Business context and reporting period
Prudential plc’s Form 20-F, filed 26 March 2024, reports the fiscal year ended 31 December 2023; it is an annual report, not a standalone Q4 filing. The Group provides life and health insurance and asset management in Asia and Africa, serving more than 18 million customers across 24 markets. It reports under IFRS as issued by the IASB and presents results in US dollars.
Prudential adopted IFRS 17 and IFRS 9 from 1 January 2023. The 2022 comparative was restated under IFRS 17, but 2021 remains on IFRS 4 and is not directly comparable with 2023 or 2022. Management also uses adjusted operating profit and other alternative performance measures.
Key financial results and position
| Metric | 2023 | Comparable 2022 |
|---|---|---|
| Insurance revenue | $9.371bn | $8.549bn |
| Insurance service result | $2.087bn | $2.177bn |
| Profit before tax attributable to shareholders | $2.097bn | Loss of $643m |
| Profit after tax | $1.712bn | Loss of $997m |
| Adjusted operating profit | $2.893bn | $2.722bn |
| APE new business sales | $5.876bn; up 37% constant currency | — |
| Operating cash flow, consolidated | $832m | $1.078bn |
| Operating free surplus generation | $1.4bn after central costs and new-business investment | — |
| Shareholders’ equity | $17.823bn | $16.731bn |
| Adjusted shareholders’ equity | $37.346bn | $35.211bn |
The profit recovery chiefly reflected less adverse short-term investment fluctuations as interest rates were more stable than in 2022, alongside higher Eastspring profit and lower central costs. Adjusted operating profit excludes specified non-operating items; it is not the IFRS profit measure. The filing does not present a single Group operating margin as a key measure.
The CSM, representing deferred future profit, ended 2023 at $21.012bn, up 5% reported; profitable new business added $2.348bn, exceeding the $2.208bn released to profit. Eastspring funds under management or advice increased 7% to $237.1bn. Its adjusted operating profit was $280m, up 10% constant currency; cost/income ratio was 53% and fee margin 31 basis points.
Capital, debt and liquidity
- Estimated shareholder GWS capital surplus over the prescribed requirement was $16.1bn, with a 295% coverage ratio, versus $15.6bn and 307% at year-end 2022. Total Group surplus was $19.0bn and total coverage 197%, versus $18.1bn and 202%.
- Core structural borrowings were $3.933bn; holding-company cash and short-term investments were $3.516bn, leaving net core structural borrowings of $417m. Estimated Moody’s total leverage was 20%, within the stated 20–25% medium-term target range.
- Commercial paper outstanding was $699m. Undrawn committed facilities were $2.6bn at year-end; the Group renewed facilities for $1.6bn, expiring 2029, in February 2024. Consolidated cash and cash equivalents were $4.751bn, of which $1.590bn was held by holding and non-regulated entities and available for general use.
- Holding-company cash flow before dividends and other movements was $1.107bn; operating holding-company cash flow after dividends was $574m. The directors concluded the Group had adequate resources to continue at least 12 months from approval of the financial statements.
Material changes versus the prior comparable period
- APE sales rose 37% constant currency, led by Hong Kong after border reopening. Hong Kong APE sales increased 276%; agency APE sales grew 67%. Bancassurance APE sales rose 3% overall, with declines in the Chinese Mainland and Vietnam offset by growth elsewhere.
- IFRS profit after tax improved from a $997m loss to $1.712bn profit. This comparison is materially affected by interest-rate-driven investment volatility and the IFRS 17 change in accounting and presentation.
- Adjusted operating profit increased to $2.893bn from $2.722bn. CSM grew 5%; adjusted shareholders’ equity increased to $37.346bn.
- Customer retention declined to 86% from 89%, which management attributed partly to weaker consumer sentiment in Vietnam. Eastspring’s one-year benchmark outperformance fell to 44% of funds from 59%, while three-year outperformance increased to 50% from 39%.
Outlook, commentary and key risks
Management described 2023 as a strong financial and operational year and said sales growth continued in the first two months of 2024. It expressed increased confidence in achieving its 2027 strategic and financial objectives. The Board expects 2024 annual dividend growth of 7–9%. The Group intends to invest around $1bn in core capabilities, particularly customer, distribution, health and technology. Strategy targets include 90–95% customer retention and top-quartile relationship NPS in ten business units by 2027; strategic bank-partner product penetration is targeted at 9–11% by 2027, versus 7.8% in 2023.
- Financial and insurance risks include interest-rate, equity, credit, foreign-exchange and liquidity volatility; medical claims inflation; mortality and morbidity experience; lapses, affordability and policyholder behaviour; and potential sovereign or corporate credit deterioration.
- Management highlighted geopolitical tensions, regulatory change across operating markets, competition, dependence on joint ventures and distribution partners, and execution risks from transformation and IFRS 17 implementation.
- Climate and sustainability risks include investment transition and physical risks, changing disclosure requirements, and greenwashing or litigation exposure. Prudential reported a 50% reduction in weighted average carbon intensity from its 2019 baseline and targets a 55% reduction by 2030 and net zero by 2050.
- A MOVEit data-theft incident affected Prudential businesses in Malaysia in 2023; the company said it took remedial steps and reported no other cyber or data breaches with material impact on its strategy, operations or financial condition that year.
- The CFO resigned in May 2023 following an investigation into a Code of Conduct issue involving a recruitment situation. The Group also disclosed an ongoing Malaysian court appeal concerning historic ownership of 49% of the ordinary shares in the holding company of Prudential Assurance Malaysia Berhad; management said it did not expect litigation matters to have a material adverse effect.
- IFRS 17 transition increased opening shareholders’ equity at 1 January 2022 by $1.8bn. It changed profit timing and presentation, not the Group’s underlying business economics; IFRS 9 had no material financial-statement impact. EY issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Compare 2023 and 2022 only on the restated IFRS 17 basis; do not treat the unrecast 2021 IFRS 4 figures as directly comparable.
- Assess the drivers and sustainability of IFRS profit separately from adjusted operating profit, including the impact of short-term investment movements and management’s longer-term-return methodology.
- Review the detailed GWS capital sensitivities, the distinction between shareholder and policyholder capital, and restrictions on remittances from regulated subsidiaries.
- Monitor Hong Kong-led sales concentration, customer retention, Vietnam market conditions, and Eastspring investment performance and expected M&G-related fund outflows.
- Review the status and financial implications of the planned CPL capital injection, the Malaysian ownership appeal, and the MOVEit incident follow-up.
- Confirm execution of the 2024 dividend, the 7–9% dividend-growth expectation, capability investment plans, and progress against 2027 objectives.