that is accounted for using the equity method, for which the Group has an economic interest of 70 per cent for all business sold up to
23 December 2016 and of 49 per cent for new business sold subsequent to this date.
The holding of 94.62 per cent for PT. Prudential Life Assurance represents the proportion held in the Indonesia subsidiary attaching to the aggregate of the shares across the types
of capital in issue.
The below table lists the issued share capital of the subsidiaries of the Group which, in the opinion of the Directors, principally affect the results or
assets of the Group:
Name of entity
Issued and fully paid up share/ registered capital
Prudential Assurance Company Singapore (Pte) Limited
526,557,000 ordinary shares of SG$ 1 each
PT. Prudential Life Assurance
Prudential Hong Kong Limited
Prudential Assurance Malaysia Berhad
105,500 ordinary shares and 6,000 preference shares of Rp 1,000,000 each
3,641,479,873 ordinary shares of HK$ 1 each
100,000,000 ordinary shares of RM 1 each
351
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Statement of financial position of the parent company
Fixed assets
Investments in subsidiary undertakings
Current assets
Amounts owed by subsidiary undertakings
Other debtors
Other investments: equity securities – fair value through other comprehensive income
Cash at bank and in hand
Liabilities: amounts falling due within one year
Subordinated liabilities
Debenture loans
Commercial paper
Amounts owed to subsidiary undertakings
Tax payable
Accruals and deferred income
Net current assets
Total assets less current liabilities
Liabilities: amounts falling due after more than one year
Subordinated liabilities
Debenture loans
Other borrowings
Total net assets
Capital and reserves
Share capital
Share premium
Profit and loss account
Shareholders’ funds
Profit for the year
Note
31 Dec 2022
$m
31 Dec 2021
$m
5
6
7
7
7
7
8
13,178
13,114
7,501
–
266
45
7,812
(21)
(361)
(501)
(614)
(9)
(63)
(1,569)
6,243
19,421
(2,265)
(1,614)
–
(3,879)
7,013
9
683
1,711
9,416
(1,725)
–
(500)
(161)
(7)
(85)
(2,478)
6,938
20,052
(2,350)
(1,702)
(350)
(4,402)
15,542
15,650
182
5,006
10,354
15,542
182
5,010
10,458
15,650
2022 $m
2021 $m
455
2,648
The financial statements of the parent company on pages 352 to 357 were approved by the Board of Directors on 15 March 2023 and signed on
its behalf by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
352
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Prudential plc Annual Report 2022
Statement of changes in equity of the parent company
Balance at 1 Jan 2021
Profit for the year
Valuation movements on retained interest in Jackson measured at fair value
through other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
New share capital subscribed
Demerger dividend in specie of Jackson
Share-based payment transactions
Other dividends
Total contributions by and distributions to owners
Balance at 31 Dec 2021 / 1 Jan 2022
Profit for the year
Valuation movements on retained interest in Jackson measured at fair value
through other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
New share capital subscribed
Share-based payment transactions
Dividends
Total contributions by and distributions to owners
Share
capital
$m
173
Share
premium
$m
2,637
–
–
–
9
–
–
–
9
182
–
–
–
–
–
–
–
–
–
–
2,373
–
–
–
2,373
5,010
–
–
–
(4)
–
–
(4)
Profit and
loss account
$m
9,476
2,648
273
2,921
–
(1,735)
217
(421)
(1,939)
Total
shareholders’
funds
$m
12,286
2,648
273
2,921
2,382
(1,735)
217
(421)
443
10,458
15,650
455
(125)
330
–
40
(474)
(434)
455
(125)
330
(4)
40
(474)
(438)
Balance at 31 Dec 2022
182
5,006
10,354
15,542
353
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Notes to the parent company financial statements
1 Nature of operations
Prudential plc (‘the Company’) together with its subsidiaries (collectively, ‘the Group’ or ‘Prudential’) is an international financial services
group. Prudential plc provides life and health insurance and asset management services in Asia and Africa. The business helps people get the most
out of life by making healthcare affordable and accessible by promoting financial inclusion.
2 Basis of preparation
The financial statements of the Company, which comprise the statement of financial position, statement of changes in equity and related notes,
are prepared in accordance with UK Generally Accepted Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure
Framework (‘FRS 101’) and Part 15 of the Companies Act 2006.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements in accordance with
UK-adopted international accounting standards but makes amendments where necessary in order to comply with the Companies Act 2006 and
has set out below where advantage of the FRS 101 disclosure exemptions has been taken. The Company has also taken advantage of the
exemption under Section 408 of the Companies Act 2006 from presenting its own profit and loss account.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
> A cash flow statement and related notes;
> Disclosures in respect of transactions with wholly-owned subsidiaries within the Prudential Group;
> Disclosure in respect of capital management; and
> The effects of new but not yet effective IFRS.
As the consolidated financial statements of the Group include the equivalent disclosures, the Company has also applied the exemptions available
under FRS 101 in respect of the following disclosures:
> IFRS 2 ‘Share-based Payment’ in respect of Group-settled share-based payments;
> Disclosure required by IFRS 7 ‘Financial Instruments: Disclosures’ and IFRS 13 ‘Fair Value Measurement’, except for the consequential
amendments to IFRS 7 related to IFRS 9 which have not been adopted by the Group; and
> IFRS 15, ‘Revenue from Contracts with Customers’ in respect of revenue recognition.
The accounting policies set out in note 3 below have, unless otherwise stated, been applied consistently to both years presented in these financial
statements.
On the basis of the assessment of going concern for the Company and the Group as set out in note A1 to the Group consolidated financial
statements, the Directors consider it appropriate to continue to adopt the going concern basis of accounting in preparing these financial
statements for the year ended 31 December 2022.
The Company and Group manages its cash resources, remittances and financing primarily in US dollars. Accordingly, the functional currency of
the Company is US dollars.
3 Significant accounting policies
Investments in subsidiary undertakings
Investments in subsidiary undertakings are shown at cost, less impairment. Investments are assessed for impairment by comparing the net assets
of the subsidiary undertakings with the carrying value of the investment.
Amounts owed by subsidiary undertakings
Amounts owed by subsidiary undertakings are shown at cost, less provisions. Provisions are determined using the expected credit loss approach
under IFRS 9.
Financial instruments
Under IFRS 9, except for derivative instruments (where applicable) that are mandatorily classified as fair value through profit or loss and the
Company’s financial investment in Jackson’s equity securities (as discussed below), all of the financial assets and liabilities of the Company are
held at amortised cost. The Company assesses impairment on its loans and receivables using the expected credit loss approach. The expected
credit loss on the Company’s loans and receivables, the majority of which represent loans to its subsidiaries, have been assessed by taking into
account the probability of default on those loans. In all cases, the subsidiaries are expected to have sufficient resources to repay the loan either
now or over time based on projected earnings. For loans recallable on demand, the expected credit loss has been limited to the impact of
discounting the value of the loan between the balance sheet date and the anticipated recovery date. For loans with a fixed maturity date the
expected credit loss has been determined with reference to the historic experience of loans with equivalent credit characteristics.
Upon the demerger of Jackson in September 2021, the Company has made the election under IFRS 9 to measure its retained interest in
Jackson’s equity securities at ‘fair value through other comprehensive income’. Under this designation, only dividend income from this retained
interest is recognised in the profit or loss of the Company. Unrealised gains and losses are recognised in other comprehensive income and there is
no recycling to the profit or loss on derecognition.
354
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Prudential plc Annual Report 2022
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs, and subsequently accounted for on an amortised cost basis using the
effective interest method. Under the effective interest method, the difference between the redemption value of the borrowing and the initial
proceeds, net of transaction costs, is amortised through the profit and loss account to the date of maturity or, for subordinated debt, over the
expected life of the instrument.
Dividends
Interim dividends are recorded in the period in which they are paid.
Foreign currency translation
Transactions not denominated in the Company’s functional currency, US dollars, are initially recorded at the functional rate of currency prevailing
on the date of the transaction. Monetary assets and liabilities not denominated in the Company’s functional currency are translated to the
Company’s functional currency at year end spot rates. The impact of these currency translations is recorded within the profit and loss account for
the year.
Tax
Current tax expense is charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year. To the extent that losses of an individual UK company are not offset, they can be carried back for one year or carried
forward indefinitely to be offset, subject to restrictions based on future taxable profits, against profits arising from the same company or other
companies in the same UK tax group.
Deferred tax assets and liabilities are recognised in accordance with the provisions of IAS 12 ‘Income Taxes’. Deferred tax assets are recognised
to the extent that it is regarded as more likely than not that future taxable profits will be available against which these losses can be utilised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
Share-based payments
The Group offers share award and option plans for certain key employees and a Save As You Earn (‘SAYE’) plan for all UK and certain overseas
employees. The share-based payment plans operated by the Group are mainly equity-settled.
Under IFRS 2 ‘Share-based payment’, where the Company, as the parent company, has the obligation to settle the options or awards of its
equity instruments to employees of its subsidiary undertakings, and such share-based payments are accounted for as equity-settled in the Group
financial statements, the Company records an increase in the investment in subsidiary undertakings for the value of the share options and awards
granted with a corresponding credit entry recognised directly in equity. The value of the share options and awards granted is based upon the fair
value of the options and awards at the grant date, the vesting period and the vesting conditions. Cash receipts from business units in respect of
newly issued share schemes are treated as returns of capital within investments in subsidiaries.
4 Reconciliation from the FRS 101 parent company results to the IFRS Group results
The parent company financial statements are prepared in accordance with FRS 101 and the Group financial statements are prepared in
accordance with IFRS Standards as issued by the IASB and international financial reporting standards adopted for use in the UK.
The tables below provide a reconciliation between the FRS 101 parent company results and the IFRS Group results.
Profit after tax
Profit for the financial year of the Company in accordance with FRS 101 note (i)
Accounting policy difference note (ii)
Share in the IFRS result of the Group, net of distributions to the Company note (iii)
Profit (loss) after tax of the Group attributable to equity holders in accordance with IFRS note (iv)
Shareholders’ equity
Shareholders’ funds of the Company in accordance with FRS 101
Accounting policy difference note (ii)
Share in the IFRS net equity of the Group note (iii)
Shareholders’ equity of the Group in accordance with IFRS
2022 $m
2021 $m
455
108
435
998
2,648
28
(4,718)
(2,042)
31 Dec 2022
$m
31 Dec 2021
$m
15,542
66
1,352
16,960
15,650
19
1,419
17,088
Notes
(i)
(ii)
(iii)
(iv)
The Company’s profit for the financial year includes distributions to the Company from subsidiaries.
Accounting policy difference represents the difference in accounting policy for expected credit losses on loan assets, and the difference in treatment of realised gains and losses on investments
classified as fair value through other comprehensive income, as the Company has adopted IFRS 9 while the Group applies IAS 39.
The ‘Share in the IFRS result and net equity of the Group’ line represents the parent company’s equity in the earnings and net assets of its subsidiaries and associates. The movement relative to
the prior period reflects movements in the results of the Group relative to the result of the Company.
The profit for the year of the Company in accordance with IFRS includes dividends received from subsidiary undertakings of $708 million for the year ended 31 December 2022 (2021:
$3,597 million).
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Notes to the parent company financial statements / continued
5 Investments in subsidiary undertakings
At 1 Jan
Capital injections note (i)
Other note (ii)
At 31 Dec
2022 $m
2021 $m
13,114
62
2
13,178
12,682
430
2
13,114
Notes
(i)
(ii)
In December 2022, intercompany loans of $62 million owed to the Company were settled in exchange for the issue of equity instruments from Prudential Group Holdings Limited, an immediate
subsidiary of the Company.
Other includes net amounts in respect of share-based payments settled by the Company for employees of its subsidiary undertakings.
Investments in subsidiaries held at 31 December 2022 have been assessed for impairment and no impairment was identified.
Subsidiary undertakings of the Company at 31 December 2022 are listed in note D6 of the Group IFRS consolidated financial statements.
6 Equity securities – fair value through other comprehensive income
The Company’s interest in the equity securities of Jackson Financial Inc are recognised as a financial investment at ‘fair value through other
comprehensive income’. Transactions in 2022 reduced the Company’s interest in Jackson to 9.2 per cent (both voting and economic interest) at
31 December 2022 (31 December 2021: 18.4 per cent economic interest with 18.5 per cent voting interest).
The fair value of the Company’s holding in the equity securities of Jackson Financial Inc. is determined by the use of current market bid prices,
and is categorised as Level 1: Quoted prices (unadjusted in active markets) of the IFRS 13 ‘Fair Value Measurement’ defined fair value hierarchy. A
loss of $125 million (2021: $273 million gain) has been recognised in other comprehensive income for the year in respect of these instruments.
7 Borrowings
Core structural borrowings note (i)
Subordinated liabilities note (ii)
Debenture loans
Bank loan
Commercial paper note (iii)
Total borrowings note (iv)
Borrowings are repayable as follows:
Within 1 year
Between 1 and 5 years
After 5 years
Core structural borrowings
Other borrowings
Total
31 Dec 2022
$m
31 Dec 2021
$m
31 Dec 2022
$m
31 Dec 2021
$m
31 Dec 2022
$m
31 Dec 2021
$m
2,286
1,975
–
4,261
–
4,261
382
–
3,879
4,261
4,075
1,702
350
6,127
–
6,127
1,725
778
3,624
6,127
–
–
–
–
501
501
501
–
–
501
–
–
–
–
500
500
500
–
–
500
2,286
1,975
–
4,261
501
4,762
883
–
3,879
4,762
4,075
1,702
350
6,127
500
6,627
2,225
778
3,624
6,627
Notes
(i)
(ii)
(iii)
(iv)
356
Further details on the core structural borrowings of the Company are provided in note C5.1 of the Group IFRS consolidated financial statements.
The interests of the holders of the subordinated liabilities are subordinate to the entitlements of other creditors of the Company. On 20 January 2022 the Company redeemed subordinated debt
instruments of $1,725 million, as described in note C5.1 of the Group IFRS consolidated financial statements.
These borrowings support a short-term fixed income securities programme.
Borrowings are classified in line with contractual maturity dates unless the Company has established its intention to redeem at an earlier date.
prudentialplc.com
Prudential plc Annual Report 2022 8 Capital and reserves
Share capital and share premium
On 4 October 2021, the Company completed the issuance of 130,780,350 new ordinary shares on the Stock Exchange of Hong Kong through a
concurrent Hong Kong public offer and international placing. Further details on this issuance together with a summary of the ordinary shares in
issue and the options outstanding to subscribe for the Company’s shares at 31 December 2021 are set out in note C8 of the Group IFRS
consolidated financial statements.
Retained profit of the Company
Retained profit at 31 December 2022 amounted to $10,354 million (31 December 2021: $10,458 million). The retained profit includes
distributable reserves of $4,639 million (31 December 2021: $4,734 million) and non-distributable reserves of $5,715 million (31 December 2021:
$5,724 million). The non-distributable reserves of the Company relate to gains on intra-group transactions, in which qualifying consideration was
not received, and share-based payment reserves.
Under UK company law, Prudential may pay dividends only if sufficient distributable reserves of the Company are available for the purpose and
if the amount of its net assets is greater than the aggregate of its called up share capital and non-distributable reserves (such as the share
premium account) and the payment of the dividend does not reduce the amount of its net assets to less than that aggregate.
The retained profit of the Company is substantially generated from dividend income received from subsidiaries. The Group segmental analysis
illustrates the generation of profit across the Group (see note B1 of the Group IFRS consolidated financial statements). The Group and its
subsidiaries are subject to local regulatory minimum capital requirements, as set out in note C10 of the Group IFRS consolidated financial
statements. A number of the principal risks set out in the Risk Review report could impact the generation of profit in the Group’s subsidiaries in the
future and hence impact their ability to pay dividends in the future.
In determining the dividend payment in any year, the Directors follow the Group dividend policy described in the Financial review section of this
Annual Report. The Directors consider the Company’s ability to pay current and future dividends twice a year by reference to the Company’s
business plan and certain stressed scenarios.
9 Other information
a
Information on key management remuneration is given in note B2.3 of the Group IFRS consolidated financial statements. Additional
information on Directors’ remuneration is given in the Directors’ remuneration report section of this Annual Report.
Information on transactions of the Directors with the Group is given in note D4 of the Group IFRS consolidated financial statements.
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were $0.1 million (2021: $0.1 million) and for other
services were $0.1 million (2021: $0.1 million).
In certain instances, the Company has guaranteed that its subsidiaries will meet their obligations when they fall due for payment.
e
b
c The Company employs no staff.
d
10 Post balance sheet events
Dividends
The second interim dividend for the year ended 31 December 2022, which was approved by the Board of Directors after 31 December 2022,
is described in note B5 of the Group IFRS consolidated financial statements.
Debt redemption
On 20 January 2023, the Company redeemed a senior debt instrument of £300 million, as described in note C5.1 of the Group IFRS consolidated
financial statements.
Debt Transfer
On 2 March 2023 the Company transferred all its external debt instruments, classified as core structural borrowings, to a wholly-owned indirect
subsidiary of the Company, Prudential Funding (Asia) plc, in exchange for assuming intercompany debt liabilities with similar terms to the
transferred instruments. The Company has provided a guarantee to holders of the debt instruments in the event of default by Prudential Funding
(Asia) plc.
The effect of this transaction, which in substance crystallises the difference between the fair value and the carrying value of the debt, is a gain
of approximately $0.4 billion.
357
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Responsibility statement of the directors in respect of the
annual financial report
The directors of Prudential plc, whose names and positions are set
out on pages 180 to 189 confirm that to the best of their knowledge:
> the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken
as a whole;
> the strategic report includes a fair review of the development and
performance of the business and the position of the Group and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and
> the annual report and financial statements, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
Statement of Directors’ responsibilities in respect
of the Annual Report and the financial statements
The directors are responsible for preparing the Annual Report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare Group and parent
company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in
accordance with UK-adopted international accounting standards and
applicable law and have elected to prepare the parent company
financial statements in accordance with UK accounting standards
and applicable law, including FRS 101 Reduced Disclosure Framework.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent company and of their
profit or loss for that period. In preparing each of the Group and
parent company financial statements, the directors are required to:
> select suitable accounting policies and then apply them
consistently;
> make judgements and estimates that are reasonable, relevant,
reliable and prudent;
> for the Group financial statements, state whether they have been
prepared in accordance with UK-adopted international accounting
standards;
> for the parent company financial statements, state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent
company financial statements;
> assess the Group and parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
> use the going concern basis of accounting unless they either intend
to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
358
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Prudential plc Annual Report 2022 Independent auditor’s report to the members of Prudential plc
1. Our opinion is unmodified
In our opinion:
> the financial statements of Prudential plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2022, and of the Group’s profit for the year then ended;
> the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
> the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework; and
> the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What our opinion covers
We have audited the Group and Parent Company financial statements of Prudential plc (“the Company”) for the year ended 31 December 2022
(FY22) included in the Annual Report 2022, which comprise:
Group (Prudential plc and its subsidiaries)
Parent Company (Prudential plc)
Consolidated income statement, Consolidated statement of
comprehensive income, Consolidated statement of changes in equity,
Consolidated statement of financial position and Consolidated
statement of cash flows.
Statement of financial position of the Parent Company and
Statement of changes in equity of the Parent Company
Notes 1 to 10 to the Parent Company financial statements,
including the accounting policies in note 3.
Notes A1 to D6 to the Group financial statements, including the
accounting policies in note A3.1.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion and
matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee (“AC”).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including
the FRC Ethical Standard as applied to listed public interest entities.
2. Overview of our audit
Factors driving our
view of risks
The three Key Audit Matters (“KAMs”) identified in 2022 all remain
unchanged from FY21.
KAM 4.1 is driven by the inherent subjectivity required when
valuing the ultimate total settlement value of long-term policyholder
liabilities. We consider the risk to be unchanged in the current year in
light of the continued business and economic disruption caused by
the Coronavirus pandemic’s (COVID-19) potential impact on medical
claims experience and trends in policyholder behaviour in respect of
lapses, making historical experience less reliable in setting operating
assumptions. Market volatility also drives the level of subjectivity
in setting economic assumptions such as discount rates and
investment return and this continues to be a driver of the risk in
this area reflecting economic and market conditions in 2022.
KAM 4.2 is driven by the significant judgement required in valuing
certain level 2 and level 3 investments, specifically unlisted debt
securities and unlisted funds that are valued by reference to their Net
Asset Value (‘NAV funds’) where third party prices are not available
and therefore expert judgement is required in the valuations
adopted. Economic conditions in 2022 mean that there remains a
high level of subjectivity in determining the valuations of such
investments.
The continuing financial significance of the Parent Company’s
investment in subsidiaries also drove the identification of KAM 4.3
which remains the most significant area in the context of the Parent
Company financial statements.
Key Audit Matters
Vs FY21
Item
Valuation of insurance
contract liabilities and
investment contract
liabilities with discretionary
participation features
Valuation of certain level 2
and level 3 investments held
at fair value
Recoverability of Parent
Company’s investment in
subsidiaries
4.1
4.2
4.3
Audit committee
interaction
During the year, the AC met 8 times. KPMG are invited to attend all AC meetings and are provided with an opportunity
to meet with the AC in private sessions without the Executive Directors being present. For each Key Audit Matter, we
have set out communications with the AC in section 4, including matters that required particular judgement for each.
The matters included in the AC report on page 211 are materially consistent with our observations of those meetings.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
Total audit fee
Audit related fees
Other services
Non-audit fee as a % of
total audit and audit
related fee %
$6.7m
$3.5m
$0.7m
41%
Date first appointed
October 1999
Uninterrupted audit
tenure
Next financial period
which requires a tender
Tenure of Group
engagement partner
Average tenure of
component signing
partners
24 years
2023
1 year
2 years
2. Overview of our audit continued
Our independence
We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed
public interest entities.
Apart from the matters noted below, we have not performed any
non-audit services during the year ended 31 December 2022 or
subsequently which are prohibited by the FRC Ethical Standard.
During 2023, we identified that certain KPMG member firms had
provided preparation of local GAAP financial statement services and
foreign language translation of those financial statements over the
period 2017 to 2022 and earlier periods prior to the implementation
of the FRC Ethical Standard. Some of those entities to whom services
were provided are, and have been, in scope for the Group audit. The
services, which have been terminated, were administrative in nature
and did not involve any management decision-making or
bookkeeping. The work in each case had no direct or indirect effect
on Prudential plc’s consolidated financial statements.
In our professional judgement, we confirm that based on our
assessment of the breach, our integrity and objectivity as auditor
has not been compromised and we believe that an objective,
reasonable and informed third party would conclude that the
provision of these services would not impair our integrity or
objectivity for any of the impacted financial years. The AC have
concurred with this view.
We were first appointed as auditor by the directors for the
year ended 31 December 1999. The period of total uninterrupted
engagement is for the 24 financial years ended 31 December 2022.
The Group engagement partner is required to rotate every 5 years.
As these are the first set of the Group’s financial statements signed
by Stuart Crisp, he would have been required to rotate off after the
FY26 audit. However, given that KPMG will rotate off this audit after
the completion of this 2022 audit, following the audit tender
conducted by the Company in 2020, this will be his last year of
involvement.
The average tenure of partners responsible for component audits as
set out in section 7 below is 2 years, with the shortest being 1 and
the longest being 3.
Materiality
(Item 6 below)
The scope of our work is influenced by our view of materiality and our
assessed risk of material misstatement.
Materiality levels used in our audit
We have determined overall materiality for the Group financial
statements as a whole at $190m (FY21: $190m) and for the Parent
Company financial statements as a whole at $45m (FY21: $53m).
Consistent with FY21, we determined that IFRS shareholders’ equity
remains the benchmark for the Group as it represents the residual
interest that can be ascribed to shareholders after policyholder assets
and corresponding liabilities have been accounted for. We consider
that this is the most appropriate measure for the size of the business
and that it provides a stable measure year on year. As such, we based
our Group materiality on net assets, of which it represents 1.1%
(FY21: 1.1%).
Materiality for the Parent Company financial statements was
determined with reference to a benchmark of Parent Company’s
net assets of which it represents 0.3% (FY21: 0.4%).
Group
GPM
HCM
PLC
LCM
AMPT
9
9
45
53
20
20
190
190
140
140
110
110
FY22
FY21
Group Group Materiality
GPM
HCM
PLC
LCM
AMPT
Group Performance Materiality
Highest Component Materiality
Parent Company Materiality
Lowest Component Materiality
Audit Misstatement Posting
Threshold
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Independent auditor’s report to the members of Prudential plc / continuedPrudential plc Annual Report 2022 Group scope
(Item 7 below)
We have performed risk assessment and planning procedures to
determine which of the Group’s components are likely to include risks
of material misstatement to the Group financial statements, the type
of procedures to be performed at these components and the extent of
involvement required from our component auditors around the world.
Of the 13 (FY21:13) reporting components scoped in for the Group
audit, we subjected 6 (FY21: 7) to full scope audits for group reporting
purposes, 5 (FY21: 5) to an audit of account balances, 2 to specified
risk-focused audit procedures over cash and cash equivalents, equity
and debt securities and deposits with credit institutions and insurance
contract liabilities (FY21: 1 to specified risk-focused audit procedures
over cash and cash equivalents and debt securities). The components
for which we performed work other than full scope audits for Group
reporting purposes were not individually significant but were included
in the scope of our Group reporting work as they did present specific
individual audit risks that needed to be addressed or in order to provide
further coverage over the Group’s results.
The components within the scope of our work accounted for the
percentages illustrated opposite.
In addition, we have performed Group level analysis on the remaining
components to determine whether further risks of material
misstatement exist in those components.
We consider the scope of our audit, as communicated to the AC, to be
an appropriate basis for our audit opinion.
Full scope for FY22 audit
Audits of one or more account balances and specified risk
focused audit procedures for FY22
Full scope for FY21 audit
Coverage of Group financial statements
8
74
5
79
16
18
Shareholders’
Equity
92%
55
86
11
10
4
Profit
before tax
89%
34
4
85
Audits of one or more account balances and specified risk
focused audit procedures for FY21
11
9
78
Residual components
13
Revenue
96%
17
13
1
82
5
82
Total
assets
98%
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2. Overview of our audit continued
The impact of
climate change on
our audit
In planning our audit, we have considered the potential impact of climate change on the Group’s business and its
financial statements.
The Group has set out its commitments to decarbonise its portfolio of assets held on behalf of its insurance
companies with a new goal of becoming “net zero” by 2050. Further information is provided in the Group’s
Environment, Social and Governance report.
Climate change risk could have a significant impact on the Group’s business as the operations and strategy of the
Group are adapted to address the potential financial and non-financial risks which could arise from both the physical
and transition risks associated with climate change. Climate change initiatives and commitments could impact the
financial statements of the Group in a variety of ways including in the determination of fair value for assets and
potential for increased claims experience which could impact the valuation of liabilities. Greater narrative and
disclosure of the impact of climate change risk is incorporated into the annual report.
As a part of our audit we have made enquiries of the directors and other management to understand the extent of
the potential impact of climate change risk on the Group’s financial statements and the Group’s preparedness for this.
We have performed a risk assessment of how the impact of the scenario analysis performed by the Group in respect
of climate change may affect the financial statements and our audit, this involved a discussion with our own climate
risk subject matter professionals to challenge our risk assessment. There was no significant impact of this on our key
audit matters.
We have assessed how the Group considers the impact of climate change risk on the valuation of the policyholder
liabilities taking into account the nature of the insurance contracts that the Group enters into and the associated
valuation methodology. This has not had a significant impact on the related key audit matter. We have also
incorporated a consideration of the climate change impact on the audit of the valuation of certain level 2 and level 3
positions within the portfolio of financial investments held at fair value, taking into account the nature of the
investments and the associated valuation approach. This has not had a significant impact on the related key audit
matter. We have read the disclosure of climate related information in the front half of the annual report and
considered consistency with the financial statements and our audit knowledge.
We have not been engaged to provide assurance over the accuracy of the climate risk disclosures set out on pages 90
to 132 in the Annual Report.
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Independent auditor’s report to the members of Prudential plc / continuedPrudential plc Annual Report 2022 3. Going concern, viability and principal risks and uncertainties
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent
Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position means that this
is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as
a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Going concern
We used our knowledge of the Group and the Parent Company, its industry, and the general
economic environment in which it operates to identify the inherent risks to its business model
and analysed how those risks might affect the Group and the Parent Company’s financial
resources or ability to continue operations over the going concern period. The risks that were
considered most likely to adversely affect the Group’s and the Parent Company’s available
financial resources over this period were:
> Adverse impacts arising from fluctuations or negative trends in the economic environment
which affect the valuations of the Group’s investments, wider credit spreads and defaults and
valuation of policyholder liabilities due to the impact of these market movements;
> The impact on regulatory capital solvency margins from movements in interest rates; and
> Severely adverse policyholder lapse or claims experience.
We also considered less predictable but realistic second order impacts, such as failure of some of
the Group’s counterparties (such as banks and reinsurers) to meet commitments, which could
give rise to a negative impact on the Group’s financial position and liquidity, and wider economic
factors such as the Coronavirus pandemic’s impact on economic volatility and market
uncertainty in the period, and other such macroeconomic events.
We considered whether these risks could plausibly affect the liquidity or solvency in the going
concern period by assessing the directors’ sensitivities over the level of available financial
resources indicated by the Group’s and the Parent Company’s cash flow forecasts taking account
of severe but plausible adverse effects that could arise from these risks individually and
collectively.
We considered whether the going concern disclosure in note A1 to the financial statements gives
a full and accurate description of the directors’ assessment of going concern, including the
identified risks and related sensitivities.
Accordingly, based on those procedures, we found the directors’ use of the going concern basis
of accounting without any material uncertainty for the Group and Parent Company to be
acceptable. However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were reasonable at
the time they were made, the above conclusions are not a guarantee that the Group or the
Parent Company will continue in operation.
Our conclusions
> We consider that the directors’ use of
the going concern basis of accounting in
the preparation of the financial
statements is appropriate;
> We have not identified, and concur with
the directors’ assessment that there is
not, a material uncertainty related to
events or conditions that, individually or
collectively, may cast significant doubt
on the Group’s or Parent Company’s
ability to continue as a going concern for
the going concern period;
> We have nothing material to add or
draw attention to in relation to the
directors’ statement in note A1 to the
financial statements on the use of the
going concern basis of accounting with
no material uncertainties that may cast
significant doubt over the Group and
Parent Company’s use of that basis for
the going concern period, and we found
the going concern disclosure in note A1
to be acceptable; and
> The related statement under the Listing
Rules set out on page 223 is materially
consistent with the financial statements
and our audit knowledge.
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Our reporting
> We have nothing material to add or
draw attention to in relation to these
disclosures.
> We have concluded that these
disclosures are materially consistent with
the financial statements and our audit
knowledge.
3. Going concern, viability and principal risks and uncertainties continued
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency
between the directors’ disclosures in respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
> the directors’ confirmation within the risk review on page 52 that they have carried out
a robust assessment of the emerging and principal risks facing the Group, including those
that would threaten its business model, future performance, solvency and liquidity;
> the principal risks and uncertainties disclosures describing these risks and how emerging
risks are identified and explaining how they are being managed and mitigated; and
> the directors’ explanation in the viability statement of how they have assessed the prospects
of the Group, over what period they have done so and why they considered that period to be
appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We are also required to review the viability statement set out on page 64 under the Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired
during our financial statements audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Parent Company’s longer-term viability.
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Independent auditor’s report to the members of Prudential plc / continuedPrudential plc Annual Report 2022 4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on:
> the overall audit strategy;
> the allocation of resources in the audit; and
> directing the efforts of the engagement team.
We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address those matters
and our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, for the purpose of our
audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
4.1 Valuation of insurance contract liabilities and investment contract liabilities with discretionary participation
features (group)
Financial Statement Elements
Our assessment of risk vs FY21
Our results
FY22
FY21
$121,522m $151,101m
Insurance contract
liabilities and
investment
contract liabilities
with discretionary
participation
features
FY22: Acceptable
FY21: Acceptable
We have not identified any
significant changes to our
assessment of the level of
risk relating to the valuation
of insurance contract
liabilities and investment
contract liabilities with
discretionary participation
features compared to FY21
Description of the Key Audit Matter
Our response to the risk
We used our own actuarial specialists to assist us in performing our procedures in this area.
Our procedures included:
Methodology choice
We assessed the methodology for selecting assumptions and calculating the policyholder
liabilities. This included:
> Assessing the methodology adopted for selecting assumptions by applying our industry
knowledge and experience and comparing the methodology used against industry
standard actuarial practice;
> Assessing the methodology adopted for calculating the policyholder liabilities by reference
to the requirements of the accounting standard and actuarial market practice, and
assessing the impact of current year changes in methodology on the calculation of
policyholder liabilities;
> Comparing changes in methodology to our expectations derived from market experience;
and
> Evaluating the analysis of the movements in policyholder liabilities during the year,
including consideration of whether the movements were in line with the methodology and
assumptions adopted.
Control operation
We used our own IT specialists to assist us in performing our procedures in this area which
included testing of the design, implementation and operating effectiveness of key controls
over the valuation process. Controls testing in respect of the valuation process included
assessment and approval of the methods and assumptions adopted over the calculation of
policyholder liabilities as well as appropriate access and change management controls over
the actuarial models.
The Group has significant insurance contract
liabilities and investment contract liabilities
with discretionary participation features
(policyholder liabilities) representing
82 per cent (FY21: 83 per cent) of the Group’s
total liabilities.
Subjective valuation
This is an area that involves significant
judgement over uncertain future outcomes,
mainly the ultimate total settlement value of
these long term policyholder liabilities, and
we consider the risk to have remained
unchanged in the current year in light of the
continued business and economic disruption
caused by the Coronavirus pandemic’s
(COVID-19) potential impact on policyholder
behaviour in respect of lapses and trends in
medical experience, making historical
experience less reliable in setting operating
assumptions.
Significant judgement is required to assess
whether the directors’ overall estimate,
taking into account key economic
assumptions, including investment return
and associated discount rates, and operating
assumptions including mortality, morbidity,
expenses and lapses, which are the key
inputs used to estimate these long term
liabilities, falls within an acceptable range, in
addition to the appropriate design and
calibration of complex reserving models.
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4. Key audit matters continued
The effect of these matters is that, as part of
our risk assessment, we determined that the
valuation of policyholder liabilities has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole and possibly many
times that amount. The financial statements
note C6 disclose the sensitivities estimated
by the Group.
Our procedures also included:
Historical comparison
> Evaluating the experience analysis in respect of the mortality, morbidity, lapse, and
expense assumptions by reference to actual experience, taking into account the potential
impact of COVID-19 on reported claims, in order to assess whether this supported the
year-end assumptions adopted.
Benchmarking assumptions and sector experience
> Using our sector experience and market knowledge to inform our challenge of the
assumptions in the areas noted above.
Model evaluation
> Assessing the reserving models by considering the accuracy of the cash flow projections
including by reference to the inclusion of relevant product features. We have also assessed
the impact of modelling and assumption changes by inspecting pre and post change
model runs and comparing the outcomes of the changes to our expectations.
Assessing transparency
We assessed whether the disclosures in relation to the assumptions used in the valuation of
policyholder liabilities are compliant with the relevant accounting requirements.
Communications with the Prudential plc’s AC
Our discussions with and reporting to the AC included:
> Our approach to the audit of insurance contract liabilities and investment contract liabilities with discretionary participation features
including details of our planned substantive procedures and the extent of our control reliance.
> Our conclusions on the appropriateness of the Company’s methodology for selecting assumptions and calculating policyholder liabilities
and accounting policies.
> Our conclusions on the appropriateness of the calibration of the models and changes to the methodology, including the impact of the early
adoption of the Risk-Based Capital regime on the valuation of contract liabilities in Hong Kong. We communicated to the AC our challenge
of the assumptions using our sector experience and market knowledge.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
> Reasonableness of the estimate, depending on the application of the key economic assumptions including investment return and
associated discount rates, and operating assumptions including mortality, morbidity, expenses and lapses
> Significance of the inputs into the reserving models and the consequent impact on the valuation of policyholder liabilities.
Our results
We found the valuation and disclosures of policyholder liabilities to be acceptable (FY21: acceptable).
Further information in the Annual Report: See the AC on page 211 for details on how the AC considered the valuation insurance contract
liabilities and investment contracts with discretionary participation features as an area of significant attention, page 290 for the accounting
policy on insurance contract liabilities and investment contracts with discretionary participation features, and pages 324 to 327 note C3 for
the financial disclosures.
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Financial Statement Elements
Our assessment of risk vs FY21
Our results
FY22
FY21
$28,665m
$31,282m
Level 2 and 3
financial
investments
FY22: Acceptable
FY21: Acceptable
We have not identified any
significant changes to our
assessment of the level of
risk relating to the valuation
of certain level 2 and level 3
investments held at fair
value compared to FY21
Description of the Key Audit Matter
Our response to the risk
We used our own valuation specialists in order to assist us in performing our procedures in this
area.
Our procedures included:
Methodology choice
We assessed the appropriateness of the valuation methodologies with reference to relevant
accounting standards as well as industry practice.
Control operation
We tested the design, implementation and operating effectiveness of key controls over the
valuation process, including the Group’s review and approval of the estimates and
assumptions used for the valuation including key authorisation and data input controls.
Tests of detail
For a sample of securities, we used our valuation specialists to assess the Group’s classification
of assets within Level 2 or Level 3 by evaluating the observability of the inputs used in valuing
these securities.
For a sample of unlisted debt securities we compared the price adopted to our independently
derived price, using our valuation specialists. For a sample of unlisted funds, we agreed the
valuations for the NAV funds to the most recent NAV statements. To assess reliability of these
statements we compared to audited financial statements of the funds, where available, or
performed a retrospective test over the NAV valuations for each fund to assess if the fund
valuations reported in the audited financial statements in the prior year were materially
consistent with the most recent NAV valuation statements available at the time.
Assessing transparency
We assessed whether the disclosures in relation to the valuation of level 2 and 3 investments
held at fair value are compliant with the relevant accounting requirements
The Group’s investments portfolio represents
87 per cent (FY21: 85 per cent) of the Group’s
total assets.
Subjective valuation
The area that involved significant audit effort
and judgement in the current year was the
valuation of certain level 2 and level 3
positions within the portfolio of financial
investments held at fair value. This is
comprised of unlisted debt securities and
unlisted funds that are valued by reference to
their Net Asset Value (‘NAV funds’). For these
positions a reliable third-party price was not
readily available and therefore involved the
application of expert judgement in the
valuations adopted.
Auditor judgement is required in determining
the appropriate valuation methodology
where external pricing sources are either not
readily available or are unreliable. Further
judgement is required to assess whether the
directors’ overall estimate, based on their
judgement depending on the observability
and significance of the inputs into the
valuation and the consequent impact on the
classification of those investments, falls
within an acceptable range.
The effect of these matters is that, as part of
our risk assessment, we determined that the
valuation of certain level 2 and 3
investments held at fair value has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole and possibly many
times that amount.
The financial statements note C6 disclose
the sensitivities estimated by the Group.
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4. Key audit matters continued
Communications with the Prudential plc’s AC
Our discussions with and reporting to the AC included:
> Our approach to the audit of unlisted debt securities and unlisted funds that are valued by reference to their Net Asset Value including
details of our planned substantive procedures and the extent of our control reliance.
> Our conclusions on the appropriateness of the methodology adopted by the Group and the valuation selected for individual investments.
> For our sample of securities, any differences between the valuation adopted by the Group and our independently derived price.
> The adequacy of the disclosures, particularly as it relates to the sensitivity of the value of the level 2 and level 3 investments to key
assumptions.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
> Determination of the valuation methodology where external pricing sources are not readily available or unreliable
> Reasonableness of the estimate, depending on the observability and significance of the inputs into the valuation and the consequent
impact on the classification of those investments.
Our results
We found the valuation of and disclosures of level 2 and 3 investments held at fair value to be acceptable (FY21: acceptable).
Further information in the Annual Report: See the AC Report on page 211 for details on how the AC considered the valuation of certain level 2 and
level 3 investments, page 292 for the accounting policy on the valuation of certain level 2 and level 3 investments , and pages 315 to 322/note C2
for the financial disclosures.
4.3 Recoverability of parent company’s investment in subsidiaries (parent company)
Financial Statement Elements
Our assessment of risk vs FY21
Our results
Investment in
subsidiaries
FY22
FY21
$13,178m
$13,114m
We have not identified any
significant changes to our
assessment of the level of
risk relating to KAM 4.3
compared to FY21
FY22: Acceptable
FY21: Acceptable
Description of the Key Audit Matter
Our response to the risk
Low risk, high value
The carrying amount of the Parent
Company’s investments in subsidiaries
represents 63 per cent (FY21: 58 per cent) of
the Parent Company’s total assets. Their
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to their
materiality in the context of the Parent
Company financial statements, this is
considered to be the area that had the
greatest effect on our overall Parent
Company audit.
Our procedures included:
Tests of detail
Comparing the carrying amount of 100% of the investment in subsidiaries with the relevant
subsidiaries’ draft balance sheet to identify whether their net assets, being an approximation
of their minimum recoverable amount, were in excess of their carrying amount, and assessing
whether those subsidiaries have historically been profit-making.
We performed the test above rather than seeking to rely on the Parent Company’s controls
because the nature of the balance is such that we would expect to obtain audit evidence
primarily through the detailed procedure described.
Assessing subsidiary audits
Assessing the work performed by the subsidiary audit teams on all of those subsidiaries and
considering the results of that work on those subsidiaries’ profits and net assets.
Communications with the Prudential plc’s AC
Our discussions with and reporting to the AC included:
> Our approach to the audit of the recoverability of the Parent Company’s investment in subsidiaries including details of our planned
substantive procedures.
> Our conclusions on the appropriateness of the valuation of the Parent Company’s investment in subsidiaries.
Our results
We found the Parent Company’s conclusion that there is no impairment of its investment in subsidiaries to be acceptable (FY21:acceptable).
Further information in the Annual Report: See the AC Report on page 211 for details on how the AC considered the valuation of Parent Company’s
investment in subsidiaries as an area of significant attention, page 354 for the accounting policy on the valuation of Parent Company’s
investment in subsidiaries, and page 356/note 5 for the financial disclosures.
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5. Our ability to detect irregularities, and our response
Fraud – identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment
Risk communications
Fraud risks
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions
that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
> Enquiring of directors, the AC, internal audit, group security, and inspecting key papers provided to
those charged with governance as to the high-level policies and procedures to prevent and detect
fraud, including the Group’s channel for “whistleblowing” and process for engaging local management
to identify fraud risks specific to their business units, as well as whether they have knowledge of any
actual, suspected, or alleged fraud.
> Reading board and AC minutes.
> Considering remuneration incentive schemes and performance targets for directors.
> Consulting with our own professionals with forensic knowledge to assist us in identifying fraud risks
based on discussions of the circumstances of the Group and the Parent Company.
We communicated identified fraud risks throughout the audit team and remained alert to any indications
of fraud throughout the audit. This included communication from the Group audit team to all
component audit teams in scope of relevant fraud risks identified at the Group level and requests to these
component audit teams to report to the Group audit team any instances of fraud that could give rise to a
material misstatement at Group.
As required by auditing standards, and taking into account possible pressures to meet profit targets, we
perform procedures to address the risks of management override of controls, in particular the risk that
Group and component management may be in a position to make inappropriate accounting entries and
the risk of bias in accounting estimates and judgements. Accordingly, we identified fraud risks related to
the valuation of policyholder liabilities given the impact on the Group’s profit, the opportunity for
management to manipulate assumptions due to the subjectivity involved and given the long-term nature
of these assumptions which are more difficult to corroborate.
On this audit we do not consider there is a fraud risk related to revenue recognition as there is limited
management judgement involved in the determination of all material revenue streams as the amounts
are contractually derived.
Link to KAMs
Further detail in respect of the valuation of insurance contract liabilities is set out in the valuation of
insurance contract liabilities KAM disclosures in section 4.1 of this report.
Procedures to address
fraud risks
In determining the audit procedures to address the identified fraud risks, we took into account the results
of our evaluation and testing of the operating effectiveness of the Group-wide anti-fraud risk controls. In
order to address the risk of fraud specifically as it relates to the valuation of insurance contract liabilities,
we involved actuarial specialists to assist in our challenge of management. We challenged management
in relation to the selection of assumptions and the appropriateness of the rationale for any changes, the
consistency of the selected assumptions across different aspects of the financial reporting process and
comparison to our understanding of the product portfolio, trends in experience, policyholder behaviour
and economic conditions and also by reference to market practice. Further detail in respect of these is set
out in the audit response to the risks associated with this key audit matter in section 4 of this report.
To address the pervasive risk as it relates to management override, we also performed procedures
including:
> Identifying journal entries to test at Group and for all in-scope components, other than those only
in scope for specified risk-based audit procedures, based on risk criteria and comparing the identified
entries to supporting documentation. These include unusual journal entries posted to either cash
or borrowings.
> Evaluating the business purpose of any non-recurring transactions.
> Assessing significant accounting estimates and judgements for bias.
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5. Our ability to detect irregularities, and our response continued
Laws and regulations – identifying and responding to risks of material misstatement relating to compliance with laws and
regulations
Laws and regulations risk
assessment
Risk communications
Direct laws context and link to
audit
Most significant indirect law/
regulation areas
We identified areas of laws and regulations that could reasonably be expected to have a material effect
on the financial statements from our general commercial and sector experience, through discussion with
the directors, and from inspection of the Group’s regulatory and legal correspondence. We discussed with
the directors and other management the policies and procedures regarding compliance with laws and
regulation.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control
environment including the entity’s procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. This included communication from the Group audit
team to all in-scope component audit teams, with the exception of those scoped in only for specified
risk-based audit procedures, of relevant laws and regulations identified at the Group level, and a request
for these teams to report to the Group audit team any instances of non-compliance with said laws and
regulations, or any identified local laws and regulations, that could give rise to a material misstatement at
Group.
The potential effect of these laws and regulations on the financial statements varies considerably.
The Group is subject to laws and regulations that directly affect the financial statements including
financial reporting legislation (including related companies legislation), distributable profits legislation
and taxation legislation and we assessed the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement items.
The Group is subject to many other laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the financial statements, for instance through
the imposition of fines or litigation or the loss of the Group’s license to operate. We identified the
regulations governing capital requirements most likely to have such an effect recognising the financial
and regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and other management and inspection of regulatory and legal
correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that breach.
Actual or suspected breaches
discussed with ac
We discussed with the AC matters related to actual or suspected fraud, for which disclosure is not
necessary, and considered any implications for our audit.
Context
Context of the ability of the
audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected
some material misstatements in the financial statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Our audit procedures are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect non-compliance with all
laws and regulations.
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The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative considerations to
help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements, both
individually and in the aggregate, on the financial statements as a whole.
$190m
(FY21: $190m)
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Materiality for the group
financial statements as a
whole
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at $190m (FY21: $190m). This was
determined with reference to a benchmark of IFRS shareholders’ equity.
Consistent with FY21, we determined that IFRS shareholders’ equity remains the main benchmark for the
Group as it represents the residual interest that can be ascribed to shareholders after policyholder assets
and corresponding liabilities have been accounted for; we consider that this is the most appropriate
measure for the size of the business and that it provides a stable measure year on year.
Our Group materiality of $190m (FY21: $190m) was determined by applying a percentage to the IFRS
Shareholders’ equity. When using a benchmark of net assets/equity to determine overall materiality,
KPMG’s approach for listed entities considers a guideline range 0.5 - 2% of the measure. In setting overall
Group materiality, we applied a percentage of 1.1% (FY21: 1.1%) to the benchmark.
Materiality for the Parent Company financial statements as a whole was set at $45m (FY21: $53m),
determined with reference to a benchmark of Parent Company net assets, of which it represents 0.3%
(FY21: 0.4%).
$140m
(FY21: $140m)
Performance materiality
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial
statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY21: 75%) of materiality for
Prudential plc Group financial statements as a whole to be appropriate.
The Parent Company performance materiality was set at $33m (FY21: $33.75m), which equates to 75%
(FY21: 75%) of materiality for the Parent Company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify
any factors indicating an elevated level of risk.
$9m
(FY21: $9m)
Audit misstatement posting
threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a
quantitative point of view. We may become aware of misstatements below this threshold which could
alter the nature, timing and scope of our audit procedures, for example if we identify smaller
misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to Prudential plc’s
AC.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (FY21: 5%) of our materiality for the Group
financial statements. We also report to the AC any other identified misstatements that warrant reporting
on qualitative grounds.
The overall materiality for the Group financial statements of $190m (FY21: $190m) compares as follows to the main financial statement caption
amounts:
Total Group Revenue
Group profit before tax for
continuing operations
Total Group Assets
FY22
FY21
FY22
FY21
FY22
FY21
Financial statement Caption
$(8,219)m
$26,500m
$1,482m
$3,018m
$165,942m
$199,102m
Group Materiality as % of caption
2.3%
1.0%
12.8%
6.3%
0.1%
0.1%
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
7. The scope of our audit
Group scope
What we mean
How the Group audit team determined the procedures to be performed across the Group.
The Group has 13 (FY21: 13) reporting components scoped in for the Group audit. In order to determine
the work performed at the reporting component level, we identified those components which we
considered to be of individual financial significance, those which were significant due to risk and those
remaining components on which we required procedures to be performed to provide us with the evidence
we required in order to conclude on the Group financial statements as a whole.
We determined individually financially significant components as those contributing at least 7% (FY21:
6%) of profit before tax (for components that are equity accounted in the consolidated financial
statements), total assets (for life insurance components) or revenue (for components that are not life
insurance components). We selected profit before tax, total assets and revenue because these are the
most representative of the relative size of the components and the nature. We identified 6 (FY21: 7)
components as individually financially significant components and performed full scope audits on these
components.
In addition to the individually financially significant components, we identified 4 (FY21: 3) components as
significant, owing to significant risks of material misstatement affecting the Group financial statements.
Of the 4 (FY21: 3) components identified as significant due to risk, we performed audits of equity and
debt securities in 3 components (2021: 3), gross insurance contracts in 3 components (FY21: 3) and
performed specific risk-focused audit procedures over gross insurance contract liabilities in 1 component
(FY21: none).
In addition, to enable us to obtain sufficient appropriate audit evidence for the Group financial
statements as a whole, we selected 7 (FY21: 7) components on which to perform procedures. 4 of these
components were already scoped in owing to significance due to risk, as explained above. We performed
audits of:
> distribution rights, policy loans and benefits and claims and movement in unallocated surplus of
with-profits funds in 2 components (FY21: 2),
> deferred acquisition costs, gross premiums earned, total investment return and acquisition costs and
other expenditure in 3 components (FY21:3)
> equity and debt securities, gross investment contract liabilities without discretionary participation
features, gross insurance contracts and other income in 1 component (FY21: 1),
> cash and cash equivalents and deposits with credit institutions in 4 components (FY21:4),
> performed specific risk-focused audit procedures over cash and cash equivalents and deposits with
credit institutions in 1 component (FY21: cash and cash equivalents and debt securities).
> performed specific risk-focused audit procedures over equity and debt securities in 1 component (FY21:
none).
The components within the scope of our work accounted for the percentages illustrated in section 2 -
Group Scope.
Scope
Full scope audit
Audit of one or more account balances
Specified audit procedures
Number of
components
Range of materiality
applied
6
5
2
$45m - $110m
$20m - $45m
$20m
In addition, we have performed Group level analysis on the remaining components to determine whether
further risks of material.
We were able to rely upon the Group’s internal control over financial reporting in several areas of our
audit, where our controls testing supported this approach, which enabled us to reduce the scope of our
substantive audit work; in the other areas the scope of the audit work performed was fully substantive.
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Independent auditor’s report to the members of Prudential plc / continuedPrudential plc Annual Report 2022 Group audit team oversight
What we mean
The extent of the Group audit team’s involvement in component audits.
In working with component auditors, we:
> Held a virtual global planning conference with component auditors to identify audit risks and decide
how each component team should address the identified audit risks.
> Instructed component auditors as to the significant areas to be covered, including the relevant risks
detailed above and the information to be reported.
> Approved the component materialities, which ranged from $20 million to $110 million (FY21:
$20 million to $110 million) across the components, having regard to the size and risk profile of the
Group across the components. The work on 11 components (FY21: 11 components) was performed by
component auditors and work on the remaining two components, which included the Parent
Company, was performed by the Group audit team.
> Visited 8 component locations across Asia, as travel restrictions eased during the course of 2022 (FY21:
due to Coronavirus restrictions on travel the Group audit team held video and telephone conference
meetings with component auditors). Video and telephone conference meetings were also held with
these component auditors. During these video and telephone conference meetings, an assessment
was made of audit risk and strategy, the findings reported to the Group audit team were discussed in
more detail, key working papers were inspected and any further work required by the Group audit team
was then performed by the component auditor.
> The Group team also routinely reviews the audit documentation of all component audits. The Group
audit team conducted a combination of in person and remote file reviews, performed by experienced
members of the audit team, to evaluate whether work performed by all component audit teams over
significant risk and other relevant audit areas was sufficient. In addition, the Group audit team
maintained clear oversight of the work of component auditors and attended local final audit closing
meetings via conference/video call.
> The Senior Statutory Auditor, in conjunction with other senior staff in the Group and component audit
teams, also regularly attended subsidiary AC meetings and participated in meetings with local
components to obtain additional understanding, first hand, of the key risks and audit issues at a
component level which may affect the Group financial statements.
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8. Other information in the annual report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether, based on
our financial statements audit work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not
identified material misstatements or
inconsistencies in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
> we have not identified material misstatements in the strategic report and the directors’
report;
> in our opinion the information given in those reports for the financial year is consistent with
the financial statements; and
> in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’ Remuneration
Report to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency
between the financial statements and our audit knowledge, and:
> the directors’ statement that they consider that the annual report and financial statements
taken as a whole is fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and performance, business model
and strategy;
> the section of the annual report describing the work of the AC, including the significant issues
that the AC considered in relation to the financial statements, and how these issues were
addressed; and
> the section of the annual report that describes the review of the effectiveness of the Group’s
risk management and internal control systems.
Our reporting
In our opinion the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006.
Our reporting
Based on those procedures, we have
concluded that each of these disclosures is
materially consistent with the financial
statements and our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating to the
Group’s compliance with the provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.
We have nothing to report in this respect.
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Independent auditor’s report to the members of Prudential plc / continuedPrudential plc Annual Report 2022 Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
> adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
> the Parent Company financial statements and the part of the Directors’ Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
> certain disclosures of directors’ remuneration specified by law are not made; or
> we have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these
respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 358, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single electronic reporting format
specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in
accordance with that format.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Stuart Crisp (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Public Interest Entity Auditor recognised in accordance with the Hong Kong Financial Reporting Council Ordinance
Chartered Accountants
15 Canada Square
London, E14 5GL
15 March 2023
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportEuropean Embedded Value (EEV) basis resultsAdditional informationFinancial statements
European
Embedded
Value (EEV)
basis results
378 Index to EEV basis results
376
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Prudential plc Annual Report 2022 E
u
r
o
p
e
a
n
E
m
b
e
d
d
e
d
V
a
u
e
(
E
E
V
)
b
a
s
i
s
r
e
s
u
l
t
s
l
377
Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationPrudential plc Annual Report 2022
Index to European Embedded Value (EEV) basis results
EEV results highlights
Basis of preparation
Movement in Group EEV shareholders’ equity
Movement in Group free surplus
Notes on the EEV basis results
1
2
3
4
5
6
7
8
9
10
11
Analysis of new business profit and EEV for long-term business operations
Analysis of movement in net worth and value of in-force business for long-term business operations
Sensitivity of results for long-term business operations
Expected transfer of value of in-force business and required capital to free surplus for long-term business operations on a discounted basis
EEV results for other (central) operations
Net core structural borrowings of shareholder-financed businesses
Comparison of EEV basis shareholders’ equity with IFRS basis shareholders’ equity
Methodology and accounting presentation
Assumptions
Insurance new business
Post balance sheet events
Statement of Directors’ responsibilities
Independent auditor’s report to Prudential plc
Page
379
380
382
384
386
387
388
390
390
391
392
392
395
397
397
398
399
Description of EEV basis reporting
The EEV basis results have been prepared in accordance with the EEV Principles issued by the European Insurance CFO Forum in 2016. All results
are stated net of tax and converted using actual exchange rates (AER) unless otherwise stated. AER are actual historical exchange rates for the
relevant accounting period. Constant exchange rate (CER) results are calculated by translating prior period results using current period foreign
currency exchange rates, ie current period average rates for the income statement and current period closing rates for the balance sheet. Where
appropriate, the EEV basis results include the effects of adoption of IFRS Standards.
The Directors are responsible for the preparation of the supplementary information in accordance with the EEV Principles. In preparing the EEV
basis supplementary information, the Directors have satisfied themselves that the Group remains a going concern. Further information is provided
in note A1 of the IFRS financial results.
378
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Prudential plc Annual Report 2022 European Embedded Value (EEV) basis results
EEV results highlights
New business profit note (ii)
Annual premium equivalent (APE) note (ii)
New business margin (APE) (%)
Present value of new business premiums (PVNBP)
Operating free surplus generated notes (ii)(iii)
EEV operating profit notes (ii)(iv)
EEV operating profit, net of non-controlling interests
Operating return on average EEV shareholders’ equity, net of non-
controlling interests (%)
Closing EEV shareholders’ equity, net of non-controlling interests
Closing EEV shareholders’ equity, net of non-controlling interests
per share (in cents)
2022
$m
2,184
4,393
50%
22,406
2,193
3,952
3,923
9%
42,184
1,534¢
2021
AER
CER
$m
note (i)
2,526
4,194
60%
24,153
2,071
3,543
3,515
8%
47,355
1,725¢
% change
(14)%
5%
(10)pp
(7)%
6%
12%
12%
(11)%
(11)%
$m
note (i)
2,443
4,013
61%
23,281
2,004
3,429
3,401
46,256
1,684¢
% change
(11)%
9%
(11)pp
(4)%
9%
15%
15%
(9)%
(9)%
The 2021 results above are for the Group’s continuing operations only, excluding results from the discontinued US operations which were demerged in September 2021.
Results are presented before deducting the amounts attributable to non-controlling interests. This presentation is applied consistently throughout this document, unless stated otherwise.
Notes
(i)
(ii)
(iii) Operating free surplus generated is for long-term and asset management businesses only, before restructuring and IFRS 17 implementation costs, centrally incurred costs and eliminations.
(iv) Group EEV operating profit is stated after restructuring and IFRS 17 implementation costs, centrally incurred costs and eliminations.
The EEV basis supplementary information on pages 379 to 401 was approved by the Board of Directors on 15 March 2023 and signed on its
behalf by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
379
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
Basis of preparation
IFRS profit for long-term business broadly reflects the aggregate of results on a traditional accounting basis. By contrast, EEV is a way of
measuring the value of the in-force life insurance business. The value of future new business is excluded from the embedded value. The EEV
Principles provide consistent definitions of the components of EEV, a framework for setting assumptions and an approach to the underlying
methodology and disclosures. The EEV Principles were designed to provide guidance and common principles that could be understood by both
users and preparers alongside prescribing a minimum level of disclosures to enable users to understand an entity’s methodology, assumptions and
key judgements as well as the sensitivity of an entity’s EEV to key assumptions. Results prepared under the EEV Principles represent the present
value of the shareholders’ interest in the post-tax future profits (generally on a local statutory basis) expected to arise from the current book of
long-term business, after sufficient allowance has been made for the aggregate risks in the business. The shareholders’ interest in the Group’s
long-term business is the sum of the shareholders’ total net worth and the value of in-force business.
For the purposes of preparing EEV results, insurance joint ventures and associates are included at the Group’s proportionate share of their
embedded value and not at their market value. Asset management and other non-insurance subsidiaries, joint ventures and associates are
included in the EEV results at the Group’s proportionate share of IFRS shareholders’ equity, with central Group debt shown on a market value basis.
Post the demerger of the Group’s US operations (Jackson) in September 2021, the Group’s retained interest in Jackson has been included at its fair
value within other (central) operations. This is equivalent to its value within the Group’s IFRS financial results. Further information is contained in
note 5.
Key features of the Group’s EEV methodology include:
> Economic assumptions: The projected post-tax profits assume a level of future investment return and are discounted using a risk discount rate.
Both the risk discount rate and the investment return assumptions are updated at each valuation date to reflect current market risk-free rates,
such that changes in market risk-free rates impact all projected future cash flows. Risk-free rates, and hence investment return assumptions, are
based on observable market data, with current market risk-free rates assumed to remain constant throughout the projection, with no trending
or mean reversion to longer-term assumptions. Different products will be sensitive to different assumptions, for example, participating products
or products with guarantees are likely to benefit disproportionately from higher assumed investment returns.
> Time value of financial options and guarantees: Explicit quantified allowances are made for the time value of financial options and guarantees
(TVOG). The TVOG is determined by weighting the probability of outcomes across a large number of different economic scenarios and is
typically less applicable to health and protection business that generally contains more limited financial options or guarantees. At 31 December
2022, the TVOG is $(151) million (31 December 2021: $(784) million). The magnitude of the TVOG at 31 December 2022 would be
approximately equivalent to a circa 3 basis point (31 December 2021:10 basis point) increase in the weighted average risk discount rate.
> Allowance for risk in the risk discount rates: Risk discount rates are set equal to the risk-free rate at the valuation date plus product-specific
allowances for market and non-market risks. Risks that are explicitly captured elsewhere, such as via the TVOG, are not included in the risk
discount rates.
The allowance for market risk is based on a product-by-product assessment of the sensitivity of shareholder cash flows to varying market returns.
This approach reflects the inherent market risk in each product group and results in lower risk discount rates for products where the majority of
shareholder profit is uncorrelated to market risk and appropriately higher risk discount rates for products where there is greater market exposure
for shareholders.
For example, for health and protection products, which represent 51 per cent of the value of in-force business and 43 per cent of new business
profit, the major sources of shareholder profits are underwriting profits or fixed shareholder charges which have low market risk sensitivity. There is
a lower proportion of health and protection than in prior periods largely as a result of higher interest rates, which is adverse on health and
protection type products and positive impact on savings type products. New business profit is also impacted by the mix of business sold in the
period.
The construct of UK-style with-profits or similar participating funds in some business units (representing 26 per cent of the value of in-force and
18 per cent of new business profit) reduce the market volatility of both policyholder and shareholder cash flows due to smoothed bonus
declarations and for some markets the presence of an estate. Accordingly, 77 per cent of the value of in-force is products with low market risk
sensitivity and this is reflected in the overall risk discount rate.
For unit-linked products where fund management charges fluctuate with the investment return, a portion of the profits will typically be more
sensitive to market risk due to the higher proportion of equity-type assets in the investment portfolio resulting in a higher risk discount rate. This
business represents 17 per cent of the value of in-force and 11 per cent of the value of new business profit which limits the impact on the overall risk
discount rate. The remaining parts of the business (6 per cent of the value of in-force business and 28 per cent of the value of new business) relate
to non-participating products not covered by the above.
The allowance for non-market risk comprises a base Group-wide allowance of 50 basis points plus additional allowances for emerging market
risk where appropriate. At 31 December 2022, the total allowance for non-market risk is equivalent to a $(2.8) billion (31 December 2021:
$(3.7) billion) reduction, or around (7) per cent (31 December 2021: (8) per cent) of the embedded value.
380
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European Embedded Value (EEV) basis results / continuedPrudential plc Annual Report 2022 Hong Kong Risk-Based Capital regime
In April 2022, Prudential Hong Kong Limited (PHKL), the Group’s 100 per cent owned life insurance subsidiary in Hong Kong received approval
from the Hong Kong Insurance Authority (IA) to early adopt the Hong Kong Risk-Based Capital (HK RBC) regime with effect from 1 January 2022.
This impacts PHKL’s (and consequentially the Group’s) capital position as described in note I(i) within Additional unaudited financial information.
Under the Group’s EEV methodology, local regulatory and target capital requirements are the basis of estimating future shareholder cash flows
and therefore the changes to the HK RBC framework will impact the Group’s EEV, with effect from 1 January 2022, as discussed below.
Comparatives have not been restated.
Adjustment to shareholders’ equity at 1 January 2022
Long-term insurance business
As reported at 31 Dec 2021
Opening adjustment at 1 Jan 2022:
HK RBC impact
Long-term insurance business as at 1 Jan 2022
Free
surplus
5,960
1,360
7,320
Required
capital
3,230
2,853
6,083
Net
worth
9,190
4,213
13,403
Value of
in-force
business
35,456
(3,984)
31,472
Embedded
value
44,646
229
44,875
The HK RBC framework requires liabilities to be valued on a best estimate basis and capital requirements to be risk based. As a result of applying
this framework, the EEV net worth increased by $4,213 million, reflecting the release of prudent regulatory margins previously included in
liabilities, and a reduction in VIF. EEV free surplus excludes regulatory surplus that arises where HK RBC technical provisions are lower than
policyholder asset shares or cash surrender values to more realistically reflect how the business is managed. The introduction of this flooring for
PHKL reduces the increase to its free surplus that would have otherwise arisen. The impact therefore differs from the effect on Group GWS surplus
as explained in note I(i) of the Additional unaudited financial information.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
Movement in Group EEV shareholders’ equity
2022 $m
2021 $m
Continuing operations:
New business profit
Profit from in-force business
Long-term business
Asset management
Operating profit from long-term and asset management businesses
Other income (expenditure)
Operating profit (loss) before restructuring and IFRS 17
implementation costs
Restructuring and IFRS 17 implementation costs
Operating profit (loss) for the year
Short-term fluctuations in investment returns
Effect of changes in economic assumptions
(Loss) profit attaching to corporate transactions
Mark-to-market value movements on core structural borrowings
Non-operating results
(Loss) profit from continuing operations
Loss from discontinued US operations note (i)
(Loss) profit for the year
Non-controlling interests share of profit from continuing operations
Non-controlling interests share of loss from discontinued US operations
(Loss) profit for the year attributable to equity holders of the Company
Equity items from continuing operations:
Foreign exchange movements on operations
Intra-group dividends and investment in operations note (ii)
Demerger dividend in specie from Jackson
Other external dividends
New share capital subscribed note (iii)
Other movements note (iv)
Equity items from discontinued US operations net of non-controlling interest
Net (decrease) increase in shareholders’ equity
Shareholders’ equity at beginning of year (as previously disclosed)
Effect of HK RBC
Shareholders’ equity at beginning of year after adoption of HK RBC
Shareholders’ equity at end of year
Contribution to Group EEV:
At end of year:
Long-term business
Asset management and other
Shareholders’ equity, excluding goodwill attributable to equity holders
Goodwill attributable to equity holders
Shareholders’ equity at end of year
At beginning of year:
Long-term business
Asset management and other
Shareholders’ equity, excluding goodwill attributable to equity holders
Goodwill attributable to equity holders
Total continuing operations (as previously disclosed)
Discontinued US operations
Shareholders’ equity at beginning of year (as previously disclosed)
Insurance
and asset
management
operations
Note
Other (central)
operations
1
2
5
2
2
6
2
5
2
5
2,184
2,358
4,542
234
4,776
–
4,776
(125)
4,651
(6,893)
(1,571)
(5)
–
(8,469)
(3,818)
–
(3,818)
(29)
–
(3,847)
(1,195)
(1,211)
–
–
172
–
(6,081)
46,114
229
46,343
40,262
38,857
643
39,500
762
40,262
44,646
690
45,336
778
46,114
–
46,114
–
–
–
–
–
(542)
(542)
(157)
(699)
19
–
62
865
946
247
–
247
–
–
247
–
1,211
–
(474)
(4)
(299)
–
681
1,241
–
1,241
1,922
–
1,922
1,922
–
1,922
–
1,241
1,241
–
1,241
–
1,241
Group
total
2,184
2,358
4,542
234
4,776
(542)
4,234
(282)
3,952
(6,874)
(1,571)
57
865
(7,523)
(3,571)
–
(3,571)
(29)
–
(3,600)
(1,195)
–
–
(474)
(4)
(127)
–
(5,400)
47,355
229
47,584
42,184
38,857
2,565
41,422
762
42,184
44,646
1,931
46,577
778
47,355
–
47,355
Group
total
2,526
1,630
4,156
284
4,440
(723)
3,717
(174)
3,543
(1,040)
412
(35)
357
(306)
3,237
(10,852)
(7,615)
(40)
1,205
(6,450)
(460)
–
(1,735)
(421)
2,382
238
(206)
(6,652)
54,007
–
54,007
47,355
44,646
1,931
46,577
778
47,355
42,861
(1,756)
41,105
821
41,926
12,081
54,007
382
prudentialplc.com
European Embedded Value (EEV) basis results / continuedPrudential plc Annual Report 2022 EEV shareholders’ equity per share (in cents) note (v)
At end of year:
Based on shareholders’ equity, net of goodwill attributable to equity holders
Based on shareholders’ equity at end of year
Insurance
and asset
management
operations
2022
Other
(central)
operations
1,437¢
1,464¢
70¢
70¢
Group
total
1,507¢
1,534¢
2021
Group
total
1,696¢
1,725¢
At beginning of year:
Based on shareholders’ equity, net of goodwill attributable to equity holders
1,651¢
45¢
1,696¢
1,576¢
Based on shareholders’ equity at beginning of year
From continuing operations
From discontinued US operations
EEV basis basic earnings per share in cents note (vi)
Based on operating profit from continuing operations
Based on (loss) profit for the year:
From continuing operations
From discontinued US operations
1,680¢
–
45¢
–
1,725¢
–
1,607¢
463¢
Before non-
controlling
interests
$m
2022
After non-
controlling
interests
$m
Basic
earnings
per share
cents
3,952
3,923
143.4¢
(3,571)
–
(3,600)
–
(131.6)¢
–
2021
Basic
earnings
per share
cents
133.8¢
121.7¢
(367.1)¢
Notes
Discontinued operations represent the Group’s US business (Jackson) which was demerged in September 2021.
(i)
(ii)
Intra-group dividends represent dividends that have been declared in the year. Investment in operations reflects movements in share capital.
(iii) New share capital subscribed in 2021 primarily represented the issuance of new ordinary shares on the Hong Kong Stock Exchange in October 2021.
(iv) Other movements include reserve movements in respect of valuation movements on the retained interest in Jackson, share-based payments, treasury shares and intra-group transfers between
operations that have no overall effect on the Group’s shareholders’ equity.
Based on the number of issued shares at 31 December 2022 of 2,750 million shares (31 December 2021: 2,746 million shares).
Based on weighted average number of issued shares of 2,736 million shares in 2022 (2021: 2,628 million shares).
(v)
(vi)
383
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
Movement in Group free surplus
Operating free surplus generation is the financial metric we use to measure the internal cash generation of our business operations and for our life
operations is generally based on (with adjustments as discussed below) the capital regimes that apply locally in the various jurisdictions in which
the Group operates. It represents amounts emerging from the in-force business during the year, net of amounts reinvested in writing new
business. For asset management businesses, it equates to post-tax adjusted operating profit for the year.
For long-term business, free surplus is generally based on (with adjustments including recognition of certain intangibles and other assets that
may be inadmissible on a regulatory basis) the excess of the regulatory basis net assets (EEV total net worth) over the EEV capital required to
support the covered business. For shareholder-backed businesses, the level of EEV required capital has been based on the Group Prescribed Capital
Requirements (GPCR) used in our GWS reporting as set out in note 8.1(e).
Adjustments are also made to enable free surplus to be a better measure of shareholders’ resources available for distribution as described in the
reconciliation to GWS surplus as disclosed in note I(i) of the Additional unaudited financial information. For asset management and other
non-insurance operations (including the Group’s central operations), free surplus is taken to be IFRS basis shareholders’ equity, net of goodwill
attributable to shareholders, with central Group debt recorded as free surplus to the extent that it is classified as capital resources under the
Group’s capital regime. Following the application of the GWS Framework, both subordinated and senior debt (excluding the amount issued in
2022) are treated as capital for the purposes of free surplus at 31 December 2022.
A reconciliation of EEV free surplus to the GWS shareholder capital surplus over GPCR is set out in note I(i) of the Additional unaudited financial
information.
2022 $m
2021 $m
Insurance
and asset
management
operations
Note
Other
(central)
operations
Continuing operations:
Expected transfer from in-force business
Expected return on existing free surplus
Changes in operating assumptions and experience variances
Operating free surplus generated from in-force long-term business
Investment in new business note (ii)
2
2
Long-term business
Asset management
Operating free surplus generated from long-term and asset management businesses
Other income (expenditure)
Restructuring and IFRS 17 implementation costs
Operating free surplus generated
Non-operating free surplus generated note (iii)
Free surplus generated from continuing operations
Free surplus generated from discontinued US operations note (i)
Free surplus generated for the year
Equity items from continuing operations:
Net cash flows paid to parent company note (iv)
Demerger dividend in specie from Jackson
Other external dividends
Foreign exchange movements on operations
New share capital subscribed note (v)
Other movements and timing differences
Treatment of ‘grandfathered’ debt instruments under the GWS Framework
Equity items from discontinued US operations
Net movement in free surplus before non-controlling interest and before net
subordinated debt redemption
Net subordinated debt redemption
Net movement in free surplus before non-controlling interest
Change in amounts attributable to non-controlling interests
Balance at beginning of year (as previously reported)
Effect of HK RBC
Balance at beginning of year after adoption of HK RBC
Balance at end of year
Representing:
Free surplus excluding distribution rights and other intangibles
Distribution rights and other intangibles
Balance at end of year
384
2,406
347
(227)
2,526
(567)
1,959
234
2,193
–
(120)
2,073
(2,040)
33
–
33
(1,304)
–
–
(316)
–
265
–
–
(1,322)
–
(1,322)
(10)
6,650
1,360
8,010
6,678
5,727
951
6,678
–
–
–
–
–
–
–
–
(542)
(157)
(699)
116
(583)
–
(583)
1,304
–
(474)
–
(4)
(392)
–
–
(149)
(1,699)
(1,848)
–
7,399
–
7,399
5,551
2,663
2,888
5,551
Group
total
2,406
347
(227)
2,526
(567)
1,959
234
2,193
(542)
(277)
1,374
(1,924)
(550)
–
(550)
–
–
(474)
(316)
(4)
(127)
–
–
(1,471)
(1,699)
(3,170)
(10)
14,049
1,360
15,409
12,229
8,390
3,839
12,229
Group
total
2,340
157
(173)
2,324
(537)
1,787
284
2,071
(723)
(169)
1,179
82
1,261
770
2,031
–
(1,735)
(421)
10
2,382
238
1,995
(206)
4,294
(232)
4,062
(106)
10,093
–
10,093
14,049
10,083
3,966
14,049
prudentialplc.com
European Embedded Value (EEV) basis results / continuedPrudential plc Annual Report 2022 Contribution to Group free surplus:
At end of year:
Long-term business
Asset management and other
Free surplus at end of year
At beginning of year:
Long-term business
Asset management and other
Total continuing operations at beginning of year
Discontinued US operations
Free surplus at beginning of year
2022 $m
2021 $m
Insurance
and asset
management
operations
Note
Other
(central)
operations
2
5
2
5
6,035
643
6,678
5,960
690
6,650
–
6,650
–
5,551
5,551
–
7,399
7,399
–
Group
total
6,035
6,194
12,229
5,960
8,089
14,049
–
Group
total
5,960
8,089
14,049
5,348
2,996
8,344
1,749
7,399
14,049
10,093
Notes
(i)
(ii)
(iii) Non-operating free surplus generated for other operations represents the post-tax IFRS basis short-term fluctuations in investment returns, gain or loss on corporate transactions for other entities
Discontinued operations represent the Group’s US business (Jackson) which was demerged in September 2021.
Free surplus invested in new business primarily represents acquisition costs and amounts set aside for required capital.
and the movement in the mark-to-market value adjustment on core structural borrowings which did not meet the qualifying conditions as set out in the Insurance (Group Capital) Rules.
(iv) Net cash flows to parent company reflect the cash remittances as included in the holding company cash flow at transaction rates. The difference to the intra-group dividends and investment in
operations in the movement in EEV shareholders’ equity primarily relates to intra-group loans, foreign exchange and other non-cash items.
New share capital subscribed in 2021 primarily represented the issuance of new ordinary shares on the Hong Kong Stock Exchange in October 2021.
(v)
385
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
Notes on the EEV basis results
1 Analysis of new business profit and EEV for long-term business operations
CPL (Prudential’s share)
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total long-term operations
CPL (Prudential’s share)
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total long-term operations
CPL (Prudential’s share)
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total long-term operations
Note
The movement in new business profit from long-term operations is analysed as follows:
2021 new business profit
Foreign exchange movement
Sales volume
Effect of changes in interest rates and other economic assumptions
Business mix, product mix and other items
2022 new business profit
2022
Annual
premium
equivalent
(APE)
$m
Present
value of new
business
premiums
(PVNBP)
$m
884
522
247
359
770
1,611
4,393
3,521
3,295
1,040
1,879
6,091
6,580
22,406
New
business
profit
(NBP)
$m
387
384
125
159
499
630
2,184
2021 (AER)
New
business
profit
(NBP)
$m
Annual
premium
equivalent
(APE)
$m
Present
value of new
business
premiums
(PVNBP)
$m
352
736
125
232
523
558
2,526
776
550
252
461
743
1,412
4,194
3,761
4,847
1,067
2,137
6,214
6,127
24,153
2021 (CER)
New
business
profit
(NBP)
$m
Annual
premium
equivalent
(APE)
$m
Present
value of new
business
premiums
(PVNBP)
$m
337
731
120
219
510
526
2,443
743
546
243
434
724
1,323
4,013
3,602
4,812
1,027
2,013
6,056
5,771
23,281
New
business
margin
(APE)
%
44%
74%
51%
44%
65%
39%
50%
New
business
margin
(APE)
%
45%
134%
50%
50%
70%
40%
60%
New
business
margin
(APE)
%
45%
134%
49%
50%
70%
40%
61%
New
business
margin
(PVNBP)
%
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
11%
12%
12%
8%
8%
10%
10%
3,259
16,576
1,833
3,695
6,806
6,688
38,857
New
business
margin
(PVNBP)
%
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
9%
15%
12%
11%
8%
9%
10%
3,114
21,460
2,237
3,841
7,732
6,262
44,646
New
business
margin
(PVNBP)
%
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
9%
15%
12%
11%
8%
9%
10%
2,855
21,436
2,048
3,633
7,772
5,852
43,596
$m
2,526
(83)
231
(173)
(317)
2,184
EEV new business profit reflects the value of expected future profits from the new business sold in the year, and is a measure used by Prudential to
assess profitability of the new business written. Explanations of changes in new business profitability is contained in the Group Strategic and
Operating Review. Information on the Group’s operating experience variances on the in-force business is shown in note 2.
386
prudentialplc.com
Prudential plc Annual Report 2022 2 Analysis of movement in net worth and value of in-force business for long-term
business operations
2022 $m
2021 $m
Balance at beginning of year after adoption of HK RBC
Balance at beginning of year (as previously reported)
Effect of HK RBC
Balance at beginning of year after adoption of HK RBC
New business contribution
Existing business – transfer to net worth
Expected return on existing business note 2(b)
Changes in operating assumptions, experience variances
and other items note 2(c)
Operating profit before restructuring and IFRS 17
implementation costs
Restructuring and IFRS 17 implementation costs
Operating profit
Non-operating result note 2(d)
(Loss) profit for the year
Non-controlling interests share of (profit) loss
(Loss) profit for the year attributable to equity holders
of the Company
Foreign exchange movements
Intra-group dividends and investment in operations
Other movements note 2(e)
Embedded
value
Embedded
value
Free
surplus
Required
capital
Net worth
5,960
1,360
7,320
(567)
2,406
347
3,230
2,853
6,083
334
(198)
289
9,190
4,213
13,403
(233)
2,208
636
Value of
in-force
business
35,456
(3,984)
31,472
2,417
(2,208)
1,923
44,646
229
44,875
2,184
–
2,559
(227)
(266)
(493)
292
(201)
1,959
(111)
1,848
(2,040)
(192)
(3)
(195)
(283)
(999)
192
159
–
159
(548)
(389)
–
(389)
(94)
(44)
–
2,118
(111)
2,007
(2,588)
(581)
(3)
(584)
(377)
(1,043)
192
2,424
(5)
2,419
(5,881)
(3,462)
(19)
(3,481)
(769)
44
–
4,542
(116)
4,426
(8,469)
(4,043)
(22)
(4,065)
(1,146)
(999)
192
42,861
–
42,861
2,526
–
1,761
(131)
4,156
(82)
4,074
(603)
3,471
(30)
3,441
(457)
(1,115)
(84)
44,646
Balance at end of year note 2(a)
6,035
5,556
11,591
27,266
38,857
Notes
(a)
Total embedded value
The total embedded value for long-term business operations at the end of each year, excluding goodwill attributable to equity holders, can be analysed as follows:
Value of in-force business before deduction of cost of capital and time value of options and guarantees
Cost of capital
Time value of options and guarantees note
Net value of in-force business
Free surplus
Required capital
Net worth
Embedded value
31 Dec 2022 $m 31 Dec 2021 $m
28,126
(709)
(151)
27,266
6,035
5,556
11,591
38,857
36,965
(725)
(784)
35,456
5,960
3,230
9,190
44,646
Note
The time value of options and guarantees (TVOG) arises from the variability of economic outcomes in the future and is, where appropriate, calculated as the difference between an average
outcome across a range of economic scenarios, calibrated around a central scenario, and the outcome from the central economic scenario, as described in note 8.1(d). At 31 December 2022,
the TVOG is $(151) million, with the substantial majority arising in Hong Kong. The TVOG has decreased since 31 December 2021 reflecting the generally higher government bond yields at
31 December 2022 which mean guarantees are less likely to be in-the-money. The TVOG reflects the variability of guaranteed benefit payouts across the range of economic scenarios around
interest rates at the valuation date and represents some of the market risk for the key products in Hong Kong. As this market risk is explicitly allowed for via the TVOG, no further adjustment is
made for this within the EEV risk discount rate, as described in note 8.1(h).
(b)
Expected return on existing business
The expected return on existing business reflects the effect of changes in economic and operating assumptions in the current year, as described in note 8.2(c). The movement in this amount
compared to the prior year from long-term operations is analysed as follows:
$m
2021 expected return on existing business
Foreign exchange movement
Effect of changes in interest rates and other economic assumptions
Growth in opening value of in-force business and other items
2022 expected return on existing business
1,761
(56)
715
139
2,559
387
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
2 Analysis of movement in net worth and value of in-force business for long-term
business operations continued
(c)
Changes in operating assumption, experience variances and other items
Overall, the total impact of operating assumption changes, experience variances and other items in 2022 was $(201) million (2021: $(131) million), comprising changes in operating
assumptions of $32 million in 2022 (2021: $118 million) and experience variances and other items of $(233) million (2021: $(249) million).
(d) Non-operating results
The EEV non-operating result from long-term operations can be summarised as follows:
Short-term fluctuations in investment returns note (i)
Effect of change in economic assumptions note (ii)
Loss attaching to corporate transactions
Non-operating results
2022 $m
2021 $m
(6,893)
(1,571)
(5)
(8,469)
(1,015)
412
–
(603)
Notes
(i)
(ii)
The charge of $(6,893) million for short-term fluctuations in investment returns mainly reflects lower than expected bond returns, following the rise in interest rates in many markets in the
year, widening credit spreads and falling equity markets.
The charge of $(1,571) million for effect of change in economic assumptions primarily arises from increases in interest rates, resulting in higher risk discount rates, partially offset by the
effect of higher assumed fund earned rates that impact projected future cash flows. The effects and impacts vary between businesses and products with the overall negative impact due to
larger weight of health and protection business outweighing positive impacts for other products.
(e) Other reserve movements
Other movements include reserve movements in respect of share-based payments, treasury shares, intra-group loans and other intra-group transfers between operations that have no overall
effect on the Group’s shareholders’ equity.
3 Sensitivity of results for long-term business operations
(a) Sensitivity analysis – economic assumptions
The tables below show the sensitivity of the new business profit and the embedded value for long-term business operations to:
> 1 per cent and 2 per cent increases in interest rates and 0.5 per cent decrease in interest rates. This allows for consequential changes in the
assumed investment returns for all asset classes, market values of fixed interest assets, local statutory reserves, capital requirements and risk
discount rates (but excludes changes in the allowance for market risk);
> 1 per cent rise in equity and property yields;
> 1 per cent and 2 per cent increases in the risk discount rates. The main driver for changes in the risk discount rates from period to period is
changes in interest rates, the impact of which is expected to be partially offset by a corresponding change in assumed investment returns, the
effect of which is not included in the risk discount rate sensitivities. The impact of higher investment returns can be approximated as the
difference between the sensitivity to increases in interest rates and the sensitivity to increases in risk discount rates;
> For embedded value only, 20 per cent fall in the market value of equity and property assets; and
> For embedded value only, holding the Group Minimum Capital Requirements (GMCR) under the GWS Framework in contrast to EEV required
capital based on the GPCR. This reduces the level of capital and therefore the level of charge deducted from the embedded value for the cost of
locked-in required capital. This has the effect of increasing EEV.
The sensitivities shown below are for the impact of instantaneous and permanent changes (with no trending or mean reversion) on the
embedded value of long-term business operations and include the combined effect on the value of in-force business and net assets (including
derivatives) held at the valuation dates indicated. The results only allow for limited management actions, such as changes to future policyholder
bonuses, where applicable. If such economic conditions persisted, the financial impacts may differ to the instantaneous impacts shown below. In
this case, management could also take additional actions to help mitigate the impact of these stresses. No change in the mix of the asset
portfolio held at the valuation date is assumed when calculating sensitivities, while changes in the market value of those assets are recognised.
The sensitivity impacts are expected to be non-linear. To aid understanding of this non-linearity, impacts of both a 1 per cent and 2 per cent
increase to interest rates and risk discount rates are shown.
If the changes in assumptions shown in the sensitivities were to occur, the effects shown below would be recorded within two components of
the profit analysis for the following period, namely the effect of changes in economic assumptions and short-term fluctuations in investment
returns. In addition to the sensitivity effects shown below, the other components of the profit for the following period would be calculated by
reference to the altered assumptions, for example, new business profit and expected return on existing business.
388
prudentialplc.com
Notes on the EEV basis results / continuedPrudential plc Annual Report 2022
New business profit from long-term business
New business profit
Sensitivity to alternative economic assumptions:
Interest rates and consequential effects – 2% increase
Interest rates and consequential effects – 1% increase
Interest rates and consequential effects – 0.5% decrease
Equity/property yields – 1% rise
Risk discount rates – 2% increase
Risk discount rates – 1% increase
Embedded value of long-term business
Embedded value
Sensitivity to alternative economic assumptions:
Interest rates and consequential effects – 2% increase
Interest rates and consequential effects – 1% increase
Interest rates and consequential effects – 0.5% decrease
Equity/property yields – 1% rise
Equity/property market values – 20% fall
Risk discount rates – 2% increase
Risk discount rates – 1% increase
Group Minimum Capital Requirements
2022 $m
2021 $m
2,184
2,526
220
134
(97)
160
(551)
(309)
88
70
(64)
155
(653)
(380)
31 Dec 2022 $m 31 Dec 2021 $m
38,857
44,646
(3,988)
(2,067)
1,058
1,884
(1,840)
(7,371)
(4,155)
117
(4,782)
(2,228)
223
1,909
(1,959)
(9,717)
(5,443)
136
For a 1 per cent increase in assumed interest rates, the $(2,067) million negative effect comprises a $(4,155) million negative impact of increasing
the risk discount rate by 1 per cent, partially offset by a $2,088 million benefit from assuming 1 per cent higher investment returns. Similarly, for a
2 per cent increase in assumed interest rates the $(3,988) million negative effect comprises a $(7,371) million negative impact of increasing the
risk discount rates by 2 per cent, partially offset by a $3,383 million benefit from higher assumed investment returns. Finally, for a 0.5 per cent
decrease in assumed interest rates, there would be a $1,058 million positive effect reflecting the benefit of a 0.5 per cent reduction in risk discount
rates being partially offset by lower assumed investment returns. These offsetting impacts are sensitive to economics and the net impact can
therefore change from period to period depending on the current level of interest rates.
In order to illustrate the impact of varying specific economic assumptions, all other assumptions are held constant in the sensitivities above and,
therefore, the actual changes in embedded value were these economic effects to materialise may differ from the sensitivities shown. For example,
market risk allowances within the risk discount rate may change if interest rates change and these are not allowed for in the above. If market risk
allowances were changed as expected when interest rates are increased by 1 per cent, the expected reduction in EEV would be $(2,038) million
(compared with the $(2,067) million impact shown above). Similarly, if interest rates actually decreased by 0.5 per cent, it would lead to a
$1,029 million increase (compared with the $1,058 million increase shown above).
(b) Sensitivity analysis – non-economic assumptions
The tables below show the sensitivity of the new business profit and the embedded value for long-term business operations to:
> 10 per cent proportionate decrease in maintenance expenses (for example, a 10 per cent sensitivity on a base assumption of $10 per annum
would represent an expense assumption of $9 per annum);
> 10 per cent proportionate decrease in lapse rates (for example, a 10 per cent sensitivity on a base assumption of 5.0 per cent would represent a
lapse rate of 4.5 per cent per annum); and
> 5 per cent proportionate decrease in base mortality (ie increased longevity) and morbidity rates.
New business profit from long-term business
New business profit
Maintenance expenses – 10% decrease
Lapse rates – 10% decrease
Mortality and morbidity – 5% decrease
2022 $m
2021 $m
2,184
48
134
99
2,526
60
190
143
389
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
3 Sensitivity of results for long-term business operations continued
(b) Sensitivity analysis – non-economic assumptions continued
Embedded value of long-term business
Embedded value
Maintenance expenses – 10% decrease
Lapse rates – 10% decrease
Mortality and morbidity – 5% decrease
31 Dec 2022 $m 31 Dec 2021 $m
38,857
44,646
411
1,533
1,300
455
1,901
1,596
4 Expected transfer of value of in-force business and required capital to free surplus
for long-term business operations on a discounted basis
The table below shows how the value of in-force business (VIF) and the associated required capital for long-term business operations are
projected as emerging into free surplus over future years. Cash flows are projected on a deterministic basis and are discounted at the appropriate
risk discount rate. The modelled cash flows use the same methodology underpinning the Group’s EEV reporting and so are subject to the same
assumptions and sensitivities. The projected emergence of VIF and required capital into free surplus in 2022 will be the starting point for expected
free surplus generation next year, after updating for operating and economic assumption changes. See note I(vi) of the Additional unaudited
financial information for further detail.
2022 ($m)
(%)
2021 ($m)
(%)
Total
expected
emergence
32,648
100%
38,922
100%
Expected period of conversion of future post-tax distributable earnings
and required capital flows to free surplus at 31 Dec
1-5 years
6-10 years
11-15 years
16-20 years
21-40 years
40+ years
9,764
30%
9,520
24%
6,038
19%
6,824
18%
4,360
13%
5,160
13%
3,424
10%
4,190
11%
6,910
21%
9,588
25%
2,152
7%
3,640
9%
The required capital and value of in-force business for long-term business operations can be reconciled to the total discounted emergence of
future free surplus shown above as follows:
Required capital note 2
Value of in-force business (VIF) note 2
Other items*
Long-term business operations
31 Dec 2022 $m 31 Dec 2021 $m
5,556
27,266
(174)
32,648
3,230
35,456
236
38,922
*
Other items’ represent the impact of the TVOG and amounts incorporated into VIF where there is no definitive time frame for when the payments will be made or receipts received. These items
are excluded from the expected free surplus generation profile above.
5 EEV results for other (central) operation
EEV results for other income and expenditure represents the post-tax IFRS results for other (central) operations (before restructuring and IFRS 17
implementation costs), together with an adjustment to deduct the unwind of expected margins on the internal management of the assets of the
covered business, as shown in the table below. It mainly includes interest costs on core structural borrowings and corporate expenditure for head
office functions that are not recharged/allocated to the insurance operations.
In line with the EEV Principles, the allowance for the future costs of internal asset management services within the EEV results for long-term
insurance operations excludes the projected future profits or losses generated by any non-insurance entities within the Group in providing those
services (ie the EEV for long-term insurance operations assumes that the cost of internal asset management services will be that incurred by the
Group as a whole, not the cost that will be borne by the insurance business). The results of the Group’s asset management operations include the
current period profit from the management of both internal and external funds, consistent with their presentation within the Group’s IFRS basis
reporting. An adjustment is accordingly made to Group EEV operating profit, within the EEV results for other operations, to deduct the expected
profit anticipated to arise in the current period in the opening value of in-force business from internal asset management services, such that Group
EEV operating profit includes the actual profit earned in respect of the management of these assets.
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Any costs incurred within the head office functions that are deemed attributable to the long-term insurance (covered) business are recharged to
the insurance operations and recorded within the results for those operations. The assumed future expenses within the value of in-force business
for long-term insurance operations allow for amounts expected to be recharged by the head office functions. Other costs that are not recharged
to the insurance operations are shown as part of other income and expenditure for the current period, and are not included within the projection
of future expenses for in-force insurance business.
IFRS other income (expenditure) (as recorded in note B1.1 of the IFRS financial results)
Tax charge on the above IFRS results
Less: unwind of expected profit on internal management of the assets of long-term business
EEV other income (expenditure)
2022 $m
2021 $m
(437)
(21)
(84)
(542)
(605)
(37)
(81)
(723)
The EEV shareholders’ equity for other operations is taken to be IFRS shareholders’ equity, with central Group debt shown on a market value basis.
Free surplus for other operations is taken to be IFRS shareholders’ equity, net of goodwill attributable to equity holders, with central Group debt
recorded as free surplus to the extent that it is classified as capital resources under the Group’s capital regime. Under the GWS Framework, debt
instruments issued at the date of designation which met the transitional conditions set by the Hong Kong IA are included as GWS eligible group
capital resources. In addition, debt issued since the date of designation which met the qualifying conditions as set out in the Insurance (Group
Capital) Rules are also included as GWS eligible group capital resources. The $350 million senior debt issued in 2022 did not meet the conditions
and hence has not been treated as available capital within free surplus.
Shareholders’ equity for other (central) operations can be compared across metrics as shown in the table below.
IFRS basis shareholders’ equity (as recorded in note C1 of the IFRS financial results)
Mark-to-market value adjustment on central borrowings note 6
EEV basis shareholders’ equity
Debt instruments treated as capital resources
Free surplus of other (central) operations
2022 $m
2021 $m
1,495
427
1,922
3,629
5,551
1,679
(438)
1,241
6,158
7,399
Jackson shareholding
The fair value of the Group’s retained interest in Jackson equity securities, as included in the Group’s EEV at 31 December 2022, was $266 million
(31 December 2021: $683 million). Net unrealised changes in fair value since the date of demerger have been included in other movements in
equity items as part of the EEV basis results for other (central) operations. This treatment is consistent with the approach adopted for IFRS. Further
information can be found in note D1.2 of the IFRS financial results.
6 Net core structural borrowings of shareholder-financed businesses
Holding company cash and short-term investments note (i)
Central borrowings:
Subordinated debt
Senior debt
Bank loan
Total central borrowings
Net core structural borrowings of
shareholder-financed businesses
31 Dec 2022 $m
31 Dec 2021 $m
Mark-to-
market
value
adjustment
note (iii)
EEV
basis at
market
value
Mark-to -
market
value
adjustment
note (iii)
IFRS basis
note (ii)
–
(3,057)
(3,572)
IFRS basis
note (ii)
(3,057)
2,286
1,975
–
4,261
(306)
(121)
–
(427)
1,980
1,854
–
3,834
1,204
(427)
777
–
196
242
–
438
438
4,075
1,702
350
6,127
2,555
EEV
basis at
market
value
(3,572)
4,271
1,944
350
6,565
2,993
Notes
(i)
(ii)
(iii)
The definition of holding company cash and short-term investments has been updated. As at 31 December 2022, holding company includes central holding and service companies. As at
31 December 2021, holding company includes centrally managed group holding companies. Further information is provided in note I(v) of the Additional unaudited financial information.
As recorded in note C5.1 of the IFRS financial results.
The movement in the value of core structural borrowings includes issuances and redemptions in the year and foreign exchange effects for pounds sterling denominated debts. The movement in
the mark-to-market value adjustment can be analysed as follows:
Mark-to-market value adjustment at beginning of year
Credit included in the income statement
Mark-to-market value adjustment at end of year
2022 $m
2021 $m
438
(865)
(427)
795
(357)
438
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7 Comparison of EEV basis shareholders’ equity with IFRS basis shareholders’ equity
Assets less liabilities before deduction of insurance funds
Less insurance funds (including liabilities in respect of insurance products classified as investment contracts under IFRS 4):
Policyholder liabilities (net of reinsurers’ share) and unallocated surplus of with-profits funds
Shareholders’ accrued interest in the long-term business
Less non-controlling interests
Total net assets attributable to equity holders of the Company
Share capital
Share premium
IFRS basis shareholders’ reserves
IFRS basis shareholders’ equity, net of non-controlling interests
Shareholders’ accrued interest in the long-term business
EEV basis shareholders’ equity, net of non-controlling interests
31 Dec 2022 $m 31 Dec 2021 $m
140,078
164,810
(122,951)
25,224
(97,727)
(167)
42,184
182
5,006
11,772
16,960
25,224
42,184
(147,546)
30,267
(117,279)
(176)
47,355
182
5,010
11,896
17,088
30,267
47,355
8 Methodology and accounting presentation
8.1 Methodology
(a) Covered business
The EEV basis results for the Group are prepared for ‘covered business’ as defined by the EEV Principles. Covered business represents the Group’s
long-term insurance business (including the Group’s investments in joint venture and associate insurance operations), for which the value of new
and in-force contracts is attributable to shareholders. The definition of long-term insurance business comprises those contracts falling under the
definition for regulatory purposes.
The EEV results for the Group’s covered business are then combined with the post-tax IFRS results of the Group’s asset management and other
operations (including interest costs on core structural borrowings and corporate expenditure for head office functions that is not recharged/
allocated to the insurance operations), with an adjustment to deduct the unwind of expected margins on the internal management of the assets
of the covered business. Under the EEV Principles, the results for covered business incorporate the projected margins of attaching internal asset
management, as described in note (g) below.
(b) Valuation of in-force and new business
The EEV basis results are prepared incorporating best estimate assumptions about all relevant factors including levels of future investment
returns, persistency, mortality, morbidity and expenses, as described in note 9(c). These assumptions are used to project future cash flows. The
present value of the projected future cash flows is then calculated using a discount rate, as shown in note 9(a), which reflects both the time value
of money and all other non-diversifiable risks associated with the cash flows that are not otherwise allowed for.
The total profit that emerges over the lifetime of an individual contract as calculated under the EEV basis is the same as that calculated under
the IFRS basis. Since the EEV basis reflects discounted future cash flows, under the EEV methodology the profit emergence is advanced, thus more
closely aligning the timing of the recognition of profit with the efforts and risks of current management actions, particularly with regard to
business sold during the period.
New business
In determining the EEV basis value of new business, premiums are included in projected cash flows on the same basis of distinguishing regular and
single premium business as set out in the Group’s new business sales reporting.
New business premiums reflect those premiums attaching to the covered business, including premiums for contracts classified as investment
contracts under IFRS 4. New business premiums for regular premium products are shown on an annualised basis.
New business profit represents profit determined by applying operating and economic assumptions as at the end of the period. New business
profitability is a key metric for the Group’s management of the development of the business. In addition, new business margins are shown by
reference to annual premium equivalent (APE) and the present value of new business premiums (PVNBP). These margins are calculated as the
percentage of the value of new business profit to APE and PVNBP. APE is calculated as the aggregate of regular premiums on new business written
in the period and one-tenth of single premiums. PVNBP is calculated as the aggregate of single premiums and the present value of expected
future premiums from regular premium new business, allowing for lapses and the other assumptions made in determining the EEV new business
profit.
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Notes on the EEV basis results / continuedPrudential plc Annual Report 2022
(c) Cost of capital
A charge is deducted from the embedded value for the cost of locked-in required capital supporting the Group’s long-term business. The cost is the
difference between the nominal value of the capital held and the discounted value of the projected releases of this capital, allowing for post-tax
investment earnings on the capital.
The EEV results are affected by the movement in this cost from period to period, which comprises a charge against new business profit and
generally a release in respect of the reduction in capital requirements for business in force as this runs off.
Where required capital is held within a with-profits long-term fund, the value placed on surplus assets within the fund is already adjusted to
reflect its expected release over time and so no further adjustment to the shareholder position is necessary.
(d) Financial options and guarantees
Nature of financial options and guarantees
Participating products, principally written in China, Hong Kong, Malaysia, Singapore and Taiwan, have both guaranteed and non-guaranteed
elements. These products provide returns to policyholders through bonuses that are smoothed. There are two types of bonuses: regular and final.
Regular bonuses are declared once a year and, once credited, are guaranteed in accordance with the terms of the particular products. Final
bonuses are guaranteed only until the next bonus declaration.
There are also various non-participating long-term products with guarantees. The principal guarantees are those for whole-of-life contracts
with floor levels of policyholder benefits that typically accrue at rates set at inception and do not vary subsequently with market conditions. Similar
to participating products, the policyholder charges incorporate an allowance for the cost of providing these guarantees, which, for certain
whole-of-life products in Hong Kong, remains constant throughout varying economic conditions, rather than reducing as the economic
environment improves and vice versa.
Time value
The value of financial options and guarantees comprises the intrinsic value (arising from a deterministic valuation on best estimate assumptions)
and the time value (arising from the variability of economic outcomes in the future).
Where appropriate (ie where financial options and guarantees are explicitly valued under the EEV methodology), a full stochastic valuation has
been undertaken to determine the time value of financial options and guarantees. The economic assumptions used for the stochastic calculations
are consistent with those used for the deterministic calculations. Assumptions specific to the stochastic calculations reflect local market conditions
and are based on a combination of actual market data, historic market data and an assessment of long-term economic conditions. Common
principles have been adopted across the Group for the stochastic asset models, such as separate modelling of individual asset classes with an
allowance for correlations between various asset classes. Details of the key characteristics of each model are given in note 9(b).
In deriving the time value of financial options and guarantees, management actions in response to emerging investment and fund solvency
conditions have been modelled. Management actions encompass, but are not confined to, investment allocation decisions, levels of regular and
final bonuses and credited rates. Bonus rates are projected from current levels and varied in accordance with assumed management actions
applying in the emerging investment and fund solvency conditions. In all instances, the modelled actions are in accordance with approved local
practice and therefore reflect the options available to management.
(e) Level of required capital and net worth
In adopting the EEV Principles, Prudential has based required capital on the applicable local statutory regulations, including any amounts
considered to be required above the local statutory minimum requirements to satisfy regulatory constraints.
For shareholder-backed businesses, the level of required capital has been based on the GPCR.
> For CPL operations, the level of required capital follows the approach for embedded value reporting issued by the China Association of
Actuaries (CAA) reflecting the C-ROSS regime. The CAA has started a project to assess whether any changes are required to the embedded
value guidance in China given changes in regulatory rules, regulations and the external market environment since the standard was first issued.
To date, no outcomes have been proposed by the CAA and Prudential has made no change to its EEV basis for CPL in 2022. At such time that
there is a new basis, Prudential will consider the effect of proposals.
> For Hong Kong participating business, the HK RBC regime recognises the value of future shareholder transfers on an economic basis as
available capital with an associated required capital. Within EEV, the shareholder value of participating business continues to be recognised as
VIF with no recognition within free surplus and no associated required capital.
> For Singapore life operations, the level of net worth and required capital is based on the Tier 1 Capital position under the risk-based capital
framework (RBC2), which removes certain negative reserves permitted to be recognised in the full RBC2 regulatory position applicable to the
Group’s GWS capital position, in order to better reflect free surplus and its generation.
Free surplus is the shareholders’ net worth in excess of required capital. For the Hong Kong business, the HK RBC framework requires liabilities to be
valued on a best estimate basis and capital requirements to be risk based. EEV free surplus excludes regulatory surplus that arises where HK RBC
technical provisions are lower than policyholder asset shares or cash surrender values to more realistically reflect how the business is managed.
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8 Methodology and accounting presentation continued
8.1 Methodology continued
(f) With-profits business and the treatment of the estate
For the Group’s relevant operations, the proportion of surplus allocated to shareholders from the with-profits funds has been based on the
applicable profit distribution between shareholders and policyholders. The EEV methodology includes the value attributed to the shareholders’
interest in the residual estate of the in-force with-profits business. In any scenarios where the total assets of the life fund are insufficient to meet
policyholder claims in full, the excess cost is fully attributed to shareholders. As required, adjustments are also made to reflect any capital
requirements for with-profits business in excess of the capital resources of the with-profits funds.
(g) Internal asset management
In line with the EEV Principles, the in-force and new business results from long-term business include the projected future profit or loss from asset
management and service companies that support the Group’s covered insurance businesses. The results of the Group’s asset management
operations include the current period profit from the management of both internal and external funds. EEV basis shareholders’ other income and
expenditure is adjusted to deduct the expected profit anticipated to arise in the current period in the opening VIF from internal asset
management and other services. This deduction is on a basis consistent with that used for projecting the results for covered insurance business.
Accordingly, Group operating profit includes the actual profit earned in respect of the management of these assets.
(h) Allowance for risk and risk discount rates
Overview
Under the EEV Principles, discount rates used to determine the present value of expected future cash flows are set by reference to risk-free rates
plus a risk margin.
The risk-free rates are largely based on local government bond yields at the valuation date and are assumed to remain constant throughout the
projection, with no trending or mean reversion to longer-term assumptions that cannot be observed in the current market.
The risk margin reflects any non-diversifiable risk associated with the emergence of distributable earnings that is not allowed for elsewhere in
the valuation. In order to better reflect differences in relative market risk volatility inherent in each product group, Prudential sets the risk discount
rates to reflect the expected volatility associated with the expected future shareholder cash flows for each product group in the embedded value
model, rather than at a Group level.
Where financial options and guarantees are explicitly valued under the EEV methodology, risk discount rates exclude the effect of these product
features.
The risk margin represents the aggregate of the allowance for market risk and allowance for non-diversifiable non-market risk. No allowance is
required for non-market risks where these are assumed to be fully diversifiable.
Market risk allowance
The allowance for market risk represents the beta multiplied by the equity risk premium.
The beta of a portfolio or product measures its relative market risk. The risk discount rates reflect the market risk inherent in each product group
and hence the volatility of product-specific cash flows. These are determined by considering how the profit from each product is affected by
changes in expected returns across asset classes. By converting this into a relative rate of return, it is possible to derive a product-specific beta. This
approach contrasts with a top-down approach to market risk where the risks associated with each product are not directly reflected in the
valuation basis.
The Group’s methodology allows for credit risk in determining the best estimate returns and through the market risk allowance, which covers
expected long-term defaults, a credit risk premium (to reflect the volatility in downgrade and default levels) and short-term downgrades and
defaults.
Allowance for non-diversifiable non-market risks
The majority of non-market and non-credit risks are considered to be diversifiable. An allowance for non-diversifiable non-market risks is estimated
as set out below.
A base level allowance of 50 basis points is applied to cover the non-diversifiable non-market risks associated with the Group’s covered business.
For the Group’s businesses in less mature markets (such as the Philippines, Thailand and Africa) additional allowances of 250 basis points are
applied. The level and application of these allowances are reviewed and updated based on an assessment of the Group’s exposure and experience
in the markets. For the Group’s business in more mature markets, no additional allowance is necessary. At 31 December 2022, the total allowance
for non-diversifiable non-market risk is equivalent to a $(2.8) billion, or (7) per cent, reduction to the embedded value of long-term business
operations.
(i) Foreign currency translation
Foreign currency profits and losses have been translated at average exchange rates for the period. Foreign currency transactions are translated at
the spot rate prevailing at the date of the transactions. Foreign currency assets and liabilities have been translated at closing exchange rates. The
principal exchange rates are shown in note A1 of the Group IFRS financial results.
(j) Taxation
In determining the post-tax profit for the period for covered business, the overall tax rate includes the impact of tax effects determined on a local
regulatory basis. Tax payments and receipts included in the projected future cash flows to determine the value of in-force business are calculated
using tax rates that have been announced and substantively enacted by the end of the reporting period.
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Notes on the EEV basis results / continuedPrudential plc Annual Report 2022 8.2 Accounting presentation
(a) Analysis of post-tax profit or loss
To the extent applicable, the presentation of the EEV profit or loss for the period is consistent with the classification between operating and
non-operating results that the Group applies for the analysis of IFRS results. Operating results are determined as described in note (b) below and
incorporate the following:
> New business profit, as defined in note 8.1(b) above;
> Expected return on existing business, as described in note (c) below;
> The impact of routine changes of estimates relating to operating assumptions, as described in note (d) below; and
> Operating experience variances, as described in note (e) below.
In addition, operating results include the effect of changes in tax legislation, unless these changes are one-off and structural in nature, or primarily
affect the level of projected investment returns, in which case they are reflected as a non-operating result.
Non-operating results comprise:
> Short-term fluctuations in investment returns;
> Mark-to-market value movements on core structural borrowings;
> Effect of changes in economic assumptions; and
> The impact of corporate transactions, if any, undertaken in the year.
Total profit or loss in the period attributable to shareholders and basic earnings per share include these items, together with actual investment
returns. The Group believes that operating profit, as adjusted for these items, better reflects underlying performance.
(b) Investment returns included in operating profit
For the investment element of the assets covering the total net worth of long-term insurance business, investment returns are recognised in
operating results at the expected long-term rates of return. These expected returns are calculated by reference to the asset mix of the portfolio.
(c) Expected return on existing business
Expected return on existing business comprises the expected unwind of discounting effects on the opening value of in-force business and required
capital and the expected return on existing free surplus. The unwind of discount and the expected return on existing free surplus are determined
after adjusting for the effect of changes in economic and operating assumptions in the current period on the embedded value at the beginning of
the period, for example, the unwind of discount on the value of in-force business and required capital is determined after adjusting both the
opening value and the risk discount rates for the effect of changes in economic and operating assumptions in the current period.
(d) Effect of changes in operating assumptions
Operating profit includes the effect of changes to operating assumptions on the value of in-force business at the end of the reporting period. For
presentational purposes the effect of changes is delineated to show the effect on the opening value of in-force business as operating assumption
changes, with the experience variances subsequently being determined by reference to the assumptions at the end of the reporting period, as
discussed below.
(e) Operating experience variances
Operating profit includes the effect of experience variances on operating assumptions, such as persistency, mortality, morbidity, expenses and
other factors, which are calculated with reference to the assumptions at the end of the reporting period.
(f) Effect of changes in economic assumptions
Movements in the value of in-force business at the beginning of the period caused by changes in economic assumptions, net of the related
changes in the time value of financial options and guarantees, are recorded in non-operating results.
9 Assumptions
(a) Principal economic assumptions
The EEV results for the Group’s covered business are determined using economic assumptions where both the risk discount rates and long-term
expected rates of return on investments are set with reference to risk-free rates of return at the end of the reporting period. Both the risk discount
rate and expected rates of return are updated at each valuation date to reflect current market risk-free rates, with the effect that changes in
market risk-free rates impact all projected future cash flows. The risk-free rates of return are largely based on local government bond yields and are
assumed to remain constant throughout the projection, with no trending or mean reversion to longer-term assumptions that cannot be observed
in the current market. The risk-free rates of return are shown below for each of the Group’s insurance operations. Expected returns on equity and
property assets and corporate bonds are derived by adding a risk premium to the risk-free rate based on the Group’s long-term view.
As described in note 8.1(h), risk discount rates are set equal to the risk-free rate at the valuation date plus allowances for market risk and
non-diversifiable non-market risks appropriate to the features and risks of the underlying products and markets.
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9 Assumptions continued
(a) Principal economic assumptions continued
Risks that are explicitly allowed for elsewhere in the EEV basis, such as via the cost of capital and the time value of options and guarantees, as set
out in note 2(a), are not included in the risk discount rates.
Risk discount rate %
New business
In-force business
10-year government
bond yield %
Equity return
(geometric) %
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
CPL
Hong Kong note (i)
Indonesia
Malaysia
Philippines
Singapore
Taiwan
Thailand
Vietnam
Total weighted average (new business) note (ii)
Total weighted average (in-force business) note (ii)
7.4
4.8
10.0
5.8
14.5
5.0
3.5
10.0
6.9
6.9
n/a
7.3
2.5
9.9
5.7
12.0
3.4
3.5
9.3
4.0
5.0
n/a
7.4
5.5
10.6
6.5
14.5
5.2
4.0
10.0
6.7
n/a
6.4
7.3
2.8
10.5
6.1
12.0
3.8
3.1
9.3
4.1
n/a
4.3
2.9
3.9
7.3
4.1
7.3
3.1
1.3
2.7
5.0
4.2
4.0
2.8
1.5
7.0
3.7
4.8
1.7
0.7
2.0
2.2
2.7
2.3
6.9
7.4
11.5
7.6
11.5
6.6
5.3
7.0
9.3
7.5
7.6
6.8
5.0
11.3
7.2
9.0
5.2
4.7
6.3
6.4
6.1
5.8
Notes
(i)
(ii)
(iii)
For Hong Kong, the assumptions shown are for US dollar denominated business. For other businesses, the assumptions shown are for local currency denominated business.
Total weighted average assumptions have been determined by weighting each business’s assumptions by reference to the EEV basis new business profit and the closing net value of in-force
business. The changes in the risk discount rates for individual businesses reflect the movements in the local government bond yields, changes in the allowance for market risk (including as a result
of changes in asset mix) and changes in product mix.
Expected long-term inflation assumptions range from 1.5 per cent to 5.5 per cent for all periods shown above.
(b) Stochastic assumptions
Details are given below of the key characteristics of the models used to determine the time value of financial options and guarantees as referred
to in note 8.1(d).
> The stochastic cost of guarantees is primarily of significance for the Hong Kong, Malaysia, Singapore and Taiwan businesses;
> The principal asset classes are government bonds, corporate bonds and equity;
> Interest rates are projected using a stochastic interest rate model calibrated to the current market yields;
> Equity returns are assumed to follow a log-normal distribution;
> The corporate bond return is calculated based on a risk-free return plus a mean-reverting spread;
> The volatility of equity returns ranges from 18 per cent to 35 per cent for both years; and
> The volatility of government bond yields ranges from 1.1 per cent to 2.0 per cent for both years.
(c) Operating assumptions
Best estimate assumptions are used for projecting future cash flows, where best estimate is defined as the mean of the distribution of future
possible outcomes. The assumptions are reviewed actively and changes are made when evidence exists that material changes in future
experience are reasonably certain. Where experience is expected to be adverse over the short term, a provision may be established.
Assumptions required in the calculation of the time value of financial options and guarantees, for example relating to volatilities and
correlations, or dynamic algorithms linking liabilities to assets, have been set equal to the best estimates and, wherever material and practical,
reflect any dynamic relationships between the assumptions and the stochastic variables.
Demographic assumptions
Persistency, mortality and morbidity assumptions are based on an analysis of recent experience, and reflect expected future experience. When
projecting future cash flows for medical reimbursement business that is repriced annually, explicit allowance is made for expected future premium
inflation and separately for future medical claims inflation.
Expense assumptions
Expense levels, including those of the service companies that support the Group’s long-term business, are based on internal expense analysis and
are appropriately allocated to acquisition of new business and renewal of in-force business. For mature business, in general, it is Prudential’s policy
not to take credit for future cost reduction programmes until the actions to achieve the savings have been delivered. An allowance is made for
short-term required expenses that are not representative of the longer-term expense loadings of the relevant businesses. At 31 December 2022,
the allowance held for these costs across the Group was $(173) million. If future expense overruns are expected to be short-lived, they are
capitalised and subsequently amortised against future overruns.
Expenses comprise costs borne directly and costs recharged from the Group head office functions that are attributable to the long-term
insurance (covered) business. The assumed future expenses for the long-term insurance business allow for amounts expected to be recharged by
the head office functions. Development expenses are allocated to covered business and are charged as incurred.
Corporate expenditure, which is included in other income and expenditure, comprises expenditure of the Group head office functions that is not
recharged/allocated to the long-term insurance or asset management operations, primarily for corporate related activities that are charged as
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Notes on the EEV basis results / continuedPrudential plc Annual Report 2022
incurred, together with restructuring and IFRS 17 implementation costs incurred across the Group as recorded in note B1.1 of the IFRS financial results.
Tax rates
The assumed long-term effective tax rates for operations reflect the expected incidence of taxable profit or loss in the projected future cash flows
as explained in note 8.1(j). The local standard corporate tax rates applicable are as follows:
CPL
Hong Kong
Indonesia
Malaysia*
Philippines
Singapore
Taiwan
Thailand
Vietnam
%
25.0
16.5% on 5% of premium income
22.0
24.0
25.0
17.0
20.0
20.0
20.0
*
The Malaysia 2022 Budget imposed a one-off tax change in 2022 where the first RM100 million chargeable income will continue to be taxed at the standard corporate tax rate of 24 per cent
and any excess will be taxed at a rate of 33 per cent. The anticipated effect was allowed for within EEV at 31 December 2021.
10 Insurance new business
AER
CPL note (i)
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets:
Africa
Cambodia
India note (ii)
Laos
Myanmar
Philippines
Taiwan
Thailand
Vietnam
Total
Single premiums
Regular premiums
Annual premium
equivalents (APE)
Present value of new
business premiums (PVNBP)
2022 $m
2021 $m
2022 $m
2021 $m
2022 $m
2021 $m
2022 $m
2021 $m
1,254
842
250
99
2,628
9
–
273
–
–
61
157
150
99
1,760
808
258
74
2,412
15
–
285
–
–
89
172
142
55
759
438
222
350
507
148
18
196
–
3
176
486
220
288
600
469
226
453
502
133
14
200
1
1
168
379
204
237
884
522
247
359
770
149
18
223
–
3
182
503
235
298
776
550
252
461
743
134
14
228
1
1
177
397
218
242
3,521
3,295
1,040
1,879
6,091
308
69
1,148
1
6
615
1,835
932
1,666
3,761
4,847
1,067
2,137
6,214
288
59
1,172
2
3
655
1,417
882
1,649
5,822
6,070
3,811
3,587
4,393
4,194
22,406
24,153
Notes
(i)
(ii)
(iii)
New business in CPL is included at Prudential’s 50 per cent interest in the joint venture.
New business in India is included at Prudential’s 22 per cent interest in the associate.
The table above is provided as an indicative volume measure of transactions undertaken in the reporting period that have the potential to generate profit for shareholders. The amounts shown
are not, and not intended to be, reflective of premium income recorded in the Group IFRS income statement.
11 Post balance sheet events
Second interim ordinary dividend
The 2022 second interim ordinary dividend approved by the Board of Directors after 31 December 2022 is as described in note B5 of the IFRS
financial results.
Debt redemption
On 20 January 2023 the Company redeemed senior debt instruments of £300 million, as described in note C5.1 of the IFRS financial results.
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Statement of Directors’ responsibilities in respect of the
European Embedded Value (EEV) basis supplementary information
The Directors have chosen to prepare supplementary information in
accordance with the European Embedded Value Principles issued by
the European Insurance CFO Forum in 2016 (‘the EEV Principles’)
using the methodology and assumptions set out in the Notes on the
EEV basis results.
When compliance with the EEV Principles is stated, those principles
require the Directors to prepare supplementary information in
accordance with the Embedded Value Methodology (EVM)
contained in the EEV Principles and to disclose and explain any
non-compliance with the EEV guidance included in the EEV Principles.
In preparing the EEV supplementary information, the Directors have:
> Prepared the supplementary information in accordance with the
EEV Principles;
> Identified and described the business covered by the EVM;
> Applied the EVM consistently to the covered business;
> Determined assumptions on a realistic basis, having regard to past,
current and expected future experience and to any relevant
external data, and then applied them consistently;
> Made estimates that are reasonable and consistent; and
> Described the basis on which business that is not covered business
has been included in the supplementary information, including any
material departures from the accounting framework applicable to
the Group’s financial statements.
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Prudential plc Annual Report 2022 Independent auditor’s report to Prudential plc on the
European Embedded Value (EEV) basis supplementary information
Opinion
We have audited the EEV basis supplementary information of
Prudential plc (‘the Company’ and, together with its subsidiaries,
(‘the Group’)) for the year-ended 31 December 2022 which comprise
the EEV results highlights, movement in Group EEV shareholders’
equity, movement in Group free surplus and related notes,
including the basis of preparation on page 380. The EEV basis
supplementary information should be read in conjunction with
the Group financial statements.
In our opinion, the EEV basis supplementary information of the
Group for the year-ended 31 December 2022 has been properly
prepared, in all material respects, in accordance with the European
Embedded Value Principles issued by the European Insurance CFO
Forum in 2016 (‘the EEV Principles’) using the methodology and
assumptions set out in the Notes on the EEV basis results.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”), including ISA (UK) 800, and the terms
of our engagement. Our responsibilities are described below. We have
fulfilled our ethical responsibilities under, and are independent of the
Company in accordance with, UK ethical requirements including the
FRC Ethical Standard. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion.
Emphasis of matter – special purpose basis of preparation
We draw attention to page 380 of the EEV basis supplementary
information. As explained on that page, the EEV basis supplementary
information is prepared to provide additional information to users of
the Group financial statements. As a result, the EEV basis
supplementary information may not be suitable for another purpose.
Our opinion is not modified in respect of this matter.
Going Concern
The Directors have prepared the EEV basis supplementary
information on the going concern basis as they do not intend to
liquidate the Group or to cease their operations, and as they have
concluded that the Group’s financial position means that this is
realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the EEV basis supplementary information (“the going
concern period”).
We used our knowledge of the Group, its industry, and the general
economic environment in which it operates to identify the inherent
risks to its business model and analysed how those risks might affect
the Group’s financial resources or ability to continue operations over
the going concern period. The risks that were considered most likely
to adversely affect the Group’s available financial resources over this
period were:
> Adverse impacts arising from fluctuations or negative trends in the
economic environment which affect the valuations of the Group’s
investments, wider credit spreads and defaults and valuation of
EEV shareholders’ equity due to the impact of these market
movements;
> The impact on regulatory capital solvency margins from
movements in interest rates; and
> Severely adverse policyholder lapse or claims experience.
We also considered less predictable but realistic second order
impacts, such as failure of some of the Group’s counterparties (such
as banks and reinsurers) to meet commitments, which could give rise
to a negative impact on the Group’s financial position and liquidity,
and wider economic factors such as the Coronavirus pandemic’s
impact on economic volatility and market uncertainty in the period,
and other such macroeconomic events.
We considered whether these risks could plausibly affect the liquidity
or solvency in the going concern period by assessing the Directors’
sensitivities over the level of available financial resources indicated by
the Group’s cash flow forecasts taking account of severe but plausible
adverse effects that could arise from these risks individually and
collectively.
However, as we cannot predict future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group will continue
in operation.
We assessed the completeness of the going concern disclosure.
Our conclusions based on this work:
> We consider that the directors’ use of the going concern basis of
accounting in the preparation of the EEV basis supplementary
information is appropriate;
> We have not identified, and concur with the directors’ assessment
that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant
doubt on the Group’s ability to continue as a going concern for the
going concern period; and
> We found the going concern disclosure to be acceptable.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”)
we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included:
> Enquiring of directors, the Audit Committee, Internal Audit, Group
Security, and inspecting key papers provided to those charged with
governance as to the high-level policies and procedures to prevent
and detect fraud, including the Group’s channel for
“whistleblowing” and process for engaging local management to
identify fraud risks specific to their business units, as well as
whether they have knowledge of any actual, suspected, or alleged
fraud.
> Reading board and Audit Committee minutes.
> Considering remuneration incentive schemes and performance
targets for directors.
> Consulted with professionals with forensic knowledge to assist us in
identifying fraud risks based on discussions of the circumstances of
the Group.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
This included communication from the Group audit team to all
component audit teams in scope of relevant fraud risks identified at
the Group level and requests to these audit teams to report to the
Group audit team any instances of fraud that could give rise to a
material misstatement at Group.
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Independent auditor’s report to Prudential plc on the European Embedded Value (EEV) basis supplementary information / continued
As required by auditing standards, and taking into account possible
pressures to meet profit targets, we perform procedures to address
the risks of management override of controls, in particular the risk
that Group and component management may be in a position to
make inappropriate accounting entries and the risk of bias in
accounting estimates and judgements. Accordingly, we identified a
fraud risk related to the selection of EEV operating assumptions given
their direct impact on the Group’s embedded value, the opportunity
for management to manipulate assumptions due to the subjectivity
involved and given the long-term nature of these assumptions which
are more difficult to corroborate.
On this audit we do not consider there is a fraud risk related to revenue
recognition as there is limited management judgement involved in
the determination of all material revenue streams as the amounts are
contractually derived.
In determining the audit procedures to address the identified fraud
risks, we took into account the results of our evaluation and testing of
the operating effectiveness of the group-wide anti-fraud risk controls.
In order to address the risk of fraud specifically as it relates to the EEV
operating assumptions, we involved actuarial specialists to assist in
our challenge of management. We challenged management in
relation to the selection of assumptions and the appropriateness of
the rationale for any changes, the consistency of the selected
assumptions across different aspects of the financial reporting
process and comparison to our understanding of the product
portfolio, trends in experience, policyholder behaviour and economic
conditions and also by reference to market practice.
To address the pervasive risk as it relates to management override, we
also performed procedures including:
> Identifying journal entries based on risk criteria and comparing the
identified entries to supporting documentation. These include
journal entries related to non-recurring transactions.
> Evaluating the business purpose of non-recurring transactions.
> Assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the EEV basis supplementary
information from our general commercial and sector experience,
through discussion with the directors, and from inspection of the
Group’s regulatory and legal correspondence. We discussed with the
directors and other management the policies and procedures
regarding compliance with laws and regulation.
As the Group is regulated, our assessment of risks involved gaining an
understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. This included communication from the Group
to all in-scope component audit teams of relevant laws and
regulations identified at the group level, and a request for these
teams to report to the Group any instances of non-compliance with
said laws and regulations, or any identified local laws and regulations,
that could give rise to a material misstatement at Group.
The potential effect of these laws and regulations on the EEV basis
supplementary information varies considerably.
The Group is subject to laws and regulations that directly affect the
EEV basis supplementary information including financial reporting
legislation (including related companies legislation), distributable
profits legislation and taxation legislation and we assessed the extent
of compliance with these laws and regulations as part of our
procedures on the related EEV basis supplementary information
items.
The Group is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the EEV basis supplementary information,
for instance through the imposition of fines or litigation or the loss of
the Group’s licence to operate. We identified the area of regulatory
capital as that most likely to have such an effect recognising the
financial and regulated nature of the Group’s activities.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the
directors and other management and inspection of regulatory and
legal correspondence, if any. Therefore, if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of
law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the EEV basis supplementary information, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations (irregularities) is from the
events and transactions reflected in the EEV basis supplementary
information, the less likely the inherently limited procedures required
by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
controls. We are not responsible for preventing non-compliance or
fraud and cannot be expected to detect non-compliance with all laws
and regulations.
Other information
The directors are responsible for the other information presented in
the Annual Report together with the EEV basis supplementary
information. Our opinion on the EEV basis supplementary
information does not cover the other information and, accordingly,
we do not express an audit opinion or any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our EEV basis supplementary information
audit work, the information therein is materially misstated or
inconsistent with the EEV basis supplementary information or our
audit knowledge. Based solely on that work, we have not identified
material misstatements in the other information.
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Prudential plc Annual Report 2022 Directors’ responsibilities
As explained more fully in their statement set out on page 398,
the directors are responsible for the preparation of the EEV basis
supplementary information in accordance with the European
Embedded Value Principles issued by the European Insurance CFO
Forum in 2016 (‘the EEV Principles’) using the methodology and
assumptions set out in the Notes on the EEV basis results. They are
also responsible for: such internal control as they determine is
necessary to enable the preparation of EEV basis supplementary
information that is free from material misstatement, whether due to
fraud or error; determining that the basis of preparation is acceptable
in the circumstances; assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless they
either intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
EEV basis supplementary information as a whole is free from material
misstatement, whether due to fraud or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of the EEV basis supplementary information.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement. Our audit work has been undertaken so
that we might state to the Company those matters we have been
engaged to state to it in this report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our audit work,
for this report, or for the opinions we have formed.
Stuart Crisp
for and on behalf of KPMG LLP
Chartered Accountants
London
15 March 2023
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsAdditional informationEuropean Embedded Value (EEV) basis results
Additional
information
404 Index to the additional unaudited
financial information
430 Risk factors
443 Glossary
447 Shareholder information
450 How to contact us
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Prudential plc Annual Report 2022
A
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d
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Prudential plc Annual Report 2022
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Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis results
Index to the additional unaudited financial information
I
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Additional financial information
Group capital position
Analysis of adjusted operating profit by driver
Analysis of adjusted operating profit by business unit
Group funds under management
Holding company cash flow
Reconciliation of EEV expected transfer of value of in-force business and required capital to free surplus
(vii)
Share schemes
(viii)
Selected historical financial information of Prudential
II
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Calculation of alternative performance measures
Reconciliation of adjusted operating profit to profit before tax
Calculation of IFRS gearing ratio
Return on IFRS shareholders’ equity
Calculation of IFRS shareholders’ equity per share
Calculation of Eastspring cost/income ratio
Reconciliation of gross premiums earned to renewal insurance premiums
(vii)
Reconciliation of gross premiums earned to APE new business sales
(viii) Gross premiums earned including joint ventures and associates
(ix)
(x)
Reconciliation between IFRS and EEV shareholders’ equity
Calculation of return on embedded value
Page
405
410
411
413
413
414
416
424
426
426
426
427
427
427
428
428
428
429
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Prudential plc Annual Report 2022 Additional unaudited financial information
I Additional financial information
I(i) Group capital position
Prudential applies the Insurance (Group Capital) Rules set out in the Group-wide Supervision (GWS) Framework issued by the Hong Kong IA to
determine group regulatory capital requirements (both minimum and prescribed levels). For regulated insurance entities, the capital resources and
required capital included in the GWS capital measure for Hong Kong IA Group regulatory purposes are based on the local solvency regime
applicable in each jurisdiction. The Group holds material participating business in Hong Kong, Singapore and Malaysia. Alongside the total
regulatory GWS capital basis, a shareholder GWS capital basis is also presented which excludes the contribution to the Group GWS eligible group
capital resources, the Group Minimum Capital Requirements (GMCR) and the Group Prescribed Capital Requirements (GPCR) from these
participating funds.
Regulatory updates
The GWS group capital adequacy requirements require that total eligible group capital resources are not less than the GPCR and that GWS Tier 1
group capital resources are not less than the GMCR. In line with the changes in the 2022 Half-Year Report and the updated GWS disclosure
guidelines issued by the Hong Kong IA in December 2022 the GWS capital disclosures present the Group capital position by comparing the total
eligible group capital resources to the GPCR, aligned with the basis of our EEV capital requirements. In addition, the total regulatory Tier 1 capital
resources relative to the GMCR is also disclosed.
The recent trend to more risk-based capital regimes being adopted in many of the Group’s markets is continuing and this impacts on the Group’s
GWS capital measure, which is underpinned by the local regulatory regimes of the Group’s subsidiaries, joint ventures and associates. C-ROSS
Phase II became effective in the Chinese Mainland in the first quarter of 2022, and in April 2022 Prudential Hong Kong Limited received approval
from the Hong Kong IA to early-adopt the new risk-based capital regime effective from 1 January 2022.
The impact of these changes on the GWS capital position, estimated as at 31 December 2021 and after allowing for the impact of the
$1.7 billion debt redemption in January 2022, are shown below:
$ billion
Capital resources
Required capital
GWS capital surplus
GWS coverage ratio
Shareholder basis
GMCR basis
As disclosed
Impact of
HK RBC &
C-ROSS II
Post
regulatory
updates
GPCR basis
Post
regulatory
updates
Total regulatory basis
GMCR basis
As disclosed
Impact of
HK RBC &
C-ROSS II
Post
regulatory
updates
GPCR basis
Post
regulatory
updates
15.2
+10.3
25.5
25.5
42.7
(0.7)
42.0
42.0
3.7
11.5
408%
+1.0
+9.3
+137%
4.7
20.8
545%
8.0
17.5
320%
10.7
32.0
398%
+0.4
(1.1)
-20%
11.1
30.9
378%
20.6
21.4
204%
The Hong Kong RBC framework requires liabilities to be valued on a best estimate basis and capital requirements to be risk-based, resulting in the
release of prudent regulatory margins previously included in liabilities and an increase in required capital. In addition the shareholder position also
recognises the value of future shareholder transfers from participating business on an economic basis within the capital resources along with an
associated required capital. In total this results in a material increase in the GWS shareholder capital resources and required capital as presented
above.
At a GWS total regulatory level, after including the contribution from participating business, the introduction of the Hong Kong RBC framework
results in a fall in capital resources. The impact on the shareholder position as noted above is more than offset by the Hong Kong RBC framework
requirement to reflect future discretionary policyholder bonuses within the participating business liabilities which were previously treated as
capital.
In addition to the regulatory changes discussed above, the Hong Kong IA issued guidance in the first half of 2022 on the classification of GWS
Tier 1 group capital and the GMCR that should be assessed against this Tier 1 group capital, in particular to ensure that participating business
capital resources that are not classified as Tier 1 group capital by the application of local rules, do not attract a corresponding GMCR. Applying this
guidance at 31 December 2021 would reduce the total regulatory GMCR presented above of $11.1 billion by $(4.6) billion to $6.5 billion with no
impact on the GPCR.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(i) Group capital position continued
Estimated GWS capital position
As at 31 December 2022, the estimated shareholder GWS capital surplus over the GPCR is $15.6 billion (31 December 2021: $17.5 billion),
representing a coverage ratio of 307 per cent (31 December 2021: 320 per cent) and the estimated total GWS capital surplus over the GPCR is
$18.1 billion (31 December 2021: $21.4 billion), representing a coverage ratio of 202 per cent (31 December 2021: 204 per cent). The estimated
Group Tier 1 capital resources are $17.4 billion with headroom over the GMCR of $12.1 billion (31 December 2021: $14.9 billion), representing a
coverage ratio of 328 per cent (31 December 2021: 328 per cent).
Group capital resources ($bn)
of which: Tier 1 capital resources ($bn) note (2)
Group Minimum Capital Requirement ($bn)
Group Prescribed Capital Requirement ($bn)
GWS capital surplus over GPCR ($bn)
GWS coverage ratio over GPCR (%)
GWS Tier 1 surplus over GMCR ($bn)
GWS Tier 1 coverage ratio over GMCR (%)
31 Dec 2022 note (4)
31 Dec 2021 note(1)
Shareholder
Add
policyholder
note (3)
Total
note (5)
Shareholder
Add
policyholder
note (3)
23.2
15.9
4.4
7.6
15.6
307%
12.6
1.5
0.9
10.1
2.5
35.8
17.4
5.3
17.7
18.1
202%
12.1
328%
25.5
17.9
4.7
8.0
17.5
320%
16.5
3.5
1.8
12.6
3.9
Total
note (5)
42.0
21.4
6.5
20.6
21.4
204%
14.9
328%
Change
in total
note (6)
(6.2)
(4.0)
(1.2)
(2.9)
(3.3)
(2)%
(2.8)
–
Notes
(1)
(2)
(3)
(4)
(5)
(6)
All 31 December 2021 GWS capital results reflect the impact of the regulatory updates discussed in the section above and are after allowing for the impact of the $1.7 billion debt redemption in
January 2022.
The classification of tiering of capital under the GWS framework reflects the different local regulatory regimes along with guidance issued by the Hong Kong IA. At 31 December 2022, total Tier 1
capital resources of $17.4 billion comprises: $23.2 billion of total shareholder capital resources; less $(4.0) billion of Prudential plc issued sub-ordinated and senior Tier 2 debt capital; less
$(3.3) billion of local regulatory tiering classifications in Singapore and the Chinese Mainland which are classified as GWS Tier 2 capital resources; plus $1.5 billion of Tier 1 capital resources in
policyholder funds.
This allows for any associated diversification impacts between the shareholder and policyholder positions reflected in the total company results where relevant.
The 31 December 2022 GWS capital results do not reflect the impact of the redemption of $0.4 billion of senior debt in January 2023. Allowing for this redemption reduces the estimated
shareholder GWS capital surplus over GPCR to $15.2 billion with a coverage ratio of 302 per cent and reduces the estimated total GWS capital surplus over GPCR to $17.7 billion with a coverage
ratio of 200 per cent. The total GWS Tier 1 over GMCR capital position is unaffected by this redemption.
The total company GWS coverage ratio over GPCR presented above represents the eligible group capital resources coverage ratio as set out in the GWS framework while the total company GWS
tier 1 coverage ratio over GMCR represents the tier 1 group capital coverage ratio.
Refer to section on Material changes in GMCR, GPCR, tier 1 group capital and eligible group capital resources below.
GWS sensitivity analysis
The estimated sensitivity of the GWS capital position (based on the GPCR) to changes in market conditions as at 31 December 2022 is shown
below, for both the shareholder and the total capital position.
Impact of market sensitivities
Base position
Impact of:
10% increase in equity markets
20% fall in equity markets
50 basis points reduction in interest rates
100 basis points increase in interest rates
100 basis points increase in credit spreads
31 Dec 2022
Shareholder
Total
Surplus
$bn
15.6
0.3
(1.9)
0.4
(1.1)
(0.8)
Coverage ratio
307%
(3)%
(14)%
4%
(15)%
(9)%
Surplus
$bn
18.1
1.2
(3.6)
0.0
(0.6)
(1.2)
Coverage ratio
202%
1%
(12)%
0%
(3)%
(6)%
The sensitivity results above reflect the impact on the Group’s long-term business operations at 31 December 2022. The sensitivity results assume
instantaneous market movements and reflect all consequential impacts as at the valuation date. These results also allow for limited management
actions such as changes to future policyholder bonuses and rebalancing investment portfolios where relevant. If such economic conditions
persisted, the financial impacts may differ to the instantaneous impacts shown above. In this case, management could also take additional
actions to help mitigate the impact of these stresses. These actions include, but are not limited to, market risk hedging, further rebalancing of
investment portfolios, increased use of reinsurance, repricing of in-force benefits, changes to new business pricing and the mix of new business
being sold.
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 GWS Risk Appetite and capital management
The Group’s capital management framework focuses on achieving sustainable, profitable growth and retaining a resilient balance sheet.
The Group monitors regulatory capital, economic capital and rating agency capital metrics and manages the business within its risk appetite by
remaining within its economic and regulatory capital limits. In respect of regulatory capital limits, a capital buffer above the GPCR is held to ensure
the Group can withstand volatility in markets and operational experience, with capital resources remaining sufficient to cover the GPCR even after
significant stresses. The calibration of the capital buffer reflects the Group’s risk profile and the external economic environment, and is set and
reviewed regularly by the Board.
Typically, this requires a Group shareholder coverage ratio of above 150 per cent of the shareholder GPCR to be maintained and de-risking
management actions will be taken as necessary to maintain this buffer. No maximum limit on the GWS coverage ratio has been set. While the
GWS shareholder capital position is a key metric for assessing regulatory solvency, and for risk management, there are some elements of the
shareholder GWS capital surplus which will only become available as cash flow for distribution over time. The Group’s Free Surplus metric is a better
measure of the shareholder capital available for distribution, and is used as the primary metric for assessing the Group’s sources and uses of
capital in the Group’s capital management framework, and underpinning the Group’s dividend policy.
At 31 December 2022, the Group’s Free Surplus stock (excluding distribution rights and other intangibles) was $8.4 billion, compared to the
GWS shareholder surplus of $15.6 billion and a reconciliation is shown below. A projection of expected Free Surplus generation for the next 40
years is shown in Section I(vi) of this Group’s 2022 annual report, for in-force business and separately for current year’s new business.
The uses of capital, for both organic and inorganic opportunities, are assessed by reference to expected shareholder returns and payback
periods, relative to risk-adjusted hurdle rates which are set centrally.
Reflecting the Group’s capital allocation priorities, a portion of the free surplus generated in each period will be retained for reinvestment in the
business, and dividends will be determined primarily based on the Group’s operating free surplus generation after allowing for the capital strain of
writing new business and recurring central costs (on a right-sized basis). To the extent that free surplus arises which is not required to support
organic and inorganic growth opportunities, consideration will be given to returning capital to shareholders.
Separate from the capital management framework applied for shareholder-owned capital, the capital held in ring-fenced with-profits funds
supports policyholder investment freedom, which increases expected returns for our with-profits funds’ customers. GWS policyholder capital
surplus is not available for distribution out of the ring-fenced funds other than as a defined proportion distributable to shareholders when
policyholder bonuses are declared. Policyholder fund capital surplus is deployed over time to increase investment risk in the with-profits funds in
order to target higher customer returns, or distributed as higher customer bonuses, in line with the specific with-profits bonus policies which apply
to each ring-fenced fund. The result of applying these policies is that the aggregate policyholder fund GPCR coverage ratio is typically lower than
the GPCR shareholder coverage ratio.
The total GWS coverage ratio, which is an aggregate of the policyholder and shareholder capital positions, is therefore usually lower than the
shareholder coverage ratio, but also less sensitive in stress scenarios, as is shown in the GWS sensitivity analysis section above as at 31 December
2022. The total GWS coverage ratio is the Group’s regulatory solvency metric to which Group supervision applies, and this total regulatory
coverage ratio is managed to ensure it remains above the GPCR by applying separate shareholder and policyholder risk appetite limits, as
described above.
Analysis of movement in total regulatory GWS capital surplus (over GPCR)
A summary of the movement in the restated 31 December 2021 regulatory GWS capital surplus (over GPCR) of $21.4 billion to $18.1 billion at
31 December 2022 is set out in the table below.
Total GWS surplus at 1 Jan (over GPCR) (Post regulatory updates)
Shareholder free surplus generation
In force operating capital generation
Investment in new business
Total operating free surplus generation
External dividends
Non-operating movements (including market movements)
Other capital movements (including foreign exchange movements)
Movement in free surplus (see EEV basis results for further detail)
Other movements in GWS shareholder surplus (not included in free surplus)
Movement in contribution from GWS policyholder surplus (over GPCR)
Net movement in GWS capital surplus (over GPCR)
Total GWS surplus at 31 Dec (over GPCR)
2022 $bn
21.4
2.0
(0.6)
1.4
(0.5)
(1.9)
(0.5)
(1.5)
(0.4)
(1.4)
(3.3)
18.1
Further detail on the movement in free surplus of $(1.5) billion is included in the Financial review section of the Strategic report and in the
Movement in Group free surplus section of the Group’s EEV basis results. Other GWS movements which are not reflected in EEV Free Surplus relate
to a $(0.5) billion movement in the items in the Reconciliation of free surplus to GWS capital surplus presented below, partially offset by a
$0.1 billion benefit from the exclusion of the movement in distribution rights and other intangibles from the GWS surplus, as these are expensed
on day one under the GWS requirements.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(i) Group capital position continued
Material changes in GMCR, GPCR, tier 1 group capital and eligible group capital resources
The GWS guidelines on external disclosures for supervised groups requires detail to be provided on any material changes in GPCR, GMCR, eligible
group capital resources and tier 1 group capital along with the reason for such changes.
> Total eligible capital resources has decreased by $(6.2) billion to $35.8 billion at 31 December 2022 (31 December 2021: $42.0 billion). This
includes a $(4.0) billion decrease in tier 1 group capital to $17.4 billion (31 December 2021: $21.4 billion). The fall in total eligible capital
resources and tier 1 group capital are primarily driven by market movements over the year, driven largely by falling equity markets and
increasing interest rates, and external dividends paid partially offset by the positive contribution from operating capital generation.
> Total regulatory GPCR has decreased by $(2.9) billion to $17.7 billion at 31 December 2022 (31 December 2021: $20.6 billion) and the total
regulatory GMCR has decreased by $(1.2) billion to $5.3 billion at 31 December 2022 (31 December 2021: $6.5 billion). The fall in GPCR and
GMCR are primarily driven by market movements over the year and the release of capital as the policies mature or are surrendered, partially
offset by an increase as a result of new business sold over the year.
Reconciliation of Free Surplus† to total regulatory GWS capital surplus (over GPCR)
Free surplus excluding distribution rights and other intangibles†
Restrictions applied in free surplus for China C-ROSS II note (a)
Restrictions applied in free surplus for HK RBC note (b)
Restrictions applied in free surplus for Singapore RBC note (c)
Other
Add GWS policyholder surplus contribution
Total regulatory GWS capital surplus (over GPCR)
31 Dec 2022 $bn
Capital
resources
Required
capital
Surplus
13.9
2.1
5.3
1.9
0.0
12.6
35.8
5.5
1.5
0.6
0.1
(0.1)
10.1
17.7
8.4
0.6
4.7
1.8
0.1
2.5
18.1
†
As per the “Free surplus excluding distribution rights and other intangibles” shown in the statement of Movement in Group free surplus of the Group’s EEV basis results.
Notes
(a)
(b)
(c)
Free surplus applies the embedded value reporting approach issued by the China Association of Actuaries (CAA) in the Chinese Mainland and includes a requirement to establish a deferred profit
liability within EEV net worth which leads to a reduction in EEV free surplus as compared to the C-ROSS II surplus reported for local regulatory purposes. Further differences relate to the treatment
of subordinated debt within CPL which is excluded from EEV free surplus and which contributes to C-ROSS II surplus for local regulatory reporting.
EEV free surplus for Hong Kong under the HK RBC regime excludes regulatory surplus that is not considered distributable immediately. This includes HK RBC technical provisions that are lower
than policyholder asset shares or cash surrender floors as well as the value of future shareholder transfers from participating business (net of associated required capital) which are included in the
shareholder GWS capital position.
EEV free surplus for Singapore is based on the Tier 1 requirements under the RBC2 framework, which excludes certain negative reserves permitted to be recognised in the full RBC 2 regulatory
position used when calculating the GWS capital surplus (over GPCR).
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 Reconciliation of Group IFRS shareholders’ equity to Group total GWS capital resources
Group IFRS shareholders’ equity
Remove DAC, goodwill and intangibles recognised on the IFRS statement of financial position
Add debt treated as capital under GWS note (a)
Asset valuation differences note (b)
Liability valuation (including insurance contracts) differences note (c)
Differences in associated net deferred tax liabilities note (d)
Other note (e)
Contribution from Policyholder business
Group total GWS capital resources
31 Dec 2022
$bn
17.0
(7.8)
4.0
(0.3)
9.2
1.3
(0.2)
12.6
35.8
Notes
(a)
(b)
(c)
As per the GWS Framework, debt in issuance at the date of designation that satisfy the criteria for transitional arrangements and qualifying debt issued since the date of designation are included
as Group capital resources but are treated as liabilities under IFRS.
Asset valuation differences reflect differences in the basis of valuing assets between IFRS and local statutory valuation rules, including deductions for inadmissible assets. Differences include for
some markets where government and corporate bonds are valued at book value under local regulations but are valued at market value under IFRS.
Liability valuation differences reflect differences in the basis of valuing liabilities between IFRS and local statutory valuation rules. Material differences include in Hong Kong, Singapore and the
Chinese Mainland where the local capital resources under the local risk-based capital solvency bases permits the recognition of certain negative reserves in the local statutory position that are not
fully recognised under IFRS. This also includes the present value of future shareholder transfers from Hong Kong participating business which is included as an asset within the GWS capital resources.
(d) Differences in associated net deferred tax liabilities mainly results from the tax impact of changes in the valuation of assets and liabilities.
(e) Other differences include the removal of DAC and intangibles of the Group’s joint ventures and associates and, in Chinese Mainland, a difference from the inclusion of subordinated debt as local
capital resources on a C-ROSS II basis as compared to being held as a liability under IFRS.
Basis of preparation for the Group GWS capital position
Prudential applies the Insurance (Group Capital) Rules set out in the GWS Framework to determine group regulatory capital requirements (both
minimum and prescribed levels). The summation of local statutory capital requirements across the Group is used to determine group regulatory
capital requirements, with no allowance for diversification between business operations. The GWS eligible group capital resources is determined
by the summation of capital resources across local solvency regimes for regulated entities and IFRS shareholders’ equity (with adjustments
described below) for non-regulated entities.
In determining the GWS eligible group capital resources and required capital the following principles have been applied:
> For regulated insurance entities, capital resources and required capital are based on the local solvency regime applicable in each jurisdiction,
with minimum required capital set at the solo legal entity statutory minimum capital requirements and prescribed capital requirement set at
the level at which the local regulator of a given entity can impose penalties, sanctions or intervention measures;
> The classification of tiering of eligible capital resources under the GWS framework reflects the different local regulatory regimes along with
guidance issued by the Hong Kong IA. In general, if a local regulatory regime applies a tiering approach then this should be used to determine
tiering of capital on a GWS capital basis, where a local regulatory regime does not apply a tiering approach then all capital resources should be
included as Group Tier 1 capital. For non-regulated entities tiering of capital is determined in line with the Insurance (Group Capital) Rules.
> For asset management operations and other regulated entities, the capital position is derived based on the sectoral basis applicable in each
jurisdiction, with minimum required capital based on the solo legal entity statutory minimum capital requirement;
> For non-regulated entities, the capital resources are based on IFRS shareholder equity after deducting intangible assets. No required capital is
held in respect of unregulated entities;
> For entities where the Group’s shareholding is less than 100 per cent, the contribution of the entity to the GWS eligible group capital resources
and required capital represents the Group’s share of these amounts and excludes any amounts attributable to non-controlling interests. This
does not apply to investment holdings which are not part of the Group;
> Following the demerger of Jackson from Prudential plc in September 2021, the Group retains a non-controlling interest in Jackson. As agreed
with the Hong Kong IA, this retained interest is included within the GWS eligible group capital resources valued at 60 per cent of the listed
market value and contributes $0.2 billion to the GWS capital surplus (over GPCR) at 31 December 2022;
> Investments in subsidiaries, joint ventures and associates (including, if any, loans that are recognised as capital on the receiving entity’s balance
sheet) are eliminated from the relevant holding company to prevent the double counting of capital resources;
> Under the GWS Framework, debt instruments in issuance at the date of designation that satisfy the criteria for transitional arrangements and
qualifying debt issued since the date of designation are included in eligible group capital resources as tier 2 group capital. At 31 December 2022
all debt instruments with the exception of the senior debt issued in 2022 are included as Group capital resources. The eligible amount permitted
to be included as Group capital resources for transitional debt is based on the net proceeds amount translated using 31 December 2020
exchange rates for debt not denominated in US dollars;
> The total company GWS capital basis is the capital measure for Hong Kong IA Group regulatory purposes as set out in the GWS framework. This
framework defines the eligible group capital resources coverage ratio (or total company GWS coverage ratio over GPCR as presented above) as
the ratio of total company eligible group capital resources to the total company GPCR and defines the tier 1 group capital coverage ratio (or
total company GWS tier 1 coverage ratio over GMCR as presented above) as the ratio of total company tier 1 group capital to the total company
GMCR; and
> Prudential also presents a shareholder GWS capital basis which excludes the contribution to the Group GWS eligible group capital resources, the
GMCR and GPCR from participating business in Hong Kong, Singapore and Malaysia. In Hong Kong the present value of future shareholder
transfers from the participating business are included in the shareholder GWS eligible capital resources along with an associated required
capital, this is in line with the local solvency presentation. The shareholder GWS coverage ratio over GPCR presented above reflects the ratio of
shareholder eligible group capital resources to the shareholder GPCR.
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I Additional financial information continued
I(ii) Analysis of adjusted operating profit by driver
This schedule classifies the Group’s adjusted operating profit into the underlying drivers using the following categories:
> Spread income represents the difference between net investment income and amounts credited to certain policyholder accounts. It excludes
the operating investment return on shareholder net assets, which has been separately disclosed as expected return on shareholder assets.
> Fee income represents profit driven by net investment performance, being fees that vary with the size of the underlying policyholder funds, net
of investment management expenses.
> With-profits represents the pre-tax shareholders’ transfer from the with-profits business for the period.
> Insurance margin primarily represents profit derived from the insurance risks of mortality and morbidity.
> Margin on revenues primarily represents amounts deducted from premiums to cover acquisition costs and administration expenses (see
below).
> Acquisition costs and administration expenses represent expenses incurred in the period attributable to shareholders. These exclude items
such as restructuring and IFRS 17 implementation costs, which are not included in the segment profit, as well as items that are more
appropriately included in other categories (eg investment expenses are netted against investment income as part of spread income or fee
income as appropriate).
> DAC adjustments comprise DAC amortisation for the period, excluding amounts related to short-term fluctuations in investment returns, net
of costs deferred in respect of new business written in the period.
The following analysis expresses certain of the Group’s sources of adjusted operating profit as a margin of policyholder liabilities or other relevant
drivers. The 2021 comparative information has been presented at both AER and CER to eliminate the impact of exchange translation.
Spread income
Fee income
With-profits
Insurance margin
Margin on revenues
Expenses:
Acquisition costs note (c)
Administration expenses
DAC adjustments
Expected return on shareholder
assets
2022
Average
liability
$m
note (a)
42,722
32,295
81,405
Margin
bps
note (b)
72
102
20
4,393
75,354
(53)%
(230)
Profit
$m
307
331
160
3,219
3,194
(2,346)
(1,732)
554
235
3,922
Share of related tax charges from
joint ventures and associates note (d)
(76)
Long-term business
Eastspring
Adjusted operating profit
3,846
260
4,106
2021 AER
2021 CER
Average
liability
$m
note (a)
46,137
32,062
84,435
Margin
bps
note (b)
65
103
16
4,013
78,472
(50)%
(201)
Average
liability
$m
note (a)
47,270
33,401
84,905
Margin
bps
note (b)
66
103
16
4,194
80,968
(50)%
(205)
Profit
$m
312
345
135
2,897
3,008
(2,085)
(1,656)
566
231
3,753
(44)
3,709
314
4,023
Profit
$m
299
329
133
2,795
2,881
(2,000)
(1,581)
545
224
3,625
(42)
3,583
299
3,882
Notes
(a)
The calculation of average liabilities is generally derived from opening and closing balances, except the average liabilities used to derive fee income margin which is calculated using quarter-end
balances to provide a more meaningful analysis. Other than the average liabilities used to calculate the administration expense margin, the average liabilities in the analysis above exclude the
liabilities for the Africa operations.
(b) Margin represents the operating return earned in the year as a proportion of the relevant class of policyholder liabilities excluding unallocated surplus.
(c)
The ratio of acquisition costs is calculated as a percentage of APE sales in the year, including with-profits sales. Acquisition costs include only those relating to shareholder-backed business. The
ratio of shareholder acquisition costs to shareholder APE sales (excluding with-profits) in 2022 is 62 per cent (2021: 61 per cent on both AER and CER basis).
(d) Under IFRS, the Group’s share of results from its investments in joint ventures and associates accounted for using the equity method is included as a single line in the Group’s profit before tax on a
net of related tax basis. In the table above, the results of the joint ventures and associates are analysed by adjusted operating profit drivers and on a pre-tax basis, with related tax charges shown
separately in order for the contribution from the joint ventures and associates to be included in the profit driver and margin analysis on a consistent basis with the rest of the business operations.
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 I(iii) Analysis of adjusted operating profit by business unit
The table below presents the 2021 results on both AER and CER bases to eliminate the impact of exchange translation.
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Philippines
Taiwan
Thailand
Vietnam
Other*
Share of related tax charges from joint ventures and associate
Long-term business
Eastspring
Adjusted operating profit
*
Includes other growth markets and a number of small items that are not expected to reoccur.
(a) Eastspring adjusted operating profit
Operating income before performance-related fees note (1)
Performance-related fees
Operating income (net of commission) note (2)
Operating expense note (2)
Group’s share of tax on joint ventures’ operating profit
Adjusted operating profit
Average funds managed or advised by Eastspring
Margin based on operating income note (3)
Cost/income ratio note II(v)
2022 $m
2021 $m
2022 vs 2021 %
368
1,036
343
364
678
112
93
266
327
335
(76)
3,846
260
4,106
AER
343
975
446
350
663
110
94
236
317
219
(44)
3,709
314
4,023
CER
329
969
429
330
646
100
88
215
310
210
(42)
3,584
299
3,883
AER
7%
6%
(23)%
4%
2%
2%
(1)%
13%
3%
53%
73%
4%
(17)%
2%
CER
12%
7%
(20)%
10%
5%
12%
6%
24%
5%
60%
81%
7%
(13)%
6%
2022 $m
2021 $m
660
1
661
(360)
(41)
747
15
762
(403)
(45)
260
$229.4bn
29bps
55%
314
$251.7bn
30bps
54%
Notes
(1) Operating income before performance-related fees for Eastspring can be further analysed as follows (institutional below includes internal funds under management or under advice):
2022
2021
Retail
$m
392
449
Margin
bps
Institutional
$m
Margin
bps
54
56
268
298
17
17
Total
$m
660
747
Margin
bps
29
30
(2) Operating income and expense include the Group’s share of contribution from joint ventures. In the consolidated income statement of the Group IFRS financial results, the net income after tax
of the joint ventures and associates is shown as a single line item.
(3) Margin represents operating income before performance-related fees as a proportion of the related funds under management or advice. Monthly closing internal and external funds managed or
advised by Eastspring have been used to derive the average. Any funds held by the Group’s insurance operations that are not managed or advised by Eastspring are excluded from these
amounts.
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I Additional financial information continued
I(iii) Analysis of adjusted operating profit by business unit continued
(b) Eastspring total funds under management or advice
Eastspring manages funds from external parties and also funds for the Group’s insurance operations. In addition, Eastspring advises on certain
funds for the Group’s insurance operations where the investment management is delegated to third-party investment managers. The table below
analyses the total funds managed or advised by Eastspring.
External funds under management, excluding funds managed on behalf of M&G plc note (1)
Retail
Institutional
Money market funds (MMF)
Funds managed on behalf of M&G plc note (2)
External funds under management
Internal funds:
Internal funds under management
Internal funds under advice
Total funds under management or advice note (3)
Notes
(1) Movements in external funds under management, excluding those managed on behalf of M&G plc, are analysed below:
At 1 Jan
Market gross inflows
Redemptions
Market and other movements
At 31 Dec
31 Dec 2022
$bn
31 Dec 2021
$bn
60.1
11.3
10.5
81.9
9.3
91.2
104.1
26.1
130.2
221.4
68.5
13.2
12.3
94.0
11.5
105.5
124.2
28.8
153.0
258.5
2022 $m
2021 $m
93,956
81,942
(84,397)
(9,552)
81,949
93,863
98,963
(99,862)
992
93,956
*
The analysis of movements above includes $10,495 million relating to Asia Money Market Funds at 31 December 2022 (31 December 2021: $12,248 million). Investment flows for 2022
include Eastspring Money Market Funds gross inflows of $61,063 million (2021: $61,949 million) and net outflows of $(869) million (2021: net outflows of $(1,512) million).
(2) Movements in funds managed on behalf of M&G plc are analysed below:
At 1 Jan
Net flows
Market and other movements
At 31 Dec
(3)
Total funds under management or advice are analysed by asset class below:
2022 $m
2021 $m
11,529
(765)
(1,529)
9,235
15,737
(4,040)
(168)
11,529
Equity
Fixed income
Alternatives
Money Market Funds
Total funds
Funds under
management
31 Dec 2022
Funds under
advice
31 Dec 2021
Total
Total
$bn
% of total
$bn
% of total
$bn
% of total
$bn
% of total
92.9
86.4
2.4
13.6
195.3
42%
39%
1%
6%
88%
7.8
18.3
–
–
26.1
4%
8%
–
–
12%
100.7
104.7
2.4
13.6
221.4
46%
47%
1%
6%
100%
107.1
133.6
2.7
15.1
258.5
41%
52%
1%
6%
100%
412
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 I(iv) Group funds under management
For Prudential’s asset management businesses, funds managed on behalf of third parties are not recorded on the balance sheet. They are,
however, a driver of profitability. Prudential therefore analyses the movement in the funds under management each year, focusing on those which
are external to the Group and those primarily held by the Group’s insurance businesses. The table below analyses the funds of the Group held in
the balance sheet and the external funds that are managed by Prudential’s asset management businesses.
Internal funds
Eastspring external funds, including M&G plc (as analysed in note I(iii) above)
Total Group funds under management note
Note
Total Group funds under management comprise:
Total investments and cash and cash equivalents held on the balance sheet
External funds of Eastspring including M&G plc
Internally managed funds held in joint ventures and associates, excluding assets attributable to external unit holders of the
consolidated collective investment schemes and other adjustments
Total Group funds under management
31 Dec 2022
$bn
31 Dec 2021
$bn
168.6
91.2
259.8
193.9
105.5
299.4
31 Dec 2022
$bn
31 Dec 2021
$bn
151.5
91.2
17.1
259.8
177.9
105.5
16.0
299.4
I(v) Holding company cash flow
The holding company cash flow describes the movement in the cash and short-term investments of the centrally managed group holding
companies and differs from the IFRS cash flow statement, which includes all cash flows in the year including those relating to both policyholder
and shareholder funds. The holding company cash flow is therefore a more meaningful indication of the Group’s central liquidity.
Net cash remitted by business units note (a)
Net interest paid
Corporate expenditure note (b)
Centrally funded recurring bancassurance fees
Total central outflows
Holding company cash flow before dividends and other movements
Dividends paid
Operating holding company cash flow after dividends but before other movements
Other movements
Issuance and redemption of debt
Hong Kong public offer and international placing
Other corporate activities note (c)
US demerger costs
Total other movements
Net movement in holding company cash flow
Cash and short-term investments at 1 Jan note (d)
Foreign exchange movements
Inclusion of amounts at 31 Dec from additional centrally managed entities note (e)
Cash and short-term investments at 31 Dec note (e)
2022 $m
2021 $m
1,304
(204)
(232)
(220)
(656)
648
(474)
174
(1,729)
–
248
–
(1,481)
(1,307)
3,572
(113)
905
3,057
1,451
(314)
(322)
(176)
(812)
639
(421)
218
(255)
2,374
(199)
(30)
1,890
2,108
1,463
1
–
3,572
Notes
(a) Net cash remitted by business units comprise dividends and other transfers, net of capital injections, that are reflective of earnings and capital generation.
(b)
(c)
Including IFRS 17 implementation and restructuring costs paid in the year.
Other cash flow movements included net receipts from other corporate activities of $248 million (2021: $(256) million net payments) comprising proceeds of $315 million (2021: $171 million)
received from the sales of shares in Jackson together with dividends from Jackson, partially offset by cash provided for investment by the businesses mainly in digital infrastructure.
Proceeds from the Group’s commercial paper programme are not included in the holding company cash and short-term investments balance.
The definition of holding company cash and short-term investments has been updated, with effect from 31 December 2022, following the combination of the Group’s London office and Asia
regional office into a single Group Head Office in 2022. This updated definition includes all cash and short-term investments held by central holding and service companies, including amounts
previously managed on a regional basis. These balances are now being centrally managed by the Group’s Treasury function. This refinement increased holding company cash and short-term
investment balances by $0.9 billion at 31 December 2022.
(d)
(e)
The table below shows the reconciliation of the Cash and cash equivalents of Unallocated to a segment (Central operations) held on the IFRS balance sheet and Cash and short-term
investments at 31 December 2022:
31 Dec 2022 $m
Cash and cash equivalents of Central operations held on balance sheet note C1
Less: amounts from commercial paper
Add: Deposits with credit institutions of Central operations held on balance sheet note C1
Cash and short-term investments
1,809
(501)
1,749
3,057
413
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(vi) Reconciliation of EEV expected transfer of value of in-force business and required capital to free surplus
The table below shows how the EEV value of in-force business (VIF) and the associated required capital for long-term insurance business
operations are projected as emerging into free surplus over the next 40 years. Although circa 6 per cent of the embedded value emerges after this
date, analysis of cash flows emerging in the years shown is considered most meaningful. The modelled cash flows use the same methodology
underpinning the Group’s embedded value reporting and so are subject to the same assumptions and sensitivities used to prepare our 2022
results.
In addition to showing the amounts, on both a discounted and undiscounted basis, expected to be generated from all in-force business at
31 December 2022, the table also presents the future free surplus expected to be generated from the investment made in new business during
2022 over the same 40-year period.
Expected period of emergence
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043-2047
2048-2052
2053-2057
2058-2062
31 Dec 2022 $m
Long-term insurance business operations
Expected generation from all
in-force business*
Expected generation from new
business written in 2022*
Undiscounted
Discounted
Undiscounted
Discounted
2,658
2,327
2,201
2,155
2,087
2,010
1,946
1,905
1,884
1,857
1,858
1,843
1,860
1,867
1,877
1,888
1,924
1,947
1,953
1,943
9,769
9,986
9,842
9,929
2,548
2,089
1,857
1,710
1,560
1,416
1,292
1,191
1,107
1,032
969
910
868
825
788
749
720
688
653
614
2,594
1,951
1,382
983
352
227
204
174
188
181
161
153
146
158
159
148
154
142
158
137
136
139
136
145
695
687
648
637
336
200
170
138
138
125
105
93
83
85
79
69
68
60
62
51
49
47
44
44
183
134
98
72
Total free surplus expected to emerge in the next 40 years
79,516
30,496
6,065
2,533
*
The analysis excludes amounts incorporated into VIF and required capital at 31 December 2022 where there is no definitive time frame for when the payments will be made or receipts received.
It also excludes any free surplus projected to emerge after 2062.
414
prudentialplc.com
Additional unaudited financial information / continuedPrudential plc Annual Report 2022 The expected free surplus generation from new business written in 2022 can be reconciled to the new business profit as follows:
Undiscounted expected free surplus generation for years 2023 to 2062
Less: discount effect
Discounted expected free surplus generation for years 2023 to 2062
Discounted expected free surplus generation for years after 2062
Discounted expected free surplus generation from new business written in 2022
Free surplus investment in new business
Other items*
New business profit
2022 $m
6,065
(3,532)
2,533
135
2,668
(567)
83
2,184
*
Other items represent the impact of the TVOG on new business, foreign exchange effects and other non-modelled items. Foreign exchange effects arise as EEV new business profit amounts are
translated at average exchange rates and the expected free surplus generation is translated at closing rates.
The discounted expected free surplus generation from in-force business can be reconciled to the embedded value for long-term business
operations as follows:
Discounted expected generation from all in-force business for years 2023 to 2062
Discounted expected generation from all in-force business for years after 2062
Discounted expected generation from all in-force business at 31 December 2022
Free surplus of long-term business operations at 31 December 2022
Other items*
EEV for long-term business operations
*
Other items represent the impact of the TVOG and other non-modelled items.
31 Dec 2022 $m
30,496
2,152
32,648
6,035
174
38,857
The undiscounted expected free surplus generation from all in-force business at 31 December 2022 can be reconciled to the amount that was
expected to be generated at 31 December 2021 as follows:
2021 expected free surplus generation for years
2022 to 2061
Less: Amounts expected to be realised in the
2022 $m
2023 $m
2024 $m
2025 $m
2026 $m
2027 $m
Other $m
Total $m
2,343
2,267
2,155
2,014
2,034
1,978
53,604
66,395
current year
(2,343)
Add: Expected free surplus to be generated in
year 2062 (excluding 2022 new business)
Foreign exchange differences
New business
Operating movements
Non-operating and other movements*
2022 expected free surplus generation for years
2023 to 2062
–
–
–
–
–
–
–
–
(93)
352
48
84
–
–
(85)
227
(14)
44
–
–
(72)
204
39
16
–
–
(70)
174
20
(3)
–
–
(66)
188
(35)
22
–
(2,343)
1,101
(1,242)
4,920
1,101
(1,628)
6,065
9,705
9,926
2,658
2,327
2,201
2,155
2,087
68,088
79,516
*
‘Non-operating and other movements’ include the impact of the early adoption of the Hong Kong Risk-based Capital (HK RBC) regime, effective from 1 January 2022. Further details can be
found in the Basis of Preparation in the EEV basis results.
415
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(vi) Reconciliation of EEV expected transfer of value of in-force business and required capital to free surplus continued
At 31 December 2022, the total free surplus expected to be generated over the next five years (2023 to 2027 inclusive) for long-term business
operations, using the same assumptions and methodology as those underpinning 2022 embedded value reporting, was $11.4 billion
(31 December 2021: $10.8 billion).
At 31 December 2022, the total free surplus expected to be generated on an undiscounted basis over the next 40 years for long-term business
operations is $79.5 billion, $13.1 billion higher than the $66.4 billion expected at the end of 2021. The increase is driven by new business and the
effect of generally higher interest rates across the region increasing projected returns, partially offset by unfavourable foreign exchange
movements.
Actual underlying free surplus generated in 2022 from long-term business in force at the end of 2021, before restructuring and IFRS 17
implementation costs, was $2.5 billion, after allowing for $(0.2) billion of changes in operating assumptions and experience variances. This
compares with the expected 2022 realisation at the end of 2021 of $2.3 billion and can be analysed further as follows:
Expected transfer from in-force business to free surplus
Expected return on existing free surplus
Changes in operating assumptions and experience variances
Underlying free surplus generated from long-term business in force before restructuring and IFRS 17 implementation costs
2022 free surplus expected to be generated at 31 December 2021
2022 $m
2,406
347
(227)
2,526
2,343
I(vii) Share schemes
The Company operates a number of share schemes and plans which are described below. The purpose of these arrangements are to incentivise
and retain eligible employees of the Group or, in the case of the Agency LTIP and the ISSOSNE, eligible agents based in certain business units of
the Group through the grant of options over, and awards of, shares in Prudential plc. Participants are not required to pay anything on application
for or acceptance of any awards or options granted to them.
The number of Prudential plc shares which may be issued to satisfy awards or options granted in any ten-year rolling period under these plans
and any other share scheme adopted by Prudential plc and its subsidiaries may not exceed 10 per cent of the issued ordinary share capital
of Prudential plc from time to time. In addition, the number of Prudential plc shares which may be issued to satisfy awards or options granted in
any ten-year rolling period under any scheme or plan in which Executive Directors participate or any other discretionary employee share scheme
adopted by Prudential plc and its subsidiaries may not exceed 5 per cent of the issued ordinary share capital of Prudential plc and its subsidiaries
from time to time. Prudential plc shares transferred out of treasury will count towards these limits for so long as this is required under institutional
shareholder guidelines.
As at 1 January 2022 and 31 December 2022, the shareholder dilution under all share schemes adopted by Prudential plc and its subsidiaries
represented 0.81 per cent and 0.66 per cent of the issued ordinary share capital of Prudential plc respectively (the 'Scheme Mandate'). Accordingly,
the number of Prudential plc shares available for issue in respect of all options and awards under the Scheme Mandate at the beginning and the
end of the year ended 31 December 2022 were 252,358,711 and 256,825,059 respectively.
The number of Prudential plc shares that may be issued in respect of share options and awards granted under all share option schemes and
share award schemes during the year ended 31 December 2022 divided by the weighted average number of Prudential plc shares in issue for the
year ended 31 December 2022 is 0.22 per cent.
The weighted average share price of Prudential plc for the year ended 31 December 2022 was £10.33 (2021: £14.31).
Prudential calculates the fair value of options and awards in accordance with the applicable accounting standards and policies adopted for
preparing the consolidated financial statements. More detail on the methodology and assumptions used is given in note B2.2 to the IFRS financial
statements.
No payment is payable on application for, or acceptance of, any award made under any of the share schemes or plans operated by the
Company.
416
prudentialplc.com
Additional unaudited financial information / continuedPrudential plc Annual Report 2022
Share schemes funded by new shares of Prudential
The arrangements in operation which are funded by new issue shares of Prudential plc are the Prudential Long Term Incentive Plan (PLTIP), the
Prudential Agency Long-Term Incentive Plan (Agency LTIP), the UK Savings-Related Share Option Scheme (UK SAYE) and the Prudential
International Savings-Related Share Option Scheme for Non-Employees (ISSOSNE).
Share scheme and
participants
Total number of shares
available for issue under the
scheme
Maximum entitlement
of each participant
Vesting period
Exercise period and basis of
determining exercise price
Remaining life of
the scheme
Awards will not be granted over
Prudential plc shares with a
market value in excess of 550%
of salary, in respect of any
financial year of the Company.
The replacement PLTIP to be
submitted for shareholder
approval at the 2023 AGM will
additionally require that no
awards be granted if it will cause
the Prudential plc shares over
which all awards or options
granted to a participant in any
12-month period to exceed
one per cent of Prudential plc’s
ordinary share capital.
The rules of the Agency LTIP will
be submitted for shareholder
approval at the 2023 AGM and
will require that no awards be
granted if it would cause the
Prudential plc shares over which
all awards or options are granted
to a participant in any 12-month
period to exceed one per cent of
Prudential plc’s ordinary share
capital.
Not applicable.
Normally three years
from grant. Awards
may vest earlier upon
a takeover of
Prudential plc or if a
participant leaves
with good-leaver
status or passes away.
Normally three years
from grant. Awards
may vest earlier upon
a takeover of
Prudential plc or if a
participant leaves
with good-leaver
status or passes away.
One month from vesting (or two
months if an extension is agreed
with Prudential).
The exercise price is the nominal
value of a Prudential plc share.
Options will not be granted if it
would result in the participant’s
monthly contributions to the UK
SAYE exceeding £500.
The replacement UK SAYE to be
submitted for shareholder
approval at the 2023 AGM will
additionally require that no
options be granted if it would
cause the Prudential plc shares
over which all awards or options
are granted to a participant in
any 12 months period to exceed
one per cent of Prudential plc’s
ordinary share capital.
Normally three or five
years (depending on
the length of the
relevant savings
contract selected by
the participant).
Options may be
exercised early if there
is a takeover of
Prudential plc or a
participant leaves
with good leaver
status or passes away.
Six months from the conclusion of
the savings contract the participant
enters into in connection with the
UK SAYE.
Options may be exercisable for a
period of 12 months if a participant
passes away.
The price per share payable on the
exercise of an option will be
determined by the Board and will be
no less than 80 per cent of the
average share price of Prudential plc
for the three dealing days before the
issue of invitations to employees to
participate in the UK SAYE.
The existing
PLTIP is due to
expire on
16 May 2023.
A replacement
plan will be
submitted for
shareholder
approval at
the 2023
AGM.
The amended
Agency LTIP
will be
submitted for
shareholder
approval at
the 2023 AGM
and will expire
on the tenth
anniversary of
the date of
approval.
The existing
UK SAYE is due
to expire on
16 May 2023.
A replacement
plan will be
submitted for
shareholder
approval at
the 2023
AGM.
PLTIP
Any employee of
a Group
Company may be
selected to be
granted an
award.
The total number of
securities available for
issue under the scheme is
4,065,491 which
represents 0.148 per cent
of the issued share capital
at 31 December 2022.
The total number of
securities available for
issue under the scheme is
2,814,039 which
represents 0.102 per cent
of the issued share capital
at 31 December 2022.
The total number of
securities available for
issue under the scheme is
142,304 which represents
0.005 per cent of the
issued share capital at
31 December 2022.
Agency LTIP
Any Agent, who is
a person who
provides sales
services to any
Group Company
under a contract
for services,
excluding any
connected
person, may be
selected to be
granted an
Award.
UK SAYE
Any employee
can participate
who meets the
definition of
eligible
employee, as
defined by the
relevant UK tax
legislation.
ISSOSNE
Any agent can
participate who
has been
continuously
engaged under a
contract for
service by a
Participating
Company for at
least six months.
The total number of
securities available for
issue under the scheme is
1,715,988 which represents
0.062 per cent of the
issued share capital at
31 December 2022.
Options will not be granted if it
would result in the participant’s
monthly contributions to the
ISSOSNE exceeding the local
currency equivalent of £500 or if
it would cause the Prudential plc
shares over which all awards or
options are granted to a
participant in any 12-month
period to exceed one per cent of
Prudential plc’s ordinary share
capital.
Normally three years
from grant, though
the Board may
determine an
alternative period
depending on the
length of the relevant
savings contract the
participant enters into
in connection with the
ISSOSNE.
Six months from vesting, though
options may be exercisable for a
period of 12 months if a participant
passes away.
The ISSOSNE
is due to expire
on 26 May
2032.
The price per share payable on the
exercise of an option will be
determined by the Board and will be
no less than 80 per cent of the
average share price of Prudential plc
for the three dealing days before the
issue of invitations to agents to
participate in the ISSOSNE.
417
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(vii) Share schemes continued
The following analysis shows the movement in each share plan for the year ended 31 December 2022:
(a) PLTIP
Vesting period
Fair value at
grant date £
Number of shares under awards
Date of grant
04 Apr 18
18 Sep 18
02 Apr 19
14 Jun 19
28 Jun 19
09 Apr 20
15 May 20
24 Jun 20
07 Apr 21
21 Apr 21
17 May 21
05 Apr 22
27 May 22
Total PLTIP
Representing:
Directors1,2
Other employees
Total PLTIP
Vesting
date
PLTIP
TSR
PLTIP
IFRS
Beginning
of year
Granted
Vested Cancelled
Lapsed/
Forfeited
End
of year
Closing share
price before
grant date £
04 Apr 21
18 Sep 21
02 Apr 22
14 Jun 22
28 Jun 22
09 Apr 23
15 May 23
24 Jun 23
07 Apr 24
21 Apr 24
17 May 24
05 Apr 25
27 May 25
6.65
4.34
6.31
6.03
6.83
4.71
5.37
4.89
8.37
7.39
7.52
2.28
1.90
17.50
16.64
16.06
16.02
16.79
10.47
10.50
11.78
15.67
14.93
14.96
11.34
10.30
12,181
369
1,591,572
28,289
12,995
1,350,688
802,234
11,797
371,885
125,282
861,391
–
–
–
–
–
–
–
–
–
–
–
–
–
781,078
270,126
(12,181)
–
(351,459)
(17,799)
–
(6,174)
–
–
–
–
–
–
–
5,168,683 1,051,204
(387,613)
1,990,221
3,178,462
634,474
416,730
(111,291)
(276,322)
5,168,683 1,051,204
(387,613)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(369)
–
(1,240,113)
–
(10,490)
–
–
(12,995)
(91,818) 1,252,696
695,342
6,677
332,580
113,145
613,847
781,078
270,126
(106,892)
(5,120)
(39,305)
(12,137)
(247,544)
–
–
(1,766,783) 4,065,491
(851,320) 1,662,084
(915,463) 2,403,407
(1,766,783) 4,065,491
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.30
10.07
Notes
1
2
Disclosure of movement in share awards for each individual Director is set out in the Directors Remuneration Report.
PLTIP awards have performance conditions attached and these are set out in the Directors Remuneration Report.
(b) Agency LTIP
Vesting period
Number of shares under awards
Date of grant
Vesting
date
Fair value at
grant date £
Beginning
of year
Granted
Vested Cancelled
Lapsed/
Forfeited
End
of year
Closing share
price before
grant date £
31 Mar 15
01 Apr 16
04 Apr 17
04 Apr 17
04 Apr 18
02 Apr 19
19 Sep 19
09 Apr 20
22 Sep 20
16 Dec 20
07 Apr 21
18 Jun 21
07 Oct 21
27 May 22
31 Mar 21
01 Apr 19
04 Apr 20
04 Apr 24
04 Apr 21
02 Apr 22
02 Apr 22
09 Apr 23
09 Apr 23
09 Apr 23
07 Apr 24
07 Apr 24
07 Apr 24
05 Apr 25
14.47
11.80
15.07
13.17
16.22
14.73
13.42
9.45
9.85
12.57
14.58
13.70
14.75
10.03
572
49,070
560
45,409
2,113
2,483,595
5,083
2,598,971
30,955
10,673
120,969
14,600
5,227
–
–
–
(45,410)
–
(560)
–
–
–
–
–
– (2,471,697)
(5,083)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
41,725
Total Agency LTIP1
5,367,797
41,725 (2,522,750)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
All of the participants of this scheme are service providers.
Note
1
418
(572)
(3,660)
–
(2,128)
(2,113)
(10,777)
–
–
–
–
43,281
–
1,121
–
(53,483) 2,545,488
30,955
10,673
120,969
14,600
5,227
41,725
–
–
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10.07
(72,733) 2,814,039
prudentialplc.com
Weighted
avg closing
share price
before
vesting
date £
12.99
n/a
11.25
9.77
n/a
12.99
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Weighted
avg closing
share price
before
vesting
date £
n/a
11.21
10.09
n/a
n/a
11.21
11.21
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Additional unaudited financial information / continuedPrudential plc Annual Report 2022
(c) UK SAYE
Exercise period
Number of shares under options
Date of grant
Exercise
price £
Beginning
End
01 Jan 23
01 Jan 25
11.04 01 Dec 21 31 May 22
14.55 01 Dec 22 31 May 23
30 Jun 23
11.18
30 Jun 25
11.18
9.64 01 Dec 23 31 May 24
9.64 01 Dec 25 31 May 26
30 Jun 25
30 Jun 27
7.37 01 Dec 25 31 May 26
7.37 01 Dec 27 31 May 28
01 Jan 25
01 Jan 27
12.02
12.02
21 Sep 16
21 Sep 17
29 Nov 19
29 Nov 19
22 Sep 20
22 Sep 20
08 Dec 21
08 Dec 21
23 Sep 22
23 Sep 22
Total SAYE
Representing:
Directors1
Other employees
Total SAYE
Fair
value at
grant
date £
Beginning
of year
3.31
3.71
3.28
3.69
1.90
2.04
3.03
3.65
3.08
3.63
2,717
4,122
48,528
7,513
63,272
6,286
14,664
2,544
–
–
Granted
Exercised
Cancelled
Lapsed/
Forfeited
End
of year
–
–
–
–
–
–
–
–
47,346
12,372
–
–
(1,073)
–
–
–
–
–
–
–
–
–
(12,772)
(2,147)
(22,911)
(3,112)
(7,365)
(2,495)
–
–
(2,717)
(2,061)
(6,493)
–
(3,315)
–
(599)
–
–
–
–
2,061
28,190
5,366
37,046
3,174
6,700
49
47,346
12,372
149,646
59,718
(1,073)
(50,802)
(15,185) 142,304
3,928
145,718
–
59,718
–
(1,073)
–
(50,802)
–
3,928
(15,185) 138,376
149,646
59,718
(1,073)
(50,802)
(15,185) 142,304
Note
1
Disclosure of movement in share awards for each individual Director is set out in the Directors Remuneration Report.
(d) ISSOSNE
Exercise period
Number of shares under options
Date of grant
Exercise
price £
Beginning
End
21 Sep 16
21 Sep 17
18 Sep 18
18 Sep 18
02 Oct 19
02 Oct 19
22 Sep 20
22 Sep 20
02 Nov 21
02 Nov 21
21 Sep 22
21 Sep 22
Total
9.56 01 Dec 21 31 May 22
12.59 01 Dec 22 31 May 23
12.07 01 Dec 21 31 May 22
12.07 01 Dec 23 31 May 24
9.62 01 Dec 22 31 May 23
9.62 01 Dec 24 31 May 25
9.64 01 Dec 23 31 May 24
9.64 01 Dec 25 31 May 26
11.89 01 Dec 24 31 May 25
11.89 01 Dec 26 31 May 27
7.37 01 Dec 25 31 May 26
7.37 01 Dec 27 31 May 28
Fair
value at
grant
date £
3.31
3.71
3.11
3.61
2.85
2.98
1.90
2.04
3.91
4.46
3.13
3.59
Beginning
of year
133,134
191,542
98,024
132,495
338,819
223,476
202,099
157,319
206,550
189,431
–
–
Granted
Exercised
Cancelled
Lapsed/
Forfeited
End
of year
– (105,029)
–
–
(7,564)
–
–
–
– (154,110)
(157)
–
–
–
–
–
–
–
–
–
–
220,733
–
178,805
(17,699)
(87,439)
(62,761)
(2,022)
(26,634)
(7,244)
(3,357)
(6,838)
(21,005)
(14,750)
–
–
(10,082)
(27,699)
324
(1,783) 102,320
–
(109) 130,364
(157) 157,918
216,075
198,742
150,481
185,545
174,681
220,733
178,805
–
–
–
–
–
–
–
ISSOSNE1
1,872,889
399,538 (266,860)
(249,749)
(39,830) 1,715,988
Note
1
All of the participants of this scheme are service providers.
Weighted
avg closing
share price
before
exercise
date £
Closing
share price
before
grant date £
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
9.34
9.34
n/a
n/a
12.95
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Weighted
avg closing
share price
before
exercise
date £
Closing
share price
before
grant date £
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
9.54
9.54
10.36
n/a
12.23
n/a
10.29
9.86
n/a
n/a
n/a
n/a
n/a
n/a
419
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(vii) Share schemes continued
Share schemes funded by existing shares of Prudential
The arrangements in operation which are funded by existing shares of Prudential plc include the Prudential Asia and Africa Long Term Incentive
Plan (PAA LTIP), the Restricted Share Plan (RSP), the UK Share Incentive Plan (UK SIP), the Prudential Corporation Asia All Employee Share
Purchase Plan (PruSharePlus) and a number of deferred bonus plans, namely the Prudential Deferred Annual Incentive Plan (DAIP), the Group
Deferred Bonus Plan (GDBP) and the Prudential Corporation Asia Deferred Bonus Plan (PCA DBP).
Maximum entitlement of each
participant
Vesting period
Exercise period and basis of
determining exercise price
Remaining life of
the scheme
The size of PAA LTIP awards is
determined on a case by case basis.
Total number of shares
available for issue under
the scheme
The total number of
securities available for
issue under the scheme
is 7,898,341 which
represents
0.287 per cent of the
issued share capital at
31 December 2022.
Share scheme and
participants
Prudential Asia and
Africa Long-Term
Incentive Plan (PAA
LTIP)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment, and is
not a director, may be
selected to be granted
an award.
Restricted Share
Plan (RSP)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment, and is
not a director, may be
selected to be granted
an award.
Awards will not be granted over
Prudential plc shares with a market
value in excess of 600% of salary, in
respect of any financial year of the
Company.
The total number of
securities available for
issue under the scheme
is 575,558 which
represents
0.021 per cent of the
issued share capital at
31 December 2022.
Normally three years from
grant. Where a deferral
model is used, awards may
vest on the first, second
and third anniversary of
the grant date in tranches
of a third of the award.
Awards may vest earlier
upon a takeover of
Prudential plc or if a
participant leaves with
good-leaver status or
passes away.
Normally three years from
grant. Awards may vest
earlier upon a takeover of
Prudential plc or if a
participant passes away or
leaves with good-leaver
status.
In the case of any nil-cost
awards granted under the
PAA LTIP, a period of six
months from vesting.
The PAA LTIP
does not have
a fixed expiry
date.
In the case of any nil-cost
awards granted under the
RSP, a period of 12 months
from vesting.
The RSP is due
to expire on
30 June 2025.
Group Share
Incentive Plan (UK
SIP)
n/a
Any employee can
participate who meets
the definition of
eligible employee, as
defined by the
relevant UK tax
legislation.
Partnership and dividend
shares are acquired at the
market value of a
Prudential plc share.
There is no acquisition cost
in the case of free shares
and matching shares.
The UK SIP
rules are due
to expire in
2080 on the
expiry of the
UK SIP trust
In the case of free shares, up to
£3,600 worth of Prudential plc
shares in respect of any UK tax year.
In the case of partnership shares
(bought with the participant’s own
funds), Prudential plc shares worth
up to the lower of £1,800 or 10% of
salary, in respect of any UK tax year.
In the case of matching shares, a
ratio of matching shares to
partnership shares not greater than
two free (matching) Prudential plc
shares for every one partnership
share bought.
Partnership shares (bought
with the participant’s own
funds) may be withdrawn
at any time. For free,
matching and dividend
shares, awards must be
held in the UK SIP for three
years.
Free, matching and
dividend shares may be
withdrawn earlier upon a
takeover of Prudential plc
or if a participant passes
away or leaves with
good-leaver status.
420
prudentialplc.com
Additional unaudited financial information / continuedPrudential plc Annual Report 2022 Share scheme and
participants
Total number of shares
available for issue under
the scheme
Maximum entitlement of each
participant
Vesting period
Exercise period and basis of
determining exercise price
Remaining life of
the scheme
Prudential
Corporation Asia All
Employee Share
Purchase Plan
(PruSharePlus)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment, and is
not an executive
director, can
participate.
Deferred Annual
Incentive Plan
(DAIP)
Any employee of a
Group Company who
has received a bonus
may be selected to be
granted an award.
Group Deferred
Bonus Plan (GDBP)
Any employee of a
Group Company, and
is not a director, may
be selected to be
granted an award.
Prudential Deferred
Bonus Plan (PDBP)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment, and is
not a director, may be
selected to be granted
an award.
n/a
The maximum amount a participant
may contribute to PruSharePlus is
the lower of 10% of salary or £5,000.
The size of DAIP awards is
determined on a case by case basis.
The size of GDBP awards is
determined on a case by case basis.
The size of PCA DBP awards is
determined on a case by case basis.
The total number of
securities available for
issue under the scheme
is 726,341 which
represents
0.026 per cent of the
issued share capital at
31 December 2022.
The total number of
securities available for
issue under the scheme
is 17,593 which
represents
0.001 per cent of the
issued share capital at
31 December 2022.
The total number of
securities available for
issue under the scheme
is 816,224 which
represents
0.030 per cent of the
issued share capital at
31 December 2022.
Purchased shares are
acquired at the market
value of a Prudential plc
share.
There is no acquisition cost
for matching awards.
The
PruSharePlus is
due to expire
on 7 March
2024.
In the case of any nil-cost
options granted under the
DAIP, a period of six
months from vesting.
The DAIP
is due to
expire on
30 September
2023. A
replacement
plan will be
established in
2023.
In the case of any nil-cost
options granted under the
GDBP, a period of six
months from vesting.
The GDBP
does not have
a fixed expiry
date.
In the case of any nil-cost
options granted under the
PCA DBP, a period of six
months from vesting.
The PCA DBP
does not have
a fixed expiry
date.
Matching awards normally
vest one year from the end
of the period in respect of
which the related shares
purchased with the
participant’s contributions
were acquired. Awards
may vest earlier upon a
takeover of Prudential plc
or if a participant leaves
with good-leaver status.
The normal vesting date
for each award under the
DAIP is set at the time the
award is granted on a case
by case basis. Awards may
vest earlier upon a takeover
of Prudential plc or if a
participant leaves for any
reason other than cause or
passes away.
The normal vesting date
for each award under the
GDBP is set at the time the
award is granted on a case
by case basis. Awards may
vest earlier upon a takeover
of Prudential plc or if a
participant passes away.
The normal vesting date
for each award under the
PCA DBP is set at the time
the award is granted on a
case by case basis. Awards
may vest earlier upon a
takeover of Prudential plc,
if a participant leaves with
good leaver status or
passes away.
421
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(vii) Share schemes continued
The following analysis shows the movement in each share plan for the year ended 31 December 2022:
Vesting period
Number of shares under awards1
Date of grant
Vesting date
Fair value
at grant date
£
Beginning
of year
Granted
Vested/
Released
Cancelled
Lapsed/
Forfeited
End
of year
04 Apr 22
04 Apr 22
Restricted Share Plan (RSP)
18 Sep 18
13 Dec 18
02 Apr 19
14 Jun 19
11 Dec 19
09 Apr 20
24 Jun 20
22 Sep 20
16 Dec 20
07 Apr 21
21 Apr 21
18 Jun 21
07 Oct 21
02 Nov 21
08 Dec 21
05 Apr 22
29 Jun 22
21 Sep 22
15 Dec 22
15.23
13.08
01 Mar 22 – 01 Mar 23 14.35 – 14.77
02 Apr 22
14.75
11 Dec 22
13.19
9.45 – 10.47
01 Apr 22 – 09 Apr 23
28 Feb 22 – 16 Jun 23 10.72 – 11.78
01 Feb 22 – 24 Jun 23
4.39 – 10.74
31 Mar 22 – 01 Apr 23 12.58 – 14.93
20 Jan 22 – 01 Apr 25 14.24 – 15.38
14.93
17 Mar 22 – 01 Apr 24 13.97 – 14.26
01 Mar 22 – 07 Apr 24 14.75 – 15.00
14.71
01 Feb 22 – 01 Feb 25 12.95 – 13.27
07 Oct 22 – 07 Apr 24 11.14 – 11.29
9.91 – 10.25
31 Aug 22 – 01 Mar 26
17 Oct 22 – 31 Dec 25
9.24 – 9.57
10 Feb 23 – 01 Apr 26 10.22 – 10.63
07 Oct 22
21 Apr 24
1,763
586
1,708
905
168,535
150,806
32,613
2,481
59,329
78,684
2,292
34,781
597,553
8,050
90,319
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,330
21,929
36,519
56,897
(1,763)
(586)
(1,366)
(905)
(11,953)
(4,212)
(21,464)
(413)
(26,829)
(16,759)
–
(17,166)
(488,476)
(4,950)
(55,042)
(2,000)
(2,581)
(10,337)
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,637)
–
(1,366)
–
–
–
–
–
–
(342)
–
(4,115)
(6,602)
(1,817)
(862)
(12,984)
(6,035)
–
–
(73,710)
(3,100)
(100)
(50)
–
–
–
–
–
–
–
152,467
139,992
9,332
1,206
19,516
55,890
2,292
17,615
28,730
–
33,811
12,280
19,348
26,182
56,897
Prudential Asia and Africa
Long-Term Incentive Plan
(PAA LTIP)2
17 Dec 13
04 Apr 18
02 Apr 19
14 Jun 19
19 Sep 19
09 Apr 20
24 Jun 20
16 Dec 20
07 Apr 21
18 Jun 21
07 Oct 21
05 Apr 22
29 Jun 22
21 Sep 22
10 Aug 23
04 Apr 21
02 Apr 22
02 Apr 22
02 Apr 22 – 18 Sep 22
09 Apr 23
07 Apr 23
09 Apr 23
9.91
16.27
14.73
14.75
14.69
9.45
10.68
12.57
07 Apr 22 – 07 Apr 24 14.58 – 15.30
07 Apr 22 – 07 Apr 24 13.70 – 14.23
14.75
07 Apr 24
05 Apr 23 – 05 Apr 25
0.91 – 11.24
05 Apr 23 – 05 Apr 25 10.00 – 10.19
9.31 – 9.52
05 Apr 23 – 05 Apr 25
95,394
37,561
1,785,824
5,453
279,077
2,707,218
3,901
69
2,246,856
2,320
3,216
–
–
–
–
–
–
–
–
–
–
–
– 3,552,644
5,875
–
3,123
–
–
(34,384)
(1,757,980)
(5,453)
(61,250)
(15,593)
–
–
(81,609)
(143)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(24,654)
–
–
–
(3,177)
(21,816)
–
(33,915)
95,394
–
6,028
–
183,912
(214,447) 2,477,178
3,770
36
(280,250) 1,884,997
2,060
3,216
(289,926) 3,238,064
563
3,123
(5,312)
–
(131)
(33)
(117)
–
Prudential Deferred Bonus Plan (PDBP)
02 Apr 19
09 Apr 20
07 Apr 21
05 Apr 22
02 Apr 21
09 Apr 22 – 09 Apr 23
07 Apr 23 – 07 Apr 24
05 Apr 24
Deferred Annual Incentive Plan (DAIP)
04 Apr 18
02 Apr 19
09 Apr 20
17 May 21
05 Apr 22
04 Apr 21
02 Apr 22
09 Apr 23
17 May 24
05 Apr 25
Group Deferred Bonus Plan (GDBP)
02 Apr 19
09 Apr 20
21 Apr 21
02 Apr 22
09 Apr 23
21 Apr 24
16.06
10.47
15.67
11.34
17.50
16.06
10.47
14.96
11.34
16.06
10.47
14.93
66,370
643,845
357,207
–
–
–
–
473,261
(66,370)
(631,115)
(18,849)
–
13,721
254,700
338,251
137,639
–
–
–
–
–
250,451
(13,721)
(254,700)
–
–
–
3,405
11,152
3,810
–
–
–
(774)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,947)
(6,178)
–
–
10,783
332,180
473,261
–
–
–
–
–
–
–
–
–
–
338,251
137,639
250,451
2,631
11,152
3,810
422
Weighted
avg closing
share price
before
vesting
date £
Closing
share price
before
grant date £
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.30
10.53
9.54
10.90
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.30
10.53
9.54
n/a
n/a
n/a
11.30
n/a
n/a
n/a
n/a
11.30
11.21
11.21
11.02
11.21
11.06
11.21
10.54
10.00
11.16
10.58
n/a
11.07
9.41
9.36
11.05
9.36
9.10
10.05
n/a
n/a
12.99
11.23
11.21
10.53
12.99
n/a
n/a
11.21
11.21
n/a
n/a
n/a
n/a
12.99
11.15
10.00
n/a
12.99
11.21
n/a
n/a
n/a
n/a
n/a
11.21
n/a
prudentialplc.com
Additional unaudited financial information / continuedPrudential plc Annual Report 2022 Vesting period
Number of shares under awards1
Date of grant
Vesting date
Fair value
at grant date
£
Beginning
of year
Granted
Vested/
Released
Cancelled
Lapsed/
Forfeited
End
of year
Weighted
avg closing
share price
before
vesting
date £
Closing
share price
before
grant date £
Group Share Incentive Plan (UK SIP)
2009 – 2022
n/a
n/a
11,807
2,525
(7,577)
Purchase Plan (PruSharePlus)
2020 – 2022
n/a
n/a
368,297
272,153
(200,946)
–
–
(870)
5,885
n/a
n/a
(2,092)
437,412
n/a
n/a
Total share schemes funded by existing shares
of Prudential
Representing:
Five highest paid individuals
All other grantees
10,607,498 4,689,707 (3,817,266)
(32,657)
(969,928) 10,477,354
742,045
(299,008)
399,216
9,865,453 4,290,491 (3,518,258)
–
(32,657)
–
842,253
(969,928) 9,635,101
Total share schemes funded by existing shares
of Prudential
10,607,498 4,689,707 (3,817,266)
(32,657)
(969,928) 10,477,354
Notes
1
2
The table above includes share plans held by Directors of the Group. Details of share plans held by the individual Directors have been set out separately in the Directors Remuneration Report.
The five highest paid individuals during the financial year may also include Directors, if applicable.
For some PAA LTIP awards a portion of the award has performance conditions attached. There are usually three elements to these performance conditions; Total Shareholder Return
(50% weighting), Return on Embedded Value (30% weighting) and sustainability Scorecard capturing both financial and non-financial measures aligned to the Group’s strategic objectives
(20% weighting).
423
Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
I Additional financial information continued
I(viii) Selected historical financial information of Prudential
The following table sets forth Prudential’s selected consolidated financial data for the years indicated, which is derived from Prudential’s audited
consolidated financial statements. This table is only a summary and should be read in conjunction with Prudential’s consolidated financial
statements and the related notes included elsewhere in this document.
In the table below, continuing operations reflect the Group’s insurance and asset management businesses in Asia and Africa and central
operations. Discontinued operations represent the Group’s US business (Jackson) demerged in September 2021 and the Group’s UK and Europe
business (M&G) demerged in November 2019.
IFRS financial results
Income statement
Continuing operations:
Gross premiums earned
Outward reinsurance premiums
Earned premiums, net of reinsurance
Investment return
Other income
Total revenue, net of reinsurance
Benefits and claims and movement in unallocated surplus of with-profits
funds, net of reinsurance
Acquisition costs and other expenditure
Finance costs: interest on core structural borrowings of shareholder-financed
businesses
Gain (loss) attaching to corporate transactions
Total charges, net of reinsurance
Share of profits from joint ventures and associates net of related tax
Profit before tax (being tax attributable to shareholders’ and
policyholders’ returns) note (i)
Tax charges attributable to policyholders’ returns
Profit before tax attributable to shareholders’ returns
Tax charges attributable to shareholders’ returns
Profit from continuing operations
(Loss) profit from discontinued US operations
(Loss) profit from discontinued UK and Europe operations
Profit (loss) for the year
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
23,344
(1,943)
21,401
(30,159)
539
(8,219)
24,217
(1,844)
22,373
3,486
641
26,500
23,495
(1,625)
21,870
13,762
615
36,247
23,855
(1,116)
22,739
14,961
639
38,339
22,039
(771)
21,268
(2,723)
465
19,010
13,697
(3,880)
(18,911)
(4,560)
(28,588)
(4,651)
(29,171)
(5,908)
(11,690)
(5,793)
(200)
55
9,672
29
1,482
(21)
1,461
(454)
1,007
–
–
1,007
(328)
(35)
(316)
(30)
(496)
(142)
(525)
(57)
(23,834)
(33,585)
(35,717)
(18,065)
352
517
397
319
3,018
(342)
2,676
(462)
2,214
(5,027)
–
(2,813)
3,179
(271)
2,908
(440)
2,468
(283)
–
2,185
3,019
(365)
2,654
(316)
2,338
(385)
(1,161)
792
1,264
(107)
1,157
(235)
922
1,959
1,142
4,023
Basic earnings per share (in cents)
2022
2021
2020
2019
2018
Based on profit (loss) for the year attributable to the equity holders of the
Company:
Continuing operations
Discontinued US operations
Discontinued UK and Europe operations
Total
Dividend per share (in cents) excluding demerger dividend
Dividends paid in reporting period
36.5¢
–¢
–¢
36.5¢
83.4¢
(161.1)¢
–¢
(77.7)¢
2022
17.60¢
2021
16.10¢
94.6¢
(13.0)¢
–¢
81.6¢
2020
31.34¢
90.0¢
(14.9)¢
(44.8)¢
30.3¢
2019
63.18¢
35.6¢
76.1¢
44.3¢
156.0¢
2018
64.34¢
Statement of financial position at 31 Dec
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
Total assets
Total policyholder liabilities and unallocated surplus of with-profits funds
Core structural borrowings of shareholder-financed businesses
Total liabilities
Total equity
165,942
125,758
4,261
148,815
17,127
199,102
157,299
6,127
181,838
17,264
516,097
446,463
6,633
493,978
22,119
454,214
390,428
5,594
434,545
19,669
647,810
541,466
9,761
625,819
21,991
424
prudentialplc.com
Additional unaudited financial information / continuedPrudential plc Annual Report 2022 Supplementary IFRS financial results – continuing operations
Adjusted operating profit note (ii)
Non-operating items
Profit before tax attributable to shareholders
Operating earnings per share after tax and non-controlling interest (in cents)
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
3,375
(1,914)
1,461
100.5¢
3,233
(557)
2,676
101.5¢
2,757
151
2,908
86.6¢
2,247
407
2,654
73.4¢
1,875
(718)
1,157
62.1¢
Supplementary EEV basis results
Continuing operations:
EEV operating profit note (ii)
Non-operating items
Profit attributable to shareholders
Operating earnings per share after non-controlling interest (in cents)
New business contribution*
Annual premium equivalent (APE) sales
EEV new business profit (NBP) (post-tax)
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
3,952
(7,523)
(3,571)
143.4¢
3,543
(306)
3,237
3,401
573
3,974
5,151
1,058
6,209
5,088
(533)
4,555
133.8¢
130.6¢
198.8¢
197.4¢
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
4,393
2,184
4,194
2,526
3,808
2,201
5,243
3,522
5,050
3,477
* Africa operations are included within the covered business from 2021 following the change in the Group’s operating segments. Africa is excluded from all previous years.
Embedded value at 31 Dec
2022† $bn
2021 $bn
2020 $bn
2019 $bn
2018 $bn
EEV shareholders’ equity, excluding non-controlling interests – continuing
operations
Discontinued operations (US, UK and Europe)
EEV shareholders’ equity†
42.2
–
42.2
47.4
–
47.4
41.9
12.1
54.0
38.4
16.3
54.7
27.4
36.0
63.4
†
2022 includes the impact of the early adoption of the Hong Kong Risk-based Capital (HK RBC) regime, effective from 1 January 2022. Comparatives have not been restated. Further details can
be found in the Basis of Preparation in the EEV basis results.
Other financial information – continuing operations
Operating free surplus generated
Total operating free surplus generated
2022 $m
2021 $m
2020 $m
2019 $m
2018 $m
1,374
1,179
890
762
554
At 31 Dec
Eastspring funds under management or advice note (iii)
Group shareholder GWS capital surplus (over GPCR) note (iv)
2022 $bn
2021 $bn
2020 $bn
2019 $bn
2018 $bn
221.4
15.6
258.5
17.5
247.8
n/a
241.1
n/a
192.7
n/a
Notes
(i)
(ii)
(iii)
(iv)
This measure is the formal profit (loss) before tax measure under IFRS. It is not the result attributable to shareholders.
Adjusted operating profit and EEV operating profit are determined on the basis of including longer-term investment returns, which are stated after excluding the effect of short-term fluctuations
in investment returns on shareholder-backed business and gain or loss attaching to corporate transactions. Separately, for IFRS financial results, adjusted operating profit also excludes
amortisation of acquisition accounting adjustments arising on the purchase of business. For EEV basis results, operating profit also excludes the effect of changes in economic assumptions and
the mark-to-market value movements on core structural borrowings for shareholder-financed operations.
Eastspring total funds under management or advice comprise funds from external parties, including funds managed on behalf of M&G plc, as well as funds managed or advised for the Group’s
insurance operations.
The Group shareholder GWS capital surplus (over GPCR) reflects the Insurance (Group Capital) Rules as set out in the GWS Framework which became effective for Prudential in May 2021.The
2021 comparative information has been re-resented to reflect the impact of HK RBC and C-ROSS II regimes which became effective in the first half of 2022 and after allowing for the impact of
the $1.7 billion debt redemption in January 2022 to show total Group GWS capital surplus (over GPCR) on a more comparable basis. Prior to 2021, the Group adopted LCSM basis.
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II Calculation of alternative performance measures
Prudential uses alternative performance measures (APMs) to provide more relevant explanations of the Group’s financial position and
performance. This section sets out explanations for each APM and reconciliations to relevant IFRS balances.
II(i) Reconciliation of adjusted operating profit to profit before tax
Adjusted operating profit presents the operating performance of the business. This measurement basis adjusts for the following items within total
IFRS profit before tax:
> Short-term fluctuations in investment returns on shareholder-backed business;
> Amortisation of acquisition accounting adjustments arising on the purchase of business; and
> Gain or loss on corporate transactions.
More details on how adjusted operating profit is determined are included in note B1.2 of the Group IFRS consolidated financial statements. A full
reconciliation to profit after tax is given in note B1.1 of the Group IFRS consolidated financial statements.
II(ii) Calculation of IFRS gearing ratio
IFRS gearing ratio is calculated as net core structural borrowings of shareholder-financed businesses divided by closing IFRS shareholders’ equity
plus net core structural borrowings.
Core structural borrowings of shareholder-financed businesses
Less holding company cash and short-term investments
Net core structural borrowings of shareholder-financed businesses
Closing shareholders’ equity
Closing shareholders’ equity plus net core structural borrowings
IFRS gearing ratio
31 Dec 2022 $m 31 Dec 2021 $m
4,261
(3,057)
1,204
16,960
18,164
7%
6,127
(3,572)
2,555
17,088
19,643
13%
II(iii) Return on IFRS shareholders’ equity
This measure is calculated as adjusted operating profit, after tax and non-controlling interests, divided by average shareholders’ equity.
Detailed reconciliation of adjusted operating profit to IFRS profit before tax for the Group is shown in note B1.1 to the Group IFRS consolidated
financial statements.
Adjusted operating profit
Tax on adjusted operating profit
Adjusted operating profit attributable to non-controlling interests
Adjusted operating profit, net of tax and non-controlling interests
Shareholders’ equity at 1 Jan
Shareholders’ equity at 31 Dec
Average shareholders’ equity
Operating return on average shareholders’ equity (%)
2022 $m
2021 $m
3,375
(614)
(11)
2,750
17,088
16,960
17,024
16%
3,233
(548)
(17)
2,668
12,367
17,088
14,728
18%
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 II(iv) Calculation of IFRS shareholders’ equity per share
IFRS shareholders’ equity per share is calculated as closing IFRS shareholders’ equity divided by the number of issued shares at the end of the year.
Number of issued shares at the end of the year (million shares)
Closing IFRS shareholders’ equity ($ million)
Shareholders’ equity per share (cents)
31 Dec 2022
31 Dec 2021
2,750
16,960
617¢
2,746
17,088
622¢
II(v) Calculation of Eastspring cost/income ratio
The cost/income ratio is calculated as operating expenses, adjusted for commissions and share of contribution from joint ventures and associates,
divided by operating income, adjusted for commission, share of contribution from joint ventures and associates and performance-related fees.
IFRS revenue
Share of revenue from joint ventures and associates
Commissions
Performance-related fees
Operating income before performance-related fees note
IFRS charges
Share of expenses from joint ventures and associates
Commissions
Operating expense
Cost/income ratio (operating expense/operating income before performance-related fees)
2022 $m
2021 $m
513
303
(155)
(1)
660
398
117
(155)
360
55%
665
314
(217)
(15)
747
498
122
(217)
403
54%
Note
IFRS revenue and charges for Eastspring are included within the IFRS Income statement in ‘other income’ and ‘acquisition costs and other expenditure’ respectively. Operating income and expense
include the Group’s share of contribution from joint ventures and associates. In the Consolidated income statement of the Group IFRS consolidated financial statements, the net income after tax from
the joint ventures and associates is shown as a single line item.
II(vi) Reconciliation of gross premiums earned to renewal insurance premiums
IFRS gross premiums earned
Less: General insurance premium
Less: IFRS gross earned premium from new regular and single premium business
Add: Renewal premiums from joint ventures and associates note
Renewal insurance premiums
Annual premium equivalent (APE)
Life weighted premium income
2022 $m
2021 $m
23,344
(124)
(6,807)
2,262
18,675
4,393
23,068
AER
24,217
(124)
(6,500)
2,295
19,888
4,194
24,082
CER
23,546
(123)
(6,243)
2,182
19,362
4,013
23,375
Note
For the purpose of the definition of renewal premiums from joint ventures and associates in the table above, premiums for the deposit component of insurance contracts from CPL are excluded.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
II Calculation of alternative performance measures continued
II(vii) Reconciliation of gross premiums earned to APE new business sales
The Group reports APE new business sales as a measure of the new policies sold in the year. APE is calculated as the aggregate of regular
premiums and one-tenth of single premiums on new business written during the year for all insurance products, including premiums for contracts
designated as investment contracts under IFRS 4. The use of the one-tenth of single premiums is to normalise policy premiums into the equivalent
of regular annual payments. This measure is commonly used in the insurance industry to allow comparisons of the amount of new business
written in a period by life insurance companies, particularly when the sales contain both single premium and regular premium business. This differs
from the IFRS measure of gross premiums earned as shown below:
Gross premiums earned
Less: premiums from in-force renewal business note (a)
Less: 90% of single premiums on new business sold in the year note (b)
Add: APE sales from joint ventures and associates on equity accounting method note (c)
Other adjustments note (d)
Annual premium equivalent (APE)
2022 $m
2021 $m
23,344
(16,413)
(3,839)
1,182
119
4,393
24,217
(17,593)
(3,602)
1,104
68
4,194
Notes
(a) Gross premiums earned include premiums from existing in-force business as well as new business given the Group’s focus on recurring premium business.
(b)
(c)
APE new business sales only include one-tenth of single premiums, recorded on policies sold in the year. Gross premiums earned include 100 per cent of such premiums.
For the purpose of reporting APE new business sales, the Group’s share of amounts sold by the Group’s insurance joint ventures and associates are included. Under IFRS, joint ventures and
associates are equity accounted and so no amounts are included within gross premiums earned.
APE new business sales are annualised while gross premiums earned are recorded only when revenues are due. Other adjustments also reflect the inclusion of policies written in the year which are
classified as investment contracts without discretionary participation features under IFRS 4, which are recorded as deposits and therefore not in gross premiums earned, and the exclusion of
general insurance earned on an IFRS basis.
(d)
II(viii) Gross premiums earned including joint ventures and associates
IFRS gross premiums earned
Gross premiums earned from joint ventures and associates
Total Group
2022 $m
2021 $m
23,344
4,439
27,783
24,217
4,579
28,796
Note
Calculated in accordance with the Group’s IFRS accounting policies, which includes the full premium for insurance contracts classified under IFRS 4.
II(ix) Reconciliation between IFRS and EEV shareholders’ equity
The table below shows the reconciliation of EEV shareholders’ equity and IFRS shareholders’ equity at the end of the year:
IFRS shareholders’ equity
Less: DAC assigned zero value for EEV purposes
Add: Value of in-force business of long-term business note (a)
Other note (b)
EEV shareholders’ equity
31 Dec 2022 $m 31 Dec 2021 $m
16,960
(3,254)
27,266
1,212
42,184
17,088
(2,815)
35,456
(2,374)
47,355
Notes
(a)
EEV shareholders’ equity comprises the present value of the shareholders’ interest in the value of in-force business, total net worth of long-term business operations and IFRS shareholders’ equity
of asset management and other operations. The value of in-force business reflects the present value of expected future shareholder cash flows from long-term in-force business which are not
captured as shareholders’ interest on an IFRS basis. Total net worth represents the regulatory basis net assets for EEV reporting purposes, with adjustments as appropriate.
(b) Other adjustments represent asset and liability valuation differences between IFRS and the local regulatory reporting basis used to value total net worth for long-term insurance operations.
These also include the mark-to-market value movements of the Group’s core structural borrowings which are fair valued under EEV but are held at amortised cost under IFRS.
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Additional unaudited financial information / continuedPrudential plc Annual Report 2022 II(x) Calculation of return on embedded value
Operating return on embedded value is calculated as the EEV operating profit for the year as a percentage of average EEV basis shareholders’
equity.
EEV operating profit for the year
Operating profit attributable to non-controlling interests
EEV operating profit, net of non-controlling interest ($ million)
Shareholders’ equity at 1 Jan*
Shareholders’ equity at 31 Dec
Average shareholders’ equity ($ million)
Operating return on average shareholders’ equity (%)
2022
3,952
(29)
3,923
47,584
42,184
44,884
9%
2021
3,543
(28)
3,515
41,926
47,355
44,641
8%
*
Opening shareholders’ equity at 1 January 2022 has been adjusted for the early adoption of the HK RBC regime. Further details can be found in the Basis of Preparation in the EEV basis results.
New business profit over embedded value is calculated as the EEV new business profit for the year as a percentage of average EEV basis
shareholders’ equity for long-term insurance business operations, excluding goodwill attributable to equity holders.
New business profit ($ million)*
Average EEV basis shareholders’ equity for long-term insurance business operations, excluding goodwill attributable to equity
holders ($ million)
New business profit on embedded value (%)
*
New business profit is attributed to the shareholders of the Group before deducting the amount attributable to non-controlling interests.
2022
2,184
41,866
5%
2021
2,526
43,754
6%
Average embedded value has been based on opening and closing EEV basis shareholders’ equity for long-term business operations, excluding
goodwill attributable to equity holders, as follows:
Shareholders’ equity at 1 Jan*
Shareholders’ equity at 31 Dec
Average shareholders’ equity
2022 $m
2021 $m
44,875
38,857
41,866
42,861
44,646
43,754
*
Opening shareholders’ equity at 1 January 2022 has been adjusted for the early adoption of the HK RBC regime. Further details can be found in the Basis of Preparation in the EEV basis results.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
Risk factors
A number of risk factors may affect the financial condition,
results of operations and/or prospects of Prudential and its wholly
and jointly owned businesses, as a whole, and, accordingly, the
trading price of Prudential’s shares. The risk factors mentioned below
should not be regarded as a complete, exhaustive and comprehensive
statement of all potential risks and uncertainties. The information
given is as of the date of this document, and any forward-looking
statements are made subject to the factors specified under
‘Forward-looking statements’.
Prudential’s approaches to managing risks are explained in the
‘Risk Review’ section of this document.
1. Risks relating to prudential’s financial situation
1.1 Prudential’s businesses are inherently subject to market
fluctuations and general economic conditions, each of which
may adversely affect the Group’s business, financial condition,
results of operations and prospects.
Uncertainty, fluctuations or negative trends in global and national
macroeconomic conditions and investment climates could have
a material adverse effect on Prudential’s business and profitability.
Prudential operates in a macroeconomic and global financial
market environment that has materially changed in recent periods.
This presents significant uncertainties and potential challenges.
For example, the rise in energy and commodity prices, exacerbated
by the Russia-Ukraine conflict and global supply chain stresses, has
contributed to the current inflationary environment. This has resulted
in central banks, led by the US, rapidly tightening financial conditions
with potential for further increases in interest rates in major global
economies and the markets in which the Group operates, adversely
impacting the valuation of fixed income assets and future profits due
to the use of higher discount rates. In addition, the rising rates for
developed economies have also led to weakened exchange rates
of a number of emerging economies in which the Group operates,
adversely impacting Prudential’s consolidated financial statements
upon the translation of results into US dollars, the Group’s reporting
currency. Other market uncertainties also include the impact
of factors such as the nature and extent of central banks and
governments actions in response to the inflationary environment,
and the rapid relaxation of the Chinese Mainland’s zero tolerance
Covid-19 policy as well as border reopening. These uncertainties
may apply for a prolonged period of time. The transition to a lower
carbon economy, the timing and speed of which is uncertain and will
vary by country, may also result in greater uncertainty, fluctuations
or negative trends in asset valuations and reduced liquidity,
particularly for carbon intensive sectors, and will have a bearing
on inflation levels.
The uncertain macroeconomic and financial market environment
may have a number of adverse impacts on the business, financial
condition and results of the Group, including increased strategic,
business, insurance, product and customer conduct risks. In general,
upheavals in the financial markets may affect general levels of
economic activity, employment and customer behaviour. As a result,
insurers may experience an elevated incidence of claims, frauds,
lapses, or surrenders of policies, and some policyholders may choose
to defer or stop paying insurance premiums or reduce deposits into
retirement plans. Uncertainty over livelihoods, elevated cost of living
and challenges in affordability may adversely impact the demand
for insurance products, and increase regulatory risk in meeting
regulatory definitions and expectations with respect to vulnerable
customers (see risk factor 3.8). In addition, there may be a higher
incidence of counterparty failures. If sustained, this environment is
likely to have a negative impact on the insurance sector over time
and may consequently have a negative impact on Prudential’s
business, balance sheet and profitability.
For example, this could occur if the recoverable value of intangible
assets for bancassurance agreements and deferred acquisition costs
are reduced. New challenges related to market fluctuations and
general economic conditions may continue to emerge. For example,
sustained inflationary pressures driving interest rates to even higher
levels may lead to increased lapses for some guaranteed savings
products where higher levels of guarantees are offered by products
of the Group’s competitors, reflecting consumer demand for returns
at the level of, or exceeding, inflation. High inflation, combined with
an economic downturn or recession, may also result in affordability
challenges, adversely impacting the ability of consumers to purchase
insurance products. Rising inflation, via medical claims inflation (with
rising medical import prices a factor under current market conditions),
may adversely impact the profitability of the Group’s businesses.
Global financial markets are subject to uncertainty and volatility
created by a variety of factors. These factors include actual or
expected changes in monetary policy in the Chinese Mainland, the
US and other jurisdictions together with their impact on base interest
rates and the valuation of all asset classes and inflation expectations;
slowdowns or reversals in world or regional economic growth
(particularly where this is abrupt, as has been the case with the
impact of the Russia-Ukraine conflict and geopolitical tensions);
sector-specific slowdowns or deteriorations which have the potential
to have contagion impacts (such as the negative developments in
the Chinese Mainland property sector); fluctuations in global energy
prices; and concerns over sovereign debt. Other factors include
fluctuations in global commodity prices, concerns on the
serviceability of sovereign debt in certain economies (particularly
as central banks continue to raise rates in response to high inflation
and the high indebtedness across sub-Saharan Africa countries),
the increased level of geopolitical and political risk and policy-related
uncertainty (including those resulting from the Russia-Ukraine
conflict and the uncertainty and potential impact on business
sentiment and the broader market resulting from the relaxation
of pandemic-related restrictions, and border reopening, as well as
regulatory tightening across sectors in the Chinese Mainland) and
socio-political, climate-driven and pandemic events. The extent of
the financial market and economic impact of these factors may be
highly uncertain and unpredictable and influenced by the actions,
including the duration and effectiveness of mitigating measures of
governments, policymakers and the public.
The adverse effects of such factors could be felt principally through
the following items:
> Changes to interest rates could reduce Prudential’s capital strength
and impair its ability to write significant volumes of new business.
Increases in interest rates could adversely impact the financial
condition of the Group through changes in the present value of
future fees for unit-linked based businesses and/or the present
value of future profits for accident and health products; and/or
reduce the value of its assets and/or have a negative impact on its
assets under management and profit. Decreases in interest rates
could increase the potential adverse impact of product guarantees
included in non-unit-linked products with a savings component;
reduce investment returns arising on the Group’s portfolios; impact
the valuation of debt securities; and/or increase reinvestment risk
for some of the Group’s investments from accelerated prepayment
and increased redemptions.
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Prudential plc Annual Report 2022 > A reduction in the financial strength and flexibility of corporate
entities, as experienced by a number of issuers within the Chinese
Mainland property sector, which may deteriorate the credit rating
profile and valuation of the Group’s invested credit portfolio (and
which may result in an increase in regulatory capital requirements
for the Group or its businesses), increased credit defaults and debt
restructurings and wider credit and liquidity spreads resulting in
realised and unrealised credit losses. Regulations imposing or
increasing restrictions on the amount of company debt financing,
such as those placing limits on debt or liability ratios, may also
reduce the financial flexibility of corporate entities. Similarly,
securitised assets in the Group’s investment portfolio are subject to
default risk and may be adversely impacted by delays or failures of
borrowers to make payments of principal and interest when due.
Where a widespread deterioration in the financial strength of
corporate entities occurs, any assumptions on the ability and
willingness of governments to provide financial support may need
to be revised.
> Failure of, or legal, regulatory or reputational restrictions on the
Group’s ability to deal with, counterparties who have transactions
with Prudential (such as banks, reinsurers and counterparties
to cash management and risk transfer or hedging transactions)
to meet commitments could give rise to a negative impact
on Prudential’s financial position and on the accessibility or
recoverability of amounts due or the adequacy of collateral.
Geographic or sector concentrations of counterparty credit
risk could exacerbate the impact of these events where
they materialise.
> Estimates of the value of financial instruments becoming more
difficult because in certain illiquid, volatile or closed markets,
determining the value at which financial instruments can be
realised is highly subjective. Processes to ascertain such values
require substantial elements of judgement, assumptions and
estimates (which may change over time). Where the Group is
required to sell its investments within a defined timeframe, such
market conditions may result in the sale of these investments at
below expected or recorded prices.
> Illiquidity of the Group’s investments. The Group holds certain
investments that may, by their nature, lack liquidity or have the
potential to lose liquidity rapidly, such as investment funds
(including money market funds), privately placed fixed maturity
securities, mortgage loans, complex structured securities and
alternative investments. If these investments were required to
be liquidated on short notice, the Group may experience difficulty
in doing so and may be forced to sell them at a lower price than
it otherwise would have been able to realise.
> A reduction in revenue from the Group’s products where fee
income is linked to account values or the market value of the funds
under management. Sustained inflationary pressures which may
drive higher interest rates may also impact the valuation of fixed
income investments and reduce fee income.
> Increased illiquidity, which includes the risk that expected cash
inflows from investments and operations will not be adequate
to meet the Group’s anticipated short-term and long-term
policyholder benefits and expense payment obligations. Increased
illiquidity also adds to the uncertainty over the accessibility of
financial resources which in extreme conditions could impact the
functioning of markets and reduce capital resources as valuations
decline. This could occur where external capital is unavailable at
sustainable cost, increased liquid assets are required to be held as
collateral under derivative transactions or redemption restrictions
are placed on Prudential’s investments in illiquid funds. In addition,
significant redemption requests could also be made on Prudential’s
issued funds and while this may not have a direct impact on the
Group’s liquidity, it could result in reputational damage to
Prudential. The potential impact of increased illiquidity is more
uncertain than for other risks such as interest rate or credit risk.
For some non-unit-linked products with a savings component it may
not be possible to hold assets which will provide cash flows to match
those relating to policyholder liabilities. This may particularly be
the case in those markets where bond markets are less developed
or where the duration of policyholder liabilities is longer than the
duration of bonds issued and available in the market, and in certain
markets where regulated premium and claim values are set with
reference to the interest rate environment prevailing at the time
of policy issue. This results in a mismatch due to the duration and
uncertainty of the liability cash flows and the lack of sufficient assets
of a suitable duration. While this residual asset/liability mismatch risk
can be managed, it cannot be eliminated. If interest rates in these
markets are lower than those used to calculate premium and claim
values over a sustained period, this could have a material adverse
effect on Prudential’s reported profit and the solvency of its
business units. In addition, part of the profit from the Group’s
operations is related to bonuses for policyholders declared on
with-profits products, which are impacted by the difference between
actual investment returns of the with-profits fund (which are broadly
based on historical and current rates of return on equity, real estate
and fixed income securities) and minimum guarantee rates offered to
policyholders. This profit could be lower in particular in a sustained
low interest rate environment.
Any of the foregoing factors and events, individually or together,
could have a material adverse effect on Prudential’s business,
financial condition, results of operations and prospects.
1.2 Geopolitical and political risks and uncertainty may
adversely impact economic conditions, increase market
volatility and regulatory compliance risks, cause operational
disruption to the Group and impact the implementation of
its strategic plans, which could have adverse effects on
Prudential’s business, financial condition, results of operations
and prospects.
The Group is exposed to geopolitical and political risks and
uncertainty in the diverse markets in which it operates. Such risks
may include:
> The application of government regulations, executive powers,
protectionist or restrictive economic and trade policies or measures
adopted by businesses or industries which increase trade barriers
or restrict trade, sales, financial transactions, or the transfer
of capital, investment, data or other intellectual property, with
respect to specific territories, markets, companies or individuals;
> An increase in the volume and pace of domestic regulatory
changes, including those applying to specific sectors;
> The increased adoption or implementation of laws and regulations
which may purport to have extra-territorial application;
> International trade disputes such as the implementation of
trade tariffs;
> Withdrawals or expulsions from existing trading blocs or
agreements or financial transaction systems, including those
which facilitate cross-border payments;
> The domestic application of measures restricting national airspace
with respect to aircraft of specific territories, markets, companies
or individuals;
> Measures favouring local enterprises, such as changes to the
maximum level of non-domestic ownership by foreign companies
or differing treatment of foreign-owned businesses under
regulations and tax rules; and
> Measures which require businesses of overseas companies to
operate through locally incorporated entities or with requirements
on minimum local representation on executive or management
committees.
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Prudential plc Annual Report 2022Group overviewStrategic reportGovernanceDirectors’ remuneration reportFinancial statementsEuropean Embedded Value (EEV) basis resultsAdditional information
The above measures may have an adverse impact on Prudential
through their effects on the macroeconomic outlook and the
environment for global regional and national financial markets.
They may also increase uncertainties and long-term complexity of
legal and regulatory compliance, and result in heightened sanctions
risk driven by geopolitical conflicts, as well as increase reputational
risks, or may adversely impact Prudential where they apply to, and
impact, the economic, business, legal and regulatory environment
in specific markets or territories in which the Group, its joint ventures
or jointly owned businesses, sales and distribution networks,
or third-party service providers have operations. For internationally
active groups such as Prudential, operating across multiple
jurisdictions, such measures may also add to the complexity of legal
and regulatory compliance and increase the risk of conflicts between
the requirements of one jurisdiction and another. See risk factor
4.1 below.
Geopolitical and political risks and uncertainty may also adversely
impact the Group’s operations and its operational resilience.
Increased geopolitical tensions may increase domestic and
cross-border cyber intrusion activity and therefore increase cyber
security risks. Geopolitical and political tensions may also lead to
conflict, civil unrest and/or acts of civil disobedience. Such events
could impact operational resilience by disrupting Prudential’s
systems, operations, new business sales and renewals, distribution
channels and services to customers, which may result in a reduction
in contributions from business units to the central cash balances
and profit of the Group, decreased profitability, financial loss,
adverse customer impacts and reputational damage and may
impact Prudential’s business, financial condition, results of operations
and prospects.
Legislative or regulatory changes which adversely impact
Hong Kong’s economy or its international trading and economic
relationships, in particular, may result in adverse sales, operational
and product distribution impacts to the Group due to the territory
being a key market which also hosts Group head office functions.
1.3 Covid-19 continues to have the potential to impact
financial market volatility and global economic activity,
increase operational disruption risks for businesses and
adversely impact Prudential’s sales in affected markets and
its financial condition, results of operations and prospects.
Whilst most markets have moved to an endemic approach in
managing Covid-19, the broader long-term macroeconomic impacts
of Covid-19 continue to add uncertainty to the stability and outlook
of equity markets, interest rates and credit spreads, and have the
potential to affect market liquidity and reduce global economic
activity. The potential adverse impacts to the Group of these effects
are detailed in risk factor 1.1 above. Where measures to contain
Covid-19 have been in effect, the level of sales activity in affected
markets has been adversely impacted through a reduction in travel,
and in agency and bancassurance activity. In particular, sales in the
Group’s Hong Kong business have been adversely impacted by the
border restrictions in place with the Chinese Mainland. The recent
easing of pandemic-related restrictions and the reopening of borders
may help with recovery in sales levels in Hong Kong, however,
uncertainty remains on the return of Chinese Mainland customers
as well as the resumption of their demand for the Group’s products
in Hong Kong. The longer-term effects of Covid-19 have included,
and may continue to include, latent morbidity impacts from the
deferral of medical treatment by policyholders. It may be a factor in
increasing morbidity claims and there may be implications from other
factors such as long-term post-Covid-19 symptoms (although there
is currently no consensus on the longer term impact on morbidity).
In response to previous pandemic-related restrictions, Prudential
implemented changes to its sales and distribution processes in
specific markets. These included virtual face-to-face sales of its
products and the online recruitment, training and, where possible,
licensing of agents. Such changes may increase or introduce
operational and regulatory risks, in particular those focused on
customer outcomes and conduct. A failure to apply ongoing
appropriate governance and management of these risks may
adversely impact Prudential’s reputation and brand and the results
of its operations. In markets where the level of sales under these
processes is material or where such processes become permanent
distribution channels, the commercial value of the Group’s existing
sale and distribution arrangements, such as bancassurance
arrangements, may be adversely impacted.
1.4 As a holding company, Prudential is dependent upon its
subsidiaries to cover operating expenses and dividend payments.
The Group’s insurance and investment management operations
are generally conducted through direct and indirect subsidiaries,
which are subject to the risks discussed elsewhere in this
‘Risk Factors’ section.
As a holding company, Prudential’s principal sources of funds
are remittances from subsidiaries, shareholder-backed funds,
the shareholder transfer from long-term funds and any amounts
that may be raised through the issuance of equity, debt and
commercial paper.
Certain of Prudential’s subsidiaries are subject to insurance, asset
management, foreign exchange and tax laws, rules and regulations
(including in relation to distributable profits that can limit their ability
to make remittances). In some circumstances, including where there
are changes to general market conditions, this could limit Prudential’s
ability to pay dividends to shareholders or to make available funds
held in certain subsidiaries to cover operating expenses of other
members of the Group.
A material change in the financial condition of any of Prudential’s
subsidiaries may have a material effect on its business, financial
condition, results of operations and prospects.
1.5 Prudential is subject to the risk of potential sovereign debt
credit deterioration owing to the amounts of sovereign debt
obligations held in its investment portfolio.
Investing in sovereign debt creates exposure to the direct or indirect
consequences of geopolitical or political, social or economic changes
(including changes in governments, heads of state or monarchs),
military conflicts, pandemics and associated disruption, and other
events affecting the markets in which the issuers of such debt are
located and the creditworthiness of the sovereign. Investment in
sovereign debt obligations involves risks not present in debt
obligations of corporate issuers. In addition, the issuer of the debt or
the governmental authorities that control the repayment of the debt
may be unable or unwilling to repay principal or pay interest when
due (or in their agreed currency) in accordance with the terms of such
debt, and Prudential may have limited recourse to compel payment
in the event of a default. A sovereign debtor’s willingness or ability
to repay principal and to pay interest in a timely manner may be
affected by, among other factors, its cash flow situation, its relations
with its central bank, the extent and availability of its foreign currency
reserves, the availability of sufficient foreign exchange on the date
a payment is due, the relative size of the debt service burden to the
economy as a whole, the sovereign debtor’s policy toward local and
international lenders, geopolitical tensions and conflicts and the
political constraints to which the sovereign debtor may be subject.
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Risk factors / continuedPrudential plc Annual Report 2022 Moreover, governments may use a variety of techniques, such as
intervention by their central banks or imposition of regulatory
controls or taxes, to devalue their currencies’ exchange rates, or may
adopt monetary, fiscal and other policies (including to manage their
debt burdens) that have a similar effect, all of which could adversely
impact the value of an investment in sovereign debt even in the
absence of a technical default. Periods of economic uncertainty may
affect the volatility of market prices of sovereign debt to a greater
extent than the volatility inherent in debt obligations of other types
of issuers.
In addition, if a sovereign default or other such events described
above were to occur, as has happened on certain occasions in the
past, other financial institutions may also suffer losses or experience
solvency or other concerns, which may result in Prudential facing
additional risks relating to investments in such financial institutions
that are held in the Group’s investment portfolio. There is also risk
that public perceptions about the stability and creditworthiness
of financial institutions and the financial sector generally might be
adversely affected as might counterparty relationships between
financial institutions.
If a sovereign were to default on its obligations, or adopt policies that
devalued or otherwise altered the currencies in which its obligations
were denominated, this could have a material adverse effect on
Prudential’s business, financial condition, results of operations
and prospects.
1.6 Downgrades in Prudential’s financial strength and credit
ratings could significantly impact its competitive position
and damage its relationships with creditors or trading
counterparties.
Prudential’s financial strength and credit ratings, which are used
by the market to measure its ability to meet policyholder obligations,
are an important factor affecting public confidence in Prudential’s
products, and as a result its competitiveness. Downgrades in
Prudential’s ratings as a result of, for example, decreased profitability,
increased costs, increased indebtedness or other concerns could have
an adverse effect on its ability to market products and retain current
policyholders, as well as the Group’s ability to compete for acquisition
and strategic opportunities. Downgrades may also impact the
Group’s financial flexibility, including its ability to issue commercial
paper at acceptable levels and pricing. The interest rates at which
Prudential is able to borrow funds are affected by its credit ratings,
which are in place to measure the Group’s ability to meet its
contractual obligations.
In addition, changes in methodologies and criteria used by rating
agencies could result in downgrades that do not reflect changes in
the general economic conditions or Prudential’s financial condition.
In addition, any such downgrades could have a material adverse
effect on Prudential’s business, financial condition, results of
operations and prospects. Prudential cannot predict what actions
rating agencies may take, or what actions Prudential may take
in response to any such actions, which could adversely affect
its business.
Any such downgrade of the Group could have an adverse effect on
Prudential’s financial flexibility, requirements to post collateral under
or in connection with transactions and ability to manage market risk
exposures. In addition, the interest rates or other costs that the Group
incurs in respect of its financing activities may increase as a result.
A credit rating downgrade may also affect public confidence in the
Group’s products and may adversely impact on its ability to market
products, retain current policyholders or attract new policyholders.
1.7 Prudential is subject to the risk of exchange rate
fluctuations owing to the geographical diversity of its
businesses.
Due to the geographical diversity of Prudential’s businesses,
Prudential is subject to the risk of exchange rate fluctuations.
Prudential’s operations generally write policies and invest in assets
denominated in local currencies. Although this practice limits the
effect of exchange rate fluctuations on local operating results, it can
lead to fluctuations in Prudential’s consolidated financial statements
upon the translation of results into the Group’s presentation currency.
This exposure is not currently separately managed. The Group
presents its consolidated financial statements in US dollars. The
results of some entities within the Group are not denominated in or
linked to the US dollar and some enter into transactions which are
conducted in non-US dollar currencies. Prudential is subject to the risk
of exchange rate fluctuations from the translation of the results of
these entities and non-US dollar transactions and the risks from the
maintenance of the HK dollar peg to the US dollar. In cases where
a non-US dollar denominated surplus arises in an operation which
is to be used to support Group capital or shareholders’ interest
(ie remittances), this currency exposure may be hedged where
considered economically favourable. Prudential is also subject to
the residual risks arising from currency swaps and other derivatives
that are used to manage the currency exposure.
2. Risks relating to sustainability and environmental, social
and governance (‘esg’) matters
2.1 The failure to understand and respond effectively to
the risks associated with ESG factors could adversely affect
Prudential’s achievement of its long-term strategy.
A failure to manage the material risks associated with key ESG
themes detailed below may undermine the Group from meeting
its ESG commitments and the sustainability of Prudential by
adversely impacting the Group’s reputation and brand, and its ability
to attract and retain customers and employees, and therefore the
results of its operations and delivery of its strategy and long-term
financial success.
(a) Environmental risks
Environmental concerns, notably those associated with climate
change and their social and economic impacts, present long-term
risks to the sustainability of Prudential and may impact its customers
and other stakeholders.
Prudential’s investment horizons are long-term, and it is therefore
exposed to the potential long-term impact of climate change risks,
which include the financial and non-financial impact of the transition
to a lower carbon economy, physical, reputational and shareholder,
customer or third-party litigation risks. The global transition to a lower
carbon economy may have an adverse impact on investment
valuations and liquidity as the financial assets of carbon intensive
companies re-price, and this could result in some asset sectors
facing significantly higher costs and a reduction in demand for their
products and services. The speed of this transition, and the extent
to which it is orderly and managed, will be influenced by factors such
as changes in public policy, technology and market or investor
sentiment. The potential impact of these factors on the valuation
of investments may also have a broader economic impact that
may adversely affect customers and their demand for the Group’s
products. Direct physical and other risks from climate change and
the transition to a lower carbon economy have the potential to
disproportionately impact the Asia and Africa markets in which
Prudential operates and invests, and the Group’s stakeholders
increasingly expect and/or rely on the Group to support an orderly,
inclusive and sustainable transition based on an understanding of
relevant market and company-level transition plans taking into
consideration the impact on the economies, businesses, communities
and customers in these markets.
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The Group’s ability to sufficiently understand and appropriately
respond to transition risk and its ability to deliver on its external
carbon reduction commitments and the implementation of ESG
considerations in existing or new ESG-orientated products may be
limited by insufficient or unreliable data on carbon exposure and
transition plans for the investee company assets in which it invests.
The direct physical impacts of climate change, driven by both specific
short-term climate-related events such as natural disasters and
longer-term changes to climate and the natural environment,
are likely to become increasingly significant factors in the mortality
and morbidity risk assessments for the Group’s insurance product
underwriting and offerings and their associated claims profiles.
Such short-term and long-term changes in markets where Prudential
or its key third parties operate could adversely impact the Group’s
operational resilience and its customers, which may potentially occur
through migration or displacement both within and across borders.
The pace and volume of global standards and climate-related
regulations emerging across the markets in which the Group operates,
the need to deliver on existing and new exclusions or restrictions
on investments in certain sectors, engagement and reporting
commitments and the demand for externally assured reporting may
give rise to compliance, operational and disclosure and litigation risks
which may be increased by the multi-jurisdictional coordination
required in adopting a consistent risk management approach. The
launch of ESG-orientated products, or the (method of) incorporation
of ESG considerations in the investment process for existing products,
may increase the risks related to the perceived fulfilment of fiduciary
duties to customers by the Group’s asset managers and may increase
regulatory compliance, customer conduct, product disclosure and
customer litigation risks. Prudential’s voluntary memberships of,
or participation within, industry organisations and groups or their
initiatives may increase stakeholder expectations of the Group’s
acquiescence or compliance with their publicised positions or aims
and therefore may increase the reputational risk of the Group where
their positions or aims evolve. See risk factor 4.1 for details of ESG
and sustainability-related regulatory and supervisory developments
with potential impacts the Group.
A failure to understand, manage and provide greater transparency
of its exposure to these climate-related risks may have increasingly
adverse implications for Prudential and its stakeholders.
(b) Social risks
Social risks that could impact Prudential may arise from a failure
to consider the rights, diversity, well-being, changing needs,
human rights and interests of its customers and employees and the
communities in which the Group or its third parties operate. Perceived
inequity and income disparities (both with developed markets and
within the Group’s markets), intensified by the pandemic, have the
potential to further erode social cohesion across the Group’s markets
which may increase operational and disruption risks for Prudential.
Direct physical impacts of climate change and deterioration of the
natural environment and the global transition to a lower carbon
economy may disproportionately impact the stability of livelihoods
and health of lower socioeconomic groups within the markets in
which the Group operates. These risks are heightened as Prudential
operates in multiple jurisdictions and vulnerable to climate change,
with distinct local cultures and considerations.
Evolving social norms and emerging population risks associated
with public health trends (such as an increase in obesity and mental
health deterioration) and demographic changes (such as population
urbanisation and ageing) may affect customer lifestyles and
therefore may impact the level of claims under the Group’s insurance
product offerings. As a provider of insurance and investment services,
the Group is increasingly focused on making its products more
accessible through digital innovation, technologies and distribution
methods for a broadening range of products and services.
As a result, Prudential has access to extensive amounts of customer
personal data, including data related to personal health, and an
increasing ability to analyse and interpret this data through the
use of complex tools, machine learning and artificial intelligence
technologies. The Group is therefore exposed to the regulatory,
ethical and reputational risks associated with customer data misuse
or security breaches. These risks are explained in risk factor 3.5.
The increasing digitalisation of products, services and processes
may also result in new and unforeseen regulatory requirements and
stakeholder expectations, including those relating to how the Group
supports its customers through this transformation.
The Group believes in supporting human rights and acting
responsibly and with integrity in everything the Group does, and is
committed to fostering an inclusive, diverse and open environment
for its employees in accordance with the principles of the Universal
Declaration of Human Rights and of the International Labour
Organisation’s core labour standards. The potential for reputational
risk extends to the Group’s supply chains and its investee companies,
which may be exposed to factors such as poor labour standards and
abuses of human rights by third parties. The Group is committed to
zero tolerance of slavery, human trafficking, child labour and any
other form of human rights abuse within the Group or in its supply
chains globally.
(c) Governance
A failure to maintain high standards of corporate governance
may adversely impact the Group and its customers and employees
and increase the risk of poor decision-making and a lack of oversight
and management of its key risks. Poor governance may arise
where key governance committees have insufficient independence,
a lack of diversity, skills or experience in their members, or unclear
(or insufficient) oversight responsibilities and mandates. Inadequate
oversight over remuneration also increases the risk of poor senior
management behaviours.
Prudential operates across multiple jurisdictions and has a group and
subsidiary governance structure which may add further complexity
to these considerations. Participation in joint ventures or partnerships
where Prudential does not have direct overall control, and the use of
third-party service providers, increase the potential for reputational
risks arising from inadequate governance.
Sustainability and ESG-related risks may directly or indirectly impact
Prudential’s business and the achievement of its strategic focus on
providing greater and more inclusive access to good health and
financial security, responsible stewardship in managing the human
impact of climate change and building human and social capital
with its broad range of stakeholders, which range from customers,
institutional investors, employees and suppliers, to policymakers,
regulators, industry organisations and local communities. A failure to
transparently and consistently implement the Group’s ESG strategy
across operational, underwriting and investment activities, as well as
a failure to implement and uphold responsible business practices,
may adversely impact the financial condition and reputation of the
Group. This may also negatively impact the Group’s stakeholders,
who all have expectations, concerns and aims related to ESG and
sustainability matters, which may differ, both within and across the
markets in which the Group operates. In its investment activities,
Prudential’s stakeholders increasingly have expectations of, and
place reliance on, an approach to responsible investment that
demonstrates how ESG and sustainability considerations are
effectively integrated into investment decisions, responsible supply
chain management and the performance of fiduciary and
stewardship duties. These duties include effective implementation of
exclusions, voting and active engagement decisions with respect to
investee companies, as both an asset owner and an asset manager,
in line with internally defined procedures and external commitments.
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Risk factors / continuedPrudential plc Annual Report 2022 The increased demands and expectations of stakeholders for
transparency and disclosure of the activities that support these
duties further heightens disclosure risks for the Group, including those
associated with potentially overstating or mis-stating the positive
environmental or societal impacts of the Group’s activities, products
and services (eg greenwashing).
3. Risks relating to prudential’s business activities and industry
3.1 The implementation of large-scale transformation,
including complex strategic initiatives, gives rise to significant
design and execution risks and may affect Prudential’s
operational capability and capacity. Failure of these initiatives
to meet their objectives may adversely impact the Group and
the delivery of its strategy.
Where required in order to implement its business strategies for
growth, meet customer needs, improve customer experiences,
strengthen operational resilience, meet regulatory and industry
requirements and maintain market competitiveness, Prudential from
time to time undertakes corporate restructuring, transformation
programmes and acquisitions and disposals across its business.
Many of these change initiatives are complex, inter-connected
and/or of large scale, and include improvement of business
efficiencies through operating model changes, advancing the Group’s
digital capability, expanding strategic partnerships and industry and
regulatory-driven change. There may be a material adverse effect
on Prudential’s business, employees, customers, financial condition,
results of operations and prospects if these initiatives incur
unplanned costs, are subject to implementation delays, or fail to fully
meet their objectives. There may also be adverse implications for
the Group in undertaking transformation initiatives such as placing
additional strain on employees, operational capacity, and weakening
the control environment. Implementing initiatives related to
significant accounting standard changes, such as IFRS 17, and other
regulatory changes in major businesses of the Group, such as those
related to the sale and management of investment-linked products
at the Indonesia businesses, may amplify these risks. Leadership
changes and changes to the business and operational model of
the Group increase uncertainty for its employees, which may affect
operational capacity and the ability of the Group to deliver its
strategy. Risks relating to these regulatory changes are explained
in risk factor 4.1 below.
The speed of technological change in the business could outpace
the Group’s ability to anticipate all the unintended consequences
that may arise from such change. Innovative technologies, such as
artificial intelligence, expose Prudential to potential additional
regulatory, information security, operational, ethical and conduct
risks which, if inadequately managed, could result in customer
detriment and reputational damage.
3.2 Prudential’s businesses are conducted in highly competitive
environments with rapidly developing demographic trends.
The profitability of the Group’s businesses depends on
management’s ability to respond to these pressures and trends.
The markets for financial services are highly competitive, with a
number of factors affecting Prudential’s ability to sell its products
and profitability, including price and yields offered, financial strength
and ratings, range of product lines and product quality, ability to
implement and comply with regulatory changes, the imposition
of regulatory sanctions, brand strength and name recognition,
investment management performance and fund management
trends, historical bonus levels, the ability to respond to developing
demographic trends, customer appetite for certain savings products
(which may be impacted by broader economic pressures) and
technological advances. In some of its markets, Prudential faces
competitors that are larger, have greater financial resources or a
greater market share, offer a broader range of products or have
higher bonus rates.
Further, heightened competition for talented and skilled employees,
agents and independent financial advisers may limit Prudential’s
potential to grow its business as quickly as planned or otherwise
implement its strategy. Technological advances, including those
enabling increased capability for gathering large volumes of
customer health data and developments in capabilities and tools in
analysing and interpreting such data (such as artificial intelligence
and machine learning), may result in increased competition to the
Group, both from within and outside the insurance industry, and may
increase the competition risks resulting from a failure to be able to
attract or retain talent.
The Group’s principal competitors include global life insurers, regional
insurers and multinational asset managers. In most markets, there
are also local companies that have a material market presence.
Prudential believes that competition will intensify across all regions
in response to consumer demand, digital and other technological
advances (including the emergence and maturing of new distribution
channels), the need for economies of scale and the consequential
impact of consolidation, regulatory actions and other factors.
Prudential’s ability to generate an appropriate return depends
significantly upon its capacity to anticipate and respond
appropriately to these competitive pressures. This includes managing
the potential adverse impacts to the commercial value of the Group’s
existing sale and distribution arrangements, such as bancassurance
arrangements, in markets where new distribution channels develop.
Failure to do so may adversely impact Prudential’s ability to attract
and retain customers and, importantly, may limit Prudential’s ability
to take advantage of new business arising in the markets in which it
operates, which may have an adverse impact on the Group’s business,
financial condition, results of operations and growth prospects.
3.3 Adverse experience in the operational risks inherent in
Prudential’s business, and those of its material outsourcing
partners, could disrupt its business functions and have a
negative impact on its business, financial condition, results
of operations and prospects.
Operational risks are present in all of Prudential’s businesses,
including the risk of loss arising from inadequate or failed internal
processes, systems or human error, fraud, the effects of natural
or man-made catastrophic events (such as natural disasters,
pandemics, cyber-attacks, acts of terrorism, civil unrest and other
catastrophes) or other external events. These risks may also adversely
impact Prudential through its partners. Prudential relies on the
performance and operations of a number of bancassurance, product
distribution, outsourcing (including but not limited to external
technology, data hosting and pauments) and service partners.
These include back office support functions, such as those relating to
technology infrastructure, development and support and customer
facing operations and services, such as product distribution and
services (including through digital channels) and investment
operations. This creates reliance upon the resilient operational
performance of these partners and exposes Prudential to the risk that
the operations and services provided by these partners are disrupted
or fail. Further, Prudential operates in extensive and evolving legal
and regulatory environments which adds to the complexity of the
governance and operation of its business processes and controls.
Exposure to such risks could impact Prudential’s operational resilience
and ability to perform necessary business functions when there
are disruptions to its systems, operations, new business sales and
renewals, distribution channels and services to customers, or result
in the loss of confidential or proprietary data. Such risks, as well as
any weaknesses in administration systems (such as those relating
to policyholder records) or actuarial reserving processes, may also
result in increased expenses, as well as legal and regulatory sanctions,
decreased profitability, financial loss and customer conduct
risk impacts.
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This could damage Prudential’s reputation and relationship with its
customers and business partners. A failure to adequately oversee
service partners (or their technology and operational systems and
processes) could result in significant service degradation or disruption
to Prudential’s business operations and services to its customers,
which may have reputational or conduct risk implications and could
have a material adverse effect on the Group’s business, financial
condition, results of operations and prospects.
Prudential’s business requires the processing of a large number of
transactions for a diverse range of products. It also employs complex
and inter-connected technology and finance systems, models, and
user developed applications in its processes to perform a range of
operational functions. These functions include the calculation of
regulatory or internal capital requirements, the valuation of assets
and liabilities and the acquisition of new business using artificial
intelligence and digital applications. Many of these tools form an
integral part of the information and decision-making frameworks
used by Prudential and the risk of adverse consequences arising from
erroneous or misinterpreted tools used in core business activities,
decision-making and reporting exists. Errors or limitations in these
tools, or their inappropriate usage, may lead to regulatory breaches,
inappropriate decision-making, financial loss, customer detriment,
inaccurate external reporting or reputational damage. The long-term
nature of much of the Group’s business also means that accurate
records are to be maintained securely for significant time periods.
The performance of the Group’s core business activities and the
uninterrupted availability of services to customers rely significantly
on, and require significant investment in, resilient IT applications,
infrastructure and security architectural design, data governance and
management and other operational systems, personnel, controls and
processes. During large-scale disruptive events or times of significant
change, or due to other factors impacting operational performance
including adequacy of skilled/experienced personnel, the resilience
and operational effectiveness of these systems and processes at
Prudential and/or its third-party service providers may be adversely
impacted. In particular, Prudential and its business partners are
making increasing use of emerging technological tools and digital
services, or forming strategic partnerships with third parties to provide
these capabilities. Automated distribution channels and services to
customers increase the criticality of providing uninterrupted services.
A failure to implement appropriate governance and management of
the incremental operational risks from emerging technologies may
adversely impact Prudential’s reputation and brand, the results of its
operations, its ability to attract and retain customers and its ability
to deliver on its long-term strategy and therefore its competitiveness
and long-term financial success.
Although Prudential’s technology, compliance and other operational
systems, models and processes incorporate governance and controls
designed to manage and mitigate the operational and model risks
associated with its activities, there can be no complete assurance as
to the resilience of these systems and processes to disruption or that
governance and controls will always be effective. Due to human error,
among other reasons, operational and model risk incidents do occur
from time to time and no system or process can entirely prevent
them. Prudential’s legacy and other technology systems, data and
processes, as with operational systems and processes generally,
may also be susceptible to failure or security/data breaches.
3.4 Attempts to access or disrupt Prudential’s technology
systems, and loss or misuse of personal data, could result in
loss of trust from Prudential’s customers and employees and
reputational damage, which could have material adverse
effects on the Group’s business, financial condition, results
of operations and prospects.
Prudential and its business partners are increasingly exposed to
the risk that individuals (which includes connected persons such
as employees, contractors or representatives of Prudential or its
third-party service providers, and unconnected persons) or groups
may intentionally or unintentionally disrupt the availability,
confidentiality and integrity of its technology systems or compromise
the integrity and security of data (both corporate and customer),
including disruption from ransomware (malicious software designed
to restrict Prudential’s access to data until the payment of a sum of
money and to exfiltrate data with a threat to publicly expose
Prudential data if a ransom payment is not paid), and untargeted but
sophisticated and automated attacks. Where these risks materialise,
this could result in disruption to key operations, make it difficult to
recover critical data or services or damage assets, any of which could
result in loss of trust from Prudential’s customers and employees,
reputational damage and direct or indirect financial loss. The
Russia-Ukraine conflict has coincided with a significant increase
in reported cyber threats and attacks during 2022. Cyber-security
threats continue to evolve globally in sophistication and potential
significance. Prudential’s increasing profile in its current markets and
those in which it is entering, growing customer interest in interacting
with their insurance providers and asset managers through the
internet and social media, improved brand awareness, and increasing
adoption of the Group’s digital platforms could also increase the
likelihood of Prudential being considered a target by cyber criminals.
Ransomware campaigns have increased in frequency and represent
an increasing threat to the financial services sector, with recent highly
publicised attacks on financial services companies.
There is an increasing requirement and expectation on Prudential
and its business partners not only to hold the data of customers,
shareholders and employees securely, but also to ensure its ongoing
accuracy and that it is being used in a transparent, appropriate and
ethical way, including in decision-making where automated processes
are employed. As Prudential and its business partners increasingly
adopt digital technology in business operations, the data the Group
generates creates an opportunity to enhance customer engagement
while maintaining a responsibility to keep customers’ personal data
safe. Prudential adheres to data minimisation and ‘privacy-by-design’
principles, ensuring that the Group only collects and uses data for its
intended purpose and does not retain it longer than necessary, and
that privacy elements are present both at the onset and throughout
the Group’s entire data processes. The handling of customer’s data is
governed by specific policies and frameworks, such as the Group
Information Security Policy, the Group Privacy Policy and the Group
Data Policy. A failure to adhere to these polices may result in
regulatory scrutiny and sanctions and detriment to customers and
third-party partners, and may adversely impact the reputation and
brand of the Group, its ability to attract and retain customers and
deliver on its long-term strategy and therefore the results of its
operations.
The risk to the Group of not meeting these requirements and
expectations may be increased by the development of cloud-based
infrastructure and the usage of digital distribution and service
channels, which can collect a broader range of personal and health-
related data from individuals at increased scale and speed, and the
use of complex tools, machine learning and artificial intelligence
technologies to process, analyse and interpret this data. New and
currently unforeseeable regulatory issues may also arise from the
increased use of emerging technology. Regulatory developments in
cybersecurity and data protection continue to progress worldwide.
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Risk factors / continuedPrudential plc Annual Report 2022 Across the Group’s markets these include the ongoing development of
a holistic data governance regime in the Chinese Mainland, including
the Data Security Law and Personal Information Protection Law, and
the revised Measures for Cybersecurity Review. In Thailand, the
Personal Data Protection Act regulations came into effect in June 2022.
Such developments may increase the complexity of requirements
and obligations in this area, in particular where they include national
security restrictions or impose differing and/or conflicting requirements
compared with those of other jurisdictions. These risks may also
increase the financial and reputational implications for Prudential of
regulatory non-compliance or a significant breach of IT systems or
data, including at its joint ventures or third-party service providers.
The international transfer of data may, as a global organisation,
increase regulatory risks for the Group.
The Group has not, to date, experienced or been affected by any
cyber and data breaches which have had a material impact on its
operations. However, Prudential has been, and likely will continue to
be, subject to potential damage from computer viruses, unauthorised
access and cyber-security attacks such as ‘denial of service’ attacks,
phishing and disruptive software campaigns. Despite the multi-layers
security defences in place, there can be no assurance that such events
will not take place which may have material adverse consequential
effects on Prudential’s business, financial condition, results of
operations and prospects.
3.5 Prudential’s digital platforms may heighten existing
business risks to the Group or introduce new risks as the
markets in which it operates, and its partnerships and product
offerings evolve.
Prudential’s digital platforms, including Pulse, are subject to a number
of risks discussed within this ‘Risk Factors’ section. In particular, these
include risks related to legal and regulatory compliance and the
conduct of business; the execution of complex change initiatives;
information security and data privacy; the use of models (including
those using artificial intelligence) and the handling of personal data;
the resilience and integrity of IT infrastructure and operations; and
those relating to the management of third parties. These existing
risks for the Group may be increased due to a number of factors:
> The number of current and planned markets in which Pulse and
other digital platforms operate, each with their own laws and
regulations, regulatory and supervisory authorities, the scope of
application of which may be uncertain or change at pace, may
increase regulatory compliance risks;
> The implementation of planned digital platforms and services may
require the delivery of complex, inter-connected change initiatives
across current and planned markets. This may give rise to design
and execution risks, which could be amplified where these change
initiatives are delivered concurrently;
> The increased volume, breadth and sensitivity of data on which
the business model of the platform is dependent and to which
the Group has access, holds, analyses and processes through its
models, which increases data security, privacy and usage risks.
The use of complex models, including where they use artificial
intelligence for critical decision-making, in the application’s
features and offerings may give rise to ethical, operational,
conduct, litigation and reputational risks where they do not
function as intended;
> The digital platform and its services may rely on and/or collaborate
with a number of third-party partners and providers, which may
vary according to the market. This may increase operational
disruption risks to the uninterrupted provision of services to
customers, regulatory compliance and conduct risks, and the
potential for reputational risks; and
> Support for, and development of, the platform may be provided
outside of the individual markets in which the platform operates,
which may increase the complexity of local legal and regulatory
compliance.
New product offerings and functionality may be developed and
provided through the digital platforms, which may introduce new
regulatory, operational, conduct and strategic risks for the Group.
Regulations may be introduced, which limit the permitted scope
of online or digitally distributed insurance and asset management
services, and may restrict current or planned offerings provided by
the platform.
A failure to implement appropriate governance and management of
the incremental and new risks detailed above may adversely impact
Prudential’s reputation and brand, its ability to attract and retain
customers, its competitiveness and its ability to deliver on its
long-term strategy.
3.6 Prudential operates in certain markets with joint venture
partners and other shareholders and third parties. These
businesses face the same risks as the rest of the Group and
also give rise to certain risks to Prudential that the Group does
not face with respect to its wholly owned subsidiaries.
Prudential operates, and in certain markets is required by local
regulation to operate, through joint ventures and other joint
ownership or third-party arrangements (including associates). The
financial condition, operations and reputation of the Group may be
adversely impacted, or the Group may face regulatory censure, in the
event that any of its partners fails or is unable to meet its obligations
under the arrangements, encounters financial difficulty, or fails to
comply with local or international regulation and standards such as
those pertaining to the prevention of financial crime. Reputational
risks to the Group are amplified where any joint ventures or jointly
owned businesses carry the Prudential name.
A material proportion of the Group’s business comes from its joint
venture and associate businesses in the Chinese Mainland and India,
respectively. For such operations the level of control exercisable by
the Group depends on the terms of the contractual agreements,
in particular, those terms providing for the allocation of control
among, and continued cooperation between, the participants.
As a result, the level of oversight, control and access to management
information the Group is able to exercise at these operations may be
lower compared to the Group’s wholly owned businesses. This may
increase the uncertainty for the Group over the financial condition
of these operations, including the credit risk profile and valuation
of their investment portfolios and the extent of their invested credit
and counterparty credit risk exposure, resulting in heightened risks
to the Group as a whole. This may particularly be the case where the
geographies in which these operations are located experience market
or sector-specific slowdowns, disruption, volatility or deterioration
(such as the negative developments in the Chinese Mainland
property sector). In addition, the level of control exercisable by the
Group could be affected by changes in the maximum level of
non-domestic ownership imposed on foreign companies in certain
jurisdictions. The exposure of the Group to the risks detailed in risk
factor 3.1 above may also increase should the Group’s strategic
initiatives include the expansion of the Group’s operations through
joint ventures or jointly owned businesses.
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In addition, a significant proportion of the Group’s product
distribution is carried out through agency arrangements and
contractual arrangements with third-party service providers not
controlled by Prudential, such as bancassurance arrangements,
and the Group is therefore dependent upon the continuation
of these relationships. The effectiveness of these arrangements,
or temporary or permanent disruption to them, such as through
significant deterioration in the reputation, financial position or other
circumstances of the third-party service providers, material failure in
controls (such as those pertaining to the third-party service providers’
systems failure or the prevention of financial crime), regulatory
changes affecting the governance, operation, or failure to meet
any regulatory requirements could adversely affect Prudential’s
reputation and its business, financial condition, results of operations
and prospects.
3.7 Adverse experience relative to the assumptions used
in pricing products and reporting business results could
significantly affect Prudential’s business, financial condition,
results of operations and prospects.
In common with other life insurers, the profitability of the Group’s
businesses depends on a mix of factors including mortality and
morbidity levels and trends, policy surrenders and take-up rates
on guarantee features of products, investment performance
and impairments, unit cost of administration and new business
acquisition expenses. The Group’s businesses are subject to inflation
risk. In particular, the Group’s medical insurance businesses are also
exposed to medical inflation risk. The potential adverse impacts to
the Group’s persistency and morbidity experience resulting from
Covid-19 related restrictions are described in risk factor 1.3 above.
The potential adverse impacts to the profitability of the Group’s
businesses from the upheavals in financial markets and levels of
economic activity on customer behaviours are described in risk factor
1.1 above. While the Group has the ability to re-price some of its
products, the frequency of re-pricing may need to be increased.
Such repricing is dependent on the availability of operational and
resource capacity to do so, as well as the Group’s ability to implement
such re-pricing in light of the increased regulatory and societal
expectations reflecting the affordability of insurance products and
the protection of vulnerable customers, as well as the commercial
considerations of the markets the Group operates in. The profitability
of the Group’s businesses also may be adversely impacted by medical
reimbursement downgrade experience following any re-pricing.
Prudential, like other insurers, needs to make assumptions about
a number of factors in determining the pricing of its products, for
setting reserves, and for reporting its capital levels and the results of
its long-term business operations. A further factor is the assumptions
that Prudential makes about future expected levels of the rates
of early termination of products by its customers (known as
persistency). This is relevant to a number of lines of business in the
Group. Prudential’s persistency assumptions reflect a combination
of recent past experience for each relevant line of business and
expert judgement, especially where a lack of relevant and credible
experience data exists. Any expected change in future persistency is
also reflected in the assumptions. If actual levels of persistency are
significantly different than assumed, the Group’s results of operations
could be adversely affected.
In addition, Prudential’s business may be adversely affected by
epidemics, pandemics and other effects that give rise to a large
number of deaths or additional sickness claims, as well as increases
to the cost of medical claims. Pandemics, significant influenza and
other epidemics have occurred a number of times historically, but the
likelihood, timing, or the severity of future events cannot be predicted.
The effectiveness of external parties, including governmental and
non-governmental organisations, in combating the spread and
severity of any epidemics, as well as pharmaceutical treatments and
vaccines (and their roll-outs) and non-pharmaceutical interventions,
could have a material impact on the Group’s claims experience.
The risks to the Group resulting from Covid-19 are included in risk
factor 1.3 above.
Prudential uses reinsurance to selectively transfer mortality, morbidity
and other risks. This exposes the Group to the counterparty risk of a
reinsurer being unable to pay reinsurance claims or otherwise meet
their commitments; the risk that a reinsurer changes reinsurance
terms and conditions of coverage, or increases the price of
reinsurance which Prudential is unable to pass on to its customers; the
risk of ambiguity in the reinsurance terms and conditions leading to
uncertainty whether an event is covered under a reinsurance contract;
and the risk of being unable to replace an existing reinsurer, or find a
new reinsurer, for the risk transfer being sought.
Any of the foregoing, individually or together, could have a material
adverse effect on Prudential’s business, financial condition, results of
operations and prospects.
4. Risks relating to legal and regulatory requirements
4.1 Prudential conducts its businesses subject to regulation
and associated regulatory risks, including a change to the
basis in the regulatory supervision of the Group, the effects
of changes in the laws, regulations, policies and their
interpretations and any accounting standards in the markets
in which it operates.
Changes in government policy and legislation (including in relation
to tax and data security), capital control measures on companies
and individuals, regulation or regulatory interpretation applying to
companies in the financial services and insurance industries in any of
the markets in which Prudential operates (including those related to
the conduct of business by Prudential or its third-party distributors), or
decisions taken by regulators in connection with their supervision of
members of the Group, which in some circumstances may be applied
retrospectively, may adversely affect Prudential. The impact from
any regulatory changes may be material to Prudential, for example
changes may be required to its product range, distribution channels,
handling and usage of data, competitiveness, profitability, capital
requirements, risk management approaches, corporate or
governance structure, financial and non-financial disclosures and
reported results and financing requirements. Changes in regulations
related to capital have the potential to change the extent of
sensitivity of capital to market factors. Also, regulators in jurisdictions
in which Prudential operates may impose requirements affecting
the allocation of capital and liquidity between different business units
in the Group, whether on a geographic, legal entity, product line or
other basis. Regulators may also change solvency requirements,
methodologies for determining components of the regulatory or
statutory balance sheet including the reserves and the level of capital
required to be held by individual businesses (with implications to the
Group capital position), and the regulation and expectations of
customers-facing processes including selling practices, and could
introduce changes that impact products sold or that may be sold.
Furthermore, as a result of interventions by governments in light of
financial and global economic conditions, there may continue to be
changes in government regulation and supervision of the financial
services industry, including the possibility of higher capital
requirements, restrictions on certain types of transactions and
enhancement of supervisory powers.
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Risk factors / continuedPrudential plc Annual Report 2022 In the markets in which it operates, Prudential is subject to regulatory
requirements and obligations with respect to financial crime,
including anti-money laundering, and sanctions compliance, which
may either impose obligations on the Group to act in a certain
manner or restrict the way that it can act in respect of specified
individuals, organisations, businesses and/or governments. A failure
to do so may adversely impact the reputation of Prudential and/or
result in the imposition of legal or regulatory sanctions or restrictions
on the Group. For internationally active groups such as Prudential,
operating across multiple jurisdictions increases the complexity
and volume of legal and regulatory compliance. Compliance with
Prudential’s legal or regulatory obligations, including those in respect
of international sanctions, in one jurisdiction may conflict with the
law or policy objectives of another jurisdiction, or may be seen as
supporting the law or policy objectives of that jurisdiction over
another, creating additional legal, regulatory compliance and
reputational risks for the Group. Geopolitical developments, such as
the Russia-Ukraine conflict and US-China tensions, may result in an
increase in the volume and complexity of international sanctions.
These risks may be increased where uncertainty exists on the scope
of regulatory requirements and obligations, and where the
complexity of specific cases applicable to the Group is high.
Further information on specific areas of regulatory and supervisory
requirements and changes are included below.
(a) Group-wide Supervision (‘GWS’)
To align Hong Kong’s regulatory regime with international standards
and practices, the Hong Kong IA developed its GWS Framework for
multinational insurance groups under its supervision based on a
principle-based and outcome-focused approach, which allows the
Hong Kong IA to exercise direct regulatory powers over the
designated holding companies of multinational insurance groups.
The GWS Framework became effective for Prudential upon
designation by the Hong Kong IA on 14 May 2021. Whilst the
regulatory requirements are in effect, given the early nature of the
regime, there is a risk that the interpretations of the principle-based
regulatory requirements made by the Group in complying with the
regulatory requirements may differ in some aspects from the
interpretations made by the Hong Kong IA in their supervision of
these principle-based regulatory requirements or as a result of the
potential for further regulatory guidance to be issued. Prudential
constructively engages with the Hong Kong IA as its Group-wide
supervisor to ensure ongoing sustainable compliance.
(b) Global regulatory requirements and systemic risk
regulation
Currently there are also a number of ongoing global regulatory
developments which could impact Prudential’s businesses in the
many jurisdictions in which they operate. These include the work of
the Financial Stability Board (‘FSB’) in the area of systemic risk
including assessing and mitigating systemic risk through the Holistic
Framework (‘HF’) (replacing the Global Systemically Important
Insurer ‘G-SII’ designations) and the Insurance Capital Standard
('ICS’), both being developed by the International Association of
Insurance Supervisors (‘IAIS’). In addition, regulators in a number of
jurisdictions in which the Group operates are further developing their
local capital regimes. There remains a high degree of uncertainty over
the potential impact of such changes on the Group.
Efforts to curb systemic risk and promote financial stability are also
under way. At the international level, the FSB continues to develop
recommendations for the asset management and insurance sectors,
including ongoing assessment of systemic risk measures. The IAIS
has continued to focus on the following key developments.
In November 2019, the IAIS adopted the Common Framework
(‘ComFrame’) which establishes supervisory standards and guidance
focusing on the effective group-wide supervision of Internationally
Active Insurance Groups (‘IAIGs’). Prudential was included in the first
register of IAIGs released by the IAIS on 1 July 2020 and was
designated an IAIG by the Hong Kong IA following an assessment
against the established criteria in ComFrame.
The IAIS has also been developing the ICS as part of ComFrame. The
implementation of ICS will be conducted in two phases: a five-year
monitoring phase followed by an implementation phase. The
Aggregation Method is one of the alternatives being considered to
the default approach undertaken for the ICS during the monitoring
period and the related proposals are being led by the National
Association of Insurance Commissioners (‘NAIC’). In June 2022, the
IAIS released a paper on comparable outcomes of the Aggregation
Method for ICS. Feedback on this public consultation was received by
15 August 2022 and the IAIS expects to adopt the comparability
criteria by March 2023.
In December 2020, the FSB endorsed a new HF, intended for the
assessment and mitigation of systemic risk in the insurance sector,
(implemented by the IAIS in 2020), and discontinued G-SII
designations. Many of the previous G-SII measures have already
been adopted into the Insurance Core Principles (‘ICPs’) and
ComFrame, as well as under the Hong Kong IA’s GWS Framework. As
an IAIG, Prudential is subject to these measures. The HF also includes
a monitoring element for the identification of a build-up of systemic
risk and to enable supervisors to take action where appropriate. The
FSB reserves the right to publicly express its views on whether an
individual insurer is systemically important in the global context and
the application of any necessary policy measures to address such
systemic importance. The FSB will also continue to review the process
of assessing and mitigating systemic risk based on the HF and may
adjust the process, including bringing back G-SII designations if
deemed necessary.
There continues to be material change in the regulatory guidance in
this area, including several areas still in development as part of the
IAIS’ HF implementation and any new or changing regulations could
have a further impact on Prudential. Recent developments include:
> At its Annual General Meeting in November 2022, the IAIS
Executive Committee agreed to publish the liquidity metrics that
have been under development to facilitate the monitoring of the
global insurance sector’s liquidity risk.
> A public consultation on the review of the individual insurer
monitoring assessment methodology was launched in January
2023 to look at how to fine tune systemic risk indicators as part of
the regular tri-annual review of the Global Monitoring Exercise.
> The IAIS Executive Committee also adopted an aggregate report
on the outcomes of the intensive Targeted Jurisdictional
Assessments of the implementation of the HF supervisory
material. A public report is due to be released in the first half of
2023. A key conclusion is that significant progress has been made
in implementing macroprudential supervisory requirements in
recent years.
(c) Regional regulatory regime developments, including
climate-related regulatory changes
In 2022, regulators in Asia continue to focus on the financial and
operational resilience of the insurance industry as well as customer
and policyholder protection. New regulations were continuously, and
often concurrently, issued in a number of markets to (1) manage
insurance and financial risks, including capital and solvency, and (2)
implement effective customer protection, information security and
data privacy and residency, third party and technology risk
management controls with appropriate corporate governance.
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In some of the Group’s key markets, major regulatory changes and
reforms are in progress, with some uncertainty on the full impact to
Prudential:
> In the Chinese Mainland, regulatory developments across a
number of industries including the financial sector, have continued
at pace, potentially increasing compliance risk to the Group. Recent
regulatory developments in the Chinese Mainland which include
the following:
– The China Banking and Insurance Regulatory Commission
(‘CBIRC’) released the official regulation for its China Risk
Oriented Solvency System (‘C-ROSS II’) Phase II, which became
effective for Q1 2022 solvency reporting, subject to ongoing
transitional arrangements;
– The Cyberspace Administration of China (‘CAC’) issued the
Measures on Security Assessment of Outbound Data Transfers
in Q3 2022, which, although provide more information on
cross-border data transfers, imposed new requirements
including a mandatory security assessment on outbound data
transfers. Businesses that collect and process the personal
information of the Chinese Mainland citizens are anticipating
further requirements to be introduced;
– CBIRC issued updated rules since late 2022 for consumer rights
protection and information disclosures, where insurers are
required to establish mechanisms throughout the business
strategy and product lifecycle with proper governance and
customer protection. Sufficient product information and risk
disclosures should be also provided for different life insurance
products. These regulatory developments are intended to
promote industry professionalisation, customer satisfaction, and
sustainability in the long run;
– In light of the continuous market developments in Fintech,
sustainability and social media, CBIRC is constantly refining its
supervisory directions including use of new technology for onsite
examinations, offsite surveillance and intelligence for risk
identification; and urged financial institutions to deploy
emerging technologies to improve the way businesses manage
regulatory compliance.
> In Indonesia, regulatory and supervisory focus on the insurance
industry remains high. The Financial Services Authority of
Indonesia, the Otoritas Jasa Keuangan (‘OJK’) has significantly
revised investment linked products (‘ILP’) regulations with the aim
of increasing insurance penetration and better protecting
customer interests and improving market conduct. The final
regulations were enacted in Q1 2022 for a full adoption in Q1 2023,
and have implications for the product strategies and insurance and
compliance risks for insurers. Industry discussion with respect to
the implementation of some of the requirements under the new
regulations is ongoing. General supervisory focus on insurer
governance has increased, in particular on the autonomy of
decision-making of local insurers. The OJK has also focused on
consumer protection regulations more broadly, enacting updated
regulations in April 2022, and has recently enhanced regulatory
requirements on technology risk management. The Personal Data
Protection Law came into effect in October 2022, which requires
actions to enhance data protection governance and procedures
including privacy assessments and designated data protection
personnel within a two-year transition period. Moreover, a new
financial sector law was passed by the Parliament. A notable
change includes a new policy guarantee agency in the insurance
sector. The Indonesia Deposit Insurance Corporation will expand
their assurance coverage on bank savings to also include insurance
in case of insurers going bankrupt, further details are expected.
> In Malaysia, the BNM has initiated a multi-phase review of its
current RBC frameworks for insurers and takaful operators which
has been conducted since 2019. The review aims to ensure that the
frameworks remain effective under changing market conditions,
facilitate consistent and comparable capital adequacy
measurement across the insurance and takaful industry, where
appropriate, and achieve greater alignment with key elements of
the global capital standards such as ICS, where appropriate. The
roll out of the RBC framework is planned in phases, which include
quantitative impact studies carried out in 2022, the issuance of
exposure drafts in 2023, a Qualitative Impact Study (‘QIS’) and a
parallel run planned in 2024 prior to earliest implementation in
2025, subject to results of the QIS and parallel run.
> In Hong Kong, the Hong Kong IA has in place comprehensive
regulations covering all aspects of the insurance product lifecycle.
The regulator continues to place increasing focus of its supervision
on culture and conduct aspects of local insurers. At the same time,
the Hong Kong IA has sought to align the territory’s insurance
regime with international standards and has been developing a
risk-based capital (‘RBC’) framework. The RBC framework
comprises three pillars: quantitative requirements, including
assessment of capital adequacy and valuation; qualitative
requirements, including corporate governance, Enterprise Risk
Management as well as Own Risk and Solvency Assessment; and
public disclosures and transparency of information. The Hong
Kong IA approved the early adoption of the framework at the
Group’s Hong Kong business in April 2022. In late 2022, the
regulator also shared the ongoing industry priorities for 2023
including Insurtech, ESG, and cybersecurity, which are essential in
enabling Hong Kong insurers’ development in the Greater Bay
Area, further regulatory developments are anticipated. The Hong
Kong Government also proposed to establish a Policyholder
Protection Scheme in December 2022 as a safety net for
policyholders in the event of an insurer’s insolvency. A public
consultation is underway until end of March 2023, followed by an
industry level consultation within the same year.
> In Thailand, the Personal Data Protection Commission was
established in January 2022, as the regulator under Thailand’s
Personal Data Protection Act which became effective in June 2022.
> In Vietnam, the amended Insurance Law is set to take effect on
1 January 2023. Key amendments include provisions for online
sales; regulating outsourcing; and training and registration
obligations of agents. The new law also contains provisions on RBC,
with a five-year grace period, effective from 1 January 2028.
> In India, the Insurance Regulatory and Development Authority of
India (‘IRDAI’) continues to focus on industry reform by boosting
innovation, competition, and distribution efficiencies, while moving
towards a principle-based regulatory regime with considerations of
technology developments. The regulator is in the process of
relaxing capital requirements and setting distribution tie-up limits
for corporate agents, as well as lengthening the experimentation
period for sandbox in order to introduce further ease of doing
business for growing India’s insurance penetration by 2030.
The increasing use of emerging technological tools and digital
services across industry, is likely to lead to new and unforeseen
regulatory requirements and issues, including expectations regarding
the governance and ethical use of technology, artificial intelligence
and data. Distribution and product suitability linked to innovation
continues to set the pace of conduct regulatory change in Asia.
Prudential falls under the scope of these conduct regulations
requiring that regulatory changes are appropriately implemented.
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Risk factors / continuedPrudential plc Annual Report 2022 The pace and volume of climate-related regulatory changes is also
increasing. Regulators including the Hong Kong IA, the Monetary
Authority of Singapore, the BNM in Malaysia and the Financial
Supervisory Commission in Taiwan are in the process of developing
supervisory and disclosure requirements or guidelines related to
environmental and climate change risk management. Other
regulators are expected to develop, or are at the early stages of
developing, similar requirements. While the Hong Kong IA has yet to
propose any insurance-specific regulations on sustainability and
climate, it has regularly emphasised its increasing focus in this area in
order to support Hong Kong’s position as a regional green finance
hub, and industry consultations are expected from the Hong Kong IA
in 2023. International regulatory and supervisory bodies, such as the
International Sustainability Standards Board (‘ISSB’) and Taskforce
on Nature-related Disclosures, are progressing on global ESG and
sustainability-related disclosure requirements. Recent high-profile
examples of government and regulatory enforcement and civil
actions against companies for misleading investors on ESG and
sustainability-related information demonstrate that disclosure,
reputational and litigation risks remain high and may increase, in
particular as companies increase their disclosures or product offerings
in this area. These changes and developments may give rise to
regulatory compliance, customer conduct, operational, reputational
and disclosure risks requiring Prudential to coordinate across multiple
jurisdictions in order to apply a consistent risk management
approach.
The rapid pace and high volume of regulatory changes and
interventions, and swiftness of their application including those
driven by the financial services industry, have been observed in recent
years across many of the Group’s markets. The transformation and
regulatory changes have the potential to introduce new, or increase
existing, regulatory risks and supervisory interest while increasing the
complexity of ensuring concurrent regulatory compliance across
markets driven by potential for increased intra-Group connectivity
and dependencies. In jurisdictions with ongoing policy initiatives and
regulatory developments which will impact the way Prudential is
supervised, these developments are monitored at market and group
level and inform the Group’s risk framework and engagement with
government policy makers, industry groups and regulators.
(d) IFRS 17
IFRS 17 became effective from 1 January 2023 and the first external
reporting under this basis will be from half year 2023. The new
standard requires a fundamental change to accounting, presentation
and disclosures for insurance contracts as well as the application of
significant judgement and new estimation techniques. The Group
has been implementing IFRS 17 through a Group-wide
implementation programme over a multi-year period, involving
significant enhancements to technology, actuarial and finance
systems and processes across the Group. The Group has yet to
complete production of its 2022 comparatives using the IFRS 17
accounting standard. IFRS 17 presents a significant change to the
method of accounting for insurance contracts. Therefore, in the short
term, it may take time for investors, rating agencies and other
stakeholders to gain familiarity with the new standard and to
interpret the Group’s business performance and dynamics as
reported under IFRS 17, and in particular to understand the
comparisons with previous financial periods.
Apart from IFRS 17, any other changes or modification of IFRS
accounting policies may also require a change in the way in which
future results will be determined and/or a retrospective adjustment of
reported results to ensure consistency.
(e) Inter-bank offered rate (‘IBOR’) reforms
In July 2014, the FSB announced widespread reforms to address the
integrity and reliability of IBORs. The discontinuation of IBORs in their
current form and their replacement with alternative risk-free
reference rates such as the Secured Overnight Financing Rate
(‘SOFR’) in the US and the Singapore Swap Offer Rate (‘SOR’) could,
among other things, impact the Group through an adverse effect on
the value of Prudential’s assets and liabilities which are linked to or
which reference IBORs, a reduction in market liquidity during any
period of transition and increased legal and conduct risks to the
Group arising from changes required to documentation and its
related obligations to its stakeholders.
(f) Investor contribution schemes
Various jurisdictions in which Prudential operates have created
investor compensation schemes that require mandatory
contributions from market participants in some instances in the event
of a failure of a market participant. As a major participant in the
majority of its chosen markets, circumstances could arise in which
Prudential, along with other companies, may be required to make
such contributions.
4.2 The conduct of business in a way that adversely impacts
the fair treatment of customers could have a negative impact
on Prudential’s business, financial condition, results of
operations and prospects or on its relations with current and
potential customers.
In the course of its operations and at any stage of the customer and
product lifecycle, the Group or its intermediaries may conduct
business in a way that adversely impacts customer outcomes and the
fair treatment of customers (‘conduct risk’). This may arise through a
failure to design, provide and promote suitable products and services
to customers that meet their needs, are clearly explained or deliver
real value, provide and promote a high standard of customer service,
appropriately and responsibly manage customer information, or
appropriately handle and assess complaints. A failure to identify or
implement appropriate governance and management of conduct
risk may result in harm to customers and regulatory sanctions and
restrictions, and may adversely impact Prudential’s reputation and
brand, its ability to attract and retain customers, its competitiveness,
and its ability to deliver on its long-term strategy. There is an
increased focus by regulators and supervisors on customer
protection, suitability, and inclusion across the markets in which the
Group operates, therefore increasing regulatory compliance and
reputational risks to the Group in the event the Group is unable to
effectively implement the regulatory changes and reforms stated in
risk factor 4.1 above.
Prudential is, and in the future may continue to be, subject to legal
and regulatory actions in the ordinary course of its business on
matters relevant to the delivery of customer outcomes. Such actions
relate, and could in the future relate, to the application of current
regulations or the failure to implement new regulations, regulatory
reviews of broader industry practices and products sold (including in
relation to lines of business that are no longer active) in the past
under acceptable industry or market practices at the time and
changes to the tax regime affecting products. Regulators may also
focus on the approach that product providers use to select third-party
distributors and to monitor the appropriateness of sales made by
them and the responsibility of product providers for the deficiencies
of third-party distributors.
There is a risk that new regulations introduced may have a material
adverse effect on the sales of the products by Prudential and increase
Prudential’s exposure to legal risks. Any regulatory action arising out
of the Group’s position as a product provider could have an adverse
impact on the Group’s business, financial condition, results of
operations and prospects, or otherwise harm its reputation.
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On 20 December 2021 the OECD published detailed model rules for
the second pillar, with implementation of the rules initially envisaged
by 2023. These rules will apply to Prudential when implemented into
the national law of jurisdictions where it has entities within the scope
of the rules. On 14 March 2022 the OECD issued detailed guidance to
assist with interpreting the model rules. On 20 December 2022 the
OECD issued additional documents including proposals for safe
harbours and a consultation on the proposed information return. On
2 February 2023 the OECD also issued its first tranche of agreed
administrative guidance which is intended to ensure that the model
rules are implemented and applied in a co-ordinated manner. It is
expected that a revised version of the guidance (which was issued in
March 2022) will be released later this year. Furthermore, the OECD is
expected to publish further agreed administrative guidance on an
ongoing basis.
On 17 November 2022 the UK government confirmed its intention to
implement rules into UK legislation for the second pillar through
inclusion in the Spring Finance Bill 2023 with the rules applying to
accounting periods beginning on or after 31 December 2023. On
23 December 2022, the parliament of the Republic of Korea
approved the budget bill for 2023 which includes the enactment of
rules for the second pillar. This enactment of the rules in the Republic
of Korea is not, in isolation, expected to have any impact for
Prudential.
A number of jurisdictions in which Prudential has operations have
indicated that consideration is being given to introducing a domestic
minimum tax for in-scope multinationals alongside introducing the
model rules. As Prudential operates in a number of jurisdictions where
the effective tax rate can be less than 15 per cent, the
implementation of the model rules and/or equivalent domestic
minimum tax rules may have an adverse impact on the Group. Until
all expected OECD documents are published and details of
implementing domestic legislation in relevant jurisdictions are
available, the full extent of the long-term impact on Prudential’s
business, tax liabilities and profits remain uncertain.
4.3 Litigation, disputes and regulatory investigations may
adversely affect Prudential’s business, financial condition, cash
flows, results of operations and prospects.
Prudential is, and may in the future be, subject to legal actions,
disputes and regulatory investigations in various contexts, including
in the ordinary course of its insurance, investment management and
other business operations. These legal actions, disputes and
investigations may relate to aspects of Prudential’s businesses and
operations that are specific to Prudential, or that are common to
companies that operate in Prudential’s markets. Legal actions and
disputes may arise under contracts, regulations or from a course of
conduct taken by Prudential, including class action litigation.
Although Prudential believes that it has adequately provided in all
material respects for the costs of litigation and regulatory matters, no
assurance can be provided that such provisions are sufficient. Given
the large or indeterminate amounts of damages sometimes sought,
other sanctions that might be imposed and the inherent
unpredictability of litigation and disputes, it is possible that an
adverse outcome could have an adverse effect on Prudential’s
business, financial condition, cash flows, results of operations and
prospects.
4.4 Changes in tax legislation may result in adverse tax
consequences for the Group’s business, financial condition,
results of operations and prospects.
Tax rules, including those relating to the insurance industry, and their
interpretation may change, possibly with retrospective effect in any
of the jurisdictions in which Prudential operates. Significant tax
disputes with tax authorities, and any change in the tax status of any
member of the Group or in taxation legislation or its scope or
interpretation could affect Prudential’s business, financial condition,
results of operations and prospects.
The Organisation for Economic Co-operation and Development
(‘OECD’) is currently undertaking a project intended to modernise the
global international tax system, commonly referred to as Base
Erosion and Profit-Shifting 2.0. The project has two pillars. The first
pillar is focused on the allocation of taxing rights between
jurisdictions for in-scope multinational enterprises that sell cross-
border goods and services into countries with little or no local physical
presence. The second pillar is focused on developing a global
minimum tax rate of 15 per cent applicable to in-scope multinational
enterprises.
On 8 October 2021 the OECD issued a statement setting out the high
level principles which have been agreed by over 130 jurisdictions
involved in the project. Based on the 8 October 2021 OECD
statement, Prudential does not expect to be affected by proposals
under the first pillar given they include an exemption for regulated
financial services companies.
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Risk factors / continuedPrudential plc Annual Report 2022 Glossary
A
Acquisition costs or expenses
Acquisition costs or expenses include the
initial expenses and commissions incurred
in writing new business. Typically, under
IFRS, an element of acquisition costs is
deferred ie not expensed in the year
incurred, and instead amortised in the
income statement in line with the
emergence of surpluses on the related
contracts.
Actual exchange rates (AER)
Actual historical exchange rates for the
specific accounting period, being the
average rates over the year for the income
statement and the closing rates at the
balance sheet date for the statement of
financial position.
Administration expenses
Administration expenses are expenses and
renewal commissions incurred in managing
existing business.
Alternative performance measures
(APMs)
APMs are non-GAAP measures used by the
Prudential Group within its annual reports
to supplement disclosures prepared in
accordance with widely accepted guideline
and principles established by accounting
standard setters, such as International
Financial Reporting Standards. These
measures provide useful information to
enhance the understanding of the Group’s
financial performance.
American Depositary Receipts (ADRs)
The stocks of most foreign companies that
trade in the US markets are traded as ADRs.
US depositary banks issue these stocks.
Each ADR represents one or more shares of
foreign stock or a fraction of a share. The
price of an ADR corresponds to the price of
the foreign stock in its home market,
adjusted to the ratio of the ADRs to foreign
company shares.
Annual premium equivalent (APE)
A measure of new business sales, which is a
key metric for the Group’s management of
the development and growth of the
business. APE is calculated as the aggregate
of annualised regular premiums from new
business and one-tenth of single premiums
on new business written during the period
for all insurance products, including
premiums for contracts designated as
investment contracts under IFRS 4.
Assets under management
Assets under management represent all
assets managed by or on behalf of the
Group, including those assets managed by
third parties. Assets under management
include managed assets that are included
within the Group’s statement of financial
position and those assets belonging to
external clients outside the Prudential
Group, which are therefore not included in
the Group’s statement of financial position.
These are also referred to as funds under
management.
Available for sale (AFS)
Securities that have been acquired neither
for short-term sale nor to be held to
maturity. AFS securities are measured at fair
value on the statement of financial position
with unrealised gains and losses being
booked in other comprehensive income
instead of the income statement.
B
Bancassurance
An agreement with a bank to offer
insurance and investment products to the
bank’s customers.
Bonuses
Bonuses refer to the non-guaranteed
benefit added to participating life insurance
policies and are the way in which
policyholders receive their share of the
profits of the policies. These include regular
bonus and final bonus and the rates may
vary from period to period.
C
Cash remittances
Amounts paid by our business units to the
Group comprising dividends and other
transfers net of capital injections, which are
reflective of emerging earnings and capital
generation.
Cash surrender value
The amount of cash available to a policy
holder on the surrender of or withdrawal
from a life insurance policy or annuity
contract.
China Risk-Oriented Solvency System
(C-ROSS)
A regulatory framework that governs the
insurance industry in China effective from
1 March 2021. The second phase of the
C-ROSS (or C-ROSS II) became effective in
the first quarter of 2022.
Collective investment schemes (CIS)
CIS is an open-ended investment fund of
pooled assets in which an investor can buy
and sell units that are issued in the form of
shares.
Constant exchange rates (CER)
Prudential plc reports its results at both AER
to reflect actual results and also CER to
eliminate the impact from exchange
translation. CER results are calculated by
translating prior year results using current
year foreign currency exchange rates, ie
current year average rates for the income
statements and current year closing rate for
the statement of financial position.
Core structural borrowings
Borrowings which Prudential considers
forming part of its core capital structure and
excludes operational borrowings.
Credit risk
The risk of loss if another party fails to meet
its obligations or fails to do so in a timely
fashion.
Currency risk
The risk that asset or liability values, cash
flows, income or expenses will be affected
by changes in exchange rates. Also referred
to as foreign exchange risk.
D
Discretionary participation features
(DPF)
These represent a contractual right to
receive, as a supplement to guaranteed
benefits, additional benefits that are likely
to be a significant portion of the total
contractual benefits. The amount or timing
of the benefits is contractually at the
discretion of the issuer and the benefits are
contractually based on asset, fund,
company or other entity performance.
E
Endowment product
An ordinary individual life insurance product
that provides the insured party with various
guaranteed benefits if it survives specific
maturity dates or periods stated in the
policy. Upon the death of the insured party
within the coverage period, a designated
beneficiary receives the face value of the
policy.
Environmental, Social and Governance
(ESG)
ESG refers to the three central factors in
measuring the sustainability and societal
impact of an investment in a company or
business, which is qualitative and non-
financial and not readily quantifiable in
monetary terms. The key features of
Prudential ESG framework are its three
strategic pillars: 1) making health and
financial security accessible; 2) stewarding
the human impacts of climate change; and
3) building social capital.
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European Embedded Value (EEV)
Financial results that are prepared on a
supplementary basis to the Group’s
consolidated IFRS results and which are
prepared in accordance with a set of
Principles issued by the CFO Forum of
European Insurance Companies in 2016.
Embedded value is a way of measuring the
current value to shareholders of the future
profits from life business written based on a
set of assumptions.
F
Funds under management
See ‘assets under management’ above.
G
Group free surplus
Free surplus is the metric we use to measure
the internal cash generation of our business
operations and broadly reflects the amount
of money available to our operational
businesses for investing in new business,
strengthening our capacity and capabilities
to grow the business, and potentially paying
returns to the Group. For our insurance
businesses it largely represents the Group’s
available regulatory capital resources after
allowing for the prescribed required
regulatory capital held to support the
policies in issue, with a number of
adjustments so that the free surplus better
reflects resources potentially available for
distribution to the Group. For our asset
management businesses, Group holding
companies and other non-insurance
companies, the measure is based on IFRS
net assets with certain adjustments,
including to exclude accounting goodwill
and to align the treatment of capital with
our regulatory basis. Operating free surplus
generation represents amounts emerging
from the in-force business during the year,
net of amounts reinvested in writing new
business. For asset management
businesses, it equates to post-tax adjusted
operating profit for the year.
Group-wide Supervision (GWS)
Framework
Regulatory framework developed by the
Hong Kong Insurance Authority (see below)
for multinational insurance groups under its
supervision. The GWS Framework is based
on a principle-based and outcome-focused
approach and allows the Hong Kong
Insurance Authority to exercise direct
regulatory powers over the designated
holding companies of multinational
insurance groups. The GWS framework sets
out a measure of capital for the Group as a
whole, by aggregating the capital measures
of individual insurance businesses and other
regulated businesses, as well as the capital
resources held by Group holding companies.
H
Health and protection (H&P) products
or accident and health (A&H) products
These comprise health and personal
accident insurance products, which provide
morbidity or sickness benefits and include
health, disability, critical illness and accident
coverage. H&P products are sold both as
standalone policies and as riders (see
below) that can be attached to life
insurance products. H&P riders are
presented together with ordinary individual
life insurance products for the purposes of
disclosure of financial information.
Hong Kong Insurance Authority (IA)
The Hong Kong IA is an insurance
regulatory body responsible for the
regulation and supervision of the Hong
Kong insurance industry.
I
In-force
An insurance policy or contract reflected on
records that has not expired, matured or
otherwise been surrendered or terminated.
International Association of Insurance
Supervisors (IAIS)
The IAIS is a voluntary membership
organisation of insurance supervisors and
regulators. It is the international standard-
setting body responsible for developing and
assisting in the implementation of
principles, standards and other supporting
material for the supervision of the insurance
sector.
International Financial Reporting
Standards (IFRS Standards)
Accounting standards and practices that
are developed and issued by the IFRS
Foundation and the International
Accounting Standards Board (IASB).
Investment grade
Investments rated BBB- or above for S&P
and Baa3 or above for Moody’s. Generally,
they are bonds that are judged by the rating
agency as likely enough to meet payment
obligations that banks are allowed to invest
in them.
Investment-linked products or
contracts
Insurance products where the surrender
value of the policy is linked to the value of
underlying investments (such as collective
investment schemes, internal investment
pools or other property) or fluctuations in
the value of underlying investment or
indices. Investment risk associated with the
product is usually borne by the policyholder.
Insurance coverage, investment and
administration services are provided for
which the charges are deducted from the
investment fund assets. Benefits payable
will depend on the price of the units
prevailing at the time of surrender, death or
the maturity of the product, subject to
surrender charges. These are also referred to
as unit-linked products or unit-linked
contracts.
K
Key performance indicators (KPIs)
These are measures by which the
development, performance or position of
the business can be measured effectively.
The Group Board reviews the KPIs annually
and updates them where appropriate.
L
Liquidity coverage ratio (LCR)
Prudential calculates this as assets and
resources available to us that are readily
convertible to cash to cover corporate
obligations in a prescribed stress scenario.
We calculate this ratio over a range of time
horizons extending to twelve months.
Liquidity premium
This comprises the premium that is required
to compensate for the lower liquidity of
corporate bonds relative to swaps and the
mark-to-market risk premium that is
required to compensate for the potential
volatility in corporate bond spreads (and
hence market values) at the time of sale.
M
Million Dollar Round Table (MDRT)
MDRT is a global, independent association
of life insurance and financial services
professionals that recognises professional
knowledge, strict ethical conduct and
outstanding client service. MDRT
membership is recognised internationally as
the standard of excellence in the life
insurance and financial services business.
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Prudential plc Annual Report 2022 Money Market Fund (MMF)
An MMF is a type of mutual fund that has
relatively low risks compared to other
mutual funds and most other investments
and historically has had lower returns. MMF
invests in high quality, short-term debt
securities and pays dividends that generally
reflect short-term interest rates. The
purpose of an MMF is to provide investors
with a safe place to store cash or as an
alternative to investing in the stock market.
Morbidity rate
Rate of sickness, varying by such
parameters as age, gender and health, used
in pricing and computing liabilities for future
policyholders of health products, which
contain morbidity risks.
Mortality rate
Rate of death, varying by such parameters
as age, gender and health, used in pricing
and computing liabilities for future
policyholders of life and annuity products,
which contain mortality risks.
N
Net premiums
Life insurance premiums net of reinsurance
ceded to third-party reinsurers.
Net worth
Net assets for EEV reporting purposes that
reflect the regulatory basis position,
sometimes with adjustments to achieve
consistency with the IFRS treatment of
certain items.
New business margin
New business margin is expressed as the
value of new business profit as a percentage
of APE and the present value of new
business premiums (see below) expected to
be received on an EEV basis.
New business profit (NBP)
The profits, calculated in accordance with
EEV Principles, from business sold in the
financial reporting period under
consideration. NBP is how we measure the
amount of profit we estimate we will make
from any new policies we sell, for as long as
those policies are active. To estimate these
future profits, we make a number of
assumptions. For example, we estimate the
average length of a typical policy and the
premiums that will be payable, plus the
amount we expect to pay to the customer
over the life of the policy. We also estimate
how much it costs to service a policyholder,
including any income that might be gained
on investments we make in relation to that
policy. Then we reduce or discount these
estimates to recognise that these profits
arise over a long period of time.
Non-participating business
A life insurance policy where the
policyholder is not entitled to a share of the
company’s profits and surplus but receives
certain guaranteed benefits. Examples
include pure risk policies (eg fixed annuities,
term insurance, critical illness) and
unit-linked insurance contracts.
O
Operational borrowings
Borrowings which arise in the normal course
of the business, including all lease liabilities
under IFRS 16.
P
Participating funds
Distinct portfolios where the policyholders
have a contractual right to receive, at the
discretion of the insurer, additional benefits
based on factors such as the performance
of a pool of assets held within the fund, as a
supplement to any guaranteed benefits.
The insurer may either have discretion as to
the timing of the allocation of those
benefits to participating policyholders or
may have discretion as to the timing and
the amount of the additional benefits.
Participating policies or participating
business
Contracts of insurance where the
policyholders have a contractual right to
receive, at the discretion of the insurer,
additional benefits based on factors such as
investment performance, as a supplement
to any guaranteed benefits. This is also
referred to as with-profits business.
Persistency
The percentage of policies remaining in
force from period to period.
Present value of new business
premiums (PVNBP)
PVNBP is calculated as the aggregate of
single premiums and the present value of
expected future premiums from regular
premium new business, allowing for lapses
and other assumptions made in
determining the EEV new business
contribution.
R
Regular premium product
A life insurance product with regular
periodic premium payments.
Renewal or recurring premiums
Renewal or recurring premiums are the
subsequent premiums that are paid on
regular premium products.
Rider
A supplemental plan that can be attached
to a basic insurance policy, typically with
payment of additional premiums.
Risk-based capital (RBC) framework
RBC is a method of measuring the
minimum amount of capital set by
regulators as appropriate for a reporting
entity to support its overall business
operations in consideration of its size and
the level of risk it is faced. RBC limits the
amount of risk a company can take and act
as a cushion to protect a company from
insolvency. RBC is intended to be a
minimum regulatory capital standard and
not necessarily the full amount of capital
that an insurer would want to hold to meet
its safety and competitive objectives. In
addition, RBC is not designed to be used as
a stand-alone tool in determining financial
solvency of an insurance company; rather it
is one of the tools that give regulators legal
authority to take control of an insurance
company.
S
Single premiums
Single premium policies of insurance are
those that require only a single lump sum
payment from the policyholder.
Stochastic techniques
Stochastic techniques incorporate results
from repeated simulations using key
financial parameters which are subject to
random variations and are projected into
the future.
Subordinated debt
A fixed interest issue or debt that ranks
below other debt in order of priority for
repayment if the issuer is liquidated. Holders
are compensated for the added risk through
higher rates of interest.
Surrender
The termination of a life insurance policy or
annuity contract at the request of the
policyholder after which the policyholder
receives the cash surrender value, if any, of
the contract.
Surrender charge
The fee charged to a policyholder when a
life insurance policy or annuity contract is
surrendered for its cash surrender value
prior to the end of the surrender charge
period.
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T
Time value of options and guarantees
(TVOG)
The value of financial options and
guarantees comprises two parts, the
intrinsic value and the time value. The
intrinsic value is given by a deterministic
valuation on best estimate assumptions.
The time value is the additional value
arising from the variability of economic
outcomes in the future.
U
Unallocated surplus
Unallocated surplus is recorded wholly as a
liability and represents the excess of assets
over policyholder liabilities for Prudential’s
with-profits funds. The balance retained in
the unallocated surplus represents
cumulative income arising on the with-
profits business that has not been allocated
to policyholders or shareholders.
Unit-linked products or unit-linked
contracts
See ‘investment-linked products or
contracts’ above.
Universal life
An insurance product where the customer
pays flexible premiums, subject to specified
limits, which are accumulated in an account
and are credited with interest (at a rate
either set by the insurer or reflecting returns
on a pool of matching assets). The customer
may vary the death benefit and the
contract may permit the customer to
withdraw the account balance, typically
subject to a surrender charge.
V
Value of in-force business (VIF)
The present value of future shareholder
cash flows projected to emerge from the
assets backing liabilities of the in-force
covered business.
W
Whole life contracts
A type of life insurance policy that provides
lifetime protection, commonly used for
estate planning purposes. Premiums must
usually be paid for life, and the sum assured
is paid out whenever death occurs.
With-profits contracts
For Prudential, the most significant
with-profits contracts are written in Hong
Kong, Malaysia and Singapore. See
‘participating policies or participating
business’ above.
With-profits funds
See ‘participating funds’ above.
Y
Yield
A measure of the rate of return received
from an investment in percentage terms by
comparing annual income (and any change
in capital) to the price paid for the
investment.
Yield curve
A line graph that shows the relative yields
on debt over a range of maturities typically
from three months to 30 years. Investors,
analysts and economists use yield curves to
evaluate bond markets and interest rate
expectations.
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Prudential plc Annual Report 2022 Shareholder information
Communication with shareholders
The Group maintains a corporate website containing a wide range
of information relevant for private and institutional investors,
including the Group’s financial calendar: www.prudentialplc.com
Shareholder meetings
The 2023 Annual General Meeting (AGM) will be held in London
on Thursday 25 May 2023 at 10.30am. We would encourage all
shareholders to participate in the AGM and will again offer an option
to link digitally to the meeting as an alternative, which will enable full
participation by all shareholders. The 2023 AGM notice will provide
more details on meeting arrangements and how to participate.
Prudential will continue its practice of calling a poll on all resolutions
and the voting results, including all proxies lodged prior to the
meeting, are subsequently published on the Company’s website.
Shareholders were able to attend the 2022 AGM in person or
digitally, where they were able to view a live video feed, submit
voting instructions and ask direct questions to the Board. Details of
the 2022 AGM, including the results of shareholders’ votes, can be
found on the Company’s website at www.prudentialplc.com/en/
investors/shareholder-information/agm/2022
In accordance with relevant legislation, shareholders holding
5 per cent or more of the fully paid up issued share capital are able to
require the Directors to hold a general meeting. Written shareholder
requests should be addressed to the Company Secretary at the
registered office.
Analysis of shareholder accounts as of 31 December 2022
Balance ranges
1–1,000
1,001 –5,000
5,001–10,000
10,001–100,000
100,001–500,000
500,001–1,000,000
1,000,001 upwards
Totals
Major shareholders
The table below shows the holdings of major shareholders in the
Company’s issued ordinary share capital, as of 31 December 2022,
as notified and disclosed to the Company in accordance with the
Disclosure Guidance and Transparency Rules.
As of 31 December 2022
BlackRock, Inc
Norges Bank
% of total
voting rights
5.08
3.10
On 27 January, Norges Bank notified Prudential that its holding had
decreased to 3.01 per cent of the company’s issued share capital.
On 13 March, Norges Bank notified Prudential that its holding had
increased to 3.10 per cent of the company’s issued share capital.
Whilst no formal notice has been disclosed to the Company in
accordance with the Disclosure Guidance and Transparency Rules,
we understand that Third Point LLC no longer have a financial interest
in the Company’s issued ordinary share capital.
Company constitution
Prudential is governed by the Companies Act 2006, other applicable
legislation and regulations, and provisions in its Articles of Association
(Articles). Any change to the Articles must be approved by special
resolution of the shareholders. There were no changes to the
constitutional documents during 2022. The current Memorandum
and Articles are available on the Company’s website.
Issued share capital
The issued share capital as of 31 December 2022 consisted of
2,749,669,380 (2021: 2,746,412,265) ordinary shares of 5 pence
each, all fully paid up and listed on the London Stock Exchange and
the Hong Kong Stock Exchange. As of 31 December 2022, there were
38,453 (2021: 41,532) accounts on the register. Further information
can be found in note C8 on page 335.
Prudential also maintains secondary listings on the New York Stock
Exchange (in the form of American Depositary Receipts which are
referenced to ordinary shares on the main UK register) and the
Singapore Stock Exchange. Prudential has maintained a sufficiency
of public float throughout the reporting period as required by the
Hong Kong Listing Rules.
Total number
of holdings
Percentage
of holders
Total number
of shares
Percentage of
issued capital
27,209
7,918
1,262
1,206
440
136
282
38,453
70.76%
20.59%
3.28%
3.14%
1.14%
0.35%
0.73%
6,500,397
17,434,824
8,791,251
36,907,373
102,842,323
97,308,564
2,479,884,648
2,749,669,380
0.24%
0.63%
0.32%
1.34%
3.74%
3.54%
90.19%
Rights and obligations
The rights and obligations attaching to the Company’s shares are
set out in full in the Articles. There are currently no voting restrictions
on the ordinary shares, all of which are fully paid, and each share
carries one vote on a poll. If votes are cast on a show of hands,
each shareholder present in person or by proxy, or in the case of a
corporation, each of its duly authorised corporate representatives,
has one vote except that if a proxy is appointed by more than one
member, the proxy has one vote for and one vote against if instructed
by one or more members to vote for the resolution and by one or
more members to vote against the resolution. Where, under an
employee share plan, participants are the beneficial owners of the
shares but not the registered owners, the voting rights are normally
exercisable by the trustee on behalf of the registered owner in
accordance with the relevant plan rules. The trustees would not
usually vote on any unallocated shares held in trust but they may do
so at their discretion provided it would be in the best interests of the
beneficiaries of the trust and permitted under the relevant trust deed.
As of 14 March 2023, the trustees held 0.44 per cent of the issued
share capital under the various plans in operation. Rights to dividends
under the various schemes are set out on pages 228 to 279.
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Shareholder information / continued
Restrictions on transfer
In accordance with English company law, shares may be transferred
by an instrument of transfer or through an electronic system
(currently CREST) and any transfer is not restricted except that the
Directors may, in certain circumstances, refuse to register transfers of
shares but only if such refusal does not prevent dealings in the shares
from taking place on an open and proper basis. If the Directors make
use of that power, they must send the transferee notice of the refusal
within two months. Certain restrictions may be imposed from time to
time by applicable laws and regulations (for example, insider trading
laws) and pursuant to the Listing Rules of both the Financial Conduct
Authority and the Hong Kong Stock Exchange, as well as under the
rules of some of the Group’s employee share plans.
All Directors are required to hold a minimum number of shares
under guidelines approved by the Board, which they would also
be expected to retain as described on page 254 of the Directors’
Remuneration Report.
Authority to issue shares
The Directors require authority from shareholders in relation to the
issue of shares. Whenever shares are issued, these must be offered
to existing shareholders pro rata to their holdings unless the Directors
have been given authority by shareholders to issue shares without
offering them first to existing shareholders. Prudential seeks authority
from its shareholders on an annual basis to issue shares up to a
maximum amount, of which a defined number may be issued
without pre-emption.
Disapplication of statutory pre-emption procedures is also sought
for rights issues. The existing authorities to issue shares, and to do
so without observing pre-emption rights, are due to expire at the
end of this year’s AGM. Relevant resolutions to authorise share
capital issuances will be put to shareholders at the AGM on
25 May 2023.
Details of shares issued during 2022 and 2021 are given in note C8
on page 335. In accordance with the terms of a waiver granted by
the Hong Kong Stock Exchange, Prudential confirms that it complies
with the applicable law and regulation in the UK in relation to the
holding of shares in treasury and with the conditions of the waiver in
connection with the purchase of own shares and any treasury shares
it may hold.
Authority to purchase own shares
The Directors also require authority from shareholders in relation
to the purchase of the Company’s own shares. Prudential seeks
authority by special resolution on an annual basis for the buy-back
of its own shares in accordance with the relevant provisions of the
Companies Act 2006 and other related guidance. This authority
has not been used since it was last granted at the AGM in 2022.
This existing authority is due to expire at the end of this year’s
AGM and a special resolution to renew the authority will be put
to shareholders at the AGM on 25 May 2023.
Dividend information
2022 second interim dividend
Ex-dividend date
Record date
Payment date
Several dividend waivers are in place in respect of shares issued but
not allocated under the Group’s employee share plans. These shares
are held by the trustees and will, in due course, be used to satisfy
requirements under the Group’s employee share plans. The dividends
waived represent less than 1 per cent of the value of dividends paid
during the year.
Dividend mandates
Dividends are paid directly into UK-based shareholders’ bank or
building society accounts. UK-based shareholders should contact
EQ should they have any questions concerning the payment of
dividends, or to provide their bank or building society account details.
Alternatively, UK-based shareholders may download the form from
www.shareview.co.uk
Shareholders on the UK and Hong Kong registers have the option to
elect to receive their dividend in US dollars instead of pounds sterling
or Hong Kong dollars respectively. More information may be found
on www.shareview.co.uk
Shareholders
registered on the
UK register and
Hong Kong
branch register
23 March 2023
24 March 2023
15 May 2023
Holders
of American
Depositary
Receipts
Shareholders
with ordinary shares
standing to the
credit of their CDP
securities accounts
–
24 March 2023
15 May 2023
23 March 2023
24 March 2023
On or around 22 May 2023
Cash dividend alternative
The Company operates a Dividend Re-investment Plan (DRIP).
UK-based shareholders who have elected for the DRIP will
automatically receive shares for all future dividends in respect of
which a DRIP alternative is offered. The election may be cancelled
at any time by the shareholder. Further details of the DRIP and the
timetable are available at www.shareview.co.uk/4/Info/Portfolio/
default/en/home/shareholders/Pages/ReinvestDividends.aspx
Electronic communications
Shareholders located in the UK are encouraged to elect to receive
shareholder documents electronically by registering with Shareview
at www.shareview.co.uk This will save on printing and distribution
costs, and create environmental benefits. Shareholders who have
registered will be sent an email notification whenever shareholder
documents are available on the Company’s website and a link will
be provided to that information. When registering, shareholders will
need their shareholder reference number which can be found on their
share certificate or proxy form. Please contact EQ if you require any
assistance or further information.
The option to receive shareholder documents electronically is not
available to shareholders holding shares through The Central
Depository (Pte) Limited (CDP).
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Share dealing services
The Company’s UK registrars, EQ, offer a postal dealing facility for
buying and selling Prudential plc ordinary shares; please see the
EQ address or telephone 0371 384 2248. They also offer a telephone
and internet dealing service, Shareview, which provides a simple and
convenient way of buying and selling Prudential shares. For telephone
sales, call 0345 603 7037 between 8am and 5pm, Monday to Friday,
and for internet sales log on to www.shareview.co.uk/dealing
ShareGift
Shareholders who have only a small number of shares, the value
of which makes them uneconomic to sell, may wish to consider
donating them to ShareGift (Registered Charity: 1052686).
The relevant share transfer form may be downloaded from
our website or from EQ at www.shareview.co.uk
Further information about ShareGift may be obtained on
+44 (0)20 7930 3737 or from www.ShareGift.org
Shareholder enquiries
For enquiries about shareholdings, including dividends and lost share certificates, please contact the Company’s registrars:
Register
UK register
By post
Equiniti Limited, Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA, UK.
Hong Kong register
Singapore register
Computershare Hong Kong Investor Services Limited, 17M Floor,
Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
Shareholders who have shares standing to the credit of their securities
accounts with The Central Depository (Pte) Limited (CDP) in Singapore
may refer queries to the CDP at 11 North Buona Vista Drive,
# 06-07 The Metropolis Tower 2, Singapore 138589.
Enquiries regarding shares held in Depository Agent Sub-accounts
should be directed to your Depository Agent or broker.
ADRs
Shareowner Services, P.O. Box 64504, St. Paul,
MN 55164-0504, USA.
By telephone
Tel 0371 384 2035*
Textel 0371 384 2255
(for hard of hearing).
Lines are open from
8.30am to 5.30 pm (UK),
Monday to Friday.
* Please use the country code (+44)
when calling from outside the UK
Tel +852 2862 8555
Operating Hours
Monday to Friday:
8.30am to 5.00pm
Saturday:
8.30am to 12.00pm
Email : asksgx@sgx.com
Contact Centre :
+65 6535 7511
Tel +1 800 990 1135,
or from outside the
USA +1 651 453 2128
or log on to www.adr.com
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Prudential plc – Hong Kong Office
13th Floor
One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Tel +852 2918 6300
How to contact us
Prudential plc – Registered Office
1 Angel Court
London
EC2R 7AG
UK
Tel +44 (0)20 7220 7588
www.prudentialplc.com
Media enquiries
Simon Kutner
Tel +44 (0)7581 023260
Email: Simon.Kutner@prudentialplc.com
Jennifer Tear
Tel +65 8870 8754
Sonia Tsang
Tel +852 5580 7525
Board
Shriti Vadera
Chair
Independent Non-executive Directors
Group Executive Committee
Philip Remnant
Senior Independent Director
Jeremy Anderson
Arijit Basu
Chua Sock Koong
David Law
Ming Lu
George Sartorel
Claudia Suessmuth Dyckerhoff
Tom Watjen
Jeanette Wong
Amy Yip
Executive Director
Anil Wadhwani
Chief Executive Officer
Solmaz Altin
Managing Director, Strategic Business Group
Jolene Chen
Group Human Resources Director
Avnish Kalra
Group Chief Risk and Compliance Officer
Lilian Ng
Managing Director, Strategic Business Group
Seck Wai-Kwong
Chief Executive Officer , Strategic Business Group
Dennis Tan
Managing Director, Strategic Business Group
James Turner
Group Chief Financial Officer
Shareholder contacts
Institutional analyst
and investor enquiries
Tel +44 (0)20 3977 9720
Email: investor.relations@prudentialplc.com
UK Register private
shareholder enquiries
Tel 0371 384 2035
International shareholders:
Tel +44 (0)121 415 7026
Hong Kong Branch Register
private shareholder enquiries
Operating Hours
Monday to Friday: 9.00am to 6.00pm
Tel +852 2862 8555
US American Depositary
Receipts holder enquiries
Tel +1 800 990 1135
From outside the US:
Tel +1 651 453 2128
The Central Depository (Pte) Limited
shareholder enquiries
Operating Hours
Monday to Friday: 8.30am to 5.00pm
Saturday: 8.30am to 12.00pm
Tel +65 6535 7511
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Prudential plc Annual Report 2022 Forward-looking statements
This document contains ‘forward-looking statements’ with respect to certain of
Prudential’s (and its wholly and jointly owned businesses’) plans and its goals
and expectations relating to future financial condition, performance, results,
strategy and objectives. Statements that are not historical facts, including
statements about Prudential’s (and its wholly and jointly owned businesses’)
beliefs and expectations and including, without limitation, commitments,
ambitions and targets, including those related to ESG, and statements
containing the words ‘may’, ‘will’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’,
‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’, and words of similar
meaning, 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 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:
> current and future market conditions, including fluctuations in interest rates
and exchange rates, inflation (including resulting interest rate rises), sustained
high or low interest rate environments, the performance of financial and credit
markets generally and the impact of economic uncertainty, slowdown or
contraction (including as a result of the Russia-Ukraine conflict and related or
other geopolitical tensions and conflicts), which may also impact policyholder
behaviour and reduce product affordability;
> asset valuation impacts from the transition to a lower carbon economy;
> derivative instruments not effectively mitigating any exposures;
> global political uncertainties, including the potential for increased friction in
cross-border trade and the exercise of laws, regulations and executive powers
to restrict trade, financial transactions, capital movements and/or investment;
> the longer-term impacts of Covid-19, including macro-economic impacts on
financial market volatility and global economic activity and impacts on sales,
claims, assumptions and increased product lapses;
> the policies and actions of regulatory authorities, including, in particular, the
policies and actions of the Hong Kong Insurance Authority, as Prudential’s
Group-wide supervisor, as well as the degree and pace of regulatory changes
and new government initiatives generally;
> given Prudential’s designation as an Internationally Active Insurance Group,
the impact on Prudential of systemic risk and other group supervision policy
standards adopted by the International Association of Insurance Supervisors;
> the physical, social, morbidity/health and financial impacts of climate change
and global health crises, which may impact Prudential’s business,
investments, operations and its duties owed to customers;
> legal, policy and regulatory developments in response to climate change and
broader sustainability-related issues, including the development of
regulations and standards and interpretations such as those relating to ESG
reporting, disclosures and product labelling and their interpretations (which
may conflict and create misrepresentation risks);
> the collective ability of governments, policymakers, the Group, industry and
other stakeholders to implement and adhere to commitments on mitigation
of climate change and broader sustainability-related issues effectively
(including not appropriately considering the interests of all Prudential’s
stakeholders or failing to maintain high standards of corporate governance
and responsible business practices);
> the impact of competition and fast-paced technological change;
> the effect on Prudential’s business and results from, in particular, 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 internal transformation projects and other strategic actions
failing to meet their objectives or adversely impacting the Group’s employees;
> the availability and effectiveness of reinsurance for Prudential’s businesses;
> the risk that Prudential’s operational resilience (or that of its suppliers and
partners) may prove to be inadequate, including in relation to operational
disruption due to external events;
> disruption to the availability, confidentiality or integrity of Prudential’s
information technology, digital systems and data (or those of its suppliers and
partners) including the Pulse platform;
> the increased non-financial and financial risks and uncertainties associated
with operating joint ventures with independent partners, particularly where
joint ventures are not controlled by Prudential;
> the impact of changes in capital, solvency standards, accounting standards or
relevant regulatory frameworks, and tax and other legislation and regulations
in the jurisdictions in which Prudential and its affiliates operate; and
> the impact of legal and regulatory actions, investigations and disputes.
These factors are not exhaustive. Prudential operates in a continually changing
business environment with new risks emerging from time to time that it may be
unable to predict or that it currently does not expect to have a material adverse
effect on its business. In addition, 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 actual future
financial condition or performance to differ, possibly materially, from those
anticipated in Prudential’s forward-looking statements can be found under the
‘Risk Factors’ heading of this document, Prudential’s 2022 Annual Report, and
any subsequent filing Prudential makes with the US Securities and Exchange
Commission, including any subsequent Annual Report on Form 20-F.
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 any of 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 Guidance and
Transparency Rules, the Hong Kong Listing Rules, the SGX-ST Listing Rules or
other applicable laws and regulations.
Prudential may also make or disclose written and/or oral forward-looking
statements in reports filed with or furnished to the US Securities and Exchange
Commission, the UK Financial Conduct Authority, the Hong Kong Stock
Exchange and other regulatory authorities, as well as in its annual report and
accounts to shareholders, periodic financial reports to shareholders, proxy
statements, offering circulars, registration statements, prospectuses, prospectus
supplements, press releases and other written materials and in oral statements
made by directors, officers or employees of Prudential to third parties, including
financial analysts. All such forward-looking statements are qualified in their
entirety by reference to the factors discussed under the ‘Risk Factors’ heading of
this document, Prudential’s 2022 Annual Report, and any subsequent filing
Prudential makes with the US Securities and Exchange Commission, including
any subsequent Annual Report on Form 20-F.
Cautionary statements
This document does not constitute or form part of any offer or invitation to
purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any
offer to purchase, acquire, subscribe for, sell or dispose of, any securities in any
jurisdiction nor shall it (or any part of it) or the fact of its distribution, form the
basis of, or be relied on in connection with, any contract therefor.
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Prudential plc is a holding company, some of whose subsidiaries are
authorised and regulated, as applicable, by the Hong Kong Insurance
Authority and other regulatory authorities. The Group is subject to a
group-wide supervisory framework which is regulated by the Hong
Kong Insurance Authority.
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, nor with The Prudential Assurance Company
Limited, a subsidiary of M&G plc, a company incorporated in the
United Kingdom.
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Prudential plc Annual Report 2022 Prudential public limited company
Incorporated and registered
in England and Wales
Registered office
1 Angel Court
London
EC2R 7AG
Registered number 1397169
www.prudentialplc.com
Principal place of business
in Hong Kong
13th Floor
One International Finance Centre
1 Harbour View Street
Central
Hong Kong