Prudential plc
Annual Report 2023
For Every Life,
For Every Future
A strategy to protect Asia & Africa
We are inspired by our purpose
For Every Life,
For Every Future
Our mission is to be the most trusted partner and protector for this
generation and generations to come, by providing simple and accessible
financial and health solutions.
This report contains references to Prudential plc’s website. These references are for readers’ convenience only and information included on
Prudential plc’s website is not incorporated in, and does not form part of, this annual report.
The Directors’ Report of Prudential plc for the year ended 31 December 2023 is set out on pages 150 to 197 and 365 to 404 and includes
the sections of the annual report referred to in these pages.
Strategic report
Key highlights for the year
Our business at a glance
Investment case
Chair’s statement
Our clear and simple strategy
Market review
Strategy in action
Group-wide enablers
Strategic and operating review
Business model
Key financial performance indicators
Financial review
Segment discussion
Risk review
Viability statement
Risk factors
Section 172 and stakeholder engagement
Sustainability
TCFD
Reference tables
Non-financial and sustainability information statement
Governance
Governance at a glance
Diversity
Our leadership
Corporate governance
How we operate
Risk management and internal control
Committee reports
Statutory and regulatory disclosures
Index to principal Directors’ report disclosures
Directors’ remuneration report
Annual statement from the Chair of Remuneration Committee
Remuneration at a glance
Annual report on remuneration
Additional remuneration disclosures
Financial statements
European Embedded Value (EEV) Basis Results
Additional information
Index to the additional unaudited financial information
Glossary
Shareholder information
How to contact us
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Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Strategic
Report
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Prudential plc Annual Report 2023
Strategic Report
Key highlights for the year
Our business at a glance
Investment case
Chair’s statement
Our clear and simple strategy
Market review
Strategy in action
Group-wide enablers
Strategic and operating review
Business model
Key financial performance indicators
Financial review
Segment discussion
Risk review
Viability statement
Risk factors
Section 172 and stakeholder engagement
Sustainability
TCFD
Reference table
Non-financial and sustainability information statement
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Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Key highlights of the year
Delivering the next
chapter of growth
Financial highlights(1)(3)
New business profit
$3.1bn
+45% CER(2) +43% AER(2)
Adjusted operating profit
$2.9bn
+8% CER +6% AER
Operating free surplus generated from in-force
insurance and asset management business
$2.7bn
+1% CER (1)% AER
Operating free surplus generated
2.0bn
(8)% CER (8)% AER
IFRS profit after tax
$1.7bn
up from a loss after tax of $(1.0bn) AER(3) in 2022
IFRS shareholders’ equity
$17.8bn
+7% AER(3)
Adjusted IFRS shareholders’ equity
$37.3bn
+6% AER(3)
EEV shareholders’ equity
$45.3bn
+7% AER
(1) The financial highlights presented above are the key financial metrics Prudential's management use to assess and manage the performance and position of the business. In
addition to the metrics prepared in accordance with IFRS standards - IFRS profit after tax and IFRS shareholders' equity - additional metrics are prepared on alternative
bases. The presentation of these key metrics is not intended to be considered as a substitute for, or superior to, financial information prepared and presented in accordance
with IFRS Standards. The definitions of the key metrics we use to discuss our performance in this report are set out in the "Definition of performance metrics" section later in
this document, including, where relevant, references to where these metrics are reconciled to the most directly comparable IFRS measure.
(2) CER - Constant exchange rates, AER - Actual exchange rates.See note A1 to the IFRS financial statements for more detail on our exchange rate presentation.
(3) IFRS Comparatives for 2022 have been restated to reflect the retrospective application of IFRS 17. See note A2.1 to the financial statements for further information and
reconciliation.
(4) The objectives assume exchange rates at December 2022 and economic assumptions made by Prudential in calculating the EEV basis supplementary information for the
year ended 31 December 2022, and are based on regulatory and solvency regimes applicable across the Group at the time the objectives were set. The objectives assume
that existing EEV and Free Surplus methodology at December 2022 will be applicable over the period.
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Prudential plc Annual Report 2023
These are a very strong set of
results in a challenging
environment, driven by our
focus on execution. It is an
illustration of the strength of
both our agency and
bancassurance channels as
well as an affirmation of our
leadership position in many of
our key markets.”
Anil Wadhwani, Chief Executive Officer
Our key financial objectives:
Growing new business profit at
15-20 %
compound annual growth between
2022 and 20274
New business profit growth of 45% in 2023
Achieving
double-digit
compound annual growth in operating free surplus
generated from in-force insurance and asset
management business between 2022 and 20274
Stable in 2023, as we invest in our strategic pillars
and new business
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Our business at a glance
A trusted partner
for millions
Our life and health insurance and asset management solutions benefit over
18 million customers across 24 markets in Asia and Africa. We are
headquartered in Hong Kong, and have dual primary listings on the Stock
Exchange of Hong Kong (2378) and the London Stock Exchange (PRU).
Our markets
Life insurance - offering a range of products including health and protection
Asset management
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Prudential plc Annual Report 2023
Our markets
Life business
Market ranking1
APE Sales
Top 10 asset
manager2
Eastspring funds under
management or advice3
Chinese Mainland
5th
$534m
Hong Kong and Macau
3rd
$1,966m
Indonesia
Malaysia
Singapore
India
Taiwan
Vietnam
Laos
Philippines
Cambodia
Thailand
Myanmar
Japan
Korea
Africa
1st
$277m
2nd
$384m
3rd
4th
1st
1st
$787m
$233m
$895m
$197m
2nd
<$1m
1st
1st
6th
2nd
$175m
$18m
$246m
$6m
Top 5 in 6
markets
$158m
P
P
P
P
P
$9.7bn
$5.0bn
$3.4bn
$13.0bn
$129.2bn
$38.5bn
$5.1bn
$7.0bn
P
$10.6bn
$4.4bn
$8.6bn
(1) As reported at full year 2023 unless otherwise specified. Sources include formal (eg competitors results release, local regulators and insurance association) and informal
(industry exchange) market share. Ranking based on new business (APE sales, weighted new business premium, full year premium or weighted first year premium) or Gross
Written Premium depending on availability of data. Rankings in the case of Chinese Mainland, Taiwan and Myanmar are among foreign insurers, and for India is among
private companies. Countries based on nine months ended September 2023: Philippines, Ghana (Africa) and Kenya (Africa) and full year 2022: Laos, Zambia (Africa) and
Togo (Africa) and full year 2020: Nigeria (Africa).
(2) As reported at full year 2023. Sources include local regulators, asset management association, investment data providers and research companies (eg Morningstar, Lipper).
Rankings are based on total funds under management (including discretionary funds, where available) of onshore domiciled funds or public mutual funds of the respective
markets.
(3) Full year 2023 funds under management or advice based on the country where the funds are contractually managed. Excludes funds managed in Luxembourg.
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Investment case
Delivering for
our investors
Given the relentless
execution focus in
implementing our
strategy, we are
increasingly confident in
achieving our 2027
financial and strategic
objectives and in
accelerating value
creation for our
shareholders."
Anil Wadhwani
Chief Executive Officer
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Prudential plc Annual Report 2023
Leading positions in high growth markets driven by
significant need for protection and rising wealth.
Top 5
Top 3
positions in 10 Asian life markets1
positions in 6 African life markets1
Trusted household brand
18 million
customers
175 years
of history
Broad footprint across Asia and Africa
4 billion
combined population2
c.$1 trillion
growth opportunity in our markets over 10 years3
Multi-channel distribution at scale
c. 68,000
average monthly active agents
The #1
independent insurer in Asia bancassurance4
Strong and highly resilient capital position
Strong and highly resilient capital position, with limited
exposure to market risk reflecting a long-held quality focus.
295%
GWS shareholder coverage ratio over GPCR
Clear strategy to accelerate value creation through
operational and financial discipline
Customers
Top-quartile net promoter
score by 2027
Employees
Top-quartile engagement
score by 2027
Shareholders
15 to 20% CAGR for new
business profit from 2022 –
20275, Double-digit CAGR for
Operating Free Surplus
Generation from 2022 – 20275
Communities
Net zero by 2050,
55% reduction in
Weighted average carbon
intensity by 2030
*
The definitions of the key metrics we use to discuss our performance in this report are set out in the "Definition of performance metrics" within the Glossary later in this
document.
(1) As reported at full year 2023 unless otherwise specified. Sources include formal (eg competitors results release, local regulators and insurance association) and informal
(industry exchange) market share. Ranking based on new business (APE sales, weighted new business premium, full year premium or weighted first year premium) or Gross
Written Premium depending on availability of data. Rankings in the case of Chinese Mainland, Taiwan and Myanmar are among foreign insurers, and for India is among
private companies. Countries based on nine months ended September 2023: Philippines, Ghana (Africa) and Kenya (Africa) and full year 2022: Laos, Zambia (Africa) and
Togo (Africa) and full year 2020: Nigeria (Africa).
(2) Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects 2022.
(3) Source: Swiss Re forecast (July 2023) Forecast incremental annual gross written premium in 2033 compared with 2022.
(4) Based on FY2022 data from local regulators, industry associations and Prudential' internal data. Estimates are based on market intelligence, if data is not publicly available
(5) The objectives assume exchange rates at December 2022 and economic assumptions made by Prudential in calculating the EEV basis supplementary information for the
year ended 31 December 2022, and are based on regulatory and solvency regimes applicable across the Group at the time the objectives were set. The objectives assume
that existing EEV and Free Surplus methodology at December 2022 will be applicable over the period.
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Chair’s statement
Focusing on our
new purpose
Dear shareholder
2023 marked our 100th year operating in Asia and 175 years since
Prudential was founded. It was a year in which we put in place the
management and strategy to deliver on the additional value that can
be realised by an exclusively Asia and Africa focused platform created
from two demergers. It was also a year which saw critical
developments in our external operating environment, including the
return of more normal economic and social conditions in our markets.
I would like to thank all our people for the commitment with which
they have continued to serve our customers, contributed to a strong
operating performance, and put in place the key components for our
future growth and success.
New leadership, renewed purpose and a refreshed
strategy
Anil Wadhwani joined as Chief Executive at the end of February
2023, bringing dynamism, energy and a clear focus on a refined
strategy and excellence in execution. The Board is delighted with how
Anil has begun his tenure, establishing a strong working relationship
with the Board through his openness and engagement, inspiring our
people and building the management team, including with the
appointment of Ben Bulmer as Chief Financial Officer in May. The
Board worked with Anil and the leadership team throughout the year
on a refreshed strategy and renewed purpose and values. We will
continue to support him developing the organisational structure and
deepening our capabilities to deliver on the promise of our corporate
transformation in recent years.
The strategy sets out where and how we will create value for our
shareholders by enhancing delivery for our customers, strengthening
our multi-channel distribution, and transforming our health business
model across our chosen markets in Asia and Africa. Key enablers for
these strategic pillars include investment in technology, people, and
wealth and investment capabilities.
Our renewed purpose - “For Every Life, For Every Future” - embodies
our commitment as a life and health insurance provider and long-
term investor in the under-penetrated markets of Asia and Africa. This
purpose, and the values that underpin it, were co-created through
engagement with colleagues at all levels of the organisation and
across our markets. This engagement will continue through 2024 as
we embed our values, invest further in skills and talent development,
and ensure we are supporting well-being and inclusion throughout the
organisation.
Business momentum
While investing in our long-term, sustainable growth, we delivered a
strong operational performance in 2023, with most markets gradually
recovering to pre-pandemic levels. We responded swiftly and
effectively to meet the renewed demand from the resurgence of
Chinese Mainland visitors to Hong Kong after the border reopened.
We remain committed to market and channel diversification as
shown by the growth of APE sales across most of our markets
throughout the year. However, our strong operating results were set in
a complex landscape of slowing global growth, inflationary pressures
and volatile geopolitical events. In particular, the uneven
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Prudential plc Annual Report 2023
trajectory of China’s macro-economic environment as it emerged
from the pandemic, coupled with broader geo-political tensions,
significantly influenced market sentiment.
The Board recognises that our business momentum has not been
reflected in the company’s share price. While this is very
disappointing, we are focused on delivering consistently strong
business performance built on the execution of a strategy designed to
harness the long-term and sustainable growth opportunities we firmly
believe are present in Asian and emerging markets. Reflecting our
commitment to growing long-term shareholder value, the Board
worked with Anil and the leadership team to set out new targets for
new business profit and operating free surplus aligned to the strategy.
Further detail can be found in the Strategic Report.
Our performance and future growth is underpinned by a strong
balance sheet supported by clear and disciplined capital allocation
and managing our in-force portfolio to invest in growth opportunities
and in our core capabilities, people and technology. We have set out
our priorities alongside the strategy, and we have maintained our
dividend policy. At the time we announced our strategy update, given
our confidence in the strategy, we said we would look through the
investments in new business and capabilities when determining the
dividend. The Board has approved a second interim dividend for the
year of 14.21 cents per share (2022: 13.04 cents per share). When
this is combined with the first interim dividend the total dividend for
the year is 20.47 cents per share (2022: 18.78 cents per share). We
continue to expect the 2024 annual dividend to grow in the range 7 –
9 per cent. Further detail on our approach to capital allocation is set
out on page 42.
will be a great asset to the Board and as a member of the Audit
and Risk Committees.
The Board has undergone significant change over the past three
years as it has transitioned from a board of a financial holding
company of businesses around the world, to the board of an
operating company working exclusively in Asia and Africa. As well as
composition changes, the Board’s agenda, ways of working and
culture have adapted to reflect the changed footprint of the
company. I was pleased, therefore, with the validation of these efforts
from the external Board evaluation that was carried out this year. It
reflected on the collaborative atmosphere in the Board, with a culture
of transparency and positive and strong relationships between the
Board and the senior management team. I welcome the constructive
recommendations on how we can further enhance the Board’s
effectiveness. I am very grateful to all our Board members and the
management team for all their contributions.
Looking ahead
In 2024, the Board will continue to support Anil and the leadership as
they deepen our capabilities and embed rigorous standards of
operational delivery and excellence. In a complex external
environment, we remain vigilant of how political and geopolitical
events and changes are interacting with the global macro-economic
environment in ways which compound uncertainty. While we will
continue to plan for a challenging environment, we see significant
strategic opportunities. We are focused on creating value for our
shareholders and on delivering the products and services which our
customers – current and prospective – need to build their financial
resilience and prosperity. Thank you again to all my colleagues in all
our markets and functions and Prudential's leadership team for their
hard work, dedication, and focus on delivering a positive
performance, and building the platform for Prudential’s long-term
success.
Shriti Vadera
Chair
Sustainability at our core
A clear driver of value for both our business and the societies in which
we operate is our commitment to sustainability. We have purposefully
aligned our new strategy with wider objectives in each of our markets
and we are focused on trying to make a real difference: to deepen
and widen financial inclusion, to support health prevention and
protection, to invest in the economies, people and communities in
which we operate, and to conduct our business in a sustainable and
responsible way.
We recognise that Asia and Africa are regions which have historically
contributed the least to the stock of carbon in the environment, where
the impact of climate change is felt most, where the need to reduce
emissions is now greatest, but the resources available often more
scarce. The existing energy mix and future requirements mean
investment and engagement is needed to support a genuine brown-
to-green transition without sacrificing economic and social
development. These factors drive our fundamental belief that
supporting a just and inclusive transition is the right thing to do in our
markets.
It is important for Prudential to play its part meeting the challenges
faced, including through advocacy and engagement with
stakeholders, built on the perspectives and experiences of the specific
needs and situations of the markets in which we operate and the
communities we serve. As steps on a pathway to net zero as an asset
owner and manager by 2050, in March 2023 we published our first
Climate Transition Plan and in August 2023 we set a new
decarbonisation target to reduce the carbon intensity of our
investment portfolio (WACI) by 55 per cent by 2030. To underpin this
target, we have also developed a new internal investment target on
financing the transition to a lower carbon future and embedded
sustainability targets in our executive remuneration. More details on
our actions and further detailed progress our climate and
sustainability targets are set out in our sustainability report on page
97 and in our remuneration report on page 200.
The Board
The Board has continued to evolve to best serve an operating
company focused on the growth markets of Asia and Africa. David
Law, who joined the Board in September 2015, reaches the end of his
nine-year tenure this year and will retire from the Board at the
conclusion of the Annual General Meeting on 23 May 2024. The
Board is immensely grateful to David for his contribution over the last
nine years, in particular as Chair of the Audit Committee since May
2017. During this period, in addition to its regular activities, the Audit
Committee successfully oversaw the demergers of the M&G and
Jackson businesses, an equity raise in Hong Kong, a change of
auditors and the adoption of IFRS 17. David has led the Committee
with rigour and dedication, and he retires from the Board with our
enormous gratitude.
We are delighted to have such a capable replacement in Jeanette
Wong, who has been on the Audit Committee since joining the
Board in May 2021. Jeanette will succeed David following the
publication of the 2023 full year results and they have been
working together closely to ensure a smooth transition.
In planning for David’s retirement, we focused recruiting on
future Board members with insurance-specific financial assurance
skills. We are therefore pleased to be welcoming Mark Saunders
as a Non-executive Director to the Board from 1 April 2024.
Mark has extensive knowledge of the insurance industry in
Asian markets, working in the industry for 35 years, the last 30 of
which in Hong Kong, and is a qualified actuary. He brings a blend
of strategic thinking, commercial insight and actuarial skills which
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Our clear and simple strategy
Our purpose:
For every Life
For every Future
Our mission is to be the most trusted partner and protector for this generation and
generations to come by providing simple and accessible financial and health solutions.
'For Every Life' speaks to our ambition to meet the huge underserved needs of
potentially four billion people across our markets in Asia and Africa. With the collective
wisdom of our talented people, we will partner with customers to improve their health
and financial understanding so that they can build the life they want.
'For Every Future' speaks to our ambition to add value to the wider community, for a
more sustainable and inclusive future. We are here to protect this generation, just as we
have previous generations, and those we are yet to meet.
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Prudential plc Annual Report 2023
Organisational model replicating successes at pace and scale
Multi-market growth engines
Greater China
ASEAN
India
Africa
Strategic pillars
Enhancing
customer
experiences
Technology-
powered
distribution
Transforming
health
business model
Group-wide enablers
Open-architecture
technology
platform
Engaged people &
high-performance
culture
Wealth &
Investment
capabilities
Value creation for stakeholders
Customers
Employees
Shareholders
Communities
> Read more
about our
markets on p.14
to 15 and p.47
to 55
> Read more
about our
strategic
pillars on
p.16 to 21
and p.25 to
27
> Read more
about our
enablers on
p.22 to 23
and p.27 to
29
> Read more
about
stakeholders
on p.88 to
96
Managing our risks
Prudential’s Group Risk Framework, risk appetite, and robust governance enable the business to manage and control its risk exposure.
> Read more about risk management from p. 56
Underpinned by the three pillars of our sustainability strategy
Simple and Accessible Health and Financial Protection • Responsible Investment • Sustainable Business
> Read more from p.97 in our Sustainability section
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Market review
Multi-market growth engines
We have extensive access to the some of
the world's fastest growing markets.
Our strategic planning leverages this
unique advantage to deliver growth
across our target markets.
Socio-economic trends
Low levels of insurance cover
Penetration1 of GDP (%)
Significant need for protection
Out of pocket health expenditure2 (%)
Rising wealth
Greater
China
ASEAN
India
UK
Asia
US
Description of trend
Single digit life insurance penetration
rates and limited pension and social
security provision have created huge
health, protection and mortality gaps in
Asia.
Description of trend
In Asia, people pay for about four times
more of their health costs from their own
pockets than in the US – creating a big
demand for products that offer people
support for their health expenses.
How Prudential is responding: Our customer-centric strategy sets out how we
will deliver on our purpose and capture the opportunities presented by these
long-term trends over the five years from 2022 to 2027. We are committed to
evolving from being organised around products and channels to being the
most trusted partner to our customers throughout their life journeys. We are
building a sustainable growth platform through targeted investment in
structural growth markets across Asia and Africa. We believe that consistent
delivery of our strategy will enable us to meet our financial objectives and
also create value for our employees, customers, shareholders and the
communities in which we operate.
3 out of 4
global working age population will be in
Asia & Africa by 20303
>$150tn
Household wealth in Asia in 20214
Description of trend
A rapidly rising middle-class population in
Asia is expected to lead to increased
awareness of, and demand for, protection
and wealth management solutions. These
changing dynamics also lead us to believe
there is scope for increasing participation
in wealth management propositions.
> See risks from p.56
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Prudential plc Annual Report 2023
2.52.63.08.14311
Greater China
Overview
The Chinese Mainland presents significant growth
opportunities for the Group - it has a circa 1.4 billion3
population; low insurance penetration rates1; and an estimated
health and protection gap5 of $805 billion. In Hong Kong, we
have a strong and reputable brand that serves around 1.4
million customers. Meanwhile, Taiwan is the fifth-largest life
insurance market6 in Asia Pacific with a population of 24
million3.
ASEAN
Overview
The ASEAN markets have a combined population of more
than 600 million3 people, served by our businesses in
Indonesia, Malaysia, Singapore, Thailand, Vietnam, the
Philippines, Cambodia, Myanmar and Laos. They are a diverse
range of markets that can counterbalance each other,
ensuring we are not over-dependent on one single geography.
Our approach to these markets
Our approach to these markets
– We have access to over 80 per cent of GDP and hold
– We have one of the leading multi-channel distribution
licences to operate in 102 cities through our partner, CITIC.
Our strategic planning focuses on expanding our agency
channel and increasing its productivity to complement the
multiple bancassurance partnerships we have in place.
– In Hong Kong, following the opening of our Macau branch,
we are present in all 11 cities in the Greater Bay Area, an
area that has an extended population of over 85 million7
people. We have benefited not only from the traction seen
among the Chinese Mainland visitor segment, but also
from continued growth in our domestic business.
– In Taiwan, we are the number one8 foreign player having
developed a sustainable bancassurance channel that
generates attractive margins.
franchises in the region – our agency force includes more
than 40,000 monthly active agents, or 60 per cent of the
Group’s monthly active agents; while our established bank
partners include Standard Chartered and UOB.
– We have a strong brand and reputation across the region,
and we hold top three positions8 in eight out of our nine
markets in the regions, including Singapore, Malaysia and
Indonesia and in the fast-developing markets of the
Philippines, Vietnam, Cambodia, Myanmar and Laos. Our
strategy in these markets will seek to leverage our leading
platform across the region.
– In Thailand, we continue to grow through our
bancassurance business.
India
Overview
Africa
Overview
India represents a compelling opportunity for the Group. It
has a large population of over 1.4 billion3, while the share of
health expenses paid out of pocket is as high as 50 per cent2.
Our 8 markets in Africa have a combined population of over
400 million3, have underserved insurance needs and offer
high-growth potential.
Our approach to these markets
Our approach to these markets
– We are looking to grow our franchise further. We are also
exploring options to address the health opportunity in India.
– We continue to work closely with our partner ICICI Bank in
both the life insurance and asset management business
segments.
– Africa may make a relatively small contribution to our
overall new business profit today, but high growth rates
across the continent present a longer-term opportunity.
– Our focus in Africa is on the highest value markets where
we have the strongest competitive advantage.
(1) Swiss Re Institute; sigma No. 3/2023 World insurance: stirred, and not shaken - Insurance penetration (premiums as a percentage of GDP)
(2) World Health Organisation: Global Health Observatory data repository (2018). Out of pocket as % of Total Health Expenditure. Asia calculated as the average of the out-of-
pocket percentages.
(3) United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects 2022.
(4) Credit Suisse Global Wealth Report 2022, including Asia Pacific (ex-Japan), China, India and Africa.
(5) Source: Swiss Re Institute. The health protection gap in Asia, October 2018. Estimated total national health protection gap, as defined by Swiss Re Institute (financial stress
caused by health spending and incidence of people not seeking treatment due to affordability.
(6) Source: Swiss Re Institute based on 2022 premiums
(7) The Guangdong-Hong Kong-Macao Greater Bay Area Development Office
(8) As reported at full year 2023 unless otherwise specified. Sources include formal (eg competitors results release, local regulators and insurance association) and informal
(industry exchange) market share. Ranking based on new business (APE sales, weighted new business premium, full year premium or weighted first year premium) or Gross
Written Premium depending on availability of data. Rankings in the case of Chinese Mainland, Taiwan and Myanmar are among foreign insurers, and for India is among
private companies. Countries based on nine months ended September 2023: Philippines, Ghana (Africa) and Kenya (Africa) and full year 2022: Laos, Zambia (Africa) and
Togo (Africa) and full year 2020: Nigeria (Africa).
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Additional information
Strategy in action
Enhancing
customer
experiences
Being seen as a trusted partner leads to more satisfied customers as
well as new business. To deliver better customer experiences, we are:
– Personalising our targeting for customer acquisition: we will
deploy our data and technology resources to drive high-quality
leads from our ecosystem of partners and other sources, such as
social media, to help our agents identify engagement
opportunities;
– Segmenting by life stage: we will develop impactful propositions
by focusing on understanding what our customers need over the
various life stages;
– Offering differentiated propositions: we will deliver comprehensive
solutions that include health, wellbeing and wealth services as well
as life products so that we become a one-stop proposition for our
target segments; and
– Creating simple tech-enabled journeys: we will use a unified and
scalable technology platform to support customers over their
lifetimes. For example, our PruServices already offers a self-service
solution for simple enquiries, service and claims anytime,
anywhere.
We are targeting top quartile relationship net promoter scores by
2027, which we believe will support greater customer retention and
acquisition, increase cross-selling opportunities over the customer
lifetime and contribute to our key financial objectives.
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Additional information
Strategy in action
Technology-
powered
distribution
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Prudential plc Annual Report 2023
We have a large well-established distribution platform centred around
our agency and bancassurance channels. We aim to leverage our
existing strengths through best-in-class technology to enable us to
reach more customers and strengthen relationships with existing ones.
Our priorities for the agency channel are:
– Upskilling the agency force - converting agents from part-time to
full-time;
– Moving agents away from being solely focused on sales to being
trusted advisers;
– Basing our recruitment approach around tailored and strategic
talent sourcing;
– Learning and development - ensuring we are developing the next
generation of highly productive agents; and
– Embedding technology and digital tools to increase the
productive time our agents spend with their customers.
We aim to more than double new business profit per agent,
targeting a two and a half to three times increase in agency new
business profit, from the 2022 level, by 2027.
In our bancassurance channel our priorities are to:
– Broaden our proposition so that it covers multiple customer
segments;
– Engage with our customers by developing omni-channel customer
journeys backed by analytics;
– Utilise integrated data-led marketing;
– Reward our bank partners for outcomes that deliver for the
customer and create value; and
– Establish an operating cadence with our bank partners that
ensures we deliver the above.
Our goal is to increase new business profit from bancassurance by
one and a half to two times, from the 2022 level, by 2027. To
support this we aim to increase the penetration rate of our insurance
products at our major strategic partners from circa eight per cent in
2022 to between 9 and 11 per cent by 2027. In addition, we aim to
support our margins by increasing the contribution of our health and
protection products.
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Additional information
Strategy in action
Transforming our
health
business model
Health insurance across Asia is one of the major growth engines we
have identified in our markets. In Asia, individuals depend on private
providers for their healthcare needs - it is estimated that those
requiring healthcare have high out-of-pocket spending of around 40
per cent.
We believe we can increase health insurance’s contribution to the
business by expanding into new geographies and extending our
offering beyond reimbursement. By stepping up to the role of
coordinator across the healthcare journey, we aim to become a
trusted partner to our customers. We are focused on:
– Upgrading our core health insurance capabilities so that our
distribution force is given the knowledge and tools to offer the
products and services customers need;
– Expanding our role from payer to partner by connecting the
various stages of customer healthcare journeys using an asset-
light approach; and
– Operational excellence - through increased automation and
enhanced analytics.
We are targeting a top-quartile health insurance NPS by 2027. We
are also looking to more than double our health new business profit
from 2022’s level by 2027.
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Additional information
Group-wide enablers
Capturing growth opportunities
To capture the growth opportunities in our markets, the strategic pillars are supported by three key enablers:
Open-
architecture
technology
platform
Engaged
people & high-
performance
culture
Building a fit-for-purpose
open-architecture
technology platform
Working with our people
to create a culture that
is customer-led and
performance-driven
Wealth &
Investment
capabilities
Enhancing our wealth and
investment capabilities by
leveraging Eastspring and
our investment office
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Prudential plc Annual Report 2023
Open-architecture technology is key to delivering superior customer
and distribution experiences and maintaining our exacting
standards in today’s fast-changing landscape we are transforming
the underlying technology that powers our existing customer
engagement application by utilising:
– An open-architecture design so that new market innovations can
be adopted easily and efficiently while our partners’ ecosystems
can be engaged seamlessly;
– A data platform that generative AI and data analytics can be
applied to in order to generate actions and insights;
– A refreshed operating model for greater collaboration between
the centres of excellence and local markets; and
– Appropriate governance and protections to safeguard our
customer data and business integrity.
An engaged workforce is key to achieving our targets for the
2022-2027 period. We are focused on fostering a working
environment that enables our people to realise their full potential.
We have set ourselves the target of a top quartile employee
engagement and aim to achieve this by implementing the following:
– Upgrade strategic capabilities relating to Customer, Distribution,
Health and Technology;
– Develop a robust internal talent pipeline, facilitate mobility and
acquire capabilities in the market where they do not exist
internally; and
– Build a customer-led and performance-driven culture centred
around values-based leadership and aligned reward structures.
The wealth management opportunity across Asia is substantial. In
2021, aggregate household wealth in Asia totalled over $150
trillion1, a level similar to that of North America but higher than
Europe. With Asia and Africa expected to account for three-quarters
of the global working age population by 2030, aggregate household
wealth across our markets is expected to grow in the years ahead.
Expanding our wealth management propositions and developing a
differentiated offering for affluent customers will help us capitalise
on this growth opportunity.
Our wealth and investment capabilities also support the transition to
net zero by targeting a 55 per cent reduction in our WACI by 2030.
Our current wealth capabilities are currently focused in Singapore
and Hong Kong. Our investment arm, Eastspring, manages over
$237 billion in assets and covers 11 markets. We believe our internal
capabilities can be leveraged further by:
– Providing distribution support to our top agents with a more
holistic suite of tools to help them identify the needs of our
affluent customers;
– Product innovation and customising investment solutions at a
much faster speed-to-market; and
– Improving investment performance consistency through high-
performance teams focused on outperforming relevant
benchmarks.
Note: (1) Source: Credit Suisse Global Wealth Report 2022, including Asia Pacific
(ex-Japan), China, India and Africa.
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Additional information
Strategic and operating review
Well positioned for
future opportunities
Prudential has been operating in global life markets for 175 years. We
are a household name1 in markets that place great value on brand.
Today, we deliver our life insurance solutions to over 18 million
customers in large and fast-growing markets across Asia and Africa.
'Large’ because the combined population of the markets we operate
in stands at approximately four billion2; ‘Fast-growing’ as it is
estimated that our markets will collectively generate incremental
annual gross written premiums of almost US$1 trillion3 in 2033
compared with 2022.
We hold the top three positions in 10 out of the 14 Asian life markets4
in which we have a presence. We are in the top five in six of our eight
African markets4. Our multi-channel agency and bancassurance
distribution platform of scale has around 68,000 average monthly
active agents. We are the number one independent insurer in Asia
bancassurance5, and our Asia-based in-house investment arm,
Eastspring, has over US$ 237 billion in assets under management and
is ranked in the top 10 in six of its markets6.
In 2023, we grew new business profit by 45 per cent to $3,125
million, in excess of the 37 per cent increase in APE sales. Sales growth
has continued in the first two months of 2024.
In August we set out our renewed purpose and strategy for the next
five years to 2027, together with the key metrics we will use to
measure our success.
We have commenced executing the steps outlined in our updated
strategy announced in August. This includes changes in the strategic
areas of customer, distribution and health and in our operational
model. We have complemented the existing leadership teams with
key hires. 2024 will be a pivotal year as we deepen our execution
capabilities in the areas most important to us.
We are seeing early signs of progress across our strategic pillars;
– in customer, four business units9 in 2023 are ranked in the top
quartile for customer relationship Net Promoter Score (NPS),
compared to three in 2022, out of the ten business units9 that have
a standardised approach for measuring customer advocacy. Four
further business units9 improved their rankings by at least a
quartile;
– in agency distribution, we grew average new business profit per
active agent by 59 per cent contributing to a 75 per cent increase
in Agency new business profit;
– in bancassurance, we continued to expand our bancassurance
partner network and increased the proportion of APE sales from
health and protection business in this channel from 6 per cent in
2022 to over 7 per cent in 2023; and
– in health, new business profit grew 20 per cent to $330 million.
Further detail on our initial progress on the key strategic pillars and
enablers is set out later in this report.
Our purpose - For Every Life, For Every Future - defines why we are in
this business and what we seek to achieve as custodians of
stakeholder value for the long term.
To demonstrate our commitment to delivering shareholder value
through the new strategy, we introduced two new financial
objectives7:
Our strategy sets out our priorities and objectives over the next five
years to realise our purpose and how we will create value for all our
stakeholders: our customers, our employees, our shareholders and our
communities.
The components of our strategy are:
– our multi-market growth engines;
– our strategic pillars;
– our group-wide enablers; and
– our organisational model design.
We believe carrying out the actions to deliver the strategy will
transform the business and enable us to take greater advantage of
the opportunities open to us.
– to grow new business profit to 2027 at a rate of 15-20 per cent
compound annual growth from the level achieved in 2022; and
– for the same period to deliver double digit compound annual
growth in operating free surplus generated from in-force insurance
and asset management business.
Alongside our early successes in delivering against our strategy we
have seen a strong financial performance in 2023 as discussed below.
As in previous years, we discuss our performance in this report on a
constant currency basis8, unless stated otherwise. We discuss our
financial position on an actual exchange rates basis, unless otherwise
noted. The definitions of the key metrics we use to discuss our
performance are set out in the "Definition of performance metrics"
section later in this document.
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Prudential plc Annual Report 2023
New business profit
Full Year 2022
Actual exchange
rate
Full Year 2023
$2.2 billion $3.1 billion
Objective 20277
Implied amount
$4.4 – $5.4 billion
Amount
Our business generated new business profit of $3,125 million for the
year, demonstrating substantial progress towards our 2027 objective.
Operating free surplus generated from in-force
insurance and asset management business
Full Year 2022
Actual exchange
rate
Full Year 2023
$2.8 billion $2.7 billion
Objective 20277
Implied amount
>$4.4 billion
Amount
The $2,740 million of operating free surplus that we generated from
in-force insurance and asset management business for the year is
broadly flat when compared with the prior year, as we continue to
invest as planned in our strategic pillars and new business over the
next couple of years. The gradual compounding of the new business
contribution and improving operating variances will support progress
towards our 2027 financial objective.
Our performance reflects the breadth and broad based nature of our
markets, with new business profit growing in 17 of our 22 life markets
and an increased market share in seven of our Asian life markets4.
Our agency channel delivered new business profit of $2,096 million,
an increase of 75 per cent. This reflects both APE sales growth of 67
per cent and favourable business mix effects along with a 37 per cent
increase in new business profit from health and protection products.
Agency sales accounted for 48 per cent of total APE sales and circa
two-thirds of the Group’s new business profits.
Bancassurance new business profit fell 8 per cent to $793 million in
2023 primarily due to challenging market conditions in the Chinese
Mainland and Vietnam. Excluding these two markets, new business
profit increased by 23 per cent with 11 markets delivering double-
digit growth. APE sales through the bancassurance channel increased
3 per cent compared with 2022, supported by growth in Hong Kong
and Taiwan, offset by significant reductions in sales volumes in the
Chinese Mainland and Vietnam.
Hong Kong was a significant contributor to growth accounting for 45
per cent of new business profits in the period as both its new business
profit and APE sales grew by over three times the prior year level. This
growth was diversified across distribution channels and products. We
see an opportunity for sustained growth in Hong Kong as the drivers
of demand from domestic and Chinese Mainland visitors remain
intact.
Eastspring's funds under management and advice increased by 7 per
cent (on an actual exchange rates basis) to $237.1 billion, reflecting
positive market movements and inflows from external clients and our
life business. These positive movements were offset by expected
outflows of funds managed on behalf of M&G plc.
During 2023 the Group adopted IFRS 17, a new accounting standard
for insurance that significantly altered the Group's IFRS reporting.
More details on the change and its impact are set out in the Financial
Review. On the IFRS 17 metric, Group adjusted IFRS operating profit
for the year was $2,893 million, 8 per cent higher than 2022
calculated on a consistent basis and using constant exchange rates.
IFRS profit after tax for 2023 was $1,712 million (2022: loss after tax
of $(1,005) million on a constant exchange rate basis, loss after tax of
$(997) million on an actual exchange rate basis).
The substantial increase in new business reported above led to
materially higher investment in new business of $(733) million (2022:
$(552) million). This resulted in lower group operating free surplus,
despite reduced central costs including interest expense and
restructuring costs. The Group's capital position remains strong, with
an estimated shareholder surplus above the Group's Prescribed
Capital Requirement of $16.1 billion at 31 December 2023 (31
December 2022: $15.6 billion on an actual exchange rate basis) and
a cover ratio of 295 per cent (31 December 2022: 302 per cent after
allowing for the debt redemption in January 2023).
Reflecting the Group's strong capital position and in line with its
policy the Directors have approved a second interim dividend per
share of 14.21 cents per share (2022: 13.04 cent per share), for a
total 2023 divided of 20.47 cents per share (2022: 18.78 cents per
share), an increase of 9 per cent over the prior year.
Focus on our three strategic pillars
1. Enhancing customer experiences – we are committed
to putting customer advocacy at the heart of our business and
becoming their trusted partner. We have the following priorities:
– to support customer acquisition by personalised targeting –
allowing us to more easily identify engagement opportunities;
– to curate comprehensive customer-led differentiated
proposition offerings with segmentation by life stages; and
– to offer seamless end-to-end customer experiences through
simple tech-enabled journeys combining technology with
human care and understanding.
By focusing on these priorities we believe we will drive new customer
acquisition and existing customer retention.
We have standardised our approach to measuring and analysing
customer advocacy across ten business units9. Our approach is
centred around net promoter scores, which measure how likely
customers are to recommend Prudential. We have seen initial traction
in 2023 with four of our business units9 in the top quartile (up from
three in 2022). Eight out of ten business units9 moved up at least one
quartile or remained in 1st quartile in the latest relationship net
promoter scores results. The improvement seen has been led by
leadership initiatives that prioritise the voice of customers in our
business. These include the launch of a monthly CEO customer
experience forum in our markets, together with a proactive approach
to following up with customers who report unsatisfactory experiences.
We empowered employees to listen to the voices of our customers
through the introduction of service huddles. These meetings bring
together employees across a range of functions to discuss recent
customer feedback and collectively identify solutions for customer
pain points. We will continue this journey in 2024 and beyond with
more customer advocacy initiatives and actions.
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Additional information
Strategic and operating review continued
To achieve our ambition of having ten business units9 in the top
quartile relationship NPS in their respective markets by 2027, we will
further strengthen our efforts around customer advocacy. We will do
this by investing in common platforms and frameworks,
institutionalising best practices, deploying digital and data
capabilities in customer acquisition, servicing and engagement. We
will deliver these capabilities at pace and scale across all markets with
a unified customer organisation structure, which will give us a strong
foundation to support the achievement of our ambitions. We plan to
drive customer advocacy by; setting high service standards,
continuously listening to customer feedback and acting on it, re-
designing our customer journey and using robust portfolio
management to engage new customers, increase repeated sales and
improve loyalty.
We measure our success using relationship net promoter scores across
the organisation. We aim to be top quartile for ten business units9 by
2027. For our customer retention rate we have an ambition of
achieving between 90 per cent and 95 per cent by 2027. During 2023
we saw a slight decline in the customer retention rate to 86 per cent
(2022: 89 per cent) which was affected by an industry-wide fall in
consumer sentiment in Vietnam. We see customer base growth and
improving net promoter scores for each transactional touchpoint as
the building blocks of our overall relationship net promoter score.
2. Technology-powered distribution – empowering our
agency force with best-in-class technologies and solutions,
deepening our bank partner base through segmented
propositions and creating omnichannel customer journeys will
enable us to reach more customers and strengthen relationships
with existing ones.
Agency
We have around 68,000 average monthly active agents and, over
9,000 who qualify for Million Dollar Round Table (MDRT) status.
Prudential has one of the leading agency forces in Asia.
We have the ambition to increase agency new business profit by 2.5
to 3 times from the 2022 level by 2027, through significantly
increasing the number of active monthly agents and more than
doubling new business profit per agent over the same period.
In 2023, the number of average active agents per month increased
by three per cent and average monthly new business profit per active
agent increased by 59 per cent to over $2,800.
We continue to focus on quality recruitment through tailored and
strategic talent sourcing. Our signature career switcher programme
for existing professionals is active in seven markets and recruited over
4,500 advisors. On average these advisors were six times more
productive in their first year than other typical agent recruits. In Hong
Kong, we introduced a Top Talent Professional recruitment
programme tapping into over 100 high profile talent immigrants
sponsored by government. In Singapore, we inaugurated Prudential
Financial Advisers to attract professional financial planners who are
committed to offering holistic advice on both insurance and
investment solutions.
We continue to upskill our agency force by enhancing the career
path and learning journey for our agents. This equips them with the
necessary knowledge, skills and tools to be a trusted advisor to our
customers. We integrated our activity and leads management engine
with customer campaigns to scale up and enhance the productivity of
our agents. 115,000 agents used PruForce, our technology-driven
distribution platform, which we believe enhances agent effectiveness.
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Prudential plc Annual Report 2023
Over four million leads were generated and distributed to the agency
force using PruLeads, our digital leads platform in PruForce, across our
markets in 2023. Assisted by this technology, our agents converted 8
per cent of these leads into new sales to meet customers' needs and
financial goals.
We are upskilling the next generation of highly productive agents via
our on-demand learning and development platform, which offers
personalised curriculums to assist agents in engaging, nurturing and
converting prospects. Agency leaders are being trained to become the
next generation of professional team-builders through structured
leadership development programmes.
Bancassurance
Bancassurance provides incremental access to large numbers of
customers in multiple locations using third-party infrastructure. It is a
significant source of new business for the Group. Our 200 bank
partners include 10 key strategic partners, including two joint venture
and associate partners.
The penetration rate in our seven strategic bank partners (excluding
our joint venture and associate partners and our partner in Cambodia
and Laos) in the year was 7.8 per cent (2022: circa 7.6 per cent).
We are building on the performance seen in 2023 by delivering
against our strategic priorities.
We are broadening our customer proposition to offer attractive
health and protection propositions and by penetrating the high net
worth and premium segments. Overall, we sold around 1 million new
policies in 2023, with regular premium policies contributing to more
than 90 per cent of APE sales. APE sales of health and protection
products through bancassurance partners increased 26 per cent in the
year, representing over half of the policies sold through the channel
and over 7 per cent of total APE sales in 2023 (2022: 6 per cent). We
see increasing the contribution of health and protection products to
our bancassurance channel as a key step in achieving our
bancassurance new business profit growth ambition.
We are developing omni-channel customer journeys backed by
analytics to engage with our customers. For example in Thailand, we
innovated with a new simple in-branch digital referral model with a
key strategic partner, which enables us to reach potentially over 7,000
customers and will help them achieve their medium term saving and
protection goals.
To expand bank penetration further, we will deploy integrated data-
led marketing to target customers more effectively. In early 2024 we
launched a structured customer engagement program with UOB,
powered by analytics. The programme supports sales staff in
recommending suitable insurance offerings during their interactions
with customers.
We reward our bank partners for outcomes that deliver for the
customer and create value. We have introduced new reward
mechanisms with our strategic partners to deliver win-win solutions
for customers, partners and shareholders.
We also aim to offer our bank partners' staff learning and
development via integrated modern and digital learning platforms
that can provide modular, on-demand, training.
We continue to expand our bancassurance network. In Thailand, our
new 10-year partnership with CIMB became effective at the end of
2023. In the first two months of partnership, its APE sales had already
accounted for 6 per cent of Thailand bancassurance APE sales.
In Vietnam, we extended our partnership with VIB until 2036. Our
agreement with VIB incorporates a first-in-market approach to
strengthen the control of business quality, demonstrating our joint
commitment to serve customers better.
Our key strategic partner, UOB, successfully integrated the ex-Citi
franchise across four of our markets, giving us access to an additional
2.4 million bank customers.
We have established an operating cadence with our strategic
partners and we will continue to drive aligned strategic direction and
execution through partnership steering committees both at Group
and local levels to ensure we deliver on all our priorities.
In 2023, our health business across the Group contributed $330
million to new business profit, an increase of 20 per cent. By focusing
on the priorities above we are committed to achieving our ambitions
to deliver a top-quartile health insurance Net Promoter Score by 2027,
growing our customer base and profitability, and doubling our health
new business profit from 2022 to 2027.
Focus on our three strategic enablers
To capture the growth opportunities that we have identified in each
of the strategic pillars above, we have three enablers:
By focusing on these priorities we believe we will meet our ambition
to increase new business profit from bancassurance by 2027 to be 1.5
to 2 times that seen in 2022.
3. Transforming the health business model – we
believe there are substantial opportunities to further grow our
health business by becoming a trusted partner to our customers
and playing a much-needed coordinating role across their
healthcare journeys. We are focusing on the following priorities:
– Upgrading our core health insurance proposition – we are
accelerating development of more advanced, segment-specific and
sustainable products. This includes incorporating risk-based pricing
and value-added services, such as enhancing the in-network
benefits of existing as-charged products to cater to our customers'
evolving healthcare needs. We are also adopting practices that are
utilised elsewhere in the Group to assist with managing customer
affordability and continuity of coverage - for example, in Indonesia
and Malaysia, we are introducing regular repricing of health
products. In addition, we are supporting our agents' efforts to
distribute health products through enhanced recognition, reward
and training initiatives. We are also strengthening our health
branding campaigns to highlight Prudential’s aim to become a
trusted partner for its health customers. Operational excellence is
being further enhanced by straight-through-processing and AI-
enabled digitalisation of underwriting and claims journeys. We
believe increased automation and enhanced analytics will deliver
better customer experience as well as further protect us against
claims fraud and abuse, for example, by implementing AI-driven
detection models.
– Expanding our role through connecting health-care journeys
using an asset-light approach - we will implement guided care
pathways and case management to help customers better
navigate through their healthcare journey. By leveraging our
streamlined preferred medical provider partners, we will ensure
high-quality and cost-effective care. Examples include scoring and
tiering of network hospitals based on outcome and cost in
Indonesia and Malaysia, regional arrangements for breast cancer
treatment in Thailand by a leading hospital group, and developing
case management and concierge capabilities in Indonesia,
Singapore and Hong Kong.
We have developed an operational plan across our major health
markets of Malaysia, Indonesia, Hong Kong and Singapore with clear
accountabilities, performance metrics, timelines and deliverables. In
early 2024, we appointed Arjan Toor as Health CEO, who will be
based in Singapore and has joined us from Cigna. We are allocating
dedicated resources and will be recruiting further key talent at both
local and Group levels to manage health insurance as a line of
business in order to drive business performance and accelerate
growth. We are exploring health opportunities in India.
Enabler#1: Open-architecture technology
platform
Our long-term programme is changing our technology operating
model. By delivering superior customer and distribution
experiences, our new model will support our three strategic pillars -
Customer, Distribution and Health. Data privacy and customer
information security are critical focus areas for this function and we
are investing substantial amounts in infrastructure, systems and
culture to support this.
In respect of our wholly owned operations technology driven core
competencies that are consistent across these markets will be housed
on an open architecture platform. Our strategy focuses on i.) creating
new, common capabilities with greater collaboration between central
centres of excellence and local market teams; ii.) improving
resiliency; iii.) efficiency; and iv) using AI and data analytics
throughout our whole organisation.
We intend to move our applications in different markets to a
common platform, to help provide a uniform user experience, improve
our efficiency, increase operational reliability and create new global
capabilities as we switch to modular and standardised applications.
We aim to cut the number of our applications by more than half by
2027. We have begun this journey with the introduction of our
PruServices 2.0 Web in Malaysia in January 2024. PruServices 2.0 Web
offers an improved and simplified customer experience with
immediate customer feedback and as we roll it out across our
markets, we will be able to retire 15 customer service applications.
Similarly, PruForce, the technology-driven distribution platform for our
agents, will offer a consistent set of features for our agents across our
markets, enabling us to retire 26 agency-related applications.
Improving the reliability of our technology infrastructure is key. We
have added a service integration and management layer to oversee
our outsourced technology infrastructure and operations services. This
is to ensure the performance and dependability of our systems. We
also invested in tooling capabilities to improve the efficiency of
infrastructure monitoring, spot high risk or vulnerable areas that need
more support and upgrades, to enhance our overall system
availability. As a result, we lowered the number of monthly incidents
by 60 per cent, and improved recovery times by 40 per cent in 2023.
We have also finalised our technology organisation operating model,
which brings together our technology talent pool across the business
into a single integrated team. This new operating model will leverage
the experience and skills of our talent pool in specific markets for the
benefit of the whole business. It also captures efficiencies by
removing duplication of functions and skills. As part of the new
operating model, we are also building teams centred around global
technology products for our customer and agency pillars. We plan to
deploy similar teams for other business areas and group functions by
the end of 2024.
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Additional information
Strategic and operating review continued
In addition, we have developed advanced platforms that store the
key data of our operations in our main markets. This enables us to
deploy advanced analytics and AI for high value purposes. For
example, using GenAI to help our call centre agents shorten customer
enquiry times. In a test run in one market, product enquiry times were
cut from more than four minutes to less than 30 seconds. We are now
testing this on real-time customer enquiries as well as in two other
markets. We are also working on utilising analytics and AI more across
our strategic pillars and those group functions that use the open
architecture platform. We continue to invest in our machine learning
operations capabilities to build AI and machine learning models of
scale. Our aim is to embed analytics and AI within the culture of our
organisation. In line with this, we are looking to design and develop
tailored training for all our employees across all levels, locations and
functions, along with adoption programmes to help our employees
make use of analytics and AI in their daily work life. To facilitate these
programmes, we are setting up an AI lab to foster innovation and
creativity internally, while also attracting external talent and ideas.
The lab will help us try out new capabilities that we can then grow
and use at scale across the organisation. Through these initiatives, we
plan to deliver at least two high-value analytics and AI use cases per
strategic pillar this year for use in our markets.
Innovation in AI is also being undertaken at our Joint Ventures. For
example, by utilising AI technology, CPL has shortened the
underwriting of non-standard cases from three days to one and a half
hours. Meanwhile, the claims payment turnaround has shortened
from 1.29 days in 2022 to 0.45 days in 2023.
Enabler#2: Engaged people and high-
performance culture
An engaged workforce is critical to the delivery of our strategy and we
are working with our people to create a culture that is customer led
and performance-driven.
We aim to create an environment that allows our people to thrive,
connect, grow, and succeed. We will focus on the following priorities
to deliver this:
– Promote values-based leadership and aligned reward structure
to help build a culture that is customer-led and performance-driven;
– Build strategic capabilities through targeted talent acquisition
and internal talent development, particularly within the areas of
customer, distribution, health and technology;
– Develop a robust internal talent pipeline through succession
planning, facilitating mobility and focused development plans, in
tandem with efforts to accelerate development of female leaders;
and
– Standardise, simplify, and digitalise end-to-end people processes to
enhance the employee experience.
By focusing on these priorities, we aim to create a better workplace
experience as we make the required shifts across the organisation to
achieve our strategy.
The PruWay (our values) was co-created with our employees and
launched in September 2023 following the launch of our Strategy
and Purpose. Progress has been made in activating the PruWay and
engaging the organisation on our values and desired behaviours. By
engaging with the Group’s senior leaders in a series of workshops and
with the wider workforce through the Group Executive Committee
(GEC), we have started the process of internalising and translating a
set of value statements into day-to-day actions. We call these
PruSteps. The Group’s senior leaders will be involved in embedding
the PruWay deeper into the organisation through workshops that will
touch all employees in 2024.
To drive a high-performance culture, a refreshed performance and
pay model will be implemented in 2024. The emphasis will be to align
personal and team goals to our strategy and the PruWay. This is to
ensure we establish an environment where highly engaged
employees consistently demonstrate behaviour and practice our
values. To do this, we will communicate the value proposition on what
a high-performance culture means and build our capability to uplift
the strength of our workforce through meaningful and effective
development conversations.
To build a robust talent pipeline we are in the process of
implementing a consistent succession planning and talent
development process to enhance the robustness and sustainability of
our leadership bench strength.
Through these measures we seek to improve the engagement of all
our employees with an ambition to have top-quartile employee
engagement by 2027.
Enabler#3: Wealth and investments
capabilities
Wealth and Investment is a key enabler to help us deliver on our
purpose.
We plan to enhance our wealth and investment capabilities by
leveraging Eastspring and our investment office as well as providing
distribution support to our top agents to better serve our wealth
customers.
We are committed to product innovation to enable us to offer a
wide variety of customised wealth solutions that meet our customers'
needs for wealth appreciation, wealth protection, wealth succession
and retirement, and to provide our distribution teams with the tools
and training they need to serve our wealth customers better.
The cornerstone of helping customers meet their financial goals is the
delivery of positive investment performance and the creation of
appropriate delivery mechanisms to achieve this. Consideration of
asset allocations, mandates and selection of investment managers
for Prudential insurance policies sits with the life companies, overseen
by the Group Investment Officer. Eastspring’s specific investment
skills and track record in certain asset classes along with its investment
wrapper design capabilities are being harnessed alongside third-party
capabilities.
28
Prudential plc Annual Report 2023
We are formulating a series of wealth management products that
can be used by advisors to create investment outcomes that can
adapt and meet their customer needs overtime. These may include a
combination of passive and active investment strategies. The
packaging of these strategies into discretionary fund management
options provides the client with the potential to invest in a spectrum
of asset management styles over their lifetimes and as their financial
circumstances change.
Eastspring has focused on developing its human resources both in
terms of human capital and internal performance benchmarking. A
CIO has been appointed in February 2024, who will be responsible for
the day to day management of the investment teams. A new head of
distribution was also appointed in February 2024.
Eastspring is supporting the training and development needs of our
Prudential Financial Advisers (PFA) distribution force, a force of over
500 financial advisors who offer a more holistic suite of products
outside of our core Prudential insurance offerings. Already, products
from seven general insurance and two life firms are included in the
range, broadening the suite of products for legacy planning for high-
net-worth individuals and retirement plans to meet the needs of a
rapidly ageing population. The range is expected to expand further in
2024 and a thousand additional advisors are planned to be added to
PFA in due course.
We continue to strengthen our wealth team and are enhancing our
go-to-market investment updates for customers and distribution
teams. We see opportunities to better meet our customers needs for
wealth accumulation, wealth protection, wealth succession and
retirement. Through high-performance investment teams we will seek
to drive continual improvement in customer outcomes across the
wealth life-cycle.
Implementing our Organisational Model
Changes to our organisational model are being made to enable us to
deliver consistent performance across the Group and to prioritise
value creation when deploying capital across our markets.
These changes include the complementing of existing teams and
structures with additional skills and capabilities through the sourcing
of selected new talent, reskilling existing talent and changing
reporting and responsibilities across teams.
We believe our new organisational model, together with our
commitment to invest in building out our capabilities further, will
harness economies of scale and generate value for all our
stakeholders.
By implementing changes to our organisational model and by
combining the technology platform changes we are making, including
the roll-out of best practices across our markets, we are confident we
can deliver a consistently high level of service to our customers and
our partners over the long term.
Outlook
We delivered an excellent financial and operational performance in
2023 and deployed increased levels of capital in new business,
enhancing core capabilities and expanding distribution. Sales growth
has continued in the first two months of 2024. Given the relentless
execution focus in implementing our strategy, we are increasingly
confident in achieving our 2027 financial and strategic objectives and
in accelerating value creation for our shareholders.
Notes
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Source: Kantar survey.
Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects 2022.
Source: Swiss Re forecast (July 2023).
As reported at full year 2023 unless otherwise specified. Sources include formal (eg competitors results release, local regulators and insurance association) and informal
(industry exchange) market share. Ranking based on new business (APE sales, weighted new business premium, full year premium or weighted first year premium) or
Gross Written Premium depending on availability of data. Rankings in the case of Chinese Mainland, Taiwan and Myanmar are among foreign insurers, and for India is
among private companies. Countries based on nine months ended September 2023: Philippines, Ghana (Africa) and Kenya (Africa) and full year 2022: Laos, Zambia
(Africa) and Togo (Africa) and full year 2020: Nigeria (Africa).
Source: Based on FY2022 data from local regulators, industry associations and Prudential' internal data. Estimates are based on market intelligence, if data is not publicly
available.
Source: As reported at full year 2023. Sources include local regulators, asset management association, investment data providers and research companies (e.g.
Morningstar, Lipper). Rankings are based on total funds under management (including discretionary funds, where available) of onshore domiciled funds or public mutual
funds of the respective markets.
The objectives assume exchange rates at December 2022 and economic assumptions made by Prudential in calculating the EEV basis supplementary information for the
year ended 31 December 2022, and are based on regulatory and solvency regimes applicable across the Group at the time the objectives were set. The objectives assume
that existing EEV and Free Surplus methodology at December 2022 will be applicable over the period.
See note A1 to the IFRS financial statements for more detail on our exchange rate presentation.
Business units equate to legal entities.
Prudential plc Annual Report 2023
29
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Our business model
We are guided by our purpose
For Every Life, For Every Future
Key resources, relationships and differentiators
Customers
At Prudential, we are focused on being our customers’ most trusted
partner throughout their life journeys.
Our retention ratio already stands at 86 per cent, putting us in a strong
position to grow our share of wallet with existing customers over their
lifetime. The roll-out of key priorities, such as personalised targeting,
segmentation by life stage, differentiated propositions and simple tech-
enabled journeys underpin our customer-centric strategy.
Markets
The Asian and African markets we are focused on are large – with
increasing demand for health protection and wealth management
solutions.
We are one of the few pure-play Asian/African focused groups in our
sector. We hold top-three positions in 10 out of the 14 Asian life markets
and top five in 6 out of the 8 African life markets we have a presence in.
We have one of the largest agency forces in Asia and we are the number
one independent insurer in Asia bancassurance. The breadth of our
access to the world’s fastest-growing markets across Asia and Africa is
therefore a key differentiator for us.
Products
As well as our traditional protection and wealth products, we are
addressing the major health insurance opportunity in Asia.
We have had a substantial health and protection business in several
markets for many years. There are opportunities to grow the Group’s
footprint across other markets and we want to become a trusted partner
to our customers, fulfilling a much-needed coordinating role across their
healthcare journeys.
Distribution
Prudential has a multi-channel distribution platform of scale.
We have scale in both agency and bancassurance channels with around
68,000 average monthly active agents and more than 200 bank
partners, 10 of which are strategic.
Aggregate household wealth in Asia totalled over $150 trillion2 in 2021
and is expected to continue to grow in the years ahead.
Eastspring, our in-house asset manager, spans 11 markets and manages
over US$237 billion of assets and occupies top-10 positions in six of its
markets.
30
Prudential plc Annual Report 2023
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.
Key metric:
Gross Free
Surplus
Generation
Allocating capital
We reinvest the cash flow
generated by existing
policies in new business and
extending our customer,
digitally enabled
distribution and health
capabilities, compounding
the growth of the business.
These cash flows are also
used to meet our central
costs and pay returns to
shareholders, including
dividends.
Following our
purpose
> p.12
Driven by our
strategy
> p.13
Writing new business
We sell products designed to meet the
needs of customers and support our
agents in the sales process. We aim to
write new business that provides attractive
returns to our shareholders.
Key metric:
New Business
Profit
Managing the policies of
our existing customers
By putting the customer at the
heart of what we do, we seek to
retain them alongside managing
the investments that back their
policies and the costs of running
our business.
Key metric:
Embedded
Value
Value we create for key stakeholders
Customers
We aim to deliver superior customer
experiences. Our mission is ‘to be the
most trusted partner and protector for
this generation and generations to come,
by providing simple and accessible
financial and health solutions’. How we
are delivering for our customers will be
assessed against our ambition to achieve
top quartile relationship NPS by 2027.
4
Business units with
top quartile
relationship NPS
scores in 2023
Employees
We provide an inclusive working
environment where we develop talent,
reward performance, protect our people
and value our differences. We measure
success for our employees through
engagement scores from annual surveys.
Our ambition is
top quartile
employee
engagement
when compared
to our peers.
$3.1bn
2023 new
business profit
(2022: $2.1bn)
$2.7bn
2023 OFSG from
in-force insurance
and asset
management
business (2022:
$2.7bn)
50%
2023 reduction in
WACI from 2019
baseline
Shareholders
We can accelerate value creation for our
shareholders and other stakeholders by
exercising operational and financial
discipline as we execute our strategy and
business model. Our ambition is to grow
new business profit at a CAGR of 15 to
20 per cent between 2022 and 20271.
This will be driven by our plan to increase
agency, bancassurance and health new
business profits, and grow operating free
surplus generation at a double-digit
CAGR growth rate across the same time
period1.
Communities
Our purpose reflects our commitment to
the wider communities in which we
operate, through meeting the
underserved needs of our markets and
adding value for a more sustainable and
inclusive future. Our commitment to
sustainability is underpinned by our
ambition to achieve net zero by 2050
and a 55% reduction in Weighted
Average Carbon Intensity by 2030
against our 2019 baseline.
Underpinned by our
commitment to
sustainability
> p.97
Focusing on our
rigorous risk
management
> p.56
(1) The objectives assume exchange rates at December 2022 and economic
assumptions made by Prudential in calculating the EEV basis supplementary
information for the year ended 31 December 2022, and are based on
regulatory and solvency regimes applicable across the Group at the time the
objectives were set. The objectives assume that existing EEV and Free Surplus
methodology at December 2022 will be applicable over the period.
(2) Source: Credit Suisse - Global Wealth Report 2022
Prudential plc Annual Report 2023
31
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Key financial performance indicators
Measuring our financial performance
EEV new business profit $m
$3,125m
+43 per cent
Operating free surplus generation from in force insurance
and asset management business $m
$2,740m
(1) per cent
EEV shareholders’ equity $bn
$45.3bn
+7 per cent
1,643¢ per share
1,534¢ per share
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.
EEV new business profit increased by 45 per cent on a constant
exchange rate basis (43 per cent on an actual exchange rate
basis) to $3,125 million, with a double-digit growth in 12 markets
led by Hong Kong following the reopening of the border between
Hong Kong and the Chinese Mainland.
Free surplus generation from in force insurance and asset
management business is used to measure the internal cash
generation of our business before investment in new
business.
For insurance operations, it represents amounts emerging from
the in-force business during the year, before allowing for
investment in new business and excludes non-operating items.
For asset management, it equates to post-tax adjusted operating
profit for the year. It is stated before any restructuring costs.
The operating free surplus generation from in-force insurance
and asset management business during the year was $2,740
million, broadly flat when compared with the prior year.
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 subsidiaries, joint
ventures and associates 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.
EEV shareholders’ equity increased by 7 per cent (on an actual
exchange rate basis) to $45.3 billion, largely reflecting higher EEV
operating profit driven by a 45 per cent increase (on constant
exchange rate basis) in new business profit, partly offset by the
payment of external dividends and the effects of market
movements over the year.
32
Prudential plc Annual Report 2023
$3,125m$2,184m20232022$2,740m$2,760m20232022$45.3bn$42.2bn20232022 Adjusted operating profit $m
$2,893m
+6 per cent
Adjusted shareholders' equity $bn
$37.3bn
+6 per cent
1,356¢ per share
1,280¢ per share
IFRS operating profit based on longer-term investment
returns (adjusted operating profit).
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). A full reconciliation is given in note B1.1 to the IFRS
financial results
The Group's adjusted operating profit was $2,893 million, up 8
per cent on a constant exchange rate basis (6 per cent on an
actual exchange rate basis), largely as a result of lower central
costs and higher profits from Eastspring, our asset management
business. The Group's total IFRS profit after tax was $1,712
million, an improvement on the 2022 loss after tax of $(1,005)
million on constant exchange rate basis ($(997) million on an
actual exchange rate basis) given significant investment losses in
the prior year following rising interest rates.
Management use adjusted shareholders' equity to provide a
useful reconciliation between IFRS 17 shareholders' equity and
the Group's embedded value framework, which is often used for
valuations. It is calculated by adding the IFRS 17 expected future
profit (as contained within the contractual service margin) to
IFRS shareholders' equity for all entities in the Group. A full
reconciliation is given in note II(ii) of the additional information.
The adjusted shareholders' equity increased to $37.3 billion
(2022: $35.2 billion on an actual exchange rate basis) driven by
an increase in IFRS shareholders' equity (up 7 per cent) and an
increase in the Contractual Service Margin (CSM) (up 5 per cent).
Notes
(1) 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 report on our 2023 financial performance. Growth rates for 2023 to 2022 are on an AER
basis.
(2) The definition of the key financial metrics are set out in the 'Definition of performance metrics' section later in this document.
(3) IFRS Comparatives for 2022 have been restated to reflect the retrospective application of IFRS 17. See note A2.1 to the financial statements for further information and
reconciliation.
Prudential plc Annual Report 2023
33
$2,893m$2,722m20232022$37.3bn$35.2bn20232022 Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review
Strong and diversified financial
performance
Prudential delivered a strong 2023 financial performance. This
highlights the value of our diversification across geography and by
distribution channel. We introduced two new financial objectives as
an integral part of the Group's strategy update. In 2023 we made
good progress towards our 2027 new business profit objective and
are on track with our related 2027 objective for operating free surplus
generated from in-force insurance and asset management business.
2023 also saw higher EEV operating profit and shareholders’ equity,
as well as higher Group adjusted operating profit following CSM
growth.
2023 saw an improvement in economic performance of the countries
in which we operate. There was still volatility although this reduced
over the course of the year. Government bond yields in many of our
Asian markets reduced while the US 10-year yield closed the year
relatively stable at 3.9 per cent. Equity market performance varied
considerably, with the S&P 500 index increasing by 24 per cent, the
MSCI Asia excluding Japan equity index by 4 per cent, while the Hang
Seng index fell by 14 per cent.
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. We discuss our financial position on an actual
exchange rates basis, unless otherwise noted. The definitions of the
key metrics we use to discuss our performance in this report are set
out in the 'Definition of performance metrics' section later in this
document.
New business profit was up 45 per cent to $3,125 million, led by Hong
Kong, with a double-digit growth in 12 of our 22 markets following
the removal of all pandemic-related restrictions, in particular the
reopening of the border between Hong Kong and the Chinese
Mainland and consequential rebound of APE sales. Further, we saw a
34 per cent increase in the new business profit for health and
protection products contributing to 40 per cent of our new business
profit, while the new business profit for savings product grew by 54
per cent. This was underpinned by a 37 per cent growth in APE sales,
which, in absolute terms, exceeded the pre-pandemic level of 2019.
Excluding the effects of interest rates and other economic changes,
given our active EEV reporting basis, new business profit increased by
47 per cent.
Group EEV operating profit increased by 17 per cent to $4,546
million, largely due to higher new business profits from insurance
business, an increase in the profit from Eastspring, our asset
management business, and a reduction in central costs. The
operating return on embedded value was 10 per cent compared with
9 per cent in 2022. After allowing for the payment of the external
dividend and economic effects, such as changes in interest rates, and
currency movements, the Group’s embedded value at 31 December
2023 was $45.3 billion (31 December 2022: $42.2 billion on an
actual exchange rate basis), equivalent to 1,643 cents per share (31
December 2022: 1,534 cents per share on an actual exchange rate
basis). The operating free surplus generated from in-force insurance
and asset management business during the period was $2,740
million, broadly flat when compared to prior year. Investment in new
business of $(733) million (2022: $(552) million) reflected higher APE
sales and business mix effects. As a result total operating free surplus
generated from life and asset management business reduced to
$2,007 million (2022: $2,173 million).
The Group implemented IFRS 17, the new accounting standard for
insurance contracts in 2023 with comparatives restated accordingly.
In line with the preliminary guidance provided with the Group’s 2022
results (on an actual exchange rates basis), the Group shareholders’
equity at 1 January 2022, the date of transition, increased by $1.8
billion to $18.9 billion and 2022 full year adjusted operating profit fell
by $653 million to $2,722 million. The full year 2022 saw a loss after
tax of $(997) million on an IFRS 17 basis. While IFRS 17 is an
important accounting change, resulting in changes to the timing of
profit recognition compared with the previous IFRS 4 approach, it
does not change the total level of profit generated. As a result, it does
not change the underlying economics of our business. Our embedded
value framework, which is linked to the Group’s regulatory position
and consequently future capital generation, is in our view more
representative of shareholder value. The Group also implemented
IFRS 9 Financial Instruments from 1 January 2023, with no material
impact on the Group’s financial statements. Further details on the
transition to IFRS 17 and IFRS 9 are included in the IFRS financial
results.
34
Prudential plc Annual Report 2023
The Group's dividend policy is unchanged and described later in this
report. Recognising the strong conviction we have in the Group's
strategy, when determining the annual dividend we look through the
investments in new business and investments in capabilities. The
Board has approved a second interim dividend of 14.21cents per
share (2022: 13.04 cents per share up 9 per cent). When this is
combined with the first interim dividend the Group’s total 2023
dividend is 20.47 cents per share (2022: 18.78 cents per share), an
increase of 9 per cent. The Board intends to maintain this approach,
and continues to expect the 2024 annual dividend to grow in the
range 7 - 9 per cent.
The Group is carrying out a number of actions to support the
development of liquidity in the trading of its shares on the Hong Kong
Stock Exchange, following its capital raise in 2021. In 2024, the Group
is actively exploring the use of scrip dividends, including issuance only
on the Hong Kong line and the dilutive effect being neutralised by a
share buy back on the London line.
The Group executed a $41 million share repurchase programme in
January 2024 to neutralise the 2023 Employee and agent share
scheme issuance. It intends to make further repurchases in the future
to offset the expected dilution from the vesting of awards under
employee and agent share schemes.
We believe that the Group’s performance during the year positions us
well, as we implement the new strategy, to meet our financial
objectives to grow new business profit and consequently in-force
insurance and asset management operating free surplus generated,
as detailed in the strategic and operating review.
Group IFRS adjusted operating profit was $2,893 million, up 8 per
cent in 2023, largely as a result of lower central costs and higher
profits from Eastspring, our asset management business. The Group’s
total IFRS profit after tax for the period was $1,712 million, an
improvement on the 2022 loss after tax of $(1,005) million on a
constant exchange rate basis (loss of $(997) million on an actual
exchange rate basis). The swing in result largely reflects changes in
short-term fluctuations in interest rates. There was a modest decrease
in interest rates in 2023 compared with interest rates increasing
significantly in 2022.
Adjusted shareholders’ equity increased to $37.3 billion (31
December 2022: $35.2 billion on an actual exchange rate basis),
equivalent to 1,356 cents per share (31 December 2022: 1,280 cents
per share on an actual exchange rate basis), driven by an increase in
IFRS shareholders’ equity (up 7 per cent) and an increase in the
Contractual Service Margin (CSM) (up 5 per cent). The CSM benefited
from the contribution from new business and unwind. Using a longer-
term normalised return for Variable Fee Approach (VFA) business, the
unwind and new business contribution would have exceeded the
release in the period by $1.7 billion, equivalent to a net increase of 9
per cent in the CSM compared with the start of year position.
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.
The Group capital adequacy requirements are aligned with the
established EEV and free surplus framework by comparing the total
eligible Group capital resources with the Group’s Prescribed Capital
Requirement (GPCR). At 31 December 2023, the estimated
shareholder surplus above the GPCR was $16.1 billion (31 December
2022: $15.6 billion on an actual exchange rates basis) and cover ratio
295 per cent (31 December 2022: 307 per cent before allowing for
the debt redemption in January 2023 and 302 per cent after the
redemption).
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. In 2023, we have allocated capital to investing
in higher new business at attractive rates of return, in developing our
customer, distribution, health and technology capabilities and we
intend to deploy $1billion as part of our updated strategy. In line with
our capital allocation priorities (as set out in the Capital Management
section below) excess capital, if and when it emerges, would be
returned to shareholders.
Prudential plc Annual Report 2023
35
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
IFRS profit
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Insurance business
Asset management
Total segment profit
Other income and expenditure:
Investment return and other items
Interest payable on core structural borrowings
Corporate expenditure
Other income and expenditure
Restructuring and IFRS 17 implementation costs
Adjusted operating profit
Non-operating items:
Short-term fluctuations in investment returns
(Loss) gain attaching to corporate transactions
Profit (loss) before tax attributable to shareholders
Tax charge attributable to shareholders' returns
Profit (loss) for the year
IFRS earnings per share
Actual exchange rate
Constant exchange rate
2023 $m
368
1,013
221
305
584
746
3,237
280
3,517
(21)
(172)
(230)
(423)
(201)
2022 $m
271
1,162
205
340
570
728
3,276
260
3,536
(44)
(200)
(276)
(520)
(294)
2,893
2,722
(774)
(22)
2,097
(385)
1,712
(3,420)
55
(643)
(354)
(997)
Change %
36
(13)
8
(10)
2
2
(1)
8
(1)
52
14
17
19
32
6
77
n/a
n/a
(9)
n/a
2022 $m
258
1,162
200
329
585
715
3,249
255
3,504
(44)
(200)
(277)
(521)
(293)
2,690
(3,404)
55
(659)
(346)
(1,005)
Change %
43
(13)
11
(7)
—
4
—
10
—
52
14
17
19
31
8
77
n/a
n/a
(11)
n/a
Based on adjusted operating profit, net of tax and non-controlling
interest
Based on profit (loss) for the year, net of non-controlling interest
89.0¢
62.1¢
79.4¢
(36.8) ¢
12
n/a
78.5¢
(37.0) ¢
13
n/a
Actual exchange rate
Constant exchange rate
2023 cents
2022 cents
Change %
2022 cents
Change %
Detailed discussion of IFRS financial performance by segment,
including the detailed analysis of asset management business is
presented in the section on 'Performance by market'.
Adjusted operating profit reflects that the assets and liabilities of our
insurance businesses are held for the longer term and the Group
believes that the 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.
Group IFRS adjusted operating profit was $2,893 million, up by 8 per
cent, largely reflecting a 10 per cent increase in profit generated by
Eastspring, our asset management business, and lower central costs.
Adjusted operating profit for insurance business was at similar levels
of 2022, with economic movements in 2022 reducing the level of
longer-term net investment result (which is based on opening asset
values), largely offset by a higher insurance service result.
36
Prudential plc Annual Report 2023
Insurance business analysis of operating profit drivers
The table below sets out the key drivers of the Group’s adjusted operating profit for the insurance business as described in note B1.3 of the IFRS
financial results.
Actual exchange rate
Constant exchange rate
Adjusted release of CSM 1
Release of risk adjustment
Experience variances
Other insurance service result
Adjusted insurance service result
Net investment result on longer-term basis
Other insurance income and expenditure
Share of related tax charges from joint ventures and associates
2023 $m
2,205
218
(118)
(109)
2,196
1,241
(122)
(78)
2022 $m
2,265
179
(66)
(204)
2,174
1,290
(98)
(90)
Insurance business
3,237
3,276
Change %
(3)
22
(79)
47
1
(4)
(24)
13
(1)
2022 $m
2,242
178
(62)
(195)
2,163
1,271
(100)
(85)
3,249
Change %
(2)
22
(90)
44
2
(2)
(22)
8
—
The release of CSM is the principal source of our IFRS 17 insurance
business adjusted operating profit. The adjusted CSM release1 in
FY2023 of $2,205 million (2022: $2,242 million) equates to an
annualised release rate of circa 9.5 per cent, broadly similar to the
release rate seen in 2022 and broadly consistent with the 2023
release expected as at the end of 2022.
The release of the risk adjustment of $218 million (2022: $178
million) represents the expiry of non-market risk in the period. As
expected, this release is a relatively stable proportion of the opening
balance as compared with the corresponding rate in the prior year.
Experience variances of $(118) million (2022: $(62) million) comprise
largely of claims and expense variances (those impacting past or
current service rather than future service which is reflected in CSM). A
small element of the elevated expenses reflects the investment in our
strategic pillars consistent with our Strategy.
The other insurance service result of $(109) million (2022: $(195)
million) largely reflects losses on contracts that are described under
IFRS 17 as ‘onerous’, either at inception or because changes in the
period result in the CSM being exhausted. It does not mean these
contracts are not profitable overall as the CSM does not allow for real-
world returns, which are earned over time. The losses in 2022 were
largely as a result of adverse economic conditions which have
stabilised in 2023.
The net investment result of $1,241 million (2022: $1,271 million)
largely reflects the long-term return on assets backing equity and
capital and long-term spreads on business not accounted for under
the variable fee approach. The long-term rates are applied to the
opening value of assets and so falls in asset values over 2022,
following the adverse market movements in 2022 saw this source of
income reduce in 2023. Growth in the General Measurement Model
asset base from new business in recent periods and renewal
premiums offset some of this reduction.
Other income and expenditure of $(122) million (2022: $(100)
million) mainly relates to expenses that are not directly related to an
insurance contract as defined under IFRS 17.
Movement in Contractual Service Margin
The CSM balance represents a discounted stock of unearned profit
which will be released over time as services are provided. This balance
increases due to additions from profitable new business contracts sold
in the period and the unwind of the in-force book. It is also updated
for any changes in expected future profitability, where applicable,
including the effect of short-term market fluctuations for business
measured using variable fee approach. The release of the CSM, which
is the main driver of adjusted operating profit, is then calculated after
allowing for these movements.
In a normalised market environment, if the contribution from new
business and the unwind of the CSM balance is greater than the rate
at which services are provided, then the CSM balance will increase.
The new business added to the CSM will therefore be an important
factor in building the CSM and we expect the compounding effect
from the new business added to the CSM over time to support growth
in IFRS 17 adjusted operating profit in the future. The objectives
announced in August for EEV new business profit growth will act to
support such CSM growth. As we grow new business profit, in line with
our recently announced financial objectives, we would expect this to
generate growth of the CSM and hence lead to adjusted operating
profit growth over time.
The table below sets out the movement of CSM over the period.
Prudential plc Annual Report 2023
37
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
Contractual Service Margin Net of reinsurance
Net Opening Balance at 1 Jan
New contracts in the year
Unwind*
Balance before variances, effect of foreign exchange and CSM release
Economic and other variances
CSM balance before release
Release of CSM to income statement
Effect of movements in exchange rates
Net balance at the end of the period
2023 $m
19,989
2,348
1,563
23,900
(619)
23,281
(2,208)
(61)
21,012
*
The unwind of CSM presented in this table reflects the accretion of interest on general measurement model contracts, as presented in note C3.2 to the IFRS financial results,
together with the unwind of the CSM related to variable fee approach contracts on a long-term normalised basis. This differs from the presentation in note C3.2 to the IFRS
financial results by reallocating $1,303 million from economic and other variances to unwind.
Profitable new business in 2023 grew the CSM by $2,348 million
which combined with the unwind of the CSM balance shown in the
table above of $1,563 million, increased the CSM by $3,911 million.
This increase exceeded the release of the CSM to the income
statement in the period of $(2,208) million, demonstrating the
strength of our franchise and its ability to deliver future growth in
CSM and ultimately adjusted operating profit.
Other movements in the CSM reflect economic and other variances to
update the CSM for changes in expected future profitability including
the impact of short term market effects of business accounted for
under the variable fee approach. In 2023 ‘economic and other
variances’ includes $117 million for new riders added to existing base
savings contracts. The incremental value from such sales is not
included within the new business contribution to CSM because our
IFRS17 approach considers insurance contracts as a whole. In contrast,
EEV will include this amount as new business. The remainder of the
variance includes the effects of the operating variances and
assumption changes on future profits and the impact of a reduction
in interest rates and changes in equity indices. Movements in
exchange rates had a negative impact of $(61) million on the closing
CSM. Overall the CSM grew by 5 per cent, or 9 per cent excluding the
effect of economic and other variances and exchange rates.
Other income and expenditure
Central costs (before restructuring and IFRS 17 implementation costs)
were 19 per cent lower in 2023 as compared to the prior year,
reflecting the benefit of the targeted reduction of head office costs
and the redemption of a senior debt instrument in January 2023.
Interest payable on core structural borrowings reduced by $28 million
in 2023 compared with the prior year. Total head office expenditure
was $(230) million (2022: ($277) million). Net investment return and
other items improved by $23 million from increased investment
returns on Group Treasury following the increase in interest rates.
Restructuring costs of $(201) million (2022: $(293) million) reflect the
Group’s project to implement and embed IFRS 17, and one-off costs
associated with regulatory and other initiatives in our business. IFRS
17 costs are expected to decrease but in 2024 will be replaced by
investment to enhance Eastspring's operating model and improve our
back office efficiency and scalability. From the end of 2024,
restructuring costs are expected to revert over time to the lower levels
typically incurred historically.
IFRS basis non-operating items
Non-operating items in the year consist of negative short-term
fluctuations in investment returns of $(774) million (2022: $(3,404)
million) and $(22) million of costs associated with corporate
transactions (2022: gain of $55 million).
These short-term fluctuations principally arise from our business in
the Chinese Mainland reflecting negative equity returns as well as the
impact from lower interest rates on the discount rate for General
Measurement Model (GMM) best estimate insurance liabilities.
38
Prudential plc Annual Report 2023
IFRS effective tax rates
In 2023, the effective tax rate on adjusted operating profit was 15
per cent (2022: 20 per cent). The decrease from the 2022 effective
tax rate primarily reflects the recognition of a deferred tax asset in
relation to historical tax losses, due to an increase in forecast taxable
profit in the UK tax group, together with a reduction from 2022 to
2023 in head office costs for which no tax credit is recognised.
The effective tax rate on total IFRS profit in 2023 was 18 per cent
(2022: negative 55 per cent), reflecting a reduction in the level of
investment losses on which no tax credit is recognised.
to be effective in Hong Kong (where Prudential plc is now tax
resident), at which point the new rules will apply to the whole
Prudential group. Management continues to assess the likely impact
on the 2025 and subsequent financial periods and guidance on the
potential impact will be provided in due course.
Total tax contributions
The Group continues to make significant tax contributions in the
jurisdictions in which it operates, with $969 million remitted to tax
authorities in 2023, slightly lower than the equivalent amount of
$1,009 million remitted in 2022 (on an actual exchange rate basis).
During 2023, jurisdictions around the world, including some relevant
to Prudential, commenced implementation of the OECD global
minimum tax rules. For those jurisdictions where the rules will apply to
Prudential for the 2024 financial period, management’s assessment
is that the new tax rules (which involve comparing a jurisdiction’s
effective tax rate to the global minimum effective tax rate of 15 per
cent) are not expected to have a material impact on the IFRS tax
charge for 2024. From 2025 onwards, the new tax rules are expected
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 which provide insight
into the Group’s tax contributions. An updated version of the tax
strategy, including 2023 data, will be available on the Group’s
website before 31 May 2024.
Shareholders’ equity
Group IFRS shareholders' equity
Profit /(loss) for the year
Less non-controlling interest
Profit (loss) after tax for the year attributable to shareholders
Exchange movements, net of related tax
External dividends
Other movements
Net increase/(decrease) in shareholders’ equity
Shareholders’ equity at beginning of the year
As previously reported
Effect of initial application of IFRS 17 & IFRS 9, net of tax
Shareholders’ equity at end of the year
Shareholders' value per share3
Adjusted shareholders equity3
2023 $m
1,712
11
2022 $m
(997)
10
1,701
(1,007)
(124)
(533)
48
(603)
(474)
(121)
1,092
(2,205)
16,731
—
17,823
647¢
—
17,088
1,848
16,731
608¢
37,346
35,211
Group IFRS shareholders’ equity increased from $16.7 billion at the start of 2023 (after allowing for the effects of IFRS 17 and IFRS 9) to $17.8
billion at 31 December 2023. This largely reflects profit generated during the period, offset by dividend payments of $(0.5) billion, and exchange
movements of $(0.1) billion.
In 2023, the Group completed the disposal of its remaining interest in Jackson, the Group’s former US business, for cash of $273 million. This
gave rise to a gain of $8 million compared to the carrying value of this interest at 31 December 2022 that is included in other movements.
Following the adoption of IFRS 9, the income statement is unaffected by this transaction.
The IFRS adjusted shareholders’ equity represents the sum of Group IFRS shareholders’ equity and CSM, net of tax. Group’s IFRS adjusted equity
increased to $37.3 billion at 31 December 2023 (31 December 2022: $35.2 billion) reflecting increases in IFRS shareholders’ equity and the
CSM. A full reconciliation to shareholders’ equity is included in note C3.1 of the IFRS financial results.
Prudential plc Annual Report 2023
39
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
EEV basis results
EEV financial results
New business profit
Profit from in-force business
Operating profit from insurance business
Asset management
Other income and expenditure
Operating profit for the year
Non-operating results
Profit (loss) for the year
External dividends
Foreign exchange movements
Other movements
Net increase (decrease) in EEV shareholders' equity
EEV shareholders' equity at 1 Jan after effect of HKRBC
EEV shareholders' equity at end of year
% New business profit/average EEV shareholders' equity for
insurance business operations*
% Operating profit/average EEV shareholders' equity
* Excluding goodwill attributable to equity holders
EEV shareholders' equity
Represented by:
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Embedded value from insurance 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
Change %
43
(25)
8
9
26
15
89
n/a
2022 $m
2,149
2,345
4,494
230
(823)
3,901
(7,530)
(3,629)
Change %
45
(24)
9
10
26
17
89
n/a
2023 $m
3,125
1,779
4,904
254
(612)
4,546
(834)
3,712
(533)
(134)
21
3,066
42,184
45,250
2022 $m
2,184
2,358
4,542
234
(824)
3,952
(7,523)
(3,571)
(474)
(1,195)
(160)
(5,400)
47,584
42,184
8%
10%
5%
9%
31 Dec 2023 $m 31 Dec 2022 $m
3,038
17,702
1,509
3,709
7,896
7,674
3,259
16,576
1,833
3,695
6,806
6,688
41,528
38,857
2,955
767
45,250
1,643¢
2,565
762
42,184
1,534¢
40
Prudential plc Annual Report 2023
APE new business sales (APE sales) and EEV new business profit
Actual exchange rate
Constant exchange rate
2023 $m
2022 $m
Change %
2022 $m
Change %
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets
and other
Total
Total new
business
margin
APE sales
884
New business
profit
387
APE sales
(40)
New business
profit
(43)
APE sales
534
1,966
277
384
787
New business
profit
222
1,411
142
167
484
522
247
359
770
384
125
159
499
APE sales
840
523
240
347
791
New business
profit
368
384
122
154
512
267
14
5
(3)
1,928
5,876
699
3,125
1,611
4,393
630
2,184
11
43
1,546
4,287
609
2,149
277
12
7
2
20
34
APE sales
(36)
276
15
11
(1)
25
37
New business
profit
(40)
267
16
8
(5)
15
45
53%
50%
50%
Group EEV operating profit increased by 17 per cent to $4,546
million, reflecting a 9 per cent increase in the operating profit for the
insurance business, largely reflecting higher new business profit, a 10
per cent increase in the operating profit for the asset management
business and an improvement in central costs. The operating return
on average embedded value was 10 per cent (2022: 9 per cent).
The operating profit from the insurance business increased to $4,904
million, largely reflecting a 45 per cent increase in new business profit
to $3,125 million following growth in APE sales, partly offset by a (24)
per cent fall in profit from in-force business to $1,779 million. The
profit from in-force business is driven by the expected return and the
effects of operating assumption changes and experience variances.
The expected return was lower at $2,122 million (2022: $2,531
million), reflecting a lower opening balance to which the expected
return is applied, as a result of economic movements in 2022.
Operating assumption changes and experience variances were
negative $(343) million on a net basis compared with $(186) million
in 2022. This reflects short-term industry-wide increases in lapses in
Vietnam, following negative consumer sentiment in the wider
industry, along with unfavourable morbidity experience on some
medical reimbursement products following the removal of Covid-19
restrictions. We have also continued to invest in our strategic
capabilities.
The non-operating loss of $(834) million (2022: loss of $(7,530)
million) is largely driven by the combined impact of negative equity
returns in Chinese Mainland and Hong Kong, with interest rate falls
and narrowing credit spreads in many of our markets in the year.
These effects were more muted than in the prior year.
Overall, EEV shareholders' equity increased to $45.3 billion at 31
December 2023 (31 December 2022: $42.2 billion). Of this, $41.5
billion (31 December 2022: $38.9 billion) relates to the insurance
business operations, excluding goodwill attributable to equity
shareholders. This amount includes our share of our India associate
valued using embedded value principles. The market capitalisation of
this associate at 31 December 2023 was circa $9.3 billion, which
compares with a publicly reported embedded value of circa $4.6
billion at 30 September 2023.
EEV shareholders' equity on a per share basis at 31 December 2023
was 1,643 cents (31 December 2022: 1,534 cents).
Prudential plc Annual Report 2023
41
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
Greater China presence
Prudential has a significant footprint in the Greater China region, with businesses in the Chinese Mainland (through its holding CPL), Hong Kong
(together with its branch in Macau) and Taiwan.
The table below demonstrates the proportion of the Group’s financial measures that were contributed by the Greater China region:
Total Greater China †
Total Group†
Percentage of total
Comparatives stated on a AER basis
Gross premiums earned*
New business profit
2023 $m
2022 $m
12,859
26,221
13,103
27,783
2023 $m
1,870
3,125
2022 $m
912
2,184
49 %
47%
60 %
42%
*
†
The gross earned premium includes the Group's share of amounts earned from joint ventures and associates as disclosed in note II (vi) of the Additional financial
information.
Total Greater China represents the amount contributed by the insurance businesses 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 insurance business joint ventures and associates.
Capital management
We aim to invest capital to write new business that generates three
times the amount invested, at internal rates of return above 25 per
cent with less than four-year payback periods. Our ability to invest at
attractive returns will drive our capital allocation priorities which are
as follows:
– We will continue to target resilient capital buffers such that the
Group shareholder coverage ratio is above 150 per cent of the
shareholder Group Prescribed Capital Requirement to ensure the
Group can withstand volatility in markets and operational
experience;
– Otherwise, our priority for allocating capital will be re-investing in
new business. Our resilient capital position allows us to prioritise
investment in new business with an aim to write quality new
business while managing the initial capital strain and capturing the
economic value at attractive returns;
– Our next priority is investing around $1 billion in core capabilities,
primarily in the areas of Customer, Distribution, Health and
Technology;
– Our dividend policy remains linked to net operating free surplus
generation which is calculated after investment in new business
and capability investment;
– We will invest in inorganic opportunities where there is good
strategic fit; and
– All investment decisions will be made against the alternative of
returning surplus capital to shareholders but given the abundance
of organic and inorganic opportunities ahead of us, we are
confident that in the near-term we will be reinvesting capital at
attractive returns.
To generate capital to allocate to these priorities we will also prioritise
managing our in-force embedded value to ensure maximum
conversion into free surplus over time. Based on the economic and
other assumptions and methodology that underpinned our EEV
reporting at the end of 2023, we expect to transfer over $9 billion by
end of 2027 from VIF and required capital to operating free surplus
generated from our in-force insurance business at the end of 2023.
This is before allowing for the incremental effect of new business and
any return on the underlying assets backing that surplus. We will drive
improved emergence of free surplus by managing claims, expense
and persistency in each market. This additional free surplus will
enable our continued investment in profitable new business at
attractive returns, as well as in our strategic capabilities, and support
payments of returns to shareholders including dividends.
42
Prudential plc Annual Report 2023
Group free surplus generation
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
Analysis of movement in Group free surplus
Expected transfer from in-force business and return on existing free
surplus
Changes in operating assumptions and experience variances
Operating free surplus generated from in-force insurance
business
Asset management
Operating free surplus generated from in-force insurance and
asset management business
Investment in new business
Operating free surplus generated from insurance and asset
management business
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
Non-operating and other movements, including foreign exchange
External cash dividends
Increase (decrease) in Group free surplus before net
subordinated debt redemption
Net subordinated debt redemption
Increase (decrease) in Group free surplus before amounts
attributable to non-controlling interests
Change in amounts attributable to non-controlling interests
Free surplus at beginning of year
Free surplus at end of year
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 the EEV financial results.
Actual exchange rate
Constant exchange rate
2023 $m
2022 $m
Change %
2022 $m
Change %
6
(77)
—
10
1
(33)
(8)
14
17
73
30
3
2,869
(383)
2,486
254
2,740
(733)
2,753
(227)
2,526
234
2,760
(567)
4
(69)
(2)
9
(1)
(29)
2,711
(216)
2,495
230
2,725
(552)
2,007
2,193
(8)
2,173
14
17
73
31
2
(200)
(277)
(66)
(275)
1,355
(172)
(230)
(18)
(192)
1,395
(206)
(533)
656
(421)
235
(9)
12,229
12,455
(200)
(276)
(66)
(277)
1,374
(2,371)
(474)
(1,471)
(1,699)
(3,170)
(10)
15,409
12,229
Free surplus at end of year excluding distribution rights and
other intangibles
8,518
8,390
Operating free surplus generated from in-force insurance and asset
management business was broadly flat at $2,740 million when
compared with the prior year. The cost of investment in new business
increased by 33 per cent to $(733) million largely reflecting the
increase in APE sales of 37 per cent. As a consequence, the Group
generated an operating free surplus from insurance and asset
management operations before restructuring costs of $2,007 million,
down (8) per cent compared to 2022.
After allowing for lower central costs and restructuring and IFRS 17
costs, total Group free surplus generation was up 3 per cent to $1,395
million.
After allowing for short-term market and currency losses, the
redemption of debt (which is treated as capital for free surplus
purposes), and the external dividend payment, free surplus at 31
December 2023 was $12.5 billion as compared to $12.2 billion at the
start of the year. Excluding distribution rights and other intangibles,
free surplus was $8.5 billion (31 December 2022: $8.4 billion).
Prudential plc Annual Report 2023
43
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
Dividend
Reflecting the Group’s capital allocation priorities, a portion of capital
generation will be retained for reinvestment in organic growth
opportunities and for investment in capabilities, 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,
and will be set taking into account financial prospects, investment
opportunities and market conditions.
Recognising the strong conviction we have in the Group's new
strategy, the Board indicated alongside the strategy update in August
2023, that when determining the annual dividend, it intended to look
through the investments in new business and investments in
capabilities, and expected the annual dividend to grow in the range 7
– 9 per cent per annum over 2023 and 2024.
The Board has applied this approach to determining the 2023 second
interim cash dividend, and has approved a 2023 second interim cash
dividend of 14.21 cents per share (2022: 13.04 cents per share).
Combined with the first interim cash dividend of 6.26 cents per share
(2022: 5.74 cents per share), the Group’s total 2023 cash dividend is
20.47 cents per share (2022: 18.78 cents per share), an increase of 9
per cent.
The Board intends to maintain this approach, and continues to expect
the 2024 annual dividend to grow in the range 7 - 9 per cent.
Group capital position
The Prudential Group applies the Insurance (Group Capital) Rules set
out in the GWS Framework issued by the Hong Kong Insurance
Authority ('HKIA') 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. More information
is set out in note I(i) of the Additional 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.
Group capital resources ($bn)
of which: Tier 1 capital resources ($bn)
Group Minimum Capital Requirement ($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 2023
31 Dec 2022
Shareholder
Policyholder*
Total†
Shareholder
Policyholder*
Total†
24.3
17.1
4.8
8.2
16.1
295 %
14.3
1.2
1.1
11.4
38.6
18.3
5.9
19.6
2.9
19.0
23.2
15.9
4.4
7.6
15.6
12.6
1.5
0.9
10.1
2.5
197 %
307%
12.4
313 %
35.8
17.4
5.3
17.7
18.1
202%
12.1
328%
*
†
This allows for any associated diversification impacts between the shareholder and policyholder positions reflected in 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 capital coverage ratio.
As at 31 December 2023, the estimated shareholder GWS capital
surplus over the GPCR is $16.1 billion (31 December 2022: $15.6
billion), representing a coverage ratio of 295 per cent (31 December
2022: 307 per cent) and the estimated total GWS capital surplus over
the GPCR is $19.0 billion (31 December 2022: $18.1 billion)
representing a coverage ratio of 197 per cent (31 December 2022:
202 per cent). During January 2023 the Group redeemed $0.4 billion
of senior debt equivalent to a reduction of 5 percentage points to the
shareholders' GWS coverage ratio over GPCR measured at 31
December 2022 and a 2 percentage points reduction to total GWS
coverage ratio over GPCR measured at the same date.
Operating capital generation in 2023 was $1.4 billion after allowing
for central costs and the investment in new business. This was offset
by the payment of external dividends of $(0.5) billion.
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 financial information, alongside further
information about the GWS measure.
44
Prudential plc Annual Report 2023
Financing and liquidity
The Group manages its leverage on a Moody’s total leverage basis,
which takes into account gross debt, including commercial paper, and
also allows for a proportion of the surplus within the Group’s with-
profits funds. The Group’s leverage target is to be between 20 and 25
per cent on a Moody’s total leverage basis over the medium term.
Moody’s have not finalised how they will calculate leverage under
IFRS 17 but are consulting on a proposal to consider up to 50 per cent
of any company’s CSM as equity. This has yet to be incorporated into
Moody’s formal methodology and hence has not been incorporated
into the Group’s target above. At 31 December 2023, we estimate
that our Moody’s total leverage was 20 per cent2 (31 December
2022: 21 per cent2, before allowing for the £300 million senior bonds
redeemed in January 2023). This would reduce to circa 14 per cent
(31 December 2022: 15 per cent, before allowing for the £300 million
senior bonds redeemed in January 2023) if a 50 per cent equity credit
for the CSM was provided.
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.
Net core structural borrowings of shareholder-financed businesses
31 Dec 2023 $m
31 Dec 2022 $m
Borrowings of shareholder-financed businesses
Less: holding company cash and short-term investments
3,933
(3,516)
Net core structural borrowings of shareholder-financed
businesses
Moody's total leverage
417
20%
IFRS
basis
Mark-to-
market value
(274)
EEV
basis
3,659
IFRS
basis
4,261
Mark-to-market
value
(427)
EEV
basis
3,834
—
(3,516)
(3,057)
—
(3,057)
(274)
143
1,204
(427)
777
21%
The total borrowings of the shareholder-financed businesses were
$3.9 billion at 31 December 2023 (31 December 2022: $4.3 billion).
The Group had central cash resources of $(3.5) billion at
31 December 2023 (31 December 2022: $(3.1) billion), resulting in
net core structural borrowings of the shareholder-financed businesses
of $0.4 billion at end of 31 December 2023 (31 December 2022: $1.2
billion). We have not breached any of the requirements of our core
structural borrowings nor modified any of their terms during 2023.
On 20 January 2023 the Group redeemed £300 million ($371 million)
senior bonds as they reached their maturity, and on 10 July 2023 the
Group redeemed a €20m ($22 million) medium-term note as it fell
due on 10 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
the borrowings is presented in note C5.1 to the IFRS financial results.
On 2 March 2023 the Group’s parent company, Prudential plc,
transferred all of its borrowings to a wholly-owned indirect subsidiary,
Prudential Funding (Asia) plc. Prudential plc has provided a guarantee
to holders of the debt instruments in the event of default by
Prudential Funding (Asia) plc. Other terms of the borrowings, and the
value recognised by the Group, were unchanged by this transfer.
In addition to its net core structural borrowings of shareholder-
financed businesses set out above, the Group has structures in place
to enable access to 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 $699
million in issue at 31 December 2023 (31 December 2022: $501
million).
As at 31 December 2023, 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 2023. The
Group has reviewed its requirements for committed facilities and
after the balance sheet date on15 February 2024, the Group renewed
its undrawn committed facilities for a total of $1.6 billion expiring
2029.
Prudential plc Annual Report 2023
45
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial review continued
Cash remittances
The definition of holding company cash and short-term investments was 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. The inclusion of amounts previously
managed on a regional basis increased the holding company cash and short-term investment by $0.9 billion at 31 December 2022.
Holding company cash flow
Net cash remitted by businesses units
Net interest paid
Corporate expenditure
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
Other corporate activities
Total other movements
Net movement in 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
2023 $m
1,611
(51)
(271)
(182)
(504)
1,107
(533)
574
(393)
226
(167)
407
2022 $m
1,304
Change %
24
(204)
(232)
(220)
(656)
648
(474)
174
(1,729)
248
(1,481)
(1,307)
75
(17)
17
23
71
(12)
230
77
(9)
89
n/a
3,057
3,572
52
—
(113)
905
3,516
3,057
Remittances from our businesses were $1,611 million (2022: $1,304
million).The remittances are net of cash advanced to CPL, our joint
venture business in the Chinese Mainland, of $176 million in
anticipation of a future capital injection, as previously announced in
December 2023. Remittances were used to meet central outflows of
$(504) million (2022: $(656) million) and to pay dividends of $(533)
million (2022: $(474) million).
Central outflows include net interest paid of $(51) million (2022:
$(204) million), which is net of interest and similar income earned on
central cash balances in 2023, largely on balances brought into the
updated definition of holding company cash and short-term
investments at the end of 2022. In addition, lower interest payments
were made on core structural borrowings in 2023 as compared with
the prior year.
Cash outflows for corporate expenditure of $(271) million (2022:
$(232) million) include cash outflows for restructuring costs.
Other cash flow movements included net receipts from other
corporate activities of $226 million (2022: $248 million) comprising
largely of proceeds received from the sale of our remaining shares in
Jackson Financial Inc. as well as dividend receipts. In 2023, the Group
redeemed senior bonds as they reached their maturity at a cost of
$393 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) Adjusted release of CSM reflects an adjustment to the release of CSM figure as shown in note C3.2 of the IFRS financial results of $(3) million (2022: $23 million) for the
treatment adopted for adjusted operating purposes of combining losses on onerous contracts and gains on profitable contracts that can be shared across more than one
annual cohort. See note B1.3 to the IFRS financial results for more information.
(2) Calculated with no adjustment for the value of contractual service margin in equity and with 50 per cent of the with-profits estate treated as equity.
(3) See note II of the Additional unaudited financial information for definition and reconciliation to IFRS balances.
46
Prudential plc Annual Report 2023
Segment discussion
Delivering through our multi-market
growth engines
The following commentary provides an overview of each of the Group’s segments, together with a discussion of their 2023
financial performance.
As in previous years, we discuss our performance on a constant currency basis, unless stated otherwise. The definitions of
the key metrics we use to discuss our performance in this report are set out in the 'Definition of performance metrics'
section later in this document, including, where relevant, references to where these metrics are reconciled to the most
directly comparable IFRS measure.
Chinese Mainland – CITIC Prudential Life (CPL)
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS (loss) after tax ($m)
Amounts included in the table above represents the Group's 50 per cent share.
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 with a truly multi-distribution platform offering a diverse
set of products to meet customers' needs.
CPL is an established franchise with an extensive footprint across 23
branches covering 102 cities. CPL is focused on the affluent and
advanced affluent segments of the market where personal income
levels from these segments have more economic resilience and which
are still significantly under penetrated. CPL has a high quality agency
force and an extensive network of 62 bancassurance partners with
access to over 5,600 branches across the Chinese Mainland.
During December 2023 Prudential announced that it was providing
additional growth capital to CPL of RMB1.25 billion (US$176 million) in
cash, with CITIC, its joint venture partner providing an equal amount.
The additional capital supports new business growth and improves
CPL's regulatory capitalisation. The business will be focused on margin
maintenance, strong risk management through a rebalanced product
mix and seeking quality growth in its agency channel through targeted
agent recruitment and improved productivity and from improved
penetration of its customer bases of its bank partners.
Financial performance
During 2023 CPL pro-actively diversified its products with a pivot
towards whole-life products and higher margin annuity and longer-
premium payment term products. The re-pricing approach was
ratified by the regulator in the second half of 2023 with further
regulatory guidance on expense control for the bancassurance
channel, and was implemented well ahead of the industry.
Consequently, 2023 saw new business profit in CPL fall by (40) per
cent reflecting both lower volumes and adverse economic impacts.
Bancassurance channel sales declined driven by the regulatory reform
on expense control of the channel mentioned above, which was
partially offset by growth in the agency channel. Excluding the effects
of interest rates and other economic movements, new business
2023
534
222
42
368
(577)
Actual exchange rate
Constant exchange rate
2022
884
387
44
271
(345)
Change
(40) %
(43) %
(2) ppts
36%
2022
840
368
44
258
Change
(36) %
(40) %
(2) ppts
43%
(67) %
(328)
(76) %
margin grew by six percentage points as a result of actions to
rebalance the product proposition. Including the effects of economics
the new business margin declined by two percentage points.
CPL has grown long term protection APE sales by 27 per cent with
strong whole life protection propositions and enhanced critical illness
features targeting elderly and infants.
CPL's agency business saw an increase in APE sales and new business
profit reflecting an increase in the productivity of our agents and a
high agent activation rate. We have seen an increase in agent
productivity in the year, both in terms of policies sold per agent (up
11 per cent) and new business profit per agent (up 26 per cent). The
agents provisionally qualified for the Million Dollar Round Table
(MDRT) in 2023 increased by 19 per cent to more than 1,000 along
with an increase in new agents by 6 per cent.
As previously noted, during 2023 CPL proactively rebalanced its
bancassurance sales mix between whole-life products and higher
margin annuity and longer-premium payment term products. CPL's
bancassurance business was further affected by expense regulatory
reforms during the second half of the year. As a result APE sales
through the bancassurance channel fell materially. We see the recent
regulatory driven transformations as conducive to the long-term
development of the insurance industry particularly on health and
protection and retirement. We believe these transformations and
other actions in 2023, leave CPL well positioned to grow in the future.
The adjusted operating profit for our business in the Chinese Mainland,
CPL, increased by 43 per cent to $368 million, reflecting an increased
longer-term net investment result given a higher asset base from
increased sales of savings products in recent years and a reduction in
the losses from the contracts classified as onerous under IFRS 17. The
IFRS loss after tax for the year was $(577) million compared to $(328)
million in the prior year, reflecting lower than expected equity returns
and the net impact of falling interest rates on insurance assets and
liabilities.
Prudential plc Annual Report 2023
47
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Segment discussion continued
Hong Kong
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS profit/ (loss) after tax ($m)
In Hong Kong, Prudential is a trusted household brand, with a
premium agency force and is among the top three life insurers1.
In 2023, we significantly outperformed the market increasing our
market share, resulting in a number one ranking for the offshore
business1. Our premier agency force and strong partnership with
Standard Chartered Bank position us well to address the unique needs
of the customers across different life stages, including comprehensive
health and protection solutions and long-term savings and retirement
solutions to address the wealth accumulation, retirement and legacy
planning needs. We are well positioned to serve the needs of Chinese
Mainland customers, which include diversification of currency and
asset class, professional financial advice across a broad product
spectrum and access to high-quality medical care available in Hong
Kong. Our surveys of potential Chinese Mainland customers report
consistent demand for long term savings and health and protection
products. With our newly opened Macau branch, we are present in all
11 cities2 in the Greater Bay Area, with a population of over 85 million
people3.
Financial performance
New business profit increased by 267 per cent to $1,411 million,
largely reflecting the increase in APE sales.
APE sales for our business in Hong Kong increased by 276 per cent to
$1,966 million in 2023, reflecting the strong demand from both
Domestic customers and Chinese Mainland visitors as borders
reopened in early 2023, with growth across all distribution channels.
The Hong Kong economy continued to recover year-on-year led by
inbound tourism and domestic demand, with over 26 million people
from the Chinese Mainland visiting Hong Kong in 2023. Visitor
numbers in the year were circa 60 per cent of that in 2019, before the
Covid-19 pandemic, while APE sales to Chinese Mainland visitors in
the same period were circa 1.1 times of that in 2019, but marginally
still below the levels of 2018, prior to any Covid-19 related disruption.
In addition, we also saw growth of 36 per cent in our domestic
segment supported by new product launches and customer
campaigns.
While savings products contribute the majority of APE sales, due to
large case sizes, on a policy count basis, health and protection sales
represented 58 per cent of new policy issuances, reflecting the growth
in both agency and bancassurance channels.
48
Prudential plc Annual Report 2023
2023
1,966
1,411
72
1,013
976
Actual exchange rate
Constant exchange rate
2022
522
384
74
1,162
(742)
Change
277 %
267 %
(2) ppts
(13%)
n/a
2022
523
384
Change
276 %
267 %
73
(1) ppts
1,162
(13%)
(742)
n/a
We increased APE sales in our health business by 22 per cent and
generated a new business profit for health business of $86 million,
covering more than 550,000 customers.
Our agency channel contributed to 70 per cent of APE sales, with
robust growth of 352 per cent supported by domestic and Chinese
Mainland customers. We have reached our recruitment target of
hiring 4,000 agents in 2023, the vast majority of which have already
had regulatory approval. Our active agents increased by 72 per cent
with an increase in monthly new business profit per active agent by
128 per cent, contributing to an increase in agency channel new
business profit of 294 per cent.
Our bancassurance channel also saw significant growth with APE sales
up 52 per cent. The proportion of APE sales comprising health and
protection products increased from 5 per cent in 2022 to 13 per cent
in 2023, which, together with the growth in APE sales, contributed to
an increase in new business profit of 93 per cent. Of the overall
bancassurance APE sales, around 68 per cent were from 'new to
insurance' customers compared to 50 per cent in 2022, reflecting
strong demand for our products. In advance of the reopening of
border with the Chinese Mainland, we reactivated our broker network
which delivered significant increase in APE sales increasing our market
share and ranking in broker channel.
Overall the new business margin for Hong Kong was broadly stable at
72 per cent (2022: 73 per cent), reflecting a favourable shift in
channel mix to the growing agency business, offset by the impact of
product mix shifts reflecting higher case sizes of relatively lower
margin savings products sold to Chinese Mainland customers.
Economic impacts only marginally decreased the margin.
Normalisation of savings product case sizes, combined with an
increase in the proportion of health and protection sales, led to
favourable product mix shifts and margins increasing in the second
half of the year.
In Hong Kong, adjusted operating profit was $1,013 million, down
(13) per cent mainly due to reduced net investment return associated
with lower opening asset balances following adverse market
movements in 2022 and a lower level of positive claims and expense
variance as a result of our continued investment in our strategic
pillars.
The IFRS profit after tax for our Hong Kong business was $976 million
compared to a loss after tax of $(742) million in 2022. The loss in
2022 largely reflected investment losses given the large increase in
interest rates in that period. This compares to a more stable interest
rate environment in 2023.
2023
277
142
51
221
156
Actual exchange rate
Constant exchange rate
2022
247
125
51
205
108
Change
12%
14%
— ppts
8%
44%
2022
240
122
Change
15%
16%
51
— ppts
200
104
11%
50%
In the bancassurance channel, our strategic partnerships provide us
an opportunity to provide solutions across a wide spectrum of
customer segments. We saw a marginal increase in APE sales from
our bancassurance channel. We continue to drive high margin health
and protection business, with over 38 per cent of APE sales in the
bancassurance channel from health and protection products. The
integration of Citi Bank with UOB, which commenced in the fourth
quarter of 2023, is now completed and we will be able to offer
comprehensive solutions to the expanded customer base. We see
long-term growth opportunities given our existing partnerships and
potential for new partnerships.
The adjusted operating profit for Indonesia increased by $21 million
to $221 million in 2023, following the non-repeat of losses that arose
on a small portfolio of contracts that were classified as onerous under
the IFRS 17 methodology in 2022.
The IFRS profit after tax for our business in Indonesia increased from
$104 million to $156 million, reflecting the benefits described above
along with reduced negative short-term investment variances in 2023
following the drop in interest rates during the year compared to
higher interest rates in 2022.
Indonesia
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS profit after tax ($m)
In Indonesia, we are among the top three life insurers in both the
conventional and Syariah markets1. We continue to offer innovative
products, through a diversified distribution network. We have a
leading premier agency force with a 29 per cent agency market
share1, contributing around 80 per cent of overall APE sales. Through
our dedicated Syariah life insurance entity, we are well positioned to
meet the growing demands for Syariah solutions and support the
growth of the Syariah community and economy.
Financial performance
Overall new business profit grew by 16 per cent to $142 million,
marginally above the growth in APE sales. In the second half of 2023,
new business profit grew slower than in the first half but was still a
double-digit percentage increase supported by a strategic pivot from
individual linked products to traditional life products and a favourable
shift in channel mix towards agency business. We have revamped our
unit-linked product propositions with enhanced benefits in response
to new regulations governing the design, sale and management of
unit-linked products (commonly known as PAYDI in the market). APE
sales for our business in Indonesia grew by 15 per cent to $277
million. Health and protection APE sales grew by 18 per cent in 2023
assisted by repricing actions and medical riders upgrades.
Our diversified distribution network comprises our high quality agency
force, a long-standing partnership with Standard Chartered Bank and
UOB, other bank partnerships and direct marketing.
APE sales for the agency channel increased by 18 per cent. The
growth in agency channel sales was achieved amidst a wider industry
slowdown and we saw monthly new business profit per active agent
increase by 7 per cent. This was supported by our transformation
programme that commenced in 2022, where we accelerated agency
channel growth by revamping our sales management model,
upgrading our training programme and redesigning our
compensation scheme to incentivise quality sales and productivity
growth as well as successful repricing. We have over 1,100 agents
provisionally qualified for the Million Dollar Round Table (MDRT) in
2023, an increase of over 40 per cent from the prior year.
Prudential plc Annual Report 2023
49
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Segment discussion continued
Malaysia
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS profit after tax ($m)
In Malaysia, we are a leading life insurer and the largest Takaful
operator1 with 18 per cent and 22 per cent market share respectively.
In the young segment, we continue to provide comprehensive
investment linked propositions along with various health and
protection riders, while in the case of the family segment, we provide
core investment linked propositions, affordable health solution and
savings solutions.
In Malaysia, our diversified distribution network is complemented by
a premier agency force and our bank partnerships with Standard
Chartered Bank, UOB and Bank Simpanan Nasional.
Our conventional and Takaful business in Malaysia featured among
the top five in Life insurance customer satisfaction survey conducted
by 'Bank Negara Malaysia'.
The metrics in the segment table above reflect the Group's 100 per
cent economic interest in the Malaysian conventional Life business
(Prudential Assurance Malaysia Berhad or PAMB) and the Group's
interest in the Takaful joint venture.
Prudential currently owns 51 per cent of the ordinary shares of the
holding company of PAMB and a 49 per cent share in the Takaful
joint venture.
Market liberalisation measures were introduced by BNM, the
Malaysian insurance regulator, in April 2009, which increased the limit
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
financially support expansion of providing insurance coverage to the
most vulnerable in Malaysian society through the National B40
Protection Trust Fund.
We are focused on further strengthening our franchise in Malaysia
through enhancing recruitment and activation of the agency force,
increasing customer penetration and breadth of our bank partners as
well as actively managing our health portfolio and we will deploy
capital as needed to support growth.
2023
384
167
43
305
257
Actual exchange rate
Constant exchange rate
2022
359
159
44
340
178
Change
7%
5%
(1) ppts
(10) %
44%
2022
347
154
44
329
173
Change
11%
8%
(1) ppts
(7) %
49%
Financial performance
New business profit for our businesses in Malaysia grew 8 per cent to
$167 million. This growth reflects an increase in APE sales of 11 per
cent to $384 million, primarily driven by growth in the bancassurance
channel, due to marketing campaigns and supported by the merger
of UOB and Citibank that has widened the number of accessible
customers. The growth in APE sales from the bancassurance channel
was offset in part by a marginal decline in the agency channel.
We recruited more than 6,800 agents in 2023, and more than 550
agents provisionally qualified for Million Dollar Round Table (MDRT).
Following these initiatives, we saw an increase in monthly new
business profit per active agent resulting in an 8 per cent increase in
new business profit, despite a marginal decline in APE sales. We
continue to take actions to improve productivity by developing
programs to support both new and established agents which have
seen productivity increase consistently each quarter since the start of
2023.
We maintained the market leadership position in the conventional
bancassurance channel, demonstrating the strength of our strategic
bank partnerships. We continue to provide comprehensive
propositions for the diverse needs of customers in each of the high
net worth, affluent and mass market segments and we seek to
increase the penetration into our bank partners' customer base.
Overall we saw a 36 per cent increase in the APE sales through the
bancassurance channel leading to double digit growth in new
business profit.
The adjusted operating profit for our business in Malaysia declined by
(7) per cent to $305 million, primarily driven by a normalisation of
claims experience as the number of medical reimbursement cases
returned to pre-pandemic levels.
The IFRS profit after tax for our business in Malaysia increased from
$173 million to $257 million, primarily reflecting the positive impacts
from the decline in interest rates in Malaysia, compared to increasing
interest rates in 2022.
50
Prudential plc Annual Report 2023
Singapore
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS profit/ (loss) after tax ($m)
In Singapore, we are one of the market leaders in protection, savings
and investment-linked plans1. 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 agents and financial advisors and our bank partners.
Through our two strategic partners, UOB and Standard Chartered
Bank, we gain access to the retail, commercial banking, and high net
worth customer base of two established banks in Singapore.
We remain focused on our customers and seek to address their needs
across the life stages. In the affluent segment, we offer
comprehensive health and retirement solutions. We are one of the
key players in the integrated Shield market (private insurance
coverage that integrates with the national MediShield Life scheme),
and continue to explore innovative partnerships with healthcare and
technology providers to enhance our offerings. For the younger
generation, we continually improve our investment-linked
propositions and expand options for ESG - themed investments for
customers. Finally, we serve the small and medium enterprise (SME)
segment for the employee benefit business.
We received external recognition by winning No.1 Insurer The Straits
Times Singapore's Best Customer Service 2023/24 survey.
Financial performance
2023 saw a challenging operating environment for the life insurance
industry in Singapore due to higher interest rates, particularly in the
first part of the year. New business profit declined by (5) per cent to
$484 million, reflecting a smaller proportion of relatively high margin
single premium participating products, alongside lower APE sales.
In this context, APE sales declined by (1) per cent to $787 million.
Regular premium sales have seen steady growth across 2023, with
higher new business volume observed in each quarter compared with
the same period in the prior year, and overall achieving double-digit
growth in the year. However, sales of single premium participating
products through the bancassurance channel were particularly
affected by movements in interest rates in the period, contrasting
with the elevated level of sales in the comparative period particularly
in the first half when interest rates were favourable. In contrast
overall APE sales momentum was positive in the second half of the
year, with APE sales in the third quarter and fourth quarter increasing
on the prior quarter driven by the expansion in regular premium
business.
While individual health and protection business have remained at a
stable level in our product mix, we saw a shift in customer interest and
new business sales towards investment-linked policies. While new
business profit margin for the year declined overall, we saw sequential
improvement across quarters during the year with growing
momentum in sales of higher margin individual protection and
investment-linked business.
2023
787
484
61
584
512
Actual exchange rate
Constant exchange rate
2022
770
499
65
570
(7)
Change
2 %
(3) %
(4) ppts
2 %
2022
791
512
65
585
Change
(1) %
(5) %
(4) ppts
— %
n/a
(7)
n/a
Our enterprise benefit business delivered good growth with APE sales
increasing by 9 per cent, covering around 3,000 small-to-medium
enterprises and over 200,000 employees. Our Shield APE grew 9 per
cent over last year as we increase the provision of value-added and
wellness related services to customers.
Overall new business profit from the Agency channel improved by 4
per cent in the year, reflecting positive product mix effects from a
growth in the proportion of sales from Shield and higher margin
individual protection products. APE sales for the agency channel
decreased by (4) per cent in the year. Regular premium APE sales in
our agency channel grew 4 per cent compared with the prior year.
At the end of 2023 our total financial consultant force, of agents and
financial advisors increased by 3 per cent when compared with 2022.
Our number of eligible Agency MDRT members remained stable at
over 1,280 agents in 2023.
We launched Prudential Financial Advisor channel in April 2023,
which is the first financial advisory firm in the Prudential Group. PFA
will offer a wide range of products and services including general
insurance and wealth solutions, in addition to Prudential’s core
solutions in whole and term life, health & protection, savings,
retirement and employee benefits. With this, we aim to cater to the
growing and diverse needs of various customer segments in
Singapore, as well as boost financial representative recruitment.
Reflecting the decline in high margin single premium products,
bancassurance new business profit declined by (24) per cent in the
year. However, bancassurance APE sales increased 2 per cent
compared with the prior year. Pivoting to customer needs in this
environment we have launched regular premium investment linked
products and sales of these products gathered momentum in the
second half of 2023. The level of regular premium business in
bancassurance channel stands at 81 per cent overall in 2023, 41
percentage points higher than 2022.
Our adjusted operating profit for our business in Singapore remained
at similar level at $584 million, with the higher release of CSM and risk
adjustment offset by a lower net investment return, following the
adverse market movements in 2022 lowering the opening investment
balances.
The IFRS profit after tax for our Singapore business was $512 million
compared with a loss after tax of $(7) million in 2022. This largely
reflected higher investment losses in 2022 following the significant
increase in interest rates in that year.
Prudential plc Annual Report 2023
51
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Segment discussion continued
Growth markets and other
APE sales ($m)
New business profit ($m)
New business margin (%)
Adjusted operating profit ($m)
IFRS profit after tax ($m)
2023
1,928
699
36
746
775
Actual exchange rate
Constant exchange rate
2022
1,611
630
39
728
314
Change
20%
11%
(3) ppts
2%
147%
2022
Change
1,546
609
39
715
304
25%
15%
(3) ppts
4%
155%
Our growth markets and other segment incorporates our life
businesses Thailand, Vietnam, the Philippines, Cambodia, Laos and
Myanmar in the ASEAN region, as well as those in India, Taiwan, and
Africa.
Vietnam
Prudential is the leading life insurance company in Vietnam, which
has the third-largest population in ASEAN, and operates with a
diversified distribution mix.
Life new business profits grew by 15 per cent to $699 million, the
second largest segment in the Group, and APE sales grew 25 per cent
to $1,928 million.
There was a small fall in overall new business margin as a result of
country mix following a fall in consumer sentiment and hence lower
sales in Vietnam.
The adjusted operating profit was $746 million, up 4 per cent. This
reflects an increase in the release of CSM and net investment return
aided by recent new business growth. These effects are partially
offset by the elevated expenses supporting the continued investment
in our strategic pillars together with less favourable claims experience.
The IFRS profit after tax and adjusted operating profit for Growth
market and others also includes the tax charge on the profits for joint
venture life business in Chinese Mainland and Malaysia. The IFRS profit
after tax in the Growth market and other segment increased from $304
million to $775 million, largely reflecting significant investment losses in
2022 from higher interest rates in most of our markets.
A detailed discussion of new business performance by key businesses
in presented below.
Thailand
In Thailand we are focused on our bancassurance channel supported
by alternative distribution methods including digital, agency, direct
marketing and brokerage. New business profit declined by 6 per cent,
largely as a result of interest rate changes. APE sales grew by 4 per
cent following a high base in 2022, benefiting from double-digit
growth from our UOB bank partnership and an increase in the
contribution of Group employee benefit (EB) solutions.
Our distribution partnerships have benefited in the year through the
integration of the Citi and UOB organisations in Thailand. We also
revamped our online application platform ('PRUPlus') to improve
reliability and enhance the seller and customer experience. At the end
of 2023 we invested in a new bancassurance partnership with CIMB,
becoming the exclusive life insurance partner of CIMB Thai.
Prudential Thailand seeks to accelerate its growth plans building on
the fact that it is already the third largest bancassurance player in the
market1.
New business profit for our business in Vietnam declined materially,
albeit there was an improvement in new business margins,
particularly from the bancassurance business and interest rate effects.
APE sales declined by 33 per cent, against an overall market decline of
41 per cent, reflecting an industry-wide fall in consumer sentiment.
However, the business’s focus on customers and the strength of its
agency force has seen it outperform the market, increase its market
share and retain the number one position in the market.
We continue to expand our geographical footprint in urban areas
through technology-powered agency and bancassurance channels.
Our diversified distribution includes our established agency force,
which includes more than 1,500 agents provisionally qualified for
Million Dollar Round Table (MDRT), and seven exclusive bank
partnerships.
We extended our exclusive bancassurance partnership with Vietnam
International bank until 2036, developing new industry-leading
quality standards and contributing to the healthy and sustainable
development of bancassurance in Vietnam. We continue to focus on
improving sales quality and strengthening our relationships with our
bank partners to widen our reach to customers through their
combined 800 branches in Vietnam.
The Philippines
We are the market leader in the Philippines with 17 per cent market
share1 by weighted new business premium, based on the latest
available market data reflecting the core strength of our leading
agency force. With our young and digitally empowered agency force,
we have one of the largest agency forces in the country. Competition
for quality agents is strong and we have taken steps to retain talent.
We continue to offer a wide range of products to meet our
customers’ savings and protection needs. New business profit in 2023
delivered double-digit growth, despite a marginal (2) per cent decline
in APE sales reflecting a favourable impact from product mix and
economic tailwinds. We will continue to strengthen our distribution
network through onboarding and nurturing high-quality agents,
equipped by digital capabilities, as well as continue to enhance
customer experiences through offering comprehensive solutions and
seamless customer experiences.
52
Prudential plc Annual Report 2023
In Taiwan we saw 86 per cent APE sales growth in 2023, supported by
a diversified channel mix in bancassurance and brokerage channels,
with strong local bank partners performance as supported by key
products campaign and initiatives. Our newly nurtured bank partners
delivered over double-digit APE sales growth compared to last year,
and contributed to 34 per cent of APE sales in 2023. The sales
performance was attributable to our offering of tailored solutions to
fulfil specific customer needs across saving, protection and medical
needs in different life stages with different currencies. New business
profit rose, driven by this increase in APE sales as well as favourable
product mix changes. The business is focused on further improving
margins.
Africa
Despite macro-economic uncertainties and in particular higher
inflation, APE sales for Africa grew by 26 per cent in 2023, with
double-digit growth in both agency and bancassurance sales. Six out
of the eight markets delivered double-digit growth in the new
business profit in the year. This resulted from an improved channel
and product mix, alongside the growth in APE sales, which led to 33
per cent increase in new business profit.
In Africa, Prudential has an established agency force with over 300
agents who qualified for Million Dollar Round Table membership. In
addition, Prudential Africa has added 13 additional bank partners in
the year, given us access to over 1,700 bank branches in total.
We will continue to focus our investment and capital on those
markets which are large and in which we see the long-term attractive
returns.
India
Our associate business in India, ICICI Prudential Life, successfully
accomplished its objective to double its 2019 new business profit by
2023 through its ‘4P’ strategic framework for Premium growth,
Protection focus, Persistency improvement and Productivity
enhancement.
New business profit was up 2 per cent with the uplift from APE sales
growth being offset by adverse economics and a greater proportion
of savings products being sold in the year.
APE sales for ICICI Prudential Life grew by 10 per cent, with a well-
diversified distribution network enabling the company to reach a
wider cross-section of customers to drive growth. The diverse
distribution network comprises more than 200,000 agents including
the addition of 40,000 new agents in 2023 and 42 bank partnerships
with access to more than 20,000 bank branches.
To enhance distribution capabilities, ICICI Prudential has introduced
'ICICI Pru Stack' a set of platform capabilities encompassing digital
tools and analytical abilities. This provides distribution partners with
greater information on customers and their needs, and has enabled
simplification of the buying journey, with approximately 40 per cent
of long-term savings policies now issued on the same day as the
purchase process starts.
ICICI Prudential Life, of which we hold 22 per cent, is amongst the
top-four private life insurance companies in India and is listed on the
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in
India.
Taiwan
Taiwan is the fifth-largest life insurance market in Asia4, with a
population of 24 million. Prudential is a leading insurance company in
Taiwan among foreign players with an overall APE market share of 8
per cent in 2023, 3 percentage points higher than 2022. It also
delivered the highest year-on-year growth rate in the industry during
2023.
Our business in Taiwan provides solutions for long-term savings and
protection to our target market segments. Families remains a key
customer segment for Prudential Taiwan with 31,000 new customers
acquired from this segment (an increase in the year of 104 per cent).
Prudential plc Annual Report 2023
53
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Segment discussion continued
Eastspring
Total funds under management ($bn)
Adjusted operating profit ($m)
Fee margin based on operating income (bps)
Cost/income ratio (%)
IFRS profit after tax ($m)
Eastspring is the asset management arm of the Group. Its funds under
management or advice (referred collectively as funds under management
or FUM) of $237.1 billion includes $38.5 billion that represents our 49
per cent share in funds managed by ICICI Prudential Asset Management
Company (IPAMC) in India and $9.7 billion that represents our 49 per
cent share in funds managed by CITIC-Prudential Fund Management
Company Limited (CPFMC) in China. Eastspring has $141.0 billion of
funds under management on behalf of the Prudential Group.
Investment performance
Eastspring's investment performance saw 44 per cent of FUM
outperforming their benchmarks over the past year (2022: 59 per cent)
and 50 per cent of FUM outperforming their benchmarks over the past
three years (2022: 39 per cent). Whilst, there was a decline in one-year
outperformance when compared to 2022 mainly driven by
underperformance in three multi-asset portfolios, the Singapore-based
Value Equity teams continued their substantial outperformance. Both
the Growth Equities and Active Quantitative strategies also posted
positive aggregate returns across one and three years. The Singapore-
based Fixed Income team was also able to turnaround the
underperformance experienced in 2022, with 90 per cent of FUM
outperforming their benchmarks in 2023. We continued to upgrade our
investment and risk management platform for multi-asset strategies and
investment performance improved in the fourth quarter of 2023
compared to the prior quarter.
Eastspring also continued to develop its investment platform and
capabilities through a series of strategic hires, notably in portfolio risk
management and fixed income, and through investment process
enhancements across the various teams. Further work was progressed
in integrating Eastspring’s investment performance for wholly-owned
businesses and aligning common investment practices, including
research.
Eastspring continued to be recognised for its achievements, being
named Best Emerging Markets Equity Manager by Citywire Asia Asset
Management Awards for the second consecutive year and Best Value
Investing Manager regionally by Asia Asset Management.
Broadening distribution capabilities
Eastspring’s strategy is anchored on understanding its clients and
delivering strong capabilities and products for their bespoke needs. In
2023, Eastspring continued to extend and deepen its relationships
with third-party clients and Prudential Life Companies which has
generated positive net inflows.
Eastspring continued to build retail partnerships with distributors and
banks. Notably in Japan, the firm expanded its partnerships to more
than 120 retail distributors and converged 22,800 attendees through
274 workshops and client seminars.
Across the institutional business, the firm has seen success in its
international markets of the Americas, Europe, Taiwan and Thailand.
54
Prudential plc Annual Report 2023
2023
237.1
280
31
53
254
Actual exchange rate
Constant exchange rate
2022
221.4
260
29
55
234
Change
7%
8%
2bps
2ppts
9%
2022
Change
222.2
255
28
55
230
7%
10%
3bps
2ppts
10%
Accelerating responsible investing
Eastspring’s commitment to responsible investing is embedded across
its business.
Across its markets, Eastspring is focused on driving sustainable
solutions on three fronts. First, Eastspring extended its engagement
programme beyond climate change to include themes of palm oil,
unsustainable timber, and modern slavery. Second, the firm enhanced
its ESG data analytics to support investment activities via the creation
of a proprietary ESG assessment visualiser and enhanced client
reporting tools for climate risk, UN Sustainable Development Goal
alignment and Scope 3 carbon emissions. Third, the firm published its
first Responsible Investment Report and improved its United Nations
Principles for Responsible Investment (UNPRI) assessment.
Open-architecture technology platform
Eastspring has embarked on a multi-year firm-wide transformation
journey to modernise its business. This includes upgrading its operating
model for robustness and scalability, as well as enhancing its control
environment.
Through HERA, Eastspring’s proprietary cloud-native Data & AI platform,
Eastspring is making good progress in its ambition to become a data-
driven organisation. Eastspring is already seeing benefits from its
early efforts in the form of an automated Finance 'data-mart' for end
to end reporting, optimising insights across markets, and building
robust data for monitoring and regulatory purposes. The platform has
also powered climate insights for our portfolio and strengthened real-
time risk management through its investment risk insights.
Joint venture growth initiatives
In India, IPAMC strengthened its distribution capabilities, servicing a
direct client base spread across 300 cities in India. This resulted a 17
per cent increase in IPAMC’s client base to over 9 million; of which
around 33 per cent were direct clients. In addition, IPAMC broadened
its product suite into the alternatives segment focused on private
equity and private credit, and raised $324 million (100 per cent
shareholding basis). Reflecting net inflows coupled with a favourable
equity market performance, FUM for IPAMC grew by 28 per cent (on
actual exchange rate basis).
In China, CPFMC is looking to broaden its product suite with new fixed
income and quantitative products. CPFMC also strengthened its
distribution capabilities with 14 new partnerships, comprising of 10
bank wealth management companies and 4 securities firms. The
depth of our partnership, including the e-commerce platforms has
generated strong net inflows, primarily from money market funds
supporting a 8 per cent increase (on actual exchange rate basis) in
FUM for CPFMC, despite the challenging economic environment.
Financial performance
External funds under management ($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)
2023
$m*
94.2
1.9
96.1
110.0
31.0
141.0
Actual exchange rate
Constant exchange rate
2022
$m*
Change
%
2022
$m*
Change
%
81.9
9.3
91.2
104.1
26.1
130.2
15
(80)
5
6
19
8
7
81.3
9.4
90.7
104.9
26.6
131.5
222.2
16
(80)
6
5
17
7
7
Total funds under management or advice ($bn)
237.1
221.4
Total external net flows†
4,054
(1,586)
n/a
(1,538)
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
Average funds managed by Eastspring
Fee margin based on operating income
Cost/income ratio
353
347
700
(2)
698
(372)
(46)
280
254
225.9
31bps
53%
319
341
660
1
661
(360)
(41)
260
234
229.4
29bps
55%
11
2
6
n/a
6
(3)
(12)
8
9
(2)
2bps
2ppts
311
342
653
1
654
(359)
(40)
255
230
229.9
28bps
55%
14
1
7
n/a
7
(4)
(15)
10
10
(2)
3bps
2ppts
Excluding funds managed on behalf of M&G plc.
* Unless otherwise stated.
†
‡ During the year Eastspring has reclassified its funds under management, and associated income, between retail and institutional categories. Amounts are now classified as
retail or institutional based on whether the owner of the holding is a retail or institutional investor. Under the previous basis amounts were classified based on the nature of
the investment vehicle in which the amounts were invested. The revised classification presents the funds held by each client type on a more consistent basis, which aligns
with typical differences in fee rate basis for each client type. Prior period figures are restated accordingly.
Eastspring's total funds under management and advice (FUM)
increased by 7 per cent to $237.1 billion (31 December 2022: $221.4
billion on actual exchange rate), reflecting favourable market
movements, and net inflows from third parties (excluding M&G plc)
and the Group's life business. In 2023, there was a shift in overall asset
mix from bonds to equity and multi-assets funds, while the overall
assets remain well diversified across both clients and asset classes.
Third party net inflows (excluding money market funds and funds
managed on behalf of M&G plc) were $4.1 billion (2022: net outflows
of $(1.5) billion) reflecting inflows into higher margin retail funds. This
was more than offset by net outflows of $(7.6) billion (2022: $(0.8)
billion) from the expected redemption of funds managed on behalf
of M&G plc, with further net outflows of about $(0.6) billion expected
in 2024. In addition, net inflows from Prudential's life business were
$2.3 billion (2022: $8.0 billion).
The average FUM decreased by (2) per cent compared to 7 per cent
increase in closing FUM, largely reflecting the adverse market
movements in 2022. Eastspring’s adjusted operating profit increased
by 10 per cent to $280 million, reflecting a circa $20 million net
investment gain, reported within operating income before
performance-related fees (as compared with a net investment loss of
circa $10 million in the prior year) on shareholders’ investments
including seed capital. Excluding the gains and losses on shareholders’
investments from both periods, operating profit was (2) per cent lower,
consistent with the decline in average FUM. There was an improvement
in the fee margin and cost/income ratio, reflecting the higher mix from
retail equity funds and the investment gains as noted above.
Notes
(1) As reported at full year 2023 unless otherwise specified. Sources include formal (eg competitors results release, local regulators and insurance association) and informal
(industry exchange) market share. Ranking based on new business (APE sales, weighted new business premium, full year premium or weighted first year premium) or Gross
Written Premium depending on availability of data. Rankings in the case of Chinese Mainland, Taiwan and Myanmar are among foreign insurers, and for India is among
private companies. Countries based on nine months ended September 2023: Hong Kong, Philippines, Ghana (Africa) and Kenya (Africa) and full year 2022: Laos, Zambia
(Africa) and Togo (Africa) and full year 2020: Nigeria (Africa).
(2) Across Hong Kong, Macau and the Chinese Mainland.
(3) Source: The Guangdong-Hong Kong-Macao Greater Bay Area Development Office.
(4) Source: Swiss Re Institute.
Prudential plc Annual Report 2023
55
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Risk review
Thoughtful risk management through
advocating the interests of our people,
customers, regulators and shareholders
1 Introduction
Prudential’s Group Risk Framework, risk appetite and robust governance
have enabled the business to manage and control its risk exposure
throughout market volatility and uncertainty in 2023 to support the
Group’s strategy of delivering sustainable value for all our stakeholders. As
Prudential focuses on executing its new strategy across Asia and Africa,
the Group-wide Risk, Compliance and Security (RCS) function has
continued to provide risk advice, recommendations and assurance, as
well as engage with Prudential’s Group-wide supervisor, the Hong Kong
Insurance Authority (IA), on critical activities, while overseeing the risks
and implications to the ongoing business with the goal of ensuring that
the Group remains within its approved risk appetite. The Group effectively
leverages 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 under the complex
operating environment, and reflective of opportunities, customer issues
and needs, and local customs. Prudential will continue to take a holistic
and coordinated approach in managing the increasingly dynamic,
multifaceted and often interconnected risks facing its businesses.
Below we explain how we manage risk, including through our risk
governance framework and processes. We then describe the principal
risks the Group faces, including how each principal risk is managed
and mitigated, followed by a detailed description of the specific risk
factors that may affect our business, the Group and our stakeholders.
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 within the risk appetite, while the ‘second line’ provides additional
independent challenge, expertise and oversight to support risk and
compliance management. 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 2023, continuous efforts have been made to ensure the
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 also
regularly reviews the Group Risk Framework and supporting policies,
including to ensure sustainability considerations, which form an
integral part of the wider Group governance, are appropriately reflected
in policies and processes and embedded within all business functions.
Risk governance and culture
b Group Risk Framework
i.
Prudential’s risk governance comprises the Board organisational structures,
reporting relationships, delegation of authority, roles and responsibilities,
and risk and compliance policies that have been established to enable
business decision-making with respect to control activities and risk-related
matters. The Group Risk Committee (GRC) leads the risk governance
structure, supported by independent Non-executive Directors on the risk
committees of the Group’s major businesses. The GRC approves changes
to the Group Risk Framework and the core risk and compliance policies that
support it, and has direct lines of communication, reporting and oversight
of the risk committees of the Group’s major businesses. The chief risk and
compliance officers of the Group’s major businesses and the managing
directors of the Group’s Strategic Business Groups are also invited to 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 GRC meetings on a rotational basis.
Risk culture is a strategic priority of the Board, which recognises its
importance in the way the Group conducts business. A revised set of
fundamental values was rolled out across the Group in 2023, referred
to as ‘The PruWay’, that serves as the Group’s guiding principles to
ethical and authentic conduct. These values apply equally to all
members of Prudential and its affiliates. The Responsibility &
Sustainability Working Group (RSWG) supports its responsibilities in
relation to implementation of sound culture considerations in the
ways we operate, as well as embedding the Group’s Sustainability
Strategy and overseeing progress on customer, culture, people and
community matters. The PruWay defines how Prudential expects
business to be conducted to achieve its strategic objectives, to build a
culture of trust and transparency that allows our people to thrive, and to
deliver sustainable value for all our stakeholders: customers,
employees, shareholders and the communities in which we operate.
The Group Risk Framework and underlying policies 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
by: the inclusion of risk and sustainability considerations in performance
management and remuneration for key executives; the building of
appropriate skills and capabilities in risk management; and ensuring that
employees understand and care about their role in managing risk through
open discussions, collaboration and engagement. The GRC 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 Conduct and Group Governance Manual,
supported by the Group’s risk-related policies, are reviewed regularly. A
revised Group Code of Conduct (the Code) was launched in November
2023 to further enhance risk culture and awareness underpinning
operational and financial discipline. The Code lays down the principles and
guidelines that outline the ethical standards and responsibilities of the
organisation and our people. Supporting policies include those related to
financial crime, covering anti-money laundering, sanctions, anti-bribery
56
Prudential plc Annual Report 2023
and corruption, conduct, conflicts of interest, confidential and proprietary
information and securities dealing. The Group’s Third-Party Supply and
Outsourcing Policy requires that human rights and modern slavery
considerations are embedded in material supplier arrangements.
Procedures to allow individuals to speak out safely and anonymously
against unethical behaviours and conduct violations are also in place.
Further details on the Group’s sustainability governance arrangements and
strategic framework are included in the Group’s 2023 Sustainability Report.
ii. The risk management cycle
The Group Own Risk and Solvency Assessment (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 that also includes climate scenarios.
Risk identification
The Group identifies principal risks in accordance with provision 28 of
the UK Corporate Governance Code and the Group-wide Supervision
(GWS) guidelines issued by the HKIA. The Group performs a robust
assessment and analysis of principal and emerging risk themes
through the risk identification process, the Group 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. Top-down and bottom-up processes are in place to
support Group-wide identification of principal risks. The Group’s
principal risks, which are reported and managed by the Group with
enhanced focus, are reviewed and updated on a regular basis.
An emerging risk identification framework also exists to support the Group’s
preparations in managing financial and non-financial risks expected to
crystallise beyond the short-term horizon. The Group’s emerging risk
identification process recognises the dynamic materiality of emerging risk
themes, whereby the topics and the associated risks that are important to
the Group and its respective key stakeholders can change over time, often
very quickly. This is often seen for sustainability (including environmental,
social and governance (ESG) and climate-related) risks, which impact
the Group’s reputation given evolving stakeholder expectations.
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 and assessment of management actions which
could be taken to conserve and aid stakeholder value creation.
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) with robust processes and controls on model changes. The
GIECA model and results are subject to independent validation.
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, not
absolute, assurance against material misstatement or loss. The Group’s risk
policies define the Group’s appetite for material risks and set out the risk
management and control requirements to limit exposure. 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. Stress and scenario testing is also in
place to assess the robustness of capital adequacy and liquidity and the
appropriateness of risk limits, as well as to support recovery planning.
This includes reverse stress testing which 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 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 GRC 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 aims to balance the interests of the broad spectrum of its
stakeholders (including customers, investors, employees, communities
and key business partners) and understands that a well-managed
acceptance of risk lies at the heart of its business. The Group generates
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 GRC 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 GRC, 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.
1. 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 and regulatory capital requirements,
achieves its desired target credit rating to meet its business
objectives, and the need for supervisory intervention is avoided. The
two measures in use at the Group level are the GWS and GIECA
capital requirements.
2. Liquidity: The objective of the Group’s liquidity risk appetite is to
help 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.
3. Non-financial risks: The Non-Financial Risk Appetite Framework is in
place to identify, measure and assess, manage and control, monitor
and report effectively on material non-financial risks across the
business. The non-financial risk appetite is framed around the
perspectives of its varied stakeholders, accounts for current and
expected changes in the external environment, and provides 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,
and 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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Risk review continued
Risk identification
Risk identification covers Group-wide:
(a) Top-down risk identification
(b) Bottom-up risk identification
(c) Emerging risk identification
Risk measurement and
assessment
Risks are assessed in terms of materiality.
Material risks which are modelled are
included in appropriately validated capital
models.
Risk governance and culture
Risk governance comprises the Board,
organisational structures, reporting
relationships, delegation of authority, roles
and responsibilities, and risk policies. A
revised set of fundamental values (The
PruWay) and a revised Group Code of
Conduct were rolled out across the Group in
2023, which serve as the Group’s guiding
principles to ethical and authentic conduct.
Business strategy
Business strategy and 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.
Risk management
Capital management
Capital adequacy is monitored to help
ensure that internal and regulatory capital
requirements are met, and that solvency
buffers are appropriate over the business
planning horizon and under stress.
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, as well as
to support recovery planning, which
includes assessment of the effectiveness
of the Group's recovery measures and
the appropriateness of activation points.
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.
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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:
The Risk and Control Self-Assessment (RCSA) process
The Own Risk and Solvency Assessment (ORSA)
1.
2.
3. Group-approved limits and early warning triggers
4.
5. Global Counterparty Limit Framework
Critical/internal incidents procedures
6.
Stress and scenario testing, including reverse stress testing
7.
Large risk approval process
3 The Group’s principal risks
The delivery of the Group’s strategy in building long-term value for all
our stakeholders inevitably requires the acceptance of certain risks.
The materialisation of any 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 fulfillment of commitments to customers and other
stakeholders, with an adverse impact on Prudential’s brand and
reputation.
This section provides a high-level overview of the principal risks faced
by the Group including the key tools used to manage and mitigate
each risk. A detailed description of these and other risks is presented
under the heading ‘Risk factors’, below.
The Group’s 2023 Sustainability Report includes further detail on the
sustainability (including ESG and climate-related) risks which
contribute to the materiality of the Group’s principal risks detailed
below.
Summary of principal risks
Risks to the Group’s financial position (including
those from the external macroeconomic and
geopolitical environment)
Risks from the nature of our business and our
industry
The global economic and geopolitical environment may
impact the Group directly by affecting trends in financial
markets and asset values, as well as driving short-term
volatility.
Risk type
– Global economic and geopolitical conditions
– Market risks to our investments:
– Interest rate risk, including asset liability management
(ALM)
– Equity and property investment risk
– Foreign exchange risk
– Liquidity risk
– Credit risks
The Group’s sustainability (including ESG and
climate-related) risks
These include sustainability risks associated with
environmental considerations such as climate change
(including physical and transition risks), societal risks arising
from diverse stakeholder commitments and expectations and
governance-related risks.
These include the Group’s non-financial risks including
operational and transformation risks from significant change
activity, information security and data privacy risk, risks
associated with the Group’s joint ventures and associates, risks
related to regulatory compliance, insurance risks, and
customer conduct risks assumed by the Group in providing its
products.
Risk type
– Non-financial risks
– Operations processes risk
– Change management risk
– Third-party and outsourcing risk
– Model risk
– Fraud risk
– Financial crime risk
– Information security, IT infrastructure and data privacy
risks
– Customer conduct risk
– Legal and regulatory compliance risk
– Insurance risks
– Medical claims inflation risk
– Morbidity risk
– Persistency risk
– Business concentration risk
– Risk associated with the oversight of the Group's joint
ventures and associates
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Risk review continued
Risk description
Risks to the Group’s financial position (including those from the external macroeconomic
and geopolitical environment)
Risk management
The global economic and geopolitical environment may impact 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
Prudential operates in a macroeconomic and global financial market environment that continues to present significant uncertainties and
potential challenges. For example, while headline inflation has moved down in 2023, core inflation has remained well above central bank
targets and central banks may need to maintain tight monetary policies to rein in inflation, which could exert downward pressures on growth.
In the major emerging markets, inflation has generally been less severe and monetary policies have been less restrictive. However, this
environment of relatively high global interest rates presents a meaningful recession risk and is putting pressure on banks’ balance sheets and
margins. This could result in a pullback in both credit supply and credit demand and lead to a sharper tightening in global credit conditions.
Challenges in the US and EU banking sector increased risk in the US commercial real estate sector. The weak growth and concerns around the
Chinese Mainland property sector not only put a toll on the Chinese Mainland economy and place downward pressure on China interest rate,
but could also weigh on the broader Asian region and the global economy’s vitality going forward. A number of issuers within the Chinese
Mainland property sector and the US commercial real estate sector experienced a reduction in financial strength and flexibility of corporate
entities in 2023, although the overall impact to the Group’s invested credit portfolio was immaterial due to our diversified investment
strategy. The serviceability of sovereign debt also posed some concerns in certain economies (particularly the high indebtedness across
countries in Africa, such as the sovereign debt restructuring in Ghana).
Geopolitical tensions between Russia and Ukraine, Israel and Gaza, as well as the Chinese Mainland and countries such as the United States
and India, continued to contribute to the slow and/or negative global or regional economic growth in 2023. These conflicts may lead to
further realignment among blocs or global polarisation and decoupling.
Macroeconomic and geopolitical developments are considered material to the Group and can potentially increase operational and business
disruption (including sanctions) and 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 sections 1.1 and 1.2 of the Risk factors.
Market risks to our investments
(Audited)
The value of Prudential’s direct investments is impacted by
fluctuations in equity prices, interest rates, credit spreads,
foreign exchange rates and property prices. There is also
potentially indirect impact through the value of the net equity
of its joint ventures and associates. Although inflation remains
at decades-level highs in certain global markets, the Group’s
direct exposure to inflation remains modest. Exposure mainly
arises through an increase in medical claims obligations, driven
by rising medical prices as well as potential impact on
customers from an affordability perspective. Medical inflation
risk as well as 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;
– The Group Capital and Asset Liability Management (ALM)
Committee and Group ALM Policy;
– 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 and swaps,
bond forwards/futures, interest rate futures and swaps, and equity
futures;
– 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.
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Risk description
Risk management
Market risks to our investments continued
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.
High interest rates, driven by sustained inflationary pressures,
may impact the valuation of fixed income investments and
reduce fee income. 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 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, Singapore
and CPL's participating and non-participating 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.
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 participating
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
businesses' investment portfolios, which include equities.
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
unit-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 unit-
linked business.
The Group 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.
The Group’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. When asset and liability
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 has limited acceptance for exposures to equity risk from
non-participating products if it is not rewarded for taking the equity
risk. The Group accepts equity exposure that arises from future fees
(including shareholder transfers from the participating businesses) but
limits its exposure to policyholder guarantees by hedging against
equity movements and guarantees where it is considered economically
optimal to do so.
Where equity risk is accepted, it is explicitly defined by the strategic
asset allocation, as well as monitored and managed through local risk
and ALM committees. Overall exposure to equity risk from the
participating businesses is also managed through Group risk limits
consistent with the Group’s appetite for equity risk.
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Risk review continued
Risk description
Risk management
Market risks to our investments continued
Foreign exchange risk
The geographical diversity of Prudential’s businesses means
that it is exposed 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 further detailed in section 1.6
of the Risk factors.
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 market conditions and valuation of assets in a
more uncertain way than other risks like interest rate or credit
risk. It may arise, for example, where external capital is
unavailable at sustainable cost, where 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.
The Group accepts the currency risk that emerges from profits retained
locally to support the growth of the Group’s business and the
translation risks from capital being held in the local currency of the
business to meet local regulatory and market requirements. However, in
cases where a surplus arising in an overseas operation supports Group
capital or shareholders’ interest (ie remittances), this exposure is
hedged if it is economically optimal to do so. The Group does not
accept significant shareholder exposures to foreign exchange risks in
currencies outside the local territory.
Foreign exchange risk is managed by the Group Capital and ALM
Committee through the implementation of asset allocation on funds
which captures the exposure to non-local-denominated assets.
The Group 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. 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 $1.6 billion of undrawn committed facilities that can be
made use of, expiring in 2029. 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;
– 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;
– The Group’s Collateral Management Framework;
– 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.
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Risk description
Credit risk
Risk management
(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
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 total debt securities at 31 December 2023 held by the
Group’s operations were $83.1 billion (31 December 2022:
$77.0 billion). The majority (83 per cent, 31 December 2022: 84
per cent) of the portfolio are investments either held in unit-
linked funds or that support insurance products where
policyholders participate in the returns of a specified pool of
investments1. The gains or losses on these investments will
largely be offset by movements in policyholder liabilities2. The
remaining 17 per cent (31 December 2022: 16 per cent) of the
debt portfolio (the ‘shareholder debt portfolio’) are investments
where gains and losses broadly impact the income statement,
albeit short-term market fluctuations are recorded outside of
adjusted operating profit.
– Group sovereign debt: Prudential invests in bonds issued by
national governments. This sovereign debt holding within the
shareholder debt portfolio represented 55 per cent or $7.8
billion3 of the total shareholder debt portfolio as at 31
December 2023 (31 December 2022: 41 per cent or $4.9
billion). The particular risks associated with holding sovereign
debt are detailed further in the disclosures in the Risk factors.
The total exposures held by the Group in sovereign debt
securities at 31 December 2023 are given in note C1 of the
Group’s IFRS financial statements.
– Corporate debt portfolio: In the shareholder debt portfolio,
corporate debt exposures totalled $5.8 billion of which $5.4
billion or 94 per cent were investment grade rated (31
December 2022: $6.6 billion of which $6.1 billion or 93 per
cent were investment grade rated).
– 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, considered to be a material
risk for the Group, as well as being important for the hedging
and other activities undertaken to manage its various
financial risks.
At 31 December 2023:
– 94 per cent of the Group’s shareholder portfolio (excluding all
government and government-related debt) is investment
grade rated4. In particular, 59 per cent of the portfolio is
rated4 A- and above (or equivalent); and
– The Group’s shareholder portfolio is well diversified: no
individual sector5 makes up more than 13 per cent of the total
portfolio (excluding the financial and sovereign sectors).
The Group’s holdings across its life portfolios are mostly in local
currency and with a largely domestic investor base. 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 ongoing
developments in the global banking sector, effects of the global
economic slowdown on the invested assets, the impacts of the
tightening of monetary policy in the Group’s key markets, higher
refinancing costs, heightened geopolitical tension and protectionism,
the ongoing downsizing of the Chinese Mainland property sector and
more widely across the Chinese Mainland economy, as well as high
indebtedness in African countries. The impacts of these closely
monitored trends 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,
particularly in local markets where depth (and therefore the liquidity of
such investments) may be low. The Group has appetite to accept 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. This risk is further detailed in sections 1.4 and 1.5 of the Risk
factors.
The Group actively reviews its investment portfolio to improve the
robustness and resilience of the solvency position. A number of risk
management tools are used to manage and mitigate credit and
counterparty credit risk, including the following:
– The Group Credit Risk Policy and the Group Dealing Controls Policy;
– The Global Counterparty Limit Framework and concentration limits
on large names;
– Collateral arrangements for derivative, secured lending reverse
repurchase and reinsurance transactions which aim to provide a high
level of credit protection; and
– The Group Executive Risk Committee and Group Investment
Committee’s oversight of credit and counterparty credit risk and
sector and/or name-specific reviews.
Exposure to the banking 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 or using additional
collateral arrangements where appropriate.
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Risk review continued
Risk description
Risk management
The Group’s sustainability (including ESG and climate-related) risks
These include sustainability risks associated with environmental considerations such as climate change (including physical and transition
risks), societal risks arising from diverse stakeholder commitments and expectations and governance-related risks.
Material and emerging risks associated with key sustainability
themes may undermine the long-term success of a business by
adversely impacting its reputation and brand, and ability to
attract and retain customers, investors, employees and
distribution and other business partners, and therefore the
results of its operations and delivery of its strategy and long-
term financial success. The Group’s sustainability strategy is
centered on three key pillars (providing simple and accessible
health and financial protection, investing responsibly and
creating a sustainable business), each of which increases the
expectations of the Group’s stakeholders with regards to the
Group’s potential external environmental and social impact.
Sustainability risks arise from the activities that support
implementation of the Group’s strategy, which include
developing sustainable and inclusive offerings, continuing to
decarbonise the Group’s investment portfolio in a science-
informed approach to facilitate becoming a net zero asset
owner by 2050 whilst financing a just and inclusive transition,
and advancing the diversity, equity and inclusion and
belonging strategy to empower existing employees.
Potential regulatory compliance and litigation risks exist
globally and across Asia, as sustainability-related topics remain
high on the agenda of both local regulators and international
supervisory bodies, including the International Association of
Insurance Supervisors (IAIS) and the International
Sustainability Standards Board (ISSB), which published its
inaugural sustainability and climate-related disclosure
requirements in June 2023. Delivery of the Group’s
Sustainability Strategy, including the decarbonisation
commitments and the development of sustainable and
inclusive offerings, heightens the risk of accusations of
misleading or unsubstantiated representations to the extent of
the environmental or societal impact of the Group’s activities
and the sustainability features of new products (eg
greenwashing), which subsequently increases the risk of
potential litigation or reputational damage. Further details of
the Group’s sustainability-related risks and regulations are
included in sections 2.1 and 4.1 of the Risk factors.
As custodians of stakeholder value for the long term, the Group seeks
to manage sustainability risks and their potential impact on its business
and stakeholders through transparent and consistent implementation
of its strategy in its markets and across operational, underwriting and
investment activities. It is enabled by strong internal governance,
sound business practices and a responsible investment approach, with
sustainability-related considerations integrated into investment
processes and decisions and the performance of fiduciary and
stewardship duties, including via voting and active engagement
decisions with respect to investee companies, as both an asset owner
and an asset manager. Climate risk, the Group’s reporting against the
recommendations of the Task Force on Climate-Related Financial
Disclosures (TCFD), and progress on the Group’s external climate-
related commitments, remain a priority focus for the GRC for 2024.
Further information on the Group’s sustainability governance and
strategy, as well as the management of material sustainability themes,
is included in the Group’s 2023 Sustainability Report.
The Group participates in networks, 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
sustainability risks and promoting a just and inclusive transition. The
Group also actively engages with, and responds to, discussions,
consultations and information-gathering exercises with local regulators,
international supervisory bodies and global industry standard setters.
The Group Risk Framework continues to be critically evaluated and
updated where required to ensure both sustainability-related
considerations and risks to the Group, including those arising from
stakeholder expectations of the external impact of the Group’s
activities, are appropriately captured. Risk management and mitigation
of sustainability risks are embedded within the Group Risk Framework
and risk processes, including:
– Consideration within the emerging risk identification and evaluation
processes that emerging sustainability themes and the associated
risks can potentially quickly change from immaterial to material
(dynamic-materiality);
– Reflection in the risk taxonomy that the Group can be both impacted
by sustainability issues as well as having an impact on these in the
external world (‘double materiality’);
– The addition of ‘social and environmental responsibility’ as a
strategic risk within the risk taxonomy to consider the potential risks
arising from the external impact of the Group’s activities;
– Workshops and function-wide training on specific risk themes,
including sustainability risk principles, greenwashing risk and the risks
associated with delivery of the Group’s external responsible
investment commitments;
– 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; and
– Deep dives into emerging and increasingly material sustainability
themes, including climate-related risks, and development of Board-
level and broader Group-wide training.
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Risk description
Risk management
Risks from the nature of our business and our industry
These include the Group’s non-financial risks including operations processes, change management, information security, IT infrastructure and
data privacy, as well as customer conduct, legal and regulatory compliance risks. Insurance risks and business concentration risks are also
assumed by the Group in providing its products. Furthermore, there are risks associated with the oversight of the Group’s joint ventures and
associates stemming from our operation in certain markets.
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
which are considered to be material at a Group level.
The Group’s non-financial risks, which are not exhaustive and
discussed further in section 3 of the Risk factors, are outlined
below.
Alongside the Non-Financial Risk Appetite Framework, other risk
policies and standards are in place that individually engage with
specific non-financial risks, including operations processes, change
management, third-party and outsourcing management, business
continuity, fraud, financial crime as well as information security, IT
infrastructure and data privacy. These policies and standards include
subject matter expert-led processes that are designed to identify,
assess, manage and control non-financial risks, including:
– Reviews of key non-financial risks and challenges within Group and
business units' 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;
– Regular updating and risk-based testing of disaster recovery plans
and the Critical Incident Procedure process;
– Established processes to deliver the highest quality of service to fulfil
customers’ needs and expectations; and
– Active engagement in and monitoring of regulatory developments.
The Group aims to manage the risk effectively by maintaining
operational resilience and honouring commitments to customers and
stakeholders, whilst avoiding material adverse financial loss or impact
on its reputation. Further detail on the risks to the Group arising from
system issues or control gaps is included in sections 3.1 and 3.3 in the
Risk factors.
The Group 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. The Group’s
Transformation Risk Framework is in place alongside the Group’s
existing risk policies and frameworks with the aim to ensure
appropriate governance and controls are in place to mitigate these
risks. The Group also enhanced its governance framework in 2023 to
better oversee the implementation and risk management of digital
platforms. This includes the establishment of digital governance
forums that oversee digital transformation from various dimensions
such as customer-centricity, strategic, financial, operational and risk
management. In addition, Prudential is continuously enhancing
strategic capabilities through internal talent development and talent
acquisition. Developing an engaged workforce that provides adequate
resources for our people to manage change, connect, grow and
succeed is one of the priorities for the company.
Prudential plc Annual Report 2023
65
Operations processes risk
Operations processes risk is the risk of failure to adequately or
accurately process different types of operational transactions,
including customer servicing and asset and investment
management operations. Due to human error, among other
reasons, operations and process control incidents do occur from
time to time and no system or process can entirely prevent
occurrence.
Change management risk
Change management risk remains a material risk for
Prudential, with a number of significant change programmes
under way which, if not delivered and executed effectively with
adequate and capable resources to defined timelines, scope
and cost, may negatively impact its operational capability,
control environment, employees, reputation and ability to
deliver its strategy and maintain market competitiveness. The
current portfolio of transformation and significant change
programmes includes (i) the implementation and embedding
of large-scale regulatory/industry 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. Further detail on the risks to the
Group associated with large-scale transformation and complex
strategic initiatives is included in section 3.1 of the Risk factors.
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Risk review continued
Risk description
Risk management
Non-financial risks continued
Third-party and outsourcing management risk
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, with both
market counterparties and outsourcing partners, including
distribution, technology and ecosystem providers. The Group
maintains material strategic partnerships and bancassurance
arrangements, which create a reliance on the operational
resilience and performance of outsourcing and business
partners. This risk is explored in more depth in section 3.3 of the
Risk factors.
Model risk
Model risk is the risk of adverse financial, regulatory,
operational, or reputational impact, or misinformed business
and strategic decision-making resulting from reliance on a
model or user-developed application (UDA) that is inaccurate,
incorrect or misused. The Group utilises various tools and they
form an integral part of operational functions including the
calculation of regulatory or internal capital requirements, the
valuation of assets and liabilities, determining hedging
requirements, assessing projects and strategic transactions, and
acquiring new business via digital platforms.
Technological developments, in particular in the field of
artificial intelligence (AI) and the increased use of generative
AI, pose new considerations on model risk oversight provided
under the Group Risk Framework.
Fraud risk
Prudential is exposed to fraud risk, including fraudulent
insurance claims, transactions, or procurement of services, that
are made against or through the business.
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
HKIA’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 aims to
ensure that appropriate contract performance and risk mitigation
measures are in place over these arrangements. In addition, the Group
Third-Party Risk Oversight Framework is in place to set out the Group’s
third-party risk management and oversight standards that guide the
Group senior management and RCS function to oversee, challenge and
manage the Group’s third-party risk profile in a consistent and
coherent way.
The Group has no appetite for model or UDA related incidents leading
to regulatory breaches. There is limited appetite for failures to develop,
implement and monitor appropriate risk mitigation measures to
manage model and UDA risk. The Group’s model and UDA risk is
managed and mitigated via the Model and UDA Risk Framework which
applies a risk-based approach to tools (including those under
development) with the aim to ensure a proportionate level of risk
management. The framework requirements include:
– Set of risk oversight, management and governance requirements;
– Regular risk assessment requirements of all tools taking into account
potential impact on various stakeholders, including policyholders;
and
– Regular independent validation (including limitations, known errors
and approximations) of all Group critical tools.
An oversight forum for the use of AI and ensuring compliance with the
key ethical principles is also in place and adopted by the Group with the
aim to ensure the safe use of AI.
The Group’s Counter Fraud Policy and analytics-led tooling are in place
to set out the required standards to enhance fraud detection, prevention
and investigation activities with the objective to protect resources to
support sustainable business growth. The policy also sets out the
framework to tackle fraud with the goals of safeguarding customers,
protecting local businesses and the Group’s reputation, and providing
assurance that fraud risk is managed within appetite.
The Group undertakes strategic activities to monitor and evaluate the
evolving fraud risk landscape, mitigate the likelihood of fraud occurring
and increase the rate of detection. The Group has a mature confidential
reporting system in place, 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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Risk description
Risk management
Non-financial risks continued
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); 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
improper benefits). Further detail on the risks to the Group
associated with operating in high-risk markets is included in
section 3.6 of the Risk factors.
Information security, IT infrastructure and data
privacy risks
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 remain prevalent,
particularly as the accessibility of attacking tools available to
potential adversaries increases. Regulatory developments in
cyber security and data protection are progressing worldwide
and may increase the complexity of requirements and
obligations required for companies. Further detail on the risks
to the Group associated with operating in high-risk markets is
included in sections 3.4 and 3.5 of the Risk factors.
The Group-wide policies on anti-money laundering, sanctions and anti-
bribery and corruption risks reflect the requirements applicable to all
staff in all offices and businesses. Screening and transaction
monitoring systems are 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 for businesses and offices across all locations. Due
diligence reviews and assessments against the Group’s financial crime
policies are performed as part of the Group’s business acquisition
process.
The Group adheres to data minimisation and ‘privacy-by-design’
principles, where data is only collected and used for its intended
purpose and is not retained longer than necessary. The handling of
customers' data is governed by specific policies and frameworks, such
as the Group Information Security Policy, the Group Privacy Policy and
the Group Data Policy, to ensure compliance with all applicable laws
and regulations, and the ethical use of customer data.
Despite the rise in ransomware activity due to the availability of
ransomware exploit toolkits and Ransomware-as-a-Service (RaaS) for
threat actors, the Group has a number of defences in place to protect
its systems from cyber security attacks. Prudential has adopted a
holistic risk management approach which is designed to prevent and
disrupt potential attacks against the Group as well as third-party
partner systems and to manage the recovery process should an attack
take place. Other defences include, but are not limited to: (i) distributed
denial of services (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 cyber attack simulation
exercises have been carried out to enhance preparedness. The Group
has also established various processes to ensure the effectiveness of
information security and privacy mechanisms deployed, which include
setting up a dedicated ethical hacking team to perform testing on the
Group’s systems to identify potential vulnerabilities, engaging external
consultants to perform penetration testing on our systems, and
engaging external consultants to perform independent assessments on
both security operations centre and the information and privacy
function as a whole to further improve the efficiency of the functions. A
private Bug Bounty Programme has also been established to provide a
mechanism for invited external security practitioners to report security
issues and vulnerabilities. This is further supported by a Vulnerability
Disclosure Programme that allows independent security researchers to
report security issues and vulnerabilities via the Prudential websites.
The Group has subscribed to services from independent security
consultants to continuously monitor our external security posture. 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.
In 2023, among many companies around the world, the Group’s
businesses in Malaysia were affected by the global MOVEit data-theft
attack, where a zero-day vulnerability was exploited at MOVEit, a
software solution providing secured file transfer services, with
infringements to data security, integrity and privacy. As a result, this
incident directly impacted the Group’s reputation and compliance with
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Risk review continued
Risk description
Risk management
Non-financial risks continued
Information security, IT infrastructure and data
privacy risks continued
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regulatory and data privacy requirements. Following the threats,
various actions have been taken, including isolating the affected server,
a thorough investigation, and customer and authority notifications.
Potential enhancements have been identified from the review and
specific actions have been implemented to address these. Apart from
this event, the Group did not experience any cyber security and data
breaches with a material impact on its business strategy, operations or
financial condition in 2023.
In addition, the Group is proactively monitoring possible advanced
social engineering attacks related to corporate activities, for example,
deepfakes, the use of AI-generated synthetic medium to imitate senior
executives to conduct fraudulent activities. The Group is taking steps to
mitigate such attacks, pragmatic measures include raising regular cyber
security awareness, implementing robust preventative and detective
controls, and having a well-defined incident response plan as part of a
wider cyber resilience strategy.
The Group Infrastructure Policy was revamped in 2023 to ensure
comprehensive governance and assurance of our technology
components. A new enterprise operating model was designed based on
an innovation-led technology operations structure, mature internal
capabilities, and an aligned outsourcing model. Furthermore,
businesses remained focused on digital ecosystems for strategic
growth in 2023. A resiliency enhancement programme has been put in
place to enhance capabilities in managing disruptions or failures on
system platforms serving our customers. This includes implementing
robust measures such as identifying and removing single-points-of-
failure (SPOF) infrastructure, disaster recovery plans, and backup
systems.
Alongside continuous technology development, the Group’s
Technology Risk Management function is primarily responsible for
technology risk identification, assessment, mitigation, monitoring and
reporting across different technology domains to provide advisory,
assurance and operations support for holistic technology risk
management including information security and privacy. Specifically,
key risk indicators have been enhanced to cover key technology risk
areas, annual risk assessment is conducted to identify specific risks,
priorities and focus areas, and deep-dive reviews are conducted on
different technology domains to provide assurance of controls to
manage technology risks. In addition, the Group Technology Risk
Committee is a sub-committee of the Group Executive Risk Committee,
which oversees the effectiveness of technology risk management
including information security and privacy across the Group. Work was
undertaken in 2023 to further enhance the maturity of the technology
risk operating model which includes organisational structure
improvements, policy enhancements and enriched key risk indicators to
provide a quantifiable overlay to overseeing and managing technology
risks. The Group’s internal audits also regularly include cyber security as
part of its audit coverage. Cyber and privacy risks are reported regularly
to the GRC by the Group Chief Technology Risk Officer. In addition, the
GRC and Group Audit Committee receive more detailed briefings at
least twice annually from the Group Chief Technology Officer. Both the
Group Chief Technology Risk Officer and Group Chief Technology
Officer are experienced professionals with more than 20 years of
experience in information technology and cyber security. Further, the
Group Executive Committee (GEC) participates in annual cyber
tabletop exercises and risk workshops to ensure members are well
equipped to respond to a cyber or information security incident and
fully understand the latest threats and regulatory expectations.
Risk description
Risk management
Non-financial risks continued
Customer conduct risk
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 is met. The Group’s
Customer Conduct Risk Framework reflects management’s
focus on customer outcomes.
Factors that may increase conduct risk 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 agency workforce, virtual face-to-
face sales, and sales via online digital platforms.
Legal and regulatory compliance risk
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 the business 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. In certain jurisdictions in
which Prudential operates there are several ongoing policy
initiatives and regulatory developments which will impact the
way Prudential is supervised. Further information on specific areas
of regulatory and supervisory focus and changes are included in
section 4 of the Risk factors.
The Group has developed a Group Customer Conduct Risk Policy which
sets out five customer conduct standards that the business is expected
to meet, being:
– Treat customers fairly, honestly and with integrity;
– Provide and promote products and services that meet customer
needs, are clearly explained and that deliver real value;
– Manage customer information appropriately, and maintain the
confidentiality of customer information;
– Provide and promote high standards of customer service; and
– Act fairly and promptly to address customer complaints and any
errors found.
Conduct risk is managed 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.
Management of the Group’s conduct risk is key to the Group’s strategy.
Prudential’s conduct risks are managed and mitigated using the
following, among other tools:
– The Group’s Code of Conduct and conduct standards, product
underwriting and other related risk policies, and supporting controls
including the Group’s fraud risk control programme;
– A culture that supports the fair treatment of the customer, 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 help
ensure sales are conducted in a manner that considers the fair
treatment of customers within digital environments;
– Quality of sales processes, services and training, and use of 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.
Regulatory developments are 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.
Risk management and mitigation of regulatory risk at Prudential
includes a comprehensive set of compliance and financial crime
operating arrangements, such as policies, procedures, reporting
protocols, risk management measures, disclosures and training, to
ensure ongoing compliance with regulatory and legal obligations.
Appropriate controls or tools have been systematically integrated into
the daily operations of Prudential:
– Close monitoring and assessment of our business controls and
regulatory landscape, with explicit compliance consideration of risk
themes in strategic decisions and cross-border activities including
payments;
– Ongoing engagement with national regulators, government policy
teams and international standard setters; and
– Compliance oversight to ensure adherence to new regulatory
developments, including those associated with greenwashing risk.
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EEV basis results
Additional information
Risk management
Insurance risks are managed and mitigated using the following,
among other methods:
– The Group’s Insurance Policy;
– 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 (see the 'Fraud risk' section
above);
– 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 and 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; and
– Using product repricing and other claims management initiatives
in order to mitigate morbidity and medical claims inflation risk.
This risk is best managed 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 monitored by the Group’s businesses.
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.
Risk review continued
Risk description
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 behavior are detailed in section 3.7 of
the 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.
Inflationary and other economic pressures have also impacted
morbidity experience in several markets. Elevated interest rates may
lead customers to lapse in preference for alternate saving options
that offer higher levels of guarantees. 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.
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 medical claims inflation risk,
morbidity risk and persistency 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. The cost
of medical treatment could increase more than expected, resulting
in higher than anticipated medical claims cost passed on to
Prudential.
Morbidity risk
Morbidity risk is the risk of deviations in the future frequency and
magnitude of non-fatal accident and sickness claims relative to
initial assumptions that are adverse to shareholder value. It can be
influenced by a range of factors including: inflationary, economic and
other pressures on the cost of medical treatment; medical advances
which can reduce the incidence and improve recovery rates of
serious health conditions but can also increase diagnosis rates and/
or increase treatment costs of certain conditions; government and
regulatory policies; opportunistic activities (including fraud); and
natural events (including pandemics). Morbidity risk can also result
from: product design features that incentivise adverse policyholder
behaviour; inappropriate or insufficiently informed initial
assumptions; claims volatility due to random fluctuation or a large-scale
systemic event; insufficient recognition of an individual’s medical;
financial and/or and other relevant circumstances during the policy
application assessment process; and/or ineffective claims assessments
leading to payment of claims that are inconsistent with the insurance
product’s contract and/or best practice.
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Risk description
Insurance risks continued
Risk management
Persistency risk is managed by appropriate controls across the product
life cycle. These include: 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.
To improve business resilience, the Group continues to look for
opportunities to enhance business diversification by building multi-
market growth engines as part of its strategy.
Persistency risk
Persistency risk results from adverse changes in policy surrenders,
paid-ups and other policy discontinuances. In general, lower
persistency experience results in deterioration of profits and
shareholder value and can be an indicator of inadequate sales
quality controls, and can elevate conduct, reputational and
regulatory risks. Persistency risk generally stems from misalignment
between customer needs and purchased product as a result of
insufficient product collaterals and/or sales process, insufficient
post-sale communication and engagement with the customer
leading to a deterioration of appreciation of the value of their
policy, operational barriers to premium renewal payment, and/or
changes in policyholder circumstances resulting from external drivers.
Business concentration risk
Prudential operates in markets in both Asia and Africa via various
channels and product mix; although largely diversified at the
Group level, several of these markets are exposed to certain
levels of concentration risk. From a channel concentration
perspective, some of the Group’s key markets rely on agency
and some markets rely on bancassurance. From a product
concentration perspective, some of the Group’s markets focus
heavily on specific product types, depending on the target
customer segments. Geographically, the Greater China (Hong
Kong, the Chinese Mainland and Taiwan) region contributes
materially to the Group’s top and bottom lines. Uncertainties in
macroeconomic and geopolitical conditions as well as regulatory
changes may elevate business concentration risk including any
potential slowdown in business from Mainland Chinese visitors and
in the Chinese Mainland, and adversely impact the Group’s
business and financial condition.
Risks associated with the oversight of 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 associates. For such operations, the level of control
exercisable by the Group depends on the terms of the contractual
agreements between participants. Whilst the joint ventures and
associates are run as separate entities, the Group’s interests are
best safeguarded by our ability to effectively oversee and influence
these joint venture and associates in a way that is proportionate to
our ownership level and control. Further information on the risks to
the Group associated with its joint ventures and other shareholders
and third parties are included in section 3.6 of the Risk factors.
The Group exercises primary oversight and control over joint ventures
and associates through our nominated directors and other
representatives on the Board and Board Committees, whose
appointments are subject to regular review. The Group has effective
access to management information on these businesses via the Board
and Board Committees, the businesses’ public disclosures, and
established regular touchpoints with key business functions of these
organisations (eg audit). Key updates on joint ventures and associates
are provided to the Group’s governance such as the Risk Committee
and the Audit Committee.
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Additional information
Viability statement
Viability statement prepared in
accordance with provision 31 of the UK
Corporate Governance Code
The Group’s longer-term prospects
Prudential’s mission is to be the most trusted partner and protector
for this generation and generations to come by providing simple and
accessible financial and health solutions. As such, Prudential considers
that its purpose aligns closely with important societal needs, including
increasing access to health and financial protection, enabling a just
and inclusive transition to a low-carbon future and paving the way to
long-term resilience for our customers, people, communities and
investors. 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 levels of
insurance cover, need for protection and rising wealth in our markets,
are discussed on pages 14 to 15, alongside the actions 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.
During 2023, consumer demand in Asia remained resilient as
reflected in overall growth in the business, although there was
variation across markets. This underscores the strength of our multi-
market growth engine backed by our diversified channel mix, which is
key to driving sustainable value in the long 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 review on pages 56 to 58.
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 367 to 370.
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 Sustainability
section on pages 97 to 149.
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 2026. 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 regard 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 and economic growth rates. 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 pillars, enablers and business model discussed
on pages 24 to 29. 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 56 to 71.
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 as to present a
shock to the Group’s financial position. While all the risks set out in
the Risk review 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 geo-political and technology risk and the potential impact
of the macroeconomic environment in the markets in which the
Group operates. Mitigation in place for these key risks to viability is set
out on pages 59 to 62 and 66 to 68.
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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:
Global stagflation
Geopolitical risk
Interest rate stress6
+75bps
to
+200bps
(100)bps
to
+200bps
Equity stress6
(20)% to
(25)%
Property
stress
(10)%
Corporate credit
spread increase
+50bps
Credit default/
downgrade
3 times base
assumption
Adverse currency
movement6
(5)% to
(10)%
Adverse expense
(unit cost)
+5%
(20)% to
(40)%
(10)% +100bps to
+130bps6
3 times base
assumption
(5)% to
(20)%
+10%
Other stress
Adverse
policyholder
behaviour
Adverse
policyholder
behaviour
The sensitivity of the Group’s regulatory solvency at 31 December
2023 to changes in key assumptions is set out on pages 367 to 368
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 $1.6 billion in place from 15
February 2024, which replaced the $2.6 billion facilities in place at 31
December 2023, on top of central cash and short-term investment
balances, which as at 31 December 2023 were $3.5 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 and repricing of in-force benefits. 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.
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 2026.
Notes
(1) Reflecting products that are classified as Variable Fee Approach only.
(2) With the exception of investments backing the shareholders' 10 per cent share
of the estate within the Hong Kong participating fund
(3) Excluding assets held to cover linked liabilities and those of the consolidated
investment funds.
(4) Based on middle ranking from Standard & Poor's, Moody's and Fitch. If
unavailable, NAIC and other external ratings and then internal ratings have been
used.
(5) Source of segmentation: Bloomberg Sector, Bloomberg Group and Merrill Lynch.
Anything that cannot be identified from the three sources noted is classified as
other.
(6) Position in range depends on local market.
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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’.
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, financial condition
and results of operations, including as a result of increased strategic,
business, insurance, product and customer conduct risks.
Global financial markets are subject to uncertainty and volatility
created by a variety of factors. Examples of these factors include:
actual or expected changes in both monetary and regulatory policies
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 from geopolitical conflicts and/or global
issues such as pandemics, etc.; and sector-specific, for examples in
banking, real estate, etc., slowdowns or deteriorations which have the
potential to have contagion impacts. Other factors include
fluctuations in global commodity and energy prices, concerns over the
serviceability of sovereign debt in certain economies, the increased
level of geopolitical and political risk and policy-related uncertainty,
socio-political and climate-driven events, etc. 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 may have a bearing on inflation
levels. 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 by 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 businesses and/or the present value of
future profits for accident and health products; and/or reduce the
value of the Group’s 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 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 prepayments
and increased redemptions.
– A reduction in the financial strength and flexibility of corporate
entities may result in a deterioration of the credit rating profile and
valuation of the Group’s invested credit portfolio (which may lead
to 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 Prudential’s counterparties (such as banks, reinsurers and
counterparties to cash management and risk transfer or hedging
transactions) to meet commitments, or legal, regulatory or
reputational restrictions on the Group’s ability to deal with these
counterparties, 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 time frame, 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 could experience difficulty in
doing so and could be forced to sell them at a lower price than it
otherwise would have been able to realise.
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– 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 if 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 participating
products, which are impacted by the difference between actual
investment returns of the participating 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.
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, partial withdrawals 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 3.7). 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 is 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.
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,
sanctions, 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;
– An increase in military tensions, regional hostilities or new conflicts
which may disrupt business operations, investments and growth;
– Withdrawals or expulsions from existing trading blocs or
agreements or financial transaction systems, or fragmentation of
systems, including those which facilitate cross-border payments;
– The implementation of measures favouring local enterprises
including changes to the maximum level of non-domestic
ownership by foreign companies, differing treatment of foreign-
owned businesses under regulations and tax rules, or international
trade disputes affecting foreign companies;
– Increased costs due to government mandates or regulations
imposing a financial contribution to the government as a condition
for doing business; 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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Risk factors continued
The above risks may have an adverse impact on Prudential through
their effects on the macroeconomic outlook and the environment for
global, regional and national financial markets. Prudential may also
face heightened sanction risks driven by geopolitical conflicts as well
as increased reputational risks. The above risks may also adversely
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.
Increasing geopolitical and political tensions may lead to conflict, civil
unrest and/or disobedience as well as increases in domestic and cross-
border cyber intrusion activity. 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 and geopolitical or political risks
which adversely impact Hong Kong’s international trading and
economic relationships 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 As a holding company, Prudential is dependent upon its subsidiaries to cover operating expenses and dividend
payments.
The Group’s insurance and asset 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 subjected 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 the 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.
1.4 Prudential’s investment portfolio is subject to the risk of potential sovereign debt credit deterioration.
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 that are different to
investment in the 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 financial
position, 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.
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 or restructure 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.
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1.5 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
important factors 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, retain current policyholders and attract new
policyholders, as well as the Group’s ability to compete for acquisition and
strategic opportunities. Downgrades could have an adverse effect on the
Group’s financial flexibility, including its ability to issue commercial paper
at acceptable levels and pricing, requirements to post collateral under or in
connection with transactions, and ability to manage market risk exposures.
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.
1.6 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, but in some markets, Prudential also
writes policies and invests in assets denominated in non-local
currencies, primarily in the US dollar. 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.
Risks relating to sustainability (including environmental, social and governance (ESG) and climate-related) matters
2.1 The failure to understand and respond effectively to the risks associated with sustainability factors could adversely
affect Prudential’s achievement of its long-term strategy.
A failure to manage the material risks associated with key
sustainability themes, including those detailed below, may inhibit the
Group’s ability to meet its sustainability-related commitments and
undermine its sustainability credentials 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.
Environmental risks
a
Environmental concerns, notably those associated with climate
change and its social and economic impacts, but also including those
associated with biodiversity and nature degradation, present long-
term risks to the sustainability of Prudential and may impact its
customers and other stakeholders.
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 risks associated with the impacts of
climate change combined with the potential economic impacts of the
transition to a lower carbon economy have the potential to
disproportionately impact the Asia and Africa markets in which
Prudential operates and invests. 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 with
consideration given to the impact on the economies, businesses,
communities and customers in these markets.
Prudential’s investment horizons are long term, and it is therefore
exposed to the 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 in some asset sectors re-price as a result of increased
operating 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 versus disorderly and reactive, will be influenced
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
sustainability considerations in existing or new sustainability or
climate-orientated investment strategies and products may be limited
by insufficient or unreliable data on carbon exposure, transition plans
of the investee company assets in which it invests, or inability to
divest as planned. The direct physical impacts of climate change,
including shorter-term event-driven (acute) physical risks such as
increasingly frequent and severe hurricanes and wildfires, and those
associated with longer-term shifts in climate patterns such as
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Risk factors continued
elevated temperatures and prolonged drought (chronic physical risks),
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.
Similarly, nature-related physical risks can impact life and health
liabilities where, for example, pollution, poor water quality, waste
contamination and overexploitation of the natural environment can
all contribute to biodiversity degradation, which in turn can
potentially pose threats to human health. Such short-term and long-
term environmental 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 sustainability,
environmental 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,
disclosure and litigation risks which may be increased by the multi-
jurisdictional coordination required in adopting a consistent risk
management approach. The launch of sustainability-focused funds or
products, or the (method of) incorporation of sustainability
considerations within the investment process for existing products,
may increase the risks related to the perceived fulfilment of fiduciary
duties to customers and investors by the Group’s appointed asset
managers, and may subsequently increase regulatory compliance,
customer conduct, product disclosure and 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. The reputational and litigation risks of
the Group may subsequently increase where the stated positions or
aims of such industry organisations or their initiatives continue to
evolve, or where jurisdictions interpret their objectives as adversely
impacting on markets or consumers, including for example, perceived
conflicts with anti-trust laws. See risk factor 4.1 for details of
sustainability including ESG and climate-related regulatory and
supervisory developments with potential impacts for 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.
Social risks
b
Social risks that could impact Prudential may arise from a failure to
consider the rights, diversity, wellbeing, changing needs, human rights
and interests of its customers and employees and the communities in
which the Group or its third parties operate. Perceived or actual
inequity and income disparities (both within developed markets and
within the Group’s markets), intensified by the recent pandemic, have
the potential to further erode social cohesion across the Group’s
markets which may increase operational and disruption risks for
Prudential and impact the delivery of the Group’s strategy on
developing affordable and accessible products to meet the needs of
people across these markets. Direct physical impacts of climate
change and deterioration of the natural environment, together with
the actions that support 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 that are particularly vulnerable to
climate change and biodiversity degradation, 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
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urbanisation and ageing), as well as potential migration due to
factors including climate-related developments, 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
the use of digital services, technologies and distribution methods to
customers. 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
(AI) technologies. The Group is therefore exposed to an increase in
technology risk, including potential unintended consequences from
algorithmic bias, as well as regulatory, ethical and reputational risks
associated with customer data misuse or security breaches. These
risks are explained in risk factors 3.4 and 3.5 below. 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.
Failure to foster an inclusive, diverse and open environment for the
Group’s employees in accordance with the principles of the Universal
Declaration of Human Rights and the International Labour
Organisation’s core labour standards could impact the ability to
attract and/or retain employees and increase potential reputational
risk. The business practices within the Group’s third-party supply chain
and investee companies with regards to topics including labour
standards, respect of human rights and modern slavery also expose
the Group to potential reputational risk.
Governance
c
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 risks may directly or indirectly impact Prudential’s
business and the achievement of its strategic focus on providing
greater and more accessible health and financial protection,
responsible stewardship and investment within the Group’s market to
support a just and inclusive transition, developing a sustainable
business that delivers a positive impact on 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 Sustainability Strategy across its
local businesses and 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
sustainability matters, which may differ, both within and across
stakeholder groups and 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 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.
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 misstating the positive
environmental or societal impacts of the Group’s activities, products
and services (eg greenwashing).
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/disposals across its business. Many such
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.
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. There may also be adverse implications for the Group in
undertaking transformation initiatives such as placing additional
strain on employees or operational capacity, and weakening the
control environment. Implementing initiatives related to the revised
strategy for the Group, control environment transformation,
significant accounting standard changes, such as IFRS 17, and other
regulatory changes in major businesses of the Group, such as those
related to the agency transformation at the Indonesia businesses,
may amplify these risks. 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 AI,
expose Prudential to potential additional regulatory, information
security, privacy, operational, ethical and conduct risks. Specifically,
the increasing use of AI could lead to increased scrutiny from
regulators, potential bias in decision-making processes, and
unforeseen vulnerabilities in information security. The ethical
implications of AI use, such as data privacy and transparency in
automated decisions, are also potential areas of concern. If
inadequately managed, these risks 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
its 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 for analysing and interpreting such data (such as AI 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 use of AI to improve operational efficiency and
enhance customer experiences), 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.
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Risk factors continued
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, misconduct, 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 payments), 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 if there are
disruptions to its systems, operations, new business sales and
renewals, distribution channels and services to customers, or could
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. 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-centric 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 AI 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
mature 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 strong 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.
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3.4 Cyber security risks, including attempts to access or disrupt Prudential’s technology systems, and loss or misuse of
personal data, could have potential adverse financial impacts on the Group and could result in loss of trust from
Prudential’s customers and employees and reputational damage, which in turn 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 targeted and untargeted but
sophisticated 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 vast amount of personal and financial data held by financial
services companies makes them attractive targets for cyber crime
groups. The ease and accessibility of ransomware exploit toolkits and
Ransomware-as-a-Service (RaaS) for threat actors contribute to the
increase in ransomware activity. At the same time, 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.
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. Various policies and frameworks are in place to govern the
handling of customers' data. 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 AI technologies to
process, analyse and interpret this data.
New and currently unforeseeable regulatory, reputational and
operational issues may also arise from the increased use of emerging
technology such as generative AI which requires careful consideration
and guardrails established to enable its safe use. Regulatory
developments in cyber security and data protection continue to
progress worldwide. In 2023, the momentum in focus on data privacy
continued to increase, with regulators in Asia introducing new data
privacy laws or enhancing existing ones (eg new data protection laws
in Vietnam in June 2023 and extensive amendments to the Korean
data privacy law). 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.
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-layered security
defences in place, there can be no assurance that such events will not
take place and they may have material adverse consequential effects
on Prudential’s business, financial condition, results of operations and
prospects.
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Risk factors continued
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 are subject to a number of risks. 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:
– Reliance on and/or collaboration 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 being provided
outside some of the individual markets in which the platform
operates, which may increase the complexity of local legal and
regulatory compliance.
– The number of current and planned markets in which Prudential’s
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,
which 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
digital platforms are dependent and to which the Group has access,
holds, analyses and processes through its models, increases data
security, privacy and usage risks. Furthermore, the use of complex
models, including where AI is used for critical decision-making, in
an application’s features and offerings may give rise to ethical,
operational, conduct, litigation and reputational risks if they do not
function as intended;
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, its ability to deliver on its long-term
strategy and the financial position of the Group.
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 and
sustainability (including climate-related) risks (see risk factor 2 above).
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 as well as
local regulatory constraints applicable to the joint venture and
associate businesses, such as listing requirements; and 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 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
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slowdowns, disruption, volatility or deterioration (such as the negative
developments in the Chinese Mainland property sector and more
widely across the Chinese Mainland economy). In addition, the level
of control exercisable by the Group could be affected by changes in
the maximum level of foreign 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.
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 their governance or operation, or their 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 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 reprice some of its
products, the frequency of repricing 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
repricing 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 the medical
reimbursement downgrade experience following any repricing.
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 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.
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.
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 of the regulatory supervision or intervention of the Group, the level of regulatory scrutiny arising from the
Group’s reported events, the effects and pace of changes in the laws, regulations, policies and their interpretations and
any industry/accounting standards in the markets in which it operates.
Any non-compliance with government policy and legislation, financial
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 business conduct
of Prudential or its 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. Further, the impact from regulatory changes may
be material to Prudential, for instance, changes may be required to its
product range, distribution channels, sales and servicing practices,
handling of data, competitiveness, profitability, capital requirements,
risk management approaches, corporate or governance structure,
financial and non-financial disclosures and reported results and
financing requirements. Other changes in capital-related regulations
have the potential to change the extent of sensitivity of capital to
market factors, 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).
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, potentially resulting in tightened customer
protection, higher capital requirements, restrictions on transactions
and enhancement of supervisory powers.
In the markets in which Prudential operates, it is subject to regulatory
requirements for ongoing operations as well as 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
including cross-border activities increases the complexity and volume
of legal and regulatory compliance challenges. Compliance with
Prudential’s legal or regulatory obligations, including those in respect
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Additional information
Risk factors continued
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 and global tensions may
also lead to realignment among blocs or global polarisation and
decoupling, which may lead to 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 or changes are included below.
a Group-wide Supervision (GWS)
The Hong Kong Insurance Authority (Hong Kong IA) is the Group-
wide supervisor for Prudential. The Hong Kong IA’s Group-wide
Supervision (GWS) Framework applies on a principles-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. Prudential has in place
various monitoring mechanisms and controls to ensure ongoing
sustainable compliance and to promote constructive engagement
with the Hong Kong IA as its Group-wide supervisor.
b Global regulatory developments and systemic risk
regulation
There are a number of ongoing global regulatory developments
which could potentially impact Prudential’s businesses in the many
jurisdictions in which they operate. Mandated by the Financial
Stability Board (FSB), this work includes standard setting and
guidance in the areas of systemic risk (including climate-related risks)
and the Insurance Capital Standard (ICS).
For the insurance sector, the International Association of Insurance
Supervisors (IAIS) continues to monitor and assess systemic risk through
the Holistic Framework (HF) which effectively replaced the Global
Systemically Important Insurer (G-SII) designations in 2019. The FSB
continues to receive an annual update on the outcomes of the IAIS’s
global monitoring exercise which will include IAIS’s assessment of
systemic risk. 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 HF supervisory policy
measures to address such systemic importance. In November 2025, the
FSB will review the process for assessing and mitigating systemic risk under
the HF. Following this review the FSB will, as necessary, adjust its process
which could include reinstating an updated G-SII identification process.
Many of the prior G-SII measures have been adopted into IAIS’s
Insurance Core Principles (ICPs) and Common Framework (ComFrame),
described below, as well as under the Hong Kong IA’s GWS Framework. As
an Internationally Active Insurance Group (IAIG), Prudential is subject to
these measures.
The IAIS’s ComFrame establishes quantitative and qualitative
supervisory standards and guidance focusing on the effective Group-
wide supervision of IAIGs. The ICS is the quantitative element of
ComFrame and a consolidated capital standard in the final phase of
development, coming into effect in 2025. Prudential has been
designated an IAIG by the Hong Kong IA following an assessment
against the established qualitative criteria in ComFrame, and will be
required to either adopt ICS or demonstrate its current Group capital
supervisory framework to be outcome-equivalent with ICS.
The development of ICS has been conducted in two phases: a five-
year monitoring phase, which commenced at the beginning of 2020,
followed by an implementation phase. An alternative to the ICS
called the ‘Aggregation Method’ has also been developed in the US
by the National Association of Insurance Commissioners; the IAIS is
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in the process of evaluating whether it produces comparable
outcomes to the ICS.
There is a risk attached to the manner in which regulators from
member jurisdictions may choose to implement the HF and ICS which
could lead to additional burdens or adverse impacts to the Group. As
a result, there remains a degree of uncertainty over the potential
impact of such changes on the Group.
Regional regulatory regime developments
c
In 2023, regulators in the markets in which we operate continued to
focus on the financial resilience of the insurance industry (including to
address issues of solvency and rising interest rates), the protection of
customers in relation to product and service performances and
operational soundness with appropriate governance and controls.
New regulations and guidelines were issued in several markets
whereby the industry is required to assess, monitor and manage non-
financial and financial risks, including insurance risk, capital and
solvency. Business conduct and consumer protection remain the key
priorities for regulators in Asia, with emphases on product design,
remuneration structure, marketing literature, sales and servicing
practices, and various operational processes including specifically for
investment management and oversight of third parties and
technology vendors.
Major regulatory changes and reforms are in progress in some of the
Group’s key markets, 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,
potentially increasing compliance risk to the Group. Key regulatory
developments in the Chinese Mainland include the following:
– As part of the regulatory reform, the Chinese government has
consolidated oversight of the financial industry directly under the
State Council and announced a new national financial regulator,
the National Financial Regulatory Administration (NFRA) to
replace the China Banking and Insurance Regulatory
Commission (CBIRC) on 18 May 2023. The NFRA is authorised
to overall supervise and regulate the Chinese Mainland banking
and insurance markets to ensure financial institutions operate in
a stable manner in compliance with the law and meet their
obligations to customers. Key changes implemented by the
NFRA include: reductions in statutory valuation interest rates for
life insurance products, which are expected to lower pricing
interest rate, effective from July 2023; and solvency relief
measures through the China Risk Oriented Solvency System
Phase II (C-ROSS II), effective from September 2023. In early
2024, further regulatory changes have been issued including:
reductions in crediting rates for universal life products;
requirements on consistency between reported and incurred
bancassurance commissions and expenses; and new measures
for setting requirements for insurance sales conduct, product
design, marketing and disclosures.
– The amendment of the Insurance Law of the People’s Republic
of China is in progress with emphasis on corporate governance
including appointment of directors, fiduciary duties, and
supervision of participating and investment-linked product (ILP)
policies. The implementation timeline is yet to be announced.
– In Indonesia, regulatory and supervisory focus on the insurance
industry remains high. In 2023, the Otoritas Jasa Keuangan (OJK)
issued a five-year industry roadmap with plans to establish an
insurance industry that upholds high integrity, strengthens
consumer and public protection, and supports national economic
growth. The roadmap covers areas to enhance policyholder
protection as well as other aspects on licensing, data, capital,
products, actuarial, risk and controls. Implementation of this
roadmap is in three phases from 2023 to 2027, including
foundation strengthening, consolidation and momentum creation,
and alignment and growth.
– In Malaysia, Bank Negara Malaysia (BNM) has initiated a multi-
phase review of its current risk-based capital (RBC) frameworks for
insurers and Takaful operators since 2019, which includes
quantitative impact studies carried out in 2022, the issuance of
exposure drafts and a parallel run in 2023, prior to the potential full
implementation targeting by the end of 2024 at the earliest. BNM
also revised its policy on Management of Customer Information
and Permitted Disclosures in April 2023, which sets out
requirements regarding controls in collection, storage, use,
transmission, sharing, disclosure and disposal of customer
information. Furthermore, a new regulation on professionalism of
agents came into effect on 1 January 2024, requiring additional
'fit and proper' and due diligence procedures as enhanced agent
onboarding and screening requirements.
– In Hong Kong, the revised Guideline GL3 on anti-money laundering
(AML) and counter-terrorism financing (CTF) was published with an
effective date of 1 June 2023. The Hong Kong Government also
proposed to establish a Policy Holders' Protection Scheme in
December 2022 as a safety net for policyholders in the event of an
insurer’s insolvency. Public views were sought in 2023 and the
legislation process is expected to commence in the second half of
2024 at the earliest.
– In Singapore, the Monetary Authority of Singapore (MAS) has
designated the Group’s Singapore business as a domestic
systemically important insurer. Furthermore, in order to mitigate
money laundering risk in the financial sector as a whole, the MAS
has been soliciting feedback from industry stakeholders to improve
anti-money laundering standards. Further regulatory developments
are expected.
– In Thailand, the Office of Insurance Commission presented draft
amendments to the life and non-life insurance laws in December
2023, aimed at elevating governance standards within the
insurance industry. The amendments are currently under review.
– In Vietnam, the amended Insurance Law took effect on 1 January
2023. The new law contains provisions on RBC, with a five-year
grace period, effective from 1 January 2028. The Vietnamese
Government also issued a decree for personal data privacy
guidance with an effective date of 1 July 2023, which provides
definitions of personal data with examples of sensitive personal
data, the rights of data subjects, and notification and data transfer
requirements pertaining to the use of data. Another implementing
circular of the Insurance Law issued in November 2023 also
requires mandatory voice recording for sales, agency remuneration
limits, and a cooling-off period for lending customers.
– In the Philippines, financial product and customer service
requirements were issued by the Insurance Commission in March
2023 with an 18-month transition period for adoption. The new
requirements include product and service disclosures, a systematic
approach to customer assistance and conduct risk management, as
well as additional complaints filing.
– In India, the Insurance Regulatory and Development Authority of
India (IRDAI) continues to focus on industry reform. Its 'Insurance
for All by 2047' proposal aims to ensure that every citizen and
enterprise in India has adequate life, health and property insurance
cover. The IRDAI is promoting the use of technology, such as big
data, AI and machine learning, to transform the insurance
landscape in the country, in order to become the sixth-largest
insurance market by 2032. A new income tax rule took effect from
1 April 2023, which makes maturity proceeds of insurance policies
taxable for policies issued from this date which have annual
premiums exceeding INR 500,000. Another IRDAI regulation
issued in March 2023 removed commission payment limits for
insurers, with the aim of giving more operational flexibility to
insurers and enhancing insurance penetration.
The increasing use of emerging technological tools and digital
services across the industry is likely to lead to new and unforeseen
regulatory requirements and issues, including expectations regarding
the governance, ethical and responsible use of technology, AI and
data. Distribution and product suitability linked to innovation
continues to set the pace of conduct regulatory change in Asia.
Prudential falls within the scope of these conduct regulations,
requiring that regulatory changes are appropriately implemented.
The pace and volume of sustainability-related regulatory changes
including ESG and climate-related changes are 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 different 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. In
2023, the Hong Kong IA invited Hong Kong authorised insurers to
participate in a survey regarding their implementation of climate risk
management practices. The purpose of the survey was for the Hong
Kong IA to understand any gaps and challenges faced by the
insurance sector in managing climate-related financial risks and to
develop appropriate guidance for insurers. International regulatory
and supervisory bodies, such as the International Sustainability
Standards Board (ISSB) and Taskforce on Nature-related Disclosures,
are progressing on global sustainability and climate-related disclosure
requirements. Recent high-profile examples of government and
regulatory enforcement and civil actions against companies for
misleading investors on sustainability and ESG-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. International and local
regulatory and industry bodies are beginning to establish principles
and standards with regards to the use of sustainability and ESG
nomenclature in the labelling of investment products. 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.
A rapid pace and high volume of regulatory changes and
interventions, and the 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 the 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 policymakers, industry groups and regulators.
IFRS 17
d
IFRS 17 became effective from 1 January 2023 and the first external
reporting under this basis was in 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. These changes mean that
investors, rating agencies and other stakeholders may take time to gain
familiarity with the new standard and to interpret the Group’s business
performance and dynamics. In addition, comparison with previous
financial reporting periods will be more challenging in the short term. New
systems, processes and controls have been developed to align with the
new IFRS 17 basis and are expected to mature over time. In the short
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Additional information
Risk factors continued
term there may be increased operational risk associated with these new
systems and processes.
Apart from IFRS 17, any other changes or modification to 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.
Investor contribution schemes
e
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 life cycle, 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, thereby 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.
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, asset 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.
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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.
On 20 December 2021 the OECD published detailed model rules for
the second pillar, with implementation of the rules initially envisaged
by 2023. Due to the complexity of the rules, the implementation date
was subsequently postponed to commence no earlier than 2024 to
provide multinational enterprises and tax authorities sufficient time
to prepare. These rules will apply to the Group 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. As part of the
OECD’s development of the implementation framework, the OECD
published guidance on transitional safe harbours on 20 December
2022, and additional administrative guidance on 2 February 2023, 17
July 2023 and 18 December 2023 providing further updates and
clarifications on how to interpret the model rules. The OECD is
expected to publish further new guidance in 2024 which will affect
the interpretation of already implemented legislation.
A number of jurisdictions in which the Group has operations – Japan,
Korea, Luxembourg, Vietnam and the UK – have implemented either
a global minimum tax or a domestic minimum tax at a rate of 15 per
cent, in line with the OECD proposals, effective for 2024 onwards.
Malaysia has implemented both the global minimum tax and
domestic minimum tax effective for 2025 onwards. Other
jurisdictions where Prudential has a taxable presence, including Hong
Kong, Singapore and Thailand, intend to implement the proposals for
2025 onwards.
For those jurisdictions where either a global minimum tax or a
domestic minimum tax or both have been implemented with effect
for 2024, no material impact to the Group’s IFRS tax charge for the
2024 financial year is expected. The implementation of a global
minimum tax and a domestic minimum tax in Malaysia effective for
2025 is not expected to have a material impact for the Group’s IFRS
tax charge for the 2025 financial year. These assessments consider a
number of factors including whether the transitional safe harbour is
expected to apply based on the most recent filings of tax returns,
country-by-country reporting and financial statements of the relevant
entities. In some jurisdictions a global minimum tax but not a
domestic minimum tax regime has been implemented and the
Group’s operations in that jurisdiction will not be subject to the rules
as they are wholly domestic operations.
For those jurisdictions, such as Hong Kong and Singapore, where the
proposals are expected to be implemented with effect from 2025
onwards, work is ongoing to assess the potential impact and guidance
will be provided in due course. As a result, the full extent of the long-
term impact on the Group’s business, tax liabilities and profits
remains uncertain.
In addition to the global minimum tax and domestic minimum tax
rules, both Korea and Luxembourg have also implemented an
undertaxed profits rule effective for 2025 onwards. The undertaxed
profits rule is intended as a backstop provision to deal with
jurisdictions in case of any delay or not implementing the global
minimum tax or domestic minimum tax rules. As the rules in Hong
Kong (where Prudential plc has been tax-resident since 3 March 2023)
are expected to be in force and would apply to Prudential plc from
2025, the undertaxed profits rules implemented in Korea and
Luxembourg are not expected to have any practical application to the
Group.
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Section 172 and stakeholder engagement
Engaging with all stakeholders
UK Companies Act, Section 172 Statement
The Board recognises the importance of taking the interests of its
stakeholders into consideration when making decisions.
The Directors have acted in a way that they consider, in good faith,
would be most likely to promote the success of the Company for the
benefit of its members. This requires each of the Directors to
have regard, among other matters, to the interests of the Company’s
employees, the Company’s relationship with customers and suppliers,
and the impact of the Company’s operations on the wider
community. This statement sets out how the Directors have had
regard to the matters set out in Section 172(1)(a)-(f) of the UK
Companies Act 2006 and details how the Board builds and maintains
strong relationships with its stakeholders, how it gains an
understanding of their interests, needs and concerns, and how the
strength of these relationships contributes to the Company’s success.
Underlying its relationships with stakeholders are Prudential’s purpose
and values, which were refreshed by the Board in 2023, as
communicated in our Half-Year Financial Report.
How Directors are supported in their duties
Upon joining the Board, each Director is provided with an induction
which includes a detailed briefing on Directors’ duties, including those
arising under Section 172, and an overview of the Group’s
stakeholders.
At each Board meeting, a briefing note reminding Directors of their
Section 172 duties is made available. In addition, members of the
management team who submit proposals to the Board for approval
are required to address the Section 172 criteria in their papers,
pointing out the potential impact their proposals may have on
relevant stakeholders, or how stakeholder views have been considered.
This ensures that members of the Board are sufficiently briefed, and
that any materials provided support a robust discussion on the impact
a proposal may have on the Group’s stakeholders.
A summary of the Board’s stakeholder engagement activities in 2023
is set out in the following pages.
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Case study:
purpose and values
In August 2023, we announced our new purpose – For Every Life, For
Every Future – reflecting our mission to be the most trusted partner and
protector for this generation and generations to come, by providing
simple and accessible health and financial solutions. Alongside this we
announced new value statements – The PruWay – which define how we
set out to work together and deliver value for our stakeholders, be it our
customers, people, shareholders or communities.
The development of our values was conducted in three stages:
discovery, evidence and testing. The process was led by HR and
Corporate Affairs, who hosted focus groups with colleagues at all levels
of the organisation and across our markets. The Chair and CEO shared
emerging insights from this work at the Leadership Conference for our
Top 200 leaders and discussed ideas on how the new approach to
purpose, values and culture should match the Group’s strategic
ambitions and respond to changing market dynamics.
Senior leaders, including our Non-executive Directors and GEC members,
PruYoung professionals, which is our network of employees under 35,
and HR leaders were interviewed to test multiple purpose statements
and values to ensure that the messaging and approach was aligned and
representative of our ambitions for the next chapter of growth for
Prudential. Testing was also extended to agency focus groups to ensure
resonance and alignment with this important group of stakeholders
representing Prudential externally.
The insights gained from the focus groups and interviews were
combined with external research from investors and analysts, brand
perceptions and internal research which included employee surveys, key
learnings from past leadership conferences, and themes from our
regional brand health tracker. The key themes and opportunities
identified included telling a simple and clear story of how we aim to
achieve our mission to be the most trusted partner and protector for this
generation and generations to come, differentiation in our markets,
creating value and ensuring this is underpinned by good governance
and responsible business practices.
The RSWG and the Board discussed the emerging purpose and values
and these were approved by the Board in July.
The roll-out began in August, with a series of GEC employee townhalls
across our markets to embed the values, including operationalising
changes to ensure we establish an environment where highly engaged
employees demonstrate behaviour consistent with our desired culture
and values. An example of this has been reviewing the reward
methodology across the organisation to reflect our values.
A Collaboration Jam to discuss our purpose, strategy and The PruWay
and what they mean for employees in their daily lives was attended by
more than 7,000 employees, including our Non-executive Directors.
Following the multi-faceted employee engagement campaign, an
employee survey conducted in November provided a first reflection on
how well these value statements have been communicated and are
resonating with people. The results from the survey and Collaboration
Jam were shared with the Responsibility & Sustainability Working Group
who, with the Board, will continue to monitor how values are being
embedded across the organisation in 2024.
Our stakeholders
We have a clear strategy that is focused on delivering sustainable
value for all stakeholders. Our key stakeholders are our customers,
employees, shareholders and communities. The Board also engages
with other stakeholders including the broader workforce, the broader
investment community, regulators, governments and suppliers. Where
conflicts between different stakeholder interests arise, we ensure
these are taken into account and resolved as smoothly as possible, at
the highest level necessary.
The Chair and management regularly report to the Board on
interactions with investors, governments and regulators. Directors are
also briefed on customer needs as part of regular updates on specific
parts of the business. During the year, customer needs were central to
the Board’s discussions, which focused heavily on refreshing the
Group’s strategy. In addition, Directors participated in employee
engagement initiatives, while the Board also approved the new
purpose and value statements, which had been co-created with our
employees, to align with the Group’s refreshed strategy.
Suppliers
We work with a range of 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. We
therefore seek to build strong working
relationships with all our suppliers.
Communities & governments
Governments and policymakers in the markets
in which we operate are important 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
generate for individuals, families, communities
and the wider economy. We contribute to the
communities where we operate through
our purpose-driven Sustainability
Strategy, which is integrated
into our business.
Customers
Our customers are at the heart of
what we do. Our purpose is to be
partners for every life and protectors
for every future. At Prudential, it is our
mission to be the most trusted partner
and protector for this generation and
generations to come, by providing
simple and accessible financial
and health solutions.
Relationships
with our
stakeholders
Regulators
Prudential operates in highly
regulated markets. Regulators
supervise the insurance and asset
management industries, promote
general stability and protect
policyholders. Prudential is committed
to maintaining a constructive and
open relationship with all of its
regulators to ensure mutual trust,
respect and understanding.
Employees
Our people are our most important asset
and their engagement is fundamental to our
ability to retain our current employees,
motivate them to achieve success for
themselves and Prudential and attract future
talent. To support our strategic goals, the
Board’s focus is on creating an environment
where talent thrives and powers growth
and in which employees can connect,
grow and succeed.
Investors
The Board recognises that regular
engagement secures investors'
trust and promotes their ongoing
investment and support. The
Board is committed to the long-
term delivery of shareholder
returns through a combination of
value appreciation and dividends,
and to the delivery of credit
investors' contractual rights to
servicing and principal.
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Prudential’s engagement with customers is governed by the
following principles:
1. Treat customers fairly, honestly and with integrity.
2. Provide and promote products and services that meet customer
needs, are clearly explained and deliver real value.
3. Maintain the confidentiality of our customer information.
4. Provide and promote high standards of customer service.
5. Act fairly and promptly to address customer complaints and
any errors we find.
During the year, each of the Group Executive Committee members,
led by the Chief Executive Officer, participated in meetings with
customers. This ensured that the voice of the customer was reflected
in Board discussions. Discussions on customers form part of each
meeting of the Group Executive Committee, at which the Group
Chief Customer & Marketing Officer provides updates on the latest
customer experience initiatives and seeks the Committee’s steer.
Impact of engagement on Board decision-making
and outcomes
The outcome of our operational teams’ engagement with
customers is communicated 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. The Board is supporting further development and
embedding of a customer-centric organisational culture that
promotes customer advocacy, which in turn will help improve NPS.
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 also drove the development of our refreshed strategy
to more clearly articulate our fundamental value of customers
being at the heart of everything we do, and has been supporting
the strengthening and embedding of a consistent Group-wide
culture that is customer-centric.
Customers
What matters to them
Our customers want a seamless experience, from a trusted
provider offering comprehensive solutions and products tailored
to their needs and the stage in their lives.
Engagement metrics
– We are aiming for a top-quartile relationship net promoter
score (NPS) by 2027.
– To support this ambition, regular NPS surveys will be carried
out, led by the Group Executive Committee, and results
regularly reported to the Board.
How the Board engages and communicates
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 Prudential Hong Kong Limited, one
of its material subsidiaries, the Board met with agents to hear
directly about customer needs and how the Group’s
propositions, products and services are evolving to meet them.
The Responsibility & Sustainability Working Group (RSWG)
focuses on how the Group is demonstrating and embedding its
customer-centric focus for new and existing customers. The
RSWG discussed a refresh of Prudential’s customer strategy
framework in July, focusing on priorities to facilitate our strategic
pillar of enhancing customer experiences by becoming our
customers’ most trusted partner by enriching their life, health
and wealth journey.
The Board discussed customer strategy in July, following the
more detailed RSWG engagement. This included considering
the value propositions offered to different customer segments,
and how Prudential is supporting digitally-enabled customer
journeys. Further Board discussions on customer strategy took
place in December as part of consideration of the operating
plan for the next three years, and the Board agreed the metrics
by which it would measure progress.
How the Group engages and communicates
Prudential is committed to evolving from a Group which is
organised around products and channels to becoming the most
trusted partner to our customers. Our extensive distribution
channels enable us to better understand and service our
customers’ financial needs. At the core of Prudential’s work is
helping customers achieve their healthcare and financial goals.
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.
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Investors
What matters to them
Our capital providers are looking for us to provide them with
operational and financial performance consistent with their
expectations when they decided to make their investment.
Engagement metrics
– Ahead of the 2024 AGM, the Chair attended 16 shareholder
meetings. She also attended six shareholder meetings earlier
in the year.
– The Remuneration Committee Chair attended 11 shareholder
meetings ahead of the 2024 AGM, and 3 meetings with
investor bodies.
– The Senior Independent Director also held meetings with
investors and all Directors attended the Annual General
Meeting (AGM).
– Management held 192 meetings with 244 individual
institutional investors in Asia, the US, UK and Europe. Of these
meetings, 162 were attended by either the CEO or CFO.
How the Board engages and communicates
The Board is made aware of major shareholder matters and
concerns through a variety of sources including regular reporting
by the CEO, the CFO and the Chief of Investor Relations.
The Chair holds an annual programme of engagement with
major shareholders in respect of governance and strategic matters.
The Chair updates the Board on key themes emerging from her
meetings which, during 2023-2024, included Chief Executive
succession/transition, Board composition, business performance
and strategy, key risks and other external factors affecting the
share price, and sustainability topics.
The Remuneration Committee Chair conducts a separate annual
engagement programme with key shareholders and proxy
agencies on the Directors’ Remuneration Policy and its
implementation. She reports to the Remuneration Committee in
detail on the feedback from shareholders and to the Board on
key themes. The Remuneration Committee’s advisers also
provide updates on major investor and proxy agency views
which the Committee takes into account in its decision-making.
The Senior Independent Director (SID) and Committee Chairs
offer separate meetings to major investors. In 2023, Philip
Remnant wrote to major shareholders to offer introductory
meetings with the incoming SID, Jeremy Anderson, and himself.
The Group’s 2023 AGM adopted a hybrid approach, which allowed
shareholders to attend either in person or online. All Board members
attended the AGM in person. Prudential will continue to offer
this hybrid approach, which allows the greatest flexibility for all
shareholders across both the UK and Hong Kong. Our 2024 Annual
General Meeting will be held in Hong Kong as a hybrid meeting.
In addition, Prudential will offer a separate event in London for
shareholder engagement in person with the Chair, the Chief
Executive Officer and management later in the year. More details
will be shared with shareholders separately.
Looking forward, the Board is considering conducting an investor
perception audit during 2024 to deepen its understanding of
the views of existing and potential investors.
How the Group engages and communicates
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.
These meetings took a variety of forms in 2023 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.
In 2023, investor engagement focused particularly on the
introduction of the new Chief Executive Officer, the Group’s
subsequent strategic update, and supporting analysts and
investors with understanding the new IFRS 17 accounting
framework.
Investor relations activity in 2024 will continue to focus on
communicating the Group’s investment story and particularly
progress in the execution of our updated strategy.
We continue to take active steps to support an increase in liquidity on
the Hong Kong line of stock (ticker 2378 HK), including moving
equity issuance under share schemes for employees and agents
to the Hong Kong line where possible. We are engaging with
both the Hong Kong Stock Exchange and market participants to
achieve faster and lower-cost transfers of shareholdings from the
London line.
Nearly half of our coverage analysts are now located in the Asia
region and actively cover our Asian regional peers. We will
continue working with Asian-based research franchises to
support and build coverage of the stock by those located close
to our operating markets. At the same time we continue to
provide support to the European research teams.
Impact of engagement on Board decision-making
and outcomes
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 in 2023
investor views were heard in the boardroom and that the Board’s
strategy and approach to key decisions were understood by
investors.
The Remuneration Committee Chair provided detailed briefings
to the Remuneration Committee and, where appropriate, the full
Board on matters raised by investors. Feedback from investors
forms a key part in the Committee’s formulation of the
Directors’ Remuneration Policy and its implementation.
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Employees
What matters to them
Our workforce is looking for a positive working environment
where they belong and feel valued, can thrive and are able to
progress their careers.
Engagement metrics
– 95 per cent participation in employee survey conducted in
January 2023;
– 87 per cent participation in snap survey conducted in
November 2023; and
– Targeting top quartile employee engagement.
How the Board engages and communicates
The Board and management use a range of formal and
informal methods to engage, communicate with and
understand the views of the workforce. The Board has chosen
to adopt a collective approach to employee engagement, led
by the RSWG. This enables Directors to interact directly with
the workforce, hear their 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.
The RSWG along with other Non-executive Directors
participated in workforce engagement activities. Key
engagement activities included:
– Attendance by the Chair of the RSWG, George Sartorel, and
Arijit Basu at Diversity & Inclusion (D&I) Council meetings;
– Attendance by the Chair of the Board at townhall meetings and
leadership team meetings in Hong Kong and at local offices;
– Various Non-executive Directors attended graduation
ceremonies of Prudential’s flagship leadership development
programme;
– Non-executive Directors participated in the 2023
Collaboration Jam;
– As part of the Board visit to Prudential Hong Kong Limited in
April, the Board spent time with local and Group management
teams and talent, as well as with agency leaders; and
– Claudia Suessmuth Dyckerhoff and Jeanette Wong visited our
Indonesia and Singapore offices for various meetings with the
local leadership teams and informal events with top talent.
In addition to its direct engagement with the workforce, the
Board receives regular updates on employee matters from the
Chief Executive Officer, the Chief Human Resources Officer
and local business leaders. The Board, supported by the RSWG,
oversees Prudential's people strategy and receives updates on
talent development and people metrics. The RSWG reviews in
detail the output from employee engagement surveys and the
Collaboration Jam, a crowd-sourced conversation online,
supported by our external advisers HSM, and discusses follow-
up actions with management. This is also discussed at Board
meetings.
The RSWG is regularly updated on the D&I Council’s
meetings and the Group’s D&I initiatives. Through
attendance at D&I Council meetings, Non-executive
Directors have been able to experience directly how the
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Group is fulfilling its role and gain a better understanding of the
progress being made and an appreciation of different initiatives in
support of the Group’s goal to empower employees and create a
sense of belonging through respect and appreciation of differences.
How the Group engages and communicates
Prudential is committed to creating an inclusive environment which
welcomes commonalities and values differences. We therefore
endeavour to provide a work environment that is free from all forms
of discrimination and harassment, including those based on race,
gender, religion, colour, national or ethnic origin, marital status,
sexual orientation, age, disability or any other characteristic
protected by law. This also means that Prudential is an equal
opportunity employer.
The Group engages with the workforce throughout the year.
Highlights include employee surveys and the Collaboration Jam.
These surveys provide valuable insights into employees’ sense of
belonging and their key priorities, alongside areas for further
improvement.
Prudential offers leadership development programmes across the
Group, designed to deepen participants’ self-awareness and
empower them to lead with authenticity and purpose.
Prudential’s D&I Council is co-chaired by the Chief Risk and
Compliance Officer and the Chief Human Resources Officer and
comprises leaders from across the Group. It is responsible for
defining a global D&I strategy, promoting and championing D&I
initiatives in the various businesses, and challenging the organisation.
Extensive engagement of employees took place as part of the
development and roll-out of the new purpose and values (see case
study on purpose and values).
Impact of engagement on Board decision-making and
outcomes
The Board and RSWG discussed with management the output of the
annual 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
ongoing initiatives to support the workforce, including support for staff
wellbeing, embedding the Group’s values throughout the organisation, and
developing talent and a diverse and inclusive workplace.
> For more information, please refer to pages 50 to 55 of the
Sustainability Report.
Members of the RSWG and other Non-executive Directors spent time with
employees to hear from them directly and shared feedback with the Board.
Through their 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 updated
culture and values are embedded within the leadership and across the
business; and other issues 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.
Regulators
What matters to them
Our regulators protect customers’ interests and set the
framework within which Prudential operates as a financial
services group. They regulate and supervise the insurance and
asset management industries, promote their general stability
and protect policyholders and other customers.
Engagement metrics
– The Board met with the Hong Kong Insurance Authority
(IA) to receive feedback from the Regulatory College.
How the Board engages and communicates
In March 2023, the Board received a detailed presentation by
the Hong Kong IA on its observations and expectations
following the Regulatory College of Supervisors in late 2022,
which is an annual event attended by regulators from the key
markets in which we operate. Following the presentation, the
Board discussed and agreed the feedback to the annual
College letter.
In November 2023, members of the Board and the Group
Executive Committee (GEC) engaged in discussions with the
Regulatory College of Supervisors. This was an important
opportunity for members of the Board to engage directly with
regulators in the Group’s key markets and to hear first hand
their concerns and priority areas of focus. Feedback from the
Regulatory College of Supervisors will be shared with the
Board in 2024.
The Board received regular updates throughout the year on
our significant engagements with the Hong Kong IA and
other key regulators. The Risk Committee oversaw progress in
addressing the observations in the 2022 Regulatory College
letter.
Case study: strategy
In the first six months of joining Prudential, the new CEO’s key
focus was undertaking a thorough strategic and operational
review of the Group, meeting with employees, customers,
distributors, partners, regulators, investors and other capital
providers.
The outcome of the review was a refreshed strategy to deliver
on the Group’s purpose ‘For Every Life, For Every Future’. The
strategy is underpinned by three strategic pillars, which are in
turn supported by three group-wide enablers. The Board was
engaged throughout the review conducting deep dives into each
of the strategic pillars and enablers and considering how the
refreshed strategy created sustainable value for different
stakeholder groups, in particular customers, employees,
shareholders and communities.
How the Group engages and communicates
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.
Prudential Corporation Asia Limited 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.
GEC members (in particular the Chief Risk and 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.
In addition, our local businesses communicate and engage with
their local regulators as required in order to maintain
constructive and open relationships.
Impact of engagement on Board decision-making
and outcomes
Feedback from engagement with the Hong Kong IA drives focus
areas for the Risk team and helps shape the annual schedule of
business for the Board and its principal committees, in particular
the Risk and Audit Committees.
During 2023, the Board discussed and approved various matters
and documents required under the GWS Framework, including
the Group’s Own Risk and Solvency Assessment.
Within the strategy approved by the Board in July 2023, and
announced in August, were defined success metrics for each of
these key stakeholder groups: customer NPS, employee NPS,
financial growth targets, and an updated carbon reduction
target. Following the announcement, management undertook
an extensive programme of investor engagement to discuss the
strategy and its execution; the Chair also engaged investors for
their views on the strategy in her annual engagement
programme. Management held a series of townhall meetings
across our markets to launch the refreshed strategy, purpose
and values with employees.
Over 2024, the Board will continue to monitor the execution of
the strategy against the agreed success metrics for the different
stakeholder groups and a more detailed dashboard of financial
and non-financial metrics.
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Communities and governments
What matters to them
Governments shape the business environment that affects how
companies contribute to the local economy and societies, how
governments interact at the international level shapes the wider
operating environment for Prudential as a global business.
The Board also engages through the CEO. As part of his
introduction as CEO in 2023, Anil Wadhwani undertook a range
of market visits and met relevant government ministers and
regulators to understand their perspectives and priorities as he
developed our strategy refresh.
The Board considered sustainability as a key enabler of the
strategy refresh in August. The Board approved a new weighted
average carbon intensity (WACI) reduction target of 55 per cent
by 2030 as well as a sustainability-linked KPI for all people
managers by 2026.
> For more information, please refer to the Sustainability Report.
The Risk Committee oversees external climate-related
commitments and reporting against the TCFD. The Risk
Committee also considered and approved a new approach to
transition financing and received regular updates on key
initiatives and progress against climate priorities and external
developments.
The RSWG oversees our community engagement and investment
activities on behalf of the Board. In 2023, the RSWG received
updates on the activities of the Prudence Foundation and its
strategic focus for 2024, and discussed the alignment of the
Foundation's activities to the Group Sustainability strategy and
how to assess the impact of its activities.
Communities in which we operate are affected by Prudential,
including at a societal and environmental level. Communities
want sustainable businesses that benefit the local community.
Engagement metrics
– 11 market visits by the CEO;
– 5 market visits and 4 major international climate-finance
related Summits by the Chair; and
– Prudential invested $13 million in community programmes
during 2023.
How the Board engages and communicates
The Board regularly receives and discusses reporting on
government, (geo)political and regulatory developments from
the Chief Government Relations & Policy Officer.
On behalf of the Board, the Chair engages with key government
stakeholders in a number of ways throughout the year, including
bilateral meetings and at public events. Examples include
meetings and engagements with government officials and
regulators, including in and from Hong Kong, Beijing, Shanghai,
the Philippines, Cambodia, Singapore, India, the UK, the US, the
EU and Vietnam.
Engagement also took place in international fora and with
international regulatory bodies, standard setters, and multilateral
development banks, including at and during COP28, New York
Climate Week, the Paris Summit for a New Global Financial Pact,
and the Windsor Climate Finance Mobilisation Forum; and
through the Chair’s Board membership of the Institute for
International Finance (IIF).
Areas of discussion during 2023 included:
– Insurance sector development;
– Capital market development;
– Healthcare access and insurance;
– Financial inclusion;
– Climate change and sustainable finance; and
– Technology and innovation.
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Impact of engagement on Board decision-making
and outcomes
Engagement with governments contributes to better
understanding and analysis at Board deliberations 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 improves
understanding of 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 Sustainability 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.
> For more information on our sustainability strategy, goals and
actions, please refer to page 6 of the Sustainability Report.
Communities and governments
How the Group engages and communicates
Governments
We engage with governments in a number of ways,
both 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.
Through 2023, 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, climate change and
sustainable finance, pandemic recovery, healthcare and
technology. An example of local advocacy was Prudential
convening industry dialogues on climate health and financial
risks in the Philippines with local insurance and financial
regulators. Through partnerships with the British Chamber of
Commerce in Vietnam and non-profits like the Climate Bonds
Initiative (CBI), Prudential also organised workshops on local
transition investment, such as exploring how financing
mechanisms like Vietnamese thematic bonds can mobilise
capital for the transition to net zero by 2050.
> For more information, please refer to page 66 of the
Sustainability Report.
Wider communities
Our approach to community investment and engagement is
guided by our Group-wide Community Investment Policy and
the Group’s Sustainability strategy. 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. For example, a fund
which had been established for Covid-related community
assistance was transitioned to the PRU Community Health Fund,
and allocated to various businesses for the purpose of
identifying and supporting health initiatives.
Prudential engaged at COP28 with a particular focus on
transition finance and the role of the private sector in supporting
a just and inclusive transition in emerging markets; and
supported existing partnerships such as the UN-convened Net
Zero Asset Owner Alliance, Insurance Development Forum and
High Level Champions.
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Suppliers
What matters to them
Our suppliers look for mutually beneficial business relationships
and reliable business partners.
Engagement metrics
– Circa 13,000 suppliers supporting our businesses across Asia,
Africa and the UK;
– Circa 180 staff attended modern slavery risk awareness
training across our markets, with representation from
procurement managers, risk assessors, legal teams and
sustainability representatives;
– Average time to pay invoices 29 days in the UK; and
– In the UK, over 203 small suppliers have been paid within 10
days since launch of our Small Supplier Accelerated Payment
Scheme, with payments of over £3.5 million in 2023 to bring
the total since launch to £24 million.
How the Board engages and communicates
The Board approves agreements with major suppliers and
receives updates on key supplier relationships as part of
operational and business reviews focusing on various parts of
the Group.
Key strategic supplier relationships are also considered as part of
the strategy and operational plan discussed and approved by
the Board annually.
The Board, supported by the RSWG, reviews and approves the
Group’s Modern Slavery statement annually.
How the Group engages and communicates
Prudential uses third-party suppliers and outsourcing providers to
allow us to focus on our core business strengths and reduce
costs.
We use a Group Third-Party Supply and Outsourcing Policy
(known as the GTPSO) consistently throughout the Group to
ensure we articulate clearly how we work with suppliers and our
expectations of them. The policy is a core part of our system of
governance. It sets out our position on supply chain
management, outlining our approach to due diligence, selection
criteria, contractual requirements and ongoing monitoring of our
supplier relationships. The policy also supports compliance with
the Hong Kong IA’s Group-wide Supervision Outsourcing
guidelines.
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
continues to carry out a range of activities to enhance the
Group’s approach to modern slavery, not least through
responsible supplier risk assessments and due diligence
requirements within the GTPSO. Our systems include due
diligence checks 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 or guarding.
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Our Responsible Supplier Guidelines further promote the
development of a sustainable and ethical supply chain, with
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.
Payment terms
In order to demonstrate Prudential’s ongoing commitment
to supporting its supply chain, Prudential continued to provide
payment assistance in 2023 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. 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.
Impact of engagement on Board decision-making
and outcomes
In 2023, we further enhanced the GTPSO to drive consistent use
of our procurement and third-party risk management system,
Coupa, to ensure that our third-party risk management
framework is consistently applied. The policy was enhanced by
introducing an updated third-party risk assessment
methodology that is clearer in identifying elevated risks,
strengthens risk monitoring and remediation processes,
emphasises market tendering requirements and further clarifies
the roles and responsibilities of key functions and stakeholders
across the Company.
Through the introduction of the new Responsible Supplier
Guidelines in 2022, Prudential has sought to increasingly
introduce the same measures deployed in the UK to our Asia
and Africa supply chain. For more information, please refer to
our most recent Modern Slavery Statement on our website. We
also introduced measures to understand a supplier’s position on
ethical labour standards, health and safety and equal
opportunities for our material suppliers and those that provide
services in areas deemed to pose higher modern slavery risks.
We remain committed to learning how to improve our own due
diligence and monitoring and engaged an external party to
conduct a review to compare Prudential’s best practices to those
of other pan-Asian insurers and identify improvements.
In December 2023, Group Procurement conducted modern
slavery risk awareness training in partnership with a non-profit
organisation that focuses on these issues. The training provided
an overview of modern slavery and raised awareness on where
and how these issues may exist in the Group’s supply chain,
along with how these risks can be mitigated and monitored and
the type of positive actions that can be taken to remediate
them.
The Board approved updates to Prudential’s Code of Conduct in
2023 and expects that external stakeholders, including suppliers,
abide by principles consistent with those of Prudential.
Prudential chooses to partner only with those who can meet our
rigorous ethical standards.
Sustainability
Sustainability for Real-world Impact
and Long-term Resilience
Our commitment to sustainability is
embedded in our company purpose
For Every Life, For Every Future,
reflected in our values and underpins our business strategy.
Our mission is to be the most trusted partner and protector for
this generation and generations to come, by providing simple
and accessible financial and health solutions.
Our strategy goes beyond managing environmental, social and governance (ESG) risks
As individuals and as an
organisation, we want to
contribute to a greener, more
inclusive, and responsible
future for our customers,
people, shareholders and the
communities in which we
operate.
Our activities in 2023
provide good examples of
how we are delivering for the
next chapter of growth and
taking proactive steps to
achieve our sustainability
ambition.
As we evolve our terminology
to use the more
comprehensive umbrella of
‘sustainability’, we
demonstrate our ambition to
run a sustainable business
that has real-world impact
and builds long-term
resilience.
In 2024, we will be taking a
strategic and integrated
approach to sustainability,
tracking ourselves against key
metrics to hold ourselves
accountable to all our
stakeholders.
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Additional information
Sustainability continued
Our refreshed sustainability strategy
From ESG to sustainability
As our approach to sustainability has evolved, how we talk about
sustainability has evolved too. We view sustainability as a clear driver
of value for our business and society. Our holistic approach involves
enhancing the impact of our products and services and shaping the
future of sustainability in some of the largest markets in the world.
To that end, we are now using the term sustainability as an all-
encompassing term that signifies the creation of value and growth
through the positive impact we are having in our markets.
Our sustainability purpose and strategy
As a life and health insurance provider and long-term investor in Asia
and Africa, we are committed to playing our part in increasing access
to affordable health and financial protection, enabling a just and
inclusive transition to a low-carbon future and paving the way to long-
term resilience for our customers, people, communities and
shareholders.
Our sustainability strategy is core to who we are as a business and our
purpose 'For Every Life, For Every Future' speaks to our ambition to
deliver real-world impact in the markets where we operate for a more
sustainable, responsible and inclusive future.
Our refreshed sustainability strategy is centred on three pillars that
reflect who we are as a business. They are simple and accessible
health and financial protection, responsible investment and
sustainable business. Each pillar has three key priorities that map out
our opportunities for impact. Good governance and responsible
business practices form the critical foundation across the strategy.
As guardians of our customers’ and shareholders’ assets, we consider
all material risks, including ESG risks, in fulfilling our fiduciary duty.
Our sustainability strategy actively places the considerations of
emerging markets at the forefront, reflecting the needs of many of
the markets in which we operate. There is broad recognition of the
need to manage the energy transition in a just and inclusive way, yet
there is limited emphasis in mainstream discussions on exactly how
difficult this process for emerging markets can be. They are currently
the largest greenhouse gas emitters, but have historically contributed
the least, have the largest financing gaps and are most vulnerable to
the physical impacts of climate change. With our sustainability
strategy we aim to bridge the gap between developed and emerging
markets.
Affordability is still a key hurdle for many in emerging markets to
access health and financial protection. As a result, we strive to provide
more affordable products and solutions to help close the health and
protection gaps between emerging and developed markets. By
putting our customers at the centre of our product development
process, we aim to adapt to changing demographics and meet the
evolving needs of our customers.
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Sustainability strategy
Ambition
Purpose
Pillars
> See page 108
> See page 110
> See page 114
Priorities
Sustainability for real-world impact and long-term resilience
For Every Life, For Every Future
Simple and accessible health
and financial protection
Increase access to health and
financial protection for every life
Responsible investment
Enable a just and inclusive
transition to net zero for every
future
Delivering partnerships and
digital innovation for health
outcomes
Drive positive health outcomes
through partnerships and digital
innovation
Developing sustainable and
inclusive offerings
Develop sustainable and
inclusive offerings to increase
access to protection for
underserved customer needs
and communities
Decarbonising our portfolio
Committed to decarbonise our
portfolio and become a net zero
asset owner by 2050
Financing a just and inclusive
transition
Financing a just and inclusive
transition with emerging markets
considerations at the forefront
Sustainable business
Embed sustainability into our
business operations and value
chain to amplify the pace and
scale of our impact
Empowering our people
Empower our talent pool by
upgrading their sustainability
capabilities and advancing our
diversity, equity, inclusion and
belonging strategy
Establishing sustainable
operations and value chain
Embed sustainability in our
day-to-day operations as a
business, including with our
suppliers and partners
Building resilient communities
Support the communities in which
we operate, building resilience
through the work of our business
units and Prudence Foundation
Mainstreaming responsible
investments in emerging
markets
Leverage our influences as asset
owner to mainstream responsible
investments in emerging markets
Harnessing thought leadership
to shape the agenda
Leverage our advocacy power to
shape a sustainability agenda
that places emerging markets
considerations at the forefront
Foundation
New targets
Good governance and responsible business practices:
Corporate governance, conduct and ethics, risk management,
external reporting and benchmarking
55% weighted
average carbon intensity
(WACI) reduction
by 2030
Developed new internal
investment target on
financing the transition, as
an underpin to the WACI
reduction target
40% female representation
in Group Leadership Team
by the end of 2026
All people managers
to have sustainability-
linked KPIs by the
end of 2026
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Sustainability continued
Targets
We have committed to becoming a net zero1 asset owner by 2050 and have set shorter-term targets in line with the recommendations of the
Paris Agreement. When we refreshed our sustainability strategy to align with our new business strategy, we also set additional targets around
responsible investment and sustainable business and put measurement processes in place to obtain data and set baselines.
Our targets and progress
Targets
Responsible investment
Timing
Board’s evaluation of progress
By 2030
On track:
Deliver a 55% reduction in the carbon emissions*
intensity of our investment portfolio† by 2030 against
our 2019 baseline
During 2023 we reduced the weighted average
carbon intensity (WACI) of our portfolio by 50%
against the 2019 baseline
By 2030
New target
Internal investment target on financing the transition
to a lower-carbon future. (Note: This is a critical
underpin for the WACI reduction target and is linked to
our executive remuneration)
Engage with the companies responsible for 65% of
absolute emissions in our investment portfolio
Ongoing
Fully met:
Deliver a 25% reduction in our operational emissions
intensity from a 2016 baseline, and 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
Sustainable business
This is an ongoing annual target, which we have fully
met in 2023 for the identified cohort of companies
By 2030
On track:
We achieved an intensity ratio of 0.95 tCO2e/FTE for
2023, putting us on track to meet our 2030 target of
1.65 tCO2e/FTE
Employ 35% of women in senior management‡ by the
end of 2023
By 2023
Fully met
At 31 December 2023, the representation was 35%,
in line with our 2023 target
Ensure 40% of women in Group Leadership Team§ by
the end of 2026
All people managers to have sustainability-linked KPIs
by 2026
By 2026
New target
By 2026
New target
* 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.
‡ The senior management definition was previously defined as all senior managers who represent the most pivotal roles in our Group below the Group Executive Committee
(GEC). It excludes the Chair, Executive Directors, and GEC members.
§ Group Leadership Team (GLT) is defined as the direct reports of all GEC members, all CEOs of our Life businesses and their direct reports, all CEOs of our Eastspring
businesses, and select roles that are essential in delivering our strategy.
(1) In the context of Prudential, net zero and carbon neutral have the following meanings: 1. ‘Net zero’, in regard 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 greenhouse gas emissions to as close to zero as
possible. Only then are any residual emissions balanced by removals from the atmosphere.
The above performance against targets is as of 31 December 2023. The Board will continue to review and evolve this as the Group progresses on
its sustainability journey to consider evolving scientific data and stakeholder expectations.
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Approach to sustainability reporting
We have observed our obligations under: (i) sections 414CA and
414CB of the UK Companies Act 2006; (ii) the UK’s Financial Conduct
Authority’s Listing Rules in respect of climate-related disclosures; and
(iii) the ESG Reporting Guide contained in Appendix C2 to the Rules
Governing the Listing of Securities on the Stock Exchange of Hong
Kong Limited (HKEX). The HKEX sets out five reporting principles,
which we have addressed as follows:
Materiality
Quantitative
Consistency
Balance
Reporting boundary
The process of materiality assessment
and stakeholder engagement is outlined
in the Materiality assessment section
below.
Consistent with our approach in 2022,
metrics have been provided in compliance
with the HKEX requirements and
voluntary adoption of the SASB
Insurance Standard. An index to this
report covers HKEX and SASB Insurance
requirements.
The FY23 report is consistent with the
FY22 report to support compatibility.
We have endeavoured to provide an
unbiased account of our performance
and to use objective presentation
formats.
Consistent with previous years, the
scope of the report, and data therein is
available 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.
We have made disclosures consistent with the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations
and recommended disclosures (see TCFD index in this Annual
Report). In line with our ‘comply or explain’ obligation under the
UK’s Financial Conduct Authority’s Listing Rules, we can confirm
that we have made disclosures consistent with the TCFD
recommendations and recommended disclosures in this Annual
Report. Our TCFD disclosures also meet the new climate-related
financial disclosure requirements contained in section 414CB of the
Companies Act 2006.
In 2023, Prudential continued participating in the Climate Change
questionnaire of CDP, scoring B (2022: A-). This was due in part to
survey changes, as CDP asks financial institutions to quantify revenue
and costs aligned with their climate transition, consistent with
strengthening global sustainability reporting framework requirements.
To address this moving forward, we are looking to prepare for
alignment with the International Sustainability Standards Board
(ISSB) disclosures (particularly the new S2 Climate Standard), and
report on climate-related disclosures through this lens once it
becomes mandatory.
In line with HKEX guidance, the Group has sought limited assurance
on select indicators covering Scope 1, Scope 2 and Scope 3 financed
emissions, community investment cash contributions and employee
diversity as per the prior year. We appointed EY LLP (EY) to provide
limited independent assurance over these. EY will be the Group’s
external auditor from FY2023. In 2023, we also strengthened our
internal procedures for verification of our disclosures covering non-
financial statements to improve the accuracy of our information.
Rising to the climate challenge
Protecting the future is at the very core of Prudential’s purpose: 'For
Every Life, For Every Future'. And a future where everyone can thrive
relies on limiting the human impact of climate change. Therefore, we
are strongly committed to facilitating a just and inclusive net zero
transition that fosters sustainable growth and promotes economic
wellbeing within the communities we serve. Doing so will involve
keeping capital in countries that currently rely heavily on fossil fuels to
ensure they have vital funds to invest in lower-carbon transformation.
Climate change is an issue that cuts across all pillars of our sustainability
strategy and our business, and we will coordinate our efforts across
responsible investment, products and services, engagement and
advocacy, and our own operations, to achieve our climate ambitions.
In March 2023, we published our first Climate Transition Plan. It sets
out our approach to fulfilling our climate-related commitments and
details the specific actions we will take and the metrics that will guide
us on the path to net zero. Updates to our Climate Transition Plan are
integrated within the Responsible investment and Sustainable
business sections of the Sustainability Report 2023. Both the
Sustainability Report and Annual Report contain an index to show
alignment with the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD).
Further climate-related information in this report
> TCFD disclosures, pages 119
> TCFD reference tables, pages 137
> Responsible investment information, pages 110
> Environmental metrics, pages 126
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Additional information
Sustainability continued
Materiality assessment
To deliver sustainable value in the long term, we need to align with our
shareholder and stakeholder expectations. In 2022, we carried out a
robust materiality assessment based on structured stakeholder
engagement. This included formal surveys and interviews with
customers, distributors and employees. Via this process, we explored a
range of issues, risks and opportunities, focusing on where we can
create positive impact through our products, services and initiatives. In
2023, after reviewing the findings, assessing external trends and
holding regular dialogues with key stakeholders, we concluded that
the findings remained relevant.
Materiality assessment process 2023
Step 1: Identify and define material topics
We reviewed the 21 topics from 2022 that were drawn from prior
material topics, HKEX and SASB requirements, and peer reviews.
Step 2: Prioritise topics based on stakeholder views
Prioritisation was based on the assessment carried out in 2022, which
was informed by regular interaction with stakeholders, as well as
formal ESG surveys with nearly 1,000 customers, more than 1,000
employees, and over 7,000 agency distributors.
Step 3: Analyse and evaluate
We analysed and evaluated the 2022 outcomes and determined that
the topics are still relevant to our business and remain important areas
of concern for our stakeholders.
Step 4: Validation and approval by senior management
The final step of our materiality assessment involved validation and
approval from senior management via the governance of our Group
Sustainability Committee and Responsibility & Sustainability Working
Group (RSWG).
Materiality matrix
Our assessment identified 21 topics and ranked them as either high, medium or emerging priority. The topics are
mapped according to their importance to stakeholders and Prudential’s business, and their impact on the
economy, environment and society. Our high-priority material topics are consistent with our findings in 2022.
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Understanding our impact
Stakeholder engagement
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 are and our response to these.
Rating agencies
Employees
Mode of engagement
Annual meetings
Topics of interest or concern where indicated
by the stakeholder group
– Climate change
– Inclusive products and services
– Responsible investment
– Diversity, inclusion and belonging
– Responsible procurement practices
– Data privacy and cyber security
Mode of engagement
– Employee engagement surveys
– Collaboration Jam
– Townhalls
– GEC roadshows
Topics of interest or concern where indicated
by the stakeholder group
– Responsible environmental practices
– Financial literacy
– Responsible investment
– Climate change
– Employment, recruitment and rewards
– Diversity, equity and inclusion in the workplace
Governments and regulators
Investors
Mode of engagement
– Roundtables
– Consultations
– Public events
– Regulatory colleges
– Regular meetings (direct and indirect, eg with sector-wide/
industry bodies)
Topics of interest or concern where indicated
by the stakeholder group
– Healthcare access and insurance
– Financial inclusion
– Climate change and sustainable finance
– Technology and innovation
– Data privacy
– Ethics and responsible business practices
– Responsible tax
Mode of engagement
– Regular meetings
– Investor conferences
– Investor Perception Study
Topics of interest or concern where indicated
by the stakeholder group
– Climate change
– Responsible investment
– Inclusive products and services
– Diversity, inclusion and belonging
– Digital health innovation
– Fair treatment of customers
> Further information on stakeholder engagement can be found in our Section
172 Companies Act Statement in our Annual Report and Accounts on page 88.
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Additional information
Agency distributors
Mode of engagement
– Agency distributor survey
Topics of interest or concern where indicated
by the stakeholder group
– Customer satisfaction
– Inclusive products and services
– Training and development
– Digital innovation
– Customer fair dealing
Sustainability continued
Customers
Mode of engagement
– Contact centres
– Focus groups
– Customer survey
Topics of interest or concern where indicated
by the stakeholder group
– Customer fair dealing
– Data privacy and protection
– Responsible investment
– Customer satisfaction
– Financial literacy
Peers and other financial institutions
Mode of engagement
– NZAOA
– Just Energy Transition Partnership (JETP) Vietnam
– Hong Kong Green Finance Association (HKGFA)
Topics of interest or concern where indicated
by the stakeholder group
– Portfolio decarbonisation
– Sustainable and transition finance
– Challenges in financing emerging markets
– Disclosures & reporting standards
– Carbon offsets
> Further information on stakeholder engagement can be found in our Section
172 Companies Act Statement in our Annual Report and Accounts on page 88.
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Sustainability governance
The Board considers sustainability to be aligned with our ambition to
be the most trusted partner and protector for generations to come. It
recognises the major role that Prudential can continue to play in
shaping sustainability across Asia and Africa, as well as in ensuring the
long-term success, resilience and health of the communities in which
we operate. As such sustainability matters, including climate change,
are overseen by the Board, which is responsible for determining overall
strategy and prioritisation of key focus areas.
The Responsibility & Sustainability Working Group (RSWG) comprises
only independent Non-executive Directors and focuses on customer,
culture, digital, people and community matters. The Risk Committee
oversees environmental and climate-related issues, including the
implementation of the Group’s commitments to decarbonise its
operations and investment portfolio and other climate-focused
responsible investment commitments. The Committee is also
responsible for external reporting, via the Sustainability Report, where
it relates to those areas within its remit, including monitoring progress
on the Group’s reporting against the recommendations of the TCFD.
The Risk Committee has 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 Risk Committee
considers and makes appropriate recommendations to the Board. The
remit of the Risk Committee also includes considering climate-related
issues when reviewing and guiding overall strategy, major plans of
action, risk management policies, annual budgets and business plans.
In 2024, the Board plans to establish a Sustainability Committee to
replace the RSWG and to take over from the Risk Committee oversight
of environmental and climate-related issues. The Committee will be
chaired by Non-executive Director, George Sartorel.
Since 2022, sustainability has been included in the strategic priorities
for the Group’s Executive Directors by way of a specific objective to
drive the climate transition and responsible investment focus across
the organisation. To support this ambition, the Remuneration
Committee has adopted a transition finance underpin target for this
element of the Prudential Long Term Incentive Plan (PLTIP). This
underpin will consider the value of qualifying investments committed
to support the transition of the world to a lower-carbon future.
In line with our updated target to reduce emissions from all
shareholder and policyholder assets by 55 per cent by 2030, in
December 2023 the Remuneration Committee agreed to attach
carbon reduction targets to Executive Directors’ 2024 Prudential Long
Term Incentive Plan (PLTIP) awards, making this the third cycle of
awards with carbon reduction targets. Sustainability metrics constitute
10 per cent of the total Executive Directors’ 2024 PLTIP award,
including 5 per cent linked to carbon reduction and 5 per cent linked
to diversity.
> Further information regarding both measures can be found in the
Directors’ remuneration report within the Annual Report and
Accounts.
Management oversight
Sustainability activities, including the impacts of climate change, are
overseen at a management level by the Group Sustainability
Committee. The Chief Financial Officer chairs the Committee, which
met five times in 2023. The Committee’s members include the Chief
Risk and Compliance Officer, Chief Investment Officer, Chief
Corporate Affairs Officer, Chief Human Resources Officer and senior
representatives from the Group’s asset owner and asset management
businesses, including the chief executives of Eastspring and Prudential
Singapore's business.
One of the Group Sustainability Committee’s responsibilities is to
oversee the Group’s progress towards fulfilling our commitment to
report against the recommendations of the TCFD. The Group’s
policies and procedures in relation to certain sustainability topics are
included in the Group Governance Manual.
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Additional information
Sustainability continued
Sustainability governance, including climate change
Prudential plc Board
Oversees all aspects of sustainability 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 sustainability, including climate change, oversight matters to its committees
Responsibility &
Sustainability Working
Group
Oversees the embedding of
the Group’s sustainability
strategy, focusing on
customer, culture, digital,
people and community
matters
Audit
Committee
Oversees the Group’s Annual
Report and Accounts, of
which the sustainability
section is an integral part
Remuneration
Committee
Supports the sustainability
strategy through alignment of
the Group’s incentive plan to
external sustainability targets
Oversees whistleblowing
programme
Risk Committee
Oversight responsibilities for
environmental and climate-
related issues
Oversees implementation of
external climate-focused
commitments
Reviews climate-related
information presented within
the Sustainability Report
Oversees the Group’s ongoing
commitment relating to TCFD
Supports the sustainability
strategy by ensuring
sustainability risks, including
climate-related risks and
opportunities, people and
culture are effectively managed
Chief executive and management team
The chief executive has responsibility for implementation of the Group’s sustainability strategy, including people, culture and
climate change risks and opportunities, with support from the executive management team
Group Sustainability Committee
Focused on the holistic assessment of sustainability matters,
including climate change, that are material to the Group
Chaired from February 2023 by CFO
Members include asset manager CEO, CRCO, CHRO, and
business entity CEO
Group Investment Committee (GIC)
Oversees Group-wide investment performance and risk
exposures, including those impacting policyholders
Members include asset manager CEO, CIO and Chief Actuary
Group Responsible Investment Working Group (GRIWG)
Operational responsibility for oversight of Responsible Investment activity
Co-chaired by CIO and Eastspring CIO
Members include local business CIOs
Local business units
Supports the implementation of the Group’s Sustainability strategy, including climate change risks and opportunities
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Challenges and future goals
In 2024 our priority will be to operationalise our new sustainability
strategy across our businesses in a way that is proportionate to each
market's level of developed sustainability.
We also recognise that we still need to evolve our approach to social
sustainability, which is why our immediate priority will be to develop a
social sustainability strategy that can potentially contribute to
increasing people’s access to health and financial protection, while
considering diversity and inclusion across our markets.
We will be looking to develop our initial position on biodiversity and
nature, evaluating how we can integrate this into our net zero
ambition and climate management approach. Through our
philanthropic arm, the Prudence Foundation, we are also setting up a
fund to advance efforts on enhancing climate-related health resilience
in communities, as well as continuing with our support on researching
into the interconnectedness between climate and health.
Our success depends on our people. Our goal is to embed
sustainability across our organisation, and build a socially responsible
organisation where our people fully understand how to apply their
skills and understanding of sustainability into their day-to-day roles
and contribute meaningfully to our sustainability ambition. We are
also advancing our diversity, equity, inclusion and belonging efforts so
that everyone can build a rewarding career and feel a strong sense of
belonging.
The table below sets out some of our areas of focus over the next
three to five years:
Description of challenges
Steps we are taking
Topic
Climate-
related
data
Customers
The quality and availability of carbon-
intensity data is an ongoing challenge, with
limited coverage of WACI and financed
emissions within our investment portfolio.
Products and services aimed at underserved
segments including women, minorities, the
elderly and low- to middle-income
individuals particularly in emerging markets
can be broadened and further refined.
Insufficient research and data on how
climate change will impact
individual health.
Transition
to a low-
carbon
economy
Inability of emerging markets to meet
global decarbonisation thresholds that are
set by developed markets due to
differences in economic development
stage.
Systems
and
processes
Markets
People
Lack of industry standards on climate
change that address the need to finance
brown to green companies.
Today we have a set of 24 local market
operations with varying degrees
of sustainability processes, systems and
governance.
Many of our major markets such as India,
China, Malaysia and Thailand remain
highly reliant on coal and other fossil fuels,
making it challenging to balance the
interests of stakeholders across both
developing and developed markets.
Continuing to attract and retain high-
quality talent across our markets to support
us in our business and sustainability
ambitions.
Increasing the coverage and quality of our Scope 3 investment book data.
Developing specific decarbonisation pathways for engagement and ESG-
integration by portfolio managers.
Increasing the coverage of our Scope 3 emissions for the rest of our value
chain (eg supply chain).
Developing a social strategy that looks at how we can contribute more to
offering inclusive and affordable health and protection products, recognising
that protection is itself a measure to enhance climate resilience through
adaptation.
Continuing to explore the intersection of climate change and adverse health
impacts, including through research, thought leadership and product
development.
We have established a new investment target on financing the transition,
which operates as an underpin for our portfolio decarbonisation target, as we
believe that decarbonisation and the transition from brown to green of our
economies are inherently connected.
Building internal capabilities and external partnerships to deliver our
financing the transition strategy.
Continuing to explore innovative opportunities to finance the net zero transition
in a just and inclusive manner, working with the private and public sector.
Implementing our new sustainability operating model approach to drive
further standardisation of sustainability processes, utilising existing systems
where feasible.
Improving data governance processes and business ownership of ESG data
so that we are assured of quality and completeness across different metrics.
We will continue to conduct regular training and collaborate with both
internal and external auditors to enhance and improve our processes and
controls in 2024.
Continuing to work alongside governments, multi-lateral development banks
and standard setters so that the interests of all our stakeholders across both
developing and developed markets take a balanced approach.
Upgrading talent capabilities, particularly within the areas of customer,
distribution, health and technology, by investing in internal talent via
targeted development programmes.
Strengthening our focus on values-based leadership and aligning reward
structures that will help build a culture that is customer-led and performance-
driven.
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Additional information
Sustainability continued
Simple and accessible health and
financial protection
We believe everyone should have the opportunity to build a more
secure future. Through technology, we are developing new solutions
to give our customers access to good health services and financial
protection. We seek to create more inclusive products that are
designed to increase access to protection for underserved customer
needs and communities. And we are investing to build the resilience
of the communities we serve through initiatives that promote
financial education and inclusion, health and safety, and climate
adaptation.
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2023 highlights
Since launching our
microinsurance product
PRUKasih Aman in Malaysia
in 2022, we have protected
9,700
individuals
from low-income communities
and those with disabilities
87%
Customer retention rate
Provided free protection for
18,000+
babies from infectious
diseases in the Philippines
2m
students reached and over
66,000 teachers trained
through Cha-Ching
curriculum (since 2016)
Established partnership
benefiting
insured customers
in five markets,
offering treatment options
for breast cancer with
cost certainty
17.4m
Total life segment
policies in force
$13m
invested in community
programmes
Nearly
28,000
employee volunteering
hours
Delivering partnerships and digital innovation for
better health outcomes
To better connect individuals with the best possible healthcare
providers and preventative care, we are constantly exploring new ways
for technology to help us make a real difference to the experience of
our customers in all our markets, and create value for our employees,
shareholders and communities. Digital innovation can drive
distribution of our products and services, empower the next
generation of agents, and strengthen our relationships with existing
customers through increasingly personalised and user-friendly access
to our offerings.
Our aim is to become a trusted partner to our customers with simple,
connected technology journeys that use differentiated propositions
for different life stages, all supported by AI and data analytics.
> For more information please refer to the Delivering partnerships and
digital innovation for better health outcomes section of the
Sustainability Report.
Developing sustainable and inclusive offerings
The health, protection and savings gap in our markets has been
estimated at $1.8 trillion1 – meaning many underserved groups miss
out on access to benefits, insurance and health coverage, even though
they are the people who need them most.
Our social strategy includes our ambition to create more sustainable
and inclusive offerings so that we are providing health and financial
protection to historically underserved populations, for example,
women, minorities and low-income families.
Inclusion at Prudential starts with ensuring access to a diverse and
continuously evolving range of products and services designed to
meet the ever-changing needs of often forgotten customers, while
also serving the needs of the majority. We seek to provide simple
health and financial protection for our customers in a way that is
accessible and affordable to all people and cultures across the
communities we serve.
Meeting the changing needs of our customers
With our customer as our compass, we are committed to developing
our products and services to provide protection at every stage of life
and meet or exceed expectations. Our stronger customer focus has
helped our customer retention rate stay healthy at 87 per cent in
2023.
Customer conduct principles:
– We treat customers fairly, honestly and with integrity;
– We provide and promote products and services that meet customer
needs, are clearly explained and deliver real value;
– We maintain the confidentiality of our customer information;
– We provide and promote high standards of customer service; and
– Act fairly and timely to address customer complaints and any errors
we find.
> For more information please see the Meeting the changing needs of
our customers section of the Sustainability Report.
Building resilient communities
Prudential is committed to enhancing the lives of communities across
our markets by helping them grow and succeed. Our community
investment strategy aligns with our purpose and we invest in
developing resilient communities by supporting initiatives that
champion financial education and inclusion, health and safety
protection and climate adaptation.
Prudential invested $13.0 million in community programmes during
2023 – an increase from $12.2 million in 2022 – reflecting our
continued commitment to bringing our sustainability goals to life with
action and investment. The total figure has been calculated using the
internationally recognised Business for Societal Impact (B4SI)
Framework and includes cash donations to charities as well as
spending on community initiatives in partnership with NGOs, non-
profits, social enterprises and other third parties. On top of financial
investment, our employees have contributed nearly 28,000 hours of
volunteer service in their local communities.
> For more information, please refer to the Sustainable and inclusive
offerings section of the Sustainability Report.
> For more information please see the Building resilient communities
section of the Sustainability Report.
(1) Swiss Re Institute: The health protection gap in Asia, October 2018.
$13.0m
invested in community
programmes during 2023
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Additional information
Sustainability continued
Responsible investment
At the centre of our responsible investment approach is our view that
the transition to a lower-carbon economy should be just and inclusive.
As a large asset owner and manager focused on Africa and Asia, we
are keenly aware that emerging markets face unique challenges as
they seek to decarbonise. Typically, they are more reliant on fossil
fuels than developed markets, while having pressing social and
development needs to meet, making it very difficult for them to meet
global decarbonisation thresholds.
Our 2022 ‘Just and Inclusive Transition’ paper outlines the issues we
want to help address through responsible investment. Currently, most
global responsible investment frameworks do not differentiate
between emerging and developed markets – applying the same
standards and thresholds to both, despite the different risks and
challenges they face. This is a barrier to much-needed investment to
finance the transition and not in line with the ‘common but
differentiated principle’ of the Paris Agreement.
We want to use the scale and position to drive positive change by
ensuring the needs of emerging markets are considered in our
investment decisions. Our approach to responsible investment is built
around three key themes:
– Financing a just and inclusive transition;
– Decarbonising our portfolio; and
– Mainstreaming responsible investments in emerging markets.
Our efforts are informed by our Climate Transition Plan, which sets
out our long-term net zero pledge and interim targets. We have made
good progress towards our own decarbonisation, but recognise the
opportunities to be proactive in enabling the transition to a lower-
carbon economy for emerging markets in the coming years.
Upgraded our WACI
reduction target from
25% to
55%
by 2030
Ongoing engagement
with the companies
responsible for
65%
of the absolute emissions in
our investment portfolio
Eastspring voted in
97.2%
of proxy votes for which it
was eligible to vote
2023 highlights
Developed
new internal
investment target
on financing the transition,
as an underpin to the WACI
reduction target
Anchor investor of the
largest equity ETF
fund in Singapore
(at time of launch) – iShares
MSCI Asia ex Japan Climate
Action ETF
875
Corporate engagements
conducted in 2023
87%
of Eastspring’s international
funds (SICAV) received
Article 8* status
* Under the European Union Sustainable Finance Disclosure Regulation,
Article 8 refers to funds that promote investments or projects with
positive or social qualities
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Financing a just and inclusive transition
Prudential’s efforts and commitment to reach net zero by 2050 are
aligned with science and the Paris Agreement. At the same time,
operating in a breadth of markets across Asia and Africa demands a
considered and dynamic approach to the low-carbon transition. The
climate-related risks and opportunities in developed markets with
diversified and mature economies are very different to those in
emerging markets. This can be seen in the large divergence between
countries and regions in their efforts and ability to act on climate
change by reducing their carbon footprint.
Some of the countries that remain the most carbon-intensive are
those least likely to be able to fund the transition to lower-carbon
technologies and practices. There is a lack of industry standards
relating to transition finance. In addition, companies operating in
emerging markets cannot typically meet the high decarbonisation
thresholds set by developed markets as they are at very different
stages of economic development. As a result, emerging markets are
underrepresented in climate-related investment strategies because
existing frameworks have created a bias against investing in them.
Shifting capital away from regions where transition financing is most
needed hampers not only the climate transition, but also social and
economic growth in these regions.
Upgraded our WACI target to a
55%
reduction in the carbon intensity of
our investment portfolio by 2030,
compared to our 2019 baseline
Our strategy on financing the transition seeks to use our capital to
advance a just and inclusive transition. It recognises that Singapore
and Hong Kong are well placed to lead climate transition in Asia,
while emerging markets will take a longer time to transition. For
example in developed markets, the focus lies on financing green
energy solutions. In many emerging markets in Asia, finding ways to
finance the phase-out of carbon-intensive assets, like coal plants, has
the potential to achieve significant absolute carbon reductions.
Therefore, our strategy also identifies categories across the transition
spectrum, including both ‘green’ and ‘brown-to-green’ investments,
allowing us to pinpoint opportunities to finance companies through
their transition.
Decarbonising our portfolio
Local context is a key consideration in our assessment of how best to
enable the transition to a low-carbon future. We believe moving
capital away from carbon-intensive companies in emerging markets
will make it more difficult for these regions to transition to a lower-
carbon future. To support a just transition, we acknowledge that we
will need to accept a higher initial baseline for some companies and
explore and implement a wider variety of strategies to achieve net
zero.
In May 2021, we committed to achieving net zero emissions by 2050
for our investment portfolio. We also resolved to reduce emissions
intensity within our investment portfolio by 25 per cent by 2025. At
the end of 2023, we had successfully reduced the weighted average
carbon intensity of our investment portfolio by 50 per cent from our
2019 baseline. Based on this strong progress, in August 2023 we
revised our WACI target upwards, committing to deliver a 55 per cent
reduction in the carbon intensity of our investment portfolio by 2030,
compared with our 2019 baseline.
Decarbonising our portfolio remains a priority, but our progress in
reducing our WACI is unlikely to be linear. It can be influenced by a
range of market factors that could cause the WACI to rise or fall. We
might also decide intentionally to invest in a carbon-intensive
company to support and enable its transition plans.
Our strategy to finance the transition aims to actively support carbon-
intensive companies on the implementation of their transition plans
from brown to green. While this will make our decarbonisation
pathway more volatile, our interim targets align to a 1.5°C degree
pathway.
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Additional information
Sustainability continued
Mainstreaming responsible investments in emerging
markets
Our long heritage of owning and managing assets across Asia and
Africa gives us a unique perspective on investing in both developed
and emerging markets. It also gives us the opportunity to understand
the range of issues and structural challenges these economies face in
transitioning to a low-carbon economy. As an active member of
global initiatives such as the UN-convened Net Zero Asset Owner
Alliance (NZAOA) and the Just Energy Transition Partnership (JETP),
we contribute by providing a voice on behalf of these markets.
Corporate engagement
We work closely with our investee companies to support their
transition to a net zero business model. Each year, we have
committed to engage with the companies responsible for 65 per cent
of the emissions related to our investment portfolio, which is aligned
to the recommendations of the NZAOA. By addressing key topics –
such as improving disclosure, setting net zero and decarbonisation
targets, adapting business models, and financing green projects – our
goal is to encourage them to accelerate their progress.
Voting to drive change
Voting is a crucial element of being an active shareholder and an
important opportunity to influence a company. Eastspring’s voting
and engagement activities are closely aligned when seeking to
change a company’s actions or approach.
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 vote processing and
recommendations. Eastspring reviews these recommendations and
decides whether to follow or vote differently.
Shareholders’ long-term interests are paramount, so Eastspring does
not always support company management and may vote against
management from time to time. In 2023, Eastspring voted on 97.2
per cent of proxy votes in which it was eligible to vote. Eastspring
voted with management recommendations on 89.4 per cent of these,
and voted against management recommendations on 10.6 per cent
of these.
Responsible investment governance
To oversee our responsible investment activities and monitor our
progress towards our commitments, we have established a robust
governance framework.
Risk
Committee
Board committee that
reviews the Group’s
material risk exposures,
and monitors the Group’s
reporting against the
recommendations of the
TCFD
Responsibility &
Sustainability
Working Group
(RSWG)
Board-level working group
that oversees embedding
the Group’s sustainability
strategy
Group Sustainability Committee
Responsible for assessing sustainability matters
holistically at Group level
Group Investment Committee (GIC)
Oversees Group-wide investment performance and risk
exposures, including those impacting policyholders
Members include asset manager CEO,
CIO and Chief Actuary
Group Responsible Investment Working Group
(GRIWG)
Oversees all responsible investment activity
across the Group.
In 2024, the Board plans to establish a Sustainability Committee to
replace the RSWG.
Responsible investment approach
Managing ESG risks by applying our Responsible Investment Policy is
part of our effort to generate long-term returns on assets. The policy
sets out clear criteria for screening investment portfolios to identify
and assess sustainability-related risks, and processes for ongoing
corporate engagement. To address priority themes, such as
decarbonisation, human rights and biodiversity, we have identified
criteria for excluding companies involved in certain activities.
Looking ahead, we are increasing our focus on preventing biodiversity
loss. Our asset managers screen for exposure to palm oil producers
that are not certified by the Roundtable on Sustainable Palm Oil
(RSPO). We require engagement with consumers to raise awareness
around the benefits of paying more for sustainable palm oil to ensure
producers in emerging markets have an incentive and funding for
their transition to more sustainable production. We also review the
portfolio for companies that produce or depend on commodities that
contribute to deforestation, particularly timber extraction, engaging
with them at least annually to assess their exposure.
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Integrating ESG throughout the investment process
Step 1:
Asset
allocation
Step 2:
Manager
selection
Step 3:
Portfolio
management
Step 4:
Risk
management
We integrate ESG into the strategic asset allocation (SAA) process in several ways: analysing the
ESG profiles of countries, asset classes and investment strategies; changing SAA benchmarks to
ESG benchmarks; and including ESG considerations in the asset-liability management (ALM)
process. Our investment teams consider how different allocations influence the ESG risk profile
of the portfolio, and how allocations to ESG strategies impact specific portfolio characteristics
(eg sector allocation).
Our SAAs vary based on differences in regional decarbonisation targets. For example in 2023,
Prudential Taiwan altered its benchmark to the MSCI USA ESG Enhanced Focus CTB (Climate
Transition Benchmark) to align more closely with Prudential’s responsible investment priorities
and more mature ESG markets of Europe and the United States.
Eastspring has integrated ESG considerations into its fund manager screening, due diligence
and ongoing monitoring processes, to ensure underlying managers are aligned to our Group
ESG requirements.
We also outsource some asset management to third-party asset managers, and ESG
considerations are included throughout the relationship and when establishing investment
mandates.
Eastspring uses ESG ratings to gain a better understanding of the ESG risks facing a particular
country, sector or company. To account for high variance between ratings from different
providers, Eastspring developed an ESG Ratings & ESG Integration tool, launching within its
Singapore fundamental active equity and fixed income investment teams in 2023.
The platform leverages ESG data from external ESG rating sources but combines the data
components using a proprietary framework. It draws on Eastpring's ESG materiality matrix
which references the industry’s best-in-class frameworks but includes additional context to
increase relevance to our investment universe. Potential biases and limitations specific to
particular ESG ratings are acknowledged and qualified to ensure investment teams focus on
how sustainability risks might impact returns.
The Group Responsible Investment Policy supports our efforts to manage and mitigate ESG-
related risks of our investment assets. The six implementation strategies of the policy each play
their role in managing the various risks associated with our investment activities, including
financial risks to the investment portfolio and reputational risks to the Group.
We recognise that implementation of the policy could amplify other ESG risks such as
greenwashing accusations, legal threats of acting in concert, and conflicts of interest arising
between and within stakeholder groups. These themes were identified as priorities in 2023, and
a cross-functional working group was formed to build knowledge, awareness and monitoring of
these topics.
> Find out more in the Responsible investment section of our Sustainability Report.
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Financial statements
EEV basis results
Additional information
Sustainability continued
Sustainable business
Our mission is to be the most trusted partner and protector for this
and future generations – a goal that requires us to embed
sustainability throughout everything we do, in every market we serve.
We continued to stay focused on accelerating the pace and scale of
our positive impact, ensuring that sustainability principles are at the
fore in all our business decisions and throughout our supply chain. Our
sustainable business pillar has three priority focus areas: empowering
our people, establishing sustainable operations and value chains, and
harnessing thought leadership to shape the agenda.
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2023 highlights
Over 15,000
Total number of employees
45% women
on Board as of
December 2023
Targeting 75th
percentile on employee Net
Promoter Score (eNPS)
10% of the total Executive
Director’s 2024 Prudential
Long Term Incentive Plan
awards linked to sustainability,
of which 5% will be linked to
carbon reduction and
another 5% linked to
diversity
13,000
suppliers (data as of 30
September 2023)
Targeting all people managers
to have a sustainability
linked KPI by 2026
Set a target of 40% women
in Group Leadership Team
by the end of 2026
'This is Me' partnership to
normalise conversation on
mental health,
neurodiversity and
disabilities
Connecting Health and
Climate: Prudential EOS
Climate Impacts Initiative
and Prudence Foundation’s
partnership with the IFRC
Reduced global absolute
Scope 1 and 2 (market-
based) GHG emissions by 22
per cent compared to 2022.
Empowering our people
To deliver our ambitious strategy, we are mobilising our more than
15,000 colleagues behind our new purpose. We have developed a
new people and culture strategy to create an environment where our
talent can grow and maintain a high-performance culture for long-
term resilience.
Our people want to be part of an organisation that is socially
responsible and guided by a strong purpose. To ensure we can keep
attracting and retaining talented individuals to serve our business today
and in the future, we have strengthened our focus on rewarding high
performance and creating an outstanding employee experience.
Our leaders are driven by our values and nurture a culture that fully
understands who we intend to be and how putting our people and
customers at the heart of everything we do will help us win. We will
invest further in developing the capabilities of our workforce, through
strategic talent acquisition and internal talent development.
> Find out more in the Empowering our people section of our
Sustainability Report.
while developing the strategic skills we need to build the business. This
goes beyond performance and considers their future potential.
As stated in the Sustainability governance section earlier, the Board-
level Responsibility & Sustainability Working Group (RSWG) oversees
sustainability topics including culture and people. In 2023, we
switched to conducting shorter employee engagement surveys to
enable us to gain regular feedback and respond quickly to emerging
issues across markets. This approach allows our people to provide
timely feedback and for us to detect early warning signs, track actions
and measure impact against key people metrics. A full people survey
is scheduled for the second half of 2024.
Capability
A priority of our people strategy is to build a pipeline of adaptive
leaders with both depth and breadth of capabilities. This will prime
our 200 leaders to confidently respond to future challenges, while
continuing to navigate existing challenges. To equip our employees
with necessary skills for the future, we offer them a learning
experience that includes e-learning, in-person and virtual classroom
training and mentoring.
Culture
An important step towards embedding our new business strategy was
the launch of the PruWay – the fundamental values, shaped by our
employees, which define who we are and what we represent. The
PruWay defines new ways of working with one another and delivering
value for all our stakeholders – our people, our customers, our
shareholders and our communities.
At Prudential, we are looking to transform our employee experience and
ensure our people can visualise their career progression at Prudential,
Talent vitality
We are focused on building a robust succession pipeline for our CEOs
and GLT members to ensure organisation resilience and leadership
sustainability. Succession plans for CEOs and GLT members are
reviewed regularly and discussed at the Group Talent Council.
For our people, we want them to be able to build long and rewarding
careers at Prudential. Promoting internal mobility is one way that we
demonstrate our commitment to creating an environment where
talented individuals can thrive.
Create an environment where talent thrives and powers growth
Culture
A winning spirit that is customer-
led and performance-driven
Capability
Unparalleled capabilities in digital
distribution, customer and health
Talent vitality
A robust succession pipeline and
dynamic talent marketplace
Ambition
Strategic goals
Priorities
Values-driven leadership
Strategic capability acquisition
Succession
Belonging
Talent and leadership acceleration
Employee experience
Learning academies
Mobility
Diversity
Performance and rewards
People insights and processes
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EEV basis results
Additional information
Sustainability continued
Establishing sustainable operations and value chain
Digital responsibility
In our new business strategy, technology is a key enabler for all three
strategic pillars: enhancing customer experiences, powering our
distribution with technology and transforming the health business
model. We are revamping our technology platform, growing our data
platform, and using AI to generate commercial value.
Cyber security
Cyber security incidents
Total number of incidents escalated† to the
Security incident response team (SIRT)
Number of incidents confirmed‡ by the SIRT
Number of incidents related to ransomware
2023
40
3
1
2022
37
12
2
† Total incidents reported by employees to the Security Operations Centre.
‡ Total incidents confirmed by the Security Operations Centre.
While the total number of incidents fluctuates year on year, the
number of incidents that are confirmed has continued to decline,
falling to only three confirmed incidents for 2023. However, it has
been observed that global cyber attacks have become more
advanced and sophisticated (e.g. the MOVEit data breach). As such,
we continue to uplift Prudential’s security controls and capabilities to
combat these increasingly complex attacks.
Data privacy breach metrics
Total number of (privacy) data breaches
Total number of (privacy) data breaches
involving 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 health information
2023
22
2
2022
20
1
2,087,219*
24,250
391
1
*
This significant increase is attributed to two specific incidents: a) MOVEit
software data breach publicly disclosed in June 2023 resulting in 2,023,314
records being affected in Malaysia's life entity; and b) 59,000 records affected in
an incident where a vendor sent information belonging to one Prudential
business to another Prudential business.
The top three data breaches were related to unauthorised disclosure
of personal data by staff, unauthorised telemarketing by financial
consultants, and data breaches originating from bank partners or
vendors. One data breach incident involved health information that
affected customers and employees.
Compared to 2022, the total number of data breaches and breaches
involving sensitive personal information did not significantly change.
However, the total number of customers and employees affected by
the Company's data breaches significantly increased due solely to
two major incidents in the notes above. Both were caused by vendors
and are part of the recognised supply chain risk that continues to be a
priority area for improving security and privacy controls.
For our business to be successful, we celebrate diversity and
emphasise inclusion for our people, customers and partners. Our
Global Diversity and Inclusion (D&I) Council drives D&I initiatives
across our businesses, providing updates to the Board biannually and
to the RSWG quarterly.
The D&I Council continues to define our global D&I Strategy and
action plan, outlining objectives and initiatives to promote D&I across
our businesses. While we have seen progress in our diversity metrics in
recent years, we acknowledged that there is room for further progress.
The Council continues to be guided by its Charter and upholds the
principles of employee empowerment, transparency and community
building.
The tables provide an overview of our gender diversity breakdown in 2023.
Gender diversity – total workforce‡
2023*
2022
% change
Female
Male
Unspecified^
Total
8,713.1
6,541.3
3
8,363.4
6,299.3
18
15,257.4
14,681.7
* Within the scope of EY assurance – see Basis of Reporting.
Group Leadership Team Female
Group Executive
Committee (GEC)
Executive Directors
Chair & Independent
Non-executive
Directors
Male
Female
Male
Female
Male
Female
Male
Gender diversity‡
2023*
65
121#
2
6
-
1
5
5
2022
39†
71†
2
6
-
2
4
7
4%
4%
(83) %
4%
% change
67%§
69%§
-
-
-
(50) %
25%
(29) %
^ No specification or information is captured on gender for an immaterial number
of our employees. These employees are regarded as ‘unspecified’.
‡ Total workforce is reported as FTE, while gender diversity (Board/GEC/Executive
Directors/Chair & Independent Non-executive Directors) are reported as
headcount to align with internal data definition. Newly created this year, we
extended the headcount usage to GLT for diversity reporting to align with
internally approved metrics and provided further guidance on the definition such
that leaders would only be counted as either GEC or GLT. The overall impact on
this change is 0.7 Headcount.
In 2022, the senior management definition was previously defined as all senior
managers who represent the most pivotal roles in our Group below the Group
Executive Committee (GEC). It excludes the Chair, Executive Directors, and GEC
members. We are unable to restate the 2022 figures because the GLT category
was only formed in 2023. From 2024 onwards, our gender diversity figures will
be tracked against our newly created definition in 2023.
Increase was due to the broadening out of our leadership definition to support
the new strategy driving collaboration across the organisation.
†
§
# GLT members hired by joint ventures are excluded.
For full details on our 2023 diversity metric linked to the Directors’
2024 PLTIP award, please see the Directors’ remuneration report.
As of 31 December 2023, the representation of women on our Board
was 45 per cent. We are one of only six FTSE 100 companies with a
non-white Chair. We have also 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 seven of our 11 directors fulfilling
these criteria.
> Find out more in the Empowering our people section of our
Sustainability Report.
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Responsible working practices and health and safety
procedures
Our Group Resilience Policy and Health and Safety Standards is
integral to the way we manage operations in all business units. We
operate a risk-driven health and safety management process that
seeks to ensure the best working environment. We prioritise the
prevention of injury and ill health and the reduction of health and
safety risks to employees, contractors, visitors and any others who
may be affected by our business operations.
We aim to ensure that our health and safety management processes
meet and exceed regulatory and statutory requirements, and we
follow best practice where possible.
> Read more in the Establishing sustainable operations and value
chain section of our Sustainability Report.
Harnessing thought leadership to shape the agenda
We are actively involved in advocating for emerging market
sustainability and climate-related concerns on a global level, beyond
exploring the role that investors can play in enabling a just and
inclusive transition. We also engage with policy and regulatory
stakeholders to promote awareness of sustainability issues, focusing
on regulatory reform, blended finance, alignment of standards and
taxonomies and nature preservation.
One focus of our research and advocacy efforts is the intersection of
climate and health. Climate change has the potential to significantly
impact human health, particularly from air pollutants and increasing
temperatures. Through research partnerships, we strive to help people
around the world prepare for such changes and better protect their
health and livelihoods.
> Find out more in the Harnessing thought leadership to shape the
agenda section of our Sustainability Report.
The privacy controls put in place continue to be effective, but further
enhancement in managing employees and vendors is a key initiative
for 2024. Regular internal and external privacy and security audits are
carried out as and when needed, and we work closely with regulators
to ensure this works effectively. We conduct monthly scanning of our
external environment for vulnerabilities, and all public-facing
applications undergo penetration testing, including vulnerability
assessments as part of the application launch. They are also regularly
reviewed as part of our governance process.
Privacy
As a business with a large global footprint, Prudential must navigate a
number of privacy laws. Our Group Privacy Policy sets out the
standard of privacy expected across our businesses and ensures that
we handle personal data in compliance with regulatory requirements
and in line with customer and employee expectations, while also
meeting the demands of a competitive commercial organisation. For
more information on our data and privacy policy, please visit our
Company website: Policies and statements – Prudential plc.
Responsible procurement practices
We endeavour to make sure our suppliers apply the same high
standards that we aspire to achieve, which is driven by our Group
Third-Party Supply and Outsourcing (GTPSO) Policy. This forms part of
our Group Governance Manual (GGM) and is a core part of our
system of governance. The policy sets out our position on supply
chain management, outlining our approach to due diligence, selection
criteria, contractual requirements and ongoing monitoring of our
supplier relationships.
Responsible environmental practices
To help improve the lives of our customers and communities, we
actively seek to reduce our environmental impact. We measure our
environmental performance so that we can understand our impact
and take appropriate actions.
The way we manage our property footprint aligns with our Group
Environment Policy, which covers environmental laws and regulations
for emissions, energy consumption, water use, waste disposal,
environmental supply chain management and the application of risk
management principles. During 2023, all our local business units were
issued with updated environmental roadmaps, detailing their Scope 1
and 2 emissions, their 2030 target, and the actions that businesses
have committed to over the next three years to reduce their
emissions.
Our global absolute Scope 1 and 2 (market-based) GHG emissions
were 14,426 tCO2e, down 22 per cent from 2022, 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 12,318 tCO2e (market-based), making
up 85 per cent of our total Scope 1 and 2 emissions.
We continue to focus on driving down our operational energy
consumption to reduce emissions through a range of initiatives and
policies. When creating new working environments, we take the
opportunity to implement best practice environmental performance
features from the outset. These include LED lighting, automated
lighting controls, lighting zones and climate controls.
> Read more in the Responsible environmental practices section of
our Sustainability Report.
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Additional information
Sustainability continued
Good governance and responsible
business practices
Corporate governance
Our business is overseen by strong governance from our Board of
Directors and throughout our Group and local business management
structures. At all levels of the Company, 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 on 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 Group Governance Manual (GGM) sets out our framework for
ethical business practices, governance, risk management and internal
control. We run a comprehensive mandatory training programme
covering our employees and contingent workers across the Group that
covers the key policies that are referenced in the Code of Conduct.
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 13,000 suppliers
globally. Our most recent Modern Slavery Transparency Statement,
issued in June 2023, elaborated the steps we are taking to identify,
monitor, report and proactively mitigate any modern slavery risks in
our supply chain in support of the UK activities of Prudential Plc and its
subsidiaries in scope of the UK Modern Slavery Act 2015. Our focus in
2023 was 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.
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 2023.
> Find out more in the Good governance and responsible business
practices section of our Sustainability Report.
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Task Force on Climate-related Financial Disclosures
Managing climate-related
risks and opportunities
We are committed to playing our part in the transition to a
global low-carbon economy and the collective efforts to
limit global warming. In addition to responsible investment
approaches designed to address climate-related
challenges, our Climate Transition Plan sets out how we will
fulfil our climate-related commitments and we have
included updates against the plan throughout this report.
We have also included an index to show how this report
aligns with the recommendations of the Task Force on
Climate-related Financial Disclosures.
Governance
Oversight of climate change
At a management level, sustainability, including climate-related
responsibilities and progress towards fulfilling the TCFD
recommendations, is overseen by the Group Sustainability
Committee, which is chaired by the Chief Financial Officer. The
Sustainability Committee reports to the Board-level Risk Committee,
which has ultimate oversight of environmental and climate-related
issues.
The Risk Committee has a standing agenda item relating to the
oversight of climate change, including the progress against the
Group’s climate targets, updates on principal risks including climate-
related risk and consideration of climate-related issues when
reviewing and guiding overall strategy, major plans of action, risk
management policies, annual budgets and business plans. The Risk
Committee is also responsible for external reporting, via the
Sustainability Report, where it relates to those areas within its remit,
including the TCFD disclosures. In setting future climate targets or
commitments, the Risk Committee considers and makes appropriate
recommendations to the Board. The Committee receives updates on
climate-related issues at least twice each year, and in 2023 it was
updated four times.
In 2024, the Board plans to establish a Sustainability Committee to
replace the RSWG and to take over responsibility for the oversight of
climate change from the Risk Committee.
> For more information on the governance of climate-related risk,
please refer to the Sustainability governance section of the
Sustainability Report, which details our sustainability and climate-
related governance.
Risk management
We regularly analyse and assess the potential impact of the risks
associated with climate change to ensure we can continue to serve
our customers and strengthen our business resilience. Our Group Risk
Framework (GRF) considers both emerging and significant risks,
including those related to sustainability themes. Sustainability risks,
including climate-related risks, are considered principal risks at the
Group level and consequently receive enhanced management focus
and reporting.
Identifying climate-related risks
Climate-related risks are considered within our risk management
processes to assess their importance relative to other risks. We
continue to treat climate risk as a thematic cross-cutting risk type,
with the potential to impact or amplify multiple existing risks that we
manage. By treating climate-related risks as a cross-cutting risk type,
we recognise that there could be significant interdependencies with,
and impacts on, other established stand-alone risks, including credit,
market, insurance and operational risks. We also recognise that the
risks associated with sustainability topics, including climate change,
may exhibit a number of additional risk characteristics which are not
explicitly recognised in more traditional risk management practices
and frameworks. Consequently, the following risk characteristics
associated with climate and other sustainability themes are
considered in our risk management framework:
Sustainability risk
characteristics
Longer time horizons
Double materiality
Dynamic materiality
Multiple stakeholders
Considerations
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.
The Company can be both ‘impacted
by’ ESG/sustainability issues, and have
an ‘impact on’ those issues.
A topic can rapidly change from being
immaterial to material.
The Company’s actions can impact a
wide range of stakeholders including
employees, customers, communities and
the environment.
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The GRF also includes:
– As part of the risk taxonomy refresh in 2022, a double materiality
lens was 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 sustainability strategy
and recognises a broader set of stakeholders as one of the key
characteristics defining sustainability and climate risks;
– The risks and control self-assessment libraries have been reviewed
to identify key risks and controls which support the sustainability
strategy;
– The tools developed to assist with managing against the Group’s
external Responsible Investment commitments, including the
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’s Own Risk and Solvency
Assessment (ORSA) report.
Assessing climate-related risks
To develop a comprehensive view of the potential impacts of climate
change on our business, the GRF considers climate-related risks across
three time horizons by taking into account the expected benefits and
paybacks of risk-based decisions. These time horizons are defined to
reflect the periods over which transition and physical climate-related
risks and opportunities could reasonably emerge:
– Short term: zero to three years;
– Medium term: three to five years; and
– Long term: five to 30 years.
Through this approach, we have assessed the following areas of
climate-related risks across the short-, medium- and long-term time
horizons.
Area of risk
Strategy implementation – As the Group implements its sustainability strategy
and climate-related commitments, there is an ongoing 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 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 require multi-jurisdictional coordination.
Increasing disclosure expectations heightens the potential for litigation
associated with external reporting conveying a materially false impression or
misleading information.
Climate risk type
Main affected time horizon
Transition risk
Short and medium term
Transition risk
Short, medium and long term
Transition risk
Long term
Physical risk
Long term
Transition risk
Short and medium term
Transition risk
Short and medium term
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Across our markets, we look for ways to strengthen the
climate resilience of our investment portfolios. In Singapore,
we partnered with BlackRock and SGX Group to anchor the
largest equity exchange-traded fund (ETF) in Singapore (at
time of launch), the iShares MSCI Asia ex-Japan Climate
Action ETF.
In select markets, Prudential also offers ways for local clients
to invest more sustainably, while growing capital in the long
term. In Hong Kong we manage a total of nine SFC-
authorised† ESG funds within our investment-linked products
(ILP) scope.
> For more information on how we are allocating capital to
climate-related opportunities, see the Responsible investment
section of our Sustainability Report.
† Securities & Futures Commission of Hong Kong
Managing and responding to climate-related risks
Climate-related risks vary significantly in nature, focus and impact
across the Group’s markets. Our emerging risk process helps us
identify and adapt to evolving climate change and sustainability
topics across our business.
Understanding our exposure to climate-related risks in key markets in
Asia is an ongoing priority for us and we engage with the risk teams
within key local businesses on the climate-related topics most relevant
to those markets, including TCFD-aligned pillars such as internal
governance, local strategy, risk management integration, and metrics/
targets. This enables the local businesses to share knowledge and
experience and leverage the Group experience, and enables a
consistent approach to addressing climate-related risks to be adopted
across our markets.
Climate change’s impact is evolving quickly, with new risks and
developments emerging constantly. We help our local businesses
understand the potential implications of climate-related risks and
work with them to navigate and comply with the changing regulatory
landscape, for instance in Singapore, Taiwan and Malaysia.
Identifying and responding to climate-related opportunities
We are strengthening the climate resilience of our portfolios and
adopting a considered approach to assessing carbon intensity within
our investments. We are also continuing to incorporate climate
change considerations into our products and services.
As a substantial investor and asset owner with long-term investment
horizons and obligations, we actively pursue opportunities to invest in
financing mechanisms associated with climate mitigation and
resilience. As an insurer focused on life, health and wealth products,
we also consider the opportunities presented to better serve our
customers who may experience climate-related impacts.
Some categories that we are currently looking to explore or expand
include:
– Financing mechanisms, such as green bonds, transition financing
and adaptation financing;
– Savings and insurance products, like ESG- or impact-focused
investments and climate-related health and protection offerings,
such as those that consider changes in the frequency, severity and
emergence of diseases exacerbated by climate change, like dengue
fever; and
– Engaging, educating and supporting our customers and employees
to build an understanding of sustainability and climate change.
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Strategy
We recognise the importance of not only identifying and managing
climate-related risks and opportunities, but also considering the
potential impacts on our business, and the resilience of our strategy
to climate-related changes, developments and uncertainties across a
range of climate scenarios.
Climate-related scenario analysis
Scenario testing is a valuable tool for enhancing understanding of
climate-related risks and improving decision-making. It is particularly
beneficial in raising awareness of climate change risks, due to the
broad range and uncertain timing of potential mitigation and
adaptation measures.
We closely monitor and evaluate advances in climate scenario testing,
including reviewing publications from regulators, global organisations
like the International Association of Insurance Supervisors (IAIS) and
the Network for Greening the Financial System (NGFS), as well as
reports from the UN Principles for Responsible Investment (PRI), the
Transition Pathway Initiative (TPI), the United Nations
Intergovernmental Panel on Climate Change (IPCC), and the
International Energy Agency (IEA).
Overview of our climate scenarios
To support engagement with Group and local business regulators, we
carefully considered the scenario methodologies appropriate to the
size, nature and complexity of our organisation. Since we first began
using scenario testing, we have become more sophisticated in
applying different scenarios based on specific business needs:
– NGFS scenarios (orderly transition, disorderly transition, and
hothouse world) are used for stress testing the resiliency of our
balance sheet;
– PRI scenarios, including the forecast policy scenario, assess the
economic impact of likely policy developments and inform central
market assumptions; and
– IPCC, IEA, and TPI provide science-based decarbonisation
pathways aligned with Paris Agreement goals, that can support
investee engagement to drive real-world change.
NGFS-aligned scenarios
Stress testing on our balance sheet is conducted under NGFS-aligned
scenarios, with risks assessed over the short-, medium- and long-term
time horizons. These scenarios offer insight into the potential
financial implications of the different pathways and can simulate
complex interactions between energy, economy and climate systems,
considering both policy and technology developments. We use data
from external providers who have adjusted the calibration of the
scenarios to employ non-equilibrium economic models to reflect real-
world inefficiencies.
Carbon prices used in scenario analysis
Carbon prices are used as a proxy for the impact of potential
government climate policies within our climate scenario analysis.
These prices are set to reflect differences across the regions where we
operate and consider local market dynamics.
In the long term, we expect the introduction of carbon prices and
carbon taxes to increase, as governments look for tools to combat
emissions. Imposing an internal carbon price (ICP) has been
considered as a means of establishing consistency in how carbon-
related factors are considered across our organisation.
The three NGFS-aligned scenarios used in our stress testing
are as follows:
– Orderly transition: This <2°C scenario aligns with the IPCC’s
Representative Concentration Pathway (RCP) 2.6. Under
this scenario, ambitious climate policies are introduced,
reducing fossil fuel demand, implementing higher carbon
taxes, and investing in low-carbon electricity generation
and manufacturing. Despite emissions reductions, extreme
weather events increase, leading to physical loss and
damages.
– Disorderly transition: This <2°C scenario assumes similar
transition policies and physical impacts as the orderly
transition scenario, but with delayed and disorderly policy
implementation. Market volatility rises, especially in fossil-
fuel-intensive sectors and regions, as well as across all
sectors due to the disorderly nature of policy introduction.
– Hothouse world: This scenario forecasts a >4°C
temperature increase by 2100. It anticipates irreversible
climate damage, extreme weather events and water
shortages in line with RCP 8.5. Some areas experience
warming above 4°C, rendering them unsuitable for
agriculture and habitation. Few additional climate policies
are implemented, resulting in limited transition impacts.
While we see benefits in the use of forward-looking data,
particularly in supporting the assessment of how well
companies are prepared for the climate transition, it is
important to acknowledge the limitations. These limitations
include but are not limited to data quality, data availability,
data consistency, underestimation of physical climate risk,
model limitations, greater uncertainties over longer time
horizons, and the need for extensive judgements and
assumptions. In addition, current climate models do not
capture tail events such as climate tipping points (eg ice
sheet melt, Amazon dieback) or knock-on effects (eg
migration, war, political and social instability) that could have
significant impacts on global economies. As a result, we treat
forward-looking climate data with more caution than other
decision-useful metrics like historical financial statements.
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Impact on our businesses, strategy and financial
planning
Our scenario analysis results are translated into sensitivities to
economic factors to assess the possible financial consequences of
climate change on our business. The results of our climate scenario
stress testing have allowed us to arrive at two conclusions with respect
to our balance sheet:
– Though the Group faces potential financial risks from plausible
global responses to climate change, the results of our scenario
testing are not outside observed market volatility, suggesting no
immediate need for explicit climate change considerations within
current valuations of our investment portfolio;
– Furthermore, explicitly including additional stresses for climate
change in our internal economic capital adequacy model is not
needed currently.
The results are documented in the Group’s Own Risk and Solvency
Assessment (ORSA) report, which is regularly shared with the Board.
The results are simplified in ways which enable understanding and
comparison: for example a static balance sheet is used, and the
potential sectoral and regional impacts are summarised at a high
level. We understand that these simplifications could result in
understating exposures and vulnerabilities, as acknowledged by the
Financial Stability Board (FSB) and NGFS. We remain mindful of these
limitations when referring to the results of the scenario testing.
Additionally, our climate scenario analysis currently does not consider
potential management actions we could take to mitigate the
negative impacts of climate change. However, we recognise the need
to explore these opportunities in the future. At this stage, given these
models have evolved considerably and continue to change, we do not
consider the climate scenario tests suitable for setting capital
requirements.
Impacts on assets
As a significant asset owner and manager, we rely on investment
returns to meet long-term liabilities. This leaves us vulnerable to any
risks that could disrupt or diminish investment returns, and we explore
these risks under each climate scenario.
The ‘disorderly transition’ scenario showed the most significant
impact in the short to medium term as markets adjusted to disorderly
policy changes. As expected, the ‘orderly transition’ scenario had the
least overall impact on the Group’s balance sheet. This reinforces our
strategic objective of decarbonising our investment portfolio. The
‘hothouse world’ scenario considers long-term physical climate
change impacts that could lead to financial market repercussions in
the medium to long term. While the impact of the ‘hothouse world’
scenario are muted in the short to medium term, it had the largest
overall impact on the Group’s balance sheet over the long term,
reinforcing the message that investors should not be misled into a
false sense of security of maintaining current government policies, as
the true cost of climate change compounds over much longer time
horizons.
The scenario analysis reveals important insight into how the different
scenarios might impact different sectors, as shown in the heatmap
diagram below.
In the ‘orderly transition’ scenario, the impact is confined to three
sectors: fossil-based utilities, coal and manufactured fuels, and oil and
gas. In contrast, under the ‘disorderly transition’ scenario, the impact
extends beyond the three sectors highlighted.
These sectoral impacts are significant to Prudential, given our
operational footprint across Asia and Africa, with many countries
engaged in manufacturing rather than service industries. Both
scenarios also present investment opportunities in clean energy and
water supply.
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 administrative and defence
Education
Other low-carbon and biobased electricity
Water supply
Wind and solar
Nuclear
Forestry
Source: Prudential internal scenario analysis work
Orderly transition
Disorderly transition
2025
2035
2050
2025
2035
2050
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Impact on strategic asset allocation
In addition to climate scenario analysis, we integrate climate change
into our strategic asset allocation (SAA) process. The SAA process
heavily relies on capital market assumptions (CMAs), which are
economic projections used across our financial metrics and asset
classes. We use CMAs that are particularly focused on the countries
where we operate and invest.
These CMAs are developed through a rigorous process that
incorporates comprehensive research, economic models and
projections of key drivers of economic variables. To ensure climate risk
is captured within our CMAs, we include climate data, such as climate-
related transition and physical risks.
We have partnered with an external provider to assess a climate
scenario and associated potential impacts on our CMAs. This
evaluation will be conducted twice a year to ensure the CMAs remain
relevant. We will also continually review our data and findings,
considering the higher levels of uncertainty typically experienced by
emerging markets.
Impact on financial and strategic planning
We review our strategy and financial planning process annually and
stress-test the proposed strategy to assess its resilience. These stress
tests, which are conducted as part of our usual business activities and
consider stresses independent of climate change, are more stringent
than the scenarios outlined in the Climate-related scenario analysis
section. The results of these business stress tests, combined with the
insights gained from the climate-scenario testing, provide us with
additional confidence in the strategy’s viability for the year ahead.
We also ask our local businesses to consider our sustainability strategy
and Responsible Investment Policy in their product development
processes and ongoing product evaluations.
Regional impact on our operations
As extreme weather increases in frequency, our people and our operations are potentially exposed to physical risks associated with
climate change. Strengthening our organisational resilience to these risks is a key priority for us.
We use a third-party platform to assess the risks associated with natural disasters and inform our business continuity management
approach. The most recent assessment revealed potential significant physical climate impacts to our operations under the ‘hothouse
scenario’ (RCP 8.5) as shown on the map.
We also use scenario analysis to identify additional vulnerabilities in our operations, supply chains and customer base. Using our third-
party provider’s platform, we also investigate the potential operational risks from severe typhoons or floods, including property damage,
business interruption and market volatility.
427 Overall Risk Rating
0-25
26-50
51-75
76-100
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To safeguard our customers from the impacts of climate change and
build resilience for the future, we will continue to update our climate
transition actions and progress, aiming to make more proactive
contributions to a just and inclusive net zero transition across our
broad footprint in Asia and Africa. Broadly, we will seek to:
– Work with data providers and our asset managers to improve the
availability and quality of our Scope 3 investment book data,
including potential monitoring of other asset classes as
methodologies continue to develop;
– Develop the coverage of our Scope 3 value chain emissions beyond
financed emissions, for example our supply chain emissions and
initiatives to reduce them;
– Investigate the feasibility of setting net zero operational targets, in
light of the constraints of renewable energy availability within our
markets;
– Examine how emerging topics, such as nature and biodiversity,
may impact our decarbonisation strategy and our overall approach
to climate change;
– Continue to explore climate-related opportunities, such as those
relating to climate financing within emerging markets, our
customers and digital services, climate-related health products and
services, and employee initiatives;
– Further develop our approach to corporate engagement and asset
manager engagement, focusing on appropriate sector-specific and
emerging market engagement approaches to maximise our
impact;
– Continue to develop localised, market-specific responsible
investment approaches;
– Explore additional opportunities to collaborate and partner with
relevant private and public entities on climate change and
transition financing; and
– Continue to engage with other financial market participants, local
regulators and stakeholders to advance the development of
frameworks that support our climate work in emerging markets.
Climate-related targets and metrics
Our long-term pledge is to become net zero by 2050, and we have
established interim targets to measure our progress on the path to
net zero. These targets are designed to support the achievement of
the Paris Agreement goals to limit the increase in global average
temperatures to 1.5˚C above pre-industrial levels.
Since our carbon journey began in 2018, we have continually
reviewed our approach and our commitments to assess our progress
towards our net zero pledge. We have met or exceeded our interim
targets at every stage, allowing us to increase our ambitions and
update our targets to accelerate our progress.
Impact on access to capital
Occasionally, we seek to raise capital from bond or equity markets to
fund strategic opportunities like mergers, acquisitions or new market
entry. Institutional investors are our primary source of capital, and we
expect them to continue to provide access to sufficient capital despite
potential impacts of climate change.
Our credit ratings remain high, based on credit rating agencies’
assessment of our business profile and financial flexibility, including
capital market access. ESG factors are regularly discussed in our
annual meetings with ratings agencies. To date, they have not
impacted our creditworthiness.
Impacts on insurance liabilities
Potential climate change impacts may also affect morbidity,
mortality and persistency differently across global regions. These
differences are captured in the annual review process that monitors
these factors and considers their impact on our products. As a life and
health insurer, while we recognise the potential for climate change
and government policies to impact the assumptions underlying our
underwriting liabilities, we believe there is currently insufficiency of
and uncertainty in data that would allow us to reliably use the
assumptions for the valuation of our underwriting liabilities.
Therefore, at this stage, the Group’s assumptions for our life and
health insurance business do not include additional assumptions
related to the impacts of climate change. We will continue to engage
with our regular experience analysis, to engage with reinsurers and
monitor relevant academic studies. If significant changes occur, the
financial impacts of climate-related risks on insurance liabilities will be
considered. Additionally, we have analysed the distribution of our
customers across locations to assess their vulnerability to extreme
climate events. These assessments aim to improve our understanding
of our customers’, and our, exposure to climate risks.
Advocating for emerging market sustainability and
climate-related issues
We are actively involved in advocating for emerging market
sustainability and climate-related concerns on a global level. Our
advocacy efforts extend beyond exploring the role of investors in a
just and inclusive transition in Asia and Africa. We also engage with
policy and regulatory stakeholders to promote awareness of
sustainability issues. Our outreach focuses on key themes, including
regulatory reform, blended finance, harmonisation of standards and
taxonomies, and the preservation of nature. We also continue to
explore the impacts of climate change on health through research
partnerships. It is critical that policymakers and communities have the
knowledge and tools to support them with climate change adaptation
efforts.
Evolving our climate actions
Climate change is a fast-moving issue, with new challenges and
solutions emerging all the time. We are continually looking to improve
our understanding of the challenges we face and the effectiveness of
our efforts to mitigate them.
As outlined in the Rising to the climate challenge section above, we
plan to continue devising and executing renewed climate action at
Prudential. We are already mapping a clearer trajectory on our
journey to net zero and identifying opportunities to drive positive
change across our business and customer interfaces, as well as our
operations and our supply chains.
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Progress against our climate-related targets
Target
2023 progress
Deliver a 55% reduction in the carbon emissions intensity of our
investment portfolio by 2030 against our 2019 baseline
Achieved 50% reduction by the end of 2023 and revised target
upwards to 55% reduction by 2030 against our 2019 baseline
This is an ambitious but realistic target that will accelerate our
progress towards becoming a net-zero asset manager
The WACI of our portfolio is influenced by movements in the
carbon intensity of the companies we invest in, movements in
markets, and changes to portfolio weights
Finance the transition, particularly in emerging markets, through
investments and strategy development
Internal investment target on financing the transition to a lower
carbon future
Divest from all direct investments in businesses that derive more
than 30% of their income from coal
– Fully divested from coal equities by 2021
– Fully divested from coal bonds during 2023
The threshold for our coal policy has been carefully considered to
strike a balance between risk and return, and enable companies in
our markets to gradually phase out coal
Engage with the companies responsible for 65% of the absolute
emissions in our investment portfolio
Deliver a 25% reduction in our operational emissions intensity from
a 2016 baseline, and abate 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
This is an annual target, so our portfolio is constantly reviewed
against this threshold
Engagement completed for all identified companies during 2023
Achieved an intensity ratio of 0.95 tCO2e/FTE for 2023, keeping us
ahead of the trajectory needed to meet our 2030 target of 1.65
tCO2e/FTE
Carbon emissions profile as of 31 December 2023
Scope 1 and 2 (market-based) (tCO2e)
Scope 3 – including emissions associated
with fuel- and energy-related activities,
waste generated in operations and business
travel, excluding category 15 (tCO2e)
Scope 3 category 15 – including emissions
associated with investments (tCO2e)
14,425*
14,462*
3,600,000*
* Within the scope of EY assurance – for further information, see the the Basis of
Reporting which notes those Scope 3 categories that were within the scope of EY
assurance.
Climate-related metrics
We continually review the climate metrics we use to assess their
suitability for our markets, considering factors like practicality of
implementation, data availability and coverage.
To measure our exposure to climate-related risks, we use a
combination of absolute emissions data and emission intensity data.
Absolute emissions allow us to quantify the overall carbon footprint of
investments within our portfolio, while WACI data allows us to
compare carbon footprints relative to the revenue generated by
investments.
Measuring WACI enables us to compare the intensity of emissions for
different portfolios and assess improvements over time. WACI is also
useful as a proxy for transition risk within our investment portfolio,
with a higher WACI usually indicating a gap in alignment with the
goals of the Paris Agreement.
As mentioned in the Challenges and future goals section of the
report, the calculation of WACI is aligned to the protocol of the Net
Zero Asset Owner Alliance as follows:
– Assets from wholly-owned business only;
– Shareholder and policyholder assets (excluding assets in unit-linked
funds);
– Assets in the following asset classes only: listed equities and
classified corporate bonds, using industry practice;
– Assets in the following investment vehicles: segregated mandates,
collective investment schemes and exchange traded funds.
These assets mentioned above, as reported by our main portfolio
management system, constitutes over 92.9 per cent of our
investment portfolio as at 30 September 2022.
To assess our operational emissions, we measure the reduction in
emissions intensity per full-time employee.
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Prudential plc Annual Report 2023
Movement in metrics
Target-related metrics
WACI (weighted average of tCO2e/$m revenue)
Coverage for the WACI of the investment portfolio*
2023
192*
69%
Holdings in companies with more than 30% of revenue from coal
Fully divested
2022
2021
219
67%
Substantially
divested from
bonds
296
69%
Fully divested
from equities
Engagement with the companies responsible for 65% 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
Scope 3: Downstream activities (financed emissions) (tCO2e)‡
Reviewed 100%
Engaged 100%
0.95
Reviewed 100%
Engaged 100%
1.21
Reviewed 44%
Engaged 31%
1.47
2,108*
12,318*
18,334*
14,462*
1,645
16,938
19,880
9,487
1,481
19,986
21,547
8,798
3,600,000*
3,100,000
4,700,000
* Within the scope of EY assurance – for further information, see the Basis of Reporting which notes those Scope 3 categories that were within the scope of EY assurance.
†
‡ Reflecting the absolute emissions of the assets in the WACI calculation where the underlying data is available as detailed in the Basis of Reporting
Includes the following Scope 3 categories: 3 (fuel- and energy-related activities, 5 (waste generated in operations) and 6 (business travel).
Monitoring and shaping industry developments
We continue to monitor developments related to the International
Sustainability Standards Board (ISSB) and guidance from the
regulatory authorities in markets where we operate and will continue
to review the completeness and robustness of our sustainability-
related data and methodologies in general.
We have also reviewed the Science Based Targets initiative (SBTi) as
part of our ongoing evaluation of our climate targets. As part of this
process, in 2023 we met with the SBTi specifically around the
applicability of its methodology to emerging markets. The SBTi uses
global decarbonisation targets and pathways for verification that do
not differentiate between the requirements of emerging markets and
developed markets. In line with our commitment to a just and
inclusive net zero transition, we believe it is crucial to recognise the
differing transition challenges faced by different countries and
companies. This also aligns with the Paris Agreement, which includes
the principle of ‘common but differentiated responsibilities’. Our
responsible investment approach seeks to incorporate this principle.
We will continue to engage with the SBTi and monitor its publications
to understand whether its methodology can be applied appropriately
in our markets.
For more information on our participation in regional and global
advocacy, please refer to Harnessing thought leadership to shape the
agenda section of the Sustainability Report.
Data availability
As a data user, we rely on information disclosed by investee
companies via reporting frameworks like the TCFD recommendations
and the CDP. To enhance data availability, we are working with both
data providers and our asset managers to improve disclosures. In
time, we expect the situation to improve as companies across regions
are increasingly required to make climate-related disclosures and face
increased scrutiny from stakeholders.
We are aware that expanding data coverage could impact the WACI
of our portfolio, either positively or negatively, as newly disclosed data
is included in our calculations.
For more detail on our direct environmental footprint, please refer to
the Sustainable business section of the Sustainability Report.
Forward-looking metrics
We are actively working with our asset management and asset owner
businesses to develop forward-looking metrics that are more suitable
for our operations. These metrics would enable us to effectively
manage and report on climate-related risks, while integrating
seamlessly with our investment processes to help us uphold our
responsible investment framework.
In assessing new metrics, we have conducted a thorough review of
peer practices and industry recommendations regarding forward-
looking metrics, including Climate Value at Risk (Climate-VAR) and
implied temperature rise (ITR). We have reviewed these metrics and
believe they are only suitable for internal use at this stage, due to
limitations in the data availability and the underlying assumptions in
their methodologies.
We have enhanced our internal reporting by incorporating ITR as an
indicator of the temperature alignment of our investment portfolio,
and Climate-VAR as an indicator of the portfolio’s exposure to
physical and transition climate change risks. We will continue to build
our understanding of these metrics and consider their use for external
disclosure once their limitations have been appropriately addressed or
mitigated.
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables
Hong Kong Stock Exchange requirements
HKEX KPI requirement
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.
The types of emissions and
respective emissions data.
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.
Total non-hazardous
waste produced (in
tonnes) and, where
appropriate, intensity.
Indicator
Disclosure
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 2023, there were no confirmed instances of non-compliance in relation to such laws and
regulations that would have a significant impact on the Group.
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 Climate-related metrics section on page 126, and the
Responsible environmental practices section of the Sustainability Report.
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)
2023
2,108
0.14
6.33
12,318
0.81
36.97
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.
A1.4
Total non-hazardous waste produced (tonnes)
Total non-hazardous waste produced (tonnes/FTE)
2023
379
0.02
2022
357
0.02
2021
222
0.02
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 2023, we increased the scope of reporting of waste data to cover 91 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 abate 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; and
– Actively examining how we can procure renewable power for our office operations in certain
markets.
To date, we are ahead of the emissions reduction trajectory required to meet our target. More
information is available in the Progress against our climate-related targets section on page 126. In
2023, we revised our target to reduce the carbon emissions of our portfolio of shareholder and
policyholder assets by 55 per cent by 2030, against our 2019 baseline. Our ambition is that the
assets we hold on behalf of our insurance companies will be ‘net zero’ by 2050. During 2023 we
reduced the weighted average carbon intensity (WACI) of our portfolio by 50 per cent against the
2019 baseline. More information is available in the Decarbonising our portfolio section on page 111.
Description of emissions
target(s) set and steps
taken to achieve them.
A1.5
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HKEX KPI requirement
Description of how
hazardous and non-
hazardous wastes are
handled, and a description
of reduction target(s) set
and steps taken to achieve
them.
Policies on the efficient use
of resources, including
energy, water and other
raw materials.
A2
Direct and/or indirect
energy consumption by
type in total (kWh in ’000s)
and intensity.
A2.1
Water consumption in
total and intensity.
A2.2
Description of energy use
efficiency target(s) set and
steps taken to achieve
them.
A2.3
Indicator
A1.6
Disclosure
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.
Total consumption (kWh)
kWh/FTE
2023
2022
2021
41,985,325 41,200,175 42,131,700
2,750.73
2,688.60
2,891.48
More information is available in the SECR report on page 148
2023
2022
2021
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 metering, or water is part of the service charge.
138,960.00 163,720.17 123,025.82
0.42
0.33
0.48
During 2023, we increased the scope of reporting of water data to cover 79 per cent of our
occupied floor area.
We do not have explicit energy efficiency targets in place. However, 85 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 is key.
We have carried out site assessments across our asset portfolio and identified measures to
reduce our impact. We have developed roadmaps for our businesses with measures they can
implement to generate energy savings. We will continue to carry out these assessments and
identify savings opportunities to reduce our energy consumption.
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.
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 in the Decarbonising our portfolio section on
page 111, as well as in the Responsible investment section on page 110.
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
Hong Kong Stock Exchange requirements continued
HKEX KPI requirement
Policies on identification
and mitigation of
significant climate-related
issues which have
impacted, and those which
may impact the issuer
Description of the
significant climate-related
issues which have
impacted, and those which
may impact, the issuer, and
the actions taken to
manage them.
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.
Indicator
A4
Disclosure
More information is available in the Identifying climate-related risks section on page 119, and
the Managing and responding to climate-related risks section on page 121.
A4.1
Different scenarios, including <2°C scenarios, have different potential impacts on our businesses,
strategy and financial planning, as described in the Identifying climate-related risks section on
page 119.
We have identified short-, medium- and long-term climate-related issues as described in the
Identifying climate-related risks section on page 119. 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 Assessing climate-related risks section, and the
Managing and responding to climate-related risks section on page 121.
We also identified climate-related opportunities, as described in the Identifying and responding
to climate-related opportunities section on page 121.
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 in the Our
Group-wide policies relating to our sustainability strategy section on pages 146-149:
– Discrimination and Harassment Policy
– Diversity and Inclusion Policy
– Employee Relations Policy
– Recruitment Policy
– Remuneration Policy
– Talent Policy
In 2023, 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
Unspecified
Male
Female
Total workforce by employment type
Full-time
Part-time
Total workforce by age group
Unspecified
Below 30
30-50
Above 50
Total workforce by region
Asia
Africa
Europe and USA
2023
3.0
6,541.3
8,713.2
2022
18.0
6,299.3
8,363.4
2021*
11.0
5,911.6
7,946.1
2023
2022
2021*
15,250.1
14,671.6
13,854.8
7.4
2023
0
9.1
13.9
2022
34.0
2021*
31.0
2,698.0
2,880.9
2,715.4
11,428.8
10,535.4
10,030.2
1,130.7
1,230.4
1,092.1
2023
2022
2021*
13,933.7
13,399.7
12,574.5
1,202.0
121.8
1,126.0
155.0
1,075.0
219.2
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Prudential plc Annual Report 2023
HKEX KPI requirement
Employee turnover rate by
gender, age group and
geographical region.
Indicator
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 Empowering
our people section.
Disclosure
Employee turnover rate by gender
Male
Female
Employee turnover rate by age group
Below 30
30-50
Above 50
Employee turnover rate by region
Asia
Europe and USA
Africa‡
Overall
† All 2021-2022 employee turnover data excludes Africa
‡ Group Human Resources systems only began recording full-time employee (FTE)
turnover numbers from Africa in 2023.
2023
18%
16%
2023
27%
14%
20%
2023
17%
18%
11%
17%
2022†
24%
21%
2022†
38%
19%
20%
2022
22%
56%
N/A
23%
2021†
26%
23%
2021†
38%
19%
16%
2021
24%
22%
N/A
24%
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 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, to as low as is
reasonably practicable.
Our policy and operational standards are aligned with the global ISO 45001:2018 standard 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 (2022: nil; 2021: nil).
B2.2
B2.3
36 incidents resulting in 4 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 system 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.
B3
Policies on improving
employees’ knowledge and
skills for discharging duties
at work. Description of
training activities.
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 Empowering our people section of our Sustainability Report.
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
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.
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.
Hong Kong Stock Exchange requirements continued
HKEX KPI requirement
The percentage of
employees trained by
gender and employee
category.
Indicator
B3.1
Disclosure
Percentage of employees trained by gender
Unspecified
Male
Female
Percentage of employees trained by employee category
Rank and file
Middle level
Top level
Average training hours completed per employee by gender
Unspecified
Male
Female
Average training hours completed per employee by employee category
Top level
Middle level
Rank and file
2023
0%
99%
99%
2023
98%
99%
99%
2023
N/A
15.01
14.23
2023
16.90
15.39
14.09
2022
65%
96%
96%
2022
96%
93%
95%
2022
8.43
16.04
15.58
2022
11.54
9.91
16.06
2021
45%
97%
97%
2021
96%
99%
99%
2021
5.65
11.22
12.44
2021
6.09
9.19
12.63
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 Combatting modern slavery section of our Sustainability Report.
B4.1, B4.2
We believe in supporting human rights and acting responsibly and with integrity in everything we
do. These values are reflected within our Group Code of 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.
Description of steps taken
to eliminate such practices
when discovered.
Policies on managing
environmental and social
risks of the supply chain.
B5
Number of suppliers by
geographical region.
B5.1
The nature of our business means that main risk would be in our supply chain. More information
is available in the Combatting modern slavery section of our Sustainability Report.
Our Group Code of Conduct outlines the values and standards that are required of 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 sustainability topics. More
information is available in the Responsible procurement practices section of our Sustainability
Report.
Asia
Africa
Europe and US
Total
‡ Data as of 30 September 2023
2023‡
10,712
1,844
451
13,007
2022
7,362
2,103
485
9,950
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HKEX KPI requirement
Description of practices
relating to engaging
suppliers, number of
suppliers where the
practices are being
implemented, and how
they are implemented and
monitored.
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.
B6.3
B6.4
B6.5
Description of practices
relating to observing and
protecting intellectual
property rights.
Description of quality
assurance process and
recall procedures.
Description of consumer
data protection and
privacy policies, and how
they are implemented and
monitored.
Indicator
B5.2
Disclosure
In 2023, the Group's third-party risk assessment platform, Coupa Risk Assess, 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 resilience. Through this
system we also issued due diligence questionnaires aligned to the principles of the responsible
supplier guidelines.
More information is available in the Responsible procurement practices section of our
Sustainability Report.
B5.3
More information is available in the Responsible procurement practices section and the
Combatting modern slavery section of our Sustainability Report.
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 sustainability
topics. More information is available in the Responsible procurement practices section of our
Sustainability Report.
Our Customer Conduct Risk Policy includes our Customer Conduct principles 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 Meeting the changing needs of our customers
section of our Sustainability Report.
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 in Our Group-
wide policies relating to our sustainability strategy section on page 145.
Our Privacy Policy governs the protection of data and complies with the General Data Protection
Regulation. More information is available in Our Group-wide policies relating to our sustainability
strategy section on page 145.
B6.1
As a life insurer, this is not applicable to our business.
B6.2
33,070 (2022: 37,589).
In 2023, complaints per 1,000 policies have remained broadly flat at 2 (2022: 2 complaints per
1,000 policies in force).
More information on how we deal with customer complaints is available on in the Meeting the
changing needs of our customers section of our Sustainability Report.
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.
A description of our quality assurance procedures is available in the Meeting the changing needs
of our customers section of our Sustainability Report.
As a life insurer, product recall procedures are not relevant to our business.
Our Group Data Policy defines how we should manage data throughout its life cycle and employ
the technology best suited for business use case. More information is available in Our Group-wide
policies relating to our sustainability strategy section on page 145.
Our Privacy Policy governs the protection of data and complies with the General Data Protection
Regulation. More information is available in Our Group-wide policies relating to our sustainability
strategy section on page 145.
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.
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EEV basis results
Additional information
Reference tables continued
Hong Kong Stock Exchange requirements continued
Indicator
B7
Disclosure
More information is available in Our Group-wide policies relating to our sustainability strategy
section on page 145:
– Anti-Bribery and Corruption Policy
– Anti-Money Laundering and Sanctions Policy
– Group Escalation Policy
– Group Counter Fraud Policy.
In 2023, 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 (2022: Nil)
B7.2
More information is available in the Whistleblowing section of our Sustainability Report.
HKEX KPI requirement
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.
Description of anti-
corruption training provided
to directors and staff.
B7.3
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.
B8
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.
Our Community Investment Policy covers working with the communities in which we operate as
active and supportive members. It also outlines our strategy for investing in the communities and
how we make investments and report against them.
Focus areas of
contribution.
B8.1
Total cash contribution by area of focus %
Education
Social and welfare
Environment
Cultural
Other
Emergency relief
Health
Economic development
Payroll giving
2023
57%
30%
2%
0%
4%
3%
4%
0%
0%
2022
2021 (restated)
52%
39%
0%†
0%†
1%
4%
3%
0%
0%†
51%
31%
2%
0%
1%
7%
7%
1%
0%
† 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
2023
95%
0%
5%
2022
2021 (restated)
95%
3%
2
91%
5%
4%
Resources contributed to
the focus area.
B8.2
Over the course of 2023, Prudential invested a total of $13.0 million, a 6% increase versus 2022
($12.2million), in community programmes through the Prudence Foundation – our community
investment charity – and other community programmes led by our local markets. This
demonstrated our continued commitment to bringing our sustainability goals to life with action
and investment in the communities we operate in.
More information is available in the Building resilient communities section of our Sustainability
Report.
134
Prudential plc Annual Report 2023
Disclosure
$0 (2022: $0.2m)
SASB Insurance Standard
SASB topic
Transparent
Information and
Fair Advice for
Customers
FN-IN-270a.1
Accounting metric Code
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.2
Total number of complaints received / total claims raised x 1,000 = 13 (2022: 17)
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 (2022: 2 complaints per 1,000
policies in force)
FN-IN-270a.3
87 per cent (2022: 89 per cent) (excludes our joint ventures, China and India
entities, and Takaful business in Malaysia)
FN-IN-270a.4 More information on the way we communicate with customers and our approach
to responsible marketing is available in the Meeting the changing needs of our
customers section of our Sustainability Report.
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 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.
Policies Designed
to Incentivize
Responsible
Behaviour
Complaints-to-claims
ratio
Customer retention
rate
Description of
approach to
informing customers
about products
Description of
approach to
incorporation of
environmental,
social, and
governance (ESG)
factors in investment
management
processes and
strategies
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
Prudential plc Annual Report 2023
135
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
SASB Insurance Standard continued
SASB Topic
Environmental
Risk Exposure
Accounting metric
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
Code
FN-IN-450a.1
Disclosure
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
Our annual review process monitors potential climate change impacts
that may affect morbidity, mortality, and persistency levels across
different regions. We then consider how these factors may impact our
products. We also analyse the distribution of our customers across
these various locations to assess their vulnerability to extreme climate
events, in order to improve our understanding of both our exposure,
and that of our customers, to climate risks. As a life and health insurer,
we recognise the potential for climate change and government policies
to impact the assumptions underlying our underwriting liabilities.
Currently, we believe there is insufficiency of and uncertainty in data
that would allow us to reliably use these assumptions for the valuation
of our underwriting liabilities. Thus, the Group’s assumptions for our life
and health insurance business currently do not include additional
assumptions related to the impacts of climate change. We will
continue to engage with our regular experience analysis, to engage
with reinsurers and monitor relevant academic studies. If material
changes occur, we will consider the financial impacts of climate-related
risks on our insurance liabilities.
Systemic Risk
Management
Activity Metric
Exposure to derivative
instruments by category: (1)
total potential exposure to non-
centrally 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 non-centrally cleared derivatives:
$29,621m;
(2) Total fair value of acceptable collateral posted with the Central
Clearinghouse: ($628m); and
(3) Total potential exposure to centrally cleared derivatives: $21,916m.
FN-IN-550a.2
$16.0m
FN-IN-550a.3
A description of our approach is covered in the Risk Report of our
Annual Report and Accounts, under the discussion of the Group’s
principal risks.
FN-IN-000.A
Total policies in force, all in life segment:
17,388,924
136
Prudential plc Annual Report 2023
TCFD Index
TCFD recommendation
Governance
a. Describe the Board’s oversight of climate-related risks and opportunities
Prudential Group response
Location
Guidance for All Sectors
The processes and
frequency by which the
Board and committees
are informed about
climate-related issues
All sustainability matters, including climate change, are overseen by the Board, which
is responsible for determining overall strategy and prioritisation of key focus areas.
This includes climate-related risks and opportunities, and providing rigorous
challenge to management on progress against goals and targets. The Sustainability
governance section sets out the climate-related responsibilities which have been
assigned to the Board and relevant committees, including the processes and
frequency by which they are informed about climate-related issues.
Our governance for responsible investment is disclosed in the Responsible investment
governance section.
Sustainability governance
on page 105
Responsible investment
governance on page 110
Identifying climate-related
risks on page 119
Risk governance on page
56
Prudential treats climate risk as a thematic cross-cutting risk type, with the potential
to impact or amplify multiple existing risks that we manage, as described in the
Identifying 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 Risk governance section.
How the Board and
committees incorporate
climate-related issues
into decision-making
How the Board monitors
and oversees progress
against climate-related
goals and targets
All sustainability matters, including climate change, are overseen by the Board, which
is responsible for determining overall strategy and prioritisation of key focus areas.
This is discussed in the Sustainability governance section, as the Remuneration
Committee has agreed to attach carbon reduction targets to Executive Directors'
2024 Prudential Long Term Incentive Plan awards. More information can also be
found in the Directors' remuneration report section.
Sustainability governance
on page 105
Directors' remuneration
report on page 198
The Risk Committee, a Board-level structure, oversees environmental and climate-
related issues, including the implementation of the Group’s commitments to
decarbonise its operations and investment portfolio and other climate-focused
responsible investment commitments. The Risk Committee has a regular 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 Risk Committee
considers and makes appropriate recommendations to the Board.
Sustainability governance
on page 105
b. Describe management’s role in assessing and managing climate-related risks and opportunities
Guidance for All Sectors
Climate-related
responsibilities and
accountability
Sustainability activities, including climate-related responsibilities and accountability,
are overseen at a management level by the Group Sustainability Committee, chaired
by the Chief Financial Officer, as described in the Oversight of climate change
section. These committees report to the Board and Board committees, as described
in the Sustainability governance section.
Our governance for responsible investment is disclosed in the Responsible investment
governance section.
Organisational structure The climate-related organisational structure is included in the Sustainability
governance, including climate change section.
Sustainability governance
on page 105
Oversight of climate
change on page 119
Responsible investment on
page 110
Sustainability governance,
including climate change
on page 105
Prudential plc Annual Report 2023
137
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
TCFD Index continued
TCFD recommendation
Governance
b. Describe management’s role in assessing and managing climate-related risks and opportunities
Prudential Group response
Location
Guidance for All Sectors
How management is
informed about climate-
related issues
How management
monitors climate-related
issues
We have implemented appropriate processes by which management are informed
about climate-related issues, as discussed in the Management oversight section. In
addition, the Oversight of climate change section highlights how the Group
Sustainability Committee oversees climate-related responsibilities and progress, and
reports to the Risk Committee, which has ultimate oversight.
Prudential treats climate risk as a thematic cross-cutting risk type, with the potential
to impact or amplify multiple existing risks that we manage, as described in the
Identifying climate-related risks section.
Our enterprise risk management processes, which is how management is informed
on climate-related matters, is described in the Risk governance section.
Our management committees actively monitor climate-related issues, as described in
the Management oversight section. The Group Sustainability Committee, chaired by
the Chief Financial Officer, met five times in 2023. It is informed by other
Committee members, including Chief Risk and Compliance Officer, and Chief
Investment Officer.
Prudential treats climate risk as a thematic cross-cutting risk type, with the potential
to impact or amplify multiple existing risks that we manage, as described in the
Identifying climate-related risks section.
Our enterprise risk management processes, which is how management is informed
on climate-related matters, is described in the Risk governance section.
Management oversight on
page 105
Oversight of climate
change on page 119
Identifying climate-related
risks on page 119
Risk governance on page
56
Management oversight on
page 105
Identifying climate-related
risks on page 119
Risk governance on page
56
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 Assessing climate-related risks section.
Assessing climate-related
risks on page 120
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 Assessing climate-related
risks section.
Assessing climate-related
risks on page 120
138
Prudential plc Annual Report 2023
TCFD recommendation
Strategy
a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term
Prudential Group response
Location
Guidance for All Sectors
Processes used to
determine which risks
and opportunities could
have a material financial
impact on the
organization
We regularly analyse and assess the potential impact of risks associated with climate
change. Our Group Risk Framework considers both emerging and significant risks.
Climate risks are considered principal risks at the Group level, and subsequently
receive enhanced management focus and reporting. An example includes review of
risks and control self-assessment libraries that support the broader sustainability
strategy.
Furthermore our risk and strategy processes have identified climate-related risks and
opportunities which could have a material financial impact on our organisation, as
described in the Identifying climate-related risks section, the Impact on our
businesses, strategy and financial planning section, and the Identifying and
responding to climate-related opportunities section.
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 Impacts on assets section, the Impact on our businesses, strategy
and financial planning section, and the Regional impact on our operations section.
Identifying climate-related
risks on page 119
Impact on our businesses,
strategy and financial
planning on page 123
Identifying and responding
to climate-related
opportunities on page 121
Impacts on assets on page
123
Impact on our businesses,
strategy and financial
planning on page 123
Regional impact on our
operations on page 124
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 and responding to climate-
related opportunities section;
– Supply chain and/or value chain, including carbon prices, in the Regional impact
on our operations section, and the Carbon prices used in scenario analysis section;
– Adaptation and mitigation activities in the Progress against our climate-related
targets section; and
– 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 our businesses, strategy and financial planning section.
These risks are prioritised using the processes described in The Group’s principal risks
and the Risk governance sections.
Identifying and responding
to climate-related
opportunities on page 121
Regional impact on our
operations on page 124
Carbon prices used in
scenario analysis on page
122
Progress against our
climate-related targets on
page 126
Impact on access to capital
on page 125
Impact on our businesses,
strategy and financial
planning on page 123
The Group’s principal risks
on page 59
Risk governance on page
56
Prudential plc Annual Report 2023
139
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
TCFD Index continued
Prudential Group response
TCFD recommendation
Strategy
b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial
planning
Guidance for All Sectors
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 analysis 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.
Our plans for
transitioning to a low-
carbon economy
We have made GHG emissions reduction commitments, as described in the Progress
against our climate-related targets section. We have identified specific activities for
transitioning to a low-carbon economy, as set out throughout our Climate Transition
Plan.
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 Impact on strategic asset allocation section. We
pursue these opportunities through our responsible investment approach, as
described in the Integrating ESG throughout the investment process section.
Our asset manager Eastspring Investments also factors in ESG considerations,
including climate change, into their responsible investment strategy.
Climate-related scenario
analysis on page 122
Impact on our businesses,
strategy and financial
planning on page 123
Progress against our
climate-related targets on
page 126
Climate Transition Plan
Impact on strategic asset
allocation on page 124
Integrating ESG
throughout the investment
process on page 113
Eastspring Responsible
Investment Report
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 our businesses, strategy and financial 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 analysis section.
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 (including our investments and products & services) for the
Group, as described in the Identifying and responding to climate-related
opportunities section.
We identify climate-related risks that affect our strategy, as described in the
Identifying 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 allows us to generate climate-
related opportunities (including our investments and products and services) for the
Group, as described in the Identifying and responding to climate-related
opportunities section.
Our strategy may also be impacted by climate-related risks, as described in the
Identifying climate-related risks section, and how we assess and manage these risks,
as described in the Managing and responding to climate-related risks section.
A description of the
climate-related scenarios
used
We use climate-related scenarios, including <2°C scenarios, as described in the
Climate-related scenario analysis section. We identified the related time horizons, as
set out in the Assessing climate-related risks section.
Impact on our businesses,
strategy and financial
planning on page 123
Climate-related scenario
analysis on page 122
Identifying and responding
to climate-related
opportunities on page 121
Identifying climate-related
risks on page 119
Managing and responding
to climate-related risks on
page 121
Identifying and responding
to climate-related
opportunities on page 121
Identifying climate-related
risks on page 119
Managing and responding
to climate-related risks on
page 121
Climate-related scenario
analysis on page 122
Assessing climate-related
risks on page 120
140
Prudential plc Annual Report 2023
Prudential Group response
TCFD recommendation
Strategy
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
Location
A description of how
climate-related scenarios
are used, such as to
inform investments in
specific assets
We use our strategic asset allocation process to inform investments in specific assets,
as described in the Impact on strategic asset allocation section. The climate-related
scenarios we use in the strategic asset allocation process are described in the
Climate-related scenario analysis section. We pursue these opportunities through our
responsible investment approach, as described in the Integrating ESG throughout
the investment process section.
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 Assessing climate-related risks
section, and the 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 Group’s principal risks and the Risk governance sections.
Existing and emerging
regulatory requirements
related to climate
change
Processes for assessing
the potential size and
scope of identified
climate-related risks
We consider existing and emerging regulatory requirements related to climate
change, as described in the Assessing climate-related risks section, and the Managing
and responding to climate-related risks section.
We have processes for assessing the size and scope of climate-related risks. To
develop a comprehensive view of the potential impacts of climate change on our
business, the Group Risk Framework considers climate-related risks across three time
horizons, by taking into account the expected benefits and paybacks of risk-based
decisions. These time horizons are defined to reflect the periods over which transition
and physical climate-related risks and opportunities could reasonably emerge. This is
described in the Assessing climate-related risks section.
Impact on strategic asset
allocation on page 124
Climate-related scenario
analysis on page 122
Integrating ESG
throughout the investment
process on page 113
Assessing climate-related
risks on page 120
Managing and responding
to climate-related risks on
page 121
The Group’s principal risks
on page 59
Risk governance on page
56
Assessing climate-related
risks on page 120
Managing and responding
to climate-related risks on
page 121
Assessing climate-related
risks on page 120
Risk governance on page
56
Definitions of risk
terminology used or
references to existing
risk classification
frameworks used
More information can also be found in the Risk governance section.
Our risk classification framework, with our definitions of risk terminology used, forms
part of our Group Risk Framework, which can be found in the Identifying climate-
related risks section.
Risk governance on page
56
More information can be found in the Risk governance section.
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 Corporate engagement
section.
Corporate engagement on
page 112
Prudential plc Annual Report 2023
141
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
TCFD Index continued
TCFD recommendation
Risk management
b. Describe the organization’s processes for managing climate-related risks
Prudential Group response
Guidance for All Sectors
Managing climate-
related risks
We have processes for managing and prioritising climate-related risks, as described in
the Assessing climate-related risks section, and the Managing and responding to
climate-related risks section.
These are also described in The Group’s principal risks and the Risk Governance
sections.
Location
Assessing climate-related
risks on page 120
Managing and responding
to climate-related risks on
page 121
The Group’s principal risks
on page 59
Risk governance on page
56
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 Progress
against our climate-related targets section.
Progress against our
climate-related targets on
page 126
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.
Responsible investment
approach on page 112
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 Assessing
climate-related risks section, and the Managing and responding to climate-related
risks section. These risks are integrated into our risk management framework, as
described in The Group's principal risks and the Risk governance sections.
Assessing climate-related
risks on page 120
Managing and responding
to climate-related risks on
page 121
The Group's principal risks
on page 59
Risk governance on page
56
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 Climate-related metrics section, including absolute
and intensity metrics.
The following metrics are provided:
– Absolute Scope 1, Scope 2, Scope 3 in the Climate-related metrics section;
– Proportion of executive management remuneration linked to climate
considerations in the Directors’ remuneration report section.
We describe the following qualitatively:
– Amount and extent of assets or business activities vulnerable to transition and
physical risks in the Impact on assets 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 and responding to climate-related
opportunities section; and
– Amount of capital expenditure, financing, or investment deployed toward
climate-related risks and opportunities in the Integrating ESG throughout the
investment process section.
Climate-related metrics on
page 126
Directors’ remuneration
report on page 198
Impacts on assets on page
123
Regional impact on our
operations on page 124
Identifying and responding
to climate-related
opportunities on page 121
Integrating ESG
throughout the investment
process on page 113
142
Prudential plc Annual Report 2023
TCFD recommendation
Metrics and targets
Prudential Group response
Location
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
Metrics on climate-
related risks associated
with water, energy, and
waste management
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 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 128
We incorporate climate-related performance metrics, as described in the Directors’
remuneration report section.
Directors’ remuneration
report on page 198
We use carbon prices in our scenario testing, as described in the Carbon prices used
in scenario analysis section.
We provide the metrics used to assess climate-related risks in the Climate-related
metrics section. We discuss qualitatively the climate-related risk management
process in the Assessing climate-related risks section, and the Managing and
responding to climate-related risks section, as well as opportunities from products
and services designed for a lower-carbon economy in the Identifying and responding
to climate-related opportunities section.
Carbon prices used in
scenario analysis on page
122
Climate-related metrics on
page 126
Assessing climate-related
risks on page 120
Managing and responding
to climate-related risks on
page 121
Identifying and responding
to climate-related
opportunities on page 121
Metrics for historical
periods
We provide historical metrics in the Climate-related metrics section, so as to allow for
trend analysis.
Climate-related metrics on
page 126
Forward-looking metrics We qualitatively discuss forward-looking metrics in the Forward-looking metrics
section.
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.
Forward-looking metrics on
page 127
Basis of Reporting
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
Climate-related metrics section.
Climate-related metrics on
page 126
Prudential plc Annual Report 2023
143
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
TCFD Index continued
Prudential Group response
TCFD recommendation
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
Location
Supplemental Guidance for Asset Owners
Metrics used to assess
climate-related risks and
opportunities in each
fund or investment
strategy
Weighted average carbon intensity (WACI) is useful as a proxy for transition risk
within our investment portfolio, as a higher WACI usually indicates a gap in
alignment with the goals of the Paris Agreement. Measuring WACI enables us to
compare the intensity of emissions for different portfolios and assess improvements
over time. More information can be found in the Climate-related metrics section.
Climate-related metrics on
page 126
Metrics considered in
investment decisions and
monitoring
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 Climate-related
metrics section, where we explain how these metrics have changed over time.
Climate-related metrics on
page 126
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.
Forward-looking metrics on
page 127
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
The asset classes included are found in the Climate-related metrics section. Full
details are in our Basis of Reporting.
Climate-related metrics on
page 126
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
Basis of Reporting
Guidance for All Sectors
How we calculate our
Scope 1, Scope 2 and
Scope 3 GHG emissions
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 in the Climate-related metrics section
Climate-related metrics on
page 126
Basis of Reporting
Our historical GHG
emissions and associated
metrics, a description of
the methodologies
We provide metrics for historical periods to allow for trend analysis in the Climate-
related metrics 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.
Climate-related metrics on
page 126
Basis of Reporting
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
Supplemental Guidance for Asset Owners
Disclosure of GHG
emissions for assets we
own and the weighted
average carbon intensity
(WACI)
Other carbon footprinting
metrics we believe are
useful for decision-
making
We disclose the GHG emissions and WACI for our investment portfolio, as defined
in the Climate-related metrics section. The emissions are calculated in line with the
PCAF Standard, as fully detailed in our Basis of Reporting, so as to provide a single
consistent referable description of the methodologies.
Climate-related metrics on
page 126
Basis of Reporting
We qualitatively discuss other carbon footprinting metrics which we believe can be
useful for decision-making, including forward-looking metrics, in the Climate-related
metrics section, and Forward-looking metrics section.
Climate-related metrics on
page 126
Forward-looking metrics on
page 127
144
Prudential plc Annual Report 2023
Prudential Group response
TCFD recommendation
Metrics and targets
c. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against
targets
Guidance for All Sectors
Location
Key climate-related
targets
Interim targets
We have set key climate-related targets, as described in the Progress against our
climate-related targets 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.
Progress against our
climate-related targets on
page 126
We disclose our interim targets in aggregate in the Progress against our climate-
related targets section, which also includes the associated medium-term and long-
term targets.
Progress against our
climate-related targets on
page 126
Description of the
methodologies used to
calculate targets and
measures
In our Climate-related metrics section, we describe how our WACI calculations are
aligned with the international protocol of the Net Zero Asset Owner Alliance. For
more information, please see our Basis of Reporting, where we fully describe the
methodologies used to calculate targets and measures, so as to provide a single
consistent referable description of the methodologies.
Climate-related metrics on
page 126
Basis of Reporting
Our Group-wide policies relating to our sustainability strategy
Sustainability pillars
and priorities
Simple and accessible
health and financial
protection
Responsible investment
GGM policies
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 Principles,
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 support our
sustainability strategy. These values and standards include specific requirements
regarding customers. In particular, the Group has committed to:
– 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 customer information;
– Provide and promote high standards of customer service; and
– Act fairly and timely to address customer complaints and any errors we find.
Our Community Investment Policy covers how we are committed to working
with the communities in which we operate as active and supportive members.
This also outlines our strategy for investing in the communities and how we make
investments and report against them.
The Responsible Investment Policy articulates how environmental, social and
governance considerations are integrated into investment activities and processes
in a consistent and coherent way. It describes our approach ensuring external
commitments and internal targets on responsible investment are met and ensuring
the different objectives of responsible investment are taken into consideration
when making investment decisions.
Owner and date of last
review
Chief Executive Officer
July 2023
Chief Executive Officer
July 2023
Chief Financial Officer
July 2023
Prudential plc Annual Report 2023
145
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
Our Group-wide policies relating to our sustainability strategy continued
Sustainability pillars
and priorities
Sustainable business
GGM policies
Our Group Environment Policy outlines our approach in understanding and
managing the direct environmental impact of the Group. This covers our
measurement, monitoring, review and reporting of issues associated with our
environmental performance.
Owner and date of last
review
Chief Financial Officer
July 2023
Our 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.
Chief Human Resources
Officer
May 2023
Our 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.
Chief Human Resources
Officer
April 2023
Our Learning Policy provides a framework to ensure that our employees receive
continuous, high-quality and relevant learning opportunities, to build skills for
present and future success. We recognise that investment in their development is
essential to building talent vitality, delivering against our business strategy and
shaping the future success of the organisation.
Our Performance Management Policy sets out the importance of our people and
frames how we actively and consistently manage their performance throughout the
year, laying the foundation and investing in their development to deliver against
our strategy and the future success of the organisation.
Our 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.
Our 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 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 those cooperating or
participating in the investigation of a complaint.
Chief Human Resources
Officer
May 2023
Chief Human Resources
Officer May 2023
Chief Human Resources
Officer
May 2023
Chief Human Resources
Officer
April 2023
Our Remuneration Policy outlines our effective approach to appropriately
rewarding our employees in a way that aligns incentives to business objectives and
enables the recruitment, retention and incentivisation of high-calibre employees in
line with our risk appetite and Group reward principles.
Chief Human Resources
Officer
May 2023
Our Talent Policy demonstrates how we attract and select the best people for roles
that will ensure high performance in the short term and improve the longer-term
succession and talent pipeline. It sets out our fair and effective approach to
pursuing this.
Chief Human Resources
Officer
May 2023
Our 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. Additionally, our policy considers the requirements of the
UK Modern Slavery Act and the principles of the UN’s Universal Declaration of
Human Rights.
Chief Financial Officer
November 2023
146
Prudential plc Annual Report 2023
Sustainability pillars
and priorities
Good governance and
responsible business
practices
GGM Policies
The Group Code of Conduct details our required standards of business conduct to
be used across the Group and covers both our employees and individuals or
organisations acting on our behalf. 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.
Owner and date of last
review
Chief Risk and Compliance
Officer
November 2023
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.
Chief Risk and Compliance
Officer
July 2023
Our 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.
Chief Risk and Compliance
Officer
September 2023
Our 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 we make to comply with sanctions, laws and regulations by screening,
prohibiting or restricting business activity, and following up through investigation.
The purpose of the Group Escalation and Investigation Policy is to set the
framework by which the Group can conduct investigations that are in line with its
regulatory and legal obligations, while meeting the demands of a competitive
commercial organisation. The principles set out in this policy are, therefore,
designed to enhance commercial opportunity, while minimising corporate risk.
Our Group Counter-Fraud Policy serves to support its business units in developing
and maintaining effective fraud risk management frameworks that meet regulatory
requirements and protect the interests of customers, shareholders and employees.
The policy also aims to enhance fraud detection, prevention and investigation
activities across the Group, and to provide a consistent approach to tackling fraud
that safeguards the Group’s reputation and resources. The policy outlines the roles
and responsibilities of the Group board, the Group Security function, and the
business units in relation to fraud risk management.
Our Group Resilience Policy outlines the principles and requirements for ensuring
the security and resilience of the Group’s people, assets and operations. The policy
covers various aspects of physical and travel security, health and safety, and
business continuity management. The policy also defines the roles and
responsibilities of different levels of governance and oversight within the Group, as
well as the processes for reporting, investigating and responding to incidents and
crises. The policy aims to comply with relevant legal and regulatory obligations, as
well as to meet the demands of a competitive commercial organisation.
The purpose of the Group Information Security Policy is to support the business
to deliver on customer outcomes, business strategy and any applicable legal and
regulatory requirements by maintaining a secure and adaptable environment to do
business. This policy has been developed to ensure the confidentiality, integrity and
availability of information systems and IT assets.
Our Group Data Policy is centred on the principle that data must be well governed
and effectively managed through its life cycle. The Policy provides a data, business,
people and technology framework which defines how we should manage data
throughout its life cycle and employ the technology best suited for business use
cases.
Chief Risk and Compliance
Officer
July 2023
Chief Risk and Compliance
Office
October 2023
Chief Risk and Compliance
Officer
July 2023
Chief Risk and Compliance
Officer
July 2023
Chief Information
Technology Officer
July 2023
Chief Information
Technology Officer
July 2023
Prudential plc Annual Report 2023
147
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Reference tables continued
Our Group-wide policies relating to our sustainability strategy continued
Sustainability pillars
and priorities
GGM Policies
Our Group Privacy Policy governs the protection of data and complies with the
General Data Protection Regulation. Our Information Security Standard supports
our resilient information security programme across the organisation and our
commitment to protecting the data entrusted to us by customers.
Our Speak out policy sets out our framework and controls relating to
whistleblowing. It is a confidential reporting system that allows employees and
other stakeholders to raise concerns about unethical or illegal activity within the
Group. The policy aims to foster a culture of openness, honesty and accountability,
and to comply with all relevant local regulatory and statutory requirements related
to whistleblowing. The policy also provides protection from retaliation for those who
report genuine concerns through the Speak Out programme.
Our 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.
Our Political Donations 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 elicit 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.
Owner and date of last
review
Chief Information
Technology Officer
July 2023
Chief Risk and
Compliance Officer
July 2023
Chief Financial Officer
June 2023
Chief Executive Officer
July 2022
SECR Report
Our 2023 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 2023. Information on energy reduction initiatives across our Asian and African portfolio are included in the section on Managing our
direct operational environmental impacts. We calculate our GHG emissions in line with the GHG Protocol methodology. Full details on the
calculation methodologies used are available in the Basis of Reporting.
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
2023
2023
2022
2021
UK and offshore
80
Global
(excluding UK
and offshore)
2,027
UK and offshore
123
Global (excluding
UK and offshore)
1,522
UK and offshore
122
Global (excluding
UK and offshore)
3,954
119
18,215
131
19,749
122
36,516
26
12,292
219
16,719
177
34,900
Total gross Scope 1 and Scope 2 emissions
119
20,242
254
21,272
244
40,470
(location-based) tCO2e
Intensity ratio Scope 1 and Scope 2 (location-
0.0263
0.0622
0.0222
0.0640
0.0119
0.0850
based): tCO2e /m2
Intensity ratio Scope 1 and Scope 2 (location-
1.8880
1.3364
1.5875
1.4028
1.1675
2.3354
based): tCO2e /fte
Energy consumption used to calculate above
438,640
9,701,578
671,652
7,039,834
663,621
19,252,400
emissions: kWh (Scope 1)
Energy consumption used to calculate above
573,330
31,845,100
638,894
32,849,795
559,790
69,984,995
emissions: kWh (Scope 2)
Note: 2021 Global (excluding UK and offshore) emissions data includes the US portfolio, Jackson operations, up to the demerger on 13 September 2021.
148
Prudential plc Annual Report 2023
Non-financial and sustainability 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 above.
The Group’s Strategic Report, including the Sustainability 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 Group's consideration of materiality for non-financial and sustainability matters is set out on page
102. The table below illustrates where the relevant material is presented.
Reporting area
Environment
Sustainability section
Sustainability section
Sustainability section
Employees
Sustainability section
Human rights
Sustainability section
Anti-bribery and corruption
Sustainability section
Social matters
Sustainability section
Sustainability section
Non-financial key performance
indicators
Addressed in section
Page reference
Responsible investment
Sustainable business
Managing climate-related risks and opportunities –
TCFD disclosures
> Pages 110 to 113
> Pages 114 to 117
> Pages 119 to 127
Sustainable business – Empowering our people
> Page 115
Good governance and responsible business practices
> Page 118
Good governance and responsible business practices
> Page 118
Simple and accessible health and financial protection
> Pages 108 to 109
Sustainable business
> Pages 114 to 117
Sustainability section
Targets
> Page 100
Management of principal risks
and uncertainties
Risk review
Risk review
Business model
Risk management
The Group's principal risks
Strategic and operating review
Business model
> Pages 56 to 58
> Pages 59 to 71
> Pages 30 to 31
Strategic Report approval by the Board of Directors
The Strategic Report set out on pages 2 to 149 is approved by the Board of Directors
Signed on behalf of the Board of Directors
Anil Wadhwani
Chief Executive Officer
19 March 2024
Prudential plc Annual Report 2023
149
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Governance
150
Prudential plc Annual Report 2023
Governance
Governance at a glance
Our leadership
Corporate governance
How we operate
Risk management and internal control
Committee reports
Statutory and regulatory disclosures
Index to principal Directors’ report disclosures
Page
152
155
163
165
176
178
195
197
Prudential plc Annual Report 2023
151
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Governance
Governance at a glance
Board
Committees
Board changes 2023
– January: Claudia Suessmuth Dyckerhoff was appointed as
an Independent Non-executive Director.
– February: Anil Wadhwani succeeded Mark FitzPatrick as an
Executive Director and Chief Executive Officer.
– May: Philip Remnant and Tom Watjen retired from the
Board following the conclusion of the 2023 Annual General
Meeting (AGM). Jeremy Anderson succeeded Philip
Remnant as Senior Independent Director (SID).
Committee and Working Group membership
changes 2023
– Responsibility & Sustainability Working Group: In January,
Claudia Suessmuth Dyckerhoff joined the Responsibility &
Sustainability Working Group (RSWG) and in March, Jeremy
Anderson stepped down from the RSWG.
– Risk Committee: In January, Claudia Suessmuth Dyckerhoff
joined the Risk Committee.
– Remuneration Committee: In May, George Sartorel joined the
Remuneration Committee.
Board changes 2024
– On 1 April 2024: Mark Saunders will join the Board as an
Independent Non-executive Director. He will also join the
Audit and Risk Committees.
– On 23 May 2024: David Law will retire as a Non-executive
Director, with effect from the conclusion of the AGM.
Committee membership changes 2024
– Audit Committee: On 20 March 2024, Jeanette Wong will
succeed David Law as Chair of the Audit Committee.
– Remuneration Committee: On 23 May 2024, Shriti Vadera
will join the Remuneration Committee, with effect from the
conclusion of the AGM.
Group Executive Committee changes 2023
April: Catherine Chia succeeded Jolene Chen as a member of the Group Executive Committee and Chief Human Resources Officer
(CHRO).
May: Ben Bulmer succeeded James Turner as member of the Group Executive Committee and Chief Financial Officer.
September: Bill Maldonado succeeded Seck Wai-Kwong as member of the Group Executive Committee and CEO of Eastspring
Investments Group.
Governance highlights
Ne Leadership
– Onboarded new CEO with a clear focus on execution,
setting the tone for the organisation.
Succession planning
– Equipped the Board with the skills needed to oversee
execution of our refreshed strategy.
– Strengthened the management team with new
– Oversaw the development of a new approach to succession
appointments and built strong relationships between the
Board and management.
Refreshed strategic ambition, purpose and values
– Led by the CEO, the Board refreshed the Group's strategy,
and agreed implementation plans and metrics to monitor
progress. See page 93
– Approved refreshed Prudential purpose and values, co-
created with our employees. See page 88
planning and talent development across the Group.
Board evaluation
– Good progress on addressing actions identified in 2022.
– Positive feedback from external evaluation and actions
identified to further enhance how we operate as a Board. See
page 173.
Financial reporting
– Oversaw the implementation of the new financial reporting
standard IFRS 17.
– Oversaw smooth transition to new auditor.
152
Prudential plc Annual Report 2023
Board governance structure
Shareholders
Board of Directors
The Board establishes the purpose, values and strategy of the Group and promotes
its long-term success for the benefit of our members and stakeholders
Audit
Committee
Assists the Board in
meeting its Group
financial reporting
responsibilities, including
overseeing the
effectiveness of the
internal control and risk
management system and
the effectiveness and
objectivity of the internal
and external auditors.
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. Has
oversight of matters
relating to the impact of
climate change and
responsible investment.
Remuneration
Committee
Assists with the
implementation and
operation of the
Remuneration Policy,
including the
remuneration of the
Chair and the CEO, and
oversees the
remuneration
arrangements of other
staff within scope,
including approving
remuneration for
members of the Group
Executive Committee.
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.
Responsibility &
Sustainability
Working Group
Helps the Board embed
the Group’s Sustainability
framework and has
oversight of people
initiatives and
communities, customers
and digital.
See page183
See page 190
See page 200
See page 178
See page 105
Chief Executive Officer
Responsible for the day-to-day management of the business
Group Executive Committee
The Group Executive Committee (GEC) is our leadership team and is responsible for executing the strategy approved by the Board and
supporting the CEO
Company Secretary
The Company Secretary advises 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.
Chief Financial Officer
The Chief Financial Officer (CFO) is
responsible for managing the Finance
function, including all aspects of financial
reporting and planning, and investor
engagement.
The CFO 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). The appointment and removal
of the CFO is decided by the Board and
their remuneration is determined by the
Remuneration Committee.
Chief Risk and
Compliance Officer
The Chief Risk and Compliance Officer
(CRCO) is responsible for the risk
management and compliance activities of
the Group.
The CRCO 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). The appointment and removal
of the CRCO is decided by the Board and
their remuneration is determined by the
Remuneration Committee.
Financial review – Pages 34 – 46
Risk review – Pages 56– 73
Directors’ remuneration report Pages
200 – 225
Directors’ remuneration report
Pages 200 – 225
Prudential plc Annual Report 2023
153
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Diversity
The following tables set out the information Prudential is required to disclose under UK LR 9.8.6R(10) and the information is provided
as of 31 December 2023.
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, SID
and Chair)2
Number in
executive
management3
Percentage of
executive
management
6
5
–
4
–
7
–
–
–
55%
45%
–
36%
–
64%
–
–
–
2
1
–
1
–
2
–
–
–
6
2
–
3
–
5
–
–
–
75%
25%
–
37%
–
63%
–
–
–
Notes
(1) The information in this table was sourced directly from individuals concerned. Members of the Board and Executive Management were provided with the prescribed
disclosure categories and asked to complete them based on their self-identification.
(2) The CFO is not a Board position but serves as a member of the Group Executive Committee.
(3) For the purposes of this disclosure ‘executive management’ means the Group Executive Committee.
> More details on the Group’s diversity and inclusion (D&I) activities can be found in the Sustainability section of the Annual Report, on pages
114 to 116
Gender
Board
GEC
Ethnic diversity
Board
GEC
Male
Female
6
5
Male
Female
Board composition at a glance
Composition
Executive Director
Non-Executive Directors
Non-executive Director tenure
0-2 years
2-4 years
4-6 years
6-9 years
Age
55-59
60-64
65+
154
Prudential plc Annual Report 2023
6
2
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
4
0
7
White British or other White
(including minority-white
groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
3
0
5
Non-executive Directors' skills matrix
Geographical experience
Technical skills and experience
110252124598513637753Pan-AsiaChinaIndiaAfricaInsuranceOther financial servicesHealthTech/DigitalOperationalFinancial assuranceRegulatory/public policy
Our leadership
Board of Directors
The Board establishes the purpose, values and strategy of the Group and promotes its long-term success for the benefit of
our members and stakeholders. Our Board members bring a diverse range of skills and experience to support our strategy in
our chosen markets.
Shriti Vadera (Age: 61)
Chair of the Board and Chair of the Nomination & Governance
Committee
Anil Wadhwani (Age: 55)
Chief Executive Officer
Appointed to the Board: May 2020 (Chair since January 2021)
Appointed to the Board: February 2023
Membership of committees
– Nomination & Governance Committee (since May 2020,
appointed Chair January 2021)
– Shriti is a standing attendee of the Audit, Risk and Remuneration
Committees and the Responsibility & Sustainability Working Group.
She will join the Remuneration Committee from May 2024.
Career
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.
Relevant skills and experience for Prudential
– Senior boardroom experience and leadership skills at complex
organisations, including extensive experience in the financial
services sector, with international operations and at the highest
levels of international negotiations between governments and in
multinational organisations
– Wide-ranging and global experience in economics, public policy
and strategy, as well as deep understanding and insight into
global and emerging markets and the macro-political and
economic environment
Key appointments
– The Royal Shakespeare Company (Chair)
– Institute of International Finance (Board Member)
– World Bank Private Sector Investment Lab (Co-Chair)
Anil is a standing attendee of the Audit, Nomination & Governance,
Remuneration and Risk Committees and the Responsibility &
Sustainability Working Group.
Career
Prior to joining Prudential, Anil served as President and CEO of
Manulife Asia where 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. 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.
Relevant skills and experience for Prudential
– With more than 30 years of experience in markets around the
world, Anil is a global financial leader with significant expertise,
particularly in Asia
– Anil has a proven track record of successful digital transformation,
having led the modernisation of technology platforms across 13
markets in Asia in his role at Manulife
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Our leadership continued
Jeremy Anderson (Age: 65)
Senior Independent Director
Arijit Basu (Age: 63)
Independent Non-executive Director
Appointed to the Board: January 2020 (Senior Independent Director
since May 2023)
Membership of committees
– Risk Committee (since January 2020, Chair since May 2020)
– Audit Committee (since January 2020)
– Nomination & Governance Committee (since November 2022).
Career
Jeremy was formerly the Chair 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
at 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.
Relevant skills and experience for Prudential
– Substantial leadership experience in financial services in the UK,
Asia and the US
– More than 30 years of experience advising international
companies on audit and risk management
Listed company directorships
– UBS Group AG, including its subsidiary, UBS AG (Senior
Independent Director and audit committee Chair)
Other key appointments
– Credit Suisse AG and Credit Suisse International (Non-executive
Director)
– The Kingham Hill Trust (Trustee)
– The Productivity Group (Non-executive Director)
Appointed to the Board: September 2022
Membership of committees
– Audit Committee (since September 2022)
– Responsibility & Sustainability Working Group (since September
2022).
Career
Arijit retired as the Managing Director of State Bank of India (SBI) in
September 2020 concluding a 40-year career, 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 worked 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.
Relevant skills and experience for Prudential
– Extensive experience in India's banking and insurance industries
spanning nearly 40 years
– Held high-profile leadership roles and gained broad operational
experience from various senior positions within SBI
Key appointments
– HDB Financial Services Ltd (Chair)
– Academic Council of the Reserve Bank of India (Chair)
– Peerless Hospitex Hospital and Research Center Ltd (Non-
executive Director)
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Chua Sock Koong (Age: 66)
Independent Non-executive Director
David Law ACA (Age: 63)
Independent Non-executive Director
Appointed to the Board: May 2021
Appointed to the Board: September 2015
Membership of committees
– Remuneration Committee (since May 2021, Chair since May
David is due to retire from the Board at the conclusion of the AGM
on 23 May 2024.
2022)
– Nomination & Governance Committee (since May 2022)
– Sock Koong served on the Audit Committee from May 2021 until
May 2022.
Career
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. From
April 2018 until March 2024, Sock Koong was a Non-executive
Director of Cap Vista Pte Ltd and from March 2018 until March
2024, she was a Non-executive Director of the Defence Science and
Technology Agency.
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.
Relevant skills and experience for Prudential
– More than 30 years’ experience working in business leadership
and operations with significant experience in the Asia market.
– Significant boardroom experience, having served in several C-suite
roles throughout her career.
Listed company directorships
– Bharti Airtel Limited (Non-executive Director)
– Royal Philips NV (Non-executive Director)
– Ayala Corporation (Non-executive Director)
Other key appointments
– The Singapore Public Service Commission (Deputy Chair)
– The Singapore Council of Presidential Advisers (Member)
– Singapore Securities Industry Council (Member)
Membership of committees
– Audit Committee (since September 2015, Chair since May 2017)
– Risk Committee (since May 2017)
– Remuneration Committee (since February 2021)
– David served on the Nomination & Governance Committee from
May 2017 until February 2021.
Career
David is a Chartered Accountant and spent almost 33 years working
with Price Waterhouse and PricewaterhouseCoopers (PwC). During
that time he was, amongst other positions, the global leader of
PwC’s insurance practice, a partner in the UK firm, and 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 he retired
from PwC, David became a director and Chief Executive Officer of
L&F Holdings Limited and its subsidiaries, 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.
Relevant skills and experience for Prudential
– Extensive technical knowledge and skills in audit, accounting and
financial reporting matters.
– Experience across the Group’s key markets and particular
expertise in the insurance sector.
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EEV basis results
Additional information
Our leadership continued
Ming Lu (Age: 65)
Independent Non-executive Director
George Sartorel (Age: 66)
Independent Non-executive Director
Appointed to the Board: May 2021
Appointed to the Board: January 2022
Membership of committees
– Nomination & Governance Committee (since May 2021)
– Remuneration Committee (since May 2022)
– Ming served on the Risk Committee from May 2021 until May
2022.
Career
Ming is the Executive Chairman, Asia Pacific at KKR Asia Limited and
a partner of Kohlberg Kravis Roberts & Co. L.P. He also serves as a
member of the KKR Asian Private Equity Investment Committee and
the KKR Asian Portfolio Management Committee. Since 2018 he has
played an important role in KKR’s Asia growth and expansion. He has
served as a member of the Asia Infrastructure Investment Committee
and Asia Real Estate Investment Committee.
Ming previously worked for CITIC, China's largest direct investment
firm, 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 several countries throughout Asia. Ming has
also held directorships at Ma San Consumer Corporation, Unisteel
Technology International Limited, Weststar Aviation Service Sdn
Bhd and MMI Technologies Pte Ltd. He was a Non-executive
Director of Jones Lang LaSalle Inc from 2009 to 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.
Relevant skills and experience for Prudential
– More than 30 years of experience investing in and developing
businesses throughout the Asia Pacific region
– Brings deep knowledge and up-to-date insights on China and
other key markets
Key appointments
– KKR Asia Ltd (Executive Chair, Asia Pacific)
– Goodpack Pte Limited, a KKR portfolio company (Director)
Membership of committees
– Responsibility & Sustainability Working Group, (Chair since May
2022)
– Nomination & Governance Committee (since May 2022)
– Risk Committee (since May 2022)
– Remuneration Committee (since May 2023).
Career
From 2014 to 2019 George was the regional Chief Executive Officer
of Allianz’s Asia Pacific business, having previously held a range of
senior roles within the company, including Chief Executive of both
Allianz Italy and Allianz Turkey, Global Head of Change Programmes
for Allianz Group, and General Manager of Allianz Malaysia and
Allianz Australia and New Zealand. George also sat on the Financial
Advisory Panel of the Monetary Authority of Singapore from 2015
to 2019. George’s career began at Manufacturers Mutual Insurance
in Australia in 1973, before its acquisition by Allianz in 1998.
George holds a Master’s Degree in International Business Studies
from Heriot-Watt University.
Relevant skills and experience for Prudential
– Considerable operational expertise in the insurance industry
gained over a 40-year career, including experience of digital
transformation.
– A range of senior leadership roles, including as regional Chief
Executive Officer of Allianz AG’s Asia Pacific business and several
country-head positions prior to that.
Listed company directorships
– Insurance Australia Group Limited (Non-executive Director)
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Claudia Suessmuth Dyckerhoff (Age: 57)
Independent Non-executive Director
Jeanette Wong (Age: 64)
Independent Non-executive Director
Appointed to the Board: January 2023
Appointed to the Board: May 2021
Membership of committees
– Risk Committee (since January 2023)
– Responsibility & Sustainability Working Group (since January
2023).
Membership of committees
– Audit Committee (since May 2021)
– Risk Committee (since May 2021)
– Responsibility & Sustainability Working Group (since November
Career
Claudia joined the global consultancy firm McKinsey & Partners in
1995 and worked in several 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.
Claudia was also a Non-executive Director of Huma Therapeutics
Ltd, a global health technology company, from March 2021 until
October 2023.
Claudia holds a PhD in Business Administration from the University
of St. Gallen in Switzerland and a Master’s Degree in Business
Administration from CEMS/ESADE in Barcelona.
Relevant skills and experience for Prudential
– Considerable experience in the healthcare services and technology
sectors across China and the broader Asia-Pacific region. Her
board experience has helped her develop valuable insights around
the implementation of transformation through technology, digital
and data.
– Knowledge of Asian markets, particularly China, having been
based in Shanghai for nearly 15 years and Hong Kong for a
further two years.
Listed company directorships
– Ramsay Health Care Ltd (Non-executive Director)
– Clariant AG (Non-executive Director)
– Roche Holding AG (Non-executive Director)
Other key appointments
– QuEST Global Services Private Ltd (Non-executive Director)
2021)
– Jeanette Wong will succeed David Law as Audit Committee Chair
from 20 March 2024.
Career
From 2008 to 2019, Jeanette 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, she 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 is a member of the UBS Board, where she has served as a
member of the audit committee since 2019.
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.
Relevant skills and experience for Prudential
– Over 35 years of operational experience in financial services
– Extensive knowledge and experience of ASEAN markets as well as
significant boardroom experience gained from a number of non-
executive roles
Listed company directorships
– UBS Group AG, including its subsidiary, UBS AG (Non-executive
Director and audit committee member)
– Singapore Airlines Limited (Non-executive Director)
Other key appointments
– Council of CareShield Life (Chair)
– GIC Pte Ltd (Non-executive Director)
– PSA International Pte Ltd (Non-executive Director)
– Singapore Securities Industry Council (Member)
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EEV basis results
Additional information
Our leadership continued
Amy Yok Tak Yip (Age: 72)
Independent Non-executive Director
Tom Clarkson (Age: 48)
Company Secretary
Appointed to the Board: September 2019
Appointed as Company Secretary: August 2019
Relevant skills and experience
As the Company Secretary, Tom is a trusted adviser to the Board
and plays an important role in the governance and administration of
Prudential. Before 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 and is admitted to practise in England
and Wales. Before joining Prudential, he practised law at Herbert
Smith LLP, between 2002 and 2012, which included secondments to
Lloyds Banking Group and Royal Bank of Scotland.
Membership of committees
– Audit Committee (since March 2021)
– Amy served on the Remuneration Committee from September
2019 until March 2021.
Career
Amy was formerly a Non-executive Director of Deutsche Börse AG,
Temenos Group AG, Fidelity Funds, and 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 also head of its Wealth
Management Group and Chair of DBS Asset Management. From
1996 to 2006, Amy held various senior positions at the Hong Kong
Monetary Authority. 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.
Amy has a Master’s Degree in Business Administration from Harvard
Business School and a Bachelor’s Degree in Arts (History) from
Brown University.
Relevant skills and experience for Prudential
– Extensive skills and experience in asset management, banking,
insurance, and regulation following a career spanning more than
40-years.
– Substantial experience of China and South-east Asian markets
having occupied roles across these regions for much of her career.
Listed company directorships
– EFG International AG, including its subsidiary, EFG Bank AG (Non-
executive Director)
– TP ICAP Group plc (Non-executive Director)
Other key appointments
– AIG Insurance Hong Kong Limited (Non-executive Director)
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Group Executive Committee
The Group Executive Committee (GEC) supports the CEO in the day-to-day management of the business and
implementation of strategy. It is constituted and chaired by the CEO. For the purposes of the Hong Kong Listing Rules,
Senior Management is defined as the members of the GEC.
Solmaz Altin (Age: 50)
Managing Director, Strategic
Business Group
Ben Bulmer (Age: 49)
Chief Financial Officer
Catherine Chia (Age: 56)
Chief Human Resources
Officer
Avnish Kalra CA (Age: 56)
Chief Risk and Compliance
officer
Appointments: Appointed
Managing Director, Strategic
Business Group and member of
the Group Executive
Committee: July 2022
Relevant skills and
experience: Solmaz is
Managing Director of the
Strategic Business Group
covering India, Indonesia,
Malaysia, the Philippines, Laos,
Myanmar, Cambodia and
Africa.
He is also accountable for the
Group’s 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, with 25
years’ experience leading
business change and growth in
the financial services industry.
His most recent role before
joining Prudential was as
regional Chief Executive Officer
of Asia-Pacific at Allianz.
Solmaz holds a Diplom-
Ökonom, Banking and
Economics from the University
of Duisburg-Essen.
Appointments: Appointed Chief
Financial Officer and member of
the Group Executive Committee:
May 2023
Ben is a standing attendee of
the Board and of the Audit and
Risk Committees.
Relevant skills and
experience: Ben was
appointed Chief Financial
Officer of Prudential in May
2023. As CFO, he is responsible
for managing the Finance
function, including all aspects of
financial reporting and planning
such as performance
management including
planning and forecasting,
financial reporting, capital
management and investment
management as well as the
Group Actuarial function,
strategy, investor relations and
sustainability.
Ben joined Prudential in 1997
and has held various leadership
roles including CFO, Insurance
and Asset Management,
regional CFO of Prudential Asia,
CFO of Eastspring Investments,
the Group’s asset management
business, CFO of Prudential
Hong Kong’s Life and General
Insurance businesses and Chief
Accountant of Prudential Asia.
Ben is a Chartered Accountant
(The Chartered Institute of
Management Accountants) and
holds a Bachelor's degree from
The London School of
Economics.
Appointments: Appointed
Chief Human Resources Officer
and member of the Group
Executive Committee: April
2023
Relevant skills and
experience: In her role as Chief
Human Resources Officer,
Catherine leads Prudential’s
Group-wide people and culture
agenda, to build a high-
performance organisation
where great talent is engaged,
inspired and developed.
Catherine joined from StarHub,
Singapore, where she had been
Chief HR Officer since 2018,
driving workforce optimisation,
culture transformation, talent
development and employee
engagement. She also chaired
the company’s Covid-19 task
force. Before leading the HR
function at StarHub, Catherine
held global and regional senior
HR leadership roles in LEGO,
United Overseas Bank, Dell Inc.
in Singapore and Shanghai.
She holds a Bachelor’s Degree
with Honours in Social Sciences
from the National University of
Singapore. She served as a
Nominations Committee
member of Daughters of
Tomorrow (Singapore) and was
a board member of the
Singapore Breast Cancer
Foundation.
Appointments: Appointed
Chief Risk and Compliance
Officer and member of the
Group Executive Committee:
April 2022
Avnish is a standing attendee of
the Board and of the Risk and
Audit Committees.
Relevant skills and
experience: In his role as Chief
Risk and Compliance Officer,
Avnish is responsible for the
Group's risk management and
compliance activities.
Before he was appointed as
CRCO in April 2022, Avnish had
held the position of Chief Risk
Officer of Prudential
Corporation Asia since July
2018. He 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.
Before joining Prudential, Avnish
was the Asia Chief Risk Officer
for Aviva for six years. He also
worked at Bank of America for
14 years in various capital
markets trading and risk roles
across Asia.
Avnish is a Chartered
Accountant who worked with
PwC in India and Ernst & Young
in Dubai.
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Our leadership continued
Bill Maldonado (Age: 60)
CEO, Eastspring Investments
Group
Lilian Ng (Age: 58)
Managing Director, Strategic
Business Group
Dennis Tan (Age: 55)
Managing Director, Strategic
Business Group
Appointments: Appointed
Chief Executive Officer
Eastspring Investments Group
and member of the Group
Executive Committee:
September 2023
Relevant skills and
experience: Having served as
Chief Investment Officer of
Eastspring since May 2022, Bill
was appointed interim Chief
Executive Officer in April 2023,
an appointment which was
made permanent in September
2023.
As CEO of Eastspring
Investments, Bill is a member of
Eastspring’s Board of Directors,
chairs the Eastspring Executive
Management Committee and
has overall responsibility for the
management and strategic
development of the firm. As CIO
since May 2022, Bill spearheads
Eastspring’s investment
platform across equities, fixed
income, multi-asset,
quantitative and alternatives,
overseeing investment
strategies and products.
Bill has 30 years of asset
management experience and a
strong track record in leading
investment teams globally. Prior
to joining Eastspring as Head of
Equities in September 2021, Bill
served as the Asia Pacific Chief
Investment Officer and Global
Chief Investment Officer,
Equities at HSBC Global Asset
Management.
Bill holds an MBA from Cranfield
University, a Doctorate in Laser
Physics from Oxford University
and a Bachelor's Degree in
Physics from Sussex University,
UK and Uppsala University,
Sweden.
Appointments: Appointed
Managing Director, Strategic
Business Group and member of
the Group Executive
Committee: July 2022
Appointments: Appointed
Managing Director, Strategic
Business Group and member of
the Group Executive Committee:
July 2022
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 also the Chair of the
Board of Prudential Hong Kong
Limited and a Director at CITIC
Prudential Life Insurance
Company Limited. Lilian has
been part of the Prudential
family for over 25 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.
Relevant skills and
experience: Dennis has been
CEO of Prudential Singapore
since March 2020 and was
appointed Managing Director of
the Strategic Business Group
covering Singapore, Thailand and
Vietnam in July 2022. A veteran
banker, Dennis has 26 years of
experience in consumer banking
spanning product development,
segment management,
marketing and sales and
distribution.
Prior to joining Prudential, he was
with OCBC Bank for 10 years,
seven of which were spent as
Head of Consumer Financial
Services. Dennis 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. He is
President of the Life Insurance
Association’s Management
Committee and a council
member at IBF 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.
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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 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 both 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), 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
Corporate governance principles
The table below 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.
1. Board leadership and company purpose
A
B
C
D
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) is provided.
Purpose, values and strategy aligned with culture
The Board is satisfied Prudential’s purpose, values and strategy are
aligned with its culture. In 2023, the Board approved a strategy
refresh, and a new purpose and set of values.
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.
Engagement with stakeholders
Prudential and the Board actively engage with shareholders and
stakeholders throughout the year and consider their interests.
Prudential’s stakeholders in this context are its customers, investors,
employees, regulators, communities, governments and suppliers.
E Workforce policies and practices
Prudential has applied principle E and ensures that standards of
business conduct and workforce policies which support the long-
term and sustainable success of Prudential are maintained. In 2023,
the Board approved an updated Group Code of Conduct.
Employees are able to raise concerns under the Company’s Speak
Out process.
2. Division of responsibilities
F
G
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.
Division of responsibilities
The Board consists of a majority of independent Non-executive
Directors. There is a clear division of responsibility between the
Board and the executive management team.
Strategic report: Pages 2 to 149
Sustainability section: Pages 97 to 100
Section 172 Statement: Pages 88 to 96
Governance report: Page 170
Directors’ remuneration report: Pages 200 to 225
Governance report: Page 167
Risk management and internal control: Pages 176 to
177
Section 172 Statement: Pages 88 to 96
Sustainability section: Pages 103 to 104
Section 172 Statement
(for provision five): Pages 88 to 96
Sustainability section: Pages 97 to 148
Whistleblowing (Speak Out)
(for provision six): Page 188
Governance report : Page 166
Governance report: Page 153
Nomination & Governance Committee report: Pages
180 to 181
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Corporate Governance continued
2. Division of responsibilities continued
H
I
Non-executive Directors
After reviewing the performance of the Non-executive Directors,
the Board was satisfied that each Non-executive Director has sufficient
time to meet their Board responsibilities and recommended them for
election by shareholders at the AGM.
Effective and efficient processes
The 2023 Board evaluation tested and confirmed that the Board
has the necessary support and information to function effectively
and efficiently. The evaluation was conducted by an external
evaluator.
3. Composition, succession and evaluation
J
K
L
Appointments and succession planning
The Board applied Principle J and provisions 20 and 23 to
appointments and succession planning.
Skills, experience and knowledge
The Board and its Committees have a diverse combination of skills,
experience and knowledge.
Board evaluation, composition and diversity
The externally facilitated Board evaluation confirmed the
effectiveness of the Board and its individual members. The
Nomination & Governance Committee assesses Board (and
committee) composition and diversity throughout the year.
4. Audit, risk and internal control
M Integrity of financial statements
Prudential has formal and transparent policies and procedures that
ensure the independence and effectiveness of its 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.
O
Internal control and risk management
The Board has established an effective internal controls and risk
management framework, which is kept under regular review.
5. Remuneration
P
Q
R
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. Prudential’s new
purpose and values have been reflected in the remuneration
framework.
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.
Independent judgement and discretion
Directors exercise independent judgement and discretion when
authorising remuneration outcomes.
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Prudential plc Annual Report 2023
Nomination & Governance Committee report: Pages
181 to 182
Governance report: Pages 173 to 175
Nomination & Governance Committee Report: Pages
178 to 182
Directors’ biographies: Pages 155 to 160
Governance report: Pages 173 to 175
Nomination & Governance Committee report
(including provision 23): Pages 178 to 181
Audit Committee report : Pages 186 to 189
Governance report
(including provision 27, 30 and 31): Page 195
Audit Committee report
(including provision 26): Pages 183 to 189
Risk management and internal control: Pages 176 to
177
Risk review: Pages 56 to 71
Directors’ remuneration report: Pages 200 to 225
Directors’ remuneration report: Pages 200 to 207
The shareholder-approved Directors’ Remuneration
Policy sets out the limited circumstances in which the
Remuneration Committee may exercise discretion. This
policy is available to view on the Company’s website at
www.prudentialplc.com/investors/governance-and-
policies/policies-and-statements
How we operate
Board, Director and Committee responsibilities
Led by the Chair, the Board is responsible for the overall leadership of
the Group, which includes:
– Delivering long-term sustainable success for shareholders and
contributing to wider society;
– Approving the Group’s long-term strategic objectives, business plan
and budgets;
– Monitoring performance and implementation of strategy and
strategic objectives, capital allocation, and business plans;
– Establishing the Group’s purpose and values and ensuring that the
values and culture are aligned with the Group’s strategy;
– Fostering and overseeing the embedding of culture;
– Ensuring that an effective system of internal control and risk
management is in place and approving the Group’s overall risk
appetite and tolerance;
– Approving Prudential’s periodic financial reporting disclosures;
– Approving the appointment of Directors, including the Chief
Executive Officer, and the appointment of the Chief Financial
Officer and the Chief Risk and Compliance Officer, and ensuring an
effective system of talent development and succession planning
for senior leadership roles; and
– Ensuring effective engagement with stakeholders.
To help the Board carry out its functions, some of its responsibilities
are delegated to the Board’s principal Committees, which consist of
Non-executive Directors only. The Board’s principal Committees are
the Audit Committee, the Nomination & Governance Committee, the
Remuneration Committee and the Risk Committee. The Responsibility
& Sustainability Working Group (RSWG) assists the Board with the
Group’s Sustainability framework and is responsible for engagement
with the workforce. In 2024, the Board plans to establish a
Sustainability Committee to replace the RSWG.
The Board receives regular updates on the activities of its Committees
and the RSWG.
The Board’s responsibilities are outlined in the schedule of matters
reserved to the Board, which is available on our website at
www.prudentialplc.com/en/investors/governance-and-policies/board-
and-committees-governance.
The Board’s responsibilities are also subject to relevant laws and
regulations, and to Prudential’s Articles of Association, which can be
found at www.prudentialplc.com/en/investors/governance-and-
policies/memorandum-and-articles-of-association.
The roles of Chair and Chief Executive Officer are separate, with a
clear division of responsibilities between the Chair’s leadership of the
Board and the Chief Executive Officer’s responsibilities for the day-to-
day management of the Group. All other Board members are
independent Non-executive Directors who offer strategic guidance
and constructive challenge to management. At the date of this report,
the Board consists of 10 Non-executive Directors and one Executive
Director, who is the CEO. From 1 April 2024, the Board will consist of
11 Non-executive Directors and the CEO, following the appointment
of Mark Saunders. David Law will not stand for re-election at the AGM
in line with governance guidelines, given his nine-year tenure.
The Board’s size allows for effective decision-making and reflects a
broad range of views and perspectives. More information on the skills
and experience of individual Directors can be found in their
biographies on pages 155 to 160. More information on their
independence can be found on page 181.
The Chair, CEO and SID all have written terms of reference which are
approved by the Board and kept under regular review.
Board meetings
The Board is typically scheduled to meet at least six times a year and
at the end of each of those meetings the Non-executive Directors
meet without the Executive Director present. In 2023, the Board held
seven scheduled meetings and an additional four ad-hoc meetings.
In addition, the Board held a full-day strategy workshop in April and
went on a site visit to the Hong Kong business.
All scheduled meetings typically take place at our Head Office in
Hong Kong or at one of our businesses, providing opportunities for
Board members to engage directly with management and the wider
workforce. Additional meetings are scheduled as required and are
often held virtually, particularly if called at short notice.
Board and Committee papers are typically provided one week ahead
of a meeting and where a Director is unable to attend a meeting,
their views are canvassed in advance by the Chair if possible.
The Chief Financial Officer, the Chief Risk and Compliance Officer,
and the Company Secretary have a standing invitation to all Board
meetings (except for private meetings of the Non-executive
Directors).
Prudential plc Annual Report 2023
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Financial statements
EEV basis results
Additional information
How we operate continued
Roles, responsibilities and meeting attendance
Role and responsibilities
Chair
The Chair is responsible for the leadership of the Board in its role to
promote the long-term sustainable success of the Company and in
holding management to account. She shapes the culture in the
boardroom, is responsible for ensuring the Board’s effectiveness and
leads on Director-level succession. The Chair sets the Board’s agenda,
with a focus on strategy, performance and value creation, and ensures
effective communication with shareholders and other stakeholders.
Together with the CEO, she also represents the Group externally.
Read more in Chair’s Statement, pages 10-11
CEO
The CEO is accountable to, and reports to, the Board. He is responsible
for the day-to-day management of the Group, including developing and
recommending the Group’s long-term strategic objectives and business
plans to the Board. He is also responsible for executing the approved
strategy and business plans, and embedding the Group’s values and
culture. The CEO plays a key role in establishing the Group’s internal
controls framework.
Read more in Strategic report, pages 4-149
Non-executive Directors
Non-executive Directors offer constructive challenge to management
and hold them to account against agreed performance objectives.They
also provide strategic guidance, offer specialist advice and serve on at
least one of the Board’s Committees.
Senior Independent Director
The SID acts as a sounding board for the Chair and supports her in the
delivery of her objectives. The SID is also an intermediary for other
Directors and shareholders as needed and leads the annual
performance evaluation of the Chair.
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.
Audit Committee report – Page 183
Nomination & Governance Committee report – Page 178
Directors' remuneration report – Page 200
Risk Committee report – Page 190
Board meeting attendance
in 20231
Scheduled
Board meetings
7/7
Ad-hoc Board
meetings
4/4
AGM
attendance
2023
1/1
Board member
Shriti Vadera
Anil Wadhwani
7/7
4/4
1/1
Jeremy Anderson
Arijit Basu
Chua Sock Koong
David Law2
Ming Lu3
Philip Remnant4
(until May 2023)
George Sartorel
Claudia Suessmuth
Dyckerhoff2
Tom Watjen4
(until May 2023)
Jeanette Wong5
Amy Yip
Jeremy Anderson
7/7
7/7
7/7
7/7
7/7
4/4
7/7
7/7
2/4
6/7
7/7
4/4
4/4
4/4
3/4
1/4
2/2
4/4
3/4
2/2
4/4
4/4
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
David Law6 (Audit Committee)
Shriti Vadera (Nomination & Governance Committee)
Chua Sock Koong (Remuneration Committee)
Jeremy Anderson (Risk Committee)
(1) The Board held seven scheduled meetings, one of which took place over one and a half days, and four ad-hoc meetings.
(2) David Law and Claudia Suessmuth Dyckerhoff were unable to attend one ad-hoc Board meeting, arranged at short notice.
(3) Ming Lu was unable to attend three ad-hoc Board meetings, arranged at short notice. Please see further information on page 182
(4) Philip Remnant and Tom Watjen retired as Directors on 25 May 2023.
(5) Jeanette Wong was unable to attend one scheduled Board meeting.
(6) Jeanette Wong will succeed David Law as Audit Committee Chair from 20 March 2024.
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Prudential plc Annual Report 2023
Standing Committee
In addition to the principal Committees and the RSWG, the Board
operates a Standing Committee that meets to discuss any ad-hoc
urgent issues which cannot be delayed until the next scheduled Board
meeting. All Directors are members of the Standing Committee and
can attend meetings and receive all related documents. Before
making decisions, the Standing Committee must agree that the topics
for discussion do not require consideration by the whole Board. The
Standing Committee allows for agile decision-making when needed,
while ensuring that the Board receives all feedback and that all Directors
can contribute. In 2023, the Standing Committee met three times.
Delegation to management
While responsibility for the day-to-day management of the business
and implementation of strategy has been delegated to the CEO, the
CEO delegates certain responsibilities to senior executives through
management reporting lines (principally to other members of the GEC).
The members of the GEC, and short biographies of each individual,
can be found on pages 161 to 162.
The CFO and CRCO are part of the GEC, with the Board approving
their appointment and removal. Their performance reviews include
feedback from the Chairs of the Audit and Risk Committees respectively,
and their remuneration is determined by the Remuneration Committee.
The GEC meets every week and supports the CEO in the day-to-day
management of the business and the implementation of strategy.
Strategic Business Groups bring together our mature and growth
businesses within different markets to drive performance, operational
excellence and the sharing of best practice. The Managing Directors
of these groups are responsible for the operational results of the
businesses within their group and for the Group-wide delivery of
enabling functions. The Eastspring CEO is responsible for the growth of
Eastspring’s business and the delivery of its investment performance.
Business review meetings take place every quarter to review business
performance over the previous quarter and discuss the outlook and
plans for the upcoming quarter, led by the CEO. Each quarterly
meeting has different focus areas, for example results preparation in
the first quarter and the business plan in the fourth quarter of the
year. Participants include members of local executive committees,
members of the GEC and other key members from head office and
the Strategic Business Groups.
Subsidiary governance
Prudential is committed to high standards of governance across the
whole Group. The Group Governance Manual (GGM) outlines the
Group-wide approach to governance, risk management and internal
control, and helps embed it into the day-to-day operations of the
business. The principles that guide our business activities are set out in
the Group Code of Conduct (Code), which sits at the heart of the
GGM.
The Code is reviewed yearly by the RSWG and is approved by the
Board. The 2023 review brought the Code in line with Prudential’s
refreshed values, making the standards of business and personal
conduct more engaging and clearer for everyone. All employees
confirm every year that they have adhered to these standards. The
Code can be found on our website www.prudentialplc.com/investors/
governance-and-policies/code-of-business-conduct.
The GGM also outlines 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 training across the Group.
The Nomination & Governance Committee carries out regular reviews
of the Group’s governance framework, monitors significant governance
policies, including those of the Group’s Material Subsidiaries (as described
below), and makes recommendations to the Board when needed. The
Risk Committee approves the GGM’s Group Risk Framework, an
integral part of the GGM, while 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 an ongoing GGM policy
exemption and breach reporting process. This includes compliance
with our risk management framework, which is summarised on pages
176 to 177 of this report.
Reflecting the developing nature of the Group and the markets we
operate in, the GGM is reviewed regularly with any significant changes to
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.
Material subsidiaries
The Group’s Material Subsidiaries are made up of our insurance
subsidiaries in Hong Kong, Indonesia, Malaysia and Singapore and
the Eastspring holding company.
Subsidiary
Prudential Hong
Kong Limited
GEC member responsible
Lilian Ng, Managing Director of the
Strategic Business Group including Hong
Kong
PT Prudential Life
Assurance
(Indonesia)
Solmaz Altin, Managing Director of the
Strategic Business Group including
Indonesia and Malaysia
Prudential
Assurance Malaysia
Berhad
Solmaz Altin, Managing Director of the
Strategic Business Group including
Indonesia and Malaysia
Prudential
Assurance
Company
Singapore (Pte)
Limited
Eastspring
Investments Group
Pte. Ltd.
Dennis Tan, Managing Director of the
Strategic Business Group including
Singapore and CEO, Prudential Assurance
Company Singapore
Bill Maldonado, CEO, Eastspring
Investments Group
Prudential’s Material Subsidiaries and a number of other subsidiaries
have appointed independent non-executive directors to their boards
and have established audit and risk committees with standard terms
of reference. All audit and risk committees of the Material
Subsidiaries, as well as a number of those of other subsidiaries, are
chaired by an independent board member. To ensure consistent
communications, 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 provide
written updates to Group-level Committees and can refer issues to the
Group Committee Chairs or management if needed.
In 2023, the Chairs of the Group Audit and Risk Committees hosted
an online subsidiary governance forum, where they met with Non-
executive Directors from each of the Material Subsidiaries to discuss
areas of mutual importance, including the Group’s strategy,
performance, sustainability and key areas of focus in audit and risk.
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Additional information
How we operate continued
Regulators
Prudential Corporation Asia Limited is a designated insurance holding
company under the Hong Kong IA Insurance Ordinance and falls
within the scope of the Hong Kong IA’s Group-wide Supervision
(GWS) Framework. The GWS Framework includes requirements for
Hong Kong insurance groups to have appropriate corporate
governance arrangements in place, and to maintain appropriate
internal controls for the oversight of their business.
Individual regulated entities within the Group are also subject to entity-
level regulations in the jurisdictions in which they carry out business.
We are committed to holding constructive discussions with regulators
and our Chair, CEO and CRCO represent the Group in these interactions.
Directors’ inductions, training and development
The induction programme for new Non-executive Directors covers 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
CEO, the CFO, the CRCO and the Chairs of the Board’s Committees
and the RSWG (as appropriate). Additional meetings with members
of senior management at Group and local level can also be held to
develop the Director’s 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. New
Directors usually join the Audit or Risk Committee to develop their
knowledge of the business.
In addition to the induction of Claudia Suessmuth Dyckerhoff in 2023
(see page 169), the CEO received an in-depth induction programme,
led by the Company Secretary and overseen by the Chair, in relation
to his role and duties as Chief Executive Officer and Director.
Throughout the year, the Board and its Committees received regular
business updates and participated in deep-dive sessions that helped
to develop their knowledge of individual businesses, current and
emerging issues relevant to the Group and particular products and
business opportunities. This included in-depth sessions about the
Group’s operations in different markets. In 2023, these sessions were
focused on deep dives to support the Board’s consideration of the
Group’s refreshed strategy, including the drivers of value underpinning
the Group’s strategy, market analysis and trends, macroeconomic
trends, and each of the key pillars and enablers of the strategy.
The Board also received updates on a number of topics, including
macroeconomic and geopolitical risks, the continued transformation
of the Group into an Asia- and Africa-focused business and the
development of the Group’s purpose and values. The Board and the
Audit Committee received updates on the implementation of the new
financial reporting standard, IFRS 17, which became effective from 1
January 2023, including the impact on the Group’s financial reporting.
All Directors have the opportunity to discuss their individual
development needs as part of their Director evaluations and are
encouraged to ask for specific updates during the year. At the end
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 a yearly basis. All Directors have the right to obtain
professional advice at Prudential’s expense.
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 88 to 96.
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Prudential plc Annual Report 2023
Employee voice
Prudential’s programme for workforce engagement is led by the
RSWG and all Board members take part in engagement activities. An
overview of the workforce engagement activities during 2023 can be
found in the Section 172 statement on page 92.
Shareholder Communication Policy and engagement
We have 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 of American Depositary Shares on the
New York Stock Exchange. These listings are each subject to rules that
inform our Shareholder Communications Policy.
This policy provides that shareholders and the larger investment
community are provided with timely access to balanced and
understandable information about the Company, and its financial
performance, strategic goals, plans and material developments. This
helps all shareholders and prospective shareholders exercise their
rights in an informed manner.
Information released by the Company to these stock exchanges is also
posted on the Company’s website (www.prudentialplc.com). Prudential’s
corporate communications are available in English and Chinese.
To better understand shareholder views, the Chair holds an annual
engagement programme with major shareholders focusing on
governance and strategy. The Remuneration Committee Chair also
engages with major shareholders annually to hear their feedback on
remuneration decisions and policy proposals. Other Non-executive
Directors, in particular the SID and Committee Chairs, are available to
meet with major shareholders on request. Shareholders can share their
views on issues affecting the Company through various channels
throughout the year, including investor events. Retail shareholders can
access dedicated services through the Company’s Registrars, EQ in the
UK and Computershare in Hong Kong. More information can be found in
the 'Shareholder information' section on page 401 and on the
Company’s website, including contact details for the Group’s Secretariat.
The Board conducts an annual review of its Shareholder
Communications Policy. For the year ended 31 December 2023, the
Board concluded that the Shareholder Communications Policy
continues to be effective.
During 2023, almost 600 meetings were held with over 480
institutional investors in Asia, the US, Europe and the UK. The CEO or
another member of the GEC attended 192 of these meetings, which
took place as one-to-one sessions, group meetings, panels or in some
cases walking tours organised by brokers. You can find a summary of
the Board’s stakeholder engagement activities in the Section 172
statement on pages 88 to 96. These views and opinions are taken
into account by the Board when making strategic decisions.
The Group provided a strategy update alongside its 2023 Half Year
Report which was followed by an extensive programme of investor
interactions. The Group continues to host presentations in Hong
Kong, with open communications with shareholders and the research
community supported by live and online material. The Managing
Directors of the Group’s Strategic Business Groups also provide
regular updates. The Group remains focused on supporting an
increase in share trading liquidity on the Hong Kong line and has
maintained an enhanced programme of related marketing in the Asia
region, particularly on the Chinese Mainland and in Hong Kong,
targeting both retail and institutional investors.
The Group’s AGM in 2023 was a hybrid meeting with shareholders
attending in-person and online. The Group plans to continue to offer
both in-person and online communications to investors in the year ahead.
Induction of Claudia Suessmuth Dyckerhoff
In January 2023, Claudia Suessmuth Dyckerhoff joined the
Board as an Independent Non-executive Director and
member of the Risk Committee and the RSWG.
As part of her induction, Claudia visited the head offices in
London and Hong Kong, where she met with members of
the Board and Group Executive Committee as well as
functional leads. Additionally, Claudia visited the Singapore
and Indonesia businesses for meetings with local
management teams, receiving detailed briefings on each
business and experiencing directly how businesses support
their customers and distributors. Given her background in
healthcare, she met with the chief health officers in these
markets to better understand their health businesses.
Through her induction, Claudia gained insight into the
Group’s business, strategy, operations, risk profile and
culture. She also received briefings on her duties as a
Director under relevant UK and Hong Kong corporate
governance frameworks and the Group’s regulatory
environment. In addition, she participated in Board deep-
dive sessions and one-to-one meetings with senior
management which helped her gain an understanding of
the various Strategic Business Groups and the Eastspring
asset management business.
Specifically for her role, Claudia met with the Chairs of the
Risk Committee and RSWG. As a member of the Risk
Committee, Claudia met with the CRCO who provided an
overview of the Group’s risk profile, risk framework and key
risks, and had more detailed sessions with senior members
of the Risk team covering areas such as risk appetite limits
and triggers, capital regimes, conduct, and financial crime.
She also met with the Chief of Internal Audit who provided
an overview of Group-wide Internal Audit and its recent
activities, with the external auditor who shared their views
on Prudential’s financial reporting, and with the Chief of
Financial & Capital Reporting who provided a briefing on
the Group’s key performance indicators and balance sheet
and also provided training on IFRS 17.
To learn more about the RSWG and its activities, Claudia
met with the Director of ESG and received a briefing on the
Group’s ESG strategic framework. The Group HR Director
briefed Claudia on the Group’s culture framework and
workforce strategies and initiatives, including D&I and
employee wellbeing priorities.
These meetings were tailored to Claudia’s role at Prudential
and provided her with a detailed view of current issues and
emerging themes, as well as an understanding of the
interests of the Group’s key stakeholders.
Jeremy Anderson was chosen as the long-standing Non-
executive Director to support Claudia during her first year on
the Board. Following the conclusion of her formal induction
programme, Claudia provided the Company Secretary with
feedback on the programme.
My induction gave me an excellent
introduction to the business, my role
and our key stakeholder groups. It was
particularly valuable to meet with
many of our teams and hear first hand
from local teams what their significant
issues and areas of focus are. This has
given me a thorough understanding of
our Strategic Business Groups and
helped me contribute effectively to
Board and Committee discussions
immediately.
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Additional information
How we operate continued
Key areas of focus – how the Board spent its time in 2023
The refresh of the Group’s strategy was a key area of focus
for 2023. After the refresh was announced in August, the
Board was engaged throughout the year in certain key
milestones.
As part of the strategy update in 2023, the Board took the
opportunity to review the Group’s purpose and values
given the significant changes in the organisation and the
appointment of a new CEO. The Board was engaged
throughout the year in certain key milestones.
Strategy
Purpose and values
Preliminary assessment
Development of purpose and values
– The Board provided initial feedback on the suggested scope of the
– Culture was identified as one of the value drivers for the
strategic review (November 2022).
– Preliminary strategic assessment of current portfolio and
emerging themes discussed by the Board, ahead of the CEO’s
appointment in February 2023.
Discussion of emerging themes
– A Board off-site workshop was led by the CEO to share his
emerging thinking, for discussion and feedback from the Board.
Key value drivers were defined and a first outline of the new
strategic framework began to take shape (April 2023).
Group’s strategy. The CEO shared his thoughts on
organisational culture and the Board agreed a roadmap for
the development of the new purpose and values. (April
2023).
– The Board provided input into the development of the
purpose and values, which are shaping our culture. This
included individual interviews with Non-executive Directors
and members of the GEC in the discovery and evidence
generation phases.
– The RSWG discussed the proposed refresh of our purpose
and values (July 2023).
– The Board discussed the alignment of the refreshed purpose
and values to Prudential’s new strategy (July 2023).
– The Board attended externally facilitated market deep-dive
Approvals
sessions to provide Non-executive Directors with more in-depth
insight into market trends, opportunities and challenges, and
implications for Prudential, particularly in respect of adjacent
markets (June 2023).
– A Board workshop shared the strategic and value-creation
narrative and explored the key strategic pillars and Group-wide
enablers within the new strategic framework (June 2023).
– The Board approved the new purpose and values (July
2023).
– The Board approved the updated Code of Conduct, which
incorporates and supports our new values (October 2023).
– Consideration by the Remuneration Committee of how the
new values and desired behaviours are incorporated into
remuneration structures (December 2023).
Approvals
Implementation and ongoing oversight
– The Board approved the new strategy and market messaging,
– Our new purpose and values (The PruWay) were rolled out
including financial objectives (July 2023).
(from August 2023).
– The Board approved the new strategic and operating plan
– Updates were provided to the RSWG (October 2023 and
(December 2023).
Implementation and ongoing oversight
– Development of detailed success metrics for each pillar and
enabler (December 2023).
– Oversight of execution of strategy began in early 2024, with
regular updates to the Board against agreed success metrics.
February 2024) and the Board (December 2023) on roll-out
plan and communications.
– Assessment and monitoring of culture to measure how the
new values are being embedded into the organisation
commenced. Regular updates from initiatives such as
employee surveys will be provided to the RSWG and the
Board (from 2024).
A detailed schedule of key areas discussed by the Board during 2023 is set out overleaf.
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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;
– Deep dives into the strategic pillars and enablers underpinning
the Group’s refreshed strategy, including: customer, distribution,
health, wealth and technology;
– In addition there was a deep dive into the Group’s life business
in Singapore, and reviews of the Group’s joint ventures in China
and India, which included updates on business performance
and growth prospects and a review of the economic and
regulatory landscape; and
– Discussed macroeconomic and geopolitical trends affecting the
Group’s key markets, supported by an external economist.
Business plan and budget
– Approved updates to the 2023-2025 business plan to reflect the
opening of the Hong Kong-Mainland China border, and IFRS 17;
– Approved the 2024-2026 business plan;
– Approved the 2024 strategic priorities;
– Approved entry into a strategic partnership with Microsoft;
– Reviewed and approved a transformation project for the
Finance function across the Group;
– Approved the revised partnership agreement with Vietnam
International Bank; and
– Considered and approved any spend over $30 million.
Capital
– Oversaw an increase in the allocation of capital invested in
organic new business and investments in capabilities,
following the restructuring of the Group into an Asia- and
Africa-focused growth business;
– Reviewed the Group’s sources and uses of capital as part of
the business planning process; and
– Approved a capital injection into CITIC-Prudential Life
Insurance Company Limited.
Performance, business and operations
Reports from CEO, CFO and CRCO
– Received regular reports from the CEO, CFO and CRCO
– Received reports from regional business heads.
Financial results
– Reviewed and approved the half-year and full-year results and
the US Form 20F, including overseeing the adoption of IFRS 17;
discussed its impact on operating profit and received updates
from the Audit Committee on the production of the opening
balance sheet;
– Considered fair, balanced and understandable requirements in
the half- and full-year financial reports, after a review by the
Audit Committee;
– Reviewed and approved the Going Concern and Viability
Statements that appeared in the 2022 Annual Report;
– Approved the 2022 second interim dividend and first interim
dividend for 2023;
– Reviewed and approved updates to the Dividend Policy; and
– Approved quarterly performance updates for Q1 and Q3.
Customers
– Customers are considered as a core part of all discussions on
business performance and operations;
– Discussed customer proposition, products and customer
service as part of deep dives and regular business updates;
– Discussed the evolution of Prudential’s digital strategy and
key areas of focus; and
– Considered the impact of macroeconomic trends on
customers and discussed initiatives to mitigate the impact of
them.
Governance, approvals and Board succession
Approvals
– A number of routine and administrative proposals put to the
Board for approval;
– Reviewed the Terms of Reference for the Board, its Committees,
senior Board roles and other standing delegations; and
– Approved key matters requiring Board approval under internal
policies and noted key matters approved by management.
Board Committees
– Received reports from the Chairs of the Audit, Nomination &
Governance, Remuneration and Risk Committees, and the
RSWG;
– Considered updates to the Group risk appetite; and
– Approved the Own Risk and Solvency Assessment for submission
to the Hong Kong Insurance Authority.
Shareholder meetings
– Approved key items for, and attended, the AGM.
Board evaluation and succession planning
– Oversaw the process to appoint a new CFO;
– Approved other Board appointments and Committee
changes on the recommendation of the Nomination &
Governance Committee;
– Discussed the Non-executive Directors’ skills matrix and
identified key areas of focus for future Non-executive
Director succession planning;
– Received the findings of the 2022 internal Board evaluation,
discussed and agreed the action plan and monitored
progress; and
– Considered succession planning for the CEO and GEC roles,
including a revised framework and approach to talent
development and succession planning, which was discussed
further by the RSWG and the Nomination & Governance
Committee.
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Additional information
How we operate continued
Stakeholders
Investors
– Received regular reports from the Chief of Investor Relations
on shareholder-related matters. Also received feedback from
the Chair on her annual shareholder engagement programme
and the additional meetings she offered in connection with
the CEO succession process;
– Regularly informed of feedback and key topics of interest
from management’s ongoing shareholder engagement
activities;
– Kept appraised of investor and UK and Hong Kong
governance themes; and
– Discussed development of the investor base and increasing
liquidity in Hong Kong.
Workforce
– Received updates from the RSWG and directly from the CHRO
on various people, culture and talent initiatives including the
2023 people and culture priorities and key priorities for 2024;
– Attended the employee Collaboration Jam and discussed
feedback from employee engagement activities;
– Reviewed and approved the Group’s refreshed purpose and
values statements and satisfied itself that these and the
Group’s desired culture are aligned;
– Approved refreshed Group Code of Conduct; and
– Oversaw the start of the roll-out and embedding of values and
Group Code of Conduct.
Regulators
– Received regular reports on the Group’s engagement with its
key regulators;
– Received detailed briefing from the Hong Kong Insurance
Authority (Hong Kong IA) on key observations and themes
from the Regulatory College Letter, expectations of the Group
and an overview of the GWS framework; and
– Received reports from the Head of Group Government
Relations on key government and political developments,
regulatory policy updates and steps taken to develop and
strengthen government relation capabilities in priority
markets.
Government and wider society
– Received regular reports on ESG policy developments;
– Approved the Climate Transition Plan for publication
alongside the 2022 ESG Report; and
– Approved new commitment to a 55 per cent reduction in our
weighted average carbon intensity by 2030 in line with our
commitment to net zero by 2050.
Case study: Board visit to Prudential Hong Kong Limited
In April, the Board visited Prudential Hong Kong Limited (PHKL),
one of our Material Subsidiaries. This was an opportunity for the
Board to speak with colleagues and agents and to find out how
the business had responded to the reopening of the border
between Hong Kong and the Chinese Mainland. It was also an
opportunity to discuss PHKL’s plans to further enhance its
customer propositions and servicing and the support it provides
to its agency force.
As well as presentations on the business, the visit involved
interactions with PHKL’s employees, agents and strategic
partners including:
– Meeting with agency leaders to celebrate successes and share
views on market opportunities and how Prudential enables
them to succeed;
– Seeing examples of the innovative ways in which Prudential
and its strategic partners are developing and using technology
to better serve customers and support agents; and
– Spending time with the local management team as well as
with top talent, in order for the Board to hear directly from
potential future leaders.
To celebrate the Group’s 175-year anniversary, the Board hosted
a dinner with local and regional management, agency leaders
and key partners.
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Board effectiveness
The Board carries out formal and rigorous evaluations of its
performance and that of its committees and individual Directors.
These evaluations are overseen by the Nomination & Governance
Committee and are carried out each year. In line with governance
guidelines, this year’s assessment was carried out by an external
evaluator.
Year 1
Internal Board
Evaluation
questionnaire-based review,
led by the Chair and supported
by the Company Secretary
Year 3
External Board
Evaluation
interview-based review,
facilitated externally
Year 2
Internal Board
Evaluation
questionnaire-based
approach, largely similar to
year 1 to allow comparison,
with additional topical
questions
External evaluation process for 2023/24
Scoping
– The Nomination & Governance Committee discussed
potential external evaluators and approved Ffion
Hague of Independent Board Evaluation as the
evaluator for 2023.
– The Chair and Company Secretary briefed Ffion
Hague on the operation of the Board and its
Committees and areas of enhancement from recent
internal evaluations.
– Ffion Hague drafted questions for the 2023 review.
Interviews
– The evaluation included seeking feedback, via face to
face interviews, from each Director, the Company
Secretary, senior management and other non-Board
contributors such as the auditor.
Observation
– Ffion Hague observed meetings of the Board, each of
the principal Board Committees, as well as the RSWG.
Feedback
– Ffion Hague provided feedback on the effectiveness
of the Board as a whole, each of its principal
Committees, and the RSWG.
– Ffion Hague provided feedback to the Chair on
Directors’ individual performance and to the SID on
the performance of the Chair.
– The Board and each Committee discussed the results
of the evaluation and steps to address the
recommendations.
– The Chair provided feedback to Directors in one-to-
one discussions on their individual performance and
the SID provided feedback to the Chair on her
performance.
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How we operate continued
2023 review and actions for 2024
The performance evaluation of the Board and its Committees for
2023 was conducted externally by Ffion Hague of Independent
Board Evaluation (IBE). The external nature of the review met the
provisions of the UK Corporate Governance Code, which provides that
external evaluations should happen at least every three years.
The Nomination & Governance Committee is responsible for
overseeing the process by which the Board, its Committees and
individual Directors’ effectiveness is assessed. The Committee
decided to appoint IBE, who had undertaken the last externally-
facilitated review in late 2020. The 2020 review had focussed on
forward-looking observations to support the Chair as she took over
the role in January 2021. The Committee considered IBE to be best
placed to reflect on the progress made by the Board since that time,
understanding the nature of the transformation that the Group and
the Board had been through since then.
IBE does not have any other connections with the Company or any of
the Directors and there were no concerns about their ability to
exercise independent and objective judgement.
The evaluation included seeking feedback, via face to face interviews,
from each Director, the Company Secretary, senior management and
other non-Board contributors. Ffion Hague attended and observed
meetings of the Board, its Committees and the RSWG. The Company
Secretary was responsible for providing IBE with access to relevant
meeting materials and any other support requested. The Senior
Independent Director was identified as the escalation point for the
review, if needed.
All Board members were interviewed according to a set agenda,
tailored for the Board, which covered all main functions of the Board
and aspects of its effectiveness including Board performance and
focus, Board composition, Board culture, the Board’s relationship with
management, succession planning, induction and training, and the
support provided to Board members.
Draft conclusions were discussed with the Chair and the Chairs of the
Committees and RSWG before being presented to the Board in early
March 2024. The Board discussed the review’s observations and
recommendations and exchanged thoughts on actions to respond to
them.
IBE’s report highlighted the positive and collaborative atmosphere
around the Board table, the open culture of transparency between
the Board and the management team, the Board’s strong
relationship with the Chief Executive Officer and senior management
team, the strength of its risk oversight and that there was a diverse
and relevant mix of skills around the table. The Report noted the
relative newness of many Board members and the management
team, which meant that the Board was still in its forming stage.
Whilst the early signs were very positive, the Report made a number
of suggestions to help the Board accelerate the learning curve in order
to get it operating at its full potential as soon as possible.
– Induction and education – effective induction programmes for new
Directors and increased travel by the Board/Committees in order to
spend more time getting to know the business and each other, and
setting expectations for the amount of time needed to do this.
– Relationship with senior management – structured approaches to
increasing informal interaction between Non-executive Directors
and senior management, and for formalising employee
engagement activity.
– Defining the model: both in terms of Board/Committee
responsibilities and central/local functions, to help new Board
members and to create more space at Board meetings for more
strategic thinking.
Through the evaluation and subsequent discussion, the Board
identified areas of particular focus and related actions:
Theme
Induction and education
Summary of actions
– Enhance Non-executive Director induction processes
– Board scheduling to maximise opportunities for Board travel to markets together post Covid
Relationship with senior management
– Develop a more structured approach to the development of relationships between the Board
and the GEC talent pipeline
Operation of the Board
Group governance
– Continue focus on streamlining Board papers and honing key messages
– Review articulation of Group model and interaction between Group and subsidiary boards
and committees
– Formalise the Responsibility & Sustainability Working Group as a Sustainability Committee
with responsibilities to include leading on workforce engagement
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Actions during 2023 arising from the 2022 review
Theme
Board dynamics
Summary of actions
– 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 recent
return of in-person meetings.
Meeting
management and
support
– Drive greater consistency across all management
papers/presentations 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; and
– Review suite of non-financial KPIs.
Succession planning
and talent
development
– Following senior leadership changes in 2022,
the Nomination & Governance Committee to
oversee the refresh of CEO succession and
development, and the GEC succession
development plans by the CEO; and
– Continuing to oversee, through the RSWG, the
development of a systematic approach to
talent development across the Group.
Progress in 2023
– Created more opportunities for Board members to spend
time with each other and with management outside Board
meetings.
– Continued use of private meetings (with and without the
Executive Director present) to foster open discussion and
ensure alignment of expectations between the Board and
senior management, and ensure that relationships are
constructive.
– Good progress noted, with paper quality rated highly, but
there remains room for continued improvement and greater
consistency. Group Secretariat issued updated paper
preparation guidance, embedded through internal training
and feedback loop;
– A broader group of presenters has been introduced to the
Board. In addition, Board members had increased
opportunities to meet with future leaders both at a Group
and local level, including through the Board visit to Prudential
Hong Kong Limited, and individual Director visits to other
markets; and
– The refresh of the Group’s strategy in 2023 included the
development of a suite of financial and non-financial metrics,
and a dashboard to support monitoring of strategy execution
was approved.
– The approach to talent management is a key enabler of
Prudential’s strategy and Board members were engaged
throughout 2023 on this area;
– A revised framework for talent development and succession
planning was discussed at a joint meeting of the RSWG and
the Nomination & Governance Committee, and then the
Board;
– Given the importance of the topic, succession planning for
GEC roles including the CEO was discussed with the Board
as a whole; and
– The Board provided feedback on the methodology and
further discussions at Board level are scheduled for 2024.
Director evaluation
As part of the external Board evaluation, Ffion Hague provided
feedback to the Chair on the performance of the Non-executive
Directors and of the CEO, in his role as a member of the Board. The
Chair discussed the individual feedback with the CEO and each Non-
executive Director. Ffion Hague also provided feedback on the Chair’s
evaluation to the SID who discussed this with the Non-executive
Directors in a private meeting and then with the Chair. The outcome
of these evaluations inform the Nomination & Governance
Committee’s recommendation for Directors to be put forward for re-
election by shareholders.
The performance of the CEO, in his executive capacity, is subject to
regular review. As part of the yearly performance evaluation of all
employees, the Chair assessed the performance of the CEO in
consultation with the Non-executive Board, while the CEO appraised
the performance of all other members of the GEC. The Chair of the
Risk Committee provided feedback to the CEO on the performance of
the CRCO and the Chair of the Audit Committee provided feedback
to the CEO on the performance of the CFO. GEC members’
performance, including that of the CEO, is also reviewed by the
Remuneration Committee as part of its decision-making.
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Additional information
How we operate continued
Risk management and internal control
The Board is responsible for making sure 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
clearly delegated authorities that provide Board oversight and control
of important decisions. The framework is underpinned by the Group
Code of Conduct, which sets out the ethical standards of the Board,
employees, agents, suppliers and others working on behalf of the
Group. It is supported by a set of Group-wide principles and values
that outline the way the Group expects business to be carried out
while striving to achieve its strategic objectives. This framework is
designed to monitor and manage, rather than eliminate, the risk of
not meeting these objectives, while taking into account the interests
of our different stakeholders.
As a provider of financial services, the Group recognises the interests
of a broad spectrum of stakeholders and that managed acceptance
of risk lies at the heart of the business. As a result, effective risk
management represents a key source of competitive advantage for
the Group. Through selective exposure to risk, we seek to generate
customer and shareholder value, where these are an outcome of
chosen business activities and strategy. These risks will be reduced
when 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 plans aim to maintain our 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 Group Governance Manual (GGM) sets out the general principles
by which we conduct our business and defines our Group-wide
approach to governance, risk management and internal control. More
information on the GGM can be found on page 167.
Group-wide policies, internal controls and processes, based on the
GGM, are in place across the Group and include controls around the
preparation of financial reporting. The operation of these controls
and processes supports the preparation of reliable financial reporting
and of local and consolidated financial statements that adhere to
applicable accounting standards, and the requirements of the
Sarbanes-Oxley Act. These controls include certifications by the CEO
and CFO of each business on the accuracy of information provided
for use in the Group’s consolidated financial reporting, and the
assurance work carried out as required by 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 by the assurance work
carried out by Group-wide Internal Audit (GwIA) and the Group’s
Material Subsidiary audit committees, 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 can be found on pages 183 to 189.
Risk management
A key part of the GGM is the Group Risk Framework, which requires all
businesses to have established processes for i) identifying; ii)
measuring and assessing; iii) managing and controlling; and iv)
monitoring and reporting the risks facing the business.
The Board determines the nature and extent of the principal risks it
is willing to take to achieve its strategic objectives while taking into
account the interests of our 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. The Risk Committee also oversees and advises
on the current and potential future risk exposures of the Group;
reviews and approves the Group’s risk management framework,
including changes to risk limits within the Board-approved risk
appetite; and monitors the effectiveness of the framework
and adherence to the various risk policies. Its regular activities can be
found on pages 190 to 194.
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 once a year. Before the Board reaches
a conclusion on the effectiveness of the system in place, the report
is considered by the Disclosure Committee and the Audit Committee,
with risk-specific disclosures in the report also reviewed by the
Risk Committee. This evaluation takes place before the publication
of the Annual Report.
As part of the assessment, businesses carrying out the annual risk and
control evaluation must produce a business controls report that
includes the outcome of their risk and control assessment, including
any relevant issues identified and reported by other Group oversight
functions, findings from reviews undertaken by GwIA, which carries
out risk-based audits across the Group, and any material issues arising
from any external regulatory engagements. Any breaches or
exemptions raised under Group policies and their implications for the
functioning of internal controls are also considered. The Group
Governance function, under the direction of the CRCO, supports the
carrying out of this evaluation process.
The Group’s effectiveness assessment follows the UK Financial
Reporting Council (FRC) guidance on risk management, internal
control and related financial and business reporting. In line with this
guidance, the evaluation does not apply to material joint ventures
and associates where the Group does not exercise full management
control. In these cases, the Group ensures that suitable governance
and risk management arrangements are in place to protect the
Group’s interests. Moreover, the relevant Group company which is
part of the joint venture or associate must also comply with
the requirements of the Group’s internal governance framework.
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Effectiveness of controls
As outlined by 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 2023. 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,
Financial Reporting and Sustainability functions. The review identified
areas for improvement, particularly in respect of the general IT
control environment, 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 make
sure enough resources and focus are in place to resolve them within a
reasonable time frame.
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 violations of risk
management policies, mandates or instructions;
– Identifies and promptly escalates significant emerging risk
issues;
– Establishes and maintains appropriate and effective structures,
processes and controls for the management and mitigation of
risk and issues/incidents on a day-to-day basis;
– Manages the business to ensure full compliance with the Group
risk management framework as set out in the GGM; and
– Ensures adherence to all relevant regulations.
Second line (risk control and oversight)
– Assists the Board to formulate the risk appetite and limit
framework, risk management plans, risk policies, risk
identification, measurement, assessment and risk reporting
processes; and
– Reviews and assesses the risk-taking activities of the first line,
and where appropriate challenges the actions being taken to
manage and control risks and approves changes to controls.
Third line (independent assurance)
– Provides independent assurance on the design, effectiveness
and implementation of the overall system of internal controls,
including governance structures and processes, risk
management and compliance.
Each business must 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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Additional information
Nomination &
Governance
Committee report
Dear shareholder
Following the intense activity in 2022, with the process that led to the
appointment of Anil as our new CEO, the Committee’s key areas of
focus in 2023 were succession planning for the Audit Committee and
overseeing the development of updated succession plans for senior
leadership roles.
As I set out in my Chair’s statement, we put in place a succession plan
for David Law’s upcoming retirement from the Board. Jeanette Wong,
a well-established member of the Audit Committee, will transition to
chair it and we recruited Mark Saunders to reinforce our insurance-
specific financial assurance skills.
The Committee remains
focused on ensuring the
Board has the right
skills and experience to
oversee the Group and
provide support and
challenge to management
as they execute the
refreshed strategy.
The Committee remains focused on ensuring the Board has the right
skills and experience to oversee the Group and provide support and
challenge to management as they execute the refreshed strategy. To
do so, we continue to prioritise candidates with deep Asian operating
experience and strong digital understanding, alongside ensuring a
balance of specific market and sectoral experience.
Committee’s purpose
The purpose of this Committee is to help the Board retain an
appropriate balance of skills to support the strategic objectives
of the Group, develop a formal, rigorous and transparent
approach to the appointment of Directors, and maintain
effective succession planning. It also supports and advises 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 https://
www.prudentialplc.com/investors/governance-and-policies/
board-and-committees-governance
Membership and 2023 meeting attendance
Committee members
Shriti Vadera
Member since
May 2020
(Chair since January
2021)
2023 meetings1
4/4
Jeremy Anderson
November 2022
Chua Sock Koong
Ming Lu2
Philip Remnant3
George Sartorel
May 2022
May 2021
January 2013
May 2022
4/4
4/4
3/4
1/2
4/4
Regular attendees
– CEO
– CHRO
– Company Secretary
(1) The Committee held one scheduled joint meeting with the Responsibility &
Sustainability Working Group.
(2) Ming Lu was unable to attend one scheduled meeting which was re-
scheduled at relatively short notice.
(3) Philip Remnant retired from the Board on 25 May 2023.
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Committee highlights 2023
– Ensuring that the Board and its committees continue to have
the right skills and experience, particularly in light of the
impending retirement of the Chair of the Audit Committee,
David Law;
– Overseeing succession planning for GEC roles and, with the
RSWG, overseeing the Group’s methodology for succession
planning below GEC level and talent development to support
operationalisation of the Board’s strategy; and
– Reviewing and confirming the appropriateness of Material
Subsidiary and other subsidiary governance arrangements.
The external Board effectiveness evaluation gave us a valuable
opportunity to reflect upon the changes the Board has been through
since I took over as Chair in 2021, and how the Board is working,
together, and how it is working with the management team. I was
delighted to get Ffion Hague’s positive feedback on this and the
validation of our efforts to date. I welcome the constructive
recommendations on how we can be even more effective in the
future.
This report sets out in detail our activities in 2023. I would like to
thank the Committee members for their diligence and contribution
throughout the year.
Shriti Vadera
Chair of the Nomination & Governance Committee
The Committee recognises that with David’s departure after the
AGM, the average Director tenure will be lower than for most boards.
There are two main reasons for this. Firstly, the Group has undergone
significant transformation over the last four years with two
demergers. During this time the Board did not significantly change,
and now the Board and Committee can look for individuals who have
relevant operating experience in our key markets. Secondly, we had a
high number of Directors whose tenure expired over a short period
between the 2020 and 2022 AGMs.
This also puts an onus on effective induction for new Board members,
which the Committee oversees. Most recently, the Committee
oversaw Claudia Suessmuth Dyckerhoff's induction in 2023 (further
detail is provided on page 169) and it will oversee Mark Saunders'
induction this year.
The changes to the Group Executive Committee (GEC) over the last
two years, and the additional leadership capabilities needed to
execute our strategy make effective succession planning for
leadership roles vital. The Committee held a joint meeting with the
Responsibility & Sustainability Working Group to discuss the
development of our refreshed framework for talent development and
succession planning. We were pleased to see the progress made by
the CEO and CHRO in developing a more systematic, Group-wide
approach for all our markets. Given the importance of the topic, we
discussed succession plans for the CEO and GEC members with the
whole Board, and we have scheduled further discussions in 2024 as
the new framework embeds.
During the year, the Committee also reviewed the governance
arrangements for the Group’s Material Subsidiaries.
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Additional information
Nomination & Governance Committee report continued
Board composition, skills and succession
The Committee continually reviews the leadership needs of the
Group, including both 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 the Board
maintain a balance in the mix of skills and experiences of its
members.
The Committee reviews the size, structure and composition of the
Board, its principal Committees and the RSWG. As part of the review
process, the Committee looks at the balance of Non-executive to
Executive Directors on the Board, the overall number of Directors and
their respective skills and experience. The Chair also considers the
needs of the Board and its Committees as part of the annual Board
evaluation and the Committee continuously discusses desired skills as
part of succession planning.
To support its assessment of skills and succession planning, the
Committee maintains a skills matrix for Non-executive Directors
which helps map the Board's existing skills and identify any shortages.
Non-executive Directors
Non-executive Directors bring a range of industry experience, sector
expertise and personal strengths to the Board. In 2022, the
Committee identified the need for a Board member with insurance-
specific financial assurance expertise in anticipation of David Law
reaching the end of his tenure in 2024, after nine years on the Board.
The recruitment process led to the appointment of Mark Saunders,
who brings extensive knowledge of the insurance industry and Asia
markets having been employed in the industry for 35 years. For the
last 30 of those years, he was based in Hong Kong. A qualified
actuary, most recently he served on the executive committee of AIA
Group Limited as Chief Strategy and Corporate Development Officer.
Prior to that, he spent over 16 years at Tillinghast (now Willis Towers
Watson) where he led many actuarial appraisal value assessments of
insurers across 20 markets in Asia Pacific, ultimately becoming leader
of the Hong Kong business and transforming the Asia Pacific
insurance consulting practice. Since retiring from AIA in March 2022,
Mark has remained active in several advisory roles in the insurance
industry. Mark will join both the Audit and Risk Committees.
Committee membership and financial skills
During 2023, the Committee also reviewed the membership of the
Board’s principal Committees and the RSWG. In anticipation of David
Law’s retirement at this year’s AGM, the Committee identified
Jeanette Wong as a natural successor to the role of Audit Committee
Chair. During her extensive executive career in financial services,
Jeanette was Chief Financial Officer at DBS Group for five years. As a
Non-executive Director, she has been a member of the Audit
Committee at UBS Group since 2019 and has performed strongly as a
Prudential Audit Committee member since joining the Board in 2021.
From 20 March 2024, Jeanette will succeed David as Audit
Committee Chair. David Law remains the financial expert as defined
in the Sarbanes-Oxley Act until his retirement at the conclusion of the
AGM on 23 May 2024, when Jeanette will become the designated
financial expert.
For the purposes of the UK and Hong Kong Corporate Governance
Codes, each member of the Audit Committee has recent and relevant
financial experience. Detailed information on the experience,
qualifications and skill sets of all Committee members can be found
on pages 155 to 160.
The Committee also considered the membership of the
Remuneration Committee. Following the retirement of Philip
Remnant and Tom Watjen in May 2023, and in anticipation of the
retirement of David Law in May 2024, the Committee recommended
the appointment of George Sartorel, who was appointed from 25
May 2023, and Shriti Vadera, who will join the Committee on 23 May
2024, from the conclusion of the 2024 AGM.
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.
These appointments are part of an ongoing process to refresh the
Board to ensure it has the right skills and experience to support the
Group’s strategic objectives in Asia and Africa, both now and in the
future. Whilst the Committee does not consider there to be any
immediate skills gaps on the Board to address, in future searches it
intends to prioritise further digital/technology expertise and
individuals with deep working knowledge of Greater China.
The regular and ongoing review of candidates by the Committee
allows for a controlled approach to the onboarding of new Non-
executive Directors, and for a transition period in respect of Directors
reaching the end of their tenure.
Executive roles
Given the importance of executive succession planning to the
successful delivery of the Group’s strategy, the Board discussed
succession planning for the CEO and the other GEC roles. CEO and
GEC succession planning had been identified as an area of focus in
the 2022 Board evaluation following senior leadership changes that
year and the Board was pleased to see the refreshed approach
developed by the new CEO and CHRO.
To help with succession planning, the Committee oversees a diverse
pipeline of leadership talent below the level of the GEC. The RSWG
also shares some responsibilities when it comes to succession
planning and talent development across the Group, including
diversity, inclusion and employee wellbeing. The Committee and
RSWG hold joint meetings where appropriate. In 2023, a joint
meeting took place in October which looked in closer detail at the
development of a more systematic approach to talent development
and succession planning for senior leadership roles.
During the year, the Committee worked with talent agencies Spencer
Stuart and Russell Reynolds, both of which support the searches for
Non-executive Directors. Both firms are also engaged by the Group
for senior management recruitment. There are no other connections
to Prudential or to any of the Directors.
Process for appointing new Directors
The Committee helps the Board put in place a formal, rigorous and
transparent approach to the appointment of new Directors, and is
involved from the beginning when a vacancy or a gap in the Board’s
skills is identified. A role description which reflects the desired skills,
experience and Committee feedback, as well as the Board’s diversity
objectives, is prepared, after which specialist talent agencies are
briefed. A short-list is drafted from the long-list provided by agencies,
with Committee members and selected Board members interviewing
the chosen candidates. The SID leads the Committee in the process
of appointing a new Chair and the Chair leads the process for the
appointment of a new CEO, involving all Non-executive Directors in
the process.
Due diligence checks run alongside, and Prudential liaises with the
relevant regulatory authorities. The Committee is kept up to date as
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needed. Following appointment, the Committee then oversees the
induction of the new Non-executive Directors.
Director induction
The Committee helps the Chair to provide a tailored induction
programme for each new non-executive appointee. During 2023, the
Committee oversaw the induction for Claudia Suessmuth Dyckerhoff
and more information on this can be found on page 169.
Board, Committee and Director evaluation
The Committee oversees the performance review of the Board, its
Committees and individual Directors and approved the appointment
of Ffion Hague of Independent Board Evaluation to conduct the
2023 external review. No material issues were identified in respect of
the operation of the Committees, which were included in the Board
evaluation. The findings were presented to the Board in March 2024
and are described on pages 173 to 175.
Following evaluation, the Committee decided that each of the
Directors continued to perform effectively and was able to devote
appropriate time to their responsibilities, and that the Board and its
Committees had an appropriate combination of skills, experience and
knowledge.
In support of this decision, the Committee found that the Non-
executive Directors continued to demonstrate the desired attributes
and contribute effectively to decision-making, and that they exercised
sound judgement in holding management to account. As a result, the
Committee recommended these Directors for election (or re-election)
at the 2024 AGM.
Board Diversity Policy
To help bring a range of skills and expertise to the Board, the
Committee seeks candidates with backgrounds, experience and skills
that boost the Board’s capabilities, especially in the markets where we
operate. When searching for new candidates, the Committee briefs
talent search agencies on the Board’s requirements with candidates
selected against a range of criteria and considerations that include
sector-specific knowledge, operational experience and commercial
acumen, insights into the markets in which the Group operates, and
diversity (including thought and perspective, gender, ethnicity, age,
nationality and geographical provenance), and social, educational
and professional backgrounds.
The UK Listing Rules require boards to meet and report on diversity
and gender targets. The Board’s target for female representation on
the Board is 40 per cent by the end of 2025. As of 31 December
2023, the role of Chair was held by a woman and the overall
representation of women on our Board was 45 per cent. On 1 April
2024 female representation will decrease to 41 per cent. As
previously announced, David Law will not stand for re-election at the
forthcoming AGM.
The Parker Review recommends that we appoint at least one Director
from what is regarded in the UK as an ethnic minority background.
We do not consider this to be the most pertinent measure for an Asia-
based group and we have comfortably exceeded this
recommendation, with 7 of our 11 Directors meeting the criteria as at
31 December 2023 (63 per cent). We are one of only six FTSE 100
companies with a non-white Chair.
The Group’s Diversity and Inclusion Policy applies at all levels of the
business and 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, are treated
fairly and are respected.
The Committee considers that the pipeline for diverse talent to serve
on the GEC is reasonable, but with continued effort needed. We met
our target of employing 35 per cent women in senior management
by the end of 2023. 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 apply to the Board, the Committees and the
wider organisation. A full description of the Group’s activities on D&I
throughout the workforce, including at senior management level, can
be found in the Sustainability section on pages 114 to 116.
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
additional years, or more in certain limited circumstances.
Reappointment is subject to rigorous review as well as re-election by
shareholders.
In line with the UK Code, the notice of the 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.
The Directors’ remuneration report sets out the terms of Non-
executive Directors’ letters of appointment and the terms applicable
to the Executive Director’s contract.
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 is reviewed yearly. To support the
assessment, each Non-executive Director (except the Chair) provides
an annual independence confirmation. Members of the Audit
Committee are also assessed against the independence criteria
outlined in the Sarbanes-Oxley Act.
Following review by the Committee, all Non-executive Directors were
considered to be independent. The Chair, who was independent
on appointment, is no longer assessed as independent in accordance
with the UK Corporate Governance Code.
When considering the independence of the Non-executive Directors,
the Committee and the Board took into account that both Jeremy
Anderson and Jeanette Wong serve as non-executive directors of UBS
Group AG and that Chua Sock Koong and Jeanette Wong serve as
members of the Singapore Securities Industry Council. The
Committee and the Board have determined that these relationships
do not affect the independence of those Non-executive Directors.
Based on their contributions to Board discussions to date, the Board is
confident that they can be expected to continue to demonstrate
objectivity and independence of judgement.
Time commitment
Non-executive Directors are expected to devote sufficient time as is
needed to carry out their duties. The expected time commitment for
Non-executive Directors is agreed and set out in writing in their Letter
of Appointment. The appointment process also evaluates the
individual’s external time commitments and their impact on the
person’s suitability for the role. The assessment takes into account
the time required to prepare for and attend Board and Committee
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Additional information
Nomination & Governance Committee report continued
meetings, the AGM, general projects, Board training, dinners and
other activities. Any other external appointments which could impact
a Director’s ability to meet their expected time commitments must
first be discussed with the Chair, or, in the case of the Chair, with the
SID. In some cases, external appointments must also be 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 appointment.
The time commitment required of the Non-executive Directors was
last considered in detail by the Committee in 2022 and has been kept
under review, but no changes were considered necessary in 2023.
The Committee considered Directors’ attendance during the year.
The Committee noted that attendance at scheduled meetings had
been very good overall. Several additional, ad-hoc meetings had been
held at short notice during the year and attendance had been more
difficult, with some Directors unable to attend all of the additional
meetings. In particular, whilst Ming Lu attended all scheduled Board
meetings, he was unable to attend one scheduled Remuneration
Committee, one scheduled Nomination & Governance Committee,
and a number of short, ad-hoc Board and Remuneration Committee
meetings that had been scheduled at short notice, due to clashes with
his external executive responsibilities and travel commitments. Whilst
his attendance at scheduled Board meetings was 100 per cent, his
overall attendance record at Board and Committee meetings over the
year was marginally below 75 per cent.
The Committee noted that Ming had devoted additional time during
the year outside meetings, including to interview prospective Non-
executive Directors and to meet with management to contribute to
the development of the Group’s strategy refresh. It also noted that
his attendance record at meetings in previous years had been good,
at over 90 per cent.
The Committee recognised that because of his executive
commitments and travel requirements, Ming may not be able to
attend all meetings, particularly when arranged at short notice, but it
was not expected that his attendance in future years would be lower
than 75 per cent.
Taking these factors into consideration, the Committee was satisfied
that Ming devoted sufficient time to perform his duties. Moreover, the
Committee noted the value of having a serving executive on the
Board and the insight that he brings in respect of Greater China and
the ASEAN markets.
The Committee was satisfied that all Non-executive Directors had
committed sufficient time to meet their responsibilities and
contribute effectively. The Committee was supported in its conclusion
by the feedback from the external Board evaluator, Independent
Board Evaluation, who also reviewed individual Director performance
in 2023.
The current time expectations for Board and Committee members
are given below. The time expectations of Directors performing Chair
roles are 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
Conflicts of interest
Directors have a statutory duty to avoid conflicts of interest, and
Prudential also has procedures in place to identify and 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 authorise
any actual or potential conflicts of interest, referring any specially
material conflicts to the Board.
When recommending a candidate for appointment or re-election, the
Committee considers the external appointments of the individual
and, where appropriate, recommends authorisation of any conflicts to
the Board, attaching conditions to the authorisation where necessary.
Should a Director wish to take on a new external position during the
year, the Chair (or the SID in the case of the Chair) will evaluate the
proposed appointment and will refer it to the Committee (or the
Board) for authorisation if a conflict or potential conflict is identified.
The Board considers that the procedures for dealing with conflicts
of interest operate effectively.
Governance
The Committee reviews the Group’s governance framework regularly,
monitors the Group’s significant governance policies (including
governance arrangements of the Group’s Material Subsidiaries) and,
where appropriate, recommends changes to the Board. In 2023, a
review was carried out to make sure the governance framework
supports the Group’s strategic objectives, with particular attention
given to Material Subsidiaries. The review considered the skills and
composition of the boards and committees, in particular the audit
and risk committees, of the Material Subsidiaries - with no significant
changes recommended following the review.
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Audit Committee report
Committee’s purpose
The Committee helps the Board meet its responsibilities around
the integrity of the Group’s financial reporting, the internal
control and risk management systems, and 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
https://www.prudentialplc.com/en/investors/governance-and-
policies/board-and-committees-governance
Membership and 2023 meeting attendance
Committee members
David Law, Chair
Member since
September 2015
(Chair since May 2017)
2023 meetings1
17/17
17/17
17/17
8/8
16/17
17/17
Jeremy Anderson
January 2020
Arijit Basu
Philip Remnant2
Jeanette Wong3
Amy Yip
September 2022
January 2013
May 2021
March 2021
Regular attendees
– Chair of the Board
– Chief Executive Officer
– Chief Risk and Compliance Officer
– Chief Financial Officer
– Company Secretary
– Chief Internal Auditor
– Chief of Financial & Capital Reporting
– Chief Security Officer
– External Audit Partners
(1) The Committee held four scheduled joint meetings with the Risk
Committee, in addition to the 13 Audit Committee meetings.
(2) Philip Remnant retired from the Board on 25 May 2023.
(3) Jeanette Wong was unable to attend one meeting.
Audit Committee
report
Dear shareholder
This is my last report as Chair of the Audit Committee as, having
served my full tenure as a Non-executive Director, I will be retiring
from the Board in May. It has been my privilege and pleasure to serve
on this Board and in particular to have led the Audit Committee since
May 2017. We have covered a lot of ground over the past nine years.
I am pleased to be passing the chair to Jeanette Wong, who has been
a member of the Committee since May 2021, and I am confident
that the Committee will benefit from her skill, experience and
knowledge.
Early in the year, the Committee agreed that its areas of focus for
2023 should include:
1. Oversight and understanding of IFRS 17;
2. Continuing to increase understanding of key assumptions and
challenges at the Group’s Material Subsidiaries;
3. Facilitating the embedding of EY as the Group’s auditor; and
4. Monitoring financial reporting controls (with the Risk Committee),
particularly in relation to IFRS 17, and other transformation
activities.
The Committee has spent
significant time in
developing its understanding
of the new IFRS17
accounting standard,
overseeing its
implementation, and
discussed key accounting
issues and judgments.
The IFRS 17 standard came into effect on 1 January 2023, alongside
the adoption of IFRS 9. The requirements of IFRS 17 are complex and
although they do not alter the economics of the business, they require
a fundamental change to the accounting presentation and
disclosures of insurance contracts. The Group published its first set of
interim results under the new standard in August, having held a
briefing for investors in July to highlight the expected impact on the
presentation of results. The Committee has spent significant time in
developing its understanding of the new standard, has overseen its
implementation and discussed key accounting issues and
judgements.
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Additional information
Audit Committee report continued
Committee highlights 2023
– Oversight of the implementation of a complex new
accounting standard (IFRS 17) for insurance contracts.
– Facilitating the embedding of EY as the Group’s auditor.
To satisfy the requirements of IFRS 17, management previously
established a Group-wide implementation programme, which
oversaw significant enhancements to IT, actuarial and finance
systems. The Committee received regular updates on progress and
held joint meetings with the Risk Committee in May and October to
discuss delivery risks and to satisfy itself that the assurance and
controls around the production of results were robust. This has been a
multi-year project, involving considerable resource and effort, and I
would like to thank the teams involved across the business for their
hard work and diligence.
In order to have oversight of the important issues considered by
subsidiaries, the Committee continued to receive written updates on
the activities of the local audit committees. I also met regularly with
the chairs of our Material Subsidiary audit committees and relayed
those discussions to the Committee at its regular meetings. Over the
year finance teams from the Material Subsidiaries and other local
business units were invited to present to the Committee, the last such
presentation was from Vietnam in March 2024. In October, in order
to foster a close working relationship and deepen our understanding
of audit and risk-related topics across the Group, Jeremy Anderson
and I chaired a virtual conference attended by the Non-executive
Directors of the Group’s Material Subsidiaries.
We have paid close attention to our whistleblowing procedures. We
received regular updates on cases and their resolution alongside
indicators of issues. The matters are also discussed in private with me,
the Board, the Committee or the relevant local audit committee as
necessary.
The Committee held joint meetings with the Risk Committee to
discuss the Group’s approach to technology, data governance and AI.
The Group announced in May 2023 the resignation of the Chief
Financial Officer, James Turner, following an investigation into a Code
of Conduct issue relating to a recruitment situation. This led to the
appointment of a new CFO, Ben Bulmer, and the Committee has
worked closely with him as he transitioned into his new role. During
the year the Committee also received a presentation on the planned
work to modernise the Group's finance function, which Ben will lead.
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.
In accordance with mandatory rules governing external auditor
rotation, KPMG LLP resigned as the Group’s auditor at the Company’s
AGM in May 2023 and Ernst & Young LLP (EY) were appointed. The
original tender process was completed in 2020 and the Committee
has monitored the transition throughout the year and in the period
leading up to it. The long run in has been helpful with our IFRS17
conversion and I am very grateful to both firms for the professional
manner in which they have handled the change.
The Committee and I received regular updates from EY during the
year and have met with the audit partners privately.
Internal audit
The Committee received regular updates from the Chief Internal
Auditor and key members of his team to discuss their work and
matters arising. We also followed up specific points to ensure
appropriate action was taken. During the year, we appointed an
external third-party to provide the quality assurance of work
performed by the internal audit team and we received positive
feedback from them. As highlighted in the Risk management and
controls section of this report, IT access controls have been one area
of particular attention. Having a strong internal audit function with
the appropriate resource focused on our key risks remains a priority
for the Committee.
Committee operation, governance and compliance
with regulatory requirements
In addition to Jeanette succeeding me as Chair of the Committee
from 20 March 2024, I am pleased that Mark Saunders will be
appointed as a Non-executive Director of the Company and will join
the Audit Committee from 1 April 2024. Mark has extensive actuarial
experience and knowledge of the insurance industry, as well as
markets across the Asia Pacific region.
The operation of the Committee was reviewed as part of the annual
Board evaluation. No material issues were identified. Jeanette will
rightly bring a fresh approach to the role the Committee plays going
forward in helping the Company deliver its new strategic direction.
Finally, I would like to thank management colleagues and fellow
Committee members for their hard work, support and commitment,
not just in 2023 but over the course of my time at Prudential. They
have been and continue to be a great group of dedicated people and
I wish them all the best for the future.
David Law
Chair of the Audit Committee
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Principal activities and significant issues considered by the Audit Committee during 2023
Accounting
judgements and
estimates
supporting the
Group’s results
One of the Committee’s key responsibilities is to monitor the integrity of financial statements and any other
periodic financial reports. 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. The Committee also reviewed the
quarterly business performance updates provided for the first and third quarter of 2023 and these will be issued
on a regular basis going forward.
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. A significant
part of the Committee’s activity in 2023 was to review the Group’s implementation of IFRS 17 'Insurance
Contracts' which resulted in a substantial change to the Group’s accounting policies.
The Group adopted IFRS 17 and IFRS 9 'Financial Instruments' on 1 January 2023. The approach to and the
impact of their adoption is discussed in note A2.1 of the IFRS financial statements. Key accounting policies
discussed with the Committee over the course of the project include the determination of fulfilment cash flows
used in the measurement of insurance and reinsurance contracts, discount rates applied and the determination of
coverage units used to determine revenue in respect of the release of the contractual service margin (CSM), which
are set out in note A3.1, with further details on products and the measurement of CSM provided in note C3.4. The
Committee received regular updates from both management and EY on the Group’s development of its IFRS 17
accounting policies, its approach to transition and the production of its 2022 comparative results. It reviewed the
proposed disclosure of 2022 comparatives alongside EY’s report on its associated assurance activities in July prior
to a briefing to the market, held on 20 July 2023, on the impact of IFRS 17.
The Committee reviewed the key assumptions and judgements supporting the Group’s IFRS results, including
those made in valuing the Group's investments, insurance contract balances and intangible assets. The
Committee also reviewed the assumptions underpinning the Group's European Embedded Value (EEV) metrics.
Assumptions setting
The measurement of insurance contract balances is based on the best estimate 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 sensitivity of the Group’s metrics to key economic and non-economic
assumption changes is set out in note C6 for IFRS insurance contracts and note 3 for EEV. The Committee
considered proposed changes to assumptions and other estimates in advance of the 2023 reporting. The key
assumptions reviewed were:
– The 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) within insurance businesses. When assessing these assumptions, the Committee considered
recent experience and whether adverse variances were expected to be short-term in nature; and
– Economic assumptions, including investment returns, associated risk discount rates for EEV and related
illiquidity premiums for IFRS 17. Note A3.1 sets out the Group’s approach to setting risk discount rates,
incorporating illiquidity premiums, for IFRS 17.
The Committee was satisfied that the assumptions adopted by management were appropriate.
Valuation of investments
The Committee received information on the carrying value of investments in the Group’s balance sheet which
acknowledged that most of the Group’s investments are based on quoted prices in an active market (81 per cent
being included in level 1 as at 31 December 2023). Further information on the valuation of assets is contained in
note C2 of the IFRS financial statements. Climate change does not directly impact fair values, particularly where
these are built on observable inputs (ie are level 1 and 2), however the impact of environmental risks on the
Group’s assets and liabilities is discussed in more detail in note C6 of the IFRS financial statements, the Risk review
report and the Sustainability report. The Committee agreed that overall investments were valued appropriately.
Intangible assets
The Committee received information to enable it to review certain intangible asset balances, for example, whether
there had been any indication of impairment of the Group’s distribution rights asset or goodwill given the current
macroeconomic environment. The Committee was satisfied that there was no impairment of those intangible
assets at 31 December 2023. More information is contained in note C4 of the IFRS financial statements.
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Additional information
Audit Committee report continued
Principal activities and significant issues considered by the Audit Committee during 2023 continued
Other financial
reporting
matters
Going concern and viability statements
The Committee considered various analyses from management on 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 the financial statements should continue to be prepared on a going
concern basis and that the disclosures in the 2023 Annual Report on the Group’s longer-term viability were both
reasonable and appropriate.
Alternative performance measure (APM)
Following the adoption of IFRS 17, the Group reaffirmed its belief that 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. This concept was previously applied under IFRS 4, but the changing measurement model under
IFRS 17 has impacted how such short-term fluctuations are determined. The Committee reviewed and commented on
the revised definition of adjusted operating profit as set out in note B1.2. The Committee also considered the
prominence of disclosure and was satisfied that the disclosure of adjusted operating profit was not unduly prominent
when compared with IFRS measures of performance, and that the adjusted operating profit was appropriately
reconciled to IFRS measures in note B1.1.
Fair, balanced and understandable requirement
The Committee carried out a formal review of whether the 2023 Annual Report and Accounts 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 agreed that, taken as a whole, the
Group’s Annual Report and Accounts were 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 agreed that the level of provisioning adopted by management was
appropriate. In 2023, 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, which will be partly effective for the Group in 2024 and fully
effective for the Group from 2025. Further information is included in notes B3 and C7 of the IFRS financial statements.
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 (approximating their minimum recoverable amount) were in excess of their carrying value at the
balance sheet date.
FRC’s thematic review of the Group’s interim IFRS 17 disclosures
The FRC’s Corporate Reporting Review team carried out a limited scope review of the Group’s half-year 2023 IFRS 17
disclosures in the first year of application. The review was based solely on the interim report and did not benefit from
detailed knowledge of Prudential’s business or an understanding of underlying transactions entered into, nor did it
provide any assurance that the annual report and accounts are correct in all material respects. Following completion of
the review, the Committee was provided with a letter from the FRC’s Corporate Reporting Review team and was
pleased to note that no questions or queries were raised. The Group has considered the matters raised in the thematic
review when preparing the 2023 Annual Report and Accounts.
External Audit
External audit effectiveness
EY was appointed as the auditor of the Group in May 2023 and oversight of this relationship 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;
– EY's approach to Group materiality setting and their proposal on how that is applied to individual business units;
– EY's knowledge around the key assumptions, and their insight and constructive challenge to management by
highlighting where those assumptions sat on a range;
– Insight around the key accounting judgements and estimates and demonstration of professional scepticism in
dealing with management; and
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Principal activities and significant issues considered by the Audit Committee during 2023 continued
External audit
continued
– The outcome of management’s internal evaluation of the auditor and audit quality, which was based on a short
questionnaire survey circulated to the Chief Financial Officer and a number of senior finance leaders. The short
survey in 2023 covered audit quality and execution, team performance, process and communication in the half-
year 2023 assurance work as well as the audit of 2022 comparative results under IFRS 17. While areas of
improvement were identified, no material concerns were raised.
The Committee maintains an open dialogue on emerging risks and issues with the Group Lead Partners via a regular
schedule of meetings aligned to key reporting milestones. In 2023 the Committee formally met with the Group Lead
Partners without management present on two separate occasions.
FRC and PCAOB audit quality inspection of EY
When assessing the audit quality of EY, the Committee reviewed the inspection results published by regulators in the
UK and the US. In July 2023, the FRC published its findings from the 2022-23 inspection of EY carried out by its Audit
Quality Review (AQR) team, which showed an improvement in overall grade from prior years for both categories of
'all audits' and 'FTSE 350 audits' sampled. In November 2023, EY released findings from the PCAOB (Public
Accounting Oversight Board) inspection related to the 2021 US audits, which showed a deterioration in findings rate
from the previous year. The Committee discussed the findings with the EY team who noted enhancements had been
made by the firm to address the issues raised by the PCAOB which would be applied to the Prudential plc 2023 audit
with relevant members of the audit team being trained on the changes. Overall, the Committee was satisfied that the
audit of Prudential plc remained effective.
Auditor independence and objectivity
The Committee monitors auditor independence and objectivity and is supported by the Group’s Auditor
Independence Policy (the Policy). The Committee reviews and approves any changes to the Policy annually. The
Policy sets out the circumstances in which the external auditor may 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. Non-audit
services undertaken by EY were agreed prior to the commencement of work 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
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 Policy and did not impair the auditor’s objectivity or independence. The
Committee noted that EY 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 announcements.
In keeping with professional ethical standards, EY confirmed its independence to the Committee and set out the
supporting evidence, such as details of non-audit services and the potential threats and related safeguards in
providing those services, in a report that was considered by the Committee prior to publication of the financial results.
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.
Fees paid to the external auditor
The fees paid to EY for the year ended 31 December 2023 since their appointment as the Group’s statutory auditor
amounted to $18.8 million, of which $3.8 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 EY can be found in note B2.4 of the IFRS financial statements. The FRC cap on the ratio of non-audit
fees over average audit fees for the past three years is not applicable for 2023 given this is the first year of EY being
the Group’s auditor.
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Additional information
Audit Committee report continued
Principal activities and significant issues considered by the Audit Committee during 2023 continued
External audit
continued
The 2023 services associated with the $3.8 million included the review of the Group’s half-year financial statements,
EEV disclosures and other limited assurance work. In all cases, EY was considered the most appropriate to carry out
the work, given its knowledge of the Group and the accumulated expertise that arose 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.
Reappointment of the external auditor
EY was appointed as the Group’s external auditor at the 2023 AGM following the competitive tender process in 2020.
Based on the outcome of the effectiveness evaluation, discussed above, and all other considerations, the Committee
concluded that there was nothing in the performance of the auditor which would require a change at the next AGM.
The Committee therefore recommended that EY be reappointed as the auditor, with John Headley remaining as the
Group Lead Partner. A resolution to this effect will be proposed to shareholders at the 2024 AGM.
Throughout the 2023 financial year, the Company 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.
Whistleblowing
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, QR code, free-to-call hotlines, email and letters. Reports are captured, confidentially recorded by Navex,
and triaged by Group Security Investigations before being investigated by the appropriate teams.
The Committee is responsible for overseeing 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 was
further strengthened during the year by enhanced analysis of Speak Out data for management-level committees.
Where relevant, the Committee requested information on the sharing of lessons learned.
The Chair and Committee regularly spent time privately with the Group Chief Security Officer to understand
outcomes of investigations, 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.
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.
Internal audit
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 2023, 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 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
Chief Internal Auditor has a reporting line to the Chief Risk and Compliance Officer. In addition to formal Committee
meetings, the Committee meets with the 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 function to discuss the outcome of the quality
reviews of GwIA’s work and actions arising.
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Principal activities and significant issues considered by the Audit Committee during 2023 continued
Internal audit
continued
Annual Internal Audit Plan and focus for 2024
GwIA operates a rolling six-month approach to audit planning. The Committee approved the plan for the second half
of 2023. It also considered and approved the internal audit plan, resource and budget for the first half (H1) of 2024.
The H1 2024 Internal Audit Plan was based on a bottom-up risk assessment of audit needs. These were mapped
against various metrics and are based on a top-down approach to compliance. The plan was then assessed against a
series of risk and control parameters, including the top risks identified by the Risk Committee, to verify that it was
appropriately balanced between financial, business change, regulatory and operational risk drivers and provides
appropriate coverage of key risk areas and audit themes. Key areas of focus for this plan 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 the approval of the GwIA charter, audit plan and resources, and monitors 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 quality assurance (QA) internal effectiveness review.
The last EQA review was conducted in Q4 2021, with GwIA being assessed as a mature function and receiving the
highest rating (Generally Conforms) under the Institute of Internal Audit’s framework. Having considered the findings
of the 2023 internal effectiveness review, performed as an assessment by the internal audit function (supported by
the engaged third party quality assurance team), 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 2023.
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, particularly in respect of the general IT control environment,
and the necessary actions that have been, or are being, taken.
Group Governance Manual
The Group Governance Manual (GGM), which includes the Group Code of Conduct, sets out the general principles by
which Prudential conducts its business, the standards expected, and defines the Group-wide approach to governance,
risk management and internal control.
Exemptions and breaches of mandatory requirements set out in the Group-wide policies and delegated authorities
are monitored, and remedial actions are taken as necessary. The Committee received regular reports throughout the
year. All staff and contingent workers are expected to provide a declaration confirming compliance with the Group
Code of Conduct annually.
The Committee reviewed the results of the annual content review of the GGM and the report on exemption and
breaches reported against Group policies for the year ended 31 December 2023.
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Additional information
Risk Committee
report
Dear shareholder
As Chair of the Risk Committee, I am pleased to report on the
Committee’s activities and areas of focus during 2023.
This year, the Committee considered the management of both
financial and non-financial risks which have the potential to impact
the Group’s financial operational resilience, as well as those associated
with transformation, third parties and outsourcing and technology. In
particular, the Committee continued to monitor the confluence of
macroeconomic volatility and geopolitical tensions.
The key risks and matters considered by the Committee are
summarised in this letter, with more information included in the table
below. In areas where risks are strategic or have broader impact, the
Committee escalates to the Board for a wider discussion.
Through the Committee the Board
has continued to provide strategic
leadership, direction and oversight of
the multi-faceted and often inter-
connected risks for the Group in a highly
complex operating environment.
Committee operation and governance
As part of its duties detailed above, the Committee reviewed and
approved the Group Risk Framework (GRF) to ensure that it remained
effective in identifying and managing the risks faced by the Group in
2023. We considered and approved the Risk, Compliance and Security
(RCS) function’s planned activities for 2023 and received regular
reports from the Chief Risk and Compliance Officer (CRCO). We also
received regular reports from the Group-wide Internal Audit (GwIA)
function and updates from other areas of the business as needed.
The Committee works closely with the Audit Committee to ensure both
are updated and aligned in areas of common interest, and I report to the
Board on the main matters discussed. The CRCOs of our Material
Subsidiaries are also 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
remain 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 local
audit and risk committees and deepen understanding of Group-wide risks,
in October David Law and I chaired the annual conference attended
by the non-executive directors of the Group’s Material Subsidiaries.
Committee’s purpose
The Committee helps the Board provide 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 as well as matters relating to
climate change and responsible investment. It 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/investors/governance-and-policies/
board-and-committees-governance
Membership and 2023 meeting attendance
Committee members
Member since
2023 meetings1
Scheduled
Committee
meetings
10/10
Ad-hoc
Committee
meetings
1/1
10/10
10/10
5/5
10/10
1/1
1/1
1/1
1/1
Jeremy Anderson,
Chair
David Law
George Sartorel
Tom Watjen2
Jeanette Wong
January 2020
(Chair since May
2020)
May 2017
May 2022
November 2018
May 2021
Regular attendees
– Chair of the Board
– Chief Executive Officer
– Chief Risk and Compliance Officer
– Chief Financial Officer
– Company Secretary
– Chief Internal Auditor
Members of the Risk, Compliance and Security Leadership team
are invited to attend each meeting as appropriate.
(1) The Committee held one scheduled joint meeting with the RSWG and four
scheduled joint meetings with the Audit Committee.
(2) Tom Watjen retired from the Board on 25 May 2023.
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Prudential plc Annual Report 2023
Committee highlights 2023
– Ongoing oversight of the Group’s principal risks including
geopolitical tensions, the macroeconomic environment and
heightened global cyber security threats.
– Embedding the Committee’s expanded climate
responsibilities, including the recommendation of the Group’s
Climate Transition Plan for approval by the Board and new
targets to reflect the Group's commitment to carbon
reduction and supporting a just and inclusive transition.
– Monitoring risks associated with the implementation of
transformation programmes including IFRS 17.
– Oversight of the Group’s supplier and third-party risk and
strengthening of the Group’s third-party risk management
framework.
Risk appetite and principal risks
a. Risk governance, capital and liquidity
The Committee carried out its regular review of the Group’s risk
policies and proposed updates to the Group risk appetite statements
and associated limits. We regularly monitored 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
geopolitical tensions, macroeconomic developments, including
inflationary pressure, high interest rates, slowing economic growth,
and an elevated cyber security threat globally. The Committee also
considered the risks associated with the Group’s transformation
programmes and material joint ventures impacting the Group’s risk
profile. In addition, the Committee reviewed the Group’s annual Own
Risk and Solvency Assessment (ORSA) report in May 2023 and in-
depth assessments were performed on existing and emerging high-
risk areas. A detailed 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 56 to 71.
Sustainability (including environmental, social and
governance (ESG) and climate-related) risks
The Committee received regular updates on climate-related initiatives
that support the Group’s Sustainability Strategy. Reflecting our
support for a just and inclusive transition to net zero, the Committee
reviewed and recommended for approval, the Group’s Climate
Transition Plan, an updated carbon reduction target and a new target
reflecting the Group's commitment to transition financing.
Change management risk
Following the Group’s adoption of IFRS 17, which came into effect on
1 January 2023, the Committee considered the risks associated with
IFRS 17 implementation and the longer-term plans of embedding it
into the business. The Committee also assessed the risks associated
with the Group’s other transformation programmes, including those
driven by the Group’s new strategy.
Information security, IT infrastructure and data
privacy risks
In addition to receiving updates on the key risks associated with
technology across the Group, including notable incidents, regulatory
developments, governance and strategy, the Committee was
regularly updated on Artificial Intelligence (AI), IT infrastructure,
operations enhancement and the global cyber security threat
landscape.
The Committee reviewed and approved a number of policies to
strengthen technology risk management processes and governance,
bolster the approach to managing technology risks relating to
information security, data privacy and IT infrastructure, and define
clearer roles and responsibilities within the organisation.
Third-party and outsourcing management risk
With an increasing reliance on third parties, strategic partnerships and
bancassurance arrangements to deliver the Group’s strategic
outcomes, third-party risk management remains one of the key areas
of focus for the Committee. It received regular updates on the
Group’s supplier and third-party risk oversight and progress on
strengthening the Group’s Third-Party Risk Oversight Framework. It
also assessed the effectiveness of the Group’s third-party risk
governance.
Oversight of the Group’s joint ventures and associates
The Committee also maintained oversight of key risks of the Group’s
joint ventures and associates. In 2023, the Group completed a series
of deep-dive reviews on the Group’s oversight of material insurance
and asset management joint ventures and their contributions to the
Group’s risk profile, with the Committee evaluating the effectiveness
of current oversight mechanisms and areas for potential
improvement.
Group Internal Economic Capital Assessment
The 2023 Group Internal Economic Capital Assessment (GIECA)
model results were presented to the Committee before being
submitted to the Hong Kong Insurance Authority (Hong Kong IA). The
updates considered key assumptions, recalibration of the Group risk
appetite capital target, the governance framework and validation
activity for the GIECA model. The Committee's main area of focus
was on the use of the GIECA model. This model provides a consistent
risk and return lens for capital allocation and decision-making across
various business processes including business planning, product
pricing, strategic business decisions and remuneration management.
Committee effectiveness
The operation of the Committee was reviewed as part of the annual
Board evaluation. No material issues were identified.
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 a
complex macroeconomic, geopolitical and regulatory environment. I
would like to give special thanks to David Law, who will resign from
the Board in May 2024, having served diligently as a member of the
Committee for seven years, and to welcome Mark Saunders who joins
the Committee in April 2024.
Jeremy Anderson
Chair of the Risk Committee
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Additional information
Risk committee report continued
Principal activities and significant issues considered by the Risk Committee during 2023
Risk management
Group principal risks, including Chief Risk and Compliance Officer (CRCO) report
The Committee evaluated the Group’s principal risks and considered recommendations for the inclusion of
additional risks and changes in the scope of existing risks. The Committee also received regular reports on the
Group’s exposure and management of its principal risks, emerging risk themes, material joint ventures impacting
the Group’s risk profile, and external developments within the CRCO’s regular report to the Committee. Further
information on how the Group identifies principal and emerging risks can be found in the Risk review.
The CRCO’s reports provided the Committee with regulatory updates, including the implications of developing
global capital standards, systemic risk regulation, engagement with regulators (including the Supervisory College)
and the Group’s ongoing compliance with the Hong Kong IA’s Group-wide Supervision Framework as well as
applicable local regulatory requirements.
Deep dives
As part of its risk oversight responsibilities, the Committee considered the results of deep-dive risk reviews
performed over the year. In 2023, these reviews focused on: the risks relating to the Group’s material joint
ventures with particular emphasis on oversight management and key risks impacting the Group’s risk profile,
people risk, lessons learned following a series of stress events within the banking sectors in Q1 2023, the Group’s
exposure to sovereign default risk and other macroeconomic risks in Africa and an information security controls
review in Africa. The Committee further considered ongoing effectiveness reviews of regulatory compliance,
customer conduct and anti-money laundering, as well as updates on the Group’s asset liability management
processes and interest rates exposures.
Change management risk
The Committee monitored the progress of the Group’s key strategic projects, which included the Group’s new
strategy and IFRS 17 implementation. The Group is undergoing significant strategic transformation, and the
Committee noted the importance of management balancing the need to look after people whilst maintaining
focus on the strategic outcomes.
Joint meetings of the Risk Committee and Audit Committee in May and October led to both Committees being
updated on the risks related to IFRS 17 implementation and on preparation activities for FY 2023 IFRS 17
reporting. The longer-term plans for embedding IFRS 17 into the business were also discussed.
Third-party and outsourcing management risk
The Committee considered an assessment of the effectiveness of the Group’s third-party risk governance
framework, and approved the list of the Group’s material outsourcing arrangements prior to submission to the
Hong Kong IA in May. The Committee received regular progress updates on the strengthening of the Group’s
Third-Party Risk Oversight Framework.
Information security, IT infrastructure and data privacy risks
Updates were provided to the Committee on key external developments relevant to cyber security and data
privacy, including changes in regulations and the threat landscape. The Committee received regular progress
updates on the operationalisation of the Group-wide governance model and the strategy for the management of
information security and data privacy risks, as well as the strengthening of IT infrastructure and operations
resilience. The Committee was also informed of material incidents and improvement plans.
During the year, the Committee approved the revised Group Information Security Policy, the new Group
Information Technology Infrastructure Policy and the new Group Technology Risk Management Policy.
Joint meetings of the Risk Committee and Audit Committee in May and October ensured both Committees were
updated on the Group Data Policy and AI governance process as well as the progress of addressing critical
operational challenges including material outsourcing.
Sustainability (including ESG and climate-related) risks
The Committee received regular updates on climate-related regulatory and legislative developments, including:
those concerning disclosure requirements; progress against the Group’s responsible investment commitments;
and its ESG ratings by external assessors and agencies. These updates also reported back on 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.
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Principal activities and significant issues considered by the Risk Committee during 2023 continued
Risk management
continued
Prudential has a long-term target to become a net zero asset owner by 2050 and in 2021 established a target to
achieve a 25 per cent reduction in its Weighted Average Carbon Intensity (WACI) metric by 2025. In July, the
Committee considered and recommended to the Board a new 2030 WACI reduction target of 55 per cent
(compared to the 2019 baseline), reflecting a balance between ambition and uncertainty around the
practicalities of implementation, as well as the Group’s intention to support transition finance in emerging
markets as part of a just and inclusive transition. The Board approved the changes, which were disclosed in the
HY 2023 announcement. In December, the Committee considered the use of a 'Financing-the-Transition' target
in executives’ long-term incentive plans to underpin to the WACI target and recommended this to the
Remuneration Committee.
The Committee also received reports on the Group ESG Data Governance Framework and the enhanced
reporting processes and controls for non-financial ESG information during a joint meeting of the Risk Committee
and Audit Committee held in December.
Control environment and risk culture
Regular reports of any breaches of the Group’s Non-Financial Risk Appetite, and mitigating actions, were
provided to the Committee throughout the year. The Committee also received regular updates on risk culture
enhancements including the roll-out of the revised Group Code of Conduct that outlines the ethical standards
and responsibilities of the organisation and our employees, and associated training programmes. A joint meeting
of the Risk Committee and Audit Committee was held in December, when a Group-wide control enhancement
programme, which will be one of the key enablers for achieving operational discipline in the successful execution
of the new strategy, was discussed.
Remuneration
The Committee plays a formal role in advising the Remuneration Committee on the risk management
considerations in respect of executive remuneration. It considered risk management assessments of proposed
executive remuneration structures and outcomes during the year, relevant regulations, as well as climate-related
considerations, before making related recommendations to the Remuneration Committee.
Stress and scenario testing
The Committee reviews the 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.
The Group’s recovery plan, considered by the Committee in May, included an assessment of the viability and
operational resilience of the Group under severe financial and non-financial shock scenarios, and the 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 extreme
stresses required to breach 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 including the implementation of the Group’s new strategy,
which highlighted key financial and non-financial risks. The analysis included sensitivity assessments of the
impact of two plausible scenarios.
Model risk management
The Committee received regular updates on the Group-wide model risk assessment and model-risk-related
activities, such as targeted model validations and model oversight assurance reviews to embed the model risk
framework, reviews of model inventories in business units to ensure completeness and quality, and ongoing
initiatives to improve model risk management.
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Additional information
Risk committee report continued
Principal activities and significant issues considered by the Risk Committee during 2023 continued
Regulatory and
compliance matters
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. Updates covered issues such as regulatory changes, reviews and
interventions, including those relating to business and customer conduct, fraud, anti-bribery and corruption, anti-
money laundering, counter-terrorist financing, and sanctions risks.
Risk and
compliance
framework
In addition, the Committee was updated on the Group’s customer conduct risk analysis and progress of other key
areas in response to the Supervisory College's interested topics.
Group-wide Internal Audit (GwIA)
Updates on relevant matters which fall within the Committee's responsibilities were provided by GwIA
throughout the year.
Annual review of risk framework associated policies, risk framework compliance and Committee effectiveness
The GRF and its associated 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 Committee approved the
changes in July.
In March, the Committee was updated on the ongoing implementation of the Non-Financial Risk Framework.
The Committee considered the findings of the annual evaluation of Committee effectiveness and agreed actions
to improve Committee effectiveness. The Committee also evaluated the effectiveness of the RCS function's
oversight of the Group's key risks.
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 May, the Committee recommended to the Board a proposed recalibration of the Group risk appetite capital
targets to ensure their continued appropriateness for approval. In December the Committee approved a number
of revisions of the Group risk limits including the duration mismatch triggers and credit limits to manage interest
rate and credit risks, and ensured that they are consistent with the aggregate Group Risk Appetite statements.
External and
regulatory
reporting
ORSA
The ORSA is a key ongoing process for identifying, assessing, controlling, monitoring and reporting risk and
compliance issues to which the Group is exposed as well as assessing capital adequacy over the business planning
horizon.
In May, the Committee considered the Group’s ORSA report, based on the business plan, prior to its approval by
the Board and submission to the Hong Kong IA.
Systemic risk management
In May, the Committee considered the Group’s recovery plan, which includes the Group critical incident
procedure and the liquidity risk management plan, and recommended them for approval by the Board.
Group Internal Economic Capital Assessment (GIECA)
The Committee received regular bi-annual updates on the GIECA results in May and October, and provided
approval prior to submission to the Hong Kong IA. The updates also covered the governance framework and
validation activity for the GIECA model. In December, the Committee proposed changes to the GIECA risk
modelling assumptions for FY 2023 reporting.
The Committee received updates on embedding the use of the GIECA model in various business processes and
decision-making in October.
Insurance Capital Standard (ICS)
The Committee considered the Group’s FY 2022 ICS results in December. This included an update on the Group’s
engagement on the ICS development with the International Association of Insurance Supervisors on ICS
technical topics, and updates on the Group’s key next steps for potential ICS implementation.
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Statutory and regulatory disclosures
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 which can be found on pages
228 to 329. They also prepare the supplementary information which
is on pages 342 to 361.
Based on the audit of the financial statements and EEV basis
supplementary information, the auditor must form an independent
opinion on the performance of the Group and report this opinion to
the Company and its shareholders. You can find the auditor’s opinion
on pages 330 to 339 and pages 362 to 363.
Directors have a legal obligation to prepare financial statements that
give a true and fair view of the financial affairs of the Company and
the Group. The criteria used for the preparation of the financial
statements can be found in the Statement of Directors’
responsibilities on page 329. Company law also requires the Board to
approve the Strategic report on page 149. The Strategic Report
provides a description of the Group’s capital position, financing and
liquidity. The risks facing the Group’s business are discussed in the
Risk review on pages 56 to 71. Directors must also confirm that the
Strategic Report includes a fair review of the development and
performance of the business, including a description of the principal
risks and uncertainties. This confirmation is in the Statement of
Directors’ responsibilities on page 329.
The Directors’ statement must also confirm 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,
performance, business model and strategy.
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; and that 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 line with guidance issued by the FRC in September 2014 on risk
management, internal control and related financial and business
reporting, and 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 the Viability Statement
on page 72 and the basis of preparation disclosure in the financial
statements.
Powers of the Board
The Board may exercise all powers conferred on it by the Company’s
Articles (the Articles) and the Companies Act 2006. This includes the
power 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
Articles) 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, 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 Articles
allow 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 case 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 other relevant
individuals within the Group. These indemnities were in force for 2023
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 C1
to the HK Listing Rules and by relevant UK regulations. Having made
specific enquiry of all Directors, Prudential confirms that the Directors
have complied with these rules throughout the period.
The Group has also 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.
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
9.8.4 (4)
9.8.4 (7)
9.8.4 (10)
9.8.4 (12)
9.8.4 (13)
Description
Details of long-term incentive
schemes required by Listing Rule
9.4.3
Details of allotments of equity
securities for cash
Contracts of significance involving
a Director
Details of shareholder waiver of
dividends
Details of shareholder waiver of
future dividends
Page
211
302
195
400
400
Connected transactions
There were no connected transactions during 2023 requiring
disclosure.
Prudential plc Annual Report 2023
195
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Statutory and regulatory disclosures continued
US regulation and legislation
As a result of its listing on the New York Stock Exchange, the
Company complies with the relevant provisions of the Sarbanes-Oxley
Act 2002 as they apply to foreign private issuers and has adopted
procedures to ensure compliance. In particular, adherence to Section
302 of the Sarbanes-Oxley Act 2002 which covers disclosure controls
and procedures, is overseen by a Disclosure Committee which reports
to the CEO, chaired by the CFO and comprising members of head
office management. The Disclosure Committee supports the CEO and
CFO in making certifications about the effectiveness of the Group’s
disclosure procedures.
Hong Kong IA GWS public disclosures
Under the GWS framework, the Group must make public disclosures
around certain risks and capital. 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 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 the purchase or
sale will 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 constitute in aggregate less
than 30 per cent of the total revenue from sales for each of the years
presented in this Annual Report and financial statements.
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Prudential plc Annual Report 2023
Index to principal Directors’ report disclosures
Index to principal Directors’ report disclosures
Information required to be disclosed in the Directors’ report may be found in the following sections:
Information
Disclosure of information to auditor
Directors in office during the year
Board diversity
ESG matters
Group-wide policies, including those relating to 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
Details of qualifying third-party indemnity provisions
Internal control and risk management
Section in Annual Report
Statutory and regulatory disclosures
Board of Directors
Governance report
Sustainability section
Sustainability section
Sustainability section
Sustainability section
Sustainability section
Directors’ remuneration report
Directors’ remuneration report
Directors’ remuneration report
Governance report
Governance report and Strategic report
Powers of Directors
Rules governing appointment of Directors
Significant agreements impacted by a change of control
Future developments of the business of the Company
Governance report
Governance report
Governance report
Strategic report
Post-balance sheet events
Note D2 of the notes on the Group financial statements
Rules governing changes to the Articles of Association
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
Shareholder information, Governance report and note C8
of the notes on the Group financial statements
Business review
Changes in borrowings
Dividend details
Financial instruments
Corporate governance statement including compliance with
the Code
Fostering the Company’s business relationships
Details of how directors have regard to stakeholders
Monitoring culture
Group overview and Strategic Report
Financial review and note C5 of the notes on the
Group financial statements
Group overview and Strategic Report
Additional information
Governance report
Strategic report
Section 172 Statement
Sustainability section
Strategic report
Section 172 Statement
Sustainability section
Section 172 Statement
Sustainability section
Details of the Company’s approach to investing in and
rewarding its workforce
Section 172 Statement
Additional information can be found in the Sustainability
Report
Page number(s)
195
152 and 155 -
160
154 and 181
97 - 149
145 - 148
117, 126 - 128
and 148
134
118
200 - 225
200 - 225
200 - 225
195
56 - 71 and 176
- 177
195
195
196
24 - 33
307
399
302
10 - 149
296
44
272 - 275
163 - 164
24 - 29
88 - 96
103 - 104, 109
and 114 - 118
24 - 29
88 - 96
103 - 104, 109
and 114 - 118
88
115
92
51
In addition, the risk factors set out on pages 74 to 87 and the additional unaudited financial information set out on pages 366 to 392,
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
19 March 2024
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197
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Directors'
remuneration
report
198
Prudential plc Annual Report 2023
Directors’ remuneration report
Annual statement from the Chair of the Remuneration
Committee
Remuneration at a glance
Annual report on remuneration
Additional remuneration disclosures
200
204
206
223
Prudential plc Annual Report 2023
199
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Directors’ remuneration report
Annual statement
from the Chair of
the Remuneration
Committee
Dear shareholder,
On behalf of the Board and its Remuneration Committee
(Committee), I am pleased to present the Directors’ remuneration
report for the year ended 31 December 2023.
The Committee is grateful for the level of support received for the
Directors’ remuneration policy presented at the 2023 AGM (95.7%).
The Committee operated within that policy in 2023 and intends to
continue to do so during 2024.
In arriving at the remuneration outcomes for 2023, the Committee
has assessed Company performance in the context of the wider
stakeholder experience.
2023 in summary
Company performance
As described in the Strategic Report earlier in this Annual Report:
– We have seen strong financial performance in 2023;
– We have demonstrated substantial progress towards our 2027
objectives that were communicated alongside our updated strategy
in August 2023; and
– Our performance reflects the breadth and broad-based nature of
our markets and the strong capital position of the Group.
The charts opposite illustrate achievement against our key financial
annual objectives. The Group achieved these results while maintaining
appropriate levels of capital and while operating within the Group’s
risk framework and appetite.
Committee's purpose
The Committee’s purpose 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 and the
Executive Directors.
Membership and 2023 meeting attendance
Committee members
Chua Sock Koong (Chair)
David Law ACA
Ming Lu1
Philip Remnant CBE FCA2
George Satorel3
Tom Watjen4
Scheduled
meetings
5/5
Ad hoc
meetings
5/5
5/5
4/5
2/2
3/3
2/2
5/5
3/5
4/4
1/1
3/4
Regular attendees
– Chair
– Chief Executive Officer
– Company Secretary
– Chief Human Resources Officer (CHRO)
– Director, Group Reward and Employee
Relations, and CHRO, UK
– Remuneration Committee Adviser
(1) Ming Lu was unable to attend one scheduled meeting and two Ad hoc
meetings, arranged at short notice.
(2) Philip Remnant retired from the Board on 25 May 2023.
(3) George Sartorel joined the Committee in May 2023.
(4) Tom Watjen retired from the Board on 25 May 2023.
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.
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Prudential plc Annual Report 2023
Performance measures (% weighting of financial bonus targets)
Group new business profit (55%)
A measure of the future profitability of the new business sold during
the year and an indicator of the profitable growth of the Group.
Group operating free surplus generated2 (15%)
A measure of the internal cash generation of our businesses.
Group performance ($m)1
Group performance ($m)1
Performance measures (% weighting of Financial bonus targets)
Group adjusted operating profit3 (20%)
Prudential’s primary measure of profitability and a key driver of
shareholder value.
Group cash flow (AER)4 (10%)
Cash flows across the Group reflect our aim of achieving a balance
between ensuring sufficient net remittances from business units to
cover the dividend and responsibly managing corporate costs to
allow for reinvestment in profitable opportunities.
Group performance ($m)1
Group performance ($m)
Notes
(1) Group performance and growth rates shown on a constant exchange rate basis.
(2) 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.
(3) In this report ’adjusted operating profit’ refers to adjusted IFRS operating profit based on longer-term investment returns.
(4) Group cash flow includes business unit remittances net of dividends and corporate costs.
Stakeholders’ experience
In reaching its decisions for 2023, the Committee considered the experience of the Group’s stakeholders during the year, as set out below. More
details about how we have listened to our stakeholders and what the Group delivered in 2023 can be found in the Sustainability Report section
of the Strategic Report.
Investors
– 2023 was a year of significant engagement with investors, with a new
CEO, IFRS 17, the launch of an updated strategy and introduction of
quarterly trading updates.
– The Group provided its strategy update alongside its half year 2023
results which was followed by an intensive programme of investor
interaction.
Our people
– Alongside our new purpose statement, our revised set of values,
The PruWay, co-created by employees, was launched.
– As well as holding our third Group Wellness Day (now Prudential
Recharge Day) in September 2023:
– We launched a digital coaching tool globally to provide holistic
health and wellbeing personal ongoing support.
– Engagement with investors: During 2023, over 589 meetings were
– We announced our sponsorship for This Is Me on World Mental
held with around 475 individual institutional investors in Asia, the US,
continental Europe and the UK. Of these meetings, 192 were attended
by one or more of the Executive Directors.
– TSR performance was below the median of the peer group; over the
period 1 January 2021 to 31 December 2023 TSR was -21.0% while
the median performance was -15.3%. This reflects the exposure to
Asia-based headwinds inherent in Prudential’s operating environment
over the period and the fact that only one constituent of the 2021
PLTIP peer group operates substantially in the same markets as
Prudential.
Health Day.
– Engagement with our people included:
– Use of snap surveys for more timely feedback. Employee
engagement scores remain at similar levels to January 2023.
– Over 7,400 colleagues participated in the Company's fourth
Collaboration Jam, which focused on fostering engagement
and awareness of The PruWay.
Prudential plc Annual Report 2023
201
2,1493,125202220231,3551,395202220232,6902,8932022202339475620222023 Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Directors’ remuneration report continued
Customers
– We have standardised our approach to measuring and analysing
customer advocacy, centred around net promoter scores (NPS) across
ten business units (BUs).
– Four of the ten are ranked in the top quartile for customer
relationship NPS (ie brand), compared to three in 2022.
– Four further BUs improved their rankings by a quartile.
– This has been supported by leadership prioritising the voice of
customers in our business, with initiatives including:
– Monthly CEO customer experience forums and a proactive
approach to calling back customers reporting unsatisfactory
experiences.
– Group Executive Committee members met with over 150 customers
to understand better how we can deliver a distinct customer
experience.
Governments and regulators
– Prudential continued its engagement with the International
Association of Insurance Supervisors (IAIS) relating to
international developments including the Insurance Capital Standard
(ICS).
– Alongside other insurance industry peers, we met with the Chair of the
IAIS Executive Committee to discuss financial inclusion and protection
gaps and explore ways in which the industry could support the work of
the IAIS on these topics.
– Constructive dialogue with the Hong Kong Insurance Authority
(Hong Kong IA) continued during 2023, with the Hong Kong IA
attending a Board meeting in March 2023 to present feedback on key
observations and expected actions directly to the Board.
Climate change initiatives
– Highlights included:
– In March 2023, Prudential’s Climate Transition Plan was published,
setting out our long-term net zero pledge and interim targets, and
the progress we have made against them.
– In May 2023, we participated in the Net Zero Delivery Summit held
in London and contributed to a panel discussion on best practice
and illustrative case studies of channelling green finance to
emerging markets for a just transition, together with leaders from
Vietnam and Africa.
Remuneration decisions and outcomes for 2023
Senior leadership changes
During the year we welcomed Anil Wadhwani as Chief Executive
Officer (CEO) from 25 February 2023. Details of his remuneration are
disclosed in the 'Annual report on remuneration' section of this
report. The remuneration for Mark FitzPatrick, the Interim CEO, can
also be found in this section.
As disclosed in last year's report, the Company agreed to replace
remuneration forfeited by Mr Wadhwani as a consequence of his
leaving his former employer. The replacement awards are disclosed in
the 'Recruitment arrangements' section.
2023 Annual incentive Plan (AIP)
Strong performance against the adjusted stretch targets of the
financial metrics led to a formulaic outcome of 100% of maximum
on the financial scorecard. The Committee noted inputs from the Risk
Committee and Audit Committee, and that the capital underpin had
been met and approved the formulaic outcome of 100%.
Taking into account the personal performance of the Executive
Directors, this led to bonus outcomes of 99.0% and 97.4% of
maximum for Anil and Mark respectively.
Further details can be found in the 'Annual bonus outcomes for 2023'
section.
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Prudential plc Annual Report 2023
Suppliers
– Prudential is committed to ensuring that slavery, human trafficking,
child labour or any other abuse of human rights have no place in
our organisation or supply chain. In 2023, we further enhanced
our existing Group Third Party Supplier and Outsourcing Policy
(GTPSO) to drive compliance to use our procurement and third-
party risk management system, and to ensure that the Group’s
Third Party Risk Management (TPRM) framework is consistently
applied.
Society
– Diversity and inclusion: New members of the Diversity and
Inclusion Council were onboarded to focus on inclusion. In 2023,
we were listed on the Bloomberg Gender Equality Index for the
fourth successive year.
– Prudence Foundation continued to invest in our communities.
Highlights included:
– The Cha-Ching programme, which aims to raise financial
literacy in children aged seven to 12 years old, had taught over
two million children and had trained over 66,000 teachers.
– 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 in 2023.
– We engaged with the IAIS on climate-related risks, including
taking part in discussions on this topic. During 2023, Prudential
was the co-chair of the Institute of International Finance Asia-
Pacific Subgroup, with an agenda focusing on digital
developments and climate-related risks in Asia markets.
2021-2023 PLTIP
As a result of our performance over 2021-2023, the 2021 PLTIP
vested at 27.58%. This reflected below threshold performance
against the relative TSR targets, and above threshold performance
on the Return on Embedded Value (RoEV) targets and strong
performance against the sustainability scorecard. These awards are
subject to a two-year holding period. Awards were adjusted to take
account of the Jackson demerger as set out in the 2021 Directors'
remuneration report.
The Committee considered the Company’s share price at the time
the 2021 PLTIP awards were made (£15.05/HKD164.07) compared
to the share price at the end of the performance period (£8.87/
HKD87.40). The share price in early 2024 did not increase and the
Committee is satisfied that no windfall gains have arisen on vesting.
Further details can be found in the 'Long-term incentives vesting in
respect of performance to 31 December 2023' section.
The Committee carefully considered the formulaic outcomes for both
the AIP and PLTIP in the context of the Group's financial
performance and the stakeholder experience, as set out earlier in this
statement, and determined that these were appropriate. As such, no
discretion was applied in determining the AIP and PLTIP outcomes.
Remuneration for 2024
Strategic ambition
A new purpose and strategy were announced alongside the 2023
interim results in August, which included an emphasis on operational
and financial discipline to accelerate value creation. The new strategy
provides a focus on investing in new business at attractive returns,
core capabilities and strategic opportunities as well as returning
capital to shareholders via dividends.
A key focus of the Committee's work in 2023 has been to ensure the
new strategy is embedded in the remuneration arrangements for
2024. The Committee therefore consulted with major shareholders,
and shareholder representative bodies, on proposed changes to the
weightings and metrics for the 2024 AIP and 2024 PLTIP, as well as
on proposed changes to the remuneration arrangements for the CEO.
Responses were received from shareholders, representing around
45% of the Group's share capital, with investors generally being
supportive of the proposals. After careful consideration, and in order
to ensure alignment with the new strategy, the Committee intends to
implement the following changes to the 2024 AIP and 2024 PLTIP
measures, and an increase in PLTIP award level for the CEO.
2024 AIP and 2024 PLTIP measures
While the Committee believes that the existing AIP measures remain
appropriate, it decided to change the balance between the measures
for 2024 to better reflect the refreshed strategy. Specifically, it
approved an increased weighting for Operating Free Surplus
Generation (OFSG) and Cash flow. Consequently, New Business Profit
(NBP) will reduce, although it retains the highest weighting (at 45%),
reflecting the Group’s focus on future profitability.
Remuneration arrangements for the Chief Executive Officer
The Committee undertook a review of the remuneration package of
the CEO and other senior executives to ensure they are adequate to
attract, motivate and retain the high-calibre personnel required to
deliver on our new purpose and strategy. As part of the review,
consideration was given to increasing the CEO’s salary for 2024,
reflecting his performance in the role to date, the passage of time
since his original salary was set in May 2022 and the fact that it was
unchanged for 2023.
However, after careful deliberation, the Committee decided that it
would be more appropriate to increase the CEO’s 2024 PLTIP award
level from 400% to 425% of salary, in lieu of a salary increase.
The increased PLTIP opportunity, which is well within the maximum
allowable under the Policy, is wholly based on performance over the
long term, thereby providing a greater focus than a salary increase
would give on the achievement of the Group’s strategic goals. The
Committee therefore believes that this approach will, particularly in
combination with the increased weight of TSR, serve to strengthen
the alignment of the CEO’s interests with those of other shareholders.
The Committee is mindful of the impact that a low share price has on
the number of shares under an award, which might give rise to a
windfall gain in the future. After careful consideration the Committee
decided to review the 2024 PLTIP award at vesting, when all factors
can be assessed, to ensure that there has been no windfall gain. As
part of this review, the Committee will consider Prudential's stretching
performance targets, the share price performance of Prudential and
its peers, the share price performance of indices on which Prudential is
listed and any other factors deemed relevant to determining a final
vesting outcome.
The Committee believes that the PLTIP measures should closely align
the economic interests of shareholders with those of executives and
support the longer-term strategic ambitions of the Group.
Consequently, it intends to:
Committee effectiveness review
The operation of the Committee was reviewed in 2023 as part of the
annual Board evaluation. No material issues were identified.
– Retain Total Shareholder Return (TSR) as a measure, with an
increased weight of 45%, which will ensure that maximum vesting
only occurs where achievement of the Group's longer-term strategy
generates shareholder value.
– Include Life and Asset Management Gross OFSG and NBP as
measures (each with a weight of 15%), reflecting the two key
financial objectives announced with the new strategy. The
measures will replace RoEV. The Committee’s view is that the
ability to repeatedly demonstrate growth in NBP over a sustained
period (through successive PLTIP cycles) is a key driver for value
creation. Similarly, continued growth in Life and Asset
Management OFSG ensures a focus on profitable new business and
managing experience variances over the longer term. Full vesting
of the NBP and OFSG elements of the 2024 PLTIP will only be
achieved if CAGR over the three-year performance period is aligned
with our stated ambitions over the 2022 to 2027 period.
– Retain the Business Integrity Scorecard (with an unchanged weight
of 25%), using the existing measures. As part of our support for a
just and inclusive transition to net zero, the Board approved a
target reduction in our portfolio's weighted average carbon
intensity (WACI) of 55% by 2030 (compared to the 2019
baseline). To support this ambition, the Committee has retained a
WACI metric in the 2024 PLTIP and introduced a transition finance
underpin for this element of the PLTIP.
The Committee is mindful that NBP and OFSG feature in both the
2024 AIP and 2024 PLTIP. However, on balance it believes this is
appropriate given that these measures are central to the Group’s
strategic ambitions in both the short and longer term, and that
performance will be measured over different periods.
Committee changes in 2023
Philip Remnant and Tom Watjen retired from the Board and the
Committee at the 2023 AGM. I would like to thank them both for
their input and support on the Committee. I would also like to
welcome George Sartorel, who joined the Committee in May 2023.
George has considerable operational expertise in insurance, mainly
across the Asia Pacific region.
I would like to thank the Committee members for their work over the
past year in ensuring that our remuneration approach supports the
Group's strategy and continues to align with shareholder interests,
especially when they have been asked to consider time-critical
matters.
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 2023 and of the proposed Directors’ remuneration
arrangements for 2024.
Chua Sock Koong
Chair of the Remuneration Committee
19 March 2024
Prudential plc Annual Report 2023
203
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Remuneration at a glance
The elements of Executive Director
remuneration
A significant portion of Executive Directors’ remuneration is
performance-based, long-term and remains at risk. The chart
on the right shows the breakdown of the Chief Executive’s
remuneration based on a scenario of maximum AIP payout
of 200% of salary and full vesting of an LTIP award of
425% of salary.
Performance-related remuneration is subject to malus
(forfeiture or reduction before delivery) and clawback
(recovery provisions for a period after delivery). The malus
and clawback provisions are detailed in the Directors'
remuneration policy.
Principles underlying the policy
Proportionality
Pension
4%
Alignment to culture
– Executive Directors' pension benefit of 13 per cent of salary is
aligned with that of the wider workforce.
– The conduct measure in the PLTIP 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 PLTIP reflects the time horizon
of the business plan.
– The additional post-vesting holding period and share ownership
guidelines align Executive Director interests with other stakeholders.
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.
Clarity
– The Committee consults regularly with the Company’s largest
shareholders on executive pay decisions before they are implemented.
– Details on Executive Director pay are clearly set out in the Annual
– There are no incentive outcomes 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
report on remuneration.
Risk
for achieving threshold performance.
– The Risk Committee advises the Committee on risk management
– The Committee approves termination arrangements of Executive
considerations to inform remuneration decisions.
Directors to ensure that there is no reward for failure.
– The Committee has flexibility to adjust incentive outcomes, and to
Simplicity
– The structure comprises fixed remuneration, annual and long-term
incentives only.
– The structure is largely unchanged from previous policies.
– There is a demonstrable link between performance and reward
outcomes.
apply malus and clawback to awards and incentive payments.
– The holding period on PLTIP awards extends the award time
horizon to five years.
– In-employment share ownership guidelines provide a strong
connection to the sustained success of the Company. Post-
employment requirements continue the alignment with Company
success and stakeholder interests.
204
Prudential plc Annual Report 2023
How the Directors’ remuneration policy operates
The remuneration policy was approved by shareholders at our AGM on 25 May 2023 and will apply for a period of up to three years. Although
summarised below for convenience, the full and definitive policy can be found on our website at https://www.prudentialplc.com/~/media/Files/P/
Prudential-V13/policies-and-statements/directors-remuneration-policy-2022.pdf.
Key elements of remuneration
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 policy
Fixed pay
Salary and
benefits
Pension
Short-term
variable pay
Cash bonus
Deferred
bonus
Long-term
variable pay
Three-year
performance
assessment
Prudential
Long Term
Incentive
Plan (PLTIP)
Share
ownership
guidelines
d
o
i
r
e
p
e
c
n
a
m
r
o
f
r
e
P
d
o
i
r
e
p
g
n
d
o
H
i
l
– Salaries reviewed annually with increases generally no greater than 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.
– The maximum opportunity is up to 200% of salary.
– 40% of bonus is deferred for three years. Deferral will be in cash where
share ownership guidelines have been met, or shares where not.
– Awards are subject to the achievement of financial and personal
objectives, with a Pillar I capital underpin aligned with the Hong Kong
Insurance Authority capital framework.
– Award is subject to malus and clawback provisions.
– 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 relative TSR and financial performance, as well as a
business integrity scorecard.
– Awards are subject to malus and clawback provisions.
– Chief Executive Officer guidelines are 400% of salary.
– Executives generally have five years to build this level of ownership.
– Executives 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
What performance means for Executive Director remuneration in 2023
At Prudential, remuneration packages are designed to ensure strong alignment between pay and performance. In 2023 the Group’s
performance was appropriately reflected in the incentive outcomes as set out below, and in the Annual report on remuneration.
2023 AIP outcomes
Measure
Group adjusted operating profit
Group operating free surplus generated
Group cash flow
Group EEV new business profit
Total Group financial measures
Personal objectives
Total bonus
Weighting
20%1
15%1
10%1
55%1
80%
20%
100%
Outturn
20%
15%
10%
55%
80 %
17.4% - 19%
97.4% - 99 %
% achieved
95.0%
99.0%
2021-2023 PLTIP outcomes
Measure
Weighting
Outturn
% achieved
Three-year relative TSR
Return on Embedded Value
Sustainability scorecard
Total PLTIP
50%
30%
20%
100%
0.0 %
8.4 %
19.2 %
27.6 %
Notes
(1) Weighting of measures within the overall 80% for the category.
Prudential plc Annual Report 2023
205
100.0%100.0%100.0%100.0%100.0%87.0%97.4%28.1%95.8%27.6%
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration
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 can be found on the Company’s website at https://www.prudentialplc.com/~/media/Files/P/Prudential-V13/
content-pdf/egroup-remuneration-committee-tors-approved-20231205.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 2023, the Committee met 10 times and also dealt with a number
of matters by email circulation.
The principal responsibilities of the Committee set out in its terms of reference and discharged during 2023 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 and recommending the Directors’ Remuneration Policy, applicable to all Directors of the Board, for approval by shareholders;
– Consulting with shareholders and the principal advisory bodies in respect of the Directors’ remuneration policy ahead of its approval at the
2023 AGM, and discussing decisions taken in respect of the Executive Director’s remuneration arrangements for 2024 (as discussed in the
Annual statement from the Chair of the Remuneration Committee);
– 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 the:
– Chief Risk and Compliance Officer;
– Chief Financial Officer;
– Chief Human Resources Officer; 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.
During 2023, Deloitte LLP was the independent remuneration adviser to the Committee, having been appointed by the Committee following a
competitive tender process during 2021. Deloitte is a member of the Remuneration Consultants’ Group and voluntarily operates under its 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 2023 were £136,100 charged on a fixed fee as well as a time and materials basis. During
2023, 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
considered to be material. During the latter part of 2023, a competitive tender process began for the provision of independent advice to the
Committee. The tender will conclude during 2024 and details will be provided in the Directors’ remuneration report for 2024.
In 2023, the Board conducted an evaluation of its effectiveness, which included an assessment of the Remuneration Committee. No material
issues were identified.
206
Prudential plc Annual Report 2023
Table of 2023 Executive Director total remuneration (the ‘single figure’) - audited information
$000s
Anil Wadhwani1
Mark FitzPatrick2
Total
2023
salary
1,326
229
1,555
2023
taxable
benefits*
486
188
674
2023
total
bonus†
2,638
441
3,079
2023
PLTIP
releases‡
—
313
313
2023
pension
benefits§
174
2023
Other
remuneration1
7,669
Total 2023
fixed
remuneration~
3,113
Total 2023
variable
remuneration~
9,180
Total 2023
remuneration
the ‘single
figure’^
12,293
30
204
—
7,669
447
3,560
754
1,201
9,934
13,494
* Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements and relocation/expatriate benefits. Benefits of
significant value include housing costs for Mr Wadhwani ($324,000), which is in line with Asia practice.
† The total value of the bonus, comprising both the 60 per cent delivered in cash and 40 per cent bonus deferred for three years. Given that Mr Wadhwani has not yet met his
share ownership guideline, the deferred part of the bonus will be into Prudential plc shares. 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 2023 PLTIP awards vesting for all Executive Directors has been calculated based on the average share price over the last three months of 2023
(HKD84.82) 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 2023’ 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 ‘Remuneration decisions taken in relation to the demerger’ section in the 2021 remuneration report. The actual
value of vesting PLTIP awards, based on the share price on the date awards vest, will be shown in the 2024 report. Due to share price depreciation over the vesting period,
the estimated value per share of the 2021 LTIP awards is 48 per cent lower than the value per share at grant. No adjustment to vesting levels has been proposed as a result
of the share price depreciation.
§ 2023 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, pension benefits and the fixed elements of Mr Wadhwani's buyout. Total variable remuneration includes total
bonus, PLTIP awards vesting and variable remuneration elements of Mr Wadhwani's buyout.
^ Each remuneration element is rounded to the nearest $1,000 and totals are the sum of these rounded figures. Total 2023 remuneration has been converted to US dollars
using the exchange rate of 0.8041 for GBP and 7.8289 for HKD. Exchange rate fluctuations will therefore impact the reported value.
Notes
(1) Mr Wadhwani joined Prudential on 25 February 2023 and is paid in Hong Kong dollars. ‘Other remuneration’ consists of the value of replacement awards and payments
made in relation to remuneration forfeited by Mr Wadhwani as a consequence of leaving his former employer, Manulife, and joining Prudential. This includes
compensation for salary, pension and housing benefit ($780k), as well as bonus ($1,637k), forfeited during the period between the end of his employment with Manulife
and the commencement of his employment with Prudential, and the cost to him of buying out his notice period ($347k). The figure also includes an estimated value of
those elements of Mr Wadhwani’s replacement award (an option granted on 21 March 2023) that have no performance conditions or where the performance period
ended in 2023 ($4,905k). The estimated value of the award has been calculated using the share price at the time of award (HKD124.30) for elements with no performance
conditions, and the average share price over the last three months of 2023 (HKD84.82) for those elements with performance conditions. Target vesting has been used to
value this latter element given that performance against the original Manulife targets is not yet known. The actual value, based on the actual share price at vesting and
actual performance outcomes, will be shown in the 2024 report. Further details of Mr Wadhwani's buy-out can be found in the ‘Recruitment arrangements’ section later in
this report.
(2) Mr FitzPatrick stepped down from the Board on 24 February 2023. The salary figure includes his monthly pensionable cash supplement of £30,167. Mr FitzPatrick was paid
in sterling.
Table of 2022 Executive Director total remuneration (the ‘single figure’) - audited information
$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‡
1,255
1,245
2,108
4,608
2022
pension
benefits§
176
Total 2022
fixed
remuneration~
1,842
Total 2022
variable
remuneration~
3,846
139
48
363
2,104
663
4,609
3,012
2,801
9,659
Total 2022
remuneration
the ‘single
figure’^
5,688
5,116
3,464
14,268
* Benefits include (where provided) the cost of providing the use of a car and driver, medical insurance, security arrangements and 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.
In line with the regulations, the value of the 2020 PLTIP awards vesting for all Executive Directors has been recalculated using the actual share prices at vesting (HKD113.10
and HKD110.70) and includes the accumulated dividends delivered in the form of shares. 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 ‘Remuneration decisions taken in relation to the demerger’ section in the 2021 remuneration
report. Due to share price appreciation over the vesting period, the value per share of the 2020 LTIP awards was 8.1 per cent higher 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.
Notes
(1) Mr FitzPatrick received a monthly pensionable cash supplement of £30,167, which is included in the annualised salary figure from 1 April 2022.
(2) Mr Turner was paid in HK dollars, while Messrs Wells and FitzPatrick were paid in sterling.
(3) 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.
Prudential plc Annual Report 2023
207
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
Remuneration in respect of performance in 2023 - audited information
Base salary
Anil Wadhwani’s salary was set on his appointment and was effective from 25 February 2023.
A salary increase of 3 per cent was awarded to Mark FitzPatrick with effect from January 2023. The 2023 average salary increases for other
employees across the Group’s businesses was 6 per cent. In his role as Interim Group Chief Executive, Mark FitzPatrick received a monthly
pensionable cash supplement of £30,167 in addition to his base salary. This amount is included in the figure below.
As a result, Executive Directors received the following base salaries in 2023:
Executive Director
Anil Wadhwani, Chief Executive Officer
Mark FitzPatrick, Interim Group Chief Executive
2023 salary
(local currency)
from
1 January 2023 1
HK$12,281,000
£1,209,000
2023 salary
(USD)2
from
1 January 2023
$1,569,000
$1,504,000
Notes
(1) Anil Wadhwani’s salary effective from 25 February 2023.
(2) 2023 salaries were converted to US dollars using an exchange rate of 0.8041 for GBP and 7.8289 for HKD. All salaries are rounded to the nearest $1,000/£1,000 or HKD
10,000.
Pension benefit entitlements
Pension benefit arrangements for 2023 are set out in the table below. The employer pension contribution available to the wider workforce is
13 per cent of salary.
Executive Director
Anil Wadhwani
Mark FitzPatrick
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.
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 2023
Target setting
For 2023, financial AIP metrics comprised 80 per cent of the bonus opportunity for the Chief Executive Officer and Interim Group Chief Executive
roles. The financial element of Executive Directors’ 2023 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 for Mark FitzPatrick and on appointment for Anil Wadhwani. They reflect the Group’s strategic priorities as set by the Board for 2023.
AIP payments are subject to meeting minimum capital thresholds which are aligned to the Group risk framework and appetites (as adjusted for
any Risk Committee approved counter-cyclical buffers), as described in the Chief Risk and Compliance Officer’s report.
The Committee seeks advice from the 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.
208
Prudential plc Annual Report 2023
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 Chief Risk and Compliance Officer which was approved by the Risk Committee. This report
confirmed that the 2023 results were achieved within the Group’s and businesses’ risk framework and appetite. The 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.
The table below illustrates the weighting of performance measures for 2023 and the level of achievement under the AIP:
Executive Director
Anil Wadhwani1
Mark FitzPatrick1
Weighting of measures
(% of total bonus opportunity)
Group
financial
measures
80%
80%
Personal
objectives
20%
20%
Performance against
measures
(% of max for each
component)
Group
financial
measures
100 %
100 %
2023 AIP
outcome
(% of max
opportunity)
99.0 %
Personal
objectives
95 %
87 %
97.4 %
Maximum 2023
AIP
(% of salary)
Actual 2023
AIP
(% of salary)
2023 salary2
200% 198.0 % 1,332,299
200% 194.8 % 226,562
2023 AIP
award3
2,637,953
441,343
Notes
(1) Anil Wadhwani’s bonus is for the period from appointment on 25 February 2023 and Mark FitzPatrick’s bonus is for the period served as a Director from 1 January to 24
February 2023.
(2) Salaries are converted to US dollars using an exchange rate of 0.8041 for GBP and 7.8289 for HKD.
(3) All bonus awards are subject to 40 per cent deferral for three years and the deferred bonus will be paid in Prudential plc shares.
The Committee determined the 2023 AIP awards 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.
Financial performance
The Committee reviewed performance at its meeting in March 2024. For all the financial metrics, the adjusted stretch targets established by the
Board were exceeded.
The level of performance required for threshold, target and maximum payment against the Group’s 2023 AIP financial measures and the results
achieved are set out below:
2023 AIP measure
Group adjusted operating profit
Group operating free surplus generated
Group cash flow
Group EEV new business profit
Weighting
20%
15 %
10%
55%
Threshold
($m)
2,513
1,261
296
2,155
Target
($m)
2,645
1,328
439
2,394
Stretch target
($m)
Achievement
($m)
2,777
1,394
582
2,514
2,893
1,395
756
3,125
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 neutralising the effect of
interest rates and foreign exchange movements during that year.
Prudential plc Annual Report 2023
209
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
Personal performance
20% of the 2023 annual bonus for each Executive Director is based on the achievement of personal objectives, which may include:
– 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 2024, it concluded that 2023 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 2023
personal objectives. Where applicable, all executives met their individual conduct measures and contributed significantly to the achievement of
Group strategy during 2023.
The below summarises performance against the personal objectives and strategic priorities for the Executive Directors. Assessments were
undertaken by the Chair of the Board.
Anil Wadhwani
2023 personal objectives
Strategy
Key achievements
– An updated strategy was developed and presented alongside half year results in August
2023 to a positive reception from key stakeholder groups.
– Early signs of progress were seen in implementing the updated strategy across the
strategic pillars, with improvements in relationship NPS rankings, growth in agency
channel, health new business profit and the continued expansion of our bancassurance
partner network.
– Quarterly reporting of key metrics provides more regular updates on our progress
Weighting
40%
Performance
relative to target
100 %
towards the longer-term strategic ambitions and targets communicated in August 2023.
People and Culture – A refreshed set of values was co-created with employees, launched in September 2023,
20%
100 %
and is successfully being embedded throughout the organisation.
– The values have been introduced as a material element of employee goal setting and
appraisal processes for 2024, against which performance will be assessed and rewarded.
Stakeholders
– Engagement with investors was positive, focusing on the Group’s updated strategy and
15%
100 %
targets.
– Mr Wadhwani has built on his existing or has established relationships with government
ministers and regulators to understand their perspectives and priorities as he developed
the strategy.
– Prudential’s first Climate Transition Plan was published in March 2023 setting out our
long-term net zero pledge and interim targets, including the upgrade of our WACI
reduction target to 55% by 2030 with an underpin of an internal transition finance
target.
Operating Model
– Organisational structures are being revised to enable us to deliver consistent
15%
87 %
Joint Ventures
performance across the Group and to replicate best practices at speed and scale.
– Mr Wadhwani has started making the key appointments required to support the delivery
of the strategy.
– Established strong relationships with the CEO of ICICI. India has been identified as a
multi-market engine. We are looking to grow our franchise further and continue to
explore options to address the health opportunity in India.
– Active engagement with the joint venture management team and CITIC. Established
engagement with the new Chair of CITIC and with the new insurance regulator (NFRA)
as well as local government bodies.
10%
70 %
Recognising Mr Wadhwani’s performance against his personal objectives, the Committee judged that an assessment of 95% of the portion of
the bonus attributable to personal objectives (20%) was appropriate.
Mark FitzPatrick in the role of Interim Group Chief Executive from 1 January to 24 February 2023
2023 personal objective
Supporting the
transition to the
new Chief Executive
Officer
Achievement
– Facilitated the onboarding of, and smooth transition to, the new CEO:
– Introducing him to regulators, investors and other external stakeholders
– Sharing his knowledge of the Group, its internal and external challenges, customers,
people, culture and values.
– Conducted an effective handover of the FY 2022 reporting process ensuring a
successful presentation of results by the new CEO and CFO.
Performance
relative to target
87 %
Recognising Mr FitzPatrick’s performance against his personal objectives, the Committee judged that an assessment of 87% of the portion of
the bonus attributable to personal objectives (20%) was appropriate.
210
Prudential plc Annual Report 2023
Long-term incentives vesting in respect of performance to 31 December 2023 - audited information
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 determining the
financial targets, the Committee had regard to the stretching nature of the three-year business plan for return on embedded value 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 Chief Risk and Compliance Officer on behalf of the 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 2021 PLTIP award targets excluded Jackson performance, with the exception of the
‘conduct’ measure in the sustainability scorecard which includes Jackson performance until the point of demerger. The TSR peer group was
revised ahead of the 2021 awards being made in order to reflect the post-demerger footprint of the Group.
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.
TSR1
Return on
Embedded Value
(RoEV)2
GWS operating
capital
generation3
ECap operating
capital
generation4
Conduct5
Weighting
Threshold (20 per cent of award vests)
Stretch (100 per cent of award
vests)
Performance achieved
Vesting outcome
50%
30%
Median
8.9%
Upper quartile
Below median
10.9%
9.0%
0 per cent
28.1 per cent
5%
$2,051 million
$2,507 million
Above stretch target
100 per cent
5%
$2,096 million
$2,562 million
Above stretch target
100 per cent
5%
Partial achievement
Stretch achievement
No conduct, culture or governance
issues that resulted in significant
capital add-ons or material fines
100 per cent
Diversity6
Total
5%
33.0%
100% –
37.0%
–
35.3%
–
83 per cent
27.58 per cent
Notes
(1) Group TSR is measured on a ranked basis over three years relative to peers. The peer group for the 2021 awards consists of AIA, Allianz, AXA, China Life, China Pacific
Insurance, China Taiping Insurance, Great Eastern, Manulife Financial, New China Life, Ping An Insurance, Sun Life Financial and Zurich Insurance Group. No adjustments
were made to the peer group in respect of the demerger.
(2) The average three-year Group RoEV relative to the 2021-2023 Board-approved business plan.
(3) Cumulative three-year GWS operating capital generation.
(4) Cumulative three-year ECap Group operating capital generation, less cost of capital (based on the capital position at the start of the performance period).
(5) 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.
(6) Diversity is measured as the percentage of Group Leadership Team (GLT) that is female at the end of 2023. For these purposes, GLT membership includes leaders recruited
by our operating joint venture Prudential BSN Takaful Berhad.
Details of cumulative achievement under the capital measures have not been disclosed as the Committee considers that these are commercially
sensitive and disclosure 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 Chief Risk and Compliance Officer which was approved by the 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 of the 2021 PLTIP awards. The Committee determined the vesting of Mark FitzPatrick’s PLTIP award as set out below:
Executive Director
Mark FitzPatrick
Percentage
of the PLTIP
award vesting
27.58 %
Number of
shares vesting1
28,930
Value of
shares vesting2
$313,434
Notes
(1) The number of shares vesting has been pro-rated to the end of Mr FitzPatrick’s employment and includes accrued dividends. Shares vesting will be subject to a two-year
holding period. The number of shares under award was adjusted to take account of the Jackson demerger.
(2) The share price used to calculate the value of the PLTIP award for Mr FitzPatrick,was the average share price for the three months up to 31 December 2023, being
HKD84.82, converted to US dollars at the exchange rate of 7.8289.
Prudential plc Annual Report 2023
211
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
Long-term incentives awarded in 2023 - audited information
2023 share-based long-term incentive awards
The table below shows the conditional award of shares made to the Chief Executive Officer under the PLTIP in 2023 and the performance
conditions attached to this award.
Executive Director
Anil Wadhwani
Role
Chief Executive Officer
Number of
shares
subject
to award
438,098
Face value of award
% of
salary
(USD)†
400% 6,274,691
Percentage
of awards
released for
achieving
End of
threshold
performance
targets
period
20% 31 December 2025
Weighting of performance conditions
Group
TSR
Business
integrity
RoEV
scorecard§
35% 40% 25%
† Award calculated based on the average share price over the three dealing days prior to the grant date in May, being HKD112.13. The value has been converted to US dollars
at the exchange rate of 7.8289.
§ Each of the five measures within the business integrity scorecard has equal weighting. They are Carbon reduction, GWS capital generation, Group Internal Economic Capital
Assessment (GIECA),Diversity and Conduct.
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 2023 PLTIP awards was revised from 2022 to further reflect the Group’s strategic
focus. Allianz, Axa, Sun Life Financial and Zurich Insurance were removed. The peer group is set out below (additions are denoted by an *):
AIA Group
DBS Group*
MetLife*
China Life Insurance
China Pacific Insurance (CPIC)
China Taiping Insurance
Great Eastern
Hang Seng Bank
New China Life Insurance (NCl)
Ping An Insurance
Manulife Financial
Standard Chartered*
Return on Embedded Value Equity (RoEV)
Performance will be assessed on the average three-year Group RoEV relative to the 2023 to 2025 Board-approved plan. 20 per cent of the award
will vest for achieving the threshold level of 9.2 per cent, increasing to full vesting for reaching the stretch level of at least 12.5 per cent.
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:
Measure
Reduction in weighted average carbon intensity (WACI)2
GWS capital measure3
GIECA measure3
Diversity4
Conduct5
Threshold performance1
(20% vesting)
Stretch performance1
(100% vesting)
25%
Threshold
Threshold
35% female
Partial achievement of Group
expectations
35%
Stretch
Stretch
40% female
Achieving Group
expectations
Notes
(1) Performance below threshold results in nil vesting.
(2) Reduction as at 31 December 2025 compared with the baseline as at 31 December 2019. The baseline and targets have been externally validated, with a threshold WACI
of 299, and a maximum WACI of 280. Please see our Sustainability Report for details on our ambitions and progress to date.
(3) The targets for the GWS capital measure and the GIECA measure are deemed to be commercially sensitive and will be disclosed in the 2025 Annual Report.
(4) Percentage of the Group Leadership Team (GLT) that are female at the end of 2025. The GLT is defined as individuals who occupy a value-creator role across the
organisation and/or individuals who have demonstrated future potential for succession to a value-creator role.
(5) Through strong risk management action, ensure there are no significant conduct/culture/governance issues that result in significant capital add-ons or material fines
212
Prudential plc Annual Report 2023
Recruitment arrangements - audited information
As detailed in the 2022 Directors’ remuneration report, in order to facilitate Mr Wadhwani’s appointment, the Company agreed to replace
remuneration forfeited by him and reimburse costs he incurred as a consequence of his leaving his former employer, Manulife, and joining
Prudential. Details of the recruitment arrangements are set out below.
Cash compensation
The Committee determined that it was appropriate and consistent with the Directors’ remuneration policy to provide the following cash
compensation payments to Mr Wadhwani which, while uncommon from a UK market perspective, given the nature of Mr Wadhwani’s
employment with Manulife, were necessary to facilitate his move to Prudential and ensure his timely appointment as Chief Executive Officer.
Specifically, the Committee decided that it would be appropriate to reimburse Mr Wadhwani for the following amounts he forfeited
on joining Prudential:
– The cost of Mr Wadhwani buying out his notice period with Manulife ($347,000);
– Salary, pension and housing benefit foregone during Mr Wadhwani's non-compete period ($780,000); and
– Bonus ($1.6 million) forfeited for the period from the start of the 2022 performance year to the commencement of Mr Wadhwani's
employment with Prudential. This bonus is subject to a 40% deferral into Prudential shares for three years.
Replacement award
A replacement award was made in relation to share-based awards made by Manulife that were forfeited. In line with the Directors’ remuneration
policy, the Committee is satisfied that the replacement award was made on a like-for-like basis with elements of the award subject to release in
accordance with the original vesting time frames, and where applicable, satisfaction of the Manulife performance conditions attached to the
original awards.
Three types of forfeited awards were replaced:
– Performance shares were replaced at their maximum value (180% of target) but remain subject to satisfaction of the original Manulife
performance conditions over the original performance period (to be determined by the Committee based on performance outcomes published
in the relevant Manulife Management Information Circular expected to be published in March 2024 and March 2025 for the 2021 and 2022
awards respectively);
– Restricted shares were replaced at face value; and
– Market-value stock options were only replaced to the extent that they were 'in the money'.
The replacement award could not be made under any of the Company’s existing incentive plans given the varying structures and terms of the
forfeited awards. Therefore, the replacement award was made under a one-off award agreement entered into on 8 March 2023 in accordance
with Rule 9.4.2 of the UK Listing Rules. The award comprised (i) a cash-settled nominal-cost option over Prudential shares, and (ii) replacement
cash payments.
– Elements of the replacement award that would otherwise have vested before Mr Wadhwani joined the Company were settled in cash
($1.6 million), with a portion used to acquire shares, in Prudential, on behalf of Mr Wadhwani, in line with the requirements of the original
Manulife awards.
– The nominal-cost option was granted to Mr Wadhwani on 21 March 2023 to replace the other forfeited Manulife awards in the following
tranches:
Type of original award
and year of grant1
Replacement
award
Date of grant
No. of
notional
shares under
option
Exercise
price
(HKD)
Performance shares
20212
20223
Restricted shares
20212
20222
Stock options
20212
20222
Nominal-cost
option
Nominal-cost
option
Nominal-cost
option
21 March
2023
168,284
163,004
21 March
2023
62,706
60,738
21 March
2023
7,820
11,552
0.48
0.48
0.48
0.48
0.48
0.48
Face value1
(USD)
End of performance
period (if applicable)
Vesting date Exercise period
2,671,857
31 Dec 2023
2,588,026
31 Dec 2024
March 2024 30 days from approval of
March 2025
vesting4
995,588
964,342
124,159
183,412
n/a
n/a
n/a
n/a
2 Mar 2024 2 - 31 March 2024
1 Mar 2025 1 - 30 March 2025
5 Mar 2024 5 March - 3 April 2024
5 Mar 2025 5 March - 3 April 2025
Notes
(1) Awards were calculated based on the average share price over the 20 dealing days before Mr Wadhwani's employment with Prudential started, being HKD124.30, and have
been converted to US dollars using the exchange rate of 7.8289.
(2) Elements of the replacement award that are reportable within the 'Table of 2023 Executive Director total remuneration' are the 2021 performance shares (given their
performance period ended on 31 December 2023), and all the restricted shares and options (given that these elements are not subject to performance conditions).
(3) The 2022 performance shares (which have a performance period ending on 31 December 2024), will be reported in the 'Table of 2024 Executive Director total
remuneration' in next year's report.
(4) The exercise period will be extended if it ends in a closed period.
Prudential plc Annual Report 2023
213
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
The nominal-cost option is subject to the following key terms:
– Prudential will withhold a portion of any proceeds received on exercise of the nominal-cost option and use it to acquire shares in Prudential on
behalf of Mr Wadhwani, in line with the requirements of the original Manulife awards.
– Malus and clawback may apply at the Committee’s discretion to the nominal-cost option if there is a material restatement of the Group’s
financial statements, a calculation error or misleading data leading to an over vesting of the nominal-cost option, a material breach of law,
regulation or code of conduct, or if personal conduct has caused or has the potential to cause significant reputational or financial damage for
the Group. Clawback may be applied up to two years from vesting.
– If Mr Wadhwani leaves the Group, any unvested element of the nominal-cost option will normally lapse unless he leaves as a good leaver (as
defined in the Directors’ remuneration policy). If there is a takeover of Prudential the nominal-cost option may either vest early or be
exchanged for an equivalent option over shares in the acquiring company. If Mr Wadhwani is a good leaver or there is a takeover the extent
to which the unvested element of the nominal-cost option will vest will be subject to the achievement of relevant performance conditions and,
unless the Committee determines otherwise, time pro-rating.
– The nominal-cost option may be adjusted if there is a variation in the share capital of Prudential or other corporate event. Changes to the
advantage of Mr Wadhwani will not be made to the replacement award agreement unless shareholders give their consent to the change
where the proposed change, if made in relation to a PLTIP award, would require shareholder approval. Benefits under these arrangements will
not be pensionable or transferable.
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 which comprise the Company’s TSR peer
group for the 2023 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 2014 to 31 December 2023 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 reinvested dividends (as measured at
the ex-dividend dates).
Prudential TSR vs FTSE 100 and peer group average – total return over 10-year period to December 2023
n Prudential
n FTSE 100
n Peer group
The information in the table below shows the total remuneration for the Chief Executive Officer over the same period:
$0001
Chief Executive Officer2,3
2014
TT
2015
TT
2015
MW
2016
MW
2017
MW
2018
MW
2019
MW
2020
MW
2021
MW
2022
MW
2022
MFP
2023
MFP
2023
AW
Salary, pension and benefits
Annual bonus payment
2,406
3,501
938
1,077
3,048
1,903
3,029
2,904
2,415
2,673
2,423
2,848
2,122
2,804
2,126
1,355
2,249
3,057
663
693
1,476
2,161
447
441
1,986
2,638
(As % of maximum)
(100%)
(77.3%)
(99.7%)
(99.5%)
(94%)
(95%)
(96%)
(46.0%)
(96.7%)
(96%)
(98%)
(97.4) % (99) %
LTIP vesting
(As % of maximum)
Other payment4
Chief Executive Officer
‘single figure’ of total
remuneration5
16,233
5,174
6,564
4,016
5,955
4,837
2,746
4,286
1,052
2,108
1,255
313
–
(100%)
(100%)
(100%)
(70.8%)
(95.8%)
(62.5%)
(62.5%)
(68.8%)
(17.8%)
(45.5%)
(45.5%)
(27.6) %
–
–
–
–
–
–
–
–
–
–
–
–
–
7,669
22,140
7,189
11,515
9,950
11,042
10,109
7,671
7,768
6,358
3,464
4,892
1,201
12,293
Notes
(1) All remuneration has been converted to USD using the average exchange rate for each respective financial year.
(2) In years where there has been a change in Chief Executive Officer, the figures shown for each individual’s remuneration in that year relate only to their service as Chief
Executive Officer.
(3) The Chief Executive Officers are: TT: Tidjane Thiam MW: Mike Wells MFP: Mark FitzPatrick AW: Anil Wadhwani
(4) Other payment refers to the value of remuneration forfeited by Mr Wadhwani as a consequence of his leaving his former employer, that was provided by the Company.
(5) 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 2023 (for which an estimate is used). For Mark FitzPatrick, the LTIP vesting for 2022 and 2023 also includes performance periods in which he
occupied the role of Group Chief Financial Officer and Chief Operating Officer.
214
Prudential plc Annual Report 2023
31/12/201331/12/201431/12/201530/12/201629/12/201731/12/201831/12/201931/12/202031/12/202130/12/202229/12/202375100125150175
Relative importance of spend on pay
The table below sets out the amounts payable in respect of 2022 and 2023 on all employee pay and dividends:
All employee pay ($m)1
Dividends ($m)2
Notes
(1) All employee pay as taken from note B2.1 to the financial statements.
(2) Dividends paid in the year as taken from note B5 to the financial statements.
2022
1,099
474
2023
1,162
533
Percentage
change
6 %
12 %
Percentage change in remuneration
The table below illustrates the year-on-year change in remuneration for each Director compared to a wider employee comparator group:
Salary (% change)
Benefits (% change)
Bonus9 (% change)
2022-23
2021-22
2020-21
2019-20
2022-23
2021-22
2020-21
2019-20
2022-23
2021-22
2020-21
2019-20
Executive Directors1
Anil Wadhwani2
Mark FitzPatrick2
Chair and Non-executive Directors4
Shriti Vadera3
Jeremy Anderson4
Arijit Basu5
Chua Sock Koong4,6
David Law
Ming Lu6
Philip Remnant7
George Sartorel5
Claudia Suessmuth Dyckerhoff8
Tom Watjen7
Jeanette Wong6
Amy Yip
UK-based employees
–
–
(83) % 39% 3% 1% (40) % 31% 15% 35% (83) % 39% 46% (27) %
–
–
–
–
–
–
–
–
–
–
1 % 2% 907%
12 % 3% 13%
–
198 %
–
5 % 70%
0% 2% 6% 1%
–
–
–
–
0% 58%
–
(59) % 1 % 0% 1%
–
34 %
–
–
(60) % (9)% (4)% 10%
–
0% 74%
–
–
–
–
–
–
–
10 % 35%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0% 1% 0% 0%
–
6.0 % 6.7 % 3.1 % 3.8 % 45.1 % (7.3) % 0.7 % (4.0) % 143 % 7.9 % 5.8 % (7.3) %
–
–
–
–
–
–
–
Notes
(1) 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.
(2) Mark FitzPatrick served as Interim Group Chief Executive until 24 February 2023. Anil Wadhwani was appointed Chief Executive Officer from 25 February 2023.
(3) Shriti Vadera joined the Board and the Nomination & Governance 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.
(4) Fluctuations in Non-executive Directors’ pay are due to changes in Committee memberships.
(5) Arijit Basu and George Sartorel joined the Board in 2022. The changes in pay in 2022-23 reflect their pro-rated pay for 2022.
(6) Chua Sock Koong, Ming Lu and Jeanette Wong joined the Board in 2021. The changes in pay in 2021-22 reflect their pro-rated pay for 2021.
(7) Philip Remnant and Tom Watjen both retired from the Board on 25 May 2023.
(8) Claudia Suessmuth Dyckerhoff joined the Board on 1 January 2023.
(9) The year-on-year change in bonus for UK-based employees between 2022 and 2023 reflects changes in the structure of their bonus plan and business performance.
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 has 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 each year from 2023 back to 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. The increase in the level of taxable
benefit from 2022 to 2023 for employees reflects the extension of private medical cover offered to employees and the introduction of critical
illness cover.
Chief Executive Officer pay compared with employee pay and gender pay gap
As reported in prior years, 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.
Prudential plc Annual Report 2023
215
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
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 2023, 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.
Directors’ remuneration is considered appropriate compared to the wider workforce. In 2023, salary increases for other employees across the
Group’s businesses were 6 per cent while Executive Directors received 3 per cent salary increases in January 2023. Employee engagement is led
by the Responsibility & Sustainability Working Group. The Strategic Report describes how it discharged this responsibility during 2023.
The Group operates PRUSharePlus, an all-employee share purchase plan available to employees in 25 countries – 15 in Asia, eight in Africa and
two in Europe – allowing our people to invest in the Company’s shares. Similar Syariah-compliant plans are available in our Syariah business. Not
only do these plans connect all employees to the success of the Company and interests of other shareholders, but they also mean that 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 third Prudential Recharge Day on 15 September 2023. All
employees Group-wide were encouraged to take the day as an extra day off to rest and recharge, and to spend time with family and friends, as
referred to in the ‘Stakeholders’ experience’ section.
Chair and Non-executive Director remuneration in 2023 - audited information
Given the change to the geographic focus of the Group, it was felt to be more appropriate for the Non-executive Chair's and Non-executive
Directors' fees to be denominated in our reporting currency (US dollars) rather than in sterling. Major shareholders were consulted on this in July
and were supportive of the change. The Directors’ remuneration policy, approved by shareholders at the 2023 AGM, anticipated this change.
The Chair and Non-executive Director fees were last increased in July 2022, in line with the increase awarded to Executive Directors in January
2022. No increases were made in 2023.
Chair fees
Shriti Vadera’s fee was revised on 1 July 2022 by 3 per cent, to £788,000. The fee was then re-denominated to US dollars with effect from
1 August 2023 to $966,000, using the average exchange rate for the six-month period 1 December 2022 to 31 May 2023 of 0.815806 and
rounded to the nearest $1,000.
Non-executive Directors’ fees
The Non-executive Directors’ fees were re-denominated to US dollars with effect from 1 August 2023 on the same basis as the Chair's fee.
Changes in US dollar amounts reflect changes in the exchange rate.
Annual fees
Basic fee
Additional fees:
Audit Committee Chair
Audit Committee member
Remuneration Committee Chair
Remuneration Committee member
Risk Committee Chair
Risk Committee member
Nomination & Governance Committee Chair1
Nomination & Governance Committee member
Responsibility & Sustainability Working Group Chair
Responsibility & Sustainability Working Group member
Senior Independent Director
From
1 July 2022
(£)2
102,000
75,000
30,000
65,000
30,000
75,000
30,000
–
15,000
45,000
22,000
50,000
From
1 July 2022
($)2
126,000
From
1 August 2023
($)
125,000
93,000
37,000
80,000
37,000
93,000
37,000
–
19,000
56,000
27,000
62,000
92,000
37,000
80,000
37,000
92,000
37,000
–
18,000
55,000
27,000
61,000
Notes
(1) There is no fee paid for the role of Nomination & Governance Committee Chair.
(2) Fees were denominated in sterling and converted to USD using an exchange rate of 0.8088 for 2022 for reporting purposes.
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.
216
Prudential plc Annual Report 2023
The resulting fees paid to the Chair and Non-executive Directors are:
Chair
Shriti Vadera
Non-executive Directors
Jeremy Anderson
Arijit Basu1
Chua Sock Koong
David Law
Ming Lu5
Philip Remnant2
George Sartorel3
Claudia Suessmuth Dyckerhoff4
Tom Watjen2
Jeanette Wong
Amy Yip
Total
2023 fees
($000)
2022 fees
($000)
2023
taxable
benefits*
($000)
2022
taxable
benefits*
($000)
Total 2023
remuneration:
the ‘single
figure’
($000)†‡
Total 2022
remuneration:
the ‘single
figure’
($000)†‡
974
320
190
225
293
182
115
260
190
82
228
163
960
284
63
212
291
180
279
192
–
205
226
161
137
124
1,111
1,084
1
1
1
1
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
321
191
226
294
182
115
261
191
82
228
163
284
63
212
291
180
279
192
0
205
226
161
3,222
3,053
143
124
3,365
3,177
* Benefits include the cost of providing the use of a car and driver and medical insurance where applicable.
† 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 an exchange rate of 0.8088 for the 2022 single figure calculation and 0.8041 for the period 1 January to
31 July 2023 for the 2023 single figure calculations. As Non-executive Directors and the Chair do not receive variable remuneration components, the table above does not
include a sum of total fixed and total variable remuneration.
Notes
(1) Arijit Basu joined the Board on 1 September 2022.
(2) Philip Remnant and Tom Watjen both retired from the Board on 25 May 2023.
(3) George Sartorel joined the Board on 14 January 2022.
(4) Claudia Suessmuth Dyckerhoff joined the Board on 1 January 2023.
(5) Ming Lu donates his fee to Asia Art Archive, an independent non-profit organisation based in Hong Kong.
Prudential plc Annual Report 2023
217
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
Statement of Directors’ shareholdings - audited information
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 ‘Additional remuneration disclosures’
section. It is only these shares that count towards the share ownership guidelines.
1 January 2023
(or on date of
appointment)
31 December 2023
(or on date of stepping down)2
Total
beneficial
interest
(number of
shares)
Number
of shares
acquired
during the
year
Number
of shares
disposed of
during the
year
Total
beneficial
interest*
(number of
shares)
Number
of shares
subject to
performance
conditions†
Total interest
in shares
Share ownership guidelines
Share
ownership
guidelines‡
(% of
salary/fee)
Beneficial
interest as a
percentage
of basic
salary/
basic fees§
67,500
–
–
42,900
308,566
9,157
29
–
–
3,804
11,054
7,000
7,916
–
5,600
–
–
–
5,000
4,800
7,500
7,500
10,340
9,600
9,791
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67,500
–
67,500
100%
82%
42,900
308,595
438,098
763,861
480,998
1,072,456
400%
32%
250% 343%
9,157
3,804
11,054
12,600
7,916
5,000
4,800
15,000
10,340
9,600
9,791
–
–
–
–
–
–
–
–
–
–
–
9,157
3,804
11,054
12,600
7,916
5,000
4,800
15,000
10,340
9,600
9,791
100%
100%
86%
36%
100% 103%
100% 118%
100%
100%
100%
74%
47%
45%
100% 140%
100%
100%
100%
97%
90%
92%
Chair
Shriti Vadera
Executive Directors
Anil Wadhwani1
Mark FitzPatrick2
Non-executive Directors
Jeremy Anderson
Arijit Basu3
David Law
Ming Lu
Philip Remnant4
George Sartorel3
Claudia Suessmuth Dyckerhoff3
Chua Sock Koong
Tom Watjen 4, 5
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
2023 and 19 March 2024.
† Further information on share awards subject to performance conditions are detailed in the ‘share-based long-term incentive awards’ part of the ‘Additional remuneration
disclosures’ section.
‡ Holding requirement under 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 2023 (HKD91.61) and the exchange rate of 0.8041 for GBP and 7.8289 for HKD.
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) Anil Wadhwani was appointed on 25 February 2023. Although he has not yet met his share ownership guidelines, in line with the Directors' remuneration policy, he has five
years from the date of his appointment to do so.
(2) Mark FitzPatrick stepped down from the Board on 24 February 2023 and is subject to post-employment shareholding guidelines.
(3) Board appointment dates: Arjit Basu - 1 September 2022; George Sartorel - 14 January 2022; and Claudia Suessmuth Dyckerhoff - 1 January 2023.
(4) Philip Remnant and Tom Watjen both retired from the Board on 25 May 2023.
(5) For the 1 January 2023 and 25 May 2023 figures, Tom Watjen’s beneficial interest in shares is made up of 5,170 ADRs (representing 10,340 ordinary shares).
218
Prudential plc Annual Report 2023
Directors’ terms of employment
Details of the service contract of the Chief Executive Officer 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 Executive Director service
contracts 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
Anil Wadhwani
Date of contract
Notice period
to the
Company
Notice period
from the
Company
25 February 2023
12 months
12 months
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 2024 AGM
Chair
Shriti Vadera (Chair from 1 January 2021)
1 May 2020
12 months
Non-executive Director
Philip Remnant1
David Law
Tom Watjen1
Amy Yip
Jeremy Anderson
Ming Lu
Chua Sock Koong
Jeanette Wong
George Sartorel
Arijit Basu
Claudia Suessmuth Dyckerhoff
1 January 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
Notes
(1) Philip Remnant and Tom Watjen both retired from the Board on 25 May 2023.
4 years
n/a
8 years 8 months
n/a
4 years 8 months
4 years 4 months
3 years
3 years
3 years
2 years 4 months
1 year 8 months
1 year 4 months
Prudential plc Annual Report 2023
219
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
Payments to past Directors and payments for loss of office - audited information
Payments to past Directors, as they relate to their Directorships, are described below. There were no additional payments to Directors for loss of
office in 2023.
Arrangements for James Turner
As reported in 2022, James Turner stepped down from the Board on 31 December 2022, but remained Group Chief Financial Officer and a
member of the Group Executive Committee. Salary, pension and benefits continued to be paid to Mr Turner whilst he was a member of the
Group Executive Committee. During this period, Mr Turner received benefits in respect of a tax liability, housing benefit and the cost of tax return
preparation support (totalling $173,000), which related to periods he served while a Director of the Company. Details of remuneration
arrangements associated with his stepping down from the Board were disclosed in full in the 2022 Annual Report.
Subsequently, and as announced on 31 May 2023, James resigned as Chief Financial Officer in light of an investigation into a Code of Conduct
issue relating to a recruitment situation. He remained available to the Group for a period of four months, to 30 September 2023, to support a
smooth transition to his successor.
The Committee determined that any outstanding unvested long-term incentive awards would lapse at the end of Mr Turner’s employment and
that an adjustment may be made in the future to other awards, if appropriate in line with the provisions of the policy and in line with the rules of
the relevant plans. Deferred bonus awards remain subject to the plan rules including malus and clawback provisions. The ‘Post Directorship
guidelines’ under the Policy will continue to apply.
Arrangements for Mark FitzPatrick
The arrangements for Mark FitzPatrick during 2023 were implemented in line with the 2022 Directors’ remuneration report and are detailed in
the relevant sections of this report. Full details of remuneration arrangements associated with his stepping down from the Board were disclosed
in full in the 2022 Annual Report.
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.
As disclosed in last year’s Directors’ remuneration report, Mike Wells stepped down as Chief Executive on 1 April 2022 and subsequently retired in
July 2022. The treatment of his outstanding awards and other remuneration elements was disclosed in 2022. Mike holds a PLTIP award granted
in 2021 and as set out in the ‘Remuneration in respect of performance in 2023’ the performance condition attached to this award was partially
met and 27.58 per cent will be released in 2024.
Award
PLTIP
Number of shares
vesting1
Value of shares
vesting2
32,491
$352,015
Notes
(1) The number of shares vesting has been pro-rated to reflect time employed and includes accrued dividends.
(2) The share price used to calculate the value was the average share price for the three months up to 31 December 2023, being HKD84.82, converted into US dollars using an
exchange rate of 7.8289.
220
Prudential plc Annual Report 2023
Statement of voting at general meeting
The Directors’ remuneration policy and 2022 Directors’ remuneration report were both approved by shareholders at the 2023 Annual General
Meeting. Both 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
To approve the Directors’ remuneration policy (2023 AGM) 2,176,820,906
% of
votes cast
95.71
Votes against
97,529,901
% of
votes cast
4.29
Total votes cast
Votes withheld
2,274,350,807 12,342,304
To approve the Directors’ remuneration report (2023 AGM) 2,096,173,741
94.69 117,660,098
5.31
2,213,833,839 72,859,272
Statement of implementation of remuneration policy in 2024
Base salary
The Chief Executive Officer’s remuneration package was reviewed in 2023, with any changes effective from 1 January 2024. When the
Committee made these decisions, it considered the expected salary increases budgeted for other employees in 2024, as well as external market
reference points, to provide context to the Committee based on data for the 2024 TSR peer group, Asia-focused insurers and Asia financial
services firms.
After due deliberation and following consultation with shareholders, the Committee considered that there should be no increase to Mr
Wadhwani’s salary for 2024. This compares to an average 4 per cent salary increase received by the wider Prudential workforce. On this basis,
2024 will be the twelfth 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.
Mr Wadhwani’s annual salary, effective 1 January 2024, will remain as HKD12,281,000.
2024 pension entitlements
Mr Wadhwani’s 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 Hong Kong, in line with the local requirements.
Annual bonus
Award levels
Anil Wadhwani will remain eligible for a maximum bonus opportunity of 200 per cent of salary.
Performance conditions
For 2024, the AIP for the Chief Executive Officer will continue to be based 80 per cent on financial measures and 20 per cent on personal and
strategic objectives. The financial AIP measures and weightings will change to align with the new strategy announced in 2023, increasing the
focus on new business profit and operating free surplus generated, as described in the Committee Chair’s statement. The resulting 2024
financial AIP measures and weightings are as follows:
– Group EEV new business profit – 45 per cent;
– Group adjusted operating profit – 20 per cent;
– Group operating free surplus generation – 20 per cent; and
– Group holding Company cash flow – 15 per cent.
Prudential plc Annual Report 2023
221
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Annual report on remuneration continued
2024 share-based long-term incentive awards
Award levels
Anil Wadhwani will be eligible to receive a 2024 PLTIP award of 425 per cent of salary (an increase from 400% in 2023). Please see the
Committee Chair’s statement for further information.
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.
Performance conditions
Performance conditions for the 2024 PLTIP award have been revised to ensure that they (together with the 2024 AIP measures) are aligned with
the Company’s strategic ambitions going forward. Consequently:
– NBP and Life and Asset Management Gross OFSG will be introduced as LTIP measures. The ability to repeatedly demonstrate growth in NBP
over a sustained period (ie through successive LTIP cycles) is a key driver for value creation. Full vesting of the NBP and OFSG elements of the
2024 PLTIP will only be achieved if CAGR over the three-year performance period is aligned with our stated ambitions.
– The TSR measure will be retained, with a greater weighting to further enhance alignment with shareholders’ interests.
– The business integrity scorecard will be retained with an unchanged weighting. In order to support our just and inclusive transition to net zero,
the existing WACI measure will have an underpin based on the value of transition finance, which must be met for any part of the WACI
measure to vest. This underpin will consider the value of qualifying investments committed to support the transition of the world to a lower
carbon future. Any vesting of this element of the PLTIP will be subject to both the Risk and Remuneration Committees being satisfied that the
value of funds committed is appropriate after considering the broader economic environment over the performance period.
The measures, weightings and targets for the 2024 PLTIP awards for Mr Wadhwani are summarised below:
Measure
Relative TSR2
NBP3
Gross OFSG4
Business integrity scorecard
Weighting
45%
Threshold1
20% vesting
Maximum
100% vesting
Median
Upper quartile
15% $10,305m
$8,279m
15%
25%
$13,942m
$11,202m
see below
Notes
(1) Performance below Threshold results in 0% vesting.
(2) Relative TSR is measured on a local currency basis since this has the benefit of simplicity and directness of comparison. The TSR peer group reflects that used for 2023
awards and comprises: AIA Group, China Life Insurance, China Pacific Insurance Company, China Taiping Insurance, DBS Group, Great Eastern, Hang Seng Bank, Manulife
Financial, MetLife, New China Life, Ping An Insurance and Standard Chartered.
(3) NBP measures the value creation of writing new business and is a key metric to indicate growth.
(4) Gross OFSG will be calculated as the operating free surplus generated within local businesses before investment in new business and any central costs.
Under the business integrity scorecard, performance will be assessed for each of the five measures at the end of the three-year performance period:
Measure
Reduction in WACI1
GWS capital measure2, 6
GIECA measure3, 6
Diversity4
Conduct5
Weighting
(% of total LTIP)
Threshold performance
(20% vesting)
Stretch performance
(100% vesting)
5%
5%
5%
5%
47.5 %
Threshold
Threshold
38% female
52.5 %
Stretch
Stretch
42% female
5% Partial achievement of Group expectations
Achieving Group expectations
Notes
(1) WACI indicator at the end of the performance period (31 December 2026) compared with the baseline number as at 31 December 2019. This element is subject to a
transition finance underpin which must be met before any part of the WACI element vests.
(2) Cumulative three-year GWS operating capital generation relative to threshold.
(3) Group Internal Economic Capital Assessment (GIECA) surplus generation is a Pillar 2 economic capital metric.
(4) Percentage of females in the GLT at the end of the performance period.
(5) Through strong risk management action, ensure there are no significant conduct/culture/governance issues that result in significant capital add-ons or material fines.
(6) The targets for these metrics are deemed to be commercially sensitive and if disclosed would put the Company at a disadvantage compared to its competitors. They will be
published in the Annual Report for the final year of the performance period.
Chair and Non-executive Directors
Fees for the Chair and Non-executive Directors were reviewed in 2023 with no changes made, other than the re-denomination into US dollars
effective from 1 August 2023, as set out in the ‘Chairman and Non-executive Director remuneration in 2023’ section. The next regular fee level
review will be conducted in 2024.
Chua Sock Koong
Chair of the Remuneration Committee
19 March 2024
222
Prudential plc Annual Report 2023
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(vi) of the ‘Additional Financial Information’ section.
Share-based long-term incentive awards
Plan name
Year of
award
Conditional
share awards
outstanding
at 1 Jan 2023
Conditional
awards in
2023
Market price
at date of
award
Anil Wadhwani
PLTIP
2023
Mark FitzPatrick
(Number of
shares)
(Number of
shares)
–
–
438,098
438,098
PLTIP
PLTIP
PLTIP
PLTIP
2020
2021
2022
2022
181,137
130,467
182,131
270,126
763,861
–
–
–
–
(pence)
1,125
1,050
1,496
1,134
1,030
Rights
exercised in
2023
Rights
lapsed in
2023
Dividend
equivalents
on vested
shares1
(Number of
shares
released)
Rights
lapsed in
2023
following
leaving the
company
Conditional
share awards
outstanding
on date of
leaving the
Company2
(Number of
shares)
Conditional
share awards
outstanding at
31 December
2023
(Number of
shares)
Date of
end of
performance
period
–
–
–
–
–
–
6,574
79,678
94,885
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130,467
25,561
182,131
93,979
270,126 148,344
6,574
79,678
94,885
582,724 267,884
438,098 31 Dec 25
438,098
– 31 Dec 22
104,906 31 Dec 23
88,152 31 Dec 24
121,782 31 Dec 24
314,840
Notes
(1) A dividend equivalent was accumulated on these awards.
(2) Mark FitzPatrick stepped down from his role as Interim Group Chief Executive on 24 February 2023 and subsequently left the Company on 30 September 2023.
Other share awards
The table below sets out Executive Directors’ deferred bonus share awards.
Year of
grant
Conditional
share awards
outstanding
at 1 Jan
2023
(Number of
shares)
Conditionally
awarded in
2023
(Number of
shares)
Dividends
accumulated
in 20231
(Number of
shares)
Shares
released
in 2023
(Number of
shares)
Conditional
share awards
outstanding
on date of
leaving the
Company2
(Number of
shares)
Dividends
accumulated
in 2023 after
leaving the
company2
(Number of
shares)
Conditional
share awards
outstanding
at 31
December
2023
(Number of
shares)
Date of end of
restricted
period
Date of
release
Market
price at
date of
award
Market
price at
date of
vesting or
release
(pence)
(pence)
Anil Wadhwani
Deferred 2023
annual
incentive award 2023
Mark FitzPatrick
Deferred 2020
annual
incentive award 2020
Deferred 2021
annual
incentive award 2021
Deferred 2022
annual
incentive award 2022
Deferred 2023
annual
incentive award 2023
–
–
33,301
33,301
199
199
–
52,803
25,865
48,691
52,803
228
429
–
–
33,500 31 Dec 25
1183.0
33,500
– 31 Dec 22 19 May 23 1047.0 1178.0
26,093
155
26,248 31 Dec 23
1495.5
49,120
293
49,413 31 Dec 24
1133.5
127,359
74,615
74,615
74,615
657 52,803
149,828
445
893
75,060 31 Dec 25
1183.0
150,721
Notes
(1) A dividend equivalent was accumulated on these awards.
(2) Mark FitzPatrick stepped down from his role as Interim Group Chief Executive on 24 February 2023 and subsequently left the Company on 30 September 2023.
Prudential plc Annual Report 2023
223
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
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.
Participants are 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.
Share Incentive Plan (SIP)
UK-based Executive Directors are also eligible to participate in the Company’s Share Incentive Plan (SIP). All UK-based employees are 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 FitzPatrick1
Share Incentive
Plan awards held
in Trust
at 1 Jan 2023
(Number of
shares)
962
Partnership shares
accumulated
in 2023
(Number of
shares)
134
Matching shares
accumulated
in 2023
(Number of
shares)
36
Dividend shares
accumulated
in 2023
(Number of
shares)
15
Year of initial
participation
2017
Share Incentive
Plan awards held
in Trust
at date of leaving
the Company
(Number of
shares)
1,147
Note
(1) Mark FitzPatrick stepped down from his role as Interim Group Chief Executive on 24 February 2023 and subsequently left the Company on 30 September 2023. The
number of shares shown at date of leaving the company includes an entitlement to matching and dividend shares.
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.
224
Prudential plc Annual Report 2023
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 2023 was 0.13 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.
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 2023.
Of the five individuals with the highest emoluments in 2023, one was an Executive Director for the majority of the year whose emoluments are
disclosed in this report. The aggregate of the emoluments of the other four individuals for 2023 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 contribution
Performance-related pay
Payments made on appointment
Payments made on separation
Total1
Their emoluments for 2023 were within the following bands:
Remuneration band HKD
4,500,001 - 5,000,000
7,500,001 - 8,000,000
9,000,001 - 9,500,000
15,000,001 - 15,500,000
19,000,001 - 19,500,000
20,500,001 - 21,000,000
24,500,001 - 25,000,000
31,000,001 - 31,500,000
33,500,001 - 34,000,000
41,500,001 - 42,000,000
42,500,001 - 43,000,000
96,000,001 - 96,500,000
Remuneration band USD equivalent
574,800 - 638,700
958,000 - 1,021,900
1,149,600 - 1,213,500
1,916,000 - 1,979,800
2,426,900 - 2,490,800
2,618,500 - 2,682,400
3,129,400 - 3,193,300
3,959,700 - 4,023,600
4,279,000 - 4,342,900
5,300,900 - 5,364,700
5,428,600 - 5,492,500
12,262,300 - 12,326,100
Five highest paid
Senior management
HKD000
34,087
4,333
$000
4,354
553
110,641
14,132
–
–
–
–
HKD000
75,348
8,138
184,542
63,661
–
$000
9,624
1,039
23,572
8,132
–
149,061
19,039
331,689
42,367
Number of employees
Five highest
paid2
Senior
management
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
Note
(1) Further detail on the payments made to senior management can be found in note B2.3 to the IFRS financial statements.
(2) Excludes an Executive Director, whose remuneration is disclosed in this report.
Prudential plc Annual Report 2023
225
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Financial
Statements
226
Prudential plc Annual Report 2023
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
229
230
231
232
233
Prudential plc Annual Report 2023
227
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Group IFRS financial results
Section
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Consolidated statement of cash flows
Section
A
A1
A2
Basis of preparation and accounting policies
Basis of preparation and exchange rates
New accounting pronouncements in 2023
A2.1 Adoption of IFRS 17 and IFRS 9
A2.2 Adoption of other new accounting
pronouncements
A3
Accounting policies
A3.1 Critical accounting policies, estimates and
judgements
A3.2 New accounting pronouncements not yet
effective
B
B1
Earnings performance
Analysis of performance by segment
B1.1 Segment results
B1.2 Determining operating segments and
performance measure of operating segments
B1.3 Analysis of adjusted operating profit by driver
B1.4 Revenue
B1.5 Net insurance and reinsurance finance income
(expense)
Page
229
230
231
232
233
Page
234
234
235
235
241
241
241
248
249
249
249
250
251
253
256
B1.6 Additional segmental analysis of profit after tax
256
B2
Insurance service expenses and other
expenditure
B2.1 Staff and employment costs
B2.2 Share-based payment
B2.3 Key management remuneration
B2.4 Fees payable to the auditor
B3
Tax charge
B3.1 Total tax charge by nature
B3.2 Reconciliation of effective tax rate
B4
B5
C
C1
Earnings per share
Dividends
Financial Position
Group assets and liabilities
Group investments by business type
Other assets and liabilities
Cash and cash equivalents
Provisions
C1.1
C1.2
C1.3
C1.4
C2
Measurement of financial assets and liabilities
C2.1
C2.2
C2.3
Determination of fair value
Valuation hierarchy
Additional information on financial
instruments
257
257
258
260
260
261
261
262
263
264
265
265
265
268
268
268
269
269
270
272
228
Prudential plc Annual Report 2023
Section
C3
Insurance and reinsurance contracts
C3.1 Group overview
C3.2 Analysis of movements in insurance and
reinsurance contract balances (excluding
JVs and associates)
C3.3 Analysis of movements in insurance and
reinsurance contract balances (including
JVs and associates)
C3.4 Products and determining contract liabilities
C4
Intangible assets
C4.1 Goodwill
C4.2 Other intangible assets
C5
Borrowings
C5.1 Core structural borrowings of shareholder-
financed businesses
C5.2 Operational borrowings
C6
Risk and sensitivity analysis
C6.1 Insurance operations
C6.2 Eastspring and central operations
C7
Tax assets and liabilities
C7.1 Current tax
C7.2 Deferred tax
C8
C9
Share capital, share premium and own shares
Capital
C9.1 Group objectives, policies and processes for
managing capital
C9.2 Local capital regulations
C9.3 Transferability of capital resources
C10
Property, plant and equipment
D
D1
D2
D3
D4
D5
Other information
Contingencies and related obligations
Post balance sheet events
Related party transactions
Commitments
Investments in subsidiary undertakings, joint
ventures and associates
D5.1 Basis of consolidation
D5.2 Dividend restrictions and minimum capital
requirements
D5.3 Investment in joint ventures and associates
D5.4 Related undertakings
Page
275
276
277
283
292
294
294
295
296
296
296
297
298
300
301
301
301
302
303
303
303
304
305
307
307
307
308
308
309
309
310
310
312
Consolidated income statement
Insurance revenue
Insurance service expense:
Claims incurred
Directly attributable expenses incurred
Amortisation of insurance acquisition cash flows
Other insurance service expenses
Net expense from reinsurance contracts held
Insurance service result
Investment return:
Interest revenue calculated using the effective interest method
Other investment return on financial investments
Fair value movement on investment contract liabilities
Net insurance and reinsurance finance income (expense):
Net finance (expense) income from insurance contracts
Net finance income (expense) from reinsurance contracts held
Net investment result
Other revenue
Non-insurance expenditure
Finance costs: interest on core structural borrowings of shareholder-financed businesses
(Loss) gain attaching to corporate transactions
Share of loss from joint ventures and associates, net of related tax
Profit (loss) before tax (being tax attributable to shareholders’ and policyholders’ returns) note
Tax charge attributable to policyholders' returns
Profit (loss) 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 (loss) for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Profit (loss) for the year
Earnings per share (in cents)
Based on profit (loss) attributable to equity holders of the Company:
Basic
Diluted
Note
B1.4
2023 $m
9,371
2022* $m
8,549
(2,913)
(1,258)
(2,745)
(197)
(2,563)
(1,221)
(2,453)
(30)
(7,113)
(6,267)
(171)
2,087
(105)
2,177
340
9,423
9,763
(24)
(8,839)
191
(8,648)
1,091
369
(990)
(172)
(22)
(91)
2,272
(175)
2,097
(560)
175
(385)
1,712
237
(29,617)
(29,380)
67
28,623
(1,193)
27,430
(1,883)
436
(1,019)
(200)
55
(85)
(519)
(124)
(643)
(478)
124
(354)
(997)
1,701
(1,007)
11
1,712
10
(997)
2023
2022*
62.1¢
61.9¢
(36.8)¢
(36.8)¢
B1.4
B1.5
B1.5
B1.4
B2
B1.1
D5.3
B3.1
B3.2
B1.6
Note
B4
*
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1. Accordingly, the comparative
results and the related notes have been re-presented from those previously published.
Note
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.
Prudential plc Annual Report 2023
229
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Consolidated statement of comprehensive income
Profit (loss) for the year
Other comprehensive income (loss):
Exchange movements arising during the year
Valuation movements on retained interest in Jackson classified as available-for-sale under IAS 39: note
Unrealised (loss) arising during the year
Deduct net gains included in the income statements on disposal
Total items that may be reclassified subsequently to profit or loss
Valuation movements on retained interest in Jackson classified as fair value through other comprehensive income
under IFRS 9 note
Total items that will not be reclassified subsequently to profit or loss
2023 $m
1,712
2022* $m
(997)
(135)
(613)
(125)
(62)
(187)
(800)
(135)
8
8
Total comprehensive income (loss) for the year
1,585
(1,797)
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income (loss) for the year
1,585
(1,797)
–
–
1,585
(1,797)
*
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1. Accordingly, the comparative
results have been re-presented from those previously published.
Note
On the adoption of IFRS 9 at 1 January 2023, the Group elected to measure its retained interest in the equity securities of Jackson at fair value through other comprehensive
income. The Group has subsequently disposed of its remaining interest in Jackson in 2023. In 2022, these securities were measured at available-for-sale under IAS 39.
230
Prudential plc Annual Report 2023
Consolidated statement of changes in equity
Reserves
Profit for the year
Other comprehensive (loss) income
Total comprehensive income (loss) for the year
Transactions with owners of the Company
Dividends
Transfer of fair value reserve following disposal of
investment in Jackson
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
Year ended 31 Dec 2023 $m
Note
Share
capital
Share
premium
Retained
earnings
Translation
reserve
Fair value
reserve
under
IFRS 9
Share-
holders'
equity
Non-
controlling
interests
Total
equity
B5
C8
–
–
–
–
–
–
–
1
–
1
–
–
–
–
–
–
–
3
–
3
1,701
–
–
(124)
1,701
(124)
(533)
71
(5)
16
–
25
–
–
–
–
–
–
–
8
8
–
(71)
–
–
–
–
1,701
(116)
11
(11)
1,712
(127)
1,585
–
1,585
(533)
(7)
(540)
–
(5)
16
4
25
–
–
–
–
–
–
(5)
16
4
25
1,275
(124)
(63)
1,092
(7)
1,085
182
183
5,006 10,653
5,009 11,928
827
703
63 16,731
167 16,898
– 17,823
160 17,983
Year ended 31 Dec 2022* $m
Note
Share
capital
Share
premium
Retained
earnings
Translation
reserve
Available-for-
sale
reserve under
IAS 39
Share-
holders'
equity
Non-
controlling
interests
Total
equity
Reserves
Profit (loss) for the year
Other comprehensive loss
Total comprehensive 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 decrease in equity
Balance at 1 Jan
As previously reported
Effect of initial application of IFRS 17 and
classification overlay of IFRS 9, net of tax
As restated after effect of changes
Balance at 31 Dec
–
–
–
–
–
–
(4)
(474)
24
49
–
–
(3)
–
–
–
–
–
–
–
–
–
(1,007)
–
–
(1,007)
10
(997)
–
(603)
(187)
(790)
(10)
(800)
(1,007)
(603)
(187) (1,797)
–
(1,797)
–
–
–
–
–
–
–
–
–
–
(474)
(8)
(482)
24
49
(4)
(3)
–
–
–
–
24
49
(4)
(3)
(4) (1,411)
(603)
(187) (2,205)
(8) (2,213)
182
5,010
10,216
1,430
250
17,088
176
17,264
–
–
1,848
–
–
1,848
(1) 1,847
182
5,010
12,064
1,430
250
18,936
175
19,111
182
5,006
10,653
827
63
16,731
167
16,898
*
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1. Accordingly, the comparative
results have been re-presented from those previously published.
Prudential plc Annual Report 2023
231
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Consolidated statement of financial position
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Insurance contract assets
Reinsurance contract assets
Deferred tax assets
Current tax recoverable
Investments in joint ventures and associates accounted for using the equity method
Investment properties
Loans
Equity securities and holdings in collective investment schemes note (ii)
Debt securities note (ii)
Derivative assets
Deposits
Accrued investment income
Other debtors
Cash and cash equivalents
Total assets
Equity
Shareholders' equity
Non-controlling interests
Total equity
Liabilities
Insurance contract liabilities
Reinsurance contract liabilities
Investment contract liabilities without discretionary participation features
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
C4.1
C4.2
C10
C3.1
C3.1
C7.2
C7.1
D5.3
C1.1
C1.1
C1.1
C1.1
C2.2
C1.1
C1.2
C1.2
C1.3
C3.1
C3.1
C2.2
C5.1
C5.2
C2.3
C2.3
C7.2
C7.1
C1.2
C1.4
C2.2
31 Dec 2023 $m
31 Dec 2022 $m
1 Jan 2022 $m
note (i)
note (i)
896
3,986
374
1,180
2,426
156
34
1,940
39
578
64,753
83,064
1,855
5,870
1,003
1,161
4,751
174,066
17,823
160
17,983
139,840
1,151
769
3,933
941
716
2,711
1,250
275
4,035
224
238
156,083
174,066
890
3,884
437
1,134
1,856
140
18
2,259
37
590
57,679
77,016
569
6,275
983
968
5,514
160,249
16,731
167
16,898
126,242
1,175
663
4,261
815
582
4,193
1,139
208
2,866
206
1,001
143,351
160,249
907
4,015
495
1,250
2,787
132
20
2,698
38
771
61,601
99,154
481
4,741
1,017
955
7,170
188,232
18,936
175
19,111
149,798
1,254
722
6,127
861
223
5,664
1,167
185
2,624
234
262
169,121
188,232
Notes
(i) The Group has adopted IFRS 9 'Financial instruments' and IFRS 17 ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1. Accordingly, the 31 December
2022 and 1 January 2022 comparative statements of financial position and related notes have been re-presented from those previously published.
(ii) Included within equity securities and holdings in collective investment schemes and debt securities as at 31 December 2023 are $2,001 million of lent securities and assets
subject to repurchase agreements (31 December 2022: $1,571 million).
The parent company statement of financial position is presented on page 322.
The consolidated financial statements on pages 229 to 321 were approved by the Board of Directors on 19 March 2024 and signed on its behalf
by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
232
Prudential plc Annual Report 2023
Consolidated statement of cash flows
Cash flows from operating activities
Profit (loss) before tax (being tax attributable to shareholders' and policyholders' returns)
2,272
(519)
Adjustments to profit before tax for non-cash movements in operating assets and liabilities:
Note
2023 $m
2022* $m
Investments
Other non-investment and non-cash assets
Insurance and reinsurance contract assets and liabilities
Other non-insurance liabilities
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
Proceeds from disposal of property, plant and equipment
Acquisition of business and intangibles note (ii)
Cash advanced to CPL note (i)
Disposal of Jackson shares
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 in cash and cash equivalents
Cash and cash equivalents at 1 Jan
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at 31 Dec
(14,539)
22,717
23
(35)
12,787
(20,440)
42
(4,378)
(665)
(3,912)
2,872
2,589
(75)
1,650
(406)
584
832
(44)
2
(415)
(176)
273
(360)
–
(393)
(188)
(93)
(16)
1,523
(449)
285
1,078
(34)
–
(298)
–
293
(39)
346
(2,075)
(204)
(101)
4
(4)
(533)
(7)
(1,210)
(738)
5,514
(25)
(474)
(8)
(2,520)
(1,481)
7,170
(175)
5,514
C10
C8
B5
C1.3
4,751
*
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1. Accordingly, the comparative
results have been re-presented from those previously published.
Notes
(i)
Included in net cash flows from operating activities are dividends from joint ventures and associates of $209 million (2022: $112 million). Cash advanced to CPL, the
Group’s joint venture in the Chinese Mainland, of $176 million was made in anticipation of a future capital injection as described in note D3.
(ii) Cash flows from acquisition of business and intangibles include amounts paid for distribution rights. There were no acquisitions of businesses in the year.
(iii) Structural borrowings of shareholder-financed businesses exclude borrowings to support short-term fixed income securities programmes, lease liabilities 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:
Cash movements $m
Non-cash movements $m
2023
2022
Balance at 1 Jan
$m
4,261
6,127
Issuance
of debt
–
346
Redemption
of debt
(393)
(2,075)
58
(147)
Foreign exchange
movement
Other
movements
Balance at 31 Dec
$m
3,933
7
10
4,261
Prudential plc Annual Report 2023
233
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial 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 UK-adopted
international accounting standards. At 31 December 2023, there were no unadopted standards effective for the year ended 31 December 2023
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 has adopted IFRS 17, ‘Insurance Contracts’ and IFRS 9, ‘Financial Instruments’ (including any consequential amendments to other
standards) as issued by the IASB and as adopted for use in the UK from 1 January 2023, as discussed in note A2.1. The transition date of the
Group for IFRS 17 was 1 January 2022. Except for the changes from the adoption of these two standards and the new and amended IFRS
Standards as described in note A2.2, the accounting policies applied by the Group in determining the IFRS financial results in these consolidated
financial statements are the same as those previously applied in the Group’s consolidated financial statements for the year ended 31 December
2022 as disclosed in the 2022 annual report.
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 322.
Going concern basis of accounting
The Directors have made an assessment of going concern covering a period to 31 March 2025, being 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, as described further in the
Risk review section (including the Viability statement).
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 to 31 March 2025, being at least 12 months from the date these consolidated financial statements and the parent
company 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 2023.
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
Closing rate at year end
Average rate for the year to date
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)
31 Dec 2023
7.09
7.81
83.21
31 Dec 2022
6.95
7.81
82.73
1 Jan 2022
6.37
7.80
74.34
2023
7.09
7.83
2022
6.73
7.83
82.60
78.63
15,397.00 15,567.50
14,252.50
15,230.82 14,852.24
4.60
1.32
30.69
34.37
0.78
4.41
1.34
30.74
34.56
0.83
4.17
1.35
27.67
33.19
0.74
4.56
1.34
31.17
34.80
0.80
4.40
1.38
29.81
35.06
0.81
24,262.00 23,575.00
22,790.00
23,835.92 23,409.87
234
Prudential plc Annual Report 2023
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 2023
A2.1 Adoption of IFRS 17 and IFRS 9
The Group adopted IFRS 17 ‘Insurance Contracts’ and IFRS 9 ‘Financial Instruments’, including any consequential amendments to other
standards, from 1 January 2023.
IFRS 17, ‘Insurance contracts’
IFRS 17 introduces significant changes to 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 (DPF) accounted
under IFRS 4 are now accounted under IFRS 17.
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 replaces this with a new measurement model that establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts, reinsurance contracts and investment contracts with DPF.
Insurance contracts are aggregated into groups for measurement purposes. Groups of insurance contracts are determined by identifying
portfolios of insurance contracts, each comprising contracts subject to similar risks and managed together, and dividing each portfolio into
annual cohorts (ie by year of issue) and each annual cohort into groups based on the profitability of contracts. Portfolios of reinsurance contracts
held are assessed for aggregation separately from portfolios of insurance contracts issued.
When determining 'similar risks' the Group does not divide risks within a contract, eg riders sold under a single contract would not be split by risk
type. The Group have therefore identified three broad categories of risks referred to as 'dominant' risks, namely, protection, investment and to a
less material extent longevity. The requirement 'managed together' is assessed within the geographical boundary of each local business unit.
Each ring-fenced fund is considered to be managed separately.
Under IFRS 17 groups of contracts are measured on initial recognition 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 represents the deferral of any day-one gains arising on initial recognition.
Day-one losses, any subsequent losses on onerous contracts and reversal of those losses arising from groups of insurance contracts are
recognised directly in the income statement. For groups of reinsurance contracts held, any net gains or losses at initial recognition are recognised
as CSM unless the net cost of purchasing reinsurance relates to past events, in which case such net cost is recognised immediately in the income
statement.
Under IFRS 17 insurance contracts are measured under the General Measurement Model (GMM), Variable Fee Approach (VFA) or 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.
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Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Approximately 72 per cent of the CSM (including joint ventures and associates and net of reinsurance) at transition (as described below) was
calculated under the VFA and relates to the Group’s with-profits and shareholder-backed participating products and unit-linked products with a
low proportion of protection riders. The remaining approximately 28 per cent of the CSM at transition was calculated under the GMM and
includes the Group’s non-profit protection products and unit-linked products with a high proportion of protection riders.
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, on initial recognition 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 discount rates determined at the date of initial recognition (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 for GMM business are determined using the locked-in discount rates. Further information on the subsequent measurement of the
CSM is contained within note C3.4.
IFRS 17 is applied retrospectively unless impractical to do so. The effect of adopting IFRS 17 retrospectively adjusts shareholders’ equity as at the
date of transition of 1 January 2022. At the transition date, the opening balance sheet for IFRS 17 is established, as set out in the section ‘Effect
of adoption of IFRS 17 and IFRS 9’ below.
With the adoption of IFRS 17, certain line items in the Group’s consolidated statement of financial position have been replaced with new line
items. For example, the Group now presents separately the carrying amount of portfolios of:
– Insurance contracts issued that are assets;
– Insurance contracts issued that are liabilities;
– Reinsurance contracts held that are assets; and
– Reinsurance contracts held that are liabilities.
Further, the line items in the consolidated income statement have been changed significantly compared with reporting under IFRS 4. In
accordance with the IFRS 17 requirements, the following line items are no-longer reported: Gross premiums earned, Outward reinsurance
premiums, Benefits and claims, Reinsurers’ share of benefits and claims, Movements in unallocated surplus of with-profits funds and Acquisition
costs. Those are replaced with the following IFRS 17 line items:
– Insurance revenue;
– Insurance service expenses;
– Net income (expense) from reinsurance contracts held; and
– Net insurance finance income (expenses).
Approach to transition to IFRS 17
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 'Full 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. Prudential has
adopted the Modified Retrospective Approach for cohorts of business for which expected cash flows at the date of initial recognition are not
available but where actual historic cash flows are available. If reasonable and supportable information necessary to apply the modified
retrospective approach is not available, the fair value approach must be applied.
The CSM of the groups of insurance contracts transitioned under retrospective approaches (ie full retrospective approach and modified
retrospective approach) has been calculated as if the Group had only prepared annual financial statements before the transition date (ie
transition CSM has been measured using a year-to-date approach).
Full Retrospective Approach (FRA)
Under the FRA, each group of insurance contracts has been identified, recognised and measured as if IFRS 17 had always applied. The CSM was
calculated at initial recognition of a group of contracts based on the facts and circumstances at that time (ie without use of hindsight). This CSM
was then rolled forward to the transition date in line with the requirements of the standard.
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Prudential plc Annual Report 2023
Modified Retrospective Approach (MRA)
The objective of the MRA is to achieve the closest possible outcome to retrospective application possible using reasonable and supportable
information without undue cost and effort. A number of specific modifications are permitted under the MRA. The Group has adopted the
following modifications:
– To use information at the transition date to identify insurance contract groups;
– To use information at the transition date to assess eligibility for the variable fee approach; and
– To use information at the transition date to identify discretionary cash flows.
General Measurement Model (GMM)
Under the MRA for GMM business, the cash flows at the date of initial recognition of a group of insurance contracts have been estimated as the
cash flows at the earliest available date (ie the first year when the FRA is practicable, referred to as the 'earlier date'), adjusted by the cash flows
that are known to have occurred between these two dates. A number of further specific modifications are permitted. The Group has adopted the
following modifications:
– To estimate the risk adjustment at the date of initial recognition as the risk adjustment at the earlier date adjusted by the expected release of
risk before that date based on the risk adjustment release pattern for similar contracts;
– To estimate CSM amortisation in line with run-off of the coverage units; and
– If there is a loss component at initial recognition, to estimate the amount allocated to the loss component before the transition date using a
systematic allocation consistent with the modifications adopted above.
Discount rates at the date of initial recognition were determined using observable market data at that date.
Variable Fee Approach (VFA)
Under the MRA for VFA business, the CSM at the transition date for a group of insurance contracts has been determined as:
– The total fair value of the underlying items at that date; minus
– The fulfilment cash flows at that date; plus or minus
– An adjustment for:
– Amounts charged to policyholders before that date;
– Amounts paid before that date not varying with underlying items;
– The change in the risk adjustment caused by the release from risk before that date; and minus
– An estimate of the amounts that would have been recognised in profit or loss for services provided before the transition date by comparing
the remaining coverage units at the transition date with the coverage units provided under the group of contracts before the transition date.
In implementing this approach, the amounts charged to policyholders, the amounts paid not varying with underlying items and coverage units
have been adjusted for the time value of money.
Fair Value Approach (FVA)
The insurance contracts of the Group under the FVA generally represent groups of contracts that were written many years ago where suitable
historical information required to apply the retrospective transition approaches is no longer practicably available.
Under the FVA, the CSM at the transition date is the difference between the fair value of the insurance contracts, determined in accordance with
IFRS 13 Fair Value Measurement, and the fulfilment cash flows at that date.
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value of groups of insurance contracts has therefore been interpreted as the
compensation that a market participant would require for taking on the relevant obligation under the contracts.
The fair value has been determined using a cost of capital approach by reference to a quantum of capital required to be held in order to fulfil the
contracts and a required return on that capital. Expected cash flows and the required locked-in capital are projected forward over the duration of
the groups of contracts and discounted at the required rate of return. These calculations are based on the following key assumptions:
– The expected cash flows reflect the future cost that a market participant would expect to incur in fulfilling the obligations under the contracts.
The fair value has been based on the same scope of cash flows as are included in the calculation of the best estimate liability. In particular, the
same contract boundaries are assumed in the calculation of the fair value and best estimate liability. However, the measurement of those cash
flows need not be the same.
– The required locked-in capital is the level of capital realistically required for a business to operate in the relevant jurisdiction.
– The required rate of return is compensation the Group would expect a market participant to require to enter into a transaction to transfer the
liability associated with the insurance contracts at the transition date. This return has been determined using the Capital Asset Pricing Model,
including allowance for both financial risk and uncertainty in non-financial risk.
A number of specific modifications are permitted under the FVA. The Group has adopted the following modifications:
– To use information at the transition date to identify groups of insurance contracts;
– To use information at the transition date to assess eligibility for the VFA;
– To use information at the transition date to identify discretionary cash flows;
– To use information at the transition date to assess whether a contract meets the definition of an investment contract with DPF; and
– To group annual cohorts of business.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
The allocation of opening CSM by transition approach is given in note C3.2(b), alongside a segmental split.
IFRS 9, ‘Financial Instruments’
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018. The
Group met the eligibility criteria, under the amendments to IFRS 4 to apply the temporary exemption from IFRS 9, deferring the initial
application date of IFRS 9 to align with the initial application of IFRS 17.
The adoption of IFRS 9 has affected 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. The Company has made the election under IFRS 9 to measure its retained interest in Jackson 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. This was the only
investment classified at FVOCI at 1 January 2023.
A table explaining the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the
Group’s financial assets and financial liabilities as at 1 January 2023 is set out in the section 'Effect of adoption of IFRS 17 and IFRS 9' below.
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 replaced the incurred loss impairment model under IAS 39, resulting in
earlier recognition of credit losses compared with IAS 39. This aspect is the most complex area of IFRS 9 and involves significant judgements and
estimation processes.
As discussed above, the vast majority of the financial investments of the Group are held at FVTPL to which these requirements do not apply.
Accordingly, no significant amount of additional impairment was 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.
Effect of adoption of IFRS 17 and IFRS 9
The adoption of IFRS 17 has significant changes to the accounting for insurance and reinsurance contracts, as discussed above. The Group’s
approach to transition to IFRS 17 is set out in the preceding section. The Group has restated the 2022 comparative amounts and presented a
restated consolidated statement of financial position as at 1 January 2022.
The implementation of IFRS 9 has an insignificant impact on the Group’s financial statements. As permitted by IFRS 9, the Group has not
restated the comparatives on initial application of the standard but the Group is taking advantage of the classification overlay as permitted by
the Amendment to IFRS 17, ‘Initial Application of IFRS 17 and IFRS 9 – Comparative Information’ issued in December 2021. In accordance with
this amendment, the balance sheet at 1 January 2022 reflects the change in classification of certain debt securities to amortised cost from fair
value through profit and loss, certain loans to fair value through profit and loss from amortised cost and the recognition of IFRS 9 expected credit
losses for certain mortgage loans that continue to be classified as amortised cost. With the exception of these changes, for which the overall net
asset impact is insignificant at less than $5 million, the consolidated statement of financial position as of 1 January 2022 as restated under IFRS
17 has been presented to reflect the classification and measurement under IAS 39.
Consolidated statement of financial position at transition date 1 January 2022
The following table shows the Group’s consolidated statement of financial position as at 1 January 2022 restated under the IFRS 17 basis and
the summarised effects of the adoption of the new standard.
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Prudential plc Annual Report 2023
Assets
Goodwill
Deferred acquisition costs and other intangible assets:
Deferred acquisition costs
Other intangible assets
Insurance contract assets
Reinsurance contract assets
Deferred tax assets
Other non-investment and non-cash assets
Investment properties
Investments in joint ventures and associates accounted for using the equity method
Total financial investments:
Policy loans
Other loans
Equity securities and holdings in collective investment schemes
Debt securities
Derivative assets
Deposits
Cash and cash equivalents
Total assets
Equity
Shareholders' equity
Non-controlling interests
Total equity
Liabilities
Insurance contract liabilities*
Reinsurance contract liabilities
Investment contract liabilities without discretionary participation features
Core structural borrowings of shareholder-financed businesses
Operational borrowings
Deferred tax liabilities
Other liabilities
Total liabilities
Total equity and liabilities
At 31 Dec 2021
$m
(as reported under
IFRS 4)
Effects of adoption of IFRS 17 $m
At 1 Jan 2022 $m
Presentation
changes
note(i)
Measurement
changes
(as restated under
IFRS 17)
note (ii)
907
–
–
907
2,815
4,043
6,858
n/a
9,753
266
3,448
38
2,183
1,733
829
61,601
99,094
481
4,741
168,479
7,170
199,102
17,088
176
17,264
(39)
–
(39)
–
(22)
(134)
(1,022)
–
–
(1,733)
–
–
–
–
–
(1,733)
–
(2,776)
(28)
(2,804)
1,250
(6,944)
–
61
–
515
–
(58)
–
60
–
–
2
–
–
4,015
4,015
1,250
2,787
132
2,487
38
2,698
–
771
61,601
99,154
481
4,741
166,748
7,170
(2,950)
(7,920)
188,232
–
–
–
1,848
(1)
1,847
18,936
175
19,111
156,485
4,243
(10,930)
149,798
n/a
814
6,127
861
2,862
14,689
181,838
199,102
–
–
–
–
(1,696)
(5,497)
(2,950)
(2,950)
1,254
(92)
–
–
1
–
1,254
722
6,127
861
1,167
9,192
(9,767)
169,121
(7,920)
188,232
*
Included within insurance contract liabilities at 31 December 2021 are investment contracts with DPF and unallocated surplus of with-profits funds under IFRS 4.
Notes
(i) The presentation changes as shown in the table above principally arise from the following effects of the adoption of IFRS 17:
– Inclusion of insurance and reinsurance related receivable and payable balances within IFRS 17 insurance and reinsurance contract assets and liabilities
Under IFRS 17, the measurement of a group of insurance contracts requires inclusion of all the future cash flows within the boundary of each contract and as a result, all
insurance and reinsurance related receivable and payable balances (eg premiums receivable and claims payable) that were previously separately presented on the
balance sheet are now in effect included within the insurance and reinsurance contract balances under IFRS 17.
– Policy loans
Applying the same IFRS 17 measurement principles described above, policy loans related cash flows including any accrued interest income (previously included in
‘Accrued investment income’) are also included within the fulfilment cash flows of the associated group of insurance contracts.
– Deferred tax liabilities
In line with IAS 12, deferred tax assets and liabilities have been netted as appropriate. The deferred tax liabilities arising from expected future distributions of the
Singapore with-profits funds have been reclassified to be part of the insurance contract liabilities under IFRS 17.
(ii) The measurement changes shown in the table above principally reflect the following measurement differences arising from the adoption of IFRS 17:
– Deferred acquisition costs (DAC)
Acquisition cash flows are taken into account in determining the day-one CSM of a group insurance contracts. As such, explicit assets for DAC are not required and the
IFRS 4 balances are removed. DAC relating to investment contracts without discretionary participation features remains as an asset and has been reclassified to ‘Other
debtors’ under 'Other non-investment and non-cash items'.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
– Insurance and reinsurance contract assets and liabilities
The adjustments represent insurance and reinsurance contract measurement differences between IFRS 4 and IFRS 17, which primarily relate to the following effects:
– the establishment of a CSM under IFRS 17 in accordance with the transition rules, intended to represent the unamortised amount of expected future profit deferred
upon initial recognition of an insurance contract for all in-force contracts;
– the establishment of an explicit risk adjustment for non-financial risk under IFRS 17;
– release of prudence in the IFRS 4 policyholder liabilities to leave the best estimate liability; and
– the change in treatment of the unallocated surplus of with-profits funds such that the shareholders’ share is recognised in shareholders’ equity after allowing for
measurement differences between IFRS 4 and IFRS 17.
– Tax
– Current tax assets and liabilities are calculated for each entity in the Group based on local tax rules, and the basis of tax varies between jurisdictions. For insurance
entities in the Group, the current tax is calculated based on either the financial statements prepared under local generally accepted accounting principles (GAAP), or
the regulatory return prepared under relevant regulatory rules, or on an alternative basis (for example, Hong Kong, where most life insurance business is taxed by
reference to net premiums). Current tax assets and liabilities at transition date are not impacted by the adoption of IFRS 17 at Group level as the adoption for the
Group financial statements has no impact on local tax calculations. For jurisdictions where the basis of tax is the local financial statements, current tax assets and
liabilities will be calculated applying IFRS 17 if and when the standard is adopted locally, and subject to local tax rules for transitional adjustments. The impact of any
such local adoption on the Group financial statements will be considered when relevant.
– Deferred tax balances are adjusted to reflect the deferred tax effects of the measurement adjustments arising from transition to IFRS 17 described above. The
methods of calculating deferred tax are unchanged. Where insurance and reinsurance contract assets and liabilities give rise to a tax deduction or taxable income
when they are recovered or settled, measurement changes to these balances, without equal changes in current taxable income, give rise to corresponding changes to
the deferred tax balances at the tax rates expected to apply when the deferred tax assets or liabilities are realised or settled.
– Investments in joint ventures and associates accounted for using the equity method
The adjustments represent the Group’s share of the impact of the transition of the balance sheets of the Group’s life joint ventures and associate (being CPL, India and
the Takaful business in Malaysia) from IFRS 4 to IFRS 17, arising principally from the measurement differences as described above.
Financial assets and liabilities by IFRS 9 category
The following table and the accompanying notes explain the original measurement categories under IAS 39 and the new measurement
categories under IFRS 9 for each class of the Group’s financial assets and financial liabilities as at 31 December 2022/1 January, 2023.
The effects of the reclassification of financial assets as a result of transition to IFRS 9 is not material.
Classification at initial application
Carrying value $m
Original under IAS 39
New under IFRS 9
Original under IAS 39
New under IFRS 9
Financial instruments
Financial assets
Loans note (i)
Loans /debt securities note (ii)
Loans
Equity securities and portfolio holdings in collective
investment schemes
Equity securities note (iii)
Debt securities held by Eastspring note (iv)
Other Debt securities
Derivative assets
Accrued investment income
Deposits
Cash and cash equivalents
Other debtors note (i)
Financial liabilities
Amortised cost
Amortised cost
FVTPL
FVTPL
Amortised cost
Mandatorily at FVTPL
Mandatorily at FVTPL
Mandatorily at FVTPL
Available-for-sale (AFS)
FVOCI
FVTPL
FVTPL
FVTPL
Amortised cost
Mandatorily at FVTPL
Mandatorily at FVTPL
Loans and receivables
Amortised cost
Loans and receivables
Amortised cost
Loans and receivables
Amortised cost
Loans and receivables
Amortised cost
Investment contract liabilities without DPF
Derivative liabilities
FVTPL
FVTPL
Mandatorily at FVTPL
Mandatorily at FVTPL
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 note (v)
Other liabilities
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
Designated at FVTPL
Amortised cost
Amortised cost
140
26
450
140
27
450
57,413
57,413
266
67
266
67
76,922
76,922
569
983
6,275
5,514
968
663
1,001
4,261
815
582
4,193
2,866
569
983
6,275
5,514
968
663
1,001
4,261
815
582
4,193
2,866
Notes
(i)
In accordance with IFRS 17 requirements policy loans and debtor balances that are related to insurance contracts are included within the measurement of insurance
contract liabilities. Therefore, the amounts for these balance sheet line items as presented in this table do not include such balances.
(ii) Certain securities that were classified as loans at amortised cost under IAS 39 were reclassified to debt securities at fair value through profit or loss under IFRS 9 aligning to
how these securities are managed.
(iii) Represents the Group’s interest in Jackson which the Group elected to be classified at FVOCI.
(iv) Under IAS 39 Eastspring debt securities were classified as FVTPL. The Group has reclassified these debt securities as measured at amortised cost because these instruments
meet the solely payments of principal and interest (SPPI) criterion and are held with the intention to collect contractual cash flows.
(v) ‘Net asset value attributable to unit holders of consolidated investment funds’ represents the interests of investors other than the Group in the investment funds that the
Group is deemed to control and therefore treated as a subsidiary and consolidated in the Group financial statements. The Group has designated ‘Net asset value
attributable to unit holders of consolidated investment funds’ as financial liabilities measured at FVTPL to eliminate any accounting mismatch with the underlying
investments of those consolidated investment funds, which are measured at FVTPL.
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Prudential plc Annual Report 2023
The measurement categories of the Group’s financial assets and financial liabilities as at 31 December 2023, as shown on the consolidated
statement of financial position, are consistent with those as at 1 January 2023. The following line items contain more than one asset
classification at 31 December 2023:
Loans
Debt securities
Amortised Cost
$m
148
Mandatorily at
FVTPL $m
Total 31 Dec 2023
$m
578
430
–
83,064
83,064
A2.2 Adoption of other new accounting pronouncements
In addition to IFRS 17 and IFRS 9, the Group has adopted the following amendments in these consolidated financial statements. The adoption
of these amendments has had no significant impact on the Group financial statements.
– Amendments to IAS 1 and IFRS Practice Statement 2 ‘Disclosure of accounting policies’ issued in February 2021;
– Amendments to IAS 8 ‘Definition of Accounting Estimates’ issued in February 2021;
– Amendments to IAS 12 ‘Deferred tax related to assets and liabilities arising from a single transaction’ issued in May 2021; and
– Amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’ issued in May 2023. Further details are provided in notes B3.2 and
C7.2.
A3 Accounting policies
A3.1 Critical accounting policies, estimates and judgements
This note 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 as discussed in note A2 above.
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 insurance 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.
(a) Critical accounting policies with associated critical estimates and judgements – Measurement of insurance and
reinsurance contracts under IFRS 17
IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts, reinsurance contracts and
investment contracts with discretionary participation features. It introduces a model that measures groups of contracts based on the Group’s
estimates of the present value of future cash flows that are expected to arise as the Group fulfils the contracts, an explicit risk adjustment for
non-financial risk and a CSM. The process of determining the present value of future cashflows involves a number of estimates and judgments,
which are set out below.
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Determination of fulfilment cashflows used in the measurement of insurance and reinsurance contract assets and liabilities
(impacts $(137.4) billion of net insurance and reinsurance contract balances, excluding those held by joint ventures and
associates)
Estimates of future cash
flows
Expense assumptions
used in future cash flow
estimation
Policyholder benefits
The Group’s process for estimating future cash flows incorporates, in an unbiased way, all reasonable and
supportable information that is available without undue cost or effort at the reporting date. This information
includes both internal and external historical data about claims and other experience, updated to reflect current
expectations of future events. As this is a prediction of the future, significant judgement is applied in determining
the assumptions that underpin the estimation of future cash flows. These assumptions include, but are not
limited to, operating assumptions such as morbidity, mortality, persistency and expenses, and economic
assumptions such as risk-free rates and illiquidity premium. Granular assumptions are set at a business unit level.
The demographic assumptions are consistent with those used in other metrics such as EEV reporting. The Risk
Review included in this Annual Report discusses the insurance and market risks the Group faces and how these
risks are mitigated.
When estimating future cash flows, the Group takes into account current expectations of future events (other
than those from future legislation or regulatory changes that have not been substantively enacted) that might
affect those cash flows.
Cash flows within the boundary of a contract (the Group’s accounting policy on contract boundary is given
below) relate directly to the fulfilment of the contract, including those for which the Group has discretion over the
amount or timing. These include future premium receipts, payments to (or on behalf of) policyholders, insurance
acquisition cash flows and other costs that are incurred in fulfilling contracts.
In relation to reinsurance contracts held, the probability weighted estimates of the present value of future cash
flows includes the potential credit losses and losses from other disputes to reflect the non-performance risk of the
reinsurers.
The sensitivity of shareholder equity and CSM to insurance risks is set out in Note C6.1(b).
Insurance acquisition cash flows (as discussed below) and other costs that are incurred in fulfilling contracts
comprise both direct costs and an allocation of fixed and variable overheads incurred by the insurance entities.
The Group projects estimates of future expenses relating to the fulfilment of contracts within the scope of IFRS
17 using current expense levels adjusted for inflation. Costs that are incurred in fulfilling the contracts include,
but are not limited to claims handling costs, policy administration expenses, investment management expenses,
income tax and other costs specifically chargeable to the policyholders under the terms of the contracts.
Expenses included in estimated future cash flows comprise expenses directly attributable to the groups of
contracts, including an allocation of fixed and variable overheads incurred by the insurance entities.
Investment management expenses in relation to the management of the assets backing policyholder liabilities
are included in the fulfilment cash flows for business using the VFA model, other participating business using the
general model and general model non-participating business where the Group performs investment
management activities to enhance benefits from insurance coverage for policyholders. The future expenses of
internal asset management and other services excludes the projected future profits or losses generated by any
non-insurance entities within the Group in providing those services (ie the IFRS results for the life insurance
operations in the consolidated financial statements assume that the cost of internal asset management and
other services will be that incurred by the Group as a whole, not the cost that will be borne by the insurance
business).
Most of the costs incurred by the insurance entities within the Group are considered to be incurred for the
purpose of selling and fulfilling insurance contracts and are hence treated as attributable expenses. Cash flows
that are not directly attributable to a portfolio of insurance contracts, such as some product development and
training costs, are recognised in other operating expenses as incurred.
The assumptions used to project the cash flows also reflect the actions that management would take over the
duration of the projection, the time it would take to implement these actions and any expenses incurred in taking
those actions. Management actions encompass, but are not confined to, investment allocation decisions, levels
of regular and final bonuses and crediting rates.
For participating contracts, estimated future claim payments include bonuses paid to policyholders determined
by reference to the relevant profit-sharing arrangement. For example, for the Group’s with-profits business in
Hong Kong, Singapore and Malaysia, asset shares are used to determine payments to policyholders.
Where cash flows from one group of contracts affect, or are affected by, cash flows in other groups of contracts
(eg for with-profits business), the fulfilment cash flows for a group include payments arising from the terms of
existing contracts to policyholders in other groups and exclude payments to policyholders in the group that have
been included in the fulfilment cash flows of another group.
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Prudential plc Annual Report 2023
Determination of fulfilment cashflows used in the measurement of insurance and reinsurance contract assets and liabilities
(impacts $(137.4) billion of net insurance and reinsurance contract balances, excluding those held by joint ventures and
associates)
Insurance acquisition
cash flows
Insurance acquisition cash flows arise from the activities of selling, underwriting and starting a group of
insurance contracts that are directly attributable to the portfolio of contracts to which the group belongs.
Insurance acquisition cash flows that are directly attributable to a group of contracts (eg non-refundable
commissions paid on issuance of a contract) are allocated to that group and to the groups that will include
renewals of those contracts. Bancassurance payments (eg upfront payments to sell insurance contracts to
distribution partners) are capitalised under IAS 38 as intangible assets and 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. The amortisation of the bancassurance intangibles is considered to constitute insurance
acquisition cash flows. They generally form part of fulfilment cash flows and are amortised implicitly in line with
the coverage unit pattern.
Determining the point of
recognition and the
boundary of an
insurance contract
The point of initial recognition of a group of contracts is the earliest of the premium due date, the date coverage
starts and, for an onerous contract, the date the contract is signed and accepted by both parties. There is limited
judgement involved in relation to most contracts issued by the Group as the coverage period generally starts
from the premium due date.
The contract boundary defines which future cash flows are included in the measurement of a contract. The
boundary of the fulfilment cash flows under IFRS 17 is considered to be the point at which the Group both no
longer has substantive rights and obligations under the insurance contract to provide services or compel the
policyholder to pay premiums.
The contract boundary is assessed at inception and then reassessed only when there are changes in features or
circumstances that alter the commercial substance of the contract or when there are changes in the products
within a portfolio. The reassessment of the contract boundary for any changes is performed at the end of each
reporting period.
For most contracts issued by the Group, there is little judgement involved in determining the contract boundary
as either a single premium is received for a contract which is expected to continue for a long period or a
guaranteed premium is received for regular premium contracts.
For certain contracts where the premiums are not guaranteed, more judgement is involved in assessing the
Group’s substantive rights and obligations. When determining the boundary for these contracts various factors
are taken into consideration by the Group such as the Group’s practical ability to terminate or refuse renewal of
a contract, the Group’s ability to fully reprice at the individual contract level and whether the Group has the
ability to reassess risks at a portfolio level and set a price that fully reflects the risks of that portfolio.
The Group has some immaterial business that is general insurance in nature and which is considered to have a
boundary of one year.
Where riders attach to and are not separated from a base contract, the contract boundary is determined based
on the component of the contract which has the longest contract boundary.
Future cash flows relating to riders which are not purchased at the inception of the base contract, but are added
at a later date, are not included within the contract boundary at initial recognition. As the addition of these riders
is the exercise of an option under the contract it is not considered a contract modification but is instead treated
as changes in fulfilment cash flows.
Similar considerations to those applying to underlying insurance contracts apply in determining the contract
boundary of groups of reinsurance contracts held. Further detail on reinsurance contracts, including on
recognition is set out in note C3.4(b).
Prudential plc Annual Report 2023
243
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Determination of discount rates
Discount rate and risk-
free rate
IFRS 17 enables discount rates to be calculated on a top-down or bottom-up basis. The Group elects to
determine discount rates 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.
Risk-free rates are based on government bond yields for all currencies except HKD where risk-free rates are based
on swap rates due to the higher liquidity of the HKD swap market. Government bond yields and swap rates are
obtained from publicly available data sources. Yield curves are constructed by using a market-observed curve up
to a last liquid point and then extrapolating to an ultimate forward rate.
Where cash flows vary based on the return on underlying items, the projected earned rate is set equal to the
discount rate. Where stochastic modelling techniques are used, the projected average investment returns are
calibrated to be equal to the deterministic discount rate (including the illiquidity premium).
The illiquidity premium is calculated as the yield-to-maturity on a reference portfolio of assets with similar
liquidity characteristics to the insurance contracts, (in particular, corporate bonds) less the risk-free curve, and an
allowance for credit risk.
The allowance for credit risk includes a credit risk premium which is derived through a lifetime projection of
expected bond cash flows, allowing for the cost of downgrades and defaults, a rebalancing rate of projected
downgrades and a recovery rate in the event of default. The allowance for credit risk varies by currency ranging
between 20bps and 56bps at 31 December 2023 (31 December 2022: between 23bps and 56bps) .
A proportion of the reference portfolio’s illiquidity premium (either 0%, 50% or 100%) is applied to portfolios of
insurance contracts reflecting the liquidity characteristics of the insurance contracts. The liquidity characteristics
are assessed from the policyholders’ perspective. Consideration is given to the nature of premiums, the level of
underwriting, and the surrender and other benefit features of the portfolios. A product’s illiquidity premium is
restricted to be no greater than reasonably expected to be earned on the assets backing the insurance contract
liabilities, over the duration of the insurance contracts.
The following tables set out the range of yield curves used to discount cash flows of insurance contracts for major
currencies. The range reflects the proportion of illiquidity premium applied by business unit and portfolio.
Chinese yuan (CNY)
Hong Kong dollar (HKD)
Indonesian rupiah (IDR)
Malaysian ringgit (MYR)
Singapore dollar (SGD)
31 Dec 2023 %
1 year
2.07 - 2.33
5 years
2.41 - 2.67
10 years
2.59 - 2.85
15 years
2.70 - 2.96
20 years
2.76 - 3.02
4.76 - 5.23
3.75 - 4.22
3.76 - 4.23
3.89 - 4.36
3.95 - 4.42
6.47 - 6.96
6.63 - 7.12
6.73 - 7.22
6.94 - 7.43
7.03 - 7.52
3.31 - 3.56
3.67 - 3.92
3.78 - 4.03
4.09 - 4.34
4.33 - 4.58
3.62 - 4.37
2.67 - 3.42
2.71 - 3.46
2.77 - 3.52
2.74 - 3.49
United States dollar (USD)
4.81 - 5.64
3.86 - 4.69
3.90 - 4.73
4.01 - 4.84
4.36 - 5.19
Chinese yuan (CNY)
Hong Kong dollar (HKD)
Indonesian rupiah (IDR)
Malaysian ringgit (MYR)
Singapore dollar (SGD)
31 Dec 2022 %
1 year
2.09 - 2.84
5 years
2.65 - 3.29
10 years
2.88 - 3.52
15 years
3.05 - 3.69
20 years
3.14 - 3.79
4.85 - 6.14
3.96 - 5.25
3.78 - 5.07
3.82 - 5.11
3.84 - 5.13
5.65 - 6.13
6.72 - 7.20
7.29 - 7.77
7.51 - 7.99
7.77 - 8.25
3.52 - 3.91
3.91 - 4.29
4.13 - 4.52
4.35 - 4.73
4.49 - 4.88
3.83 - 4.94
2.86 - 3.98
3.11 - 4.22
2.91 - 4.02
2.49 - 3.61
United States dollar (USD)
4.75 - 5.91
4.02 - 5.17
3.89 - 5.05
3.98 - 5.15
4.27 - 5.43
Chinese yuan (CNY)
Hong Kong dollar (HKD)
Indonesian rupiah (IDR)
Malaysian ringgit (MYR)
Singapore dollar (SGD)
1 Jan 2022 %
1 year
2.21 - 2.60
5 years
2.63 - 2.99
10 years
2.81 - 3.19
15 years
3.00 - 3.65
20 years
3.12 - 3.71
0.43 - 1.44
1.24 - 2.26
1.47 - 2.48
1.62 - 2.64
1.91 - 2.92
3.43 - 4.81
5.55 - 6.93
7.04 - 8.42
7.43 - 8.81
7.74 - 9.12
2.25 - 2.58
3.19 - 3.52
3.72 - 4.05
4.13 - 4.46
4.34 - 4.67
0.60 - 1.58
1.38 - 2.35
1.72 - 2.70
1.99 - 2.97
2.14 - 3.12
United States dollar (USD)
0.38 - 1.30
1.27 - 2.20
1.53 - 2.46
1.69 - 2.61
2.01 - 2.93
The sensitivity of shareholder equity and CSM to changes in interest rates is set out in Note C6.1(a), covers a
sensitivity to changes in the discount rates.
244
Prudential plc Annual Report 2023
Determination of risk adjustment for non-financial risk
Risk adjustment for non-
financial risk
The risk adjustment for non-financial risk 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.
For reinsurance contracts held, the risk adjustment for non-financial risk represents the amount of risk being
transferred by the Group to the reinsurer.
The risk adjustment for non-financial risk is determined by the Group using a confidence level approach. This is
implemented through the use of provisions for adverse deviations (PADs) calibrated using non-financial risk
distributions and correlation assumptions. The PADs are applied to best estimate assumptions and hence the risk
adjustment is calculated on a contract by contract basis.
The Group’s risk adjustment allows for all insurance, persistency and expense risks and operational risks specific
to uncertainty in the amount and timing of insurance contract cash flows. Reinsurance counterparty default risk
is excluded from the calculation. Diversification is included on a net of reinsurance basis within each insurance
entity of the Group. Diversification is not allowed for between entities.
By applying a confidence level technique, the Group estimates the probability distribution of the expected
present value of the future cash flows from insurance contracts at each reporting date and calculates the risk
adjustment for non-financial risk as the excess of the value at risk at the 75th percentile (the target confidence
level) over the expected present value of the future cash flows. The confidence level is calibrated over a one-year
period.
Determination of coverage units
Coverage units
The proportion of CSM recognised in profit or loss at the end of each period for a group of contracts is
determined as the ratio of:
– the coverage units in the period; divided by
– the sum of the coverage units in the period and the present value of expected coverage units in future periods.
The total number of coverage units in a group reflects the quantity of service provided determined by
considering the quantity of benefits for each contract and its expected coverage period. The Group defines the
quantity of benefits for insurance services as the maximum amount which a policyholder receives when an
insured event takes place, for example the sum assured, the annual limit for a medical plan or the present value
of a stream of payments. The quantity of benefits is updated each period. Investment related and investment-
return services are assumed to be constant over time.
Where there are multiple different services in a group of contracts (for example both insurance and investment
services are provided), the quantities of benefits for the different types of service are combined using weighting
factors. These weighting factors are defined as the present value of expected outflows for each type of service,
determined at a contract level.
The expected coverage period is the expected duration up to the contract boundary. The expected coverage
period of the contracts in a group and the calculation of future coverage units allows for expected decrements
(eg deaths and lapses) in each future period using current best estimate assumptions consistent with the best
estimate liabilities (BEL) calculation.
The Group elects to allow for the time value of money by discounting future coverage units in the determination
of the proportion of CSM recognised in profit or loss.
Determination of coverage units for groups of reinsurance contracts held follows the same principles as for
groups of underlying contracts.
Insurance finance income and expenses
Disaggregation between
profit or loss and other
comprehensive income
IFRS 17 allows an accounting policy choice between:
– Including insurance finance income or expenses for the period in profit or loss; or
– Disaggregating insurance finance income or expenses for the period to include in profit or loss an amount
determined by a systematic allocation of the expected total insurance finance income or expenses over the
duration of the group of contracts, with the balance being included in other comprehensive income.
The Group has made only very limited use of FVOCI accounting for assets. As discussed in note A2.1 under the
heading 'The classification and measurement of financial assets and liabilities', the only financial assets
classified at FVOCI at 1 January 2023 was the Group’s retained equity interest in Jackson, which have been
subsequently disposed of. Consequently, the Group has not elected to disaggregate insurance finance income
and expenses between profit or loss and other comprehensive income.
Prudential plc Annual Report 2023
245
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Risk mitigation
Risk mitigation option
IFRS 17 allows the option in certain circumstances to not recognise a change in the CSM to reflect some or all of
the changes in the effect of the time value of money and financial risk on:
– the amount of the entity’s share of the underlying items if the entity mitigates the effect of financial risk on
that amount using derivatives or reinsurance contracts held; and
– The fulfilment cash flows if the entity mitigates the effect of financial risk on those fulfilment cash flows using
derivatives, non-derivative financial instruments measured at fair value through profit or loss, or reinsurance
contracts held.
The Group has not elected to utilise this option.
The effect of accounting estimates made in interim financial statements
Effect of estimates
made in interim
financial statements
IFRS 17 allows an accounting policy choice as to whether to change the treatment of accounting estimates
made in previous interim financial statements when applying IFRS 17 in the annual reporting period.
The Group has elected to allow updates to accounting estimates made in interim financial statements when
applying IFRS 17 in the annual reporting period.
(b) Further critical accounting policies affecting the presentation of the Group’s results
Presentation of results before tax attributable to shareholders
Total tax charge for the Group reflects tax that relates to shareholders’ profit and also tax
attributable to policyholders through the interest in with-profits or unit-linked funds. 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.
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 $2,097 million and
compares to profit before tax of $2,272
million as shown in the Consolidated
income statement.
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 $3,517 million as shown in note
B1.1.
The basis of calculation of adjusted operating profit is provided in note B1.2.
The vast majority of the Group’s investments are valued at fair value through profit and loss. Short-
term fluctuations in the fair value of investments are only partially offset by the effect of economic
changes on insurance contract assets and liabilities and so affect the result for the year. The Group
therefore 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 nature.
246
Prudential plc Annual Report 2023
(c) Other items requiring application of critical estimates or judgements
VFA eligibility assessment
The Group applies judgements in
assessing the VFA eligibility of contracts.
Application of the VFA impacts the
calculation of the CSM at the balance
sheet date, which in turn impacts the
future year’s amortisation recognised in
the income statement. Unlike the GMM
approach, the VFA approach absorbs
economic impacts within the CSM,
rather than in the profit and loss
account.
The total insurance and reinsurance
CSM at the balance sheet date is
$21,012 million, including joint ventures
and associates, and the CSM
amortisation, net of reinsurance,
recognised in the income statement is
$(2,208) million as shown in note
C3.3(a). Approximately 72 per cent of
the CSM (including joint ventures and
associates and net of reinsurance) at
transition was calculated under the VFA.
IFRS 17 requires the use of the VFA for insurance contracts with direct participation features, ie
substantially investment-related service contracts for which, at inception:
– the contractual terms specify that the policyholder participates in a share of a clearly identified
pool of underlying items;
– the entity expects to pay to the policyholder an amount equal to a substantial share of the fair
value returns on the underlying items; and
– the entity expects a substantial proportion of any change in the amounts to be paid to the
policyholder to vary with the change in fair value of the underlying items.
The following key judgements have been made in assessing VFA eligibility:
Definition of substantial
The term substantial is interpreted to mean greater than 50 per cent.
Contractual terms
Granularity of assessment
Calculation basis
In some circumstances contractual terms are implied by customary
business practices.
The assessment has been carried out at a contract level. However, to
the extent insurance contracts in a group affect the cash flows to
policyholders of contracts in other groups (referred to as
'mutualisation'), eligibility for the VFA has been assessed at the level
at which such mutualisation occurs (eg fund level).
VFA eligibility assessments have been performed on a basis consistent
with how the Group measures its realistic expectations, for example
when pricing, monitoring or setting returns to policyholders.
Contracts not qualifying for the VFA are accounted for under the GMM or PAA. The PAA is not used
significantly within the Group.
The measurement model (VFA or GMM) used for key products is set out in Note C3.4(a).
Carrying value of distribution rights intangible assets
The Group applies judgement to assess
whether factors such as the financial
performance of the distribution
arrangements, or 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 units (CGUs)
containing the distribution rights.
Impacts $3,709 million 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 CGUs to which it is allocated.
Prudential plc Annual Report 2023
247
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Financial investments – Valuation
Financial investments held at fair value,
net of derivative liabilities, excluding
those held by joint ventures and
associates is $149.9 billion as shown in
note C2.2(a).
Financial investments held at amortised
cost represent $6.0 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.
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 and
certain debt securities held by Eastspring.
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.
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 2023. 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 an
impact on the Group’s consolidated financial statements are discussed.
– Amendments to IFRS 16 ‘Lease liability in a sale and leaseback’ issued in September 2022 and effective from 1 January 2024;
– Amendments to IAS 1 ‘Non-current liabilities with covenants’ issued in October 2022 and effective from 1 January 2024;
– Amendments to IAS 7 and IFRS 7 ‘Supplier finance arrangements’ issued in May 2023 and effective from 1 January 2024; and
– Amendments to IAS 21 ‘Lack of exchangeability’ issued in August 2023 and effective from 1 January 2025.
248
Prudential plc Annual Report 2023
B Earnings performance
B1 Analysis of performance by segment
B1.1 Segment results
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 note (iii)
Interest payable on core structural borrowings
Corporate expenditure note (iv)
Total other expenditure
Restructuring and IFRS 17 implementation costs note (v)
Adjusted operating profit
Short-term fluctuations in investment returns
(Loss) gain attaching to corporate transactions
Profit (loss) before tax attributable to shareholders
Tax charge attributable to shareholders' returns
B3.2
Profit (loss) for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Profit (loss) for the year
Basic earnings per share (in cents)
2023 $m
2022 $m
2023 vs 2022 %
Note
note (i)
368
1,013
221
305
584
746
280
AER
note (i)
271
CER
note (i)
258
1,162
1,162
205
340
570
728
260
200
329
585
715
255
B1.3
3,517
3,536
3,504
(21)
(172)
(230)
(423)
(201)
B1.3
2,893
(774)
(22)
2,097
(385)
1,712
1,701
11
1,712
(44)
(200)
(276)
(520)
(294)
2,722
(3,420)
55
(643)
(354)
(997)
(44)
(200)
(277)
(521)
(293)
2,690
(3,404)
55
(659)
(346)
(1,005)
(1,007)
(1,014)
10
(997)
9
(1,005)
AER
note (i)
36 %
(13) %
8 %
(10) %
2 %
2 %
8 %
(1) %
52 %
14 %
17 %
19 %
32 %
6 %
77 %
n/a
n/a
(9) %
n/a
n/a
10 %
n/a
CER
note (i)
43 %
(13) %
11 %
(7) %
0 %
4 %
10 %
0 %
52 %
14 %
17 %
19 %
31 %
8 %
77 %
n/a
n/a
(11) %
n/a
n/a
22 %
n/a
2023
2022
2023 vs 2022 %
Note
note (i)
AER
note (i)
CER
note (i)
AER
note (i)
CER
note (i)
Based on adjusted operating profit, net of tax and non-
controlling interest
B4
89.0 ¢
79.4 ¢
78.5 ¢
12 %
13 %
Based on profit (loss) for the year, net of non-
controlling interest
B4
62.1 ¢
(36.8) ¢
(37.0) ¢
n/a
n/a
Notes
(i) 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.
(ii) The Growth markets and other segment includes non-insurance entities that support the Group’s insurance business and the result for this segment is after deducting the
corporate taxes arising from the life joint ventures and associates.
(iii) Net investment return and other items includes an adjustment to eliminate intercompany profits as described below. Entities within the Prudential Group can provide
services to each other, the most significant example being the provision of asset management services by Eastspring to the life entities. If the associated expenses are
deemed attributable to the entity’s insurance contracts then the costs are included within the estimate of future cashflows when measuring the insurance contract under
IFRS 17. In the Group’s consolidated accounts, IFRS 17 requires the removal of the intercompany profit from the measurement of the insurance contract. Put another way
the future cash flows include the cost to the Group (not the insurance entity) of providing the service. In the period that the service is provided the entity undertaking the
service, for example Eastspring, recognises the profit it earns as part of its results. To avoid any double counting an adjustment is included with the centre’s 'net investment
return and other item' to remove the benefit already recognised when valuing the insurance contract.
(iv) Corporate expenditure as shown above is for head office functions.
(v) Restructuring and IFRS 17 implementation costs include those incurred in insurance and asset management operations of $(81) million (2022: $(137) million), largely
comprising the costs of Group-wide projects including the implementation of IFRS 17 (this includes one-off costs associated with embedding IFRS 17), reorganisation
programmes and initial costs of establishing new business initiatives and operations.
Prudential plc Annual Report 2023
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Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
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’. There have been no changes to the Group’s operating segments from those reported in the Group’s consolidated financial
statements for the year ended 31 December 2022.
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.
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, including short-term fluctuations in investment returns and gain or loss on corporate transactions. Note B1.1 shows the
reconciliation from adjusted operating profit to total profit (loss) for the year.
A comparison of the Group’s 2022 adjusted operating profit under the previous IFRS 4 basis and the IFRS 17 basis is provided below:
IFRS 4 basis adjusted operating profit as previously published
Difference
IFRS 17 basis adjusted operating profit
2022 $m
3,375
(653)
2,722
IFRS 17 adjusted operating profit is circa $650 million lower than under IFRS4 in 2022. This broadly comprises:
– a circa $200 million reduction from the prohibition of day-one profit recognition from new business under IFRS17;
– a circa $250 million reduction from changes in the subsequent timing of profit recognition, mainly related to differences on protection
products; and
– a circa $200 million reduction due to a one-off uplift in IFRS4 arising as a result of the adoption of Risk Based Capital in Hong Kong.
Determination of adjusted operating profit
(a) Approach adopted for insurance businesses
The measurement of adjusted operating profit reflects that, for the insurance business, assets and liabilities are held for the longer term. 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. This concept was previously applied under IFRS 4, but the changing measurement
model under IFRS 17 has impacted how such short-term fluctuations are determined.
The method of allocating profit between operating and non-operating components involves applying longer-term rates of return to the Group’s
assets held by insurance entities (including joint ventures and associates). These longer-term rates of return are not applied when assets and
liabilities move broadly in tandem and hence the effect on profit from short-term market movements is more muted. In summary the Group
applies the following approach when attributing the ‘net investment result’ between operating and non-operating profit:
– Returns on investments that meet the definition of an ‘underlying item’, namely those investments that determine some of the amounts
payable to a policyholder such as assets within unit linked funds or with-profits funds, are recorded in adjusted operating profit on an actual
return basis. The exception is for investments backing the shareholders’ 10 per cent share of the estate within the Hong Kong with-profits
fund. Changes in the value of these investments, including those driven by market movements, pass through the income statement with no
liability offset. Consequently adjusted operating profit recognises investment return on a longer-term basis for these assets.
– For insurance contracts measured under the GMM, the impact of market movements on both the non-underlying insurance contract balances
and the investments they relate to are considered together. Adjusted operating profit allows for the long-term credit spread (net of the
expected defaults) or long-term equity risk premium on the debt and equity-type instruments respectively. Deducted from this amount is the
unwind of the illiquidity premium included in the current discount rate for the liabilities.
– Some GMM BEL components are calculated by reference to the investment return of assets, even if the BEL component itself is not considered
an underlying item, for example the BEL component related to future fee income or a guarantee. In these cases for the purposes of
determining operating profit, the BEL component is calculated assuming a longer-term investment return and any difference between the
actual return arising in the period and the longer-term investment return is taken to non-operating profit. There is no impact on the balance
sheet of this allocation.
– A longer-term rate of return is applied to all other investments held by the Group’s insurance business for the purposes of calculating adjusted
operating profit. More details on how longer-term rates are determined are set out below.
The difference between the net investment result recorded in the income statement and the longer-term returns determined using the above
principles is recorded as ‘short-term fluctuations in investment returns’ as a component of non-operating profit.
The ‘insurance service result’ is recognised in adjusted operating profit in full with the exception of gains or losses that arise from market and
other related movements on onerous contracts measured under the variable fee approach. If these gains and losses are capable of being offset
across more than one annual cohort of the same product or fund as applicable, then the adjusted operating profit is determined by amortising
the net of the future profits and losses on all contracts where profits or losses can be shared. Any difference between this and the insurance
service results presented in the income statement is classified as part of ‘short-term fluctuations in investment returns’, a component of non-
operating profit.
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Prudential plc Annual Report 2023
(b) Determination of longer-term returns
The longer-term rates of return are estimates of the long-term trend investment returns having regard to past performance, current trends and
future expectations. 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.
For collective investment schemes that include different types of assets (eg equities and debt securities), weighted assumptions are used
reflecting the asset mix underlying the relevant fund mandates.
Debt securities and loans
For debt securities and loans, the longer-term rates of return are estimates of the long-term government bond yield, plus the estimated long-term
credit spread over the government bond yield, less an allowance for expected credit losses. The credit spread and credit loss assumptions reflect
the mix of assets by credit rating. Longer-term rates of return range from 2.8 per cent to 8.4 per cent for 2023 (2022: 2.8 per cent to 7.8 per
cent).
Equity-type securities
For equity-type securities, the longer-term rates of return are estimates of the long-term trend investment returns for income and capital. Longer-
term rates of return range from 8.6 per cent to 15.7 per cent for 2023 and 2022.
Derivative value movements
In the case where derivatives change the nature of other invested assets (eg by lengthening the duration of assets, hedging overseas bonds to
the currency of the local liabilities, or by providing synthetic exposure to equities), the longer-term return on those invested assets reflects the
impacts of the derivatives.
(c) Non-insurance businesses
For these businesses, the determination of adjusted operating profit reflects the underlying economic substance of the arrangements and
excludes market related items only where it is expected these will unwind over time.
B1.3 Analysis of adjusted operating profit by driver
Management assesses adjusted operating profit by breaking it down into the key components that drive performance each period. This analysis
changes from the previous IFRS 4 driver breakdown as the new IFRS 17 measurement model leads to different drivers being relevant. The new
basis is not directly reconcilable to the old basis.
The table below analyses the Group’s adjusted operating profit into the underlying drivers using the following categories:
– Adjusted release of CSM, which is net of reinsurance, represents the release from the CSM for the insurance services provided in the period
adjusted for the reduction in CSM release that would occur if gains on profitable contracts were combined with losses on onerous contracts for
those contracts where gains and losses can be shared across cohorts as described in note B1.2.
– Release of risk adjustment, which is net of reinsurance, represents the amount of risk adjustment recognised in the income statement
representing non-financial risk that expired in the period net of the amount that was assumed to be covered by under any reinsurance
contracts in place. The only difference between the amount shown in the table below and the amount included within Insurance service result
on the consolidated income statement and note C3.2 is the amount relating to the Group’s life joint ventures and associates that use the
equity method of accounting.
– Experience variances represent the difference between the actual amounts incurred or received in the period and that assumed within the best
estimate liability for insurance and reinsurance contracts. It covers items such as claims, attributable expenses and premiums to the extent
that they relate to current or past service.
– Other insurance service result primarily relates to movements on onerous contracts that impact adjusted operating profit (ie excluding those
discussed in B1.2).
– Net investment result on longer-term basis comprises the component of the ‘net investment result’ that has been attributed to adjusted
operating profit by applying the approach as described in note B1.2.
– Other insurance income and expenditure represent other sources of income and expenses that are not considered to be attributable to
insurance contracts under IFRS 17.
– Share of related tax charges from joint ventures and associates represents the related tax on the adjusted operating profit of the Group’s life
joint ventures and associates accounted for using the equity method. 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 below, the results of the life joint ventures and associates are analysed by adjusted operating profit drivers and on a pre-
tax basis, with related tax shown separately in order for the contribution from the life joint ventures and associates to be included in the profit
driver analysis on a consistent basis with the rest of the insurance business operations.
Prudential plc Annual Report 2023
251
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Adjusted release of CSM note (i)
Release of risk adjustment
Experience variances
Other insurance service result
Adjusted insurance service result note (i)
Net investment result on longer-term basis note (ii)
Other insurance income and expenditure
Share of related tax charges from joint ventures and associates
Insurance business
Eastspring
Other income and expenditure
Restructuring and IFRS 17 implementation costs
Adjusted operating profit, as reconciled to profit (loss) for
2023 $m
2022 $m
2023 vs 2022 %
2,205
218
(118)
(109)
2,196
1,241
(122)
(78)
3,237
280
(423)
(201)
AER
2,265
179
(66)
(204)
2,174
1,290
(98)
(90)
3,276
260
(520)
(294)
CER
2,242
178
(62)
(195)
2,163
1,271
(100)
(85)
3,249
255
(521)
(293)
AER
(3) %
22 %
(79) %
47 %
1 %
(4) %
(24) %
13 %
(1) %
8 %
19 %
32 %
CER
(2) %
22 %
(90) %
44 %
2 %
(2) %
(22) %
8 %
– %
10 %
19 %
31 %
the year in note B1.1
2,893
2,722
2,690
6 %
8 %
Notes
(i) The adjusted release of CSM and the adjusted insurance service result are reconciled to the information in the Analysis of movements in insurance and reinsurance contract
balances by measurement component in note C3.2 (excluding joint ventures and associates) and the consolidated income statement as follows:
Release of CSM, net of reinsurance as included within Insurance service result on the consolidated
income statement and note C3.2
Add amounts relating to the Group’s life joint ventures and associates that are accounted for on equity-
method
Release of CSM, net of reinsurance as shown in note C3.3
Insurance
Reinsurance
Adjustment to release of CSM for the treatment adopted for adjusted operating profit purposes of combining
losses on onerous contracts and gains on profitable contracts that can be shared across more than one
annual cohort
Adjusted release of CSM as shown above
Insurance service result as shown in the consolidated income statement and note C3.2
Add amounts relating to the Group’s life joint ventures and associates that are accounted for on equity-
method
Insurance service result as shown in note C3.3
Insurance
Reinsurance
Removal of losses or gains from reversal of losses on those onerous contracts that meet the criteria in note
B1.2 less the change to the release of CSM shown above
Other primarily related to policyholder tax*
Adjusted insurance service result as shown above
2023 $m
2022 $m
1,990
2,013
218
229
2,414
(206)
2,208
2,413
(171)
2,242
(3)
2,205
23
2,265
2023 $m
2,087
2022 $m
2,177
148
112
2,424
(189)
2,235
68
(107)
2,196
2,396
(107)
2,289
(33)
(82)
2,174
* Other primarily relates to the revenue recognised to cover the tax charge attributable to policyholders that is included in the insurance service result in the income
statement. This revenue is fully offset by the actual tax charge attributable to policyholders that is included, as required by IAS 12, in the tax line in the income
statement resulting in no net impact to profit after tax and so have been offset in the analysis of adjusted operating profit.
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Prudential plc Annual Report 2023
(ii) In addition, net investment result on longer-term basis is reconciled to the net investment result in the consolidated income statement as follows:
Net investment result as shown in the consolidated income statement
Remove investment return of non-insurance entities
Remove short-term fluctuations in investment return included in non-operating profit*
Other items*
Net investment result on longer-term basis as shown above
*
These reconciling line items include the impact from the Group’s life joint ventures and associates.
2023 $m
1,091
(142)
774
(482)
1,241
2022 $m
(1,883)
(53)
3,420
(194)
1,290
B1.4 Revenue
The Group recognises insurance revenue as it satisfies its performance obligations, ie as it provides services under groups of insurance contracts.
The insurance revenue relating to services provided for each period represents the total of the changes in the liability for remaining coverage
that relate to services for which the Group expects to receive consideration and comprises the following items.
– A release of the CSM, measured based on coverage units;
– Changes in the risk adjustment for non-financial risk relating to current services;
– Claims and other insurance service expenses for the period expected at the beginning of the year; and
– Other amounts include the revenue recognised to cover the tax charge attributable to policyholders and other items, for example experience
adjustments for premium receipts for current or past services.
In addition, the Group allocates a portion of premiums that relate to recovering insurance acquisition cash flows to each period using the same
amortisation factor used to amortise CSM. The Group recognises the allocated amount, adjusted for interest accretion, as insurance revenue and
an equal amount as insurance service expenses.
Non-distinct investment components are excluded from insurance revenue and insurance service expenses.
Policy fees charged on investment contracts without discretionary participation features for asset management and policy administration fees
are recognised when related services are provided.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
(a) Analysis of total revenue by segment
Insurance operations note (i)
2023 $m
Hong Kong
Indonesia
Malaysia
Singapore
Growth
markets
and other
Inter-
segment
elimination
Eastspring
Total
segment
Unallocated
to a segment
Total
Amounts relating to changes in the
liability for remaining coverage:
Expected claims and other directly
attributable expenses
Change in risk adjustment for non-
financial risk
Release of CSM for services provided
Other adjustments note (ii)
Recovery of insurance acquisition cash
flows
Insurance revenue
Other revenue note (iii)
Total revenue from external customers note
(iv)
Intra-group revenue
Interest income
Dividend and other investment income
Investment appreciation (depreciation)
Investment return
Total revenue
Amounts relating to changes in the
liability for remaining coverage:
Expected claims and other directly
attributable expenses
Change in risk adjustment for non-
financial risk
Release of CSM for services provided
Other adjustments note (ii)
Recovery of insurance acquisition cash
flows
Insurance revenue
Other revenue note (iii)
Total revenue from external customers note
(iv)
Intra-group revenue
Interest income
Dividend and other investment income
Investment depreciation
Investment return
Total revenue
1,089
582
642
970
670
73
787
73
1,207
3,229
22
35
187
32
306
1,142
4
24
203
31
234
1,134
4
55
478
45
435
1,983
–
41
538
71
563
1,883
39
3,251
1,146
1,138
1,983
1,922
–
1,033
775
2,155
3,963
7,214
–
92
93
50
235
1,381
–
239
151
177
567
1,705
–
785
528
1,490
2,803
4,786
–
627
117
1,309
2,053
3,975
–
–
–
–
–
–
299
299
184
7
3
4
198
497
Insurance operations note (i)
2022 $m
–
–
–
–
–
–
–
–
3,953
228
2,193
252
2,745
9,371
368
9,739
(184)
–
–
–
–
2,783
1,667
5,185
–
–
–
–
–
–
1
1
–
164
7
3,953
228
2,193
252
2,745
9,371
369
9,740
–
2,947
1,674
(43)
5,142
(184)
9,635
128
9,763
(184) 19,374
129
19,503
Hong Kong
Indonesia
Malaysia
Singapore
Growth
markets
and other
Inter-
segment
elimination
Eastspring
Total
segment
Unallocated
to a segment
Total
969
438
563
935
736
53
737
30
1,051
2,840
65
33
274
16
309
1,070
6
20
215
–
231
1,029
–
33
442
27
378
1,815
1
30
513
32
484
1,795
33
2,905
1,076
1,029
1,816
1,828
–
927
689
(23,615)
(21,999)
–
83
77
–
208
183
–
724
576
1
601
107
(69)
(386)
(6,679)
(2,860)
(21)
91
5
(5,379)
(2,151)
(19,094)
1,167
1,034
(3,563)
(323)
–
–
–
–
–
–
330
330
199
4
1
–
–
–
–
–
–
–
–
(200)
–
–
–
3,641
169
2,181
105
2,453
8,549
435
8,984
–
2,547
1,633
–
–
–
–
–
–
1
1
–
50
25
3,641
169
2,181
105
2,453
8,549
436
8,985
–
2,597
1,658
(33,630)
(5)
(33,635)
183
513
(200)
(29,450)
(200)
(20,466)
70
71
(29,380)
(20,395)
Notes
(i) The Group’s share of the results from the joint ventures and associates including CPL that are equity accounted for 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
2023 is $560 million (2022: $595 million). Further financial information on CPL is provided in note D5.3.
(ii) Other adjustments comprise experience adjustment for premium receipts relating to past and current services provided under insurance contracts and insurance revenue
earned from contracts measured under the PAA as well as the revenue recognised to cover the tax charge attributable to policyholders.
(iii) Other revenue comprises revenue from external customers and consists primarily of revenue from the Group’s asset management business of $299 million (2022: $330
million). Also included in other revenue is fee income on financial instruments that are not held at FVTPL of $3 million (2022: $2 million).
(iv) Due to the nature of the business of the Group, there is no reliance on any major customers. Of the Group’s markets, other than Hong Kong, Singapore, Indonesia and
Malaysia as shown above, no individual markets have revenue from external customers that exceeds 10 per cent of the Group total for the years presented.
254
Prudential plc Annual Report 2023
(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 mandatorily classified or designated as FVTPL and realised gains and losses (including
impairment losses) on items classified at amortised cost and/or FVOCI (AFS for 2022). Movements in unrealised appreciation or depreciation of
securities designated as FVOCI (AFS for 2022) 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.
IFRS 9 basis
Interest income calculated using the effective interest method
Net gains on financial instruments at FVTPL note
Dividend income from Jackson shares designated at FVOCI recognised in the income statement
Other investment returns (including foreign exchange gains and losses)
Movement in amounts attributable to external unit holders of consolidated investment funds
Investment return recognised in the income statement
Valuation movements in Jackson shares recognised in other comprehensive income
Total investment return recognised in the income statement and other comprehensive income
IAS 39 basis
Interest income calculated using the effective interest method
Net losses on financial instruments at FVTPL note
Dividend income from Jackson shares classified as AFS recognised in the income statement
Other investment returns (including foreign exchange gains and losses)
Movement in amounts attributable to external unit holders of consolidated investment funds
Investment return recognised in the income statement
Valuation movements in Jackson shares recognised in other comprehensive income
Total investment return recognised in the income statement and other comprehensive income
2023 $m
340
9,400
7
267
(251)
9,763
8
9,771
2022 $m
237
(30,890)
24
239
1,010
(29,380)
(187)
(29,567)
Note
Net gains (losses) comprise interest income on financial instruments at FVTPL, dividend and other investment income and investment appreciation (depreciation). Net realised
gains and losses on the Group’s investments for 2023 recognised in the income statement amounted to a net loss of $(6.0) billion (2022: a net loss of $(9.4) billion).
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 FVTPL),
and the Group’s retained interest in Jackson which was, prior to its disposal in 2023, classified as FVOCI under IFRS 9 (designated as AFS under
IAS 39). 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.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
B1.5 Net insurance and reinsurance finance income (expense)
Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance and reinsurance contracts arising
from the effects of the time value of money, financial risk and changes therein, unless any such changes for groups of direct participating
contracts are allocated to a loss component and included in insurance service expenses. These amounts include changes in the measurement of
groups of contracts caused by changes in the value of underlying items (excluding additions and withdrawals). The Group does not disaggregate
insurance finance income or expenses between profit or loss and other comprehensive income.
The following table provides an analysis of net insurance and reinsurance finance income (expense).
Net finance (expense) income from insurance contracts notes (i)(ii)
Accretion of interest on GMM contracts
Changes in fair value of underlying assets and other adjustments relating to VFA contracts
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and adjusting the CSM at locked-in rates
Net foreign exchange income (expense)
Other finance (expense) income from insurance contracts note (iii)
Net finance expense from reinsurance contracts held notes (i)(ii)
Accretion of interest on GMM contracts
Effect of changes in interest rates and other financial assumptions
Effect of measuring changes in estimates at current rates and adjusting the CSM at locked-in rates
Net foreign exchange (expense)
Other finance (expense) from reinsurance contracts note (iv)
2023 $m
2022 $m
(233)
(240)
(8,162)
28,498
(276)
43
12
(223)
458
53
(524)
378
(8,839)
28,623
45
168
(11)
(8)
(3)
45
(1,301)
71
(1)
(7)
191
(1,193)
Notes
(i) The Group has made an accounting policy choice to disaggregate the finance component of the risk adjustment and present it under insurance finance income (expenses)
instead of insurance service result.
(ii) The analysis of the investment return on the assets of the Group is provided in note B1.4. The impact of changes in market movements on the assets and insurance contract
liabilities will vary depending on whether the insurance contracts are classified as VFA or GMM, which is discussed further in note C6.1(a).
(iii) Other finance (expense) income from insurance contracts includes the effect of changes in the policyholders’ interest in the excess net assets of relevant participating funds
of $(192) million (2022: $515 million).
(iv) Other finance (expense) from reinsurance contracts held includes the effect of changes in non-performance risk of reinsurers of $(3) million (2022: $(7) million).
B1.6 Additional segmental analysis of profit after tax
CPL note
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other note
Eastspring
Total segment
Unallocated to a segment (central operations)
Total profit (loss) after tax
2023 $m
(577)
976
156
257
512
775
254
2,353
(641)
1,712
2022 $m
(345)
(742)
108
178
(7)
314
234
(260)
(737)
(997)
Note
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 that are accounted for on an equity-method basis. Accordingly, on the segmental analysis of the
profit after tax basis above, the amount shown for CPL is before tax (with its tax being included in the Growth markets and other segment). The Group's share of CPL's post-tax
result was $(366) million (2022: $(275) million).
256
Prudential plc Annual Report 2023
B2 Insurance service expenses and other expenditure
Insurance service expenses arising from insurance contracts are recognised in profit or loss generally as they are incurred. They exclude
repayments of investment components and comprise:
– incurred claims and other insurance service expenses;
– amortisation of insurance acquisition cash flows;
– losses on onerous contracts and reversals of such losses;
– adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and changes
therein, which are recognised in insurance finance income (expense); and
– impairment losses on assets for insurance acquisition cash flows and reversals of such impairment losses.
An analysis of the expenses incurred by the Group in the year is provided in the table below.
Expenses attributed to insurance acquisition cash flows note (i)
Other directly attributable expenses note (ii)
Other expenditure note (iii)
Total expenses
2023 $m
4,833
1,258
990
7,081
2022 $m
3,232
1,221
1,019
5,472
Notes
(i) Expenses attributed to insurance acquisition cash flows represent insurance acquisition expenses incurred in the year, which are implicitly deferred within the CSM and
amortised as part of the CSM amortisation.
(ii) Other directly attributable expenses are those incurred in the year when providing insurance services to the policyholders, excluding the cost of claims and benefit payments.
The expected other directly attributable expenses are explicitly included within the BEL and form part of the BEL release to the insurance revenue. The actual other directly
attributable expenses incurred in the year form part of insurance service expenses.
(iii) Other expenditure includes interest expense other than interest on core structural borrowings that is presented separately on the income statement as Finance costs. Total
segment interest expense is $58 million (2022: $23 million), of which $31 million arises in the Hong Kong segment (2022: $11 million) and $23 million (2022: $9 million)
arises in the Centre segment with the remainder spread broadly across the other markets. Included within interest expense is $7 million (2022: $8 million) of interest on
lease liabilities. Core structural borrowings and operational borrowings (other than lease liabilities) represent financial liabilities that are not classified at FVTPL.
Total depreciation and amortisation expenses relate primarily to amortisation of distribution rights intangibles as shown in note C4.2. The
segmental analysis of total 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
B2.1 Staff and employment costs
Total staff and employment costs are analysed by category below:
Wages and salaries
Social security costs
Defined contribution pension schemes
Total Group
The average number of staff employed by the Group during the years shown was:
Asia and Africa operations note
Head office function
Total Group
2023 $m
42
11
21
36
369
12
491
33
524
2022 $m
43
12
21
40
339
13
468
26
494
2023 $m
1,079
37
46
2022 $m
1,018
41
40
1,162
1,099
2023
14,479
551
2022
13,685
511
15,030
14,196
Note
The Asia and Africa operations staff numbers above exclude 621 (2022: 744) commission-based sales staff who have an employment contract with the Group.
Prudential plc Annual Report 2023
257
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
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 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*
Prudential Global Long Term
Incentive Plan (PGLTIP)
Prudential Agency Long-Term
Incentive Plan (LTIP)
Restricted Share Plan (RSP)
Deferred bonus plans
Savings-related share option
schemes
Share purchase plans
Description
The PGLTIP 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.
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 PGLTIP described above, with most awards
granted with a three-year vesting period.
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.
*
The total numbers of securities available for issue under these schemes are disclosed in note I(vii) within additional unaudited financial information.
(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
2023
2022
2023
2022
Number
of options
millions
1.9
0.4
(0.3)
–
(0.3)
–
1.7
0.2
Weighted
average
exercise
price
£
10.4
7.8
11.6
7.8
12.0
10.4
9.5
10.8
Number
of options
millions
2.0
0.5
(0.3)
–
(0.3)
–
1.9
0.3
Weighted
average
exercise
price
£
11.6
7.4
11.2
10.8
12.7
13.0
10.4
12.5
Number of awards
millions
21.0
6.3
(10.1)
(1.7)
(0.1)
(1.1)
14.3
24.6
6.5
(7.2)
(1.1)
(0.1)
(1.7)
21.0
Balance at beginning of year:
Granted
Exercised
Forfeited
Cancelled
Lapsed/Expired
Balance at end of year
Options immediately exercisable at end of year
The weighted average share price of Prudential plc for 2023 was £10.46 (2022: £10.33).
The following table provides a summary of the range of exercise prices for Prudential plc options outstanding at 31 December:
258
Prudential plc Annual Report 2023
Number outstanding
millions
2023
0.7
0.3
0.6
–
0.1
–
1.7
2022
0.5
0.4
0.8
–
0.1
0.1
1.9
Outstanding
Weighted average
remaining
contractual life
years
2023
3.7
1.4
2.0
–
0.4
–
2.6
2022
4.1
2.2
2.4
–
1.4
0.4
2.6
Weighted average
exercise prices
£
2023
7.55
9.64
2022
7.37
9.64
11.59
11.48
–
13.94
–
9.50
–
13.94
14.55
10.43
Exercisable
Number exercisable
millions
Weighted average
exercise prices
£
2023
–
0.1
–
–
0.1
–
0.2
2022
–
–
0.2
–
2023
–
9.64
–
–
–
13.94
2022
–
–
11.12
–
–
0.1
0.3
–
10.82
14.55
12.48
Between £7 and £8
Between £9 and £10
Between £11 and £12
Between £12 and £13
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)
–
31.50
4.34
–
–
11.59
5.10
2023
2022
SAYE
options
1.38
30.02
4.55
3.95
7.75
8.89
2.85
Other
awards
–
–
–
–
–
–
11.45
Prudential
LTIP (TSR)
–
33.64
2.79
–
–
11.15
2.09
SAYE
options
1.11
25.68
3.97
4.52
7.37
9.54
3.45
Other
awards
–
–
–
–
–
–
11.11
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 2023, the average
volatility for the basket of competitors was 26 per cent (2022: 26 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 2023 in the consolidated financial statements relating to share-based compensation is $81 million (2022: $104
million), of which $71 million (2022: $97 million) is accounted for as equity-settled.
The Group had $31 million of liabilities at 31 December 2023 (31 December 2022: $27 million) relating to share-based payment awards
accounted for as cash-settled.
Prudential plc Annual Report 2023
259
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
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 (including fees paid to non-executive directors)
Post-employment benefits
Share-based payments
Payments on separation
2023 $m
27.0
1.0
22.2
–
50.2
2022 $m
22.5
1.0
15.4
1.0
39.9
The share-based payments charge comprises $7.6 million (2022: $6.7 million), which is determined in accordance with IFRS 2 ‘Share-based
Payment’ (see note B2.2), $9.6 million (2022: $8.7 million) of deferred share awards and $5.0 million for an award made to Mr Wadhwani in
2023 to replace share-based awards from his former employer that were forfeited as a consequence of his joining Prudential.
Additional details on the Directors’ emoluments, retirement benefits and other payments are given in the Directors’ remuneration 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 note (i)
Audit-related assurance services note (ii)
Other assurance services
Non-audit fees payable to the auditor
Total fees payable to the auditor
2023 $m
5.8
8.1
13.9
4.0
0.9
4.9
2022 $m
2.3
4.4
6.7
3.5
0.7
4.2
18.8
10.9
Notes
(i) EY became the Group’s statutory auditor in 2023 replacing KPMG who was the statutory auditor during 2022. The 2023 fees shown above are wholly in respect of fees
payable to EY while the 2022 fees were the fees paid to KPMG.
(ii) Of the audit-related assurance service fees of $4.0 million for EY in 2023 (2022: $3.5 million for KPMG), $1.1 million (2022: $0.9 million) relates to services that are required
by law and regulation as defined by the FRC.
In addition to the above, in the period from September 2021 until their appointment as the Group's statutory auditor in May 2023, EY were paid
$12.4 million to provide audit assurance over the implementation of IFRS 17.
260
Prudential plc Annual Report 2023
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:
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Eastspring
Total segment note (i)
Unallocated to a segment (central operations)
Total tax charge notes (i)(ii)
2023 $m
(129)
(43)
(98)
(174)
(103)
(26)
(573)
13
(560)
2022 $m
(106)
(27)
(44)
(61)
(210)
(26)
(474)
(4)
(478)
Notes
(i) 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.
(ii) The total tax charge is analysed between current tax and deferred tax as follows
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 (charge) credit
Total tax charge
2023 $m
2022 $m
(457)
1
(456)
(135)
31
(104)
(560)
(474)
(7)
(481)
–
3
3
(478)
Prudential plc Annual Report 2023
261
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
B3.2 Reconciliation of 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
year. It reflects the corporation tax rates of each jurisdiction weighted by reference to the amount of profit or loss contributing to the aggregate
result. The reconciliation of the expected to actual tax charge/credit and the percentage impact of reconciliation items on shareholder effective
tax rate are provided below.
Profit (loss) before tax (being tax attributable to shareholders’ and policyholders’
2023
$m
%
2022
$m
%
returns)
Tax charge attributable to policyholders’ returns note (i)
Profit (loss) before tax attributable to shareholders' returns
Tax (charge) credit 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
Effect of results of joint ventures and associates note (v)
Irrecoverable withholding taxes note (vi)
Other
Total charge on recurring items
Effects of non-recurring tax reconciliation items:
Adjustments to tax charge in relation to prior years note (vii)
Movements in provisions for open tax matters note (viii)
Adjustments in relation to business disposals and corporate transactions
Total credit (charge) on non-recurring items
Tax charge attributable to shareholders' returns
Tax charge attributable to policyholders’ returns note (i)
Tax charge attributable to shareholders' and policyholders' returns
Profit before tax attributable to shareholders’ returns analysed into:
Adjusted operating profit
Non-operating result note (ix)
Profit (loss) before tax attributable to shareholders' returns
Tax charge attributable to shareholders' returns analysed into:
Tax charge on adjusted operating profit
Tax credit on non-operating result note (ix)
Tax charge attributable to shareholders' returns
Actual tax rate on:
Adjusted operating profit:
Including non-recurring tax reconciling items note (x)
Excluding non-recurring tax reconciling items
Profit before tax attributable to shareholders' returns note (x)
2,272
(175)
2,097
(399)
80
(136)
137
13
(38)
(63)
(2)
(9)
42
(15)
(4)
23
(385)
(175)
(560)
2,893
(796)
2,097
(444)
59
(385)
15%
16%
18%
19 %
(4) %
6 %
(7) %
(1) %
2 %
3 %
1 %
0 %
(2) %
1 %
0 %
(1) %
(519)
(124)
(643)
85
61
(196)
(129)
(45)
(32)
(55)
(15)
13 %
9 %
(30) %
(20) %
(7) %
(5) %
(9) %
(2) %
(411)
(64) %
0 %
(6) %
2 %
(4) %
1
(40)
11
(28)
(354)
(124)
(478)
2,722
(3,365)
(643)
(539)
185
(354)
20%
18%
(55)%
Notes
(i) The tax charge attributable to policyholders of $(175) million (2022: $(124) million) is equal to the profit before tax attributable to policyholders as a result of accounting
for policyholder income after the deduction of expenses on a post-tax basis.
(ii) Income not taxable or taxable at concessionary rates primarily relates to non-taxable investment income in Growth markets and Singapore.
(iii) Deductions and losses not allowable for tax purposes primarily relates to non-deductible head office costs in Other operations.
(iv) 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.
(v) 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.
(vi) 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.
(vii) Adjustments to tax charge in relation to prior years primarily relates to the recognition of a deferred tax asset in relation to historical tax losses, due to an increase in
forecast taxable profit in the UK tax group.
(viii)The statement of financial position contains the following provisions in relation to open tax matters.
262
Prudential plc Annual Report 2023
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
2023 $m
(79)
(15)
1
(93)
(ix) ‘Non-operating result’ is used to refer to items excluded from adjusted operating profit and includes short-term investment fluctuations in investment returns and corporate
transactions. 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.
(x) The actual tax rates of the relevant business operations are shown below:
2023 %
Tax rate on adjusted operating profit
Tax rate on profit before tax
Hong Kong
7 %
Indonesia
22 %
7 %
22 %
Malaysia
22 %
20 %
Singapore
16 %
16 %
2022 %
Tax rate on adjusted operating profit
Tax rate on profit before tax
Hong Kong
4 %
(7)%
Indonesia
19 %
16 %
Malaysia
26 %
25 %
Singapore
16 %
63 %
Growth
markets
and other
20 %
11 %
Growth
markets
and other
33 %
40 %
Eastspring
9 %
Other
operations
2 %
Total
attributable
to
shareholders
15 %
9 %
2 %
18 %
Other
operations
0 %
Total
attributable to
shareholders
20 %
(1) %
(55) %
Eastspring
10 %
10 %
Actual tax rates on adjusted operating profit for each segment for 2022 prepared applying IFRS 17 as shown in the table above are generally consistent with the tax rates
previously published for 2022 results prepared applying IFRS 4. The tax rates on adjusted operating profit for Growth markets and other and the Group total as shown in the
table above differ from the equivalent tax rates previously published under IFRS 4 for 2022 due primarily to differences in the proportions of adjusted operating profit
contributed by entities with different tax rates. Actual tax rates on profit before tax for 2022 prepared under IFRS 17 differ from the equivalent tax rates previously
published under IFRS 4 for 2022 primarily due to non-taxable and non-deductible amounts, such as investment gains or losses, making up a different proportion of total
profit before tax for each segment and the Group total under each standard.
A number of jurisdictions in which the Group has operations – Japan, South Korea, Luxembourg, Vietnam and the UK – have implemented either
a global minimum tax or a domestic minimum tax at a rate of 15 per cent, in line with the OECD proposals, effective for 2024 onwards. Malaysia
has implemented both the global minimum tax and domestic minimum tax effective for 2025 onwards. Other jurisdictions where the Group has
a taxable presence, including Hong Kong (where Prudential plc has been tax resident since 3 March 2023), Singapore and Thailand intend to
implement the proposals for 2025 onwards.
For those jurisdictions where either a global minimum tax or domestic minimum tax or both have been implemented with effect for 2024, no
material impact to the Group’s IFRS tax charge for the 2024 financial year is expected. The implementation of a global minimum tax and
domestic minimum tax in Malaysia effective for 2025 is not expected to have a material impact for the Group’s IFRS tax charge for the 2025
financial year. These assessments consider a number of factors including whether the transitional safe harbour is expected to apply based on the
most recent filings of tax returns, country by country reporting and financial statements of the relevant entities. In some jurisdictions a global
minimum tax but not a domestic minimum tax regime has been implemented and the Group’s operations in that jurisdiction will not be subject
to the rules as they are wholly domestic operations.
Luxembourg and South Korea have both implemented an undertaxed profits rule effective for 2025 onwards. The undertaxed profits rule is
intended as a backstop provision to deal with jurisdictions which delay or do not implement the global minimum tax or domestic minimum tax
rules. In the December 2023 public consultation and February 2024 budget, Hong Kong confirmed its intention to implement the global
minimum and domestic minimum tax rules effective from 2025 onwards. As the Hong Kong rules are expected to be in force for 2025 and would
apply to the Group from 2025, the undertaxed profits rules implemented in South Korea and Luxembourg are not expected to have any practical
application to the Group. For those jurisdictions, such as Hong Kong and Singapore, where the proposals are expected to be implemented with
effect from 2025 onwards, work is ongoing to assess the potential impact and guidance will be provided in due course during 2024.
B4 Earnings per share
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. No adjustment is made if the impact is anti-dilutive overall.
Prudential plc Annual Report 2023
263
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Based on adjusted operating profit
2,893
(444)
(11)
2,438
89.0 ¢
88.7 ¢
Before
tax
$m
Tax
$m
2023
Non-controlling
interests
Net of tax
and non-
controlling
interests
Basic
earnings
per share
Diluted
earnings
per share
$m
$m
cents
cents
Short-term fluctuations in investment returns
Loss attaching to corporate transactions
(774)
(22)
59
–
–
–
Based on profit for the year
2,097
(385)
(11)
1,701
(715)
(26.1) ¢
(26.0) ¢
(22)
(0.8) ¢
62.1 ¢
(0.8) ¢
61.9 ¢
For 2023, the weighted average number of shares for calculating basic earnings per share, which excludes those held in employee share trusts, is
2,741 million. After including a dilutive effect of the Group's share options and awards (see note B2.2) of 6 million, the weighted average
number of shares for calculating diluted earnings per share is, 2,747 million.
Based on adjusted operating profit
Short-term fluctuations in investment returns
Gain attaching to corporate transactions
Based on loss for the year
Before
tax
$m
2,722
(3,420)
55
(643)
2022
Tax
Non-controlling
interests
$m
(539)
185
–
$m
(11)
1
–
Net of tax
and non-
controlling
interests
$m
2,172
Basic
earnings
per share
cents
79.4 ¢
Diluted
earnings
per share
cents
79.4 ¢
(3,234)
(118.2) ¢
(118.2) ¢
55
2.0 ¢
2.0 ¢
(36.8) ¢
(354)
(10)
(1,007)
(36.8) ¢
For 2022, the weighted average number of shares for calculating basic and diluted earnings per share, which excludes those held in employee
share trusts, was 2,736 million. As the Group made a loss for the year in 2022, the potential ordinary shares from the Group's share options and
awards (see note B2.2) would be anti-dilutive and therefore not included in the diluted earnings per share calculation as it is not permissible for
the diluted earnings per share to be greater than the basic earnings per share.
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
2023
2022
Cents per share
$m
Cents per share
$m
6.26 ¢
14.21 ¢
20.47 ¢
6.26 ¢
13.04 ¢
19.30 ¢
172
392
564
172
361
533
5.74 ¢
13.04 ¢
18.78 ¢
5.74 ¢
11.86 ¢
17.60 ¢
154
359
513
154
320
474
First and second interim dividends are recorded in the period in which they are paid.
Dividend per share
The 2023 first interim dividend of 6.26 cents per ordinary share was paid to eligible shareholders on 19 October 2023.
On 16 May 2024, Prudential will pay a second interim dividend of 14.21 cents per ordinary share for the year ended 31 December 2023. The
second interim dividend will be paid to shareholders recorded on the UK register at 6.00pm (British Summer Time) and to shareholders on the HK
branch register at 4.30pm (Hong Kong Time) on 2 April 2024 (Record Date), and also to the Holders of US American Depositary Receipts (ADRs)
as at 2 April 2024. The second interim dividend will be paid on or about 23 May 2024 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 to receive dividend payments in USD. Elections must be made through the relevant UK or HK share registrar on or before 24
April 2024. The corresponding amounts per share in GBP and HKD are expected to be announced on or about 2 May 2024. 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.
264
Prudential plc Annual Report 2023
C Financial position
C1 Group assets and liabilities
C1.1 Group investments by business type
The analysis below is structured to show the investments of the Group's subsidiaries 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 2023 were $1,181 million (31 December 2022: $1,152 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-.
The following table classifies assets into those that primarily back the Group’s participating funds that are measured under the variable fee
approach, those backing unit-linked funds, other investments held within the insurance entities, Eastspring’s investments and those that are
unallocated to a segment (principally centrally held investments).
In terms of the investments held by the insurance businesses, those within funds with policyholder participation and those within unit-linked
funds represent underlying items. The gains or losses on these investments will be offset by movements in policyholder liabilities and therefore
adjusted operating profit reflects the actual investment return on these assets. The exception is for investments backing the shareholders’ 10 per
cent share of the estate within the Hong Kong with-profits fund. Changes in the value of these investments, including those driven by market
movements, pass through the income statement with no liability offset. Consequently adjusted operating profit recognises investment return on
a longer-term basis for these assets.
In terms of other assets held within the insurance entities, these largely comprise assets backing IFRS shareholders’ equity or are non-underlying
items backing GMM liabilities and therefore the returns on these other investments are recognised in adjusted operating profit at a longer-term
rate.
Prudential plc Annual Report 2023
265
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
31 Dec 2023 $m
Asia and Africa
Other
Eastspring
Total
Unallocated
to a segment
Group
total
Debt securities
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 notes (ii)(iv)
Loans
Mortgage loans
Other loans
Total loans
Insurance
Unit-linked
funds
Funds with
policyholder
participation
note (i)
393
3,006
2
–
23,552
3,143
4,375
611
607
4
5
84
30
664
34,471
2,005
1,533
120
689
271
502
94
17
95
57
11
3,115
274
1,214
2,716
10,918
9,466
2,280
147
440
460
714
500
525
929
1,957
87
2,351
173
1,732
7,754
119
29
239
56
63
506
243
934
2,179
2,055
356
26,594
2,261
5,767
174
6
30
7
–
217
2
–
–
–
1
3
54
2
7
2
–
65
–
–
–
–
–
–
28
28
–
–
–
–
2
2
–
–
–
–
–
–
–
–
–
–
–
–
1,529
4,542
1,963
92
25,987
3,346
6,799
44,258
1,746
166
1,023
384
578
3,897
1,604
4,090
13,557
12,235
3,136
34,622
230
8
37
9
1
285
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
1
–
2
–
–
–
–
–
–
2
–
–
–
1,529
4,542
1,963
92
25,987
3,346
6,799
44,258
1,746
166
1,023
384
578
3,897
1,604
4,090
13,558
12,236
3,136
34,624
230
8
37
9
1
285
83,064
148
430
578
64,397
4,543
14,092
30
83,062
65
430
495
–
–
–
83
–
83
–
–
–
148
430
578
Equity securities and holdings in
collective investment schemes
Direct equities
18,711
12,075
182
128
31,096
Collective investment schemes
24,529
7,546
1,580
2
33,657
–
–
31,096
33,657
Total equity securities and holdings in
collective investment schemes
Other financial investments note (iii)
Total financial investments note (v)
Investment properties
Cash and cash equivalents
Total investments
43,240
19,621
2,893
396
1,762
1,707
130
101
64,753
–
64,753
5,097
2,628
7,725
111,025
24,560
17,644
261 153,490
2,630 156,120
–
–
39
–
39
–
39
1,054
647
1,287
173
3,161
1,590
4,751
112,079
25,207
18,970
434 156,690
4,220 160,910
266
Prudential plc Annual Report 2023
31 Dec 2022 $m
Asia and Africa
Insurance
Funds with
policyholder
participation Unit-linked funds
note (i)
Other
Eastspring
Total
Unallocated
to a segment
Group
total
565
3,240
–
–
21,580
2,263
3,663
31,311
1,480
112
765
327
483
3,167
1,094
2,356
9,233
9,515
2,918
25,116
228
7
25
17
2
279
59,873
92
450
542
15,000
22,015
37,015
3,010
100,440
–
1,563
102,003
589
507
–
4
54
12
646
1,812
85
21
139
77
22
344
181
385
524
1,325
444
2,859
5
1
–
–
1
7
5,022
–
–
–
11,379
6,760
18,139
379
23,540
–
749
24,289
400
917
1,456
–
257
135
1,666
4,831
108
20
233
99
67
527
268
1,151
2,345
2,344
454
6,562
85
2
9
6
1
103
12,023
48
–
48
202
1,992
2,194
1,599
15,864
37
1,266
17,167
3
67
–
–
–
–
27
97
–
–
–
–
–
–
–
–
–
1
–
1
–
–
–
–
–
–
98
–
–
–
61
2
63
107
268
–
127
395
1,557
4,731
1,456
4
21,891
2,410
6,002
38,051
1,673
153
1,137
503
572
4,038
1,543
3,892
12,102
13,185
3,816
34,538
318
10
34
23
4
389
77,016
140
450
590
26,642
30,769
57,411
5,095
140,112
37
3,705
143,854
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
266
2
268
1,749
2,017
–
1,809
3,826
1,557
4,731
1,456
4
21,891
2,410
6,002
38,051
1,673
153
1,137
503
572
4,038
1,543
3,892
12,102
13,185
3,816
34,538
318
10
34
23
4
389
77,016
140
450
590
26,908
30,771
57,679
6,844
142,129
37
5,514
147,680
Debt securities
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 notes (ii)(iv)
Loans
Mortgage loans
Other loans
Total loans
Equity securities and holdings in collective
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
Cash and cash equivalents
Total investments
Notes
(i) Funds with policyholder participation represent investments held to support insurance products where policyholders participate in the returns of a specified pool of
investments (excluding unit-linked policies) that are measured using the variable fee approach.
(ii) Of the Group’s debt securities, the following amounts were held by the consolidated investment funds:
Debt securities held by the consolidated investment funds
31 Dec 2023 $m 31 Dec 2022 $m
11,899
11,116
(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.
(v) Of the total financial investments of $156,120 million as at 31 December 2023 (31 December 2022: $142,129 million), $80,022 million (31 December 2022:
$68,949 million) are expected to be recovered within one year, including equity securities and holdings in collective investment schemes.
Prudential plc Annual Report 2023
267
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
C1.2 Other assets and liabilities
(a) Accrued investment income and other debtors
Interest receivable
Other accrued income
Total accrued investment income
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
Total accrued investment income and other debtors
31 Dec 2023 $m 31 Dec 2022 $m
806
871
132
1,003
1,161
2,164
2,048
116
2,164
177
983
968
1,951
1,882
69
1,951
(b) Accruals, deferred income and other creditors
Accruals, deferred income and other creditors are analysed as follows (detailed maturity analysis is provided in note C2.3):
Accruals and deferred income
Interest payable
Other creditors
Total accruals, deferred income and other creditors
31 Dec 2023 $m 31 Dec 2022 $m
200
244
35
3,756
4,035
59
2,607
2,866
C1.3 Cash and cash equivalents
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 2023 $m 31 Dec 2022 $m
1,878
1,964
2,787
4,751
1,590
3,161
4,751
3,636
5,514
1,809
3,705
5,514
The Group’s cash and cash equivalents are held in the following currencies as at 31 December 2023: USD 42 per cent, MYR 14 per cent, GBP 5
per cent, HKD 6 per cent, SGD 8 per cent, and other currencies 25 per cent (31 December 2022: USD 45 per cent, MYR 14 per cent, GBP 11 per
cent, HKD 5 per cent, SGD 5 per cent and other currencies 20 per cent).
C1.4 Provisions
An analysis of movement in total provisions held is shown below:
Balance at 1 Jan
Charge (credit) to income statement:
Additional provisions
Unused amounts released
Utilisation during the year
Exchange differences
Balance at 31 Dec
2023 $m
206
2022 $m
234
198
(10)
(172)
2
224
153
(19)
(154)
(8)
206
Of the $224 million of provisions at 31 December 2023 (31 December 2022: $206 million), which excludes any amounts attributable to
insurance contracts, the Group held $215 million (31 December 2022: $199 million) provisions for staff benefits, which are generally expected to
be paid out within the next three years.
268
Prudential plc Annual Report 2023
C2 Measurement of financial assets and liabilities
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 IFRS 9 (2023) / IAS 39 (2022 and prior) whereby subject to specific criteria, financial instruments are required to be accounted
for under one of the following categories:
– Financial instruments at FVTPL: this comprises primarily 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. In addition, this includes derivatives. All investments within this category are
measured at fair value with all changes thereon being recognised in investment return in the income statement.
– Financial instruments at FVOCI under IFRS 9 or on an AFS basis under IAS 39: these instruments 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 except for equity
securities that have been elected to be designated at FVOCI under IFRS 9 whereby there is no recycling to the profit or loss on derecognition
being the difference to the AFS treatment for equity securities under IAS 39. Subsequent to the demerger of Jackson in September 2021, the
Group designated its retained interest in Jackson as AFS equity securities under IAS 39. Upon the adoption of IFRS 9, the Group made the
election to measure its interest in equity securities in Jackson at FVOCI, which were disposed of entirely in 2023. There were no financial
instruments at FVOCI at 31 December 2023.
– Financial instruments at amortised cost: these instruments comprise non-quoted investments that have fixed or determinable payments,
including loans collateralised by mortgages, deposits, and other 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. Climate change does not directly impact fair values particularly where these are built on observable inputs (ie
level 1 and level 2), which represent the majority of the Group’s financial instruments as discussed below.
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.
The fair value of the subordinated and senior debt issued by the Group is determined using quoted prices from independent third parties.
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.
Prudential plc Annual Report 2023
269
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
C2.2 Valuation hierarchy
(a) Assets and liabilities at fair value
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 FVTPL at 31 December 2023. At 31 December 2022, $266 million of financial assets
classified as AFS under IAS 39 related to the Group’s retained interest in Jackson, which was disposed of in 2023. All assets and liabilities held at
fair value are measured on a recurring basis.
Financial instruments at fair value
Loans
Equity securities and holdings in collective investment schemes
Debt securities note (i)
Derivative assets
Derivative liabilities
31 Dec 2023 $m
Level 1
Level 2
Level 3
Quoted prices
(unadjusted)
in active markets
Valuation based
on significant
observable
market inputs
Valuation based
on significant
unobservable
market inputs
–
56,327
64,004
1,460
(58)
430
5,562
19,020
395
(180)
note (iii)
–
2,864
40
–
–
Total
430
64,753
83,064
1,855
(238)
Total financial investments, net of derivative liabilities
Investment contract liabilities without DPF note (ii)
Net asset value attributable to unit holders of consolidated investment funds
121,733
25,227
2,904
149,864
–
(2,711)
(769)
–
–
–
(769)
(2,711)
Total financial instruments at fair value
Percentage of total (%)
119,022
24,458
2,904
146,384
81%
17%
2%
100%
Loans
Equity securities and holdings in collective investment schemes
Debt securities note (i)
Derivative assets
Derivative liabilities
31 Dec 2022 $m
Level 1
Level 2
Level 3
Quoted prices
(unadjusted)
in active markets
–
49,725
57,148
82
(778)
Valuation
based
on significant
observable
market inputs
447
7,130
19,763
487
(223)
Valuation
based
on significant
unobservable
market inputs
note (iii)
3
824
38
–
–
Total
450
57,679
76,949
569
(1,001)
Total financial investments, net of derivative liabilities
Investment contract liabilities without DPF note (ii)
Net asset value attributable to unit holders of consolidated investment funds
Total financial instruments at fair value
106,177
27,604
865
134,646
–
(4,193)
101,984
(663)
–
26,941
–
–
865
(663)
(4,193)
129,790
Percentage of total (%)
78%
21%
1%
100%
Notes
(i) Of the total level 2 debt securities of $19,020 million at 31 December 2023 (31 December 2022: $19,763 million), $10 million (31 December 2022: $37 million) are valued
internally.
(ii) For Investment contract liabilities without DPF, it is assumed that these investment contracts are not quoted in an active market and do not have readily available published
prices and that their fair values are determined using valuation techniques. It is assumed that all significant inputs used in the valuation are observable and these
investment contract liabilities are classified in level 2.
(iii) At 31 December 2023, the Group held $2,904 million (31 December 2022: $865 million) of net financial instruments at fair value within level 3. This represents 2 per cent
(2022: less than one per cent) of the total fair valued financial assets, net of financial liabilities and comprises the following:
– Equity securities and holdings in collective investment schemes of $2,863 million (31 December 2022: $823 million) are externally valued using the net asset value of the
invested entities and consist primarily of property and infrastructure funds held by the participating funds. Equity securities of $1 million (31 December 2022: $1 million)
are internally valued. Internal valuations are inherently more subjective than external valuations; and
– Other sundry individual financial instruments of a net asset of $40 million (31 December 2022: $41 million).
Of the net financial instruments of $2,904 million (31 December 2022: $865 million) referred to above:
– A net asset of $2,866 million (31 December 2022: $830 million) is held by the Group’s with-profits and unit-linked funds and therefore shareholders’ profit and equity
are not immediately impacted by movements in the valuation of these financial instruments; and
– The remaining level 3 investments comprise a net asset of $38 million (31 December 2022: $35 million) and are primarily corporate bonds valued using external prices
adjusted to reflect the specific known conditions relating to these bonds (eg distressed securities). If the value of all these level 3 financial instruments decreased by 10
per cent, the change in valuation would be $(4) million (31 December 2022: $(4) million), which would reduce shareholders’ equity by this amount before tax.
270
Prudential plc Annual Report 2023
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 2023, the transfers between levels within the portfolios included transfers from level 1 to level 2 of $505 million and transfers from level 2
to level 1 of $1,708 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 2 to level 3 of $1,489 million in
the period relating to certain of the underlying investments of the Group’s consolidated investment funds, which are now deemed to have more
unobservable inputs.
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 of the period to that presented at the end of
the period.
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 US dollars.
Balance at 1 Jan
Total gains in income statement note
Total gains recorded in other comprehensive income
Purchases and other additions
Sales
Transfers into level 3
Balance at 31 Dec
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
2023 $m
Equity
securities
and
holdings in
collective
investment
schemes
824
25
6
524
(4)
1,489
2,864
2022 $m
Equity
securities
and
holdings in
collective
investment
schemes
577
(31)
(6)
305
(21)
–
824
Loans
3
–
–
–
(3)
–
–
Loans
5
(2)
–
–
–
–
3
Debt
securities
38
Group total
865
2
–
–
–
–
40
27
6
524
(7)
1,489
2,904
Debt
securities
58
Group total
640
(2)
(3)
–
–
(15)
38
(35)
(9)
305
(21)
(15)
865
Note
Of the total net gain in the income statement of $27 million at 2023 (2022: net loss of $(35) million), $29 million (2022: $(12) 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
Net unrealised gains and losses of financial instruments still held at the end of the year
2023 $m
–
27
2
29
2022 $m
(2)
(8)
(2)
(12)
Prudential plc Annual Report 2023
271
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
(b) 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.
Deposits, cash and cash equivalents, accrued investment income, other debtors, accruals, deferred income and other creditors are excluded from
the analysis below, as these are carried at amortised cost which approximates fair value.
Assets
Debt securities
Loans
Liabilities
Core structural borrowings of shareholder-financed businesses
Operational borrowings (excluding lease liabilities)
Obligations under funding, securities lending and sale and repurchase
agreements
Net financial liabilities at amortised cost
31 Dec 2023 $m
31 Dec 2022 $m
Carrying
value
–
148
Fair
value
–
179
(3,933)
(3,659)
(707)
(707)
(716)
(716)
(5,208)
(4,903)
Carrying
value
67
140
(4,261)
(516)
(582)
(5,152)
Fair
value
67
206
(3,834)
(516)
(582)
(4,659)
The fair value of the assets and liabilities in the table above, with the exception of the subordinated and senior debt issued by the Group, 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 2023 and 2022, reflecting the observability of the inputs used to derive their fair value. The fair value of
the subordinated and senior debt issued by the Group is determined using quoted prices from independent third parties.
C2.3 Additional information on financial instruments
(a) Financial risk
Liquidity analysis
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.
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 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. For investment contracts without DPF, the maturity profile is based on undiscounted cash flow projections of
expected benefit payments.
31 Dec 2023 $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
769
155
169
68
149
24
9
5
273
852
3,933
126
126
379 3,555
234
707
76
707
62
–
86
–
25
–
716
716
4,035
3,845
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
750
4,936
–
–
–
251
707
716
–
190
4,035
2,711
2,711
–
–
–
–
–
–
–
2,711
13,105
8,336
357
533 3,729
26
9
5 1,213
14,208
Investment contracts without DPF
note
Core structural borrowings of
shareholder-financed businesses
Lease liabilities under IFRS 16
Other operational borrowings
Obligations under funding,
securities lending and sale and
repurchase agreements
Accruals, deferred income and other
liabilities
Net asset value attributable to unit
holders of consolidated investment
funds
Total non-derivative financial
liabilities
272
Prudential plc Annual Report 2023
31 Dec 2022 $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
Investment contracts without DPF
note
Core structural borrowings of
shareholder-financed businesses
Lease liabilities under IFRS 16
Other operational borrowings
Obligations under funding,
securities lending and sale and
repurchase agreements
Accruals, deferred income and other
liabilities
Net asset value attributable to unit
holders of consolidated investment
funds
Total non-derivative financial
liabilities
663
11
163
206
98
22
4,261
299
516
509
101
516
124
76
–
582
582
2,866
2,686
4,193
4,193
–
–
–
370
2,598
1,024
127
–
28
–
–
–
–
–
–
–
9
–
–
–
–
13,380
8,598
363
703
2,724
1,055
8
–
–
–
–
–
–
8
4
–
–
–
–
–
–
243
755
750
5,375
–
–
–
341
516
582
180
2,866
–
4,193
4
1,173
14,628
Note
The undiscounted cash flows of investment contracts without DPF included under the 'No stated maturity' category in the maturity profile shown above are mostly repayable
on demand due to most of these investment contracts having options to surrender early, though often subject to surrender or other penalties therefore, these options are
unlikely to be exercised in practice.
Maturity analysis of derivatives
The following table shows the carrying value of the gross and net derivative positions.
31 Dec 2023
31 Dec 2022
Carrying value of net derivatives $m
Derivative
assets
Derivative
liabilities
1,855
(238)
Net
derivative
position
1,617
569
(1,001)
(432)
All net derivatives are carried at fair value and are considered to be 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.
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.
The majority of Group’s financial instruments are carried at FVTPL. The total value of assets held at amortised cost is $12,933 million (31
December 2022: $13,947 million), comprising primarily cash and cash equivalents, deposits and accrued investment income where the credit risk
is considered to be low by nature. There are no material expected credit losses recognised on these assets. At 31 December 2023, $9 million (31
December 2022: $7 million) are past their due date and as recovery is anticipated, immaterial expected credit loss provision has been
established.
In addition, the Group did not take possession of any other collateral held as security in both years.
Foreign exchange risk
The Group is exposed to exchange gains and losses on financial assets and liabilities held by the Group's business units in a currency 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 loss on financial instruments recognised in the income statement in 2023, except for those arising on financial
instruments measured at FVTPL, is $(38) million (2022: $234 million gain).
Prudential plc Annual Report 2023
273
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
(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 IFRS 9/IAS 39. The Group has no net investment, fair
value or cash flow hedges under IFRS 9 and IAS 39 at 31 December 2023 and 2022, respectively. 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.
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. 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.
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 2023, the fair value of the collateral held in respect of these transactions, which is represented by the purchased
securities was $3,623 million (31 December 2022: $3,244 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 2023, the Group had $2,001 million (31 December 2022: $1,571 million) of lent securities and assets subject to repurchase
agreements. The cash and securities collateral held or pledged under such agreements were $2,042 million (31 December 2022: $1,679 million).
Collateral and pledges under derivative transactions
At 31 December 2023, the Group had pledged $457 million (31 December 2022: $62 million) for liabilities and held collateral of $1,586 million
(31 December 2022: $234 million) for assets in respect of 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 derivative transactions, which permit sale or re-pledging of underlying
collateral. The Group has not sold any non-cash collateral held or re-pledged any non-cash collateral.
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.
274
Prudential plc Annual Report 2023
The following tables present the gross and net information about the Group’s financial instruments subject to master netting arrangements:
Derivative assets
Reverse repurchase agreements
Total financial assets
Derivative liabilities
Securities lending and repurchase agreements
Total financial liabilities
Derivative assets
Reverse repurchase agreements
Total financial assets
Derivative liabilities
Securities lending and repurchase agreements
Total financial liabilities
31 Dec 2023 $m
Gross amount
included in the
balance sheet
Related amounts not offset in the balance sheet
Financial
instruments
Cash collateral
Securities
collateral
note (i)
1,820
3,616
5,436
(225)
(713)
(938)
note (ii)
(138)
(12)
(150)
138
–
138
(1,529)
–
(1,529)
57
(18)
39
(11)
(3,604)
(3,615)
–
730
730
Gross amount
included in the
balance sheet
note (i)
457
3,174
3,631
(284)
(582)
(866)
31 Dec 2022 $m
Related amounts not offset in the balance sheet
Financial
instruments
Cash collateral
note (ii)
(179)
–
(217)
–
(179)
(217)
179
–
179
27
13
40
Securities
collateral
note (iii)
–
(3,174)
(3,174)
6
566
572
Net amount
included in the
balance sheet
note (iv)
142
–
142
(30)
(1)
(31)
Net amount
included in the
balance sheet
note (iv)
61
–
61
(72)
(3)
(75)
Notes
(i) The Group has not offset any of the amounts included in the balance sheet.
(ii) 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.
(iii) Excludes initial margin amounts for exchange-traded derivatives.
(iv) 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.
C3 Insurance and reinsurance contracts
Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are assets and those
that are liabilities, are presented separately in the statement of financial position. Any assets or liabilities recognised for cash flows arising before
the recognition of the related group of contracts (including any assets for insurance acquisition cash flows) are included in the carrying amount
of the related portfolios of contracts.
The amounts recorded in the balance sheet as insurance and reinsurance contract asset and liabilities are set out in the table below (on the left
hand side), broken out into their component parts. Additionally presented on the right hand side are the same amounts but including the Group’s
share of the relevant amounts of its joint venture and associates, which are equity accounted for on the statement of financial position and
hence all assets and liabilities of those businesses are included in a separate line.
Management believe that the movement in the CSM is a key driver for understanding changes in profitability from period to period and as the
Group’s share of the results of the joint ventures and associates are included in the Group’s adjusted operating and total profit, it is relevant to
understand the movement in insurance assets and liabilities including those entities too.
Therefore note C3 comprises:
– Note C3.1 which sets out the components of assets and liabilities as described above. It also provides adjusted shareholders’ equity which
includes the Contractual service margin net of tax and other adjustments, which management believes is a better measure of value than IFRS
shareholders’ equity alone as it includes the Group’s future expected profits (based on assumptions at 31 December) on policies that are in-
force at the balance sheet date.
– Note C3.2 which contains the required IFRS 17 disclosures on how certain insurance and reinsurance contract balances have moved during the
year, including an analysis of the movement of CSM by transition type. These exclude JV and associate balances.
– Note C3.3 includes the disclosures in C3.2 which management believe would be helpful to show on a basis that includes the Group’s share of
joint ventures and associates, together with a further breakdown of the movement in insurance and reinsurance contract balances by
segment. The difference in most cases between the notes in C3.2 and C3.3 is solely the addition of the joint venture and associate amounts
and so no explicit reconciliation has been provided to bridge between the two.
Prudential plc Annual Report 2023
275
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
C3.1 Group overview
(a) Analysis of Group insurance and reinsurance contract assets and liabilities
The table below provides an analysis of portfolio of insurance and reinsurance (RI) contract assets and liabilities held on the Group’s statement
of financial position:
Excluding JVs and associates
Including JVs and associates note (i)
Assets
Liabilities
Net liabilities (assets)
Assets
Liabilities
Net liabilities (assets)
Insurance
RI
Insurance
RI
Insurance
$m
$m
$m
$m
$m
RI
$m
Insurance
RI
Insurance
RI
Insurance
$m
$m
$m
$m
$m
RI
$m
note (ii)
note (ii)
3,952
1,175
120,115
1,182
116,163
7
3,998
1,315
139,673
1,222
135,675
(93)
(631)
(84)
1,713
(21)
2,344
63
(630)
(67)
1,969
(24)
2,599
43
(2,173)
1,148
1,335
2,426
18,011
139,839
(10) 20,184
138,691
1,151
(1,345)
(1,275)
(2,176)
1,192
1,321
2,569
20,176
161,818
(19) 22,352
160,626
1,179
(1,340)
(1,390)
32
–
1
–
(31)
–
32
–
1
–
(31)
–
1,180
2,426
139,840
1,151
138,660
(1,275)
1,224
2,569
161,819
1,179
160,595
(1,390)
3,540
508
107,582
1,162
104,042
654
3,562
652
124,297
1,193
120,735
541
(505)
(39)
1,418
(44)
1,923
(5)
(502)
(21)
1,662
(47)
2,164
(26)
(1,929)
1,387
17,239
57
19,168
(1,330)
(1,921)
1,369
19,383
54
21,304
(1,315)
As at 31 Dec 2023
Best estimate liabilities (BEL)
Risk adjustment for non-
financial risk (RA)
Contractual service margin
(CSM)
Insurance contract balances
Assets for insurance acquisition
cash flows
Insurance and reinsurance
contract (assets) liabilities
As at 31 Dec 2022
Best estimate liabilities (BEL)
Risk adjustment for non-
financial risk (RA)
Contractual service margin
(CSM)
Insurance contract balances
1,106
1,856
126,239
1,175
125,133
(681)
1,139
2,000
145,342
1,200
144,203
(800)
Assets for insurance acquisition
cash flows
Insurance and reinsurance
contract (assets) liabilities
As at 1 Jan 2022 (transition
date)
28
–
3
–
(25)
–
28
–
3
–
(25)
–
1,134
1,856
126,242
1,175
125,108
(681)
1,167
2,000
145,345
1,200
144,178
(800)
Best estimate liabilities (BEL)
3,818
1,752
126,438
1,474
122,620
(278)
3,993
1,916
142,146
1,501
138,153
(415)
Risk adjustment for non-
financial risk (RA)
Contractual service margin
(CSM)
(547)
(15)
1,661
(46)
2,208
(31)
(575)
1
1,868
(49)
2,443
(50)
(2,050)
1,050
21,699
(174) 23,749
(1,224)
(2,161)
1,023
23,787
(176) 25,948
(1,199)
Insurance contract balances
1,221
2,787
149,798
1,254
148,577
(1,533)
1,257
2,940
167,801
1,276
166,544
(1,664)
Assets for insurance acquisition
cash flows
Insurance and reinsurance
contract (assets) liabilities
29
–
–
–
(29)
–
29
–
–
–
(29)
–
1,250
2,787
149,798
1,254
148,548
(1,533)
1,286
2,940
167,801
1,276
166,515
(1,664)
Notes
(i) The Group’s investments in JVs and associates are accounted for on an equity method and the Group’s share of insurance and reinsurance contract liabilities and assets as
shown above relate to the life business of CPL, India and Takaful business in Malaysia.
(ii) At 31 December 2023 and 2022 the Group’s exposure to credit risk arising from insurance contracts issued is not material to the Group as premiums receivable from an
individual party (policyholders and intermediaries) is not material to the Group.
(b) Adjusted shareholders’ equity
31 Dec 2023 $m
31 Dec 2022 $m
1 Jan 2022 (transition date) $m
Balances
excluding
JVs and
associates
15,883
Group’s
share
relating to
JVs and
associates
Total
including
JVs and
associates
1,940 17,823
Balances
excluding
JVs and
associates
14,472
Group’s share
relating to
JVs and
associates
2,259
Total
including
JVs and
associates
16,731
Balances
excluding
JVs and
associates
16,238
Group’s share
relating to
JVs and
associates
2,698
Total
including
JVs and
associates
18,936
18,839
2,173 21,012
17,838
2,151
19,989
22,525
2,224
24,749
1,367
–
1,367
1,295
–
1,295
1,144
–
1,144
Shareholders’ equity
CSM, net of reinsurance
Remove: CSM asset attaching to
reinsurance contracts wholly
attributable to policyholders
Less: Related tax adjustments
(2,347)
(509)
(2,856)
(2,295)
(509)
(2,804)
(2,531)
(527)
(3,058)
Adjusted shareholders’ equity
33,742
3,604 37,346
31,310
3,901
35,211
37,376
4,395
41,771
276
Prudential plc Annual Report 2023
C3.2 Analysis of movements in insurance and reinsurance contract balances (excluding JVs and associates)
(a) Analysis of movements in insurance and reinsurance contract balances by measurement component
An analysis of movements in insurance and reinsurance contract balances by measurement component and excluding the Group’s share of
insurance and reinsurance contract liabilities and assets relate to the life JVs and associates is set out below:
Opening assets
Opening liabilities
Excluding JVs and associates
2023 $m
Insurance
Reinsurance
BEL
RA
CSM
Total
BEL
RA
CSM
Total
(3,540)
note (b)
505 1,929 (1,106)
(508)
39 (1,387) (1,856)
note (b)
107,582 1,418 17,239 126,239
1,162
(44)
57 1,175
Net opening balance at 1 Jan
104,042 1,923 19,168 125,133
654
(5) (1,330)
(681)
Changes that relate to future service
Changes in estimates that adjust the CSM
Changes in estimates that result in losses or reversal of
losses on onerous contracts
New contracts in the year
(1,181)
343
838
–
57
43
(100)
–
196
(6)
–
190
(2,461)
295 2,173
7
(3,446)
632 3,011
197
– (2,193) (2,193)
(228)
–
–
(228)
(176)
(98)
75
34
–
–
45
45
–
(5)
38
–
24
–
24
–
(98)
(70)
–
(170)
(98)
203
203
–
–
24
45
203
272
Changes that relate to current service
Release of CSM to profit or loss
Release of risk adjustment to profit or loss
–
–
Experience adjustments
(176)
–
Changes that relate to past service
(176)
(228) (2,193) (2,597)
Adjustments to assets/liabilities for incurred claims
144
(2)
–
142
Insurance service result
(3,478)
402
818 (2,258)
(3)
76
–
62
–
33
(3)
171
(2)
10
8
70
(2)
68
–
–
–
–
(49)
–
(49)
(16)
1
(45)
(146)
(191)
(20)
–
(15)
(20)
– (1,032)
–
–
–
–
458
(574)
Net finance (income) expense from insurance and
reinsurance contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
(43)
8,650
8,607
47
(32)
15
229
233
(12) 8,606
217 8,839
Total amount recognised in income statement
5,129
417 1,035 6,581
Effect of movements in exchange rates
225
4
(19)
210
Total amount recognised in comprehensive income
5,354
421 1,016 6,791
6
(156)
(150)
(74)
1
(73)
Cash flows
Premiums received net of ceding commissions paid
Insurance acquisition cash flows
22,294
(4,270)
Claims and other insurance service expenses net of
recoveries from reinsurance received*
Total cash flows
Other changes note
Closing assets
Closing liabilities
–
–
–
–
– 22,294
– (4,270)
(1,032)
–
– (11,082)
– 6,942
458
(574)
(11,082)
6,942
(175)
–
–
(175)
–
–
–
–
(3,952)
631 2,173 (1,148)
(1,175)
84 (1,335) (2,426)
120,115 1,713 18,011 139,839
1,182
(21)
(10) 1,151
Net closing balance at 31 Dec
116,163 2,344 20,184 138,691
7
63 (1,345) (1,275)
Prudential plc Annual Report 2023
277
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Opening assets
Opening liabilities
Excluding JVs and associates
2022 $m
Insurance
Reinsurance
BEL
RA
CSM
Total
BEL
RA
CSM
Total
(3,818)
547
note (b)
2,050
(1,221)
(1,752)
15
note (b)
(1,050)
(2,787)
126,438
1,661
21,699
149,798
1,474
(46)
(174) 1,254
Net opening balance at 1 Jan
122,620
2,208
23,749
148,577
(278)
(31)
(1,224)
(1,533)
Changes that relate to future service
Changes in estimates that adjust the CSM
Changes in estimates that result in losses or reversal of
losses on onerous contracts
New contracts in the period
Changes that relate to current service
Release of CSM to profit or loss
Release of risk adjustment to profit or loss
Experience adjustments
Changes that relate to past service
4,043
(222)
(3,821)
79
(52)
–
(1,811)
232
1,582
2,311
(42)
(2,239)
–
27
3
30
–
–
(108)
(108)
–
(2,181)
(2,181)
(169)
–
–
–
(169)
(108)
(169)
(2,181)
(2,458)
Adjustments to assets/liabilities for incurred claims
144
2
–
146
Insurance service result
2,347
(209)
(4,420)
(2,282)
280
10
(290)
–
(3)
(45)
232
–
–
(87)
(87)
25
170
–
1
11
–
2
–
2
–
13
–
44
(246)
168
–
–
168
(3)
–
(3)
168
2
(87)
83
–
(78)
25
105
Net finance (income) expense from insurance and
reinsurance contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
13
9
218
240
(3)
(1)
(41)
(45)
(28,954)
(28,941)
(26)
(17)
117
(28,863)
1,224
335
(28,623)
1,221
Total amount recognised in income statement
(26,594)
(226)
(4,085) (30,905)
1,391
Effect of movements in exchange rates
(1,595)
(59)
(496)
(2,150)
(19)
Total amount recognised in comprehensive income
(28,189)
(285)
(4,581) (33,055)
1,372
Cash flows
Premiums received net of ceding commissions paid
Insurance acquisition cash flows
Claims and other insurance service expenses net of
recoveries from reinsurance received*
Total cash flows
Other changes note
Closing assets
Closing liabilities
23,464
(3,138)
(10,650)
9,676
(65)
–
–
–
–
–
–
–
–
–
–
23,464
(970)
(3,138)
–
(10,650)
9,676
519
(451)
(65)
11
(3,540)
505
1,929
(1,106)
(508)
39
(1,387)
(1,856)
107,582
1,418
17,239
126,239
1,162
(44)
57
1,175
Net closing balance at 31 Dec
104,042
1,923
19,168
125,133
654
(5)
(1,330)
(681)
*
Including investment component.
Note
Other changes include movements in insurance contract liabilities arising from adjustments to remove the incurred non-cash expenses (such as depreciation, amortisation) from
insurance contract asset/liability balance.
Accretion of interest includes interest on policy loans.
278
Prudential plc Annual Report 2023
10
9
22
4
26
–
–
–
–
–
4
1,238
(37) 1,193
(115) 1,298
9
(6)
(106) 1,292
–
–
–
–
–
(970)
–
519
(451)
11
(b) CSM transition approach
The table below provides an analysis of CSM by transition approach excluding JVs and associates:
Balance at 1 Jan
Changes that relate to future service
Insurance contracts (excluding JVs and associates)
2023 $m
2022 $m
Contracts
under MRA
822
Contracts
Other
under FVA
contracts*
Total CSM
3,635 14,711 19,168
Contracts
under MRA
944
Contracts
under FVA
4,798
Other
contracts*
18,007
Total CSM
23,749
Changes in estimates that adjust the CSM
143
462
233
New contracts in the year
Changes that relate to current service
–
–
2,173
143
462
2,406
838
2,173
3,011
18
–
18
(686)
(3,153)
(3,821)
–
1,582
1,582
(686)
(1,571)
(2,239)
Release of CSM to profit or loss
(135)
(434)
(1,624)
(2,193)
(122)
(466)
(1,593)
(2,181)
8
28
782
818
(104)
(1,152)
(3,164)
(4,420)
Net finance income (expenses) from
insurance contracts
Effect of movements in exchange rates
Balance at 31 Dec
24
(25)
829
3
8
217
(19)
3,674 15,681 20,184
190
(2)
35
(53)
822
40
(51)
260
(392)
3,635
14,711
335
(496)
19,168
* Other contracts represent groups of insurance contracts measured under the full retrospective approach at the transition date, 1 January 2022 and groups of contracts
recognised on or after the transition date.
Balance at 1 Jan
Changes that relate to future service
Changes in estimates that adjust the CSM
New contracts in the year
Changes that relate to current service
Release of CSM to profit or loss
Net finance income (expenses) from
reinsurance contracts
Effect of movements in exchange rates
Balance at 31 Dec
Reinsurance contracts (excluding JVs and associates)
2023 $m
2022 $m
Contracts
under MRA
Contracts
under FVA
–
(34)
Other
contracts*
(1,296)
Total CSM
(1,330)
Contracts
under MRA
–
Contracts
under FVA
(26)
Other
contracts*
(1,198)
Total CSM
(1,224)
–
–
–
–
–
–
–
–
(19)
–
(81)
(70)
(19)
(151)
8
(11)
(1)
1
195
44
(48)
–
(100)
(70)
(170)
203
33
(49)
1
(45)
(1,300)
(1,345)
–
–
–
–
–
–
–
–
(18)
(272)
(290)
–
44
44
(18)
(228)
(246)
8
(10)
–
2
160
(68)
(37)
7
168
(78)
(37)
9
(34)
(1,296)
(1,330)
* Other contracts represent groups of reinsurance contracts measured under the full retrospective approach at the transition date, 1 January 2022 and groups of contracts
recognised on or after the transition date.
An analysis of insurance revenue by transition approach is included in note C3.2(c).
(c) Analysis of movements in insurance and reinsurance contract balances by remaining coverage and incurred claims
(excluding JVs and associates)
An analysis of movements in insurance and reinsurance contract balances by remaining coverage and incurred claims and excluding JVs and
associates is set out below:
Prudential plc Annual Report 2023
279
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Excluding JVs and associates
2023 $m
Insurance
Reinsurance
Liabilities for remaining
coverage
Excluding
loss
component
Liabilities for
incurred
claims
Loss
component
note (i)
Liabilities for remaining
coverage
Total
Excluding loss
component
Loss
component
Liabilities for
incurred
claims
Total
note (i)
(1,200)
14
80
(1,106)
(1,460)
(29)
(367)
(1,856)
Opening assets
Opening liabilities
123,855
622
1,762 126,239
Net opening balance at 1 Jan
122,655
636
1,842 125,133
Insurance revenue
Contracts measured under the modified
retrospective approach
Contracts measured under the fair value
approach
Other contracts note (ii)
Insurance service expense
Incurred claims and other directly attributable
expenses
Amortisation of insurance acquisition cash
flows
Losses or reversal of losses on onerous
contracts
Adjustments to liability for incurred claims
Net (income) expense from reinsurance
contracts held
(247)
(733)
(8,391)
(9,371)
–
–
–
–
–
(247)
–
–
–
(733)
(8,391)
(9,371)
–
(42)
4,071
4,029
2,745
–
–
2,745
–
–
197
–
–
142
197
142
2,745
155
4,213
7,113
Insurance service result
(6,626)
155
4,213
(2,258)
1,220
(240)
(6)
(39)
1,175
(35)
(406)
(681)
640
640
(98)
(98)
(371)
(371)
171
171
–
–
1
–
–
(191)
Investment components and premium refunds
(7,095)
–
7,095
–
(1)
8,792
15
32
8,839
(191)
Effect of movement in exchange rates
220
(4)
(6)
210
(4,929)
170 11,340
6,581
448
(1)
(98)
(370)
(20)
–
1
–
(4,709)
166 11,334
6,791
447
(98)
(369)
(20)
Net finance (income) expenses from insurance
and reinsurance contracts
Total amount recognised in income
statement
Total amount recognised in comprehensive
income
Cash flows
Premiums received net of ceding commissions
paid
Insurance acquisition cash flows
Claims and other insurance service expenses
net of recoveries from reinsurance received*
22,294
(4,270)
–
–
– 22,294
(1,032)
–
(4,270)
–
–
–
–
–
–
–
–
(1,032)
–
458
458
458
(574)
Total cash flows
18,024
– (11,082)
6,942
(1,032)
–
–
– (11,082) (11,082)
Other changes note (iii)
(236)
23
38
(175)
2
(1)
(1)
–
Closing assets
Closing liabilities
(1,285)
20
117
(1,148)
(2,023)
(119)
(284)
(2,426)
137,019
805
2,015 139,839
1,200
(15)
(34)
1,151
Net closing balance at 31 Dec
135,734
825
2,132 138,691
(823)
(134)
(318)
(1,275)
280
Prudential plc Annual Report 2023
Excluding JVs and associates
2022 $m
Insurance
Reinsurance
Liabilities for remaining
coverage
Excluding loss
component
Loss
component
Liabilities
for
incurred
claims
Liabilities for remaining
coverage
Total
Excluding loss
component
Loss
component
Liabilities for
incurred
claims
Total
(1,308)
147,209
145,901
note (i)
17
651
668
70
(1,221)
(2,431)
1,938
149,798
1,314
2,008
148,577
(1,117)
note (i)
(32)
(1)
(33)
(324)
(2,787)
(59)
1,254
(383)
(1,533)
(367)
(1,083)
(7,099)
(8,549)
–
–
–
–
–
–
–
–
(367)
(1,083)
(7,099)
(8,549)
–
(41)
3,679
3,638
Opening assets
Opening liabilities
Net opening balance at 1 Jan
Insurance revenue
Contracts measured under the modified
retrospective approach
Contracts measured under the fair value
approach
Other contracts note (ii)
Insurance service expense
Incurred claims and other directly attributable
expenses
Amortisation of insurance acquisition cash flows
2,453
Losses or reversal of losses on onerous contracts
Adjustments to liability for incurred claims
–
–
–
30
–
–
–
146
2,453
30
146
2,453
(11)
3,825
6,267
Net (income) expense from reinsurance
contracts held
Insurance service result
(6,096)
(11)
3,825
(2,282)
487
487
(2)
(2)
(380)
(380)
105
105
Investment components and premium refunds
(6,895)
–
6,895
–
179
Net finance (income) expenses from insurance
and reinsurance contracts
Total amount recognised in income
statement
(28,605)
(21)
3
(28,623)
1,182
(41,596)
(32) 10,723
(30,905)
1,848
(2)
(548)
1,298
Effect of movement in exchange rates
(2,044)
(15)
(91)
(2,150)
(10)
Total amount recognised in comprehensive
income
(43,640)
(47) 10,632
(33,055)
1,838
Cash flows
Premiums received net of ceding commissions
paid
Insurance acquisition cash flows
Claims and other insurance service expenses net
of recoveries from reinsurance received*
Total cash flows
Other changes note (iii)
Closing assets
Closing liabilities
Net closing balance at 31 Dec
*
Including investment component.
23,464
(3,138)
–
20,326
–
–
–
–
23,464
(970)
–
–
(3,138)
–
–
(10,650) (10,650)
(10,650)
9,676
(970)
68
15
(148)
(65)
9
(2)
4
11
(1,200)
123,855
122,655
14
622
636
80
(1,106)
(1,460)
1,762
126,239
1,220
1,842
125,133
(240)
(29)
(6)
(35)
(367)
(1,856)
(39)
1,175
(406)
(681)
Notes
(i) The Group establishes a loss component of the liability for remaining coverage for onerous groups of insurance contracts. The loss component determines the amounts of
fulfilment cash flows that are subsequently presented in profit or loss as reversals of losses on onerous contracts and are excluded from insurance revenue when they occur.
(ii) Other contracts represent groups of insurance and reinsurance contracts measured under the full retrospective approach at the transition date, 1 January 2022 and groups
of contracts recognised on or after the transition date.
(iii) Other changes include adjustments to remove the incurred non-cash expenses (such as depreciation and amortisation) from insurance contract asset/liability balance.
Prudential plc Annual Report 2023
281
–
–
(179)
–
11
1,193
2
–
–
–
–
–
2
(6)
(546)
1,292
–
–
519
519
(970)
–
519
(451)
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
(d) Effect of insurance and reinsurance contracts initially recognised in the year
The following tables summarise the effect on the measurement components arising from the initial recognition of insurance and reinsurance
contracts in the year,excluding the effect from the Group’s share of the amounts relating to life JVs and associates.
(i)
Insurance contracts
Estimate of present value of expected future cash
outflows:
Insurance acquisition cash flows
Claims and other directly attributable expenses
Estimate of present value of expected future cash
inflows
Risk adjustment for non-financial risk
CSM
Loss recognised on initial recognition
(ii) Reinsurance contracts
Excluding JVs and associates
Profitable
contracts
issued
2023 $m
Onerous
contracts
issued
2022 $m
Profitable
contracts
issued
Onerous contracts
issued
Total
Total
4,365
17,125
21,490
101
348
449
4,466
17,473
21,939
2,416
12,153
14,569
49
420
469
2,465
12,573
15,038
(23,916)
(484)
(24,400)
(16,379)
(470)
(16,849)
253
2,173
–
42
–
7
295
2,173
7
228
1,582
–
4
–
3
232
1,582
3
Excluding JVs and associates
2023 $m
Contracts
initiated without
loss-recovery
component
Contracts
initiated with
loss-recovery
component
Total
Contracts
initiated
without
loss-recovery
component
2022 $m
Contracts
initiated with
loss-recovery
component
Estimate of present value of expected future cash
outflows
Estimate of present value of expected future cash
inflows
Risk adjustment for non-financial risk
CSM
Profit (loss) recognised on initial recognition
1,022
(1)
1,021
762
(946)
(5)
(71)
–
–
–
1
–
(946)
(5)
(70)
–
(813)
1
50
–
–
6
–
(6)
–
Total
762
(807)
1
44
–
282
Prudential plc Annual Report 2023
C3.3 Analysis of movements in insurance and reinsurance contract balances (including JVs and associates)
(a) Analysis of movements in insurance and reinsurance contract balances by measurement component
An analysis of movements in insurance and reinsurance contract balances by measurement component and including the Group’s share of
insurance and reinsurance contract liabilities and assets relate to the life JVs and associates is set out below:
Opening assets
Opening liabilities
Including JVs and associates
2023 $m
Insurance
Reinsurance
BEL
RA
CSM
Total
BEL
RA
CSM
Total
(3,562)
502
note (b)
1,921
(1,139)
124,297
1,662 19,383 145,342
(652)
1,193
21
(47)
note (b)
(1,369)
(2,000)
54
1,200
Net opening balance at 1 Jan
120,735
2,164 21,304 144,203
541
(26)
(1,315)
(800)
(1,142)
341
801
–
62
43
(105)
–
224
(8)
–
(2,687)
(3,605)
317
2,429
650
3,230
216
59
275
–
–
(170)
(170)
–
(2,414)
(2,414)
(242)
–
–
–
(242)
(170)
(242)
(2,414)
(2,826)
(93)
86
55
–
–
50
50
–
(6)
37
–
27
–
27
–
(81)
(186)
(93)
(1)
(94)
206
206
–
–
27
50
206
283
130
(3)
–
127
(3,645)
405
816
(2,424)
–
105
–
64
–
20
–
189
Changes that relate to future service
Changes in estimates that adjust the CSM
Changes in estimates that result in losses or
reversal of losses on onerous contracts
New contracts in the year
Changes that relate to current service
Release of CSM to profit or loss
Release of risk adjustment to profit or loss
Experience adjustments
Changes that relate to past service
Adjustments to assets/liabilities for incurred
claims
Insurance service result
Net finance (income) expense from
insurance and reinsurance contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
Total amount recognised in income
statement
158
10,379
10,537
52
(20)
32
307
517
(12) 10,347
295 10,864
6,892
437
1,111
8,440
(3)
(155)
(158)
(53)
2
(3)
9
6
70
(1)
(47)
–
(47)
(27)
2
(53)
(146)
(199)
(10)
3
Effect of movements in exchange rates
(49)
(2)
(63)
(114)
Total amount recognised in comprehensive
income
Cash flows
6,843
435
1,048
8,326
(51)
69
(25)
(7)
Premiums received net of ceding commissions
paid
Insurance acquisition cash flows
26,224
(4,802)
Claims and other insurance service expenses net
of recoveries from reinsurance received*
(13,144)
–
–
–
–
–
– 26,224
(1,137)
–
(4,802)
–
– (13,144)
–
8,278
554
(583)
–
(181)
–
–
–
–
–
–
–
–
–
–
–
(1,137)
–
554
(583)
–
8,278
(181)
(3,998)
630
2,176
(1,192)
(1,315)
67
(1,321)
(2,569)
139,673
1,969 20,176 161,818
1,222
(24)
(19)
1,179
Net closing balance at 31 Dec
135,675
2,599 22,352 160,626
(93)
43
(1,340)
(1,390)
Prudential plc Annual Report 2023
283
Total cash flows
Other changes note
Closing assets
Closing liabilities
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Opening assets
Opening liabilities
Including JVs and associates
2022 $m
Insurance
Reinsurance
BEL
RA
CSM
Total
BEL
RA
CSM
Total
(3,993)
575
note (b)
2,161
(1,257)
(1,916)
142,146
1,868
23,787
167,801
1,501
note (b)
(1,023)
(2,940)
(176)
1,276
(1)
(49)
Net opening balance at 1 Jan
138,153
2,443
25,948
166,544
(415)
(50)
(1,199)
(1,664)
Changes that relate to future service
Changes in estimates that adjust the CSM
Changes in estimates that result in losses or
reversal of losses on onerous contracts
New contracts in the period
Changes that relate to current service
Release of CSM to profit or loss
Release of risk adjustment to profit or loss
Experience adjustments
Changes that relate to past service
Adjustments to assets/liabilities for incurred
claims
Insurance service result
Net finance (income) expense from
insurance and reinsurance contracts
4,214
(226)
(3,988)
–
284
162
(52)
–
(2,210)
259
2,027
2,166
(19)
(1,961)
110
76
186
–
–
(119)
(119)
–
(2,413)
(2,413)
(184)
–
–
–
(184)
(119)
(184)
(2,413)
(2,716)
(17)
(37)
230
–
–
(80)
(80)
133
2,180
1
–
134
(202)
(4,374)
(2,396)
28
178
10
–
–
10
–
5
–
5
–
15
(294)
–
–
37
(257)
171
–
–
171
(17)
–
(17)
171
5
(80)
96
–
(86)
28
107
Accretion of interest on GMM contracts
182
13
294
489
(8)
(6)
(39)
(53)
Other net finance (income) expense
(28,612)
(12)
117
(28,507)
(28,430)
1
411
(28,018)
1,215
1,207
Total amount recognised in income
statement
(26,250)
(201)
(3,963) (30,414)
1,385
Effect of movements in exchange rates
(3,070)
(78)
(681)
(3,829)
3
Total amount recognised in comprehensive
income
Cash flows
Premiums received net of ceding commissions
paid
Insurance acquisition cash flows
Claims and other insurance service expenses net
of recoveries from reinsurance received*
Total cash flows
Other changes note
Closing assets
Closing liabilities
(29,320)
(279)
(4,644) (34,243)
1,388
27,916
(3,690)
(12,241)
11,985
(83)
–
–
–
–
–
–
–
–
–
–
27,916
(1,013)
(3,690)
–
(12,241)
11,985
567
(446)
(83)
14
10
4
19
5
24
–
–
–
–
–
4
(35)
1,229
1,176
(121)
1,283
5
13
(116)
1,296
–
–
–
–
–
(1,013)
–
567
(446)
14
Net closing balance at 31 Dec
120,735
2,164
21,304
144,203
*
Including investment component.
(3,562)
502
1,921
(1,139)
(652)
21
(1,369)
(2,000)
124,297
1,662
19,383
145,342
1,193
541
(47)
54
1,200
(26)
(1,315)
(800)
Note
Other changes include movements in insurance contract liabilities arising from adjustments to remove the incurred non-cash expenses (such as depreciation, amortisation) from
insurance contract asset/liability balance.
Accretion of interest includes interest on policy loans.
284
Prudential plc Annual Report 2023
(b) Analysis of CSM by transition approach including JVs and associates
Balance at 1 Jan
Changes that relate to future service
Changes in estimates that adjust the CSM
Insurance contracts (including JVs and associates)
2023 $m
2022 $m
Contracts
under MRA
2,033
Contracts
under FVA
Other
contracts*
Total CSM
4,102 15,169 21,304
Contracts
under MRA
2,467
Contracts
under FVA
5,355
Other
contracts*
18,126
Total CSM
25,948
117
496
188
801
(92)
(707)
(3,189)
(3,988)
New contracts in the year
–
–
2,429
2,429
–
–
2,027
2,027
117
496
2,617
3,230
(92)
(707)
(1,162)
(1,961)
Changes that relate to current service
Release of CSM to profit or loss
Net finance income (expenses) from insurance
contracts
Effect of movements in exchange rates
(247)
(130)
66
(47)
(458)
(1,709)
(2,414)
(250)
(511)
(1,652)
(2,413)
38
908
816
(342)
(1,218)
(2,814)
(4,374)
9
(6)
220
(10)
295
(63)
83
54
274
411
(175)
(89)
(417)
(681)
Balance at 31 Dec
1,922
4,143 16,287 22,352
2,033
4,102
15,169
21,304
* Other contracts represent groups of insurance contracts measured under the full retrospective approach at the transition date, 1 January 2022 and groups of contracts
recognised on or after the transition date.
The majority of the CSM on transition on insurance contracts under MRA arises from CPL while the majority of the CSM on transition under FVA
arises from the Hong Kong and Singapore businesses.
The transition approach adopted by the Group’s main business segments for the different cohorts of their insurance contracts is summarised in
the table below. The overlap between approaches reflects the fact that the approaches used vary by insurance contract portfolio and year of
issue (cohort).
CPL
Hong Kong
Singapore
Malaysia
Indonesia note (i)
Growth markets and other note (ii)
FRA
Cohort
n/a
MRA
Cohort
2016 – 2021
n/a
n/a
2000 - 2009
(Unit-linked)
2010 – 2021
2009 – 2021
2010 – 2021
(Unit-linked)
2010-2021
(Non
Participating)
2010 – 2021 2007 – 2009
See note
See note
FVA
Cohort
Pre 2016
Pre 2010
Pre 2009
Pre 1999
(Unit-linked)
Pre-2009
(Non-participating)
Pre-2021
(Other)
Pre 2007
See note
Notes
(i) The cohorts shown are in respect of Indonesia’s unit-linked portfolios.
(ii) CSM on transition for Growth markets primarily arises from Vietnam, Taiwan and the Philippines. Vietnam has applied the FRA for cohorts from 2013 – 2021, MRA for
cohorts from 2008 – 2012 and FVA for cohorts prior to 2013. Taiwan and the Philippines have applied the FRA for cohorts from 2010 – 2021 and FVA for all cohorts prior to
2010.
Prudential plc Annual Report 2023
285
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Balance at 1 Jan
Changes that relate to future service
Changes in estimates that adjust the CSM
New contracts in the year
Changes that relate to current service
Release of CSM to profit or loss
Net finance income (expenses) from reinsurance
contracts
Effect of movements in exchange rates
Balance at 31 Dec
Reinsurance contracts (including JVs and associates)
2023 $m
2022 $m
Contracts
under MRA
Contracts
under FVA
–
(55)
Other
contracts*
(1,260)
Total CSM
(1,315)
Contracts
under MRA
–
Contracts
under FVA
(46)
Other
contracts*
(1,153)
Total CSM
(1,199)
–
–
–
–
–
–
–
–
(17)
–
(88)
(81)
(105)
(81)
(17)
(169)
(186)
10
(7)
(2)
1
196
27
206
20
(45)
1
(47)
2
(63)
(1,277)
(1,340)
–
–
–
–
–
–
–
–
(22)
(272)
(294)
–
37
37
(22)
(235)
(257)
10
(12)
(1)
4
161
(74)
(34)
1
171
(86)
(35)
5
(55)
(1,260)
(1,315)
* Other contracts represent groups of reinsurance contracts measured under the full retrospective approach at the transition date, 1 January 2022 and groups of contracts
recognised on or after the transition date.
The CSM on transition on reinsurance contracts held primarily arises from the Hong Kong segment, which has predominantly applied the FRA to
transition reinsurance cohorts from 2010 – 2021 and the FVA for reinsurance cohorts prior to 2010.
(c) Additional analysis of insurance and reinsurance contract balances by segment
The table below provides an analysis of portfolio of insurance and reinsurance contract balances, excluding assets for insurance acquisition cash
flows, by segment. The balances presented include Group’s share of insurance contract balances relating to the life business of CPL, India and
Takaful business in Malaysia, which are accounted for on an equity method in the consolidated statement of financial position.
Insurance $m
Reinsurance $m
BEL
RA
CSM
Total
BEL
RA
CSM
Total
13,029
152
1,652 14,833
60,761
776
8,536 70,073
2,197
5,910
206
739
3,142
357
2,127
8,394
31,770
22,008
687
421
4,962 37,419
4,336 26,765
135,675
2,599 22,352 160,626
10,989
54,347
2,032
5,452
28,752
19,163
149
482
199
334
629
371
1,699
12,837
7,857
1,046
2,241
62,686
3,277
8,027
4,522
33,903
3,939
23,473
4
(44)
22
26
(146)
45
(93)
2
465
8
31
40
(3)
(22)
(21)
84
(1,429)
(1,389)
(7)
(7)
3
(27)
(6)
6
149
(38)
9
25
6
(20)
43
(1,340)
(1,390)
(3)
17
(3)
(7)
(3)
(21)
(1,405)
–
(2)
141
(28)
(22)
(923)
5
22
178
(60)
(5)
(27)
120,735
2,164
21,304
144,203
541
(26)
(1,315)
(800)
As at 31 Dec 2023
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total insurance segments
As at 31 Dec 2022
CPL
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets and other
Total insurance segments
286
Prudential plc Annual Report 2023
Summarised movement analysis of insurance and reinsurance contract balances by segment
Net opening balance at 1 Jan 2022
Insurance service result
Net finance income (expenses) from insurance contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
Insurance $m
CPL
11,273
Hong Kong
80,186
Indonesia
3,720
Malaysia
8,342
Singapore
36,643
Growth
markets and
other
26,380
Total
insurance
segments
166,544
(73)
(696)
(117)
(242)
(546)
(722)
(2,396)
206
37
87
(21,912)
293
(21,875)
37
26
63
95
31
83
489
(77)
(4,956)
(1,675) (28,507)
18
(4,925)
(1,592) (28,018)
Total amount recognised in income statement
220
(22,571)
(54)
(224)
(5,471)
(2,314) (30,414)
Effect of movements in exchange rates
Total amount recognised in comprehensive income
Total cash flows
Other changes
(1,019)
(153)
(799) (22,724)
2,363
5,216
–
8
(307)
(361)
(69)
(13)
(454)
117
(2,013)
(3,829)
(678)
(5,354)
(4,327) (34,243)
366
2,684
1,425
11,985
(3)
(70)
(5)
(83)
Net closing balance at 31 Dec 2022 / 1 Jan 2023
12,837 62,686
3,277
8,027 33,903 23,473 144,203
Insurance service result
(98)
(755)
(146)
(254)
(598)
(573)
(2,424)
Net finance income (expenses) from insurance contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
Total amount recognised in income statement
Effect of movements in exchange rates
Total amount recognised in comprehensive income
Total cash flows
Other changes
227
(1)
692
3,646
919
3,645
821
2,890
(259)
(11)
562
2,879
43
145
188
42
46
88
100
6
142
517
498
2,657
2,709 10,347
598
2,663
2,851 10,864
344
2,065
2,278
8,440
(336)
621
(175)
(114)
8
2,686
2,103
8,326
1,434
4,509
(186)
364
884
1,273
8,278
–
(1)
(37)
(5)
(54)
(84)
(181)
Net closing balance at 31 Dec 2023
14,833 70,073
3,142
8,394 37,419 26,765 160,626
Prudential plc Annual Report 2023
287
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Net opening balance at 1 Jan 2022
Insurance service result
Net finance income (expenses) from reinsurance
contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
Total amount recognised in income statement
Effect of movements in exchange rates
Total amount recognised in comprehensive income
Total cash flows
Other changes
Net closing balance at 31 Dec 2022 / 1 Jan 2023
Insurance service result
Net finance income (expenses) from reinsurance
contracts
Accretion of interest on GMM contracts
Other net finance (income) expense
Total amount recognised in income statement
Effect of movements in exchange rates
Total amount recognised in comprehensive income
Total cash flows
Other changes
Reinsurance $m
CPL
(25)
Hong Kong
(1,663)
Indonesia
8
6
63
–
Malaysia
15
10
Growth
markets and
other
(58)
Total
insurance
segments
(1,664)
Singapore
59
4
24
107
(1)
–
(1)
5
1
6
(45)
1,246
1,201
1,264
4
1,268
(3)
(535)
–
7
(22)
(923)
8
135
(1)
–
(1)
7
3
10
(9)
–
(38)
(154)
(192)
(57)
(2)
(59)
(407)
–
–
(1)
(1)
(1)
(1)
(2)
(1)
–
5
2
–
(6)
(6)
(4)
(1)
(5)
9
–
9
1
1
2
12
–
12
(5)
–
22
9
1
–
1
10
(1)
9
(6)
–
25
(1)
(6)
(7)
(3)
4
1
118
–
178
17
(8)
1
(7)
10
(1)
9
(181)
–
6
(7)
(11)
(18)
6
(53)
1,229
1,176
1,283
5
11
13
1,296
(20)
(446)
7
(60)
18
14
(800)
189
(7)
13
6
24
5
29
11
–
(53)
(146)
(199)
(10)
3
(7)
(583)
–
(20)
(1,390)
Net closing balance at 31 Dec 2023
(21)
(1,389)
288
Prudential plc Annual Report 2023
(d) Contractual service margin
The following tables illustrate when the Group expects to recognise the remaining CSM in profit or loss after the reporting date based on the
assumptions and economics in place at the year ends shown. Future new business is excluded.
(i)
Insurance contracts – expected recognition of the CSM
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total CSM
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total CSM
(ii) Reinsurance contracts – expected recognition of the CSM
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total CSM
31 Dec 2023 $m
Total as reported on the
consolidated statement of
financial position
Group’s share relating to
JVs and associates
2,041
1,780
1,586
1,412
1,283
4,604
2,924
1,781
2,773
226
190
165
146
127
474
293
195
352
20,184
2,168
Total including Group’s share
relating to
JVs and associates
2,267
1,970
1,751
1,558
1,410
5,078
3,217
1,976
3,125
22,352
Total as reported on the
consolidated statement of
financial position
1,981
1,751
1,555
1,385
1,217
4,306
2,705
1,666
2,602
31 Dec 2022 $m
Group’s share relating to
JVs and associates
219
Total including Group’s share
relating to
JVs and associates
2,200
175
155
138
122
454
292
201
380
1,926
1,710
1,523
1,339
4,760
2,997
1,867
2,982
19,168
2,136
21,304
31 Dec 2023 $m
Total as reported on the
consolidated statement of
financial position
Group’s share relating to
JVs and associates
(177)
(132)
(103)
(85)
(74)
(268)
(173)
(113)
(220)
(1,345)
(2)
–
1
1
1
3
2
–
(1)
5
Total including Group’s share
relating to
JVs and associates
(179)
(132)
(102)
(84)
(73)
(265)
(171)
(113)
(221)
(1,340)
Prudential plc Annual Report 2023
289
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total CSM
Total as reported on the
consolidated statement of
financial position
31 Dec 2022 $m
Group’s share relating to
JVs and associates
(122)
(111)
(100)
(89)
(80)
(301)
(188)
(119)
(220)
(2)
2
2
2
2
5
3
1
–
Total including Group’s share
relating to
JVs and associates
(124)
(109)
(98)
(87)
(78)
(296)
(185)
(118)
(220)
(1,330)
15
(1,315)
(e) Maturity analysis of the future cash flows of insurance and reinsurance contract liabilities
The following table shows the maturity profile of the expected future cash flows on a discounted basis relating to insurance and reinsurance
contract liabilities, respectively. The amounts in the table below include the expected amounts payable on demand at a timing of when they are
expected to occur over the outstanding duration of the existing business.
(i)
Insurance contract liabilities – expected cash flows (discounted)
31 Dec 2023 $m
Total as reported on the
consolidated statement of
financial position
Group’s share relating to
JVs and associates
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
No stated maturity
2,256
2,262
4,269
5,272
4,436
18,726
16,374
14,560
35,210
16,750
Total including Group’s share
relating to
JVs and associates
1,779
(477)
94
516
973
828
3,076
2,703
2,016
6,287
3,542
2,356
4,785
6,245
5,264
21,802
19,077
16,576
41,497
20,292
Total expected future cash flows
120,115
19,558
139,673
31 Dec 2022 $m
Total as reported on the
consolidated statement of
financial position
(622)
Group’s share relating to
JVs and associates
(847)
Total including Group’s share
relating to
JVs and associates
(1,469)
1,040
3,021
4,441
4,652
20,131
16,507
12,873
30,891
14,648
107,582
81
477
732
1,146
2,832
2,309
1,674
5,064
3,247
16,715
1,121
3,498
5,173
5,798
22,963
18,816
14,547
35,955
17,895
124,297
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
No stated maturity
Total expected future cash flows
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Prudential plc Annual Report 2023
(ii) Reinsurance contract liabilities – expected cash flows (discounted)
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total expected future cash flows
1 year or less
After 1 year to 2 years
After 2 years to 3 years
After 3 years to 4 years
After 4 years to 5 years
After 5 years to 10 years
After 10 years to 15 years
After 15 years to 20 years
After 20 years
Total expected future cash flows
31 Dec 2023 $m
Total as reported on the
consolidated statement of
financial position
Group’s share relating to
JVs and associates
820
58
54
26
4
(3)
4
5
214
1,182
15
–
–
–
–
1
2
3
19
40
Total including Group’s
share relating to
JVs and associates
835
58
54
26
4
(2)
6
8
233
1,222
31 Dec 2022 $m
Total as reported on the
consolidated statement of
financial position
136
Group’s share relating to
JVs and associates
23
Total including Group’s share
relating to
JVs and associates
159
693
–
4
(15)
(67)
1
24
386
1,162
2
2
1
1
2
–
–
(1)
30
695
2
5
(14)
(65)
1
25
385
1,193
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Additional information
Notes to the consolidated financial statements continued
C3.4 Products and determining contract liabilities
(a) Measurement of insurance and reinsurance contracts
Separating components
A contract has an investment component if there is an amount (which could be zero) that the contract requires the entity to repay to the
policyholder in all circumstances that have commercial substance. The surrender value, net of policy loans (where these exist), is accounted as the
investment component of a contract. Participating and non-participating (such as whole-life and endowment) contracts have explicit surrender
values. There are a relatively small number of products that do not have a surrender value, and the investment components of these contracts
are determined on a case-by-case basis. The non-distinct investment components are excluded from insurance revenue and insurance service
expenses.
At initial recognition, the Group is required to separate the following components and account for them as if they were stand-alone contracts.
– Distinct investment components. An investment component is distinct if and only if (a) the insurance and investment components are not
highly interrelated and (b) a contract with equivalent terms is, or could be, sold separately in the same market or jurisdiction.
– Embedded derivatives that do not meet the definition of an insurance contract and whose economic characteristics and risks are not closely
related to those of the host contract.
– Distinct services other than insurance contract services. A service component is distinct if it is not highly interrelated with the insurance
component and the entity provides no significant service in integrating the service component with the insurance component
There are no material instances within the Group where distinct investment components, distinct services or embedded derivatives are separated
from insurance contracts.
Asset management services for investments held under an insurance contract are not separated.
Subsequent measurement of CSM
The CSM of each group of contracts is calculated at each reporting date as follows.
The carrying amount of the CSM of contracts measured under the GMM at each reporting date is the carrying amount at the start of the year,
adjusted for: (a) the CSM of any new contracts that are added to the group in the year; (b) interest accreted at locked-in discount rate; (c)
changes in fulfilment cash flows arising from operating assumption changes and variances that relate to future services except for those relating
to onerous contracts; (d) the effect of currency exchange differences on the CSM; and (e) the amount of CSM recognised in profit or loss in the
year based on the coverage units.
The carrying amount of the CSM of contracts measured under the VFA at each reporting date is the carrying amount at the start of the year,
adjusted for: (a) the CSM of any new contracts that are added to the group in the year; (b) the change in the amount of the Group’s share of the
fair value of the underlying items; (c) changes in fulfilment cash flows arising from both operating and economic assumption changes and
variances that relate to future services except for those relating to onerous contracts; (d) the effect of currency exchange differences on the CSM;
and (e) the amount of CSM recognised in profit or loss in the year based on the coverage units.
The table below provides a description of the material features of each of the key products written by the Group, together with the measurement
model used to determine their contract liabilities under IFRS 17.
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Contract type
Description and material features
Measurement model
All with-profits contracts of the Group written in Hong Kong,
Singapore and Malaysia are measured using the VFA model.
The shareholders’ share of the excess of the assets of the
with-profits funds over policyholder liabilities is recognised
within shareholders’ equity.
Other participating contracts of the Group are measured
under the VFA model except for the contracts that are
written by the Group’s life joint venture, CPL, where the
GMM approach is applied.
Unit-linked contracts are measured either under the VFA or
the GMM depending on the relative size of the savings and
protection benefits of the contract. The larger the
protection component the more likely the contract is
required to be measured under the GMM.
Shareholder-backed participating critical illness contracts
are measured under the VFA.
Stand-alone non-par health and protection (excluding
shareholder-backed participating critical illness) contracts
are measured under the GMM.
These contracts are measured under the GMM.
With-profits
contracts
(written in
Hong Kong,
Singapore and
Malaysia)
Other
participating
contracts
Unit-linked
contracts
Health and
protection –
Shareholder-
backed
participating
critical illness
contracts
Health and
protection –
Other
Non-
participating
term, whole life
and
endowment
assurance
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
local business unit.
With-profits 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.
Additional health and protection benefits can be provided
through riders (which are not separated from the base
with-profits contracts).
Similar to the with-profits contracts, other participating
contracts include savings and/or protection elements, with
policyholders and shareholders sharing in the returns of
the underlying funds.
Combines savings with health and protection riders (which,
under IFRS 17, are not separated from the base contract).
The cash value of the policy primarily depends on the
value of the underlying unitised funds.
Shareholder-backed participating critical illness contracts
are written by the Group’s Hong Kong business. These
products combine critical illness and death benefits with a
savings element. These are whole life products and have
regular premium payments with a limited payment term.
In addition to supplementary heath and protection
contract products attached to with-profits and unit-linked
contracts described above, the Group also offers stand-
alone health and protection products.
These are non-participating contracts that provide
mortality and/or morbidity benefits including health,
disability, critical illness and accident coverage.
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 local business unit. These products often offer a
guaranteed maturity and/or surrender value. It is common
in Asia 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.
The fair value of underlying items of the Group’s direct participating contracts at 31 December 2023, excluding the Group’s share of the
amounts that relate to life JVs and associates, is $127,570 million (31 December 2022: $115,489 million). The Group’s direct participating
contracts are the contracts that are measured under the VFA model and as discussed in the table above comprise primarily the Group’s with-
profits, unit-linked and shareholder-backed participating critical illness contracts. Those underlying items comprise primarily investments in debt
securities, equity securities and holdings in collective investment schemes. The underlying items also include the related reinsurance assets and
the policyholders’ interest in the excess net assets of relevant participating funds.
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Additional information
Notes to the consolidated financial statements continued
(b) Reinsurance contracts held
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. 98 per cent (31 December 2022: 95 per cent) of the Group’s
reinsurance contract BEL that are assets, excluding the Group’s share of the balances held by life joint ventures and associates, are held with
reinsurers with a rating of A- and above by Standard & Poor’s or other external rating agencies by reference to the reinsurance BEL.
The reinsurance contracts held primarily relate to protection business written in Hong Kong. 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 internally set maximum limits based on characteristics of coverage.
As required by IFRS 17, all reinsurance contracts held by the Group are measured using the GMM.
A group of reinsurance contracts held is recognised on the following date:
– Reinsurance contracts held by the Group that provide proportionate coverage: The later of the start date of the coverage period, and the date
on which any underlying insurance contract is initially recognised. This applies to the Group’s quota share reinsurance contracts.
– Other (non-proportionate) reinsurance contracts held by the Group: The earlier of beginning of the coverage period of the group of
reinsurance contracts or the recognition date of an underlying onerous group of insurance contracts issued.
– Reinsurance contracts held acquired via a business acquisition/ combination: The date of the business acquisition/combination.
On initial recognition, the CSM of a group of reinsurance contracts held represents a net cost or net gain on purchasing reinsurance. It is
measured as the equal and opposite amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any
assets or liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income
recognised in profit or loss because of onerous underlying contracts recognised at that date. However, if the net cost of purchasing reinsurance
relates to past events, the Group recognises the net cost immediately in profit or loss.
The carrying amount at the end of each reporting period of a group of reinsurance contracts held is measured in the same way as the underlying
insurance contracts under GMM. Reinsurance contracts held are subject to the same modification requirements as insurance contracts.
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 that the goodwill may be
impaired.
Goodwill shown on the consolidated statement of financial position represents amounts allocated to businesses in Asia and Africa in respect of
both acquired asset management and life businesses. There has been no impairment as at 31 December 2023 and 2022.
Carrying value at 1 Jan
Exchange differences
Carrying value at 31 Dec
2023 $m
890
6
896
2022 $m
907
(17)
890
294
Prudential plc Annual Report 2023
Impairment testing
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to CGUs for the purposes of impairment
testing. These 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 2023, $449 million (31 December 2022: $445 million) relates to asset
management business in Thailand and $238 million (31 December 2022: $234 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 two acquired entities were merged as Eastspring
Asset Management (Thailand) Co., Ltd in 2022. The goodwill impairment testing for these businesses is prepared as a single CGU reflecting that
these businesses are managed together. The recoverable amount has been determined by calculating the value in use of the 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 or forecast;
– A constant growth rate of 3.5 per cent (2022: 3.5 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 (31 December
2022: 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. No material impairment is expected to occur if a reasonably possible change is made to each of the individual key
assumptions, which the Group has taken to be a 10 per cent fall in cashflow projections, a 1 per cent fall in the growth rate or a 1 per cent
increase in the discount rate. A more significant fall or a combination of effects could have a larger impact on the recoverable value and so there
are circumstances where an impairment could occur.
C4.2 Other intangible assets
Intangible assets acquired on the purchase of a subsidiary or portfolio of contracts are measured at fair value on acquisition. 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 goodwill, 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 Consolidated income statement and allocated between attributable and non-attributable expenses for the Group's insurance entities as
shown in note B2. Impairment testing is conducted when there is an indication that the intangible asset may be impaired.
Balance at 1 Jan
Cost
Accumulated amortisation
Additions
Amortisation charge
Disposals and transfers
Exchange differences and other movements
Balance at 31 Dec
Comprising:
Cost
Accumulated amortisation
Distribution rights
2023 $m
Other
intangibles
Total
Distribution rights
note (i)
note (ii)
note (i)
2022 $m
Other
intangibles
note (ii)
5,176
(1,546)
3,630
415
(330)
–
(6)
489
(235)
254
83
(49)
(6)
(5)
5,665
(1,781)
3,884
498
(379)
(6)
(11)
5,037
(1,255)
3,782
206
(301)
–
(57)
3,709
277
3,986
3,630
5,585
(1,876)
537
(260)
6,122
(2,136)
5,176
(1,546)
425
(192)
233
83
(48)
(6)
(8)
254
489
(235)
Total
5,462
(1,447)
4,015
289
(349)
(6)
(65)
3,884
5,665
(1,781)
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.
(ii) Included within other intangibles are software and licence fees.
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Additional information
Notes to the consolidated financial statements continued
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$750m 4.875% Notes
€20m Medium Term Notes 2023 note (ii)
£435m 6.125% Notes 2031
US$1,000m 2.95% Notes 2033
Senior debt: note (i)
£300m 6.875% Notes 2023 note (ii)
£250m 5.875% Notes 2029
US$1,000m 3.125% Notes 2030
US$350m 3.625% Notes 2032
31 Dec 2023 $m
31 Dec 2022 $m
750
–
551
996
–
301
988
347
750
21
520
995
361
281
987
346
Total core structural borrowings of shareholder-financed businesses
3,933
4,261
Notes
(i) The senior debt ranks above subordinated debt in the event of liquidation.
(ii) The £300 million Notes were redeemed on 20 January 2023. The €20 million Medium Term Notes were redeemed on 10 July 2023.
C5.2 Operational borrowings
Borrowings in respect of short-term fixed income securities programmes (commercial paper)
Lease liabilities under IFRS 16
Other borrowings
Total operational borrowings
31 Dec 2023 $m
699
234
8
941
31 Dec 2022 $m
501
299
15
815
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Prudential plc Annual Report 2023
C6 Risk and sensitivity analysis
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 assumptions that may have an effect on IFRS basis profit or loss and shareholders’ equity as described
below. The market and insurance risks and also sustainability-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 sustainability-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 Sustainability Report included in this Annual Report sets out three commonly used scenarios of plausible global responses to climate change.
The Group’s scenario testing results are translated into sensitivities to economic factors to assess the possible financial consequences of climate
change on the Group’s business. Though the Group faces potential financial risks from plausible global responses to climate change, the results
for the Group’s scenario testing are not outside observed market volatility suggesting no immediate need for explicit climate change allowance
within the current valuations of the Group’s investment portfolio. The Group remains mindful of the limitations within the results of the scenario
testing and that the models for the testing continue to change. Additionally, the Group’s climate scenario analysis currently does not consider
management actions the Group could take to mitigate the negative impacts of climate change. In addition, given the current insufficiency and
uncertainty of data available, at this stage, the Group’s claims and lapses assumptions for its life and health insurance business do not include
additional assumptions related to the impacts of climate change over and above those that arise from the annual review of experience. The
Group will continue to perform its regular experience analysis, engage with reinsurers and monitor relevant academic studies. If significant
changes occur, the financial impacts from climate-related risks on insurance liabilities will be considered. The Group has analysed the distribution
of its customers across locations to assess their vulnerability to extreme climate events to improve the Group’s understanding of its customers
and its exposure to climate risks.
Sensitivity analyses of IFRS profit or loss, shareholders’ equity and CSM 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 profit after tax, shareholders’ equity and CSM to changes in the relevant
risk variables, all of which are considered to be reasonably possible at the relevant balance sheet date. The sensitivities reflect consequential
impacts from market movements at the valuation 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. The simplified sensitivities below are calculated at the individual business unit level and
aggregated to show the Group impact and no group level adjustments are made.
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 where a
group undertaking has a functional currency that differs to US dollar, the Group’s presentational currency. Consistent with the Group’s
accounting policies, the profits of these business units are translated at average exchange rates and shareholders’ equity at the closing rate for
the reporting period. For 2023 and 2022, the rates for the most significant operations are given in note A1. 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). The impact of changes of foreign exchange rates on the Group’s
assets and liabilities from the above exposure is recorded as part of Other comprehensive income and in 2023 represented a loss of $124 million
(2022: loss of $603 million) which corresponds to 1 per cent of opening shareholders’ equity (2022: 3 per cent). Additionally note B1.1 ‘Segment
Results’ shows the Group’s segment and total profit for 2022 as if it had been prepared using the same exchange rates as 2023, giving an
indication of how foreign exchange rates impact the Group’s profit and loss.
A 10 per cent increase (strengthening of the US dollar) or decrease (weakening of the US dollar) in these rates would have reduced or increased
profit for the year and shareholders’ equity of the Group respectively as follows:
Change in local currency to $ exchange rates
Profit after tax for the year
Shareholders’ equity
31 Dec 2023 $m
31 Dec 2022 $m
Decrease of 10%
Increase of 10%
Decrease of 10% Increase of 10%
152
(124)
1,256
(1,028)
49
1,182
(40)
(967)
The Group is also exposed to foreign exchange gains and losses on assets and liabilities held by the Group’s undertakings in a currency other
than their functional currency. These will often be managed by derivatives or by having assets and liabilities that match in terms of currency.
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Additional information
Notes to the consolidated financial statements continued
C6.1 Insurance operations
(a) Sensitivity to key market risks
The table below shows the sensitivity of profit after tax, shareholders’ equity and CSM as at 31 December 2023 and 2022 for insurance
segments to the following market risks:
– 1 per cent increase and 0.5 per cent decrease in observable risk-free interest rates (as described in note A3.1(a)) 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 and re-pricing for medical business,
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) increased use of reinsurance, repricing of in-force benefits, changes to new business pricing and
the mix of new business being sold.
The impact of changes in interest rates and equity values impacts both assets and liabilities. For assets backing insurance contract liabilities and
those related liabilities, these impacts will vary depending on whether insurance contracts are classified as VFA or GMM. In addition there will be
impacts from other shareholder assets that back IFRS shareholders equity rather than insurance contract liabilities. The vast majority of the
Group’s investments are classified as FVTPL and so movements as a result of interest rate and equity markets directly impact profit, unless they
are offset by corresponding movements in the Group’s liabilities.
For VFA contracts (which include the majority of the Group’s participating and unit-linked contracts but not all as discussed in note A2.1)
movements in underlying assets are matched by a movement in insurance liabilities. Changes in BEL and risk adjustment as a result of a change
in discount rate or from changes in the variable fee (that is dependent on the value of underlying assets) are taken as a change to the CSM with
no immediate impact on profit or shareholders’ equity. There will however be an impact on profit and shareholders’ equity from changes to the
CSM amortisation as a result of changes both to the CSM and the discounting of the coverage units. Onerous contracts with no CSM will also
have impacts going directly to the income statement.
For GMM contracts, the CSM is calculated on a locked-in basis (ie using discount rates applied at the dates of initial recognition of each group of
contracts), whereas the BEL and risk adjustment are calculated using a current discount rate. This accounting mismatch passes through the
income statement. The impact will depend on whether the BEL is an asset or a liability. For BEL assets, which are largely offset by CSM liabilities,
(ie for certain protection contracts where future premiums are expected to exceed future claims and expenses) increases in interest rates will
reduce the BEL asset with no impact on the CSM liability and hence reduce profit. For a BEL liability, where the BEL and CSM liabilities are backed
by invested assets, (eg certain Universal Life contracts) there are likely to be offsetting asset impacts (for example BEL liabilities and bond values
will both reduce as interest rates increase) and the impact on profit will be dependent on any mismatches between assets and liabilities together
with the impact of the CSM being calculated on a locked-in basis.
For other shareholder assets, that are not backing insurance contract liabilities increases in interest rates and falls in equity markets reduce asset
values, which under the Group’s accounting policy pass directly through the income statement and hence reduce profit (vice-versa for decreases
in interest rates and increases in equity markets).
The income statement volatilities stated above lead to a volatility in the shareholders’ equity to the same extent.
Base values
Profit (loss) after tax for the year from insurance segments
Group shareholders’ equity as at 31 Dec
CSM as at 31 Dec including JVs and associates
Insurance segments
Interest rates and consequential effects
Increase/(decrease) to shareholders’ equity and profit after tax:
Financial assets
Net insurance contract liabilities (including CSM)
Net effect on shareholders' equity and profit after tax note
Increase/(decrease) to CSM liability:
CSM
2023 $m
2,099
17,823
21,012
2022 $m
(494)
16,731
19,989
31 Dec 2023 $m
31 Dec 2022 $m
Decrease of 0.5%
Increase of 1%
Decrease of 0.5%
Increase of 1%
6,815
(12,004)
(7,332)
12,191
(328)
24
5,873
(6,120)
(127)
(10,362)
10,295
(165)
358
(880)
220
(850)
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Prudential plc Annual Report 2023
Insurance segments
Equity/property market values
Increase/(decrease) to shareholders’ equity and profit after tax:
Financial assets
Net insurance contract liabilities (including CSM)
Net effect on shareholders' equity and profit after tax note
Increase/(decrease) to CSM liability:
CSM
31 Dec 2023 $m
31 Dec 2022 $m
Decrease of 20%
Increase of 10%
Decrease of 20%
Increase of 10%
(13,359)
12,288
(822)
6,681
(6,254)
327
(11,884)
10,927
(735)
5,939
(5,571)
283
(1,392)
618
(1,303)
550
Note
The net effect on shareholders’ equity and profit after tax reflects the net pre-tax effect on the financial assets and net insurance contract liabilities shown above, together with
the pre-tax effect on other non-insurance liabilities and the related tax impact.
The sensitivity of the insurance segments 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. Changes to the results of the Africa insurance operations from interest rate or equity price changes would not materially
impact the Group’s results.
The Group uses the segment measure 'Adjusted operating profit' to review the performance of the business (see note B1.2 for how this measure
is determined). The impact on 'Adjusted operating profit' will be more muted than on total profit as long-term asset returns are assumed for
surplus assets and long-term spreads are assumed for GMM business. Adjusted operating profit will be impacted by changes in CSM amortisation
for VFA business following the impact of economic changes on underlying assets and discount rates that impact the value of variable fees, and
on the value of onerous contracts losses (or reversal thereof) taken directly to the income statement. The changes in CSM amortisation result
from changes both to the CSM and the discounting of the coverage units.
The pre-tax adjusted operating profit impacts for a decrease of 0.5 per cent and an increase of 1 per cent in interest rates at 31 December 2023
were $(30) million and $33 million, respectively (2022: $(47) million and $54 million, respectively).
The pre-tax adjusted operating profit impacts for a decrease of 20 per cent and an increase of 10 per cent in equity/property market values at 31
December 2023 were $(186) million and $83 million, respectively (2022: $(157) million and $66 million, respectively).
(b) Sensitivity to insurance risk
For insurance operations, adverse persistency experience can impact the overall 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 effects of these management actions have not been factored into the
sensitivities below.
In addition many of the business units are exposed to mortality and morbidity risk and changes in maintenance expense level.
Changes to the assumed levels of persistency, mortality, morbidity and expenses from that when the contract is first recognised will impact the
overall profitability of the insurance contract. These risks are managed on a portfolio basis and reinsurance can be used to mitigate the risk the
Group has. In particular for certain medical contracts, product repricing is a key management action that is embedded in the process to mitigate
morbidity risk. A degree of medical product repricing is assumed to have been undertaken in the mortality and morbidity sensitivity results shown
in the table below.
In terms of the impact on the Group’s financial results, changes to shareholders’ equity or profit or loss will occur over the life of the contract, as
changes to future cash flows from altered assumptions are recognised as an increase or decrease of CSM (except for onerous contracts), which is
then amortised to profit and loss (and hence shareholders’ equity) over time.
The table below shows how the shareholders’ equity and CSM would have increased or decreased if changes in the future assumptions in
insurance risk that were reasonably possible at the reporting date had occurred. This analysis presents the sensitivities both before and after risk
mitigation by reinsurance and assumes that the other variables remain constant.
Sensitivity to insurance risk:
Maintenance expenses – 10% increase
Lapse rates – 10% increase
Mortality and morbidity – 5% increase
2023 $m
Net effect on shareholders’ equity
and profit after tax
Net effect on CSM
Gross of
reinsurance
(77)
(88)
(131)
Net of
reinsurance
(71)
(76)
(96)
Gross of
reinsurance
(420)
(1,363)
(638)
Net of
reinsurance
(427)
(1,496)
(261)
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EEV basis results
Additional information
Notes to the consolidated financial statements continued
Sensitivity to insurance risk:
Maintenance expenses – 10% increase
Lapse rates – 10% increase
Mortality and morbidity – 5% increase
2022 $m
Net effect on shareholders’ equity
and profit after tax
Net effect on CSM
Gross of
reinsurance
(58)
Net of
reinsurance
(57)
(78)
(88)
(70)
(79)
Gross of
reinsurance
(365)
(1,179)
(548)
Net of
reinsurance
(365)
(1,274)
(217)
The pre-tax adjusted operating profit impacts, net of reinsurance, for a 10 per cent increase in maintenance expenses, a 10 per cent increase in
lapse rates and a 5 per cent increase in mortality and morbidity were $(61) million, $(95) million and $(85) million, respectively (2022: $(53)
million, $(69) million and $(67) million, respectively).
A 10 per cent decrease in the maintenance expense and lapse rate assumptions would have a broadly similar opposite effect on profit and
shareholders’ equity to the sensitivities shown above. The effect from a 5 per cent decrease in mortality and morbidity assumptions is dependent
on the degree of product repricing assumed to have been undertaken.
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 2023 Central operations did not hold significant financial investments other than short-term deposits and money market funds
held by the Group’s treasury function for liquidity purposes and so there is immaterial sensitivity to market movements.
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Prudential plc Annual Report 2023
C7 Tax assets and liabilities
Accounting policies on deferred tax are included in note B3.
C7.1 Current tax
At 31 December 2023, of the $34 million (31 December 2022: $18 million) current tax recoverable, the majority is expected to be recovered
within 12 months after the reporting period.
At 31 December 2023, the current tax liability of $275 million (31 December 2022: $208 million) includes $93 million (31 December 2022: $79
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 deferred tax assets of $156 million (31 December 2022: $140 million) and deferred tax liabilities of
$1,250 million (31 December 2022: $1,139 million), which are presented on a net basis in each of the categories below for the purpose of this
movement analysis only:
Unrealised losses or gains on investments
Balances relating to insurance and reinsurance contracts
Short-term temporary differences
Unused tax losses
Net deferred tax liabilities note
Net deferred tax
(assets) liabilities
at
1 Jan
(129)
1,255
(96)
(31)
999
2022 $m
2023 $m
Other
movements
including
foreign
exchange
movements
Movement in
income
statement
Net deferred tax
(assets) liabilities
at 31 Dec
129
(10)
2
–
(1)
(9)
1,170
(94)
(111)
1,094
268
(87)
2
(79)
104
Unrealised losses or gains on investments
Balances relating to insurance and reinsurance
contracts
Short-term temporary differences
Unused tax losses
Net deferred tax liabilities note
Effect of initial
application of
IFRS 17 and
classification
overlay of
IFRS 9
–
Restated net
deferred tax
(assets) liabilities
at 1 Jan
239
Other
movements
including
foreign
exchange
movements
Movement in
income
statement
(361)
(7)
Net deferred tax
(assets) liabilities
at 31 Dec
(129)
Net deferred tax
(assets) liabilities
at 1 Jan
239
2,091
333
(67)
(1,092)
(469)
–
999
(136)
(67)
297
29
32
2,596
(1,561)
1,035
(3)
(33)
(41)
1,255
11
4
(96)
(31)
999
Note
Deferred tax assets and deferred tax liabilities in the statement of financial position are offset at an entity level (or in some cases at a jurisdiction level where relevant tax
grouping rules apply) as permitted under IAS 12.
The Group has applied the mandatory exemption from recognising and disclosing information on the associated deferred tax assets and
liabilities at 31 December 2023 as required by the amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’ referred to in note
A2.2.
At 31 December 2023, a deferred tax asset of $54 million has been recognised in relation to unused UK tax losses and deductible temporary
differences, due to an increase in forecast taxable profit in the UK tax group, which follows the change of tax residence of Prudential plc in March
2023 from the UK to Hong Kong. The Group has further unused tax losses and deductible temporary differences of $1,319 million (31 December
2022: $2,235 million) in respect of which no deferred tax asset has been recognised. $837 million of unused tax losses expired at the point of
Prudential plc’s tax residency change. Of the unrecognised amounts, $108 million (31 December 2022: $103 million) relates to unused tax losses
that will expire within the next ten years (potential tax benefit: $24 million), and the remainder of $1,211 million (31 December 2022: $1,295
million) has no expiry date (potential tax benefit: $240 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 2023, deferred tax liabilities of $225 million (31 December 2022: $210 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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EEV basis results
Additional information
Notes to the consolidated financial statements continued
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
Number of
ordinary shares
Balance at 1 Jan
2,749,669,380
Shares issued under share-based schemes
3,851,376
2023
2022
Share
capital
$m
182
1
Share
premium
$m
5,006
Number of
ordinary shares
2,746,412,265
3
3,257,115
Shares issued under Hong Kong public offer
and international placing in 2022
–
–
–
Share
capital
$m
182
–
–
Share
premium
$m
5,010
2
(6)
Balance at 31 Dec
2,753,520,756
183
5,009
2,749,669,380
182
5,006
Options outstanding under save as you earn schemes to subscribe for shares at each year end shown below are as follows:
31 Dec 2023
31 Dec 2022
Share price range
Number of shares to
subscribe for
1,671,215
1,858,292
from
(in pence)
737p
737p
to
(in pence)
1,455p
1,455p
Exercisable by year
2029
2028
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 through the trusts established to facilitate
the delivery of shares under employee incentive plans.
During the year, the trusts purchased a total number of shares of 3,888,138 (2022: 5,498,486) and the cost of acquiring these shares, including
shares purchased for members under employee share purchase plans was $54 million (2022: $77 million). 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. At 31 December 2023, 10.0 million (31 December 2022: 12.6 million) Prudential plc shares were held in the trusts.
Other than as disclosed above, the Company and its subsidiaries did not purchase, sell or redeem any Prudential plc listed securities during 2023.
Subsequent to the year end, the Company commenced and completed a share repurchase programme in January 2024 in respect of 3,851,376
ordinary shares as disclosed in note D2.
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Prudential plc Annual Report 2023
C9 Capital
C9.1 Group objectives, policies and processes for managing capital
Capital measure
The Group manages its Group GWS capital resources as its measure of capital. At 31 December 2023, estimated Group shareholder GWS capital
resources is $24.3 billion (31 December 2022: $23.2 billion).
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.
More details on Group capital are given in section I(i) in the Additional unaudited financial information section.
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:
– Invest in core capabilities;
– Maintain flexibility and absorb shock events;
– Cover central costs;
– Fund dividends; and
– Fund new opportunities where there is a good strategic fit.
More details on holding company cash flows and balances are given in section I(iv) 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.
C9.2 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 set out below.
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. A transition period allows insurers to implement the rules in stages before full implementation of the new
regime is required from 2025 onwards.
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EEV basis results
Additional information
Notes to the consolidated financial statements continued
Hong Kong
Prudential Hong Kong Limited applies the new risk-based capital regime (HK RBC) following approval in April 2022 from the Hong Kong IA to
early adopt this new regime. 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. The HK RBC regime is expected to become effective across the industry in the second half of 2024. The Hong
Kong IA issued a consultation paper on the draft rules in December 2023 and Prudential Hong Kong Limited have provided feedback on this. The
quantitative impact of any changes to the final rules will be reflected on implementation of the final HK RBC regime.
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 (i.e. negative liabilities are not permitted at a policy level). For unit-linked policies, an unearned premium
reserve is established.
Malaysia
A risk-based capital (RBC) 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 (i.e. negative liabilities are not
permitted at fund level). The BNM has initiated a review of its RBC framework for insurers and Takaful operators in 2021 and the BNM has yet to
issue their final technical specifications. 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 implementation.
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 financially support expansion of providing insurance
coverage to the most vulnerable in Malaysian society through the National B40 Protection Trust Fund.
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
2023 $m
466
254
(20)
3
(205)
(1)
497
2022 $m
522
187
15
3
(214)
(47)
466
C9.3 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 an appropriate level of operating capital, based on
local regulatory solvency requirements, where relevant.
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Prudential plc Annual Report 2023
C10 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. Property, plant and
equipment, including the right-of-use assets under operating leases, are generally held at cost less cumulative depreciation calculated using the
straight-line method, and impairment charge. Owner occupied properties held by the Group's Singapore business that are underlying items of
direct participating contracts are measured at fair value following the adoption of IFRS 17.
Property, plant and equipment held at cost note (a)
Owner occupied properties held at fair valuenote (b)
Total property, plant and equipment
31 Dec 2023 $m
347
27
374
31 Dec 2022 $m
410
27
437
(a) Property, plant and equipment held at cost
A reconciliation of the carrying amount of the Group’s property, plant and equipment held at cost from the beginning to the end of the years
shown is as follows:
Balance at 1 Jan
Cost
Accumulated depreciation
Opening net book amount
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
2023 $m
2022 $m
Group
occupied
property
Tangible
assets
Right-of-
use assets
Total
Group
occupied
property
Tangible
assets
Right-of-
use assets
21
(8)
13
–
–
3
–
16
24
(8)
16
486
(360)
126
44
(50)
(4)
(1)
115
495
(380)
115
676
(405)
271
57
(95)
(18)
1
216
683
(467)
216
1,183
(773)
410
101
(145)
(19)
–
347
1,202
(855)
347
22
(8)
14
–
–
–
(1)
13
21
(8)
13
489
(349)
140
34
(39)
(2)
(7)
126
486
(360)
126
678
(363)
315
49
(106)
26
(13)
271
676
(405)
271
Total
1,189
(720)
469
83
(145)
24
(21)
410
1,183
(773)
410
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Additional information
Notes to the consolidated financial statements continued
(b) Owner occupied properties held at fair value
IFRS 17 amended the subsequent measurement requirements in IAS 16 Property, plant and equipment to permit entities to elect to measure owner-
occupied properties that are underlying items of direct participating contracts at fair value through profit or loss. Upon the adoption of IFRS 17, the Group
has elected to measure the owner-occupied properties held by the participating funds of its Singapore business at fair value from the transition date.
Previously, these properties were measured at cost less accumulated depreciation less any impairment losses. The fair value of these properties is based on
market values as assessed by professionally qualified external valuers or by the Group’s qualified surveyors.
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 2023, total right-of-use assets
comprised $202 million (31 December 2022: $267 million) of property and $14 million (31 December 2022: $4 million) of non-property assets.
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 2023, the undiscounted value
of lease payments beyond the break period not recognised in the lease liabilities is $231 million (31 December 2022: $189 million).
The Group has non-cancellable property subleases which have been classified as operating leases under IFRS 16. The sublease rental income
received in 2023 for the leases is $7 million (2022: $6 million).
Capital expenditure: property, plant and equipment by segment
The capital expenditure on property, plant and equipment excluding right-of-use assets in 2023 of $44 million (2022: $34 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
2023 $m
22
–
1
2
15
4
44
–
44
2022 $m
11
1
1
3
16
2
34
–
34
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Prudential plc Annual Report 2023
D Other information
D1 Contingencies and related obligations
Litigation and regulatory proceedings
The Group is involved in various litigation and regulatory proceedings from time to time. 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.
Litigation developments during the year include a case regarding a historic transaction connected to the legal and beneficial ownership of 49 per
cent of the ordinary shares of the holding company of Prudential Assurance Malaysia Berhad. Prudential currently owns 51 per cent of this entity
but consolidates the entity at 100 per cent reflecting the economic interest of the Group. Prudential has been successful at court hearings
relating to the transaction concerned both in the first instance and at the subsequent appeal stage. In July 2023, the Federal Court, which is
Malaysia’s highest Court, granted leave to allow the appellant to further appeal the case in the Federal Court. The appeals process is ongoing.
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 provided undertakings to the regulators of its Hong Kong life subsidiary, Prudential Hong Kong Limited, to formalise the
circumstances regarding their solvency levels in which intra-group capital support will be provided by Prudential. Other intra-group transactions
are discussed in note D3 below.
D2 Post balance sheet events
Dividends
The 2023 second interim dividend approved by the Board of Directors after 31 December 2023 is as described in note B5.
Share repurchase programme to neutralise 2023 employee and agent share scheme issuance
On 16 January 2024, the Company announced that the share repurchase programme in respect of 3,851,376 ordinary shares that it announced
on 5 January 2024 and commenced on 8 January has been completed. The purpose of the share repurchase programme was to offset dilution
from the vesting of awards under employee and agent share schemes during 2023. The Company has repurchased 3,851,376 ordinary shares in
aggregate (representing 0.14 per cent of the total number of ordinary shares in issue at the end of the year (as disclosed in note C8)) at a
volume weighted average price of £8.2676 per ordinary share for a total consideration of approximately £32 million.
Prudential plc Annual Report 2023
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EEV basis results
Additional information
Notes to the consolidated financial statements continued
D3 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 B1.4. All intra-group transactions are subject to the same internal approval framework as external transactions.
Given the nature of the Group’s business there has historically been 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 IFRS 9 / 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 except for a planned capital injection into CPL, the Group’s joint venture business in the Chinese Mainland
announced in December 2023. The Group announced that it was providing additional growth capital to CPL of RMB1.25 billion (US$176 million)
in cash subject to relevant regulatory approvals, with CITIC, its joint venture partner providing an equal amount. In anticipation of the future
capital injection, the Group advanced the cash of $176 million to CPL in December 2023.
Key management personnel of the Company, as described in note B2.3, may from time to time purchase insurance or asset management
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 2023 and 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.
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.
D4 Commitments
The Group has provided, from time to time, certain commitments to third parties.
At 31 December 2023, the Group had $2,456 million unfunded commitments (31 December 2022: $2,626 million) primarily related to
investments in infrastructure funds and alternative investment funds in Asia.
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Prudential plc Annual Report 2023
D5 Investments in subsidiary undertakings, joint ventures and associates
D5.1 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 following are met:
– It has power over an investee;
– It is exposed to, or has rights to, variable returns from its involvement with the investee; and
– 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 of the Partnership Act, on the basis that the limited partnership is consolidated
in these financial statements.
(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 FVTPL.
(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; and
– 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.
Prudential plc Annual Report 2023
309
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
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.
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 2023 $m
31 Dec 2022 $m
Investment
funds
33,657
–
33,657
Other
structured
entities
–
285
285
Investment
funds
30,771
–
30,771
Other
structured
entities
–
389
389
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 D4).
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 2023 and 2022, 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.
D5.2 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 C9.2.
D5.3 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 FVTPL, where there are published price quotations, is approximately $0.5 billion at 31 December 2023 (31 December
2022: $0.3 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 2023 and 2022 (covering the same period as that of the Group) has been used in these consolidated financial statements.
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Prudential plc Annual Report 2023
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 that are equity accounted for as shown in the Consolidated income statement, is allocated across segments as
follows:
CPL
Malaysia
Growth markets and other note
Insurance operations
Eastspring
Total segment and Group total
2023 $m
(577)
18
310
(249)
158
(91)
2022 $m
(345)
16
100
(229)
144
(85)
Note
For growth markets and other, as well as the segment results for associates and joint ventures within the segment, the amount shown includes a credit of $191 million (2022:
$72 million credit) of taxes for all life joint ventures and associates.
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)
*
The Group’s 50 per cent share of CPL’s insurance and reinsurance contract balances are shown in note C3.3(c).
Income statement:
Revenue
Loss for the year after tax
The above loss for the year includes the following:
Depreciation and amortisation
Interest income
Interest expense
Income tax credit
31 Dec 2023 $m
33,271
32,005
1,266
31 Dec 2022 $m
29,914
27,734
2,180
868
1,198
561
985
2023 $m
1,676
(733)
2022 $m
1,023
(550)
(39)
543
(2)
422
(43)
569
(3)
140
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%)
31 Dec 2023 $m
1,266
633
633
31 Dec 2022 $m
2,180
1,090
1,090
The Group has received $88 million of dividends from CPL in 2023 (2022: nil). In December 2023, the Group announced a planned capital
injection into CPL of $176 million as discussed in note D3.
At 31 December 2023, the Group’s investments in joint ventures and associates accounted for using the equity method are $1,940 million (31
December 2022: $2,259 million), out of which $633 million (31 December 2022: $1,090 million) relates to the Group's interest in CPL as
discussed above. The aggregate carrying amount of the Group’s investments in the other joint ventures and associates accounted for using the
equity method is $1,307 million (31 December 2022: $1,169 million).
Prudential plc Annual Report 2023
311
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
D5.4 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 2023. 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 D5.1.
Simplified corporate structure as at 31 December 2023
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†
PT
Prudential
Sharia Life
Assurance†
(Indonesia)
Prudential
Assurance
Malaysia
Berhad†
Prudential
BSN
Takaful
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,
the
Philippines,
Taiwan,
Thailand,
Vietnam)
Prudential
International
Treasury
Limited
Prudential
Funding
(Asia) plc‡
*
†
‡
CPL is a joint venture with CITIC, a leading state owned conglomerate in the Chinese Mainland.
Indirectly held by Prudential Corporation Asia Limited.
The company was incorporated in February 2023 and a 100 per cent subsidiary of Prudential Corporation Asia Limited.
Direct subsidiary undertakings of the parent company, Prudential plc (shares held directly or via nominees)
Key to share classes:
Abbreviation
Class of share held
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
Prudential Corporation Asia Limited OS
Classes of shares held
Proportion held
100.00%
Registered office address
13th Floor, One International Finance Centre, 1 Harbour View Street,
Central, Hong Kong
Prudential Group Holdings Limited OS
100.00%
1 Angel Court, London, EC2R 7AG, United Kingdom
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Prudential plc Annual Report 2023
Other subsidiaries, joint ventures, associates and significant holdings of the Group – no shares held directly by the parent
company (Prudential plc) or its nominees
Classes of
shares held
Proportion
held
Registered office address
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
U
U
U
PI
U
U
U
U
U
U
BOCI-Prudential Asset Management Limited OS
BOCI-Prudential Trustee Limited
BSP Debt Fund V Unlevered (Non-US) L.P.
Cathay High Yield ex China Cash pay 1-5
Year 2% Issuer Capped ETF
OS
U
U
26.87% 28th Floor Bangkok City Tower, 179 South Sathorn Road,
Thungmahamek, Sathorn, Bangkok 10120, Thailand
35.13% 21 Church Street, #01-01, Capital Square Two, Singapore 049480
61.88%
100.00% Citypoint, 65 Haymarket Terrace, Edinburgh, EH12 5HD
100.00% PO Box 1093, Queensgate House, Grand Cayman, KY1-1102,
Cayman Islands
46.52% 27th Floor, Bank of China Tower, 1 Garden Road, Hong Kong
40.43%
52.42%
42.17%
37.11%
36.00%
36.00% Suites 1501-1507 & 1513-1516, 15th Floor, 1111 King's Road,
Taikoo Shing, Hong Kong
53.00% C/o Benefit Street Partners LLC, New York, New York 10019
46.49% 6th Floor, No.39, Sec.2, Dunhua South. Rd., Taipei, Taiwan
CITIC-CP Asset Management Co., Ltd.
MI - JV
26.95% Room 101-2, No.128 North Zhangjiabang Road, Pudong District,
Shanghai, China
CITIC-Prudential Fund Management
Company Limited
MI - JV
49.00% Level 9, HSBC Building, Shanghai IFC, 8 Century Avenue, Pudong,
Shanghai, China
CITIC-Prudential Life Insurance Company
Limited
MI - JV
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
Eastspring Al-Wara' Investments Berhad
OS
100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit
Damansara, 50490 Kuala Lumpur, Wilayah Persekutuan, Malaysia
Eastspring Asia Pacific High Yield Equity
Fund
Eastspring Asset Management (Thailand)
Co., Ltd.
U
OS
39.60% 4th Floor, No.1, Songzhi Rd., Xinyi Dist., Taipei, Taiwan
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% 22F (Seoul International Finance Center, Yeouido dong), 10
Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul 07326, Republic of
Korea
Eastspring Investment Management
(Shanghai) Company Limited
MI - WFOE 100.00% Unit 306-308, 3rd Floor, Azia Center, 1233 Lujiazui Ring Road, China
(Shanghai) Pilot Free Trade Zone, China
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Eastspring Investments - Asia ESG Bond
Fund
Eastspring Investments – Asia Opportunities
Equity Fund
Eastspring Investments - Asia Pacific Equity
Fund
Eastspring Investments - Asia Real Estate
Multi Asset Income 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 Local Bond
Fund
U
U
U
U
U
U
U
U
U
U
U
94.82% 26, Boulevard Royal, L-2449, Luxembourg
100.00%
95.55%
35.06%
89.85%
95.21%
98.94%
88.46%
67.15%
88.64%
83.45%
314
Prudential plc Annual Report 2023
Registered office address
Name of entity
Classes of
shares held
Eastspring Investments - Asian Low Volatility
Equity Fund
Eastspring Investments - Asian Multi Factor
Equity Fund
Eastspring Investments - China A Shares
Growth Fund
Eastspring Investments - Dragon Peacock
Fund
Eastspring Investments - European
Investment Grade Bond Fund
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 Emerging
Markets Fundamental Value Fund
Eastspring Investments - Global Equity
Navigator Fund
Eastspring Investments - Global Growth
Equity Fund
Eastspring Investments - Global Low
Volatility Equity Fund
Eastspring Investments - Global Market
Navigator Fund
Eastspring Investments - Global Multi Asset
Income Plus Growth Fund
Eastspring Investments - Global Technology
Fund
Eastspring Investments - Greater China
Equity Fund
Eastspring Investments - India Equity Fund
Eastspring Investments - Japan Sustainable
Value Fund
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
Proportion
held
91.60%
95.20%
79.87%
97.09%
99.88%
98.06%
38.21%
100.00%
100.00%
97.86%
42.30%
98.48%
99.60%
100.00%
84.16%
89.88%
58.85%
86.85%
Eastspring Investments - Pan European Fund U
66.59%
Eastspring Investments - US Corporate Bond
Fund
Eastspring Investments - US High
Investment Grade Bond Fund
Eastspring Investments - US High Yield Bond
Fund
Eastspring Investments - US Investment
Grade Bond Fund
Eastspring Investments - World Value Equity
Fund
U
U
U
U
U
68.69%
85.91%
54.03%
58.61%
93.68%
Eastspring Investments (Hong Kong) Limited OS
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street,
Central, Hong Kong
Eastspring Investments (Luxembourg) S.A.
OS
100.00% 26, Boulevard Royal, L-2449 Luxembourg, Grand Duchy of
Luxembourg
Eastspring Investments (Singapore) Limited OS
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre,
Singapore 018983
Prudential plc Annual Report 2023
315
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Eastspring Investments Asia Pacific ex-Japan
Target Return Fund
U
78.56% Eastspring Investments Berhad, Level 22, Menara Prudential,
Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala Lumpur,
Malaysia
Eastspring Investments Berhad
OS
100.00% Level 25, Menara Hong Leong, No. 6 Jalan Damanlela, Bukit
Damansara, 50490 Kuala Lumpur, Wilayah Persekutuan, Malaysia
Eastspring Investments Equity Income Fund U
43.13% Eastspring Investments Berhad, Level 22, Menara Prudential,
Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala Lumpur,
Malaysia
Eastspring Investments Fund Management
Limited Liability Company
MI
100.00% 23rd Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1,
Ho Chi Minh City, Vietnam
Eastspring Investments Global Oncology
Securities Baby Investment Trust (H)
Eastspring Investments Global Oncology
Securities Baby Investment Trust (UH)
Eastspring Investments Global Oncology
Securities Baby Investment Trust (USD)
Eastspring Investments Group Pte. Ltd.
Eastspring Investments Growth Fund
Eastspring Investments Incorporated
Eastspring Investments India Consumer
Equity Open Limited
Eastspring Investments India Equity Open
Limited
Eastspring Investments India Infrastructure
Equity Open Limited
Eastspring Investments Limited
Eastspring Investments MY Focus Fund
U
U
U
OS
U
OS
OS
OS
OS
OS
U
Eastspring Investments Private Fixed Income
Fund Number 1
U
72.72% 22nd Floor One IFC, 10 Gukjegeumyung-ro, Youngdungpo-gu, Seoul
07326, Korea
92.43%
96.00%
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre,
Singapore 018983
40.96% Eastspring Investments Berhad, Level 22, Menara Prudential,
Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala Lumpur,
Malaysia
100.00% 874 Walker Road, Suite C, City of Dover, County of Kent, State of
Delaware, 19904, United States
100.00% 3rd Floor, 355 NEX, Rue du Savoir, Cybercity Ebene 72201, Mauritius
100.00%
100.00%
100.00% Marunouchi Park Building, 6-1 Marunouchi 2-chome, Chiyoda-Ku,
Tokyo, Japan
31.20% Eastspring Investments Berhad, Level 22, Menara Prudential,
Persiaran TRX Barat, 55188 Tun Razak Exchange, Kuala Lumpur,
Malaysia
66.94% Units 306-308, 3rd Floor, Azia Center, 1233 Lujiazui Ring Road,
Shanghai, China, 200120
Eastspring Investments Services Pte. Ltd.
OS
100.00% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre,
U
U
U
U
U
Singapore 018983
100.00% 26, Boulevard Royal, L-2449, Luxembourg
97.79% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
98.85%
64.89%
77.52% 23rd Floor, Saigon Trade Center Building, 37 Ton Duc Thang Street,
Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam
MI - WFOE 100.00% Unit 306-308, 3rd Floor, 1233 Lujiazui Ring Road, China (Shanghai)
Pilot Free Trade Zone, China
U
OS
U
100.00% 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
Eastspring Investments SICAV-FIS -
Alternative Investment Fund
Eastspring Investments Unit Trusts - Dragon
Peacock Fund ID
Eastspring Investments Unit Trusts -
Singapore ASEAN Equity Fund
Eastspring Investments Unit Trusts -
Singapore Select Bond Fund
Eastspring Investments Vietnam Navigator
Fund
Eastspring Overseas Investment Fund
Management (Shanghai) Company Limited
Eastspring Private Equity Fund 2
Eastspring Securities Investment Trust Co.,
Ltd.
Eastspring Singapore Alternatives VCC
316
Prudential plc Annual Report 2023
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Eastspring Syariah Equity Islamic Asia Pacific
USD Kelas B
Eastspring Syariah Fixed Income USD Kelas
A
U
U
86.25% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta
12910, Indonesia
63.13%
First Sentier Global Property Securities Fund U
74.35% 38 Beach Road, #06-11 South Beach Tower, Singapore 189767
FSITC GLOBAL TRENDS FUND
FSSA China Focus Fund
Fubon 1-5 Years US High Yield Bond Ex
China
U
U
U
24.31% 1st Floor, No.6, Sec. 3 ,Minquan West Rd, Taipei
65.21% 70 Sir John Rogerson’s Quay, Dublin 2, D02 R296 Ireland
42.48% 8th Floor, No.108, Sec.1, Dunhua South. Rd., Taipei, Taiwan
Fubon Global Investment Grade Bond Fund U
57.59%
Fuh Hwa 1-5 Yr High Yield ETF
Furnival Insurance Company PCC Limited
GIS Total Return Bond Fund
GS Twenty Two Limited
U
OS
U
OS
44.38% 8th & 9th Floor, No.308, Sec. 2, Bade Rd., Da-an District
100.00% PO Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET,
Guernsey
25.22% 78 Sir John Rogerson's Quay, Dublin, D02 HD32, Ireland
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
HSBC Senior Global Infrastructure Debt Fund U
100.00% 8 Canada Square, London, E14 5HQ, United Kingdom
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 Global High Yield Corp Bond UCITS
ETF
iShares MSCI Asia ex Japan Climate Action
ETF
JPMorgan Investment Funds - Japan
Sustainable Equity Fund
KKP ACTIVE EQUITY FUND
Krungsri Greater China Equity Hedged
Dividend Fund
Lasalle Property Securities SICAV-FIS
M&G Asia Property TS Trust
M&G Real Estate Asia Holding Company Pte.
Ltd.
Manulife Asia Pacific Bond Fund
OS
OS
OS
OS
U
U
U
U
U
U
U
U
U
U
OS
U
49.00% 12th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi
110001, India
22.05% ICICI PruLife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi,
Mumbai 400025, India
22.05%
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
98.42% 8th Floor, No 122, Tung Hua N. Rd. Taipei, Taiwan
98.69%
55.25% 200 Capital Dock, 79 Sir John Rogerson’s Quay, Dublin 2, Ireland
73.52% 20 Anson Road, #18-01 Twenty Anson, Singapore 079912
62.01% 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of
Luxembourg
31.54% 209 KKP Tower A, 17 Fl., Sukhumvit 21 (Asoke), Khlong Toey Nua,
Wattana, Bangkok 10110 Thailand
28.12% 12th, 18th Zone B Floor, Ploenchit Tower 898 Ploenchit Road,
Lumpini Pathumwan, Bangkok 10330 Thailand
100.00% 11-13 Bouldevard de la Foire, L-1528 Luxembourg
100.00% 138 Market Street, CapitaGreen #35-01, Singapore 048946
33.00%
82.22% 9th Floor, No 89 Son Ren Road, Taipei, Taiwan
Manulife AUD Income Bond Fund-A(CNY-H) U
30.73%
Manulife China Offshore Bond Fund
Manulife Taiwan Dynamic Fund
U
U
32.48%
26.11%
Prudential plc Annual Report 2023
317
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Name of entity
Classes of
shares held
Proportion
held
Registered office address
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
U
U
U
98.98% 101 Tower, 30th Floor, No. 7 Sec. 5, Xinyi Rd., Xinyi Dist., Taipei,
Taiwan
40.50%
98.40%
North Sathorn Holdings Company Limited
OS
100.00% No. 63, Athenee Tower, 34th Floor, Wireless Road, Lumpini
PCA IP Services Limited
PCA Life Assurance Co., Ltd.
PCA Reinsurance Co. Ltd.
PineBridge US Dual Core Income Fund
PLUK Agents Savings Fund
Principal Global Silver Age Fund
Pru Life Insurance Corporation of U.K.
Pru Life UK Asset Management and Trust
Corporation
OS
OS
OS
U
U
U
OS
OS
Subdistrict Pathumwan District, Bangkok Metropolis, Thailand
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
27.97% 10th Floor, No. 144, Sec. 2, Minquan East Rd, Taipei
100.00% 8th Floor, 8 Rockwell, Rockwell Drive, Rockwell Center, Makati City
31.05% 44, 16th Floor, CIMB Thai Bank, Lungsuan Road, Lumpini, Bangkok
10330, Thailand
100.00% 9th Floor, Uptown Place Tower 1, 1 East 11th Drive, Uptown
Bonifacio, 1634 Taguig City, Metro Manila, Philippines
100.00%
Prudence Foundation
LBG
100.00% 13th Floor, One International Finance Centre, 1 Harbour View Street,
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.
OS
OS
OS
OS
OS
OS
OS
OS
Central, Hong Kong
100.00% VTrust Tower, Unit A B &C, 3rd Floor, Tchecoslova Blvd (Street 169),
Sangkat Veal Vong, Khan 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
51.00% Abidjan Plateau, Avenue Noguès, Immeuble Woodin Center, 1er
étage, 01 P.O. BOX 5173, Abidjan 01, Côte d'Ivoire
Prudential Belife Insurance Côte d'Ivoire S.A. OS
51.00%
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.
OS
OS
OS
OS
OS
OS
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 26, 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
318
Prudential plc Annual Report 2023
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Prudential Financial Partners (Asia) Limited
OS
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Financial Partners HK Limited
Prudential Funding (Asia) PLC
Prudential General Insurance Hong Kong
Limited
Prudential Group Secretarial Services HK
Limited
OS
OS
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
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
Prudential Group Secretarial Services Limited OS
100.00% 1 Angel Court, London, EC2R 7AG, United Kingdom
Prudential Holdings Limited
Prudential Hong Kong Limited
Prudential International Treasury Limited
Prudential Investment Management Private
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
Prudential Life Insurance Ghana Limited
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
Prudential Vietnam Assurance Private
Limited
Prudential Wealth Holdings Company Pte.
Ltd.
Prudential Wealth Management Singapore
Pte. Ltd.
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
PS
OS
OS
OS
PS
OS
OS
OS
OS
OS
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% 7 Straits View #07-01, Marina One East Tower, Singapore 018936,
Singapore
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
100.00% Vienna Court, Ground Floor, State House Crescent, Off State House
Avenue, P.O. Box 25093-00603, Nairobi, Kenya
100.00% Prudential House, Plot No. 32256, Thabo Mbeki Road, P.O. Box
31357, Lusaka, Zambia
100.00% H/NO. 35, Opp. Hobats Clinic, North Street, Tesano, Accra, Accra
Metropolitan, Greater Accra, P.O. Box AN 10476, Ghana
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 Pensions Management Zambia Limited Support Office,
Plot F/377/9/H/3, Kabulonga Road, Kabulonga, Lusaka
100.00% Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh
100.00%
Ampang, 50100 Kuala Lumpur, Malaysia
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 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
100.00% 25th Floor, Saigon Trade Center, 37 Ton Duc Thang Street, District 1,
Ho Chi Minh City, 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
Prudential plc Annual Report 2023
319
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes to the consolidated financial statements continued
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Prudential Zenith Life Insurance Limited
OS
51.00% 13th Floor, Civic Towers, Ozumba Mbadiwe Avenue, Victoria Island,
PRUInvest PH Equity Index Tracker Fund
PruInvest PHP Balanced Allocation Fund
PruInvest PHP Dynamic Equity Fund
U
U
U
Lagos State, Lagos, Nigeria
99.61% 8th Floor, 8 Rockwell, Rockwell Drive, Rockwell Center, Makati City
72.30%
52.45%
PruInvest PHP Intermediate Term Bond Fund U
82.73%
PRUInvest PHP Liquid Fund
PruInvest USD Global Market Balanced Fund
of Funds
PruInvest USD High Yield Asian Bond Feeder
Fund
PruInvest USD Intermediate Term Bond
Fund
PruInvest USD Liquid 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 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
U
U
U
U
U
OS
OS
OS
OS
OS
U
U
U
U
U
U
U
U
U
U
100.00%
20.43%
65.19%
93.17%
56.46%
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
97.72% Prudential Tower, 23rd Floor, Jl. Jend. Sudirman Kav.79, Jakarta
12910, Indonesia
70.16%
98.57%
99.01% Graha CIMB Niaga 21st Floor. Jl Jend Sudirman Kav 58, Jakarta -
12190, Indonesia.
99.93% 10 Marina Boulevard, #32-01, Marina Bay Financial Centre Tower 2,
Singapore 018983
99.92%
92.86% 6, route de Trèves, L-2633 Senningerberg, Grand Duchy of
Luxembourg
31.68% 138 Market Street, #23-01 CapitaGreen, Singapore 048946
77.62%
51.13%
Schroder US Dollar Money Fund
Scotts Spazio Pte. Ltd.
U
OS
27.98% 9th floor, no. 108, section 5, xinyi road, Taipei
45.00% 316 Tanglin Road, #01-01,Singapore, 247978
Shenzhen Prudential Technology Limited
MI - WFOE 100.00% Unit 5, 8th Floor, China Resources Tower, No.2666 Keyuan South
Sri Han Suria Sdn. Bhd.
Staple Limited
Road, Yuehai Street, Nanshan District, Shenzhen 518054, China
OS
OS
51.00% Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing, No. 1 Leboh
Ampang, 50100 Kuala Lumpur, Malaysia
100.00% No. 63, Athenee Tower, 34th Floor, Wireless Road, Lumpini
Subdistrict Pathumwan District, Bangkok Metropolis, Thailand
320
Prudential plc Annual Report 2023
Name of entity
Classes of
shares held
Proportion
held
Registered office address
Templeton Asian Growth Fund
Threadneedle (Lux) – Global Emerging
Market Equities
United Global Innovation Fund
United Global Quality Equity Fund – MYR
hedged Class
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
U
U
U
U
U
U
U
U
32.88% 8A, rue Albert Borschette, L-1246 Luxembourg
65.59% 44 Rue de la vallée, 2661 Luxembourg
24.24% 23A, 25th Floor, Asia Centre Building, 173/27-30, 32-33 South
Sathorn Road, Thungmahamek, Sathorn, Bangkok 10120, Thailand
27.57% Jln Raja Laut, City Centre, 50100 Kuala Lumpur, Wilayah
Persekutuan Kuala Lumpur
45.27% 23A, 25th Floor, Asia Centre Building, 173/27-30, 32-33 South
Sathorn Road, Thungmahamek, Sathorn, Bangkok 10120, Thailand
35.67%
38.84%
21.90% 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 31 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
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
Prudential Assurance Malaysia Berhad
100,000,000 ordinary shares of RM 1 each
Prudential plc Annual Report 2023
321
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Statement of financial position of the parent company
Fixed assets
Investments in subsidiary undertakings
Current assets
Amounts owed by subsidiary undertakings
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
Amounts owed to subsidiary undertakings
Total net assets
Capital and reserves
Share capital
Share premium
Profit and loss account
Shareholders’ funds
Profit for the year
Note
31 Dec 2023 $m
31 Dec 2022 $m
5
13,786
13,178
6
7
7
7
7
7
8
7,267
–
21
7,288
–
–
–
(866)
(7)
(7)
(880)
6,408
20,194
–
–
(3,610)
(3,610)
16,584
183
5,009
11,392
16,584
7,501
266
45
7,812
(21)
(361)
(501)
(614)
(9)
(63)
(1,569)
6,243
19,421
(2,265)
(1,614)
–
(3,879)
15,542
182
5,006
10,354
15,542
2023 $m
1,525
2022 $m
455
The financial statements of the parent company on pages 322 to 328 were approved by the Board of Directors on 19 March 2024 and signed
on its behalf by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
322
Prudential plc Annual Report 2023
Statement of changes in equity of the parent company
Balance at 1 Jan 2022
Profit for the year
Valuation movements on Jackson equity securities 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 distributions to owners
Share
capital
$m
182
Share
premium
$m
5,010
Profit and
loss account
$m
10,458
Shareholders’
funds
$m
15,650
–
–
–
–
–
–
–
–
–
–
(4)
–
–
(4)
455
455
(125)
330
(125)
330
–
40
(474)
(434)
(4)
40
(474)
(438)
Balance at 31 Dec 2022 / 1 Jan 2023
182
5,006
10,354
15,542
Profit for the year
Valuation movements on Jackson equity securities 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 distributions to owners
–
–
–
1
–
–
1
–
–
–
3
–
–
3
1,525
1,525
8
8
1,533
1,533
–
38
(533)
(495)
4
38
(533)
(491)
Balance at 31 Dec 2023
183
5,009
11,392
16,584
Prudential plc Annual Report 2023
323
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
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. Prudential’s mission is to be the most trusted
partner and protector for this generation and generations to come, by providing simple and accessible financial and health solutions.
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
international accounting standards adopted for use in the UK but makes amendments where necessary, in order to comply with the Companies
Act 2006, and has set out below where advantages of the FRS 101 disclosure exemptions have been taken. The Company has also taken the
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 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 the consequential amendments to IFRS 7 related to IFRS 9, and IFRS 13
‘Fair Value Measurement’; and
– IFRS 15 ‘Revenue from Contracts with Customers’ in respect of revenue recognition.
The accounting policies set out in note 3 below have been applied consistently to both years presented in these financial statements.
The Company and the Group manage cash resources, remittances and financing primarily in US dollars. Accordingly, the functional and
presentational currency of the Company is US dollars.
On the basis of the assessment of going concern for the Company and the Group as set out in note A1 to the Group IFRS 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 2023.
3 Significant accounting policies
Investments in subsidiary undertakings
Investments in subsidiary undertakings are shown at cost less impairment. Investments are assessed for indicators of impairment, and if any are
identified, any impairment is assessed by comparing the net assets and value in use of the subsidiary undertakings with the carrying value of the
investments.
Amounts owed by subsidiary undertakings
Amounts owed by subsidiary undertakings are shown at cost less expected credit losses, which 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 FVTPL, all 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 defaults on those loans. In all cases, the subsidiaries are expected to have sufficient resources
to repay the loans 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.
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.
324
Prudential plc Annual Report 2023
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 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 and adjustments made in relation to prior years. Current tax recoverable (payable) recognised in the balance sheet
is measured at the amount expected to be either recovered from (paid to) relevant tax authorities or Group undertakings in relation to the
surrender (claim) of tax losses.
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.
The Company has applied the mandatory exemption from recognising and disclosing information on the associated deferred tax assets and
liabilities at 31 December 2023 as required by the amendments to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’ referred to in note
A2.2 to the Group IFRS consolidated financial statements.
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.
Significant accounting judgement - valuation of debt transfer
The fair value of the external debt transferred from the Company to Prudential Funding (Asia) plc in March 2023 was determined by reference to
the externally observable prices of these quoted instruments.
The intercompany liability due to Prudential Funding (Asia) plc as consideration for the transfer of the external debt liabilities are for the same
principal amounts and have identical terms to the external debt, with the exception of an additional margin on the interest rate. It is judged that
the most appropriate measure of the fair value of these intercompany items is the fair value of the external debt instruments with an adjustment
for the fair value of the additional interest margin, which increased the fair value of the liability by $17 million on initial recognition.
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Additional information
Notes to the parent company financial statements continued
4 Reconciliation from the FRS 101 parent company results to the Group IFRS results
The parent company financial statements are prepared in accordance with FRS 101 and the Group financial statements are prepared
in accordance with IFRS 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 Group IFRS results.
Profit after tax
Profit for the financial year of the Company in accordance with FRS 101 note (i)
Accounting 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
2023 $m
2022 $m
1,525
(65)
241
1,701
455
108
(1,570)
(1,007)
31 Dec 2023 $m
31 Dec 2022* $m
16,584
–
1,239
17,823
15,542
66
1,123
16,731
*
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1 to the Group IFRS consolidated
financial statements. Accordingly, the comparative results have been re-presented from those previously published.
Notes
(i) The Company’s profit for the financial year includes distributions to the Company from subsidiaries.
(ii) In the current year, accounting difference represents the difference in accounting for expected credit losses on loan assets. In the prior year, differences also arose from that
effect, together with the difference in treatment of realised gains and losses on investments classified as fair value through other comprehensive income, as the Company
applied IFRS 9 in 2022 which the Group adopted, without retrospective application, in 2023.
(iii) The share in the IFRS result of the Group line represents the parent company’s interest in the earnings of its subsidiaries, joint ventures and associates. The share in the IFRS
net equity line represents the parent company's interest in the net assets of its subsidiaries, joint ventures and associates. The movement compared with the prior year
reflects movements in the results of the Group relative to the result of the Company.
(iv) The profit for the year of the Company in accordance with IFRS includes dividends received from subsidiary undertakings of $1,277 million for the year ended 31 December
2023 (2022: $708 million).
5 Investments in subsidiary undertakings
At 1 Jan
Capital injections note (i)
Other note (ii)
At 31 Dec
2023 $m
13,178
606
2
13,786
2022 $m
13,114
62
2
13,178
Notes
(i)
In March 2023 the company subscribed to $17m in equity in Prudential Corporation Asia Limited, an immediate subsidiary, as part of the transfer of debt to subsidiary
company Prudential Funding (Asia) Limited, In June 2023 the company subscribed to $400m of equity in Prudential Corporation Asia Limited as part of the capitalisation of
Group company Prudential Funding (Asia) Limited, and in September 2023, intercompany loans of $189 million owed to the Company were settled in exchange for the
issue of equity instruments from Prudential Corporation Asia Limited.
(ii) 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 2023 have been assessed for indicators of impairment and none were identified.
Subsidiary undertakings of the Company at 31 December 2023 are listed in note D5.4 of the Group IFRS consolidated financial statements.
6 Equity securities – fair value through other comprehensive income
The Company made the election to measure its interest in equity securities in Jackson at FVOCI, which were disposed of entirely in 2023.
The fair value of the Company’s holding in the equity securities of Jackson Financial Inc. was 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 gain of $8 million (2022: a loss of $(125) million) has been recognised in other comprehensive income for the year in respect of these
instruments.
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7 Borrowings
Core structural borrowings note (i)
Subordinated liabilities note (ii)
Debenture loans
Commercial paper note (iii)
Total borrowings note (iv)
Borrowings are repayable as follows:
Within 1 year
After 5 years
Core structural borrowings
Other borrowings
Total
31 Dec 2023 $m 31 Dec 2022 $m 31 Dec 2023 $m 31 Dec 2022 $m 31 Dec 2023 $m 31 Dec 2022 $m
–
–
–
–
–
–
–
–
2,286
1,975
4,261
–
4,261
382
3,879
4,261
–
–
–
–
–
–
–
–
–
–
–
501
501
501
–
501
–
–
–
–
–
–
–
–
2,286
1,975
4,261
501
4,762
883
3,879
4,762
Notes
(i) Further details on the core structural borrowings of the Company are provided in note C5.1 of the Group IFRS consolidated financial statements.
(ii) The interests of the holders of the subordinated liabilities are subordinate to the entitlements of other creditors of the Company.
(iii) These borrowings support a short-term fixed income securities programme.
(iv) Borrowings are classified in line with contractual maturity dates unless the Company has established its intention to redeem at an earlier date
(v) On 2 March 2023 the Company transferred certain external debt instrument liabilities to Prudential Funding (Asia) plc. In consideration for this transfer the Company
entered into intercompany debt payable arrangements with Prudential Financial Partners (Asia) plc, which matched the terms and value of the external debt liability
instruments, with an additional margin on the interest rate in excess of the interest payable on the debt liability instruments. These intercompany payable instruments were
measured at fair value on initial recognition, which totalled $3,605 million, including accrued interest. The difference between the fair value of the intercompany payables
and the previously recognised carrying value of the external debt instruments of $370 million was recognised as a gain in the Company’s income statement. The fair value
of these instruments was established by reference to the observable market value of the external debt liability instruments transferred on the same day, with an adjustment
for the additional interest margin. These intercompany payable instruments are subsequently measured at amortised cost, applying the effective interest rate method, to
amortise the difference between the value initial recognised and redemption value of the assets. At 31 December 2023, $3,610m of amounts owed to subsidiary
undertakings were due to Prudential Funding (Asia) Limited and due after more than one year in line with the terms of the external debt.
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Additional information
Notes to the parent company financial statements continued
8 Capital and reserves
Share capital and share premium
A summary of the ordinary shares in issue and the options outstanding to subscribe for the Company’s shares at 31 December 2023 is set out in
note C8 to the Group IFRS consolidated financial statements.
Retained profit of the Company
Retained profit at 31 December 2023 amounted to $11,392 million (31 December 2022: $10,354 million). The retained profit includes
distributable reserves of $5,640 million (31 December 2022: $4,639 million) and non-distributable reserves of $5,752 million (31 December
2022: $5,715 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 B1.1 to the Group IFRS consolidated financial statements). The Group and its
subsidiaries are subject to local regulatory minimum capital requirements, as set out in note C9 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 to the Group IFRS consolidated financial statements. Additional
information on directors’ remuneration is given in the Directors’ remuneration report section of this Annual Report.
(b)
Information on transactions of the Directors with the Group is given in note D3 to the Group IFRS consolidated financial statements.
(c) The Company employs no staff.
(d) Fees payable to the Company’s auditor for the audit of the Company’s annual accounts were $0.1 million (2022: $0.1 million) and for other
services were $0.1 million (2022: $0.1 million).
(e)
In certain instances, the Company has guaranteed that its subsidiaries will meet their obligations when they fall due for payment.
10 Post balance sheet events
Dividends
The second interim dividend for the year ended 31 December 2023, which was approved by the Board of Directors after 31 December 2023, is
described in note B5 of the Group IFRS consolidated financial statements.
Share repurchase programme to neutralise 2023 employee and agent share scheme issuance
On 16 January 2024, the Company announced that the share repurchase programme in respect of 3,851,376 ordinary shares that it announced
on 5 January 2024 and commenced on 8 January has been completed. The purpose of the share repurchase programme was to offset dilution
from the vesting of awards under employee and agent share schemes during 2023. The Company has repurchased 3,851,376 ordinary shares in
aggregate (representing 0.14 per cent of the total number of ordinary shares in issue announced on 29 December 2023) at a volume weighted
average price of £8.2676 per ordinary share for a total consideration of approximately £31,841,826.52.
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Prudential plc Annual Report 2023
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.
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 155 to 160 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.
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Additional information
Independent Auditor's Report to the members of Prudential plc
Opinion
In our opinion:
– Prudential plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of
the state of the group’s and of the parent company’s affairs as at 31 December 2023 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 United Kingdom Generally Accepted Accounting
Practice; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Prudential plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31
December 2023 which comprise:
Group
Parent company
Consolidated statement of financial position as at 31 December
2023
Statement of financial position as at 31 December 2023
Consolidated income statement for the year then ended
Statement of changes in equity for the year then ended
Consolidated statement of comprehensive income for the year
then ended
Related notes 1 to 10 to the financial statements including material
accounting policy information.
Consolidated statement of changes in equity for the year then
ended
Consolidated statement of cash flows for the year then ended
Related notes A1 to D5 to the financial statements, including
material accounting policy information and the information
marked ‘audited’ in the Risk Review section of the annual report
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted
International Accounting Standards. The financial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. In evaluating the directors’ assessment of the Group and Parent Company’s ability to continue to adopt
the going concern basis of accounting we:
– confirmed our understanding of management’s going concern assessment process and obtained management’s assessment which covers the
period to 31 March 2025;
– assessed management’s evaluation of the liquidity and solvency position of the Group by reviewing base case and stressed liquidity and
solvency projections through the going concern period;
– evaluated management’s forecast analysis to understand the severity of the downside scenarios that would be required to occur to result in
the elimination of solvency and / or liquidity headroom and considered the actions available to management in such scenarios;
– performed enquiries of management and those charged with governance to identify risks or events that may impact the Group’s ability to
continue as a going concern.
– assessed the appropriateness of the going concern disclosures by comparing the disclosures with management’s assessment and considering
their compliance with the relevant reporting requirements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for the period of to 31 March
2025, being at least one year from when the financial statements are authorised for issue.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
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Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as a
going concern.
Overview of our audit approach
Audit scope
– We performed an audit of the complete financial information of 6 components and audit procedures on specific
balances for a further 4 components.
– The components where we performed full or specific audit procedures accounted for 87% of Total equity, 78% of
Profit before tax, 96% of Total assets and 99% of Best estimate insurance contract liabilities.
Key audit matters
– Actuarial assumptions
– IFRS 17 fulfilment cashflows modelling
– Revenue recognition in respect of release of contractual service margin
– Transition to IFRS 17
Materiality
– Overall Group materiality of $170m which represents c1% of total equity.
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
component within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We took into account
the size, risk profile, the organisation of the Group and effectiveness of its control environment, changes in the business environment and other
factors when assessing the level of work to be performed at each component.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, we performed an audit of the complete financial information of the principal life insurance
companies in Hong Kong, Singapore, Malaysia, Indonesia and Vietnam and the CPL life insurance joint venture in China, (“full scope
components”), which were selected based on their size or risk characteristics. For the life insurance companies in Taiwan and Thailand, the
Eastspring asset management business and certain of the holding and service entities in the UK and Hong Kong (“specific scope components”),
we performed audit procedures on specific accounts within the component that we considered had the potential for the greatest impact on the
significant accounts in the financial statements either because of the size of these accounts or their risk profile.
We took a centralised approach to auditing certain processes and controls, as well as the substantive testing of specific account balances related
to those processes. This included audits procedures over the Group’s shared IT infrastructure and elements of the Group’s IFRS 17 infrastructure
that are managed and maintained centrally.
The reporting components where we performed audit procedures accounted for 87% of the Group’s equity, 78% of the Group’s Profit before
tax, and 96% of the Group’s Total assets. The table below shows the contribution of the full scope and specific components to these metrics,
and to the Best estimate insurance contract liabilities and Release of CSM that are considered Key Audit Matters and described later in this
report.
Full scope
Specific scope (Note 3)
Full and specific scope coverage
Remaining components (Note 5)
Total reporting components
Total equity
63%
24%
87%
13%
100%
Profit
before tax
95%
(Note 1)
(17%)
(Note 2)
78%
22%
100%
2023
Total assets
83%
Best estimate insurance contract
liabilities (Note 4)
90%
Release of CSM
(Note 4)
86%
13%
96%
4%
100%
9%
99%
1%
100%
8%
94%
6%
100%
(1) The profit before tax coverage of 95% represents five full scope components having a positive contribution of 111% offset by one full scope component having a negative
contribution of 16%.
(2) The profit before tax coverage of (17%) includes central costs and interest on core structural borrowings which are audited by the primary team and have a contribution of
(26%) and the life insurance and asset management specific scope components that have a contribution of 9%.
(3) The audit scope of the specific scope components may not have included testing of all significant accounts of the component but will have contributed to the coverage of
significant accounts tested for the Group.
(4) The Group audit risks in respect of the calculation of the best estimate insurance contract liabilities and revenue recognition in respect of release of the contractual service
margin were subject to full audit procedures at each of the full scope components and the specific scope life insurance components.
(5) Of the remaining components, none are individually greater than 4% of the Group’s total equity. For these components, we performed other procedures at the Group level
which included: performing analytical reviews at the Group financial statement line item level, testing entity level controls and testing of consolidation journals and
intercompany eliminations to respond to any potential risks of material misstatement to the Group financial statements.
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Additional information
Independent Auditor's Report to the members of Prudential plc continued
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the
components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating under our
instruction. For the UK and Hong Kong holding and service companies and for the centralised processes and controls, audit procedures were
performed directly by the primary audit team. For the full scope and remaining specific scope components, audit procedures were performed by
component audit teams. Where the work was performed by component auditors, we determined the appropriate level of involvement to enable
us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
The primary team were responsible for the scoping and direction of the audit process and interacted regularly with the component teams
throughout the audit, including regular video conference meetings to provide updates on the Group, the audit approach and matters arising
from the component audits.
The primary audit team followed a programme of planned visits that was designed to ensure that the Senior Statutory Auditor and/or other
senior members of the primary team visited each component team and management of each component. During the current year’s audit cycle,
visits were undertaken by the primary audit team to all component locations listed above. These visits involved oversight of work undertaken at
those locations, discussing the audit approach with the component team and any issues arising from their work, reviewing relevant audit working
papers in key risk areas, meeting with local management, attending closing meetings and, for the largest four components, attending local Audit
Committees.
The combination of these oversight procedures, together with the additional procedures performed at Group level, gave us appropriate evidence
for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will impact Prudential plc. The Group has determined that the most significant
future impacts from climate change will be from strategy implementation, financial resilience, insurance and product risks, operational resilience,
data and model limitations and regulatory, legislative and disclosure expectations. These are explained in the required Task Force on Climate
Related Financial Disclosures and on page 64 in the principal risks and uncertainties. The Group has also explained its climate commitments on
page 100. All of these disclosures form part of the “Other information” rather than the audited financial statements. Our procedures on these
unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other
information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential
material impact on its financial statements.
The Group has explained in note C6 Risk and sensitivity analysis how climate change has been reflected in the financial statements, and in
particular that the application of three commonly used scenarios of plausible global responses to climate change do not indicate the need for
explicit allowance for climate change within the current valuation of assets and liabilities.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment
of the impact of climate risk, physical and transition, their climate commitments, the effects of material climate risks disclosed on pages 119-120
and their assessment that there is no need for explicit allowance for climate change within the valuation of assets and liabilities following the
requirements of UK-adopted International Accounting Standards. As part of this evaluation, we performed our own risk assessment, supported
by our climate change internal specialists, to determine any risks of material misstatement in the financial statements from climate change
which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated
disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key
audit matter.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included 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. These matters were addressed in the context of our audit of the financial statements as a whole, and in our
opinion thereon, and we do not provide a separate opinion on these matters.
For the risk areas identified below, we performed full and specific scope audit procedures for all in-scope components with life insurance
businesses as indicated in the scope section above.
Risk area
Actuarial assumptions
(Net best estimate insurance contract liabilities $116.3bn; 2022:
$104.0bn)
Our response to the risk
Using EY actuaries as part of our audit team, we performed the following
procedures:
– obtained an understanding and tested the design and operating
Refer to the Audit Committee Report (page 185); and Note A3.1
of the Consolidated Financial Statements (page 241)
effectiveness of key controls over management’s process for setting
economic and non-economic assumptions;
Insurance contract balances are sensitive to economic and non-
economic assumptions set by management. Judgment is
involved in setting economic assumptions, particularly discount
rates (including the illiquidity premium adjustment) and
investment return assumptions; and in determining non-
economic assumptions in respect of mortality, morbidity
(including medical claims costs), persistency and expenses.
There is a risk that assumptions do not reflect the economic
environment and the group’s demographic and operating
experience. Due to the element of judgment in setting non-
economic assumptions and the sensitivity of the insurance
contract balances to small changes in assumptions, there is an
inherent risk of management override in this area.
– for economic assumptions:
– tested discount rates and investment return assumptions by
reference to yield curves and the Group’s economic scenario
generators; and
– compared the information used to determine the illiquidity premium
to the characteristics of the liabilities, asset allocations, and yields-to-
maturity and allowance for credit risk on the reference portfolio of
assets;
– for non-economic assumptions:
– compared the key assumptions set by management with
management’s experience investigations, market trends and
regulatory developments around product pricing; and
– compared the expense assumptions to the Group’s historical, current
and projected expense levels and policy relating to the attribution of
expenses to insurance contracts; and
– performed procedures to test that the assumptions used in the models
were consistent with the approved basis.
Key observations communicated to the Audit Committee
We determined that the actuarial assumptions used by management fall within a reasonable range and are concluded to be reasonable.
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Additional information
Independent Auditor's Report to the members of Prudential plc continued
Risk area
IFRS 17 fulfilment cashflows modelling
(Net best estimate insurance contract liabilities $116.2bn; 2022:
$104.0bn)
Refer to the Audit Committee Report (page 185); and Note A3.1
of the Consolidated Financial Statements (page 241)
We consider the integrity and appropriateness of actuarial
cashflow models used to determine the IFRS 17 best estimate
liabilities (BEL) to be critical to the valuation of insurance contract
balances.
We consider the key risks to relate to:
a) model changes applied to the actuarial models;
b)
c)
completeness and accuracy of policyholder data; and
appropriateness of material out-of-model adjustments.
Our response to the risk
Using EY actuaries as part of our audit team, we performed the following
procedures:
– obtained an understanding of management’s processes and tested
the design and operating effectiveness of key controls over the
appropriateness of model changes, completeness and accuracy of
policyholder data and appropriateness of out-of-model adjustments;
– for a sample of new models and changes to existing models that were
tested at transition to IFRS 17 as described in the separate Key Audit
Matter below, compared management’s model validation results with
the terms and conditions of the related insurance contracts and the
Group’s IFRS 17 valuation policies. For a selection of these models,
performed an independent recalculation of the BEL for a sample of
insurance contract groups (ICGs) and compared the results to the
output of the cashflow model used by management;
– tested reconciliations of model point files to the policy administration
system and output of the actuarial models; and
– gained an understanding of the rationale for material out-of-model
adjustments, compared the calculation methodology to the Group’s
IFRS 17 valuation policies and tested the calculation of the
adjustments.
Key observations communicated to the Audit Committee
We determined that the actuarial models used are appropriate, that changes to the models were implemented as intended and that controls
over management’s processes for modelling IFRS 17 BEL using the actuarial models were operating effectively.
We determined that the recorded BEL, including liabilities calculated outside the actuarial models, is reasonable.
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Risk area
Revenue recognition in respect of the release of contractual
service margin (CSM)
Our response to the risk
Using EY actuaries as part of our audit team, we performed the following
procedures:
(Release of CSM $2.2bn; 2022: $2.2bn)
Refer to the Audit Committee Report (page 185); and Note A3.1
of the Consolidated Financial Statements (page 241)
Release of CSM is a key component of insurance revenue under
IFRS 17 and its calculation involves significant management
judgment.
The release of CSM is measured based on the level of service
provided, as measured by coverage units, and is based on the
opening CSM adjusted for movements in the period, including:
– Additions to the CSM during the period in respect of new
business
– obtained an understanding of management’s processes and tested
the design and operating effectiveness of controls over: (1) the
determination of coverage units; (2) the change management and
governance process over the CSM calculation model; (3) management
review controls over CSM movements during the period, including
release of CSM;
– tested the accuracy of the CSM calculation, including the
determination of coverage units and release of CSM, through
reperformance of the calculation for a sample of ICGs;
– compared the impact of assumption changes in the CSM movement
to related changes in the BEL calculation, including considering
whether they related to past or future service;
– tested the calculation of interest accretion for contracts measured
using GMM;
– Interest accretion for contracts measured using the General
– tested the change in the fair value of underlying items resulting from
Measurement Model (GMM)
– The change in fair value of underlying items for contracts
measured using the variable fee approach (VFA)
– Changes in fulfilment cashflows arising from changes in
operating assumptions, and for VFA, changes in economic
assumptions, that relate to future service
investment movements for contracts measured using VFA;
– for a sample of contracts issued during the year, we tested the
calculation of the initial CSM including, where relevant, the
identification of onerous contracts; and
– validated the CSM movement disclosures in the financial statements
to the output of the CSM calculation model.
Given the importance of the release of CSM to reported insurance
revenue, and the complexity of calculations and subjectivity of
assumptions involved in determining coverage units and
movements in the CSM, we consider release of CSM to give rise to
an inherent risk of fraud in revenue recognition.
Key observations communicated to the Audit Committee
We determined that the CSM calculation model is appropriate, that changes to the model were implemented as intended and that controls
over management’s processes over the CSM calculation model, coverage units determination and CSM movements operated effectively.
We also determined that CSM movements including release of CSM are reasonable and that CSM related disclosures in the consolidated
financial statements are complete and appropriate.
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Additional information
Independent Auditor's Report to the members of Prudential plc continued
Risk area
Transition to IFRS 17
The transition to IFRS 17, effective for annual reporting periods
beginning on or after 1 January 2023, has resulted in significant
changes to the reporting processes and to the consolidated
financial statements. This transition, which includes a number of
key judgements required substantial focus during our audit.
Key areas of focus in our audit of the IFRS 17 transition included:
b)
a) Accounting policies - The risk of management’s IFRS 17
accounting policies being inconsistent with the standard
and their methodology papers reflecting inappropriate
application of the policies.
Key judgement areas – The risk of inappropriate
management judgment in applying IFRS 17 for key aspects
of the standard including transition approach,
determination of contract boundaries, eligibility for VFA,
calculation of risk adjustment and determination of
coverage units for release of CSM purposes.
c) Models – The risk that models used to calculate BEL at
transition do not appropriately reflect the Group’s IFRS 17
accounting policies and decisions on the judgment areas
described above.
Transition approach - The risk that the calculation of the
CSM on transition does not appropriately reflect the
requirements of IFRS 17 where the full retrospective
approach (FRA) or modified retrospective approach (MRA)
was used, or IFRS 13 where the fair value approach (FVA)
was used.
Transition balance sheet and related disclosures – The risk
that the transition balance sheet disclosures are inaccurate,
incomplete or do not meet the requirements of IFRS 17.
d)
e)
Key observations communicated to the Audit Committee
Our response to the risk
Using EY actuaries as members of our team we performed the following
procedures to address the risk in relation to the transition to IFRS 17:
– obtained an understanding, evaluated the design, and tested the
operating effectiveness of the Group’s controls over the transition to
IFRS 17, including governance and approval of the IFRS 17 accounting
policies and their application by the Group;
– evaluated management’s accounting policies and methodology
papers in comparison with IFRS 17, particularly in the key judgment
areas set out in the ‘risk area’ column;
– for a sample of key products, we compared management’s policy
application decisions with underlying product features and supporting
documentation;
– for a sample of models used to calculate the BEL at transition, we
compared management’s model validation results with the terms and
conditions of the related insurance contracts and the Group’s IFRS 17
valuation policies. For a selection of models, performed an
independent recalculation of the BEL for a sample of ICGs and
compared the results to the output of the cashflow model used by
management;
– assessed management’s judgements in respect of the application of
transition approaches, including the impracticability of applying FRA to
certain cohorts;
– for a sample of ICGs, we tested the valuation of the CSM at transition
under each approach. For a sample of ICGs under MRA, we compared
the modifications applied to the requirements of the standard and for
a sample of ICGs under FVA, we compared the fair value assumptions
and calculations to the requirements of IFRS 13, Fair Value
Measurement; and
– tested the appropriateness, accuracy and completeness of
management’s disclosures in respect of IFRS 17 transition in the
consolidated financial statements.
Through the procedures performed, we have determined that management have appropriately implemented IFRS 17 within their financial
reporting and this is reflected within the consolidated financial statements.
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Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and
in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be $170 million, which is c1% of total equity. We believe that total equity is an appropriate measure
to set materiality as we believe that investors are mainly focused on the financial strength of the group, for which the most appropriate IFRS
metric is equity, and growth and profitability metrics based on the non-IFRS EEV reporting basis. We also consider that using total equity as a
measure to set materiality is appropriate as investors and analysts are yet to develop consistent IFRS17 based profit metrics on which to assess
company performance.
We determined materiality for the Parent Company to be $165 million, which is 1% of total equity.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% of our planning materiality, namely $85m. We have set performance materiality at this percentage due to
this being the first year we will issue a statutory auditor’s report for Prudential plc and due to the implementation of IFRS 17.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and
risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range
of performance materiality allocated to components was $19m to $38m.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $9m, which is set at 5% of
planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, comprising the Strategic Report, the Governance Report, the
Directors’ Remuneration Report, the EEV Basis Results and the Additional Financial Information, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report,
we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
– the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
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Additional information
Independent Auditor's Report to the members of Prudential plc continued
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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.
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the group and company’s compliance with the provisions of the UK Corporate Governance Code specified for our review
by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
– Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 195;
– Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is appropriate
set out on pages 72-73;
– Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities
set out on page 195;
– Directors’ statement on fair, balanced and understandable set out on page 329;
– Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 57;
– The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page
177; and;
– The section describing the work of the audit committee set out on pages 183-189.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 329, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for 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 the directors 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 for the audit of the financial statements
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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a 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 the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company
and management.
– We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most
significant are the relevant laws and regulations related to elements of company law, insurance regulation and tax legislation, and the
financial reporting framework. Our considerations of other laws and regulations that may have a material effect on the financial statements
included permissions and supervisory requirements of the listing authorities in the countries where the Company’s shares and debt are listed.
We also obtained an understanding of the laws and regulations in the territories in which the Group operates to consider if these would have a
material effect on the financial statements.
– We understood how the Company is complying with those frameworks by making enquiries of management and those responsible for legal
and compliance matters. We also reviewed correspondence between the Company and regulatory bodies; reviewed minutes of the Board and
its Committees; and gained an understanding of the Company’s approach to governance, demonstrated by the Board’s approval of the
Company’s governance framework.
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Prudential plc Annual Report 2023
– We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by assessing
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 and Internal Audit
– Inspecting papers provided to those charged with governance as to the policies and procedures to prevent and detect fraud, including the
Group’s “whistleblowing” policies and procedures along with the engagement with 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 management.
– Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures
involved inquires of the Group’s internal legal counsel, internal audit, certain senior management executives and focused testing on a sample
basis, including journal entry testing. We also performed inspection of key regulatory correspondence from the relevant regulatory authorities
as well as review of board and committee minutes.
– The fraud risk was considered to be higher within revenue recognition in respect of the release of CSM of due to the fact that the release of
CSM represents a significant portion of the Company’s insurance revenue. Our procedures in this area are outlined above under our Key Audit
Matters section under Revenue recognition in respect of the release of contractual service margin (CSM).
– We also considered there to be a higher fraud risk specifically related to non-economic assumptions, which affect the valuation of the
insurance contract liabilities. We considered management override risk to be higher in this area due to significant judgements and estimates
involved. Our procedures in this area included:
– Supported by our actuarial team, challenging management in relation to the selection of assumptions;
– Assessing 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,
demographic changes 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;
– Assessing significant accounting estimates for bias.
– The Group operates in the insurance industry which is a highly regulated environment. As such, the Senior Statutory Auditor considered the
experience and expertise of the Group audit engagement team and the component teams to ensure that the team had the appropriate
competence and capabilities, which included the use of specialists where appropriate.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
Following the recommendation of the Group Audit Committee, we were appointed by the Company after approval by shareholders at the
Annual General Meeting on 25 May 2023 to audit the financial statements for the year ending 31 December 2023 and subsequent financial
periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 1 year.
The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
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.
John Headley (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London, United Kingdom
19 March 2024
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Additional information
EEV
basis results
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Prudential plc Annual Report 2023
EEV basis results
EEV results highlights
Basis of preparation
Movement in Group EEV shareholders’ equity
Movement in Group free surplus
343
344
345
347
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
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
Analysis of new business profit and EEV for insurance business operations
Analysis of movement in net worth and value of in-force business for insurance business operations
Sensitivity of results for insurance business operations
Expected transfer of value of in-force business and required capital to free surplus for insurance business operations on a
discounted basis
EEV basis results for other (central) operations
Net core structural borrowings of shareholder-financed businesses
7 Methodology and accounting presentation
8
9
Assumptions
Insurance new business
10 Post balance sheet events
Statement of Directors’ responsibilities
Independent auditor’s report to Prudential plc
Description of EEV basis reporting
Page
343
344
345
347
349
350
351
353
353
354
354
358
360
360
361
362
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 year results using current year
foreign currency exchange rates, ie current year average rates for the income statement and current year closing rates for the balance sheet.
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 to the IFRS consolidated financial statements.
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EEV results highlights
New business profit note (i)
Annual premium equivalent (APE) note (i)
New business margin (APE) (%)
Present value of new business premiums (PVNBP)
2023
2022
AER
CER
$m
3,125
5,876
53%
$m
2,184
4,393
50%
28,737
22,406
% change
43%
34%
+3pp
28%
$m
2,149
4,287
50%
22,080
% change
45%
37%
+3pp
30%
Operating free surplus generated notes (i)(ii)
Operating free surplus generated from in-force insurance and asset
management business notes (i)(ii)
2,007
2,193
(8)%
2,173
(8)%
2,740
2,760
(1)%
2,725
1%
EEV operating profit notes (i)(iii)
EEV operating profit, net of non-controlling interests
Operating return on average EEV shareholders’ equity, net of non-
controlling interests (%)
4,546
4,526
3,952
3,923
15%
15%
3,901
3,872
17%
17%
10%
9%
Closing EEV shareholders’ equity, net of non-controlling interests
45,250
42,184
7%
42,038
Closing EEV shareholders’ equity, net of non-controlling interests per share
(in cents)
1,643¢
1,534¢
7%
1,529¢
8%
7%
Notes
(i) Results are presented before deducting the amounts attributable to non-controlling interests. This presentation is applied consistently throughout this document, unless
stated otherwise.
(ii) Operating free surplus generated is for long-term and asset management businesses only and is stated before restructuring and IFRS 17 implementation costs, centrally
incurred costs and eliminations.
(iii) 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 343 to 363 was approved by the Board of Directors on 19 March 2024 and signed on its
behalf by:
Shriti Vadera
Chair
Anil Wadhwani
Chief Executive Officer
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Governance Directors' remuneration report
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EEV basis results
Additional information
European Embedded Value (EEV) basis results
Basis of preparation
IFRS profit for insurance contracts largely reflects the level of services provided for a given period. Unearned future profits expected on those
same insurance contracts are contained in a separate liability called the contractual service margin. These future profits have been derived on a
risk neutral basis (including a liquidity premium), namely without allowing for the real world investment return that will be earned on the assets
held. By contrast, EEV reflects all future profits, with no equivalent liability to the contractual service margin, but values those profits on a risk
adjusted real world basis, namely allowing for the future investment returns that are expected to be earned by the assets held but uses a higher
discount rate that allows for the uncertainties in these cash flows. 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. 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 and do not revert to longer-term rates over
time. 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
2023, the TVOG is $(290) million (31 December 2022: $(151) million). The magnitude of the TVOG at 31 December 2023 would be
approximately equivalent to a 6 basis point (2022: 3 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 (31 December 2022: 51 per cent)
and 40 per cent of new business profit (31 December 2022: 43 per cent), the major sources of shareholder profits are underwriting profits or
fixed shareholder charges which have low market risk sensitivity. The proportion of health and protection business varies with interest rates as
well as the mix of business sold in the current period.
The construct of UK-style with-profits or similar participating funds in some business units, representing 27 per cent of the value of in-force (31
December 2022: 26 per cent) and 14 per cent of new business profit (31 December 2022: 18 per cent), 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, 78
per cent of the value of in-force (31 December 2022: 77 per cent) 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 13 per cent of the value of in-force (31 December 2022: 17 per cent) and 4 per cent of the value of new business profit (31
December 2022: 11 per cent) which limits the impact on the overall risk discount rate.
The remaining parts of the business, 9 per cent of the value of in-force business (31 December 2022: 6 per cent) and 42 per cent of the value of
new business (31 December 2022: 28 per cent), relate to other products not covered by the above. The high proportion of new business in the
current period reflects the higher proportion of savings product in Hong Kong as the border reopened.
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 2023, the total allowance for non-market risk is equivalent to a $(3.0) billion (31 December 2022: $(2.8)
billion) reduction, or around (7) per cent (31 December 2022: (7) per cent) of the embedded value.
344
Prudential plc Annual Report 2023
Movement in Group EEV shareholders’ equity
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
Profit (loss) for the year
Non-controlling interests share of (profit)
Profit (loss) for the year attributable to equity holders of the
Company
Equity items:
Foreign exchange movements on operations
Intra-group dividends and investment in operations note (i)
External dividends
New share capital subscribed
Other movements note (ii)
Net increase (decrease) in shareholders’ equity
Shareholders’ equity at beginning of year note (v)
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 note (v)
Asset management and other
Shareholders’ equity, excluding goodwill attributable to equity
holders
Goodwill attributable to equity holders
Shareholders’ equity at beginning of year note (v)
Note
1
2
Insurance
and asset
management
operations
2023 $m
Other
(central)
operations
3,125
1,779
4,904
254
5,158
–
–
–
–
–
5
–
(420)
2
2
6
5,158
(72)
5,086
(62)
(589)
–
–
(651)
4,435
(20)
(420)
(120)
(540)
(8)
–
(22)
(153)
(183)
(723)
–
Group
total
3,125
1,779
4,904
254
5,158
(420)
4,738
(192)
4,546
(70)
(589)
(22)
(153)
(834)
3,712
(20)
2022 $m
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)
(29)
4,415
(723)
3,692
(3,600)
1
(134)
(1,195)
(135)
(1,702)
–
–
118
2,696
40,262
42,958
1,702
(533)
4
(81)
370
1,922
2,292
–
(533)
4
37
3,066
42,184
45,250
2
5
41,528
–
41,528
663
2,292
2,955
42,191
2,292
44,483
767
–
767
42,958
2,292
45,250
2
5
38,857
–
38,857
643
1,922
2,565
39,500
1,922
41,422
762
–
762
40,262
1,922
42,184
–
(474)
(4)
(127)
(5,400)
47,584
42,184
38,857
2,565
41,422
762
42,184
44,875
1,931
46,806
778
47,584
Prudential plc Annual Report 2023
345
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Movement in Group EEV shareholders’ equity continued
EEV shareholders’ equity per share (in cents) note (iii)
At end of year:
Based on shareholders’ equity, net of goodwill attributable to equity holders
Based on shareholders’ equity at end of year
At beginning of year:
Based on shareholders’ equity, net of goodwill attributable to equity holders
Based on shareholders’ equity at beginning of year
EEV basis basic earnings per share note (iv)
Based on operating profit
Based on profit (loss) for the year
Insurance
and asset
management
operations
2023
Other
(central)
operations
1,532¢
1,560¢
1,437¢
1,464¢
Before non-
controlling
interests
$m
4,546
3,712
83¢
83¢
70¢
70¢
2023
After non-
controlling
interests
$m
4,526
3,692
2022
Group
total
1,507¢
1,534¢
1,696¢
1,725¢
2022
Basic
earnings
per share
cents
143.4¢
(131.6)¢
Group
total
1,615¢
1,643¢
1,507¢
1,534¢
Basic
earnings
per share
cents
165.1¢
134.7¢
Notes
(i)
(ii) Other movements include reserve movements in respect of valuation changes on the retained interest in Jackson prior to its disposal in 2023, share-based payments,
Intra-group dividends represent dividends that have been paid in the year. Investment in operations reflects movements in share capital.
treasury shares and intra-group transfers between operations that have no overall effect on the Group’s shareholders’ equity.
(iii) Based on the number of issued shares at 31 December 2023 of 2,754 million shares (31 December 2022: 2,750 million shares).
(iv) Based on weighted average number of issued shares of 2,741 million shares in 2023, which excludes those held in employee share trusts (2022: 2,736 million shares).
(v) Balance at the beginning of the year after the adoption of HK RBC.
346
Prudential plc Annual Report 2023
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 insurance 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 (Group Wide Supervision) reporting as set out in note 7.1(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 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. A reconciliation of EEV free surplus to the GWS shareholder capital surplus over group minimum capital requirements is also set out in
note I(i) of the Additional unaudited financial information.
Insurance
and asset
management
operations
Note
2023 $m
Other
(central)
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 (i)
Long-term business
Asset management
Operating free surplus generated from long-term and asset
2
management businesses
Other income (expenditure)
Restructuring and IFRS 17 implementation costs
Operating free surplus generated
Non-operating free surplus generated note (ii)
Free surplus generated for the year
Equity items:
Net cash flows paid to parent company note (iii)
External dividends
Foreign exchange movements on operations
New share capital subscribed
Other movements and timing differences
Net movement in free surplus before non-controlling interests and
before net subordinated debt redemption
Net subordinated debt redemption
6
Net movement in free surplus before non-controlling interests
Change in amounts attributable to non-controlling interests
Balance at beginning of year note (iv)
Balance at end of year
Representing:
Free surplus excluding distribution rights and other intangibles
Distribution rights and other intangibles
Balance at end of year
2,635
234
(383)
2,486
(733)
1,753
254
2,007
–
(72)
1,935
(188)
1,747
(1,611)
–
(25)
–
27
138
–
138
(9)
6,678
6,807
5,663
1,144
6,807
–
–
–
–
–
–
–
–
(420)
(120)
(540)
(35)
(575)
1,611
(533)
1
4
10
518
(421)
97
–
5,551
5,648
2,855
2,793
5,648
2022 $m
Group
total
note (i)
2,406
347
(227)
2,526
(567)
1,959
234
2,193
(542)
(277)
1,374
(1,924)
(550)
–
(474)
(316)
(4)
(127)
(1,471)
(1,699)
(3,170)
(10)
15,409
12,229
8,390
3,839
12,229
Group
total
2,635
234
(383)
2,486
(733)
1,753
254
2,007
(420)
(192)
1,395
(223)
1,172
–
(533)
(24)
4
37
656
(421)
235
(9)
12,229
12,455
8,518
3,937
12,455
Prudential plc Annual Report 2023
347
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Movement in Group free surplus continued
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 note (iv)
Asset management and other
Free surplus at beginning of year note (iv)
Insurance
and asset
management
operations
Note
2
5
2
5
6,144
663
6,807
6,035
643
6,678
2023 $m
2022 $m
Other
(central)
operations
–
5,648
5,648
Group
total
Group
total
6,144
6,311
12,455
6,035
6,194
12,229
–
5,551
5,551
6,035
6,194
7,320
8,089
12,229
15,409
Notes
(i) Free surplus invested in new business primarily represents acquisition costs and amounts set aside for required capital.
(ii) Non-operating free surplus generated for other (central) operations represents the post-tax IFRS basis short-term fluctuations in investment returns, 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 and gain or
loss on corporate transactions for other entities.
(iii) 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, other non-cash items, and foreign exchange.
(iv) Balance at the beginning of the year after the adoption of HK RBC.
348
Prudential plc Annual Report 2023
Notes on the EEV basis results
1 Analysis of new business profit and EEV for insurance 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
142
167
484
699
3,125
New
business
profit
(NBP)
$m
387
384
125
159
499
630
2,184
New
business
profit
(NBP)
$m
368
384
122
154
512
609
2,149
2023
Present
value of new
business
premiums
(PVNBP)
Annual
premium
equivalent
(APE)
$m
534
$m
2,020
New
business
profit
(NBP)
$m
222
1,411
1,966
10,444
277
384
787
1,928
5,876
1,136
1,977
5,354
7,630
28,561
New
business
margin
(APE)
%
42%
72%
51%
43%
61%
36%
53%
New
business
margin
(PVNBP)
%
11%
14%
13%
8%
9%
9%
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
3,038
17,702
1,509
3,709
7,896
7,674
11%
41,528
2022 (AER)
Present
value of new
business
premiums
(PVNBP)
$m
3,521
3,295
1,040
1,879
6,091
6,580
22,406
2022 (CER)
Present
value of new
business
premiums
(PVNBP)
$m
3,346
3,296
1,014
1,813
6,254
6,357
22,080
New business
margin
(APE)
New business
margin
(PVNBP)
%
44%
74%
51%
44%
65%
39%
50%
%
11%
12%
12%
8%
8%
10%
10%
New business
margin
(APE)
New business
margin
(PVNBP)
%
44%
73%
51%
44%
65%
39%
50%
%
11%
12%
12%
8%
8%
10%
10%
Annual
premium
equivalent
(APE)
$m
884
522
247
359
770
1,611
4,393
Annual
premium
equivalent
(APE)
$m
840
523
240
347
791
1,546
4,287
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
3,259
16,576
1,833
3,695
6,806
6,688
38,857
Closing EEV
shareholders’
equity,
excluding
goodwill
$m
3,195
16,568
1,853
3,542
6,921
6,616
38,695
$m
2,184
(35)
796
(37)
217
3,125
Note
The movement in new business profit from long-term operations is analysed as follows:
2022 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
2023 new business profit
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.
Prudential plc Annual Report 2023
349
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes on the EEV basis results continued
2 Analysis of movement in net worth and value of in-force business for insurance business
operations
2023 $m
2022 $m
Free
surplus
Required
capital
Net
worth
Value of
in-force
business
Embedded
value
Embedded
value
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(ii)
Changes in operating assumptions, experience variances and
other items note(iii)
Operating profit before restructuring and IFRS 17
implementation costs
Restructuring and IFRS 17 implementation costs
Operating profit
Non-operating result note (iv)
Profit (loss) for the year
Non-controlling interests share of (profit) loss
Profit (loss) for the year attributable to equity holders of
the Company
Foreign exchange movements
Intra-group dividends and investment in operations
Other movements note (v)
Balance at end of year
6,035
(733)
2,635
234
note (i)
5,556 11,591 27,266 38,857
3,125
–
2,122
3,276
(2,374)
1,652
(151)
2,374
470
582
(261)
236
note (i)
44,875
2,184
-
2,559
(383)
(70)
(453)
110
(343)
(201)
1,753
(55)
1,698
(188)
1,510
(2)
1,508
(21)
(1,502)
124
6,144
487
–
487
(36)
451
(1)
2,240
(55)
2,185
(224)
1,961
(3)
2,664
–
2,664
(427)
2,237
(10)
4,904
(55)
4,849
(651)
4,198
(13)
450
(22)
–
–
4,185
(136)
(1,502)
124
5,984 12,128 29,400 41,528
1,958
(43)
(1,502)
124
2,227
(93)
–
–
4,542
(116)
4,426
(8,469)
(4,043)
(22)
(4,065)
(1,146)
(999)
192
38,857
(i) 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 2023 $m
30,436
(746)
(290)
29,400
6,144
5,984
12,128
41,528
31 Dec 2022 $m
28,126
(709)
(151)
27,266
6,035
5,556
11,591
38,857
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 7.1(d). At 31 December 2023, the TVOG is $(290) million, with the substantial majority arising in Hong Kong.
(ii) Expected return on existing business
The expected return on existing business comprises the expected unwind of discounting effects on the opening value of in-force business and
required capital (after allowing for updates to economic and operating assumptions) and the expected return on existing free surplus, as
described in note 7.2(c). The movement in this amount compared to the prior year from long-term operations is analysed as follows:
2022 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
2023 expected return on existing business
$m
2,559
(28)
(513)
104
2,122
(iii) Changes in operating assumptions, experience variances and other items
Overall, the total impact of operating assumption changes, experience variances and other items in 2023 was $(343) million (2022: $(201)
million), comprising changes in operating assumptions of $85 million in 2023 (2022: $32 million) and experience variances and other items of
$(428) million (2022: $(233) million).
350
Prudential plc Annual Report 2023
(iv) 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
2023 $m
(62)
(589)
–
(651)
2022 $m
(6,893)
(1,571)
(5)
(8,469)
Notes
(i) Short-term fluctuations in investment returns of $(62) million mainly reflect the impact of lower than expected equity returns in some regions broadly offset by higher than
expected bond gains, following the decrease in interest rates in many markets during the year.
(ii) The charge of $(589) million for the effect of changes in economic assumptions primarily arises from decreases in interest rates and credit spreads in some markets,
resulting in lower fund earned rate that impact future cashflows, partially offset by the positive effect of lower risk discount rates. The effects and impacts vary between
businesses and products.
(v) Other reserve movements
Other movements include reserve movements in respect of 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 insurance business operations
(a) Sensitivity analysis – economic assumptions
The tables below show the sensitivity of the new business profit and the embedded value for insurance 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 group prescribed capital requirements (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 at the end of that period, for example, new business profit and expected return on existing business are calculated
with reference to end of period economic assumptions.
New business profit from insurance 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
2023 $m
3,125
2022 $m
2,184
(175)
(88)
35
139
(917)
(529)
220
134
(97)
160
(551)
(309)
Prudential plc Annual Report 2023
351
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes on the EEV basis results continued
Embedded value of insurance business
Embedded value note
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
31 Dec 2023 $m 31 Dec 2022 $m
38,857
41,528
(4,154)
(2,172)
1,133
1,856
(1,863)
(8,015)
(4,516)
117
(3,988)
(2,067)
1,058
1,884
(1,840)
(7,371)
(4,155)
117
Note
Embedded value includes Africa operations following the change in the Group's operating segments in 2023. In the context of the Group, Africa’s results are not materially
impacted by the above sensitivities.
New business sensitivities vary with changes in business mix and APE sales volumes. In particular, the directional movements in the new business
profit interest rate sensitivities from 31 December 2022 to 31 December 2023 reflect the significantly higher new business levels in 2023 along
with a greater proportion of sales to Hong Kong.
For a 1 per cent increase in assumed interest rates, the $(2,172) million negative effect comprises a $(4,516) million negative impact of
increasing the risk discount rate by 1 per cent, partially offset by a $2,344 million benefit from assuming 1 per cent higher investment returns.
Similarly, for a 2 per cent increase in assumed interest rates the $(4,154) million negative effect comprises a $(8,015) million negative impact of
increasing the risk discount rates by 2 per cent, partially offset by a $3,861 million benefit from higher assumed investment returns. Finally, for a
0.5 per cent decrease in assumed interest rates, there would be a $1,133 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 would likely be increased within the risk discount rate if interest rates increased by 1 per cent, leading to a
reduction of $(1,969) million (compared with the $(2,172) million impact shown above). However, if interest rates actually decreased by 0.5 per
cent, it would lead to a $1,043 million increase (compared with the $1,133 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 insurance business
New business profit
Maintenance expenses – 10% decrease
Lapse rates – 10% decrease
Mortality and morbidity – 5% decrease
Embedded value of insurance business
Embedded value
Maintenance expenses – 10% decrease
Lapse rates – 10% decrease
Mortality and morbidity – 5% decrease
352
Prudential plc Annual Report 2023
2023 $m
3,125
2022 $m
2,184
61
212
114
48
134
99
31 Dec 2023 $m 31 Dec 2022 $m
38,857
41,528
440
1,806
1,514
411
1,533
1,300
4 Expected transfer of value of in-force business and required capital to free surplus for long-
term business operations on a discounted basis
The table below shows how the value of in-force business (VIF) and the associated required capital for long-term business operations are
projected as emerging into free surplus over future years. Cash flows are projected on a deterministic basis and are discounted at the appropriate
risk discount rate. The modelled cash flows use the same methodology underpinning the Group’s EEV reporting and so are subject to the same
assumptions and sensitivities. The projected emergence of VIF and required capital into free surplus in 2023 will be the starting point for
expected free surplus generation next year, after updating for operating and economic assumption changes. See note I(v) of the additional
financial information for further detail.
2023 ($m)
(%)
2022 ($m)
(%)
Total
expected
Emergence
35,223
100%
32,648
100%
Expected period of conversion of future post-tax distributable earnings and required capital flows to free surplus at 31 Dec
1-5 years
9,897
28%
9,764
30%
6-10 years
6,744
19%
11-15 years
4,884
14%
16-20 years
3,749
11%
21-40 years
7,590
21%
6,038
19%
4,360
13%
3,424
10%
6,910
21%
40+ years
2,359
7%
2,152
7%
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 2023 $m
5,984
31 Dec 2022 $m
5,556
29,400
(161)
35,223
27,266
(174)
32,648
*'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 basis results for other (central) operations
EEV results for other income and expenditure represents the post-tax IFRS results for other (central) operations (before restructuring and IFRS 17
implementation costs). It mainly includes interest costs on core structural borrowings and corporate expenditure for head office functions that
are not recharged/allocated to the insurance and asset management business.
Certain costs incurred within the head office functions 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 insurance operations allow for amounts expected to be
recharged by the head office functions on a recurring basis. 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.
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 generated by any non-insurance entities within the Group in providing those services
(ie the EEV for long-term insurance operations includes the projected future profit or loss from asset management and service companies that
support the Group’s covered insurance businesses). Following the implementation of IFRS 17, a similar adjustment is made to eliminate the
intra-group profit within the results of central operations.
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.
Shareholders’ equity for other operations can be compared across metrics as shown in the table below.
IFRS shareholders’ equity
Mark-to-market value adjustment on central borrowings note 6
EEV shareholders’ equity
Debt instruments treated as capital resources
Free surplus of other (central) operations
2023 $m
2,018
274
2,292
3,356
5,648
2022 $m
1,495
427
1,922
3,629
5,551
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Financial statements
EEV basis results
Additional information
Notes on the EEV basis results continued
6 Net core structural borrowings of shareholder-financed businesses
Holding company cash and short-term investments note (i)
Central borrowings:
Subordinated debt
Senior debt
Total central borrowings
31 Dec 2023 $m
31 Dec 2022 $m
Mark-to
-market
value
adjustment
note (iii)
EEV
basis at
market
value
–
(3,516)
(205)
(69)
(274)
2,092
1,567
3,659
IFRS
basis
note (ii)
(3,516)
2,297
1,636
3,933
Mark-to
-market
value
adjustment
note (iii)
–
EEV
basis at
market
value
(3,057)
(306)
(121)
(427)
1,980
1,854
3,834
IFRS
basis
note (ii)
(3,057)
2,286
1,975
4,261
Net core structural borrowings of shareholder-financed
businesses
417
(274)
143
1,204
(427)
777
Notes
(i) Holding company includes centrally managed Group holding companies and service companies.
(ii) As recorded in note C5.1 of the IFRS consolidated financial statements.
(iii) The movement in the value of core structural borrowings includes 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 (charge) included in the income statement
Mark-to-market value adjustment at end of year
7 Methodology and accounting presentation
2023 $m
(427)
153
(274)
2022 $m
438
(865)
(427)
7.1 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 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 8(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 8(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 17. 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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Prudential plc Annual Report 2023
(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 the Chinese Mainland, 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
8(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, 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
the Chinese Mainland 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 2023. 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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Financial statements
EEV basis results
Additional information
Notes on the EEV basis results 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 long-term business EEV includes the projected future profit 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 and do not
revert to longer-term rates over time.
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. 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. The level and application of these
allowances are reviewed and updated based on assessment of the Group’s exposure and experience in the markets.
At 31 December 2023, the total allowance for non-diversifiable non-market risk is equivalent to a $(3.0) billion, or (7) per cent, reduction to the
embedded value of insurance 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 statements.
(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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Prudential plc Annual Report 2023
7.2 Accounting presentation
(a) Analysis of post-tax profit
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 7.1(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.
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Financial statements
EEV basis results
Additional information
Notes on the EEV basis results continued
8 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 projected future cash flows. The risk-free rates of return are largely based on local government bond yields and are
assumed to remain constant and do not revert to longer-term rates over time. 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 and, where relevant, allowing for market volatility.
As described in note 7.1(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.
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(i), are not included in the risk discount rates.
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)
Risk discount rate %
New business
In-force business
10-year government bond yield
%
Equity return
(geometric) %
31 Dec
31 Dec
31 Dec
31 Dec
31 Dec
31 Dec
31 Dec
31 Dec
2023
7.1
4.7
9.0
5.6
12.3
4.6
3.3
10.0
3.7
5.6
n/a
2022
7.4
4.8
10.0
5.8
14.5
5.0
3.5
10.0
6.9
6.9
n/a
2023
7.1
5.5
9.9
6.2
12.3
4.8
4.2
10.0
4.1
n/a
5.9
2022
7.4
5.5
10.6
6.5
14.5
5.2
4.0
10.0
6.7
n/a
6.4
2023
2.6
3.9
6.7
3.8
6.1
2.7
1.3
2.8
2.3
3.8
3.6
2022
2.9
3.9
7.3
4.1
7.3
3.1
1.3
2.7
5.0
4.2
4.0
2023
6.6
7.4
11.0
7.3
10.3
6.2
5.3
7.0
6.6
7.2
7.1
2022
6.9
7.4
11.5
7.6
11.5
6.6
5.3
7.0
9.3
7.5
7.6
Notes
(i) For Hong Kong, the assumptions shown are for US dollar denominated business. For other businesses, the assumptions shown are for local currency denominated business.
(ii) 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
allowances for market risk (including as a result of changes in asset mix), and, if applicable, non-diversifiable non-market risk, and changes in product mix.
(iii) Expected long-term inflation assumptions range from 1.5 per cent to 5.5 per cent for both years 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 7.1(d).
– The stochastic cost of guarantees is primarily of significance for the Hong Kong, Vietnam, Taiwan, Singapore and Malaysia 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 17 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.
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Prudential plc Annual Report 2023
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, it is Prudential’s policy not to
take credit for future cost reduction programmes until the actions to achieve the savings have been delivered. Expense overruns are reported
where these are expected to be short-lived, including businesses that are growing rapidly or are sub-scale.
Expenses comprise costs borne directly and costs recharged/allocated from the Group head office functions in London and Hong Kong 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/allocated by the head office functions.
Corporate expenditure, which is included in other income and expenditure, comprises expenditure of the Group head office functions in London
and Hong Kong that is not recharged/allocated to the long-term insurance or asset management operations, primarily for corporate related
activities that are charged as incurred, together with restructuring and IFRS 17 implementation costs incurred across the Group.
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 7.1(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
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Notes on the EEV basis results continued
9 Insurance new business
CPL note (i)
Hong Kong
Indonesia
Malaysia
Singapore
Growth markets:
Africa
Cambodia
India note (ii)
Laos
Myanmar
Philippines
Taiwan
Thailand
Vietnam
Single premiums
Regular premiums
Annual premium equivalents (APE)
2023 $m
487
235
230
93
989
8
1
2022 $m
1,254
842
250
99
2,628
9
–
270
273
–
–
56
132
143
19
–
–
61
157
150
99
2023 $m
485
1,942
254
375
688
157
18
206
–
6
170
882
232
195
2022 $m
759
438
222
350
507
148
18
196
–
3
176
486
220
288
2023 $m
534
1,966
277
384
787
158
18
233
–
6
175
895
246
197
2022 $m
884
522
247
359
770
149
18
223
–
3
182
503
235
298
Present value of new business
premiums (PVNBP)
2023 $m
2,020
10,444
1,136
1,977
5,354
2022 $m
3,521
3,295
1,040
1,879
6,091
326
74
308
69
1,145
1,148
2
19
612
3,308
999
1,321
1
6
615
1,835
932
1,666
Total
2,663
5,822
5,610
3,811
5,876
4,393
28,737
22,406
Notes
(i) New business in CPL is included at Prudential’s 50 per cent interest in the joint venture.
(ii) New business in India is included at Prudential's 22 per cent interest in the associate.
(iii) 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 revenue recorded in the IFRS consolidated income statement.
10 Post balance sheet events
Dividends
The second interim dividend for the year ended 31 December 2023, which was approved by the Board of Directors after 31 December 2023, is
described in note B5 of the Group IFRS consolidated financial statements.
Share repurchase programme to neutralise 2023 employee and agent share scheme issuance
On 16 January 2024, the Company announced that the share repurchase programme in respect of 3,851,376 ordinary shares that it announced
on 5 January 2024 and commenced on 8 January has been completed. The purpose of the share repurchase programme was to offset dilution
from the vesting of awards under employee and agent share schemes during 2023. The Company has repurchased 3,851,376 ordinary shares in
aggregate (representing 0.14 per cent of the total number of ordinary shares in issue at the end of the year (as disclosed in note C8 of the Group
IFRS consolidated financial statements)) at a volume weighted average price of £8.2676 per ordinary share for a total consideration of
approximately £32 million.
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Prudential plc Annual Report 2023
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.
Prudential plc Annual Report 2023
361
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Independent auditor’s report to Prudential plc on the European Embedded
Value (EEV) basis supplementary information
Opinion
We have audited the European Embedded Value (‘EEV’) Basis Results of Prudential plc (‘the Company’ and, together with its subsidiaries, ‘the
Group’) for the year ended 31 December 2023, which comprise the EEV results highlights, the movement in Group EEV shareholders’ equity, the
movement in Group free surplus and the related notes, including the basis of preparation on page 344. The EEV Basis Results should be read in
conjunction with the Group financial statements.
In our opinion, the EEV Basis Results of the Group for the year ended 31 December 2023 are 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 basis of preparation note on page 344.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) including ‘ISA (UK) 800 (Revised) Special
Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks’. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the EEV Basis Results section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to our audit of the EEV Basis Results in the UK, including the FRC’s
Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter - basis of preparation and restriction on use
We draw attention to the special purpose basis of preparation on page 344. The EEV Basis Results are prepared to provide additional information
to users of the Group financial statements. As a result, the EEV Basis Results may not be suitable for another purpose. Our opinion is not modified
in respect of this matter.
Our report is intended solely for the Company, in accordance with the terms of our engagement letter dated 25 May 2023. 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.
Conclusions relating to going concern
In auditing the EEV Basis Results, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
EEV Basis Results is appropriate.
In evaluating the Directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting we:
– confirmed our understanding of management’s going concern assessment process and obtained management’s assessment which covers the
period to 31 March 2025;
– assessed management’s evaluation of the liquidity and solvency position of the Group by reviewing base case and stressed liquidity and
solvency projections through the going concern period;
– evaluated management’s forecast analysis to understand the severity of the downside scenarios that would be required to occur to result in
the elimination of solvency and / or liquidity headroom and considered the actions available to management in such scenarios ;
– performed enquiries of management and those charged with governance to identify risks or events that may impact the Group’s ability to
continue as a going concern.
– assessed the appropriateness of the going concern disclosures by comparing the disclosures with management’s assessment and considering
their compliance with the relevant reporting requirements.
Based on the work we have performed, we have not identified any material uncertainties relating 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 period to 31 March 2025, being at least one
year from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a
going concern.
Other information
The other information comprises the information included in the Annual Report, other than the EEV Basis Results and our auditor’s report
thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the EEV Basis Results does not cover the other information and, except to the extent otherwise explicitly stated in this report, we
do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the EEV
Basis Results or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the EEV Basis
Results themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
362
Prudential plc Annual Report 2023
Responsibilities of directors
Management is responsible for the preparation of the EEV Basis Results in accordance with the EEV Principles using the methodology and
assumptions set out in the special purpose basis of preparation on page 344, and for such internal control as management determines is
necessary to enable the preparation of the EEV Basis Results that are free from material misstatement, whether due to fraud or error.
In preparing the EEV Basis Results, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the EEV Basis Results
Our objectives are to obtain reasonable assurance about whether the EEV Basis Results as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
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 the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these EEV Basis Results.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the
primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
– We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most
significant are the relevant laws and regulations related to elements of company law, insurance regulation and tax legislation, and the
financial reporting framework. Our considerations of other laws and regulations that may have a material effect on the EEV Basis Results
included permissions and supervisory requirements of the listing authorities in the countries where the Company’s shares and debt are listed.
– We understood how the Company is complying with those frameworks by making enquiries of management and those responsible for legal
and compliance matters. We also reviewed correspondence between the Company and regulatory bodies; reviewed minutes of the Board and
its Committees; and gained an understanding of the Company’s approach to governance, demonstrated by the Board’s approval of the
Company’s governance framework.
– We assessed the susceptibility of the Company’s EEV Basis Results to material misstatement, including how fraud might occur by assessing
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 and inspecting papers provided to those charge with governance as to the
policies and procedures to prevent and detect fraud, including the Group’s “whistleblowing” policies and procedures along with the
engagement with 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 management.
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.
– 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 fraud prevention 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.
– Assessing significant accounting estimates for bias.
A further description of our responsibilities for the audit of the EEV Basis Results is located on the Financial Reporting Council’s website at https://
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
John Headley
for and on behalf of Ernst & Young LLP
London
19 March 2024
Prudential plc Annual Report 2023
363
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Additional
information
364
Prudential plc Annual Report 2023
Index to the additional unaudited financial
information
Glossary
Shareholder information
How to contact us
366
393
399
402
Prudential plc Annual Report 2023
365
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Index to the additional financial information*
I
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Additional financial information
Group capital position
Analysis of total segment 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
Share Schemes
(vii)
Selected historical financial information of Prudential
II
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Calculation of alternative performance measures
Reconciliation of adjusted operating profit to profit before tax
Adjusted shareholders’ equity
Return on IFRS shareholders’ equity
Calculation of IFRS shareholders’ equity per share
Calculation of Eastspring cost/income ratio
Insurance premiums
Reconciliation between EEV new business profit and IFRS new business CSM
Reconciliation between EEV shareholders' equity and IFRS shareholders’ equity
Calculation of return on embedded value
*
The additional financial information is not covered by the EY independent audit opinions.
Page
366
367
371
372
373
374
376
386
390
390
390
390
390
391
391
391
392
392
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Prudential plc Annual Report 2023
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.
Estimated GWS capital position
As at 31 December 2023, the estimated shareholder GWS capital surplus over the GPCR is $16.1 billion (31 December 2022: $15.6 billion),
representing a coverage ratio of 295 per cent (31 December 2022: 307 per cent) and the estimated total GWS capital surplus over the GPCR is
$19.0 billion (31 December 2022: $18.1 billion), representing a coverage ratio of 197 per cent (31 December 2022: 202 per cent). The estimated
Group Tier 1 capital resources are $18.3 billion with headroom over the GMCR of $12.4 billion (31 December 2022: $12.1 billion), representing a
coverage ratio of 313 per cent (31 December 2022: 328 per cent).
Group capital resources ($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 (%)
24.3
17.1
4.8
8.2
16.1
295 %
31 Dec 2023
Add
policyholder
Shareholder
31 Dec 2022 note (1)
Total
Shareholder
Add
policyholder
note (3)
14.3
note (4)
38.6
1.2
18.3
1.1
5.9
11.4
19.6
23.2
15.9
4.4
7.6
note (3)
12.6
1.5
0.9
10.1
Total
note (4)
35.8
17.4
5.3
17.7
Change
in total
note (5)
2.8
0.9
0.6
1.9
0.9
2.9
19.0
15.6
2.5
18.1
197 %
307 %
202 %
(5) %
12.4
313 %
12.1
0.3
328 %
(15) %
Notes
(1) 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.
(2) 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 2023, total Tier 1 capital resources of $18.3 billion comprises: $24.3 billion of total shareholder capital resources; less $(3.6) billion of Prudential plc issued sub-
ordinated and senior Tier 2 debt capital; less $(3.6) billion of local regulatory tiering classifications which are classified as GWS Tier 2 capital resources primarily in Singapore
and the Chinese Mainland; plus $1.2 billion of Tier 1 capital resources in policyholder funds.
(3) This allows for any associated diversification impacts between the shareholder and policyholder positions reflected in the total company results where relevant.
(4) The total company GWS coverage ratio over GPCR presented above represents the eligible group capital resources coverage ratio as set out in the GWS framework while the
total company GWS tier 1 coverage ratio over GMCR represents the tier 1 group capital coverage ratio.
(5) Refer to section on Material changes in GMCR, GPCR, tier 1 group capital and eligible group capital resources below.
GWS sensitivity analysis
The estimated sensitivity of the GWS capital position (based on the GPCR) to changes in market conditions as at 31 December 2023 and 31
December 2022 are shown below, for both the shareholder and the total capital position.
Impact of market sensitivities
Base position
Impact of:
10% increase in equity markets
20% fall in equity markets
50 basis points reduction in interest rates
100 basis points increase in interest rates
100 basis points increase in credit spreads
Shareholder
31 Dec 2023
31 Dec 2022
Surplus ($bn)
16.1
Coverage ratio
295 %
Surplus ($bn)
15.6
Coverage ratio
307%
0.4
(2.5)
0.7
(2.1)
(1.0)
(3) %
(17) %
11 %
(25) %
(12) %
0.3
(1.9)
0.4
(1.1)
(0.8)
(3)%
(14)%
4%
(15)%
(9)%
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
Impact of market sensitivities
Base position
Impact of:
10% increase in equity markets
20% fall in equity markets
50 basis points reduction in interest rates
100 basis points increase in interest rates
100 basis points increase in credit spreads
Total
31 Dec 2023
31 Dec 2022
Surplus ($bn)
19.0
Coverage ratio
197 %
Surplus ($bn)
18.1
Coverage ratio
202%
1.2
(4.0)
0.4
(1.4)
(1.4)
1%
(13)%
3%
(8)%
(7)%
1.2
(3.6)
0.0
(0.6)
(1.2)
1%
(12)%
0%
(3)%
(6)%
The sensitivity results above reflect the impact on the Group’s insurance business operations as at the valuation dates. 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.
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 2023, the Group’s Free Surplus stock (excluding distribution rights and other intangibles) was $8.5 billion, compared to the GWS
shareholder surplus of $16.1 billion and a reconciliation is shown below.
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 new
business and capabilities, particularly in the areas of Customer, Distribution, Health and Technology, 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.
Recognising our conviction in the Group’s revised strategy, when determining the annual dividend we look through the investments in new
business and investments in capabilities and continue to expect the 2024 annual dividend to grow in the range of 7 to 9 per cent. 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
2023. 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.
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Prudential plc Annual Report 2023
Analysis of movement in total regulatory GWS capital surplus (over GPCR)
A summary of the movement in the 31 December 2022 regulatory GWS capital surplus (over GPCR) of $18.1 billion to $19.0 billion at
31 December 2023 is set out in the table below.
Total GWS surplus at 1 Jan (over GPCR)
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)
2023 $bn
18.1
2.1
(0.7)
1.4
(0.5)
(0.2)
(0.5)
0.2
0.3
0.4
0.9
19.0
Further detail on the movement in free surplus of $0.2 billion is included in the Movement in Group free surplus section of the Group’s EEV basis
results.
Other movements in GWS shareholder surplus not included in free surplus are driven by the differences described in the reconciliation shown later
in this section. This includes movements in distribution rights and other intangibles (which are expensed on day one under the GWS
requirements) and movements in the restriction applied to free surplus to better reflect shareholder resources that are available for distribution.
Material changes in GMCR, GPCR, tier 1 group capital and eligible group capital resources
Detail on the material changes in GPCR, GMCR, eligible group capital resources and tier 1 group capital are provided below.
– Total eligible capital resources has increased by $2.8 billion to $38.6 billion at 31 December 2023 (31 December 2022: $35.8 billion). This
includes a $0.9 billion increase in tier 1 group capital to $18.3 billion (31 December 2022: $17.4 billion). The increase in total eligible capital
resources and tier 1 group capital is primarily driven by positive operating capital generation over the year, partially offset by external
dividends paid, debt redeemed and market movements over the year.
– Total regulatory GPCR has increased by $1.9 billion to $19.6 billion at 31 December 2023 (31 December 2022: $17.7 billion) and the total
regulatory GMCR has increased by $0.6 billion to $5.9 billion at 31 December 2023 (31 December 2022: $5.3 billion). The increase in GPCR
and GMCR is primarily driven by new business sold over the year, partially offset by the release of capital as the policies mature or are
surrendered and market movements 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 (1)
Restrictions applied in free surplus for HK RBC note (2)
Restrictions applied in free surplus for Singapore RBC note(3)
Add GWS policyholder surplus contribution
Total regulatory GWS capital surplus (over GPCR)
31 Dec 2023 $bn
Capital resources
Required capital
14.5
1.7
6.1
2.0
14.3
38.6
6.0
1.4
0.7
0.1
11.4
19.6
Surplus
8.5
0.3
5.4
1.9
2.9
19.0
*
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
(1) 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.
(2) 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.
(3) 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).
Prudential plc Annual Report 2023
369
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
Reconciliation of Group IFRS shareholders’ equity to Group total GWS capital resources
Group IFRS shareholders’ equity
Remove goodwill and intangibles recognised on the IFRS consolidated statement of financial position
Add debt treated as capital under GWS note (1)
Asset valuation differences note (2)
Remove IFRS 17 contractual service margin (CSM) (including joint ventures and associates) note (3)
Liability valuation (including insurance contracts) differences excluding IFRS 17 CSM note (4)
Differences in associated net deferred tax liabilities note (5)
Other note (6)
Group total GWS capital resources
31 Dec 2023 $bn
17.8
(4.7)
3.6
(0.8)
21.0
0.5
0.9
0.3
38.6
Notes
(1) 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.
(2) 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.
(3) The IFRS 17 contractual service margin (CSM) represents a discounted stock of unearned profit which is released over time as services are provided. On a GWS basis the
level of future profits will be recognised within the capital resources to the extent permitted by the local solvency reserving basis. Any restrictions applied by the local
solvency bases (such as zeroization of future profits) is captured in the liability valuation differences line.
(4) Liability valuation differences (excluding the CSM) reflect differences in the basis of valuing liabilities between IFRS and local statutory valuation rules. This includes the
negative impact of moving from the IFRS 17 best estimate reserving basis to a more prudent local solvency reserving basis (including any restrictions in the recognition of
future profits) offset by the fact that certain local solvency regimes capture some reserves within the required capital instead of the capital resources.
(5) Differences in associated net deferred tax liabilities mainly results from the tax impact of changes in the valuation of assets and liabilities.
(6) Other differences mainly reflect the inclusion of subordinated debt in Chinese Mainland 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 interest 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;
– 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 2023 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.
370
Prudential plc Annual Report 2023
I(ii) Analysis of total segment profit by business unit
The table below presents the 2022 results on both AER and CER bases to eliminate the impact of exchange translation.
2023 $m
2022 $m
2023 vs 2022 %
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
Insurance business
Eastspring
Total segment profit
(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)
368
1,013
221
305
584
146
115
120
357
86
(78)
3,237
280
3,517
AER
271
1,162
205
340
570
131
116
116
402
53
(90)
3,276
260
3,536
CER
258
1,162
200
329
585
129
111
117
395
48
(85)
3,249
255
3,504
AER
36 %
(13) %
8 %
(10) %
2 %
11 %
(1) %
3 %
(11) %
62 %
13 %
(1) %
8 %
(1) %
CER
43 %
(13) %
11 %
(7) %
0 %
13 %
4 %
3 %
(10) %
79 %
8 %
0 %
10 %
0 %
2023 $m
700
(2)
698
(372)
(46)
280
2022 AER $m
660
1
661
(360)
(41)
260
$225.9bn
$229.4bn
31bps
53%
29bps
55%
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). As stated in section (b) below, during the year the Group has reclassified funds under management and associated income between Retail and Institutional.
2023
2022
Retail
$m
353
319
Margin
Institutional
Margin
bps
67
64
$m
347
341
bps
20
19
Total
$m
700
660
Margin
bps
31
29
(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. A reconciliation is provided in note II(v) of this additional information.
(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.
(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.
During the year the Group has reclassified its funds under management, and associated income, between retail and institutional categories.
Amounts are now classified as retail or institutional based on whether the owner of the holding, where known, is a retail or institutional investor.
Under the previous basis amounts were classified based on the nature of the investment vehicle in which the amounts were invested. The revised
classification presents the funds held by each client type on a more consistent basis, which aligns with typical differences in fee rate basis for
each client type. Comparatives have been restated to be on a comparable basis.
Prudential plc Annual Report 2023
371
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
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 2023
$bn
31 Dec 2022 AER
$bn
50.8
31.6
11.8
94.2
1.9
42.7
28.7
10.5
81.9
9.3
96.1
91.2
110.0
31.0
141.0
237.1
104.1
26.1
130.2
221.4
2023 $m
81,949
91,160
2022 AER $m
93,956
81,942
(85,983)
(84,397)
6,997
(9,552)
94,123
81,949
*
The analysis of movements above includes $11,775 million relating to Asia Money Market Funds at 31 December 2023 (31 December 2022: $10,495 million).
Investment flows for 2023 include Eastspring Money Market Funds gross inflows of $66,340 million (2022: $61,063 million) and net inflows of $1,123 million (2022:
net outflows of $(869) 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:
31 Dec 2023
Funds under management
Funds under advice
Total
2023 $m
9,235
(7,604)
293
1,924
2022 AER $m
11,529
(765)
(1,529)
9,235
31 Dec 2022* AER
Total
Equity
Fixed income
Multi-asset
Alternatives
Money Market
Funds
Total funds
$bn
50.7
40.6
99.9
2.0
12.9
206.1
% of total
25%
20%
48%
1%
6%
100%
$bn
1.4
3.3
26.2
0.1
–
31.0
% of total
5%
11%
84%
0%
0%
100%
$bn
52.1
43.9
126.1
2.1
12.9
237.1
% of total
22 %
19 %
53 %
1 %
5 %
100 %
$bn
45.5
47.9
114.1
2.2
11.7
221.4
% of total
21%
22%
51%
1%
5%
100 %
*
The presentation of asset classes has been expanded to better reflect the Eastspring management view and how products are sold and marketed to clients. Multi-asset
funds include a mix of debt, equity and other investments. Comparatives have been presented on a comparable basis.
I(iii) 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.
372
Prudential plc Annual Report 2023
Internal funds
Eastspring external funds, including M&G plc (as analysed in note I(ii) above)
Total Group funds under management note
Note
Total Group funds under management comprise:
Total investments held on the balance sheet*
31 Dec 2023 $bn
183.3
96.1
279.4
31 Dec 2022 AER $bn
166.3
91.2
257.5
31 Dec 2023 $bn
31 Dec 2022 AER $bn
149.9
162.9
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
96.1
20.4
279.4
91.2
16.4
257.5
*
'Includes 'Investment in joint ventures and associates accounted for using the equity method' as shown on the balance sheet.
I(iv) 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 (1)
Net interest paid note (2)
Corporate expenditure note (3)
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
Other corporate activities note (4)
Total other movements
Net movement in holding company cash flow
Cash and short-term investments at 1 Jan note (5)
Foreign exchange movements
Inclusion of amounts at 31 Dec from additional centrally managed entities note (6)
Cash and short-term investments at 31 Dec
2023 $m
1,611
(51)
(271)
(182)
(504)
1,107
(533)
574
(393)
226
(167)
407
3,057
52
–
3,516
2022 AER $m
1,304
(204)
(232)
(220)
(656)
648
(474)
174
(1,729)
248
(1,481)
(1,307)
3,572
(113)
905
3,057
Notes
(1) Net cash remitted by business units comprise dividends and other transfers, net of capital injections, that are reflective of earnings and capital generation. The remittances
are net of cash advanced to CPL of $176 million in anticipation of a future capital injection as described in Note D3 of the IFRS financial statements.
(2) Following the update to the definition of holding company cash and short term investments at 31 December 2022, higher levels of interest and investment income were
earned in 2023, largely on the balances brought into the updated definition. This together with lower interest payments led to a reduction in net interest paid in 2023 as
compared with the prior year.
(3) Including IFRS 17 implementation and restructuring costs paid in the year.
(4) Cash inflows for other corporate activities were $226 million (2022: $248 million) comprising largely of proceeds received from the sale of our remaining shares in Jackson
Financial Inc., as well as dividend receipts.
(5) Proceeds from the Group's commercial paper programme are not included in the holding company cash and short-term investments balance, as shown in the reconciliation
below.
(6) The definition of holding company cash and short-term investments was 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.
The table below shows the reconciliation of the Cash and cash equivalents unallocated to a segment (Central operations)held on the IFRS
balance sheet (as shown in note C1) and Cash and short-term investments at 31 December as shown above:
Cash and cash equivalents of Central operations held on balance sheet
Less: amounts from commercial paper
Add: Deposits with credit institutions of Central operations held on balance sheet
Cash and short-term investments
31 Dec 2023 $m
1,590
(699)
2,625
3,516
31 Dec 2022 $m
1,809
(501)
1,749
3,057
Prudential plc Annual Report 2023
373
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
I(v) 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 2023 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 2023, the table also presents the future free surplus expected to be generated from the investment made in new business during
2023 over the same 40-year period.
Expected period of emergence
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044-2048
2049-2053
2054-2058
2059-2063
31 Dec 2023 $m
Expected generation from
all in-force business*
Expected generation from new business
written in 2023*
Undiscounted
2,360
2,325
2,314
2,283
2,171
2,122
2,068
2,057
2,072
2,023
1,997
1,995
1,972
1,980
1,964
1,965
1,979
1,990
1,985
1,983
9,852
9,900
9,740
9,738
Discounted
2,274
2,118
1,989
1,849
1,667
1,538
1,422
1,335
1,272
1,177
1,091
1,032
969
924
868
826
788
751
710
674
2,837
2,131
1,526
1,096
Undiscounted
294
195
207
199
209
209
199
204
198
214
242
243
224
231
224
201
201
202
200
207
968
944
983
899
Discounted
283
173
175
161
159
151
139
133
124
127
136
129
115
112
103
91
86
83
79
77
319
243
205
141
Total free surplus expected to emerge in the next 40 years
80,835
32,864
8,097
3,544
*
The analysis excludes amounts incorporated into VIF and required capital at 31 December 2023 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 2063.
The expected free surplus generation from new business written in 2023 can be reconciled to the new business profit as follows:
Undiscounted expected free surplus generation for years 2024 to 2063
Less: discount effect
Discounted expected free surplus generation for years 2024 to 2063
Discounted expected free surplus generation for years after 2063
Discounted expected free surplus generation from new business written in 2023
Free surplus investment in new business
Other items*
New business profit
2023 $m
8,097
(4,553)
3,544
278
3,822
(733)
36
3,125
* 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.
374
Prudential plc Annual Report 2023
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 2024 to 2063
Discounted expected generation from all in-force business for years after 2063
Discounted expected generation from all in-force business at 31 Dec 2023
Free surplus of long-term business operations at 31 Dec 2023
Other items*
EEV for long-term business operations
* Other items represent the impact of the TVOG and other non-modelled items.
31 Dec 2023 $m
32,864
2,359
35,223
6,144
161
41,528
The undiscounted expected free surplus generation from all in-force business at 31 December 2023 can be reconciled to the amount that was
expected to be generated at 31 December 2022 as follows:
2023
$m
2024
$m
2025
$m
2026
$m
2027
$m
2028
$m
Other
$m
Total
$m
2022 expected free surplus generation for
years 2023 to 2062
2,658
2,327
2,201
2,155
2,087
2,010 66,078 79,516
Less: Amounts expected to be realised in the
current year
(2,658)
–
–
–
–
–
–
(2,658)
Add: Expected free surplus to be generated
in year 2063 (excluding 2023 new
business)
Foreign exchange differences
New business
Operating movements
Non-operating and other movements
2023 expected free surplus generation for
years 2024 to 2063
–
–
–
–
–
–
(9)
294
(70)
(182)
–
(9)
195
6
(68)
–
(9)
207
25
(64)
–
(9)
199
85
(79)
–
(8)
1,957
1,957
(245)
(289)
209
6,993
8,097
38
487
571
(78)
(5,888)
(6,359)
2,360
2,325
2,314
2,283
2,171 69,382 80,835
At 31 December 2023, the total free surplus expected to be generated over the next five years (2024 to 2028 inclusive) for long-term business
operations, using the same assumptions and methodology as those underpinning 2023 embedded value reporting, was $11.5 billion
(31 December 2022: $11.4 billion).
At 31 December 2023, the total free surplus expected to be generated on an undiscounted basis over the next 40 years for long-term business
operations is $80.8 billion, $1.3 billion higher than the $79.5 billion expected at the end of 2022. The increase is driven by new business offset by
the effect of adverse market and other movements.
Actual underlying free surplus generated in 2023 from long-term business in force at the end of 2022, before restructuring and IFRS 17
implementation costs, was $2.5 billion, after allowing for $(0.4) billion of changes in operating assumptions and experience variances. This
compares with the expected 2023 realisation at the end of 2022 of $2.7 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
2023 free surplus expected to be generated at 31 December 2022
2023 $m
2,635
234
(383)
2,486
2,658
Prudential plc Annual Report 2023
375
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
I(vi) 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.
The number of Prudential plc shares which may be issued to satisfy awards or options granted in any ten-year rolling period under (i) 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, and (ii) the Agency LTIP and the ISSOSNE to participants who qualify as “service providers” (as defined under
the Hong Kong Listing Rules) may not exceed 2 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 2023 and 31 December 2023, the shareholder dilution under (i) all share schemes adopted by Prudential plc and its subsidiaries
represented 0.77 per cent and 0.52 per cent of the issued ordinary share capital of Prudential plc respectively (the 'Scheme Mandate'), and (ii)
the Agency LTIP and the ISSOSNE represented 0.01 per cent and 0.06 per cent of the issued ordinary share capital of Prudential plc respectively
(the 'Service Provider Sublimit'). Accordingly, the number of Prudential plc shares available for grant in respect of all options and awards under (i)
the Scheme Mandate at the beginning and the end of the year ended 31 December 2023 are 195,037,628 and 206,246,097 respectively and
(ii) the Service Provider Sublimit at the beginning and the end of the year ended 31 December 2023 are 39,455,724 and 39,807,882
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 2023 divided by the weighted average number of Prudential plc shares in issue for the
year ended 31 December 2023 is 0.50 per cent.
The weighted average share price of Prudential plc for the period ended 31 December 2023 was £10.46 (31 December 2022: £10.33).
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.
Waivers from strict compliance with the Hong Kong Listing Rules
In relation to the PLTIP 2023, a waiver from strict compliance with Rule 17.03B(1) of the Hong Kong Listing Rules was granted by the Hong Kong
Stock Exchange on 11 April 2023 such that the total number of shares of Prudential plc that may be issued under the share plans of Prudential
plc in any 10-year rolling period will not exceed 10 per cent of shares in issue from time to time. The PLTIP 2023 must also continue to be in
compliance with the UK Listing Rules and other applicable UK laws.
In relation to the Agency LTIP, a waiver from strict compliance with Rule 17.03B(1) and Rule 17.03F of the Hong Kong Listing Rules was granted
by the Hong Kong Stock Exchange on 11 April 2023 such that (i) the total number of shares of Prudential plc may be issued under the share
plans of Prudential plc in any 10-year rolling period will not exceed 10 per cent of shares in issue from time to time; and (ii) the vesting period for
awards may be less than 12 months in the following circumstances: (a) where a participant ceases to be an insurance agent for the reasons set
out under the Agency LTIP (ie redundancy, injury or disability, retirement or the participant’s employing entity or business ceasing to be part of
the Prudential group), the Remuneration Committee may allow an award to vest in part or in full before the original vesting date, taking into
consideration the performance conditions which have been satisfied, the number of months between date of grant and the cessation date and
other factors including personal conduct of the participant; (b) if a participant ceases to be an insurance agent before the original vesting date
and the Remuneration Committee decides that the award will not lapse, the award must vest in part or in full on the date of cessation if the
participant is a US taxpayer; (c) if a participant ceases to be an insurance agent before the vesting date for any other reason, including where an
agent resigns due to personal circumstances such as family relocation or a career change (other than death or summary termination of
employment), the Remuneration Committee may allow an award to vest in part or in full; (d) the Remuneration Committee may allow an award
to vest in part or in full if there is a change of control of Prudential plc or if a compromise or arrangement has been sanctioned by the Court
under the Companies Act 2006; (e) the Remuneration Committee may allow an award to vest in part or in full if Prudential plc is or is expected to
be affected by any demerger, dividend in specie, super dividend or other transaction (such as entry into a joint venture with a third party and
such transaction negatively impacts share price of Prudential plc, or a secondary capital raising, other than the transactions prescribed under the
Rule 10.1 of the Agency LTIP); and (f) for a participant who is a US taxpayer, if a delay due to vesting conditions, dealing restrictions or an
investigation into malus circumstances would postpone the issue of transfer of shares of Prudential plc or cash equivalent beyond a prescribed
period within the meaning of the US Tax Code, the Remuneration Committee may cause a share award to vest in part or in full. The Agency LTIP
must also be in compliance with the UK Listing Rules and other applicable UK laws.
In relation to the UK SAYE, a waiver from strict compliance with Rule 17.03B(1) and Rule 17.03E of the Hong Kong Listing Rules was granted by
the Hong Kong Stock Exchange on 11 April 2023 such that (i) the total number of shares of Prudential plc that may be issued under the share
plans of Prudential plc in any 10-year rolling period will not exceed 10 per cent of shares in issue from time to time; (ii) the option exercise price
will not be less than 80 per cent of the closing middle-market quotation of a share of Prudential plc as derived from the Daily Official List of the
London Stock Exchange (or, if the Board so determines, the closing price as derived from the daily quotations sheet of the Hong Kong Stock
Exchange) for the business day before the date of invitation or, if the Board so determines, the arithmetic average of the middle-market
quotations or closing prices of a share of Prudential plc on the London Stock Exchange or the Hong Kong Stock Exchange for the three business
376
Prudential plc Annual Report 2023
days before the date of invitation; and (iii) the UK SAYE rules do not provide for the cancellation of options granted, in line with UK tax legislation
and HMRC guidance. The UK SAYE must also continue to be in compliance with the UK Listing Rules and other applicable UK laws.
In relation to the ISSOSNE, a waiver from strict compliance with Rule 17.03B(1), Rule 17.03E and Rule 17.03F of the Hong Kong Listing Rules was
granted by the Hong Kong Stock Exchange on 11 April 2023 such that (i) the total number of shares of Prudential plc that may be issued under
the share plans of Prudential plc in any 10-year rolling period will not exceed 10 per cent of shares in issue from time to time; (ii) the option
exercise price will not be less than 80 per cent of the arithmetic average of the middle-market quotation of a share of Prudential plc as derived
from the Daily Official List of the London Stock Exchange (or, if the Board so determines, the daily quotations sheet of the Hong Kong Stock
Exchange) for three consecutive dealing days determined by the Board which fall within the period of 30 days immediately preceding the day on
which the relevant option is granted; and (iii) the vesting period for options may be less than 12 months in the following circumstances: (a) where
the Board has discretion to decide, in accordance with the Board’s internal guidelines (which set out the eligibility criteria for the nomination of
agents to participate in the ISSOSNE, such as exclusivity of services, average number of hours working for Prudential plc and profits generated) as
applicable from time to time, whether an option shall be exercisable if the option holder ceases to be an eligible participant. The Board may
consider exercising the aforementioned discretion in compassionate circumstances, such as where a participant has left the group due to a
terminal illness diagnosis; (b) options can be exercisable within 6 months after a change in control of Prudential plc; (c) options can be
exercisable at any time during the period from when a compromise or arrangement is sanctioned by the Court under the Companies Act 2006
until when such compromise or arrangement becomes effective; and (d) options can be exercisable within 2 months after a resolution has been
passed for the voluntary winding up of Prudential plc. The ISSOSNE must also continue to be in compliance with the UK Listing Rules and other
applicable UK laws.
Share schemes funded by new shares of Prudential
The arrangements in operation which may be funded by new issue shares of Prudential plc are the Prudential Long Term Incentive Plan
2023 (PLTIP 2023), the Prudential Agency Long-Term Incentive Plan (Agency LTIP), the Prudential Sharesave Plan 2023 (Sharesave 2023)
and the Prudential International Savings-Related Share Option Scheme for Non-Employees (ISSOSNE).
The Prudential Long Term Incentive Plan (PLTIP 2013) and the Prudential 2013 Savings-Related Share Option Scheme (UK SAYE 2013) have
been discontinued for use since their expiry on 16 May 2023, but any awards and options that remain outstanding under them may be funded
by new issue shares of Prudential plc.
Remaining life of the
scheme
The plan is due to
expire on 25 May
2033.
Exercise period and basis of
determining exercise price
Awards structured as
nil or nominal-cost
options will normally
be exercisable from
vesting (or, where an
award is subject to a
holding period,
release) until the
tenth anniversary of
the grant date.
Vesting period
Normally three years
from grant.
Awards may vest
earlier (i) if they are
recruitment awards,
(ii) upon a takeover of
Prudential plc or
similar corporate
event or (iii) if a
participant leaves
with good-leaver
status or passes
away.
Share scheme and
participants
PLTIP 2023
Any employee of a
Group Company may
be selected to be
granted an award.
Total number of shares
available for issue under the
scheme
The total number of
securities available
for issue under the
scheme is 1,650,790
which represents
0.060 per cent of the
issued share capital
at 31 December
2023.
Maximum entitlement of
each participant
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 (save in
the case of any
recruitment awards
that compensate for
entitlements forfeited
on leaving a former
employer).
In addition, no
awards will 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.
Prudential plc Annual Report 2023
377
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
Share scheme and
participants
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.
Total number of shares
available for issue under the
scheme
The total number of
securities available
for issue under the
scheme is 236,524
which represents
0.009 per cent of the
issued share capital
at 31 December
2023.
Sharesave 2023
Any employee can
participate who meets
the definition of
eligible employee, as
defined by the
relevant UK tax
legislation.
The total number of
securities available
for issue under the
scheme is 107,968
which represents
0.004 per cent of the
issued share capital
at 31 December
2023.
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 1,563,247
which represents
0.057 per cent of the
issued share capital
at 31 December
2023.
Remaining life of the
scheme
The plan is due to
expire on 25 May
2033.
Exercise period and basis of
determining exercise price
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.
The plan is due to
expire on 25 May
2033.
The plan is due to
expire on 25 May
2033.
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 option exercise
price is described in
the ‘Waivers from
strict compliance with
the Hong Kong Listing
Rules’ section above.
Six months from
vesting, though
options may be
exercisable for a
period of 12 months
if a participant passes
away.
The option exercise
price is described in
the ‘Waivers from
strict compliance with
the Hong Kong Listing
Rules’ section above .
Maximum entitlement of
each participant
No awards will 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.
Options will not be
granted if it would
result in the
participant’s monthly
contributions to the
Sharesave 2023
exceeding £500.
In addition, no
options will 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.
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.
Vesting period
Normally three years
from grant.
Awards may vest
earlier (i) if a
participant passes
away, or (ii) in the
circumstances
described in the
‘Waivers from strict
compliance with the
Hong Kong Listing
Rules’ section above.
Normally three or five
years (depending on
the length of the
relevant savings
contract selected by
the participant).
Options may be
exercised early (i)
upon a takeover of
Prudential plc or (ii) if
a participant leaves
with good leaver
status or passes
away.
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.
Options may vest
early (i) if a
participant passes
away or (ii) in the
circumstances
described in the
‘Waivers from strict
compliance with the
Hong Kong Listing
Rules’ section above.
378
Prudential plc Annual Report 2023
Share scheme and
participants
PLTIP 2013
Total number of shares
available for issue under the
scheme
n/a
Any employee of a
Group Company may
be selected to be
granted an award.
UK SAYE 2013
n/a
Any employee can
participate who meets
the definition of
eligible employee, as
defined by the
relevant UK tax
legislation.
Maximum entitlement of
each participant
No awards have been
granted under the
plan since its expiry
on 16 May 2023.
Before the expiry of
the plan, awards were
not granted over
Prudential plc shares
with a market value in
excess of 550% of
salary.
No options have been
granted under the
plan since its expiry
on 16 May 2023.
Before the expiry of
the plan, no options
were granted if it
would have resulted
in the participant’s
monthly contributions
to the UK SAYE 2013
exceeding the
statutory maximum
at the relevant time.
Vesting period
Normally three years
from grant.
Exercise period and basis of
determining exercise price
n/a
Remaining life of the
scheme
The plan expired on
16 May 2023.
The plan expired on
16 May 2023.
Awards may vest
earlier (i) upon a
takeover or winding
up of Prudential plc or
(ii) if a participant
leaves with good-
leaver status or
passes away.
Normally three or five
years (depending on
the length of the
relevant savings
contract selected by
the participant).
Options may be
exercised vest early (i)
upon a takeover or
voluntary winding up
of Prudential plc, or
(ii) if a participant
leaves with good
leaver status or
passes away.
Six months from
vesting, though
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 have been
determined by the
Board and will have
been no less than 80
per cent of the share
price of Prudential plc
for 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 2013.
Prudential plc Annual Report 2023
379
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
The following analysis shows the movement in each share plan for the year ended 31 December 2023:
(a) PLTIP
Vesting period
Date of
grant
Vesting
date
Fair value at grant
date
PLTIP
TSR
PLTIP
IFRS
£
£
Number of shares under awards
Beginning
of year
Transferred
Granted
Vested
Cancelled
Lapsed/
forfeited
End of
year
Closing
share
price2
Weighted
average
share
price3
£
11.69
11.53
10.93
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Weighted
average
share price3
£
11.70
11.46
11.75
11.75
11.75
n/a
n/a
n/a
n/a
n/a
09 Apr 20
09 Apr 23
4.71
10.47
1,252,696
15 May 20
15 May 23
5.37
10.5
695,342
24 Jun 20
07 Apr 21
21 Apr 21
24 Jun 23
4.89
11.78
6,677
07 Apr 24
8.37
15.67
332,580
21 Apr 24
7.39
14.93
113,145
17 May 21
17 May 24
7.52
14.96
613,847
05 Apr 22
05 Apr 25
2.28
11.34
781,078
27 May 22
27 May 25
1.90
10.30
270,126
22 May 23
22 May 26
5.28
11.83
30 May 23
30 May 26
4.85
11.25
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
199,991
438,098
(643,741)
(316,759)
(3,039)
–
–
–
–
–
–
–
–
–
–
–
–
–
(608,955)
(378,583)
(3,638)
–
–
–
(28,204)
304,376
(7,711)
105,434
(190,095)
423,752
(94,770)
(428,960)
257,348
–
–
–
(148,344)
121,782
(199,991)
–
11.78
–
438,098
11.25
£
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total PLTIP
Representing:
Directors1, 2
Other
employees
Total PLTIP
4,065,491
638,089
(963,539)
(94,770)
(1,994,481)
1,650,790
1,662,084
(1,662,084)
438,098
438,098
2,403,407
1,662,084
199,991
(963,539)
(94,770)
(1,994,481)
1,212,692
4,065,491
–
638,089
(963,539)
(94,770)
(1,994,481)
1,650,790
Notes
(1) Disclosure of movement in share awards for each individual Director is set out in the Directors Remuneration Report.
(2) PLTIP awards have performance conditions attached, and these are set out in the Directors Remuneration Report.
(3) Closing share price is quoted before grant date.
(4) Weighted average price is calculated based on closing share price before vesting date.
(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
Lapsed/
Forfeited
End of
year
Closing
share price2
04 Apr 17
02 Apr 19
09 Apr 20
22 Sep 20
16 Dec 20
07 Apr 21
18 Jun 21
07 Oct 21
27 May 22
04 Apr 24
02 Apr 22
09 Apr 23
09 Apr 23
09 Apr 23
07 Apr 24
07 Apr 24
07 Apr 24
05 Apr 25
30 May 23
Total Agency LTIP1
12 Apr 26
£
13.17
14.73
9.45
9.85
12.57
14.58
13.70
14.75
10.03
10.83
43,281
1,121
–
–
(42,199)
(1,121)
(1,082)
–
2,545,488
– (2,454,250)
(91,238)
(30,955)
(10,673)
–
–
–
–
–
–
–
30,955
10,673
120,969
14,600
5,227
41,725
–
–
–
–
–
–
–
66,449
–
–
–
–
–
(11,860)
109,109
(586)
–
–
–
14,014
5,227
41,725
66,449
2,814,039
66,449 (2,539,198)
(104,766)
236,524
£
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.25
Notes
(1) All of the participants of this scheme are service providers.
(2) Closing share price is quoted before grant date.
(3) Weighted average price is calculated based on closing share price before vesting date.
380
Prudential plc Annual Report 2023
(c) UK SAYE
Date of grant
Exercise
price
£
Exercise period
Beginning
End
Fair
value
at grant
date
£
Number of shares under options
Beginning
of year
Transferred
Granted
Exercised
Cancelled
Lapsed/
Forfeited
End of
year
21 Sep 17
14.55 01 Dec 22
31 May 23
3.71
2,061
29 Nov 19
11.18 01 Jan 23
30 Jun 23
3.28
28,190
29 Nov 19
11.18 01 Jan 25
30 Jun 25
3.69
5,366
22 Sep 20
9.64 01 Dec 23
31 May 24
1.90
37,046
22 Sep 20
9.64 01 Dec 25
31 May 26
2.04
08 Dec 21
12.02 01 Jan 25
30 Jun 25
3.03
08 Dec 21
12.02 01 Jan 27
30 Jun 27
3.65
3,174
6,700
49
–
–
–
–
–
–
–
7.37 01 Dec 25
31 May 26
3.08
47,346
7.37 01 Dec 27
31 May 28
3.63
12,372
7.75 01 Dec 26
31 May 27
2.62
7.75 01 Dec 28
31 May 29
3.21
–
–
19,428
12,065
Closing
share
price 2
Weighted
average
share
price3
£
n/a
£
n/a
–
–
–
(2,061)
–
–
(10,697)
(4,347) (12,180)
966
n/a 11.18
–
–
–
–
–
–
–
–
(2,683)
–
2,683
n/a
n/a
(1,015)
(2,800) (10,089) 23,142
n/a
9.64
–
–
–
3,174
n/a
n/a
(553)
(1,047)
(2,739)
2,361
n/a 12.02
–
(1,355)
–
–
–
–
–
–
(478)
–
–
49
n/a
n/a
(13,785) 32,206
n/a
7.37
–
–
–
12,372
n/a
18,950
8.89
12,065
8.89
n/a
n/a
n/a
142,304
–
31,493
(13,620) (11,355) (40,854) 107,968
3,298
(3,298)
–
–
–
–
139,006
3,298
(13,620) (11,355) (40,854) 107,968
142,304
–
(13,620) (11,355) (40,854) 107,968
23 Sep 22
23 Sep 22
01 Oct 23
01 Oct 23
Total SAYE
Representing:
Directors1
Other
employees
Total SAYE
Notes
(1) Disclosure of movement in share awards for each individual Director is set out in the Directors Remuneration Report.
(2) Closing share price is quoted before grant date.
(3) Weighted average price is calculated based on closing share price before vesting date.
(d) ISSOSNE
Date of grant
Exercise
price
£
Exercise period
Beginning
End
Fair
value
at grant
date
£
Number of shares under options
Beginning
of year
Granted
Exercised
Cancelled
Lapsed/
Forfeited
End of
year
21 Sep 16
9.56 01 Dec 21
31 May 22
3.31
324
21 Sep 17
12.59 01 Dec 22
31 May 23
3.71
102,320
18 Sep 18
12.07 01 Dec 23
31 May 24
3.61
130,364
–
–
–
(25,679)
(76,641)
–
(69,928)
–
–
(324)
9.62 01 Dec 22
31 May 23
2.85
157,918
–
(143,709)
(14,209)
Closing
share
price2
£
n/a
Weighted
average
share
price3
£
n/a
n/a
12.18
–
–
60,436
n/a
n/a
–
n/a
9.31
–
–
–
9.62 01 Dec 24
31 May 25
2.98
216,075
9.64 01 Dec 23
31 May 24
1.90
198,742
9.64 01 Dec 25
31 May 26
2.04
150,481
02 Nov 21
11.89 01 Dec 24
31 May 25
3.91
185,545
02 Nov 21
11.89
01 Dec 26
31 May 27
4.46
174,681
7.37
01 Dec 25
31 May 26
3.13
220,733
7.37
01 Dec 27
31 May 28
3.59
178,805
7.75
7.75
01 Dec 26
31 May 27
01 Dec 28
31 May 29
2.62
3.21
–
–
210,911
133,456
–
–
–
–
–
–
–
–
–
(5,477)
(1,289) 209,309
(60,639)
(520) 137,583
n/a
n/a
n/a
n/a
(237)
(2,894)
(1,608) 145,742
n/a
9.33
–
–
–
–
–
–
(13,872)
(620) 171,053
(8,322)
(252) 166,107
(6,294) (17,700) 196,739
(2,035) (17,046) 159,724
n/a
n/a
n/a
n/a
(16,203)
(11,610)
–
–
194,708
121,846
8.89
8.89
n/a
n/a
n/a
n/a
n/a
n/a
02 Oct 19
02 Oct 19
22 Sep 20
22 Sep 20
21 Sep 22
21 Sep 22
01 Oct 23
01 Oct 23
Total
ISSOSNE1
1,715,988
344,367
(169,625) (288,124) (39,359) 1,563,247
Notes
(1) All of the participants of this scheme are service providers.
(2) Closing share price is quoted before grant date.
(3) Weighted average price is calculated based on closing share price before vesting date.
Prudential plc Annual Report 2023
381
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information 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 Global Long Term Incentive Plan (PG
LTIP) (formerly known as 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 2023 (Deferred AIP), the Prudential Group Deferred Bonus Plan (GDBP) and the Prudential
Deferred Bonus Plan (PDBP) (formerly known as the Prudential Corporation Asia Deferred Bonus Plan (PCA DBP)). The Prudential Deferred
Annual Incentive Plan (DAIP) has been discontinued for use since its expiry on 30 September 2023, but any awards that remain outstanding
under it may be funded by existing shares of Prudential plc.
Exercise period and basis of
determining exercise price
In the case of any nil-
cost options granted
under the PG LTIP, a
period of six months
from vesting.
Remaining life of the
scheme
The PGLTIP does not
have a fixed expiry
date.
Maximum entitlement of
each participant
The size of PG 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 8,016,819
which represents
0.292 per cent of the
issued share capital
at 31 December
2023.
Vesting period
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.
The total number of
securities available
for issue under the
scheme is 371,894
which represents
0.014 per cent of the
issued share capital
at 31 December
2023.
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.
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.
The RSP is due to
expire on 30 June
2025.
In the case of any nil-
cost awards granted
under the RSP,
normally a period of
12 months from
vesting.
Share scheme and
participants
Prudential Global
Long Term
Incentive Plan (PG
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
that is not a deferral
model award. Any
current or former
non-director
employee of a Group
Company may be
selected to be
granted a deferral
model 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.
382
Prudential plc Annual Report 2023
Total number of shares
available for issue under the
scheme
n/a
Share scheme and
participants
Group Share
Incentive Plan (UK
SIP)
Any employee can
participate who
meets the definition
of eligible employee,
as defined by the
relevant UK tax
legislation.
n/a
Prudential
Corporation Asia All
Employee Share
Purchase Plan
(PruSharePlus)
Remaining life of the
scheme
The UK SIP rules are
due to expire in 2080
on the expiry of the
UK SIP trust.
Exercise period and basis of
determining exercise price
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 PruSharePlus
expired on 7 March
2024.
Purchased shares are
acquired at the
market value of a
Prudential plc share.
There is no
acquisition cost for
matching awards.
Maximum entitlement of
each participant
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.
The maximum
amount a participant
may contribute to
PruSharePlus is the
lower of 10% of
salary or £5,000.
Vesting period
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.
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 Deferred AIP is
due to expire on 29
November 2032.
The total number of
securities available
for issue under the
scheme is 602,078
which represents
0.022 per cent of the
issued share capital
at 31 December
2023.
Awards will not be
granted over
Prudential plc shares
with a market value in
excess of the deferred
proportion of the
bonus received (save
in the case of any
recruitment awards
that compensate for
entitlements forfeited
on leaving a former
employer).
The normal vesting
date for each award
under the Deferred
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.
In the case of any nil
or nominal-cost
options granted to (i)
a current employee,
normally a period of
ten years from
vesting, and (i) a
former employee,
normally a period of
12 months from
vesting.
Prudential plc Annual Report 2023
383
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.
Prudential Deferred
Annual Incentive
Plan 2023 (Deferred
AIP))
Any employee of a
Group Company who
has received a bonus
may be selected to be
granted an award.
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
Share scheme and
participants
Group Deferred
Bonus Plan (GDBP)
Any employee of a
Group Company, and
is not a director, may
be selected to be
granted an award.
Total number of shares
available for issue under the
scheme
The total number of
securities available
for issue under the
scheme is 3,810
which represents
0.000 per cent of the
issued share capital
at 31 December
2023.
Maximum entitlement of
each participant
The size of GDBP
awards is determined
on a case by case
basis.
The size of PDBP
awards is determined
on a case by case
basis.
The total number of
securities available
for issue under the
scheme is 572,191
which represents
0.021 per cent of the
issued share capital
at 31 December
2023.
Exercise period and basis of
determining exercise price
In the case of any nil-
cost options granted
under the GDBP, a
period of six months
from vesting.
Remaining life of the
scheme
The GDBP does not
have a fixed expiry
date.
In the case of any nil-
cost options granted
under the PDBP, a
period of six months
from vesting.
The PDBP does not
have a fixed expiry
date.
Vesting period
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 leaves for
any reason other
than cause or passes
away.
The normal vesting
date for each award
under the PDBP 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.
The DAIP expired on
30 September 2023.
In the case of any nil-
cost options granted
under the DAIP, a
period of six months
from vesting.
n/a
No awards have been
granted under the
DAIP since its expiry
on 30 September
2023.
Before the expiry of
the DAIP, the size of
awards was
determined on a case
by case basis.
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.
Prudential Deferred
Bonus Plan (PDBP)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment (unless
otherwise decided in
any particular case),
and is not a director,
may be selected to be
granted an award.
Deferred Annual
Incentive Plan
(DAIP)
Any employee of a
Group Company who
has not given or been
given notice of
termination of
employment (unless
otherwise decided in
any particular case),
and is not a director,
may be selected to be
granted an award.
384
Prudential plc Annual Report 2023
The following analysis shows the movement in each share plan for the year ended 31 December 2023:
Number of shares under awards1
Beginning
of year
Granted
Vested/
Released
Cancelled
Lapsed/
Forfeited
End of
year
Closing
share
price3
Weighted
average
share
price4
£
£
Date of
grant
Vesting period
Vesting
date
Restricted Share Plan (RSP)
11 Dec 22
Fair
value at
grant date
£
13.19
152,467
139,992
–
85
(78,782)
(140,077)
01 Apr 22 – 09 Apr 23
9.45 – 10.47
28 Feb 22 – 16 Jun 23
10.72 – 11.78
01 Feb 22 – 24 Jun 23
31 Mar 22 – 01 Apr 23
20 Jan 22 – 01 Apr 25
21 Apr 24
17 Mar 22 – 01 Apr 24
01 Mar 22 – 07 Apr 24
01 Feb 22 - 01 Feb 25
07 Oct 22 – 07 Apr 24
31 Aug 22 – 01 Mar 26
17 Oct 22 – 31 Dec 25
4.39 – 10.74
12.58 – 14.93
14.24 – 15.38
14.93
13.97 – 14.26
14.75 – 15.00
12.95 – 13.27
11.14 – 11.29
9.91 – 10.25
9.24 – 9.57
10 Feb 23 – 01 Apr 26
10.22 – 10.63
9,332
1,206
19,516
55,890
2,292
17,615
28,730
33,811
12,280
19,348
26,182
56,897
–
–
–
–
–
–
–
–
–
–
–
–
(9,332)
(667)
(19,516)
(22,827)
–
(17,615)
(16,210)
(25,157)
(396)
(6,217)
(5,880)
(15,308)
(20,770)
(17,937)
–
10 May 23
01 Jun 23 - 01 Apr 27
07 Sep 23
01 Oct 23 - 01 Mar 26
4.95 - 11.77
8.74 - 9.03
13 Dec 23
01 Jan 24 - 01 Mar 27
Prudential Global Long Term Incentive Plan (PGLTIP)2
8.26 - 8.64
0
0
0
180,291
60,603
60,171
10 Aug 23
02 Apr 22
02 Apr 22 – 18 Sep 22
09 Apr 23
07 Apr 23
09 Apr 23
9.91
14.73
14.69
95,394
6,028
183,912
–
(95,394)
1,398
–
(1,398)
(6,028)
–
(66,208)
–
–
117,704
9.45
2,477,178
6,648
(2,416,351)
(1,552)
(65,923)
10.68
12.57
3,770
36
–
–
(3,329)
(36)
(441)
–
–
–
–
–
–
07 Apr 22 – 07 Apr 24
14.58 – 15.30
1,884,997
1,743
(64,651)
07 Apr 22 – 07 Apr 24
13.70 – 14.23
07 Apr 24
14.75
2,060
3,216
–
–
(143)
–
05 Apr 23 – 05 Apr 25
0.91 – 11.24
3,238,064
290,870
(994,470)
(6,960)
(168,440)
2,359,064
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
08 Dec 21
05 Apr 22
29 Jun 22
21 Sep 22
15 Dec 22
17 Dec 13
02 Apr 19
19 Dec 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 May 23
22 May 23
13 Dec 23
05 Apr 23 – 05 Apr 25
10.00 – 10.19
05 Apr 23 – 05 Apr 25
12 Apr 24 - 12 Apr 26
12 Apr 24 - 12 Apr 26
12 Apr 26
9.31 – 9.52
4.76 - 11.64
5.08 - 11.69
1.90 - 8.36
563
3,123
–
–
(188)
(1,041)
0
0
0
1,395,824
2,548,701
7,511
–
–
–
Prudential Deferred Bonus Plan (PDBP)
09 Apr 20
07 Apr 21
05 Apr 22
10 May 23
22 May 23
09 Apr 22 – 09 Apr 23
07 Apr 23 – 07 Apr 24
05 Apr 24
12 Apr 25
12 Apr 25
Deferred Annual Incentive Plan (DAIP)
09 Apr 20
09 Apr 23
17 May 21
17 May 24
05 Apr 22
10 May 23
22 May 23
05 Apr 25
12 Apr 26
12 Apr 26
Group Deferred Bonus Plan (GDBP)
02 Apr 19
09 Apr 20
21 Apr 21
02 Apr 22
09 Apr 23
21 Apr 24
Group Share Incentive Plan (UK SIP)
2009 - 2022
n/a
Purchase Plan (PruSharePlus)
2020 - 2022
n/a
10.47
15.67
11.34
11.78
11.83
10.47
14.96
11.34
11.78
11.83
16.06
10.47
14.93
n/a
n/a
10,783
332,180
473,261
–
–
–
(10,783)
(331,000)
(117,792)
0
0
21,298
223,364
–
–
338,251
137,639
250,451
–
–
–
0
0
40,885
173,103
(338,251)
–
–
–
–
2631
11,152
3,810
–
–
–
(2,631)
(11,152)
–
5,885
4,437
(3,228)
437,412
291,511
(266,885)
11.64
11.68
10.54
9.15
11.26
10.84
n/a
11.23
11.16
10.82
10.50
10.94
10.25
10.38
10.90
9.21
n/a
9.07
n/a
11.75
11.69
11.64
11.75
11.73
11.75
n/a
11.68
11.75
11.64
n/a
n/a
n/a
11.75
11.66
10.21
n/a
n/a
11.66
n/a
n/a
n/a
n/a
n/a
11.75
n/a
–
–
–
–
–
32,433
1,825
–
8,166
8,654
11,884
11,872
20,302
14,400
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
159,521
11.75
42,666
60,171
9.33
8.87
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(73,685)
–
–
(539)
–
(630)
(467)
–
(4,354)
–
–
(1,259)
–
(27,189)
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.75
11.78
8.87
n/a
n/a
n/a
(154,368)
1,667,721
(462)
–
1,455
3,216
–
–
375
2,082
(57,296)
1,338,528
(29,538)
2,519,163
–
–
(736)
7,511
–
444
(28,384)
327,085
–
–
–
–
–
–
–
–
–
–
21,298
223,364
11.75
11.78
–
137,639
250,451
40,885
173,103
–
–
3,810
n/a
n/a
n/a
11.75
11.78
n/a
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(268)
6,826
n/a
n/a
–
462,038
n/a
n/a
Prudential plc Annual Report 2023
385
Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
I Additional financial information continued
Date of
grant
Vesting period
Vesting
date
Fair
value at
grant date
Total share schemes funded by existing shares of
Prudential
Representing:
Five highest paid individuals
All other grantees
Number of shares under awards1
Beginning
of year
Granted
Vested/
Released
Cancelled
Lapsed/
Forfeited
End of
year
Closing
share
price3
Weighted
average
share
price4
10,477,354
5,308,443
(5,120,224)
(9,910)
(620,007) 10,035,656
725,085
635,804
(298,348)
–
(14,877)
1,047,664
9,752,269
4,672,639
(4,821,876)
(9,910)
(605,130)
8,987,992
Total share schemes funded by existing shares of
Prudential
10,477,354
5,308,443
(5,120,224)
(9,910)
(620,007) 10,035,656
Notes
(1) 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.
(2) For some PGLTIP 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).
(3) Closing share price is quoted before grant date.
(4) Weighted average share price is calculated based on closing share price before vesting date.
I(vii) 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.
(a) IFRS financial results
The Group has adopted IFRS 9, ‘Financial Instruments’ and IFRS 17, ‘Insurance Contracts’ from 1 January 2023 as described in note A2.1 to the
IFRS consolidated financial statements. Accordingly, the comparative results for 2022 have been re-presented from those previously published.
The comparative results for 2021 to 2019 are as previously published.
2023 and 2022 results under IFRS 17
Income statement
Insurance revenue
Insurance service expenses
Net expense from reinsurance contracts held
Insurance service result
Investment return
Fair value movements on investment contract liabilities
Net insurance finance (expense) income
Net investment result
Other revenue
Non-insurance expenditure
Finance costs: interest on core structural borrowings of shareholder-financed businesses
Gain attaching to corporate transactions
Share of profits from joint ventures and associates net of related tax
Profit (loss) before tax (being tax attributable to shareholders’ and policyholders’ returns) note (1)
Tax charges attributable to policyholders’ returns
Profit (loss) 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 (loss) for the year
Basic earnings per share (in cents)
Based on profit (loss) for the year attributable to the equity holders of the Company
Dividend per share (in cents)
Dividends paid in reporting period
386
Prudential plc Annual Report 2023
2023 $m
9,371
(7,113)
(171)
2,087
9,763
(24)
(8,648)
1,091
369
(990)
(172)
(22)
(91)
2,272
(175)
2,097
(560)
175
(385)
1,712
2023
62.1¢
2023
19.30¢
2022 $m
8,549
(6,267)
(105)
2,177
(29,380)
67
27,430
(1,883)
436
(1,019)
(200)
55
(85)
(519)
(124)
(643)
(478)
124
(354)
(997)
2022
(36.8)¢
2022
17.60¢
Statement of financial position at 31 Dec
Total assets excluding insurance and reinsurance contracts assets
Insurance and reinsurance contract assets
Total assets
Insurance and reinsurance contract liabilities
Investment contract liabilities without discretionary participation features
Core structural borrowings of shareholder-financed businesses
Total liabilities
Total equity
Supplementary IFRS financial results – continuing operations
Adjusted operating profit note (2)
Non-operating items
Profit (loss) before tax attributable to shareholders
Operating earnings per share after tax and non-controlling interest (in cents)
2023 $m
170,460
3,606
174,066
140,991
769
3,933
2022 $m
157,259
2,990
160,249
127,417
663
4,261
156,083
143,351
17,983
16,898
2023 $m
2,893
(796)
2,097
89.0¢
2022 $m
2,722
(3,365)
(643)
79.4¢
Notes
(1) 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.
(2) Adjusted operating profit is determined on the basis of including longer-term investment returns, which are stated after excluding the effect of short-term fluctuations in
investment returns and gain or loss attaching to corporate transactions.
2021 to 2019 comparative results as previously published under IFRS 4
The Group has determined its date of transition to IFRS 17 to be 1 January 2022. As there can only be one transition date across the Group's
reporting, the Group has restated the 2022 comparative results and re-presented them above. Consequently, the 2021 to 2019 comparative
results below have not been restated on an IFRS 17 basis and have been shown on an IFRS 4 basis as previously published. Therefore, the 2021
to 2019 comparative results are presented on a very different basis and are not comparable to the 2023 and 2022 results set out above. The key
differences between IFRS 17 and IFRS 4 are set out in note A2.1 to the IFRS consolidated financial statements.
In the tables 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.
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
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 (1)
Tax charges attributable to policyholders’ returns
Profit before tax attributable to shareholders' returns
Tax charges attributable to shareholders’ returns
Profit from continuing operations
Loss from discontinued US operations
Loss from discontinued UK and Europe operations
(Loss) profit for the year
2021 $m
2020 $m
2019 $m
24,217
(1,844)
22,373
3,486
641
26,500
(18,911)
(4,560)
(328)
(35)
23,495
(1,625)
21,870
13,762
615
36,247
(28,588)
(4,651)
(316)
(30)
23,855
(1,116)
22,739
14,961
639
38,339
(29,171)
(5,908)
(496)
(142)
(23,834)
(33,585)
(35,717)
352
3,018
(342)
2,676
(462)
2,214
(5,027)
–
(2,813)
517
3,179
(271)
2,908
(440)
2,468
(283)
–
2,185
397
3,019
(365)
2,654
(316)
2,338
(385)
(1,161)
792
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Financial statements
EEV basis results
Additional information
I Additional financial information continued
Basic earnings per share (in cents)
2021
2020
2019
Based on (loss) profit 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
Statement of financial position at 31 Dec
Total assets
Total policyholder liabilities and unallocated surplus of with-profits funds
Core structural borrowings of shareholder-financed businesses
Total liabilities
Total equity
Supplementary IFRS financial results – continuing operations
Adjusted operating profit note (2)
Non-operating items
Profit (loss) before tax attributable to shareholders
Operating earnings per share after tax and non-controlling interest (in cents)
83.4¢
(161.1)¢
–
(77.7)¢
2021
16.10¢
2021 $m
199,102
157,299
6,127
181,838
17,264
2021 $m
3,233
(557)
2,676
101.5¢
94.6¢
(13.0)¢
–
81.6¢
2020
31.34¢
2020 $m
516,097
446,463
6,633
493,978
22,119
2020 $m
2,757
151
2,908
86.6¢
90.0¢
(14.9)¢
(44.8)¢
30.3¢
2019
63.18¢
2019 $m
454,214
390,428
5,594
434,545
19,669
2019 $m
2,247
407
2,654
73.4¢
Notes
(1) 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.
(2) Adjusted operating profit is 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. Adjusted operating profit also excludes amortisation of acquisition
accounting adjustments arising on the purchase of business.
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Prudential plc Annual Report 2023
(b) Supplementary EEV basis results
Continuing operations
EEV operating profit note (1)
Non-operating items
Profit (loss) attributable to shareholders
Operating earnings per share after non-controlling interest (in
cents)
2023 $m
4,546
(834)
3,712
2022 $m
3,952
(7,523)
(3,571)
2021 $m
3,543
(306)
3,237
2020 $m
3,401
573
3,974
2019 $m
5,151
1,058
6,209
165.1¢
143.4¢
133.8¢
130.6¢
198.8¢
New business contribution note (2)
Annual premium equivalent (APE) sales
EEV new business profit (NBP) (post-tax)
2023 $m
5,876
3,125
2022 $m
4,393
2,184
2021 $m
4,194
2,526
2020 $m
3,808
2,201
2019 $m
5,243
3,522
Embedded value at 31 Dec
EEV shareholders’ equity, excluding non-controlling interests
– continuing operations note (3)
Discontinued operations (US, UK and Europe)
EEV shareholders’ equity
2023 $bn
2022 $bn
2021 $bn
2020 $bn
2019 $bn
45.3
–
45.3
42.2
–
42.2
47.4
–
47.4
41.9
12.1
54.0
38.4
16.3
54.7
Notes
(1) 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, the effect of changes in economic assumptions, the mark-to-market value movements on core structural borrowings for
shareholder-financed operations and gain or loss attaching to corporate transactions.
(2) Africa operations are included within the covered business from 2021 following the change in the Group’s operating segments. Africa is excluded from 2020 and 2019.
(3) 2023 and 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.
(c) Other financial information – continuing operations
Net Group operating free surplus generated note
2023 $m
1,395
2022 $m
1,374
2021 $m
1,179
2020 $m
890
2019 $m
762
Note
Net Group operating free surplus generated represents operating free surplus generated less central costs, eliminations, restructuring costs and IFRS 17 costs, net of tax.
At 31 Dec
Eastspring funds under management or advice note (1)
Group shareholder GWS capital surplus (over GPCR) note (2)
2023 $bn
237.1
16.1
2022 $bn
221.4
15.6
2021 $bn
258.5
17.5
2020 $bn
247.8
n/a
2019 $bn
241.1
n/a
Notes
(1) 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.
(2) 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-presented 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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EEV basis results
Additional information
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 distinguishes adjusted operating profit
from other constituents of total profit or loss for the year, including short-term fluctuations in investment returns and gain or loss on corporate
transactions.
More details on how adjusted operating profit is determined are included in note B1.2 to the IFRS consolidated financial statements. A full
reconciliation to profit after tax is given in note B1.1 to the IFRS consolidated financial statements.
II(ii) Adjusted shareholders' equity
Following the implementation of IFRS 17, the Group has introduced a new IFRS equity measure termed 'Adjusted IFRS shareholders' equity',
which is calculated by adding the IFRS 17 expected future profit (CSM) to IFRS shareholders' equity for all entities in the Group (including joint
ventures and associates). Management believe this is a helpful measure that provides a reconciliation to the embedded value framework which is
often used for valuations. The main difference between the Group’s EEV measure and adjusted shareholders’ equity is economics as explained in
note II(viii).
IFRS shareholders' equity as reported in the financial statements
Add: CSM, including joint ventures and associates and net of reinsurance*
Remove: CSM asset attaching to reinsurance contracts wholly attributable to policyholders*
Less: Related deferred tax adjustments for the above*
Adjusted shareholders' equity
31 Dec 2023 $m
17,823
21,012
1,367
(2,856)
37,346
31 Dec 2022 $m
16,731
19,989
1,295
(2,804)
35,211
*
See note C3.1 to the Group IFRS consolidated financial statements for the split of the balances excluding joint ventures and associates and the Group’s share relating to
joint ventures and associates.
II(iii) Return on IFRS shareholders' equity
This measure is calculated as adjusted operating profit, after tax and non-controlling interests, divided by average IFRS 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 financial
results.
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
IFRS shareholders’ equity at beginning of year
IFRS shareholders’ equity at end of year
Average IFRS shareholders’ equity
Operating return on average IFRS shareholders’ equity (%)
2023 $m
2,893
(444)
(11)
2,438
2022 $m
2,722
(539)
(11)
2,172
16,731
17,823
17,277
18,936
16,731
17,834
14 %
12 %
II(iv) Calculation of shareholders' equity per share
IFRS shareholders’ equity per share is calculated as closing IFRS shareholders’ equity divided by the number of issued shares at the end of the
periods.
Number of issued shares at the end of the year (million shares)
Closing IFRS shareholders’ equity ($ million)
Group IFRS shareholders’ equity per share (cents)
Closing adjusted shareholders’ equity ($ million)
Group adjusted shareholders’ equity per share (cents)
31 Dec 2023
2,754
17,823
647¢
31 Dec 2022
2,750
16,731
608¢
37,346
1,356¢
35,211
1,280¢
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Prudential plc Annual Report 2023
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 and other
Performance-related fees
Operating income before performance-related fees note
IFRS charges
Share of expenses from joint ventures and associates
Commissions and other
Operating expense
Cost/income ratio (operating expense/operating income before performance-related fees)
2023 $m
497
330
(129)
2
700
376
125
(129)
372
53%
2022 $m
513
303
(155)
(1)
660
398
117
(155)
360
55%
Note
IFRS revenue and charges for Eastspring are included within the IFRS Income statement in ‘other revenue’ and ‘non-insurance expenditure’ respectively. Operating income and
expense include the Group’s share of contribution from joint ventures and associates. In the condensed consolidated income statement of the Group IFRS financial results, the
net income after tax from the joint ventures and associates is shown as a single line item.
II(vi) Insurance premiums
New business sales are provided as an indicative volume measure of transactions undertaken in the reporting period that have the potential to
generate profits for shareholders. The Group reports Annual Premium Equivalent (APE) new business sales as a measure of the new policies sold
in the year, which 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 and excluded from the scope of IFRS 17. The use
of 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.
Renewal or recurring premiums are the subsequent premiums that are paid on regular premium products. Gross premiums earned is the measure
of premiums as defined under the previous IFRS 4 basis and reflects the aggregate of single and regular premiums of new business sold in the
year and renewal premiums on business sold in previous years but excludes premiums for policies classified as investment contracts without
discretionary participation features under IFRS, which are recorded as deposits. Gross premiums earned is no longer a metric presented under
IFRS 17 and is not directly reconcilable to primary statements. The Group believes that renewal premiums and gross premiums earned are useful
measures of the Group’s business volumes and growth during the year.
Gross premiums earned
Gross premiums earned from joint ventures and associates
Total Group, including joint ventures and associates
Renewal insurance premiums
Annual premium equivalent (APE)
Life weighted premium income
II(vii) Reconciliation between EEV new business profit and IFRS new business CSM
EEV new business profit
Economics and other note (1)
New rider sales note (2)
Related tax on IFRS new business CSM note (3)
IFRS new business CSM
2023 $m
22,248
3,973
26,221
18,125
5,876
24,001
2023 $m
3,125
(1,006)
(94)
323
2022 $m
23,344
4,439
27,783
18,675
4,393
23,068
2022 $m
2,184
(424)
(66)
370
2,348
2,064
Notes
(1) EEV is calculated using ‘real-world’ economic assumptions that are based on the expected returns on the actual assets held with an allowance for risk in the risk discount
rate. Under IFRS 17, ‘risk neutral’ economic assumptions are applied with assets assumed to earn and the cash flows discounted at risk free plus liquidity premium (where
applicable). Both measures update these assumptions each period end based on current interest rates.
(2) Under EEV, new business profit arising from additional or new riders attaching to existing contracts, product upgrades and top-ups are reported as current period new
business profit. Under IFRS 17 reporting, new business profit from such rider sales and upgrades are required to be treated as experience variances of the existing contracts.
(3) IFRS 17 new business CSM is gross of tax, while EEV new business profit is net of tax. Accordingly, the related tax that on the IFRS 17 new business CSM is added back. All of
the other reconciling items in the table have been presented net of related taxes.
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Additional information
II Calculation of alternative performance measures continued
II(viii) Reconciliation between EEV shareholders' equity and IFRS Shareholders' equity
The table below shows the reconciliation of EEV shareholders’ equity and IFRS shareholders’ equity at the end of the years:
EEV shareholders’ equity
Adjustments for non-market risk allowance:
Allowance for non-market risks in EEV note (1)
IFRS risk adjustment, net of related deferred tax adjustments note (2)
Mark-to-market value adjustment of the Group's core structural borrowings note (3)
Economics and other valuation differences note (4)
Adjusted shareholders’ equity note II(ii)
Remove: CSM, including joint ventures and associates and net of reinsurance
CSM asset attaching to reinsurance contracts wholly attributable to policyholders
Add: Related deferred tax adjustments for the above
IFRS shareholders’ equity
31 Dec 2023 $m
45,250
31 Dec 2022 $m
42,184
2,968
(2,279)
(274)
(8,319)
2,760
(1,803)
(427)
(7,503)
37,346
35,211
(21,012)
(19,989)
(1,367)
2,856
17,823
(1,295)
2,804
16,731
Notes
(1) The allowance for non-diversifiable non-market risk in EEV comprises a base Group-wide allowance of 50 basis points plus additional allowances for emerging market risk
where appropriate.
(2) Includes the Group’s share of joint ventures and associates and net of reinsurance.
(3) The Group’s core structural borrowings are fair valued under EEV but are held at amortised cost under IFRS.
(4) EEV is calculated using ‘real-world’ economic assumptions that are based on the expected returns on the actual assets held with an allowance for risk in the risk discount
rate. Under IFRS 17, ‘risk neutral’ economic assumptions are applied with the cash flows discounted using risk free plus liquidity premium (where applicable). Other
valuation differences include contract boundaries and non-attributable expenses which are small.
II(ix) 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 interests
Shareholders’ equity at beginning of year
Shareholders’ equity at end of year
Average shareholders’ equity
Operating return on average shareholders’ equity (%)
2023 $m
4,546
(20)
4,526
42,184
45,250
43,717
10%
2022 $m
3,952
(29)
3,923
47,584
42,184
44,884
9%
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 insurance business operations, excluding goodwill attributable to equity holders. New business profit is attributed to the
shareholders of the Group before deducting the amount attributable to non-controlling interests.
New business profit
Average EEV shareholders’ equity for insurance business operations, excluding goodwill attributable to equity
holders
New business profit on embedded value (%)
2023 $m
3,125
2022 $m
2,184
40,193
41,866
8%
5%
Average embedded value has been based on opening and closing EEV basis shareholders’ equity for insurance business operations, excluding
goodwill attributable to equity holders, as follows:
Shareholders’ equity at beginning of year
Shareholders’ equity at end of year
Average shareholders’ equity
2023 $m
38,857
41,528
40,193
2022 $m
44,875
38,857
41,866
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Prudential plc Annual Report 2023
Glossary
Definitions of Performance Metrics
Adjusted operating profit
Adjusted IFRS operating profit based on longer-term investment
returns. This alternative performance measure is reconciled to IFRS
profit for the year in note B1.1 of the IFRS financial results and a
fuller definition given in note B.1.2.
Adjusted shareholder equity
Adjusted shareholders' equity represents the sum of Group IFRS
shareholders’ equity and CSM, net of reinsurance (unless attaching
wholly to policyholders) and tax.
See note C 3.1 (B) and II(ii) of the additional information for
reconciliation to IFRS shareholders' equity.
Agency new business profit
New business profit generated from the agency channel.
Annual premium equivalent (APE) sales
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.
See note II(vi) of the additional information for further explanation.
Average monthly active agents
An active agent is defined as agents that sell at least one case with a
Prudential life insurance entity in the month. Average active agents
per month is expressed for each reporting period as the sum of active
agents in each month divided by the number of months in the period.
Bancassurance new business profit
New business profit generated from the bancassurance channel.
Customer numbers
A customer is defined as a unique individual or entity who holds one
or more policies, that has premiums paid, with a Prudential life
insurance entity, including 100 per cent of customers of the Group's
joint ventures and associate. Group business is a single customer for
the purpose of this definition.
Customer relationship net promoter score (NPS)
Net Promoter Score on overall strength of customer relationship,
based on customers’ survey responses to how likely they would be to
recommend Prudential. It measures the response on a scale of 0 - 10
where 9 or 10 are Promoters, 7 or 8 are Passives and 0 - 6 are
Detractors. The score equates to the percentage of promoters less
percentage of detractors.
Customer retention rate
Calculated as the number of customers at the beginning of the period
minus exits during the year (net of reinstatement) over the number of
customers at the beginning of the period.
Eastspring total funds under management or advice
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.
Eastspring investment performance - percentage of funds
under management outperforming benchmarks
This measure represents funds under management at the balance
sheet date held in funds which outperform their performance
benchmark as a percentage of total funds under management over
the time period stated (1 or 3 years). Total funds under management
exclude funds with no performance benchmark.
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. See note II(v) to the additional information
for calculation.
EEV shareholders' equity
Shareholders' equity prepared in accordance with the EEV Principles
issued by the European Insurance CFO Forum in 2016.
See note II(viii) of the additional information for reconciliation to
IFRS shareholders' equity.
EEV Shareholders' value per share
EEV shareholders’ equity per share is calculated as closing EEV
shareholders’ equity divided by the number of issued shares at the
end of the period. See EEV basis results for calculation.
GWS capital surplus over GPCR
Estimated GWS capital resources in excess of the GPCR attributable to
the shareholder business, before allowing for the 2023 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.
GWS coverage ratio
Estimated GWS coverage ratio of capital resources over GPCR
attributable to the shareholder business, before allowing for the 2023
second cash interim dividend.
Health new business profit
New business profit from health products, which typically are
annually renewable and would involve diagnosis and treatment from
licensed physicians/medical facilities. Critical illness products paying
lump sum benefits are not in scope.
IFRS Shareholders' value 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 period. See note II(iv) to the additional information for
calculation
Moody’s total leverage basis
Leverage measure calculated as the Group gross debt, including
commercial paper as a proportion of the sum of IFRS shareholders’
equity, 50 per cent of the surplus in the Group’s with-profit funds and
the Groups gross debt including commercial paper. Calculated with no
adjustment for the value of contractual service margin in equity.
Net cash remitted by business units
Net cash amounts remitted by businesses are included in the holding
company cash flow, which is disclosed in detail in note I(iv) of the
Additional financial information. This comprises dividends and other
transfers from businesses, net of capital injections, that are reflective
of earnings and capital generation.
Net zero
A state in which greenhouse gas emissions from activities in the value
chain of an organisation are reduced as close to zero as possible, with
any residual emissions balanced by removals from the atmosphere, in
a time frame consistent with the Paris Agreement. Our ambition is
that the assets we hold on behalf of our insurance companies will be
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Additional information
Glossary continued
net zero by 2050, as part of Prudential’s signatory requirements to
the UN-Convened Net Zero Asset Owner Alliance (NZAOA).
New business profit
Presented on a post-tax basis, on business sold in the year, calculated
in accordance with EEV principles.
New business profit is reconciled to IFRS new business CSM in note
II(vii) to the additional information.
New Business Profit on embedded value (New business
profit/average EEV shareholders' equity for insurance
business operations)
Calculated as new business profit divided by the average EEV
shareholders' equity for insurance business operations, excluding
goodwill attributable to equity holders. See note II(ix) of the
additional for calculation.
Net Group operating free surplus generated
Operating Free Surplus Generated (see definition below) less Central
costs, eliminations, restructuring costs and IFRS 17 costs, net of tax.
New Business Profit per active agent
Average monthly agency new business profit divided by the active
agents per month. Includes 100 per cent of new business profit and
active agents in Joint Ventures and Associates.
Operating Free Surplus Generated from insurance and asset
management business
Operating free surplus generated: For insurance operations free
surplus generated represents amounts emerging from the in-force
business net of amounts reinvested in writing new business and
excludes non-operating items. For asset management business it
equates to post-tax operating profit for the period. Restructuring costs
are excluded.
Operating free surplus generated from in-force insurance
and asset management business
Operating free surplus generated from in-force insurance and asset
management business: Operating free surplus generated from in-
force insurance business which represents amounts emerging from
the in-force business during the year before deducting 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.
Operating return on embedded value (Operating profit/
average EEV shareholders' equity)
Calculated as EEV operating profit divided by the average EEV
shareholders' equity for continuing operations. See note II(ix) of the
additional for calculation.
Penetration rate of strategic bank customer base
Number of Prudential customers as percentage of total bank
customers. The measure and target pertains to seven strategic bank
partners (excluding partners of joint ventures and associates and
partnerships in, Cambodia and Laos).
Tier 1 capital resources
Tier 1 capital in accordance with the classification of tiering capital
under the GWS framework which reflects the different local regulatory
regimes along with guidance issued by the Hong Kong IA.
Weighted Average Carbon Intensity (WACI)
Reflects a portfolio’s exposure to carbon-intensive companies,
expressed in tCO2e/$m revenue. The WACI is currently the market
standard for measuring the carbon footprint of an investment
portfolio, as described by global disclosure frameworks such as the
Taskforce for Climate-related Financial Disclosures (TCFD).
Basis for Strategic Objectives
New business profit growth objective
Our new business growth objective assumes average exchange rates
of 2022 and economic assumptions made by Prudential in calculating
the EEV basis supplementary information for the year ended 31
December 2022, and are based on regulatory and solvency regimes
applicable across the Group at the time the objectives were set.
Assume that the existing EEV and Free Surplus methodology at
December 2022 will be applicable over the period.
Operating free surplus generated from in-force insurance
and asset management business growth objective
Our Operating free surplus generated from in-force insurance and
asset management business growth objective assumes average
exchange rates of 2022 and economic assumptions made by
Prudential in calculating the EEV basis supplementary information for
the year ended 31 December 2022, and are based on regulatory and
solvency regimes applicable across the Group at the time the
objectives were set. Assume that the existing EEV and Free Surplus
methodology at December 2022 will be applicable over the period.
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Prudential plc Annual Report 2023
Other definitions
A
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.
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. A reconciliation
of these APMs to IFRS metrics is provided in the additional unaudited
financial information section of the annual report.
American Depositary Receipts (ADRs)
The stocks of most foreign companies that trade in the US markets
are traded as American Depositary Receipts (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.
Association of Southeast Asian Nations (ASEAN) markets
ASEAN markets include Prudential’s businesses in Indonesia,
Malaysia, Singapore, Thailand, Vietnam, the Philippines, Cambodia,
Laos and Myanmar.
Assets under management
Assets under management represent all assets managed or
administered 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’.
B
Bancassurance
An agreement with a bank to offer insurance and investment
products to the bank’s customers.
Best estimate liabilities (BEL)
The expected present value of future cash flows for a company’s
current insurance obligations, calculated using best estimate
assumptions, projected over the contract’s run-off period, taking into
account all up-to-date financial market and actuarial information.
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 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 period average rates
for the income statements and current period closing rate for the
statement of financial position.
Contract boundary
The boundary of the fulfilment cash flows under IFRS 17 is
considered to be the point at which the Group both no longer has
substantive rights and obligations under the insurance contract to
provide services or compel the policyholder to pay premiums.
Contractual service margin (CSM)
A liability for insurance contracts under IFRS 17 representing the
deferral of any day-one gains arising on initial recognition. Over time,
the CSM balance is released into profit in the income statement as
services are delivered by the Group under the insurance contracts.
Core structural borrowings
Borrowings which Prudential considers forming part of its core capital
structure and excludes operational borrowings.
Coverage unit
The proportion of CSM recognised in profit or loss under IFRS 17 at
the end of each period for a group of contracts is determined as the
ratio of the coverage units in the period divided by the sum of the
coverage units in the period and the present value of expected
coverage units in future periods. The total number of coverage units
in a group is the quantity of service provided determined by
considering the quantity of benefits for each contract and its
expected coverage period.
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.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Glossary continued
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.
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
Fulfilment cash flows
Fulfilment cash flows under IFRS 17 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.
Funds under management
See ‘assets under management’ above.
G
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.
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
Illiquidity premium
This comprises the premium that is required to compensate for the
lower liquidity of corporate bonds relative to government bond yields
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. This is calculated as the yield-to-
maturity on a reference portfolio of assets with similar liquidity
characteristics to the insurance contracts less the risk-free curve and
an allowance for credit risk.
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.
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Prudential plc Annual Report 2023
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.
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 pay 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 worth
Net assets for EEV reporting purposes that reflect the regulatory basis
position, with adjustments where necessary to achieve consistency
with the IFRS treatment of certain items or to better reflect the assets
that are available to be transferred to the shareholder.
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.
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
Onerous contracts
Under IFRS 17, an insurance contract is onerous at the date of initial
recognition if the fulfilment cash flows allocated to the contract, any
previously recognised acquisition cash flows and any cash flows
arising from the contract at the date of initial recognition in total are
a net outflow.Classification as onerous does not necessarily mean the
contract is not profitable overall as it does not allow for all real world
investment returns that will be earned over time.
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 contracts
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
contracts.
Persistency
A measure of the 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 adjustment
The risk adjustment for non-financial risk under IFRS 17 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. The risk adjustment is a
component of the insurance contract liability, and it is released as
profit if experience plays out as expected.
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.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Glossary continued
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.
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.
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
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.
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Prudential plc Annual Report 2023
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 2024 Annual General Meeting (AGM) will be held as a hybrid
meeting in Hong Kong on Thursday 23 May 2024 at 16:30 HKT /
09:30 UKT. We would encourage all shareholders to participate in the
AGM (an option to link digitally to the meeting will be provided, which
will enable full participation by all shareholders). The 2024 AGM
notice will provide more details on meeting arrangements and how to
participate. Separately, we will offer UK-based shareholders an
opportunity to meet with the Chair, CEO and management in person
later in the year, at an informal event.
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 published on the Company’s website after the meeting.
Shareholders were able to attend the 2023 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 2023
AGM, including the results of the voting, can be found on the
Company’s website at https://www.prudentialplc.com/en/investors/
shareholder-information/agm/2024. 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 at 31 December 2023
Balance ranges
1–1,000
1,001 –5,000
5,001–10,0 00
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 at 31 December 2023,
as notified and disclosed to the Company in accordance with the
Disclosure Guidance and Transparency Rules.
As at 31 December 2023
BlackRock, Inc
Norges Bank
% of total
voting rights
5.08 %
3.10 %
No notifications have been received from year end to 18 March 2024.
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
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. At the AGM in 2023, the Company
reviewed and updated its Articles in order to comply with new core
shareholder protection standards as set out in Appendix 3 to the
Hong Kong Listing Rules and to reflect latest market practice. The
current Memorandum and Articles are available on the Company’s
website.
Issued share capital
The issued share capital as at 31 December 2023 consisted of
2,753,520,756 (2022: 2,749,669,380) ordinary shares of 5 pence
each, all fully paid up and listed on the London Stock Exchange and
the Hong Kong Stock Exchange. As at 31 December 2023, there were
36,870 (2022: 38,452) accounts on the register. Further information
can be found in note C8 on page 302.
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
26,327
7,429
1,194
1,105
399
123
293
Percentage of
holders Total number of shares
6,186,497
71.40 %
20.15 %
16,374,056
3.24 %
8,262,995
3.00 %
34,572,864
1.08 %
92,343,546
0.33 %
87,434,282
Percentage
of issued capital
0.22 %
0.59 %
0.30 %
1.26 %
3.35 %
3.18 %
0.79 % 2,508,346,516
91.10 %
36,870
2,753,520,756
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 at 18 March 2024, the trustees held 0.38 per cent of the issued
share capital under various share plans in operation. Rights to
dividends under Prudential’s share plans are set out on pages 200 to
225.
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
Prudential plc Annual Report 2023
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Strategic report
Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
Shareholder information continued
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 are expected to retain
as described on page 218 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.
of this year’s AGM. Relevant resolutions to authorise share capital
issuances will be put to shareholders at the AGM on 23 May 2024.
Details of shares issued during 2023 and 2022 are given in note C8
on page 302. 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 regulations 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 related guidance. Under this authority,
Prudential purchased 3,851,376 ordinary shares in aggregate at a
volume weighted average price of £8.2676 per ordinary share, for a
total consideration of approximately £31,841,826.52, between 8
January and 16 January 2024. All shares were cancelled. No shares
were purchased under this authority during 2023.
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
The 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 23 May 2024.
Dividend information
2023 second interim dividend
Ex-dividend date
Record date
Payment date
Shareholders registered on
the UK register and Hong
Kong branch register
28 March 2024
2 April 2024
16 May 2024
Holders of
American Depositary
Receipts
_
2 April 2024
16 May 2024
Shareholders with ordinary
shares standing to
the credit of their
CDP securities accounts
1 April 2024
2 April 2024
On or around
23 May 2024
A number of 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.
However, if the amount of the dividend, less any dealing costs
incurred in completing the purchase, is insufficient to buy a single
share no charge is made and the dividend is carried forward. Further
details of the DRIP are available at www.shareview.co.uk/4/Info/
Portfolio/default/en/home/shareholders/Pages/
ReinvestDividends.aspx
Dividend mandates
Dividends are paid directly into UK based shareholders’ bank or
building society accounts. UK-based shareholders should contact
Equiniti if 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 necessary
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 (UK based shareholders).
Cash dividend alternative
Prudential offers a Dividend Re-Investment Plan (DRIP) to
shareholders on the UK register. The DRIP is provided by Equiniti
Financial Services Limited ('Equiniti FS'), and is a convenient, easy
and cost effective way to build a shareholding by using cash
dividends to buy additional shares. Rather than having a bank
account credited with a cash dividend, Equiniti FS will use the
dividends payable to DRIP participants to purchase shares on their
behalf in the market. Whole shares are purchased with any residual
money being carried forward and added to the next dividend.
Electronic communications
Shareholders are encouraged to elect to receive corporate
communications electronically. Using electronic communication will
save on printing and distribution costs, and create environmental
benefits.
Shareholders located in the UK can elect to receive corporate
communications electronically by registering with Shareview at
www.shareview.co.uk Shareholders who have registered will be sent
an email notification when corporate communications 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. Please contact Equiniti if you require any assistance or
further information.
Shareholders located in Hong Kong can elect to receive corporate
communications electronically by registering with Computershare
Hong Kong. Shareholders who have registered will receive an email
notification when corporate communications are available on the
Company’s website. Please contact Computershare Hong Kong if you
require any assistance or further information.
400
Prudential plc Annual Report 2023
The option to receive shareholder documents electronically is not
available to shareholders holding shares through The Central
Depository (Pte) Limited (CDP) in Singapore.
Equiniti Shareview service
Information on how to manage shareholdings can be found at
https://help.shareview.co.uk
The pages at this web address provide the following:
– Answers to commonly asked questions regarding shareholder
registration;
– Links to downloadable forms, guidance notes and company history
fact sheets; and
– A choice of contact methods – via email, telephone or post.
Share dealing services
The Company’s UK Registrar, Equiniti, offer a postal dealing facility
for buying and selling Prudential plc ordinary shares, for contact
details refer to Shareholder enquiries below or telephone +44 (0)371
384 2035. 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 +44 (0)345 603 7037 between 8:30am and
5:30pm, Monday to Friday excluding weekends and UK bank holidays,
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 Equiniti 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.
Computershare Investor Services PLC will be replacing Equiniti as the
Company’s UK Registrar later this year. Further information including full
contact details will be made available to shareholders nearer the time and will
be incorporated into all future shareholder communications following the
transition.
Hong Kong register
Computershare Hong Kong Investor Services Limited, 17M Floor,
Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
Singapore register
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.
Enquiries regarding shares held in Depository Agent Sub-accounts should be
directed to your Depository Agent or broker.
US American
Depositary Receipts
(ADRs)
Shareowner Services
P.O. Box 64504, St. Paul,
MN 55164-0504, USA
By telephone
Tel +44 (0)371 384 2035
For deaf and speech impaired
customers Equiniti welcome calls via
Relay UK. Please see
www.relayuk.bt.com for more
information.
Lines are open from 8.30am to 5.30pm
(London time), Monday to Friday excluding
weekends and bank holidays.
Tel +852 2862 8555
Lines are open from 9.00am to
6.00pm (Hong Kong time), Monday
to Friday.
Operating Hours (Singapore time)
Monday to Friday: 8.30am to
5.00pm
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
Lines are open from 7.00am to
7.00pm (Central European time),
Monday to Friday excluding
weekends and bank holidays.
Prudential plc Annual Report 2023
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Governance Directors' remuneration report
Financial statements
EEV basis results
Additional information
How to contact us
Prudential plc
Registered office
1 Angel Court
London
EC2R 7AG
UK
Tel +44 (0)20 7220 7588
www.prudentialplc.com
Board
Shriti Vadera
Chair
Independent Non-executive Directors
Jeremy Anderson
Senior Independent Director
Arijit Basu
Chua Sock Koong
David Law
Ming Lu
George Sartorel
Claudia Suessmuth Dyckerhoff
Jeanette Wong
Amy Yip
Principal place of business
13th Floor
One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Tel +852 2918 6300
Media enquiries
Simon Kutner
Tel +44 (0)7581 023260
Email: Simon.Kutner@prudentialplc.com
Sonia Tsang
Tel +852 5580 7525
Email: Sonia.ok.tsang@prudential.com.hk
Sophie Sophaon
Tel +852 6286 0229
Email: sophie.sophaon@prudential.com.hk
Group Executive Committee
Executive Director
Anil Wadhwani
Chief Executive Officer
Solmaz Altin
Managing Director, Strategic Business Group
Ben Bulmer
Chief Financial Officer
Catherine Chia
Chief Human Resources Officer
Avnish Kalra
Chief Risk and Compliance Officer
Bill Maldonado
CEO, Eastspring Investments Group
Lilian Ng
Managing Director, Strategic Business Group
Dennis Tan
Managing Director, Strategic Business Group
Shareholder contacts
Institutional analyst and investor enquiries
Tel +44 (0)20 3977 9720
Email: investor.relations@prudentialplc.com
UK Register private shareholder enquiries
Tel +44 (0)371 384 2035
International shareholders:
Tel +44 (0)121 415 7026
Hong Kong Branch Register private shareholder enquiries
Tel +852 2862 8555
US American Depositary Receipts holder enquiries
Tel +1 800 990 1135
From outside the US:
Tel +1 651 453 2128
Singapore: The Central Depository (Pte) Limited shareholder
enquiries
Tel +65 6535 7511
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Prudential plc Annual Report 2023
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 sustainability (including ESG and climate-related) matters,
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, conflict in the Middle East, 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 (including related to treatments deferred during the pandemic), 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;
– the impact on Prudential of systemic risk and other group supervision policy standards adopted by the International Association of Insurance
Supervisors, given Prudential’s designation as an Internationally Active Insurance Group;
– 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 sustainability (including ESG and climate-related) 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 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
operations or 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 dispute
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.
Any forward-looking statements contained in this document speak only as of the date on which they are made. Prudential expressly disclaim 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 plc Annual Report 2023
403
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.
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.
404
Prudential plc Annual Report 2023
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Prudential public limited company
Incorporated and registered in England and Wales with limited liability.
Registered office
1 Angel Court
London
EC2R 7AG
Registered number 1397169
www.prudentialplc.com
Principal place of business
13th Floor
One International Finance Centre
1 Harbour View Street
Central
Hong Kong
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 or with The Prudential Assurance
Company Limited, a subsidiary of M&G plc, a company incorporated in the United Kingdom.
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