SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August, 2023
PRUDENTIAL PUBLIC LIMITED COMPANY
(Translation
of registrant's name into English)
13/F, One International Finance Centre,
1 Harbour View Street, Central,
Hong Kong, China
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports
under
cover Form 20-F or Form 40-F.
Form
20-F X
Form 40-F
Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes
No X
If
"Yes" is marked, indicate below the file number assigned to the
registrant
in
connection with Rule 12g3-2(b): 82-
IFRS disclosures
Prudential plc Half Year 2023 results
International Financial Reporting Standards (IFRS) financial
results
Condensed consolidated income statement
|
|
|
|
2023 $m
|
|
2022* $m
|
|
|
|
Note
|
Half year
|
|
Half year
|
|
Full year
|
Insurance revenue
|
B1.4
|
4,591
|
|
4,159
|
|
8,549
|
Insurance service expenses
|
|
(3,489)
|
|
(2,879)
|
|
(6,267)
|
Net expense from reinsurance contracts held
|
|
(83)
|
|
(22)
|
|
(105)
|
Insurance service result
|
|
1,019
|
|
1,258
|
|
2,177
|
Investment return
|
B1.4
|
7,171
|
|
(23,872)
|
|
(29,380)
|
Fair value movements on investment contract
liabilities
|
|
(23)
|
|
67
|
|
67
|
Net insurance finance (expense) income
|
|
(6,496)
|
|
21,707
|
|
27,430
|
Net investment result
|
|
652
|
|
(2,098)
|
|
(1,883)
|
Other revenue
|
B1.4
|
176
|
|
204
|
|
436
|
Non-insurance expenditure
|
|
(446)
|
|
(592)
|
|
(1,019)
|
Finance costs: interest on core structural borrowings of
shareholder-financed businesses
|
|
(85)
|
|
(103)
|
|
(200)
|
Gain attaching to corporate transactions
|
D1
|
-
|
|
62
|
|
55
|
Share of loss from joint ventures and associates, net of related
tax
|
|
(73)
|
|
(54)
|
|
(85)
|
Profit (loss) before tax (being tax attributable to
shareholders' and policyholders' returns)note
|
|
1,243
|
|
(1,323)
|
|
(519)
|
Tax charge attributable to policyholders' returns
|
|
(68)
|
|
(24)
|
|
(124)
|
Profit (loss) before tax attributable to shareholders'
returns
|
B1.1
|
1,175
|
|
(1,347)
|
|
(643)
|
Total tax charge attributable to shareholders' and policyholders'
returns
|
B2
|
(296)
|
|
(182)
|
|
(478)
|
Remove tax charge attributable to policyholders'
returns
|
|
68
|
|
24
|
|
124
|
Tax charge attributable to shareholders' returns
|
|
(228)
|
|
(158)
|
|
(354)
|
Profit (loss) for the period
|
|
947
|
|
(1,505)
|
|
(997)
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Equity holders of the Company
|
|
944
|
|
(1,508)
|
|
(1,007)
|
Non-controlling interests
|
|
3
|
|
3
|
|
10
|
Profit (loss) for the period
|
|
947
|
|
(1,505)
|
|
(997)
|
Earnings per share (in cents)
|
|
2023
|
|
2022*
|
2022
|
|
|
|
Note
|
Half year
|
|
Half year
|
Full year
|
Based on profit (loss) attributable to equity holders of the
Company:
|
B3
|
|
|
|
|
|
Basic
|
|
34.5¢
|
|
(55.1)¢
|
(36.8)¢
|
|
Diluted
|
|
34.5¢
|
|
(55.1)¢
|
(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.
Dividends per share (in cents)
|
|
2023
|
|
2022
|
|
|
Note
|
Half year
|
|
Half year
|
Full year
|
Dividends relating to reporting period:
|
B4
|
|
|
|
|
|
First interim ordinary dividend
|
|
6.26¢
|
|
5.74¢
|
5.74¢
|
|
Second interim ordinary dividend
|
|
-
|
|
-
|
13.04¢
|
Total relating to reporting period
|
|
6.26¢
|
|
5.74¢
|
18.78¢
|
Dividends paid in reporting period:
|
B4
|
|
|
|
|
|
Current year first interim dividend
|
|
-
|
|
-
|
5.74¢
|
|
Second interim ordinary dividend for prior year
|
|
13.04¢
|
|
11.86¢
|
11.86¢
|
Total paid in reporting period
|
|
13.04¢
|
|
11.86¢
|
17.60¢
|
Condensed consolidated statement of comprehensive
income
|
|
|
2023 $m
|
|
2022* $m
|
|
|
|
Half year
|
|
Half year
|
Full year
|
Profit (loss) for the period
|
947
|
|
(1,505)
|
(997)
|
Other comprehensive income (loss):
|
|
|
|
|
|
Exchange movements arising during the period
|
(199)
|
|
(539)
|
(613)
|
|
Valuation movements on retained interest in Jackson classified as
available-for-sale securities under IAS 39note
(i)
|
-
|
|
(247)
|
(187)
|
Total items that may be reclassified subsequently to profit or
lossnote
(ii)
|
(199)
|
|
(786)
|
(800)
|
|
|
|
|
|
Valuation movements on retained interest in Jackson classified as
FVOCI securities under IFRS 9
|
8
|
|
-
|
-
|
Total items that will not be reclassified subsequently to profit or
loss
|
8
|
|
-
|
-
|
|
|
|
|
|
|
|
Total comprehensive income (loss) for the period
|
756
|
|
(2,291)
|
(1,797)
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity holders of the Company
|
767
|
|
(2,284)
|
(1,797)
|
Non-controlling interests
|
(11)
|
|
(7)
|
-
|
Total comprehensive income (loss) for the period
|
756
|
|
(2,291)
|
(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.
Notes
(i)
On the adoption of IFRS 9 at 1 January 2023, the Group has elected
to measure its retained interest in the equity securities of
Jackson at fair value through other comprehensive income
(FVOCI). The Group has subsequently disposed of
its remaining interest in Jackson. In the 2022
comparatives above, these securities were measured at
available-for-sale under IAS 39.
(ii)
There are no related taxes on the other comprehensive income
components of the Group.
Condensed consolidated statement of changes in equity
|
|
|
Period ended 30 Jun 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 period
|
|
-
|
-
|
944
|
-
|
-
|
944
|
3
|
947
|
Other comprehensive income (loss)
|
|
-
|
-
|
-
|
(185)
|
8
|
(177)
|
(14)
|
(191)
|
Total comprehensive income (loss) for the period
|
|
-
|
-
|
944
|
(185)
|
8
|
767
|
(11)
|
756
|
Transactions with owners of the Company
|
|
|
|
|
|
|
|
|
|
Dividends
|
B4
|
-
|
-
|
(361)
|
-
|
-
|
(361)
|
(4)
|
(365)
|
Transfer of fair value reserve following disposal of investment in
Jackson
|
|
-
|
-
|
71
|
-
|
(71)
|
-
|
-
|
-
|
Reserve movements in respect of share-based payments
|
|
-
|
-
|
(6)
|
-
|
-
|
(6)
|
-
|
(6)
|
Effect of transactions relating to non-controlling
interests
|
|
-
|
-
|
(9)
|
-
|
-
|
(9)
|
-
|
(9)
|
New share capital subscribed
|
C6
|
1
|
3
|
-
|
-
|
-
|
4
|
-
|
4
|
Movement in own shares in respect of share-based payment
plans
|
|
-
|
-
|
33
|
-
|
-
|
33
|
-
|
33
|
Net increase (decrease) in equity
|
|
1
|
3
|
672
|
(185)
|
(63)
|
428
|
(15)
|
413
|
Balance at beginning of period
|
|
182
|
5,006
|
10,653
|
827
|
63
|
16,731
|
167
|
16,898
|
Balance at end of period
|
|
183
|
5,009
|
11,325
|
642
|
-
|
17,159
|
152
|
17,311
|
|
|
|
Period ended 30 Jun 2022 $m
|
|
Note
|
Share
capital
|
Share
premium
|
Retained
earnings
|
Translation
reserve
|
Available
-for-sale
securities
reserves
under IAS 39
|
Share-
holders'
equity
|
Non-
controlling
interests
|
Total
equity
|
Reserves
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the period
|
|
-
|
-
|
(1,508)
|
-
|
-
|
(1,508)
|
3
|
(1,505)
|
Other comprehensive loss
|
|
-
|
-
|
-
|
(529)
|
(247)
|
(776)
|
(10)
|
(786)
|
Total comprehensive loss for the period
|
|
-
|
-
|
(1,508)
|
(529)
|
(247)
|
(2,284)
|
(7)
|
(2,291)
|
Transactions with owners of the Company
|
|
|
|
|
|
|
|
|
|
Dividends
|
B4
|
-
|
-
|
(320)
|
-
|
-
|
(320)
|
(5)
|
(325)
|
Reserve movements in respect of share-based payments
|
|
-
|
-
|
15
|
-
|
-
|
15
|
-
|
15
|
Effect of transactions relating to non-controlling
interests
|
|
-
|
-
|
(16)
|
-
|
-
|
(16)
|
-
|
(16)
|
Movement in own shares in respect of share-based payment
plans
|
|
-
|
-
|
(4)
|
-
|
-
|
(4)
|
-
|
(4)
|
Net decrease in equity
|
|
-
|
-
|
(1,833)
|
(529)
|
(247)
|
(2,609)
|
(12)
|
(2,621)
|
Balance at beginning of period:
|
|
|
|
|
|
|
|
|
|
|
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
for 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 end of period
|
|
182
|
5,010
|
10,231
|
901
|
3
|
16,327
|
163
|
16,490
|
Condensed consolidated statement of changes in equity
(continued)
|
|
|
|
Year ended 31 Dec 2022 $m
|
|
Note
|
Share
capital
|
Share
premium
|
Retained
earnings
|
Translation
reserve
|
Available
-for-sale
securities
reserves
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 period
|
|
-
|
-
|
(1,007)
|
(603)
|
(187)
|
(1,797)
|
-
|
(1,797)
|
Transactions with owners of the Company
|
|
|
|
|
|
|
|
|
|
Dividends
|
B4
|
-
|
-
|
(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
|
C6
|
-
|
(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 beginning of year:
|
|
|
|
|
|
|
|
|
|
|
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
for 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 end of year
|
|
182
|
5,006
|
10,653
|
827
|
63
|
16,731
|
167
|
16,898
|
Condensed consolidated statement of financial position
|
|
|
|
2023 $m
|
|
2022 $m
|
|
|
|
Note
|
30 Jun
|
|
31 Dec
|
1 Jan
|
|
|
|
|
|
|
note (i)
|
note (i)
|
Assets
|
|
|
|
|
|
Goodwill
|
C4.1
|
879
|
|
890
|
907
|
Other intangible assets
|
C4.2
|
3,686
|
|
3,884
|
4,015
|
Property, plant and equipment
|
C1.2
|
396
|
|
437
|
495
|
Insurance contract assets
|
C3.1
|
1,167
|
|
1,134
|
1,250
|
Reinsurance contract assets
|
C3.1
|
2,023
|
|
1,856
|
2,787
|
Deferred tax assets
|
|
168
|
|
140
|
132
|
Current tax recoverable
|
|
25
|
|
18
|
20
|
Accrued investment income
|
C1.2
|
1,017
|
|
983
|
1,017
|
Other debtors
|
C1.2
|
1,035
|
|
968
|
955
|
Investment properties
|
C1.1
|
38
|
|
37
|
38
|
Investments in joint ventures and associates accounted for using
the equity method
|
|
2,078
|
|
2,259
|
2,698
|
Loans
|
C1.1
|
574
|
|
590
|
771
|
Equity securities and holdings in collective investment
schemesnote
(ii)
|
C1.1
|
60,508
|
|
57,679
|
61,601
|
Debt securitiesnote
(ii)
|
C1.1
|
80,430
|
|
77,016
|
99,154
|
Derivative assets
|
C1.1
|
458
|
|
569
|
481
|
Deposits
|
C1.1
|
5,056
|
|
6,275
|
4,741
|
Cash and cash equivalents
|
C1.1
|
5,920
|
|
5,514
|
7,170
|
Total assets
|
|
165,458
|
|
160,249
|
188,232
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Shareholders' equity
|
|
17,159
|
|
16,731
|
18,936
|
Non-controlling interests
|
|
152
|
|
167
|
175
|
Total equity
|
|
17,311
|
|
16,898
|
19,111
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Insurance contract liabilities
|
C3.1
|
134,096
|
|
126,242
|
149,798
|
Reinsurance contract liabilities
|
C3.1
|
950
|
|
1,175
|
1,254
|
Investment contract liabilities without discretionary participation
features
|
|
716
|
|
663
|
722
|
Core structural borrowings of shareholder-financed
businesses
|
C5.1
|
3,949
|
|
4,261
|
6,127
|
Operational borrowings
|
C5.2
|
802
|
|
815
|
861
|
Obligations under funding, securities lending and sale and
repurchase agreements
|
|
617
|
|
582
|
223
|
Net asset value attributable to unit holders of consolidated
investment funds
|
|
2,683
|
|
4,193
|
5,664
|
Deferred tax liabilities
|
|
1,214
|
|
1,139
|
1,167
|
Current tax liabilities
|
|
247
|
|
208
|
185
|
Accruals, deferred income and other creditors
|
C1.2
|
2,277
|
|
2,866
|
2,624
|
Provisions
|
|
129
|
|
206
|
234
|
Derivative liabilities
|
|
467
|
|
1,001
|
262
|
Total liabilities
|
|
148,147
|
|
143,351
|
169,121
|
Total equity and liabilities
|
|
165,458
|
|
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 30 June 2023 are
$1,556 million of lent securities and assets subject to repurchase
agreements (31 December 2022: $1,571 million).
Condensed consolidated statement of cash flows
|
|
|
|
2023 $m
|
|
2022* $m
|
|
|
|
Note
|
Half year
|
|
Half year
|
Full year
|
Cash flows from operating activities
|
|
|
|
|
|
Profit (loss) before tax (being tax attributable to
shareholders' and policyholders' returns)
|
|
1,243
|
|
(1,323)
|
(519)
|
Adjustments to profit (loss) before tax for:
|
|
|
|
|
|
|
Non-cash movements in operating assets and liabilities
|
|
(71)
|
|
2,968
|
1,577
|
|
Investment income and interest payments included in profit before
tax
|
|
(2,420)
|
|
(2,065)
|
(3,912)
|
Operating cash items
|
|
2,252
|
|
1,981
|
3,647
|
Other non-cash items
|
|
263
|
|
155
|
285
|
Net cash flows from operating activitiesnote
(i)
|
|
1,267
|
|
1,716
|
1,078
|
Cash flows from investing activities
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(18)
|
|
(14)
|
(34)
|
Acquisition of business and intangiblesnote
(ii)
|
|
(197)
|
|
(221)
|
(298)
|
Disposal of Jackson shares
|
|
273
|
|
171
|
293
|
Net cash flows from investing activities
|
|
58
|
|
(64)
|
(39)
|
Cash flows from financing activities
|
|
|
|
|
|
Structural borrowings of shareholder-financed
operations:note
(iii)
|
C5.1
|
|
|
|
|
|
Issuance of debt, net of costs
|
|
-
|
|
346
|
346
|
|
Redemption of debt
|
|
(371)
|
|
(2,075)
|
(2,075)
|
|
Interest paid
|
|
(98)
|
|
(117)
|
(204)
|
Payment of principal portion of lease liabilities
|
|
(49)
|
|
(56)
|
(101)
|
Equity capital:
|
|
|
|
|
|
|
Issues of ordinary share capital
|
C6
|
4
|
|
-
|
(4)
|
External dividends:
|
|
|
|
|
|
|
Dividends paid to the Company's shareholders
|
B4
|
(361)
|
|
(320)
|
(474)
|
|
Dividends paid to non-controlling interests
|
|
(4)
|
|
(5)
|
(8)
|
Net cash flows from financing activities
|
|
(879)
|
|
(2,227)
|
(2,520)
|
Net increase (decrease) in cash and cash equivalents
|
|
446
|
|
(575)
|
(1,481)
|
Cash and cash equivalents at beginning of period
|
|
5,514
|
|
7,170
|
7,170
|
Effect of exchange rate changes on cash and cash
equivalents
|
|
(40)
|
|
(180)
|
(175)
|
Cash and cash equivalents at end of period
|
|
5,920
|
|
6,415
|
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 $62 million (half year
2022: $60 million; full year 2022: $112 million).
(ii) Cash
flows from acquisition of business and intangibles include amounts
paid for distribution rights. There were no acquisitions of
businesses in the period.
(iii)
Structural borrowings of shareholder-financed businesses exclude
borrowings to support short-term fixed income securities
programmes, non-recourse borrowings of investment subsidiaries of
shareholder-financed businesses and other borrowings of
shareholder-financed businesses. Cash flows in respect of these
borrowings are included within cash flows from operating
activities. The changes in the carrying value of the structural
borrowings of shareholder-financed businesses for the
Group are analysed below:
|
|
Balance at
|
Cash movements $m
|
|
Non-cash movements $m
|
Balance at
|
|
|
beginning
of period
$m
|
Issuance
of debt
|
Redemption
of debt
|
|
Foreign exchange
movement
|
Other
movements
|
end of
period
$m
|
|
30 Jun 2023
|
4,261
|
-
|
(371)
|
|
56
|
3
|
3,949
|
|
30 Jun 2022
|
6,127
|
346
|
(2,075)
|
|
(137)
|
5
|
4,266
|
|
31 Dec 2022
|
6,127
|
346
|
(2,075)
|
|
(147)
|
10
|
4,261
|
Notes to the condensed consolidated financial
statements
A Basis
of preparation and accounting policies
A1 Basis of preparation and exchange rates
These consolidated interim financial statements ('interim financial
statements') for the six months ended 30 June 2023 have been
prepared in accordance with both IAS 34 'Interim Financial
Reporting' as issued by the IASB and IAS 34 as adopted for use in
the UK. The Group's policy for preparing this interim financial
information is to use the accounting policies adopted by the Group
in its last consolidated financial statements, as updated by any
changes in accounting policies it intends to make in its next
consolidated financial statements as a result of new or amended
IFRS and other policy improvements. At 30 June 2023, there were no
unadopted standards effective for the period ended 30 June 2023
which impacted the interim 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 interim 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 IFRS financial results for half year 2023 and half year 2022
are unaudited. The 2022 half year and full year IFRS financial
results have been restated for the effect of a retrospective
application of IFRS 17 and the classification overlay adjustment
for IFRS 9, which were effective on 1 January 2023. Except for this
restatement, the full year IFRS financial results have been derived
from the 2022 statutory accounts. An additional statement of
financial position as at 1 January 2022 is presented in these
consolidated financial statements due to the retrospective
application of IFRS 17 (refer to note A2.1 below for details on the
effect of the retrospective application). The Group's previous auditors,
KPMG, reported on the 2022 statutory accounts which have been
delivered to the Registrar of Companies. The auditors' report on
the 2022 statutory accounts 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 of at least 12 months from the date these interim financial
statements are approved. In making this assessment, the Directors
have considered both the Group's current performance, solvency and
liquidity and the Group's business plan taking into account the
Group's principal risks, and the mitigations available to address
them, as well as the results of the Group's stress and scenario
testing.
Based on the above, the Directors have a reasonable expectation
that the Company and the Group have adequate resources to continue
their operations for a period of at least 12 months from the date
these interim financial statements are approved. No material
uncertainties that may cast significant doubt on the ability of 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 interim financial
statements for the period ended 30 June
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 period end
|
|
Average rate for the period to date
|
|
30 Jun 2023
|
31 Dec 2022
|
1 Jan 2022
|
|
Half year 2023
|
Half year 2022
|
Full year 2022
|
Chinese yuan (CNY)
|
7.26
|
6.95
|
6.37
|
|
6.93
|
6.48
|
6.73
|
Hong Kong dollar (HKD)
|
7.84
|
7.81
|
7.80
|
|
7.84
|
7.83
|
7.83
|
Indian rupee (INR)
|
82.04
|
82.73
|
74.34
|
|
82.22
|
76.23
|
78.63
|
Indonesian rupiah (IDR)
|
14,992.50
|
15,567.50
|
14,252.50
|
|
15,042.54
|
14,453.52
|
14,852.24
|
Malaysian ringgit (MYR)
|
4.67
|
4.41
|
4.17
|
|
4.46
|
4.27
|
4.40
|
Singapore dollar (SGD)
|
1.35
|
1.34
|
1.35
|
|
1.34
|
1.37
|
1.38
|
Taiwan dollar (TWD)
|
31.14
|
30.74
|
27.67
|
|
30.56
|
28.73
|
29.81
|
Thai baht (THB)
|
35.33
|
34.56
|
33.19
|
|
34.20
|
33.73
|
35.06
|
UK pound sterling (GBP)
|
0.79
|
0.83
|
0.74
|
|
0.81
|
0.77
|
0.81
|
Vietnamese dong (VND)
|
23,585.00
|
23,575.00
|
22,790.00
|
|
23,521.79
|
22,925.22
|
23,409.87
|
Certain notes to the financial statements present comparative
information at constant exchange rates (CER), in addition to the
reporting at actual exchange rates (AER) used throughout the
interim financial statements. AER are actual historical exchange
rates for the specific accounting period, being the average rates
over the period for the income statement and the closing rates at
the balance sheet date for the statement of financial position. CER
results are calculated by translating prior period results using
the current period foreign exchange rate, ie current period average
rates for the income statement and current period closing rates for
the statement of financial position.
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 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 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, the CSM represents
the variable fee to shareholders and it is adjusted to reflect the
effect of changes in economics as well as experience variances
and/or assumptions changes that relate to future services. For
contracts accounted for under GMM, the CSM is accreted using the
locked-in discount rates and only adjusted to reflect the effect of
non-economic experience variances and/or assumptions changes that
relate to future services. The adjustments to the CSM are
determined using the locked-in discount rates. Further information
on the subsequent measurement of the CSM is contained within note
C3.4(a).
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 later in this note.
With the adoption of IFRS 17, certain line items in the Group's
consolidated statement of financial position have been replaced
with new line items. For example, the Group now presents separately
the carrying amount of portfolios of:
-
Insurance contracts issued that are assets;
-
Insurance contracts issued that are liabilities;
-
Reinsurance contracts held that are assets; and
-
Reinsurance contracts held that are liabilities.
Further, the line items in the consolidated income statement have
been changed significantly compared with reporting under IFRS 4. In
accordance with the IFRS 17 requirements, the following line items
are no longer reported: Gross premiums earned, Outward reinsurance
premiums, Benefits and claims, Reinsurers' share of benefits and
claims, Movements in unallocated surplus of with-profits funds and
Acquisition costs. Those are replaced with the following IFRS 17
line items:
-
Insurance revenue;
-
Insurance service expenses;
-
Net income (expense) from reinsurance contracts held;
and
-
Net insurance finance income (expenses).
Approach to transition to IFRS 17
Transition refers to the determination of the opening balance sheet
for the first year of comparative information presented under IFRS
17 (ie at 1 January 2022). The future cash flows and risk
adjustment are measured on a current basis in the same manner as
they would be calculated for subsequent measurement. The key
component of transition is therefore the determination of the
CSM.
The standard requires IFRS 17 to be applied retrospectively (the
'Full Retrospective Approach') unless impracticable. If a fully
retrospective approach is impracticable there is an option to
choose either a Modified Retrospective Approach or a Fair Value
Approach. If reasonable and supportable information necessary to
apply the modified retrospective approach is not available, the
fair value approach must be applied.
The contractual service margin 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).
(a) 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.
(b) 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.
(i) 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.
(ii) Variable
Fee Approach (VFA)
Under
the MRA for Variable Fee Approach business, the contractual service
margin 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.
(c) 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.
The fair value of insurance contracts has been determined as the
present value of best estimate expected future cash flows plus an
additional amount representing compensation a market participant
would require to enter into a transaction to transfer the liability
associated with the insurance contracts at the transition date. The
return required by a market participant includes an allowance for
both financial risk and uncertainty in non-financial
risk.
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.
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.
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's equity securities at FVOCI. Under this designation, only
dividend income from this retained interest is recognised in the
profit or loss of the Company. Unrealised gains and losses are
recognised in other comprehensive income and there is no recycling
to the profit or loss on derecognition.
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 note C2.3.
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
|
Effects of adoption of IFRS 17 $m
|
At 1 Jan 2022
|
|
|
(as reported under
IFRS 4) $m
|
Presentation changes
|
Measurement changes
|
(as restated under
IFRS 17) $m
|
|
|
|
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:
(a) 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.
(b) 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.
(c) 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:
(a) 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'.
(b) 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.
(c) Deferred
tax assets and liabilities
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.
(d) 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 interim 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.
On 23 May 2023, the IASB issued amendments to IAS 12 'International
Tax Reform - Pillar Two Model Rules' referred to above, which
became effective immediately and were approved for adoption in the
UK on 19 July 2023. On 20 June 2023, legislation was substantively
enacted in the UK to introduce the OECD's Pillar Two global minimum
tax rules and a UK qualified domestic minimum top-up tax, with
effect from 1 January 2024. The Group has applied the IAS 12
mandatory exemption from recognising and disclosing information on
the associated deferred tax assets and liabilities at 30 June
2023.
A3 Critical accounting policies, estimates and
judgements
The preparation of these financial statements requires Prudential
to make accounting estimates and judgements about the amounts of
assets, liabilities, revenues and expenses, which are both
recognised and unrecognised (eg contingent liabilities) in the
financial statements. Prudential evaluates its critical accounting
estimates, including those related to insurance business
provisioning and the fair value of assets as required. The notes
below set out those critical accounting policies, the application
of which requires the Group to make critical estimates and
judgements. Also set out are further critical accounting policies
affecting the presentation of the Group's results and other items
that require the application of critical estimates and
judgements.
(a) Critical accounting policies with associated
critical estimates and judgements
Measurement of insurance and reinsurance contracts under IFRS
17
IFRS 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts, reinsurance
contracts and investment contracts with discretionary participation
features. It introduces a model that measures groups of contracts
based on the Group's estimates of the present value of future cash
flows that are expected to arise as the Group fulfils the
contracts, an explicit risk adjustment for non-financial risk and a
CSM. The process of determining the present value of future
cashflows involves a number of estimates and judgments, which are
set out below.
Determination of fulfilment cashflows used in the measurement of
insurance and reinsurance contract assets and
liabilities
(impacts $131.9 billion of net insurance and reinsurance contract
balances, excluding those held by joint ventures and
associates)
|
Estimates of future cash flows
|
The Group's process for estimating future cash flows incorporates,
in an unbiased way, all reasonable and supportable information that
is available without undue cost or effort at the reporting date.
This information includes both internal and external historical
data about claims and other experience, updated to reflect current
expectations of future events. As this is a prediction of the
future, significant judgement is applied in determining the
assumptions that underpin the estimation of future cash flows.
These assumptions include, but are not limited to operating
assumptions such as morbidity, mortality, persistency and expenses,
and economic assumptions such as risk free rates and illiquidity
premium. Individual assumptions are set at a business unit level.
The demographic assumptions are consistent with those used in other
metrics such as EEV reporting. The Risk Review included in
this Half Year Report discusses the insurance and market risks the
Group faces and how these risks are mitigated.
When estimating future cash flows, the Group takes into account
current expectations of future events (other than those form future
legislation or regulatory changes that have not been substantively
enacted) that might affect those cash flows.
Cash flows within the boundary of a contract (the Group's
accounting policy on contract boundary is given below) relate
directly to the fulfilment of the contract, including those for
which the Group has discretion over the amount or timing. These
include future premium receipts, payments to (or on behalf of)
policyholders, insurance acquisition cash flows and other costs
that are incurred in fulfilling contracts.
In relation to reinsurance contracts held, the probability weighted
estimates of the present value of future cash flows includes the
potential credit losses and losses from other disputes to reflect
the non-performance risk of the reinsurers.
|
Expense assumptions used in future cash flow
estimation
|
The Group projects estimates of future expenses relating to the
fulfilment of contracts within the scope of IFRS 17 using current
expense levels adjusted for inflation. Costs that are incurred in
fulfilling the contracts include, but are not limited to claims
handling costs, policy administration expenses, investment
management expenses, income tax and other costs specifically
chargeable to the policyholders under the terms of the contracts.
Expenses included in estimated future cash flows comprise expenses
directly attributable to the groups of contracts, including an
allocation of fixed and variable overheads incurred by the
insurance entities.
Investment management expenses in relation to the management of the
assets backing policyholder liabilities are included in the
fulfilment cash flows for business using the VFA model, indirect
participating business using the general model and general model
non-participating business where the Group performs investment
management activities to enhance benefits from insurance coverage
for policyholders. The future expenses of internal asset management
and other services excludes the projected future profits or losses
generated by any non-insurance entities within the Group in
providing those services (ie the IFRS results for the life
insurance operations in the consolidated financial statements
assume that the cost of internal asset management and other
services will be that incurred by the Group as a whole, not the
cost that will be borne by the insurance business).
Most of the costs incurred by the insurance entities within the
Group are considered to be incurred for the purpose of selling and
fulfilling insurance contracts and are hence treated as
attributable expenses. Cash flows that are not directly
attributable to a portfolio of insurance contracts, such as some
product development and training costs, are recognised in other
operating expenses as incurred.
|
Policyholder benefits
|
The assumptions used to project the cash flows also reflect the
actions that management would take over the duration of the
projection, the time it would take to implement these actions and
any expenses incurred in taking those actions. Management actions
encompass, but are not confined to, investment allocation
decisions, levels of regular and final bonuses and crediting
rates.
For participating contracts, estimated future claim payments
include bonuses paid to policyholders determined by reference to
the relevant profit sharing arrangement. For example, for the
Group's with-profits business in Hong Kong, Singapore and Malaysia,
asset shares are used to determine payments to
policyholders.
Where cash flows from one group of contracts affect, or are
affected by, cash flows in other groups of contracts (eg for
with-profits business), the fulfilment cash flows for a group
include payments arising from the terms of existing contracts to
policyholders in other groups and exclude payments to policyholders
in the group that have been included in the fulfilment cash flows
of another group.
|
Insurance acquisition cash flows
|
Insurance acquisition cash flows arise from the activities of
selling, underwriting and starting a group of insurance contracts
that are directly attributable to the portfolio of contracts to
which the group belongs. Insurance acquisition cash flows and other
costs that are incurred in fulfilling contracts comprise both
direct costs and an allocation of fixed and variable overheads
incurred by the insurance entities.
Insurance acquisition cash flows that are directly attributable to
a group of contracts (eg non-refundable commissions paid on
issuance of a contract) are allocated to that group and to the
groups that will include renewals of those contracts.
Bancassurance payments (eg upfront payments to sell insurance
contracts to distribution partners) are capitalised under IAS 38 as
intangible assets and amortised on a basis to reflect the pattern
in which the future economic benefits are expected to be consumed
by reference to new business production levels. The amortisation of
the bancassurance intangibles is considered to constitute insurance
acquisition cash flows. They form part of fulfilment cash flows,
only when such payments are linked to the sale of an insurance
contract and are then amortised implicitly in line with the
coverage unit pattern.
|
Determining the point of recognition and the boundary of an
insurance contract
|
The point of initial recognition of a group of contracts is the
earliest of the premium due date, the date coverage starts and, for
an onerous contract, the date the contract is signed and accepted
by both parties. There is limited judgement involved in relation to
most contracts issued by the Group as the coverage period generally
starts from the premium due date.
The contract boundary defines which future cash flows are included
in the measurement of a contract. The boundary of the fulfilment
cash flows under IFRS 17 is considered to be the point at which the
Group both no longer has substantive rights and obligations under
the insurance contract to provide services or compel the
policyholder to pay premiums.
The contract boundary is assessed at inception and then reassessed
only when there are changes in features or circumstances that alter
the commercial substance of the contract or changes the products
within a portfolio. The reassessment of the contract boundary for
any changes is performed at the end of each reporting
period.
For most contracts issued by the Group, there is little judgement
involved in determining the contract boundary as either a single
premium is received for a contract which is expected to continue
for a long period or a guaranteed premium is received for regular
premium contracts.
For certain contracts where the premiums are not guaranteed, more
judgement is involved. When determining the boundary for these
contracts various factors are taken into consideration by the Group
such as the Group's ability to fully reprice the respective
contract and how such contracts are managed.
The Group has some immaterial business that is general insurance in
nature and which is considered to have a boundary of one
year.
Where riders attach to and are not separated from a base contract,
the contract boundary is determined based on the component of the
contract which has the longest contract boundary.
Future cash flows relating to riders which are not purchased at the
inception of the base contract, but are added at a later date, are
not included within the contract boundary at initial recognition.
As the addition of these riders is the exercise of an option under
the contract it is not considered a contract modification but is
instead treated as changes in fulfilment cash flows.
Similar considerations to those applying to underlying insurance
contracts apply in determining the contract boundary of groups of
reinsurance contracts held.
|
|
Determination of discount rates
|
Discount rate and risk-free rate
|
The discount rate is determined on a bottom-up basis,
starting with a liquid risk-free yield curve and adding an
illiquidity premium to reflect the characteristics of the insurance
contracts.
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. 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, 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.
A proportion of the reference portfolio's illiquidity premium is
applied to portfolios of insurance contracts reflecting the
liquidity characteristics of the insurance contracts. The liquidity
characteristics are assessed from the policyholders' perspective. 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:
|
30 Jun 2023 %
|
|
1 year
|
5 years
|
10 years
|
15 years
|
20 years
|
Chinese
yuan (CNY)
|
1.86 -
2.36
|
2.44 -
2.87
|
2.67 -
3.10
|
2.91 -
3.35
|
3.05 -
3.48
|
Hong
Kong dollar (HKD)
|
4.82 -
5.98
|
4.02 -
5.18
|
3.77 -
4.93
|
3.79 -
4.95
|
3.81 -
4.97
|
Indonesian
rupiah (IDR)
|
5.81 -
6.36
|
6.15 -
6.70
|
6.57 -
7.12
|
6.80 -
7.35
|
6.95 -
7.50
|
Malaysian
ringgit (MYR)
|
3.36 -
4.03
|
3.63 -
4.30
|
3.95 -
4.62
|
4.10 -
4.77
|
4.24 -
4.91
|
Singapore
dollar (SGD)
|
3.66 -
4.62
|
3.11 -
4.07
|
3.00 -
3.96
|
2.79 -
3.75
|
2.43 -
3.39
|
United
States dollar (USD)
|
5.42 -
6.43
|
4.13 -
5.14
|
3.81 -
4.82
|
3.83 -
4.84
|
4.17 -
5.18
|
|
|
|
|
|
|
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
|
|
Determination of risk adjustment for non-financial
risk
|
Risk adjustment for non-financial risk
|
The risk adjustment for non-financial risk reflects the
compensation the Group requires for bearing the uncertainty about
the amount and timing of the cash flows from non-financial risk as
the Group fulfils insurance contracts.
For reinsurance contracts held, the risk adjustment for
non-financial risk represents the amount of risk being
transferred by the Group to the reinsurer.
The risk adjustment for non-financial risk is determined by the
Group using a confidence level approach. This is implemented
through the use of provisions for adverse deviations (PADs)
calibrated using non-financial risk distributions and correlation
assumptions. The PADs are applied to best estimate
assumptions.
The Group's risk adjustment allows for all insurance, persistency
and expense risks and operational risks specific to uncertainty in
the amount and timing of insurance contract cash flows. Reinsurance
counterparty default risk is excluded from the calculation.
Diversification is included on a net of reinsurance basis within
each insurance entity of the Group. Diversification is not allowed
for between entities.
By applying a confidence level technique, the Group estimates the
probability distribution of the expected present value of the
future cash flows from insurance contracts at each reporting date
and calculates the risk adjustment for non-financial risk as the
excess of the value at risk at the 75th percentile (the target
confidence level) over the expected present value of the future
cash flows. The confidence level is calibrated over a one-year
period.
|
Determination of coverage units
|
Coverage units
|
The proportion of CSM recognised in profit or loss at the end of
each period for a group of contracts is determined as the ratio
of:
-
the coverage units in the period; divided by
-
the sum of the coverage units in the period and the present value
of expected coverage units in future periods.
The total number of coverage units in a group is the quantity of
service provided determined by considering the quantity of benefits
for each contract and its expected coverage period. The Group
defines the quantity of benefits for insurance services as the
maximum amount which a policyholder receives when an insured event
takes place, for example the sum assured, the annual limit for a
medical plan or the present value of a stream of payments. The
quantity of benefits is updated each period. Investment related and
investment-return services are assumed to be constant over
time.
Where there are multiple different services in a group of contracts
(for example both insurance and investment services are provided),
the quantities of benefits for the different types of service are
combined using weighting factors. These weighting factors are
defined as the present value of expected outflows for each type of
service, determined at a contract level.
The expected coverage period is the expected duration up to the
contract boundary. The expected coverage period of the contracts in
a group and the calculation of future coverage units allows for
expected decrements (eg deaths and lapses) in each future period
using current best estimate assumptions consistent with the BEL
calculation.
The time value of money will be reflected in future coverage
units.
Determination of coverage units for groups of reinsurance contracts
held follow the same principles as for groups of underlying
contracts.
|
(b)
Further critical accounting policies affecting the
presentation of the Group's results
Presentation of results before tax attributable to
shareholders
|
Profit before tax is a significant IFRS income statement item. The
Group has chosen to present a measure of profit before tax
attributable to shareholders which distinguishes between tax borne
by shareholders and tax attributable to policyholders to support
understanding of the performance of the Group.
Profit before tax attributable to shareholders is $1,175 million
and compares to profit before tax of $1,243
million as shown
in the Consolidated income statement.
|
The total tax charge for the Group reflects tax that, in addition
to that relating to shareholders' profit, it is also attributable
to policyholders through the interest in with-profits or
unit-linked funds. Reported IFRS profit before the tax measure is
therefore not representative of pre-tax profit attributable to
shareholders. Accordingly, in order to provide a measure of pre-tax
profit attributable to shareholders, the Group has chosen to adopt
an income statement presentation of the tax charge and pre-tax
results that distinguishes between policyholders' and shareholders'
returns.
|
Segmental analysis of results and earnings attributable to
shareholders
|
The Group uses adjusted operating profit as the segmental measure
of its results.
Total segmental adjusted operating profit is $1,782 million as
shown in note B1.1.
|
The basis of calculation of adjusted operating profit is provided
in note B1.2.
The vast majority of the Group's investments are valued at fair
value through profit and loss. Short-term fluctuations in the fair
value of investments are only partially offset by the effect of
economic changes on insurance contract assets and liabilities and
so affect the result for the period. The Group therefore
provides additional analysis of results before and after the
effects of short-term fluctuations in investment returns, together
with other items that are of a short-term, volatile or one-off
nature.
|
(c) Other items requiring application of critical
estimates or judgements
VFA eligibility assessment
|
The Group applies judgements in assessing the VFA eligibility of
contracts. Application of the VFA impacts the calculation of the
CSM at the balance sheet date, which in turn impacts the future
year's amortisation recognised in the income statement. Unlike the
GMM approach, the VFA approach absorbs economic impacts within the
CSM, rather than in the profit and loss account.
The total insurance and reinsurance CSM at the balance sheet date
is $20,820 million, including joint ventures and associates, and
the CSM amortisation, net of reinsurance, recognised in the income
statement is $1,177 million as shown in note C3.2.
Approximately 72 per cent of the CSM (including joint ventures and
associates and net of reinsurance) at transition was calculated
under the VFA.
|
IFRS 17 requires the use of the VFA for insurance contracts with
direct participation features, ie substantially investment-related
service contracts for which, at inception:
a. the
contractual terms specify that the policyholder participates in a
share of a clearly identified pool of underlying
items;
b. the
entity expects to pay to the policyholder an amount equal to a
substantial share of the fair value returns on the underlying
items; and
c. the
entity expects a substantial proportion of any change in the
amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items.
The following key judgements have been made in assessing VFA
eligibility:
|
Definition of
substantial
|
The
term substantial is interpreted to mean greater than 50 per
cent.
|
Contractual
terms
|
In some
circumstances contractual terms are implied by customary business
practices.
|
Granularity of
assessment
|
The
assessment has been carried out at a contract level. However, to
the extent insurance contracts in a group affect the cash flows to
policyholders of contracts in other groups (referred to as
"mutualisation"), eligibility for the VFA has been assessed at the
level at which such mutualisation occurs (eg fund
level).
|
Calculation
basis
|
VFA
eligibility assessments have been performed on a basis consistent
with how the Group measures its realistic expectations, for example
when pricing, monitoring or setting returns to
policyholders.
|
Contracts not qualifying for the VFA are accounted for under the
GMM or PAA. The PAA is not used significantly within the
Group.
|
Carrying value of distribution rights intangible
assets
|
The Group applies judgement to assess whether factors such as the
financial performance of the distribution arrangements, or changes
in relevant legislation and regulatory requirements indicate an
impairment of intangible assets representing distribution
rights.
To determine the impaired value, the Group estimates the discounted
future expected cash flows arising from the cash generating unit
containing the distribution rights.
Impacts $3,428 million of assets as shown in note
C4.2.
|
Distribution rights relate to bancassurance partnership
arrangements for the distribution of products for the term of the
contractual agreement with the bank partner, for which an asset is
recognised based on fees paid and fees payable not subject to
performance conditions. Distribution rights impairment testing is
conducted when there is an indication of an
impairment.
To assess indicators of an impairment, the Group monitors a number
of internal and external factors, including indications that the
financial performance of the arrangement is likely to be worse than
expected and changes in relevant legislation and regulatory
requirements that could impact the Group's ability to continue to
sell new business through the bancassurance channel, and then
applies judgement to assess whether these factors indicate that an
impairment has occurred.
If an impairment has occurred, a charge is recognised in the income
statement for the difference between the carrying value and
recoverable amount of the asset. The recoverable amount is the
greater of fair value less costs to sell and value in use. Value in
use is calculated as the present value of future expected cash
flows from the asset or the cash generating unit to which it is
allocated.
|
Financial investments - Valuation
|
Financial investments held at fair value, net of derivative
liabilities, excluding those held by joint ventures and associates
is $141,359 million as shown in note C2.2(a).
Financial investments held at amortised cost represent $5,200
million of the Group's total assets.
The Group estimates the fair value of financial investments that
are not actively traded using quotations from independent third
parties or internally developed pricing models.
|
The Group holds the majority of its financial investments at fair
value (primarily through profit or loss). Financial investments
held at amortised cost primarily comprise loans and deposits and
certain debt securities held by Eastspring.
Determination of fair value
The fair values of the financial instruments for which fair
valuation is required under IFRS Standards are determined by the
use of quoted market prices for exchange-quoted investments or by
using quotations from independent third parties such as brokers and
pricing services or by using appropriate valuation techniques.
Further details are included in note C2.1.
The estimated fair value of derivative financial instruments
reflects the estimated amount the Group would receive or pay in an
arm's-length transaction. This amount is determined using quoted
prices if exchange listed, quotations from independent third
parties or valued internally using standard market
practices.
Quoted market prices are used to value investments having quoted
prices. Actively traded investments without quoted prices are
valued using prices provided by third parties such as brokers or
pricing services. Financial investments measured at fair value are
classified into a three-level hierarchy as described in note
C2.1.
If the market for a financial investment of the Group is not
active, the Group establishes fair value by using quotations from
independent third parties, such as brokers or pricing services, or
by using internally developed pricing models. Priority is given to
publicly available prices from independent sources when available,
but overall the source of pricing and/or the valuation technique is
chosen with the objective of arriving at a fair value measurement
which reflects the price at which an orderly transaction would take
place between market participants on the measurement date. Changes
in assumptions relating to these variables could positively or
negatively impact the reported fair value of these financial
investments. Details of the financial investments classified as
'level 3' to which valuation techniques are applied and the
sensitivity of profit before tax to a change in the valuation of
these items, are presented in note C2.2.
|
B Earnings performance
B1 Analysis of performance by segment
B1.1 Segment
results
|
|
|
|
2023 $m
|
|
2022 $m
|
|
2023 vs 2022 %
|
|
2022 $m
|
|
|
|
|
Half year
|
|
Half year
AER
|
Half year
CER
|
|
Half year
AER
|
Half year
CER
|
|
Full year
AER
|
|
|
|
Note
|
note (i)
|
|
note (i)
|
note (i)
|
|
note (i)
|
note (i)
|
|
note (i)
|
CPL
|
|
164
|
|
132
|
124
|
|
24%
|
32%
|
|
271
|
Hong Kong
|
|
554
|
|
598
|
597
|
|
(7)%
|
(7)%
|
|
1,162
|
Indonesia
|
|
109
|
|
118
|
113
|
|
(8)%
|
(4)%
|
|
205
|
Malaysia
|
|
165
|
|
193
|
184
|
|
(15)%
|
(10)%
|
|
340
|
Singapore
|
|
270
|
|
313
|
320
|
|
(14)%
|
(16)%
|
|
570
|
Growth markets and othernote
(ii)
|
|
374
|
|
337
|
323
|
|
11%
|
16%
|
|
728
|
Eastspring
|
|
146
|
|
131
|
128
|
|
11%
|
14%
|
|
260
|
Total segment profit
|
B1.3
|
1,782
|
|
1,822
|
1,789
|
|
(2)%
|
0%
|
|
3,536
|
Other income and expenditure:
|
|
|
|
|
|
|
|
|
|
|
|
Net investment return and other itemsnote
(iii)
|
|
(28)
|
|
(4)
|
(4)
|
|
n/a
|
n/a
|
|
(44)
|
|
Interest payable on core structural borrowings
|
|
(85)
|
|
(103)
|
(103)
|
|
17%
|
17%
|
|
(200)
|
|
Corporate expenditurenote
(iv)
|
|
(115)
|
|
(150)
|
(150)
|
|
23%
|
23%
|
|
(276)
|
Total other income and expenditure
|
|
(228)
|
|
(257)
|
(257)
|
|
11%
|
11%
|
|
(520)
|
Restructuring and IFRS 17 implementation costsnote
(v)
|
|
(92)
|
|
(154)
|
(152)
|
|
40%
|
39%
|
|
(294)
|
Adjusted operating profit
|
B1.2
|
1,462
|
|
1,411
|
1,380
|
|
4%
|
6%
|
|
2,722
|
Short-term fluctuations in investment returns
|
|
(287)
|
|
(2,820)
|
(2,806)
|
|
90%
|
90%
|
|
(3,420)
|
Gain attaching to corporate transactions
|
D1
|
-
|
|
62
|
62
|
|
n/a
|
n/a
|
|
55
|
Profit (loss) before tax attributable to shareholders
|
|
1,175
|
|
(1,347)
|
(1,364)
|
|
n/a
|
n/a
|
|
(643)
|
Tax charge attributable to shareholders' returns
|
|
(228)
|
|
(158)
|
(147)
|
|
(44)%
|
(55)%
|
|
(354)
|
Profit (loss) for the period
|
|
947
|
|
(1,505)
|
(1,511)
|
|
n/a
|
n/a
|
|
(997)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
944
|
|
(1,508)
|
(1,514)
|
|
n/a
|
n/a
|
|
(1,007)
|
Non-controlling interests
|
|
3
|
|
3
|
3
|
|
n/a
|
n/a
|
|
10
|
Profit (loss) for the period
|
|
947
|
|
(1,505)
|
(1,511)
|
|
n/a
|
n/a
|
|
(997)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (in cents)
|
|
2023
|
|
2022
|
|
|
2023 vs 2022 %
|
|
2022
|
|
|
|
Note
|
Half year
|
|
Half year
AER
|
Half year
CER
|
|
Half year
AER
|
Half year
CER
|
|
Full year
AER
|
|
|
|
B3
|
note (i)
|
|
note (i)
|
note (i)
|
|
note (i)
|
note (i)
|
|
note (i)
|
Based on adjusted operating profit, net of tax and non-controlling
interest
|
|
45.2¢
|
|
40.6¢
|
39.9¢
|
|
11%
|
13%
|
|
79.4¢
|
Based on profit (loss) for the period, net of non-controlling
interest
|
|
34.5¢
|
|
(55.1)¢
|
(55.4)¢
|
|
n/a
|
n/a
|
|
(36.8)¢
|
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 items"
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 $(36)
million (half year 2022: $(44) million; full year 2022: $(137)
million), largely comprising the costs of Group-wide projects
including the implementation of IFRS 17, reorganisation programmes
and initial costs of establishing new business initiatives and
operations.
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 as reported in these interim financial
statements 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 period, including
short-term fluctuations in investment returns and gain or loss on
corporate transactions.
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.
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 General Measurement
Model, 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
liquidity premium included in the current discount rate for the
liabilities.
-
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 detail on how
longer-term rates are determined is set 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
period to period 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 7.8 per cent
for all periods shown above.
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 all periods shown above.
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
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 contacts where gains and losses can be shared
across cohorts as described in note B1.2.
- 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.
- 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.
- Other
insurance service result primarily relates to movements on onerous
contracts that impact adjusted operating profit (ie excluding those
discussed in 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.
- 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.
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 %
|
|
2022 $m
|
|
|
Half year
|
|
Half year
AER
|
Half year
CER
|
|
Half year
AER
|
Half year
CER
|
|
Full year
AER
|
Adjusted release of CSMnote
|
1,178
|
|
1,212
|
1,189
|
|
(3)%
|
(1)%
|
|
2,265
|
Release of risk adjustment
|
107
|
|
98
|
96
|
|
9%
|
11%
|
|
179
|
Experience variances
|
(92)
|
|
(19)
|
(13)
|
|
n/a
|
n/a
|
|
(66)
|
Other insurance service result
|
(85)
|
|
(134)
|
(128)
|
|
37%
|
34%
|
|
(204)
|
Adjusted insurance service resultnote
|
1,108
|
|
1,157
|
1,144
|
|
(4)%
|
(3)%
|
|
2,174
|
Net investment result on longer-term basisnote
|
612
|
|
653
|
632
|
|
(6)%
|
(3)%
|
|
1,290
|
Other insurance income and expenditure
|
(45)
|
|
(83)
|
(80)
|
|
46%
|
44%
|
|
(98)
|
Share of related tax charges from joint ventures and
associates
|
(39)
|
|
(36)
|
(35)
|
|
(8)%
|
(11)%
|
|
(90)
|
Insurance business
|
1,636
|
|
1,691
|
1,661
|
|
(3)%
|
(2)%
|
|
3,276
|
Eastspring
|
146
|
|
131
|
128
|
|
11%
|
14%
|
|
260
|
Other income and expenditure
|
(228)
|
|
(257)
|
(257)
|
|
11%
|
11%
|
|
(520)
|
Restructuring and IFRS 17 implementation costs
|
(92)
|
|
(154)
|
(152)
|
|
40%
|
39%
|
|
(294)
|
Adjusted operating profit
|
1,462
|
|
1,411
|
1,380
|
|
4%
|
6%
|
|
2,722
|
Note
The adjusted release of CSM and the adjusted insurance service
result are reconciled to the information in the Analysis of
movements in insurance and reinsurance contract balances by
measurement component in note C3.2 (including joint ventures and
associates) and the condensed consolidated income
statement as follows:
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
Release of CSM, net of reinsurance as included within Insurance
service result on the consolidated income statement
|
1,068
|
|
1,088
|
2,013
|
Add amounts relating to the Group's life joint ventures and
associates that are accounted for on equity-method
|
109
|
|
113
|
229
|
Release of CSM, net of reinsurance as shown in note
C3.2
|
|
|
|
|
Insurance
|
1,223
|
|
n/a
|
2,413
|
Reinsurance
|
(46)
|
|
n/a
|
(171)
|
|
1,177
|
|
n/a
|
2,242
|
Adjustment to release of CSM for the treatment adopted for adjusted
operating purposes of combining losses on onerous contracts and
gains on profitable contracts that can be shared across more than
one annual cohort
|
1
|
|
11
|
23
|
Adjusted release of CSM as shown above
|
1,178
|
|
1,212
|
2,265
|
|
|
|
|
|
Insurance service result as shown in the consolidated income
statement
|
1,019
|
|
1,258
|
2,177
|
Add amounts relating to the Group's life joint ventures and
associates that are accounted for on equity-method
|
70
|
|
45
|
112
|
Insurance service result as shown in note C3.2
|
|
|
|
|
Insurance
|
1,181
|
|
n/a
|
2,396
|
Reinsurance
|
(92)
|
|
n/a
|
(107)
|
|
1,089
|
|
n/a
|
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
|
70
|
|
(83)
|
(33)
|
Other primarily related to policyholder tax*
|
(51)
|
|
(63)
|
(82)
|
Adjusted insurance service result as shown above
|
1,108
|
|
1,157
|
2,174
|
*
Other primarily relates to the offsetting of the expected and
variance of the tax charge attributable to policyholders included
in the insurance service result in the income statement and the
actual tax charge that is presented in the IAS 12 tax line in the
income statement but included in the pre-tax adjusted operating
profit attributable to shareholders. These tax amounts, while
presented in different lines in the consolidated income statement,
are wholly attributable to policyholders with no net impact to
adjusted operating profit and so have been offset in the analysis
above.
In addition, net investment result on longer-term basis is
reconciled to the net investment result in the condensed
consolidated income statement as follows:
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
Net investment result as shown in the consolidated income
statement
|
652
|
|
(2,098)
|
(1,883)
|
Remove investment return of non-insurance entities
|
(39)
|
|
(34)
|
(54)
|
Remove short-term fluctuations in investment return included in
non-operating profit*
|
287
|
|
2,820
|
3,420
|
Other items*
|
(288)
|
|
(35)
|
(193)
|
Net investment result on longer-term basis as shown
above
|
612
|
|
653
|
1,290
|
*
These reconciling line items include the impact from the Group's
life joint ventures and associates.
B1.4
Revenue
The Group recognises insurance revenue as it satisfies its
performance obligations, ie as it provides services under groups of
insurance contracts. The insurance revenue relating to services
provided for each period represents the total of the changes in the
liability for remaining coverage that relate to services for which
the Group expects to receive consideration, and comprises the
following items.
- A release of the CSM, measured
based on coverage units provided;
- Changes in the risk adjustment
for non-financial risk relating to current
services;
- Claims and other insurance
service expenses for the period expected at the beginning of the
year; and
- Other amounts, if any, for
example, experience adjustments for premium receipts for current or
past services.
In addition, the Group allocates a portion of premiums that relate
to recovering insurance acquisition cash flows to each period using
the same amortisation factor used to amortise CSM. The Group
recognises the allocated amount, adjusted for interest accretion,
as insurance revenue and an equal amount as insurance service
expenses.
Non-distinct investment components are excluded from insurance
revenue and insurance service expenses.
Policy fees charged on investment contracts without discretionary
participation features for asset management and policy
administration fees are recognised when related services are
provided.
|
Half year 2023 $m
|
|
Insurance
operationsnote
(i)
|
|
|
|
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and
other
|
Eastspring
|
Inter
-segment
elimi-
nation
|
Total
segment
|
Un-
allocated
to a
segment
|
Total
|
Insurance revenue
|
1,582
|
551
|
566
|
946
|
946
|
-
|
-
|
4,591
|
-
|
4,591
|
Other revenuenote
(ii)
|
11
|
2
|
-
|
1
|
17
|
145
|
-
|
176
|
-
|
176
|
Total revenue from external customers
|
1,593
|
553
|
566
|
947
|
963
|
145
|
-
|
4,767
|
-
|
4,767
|
Intra-group revenue
|
-
|
-
|
-
|
-
|
-
|
103
|
(103)
|
-
|
-
|
-
|
Interest income
|
540
|
40
|
133
|
444
|
393
|
3
|
-
|
1,553
|
61
|
1,614
|
Dividend and other investment income
|
410
|
81
|
79
|
273
|
65
|
2
|
-
|
910
|
7
|
917
|
Investment appreciation (depreciation)
|
2,345
|
36
|
(69)
|
1,234
|
1,128
|
4
|
-
|
4,678
|
(38)
|
4,640
|
Total revenue
|
4,888
|
710
|
709
|
2,898
|
2,549
|
257
|
(103)
|
11,908
|
30
|
11,938
|
|
Half year 2022 $m
|
|
Insurance
operationsnote
(i)
|
|
|
|
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and
other
|
Eastspring
|
Inter
-segment
elimi-
nation
|
Total
segment
|
Un-
allocated
to a
segment
|
Total
|
Insurance revenue
|
1,386
|
539
|
507
|
864
|
863
|
-
|
-
|
4,159
|
-
|
4,159
|
Other revenuenote
(ii)
|
14
|
-
|
-
|
2
|
7
|
181
|
-
|
204
|
-
|
204
|
Total revenue from external customers
|
1,400
|
539
|
507
|
866
|
870
|
181
|
-
|
4,363
|
-
|
4,363
|
Intra-group revenue
|
-
|
-
|
-
|
-
|
1
|
106
|
(107)
|
-
|
-
|
-
|
Interest income
|
477
|
39
|
110
|
387
|
303
|
1
|
-
|
1,317
|
3
|
1,320
|
Dividend and other investment income
|
338
|
103
|
103
|
321
|
66
|
-
|
-
|
931
|
19
|
950
|
Investment appreciation (depreciation)
|
(17,659)
|
(161)
|
(603)
|
(5,403)
|
(2,327)
|
(17)
|
-
|
(26,170)
|
28
|
(26,142)
|
Total revenue
|
(15,444)
|
520
|
117
|
(3,829)
|
(1,087)
|
271
|
(107)
|
(19,559)
|
50
|
(19,509)
|
|
Full year 2022 $m
|
|
Insurance
operationsnote
(i)
|
|
|
|
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and
other
|
Eastspring
|
Inter
-segment
elimi-
nation
|
Total
segment
|
Un-
allocated
to a
segment
|
Total
|
Insurance revenue
|
2,840
|
1,070
|
1,029
|
1,815
|
1,795
|
-
|
-
|
8,549
|
-
|
8,549
|
Other revenuenote
(ii)
|
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 appreciation (depreciation)
|
(23,615)
|
(69)
|
(386)
|
(6,679)
|
(2,860)
|
(21)
|
-
|
(33,630)
|
(5)
|
(33,635)
|
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 revenue comprises revenue from external customers and
consists primarily of revenue from the Group's asset management
business of $145 million (half year 2022: $181 million; full year
2022: $330 million).
B2 Tax charge
The
total tax charge in the income statement is as
follows:
|
|
2023 $m
|
|
2022 $m
|
|
Half year
|
|
Half year
|
Full year
|
Hong Kong
|
(63)
|
|
(57)
|
(106)
|
Indonesia
|
(27)
|
|
(17)
|
(27)
|
Malaysia
|
(43)
|
|
32
|
(44)
|
Singapore
|
(91)
|
|
46
|
(61)
|
Growth markets and other
|
(66)
|
|
(171)
|
(210)
|
Eastspring
|
(14)
|
|
(14)
|
(26)
|
Total segment
|
(304)
|
|
(181)
|
(474)
|
Unallocated to a segment (central operations)
|
8
|
|
(1)
|
(4)
|
Total tax charge
|
(296)
|
|
(182)
|
(478)
|
|
|
|
|
|
|
Analysed by:
|
|
|
|
|
Current tax
|
(238)
|
|
(255)
|
(481)
|
Deferred tax
|
(58)
|
|
73
|
3
|
Total tax charge
|
(296)
|
|
(182)
|
(478)
|
Profit before tax includes Prudential's share of profit after tax
from the joint ventures and associates that are equity-accounted
for. Therefore, the actual tax charge in the income statement does
not include tax arising from the results of joint ventures and
associates including CPL.
The actual shareholder tax rates of
the relevant business operations are shown
below:
|
|
Half year 2023 %
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and other
|
Eastspring
|
Other
operations
|
Total
attributable to
shareholders
|
Tax rate on adjusted operating profit
|
5%
|
21%
|
22%
|
16%
|
22%
|
10%
|
3%
|
15%
|
Tax rate on profit before tax attributable to shareholders'
returns
|
5%
|
22%
|
23%
|
16%
|
13%
|
10%
|
2%
|
19%
|
|
|
|
|
|
|
|
|
|
|
|
|
Half year 2022 %
|
|
|
Hong
Kong
|
Indonesia
|
Malaysia
|
Singapore
|
Growth
markets
and other
|
Eastspring
|
Other
operations
|
Total
attributable to
shareholders
|
Tax rate on adjusted operating profit
|
5%
|
22%
|
22%
|
15%
|
41%
|
11%
|
0%
|
21%
|
Tax rate on profit before tax attributable to shareholders'
returns
|
(3)%
|
22%
|
(50)%
|
17%
|
85%
|
11%
|
0%
|
(12)%
|
|
|
Full year 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 attributable to shareholders'
returns
|
(7)%
|
16%
|
25%
|
63%
|
40%
|
10%
|
(1)%
|
(55)%
|
B3 Earnings per share
|
|
|
Half year 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
|
|
1,462
|
(221)
|
(3)
|
1,238
|
45.2¢
|
45.2¢
|
Short-term fluctuations in investment returns
|
|
(287)
|
(7)
|
-
|
(294)
|
(10.7)¢
|
(10.7)¢
|
Gain attaching to corporate transactions
|
|
-
|
-
|
-
|
-
|
-¢
|
-¢
|
Based on profit for the period
|
|
1,175
|
(228)
|
(3)
|
944
|
34.5¢
|
34.5¢
|
|
|
|
Half year 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
|
|
1,411
|
(296)
|
(4)
|
1,111
|
40.6¢
|
40.6¢
|
Short-term fluctuations in investment returns
|
|
(2,820)
|
138
|
1
|
(2,681)
|
(98.0)¢
|
(98.0)¢
|
Gain attaching to corporate transactions
|
|
62
|
-
|
-
|
62
|
2.3¢
|
2.3¢
|
Based on profit for the period
|
|
(1,347)
|
(158)
|
(3)
|
(1,508)
|
(55.1)¢
|
(55.1)¢
|
|
|
|
Full year 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 profit for the year
|
|
(643)
|
(354)
|
(10)
|
(1,007)
|
(36.8)¢
|
(36.8)¢
|
Basic earnings per share are calculated based on earnings
attributable to ordinary shareholders, after related tax and
non-controlling interests, divided by the weighted average number
of ordinary shares outstanding during the period, excluding those
held in employee share trusts, which are treated as cancelled. For
diluted earnings per share, the weighted average number of shares
in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. The Group's only class of potentially dilutive
ordinary shares are those share options granted to employees where
the exercise price is less than the average market price of the
ordinary shares during the period. No adjustment is made if the
impact is anti-dilutive overall.
The weighted average number of shares for calculating basic and
diluted earnings per share, which excludes those held
in employee share trusts, is set out
as below:
|
|
2023
|
|
2022
|
Number of shares (in millions)
|
Half year
|
|
Half year
|
Full year
|
Weighted average number of shares for calculation of basic earnings
per share
|
2,740
|
|
2,736
|
2,736
|
Shares under option at end of period
|
1
|
|
-
|
1
|
Shares that would have been issued at fair value on assumed option
price at end of period
|
(1)
|
|
-
|
(1)
|
Weighted average number of shares for calculation of diluted
earnings per share
|
2,740
|
|
2,736
|
2,736
|
B4 Dividends
|
|
Half year 2023
|
|
Half year 2022
|
|
Full year 2022
|
|
Cents per share
|
$m
|
|
Cents per share
|
$m
|
|
Cents per share
|
$m
|
Dividends relating to reporting period:
|
|
|
|
|
|
|
|
|
|
First interim dividend
|
6.26¢
|
172
|
|
5.74¢
|
158
|
|
5.74¢
|
154
|
|
Second interim dividend
|
-
|
-
|
|
-
|
-
|
|
13.04¢
|
359
|
Total relating to reporting period
|
6.26¢
|
172
|
|
5.74¢
|
158
|
|
18.78¢
|
513
|
Dividends paid in reporting period:
|
|
|
|
|
|
|
|
|
|
Current year first interim dividend
|
-
|
-
|
|
-
|
-
|
|
5.74¢
|
154
|
|
Second interim dividend for prior year
|
13.04¢
|
361
|
|
11.86¢
|
320
|
|
11.86¢
|
320
|
Total paid in reporting period
|
13.04¢
|
361
|
|
11.86¢
|
320
|
|
17.60¢
|
474
|
First and second interim dividends are recorded in the period in
which they are paid.
Dividend per share
On 19 October 2023, Prudential will pay a first interim dividend of
6.26 cents per ordinary share for the year ending 31 December 2023.
The first interim dividend will be paid to shareholders recorded on
the UK register at 6.00pm (British Summer Time) or on the HK branch
register at 4.30pm (Hong Kong Time) on 8 September 2023 (Record
Date) and also to the holders of US American Depositary Receipts
(ADRs) as at 8 September 2023. The first interim dividend will be
paid on or about 26 October 2023 to shareholders with shares
standing to the credit of their securities accounts with The
Central Depository (Pte) Limited (CDP) at 5.00pm (Singapore Time)
on the Record Date.
Shareholders holding shares on the UK or HK share registers will
continue to receive their dividend payments in either GBP or HKD
respectively, unless they elect to receive dividend payments in
USD. Elections must be made through the relevant UK or HK share
registrar on or before 29 September 2023. The corresponding amounts
per share in GBP and HKD are expected to be announced on or about 9
October 2023. The USD to GBP and HKD conversion rates will be
determined by the actual rates achieved by Prudential buying those
currencies prior to the subsequent announcement.
Holders of ADRs will continue to receive their dividend payments in
USD. Shareholders holding an interest in Prudential shares through
CDP in Singapore will continue to receive their dividend payments
in SGD at an exchange rate determined by CDP.
Shareholders on the UK register are eligible to participate in a
Dividend Reinvestment Plan.
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 30 June 2023 were
$1,127 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 General Measurement Model liabilities
and therefore these other investments are recognised in adjusted
operating profit at a longer-term rate.
|
|
|
30 Jun 2023 $m
|
|
|
|
Asia and Africa
|
|
|
|
|
|
Insurance
|
|
|
|
|
|
|
|
Funds with policyholder participation*
|
Unit-linked
funds
|
Other
|
Eastspring
|
Total
|
Unallocated
to a
segment
|
Group
total
|
Debt securities:
|
|
|
|
|
|
|
|
Sovereign debt
|
|
|
|
|
|
|
|
|
Indonesia
|
408
|
637
|
460
|
-
|
1,505
|
-
|
1,505
|
|
Singapore
|
3,330
|
571
|
943
|
-
|
4,844
|
-
|
4,844
|
|
Thailand
|
1
|
3
|
1,612
|
-
|
1,616
|
-
|
1,616
|
|
United Kingdom
|
-
|
4
|
44
|
-
|
48
|
-
|
48
|
|
United States
|
23,364
|
18
|
1,756
|
-
|
25,138
|
-
|
25,138
|
|
Vietnam
|
3,084
|
27
|
180
|
-
|
3,291
|
-
|
3,291
|
|
Other (predominantly Asia)
|
4,056
|
672
|
1,675
|
27
|
6,430
|
-
|
6,430
|
Subtotal
|
34,243
|
1,932
|
6,670
|
27
|
42,872
|
-
|
42,872
|
Other government bonds
|
|
|
|
|
|
|
|
|
AAA
|
1,421
|
89
|
137
|
-
|
1,647
|
-
|
1,647
|
|
AA+ to AA-
|
85
|
11
|
22
|
-
|
118
|
-
|
118
|
|
A+ to A-
|
694
|
114
|
234
|
-
|
1,042
|
-
|
1,042
|
|
BBB+ to BBB-
|
231
|
51
|
71
|
-
|
353
|
-
|
353
|
|
Below BBB- and unrated
|
487
|
15
|
76
|
-
|
578
|
-
|
578
|
Subtotal
|
2,918
|
280
|
540
|
-
|
3,738
|
-
|
3,738
|
Corporate bonds
|
|
|
|
|
|
|
|
|
AAA
|
1,175
|
169
|
234
|
-
|
1,578
|
-
|
1,578
|
|
AA+ to AA-
|
2,527
|
356
|
932
|
-
|
3,815
|
-
|
3,815
|
|
A+ to A-
|
10,141
|
540
|
2,291
|
-
|
12,972
|
-
|
12,972
|
|
BBB+ to BBB-
|
8,938
|
711
|
2,019
|
-
|
11,668
|
-
|
11,668
|
|
Below BBB- and unrated
|
2,487
|
583
|
356
|
2
|
3,428
|
-
|
3,428
|
Subtotal
|
25,268
|
2,359
|
5,832
|
2
|
33,461
|
-
|
33,461
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
AAA
|
194
|
1
|
66
|
-
|
261
|
-
|
261
|
|
AA+ to AA-
|
16
|
2
|
2
|
-
|
20
|
-
|
20
|
|
A+ to A-
|
46
|
1
|
10
|
-
|
57
|
-
|
57
|
|
BBB+ to BBB-
|
15
|
-
|
3
|
-
|
18
|
-
|
18
|
|
Below BBB- and unrated
|
2
|
1
|
-
|
-
|
3
|
-
|
3
|
Subtotal
|
273
|
5
|
81
|
-
|
359
|
-
|
359
|
Total debt securitiesnotes
(i)(iii)
|
62,702
|
4,576
|
13,123
|
29
|
80,430
|
-
|
80,430
|
Loans:
|
|
|
|
|
|
|
|
|
Mortgage loans
|
99
|
-
|
45
|
-
|
144
|
-
|
144
|
|
Other loans
|
430
|
-
|
-
|
-
|
430
|
-
|
430
|
Total loans
|
529
|
-
|
45
|
-
|
574
|
-
|
574
|
Equity securities and holdings in collective investment
schemes:
|
|
|
|
|
|
|
|
|
Direct equities
|
17,352
|
11,637
|
156
|
106
|
29,251
|
-
|
29,251
|
|
Collective investment schemes
|
22,670
|
7,070
|
1,514
|
3
|
31,257
|
-
|
31,257
|
Total equity securities and holdings in collective investment
schemes
|
40,022
|
18,707
|
1,670
|
109
|
60,508
|
-
|
60,508
|
Other financial investmentsnote
(ii)
|
2,416
|
403
|
1,503
|
96
|
4,418
|
1,096
|
5,514
|
Total financial investments
|
105,669
|
23,686
|
16,341
|
234
|
145,930
|
1,096
|
147,026
|
Investment properties
|
-
|
-
|
38
|
-
|
38
|
-
|
38
|
Cash and cash equivalents
|
900
|
699
|
1,410
|
159
|
3,168
|
2,752
|
5,920
|
Total investments
|
106,569
|
24,385
|
17,789
|
393
|
149,136
|
3,848
|
152,984
|
|
|
|
31 Dec 2022 $m
|
|
|
|
Asia and Africa
|
|
|
|
|
|
Insurance
|
|
|
|
|
|
Funds with
policyholder
participation*
|
Unit-linked
funds
|
Other
|
Eastspring
|
Total
|
Unallocated
to a
segment
|
Group
total
|
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 securitiesnotes
(i)(iii)
|
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 investmentsnote
(ii)
|
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
|
*
Represents 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.
Notes
(i)
Of the Group's debt securities, the following amounts were held by
the consolidated investment funds:
|
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
|
Debt securities held by consolidated investment funds
|
10,769
|
11,899
|
(ii)
Other financial investments comprise derivative assets and
deposits.
(iii)
The credit ratings, information or data contained in this report
which are attributed and specifically provided by Standard &
Poor's, Moody's and Fitch Solutions and their respective affiliates
and suppliers ('Content Providers') is referred to here as the
'Content'. Reproduction of any Content in any form is prohibited
except with the prior written permission of the relevant party. The
Content Providers do not guarantee the accuracy, adequacy,
completeness, timeliness or availability of any Content and are not
responsible for any errors or omissions (negligent or otherwise),
regardless of the cause, or for the results obtained from the use
of such Content. The Content Providers expressly disclaim liability
for any damages, costs, expenses, legal fees, or losses (including
lost income or lost profit and opportunity costs) in connection
with any use of the Content. A reference to a particular investment
or security, a rating or any observation concerning an investment
that is part of the Content is not a recommendation to buy, sell or
hold any such investment or security, nor does it address the
suitability of an investment or security and should not be relied
on as investment advice.
C1.2 Other assets and liabilities
Property, plant and equipment (PPE)
At 30 June 2023, there are PPE of $396 million (31 December 2022:
$437 million). During half year 2023, the Group made additions of
$37 million of PPE (full year 2022: $83 million), of which $19
million relates to right-of-use assets (full year 2022: $49
million).
Accrued investment income and other debtors
At 30 June 2023, there are accrued investment income and other
debtors of $2,052 million (31 December 2022: $1,951 million), of
which $1,918 million (31 December 2022: $1,882 million) are
expected to be settled within one year.
Accruals, deferred income and other creditors
At 30 June 2023, there are accruals, deferred income and other
liabilities of $2,277 million (31 December 2022: $2,866 million),
of which $2,078 million (31 December 2022: $2,686 million) are due
within one year.
C2 Fair value measurement
C2.1
Determination of fair value
The fair values of the financial instruments for which fair
valuation is required under IFRS Standards are determined by the
use of quoted market prices for exchange-quoted investments, or by
using quotations from independent third parties, such as brokers
and pricing services or by using appropriate valuation
techniques.
The estimated fair value of derivative financial instruments
reflects the estimated amount the Group would receive or pay in an
arm's-length transaction. This amount is determined using quoted
prices if exchange listed, quotations from independent third
parties or valued internally using standard market
practices.
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. For further detail on the valuation approach for
level 2 fair valued assets and liabilities, refer to note C2.1 of
the Group IFRS financial statements for the year ended 31 December
2022.
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 Fair value measurement hierarchy of Group assets and
liabilities
(a) Assets and liabilities carried at fair value on the
statement of financial position
The table below shows the assets and liabilities carried at fair
value analysed by level of the IFRS 13 'Fair Value Measurement'
defined fair value hierarchy. This hierarchy is based on the inputs
to the fair value measurement and reflects the lowest level input
that is significant to that measurement.
All assets and liabilities held at fair value are classified as
fair value through profit or loss at 30 June 2023. At 31 December
2022 $266 million of financial assets were classified as
available-for-sale under IAS 39 related to the Group's retained
interest in Jackson's equity securities. All assets and liabilities
held at fair value are measured on a recurring basis.
Financial instruments at fair value
|
|
30 Jun 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 (i)
|
note (ii)
|
|
Loans
|
-
|
427
|
3
|
430
|
Equity securities and holdings in collective investment
schemes
|
52,124
|
7,159
|
1,225
|
60,508
|
Debt securities
|
60,343
|
20,049
|
38
|
80,430
|
Derivative assets
|
329
|
129
|
-
|
458
|
Derivative liabilities
|
(182)
|
(285)
|
-
|
(467)
|
Total financial investments, net of derivative
liabilities
|
112,614
|
27,479
|
1,266
|
141,359
|
Investment contract liabilities without discretionary participation
features
|
-
|
(716)
|
-
|
(716)
|
Net asset value attributable to unit holders of consolidated
investment funds
|
(2,683)
|
-
|
-
|
(2,683)
|
Total financial instruments at fair value
|
109,931
|
26,763
|
1,266
|
137,960
|
Percentage of total (%)
|
80%
|
19%
|
1%
|
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 (i)
|
note (ii)
|
|
Loans
|
-
|
447
|
3
|
450
|
Equity securities and holdings in collective investment
schemes
|
49,725
|
7,130
|
824
|
57,679
|
Debt securities
|
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 discretionary participation
features
|
-
|
(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 $20,049 million at 30 June
2023 (31 December 2022: $19,763 million), $10 million (31
December 2022: $37 million) are valued internally.
(ii)
At 30 June 2023, the Group held $1,266 million (31 December 2022:
$865 million) of net financial instruments at fair value within
level 3. This represents less than 1.0 per cent of the total fair
valued financial assets, net of financial liabilities, for all
periods and comprises the following:
-
Equity securities and holdings in collective investment schemes of
$1,225 million (31 December 2022: $824 million) consisting
primarily of property and infrastructure funds held by the
participating funds, which are externally valued using the net
asset value of the invested entities. Equity securities of $1
million (31 December 2022: $1 million) are internally valued,
representing less than 0.1 per cent for all periods of the total
fair valued financial assets net of financial liabilities. Internal
valuations are inherently more subjective than external valuations;
and
-
Other sundry individual financial instruments of a net asset of $41
million (31 December 2022: $41 million).
Of
the net financial instruments of $1,266 million at 30 June 2023 (31
December 2022: $865 million) referred to above:
-
A net asset of $1,233 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 $33
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 $(3) million (31 December 2022: $(4)
million), which would reduce shareholders' equity by this amount
before tax.
(b) Transfers into and transfers out of
levels
The Group's policy is to recognise transfers into and out of levels
as of the end of each reporting period except for material
transfers which are recognised as of the date of the event or
change in circumstances that caused the transfer. Transfers are
deemed to have occurred when there is a material change in the
observed valuation inputs or a change in the level of trading
activities of the securities.
During the first half of 2023, the transfers between levels within
the portfolios were primarily transfers from level 1 to level 2 of
$1,128 million and transfers from level 2 to level 1 of $993
million. These transfers primarily reflect the change in the
observed valuation inputs of equity securities and debt securities
and, in certain cases, the change in the level of trading
activities of the securities. There were no transfers from level 3
to level 2 and no transfers into level 3 in the
period.
Reconciliation of movements in level 3 assets and liabilities
measured at fair value
The following table reconciles the value of level 3 fair valued
assets and liabilities at the beginning of the period to that
presented at the end of the period.
Total investment return recorded in the income statement represents
interest and dividend income, realised gains and losses, unrealised
gains and losses on the assets classified at fair value through
profit and loss and foreign exchange movements on an individual
entity's overseas investments. Total gains and losses recorded in
other comprehensive income comprises the translation of investments
into the Group's presentational currency of US
dollars.
|
|
Half year 2023 $m
|
|
Loans
|
Equity securities and
holdings in collective
investment schemes
|
Debt
securities
|
Group
total
|
Balance at beginning of period
|
3
|
824
|
38
|
865
|
Total gains in income statementnote
|
-
|
14
|
3
|
17
|
Total losses recorded in other comprehensive income
|
-
|
(28)
|
(3)
|
(31)
|
Purchases and other additions
|
-
|
417
|
-
|
417
|
Sales
|
-
|
(2)
|
-
|
(2)
|
Balance at end of period
|
3
|
1,225
|
38
|
1,266
|
|
|
Full year 2022 $m
|
|
Loans
|
Equity securities and
holdings in collective
investment schemes
|
Debt
securities
|
Group
total
|
Balance at beginning of year
|
5
|
577
|
58
|
640
|
Total losses in income statementnote
|
(2)
|
(31)
|
(2)
|
(35)
|
Total losses recorded in other comprehensive income
|
-
|
(6)
|
(3)
|
(9)
|
Purchases and other additions
|
-
|
305
|
-
|
305
|
Sales
|
-
|
(21)
|
-
|
(21)
|
Transfers out of level 3
|
-
|
-
|
(15)
|
(15)
|
Balance at end of year
|
3
|
824
|
38
|
865
|
Note
Of the total net gains in the income statement of $17 million at
half year 2023 (full year 2022: net losses of $(35) million), $19
million (full year 2022: net losses of $(12) million) relates to
net unrealised gains and losses of financial instruments still held
at the end of the period, which can be analysed as
follows:
|
Half year 2023 $m
|
Full year 2022 $m
|
Loans
|
-
|
(2)
|
Equity securities and holdings in collective investment
schemes
|
16
|
(8)
|
Debt securities
|
3
|
(2)
|
Total net gains (losses)
|
19
|
(12)
|
(c) Assets
and liabilities at amortised cost and their fair
value
The table below shows the financial assets and liabilities carried
at amortised cost on the statement of financial position and their
fair value. Deposits, cash and cash equivalents, accrued investment
income, other debtors, accruals, deferred income and other
creditors are excluded from the analysis below, as these are
carried at amortised cost which approximates fair
value.
|
30 Jun 2023 $m
|
|
31 Dec 2022 $m
|
|
Carrying
value
|
Fair
value
|
|
Carrying
value
|
Fair
value
|
Assets:
|
|
|
|
|
|
Debt securities
|
-
|
-
|
|
67
|
67
|
Loans
|
144
|
173
|
|
140
|
206
|
Liabilities:
|
|
|
|
|
|
Core structural borrowings of shareholder-financed
businesses
|
(3,949)
|
(3,560)
|
|
(4,261)
|
(3,834)
|
Operational borrowings (excluding lease liabilities)
|
(554)
|
(554)
|
|
(516)
|
(516)
|
Obligations under funding, securities lending and sale and
repurchase agreements
|
(617)
|
(617)
|
|
(582)
|
(582)
|
Total net financial liabilities at amortised cost
|
(4,976)
|
(4,558)
|
|
(5,152)
|
(4,659)
|
The fair value of the assets and liabilities in the table above,
with the exception of the subordinated and senior debt issued by
the Group, has been estimated from the discounted cash flows
expected to be received or paid. The fair value of the subordinated
and senior debt issued by the Group is determined using quoted
prices from independent third parties.
C2.3 Additional information on financial
instruments
The following table and the accompanying notes explain the original
measurement categories under IAS 39 and the new measurement
categories under IFRS 9 for each class of the Group's financial
assets and financial liabilities as at 1 January 2023 (date of
initial application). The effects of the reclassification of
financial assets as a result of transition to IFRS 9 is not
material.
Financial instruments
|
|
|
1 Jan 2023 $m
|
|
Original classification
under IAS 39
|
New classification under IFRS 9
|
Original
carrying value
under IAS 39
|
New
carrying value
under IFRS 9
|
Financial assets
|
|
|
|
|
Loansnote
(i)
|
Amortised cost
|
Amortised cost
|
140
|
140
|
Loans/debt securitiesnote
(ii)
|
Amortised cost
|
Mandatorily at
fair value through
profit or loss
|
26
|
27
|
Loans
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
450
|
450
|
Equity securities and portfolio holdings in collective investment
schemes
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
57,414
|
57,414
|
Equity securities
|
Available-for-sale
|
Fair value through
other comprehensive
income
|
265
|
265
|
Debt securities held by Eastspringnote
(iii)
|
Fair value through
profit or loss
|
Amortised cost
|
67
|
67
|
Other Debt securities
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
76,922
|
76,922
|
Derivative assets
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
569
|
569
|
Accrued investment income
|
Loans and
receivables
|
Amortised cost
|
983
|
983
|
Deposits
|
Loans and
receivables
|
Amortised cost
|
6,275
|
6,275
|
Cash and cash equivalents
|
Loans and
receivables
|
Amortised cost
|
5,514
|
5,514
|
Other debtorsnote
(i)
|
Loans and
receivables
|
Amortised cost
|
968
|
968
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
Investment contract liabilities
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
663
|
663
|
Derivative liabilities
|
Fair value through
profit or loss
|
Mandatorily at
fair value through
profit or loss
|
1,001
|
1,001
|
Core structural borrowings of shareholder-financed
businesses
|
Amortised cost
|
Amortised cost
|
4,261
|
4,261
|
Operational borrowings
|
Amortised cost
|
Amortised cost
|
815
|
815
|
Obligations under funding, securities lending and sale and
repurchase agreements
|
Amortised cost
|
Amortised cost
|
582
|
582
|
Net asset value attributable to unit holders of consolidated
investment funds
|
Fair value through
profit or loss
|
Designated at fair
value through profit or loss
|
4,193
|
4,193
|
Accruals, deferred income and other creditorsnote
(i)
|
Amortised cost
|
Amortised cost
|
2,866
|
2,866
|
Notes
(i) In
accordance with IFRS 17 requirements policy loans and debtor and
creditor balances that are related to insurance contracts are
included within the measurement of insurance contract liabilities.
Therefore, the amounts for these balance sheet line items as
presented in this table do not include such balances.
(ii) Certain
securities that were classified as loans at amortised cost under
IAS 39 were reclassified to debt securities at fair value through
profit or loss under IFRS 9 aligning to how these securities are
managed.
(iii) Under
IAS 39, debt securities held by Eastspring were classified as
FVTPL. The Group has reclassified these debt securities to the
amortised cost category under IFRS 9 to align to how Eastspring
manages these securities in order to generate cash
flows.
C3 Insurance and reinsurance contracts
C3.1 Group
overview
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
associatesnote
|
|
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
|
As at 30 Jun 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Best estimate liabilities (BEL)
|
3,676
|
794
|
114,648
|
952
|
110,972
|
158
|
|
3,710
|
927
|
132,680
|
992
|
128,970
|
65
|
|
Risk adjustment for non-financial risk (RA)
|
(533)
|
(76)
|
1,490
|
(40)
|
2,023
|
36
|
|
(531)
|
(59)
|
1,732
|
(43)
|
2,263
|
16
|
|
Contractual service margin (CSM)
|
(2,007)
|
1,305
|
17,958
|
38
|
19,965
|
(1,267)
|
|
(2,004)
|
1,294
|
20,081
|
29
|
22,085
|
(1,265)
|
Insurance contract balancesnote
C3.2
|
1,136
|
2,023
|
134,096
|
950
|
132,960
|
(1,073)
|
|
1,175
|
2,162
|
154,493
|
978
|
153,318
|
(1,184)
|
Assets for insurance acquisition cash flows
|
31
|
-
|
-
|
-
|
(31)
|
-
|
|
31
|
-
|
-
|
-
|
(31)
|
-
|
Insurance and reinsurance contract (assets)
liabilities
|
1,167
|
2,023
|
134,096
|
950
|
132,929
|
(1,073)
|
|
1,206
|
2,162
|
154,493
|
978
|
153,287
|
(1,184)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 balancesnote
C3.2
|
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 balancesnote
C3.2
|
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)
|
Note
The Group's investment in joint ventures and associates is
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.
Adjusted shareholders' equity
|
30 Jun 2023 $m
|
|
31 Dec 2022 $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
|
Shareholders' equity
|
15,081
|
2,078
|
17,159
|
|
14,472
|
2,259
|
16,731
|
CSM, net of reinsurance
|
18,698
|
2,122
|
20,820
|
|
17,838
|
2,151
|
19,989
|
Remove: CSM asset attaching to reinsurance contracts wholly
attributable to policyholders
|
1,305
|
-
|
1,305
|
|
1,295
|
-
|
1,295
|
Less: Related tax adjustments
|
(2,341)
|
(498)
|
(2,839)
|
|
(2,295)
|
(509)
|
(2,804)
|
Adjusted shareholders' equity
|
32,743
|
3,702
|
36,445
|
|
31,310
|
3,901
|
35,211
|
|
1 Jan 2022 (transition
date) $m
|
|
Balances excluding
JVs and associates
|
Group's share relating to
JVs and associates
|
Total
including
JVs and associates
|
Shareholders' equity
|
16,238
|
2,698
|
18,936
|
CSM, net of reinsurance
|
22,525
|
2,224
|
24,749
|
Remove: CSM asset attaching to reinsurance contracts wholly
attributable to policyholders
|
1,144
|
-
|
1,144
|
Less: Related tax adjustments
|
(2,531)
|
(527)
|
(3,058)
|
Adjusted shareholders' equity
|
37,376
|
4,395
|
41,771
|
C3.2 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 joint ventures and
associates is set out below:
|
|
|
Half year 2023 $m
|
|
|
|
Insurance
|
|
Reinsurance
|
|
BEL
|
RA
|
CSM
|
Total
|
|
BEL
|
RA
|
CSM
|
Total
|
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
|
(990)
|
80
|
910
|
-
|
|
(36)
|
23
|
13
|
-
|
|
Changes in estimates that result in losses or reversal of losses on
onerous contracts
|
128
|
(12)
|
-
|
116
|
|
7
|
-
|
-
|
7
|
|
New contracts in the period
|
(1,296)
|
154
|
1,184
|
42
|
|
(9)
|
(3)
|
12
|
-
|
|
|
|
(2,158)
|
222
|
2,094
|
158
|
|
(38)
|
20
|
25
|
7
|
Changes that relate to current service
|
|
|
|
|
|
|
|
|
|
|
Release of CSM to profit or loss
|
-
|
-
|
(1,223)
|
(1,223)
|
|
-
|
-
|
46
|
46
|
|
Release of risk adjustment to profit or loss
|
-
|
(119)
|
-
|
(119)
|
|
-
|
12
|
-
|
12
|
|
Experience adjustments
|
(258)
|
-
|
-
|
(258)
|
|
(2)
|
-
|
-
|
(2)
|
|
|
|
(258)
|
(119)
|
(1,223)
|
(1,600)
|
|
(2)
|
12
|
46
|
56
|
Changes that relate to past service
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to assets/liabilities for incurred claims
|
261
|
-
|
-
|
261
|
|
29
|
-
|
-
|
29
|
Insurance service result
|
(2,155)
|
103
|
871
|
(1,181)
|
|
(11)
|
32
|
71
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance (income) expense from insurance contracts
|
|
|
|
|
|
|
|
|
|
|
Accretion of interest on GMM contracts
|
67
|
20
|
153
|
240
|
|
12
|
(1)
|
(23)
|
(12)
|
|
Other net finance (income) expense
|
7,350
|
2
|
1
|
7,353
|
|
(113)
|
9
|
(5)
|
(109)
|
|
|
|
7,417
|
22
|
154
|
7,593
|
|
(101)
|
8
|
(28)
|
(121)
|
Total amount recognised in income statement
|
5,262
|
125
|
1,025
|
6,412
|
|
(112)
|
40
|
43
|
(29)
|
Effect of movements in exchange rates
|
(1,420)
|
(26)
|
(244)
|
(1,690)
|
|
-
|
2
|
7
|
9
|
Total amount recognised in comprehensive income
|
3,842
|
99
|
781
|
4,722
|
|
(112)
|
42
|
50
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
|
|
|
|
|
|
|
|
|
|
Premiums received (paid) net of ceding commission
|
13,353
|
-
|
-
|
13,353
|
|
(686)
|
-
|
-
|
(686)
|
Insurance acquisition cash flows
|
(2,532)
|
-
|
-
|
(2,532)
|
|
-
|
-
|
-
|
-
|
Claims and other insurance service expenses paid
|
(6,388)
|
-
|
-
|
(6,388)
|
|
-
|
-
|
-
|
-
|
Recoveries from reinsurance
|
-
|
-
|
-
|
-
|
|
327
|
-
|
-
|
327
|
Total cash flows
|
4,433
|
-
|
-
|
4,433
|
|
(359)
|
-
|
-
|
(359)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changesnote
|
(40)
|
-
|
-
|
(40)
|
|
(5)
|
-
|
-
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing assets
|
(3,710)
|
531
|
2,004
|
(1,175)
|
|
(927)
|
59
|
(1,294)
|
(2,162)
|
|
Closing liabilities
|
132,680
|
1,732
|
20,081
|
154,493
|
|
992
|
(43)
|
29
|
978
|
Net closing balance at 30 Jun
|
128,970
|
2,263
|
22,085
|
153,318
|
|
65
|
16
|
(1,265)
|
(1,184)
|
|
|
|
Full year 2022 $m
|
|
|
|
Insurance
|
|
Reinsurance
|
|
|
|
BEL
|
RA
|
CSM
|
Total
|
|
BEL
|
RA
|
CSM
|
Total
|
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 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 (paid) net of ceding commission
|
27,916
|
-
|
-
|
27,916
|
|
(1,013)
|
-
|
-
|
(1,013)
|
Insurance acquisition cash flows
|
(3,690)
|
-
|
-
|
(3,690)
|
|
-
|
-
|
-
|
-
|
Claims and other insurance service expenses paid
|
(12,241)
|
-
|
-
|
(12,241)
|
|
-
|
-
|
-
|
-
|
Recoveries from reinsurance
|
-
|
-
|
-
|
-
|
|
567
|
-
|
-
|
567
|
Total cash flows
|
11,985
|
-
|
-
|
11,985
|
|
(446)
|
-
|
-
|
(446)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changesnote
|
(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)
|
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.
C3.3 Contractual service margin
The following tables illustrate when the Group expects to recognise
the remaining contractual service margin in profit or loss after
the reporting date based on the assumptions and economics in place
at 31 December 2022. Future new business is excluded. The amounts
shown include the Group's share of the amounts in respect of the
life joint ventures and associates of CPL, India and Takaful
business in Malaysia. These are accounted for under the equity
method in a single line in the consolidated statement of financial
position and hence are not included in the CSM balance presented in
the aforementioned statement.
(a) Insurance contracts - expected recognition of the
contractual service margin on a discounted basis
|
31 Dec 2022 $m
|
|
Liabilities (Assets)
|
|
Total as reported
on consolidated statement
of financial position
|
Group's share relating
to JVs and associates
|
Total segment, 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
|
|
19,168
|
2,136
|
21,304
|
(b) Reinsurance contracts - expected recognition of the
contractual service margin on a discounted basis
|
31 Dec 2022 $m
|
|
Liabilities (Assets)
|
|
Total as reported
on consolidated statement
of financial position
|
Group's share relating
to JVs and associates
|
Total segment, 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)
|
|
(1,330)
|
15
|
(1,315)
|
C3.4 Products and determining contract
liabilities
(a) Measurement of insurance and reinsurance
contracts
Separating components
A contract has an investment component if there is an amount (which
could be zero) that the contract requires the entity to repay to
the policyholder in all circumstances that have commercial
substance. The surrender value, net of policy loans (where these
exist), is accounted as the investment component of a contract.
Participating and non-participating (such as whole-life and
endowment) contracts have explicit surrender values. There are a
relatively small number of products that do not have a surrender
value, and the investment components of these contracts are
determined on a case-by-case basis.
At inception, the Group is required to separate distinct investment
components, distinct services other than insurance contract
services and embedded derivatives from an insurance contract and
account for them as if they were stand-alone contracts. An
investment 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.
The non-distinct investment components are excluded from insurance
revenue and insurance service expenses.
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 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 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.
|
(b) Reinsurance contracts held
The reinsurance contracts held primarily relate to protection
business written in Hong Kong. The Group's Hong Kong business cedes
insurance risk to limit exposure to underwriting losses under
various agreements that cover individual risks, group risks or
defined blocks of business, on a co-insurance, surplus, quota
share, or catastrophe excess of loss basis. The amount of each risk
retained depends on the evaluation of the specific risk, subject to
certain circumstances, to internally set maximum limits based on
characteristics of coverage.
As required by IFRS 17, all reinsurance contracts held by the Group
are measured using the General Measurement Model.
A group of reinsurance contracts held is recognised on the
following date:
-
Reinsurance contracts held by the Group that provide proportionate
coverage: The later of the start date of the coverage period, and
the date on which any underlying insurance contract is initially
recognised. This applies to the Group's quota share reinsurance
contracts.
-
Other (non-proportionate) reinsurance contracts held by the Group:
The earlier of beginning of the coverage period of the group of
reinsurance contracts or the recognition date of an underlying
onerous group of insurance contracts issued.
-
Reinsurance contracts held acquired via a business
acquisition/combination: The date of the business acquisition/
combination.
On initial recognition, the CSM of a group of reinsurance contracts
held represents a net cost or net gain on purchasing reinsurance.
It is measured as the equal and opposite amount of the total of (a)
the fulfilment cash flows, (b) any amount arising from the
derecognition of any assets or liabilities previously recognised
for cash flows related to the group, (c) any cash flows arising at
that date and (d) any income recognised in profit or loss because
of onerous underlying contracts recognised at that date. However,
if the net cost of purchasing reinsurance relates to past events,
the Group recognises the net cost immediately in profit or
loss.
The carrying amount at the end of each reporting period of a group
of reinsurance contracts held is measured in the same way as the
underlying insurance contracts under GMM.
Reinsurance contracts held are subject to the same modification
requirements as insurance contracts.
C4 Intangible assets
C4.1 Goodwill
Goodwill shown on the consolidated statement of financial position
at 30 June 2023 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 30 June
2023.
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
Carrying value at beginning of period
|
890
|
907
|
Exchange differences
|
(11)
|
(17)
|
Carrying value at end of period
|
879
|
890
|
C4.2 Other
intangible assets
|
Half year 2023 $m
|
|
Full year 2022 $m
|
|
Distribution rights
|
Other intangibles
|
Total
|
|
Total
|
|
note (i)
|
note (ii)
|
|
|
|
Balance at beginning of period
|
3,630
|
254
|
3,884
|
|
4,015
|
Additions
|
-
|
37
|
37
|
|
289
|
Amortisation to the income statement
|
(190)
|
(26)
|
(216)
|
|
(349)
|
Disposals and transfers
|
-
|
(2)
|
(2)
|
|
(6)
|
Exchange differences and other movements
|
(12)
|
(5)
|
(17)
|
|
(65)
|
Balance at end of period
|
3,428
|
258
|
3,686
|
|
3,884
|
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
|
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
Subordinated debt:
|
|
|
|
US$750m 4.875% Notes
|
750
|
750
|
|
€20m Medium Term Notes 2023note
(ii)
|
22
|
21
|
|
£435m 6.125% Notes 2031
|
550
|
520
|
|
US$1,000m 2.95% Notes 2033
|
995
|
995
|
Senior debt:note
(i)
|
|
|
|
£300m 6.875% Notes 2023note
(ii)
|
-
|
361
|
|
£250m 5.875% Notes 2029
|
299
|
281
|
|
US$1,000m 3.125% Notes 2030
|
987
|
987
|
|
US$350m 3.625% Notes 2032
|
346
|
346
|
Total core structural borrowings of shareholder-financed
businesses
|
3,949
|
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
|
|
30 Jun 2023 $m
|
31 Dec 2022 $m
|
Borrowings in respect of short-term fixed income securities
programmes (commercial paper)
|
529
|
501
|
Lease liabilities under IFRS 16
|
248
|
299
|
Other borrowings
|
25
|
15
|
Total operational borrowings
|
802
|
815
|
C6 Share capital, share premium and own shares
|
30 Jun 2023
|
|
31 Dec 2022
|
Issued shares of 5p each
|
Number of
ordinary
shares
|
Share
capital
|
Share
premium
|
|
Number of
ordinary
shares
|
Share
capital
|
Share
premium
|
fully paid:
|
|
$m
|
$m
|
|
|
$m
|
$m
|
Balance at beginning of period
|
2,749,669,380
|
182
|
5,006
|
|
2,746,412,265
|
182
|
5,010
|
Shares issued under share-based schemes
|
3,545,909
|
1
|
3
|
|
3,257,115
|
-
|
2
|
Shares issued under Hong Kong public offer and international
placing in 2021
|
-
|
-
|
-
|
|
-
|
-
|
(6)
|
Balance at end of period
|
2,753,215,289
|
183
|
5,009
|
|
2,749,669,380
|
182
|
5,006
|
Options outstanding under save as you earn schemes to subscribe for
shares at each period end shown below are as follows:
|
Number of shares
|
|
Share price range
|
|
Exercisable
|
|
to subscribe for
|
|
from (in pence)
|
to (in pence)
|
|
by year
|
30 Jun 2023
|
1,490,940
|
|
737p
|
1,455p
|
|
2028
|
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 in relation to its
employee share schemes through the trusts established to facilitate
the delivery of shares under employee incentive plans.
During half year 2023, the trusts purchased 2.9 million shares in
respect of employee incentive plans at a cost of $42.2 million
(full year 2022: 5.5 million at a cost of $76.7
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. A portion of these share
purchases were made on the Hong Kong Stock Exchange with the
remainder being made on the London Stock
Exchange.
Other than as disclosed above, the Company and its subsidiaries did
not purchase, sell or redeem any Prudential plc listed securities
during half year 2023.
D Other information
D1 Corporate transactions
The gain attaching to corporate transactions as shown on the
condensed consolidated income statement for half year 2022 of $62
million and full year 2022 of $55 million arose largely from the
sale of shares relating to the Group's retained interest in Jackson
post the demerger. Following the introduction of IFRS 9 at 1
January 2023, the Group's holding in Jackson was classified as fair
value through other comprehensive income and so the gain on the
share disposal during the first half of 2023 has not been recycled
to the income statement in accordance with the requirements of the
standard. As at 30 June 2023 the Group had disposed of its entire
holding in Jackson.
D2 Contingencies and related obligations
There have been no material changes to the Group's contingencies
and related obligations in the six months ended 30 June
2023.
The Group is involved in various litigation and regulatory
proceedings. While the outcome of such litigation and regulatory
issues cannot be predicted with certainty, the Group believes that
their ultimate outcome will not have a material adverse effect on
the Group's financial condition, results of operations, or cash
flows. Litigation developments during
the period 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.
D3 Post balance sheet events
First interim ordinary dividend
The 2023 first interim ordinary dividend approved by the Board of
Directors after 30 June 2023 is as described in note
B4.
D4 Related party transactions
There were no transactions with related parties during the six
months ended 30 June 2023 which have had a material effect on the
results or financial position of the Group.
The nature of the related party transactions of the Group has not
changed from those described in note D4 to the Group's consolidated
financial statements for the year ended 31 December
2022.
Statement of Directors' responsibilities
The Directors (who are listed below) are responsible for preparing
the Half Year Financial Report in accordance with applicable law
and regulations.
Accordingly, the Directors confirm that to the best of their
knowledge:
● the condensed consolidated
financial statements have been prepared in accordance with IAS
34, 'Interim
Financial Reporting', as adopted for use in the
UK;
● the Half Year Financial Report
includes a fair review of information required
by:
(a)
DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the six
months ended 30 June 2023, and their impact on the condensed
consolidated financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b)
DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place during the six
months ended 30 June 2023 and that have materially affected the
financial position or performance of the Group during that period;
and any changes in the related party transactions described in the
Group's consolidated financial statements for the year ended 31
December 2022 that could do so.
Prudential plc Board of Directors:
Chair
Shriti Vadera
Executive Director
Anil Wadhwani
|
Independent Non-executive Directors
Jeremy Anderson CBE
Arijit Basu
Chua Sock Koong
David Law ACA
Ming Lu
George Sartorel
Claudia Suessmuth Dyckerhoff
Jeanette Wong
Amy Yip
|
29 August 2023
Independent review report to Prudential plc
Conclusion
We have been engaged by Prudential plc (the "Company" or the
"Group") to review the condensed set of consolidated financial
statements in the half-yearly financial report for the six months
ended 30 June 2023 which comprises the Condensed consolidated
income statement, Condensed consolidated statement of comprehensive
income, Condensed consolidated statement of changes in equity,
Condensed consolidated statement of financial position, Condensed
consolidated statement of cash flows and related notes A1 to D4. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes
us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2023
is not prepared, in all material respects, in accordance with UK
adopted International Accounting Standard 34 "Interim Financial
Reporting" (IAS 34), IAS 34 as issued by the International
Accounting Standards Board (IASB) and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard
on Review Engagements 2410 (UK) "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
(ISRE) issued by the Financial Reporting Council. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note A1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards and International Financial Reporting
Standards as issued by the IASB. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with UK adopted IAS 34 and IAS 34 as issued
by the IASB.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those
performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the Group to cease to continue as a going
concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do
so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Group a conclusion on the condensed set of
consolidated financial statements in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
29 August 2023
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: 30 August
2023
|
PRUDENTIAL
PUBLIC LIMITED COMPANY
|
|
|
|
By:
/s/ Ben Bulmer
|
|
|
|
Ben
Bulmer
|
|
Group
Chief Financial Officer
|
Prudential (NYSE:PUK)
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