IFRS disclosures
Prudential plc 2023 results
International Financial Reporting Standards (IFRS) financial
results
Consolidated income statement
|
Note
|
2023 $m
|
2022*
$m
|
Insurance revenue
|
B1.4
|
9,371
|
8,549
|
Insurance service
expense:
|
|
|
|
Claims incurred
|
|
(2,913)
|
(2,563)
|
Directly attributable expenses
incurred
|
|
(1,258)
|
(1,221)
|
Amortisation of insurance
acquisition cash flows
|
|
(2,745)
|
(2,453)
|
Other insurance service
expenses
|
|
(197)
|
(30)
|
|
|
(7,113)
|
(6,267)
|
Net expense from reinsurance
contracts held
|
|
(171)
|
(105)
|
Insurance service result
|
|
2,087
|
2,177
|
Investment return:
|
|
|
|
Interest revenue calculated using
the effective interest method
|
|
340
|
237
|
Other investment return on
financial investments
|
|
9,423
|
(29,617)
|
|
B1.4
|
9,763
|
(29,380)
|
Fair value movement on investment
contract liabilities
|
|
(24)
|
67
|
Net insurance and reinsurance
finance income (expense):
|
|
|
|
Net finance (expense) income from
insurance contracts
|
|
(8,839)
|
28,623
|
Net finance income (expense) from
reinsurance contracts held
|
|
191
|
(1,193)
|
|
|
(8,648)
|
27,430
|
Net investment result
|
|
1,091
|
(1,883)
|
Other revenue
|
B1.4
|
369
|
436
|
Non-insurance
expenditure
|
B2
|
(990)
|
(1,019)
|
Finance costs: interest on core
structural borrowings of shareholder-financed businesses
|
|
(172)
|
(200)
|
(Loss) gain attaching to corporate
transactions
|
B1.1
|
(22)
|
55
|
Share of loss from joint ventures
and associates, net of related tax
|
|
(91)
|
(85)
|
Profit (loss) before tax
(being tax attributable to shareholders' and policyholders'
returns) note
|
|
2,272
|
(519)
|
Tax charge attributable to
policyholders' returns
|
|
(175)
|
(124)
|
Profit (loss) before tax
attributable to shareholders' returns
|
|
2,097
|
(643)
|
Total tax charge attributable to
shareholders' and policyholders' returns
|
B3.1
|
(560)
|
(478)
|
Remove tax charge attributable to
policyholders' returns
|
|
175
|
124
|
Tax charge attributable to
shareholders' returns
|
B3.2
|
(385)
|
(354)
|
Profit (loss) for the year
|
|
1,712
|
(997)
|
|
|
|
|
Attributable to:
|
|
|
|
Equity holders of the
Company
|
|
1,701
|
(1,007)
|
Non-controlling
interests
|
|
11
|
10
|
Profit (loss) for the year
|
|
1,712
|
(997)
|
Earnings per share (in cents)
|
Note
|
2023
|
2022*
|
Based on profit (loss)
attributable to equity holders of the Company:
|
B4
|
|
|
Basic
|
|
62.1¢
|
(36.8)¢
|
Diluted
|
|
61.9¢
|
(36.8)¢
|
*
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.
Consolidated statement of comprehensive
income
|
2023 $m
|
2022*
$m
|
Profit (loss) for the year
|
1,712
|
(997)
|
Other comprehensive income (loss):
|
|
|
Exchange movements arising during
the year
|
(135)
|
(613)
|
Valuation movements on retained
interest in Jackson classified as available-for-sale under IAS 39:
note
|
|
|
Unrealised (loss) arising during
the year
|
|
(125)
|
Deduct net gains included in the
income statements on disposal
|
|
(62)
|
|
|
(187)
|
Total items that may be reclassified subsequently to profit
or loss
|
(135)
|
(800)
|
|
|
|
Valuation movements on retained
interest in Jackson classified as fair value through other
comprehensive income under IFRS 9 note
|
8
|
|
Total items that will not be reclassified subsequently to
profit or loss
|
8
|
|
|
|
|
Total comprehensive income (loss) for the
year
|
1,585
|
(1,797)
|
|
|
|
Attributable to:
|
|
|
Equity holders of the
Company
|
1,585
|
(1,797)
|
Non-controlling
interests
|
-
|
-
|
Total comprehensive income (loss) for the
year
|
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.
Consolidated statement of changes in equity
|
|
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
|
Reserves
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
-
|
-
|
1,701
|
-
|
-
|
1,701
|
11
|
1,712
|
Other comprehensive (loss)
income
|
|
-
|
-
|
-
|
(124)
|
8
|
(116)
|
(11)
|
(127)
|
Total comprehensive income (loss) for the
year
|
|
-
|
-
|
1,701
|
(124)
|
8
|
1,585
|
-
|
1,585
|
Transactions with owners of the Company
|
|
|
|
|
|
|
|
|
|
Dividends
|
B5
|
-
|
-
|
(533)
|
-
|
-
|
(533)
|
(7)
|
(540)
|
Transfer of fair value reserve
following disposal of investment in Jackson
|
|
-
|
-
|
71
|
-
|
(71)
|
-
|
-
|
-
|
Reserve movements in respect of
share-based payments
|
|
-
|
-
|
(5)
|
-
|
-
|
(5)
|
-
|
(5)
|
Effect of transactions relating to
non-controlling interests
|
|
-
|
-
|
16
|
-
|
-
|
16
|
-
|
16
|
New share capital
subscribed
|
C8
|
1
|
3
|
-
|
-
|
-
|
4
|
-
|
4
|
Movement in own shares in respect
of share-based payment plans
|
|
-
|
-
|
25
|
-
|
-
|
25
|
-
|
25
|
Net increase (decrease) in
equity
|
|
1
|
3
|
1,275
|
(124)
|
(63)
|
1,092
|
(7)
|
1,085
|
Balance at 1 Jan
|
|
182
|
5,006
|
10,653
|
827
|
63
|
16,731
|
167
|
16,898
|
Balance at 31 Dec
|
|
183
|
5,009
|
11,928
|
703
|
-
|
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
|
|
-
|
-
|
(1,007)
|
-
|
-
|
(1,007)
|
10
|
(997)
|
Other comprehensive
loss
|
|
-
|
-
|
-
|
(603)
|
(187)
|
(790)
|
(10)
|
(800)
|
Total comprehensive loss for the year
|
|
-
|
-
|
(1,007)
|
(603)
|
(187)
|
(1,797)
|
-
|
(1,797)
|
Transactions with owners of the Company
|
|
|
|
|
|
|
|
|
|
Dividends
|
B5
|
-
|
-
|
(474)
|
-
|
-
|
(474)
|
(8)
|
(482)
|
Reserve movements in respect of
share-based payments
|
|
-
|
-
|
24
|
-
|
-
|
24
|
-
|
24
|
Effect of transactions relating to
non-controlling interests
|
|
-
|
-
|
49
|
-
|
-
|
49
|
-
|
49
|
New share capital
subscribed
|
C8
|
-
|
(4)
|
-
|
-
|
-
|
(4)
|
-
|
(4)
|
Movement in own shares in respect
of share-based payment plans
|
|
-
|
-
|
(3)
|
-
|
-
|
(3)
|
-
|
(3)
|
Net decrease in equity
|
|
-
|
(4)
|
(1,411)
|
(603)
|
(187)
|
(2,205)
|
(8)
|
(2,213)
|
Balance at 1 Jan
|
|
|
|
|
|
|
|
|
|
As previously reported
|
|
182
|
5,010
|
10,216
|
1,430
|
250
|
17,088
|
176
|
17,264
|
Effect of initial application of
IFRS 17 and classification overlay of IFRS 9, net of tax
|
|
-
|
-
|
1,848
|
-
|
-
|
1,848
|
(1)
|
1,847
|
As restated after effect of
changes
|
|
182
|
5,010
|
12,064
|
1,430
|
250
|
18,936
|
175
|
19,111
|
Balance at 31 Dec
|
|
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.
Consolidated statement of financial
position
|
|
31 Dec 2023
$m
|
31 Dec
2022 $m
|
1 Jan
2022 $m
|
|
Note
|
|
note
(i)
|
note
(i)
|
Assets
|
|
|
|
|
Goodwill
|
C4.1
|
896
|
890
|
907
|
Other intangible assets
|
C4.2
|
3,986
|
3,884
|
4,015
|
Property, plant and
equipment
|
|
374
|
437
|
495
|
Insurance contract
assets
|
C3.1
|
1,180
|
1,134
|
1,250
|
Reinsurance contract
assets
|
C3.1
|
2,426
|
1,856
|
2,787
|
Deferred tax assets
|
C7.2
|
156
|
140
|
132
|
Current tax recoverable
|
C7.1
|
34
|
18
|
20
|
Investments in joint ventures and
associates accounted for using the equity method
|
|
1,940
|
2,259
|
2,698
|
Investment properties
|
C1
|
39
|
37
|
38
|
Loans
|
C1
|
578
|
590
|
771
|
Equity securities and holdings in
collective investment schemes note (ii)
|
C1
|
64,753
|
57,679
|
61,601
|
Debt securities note
(ii)
|
C1
|
83,064
|
77,016
|
99,154
|
Derivative assets
|
C2.2
|
1,855
|
569
|
481
|
Deposits
|
C1
|
5,870
|
6,275
|
4,741
|
Accrued investment
income
|
|
1,003
|
983
|
1,017
|
Other debtors
|
|
1,161
|
968
|
955
|
Cash and cash
equivalents
|
|
4,751
|
5,514
|
7,170
|
Total assets
|
|
174,066
|
160,249
|
188,232
|
|
|
|
|
|
Equity
|
|
|
|
|
Shareholders' equity
|
|
17,823
|
16,731
|
18,936
|
Non-controlling
interests
|
|
160
|
167
|
175
|
Total equity
|
|
17,983
|
16,898
|
19,111
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Insurance contract
liabilities
|
C3.1
|
139,840
|
126,242
|
149,798
|
Reinsurance contract
liabilities
|
C3.1
|
1,151
|
1,175
|
1,254
|
Investment contract liabilities
without discretionary participation features
|
C2.2
|
769
|
663
|
722
|
Core structural borrowings of
shareholder-financed businesses
|
C5.1
|
3,933
|
4,261
|
6,127
|
Operational borrowings
|
C5.2
|
941
|
815
|
861
|
Obligations under funding,
securities lending and sale and repurchase agreements
|
|
716
|
582
|
223
|
Net asset value attributable to
unit holders of consolidated investment funds
|
|
2,711
|
4,193
|
5,664
|
Deferred tax
liabilities
|
C7.2
|
1,250
|
1,139
|
1,167
|
Current tax liabilities
|
C7.1
|
275
|
208
|
185
|
Accruals, deferred income and
other creditors
|
|
4,035
|
2,866
|
2,624
|
Provisions
|
|
224
|
206
|
234
|
Derivative liabilities
|
C2.2
|
238
|
1,001
|
262
|
Total liabilities
|
|
156,083
|
143,351
|
169,121
|
Total equity and liabilities
|
|
174,066
|
160,249
|
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).
Consolidated statement of cash flows
|
Note
|
2023 $m
|
2022*
$m
|
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:
|
|
|
|
Investments
|
|
(14,539)
|
22,717
|
Other non-investment and non-cash
assets
|
|
23
|
(35)
|
Insurance and reinsurance contract
assets and liabilities
|
|
12,787
|
(20,440)
|
Other non-insurance
liabilities
|
|
42
|
(665)
|
Investment income and interest
payments included in profit before tax
|
|
(4,378)
|
(3,912)
|
Operating cash items:
|
|
|
|
Interest receipts
|
|
2,872
|
2,589
|
Interest payments
|
|
(75)
|
(16)
|
Dividend receipts
|
|
1,650
|
1,523
|
Tax paid
|
|
(406)
|
(449)
|
Other non-cash items
|
|
584
|
285
|
Net cash flows from operating
activities note (i)
|
|
832
|
1,078
|
Cash flows from investing activities
|
|
|
|
Purchases of property, plant and
equipment
|
|
(44)
|
(34)
|
Proceeds from disposal of
property, plant and equipment
|
|
2
|
-
|
Acquisition of business and
intangibles note (ii)
|
|
(415)
|
(298)
|
Cash advanced to CPL note
(i)
|
|
(176)
|
-
|
Disposal of Jackson
shares
|
|
273
|
293
|
Net cash flows from investing
activities
|
|
(360)
|
(39)
|
Cash flows from financing activities
|
|
|
|
Structural borrowings of
shareholder-financed operations: note (iii)
|
|
|
|
Issuance of debt, net of
costs
|
|
-
|
346
|
Redemption of debt
|
|
(393)
|
(2,075)
|
Interest paid
|
|
(188)
|
(204)
|
Payment of principal portion of
lease liabilities
|
|
(93)
|
(101)
|
Equity capital:
|
|
|
|
Issues of ordinary share
capital
|
C8
|
4
|
(4)
|
External dividends:
|
|
|
|
Dividends paid to equity holders
of the Company
|
B5
|
(533)
|
(474)
|
Dividends paid to non-controlling
interests
|
|
(7)
|
(8)
|
Net cash flows from financing
activities
|
|
(1,210)
|
(2,520)
|
Net decrease in cash and cash equivalents
|
|
(738)
|
(1,481)
|
Cash and cash equivalents at 1
Jan
|
|
5,514
|
7,170
|
Effect of exchange rate changes on
cash and cash equivalents
|
|
(25)
|
(175)
|
Cash and cash equivalents at 31 Dec
|
|
4,751
|
5,514
|
*
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:
|
Balance
at 1 Jan $m
|
Cash
movements $m
|
|
Non-cash movements $m
|
Balance
at 31 Dec $m
|
|
Issuance
of
debt
|
Redemption
of
debt
|
|
Foreign
exchange
movement
|
Other
movements
|
2023
|
4,261
|
-
|
(393)
|
|
58
|
7
|
3,933
|
2022
|
6,127
|
346
|
(2,075)
|
|
(147)
|
10
|
4,261
|
Notes to the consolidated financial
statements
A
Basis of preparation
A1 Basis of preparation and exchange rates
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 financial information set out
in this announcement does not constitute the Company's statutory
accounts for the years ended 31 December 2023 but is derived from
those accounts. The auditors have reported on the 2023 statutory
accounts. Statutory accounts for 2022 have been delivered to the
Registrar of Companies, and those for 2023 will be delivered
following the Company's Annual General Meeting. The auditors'
report was: (i) unqualified; (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report; and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
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 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 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 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
|
|
31 Dec
2023
|
31 Dec
2022
|
1 Jan
2022
|
|
2023
|
2022
|
Chinese yuan (CNY)
|
7.09
|
6.95
|
6.37
|
|
7.09
|
6.73
|
Hong Kong dollar (HKD)
|
7.81
|
7.81
|
7.80
|
|
7.83
|
7.83
|
Indian rupee (INR)
|
83.21
|
82.73
|
74.34
|
|
82.60
|
78.63
|
Indonesian rupiah (IDR)
|
15,397.00
|
15,567.50
|
14,252.50
|
|
15,230.82
|
14,852.24
|
Malaysian ringgit (MYR)
|
4.60
|
4.41
|
4.17
|
|
4.56
|
4.40
|
Singapore dollar (SGD)
|
1.32
|
1.34
|
1.35
|
|
1.34
|
1.38
|
Taiwan dollar (TWD)
|
30.69
|
30.74
|
27.67
|
|
31.17
|
29.81
|
Thai baht (THB)
|
34.37
|
34.56
|
33.19
|
|
34.80
|
35.06
|
UK pound sterling (GBP)
|
0.78
|
0.83
|
0.74
|
|
0.80
|
0.81
|
Vietnamese dong (VND)
|
24,262.00
|
23,575.00
|
22,790.00
|
|
23,835.92
|
23,409.87
|
Foreign exchange translation
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.
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).
Determination of discount
rates
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.
|
31 Dec 2023
%
|
|
1 year
|
5 years
|
10 years
|
15 years
|
20 years
|
Chinese yuan (CNY)
|
2.07 -
2.33
|
2.41 -
2.67
|
2.59 -
2.85
|
2.70 -
2.96
|
2.76 -
3.02
|
Hong Kong dollar (HKD)
|
4.76 -
5.23
|
3.75 -
4.22
|
3.76 -
4.23
|
3.89 -
4.36
|
3.95 -
4.42
|
Indonesian rupiah (IDR)
|
6.47 -
6.96
|
6.63 -
7.12
|
6.73 -
7.22
|
6.94 -
7.43
|
7.03 -
7.52
|
Malaysian ringgit (MYR)
|
3.31 -
3.56
|
3.67 -
3.92
|
3.78 -
4.03
|
4.09 -
4.34
|
4.33 -
4.58
|
Singapore dollar (SGD)
|
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
|
|
31 Dec 2022 %
|
|
1
year
|
5
years
|
10
years
|
15
years
|
20
years
|
Chinese yuan (CNY)
|
2.09 -
2.84
|
2.65 -
3.29
|
2.88 -
3.52
|
3.05 -
3.69
|
3.14 -
3.79
|
Hong Kong dollar (HKD)
|
4.85 -
6.14
|
3.96 -
5.25
|
3.78 -
5.07
|
3.82 -
5.11
|
3.84 -
5.13
|
Indonesian rupiah (IDR)
|
5.65 -
6.13
|
6.72 -
7.20
|
7.29 -
7.77
|
7.51 -
7.99
|
7.77 -
8.25
|
Malaysian ringgit (MYR)
|
3.52 -
3.91
|
3.91 -
4.29
|
4.13 -
4.52
|
4.35 -
4.73
|
4.49 -
4.88
|
Singapore dollar (SGD)
|
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
|
|
1 Jan 2022 %
|
|
1
year
|
5
years
|
10
years
|
15
years
|
20
years
|
Chinese yuan (CNY)
|
2.21 -
2.60
|
2.63 -
2.99
|
2.81 -
3.19
|
3.00 -
3.65
|
3.12 -
3.71
|
Hong Kong dollar (HKD)
|
0.43 -
1.44
|
1.24 -
2.26
|
1.47 -
2.48
|
1.62 -
2.64
|
1.91 -
2.92
|
Indonesian rupiah (IDR)
|
3.43 -
4.81
|
5.55 -
6.93
|
7.04 -
8.42
|
7.43 -
8.81
|
7.74 -
9.12
|
Malaysian ringgit (MYR)
|
2.25 -
2.58
|
3.19 -
3.52
|
3.72 -
4.05
|
4.13 -
4.46
|
4.34 -
4.67
|
Singapore dollar (SGD)
|
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
|
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.
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.
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.
|
At 31
Dec 2021 $m
|
Effects
of adoption of IFRS 17 $m
|
At 1 Jan
2022 $m
|
|
(as
reported under
IFRS 4)
|
Presentation
changes
|
Measurement
changes
|
(as
restated under
IFRS 17)
|
|
|
note(i)
|
note
(ii)
|
|
Assets
|
|
|
|
|
Goodwill
|
907
|
-
|
-
|
907
|
Deferred acquisition costs and
other intangible assets:
|
|
|
|
|
Deferred acquisition
costs
|
2,815
|
(39)
|
(2,776)
|
-
|
Other intangible assets
|
4,043
|
-
|
(28)
|
4,015
|
|
6,858
|
(39)
|
(2,804)
|
4,015
|
Insurance contract
assets
|
n/a
|
-
|
1,250
|
1,250
|
Reinsurance contract
assets
|
9,753
|
(22)
|
(6,944)
|
2,787
|
Deferred tax assets
|
266
|
(134)
|
-
|
132
|
Other non-investment and non-cash
assets
|
3,448
|
(1,022)
|
61
|
2,487
|
Investment properties
|
38
|
-
|
-
|
38
|
Investments in joint ventures and
associates accounted for using the equity method
|
2,183
|
-
|
515
|
2,698
|
Total financial
investments:
|
|
|
|
|
Policy loans
|
1,733
|
(1,733)
|
-
|
-
|
Other loans
|
829
|
-
|
(58)
|
771
|
Equity securities and holdings in
collective investment schemes
|
61,601
|
-
|
-
|
61,601
|
Debt securities
|
99,094
|
-
|
60
|
99,154
|
Derivative assets
|
481
|
-
|
-
|
481
|
Deposits
|
4,741
|
-
|
-
|
4,741
|
|
168,479
|
(1,733)
|
2
|
166,748
|
Cash and cash
equivalents
|
7,170
|
-
|
-
|
7,170
|
Total assets
|
199,102
|
(2,950)
|
(7,920)
|
188,232
|
Equity
|
|
|
|
|
Shareholders' equity
|
17,088
|
-
|
1,848
|
18,936
|
Non-controlling
interests
|
176
|
-
|
(1)
|
175
|
Total equity
|
17,264
|
-
|
1,847
|
19,111
|
Liabilities
|
|
|
|
|
Insurance contract
liabilities*
|
156,485
|
4,243
|
(10,930)
|
149,798
|
Reinsurance contract
liabilities
|
n/a
|
-
|
1,254
|
1,254
|
Investment contract liabilities
without discretionary participation features
|
814
|
-
|
(92)
|
722
|
Core structural borrowings of
shareholder-financed businesses
|
6,127
|
-
|
-
|
6,127
|
Operational borrowings
|
861
|
-
|
-
|
861
|
Deferred tax
liabilities
|
2,862
|
(1,696)
|
1
|
1,167
|
Other liabilities
|
14,689
|
(5,497)
|
-
|
9,192
|
Total liabilities
|
181,838
|
(2,950)
|
(9,767)
|
169,121
|
Total equity and liabilities
|
199,102
|
(2,950)
|
(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'.
- 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.
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.
B
Earnings performance
B1 Analysis of performance by segment
B1.1 Segment results
|
|
2023 $m
|
|
2022
$m
|
|
2023 vs
2022 %
|
|
|
|
|
AER
|
CER
|
|
AER
|
CER
|
|
Note
|
note (i)
|
|
note
(i)
|
note
(i)
|
|
note
(i)
|
note
(i)
|
CPL
|
|
368
|
|
271
|
258
|
|
36%
|
43%
|
Hong Kong
|
|
1,013
|
|
1,162
|
1,162
|
|
(13)%
|
(13)%
|
Indonesia
|
|
221
|
|
205
|
200
|
|
8%
|
11%
|
Malaysia
|
|
305
|
|
340
|
329
|
|
(10)%
|
(7)%
|
Singapore
|
|
584
|
|
570
|
585
|
|
2%
|
0%
|
Growth markets and other note
(ii)
|
|
746
|
|
728
|
715
|
|
2%
|
4%
|
Eastspring
|
|
280
|
|
260
|
255
|
|
8%
|
10%
|
Total segment profit
|
B1.3
|
3,517
|
|
3,536
|
3,504
|
|
(1)%
|
0%
|
Other income and expenditure
unallocated to a segment:
|
|
|
|
|
|
|
|
|
Net investment return and other
items note (iii)
|
|
(21)
|
|
(44)
|
(44)
|
|
52%
|
52%
|
Interest payable on core
structural borrowings
|
|
(172)
|
|
(200)
|
(200)
|
|
14%
|
14%
|
Corporate expenditure note
(iv)
|
|
(230)
|
|
(276)
|
(277)
|
|
17%
|
17%
|
Total other expenditure
|
|
(423)
|
|
(520)
|
(521)
|
|
19%
|
19%
|
Restructuring and IFRS 17
implementation costs note (v)
|
|
(201)
|
|
(294)
|
(293)
|
|
32%
|
31%
|
Adjusted operating profit
|
B1.2
|
2,893
|
|
2,722
|
2,690
|
|
6%
|
8%
|
Short-term fluctuations in
investment returns
|
|
(774)
|
|
(3,420)
|
(3,404)
|
|
77%
|
77%
|
(Loss) gain attaching to corporate
transactions
|
|
(22)
|
|
55
|
55
|
|
n/a
|
n/a
|
Profit (loss) before tax attributable to
shareholders
|
|
2,097
|
|
(643)
|
(659)
|
|
n/a
|
n/a
|
Tax charge attributable to
shareholders' returns
|
B3.2
|
(385)
|
|
(354)
|
(346)
|
|
(9)%
|
(11)%
|
Profit (loss) for the year
|
|
1,712
|
|
(997)
|
(1,005)
|
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Equity holders of the
Company
|
|
1,701
|
|
(1,007)
|
(1,014)
|
|
n/a
|
n/a
|
Non-controlling
interests
|
|
11
|
|
10
|
9
|
|
10%
|
22%
|
Profit (loss) for the year
|
|
1,712
|
|
(997)
|
(1,005)
|
|
n/a
|
n/a
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (in cents)
|
|
2023
|
|
2022
|
|
2023 vs
2022 %
|
|
|
|
|
AER
|
CER
|
|
AER
|
CER
|
|
Note
|
note (i)
|
|
note
(i)
|
note
(i)
|
|
note
(i)
|
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.
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:
|
2022
$m
|
IFRS 4 basis adjusted operating profit as previously
published
|
3,375
|
Difference
|
(653)
|
IFRS 17 basis adjusted operating profit
|
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.
(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 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.
|
2023 $m
|
|
2022
$m
|
|
2023 vs
2022 %
|
|
|
|
AER
|
CER
|
|
AER
|
CER
|
Adjusted release of CSM note
(i)
|
2,205
|
|
2,265
|
2,242
|
|
(3)%
|
(2)%
|
Release of risk
adjustment
|
218
|
|
179
|
178
|
|
22%
|
22%
|
Experience variances
|
(118)
|
|
(66)
|
(62)
|
|
(79)%
|
(90)%
|
Other insurance service
result
|
(109)
|
|
(204)
|
(195)
|
|
47%
|
44%
|
Adjusted insurance service result note
(i)
|
2,196
|
|
2,174
|
2,163
|
|
1%
|
2%
|
Net investment result on
longer-term basis note (ii)
|
1,241
|
|
1,290
|
1,271
|
|
(4)%
|
(2)%
|
Other insurance income and
expenditure
|
(122)
|
|
(98)
|
(100)
|
|
(24)%
|
(22)%
|
Share of related tax charges from
joint ventures and associates
|
(78)
|
|
(90)
|
(85)
|
|
13%
|
8%
|
Insurance business
|
3,237
|
|
3,276
|
3,249
|
|
(1)%
|
0%
|
Eastspring
|
280
|
|
260
|
255
|
|
8%
|
10%
|
Other income and
expenditure
|
(423)
|
|
(520)
|
(521)
|
|
19%
|
19%
|
Restructuring and IFRS 17
implementation costs
|
(201)
|
|
(294)
|
(293)
|
|
32%
|
31%
|
Adjusted operating profit, as reconciled to profit (loss) for
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 consolidated income statement as follows:
|
2023 $m
|
2022
$m
|
Release of CSM, net of reinsurance as included within
Insurance service result on the consolidated income
statement
|
1,990
|
2,013
|
Add amounts relating to the
Group's life joint ventures and associates that are accounted for
on equity-method
|
218
|
229
|
Release of CSM, net of reinsurance as shown in note
C3.2
|
|
|
Insurance
|
2,414
|
2,413
|
Reinsurance
|
(206)
|
(171)
|
|
2,208
|
2,242
|
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
|
(3)
|
23
|
Adjusted release of CSM as shown above
|
2,205
|
2,265
|
|
2023 $m
|
2022
$m
|
Insurance service result as shown in the consolidated income
statement
|
2,087
|
2,177
|
Add amounts relating to the
Group's life joint ventures and associates that are accounted for
on equity-method
|
148
|
112
|
Insurance service result as shown in note
C3.2
|
|
|
Insurance
|
2,424
|
2,396
|
Reinsurance
|
(189)
|
(107)
|
|
2,235
|
2,289
|
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
|
68
|
(33)
|
Other primarily related to
policyholder tax*
|
(107)
|
(82)
|
Adjusted insurance service result as shown
above
|
2,196
|
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.
(ii) In addition, net
investment result on longer-term basis is reconciled to the net
investment result in the consolidated income statement as
follows:
|
2023 $m
|
2022
$m
|
Net investment result as shown in the consolidated income
statement
|
1,091
|
(1,883)
|
Remove investment return of
non-insurance entities
|
(142)
|
(53)
|
Remove short-term fluctuations in
investment return included in non-operating profit*
|
774
|
3,420
|
Other items*
|
(482)
|
(194)
|
Net investment result on longer-term basis as shown
above
|
1,241
|
1,290
|
*
These reconciling line items include the impact from the Group's
life joint ventures and associates.
B1.4 Revenue
|
2023 $m
|
|
Insurance operations
note (i)
|
|
|
|
|
|
|
Hong Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and other
|
Eastspring
|
Inter-segment
elimination
|
Total
segment
|
Unallocated to a
segment
|
Total
|
Amounts relating to changes in the
liability for remaining coverage:
|
|
|
|
|
|
|
|
|
|
|
Expected claims and other directly
attributable expenses
|
1,089
|
582
|
642
|
970
|
670
|
-
|
-
|
3,953
|
-
|
3,953
|
Change in risk adjustment for
non-financial risk
|
73
|
35
|
24
|
55
|
41
|
-
|
-
|
228
|
-
|
228
|
Release of CSM for services
provided
|
787
|
187
|
203
|
478
|
538
|
-
|
-
|
2,193
|
-
|
2,193
|
Other adjustments note
(ii)
|
73
|
32
|
31
|
45
|
71
|
-
|
-
|
252
|
-
|
252
|
Recovery of insurance acquisition
cash flows
|
1,207
|
306
|
234
|
435
|
563
|
-
|
-
|
2,745
|
-
|
2,745
|
Insurance revenue
|
3,229
|
1,142
|
1,134
|
1,983
|
1,883
|
-
|
-
|
9,371
|
-
|
9,371
|
Other revenue note
(iii)
|
22
|
4
|
4
|
-
|
39
|
299
|
-
|
368
|
1
|
369
|
Total revenue from external customers
|
3,251
|
1,146
|
1,138
|
1,983
|
1,922
|
299
|
-
|
9,739
|
1
|
9,740
|
Intra-group revenue
|
-
|
-
|
-
|
-
|
-
|
184
|
(184)
|
-
|
-
|
-
|
Interest income
|
1,033
|
92
|
239
|
785
|
627
|
7
|
-
|
2,783
|
164
|
2,947
|
Dividend and other investment
income
|
775
|
93
|
151
|
528
|
117
|
3
|
-
|
1,667
|
7
|
1,674
|
Investment appreciation
(depreciation)
|
2,155
|
50
|
177
|
1,490
|
1,309
|
4
|
-
|
5,185
|
(43)
|
5,142
|
Investment return
|
3,963
|
235
|
567
|
2,803
|
2,053
|
198
|
(184)
|
9,635
|
128
|
9,763
|
Total revenue
|
7,214
|
1,381
|
1,705
|
4,786
|
3,975
|
497
|
(184)
|
19,374
|
129
|
19,503
|
|
2022
$m
|
|
Insurance operations note (i)
|
|
|
|
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and
other
|
Eastspring
|
Inter-segment elimination
|
Total
segment
|
Unallocated to a segment
|
Total
|
Amounts relating to changes in the
liability for remaining coverage:
|
|
|
|
|
|
|
|
|
|
|
Expected claims and other directly
attributable expenses
|
969
|
438
|
563
|
935
|
736
|
-
|
-
|
3,641
|
-
|
3,641
|
Change in risk adjustment for
non-financial risk
|
53
|
33
|
20
|
33
|
30
|
-
|
-
|
169
|
-
|
169
|
Release of CSM for services
provided
|
737
|
274
|
215
|
442
|
513
|
-
|
-
|
2,181
|
-
|
2,181
|
Other adjustments note
(ii)
|
30
|
16
|
-
|
27
|
32
|
-
|
-
|
105
|
-
|
105
|
Recovery of insurance acquisition
cash flows
|
1,051
|
309
|
231
|
378
|
484
|
-
|
-
|
2,453
|
-
|
2,453
|
Insurance revenue
|
2,840
|
1,070
|
1,029
|
1,815
|
1,795
|
-
|
-
|
8,549
|
-
|
8,549
|
Other revenue note
(iii)
|
65
|
6
|
-
|
1
|
33
|
330
|
-
|
435
|
1
|
436
|
Total revenue from external customers
|
2,905
|
1,076
|
1,029
|
1,816
|
1,828
|
330
|
-
|
8,984
|
1
|
8,985
|
Intra-group revenue
|
-
|
-
|
-
|
-
|
1
|
199
|
(200)
|
-
|
-
|
-
|
Interest income
|
927
|
83
|
208
|
724
|
601
|
4
|
-
|
2,547
|
50
|
2,597
|
Dividend and other investment
income
|
689
|
77
|
183
|
576
|
107
|
1
|
-
|
1,633
|
25
|
1,658
|
Investment depreciation
|
(23,615)
|
(69)
|
(386)
|
(6,679)
|
(2,860)
|
(21)
|
-
|
(33,630)
|
(5)
|
(33,635)
|
Investment return
|
(21,999)
|
91
|
5
|
(5,379)
|
(2,151)
|
183
|
(200)
|
(29,450)
|
70
|
(29,380)
|
Total revenue
|
(19,094)
|
1,167
|
1,034
|
(3,563)
|
(323)
|
513
|
(200)
|
(20,466)
|
71
|
(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.
(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.
(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).
B1.5 Additional segmental analysis of profit after
tax
|
2023 $m
|
2022
$m
|
CPL note
|
(577)
|
(345)
|
Hong Kong
|
976
|
(742)
|
Indonesia
|
156
|
108
|
Malaysia
|
257
|
178
|
Singapore
|
512
|
(7)
|
Growth markets and other
note
|
775
|
314
|
Eastspring
|
254
|
234
|
Total segment
|
2,353
|
(260)
|
Unallocated to a segment (central
operations)
|
(641)
|
(737)
|
Total profit (loss) after tax
|
1,712
|
(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).
B2 Tax charge
B2.1 Total tax charge by nature
The total tax charge in the income
statement is as follows:
|
2023 $m
|
2022
$m
|
Hong Kong
|
(129)
|
(106)
|
Indonesia
|
(43)
|
(27)
|
Malaysia
|
(98)
|
(44)
|
Singapore
|
(174)
|
(61)
|
Growth markets and
other
|
(103)
|
(210)
|
Eastspring
|
(26)
|
(26)
|
Total segment
note
|
(573)
|
(474)
|
Unallocated to a segment (central
operations)
|
13
|
(4)
|
Total tax charge note
|
(560)
|
(478)
|
Note
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.
B2.2 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.
|
2023
|
|
2022
|
|
$m
|
%
|
|
$m
|
%
|
Profit (loss) before tax (being
tax attributable to shareholders' and policyholders'
returns)
|
2,272
|
|
|
(519)
|
|
Tax charge attributable to
policyholders' returns note (i)
|
(175)
|
|
|
(124)
|
|
Profit (loss) before tax
attributable to shareholders' returns
|
2,097
|
|
|
(643)
|
|
Tax (charge) credit at the
expected rate
|
(399)
|
19 %
|
|
85
|
13
%
|
Effects of recurring tax
reconciliation items:
|
|
|
|
|
|
Income not taxable or taxable at
concessionary rates note (ii)
|
80
|
(4)%
|
|
61
|
9%
|
Deductions and losses not
allowable for tax purposes note (iii)
|
(136)
|
6%
|
|
(196)
|
(30)%
|
Items related to taxation of life
insurance businesses note (iv)
|
137
|
(7)%
|
|
(129)
|
(20)%
|
Deferred tax adjustments including
unrecognised tax losses
|
13
|
(1)%
|
|
(45)
|
(7)%
|
Effect of results of joint
ventures and associates note (v)
|
(38)
|
2%
|
|
(32)
|
(5)%
|
Irrecoverable withholding taxes
note (vi)
|
(63)
|
3%
|
|
(55)
|
(9)%
|
Other
|
(2)
|
1%
|
|
(15)
|
(2)%
|
Total charge on recurring
items
|
(9)
|
0%
|
|
(411)
|
(64)%
|
Effects of non-recurring tax
reconciliation items:
|
|
|
|
|
|
Adjustments to tax charge in
relation to prior years note (vii)
|
42
|
(2)%
|
|
1
|
0%
|
Movements in provisions for open
tax matters note (viii)
|
(15)
|
1%
|
|
(40)
|
(6)%
|
Adjustments in relation to
business disposals and corporate transactions
|
(4)
|
0%
|
|
11
|
2%
|
Total credit (charge) on
non-recurring items
|
23
|
(1)%
|
|
(28)
|
(4)%
|
Tax charge attributable to
shareholders' returns
|
(385)
|
|
|
(354)
|
|
Tax charge attributable to
policyholders' returns note (i)
|
(175)
|
|
|
(124)
|
|
Tax charge attributable to shareholders' and policyholders'
returns
|
(560)
|
|
|
(478)
|
|
Profit before tax attributable to
shareholders' returns analysed into:
|
|
|
|
|
|
Adjusted operating
profit
|
2,893
|
|
|
2,722
|
|
Non-operating result note
(ix)
|
(796)
|
|
|
(3,365)
|
|
Profit (loss) before tax
attributable to shareholders' returns
|
2,097
|
|
|
(643)
|
|
Tax charge attributable to
shareholders' returns analysed into:
|
|
|
|
|
|
Tax charge on adjusted operating
profit
|
(444)
|
|
|
(539)
|
|
Tax credit on non-operating result
note (ix)
|
59
|
|
|
185
|
|
Tax charge attributable to
shareholders' returns
|
(385)
|
|
|
(354)
|
|
Actual tax rate on:
|
|
|
|
|
|
Adjusted operating
profit:
|
|
|
|
|
|
Including non-recurring tax
reconciling items note (x)
|
15%
|
|
|
20%
|
|
Excluding non-recurring tax
reconciling items
|
16%
|
|
|
18%
|
|
Profit before tax attributable to shareholders' returns
note (x)
|
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.
|
2023 $m
|
Balance at 1 Jan
|
(79)
|
Movements in the current year
included in tax charge attributable to shareholders
|
(15)
|
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)
|
1
|
Balance at 31 Dec
|
(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 %
|
|
Hong Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and other
|
Eastspring
|
Other
operations
|
Total
attributable
to
shareholders
|
Tax rate on adjusted operating
profit
|
7%
|
22%
|
22%
|
16%
|
20%
|
9%
|
2%
|
15%
|
Tax rate on profit before
tax
|
7%
|
22%
|
20%
|
16%
|
11%
|
9%
|
2%
|
18%
|
|
2022
%
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and
other
|
Eastspring
|
Other
operations
|
Total
attributable to
shareholders
|
Tax rate on adjusted operating
profit
|
4%
|
19%
|
26%
|
16%
|
33%
|
10%
|
0%
|
20%
|
Tax rate on profit before
tax
|
(7)%
|
16%
|
25%
|
63%
|
40%
|
10%
|
(1)%
|
(55)%
|
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.
B3 Earnings per share
|
2023
|
|
Before
tax
|
Tax
|
Non-controlling
interests
|
Net of tax
and
non-
controlling
interests
|
Basic
earnings
per
share
|
Diluted
earnings
per
share
|
|
$m
|
$m
|
$m
|
$m
|
cents
|
cents
|
Based on adjusted operating
profit
|
2,893
|
(444)
|
(11)
|
2,438
|
89.0¢
|
88.7¢
|
Short-term fluctuations in
investment returns
|
(774)
|
59
|
-
|
(715)
|
(26.1)¢
|
(26.0)¢
|
Loss attaching to corporate
transactions
|
(22)
|
-
|
-
|
(22)
|
(0.8)¢
|
(0.8)¢
|
Based on profit for the
year
|
2,097
|
(385)
|
(11)
|
1,701
|
62.1¢
|
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.
|
2022
|
|
Before
tax
|
Tax
|
Non-controlling interests
|
Net of
tax
and non-
controlling
interests
|
Basic
earnings
per share
|
Diluted
earnings
per share
|
|
$m
|
$m
|
$m
|
$m
|
cents
|
cents
|
Based on adjusted operating
profit
|
2,722
|
(539)
|
(11)
|
2,172
|
79.4¢
|
79.4¢
|
Short-term fluctuations in
investment returns
|
(3,420)
|
185
|
1
|
(3,234)
|
(118.2)¢
|
(118.2)¢
|
Gain attaching to corporate
transactions
|
55
|
-
|
-
|
55
|
2.0¢
|
2.0¢
|
Based on loss for the
year
|
(643)
|
(354)
|
(10)
|
(1,007)
|
(36.8)¢
|
(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.
B4 Dividends
|
2023
|
|
2022
|
|
Cents per
share
|
$m
|
|
Cents
per share
|
$m
|
Dividends relating to reporting
year:
|
|
|
|
|
|
First interim dividend
|
6.26¢
|
172
|
|
5.74¢
|
154
|
Second interim dividend
|
14.21¢
|
392
|
|
13.04¢
|
359
|
Total relating to reporting
year
|
20.47¢
|
564
|
|
18.78¢
|
513
|
Dividends paid in reporting
year:
|
|
|
|
|
|
Current year first interim
dividend
|
6.26¢
|
172
|
|
5.74¢
|
154
|
Second interim dividend for prior
year
|
13.04¢
|
361
|
|
11.86¢
|
320
|
Total paid in reporting
year
|
19.30¢
|
533
|
|
17.60¢
|
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.
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.
|
31 Dec 2023
$m
|
|
Asia and
Africa
|
Unallocated
to a
segment
|
Group
total
|
|
Insurance
|
|
|
|
Funds with policyholder
participation
|
Unit-linked
funds
|
Other
|
Eastspring
|
Total
|
|
note (i)
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
Sovereign debt
|
|
|
|
|
|
|
|
Indonesia
|
393
|
611
|
525
|
-
|
1,529
|
-
|
1,529
|
Singapore
|
3,006
|
607
|
929
|
-
|
4,542
|
-
|
4,542
|
Thailand
|
2
|
4
|
1,957
|
-
|
1,963
|
-
|
1,963
|
United Kingdom
|
-
|
5
|
87
|
-
|
92
|
-
|
92
|
United States
|
23,552
|
84
|
2,351
|
-
|
25,987
|
-
|
25,987
|
Vietnam
|
3,143
|
30
|
173
|
-
|
3,346
|
-
|
3,346
|
Other (predominantly
Asia)
|
4,375
|
664
|
1,732
|
28
|
6,799
|
-
|
6,799
|
Subtotal
|
34,471
|
2,005
|
7,754
|
28
|
44,258
|
-
|
44,258
|
Other government bonds
|
|
|
|
|
|
|
|
AAA
|
1,533
|
94
|
119
|
-
|
1,746
|
-
|
1,746
|
AA+ to AA-
|
120
|
17
|
29
|
-
|
166
|
-
|
166
|
A+ to A-
|
689
|
95
|
239
|
-
|
1,023
|
-
|
1,023
|
BBB+ to BBB-
|
271
|
57
|
56
|
-
|
384
|
-
|
384
|
Below BBB- and unrated
|
502
|
11
|
63
|
2
|
578
|
-
|
578
|
Subtotal
|
3,115
|
274
|
506
|
2
|
3,897
|
-
|
3,897
|
Corporate bonds
|
|
|
|
|
|
|
|
AAA
|
1,214
|
147
|
243
|
-
|
1,604
|
-
|
1,604
|
AA+ to AA-
|
2,716
|
440
|
934
|
-
|
4,090
|
-
|
4,090
|
A+ to A-
|
10,918
|
460
|
2,179
|
-
|
13,557
|
1
|
13,558
|
BBB+ to BBB-
|
9,466
|
714
|
2,055
|
-
|
12,235
|
1
|
12,236
|
Below BBB- and unrated
|
2,280
|
500
|
356
|
-
|
3,136
|
-
|
3,136
|
Subtotal
|
26,594
|
2,261
|
5,767
|
-
|
34,622
|
2
|
34,624
|
Asset-backed securities
|
|
|
|
|
|
|
|
AAA
|
174
|
2
|
54
|
-
|
230
|
-
|
230
|
AA+ to AA-
|
6
|
-
|
2
|
-
|
8
|
-
|
8
|
A+ to A-
|
30
|
-
|
7
|
-
|
37
|
-
|
37
|
BBB+ to BBB-
|
7
|
-
|
2
|
-
|
9
|
-
|
9
|
Below BBB- and unrated
|
-
|
1
|
-
|
-
|
1
|
-
|
1
|
Subtotal
|
217
|
3
|
65
|
-
|
285
|
-
|
285
|
Total debt securities notes
(ii)(iv)
|
64,397
|
4,543
|
14,092
|
30
|
83,062
|
2
|
83,064
|
Loans
|
|
|
|
|
|
|
|
Mortgage loans
|
65
|
-
|
83
|
-
|
148
|
-
|
148
|
Other loans
|
430
|
-
|
-
|
-
|
430
|
-
|
430
|
Total loans
|
495
|
-
|
83
|
-
|
578
|
-
|
578
|
Equity securities and holdings in collective investment
schemes
|
|
|
|
|
|
|
|
Direct equities
|
18,711
|
12,075
|
182
|
128
|
31,096
|
-
|
31,096
|
Collective investment
schemes
|
24,529
|
7,546
|
1,580
|
2
|
33,657
|
-
|
33,657
|
Total equity securities and
holdings in collective investment schemes
|
43,240
|
19,621
|
1,762
|
130
|
64,753
|
-
|
64,753
|
Other financial investments note
(iii)
|
2,893
|
396
|
1,707
|
101
|
5,097
|
2,628
|
7,725
|
Total financial investments
|
111,025
|
24,560
|
17,644
|
261
|
153,490
|
2,630
|
156,120
|
Investment properties
|
-
|
-
|
39
|
-
|
39
|
-
|
39
|
Cash and cash
equivalents
|
1,054
|
647
|
1,287
|
173
|
3,161
|
1,590
|
4,751
|
Total investments
|
112,079
|
25,207
|
18,970
|
434
|
156,690
|
4,220
|
160,910
|
|
31 Dec
2022 $m
|
|
Asia
and Africa
|
Unallocated
to a
segment
|
|
|
Insurance
|
|
|
|
|
Funds
with policyholder participation
|
Unit-linked funds
|
Other
|
Eastspring
|
Total
|
Group
total
|
|
note
(i)
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
Sovereign debt
|
|
|
|
|
|
|
|
Indonesia
|
565
|
589
|
400
|
3
|
1,557
|
-
|
1,557
|
Singapore
|
3,240
|
507
|
917
|
67
|
4,731
|
-
|
4,731
|
Thailand
|
-
|
-
|
1,456
|
-
|
1,456
|
-
|
1,456
|
United Kingdom
|
-
|
4
|
-
|
-
|
4
|
-
|
4
|
United States
|
21,580
|
54
|
257
|
-
|
21,891
|
-
|
21,891
|
Vietnam
|
2,263
|
12
|
135
|
-
|
2,410
|
-
|
2,410
|
Other (predominantly
Asia)
|
3,663
|
646
|
1,666
|
27
|
6,002
|
-
|
6,002
|
Subtotal
|
31,311
|
1,812
|
4,831
|
97
|
38,051
|
-
|
38,051
|
Other government bonds
|
|
|
|
|
|
|
|
AAA
|
1,480
|
85
|
108
|
-
|
1,673
|
-
|
1,673
|
AA+ to AA-
|
112
|
21
|
20
|
-
|
153
|
-
|
153
|
A+ to A-
|
765
|
139
|
233
|
-
|
1,137
|
-
|
1,137
|
BBB+ to BBB-
|
327
|
77
|
99
|
-
|
503
|
-
|
503
|
Below BBB- and unrated
|
483
|
22
|
67
|
-
|
572
|
-
|
572
|
Subtotal
|
3,167
|
344
|
527
|
-
|
4,038
|
-
|
4,038
|
Corporate bonds
|
|
|
|
|
|
|
|
AAA
|
1,094
|
181
|
268
|
-
|
1,543
|
-
|
1,543
|
AA+ to AA-
|
2,356
|
385
|
1,151
|
-
|
3,892
|
-
|
3,892
|
A+ to A-
|
9,233
|
524
|
2,345
|
-
|
12,102
|
-
|
12,102
|
BBB+ to BBB-
|
9,515
|
1,325
|
2,344
|
1
|
13,185
|
-
|
13,185
|
Below BBB- and unrated
|
2,918
|
444
|
454
|
-
|
3,816
|
-
|
3,816
|
Subtotal
|
25,116
|
2,859
|
6,562
|
1
|
34,538
|
-
|
34,538
|
Asset-backed securities
|
|
|
|
|
|
|
|
AAA
|
228
|
5
|
85
|
-
|
318
|
-
|
318
|
AA+ to AA-
|
7
|
1
|
2
|
-
|
10
|
-
|
10
|
A+ to A-
|
25
|
-
|
9
|
-
|
34
|
-
|
34
|
BBB+ to BBB-
|
17
|
-
|
6
|
-
|
23
|
-
|
23
|
Below BBB- and unrated
|
2
|
1
|
1
|
-
|
4
|
-
|
4
|
Subtotal
|
279
|
7
|
103
|
-
|
389
|
-
|
389
|
Total debt securities note
(ii)
|
59,873
|
5,022
|
12,023
|
98
|
77,016
|
-
|
77,016
|
Loans
|
|
|
|
|
|
|
|
Mortgage loans
|
92
|
-
|
48
|
-
|
140
|
-
|
140
|
Other loans
|
450
|
-
|
-
|
-
|
450
|
-
|
450
|
Total loans
|
542
|
-
|
48
|
-
|
590
|
-
|
590
|
Equity securities and holdings in collective investment
schemes
|
|
|
|
|
|
|
|
Direct equities
|
15,000
|
11,379
|
202
|
61
|
26,642
|
266
|
26,908
|
Collective investment
schemes
|
22,015
|
6,760
|
1,992
|
2
|
30,769
|
2
|
30,771
|
Total equity securities and
holdings in collective investment schemes
|
37,015
|
18,139
|
2,194
|
63
|
57,411
|
268
|
57,679
|
Other financial investments note
(iii)
|
3,010
|
379
|
1,599
|
107
|
5,095
|
1,749
|
6,844
|
Total financial investments
|
100,440
|
23,540
|
15,864
|
268
|
140,112
|
2,017
|
142,129
|
Investment properties
|
-
|
-
|
37
|
-
|
37
|
-
|
37
|
Cash and cash
equivalents
|
1,563
|
749
|
1,266
|
127
|
3,705
|
1,809
|
5,514
|
Total investments
|
102,003
|
24,289
|
17,167
|
395
|
143,854
|
3,826
|
147,680
|
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:
|
31 Dec 2023
$m
|
31 Dec
2022 $m
|
Debt securities held by the
consolidated investment funds
|
11,116
|
11,899
|
(iii)
Other financial investments comprise derivative assets and
deposits.
C2 Measurement of financial assets and
liabilities
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.
C2.2 Valuation hierarchy
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
|
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
|
Total
|
|
|
|
note (iii)
|
|
Loans
|
-
|
430
|
-
|
430
|
Equity securities and holdings in
collective investment schemes
|
56,327
|
5,562
|
2,864
|
64,753
|
Debt securities note
(i)
|
64,004
|
19,020
|
40
|
83,064
|
Derivative assets
|
1,460
|
395
|
-
|
1,855
|
Derivative liabilities
|
(58)
|
(180)
|
-
|
(238)
|
Total financial investments, net
of derivative liabilities
|
121,733
|
25,227
|
2,904
|
149,864
|
Investment contract liabilities
without DPF note (ii)
|
-
|
(769)
|
-
|
(769)
|
Net asset value attributable to
unit holders of consolidated investment funds
|
(2,711)
|
-
|
-
|
(2,711)
|
Total financial instruments at fair value
|
119,022
|
24,458
|
2,904
|
146,384
|
Percentage of total (%)
|
81%
|
17%
|
2%
|
100%
|
|
31 Dec 2022 $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
|
Total
|
|
|
|
note
(iii)
|
|
Loans
|
-
|
447
|
3
|
450
|
Equity securities and holdings in
collective investment schemes
|
49,725
|
7,130
|
824
|
57,679
|
Debt securities note
(i)
|
57,148
|
19,763
|
38
|
76,949
|
Derivative assets
|
82
|
487
|
-
|
569
|
Derivative liabilities
|
(778)
|
(223)
|
-
|
(1,001)
|
Total financial investments, net
of derivative liabilities
|
106,177
|
27,604
|
865
|
134,646
|
Investment contract liabilities
without DPF note (ii)
|
-
|
(663)
|
-
|
(663)
|
Net asset value attributable to
unit holders of consolidated investment funds
|
(4,193)
|
-
|
-
|
(4,193)
|
Total financial instruments at fair value
|
101,984
|
26,941
|
865
|
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 $2,864 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.
C3 Insurance and reinsurance 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.
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
|
RI
|
|
Insurance
|
RI
|
Insurance
|
RI
|
Insurance
|
RI
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
$m
|
|
|
|
|
|
note
(ii)
|
|
|
|
|
|
|
note
(ii)
|
|
As
at 31 Dec 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best estimate liabilities
(BEL)
|
3,952
|
1,175
|
120,115
|
1,182
|
116,163
|
7
|
|
3,998
|
1,315
|
139,673
|
1,222
|
135,675
|
(93)
|
Risk adjustment for non-financial
risk (RA)
|
(631)
|
(84)
|
1,713
|
(21)
|
2,344
|
63
|
|
(630)
|
(67)
|
1,969
|
(24)
|
2,599
|
43
|
Contractual service margin
(CSM)
|
(2,173)
|
1,335
|
18,011
|
(10)
|
20,184
|
(1,345)
|
|
(2,176)
|
1,321
|
20,176
|
(19)
|
22,352
|
(1,340)
|
Insurance contract
balances
|
1,148
|
2,426
|
139,839
|
1,151
|
138,691
|
(1,275)
|
|
1,192
|
2,569
|
161,818
|
1,179
|
160,626
|
(1,390)
|
Assets for insurance acquisition
cash flows
|
32
|
-
|
1
|
-
|
(31)
|
-
|
|
32
|
-
|
1
|
-
|
(31)
|
-
|
Insurance and reinsurance contract
(assets) liabilities
|
1,180
|
2,426
|
139,840
|
1,151
|
138,660
|
(1,275)
|
|
1,224
|
2,569
|
161,819
|
1,179
|
160,595
|
(1,390)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 31 Dec 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best estimate liabilities
(BEL)
|
3,540
|
508
|
107,582
|
1,162
|
104,042
|
654
|
|
3,562
|
652
|
124,297
|
1,193
|
120,735
|
541
|
Risk adjustment for non-financial
risk (RA)
|
(505)
|
(39)
|
1,418
|
(44)
|
1,923
|
(5)
|
|
(502)
|
(21)
|
1,662
|
(47)
|
2,164
|
(26)
|
Contractual service margin
(CSM)
|
(1,929)
|
1,387
|
17,239
|
57
|
19,168
|
(1,330)
|
|
(1,921)
|
1,369
|
19,383
|
54
|
21,304
|
(1,315)
|
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
|
28
|
-
|
3
|
-
|
(25)
|
-
|
|
28
|
-
|
3
|
-
|
(25)
|
-
|
Insurance and reinsurance contract
(assets) liabilities
|
1,134
|
1,856
|
126,242
|
1,175
|
125,108
|
(681)
|
|
1,167
|
2,000
|
145,345
|
1,200
|
144,178
|
(800)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at 1 Jan 2022 (transition date)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
(547)
|
(15)
|
1,661
|
(46)
|
2,208
|
(31)
|
|
(575)
|
1
|
1,868
|
(49)
|
2,443
|
(50)
|
Contractual service margin
(CSM)
|
(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
|
29
|
-
|
-
|
-
|
(29)
|
-
|
|
29
|
-
|
-
|
-
|
(29)
|
-
|
Insurance and reinsurance contract
(assets) liabilities
|
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
|
Group's share relating
to
JVs and
associates
|
Total
including
JVs and
associates
|
|
Balances
excluding
JVs and
associates
|
Group's
share relating to
JVs and
associates
|
Total
including
JVs and
associates
|
|
Balances
excluding
JVs and
associates
|
Group's
share relating to
JVs and
associates
|
Total
including
JVs and
associates
|
Shareholders' equity
|
15,883
|
1,940
|
17,823
|
|
14,472
|
2,259
|
16,731
|
|
16,238
|
2,698
|
18,936
|
CSM, net of reinsurance
|
18,839
|
2,173
|
21,012
|
|
17,838
|
2,151
|
19,989
|
|
22,525
|
2,224
|
24,749
|
Remove: CSM asset attaching to
reinsurance contracts wholly attributable to
policyholders
|
1,367
|
-
|
1,367
|
|
1,295
|
-
|
1,295
|
|
1,144
|
-
|
1,144
|
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
|
C3.2 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:
|
Including JVs and
associates
|
|
2023
$m
|
|
Insurance
|
|
Reinsurance
|
|
BEL
|
RA
|
CSM
|
Total
|
|
BEL
|
RA
|
CSM
|
Total
|
|
|
|
note (b)
|
|
|
|
|
note (b)
|
|
Opening assets
|
(3,562)
|
502
|
1,921
|
(1,139)
|
|
(652)
|
21
|
(1,369)
|
(2,000)
|
Opening liabilities
|
124,297
|
1,662
|
19,383
|
145,342
|
|
1,193
|
(47)
|
54
|
1,200
|
Net opening balance at 1 Jan
|
120,735
|
2,164
|
21,304
|
144,203
|
|
541
|
(26)
|
(1,315)
|
(800)
|
Changes that relate to
future service
|
|
|
|
|
|
|
|
|
|
Changes in estimates that adjust
the CSM
|
(1,142)
|
341
|
801
|
-
|
|
62
|
43
|
(105)
|
-
|
Changes in estimates that result
in losses or reversal of losses on onerous contracts
|
224
|
(8)
|
-
|
216
|
|
(93)
|
-
|
-
|
(93)
|
New contracts in the
year
|
(2,687)
|
317
|
2,429
|
59
|
|
86
|
(6)
|
(81)
|
(1)
|
|
(3,605)
|
650
|
3,230
|
275
|
|
55
|
37
|
(186)
|
(94)
|
Changes that relate to
current service
|
|
|
|
|
|
|
|
|
|
Release of CSM to profit or
loss
|
-
|
-
|
(2,414)
|
(2,414)
|
|
-
|
-
|
206
|
206
|
Release of risk adjustment to
profit or loss
|
-
|
(242)
|
-
|
(242)
|
|
-
|
27
|
-
|
27
|
Experience adjustments
|
(170)
|
-
|
-
|
(170)
|
|
50
|
-
|
-
|
50
|
|
(170)
|
(242)
|
(2,414)
|
(2,826)
|
|
50
|
27
|
206
|
283
|
Changes that relate to past
service
|
|
|
|
|
|
|
|
|
|
Adjustments to assets/liabilities
for incurred claims
|
130
|
(3)
|
-
|
127
|
|
-
|
-
|
-
|
-
|
Insurance service result
|
(3,645)
|
405
|
816
|
(2,424)
|
|
105
|
64
|
20
|
189
|
|
|
|
|
|
|
|
|
|
|
Net finance (income) expense from insurance and reinsurance
contracts
|
|
|
|
|
|
|
|
|
|
Accretion of interest on GMM
contracts
|
158
|
52
|
307
|
517
|
|
(3)
|
(3)
|
(47)
|
(53)
|
Other net finance (income)
expense
|
10,379
|
(20)
|
(12)
|
10,347
|
|
(155)
|
9
|
-
|
(146)
|
|
10,537
|
32
|
295
|
10,864
|
|
(158)
|
6
|
(47)
|
(199)
|
Total amount recognised in income statement
|
6,892
|
437
|
1,111
|
8,440
|
|
(53)
|
70
|
(27)
|
(10)
|
Effect of movements in exchange
rates
|
(49)
|
(2)
|
(63)
|
(114)
|
|
2
|
(1)
|
2
|
3
|
Total amount recognised in comprehensive
income
|
6,843
|
435
|
1,048
|
8,326
|
|
(51)
|
69
|
(25)
|
(7)
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
|
|
Premiums received net of ceding
commissions paid
|
26,224
|
-
|
-
|
26,224
|
|
(1,137)
|
-
|
-
|
(1,137)
|
Insurance acquisition cash
flows
|
(4,802)
|
-
|
-
|
(4,802)
|
|
-
|
-
|
-
|
-
|
Claims and other insurance service
expenses net of recoveries from reinsurance received*
|
(13,144)
|
-
|
-
|
(13,144)
|
|
554
|
-
|
-
|
554
|
Total cash flows
|
8,278
|
-
|
-
|
8,278
|
|
(583)
|
-
|
-
|
(583)
|
|
|
|
|
|
|
|
|
|
|
Other changes note
|
(181)
|
-
|
-
|
(181)
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Closing assets
|
(3,998)
|
630
|
2,176
|
(1,192)
|
|
(1,315)
|
67
|
(1,321)
|
(2,569)
|
Closing liabilities
|
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)
|
|
Including JVs and associates
|
|
2022 $m
|
|
Insurance
|
|
Reinsurance
|
|
BEL
|
RA
|
CSM
|
Total
|
|
BEL
|
RA
|
CSM
|
Total
|
|
|
|
note
(b)
|
|
|
|
|
note
(b)
|
|
Opening assets
|
(3,993)
|
575
|
2,161
|
(1,257)
|
|
(1,916)
|
(1)
|
(1,023)
|
(2,940)
|
Opening liabilities
|
142,146
|
1,868
|
23,787
|
167,801
|
|
1,501
|
(49)
|
(176)
|
1,276
|
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
|
4,214
|
(226)
|
(3,988)
|
-
|
|
284
|
10
|
(294)
|
-
|
Changes in estimates that result
in losses or reversal of losses on onerous contracts
|
162
|
(52)
|
-
|
110
|
|
(17)
|
-
|
-
|
(17)
|
New contracts in the
period
|
(2,210)
|
259
|
2,027
|
76
|
|
(37)
|
-
|
37
|
-
|
|
2,166
|
(19)
|
(1,961)
|
186
|
|
230
|
10
|
(257)
|
(17)
|
Changes that relate to
current service
|
|
|
|
|
|
|
|
|
|
Release of CSM to profit or
loss
|
-
|
-
|
(2,413)
|
(2,413)
|
|
-
|
-
|
171
|
171
|
Release of risk adjustment to
profit or loss
|
-
|
(184)
|
-
|
(184)
|
|
-
|
5
|
-
|
5
|
Experience adjustments
|
(119)
|
-
|
-
|
(119)
|
|
(80)
|
-
|
-
|
(80)
|
|
(119)
|
(184)
|
(2,413)
|
(2,716)
|
|
(80)
|
5
|
171
|
96
|
Changes that relate to past
service
|
|
|
|
|
|
|
|
|
|
Adjustments to assets/liabilities
for incurred claims
|
133
|
1
|
-
|
134
|
|
28
|
-
|
-
|
28
|
Insurance service result
|
2,180
|
(202)
|
(4,374)
|
(2,396)
|
|
178
|
15
|
(86)
|
107
|
|
|
|
|
|
|
|
|
|
|
Net finance (income) expense from insurance and reinsurance
contracts
|
|
|
|
|
|
|
|
|
|
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)
|
|
1,215
|
10
|
4
|
1,229
|
|
(28,430)
|
1
|
411
|
(28,018)
|
|
1,207
|
4
|
(35)
|
1,176
|
Total amount recognised in income statement
|
(26,250)
|
(201)
|
(3,963)
|
(30,414)
|
|
1,385
|
19
|
(121)
|
1,283
|
Effect of movements in exchange
rates
|
(3,070)
|
(78)
|
(681)
|
(3,829)
|
|
3
|
5
|
5
|
13
|
Total amount recognised in comprehensive
income
|
(29,320)
|
(279)
|
(4,644)
|
(34,243)
|
|
1,388
|
24
|
(116)
|
1,296
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
|
|
Premiums received net of ceding
commissions paid
|
27,916
|
-
|
-
|
27,916
|
|
(1,013)
|
-
|
-
|
(1,013)
|
Insurance acquisition cash
flows
|
(3,690)
|
-
|
-
|
(3,690)
|
|
-
|
-
|
-
|
-
|
Claims and other insurance service
expenses net of recoveries from reinsurance received*
|
(12,241)
|
-
|
-
|
(12,241)
|
|
567
|
-
|
-
|
567
|
Total cash flows
|
11,985
|
-
|
-
|
11,985
|
|
(446)
|
-
|
-
|
(446)
|
|
|
|
|
|
|
|
|
|
|
Other changes note
|
(83)
|
-
|
-
|
(83)
|
|
14
|
-
|
-
|
14
|
|
|
|
|
|
|
|
|
|
|
Closing assets
|
(3,562)
|
502
|
1,921
|
(1,139)
|
|
(652)
|
21
|
(1,369)
|
(2,000)
|
Closing liabilities
|
124,297
|
1,662
|
19,383
|
145,342
|
|
1,193
|
(47)
|
54
|
1,200
|
Net closing balance at 31 Dec
|
120,735
|
2,164
|
21,304
|
144,203
|
|
541
|
(26)
|
(1,315)
|
(800)
|
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.
(b) Analysis of CSM by transition approach including JVs
and associates
|
Insurance contracts (including JVs and associates)
|
|
2023 $m
|
|
2022
$m
|
|
Contracts
under
MRA
|
Contracts
under
FVA
|
Other
contracts*
|
Total CSM
|
|
Contracts
under MRA
|
Contracts
under FVA
|
Other
contracts*
|
Total
CSM
|
Balance at 1 Jan
|
2,033
|
4,102
|
15,169
|
21,304
|
|
2,467
|
5,355
|
18,126
|
25,948
|
Changes that relate to
future service
|
|
|
|
|
|
|
|
|
|
Changes in estimates that adjust
the CSM
|
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
|
(247)
|
(458)
|
(1,709)
|
(2,414)
|
|
(250)
|
(511)
|
(1,652)
|
(2,413)
|
|
(130)
|
38
|
908
|
816
|
|
(342)
|
(1,218)
|
(2,814)
|
(4,374)
|
Net finance income (expenses) from
insurance contracts
|
66
|
9
|
220
|
295
|
|
83
|
54
|
274
|
411
|
Effect of movements in exchange
rates
|
(47)
|
(6)
|
(10)
|
(63)
|
|
(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).
|
FRA
|
MRA
|
FVA
|
|
Cohort
|
Cohort
|
Cohort
|
CPL
|
n/a
|
2016 -
2021
|
Pre
2016
|
Hong Kong
|
2010 -
2021
|
n/a
|
Pre
2010
|
Singapore
|
2009 -
2021
|
n/a
|
Pre
2009
|
Malaysia
|
2010 -
2021
(Unit-linked)
2010-2021
(Non
Participating)
|
2000 -
2009
(Unit-linked)
|
Pre
1999
(Unit-linked)
Pre-2009
(Non-participating)
Pre-2021
(Other)
|
Indonesia note
(i)
|
2010 -
2021
|
2007 -
2009
|
Pre
2007
|
Growth markets and other note
(ii)
|
See
note
|
See
note
|
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.
|
Reinsurance contracts (including JVs and
associates)
|
|
2023 $m
|
|
2022
$m
|
|
Contracts
under
MRA
|
Contracts
under
FVA
|
Other
contracts*
|
Total CSM
|
|
Contracts
under MRA
|
Contracts
under FVA
|
Other
contracts*
|
Total
CSM
|
Balance at 1 Jan
|
-
|
(55)
|
(1,260)
|
(1,315)
|
|
-
|
(46)
|
(1,153)
|
(1,199)
|
Changes that relate to
future service
|
|
|
|
|
|
|
|
|
|
Changes in estimates that adjust
the CSM
|
-
|
(17)
|
(88)
|
(105)
|
|
-
|
(22)
|
(272)
|
(294)
|
New contracts in the
year
|
-
|
-
|
(81)
|
(81)
|
|
-
|
-
|
37
|
37
|
|
-
|
(17)
|
(169)
|
(186)
|
|
-
|
(22)
|
(235)
|
(257)
|
Changes that relate to
current service
|
|
|
|
|
|
|
|
|
|
Release of CSM to profit or
loss
|
-
|
10
|
196
|
206
|
|
-
|
10
|
161
|
171
|
|
-
|
(7)
|
27
|
20
|
|
-
|
(12)
|
(74)
|
(86)
|
Net finance income (expenses) from
reinsurance contracts
|
-
|
(2)
|
(45)
|
(47)
|
|
-
|
(1)
|
(34)
|
(35)
|
Effect of movements in exchange
rates
|
-
|
1
|
1
|
2
|
|
-
|
4
|
1
|
5
|
Balance at 31 Dec
|
-
|
(63)
|
(1,277)
|
(1,340)
|
|
-
|
(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.
|
Reinsurance $m
|
|
CPL
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets and other
|
Total
insurance segments
|
Net opening balance at 1 Jan 2022
|
(25)
|
(1,663)
|
8
|
15
|
59
|
(58)
|
(1,664)
|
Insurance service result
|
6
|
63
|
-
|
10
|
4
|
24
|
107
|
Net finance income (expenses) from reinsurance
contracts
|
|
|
|
|
|
|
|
Accretion of interest on GMM
contracts
|
(1)
|
(45)
|
-
|
1
|
(1)
|
(7)
|
(53)
|
Other net finance (income)
expense
|
-
|
1,246
|
(1)
|
1
|
(6)
|
(11)
|
1,229
|
|
(1)
|
1,201
|
(1)
|
2
|
(7)
|
(18)
|
1,176
|
Total amount recognised in income statement
|
5
|
1,264
|
(1)
|
12
|
(3)
|
6
|
1,283
|
|
|
|
|
|
|
|
|
Effect of movements in exchange
rates
|
1
|
4
|
(1)
|
-
|
4
|
5
|
13
|
Total amount recognised in comprehensive
income
|
6
|
1,268
|
(2)
|
12
|
1
|
11
|
1,296
|
Total cash flows
|
(3)
|
(535)
|
(1)
|
(5)
|
118
|
(20)
|
(446)
|
Other changes
|
-
|
7
|
-
|
-
|
-
|
7
|
14
|
Net closing balance at 31 Dec 2022 / 1 Jan
2023
|
(22)
|
(923)
|
5
|
22
|
178
|
(60)
|
(800)
|
Insurance service result
|
8
|
135
|
2
|
9
|
17
|
18
|
189
|
Net finance income (expenses) from reinsurance
contracts
|
|
|
|
|
|
|
|
Accretion of interest on GMM
contracts
|
(1)
|
(38)
|
-
|
1
|
(8)
|
(7)
|
(53)
|
Other net finance (income)
expense
|
-
|
(154)
|
(6)
|
-
|
1
|
13
|
(146)
|
|
(1)
|
(192)
|
(6)
|
1
|
(7)
|
6
|
(199)
|
Total amount recognised in income statement
|
7
|
(57)
|
(4)
|
10
|
10
|
24
|
(10)
|
Effect of movements in exchange
rates
|
3
|
(2)
|
(1)
|
(1)
|
(1)
|
5
|
3
|
Total amount recognised in comprehensive
income
|
10
|
(59)
|
(5)
|
9
|
9
|
29
|
(7)
|
Total cash flows
|
(9)
|
(407)
|
9
|
(6)
|
(181)
|
11
|
(583)
|
Other changes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Net closing balance at 31 Dec 2023
|
(21)
|
(1,389)
|
9
|
25
|
6
|
(20)
|
(1,390)
|
(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
|
31 Dec 2023
$m
|
|
Total as reported on the
consolidated statement of financial position
|
Group's share relating
to
JVs and
associates
|
Total including Group's
share relating to
JVs and
associates
|
1 year or less
|
2,041
|
226
|
2,267
|
After 1 year to 2 years
|
1,780
|
190
|
1,970
|
After 2 years to 3
years
|
1,586
|
165
|
1,751
|
After 3 years to 4
years
|
1,412
|
146
|
1,558
|
After 4 years to 5
years
|
1,283
|
127
|
1,410
|
After 5 years to 10
years
|
4,604
|
474
|
5,078
|
After 10 years to 15
years
|
2,924
|
293
|
3,217
|
After 15 years to 20
years
|
1,781
|
195
|
1,976
|
After 20 years
|
2,773
|
352
|
3,125
|
Total CSM
|
20,184
|
2,168
|
22,352
|
|
31 Dec
2022 $m
|
|
Total as
reported on the consolidated statement of financial
position
|
Group's
share relating to
JVs and associates
|
Total
including Group's share relating to
JVs and associates
|
1 year or less
|
1,981
|
219
|
2,200
|
After 1 year to 2 years
|
1,751
|
175
|
1,926
|
After 2 years to 3
years
|
1,555
|
155
|
1,710
|
After 3 years to 4
years
|
1,385
|
138
|
1,523
|
After 4 years to 5
years
|
1,217
|
122
|
1,339
|
After 5 years to 10
years
|
4,306
|
454
|
4,760
|
After 10 years to 15
years
|
2,705
|
292
|
2,997
|
After 15 years to 20
years
|
1,666
|
201
|
1,867
|
After 20 years
|
2,602
|
380
|
2,982
|
Total CSM
|
19,168
|
2,136
|
21,304
|
(ii)Reinsurance contracts -
expected recognition of the CSM
|
31 Dec 2023
$m
|
|
Total as reported on the
consolidated statement of financial position
|
Group's share relating
to
JVs and
associates
|
Total including Group's
share relating to
JVs and
associates
|
1 year or less
|
(177)
|
(2)
|
(179)
|
After 1 year to 2 years
|
(132)
|
-
|
(132)
|
After 2 years to 3
years
|
(103)
|
1
|
(102)
|
After 3 years to 4
years
|
(85)
|
1
|
(84)
|
After 4 years to 5
years
|
(74)
|
1
|
(73)
|
After 5 years to 10
years
|
(268)
|
3
|
(265)
|
After 10 years to 15
years
|
(173)
|
2
|
(171)
|
After 15 years to 20
years
|
(113)
|
-
|
(113)
|
After 20 years
|
(220)
|
(1)
|
(221)
|
Total CSM
|
(1,345)
|
5
|
(1,340)
|
|
31 Dec
2022 $m
|
|
Total as
reported on the consolidated statement of financial
position
|
Group's
share relating to
JVs and
associates
|
Total
including Group's share relating to
JVs and
associates
|
1 year or less
|
(122)
|
(2)
|
(124)
|
After 1 year to 2 years
|
(111)
|
2
|
(109)
|
After 2 years to 3
years
|
(100)
|
2
|
(98)
|
After 3 years to 4
years
|
(89)
|
2
|
(87)
|
After 4 years to 5
years
|
(80)
|
2
|
(78)
|
After 5 years to 10
years
|
(301)
|
5
|
(296)
|
After 10 years to 15
years
|
(188)
|
3
|
(185)
|
After 15 years to 20
years
|
(119)
|
1
|
(118)
|
After 20 years
|
(220)
|
-
|
(220)
|
Total CSM
|
(1,330)
|
15
|
(1,315)
|
C3.3 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.
Contract type
|
Description and material features
|
Measurement model
|
With-profits contracts (written in Hong Kong, Singapore and
Malaysia)
|
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).
|
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
|
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.
|
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
|
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.
|
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.
|
Health and protection - Shareholder- backed participating
critical illness contracts
|
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.
|
Shareholder-backed participating
critical illness contracts are measured under the VFA.
|
Health and protection - Other
|
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.
|
Stand-alone non-par health and
protection (excluding shareholder-backed participating critical
illness) contracts are measured under the GMM.
|
Non-participating term, whole life and endowment assurance
contracts
|
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.
|
These contracts are measured under
the GMM.
|
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.
C4 Intangible assets
C4.1 Goodwill
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.
|
2023
$m
|
2022
$m
|
Carrying value at 1 Jan
|
890
|
907
|
Exchange differences
|
6
|
(17)
|
Carrying value at 31 Dec
|
896
|
890
|
C4.2 Other intangible assets
|
2023
$m
|
2022
$m
|
|
Distribution
rights
|
Other
intangibles
|
Total
|
Distribution rights
|
Other
intangibles
|
Total
|
|
note (i)
|
note (ii)
|
|
note
(i)
|
note
(ii)
|
|
Balance at 1 Jan
|
|
|
|
|
|
|
Cost
|
5,176
|
489
|
5,665
|
5,037
|
425
|
5,462
|
Accumulated
amortisation
|
(1,546)
|
(235)
|
(1,781)
|
(1,255)
|
(192)
|
(1,447)
|
|
3,630
|
254
|
3,884
|
3,782
|
233
|
4,015
|
Additions
|
415
|
83
|
498
|
206
|
83
|
289
|
Amortisation charge
|
(330)
|
(49)
|
(379)
|
(301)
|
(48)
|
(349)
|
Disposals and transfers
|
-
|
(6)
|
(6)
|
-
|
(6)
|
(6)
|
Exchange differences and other
movements
|
(6)
|
(5)
|
(11)
|
(57)
|
(8)
|
(65)
|
Balance at 31 Dec
|
3,709
|
277
|
3,986
|
3,630
|
254
|
3,884
|
Comprising:
|
|
|
|
|
|
|
Cost
|
5,585
|
537
|
6,122
|
5,176
|
489
|
5,665
|
Accumulated
amortisation
|
(1,876)
|
(260)
|
(2,136)
|
(1,546)
|
(235)
|
(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.
C5
Borrowings
C5.1 Core structural borrowings of shareholder-financed
businesses
|
31 Dec 2023
$m
|
31
Dec 2022 $m
|
Subordinated debt:
|
|
|
US$750m 4.875% Notes
|
750
|
750
|
€20m Medium Term Notes 2023
note (ii)
|
-
|
21
|
£435m 6.125% Notes 2031
|
551
|
520
|
US$1,000m 2.95% Notes
2033
|
996
|
995
|
Senior debt: note (i)
|
|
|
£300m 6.875% Notes 2023 note
(ii)
|
-
|
361
|
£250m 5.875% Notes 2029
|
301
|
281
|
US$1,000m 3.125% Notes
2030
|
988
|
987
|
US$350m 3.625% Notes
2032
|
347
|
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
|
31 Dec 2023
$m
|
31 Dec
2022 $m
|
Borrowings in respect of
short-term fixed income securities programmes (commercial
paper)
|
699
|
501
|
Lease liabilities under IFRS
16
|
234
|
299
|
Other borrowings
|
8
|
15
|
Total operational borrowings
|
941
|
815
|
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 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.
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:
|
31 Dec 2023
$m
|
|
31 Dec
2022 $m
|
Change in local currency to $
exchange rates
|
Decrease of
10%
|
Increase of
10%
|
|
Decrease
of 10%
|
Increase
of 10%
|
Profit after tax for the
year
|
152
|
(124)
|
|
49
|
(40)
|
Shareholders' equity
|
1,256
|
(1,028)
|
|
1,182
|
(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.
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
|
2023 $m
|
2022
$m
|
Profit (loss) after tax for the
year from insurance segments
|
2,099
|
(494)
|
Group shareholders' equity as at
31 Dec
|
17,823
|
16,731
|
CSM as at 31 Dec including JVs and
associates
|
21,012
|
19,989
|
Insurance segments
|
31 Dec 2023
$m
|
|
31 Dec 2022 $m
|
Interest rates and consequential effects
|
Decrease of
0.5%
|
Increase of
1%
|
|
Decrease
of 0.5%
|
Increase
of 1%
|
Increase/(decrease) to
shareholders' equity and profit after tax:
|
|
|
|
|
|
Financial assets
|
6,815
|
(12,004)
|
|
5,873
|
(10,362)
|
Net insurance contract liabilities
(including CSM)
|
(7,332)
|
12,191
|
|
(6,120)
|
10,295
|
Net effect on shareholders' equity
and profit after tax note
|
(328)
|
24
|
|
(127)
|
(165)
|
Increase/(decrease) to CSM
liability:
|
|
|
|
|
|
CSM
|
358
|
(880)
|
|
220
|
(850)
|
Insurance segments
|
31 Dec 2023
$m
|
|
31 Dec
2022 $m
|
Equity/property market values
|
Decrease of
20%
|
Increase of
10%
|
|
Decrease
of 20%
|
Increase
of 10%
|
Increase/(decrease) to
shareholders' equity and profit after tax:
|
|
|
|
|
|
Financial assets
|
(13,359)
|
6,681
|
|
(11,884)
|
5,939
|
Net insurance contract liabilities
(including CSM)
|
12,288
|
(6,254)
|
|
10,927
|
(5,571)
|
Net effect on shareholders' equity
and profit after tax note
|
(822)
|
327
|
|
(735)
|
283
|
Increase/(decrease) to CSM
liability:
|
|
|
|
|
|
CSM
|
(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.
|
2023 $m
|
|
Net effect on shareholders'
equity and profit after tax
|
|
Net effect on
CSM
|
Sensitivity to insurance risk:
|
Gross of
reinsurance
|
Net of
reinsurance
|
|
Gross of
reinsurance
|
Net of
reinsurance
|
Maintenance expenses - 10%
increase
|
(77)
|
(71)
|
|
(420)
|
(427)
|
Lapse rates - 10%
increase
|
(88)
|
(76)
|
|
(1,363)
|
(1,496)
|
Mortality and morbidity - 5%
increase
|
(131)
|
(96)
|
|
(638)
|
(261)
|
|
2022
$m
|
|
Net
effect on shareholders' equity and profit after tax
|
|
Net
effect on CSM
|
Sensitivity to insurance risk:
|
Gross of
reinsurance
|
Net
of
reinsurance
|
|
Gross of
reinsurance
|
Net
of
reinsurance
|
Maintenance expenses - 10%
increase
|
(58)
|
(57)
|
|
(365)
|
(365)
|
Lapse rates - 10%
increase
|
(78)
|
(70)
|
|
(1,179)
|
(1,274)
|
Mortality and morbidity - 5%
increase
|
(88)
|
(79)
|
|
(548)
|
(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.
C7
Tax assets and liabilities
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:
|
2023
$m
|
|
Net deferred tax (assets)
liabilities at
1 Jan
|
Movement
in
income
statement
|
Other
movements
including
foreign
exchange
movements
|
Net deferred tax (assets)
liabilities at 31 Dec
|
Unrealised losses or gains on
investments
|
(129)
|
268
|
(10)
|
129
|
Balances relating to insurance and
reinsurance contracts
|
1,255
|
(87)
|
2
|
1,170
|
Short-term temporary
differences
|
(96)
|
2
|
-
|
(94)
|
Unused tax losses
|
(31)
|
(79)
|
(1)
|
(111)
|
Net deferred tax liabilities
note
|
999
|
104
|
(9)
|
1,094
|
|
2022
$m
|
|
Net
deferred tax (assets) liabilities
at 1
Jan
|
Effect
of initial application of IFRS 17 and classification overlay
of
IFRS
9
|
Restated
net deferred tax (assets) liabilities
at
1 Jan
|
Movement
in
income
statement
|
Other
movements
including
foreign
exchange
movements
|
Net
deferred tax (assets) liabilities
at 31
Dec
|
Unrealised losses or gains on
investments
|
239
|
-
|
239
|
(361)
|
(7)
|
(129)
|
Balances relating to insurance and
reinsurance contracts
|
2,091
|
(1,092)
|
999
|
297
|
(41)
|
1,255
|
Short-term temporary
differences
|
333
|
(469)
|
(136)
|
29
|
11
|
(96)
|
Unused tax losses
|
(67)
|
-
|
(67)
|
32
|
4
|
(31)
|
Net deferred tax liabilities
note
|
2,596
|
(1,561)
|
1,035
|
(3)
|
(33)
|
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.
C8 Share capital, share premium and own
shares
|
2023
|
|
2022
|
Issued shares of 5p each fully paid
|
Number of
ordinary
shares
|
Share
capital
|
Share
premium
|
|
Number
of
ordinary
shares
|
Share
capital
|
Share
premium
|
|
|
$m
|
$m
|
|
|
$m
|
$m
|
Balance at 1 Jan
|
2,749,669,380
|
182
|
5,006
|
|
2,746,412,265
|
182
|
5,010
|
Shares issued under share-based
schemes
|
3,851,376
|
1
|
3
|
|
3,257,115
|
-
|
2
|
Shares issued under Hong Kong
public offer and international placing in 2022
|
-
|
-
|
|
|
-
|
-
|
(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:
|
|
Share
price range
|
|
|
Number
of shares to subscribe for
|
from
(in
pence)
|
to
(in
pence)
|
Exercisable by year
|
31 Dec 2023
|
1,671,215
|
737p
|
1,455p
|
2029
|
31 Dec 2022
|
1,858,292
|
737p
|
1,455p
|
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.
D
Other information
D1 Contingencies and related obligations
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.
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.