SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the
month of August, 2023
PRUDENTIAL PUBLIC LIMITED COMPANY
(Translation
of registrant's name into English)
13/F, One International Finance Centre,
1 Harbour View Street, Central,
Hong Kong, China
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F X
Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No X
If
"Yes" is marked, indicate below the file number assigned to the
registrant
in
connection with Rule 12g3-2(b): 82-
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 30 June 2023, the estimated shareholder GWS capital surplus
over the GPCR is $15.5 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 $18.2 billion (31 December
2022: $18.1 billion), representing a coverage ratio of 194 per
cent (31 December 2022: 202 per cent). The estimated
Group Tier 1 capital resources are $18.1 billion with headroom over
the GMCR of $12.5 billion (31 December 2022: $12.1 billion),
representing a coverage ratio of 323 per cent (31 December
2022: 328 per cent).
|
30 Jun 2023
|
|
31 Dec 2022note
(1)
|
|
|
|
Shareholder
|
Add
policyholder
|
Total
|
|
Shareholder
|
Add
policyholder
|
Total
|
|
Change in total
|
|
|
note (3)
|
note (4)
|
|
|
note (3)
|
note (4)
|
|
note (5)
|
Group capital resources ($bn)
|
23.4
|
14.0
|
37.4
|
|
23.2
|
12.6
|
35.8
|
|
1.6
|
of which: Tier 1 capital resources ($bn)note
(2)
|
16.4
|
1.7
|
18.1
|
|
15.9
|
1.5
|
17.4
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
Group Minimum Capital Requirement ($bn)
|
4.6
|
1.0
|
5.6
|
|
4.4
|
0.9
|
5.3
|
|
0.3
|
Group Prescribed Capital Requirement ($bn)
|
7.9
|
11.3
|
19.2
|
|
7.6
|
10.1
|
17.7
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
GWS capital surplus over GPCR ($bn)
|
15.5
|
2.7
|
18.2
|
|
15.6
|
2.5
|
18.1
|
|
0.1
|
GWS coverage ratio over GPCR (%)
|
295%
|
|
194%
|
|
307%
|
|
202%
|
|
(8)ppt
|
|
|
|
|
|
|
|
|
|
|
GWS Tier 1 surplus over GMCR ($bn)
|
|
|
12.5
|
|
|
|
12.1
|
|
0.4
|
GWS Tier 1 coverage ratio over GMCR (%)
|
|
|
323%
|
|
|
|
328%
|
|
(5)ppt
|
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 30 June 2023, total Tier 1 capital
resources of $18.1 billion comprises: $23.4billion of total
shareholder capital resources; less $(3.6) billion of Prudential
plc issued sub-ordinated and senior Tier 2 debt capital; less
$(3.4) billion of local regulatory tiering classifications which
are classified as GWS Tier 2 capital resources primarily in
Singapore and the Chinese Mainland; plus $1.7 billion of Tier 1
capital resources in policyholder funds.
|
(3)
|
This allows for any associated diversification impacts between the
shareholder and policyholder positions reflected in the total
company results where relevant.
|
(4)
|
The total company GWS coverage ratio over GPCR presented above
represents the eligible group capital resources coverage ratio as
set out in the GWS framework while the total company GWS tier 1
coverage ratio over GMCR represents the tier 1 group capital
coverage ratio.
|
(5)
|
Refer to section on Material changes in GMCR, GPCR, tier 1 group
capital and eligible group capital resources below.
|
GWS sensitivity analysis
The estimated sensitivity of the GWS capital position (based on the
GPCR) to changes in market conditions as at 30 June 2023 and 31
December 2022 are shown below, for both the shareholder and the
total capital position.
|
|
Shareholder
|
|
|
30 Jun 2023
|
|
31 Dec 2022
|
Impact of market sensitivities
|
Surplus ($bn)
|
Coverage ratio
|
|
Surplus ($bn)
|
Coverage ratio
|
Base position
|
15.5
|
295%
|
|
15.6
|
307%
|
Impact of:
|
|
|
|
|
|
|
10% increase in equity markets
|
0.3
|
(5)%
|
|
0.3
|
(3)%
|
|
20% fall in equity markets
|
(1.9)
|
(11)%
|
|
(1.9)
|
(14)%
|
|
50 basis points reduction in interest rates
|
0.7
|
11%
|
|
0.4
|
4%
|
|
100 basis points increase in interest rates
|
(1.4)
|
(17)%
|
|
(1.1)
|
(15)%
|
|
100 basis points increase in credit spreads
|
(0.8)
|
(12)%
|
|
(0.8)
|
(9)%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30 Jun 2023
|
|
31 Dec 2022
|
Impact of market sensitivities
|
Surplus ($bn)
|
Coverage ratio
|
|
Surplus ($bn)
|
Coverage ratio
|
Base position
|
18.2
|
194%
|
|
18.1
|
202%
|
Impact of:
|
|
|
|
|
|
|
10% increase in equity markets
|
1.0
|
0%
|
|
1.2
|
1%
|
|
20% fall in equity markets
|
(3.7)
|
(11)%
|
|
(3.6)
|
(12)%
|
|
50 basis points reduction in interest rates
|
0.3
|
3%
|
|
0.0
|
0%
|
|
100 basis points increase in interest rates
|
(0.8)
|
(4)%
|
|
(0.6)
|
(3)%
|
|
100 basis points increase in credit spreads
|
(1.2)
|
(6)%
|
|
(1.2)
|
(6)%
|
The sensitivity results above reflect the impact on the Group's
long-term 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 30 June 2023, the Group's Free Surplus stock (excluding
distribution rights and other intangibles) was $8.4 billion,
compared to the GWS shareholder surplus of $15.5 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 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 the strong conviction we have in the Group's revised
strategy, when determining the annual dividend we intend to look
through the investments in new business and investments in
capabilities and expect the annual dividend to grow in the range 7
- 9 per cent per annum over 2023 and 2024. 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 30 June 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.
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 $18.2 billion at 30
June 2023 is set out in the table below.
|
|
Half year 2023 $bn
|
Total GWS surplus at 1 Jan (over GPCR)
|
18.1
|
Shareholder free surplus generation
|
|
|
In force operating capital generation
|
1.1
|
|
Investment in new business
|
(0.4)
|
Total operating free surplus generation
|
0.7
|
|
External dividends
|
(0.4)
|
|
Non-operating movements including market movements
|
(0.1)
|
|
Other capital movements (including foreign exchange
movements)
|
(0.4)
|
Movement in free surplus (see EEV basis results for further
detail)
|
(0.2)
|
|
Other movements in GWS shareholder surplus not included in free
surplus
|
0.1
|
|
Movement in contribution from GWS policyholder
surplus (over GPCR)
|
0.2
|
Net movement in GWS capital surplus (over GPCR)
|
0.1
|
Total GWS surplus at 30 Jun (over GPCR)
|
18.2
|
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 $1.6 billion to
$37.4 billion at 30 June 2023 (31 December 2022: $35.8 billion).
This includes a $0.7 billion increase in tier 1 group capital to
$18.1 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
period, partially offset by external dividends paid, debt
redeemed and foreign exchange movements over the
period.
|
-
|
Total regulatory GPCR has increased by $1.5billion to $19.2 billion
at 30 June 2023 (31 December 2022: $17.7 billion) and the total
regulatory GMCR has increased by $0.3 billion to $5.6 billion at 30
June 2023 (31 December 2022: $5.3 billion). The increase in GPCR
and GMCR is primarily driven by new business sold over the period,
partially offset by the release of capital as the policies mature
or are surrendered and foreign exchange movements over the
period.
|
Reconciliation of Free Surplus to total regulatory GWS capital
surplus (over GPCR)
|
30 Jun 2023 $bn
|
|
Capital resources
|
Required capital
|
Surplus
|
Free surplus excluding distribution rights and other
intangibles*
|
14.0
|
5.6
|
8.4
|
Restrictions applied in free surplus for China C-ROSS
IInote
(1)
|
1.9
|
1.5
|
0.4
|
Restrictions applied in free surplus for HK RBCnote
(2)
|
5.7
|
0.7
|
5.0
|
Restrictions applied in free surplus for Singapore
RBCnote
(3)
|
2.0
|
0.1
|
1.9
|
Other
|
(0.2)
|
0.0
|
(0.2)
|
Add GWS policyholder surplus contribution
|
14.0
|
11.3
|
2.7
|
Total regulatory GWS capital surplus (over GPCR)
|
37.4
|
19.2
|
18.2
|
* 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).
|
Reconciliation of Group IFRS shareholders' equity
to Group total GWS capital
resources
|
30 Jun 2023
$bn
|
Group IFRS shareholders' equity
|
17.2
|
Remove goodwill and intangibles recognised on the IFRS consolidated
statement of financial position
|
(4.4)
|
Add debt treated as capital under GWSnote
(1)
|
3.6
|
Asset valuation differencesnote
(2)
|
(0.8)
|
Remove IFRS 17 contractual service margin (CSM) (including joint
ventures and associates)note
(3)
|
20.8
|
Liability valuation (including insurance contracts) differences
excluding IFRS 17 CSM note
(4)
|
(0.1)
|
Differences in associated net deferred tax
liabilitiesnote
(5)
|
0.9
|
Othernote
(6)
|
0.2
|
Group total GWS capital resources
|
37.4
|
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 shareholding is less than 100 per
cent, the contribution of the entity to the GWS eligible group
capital resources and required capital represents the Group's share
of these amounts and excludes any amounts attributable to
non-controlling interests. This does not apply to investment
holdings which are not part of the Group;
|
-
|
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 30 June 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.
|
I(ii) Analysis of total segment profit by business
unit
The table below presents the half year 2023 results on both AER and
CER bases to eliminate the impact of exchange
translation.
|
|
2023 $m
|
|
2022 $m
|
|
2023 vs 2022 %
|
|
2022 $m
|
|
|
Half year
|
|
Half year
AER
|
Half year
CER
|
|
Half year
AER
|
Half year
CER
|
|
Full year
AER
|
CPL
|
164
|
|
132
|
124
|
|
24%
|
32%
|
|
271
|
Hong Kong
|
554
|
|
598
|
597
|
|
(7)%
|
(7)%
|
|
1,162
|
Indonesia
|
109
|
|
118
|
113
|
|
(8)%
|
(4)%
|
|
205
|
Malaysia
|
165
|
|
193
|
184
|
|
(15)%
|
(10)%
|
|
340
|
Singapore
|
270
|
|
313
|
320
|
|
(14)%
|
(16)%
|
|
570
|
Growth markets and other
|
|
|
|
|
|
|
|
|
|
|
Philippines
|
59
|
|
62
|
58
|
|
(5)%
|
2%
|
|
131
|
|
Taiwan
|
54
|
|
57
|
54
|
|
(5)%
|
0%
|
|
116
|
|
Thailand
|
52
|
|
64
|
64
|
|
(19)%
|
(19)%
|
|
116
|
|
Vietnam
|
192
|
|
220
|
214
|
|
(13)%
|
(10)%
|
|
402
|
|
Other
|
56
|
|
(30)
|
(32)
|
|
287%
|
275%
|
|
53
|
|
Share of related tax charges from joint ventures and
associate
|
(39)
|
|
(36)
|
(35)
|
|
(8)%
|
(11)%
|
|
(90)
|
Insurance business
|
1,636
|
|
1,691
|
1,661
|
|
(3)%
|
(2)%
|
|
3,276
|
Eastspring
|
146
|
|
131
|
128
|
|
11%
|
14%
|
|
260
|
Total segment profit
|
1,782
|
|
1,822
|
1,789
|
|
(2)%
|
0%
|
|
3,536
|
(a) Eastspring
adjusted operating profit
|
2023 $m
|
|
2022 AER $m
|
|
Half year
|
|
Half year
|
Full year
|
Operating income before performance-related feesnote
(1)
|
351
|
|
332
|
660
|
Performance-related fees
|
2
|
|
4
|
1
|
Operating income (net of commission)note
(2)
|
353
|
|
336
|
661
|
Operating expensenote
(2)
|
(185)
|
|
(184)
|
(360)
|
Group's share of tax on joint ventures' operating
profit
|
(22)
|
|
(21)
|
(41)
|
Adjusted operating profit
|
146
|
|
131
|
260
|
|
|
|
|
|
Average funds managed or advised by Eastspring
|
$228.8bn
|
|
$241.8bn
|
$229.4bn
|
Margin based on operating incomenote
(3)
|
31bps
|
|
28bps
|
29bps
|
Cost/income rationote
II(v)
|
53%
|
|
55%
|
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):
|
|
|
Retail
|
Margin
|
Institutional
|
Margin
|
Total
|
Margin
|
|
|
$m
|
bps
|
$m
|
bps
|
$m
|
bps
|
|
Half year 2023
|
210
|
58
|
141
|
18
|
351
|
31
|
|
Half year 2022
|
196
|
52
|
136
|
16
|
332
|
28
|
|
Full year 2022
|
392
|
54
|
268
|
17
|
660
|
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.
Half year figures have been annualised by multiplying by two.
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.
|
|
30 Jun 2023 $bn
|
31 Dec 2022 AER $bn
|
External funds under management, excluding funds managed on behalf
of M&G plcnote
(1)
|
|
|
|
Retail
|
65.2
|
60.1
|
|
Institutional
|
11.7
|
11.3
|
|
Money market funds (MMF)
|
11.8
|
10.5
|
|
|
88.7
|
81.9
|
Funds managed on behalf of M&G plcnote
(2)
|
2.4
|
9.3
|
|
|
|
|
External funds under management
|
91.1
|
91.2
|
Internal funds:
|
|
|
|
Internal funds under management
|
107.8
|
104.1
|
|
Internal funds under advice
|
28.8
|
26.1
|
|
|
136.6
|
130.2
|
Total funds under management or advicenote
(3)
|
227.7
|
221.4
|
Notes
(1)
|
Movements in external funds under management, excluding those
managed on behalf of M&G plc, are analysed below:
|
|
|
|
Half year 2023 $m
|
Full year 2022 AER $m
|
|
At beginning of period
|
81,949
|
93,956
|
|
Market gross inflows
|
44,910
|
81,942
|
|
Redemptions
|
(42,327)
|
(84,397)
|
|
Market and other movements
|
4,236
|
(9,552)
|
|
At end of period*
|
88,768
|
81,949
|
* The analysis of movements above includes $11,848
million relating to Asia Money Market Funds at 30 June 2023 (31
December 2022: $10,495 million). Investment flows for half year
2023 include Eastspring Money Market Funds gross inflows of $33,742
million (full year 2022: $61,063 million) and net inflows of $727
million (full year 2022: net outflows of $(869)
million).
(2)
|
Movements in funds managed on behalf of M&G plc are analysed
below:
|
|
|
Half year 2023 $m
|
Full year 2022 AER $m
|
|
At beginning of period
|
9,235
|
11,529
|
|
Net flows
|
(7,116)
|
(765)
|
|
Market and other movements
|
237
|
(1,529)
|
|
At end of period
|
2,356
|
9,235
|
(3)
|
Total funds under management or advice are analysed by asset class
below:
|
|
|
30 Jun 2023
|
|
31 Dec 2022* AER
|
|
|
Funds under management
|
Funds under advice
|
Total
|
|
Total
|
|
|
$bn
|
% of total
|
$bn
|
% of total
|
$bn
|
% of total
|
|
$bn
|
% of total
|
|
Equity
|
48.0
|
24%
|
1.3
|
5%
|
49.3
|
22%
|
|
45.5
|
21%
|
|
Fixed income
|
39.1
|
20%
|
3.2
|
11%
|
42.3
|
18%
|
|
47.9
|
22%
|
|
Multi-asset
|
96.7
|
49%
|
24.3
|
84%
|
121.0
|
53%
|
|
114.1
|
51%
|
|
Alternatives
|
2.1
|
1%
|
-
|
-
|
2.1
|
1%
|
|
2.2
|
1%
|
|
Money Market Funds
|
13.0
|
6%
|
-
|
-
|
13.0
|
6%
|
|
11.7
|
5%
|
|
Total funds
|
198.9
|
100%
|
28.8
|
100%
|
227.7
|
100%
|
|
221.4
|
100%
|
* The presentation of asset classes has been altered 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 restated to be
prepared 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 period,
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.
|
|
30 Jun 2023 $bn
|
31 Dec 2022 AER $bn
|
Internal funds
|
173.9
|
166.3
|
Eastspring external funds, including M&G plc (as analysed in
note I(ii) above)
|
91.1
|
91.2
|
Total Group funds under managementnote
|
265.0
|
257.5
|
Note
Total Group funds under management comprise:
|
|
30 Jun 2023 $bn
|
31 Dec 2022 AER $bn
|
Total investments and cash and cash equivalents held on the balance
sheet*
|
155.1
|
149.9
|
External funds of Eastspring, including M&G plc
|
91.1
|
91.2
|
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
|
18.8
|
16.4
|
Total Group funds under management
|
265.0
|
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 period 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.
|
|
2023 $m
|
|
2022 $m
|
|
|
Half year
|
|
Half year
|
Full year
|
Net cash remitted by business unitsnote
(1)
|
1,024
|
|
1,009
|
1,304
|
Net interest paidnote
(2)
|
(40)
|
|
(117)
|
(204)
|
Corporate expenditurenote
(3)
|
(155)
|
|
(124)
|
(232)
|
Centrally funded recurring bancassurance fees
|
(160)
|
|
(220)
|
(220)
|
Total central outflows
|
(355)
|
|
(461)
|
(656)
|
Holding company cash flow before dividends and other
movements
|
669
|
|
548
|
648
|
Dividends paid
|
(361)
|
|
(320)
|
(474)
|
Operating holding company cash flow after dividends but before
other movements
|
308
|
|
228
|
174
|
Other movements
|
|
|
|
|
|
Issuance and redemption of debt
|
(371)
|
|
(1,729)
|
(1,729)
|
|
Other corporate activitiesnote
(4)
|
282
|
|
159
|
248
|
Total other movements
|
(89)
|
|
(1,570)
|
(1,481)
|
Net movement in holding company cash flow
|
219
|
|
(1,342)
|
(1,307)
|
Cash and short-term investments at beginning of
periodnote
(5)
|
3,057
|
|
3,572
|
3,572
|
Foreign exchange movements
|
38
|
|
(87)
|
(113)
|
Inclusion of amounts at 31 Dec from additional centrally managed
entitiesnote
(6)
|
-
|
|
-
|
905
|
Cash and short-term investments at end of period
|
3,314
|
|
2,143
|
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.
|
(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 the first half of
2023, largely on the balances brought into the updated definition.
This together with lower interest payments this led to a reduction
in net interest paid in the first half of 2023 as compared with the
prior period.
|
(3)
|
Including IFRS 17 implementation and restructuring costs paid in
the period.
|
(4)
|
Cash inflows from Other corporate activities were $282 million
(half year 2022: $159 million and full year 2022: $248 million) and
largely related to proceeds received from the sales of shares
in Jackson together with dividends from Jackson.
|
(5)
|
Proceeds from the Group's commercial paper programme are not
included in the holding company cash and short-term investments
balance.
|
(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 of Unallocated to a segment (Central operations) held
on the IFRS balance sheet and Cash and short-term investments at 30
June 2023:
|
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
Cash and cash equivalents of Central operations held on balance
sheetnote
C1
|
2,752
|
1,809
|
Less: amounts from commercial paper
|
(529)
|
(501)
|
Add: Deposits with credit institutions of Central operations held
on balance sheet
|
1,091
|
1,749
|
Cash and short-term investments
|
3,314
|
3,057
|
I(v) New business schedules
The format of the schedules is consistent with the distinction
between insurance and investment products as applied for previous
reporting periods. Insurance products refer to those
classified as contracts of insurance business for local regulatory
reporting purposes. New business premiums reflect those premiums
attaching to covered business, including premiums from contracts
designed as investment contracts under IFRS reporting. Regular
premium products are shown on an annualised basis.
The details shown for insurance products include contributions from
contracts that are classified under IFRS 17, 'Insurance Contracts',
as not containing significant insurance risk. These products are
described as investment contracts or other financial instruments
under IFRS 17, primarily represent unit-linked business and which
are included on the balance sheet as investment contracts and
similar contracts written in insurance operations.
Investment products referred to in the tables for funds under
management are unit trusts, mutual funds and similar types of
retail fund management arrangements. These are unrelated to
insurance products that are classified as investment contracts
under IFRS 17, as described in the preceding paragraph, although
similar IFRS recognition and measurement principles apply to the
acquisition costs and fees attaching to this type of
business.
Annual premium equivalent (APE) and new business profit (NBP) are
determined using the EEV methodology set out in note 6 of our EEV
basis results supplement. In determining the EEV basis value of new
business written in the period when policies incept, premiums are
included at projected cash flows on the same basis of
distinguishing regular and single premium business as set out for
local statutory basis reporting. APE sales are subject to
rounding.
Schedule A Insurance new business (AER and CER)
AER
|
Single premiums
|
Regular premiums
|
APE
|
PVNBP
|
|
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
CPL (Prudential's 50% share)
|
397
|
858
|
(54)%
|
355
|
421
|
(16)%
|
394
|
507
|
(22)%
|
1,481
|
2,119
|
(30)%
|
Hong Kong
|
116
|
656
|
(82)%
|
1,015
|
162
|
527%
|
1,027
|
227
|
352%
|
5,364
|
1,774
|
202%
|
Indonesia
|
132
|
120
|
10%
|
137
|
98
|
40%
|
150
|
110
|
36%
|
629
|
442
|
42%
|
Malaysia
|
46
|
45
|
2%
|
180
|
168
|
7%
|
185
|
172
|
8%
|
915
|
845
|
8%
|
Singapore
|
535
|
1,715
|
(69)%
|
332
|
219
|
52%
|
386
|
390
|
(1)%
|
2,441
|
3,184
|
(23)%
|
Growth markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
4
|
4
|
-
|
84
|
75
|
12%
|
85
|
76
|
12%
|
170
|
151
|
13%
|
|
Cambodia
|
1
|
-
|
-
|
9
|
7
|
29%
|
9
|
7
|
29%
|
38
|
30
|
27%
|
|
India (Prudential's 22% share)
|
130
|
135
|
(4)%
|
115
|
106
|
8%
|
128
|
120
|
7%
|
619
|
609
|
2%
|
|
Laos
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
-
|
-
|
|
Myanmar
|
-
|
-
|
-
|
3
|
1
|
200%
|
3
|
1
|
200%
|
8
|
4
|
100%
|
|
Philippines
|
38
|
36
|
6%
|
90
|
84
|
7%
|
94
|
87
|
8%
|
331
|
297
|
11%
|
|
Taiwan
|
54
|
86
|
(37)%
|
335
|
271
|
24%
|
339
|
281
|
21%
|
1,254
|
994
|
26%
|
|
Thailand
|
71
|
72
|
(1)%
|
111
|
92
|
21%
|
118
|
99
|
19%
|
470
|
394
|
19%
|
|
Vietnam
|
8
|
66
|
(88)%
|
108
|
130
|
(17)%
|
109
|
136
|
(20)%
|
709
|
885
|
(20)%
|
Total insurance operations
|
1,532
|
3,793
|
(60)%
|
2,874
|
1,834
|
57%
|
3,027
|
2,213
|
37%
|
14,430
|
11,728
|
23%
|
CER
|
Single premiums
|
Regular premiums
|
APE
|
PVNBP
|
|
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
2023
Half
year
|
2022
Half
year
|
+/(-)
|
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
$m
|
$m
|
%
|
CPL (Prudential's 50% share)
|
397
|
802
|
(50)%
|
355
|
394
|
(10)%
|
394
|
474
|
(17)%
|
1,481
|
1,982
|
(25)%
|
Hong Kong
|
116
|
655
|
(82)%
|
1,015
|
161
|
530%
|
1,027
|
227
|
352%
|
5,364
|
1,771
|
203%
|
Indonesia
|
132
|
115
|
15%
|
137
|
95
|
44%
|
150
|
106
|
42%
|
629
|
424
|
48%
|
Malaysia
|
46
|
43
|
7%
|
180
|
161
|
12%
|
185
|
165
|
12%
|
915
|
809
|
13%
|
Singapore
|
535
|
1,752
|
(69)%
|
332
|
223
|
49%
|
386
|
398
|
(3)%
|
2,441
|
3,253
|
(25)%
|
Growth markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
4
|
3
|
33%
|
84
|
65
|
29%
|
85
|
65
|
31%
|
170
|
131
|
30%
|
|
Cambodia
|
1
|
-
|
-
|
9
|
7
|
29%
|
9
|
7
|
29%
|
38
|
30
|
27%
|
|
India (Prudential's 22% share)
|
130
|
126
|
3%
|
115
|
98
|
17%
|
128
|
111
|
15%
|
619
|
564
|
10%
|
|
Laos
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
-
|
-
|
|
Myanmar
|
-
|
-
|
-
|
3
|
1
|
200%
|
3
|
1
|
200%
|
8
|
3
|
167%
|
|
Philippines
|
38
|
34
|
12%
|
90
|
79
|
14%
|
94
|
83
|
13%
|
331
|
281
|
18%
|
|
Taiwan
|
54
|
82
|
(34)%
|
335
|
256
|
31%
|
339
|
264
|
28%
|
1,254
|
935
|
34%
|
|
Thailand
|
71
|
71
|
-
|
111
|
91
|
22%
|
118
|
98
|
20%
|
470
|
389
|
21%
|
|
Vietnam
|
8
|
64
|
(88)%
|
108
|
126
|
(14)%
|
109
|
133
|
(18)%
|
709
|
863
|
(18)%
|
Total insurance operations
|
1,532
|
3,747
|
(59)%
|
2,874
|
1,757
|
64%
|
3,027
|
2,132
|
42%
|
14,430
|
11,435
|
26%
|
Schedule B Insurance new business APE and PVNBP (AER and
CER)
APE
|
2022 $m AER
|
2022 $m CER
|
2023 $m AER
|
|
H1
|
H2
|
H1
|
H2
|
H1
|
CPL (Prudential's 50% share)
|
507
|
377
|
474
|
385
|
394
|
Hong Kong
|
227
|
295
|
227
|
295
|
1,027
|
Indonesia
|
110
|
137
|
106
|
137
|
150
|
Malaysia
|
172
|
187
|
165
|
190
|
185
|
Singapore
|
390
|
380
|
398
|
397
|
386
|
Growth markets:
|
|
|
|
|
|
|
Africa
|
76
|
73
|
65
|
71
|
85
|
|
Cambodia
|
7
|
11
|
7
|
11
|
9
|
|
India (Prudential's 22% share)
|
120
|
103
|
111
|
102
|
128
|
|
Laos
|
-
|
-
|
-
|
-
|
-
|
|
Myanmar
|
1
|
2
|
1
|
2
|
3
|
|
Philippines
|
87
|
95
|
83
|
97
|
94
|
|
Taiwan
|
281
|
222
|
264
|
225
|
339
|
|
Thailand
|
99
|
136
|
98
|
143
|
118
|
|
Vietnam
|
136
|
162
|
133
|
164
|
109
|
Total insurance operations
|
2,213
|
2,180
|
2,132
|
2,219
|
3,027
|
PVNBP
|
2022 $m AER
|
2022 $m CER
|
2023 $m AER
|
|
H1
|
H2
|
H1
|
H2
|
H1
|
CPL (Prudential's 50% share)
|
2,119
|
1,402
|
1,982
|
1,439
|
1,481
|
Hong Kong
|
1,774
|
1,521
|
1,771
|
1,507
|
5,364
|
Indonesia
|
442
|
598
|
424
|
603
|
629
|
Malaysia
|
845
|
1,034
|
809
|
1,045
|
915
|
Singapore
|
3,184
|
2,907
|
3,253
|
3,033
|
2,441
|
Growth markets:
|
|
|
|
|
|
|
Africa
|
151
|
157
|
131
|
150
|
170
|
|
Cambodia
|
30
|
39
|
30
|
39
|
38
|
|
India (Prudential's 22% share)
|
609
|
539
|
564
|
533
|
619
|
|
Laos
|
-
|
1
|
-
|
1
|
1
|
|
Myanmar
|
4
|
2
|
3
|
3
|
8
|
|
Philippines
|
297
|
318
|
281
|
326
|
331
|
|
Taiwan
|
994
|
841
|
935
|
855
|
1,254
|
|
Thailand
|
394
|
538
|
389
|
567
|
470
|
|
Vietnam
|
885
|
781
|
863
|
795
|
709
|
Total insurance operations
|
11,728
|
10,678
|
11,435
|
10,896
|
14,430
|
Note
Comparative results for the first half (H1) and second half (H2) of
2022 are presented on both actual exchange rates (AER) and constant
exchange rates (CER). The H2 amounts are presented on year-to-date
average exchange rates (including the effect of retranslating H1
results for movements in average exchange rates between H1 and the
year-to-date).
Schedule C Insurance new business profit and margin (AER and
CER)
|
2022 AER
|
2022 CER
|
2023 AER
|
|
HY
|
FY
|
HY
|
FY
|
HY
|
New business profit ($m)
|
|
|
|
|
|
CPL (Prudential's 50% share)
|
217
|
387
|
203
|
376
|
171
|
Hong Kong
|
211
|
384
|
211
|
384
|
670
|
Indonesia
|
52
|
125
|
50
|
124
|
61
|
Malaysia
|
70
|
159
|
66
|
157
|
73
|
Singapore
|
244
|
499
|
249
|
515
|
198
|
Growth markets and other
|
304
|
630
|
290
|
619
|
316
|
Total insurance business
|
1,098
|
2,184
|
1,069
|
2,175
|
1,489
|
|
|
|
|
|
|
New business margin (NBP as a % of APE)
|
|
|
|
|
|
CPL
|
43%
|
44%
|
43%
|
44%
|
43%
|
Hong Kong
|
93%
|
74%
|
93%
|
74%
|
65%
|
Indonesia
|
47%
|
51%
|
47%
|
51%
|
41%
|
Malaysia
|
41%
|
44%
|
40%
|
44%
|
39%
|
Singapore
|
63%
|
65%
|
63%
|
65%
|
51%
|
Growth markets and other
|
38%
|
39%
|
38%
|
39%
|
36%
|
Total insurance business
|
50%
|
50%
|
50%
|
50%
|
49%
|
|
|
|
|
|
|
New business margin (NBP as a % of PVNBP)
|
|
|
|
|
|
CPL
|
10%
|
11%
|
10%
|
11%
|
12%
|
Hong Kong
|
12%
|
12%
|
12%
|
12%
|
12%
|
Indonesia
|
12%
|
12%
|
12%
|
12%
|
10%
|
Malaysia
|
8%
|
8%
|
8%
|
8%
|
8%
|
Singapore
|
8%
|
8%
|
8%
|
8%
|
8%
|
Growth markets and other
|
9%
|
10%
|
9%
|
10%
|
9%
|
Total insurance business
|
9%
|
10%
|
9%
|
10%
|
10%
|
Schedule D Investment flows and FUM (AER)
|
|
2022 $m
|
|
|
2023 $m
|
|
Eastspring:
|
|
H1
|
H2
|
|
|
H1
|
|
Third-party retail:note
|
|
|
|
|
|
|
|
Opening FUM
|
|
68,516
|
58,407
|
|
|
60,143
|
|
Net flows:
|
|
|
|
|
|
|
|
- Gross Inflows
|
|
11,050
|
8,504
|
|
|
10,776
|
|
- Redemptions
|
|
(12,808)
|
(8,520)
|
|
|
(8,736)
|
|
|
|
(1,758)
|
(16)
|
|
|
2,040
|
|
Other movements
|
|
(8,351)
|
1,752
|
|
|
3,060
|
|
Closing FUM
|
|
58,407
|
60,143
|
|
|
65,243
|
|
|
|
|
|
|
|
|
|
Third-party institutional:
|
|
|
|
|
|
|
|
Opening FUM
|
|
13,192
|
10,988
|
|
|
11,311
|
|
Net flows:
|
|
|
|
|
|
|
|
- Gross Inflows
|
|
561
|
763
|
|
|
392
|
|
- Redemptions
|
|
(589)
|
(547)
|
|
|
(575)
|
|
|
|
(28)
|
216
|
|
|
(183)
|
|
Other movements
|
|
(2,176)
|
107
|
|
|
550
|
|
Closing FUM
|
|
10,988
|
11,311
|
|
|
11,678
|
|
|
|
|
|
|
|
|
|
Total third-party closing FUM (excluding MMF and funds held on
behalf of M&G plc)
|
|
69,395
|
71,454
|
|
|
76,921
|
|
Note
Mandatory Provident Fund (MPF) product flows in Hong Kong are
included at Prudential's 36 per cent interest in the Hong Kong MPF
business.
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 period, 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 of the Group IFRS financial results. A full
reconciliation to profit after tax is given in note B1.1 of the
Group IFRS financial results.
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).
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
IFRS shareholders' equity as reported in the financial
statements
|
17,159
|
16,731
|
Add: CSM, including joint ventures and associates and net of
reinsurance*
|
20,820
|
19,989
|
Remove: CSM asset attaching to reinsurance contracts wholly
attributable to policyholders*
|
1,305
|
1,295
|
Less: Related deferred tax adjustments for the above*
|
(2,839)
|
(2,804)
|
Adjusted shareholders' equity
|
36,445
|
35,211
|
* See note C3.1 of the Group IFRS financial results 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. Half year profits are annualised by
multiplying by two.
|
Half year 2023 $m
|
Full year 2022 $m
|
Adjusted operating profit
|
1,462
|
2,722
|
Tax on adjusted operating profit
|
(221)
|
(539)
|
Adjusted operating profit attributable to non-controlling
interests
|
(3)
|
(11)
|
Adjusted operating profit, net of tax and non-controlling
interests
|
1,238
|
2,172
|
|
|
|
IFRS shareholders' equity at beginning of period
|
16,731
|
18,936
|
IFRS shareholders' equity at end of period
|
17,159
|
16,731
|
Average IFRS shareholders' equity
|
16,945
|
17,834
|
Operating return on average IFRS shareholders' equity
(%)
|
15%
|
12%
|
II(iv) Calculation
of shareholders' equity per share
IFRS shareholders' equity per share is calculated as closing IFRS
shareholders' equity divided by the number of issued shares at the
end of the periods.
|
30 Jun 2023
|
31 Dec 2022
|
Number of issued shares at the end of the period (million
shares)
|
2,753
|
2,750
|
Closing IFRS shareholders' equity ($ million)
|
17,159
|
16,731
|
Group IFRS shareholders' equity per share (cents)
|
623¢
|
608¢
|
|
|
|
Closing adjusted shareholders' equity ($ million)
|
36,445
|
35,211
|
Group adjusted shareholders' equity per share (cents)
|
1,324¢
|
1,280¢
|
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.
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
IFRS revenue
|
257
|
|
271
|
513
|
Share of revenue from joint ventures and associates
|
158
|
|
149
|
303
|
Commissions and other
|
(62)
|
|
(84)
|
(155)
|
Performance-related fees
|
(2)
|
|
(4)
|
(1)
|
Operating income before performance-related feesnote
|
351
|
|
332
|
660
|
|
|
|
|
|
IFRS charges
|
185
|
|
205
|
398
|
Share of expenses from joint ventures and associates
|
62
|
|
63
|
117
|
Commissions and other
|
(62)
|
|
(84)
|
(155)
|
Operating expense
|
185
|
|
184
|
360
|
Cost/income ratio (operating expense/operating income before
performance-related fees)
|
53%
|
|
55%
|
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 period, which is calculated
as the aggregate of regular premiums and one-tenth of single
premiums on new business written during the period for all
insurance products, including premiums for contracts designated as
investment contracts 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 period.
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
|
|
|
|
|
Gross premiums earned
|
10,961
|
|
12,241
|
23,344
|
Gross premiums earned from joint ventures and
associates
|
2,090
|
|
2,368
|
4,439
|
Total Group, including joint ventures and associates
|
13,051
|
|
14,609
|
27,783
|
|
|
|
|
|
Renewal insurance premiums
|
8,922
|
|
9,288
|
18,675
|
Annual premium equivalent (APE)
|
3,027
|
|
2,213
|
4,393
|
Life weighted premium income
|
11,949
|
|
11,501
|
23,068
|
II(vii) Reconciliation between EEV new business profit and IFRS new
business CSM
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
EEV new business profit
|
1,489
|
|
1,098
|
2,184
|
Economics and othernote
(1)
|
(411)
|
|
(181)
|
(424)
|
New rider salesnote
(2)
|
(42)
|
|
(51)
|
(66)
|
Related tax on IFRS new business CSMnote
(3)
|
160
|
|
191
|
370
|
IFRS new business CSM
|
1,196
|
|
1,057
|
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.
|
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
periods:
|
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
EEV shareholders' equity
|
43,704
|
42,184
|
Adjustments for non-market risk allowance:
|
|
|
|
Remove: Allowance for non-market risks in EEVnote
(1)
|
2,972
|
2,760
|
|
Add: IFRS risk adjustment, net of related deferred tax
adjustmentsnote
(2)
|
(1,951)
|
(1,803)
|
Mark-to-market value adjustment of the Group's core structural
borrowingsnote
(3)
|
(389)
|
(427)
|
Economics and other valuation differencesnote
(4)
|
(7,891)
|
(7,503)
|
Adjusted IFRS shareholders' equity (see note II(ii))
|
36,445
|
35,211
|
Remove: CSM, including joint ventures and associates and net of
reinsurance
|
(20,820)
|
(19,989)
|
Add: CSM asset attaching to reinsurance contracts wholly
attributable to policyholders
|
(1,305)
|
(1,295)
|
Add: Related deferred tax adjustments for the above
|
2,839
|
2,804
|
IFRS shareholders' equity
|
17,159
|
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 period as a percentage of average EEV
basis shareholders' equity. Half year profits are annualised
by multiplying by two.
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
EEV operating profit for the period
|
2,155
|
|
1,806
|
3,952
|
Operating profit attributable to non-controlling
interests
|
(11)
|
|
(10)
|
(29)
|
EEV operating profit, net of non-controlling interests
|
2,144
|
|
1,796
|
3,923
|
|
|
|
|
|
Shareholders' equity at beginning of period
|
42,184
|
|
47,5841
|
47,5841
|
Shareholders' equity at end of period
|
43,704
|
|
42,300
|
42,184
|
Average shareholders' equity
|
42,944
|
|
44,942
|
44,884
|
Operating return on average shareholders' equity (%)
|
10%
|
|
8%
|
9%
|
1
Opening shareholders' equity at 1 January 2022 has been adjusted
for early adoption of the HK RBC regime.
New business profit over embedded value is calculated as the EEV
new business profit for the period (annualised by multiplying by 2)
as a percentage of average EEV basis shareholders' equity for
insurance business operations, excluding goodwill attributable to
equity holders.
|
2023
|
|
2022
|
|
Half year
|
|
Half year
|
Full year
|
New business profit ($ million)*
|
1,489
|
|
1,098
|
2,184
|
Average EEV shareholders' equity for insurance business operations,
excluding goodwill attributable to equity holders ($
million)
|
39,518
|
|
41,920
|
41,866
|
New business profit on embedded value (%)
|
8%
|
|
5%
|
5%
|
* New
business profit is attributed to the shareholders of the Group
before deducting the amount attributable to non-controlling
interests.
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:
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
Shareholders' equity at beginning of period
|
38,857
|
|
44,8751
|
44,8751
|
Shareholders' equity at end of period
|
40,179
|
|
38,965
|
38,857
|
Average shareholders' equity
|
39,518
|
|
41,920
|
41,866
|
1
Opening shareholders' equity at 1 January 2022 has been adjusted
for early adoption of the HK RBC regime.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: 30 August
2023
|
PRUDENTIAL
PUBLIC LIMITED COMPANY
|
|
|
|
By:
/s/ Ben Bulmer
|
|
|
|
Ben
Bulmer
|
|
Group
Chief Financial Officer
|
Prudential (NYSE:PUK)
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