European Embedded Value (EEV) basis results
EEV
results highlights
|
2024
|
|
2023
|
|
Half year
|
|
Half
year
|
|
Full
year
|
|
|
|
AER
|
|
CER
|
|
AER
|
|
$m
|
|
$m
|
%
change
|
|
$m
|
%
change
|
%
change
excluding
economics
|
|
$m
|
|
|
|
|
|
|
|
|
note
(v)
|
|
|
New
business profitnote (i)
|
1,468
|
|
1,489
|
(1)%
|
|
1,457
|
1%
|
8%
|
|
3,125
|
Annual premium equivalent note
(i)
|
3,111
|
|
3,027
|
3%
|
|
2,940
|
6%
|
6%
|
|
5,876
|
New
business margin (%)
|
47%
|
|
49%
|
-2pp
|
|
50%
|
-3pp
|
+1pp
|
|
53%
|
Present value of new business
premiums
|
14,077
|
|
14,430
|
(2)%
|
|
14,098
|
|
|
|
28,737
|
|
|
|
|
|
|
|
|
|
|
|
Operating free surplus generated notes
(i)(ii)
|
983
|
|
1,024
|
(4)%
|
|
1,001
|
(2)%
|
|
|
2,007
|
Operating free surplus generated from in-force insurance and
asset management businesses notes
(i)(ii)
|
1,351
|
|
1,438
|
(6)%
|
|
1,405
|
(4)%
|
|
|
2,740
|
|
|
|
|
|
|
|
|
|
|
|
EEV
operating profit notes (i)(iii)
|
2,296
|
|
2,155
|
7%
|
|
2,115
|
9%
|
|
|
4,546
|
EEV
operating profit, net of non-controlling
interests
|
2,230
|
|
2,144
|
4%
|
|
2,107
|
6%
|
|
|
4,526
|
Operating return on embedded value
(%) note (iv)
|
11%
|
|
11%
|
|
|
|
|
|
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
Closing EEV shareholders' equity,
net of non-controlling interests
|
43,286
|
|
43,704
|
(1)%
|
|
43,191
|
-
|
|
|
45,250
|
Closing EEV shareholders' equity,
net of non-controlling interests per share (in cents)
|
1,575¢
|
|
1,588¢
|
(1)%
|
|
1,569¢
|
-
|
|
|
1,643¢
|
Notes
(i) Results are
presented before deducting the amounts attributable to
non-controlling interests. Half year 2024 new business and
operating results include the contribution from businesses
classified as held for sale at 30 June 2024. Comparative 2023
results are as published and included contribution from these
businesses. This presentation is applied consistently throughout
this document, unless stated otherwise.
(ii) Operating free
surplus generated is for in-force insurance and asset management
businesses only and is stated before restructuring and IFRS 17
implementation costs, centrally incurred costs and
eliminations.
(iii)
EEV operating profit is stated after restructuring and IFRS 17
implementation costs, centrally incurred costs and
eliminations.
(iv) Operating return on EEV shareholders' equity is calculated as
EEV operating profit for the period, after non-controlling
interests, as a percentage of opening EEV basis shareholders'
equity, excluding goodwill, distribution rights and other
intangibles. This differs from the definition previously applied
which has been updated to better compare to peers. Comparatives
have been restated accordingly. See note II(ix) in the Additional
information section.
(v) New business profit
excluding economic impacts (and the movements therein) represents
the amount of new business profit for the first six months of 2024
calculated using economics (including interest rates) as at 30 June
2023 and average exchange rates for the first six months of 2024.
The percentage change excluding economics compares this amount to
the new business profit in the first half of 2023, prepared using
consistent average exchange rates from the first half of 2024, as
described in the Strategic and operating review.
Basis of preparation
The EEV Principles provide
consistent definitions of the components of EEV, a framework for
setting assumptions and an approach to the underlying methodology
and disclosures. The EEV Principles were designed to provide
guidance and common principles that could be understood by both
users and preparers alongside prescribing a minimum level of
disclosures to enable users to understand an entity's methodology,
assumptions and key judgements as well as the sensitivity of an
entity's EEV to key assumptions. Results prepared under the EEV
Principles represent the present value of the shareholders'
interest in the post-tax future profits (generally on a local
statutory basis) expected to arise from the current book of
insurance business, after sufficient allowance has been made for
the aggregate risks in the business. The shareholders' interest in
the Group's insurance business is the sum of the shareholders'
total net worth and the value of in-force business. The value of
future new business is excluded from the embedded value.
IFRS profit for insurance contracts
largely reflects the level of services provided for a given period.
Unearned future profits expected on those same insurance contracts
are contained in a separate liability called the CSM. These future
profits have been derived on a risk neutral basis (including an
illiquidity premium), namely without allowing for the real-world
investment returns that will be earned on the assets held. By
contrast, EEV reflects all future profits, with no equivalent
liability to the CSM, but values those profits on a risk-adjusted
real-world basis, namely allowing for the future investment returns
that are expected to be earned by the assets held but uses a higher
discount rate that allows for the uncertainties in these cash
flows. For the purposes of preparing EEV results, insurance joint
ventures and associates are included at the Group's proportionate
share of their embedded value and not at their market value. Asset
management and other non-insurance subsidiaries, joint ventures and
associates are included in the EEV results at the Group's
proportionate share of IFRS shareholders' equity, with central
Group debt shown on a market value basis. Further information is
contained in note 4 and note 5. Key features of the Group's EEV
methodology include:
Economic assumptions
The projected post-tax profits
assume a level of future investment return and are discounted using
a risk discount rate on a risk-adjusted real-world basis that
allows for the uncertainties in these cash flows. Both the risk
discount rate and the investment return assumptions are updated at
each valuation date to reflect current market risk-free rates, such
that changes in market risk-free rates impact all projected future
cash flows at that valuation date. Risk-free rates, and hence
investment return assumptions, are based on observable market data
and hence fluctuate across valuation dates, with current market
risk-free rates assumed to remain constant and do not revert to
longer-term rates over time. Different products will be sensitive
to different assumptions, for example, participating products or
products with guarantees are likely to benefit disproportionately
from higher assumed investment returns.
Time value of financial options and
guarantees
Explicit quantified allowances are
made for the time value of financial options and guarantees (TVOG),
rather than implicit allowances within the risk discount rate. The
TVOG is determined by weighting the probability of outcomes across
a large number of different economic scenarios and is typically
less applicable to health and protection business that generally
contains more limited financial options or guarantees. At 30 June
2024, the TVOG is $(287) million (30 June 2023: $(308) million; 31
December 2023: $(290) million). The magnitude of the TVOG at 30
June 2024 would be approximately equivalent to a circa 6 basis
points (30 June 2023: 7 basis points; 31 December 2023: 6 basis
points) increase in the weighted average risk discount
rate.
Allowance for risk in the risk discount
rates
Risk discount rates are set equal to
the risk-free rate at the valuation date plus product-specific
allowances for market and non-market risks. Risks that are
explicitly captured elsewhere, such as via the TVOG, are not
included in the risk discount rates.
The allowance for market risk is
based on a product-by-product assessment of the sensitivity of
shareholder cash flows to varying market returns. This approach
reflects the inherent market risk in each product group and results
in lower risk discount rates for products where the majority of
shareholder profit is uncorrelated to market risk and appropriately
higher risk discount rates for products where there is greater
market exposure for shareholders. For example:
- For health and protection products, which represent 47 per
cent of the value of in-force business (30 June 2023: 51 per cent;
31 December 2023: 51 per cent) and 37 per cent of new business
profit (30 June 2023: 37 per cent; 31 December 2023: 40 per cent),
the major sources of shareholder profits are underwriting profits
or fixed shareholder charges which have low market risk
sensitivity. The proportion of health and protection business
varies with interest rates as well as the mix of business sold in
the current period.
- The construct of UK-style with-profits or similar
participating funds in some business units, representing 30 per
cent of the value of in-force (30 June 2023: 27 per cent; 31
December 2023: 27 per cent) and 16 per cent of new business profit
(30 June 2023: 12 per cent; 31 December 2023: 14 per cent), reduce
the market volatility of both policyholder and shareholder cash
flows due to smoothed bonus declarations and for some markets the
presence of an estate. Accordingly, 77 per cent of the value of
in-force (30 June 2023: 78 per cent; 31 December 2023: 78 per cent)
is products with low market risk sensitivity and this is reflected
in the overall risk discount rate.
- For unit-linked products where fund management charges
fluctuate with the investment return, a portion of the profits will
typically be more sensitive to market risk due to the higher
proportion of equity-type assets in the investment portfolio
resulting in a higher risk discount rate. This business represents
13 per cent of the value of in-force (30 June 2023: 16 per cent; 31
December 2023: 13 per cent) and 4 per cent of the value of new
business profit (30 June 2023: 3 per cent; 31 December 2023: 4 per
cent) which limits the impact on the overall risk discount
rate.
- The remaining parts of the business, 10 per cent of the value
of in-force business (30 June 2023: 6 per cent; 31 December 2023: 9
per cent) and 43 per cent of the value of new business (30 June
2023: 48 per cent; 31 December 2023: 42 per cent), relate to other
products not covered by the above.
The allowance for non-market risk
comprises a base Group-wide allowance of 50 basis points plus
additional allowances for emerging market risk where appropriate.
At 30 June 2024, the total allowance for non-market risk is
equivalent to a $(2.9) billion (30 June 2023: $(3.0) billion; 31
December 2023: $(3.0) billion) reduction, or around (7) per cent
(30 June 2023: (7) per cent; 31 December 2023: (7) per cent) of the
embedded value.
Movement in Group EEV shareholders' equity
|
|
2024 $m
|
|
2023
$m
|
|
|
Half year
|
|
Half
year
|
Full
year
|
|
Note
|
Insurance
and
asset
management
operations
|
Other
(central)
operations
|
Group
total
|
|
Group
total
|
Group
total
|
New business profit
|
1
|
1,468
|
-
|
1,468
|
|
1,489
|
3,125
|
Profit from in-force
business
|
2
|
1,018
|
-
|
1,018
|
|
844
|
1,779
|
Insurance business
|
|
2,486
|
-
|
2,486
|
|
2,333
|
4,904
|
Asset management business
|
|
142
|
-
|
142
|
|
132
|
254
|
Operating profit from insurance and
asset management businesses
|
|
2,628
|
-
|
2,628
|
|
2,465
|
5,158
|
Other expenditure
|
|
-
|
(236)
|
(236)
|
|
(221)
|
(420)
|
Operating profit (loss) before
restructuring and IFRS 17 implementation costs
|
|
2,628
|
(236)
|
2,392
|
|
2,244
|
4,738
|
Restructuring and IFRS 17
implementation costs
|
|
(16)
|
(80)
|
(96)
|
|
(89)
|
(192)
|
Operating profit (loss) for the period
|
|
2,612
|
(316)
|
2,296
|
|
2,155
|
4,546
|
Short-term fluctuations in
investment returns
|
2
|
(475)
|
9
|
(466)
|
|
312
|
(70)
|
Effect of changes in economic
assumptions
|
2
|
(596)
|
-
|
(596)
|
|
(92)
|
(589)
|
Loss attaching to corporate
transactions
|
|
(142)
|
-
|
(142)
|
|
-
|
(22)
|
Mark-to-market value movements on
core structural borrowings
|
5
|
-
|
8
|
8
|
|
(38)
|
(153)
|
Non-operating results
|
|
(1,213)
|
17
|
(1,196)
|
|
182
|
(834)
|
Profit (loss) for the period
|
|
1,399
|
(299)
|
1,100
|
|
2,337
|
3,712
|
Non-controlling interests share of
loss (profit)
|
|
(26)
|
-
|
(26)
|
|
(11)
|
(20)
|
Profit for the period attributable to equity holders of the
Company
|
|
1,373
|
(299)
|
1,074
|
|
2,326
|
3,692
|
Foreign exchange
movements
|
|
(819)
|
28
|
(791)
|
|
(475)
|
(134)
|
Intra-group dividends and investment
in operations note (i)
|
|
(1,081)
|
1,081
|
-
|
|
-
|
-
|
Dividends
|
|
-
|
(390)
|
(390)
|
|
(361)
|
(533)
|
Adjustment to non-controlling
interest for Malaysia conventional life business note
(ii)
|
|
(1,732)
|
29
|
(1,703)
|
|
-
|
-
|
New share capital
subscribed
|
|
-
|
-
|
-
|
|
4
|
4
|
Share repurchases/buybacks note
(iii)
|
|
-
|
(123)
|
(123)
|
|
-
|
-
|
Other equity movements note
(iv)
|
|
67
|
(98)
|
(31)
|
|
26
|
37
|
Net
(decrease) increase in shareholders' equity
|
|
(2,192)
|
228
|
(1,964)
|
|
1,520
|
3,066
|
Shareholders' equity at beginning of
period
|
|
42,958
|
2,292
|
45,250
|
|
42,184
|
42,184
|
Shareholders' equity at end of period
|
|
40,766
|
2,520
|
43,286
|
|
43,704
|
45,250
|
|
|
|
|
|
|
|
|
Contribution to Group EEV:
|
|
|
|
|
|
|
|
At
end of period
|
|
|
|
|
|
|
|
Insurance business
|
2
|
39,381
|
-
|
39,381
|
|
40,179
|
41,528
|
Asset management and
other
|
4
|
671
|
2,520
|
3,191
|
|
2,772
|
2,955
|
Shareholders' equity, excluding
goodwill attributable to equity holders
|
|
40,052
|
2,520
|
42,572
|
|
42,951
|
44,483
|
Goodwill attributable to equity
holders
|
|
714
|
-
|
714
|
|
753
|
767
|
Shareholders' equity at end of period
|
|
40,766
|
2,520
|
43,286
|
|
43,704
|
45,250
|
At
beginning of period
|
|
|
|
|
|
|
|
Insurance business
|
2
|
41,528
|
-
|
41,528
|
|
38,857
|
38,857
|
Asset management and
other
|
4
|
663
|
2,292
|
2,955
|
|
2,565
|
2,565
|
Shareholders' equity, excluding
goodwill attributable to equity holders
|
|
42,191
|
2,292
|
44,483
|
|
41,422
|
41,422
|
Goodwill attributable to equity
holders
|
|
767
|
-
|
767
|
|
762
|
762
|
Shareholders' equity at beginning of period
|
|
42,958
|
2,292
|
45,250
|
|
42,184
|
42,184
|
Movement in Group EEV shareholders' equity
continued
|
2024
|
|
2023
|
|
Half year
|
|
Half
year
|
Full
year
|
EEV
shareholders' equity per share (in cents) note
(v)
|
Insurance
and
asset
management
operations
|
Other
(central)
operations
|
Group
total
|
|
Group
total
|
Group
total
|
At
end of period
|
|
|
|
|
|
|
Based on shareholders' equity, net
of goodwill attributable to equity holders
|
1,457¢
|
92¢
|
1,549¢
|
|
1,560¢
|
1,615¢
|
Based on shareholders' equity at end
of period
|
1,483¢
|
92¢
|
1,575¢
|
|
1,588¢
|
1,643¢
|
At
beginning of period
|
|
|
|
|
|
|
Based on shareholders' equity, net
of goodwill attributable to equity holders
|
1,532¢
|
83¢
|
1,615¢
|
|
1,507¢
|
1,507¢
|
Based on shareholders' equity at
beginning of period
|
1,560¢
|
83¢
|
1,643¢
|
|
1,534¢
|
1,534¢
|
|
2024
|
|
2023
|
|
Half year
|
|
Half
year
|
Full
year
|
EEV
equity per share, before non-controlling interests (in cents)
note (v)
|
Group
total
|
|
Group
total
|
Group
total
|
At
end of period
|
|
|
|
|
EEV shareholders' equity
|
43,286
|
|
43,704
|
45,250
|
Non-controlling interests
|
1,894
|
|
188
|
203
|
EEV before non-controlling
interests
|
45,180
|
|
43,892
|
45,453
|
|
|
|
|
|
Based on EEV, before non-controlling
interests
|
1,644¢
|
|
1,594¢
|
1,650¢
|
|
2024
|
|
2023
|
|
Half year
|
|
Half
year
|
Full
year
|
EEV
basis basic earnings per share note
(vi)
|
Before non-
controlling
interests
|
After non-
controlling
interests
|
Basic
earnings
per share
|
|
Basic
earnings
per
share
|
Basic
earnings
per
share
|
|
$m
|
$m
|
cents
|
|
cents
|
cents
|
Based on operating profit
|
2,296
|
2,230
|
81.4¢
|
|
78.2¢
|
165.1¢
|
Based on profit for the
period
|
1,100
|
1,074
|
39.2¢
|
|
84.9¢
|
134.7¢
|
Notes
(i) Intra-group
dividends represent dividends that have been paid in the period.
Investment in operations reflects movements in share
capital.
(ii) The adjustment to
non-controlling interest arises from our Malaysia life entity,
Prudential Assurance Malaysia Berhad (PAMB), see note 9 for further
details.
(iii)
The Company completed a share repurchase to offset the dilution
from the vesting of awards under employee and agent share schemes
in January and June 2024. The Company also commenced the share
buyback programme in June 2024. Further details are provided in
note C7 of IFRS basis results.
(iv)
Other movements include reserve movements in respect of share-based
payments, treasury shares and intra-group transfers between
operations that have no overall effect on the Group's shareholders'
equity.
(v) Based on the number of
issued shares at 30 June 2024 of 2,748 million shares (30 June
2023: 2,753 million shares; 31 December 2023: 2,754 million
shares).
(vi)
Based on weighted average number of issued shares in half year 2024
of 2,740 million shares (half year 2023: 2,740 million shares; full
year 2023: 2,741 million shares), which excludes those held in
employee share trusts.
Movement in Group free surplus
Operating free surplus generation is
the financial metric we use to measure the internal cash generation
of our business operations and for our life operations is generally
based on (with adjustments as discussed below) the capital regimes
that apply locally in the various jurisdictions in which the Group
operates. It represents amounts emerging from the in-force business
during the period, net of amounts reinvested in writing new
business. For asset management businesses, it equates to post-tax
adjusted operating profit for the period. For insurance business,
free surplus is generally based on (with adjustments including
recognition of certain intangibles and other assets that may be
inadmissible on a regulatory basis) the excess of the regulatory
basis net assets (EEV total net worth) over the EEV capital
required to support the covered business. For shareholder-backed
businesses, the level of EEV required capital has been based on the
Group Prescribed Capital Requirements (GPCR) used in our GWS (Group
Wide Supervision) reporting as set out in note 6.1(e).
Adjustments are also made to enable
free surplus to be a better measure of shareholders' resources
available for distribution as described in the reconciliation to
GWS surplus as disclosed in note I(i) of the Additional financial
information. For asset management and other non-insurance business
operations (including the Group's central operations), free surplus
is taken to be IFRS shareholders' equity, net of goodwill
attributable to shareholders, with central Group debt recorded as
free surplus to the extent that it is classified as capital
resources under the Group's capital regime. A reconciliation of EEV
free surplus to the GWS shareholder capital surplus over group
minimum capital requirements is also set out in note I(i) of the
Additional financial information.
|
|
2024 $m
|
|
2023
$m
|
|
|
Half year
|
|
Half
year
|
Full
year
|
|
Note
|
Insurance
and asset
management
operations
|
Other
(central)
operations
|
Group
total
|
|
Group
total
|
Group
total
|
Expected transfer from in-force
business
|
|
1,231
|
-
|
1,231
|
|
1,399
|
2,635
|
Expected return on existing free
surplus
|
|
140
|
-
|
140
|
|
130
|
234
|
Changes in operating assumptions and
experience variances
|
|
(162)
|
-
|
(162)
|
|
(223)
|
(383)
|
Operating free surplus generated
from in-force insurance business
|
|
1,209
|
-
|
1,209
|
|
1,306
|
2,486
|
Investment in new business note
(i)
|
2
|
(368)
|
-
|
(368)
|
|
(414)
|
(733)
|
Insurance business
|
2
|
841
|
-
|
841
|
|
892
|
1,753
|
Asset management business
|
|
142
|
-
|
142
|
|
132
|
254
|
Operating free surplus generated from insurance and asset
management businesses
|
|
983
|
-
|
983
|
|
1,024
|
2,007
|
Other expenditure
|
|
-
|
(236)
|
(236)
|
|
(221)
|
(420)
|
Restructuring and IFRS 17
implementation costs
|
|
(16)
|
(80)
|
(96)
|
|
(88)
|
(192)
|
Operating free surplus generated
|
|
967
|
(316)
|
651
|
|
715
|
1,395
|
Non-operating free surplus generated
note (ii)
|
|
(663)
|
13
|
(650)
|
|
(66)
|
(223)
|
Free surplus generated for the period
|
|
304
|
(303)
|
1
|
|
649
|
1,172
|
Net cash flows paid to parent
company note (iii)
|
|
(1,310)
|
1,310
|
-
|
|
-
|
-
|
Dividends
|
|
-
|
(390)
|
(390)
|
|
(361)
|
(533)
|
Foreign exchange
movements
|
|
(169)
|
28
|
(141)
|
|
(89)
|
(24)
|
New share capital
subscribed
|
|
-
|
-
|
-
|
|
4
|
4
|
Share
repurchases/buybacks
|
|
-
|
(123)
|
(123)
|
|
-
|
-
|
Other equity movements
|
|
299
|
(327)
|
(28)
|
|
26
|
37
|
Net (decrease) increase in free
surplus before non-controlling interests and before debt
redemption
|
|
(876)
|
195
|
(681)
|
|
229
|
656
|
Debt redemption
|
|
-
|
-
|
-
|
|
(397)
|
(421)
|
Net (decrease) increase in free
surplus before non-controlling interests
|
|
(876)
|
195
|
(681)
|
|
(168)
|
235
|
Adjustment to non-controlling
interest for Malaysia conventional life business
|
|
(190)
|
29
|
(161)
|
|
-
|
-
|
Non-controlling interests share of
free surplus generated
|
|
(24)
|
-
|
(24)
|
|
(5)
|
(9)
|
Balance at beginning of
period
|
|
6,807
|
5,648
|
12,455
|
|
12,229
|
12,229
|
Balance at end of period
|
|
5,717
|
5,872
|
11,589
|
|
12,056
|
12,455
|
|
|
|
|
|
|
|
|
Representing:
|
|
|
|
|
|
|
|
Free surplus excluding distribution
rights and other intangibles
|
|
4,661
|
3,247
|
7,908
|
|
8,409
|
8,518
|
Distribution rights and other
intangibles
|
|
1,056
|
2,625
|
3,681
|
|
3,647
|
3,937
|
Balance at end of period
|
|
5,717
|
5,872
|
11,589
|
|
12,056
|
12,455
|
Movement in Group free surplus continued
|
|
2024 $m
|
|
2023
$m
|
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
Contribution to Group free surplus:
|
Note
|
Insurance
and asset
management
operations
|
Other
(central)
operations
|
Group
total
|
|
Group
total
|
Group
total
|
At
end of period
|
|
|
|
|
|
|
|
Insurance business
|
2
|
5,046
|
-
|
5,046
|
|
6,016
|
6,144
|
Asset management and other
businesses
|
|
671
|
5,872
|
6,543
|
|
6,040
|
6,311
|
Total at end of period
|
|
5,717
|
5,872
|
11,589
|
|
12,056
|
12,455
|
At
beginning of period
|
|
|
|
|
|
|
|
Insurance business
|
2
|
6,144
|
-
|
6,144
|
|
6,035
|
6,035
|
Asset management and other
businesses
|
|
663
|
5,648
|
6,311
|
|
6,194
|
6,194
|
Total at beginning of period
|
|
6,807
|
5,648
|
12,455
|
|
12,229
|
12,229
|
Notes
(i) Free surplus
invested in new business primarily represents acquisition costs and
amounts set aside for required capital.
(ii) Non-operating free
surplus generated for other (central) operations represents the
post-tax IFRS basis short-term fluctuations in investment returns,
the movement in the mark-to-market value adjustment on core
structural borrowings which did not meet the qualifying conditions
as set out in the Insurance (Group Capital) Rules and loss on
corporate transactions for other entities.
(iii)
Net cash flows to parent company reflect the cash remittances as
included in the holding company cash flow at transaction rates. The
difference to the intra-group dividends and investment in
operations in the movement in EEV shareholders' equity primarily
relates to intra-group loans, foreign exchange movements and other
non-cash items.
Notes on the EEV basis results
1
Analysis of new business profit and EEV for insurance business
operations
|
Half year
2024
|
|
New
business
profit
(NBP)
|
Annual
premium
equivalent
(APE)
|
Present
value of
new
business
premiums
(PVNBP)
|
New
business
margin
(APE)
|
New
business
margin
(PVNBP)
|
Closing EEV
shareholders'
equity,
excluding
goodwill
|
|
$m
|
$m
|
$m
|
%
|
%
|
$m
|
|
note
|
|
|
|
|
|
CPL (Prudential's share)
|
115
|
324
|
1,054
|
35%
|
11%
|
3,090
|
Hong Kong
|
651
|
955
|
4,695
|
68%
|
14%
|
17,037
|
Indonesia
|
47
|
107
|
433
|
44%
|
11%
|
1,408
|
Malaysia
|
69
|
191
|
857
|
36%
|
8%
|
3,725
|
Singapore
|
226
|
450
|
2,663
|
50%
|
8%
|
8,087
|
Growth markets and other
|
360
|
1,084
|
4,375
|
33%
|
8%
|
7,811
|
Non-controlling interests' share of
embedded value
|
|
|
|
|
|
(1,777)
|
Total insurance business
|
1,468
|
3,111
|
14,077
|
47%
|
10%
|
39,381
|
|
|
|
|
|
|
|
|
Half year
2023 (AER)
|
|
New
business
profit
(NBP)
|
Annual
premium
equivalent
(APE)
|
Present
value of
new
business
premiums
(PVNBP)
|
New
business
margin
(APE)
|
New
business
margin
(PVNBP)
|
Closing
EEV
shareholders'
equity,
excluding
goodwill
|
|
$m
|
$m
|
$m
|
%
|
%
|
$m
|
|
note
|
|
|
|
|
|
CPL (Prudential's share)
|
171
|
394
|
1,481
|
43%
|
12%
|
3,131
|
Hong Kong
|
670
|
1,027
|
5,364
|
65%
|
12%
|
17,496
|
Indonesia
|
61
|
150
|
629
|
41%
|
10%
|
1,763
|
Malaysia
|
73
|
185
|
915
|
39%
|
8%
|
3,557
|
Singapore
|
198
|
386
|
2,441
|
51%
|
8%
|
7,060
|
Growth markets and other
|
316
|
885
|
3,600
|
36%
|
9%
|
7,219
|
Non-controlling interests' share of
embedded value
|
|
|
|
|
|
(47)
|
Total insurance business
|
1,489
|
3,027
|
14,430
|
49%
|
10%
|
40,179
|
|
|
|
|
|
|
Half year
2023 (CER)
|
|
New
business
profit
(NBP)
|
Annual
premium
equivalent
(APE)
|
Present
value of
new
business
premiums
(PVNBP)
|
New
business
margin
(APE)
|
New
business
margin
(PVNBP)
|
Closing
EEV
shareholders'
equity,
excluding
goodwill
|
|
$m
|
$m
|
$m
|
%
|
%
|
$m
|
CPL (Prudential's share)
|
164
|
379
|
1,423
|
43%
|
12%
|
3,127
|
Hong Kong
|
672
|
1,029
|
5,377
|
65%
|
12%
|
17,563
|
Indonesia
|
58
|
142
|
595
|
41%
|
10%
|
1,614
|
Malaysia
|
69
|
174
|
863
|
40%
|
8%
|
3,519
|
Singapore
|
197
|
383
|
2,421
|
51%
|
8%
|
7,008
|
Growth markets and other
|
297
|
833
|
3,419
|
36%
|
9%
|
6,876
|
Non-controlling interests' share of
embedded value
|
|
|
|
|
|
(38)
|
Total insurance business
|
1,457
|
2,940
|
14,098
|
50%
|
10%
|
39,669
|
|
Full year
2023 (AER)
|
|
New
business
profit
(NBP)
|
Annual
premium
equivalent
(APE)
|
Present
value of
new
business
premiums
(PVNBP)
|
New
business
Margin
(APE)
|
New
business
Margin
(PVNBP)
|
Closing
EEV
shareholders'
equity,
excluding
goodwill
|
|
$m
|
$m
|
$m
|
%
|
%
|
$m
|
CPL (Prudential's share)
|
222
|
534
|
2,020
|
42%
|
11%
|
3,038
|
Hong Kong
|
1,411
|
1,966
|
10,444
|
72%
|
14%
|
17,702
|
Indonesia
|
142
|
277
|
1,136
|
51%
|
13%
|
1,509
|
Malaysia
|
167
|
384
|
1,977
|
43%
|
8%
|
3,709
|
Singapore
|
484
|
787
|
5,354
|
61%
|
9%
|
7,896
|
Growth markets and other
|
699
|
1,928
|
7,806
|
36%
|
9%
|
7,734
|
Non-controlling interests' share of
embedded value
|
|
|
|
|
|
(60)
|
Total insurance business
|
3,125
|
5,876
|
28,737
|
53%
|
11%
|
41,528
|
Note
The movement in new business profit
from insurance business operations is analysed as
follows:
|
$m
|
Half year 2023 new business
profit
|
1,489
|
Foreign exchange movement
|
(32)
|
Sales volume
|
85
|
Effect of changes in interest rates
and other economic assumptions
|
(107)
|
Business mix, product mix and other
items
|
33
|
Half year 2024 new business
profit
|
1,468
|
2
Analysis of movement in net worth and value of in-force insurance
business operations
|
2024 $m
|
|
2023
$m
|
|
Half year
|
|
Half year
|
Full year
|
|
Free
surplus
|
Required
capital
|
Net worth
|
Value of in-force
business
|
Embedded
value
|
|
Embedded
value
|
Embedded
value
|
|
|
|
|
|
note
(i)
|
|
note
(i)
|
note
(i)
|
Balance at beginning of period
|
6,144
|
5,984
|
12,128
|
29,400
|
41,528
|
|
38,857
|
38,857
|
New business contribution
|
(368)
|
323
|
(45)
|
1,513
|
1,468
|
|
1,489
|
3,125
|
Existing business - transfer to net
worth
|
1,231
|
(95)
|
1,136
|
(1,136)
|
-
|
|
-
|
-
|
Expected return on existing business
note (ii)
|
140
|
141
|
281
|
926
|
1,207
|
|
1,117
|
2,122
|
Changes in operating assumptions,
experience variances and other items note
(iii)
|
(162)
|
(115)
|
(277)
|
88
|
(189)
|
|
(273)
|
(343)
|
Operating profit before
restructuring and IFRS 17 implementation costs
|
841
|
254
|
1,095
|
1,391
|
2,486
|
|
2,333
|
4,904
|
Restructuring and IFRS 17
implementation costs
|
(6)
|
-
|
(6)
|
-
|
(6)
|
|
(29)
|
(55)
|
Operating profit
|
835
|
254
|
1,089
|
1,391
|
2,480
|
|
2,304
|
4,849
|
Non-operating result note
(iv)
|
(658)
|
25
|
(633)
|
(534)
|
(1,167)
|
|
231
|
(651)
|
Profit for the period
|
177
|
279
|
456
|
857
|
1,313
|
|
2,535
|
4,198
|
Non-controlling interests share of
loss (profit)
|
(21)
|
-
|
(21)
|
(19)
|
(40)
|
|
(8)
|
(13)
|
Profit for the period attributable to equity holders of the
Company
|
156
|
279
|
435
|
838
|
1,273
|
|
2,527
|
4,185
|
Foreign exchange
movements
|
(156)
|
(70)
|
(226)
|
(551)
|
(777)
|
|
(480)
|
(136)
|
Intra-group dividends and investment
in operations
|
(978)
|
(40)
|
(1,018)
|
40
|
(978)
|
|
(843)
|
(1,502)
|
Adjustment to non-controlling
interest for Malaysia conventional life business
|
(190)
|
(182)
|
(372)
|
(1,360)
|
(1,732)
|
|
-
|
-
|
Other equity movements note
(v)
|
70
|
-
|
70
|
(3)
|
67
|
|
118
|
124
|
Balance at end of period
|
5,046
|
5,971
|
11,017
|
28,364
|
39,381
|
|
40,179
|
41,528
|
(i) Total embedded value
The total embedded value for
insurance business operations at the end of each period, excluding
goodwill attributable to equity holders, can be analysed further as
follows:
|
2024 $m
|
|
2023
$m
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
Free surplus
|
5,046
|
|
6,016
|
6,144
|
Required capital
|
5,971
|
|
5,569
|
5,984
|
Net
worth
|
11,017
|
|
11,585
|
12,128
|
Value of in-force business before deduction of cost of capital
and time value of options and guarantees
|
29,341
|
|
29,636
|
30,436
|
Cost of capital
|
(690)
|
|
(734)
|
(746)
|
Time value of options and guarantees
note
|
(287)
|
|
(308)
|
(290)
|
Net
value of in-force business
|
28,364
|
|
28,594
|
29,400
|
Embedded value
|
39,381
|
|
40,179
|
41,528
|
Note
The time value of options and
guarantees (TVOG) arises from the variability of economic outcomes
in the future and is, where appropriate, calculated as the
difference between an average outcome across a range of economic
scenarios, calibrated around a central scenario, and the outcome
from the central economic scenario, as described in note 6.1(d). At
30 June 2024, the TVOG is $(287) million, with the substantial
majority arising in Hong Kong.
(ii) Expected return on existing
business
The expected return on existing
business comprises the expected unwind of discounting effects on
the opening value of in-force business and required capital (after
allowing for updates to economic and operating assumptions) and the
expected return on existing free surplus, as described in note
6.2(c). The movement in this amount compared to the prior period
from insurance business operations is analysed as
follows:
|
$m
|
Half year 2023 expected return on
existing business
|
1,117
|
Foreign exchange movement
|
(26)
|
Effect of changes in interest rates
and other economic assumptions
|
31
|
Growth in opening value of in-force
business and other items
|
85
|
Half year 2024 expected return on
existing business
|
1,207
|
(iii) Changes in operating assumptions, experience variances
and other items
Overall the total impact of
operating assumption changes, experience variances and other items
in half year 2024 was $(189) million (half year 2023: $(273)
million; full year 2023: $(343) million), comprising changes in
operating assumptions of $22 million (half year 2023: $49 million;
full year 2023: $85 million) and experience variances and other
items of $(211) million (half year 2023: $(322) million; full year
2023: $(428) million).
(iv) Non-operating results
The EEV non-operating result from
insurance business operations can be summarised as
follows:
|
2024 $m
|
|
2023
$m
|
|
Half year
|
|
Half
year
|
Full
year
|
Short-term fluctuations in
investment returns note (i)
|
(475)
|
|
323
|
(62)
|
Effect of change in economic
assumptions note (ii)
|
(596)
|
|
(92)
|
(589)
|
Loss attaching to corporate
transactions note (iii)
|
(96)
|
|
-
|
-
|
Non-operating results
|
(1,167)
|
|
231
|
(651)
|
Notes
(i)
Short-term fluctuations in investment returns of
$(475) million mainly reflect bond losses from increases in
interest rates in most Asia markets during the period.
(ii)
The level of the effect of changes in economic
assumptions will vary depending on the movements in interest rates
in the period and the consequent impacts on fund earned rates and
risk discount rates will vary between businesses and products. In
half year 2024 the negative impact of $(596) million is primarily
driven by falling interest rates in China and the consequent fall
in fund earned rates and rising interest rates in Hong Kong where
the effect of the increase in risk discount rates
dominates.
(iii)
Loss attaching to corporate transactions in half year 2024 mainly
related to the held for sale businesses (further details are
provided in note C1.2 of the IFRS basis results).
(v) Other equity movements
Other equity movements include
reserve movements in respect of intra-group loans and other
intra-group transfers between operations that have no overall
effect on the Group's shareholders' equity.
3
Sensitivity to alternative economic assumptions
The tables below show the
sensitivity of the new business profit and the embedded value for
insurance business operations to:
- 1 per cent and 2 per cent increases in interest rates and 0.5
per cent decrease in interest rates. This allows for consequential
changes in the assumed investment returns for all asset classes,
market values of fixed interest assets, local statutory reserves,
capital requirements and risk discount rates (but excludes changes
in the allowance for market risk);
- 1 per cent rise in equity and property yields;
- 1 per cent and 2 per cent increases in the risk discount
rates. The main driver for changes in the risk discount rates from
period to period is changes in interest rates, the impact of which
is expected to be partially offset by a corresponding change in
assumed investment returns, the effect of which is not included in
the risk discount rate sensitivities. The impact of higher
investment returns can be approximated as the difference between
the sensitivity to increases in interest rates and the sensitivity
to increases in risk discount rates;
- For embedded value only, 20 per cent fall in the market value
of equity and property assets; and
- For embedded value only, holding the group minimum capital
requirements (GMCR) under the GWS Framework in contrast to EEV
required capital based on the group prescribed capital requirements
(GPCR). This reduces the level of capital and therefore the level
of charge deducted from the embedded value for the cost of
locked-in required capital, which has the effect of increasing
EEV.
The sensitivities shown below are
for the impact of instantaneous and permanent changes (with no
trending or mean reversion) on the embedded value of insurance
business operations and include the combined effect on the value of
in-force business and net assets (including derivatives) held at
the valuation dates indicated. The results only allow for limited
management actions, such as repricing and changes to future
policyholder bonuses, where applicable. If such economic conditions
persisted, the financial impacts may differ to the instantaneous
impacts shown below. In this case, management could also take
additional actions to help mitigate the impact of these stresses.
No change in the mix of the asset portfolio held at the valuation
date is assumed when calculating sensitivities, while changes in
the market value of those assets are recognised. The sensitivity
impacts are expected to be non-linear. To aid understanding of this
non-linearity, impacts of both a 1 per cent and 2 per cent increase
to interest rates and risk discount rates are shown.
If the changes in assumptions shown
in the sensitivities were to occur, the effects shown below would
be recorded within two components of the profit analysis for the
following period, namely the effect of changes in economic
assumptions and short-term fluctuations in investment returns. In
addition to the sensitivity effects shown below, the other
components of the profit for the following period would be
calculated by reference to the altered assumptions at the end of
that period, for example, new business profit and expected return
on existing business are calculated with reference to end-of-period
economic assumptions.
New
business profit from insurance business
|
Half year 2024
$m
|
Full year
2023 $m
|
Base value
|
1,468
|
3,125
|
Impact from alternative economic
assumptions:
|
|
|
Interest rates and consequential
effects - 2% increase
|
(42)
|
(175)
|
Interest rates and consequential
effects - 1% increase
|
(21)
|
(88)
|
Interest rates and consequential
effects - 0.5% decrease
|
5
|
35
|
Equity/property yields - 1%
rise
|
59
|
139
|
Risk discount rates - 2%
increase
|
(410)
|
(917)
|
Risk discount rates - 1%
increase
|
(236)
|
(529)
|
New business profit sensitivities
vary with changes in business mix and APE sales volumes.
Embedded value of insurance business
|
30 Jun 2024
$m
|
31 Dec
2023 $m
|
Base value note
|
39,381
|
41,528
|
Impact from alternative economic
assumptions:
|
|
|
Interest rates and consequential
effects - 2% increase
|
(4,017)
|
(4,154)
|
Interest rates and consequential
effects - 1% increase
|
(2,137)
|
(2,172)
|
Interest rates and consequential
effects - 0.5% decrease
|
1,170
|
1,133
|
Equity/property yields - 1%
rise
|
1,839
|
1,856
|
Equity/property market values - 20%
fall
|
(1,970)
|
(1,863)
|
Risk discount rates - 2%
increase
|
(7,744)
|
(8,015)
|
Risk discount rates - 1%
increase
|
(4,361)
|
(4,516)
|
Group minimum capital
requirements
|
93
|
117
|
Note
Embedded value includes Africa
operations following the change in the Group's operating segments
in 2023. In the context of the Group, Africa's results are not
materially impacted by the above sensitivities.
Interest rates and consequential
effects include offsetting impacts that are sensitive to economics
and the net impact can therefore change from period to period
depending on the current level of interest rates.
- For a 1 per cent increase in assumed interest rates, the
$(2,137) million negative effect comprises a $(4,361) million
negative impact of increasing the risk discount rate by 1 per cent,
partially offset by a $2,224 million benefit from assuming 1 per
cent higher investment returns.
- Similarly, for a 2 per cent increase in assumed interest rates
the $(4,017) million negative effect comprises a $(7,744) million
negative impact of increasing the risk discount rates by 2 per
cent, partially offset by a $3,727 million benefit from higher
assumed investment returns.
- Finally, for a 0.5 per cent decrease in assumed interest
rates, there would be a $1,170 million positive effect reflecting
the benefit of a 0.5 per cent reduction in risk discount rates
being partially offset by lower assumed investment
returns.
In order to illustrate the impact of
varying specific economic assumptions, all other assumptions are
held constant in the sensitivities above and, therefore, the actual
changes in embedded value were these economic effects to
materialise may differ from the sensitivities shown.
4
EEV results for other (central) operations
EEV results for other income and
expenditure represent the post-tax IFRS results for other (central)
operations before restructuring and IFRS 17 implementation costs.
The results mainly include interest costs on core structural
borrowings and corporate expenditure for head office functions in
London and Hong Kong that are not recharged or allocated to the
insurance and asset management business.
Certain costs incurred within the
head office functions are recharged to the insurance business
operations and recorded within the results for those operations.
The assumed future expenses within the value of in-force business
for insurance business operations allow for amounts expected to be
recharged by the head office functions on a recurring basis. Other
costs that are not recharged to the insurance business operations
are shown as part of other income and expenditure for the current
period and are not included within the projection of future
expenses for in-force insurance business.
In line with the EEV Principles, the
allowance for the future costs of internal asset management
services within the EEV results for insurance business operations
excludes the projected future profits generated by any
non-insurance entities within the Group in providing those services
(ie the EEV for insurance business operations includes the
projected future profit or loss from asset management and service
companies that support the Group's covered insurance businesses).
Following the implementation of IFRS 17, a similar adjustment is
made to eliminate the intra-group profit within the results of
central operations.
The EEV shareholders' equity for
other operations is taken to be IFRS shareholders' equity, with
central Group debt shown on a market value basis. Free surplus for
other operations is taken to be IFRS shareholders' equity, net of
goodwill attributable to equity holders, with central Group debt
recorded as free surplus to the extent that it is classified as
capital resources under the Group's capital regime. Under the GWS
framework, debt instruments issued at the date of designation which
met the transitional conditions set by the Hong Kong IA are
included as GWS eligible group capital resources. In addition, debt
issued since the date of designation which met the qualifying
conditions as set out in the Insurance (Group Capital) Rules are
also included as GWS eligible group capital resources.
Shareholders' equity for other
(central) operations can be compared across metrics as shown in the
table below.
|
2024 $m
|
|
2023
$m
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
IFRS shareholders' equity
|
2,238
|
|
1,733
|
2,018
|
Mark-to-market value adjustment on
central borrowings note 5
|
282
|
|
389
|
274
|
EEV
shareholders' equity
|
2,520
|
|
2,122
|
2,292
|
Debt instruments treated as capital
resources
|
3,352
|
|
3,268
|
3,356
|
Free surplus at end of period
|
5,872
|
|
5,390
|
5,648
|
5
Net core structural borrowings of shareholder-financed
businesses
|
2024 $m
|
|
2023
$m
|
|
30 Jun
|
|
30
Jun
|
|
31
Dec
|
|
IFRS basis
|
Mark-to-market value
adjustment
|
EEV basis at market
value
|
|
IFRS
basis
|
Mark-to-market value adjustment
|
EEV basis
at market value
|
|
IFRS
basis
|
Mark-to-market value adjustment
|
EEV basis
at market value
|
|
note
(ii)
|
note
(iii)
|
|
|
note
(ii)
|
note
(iii)
|
|
|
note
(ii)
|
note
(iii)
|
|
Holding company cash and short-term
investments note (i)
|
(3,971)
|
-
|
(3,971)
|
|
(3,314)
|
-
|
(3,314)
|
|
(3,516)
|
-
|
(3,516)
|
Central borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt
|
2,294
|
(180)
|
2,114
|
|
2,317
|
(265)
|
2,052
|
|
2,297
|
(205)
|
2,092
|
Senior debt
|
1,636
|
(102)
|
1,534
|
|
1,632
|
(124)
|
1,508
|
|
1,636
|
(69)
|
1,567
|
Total central borrowings
|
3,930
|
(282)
|
3,648
|
|
3,949
|
(389)
|
3,560
|
|
3,933
|
(274)
|
3,659
|
Net
core structural borrowings of shareholder-financed
businesses
|
(41)
|
(282)
|
(323)
|
|
635
|
(389)
|
246
|
|
417
|
(274)
|
143
|
Notes
(i) Holding company
includes centrally managed Group holding companies and service
companies.
(ii) As recorded in note
C5.1 of the IFRS condensed consolidated financial
statements.
(iii)
The movement in the value of core structural borrowings includes
redemptions in the period and foreign exchange effects for pounds
sterling denominated debts. The movement in the mark-to-market
value adjustment can be analysed as follows:
|
2024 $m
|
|
2023
$m
|
|
Half year
|
|
Half
year
|
Full
year
|
Mark-to-market value adjustment at
beginning of period
|
(274)
|
|
(427)
|
(427)
|
(Charge) credit included in the
income statement
|
(8)
|
|
38
|
153
|
Mark-to-market value adjustment at
end of period
|
(282)
|
|
(389)
|
(274)
|
6
Methodology and accounting presentation
6.1
Methodology
(a) Covered business
The EEV basis results for the Group
are prepared for 'covered business' as defined by the EEV
Principles. Covered business represents the Group's insurance
business (including the Group's investments in joint venture and
associate insurance business operations), for which the value of
new and in-force contracts is attributable to
shareholders.
The EEV results for the Group's
covered business are then combined with the post-tax IFRS results
of the Group's asset management and other business operations
(including interest costs on core structural borrowings and
corporate expenditure for head office functions that is not
recharged or allocated to the insurance business operations), with
an adjustment to deduct the unwind of expected margins on the
internal management of the assets of the covered business. Under
the EEV Principles, the results for covered business incorporate
the projected margins of attaching internal asset management, as
described in note (g) below.
(b) Valuation of in-force and new
business
The EEV basis results are prepared
incorporating best estimate assumptions about all relevant factors
including levels of future investment returns, persistency,
mortality, morbidity and expenses, as described in note 7.3. These
assumptions are used to project future cash flows. The present
value of the projected future cash flows is then calculated using a
discount rate, as shown in note 7.1, which reflects both the time
value of money and all other non-diversifiable risks associated
with the cash flows that are not otherwise allowed for.
The total profit that emerges over
the lifetime of an individual contract as calculated under the EEV
basis is the same as that calculated under the IFRS basis. Since
the EEV basis reflects discounted future cash flows, under the EEV
methodology the profit emergence is advanced, thus more closely
aligning the timing of the recognition of profit with the efforts
and risks of current management actions, particularly with regard
to business sold during the period.
New
business
In determining the EEV basis value
of new business, premiums are included in projected cash flows on
the same basis of distinguishing regular and single premium
business as set out in the Group's new business sales reporting.
New business premiums reflect those premiums attaching to the
covered business, including premiums for contracts classified as
investment contracts under IFRS 17. New business premiums for
regular premium products are shown on an annualised
basis.
New business profitability is a key
metric for the Group's management of the development of the
business. New business profit represents profit determined by
applying operating and economic assumptions as at the end of the
period. In addition, new business margins are shown by reference to
annual premium equivalent (APE) and the present value of new
business premiums (PVNBP). These margins are calculated as the
percentage of the value of new business profit to APE and PVNBP.
APE is calculated as the aggregate of regular premiums on new
business written in the period and one-tenth of single premiums.
PVNBP is calculated as the aggregate of single premiums and the
present value of expected future premiums from regular premium new
business, allowing for lapses and the other assumptions made in
determining the EEV new business profit.
(c) Cost of capital
A charge is deducted from the
embedded value for the cost of locked-in required capital
supporting the Group's insurance business. The cost is the
difference between the nominal value of the capital held and the
discounted value of the projected releases of this capital,
allowing for post-tax investment earnings on the
capital.
The EEV results are affected by the
movement in this cost from period to period, which comprises a
charge against new business profit and generally a release in
respect of the reduction in capital requirements for business in
force as this runs off.
Where required capital is held
within a with-profits long-term fund, the value placed on surplus
assets within the fund is already adjusted to reflect its expected
release over time and so no further adjustment to the shareholder
position is necessary.
(d) Financial options and guarantees
Nature of financial options and guarantees
Participating products, principally
written in the Chinese Mainland, Hong Kong, Malaysia, Singapore and
Taiwan, have both guaranteed and non-guaranteed elements. These
products provide returns to policyholders through bonuses that are
smoothed. There are two types of bonuses: regular and final.
Regular bonuses are declared once a year and, once credited, are
guaranteed in accordance with the terms of the particular products.
Final bonuses are guaranteed only until the next bonus
declaration.
There are also various
non-participating long-term products with guarantees. The principal
guarantees are those for whole-of-life contracts with floor levels
of policyholder benefits that typically accrue at rates set at
inception and do not vary subsequently with market conditions.
Similar to participating products, the policyholder charges
incorporate an allowance for the cost of providing these
guarantees, which, for certain whole-of-life products in Hong Kong,
remains constant throughout varying economic conditions, rather
than reducing as the economic environment improves and vice
versa.
Time value
The value of financial options and
guarantees comprises the intrinsic value (arising from a
deterministic valuation on best estimate assumptions) and the time
value (arising from the variability of economic outcomes in the
future).
Where appropriate (ie where
financial options and guarantees are explicitly valued under the
EEV methodology), a full stochastic valuation has been undertaken
to determine the time value of financial options and guarantees.
The economic assumptions used for the stochastic calculations are
consistent with those used for the deterministic calculations.
Assumptions specific to the stochastic calculations reflect local
market conditions and are based on a combination of actual market
data, historic market data and an assessment of long-term economic
conditions. Common principles have been adopted across the Group
for the stochastic asset models, such as separate modelling of
individual asset classes with an allowance for correlations between
various asset classes. Details of the key characteristics of each
model are given in note 7.2.
In deriving the time value of
financial options and guarantees, management actions in response to
emerging investment and fund solvency conditions have been
modelled. Management actions encompass, but are not confined to,
investment allocation decisions, levels of regular and final
bonuses and credited rates. Bonus rates are projected from current
levels and varied in accordance with assumed management actions
applying in the emerging investment and fund solvency conditions.
In all instances, the modelled actions are in accordance with
approved local practice and therefore reflect the options available
to management.
(e) Level of required capital and net
worth
In adopting the EEV Principles,
Prudential has based required capital on the applicable local
statutory regulations, including any amounts considered to be
required above the local statutory minimum requirements to satisfy
regulatory constraints.
For shareholder-backed businesses,
the level of required capital has been based on the
GPCR.
- For CPL, the level of required capital follows the approach
for embedded value reporting issued by the China Association of
Actuaries (CAA) reflecting the C-ROSS regime. The CAA has started a
project to assess whether any changes are required to the embedded
value guidance in the Chinese Mainland given changes in regulatory
rules, regulations and the external market environment since the
standard was first issued. To date, no outcomes have been proposed
by the CAA and Prudential has made no change to its EEV basis for
CPL in half year 2024. At such time that there is a new basis,
Prudential will consider the effect of proposals.
- For Hong Kong participating business, the HK RBC regime
recognises the value of future shareholder transfers on an economic
basis as available capital with an associated required capital.
Within EEV, the shareholder value of participating business
continues to be recognised as VIF with no recognition within free
surplus and no associated required capital.
- For Singapore life operations, the level of net worth and
required capital is based on the Tier 1 Capital position under the
risk-based capital framework (RBC2), which removes certain negative
reserves permitted to be recognised in the full RBC2 regulatory
position applicable to the Group's GWS capital position, in order
to better reflect free surplus and its generation.
Free surplus is the shareholders'
net worth in excess of required capital. For the Hong Kong
business, the HK RBC framework requires liabilities to be valued on
a best estimate basis and capital requirements to be risk based.
EEV free surplus excludes regulatory surplus that arises where HK
RBC technical provisions are lower than
policyholder asset shares or cash surrender values to more
realistically reflect how the business is
managed.
(f) With-profits business and the treatment of the
estate
For the Group's relevant operations,
the proportion of surplus allocated to shareholders from the
with-profits funds has been based on the applicable profit
distribution between shareholders and policyholders. The EEV
methodology includes the value attributed to the shareholders'
interest in the residual estate of the in-force with-profits
business. In any scenarios where the total assets of the life fund
are insufficient to meet policyholder claims in full, the excess
cost is fully attributed to shareholders. As required, adjustments
are also made to reflect any capital requirements for with-profits
business in excess of the capital resources of the with-profits
funds.
(g) Internal asset management
In line with the EEV Principles, the
insurance business EEV includes the projected future profit from
asset management and service companies that support the Group's
covered insurance businesses. The results of the Group's asset
management business operations include the current period profit
from the management of both internal and external funds. EEV basis
shareholders' other income and expenditure is adjusted to deduct
the expected profit anticipated to arise in the current period in
the opening VIF from internal asset management and other services.
This deduction is on a basis consistent with that used for
projecting the results for covered insurance business. Accordingly,
Group operating profit includes the actual profit earned in respect
of the management of these assets.
(h) Allowance for risk and risk discount
rates
Under the EEV Principles, discount
rates used to determine the present value of expected future cash
flows are set by reference to risk-free rates plus a risk
margin.
- The risk-free rates are largely based on local government bond
yields at the valuation date and are assumed to remain constant and
do not revert to longer-term rates over time.
- The risk margin reflects any non-diversifiable risk associated
with the emergence of distributable earnings that is not allowed
for elsewhere in the valuation. In order to better reflect
differences in relative market risk volatility inherent in each
product group, Prudential sets the risk discount rates to reflect
the expected volatility associated with the expected future
shareholder cash flows for each product group in the embedded value
model, rather than at a Group level.
Where financial options and
guarantees are explicitly valued under the EEV methodology, risk
discount rates exclude the effect of these product features. The
risk margin represents the aggregate of the allowance for market
risk and allowance for non-diversifiable non-market risk. No
allowance is required for non-market risks where these are assumed
to be fully diversifiable.
Market risk allowance
The allowance for market risk
represents the beta multiplied by the equity risk
premium.
The beta of a portfolio or product
measures its relative market risk. The risk discount rates reflect
the market risk inherent in each product group and hence the
volatility of product-specific cash flows. These are determined by
considering how the profit from each product is affected by changes
in expected returns across asset classes. By converting this into a
relative rate of return, it is possible to derive a
product-specific beta. This approach contrasts with a top-down
approach to market risk where the risks associated with each
product are not directly reflected in the valuation
basis.
The Group's methodology allows for
credit risk in determining the best estimate returns and through
the market risk allowance, which covers expected long-term
defaults, a credit risk premium (to reflect the volatility in
downgrade and default levels) and short-term downgrades and
defaults.
Allowance for non-diversifiable non-market
risks
The majority of non-market and
non-credit risks are considered to be diversifiable. The allowance
for non-market risk comprises a base Group-wide allowance of 50
basis points plus an additional allowance for emerging market risk
where appropriate. The level and application of these allowances
are reviewed and updated based on assessment of the Group's
exposure and experience in the markets.
At 30 June 2024, the total allowance
for non-diversifiable non-market risk is equivalent to a $(2.9)
billion, or (7) per cent, reduction to the embedded value of
insurance business operations.
(i) Foreign currency translation
Foreign currency profits and losses
have been translated at average exchange rates for the period.
Foreign currency transactions are translated at the spot rate
prevailing at the date of the transactions. Foreign currency assets
and liabilities have been translated at closing exchange rates. The
principal exchange rates are shown in note A1 of the Group IFRS
condensed consolidated financial statements.
(j) Taxation
In determining the post-tax profit
for the period for covered business, the overall tax rate includes
the impact of tax effects determined on a local regulatory basis.
Tax payments and receipts included in the projected future cash
flows to determine the value of in-force business are calculated
using tax rates that have been announced and substantively enacted
by the end of the reporting period.
6.2
Accounting presentation
(a) Analysis of post-tax profit
To the extent applicable, the
presentation of the EEV profit or loss for the period is consistent
with the classification between operating and non-operating results
that the Group applies for the analysis of IFRS results. Operating
results are determined as described in note (b) below and
incorporate the following:
- New business profit, as defined in note 6.1(b)
above;
- Expected return on existing business, as described in note (c)
below;
- The impact of routine changes of estimates relating to
operating assumptions, as described in note (d) below;
and
- Operating experience variances, as described in note (e)
below.
In addition, operating results
include the effect of changes in tax legislation, unless these
changes are one-off and structural in nature, or primarily affect
the level of projected investment returns, in which case they are
reflected as a non-operating result.
Non-operating results
comprise:
- Short-term fluctuations in investment returns;
- Mark-to-market value movements on core structural
borrowings;
- Effect of changes in economic assumptions; and
- The impact of corporate transactions, if any, undertaken in
the period.
Total profit or loss in the period
attributable to shareholders and basic earnings per share include
investment returns included in operating profit and non-operating
results, ie reflecting actual investment returns in the period
instead of expected returns. The Group believes that operating
profit, as adjusted for these non-operating items, better reflects
underlying performance.
(b) Investment returns included in operating
profit
For the investment element of the
assets covering the total net worth of insurance business,
investment returns are recognised in operating results at the
expected long-term rates of return. These expected returns are
calculated by reference to the asset mix of the
portfolio.
(c) Expected return on existing
business
Expected return on existing business
comprises the expected unwind of discounting effects on the opening
value of in-force business and required capital and the expected
return on existing free surplus. The unwind of discount and the
expected return on existing free surplus are determined after
adjusting for the effect of changes in economic and operating
assumptions in the current period on the embedded value at the
beginning of the period, for example, the unwind of discount on the
value of in-force business and required capital is determined after
adjusting both the opening value and the risk discount rates for
the effect of changes in economic and operating assumptions in the
current period.
(d) Effect of changes in operating
assumptions
Operating profit includes the effect
of changes to operating assumptions on the value of in-force
business at the end of the reporting period. For presentational
purposes the effect of changes is delineated to show the effect on
the opening value of in-force business as operating assumption
changes, with the experience variances subsequently being
determined by reference to the assumptions at the end of the
reporting period, as discussed below.
(e) Operating experience variances
Operating profit includes the effect
of experience variances on operating assumptions, such as
persistency, mortality, morbidity, expenses and other factors,
which are calculated with reference to the assumptions at the end
of the reporting period.
(f) Effect of changes in economic
assumptions
Movements in the value of in-force
business at the beginning of the period caused by changes in
economic assumptions, net of the related changes in the time value
of financial options and guarantees, are recorded in non-operating
results.
7
Assumptions
7.1
Principal economic assumptions
The EEV results for the Group's
covered business are determined using economic assumptions where
both the risk discount rates and long-term expected rates of return
on investments are set with reference to risk-free rates of return
at the end of the reporting period. Both the risk discount rate and
expected rates of return are updated at each valuation date to
reflect current market risk-free rates, with the effect that
changes in market risk-free rates impact projected future cash
flows at each valuation date. The risk-free rates of return are
largely based on local government bond yields and are assumed to
remain constant and do not revert to longer-term rates over time.
The risk-free rates of return are shown below for each of the
Group's insurance business operations. Expected returns on equity
and property assets and corporate bonds are derived by adding a
risk premium to the risk-free rate based on the Group's long-term
view and, where relevant, allowing for market
volatility.
As described in note 6.1(h), risk
discount rates are set equal to the risk-free rate at the valuation
date plus allowances for market risk and non-diversifiable
non-market risks appropriate to the features and risks of the
underlying products and markets. Risks that are explicitly allowed
for elsewhere in the EEV basis, such as via the cost of capital and
the time value of options and guarantees, as set out in note 2(i),
are not included in the risk discount rates.
|
Risk
discount rate %
|
|
New
business
|
|
In-force
business
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
CPL
|
6.7
|
|
7.2
|
7.1
|
|
6.7
|
|
7.2
|
7.1
|
Hong Kong note
(i)
|
5.3
|
|
4.6
|
4.7
|
|
6.0
|
|
5.4
|
5.5
|
Indonesia
|
9.6
|
|
9.1
|
9.0
|
|
10.4
|
|
9.8
|
9.9
|
Malaysia
|
5.7
|
|
5.7
|
5.6
|
|
6.3
|
|
6.3
|
6.2
|
Philippines
|
12.3
|
|
13.6
|
12.3
|
|
12.3
|
|
13.6
|
12.3
|
Singapore
|
5.2
|
|
4.9
|
4.6
|
|
5.3
|
|
5.1
|
4.8
|
Taiwan note
(i)
|
6.5
|
|
5.8
|
6.0
|
|
6.5
|
|
5.8
|
6.0
|
Thailand
|
10.0
|
|
9.9
|
10.0
|
|
10.0
|
|
9.9
|
10.0
|
Vietnam
|
4.0
|
|
4.2
|
3.7
|
|
4.3
|
|
4.4
|
4.1
|
Total weighted average notes
(ii)(iii)
|
6.2
|
|
6.0
|
5.8
|
|
6.2
|
|
6.0
|
5.9
|
|
10-year
government bond yield %
|
|
Equity
return (geometric) %
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
|
30 Jun
|
|
30
Jun
|
31
Dec
|
CPL
|
2.2
|
|
2.7
|
2.6
|
|
6.2
|
|
6.7
|
6.6
|
Hong Kong note
(i)
|
4.4
|
|
3.8
|
3.9
|
|
7.9
|
|
7.3
|
7.4
|
Indonesia
|
7.2
|
|
6.6
|
6.7
|
|
11.5
|
|
10.8
|
11.0
|
Malaysia
|
3.9
|
|
3.9
|
3.8
|
|
7.4
|
|
7.4
|
7.3
|
Philippines
|
6.7
|
|
6.4
|
6.1
|
|
11.0
|
|
10.6
|
10.3
|
Singapore
|
3.2
|
|
3.0
|
2.7
|
|
6.7
|
|
6.5
|
6.2
|
Taiwan note
(i)
|
4.4
|
|
3.8
|
3.9
|
|
7.9
|
|
7.3
|
7.4
|
Thailand
|
2.8
|
|
2.6
|
2.8
|
|
7.0
|
|
6.9
|
7.0
|
Vietnam
|
2.7
|
|
2.7
|
2.3
|
|
7.0
|
|
7.0
|
6.6
|
Total weighted average (new
business) note (ii)
|
4.2
|
|
4.0
|
3.9
|
|
7.6
|
|
7.3
|
7.3
|
Total weighted average (in-force
business) note (ii)
|
4.0
|
|
3.8
|
3.7
|
|
7.5
|
|
7.3
|
7.1
|
Notes
(i) For Hong Kong
and Taiwan (as of 30 June 2024, with comparatives updated
accordingly), the assumptions shown are for US dollar denominated
business. For other businesses, the assumptions shown are for local
currency denominated business.
(ii) Total weighted
average assumptions have been determined by weighting each
business's assumptions by reference to the EEV basis new business
profit and the closing net value of in-force business. The changes
in the risk discount rates for individual businesses reflect the
movements in the local government bond yields, changes in the
allowances for market risk (including as a result of changes in
asset mix) and, if applicable, non-diversifiable non-market risk,
and changes in product mix.
(iii)
Expected long-term inflation assumptions at 30 June 2024 range from
1.5 per cent to 4.3 per cent (30 June 2023: 1.5 per cent to 5.5 per
cent; 31 December 2023: 1.5 per cent to 5.5 per cent).
7.2
Stochastic assumptions
Details are given below of the key
characteristics of the models used to determine the time value of
financial options and guarantees as referred to in note
6.1(d).
- The
stochastic cost of guarantees is primarily of significance for the
Hong Kong, Vietnam, Taiwan, Malaysia and Singapore
businesses;
- The principal asset classes are government bonds, corporate
bonds and equity;
- The interest rates are projected using a stochastic interest
rate model calibrated to the current market yields;
- The equity returns are assumed to follow a log-normal
distribution;
- The corporate bond return is calculated based on a risk-free
return plus a mean-reverting spread;
- The volatility of equity returns ranges from 17 per cent to 35
per cent for all periods; and
- The volatility of government bond yields ranges from 1.1 per
cent to 2.0 per cent for all periods.
7.3
Operating assumptions
Best estimate assumptions are used
for projecting future cash flows, where best estimate is defined as
the mean of the distribution of future possible outcomes. The
assumptions are reviewed actively and changes are made when
evidence exists that material changes in future experience are
reasonably certain. Where experience is expected to be adverse over
the short term, a provision may be established.
Assumptions required in the
calculation of the time value of financial options and guarantees,
for example relating to volatilities and correlations, or dynamic
algorithms linking liabilities to assets, have been set equal to
the best estimates and, wherever material and practical, reflect
any dynamic relationships between the assumptions and the
stochastic variables.
(a) Demographic assumptions
Persistency, mortality and morbidity
assumptions are based on an analysis of recent experience and
reflect expected future experience. When projecting future cash
flows for medical reimbursement business that is repriced annually,
explicit allowance is made for expected future premium inflation
and separately for future medical claims inflation.
(b) Expense assumptions
Expense levels, including those of
the service companies that support the Group's insurance business,
are based on internal expense analysis and are appropriately
allocated to acquisition of new business and renewal of in-force
business. For mature business, it is Prudential's policy not to
take credit for future cost reduction programmes until the actions
to achieve the savings have been delivered. Expense overruns are
reported where these are expected to be short-lived, including
businesses that are growing rapidly or are sub-scale.
Expenses comprise costs borne
directly and costs recharged or allocated from the Group head
office functions in London and Hong Kong that are attributable to
the insurance (covered) business. The assumed future expenses for
the insurance business allow for amounts expected to be recharged
or allocated by the head office functions.
Corporate expenditure, which is
included in other income and expenditure, comprises expenditure of
the Group head office functions in London and Hong Kong that is not
recharged or allocated to the insurance or asset management
business operations, primarily for corporate-related activities
that are charged as incurred, together with restructuring and IFRS
17 implementation costs incurred across the Group.
(c) Tax rates
The assumed long-term effective tax
rates for operations reflect the expected incidence of taxable
profit or loss in the projected future cash flows as explained in
note 6.1(j). The local standard corporate tax rates applicable are
as follows:
|
%
|
CPL
|
25.0
|
Hong Kong
|
16.5% on
5% of premium income
|
Indonesia
|
22.0
|
Malaysia
|
24.0
|
Philippines
|
25.0
|
Singapore
|
17.0
|
Taiwan
|
20.0
|
Thailand
|
20.0
|
Vietnam
|
20.0
|
8
Insurance new business
|
Single
premiums
|
|
Regular
premiums
|
|
APE
|
|
PVNBP
|
|
2024 $m
|
|
2023
$m
|
|
2024 $m
|
|
2023
$m
|
|
2024 $m
|
|
2023
$m
|
|
2024 $m
|
|
2023
$m
|
|
Half year
|
|
Half
year
|
Full
year
|
|
Half year
|
|
Half
year
|
Full
year
|
|
Half year
|
|
Half
year
|
Full
year
|
|
Half year
|
|
Half
year
|
Full
year
|
CPL (Prudential's share)
|
119
|
|
397
|
487
|
|
312
|
|
355
|
485
|
|
324
|
|
394
|
534
|
|
1,054
|
|
1,481
|
2,020
|
Hong Kong
|
105
|
|
116
|
235
|
|
945
|
|
1,015
|
1,942
|
|
955
|
|
1,027
|
1,966
|
|
4,695
|
|
5,364
|
10,444
|
Indonesia
|
126
|
|
132
|
230
|
|
95
|
|
137
|
254
|
|
107
|
|
150
|
277
|
|
433
|
|
629
|
1,136
|
Malaysia
|
40
|
|
46
|
93
|
|
187
|
|
180
|
375
|
|
191
|
|
185
|
384
|
|
857
|
|
915
|
1,977
|
Singapore
|
556
|
|
535
|
989
|
|
394
|
|
332
|
688
|
|
450
|
|
386
|
787
|
|
2,663
|
|
2,441
|
5,354
|
Growth markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
4
|
|
4
|
8
|
|
73
|
|
84
|
157
|
|
74
|
|
85
|
158
|
|
149
|
|
170
|
326
|
Cambodia
|
1
|
|
1
|
1
|
|
11
|
|
9
|
18
|
|
12
|
|
9
|
18
|
|
47
|
|
38
|
74
|
India note (i)
|
145
|
|
130
|
270
|
|
132
|
|
115
|
206
|
|
148
|
|
128
|
233
|
|
748
|
|
619
|
1,145
|
Laos
|
-
|
|
-
|
-
|
|
-
|
|
-
|
-
|
|
-
|
|
-
|
-
|
|
1
|
|
1
|
2
|
Myanmar
|
-
|
|
-
|
-
|
|
3
|
|
3
|
6
|
|
3
|
|
3
|
6
|
|
10
|
|
8
|
19
|
Philippines
|
21
|
|
38
|
56
|
|
70
|
|
90
|
170
|
|
72
|
|
94
|
175
|
|
251
|
|
331
|
612
|
Taiwan
|
89
|
|
54
|
132
|
|
563
|
|
335
|
882
|
|
571
|
|
339
|
895
|
|
2,137
|
|
1,254
|
3,308
|
Thailand
|
59
|
|
71
|
143
|
|
131
|
|
111
|
232
|
|
136
|
|
118
|
246
|
|
551
|
|
470
|
999
|
Vietnam
|
14
|
|
8
|
19
|
|
67
|
|
108
|
195
|
|
68
|
|
109
|
197
|
|
481
|
|
709
|
1,321
|
Total notes (ii)
|
1,279
|
|
1,532
|
2,663
|
|
2,983
|
|
2,874
|
5,610
|
|
3,111
|
|
3,027
|
5,876
|
|
14,077
|
|
14,430
|
28,737
|
Notes
(i) New business in
India is included at Prudential's 22 per cent interest in the
associate.
(ii) The table above is
provided as an indicative volume measure of transactions undertaken
in the reporting period that have the potential to generate profit
for shareholders. The amounts shown are not, and not intended to
be, reflective of revenue recorded in the Group IFRS condensed
consolidated income statement.
9
Post balance sheet events
First interim dividend
The 2024 first interim dividend
approved by the Board of Directors after 30 June 2024 is as
described in note B4 of the IFRS condensed consolidated financial
statements.
Consolidation of ownership interest in Prudential Assurance
Malaysia Berhad
The Group holds 51 per cent of the
ordinary shares of the holding company of Prudential Assurance
Malaysia Berhad, or PAMB, which is its conventional life insurance
business in Malaysia. Detik Ria Sdn Bhd ('Detik Ria') holds the
other 49 per cent. There was an agreement between the Group and
Detik Ria which allowed the Group to acquire from Detik Ria its 49
per cent shareholding. In 2008 Detik Ria exercised the put option
for which it received payments in accordance with the agreement.
Following the Federal Court of Malaysia decision on 30 July 2024,
which is an adjusting post balance sheet event for the purposes of
these interim financial statements, the Group has continued to
consolidate the business of PAMB, which remains a subsidiary
controlled by the Group, but has now reflected a 49 per cent
non-controlling interest instead of the previously consolidated 100
per cent economic interest. Further details are shown in note D2 of
the IFRS condensed consolidated financial statements. The
non-controlling interest at 30 June 2024 was $1,757 million
comprising $1,732 million at 1 January 2024 and $25 million in
respect of the movement in the first half of 2024. The Federal
Court of Malaysia also directed Detik Ria to return the
consideration payments it has previously received from the Group of
circa $29 million, which includes interest.
Independent review report to Prudential plc
Conclusion
We have been engaged by Prudential
plc ('the Company' or 'the Group') to review the European Embedded
Value ('EEV') basis results in the Half Year Financial Report for
the six months ended 30 June 2024 which comprise the EEV results
highlights, Basis of preparation, the Movement in Group EEV
shareholders' equity, the Movement in Group free surplus and the
related explanatory notes 1 to 9. The EEV basis results should be
read in conjunction with the condensed set of IFRS condensed
consolidated financial statements in the Half Year Financial
Report. We have read the other information contained in the Half
Year Financial Report and considered whether it contains any
apparent misstatements or material inconsistencies with the EEV
basis results.
Based on our review, nothing has
come to our attention that causes us to believe that the EEV basis
results in the Half Year Financial Report for the six months ended
30 June 2024 are not prepared, in all material respects, in
accordance with the European Embedded Value Principles issued by
the European Insurance CFO Forum in 2016 ('the EEV Principles'),
using the methodology and assumptions set out in the notes to the
EEV basis results.
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.
Emphasis of Matter - basis of preparation for the EEV basis
results
We draw attention to the Basis of
Preparation of the EEV basis results. The EEV basis results are
prepared to provide additional information to the users of the Half
Year Financial Report. As a result, the EEV basis results may not
be suitable for another purpose.
Our opinion is not modified in
respect of this matter.
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 ISRE 2410 (UK),
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 EEV basis results in accordance with the EEV
Principles using the methodology and assumptions set out in the
notes to the EEV basis results.
In preparing the EEV basis results,
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 EEV basis results,
we are responsible for expressing to the Group a conclusion on the
EEV basis results in the Half Year 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 the terms of our engagement letter to
provide a review conclusion to the Company on the EEV basis
results. Our review of the EEV basis results has been undertaken so
that we might state to the Company those matters we have been
engaged to state in this report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for
this report, or for the conclusions we have formed.
Ernst & Young LLP
London
28 August 2024